Bottom Line: Whitbread cheer

WHITBREAD'S interims are a triumph in the face of adversity. Despite a fall in drinks sales - the main operating division by turnover - it has managed to push pre-tax profits ahead.

That vindicates its strategy of using cashflow from drinks sales to develop growth areas such as food retailing. There, a strong performance has given it confidence to open more Brewers Fayre, Beefeater and Pizza Hut restaurants.

At the same time Whitbread is learning. The 16 new Brewers Fayres have sales running at about pounds 13,000 a week, whereas the 200 old ones average about pounds 10,000. Recent innovations like the Charlie Chalk Fun Factory, where children can be left while their parents have a quiet meal, should bring in more family custom.

The key question now is what will happen to the stakes in regional brewers which Whitbread will soon take from Whitbread Investment Company. Whitbread is non-committal but makes noises about reducing their sizes. It may decide, however, that Boddington, the pub company, has enough attractive properties to make it worth buying the remainder.

On a prospective p/e of about 15 the shares remain the sector's highest rated, but the premium 4.5 per cent yield has attractions.