Tenanted pub group Enterprise Inns (ETI) is pushing forward with its plans to mitigate the impact of the Market Rent Option (MRO) by expanding its managed business and commercial property portfolio.
The £482.6 million cap says the execution of its strategic plan is on track, sending the shares up 5.9% to 100.6p.
The number of managed pubs trading under Enterprise’s Bermondsey and Craft Union operations has increased from 16 in May to 35 and it has opened the first London pub in its Hippo Inns joint venture with leisure expert Rupert Clevely.
The group has also increased its portfolio of commercial properties from 185 sites in May to 213 sites and hiked the average annualised rental income from £53,000 to £56,000.
These measures, along with the disposal of under-performing assets and a drive to improve publican profitability, are in response to the effective abolition of the beer tie, which was announced by the government last year. The MRO allows tenants to buy their beer on the open market rather from the landlord or company that owns their pub.
Enterprise, a running Shares Play of the Week, saw like-for-like growth of 0.8% in the year ending 30 September with pre-tax profit £1 million higher at £122 million. Net debt has edged down from £2.4 billion to £2.3 billion.
‘The group’s shares have fallen by around 30% over the last six months or so and this looks a little over-done. Whilst the MRO remains unclear as to the detail and Enterprise still has to execute on what appears to be a sensible growth strategy, its shares look relatively cheap,’ says Langton Capital analyst Mark Brumby.
