Comments to Nigel Parsons at Evosecurities
Hi, Read a segment of your article last night in the Morning Advertiser and I'm fascinated you'd still recommend Punch as a buy stock.
Surely the only route for Punch is a strategic with-drawl with least pain as possible for bond holders? The fundamentals are so poor. As a trading business selling beer: the current long term decline in Pub beer sales (when you exclude the High Street Bar sector where they aren't strong) will not alter, and conversely they are more vulnerable with a high number of urban community sites which are most at risk. As a landlord with on the whole low quality tenants, zero brands and mediocre buildings - its hard to see how they are well placed. Branded and managed operations are picking off customers from their operators everyday. The investment 'bet' that Punch embarked upon 10 years ago just hasn't paid off - there just wasn't the number of high quality operators who could sustain the high rents that the investment pay back required. The huge mistake in the whole project was to not create a franchise brand model that operators could follow. As a result in a declining sector there is no graceful exit. I take your point that they are successfully selling off to raise cash - but I am not convinced they are only selling 'tail end' sites. I think it is mistaken to blame the current economic cycle for Punch's position - there is a much wider change going on down in the Independent Pub sector and I believe one should be cautious about relying and tracking trends in the managed and branded sector as a guide.
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