Whitbread focused on life after Costa

In its first set of results after agreeing to sell Costa Coffee to Coca-Cola, Richard Hunter, head of markets at interactive investor, looks at the numbers for the remaining business.

Whitbread is in something of a holding pattern at present, with the Costa Coffee sale leaving Coca-Cola requiring regulatory approvals. In addition, the exact distribution of the proceeds is yet to be decided, although the intention is to return the vast majority to shareholders, while reducing some of its debt and the pension fund deficit.

In the meantime, there is a renewed focus on Premier Inn by management and investors alike, as the company aims for a portfolio of 100,000 rooms in the UK and also has further international ambitions, with the burgeoning branded hotel sector in Germany being a particular focus. 

Given that the UK market is showing some signs of saturation - one of the reasons for Whitbread's innovative "Zip" rooms, which are to be launched early in 2019 - the structural shift in the larger German hotel market means that it is a legitimate target where the company potentially has much to bring to the table. 

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In terms of the half-year figures, revenues and underlying pre-tax profit have shown some growth, cost control remains in focus and the ongoing return on capital of 12.4% is reassuring. 

Meanwhile, discretionary free cashflow remains strong, partially enabling an increase to the dividend, although the projected yield of 2.3% is not, of itself, an attraction. 

Past performance is not a guide to future performance

There may be some concerns around management focus as the Costa sale is executed, and the resultant Whitbread business will naturally lack some of its previous diversification.

Nonetheless, the separation of the business has long been called for by investors and the sale of Costa has helped the share price rise by 13% over the last three months. 

The performance is the same over the last year, as compared to a 6.4% decline for the wider FTSE 100 and, although the company is in the throes of an important strategic change, sentiment remains positive, with the market consensus of the shares coming in at a 'cautious buy'.