Whitbread announce revenues of over £1bn following Costa Coffee sale - Business Leader News

Whitbread announce revenues of over £1bn following Costa Coffee sale

Costa Coffee

Whitbread has announced a 2.6% rise in revenues to £1.07bn, with underlying profit before tax increasing 2.5% to over £270m.

Profit rose 3.5% to £47m at Costa Coffee, which is now categorised as a discontinued operation following the agreed sale to Coca Cola for £3.9bn earlier this year.

Total UK accommodation sales at Premier Inn rose by 4.8%, although this was driven by new hotel openings; like-for-like sales grew by just 0.2%. The interim dividend increased 4% to 32.7p per share.

Shares in the international firm fell 2% in early morning trading today.

Laith Khalaf, Senior Analyst at Hargreaves Lansdown said: “The economic environment is challenging for Whitbread, though the company has still turned in a decent performance in the first half of the year. Alison Brittain is clearly keen to give the market a taste of what life after Costa will be like, with the coffee chain demoted to a minor part in Whitbread’s half year results.

“Sales at existing Premier Inn hotels are flat, but that’s not to be sniffed at given the weak consumer environment, and the fact Whitbread has added 14,000 new rooms to its portfolio in the last three years. To lend some perspective, that’s 2.5 times the combined total of rooms added by Travelodge, Holiday Inn Express, and Ibis over the same period.

“Whitbread isn’t going to stop there either, with a further 13,000 new rooms in the pipeline, and the introduction of a new super-budget Zip format, which will launch in Cardiff next year.

“The real growth opportunity lies in Germany, where the hotel market is 35% larger than the UK, but the branded budget hotel segment only accounts for 6% of the industry, compared to 24% here in the UK. Little wonder then that Whitbread is looking to open 33 hotels across 15 German cities by 2021.

“That expansion plan will be helped by the cash flowing in from the sale of Costa to Coke for £3.9 billion, which still has a couple of regulatory hoops to jump through. We don’t know precisely how this cash will be allocated between paying down debt, funding the pension scheme and returns to shareholders, though the latter will make up the lion’s share.

“Whitbread will be a slower and steadier business once Coke has swallowed Costa, though this latest announcement showcases the company’s ambitions for Premier Inn, which are due to be further fleshed out in February.”