Advertisement

Punch Taverns starts fiscal year trading in line

Pub and bar operator Punch Taverns is trading in-line, despite which analysts warn that the equity value of the company's pubco business is nil.

Pub and bar operator Punch Taverns is trading in-line, despite which analysts warn that the equity value of the company's pubco business is nil.

In its interim management statement covering the first 16 weeks of the fiscal year, up until December 8th, the company stated that average profit per pub was stable and overall profit performance was in line with management expectations.

Advertisement - Article continues below

Thus, although net income in core estate was down 5% on a like-for-like basis, that was as expected and a recovery is currently being forecast.

The group stated that its non-core estate disposal programme remained on track. Since commencing the programme in 2011, it said it had realised proceeds of £193m from 758 pub disposals, slightly ahead of book value.

Approximately 400 non-core pubs were expected to be sold by the group in the current financial year. In the current quarter, Punch disposed of 86 pubs for proceeds of £26m.

Advertisement
Advertisement - Article continues below

The average quality of the group's estate was expected to improve as Punch Taverns sold non-core assets. However, the core estate net income is expected to decline in the current financial year as the group rebalances rents in the short-term, with a return to growth expected in the next financial year.

"Trading comparatives are much more challenging in the first half of this year and given this, net income in the core estate is down 5% on a like-for-like basis, in line with management expectations," the statement read.

Advertisement - Article continues below

Roger Whiteside, Chief Executive Officer of Punch Taverns, commented:"Our performance in the first 16 weeks of the financial year has been in line with management expectations. While the UK consumer environment is likely to remain challenging for at least the near-term, we continue to make good progress with our clear operational plan to return the core estate to growth in the medium-term and extract maximum value from our non-core assets."

Panmure analysts' viewCommenting on the statement, Panmure analysts stated: "Discussions regarding financial restructuring are on-going and on the basis of dialogue with shareholders to date, the board continues to believe that a restructuring can be successfully implemented.

"The key issue for investors is whether they think there is any value left in the pubco business for equity holders. We do not think there is, as there is likely to be a debt for equity swap as well as a change to the amortisation profile of the remaining debt and likely resetting of covenants alongside these steps.

"It will take time for this consensus to be reached, in our view, meaning the only visible value is the group's shareholding in Matthew Clark which is valued at approximately £44m, or 7p per share. This therefore dictates our Target Price; Hold."

Punch Taverns' share price was unchanged at 7.49p at 11:03 on Friday.

MF

Advertisement
Advertisement

Recommended

Broker safety – your questions answered
Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
How demographics affects stock valuations
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Do you own shares in Sirius Minerals? Here’s what you need to do now
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Why investors should be “cautiously bullish” for 2020
Stockmarkets

Why investors should be “cautiously bullish” for 2020

Analysts have been out in force making rosy predictions for stockmarkets in 2020, but while there is certainly a case for optimism, investors should r…
17 Jan 2020

Most Popular

What gold, bonds and tech stocks have in common
Stockmarkets

What gold, bonds and tech stocks have in common

"Risk off" or "safe haven" assets such as gold and government bonds have been doing well lately. But so have riskier tech stocks. That seems to defy c…
10 Jul 2020
An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
10 Jul 2020