Consumer spending has continued to hit Midland pub group Punch Taverns after it revealed a 20 per cent drop in profits.

Shares in Punch (PUB) fell more than two per cent in early trading after the group, which has some 4,800 leased pubs, revealed it saw profits in the 28 weeks to March 3 fall by £8 million to £33 million as like-for-like net income in its core estate dipped 2.1 per cent.

However, the Burton-based group said the decline in net income was driven by pubs which were returned to the group after failing and have been placed under temporary management, with the majority of the estate performing well.

Punch, which is in the middle of a turnaround plan that involves selling its 2,000 worst performing sites, said it was on track to close between 400 and 500 outlets this financial year.

Roger Whiteside, Punch chief executive, said consumer market conditions had been “weaker” in recent months but the group, which demerged its managed arm into a separate company, Spirit Group, in August, was still in line to meet full-year expectations.

Mr Whiteside has previously said the group is considering plans to restructure its £2.3 billion debts amid speculation that its bondholders could be asked to suffer a write off on some of the money they are owed.

However, Punch made no reference to the speculation surrounding bondholders in today’s results.

The group said its pubs in the south continue to fare better than those in the north, which has been harder hit by the economic downturn.

The tough conditions reflect those seen at rival JD Wetherspoon, which last month said it would slow the pace of its expansion amid sustained cost pressures and weaker sales.

But Punch remained upbeat about its prospects and said that the Queen’s Diamond Jubilee, the European football championships and the Olympic Games will boost the second half of its financial year.

Looking ahead, the company said it will increase the number of pubs per year in which it invests, from 130 in the first half of the year to 400 for the full year, with the aim of boosting the percentage of food sales in its core estate to 35% from 20%.

Food sales have propped up the performance of pub chains as more customers choose to dine in pubs over more expensive restaurants.