interim results - ei group plc · 2019. 8. 26. · interim results 2008 financial highlights 6...

Interim Results 2008

Interim Results

31 March 2008

VISIT OUR WEBSITE www.enterpriseinns.com


Financial highlights 6 months to 31 March 2008

EBITDA unchanged at £256m

Profit before tax and exceptional items reduced by 11% to £132m

Weighted average number of shares reduced by 13%

Adjusted earnings per share up 5% to 19.3 pence

Interim dividend up 12% to 5.8 pence

Robust financing structure in place


EBITDA EBITDA unchanged at £256m

6 Months to 31 March

Year to 30 Sept

Pro forma Pro forma

£m 2008 2007 2007

Revenue 438 450 918

Cost of sales (166) (176) (358)

Gross profit 272 274 560

Administrative expenses

(16) (18) (34)

EBITDA 256 256 526


Profit & loss account Adjusted EPS up 5% 6 Months to

31 March

£m 2008 2007

Revenue 438 453

EBITDA 256 258

Depreciation (4) (4)

Interest (120) (105)

PBT (pre exceptional items) 132 149

Taxation (36) (44)

Profit after tax (pre exceptional items) 96 105

Adjusted EPS (p) 19.3 18.4

Weighted average no. of shares (m) 497.8 571.1

Dividend per share (p) 5.8 5.2


Gross margin analysis Increased margin on beer sales

£m Beer, cider & fabs

Licensee discounts

Wines, spirits & minerals

Rent Machines & other Total

2007/08 - Group

Turnover 304 (25) 16 131 12 438

Cost of sales (151) - (12) (3) - (166)

Gross profit 153 (25) 4 128 12 272

Gross margin % 50.3% 62.1%

2006/07 – Proforma

Turnover 317 (25) 17 128 13 450

Cost of sales (160) - (13) (3) - (176)

Gross profit 157 (25) 4 125 13 274

Gross margin % 49.5% 60.9%


Cash flow statement Free cash inflow of £35m

6 Months to

31 March

Year to 30 Sept

£m 2008 2007 2007

Operating profit 252 254 521

Operating cash inflow 270 252 523

Interest (102) (98) (220)

Tax (43) (35) (71)

125 119 232

Dividends (52) (52) (79)

Pub capital expenditure (37) (35) (75)

Other capital expenditure (1) (2) (3)

Free cash inflow 35 30 75


Balance sheet Loan to Value at 66%

31 March 30 Sept

£m 2008 2007 2007

Goodwill & investments 417 419 417

Pubs 5,789 5,332 5,740

Net debt (3,809) (3,621) (3,798)

Net other liabilities (179) (152) (165)

Deferred tax (690) (691) (711)

Net worth 1,528 1,287 1,483


Debt structure Underlying net debt unchanged

As at 31 March As at 30

Sept

£m 2008 2007 2007

Bank debt (1,054) (818) (1,035)

Corporate bonds (1,185) (1,185) (1,185)

Securitised bonds (1,586) (1,586) (1,586)

Gross debt (3,825) (3,589) (3,806)

Cash 91 85 90

Underlying net debt (3,734) (3,504) (3,716)

Other (including mark to market of swaps) (75) (117) (82)

Net debt (3,809) (3,621) (3,798)


Group leverage ratios Efficient capital structure

2008 MAT 2007 FY

Net debt : EBITDA 7.1x 7.0x

Interest cover 2.2x 2.4x

Fixed charge cover 2.2x 2.4x


Weighted average life & cost of debt 89% fixed at 6.5% for an average of 11 years

As at 31 March 2008

Facility Weighted average life

Weighted average cost

Bank debt 3 yrs 6.5%

Corporate bonds 14 yrs 6.5%

Securitised bonds 12 yrs 6.4%

Total 11 yrs 6.5%


Three pronged financing Flexible debt structure

Bank debt Corporate bonds Securitised bonds

£m


Three pronged financing Loan to Value at 66%

£m

Corporate bonds


Three pronged financing Significant pub value headroom

Headroom

£m

Bank debt

Pub value

secured

against debt


Bank debt Cash headroom of £168m

£m As at 31 March 2008

Facility Drawn Headroom

Club facility 1,000 1,000 -

Committed facility 100 50 50

Uncommitted facility 100 4 96

Total 1,200 1,054 146

Overdraft 25 3 22


Bank debt Comfortable covenant headroom

March 2008 Covenant

Net debt : EBITDA* 5.71x 6.5x

Interest cover* 2.75x 2.0x

First charge assets ratio 1.43x 1.0x

Total property assets ratio 1.92x 1.5x

* Excludes inter-company debt of £50m and inter-company interest of £2m


Corporate bonds Structure enables constant leverage

At 30 September 2007 Asset cover Income cover

Bond Covenant Actual Covenant Actual

1. £60m due 2014 1.50x 1.57x 1.50x 2.60x

2. £600m due 2018 1.67x 1.69x 2.00x 2.00x

3. £125m due 2021 1.50x 1.72x 1.50x 2.00x

4. £125m due 2025 1.50x 1.70x 1.50x 2.00x

5. £275m due 2031 1.67x 1.67x 1.50x 2.13x

• Covenants tested annually on a MAT basis

• Bonds 2 to 5 : annual withdrawal of pubs to either income cover of 2x or asset cover covenant

• Substitution of pubs as and when required


Securitised bonds Debt repayment profile until 2018

£140m of debt prepaid

Next scheduled repayment June 2010

£m


Securitised bonds Significant liquidity and headroom on covenants

March 2008 Covenant

Debt Service Cover Ratio (DSCR) 2.15x 1.10x

Net worth £m 1,401 150

Covenants

Liquidity

Liquidity facility - £190m

Retained cash within structure – circa £100m


Group financing Structure summary

3 prongs provide flexibility

89% of debt is fixed at 6.5% for an average of 11 years

Net debt at 66% of freehold estate value

Leverage is appropriate for current market conditions

Fixed charge cover at 2.2 times is comfortable

Undrawn facilities provide sufficient liquidity

Significant headroom to financial covenants


Operating highlights 6 months to 31 March 2008

Group EBITDA unchanged at £256m

Solid performance in a tough market

Increased support for pub retailers through discounts and concessions

Average EBITDA per pub down 0.9% at £33,000

£37m capital expenditure invested into the estate

40 high quality acquisitions for £32m

Surplus land, underperforming & HAUV pubs sold for £12m (£1m profit)


EBITDA (£m) 257 528 268 547 258 528 256

Ave pub no. 8,687 8,651 8,594 8,522 7,747 7,741 7,756

EBITDA per pub (£k) 29.6 61.0 31.2 64.2 33.3 68.2 33.0

Y-o-Y % increase 9.0% 8.3% 5.4% 5.2% 6.7% 6.2% (0.9)%

EBITDA per pub Resilient performance in a tough market

Half year

Full year


Top quality pub estate Enterprise secured the best available pub assets

Original pubs

acquired

Pubs at P06 FY08

% retained

Historic* cost (£m)

Current value (£m)

Income % of

historic cost

Income % of

current value

Pre float 490 177 36% 34 97 29% 10%

Other 2,267 1,161 51% 465 784 17% 10%

2001 Managed pubs (Whitbread and S&N) 840 690 82% 458 620 14% 10%

2002 Laurel (Whitbread leases) 1,860 1,641 88% 881 1,224 13% 10%

2004 Unique (Grand Met and M&B) 3,955 3,509 89% 2,162 2,626 13% 10%

Individual acquisitions 708 607 86% 338 438 11% 9%

Scotland 141 - 0%

TOTAL 10,261 7,785 76% 4,337 5,789 13% 10%

• Historic cost includes post acquisition capital expenditure

• ETI estate 61% southern based


Property revaluation Freehold pub estate conservatively valued

Christies House Price Index 100.0 114.9 118.7 130.1 139.1

Enterprise Inns 100.0 103.7 109.4 116.5 123.5

ETI Pub value uplift (%) 3.7 5.5 6.5 5.9

ETI EBITDA/pub uplift (%) 8.0 8.3 5.2 6.2

Enterprise Inns pubs are valued on an individual basis excluding lotting premium in financial accounts


Capital investment Consistent investment targeting 12% return

6 months to 31 March 2008

Investment

spend

Total

investment

(£m)

No of

projects

£200k + 14 44

£100-£200k 8 51

£50-£100k 6 88

£10-£50k 7 318

£5-£10k 2 248

Total 37 749

Projects

£m No.

Sept 05 49 1,093

Sept 06 54 1,390

Sept 07 75 1,594

Mar 08 37 749


Capital investment


Acquisitions & disposals 40 individual acquisitions completed, consistently targeting 10% return

£m

40 acquisitions (32)

Disposals (inc land) 12

Net cash outflow (20)

Acquisitions Disposals

No. £m No. £m

FY05 21 14 158 47

FY06 95 80 876* 366

FY07 108 91 154** 128

* 12th September 06 sale of 769 pubs to Admiral Taverns for £318m

** 4th December 06 sale of 137 pubs to Retail & Licensed Properties Ltd for £115m


Acquisitions Golden Boar, Freckenham, Suffolk

Trowel & Hammer,

Nr Stowmarket, Suffolk

Old Oak, Holmer Green, Nr High Wycombe Ye Olde Mustard Pot, Nr Stocksbridge , Sheffield

Green Man, Sturminster Newton, Dorset


Disposals Estate value underpinned by alternative use

Essex Arms, Walthamstow sold on 25th

April 08 for £1.9m

Royal Oak, Kinson sold on 3rd Jan 08 for £1.3m


Ave licensee profit £9k £26k £37k £52k £66k £94k

Licensee profitability Profile of estate provides security and opportunity

Source: Estates Review – September 2007 (updated for H1 churn)

Post rent licensee profit


Licensee profitability Why the tied model really works?

Licensee model

£k

Pub value 740.0

Dry rent 32.0

Discounts foregone 18.4

Machine income foregone 3.0

53.4

Domestic accommodation (10.0)

Effective rental cost to licensee 43.4

5.9%

Pubco model

£k

Pub value 740.0

Property yield 53.4

Wholesale profit 19.5

Income 72.9

9.9%


Licensee profitability What’s it really like out there?

3,200 enquiries converted to 790 formal applications

82% of estate let on long term assignable leases

257 lease assignments, average premium £69k

(£86k including tenants fixtures and fittings)

Rent concessions increased to 1.0% of rent roll

480 rent reviews, 5 settled at arbitration

Rent reviews were completed at an average annual increase of 2.5%

Overdue balances similar level to last year, bad debts remain constant at 0.1% of

turnover


Licensee profitability What are Enterprise really doing to help?

Consistent application of fair rent policy

Removal of upward only rent reviews in 1996

Assessments based upon competent retailer

Equitable split of profits

Always prepared to go to binding third party

settlement

Code of practice rent review available outside

normal rent review cycle

H1 08 FY 07 FY 06

DoV rent reductions

No 35 63 79

£m 0.4 0.6 0.9

Rent reviews

No 480 1,457 1,317

% pa inc

2.5 2.7 2.6

Rent concessions

No 184 103 53

£m 2.6 1.4 0.9


Growth in a tenanted estate How the model works in a normal market

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


Growth in a tenanted estate Delivering EPS growth in a tough market

2008 2007 2006

Half 1 Year Year

Normal EPS growth 1% 11% 12%

(Organic, capex, churn and debt reduction)

Strategic disposals - (2)% -

(769 pubs & 137 Scottish pubs)

Cost savings 2% 3% 2%

(Overheads, interest and tax rate)

Share buybacks 2% 4% 3%

(net of interest)

Adjusted EPS growth 5% 16% 17%


Growth in a tenanted estate Delivering eps growth in 07/08

Challenges

Consumers are short of money and confidence

Smoking ban has affected traditional bar trade

Input costs and duty increases have put pressure on margins

Supermarkets continue to promote and sell alcohol at irresponsibly low prices

Credit markets are closed


Growth in a tenanted estate Delivering double digit growth in 07/08

Strengths

Quality of estate is at its best ever, improving and gaining market share

Quality of estate continues to attract great licensees

Food offerings increasing and improving

Long term supply contracts are in place

Pub estate is 98% freehold (99% by value)

Robust financing structure, with significant headroom on all covenants

89% of debt fixed at 6.5% for an average of 11 years

Cash generation continues to be strong


Real Estate Investment Trust (REIT) Enhancing shareholder value

Strategic imperatives Continued ownership of pub assets

Internal opco/propco structure to optimise refinancing opportunities

No change in relationship with licensees

Retain cash sufficient to grow the business

No material refinancing costs

Obtain approval of rating agencies and consent of trustees

Outcomes on conversion Conversion charge 2% of asset value Group tax charge reduced to 6-7%

Minimum 90% of tax exempt property income paid as dividend

Timetable Autumn 2008


Summary

5% growth in adjusted earnings per share

Strong cash generation

12% increase in dividend

Best quality pub estate

Clear strategy for growth in shareholder value


QUESTIONS

www.enterpriseinns.com

http://www.enterpriseinns.com/


Interim Results

31 March 2008

Appendix

VISIT OUR WEBSITE www.enterpriseinns.com


Restatement of 2007 EBITDA £2m EBITDA from Admiral disposal & Scottish disposal

2007 Adjustments* Restated 2007

£m H1 H2 Year H1 H2 Year H1 H2 Year

Revenue 453 468 921 (3) - (3) 450 468 918

Cost of sales (177) (182) (359) 1 - 1 (176) (182) (358)

Gross profit 276 286 562 (2) - (2) 274 286 560

Overheads (18) (16) (34) - - - (18) (16) (34)

EBITDA 258 270 528 (2) - (2) 256 270 526

* Scottish estate of 137 pubs sold on 4th December 2006

interim results - ei group plc · 2019. 8. 26. · interim results 2008 financial highlights 6...

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