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UK: Enterprise Inns adds to pub profits woe

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  • Enterprise swings to pre-tax losses
  • Rival Punch Taverns still in the red
  • Companies cite "improved trading" but seek more disposals 

Enterprise Inns has reported a fall in sales and a swing to pre-tax losses for its latest fiscal year, highlighting the financial pressure on the UK's largest pub companies.

Enterprise Inns is spending GBP1m (US$1.58m) per month to support pub tenants in financial difficulty, it said today (17 November). The group spent GBP15m on direct financial support to tenants in the fiscal year to the end of September, which contributed to pre-tax losses of GBP31m in the year.

Only a one-off tax gain saved net profits, which increased six-fold on the previous year to GBP26m. Although Enterprise sought to emphasise improved trading in recent months, its results show that the UK pub sector remains under intense pressure.

A cocktail of the smoking ban, Government regulation and a consumer shift to drinking at home have accentuated difficulties for the UK pub industry.

Last month, Enterprise's rival, Punch Taverns, said that impairment charges on the value of its pub estate ensured that it stayed in the red for its own fiscal year, to 21 August. Punch reported net losses of GBP197.3m, albeit down on losses of GBP278.1m in the previous year.

In the struggle to restore profitability, pub companies have been shedding unprofitable sections of their estate - invariably, pubs that do not have a strong food offering. 

Enterprise Inns disposed of 579 pubs during its fiscal year. Its estate now stands at 6,820 pubs valued at GBP5bn, according to the firm. Punch sold off 43 pubs during its year and has an estate of around 6,500. Both said that they intend to continue disposing of non-core pubs in the near-term.

Another rival, Mitchells & Butlers, announced yesterday that it has completed the sale of 330 "drinks-led" pubs to Stonegate Pub Co.

Both Punch and Enterprise reported a fall in net sales for their respective 12-month periods. Punch's sales fell by 11% to GBP1.28bn, while Enterprise's dropped by around 7% to GBP758m.

With brewers having just endured the worst quarterly performance for beer sales since records began and value added tax set to rise by 2.5% to 20% in January, Enterprise said it is clear that the sector is under pressure. However, it struck an upbeat note: "The past year has demonstrated the resilience of the best pub operators in the industry," it said.

"We remain confident that in the medium-term the business will be in a good position to deliver positive returns to shareholders," it added. Enterprise will not pay a dividend to shareholders for its most recent year.

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