Costa owner to create 12,000 jobs by 2018

Picture: Rob McDougall
Picture: Rob McDougall
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Hotels and coffee shops group Whitbread has set out ambitious growth targets for its Costa and Premier Inn chains in a move aimed at creating 12,000 jobs over the next five years.

The expansion drive was unveiled as the leisure firm, which also owns Beefeater and Brewers Fayre restaurants, reported an 11 per cent rise in underlying profits to £356.5 million for the year to 28 February, broadly in line with analysts’ expectations.

Chairman Anthony Habgood said: “Whitbread has grown its total sales in the year by over 14 per cent and continued to produce strong operating cash flows of over £500 million.

“With the Premier Inn and Costa brand propositions going from strength to strength, this growth is set to continue.”

Total revenues across the group grew 14.2 per cent to

£2 billion, with sales at Costa soaring 24 per cent. On a like-for-like basis, which strips out the effect of new stores, takings were up 6.8 per cent.

Profits at Costa, which has more than 1,500 outlets, jumped 29.3 per cent to £90.1m, while earnings from the group’s hotels and restaurants division were 5.9 per cent higher at £313.1m.

Having created 3,000 jobs in the UK during the year, Whitbread announced new targets to grow Premier Inn by 45 per cent to around 75,000 rooms and double sales at its Costa coffee chain to around £2bn by 2018.

Premier Inn opened 4,242 rooms during the financial year, taking the total to 51,671, and Whitbread expects half the additional 23,000 rooms planned by 2018 will be achieved by expanding into new catchment areas.

Chief executive Andy Harrison said: “This exciting organic growth opportunity, together with a clear focus on returns, will continue to create substantial shareholder value.”

Harrison said the group was also planning to expand Premier Inn’s international presence, which currently stands at two hotels in India and four in the Middle East.

“Our committed hotel pipeline now consists of 12 hotels together with eight signed memoranda of understanding in our target territories of the Middle East, India and south-east Asia,” he added.

“In 2018, we expect to have around 10,000 rooms open for business or in our committed pipeline. This would take the cumulative capital commitment from £100m to about £200m.”

Investec analyst James Hollins said: “We applaud a good recent performance, but our concerns over returns dilution longer term, particularly given the new 2018 milestones and doubled international hotels capex budget, remain intact, while a below-market average dividend yield limits ongoing shareholder rewards for tracking the growth programme.”

Whitbread’s board recommended a final dividend of 37.9p a share, to be paid on 12 July, giving a total payout for the year of 57.4p, an increase of 12 per cent on last year.

The group said trading during the first few weeks of its new financial year has been “in line” with its plans, as the un-seasonably cold weather benefited Costa but held back sales at its restaurants.