Punch warns on profits after summer wash-out

Punch Taverns, the UK's largest pub operator, yesterday warned it is to take a hit of up to £8m on profits following the wash-out summer which led to 150 pubs in its estate being flooded.

However, the news that pre-tax profits will come in just 2 to 3 per cent lower than forecasts of £285m was well received in the City, as this was better than expected, and shares gained 1 per cent yesterday.

Francis Patton, customer services director at Punch, said that around 130 leased pubs and 20 pubs in the company's managed estate had experienced flooding while many other pubs in rain-soaked areas had suffered from lower-than-usual customer numbers as the bad weather deterred people from going outside.

"But this was a blip," said Mr Patton. "We have seen it come back in August." He said that 2008 would benefit from the European Championship sending football fans to pubs to watch matches and "hopefully a better summer than this year".

Punch, which has an estate of 8,300 pubs and sold a chunk off to Orchid ahead of the smoking ban, said there had been no significant impact from the introduction of the ban into England so far. The company's leased business, with 7,561 pubs, saw like-for-like profits rise 2.7 per cent in the year to 18 August.

The company has also significantly restructured its debt but the move was well-timed as it fell just before the start of the credit crisis. "All of our debt is at effective fixed rates of interest and we have no refinancing risk or exposure to volatile credit markets," said Punch.

Analysts were broadly positive on the stock. Ian Rennardson, at Merrill Lynch, said: "The update period includes the lack of the Football World Cup, the start of the English smoking ban and the very poor summer weather, so a slow down should come as no surprise and does not signify any underlying problems with the business model in our view."

The retirement of finance director Robert McDonald was also announced yesterday. Mr McDonald, 52, has enjoyed a long career in the pub industry and was finance director for Allied Domecq when it was acquired by Punch in 1999. He will be replaced by Phil Dutton, who has been a board member at Punch since January.

The company also signalled it continues to mull over its options for Spirit, its managed pubs operation, and would consider any opportunities that could bring more value to shareholders.

Punch Taverns shares closed up 18p at 1084p.