Punch blames result on 1,800 pubs it is looking to sell or close, while insisting majority of estate is performing well
Downbeat consumers are resisting the temptation to drown their sorrows in pubs run by Punch Taverns, where profits have slumped 20%. The business, one of the UK's largest pub owners with 4,800 leased premises, said on Thursday that first-half profits fell by £8m to £33m on revenues down 5% at £265m.
The group blamed the result on the 1,800 pubs that it is looking to sell or close, while insisting that the majority of the estate is performing well. However, like-for-like gross profits in its core estate of 3,000 pubs dipped 2.1%.
Punch, which is in the middle of a turnaround plan that involves selling its worst-performing sites, said it was on track to close between 400 and 500 outlets this financial year. It demerged its managed arm into a separate company, Spirit Group, in August, but despite years of uninspiring news, the company remains outwardly upbeat and points to the Queen's diamond jubilee, the European football championships and the Olympic Games as events that might boost its fortunes in the second half of the financial year.
Roger Whiteside, Punch chief executive, said: "Despite weaker consumer market conditions in recent months, our teams have worked hard to contain costs and deliver profits in line with our expectations for the first half and we remain on track to meet our full-year profit expectations."
While Whiteside attempted to put a positive spin on the numbers, most shareholders are focused on the company's efforts to restructure its debts. The company has previously said it is considering plans to restructure its £2.3bn of borrowings amid speculation that bondholders could be asked to write down some of the money they are owed.
Analysts cannot see how the company can improve its share price, which closed down nearly 10% at 9.5p on the figures, without a positive resolution to the talks.
Simon French, an analyst at Panmure Gordon, wrote to clients: "Further equity value creation is dependent on the outcome of talks with bondholders during 2012. We reiterate our hold recommendation and 11p target price."
The group added that its southern pubs continue to perform 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.