Whitbread targets Coffeeheaven

Published on Saturday 12 December 2009 13:31

ALL EYES will be on Costa Coffee owner Whitbread's trading update this week as speculation mounts that it is preparing to buy European chain Coffeeheaven International.

Whitbread issued a statement to the stock exchange on Friday that it was in "advanced discussions" with Coffeeheaven, after rumours spread about the possible takeover.

It confirmed it was considering a 24p-per-share cash offer for Coffeeheaven, which values the firm at 32 million.

Coffeeheaven has 92 outlets across Central Europe. Most are in Poland, the Czech Republic and Latvia. It is listed in London but based in Warsaw.

Whitbread already owns 400 Costa Coffee shops abroad but its outlets in Poland are run as franchises.

Whitbread's most recent quarterly results revealed a 70 per cent rise in operating profits at Costa in the six months to 27 August while revenues were also up 21 per cent to 155.4m.

The company's hotel division, which runs the budget chain Premier Inn, has experienced a tougher time as travellers cut back, but the decline in sales appeared to be easing at the half-year. Like-for-like sales were down 7.5 per cent compared to a 7.7 per cent drop previously.

Tim Ramskill at Credit Suisse said that meetings with Premier's rival Travelodge showed conditions in the budget hotel sector appear to be improving. He has put an "outperform" recommendation on Whitbread's shares.

Wyn Ellis of Numis Securities says "Whitbread's brands are helping to drive gains in market share". It also owns a series of pub chains including Beefeater and Brewers Fayre.

Bands such as The Gossip, Bat for Lashes and the re-release of Beatles recordings are expected to have lifted music group Chrysalis into profit when it posts annual results on Thursday.

The label has said it will beat its own forecasts for the year and analysts are pencilling in pre-tax profits of 200,000 before one-off items, up from a 1.1m last year.

Further progress is expected to be made in the current financial year following the release of digitally remastered Beatles tracks. Chrysalis owns Beatles producer George Martin's master rights to several of the albums.

Unemployment is expected to hit 2.5 million when the latest figures are revealed on Wednesday. The rate at which British firms are laying off staff has eased substantially since the height of the recession, leading some economists to predict that unemployment will peak at 2.7m as opposed more than 3m. Around 30,000 are thought to have joined the ranks of the unemployed in the three months to October.

Inflation is tipped to creep closer to the Bank of England's 2.5 per cent target when the latest Consumer Prices Index (CPI) is unveiled on Tuesday.

It is predicted that CPI will hit 1.8 per cent as the cost of living slowly creeps back up but inflation is expected to surge to 3 per cent in the new year when VAT returns to 17.5 per cent.