General discussion on Whitbread

Friday, Sep 04 2009 by

Any Whitbread holders out there? I've just added a summary wiki for the stock - any additions to the wiki are of course appreciated!

For those that don't know it, Whitbread is the UK's largest hospitality company, managing budget hotels, coffee shops, and restaurants. Bands include Premier Inn, Costa Coffee, and Beefeater. Over recent years it has concentrated its assets on the hotel and restaurant sector, selling off its investment in sports clubs and standalone pubs.

Overall, Whitbread looks to me like an interestingly positioned company. Its focus on budget pricing in its hotels and restaurants should help it gain market share in the economic downturn, as consumers look for bargains - Taybarns, its all-you-can-eat-for-5.95 format, seems to be doing spectacularly well. And compared to quality plays in hotels and pubs, it seems quite reasonably valued - also offering a yield in excess of 3% which looks fairly stable and reasonably covered.

You can see further details here:

Thoughts welcome!

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Whitbread PLC is a hospitality company. The Company operates hotels, coffee shops and restaurants. The Company operates in two segments: Hotels & Restaurants, and Costa. The Hotels & Restaurants segment provides services in relation to accommodation and food. The Costa segment consists of operations of its branded, owned and franchised coffee outlets. Premier Inn is the Company's hotel business. The Company's restaurant brands include Beefeater, Brewers Fayre, Table Table and Whitbread Inns. The Company operates over 785 Premier Inn hotels and over 72,000 rooms across the United Kingdom. The Company operates coffee shops across the United Kingdom, over 2,400 coffee stores in approximately 31 international markets. Its subsidiaries include Whitbread Group PLC, Premier Inn Hotels Limited, Yueda Costa (Shanghai) Food & Beverage Management Company Limited, Coffeeheaven International Limited and Costa Express Limited. more »

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5 Posts on this Thread show/hide all

emptyend 6th Sep '09 1 of 5

Its focus on budget pricing in its hotels and restaurants should help it gain market share in the economic downturn

This seems a key point to me. As you say, many of its brands in this area are based around "price" and "value" - so should be doing pretty well in a recession. Anecdotally people don't seem to have cut back much on the number of times they go out - but they are certainly looking for decent value wherever they go.

They made some big investments a year or two back in Premier Inns, and backed it with a big ad campaign, which may well have boosted that division. Costs must also be well under control - and service levels should be pretty good, given less competition in the labour market.

Its a few years since I last looked at Whitbread - and they seem to have considerably sharpened up their strategy and brand focus. For example, selling David Lloyd Leisure in mid 2007 (for £925mn) and cutting their gearing looks pretty inspired in retrospect. Exiting its 50% JVs in the Marriott four-star hotel business  and Pizza Hut a year earlier also look very smart.

And, closer to home, the Costa Coffee that opened recently in my local high street has been doing a roaring trade and benefitting from Staycationers in Sunny Suffolk this summer.

I suspect they are doing pretty well....but having already doubled the EPS over the last 2-3 years (over which period, somewhat puzzlingly, the shares have nearly halved) I wonder what is left to come.

Still........its an interesting business and one that seems to be increasingly well-managed.

One for my watchlist for when my oil plays start to get monetised.....


ps - excellent Wiki entry!

But what are the net assets per share and when was their property last revaled?

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emptyend 7th Sep '09 2 of 5

Trading statement today:

In the absence of any deterioration in trading, we expect the outturn for the full year to be at least at the higher end of current market expectations.

Steady progress.....


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djpreston 7th Sep '09 3 of 5

In reply to emptyend (post #2)

Kicking myself somewhat for hmmming and hah'ing over WTB at the end of July when it was c850p as part of my "pick up quality stocks that have yet to bounce" strategy. Cant recall why I didnt now other than concerns overt the level fo competition in the budget end of the hotel market. By this I mean that there are a lot fo 4* hotels that have struggled and so its possible to pick up a room and breakfast at these at very similar prices to those of Travelodge's, plus you get the swimming pool etc.

Kicking myself somewhat today but at least Ive got the CBRY I picked up as part of this plan....  ;-)

Fund Management: European Wealth
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emptyend 7th Sep '09 4 of 5

In reply to djpreston (post #3)

By this I mean that there are a lot fo 4* hotels that have struggled and so its possible to pick up a room and breakfast at these at very similar prices to those of Travelodge's, plus you get the swimming pool etc.

Still a valid concern I think. I notice that Lenny Henry is all over the TV advertising Premier Inns rooms from £29, so one must assume that margins are under short-term pressure. However - longer term there is now a clear strategy and brand image that is definitely focused on value for the punters - and I suspect that will continue to be a winning format if we are going to grind our way out of recession rather than return to the nirvana of four star hotels with restaurants run by designer-chefs.

Pity I wasn't looking to broaden my portfolio a while ago - I'll suspect I'll just add it to my long list of opportunities missed since 2003..... ;-0

Incidentally, I doubt Whitbread is a bid candidate (unlike Cadbury) - too well-run to attract the private equity boys?



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valueinvestor 9th Sep '09 5 of 5

In reply to emptyend (post #1)

Thanks for the good words about the Wiki entry! I'm intrigued to see Costa doing so well in Suffolk - I think they're on to a clever thing opening up in other retail outlets, too, as it reduces the property cost to expansion.

From the last annual report net asset value looks like 597p - so the shares are trading about twice the asset value. Not at first sight a stunning bargain. However, the last revaluation was in 1999/2000 - so there's some good growth in the period 2000-2007 in there for free! Even though the commercial property market has plummeted since the peak in 2007, I guess there is some 'free' value for shareholders.

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