Interest rates: No suprises

Grainne Gilmore

The Bank's decision to hold rates at 5 per cent for the fifth month in a row comes as little surprise. Despite forecasts that the country is set to enter recession, there is little that the nine-member Monetary Policy Committee (MPC) can do until it is sure that inflation is starting to fall. But what the markets are waiting for now is a peek at the minutes of the meeting, due to be published on September 17. This will give some indication of how seriously the committee debated a rate cut and may give an indication of when rates may fall. Some analysts predict it will be as soon as November, while others believe that the Bank will not be free to act until early next year.

Whenever the next rate cut is, homeowners are unlikely to benefit unless the funding crisis in the mortgage market has been cured. While the interbank lending rates, which determine the price of mortgage lending, usually move in line with the base rate, they have been inflated by the lack of mortgage funding available. In addition, even if the interbank rates do fall, it is questionable whether all lenders, keen to boost their profits after a disastrous year, will choose to pass on the full cut in borrowing costs to borrowers

Unilever: Dutch courage

Carl Mortished

Few at Unilever can have expected this bombshell when Michael Treschow, the mild-mannered Swedish chairman, took over in the boardroom last year. It's not just that he has appointed an outsider as chief executive, over the heads of a clutch of very plausible internal candidates. He has brought in an outsider from that unmentionable company, Nestlé and, worse still, the boss-designate spent all of his early career at an even more dreaded competitor, Procter & Gamble (P&G). From an internal Unilever perspective, reading Paul Polman's curriculum vitae must be like an MI6 officer reading a dossier on a KGB agent, who might be tempted to cross over.

Indeed, Mr Polman's CV is like a list of Unilever front-line positions in the company's never-ending battle for market share and sales supremacy. He ran fabric care for Proctor & Gamble from 1998 to 2001and then headed the European businesses until 2006, when he switched horses to take on the top finance job at Nestlé. His arrival will no doubt result in a few jokes about a Proctoid invasion amid a lot of internal nervousness. This guy knows Unilever's strengths but he also knows its weaknesses.

Of course, that is precisely why the new chairman chose the outsider, who is, conveniently, Dutch. In a recent interview with The Times, Mr Treschow made clear that he believed Unilever had great marketing, great brands and great salesmanship. What it needed, he said, was consistent delivery. That has been where Unilever's rivals have given the Anglo-Dutch company a knock and a bruise. After more than a decade with P&G, Mr Polman will have deeply ingrained within him the virtues of consistent delivery. If he can bring some of that discipline to bear without sacrificing Unilever's great strengths — its imagination and cultural diversity — the share price, up more than 6 cent this morning, will carry on soaring.

Whitbread: Premier league

Nick Hasell

A day after Punch Taverns’s surprise dividend cut destroyed investor sentiment on 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 Coffee gained nearly 4 per cent 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 see 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 just 1 per cent in the last 11 weeks - is mitigated by strong year-on-year comparisons (they were up 10 per cent this time last year). It is also much as expected.

The comfort is that Costa can only do limited damage: it is Whitbread’s smallest division. Conversely, Premier is its biggest, accounting for over 70 per cent of profits.

With low gearing, strong cashflow and a vigorous five-year expansion plan still on track, Whitbread, at 12 times current year earnings, remains, like a budget hotel, a good place to shelter in turbulent times. Hold.

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