Enterprise Inns blames taxes and downturn for profit warning

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The Independent Online

Britain's second-largest pub group warned that profits were under pressure from the consumer downturn, falling beer sales and financial assistance given to licensees, sending its shares plummeting 13 per cent.

Enterprise Inns' chief executive, Ted Tuppen, said the consumer downturn was having the biggest impact. "The main issue is of consumer confidence. The ordinary man on the street has less money for discretionary spending after paying for [rising] utility bills, mortgages and food. This is the first anniversary of the smoking ban, and pressure on the consumer is likely to be with us for some time."

Enterprise Inns said that declines in volumes of on-trade beer sales and more than £3.5m it gave in assistance to licensees suffering from tough trading in the first half of its financial year has put pressure on earnings before interest, taxes, depreciation and amortisation. The group declined to provide a figure for falling beer sales, but cited industry sources suggesting close to double-digit falls between April and June.

Mr Tuppen said that Enterprise Inns had already "slightly" increased the amount of assistance it gives to struggling licensees in the second half of its financial year, but stressed that these accounted for about 7 per cent of its 7,700 tenanted pubs.

He said: "An awful lot of our pubs are doing remarkably well. A substantial number are trading ahead of last year."

Mr Tuppen attacked the Government's increase in alcohol duty in the Chancellor's March Budget, saying: "It punishes the regular pub goer while having absolutely no impact on binge drinking. It is just another stealth tax."

Mr Tuppen said Enterprise Inns would decide in the autumn about converting to a real estate investment trust (Reit), considered by some to be a tax-efficient way of managing a large property portfolio. On 7 May, Enterprise Inns said that HM Revenue and Customs had confirmed it was eligible to convert to a Reit, subject to an internal reorganisation. Since then it said it had made good progress with HMRC and was in a position to seek the necessary approvals from stakeholders.

John Beaumont, an analyst at Kaupthing, said Enterprise Inn's trading statement was more cautious than expected, but remained upbeat about its Reit prospects. Mr Beaumont said: "We have assumed it will become a Reit during the fourth quarter of 2008 and on this basis – and only this basis – we are positive on the stock." Shares in Enterprise Inns fell by 46.25p to 299.5p.

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