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UPDATE 2-Punch Taverns H1 profit drops, demerger on track

Published 04/12/2011, 04:19 AM
Updated 04/12/2011, 04:24 AM

* H1 pretax profit 61 million sterling vs 66 million in 2010

* Net debt 3.1 bln sterling, vs 3.3 bln in August 2010

* Demerger plans on track; Spirit Chairman appointed

(Adds CEO, analyst comments, share price)

By Neil Maidment

LONDON, April 12 (Reuters) - Embattled British pubs firm Punch Taverns said the demerger of Spirit, its managed pubs division, was on track to be completed this summer as it reported an 8-percent drop in first-half profit.

Punch, which last month announced plans to spin off Spirit as part of a strategy to reduce its crippling 3 billion pounds ($4.91 billion) debt pile, on Tuesday said pretax profit in the 28 weeks to March 5 fell to 61 million pounds from 66 million pounds for the same period in 2010.

Analysts Panmure Gordon had forecast a first-half pretax profit of 62.6 million pounds.

Punch, which said that it was on track to meet full-year expectations after good recent trade, said its debt had fallen to 3.08 billion pounds from 3.28 billion pounds in August 2010.

Shares in Punch, which have risen 15 percent in the last month, were down 1.82 percent at 78 pence by 0901 GMT.

Britain's biggest pubs group, with 6,600 establishments, said it was making good progress on its demerger plans and added that Walker Boyd would become chairman of Spirit once it was completed. It said it was searching for a new Punch chairman.

Punch, which disposed of 190 pubs in the period and expects to make 120 million pounds from sales this year, plans to demerge its better-performing Spirit business from its tenanted unit to create two independent public companies.

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Tenanted pubs are run by publicans who pay the company rent and rely on it for their beer supplies. Managed pubs, which have fared best during the recession, are run directly by the company and generally have greater freedom on pricing.

Punch said its managed division had seen a volume-led 4.9-percent rise in like-for-like sales, while its leased business posted a 7-percent fall in like-for-like net income.

"Supported by managed like-for-like sales remaining strong and further improvement in the leased estate like-for-like trend in early second half, we are holding our forecasts," wrote Numis analyst Douglas Jack, who has a "Buy" rating.

Punch built up its debt by making a series of highly leveraged acquisitions during the credit boom including the 2.7 billion pounds acquisition of Spirit in 2005.

CEO Ian Dyson said the reaction to the demerger had been positive: "We've obviously had a wealth of conversations with shareholders and bondholders and people are positive about the strategic direction in which we are taking the business."

In a management board reshuffle, Punch said Dyson will become chief executive of Spirit, while a finance director is still to be appointed. Current Managing Director Roger Whiteside will become CEO of Punch with Steve Dando as FD.

($1=.6110 Pound)

(Additional reporting by Matt Scuffham; Editing by Lorraine Turner and David Cowell)

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