M&C Report outlines the views of analysts in response to the full-year results for the year to 1 March 2012 for Whitbread, the Costa Coffee, Premier Inn, Brewers Fayre and Beefeater operator. Geof Collyer, Deutsche Bank: Buy, modest upgrade Collyer called it a “very robust performance. The DIV was +15%with the final +8%, given the planned rebasing of the H1/H2 split and thegroup’s policy of growing DIV in line with EPS. The current trading comment is limited given the continued mth-on-mth volatility, but Premier Inns lfl RevPAR is ahead so far in the first seven weeks of Q1 in contrast to flat to negativeindustry data for UK mid-scale and economy sector. “Therefore we see Premier Inn as extending its outperformance vs. the peer group. Costa’s pace of growth has continued into FY’13. We have upgraded our EPS and DIV forecasts by 4% for FY’13E and FY’14E. As a consequence of this and rolling over the year-end, we have increased our price target by 5% to 2,200p. “We have broadly maintained our revenue expectations, from the new base and current trading, which modestly reduces our RevPAR decline from -2% to -1.5% for PI. Within Costa, we are looking for +3% lfls growth in UK, +2% in Europe and +10% in China. We are looking for flat lfls in the Restaurants division, but believe that this could prove a touch pessimistic given the poor comps, especially in H1.” Simon French, Panmure Gordon: Hold French said Whitbread’s pre-tax profit of £320m was “marginally ahead of ours and consensus forecast” of £315m. But he said: “We still think the risk to consensus forecasts remains on the downside and we reiterate our Hold recommendation and 1768p TP.” “We forecast 10.5% CAGR in EPS over the next three years and dividends should grow marginally faster, although cash could yet be diverted to top up the c.£599m pension deficit. For 2013E we forecast £329.1m PBT (138.7p EPS) versus consensus currently on £333.0m (139.1p EPS). We think the risk to consensus remains on the downside. “The stock trades on a CY 2012E P/E of 13.2x and an adj EV/EBITDAR of 7.9x, whilst yielding 3.1%. Relative to other hotel peers, this is not expensive but Whitbread’s hotel business is the only one where we are forecasting falling RevPar. We reiterate our Hold recommendation and 1768p TP.” James Hollins, Investec: Sell “Whitbread’s FY12A results were marginally ahead of expectations, driven by a margin beat in Costa, more than offsetting a 40bps margin miss in Hotels & Restaurants,” said Hollins. “We therefore applaud the coffee performance, but retain our SELL stance based on: (1) a weak UK provincial hotels outlook (Hotels & Restaurants still represents >80% of group EBIT), and (2) negligible underlying cash generation (net debt increased by 3% YoY). We retain forecasts, SELL recommendation and DCF-based 1,450p price target.” He said that “less impressive” than the headline Costa figures “is the cash generation in the business”. “Despite highlighting solid operational cash flow during FY12A, net debt rose by 3% in the year to £504.3m (vs £487.9m) due to a 52% rise in capex to £307.9m and a cash pension top-up payment of £95.4m (the pension deficit rose from £488m at March 2011 to £599m at March 2012).” He added: “Current trading points to positive LFL trends in Premier Inn and restaurants, with continued strong Costa momentum. We think hotels/restaurants trading in the UK will come under pressure through the year, with the London Olympics/Paralympics net neutral to Whitbread, at best, and lower levels of consumer/SME business travel. “We are keeping FY13E group forecasts unchanged and the stock is currently trading at 12.9x FY13E earnings (8.8x EV/EBITDA) with a dividend yield of just 3.0%. On this basis, with projected downward pressure on its largest division’s top-line compounded by a FY12A margin underpeformance, we retain our SELL with a DCF-based PT of 1,450p.”