Derek Pain: I'm ignoring sales worry at Whitbread
No Pain, No Gain
Friday 08 March 2013
Should the no pain, no gain portfolio dump one of its star performers, the Whitbread leisure giant? After all, the shares are quite highly rated and following last week's trading update succumbed to a jittery bout of profit taking. And it is not at all difficult to find City analysts who are advising clients that the shares are now a spent force, deserving to be sold.
In fact the Square Mile scribblers are divided. Besides the sellers there are some saying buy while others suggest a more cautious hold. It is, of course, such differing opinions that underline the problems of assessing the shares and, no doubt, helps spread confusion among small investors.
Make no mistake, Whitbread is no longer an easy share to evaluate. The price has enjoyed a remarkable run. In the past year it has soared from 1,633p to almost 2,700p. When nearly five years ago the portfolio descended on the stock, it was down to 1,105p. Subsequently the price slipped to around 850p. But then, as the recession intensified, Whitbread became a share of our times. Its budget hotels won the hearts and wallets of business travellers as well as those booking for more relaxing reasons. The pub/restaurants, with their keen pricing and wide-ranging menus, grew in popularity and the booming coffee operation expanded dramatically as the nation accepted the habit of lingering over a latte.
But trading is getting tougher. The budget hotels chain, Premier Inn, expects more intense competition from its Travelodge rival and the American-owned Starbucks coffee shops chain should be able to sort out its tax affairs and give Whitbread's highly successful Costa Coffee business something to think about.
In last week's trading statement the group clearly suffered a sales slowdown in the final weeks of its year, although after 50 weeks it was still recording an impressive 14.8 per cent growth. Chief executive Andy Harrison seems convinced profits for the year just ended will meet stock market expectations – around £350.5m against £320.1m last time.
In spite of worries that in these recessionary times the budget hotels and pub/restaurants could feel something of a pinch, they could – and should – still serve up improved results. And there is no reason to think that the Costa Coffee revolution will not continue its exuberant progress. In the 50-weeks period coffee sales were up almost 27 per cent and with the group adding branches at a remarkable pace there seems little prospect of any slowdown. The worldwide coffee chain now embraces more than 2,500 parlours and some 320 are expected to be added this year. Whitbread is aiming for a spread of 3,500 by 2016.
Last week's share display was something of a worry. The price was weak ahead of the update and afterwards further gyrations caused concern. But by the end of the week the shares had regained some composure and at the time of writing are standing at 2,547p.
Although they remain pricey and have enjoyed an excellent run, I think the portfolio should stick with the leisure group. True, the shares are unlikely to repeat the 1,000p advance achieved in the past year, but I expect them to put in another top-class showing this year and, perhaps, beyond. As I have said many times, the portfolio is a long-term investor, not noted for providing frequent commissions to the share-dealing community. Indeed, much of the turnover since the portfolio was created 14 years ago stems from takeover action. And accepting takeover bids does not cost a penny in commissions.
Finally Avation, the aviation-leasing group. It continues to increase its fleet with the delivery of its 11th new ATR 72 aircraft. It will be operated by SkyWest under a deal with Virgin Australia. The two Australian airlines are in the process of merging.
Finance for the latest addition comes from the group's own resources and from an unidentified European bank. Another four ATR 72s are due to be delivered and leased by SkyWest this year.
Avation shares are just above my buying level at 85p after reaching 120p. Stockbroker WH Ireland recently published a 140p target price but so far the stock market has taken little notice. Perhaps it will as more aircraft are leased Down Under.
Independent Partners: See how much you could save by switching credit cards. Compare now
Simon Read: Readers think I should cough up and pay for a tradesman's travelling time
No television licence leads to debt woes after court fines add up
Mark Dampier: Small can be beautiful for those investors who think long term
Tax boost for social investment will unlock £500m
Five ways to make money on the internet
- 1 Cameron's freebie to apartheid South Africa
- 2 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 3 Sherlock series 3: Benedict Cumberbatch and Martin Freeman provide teasers for the biggest comeback in British television
- 4 A forgotten episode in Russian history leaves links with the Philippines
- 5 People will try to reduce Mandela to a lilting reggae tune about ‘love’. They will fail
- < Previous
- Next >
iJobs Money & Business
£80000 - £100000 per annum + benefits + bonus: Harrington Starr: Project Manag...
£50000 - £60000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£30000 - £40000 per annum + Bonus and Benefits: Harrington Starr: A global Con...
£150 - £250 per day: Cornwallis Elt : iPhone Rollout- Blackberry Enginee...
Day In a Page
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.
A three-bedroom new build, ground-floor flat with two bathrooms, close to Bermondsey tube, £445,000.
A three-bedroom house in an enviable new development moments from Oxshott High Street, with secluded garden and decked area, £385,000
A two-bedroom split-level flat with stunning south-west facing roof terrace in the popular Brondesbury Conservation Area, £549,950.
A charming 16th century, three-bedroom detached house in Bidborough with picturesque garden