Derek Pain: Spirit Pub Co lifts my spirits as Whitbread perks up with the help of Costa Coffee
No Pain, No Gain
Friday 01 November 2013
A few weeks ago I expressed concern about the performance of shares in the Spirit Pub Co. I am pleased to see that despite in-line profits and a scheme to reshape its debts, the price has rallied a little, although still well below its earlier level.
There is no doubt the group's plan to reorganise its debt pile should, if it is successful, benefit the lot of the pub chain. Through a tender process it wants to extend the date that £400m of bonds fall due. If most bondholders accept it should help the group continue to improve its pubs although interest costs would increase.
Spirit has already spent heavily on its estate but feels the need to continue its programme. It is benefiting from its expenditure with profits up 6 per cent to £54m although the quirks of modern accounting give a pre-tax profit, including exceptional contributions, of £71.7m against a £588.9m loss last time. The year's dividend is up 5 per cent to 2.05p a share.
The group, taking in such pub names as Chef & Brewer and Fayre & Square, says its 777 managed outlets improved sales last year by 1.6 per cent and the performance of the 452 pubs comprising the leased estate stabilised. In the first eight weeks of the current year managed pub sales were up by 4 per cent and leased income was down only 0.3 per cent.
Spirit shares have recovered from the 68p which attracted my earlier comments and now reside at around 73p, still below their 78p peak. There is little doubt the shares have attractions, although current indications suggest a fairly modest profits advance this year. They were recruited into the no pain, no gain portfolio at 42p.
Whitbread, with around 400 pub/restaurants, is one of the portfolio's star performers. The shares arrived at 1,105p and are 3,422p after topping 3,450p in intra-day trading following last week's interim figures.
But Whitbread's pubs are overshadowed by the success of its Premier Inn budget hotel chain and the impressive performance of Costa Coffee, which brewed a 20.5 per cent profits increase.
All told the three divisions increased sales by 12.4 per cent with underlying profits up 12.6 per cent at £216.1m, slightly ahead of most stock market estimates. The statutory pre-tax profit emerged at £200.7m against £185.2m. Interim dividend goes up by 11.8 per cent to 21.8p a share. Stockbroker Investec Securities expects around £405.2m for the year compared with £356.5m. But Deutsche Bank has downgraded its share recommendation from buy to hold although its target price is 3,485p.
Premier, closely linked with the group's Beefeater and other pub/restaurant brands, improved sales by 12.2 per cent; eating out managed a 2.9 per cent sales increase.
There have, as I have reported, been a series of bearish analytical recommendations on Whitbread shares. Despite the negativity evident at some of the City's stockbrokers, the shares have performed well, although I must admit I was worried about a recent, sudden relapse which occurred for no apparent reason.
The portfolio is a long-term investor and I can see no reason at the moment for any diminution in my admiration for the once Top Six brewer. Nowadays the pub/restaurants are the survivors of Whitbread's life as a leading member of the beerage when it rolled out such beers as Tankard, Mackeson and even Heineken. It sold its brewing interests at the turn of the century, and most of its pub chain not long afterwards.
Whitbread shares are on a relatively high rating and the dividend yield is nothing to get excited about. But the present coffee and hotels combination, with a little help from pub/restaurants, seems a likely beneficiary of the nation's improving economic outlook. I believe mouth-watering trading will continue and that can only help profits – and the shares.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC
- 2 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 3 London restaurant 34 creates champagne glass modelled on Kate Moss’ left breast
- 4 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 5 James Foley beheading: Fox news presenter Megyn Kelly annoyed by Ferguson update during broadcast about murdered journalist
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Bin bag full of cats' heads discovered near Manchester's Curry Mile
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
iJobs Money & Business
£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...
£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...
£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...
£45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony