Punch Taverns has axed its final dividend to pay down its debt, sending shares down in the pub group.

The group, which operates 8,400 pubs across the UK, said it would be prudent to pay off debt and strengthen its balance sheet rather than propose a final dividend.

Punch also said it has been providing drinks discounts and rent concessions to its leased pubs in order to boost trade, which has been slower across the industry since the credit crunch and smoking ban.

The group plans to use the extra cash to continue investing in its pubs.

Shares in Punch were down 12.08 per cent at 09:32 BST. The announcement also affected rival pub group Enterprise Inns, where shares fell by 11.23 per cent in morning trading.

Trading for the full year ended August 23rd was in line with management expectations, Punch added, with like-for-like sales down 3.4 per cent for its leased pub estate and 3.3 per cent lower for its managed pubs.

“Our performance has continued broadly in line with management’s expectations and we also remain confident of delivering full year earnings before exceptional items in line with market expectations, despite ongoing challenging trading conditions for the industry,” the group said in a statement.

Although Punch has been cleared to convert to real estate investment trust (REIT) status by the government, the group said it was delaying a decision due to the costs involved.