Enterprise Inns reports "challenging" first half of the year

EBITDA before exceptional items stood at £153m (H1 2012: £168m), while profit before tax and exceptional items fell to £55m (H1 2012: £64m). Revenue stood at £312m down from £342m.

The group said that it had signed strategic partnerships with Molson Coors, Brakes and wi-fi provider Arqiva to aid support for its lessees.

Ted Tuppen, chief executive said: “Trading in the first half of the year has been particularly challenging. The heavy snowfalls in January and the coldest spring for many years have not encouraged customers to venture out to their local pub.

"Against this backdrop we are satisfied with the results for the first half of the financial year and are encouraged that in recent weeks we have seen a recovery in trade. Our target continues to be the delivery of like-for-like net income growth across the entire estate during the second half of this year.

“Our strong cash generation from operations combined with the successful disposal programme enables us to maintain our strategy of debt reduction which will see total net debt reduced to £2.5bn by the year end, a reduction of £0.8bn over the last three years.”

Enterprise said that the second half of the year had started with improved trends in trading.

Tuppen said: “We estimate that, after adjusting for the timing of Easter, like-for-like net income for the total estate for the second half to date is down by around 1%. We continue to be focused on implementing activities which improve the quality of our estate and which enhance the income potential for our publicans as the most effective means of optimising our net income.
In the first half of the year the company invested £29m in enhancing its estate and expects this rate of expenditure to continue in the second half of the year.

“To date we have completed 260 exterior redecorations across our estate at an average cost of £10,000 per pub and we expect to complete a further 600 redecorations during the remainder of the year. It is encouraging that where we have completed the work, the publican has often carried out interior decorations and enhancements to other trading areas so that the pub can effectively be re-launched to its local customer base.”

In the first half of the year, the group disposed of 151 unsustainable pubs generating £42m of proceeds. In addition 10 “exceptional properties” were disposed of generating net proceeds of £12m at an average multiple of 14 times net income.

The company reported a net profit on disposal of £10m (H1 2012: £10m) after writing down those pubs that were moved to assets held for resale by £11m (H1 2012: £4m), of which £8m was charged to the income statement in the period (H1 2012: £2m). In addition, it has written down the value of pubs moved to assets held for resale but not yet disposed of by £29m (H1 2012: £12m) of which £23m (H1 2012: £8m) was charged to the income statement in the period.

For the financial year to date, the company has completed, exchanged or have in the hands of solicitors disposals of 246 pubs with proceeds of £96m and for the full year to 30 September 2013 it expects total disposal proceeds to be £150m.

The group said it continued to evolve its “managed-tenancies” as part of Project Beacon, where it has a much greater say in the operation of the pub. At 31 March 2013, it had 237 Beacon pubs and expects the number to stay around that level as the number of new Beacon sites will be offset by existing Beacon sites transferring to traditional tenancy agreements and some disposals.

The company has agreed terms with Molson Coors to provide the Sky entertainment package to Enterprise pubs at a 30% discount to list price, a potential average saving for each participating pub of £3,000 per annum. It has also agreed terms with Arqiva to provide free Wi-fi to its pubs.

The group is also set to launch a new strategic partnership with Brakes as part of its plan to increase support for pubs which offer food. The “Enterprise Pub Club” will provide the publican with access to improved pricing and a broad range of on-site food support services including menu design, gross margin management and equipment provision.