£262m Punch upbeat on outlook for pubs

Punch Taverns today insisted that talk of the death of the British pub is wildly exaggerated as it unveiled resilient profits in the toughest trading environment for decades.

The UK's biggest pub operator made £262 million in the year to 23 August, only a little down on the previous year's £282 million. Chief executive Giles Thorley called it "a pretty credible result in quite an unusual set of circumstances" and shrugged off talk that Punch is so indebted it faces a mammoth restructuring.

"A lot of people are focusing on our balance sheet," he said. "We have been using some of the uncertainty in the market."

Punch has been able to buy back £240 million of debt over the year at knockdown prices, a sign of how skittish investors have become. Thorley admits some holders of Punch debt have been keen to sell "at whatever price", but insists this extends to most convertible bonds held by most large companies.

Punch still has more than £4 billion of debt, compared with a market cap of £490 million. The shares have tumbled spectacularly from above 1400p in 2007 to today's 183½p. Punch said in September it would scrap its dividend as it sought to bolster its balance sheet.

Five UK pubs are closing every day, though pubs remain central to many communities. But Thorley said: "News of the demise of the British pub is exaggerated. It is a challenging time for all businesses. That does not necessarily mean it is terminal. Going to the pub is the most popular activity for the adult population apart from watching the TV. Do we really think pubs won't exist in five years' time?"

Of its 8400-strong estate, Punch says about 500 are "non-core", that is, up for sale. On average, a Punch pub turns a profit of £72,000 a year. Landlords complain they are being squeezed by higher beer costs and higher rents. But Punch said it has spent £40 million on "concessions" to keep good pubs alive.

It conceded, however, that it is braced for tougher times, and repeated its concern that cheap supermarket booze is hurting the pub trade.