Punch Taverns shares slumped this morning as it said it would not pay a final dividend and was delaying a REIT conversion to concentrate on maintaining the strength of the balance sheet.

The pub group, which owns 8,400 pubs, said in trading update that it had received clearance from Revenue and Customs to create a corporate structure which would allow it to become a REIT. However, it said itsfocus now was to maintain the strength of the balance sheet.

It said: ‘As previously highlighted, conversion to a REIT status would involve material implementation costs and introduces a significantly increased dividend requirement which must be weighed up against the tax benefits.

‘Whilst work progresses in assessing the reorganisation steps that would be required to allow conversion, in the current environment our main priorities are to maintain the strength of our balance sheet and to continue to invest in our business.’

Punch also reported a decline in sales given ‘ongoing challenging trading conditions’ and said it planned to suspend a final dividend because ‘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 distribution.'

It said it repaid £75m of debt from existing cash flows this year and said it ‘remained confident of being able to extract cash from its proposed securitisations following the year end’.

The group will announce its full year results in November and said it was ‘confident of delivering full year earnings…despite ongoing challenging trading conditions for the industry.’

In early trading Punch Taverns shares dropped nearly 14% to 273p.

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