Thursday, 26 January 2012

A distraction from filling out your tax return ...

As many of you approach the deadline for filing your tax returns and the realisation of exactly how much profit (or loss) you made last year I thought I would share with you some extracts from the company report for Punch and for your convenience have worked out a few figures for you to digest whilst you work out how to pay your tax bill.

If you are one of the 2,000 pubs in the "turnaround" division of Punch (i.e. "non-core "or non-essential to the long term plans of company) this is Punch's stated policy from the company report:

"The plan for the turnaround division is to maximise short-term returns with a clear focus on costs and cash flow. It is expected that these pubs will be disposed of over a five-year period and will be phased to ensure a balance between speed of disposal and value. "

From the accounts published in the report  the EBITDA  (operating profit) the following figures can be calculated.  For those of you in "turnaround" the earnings per pub was  £33,122, from core pubs the amount per pub was £73,873 .The average per  pub (for all of Punch's pubs)  was £51,558.

Now look at your tax return.

Whilst you compare your EBITDA with the company's here is some more interesting reading from the report:

"Punch as a Group achieved 21st place in the Sunday Times Best Big Companies to Work For 2011, the only major pub company to be listed. This is a fantastic achievement and reflects our commitment to develop our team and our Company culture to make us a ‘Great Place to Work’. We were rated highly for open and honest communication from managers, staff feeling they could make a contribution to the success of the Company and teams being fun to work with, as well as being nominated for a special award for wellbeing."

How open and honest were your communications from Punch last year? Do you think it's fun being a Punch tenant/lessee? Are you bathed in the glow of "wellbeing" emanating from Burton on Trent?

And whilst they were all feeling so well and having fun here's some details from the Remuneration Report for Directors:

CEO Roger Whiteside earns a base salary of £430k, plus a chance to earn  250% in bonus (1/3rd in shares) and a contribution to his pension pot of 25% of his salary.

The total Roger got last year, including all benefits and bonus  was £931,000

The total all the 12 directors earned from Punch last year was £3,363,000, an increase from £2,432,000 in 2010.This means a total increase in their remuneration packages of 38%, with average pay of £280,000 a year.

Now look at your tax return again.

Picked yourself up off the floor yet? Now work out if the profit you made from your pub increased by 38% last year or were you able to give your staff a wage increase of 38% last year?

For those of you that have invested in Punch let's also have a quick look at how your investment performed from 2006 to 2011 compared to FTSE indices:

I know it's a bit blurry, but the orange line is Punch, the other to look at is the grey line which shows the Travel and Leisure sector's performance and shows that for a nominal £100 what your 2006 investment was worth in 2011. Bet that investment is looking just dandy now isn’t it?

Now over to Solihull for news from Enterprise. They report, for October 2011, an EBITDA of £366 millions, which means they earned £58,196 per pub.

From £500 millions of sales of beers, wines and spirits they made £200 millions of gross profit, not bad for just sitting there taking orders.

On the £198 millions of rent they collected (average per pub £31,483) they spent out £5 millions on repairs and maintenance (average £795 per pub) or just 2.5%.  Measure this against a total revenue of some £711 millions and it is just 0.7%! Compare that to the ALMR Benchmark Report (October 2011) on the running costs of a pub which puts average spend on premises repairs by pub operators at 5.6%

Look at your profit and loss account and I'll wager you spent out more than £795 on repairing and maintaning their assets (your pub) last year. 

And the directors? Nine of them, in total, earned £3,070,000 or on average £341,111 down 3.6%  on the previous year. Mind you they did increase their earnings from £2,240,000 in 2009 to £3,185,000 in 2010 which was an increase of £945,000 or 42%.

Ted Tuppen the Enterprise CEO still managed to claw in a staggering £910,00 in 2011 and £1.223 million in 2010;
So how did Enterprise investors fair compared to the market places then? Take a look at the graph below:

Not much better than Punch's poor benighted investors.

At least the Enterprise Annual Report spares us the PR waffle and cuddly graphics so prevalent in the Punch document.

Inevitably I am, again, drawn to the definition of zombie: “the body of a dead person given the semblance of life, but mute and will-less, by a supernatural force, usually for some evil purpose”  when I read these reports.

And you wonder why the likes of Vince Cable want to introduce shareholder vetoes on board salaries or wonder why the BIS committee in the Commons queries if tenants and lessees are getting a fair deal from pubcos? Not!

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