Wed 12th Nov 2014 - Punch reports underlying Ebitda of £205m Punch reports underlying Ebitda of £205m: Punch Taverns has reported underlying Ebitda of £205 million (2013: £216 million) in the 53 weeks to 23 August 2014. Profit before tax was £69 million (including £30 million of profits attributable to bond purchases in H1) compared to £49 million in 2013 where there were no profits attributable to bond purchases). It has begun a search for a new chief executive, with an announcement expected in early 2015. The core estate of 2,925 pubs saw like-for-like net income up 1.3%, with growth for five consecutive quarters, with new licensee applications up 20% on the prior year. There was a £43 million of investment spend in the core estate at an average of circa £100,000 per pub – there is a pipeline of 820 investment opportunities within the estate. The first full year of the New Business Development team is delivering double-digit sales growth. The non-core estate of 884 pubs has seen 116 pubs transferred to the core estate from the start of the financial year. Punch’s disposal programme is on track with the disposal of 285 pubs (including 65 from the core estate), realising net proceeds of £111 million, at a multiple of 19 times Ebitda. A number of non-underlying items, the vast majority of which are non-cash, were recognised during the period, resulting in a net non-underlying loss after tax of £236 million, including a £27m charge for capital restructuring costs. Punch reminded the market that its capital restructuring on 8 October 2014 delivered a £0.6 billion reduction in total net debt. It added: “A robust balance sheet (is) now in place: Proforma net debt to Ebitda ratio reduced to circa 7.7 times; no bank debt, long-term amortising bonds with no term repayments until 2021 at the earliest. (Punch is a) highly cash generative business with £200 million of net deleveraging targeted over the next three years.” Executive chairman Stephen Billingham said: “We have returned the core estate to like-for-like growth and delivered underlying profits for the year in line with guidance. We have also made a positive start to the new financial year with the core estate in like-for-like net income growth of 0.8% and have realised £43 million of proceeds from the sale of non-core and gold-brick sites. We believe that the capital restructuring completed last month creates a robust and sustainable debt structure, providing stability to the business that will lead to further deleveraging through strong cash generation. We can now focus on improving our business through investment in our pubs, attracting the best partners to work with us and providing industry leading support to our partners to launch and develop their pub businesses.” The core estate accounted for 88% of Punch outlet Ebitda with an average net income per pub of approximately £74,000 per annum. The non-core estate comprised 884 pubs at the year-end with a book value of £227 million and accounted for 12% of Punch outlet Ebitda. These pubs have a much lower average net income per pub at approximately £37,000 per annum, are predominantly small, with low turnover and are wet-led. Punch reported that its Matthew Clark joint venture, where it owns 50%, has gross annual revenue of £810 million and approximately 20,000 customers. The business performed strongly in the year delivering £19 million of Ebitda, with a £6.2 million post-tax contribution to Punch, up from £4.8 million in the prior year. Punch received a dividend of £5.0 million in the period from Matthew Clark, which represented the first dividend since April 2011. Punch equity in the Matthew Clark joint venture is held on the Group balance sheet as at the year-end at £50.5 million. Of current trading, the company stated: “In the first ten weeks of the new financial year to 1 November 2014 core estate like-for-like net income was up 0.8%. Our disposal programme has started strongly with £43 million of proceeds from the disposal of 102 pubs, at a multiple of 23 times Ebitda and £14 million above book value. Looking ahead to the rest of the year, while we expect the UK consumer environment to remain challenging in the near-term, we have a clear operational plan and are in a strong position to deliver underlying Ebitda for the full year of between £193 million and £200 million.” Douglas Jack, of Numis Securities, said: “The shares, on 9.0x EV/Ebitda are at a large discount to Enterprise Inns’ 10.1x EV/Ebitda (both 2015E), reflecting Punch’s equity overhang from the debt-to-equity swap. With Punch offering greater equity upside from debt reduction, we expect its valuation discount to Enterprise to narrow over the medium-term.”