Profit growth at Whitbread (WTB) during the first half was largely down to a strong performance from Premier Inn. Revenue from the budget hotels was up 6.4 per cent to £1.1bn while pre-tax profits improved by more than a quarter to £295m. The company has been able to charge an average of £65.26 per room, a 2.8 per cent improvement on last year, which along with hotel extensions helped to boost like-for-like sales growth to 3.6 per cent. The higher room rate also helped to offset a slight reduction in the occupancy rate to 81.8 per cent. Management is hoping for Premier Inns to increase its market share to 12 per cent by 2020 from the current 9 per cent.
The national living wage and higher business rates, along with increased costs for coffee imports on sterling weakness, meant that pre-tax profits for Costa fell 9.8 per cent despite an increase in sales to £622m. Management reckons that British coffee drinkers are becoming connoisseurs, rather than just consumers, as the UK enters a “third wave” of coffee consumption – where Costa visitors are willing to spend more per cup for premium quality and innovative drinks.
Both chains are looking to increase their international presence. Whitbread is hoping to take advantage of the German hotel market, which is around 35 per cent larger than that in the UK with a less developed budget sector. The first German Premier Inn in was opened in Frankfurt in 2016 and nine more are in the pipeline to open by 2020. Costa expansion is centred on China, where coffee is “relatively new” with a market of fewer than 4,000 specialist coffee shops but expected to double in size by 2020. Costa is aiming to have 700 Chinese stores by 2020, compared with the 400 operated now.
Analysts at Numis expect pre-tax profits of £579m in the year to February 2018 giving EPS of 250p, compared to £565m and 243p in FY2017.
| WHITBREAD (WTB) | ||||
| ORD PRICE: | 3,752p | MARKET VALUE: | £ 6.88bn | |
| TOUCH: | 3,751-3,753p | 12-MONTH HIGH: | 4,333p | LOW: 3,365p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 1,465p | NET DEBT: | 32% | |
| Half-year to 31 Aug | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) | |
| 2016 | 1.56 | 264 | 111 | 29.9 | |
| 2017 | 1.67 | 316 | 138 | 31.4 | |
| % change | +7 | +20 | +24 | +5 | |
| Ex-div: | 09 Nov | ||||
| Payment: | 15 Dec |
