Enterprise Inns Share Discussion Threads

[cerrito] 05/2/2016 22:11

Anyone know what's going on here??? where the continued fall contrasts with the rebound seen in JDW,Marstons and GNK over the recent weeks..or do we just wait for the Trading Statement on Thursday.
Not feasible for me to make AGM; grateful for any feedback from people who make it.

[rickyvader] 20/1/2016 21:29

When is there next update or results ?Still think the asset rationalisation is good business but I guess the proof is in the pudding , or results

[cerrito] 20/1/2016 17:07

It would be unrealistic to think that ETI will avoid the weakness seen in JDW, GNK and Mars especially given JDW statement today

[piano man] 16/12/2015 22:21

I've lost patience with this one, I'm afraid. I might be dead before catching a whiff of nav and I'm still a young man. Yes I also thought of xmas and turkeys. Still holding a few bonds as the assets are not going anywhere (without a nuclear winter) but will they ever be reflected in the share price or deliver a growing dividend stream.

[jeffian] 08/12/2015 10:59

Thanks, Cerrito. Yes, I will probably go to AGM.

Not sure what to make of the bonds thing. I don't know about "management indecision" but it does seem odd that they didn't get some behind-the-scenes consensus before going through all the formalities only to pull it. It rather sounds as if the bondholders tried to hold them to ransom over the "consent fee" (whatever that is, but it sounds like a sweetener!). The bonds are flexible as to what assets are charged (so they can take pubs out as long as they replace them with others of equivalent value) and I imagine they'll deal with this situation by parking all the remaining tenanted pubs in the bonds and taking out those they want to manage themselves or turn into commercial properties.

[cerrito] 08/12/2015 10:33

Very peculiar behaviour to say they no longer need to amend the trust deeds of the bonds and suggests management indecision.
Jeffian first time I have been on this thread since my last posting, here is the article; will you be going to the AGM? to express your view. Not practical for me to go.


Other countries have bars. Only the British have pubs: places with names like “The Dog and Truck” once kept viable by a flow of warm beer in a fog of smoke. This business model is under relentless pressure. Smokers have been banished to the outdoors. Britain has discovered wine, quality television and the internet, making its menfolk frustratingly familial in their habits. Caffeine has steadily replaced alcohol in the British bloodstream.
More


Large pub companies such as Enterprise Inns have grappled with this vexatious social change for a while. Until a year ago, they could have expected to shift towards more reliance on food, coffee and accommodation with the help of the “beer tie”, by which they are sole supplier of beer to the tenant in return for charging a lower rent. Politics intervened. Last November MPs, chasing the ideal of the liberated, craft-brew-dispensing publican, voted to ban this arrangement. Enterprise was among the most exposed. Nearly all of its 5,000 pubs operated on the tie.
Results on Tuesday confirmed that Enterprise has done much to defuse another threat, cutting its debt-equity ratio from 2.7 to a more manageable 1.7. The MPs meddling has, however, rendered the path ahead as cloudy as a pint of ill-tended bitter. Making its pubs less pub-like is trickier when their relationship to Enterprise is up in the air. At every rent review (roughly 600 per year) publicans can opt to become a pure tenant, cutting the tie. These switches turn Enterprise into more of a property company. It also plans to gradually assume direct management of 800 pubs, from just a handful today.

Each of these steps makes Enterprise less dependent on punters slurping more beer. This is a good thing. But publicans dictate the pace and manner of this shift, which is not. In recent years, Enterprise has needed more than £60m of annual expenditure to keep its pub estate in reasonable shape. Valuing its equity at £500m, just five times its earnings, the market sees much left to do.

[jeffian] 23/11/2015 09:50

"This content is available for Premium Subscribers only"

Thanks, Cerrito!

8-(

[cerrito] 22/11/2015 22:55

Good article by Lex in the FT

[jeffian] 19/11/2015 09:32

Cerrito,

I do think that they have an excellent management team but my point above is that I feel that their 'new strategy' is simply a reaction to events beyond their control rather than a genuine belief that this is in the interests of their shareholders (rather than all their other 'stakeholders'). They pay lip service to "maximising value for shareholders" but on any level you care to judge that, they are manifestly failing to do so. Total Shareholder Return has been negative for years and, whatever progress they claim, the shareprice resolutely refuses to follow. The best they can offer us is a 5-year plan attempting to raise the share price (How? It's not in their control!) towards NAV. Now that is like saying "Give me £1 today and I'll invest it for you; if you want it back, you'll only get 38p; it might be worth £1 again in 5 years' time but we'll pay you nothing in the meantime". Not an attractive investment model!

Without any prospect of creating a real growth business, my argument is that they are far more likely to achieve NAV for their shareholders by an orderly liquidation and return of capital or at least slashing the size of the total business to the point that debt is eliminated as an issue. I can understand why management may not find that attractive (turkey/Christmas)! But my real concern is that there is a very good chance that the new strategy will simply fritter away what asset value we have. In the immediate aftermath of 2007/8, large scale property sales were necessary to reduce indebtedness but sales are continuing with proceeds not being returned to shareholders or being used to reduce debt, but "reinvested" back into the business. Now, to you and I, "investment" means enhancing the value of an asset but in reality that isn't happening. In every one of the last 5 years, investment into the estate has been vastly exceeded by a write-down in the valuation of the assets. Over that period, they've invested a total of £332m and written off £655m! Even at the individual pub level, there's a very good chance that "investments" made only a couple of years ago are being written off in later revaluations. Effectively, that is taking (our) real cash and p*ssing it away. Add to that that the new strategy requires them to load the business with additional overhead in the form of staff to manage new areas in which they have no existing experience or understanding.

Management did a great job of defending shareholders against the worst possibilities of the credit crunch. They've avoided any dilutive equity issues, kept the banks and bondholders happy and stabilised earnings. But they can't now offer a very rosy picture going forward within a reasonable timeframe and the time has come to realise those assets, IMHO, rather than inventing some strange hybrid company without any clear identity or purpose.

[rickyvader] 18/11/2015 21:21

Hi cerrito.I bought in last week in the mid 90s as thought it was good value. Quite liked the statement but yes there is some work to do still. Lots of property assets which I like and debt coming down. I have put a personal rough target of 120 which is about 15% up from today.

[cerrito] 18/11/2015 19:03

At one level this is a screaming buy. PE based on adjusted earnings 5x and the share price at a 60%+ discount to a NAV which is now more robust as 90%+ of the estate valued by external surveyors.
Leverage at 63% just about OK as is interest coverage at 1.9%.
And yet having gone through the results and listened to the webcast of the Investors' meeting I cannot see a catalyst in the short term-ie until May when we get the interims- to drive the price much higher. I am comfortable the share price has reached its floor in the mid 90s.They are entering uncharted waters. There is still the fine detail of the SBEE act to be resolved and once that has been done to deal with the unintended consequences. Also the extent that they are changing their business can be seen by the Chairman telling us that ETI have recruited senior people in concept development-whatever that is-as well as management of chance programmes ie there is quote alot of execution risk.I do note several comments that had started well but still early days.
I thought the CEO came across well.

[prokartace] 17/11/2015 07:56

had to go to the web site to get them!

[prokartace] 17/11/2015 07:47

Tks for that insight jeffian. Now where are the results??

[cerrito] 16/11/2015 21:04

Good post Jeffian and I too am confused at them being all things to all people.
Bought back in couple of weeks back at 103ish and if I had been on the ball this pm would have bought more at 96.
Let's see what tomorrow brings

[jeffian] 16/11/2015 14:50

The trouble is, it has no real reason left to exist. When I started this thread, it had a very clear game plan (as described in header post) but through no fault of its own it has had the rug pulled from under its feet firstly by the banking crisis and subsequently by Government legislation to attack the 'tie'. The result of their 'strategy review' is that they are moving from being a clearly-defined and focused tied tenanted pub business into a mixed Managed/Tenanted/Free pubco alongside a straight commercial property investment business which may or may not end up as a REIT. If you were starting from scratch, would you think "Hmmm, that's a great business model!"? No, neither would I. Their claimed NAV is around 283p/share yet shareholders have had no return (divi) on that for 6 years and could only get 95p if they sell today. To stagger on as they are may benefit Directors and employees but unless they can start paying dividends again and move the share price towards NAV in short order, it is of no use to shareholders. The answer, IMO, is clear - an orderly liquidation of assets, either entirely or to a point where it is a much smaller entity with little or no debt, and a return of capital to shareholders. The current strategy only promises years of stagnation without much hope of income or capital appreciation.

[prokartace] 16/11/2015 13:54

Weell, if it was good value then it must be a freebie now! The only broblem is the debt mountain so its always going to be a gamble. Results tomorrow, share price at a new low, lets see what happens. From the share price looks like there has been a leak and its not good news!

[hisnameisollie] 19/6/2015 23:03

There's definetely more choice with regard to where pub goers drink these days. Given increasing taxes on alcohol there's a shift towards companies like brewdog who are influencing the way people enjoy beers.

I like that enterprise inns have admitted that the conventional model of forcing certain beers on pubs may no longer work and are taking steps to innovate. I think they need to continue pushing forward and realise value in a more streamlined way.

[jeffian] 30/5/2015 23:44

"Our pub estate is re-valued every year in part by independent valuers and in part by our professionally qualified in-house team. The valuation is performed in accordance with the Royal Institution of Chartered Surveyors' "Red Book" valuation standards, which reflect the current and future rent and other income streams expected to be generated by each property, capitalised using an appropriate multiple."

They've sold pubs for over £3m and for a few £100k. It's an average. What's the problem?

Edit:
MARS have 1632 pubs valued at £2083.5m = £1.27m/pub
GNK have 1914 pubs valued at £2169.7m = £1.13m/pub

[rjmahan] 30/5/2015 18:45

If you look at 2014 annual report
£3809 m in book value.

5348 pubs

£712k per pub.

The report also shows that admittedly poorly performing pubs are being sold for £350k.

My conclusion would be that the book value is inflated.

Any views ?

[jeffian] 14/4/2015 22:47

Pubs group Enterprise Inns jumped 6.2p to 116.7p after a buy note from Deutsche Bank:

"Recent legislative changes that introduce a free-of-tie option for licensees change the commercial basis of the tenanted and leased pub market. Our analysis suggests that Enterprise should be able to offset any negative profit pressures, and that [its] evolving strategic responses will lead to eventual profit upgrades. We think that the potential changes should convert Enterprise into a more proactive, commercially minded property manager that could also encompass a partially owned REIT and a managed pub division alongside the traditional tenanted estate. We have tweaked up our price target by 5% to 215p, and remain confident that the share price should double from here."

[jeffian] 14/4/2015 11:03

LM,
Your final para in 676 is an over-simplification. If you look at the Parliamentary report linked in 673, Page 30 onwards deals with the issues of the tie, beer discounts and profitability.

Most of the pure pubco's (i.e. who don't produce their own beer) offer a very wide choice indeed. As you would expect, breweries (e.g. Marstons and Greene King) would require their tenants to stock their own brands - you wouldn't go into a Shell petrol station and expect to get BP, would you? - but for many years they have also had to allow their tenants to stock "guest ales".

[luckymouse] 14/4/2015 10:09

Noticed this upgrade btw

4/14/2015 - Deutsche Bank - Boost Price Target - Buy - GBX 205 -> GBX 215

[luckymouse] 14/4/2015 10:06

Jeffian - v good answer - tks - so a tenant entering/renewing this summer will effectively be doing so under the tied system - and may potentially have to wait c.5yrs for the option to come up - unless perhaps a review clause of some sort is added due to the historic changes taking place perhaps?

Im guessing the pubcos will be well versed in tactics to effectively delay the changes.

I also was under the impression that the pubcos took most of the profit from the beer leaving the poor landlords with a pittance & no choice?