Punch Taverns, one of the UK's biggest pubs groups, has announced it will split its business in two and sell over 2,000 of its pubs.
The announcement is the result of a strategic review by chief executive Ian
Dyson, following his take-over of the company in 2010. Having been hit by the recession, smoking ban and a rise in cheap alcohol in supermarkets, company profits have fallen and debts have hit a massive £3.3bn.
The leased side, where landlords rent the property and get their supplies from Punch, is facing more difficult conditions and will face the bulk of the cuts.
Currently it has 6,000 leased, or tenanted, pubs, over half of which will be sold at a rate of about 500 per year. Some will be transferred to the managed division, Spirit, which includes brands such as Chef & Brewer, Fayre & Square and Flaming Grill.
Although the managed side is suffering lower sales and profit margins than its competitors, Punch believe it is well placed to take advantage of the growing trend in eating out.
Ian Dyson said: “We believe that there is a significant value creation opportunity at Punch, with immediate upside in managed and longer term upside in leased. We do not believe that either opportunity can be maximised within the current group structure and accordingly, we propose that the two businesses be separated. This will be achieved by the demerger of Spirit and the creation of two independent public companies. Spirit will be positioned to deliver market leading sales and profit growth and to expand with the aim of becoming the UK’s leading managed pub operator.”
Shares in Punch Taverns rose four per cent following the announcement and ended the day 2.3 per cent higher.
