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Preliminary Results 30 September 2007

Preliminary Results 30 September 2007. VISIT OUR WEBSITE www.enterpriseinns.com. Financial highlights 12 months to 30 September 2007. Like for like EBITDA up 3.7% to £526m PBT of £301m in line with expectations Adjusted earnings per share up 15.8% to 39.6 pence

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Preliminary Results 30 September 2007

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  1. Preliminary Results30 September 2007 VISIT OUR WEBSITEwww.enterpriseinns.com

  2. Financial highlights12 months to 30 September 2007 • Like for like EBITDA up 3.7% to £526m • PBT of £301m in line with expectations • Adjusted earnings per share up 15.8% to 39.6 pence • Final dividend up 15.6% to 10.4 pence • Average EBITDA per pub up 6.2% • 102.9m shares purchased at a cost of £658m

  3. EBITDALike for like EBITDA growth of 3.7%

  4. Profit & loss accountAdjusted EPS up 15.8%

  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 £75m

  7. Taxation (pre exceptional)Cash outflow of 24%

  8. Exceptional items£75m exceptional credits

  9. Balance sheetPub estate valued at £5.7 billion

  10. Share buyback£737m returned to shareholders

  11. Debt structure

  12. Group leverage ratios * FY07 Leasehold costs £3m

  13. RefinancingUpdate • ‘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 2008 – subject to market conditions

  14. RefinancingObjectives • Create capacity for acquisitions and cash returns to shareholders • Optimise amortisation profile • Increase weighted average life • Reduce interest costs • Ensure operational & financial flexibility • Low execution costs & ease of implementation • Maintain corporate bond rating

  15. REITsCurrent status Opco/Propco de-merger is unattractive HMRC consider the current structure does not meet the qualifying criteria Exploring with HMRC whether an internal restructuring designed to enhance shareholder returns optimise the benefits of proposed refinancing would also result in Group becoming eligible for admission to the REIT regime Tax savings are attractive on a DCF basis

  16. Operating highlights12 months to 30 September 2007 • Adjusted earnings per share up 15.8% to 39.6 pence • Average EBITDA per pub up 6.2% to £68,200 • £75m capital expenditure invested into the estate • 108 high quality acquisitions for £91m • Surplus land, underperforming & HAUV pubs sold for £13m (£9m profit) • Scottish estate of 137 pubs sold £115m (£13m profit) • Operational reorganisation completed

  17. Adjusted earnings per shareIncrease of 15.8%

  18. EBITDA per pubIncrease of 6.2%

  19. Value per pubIncreased by 7%

  20. Capital investment£75m of capital investment projects completed * Pub capital investment cashflow (£75m) = Total investment (£70m) + increase in the value of WIP (£5m)

  21. Capital investment

  22. Acquisitions & disposals108 individual acquisitions completed

  23. Acquisitions Bear & Bells, Beccles Bell, Selsey Ye Olde Yew Tree, Westbere Bryngwyn, Gorseinon Ye Olde Salutation, Weobley

  24. Licensee profitabilityAverage licensee profit up 4% Source: Estates Review – September 2007

  25. Licensee profitabilityContinued improvement in licensee profitability Post rent licensee profit Source: Estates Review – September 2007

  26. Licensee profitabilityHow are they really doing • Over 85,000 visitors used our internet pub search facility • Over 1,500 formal applications, of which 80% received on line • 84% of estate let on long term assignable leases • 790 lease assignments, average premium £69k (£86k including tenants fixtures and fittings) • Rent concessions increased marginally to 0.5% of rent roll • 1,457 rent reviews, 3 settled at arbitration • Rent reviews were completed at an average annual increase of 2.7% • Overdue balance similar level to last year, bad debts remains constant at 0.1% of turnover

  27. 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

  28. Growth in a tenanted estateEPS growth

  29. Growth in a tenanted estateDelivering double digit growth in 07/08 • Challenges • Consumers likely to be short of money and confidence • Smoking ban will impact like for like growth until summer 08 • Licensees will be adversely affected by increasing regulatory and cost pressures • Supermarkets will continue to promote and sell alcohol at irresponsibly low prices • Credit markets might remain closed

  30. Growth in a tenanted estateDelivering double digit growth in 07/08 • Strengths and opportunities • Quality of estate is at its best ever, improving and gaining market share • Investment programme is delivering strong returns • Acquisition pipeline is full and market is buoyant • High alternative use value exists for underperforming assets • Quality of estate attracts great licensees • Organisation changes have been completed and quality of team enhanced

  31. Growth in a tenanted estateDelivering double digit growth in 07/08 • Opportunities • Operational gearing is very low in leased/ tenanted model • Rents are predominantly index linked • Long term supply contracts are in place • 89% of interest rates are fixed for an average of 12 years • Cash generation continues to be strong • The pub estate is 98% freehold (99% by value) • There is scope for value generation through refinancing • REIT structures may generate value for shareholders

  32. Summary • 16% growth in adjusted earnings per share • Strong cash generation • 16% increase in dividend • Improving pub quality and profitability • Clear strategy for growth in shareholder value

  33. QUESTIONS www.enterpriseinns.com

  34. Preliminary Results30 September 2007 Appendix VISIT OUR WEBSITEwww.enterpriseinns.com

  35. 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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