Punch Taverns to update on strategic review 'early next year'

Announcing its first quarter figures today, Ian Dyson, Punch Taverns' chief executive, said he plans to update the market on the progress of his strategic review for the indebted pubco early next year.

Dyson has been reviewing Punch's operating performance, capital structure and strategy since he arrived at Punch back in September, with a view to improving its pubs' trading performance and, crucially, reducing its £3bn-plus net debt.

Trading across its leased estate has been tough, with average earnings per leased pub down nearly two per cent in the 16 weeks to December 11, 2010.

Like-for-like earnings across Punch's total leased estate fell 8.7 per cent, while in the core business - excluding the 1,000-plus pubs in its 'Turnaround Division' - like-for-like earnings were down 7.3 per cent. Its non-core business saw like-for-likes down more than a fifth, 21.8 per cent.

However like-for-like sales in the group's 800-strong managed pub estate grew 2.2 per cent, with drinks sales up 1.7 per cent and food turnover up 2.6 per cent.

Dyson said recent action taken to strengthen Punch's leased and managed pub businesses had resulted in an improved trading performance. Financial support was running at just under £2m a month, and had been at this level for about a year, he added.

"We are now looking to build on this momentum by focusing on further operational improvement across the business," Dyson said.

"Meanwhile, my review of our strategy, operating performance and capital structure is progressing and I expect to give an update in the first quarter of 2011."

Punch hosts its annual general meeting today, with executives expected to face a grilling from disgruntled investors, angry at the slide in the group's share price, its massive debt mountain, and reports of Dyson's 'golden hallo', said to be worth millions of pounds in share-based incentives.

Reports have been circulating that one option being considered by Dyson as a way of tackling the group's debt is defaulting on a series of bonds issued by the group, effectively handing back in excess of 5,000 leased and tenanted pubs to bondholders.

This move would save Punch around £3.6m a month in interest payments on the bond debt, money which could then be invested back into the remaining 1,300 pubs it would own - a mix of managed and leased sites - or go to shareholders in the form of a dividend.