Spirit churn hasn't improved profits

A top City analyst has claimed he is "worried" by the performance of Spirit, Punch's managed estate, three years after it was acquired.

Geof Collyer, of Deutsche Bank, has stated that a major churn of the estate does not appear to have done anything for the quality of the profits of the estate that remains. He added that Punch should consider a disposal of the estate before profits slide further.

Collyer did concede, however, that it may be possible to turn around the performance of Spirit and there is no pressure on Punch to take pre-emptive action.

Collyer said: "The current performance of Spirit is worrying. We have downgraded our Spirit forecasts over the past year by -23%, despite there being +15% more managed pubs trading than we were expecting at the same stage last year.

"In effect, we have downgraded the average pub profitability by -33%, a number that is somewhat at odds with the group's view that Spirit is performing in line with its peers."

Collyer argued that the performance of the Whitbread pub estate — similarly subject to a restructuring process — provides a stunning contrast to the Spirit performance. Whitbread sold one third of its pubs in 2006 and subsequently enjoyed a rise in average site sales of 12%, with average Ebitda per pub up 15%, said Collyer.

He noted that increased food sales at Spirit, and increased labour bills and depreciation and repairs and maintenance capital spend had also been raised to around the sector average.