Whitbread Plc Serves Up A Strong Set Of Interim Results

Whitbread (LSE: WTB), the hotel and restaurant operator with brands including Premier Inn, Costa, Beefeater Grill and Brewers Fayre, today released an encouraging set of interim results.

Total revenues rose 12.4% to £1,145m although like-for-like sales grew more slowly at 2.8% for the six months to 29th August 2013.  Underlying profits before tax were lifted by 12.6% to £216m with earnings per share rising similarly to 90.92 pence for the six-month period.  With EPS growing strongly at 13% on average for the past four years, the trend is very positive from Whitbread.

The dividend is another strong card for the company, with the interim rising a further 11.8% to 21.8 pence per share. Dividend growth dropped to 5% for FY2013, so it will be a welcome relief to investors to see Whitbread pushing through a solid increase this time around.

Much of the sales growth stemmed from the expansion of the network.  Premier Inn opened 12 new hotels and 3 new joint site restaurants.  With like-for-like sales only growing by 3.3% it is this expansion that is driving the improved numbers for now.  Costa coffee shops saw 153 net new stores worldwide during the period bringing the total number above 1,000.  

Commenting on the results Andy Harrison, Chief Executive, said:

“Whitbread has delivered another good performance with double digit growth.  The combination of organic network expansion and good like for like sales growth, drove a 12.6% increase in underlying pre-tax profits.  Since the onset of the recession in 2008/9, Whitbread has grown its sales and underlying pre-tax profits by 11.1% and 12.0% per annum respectively, demonstrating the strength of the business and our leading market positions….This good first half performance puts us on track to deliver this year’s business plan and we remain on the right trajectory for our 2016 and 2018 growth milestones. Our combination of strong organic growth, good returns on capital and strong cash flow should continue to create substantial shareholder value.”

Whitbread shares are trading slightly up on the news at 3,405 pence.  The market had already priced in gains of around that level and took the results in its stride.  The company looks to be in very good shape overall, though, with a return on capital of over 14% and cash flow from operations up 7.9% to £308m which helped reduce net debt by £41m to £430m in the last six months.

The expectation from Whitbread is that the first-half performance puts it on track to meet this year’s business plan along with growth milestones for 2016 and 2018.

Whitbread has performed very nicely for investors over the past 5 years with a trend of rising earnings combined with an increasing multiple giving a compounded rise of over 300%.  This is the sort of performance we are looking for from our growth shares.  

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> Barry does not own shares in Whitbread.