Punch's £1.6m a month to help struggling pub landlords
Jan 15 2009 by Alun Thorne, Birmingham Post
The UK’s biggest pubs group yesterday said it had massively increased help to struggling landlords.
Punch Taverns is spending £1.6million a month in rent concessions and beer discounts compared to £400,000 a year ago – but said it was too early to see whether the support made a difference.
Across its 7,560-strong leased estate, like-for-like profits per pub since November 4 were down around 12 per cent on the same period last year, the Burton-on-Trent firm said.
“Difficult trading conditions are likely to persist for the foreseeable future and we remain extremely cautious over the near-term,” Punch added.
Punch’s shares fell more than 13 per cent at one stage following the downbeat update.
Across its much smaller managed pubs estate, like-for-like sales in the 20 weeks since the end of August were down 2.5 per cent, despite a 1.9 per cent increase over the Christmas period.
Promotions to tempt hard-pressed consumers into pubs have also squeezed margins, along with higher food and energy costs.
Pub groups across the board have meanwhile had to cope with a looming recession, the impact of the English smoking ban, and alcohol duty hikes.
Punch is scaling back its capital spending by £35million this year as it looks to reduce the huge debt burden.
This has sparked worries over the health of the firm’s balance sheet amid falling property prices and a slump in consumer confidence.
Punch’s net debt stood at £4.5billion at the end of August, although the firm has reduced this by buying back £180million of its borrowings so far at a 25 per cent discount, cutting its interest payments.
But Blue Oar Securities analyst Mark Brumby said pressure on Punch’s tenants – locked into buying their beer from the firm – was likely to continue.
He said: “JD Wetherspoon is selling session-ale at 99p a pint and, with tenants unable to compete on price, Punch – and Enterprise as well as the regionals – are likely to find the level of support required increasing over the medium term. We would reiterate our sell recommendation.”
