Punch Taverns shrugged off fears of a slowdown in consumer spending on Thursday as acquisitions helped the UK’s second-largest pubs group produce a sharp increase in first-half profit.
The group, which runs 7,800 pubs, said it remained confident despite evidence of a slowdown. “Whilst there are some recent suggestions that consumer demand has cooled, Punch has a model which has proven its resilience over many years and we are confident of a satisfactory outcome for the year,” the company said.
However, Punch shares were off 10p at 623p in mid morning trading following a 6 per cent slide earlier in the week after Whitbread warned that consumers were tightening their belts at a time of mounting costs for businesses. The leisure group owns the Brewers Fayre and Beefeater pub restaurant chains as well as hotels, coffee shops and fitness centres.
Giles Thorley, Punch chief executive, said: “We don’t think the consumer slowdown materially affects us .Our business is much more of a commodity and, if anything, customers are moving back towards their community pub. People are not going to the high street as much as they were and they are tending to stay in their local areas.
However, the company said the first few weeks of the second half had only been “satisfactory” and Mr Thorley conceded that this year was unlikely to be exceptional. “We are cautiously optimistic. This year will be a C+ rather than an A but - in school report terms - this kid will get through the exam.”
Mr Thorley argued that companies such as Boots and Kingfisher, which have reported harsh downturns, had suffered specific problems.
Turnover for the six months to March 5 rose from £303m ($577m) to £404m and pre-tax profits were up from £55.7m to £88.5m leading to a rise in earnings per share from 17.2p to 27.1p. The dividend increased from 2.9p to 3.7p.
The increase in profits reflected the first full contribution from Pubmaster, the chain of 3,100 pubs that Punch bought towards the end of the previous financial year. It also included the first contribution from InnSpired, the chain of 471 pubs acquired last September.
The company said sales from pubs held for two years were up 3.4 per cent while like-for like profits were up 2.4 per cent. It estimated that first-half sales increased 3.1 per cent in the Pubmaster pubs and 2.1 per cent in the InnSpired pubs.
Punch’s strategy is to buy about 200 pubs a year on top of its larger corporate acquisitions.
Ian Rennardson of Merrill Lynch said that despite superior earnings growth and a strong share price performance, Punch was trading at discount of more than 20 per cent to to the market and argued that “These results confirm the resilience of the business model”.
However, Mark Brumby at Oriel Securities said that while the statement was positive there were concerns going forward. “The environment is worse that at any time since the company floated two years ago and tenants will, at some stage, agitate for rent decreases if tough conditions persist,” he said.
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