Punch Taverns: making good progress

Roger Whiteside, Chief Executive Officer of Punch Taverns plc, commented:

“Our performance in the first sixteen weeks of the financial year has been in line with management expectations.  While the UK consumer environment is likely to remain challenging for at least the near-term, we continue to make good progress with our clear operational plan to return the core estate to growth in the medium-term and extract maximum value from our non-core assets.”

The estate

The average quality of the Punch estate is expected to improve as non-core assets are sold, the core estate net income is expected to decline in the current financial year in line with last year as rents are rebalanced in the short-term. A return to growth is expected in the next financial year.

Net income down 5%

Trading comparatives are stated to be much more challenging in the first half of this year and, given this, net income in the core estate is down 5% on a like-for-like basis, in line with management expectations.  The comparatives are expected to improve in the second half of the year when the business will also benefit from the recent improvements in letting and investment activity.

Delivering key strategic initiatives
The second half of last year ended with record levels of letting and investment activity, and this increased level of activity has continued.

The percentage of core pubs on substantive agreements is strong at 94%, with healthy levels of interest from new applicants, supported by the recent launch of the new recruitment website.  The level of pub failures remains in line with last year, leaving 176 core pubs (6%) available for letting of which 70 have new partners in place awaiting legal completion.

Support for Partners

Punch is committed to improving on the level of support provided to its Partners.

The Punch Buying Club continues to grow: 53% of drinks orders are now placed online, up from 25% in December 2011. The 2012 roadshows, the largest in the sector and the most successful to date, acjhieved record attendance with 53% of Partners present, and brought together a wide range of suppliers of drinks, food, services and expertise, all to help Partners build their businesses.

The new Punch Franchise Tenancy agreement for community local pubs is being rolled out nationally, aimed at new entrants to the sector.

The size of specialist field teams in the areas of investment, marketing and food development has been increased, and the roll-out of free WiFi across the pub estate has been well received with over 1,500 Partners already signed up.

Disposal programme
The non-core estate disposal programme remains on track.  Since commencing this programme in 2011, proceeds of £193 million from 758 pub disposals has been realised, slightly ahead of book value.  About 400 non-core pubs will be sold in the current financial year – 86 pubs have been sold in the current quarter (including 11 pubs from the core estate) for proceeds of £26 million.

Capital structure review
As reported at the time of the full year results announcement, the Board has completed a detailed review of the Group’s capital structure, and is now progressing discussions towards a financial restructuring of the business.

These discussions with major shareholders and other significant stakeholders remain ongoing and, following the completion of a noteholder identification exercise, will be extended to include noteholders in both the Punch A and Punch B securitisations.

On the basis of the dialogue with stakeholders to date, the Board continues to believe that a restructuring can be successfully implemented.