Punch Pubs grew revenues by 4.4% to £165.1m in Q2FY24 year-on-year.
All three divisions of the pub company - Leased and Tenanted, Management Partnership and Laine - delivered like-for-like sales growth for the 28 weeks ended 25 February 2024.
Underlying EBITDA for the pub estates before central costs increased by £6.5m to £58.6m, up 12%.
EBITDA for the period was £42.3m (prior year Q2: £37.5m) of which £43.2m was classed as underlying EBITDA (prior year: £38.9m).
Underlying EBITDA for the 52 weeks to 25 February 2024 of £85.6m compares positively to the £76m of adjusted underlying EBITDA from the wider Punch Group in the year to August 2019, the most recent financial year prior to the Covid pandemic.
Investment
During the period, the group spent £13.3m (last year: £16.7m) on expansionary and maintenance capital.
Capital expenditure also includes improvements in energy efficiency, increasing the percentage of pubs (non-listed) with SAP rating C or greater to 76% of pubs- up four percentage points year on year - with a pathway to increasing this to 100% by 31 December 2026.
Punch has identified the next tranche of pubs to convert to its Management Partnership model, with up to 70 pubs suitable for conversion, which will be phased progressively over a three-year period.
The company reported “strong returns on investment” from past conversions and expects to achieve similar returns on future conversions of between 20% and 30%.
Net proceeds from the sale of properties in the period was £6.8m (prior year: £2m), at £1.6m above book value (prior year: £0.3m).
Financial Position
The group generated a net cash inflow from operating activities for the period of £43.3m (prior year: £35.2m).
An interim dividend of £20.6m for the current financial year ending 11 August 2024 was paid in the period - the first such payment since the launch of the bond in May 2021.
The shareholder’s current intention is to not propose any further dividend payments for this financial year.
As at the 25 February 2024 period end date the group had £50.2m of available liquidity (13 August 2023: £60.3m), represented by £5.2m of cash and cash equivalents and £45.0m undrawn against the revolving credit facility.
In addition, £2.6m of cash held in deposit accounts is classified within prepayments (13 August 2023: £2.6m).
Current Trading and Outlook
Quarter 3 trading to date (covering the eight weeks to 21 April 2024) was described as encouraging with profitability ahead of the prior year.
The group expects to continue to benefit from inflation positively impacting Leased and Tenanted net income, together with the improving margins and the benefit of maturing sales and profitability in the pubs converted to the Management Partnership estate since August 2021.
Post the period end on 29 April 2024, Punch acquired a portfolio of 24 managed pubs at a cost of c.£17 million including SDLT (stamp duty land tax) and fees.
The acquisition has been funded from available cash resources and drawing on the revolving credit facility.
The portfolio is predominantly freehold including one long leasehold and three short leasehold properties.
Following completion, the pubs have all been converted to the leased and tenanted operating format with the expectation of converting approximately a third of the sites to the Management Partnerships division over the next 12 months.
The portfolio is expected to positively contribute to EBITDA from acquisition and is forecast to enhance net leverage from the first full year of trading.
The group is financed through a £600m five-year secured loan and a £70m revolving credit facility agreement.
As at the 25 February 2024, the group had £5.2m of cash balances and £45m remaining undrawn against the revolving credit facility.
The Punch Pubs Group includes 1,240 pubs, 93% of which are owned on a freehold or long-leasehold basis.
The community pub estate has limited exposure to the high-street, city centre and late-night markets with individual pubs rather than brands.
The wet-led pub estate derives c.80% of its income from drink.
