Punch Taverns facing strategy review following profit fall
Punch Taverns, the leased and tenanted pub operator, is to carry out a "comprehensive" strategy review after a fall in profits.
This morning the operator reported a 17.8 per cent fall in underlying profit to £422m, down from £514m last year.
Unveiling its interim results for the 52 weeks to 21 August, Punch said profit before tax was £131m, a figure that had widely been expected by analysts.
The company has been hit by a number of one-off charges reaching a net total of £253 million.
During the year Punch has disposed of 893 pubs, as well as invested in 800 pubs to the tune of £45m. The group said it had also identified a further 1,347 non-core pubs in its estate of 6,700 that were considered "not sustainable".
Ian Dyson, the newly appointed chief executive of the embattled pub group, said he had started a “comprehensive review” of Punch’s strategy which would focus on operating performance and capital structure, “with a view to exploring options to create value for our shareholders.”
He added: “"I am delighted to have joined Punch and to have the opportunity to build on the progress made over the last year.
“While we have been encouraged by more recent trends in both the leased and managed businesses, the economic environment is very difficult and there remains room for improvement across all aspects of our business.”
Managed division
The news of the profit fall comes as the managed division of Punch announced plans to invest £38m in refurbishing between 230 and 240 pubs this financial year.
The company is set to focus on four brands: Chef & Brewer, Fayre and Square, Taylor Walker and Flaming Grill.
Managed boss Mike Tye said the company would invest in another 43 Chef & Brewers to take the total number of refurbished sites to 100 by Christmas.
There are 32 new Fayre & Square venues which will rise to 80 by the third quarter of the financial year.
The re-branding of iconic London pubs to the Taylor Walker brand has seen 80 pubs converted with another 20 to be done by Christmas.
Tye said the company was “feeling pretty good” about the existing handful of Flaming Grill venues - and another 30 will be converted in the current year.
The planned investment is a slight step-up from last year when £31m was spent refurbishing 220 pubs.
In 2009, the company spent just £16m on 50 refurbishments as it undertook an estate review.
Future
The group was cautious about the next set of results, saying it expected economic uncertainty and the coalition government's public spending review to have an impact on performance.
“Trading in the first seven weeks of the new financial year has been in line with the improved trading performance seen in the fourth quarter of last year," Punch said in a statement.
“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.”
Martyn Leek is news editor of BigHospitality's sister publication M&C Report.
