Enterprise: we have complied with most of BEC
Enterprise Inns believes it has already complied with most of the recommendations contained within the hostile Business & Enterprise Committee report on landlord/tenant relations, according to Numis analyst Douglas Jack.
The City analyst met with Enterprise chief executive Ted Tuppen and finance director David George this week. Jack said: "The Bec report, which wiped out much of Enterprise's equity value, is likely to be dealt with by the industry - Enterprise believes it has already conformed to most of its proposals - or referred to the OFT, which has already rejected the report and 19 previous efforts to abolish the beer tie."
Jack also reported that Enterprise is successfully selling its tail-end pubs above book value. It has no "no need to raise equity".
On trading, Jack reported: "Recent trading has been improved, but largely due to easy comparatives and better weather. Relative to 2008, we believe this trend could continue for the next few months. There is a significant divergence in performance: the majority of sites are resilient; whereas the tail is continuing to perform poorly." Jack expects 300 or more tail-end disposals - 70% of disposals are for alternative use.
Jack thinks that Enterprise's bank facility should be successfully refinanced before September 2010 at a reduced size (at £600 to £700m). He added: "Management is dismissive of having a rights issue; it would rather sell 174 pubs in the West End worth £300m versus a book value of £175m if there was a necessity. Neither event is likely."
