LONDON – Leisure giant Whitbread posted an 18.5% rise in profits to £256m in the six months to August 28, ahead of a company compiled analyst consensus of 249 million.
Owners of the Costa Coffee shop chain unveiled like-for-like sales were up 7% overall, with half-year revenues also growing by 13%to £1.23bn.
Whitbread is to expand into Germany after record demand for rooms at its Premier Inn hotels and a strong performance from the Costa Coffee chain gave the UK group the confidence to take its business model into mainland Europe.
It said today it had bought the freehold of a 200 room hotel in Frankfurt to trial its Premier Inn offering.
“We believe that the German hotel market is attractive for Premier Inn with its large scale, low level of branded budget penetration and relatively similar property market characteristics to the UK,” it said.
Financial Highlights (source: press release)
- Total revenue up 13.0% to £1,293.2 million (2013/14: £1,144.7 million)
- Group like for like sales1 up 7.0%
- Underlying profit2 before tax up 18.5% to £256.0 million (2013/14: £216.1 million)
- Underlying basic EPS up 21.5% to 111.69p (2013/14: 91.94p)
- Interim dividend up 15.6% to 25.20p (2013/14: 21.80p)
- Hotels and Restaurants underlying profit2 up 15.0% to £225.0 million (2013/14: £195.7 million)
- Costa underlying profit2 up 20.5% to £52.4 million (2013/14: £43.5 million)
- Premier Inn total sales up 14.7%, like for like sales1 up 9.6% and total revpar up 8.8%
- Costa total sales up 16.9%, worldwide system sales up 15.5% and like for like sales1 up 6.1%
- Group return on capital3 increased to 15.8% (2013/14: 14.4%)
- Strong cash flow with EBITDA4 up 17.1% to £343.1 million (2013/14: £293.0 million)
- Strong balance sheet: net debt £467.2 million (£391.6 million at 27th February 2014)
Statutory Highlights
- Profit after tax and exceptional items up 7.2% to £188.6 million (2013/14: £175.9 million). Last year’s profit benefited from an exceptional deferred tax credit of £25.1million following the decrease in the corporation tax rate
- Total basic EPS 105.43p up 6.1% (2013/14: 99.33p)
Investing for future profit growth
- On track for 2016 and 2018 growth milestones
- Expected capital expenditure of around £500 million this year, growing our hotel pipeline and Costa estate and further improving our customer experience
- Building Premier Inn and Costa international profit growth platforms
- 1,300 new UK jobs created by Whitbread brands, with a further 10,000 expected over the next three years
Richard Baker, Chairman, said:
“These results build on our strong growth in profits and dividends over the last five years and show the benefit of long term investment in our growth engines – Premier Inn and Costa. The Board is clear that the financial success of Whitbread is also based on its values, looking after its team members and putting the customer at the heart of everything we do. As Chairman of Whitbread, I am determined to maintain these values to the benefit of employees, customers, shareholders and all of our stakeholders.”
Andy Harrison, Chief Executive, said:
“This is a very good set of first half results with total sales growing by 13.0%, driving an 18.5% increase in underlying pre-tax profits. This profit growth converted into strong cash generation with EBITDA4 up 17.1%, boosted by a 1.4% pts increase in our return on capital to 15.8%. Our cash flow is funding our double digit dividend growth and rapid organic expansion which will drive our future profit growth.
Our two market leading brands, Premier Inn and Costa, go from strength to strength and continue to win market share. Premier Inn delivered total sales growth of 14.7% with like for like sales1 growth of 9.6% and record UK7 occupancy at 84.0%. Costa delivered total sales growth of 16.9% with like for like sales1 growth of 6.1% in our UK stores, driven by a 5.0% increase in customer transactions. Our Restaurants business grew its total sales by 4.3%, performing ahead of its industry benchmark5.
The trading momentum of our strong first half performance has continued into the first few weeks of the second half and positions Whitbread well to deliver full year results in line with expectations. The comparatives become more demanding, especially in the fourth quarter, due to the benign winter weather last year which caused minimal trading disruption.
This financial year we expect to invest around £500 million in driving our organic growth and further improving the quality and consistency of our customer experience. We expect to open around 4,500 new Premier Inn UK rooms and around 230 net new Costa stores worldwide. This keeps us on track to achieve our ambitious growth milestones.”
COSTA – Costa produced another excellent performance in the first half with underlying profits up
20.5% to £52.4 million. Total sales increased by 16.9%, driven by good UK Retail and
Enterprises sales growth, together with the opening of 86 net new stores worldwide. Total
worldwide system sales grew by 15.5% to £657.3 million (17.7% growth at constant
currency).
UK RETAIL – Costa has delivered another strong performance, with sales up 15.6% and like for like sales
in our equity UK Retail stores up 6.1%, mainly as a result of like for like transaction growth
of 5.0%.
Costa is also extending its brand presence in the UK with an additional 85 net new stores opened in the first half, taking its total number of stores to 1,840, on track to achieve over 2,200 stores by 2018.
COSTA ENTERPRISES – Costa Enterprises had a successful first half with system sales up 18.1%. Costa Express
delivered a strong performance benefiting from 955 net new machines installed last year and from the 423 net new machines installed so far this year. In total they have 3,938 machines of which 286 are overseas. We plan to install a total of 800 net new machines in the full year. A strong performance was also delivered by Costa Wholesale and Corporate Franchise.
COSTA EMEI – In Costa EMEI total system sales rose by 5.3% (15.1% at constant currency) during the first
half. The franchise business continues to show good growth with particularly strong performances in the Middle East and Ireland. In India the franchise partner is now refocused on specific local markets and by year end they expect the store portfolio will have re-shaped from 123 to around 85 stores. In their European equity businesses, Poland is showing some encouraging signs with the re-branding of 21 stores from Coffeeheaven to Costa and the closure of seven unprofitable stores. In France Costa now has six equity stores in Paris along with three franchise stores and expects to open around a further six new equity stores this year.
COSTA ASIA – China remains an exciting profit growth opportunity and Costa has a total of 335 stores, delivering mid single digit like for like sales growth. Following a period of geographic extension into new provinces, the current focus is to build scale in the cities where they are already present and they expect to open around 40 net new stores this year.
COSTA’S REVENUE – Costa’s revenue increased by 16.9% to £442.8 million. Costa’s UK sales grew to £389.3 million, up 17.6%, with retail like for like sales1 increasing by 6.1% and 85 net new coffee shops. International sales grew by 11.9% (18.7% on a constant currency basis) to £53.5 million with 68 new stores opened and 67 closures.
