Whitbread

Wednesday, 27th June 2018 09:55 - by Rajan Dhall

Whitbread released earnings for Q1 this morning, but the company's main story remains the demerger of it's Costa Coffee brand. The Group stated group total sales growth of 3.2% and said they are making good progress with efficiency savings also the company is expect to deliver full year results in-line with expectations. As for the performance in its individual units, Premier Inn UK total accommodation sales growth was 4.3% driven by investment in new hotels and Costa UK total sales growth of 5.2% through new store growth and Costa Express expansion.

The company also commented about the Costa coffee demerger saying ' Whitbread committed to demerge Costa from Whitbread as fast as practical and appropriate to optimise value for shareholders. Constructive early steps have been taken in preparation for the demerger and good progress continues to be made on the core infrastructure and efficiency work that was already underway. A further update on the demerger will be provided alongside the interim results in October 2018.'

Looking at the chart we have recently seen a dip through the value area at 3934p. This mornings update does not suggest anything that could make sentiment worse, but news that Costa Coffee revenue will be off the books would hit any business as it continues to perform well. A break of 3646p is the support level I am most interested in as it could indicate a move to the 3292p low. As more details emerge about that move I do expect some more bearish sentiment but there will be a point were traders will find value.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.