Punch Taverns

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Punch Taverns plc
Type Public
Traded as LSEPUB
Industry Pubs
Founded 1997
Headquarters Burton upon Trent, England, UK
Key people Stephen Billingham
(Executive Chairman)
Neil Griffiths
(COO)
Revenue £457.6 million (2013)[1]
Operating income £203.3 million (2013)[1]
Net income £49.9 million (2013)[1]
Employees 451 (2013)[1]
Website www.punchtaverns.com

Punch Taverns plc is a pub and bar operator in the United Kingdom, with around 4,000 leased and tenanted pubs.[2] It is headquartered in the traditional brewing centre of Burton upon Trent in Staffordshire. It is listed on the London Stock Exchange and is a constituent of the FTSE SmallCap Index. The company has been in negotiation with its bondholders in order to secure its future as a going concern. In September 2014 bondholders and shareholders agreed a restructuring plan with bondholders taking an 85% stake in the company.[3]

History[edit]

The company was established by former Pizza Express head Hugh Osmond and Café Rouge founder Roger Myers in 1997 when they bought the Bass portfolio of public houses.[4] In 1999 Punch purchased Allied Domecq's pubs for £3 billion, beating a rival bid from Whitbread.[5][6] After the deal, Punch spun off its managed pubs into a separate division, Punch Retail, which was later renamed Spirit Group.[7]

In 2002 Punch demerged the Spirit Group[8] and then floated itself on the London Stock Exchange.[9] Later on, Punch acquired the Alehouse and Beer Engine names from Whitbread and later acquired Inn Business. Punch then bought Pubmaster in November 2003: the acquisition of larger rival Pubmaster, catapulted the operator to number one in the league.[10] The acquisition took the group to more than 7,000 pubs and cemented Punch's position as a major pub operator. After completing this deal Punch later bought InnSpired Inns plc,[11] and then Avebury Taverns.[12]

Meanwhile, Spirit Group (at that time independent from Punch Taverns) expanded when it acquired Scottish & Newcastle's 1,450-strong pub estate in 2003, beating off rival Mitchells & Butlers.[13]

In September 2005, Spirit Group sold its "City Nights" portfolio of in excess of 180 pubs and clubs, en-bloc, to Alchemy - the financial backers behind the newly formed Tattershall Castle Group (TCG).[14]

In December 2005, Punch agreed to re-acquire the Spirit Group for £2.68bn which since 2002 had been owned by the private equity firms Blackstone, Texas Pacific and CVC Capital Partners.[15]

In 2006 the Company sold its Old Orleans pub chain, which it had acquired when it bought Spirit Group, to Regent Inns.[16] Punch also sold 290 Spirit sites to the private equity firm GI Partners.[17]

In March 2008 Punch withdrew from a bid to merge with Mitchells & Butlers.[18]

On 22 March 2011 Punch announced that as part of a strategic review it would demerge its the managed pub division.[19] Spirit Pub Company plc was established as a separate company and took over 803 managed pubs and 549 leased pubs. This included the branded pubs Chef & Brewer, Taylor Walker Pubs,Fayre & Square, Original Pub Company, Flaming Grill Pub Company, John Barras Pub Company, Wacky Warehouse and Good Night Inns. Each shareholder in Punch received one share in Spirit Pub Company. The demerger was effective on 1 August 2011.[20]

Operations[edit]

Leased pubs[edit]

Punch had 4,096 pubs as at 17 August 2013. Of this total, 2,990 were classed as core. The company's stated aim is to make each core pub "the best of its type in its marketplace".[1] The remaining 1,106 are classed as non-core. The company operates non-core pubs to maximise short-term returns with a focus on costs and cash-flow, with an expectation that most will be sold within four years. Approximately 1,100 non-core pubs had been sold between 2011 and 2013.[1]

Matthew Clark[edit]

The company owns 50% of Matthew Clark, a drinks wholesaler and distributor.[1]

Debt and going concern[edit]

The company and its subsidiaries have issued loan notes in two separate tranches; tranche A (£1,449m of debt secured on 2,356 pubs) and tranche B (£884m of debt secured on 1,675 pubs). In their 2013 annual report, approved on 24 September 2013, the Directors state that the group is in compliance with its covenants and has adequate cash resources for the foreseeable future. However, the Directors state that it is in the best interests of all stakeholders to achieve a consensual renegotiation of both of the securitisations. If a covenant breach were to occur and if loan note holders were to require immediate repayment then the ability of the group to continue as a going concern would be in doubt.[21]

Criticism[edit]

On May 13, 2009, the House of Commons published a report[22] regarding its monopolies inquiry into pub groups. The report "raises a series of questions about the pub company (pubco) tied pub business model and calls on the Government to act urgently, in particular, to refer the matter to the Competition Commission. It challenges the pubcos which operate a tie to prove its benefits by giving lessees the choice between a tied or free of tie lease."[23] The report also raises issues regarding the actual conduct of pubcos in dealing with struggling tenants.

Committee chairman Peter Luff, MP says: "The report explicitly acknowledges that 'not all the problems of the pub industry come from the tied pub model. It is clear there are many pressures on any retail business ... Nonetheless, our inquiry found alarming evidence indicating there may be serious problems caused by the dominance of the large pub companies.'"[23]

The Committee commissioned its own independent survey as part of the inquiry, to determine whether the negative evidence received from lessees was typical of feelings in the industry.[23]

"The survey results, printed with the Committee’s evidence, underpinned the Committee’s findings. 64 per cent of lessees did not think their pubco added any value and while a fifth had had a dispute with their pubco, few (18 per cent) were satisfied with the outcome. The Committee was astonished to learn that 67 per cent of the lessees surveyed earned less than £15,000 pa and over 50 per cent of the lessees who had turnover of more than £500,000 pa earned less than £15,000 – a 3 per cent rate of return. The lessees may share the risks with their pubco but they do not appear to share the benefits. The report therefore concludes that problems which were identified by the Trade and Industry Committee four years ago remain. An imbalance of bargaining power between lessees and pubcos persists and the arrangements for assessing rents remain opaque. Rental assessment should be the basis for negotiation, but incumbent lessees often risk the loss of their home as well as their business if they cannot reach agreement, the report says."[23]

The committee recommended that "the tying of beers, other drinks and ancillary products should be severely limited to ensure that competition in the retail market is restored." The Eye notes that select committee chairman Peter Luff "may be looking to right the wrong created by the Thatcher government’s disastrous "Beer Orders" of 1989, in which he was involved."[24]

Shortly following the committee's report CAMRA issued a 'Super-Complaint' forcing the Office of Fair Trading to investigate this within 90 days. The OFT published its report on the 22nd of October 2009. The report largely cleared the industry of behaving in any way that caused damage to consumers [25]

See also[edit]

References[edit]

External links[edit]