Leading analyst Simon French at Cenkos has said that the departure of Andrew Harrison as chief executive of Whitbread probably delays any decision on the demerger of Costa until a new chief executive is in place and put forward current Costa managing director Chris Rogers as Harrison’s expected successor.
Mark Brumby at Langton Capital said: “The announcement that Harrison is to leave the group by early next year may lead to some consideration as to what the group has achieved to date but, overall, the group is performing well and it looks to be set to achieve more.”
French said: “Overall, numbers are ahead of forecast, the group has made a good start to the year and growth milestones have been extended as expected but the market may be un-nerved by Mr Harrison’s departure although we are relaxed given the strength of the senior management team.
“However it probably delays any decision on the demerger of Costa until the new CEO is in place and has reviewed the business. Somewhat paradoxically we expect the new CEO to be Chris Rogers, currently MD Costa and previously group CFO.”
Brumby said: “Langton Comment: Whitbread’s shares hit new highs yesterday in anticipation of good numbers and the group has once again delivered despite tougher comps and some headwinds.
“The announcement that CEO Andy Harrison is to leave the group by early next year may lead to some consideration as to what the group has achieved to date but, overall, the group is performing well and it looks to be set to achieve more. There may be some upward pressure to forecasts as a result of today’s numbers.
“Nonetheless, the group is delivering on its promises and is likely to retain the support of its shareholders. The stock changed hands at £24 as recently as the first half of 2013 year and is now at all-time highs. Despite this, today’s statement should reassure.
Trading momentum looks to have been maintained, openings are in line and the group continues to deliver financially.
“The group’s rating is perhaps somewhat stretched. The company is pencilled to earn around 237.6p in the year to February 2016, putting the shares on some 22.9x current year earnings with a yield of some 1.6%. Nonetheless, today’s update should reassure observers and there is no reason to believe that the 2016 and 2018 (and now 2020) targets that have been outlined by the group are not secure.
“No room for error at these levels but, with brands that offer international growth, WTB would appear to offer value over the longer term.”
Wyn Ellis at Numis said: “We would expect the market to be cheered by the stretched new milestone targets which suggest that there is considerable growth in the Whitbread business model for some time yet. We have trimmed our FY16 PBT forecast from £563m to £550m (-2%) to reflect additional investment in Premier Inn, a slightly subdued start to the year, and the fact that 80% of the Premier Inn room openings in FY16 are expected to be in the second half of the year.”
