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Tue 19th Nov 2013 - Breaking News - Enterprise reports 0.6% growth net income in Fourth Quarter
Enterprise reports 0.6% like-for-like net income growth in Fourth Quarter: Enterprise Inns has reported like-for-like net income growth of 0.6% in the final quarter and a decline of 2.9% for the full year. EBITDA before exceptional items was £313 million (2012: £340 million) primarily reflecting the impact of its disposal programme. The company reported £62 million of capital investment across the estate during the year. Like-for-like net income growth has been sustained in the first seven weeks of the current financial year. Profit before tax and exceptional items £121 million (2012: £137 million). Commenting on the results, chief executive Ted Tuppen said: “We are pleased to report an improving trend in our trading performance which, together with our actions to improve the quality of the estate and reduce our net debt, puts us on a clear path to return to growth in the near term. This performance was particularly pleasing when set against the challenging economic conditions, the adverse weather at the beginning of the year and the failure of our wines and spirits distributor. It is through the tireless efforts of our employees and the great work of our publicans that we have steered the business toward this growth trajectory and have delivered like-for-like net income growth of 0.6% in our final quarter. Our strong cash generation from operations combined with our successful disposal programme has reduced net debt by £216 million to £2.5 billion which, combined with our recent convertible bond offering, removes the reliance on disposal proceeds for debt reduction. This is a clear turning point and allows us to drive growth in the business from our operational initiatives and the reinvestment of future disposal proceeds to enhance the income potential of our estate. Like-for-like net income growth has continued into the first seven weeks of the current financial year. Looking ahead, we believe that the quality of our pub estate, the innovation and resilience of our publicans, the dedication of our team and the proactive actions we are taking provide the foundations for delivering sustainable net income growth.” Tuppen added: “I am pleased to report our full year results for the year ended 30 September 2013, during which time we have delivered EBITDA before exceptional items of £313 million. Like-for-like net income for the total estate for the full year was down by 2.9%. Within the year there has been steady improvement in the underlying trading performance. In the first half of the year we reported a 4.2% decline in total estate like-for-like net income as trading was adversely impacted by heavy snow in January and the coldest March for many years. In addition, the cessation of trading on 1 October 2012 of Waverley, our wines and spirits distributor, adversely impacted the business as we were unable to supply these products to publicans, resulting in a direct loss of nearly £2 million of trading income. We now have a new two year distribution agreement for wines and spirits which has been operational throughout the second half and has enabled us to return to a normalised level of trading for these categories of products. The second half of the financial year has delivered a 1.8% decline in like-for-like net income with the third quarter facing tough comparatives against the prior year due to the timing of Easter, a positive impact from the Euro 2012 football championship and the Queen’s Diamond Jubilee celebrations. In the final quarter of our year we received some benefit from a hot spell of weather in July but were also adversely impacted in the final weeks of the year by disruption caused to beer deliveries by the industrial action of employees of KNDL, our national distributor. Against this backdrop we were pleased to achieve growth of 0.6% in total estate like-for-like net income in the final quarter. While there have been two events disrupting our supply chain that have had some financial impact during the year, it is pleasing that contingency plans and intense management actions have minimised the impact to the business. Debt reduction remained a core element of our strategy during the year, driving the accelerated disposal programme which generated £150 million of net disposal proceeds. In addition, in September 2013, we successfully issued an unsecured, seven year convertible bond for gross proceeds of £97 million, with the proceeds used to reduce existing bank debt. The convertible bond issuance represents a new source of financing for the business which, with the proceeds from our accelerated disposal programme, has removed the requirement for significant bank amortisation in the next few years and extended our debt maturity profile. We now have a manageable amortisation profile which means we are able to return to a normalised level of asset disposals with the intention of only disposing of underperforming assets each year and reinvesting the c.£60 million of proceeds from such disposals to fund annual investment in the retained estate. Realising proceeds from asset disposals with very low yields and using those proceeds to generate more significant returns will provide incremental income to the business which will assist in the delivery of sustainable like-for-like net income growth. We have a manageable and tax efficient capital structure comprising predominantly long term debt, consistent with the long term nature of our freehold assets. Our strong cash generation from operations combined with the successful disposal programme has enabled us to reduce total net debt from £2.7 billion to £2.5 billion during the year. The Board currently believes that the best use of available cash is to continue to reduce debt to achieve a transfer of value to shareholders and as such will not resume the payment of dividends at this time. During the year Vince Cable, Secretary of State for Business, Innovation and Skills (BIS) initiated a further consultation into the operations of the tied pub sector. While we await the findings of the consultation, we remain firmly of the view that any statutory intervention would be unnecessary, disproportionate, without reasonable foundation and potentially subject to multiple legal challenges. Taxes suffered by pubs increased by 17% over the five years to September 2013, and now accounts for around £1 in every £3 taken across the bar. Over the same five years we worked hard to improve our pubs, investing in the region of £300 million in the fabric of the estate whilst seeing our average net income per pub fall by 12% as we have transferred significant value to our publicans through reduced rents and increased discounts.”
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