Enterprise Inns PLC ETI Final Results

  Enterprise Inns PLC (ETI) - Final Results

RNS Number : 5074R
Enterprise Inns PLC
20 November 2012

20 November 2012

                             Enterprise Inns plc


   Preliminary announcement for the financial year ended 30 September 2012

Enterprise Inns  plc (ETI),  the  leading specialist  operator of  leased  and 
tenanted pubs in the  UK, today announces  its results for  the year ended  30 
September 2012.


Ø EBITDA* before exceptional items £340m (2011: £366m)

Ø Improving performance trends across the whole estate, with like-for-like net
income down 1.2% (2011: 4.3% down)

Ø Like-for-like  net  income growth  of  2.2%  where publicans  have  been  in 
occupation for over one year

Ø £208m net proceeds from disposals and our sale and leaseback programme

Ø Strong  cash generation  has reduced  net  debt by  £266m to  £2.7bn  (2011: 

Ø New  forward  start bank  facility  of  £220m commencing  on  expiration  of 
existing facilities has extended the availability of bank financing to 15 June

Statutory results

Ø Profit before tax and exceptional items £137m (2011: £157m)

Ø Profit after tax £44m (2011: £24m)

Ø Adjusted earnings per share^# 20.5p (2011: 23.4p)

* Earnings before interest, tax, depreciation and amortisation

^# Excludes exceptional items

Commenting on the results, Ted Tuppen, Chief Executive said:

"We are pleased to report significant progress in moving towards growth in net
income despite a tough trading environment for our publicans and ourselves. We
continue to  stabilise  operating  performance with  total  like-for-like  net 
income across the entire estate reducing by only 1.2%, or £5m, in the year  to 
September 2012, compared with a fall of 4.3% in the prior year.

Strong cash  flows  from  operating activities  and  our  successful  disposal 
programme have helped to  reduce total borrowings  to £2.7bn, secured  against 
assets valued at £4.3bn.  Our exposure to the  banking market reduced to  only 
£310m and the market price of our  bonds improved by an average of 21%  during 
the year. The strong cash generative nature of our business has enabled us  to 
agree a new forward start facility of £220m which extends the availability  of 
bank funding through to 2016.

Given the security  of our  funding position,  we are  now able  to focus  all 
efforts on continued operational improvement.  Our first target is to  achieve 
like-for-like net  income  growth  for the  entire  estate  before  ultimately 
restoring the business  to sustainable growth  in earnings per  share. In  the 
meantime we will continue to  use available cash to reduce  debt as we aim  to 
create value for our shareholders."

Enquiries: Tulchan Communications, Ed Orlebar/Rebecca Scott  0207 
353 4200

 Ted Tuppen, Chief Executive 0121 733 7700

 Neil Smith, Chief  Financial Officer 0121  733 

 Emma Greves, Investor Relations Manager  07990 

The Preliminary Results presentation will be available on the company  website 
at www.enterpriseinns.com. A live video  webcast of the presentation will  be 
available on the  investor zone  section on  the above  website from  9.30am. 
Alternatively, a live conference call of  the presentation can be accessed  at 
9.30am GMT by dialling +44 (0)20 3140 0723 or +1 866 978 9967 (USA  callers). 
A replay of the conference call will be available for 7 days on +44 (0)20 3140
0698, +1 877 846 3918 (USA) Replay Passcode: 388064#.

Forward-looking statements

This report contains  certain statements  about the future  outlook for  ETI. 
Although we believe our expectations are based on reasonable assumptions,  any 
statements about future outlook may be influenced by factors that could  cause 
actual outcomes and results to be materially different.


I am pleased to report our full  year results for the year ended 30  September 
2012, during which time we have  delivered EBITDA before exceptional items  of 
£340 million  in  line with  our  expectations  and have  made  good  progress 
securing our future funding position and improving our trading performance.

We are pleased  that average net  income per  pub increased by  2.6% and  that 
like-for-like net income where publicans have been in occupation for over  one 
year increased by  2.2%. However, we  remain fully focused  on improving  the 
total estate like-for-like  net income which  has declined by  only 1.2%  this 
year compared to a decline of 4.3% last year.

There was a  wealth of  special events  taking place  this year,  such as  the 
Diamond Jubilee,  UEFA  European Football  Championship  and the  London  2012 
Olympic and Paralympic Games.  Whilst we supported  our publicans' efforts  to 
connect with their communities by holding activities to optimise the potential
of these events, the record breaking rainfall throughout the summer served  to 
outweigh any incremental trading  benefits. Furthermore, although the  Olympic 
and Paralympic Games  brought a welcome  boost to national  pride, they had  a 
negative impact on trading as evidenced by an 8% year-on-year decline in  beer 
volume sales  in  the  two weeks  of  the  Olympics compared  with  an  annual 
reduction of approximately 3% for  the financial year. Despite such  difficult 
trading conditions we are pleased with the progress we have made.

As our business  stabilises and we  look to support  our publicans in  driving 
growth in  their  pubs, we  have  reviewed and  strengthened  our  Operations, 
Property and Commercial  teams. As  part of the  review we  have recruited  an 
additional  managing  director  into   Operations,  created  more   geographic 
divisions and  reduced the  average  number of  pubs  for which  our  regional 
managers have responsibility.  In addition  we have appointed  a new  property 
managing director to  refocus the  property team  to maximise  value from  our 
property portfolio and have  recruited a new commercial  director in order  to 
extract value from our supply chain  and identify fresh opportunities to  grow 

Under the direction of  our new property managing  director we have  completed 
the review of  all property  assets in our  portfolio to  establish the  value 
potential of every outlet. We have a trading and property plan for every asset
to identify and implement its optimum trading solution whilst at the same time
identifying instances where value can be enhanced either through an  alternate 
use or disposal. The successful disposal programme has generated £208  million 
of net disposal proceeds during the past year, slightly ahead of plan, and  we 
have a  healthy pipeline  of disposals  planned  to meet  our target  of  £150 
million proceeds in 2013.

On 31 May 2012 we successfully secured a refinancing package for the bank debt
to extend  the facility  to 2016.  The new  bank facility,  for £220  million, 
commences on the expiration of the existing facilities on 16 December 2013 and
allows the  Group  to continue  its  strategy of  bank  debt reduction.  As  a 
consequence we  believe that  we  have a  very  manageable and  tax  efficient 
capital structure comprisingpredominantly long term debt,consistent with the
long term nature of our freehold assets.

As part of our bank debt reduction  strategy we have repaid and cancelled  the 
entire tranche B facility of the existing bank facilities thereby removing any
restrictions on our ability to pay dividends. However, the Board continues  to 
believe that, given the current economic uncertainty, it is not appropriate to
resume the payment of dividends at this time. The Board believes that the best
use of available  cash is  to reduce  debt such that  we achieve  a long  term 
transfer of value to shareholders.


Total estate like-for-like net income performance

The past five years have been difficult for publicans. The smoking ban, whilst
welcome in the long term, required  investment in new facilities and  directly 
led to the demise of many smaller, wet-led pubs. Irresponsibly low prices  and 
multi-buy offers from supermarkets appear  to have encouraged pre-loading  and 
increased the  incidence  of unsupervised  alcohol  consumption,  particularly 
amongst younger pub goers.

As a result of the ill-conceived duty escalator, beer duty has been  increased 
by 42% since 2008, with duty on a pint of beer (5% ABV) now costing 55p.  Beer 
duty in the UK is over 12 times  that of our German counterparts and in  spite 
of UK beer drinkers consuming just 13% of European Union ("EU") beer  volumes, 
the UK Government takes 40% of all excise duty levied in the EU. This increase
hits pubs harder  than supermarkets  and is  an extraordinary  strategy for  a 
Government which claims  to support pubs  at the heart  of local  communities. 
During the same five year period,  utility costs have increased by an  average 
of 47%, business rates have gone up  by 19% and there have been further  costs 
associated with employment and the increased regulatory burden.

As we seek  to support our  publicans through these  tough times of  weakening 
consumer expenditure  and rising  costs, rental  charged, on  a  like-for-like 
basis, in our current estate  has declined by an  average of 12% since  2008. 
Over the same period the average discounts  that we offer to our publicans  on 
the cost of a barrel of beer has increased from £37 to £65.

Given this challenging background,  we are encouraged that  the steps we  have 
taken are leading to greater stability across our estate, reflected in a  fall 
of just 1.2% in average  net income per pub on  a like-for-like basis for  the 
whole estate in  the current year.  Looking at the  performance of these  same 
5,902 pubs in our estate  at the year end, it  is interesting to note that  we 
have seen  an improving  trend to  the 1.2%  decline this  year, from  a  5.1% 
like-for-like decline in 2009.

Total estate like-for-like net income - geography

Increasingly we are  experiencing divergent trading  conditions by  geography. 
The south, representing 42% of total  net income, is growing at 1.2%  assisted 
by the effects of a strong London economy. The agenda for our southern team is
a growth  strategy, prioritising  investment  opportunities and  ensuring  our 
publican selection process leads to optimal performance. In the north our team
faces a different set of challenges. Our net income is down 3.4% as  economic 
pressures provide difficult conditions for  publicans and their customers  and 
our team focuses on  minimising the risk of  business failure. In the  central 
region our net income is down 2.4% as elements of the characteristics of  both 
the north  and  south are  evident.  The operational  reorganisation  that  we 
implemented this  year  was designed  to  recognise that  each  territory  had 
different challenges  and that  the local  teams required  the flexibility  to 
implement different strategies.

                            Net income*      % of    Net Net income Net income
                                                  income     change     change
Location  No. of pubs at 30        FY12 total net
                  Sept 2012                income   FY11       FY12       FY11
                                             FY12     £m          %          %
North                 1,769         112        28    116      (3.4)      (7.2)
Central               1,899         120        30    123      (2.4)      (3.9)
South                 2,234         166        42    164      1.2    (1.2)
Total                 5,902         398       100    403      (1.2)      (3.8)

* Net income represents like-for-like pub level gross profits, stated  before 
property costs of £28m, unallocated central  costs of £8m and excluding  £12m 
of net income relating to disposals or non-licensed premises.

Total estate like-for-like net income - occupation

As we  look towards  total  estate net  income  growth based  upon  stability, 
investment and  driving  sales  performance,  it  is  encouraging  that  where 
publicans have been in their pubs for more than one year, representing 81%  of 
total net income, we have seen  like-for-like growth of 2.2% in the  financial 
year. These pubs represent a robust core to our business and we will  continue 
to work in partnership with these publicans to enhance income for us both.  Of 
the 1,543 pubs where the publican has been trading for less than one year, 903
were trading under new agreements where the publican is still at the beginning
of establishing the business and the balance of 640 pubs were either closed or
trading under temporary agreements  whilst we identify  the correct long  term 
solution for the pub.

                                              % of             Net
Years in       No. of pubs at 30 Sept     Net total     Net income  net income
occupation                       2012 income*        income change      change
                                         FY12    Net
                                              income   FY11   FY12        FY11
                                           £m   FY12            %          %
Over 1 year                     4,359     322     81    315    2.2         0.6
Less than 1                     1,543      76     19     88 (13.6)      (24.4)
Total                           5,902     398    100    403  (1.2)       (4.3)

* Net income represents like-for-like pub level gross profits, stated before
property costs of £28m, unallocated central costs of £8m and excluding £12m
of net income relating to disposals or non-licensed premises.

^# FY11 reported net income change not directly comparable as relates to 6,289
pubs as at 30 September 2011.


In order to  secure the  path to earnings  growth, our  operational teams  are 
focusing on four key differentiating activities: enhancing the quality of  the 
estate; attracting and  retaining the right  publicans; providing  exceptional 
local support and selling in smarter ways to optimise income.

Enhancing the quality of the estate

Sometimes changes in the local market  conditions for a particular pub can  be 
so severe that even the best publicans cannot generate a sustainable level  of 
return. In such  circumstances the  appropriate outcome  is to  work with  the 
publican to identify  alternative opportunities for  them whilst our  Property 
team work to optimise the alternate use value of the asset. This churn removes
the unsustainable  element of  the  estate and  generates cash  proceeds  from 
disposal that can  be used  to repay  debt or  invested in  the core  retained 
assets to optimise their income potential.

Over the next  three years  we expect the  estate to  reduce to  approximately 
5,200 pubs. Over the same period we  plan to maintain our level of  investment 
and spend approximately £180 million to improve the quality of our estate.  In 
the recent past, a  significant proportion of our  capital expenditure has  of 
necessity been defensive in nature ensuring basic functionality is in place to
enable a  continuation  of  trade.  Looking  forward  we  plan  to  direct  an 
increasing proportion of our capital expenditure on growth driving activities,
where appropriate repositioning pub businesses  to meet the changing needs  of 
their local customer base.

Attracting and retaining the right publicans to the Enterprise offer

Identifying, recruiting  and  supporting well-funded,  quality  publicans  are 
critical success criteria for our organisation and we plan to reinvigorate the
current suite  of  agreements  that  we offer.  Quality  pubs,  together  with 
attractive and flexible  agreements, will  attract the best  talent and  allow 
entrepreneurialism to flourish within  the pub industry.  We have many  highly 
successful pubs and publicans, frequently  acknowledged for their quality  and 
contribution to their communities. For example, in 2012, the Royal Oak Inn  in 
Appleby-in-Westmoreland was recognised  as the UK's  Best Leased and  Tenanted 
pub in the annual Great British Pub Awards.

A change of  publican can be  the catalyst for  revitalising and securing  the 
prospects of a  pub. A  seamless transition from  one publican  to another  is 
always the preferred  outcome for publicans,  their customers and  ourselves. 
However, in recent market conditions this outcome has sometimes been difficult
to achieve.  Even  the best  publicans  may need  our  support to  tackle  the 
multiple challenges  of  declining  consumer  confidence,  increased  overhead 
costs, the  burden of  punitive increases  in taxation  and the  high cost  of 
regulation. In  an  attempt to  prevent  outright failure  we  have  therefore 
continued to provide temporary concessions to publicans where appropriate, and
have seen this cost reduce from £15  million last year to £6 million in  2012. 
Some of this reduction has been  embedded in amended terms for good  publicans 
because we acknowledge the  permanent nature of changes  in the market  within 
which they operate. However we have also removed concessions where it is clear
that a change of publican is the best outcome for the trading prospects of the

Another cost associated with business failure  is the bad debt that may  arise 
on the departure of the publican. It is reassuring that the underlying cost of
bad debt in the year  has reduced to £1.3  million (2011: £1.5 million),  with 
the level of overdue balances also down to £4.0 million (2011: £5.0  million), 
representing only 0.6% of turnover.

Our approach to the tie has  continued to evolve, and free-of-tie options  for 
bottled beers,  ciders  and  flavoured alcoholic  beverages  ("FABs"),  wines, 
spirits and minerals, gaming  machines and guest ales  are available in  every 
new agreement. Where circumstances  have been compelling  to both parties,  we 
have been able to agree completely free-of-tie terms. This suite of  available 
options ensures that all publicans' needs can be met, whether at the time of a
new agreement, or in order to sustain and evolve an existing relationship.

Our evolution of the traditional pub tenancy agreement, developed and trialled
successfully as part of Project Beacon,  has been further extended during  the 
year. A  greater  level  of  direction and  support  from  us  provides  both 
experienced and inexperienced self-employed publicans with the opportunity  to 
work with us in a new  and innovative way. Our comprehensive support  packages 
include flexible start-up arrangements, industry-leading training,  upweighted 
marketing support  and strong  financial  discipline. Our  regional  managers 
provide commercial  insight  and work  in  partnership with  the  publican  to 
develop the most appropriate retail proposition to compete sustainably in  the 
local market place.

We have increased the number of  outlets operating under the Beacon format  to 
254 (2011:  90)  and are  encouraged  by  their results.  They  are  typically 
smaller, wet-led pubs with an average  net income of around £35,000 but  which 
have delivered significantly improved  net income when  compared to the  three 
months prior to conversion. Aligned with our successful disposal programme, we
believe there is a natural limit to the number of our pubs that would  benefit 
from this particular product offer and method of operation and now  anticipate 
a total population  of around  300 pubs  to operate  to this  format. We  are 
extending the lessons learnt from Beacon to develop other concepts where food,
sport or family are the more central elements of the pub offer, and we already
have one trial site successfully operating a carvery concept.

Selling smarter

Our Commercial team, under  the guidance of our  new commercial director,  has 
developed our thinking to optimise income  by selling in smarter ways  through 
our product offer, our pub offer and our service offer.

· Product offer

Development of our product offer  will include initiatives to extract  greater 
value from the increasing importance of food, entertainment and technology  to 
the appeal  of  our  pubs in  their  local  markets. We  are  progressing  our 
e-commerce plans  to  enable  online  order capture  which  will  enhance  our 
capability in product up-selling and tele-marketing. Key to the development of
the product offer  is our relationship  with suppliers which  continues to  be 
strong.  We  will  work   with  our  suppliers   to  identify  margin   growth 
opportunities and target product  mix and innovations  that bring benefits  to 
our publicans and to our income.

· Pub offer

Alongside our product offer we already provide an extensive range of marketing
support activity to  our publicans  to allow them  to service  the demands  of 
their customers  and  to  compete  effectively in  their  chosen  market.  For 
example, in cask ale, which now represents  19% of all beer sales volumes,  we 
source 1,520  brands from  457 brewers,  including 437  members of  SIBA,  who 
deliver their products directly  to participating pubs, maintaining  important 
relationships between local  producer and  publican and enabling  our pubs  to 
differentiate their drinks range from  their competitors. We are  implementing 
quarterly marketing campaigns that are events-led and category focussed  which 
are supported  by  comprehensive marketing  materials,  the resources  of  our 
partner suppliers and of course our own regional teams.

· Service offer

Our training solutions have recently been enhanced to include a "Building your
Business" programme which is designed to enable existing and new publicans  to 
improve footfall and spend  per head. Further training  was provided in  such 
areas as  social  networking  and  media marketing  skills  as  well  as  more 
traditional business management activities.

We provide a wide variety of  support packages to ETI publicans enabling  them 
to secure  essential  services  which  are  both  cost-effective  and  legally 
compliant. Our Health  & Safety Management  Solution, heating, cellar  cooling 
and boiler  maintenance  packages have  now  been  taken up  by  thousands  of 
publicans at  a cost  materially less  than  would be  available in  the  open 
market. We  continue to  utilise our  purchasing leverage  and  organisational 
capabilities to access beneficial purchasing terms for dry goods, consumables,
utilities and other  merchant services, securing  significant savings for  our 

During the year we concluded a trial of Vianet iDraught bar management systems
in our  pubs, providing  real  benefits to  publicans in  controlling  pouring 
yields, beer quality and cost management. We have subsequently made around 450
installations of the iDraught  system into our estate  in the year,  alongside 
which we are also increasing the  provision of EPOS Smart Till systems,  where 

Exceptional local support

Our regional managers are at the  core of the commercial relationship  between 
us and our publicans and during  2012 we have invested in additional  resource 
to enable these teams to spend more time directly engaging with our  publicans 
in order  to understand  their needs  and to  help provide  business  building 

At a time when the role of great publicans at the heart of their community has
never been so important, we also set  out to recognise the many publicans  who 
add so much  more to their  communities than simply  serving quality food  and 
drink. We  are investing  £1  million over  the next  ten  years to  fund  our 
Community  Hero  Awards   which  have  been   established  to  celebrate   the 
contribution of publicans who have such  an impact on the fabric and  cohesion 
of their  communities. From  the many  deserving nominations  throughout  our 
estate, 18 regional  awards were  made, and the  national award  for 2012  was 
presented to our publicans at The Hare Inn in Leighton Buzzard, who proved  to 
be community heroes  in so  many different  ways, organising  local events  to 
benefit veterans and the homeless, and inviting local teams, clubs, committees
and other groups to use the pub as a regular meeting place.


£63 million spent enhancing the quality of our freehold estate

Our estate now comprises 6,060 properties  with a book value of £4.3  billion. 
The property portfolio comprises 5,902  trading pubs and 158 properties  which 
are alternative use  outlets or  properties permanently closed  or trading  on 
short term agreements pending disposal.  The estate is predominantly  freehold 
with 99% of the value of the  estate held as freehold or quasi-freehold  (long 
term leases on peppercorn rents).

                                      No. Total value
Portfolio as at 30 September 2012
                                  of pubs          £m
Current Estate                                     

- Freehold and finance leases   5,638       4,240

- Operating leases                264          11
                                    5,902       4,251

- Freehold and finance leases     148          42

- Operating leases                 10           -
TOTAL                               6,060      4,293*

* Represented by total PPE  (£4,259m) excluding other assets (£23m),  together 
with non-current  assets held  for  sale (£46m)  and operating  lease  premium 

The quality of  our pub estate  is critical  to the success  of our  business, 
attracting the best publicans and providing  a platform for them to invest  in 
the long term profitability of their business. Property condition is a  shared 
responsibility between ourselves and  our publicans and  we have continued  to 
invest in enhancing  the quality  of the estate  with £63  million of  capital 
investment during the year.  This investment is  often made working  alongside 
our publicans, who  will additionally  invest in facilities  and fixtures  and 
fittings, to reposition the pub for long  term growth. We aim to increase  the 
proportion of our capital investment in growth driving initiatives and plan to
invest a total of £60 million in the coming year.

£208 million raised from successful programme of pub disposals

Total net proceeds received from our successful disposal programme in the year
to 30 September 2012 amounted to  £208 million. We disposed of 301  properties 
in the year, of which 199  were unsustainable pubs generating net proceeds  of 
£67 million and  102 were  exceptional properties generating  net proceeds  of 
£117 million at an  average multiple of  14 times income.  A further 17  were 
sold as a sale  and leaseback package  for net proceeds of  £24 million at  an 
average rental yield of 6.9%.

We have reported a net profit on disposal of property, plant and equipment  of 
£33 million in the year (2011: £41 million) after writing down those pubs that
were moved to assets held  for resale by £25  million (2011: £76 million),  of 
which £17 million was charged to the  income statement in the year (2011:  £55 
million). We have, in addition, written down the value of pubs moved to assets
held for resale but  not yet disposed  by £36 million  (2011: £23 million)  of 
which £27 million (2011: £18 million)  was charged to the income statement  in 
the year.

We will continue to dispose of unsustainable pubs as we enhance the quality of
our retained  estate and  we will  also capture  opportunities to  dispose  of 
exceptional properties where we can realise cash proceeds above book value and
at healthy multiples of income. We  would not expect to complete further  sale 
and leaseback transactions as we wish to preserve the largely freehold  nature 
of our estate. Total disposal proceeds for  the year to 30 September 2013  are 
expected to be in the region of £150 million of which £40 million is  expected 
from our Unique estate.

Current pub valuations

Our  pub  estate  is  valued  every  year,  analysing  not  only  the  current 
performance of  every pub  but also  its future  potential. The  valuation  is 
carried out in part by independent valuers  and in part by our in-house  team, 
with the end result bench-marked  and reviewed for consistency. The  valuation 
has confirmed  that whilst  the  value of  top  quality pubs  remains  strong, 
evidenced in part by our experience from the exceptional property disposals in
the year, there is continuing weakness in demand for pubs in poorer  locations 
and with less potential. Across  the market, there is  a serious lack of  bank 
lending to support  those who  wish to buy  their own  pubs, highlighting  the 
importance of the  leased and  tenanted model in  providing opportunities  for 
entrepreneurs who wish to build a pub business of their own.

As a result  of this  annual review,  we have written  down the  value of  the 
current estate  by £105  million, a  2% reduction  to £4.3  billion, with  £83 
million charged  to the  Income Statement  and £22  million reflected  in  the 
revaluation reserve.


We have a long  term, secure, flexible and  tax efficient financing  structure 
comprising bank borrowings,  securitised bonds and  corporate bonds.  Despite 
the continued economic challenges  we have maintained  strong cash flows  from 
operating activities, as well as generating £208 million net proceeds from the
disposal of pubs in the  year, which has enabled us  to reduce net debt at  30 
September 2012 to £2.7 billion compared to £3.0 billion at last year end.

Bank borrowings reduced and availability extended to 2016

At 30 September 2012 our drawn bank  borrowings net of cash were £310  million 
(2011: £446 million), a reduction of  £136 million during the financial  year. 
The strong cash  generation in the  year has  enabled us to  repay and  cancel 
tranche B of the existing  bank facilities. Consequently any restrictions  on 
returning cash to shareholders that applied whilst tranche B was in place have
been removed. The current  available bank facility  of £389 million  comprises 
entirely of tranche A debt which expires in December 2013.

On 1 June 2012 we  announced a new £220  million Forward Start Facility  which 
will commence on expiration of the  existing facilities in December 2013.  The 
new facility is committed to 15 December 2015 (Facility A: £70 million) and 15
June 2016 (Facility B: £75 million  and Facility C: £75 million). The  initial 
margin over Libor  commences at  5.0% on  Facility A  and 4.5%  over Libor  on 
Facilities B  and C.  The  financial covenants  include  net debt  to  EBITDA, 
interest cover  and total  property asset  cover  at the  same levels  as  the 
existing facility  and  a  fixed asset  cover  of  1.33 times.  There  are  no 
restrictions upon  our ability  to  pay dividends.  In  addition there  is  an 
incremental interest  charge  of  100bps  on  £220  million  of  the  existing 
facilities during the period to December 2013.

Extending the  availability  of  bank  facilities through  to  June  2016  has 
provided us with the funding security  and the time to effectively manage  our 
strategy of bank debt reduction which has seen us reduce facilities from  £1.1 
billion in 2008 to the new level of £220 million by 2013.

Securitised bonds are long term, manageable and efficient

During the  year we  have prepaid  and cancelled  £116 million  of the  Unique 
securitised bonds  leaving £1,320  million outstanding  at the  year end.  The 
bonds amortise over a period to 2032  and attract an interest rate of 5.7%  to 
7.4%.  At  30  September  2012  the  Group  was  £124  million  ahead  of  the 
amortisation schedule  of  the  "A  class"  securitised  bonds  through  early 
repayment and market purchases.

We have now repaid and cancelled last year's total outstanding balance of  £51 
million of the Unique floating rate A2N notes meaning they have been repaid  a 
full year ahead of schedule leaving only fixed rate notes outstanding.

In addition we have purchased and cancelled £63 million Unique A4  securitised 
bonds in the year at an average discount of 20% of nominal value. We have also
acquired and cancelled £2 million Unique A3 securitised bonds at a discount of
17% of  nominal value.  These  purchases represent  the planned  programme  of 
purchase and cancellation of Unique "A class" bonds that will keep us one year
ahead of  the  scheduled  debt  profile. No  further  material  purchases  are 
required  although  we  will  continue   to  monitor  the  bond  markets   for 
opportunities to capture value.

Corporate bonds are non-amortising and asset backed

The £1,185  million of  corporate bonds  are non-amortising,  secured  against 
ring-fenced portfolios of freehold  pubs and attract  fixed rates of  interest 
averaging approximately  6.5% with  the next  scheduled maturities  being  £60 
million in February 2014 and £600 million  in March 2018. Whilst we will  have 
the resources to repay  the £60 million  bond due in 2014  from cash flow,  we 
will explore the  opportunity of  extending the  term of  this instrument.  We 
would expect to  refinance the  £600 million  bond due  in 2018  at or  before 
maturity, bearing in mind  that it will  always be secured  on a portfolio  of 
pubs with an  up-to-date valuation  of £1 billion  and interest  cover of  two 

The progress we have made during the year with regard to our funding  position 
has been reflected  in increased  bond market  confidence. We  have seen  the 
average price of the Unique bonds increase from 65p to 80p over the 12  months 
to September 2012 and the ETI corporate  bonds have increased from 69p to  81p 
during the same period, in aggregate representing a 21% improvement across all


It is reassuring for the whole industry that the Government remains  committed 
to self-regulation in the landlord-tenant  relationship. We have continued  to 
work with representative  bodies of  both companies and  publicans to  further 
evolve the Industry Framework Code of Practice in line with commitments  given 
to the Department  for Business, Innovation  and Skills. Key  elements of  the 
self-regulatory regime  are  the  low  cost  and  easily  accessible  services 
provided by  the  Pub Independent  Rent  Review  Scheme (PIRRS)  and  the  Pub 
Independent Conciliation  and  Arbitration  Service  (PICAS).  PIRRS  provides 
publicans with independent  determination of rent  at the time  of a  cyclical 
rent review,  while PICAS  provides  a mechanism  for dispute  resolution  and 
remedy. We  will continue  to extensively  promote the  availability of  these 
services to publicans.


We complete the 2012 financial year in good shape, having made progress in
many areas and having invested significant sums into the quality of our estate
and our internal resources to ensure that we are well placed to tackle the
continuing volatility and challenge of the current market.

We are confident that the quality of our pub estate, the flair and resilience
of our publicans and the skills and commitment of our team will continue to
deliver solid results, whatever the market conditions. We are now focused on
returning the business to growth, through a number of initiatives that we
believe will continue to generate significant cash flows which we will use to
reduce our debts and deliver value for shareholders.

We intend to issue an Interim Management Statement on 31 January 2013.

G E Tuppen CBE

20 November 2012

Group Income Statement

for          the          year           ended          30           September 

                                   2012                              2011

                     Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total

               Notes           items       items                 items       items
                                  £m          £m    £m              £m          £m    £m
Revenue               692           -   692             711           -   711
Cost of sales                  (318)           - (318)           (312)           - (312)
Gross profit                     374           -   374             399           -   399
Administrative                  (34)         (4)  (38)            (33)         (2)  (35)
EBITDA ^#                        340         (4)   336             366         (2)   364
Depreciation                    (14)           -                  (14)           -
amortisation                                      (14)                              (14)
Operating                        326         (4)   322             352         (2)   350
Profit on sale     4
of property,
plant and
equipment                          -          33    33               -          41    41
Goodwill           5
allocated to
disposals                          -        (18)  (18)               -        (15)  (15)
Net profit on
sale of
plant and
equipment                          -          15    15               -          26    26
Movements in       6
the valuation
of the pub
estate and
related assets                     -       (127) (127)               -       (191) (191)
Total finance                  (189)           - (189)           (195)         (4) (199)
Gain on                            -          13    13               -           -     -
purchase of
own debt
Net finance
costs              7           (189)          13 (176)           (195)         (4) (199)
Profit/(loss)                    137       (103)    34             157       (171)  (14)
before tax
Taxation         8,9            (35)          45    10            (40)          78    38
after tax
to members of
the Parent
Company                          102        (58)    44             117        (93)    24
Earnings per
Basic             10                              8.8p                              4.8p
Basic Diluted     10                              8.8p                              4.8p
Adjusted *        10           20.5p                             23.4p
Adjusted          10           20.4p                             23.4p
diluted *
^# Earnings before interest, tax, depreciation and amortisation                    
* Excludes exceptional items

Statement of Comprehensive Income

for the year ended 30 September 2012

                                                                     2012 2011
                                                                       £m   £m
Profit for the year                                                    44   24

Other comprehensive income:                                               (56)

Unrealised deficit on revaluation of pub estate
Movement in deferred tax liability related to revaluation of pub
estate                                                                  6   20
Write down of non-current assets held for sale                       (18) (26)
Actuarial loss on defined benefit pension scheme                      (1)  (1)
Movement in cash flow hedge reserve                                          3
Restatement of deferred tax liability related to the revaluation of
pub estate for change in UK tax rate                                        25
Other comprehensive income for the year net of tax                   (18) (35)
Total comprehensive income/(loss) for the year attributable to
members of the Parent Company                                          26 (11)

Group Balance Sheet

as at 30 September 2012

                                            Notes    2012    2011
                                                       £m      £m
Non-current assets
Goodwill                                              359     377
Intangible assets: operating lease premiums            11      12
Property, plant and equipment                  11   4,259   4,572
                                                    4,629   4,961
Current assets
Assets held for sale                                    3       5
Trade and other receivables                            55      64
Cash                                                  125     114
                                                      183     183
Non-current assets held for sale               12      46      27
Total assets                                        4,858   5,171
Current liabilities
Trade and other payables                            (180)   (205)
Current tax payable                                  (16)    (16)
Financial liabilities                                (95)    (42)
Provisions                                            (7)     (6)
                                                    (298)   (269)
Non-current liabilities
Financial liabilities                             (2,767) (3,075)
Provisions                                            (3)     (3)
Deferred tax                                        (364)   (426)
Pension scheme                                        (1)     (1)
                                                  (3,135) (3,505)
Total liabilities                                 (3,433) (3,774)
Net assets                                          1,425   1,397
Called up share capital                                14      14
Share premium account                                 486     486
Revaluation reserve                                   807     859
Capital redemption reserve                             11      11
Merger reserve                                         77      77
Treasury share reserve                              (227)   (227)
Other reserve                                        (20)    (23)
Cash flow hedge reserve                                 -       -
Profit and loss account                               277     200
Enterprise Inns shareholders' equity                1,425   1,397

Group Statement of Changes in Equity

at 30 September 2012

                Share   Share Revaluation    Capital  Merger Treasury   Other    Cash  Profit Total
                      premium     reserve redemption reserve    share reserve    flow     and
              capital account                reserve          reserve           hedge    loss
                                                                              reserve account
                   £m      £m          £m         £m      £m       £m      £m      £m      £m    £m
At 30
2010               14     486         922         11      77    (227)    (23)     (3)     150 1,407
Profit for
the year            -       -           -          -       -        -       -       -      24    24
income              -       -        (37)          -       -        -       -       3     (1)  (35)
income              -       -        (37)          -       -        -       -       3      23  (11)
Transfer of
surplus             -       -        (26)          -       -        -       -       -      26     -
Share based
recognised in
profit              -       -           -          -       -        -       -       -       1     1
At 30
2011               14     486         859         11      77    (227)    (23)       -     200 1,397
Profit for
the year            -       -           -          -       -        -       -       -      44    44
income              -       -        (17)          -       -        -       -       -     (1)  (18)
income              -       -        (17)          -       -        -       -       -      43    26
Transfer of
surplus             -       -        (35)          -       -        -       -       -      35     -
Transfer of
shares from
Benefit Trust
to Share
Plan                -       -           -          -       -        -       3       -     (3)     -
Share based
recognised in
profit              -       -           -          -       -        -       -       -       2     2
At 30
2012               14     486         807         11      77    (227)    (20)       -     277 1,425

Group Cash Flow Statement

for the year ended 30 September 2012

                                                         2012    2011
                                                           £m      £m
Cash flow from operating activities
Operating profit                                          322     350
Depreciation and amortisation                              14      14
Share-based expense recognised in profit                    2       1
Decrease in receivables                                     9       -
Decrease in payables                                     (25)    (12)
Increase in provisions                                      1       1
Decrease/(increase) in current assets held for sale         2     (1)
                                                          325     353
Tax paid                                                 (29)    (27)
Net cash flows from operating activities                  296     326
Cash flows from investing activities
Payments made on improvements to public houses           (61)    (71)
Payments to acquire other property, plant and equipment   (2)     (1)
Receipts from sale of property, plant and equipment       208     238
Net cash flows from investing activities                  145     166
Cash flows from financing activities
Interest paid                                           (188)   (192)
Interest received                                           1       1
Issue costs of long-term loans                            (8)     (2)
Cancellation and restructuring of interest rate swaps     (3)     (6)
Payments to acquire own debt                             (52)       -
New loans                                                 160   1,134
Repayment of loans                                      (340) (1,421)
Net cash flows from financing activities                (430)   (486)
Net increase in cash                                       11       6
Cash at start of year                                     114     108
Cash at end of year                                       125     114


        1. Status of information

The financial information for the years  ended 30 September 2012 and 2011  are 
based on  the  statutory  accounts  for  those  years.  The  auditors  issued 
unqualified opinions on the statutory accounts  for those years which did  not 
include a reference to any matters to which the auditors drew attention by way
of emphasis  without  qualifying  the  report and  which  did  not  contain  a 
statement under  s498(2) or  (3) of  the Companies  Act 2006.  The  statutory 
accounts for  the year  ended 30  September 2011  have been  delivered to  the 
Registrar of  Companies.  The  statutory  accounts  for  the  year  ended  30 
September 2012 have not yet been delivered to the Registrar of Companies. The
information contained in  this announcement was  approved by the  Board on  19 
November 2012.

        2. Accounting policies and basis of preparation

These results have  been prepared in  accordance with International  Financial 
Reporting Standards (IFRS) as adopted by the European Union.

These preliminary  financial statements  have been  prepared on  a  consistent 
basis using the accounting policies set out in the Annual Report and  Accounts 
for the year ended 30 September 2011.

The directors have made enquiries into  the adequacy of the Group's  financial 
resources including  a  review  of  its  budget,  forecasts  and  medium  term 
financial plan,  including  a review  of  cash flow  forecasts  and  financial 
covenant calculations, and have  a reasonable expectation  that the Group  has 
adequate resources to  continue in operational  existence for the  foreseeable 
future. For this  reason the  directors continue  to adopt  the going  concern 
basis of accounting in preparing the financial statements.

The Group has  elected to classify  certain items as  exceptional and  present 
them separately on the  face of the Income  Statement. Exceptional items  are 
classified as those which are separately identified by virtue of their size or
nature to allow  a full  understanding of  the underlying  performance of  the 
Group and are explained further in notes 3 to 8 below:

3. Exceptional items recognised in operating profit

An exceptional  charge of  £4 million  (2011: £2  million) has  been  incurred 
relating to reorganisational costs and costs incurred in respect of regulatory

4. Profit on sale of property, plant and equipment

                                                 2012 2011
                                                   £m   £m
Normal disposals                                   42   23
Profits on sale of property, plant and equipment
Losses on sale of property, plant and equipment  (10) (12)
Sale and leaseback disposals                       32   11
Profits on sale of property, plant and equipment
                                                    1   30
Profit on sale of property, plant and equipment    33   41

During the year 301 pubs (2011: 466 pubs) and various other plots of land with
a book value of  £154 million (2011: £95  million) were sold generating  gross 
proceeds of £193 million (2011: £117  million) which, after taking account  of 
disposal costs  of £7  million (2011:  £11 million),  resulted in  an  overall 
profit of £32 million (2011: £11 million).

In addition to the above,  17 pubs (2011: 105 pubs)  with a book value of  £23 
million (2011:  £102  million) were  sold  as part  of  the Group's  sale  and 
leaseback programme.  These  pubs generated  gross  proceeds of  £24  million 
(2011: £133 million) which, after  taking account of disposal costs,  resulted 
in a profit over  book value of  £1 million (2011:  £30 million). These  pubs 
were immediately leased back by the Group and are now classified as  operating 

5. Goodwill allocated to disposals

In accordance with IAS 36 'Impairment  of Assets' purchased goodwill has  been 
allocated to pubs disposed of, based on the relative value of the disposal  to 
pubs retained. Accordingly goodwill  of £18 million  (2011: £15 million)  has 
been allocated to  the 318 pubs  disposed of  during the year  (2011: 571  pub 

6. Movements in valuation of the pub estate

                                                                    2012  2011
                                                                      £m    £m
Movements in property, plant and equipment from revaluation of pub          
estate (see note 11)
                                                                    (83) (117)
Movements in intangible assets from revaluation of pub estate          -   (1)
Write down of non-current assets held for sale to fair value  less          
costs to sell (see note 11)
                                                                    (44)  (73)
                                                                   (127) (191)

A valuation of  the entire pub  estate excluding non-current  assets held  for 
sale has been carried  out at the  year end. The result  of the valuation  is 
that the pub estate, excluding non-current assets held for sale, has fallen by
£105 million.  Of this  write-down, £22  million has  been debited  to  Other 
Comprehensive Income and £83 million has been charged to the Income  Statement 
as an exceptional item, reflecting pub values which have fallen below historic

In respect of assets transferred to non-current assets held for sale, a  total 
write-down of £62 million has been recorded. Of this write-down, £18  million 
has been  debited to  Other  Comprehensive Income  and  £44 million  has  been 
charged to the  Income Statement  as an exceptional  item. At  the year  end, 
there are 159 pubs (2011: 95 pubs) included within non-current assets held for
sale which have been recorded at the  lower of book value and fair value  less 
costs to sell.

7. Exceptional finance cost

                                                2012 2011
                                                  £m   £m
Movement in fair value of financial instruments    1    2
Reclassification from cash flow hedge reserve      -  (3)
Other interest payable and finance costs         (1)  (3)
Gain on purchase of own debt                      13    -
                                                  13  (4)

Under IFRS, interest  rate swaps are  revalued to fair  value at each  Balance 
Sheet date and the movement is recognised in the Income Statement unless hedge
accounting is adopted.  The movement  in the fair  value of  the swaps  where 
hedge accounting is not applied is shown as an exceptional item.

The exceptional other interest payable and  finance costs in the current  year 
of £1 million  relates to interest  accrued on tax  provisions. In the  prior 
year the  charge of  £3  million principally  relates to  prospective  finance 
arrangement fees written off in the period.

During the year  ended 30 September  2012, £63 million  Unique A4  securitised 
bonds were purchased  and cancelled at  an average purchase  price of 80p  for 
each £1  of nominal  value and  £2 million  Unique A3  securitised bonds  were 
repurchased and cancelled at an  average price of 83p  for each £1 of  nominal 
value generating a gain of  £13 million, shown in  the Income Statement as  an 
exceptional item.

8. Exceptional taxation

Under IFRS, a deferred tax liability has been recognised on the Balance  Sheet 
relating to the pub estate. On transition to IFRS, the Group elected to apply
IFRS 3 retrospectively  to acquisitions from  1 January 1999  which led to  an 
increase in goodwill in respect of this deferred tax of £330 million. As this
pre-acquisition liability changes due to  capital gains indexation relief  and 
changes in  the rate  of UK  tax, the  movement is  recognised in  the  Income 
Statement. The impact of capital gains indexation relief is calculated  based 
on the movement in the  Retail Price Index (RPI).  This credit of £4  million 
has been classified as an exceptional item due to its size and because it does
not relate to any income or expense recognised in the Income Statement in  the 
same period.

A deferred tax credit of  £21 million relating to  the revaluation of the  pub 
estate and net profit on disposals of pubs recognised in the Income  Statement 
also reduces the deferred tax liability relating to the pub estate.

The UK Government reduced the  rate of corporation tax by  2% from 26% to  24% 
effective from 1  April 2012 and  announced its intention  to reduce the  rate 
further by 1% to 23% by  1 April 2013 and an additional  1% to 22% by 1  April 
2014. The change in  corporation tax from 24%  to 23% has been  substantively 
enacted and therefore the deferred tax assets and liabilities included  within 
these results have been based on the reduced rate of 23%. An exceptional  tax 
credit of £16 million has been  recognised in relation to this restatement  of 
deferred tax balances to 23% at 30 September 2012.

An exceptional tax credit of £4 million has been recognised in relation to all
other exceptional items in  the Income Statement.  The total exceptional  tax 
credit is therefore £45 million.

The forecast effect of the proposed reductions in the corporation tax rate  by 
2014 would be to decrease the net deferred tax liability by £15 million.

9. Taxation
The pre-exceptional tax charge of £35 million (2011: £40 million) for the year
equates to an effective tax rate of 25.5% (2011: 25.5%). The effective tax
rate does not include the effect of exceptional items.

10. Earnings per Ordinary Share

The calculation of basic earnings per ordinary share is based on the profit of
£44.1 million (2011:  profit of  £24.0 million)  and on  499.4 million  (2011: 
499.0 million) shares being  the weighted average number  of equity shares  in 
issue during  the year  after  excluding shares  held  by trusts  relating  to 
employee share options and shares held in treasury.

Adjusted  earnings  per  share,  which  the  directors  believe  reflects  the 
underlying performance of  the Group,  is based  on profits  adjusted for  the 
effects of exceptional  items, net  of tax,  of £102.2  million (2011:  £117.1 
million) and on 499.4 million (2011: 499.0 million) shares being the  weighted 
average number  of equity  shares in  issue during  the year  after  excluding 
shares held by trusts  relating to employee share  options and shares held  in 

Diluted earnings  per share  is based  on the  profit for  the year  of  £44.1 
million (2011: profit of £24.0 million) and adjusted profit of £102.2  million 
(2011: £117.1 million)  and on  500.2 million (2011:  499.8 million)  ordinary 
shares being the weighted average number of equity shares in issue during  the 
year adjusted for dilutive ordinary shares relating to employee share options.

11. Property, plant and equipment

                                       Licensed land   Landlords'  Other Total
                                       and buildings fixtures and assets
                                                  £m           £m     £m    £m
Cost or valuation
At 1 October 2011                              4,346          245     36 4,627
Additions                                         30           29      3    62
- Recognised in the Statement of             (22)            -      -  (22)
Comprehensive Income
- Recognised in the Income Statement            (83)            -      -  (83)
Write down to fair value less costs to
- Recognised in the Statement of                (18)            -      -  (18)
Comprehensive Income
- Recognised in the Income Statement            (44)            -      -  (44)
Net transfers to non-current assets            (178)         (14)      - (192)
held for sale
Net transfers from current assets held             -            3      -     3
for sale
Disposals                                          -          (6)    (4)  (10)
At 30 September 2012                           4,031          257     35 4,323
At 1 October 2011                                 12           29     14    55
Charge for the period                              2            9      2    13
Net transfers to non-current assets                -          (2)      -   (2)
held for sale
Net transfer to current assets held                -            2      -     2
for sale
Disposals                                          -            -    (4)   (4)
At 30 September 2012                              14           38     12    64
Net book value
At 30 September 2012                           4,017          219     23 4,259
At 30 September 2011                           4,334          216     22 4,572

12. Non-current assets held for sale

                                                 2012  2011

                                                   £m    £m

At 1 October                                       27    30
Net transfer from property, plant and equipment   190   187
Write-down to fair value less costs to sell       (2)   (1)
Disposals                                       (169) (189)
At 30 September                                    46    27
Property, plant and equipment                      46    27

When assets are identified for disposal and meet the criteria within IFRS 5
they are reclassified from property, plant and equipment to non-current assets
held for sale and are valued at the lower of book value and fair value less
costs to sell. At the end of the year non-current assets held for sale
includes 159 pubs (2011: 95 pubs) which are expected to be sold within the
next year.

13. Additional cash flow information

a) Reconciliation of net cash flow to movement in net debt

                                                                  2012    2011
                                                                    £m      £m
Increase in cash in the year                                        11       6
Cash outflow from change in debt                                   232     287
Issue costs of new long term loans                                   8       2
Change in net debt resulting from cash flows                       251     295
Amortisation of issue costs and discounts/premiums on
long-term loans                                                    (7)     (6)
Gain on purchase of own debt                                        13       -
Amortisation of securitised bonds                                    5       5
Change in fair value of interest rate swaps                          4       8
Movement in net debt in the year                                   266     302
Net debt at start of year                                      (3,003) (3,305)
Net debt at end of year                                        (2,737) (3,003)

b) Analysis of net debt

                                                  2012    2011
                                                    £m      £m
Bank borrowings                                  (335)   (464)
Corporate bonds                                (1,185) (1,185)
Securitised bonds                              (1,320) (1,436)
Gross debt                                     (2,840) (3,085)
Cash                                               125     114
Underlying net debt                            (2,715) (2,971)
Capitalised debt issue costs                       21      20
Fair value adjustments on acquisition of bonds    (39)    (44)
Fair value of interest rate swaps                    -     (4)
Finance lease payables                             (4)     (4)
Net debt                                       (2,737) (3,003)
Balance sheet:
Current financial liabilities                     (95)    (42)
Non-current financial liabilities              (2,767) (3,075)
Cash                                               125     114
Net debt                                       (2,737) (3,003)

Underlying net debt represents  amounts repayable to  banks and other  lenders 
net of cash retained in the business.  Cash includes £100 million held in  the 
securitised Unique sub-group, of  which £65 million is  held in a  securitised 
Reserve account.


Principal risks and uncertainties

This section  highlights  the principal  risks  and uncertainties  facing  the 
Group. The Group is exposed to a variety of financial, operational,  economic 
and regulatory risks and uncertainties. This is not an exhaustive analysis of
all the risks the Group  may face: some risks have  not been included in  this 
section on the basis that they are  not considered to be material. The  Group 
has formal  management  processes in  place  to identify  and  evaluate  these 
risks. Some of the risks are external and therefore beyond our control.  The 
Board formally  reviews  these  material  risks and  ensures  that  these  are 
appropriately managed by the executive  management team and the Board  retains 
overall responsibility for the Group's risk management framework.

The internal audit function provides assurance  to the Audit Committee on  the 
effectiveness of  the  internal  control procedures.  This  is  done  through 
completion of the annual internal audit plan, which takes into account current
business risks. The Board has delegated to the Audit Committee responsibility
for reviewing  annually  the  overall effectiveness  of  the  risk  management 

In summary the principal risks and uncertainties are:

Financial risks

The Group has a flexible financing structure comprising bonds issued from  the 
Unique  securitisation  (securitised   bonds),  corporate   bonds  issued   by 
Enterprise Inns plc  (Enterprise corporate  bonds) and  bank borrowings.  The 
availability of funding or changes in interest rates may cause adverse effects
on the Group's liquidity and earnings.

Mitigation  process:  The  Board  regularly  reviews  detailed  financial  and 
covenant forecasts and closely monitors the on-going debt reduction  programme 
to ensure there is sufficient headroom on funding and the financial covenants.

Operational risks

Operational risks are present in the Group's business including the risk of  a 
failure of our  information technology  systems or  our supply  chain and  our 
reliance on our employees and publicans.

Mitigation  process:  The  Group  adopts  a  number  of  policies,   including 
maintaining a  rigorous  business  continuity  plan,  adopting  a  partnership 
approach with  key  suppliers and  ensuring  robust recruitment  and  training 
programmes for employees and publicans to minimise operational risks. 

Economic risks

The Group's business operations are sensitive to economic conditions and these
conditions have  had an  adverse  impact on  consumer spending  affecting  our 
publicans and suppliers with resulting  cash flow implications for the  Group. 
Valuations of the Group's property  portfolio could be affected by  general 
economic conditions with  resulting downwards  pressure on  maintainable 
income streams and the ability to meet key financial covenants.

Mitigation process: The Group invests in developing and improving our pubs  to 
ensure that we remain competitively placed in the market. The Board regularly
monitors and reviews the performance and valuation of the estate with external
valuers and advisers.

Regulatory risks

Government regulation in  our business  sector could  impact on  the tied  pub 
model, our  operational  strategy and  our  relationship with  our  publicans. 
Reputational  risk  arises  from  the   possibility  of  legal  or   statutory 
proceedings, including health and  safety incidents. Finally  there is a  risk 
that changes to  the licensing  regulations relating  to the  sale of  alcohol 
could have an impact on the Group's business and the ability of our  publicans 
to    operate    their    pubs. 

Mitigation process: The  Group is committed  to the tied  pub model and  works 
closely with a number  of stakeholders to support  the pub sector, evolve  the 
tied pub  model and  ensure it  operates an  appropriate Code  of Practice  to 
promote a mutually beneficial relationship with its publicans.

                     This information is provided by RNS
           The company news service from the London Stock Exchange


FR BKCDBCBDDQDD -0- Nov/20/2012 07:00 GMT
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