Enterprise Inns: many licensees see "welcome uplift

Shares in Enterprise Inns rose 11 per cent this morning after the pubco reported what it described as "generally good Christmas trading" which brought "a welcome uplift" for many of its licensees.

In a trading update ahead of its AGM later today covering the 16 weeks to January 16, 2010, Enterprise said trading had been variable but "whilst extreme weather, particularly during the first two weeks of January, kept many customers at home and disadvantaged some pubs, it brought extra custom to others".

Trading in better quality pubs continued to stabilise, the group said, with average net income per pub in the 82 per cent of its pubs let on substantive agreements down by "less than two per cent" during the period, versus a three per cent dip for the 2009 financial year.

Rental income would be under pressure throughout the year, but due to the sale of a number of bottom-end pubs the decline in average net income per pub had eased to around four per cent, having fallen by eight per cent during the last financial year, the group added.

The pubco said it was "encouraged that many of these have now been able to stabilise their businesses, thereby reducing the cost of financial assistance". It acknowledged that the cost of such support was higher than last year, but the cost trend was reducing.

"In addition, we are particularly encouraged by the strength of demand from good quality licensees seeking a pub with Enterprise," it said.

Enterprise said it had sold or was in the process of selling nearly 250 pubs in the period, with proceeds of around £80m.

The group has apparently identified a further 24 pubs to go under the hammer at auction via a sale and leaseback deal, following the 20 pubs it has already sold this way.

"These sales have generated a reasonable profit above book value and confirm our view that our pub estate is conservatively valued and that pub values are beginning to stabilise," the group added.

With debt reduction very much on its mind, Enterprise said talks with its banks concerning a looming refinancing meant it "remained confident that adequate banking facilities will be available at the time of our refinancing, which we expect to be concluded before the end of this financial year".

Looking ahead, Enterprise said trading conditions would remain challenging throughout the year "as pubs and consumers alike face the prospect of rising taxes and higher unemployment.

"However, as we continue to improve the quality of our estate both through investment and the disposal of unsustainable pubs, we remain confident in our strategy and believe that we are well positioned to drive the business forward through these difficult times."

Enterprise also announced the impending retirement of Colin Pedrick, who heads up its East division of pubs. Pedrick leaves the pubco at the end of March.

The group's shares were trading at 105p, up 11 per cent.