Preliminary Results...Preliminary Results 2009 Financial performance 12 months to 30 September 2009...
Transcript of Preliminary Results...Preliminary Results 2009 Financial performance 12 months to 30 September 2009...
Preliminary Results 2009
Preliminary Results
30 September 2009
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Preliminary Results 2009
David George
Chief Financial Officer
Preliminary Results 2009
Financial performance 12 months to 30 September 2009
EBITDA pre exceptional items £450m (£512m)
Profit pre tax & exceptional items £208m (£263m)
Adjusted EPS 30.7p (39.2p)
Net income per pub down 8% (unchanged from H1)
Full year write down in pub estate value of 7% (3.5% at H1)
Strong cash generation and bank debt reduction on track
Sufficient headroom to all financial covenants
Preliminary Results 2009
Profit & loss account Adjusted EPS down by 22%
Year ending 30 Sept 2009 Year ending 30 Sept 2008
£m Pre
excep Excep Total
Pre excep
Excep Total
EBITDA 450 (5) 445 512 (2) 510
Depreciation (12) - (12) (8) - (8)
Operating profit 438 (5) 433 504 (2) 502
Property 0 (158) (158) 0 (51) (51)
Interest (230) (34) (264) (241) (1) (242)
Profit before Tax 208 (197) 11 263 (54) 209
Taxation (55) 50 (5) (68) 42* (26)
Profit after Tax 153 (147) 6 195 (12) 183
Adjusted EPS (p) 30.7 39.2
Weighted average no. of shares (m) 497.8 497.4
* Restated from prior year of £48m
Preliminary Results 2009
EBITDA Average EBITDA per pub down by 11%
Year ending 30 Sept 2009 Year ending 30 Sept 2008
£m Pre
excep Excep Total
Pre excep
Excep Total
Revenue 811 7 818 880 - 880
Cost of sales (325) (4) (329) (336) - (336)
Gross profit 486 3 489 544 - 544
Administrative expenses (36) (8) (44) (32) (2) (34)
EBITDA 450 (5) 445 512 (2) 510
Average number of pubs 7,611 7,758
EBITDA per pub (£’000) 58.5 65.7
Preliminary Results 2009
Net income per pub Net income per pub down 8% (unchanged from H1)
2009 2008 % decline
Gross profit 489 544
Adjust for: Extra day - (1)
Property costs 6 6
Adjusted net income 495 549
Average no of pubs 7,611 7,758
Average net income per pub 65.0 70.8 (8)%
Preliminary Results 2009
Gross margin analysis Margins impacted by duty increases and discretionary concessions
£m Beer,
cider
& fabs
Licensee discounts Wines,
spirits &
minerals
Rent Machines & other Total
2008/09 Contr-
actual
Price freeze
Non- contract
Income Non-
contract
Turnover 594 (47) (3) (9) 36 240 (9) 16 818
Cost of sales (296) - - - (27) (6) - - (329)
Gross profit 298 (47) (3) (9) 9 234 (9) 16 489
50.2% 59.8%
2007/08
Turnover 618 (44) - (6) 32 261 (3) 22 880
Cost of sales (305) - - - (25) (6) - - (336)
Gross profit 313 (44) - (6) 7 255 (3) 22 544
50.6% 61.8%
Preliminary Results 2009
Cash flow statement Strong cash generation in line with expectations
12 months ending
30 September
£m 2009 2008
Operating profit 433 502
Operating cash inflow 440 536
Interest (232) (246)
Tax (59) (77)
Free cash flow pre investment 149 213
Capital expenditure (54) (70)
Acquisitions (4) (48)
Disposals 103 30
Cash generation 194 131
Preliminary Results 2009
Balance sheet Robust balance sheet
30 September
£m 2009 2008
Goodwill & investments 409 417
Pubs & other assets 5,394 5,888
Net debt (3,679) (3,767)
Net other liabilities (158) (170)
Deferred tax (591) (720)*
Net worth 1,375 1,648
Minimal net pension liabilities
Minimal leasehold liabilities
* Restated from prior year of £(690)m
Preliminary Results 2009
Pub estate valuation Total pub estate valued at £5.4bn
Full year write down in pub estate value of 7% (3.5% at H1)
All pubs are annually valued at year end
As at 30 September 2009
Number of pubs
Total value
Average value per
pub
£m £’000
Pubs 7144 5310 743
Operating leases 80 15 188
Pubs held for sale 175 43 246
Total 7399 5368 726
Preliminary Results 2009
Debt structure Underlying Group net debt reduced by £142m after the payment of £52m dividend
As at 30 September
£m 2009 2008
Bank debt (802) (1,000)
Corporate bonds (1,185) (1,185)
Free cash 7 8
Parent company net debt (1,980) (2,177)
Voyager loan (100) (31)
Unique :securitised bonds (1,576) (1,586)
cash 94 90
Subsidiary net debt (1,582) (1,527)
Underlying Group net debt (3,562) (3,704)
Issue costs and fair value adjustments (117) (63)
Group net debt (3,679) (3,767)
Preliminary Results 2009
Unique securitisation Secured bonds, ring-fenced in subsidiary Attractive features
Leveraged structure at below market interest rates
Smooth amortisation profile over 22 years
Benefits to parent company
£75m dividends received in 2009
Group buying benefits and shared overhead costs
Covenants Test Sept 2009 Sept 2008
DSCR 1.10x 1.81x 2.06x
Net worth - £m 150 1,240 1,448
Liquidity facility £190m
Cash balance of £94m at September 2009
Preliminary Results 2009
Unique securitisation £64m ahead of repayment schedule
£m Rate* Expiry
Floating rate notes (FRN) 191 6.9% Sept 2013
Fixed rate notes (fixed) 1,385 6.3% Sept 2032
1,576 6.5%
2010 2011 2012 2013
FRN amortisation schedule (£m):- 0 67 67 57
Fixed amortisation schedule (£m):- 0 0 0 13
* Weighted average interest rate including the impact of interest rate swaps
Preliminary Results 2009
Corporate bonds Secure and effective debt instruments
Attractive below market fixed rates (6.5% weighted average)
Non-amortising, constant leverage
Annual injection or withdrawal of pubs as required or permitted
First charge over pub portfolio, subject to valuation and income tests, measured annually
Second charge over balance of pubs held at parent company level
Security to bondholders
Attractive features
Maturity profile
£60m 6.0% debenture 2014
£600m 6.5% bond 2018
£125m 6.875% bond 2021
£125m 6.875% bond 2025
£275m 6.375% bond 2031
Preliminary Results 2009
Corporate bonds Year end tests satisfied by addition of £29m of pubs
Valuation test Income cover test
Bond Requirement Actual Requirement Actual
1. £60m due 2014 1.50x 1.51x 1.50x 2.28x
2. £600m due 2018 1.67x 1.73x 2.00x 2.00x
3. £125m due 2021 1.50x 1.55x 1.50x 1.78x
4. £125m due 2025 1.50x 1.52x 1.50x 1.74x
5. £275m due 2031 1.67x 1.67x 1.50x 1.89x
• Annual ratios are post addition of pubs, to be completed by 31 December 2009 (Bond 2, £11m; Bond 5, £18m)
• Valuation includes lotting premiums of 15% (Bonds 3 & 4) and 20% (Bonds 2 & 5)
• Valuation and income tests are next measured in September 2010
Preliminary Results 2009
Bank facility Attractive terms with 18 months remaining
As at
Covenant Sept 2009
Sept 2008
Net debt:EBITDA 6.50x 5.82x 5.80x
Interest cover 2.00x 2.62x 2.62x
Fixed charge cover 1.00x 1.63x 1.44x
Total property assets cover 1.50x 2.20x 2.00x
Flexible element of the financial structure
Club arrangement, including core relationship banks
Sufficient headroom on financial covenants
Refinancing planned for 2010
Preliminary Results 2009
Bank facility Appropriate headroom to covenants
Leverage covenants (£m) Sept 2009
Sept 2008
Net debt (bank facility and corporate bonds)* 1,976 2,171
EBITDA (12 months) 265 304
Dividends and interest payments from Unique 75 70
340 374
Interest payable (129) (143)
Debt:EBITDA 5.82 5.80
Interest cover 2.62x 2.62x
Current margin payable of 80 bp. Maximum margin of 120 bp if debt:EBITDA exceeds 5.9x
Covenants measured semi-annually on a MAT basis
*Net of fees
Preliminary Results 2009
Bank facility Appropriate headroom to covenants
Valuation covenants (£m) Sept 2009
Sept 2008
ETI property assets 2,934 3,169
A. Less pubs outside corporate bonds (1,290) (1,462)
Pubs secured against corporate bonds 1,644 1,707
Less debenture debt (1,185) (1,185)
B. Second charge property assets 459 522
C. Bank debt* (794) (990)
First charge cover (A/C) 1.63x 1.48x
Total property assets ratio ((A+B)/C) 2.20x 2.00x
* Net of fees
Covenants measured semi-annually on a MAT basis
Preliminary Results 2009
Simon Townsend
Chief Operating Officer
Preliminary Results 2009
Challenging conditions Accelerating polarisation of pubs
Consumer has evolved, more leisure alternatives
Rising overheads, compounded by recession
Government regulation and taxation
Campaigns and inquiries
Preliminary Results 2009
2008-09 EBITDA bridge Analysis of decline in FY09 EBITDA
£m Half 1 Half 2 Full year
2008 actual EBITDA 256 254 510
FY08 operating exceptional item - 2 2
Easter/ extra day (3) 2 (1)
2008 adjusted EBITDA 253 258 511
Churn, price freeze, discretionary support, TMAs (10) (19) (29)
Business failures & trading performance (18) (19) (37)
2009 EBITDA 225 220 445
Preliminary Results 2009
Estimated impact on earnings Extra costs for ETI
£m
No of pubs
FY08 Base
Churn, price freeze,
discretionary support, TMAs
Business failures & trading
performance
FY09
All substantives 6,128 464 (11) (5) 448
Non substantives 1,271 77 (2) (28) 47
FY08 & FY09 disposals 10 (8) - 2
Unallocated costs (2) - - (2)
Net income 549 - - 495
Property costs (6) - - (6)
Gross profit 543 (21) (33) 489
Overheads (32) (8) (4) (44)
EBITDA 511 (29) (37) 445
Preliminary Results 2009
Operating performance It has been very tough
Net income per pub down 8%
Total concessions increased - £18m (£9m)
Business failures increased
Abandonments - 196 (167)
Negotiated surrender - 507 (397)
Breach and termination - 269 (169)
TMAs incurred £8m of overhead during year
Lease assignments reduced - 251 (483)
Average lease assignment premium - £47k (£63k)
Preliminary Results 2009
Operating performance The quality of our pub estate and our flexible agreements underpin solid performance
83% of estate let on substantive agreements (82%)
Income down by 3% in past twelve months
New lettings onto substantive agreements 860 (410)
Average length of occupation is over 5 years
Closed pubs to be reopened 90 (224)
1,529 formal applications (1,566)
766 (915) rent reviews completed at an average annual increase of 0.1% (2.2%)
Overdue balances at 0.8% (0.8%) of turnover, bad debts still low at 0.4%
(0.1%) of turnover
Preliminary Results 2009
Operating performance Several award winning pubs
MA Great British Pub Awards 2009 Best creative outdoor area
2010 Good Pub Guide UK Pub of the year
Preliminary Results 2009
Operating performance Several award winning pubs
Wirral CAMRA 2009 Pub of the year
CAMRA Best real ale award East London & City runner up
Preliminary Results 2009
Interventionist strategies Costly, but cost effective
Additional non contractual support to licensees
intensive care to promote business recovery
Costs of TMA programme
investment to re-let
Additional costs of business failures
robust action if required
Underperforming pubs
accelerated disposal programme
Preliminary Results 2009
Interventionist strategies Additional non contractual support to licensees
Preliminary Results 2009
Interventionist strategies Costs of TMA programme
Preliminary Results 2009
Interventionist strategies Additional costs of business failures
Preliminary Results 2009
Interventionist strategies Recovered and re-let, but at a cost
Preliminary Results 2009
Interventionist strategies Accelerated disposal programme
Preliminary Results 2009
Evolving business model Significant progress being made
Confirmation of existing custom and practice
UORR, RPI, insurance
Process controls
Disclosure, business plans, tenants’ improvements
Industry initiatives
PIRRS, licensee representation, staff qualifications
Commercial development
Flexible tie and discount options
Preliminary Results 2009
Ted Tuppen
Chief Executive
Preliminary Results 2009
ETI business model: Does it still work?
Trading in a recession: How can pubs survive?
Pub valuations: Are they realistic?
Levels of debt: Are they manageable?
Where to next?
Challenges The questions we ask ourselves
Preliminary Results 2009
Preliminary results Summary
Creditable results in a tough market
Business model remains robust and fair
Top quality freehold estate, fairly valued
Bank debt reduction programme on target
Sufficient headroom to all financial covenants
Effective actions taking place to protect long term earnings