Punch Taverns has replaced Andrew Knight as the head of Spirit Group, its managed pub division, as it tries to restore flagging investor confidence.

Mike Tye, a former Whitbread executive who ran the Costa coffee and Premier Inn divisions and David Lloyd Leisure until its sale last year, will take over the role.

The pubs group, whose share price has fallen by almost 80 per cent in the past year, is giving Mr Knight a pay-off equivalent to a year's remuneration. This year he was expected to earn £940,000, including bonuses and share grants.

Giles Thorley, Punch's chief executive, paid tribute to Mr Knight's contribution over the past two years, during which time about half its 1,800 pubs were sold or converted to tenancies. However, he admitted that Spirit, which owns the Chef & Brewer and Two For One chains, had “underperformed the market for the past six months”.

Punch, which launched an abortive attempt to acquire Mitchells & Butlers, the All Bar One operator, this year, was forced to bring forward a trading update recently amid market fears that its banking covenants might be at risk.

It assured investors that its balance sheet remained strong, that it had no refinancing requirements until 2010 and that it was confident of meeting full-year market expectations.

The company said that like-for-like trading for the 44 weeks to June 21 had declined, with the contribution from its leased estate down 3.4 per cent. It added that like-for-like sales in the core managed estate had fallen by 3.6 per cent.

Mr Thorley reiterated yesterday that there was no cause for concern over covenants: “The level of doom and gloom that would affect us would mean the high street was a ghost town with tumbleweed blowing down the road. It would be the OK Corral.”

Punch shares rose 3p, or 1.38 per cent, to close at 274p.

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