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Interim Results 31 March 2010

Interim Results 31 March 2010. VISIT OUR WEBSITE www.enterpriseinns.com. David George Chief Financial Officer. Financial performance 6 months to 31 March 2010. EBITDA pre exceptional items £204m (H1 2009 - £226m) Net income per pub down 3% (2009 - down 8%)

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Interim Results 31 March 2010

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  1. Interim Results 31 March 2010 VISIT OUR WEBSITEwww.enterpriseinns.com

  2. David George Chief Financial Officer

  3. Financial performance6 months to 31 March 2010 EBITDA pre exceptional items £204m (H1 2009 - £226m) Net income per pub down 3% (2009 - down 8%) Profit pre tax & exceptional items £86m (H1 2009 - £104m) Profit before tax £91m (H1 2009 - £9m) Adjusted EPS 12.6p (H1 2009 - 15.3p) £135m gross proceeds from disposals, realising a profit of £32m Net debt reduced by £163m in H1 Successful refinancing of bank facility

  4. Profit & loss accountAdjusted EPS down by 18%

  5. Exceptional itemsExceptional profit of £19m

  6. EBITDAEBITDA pre exceptional £204m

  7. Estimated impact on earnings94% of income from pubs let on substantive agreements

  8. Net income per pubNet income per pub down 3%

  9. Gross margin analysisRental income impacted by business failures and disposals

  10. Cash flow statementSignificant increase in cash generation

  11. Balance sheetRobust balance sheet

  12. Debt structureAttractive three-pronged debt structure • Tax efficient • Flexible • Manageable • Secure • Low cost

  13. Debt structureUnderlying Group net debt reduced by £163m in 6 months

  14. Unique securitisationSecured bonds, ring-fenced in subsidiary • Leveraged structure at below market interest rates • Smooth amortisation profile until maturity in 2032 • £40m prepayment of floating rate notes in H1 (£151m outstanding) • Fixed rate notes: • £1,385m at 6.3% • Amortisation commences September 2013 • No concerns on financial covenants

  15. Corporate bondsSecure and effective debt instruments • £1,185m at 6.5% weighted average interest rate • Non-amortising • Ring-fenced portfolio of freehold pubs • Annual injection or withdrawal of pubs to maintain income and valuation requirements • First major refinancing of £600m in 2018

  16. Bank facilityNew forward start facility (FSF) agreed • FSF of £625m - commences May 2011 • Tranche A (£419m) expires December 2013 • Tranche B (£206m) expires December 2012 • Six monthly amortisation of £25m commences December 2011 • Initial margin of 3.5% pa • No change to financial covenants • Existing facility continues until May 2011 • £100m of facility cancelled • £275m swap at 6.66% to be cancelled

  17. Simon Townsend Chief Operating Officer

  18. Challenging conditions Recession has reinforced underlying trends • Consumer demands evolving constantly • Accelerated polarisation of pubs • Cost pressure and regulatory burden on pubs • Operating models evolving rapidly

  19. Operating performanceConditions have eased, but remain challenging Average net income per pub down 3% (2009 - down 8%) Total licensee support reduced to £7m (H1 2009 - £8m) Rate of business failures reduced Abandonments, surrender and B&T 496 (H1 2009 - 530) 422 rent reviews completed at an average annual reduction of 1.2%(H1 2009 - 311 increase of 0.6%) TMAs reduced to 84 (183 at September 2009) £3m of overhead (H1 2009 - £2m)

  20. Operating performanceFurther evidence of the benefits of pub estate quality and flexible agreements 86% of estate let on substantive agreements (83% at September 2009) Income down 2% to £216m (H1 2009 - £221m) New lettings onto substantive agreements 568 (H1 2009 - 430) Average length of licensee occupation is over 5 years Closed pubs to be reopened 91 (90 at September 2009) 1,309 formal applications (H1 2009 - 419) Overdue balances at 1.2% of turnover (1.1% at March 2009) Bad debts still low at 0.3% of turnover (H1 2009 - 0.4%)

  21. Interventionist strategies Time consuming and costly, but proving worthwhile • Non-contractual support to licensees • focused, selective and conditional (and reducing) • TMA programme • rebuilding trade to re-let (and reducing) • Business failures • recover control of assets (and reducing) • Underperforming pubs • accelerated disposals (at a profit)

  22. Evolving business model Flexible, competitive and market leading • Engagement • trade advisory services, RM training, retailer forums • Standards and process controls • disclosure, business plans, tenants’ improvements, PIRRS, Code of Practice • New RPI-linked lease agreement, 10 to 20 years with no rent reviews • Commercial development • flexible discounts • tie-release options

  23. Evolving business model New agreement from July 2010 with extensive range of negotiable options

  24. Evolving business model Summary • Additional flexibility, discounts and free-of-tie options • Mandatory standards of disclosure, professionalism and support • All new agreements from July 2010 • All existing agreement holders may opt for a new agreement • Code of practice accreditation by end of June 2010

  25. Ted Tuppen Chief Executive

  26. Challenges The questions we have asked ourselves • ETI business model: It is working and evolving • Trading in a recession: Good pubs are surviving • Pub valuations: Values are stabilising • Levels of debt: Efficient, flexible, manageable, secure and low cost

  27. Interim resultsSummary • Improving trends in a tough market • Top quality freehold estate, fairly valued  • Strong operational cash generation plus profitable disposals • Business model evolving to meet market needs • Robust and manageable financing structure in place • Doing the right things to protect long term shareholder value

  28. QUESTIONS www.enterpriseinns.com

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