Punch executives land double-digit pay rises

Punch executive directors have been awarded double-digit increases in basic salaries and a 50% increase in the potential size of bonuses in the current financial year, after non-executives on the remuneration committee decided top-ups were needed to retain key talent.

Chief executive Giles Thorley has seen a 16.7% increase in basic salary in the 2007-2008 financial year, with a jump from £450,000 to £525,000. Commercial director Jonathan Paveley has seen his basic salary rise this financial year by 14.2% to £274,000. Spirit managing director Andrew Knight has also enjoyed a 14.2% rise to £274,000.

The company's annual report reveals that Thorley earned 74.6% of his 2006-2007 basic pay in bonus - a total of £335,000. Paveley earned 67.6% of basic pay in bonus - £162,240. Knight earned 52.6% of his salary in bonus - £126,240.

Punch's executives were able to earn 100% of their salary in bonus last financial year if they met performance criteria. Despite the double-digit increases in basic salaries, Punch's non-executives insist they remain below the relevant market median.

In the current year, the maximum annual bonus has also been increased to 150% of salary. A note in the 2007 annual report states: "This was necessary to maintain annual bonus at the upper quartile level, whilst the basic salary continues to be contained in a range of lower quartile to median and pension is limited to lower quartile."

Thorley, whose total compensation package was £1.37m in 2006-2007 including salary, actual bonus and other benefits, now has a total compensation target of £1.78m for the current financial year.

A spokesman for Punch said: "Sustained growth over the past five years has realised a huge amount of value for the company's shareholders (1,000 of which are employees). Total shareholder return has risen 458% for the past five years, compared with 156% for the FTSE350 travel and leisure index and 66% for the FTSE100."

punch is top pub stock pick

Analysts at Morgan Stanley have named Punch Taverns as their top pub sector stock pick. Current Morgan Stanley target price for Punch shares is 1,360p, almost double the current value of around 700p. A note from Morgan Stanley said: "The shares have fallen to trough valuation levels and it is the cheapest stock in the pub sector on price to earnings and other metrics. On our 2008 forecasts, it is trading on a P/E of 8.9x, still a 25% discount to Mitchells & Butlers at 12.5x. Moreover, given its defensive qualities, Punch also comes out as one of our top plays under a recession scenario."