Enterprise Inns warns earnings under pressure

By Matthew Scuffham

LONDON (Reuters) - Enterprise Inns (ETI.L), Britain's second-biggest pubs group, said on Tuesday its profit was under pressure from falling beer sales and the cost of helping struggling tenants, sending its shares plummeting.

"The continuing declines in on-trade beer volumes, together with increased levels of assistance to licensees who are having to cope with difficult trading conditions, has inevitably put some pressure on group EBITDA (underlying earnings)," Enterprise said in a trading update covering the 42 weeks to July 19.

Enterprise has about 7,700 tenanted pubs.

Chief Executive Ted Tuppen told Reuters the group will need to invest 7 million to 8 million pounds to help hundreds of licensees whose trade has been hit by last year's smoking ban, rising costs, declining consumer spending, and cheap alcohol prices in supermarkets.

Shares in Enterprise, which have underperformed the FTSE All Share Travel & Leisure Index .FTASX5750 by 8 percent since the start of the year, were down 14 percent to 297 pence at 11:53 a.m.. Rival Punch Taverns (PUB.L) was 12 percent down at 233 pence.

Investec analyst Matthew Gerrard said the update was "relatively vague and reads more negatively than anticipated" and lowered his pretax profit forecast to about 270.5 million pounds from 277.2 million.

"This morning's update is disappointing, especially as trading across the sector seems to have improved from a low point in April," Gerrard said.

In the first half Enterprise put more than 3.5 million pounds into its business recovery scheme, which offers pub licensees support through rent concessions and special discounts, and Tuppen said that level has increased in the second half.