So Ted Tuppen is to retire from his role as CEO of Enterprise Inns in 2014... here are his farewell remarks made to City analysts where he bigs up those he leaves behind...
“I feel like Sachin Tendulkar walking to the crease for the last time without the talent and without the adulation. So where have we got to on this journey to rehabilitation? It has been a good year after a tricky start ending with like-for-like growth in Quarter Four, a trend that’s continued in the first seven weeks of the year. You’ve heard from Simon Townsend how hard we are now working and the progress we are now making to deliver against this key like-for-like challenge for 2014. What have we achieved? Well, we have certainly dealt with Stage One. We have reduced our debts by well over £1billion with our bank overdraft now standing at just £41million net. This reduction in the level of our borrowings has been reflected in the increased value of the equity of our business and you will recall that we explained that in some charts last year – we would focus on paying down debt as we could see that creating real value for shareholders.We have successfully launched our £100million convertible bond, reducing the cash cost of our borrowings and extending the maturity thereof. We have a tax efficient structure and a manageable amortisation profile that will no longer require asset disposals to pay down debt - and that is hugely important. Getting the confidence of the market that we were going to continue to be here was probably going to be worth about £1 per share.So what next? Sustainable like-for-like growth in income per pub - we’ve done (that for) a quarter and we’ve done another seven weeks (since). But the key is to continue this, to deliver sustainable like-for-like income growth. The comparables for the coming year are reasonably helpful and all we have to do is deliver like-for-like income growth. The whole business is structured to deliver that growth and everyone in the company is aware of what we have to do to drive publican profitability and reduce the cost of business failures. Stage Two is being achieved and the sustainable bit is within reach and I think if we can deliver sustainable like-for-like income growth that ought to be worth £2 per share.To some extent we have already dealt with Stage Three. Subject to the impact of our historic disposal programme working its way out of the business over the next few years, we should now be in a position where, if we get like-for-like income growth and we efficiently recycle disposal proceeds back into the estate, we have a genuine expectation of delivering real EBITDA growth. EBITDA growth leads to additional cash generation, improving pub values, amortising debts and increasing value for shareholders. (We) reckon this ought to be worth at least £3 per share. And if you look at the share price over the last few years it’s been an interesting journey. The green line is our underlying asset value and I have to say, I’m pretty proud of the fact that during this very tumultuous, tempestuous period of the last few years we have managed to keep that green line pretty stable around about the £3 per share level. There was a moment of massive over excitement in 2006 as you can see by the black line - the level to which the share prices fell at around 25p. But the nice thing is if you just look at us getting control of things over the last three years you can see that we have moved from 88% discount to net asset value to a smaller number now. We are making real progress and we just have to continue that journey.Who is going to deliver the next part of that journey? I leave the board on 6 February and will be around for a while after that to just make sure the team are not distracted from those key operational tasks by the outcome of Vince Cable’s consultation. I have taken responsibility for dealing with that and will continue to do so. We have been building this succession infrastructure for a few years now and the board is confident that we have got it right. (Our finance director) Neil Smith has been with us for three years now, has had a tremendous impact on the business and has built real confidence amongst you and our institutions. James Croft, our property director, has been with Enterprise for ten years, first of all in finance roles. He has now been in charge of property for a couple of years and we have seen his robust approach have a very positive impact on the overall condition of the estate, through investment and enforcement, both of which are equally important. As well as driving our disposal programme and our capital expenditure programme towards a higher level of profit generation we have a very clear task - and that is to be able to use 60%, say, of our £60 million a year disposal proceeds for really driving the business forward, proper trade-generating capex. (Commercial director)Ed Cottrell, two years in, has had to deal with the collapse of WaverleyTBS and, at just the wrong time this September, had to deal with the strike and the work-to-rule by our major beer supplier, our only beer supplier. These have been very time-consuming and Ed has done a fantastic job. At the same time as dealing with these real crises, he has launched our Sky and BT entertainment packages, made available free Wi-Fi across the entire estate and, most importantly, built a team around him that will drive innovation and sales growth across the business.On the operations side, you’ll see that there won’t be a Chief Operating Officer (COO) because we have developed our three managing directors, Nick Light, Ian Ronayne and Kim Francis, to take on the roles of regional or sector COOs. So we have a COO North, a COO Midlands and a COO South. It has been their responsibility, with full understanding of the challenges, to make sure they have (created) a fully committed, skilled and effective team of divisional directors and regional managers, who completely ‘get it’ and who will deliver consistent improvement in publican ability, profitability and stability – in short, to deliver growth across their sector of the business.Finally, and most importantly, is Simon Townsend, who joined me in 1999 and joined the board in 2000 and became COO in 2006, just in time to get used to the job before the crash came. Simon has worked tirelessly and with great integrity as we have striven to keep our pubs open and our publicans profitable often in the face of ill-informed and unjustified abuse from the campaign groups who seek to change the business model for their own ends.So I am confident in that team, I wouldn’t be leaving otherwise and I am confident that I am leaving the business in good hands to carry on with out clear strategy and to deliver real value for our shareholders. The outlook? We are making progress on all fronts. I am retiring in the knowledge that Enterprise is being run by a great team of people and the whole team have real confidence in and total commitment to the continuing success of Enterprise.”
In his opening remarks this asset stripper par exellence at least has the honesty to admit he neither has the talent of Sachin Tendulkar and that his departure will no be met with adulation. I can think of many hundreds of tenants and ex-tenants of his company who will certainly not shed a tear at his departure.
But note the emphasis on sweet-talking City Analysts into accepting a share value of £3, never have I seen such a cynical attempt to manipulate a share price, one that will bring this pugnacious retiree a fortune of many millions of pounds if he cashes in at that price. For the tenants (he insists are earning some £37,000 a year from his over-rented pubs buying his over-priced beer, whilst CAMRA proved 80% of tied tenants earned considerably less) this will be of no solace, as they've probably had no spare cash to invest in Enterprise shares.
At least those in "profitable" pubs will be relieved to learn that no more disposals will be required to service Enterprise's debts and their future in their respective pubs are today just a little more secure. What will make their lives easier, fairer and more profitable will be the "distraction" of Dr Cable's consultation into the relationship between pubco/brewery landlords and their tenants, the outcome of which and the recommendations thereof are now overdue. It seems that Ted is not quite done buggering up the pub industry however, as he seems to indicate he will be sticking around to have his usual reasoned and temperate (not) say in whatever BIS comes up with.
One can only hope those who remain do concentrate on "publican profitability and stability", honour Ted's "pledge" to cap beer price increases (a bit of a joke given the eye-watering level being charged currently) even in the face of "ill-informed" campaigners who just want the over-arching principle of "no tied tenant being worse off than a free of tie tenant" which Parliament has expressed as its will in this matter.
If it weren't so painful for many Enterprise tenants this type of self-serving tosh might be mildy amusing, but I fear Ted may yet have the last laugh as he swans off into the sunset counting his grubby millions.