Punch Taverns annual profits down nearly a third

Punch Taverns today reported a 31 per cent slump in annual pre-tax profits and said the state of the economy and other factors meant it has knocked more than £660m off the value of its pub estate.

The UK's largest pub company said pre-tax profits for the year to August 22, 2009, fell from £262.3m to £160.4m as weaker beer volumes and softening rent levels continued.

Overall turnover fell nearly eight per cent to £1.44bn. Earnings per share fell from 69.9p to 36.1p.

The group said it had cut net debt by 24 per cent to £1.1bn, helped by a series of debt buybacks - the latest, of £130m, being announced earlier today - and £414m-worth of pub disposals.

Punch said it planned to raise around £200m through pub sales in the current financial year.

Capital expenditure on the group's pub estate was slashed in the year to August 2009 from £136m to £93m, it added.

Earnings before interest, tax, depreciation and amortisation (EBITDA) in Punch's 6,841-strong leased estate fell 11 per cent, although the group said it had "arrested the decline seen in the first quarter of the financial year".

Punch said it was committed to a "more open and transparent" relationship with its lessees. "The business has embarked on a three phase strategic change programme called 'Pathway to Partnership', setting ourselves the ambitious goal of becoming the most trusted and best value pub partnership business in the UK," it said.

Support for struggling tenants continued to run at £1.6m a month, Punch said, adding that 430 struggling pubs had been added to its 'Turnaround Division', which originally numbered 1,250 problem sites.

Price increases had been limited to four per cent, the pubco said, while the pubs' business relationship managers were spending more time with individual outlets.

On its managed pub side, Punch said "heightened promotional activity" had been a focus to drive sales, and the decline in turnover slowed in the second half, down 1.5 per cent overall.

While rising costs hit margins over the year, Punch said it had seen an easing of cost pressures across its 835 managed pubs, particularly in energy bills.

Noting the ongoing mediation process and debate surrounding the future of the pub trade, Punch said that while it didn't want to see the industry referred to the Competition Commission it was fully co-operating with the Office of Fair Trading's review of the sector.

On current trading trends, Punch said the year had started in line with its expectations.

"The continuing challenging market in which we operate makes forecasting difficult and while we are confident of the longer-term prospects for the group, we remain cautious over the near-term due to the lack of visibility on trading outlook."