Partner Article

Whitbread lower as its Premier Inn revenue falls

Having opened broadly flat, the FTSE 100 steadily gained ground throughout the day in what many
commentators described as a bounce back from the heavy losses seen in previous trade. Adding
to risk appetite was the strong demand that was evident during the first sale of short term bonds
of the eurozone bailout fund, the EFSF. The fund sold €1.972 billion worth of three month treasury
bills with a bid to cover ratio (i.e. the value of the bids received compared to the funds required)
of 3.2. It also achieved an average yield of 0.2222%, something that can be considered a successful
given this is lower than the yield on comparable French debt. Further, results from the German ZEW
Economic Sentiment Index, a forward looking gauge of economic outlook, showed an improvement
in December, suggesting the country is scraping through these difficult economic times.

Petrofac led the FTSE higher, the oil and gas services company upping its expectations for net profit
growth in 2011 as it works through a backlog of orders. The CFO Tim Weller stated in a conference
call with analysts that they were confident of doubling their earnings by 2015, contributing to its
5.1% daily gain. Other energy companies occupied top spots within the FTSE 100 (albeit with smaller
moves), in response to appreciation in the price of oil (Brent Crude finished up 1.6%).

Whitbread shares fell 3.9% in response to third quarter results, with investors focussing on a
slowdown in revenue from the Premier Inn business of the hotel and restaurant group. Despite the
chain continuing to win market share with its budget status, a sharp fall in sales was blamed on a
grim economic outlook. The group has traded favourably through the year benefitting from hotel
customers trading down to Premier Inn from more expensive alternatives and its Costa Coffee chain
seeing robust demand with beverages seen as an “affordable luxury”. The shares closed down 3.9%
despite guidance that implied the group would meet full year expectations.

With the index trading around 1.8%, sentiment was hurt nearing the close of trade following
rumours that Angela Merkel had rejected raising the €500 billion cap on the European Stability
Mechanism, the proposed replacement to the EFSF. The FTSE initially lost around 40 points (0.7%)
from its peak, although with the day’s early gains ensured the index closed at 5490, 1.2% higher for
the day.

This was posted in Bdaily's Members' News section by John Dance .