Whitbread not ready to call time on pub business

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The Independent Online

Whitbread, the pub and hotel group, yesterday ruled out an asset swap with rival Mitchells & Butlers as it posted credit crunch-defying sales for its first quarter.

Whitbread's chief executive, Alan Parker, said: "We have absolutely no intention of moving out of the pubs restaurant business."

His comments were a response to a research note issued by investment bank Citi last week, which suggested that Whitbread swap its pubs for Mitchells & Butlers' hotels. "It was an imaginative report that I will not have a lot of sympathy for," Mr Parker added.

Whitbread has about 400 pubs in its portfolio, which also comprises the Costa coffee chain and budget hotel brand Premier Inn.

For the 13 weeks to 29 May, Whitbread bucked the downturn in the hotel and pubs sector by delivering barnstorming total sales up 14.6 per cent and like-for-like sales up 7.1 per cent.

Panmure Gordon analyst Douglas Jack said: "The consumer environment has been tough for the last quarter and when you look at what they have done on like-for-likes it is a resilient performance."

Following the trading statement, Whitbread's shares rose by 48 p to 1270p. Mr Parker said: "You are built up to be knocked down but, hey, we are enjoying it while it lasts.

"It is a glass of champagne in a sea of flat ale."

The engine room of its growth was its budget hotel Premier Inn business, which grew total sales by 18.3 per cent and like-for-like sales up by 10.7 per cent over the 13-week period.

Mr Parker said that its revenue per available room has increased by 6.2 per cent with 8.3 per cent more rooms sold due to expansion. He said: "The rebranding exercise is close to completion and has been well received. Sales through our Business Account card have grown by 40 per cent year on year as corporate travellers recognise Premier Inn's value for money and price."

Panmure's Mr Jack pointed out that 70 per cent of Whitbread's profits come from Premier Inn.

Mr Parker said Whitbread would stick to its policy of charging a smaller increase in price for Premier Inn rooms than its rivals around the time of special events, such as the Farnborough air show in July.

It will open more than 4,000 bedrooms in Premier Inn in its financial year to February 2009, compared to 3,600 last year.

However, Mr Parker admitted that Whitbread faced soaring inflation, with energy bills up by 22 per cent and food costs 8 per cent higher this financial year, compared to last year. "This impacts distribution and other input costs to us," said Mr Parker.

Mr Parker was cautious about the outlook for this financial year. "If the economy deteriorates further we will be affected. I realise we will have to fight tougher to maintain momentum."

Its pub restaurants business, which includes Brewers Fayre and Beefeater, bucked the downward trend in the sector with like-for-like sales up by 3.6 per cent. Meanwhile, its coffee chain Costa delivered like-for-like sales up 6 per cent over the 13 weeks.