Enterprise Inns' shareholders were able to breathe a sigh of relief on the back of these figures, thanks to news that bank debt has been refinanced. But, despite that, the group is still lumbering under a massive £3.5bn net debt pile - comprising bank debt, corporate bonds and securitised bonds. What's more, the tenants that rent it 7,138 pubs face a number of potential headwinds.
The new bank facility of £625m kicks in during May next year and will mature in two tranches - of £206m in December 2012 and £419m in December 2013. During the first half, the group managed to bring down its existing bank debt by £110m to £792m and the group should continue to make inroads with its ongoing pub-disposal programme. Indeed, in the first half the group sold 261 of its mainly underperforming pubs for £86m, and generated £49m by selling and leasing back 26 higher-quality pubs. The disposal programme is ongoing with £140m expected from outright sales for the year as a whole.
Meanwhile, the deterioration in underlying trading continues to subside. The first half saw a 3 per cent decline in average net income per pub compared with 8 per cent last year and 4 per cent in the first 16 weeks of the current year. What's more, the rate of tenant failure is also down. And the number of pubs under a temporary management agreement, where Enterprise takes control to improve trading and re-let, has dropped from a peak of 218 to 84 at the end of the half. New tenants are also being enticed with the offer of more flexible lease agreements.
However, while there are encouraging signs, Enterprise's tenants face considerable potential headwinds - including rising VAT, tough competition from cut-price supermarket beer, rising beer duty and rising wage costs, and all against the backdrop of weak demand.
Numis Securities expects full-year pre-tax profits of £184m and EPS of 37.2p (£206m and 30.6p in 2009).
| ENTERPRISE INNS (ETI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 135p | MARKET VALUE: | £683m | |
| TOUCH: | 134-135p | 12-MONTH HIGH: | 179p | LOW: 93p |
| DIVIDEND YIELD: | nil | PE RATIO: | 8 | |
| NET ASSET VALUE: | 286p* | NET DEBT: | 242% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 404 | 9 | nil | nil |
| 2010 | 374 | 91 | 16.5 | nil |
| % change | -7 | +911 | ||
Ex-div:- Payment:- *Includes intangible assets of £416m, or 82p a share | ||||
