Whitbread’s value credentials have undeniably been serving the company well during the downturn and its trading performance has been much more impressive than many of its peers. More aggressive than expected cost cutting also meant the first-half performance came in comfortably ahead of earlier expectations and the shares hit a 12-month high on the results.
Some of the fears we had about how Whitbread would trade through the downturn now look overblown. Costa Coffee in particular continues to deliver storming growth by launching new stores and offering value-for-money meal deals alongside its premium coffee. Indeed, Costa was the star performer in the first half. The opening of 93 new stores took the chain to nearly 1,000 outlets, which helped boost revenues by 21 per cent to £155m and underlying operating profit by 73 per cent to £12.6m. The chain now accounts for 22 per cent of group sales and 9 per cent of underlying profit.
As expected Whitbread’s Premier Inn budget hotels have been badly hit by the downturn as the industry as a whole has seen occupancy and room rates plummet. However, compared with peers, Premier has been a winner. During the latest six-month trading period the business saw revenue per available room (RevPAR) drop 9.2 per cent, compared with a 11 per cent decline in the sector, as strong interest from a hard-pressed corporate market helped buoy demand and eye-catching offers are starting to win back the leisure customers. And while the business remains under pressure, conditions in the hotel market, which accounts for 44 per cent of turnover, are stabilising.
The strong value offering in Whitbread’s restaurant chains has also helped underpin demand in the business and like-for-like sales were up 1.8 per cent. The robust performance came despite the fact that 331 of the group’s 375 restaurants share a site with a Premier Inn from which 10 to 15 per cent of their custom is generated.
Broker Investec Securities expects full-year underlying pre-tax profits of £190m and EPS of 75.9p (2009: £230m/92.1p).
| Whitbread (WTB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,316p | MARKET VALUE: | £2,305m | |
| TOUCH: | 1,316-1,317p | 12-MONTH HIGH: | 1,350p | LOW: 656p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 595p | NET DEBT: | 58% | |
| Half-year to 31 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 682 | 117 | 23.3 | 9.65 |
| 2009 | 703 | 106 | 42.3 | 9.65 |
| % change | +3 | -10 | +82 | - |
Ex-div: 21 Oct Payment: 5 Jan | ||||
