So far Whitbread shares have held onto the growth they managed in the first week of the year, when boosted by the sooner-than-expected completion of the sale of Costa Coffee to Coca-Cola, a rise that lifted it from £45.50 to around £48.50.
It did climb a bit higher in mid-March, eventually crossing £50, only for a ratings cut by Morgan Stanley to drag it back to a current trading price of £47.85.
January’s third quarter results weren’t particularly well-received, despite Whitbread announcing a £500 million share buyback. That’s because the situation at Premier Inn – effectively the company’s sole focus in a post-Costa world – is hardly a confidence-builder.
While total UK accommodation sales were up 3.5% in Q3 and 4.4% for the year-to-date, like-for-likes were down 0.2% and up just 0.1$ respectively. The situation was even worse at its Food & Beverage brands – that includes Brewers Fayre and Beefeater – with year-to-date comparable sales sliding 0.7%. This meant that total like-for-likes fell 0.6% in the third quarter and 0.7% for the 39-week period ending 29th November 2018.
On top of this, Whitbread claimed that, due to a UK environment that ‘remains subdued’ and the ‘significant challenge’ of sustained inflation, it expects its underlying pre-tax profit for its financial 2020 to be ‘consistent’ with its 2019 performance. This as it highlighted ‘weaker’ UK market revenue per available room, greater investment, German losses of around £12 million, ‘short-term operation dis-synergies’ post-Costa sales, and cost savings £20-30 million lower than its forecast cost increases.
As for Tuesday’s full year results, analysts are expecting underlying pre-tax profit to drop 19% to £477 million, with revenue at £2.09 billion.
Whitbread shares have a consensus rating of ‘Hold’ alongside an average target price of £51.02.
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