Enterprise Inns sees annual profits fall 16 per cent
Enterprise Inns, the UK's second largest pubco, said today the business was in a "sound position" to deliver returns to shareholders, despite announcing a 16 per cent slide in annual profits to £175m.
Shares in the group were down nearly 12 per cent today after it revealed turnover for the year to the end of September 2010 down 7.2 per cent to £753m, while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 10 per cent to £405m.
There would be no dividends paid for the time being, Tuppen said, although the company hoped to be able to resume these "in the medium term".
The Enterprise boss added: "The past year has demonstrated the resilience of the best pub operators in the industry and we believe that the profile of our estate, combined with the professionalism and flair of our licensees leaves us well placed to face whatever challenges the year ahead may bring.
"We remain confident that the business is in a sound position to deliver positive returns to shareholders over the medium term, including the resumption of dividend payments."
Dumping underperforming outlets had helped Enterprise Inns stem the decline in average pub income, the group said, with like-for-like net average income per pub across the estate down five per cent, versus an eight per cent decline in 2009.
Enterprise said 89 per cent of its pubs were trading on substantive agreements, versus 83 per cent in 2009. The pubco did not reveal the number of closed pubs across its estate.
"We are now seeing a consistent improvement in average net income performance, a trend that we will seek to continue as we invest in the quality of our pub estate and our licensees and churn out underperformers," said Tuppen.
The group had got to the point where it could call a halt to its temporary management agreement (TMA) programme, he added, under which previously more than 200 pubs were trading. No pubs were under TMAs now, Tuppen said.
Enterprise said £15m had been spent on supporting licensees who were in trouble, versus £21m in 2009, while £55m-worth of investment had been ploughed in more than 1,600 pubs.
Tuppen added that the group's estate had been re-valued downwards to the tune of £103m, valuing Enterprise's 6,280 pubs at £5bn. The pubco reckoned on selling around the same number of pubs in the current financial year as the 579 sites it got rid of in 2009.
Sales of its pub helped net debt to fall by £374m during the year, to £3.3bn.
The Enterprise boss also mounted a defence of the beer tie, claiming most of the group's retailers appreciated what the company offered them.
"The debate about the tie has created a confused picture about the relationship between pub companies and their licensees and the impact of the tie on the profitability of both parties," he said. "In reality, what matters is the total cost to the licensee of renting a particular pub business, having evaluated the benefits offered by the pub company or brewer.
"The vast majority of our licensees recognise the quality of our pub estate, understand and welcome the concept of fixed and variable rental costs and appreciate the many services and benefits that we offer."
On future trading, Tuppen said "the past year has demonstrated the resilience of the best pub operators in the industry and we believe that the profile of our estate, combined with the professionalism and flair of our licensees leaves us well placed to face whatever challenges the year ahead may bring".
