Enterprise Inns, the leased and tenanted pub company, has reported a slight improvement in trading in H2 2011, with average income per pub up 1% after a flat H1.
The company has reported regional differences in the 18 weeks since its previous interim management statement within pubs on substantive agreements; net income per pub fell less than 1% (H1: -2%), with a decline of 3% in the north (H1: -5%), no change (H1: -2%) in the Midlands and an improvement of 1% (H1: +1%) in London and the south.
Total rental income, net of concessions, has remained stable over the past five months, the company revealed in its interim management statement for the 44 weeks to 30 July.
Enterprise said: “We have continued to see stabilisation in trading performance, with average income per pub up by over 1% in the 18 weeks since the interim results after being flat during the first half.
“During the period we benefited from the exceptional weather and two bank holidays during April but were then challenged by difficult comparisons with the FIFA World Cup in June last year. Whilst remaining cautious about the underlying economic environment, we expect to deliver results for the full year in line with our expectations.”
Enterprise generated £69m from the sale of 335 pubs in the period. It expects to dispose of “some 500” pubs in the full year, generating total net proceeds of c.£110m. Its sale and leaseback programme, completed in May, raised £247m from the sale of 176 sites at an average rental yield of 6.5%.
The level of bank borrowing is “on track” to be around £450m by the end of the financial year due to “strong cash generation” and disposals. More than £50m has been invested in its pubs this year, and the figure is expected to exceed £60m for the full year.
“We continue to prepay the Unique floating rate notes and, having prepaid £55m so far this year, remain £80m ahead of schedule.
“We believe that the current levels of borrowing and amortisation are sustainable even if, as we believe, the UK economy and consumer spending remain subdued for a considerable period of time. However, we continue to have the ability to reduce bank borrowing substantially should that be necessary.”
Enterprise reported “some delay” in signing substantive agreements due to stricter pre-entry training and business planning requirements. Currently 88% of its pubs, representing 94% of net income, are let on substantive agreements (H1: 87%). “We expect to meet our target of more than 90% of pubs on substantive agreements by the end of the financial year,” the firm said.
Enterprise estimates that food now accounts for about 25% of pub turnover across the estate.
“The nature of the business model is such that improvements in performance take time to feed through into like for like growth in net income, but we are pleased that many key indicators suggest that we are moving in the right direction.
“In particular, having seen significant declines over the past two years, our total rent roll (net of concessions) has remained stable for the past five months.
“Our strategy remains clear: to stabilise the business and then to build ebitda, firstly on a like for like basis per pub and then, as our accelerated disposal programme comes to an end, by growing the absolute level of ebitda.”
