Introduction

Punch Taverns plc acquired InnSpired Group Limited ("InnSpired"), an estate of 1,064 pubs, in September 2004. In order to address specific areas of local concentration, at the same time Punch agreed to sell 51 outlets from the InnSpired estate, together with 37 from its own estate.

Following a detailed strategic review of InnSpired, Punch today announces that contracts have been exchanged with Pubfolio Limited ("Pubfolio") for the disposal of 545 pubs owned by InnSpired (the "Disposal Estate"), which have been identified as non-core to Punch's long-term strategy, for a total cash consideration of £162.5 million (the "Sale").

The terms of the Sale provide that the current head office and the associated infrastructure of InnSpired will transfer to Pubfolio, with only a small number of InnSpired employees remaining with Punch to manage the 471 outlets that Punch is retaining from the InnSpired estate (the "Retained Estate").

The cash consideration for the Sale will be used to reduce net debt. Completion of the Sale is expected in January 2005.

Information on the Disposal Estate

The Disposal Estate comprises 545 pubs which are non-core to Punch. The pubs in the Disposal Estate, which average Outlet Profit(1) of £29,000 per annum, are generally less profitable than the pubs in the Retained Estate.

For the 12 months ended 30 October 2004, the Disposal Estate generated unaudited Outlet Profit of £15.7 million and earnings before interest, tax and depreciation(2) of £12.9 million. The net book value of the Disposal Estate is £125 million before any fair value adjustment associated with Punch's acquisition of InnSpired.

The consideration represents an exit multiple of 10.3x October 2004 Outlet Profit, which compares favourably to Punch's purchase price for the entire InnSpired business of 8.2x May 2004 Outlet Profit.

(1) Outlet Profit is defined as house level profit before central overhead.
(2) EBITDA is defined as Outlet Profit less central overhead (calculated on a pro-rata basis).

Information on the Retained Estate

The Retained Estate comprises 471 stable, cash-generative outlets, with strong representation in the South of England (65%) and average Outlet Profit of £52,000 per annum, reflecting the high quality of these pubs. In addition, there is substantial scope for Punch to extend its management and investment skills into the Retained Estate.

The Retained Estate will be absorbed into the Punch business, on completion, in January 2005.

Giles Thorley, Chief Executive of Punch Taverns plc, commented:

This transaction demonstrates Punch's ability to create value by acquiring pub assets, retaining those that meet our criteria and disposing profitably of the remainder, thereby further enhancing our estate.

"The InnSpired pubs being retained share the stable and sustainable business characteristics of Punch's pubs providing enduring and evolving appeal in the community now and in the future."

Ends