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As Whitbread reports strong first half results, Sheridan Admans investment research manager at The Share Centre, explains what they mean for investors.

 

Investors moved in this morning to take profits as Whitbread delivered double digit growth, supported by profits from its Costa Coffee operation and higher prices at its budget hotel operation, Premier Inn, which benefited from the Olympics.

Whitbread beat the average analyst estimates, announcing underlying pre-tax profits of £193.4m. Investors will be pleased to see the interim dividend was also raised by 11.4% to 19.5p per share.

Growth seekers will be encouraged to see the company’s aggressive five year plan defy the UK recession. The Premier Inn brand opened a further 1591 rooms at a time when one of its biggest competitors, Travelodge, is being forced to close a number of its hotels to lessen the heavy burden of its debt restructuring plans. Costa Coffee also opened a further 141 coffee shops and plan to have a total of 350 new shops by the end of its financial year.

Despite Whitbread being on target to meet its growth plan and the attractiveness of its business model, we continue to recommend investors ‘hold’ in these challenging times as we believe the potential is currently reflected in the price.

 

All information given including prices, yields and our opinion is correct at the time of publication.  Our opinions on investments can change at any time and for our latest view please go to www.share.com.  To understand how our Advice team arrive at their views please read our Investment Research Policy.

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