Punch Taverns' annual profits down 18 per cent

Shares in debt-laden Punch Taverns were down 10 per cent today after it reported annual pre-tax profits of £130.8m, 18.5 per cent lower than the previous year but roughly in line with City expectations.

Turnover for the year to August 21, 2010, fell 11 per cent to £1,283m, while operating profits fell 18.1 per cent.

The group posted a loss after exceptionals of £160m, following a net exceptional charge of £253m, which included a £218m writedown on the value of non-core assets, effectively its tail-end pubs, currently numbering around 1,300 sites. Earnings per share were down 58 per cent at 14.4p and unsurprisingly, no dividend was declared.

Despite the fall in sales and profits Ian Dyson, who succeeded Giles Thorley as chief executive last month, said he had been encouraged by recent trends across both the group's managed and leased businesses.

"Improved trading momentum delivered in the final quarter of the financial year has continued into the early weeks of the new financial year," he added, although he warned the economic environment was very difficult "and there remains room for improvement across all aspects of our business".

Meanwhile Dyson said he had started a comprehensive review of the group's strategy, operating performance and capital structure "with a view to exploring options to create value for our shareholders".

Punch said its core leased estate of 4,700 pubs had seen earnings before interest, depreciation and amortisation (EBITDA) fall nine per cent "driven principally by lower beer volumes and reduced rental settlements", while the non-core pubs witnessed a 28 per cent like-for-like fall, due, it said, to returned pubs and "much reduced beer volumes sold".

Average EBITDA per pub was down six per cent.

In its managed estate Punch said work had focussed on stabilising business performance and building trading momentum.

"Consequently, although like-for-like sales in the 52 week period were two per cent below last year, improved trading has been delivered in the second half of the year and particularly in the final quarter, where like-for-like sales for the last 12 weeks were up 2.6 per cent.

Punch said it had "made good progress" towards reducing its debt, which now stood at £3.14bn. Debt repayments of £684m were made during the year.

On current trading, the pubco said business in the first seven weeks of the new financial year had been in line with the improved trading performance seen in the fourth quarter of last year.

"However, we still expect the trading outlook in the near term to continue to be uncertain. Tax rises and reduction in public spending will inevitably put further pressure on unemployment levels, reduce disposable incomes and constrain consumer confidence.

"Against this backdrop, we believe it is sensible to adopt a cautious approach and we have prepared our financial plans accordingly.