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Interim Results 31 March 2007

Interim Results 31 March 2007. VISIT OUR WEBSITE www.enterpriseinns.com. Financial highlights 6 months to 31 March 2007. Like for like EBITDA up 4.1% to £256m Adjusted earning per share up 15.7% to 18.4 pence Interim dividend up 15.6% to 5.2 pence Average EBITDA per pub up 6.7%

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Interim Results 31 March 2007

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  1. Interim Results31 March 2007 VISIT OUR WEBSITEwww.enterpriseinns.com

  2. Financial highlights6 months to 31 March 2007 • Like for like EBITDA up 4.1% to £256m • Adjusted earning per share up 15.7% to 18.4 pence • Interim dividend up 15.6% to 5.2 pence • Average EBITDA per pub up 6.7% • 70.6m shares purchased at a cost of £446m

  3. EBITDALike for like EBITDA growth of 4.1%

  4. Profit & loss accountAdjusted EPS up 15.7%

  5. Gross margin analysisIncreased margin on beer sales * Turnover and discounts both increased by £5m as a result of price alignments at March 2006

  6. Cash flow statementFree cash inflow of £30m

  7. Balance sheetPub estate valued at £5.3 billion

  8. Share buybackFirst half progress

  9. Debt structure

  10. Group leverage ratios

  11. Operating highlights6 months to 31 March 2007 • Like for like EBITDA up 4.1% to £256m • Average EBITDA per pub up 6.7% to £33,300 • £35m capital expenditure invested into the estate • 52 high quality acquisitions for £38m • Surplus land, underperforming & HAUV pubs sold for £8m (£4m profit) • Scottish estate of 137 pubs sold £115m (£13m profit) • Operational reorganisation completed

  12. Adjusted earnings per shareIncrease of 15.6%

  13. EBITDA per pubIncrease of 6.7%

  14. Capital investment£31m of capital investment projects completed * Pub capital investment cashflow (£35m) = Total investment (£31m) + increase in the value of WIP (£4m)

  15. Acquisitions & disposals52 individual and small batch acquisitions completed

  16. Top quality assetsContinued improvement in estate quality Score definitions 1 Excellent 2 Good 3 Good average 4 Below average 5 Disposal Source: Estates Review – September 2006 (updated for churn)

  17. Morning Advertiser Awards 2007 Community pub of the year Church House Inn, Bollington Fundraising pub of the year Brook House, Hayes Regional winner, Wales – Castle Inn, Caldicot

  18. Publican Awards 2007 Music pub of the year Brickmakers Arms, Norwich Promotional pub of the year Thorverton Arms, Devon

  19. Licensee profitabilityHow are they really doing • 2,032 enquiries converted to 731 formal applications • 959 fully funded, fully screened quality applicants • 430 lease assignments, average premium £67k (£84k including tenants fixtures and fittings) • Rent concessions at 0.4% of rent roll • 758 rent reviews, 1 settled at arbitration • Rent reviews were completed at an average annual increase of 2.5% • Bad debts remains constant at 0.1% of turnover

  20. Growth in a tenanted estateManage the pubs, the cash flow and the balance sheet Core growth in operating profit (target 3% growth) Invest and churn (target 10-15% return) Evaluate all acquisition opportunities Manage balance sheet leverage in line with profit growth and estate valuation Return spare cash to shareholders Double digit growth in EPS

  21. Growth in a tenanted estateEPS growth (H1 2006 to H1 2007)

  22. RefinancingManaging balance sheet leverage • ‘Tap’ existing securitisation (c £750m) • Value tap of existing pubs • Increase procurement fee • Additional pubs (c450) • Target Group leverage 7.0x to 8.0x debt: EBITDA • Target completion Q1 07/08

  23. RefinancingObjectives • Create capacity for cash returns to shareholders • Optimise amortisation profile • Increase weighted average life • Reduce interest costs • Ensure operational flexibility • Ensure financial flexibility (FRNs) • Ensure low execution costs & ease of implementation • Maintain corporate bond rating

  24. Current issues • Smoking • REITs

  25. Impact of smoking banGrowing consumer acceptance • Total ban in Wales - 343 pubs - 2 April 2007 • Total ban in England - 7,371 pubs - 1 July 2007 • Quality pubs will cope best with the ban Outside Areas Food Offering* * Based upon October 2006 Estates Review

  26. REITsThe options • Sell / de-merge entire estate to a REIT • Sell / de-merge part of the estate to a REIT • Conversion to REIT

  27. Sell/de-merge entire estate to a REIT Effectively a sale and lease back of all properties • Assessment dependent upon • property yield driving property sale value • rent payable by Opco • market valuation of Opco • Advantage • Immediate significant cash returns to shareholders • Disadvantages • Disposal of appreciating freehold assets • Index linked rent payable • Limited ability to return further cash to investors • Restructuring costs

  28. Sell/de-merge part of estate to a REIT Similar to a disposal of whole estate, just smaller • Disposal of fewer appreciating freehold assets • Less restructuring : less complicated • Retains some flexibility • Less immediate cash for shareholders

  29. Conversion to a REITDirecting tax cash flows directly to shareholders • Retain ownership of appreciating freehold assets • Group exempt from corporation tax & CGT • 90% of profit distributed to shareholders • Adequate cash generation for capex & churn • Initial entry cost of c£100m • Exploring admission criteria with advisors

  30. Summary • 16% growth in adjusted earnings per share • Strong cash generation • 16% increase in dividend • Cash available to buy back shares • Improving pub quality and profitability • Clear strategy for growth in shareholder value

  31. Interim Results31 March 2007 Appendix VISIT OUR WEBSITEwww.enterpriseinns.com

  32. Restatement of 2006 EBITDA£40m EBITDA from Admiral disposal & Scottish disposal * 769 pubs sold to Admiral Taverns on 6th September 2006 & Scottish estate of 137 pubs sold on 4th December 2006

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