Enterprise Inns plc has published its scheduled trading update for the 44 weeks to 1 August 2015 and also updated on the progress made with regard to the implementation of its strategic plan. It reports encouraging trading with like-for-like net income growth continuing; implementation of the strategic plan is on track. Douglas Jack of Numis takes a positive view:
“With management targeting LFL net income growth over the full year, we are upgrading our forecasts (2015E PBT from £121.4m to £122.1m; consensus £122.7m). Overall, we agree with the company’s new strategy and retain our Buy recommendation. Even if the company falls behind in its managed pub conversions, the strategy should undermine the number of Market Rent Only conversions, which should be its primary objective.”
Simon Townsend, Chief Executive Officer, commented:
“We are focused upon the successful execution of our strategic plans. The first priority is to ensure that our reinvigorated tied tenancy business continues to perform well. It is pleasing to have maintained our growth momentum with like-for-like net income growth achieved for our eighth consecutive quarter.
“Trading performance is on track to be in line with our expectations for the full financial year.
“We have made good progress increasing the number of managed pubs in the estate and growing our portfolio of commercial properties. We are continuing to invest in the estate and to support our publicans. We expect to make further progress on the delivery of our strategic initiatives in the coming months and will be providing a further update when we present our preliminary results in November.”
Trading performance
Trading performance continues to be encouraging and in line with expectations with total leased and tenanted estate like-for-like net income for the 44 weeks to 1 August 2015 growing by 0.6%.
Delivered its eighth consecutive quarter of growth in the third quarter ended 27 June 2015 with like-for-like net income increasing by 0.5% despite the comparative period benefiting from the enhanced trading of the FIFA World Cup. This performance has been achieved through a continued stabilisation of rental income and growing income from beer sales as favourable weather and improving consumer confidence have provided supportive retailing conditions for many of their publicans.
Strategy implementation
The execution of the strategic plan for the business, announced on 12 May 2015, is on track. Delivery of this plan will ensure Enterprise can best serve its publicans and communities whilst providing a clear path to maximising shareholder value through the optimisation of returns from every asset within the estate.
Reinvigorated tied tenancy business
The leased and tenanted business is performing well as Enterprise enhances the provision of operational support and commercial benefits to its publicans to help them grow their businesses. This support has contributed to the delivery of a further decline in the level of business failures, down 23% on the previous year, demonstrating growing stability across the estate.
Expanded managed business
The total number of managed pubs trading under the Bermondsey and Craft Union operations has increased from 16, at 12 May 2015, to 22 and the first Managed Expert pub will open in September. On track to have 30 managed houses operational by 30 September 2015.
Quality commercial property portfolio
The portfolio of quality commercial properties continues to grow as planned. It has increased from 185 properties, at 12 May 2015, to 206 properties and has increased the average annualised rental income from £53,000 to £55,000.
Capital investment and disposals
In line with previous guidance Enterprise is on track to invest around £70 million across the total estate with some 43% of investment directed towards income growth opportunities. Disposal plans also remain in line with expectations to deliver £75 million of proceeds for the full year.
Enhancing the team
Good progress made with building a team with the capabilities and experience required to deliver the
strategic goals. Actively recruiting people to fill a number of additional senior roles and pleased already to have appointed Karen Baskett, Operations Director, Bermondsey Pub Company (formerly with Mitchells & Butlers), Miles Selby, Procurement Director (formerly with Wells & Young’s and J D Wetherspoon) and Simon Glucina, Change Programme Director (formerly with LEK Consulting).