Whitbread Rises to Three-Year High on Premier Inn Profit Boost

Whitbread Plc, the largest U.K. hotel and restaurant company, rose to a three-year high in London trading after reporting a 58 percent gain in profit on growth at Premier Inn budget hotels and Costa Coffee shops.

The shares advanced as much as 2.1 percent, climbing to the highest since Nov. 1, 2007.

First-half operating profit increased 21 percent in Whitbread’s hotel and restaurant unit and 56 percent at Costa, the Dunstable, England-based company said today in a statement. Net income attributable to shareholders for the six months ended Sept. 2 rose to 116.4 million pounds ($184.2 million).

“The market had expected good interims from Whitbread and this was duly delivered,” Nigel Parson, an analyst at Evolution Securities, said in a research note. “Whitbread has emerged from recession in good condition with a strong platform for growth.” Parson has a “buy” rating on the shares.

Whitbread says it’s gaining market share as Premier Inn, which offers rooms starting at 29 pounds a night, attracts business customers seeking to reduce travel expenses. Premier, which accounted for about 44 percent of Whitbread’s sales last year, reported a 79 percent like-for-like occupancy rate in the first half, up about 9 percentage points from the prior year.

“We are also concerned about what the outlook may be, but if you can offer value for money, people will still come back to shop with you,” Chief Financial Officer Chris Rogers said on Bloomberg Television’s Countdown with Maryam Nemazee.

Hotel Occupancy

Premier Inn aims to increase occupancy at its hotels to 80 percent and may meet that target by 2012, Rogers said. Occupancy could grow to its “likely upper limit in the mid-80s” by 2013, John Beaumont, a Matrix Group analyst in London, wrote in a note yesterday. He has a “buy” recommedation on Whitbread.

The hotel chain plans to add 1,700 rooms in the second half, after opening almost 800 in the first half. A further 3,500 rooms are due to be added next year.

Whitbread’s Costa Coffee unit opened 116 stores in the first half and plans to open about 130 stores in the second half, the company said. Sales at outlets open at least a year rose 8.5 percent in the first half, compared with growth of 10 percent at Premier Inn and 4.2 percent in restaurants.

Whitbread rose 14 pence, or 0.8 percent, to 1,707 pence at 10:30 a.m., giving the company a market value of about 3 billion pounds. The stock has gained 21 percent this year, compared with the 33 percent gain of InterContinental Hotels Group Plc, the U.K. owner of the Holiday Inn brand.

Higher opening costs in the second half and a more “muted” outlook for consumer spending may curb investors’ enthusiasm, said Nigel Hicks, an analyst at Liberum Capital, in a note today. He has a “buy” rating on Whitbread.

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