Underlying pre-tax profits in the half year to August rose 12 per cent to pounds 198m. The figures pushed the shares 11p higher to 801p. Though Whitbread hinted yesterday that it may expand some of its hotel and leisure brands on the Continent, what the market really wants to see are improvements on the return on its existing portfolio. This has been expanded significantly in the last few years by buying David Lloyd Leisure, Pelican restaurants and Marriott Hotels.
Encouragingly, Whitbread pointed out that it has invested pounds 440m in new pub and restaurant openings in the last three years and that the annualised return on capital in 1997/98 was expected to be 16 per cent.
In beer, Whitbread has bucked the trend, improving volumes by 2.4 per cent in a market down 0.8 per cent. In sectors such as take-home, brands like Stella Artois have increased sales by 28 per cent.
If there is a potential problem in the Whitbread portfolio it may be Cafe Rouge. Though it is being expanded successfully outside London, like-for-like growth is just 1 per cent and the central London outlets are suffering from increasing competition.
But with the hotels business storming away with strong rises in occupancy and yields, it is hard to find much to grumble about. On SBC Warburg's full-year forecasts of pounds 348m, the shares trade on a prospective multiple of less than 15. That is a discount to the market and as a defensive stock looks a safe haven in these volatile markets. Hold.