Punch sales up but profits down

Punch Taverns has announced a quarterly increase in earnings as drinkers enjoyed the July heatwave, but its pre-tax profits for the last year have slumped.

Punch said that like-for-like income in its core business of about 3,000 leasehold pubs grew 0.4% in the three months to mid-August, versus a 2.4% drop during the year to August 17.

But annual pre-tax profits slumped by two-thirds to £17 million, as more poor performance in its “non-core” estate of 1,100 pubs and the cost of servicing its heavy debt burden continue to weigh.

The pub group also said that talks to reduce its huge debt of £2.4 billion were still ongoing. A previous attempt to cut its debt was rejected by senior bondholders in June, but the company said it is hopeful an agreement can be reached soon. Punch said: “While the process of engagement has taken longer than previously anticipated, the board believes that a consensual restructuring can be launched in the fourth quarter of the 2013 calendar year.”

Punch is working on shrinking its debt following an acquisition spree by its former management.

It sold 433 pubs during the year for £149 million, and over the next four years hopes to sell most of its non-core pubs.

Non-core pubs earned just £30,000 in profit each during the year – down 5% on a year earlier – and make most of their money from drinks. Pubs in its core estate make average profits of £74,000 each, and are increasingly focusing on food sales. Their takings from food now account for 27% of revenues, up from 22% in 2011.

Punch executive chairman Stephen Billingham said the group has made “excellent progress” with its operational turnaround, and said core pubs are on course to grow underlying income by 1% during its latest financial year.