Punch pays price for pub bailout plans

BRITAIN’S biggest pubs firm Punch Taverns yesterday reported a 20 per cent drop in first-half pre-tax profit and said it was paying £2m a month to bail out struggling tenants.

The company, which has over 7,100 pubs, said pre-tax profit fell to £66m in the 28 weeks to 6 March compared with £82m the year before.

Britain’s pubs have battled with a torrid trading environment over the last two years as a smoking ban, recession, above-inflation increases in beer duties and cheap booze offers in supermarkets kept drinkers at home, leading to an estimated 40 pub closures a week.

Punch is providing rent concessions and product discounts to around 1,000 of its 6,300 tenants to keep their doors open.

Chief executive Giles Thorley said: “We’ll continue to provide as much support as possible to our partners until we feel they are able to stand on their own two feet.

“We do think it will come down in due course but we’re not giving any expectations in terms of timescale.”

Punch and rival Enterprise Inns operate tenanted pubs which are run by publicans who pay them rent and rely on them for beer supplies.

Managed operators such as JD Wetherspoon and Mitchells & Butlers, who directly run their pubs, have fared better through the recession as they have more freedom to cut prices, partly because of their purchasing power as larger centralised operators.

Punch has been selling underperforming pubs and buying back bonds to bring down its debt which is largely due to the £2.7bn acquisition of rival Spirit Group in 2007. It said it was on track to generate £300m from pub sales this year, having sold 547 pubs for £198m. But Punch stock fell 2.2p to 96.3p after yesterday’s results.