Enterprise Inns confirms 20 per cent profit slide

In line with City forecasts, Enterprise Inns has reported pre-tax profits of £208m for the year ending September 30, 2009, down nearly 21 per cent, on turnover down nearly eight per cent at £811m.

The UK's second largest pub operator described 2009 as "another very testing year for the pub industry, with licensees having to endure weak consumer spending alongside rising overhead costs, duty increases ahead of inflation and aggressive pricing from supermarkets".

Chief executive Ted Tuppen said the "greatest credit must go to the vast majority of our licensees who face the daily challenges of running a pub, overcoming whatever obstacles are placed in front of them and developing businesses that are consistently attractive to customers".

However Tuppen warned that given the current economic climate and the planned reduction in the size of the group's pub estate, "we are likely to see some further decline in trading profit in the short term", though Enterprise's medium term prospects were good, he added.

Average net income per Enterprise pub fell eight per cent, while earnings before interest, tax, depreciation and amortisation (EBITDA), fell 11 per cent, in line with the first half of the year.

Enterprise said that the 83 per cent of its pubs on substantive agreements had performed well, with average income per pub down three per cent, although this masked regional variations, with London pubs seeing the best of it, down three per cent, and those in the North the worst, down 11.

The remaining 17 per cent of the group's estate however had "struggled with periods of closure, sub-optimal temporary letting and general underperformance", and average income per pub down 39 per cent to £37,000.

Enterprise said the number of pubs on temporary management agreements had fallen from 218 to 183, while those on temporary tenancies had fallen 20 per cent to 769.

The number of "closed but viable" pubs had fallen from 200 sites to 90.

Bad debts among licensees was rising but still only accounted for 0.4 per cent of turnover, Enterprise said.

Financial assistance to pubs in difficulty amounted to an average of £9,500 per pub, "which in the majority of cases was sufficient to put the licensee back on to a secure footing and move the business forward".

The group said the need for such support going forward was "beginning to recede" as pubs found their feet again and the group disposed of poorer-performing outlets.

Net debt fell from £3,704m to £3,562m. The group said following talks with its banks in October it was confident regarding the prospects for refinancing the business.

Enterprise added its estate had been re-valued down seven per cent to £5.4bn - making each pub worth an average of £726,000 - and that if the next tranche of sale and leaseback auctions proved successful more such transactions would be undertaken, with proceeds used to reduce debt.

The group's shares were down 4.3p this morning, trading at 129.3p.

(More to follow)