Leading sector analyst Geof Collyer has issued a Hold recommendation for Enterprise Inns ahead of its Q3 results on 9 August, saying that all boxes are being ticked on its financial performance.
Collyer of Deutsche Bank pointed to four key measures of the tenanted and leased pub operator's performance. Firstly, disposals, which had reached £89m by the H1 stage.
“There have been plenty of minor announcements in the trade press suggesting that the top-end site programme has continued apace, whilst the auction rooms have been busy with packages of ETI’s bottom-end sites.
“This suggests that our £200m target for the full year looks fine.This also means that there should be more than enough funds to buy the remaining £33m of A3 & A4 bonds required for the UPC plan to avoid cash-trap as well as the remaining £45m of Tranche B of the bank debt, due by December 2012.”
Secondly, he said the company “remains confident that the £74m of bonds required to be cancelled will be bought before end-September”.
Thirdly, he pointed to that signing of its new bank facility on 1 June, which rolled the bank debt to mid-2016. “By this time, it should be no more than an unsecured working capital requirement facility. The incremental cost is expected to be an extra £0.8m in FY’12 and £2.2m in
FY’13 – a small price to pay for certainty of funding.”
Finally, he said that beyond this year, “spare cash flow may be used to buy up some of the 2018 corporate bonds, to help ahead of their refinancing”.
Collyer said the pattern of trading this year has been “tough to predict”, “given the volatility in the weather, the difference in timing of holidays, national celebrations, various sporting tournaments etc”.
