Punch scraps final dividend
Punch Taverns has scrapped its final dividend after deciding it should strengthen its balance sheet in the current finance market.
The company said that rent concessions have increased to £6m, around 3% of the rent roll.
Like-for-like pub contribution is down 3.4% over the year to 23 August.
The company said: "The challenges which our industry and licensees are facing currently have been well documented.
"To help our licensees through this period, Punch has provided an increasing level of support through food expertise, promotional support, drinks discounts and rent concessions."
Like-for-like sale in the Spirit managed estate were down 3.3% in the year to 23 August, slightly better than the 3.6% reported for the 44 weeks to 21 June.
Punch added: "Over the course of the year a number of considerations have led the Board to review the Group's use of the cash that it generates.
"In the current financing market environment, the board considers it prudent to retain cash and further strengthen the balance sheet ahead of returning cash to shareholders through distributions.
"Firstly, although the Group has secure, long-term debt and no near-term requirement for funding, the Board believes the main priority for the use of cash is to support the repayment of the Group's convertible bonds in spite of the fact that this does not become due until December 2010.
"Secondly, whilst cash flows remain strong we are mindful of the ongoing challenging market conditions that impact both our licensees and our managed business. It is important that we continue to invest in our pubs alongside our licensees to ensure that we continue to further improve the quality of our pub estate.
"As a consequence of the above considerations, the Board considers it prudent not to propose a final dividend for the year ended 23 August 2008.
"The Board will continue to review its use of cash and its distribution policy against its objective of maximising long-term shareholder value, based on the trading and financing environment at the time."
Punch insisted it would deliver full-year earnings before exceptional items in line with market expectations, despite ongoing challenging trading conditions for the industry.
Blue Oar analyst Mark Brumby said: "Whether the passing of the dividend is reactive to a breach or proactive in seeking to head one off is not yet clear. We are drawn to the latter and would suggest that the group is correct in retaining cash in the business.
"Nonetheless, the pressure on pubs in general remains relentless.
"Tenants in particular cannot rely on their scale to provide some protection & the pubs from which they operate may not be best positioned in the current market meaning that Punch itself is not without risk."
