Punch confident of Reit conversion
Punch Taverns believes it can convert to tax efficient Real Estate investment Trust (Reit) without having to shed its managed division Spirit.
In an interim management statement, Punch said it was in discussions with HM Revenue and Customs (HMRC) about conversion to Reit status.
To convert to the lower taxes of Reit status, 75% of revenue must come from rent with most of the profit being distributed to investors.
"Following extensive discussions with HM Revenue & Customs and our advisers, we believe that a structure has been identified which would allow Punch to elect to a Reit regime whilst retaining ownership of all of its existing businesses, including Spirit.
"The benefit of retaining our managed business is clear and includes the retention of material operational synergies, the opportunity to capture upside from improving performance and maintaining the strategic flexibility to maximise value in the future.
"Punch is continuing to discuss with its advisers and HMRC the feasibility of this structure in light of its operating and financing arrangements, and intends to submit a clearance application to HMRC in the near future."
Punch said a further announcement would be made in due course.
Britain's biggest pubco, said trading for the year to date (44 weeks to 21 June) has declined with contribution from the leased estate down 3.4%.
Like-for-like sales in the managed division are down by 3.6%.
Rent concessions
"We continue to work in partnership with our licensees and where appropriate support pubs through the current challenging trading environment with the use of discount schemes and rent concessions," it said.
"Rent concessions remain in line with the level announced at the half year and represent less than 2% of the total rent roll.
Chief executive Giles Thorley (pictured) added: "Punch remains extremely robust from both an operational and financing perspective, despite the challenging consumer environment.
"We continue to be confident of meeting the market's full year profit expectations as well as continued value creation over the medium and long term."
