Punch struggles as Spirit profits rise

Spirit reported a 17 per cent rise in full-year pretax profit, at the top end of expectations, while Punch Taverns, from which it demerged earlier this year, said full-year profit fell.

"We have made a good start to the new financial year and, while we expect the consumer environment to be more challenging, we are well positioned to move forward," Ian Dyson, chief executive of managed-pub operator Spirit, said.

Sales at pubs open more than a year were up 4.8 per cent in the eight weeks since 20 August helped by recent good weather, said Spirit, which owns over 800 pubs in Britain including the Chef & Brewer chain.

The company said Dyson, who oversaw the demerger of Punch after joining from Marks & Spencer last year, will step down at the annual shareholders meeting on December 16 and be succeeded by his deputy, Mike Tye.

Spirit, whose brands also include Taylor Walker and Fayre & Square, said its margin rose 125 basis points to 11 percent.

The company said expected the consumer environment would likely be more challenging this year and it was continuing to see pressure on costs.

Confidence among consumers improved in September for the first time since May, while inflation hit a three-year high, piling more pressure on consumers.

Spirit shares were up 0.6 per cent in early trading, while tenanted-pub operator Punch was up 2.4 percent.

Punch demerged Spirit, its better-performing division, in August as part of a move to cut billions of pounds debt.

Punch, which owns over 5,000 tenanted pubs but is worth less than Spirit because of its debt, said full-year pretax profit fell a sixth to 76 million pounds, compared with a forecast 72.6 million pounds, according to Thomson Reuters I/B/E/S.

Managed pubs have fared better than tenanted pubs in the face of touch economic conditions as they generally have more flexibility on pricing and promotional activity.

Tenanted pubs are run by publicans who pay the company rent and rely on it for beer supplies. Managed pubs are run directly by the company and generally have greater freedom on pricing.

Punch built up its debt by making a series of highly leveraged acquisitions during the credit boom including the £2.7bn acquisition of Spirit in 2005.