Punch revenue up but profits drop

15-May-2023 - Last updated on 15-May-2023 at 11:06 GMT

Trading update: Punch has converted 71 L&T sites into its Managed Partnerships division

Punch Pubs Group has announced a boost in total revenue to £158.1m for the 28 weeks to 26 February 2023, compared to £142.6m in the same period last year.

However, the group’s profit was £1.9m for the half-year (H1) period versus £5.2m for the same period ended 27 February 2022.

Punch said the increase in revenue has been helped by the company converting 71 pubs from its leased & tenanted division to its managed estate.

EBITDA (earnings before interest, taxation, depreciation and amortisation) fell slightly for the period to £37.5m (£38.6m: H1 2022).

Reduced VAT rate

Punch added H1 2022 results included the benefit of the temporarily reduced rate for VAT on food and non-alcoholic drinks, and lower energy costs, with a combined Impact of c£3m over the period.

All three divisions (Leased and Tenanted (L&T), Management Partnership and Laine) delivered like-for-like sales growth for the 28-week period when compared to the prior year, with L&T also delivering growth in like-for-like rental income.

During H1 2023, the group has spent £16.7m (£15.5m: H1 2022) on expansionary and maintenance capital, which included five transformational investments in converting pubs from L&T to Management Partnerships and acquiring a brewery to expand its beer production capacity at Laine.

Since beginning its L&T to managed conversions in August 2021, the rate has slowed as “we take time to select and build the next pipeline of pubs for transformational investment and conversion, taking learnings from the successful conversions we have completed to date”.

Property assets value up

It added the benefit of the EBITDA uplift from the conversions is yet to be fully realised, and despite the significant increase in energy costs, Punch still expects to achieve a stabilised return on investment in excess of 20%.

Net proceeds from the sale of properties in the period was £2.0m (£5.5m: H1 2022), at £0.3m above book value There were no acquisitions made in the period.

Punch said its property assets increased by £7.9m during the 28 weeks to £903.4m from a £895.5m valuation on 14 August 2022. Some 93% of the group’s pub portfolio is owned on a freehold or long leasehold (greater than 50 years remaining).

It added the group generated a net cash inflow from operating activities for the period of £35.2m (£23.7m: H1 2022).

As of 26 February 2023, the group had £47.7m of available liquidity (£52.6m: 14 August 2022), represented by £12.7m of cash balances and £3S.0m undrawn against the revolving credit facility.