Punch Taverns shares froth up under the influence of preliminary results, despite effects of Pubs Code and Brexit

William Turvill
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Average profit per pub was up four per cent in the year to August (Source: Getty)

Punch Taverns’ share price frothed up more than two per cent this morning despite a negative impact reported from new pub reforms and uncertainty over the UK’s Brexit vote.

The figures

In its preliminary results for the year to 20 August, the company said its performance was in-line with management expectations.

Punch said average profit per pub was up four per cent thanks to the disposal of non-core pubs.

Earnings before interest, taxation, depreciation and amortisation (Ebitda) fell from £196m to £178m, but the firm said this reflected £324m of disposals over the last two years.

Read more: Punch Taverns reports profits up as Pubs Code comes into force

Pre-tax profit also fell, from £105m in the year to August 2015 to £60m.

Punch’s share price, which fell below 90p over the summer, was up 2.5 per cent to 115p on Tuesday morning.

Punch Taverns Punch Taverns | mobile image

Why it’s interesting

Punch Taverns was hit by the long-awaited Pubs Code in the year to August, which put an end to a centuries-old system in which companies can set prices for beer, other drinks and items such as food.

Under the new rules, the Punch and the five other largest pub-owning companies have less power over their tenants and tied tenants can opt out of the tie.

On the UK’s Brexit vote, Punch said the “exact nature, process and timing of the UK's exit from the EU are unknown”.

Brexit could have impact on consumer spending habits, and therefore our publican's sales, either due to economic slowdown, increased inflation or increases in interest rates. Similarly, the cost of running pubs could increase as import prices in the supply chain rise, or the cost of labour increases.

Read more: Punch Taverns punches above its weight

What the company said

Chief executive Duncan Garrood:

The new Pubs Code Regulations has resulted in us having to re-market all lets in line with the new regulatory requirements. While this is impacting letting activity in the short-term, our expectations for the longer-term growth prospects for the business remain unchanged.

Punch has a clear plan for the future, a strategy that is progressing well, and a unique operating model that is expected to drive improved performance over the coming years.

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