Punch reports all three divisions delivering like-for-like sales growth, current trading “encouraging”: Punch Pubs & Co, the Fortress Investment Group-backed business, has reported that all three of its divisions (leased and tenanted, management partnership and Laine Pub Co) delivered like-for-like sales growth for the 52 weeks to 13 August 2023 when compared with the prior year. The Clive Chesser-led business, said that trading momentum has continued in the eight weeks post-year end to 8 October 2023 with strong like-for-like sales growth across all three divisions. It said Q1 trading to date has been “encouraging with profitability materially ahead of 2023”. At the end of the quarter the group owned 1,248 pubs, of which 98.7% were open and trading at the quarter end. The group said it expects to benefit from inflation positively impacting Leased and Tenanted net income together with the improving margins and the benefit of maturing sales and profitability in the 71 pubs converted to its Management Partnership estate since August 2021. For the 52 weeks to 13 August 2023 total revenue was £313.5m compared to £284.4m in the prior year period of 52 weeks to 14 August 2022, with the conversion of pubs from Leased & Tenanted over to its Management Partnership estate being the “predominant driving force leading to the increase”. Over the 52-week period Management Partnership revenue increased 24% from £112.8m to £139.8m. It said all three of its divisions (Leased and Tenanted, Management Partnership and Laine) delivered like-for-like sales growth for the 52-week period when compared to the prior year. Underlying outlet Ebitda for the pub estates (Management Partnership, Leased & Tenanted and Laine) before central costs increased by £1.1m to £106.1 million “despite the negative year-on-year impact from VAT and energy costs”. Ebitda for the period was £79.1m (prior year 52 weeks: £81.3m) of which £81.3 million was classed as underlying Ebitda (prior year 52 weeks: £83.3m). The company said that the prior year period results included the benefit of the temporary reduced rate for VAT on food and non-alcoholic drinks, and lower energy costs, with a combined impact of circa £4m over the 52-week period. It said: “Underlying Ebitda for the 52 weeks to 13 August 2023 of £81.3m compares positively to the £76.0m of adjusted underlying Ebitda from the wider Punch Group in the year to August 2019, being the most recent financial year prior to the covid pandemic.” In the 52-week period the group spent £30.8m (prior year 52 weeks: £34.3m) on expansionary and maintenance capital. It said: “As noted in the previous quarter’s report, having converted 71 pubs from Leased and Tenanted across to the Management Partnership division since August 2021, the rate of pub conversions has slowed down as we take time to select and build the next pipeline of pubs for transformational investment and conversion, taking learnings from the successful conversions we have completed to date. We are in the process of finalising the next tranche of pubs to convert to the Management Partnership model, having identified a population of up to 70 pubs that would be suitable for conversion. Future conversions would be expected to achieve a return on investment of between 20% and 30% and would be phased progressively over a three-year period. During the most recent quarter we have continued to review our estate and have identified a small number of pubs that we are anticipating to dispose within the next 12 months. These assets are segregated within Assets Held for Sale and total £12.6m. Net proceeds from the sale of properties in the period was £11.2m (prior year 52 weeks: £8.9m), at £0.6m above book value (prior year 52 weeks: £2.4m). There were no acquisitions in the period (prior year 52 weeks: £4.9m). After having realised £11.2m from property disposals in the period, property assets decreased in value by £2.5m to £893.0m (14 August 2022: £895.5m). The group’s policy is to revalue its properties on a five-year rolling basis. For the year ended 13 August 2023 20% of the estate was valued by Savills (UK) Limited, independent chartered surveyors. The impact on the financial statements of the revaluation in the current year is to decrease the net book value of property, plant and equipment by £2.8m (£20.9m being charged to operating profit and a £18.1 million credit recognised in the Statement of Other Comprehensive Income). The group benefits from operating a predominantly freehold estate, with 93% of the pub portfolio owned on a freehold or long leasehold (greater than 50 years remaining lease term) basis. The current net book value of properties at £893.0m compares favourably to the full estate property valuation undertaken ahead of the High Yield Bond launch in May 2021 at £849.7m. The increase in property values largely reflecting the purchase of the leased and tenanted pub estate from Youngs Pub Company in 2021, continued investment in the estate, and a small number of pub acquisitions and disposals.” The group said it generated a net cash inflow from operating activities for the period of £81.4m (prior year 52 weeks: £71.7m). As at the 13 August 2023 period end date the group had £62.9m of available liquidity (14 August 2022: £52.6m), represented by £12.9m of cash and cash equivalents and £50.0m undrawn against the revolving credit facility.