Punch delivers profits

The company reiterated its belief that the inclusion of the market rent only option in the pubs code is unlawful. It said it was taking steps to mitigate the impact of the regulatory changes, including a review of new managed and franchised operating format trials; new agreements including commercial free-of-tie leases and deferral of some capital investment projects.

Punch’s total revenue for the period was £221.7m, down from £233.5m last year.

Punch said its disposal programme was ahead of target at £57m and had been revised up to £80m for the full year.

It said trading in the first six weeks since the half year date had been in line with expectations and it was on track to meet full year underlying EBITDA guidance of between £193m and £200m.

It said the second half of 2015 is up against strong comparatives from the favourable weather and the Football World Cup in 2014 and it expects this to adversely impact like-for-like comparisons in the second half of the year.

The company said: “Over the last few years we have improved the fundamentals of our business and this will allow us to both drive forward the existing business model but also provide the building blocks to respond to the challenge presented by changes in the regulatory environment.

Punch reported £0.6bn reduction in net debt with leverage reduced to 7.3 times (August 2014: 9.5 times). It has £1.5bn of securitised debt, secured against largely freehold pub estate valued during August 2014 at £2.1bn. Net debt reduced by £53 million since the 8 October capital restructuring

Stephen Billingham, Executive Chairman of Punch Taverns, said:”We have delivered profits for the half year in line with our expectations and are on track to meet full year underlying EBITDA guidance of between £193 million and £200 million.

“Group debt has materially reduced following the completion of the capital restructuring on 8 October 2014 and we have delivered strong cash flow generation during the first half. All of our debt is long-term securitised debt with no short-term bank debt and we have a clear path to further debt reduction.

“I am delighted that Duncan Garrood will be joining Punch as Chief Executive Officer in June. Duncan is joining an experienced management team and Duncan’s retail and franchise background will be of great value to Punch’s future development.”

On the pubs code, the company said: “Punch’s view is that the proposed legislation is contrary to existing legal contracts and property rights and runs contrary to the OFT’s findings when it considered a super-complaint from CAMRA in 2010.

“We have already begun to take a number of operational actions to address the potential implications on Punch on implementation of the Act, including:

• Review of new managed and franchised pub operating formats on a select number of sites
• Modernisation of our pub tenancy and lease agreements
• New commercial free-of-tie lease agreement and operating model
• Deferral of some capital investment projects

“An update on progress on the above measures will be provided later in the year.”

As at 7 March 2015, the Punch estate comprised 3,653 pubs located across the UK, 96% of which were held on a freehold or long leasehold basis.It said of these, 759 were classed as non-core with the focus on “maximising short-term returns prior to disposal”.