UK's Enterprise Inns profits jump, upbeat outlook

Britain's biggest pub operator, Enterprise Inns, beat forecasts with a 33 per cent rise in annual profit yesterday and gave an upbeat outlook, saying a move towards no-smoking pubs could be a long-term positive.

Enterprise, which runs 8,727 tenanted pubs throughout the UK, said trading in October and November, the first two months of its new financial year, remained strong. It also held out the prospect of higher dividends and share buybacks from 2006.

The upbeat message lifted Enterprise shares three per cent to a new record high of 682 and a half pence by 1005 GMT, valuing the company at over £2.3 billion, and making the stock the FTSE 100 index's top riser.

The group, which took over the Unique Pub Company in March to become the nation's biggest pubs operator, was supportive of the UK's move to ban smoking in most English pubs by the end of 2008 saying pubs may lose some consumers but would gain others.

"Over time, we are confident that this will be a potential positive for the industry," said Chief Executive Ted Tuppen in a interview after full year results.

He added the group had four years to implement the changes in England, while the company only has only 140 pubs in Scotland where a total ban on smoking in pubs is set for early 2006.

Enterprise, formed in 1991 by Tuppen, and floated in 1995, posted pretax profit of £231.2 million for the year to September 30, ahead of analyst forecasts of between £219.5 and £227 million. Average profit per pub was up eight percent as the group shrugged off the effects of a wet summer, and it is set to benefit from the full integration of the Unique estate.

Morgan Stanley analyst Jamie Rollo said the results were impressive, and he was likely to raise his current year pretax forecast from 287 million pounds.

But Nigel Parson at Williams de Broe suggested this could be as good as it gets at Enterprise with clouds on the horizon from slowing consumer demand, gambling deregulation and smoking bans.

Enterprise shares are trading 14.7 times 2005 forecast earnings compared to rival Punch Taverns on 10.6 times. Although Enterprise's shares have outperformed the FTSE 100 by 25 per cent his year they have underperformed Punch by five per cent.

Enterprise's Tuppen added the group will review its dividend policy in 2006 which, given the company's strong cash generation, could mean higher dividend payouts or share buybacks after the group had consulted with its shareholders.

The company announced a full-year dividend up 40 per cent at 12 pence a share, ahead of a 32 per cent rise in adjusted earnings per share to 47.5 pence a share.

Tuppen said the group will continue to look at acquisitions, but industry sources said the group is unlikely to bid for the 350 pubs put up for sale by privately-owned Spirit Group.

Enterprise and rival Punch, which between them own over a quarter of Britain's 60,000 pubs, are expecting the result early next month of a parliamentary probe into complaints that pub landlords are giving tenants a raw deal.