Enterprise reports sharp drop in profits

Enterprise Inns has reported a £55m drop in full-year pre-tax profits to £208m for the year to 30 September. 

Profit after exceptional items was £11m compared to £209m in 2008.

Adjusted to take account of pub disposals, the decline in average net income per pub was 8%, with EBITDA (Earnings, Before Interest, Tax and Depreciation) per pub down by 11%, in line with its financial first half.

The company said that pubs in general, and "good quality pubs in particular", have proved remarkably resilient.

Significant regional variations in performance had meant average net income per pub was down by 11% in the north, 9% in the midlands and 5% in the south, including just 3% in London.

The company said: "Whilst the 83% of our pubs on substantive agreements have delivered £448m of net income, down just 3% from last year at an average of £73,000 per pub, the remaining 17% have struggled with periods of closure, sub-optimal temporary letting and general under-performance which have together resulted in a 39% fall to an average of £37,000 per pub.

"Against this background, we have continued to provide unprecedented levels of support to licensees.

"In addition to our Price Freeze package, which held back key brand price increases for six months and cost over £3m, we provided non-contractual rent concessions and special discounts costing £18m during the year to a total of 1,900 licensees under our Business Recovery Scheme (BRS).

"It is encouraging that in the majority of cases this financial assistance, costing an average of £9,500 per pub, was sufficient to put the licensee back on to a secure footing and move the business forward.

"As we accelerate the disposal of poorer quality pubs and as top quality licensees develop their businesses to succeed in these recessionary times, the requirement for direct financial support is beginning to recede."

Temporary management​

Enterprise described the introduction of Temporary Management Agreements (TMAs) during the year has "partially successful".

It added: "However, this success has come at a high cost and, having seen a peak of 218 pubs operating as TMAs, it is encouraging to see that the re-letting programme has now gathered momentum, with just 183 pubs operating under the TMA scheme at 30 September, a number which we expect to reduce significantly during the coming year.

"Whilst offering assistance to good quality licensees who are prepared to work with us and tackle the difficult trading environment in partnership, we have also faced substantial increases in the cost of business failures, incurring costs estimated at some £25m during the year, through non-payment of rent, lost sales, closure costs and legal fees. 

"Again, however, it is encouraging to see that the rate of business failures is beginning to abate."