Enterprise steadies ship

While Enterprise boss Ted Tuppen concedes that the past six months have been the industry's most difficult ever, he's

not about to chuck in the bar towel, says The PMA Team

It's been an exceptionally tough six months. Enterprise boss Ted Tuppen, presenting half-year results last week, described them as the toughest the industry has ever gone through.

And it was fascinating to hear in detail last week from the Enterprise boss how the company has gone about dealing with the problems.

There was a real sense that Enterprise had taken its share of the pain. First, there had been a £6m drop in off-invoice beer income as volumes dropped. Moreover, Enterprise had doubled rent concessions for licensees from £100,000 a month last year to £200,000 a month this year.

With bigger beer discounts on offer, the cost of this was an extra £2.5m to £3m compared to last year, with the number of pubs receiving support doubling from 400 to 800.

The support had been divided be-tween extra rent concessions — which had been worth £500,000 in the first half — and the increased beer discounts, which had been worth upwards of £2m (offering better discounts is the kind of incentive that can benefit both licensees and Enterprise).

All in all, it adds up to an extra £500,000 a month in help compared to the year before. Enterprise itself had seen its average earnings per pub drop to £33,000 from £33,300 for the same six months a year ago, as a result of volume losses and increased support.

Tuppen described that as: "not a bad result for the worst six months in living memory," and reported that 70% of those who receive increased support managed to trade through the difficulties. The remaining 30% at least get the chance to move out of the trade with dignity intact.

Overall, Tuppen's presentation stressed the resilience of the vast majority of Enterprise's pubs in this awful half-year. Earnings of £33,000 were still 12% better than those of three years ago, and such resilience could be put into historical context.

The company retained, for example, only 36% of the 490 pubs it owned on flotation over a decade ago. Since then, it's added prime pubs from Courage, Whitbread and Grand Met estates.

It's notable, too, that 61% of Enterprise's pubs are southern-based. "Trade is a little bit harder up north," reported Tuppen. A total of 73% of Enterprise's pubs have been trading in line or moving ahead of last year during the "perfect storm" that's been steadily developing since No-vember last year.

Tuppen reminded analysts that licensees are businessmen who, like farmers, realise that the prevailing conditions demand they work harder. "The (business) model is working very well and is very fair," he said. "This is a great system. The vast majority of pubs are in great shape — not over-rented."

Despite the doom and gloom surrounding the economic plight of the pub in the national media, enquiries about letting a pub are running 57% higher than this time last year. The Enterprise executives were wary of forecasting how the next six months would pan out, but Tuppen said: "I don't think it will get a lot worse."

Referring to whether financial support would have to increase, he added: "I don't know whether it's peaked or not, but we've gone a long way up the mountain."

It's worth recalling the British Beer & Pub Association (BPPA) figures indicating that the five largest tenanted pub companies accounted for just 14% of pub closures last year.

In other words, and to repeat, the vast majority of the 21,000 pubs owned by these companies are viable. Even most of the strugglers will survive, with a little extra help in this tough year for the industry.

A reit kerfuffle ends in confirmation

A bit of a kerfuffle surrounds the surprise news a couple of weeks ago that Enterprise Inns had got consent to convert to a real estate investment trust (reit). The news emerged in a note from brokerage firm MF Global and moved the market in Enterprise shares up by a mighty 29%.

MF Global sourced the news to a meeting with Punch chief executive Giles Thorley. However, well-placed sources suggest that MF Global may have over-stated what Thorley told it. "All Giles said was that he wouldn't be surprised if Enterprise announced it had got the

go-ahead at its results," said

one.

An MF Global blog served up Thorley's opinion as much more of a certainty, catching even Enterprise unawares — it had to issue confirmation a little later on. "It spoilt a good lunch," Enterprise chief executive Ted Tuppen told analysts last week.