Enterprise Inns suspends dividend after profits slide

Enterprise Inns has announced it is suspending its interim dividend after reporting interim pre-tax profits down £29m at £103m.

The UK's second largest pub operator said turnover fell £34m to £404m in the six months to March 31, 2009, while earnings before interest, tax, depreciation and amortisation (EBITDA) fell £31m to £225m.

Net income per pub fell eight per cent, while net EBITDA per pub fell by "around 10 per cent".

While acknowledging the "very challenging trading conditions" across the industry, Enterprise's chief executive Ted Tuppen said the majority of his company's licensees "continued to trade successfully during these difficult times and benefit from the advice and support that we deliver.

"Despite the financial cost to our business, we believe it is right to continue to provide substantial direct financial assistance, amounting to £1.4m per month, to help deserving licensees during this severe recession."

Enterprise said it had established a temporary management agreement (TMA) to help turn round distressed pubs. Currently 134 such pubs were under TMAs at a cost, the group said, of £3m in the first half.

The group said that none of the recent downgrades in the bond markets affected its financial position. There were no "cash trap issues" it said, referring to its £1.6bn securitised bond, while it said it was confident it would be able to refinance its £1bn bank facility in February 2011.

Enterprise said it had sold 151 pubs and "various other plots of land" for £44m, which it said was seven per cent above book value".

Chairman Hubert Reid said in a statement that it was "a tribute to the hard work and determination of the vast majority of our licensees and the high quality of the ETI pub estate that most of our pubs are trading profitably, albeit at levels below last year and helped in many cases by additional support from the company".

Reid added that "whilst offering assistance to good quality licensees who are prepared to work with us, we have also incurred additional costs of some £5m during the first half, through lost sales, non payment of rent, reopening costs and legal fees, in order to remove poor quality and underperforming licensees.

"There is clear evidence that, whilst expensive in the short term, this is vital for the long term health of the pub estate and our business," he added.