Is Change Coming For Whitbread?
Spreadex | Apr 18, 2018 11:07
2017 was a topsy-turvy year for the Costa Coffee and Premier Inn-owner. Though it only rose 5.6% across the 12 months, that period encompassed £43-crossing 7 month highs and £35-grazing 11 month lows.
(Source: Spreadex, 18/04/2018)
This year, in contrast, has been far calmer, with the stock gradually drifting from an opening price of £40 to a 4 month nadir of £36 by the start of April. However, some significant shareholder news – more on that below – has revitalised the stock, with Whitbread PLC now sitting at a current trading price of £39.36.
That recent surge came following the reveal that Elliott Advisors – the activist investor that backed Melrose’s hostile takeover of GKN (LON:GKN) and is urging BHP Billiton (LON:BLT) to drop its dual-listing structure – had become Whitbread’s largest shareholder with a 6% stake. Reports suggest that, like US hedge fund Sachem Head who own a 3.4% stake in the firm, Elliott Advisors want Whitbread split in two, the main focus being on spinning Costa Coffee off as its own entity.
In Whitbread’s most recent update, January’s third quarter results, Costa saw an 8.3% jump in total sales for the year to date, but with a slightly slower 6.9% increase in Q3. The chain’s UK like-for-like performance wasn’t quite as strong; though up 1% for the year to date, in the third quarter comparable sales actually fell 0.1%, with the company blaming ‘weakening footfall’ on the high street.
As for Premier Inn, the hotel brand saw a 4.7% rise in total sales in Q3 alongside a 5.9% increase for the year to date, the discrepancy between these numbers and those posted by Costa reigniting the calls to separate the two.
Such speculation will put the coffee chain in the spotlight next Wednesday, as investors try and gauge how much added value Costa could find as a standalone company. For Whitbread to maintain its recent momentum then Costa needs to show that its like-for-like sales didn’t carry Q3’s downward trend into Q4.
Whitbread PLC (LON:WTB) has a consensus rating of ‘Hold’ alongside an average target price of £41.40.
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