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Punch Taverns shares rise as investors toast progress

nvestors toasted Punch Taverns by sending its shares higher after the pubs business said it was making headway with its radical transformation plan, as it braces for the end of the beer tie.

Shares in Britain’s second-biggest pub company rose by 3pc to 100p in early trade after Punch boss Duncan Garrood reassured investors that the overhaul he unveiled in November is bearing fruit.

Punch, which has about 3,300 mostly leased and tenanted hostelries, is attempting to reduce its dependence on this business model after the Government unveiled plans to make it easier for publicans to end their tied contracts.

“We are already making good progress delivering on the strategy we set out in November,” Mr Garrood said, as Punch delivered half-year results. “We have launched new operating models, renewed our focus on customer service and delivered improved support to our publicans.”

As part of the overhaul, Punch is offering publicans new retail contracts, which are essentially franchises, and said today that it already has 50 retail pubs open, with a further 121 candidates identified. It also now has 41 pubs operating on commercial free-of-tie leases, has launched its first managed hostelry, and is converting sites to its new Champs sports bar and Brew & Baked coffee shop brands.

Government plans to help tenants break the so-called beer tie were unveiled in November 2014 and came as a severe blow to Punch’s business model, as the heavily indebted company had just completed a drawn-out and painful debt restructuring.

The beer tie is a centuries-old system that forces pub tenants to buy beer from their landlords instead of on the open market. The price they pay is typically above market rates, but in return tenants receive benefits such as lower rent.

Punch’s first-half pre-tax profits slumped to £54.7m from £348.5m a year earlier, although its 2014 numbers had been distorted by one-off gains associated with its debt overhaul.

On an underlying basis, profits dipped to £27.3m from £30.4m, pushed lower by £288m of pub disposals that Punch has undertaken in the past 18 months to offload non-core hostelries. Revenues edged down to £212.9m from £221.7m in 2014. Average profit per pub was up 3pc across the business.

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