In the second half of 2012, shares in leisure companies went on a fantastic charge and budget-hotels-to-coffee-chain Whitbread was at the front, rising 65 per cent from its 12-month low. However, recent hesitancy in the share price could be a taste of things to come as investors reassess Whitbread's high rating against a backdrop of increasing competition and a tough outlook for UK consumers.
- Quality operator
- London hotels trading nicely
- One-off benefits won't repeat
- Tough consumer environment
- Rating higher than average
- Little yield support
Sound trading in the fourth quarter of 2012-13 suggests Whitbread's full-year results should be in line with City expectations, but they were helped by troubles at budget hotels group Travelodge, which competes with Whitbread's Premier Inns. The Whitbread chain also received a boost by the Olympics effect in London. Meanwhile, the furore about Starbucks paying little tax saw Whitbread's Costa Coffee shops benefit.
| Whitbread (WTB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,558p | MARKET VALUE: | £4.59bn | |
| TOUCH: | 2,558-2,560p | 12-MONTH HIGH: | 2,694p | LOW: 1,633p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 748p | NET DEBT: | 39% | |
| Year to 1 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 1.44 | 208 | 92 | 38.0 |
| 2011 | 1.60 | 271 | 127 | 44.5 |
| 2012 | 1.78 | 306 | 152 | 51.3 |
| 2013* | 2.03 | 370 | 183 | 58.5 |
| 2014* | 2.28 | 390 | 186 | 64.4 |
| % change | +13 | +5 | +2 | +10 |
Normal market size: 1,000 Matched bargain trading Beta: 1.0 *Invesec Securities forecasts | ||||
Those factors won't recur in 2013. So, while Whitbread is a sharp operator, it may struggle to show much year-on-year growth in those chains. And it won't be helped by UK consumers as real disposable incomes are further squeezed. The latest monthly data from the Coffer Peach Tracker, a monitor of eating out and drinking out, suggest growth is becoming harder to achieve.
Still, Whitbread has some strong consumer businesses. The Costa chain has produced phenomenal growth in recent years and the expansion of its London hotels could be canny given evidence of strong trading in the capital - fourth-quarter revenue per available room was up 2.2 per cent in London while it was down 0.3 per cent in the provinces. However, all that and more may be in Whitbread's share price.
