Coming off caffeine: Premier Inn opens more rooms as owner Whitbread looks to life after Costa
Costa owner Whitbread grew revenues 2.6 per cent in the first half, as it looks to move away from the coffee business it sold to Coca-Cola.
The results
Revenue increased to £1.08bn, largely driven by tourism and growing capacity as it continues to expand its Premier Inn chain of hotels.
Read more: Whitbread shareholders vote Coca-Cola's Costa merger through
Underlying profit before tax grew 2.5 per cent year-on-year to £270m.
Costa's profit, now counted as discontinued operations, grew 3.5 per cent to £47m.
The company's earnings per share rose 2.4 per cent to 118.2p from 115.4p last year, while the dividend grew four per cent to 32.7p.
Why it's interesting
Whitbread is midway through a sale of Costa to Coca-Cola, which has received almost unanimous backing from shareholders as the company doubles down on growing its hotel chain Premier Inn.
Accommodation sales in the UK grew 4.8 per cent, however like-for-like sales remained virtually flat at 0.2 per cent.
Premier Inn’s international growth strategy includes plans to open 6,000 new rooms in Germany, a third of its total pipeline, in a market largely untouched by big chains.
In the UK it plans an extra 13,000 rooms, adding to its stock of 74,000. Over the last three years the firm has opened over twice the number of new rooms of Travelodge, Holiday Inn Express, and Ibis combined.
It has also begun to trial Zip by Premier Inn – no-frills accommodation with rooms less than half the size of a regular Premier Inn room, which it hopes will build on the popularity of cheap accommodation.
Shares dropped nearly two per cent on the results this morning.
Earlier this month Whitbread shareholders supported the company’s proposed £3.9bn sale of Costa to US beverages giant Coca-Cola.
The deal is still pending regulatory approval in Europe and China, though Coca-Cola expects it to close in the first half of 2019.
Whitbread has yet to say how it plans to return a majority of the proceeds to shareholders.
What Whitbread said
Chief executive Alison Brittain said: "Much work still remains to be done to ensure a smooth and successful separation from Whitbread at completion and during the following transitional service period, which we are confident in our ability to execute efficiently.
"Following the sale of Costa, Whitbread will be a focused hotel business with operations in the UK, Germany and the Middle East. In the first half of the year, Premier Inn delivered total UK accommodation sales growth of 4.8%. Although we have seen some weakness in consumer demand over the summer, we have made further encouraging progress with our efficiency programme, ensuring we remain on track with our plans for the current year."
What analysts said
Hargreaves Lansdown analyst Laith Khalaf 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.
Read more: Coca-Cola moves for Costa coffee brand in £4bn deal
“[Chief executive] 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.
“The real growth opportunity lies in Germany, where the hotel market is 35 per cent larger than the UK, but the branded budget hotel segment only accounts for 6 per cent of the industry, compared to 24 per cent here in the UK. Little wonder then that Whitbread is looking to open 33 hotels across 15 German cities by 2021.”