Enterprise Inns: continued improvement in trading

Enterprise Inns has reported a "continued improvement" in performance with average net income per pub up by over 1% in the past 18 weeks — compared to a flat performance in its first half-year results.

The leased pubco said it had benefited from exceptional weather and two bank holidays in April but were also challenged by difficult comparisons on last year, which included the football World Cup.

Enterprise currently has 88% of its estate, representing 94% of net income, let on substantive agreements — up 1% on last year — and expects to reach its target of 90% by the end of its financial year.

"Stricter pre-entry training and business planning requirements are having a positive impact for publicans taking pub businesses with ETI, although this has resulted in some delays in signing substantive agreements," it said.

It reported regional differences in performance in the substantive estate, which saw like-for-like net income per pub decline by less than 1% — against a 2% decline in the first half.

In the North, like-for-like net income per pub fell by 3% (H1:-5%), flat in the Midlands (H1: -2%) and an improvement of 1% in London and the South (H1: +1%).

The like-for-like figures take account of discretionary support given to publicans. "Whilst the cost of this support stands at around £1.4m per month for the year to date, we are pleased to note that the requirement for financial support and the monthly cost thereof is now beginning to reduce," it said.

Evolution​

Enterprise said it now offers a wide range of letting agreements from "fully tied traditional tenancies through to standard commercial agreements which are totally free of tie".

Food now accounts for 25% of pub turnover across the estate. "The nature of the business model is such that improvements in performance take time to feed through into like for like growth in net income, but we are pleased that many key indicators suggest that we are moving in the right direction.

"In particular, having seen significant declines over the past two years, our total rent roll (net of concessions) has remained stable for the past five months.

"Our strategy remains clear: to stabilise the business and then to build EBITDA, firstly on a like for like basis per pub and then, as our accelerated disposal programme comes to an end, by growing the absolute level of EBITDA."

Debt​

Enterprise generated £69m from the sale of 335 pubs in the 44 weeks to 30 July. It expects to dispose of "some 500" pubs in the full year, generating total net proceeds of around £110m. Its sale and lease-back programme, completed in May, raised £247m from the sale of 176 sites at an average rental yield of 6.5%.

Enterprise said it had continued to reduce the level of borrowings through strong cash generation and assets disposals. Its bank borrowings are on track to be around £450m by the end of the year and it is £80m ahead of schedule in paying back the Unique floating rate notes, having paid back £55m this year. It has invested £50m in capex projects, expected to raise to £60m by the end of the year.

"We believe that the current levels of borrowing and amortisation are sustainable even if, as we believe, the UK economy and consumer spending remain subdued for a considerable period of time," it said. "However, we continue to have the ability to reduce bank borrowing substantially should that be necessary."