Punch scraps its dividend but claims fall in sales is slowing

Punch Taverns scrapped its final dividend yesterday "to conserve cash" in the face of ongoing economic uncertainty, putting stocks across the sector on the skids.

Pubs are having a torrid time. The combined impact of rising barley and wheat prices, the smoking ban, tax hikes, and bargain booze in supermarkets – alongside credit crunch-related consumer spending concerns – is keeping punters at home with their on-demand multi-channel TV rather than sinking a jar at their local.

But Punch says its falling sales are flattening out, and that the scheme to scrap the dividend is an insurance policy in the face of unpredictable financial markets. Of the group's massive £4.7bn of debt, some £4.4bn is secure in a long-term mortgage. But the remaining £295m is in convertible bonds and must be paid off by the end of 2010.

"Trading overall hasn't deteriorated since the last time we reported in July but we don't think it is efficient to change our plan at this stage," Giles Thorley, the chief executive of Punch Taverns, said. "It means the company will be able to repay the bank from its own resources without relying on the financial markets, allowing us to conserve cash and continue to invest in the business."

Like-for-like sales were down by 3.4 per cent in the leased estate and by 3.3 per cent across the group's managed outlets, according to yesterday's full-year trading update. But the pace is slowing as customers get used to the smoking ban, and more people are tempted in to eat.

"In our managed business the rate of decline is slowing considerably," Mr Thorley said. "We were down 3 per cent when we reported in July, but the rate pulled back to a 1.8 per cent fall since then."

The reaction in the City yesterday was mixed. Investors baulked at the news and Punch lost 12.15 per cent, falling to 278.25p, and sending jitters across the sector. JD Wetherspoon lost nearly 4 per cent, Mitchells & Butler more than 5 per cent, and Enterprise Inns nearly 9 per cent.

Matthew Gerard, an analyst at Investec, said: "Considering that the UK consumer decline has accelerated and could potentially be longer and more severe than we initially anticipated, and that wet-led leased pubs are particularly exposed, we move our recommendation from Buy to Hold and place our price target under review."

But not everyone is pessimistic. James Ainley, an analyst at JP Morgan, said: "This removes the need for an equity issue and, although causing a negative short-term reaction, should be seen as good news."

The problems caused by the economic climate are aggravated by a longer term decline in beer-drinking. Beer sales in pubs are at their lowest since the Great Depression, and some seven million daily pints lower than the market high in 1979, according to the British Beer and Pub Association. There are all kinds of reasons – fewer factory workers stop in at their local, an ageing population, the growing popularity of wine – but the last year has seen the trend accelerate precipitously. On-trade beer sales dropped by 8.7 per cent overall in the year to May, and by 9.6 per cent in the first half.

Punch also confirmed yesterday that it has been cleared to put in place a Real Estate Investment Trust (Reit) structure, which avoids corporation tax in return for the distribution of 90 per cent of income. But because of the costs of moving to the new regime, the implementation will wait, the company said.

Punch's full-year results will be published in November.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas