Punch - comment - 26Q4

Punch Q426 delivered £103m revenues right on target and better than expected cost control allowed for £27.2m adj. EBITDA £1.4m ahead of expectations. The big divergence came from continued high CapEx and pub acquisitions that left FCF at £-14m, £-20m lower than modelled, and funded by a £35m drawdown of its RCF. This would be alarming, were it not for the positive momentum UK pubs are experiencing. We note that we have to increase the interest burden going forward. The company maintained percentage coupon last year, but the issue size has grown, especially following the tap. Pubco's and other retailers seem unable to put a foot wrong this year (there are exceptions), and we remain long both Stonegate and Punch.