Pub groups are under pressure after Punch Taverns said its finance director was leaving and Enterprise Inns reported a 16% drop in full year profits.
Punch shares have fallen 5.65p to 62.45p, an 8% decline, after announcing that Phil Dutton will step down from the board after the company's annual meeting in December and leave in March, after three years. Punch said it had begun the search for a successor, but there was no real detail on the change. Punch has run up huge debts and replaced its chief executive with Ian Dyson, former finance director of Marks & Spencer. Seymour Pierce analyst Hugh-Guy Lorriman said:
The [Punch] statement is thin on information with no explanation as such for the change. The news comes on top of much wholesale management change in the highly leveraged UK pub industry. The finance director at Enterprise Inns has recently announced he is leaving. Punch's chief executive left last year and has been replaced. The finance director, chairman and much of the senior team at Mitchells & Butlers has been changed over the last year. Ted Tuppen, chief executive at Enterprise Inns, looks like a survivor.
The situation at Punch is volatile. We believe it is high risk. We remain sellers.
Analysts have mixed views on that. Seymour Pierce's Lorriman has a sell rating on the shares, as does Greg Johnson at Shore Capital, who said:
We expect further modest declines in pretax profit in 2011 to £165m to reflect the continued disposal schedule. We remain concerned over the debt structures at Enterprise noting that the core £1.5bn secured bonds is unlikely to upstream cash from 2013 as the amortisation schedule kicks-in and hence the potential to reinstate the dividend until financial markets improve.
Results, on forecast, show the improvement in the second half which was expected. However, the non-resumption of the dividend and the property write-downs of 5% are faintly disappointing. Enterprise continues to make progress although there is more to do.
