Punch Taverns' pub profits down on last year

Shares in Punch Taverns fell more than 30p today - five per cent - after the pubco reported subdued trading across its estate.

In an interim management statement, Punch said that after what it calls a "satisfactory start to the year", trading in its pubs in the last eight weeks has been "more subdued", thanks to declining consumer confidence and the smoking ban in England and Wales.

Like-for-like profits have been lower in the first five months of current financial year, the group said, coinciding with the introduction of the English smoking ban.

"Despite the market conditions, our leased estate delivered a satisfactory performance in the first 20 weeks of our financial year to 5 January 2008, demonstrating the resilience of the model, with like-for-like outlet profit marginally lower than last year, down 0.8 per cent.

"Average outlet profit per pub is up 10 per cent over the same period last year, reflecting the improved estate quality.

"In the core managed estate like for like sales have declined by 2.2 per cent, with food sales having grown by one per cent".

Punch said food sales now accounted for 39 per cent of total sales in its managed estate, adding that the change in sales mix, coupled with inflationary cost pressures, would impact managed operating margin.

The group said it remained positive on the smoking ban and pointed to like for like profit in its Scottish leased estate over the 20 week period having grown by 1.6 per cent.

It also expects to save costs around £10m in the current financial year, in addition to the reorganisation of its field and central support teams, although it did not say how these savings would be made.

The group also hinted that it might look to acquire more businesses: "We continue to believe that our current business structure provides the best opportunity for long-term returns for shareholders, although we actively consider all opportunities that may add further value and we continue to keep all options under review."

Punch is understood to be looking at making a move for Mitchells & Butlers and would be interested in buying an estate of the size of Greene King, if the price was right.

The pubco said that while it remained "cautious over the short-term outlook for the sector, the enduring popularity and appeal of the local community pub will continue and we remain confident about the long-term prospects for our business".

Punch expects to announce interim results for the first 28 weeks of its financial year on April 24 2008.