15th Mar 2019 08:46
LONDON (Alliance News) - Pub chain Ei Group PLC on Friday updated guidance for its current and next financial year, following the sale of its commercial properties, expecting a gradual reduction in interest costs.
In addition, Ei announced a share buyback programme to repurchase up to 69.5 million shares for GBP35 million.
The programme is expected to tend by September 30 at the latest, and has the purpose of reducing Ei's share capital and deliver returns to shareholders. All repurchased shares will be cancelled.
To implement the programme, Ei has signed an agreement with Deutsche Bank AG to make on-market purchases of its shares. Deutsche Bank will be given the authority to make its own purchases under the programme independently.
Shares in Ei, formerly known as Enterprise Inns, were up 2.5% at 206.00 pence on Friday.
Ei said it had completed the sale of 348 properties not used for its pubs, the first tranche of 370 properties set for disposal.
The group received GBP336.6 million from the first sale, and the second sale of the remaining 22 properties is subject to superior landlord consent. Once obtained, the sale of the remaining 22 assets will generate proceeds of GBP11.4 million.
Proceeds from the sale will go towards the reduction of debt - with the group prepaying its Class A3 notes fully and the Class A4 notes partly - and also toward costs associated with the early prepayment of the notes.
Ei expects to start the payments on June 28.
Funds also will be used to repay and cancel the outstanding balance of GBP35 million on Ei's GBP50 million term loan facility, and GBP115 million under its GBP150 million revolving credit facility.
As a result of the property sale, Ei now expects its interest costs for the financial year ending September 30 to be between GBP136 million to GBP138 million. This would be down from GBP143 million the year before.
For the 2020 financial year, interest costs is anticipated to decrease further to between GBP120 million to GBP124 million. Ei didn't specify its total net debt following the transactions.
Ei expects the commercial properties to contribute GBP12.2 million to earnings before interest, taxes, amortisation and deprecation for the current year, down from GBP26 million the prior year.
For 2020, the portfolio is forecast to make no contribution to Ebitda.
"Today's announcement is a significant milestone for the business and evidence of our ability to unlock value across our estate and realise attractive cash proceeds for shareholders. This disposal will allow us to focus on driving growth across our core Publican Partnerships, Managed Operations and Managed Investments businesses, while also reducing our debt and delivering further shareholder value," said Chief Executive Officer Simon Townsend.
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