Enterprise Inns warns of tough times ahead
Solihull pub group Enterprise Inns has warned that the tough trading environment for pubcos is likely to continue throughout 2010.
In its interim management statement for the 16 weeks to January 16, published to coincide with today’s Annual General Meeting, the company said rental income was under pressure and was expected to remain so.
“Trading conditions will be challenging throughout the year as pubs and consumers alike face the prospect of rising taxes and higher unemployment.
“However, as we continue to improve the quality of our estate both through investment and the disposal of unsustainable pubs, we remain confident in our strategy and believe that we are well positioned to drive the business forward through these difficult times,” said the statement.
The company said that trading during the quarter had been variable and while it had been boosted by the festive period, the poor weather at the start of the year had hit sales as customers stayed at home.
On a more positive note, the firm said trading at its more up-market venues was beginning to stabilise with average net income per pub in the 82% of its sites let on substantive agreements down by less than 2% during the period.
Across the whole estate, in part helped by its disposal of underperforming pubs, the decline in average net income per pub has eased to around 4%, having fallen by 8% during the last financial year.
Enterprise said it had also seen improving trends across the ETI estate, whilst the number of closed pubs remained broadly constant.
It has also substantially reduced the number of outlets either holding over, pending legal action or operating under temporary management agreements and while this resulted in an increase in the number of pubs operating under short term tenancy agreements, many of these were now occupied by licensees finalising longer term agreements with the company.
“We continue to offer financial support to licensees who find themselves in difficulty and are encouraged that many of these have now been able to stabilise their businesses, thereby reducing the cost of financial assistance,” said the firm in the statement.
It said it was also encouraged that the trend of reducing costs referred to in its preliminary announcement in November 2009 had continued.
“In addition, we are particularly encouraged by the strength of demand from good quality licensees seeking a pub with ETI,” it added.
It said its pub disposal programme would continue and the period saw the sale of 103 pubs, raising £32m. Contracts have also been exchanged for the sale of 34 pubs for £15m and a further 95 pubs, with expected proceeds of £32m, are in the hands of solicitors awaiting exchange of contracts.
“These sales have generated a reasonable profit above book value and confirm our view that our pub estate is conservatively valued and that pub values are beginning to stabilise,” said the firm.
