The trouble with consistent outperformers like Whitbread (WTB) is that the minute the market gets even a hint of trouble, it can spook the shares. The hospitality giant's interim results included overall like-for-like sales growth of 1.9 per cent and a 5 per cent improvement in underlying pre-tax profits (which include amortisation, exceptionals and pension finance costs) to £307m. But the shares fell almost 4 per cent after management admitted investments made to the Costa coffee brand had squeezed margins there. Despite a like-for-like sales growth of 2.3 per cent for the brand, the sum of refurbishments, IT upgrades and the early introduction of the National Living Wage sent operating margins down 1.8 percentage points and left operating profits down 4 per cent.
This was expected, said chief executive Alison Brittain, stressing that both Costa and the Premier Inn chain continue to take market share away from rivals. It's not traditional for Whitbread to give too much away about the second half of the financial year at this stage, but it admits the economic outlook for the UK is uncertain. Ms Brittain pointed to a number of challenges this year, including further wage increases, higher business rates, commodity price inflation and unfavourable foreign exchange rates. Regardless, the group said it had seen no discernible impact from the recent EU referendum, and seems confident it will still meet full-year market expectations, with help from cost efficiencies.
Despite a rocky outlook for the hotel sector this year, Whitbread's Premier Inn brand appears to be going from strength to strength. The London sites are doing particularly well, growing sales by 4.7 per cent and maintaining high occupancy rates of around 86.8 per cent. Regionally, the group opened six new hotels and delivered strong like-for-like sales growth at 3.8 per cent. Over the last three years, Whitbread has opened 86 new hotels, taking the total to 746, which it said was 200 more than its closest competitor.
Analysts at Numis expect pre-tax profits of £562m for the year ending February 2017, giving EPS of 245p, compared to £546m and 236p in FY2016.
| WHITBREAD (WTB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 3,711p | MARKET VALUE: | £6.8bn | |
| TOUCH: | 3,709-3,712p | 12-MONTH HIGH: | 4,968p | LOW: 3,283p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 1,306p | NET DEBT: | 41% | |
| Half-year to 1 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 1.4 | 255 | 109 | 28.5 |
| 2016 | 1.6 | 264 | 111 | 29.9 |
| % change | +8 | +3 | +2 | +5 |
Ex-div: 10 Nov Payment: 16 Dec | ||||
