Premier Inns and Costa set for major expansion

WHITBREAD yesterday set out ambitious plans for 50 per cent more Premier Inn rooms in the UK despite the group forecasting a very slow recovery in consumer confidence.

The leisure firm said it also planned to double the size of its Costa coffee shop business as it unveiled a 20 per cent jump in full-year underlying profits to 287.1 million.

Whitbread, which offloaded its brewing business more than a decade ago, ended its financial year to 3 March with 44,295 Premier Inn rooms and 1,871 Costa stores.

But under medium-term growth plans unveiled by chief executive Andy Harrison the group aims to increase Premier's UK capacity by 50 per cent to at least 65,000 rooms. This will include 4,000 additional rooms in the current financial year.

For Costa, it expects continuing rapid growth in the UK store network and "even faster international growth" as the group looks for sales of around 1.3 billion and 3,500 stores worldwide within the next five years.

Both brands are seen as offering strong value for money and have helped Whitbread cope with the economic downturn. The firm has cut room prices at Premier to as little as 19 a night to woo leisure and business travellers trading down from more upmarket hotels.

Harrison said that despite a "challenging" consumer backdrop, the group was "confident that we will continue to outperform, based on the strength of our brands and our customer propositions".

But he warned that he did not expect an imminent improvement in the consumer environment.

"Confidence is low," he said. "I don't see any improvement for probably at least another year. I think we're in for a very slow, almost flat recovery."

One survey, published yesterday, showed British consumer morale had unexpectedly deteriorated in April to its gloomiest since the UK was in the depths of recession.

Whitbread, which also owns the Beefeater and Brewers Fayre pub restaurant chains, said that, although sales growth remained positive in the first quarter of the year, it was at a lower level than that achieved in the fourth quarter.

Premier's drive for more of the leisure market, backed by an advertising campaign featuring comedian Lenny Henry, resulted in occupancy of 76.2 per cent in the financial year, up 6.6 per cent on a like-for-like basis.

Premier Inn revenues rose 11 per cent to 698.6m, while the restaurants brands Beefeater, Brewers Fayre and Table Table - all part of Whitbread's hotels and restaurants division - lifted 2 per cent to 474.1m.Costa's sales jumped 28 per cent to 659m after another strong year of growth, with like-for-like sales up 7.8 per cent in the UK, the company added.

Keith Bowman, an analyst at Hargreaves Lansdown, said: "With UK living standards effectively in decline, the leisure and hospitality sector remains subject to consumer sacrifice.

"Furthermore, competition in the group's fields remains intense, while costs in the form of coffee and food prices continue to rise.

"For now, whilst a value ethos has endeared the shares to investors, today's results have raised uncertainties."