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Tue 12th May 2015 - Enterprise deal with Rupert Clevely offers 25% stake
Enterprise deal with Rupert Clevely offers 25% stake: Enterprise Inns chief executive Simon Townsend has told Propel that the company’s new deal with entrepreneur Rupert Clevely to develop managed pubs offers Clevely, who founded Geronimo Inns before selling the business to Young’s, a 25% stake in the venture. Enterprise is hoping to attract other leading retailers to form similar partnerships to develop managed pubs, with an average of £400,000 invested per site. Townsend said: “We will own the majority stake, 75%, and we will put the majority of the capex in.” Of the new partnership deals, the company stated this morning: “We have a partnership model whereby we can work with expert managed house operators in order to utilise their retailing flair and capability in pubs with exceptional profit potential, thereby optimising the value of such sites. In this model, the operational resource and expertise is provided by our retail partners. In the first of such partnerships, we are delighted to have agreed terms with Rupert Clevely, founder of Geronimo Inns, who will operate selected sites with us on a managed basis. We have already identified a number of sites which have the potential to be extremely successful under the guidance of Rupert and his team, and we expect to have the first site operational during the second half of this financial year. We believe this model will be very attractive to other parties whose interests, ambition and geographic coverage are complementary to our own and hope to be able to establish similar ventures with which to expand our managed house estate in partnership with some of the UK’s most successful pub retailers. Based on the profile of our estate, and the likely availability of suitable sites, we have the potential to extend this model by 15-25 sites per year over time, with an average initial capital investment of £400,000 per pub.” Townsend confirmed that licensees reaching the end of long lease agreements with the company would only be offered five-year tied agreements from this point onwards. This morning’s strategy review means that Enterprise will be operating a tied estate of circa 2,400 pubs by 2020, around 800 managed pubs and circa 1,000 pubs operated under commercial agreements, if plans come to fruition. Of the strategy review unveiled this morning by Enterprise, Cenkos analyst Simon French said: “Of more interest is the strategic review which is wide-ranging and will fundamentally change the shape and earnings profile of the business by 2020. At that point the group will have 4,200 pubs (down from 5,200 today) of which up to 850 will be managed pubs (16 today) and up to 1,000 will operate on commercial property agreements (185 today). The balance will be traditional five-year tied tenancies. Assets within the commercial property portfolio will be operated in such a way so as to take advantage of REIT status should the Board determine such a structure delivers greatest value to shareholders.” Numis Securities leisure analyst Douglas Jack described the new Enterprise strategy as ‘more transformational than expected’. He said: “H1 PBT rose 5% to £57m (we forecast £57m), with like-for-like net income up 0.6%, Ebitda down 2% and net debt down 4%. We are holding our forecasts. The direction of the strategic review is as expected, but the scale of the conversion programmes to managed pubs and commercial leases is much greater than expected. With management targeting LFL net income growth over the full year, we are holding our forecasts, with the main short-term change being increases in target disposal proceeds to £75m pa and capex rising to £70-80m pa. Overall, we agree with the revised strategy and retain our ‘Add’ recommendation (with a 150p target price).”


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