Full-year profits flat at Enterprise Inns
The company said despite modest lfl growth in the fourth quarter this had to be seen in the context of “challenging comparatives” from last year while the first half of the year performance was “ flattered by a relatively weak comparative period”.
It said the Southern estate performed particularly well, helped by strong trading in and around London. Its 732 pubs within the Greater London region showed lfl net income growth of 4.4% year-on-year to £70m. The top 90% (4,813 pubs) of the estate, in terms of income earned, grew lfl net income by 3.1% in the year, which Enterprise said demonstrated “the strength of the core estate”.
Financials
EBITDA before exceptional items was £302m, down from £313m in 2014, with profit before tax and exceptional items maintained at £121m, exactly the same as the year before. The company said interest savings from reduced debt offset reduction in EBITDA.
Profit after tax improved to £30m, compared to a £4m loss in 2013 after net exceptional charges, which the company said principally related to property matters, reduced to £65m from £99m in 2013. Net debt was down to £2.4bn (2013: £2.5bn). The company said partial refinancing of 2018 corporate bonds and a new revolving bank facility completed on 7 October provided a “smoother and extended debt maturity profile with a reduced overall cost of borrowing, improving flexibility and optionality”.
Disposals and investment
Net proceeds from disposals stood at £73m, down from £150m in 2013. Capital investment was up from £62m in 2013 to £66m this year - with 41% focused on 'growth driving initiatives', up from 32% last year.
It said: “Disposals primarily relate to under-performing assets with the proceeds re-invested to drive like-for-like net income growth and improve the financial returns in our retained estate. The objective of this equalisation of divestment and investment activities is to re-deploy invested capital to optimise our returns which will lead to enhanced total earnings. We target Return on Investment (ROI) of 15% and have achieved an average ROI of 19% on schemes delivered in the last twelve months.
“In the current year, we re-invested £66m compared to £62m in the prior year, of which, 41% was directed toward income enhancing opportunities, up from 32% last year.”
Of that £66m invested some 41% went into programmes that will generate incremental income. Within this total the company invested in excess of £100,000 in 70 pubs, in excess of £50,000 in 188 pubs and between £20,000 and £50,000 in 600 pubs.
Enterprise said it had focused on improving publican profitability, resulting in a 16% reduction in business failures.
'Progress'
Chief executive, Simon Townsend, said: “We are pleased to report like-for-like net income growth for the full year with each quarter delivering improvements on the prior year. This represents significant progress and has been achieved through our continued focus on the implementation of actions that drive sales and profit for our publicans and as a result enhance our income.
“We continue to enhance the quality of our pub estate, and while we have materially reduced the scale of our asset disposal programme, we have sold under-performing assets to fund increased investment in the retained estate, with a growing proportion of capital investment directed toward income enhancing opportunities. Our teams remain focused on providing exceptional local support and value creating opportunities to our publicans to enable them to grow their businesses.
“The successful partial refinancing of the 2018 corporate bonds and replacement of our bank facilities provides the business with increased flexibility and optionality with which we aim to sustain our operational progress, further reduce our debts and generate value for shareholders.
“While our performance this year has benefited from a UK economy which has shown some signs of strengthening, including improving employment prospects, we view the consumer recovery as fragile and remain cautious in the near-term.
“Our focus for the current year is to continue to implement initiatives which assist publican profitability whilst increasing capital investment in relevant and innovative retail offers. We are pleased that, for the first seven weeks of the new financial year, we have continued to deliver like-for-like net income growth in line with our objectives for the year.”
Beacon pubs
Its Beacon model pubs, which is currently 183 pubs strong, grew like-for-like net income by 7% in the financial year. These pubs are still operated under a tenancy agreement, but are supported by a dedicated retail team focused on sales, marketing, retail standards, customer service and cost control.
The company said it had further evolved this model such that it now also operates nine managed pubs and plan to extend this trial in 2015.
It said: “We expect to evolve our approach over time, informed by the evidence from the operation of these managed pubs, with the strategic objective of understanding the potential additional economic benefit to be derived from managed and semi-managed operating models; to evaluate the performance of defined retail concepts; to assess the transferability of benefits to the leased and tenanted model; to determine the value protection opportunity that arises from taking full operational control of pubs at risk of business failure; to assess the commercial and supply chain benefits to the group that can be derived from a managed operation; and to develop a largely outsourced, scalable back-office capability which provides the essential control environment for such operating models.”
