Preliminary Results...Preliminary Results 2009 Financial performance 12 months to 30 September 2009 EBITDA pre exceptional items £450m (£512m) Profit pre tax & exceptional items

Preliminary Results 2009

Preliminary Results

30 September 2009

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David George

Chief Financial Officer


Financial performance 12 months to 30 September 2009

EBITDA pre exceptional items £450m (£512m)

Profit pre tax & exceptional items £208m (£263m)

Adjusted EPS 30.7p (39.2p)

Net income per pub down 8% (unchanged from H1)

Full year write down in pub estate value of 7% (3.5% at H1)

Strong cash generation and bank debt reduction on track

Sufficient headroom to all financial covenants


Profit & loss account Adjusted EPS down by 22%

Year ending 30 Sept 2009 Year ending 30 Sept 2008

£m Pre

excep Excep Total

Pre excep

Excep Total

EBITDA 450 (5) 445 512 (2) 510

Depreciation (12) - (12) (8) - (8)

Operating profit 438 (5) 433 504 (2) 502

Property 0 (158) (158) 0 (51) (51)

Interest (230) (34) (264) (241) (1) (242)

Profit before Tax 208 (197) 11 263 (54) 209

Taxation (55) 50 (5) (68) 42* (26)

Profit after Tax 153 (147) 6 195 (12) 183

Adjusted EPS (p) 30.7 39.2

Weighted average no. of shares (m) 497.8 497.4

* Restated from prior year of £48m


EBITDA Average EBITDA per pub down by 11%

Year ending 30 Sept 2009 Year ending 30 Sept 2008

£m Pre

excep Excep Total

Pre excep

Excep Total

Revenue 811 7 818 880 - 880

Cost of sales (325) (4) (329) (336) - (336)

Gross profit 486 3 489 544 - 544

Administrative expenses (36) (8) (44) (32) (2) (34)

EBITDA 450 (5) 445 512 (2) 510

Average number of pubs 7,611 7,758

EBITDA per pub (£’000) 58.5 65.7


Net income per pub Net income per pub down 8% (unchanged from H1)

2009 2008 % decline

Gross profit 489 544

Adjust for: Extra day - (1)

Property costs 6 6

Adjusted net income 495 549

Average no of pubs 7,611 7,758

Average net income per pub 65.0 70.8 (8)%


Gross margin analysis Margins impacted by duty increases and discretionary concessions

£m Beer,

cider

& fabs

Licensee discounts Wines,

spirits &

minerals

Rent Machines & other Total

2008/09 Contr-

actual

Price freeze

Non- contract

Income Non-

contract

Turnover 594 (47) (3) (9) 36 240 (9) 16 818

Cost of sales (296) - - - (27) (6) - - (329)

Gross profit 298 (47) (3) (9) 9 234 (9) 16 489

50.2% 59.8%

2007/08

Turnover 618 (44) - (6) 32 261 (3) 22 880

Cost of sales (305) - - - (25) (6) - - (336)

Gross profit 313 (44) - (6) 7 255 (3) 22 544

50.6% 61.8%


Cash flow statement Strong cash generation in line with expectations

12 months ending

30 September

£m 2009 2008

Operating profit 433 502

Operating cash inflow 440 536

Interest (232) (246)

Tax (59) (77)

Free cash flow pre investment 149 213

Capital expenditure (54) (70)

Acquisitions (4) (48)

Disposals 103 30

Cash generation 194 131


Balance sheet Robust balance sheet

30 September

£m 2009 2008

Goodwill & investments 409 417

Pubs & other assets 5,394 5,888

Net debt (3,679) (3,767)

Net other liabilities (158) (170)

Deferred tax (591) (720)*

Net worth 1,375 1,648

Minimal net pension liabilities

Minimal leasehold liabilities

* Restated from prior year of £(690)m


Pub estate valuation Total pub estate valued at £5.4bn

Full year write down in pub estate value of 7% (3.5% at H1)

All pubs are annually valued at year end

As at 30 September 2009

Number of pubs

Total value

Average value per

pub

£m £’000

Pubs 7144 5310 743

Operating leases 80 15 188

Pubs held for sale 175 43 246

Total 7399 5368 726


Debt structure Underlying Group net debt reduced by £142m after the payment of £52m dividend

As at 30 September

£m 2009 2008

Bank debt (802) (1,000)

Corporate bonds (1,185) (1,185)

Free cash 7 8

Parent company net debt (1,980) (2,177)

Voyager loan (100) (31)

Unique :securitised bonds (1,576) (1,586)

cash 94 90

Subsidiary net debt (1,582) (1,527)

Underlying Group net debt (3,562) (3,704)

Issue costs and fair value adjustments (117) (63)

Group net debt (3,679) (3,767)


Unique securitisation Secured bonds, ring-fenced in subsidiary Attractive features

Leveraged structure at below market interest rates

Smooth amortisation profile over 22 years

Benefits to parent company

£75m dividends received in 2009

Group buying benefits and shared overhead costs

Covenants Test Sept 2009 Sept 2008

DSCR 1.10x 1.81x 2.06x

Net worth - £m 150 1,240 1,448

Liquidity facility £190m

Cash balance of £94m at September 2009


Unique securitisation £64m ahead of repayment schedule

£m Rate* Expiry

Floating rate notes (FRN) 191 6.9% Sept 2013

Fixed rate notes (fixed) 1,385 6.3% Sept 2032

1,576 6.5%

2010 2011 2012 2013

FRN amortisation schedule (£m):- 0 67 67 57

Fixed amortisation schedule (£m):- 0 0 0 13

* Weighted average interest rate including the impact of interest rate swaps


Corporate bonds Secure and effective debt instruments

Attractive below market fixed rates (6.5% weighted average)

Non-amortising, constant leverage

Annual injection or withdrawal of pubs as required or permitted

First charge over pub portfolio, subject to valuation and income tests, measured annually

Second charge over balance of pubs held at parent company level

Security to bondholders

Attractive features

Maturity profile

£60m 6.0% debenture 2014

£600m 6.5% bond 2018

£125m 6.875% bond 2021

£125m 6.875% bond 2025

£275m 6.375% bond 2031


Corporate bonds Year end tests satisfied by addition of £29m of pubs

Valuation test Income cover test

Bond Requirement Actual Requirement Actual

1. £60m due 2014 1.50x 1.51x 1.50x 2.28x

2. £600m due 2018 1.67x 1.73x 2.00x 2.00x

3. £125m due 2021 1.50x 1.55x 1.50x 1.78x

4. £125m due 2025 1.50x 1.52x 1.50x 1.74x

5. £275m due 2031 1.67x 1.67x 1.50x 1.89x

• Annual ratios are post addition of pubs, to be completed by 31 December 2009 (Bond 2, £11m; Bond 5, £18m)

• Valuation includes lotting premiums of 15% (Bonds 3 & 4) and 20% (Bonds 2 & 5)

• Valuation and income tests are next measured in September 2010


Bank facility Attractive terms with 18 months remaining

As at

Covenant Sept 2009

Sept 2008

Net debt:EBITDA 6.50x 5.82x 5.80x

Interest cover 2.00x 2.62x 2.62x

Fixed charge cover 1.00x 1.63x 1.44x

Total property assets cover 1.50x 2.20x 2.00x

Flexible element of the financial structure

Club arrangement, including core relationship banks

Sufficient headroom on financial covenants

Refinancing planned for 2010


Bank facility Appropriate headroom to covenants

Leverage covenants (£m) Sept 2009

Sept 2008

Net debt (bank facility and corporate bonds)* 1,976 2,171

EBITDA (12 months) 265 304

Dividends and interest payments from Unique 75 70

340 374

Interest payable (129) (143)

Debt:EBITDA 5.82 5.80

Interest cover 2.62x 2.62x

Current margin payable of 80 bp. Maximum margin of 120 bp if debt:EBITDA exceeds 5.9x

Covenants measured semi-annually on a MAT basis

*Net of fees


Bank facility Appropriate headroom to covenants

Valuation covenants (£m) Sept 2009

Sept 2008

ETI property assets 2,934 3,169

A. Less pubs outside corporate bonds (1,290) (1,462)

Pubs secured against corporate bonds 1,644 1,707

Less debenture debt (1,185) (1,185)

B. Second charge property assets 459 522

C. Bank debt* (794) (990)

First charge cover (A/C) 1.63x 1.48x

Total property assets ratio ((A+B)/C) 2.20x 2.00x

* Net of fees

Covenants measured semi-annually on a MAT basis


Simon Townsend

Chief Operating Officer


Challenging conditions Accelerating polarisation of pubs

Consumer has evolved, more leisure alternatives

Rising overheads, compounded by recession

Government regulation and taxation

Campaigns and inquiries


2008-09 EBITDA bridge Analysis of decline in FY09 EBITDA

£m Half 1 Half 2 Full year

2008 actual EBITDA 256 254 510

FY08 operating exceptional item - 2 2

Easter/ extra day (3) 2 (1)

2008 adjusted EBITDA 253 258 511

Churn, price freeze, discretionary support, TMAs (10) (19) (29)

Business failures & trading performance (18) (19) (37)

2009 EBITDA 225 220 445


Estimated impact on earnings Extra costs for ETI

£m

No of pubs

FY08 Base

Churn, price freeze,

discretionary support, TMAs

Business failures & trading

performance

FY09

All substantives 6,128 464 (11) (5) 448

Non substantives 1,271 77 (2) (28) 47

FY08 & FY09 disposals 10 (8) - 2

Unallocated costs (2) - - (2)

Net income 549 - - 495

Property costs (6) - - (6)

Gross profit 543 (21) (33) 489

Overheads (32) (8) (4) (44)

EBITDA 511 (29) (37) 445


Operating performance It has been very tough

Net income per pub down 8%

Total concessions increased - £18m (£9m)

Business failures increased

Abandonments - 196 (167)

Negotiated surrender - 507 (397)

Breach and termination - 269 (169)

TMAs incurred £8m of overhead during year

Lease assignments reduced - 251 (483)

Average lease assignment premium - £47k (£63k)


Operating performance The quality of our pub estate and our flexible agreements underpin solid performance

83% of estate let on substantive agreements (82%)

Income down by 3% in past twelve months

New lettings onto substantive agreements 860 (410)

Average length of occupation is over 5 years

Closed pubs to be reopened 90 (224)

1,529 formal applications (1,566)

766 (915) rent reviews completed at an average annual increase of 0.1% (2.2%)

Overdue balances at 0.8% (0.8%) of turnover, bad debts still low at 0.4%

(0.1%) of turnover


Operating performance Several award winning pubs

MA Great British Pub Awards 2009 Best creative outdoor area

2010 Good Pub Guide UK Pub of the year


Operating performance Several award winning pubs

Wirral CAMRA 2009 Pub of the year

CAMRA Best real ale award East London & City runner up


Interventionist strategies Costly, but cost effective

Additional non contractual support to licensees

intensive care to promote business recovery

Costs of TMA programme

investment to re-let

Additional costs of business failures

robust action if required

Underperforming pubs

accelerated disposal programme


Interventionist strategies Additional non contractual support to licensees


Interventionist strategies Costs of TMA programme


Interventionist strategies Additional costs of business failures


Interventionist strategies Recovered and re-let, but at a cost


Interventionist strategies Accelerated disposal programme


Evolving business model Significant progress being made

Confirmation of existing custom and practice

UORR, RPI, insurance

Process controls

Disclosure, business plans, tenants’ improvements

Industry initiatives

PIRRS, licensee representation, staff qualifications

Commercial development

Flexible tie and discount options


Ted Tuppen

Chief Executive


ETI business model: Does it still work?

Trading in a recession: How can pubs survive?

Pub valuations: Are they realistic?

Levels of debt: Are they manageable?

Where to next?

Challenges The questions we ask ourselves


Preliminary results Summary

Creditable results in a tough market

Business model remains robust and fair

Top quality freehold estate, fairly valued

Bank debt reduction programme on target

Sufficient headroom to all financial covenants

Effective actions taking place to protect long term earnings


QUESTIONS

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http://www.enterpriseinns.com/

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Preliminary Results...Preliminary Results 2009 Financial performance 12 months to 30 September 2009 EBITDA pre exceptional items £450m (£512m) Profit pre tax & exceptional items