Investors are toasting pub group Enterprise Inns (ETI) after favourable weather and improving consumer confidence lead to better-than-expected sales in the third quarter.
Analysts had expected flat trading due to tough comparisons from last year’s FIFA World Cup, but like-for-like net income is up by 0.5% in the quarter ended 27 June.
It is the group’s eighth consecutive quarter of growth and sends shares in the £583 million cap 4.6% higher to 120p.
The group has also reassured investors that its plans to develop a managed pub division and increase its commercial property estate, as announced in its strategic review on 12 May, are on track.
Enterprise plans to increase the number of managed pubs from 30 this September to between 750 and 850 by September 2020 and expand its commercial property estate from 185 assets to between 900 and 1,000 assets.
The number of commercial properties has already reached 206 and the average annualised rental income has risen from £53,000 to £55,000.
Enterprise’s new strategy is expected to lead to progressive upgrades to forecasts and valuations over the coming years.
A running Play of the Week, the company will get far greater control over its profit streams in the future, moving from directly controlling less than 5% of EBITDA (earnings before interest, tax, depreciation and amortisation) to almost 50% within five years. This should at least halve the current 60% discount to net asset value.
Today’s encouraging trading update leads Numis to upgrade its 2015 pre-tax profit forecast from £121.4 million to £122.1 million, an increase of 0.9% from 2014.
The analyst’s target price is 160p, implying upside of 39%.
