Whitbread profits froth to £175m

The Costa Coffee and Premier Inn owner has seen profits rocket over the past six months. Who said it's a bad time for retailers?

by Emma Haslett
Last Updated: 28 Feb 2012
Downturn? What downturn? There’s no sign of that in the first-half results of Whitbread, the company behind Costa Coffee and Premier Inn. Growth increased by a recession-busting 15% in the first six months of the year, while its profits smashed expectations, hitting a caffeine-fuelled £174.9m. That said, the company hinted that things might not continue to go quite as swimmingly as the year goes on. Although £2 isn’t that much to pay for a piping hot skinny cappuccino at 6am…

Given that stonking performance, it’s a shame Whitbread got caught up in market fears over the eurozone debt crisis, and the share price slipped by 2p. But it has plenty of cause to be proud: underlying profits at its hotel and restaurant business grew 8.5% to £167.1m, with like-for-like sales at Costa growing by 6.7%, and 5.2% at Premier Inn. All of that means shareholders are in line for a 56% rise in interim divis – so they should have smiles on their faces, despite that fall in the share price.

Whitbread may be Britain’s biggest hotel and coffee shop operator (although it’s not clear whether that’s combined or separate. It may well be Britain’s only hotel and coffee shop operator). But Costa is, without a doubt, Whitbread’s out-and-out success story. There are now three Costa Drive-Thrus in the UK, with another 10 planned, and the company is also expecting to open another 300 stores over the next six months, bringing the global total up to 3,500. That’s all been helped along nicely by the launch in August of ‘Costa Light’, a low-cal, low-caffeine version of its coffee, which accounted for 1-2% of coffee sales within a month.

With business travellers trading down from four- and five-star hotels, Premier Inn has done just as well – it’s now on track to hit its five-year target to expand the chain by 65,000 rooms across the world. Who knew purple would be that popular – or Lenny Henry, for that matter? Although its restaurant business (which includes Beefeater and Brewers Fayre) isn't doing quite so well, with a 1.6% fall in like-for-like sales.

Despite all its success, though, there are indications that Whitbread is bracing itself for a tougher few months: not only did it warn that trading is ‘variable’, but CEO (and ex-EasyJet CEO) Andy Harrison said it’s ‘on track to deliver full-year results in line with expectations’. Having breezed past forecasts for the first six months, you’d have thought it would be on track to deliver results that were way above expectations for the total year. Which just goes to show that even the most successful of companies are battening down the hatches in preparation of the storm a-brewing across the channel….  

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