Punch - comment

We had expected a softer quarter for Punch and were still a little disappointed on Friday that Q2 revenue had not been strong enough to lift margins up. While that is in line with Stonegate, we’d have thought it would slightly outpace cost already. More disappointing was the fact that the group had not converted a single pub to MP in the quarter. Conversions clearly need to be re-thought in the current environment and the higher cost as well as lower growth in the food segment (also when compared to drinks) make it harder to achieve the 20% IRRs management are gunning for - the thesis for the Fortress in the first place. The market, however, has been more constructive in its reaction.