WTB not clever or flashy but strong24 Oct 2012 11:19
Whitbread is not clever or flashy – and there lies its strength
It is hard to think of another British leisure company investing in its future, and creating jobs, with such confidence
The latest YouGov brand preference survey suggests Costa Coffee is continuing to show a clean pair of heels to Starbucks. Photograph: Lewis Whyld/PA
Costa Coffee bosses are perhaps wise not to hold their breath in expectation of hordes of tax campaigners, intellectuals and poets patronising its 1,479 cafes in protest at the tax affairs of rival operator Starbucks. Reminiscent of Paris's Left Bank they are not.
Nevertheless, the latest YouGov brand preference survey suggests Costa is continuing to show a clean pair of heels to Starbucks in terms of the brand's ranking in the affections of British coffee drinkers. Conducted before last week's scrutiny of Starbucks's UK tax bill, it showed Costa jumping from 28% to 32% in terms of consumer preference in 2012. About half of the gain appeared to be at the expense of Starbucks, now on 23%. The next survey update, conducted at the end of this month, should make for interesting reading.
It is no coincidence that Costa's parent group Whitbread has avoided the kind of tax acrobatics which last week provoked such outrage against Starbucks. The business has long resisted the siren calls of financial engineers promising an easy boost to the bottom line – and to boardroom bonuses.
There is nothing overly clever or flashy about Whitbread. And this simple fact, with the benefit of hindsight, explains quite a lot about how the group has found itself a standout success story in Britain's embattled leisure industry. On Tuesday it delivered yet another strong set of results, with half-year revenue bursting through the £1bn mark for the first time, despite a tough trading environment. Three years ago the figure was £700m.
Much of that growth has been generated by new Costas and Premier Inns sprouting up across the UK, and many more overseas. There are 10,000 more British jobs promised from Whitbread over the next three years. Meanwhile, the shares have climbed 25% in the last six months, to more than £23.
It is hard to think of another FTSE 100 leisure company investing in its future, and creating British jobs, with such confidence. Come to think of it, these days it is hard to think of another FTSE 100 leisure company full stop. Aside from Intercontinental Hotel Group and Carnival – both largely focused overseas – Whitbread is the last remaining leisure group to form part of the blue-chip index.
Relegation has been the story for pub groups Punch Taverns, Enterprise Inns, Mitchells & Butlers as well as for bookmakers William Hill and Ladbrokes. Each has struggled, to a greater or lesser degree, with mountainous debts. Wind the clock back a few years and Whitbread too had been under tremendous investor pressure to follow its peers down this ill-advised path. W
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