The UK’s biggest pubs group yesterday said it had massively increased help to struggling landlords.
Punch Taverns is spending £1.6million a month in rent concessions and beer discounts compared to £400,000 a year ago – but said it was too early to see whether the support made a difference.
Across its 7,560-strong leased estate, like-for-like profits per pub since November 4 were down around 12 per cent on the same period last year, the Burton-on-Trent firm said.
“Difficult trading conditions are likely to persist for the foreseeable future and we remain extremely cautious over the near-term,” Punch added.
Punch’s shares fell more than 13 per cent at one stage following the downbeat update.
Across its much smaller managed pubs estate, like-for-like sales in the 20 weeks since the end of August were down 2.5 per cent, despite a 1.9 per cent increase over the Christmas period.
Promotions to tempt hard-pressed consumers into pubs have also squeezed margins, along with higher food and energy costs.
Pub groups across the board have meanwhile had to cope with a looming recession, the impact of the English smoking ban, and alcohol duty hikes.
Punch is scaling back its capital spending by £35million this year as it looks to reduce the huge debt burden.
This has sparked worries over the health of the firm’s balance sheet amid falling property prices and a slump in consumer confidence.
Punch’s net debt stood at £4.5billion at the end of August, although the firm has reduced this by buying back £180million of its borrowings so far at a 25 per cent discount, cutting its interest payments.
But Blue Oar Securities analyst Mark Brumby said pressure on Punch’s tenants – locked into buying their beer from the firm – was likely to continue.
He said: “JD Wetherspoon is selling session-ale at 99p a pint and, with tenants unable to compete on price, Punch – and Enterprise as well as the regionals – are likely to find the level of support required increasing over the medium term. We would reiterate our sell recommendation.”