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Whitbread still strong

Strong performances from Whitbread's Premier Inn and Costa Coffee chains have powered the group's first-half results
October 24, 2011

Hotels, coffee house and restaurant group Whitbread has beaten most analysts' expectations with its strong first half results - but some signs of the UK’s economic strife are, nevertheless, evident.

IC TIP: Hold at 1635p

Whitbread’s budget hotel chain Premier Inn and coffee chain Costa remain the growth engines. The two brands respectively achieved like-for-like sales growth of 5.2 per cent and 6.7 per cent. Expansion is also driving performance, with 1,408 hotels rooms added in the half and a further 167 coffee houses opened. Moreover, the performance of Costa’s self-service coffee-machine business Costa Express, which was formed following the acquisition of Coffee Nation in March, is exceeding expectations. Costa’s international expansion also continues to produce impressive results. While Premier Inn’s move overseas is progressing, too, with one new hotel opened - taking the total to five.

But Whitbread’s pub-restaurant division is feeling the brunt of the consumer slowdown and like-for-like sales there slipped 1.6 per cent. Value brands, such as Brewers Fayre, are outperforming higher-price-point restaurants such as Beefeater and Table Table. But, against a backdrop of high inflation and falling disposable incomes, 2012 could prove tough.

Numis Securities expects full-year pre-tax profit of £311m, giving EPS of 127p (2011: £287m/116p).

Whitbread (WTB)
ORD PRICE:1,635pMARKET VALUE:£2.9bn
TOUCH:1,634-1,637p12-MONTH HIGH:1,899pLOW: 1,344p
DIVIDEND YIELD:3.1%PE RATIO:11
NET ASSET VALUE: 719pNET DEBT:41%

Half-year to 1 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201080515166.311.25
201189118990.817.50
% change+11+25+37+56

Ex-div: 26 Oct

Payment: 10 Jan