Enterprise Inns ‘energised’ by its people, pubs and performance

On the day the company posted pre-tax profit of £137m on revenues of £692m chief operating officer Simon Townsend told the PMA's sister title M&C Report​: “We are better informed, have better tactics, can make better choices, can be more considered and innovative. We now have a greater operational resource to aid our publicans and fewer pubs per regional manager. I feel energised by the quality of the people and the work that is going into reinvigorating the Enterprise offer.”

Like-for-like rents have fallen 12% and average beer discounts have risen 75% since 2008, said Townsend. “This is worth some £54m of value transfer from the company to our licensees, equivalent to more than £9,000 per pub. We estimate that average licensee income is around £45,000 per annum, including the £10,000-a-year live-in benefit.

"Our income per pub currently stands at £65,000 per annum, while the Government/HMRC takes an annual £145,000 in VAT, duty and other taxes for each pub in the estate. This has risen by 19% from £122,000 in 2008. So you can see who is getting the biggest slice of the cake.”

Townsend said that the group invested £63m on enhancing the quality of its freehold estate during the year. The estate now comprises 6,060 properties with a book value of £4.3bn. The property portfolio comprises 5,902 trading pubs and 158 properties which are alternative use outlets or properties permanently closed or trading on short term agreements pending disposal.

Townsend said that the group planned to invest a total of c£180m over the next three years in “positioning its pubs for growth”. He said: “Over the next three years we expect the estate to reduce to approximately 5,200 pubs. Over the same period we plan to maintain our level of investment and spend approximately £180m to improve the quality of our estate.

“In the recent past, a significant proportion of our capital expenditure has of necessity been defensive in nature, ensuring basic functionality is in place to enable a continuation of trade. Looking forward we plan to direct an increasing proportion of our capital expenditure on growth-driving activities, where appropriate repositioning pub businesses to meet the changing needs of their local customer base.”

Townsend said the investment would be focused on developing food and accommodation offers and there would be a concentration on property condition, “kerb appeal”. He added that around £10m would be spent on larger schemes worth £250,000 or more in the coming year, pubs in good locations and with high quality licensees. He also said that the group had identified 700 pubs where the external condition was “poor”, all of which will be addressed in the next 12 months.

Enterprise has seen its rate of business failures fall by 4% during the year, with 85% of agreements having had rent reviewed or negotiated since 2008. During the year, 653 rent reviews were completed at an average annual reduction of 0.7% compared to 724 in 2011 at a reduction of 1.7%. He added that 68% of substantive agreements are now linked to RPI (2011 – 65%), while 85% of publicans were receiving some form of BCF discount (2011: 81%).

Townsend said: “Our approach to the tie has continued to evolve, and free-of-tie options for bottled beers, ciders and flavoured alcoholic beverages (FABs), wines, spirits and minerals, gaming machines and guest ales are available in every new agreement.

"Where circumstances have been compelling to both parties, we have been able to agree completely free-of-tie terms. This suite of available options ensures that all publicans' needs can be met, whether at the time of a new agreement, or in order to sustain and evolve an existing relationship.”