Ebookers on uncertain flight path

Sanctuary could still prove to be a hit; Blacks Leisure looks high enough for now
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Fear of war, terrorism and disease kept most of us close to home last year - and why would we have bothered to journey to foreign shores last summer when we were enjoying tropical temperatures in our own back gardens?

Fear of war, terrorism and disease kept most of us close to home last year - and why would we have bothered to journey to foreign shores last summer when we were enjoying tropical temperatures in our own back gardens?

This all meant bad news for travel companies, and profits warnings have been a staple part of many an itinerary, including at the do-it-yourself travel agent Ebookers.

But it now seems that we are keen to go on holiday this year. Ebookers yesterday reported that online sales had been strong over the past three months and its numbers had beaten analyst forecasts. It also said 2004 had started well.

Ebookers is not a recent start-up - it was founded in 1983, and has a high street presence as well as its online sales. The company's brands include Flightbookers and Travelbag, and it still gets half its sales via old-fashioned high street stores and phone numbers in newspaper ads.

Ebookers concentrates on long and mid-haul flights and tours. This is a more expensive market, not least because of the distance, but also because people tend to stay away for longer, spending more. Its customers spend an average of £900, compared with £300 for a short-haul trip, and Ebookers is clearly taking a share of the revival now under way. As well as relying on bigger-ticket travel, the company is also trying to improve its non-air sales, of items such as travel insurance, hotel bookings and car hire. These carry high margins and Ebookers, with its low-cost admin centre in India, should benefit.

Internet-tinted stocks are enjoying another revival and, despite plunging after we were negative in November, Ebookers shares have snapped quickly back to trade at almost the level at which we advised selling. They now trade at about 21 times 2004 earnings. Rivals such as Expedia, Travelocity and Opodo look to be building strong brands that could threaten Ebookers' position, so earnings forecasts are still highly uncertain. Only for the very brave.

Sanctuary could still prove to be a hit

Those two rather downbeat number one singles from the end of last year - the Osbournes' Changes and Mad World - brought more smiles to the faces of executives and shareholders at Sanctuary Group. The little UK-quoted record company released both singles, capping another great year for a group that is (no exaggeration) lighting a path out of the doldrums for the music industry.

Upbeat results yesterday showed profits at Sanctuary were up 5 per cent at £10.7m on turnover up 28 per cent in the year to 30 September. The group takes a holistic approach to the music industry, rather than following the traditional business model of releasing singles, albums and DVDs and raking in royalties from artists' back catalogues. It also acts as manager (for Iron Maiden, Led Zeppelin, the Manic Street Preachers), tour organiser (for Robbie Williams, Eminem, the Darkness), and merchandising promoter (with a nifty new line in mobile ringtones).

It has recently moved into urban music by bringing Beyoncé's father and manager Mathew Knowles on board and by snapping up a giant back catalogue of reggae music. Further acquisitions will follow, using the proceeds of a £30m fundraising late in 2003. The coming year should show continuing improvements in the group's cashflows, plus the benefits of a wide-ranging tie-up with BMG, which sees that major label distributing Sanctuary records across the world.

The shares fell 1.75p to 46.25p yesterday, but should be a big hit for the long-term investor.

Blacks Leisure looks high enough for now

Of course, after two weeks of trading updates, you know the story from the high street by now. A slow start to the Christmas shopping spree. A late rush that almost, but never quite, made up for lost time. And then a pretty good performance in the January sales.

Blacks Leisure, the outdoor clothing group which owns Millets, was pretty typical. With a 7.7 per cent jump in like-for-like sales (that is, having stripped out the impact of new store openings) for the seven weeks to 10 January, it beat forecasters' expectations by some distance. However, the fact that more stock than usual had to be cleared in the post-Christmas sales meant profit margins were 1 per cent lower than the same period last year.

So no change, then, to the City's forecasts of £17.5m of headline pre-tax profit for the year to February, up from the £14.2m reported last time. That puts the shares, 1.5p better at 359p yesterday, on an earnings multiple of about 12.5, a discount to the clothing sector.

Blacks shares should probably trade at a premium, not a discount, to rivals because it is operating in a decent niche - although retail as a sector is likely to prove unexciting this year.

It has 15 per cent of the outdoor clothing market and there is still plenty of scope for new openings. In addition, its "boardwear" chains (Free Spirit, O'Neill and Just Add Water) cater to the growing popularity of surfing, skateboarding and, particularly, snowboarding.

Hold the shares.

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