The Investmnet Column: Local cheer

Pub operator Enterprise Inns is proving the claim that managed pubs outperform tenanted rivals a load of froth, belying the cult of centralisation. Yesterday's interim results showed Enterprise holding volumes and lifting income per pub by 5 per cent despite UK pub volumes falling by 4 per cent.

Chief executive Ted Tuppen concedes that if your local inn is "dingy with a bit of character", it's probably operated by Enterprise. The key to extracting value is a tightly-knit management structure devolving responsibility to a regional manager who is in close touch with the 50 or so landlords in his patch.

Interim pre-tax profits rose 36 per cent to pounds 13.7m, with earnings per share up 31 per cent to 15.3p, following a full contribution from the Gibbs Mew sites bought in March 1998 and a maiden contribution from Mayfair Taverns' operations, bought in October.

The full-year results should benefit from the addition of Century Inns' 498 pubs to its 1,772 operations. That has left the group with hefty gearing of 132 per cent. Mr Tuppen believes his shareholders would like him to raise gearing further and can spend about pounds 100m on acquisitions.

Analysts forecast pre-tax profits of around pounds 35.2m and earnings of 35p per share this year, putting the shares on a forward p/e of 12. With Enterprise's devolved power structure helping to hold its position and acquisitions in the pipeline, investors can expect annual earnings growth of about 10 per cent. The shares are good value, but should not be chased.