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Morning Briefing for pub, restaurant and food wervice operators

Tue 13th May 2014 - Breaking News - Enterprise Inns reports 1.1% net income growth
Enterprise Inns reports 1.1% net income growth: Enterprise Inns has reported a 1.1% like-for-like net income increase in the six months ended 31 March 2014 (H1 2013: 4.2% decline) with all geographic areas performing in line with, or ahead of, the comparative period. Ebitda before exceptional items reduced to £147 million (H1 2013: £153 million), primarily reflecting the impact of its asset disposal programme. Profit before tax and exceptional items was maintained at £55 million (H1 2013: £55 million) as interest savings offset reduction in Ebitda. Profit after tax increased to £37 million (H1 2013: £25 million), assisted by lower exceptional property charges. The company increased capital expenditure to £41 million (H1 2013: £29 million) funded from net disposal proceeds of £42 million (H1 2013: £54 million). 32% of capital investment was focused on growth driving initiatives, up from 20% in the first half of the prior year. Business failures reduced by 16% compared to the equivalent period last year. Chief executive Simon Townsend said: “I am pleased to be able to report positive progress for the business with like-for-like net income growth in the first half of the year and am particularly encouraged to see this translate into growth in earnings per share. Our focus continues to be on the implementation of actions that will sustain our improving trading performance and drive value for our publicans, which include the further enhancement of our pub estate and the provision of exceptional local support. Whilst the latter part of the year will be measured against tougher comparatives, I am confident that through our activities to support publicans to grow their businesses we will achieve our target of like-for-like net income growth for the full financial year.” He added: “Stabilisation of profit before tax has been achieved through an improved performance in like-for-like net income growth across the whole pub estate, an equalisation of our divestment and investment activities and a reduction in our interest costs as we continue to use our strong cash flows to reduce net debt. Like-for-like net income grew by 1.1% through the first six months of the financial year with steady growth of 0.5% in the first quarter followed by growth of 1.5% in the second quarter. This return to growth began in the final quarter of the last financial year such that we have now achieved three consecutive quarters of like-for-like net income growth for the first time since 2008. To some extent, net income performance in the first half of this financial year is flattered by a relatively weak comparative period, which included the collapse into administration of our wines and spirits distributor, leading to a reduction in income in the first half of the last financial year. However, we remain encouraged that our improving performance in the first half has been evident across the country with all geographic sectors reporting flat or better movement in like-for-like net income. Our southern estate has performed particularly well, helped by strong trading in and around London. The second half of the year will face more challenging comparatives but we continue to target like-for-like net income growth, helped in part by Easter falling in April and the FIFA World Cup finals in June. However, it is the continued successful delivery of our many activities aimed at both enhancing the quality of our estate and attracting, retaining and supporting great publicans that will optimise our income and help us to achieve our target of like-for-like net income growth for the full year.” Full year investment expectations are £65 million. For the foreseeable future the company expects annual investment to be around £60 million per annum to further improve the quality of its estate, funded from the proceeds of the disposal of primarily under-performing assets. It anticipates net disposal proceeds of £70 million for the current financial year.
 
Enterprise exploring alternative trading models: Enterprise Inns is exploring alternative trading models – its first managed pub opened last week. The company stated: “The total number of pubs operating in the Beacon format has remained broadly stable at 180, with strong like-for-like net income growth during the first half of the year. Our Beacon ‘managed tenancy’ model has evolved to become a successful operating concept, providing a simple, value-for-money, drinks-led pub offer to our Publicans who are supported by a dedicated retail team focused on sales, marketing, customer service and cost control. Whilst our core business will remain focused on the leased and tenanted model, we believe it is appropriate to continue to consider alternative operating formats and trading styles with which to maximise our income and returns from the pub estate. We are therefore evaluating a more proactive approach to the assessment, and selection, of the right retail offer and appropriate operating model for each pub, as well as the infrastructure requirements to support any alternative formats identified.”

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