The news that Thorley is stepping down won’t come as much of a surprise to anyone who has been following the fortunes of his firm over the last 18 months or so. The FT’s Alphaville team have nicknamed Punch the Toxic Pub Company, because of its huge debts, and were there a competition for the business which has had the worst recession without actually going bust, Punch would make an admirable winner.
In a statement released this morning, Thorley said: ‘After nine exciting years at Punch I have decided to leave the business. Having grown Punch into Britain’s largest pub company, in the past two years we have faced the worst recession for a generation and significant structural and political challenges to the business’ - before going on to state his faith in Punch’s team and its prospects for the future.
Although it’s all being very carefully stage-managed to look like a planned and orderly exit, he admits to having no job to go to and no plans beyond the old saw ‘spending time with the family.’ So what’s really going on? Well, you can take your pick of reasons why investors might want rid of Thorley, but we reckon that the incident that really marked his card was last year’s emergency £350m cash call. Shareholders tend to have a long memory for that kind of thing, especially when the prospects of them ever getting their money back look pretty remote.
His successor is yet to be announced but rumours has it that an internal candidate is likely to get the job. It’s arguable whether anyone outside the business would want it.
So what state does he leave the firm in? Pretty bad. Thorley’s boast that he made Punch into the country’s largest pub chain is true, but he did so at the cost of enormous leverage – net debt peaked at £4.5bn last year, and although this has now fallen to around £3.9bn it’s still a crushing burden. Pubs are being sold at a rate of 50 a month to try and reduce the debt, so the firm is shrinking almost as fast as it grew.
If that were its only problem, things might not be so bad – over-ambition is hardly a cardinal sin in business. But Punch has also faced criticism over the way it has been managed, compounding the already damaging effect of the recession. By contrast with nimbler rivals like JD Wetherspoon, Punch’s bosses certainly did very little to adapt the business model or customer offering to the changing economic circumstances.
To the ire of customers and staff alike, the operational side of the organisation was largely ignored, in the flawed assumption that the real money was going to be made from the rising value of the property portfolio. Some analysts now think it’s a zombie business and are calling for the new management to break it up and put investors out of their misery.
Is there any hope for the future? Well, a decent number of its remaining 7,500 boozers are trading reasonably well, and Thorley’s departure does at least offer a chance to draw a line under the recent past and try to start afresh.
But it’s going to be a long and uncertain road back to recovery. Whoever does take over may need a drop or two of Dutch Courage before they've finished.
In today's bulletin:
Darling celebrates faster recovery after dreary debate
OFT slaps RBS with £29m competition law fine (why?)
Thorley calls time after nine years at the bar
Lack of graduate jobs threatens 'disillusioned generation'
Psychology at Work: Strikes, and the psychological contract