Call for Enterprise Inns to cut dividend

A leading City analyst has called on Enterprise Inns to cut its dividend to help it pay down some of its £5bn debt.

James Ainley, of brokers JP Morgan, said that cutting the dividend and using the cash saved - around £200m a year - in order to repay debt could deliver better returns for shareholders than continuing to make the dividend payments.

Yesterday Enterprise Inns announced pre-tax profits down nearly 13 per cent at £263m, but said maintaining its dividend "showed regard for our shareholders".

However in a research note published today Ainley argued that "questions are going to remain around Enterprise's debt financing for the foreseeable future and it is hard to see the stock performing until these issues are resolved".

The pubco's management remained confident it can refinance its £1bn bank facility by May 2011, said Ainley, "but with the banking market remaining so uncertain it is impossible to know for sure what the outcome will be".

Earlier this year Ainley called on Enterprise's rival Punch Taverns to suspend its dividend in order to fund debt repayments, a move which the pubco pursued.

Enterprise, whose shares were down more than nine per cent today, declined to comment on Ainley's research note.