Punch scraps its dividend as sales in pubs plummet

Britain's largest pubs company Punch Taverns today scrapped its dividend as the sector continued to reel from plummeting sales.

Chief executive Giles Thorley said it would not be "prudent" to pay a final dividend this year given the parlous state of the pubs market and the importance of a strong balance sheet.

"We have had the opportunity over the course of the summer to consult with most of our shareholders and we think that in the circumstances we should cut our dividend," said Thorley. "We are continuing with our investment programme."

Shares in Punch, which crashed as much as 85% from their peak of around 1400p between May last year and July this year, were down 34¾p to 282p today — a slide of 11%.

Punch said like-for-like sales in its 7560 leased pubs fell 3.4% in the 12 months to 23 August while sales were down 3.3% on its managed estate of 864 pubs.

Britain's pubs have been hit by last year's smoking ban, rising costs, declining consumer spending and cheap alcohol prices in supermarkets.
Punch has pushed £6 million to its landlords in the form of rent concessions as it works to keep costs down and keep pubs open.

"To help our licensees through this period, Punch has provided an increasing level of support through food expertise, promotional support, drinks discounts and rent concessions," it said. Thorley was more bullish about trading in the next 12 months as regular pub-goers got used to the smoking ban and more punters turned up for food.

"The smoking ban started more than a year ago and the combination of that, the slowing economy and falling consumer confidence have had an impact," he said. "But some of these factors are going to start to wear off. We still feel pretty confident about the pub sector as a whole and next year we see a much better trading environment."

Punch said it remains confident of delivering full-year profits in line with market expectations. The consensus market forecast for full-year pre-tax profits is £267 million.
Mark Brumby of Blue Oar Securities said: "The group is correct in retaining cash in its business."