Punch shares dip as trading "disappoints" the City

Shares in Punch Taverns dipped nearly three per cent this morning as City analysts took a dim view of the group's trading - and perhaps even survival - prospects.

In a trading update issued today Punch revealed that like-for-like profits throughout its leased pub estate in the first 16 weeks of its current financial year had seen a similar decline to that of the previous year, seen by some City observers as indicating around 11 per cent.

The group said its help for lessees was resulting in the number of pub returns being "materially down" on the previous year, while tenancies at will were also down, although it did not elaborate with any figures for either claim.

Like-for-like turnover in the group's managed pubs over the period dipped 1.6 per cent, with sales hit by soft trading in both premium end and value-led sectors.

Punch said operating margins had "stabilised", although they continued to be hit by inflationary cost pressures and "higher rents following the return of onerous leases" to the company.

On the group's finances, Punch said its net debt after recent repayments was a shade over £3.3bn, while trading conditions would mean cash would inevitably lock into its securitisation vehicles.

It also said it was raising its estimate of disposals to £300m.

Simon French, an analyst at brokers Panmure Gordon, said the update was "disappointing". French said that as a result of weaker than anticipated trading and higher forecast disposal proceeds he was downgrading his profit forecast by 10 per cent for the current financial year to £125.8m and recommended the company as a 'sell'.

Mark Brumby of brokers Astaire also said he was a seller of the stock.

"Punch's debt reduction continues to impress but trading is not good and the management of decline is by definition finite.

"The group is aiming to stabilize its performance but stabilization at minus 11 per cent will not be sufficient to rescue the group," he said.