Enterprise Inns initiates new approach to maximise returns from pub portfolio
SOLIHULL pubco, Enterprise Inns is to implement a new strategy designed to ensure its estate can maximise return to shareholders in what remains, a challenging market.
Outlining the new strategy in its interims results report, the company said a strategic review undertaken last year had shown that an exclusively leased and tenanted operating model, whilst relatively simple did not provide the business with sufficient options with which to maximise returns.
“Therefore during 2014 we started developing the necessary operational flexibility and capability to enable us to: use alternative models to operate the pubs in our estate; better apply consumer insights to inform our decision-making; optimise our scale and leverage to the benefit of our publicans; access the growing importance of food sales; and seek to attract the very best retailers in the UK,” it said.
It said that in order to achieve its operational goals the company would continue to reinvigorate its tied tenancy business; expand its managed business; build a high quality commercial property portfolio; and make disposals where appropriate to optimise returns.
“Whilst recognising that this will be a dynamic process we are planning that by September 2020 our managed pub business should be operating in the region of 750-850 pubs and we expect to have a commercial property business with around 900-1,000 property assets,” it added.
Simon Townsend, Enterprise Inns CEO, said the new approach offered a clear path for maximising returns.
“We are building upon our core capability of operating leased and tenanted pubs by extending our operational flexibility into the direct management of pubs and increasing the scale of our commercial property business,” he said.
“This new strategic direction will ensure that we generate the greatest value from each of our assets, and will also accommodate the requirements of the new legislation. This is a sustainable strategy for our business which embraces different operating models to best serve our publicans and their communities whilst delivering greater value to our shareholders.”
The new approach comes as the latest interims, for the six months to March 2015, show the company delivered EBITDA before exceptional items of £144m million, down £3m on the comparative period as a result of planned asset disposals. Pre-tax profit, excluding exceptional items, increased by £2m to £57m, aided by lower interest costs, resulting from reduced levels of debt.
It said it had also benefited from a steady return to growth in like-for-like net income generated by the estate of leased and tenanted pubs. The growth momentum has been maintained with like-for-like net income growth of 0.6% through the first six months of the financial year; made up of growth of 0.7% in the first quarter followed by growth of 0.4% in the second quarter.
“We are pleased to report like-for-like net income growth for the first half of the financial year,” added Townsend.
“At the start of last year we delivered net income growth for the first time in many years and to have built upon that momentum is particularly satisfying. To have achieved this performance against a backdrop of legislative uncertainty reflects the professional approach of our teams and the strength of relationships we have with the vast majority of our hard working publicans.”
It said trading in the first few weeks of the second half of the year had been in line with expectations but in keeping with other pubcos recently it has warned of difficult comparisons during Q3 due to last year’s World Cup.
Longer term, it said the business may well face challenges from the new Small Business, Enterprise and Employment (SBEE) Bill, which ends tied tenancy agreements allowing landlords to source their beer from wherever they please.
