Enterprise: net income down 8% per pub
Enterprise's net income per pub is down an average of 8% on a like-for-like basis for the sixteen weeks to 17 January as beer sales slide and rent concessions take its toll on Britain's second biggest pubco.
The cost of rent concessions and special discount schemes for struggling tenants is running at £1.4m a month. The pubco said it had had "considerable success" in reducing the number of pubs temporarily closed but concessions had put "significant pressure" on its overall rent roll, with rental income down 7% on the same period last year.
Like-for-like average beer sales per pub, net of contractual and special discounts, are running 6% below last year.
"These are times of great challenge for the UK economy and for consumer facing businesses in particular," said chief executive Ted Tuppen. "Licensees across the pub industry, whether in free houses or leased and tenanted pubs, are battling with substantial cost increases, led not least by the Government's ill conceived policy of increasing alcohol duties materially above the rate of inflation.
"The Treasury took the opportunity of the 'fiscal stimulus' announced in November to increase duty on beer by a staggering 8%, adding to the 9.1% increase announced in the Budget in March 2008. Whilst pubs remain at the heart of many communities and pub going continues to be the preferred social pastime for a large proportion of the UK population, consumer confidence has reached new lows and spending in pubs is under real pressure."
He added: "Against this background Enterprise Inns has continued to work closely with licensees, not only to help them to develop new business opportunities but also to offer financial support where appropriate through rent concessions and special discount schemes."
Estate
Capital expenditure on its estate has so far amounted to £11m and is predicted to rise to £45m for the year as it focuses on "smaller schemes aimed at reinvigorating struggling pubs and helping existing licensees to develop new business opportunities".
It has sold 22 pubs in the first quarter for £7m with a further 62 pubs worth £17m in the hands of solicitors awaiting completion. It completed on the purchase of four high-end pubs at a cost of £3m agreed at the end of last year before it put its acquisition programme on hold.
"Our pub estate has always been conservatively valued and at the time of our last valuation, in September 2008, approximately one third of our pubs were written down by an average of 14%, reflecting the fact that the smoking ban, in particular, had resulted in a permanent reduction in potential profitability for a number of outlets," said Tuppen. "At the same time, the remaining two thirds of our estate comprising pubs which were well placed as a result of underlying quality, investment and market position had grown earnings and maintained or increased value."
Outlook
Tuppen added: "We expect trading conditions to continue to be very challenging during 2009, but with a Group loan to value ratio of around 63% and fixed charge cover at two times, the balance sheet and cash flows remain robust. Debt ratios are broadly in line with those reported as at the end of September 2008 and there is no requirement for refinancing before May 2011, when our existing five year bank facility of £1 billion is due for renewal. We have in place a sensible plan for debt reduction over the next two years and will continue to review the available options in the debt market."
