Investors are toasting a 1.8% rise in like-for-like net income at pub group Enterprise Inns’ (ETI), with the shares swelling 3% to 92.5p.
The growth is driven by a 3.3% rise in net income in the south of the country, in particular demand for craft and traditional ale.
Pubs in the north continue to face a more challenging economic and trading environment, the group says.
Enterprise Inns’ pre-tax profit is flat at £57 million as interest savings from reduced debt offsets a disposal-led £2 million reduction in EBITDA (earnings before interest, tax, depreciation and amortisation).
The group has signed a contract to sell a portfolio of 22 commercial properties for £20 million, representing a 9% premium to the book value and a 6.7% yield.
Enterprise Inns says the execution of its strategic plan is on track and it should have over 100 managed houses and more than 300 free-of-tie deals completed by the end of its 2016 financial year.
However, it is early days and analysts aren’t forecasting any earnings growth until 2018.
‘Many houses are just not good enough to be managed and the conversion of better tenancies to managed requires the removal of many of the better, hard-working, loyal tenants. It's a tragic irony,’ says Canaccord Genuity analyst Nigel Parson.
The group should benefit from the UEFA Euro 2016 football championship in June/July, but this could be offset by uncertainty created by the implementation of the new pubs code.
Panmure Gordon analyst Anna Barnfather says that with the stock trading on a price to earnings ratio of 4.7, it’s a highly geared play on web-led pubs, a sector that is seeing somewhat of a resurgence from rising consumer confidence and the craft beer movement.