16th May 2006 07:01
Enterprise Inns PLC16 May 2006 16 May 2006 Unaudited Interim Results of Enterprise Inns plc for the six months ended 31 March 2006 Enterprise Inns plc (Enterprise), a leading operator of leased and tenanted pubsin the UK, today announces its interim results for the six months ended 31 March2006. These are the first set of results reported under International FinancialReporting Standards (IFRS) and comparatives have been re-stated accordingly. Interim results highlights EBITDA* £268 million (2005: £257 million) Up 4.3% Profit before tax and exceptional items £153 million (2005: £136 Up 12.5%million) Earnings per share 38.1 pence (2005: 28.2 pence) Up 35% Adjusted earnings per share 31.8 pence (2005: 27.1 pence) Up 17% Interim dividend of 9.0 pence (2005: 5.6 pence) Up 61% Average EBITDA per pub £31,200 (2005: £29,600) Up 5.4% 21.1 million shares purchased at a cost of £192 million * Earnings before interest, tax, depreciation and amortisation Commenting on the results, Ted Tuppen, Chief Executive said: "We are today publishing yet another strong set of results, achieved against abackground of weak consumer spending and increasing cost and legislativepressures on our licensees. The strength of this performance reflects ourcommitment to constantly improving the quality of our pub estate and toproviding top quality support to our licensees in this challenging market. The second half of the year has started well and we look forward to deliveringcontinuing growth in shareholder value." Enquiries:Emma Baines, Assistant to ChiefExecutive 07990 550210 Ted 0121 733 7700Tuppen, Chief ExecutiveDavid George, Finance Director 0121 733 7700 The investor presentation will be available on the company website atwww.enterpriseinns.com on Tuesday 16th May 2006. A live recording of thepresentation can be accessed at 9.30am BST by dialling +44(0)20 7162 0025. Arecorded version will be available from 12 noon BST on +44(0)20 7031 4064passcode 703241 (for European callers) or +1 954 334 0342 passcode 703241 (forUS callers). CHAIRMAN'S INTERIM STATEMENT I am delighted to report on our interim results for the six months to 31 March2006, which are the first set of results published using International FinancialReporting Standards (IFRS). The re-stated financial results under IFRS for theyear ended 30 September 2005 and the six months ended 31 March 2005 werepublished on 4 May 2006 and are available on the Group's website at http//www.enterpriseinns.com/investorzone/. EBITDA in the period increased by 4.3% to £268 million and profit before tax andexceptional items rose by 12.5% to £153 million. Basic earnings per shareincreased by 35% to 38.1 pence and adjusted earnings per share increased by 17%to 31.8 pence. The directors intend to pay an interim dividend of 9.0 pence pershare on 4th July 2006 to shareholders on the register of members on 9 June 2006. The group has historically declared approximately one-third of the full yeardividend at the half-year. Free cash inflow after interest, tax, dividend and capital expenditure amountedto £40 million in the period. At the end of the period, gross debt was £3,407million with interest costs 100% fixed at an average rate of 6.8% for 13 years.Taking account of £84 million of cash within the business, underlying net debtwas £3,323 million. On 15 May 2006, the Group agreed a refinancing of itssyndicated debt at attractive rates, increasing the size of the facility from£490 million up to £1 billion, non-amortising, for a five-year term. In November, the Group commenced a rolling share buy-back programme to returncash to shareholders and to ensure that the balance sheet remains efficient. Asat the 31 March we had purchased 21.1 million shares for total consideration of£192 million (including costs) and since that date we have purchased a further1.0 million shares at a cost of £10 million. Taking account of the cash flowneeds of the business and subject always to the availability of good qualityacquisition opportunities at sensible prices, we will continue to buy backshares in the second half of the financial year and beyond. We continue to enhance the quality of the pub estate through investment,acquisitions and disposals. During the period we acquired 65 pubs at a cost of£58 million and sold 76 pubs realising proceeds of £20 million. Capitalexpenditure of £26 million was invested in the pub estate, which, alongsidelicensees' expenditure will improve the quality and potential of their pubbusinesses. At 31 March 2006, the estate comprised 8,579 pubs. Average EBITDA per pub in the first half of the year was £31,200, based on anaverage of 8,594 pubs in the period. This represents an annual increase of 5.4%in the average EBITDA per pub of £29,600 over the first half of the priorfinancial year. It is too early to draw definitive conclusions on the impact of the total ban onsmoking in pubs in Scotland introduced at the end of March this year. As aresult of the efforts of our licensees, we have been pleased with theperformance of our 139 Scottish pubs, although overall beer volumes and gamingmachine income are marginally down compared to the rest of our estate in Englandand Wales. Encouragingly for all concerned, it appears that customers haveaccepted the ban with equanimity. In the medium term, we expect that poorerquality, predominantly wet-led pubs will almost inevitably suffer some permanentdecline in trade, whilst better quality pubs with a more diverse offering,including some form of external trading area, will gain new customers and marketshare and have the opportunity to grow profitability. A total ban on smoking in pubs will be imposed in England and Wales next yearand we are encouraged by the optimism of our licensees, who in most cases seethe ban as an opportunity to develop their businesses and attract new customers.It is now essential that the Government urgently provides clear regulations andguidance to a realistic timetable which will allow licensees and localauthorities to implement the proposals in an effective manner. On 24th April 2006, the Group announced that Gordon Harrison, OperationsDirector, will be retiring from the business at the end of September this year.Gordon joined Enterprise Inns on its formation in 1991 as one of our firstregional managers, was appointed to the Board at the time of the flotation in1995 and, since that time has made a tremendous contribution to the successfulgrowth and development of the company, leading the operations team through aseries of highly successful acquisitions and integrations. The Board offerssincere thanks to Gordon for all his efforts on the Company's behalf and wisheshim a very happy retirement. On the same date, we announced that Simon Townsend,currently Customer Services Director, will be promoted to the post of ChiefOperating Officer with effect from 1st October 2006. Simon joined the company inFebruary 1999 as Director of Marketing and Logistics and joined the Board asCustomer Services Director in October 2000. These interim results reflect a good business performance in a market madechallenging by relative weakness in consumer expenditure and continuing cost andlegislative pressures on our licensees. We continue to strengthen the team atall levels to support our drive for increased profitability through improvementsin all aspects of the business and will further enhance shareholder valuethrough the optimal use of cash generated. H V Reid Chairman 16 May 2006 Group Income Statement Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 2006 31 March 2005 30 September 2005 Pre- Pre- Pre- exceptional Exceptional Total exceptional Exceptional Total exceptional Exceptional Total items items items items items items Notes £m £m £m £m £m £m £m £m £m ----------------------------------------------------------------------------------------------------Revenue 473 - 473 470 - 470 952 - 952Cost of sales (186) - (186) (192) - (192) (385) - (385) ----------------------------------------------------------------------------------------------------Gross profit 287 - 287 278 - 278 567 - 567 Administrativeexpenses (19) - (19) (21) - (21) (39) - (39) ----------------------------------------------------------------------------------------------------EBITDA * 268 - 268 257 - 257 528 - 528 Depreciation andamortisation (4) - (4) (5) - (5) (10) - (10) ----------------------------------------------------------------------------------------------------Group operatingprofit 264 - 264 252 - 252 518 - 518 Net profit onsale of property - 2 2 - 1 1 - 3 3Movements fromrevaluation ofpub estate - - - - - - - 3 3 Interest receivable 3 - 3 5 - 5 9 - 9 Interestpayable (114) - (114) (121) - (121) (237) - (237)Write off ofunamortisedissue costs - - - - (5) (5) - (5) (5)Movement infair value ofinterest rateswaps - 21 21 - (4) (4) - (20) (20) ----------------------------------------------------------------------------------------------------Total financecosts (114) 21 (93) (121) (9) (130) (237) (25) (262) ----------------------------------------------------------------------------------------------------Profit beforetax 153 23 176 136 (8) 128 290 (19) 271 Tax on profiton ordinaryactivities 4 (47) (2) (49) (43) 12 (31) (90) 25 (65) ----------------------------------------------------------------------------------------------------Profit aftertax andattributableto members ofthe parentcompany 106 21 127 93 4 97 200 6 206 ----------------------------------------------------------------------------------------------------Earnings per ShareBasic 5 38.1p 28.2p 60.2pDiluted 5 37.7p 27.9p 59.4p Adjusted 5 31.8p 27.1p 58.4pAdjusteddiluted 5 31.5p 26.8p 57.7p DividendsDividends paidand/or proposed per share inrespect of theperiod 6 9.0p 5.6p 18.0p * Earnings before interest, tax, depreciation and amortisation Group Statement of Recognised Income and Expense Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 2006 31 March 2005 30 September 2005 £m £m £mUnrealised surplus on revaluation of licensed estate - - 273Movement of deferred taxliability related to revaluedlicensed estate 16 4 (74)Actuarial gain on definedbenefit pension scheme - - 1Deferred tax relating toshare schemes recogniseddirectly in equity 2 4 7 --------------------------------------------------Net income recogniseddirectly in equity 18 8 207 Profit for the period 127 97 206 --------------------------------------------------Total recognised income andexpense 145 105 413 -------------------------------------------------- Statement of Changes in Equity Unaudited Unaudited Audited Six months ended Six months ended For the year 31 March 2006 31 March 2005 ended 30 September 2005 £m £m £mTotal equity at start ofperiod 1,574 1,240 1,240Total recognised income andexpense for the period 145 105 413Equitydividends paid (42) (29) (48)Consideration paid forpurchase of own shares (192) - -Purchase of shares to beheld in trust (1) (22) (37)Proceeds received fromexercise of employee shareoptions 4 2 3Share-based expenserecognised in operatingprofit 2 2 3 --------------------------------------------------Total equity at end ofperiod 1,490 1,298 1,574 -------------------------------------------------- Group Balance Sheet Unaudited Unaudited Audited 31 March 2006 31 March 2005 30 September 2005 £m £m £mNon-current assetsGoodwill 417 417 417Intangible assets: leasepremiums 26 28 27Property, plant andequipment 5,212 4,877 5,157 -------------------------------------------------- 5,655 5,322 5,601 Pubs held for sale 39 25 36 Current assetsAssets held for sale 8 5 7Debtors 93 85 81Cash 84 101 96 -------------------------------------------------- 185 191 184 --------------------------------------------------Total assets 5,879 5,538 5,821 --------------------------------------------------Current liabilitiesCreditors (190) (209) (217)Current tax payable (55) (44) (46)Financial liabilities (66) (36) (35)Provisions (1) (1) (1) -------------------------------------------------- (312) (290) (299)Non-current liabilitiesFinancial liabilities (3,484) (3,429) (3,347)Accruals and deferredincome (5) - (5)Provisions (6) (4) (7)Deferred tax (582) (515) (589)Pension liabilities - (2) - -------------------------------------------------- (4,077) (3,950) (3,948) --------------------------------------------------Total liabilities (4,389) (4,240) (4,247) --------------------------------------------------Net Assets 1,490 1,298 1,574 --------------------------------------------------EquityCalled up share capital 17 17 17Share premium account 486 486 486Revaluation reserve 681 474 667Capital redemption reserve 8 8 8Merger reserve 77 77 77Treasury share reserve (191) - -Other reserve (47) (44) (56)Profit and loss account 459 280 375 --------------------------------------------------Total equity 1,490 1,298 1,574 -------------------------------------------------- Group Cash Flow Statement Unaudited Unaudited Audited Six months ended Six months Year ended 31 March 2006 ended 31 March 30 September 2005 2005 £m £m £m Cash flow from operationsOperating profit 264 252 518Depreciation andamortisation 4 5 10Share-based expenserecognised in profit 2 2 3(Increase)/decrease indebtors (9) 2 5Decrease in creditors (5) (4) (12)(Decrease)/increase inprovisions (1) (1) 2Increase in current assetsheld for sale (1) - (2) -------------------------------------------------- 254 256 524Tax paid (29) (20) (53) --------------------------------------------------Net cash flows from operatingactivities 225 236 471 Cash flows from investing activitiesPayments to acquire publichouses (58) (7) (14)Payments made on improvementsto public houses (26) (26) (49)Payments to acquire otherproperty, plant andequipment (4) - (1)Receipts from sale of property,plant and equipment 20 27 47 --------------------------------------------------Net cash flows from investingactivities (68) (6) (17) Cash flows from financing activitiesInterest paid (116) (129) (244)Interest received 3 6 9Issue costs of long-termloans - (1) (2)Equitydividends paid (42) (29) (48)Payments to acquire sharesheld in employeebenefit trust (16) (22) (23)Payments toacquire ownshares (192) - -Receipts fromexercise ofshare options 4 2 3Debt due within one year- repayment of short termloans - (30) -Debt due beyond one year- new long term loans 326 681 771- repayment of long termloans (136) (754) (971) --------------------------------------------------Net cash flows from financingactivities (169) (276) (505) --------------------------------------------------Net decrease in cash (12) (46) (51)Cash at start of period 96 147 147 --------------------------------------------------Cash at end of period 84 101 96 Reconciliation of net cash flow to movement in net debt Unaudited Unaudited Audited Six months Six months ended Year ended ended 31 March 31 March 2005 30 September 2006 2005 £m £m £mDecrease in cash in theperiod (12) (46) (51)Cash (inflow)/outflow from change in debt (190) 103 200Issue costs of new long term loans - 1 2 ------------------------------------------------Change in net debt resulting from cash flows (202) 58 151 Amortisation of issue costsand discounts/premiums onlong-term loans (1) (2) (4)Amortisation of securitisedbonds 2 2 5Change in fair value ofinterest rate swaps 21 (4) (20)Write off of unamortisedissue costs - (5) (5) ------------------------------------------------Movement in net debt inthe period (180) 49 127 Net debt at start of period (3,286) (3,413) (3,413) ------------------------------------------------Net debt at end of period (3,466) (3,364) (3,286) ------------------------------------------------ Analysis of net debt Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 2006 31 March 2005 30 September 2005 £m £m £m Corporate bonds (1,185) (1,185) (1,185)Syndicated bankborrowings (468) (350) (260)Securitised bonds (1,754) (1,779) (1,772) ------------------------------------------------Gross debt (3,407) (3,314) (3,217)Cash 84 101 96 ------------------------------------------------Underlying net debt (3,323) (3,213) (3,121) Capitalised debt issue costs 26 28 27Fair value adjustments onacquisition of bonds (75) (80) (77)Fair value of interest rateswaps (88) (93) (109)Finance lease creditors (6) (6) (6) ------------------------------------------------Net debt (3,466) (3,364) (3,286) ------------------------------------------------Balance sheet:Current financialliabilities (66) (36) (35)Non-current financialliabilities (3,484) (3,429) (3,347)Cash 84 101 96 Net debt (3,466) (3,364) (3,286) Notes 1. Publication of non-statutory accounts The financial information contained in this interim statement, which isunaudited, does not constitute statutory accounts as defined in section 240 ofthe Companies Act 1985. The figures for the year ended 30 September 2005 havebeen derived from the UK GAAP statutory accounts, which have been filed with theregistrar of companies and on which the auditors gave an unqualified opinion, asrestated to comply with International Financial Reporting Standards (IFRS). 2. Accounting policies and basis of preparation of interim financial information With effect from 1 October 2005, Enterprise Inns Plc moved to reporting itsGroup financial results in accordance with IFRS as required by European UnionLaw. These interim results have therefore been prepared in accordance with theIFRS accounting policies expected to apply at 30 September 2006. The results forprior periods have been re-stated using IFRS so that proper comparison can bemade with the results for the current period. The Group's IFRS accounting policies along with reconciliations of the resultsfor the periods to 31 March 2005 and 30 September 2005 from UK GAAP into IFRSwere published on 4 May 2006. The document 'Re-statement of financialinformation under International Financial Reporting Standards' is available onthe company's website at http://www.enterpriseinns.com/investor_zone/ As permitted, this interim report has been prepared in accordance with UKlisting rules and not in accordance with IAS 34 'Interim Financial Reporting'and is therefore not fully compliant with IFRS. 3. Exceptional items The Group has elected to classify certain items as exceptional and present themseparately on the face of the Income Statement. Exceptional items are classifiedas those which are separately identified by virtue of their size or nature toallow a full understanding of the underlying performance of the Group andinclude the following: Net profit on sale of property Net profit arising from the sale of pubs. Movements from revaluation of pub estate Under IFRS any revaluation that causes the book value of a pub to fall belowhistoric cost will lead to a charge in the Income Statement. If that same publater recovers in value so that its book value exceeds historic cost, theincrease in value is credited to the Income Statement to the extent that a debitwas previous recognised. Most of the impact of the annual revaluation exerciseis accounted for in equity and recognised in the Statement of Recognised Incomeand Expense. Movement in fair value of interest rate swaps Under IFRS the interest rate swaps are re-valued to fair value at each BalanceSheet date and the movement is recognised in the Income Statement unless hedgeaccounting is adopted. The Group has elected not to adopt hedge accounting forall existing swaps. The movement in relation to the swaps will vary periodicallyand could result in increased volatility in the Income Statement. Tax Under IFRS, a deferred tax liability has been recognised on the balance sheetrelating to the pub estate. On transition to IFRS, the Group elected to re-visitsome business combinations which led to an increase in goodwill in respect ofthis deferred tax. As this pre-acquisition liability reduces due to capitalgains indexation relief, a credit is recognised in the Income Statement. Allother movements in respect of this deferred tax liability are accounted for inequity and recognised in the Statement of Recognised Income and Expense. The tax effect of all other listed exceptional items is also included inexceptional items. 4. Taxation The pre-exceptional tax charge of £47m for the six months equates to aneffective tax rate of 30.7%. The effective tax rate does not include the effectof exceptional items. 5. Earnings per Ordinary Share Basic earnings per ordinary share is based on earnings of £127m (2005 six months£97m, full year £206m) and on 333.4m (2005 six months 343.4m, full year 342.4m)ordinary shares in issue excluding shares held by trusts relating to employeeshare options. Adjusted earnings per share is based on earnings adjusted for the effects ofexceptional items, net of tax, of £106m (2005 six months £93m, full year £200m)and on 333.4m (2005 six months 343.4m, full year 342.4m) ordinary shares inissue excluding shares held by trusts relating to employee share options. Diluted earnings per share is based on basic earnings of £127m (2005 six months£97m, full year £206m) and adjusted earnings of £106m (2005 six months £93m,full year £200m) and on 336.9m (2005 six months 347.4m, full year 346.6m)ordinary shares in issue adjusting for shares held by trusts relating toemployee share options. 6. Dividends An interim dividend of 9.0 pence per Ordinary Share is proposed (2005: interim5.6 pence; final 12.4 pence) which amounts to £29m (2005: interim £19m; final£42m). This will be payable on 4 July 2006 to shareholders on the register ofmembers on 9 June 2006. Independent review report to Enterprise Inns Plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 31 March 2006 which comprises Group Income Statement, GroupStatement of Recognised Income and Expense, Statement of Changes in Equity,Group Balance Sheet, Group Cash Flow Statement and Reconciliation of Net CashFlow to Movement in Net Debt, Analysis of Net Debt, and the related notes 1 to6. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 2, the next annual financial statements of the Group willbe prepared in accordance with those IFRSs adopted for use by the EuropeanUnion. The accounting policies are consistent with those that the directorsintend to use in the next financial statements. There is, however, a possibilitythat the directors may determine that some changes to these policies arenecessary when preparing the full annual financial statements for the first timein accordance with those IFRSs adopted for use by the European Union. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof Group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies have been applied. A review excludes audit proceduressuch as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 March 2006. Ernst & Young LLP Birmingham 16 May 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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