The UK pub chain Punch Taverns has reported a 9% jump in pre-tax profits, beating market expectations.

"The year has started with continued steady progress in trading," said the group's chairman, Giles Thorley.

We have demonstrated that the Punch business model works

Giles Thorley, Punch

Punch Taverns, which floated on the stock market in May, also announced that its chief executive Stephen Lambert would be stepping down.

"This move is a natural progression of the development of management responsibilities following the successful completion of the restructuring of the group," said Mr Thorley.

The Punch group is owned by Hugh Osmond, who announced on Monday a surprise bid to take over his former company PizzaExpress.

Punch's share price has recovered from falls earlier in the summer and is back near to its float price of 230p.

The stock closed on Tuesday at 228p, down 2p on the day.

Organic growth

Pre-tax profits rose to �93m ($144.7m) for the year to August 17, compared with �85m last year.

Analysts had been expecting profits to come in lower at �87.3m.

Punch's improvement of its pubs boosted profits

Like-for-like sales at the pub group increased by 3% during the year to �392m.

The company added that �26m invested in 479 individual pub improvement schemes generated pre-tax returns of over 30%.

"We have demonstrated that the Punch business model works," said Mr Thorley.

"We have very healthy levels of organic growth and we're supplementing this with top-up acquisitions."

During the year, the group acquired 187 pubs, and sold 46 pubs.

The group plans to replace Mr Lambert with Mr Thorley after its January annual general meeting.

Phil Cox, currently deputy chairman, will be appointed non-executive chairman.

Hefty costs

Prior to the flotation, the group split off its managed pub business into a separate enterprise, leaving Punch Taverns as a leased and tenanted pub company.

One-off costs of �69m, primarily arising from the demerger and float, were not included in the pre-tax profits.

Debts of �144m, which were added to Punch's balance sheet after the demerger, were also not reflected in the figures.

This meant that the group's bottom-line figure was a loss of �124m, after tax and one-off costs.

However, the flotation added �152m to the company's coffers - of which �96m was used to reduce its debt.

The rise of Punch

The company is named after the oldest pub within the group, the Punch Tavern in London's Fleet Street, where the first issue of the satirical magazine, Punch, was published.

The group was formed in 1997 by Mr Osmond, when he bought former brewer Bass's pubs estate and now numbers 4,302 pubs.

Mr Osmond rose to prominence in 1999, when he snapped up Allied Domecq's 3,500-strong pubs estate, beating off competition from Whitbread.

He first bought Pizza Express in the early 1990s for �15m, before selling out in 1997 when firm was worth �150m.