Punch scraps payout as sales fall

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Punch, which last year paid a final dividend of 10.2 pence per share, said on Wednesday it made sense to retain cash to bolster its balance sheet rather than make a payment to shareholders.

Pubs are being hit by last year's smoking ban, rising costs, declining consumer spending and cheap alcohol offers in supermarkets - a trend highlighted on Tuesday when , Greene King reported a decline in like-for-like sales.

In a statement on its fiscal year ended August 23, Punch said like-for-like sales at its 7,560 leased pubs fell 3.4 percent in the year to August 23, with comparable sales at its 864 managed pubs down 3.3 percent.

It said the priority for the use of its cash is to support the repayment of its convertible bonds. It is required to repay a 295 million pounds convertible bond in December 2010.

Shares in Punch Taverns, which underperformed the FTSE All Share Travel & Leisure Index by 50 percent since the start of the year, were down 16.8 percent at 263-1/2 pence by 12:15 p.m..

That gave the business a market value of just over 700 million pounds, compared with the 4.96 billion pounds total net debt Punch had at the time of its interim results in March.

Elsewhere in the sector Enterprise Inns, Whitbread, Mitchells & Butlers and JD Wetherspoon were down between 5 and 14 percent.

Blue Oar Securities analyst Mark Brumby said Punch may have been forced into scrapping its dividend to avoid the risk of breaching bond conditions.

"Whether the passing of the dividend is reactive to a breach or proactive in seeking to head one off is not yet clear. We are drawn to the latter and would suggest the group is correct in retaining cash in the business," he said.

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