Whitbread interims impress but tough comparatives loom
Whitbread grew first-half sales and profit strongly in the face of a highly competitive trading environment, thanks to a strong performance from Premier Inn hotels and Costa coffee shops and a recovery in its restaurants business.
Group sales growth of 13% contributed towards an 18.5% hike in underlying profit before tax.
This, plus a 1.4%-point increase in return on capital to 15.8%, helped boost cash generation, while earnings before interest, tax, depreciation and amortisation were up 17.1% and underlying basic earnings per share were 21.5% higher at 111.69p.
The interim dividend was hoisted 15.6% to 25.2p.
"Our two market leading brands, Premier Inn and Costa, go from strength to strength and continue to win market share," said chief executive Andy Harrison.
Premier Inn grew total sales 14.7% and like-for-like (LFL) sales 9.6%, as total revenue per available room (revpar) rose 8.8% with record UK occupancy of 84.0% and a 5.6% increase in rooms available.
Costa delivered total sales growth of 16.9% with LFL sales growth of 6.1% in the UK and underlying profit up 20.5% to £52.4m.
The restaurants business grew total sales by 4.3%, performing ahead of its industry benchmarks.
"The trading momentum of our strong first half performance has continued into the first few weeks of the second half and positions Whitbread well to deliver full-year results in line with expectations," Harrison added.
He stressed that beating comparative numbers from last year will be difficult, especially as the fourth quarter last year enjoyed strong trading due to the mild winter weather.
Management expect to invest around £500m in expanding and improving the estate as it faces a highly competitive market, with around 4,500 new Premier Inn UK rooms and around 230 net new Costa stores worldwide
Broker Shore Capital was impressed, saying the remains a conservatively financed, quality play on the UK economy with a highly attractive self-funded growth story, though the tough comparatives dampen enthusiasm for much more than a small upgrade.
However, noted analyst Martin Brown, "we believe that a full recovery in hotel yields is already factored into the price."