London, April 28 - Whitbread, owner of Britain's biggest hotel and coffee-shop chains, announced long-term plans to open hundreds more Premier Inn budget hotels and Costa coffee shops as it posted forecast-topping results on Monday.
Demand for frothy coffees and budget hotel rooms remained strong despite the credit crunch as like-for-like sales in the first two months of Whitbread's new financial year grew around 5.7 percent, the same as this time last year, Chief Executive Alan Parker told journalists on a conference call.
Whitbread shares rose 4.3 percent to 1239p by 0854 GMT, making it one of the top gainers on the FTSE 100 and valuing it around 2.19 billion pounds. The European Travel and Leisure index was up 1 percent.
The Dunstable and Luton-based company plans to build at least 100 more Premier Inns next to its Beefeater and Brewers Fayre pub restaurants by 2013, and have 55,000 rooms worldwide.
Whitbread currently owns 518 Premier Inn hotels with 36,000 rooms, making it the largest hotel company in the UK.
With almost 1,000 Costa coffee shops around the world, including almost 700 in the UK, Whitbread wants to double that figure to 2,000, with half the new shops in the UK.
Pretax profits before exceptional items rose 26.3 percent to 210.3 million pounds ($415 million) for the year to Feb. 28, topping a 208 million pound consensus from a Reuters poll of 18 analysts.
"Final results are strong, driven by strong like-for-like sales and expansion," says broker Panmure Gordon analyst Douglas Jack in a "buy" note which maintained forecasts.
Other brokers, including Numis and UBS, expect market forecasts to tick up 2 or 3 percent.
Revenue on continuing operations rose 11.3 percent to 1.19 billion pounds in 2007/08, slightly below the 1.25 billion pounds consensus figure from the Reuters poll.
Asian expansion is important for growth with Whitbread recently announcing plans to open 80 Premier Inn hotels in India within 10 years. It opened its first hotel in Dubai earlier this month, with plans for 50 hotels with Dubai's Emaar Properties.
In the UK it wants a Premier Inn hotel next to each of its 400 pub restaurants.
"The company should continue to outperform most other leisure companies over the medium-term due to its low gearing and ability to drive Premier Inn and Costa expansion/like-for-like sales and remove pub restaurant costs," said Panmure's Jack.
The cost of making food has risen 8 percent in recent times, CEO Parker said, but Whitbread is confident of maintaining operating profit margins at current rates as it cuts costs.
BUILDING OUT, BUYING BACK
Whitbread expects to continue its share buy-back programme in spite of the expansion.
Last year it announced plans to buy back 300 million pounds in shares after it sold health club company David Lloyd.
Whitbread expects to broadly increase spending to fund the large-scale expansion of Premier Inns and Costa brands.
It envisages spending 280 to 300 million pounds each year in the next 2-3 years, Chief Finance Officer Chris Rogers on the conference call, compared with 285 million pounds last year.
It announced a new 455 million pound 5-year loan facility on Monday, secured at LIBOR plus 60 basis points, Rogers said.
It replaces a previous 280 million pounds facility.
"We would anticipate some earnings upgrades and in our view the stock remains attractive at current levels," said broker Numis retail analyst Richard Carter in a "buy" note.
Whitbread proposed a final dividend of 26.9p, up 21 percent, giving 36p for the year, compared to Numis' 34p forecast.
The company was trading on forward earnings of 13.3 times for 2008/09 before Monday's share rise, according to Reuters Estimates.