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November 20, 2012 6:16 pm
Selling more beer is not as relevant to the financial health of Enterprise Inns as paying off its debt, the pub group’s chief executive suggested after posting a fall in pre-tax profit for 2012.
Enterprise Inns faced a period of “flat calm” during which the focus of the
tenanted pub group had to continue to be on its long-term financing structure, Ted Tuppen said.
Net debt continues to be the biggest challenge for the group, which has 5,900 pubs on its estate. But its cash generation helped to reduce net debt by £266m to £2.7bn, and Mr Tuppen pointed at a 21 per cent rise in the average price of its bonds in the 12 months to September as evidence of the group’s relative stability.
Mr Tuppen said there was “a sentimental importance” attached to like-for-like sales, but added that they were relatively immaterial. “Compared to the impact of paying off debt, “being 1 per cent up or down is a bit at the margins”, he said.
“Realistically, the most important thing to create value for shareholders is to simply pay down our debt.”
In terms of next year, Mr Tuppen said: “There is nothing in the economy that is going to set trading alight. It will be a period of flat calm.”
Pre-tax profit fell from £157m last year to £137m, and like-for-like net income was down 1.1 per cent, compared to a fall of 4.3 per cent in 2011. However, in the 81 per cent of its pubs where publicans had been in occupation for at least a year, net income growth was up 2.2 per cent.
Of the three big events of the year, the weather damped hopes of strong trading from the diamond jubilee while Euro 2012 trading was largely flat. As for the Olympics, the stay-at-home factor dragged beer volume sales down by 8 per cent on a like-for-like basis.
Revenues were £692m compared to £711m the previous year. Pre-exceptional earnings before interest, tax, depreciation and amortisation were down more than 7 per cent to £340m. No dividend was paid.
Enterprise disposed of 301 pubs, raising £208m, in the period. It said 199 of these pubs were unsustainable. It said it would pare down the size of its estate to 5,200 over the next three years and spend £180m on improving the estate’s quality. Its shares closed up 0.75 per cent at 67.25p.
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