Resilient performance in a challenging market

Punch Taverns plc (“Punch” or “the Group”), the UK’s leading pub operator of over 8,400 leased, tenanted and managed pubs, today announces preliminary results for the 53 weeks ended 23 August 2008.

Highlights

Financial Performance*

• Profit before tax of £262 million (2007: £282 million) in line with market expectations, reflecting a 7% reduction in the average size of the estate following non-core divestments
• EBITDA of £623 million (2007: £664 million)
• Basic earnings per share of 80.2p (2007: 84.4p)
• Strong cash flow generation with free cash flow before investing activities of £298 million; year end cash balance of £321 million (2007: £268 million)
• Interest cover maintained at 2x EBITDA and no refinancing requirements before December 2010

Statutory Results (after exceptional items)**

• Basic loss per share of 24.3p (2007 earnings per share: 104.9p) following a non-cash exceptional charge of £276 million and a cash exceptional charge of £2 million
• Exceptional items include a charge for pub impairment and the mark-to-market of certain interest rate swaps

Operating Performance*

• Group EBITDA per pub at £72k, similar to prior year
• Average EBITDA per pub up 4% in the leased estate; like-for-like contribution down 3.4%
• Majority of licensees are performing well, 89% of our leased estate is on substantive leases.  Average licensee profitability remains in line with last year
• Average EBITDA per pub down 4% in the managed estate; like-for-like sales down 3.3%
• Continued investment with £133 million spent on enhancing over 1,000 pubs across the leased and managed estates

*   before exceptional items
** full analysis of exceptional items is shown in notes 3 and 4 to the Financial Statements
Throughout this document, the results are positively impacted by an additional week’s trading relative to last year; like-for-like measures and profit per pub figures are shown before exceptional items and on an equivalent 52 week basis

Capital Structure

• Since the year end, £171 million of Group debt has been repurchased and cancelled at a cash cost of £144 million, including the repayment and cancellation of £68 million (24%) of the Convertible Bond, increasing the certainty of repaying the Convertible due December 2010
• Gross debt has been reduced by £243 million (4.9%) since the August 2007 year end
• £50 million bank facility renewed and extended to October 2010; currently undrawn
• Significant headroom to financial debt covenants
• Repurchase and cancellation of £77 million Punch A debt significantly increases headroom against its restricted payment test
• Group debt supported by pub assets valued at £2bn more than the nominal value of net debt

Giles Thorley, Chief Executive of Punch Taverns plc, commented
 
“Our operational performance has been robust, delivering strong cash flow generation and an underlying profit of £262 million before tax which was in line with market expectations.

“We have secure long-term debt and no near-term requirement for funding.  We have also proactively taken prudent steps in utilising cash to reduce our level of debt, whilst maintaining investment in our pubs to further improve what is one of the most diversified and highest quality pub estates in the country. 

“Whilst we are not immune to the current difficult trading conditions, the steps we have taken over the last two years have strengthened our position and leave us well placed operationally to capitalise on any improvement in the wider consumer environment.” 

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