Derek Pain: Spirit Pub Co lifts my spirits as Whitbread perks up with the help of Costa Coffee

No Pain, No Gain

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

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Life and Style
tech

Apple has been hit by complaints about the 1.1GB download

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Sport
A 'Sir Alex Feguson' tattoo
football

PROMOTED VIDEO
Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Life and Style
Alexander McQueen A/W 2014
fashionPolitics aside, tartan is on-trend again this season
Arts and Entertainment
Rapper Jay Z performs on the Pyramid Stage at Glastonbury in 2008
musicSinger sued over use of the single-syllable sample in 'Run This Town'
Sport
Joel jumps over the board...and into a giant hole
footballFrom joy to despair in a matter of seconds
News
i100
Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Arts and Entertainment
The former Doctor Who actor is to play a vicar is search of a wife
film

Matt Smith is set to join cast of the Jane Austen classic - with a twist

Life and Style
i100

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Property Underwriter

    £70-90,000: Saxton Leigh: Our client a London Market Insurer are seeking a Pro...

    Operational Risk Manager - Asset Management

    £60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

    Trainee Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week