Shares of Punch Taverns fell by more than 30 per cent this morning to a record low after a gloomy trading update prompted analysts to slash proft forecasts for Britain's biggest pub company.

The tone of the statement prompted fresh concerns over the company's ability to avoid defaulting on its securitised loans, although Giles Thorley, the group's chief executive, insisted: "I’m still very confident we’ll survive."

The embattled Punch boss pointed out that in the past 20 weeks alone it had reduced debt by £180 million, adding: "We’ve battened down the hatches, we’ve got our tin hats on and we’re doing all the things we need to do."

The group, which has scrapped dividend payments, said this morning that trading since November 4, when it last updated the market, had "remained challenging, with the economic outlook deteriorating for the UK consumer".

It reported a 12 per cent slump in like-for-like profits in its leased and tenanted division, with beer volumes falling by more than 12 per cent and financial help to its tenants, in the form of rent concessions and beer discounts, quadrupling from £400,000 a month to £1.6 million.

It said it expected capital expenditure in the business for the year to reduce from about £30 million to £20 million as tenants, with whom it co-invests on refurbishments, reined in spending. Licensee failure rates were "pretty stable".

Mr Thorley painted a slightly more positive picture of trading in Spirit, its managed division. Like-for-like sales fell by 2.5 per cent for the first 20 weeks, a slight improvement on the second half of last year, while over Christmas and the New Year they rose by 1.9 per cent.

He said that only about 60 of its managed pubs were in competition with JD Wetherspoon pubs selling a pint of Greene King IPA at 99p, and it was "not a big deal".

However, soaring costs, notably on utilities, and heavy promotional activity impacted on margins at Spirit, which have fallen by about five percentage points.

Douglas Jack, leisure analyst at Numis Securities, said the margin decline implied a fall in like-for-like profits at Spirit of about 18 per cent.

Overall capital expenditure at Punch this year will fall by about £35 million to £85 million, while the disposal of 500 bottom-end tenanted pubs, flagged in November, was "ahead of schedule".

It said that about 100 of 700 head office jobs would be made redundant.

The group said that its focus on increasing its cashflow was strengthening its balance sheet and, based on current plans, it anticipated meeting its covenant conditions on both its main securitisations.

Despite the gloomy short-term prognosis, Mr Thorley insisted the statement was not a profit warning, arguing: "There isn’t a substantial change in the outlook to where we were in November."

But most analysts disagreed, with Mr Jack at Numis cutting his full-year pre-tax profit forecast by 28 per cent to £160 million compared to £261 million last year.

He said the level of underlying earnings (ebitda) relative to the amount of debt implied "no equity value, just option value".

But analysts at Bank of America Merrill Lynch said: Whilst trading has disappointed, Punch remains solvent and on our estimates would need ebitda to fall by another 15 per cent in 2009 before coming close to default. We think this is unlikely as it now starts to face easier comparatives."

The shares closed down by 18p to 39.75p, a fall of 31 per cent.

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