After a resilient full-year results update and the government’s decision not to put the pub on a statutory footing, Enterprise Inns now faces two key tasks going forward, according to a leading analyst. Simon French at Panmure Gordon said that the management now needs to return the business to LFL EBITDA growth; and appropriately refinance its outstanding bank debt. He said: “We think it will be able to do both and, therefore, reiterate our Buy recommendation and 80p target price. “Enterprise should be able to generate LFL EBITDA growth, given that rental income is predominantly linked to RPI (65% of substantive estate) and the rate of beer volume declines is slowing. Industry beer volumes declined 5.2% in FY 2011E (-6.8% in FY 2010A) and RPI averaged 5.1%. "Notwithstanding the macro economic backdrop, FY 2012E has the potential to be a very good year for Enterprise with mild weather and easy comparatives in Q1, followed by the Diamond Jubilee (2nd-5th June), Euro 2012 (8th June-1st July), and the Olympics (27th July-12th Aug) over Q3-Q4. “We forecast flat LFL net income in the substantive estate in FY 2012E and 2% growth in FY 2013E.” The group had net bank debt of £446m at the end of September. French said: “We forecast a reduction in group net debt of £232m by the end of FY 2012E, of which £51m will be used to prepay floating rate notes in the Unique securitisation. This suggests that the group will try to negotiate a c£300m bank debt facility. More important, in our view, is the maturity of any facility. Given that the current facility runs until December 2013, we think at least a two-year extension to this would be needed to significantly reduce market scepticism.” The analyst also flagged up the possibility of the group again exploring a conversion to a REIT. He said: “We think consultations within the Finance Bill 2011 to reduce barriers to entry (in particular, abolishing the 2% conversion charge for companies joining the REIT regime) make REITs more financially attractive. The evolution of the leased pub model over the past two years and, in particular, the increased availability of free-of-tie leases, should make conversion a more realistic prospect. And, the ability to pay scrip alternatives to cash dividends makes it more viable from a cash flow perspective.”