Enterprise: pubs trading remarkably well
The majority of Enterprise pubs are trading "remarkably well" despite the "unprecedented" trading conditions, the pubco has reported.
However, Enterprise said it is still spending £1.4m a month on rent concessions and special price discounts. It reported that trading in January had been "relatively strong", while February had been hit by two weeks of bad weather and being a shorter month and March has been "steady".
"Without doubt, the pub industry is facing trading conditions of unprecedented challenge," said chief executive Ted Tuppen. "Against this background, it is the quality of the Enterprise estate, the inherent fairness of our business model and the expertise of the majority of our licensees that underpins our performance. Having grown through the acquisition of the best of the former Whitbread, Grand Met and Courage tenanted estates, whilst at the same time aggressively disposing of underperforming outlets, we face this recession with a top quality pub estate."
Enterprise owns 98% of its pubs and has just 183 short leaseholds, on which it pays an annual rent of £2.6m. The pubco clarified its re-evaluation of its estate, which took place in September 2008. It said that the overall valuation of £5.9bn — broadly unchanged on last year — took into account £68m spent on the estate in 2008. Two-thirds of pubs had flat or increased values while there was an average decline in value of 14% across the remaining 2,500 pubs.
A total of 1,100 pubs, representing 12% of the estate, were written down in value by an average of 29%.
It has sold 150 pubs for £44m in the first six months of the trading year to date, which it said was "reassuring" as discussions with valuers had suggested that prices for poor quality or potentially unviable pubs remain weak.
Finance
Enterprise said hat none of the recent downgrades on securitised bonds or corporate bonds had implications for it in terms of covenants or costs to the business.
Its £1.6bn worth of securitised bonds amortise over 23 years and attract a fixed rate of interest of approximately 6.5% until final maturity. Enterprise is currently £85m ahead of the amortisation schedule.
Its £1.2bn worth corporate bonds are non-amortising and attract a fixed rate of interest of approximately 6.5%. The next scheduled maturities are £60m in February 2014 and £600m in March 2018. The bank syndicated facility of £1bn attracts interest at 80 basis points over LIBOR (London Inter-Bank Offered Rate) and is due for renewal in May 2011.
"We are confident that adequate banking facilities will be available at the appropriate time and, in the meantime, we have in place a sensible plan for debt reduction over the next two years and will continue to review all available options in the debt markets," said Tuppen.
