Enterprise Inns (ETI)has published its trading update for the 18 weeks to 31 January 2015, with Simon Townsend, Chief Executive Officer, commenting:
“We are pleased to have maintained the positive momentum delivered last year into the first 18 weeks of the current financial year and remain focused on continuing this progress.
“We continue to believe the tie offers the best operating model for the vast majority of our pubs with our interests closely aligned to those of our publicans. Whilst the planned legislation may require us to evolve our business model over the longer term, until the detail of the legislation is clear and enacted, we remain focused on providing exceptional local support to our publicans to aid their profitability which, in turn, will enhance our performance.”
Douglas Jack of Numis commented:
“LFL net income rose 0.3% over the 18 weeks to 31 January. We are holding our forecasts. In our view, politicians are now unlikely to soften the Market Rent Only option. Thus, meaningful equity upside requires a clear plan to deal with this threat, and that plan should have consequences that the politicians had not intended.”
Trading update
Trading performance during the first 18 weeks of the financial year has been in line with expectations, resulting in like-for-like net income growth for the leased and tenanted estate of 0.3%.
They are encouraged that positive like-for-like net income has been delivered despite the more challenging comparatives of last year. Trading over the Christmas period was positive although there has been a little softening in the volume of beer ordered during January.
The operating model is tailored to create the right environment for publicans to build successful and sustainable businesses and Enterprise remains focused on providing operational initiatives to aid publican profitability. In the first 18 weeks of the new financial year there has been a further reduction in the level of business failures as we operational support and commercial benefits have been delivered to publicans.
Regulatory update: MRO
On 18 November 2014 an amendment to the Small Business, Enterprise and Employment Bill was passed in the House of Commons inserting a “market rent only” option which, if finally enacted, would potentially have a significant impact upon aspects of our business as well as the wider pub marketplace.
Enterprise states that it is working with the industry and Government to ensure that the planned legislation does not lead to unintended consequences, whilst delivering a workable solution for its publicans, ETI and the industry as a whole.
As a direct response to the planned legislation, they are reviewing capital investment plans for the current year. The previous guidance of capital investment of £70 million for the full year remains unchanged. However, given that the planned regulatory changes may increase the uncertainty of returns from investments made into longer-term agreements, Enterprise is diverting an increased proportion of capital investment into similarly attractive opportunities from shorter-term agreements.
At this time, the guidance for disposal proceeds of £60 million for the full year also remains unchanged although the scale of future asset disposals will be subject to further review.