Costa helps Whitbread grind out profits

COSTA Coffee-to-Premier Inns hospitality group Whitbread will outline its international expansion plans this week as annual results are set to show it has been one of the recession "winners".

A number of companies are emerging the other side of the recession stronger than they went in and Whitbread is firmly in that category," Nick Batram, leisure analyst at broker KBC Peel Hunt, said.

The twin-drivers of the group's resilience in the downturn have been business people trading down to budget and three-star accommodation to save costs, and coffee proving not to be a discretionary purchase when times are tough.

Batram said: "Costa Coffee and Premier Inns have been equally impressive. It's clear from the strong sales that consumers obviously decided that coffee was far from any luxury, discretionary item when things got tight, but a small-ticket habit.

"And Premier has benefited from an element of business people trading down.It has really eaten into the 3-star market."

In its March trading update Whitbread – where former easyJet boss Andy Harrison will become chief executive designate on 1 September – said Q4 sales at Whitbread had shot up 9.5 per cent. Outgoing chief executive Alan Parker, who leaves on 25 November, snapped up 89 new sites for Costa stores in Europe this year via the acquisition of the coffeeheaven group.

In the year 185 new Costa stores were opened in the UK, and a net 32 across international markets, where they are frequently run as franchises.

One analyst said: "I think Parker will say Costa will remain the company pacesetter for international expansion. On the hotels side, Premier only has three outlets in Dubai, one in India and one in the Republic of Ireland.

The City consensus for Whitbread's annual underlying pre-tax profits on Thursday is 225.5m against 224.4m the previous year. Consensus earnings per share forecast is 94p (91p), and for the full-year divi payout to remain flat at 36.5p.