A leading analyst has said that Whitbread’s full-year results, which are due at the end of this month, should come in-line or slightly ahead of expectations but current trading is likely to be mixed.
Jamie Rollo at Morgan Stanley said: “We forecast EBIT of £379m (+10%), PBT of £353m (+10%), EPS of 150p (+12%), and DPS of 56p (+10%), broadly in line with consensus. Within this, we assume EBIT for Hotels & Restaurants of £311m (+5%) and Costa of £90m (+29%). The consumer environment in the UK remains fragile and the competitive environment is getting tougher, so we expect the company to give a cautious outlook for Premier Inn whose market share gains have been slowing, offset by strength at Costa given the recent cold weather, which should have helped demand.”
Whitbread reported another quarter of strong LfLsales for Costa at +5.5% in Q4, although some had expected an even stronger figure given Starbucks UK had been suffering from adverse publicity. FY LfL sales were +6.6%.
Rollo said: “Total sales growth of 32.2% was a meaningful acceleration from the 25% in the first 9 months, but it seemed to be driven mainly by a strong performance at Costa Enterprises where the drop through margin is lower. Costa expected to have opened 320 outlets by the end of the quarter, a touch below its previous expansion target of 330. We forecast FY EBIT of £90m (+29%), implying H2 EBIT of £54m (+29%).”
The analyst said that Whitbread is two years into its five-year expansion plan, and given excellent progress so far expectations are high that it will extend this for two years, to 2018. Its existing targets are 65,000 Premier Inn rooms and 3,500 Costa outlets by 2016.
Rollo said: “While we expect an update this calendar year, the company might hold back on making any announcements at this set of results. We expect the new strategy to involve a more aggressive international expansion plan at Costa, possibly rolling out equity stores in Continental
Europe. At Premier Inn, its 2014 room opening target of 4,000 suggests limited upside to the 65,000 figure, and press reports have suggested it is considering adding a second brand targeting the more budget segment. Hence, the final results might not provide enough airtime to present a detailed strategy review.”
For F2014, Rollo forecasts PBT of £390m based on +2% RevPAR at Premier Inn, +1.5% LfL sales in Restaurants and +2.5% LfL sales at Costa.
He said: “We are in-line with consensus, and note that our forecasts imply 10.5% EBIT growth versus our forecast slowdown to 8.5% growth in H2 2012. The company does not provide a detailed current trading update, but we think the poor weather will have been negative for Hotels & Restaurants (75% of EBIT), and positive for Costa, but overall negative given the divisional weighting.
“We think Whitbread is a solid investment, but the valuation looks up with events (cal 2013 P/E of 15.3x, 9.3x EV/EBITDA (10.2x pension adjusted), 6.0% FCF yield), competition looks set to intensify, and the company may start to invest more outside the UK which could bring greater risk. Our rating is Equal-weight and our PT is £25.”
