Costa coffee perks up Whitbread

A SURGE in annual earnings at the Costa coffee chain has helped leisure group Whitbread offset "the most challenging hotel and restaurant trading conditions for a generation".

The group, which owns Premier Inn hotels and restaurants including Brewers Fayre, yesterday posted underlying pre-tax profits of 239.1 million for the year to 4 March, up 6.6 per cent on a year earlier.

It revealed "outstanding" results at its fast-growing Costa division, with underlying earnings soaring some 60 per cent to 36.2m on like-for-like sales up 5.5 per cent.

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This helped offset a far tougher year for Premier Inn, which saw comparable sales drop 4.3 per cent, while sales edged 1.7 per cent higher within the restaurants business.

But there were signs of a turnaround at Premier Inn at the end of the financial year and Whitbread said group like-for-like sales recovered to growth of 3.1 per cent in the fourth quarter, down 0.5 per cent over the year.

Whitbread added its new year had got off to a good start.

Chief executive Alan Parker, who retires in November to be replaced by former EasyJet boss Andy Harrison, said: "While the level of economic recovery remains unclear, the first seven weeks of the financial year have started well, with positive momentum across the business."

The group's star performing Costa chain has now seen 32 consecutive quarters of like-for-like sales growth and is earmarked for further expansion.

The group plans to increase Costa store numbers in the UK and overseas by 250, or about 16 per cent, over the new financial year. It aims to have 3,000 by March 2015. About 130 of this year's target will be in the UK.

Premier Inn is also in line for growth under a target to increase room numbers by more than 2,500 this year and to 55,000 by March 2015.

An ad campaign featuring comedian Lenny Henry has led marketing efforts to promote Premier Inn hotels, which took a knock during the recession.

Whitbread claimed it outperformed the wider market.

But Premier Inn faces the threat of increased competition from rival Travelodge, which this week launches a major advertising push, including its first television campaign for 20 years.

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Analysts at Numis Securities said they were confident that Whitbread will meet forecasts for double-digit growth in the years ahead. "We believe Whitbread has the balance sheet and brand portfolio to generate attractive growth in 2011 and beyond," they added.

• Travelodge is to build 13 hotels in a 62m scheme which will create some 350 jobs.

The new establishments will add 1,224 rooms to the company's existing 28,000 rooms.