Whitbread to focus on hotel growth following Costa sale approval

Whitbread has posted its interim results for H1 (first half) FY19 and CEO Alison Brittain explained how the focus has changed following the Costa sale approval.

The latest results show that revenue increased 2.6% to £1,079m, reflecting continued capacity addition. Total UK accommodation sales grew by 4.8% and like-for-like accommodation sales rose by 0.2%, impacted by weaker consumer demand.

Underlying profit before tax increased in-line with sales by 2.5% to £270m, supported by
tight cost control and the benefit of the ongoing efficiency programme.

The sale of Costa to The Coca-Cola Company for £3.9bn has been approved by shareholders and Costa is now reported as a discontinued operation with statutory profit for the period increasing 3.5% to £47m.

During the period, the company reported that statutory profit before tax was maintained at £257m.

CEO Alison Brittain commented, “The highlight of the first half was the announcement of our agreement for the sale of Costa to The Coca-Cola Company for £3.9 billion, which received the overwhelming approval of our shareholders in October.

'We intend to return a significant majority of the net cash proceeds to shareholders, although the exact amount, timing and method will be determined following discussions with stakeholders, including our shareholders, pension fund and debt providers.

'The sale of Costa now requires Coca-Cola to obtain regulatory approval in the EU and China. 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.'

Brittain continued, '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.

'We have grown the UK network to over 74,000 rooms, with a further 13,000 rooms in our pipeline and we have potential to further extend our growth runway in the UK to 100,000 rooms and beyond. Alongside this material addition of new capacity, we have maintained our leading occupancy rate increased the rate of customers booking with us directly and delivered a strong return on capital.

'In terms of innovation, we have recently announced the trial of a new format in the UK, 'Zip by Premier Inn', which will open in the first quarter of 2019. In Germany, our pipeline is now close to 6,000 rooms, equivalent to 30% of our total pipeline for Premier Inn.

Brittain concluded, 'We are now looking forward to dedicating our focus to the significant structural growth opportunities available to Premier Inn in the UK and internationally. We will be holding an investor day in February to give an update on our ambitious plans to access these attractive opportunities.

'We will provide further detail on how we will enhance our investment in our unique, integrated operating model, which will enable us to maintain our market-leading position and access attractive growth opportunities.

'We will also discuss the optimal capital structure and property strategy to support our growth plans. Ongoing disciplined execution of our plan will continue to deliver sustainable shareholder value through growth in earning and a strong return on capital.”