Up 130% over the last year.
Anyone else watching this one.

ETI

A bit of a mouthfull, but is code
for OK things are looking up.

TEXT-S&P revises Enterprise Inns outlook to stable; affirms 'B' Rtg
13 Dec 2012 - 12:41

(The following statement was released by the rating agency) Dec 13 - Overview -- The operating performance of U.K. pub operator Enterprise Inns PLC (ETI) is stabilizing, while the company continues to reduce debt through asset disposals. -- In addition, in 2012, ETI reduced liquidity risks by refinancing part of its bank facility that expires in 2013 and by prepaying and cancelling bonds at its Unique Pub Finance Co. PLC [ETIUB.UL] (Unique) securitization. ETI is now more than one year ahead of the Unique amortization schedule. -- We are therefore revising our outlook on ETI to stable from negative and affirming our 'B' long-term corporate credit rating on ETI and our 'BB-' issue rating on the senior secured bonds. -- The stable outlook reflects ETI's improved liquidity position, our forecast of a slowdown in the decline of its revenues and earnings, and its ability to generate positive free operating cash flow. Rating Action On Dec. 13, 2012, Standard & Poor's Ratings Services revised its outlook on U.K. tenanted public house (pub) operator Enterprise Inns PLC (ETI, the company) to stable from negative. At the same time, we affirmed our 'B' long-term corporate credit rating on the company. At the same time, we affirmed our 'BB-' issue ratings on ETI's five senior secured bonds. The recovery rating on these bonds is unchanged at '1', reflecting our expectation of very high (90%-100%) recovery for senior secured lenders in the event of a payment default. Rationale The outlook revision reflects ETI's focus on debt reduction through asset disposals, its stabilizing operating performance, and a reduction in liquidity risks owing to the refinancing of part of its bank facility. In addition, ETI has significantly reduced the risk of a dividend lock-up in its Unique Pub Finance Co. PLC (Unique) securitization. In our base-case scenario for the financial year ending Sept. 30, 2013 (financial 2013), we forecast a 5% fall in both revenues and Standard & Poor's-adjusted EBITDA to about GBP660 million and GBP335 million, respectively. The forecast falls are primarily the result of ETI's disposal of an estimated 300 pubs in financial 2013. The operating environment for tenanted pub operators is likely to remain challenging, in our view, and we forecast low single-digit negative like-for-like sales across the whole ETI estate. However, we anticipate positive like-for-like sales growth for approximately 75% of ETI's pubs where the tenant has been in place for more than one year. This indicates to us stabilization in operating performance. Beyond 2013, we expect the pace of the ongoing decline in ETI's revenues and EBITDA over the past few years to slow, as the rationalization of the estate comes to a close. The smaller estate of about 5,200 pubs in 2015, down from 7,800 pubs in 2008, is likely to generate annual income of about GBP625 million and adjusted EBITDA of about GBP300 million. For financial 2013, we forecast reduced leverage, with adjusted debt to EBITDA of about 8.5x, down from 8.8x currently. We base our forecasts on our assumption that ETI will achieve a further GBP150 million of asset disposals following GBP208 million of disposals in 2012. We forecast that ETI will generate free operating cash flow of GBP50 million after capital expenditure (capex) of GBP65 million, and that adjusted EBITDA interest coverage will be 1.7x. On a deconsolidated basis, excluding the Unique securitization, EBITDA interest coverage will be about 2.5x. We consider these ratios to be commensurate with the current 'B' rating. In financial 2012, ETI repaid GBP129 million of its bank facility that expires in December 2013 and reduced the balances on its Unique securitization bonds by GBP181 million using operating cash flow and net proceeds from its GBP208 million of property sales. ETI also refinanced GBP220 million of the bank facility early under a forward-start agreement. This leaves GBP115 million to be repaid from asset disposals and operating cash flow by December 2013, against the current drawn balance of GBP335 million. ETI's capital structure is supported by its property portfolio of 6,060 public house valued at GBP4.3 billion (excluding lotting premium) against consolidated debt of GBP2.7 million. This gives ETI a loan-to-value ratio of 63%. The company's strong asset base gives it financial flexibility to manage its liquidity, which we assess as "less than adequate" and financial risk profile, which we assess as "highly leveraged." The ratings on ETI continue to reflect that the constraint on its financial risk profile from tight headroom under banking covenants, reliance on ongoing disposal proceeds to meet debt amortization payments, and dependence on dividends from its Unique securitization to maintain covenant compliance. These factors are partially tempered by ETI's and Unique's (together, the group's) asset backing, and management's ongoing actions to reduce debt. We view the group's management and governance as "fair," as defined in our criteria. ETI's business risk profile is constrained by the company's exposure to U.K. consumers' discretionary spending and structural issues in the U.K. tenanted pub sector. These structural issues include an oversupply of pubs; downward pressure on pub valuations and rental incomes; falling on-trade beer volumes; growth in off-trade sales, with more consumers entertaining at home; rising alcohol excise duties; and changing consumer preferences. These weaknesses are offset by ETI's scale and market share, its predominantly high-quality estate of tenanted pubs, and strong operating margins. Liquidity We view ETI's liquidity as "less than adequate" as defined in our criteria. We base our opinion primarily on the company's limited headroom under bank covenants, while taking into account its debt amortization profile and reliance on pub sales to meet debt repayments. We forecast that the company's sources of liquidity, including cash and facility availability, will exceed its uses by 1.2x or more over the next 12 months. We base our liquidity assessment on the following factors and assumptions: -- Our forecast that headroom under financial covenants for ETI's bank facility could not withstand a fall in EBITDA of 15% over the next 12 months. -- Our forecast of positive operating cash flows of about GBP50 million and GBP150 million from pub disposals in financial 2013. -- Cash of GBP95 million (all but GBP25 million of which is held within the Unique securitization) and GBP54 million of committed undrawn credit lines at ETI (plus Unique's GBP190 million committed liquidity facility). -- GBP65 million of capex. -- The need for ETI to reduce bank debt by GBP115 million by the time the current facility expires in December 2013. -- GBP11 million of amortization requirements in the Unique securitization in financial 2013. ETI's bank facility is subject to financial covenants, headroom under which we view as tight (less than 15% headroom). Covenant compliance is reliant on ETI having access to dividends from Unique, which would cease if Unique's debt service coverage ratio were to fall to less than 1.5x. ETI has prepaid and cancelled the Unique securitization bonds so it is now more than one year ahead of the amortization schedule. Providing ETI can meet all ongoing amortization requirements and remains one year ahead of schedule, the company should maintain sufficient headroom under Unique's debt service ratio. We therefore consider that the risk of a dividend lock-up in Unique has significantly reduced. Recovery analysis The issue rating on the GBP1.185 billion corporate bonds secured on a pool of pub assets is 'BB-', two notches above the corporate credit rating on ETI. The recovery rating on this debt is '1', reflecting our expectation of very high (90%-100%) recovery for senior secured lenders in the event of a payment default. Secured bondholders benefit from a first-ranking fixed charge on a freehold interest in a pool of pub properties valued at GBP1.949 billion on Sept. 30, 2012 (about GBP1.7 billion excluding the 15% lotting premium representing the likely increase in value if the pubs were sold en masse). In addition, bondholders have a second-lien floating charge on the asset pool that secures the bank debt. The bond documentation includes asset coverage covenants of 1.5x on the bonds maturing in 2014, 2021, and 2025, and of 1.67x on the bonds maturing in 2018 and 2031. The headroom under these covenants is minimal, as per the company's policy not to overcollateralize the bonds. The major driver of our hypothetical default scenario is continuing adverse macroeconomic and tax conditions for pubs in the U.K. These conditions would dampen consumer spending, increase pressure on tenants' solvency, and potentially reduce pub valuations and--subsequently--collateralization. We calculate a stressed valuation of about GBP1.3 billion for the pool of assets securing the bonds by applying a 25% haircut to the current value of the bonds pool. (This value excludes the lotting premium, which is included in the covenant calculations, except for the bonds maturing in 2014). We therefore do not assume material disposals of the pubs against which the bonds are secured on our path to default. Although we do not explicitly factor it into our valuation, if the value of the pledged assets were to decline significantly, ETI might have some flexibility to top up the bond collateral with assets from its bank facility pool (if the bank debt stays overcollateralized, as it currently is). We could revise the issue and recovery ratings on the corporate bonds in the event of unexpected changes to our valuation assumptions, including the market for large portfolios of pub properties becoming significantly less liquid. Outlook The stable outlook reflects our view of ETI's improved liquidity position, our forecast of a slowdown in the decline of its revenues and earnings, and the company's ability to generate positive free operating cash flow. ETI is focusing on debt reduction and is managing its high leverage by reducing debt from asset sales. Despite ETI's "less than adequate" liquidity, liquidity risks have receded due to early refinancing of the bank facility, avoidance of a dividend lock-up at Unique, and execution of its asset disposal strategy. We could lower the ratings if liquidity were to weaken or if solo EBITDA interest coverage were to drop to less than 2x (adjusted consolidated interest coverage of less than 1.5x). This could result from a decline in revenues and earnings beyond our forecasts, Unique entering dividend lock-up, or ETI's inability to achieve budgeted asset disposals. Ratings upside is limited, but would likely result from a sustained improvement in liquidity or a reduction in adjusted leverage on the back of improving operating performance and successful execution of the asset disposal strategy. Enterprise And Unique ETI holds a 100% equity stake in Unique Pubs, the ultimate parent of a borrower in a major set of securitized debt transactions. We analyze ETI on both a consolidated and a deconsolidated basis. With the two estates of broadly comparable size and business quality, we consider it unlikely that ETI would support Unique's securitized estate to the detriment of its own estate. Of the total group estate of 6,060 pubs on Sept. 30, 2012, about 54% secures ETI's secured debt and about 46% secures Unique's secured debt. Management fees receivable by ETI for running Unique's securitized estate cover ETI's costs. Any loss of Unique dividends, which would happen if Unique's debt service coverage ratio were to fall to less than 1.5x, would have a material effect on ETI's covenant compliance and deconsolidated credit metrics. Related Criteria And Research -- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012 -- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Ratings List Ratings Affirmed; CreditWatch/Outlook Action To From Enterprise Inns PLC Corporate Credit Rating B/Stable/-- B/Negative/-- Senior Secured Debt BB- BB- Recovery Rating 1 1 ((Bangalore Ratings Team, Hotline: +91 80 4135 5898 Debanjali.Ghosh@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Debanjali.Ghosh.reuters.com@reuters.net

Blimey - is that what they call 'block reading'! :-)

19 Dec Enterprise Inns PLC ETI Deutsche Bank Buy 0.00 97.25 135.00 135.00 Retains

Deutsche Bank AG > 3%

breakout????

Mid-caps do not feature much at either end of the Winners & Losers list but recovery stock Enterprise Inns (LON:ETI) is the best of the bunch. The pubs group is up 241% on the year.

The story here is of a company selling off pubs to reduce crippling debt and doing a much better job of managing the pubs it has left.

In the year to the end of September the company reduced net debt by £26mln to £2.7bn and while like-for-like (LFL) net income across the pubs estate was down 1.2% year-on-year, the company stressed that, where a publican has been in charge of the pub for at least a year, LFL net income was up 2.2%.

Now, if the pubs trade can just get the Chancellor of the Exchequer off its back, we might all be inclined to raise a glass to him this Christmas.

Pub giants face legal crackdown over 'greedy’ tactics

Britain's biggest pub companies have been accused of “greedy” and “exploitative” behaviour towards their tenant landlords - and face fines for “unfair” treatment of the publicans.

Business Secretary Vince Cable has declared war on pub companies who are “squeezing” their tenants through contracts that are “focused on short-term profit”.
Large companies such as Enterprise Inns and Punch Taverns, which lease their properties to tenant landlords, have been accused by campaigners of hastening the demise of Britain’s pubs by “overcharging” for drinks and rent.

Interim Manangement Statement

Highlights

· Exceptional trading conditions have impacted the first 17 weeks of the year, resulting in like-for-like net income decline for the total estate of 4.4%, or £5 million.

· Like-for-like performance is expected to improve during the remainder of the year.

· On track to deliver proceeds from asset disposals of £150 million for the full year.

· Effective debt reduction strategy continuing with total net debt expected to decline by £0.2bn to £2.5bn during the financial year.

Interim Results

Highlights

Ø EBITDA* before exceptional items £153 million (H1 2012: £168 million).
Ø Like-for-like net income in total estate down 4.2% (H1 2012: 1.6% down).
Ø Net proceeds from disposals of £54 million (H1 2012: £89 million) with an expectation of £150 million proceeds for the full year.
Ø Strong cash generation enables continued progress delivering our debt reduction strategy with net debt at £2.7 billion (H1 2012: £2.9 billion) and expected to reduce to £2.5 billion by the financial year end.

Statutory results

Ø Profit before tax and exceptional items £55 million (H1 2012: £64 million)

Ø Profit after tax £25 million (H1 2012: £53 million)

Ø Adjusted earnings per share# 8.4p (H1 2012: 9.6p)

In auction.

Trying 115p again.

Interesting sort of chart.

Deutsche Bank Buy 129.05 129.30 135.00 190.00 Reiterates

Turned out nice again! :-)

And again! :-)

Interim Management Statement

Operating performance

After a difficult first half of the year during which like-for-like net income declined by 4.2%, we have seen an improving trend in performance in the second half with like-for-like net income for the total estate down by 2.7% in the 18 weeks to 3 August 2013. Encouragingly, the first five weeks of our final quarter have seen like-for-like net income growth.

In the first half of the year our income was adversely impacted by some exceptionally poor winter weather alongside the cessation of trading of Waverley, our wines and spirits distributor. In the third quarter we have faced tough comparatives against the prior year due to the timing of Easter and the positive impact from the Euro 2012 football championship and the Queen's Diamond Jubilee celebrations.

After taking account of these unusual events we estimate that our underlying like-for-like net income in the first half was down by around 2% and has improved in the second half to date to be down by approximately 1%.

Key to sustaining our improved performance in like-for-like net income is the successful execution of our many operational activities. The rate of business failures continues to fall and we are making good progress with the roll out of new services to our publicans such as the deployment of free Wifi, the provision of improved food pricing and support and the availability of discounted Sky entertainment packages. We are also maintaining our investment in the estate including the completion of 656 exterior redecorations, many of which have been completed during June and July.

Numis Add 140.05 - 160.00 Reiterates

Deutsche Bank Buy 151.75 148.00 190.00 190.00 Reiterates

Enterprise Inns plc Convertible Bond Offering

Numis Add 139.90 145.90 - 170.00 Reiterates