Whitbread: The debate about
whether Whitbread will, or should, spin off Premier Inns will rumble on. For
now, the group just keeps churning out good results raising the question of how
much should investors pay for long term visibility of growth? The mapped growth
path to 2016 and 2018 is being kept to and, today, targets for 2020 have been
unveiled. It has also been announced that CEO, Andy Harrison is to retire next
year, having been at Whitbread since 2010. In his early years at Whitbread
there seemed to be rumblings of discontent in the ranks, but a share price that
was in the 1600p ballpark when he arrived and is now 5330p stands as a
testament to his tenure.
In these annual results to 26th February 2015 revenue was up
13.7%, eps up 19.4% to 213.67p with the dividend raised by the same percentage
to 82.15p. The return on capital employed edged up from 15.3% to 15.7% with
£714.2m of operational cash generation. Against this, capex of £565.3m played
its part in net debt reaching £583.2m, up from £391.6m a year ago, but net debt
to EBITDA is still only 0.84x. The 2020 milestones see the number of Premier
Inn UK rooms growing from c59,000 to c85,000 (+44%) and Costa system sales
rising from £1.4bn to c£2.5bn (+79%), underpinning good profit growth expectations.
On top of this they are building up their international Premier Inns business,
which has yet to move into profit, whilst the restaurant business ticks along
in the background.
So percentage eps growth in the teens over the next five years looks
achievable, with the 235p consensus for FY2016 being a PE of 22.7x. It has to
be said that this looks a bit toppy for the growth on offer, but there is an
extra premium in there for the sheer reliability of the recent Whitbread track
record. Steady dividend cover at 2.6x points to a 90.4p dividend, which is a
1.7% yield. Not enough to really excite yield investors, unless they feel that
the steady growth makes up for the low starting level. It all seems too dear to
me, but I came to a similar conclusion in October 2014, when the share price
was around……4200p. (Neil Cumming, 28th April 2015)
These comments are not a personal
recommendation to deal. Any investments can fall as well as rise in value, so
you could get back less than you invest. I may have a financial interest in
some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk Twitter: @DividendPower
No comments:
Post a Comment