Pubs group Punch Taverns has said it will not pay investors a dividend after reporting a decline in annual sales.

The news hammered its shares, sending them 16% lower in London and denting sentiment across the whole sector.

Punch said like-for-like sales at its 7,560 leased pubs fell 3.4% in the 12 months to 23 August, while sales at its 864 managed pubs were 3% lower.

Many consumer-related firms are having a difficult time as the UK’s economic growth slows and demand droops.

Industry challenges

At the heart of the problems has been a global credit crunch that has seen many banks tighten up their lending criteria, limiting the amount of money companies and consumers can borrow.

As a result, many companies have had to rethink how they finance their operations, and how they repay existing debts.

Pubs have also been hit by a number of other issues including a smoking ban, and increased competition from supermarkets that have been offering cheap alcohol and special deals on wine and beer.

“The challenges which our industry and licensees are facing currently have been well documented,” the company said in a statement.

“A number of considerations have led the board to review the group’s use of the cash that it generates,” it continued.

“In the current financing market environment, the board considers it prudent to retain cash and further strengthen the balance sheet ahead of returning cash to shareholders through distributions.”

Shares in Punch, which is based in Burton-upon-Trent, Staffordshire, dropped 50 pence on the news to 266.75p. Rival pub firms Enterprise Inns fell 13%, Mitchells & Butlers shed 7% and JD Wetherspoon lost 5%.

‘Relentless’

Some analysts questioned whether the decision to delay the dividend payment was needed to ensure that Punch did not breach the terms of earlier loans.

Lenders often require that firms keep a certain amount of cash compared to their debts, and can force the repayment of outstanding loans should the ratio of money to borrowing drop below the stipulated levels.

However, Punch chief executive Giles Thorley was quoted by Reuters as denying this motivation.

“No…that’s not the basis for which we’re pulling this forward,” he told the news agency.

Mark Brumby, an analyst at Blue Oar Securities, said that pub firms were under “relentless” pressure and advised his clients to sell Punch shares.

News reported by The BBC

When I was a practicing Chartered Accountant, the most asked question was probably “How do I save Tax?”

No one likes to pay tax, but it is a necessary evil of any modern society and if we want to have the luxuary of safe roads, an NHS service, a police force and our bins collected each week, as just a few examples, then tax is needed to pay for all that.

However, there is nothing wrong in trying to save tax where you can and to try and avoid tax, but not to evade tax! To put the record straight avoidance is legal whereas evasion will get you into trouble!

Dealing with a limited company within the UK, as these are the rules that I know, then there are probably four ways to get money from your business – each of which can be more or less tax efficient.

1. Salary – quite simple, you can vote yourself a salary on a monthly basis and the company will pay the tax and National Insurance (NI) on this for you. The company will deduct both tax and NI from your gross salary and pay you the net amount and the company will also have to pay over company NI too. Therefore, this method of payment is not so tax efficent, however the salary is tax deductible, as far as the company is concerned.

2. Benefits in kind – Another way to receive remuneration from your company is to provide yourself with certain perks. For example, a company car, a mobile phone, a holiday villa and private medical insurance to name a few. You will be taxed on the benefit in kind and the UK Government has a method of calculating just how much you should be taxed. For example, company cars are taxed dependent upon the value when new and on how fuel efficient they are. So the more the cost when new and the less fuel efficient they are the more you will be taxed! in a nut shell! The way I see things is that if you buy a relatively fuel efficient car, that is not too expensive (say less than £20,000) and you do not do too many business miles, then a company car is the way to go. However, there are so many permutations for this and you will need to look at your own personal circumstances and the car you are looking to buy.

3. Dividend – I would argue that dividends are quite tax efficient, as neither the company nor the individual pays NI on a dividend. However, dividends are not tax deductible for the company, so the company will pay Corporation Tax on these profits distributed as a dividend. The effective rate of tax on a dividend for 40% tax payers is only 25% though, which has to be good. And for those who remain below the 40% threshold, there is no tax to be paid on a dividend.

4. Capital distribution – Probably the most tax efficient way to be paid is by building up the value of your company, without drawing out too much by way of payment using the above 3 methods. Then put you business onto the open market and sell it to the highest bidder! In these circumstances you will pay Capital Gains Tax (CGT) on the gain you make on the sale – the present legislation in the UK is as follows:

“The relief
The relief will take effect from 6 April 2008 alongside the CGT reform programme announced at the Pre-Budget Report.

The relief will be available in respect of:

gains made on the disposal of all or part of a business, or
gains made on disposals of assets following the cessation of a business
by certain individuals who were involved in running the business.
The first £1 million of gains that qualify for relief will be charged to CGT at an effective rate of 10 per cent. Gains in excess of £1 million will be charged at the normal 18 per cent rate.

An individual will be able to make claims for relief on more than one occasion, up to a lifetime total of £1 million of gains qualifying for relief.”

So if you have a gain of less than £1million then you will only pay £100,000! whereas if you had drawn a dividend of £1million the tax would have been £250,000! And to receive a net salary of £900,000 (i.e. the total gain of £1m less the CGT of £100,000) the tax and national insurance paid on this would be a whole lot more, bearing in mind the 40% threshold is presently just of £40,000! So the majority of the £900,000 would be taxed at 40%, which is ignoring the employees NI, not to mention the Employers NI!

Further more, if you are prepared to emigrate before you make the sale you could potentially pay zero tax! Be careful where you emigrate to, as you don’t want to jump out of the fying pan and into the fire! For example, in the Isle of Man they do not have CGT so you would pay no tax on the business sale!

Before you do anything describe above I would recommend that you speak with your accountant or tax adviser!

Commodity prices will not be coming down in the near future, as the industry juggles ever-growing demand from developing economies with rising supply costs, according to the world’s biggest mining corporation.

BHP Billiton, the mining giant stalking British-Australian rival Rio Tinto, reported record profits for the seventh consecutive year yesterday. Annual production records for seven major product lines including petroleum, copper and manganese, alongside 10 new projects on stream, contributed to revenue growth of 25.3 per cent to $59.5bn (£31.9bn), attributable profit up by 14.7 per cent to $15.4bn, and a dividend increase of 48.9 per cent to $0.70.

“Strong demand, with supply-side constraints, resulted in a strong pricing environment for us,” Marius Kloppers, the BHP chief executive, said. “I want to emphasis the unbroken record of increased production, and we will continue this trend in 2009 with an estimated 10 per cent growth next year across the portfolio.”

But rising prices are also affecting commodities groups themselves. Rising energy costs added an extra $371m to BHP’s outgoings, and inputs cost $204m more than in 2006. Some, including coke, sulphuric acid and caustic soda, have gone up by more than 50 per cent since December alone. And while developed economies are slowing, the developing world – most particularly China – continues to show an unstinting appetite for raw materials. China’s construction industry alone will require three billion tonnes of steel within the next 20 years, equivalent to the entire output of Australia from 1963-2007, according to BHP.

“While the short-term outlook in developed economies remains uncertain, the longer-term fundamentals remain absolutely intact,” Mr Kloppers said. “Industry analysts are taking insufficient notice of supply-side issues and they will continue to be a key determinant in commodity prices going forward. That was my message in February and it is my message today.”

BHP’s strong financial performance is not just riding on high commodity prices. The company produced 13 per cent more petroleum, adding $1.1bn to the division’s revenues and pushing its earnings before interest and tax (Ebit) up by 82 per cent. Manganese was another stellar performer, with Ebit up a massive 549.8 per cent. The strong figures helped to offset dips in other product areas including aluminium, hit by power supply problems in South Africa, and metallurgical coal, disrupted by major flooding in Queensland.

As Mr Kloppers stressed BHP’s resilience and scale, the City showed similar confidence. Simon Toyne, an analyst at Numis Securities, said: “While a sustained upwards movement in BHP’s and/or the sector’s share prices will be difficult in the face of deteriorating macro data, both absolute and multiple-based valuation measures of BHP look cheaper than we have witnessed since 2001/02 and it remains our preferred stock in the sector.”

News reported by The Independent