A day after Punch Taverns’ surprise dividend cut destroyed investor sentiment on a swath of the leisure sector, Whitbread’s second-quarter trading update did its level best to restore it.

Shares in the owner of Premier Inn and Costa produced one of the few gains in the FTSE 100 after the company reported a 7.0 per cent advance in like-for-like sales – maintaining the resilience it showed in the first quarter.

Once again it was Premier Inn that stood out, with a 10.2 per cent rise in like-for-likes, providing further evidence that tougher times are prompting business travellers to seek out more modest lodgings.

Its pub restaurant division, comprising the made-over Brewers Fayre chain, also fared well, with sales actually strengthening on the quarter.

The only sign of weakness came at Costa, where, like Starbucks before it, the coffee chain is feeling the effect of a consumer slowdown. The extent of the second-quarter slide in sales – from a 6 per cent advance to only 1 per cent in the past 11 weeks – is mitigated by strong year-on-year comparisons (they were up 10 per cent this time last year). It was also much as expected.

The comfort is that Costa, as Whitbread’s smallest division, can do only limited damage. Conversely, Premier is by far its biggest, accounting for nearly three quarters of profits of the slimmed-down Whitbread, against one quarter four years ago.

Not that Premier’s sales are likely to carry on growing at their recent double-digit pace. Alan Parker, Whitbread’s chief executive, concedes as much. However, with its rooms typically half the price of three and four-star hotels and its business account scheme helping to encourage repeat business – as well as enabling companies to control their employees’ travel expenses – any moderation should be modest.

Meanwhile, this year’s merger of the divisional management structure of Whitbread’s hotels and restaurants appears to have had no adverse effects, while cost inflation in food and wages – running at between 4 per cent and 5 per cent – is being partially offset by menu changes and promotional activity.

At a time when leisure stocks suffer from stretched balance sheets, Whitbread enjoys low gearing (net debt of about £580 million) and strong cashflow. Yesterday’s statement was also notable for highlighting the company’s ability “to take advantage of additional growth opportunities” – which suggests that investors may expect further deals in the vein of July’s asset swap with Mitchells & Butlers.

With its five-year expansion plan still on track and operating profits forecast to carry on growing in double digits, Whitbread, at £11.27, or 12 times current-year earnings, remains, like a budget hotel, a good place to take refuge in tough times. Hold.

Imagination Tech

Imagination is something that backers of this £150 million semiconductor designer have needed plenty of. Its shares sit at the same level as they did five years ago as hoped-for surges in revenues from licensing fees and Pure digital radios have proved slow to materialise.

Although June’s full-year figures from Imagination Technologies showed a strong pickup in licensing sales, weaker than expected royalty income – a bigger influence on near-term profitability – removed some of the shine.

But a sphinx-like statement from the company yesterday suggests that its fortunes are improving. It named neither the customer nor the value of a deal to license its graphics and video chip designs, but the best guess is that it is Apple. Although Imagination supplies technology to the iPhone and iPod Touch, it does so indirectly. However, this new agreement is direct, implying a higher rate of royalties than before.

There are other modest grounds for optimism, not least the recent strengthening of the dollar, which will boost the profitability of its technology division, which books sales in dollars but bears costs in sterling. Longer term, there are signs that 3D graphics – where Imagination’s competitive advantage lies – are being incorporated into more and more consumer devices, from mobile handsets to satellite navigation equipment.

The trouble is that royalties are slow to feed through, and that semiconductor designers remain hostages to the fortunes of both licensees and their electronics customers. With economic slowdown likely to put pressure on pricing and R&D expenditure, Imagination is especially vulnerable to weakness at Texas Instruments, its biggest client. Moreover, the shares, at 33 times this year’s earnings, on Landsbanki forecasts, falling to 14 times next, are not obviously cheap. That suggests that, at 70¾p, it is better to wait for November’s first-half figures for a clearer view. Avoid.

McBride

As Europe’s biggest supplier of own-label household and personal care products, McBride might be expected to be feeling the benefit of tougher times.

Unfortunately, there was little evidence of it in yesterday’s full-year results. Although headline sales were up 18 per cent, they were down 2 per cent once the effect of currency and acquisitions had been stripped out. The culprit was the soaring cost of raw materials, on which McBride spends £400 million a year.

The pace of recent oil price rises means that the company has had to spend much time renegotiating contracts with customers: a hiatus branded rivals have taken advantage of to launch vigorous promotions. Pretax profits, down 34 per cent to £21 million, should recover as McBride recoups its costs. However, net debt of £103 million, a flat full-year dividend of 5.6p and a current-year earnings multiple of 11 times offer little attraction at 102p. Avoid.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive