Pub company Punch Taverns has clawed back more than £1bn of debt after a massive sell-off of its network of pubs.
Shares in the Staffordshire firm shot up after it announced it had reduced its net debt by 23 per cent since the start of the year – significantly more than had been predicted.
And the firm said it was on track to meet its own financial expectations for the year, despite the recession meaning reduced spending on food and drink.
But with the firm still in debt to the tune of billions of pounds, it admitted there was still a lot to do to turn its fortunes around, and said it would be looking to its margins to try to bring in more cash in a difficult market.
Individual pubs are finding trading hard during the economic downturn, facing a drop in consumer confidence and hard competition from other pub chains and supermarkets. Punch is paying more than £1.6 million a month in financial support to its network of landlords who lease pubs from the firm.
In a trading statement put out for its financial year, which ended on Saturday, Punch said: “Trading performance continues to be impacted by a combination of weaker beer volumes and a softening in rents, coupled with the previously reported increase in the levels of licensee support.
In this difficult economic environment, we continue to believe it is important to proactively support our licensees, where appropriate, in the form of rent concessions and increased product discounts.”
But a group that represents landlords leasing pubs from pubcos like Punch said the link between property owners and the landlords running pubs at those properties was being exploited by pubcos.
The Fair Pint Campaign said the beer tie, as the contract between landlords and pubcos is known, was being used to gouge money from tenants in an unfair attempt to shore up debts at pub companies.
And it said the business model used by pub companies with leased properties was pushing up prices and causing pubs to close.
The campaign has published a 21-page response after the Campaign for Real Ale made a complaint about the way the tie was affecting the industry to the Office of Fair Trading. The tie has also been investigated by the parliamentary
Fair Pint founding member: ““It is clear that the tie is simply being used by pub owning companies to extract income from struggling their tenants
“The pubco model which has also being adopted by most of the brewers with tied estates is an exploitative relationship and as well as making it difficult for tied tenants to make a living from their pubs, has led to rising prices, less choice and worsening service for consumers.
“It is clear the pub market is not functioning in an efficient and competitive way and that this lack of competition and innovation is putting the future of the whole sector at risk.”
Punch said it would have to look at future savings that could be made if it was going to reduce its debt further.
Another 450 pubs from its portfolio have been transferred into a specially-created ‘turnaround division’, which was set up earlier this year to let the company focus on pubs in difficulty and either turn them around or sell them on.