TIDMPUB
RNS Number : 7737W
Punch Taverns PLC
12 November 2014
PUNCH TAVERNS PLC
("Punch" or "the Group")
Preliminary Results for the 53 weeks to 23 August 2014
Underlying financial performance(*) - in line with guidance
-- EBITDA of GBP205 million (2013: GBP216 million)
-- Profit before tax of GBP69 million (including GBP30 million
of profits attributable to bond purchases in H1) (2013: GBP49
million; no profits attributable to bond purchases)
Operational highlights
-- Delivering the business plan with steady progress in all areas of the business
Core estate (2,925 pubs):
-- Like-for-like net income(**) up 1.3%, with growth for five consecutive quarters
-- New partner applications up 20% on the prior year
-- GBP43 million of investment spend in the core estate at an average of c.GBP100,000 per pub
-- First full year of the New Business Development team, delivering double digit sales growth
Non-core estate (884 pubs) and disposal programme:
-- 116 pubs transferred to the core estate from the start of the financial year
-- Disposal programme on track with the disposal of 285 pubs
(including 65 from the core estate), realising net proceeds of
GBP111 million, at a multiple of 19 times EBITDA
Capital Restructuring
-- Capital restructuring successfully completed on 8 October
2014 delivering a GBP0.6 billion reduction in total net debt
-- Robust balance sheet now in place: Proforma net debt to
EBITDA ratio reduced to c.7.7 times; no bank debt, long-term
amortising bonds with no term repayments until 2021 at the
earliest
-- Highly cash generative business with GBP200 million of net
deleveraging targeted over the next three years
Stephen Billingham, Executive Chairman of Punch Taverns plc,
commented:
"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 GBP43 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."
12 November 2014
(*) before non-underlying items
(**) net income represents revenue less cost of drink sales
(gross profit); growth rates are quoted on a 52 week versus 52 week
basis to exclude the benefit of an extra week trading in FY
2014
Enquiries:
Results: Punch Taverns plc Tel: 01283 501
948
Stephen Billingham, Executive Chairman
Steve Dando, Finance Director
Media: Brunswick Tel: 020 7404
5959
Jonathan Glass, Mike Smith
The preliminary results announcement and presentation will be
available on the Punch website www.punchtavernsplc.com
An audio webcast of the presentation (commencing at 9.00am
today) will also be available on the investor section of Punch's
website.
Forward-looking statements
This report contains certain statements about the future outlook
for Punch. Although we believe our expectations are based on
reasonable assumptions, any statements about future outlook may be
influenced by factors that could cause actual outcomes and results
to be materially different.
EXECUTIVE CHAIRMAN'S STRATEGIC REVIEW
MARKET OVERVIEW AND STRATEGY
Punch is a leading leased and tenanted pub company in the United
Kingdom. At 23 August 2014, Punch owned 3,809 pubs, 96% of which
are held on a freehold or long leasehold basis. In addition, Punch
has a 50% shareholding in the Matthew Clark business, the leading
independent drinks wholesaler and distributor in the UK
on-trade.
Punch's aim is to be the UK's best leased and tenanted pub
business with a focus on making each of its core pubs the best of
its type in its marketplace.
Our market
Punch operates in the UK pub industry, which itself is part of
the wider drinking-out and eating-out market that also includes
restaurants, social clubs, nightclubs and fast food outlets. The UK
pub industry currently consists of c.47,000 licensed public houses,
and going to pubs continues to be one of the most popular leisure
activities in the UK.
The UK pub industry faces a number of challenges due to changes
in demographics, legislation, consumer behaviour and the wider
economic climate, our market remains a major contributor to the
local and regional economy, and we believe that there are exciting
opportunities available.
We are committed to a strategic focus on pubs with the potential
to anticipate and meet local demand. We are investing in upgrading
pubs to provide a higher quality experience with an extended,
targeted food and entertainment offer, and we offer a vast range of
support to our partners to give them the best possible opportunity
to succeed in this challenging market
Our business model
We operate a leased pub business model whereby the pubs that we
own are leased out to our partners, independent business men and
women, who run our pubs.
The leases that our partners take, offer a flexible split
between rent and tied drink margin. There is a slightly higher risk
for the partner if they opt for a higher rent and higher drinks
discount (as opposed to lower rent and lower drinks discount), but
they could benefit from lower beer prices, further rewarding volume
outperformance.
The business model is simple and adaptable with no single pub or
any single partner accounting for more than 1 per cent. of the
Group's operating profit. Each partner is able to adapt quickly to
local market conditions without the bureaucracy of a centralised
decision-making process.
The tied leased pub model has been in operation for many years
and offers a low cost opportunity for prospective partners to take
on and run their own pub. We and our partners have a mutual
interest in making each pub successful as our profits are
ultimately linked. Punch remains committed to a sustainable future
for British pubs and the role they play in communities across the
UK.
Our strategy
Given the changing market dynamics, Punch's strategy is to focus
on its core estate, which represents a higher quality, well-located
portfolio of 2,925 pubs (as at 23 August 2014) which is suitably
positioned to adapt to changing market conditions and support
sustainable long-term growth for Punch and our partners.
The core estate aims to drive sustainable growth by making each
pub the best of its type in its marketplace. The focus is on
recruiting the best partners, investment to optimise sales, and the
provision of field support to our partners.
The strategy for the non-core estate (which comprised 884 pubs
as at 23 August 2014) is to maximise short-term returns prior to
disposal. These pubs are predominantly small, wet led and have a
much lower average net income per pub. Given the limited scope for
investment, these pubs are more likely to be impacted by the
long-term decline in drinking out and as a result are expected in
time to generate more value through disposal than retention.
Approximately 1,300 non-core pubs have been disposed of since the
division was created in March 2011.
Around half of the non-core estate is let on substantive
agreements and all non-core pubs continue to have access to the
same operational support infrastructure as our core pubs, to assist
in driving operational performance until the decision is made to
dispose of them.
CAPITAL STRUCTURE
The capital restructuring which was completed on 8 October 2014
(post the 2014 year end) reduced net debt by some GBP0.6 billion
(including the mark-to-market on interest rate swaps), creating
what we believe to be a robust and sustainable long-term debt
structure for the Group.
The Group is financed solely by long-term securitised debt and
has no short-term bank borrowings. Proforma net debt on completion
of the capital restructuring of GBP1,508 million is secured against
a largely freehold pub estate which was independently valued during
August 2014 at GBP2,133 million (after adjusting for GBP32 million
of pub disposals between August 2014 and completion of the
refinancing).
The restructured debt has a materially lower contractual
amortisation requirement with scheduled contractual amortisation of
just GBP205 million over the next five years following the
refinancing, with no term repayments until 2021.
The proforma net debt to EBITDA ratio on completion of the
refinancing was c.7.7 times, based on LTM EBITDA for the closing
pub estate. The Group generates significant levels of cash flow
(having generated GBP216 million of cash flow before debt financing
in the 2014 financial year) and the strong level of cash generation
is expected to lead to further deleveraging in the coming years,
with GBP200 million of net deleveraging targeted over the next
three years.
BUSINESS REVIEW
We have delivered underlying financial performance for the year
in line with our previously announced guidance. The core estate has
now been in growth for five consecutive quarters and we have
delivered a 3% improvement in average profit per pub across the
entire pub estate. Our results have been driven by the increased
level of operational support that we are providing to our
partners.
In the 53 weeks ended 23 August 2014, Punch generated EBITDA of
GBP205 million (excluding non-underlying items):
Core Non-core Central Punch
--------------------- -------- --------- --------- --------
Average pub numbers 2,960 993 - 3,953
--------------------- -------- --------- --------- --------
Revenue GBP380m GBP68m - GBP448m
--------------------- -------- --------- --------- --------
Net income GBP223m GBP38m - GBP261m
--------------------- -------- --------- --------- --------
EBITDA GBP206m GBP29m GBP(31)m GBP205m
--------------------- -------- --------- --------- --------
Core estate - continued growth
The core estate accounted for 88% of Punch outlet EBITDA with an
average net income per pub of approximately GBP74,000 p.a. Trading
has been in line with our expectations with like-for-like net
income showing good growth at 1.3% for the year, having now
recorded like-for-like growth for five consecutive quarters.
Our strategy for the core estate in order to drive sustainable
growth is based around recruitment, investment and partner support
and development:
(i) Recruiting the best partners:
At the heart of making each pub the best of its type in its
marketplace is recruiting the best partner to run that pub. We have
a dedicated recruitment team ensuring that the best possible
partners are recruited from the high level of applications that we
receive. We offer innovative partnership agreements to our partners
with flexible rent and drink discount levels that support the pub
business so that our partners can achieve their individual business
goals.
The percentage of core pubs on substantive lease and tenancy
agreements at the end of the year was 95% and has been within our
target range of between 93% and 95% throughout the year. The leased
pub model offers an attractive low cost method of entry into the
pub trade for entrepreneurs and we have seen yet another increase
in applicant numbers, up 20% on the previous year.
(ii) Pub investment:
We are committed to developing an estate of well invested, high
quality pubs representing the best leased pubs in the UK.
Underlying this commitment, we expect to invest in approximately
400 core pubs per year. We have an experienced food development
team, supported by dedicated marketing and training teams, which
alongside the targeted capital investment will drive further food
penetration in the core estate over the coming years.
We have spent GBP43 million investing in the core estate at an
average of approximately GBP100,000 per pub, transforming the
customer offering in these pubs. Of the pubs in the core estate,
37% have now benefitted from a meaningful investment of over
GBP40,000 in the last five years. Our target is for 65% of the core
estate to have meaningful investments and we have a strong pipeline
of investments, taking advantage of this opportunity.
(iii) Partner support and development:
We want to offer the best level of partner support in the sector
and have invested heavily in this area in the last year in
supporting the development of our partners in developing their
businesses.
2014 was the first full year with the New Business Development
team in place. This specialist team was put in place to support all
new partners with their initial investment, the launch of their pub
and throughout their first six months of trading. This support
focusses on the retail offer, aims to drive sales, improve partner
profitability and reduce the level of new partner failures. The
first year has been encouraging with average volumes for the New
Business Development team being ahead of target and in double-digit
growth.
We are also increasing the levels of specialist training that we
provide to develop our partners and their businesses. In the last
financial year we provided a record level of training, reaching
3,600 partners and members of their staff.
We ensure that new partners are set up for success with our
Foundation Week - a comprehensive training programme which provides
all the skills needed to run a successful pub business including
the support they will receive from Punch. Thereafter partners have
access to a variety of workshops and e-learning materials covering
areas such as marketing and merchandising, finance and social
media. These workshops are also available to existing partners all
of which are free of charge.
The product offers, marketing and promotional support we offer
our partners through the Punch Buying Club continue to prove
extremely popular, with 64% of our partners attending our industry
leading roadshows in 2014, an increase of 19% in demand for our
design and print service and record participation in sales
activities such as the UK's largest darts competition with 1,136
pubs taking part and the national quiz competition with 1,166 pubs
taking part, both increases on the previous year. Punch also
received national recognition from the British Beer & Pub
Association being awarded the "Beer Champion of 2014" ahead of
strong brewer competition.
Non-core estate - disposal programme on track
The non-core estate comprised 884 pubs at the year end with a
book value of GBP227 million and accounted for 12% of Punch outlet
EBITDA. These pubs have a much lower average net income per pub at
approximately GBP37,000 p.a., are predominantly small, with low
turnover and are wet-led.
(i) Maximising short-term returns:
While non-core pubs remain in our portfolio, we are committed to
driving operating performance and maximising the profits from these
outlets. At the start of the 2014 financial year, 116 pubs were
returned to the core estate, following improvement in performance.
These pubs had an average net income per pub of c.GBP59,000
p.a.
Pubs remaining in the non-core estate are managed under the
three categories of (i) protect (403 pubs), (ii) sell-later (270
pubs) and (iii) sell-now (211 pubs). We have successfully
stabilised performance in the year for the pubs within the protect
category, delivering a like-for-like net income growth of 0.4%,
with an average profit per pub of GBP38,000 p.a.
As at 23 August 2014 211 pubs in the sell-now category were
being actively marketed for disposal. These pubs have an average
profit per pub of GBP11,000 p.a. and a book value of GBP38
million.
(ii) Maximising value on disposal:
During the year we sold 285 pubs (including 65 pubs from the
core estate for GBP58 million), together with other assets for
proceeds of GBP111 million, ahead of book value, at a disposal
multiple of 19 times EBITDA.
Expectations for the next financial year are for disposal
proceeds to be not less than GBP60 million, following a strong
start to the new year with GBP43 million of proceeds realised in
the first ten weeks, GBP10 million of which was due to the delayed
completion of the sale of a package of five core London pubs
announced on 3 June 2014. The disposal programme for the remainder
of the next financial year (which is expected to be at
significantly reduced rates of disposal) will be focussed on the
disposal of tail end pubs in the non-core estate.
Matthew Clark joint venture
This business (our 50% joint venture with Accolade) has
significant scale in its marketplace as the leading independent
drinks wholesaler and distributor to the UK on-trade, with gross
annual revenue of GBP810 million and approximately 20,000
customers. Matthew Clark has a strong and experienced management
team with plans for continued growth from which the Group expects
to benefit.
The business performed strongly in the year delivering GBP19
million of EBITDA, with a GBP6.2 million post-tax contribution to
Punch, up from GBP4.8 million in the prior year. Punch received a
dividend of GBP5.0 million in the period from Matthew Clark which
represented the first dividend since April 2011.
Punch equity accounts for the Matthew Clark joint venture, and
the investment is held on the Group balance sheet as at the year
end at GBP50.5 million.
Regulatory
Punch remains committed to a sustainable future for British pubs
and the role they play in communities across the UK. Ultimately, we
will only be successful if our pubs and our partners succeed. We
are proud that we have led the way in improving the support for pub
tenants across the sector and believe that the level of support
they receive extends significantly beyond that enjoyed by other
commercial tenants.
Given the significant progress that has been made in pub
landlord / tenant relations in recent years, we do not believe that
the introduction of a Government backed Statutory Code of Practice
and Adjudicator is necessary. However, we remain committed to
working with the Department of Business Innovation and Skills to
deliver a workable Statutory Code.
MANAGEMENT
Following the successful completion of the capital
restructuring, we have commenced the search for a new Chief
Executive Officer (CEO) and hope to be in a position to announce
the appointment in early 2015. I will remain as Executive Chairman
until the CEO takes office, at which point I will return to the
role of Non-Executive Chairman.
FINANCIAL REVIEW
Results for the 53 weeks ended 23 August 2014:
Underlying results 2014 2013
GBPm GBPm
------------------------------- -------- --------
Revenue 448.1 457.6
Operating costs (249.5) (246.8)
Share of post-tax profit
from joint venture 6.2 4.8
EBITDA 204.8 215.6
Depreciation and amortisation (11.0) (12.3)
Net finance costs (125.2) (154.7)
Profit before taxation 68.6 48.6
Tax (8.2) (10.8)
Net earnings 60.4 37.8
------------------------------- -------- --------
Basic EPS 181.5p 113.7p
------------------------------- -------- --------
The financial year comprised the 53 weeks to 23 August 2014 with
results positively impacted by an extra week's trading relative to
last year. Underlying profit performance is in line with management
expectations. Results have benefited from the ongoing investment
programme but have also been impacted by the ongoing disposal of
non-core pubs and selected disposals of core pubs.
August 2013 results have been restated to reflect amendments to
accounting policies for pensions following the amendment to IAS 19
'Employee Benefits'. Full details of the impact of this (which had
the effect of reducing 2013 profit after tax by GBP0.3 million) can
be seen in the accounting note 1 to the financial statements.
Underlying results 2014 2013 change
--------------------------- ------- ------- -------
Average pub numbers 3,953 4,361 (9)%
Year end pub numbers 3,809 4,096 (7)%
--------------------------- ------- ------- -------
GBPm GBPm
Revenue
Drink 326.2 329.4
Rent 110.9 117.4
Machine income & other 11.0 10.8
Total revenue 448.1 457.6 (2)%
--------------------------- ------- ------- -------
Gross margin
Drink 140.0 137.7
Rent 110.3 116.9
Machine income & other 10.8 10.8
--------------------------- ------- ------- -------
Total gross margin 261.1 265.4 (2)%
--------------------------- ------- ------- -------
Pub and central costs and
JV income (56.3) (49.8)
--------------------------- ------- ------- -------
EBITDA 204.8 215.6 (5)%
--------------------------- ------- ------- -------
Revenue declined by 2% to GBP448 million, with a 5% decline in
underlying EBITDA which reflects the increased investment in pub
repair spend and increased costs in the provision of partner
training and field resource. This compares to a reduction in the
average estate size of 9%. The positive impact of the additional
week's trading, which added GBP4 million to the full year EBITDA,
reflects a slightly better decline in EBITDA compared to the
decline of estate size.
Net underlying financing costs decreased by 19% to GBP125
million primarily due to profits on loan note redemptions of GBP30
million. The weighted average interest rate for the Group's
borrowings, including the impact of interest rate swaps, at the
balance sheet date was 7.2%. Underlying profit before tax was GBP69
million, an increase of 41% on last year.
Taxation
The tax charge before non-underlying items of GBP8 million
equates to an effective tax rate (excluding joint venture) of 13%,
reflecting the loan note redemption profits which were non-taxable.
We received GBP3 million of corporation tax repayments in the
period from consortium relief claims. The availability of sizeable
capital allowance pools amounting to c.GBP230 million (generated
from our investment programme in community pubs) at the period end
is expected to result in no corporation tax payments being due for
the 2014/15 year.
Non-underlying items
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 GBP236 million. The principal
items are set out below:
-- GBP27 million charge for capital restructuring costs;
-- GBP51 million charge for asset write-downs, following a
review in the year of the net realisable value of the non-current
assets classified as held for sale, and the remaining assets in the
wider non-core estate;
-- GBP4 million goodwill charge on disposal of core pubs;
-- GBP26 million charge for the mark-to-market movement in value of interest rate swaps;
-- GBP214 million charge relating to the recycling of the hedge
reserve relating to the Punch A interest rate swaps following its
reclassification as ineffective during the period, due to the
announcement of the capital restructuring proposals;
-- GBP11 million profit on disposal of properties; and
-- GBP3 million credit on the release of provision for share schemes.
The tax effect of all of these items, together with the
resolution of prior year tax matters, gave rise to a tax credit of
GBP73 million.
Dividends
The Board is not proposing to recommend a final dividend for the
year.
Capital structure and cash flow
On the 8 October 2014 (post the 2014 year end) the Group
announced the successful completion of the capital restructuring
which was launched on 18 August 2014.
The nominal value of net debt following the restructuring
decreased by GBP576 million since the year end (including the
mark-to-market on interest rate swaps on exchanged notes) to
GBP1,508 million. Gross securitised debt of GBP1,604 million
following the restructuring has an initial effective interest rate
of 7.7%.
Net borrowings comprise:
8 October 23 August
2014 2014
GBPm GBPm
---------------------------- ------------ ------------
Cash(*) (96.3) (315.6)
Securitised debt due
< 1 year 45.1 74.9
Securitised debt due
> 1 year 1,559.2 2,158.8
Swap MtM on exchanged
notes - 165.6
Nominal value of net
debt 1,508.0 2,083.7
---------------------------- ------------ ------------
* after allowance for payment of all restructuring
costs at 8 October 2014
The Group has been cash generative across the year at the
operational level. This strong cash generation of GBP158 million
has enabled the Group to continue to invest in the Punch estate
with GBP52 million of capital investment. Cash flow has been
further enhanced by GBP111 million of cash generated from
disposals, resulting in a cash inflow before debt financing of
GBP216 million.
Share capital
As at 23 August 2014 Punch's issued share capital amounted to
665.8 million shares. Subsequent to the year end, Punch issued
3,771.2 million new ordinary shares on 8 October 2014 in
consideration for the debt reduction delivered under the terms of
the capital restructuring, increasing the issued share capital on
that date to 4,437.0 million ordinary shares.
On 13 October 2014 Punch effected a share consolidation on the
basis of 1 consolidated ordinary share for every 20 existing
ordinary shares. Following the share consolidation the issued share
capital on that date amounted to 221.9 million ordinary shares.
For the purpose of calculating the earnings per share measure,
the ordinary shares outstanding during the year (and the prior
year) has been adjusted for the 1 for 20 share consolidation. The
basic weighted average number of shares applied to the earnings per
share calculation is therefore 33.3 million for current year (prior
year: 33.3 million).
Current trading and guidance for 2014/15
In the first 10 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 GBP43 million of proceeds from
the disposal of 102 pubs, at a multiple of 23 times EBITDA and
GBP14 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 GBP193
million and GBP200 million.
CONSOLIDATED INCOME STATEMENT
for the 53 weeks ended 23 August 2014
53 weeks to 23 August 2014 52 weeks to 17 August 2013(Restated)
---------------------------- ------ -------------------------------------- --------------------------------------
Non-underlying Non-underlying
items items
Underlying (note Underlying (note
items 3) Total items 3) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ ----------- --------------- -------- ----------- --------------- --------
Revenue 2 448.1 - 448.1 457.6 - 457.6
Operating costs before
depreciation and
amortisation (249.5) (27.3) (276.8) (246.8) (8.3) (255.1)
Share of post-tax
profit from joint
venture 6.2 - 6.2 4.8 - 4.8
---------------------------- ------ ----------- --------------- -------- ----------- --------------- --------
EBITDA(1) 204.8 (27.3) 177.5 215.6 (8.3) 207.3
Depreciation and
amortisation (11.0) - (11.0) (12.3) - (12.3)
Profit on sale of
property, plant and
equipment and non-current
assets classified
as held for sale - 10.7 10.7 - 10.5 10.5
Impairment - (50.8) (50.8) - (10.2) (10.2)
Goodwill charge - (3.6) (3.6) - (3.8) (3.8)
---------------------------- ------ ----------- --------------- -------- ----------- --------------- --------
Operating profit
/ (loss) 193.8 (71.0) 122.8 203.3 (11.8) 191.5
Finance income 36.4 3.3 39.7 7.0 3.3 10.3
Finance costs (161.6) (214.7) (376.3) (161.7) (39.9) (201.6)
Movement in fair
value of interest
rate swaps - (26.4) (26.4) - 16.4 16.4
Profit / (loss) before
taxation 68.6 (308.8) (240.2) 48.6 (32.0) 16.6
UK income tax (charge)
/ credit 4 (8.2) 73.3 65.1 (10.8) 14.9 4.1
---------------------------- ------ ----------- --------------- -------- ----------- --------------- --------
Profit / (loss) for
the financial period
attributable to owners
of the parent company 60.4 (235.5) (175.1) 37.8 (17.1) 20.7
---------------------------- ------ ----------- --------------- -------- ----------- --------------- --------
Earnings per share 5
- basic (pence) 181.5 (526.1) 113.7 62.2
- diluted (pence) 181.5 (526.1) 113.7 62.2
---------------------------- ------ ----------- --------------- -------- ----------- --------------- --------
(1) EBITDA represents earnings before depreciation and
amortisation, profit on sale of property, plant and equipment and
non-current assets classified as held for sale, impairment,
goodwill charge, finance income, finance costs, movement in fair
value of interest rate swaps and tax of the Group.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 53 weeks ended 23 August 2014
Restated
53 weeks 52 weeks
to 23 August to 17 August
2014 2013
Notes GBPm GBPm
------------------------------------------------ ------- --------------- ---------------
(Loss) / profit for the period attributable
to owners of the parent company (175.1) 20.7
--------------------------------------------------------- --------------- ---------------
Items that are or may be recycled subsequently
to the income statement
(Losses) / gains on cash flow hedges (6.3) 58.5
Transfers to the income statement on
cash flow hedges 214.4 39.1
Tax relating to components of other
comprehensive income that can be reclassified
into profit or loss (53.2) (28.1)
Items that cannot be recycled subsequently
to the income statement
Remeasurements of defined benefit pension
schemes (1.3) (4.0)
Other items that cannot be recycled (0.9) -
subsequently to the income statement
Tax relating to components of other
comprehensive income that cannot be
reclassified into profit or loss 0.3 0.9
Other comprehensive profits for the
period 153.0 66.4
Total comprehensive (loss) / income
for the period attributable to owners
of the parent company (22.1) 87.1
--------------------------------------------------------- --------------- ---------------
CONSOLIDATED BALANCE SHEET
at 23 August 2014
23 August 17 August
2014 2013
Notes GBPm GBPm
--------------------------------------- ------- ---------- -----------
Assets
Non-current assets
Property, plant and equipment 2,297.4 2,397.2
Operating leases 4.0 5.8
Other intangible assets 0.7 0.4
Goodwill 172.6 176.2
Investment in joint venture 50.5 49.3
Other investments - 5.5
2,525.2 2,634.4
Current assets
Trade and other receivables 34.0 35.5
Current income tax assets 1.3 2.1
Non-current assets classified as held
for sale 69.8 76.5
Cash and cash equivalents 315.6 328.6
Restricted cash 315.0 315.0
------------------------------------------------ ---------- -----------
735.7 757.7
Total assets 3,260.9 3,392.1
------------------------------------------------ ---------- -----------
Liabilities
Current liabilities
Trade and other payables (99.9) (116.0)
Short-term borrowings (79.9) (68.1)
Cash-backed borrowings (315.0) (315.0)
Derivative financial instruments (38.2) (40.3)
Provisions (0.8) (3.6)
------------------------------------------------ ---------- -----------
(533.8) (543.0)
Non-current liabilities
Borrowings (2,189.9) (2,304.7)
Derivative financial instruments (240.3) (214.0)
Deferred tax liabilities (12.1) (22.0)
Retirement benefit obligations (4.3) (4.8)
Provisions (6.8) (8.0)
(2,453.4) (2,553.5)
Total liabilities (2,987.2) (3,096.5)
------------------------------------------------ ---------- -----------
Net assets 273.7 295.6
------------------------------------------------ ---------- -----------
Equity
Called up share capital 0.3 0.3
Share premium 455.0 455.0
Hedge reserve - (154.9)
Share based payment reserve 6.4 7.2
Retained earnings (188.0) (12.0)
------------------------------------------------ ---------- -----------
Total equity attributable to owners
of the parent company 273.7 295.6
------------------------------------------------ ---------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 53 weeks ended 23 August 2014
Share
based Restated
Share Share Hedge payment Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
Total equity at 18
August 2012 0.3 455.0 (226.1) 9.7 (30.7) 208.2
Profit for the period - - - - 20.7 20.7
Other comprehensive
gains / (losses)
for the period - - 71.2 - (4.8) 66.4
-------------------------- --------- --------- --------- --------- ---------- --------
Total comprehensive
income for the period
attributable to owners
of the parent company - - 71.2 - 15.9 87.1
Share based payments - - - (2.5) 2.8 0.3
-------------------------- --------- --------- --------- --------- ---------- --------
Total equity at 17
August 2013 0.3 455.0 (154.9) 7.2 (12.0) 295.6
Loss for the period - - - - (175.1) (175.1)
Other comprehensive
gains / (losses)
for the period - - 154.9 - (1.9) 153.0
-------------------------- --------- --------- --------- --------- ---------- --------
Total comprehensive
income / (loss) for
the period attributable
to owners of the
parent company - - 154.9 - (177.0) (22.1)
Share based payments - - - (0.8) 1.0 0.2
Total equity at 23
August 2014 0.3 455.0 - 6.4 (188.0) 273.7
-------------------------- --------- --------- --------- --------- ---------- --------
CONSOLIDATED CASH FLOW STATEMENT
for the 53 weeks ended 23 August 2014
53 weeks 52 weeks
to to
23 August 17 August
2014 2013
GBPm GBPm
----------------------------------------------- ------------ ------------
Cash flows from operating activities
Operating profit 122.8 191.5
Depreciation and amortisation 11.0 12.3
Impairment 50.8 10.2
Goodwill charge 3.6 3.8
Profit on sale of property, plant and
equipment and non-current assets classified
as held for sale (10.7) (10.5)
Share based payment expense recognised
in profit 0.2 0.3
Decrease / (increase) in trade and other
receivables 0.1 (6.3)
Decrease in trade and other payables (18.5) (5.5)
Difference between pension contributions
paid and amounts recognised in the income
statement (2.0) (1.9)
Decrease in provisions and other liabilities (1.4) (0.9)
Share of post-tax profit from joint venture (6.2) (4.8)
Cash generated from operations 149.7 188.2
Dividend received from joint venture 5.0 -
Income tax received / (paid) 3.0 (0.4)
------------------------------------------------- ------------ ------------
Net cash from operating activities 157.7 187.8
------------------------------------------------- ------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment (51.3) (57.1)
Proceeds from sale of property, plant
and equipment 60.0 77.7
Proceeds from sale of operating leases 0.2 -
Proceeds from sale of non-current assets
classified as held for sale 50.4 70.9
Purchase of other intangible assets (1.1) (0.4)
Interest received 7.6 7.4
------------------------------------------------- ------------ ------------
Net cash generated from investing activities 65.8 98.5
------------------------------------------------- ------------ ------------
Cash flows from financing activities
Repayment of borrowings (69.1) (57.4)
Repayment of derivative financial instruments (6.7) -
Interest paid (165.5) (167.4)
Repayments of obligations under finance
leases (0.2) (0.8)
Interest element of finance lease rental
payments (0.2) (0.2)
Proceeds from sale of shares held in
trust 5.2 4.2
Net cash used in financing activities (236.5) (221.6)
Net (decrease) / increase in cash and
cash equivalents (13.0) 64.7
Cash and cash equivalents at beginning
of period 328.6 263.9
Cash and cash equivalents at end of period 315.6 328.6
------------------------------------------------- ------------ ------------
1. ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements presented in this document
have been prepared in accordance with IFRS as adopted by the
European Union. The Company's financial statements have been
prepared in accordance with IFRS as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006. The Company has taken advantage of the exemption provided
under s408 of the Companies Act 2006 not to publish its individual
income statement and related notes.
The financial statements are prepared under the historical cost
convention, as modified by the revaluation of derivative financial
instruments to fair value, and in accordance with those parts of
the Companies Act 2006 applicable to companies reporting under IFRS
as adopted by the European Union. New standards and interpretations
issued by the International Accounting Standards Board (IASB) and
the International Financial Reporting Interpretations Committee
(IFRIC), becoming effective during the year, have not had a
material impact on the Group's financial statements.
The preliminary statement of results was approved by the Board
on 11 November 2014. The preliminary statement is derived from but
does not represent the full Group statutory financial statements of
Punch Taverns plc and its subsidiaries which will be delivered to
the Registrar of Companies in due course. The financial information
for the 52 weeks ended 17 August 2013 has been extracted from the
Annual Report and Financial Statements 2013, as filed with the
Registrar of Companies. The audit reports for both periods
presented were not modified, and did not contain statements under
section 498(2) or (3) Companies Act 2006 or equivalent preceding
legislation.
IAS 19 Employee Benefits Restatement
The Group is complying with the amendment to IAS 19 'Employee
Benefits'. Under previous IAS 19 the interest cost and the expected
return on assets were shown within finance costs and finance income
respectively. As a result of the amendment the Group now recognises
a single net interest cost or income which is calculated on the net
defined benefit liability by applying the discount rate to the net
defined benefit liability. The difference between the actual return
on plan assets and interest income, together with actuarial gains
and losses, are included within remeasurements of defined benefit
liability which are recognised in the statement of comprehensive
income.
The restatements in the year ended 17 August 2013 comprise the
reversal of pension finance income of GBP2.9m and the pension
finance cost of GBP2.5m, to be replaced by a net pension interest
cost of GBPnil. The associated income tax has been restated
accordingly. Actuarial losses recognised in the consolidated
statement of comprehensive income of GBP4.4m have been restated
into a remeasurement loss of GBP4.0m with the associated income tax
also restated. As a result of this restatement, basic and diluted
earnings per share has reduced by 0.9 pence to 62.2 pence.
The revised standard has had the effect of reducing the Group's
profit after tax by GBP0.3m and increases other comprehensive
profits by the same amount. The revised standard stipulates that
remeasurement gains and losses are recognised immediately in the
periods which they occur. The group already adopted this policy and
therefore there are no changes to the consolidated balance sheet or
consolidated cash flow statement.
Going Concern
The financial statements have been prepared on a going concern
basis. The Directors have prepared detailed operating and cash flow
forecasts, which cover a period of more than 12 months from the
date of approval of these financial statements. These show that the
Group has adequate funds for the foreseeable future to meet its
liabilities as they fall due.
The Group is financed through two whole business
securitisations, the Punch A Securitisation
(GBP1,400 million of gross debt secured against 2,194 pubs) and
the Punch B Securitisation (GBP834 million of gross debt secured
against 1,551 pubs), as well as certain cash resources held across
the Group. At 23 August 2014, the Group's liquidity position was
strong with GBP316 million of cash resources (of which GBP65
million was held outside of the securitisation structures,
excluding supply company and Employee Benefit Trust cash).
As at the 23 August 2014 the Group benefitted from covenant
waivers which were approved by noteholders on 18 July 2014 and, as
such, was not in breach of any of the financial covenants in its
securitisation arrangements.
On the 8 October 2014 the Group announced the successful
completion of the restructuring of its securitisation arrangements
including the resetting of its financial covenants. The Directors
of Punch Taverns plc believe that the completion of the
restructuring creates a robust and sustainable long-term debt
structure for the Group, with a GBP0.6 billion reduction in total
net debt (including mark-to-market interest rate swaps).
Further details of the debt structure of the Punch A and Punch B
securitisations following completion of the restructuring can be
viewed on the Punch Taverns plc website
www.punchtavernsplc.com.
2. SEGMENTAL ANALYSIS
The Punch business consists of a core estate and a non-core
estate, each having its own clear strategy. Each of these strategic
business units consists of a number of cash generating units
(CGUs), which are individual pubs. These CGUs generate their own
revenues, which are consolidated to give the Group revenue and as a
result, Group revenue is not reliant on one significant
customer.
The Chief Operating Decision Maker, represented by the Board,
reviews the performance of the core and non-core divisions
separately, at an underlying EBITDA level, as included in the
internal management reports. The Group operates solely in the
United Kingdom.
53 weeks to 23 August 2014
Core Non-core Unallocated Total
GBPm GBPm GBPm GBPm
Drink revenue 275.4 50.8 - 326.2
Rental income 96.4 14.5 - 110.9
Other revenue 8.2 2.8 - 11.0
------------------------------- -------- --------- ------------ --------
Underlying revenue 380.0 68.1 - 448.1
Underlying operating costs(1) (173.8) (38.7) (37.0) (249.5)
Share of post-tax profit
from joint venture - - 6.2 6.2
------------------------------- -------- --------- ------------ --------
EBITDA before non-underlying
items 206.2 29.4 (30.8) 204.8
------------------------------- -------- --------- ------------ --------
Underlying depreciation and
amortisation (11.0)
Operating non-underlying
items (71.0)
Net finance costs (336.6)
Movement in fair value of
interest rate swaps (26.4)
UK income tax credit 65.1
------------------------------- -------- --------- ------------ --------
Loss for the financial period
attributable to owners of
the parent company (175.1)
------------------------------- -------- --------- ------------ --------
(1) Unallocated underlying operating costs represent corporate
overheads that are not allocated down to the divisional
performance.
52 weeks to 17 August 2013
Core Non-core Unallocated Restated
GBPm GBPm GBPm Total
GBPm
Drink revenue 262.1 67.3 - 329.4
Rental income 96.4 21.0 - 117.4
Other revenue 7.4 3.4 - 10.8
-------------------------------- -------- --------- ------------ ---------
Underlying revenue 365.9 91.7 - 457.6
Underlying operating costs(1) (164.5) (48.6) (33.7) (246.8)
Share of post-tax profit
from joint venture - - 4.8 4.8
-------------------------------- -------- --------- ------------ ---------
EBITDA before non-underlying
items 201.4 43.1 (28.9) 215.6
-------------------------------- -------- --------- ------------ ---------
Underlying depreciation and
amortisation (12.3)
Operating non-underlying
items (11.8)
Net finance costs (191.3)
Movement in fair value of
interest rate swaps 16.4
UK income tax credit 4.1
-------------------------------- -------- --------- ------------ ---------
Profit for the financial
period attributable to owners
of the parent company 20.7
-------------------------------- -------- --------- ------------ ---------
(1) Unallocated underlying operating costs represent corporate
overheads that are not allocated down to the divisional
performance.
3. NON-UNDERLYING ITEMS
In order to provide a trend measure of underlying performance,
profit is presented excluding items which management consider will
distort comparability, either due to their significant
non-recurring nature or as a result of specific accounting
treatments. Included in the income statement are the following
non-underlying items:
53 weeks 52 weeks
to 23 August to 17 August
2014 2013
GBPm GBPm
-------------------------------------------------- --------------- ---------------
Operating non-underlying items
Capital restructuring, redundancy and other
related one-off costs (27.3) (8.3)
Profit on sale of property, plant and equipment
and non-current assets classified as held for
sale 10.7 10.5
Impairment losses (50.8) (10.2)
Goodwill charge(1) (3.6) (3.8)
(71.0) (11.8)
-------------------------------------------------- --------------- ---------------
Finance income
Movement in fair value of provision for share
scheme settlement(2) 3.3 1.6
Movement in fair value of Spirit shares held(3) - 1.7
3.3 3.3
-------------------------------------------------- --------------- ---------------
Finance costs
Loss on sale of shares held in trust (0.3) (0.8)
Recycling of hedge reserve(4) (214.4) (39.1)
-------------------------------------------------- --------------- ---------------
(214.7) (39.9)
-------------------------------------------------- --------------- ---------------
Movement in fair value of interest rate swaps(5) (26.4) 16.4
-------------------------------------------------- --------------- ---------------
Total non-underlying items before tax (308.8) (32.0)
-------------------------------------------------- --------------- ---------------
Tax
Tax impact of non-underlying items 72.4 16.2
Adjustments to tax in respect of prior periods 0.9 (1.3)
73.3 14.9
-------------------------------------------------- --------------- ---------------
Total non-underlying items after tax (235.5) (17.1)
-------------------------------------------------- --------------- ---------------
(1) Represents the goodwill relating to those core pubs disposed
of in the period.
(2) Represents movement in fair value of shares held to settle
future share schemes and release of provision for share
schemes.
(3) Represents movement in fair value of shares held as an
investment.
(4) Represents the recycling of the hedge reserve relating to
the Punch A B3, D1 & M2(N) interest rate swaps following its
reclassification as ineffective during the financial period (August
2013: Punch B C1 interest rate swap), due to the announcement of
the capital restructuring proposals.
(5) Represents the movement in the fair value of interest rate
swaps which do not qualify for hedge accounting.
4. TAXATION
The effective rate of tax is different to the full rate of
corporation tax. The differences are explained below:
Restated
53 weeks 52 weeks
to 23 August to 17 August
2014 2013
GBPm GBPm
--------------------------------------------------- --------------- ---------------
(Loss) / profit on ordinary activities before
tax (240.2) 16.6
Tax at current UK tax rate of 22.22% (August
2013: 23.61%) (53.4) 3.9
Effects of:
Net effect of expenses not deductible for tax
purposes and non-taxable income (underlying
items) (6.9) (0.6)
Adjustments to tax in respect of prior periods
(non-underlying items) (0.9) 1.3
Current period non-underlying credits:
- Change in standard rate of tax 1.2 (8.9)
- (Income not chargeable for tax purposes)
/ expenses not deductible for tax purposes (5.1) 0.2
Total tax credit reported in the income statement (65.1) (4.1)
--------------------------------------------------- --------------- ---------------
5. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year, excluding
those held in the employee share trust, which are treated as
cancelled.
Diluted earnings per share is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year
(adjusted for the effects of dilutive options).
The ordinary shares outstanding during the year has been
adjusted for the impact of the consolidation of ordinary shares as
announced on 13 October 2014 following successful completion of
restructuring proposals. The existing ordinary shares in Punch
Taverns plc have been consolidated into consolidated ordinary
shares on the basis of one consolidated ordinary share for every 20
existing ordinary shares. As part of the restructuring proposals
the Group has issued 3,771,151,200 new ordinary shares on 8 October
2014, prior to the share consolidation, which has not been adjusted
for as per IAS 33: Earning per share. The adjustment to ordinary
shares outstanding impacts the current and prior period.
Reconciliations of the earnings and weighted average number of
shares are set out below:
Restated
53 weeks to 23 52 weeks to 17
August 2014 August 2013
Per share Per share
Earnings amount Earnings amount
GBPm pence GBPm pence
----------------------------------- ----------- ---------- ----------- ----------
Results attributable to ordinary
shareholders:
Basic earnings per share (175.1) (526.1) 20.7 62.2
Diluted earnings per share (175.1) (526.1) 20.7 62.2
Supplementary earnings per share
figures:
Basic earnings per share before
non-underlying items 60.4 181.5 37.8 113.7
Diluted earnings per share before
non-underlying items 60.4 181.5 37.8 113.7
----------------------------------- ----------- ---------- ----------- ----------
The impact of dilutive ordinary shares is to increase weighted
average shares by nil (August 2013: nil) for employee share
options.
53 weeks 52 weeks
to 23 August to 17 August
2014 2013
No. (m) No. (m)
------------------------------------------- --------------- --------------
Basic weighted average number of shares 33.3 33.3
Diluted weighted average number of shares 33.3 33.3
------------------------------------------- --------------- --------------
6. NET DEBT
(a) Analysis of net debt
23 August 17 August
2014 2013
GBPm GBPm
--------------------------------------- ---------- ----------
Secured loan notes (2,233.7) (2,332.9)
Cash-backed borrowings (315.0) (315.0)
Cash and cash equivalents 315.6 328.6
Restricted cash 315.0 315.0
----------------------------------------- ---------- ----------
Nominal value of net debt (1,918.1) (2,004.3)
Capitalised debt issue costs 3.8 5.3
Fair value adjustments on acquisition
of secured loan notes (37.5) (42.6)
Fair value of interest rate swaps (278.5) (254.3)
Finance lease obligations (2.4) (2.6)
----------------------------------------- ---------- ----------
Net debt (2,232.7) (2,298.5)
----------------------------------------- ---------- ----------
Balance sheet:
Borrowings (2,269.8) (2,372.8)
Cash-backed borrowings (315.0) (315.0)
Derivative financial instruments (278.5) (254.3)
Cash and cash equivalents 315.6 328.6
Restricted cash 315.0 315.0
----------------------------------------- ---------- ----------
Net debt (2,232.7) (2,298.5)
----------------------------------------- ---------- ----------
(b) Analysis of changes in net debt
At 18 At 17 At 23
August Cash Non-cash August Cash Non-cash August
2012 flow movements 2013 flow movements 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------- ------- ------------ ---------- ------- ------------ ----------
Current assets
Cash at bank
and in hand 263.9 64.7 - 328.6 (13.0) - 315.6
Restricted
cash 315.0 - - 315.0 - - 315.0
578.9 64.7 - 643.6 (13.0) - 630.6
Debt
Borrowings (2,434.9) 58.2 3.9 (2,372.8) 69.3 33.7 (2,269.8)
Cash-backed
borrowings (315.0) - - (315.0) - - (315.0)
Derivative
financial
instruments (331.5) - 77.2 (254.3) 6.7 (30.9) (278.5)
(3,081.4) 58.2 81.1 (2,942.1) 76.0 2.8 (2,863.3)
Net debt
per balance
sheet (2,502.5) 122.9 81.1 (2,298.5) 63.0 2.8 (2,232.7)
---------------- ---------- ------- ------------ ---------- ------- ------------ ----------
Net debt incorporates the Group's borrowings, cash-backed
borrowings, derivative financial instruments and obligations under
finance leases, less cash and cash equivalents and restricted
cash.
Non-cash movements relate to amortisation of deferred issue
costs and premium on loan notes and fair value movement in
derivative financial instruments and profit on the purchase of
securitised debt.
7. OUR KEY RISKS AND UNCERTAINTIES
Market and economic risks
Economic climate
Punch's business operations are sensitive to economic conditions
and the economic downturn has affected consumer confidence and
discretionary spending across both the retail and leisure
industries. Delays in the recovery of consumers' disposable income
or further challenges such as further duty increases could affect
consumer expenditure, our partners' businesses and Punch's
revenue.
Consumer perception and public attitudes towards the consumption
of alcohol may continue to change, and the Group may be unable to
respond to changing consumer habits and tastes.
Mitigating actions and controls
-- We carry out regular reviews of the impact of economic
conditions on our budget and strategic plans.
-- We provided circa GBP0.5m per period to support our partners
during the difficult conditions last year resulting in 95% of our
core estate pubs now being on a substantive agreement.
-- We continue to monitor the financial health of our partners
via a Partner Support Tool, together with analysis to highlight
potential failures, and our Partnership Development Managers
continue to help grow and diversify our partners' businesses.
-- We are committed to developing an estate of well invested,
high quality pubs. We have an experienced food development team,
supported by dedicated marketing and training teams, which
alongside the targeted capital investment will drive further food
penetration in the core estate over the coming years.
Property valuations
Fluctuations in the UK property market as well as the current
uncertain market conditions could impact the value of Punch's
property portfolio and our ability to dispose of pubs at an
appropriate value.
Mitigating actions and controls
-- We have conducted full estate reviews and regularly update
these to allow us to assess the future strategy for pubs within the
estate.
-- This has allowed us to invest where appropriate; consider
possible alternative use; or dispose of those pubs which no longer
fit our future strategy.
-- We invested GBP52m on developing and improving the quality of our estate during the year.
-- We carry out an annual review for any indicators of impairment.
Increasing costs
Increases in any of our key supply costs due to availability of
products, the economic climate or inflationary price increases is
an ongoing risk to our business.
Mitigating actions and controls
-- We continue to negotiate supplier contracts to protect us
against significant increases in drink costs.
-- Careful cost control processes ensure that costs are
budgeted, closely monitored and subject to appropriate
authorisation.
Liquidity and covenant risk
Punch's capital structure is made up of debt, issued share
capital and reserves.
Punch is financed through two whole business securitisations,
the Punch A Securitisation and the Punch B Securitisation, as well
as cash resources held across the Group.
The key short-term liquidity risk is the requirement to meet
scheduled debt service costs as they fall due.
Both of Punch's securitisation structures have financial
covenants.
Mitigating actions and controls
-- Cash flow forecasts are regularly produced to assist
management in identifying liquidity requirements and are
stress-tested for possible scenarios.
-- Cash balances are invested in short-term deposits such that
they are readily available to settle short-term liabilities or fund
capital additions.
-- Covenants are closely monitored and stress-tested to ensure
we are able to generate sufficient returns to service our debt and
meet our covenant requirements.
Interest rate risk
Punch is exposed to interest rate risk from loan notes and
borrows at both fixed and floating rates of interest.
The use of fixed rate borrowings and derivative financial
instruments exposes Punch to fair value interest rate risk such
that Punch would not benefit from falls in interest rates and would
be exposed to unplanned costs, such as breakage costs, should debt
or derivative financial instruments be restructured or repaid
early
Mitigating actions and controls
-- Punch employs derivative financial instruments such as
interest rate swaps to generate the desired interest rate
profile.
-- Punch has taken out derivative financial instruments such
that 100% of all external debt (August 2013: 100%) was either at
fixed rates or was converted to fixed rates as a result of swap
arrangements, reducing our exposure to changes in interest
rates
-- Future debt requirements are closely monitored to assist
management in identifying the appropriate strategy for interest
rate hedge arrangements.
Pensions
Punch has a legacy defined benefit pension scheme which must be
funded to meet required benefit payments. The value and funding of
the scheme is subject to risk of changes in life expectancy, actual
and expected price inflation, changes in bond yields and future
salary increases. The difference in value between scheme assets and
scheme liabilities may vary resulting in an increased deficit being
recognised on our balance sheet.
Mitigating actions and controls
-- The defined benefit pension scheme is closed to new members;
and instead we operate defined contribution schemes for our
employees.
-- We maintain a close relationship with the trustees of the pension scheme.
Internal financial control
Punch is committed to maintaining a robust internal control
environment. A lack of control could result in financial fraud or
material error in our financial statements.
Mitigating actions and controls
-- Robust internal controls operate over all key processes
including general controls such as segregation of duties and
authorisation of contracts and expenditure.
-- The Internal Audit function reviews and reports on strengths
and weaknesses in the internal control environment.
-- External Audit provides assurance on key controls via a controls- based audit
Operational and People
Change Management
Punch is reliant on the successful implementation of change
programmes to deliver both day-to-day operational improvements and
our strategic plan.
Mitigating actions and controls
-- Formal project management processes are used across the
business to prepare project objectives and plans and to ensure
progress is tracked and results measured.
-- Major projects are well communicated across the business so
that a joined up approach is maintained.
Information systems, technology and security
Punch is reliant upon information systems and technology for
many aspects of its business, which could cause damage if they were
to fail for any length of time.
Mitigating actions and controls
-- An incident management and business continuity plan is in
place for critical business processes to ensure the business is
able to continue operating in the event of a major incident.
-- We have access to an off-site disaster recovery facility if
access to our support centre, or its systems, is affected.
Product quality
Punch is exposed to product quality risk in relation to drink
which is supplied to us and sold on to our partners.
Mitigating actions and controls
-- Safety measures are in place to ensure that product integrity
is maintained and that drink products are fully traceable.
-- Our incident management plan is designed so that products can
be recalled quickly if required.
Supply chain management
Punch places reliance on our key suppliers and distributors to
ensure continuous supply of drink and other products into our pubs.
Punch is exposed to the risk of interruption or failure of
suppliers or distributors, resulting in our products not being
delivered on time or to our required standards.
Mitigating actions and controls
-- Punch has reviewed the disaster recovery and business
continuity plans of our key distributors.
-- We monitor product quality closely and consider action which
may be required to provide substitute products or suppliers if
required
People risks
Failure to recruit, train and retain successful partners, and
high calibre employees for our support teams may impact the ability
to deliver our strategic plan and operational objectives.
Mitigating actions and controls
-- We provide industry leading induction training and coaching
programmes for our new partners.
-- We undertake succession planning at all levels to ensure we
attract and retain high calibre people.
-- We carry out an annual Employee Engagement Survey and regular
listening groups to obtain direct feedback from our employees.
-- We have a remuneration strategy to ensure our teams are paid fairly and competitively.
Regulatory
Health and safety
A health and safety accident or incident could lead to serious
illness, injury or even loss of life to one of our partners,
employees or visitors, or significantly impact Punch's
reputation.
Mitigating actions and controls
-- A health and safety management committee meets to consider
all aspects of health and safety across Punch and to report to the
Board of Directors on the status of health and safety.
-- We have formally documented and briefed health and safety
policies for our support centre and field-based teams and carry out
annual risk assessments in key areas.
Changes in legislation
Punch is subject to many different areas of regulation, many due
to the high level of control over the sale of alcohol. Increasing
focus in areas such as the relationship between pub companies and
their tenants, binge drinking, underage drinking, and health
impacts over recent years also means that the Government may
introduce further regulation which may significantly affect our
business.
Mitigating actions and controls
-- Punch works closely with our partners and the rest of the
industry to address the key issues facing the pub sector.
-- We ensure that our training covers all aspects of licensing
requirements and have due diligence in place to confirm that our
pubs meet relevant licensing legislation.
-- Punch works closely with local Licensing Authorities, to
ensure individual pub licensing requirements are met and any issues
are highlighted as soon as possible.
-- Punch's Code of Practice exceeds the requirements of the Pub
Industry Framework Code, with the 5th edition being accredited by
the British Institute of Innkeeping in June 2013. Any amendments to
the Code of Practice will be in line with the Pub Industry
Framework Code and will not fall below those standards. The Punch
Code of Practice clearly sets out the promises we make and exactly
how we intend to honour them and we will continue to work with the
Department of Business, Innovation and Skills to implement the
proposals for the statutory code and adjudicator in order to
provide what is best for UK pubs.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BCBDBDSBBGSB
Punch Taverns (LSE:PUB)
Historical Stock Chart
From Jun 2024 to Jul 2024
Punch Taverns (LSE:PUB)
Historical Stock Chart
From Jul 2023 to Jul 2024
