Whitbread set to serve Spanish ace

WHITBREAD'S reinvention of itself from brewing and pubs giant to specialist leisure business took another step forward on Monday.

The owner of Marriott hotels, Travel Inn and Brewers Fayre restaurants hopes to serve up a winner by taking its David Lloyd Leisure health clubs into Spain with the £10m purchase of a Barcelona tennis club.

Whitbread is also taking a small stake in Spanish racquets and gym business Bonasport and is getting a seat on the board to help it scout around for more expansion opportunities.

After years of being slated for wasting shareholders' money on costly acquisitions and failing to develop decent brands such as Cafe Rouge, Whitbread is winning investors around through its slower but safer strategy of growing best-performing divisions like David Lloyd.

The shares, up 3p to 728p, have outperformed the FTSE All-share index by 33% this year. Cazenove, which rates the stock a long-term buy, has upgraded its earnings forecasts for the next two financial years. Whitbread will be hoping for further re-ratings if it can prove its best brands have got legs. It aims to open three to four more David Lloyd clubs in Barcelona and Madrid over the next two years.

Better-than-expected first-half results from HSBC lifted the banking sector and sent the FTSE 100 up 49 points at one stage. But the blue-chip index closed just 1.7 points higher at 4100.1 following an early Wall Street slide. The pound was trading marginally higher at $1.61, but failed to keep pace with the euro at 70.5p.

EMI went straight to the top of the charts, up 5p to 147 1/2p, on reports that it has held bid talks with venture capital group Blackstone about going private in a £2.5bn deal including debt. Fears are growing that EMI, hit by falling sales and growing music piracy, will miss out on any industry mergers with players such as Warner or Bertelsmann, or be forced to do a deal from a position of weakness.

Shire Pharmaceuticals topped the list of blue-chip fallers, down 20 1/4p to 449 1/2p, after previous buyers ING downgraded the stock to a hold. ING says Shire's biggest drug Adderall XR, for hyperactive children, now accounts for 34% of total sales leaving it vulnerable if a cheaper copy of the medicine is launched.

British American Tobacco puffed 9 1/2p higher to 654p after the Serbian government confirmed it as the winning bidder for a majority stake in state tobacco company Duvanska Industrija Vranje for £35m. BAT will invest £16.8m in factory modernisation.

Price war worries sent Carphone Warehouse down 1 3/4p to 111 3/4p. Rival Phones 4U, run by self-made nearbillionaire John Caudwell, has kicked off a 'Phones 4 Less' promotion promising £20m of handset discounts.

More bad news for investors in Aberdeen Asset Management, down 2p to 53 1/2p. Aberdeen, rocked by the split cap investment trust scandal, has failed to sell its property side to British Land, 6 1/4p lower at 493p, in a dispute over price.

Electronics and ceramics engineer Cookson rose 1 1/2p to 29p as traders speculated that it is close to selling Speedline, its £20.6m loss-making electronics equipment unit in the US.

Professional support services firm Mouchel, with contracts including management of sections of the M25, cruised 11 1/2p higher to 181p. Investors welcomed its expansion into gas engineering consultancy with the acquisition of GEL Group in a deal worth up to £5.7m.

A vague takeover rumour failed to lift Medisys, down 3/4p to 23 1/2p.

Manchester United slipped 1/4p to 160 1/4p despite positive words from broker WestLB highlighting its long-term growth potential in media rights exploitation. WestLB begins research coverage of the stock with a 'neutral' rating and a 175p price target.

Speciality chemical firm Yule Catto slumped 46p to 323 1/2p after German drugs firm Schwarz Pharma, which is supplied by Yule with the active ingredient for a heartburn medicine, warned that it could not confirm this year's earnings targets.