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Article Excerpt
PARTICIPANTS
. Ted Tuppen, Enterprise Inns plc, Chief Executive . Simon Townsend, Enterprise Inns plc, COO . David George, Enterprise Inns plc, CFO . Charles Winston, Redburn Partners, Analyst . Tim Ramskill, Dresdner Kleinwort, Analyst . James Ainley, JP Morgan, Analyst . James Rollo, Morgan Stanley, Analyst . Jeffrey Harwood, Oriel Securities, Analyst . Peter Testa, One Investments, Analyst . Nick Thomas, ABN Amro, Analyst . Paul Hickman, KBC Peel Hunt, Analyst . John Beaumont, Kaupthing, Analyst
OVERVIEW
ETI.L reported its pre-close trading statement on 09/30/08. Co. anticipates delivering earnings performance and dividends in line with market expectations.
PRESENTATION SUMMARY
S1. Pre-close Trading Statement (T.T.) 1. Details: 1. Unprecedented turbulence in global financial markets. 1. All consumer-facing businesses in UK and probably elsewhere are finding trading very tough. 2. Focus has to be on running the business and delivering results ahead of market and that's what Co. is doing. 1. Cash flows are strong. 3. Confident that: 1. Balance sheet is robust. 2. Model is secure. 4. Still has 83% of estate on substantive agreements. 1. This 83%, those pubs on avg. delivered EBITDA growth during the year. 2. Has confidence that model is still robust and secure. 3. Anticipates delivering earnings performance and dividends in line with market expectations.
QUESTION AND ANSWER SUMMARY
OPERATOR: Okay, we'll now begin the question and answer session. (OPERATOR INSTRUCTIONS) And we go to Charles Winston of Redburn Partners. Please go ahead, sir.
CHARLES WINSTON, ANALYST, REDBURN PARTNERS: Yes, good morning guys. Just within the statement, there's not that much of an outlook statement. I was just wondering what --- it is turbulent times and it's very uncertain times, but I guess you must have done some sort of budgeting for next year. And I'm just wondering if there's any sort of comments for your guidance you could give for your expectations for -- maybe in a range of how things could be top and bottom for looking forward for next year at all?
TED TUPPEN, CHIEF EXECUTIVE, ENTERPRISE INNS PLC: Yes. Morning, Charles. You will completely understand that were I to answer that with a number, I'd be thrown into prison for giving you a forecast.
CHARLES WINSTON: Indeed.
TED TUPPEN: But no, it's a perfectly fair question. We've obviously done a budget and we've prepared it in great detail and we've alighted on a number we believe will be the number we'll make for next year. On the basis of that we've been confident enough obviously to bear a dividend in line with market expectations.
So that would give you a steer about our confidence on the cash side and balance sheet side. You can also be reassured that we have looked briefly at the upside scenarios and cause for celebrating those. We're also very aware that we have fully to understand the potential downsides. And you can be confident that we've looked at the downside sensitivities, evaluating the key bottom side risks, and we've still found ourselves in the position where we were confident to declare what are dividend would be in line with the market.
I think more than that and we'd be treading into dangerous territory about giving you a forecast. But I hope that that reassures you that obviously we've looked at the downsides, but we consider that even at the more pessimistic end we still feel that the model is strong.
CHARLES WINSTON: That's fine, thank you.
OPERATOR: Okay, we now go over to Tim Ramskill of Dresdner Kleinwort. Please go ahead, sir.
TIM RAMSKILL, ANALYST, DRESDNER KLEINWORT: Morning guys, couple of things from me. Firstly, I guess the refinancing that's required in 2011 feels like an awfully long way away, but might go a long way towards explaining why the share price is where it's at. Do you think it'll be as long as two and a half years before we'll have some clarity on that?
And what can you give us as a steer as to how you're thinking about the refinancing in light of the REIT being put on hold for the time being?
And then the second question was just in relation to the 850 licensees that are now receiving some form of assistance. Can you just help us reconcile how we get from 184 rent concessions at the first half, which I guess there are also some discounts being give as well, to the 850 and how that's profiled through the period of the second half?
TED TUPPEN: Sure, I'm delighted to pass the first one of those questions off to Dave and the second one off to Simon and I can have a drink of coffee.
SIMON TOWNSEND, COO, ENTERPRISE INNS PLC: Morning, Dave, do you want to answer the first bit, Dave?
DAVID GEORGE, CFO, ENTERPRISE INNS PLC: Yes, morning, Tim. On the refinancing, as you've noted, the -- our GBP1b facility is due for refinancing in May 2011. We've publicly said I think on several occasions including the last presentation that we wouldn't leave it until 2011 to take that refinancing. And all the advice we've had speaking to banks and advisers is that the first half of 2010 is when we'd be sensible to look at that refinancing.
In the meantime, as we've outlined in the pre-close statement, there's going to be a high focus on reducing level of debt we've got within the business, both from the free cash flow we generate, which if you look back to 2007 after interest and tax we generated GBP230m of free cash before dividend came in. But also by scaling back on the number of pub acquisitions we're making and we're refocusing the business on selling bottom end pubs that are no longer viable as pubs.
So there's a lot of focus, but the major focus is on reducing the level of debt.
TIM RAMSKILL: Just can I just follow up on that? Does the considered process of looking to tweak the unique securitization, does that -- is that still on the agenda or is that now permanently parked?
TED TUPPEN: Do you want to answer that as well?
SIMON TOWNSEND: Sorry?
TED TUPPEN: Can you answer that one as well, please, Dave?
DAVID GEORGE: Yes, we review things with our advisers and banks at all times. But the focus in the short to medium term is to reduce the level of debt within the business through, as I say, cash generation from normal business operations and the churn of bottom end pubs. I think the unprecedented trading conditions, as is widely recognized across the industry, will lead to the closure of a significant number of pubs that are no longer viable as pubs and will have to be sold for alternative use.
TED TUPPEN: Tim, I think your specific point, Tim, on the unique securitization, are you referring to our ability to adjust the procurementcy in fact?
TIM RAMSKILL: It was more specifically whether -- clearly you've been considering restructuring that securitization possibly as part of the REIT conversion process. Now does the process...
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