Whitbread turns up focus on Premier Inn

Premier Inn owner Whitbread has reported steady first-half results as it prepares to focus on the growth of its hotels business following the multi-billion-pound sale of the Costa Coffee chain to Coca-Cola.

The Premier Inn business currently boasts more than 74,000 rooms in the UK. Picture: Whitbread
The Premier Inn business currently boasts more than 74,000 rooms in the UK. Picture: Whitbread

The group posted a 2.6 per cent rise in revenue to £1.08 billion for the six months to 30 August, while statutory profit before tax nudged up 0.2 per cent to £257 million. Underlying profit before tax rose 2.5 per cent to £270m.

The group declared an interim shareholder dividend of 32.7p, an increase of 4 per cent on a year earlier.

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Costa, which Whitbread is selling to soft drinks giant Coca-Cola for £3.9 billion, saw profit grow 3.5 per cent to £47m in the half-year period.

Premier Inn enjoyed total UK accommodation sales growth of 4.8 per cent, but like-for-like revenues rose just 0.2 per cent, which Whitbread said was due to weaker consumer demand.

Chief executive Alison Brittain said: “The highlight of the first half was the announcement of our agreement for the sale of Costa to the Coca-Cola Company for £3.9bn, which received the overwhelming approval of our shareholders in October.

“We intend to return a significant majority of the net cash proceeds to shareholders, although the exact amount, timing and method will be determined following discussions with stakeholders, including our shareholders, pension fund and debt providers.”

She said that, following the disposal of Costa, the group would focus on the expansion of the Premier Inn business.

The UK arm has more than 74,000 rooms, with a further 13,000 rooms in the pipeline and international growth also on the agenda.

Brittain added: Following the sale of Costa, Whitbread will be a focused hotel business with operations in the UK, Germany and the Middle East.

“In the first half of the year, Premier Inn delivered total UK accommodation sales growth of 4.8 per cent. Although we have seen some weakness in consumer demand over the summer, we have made further encouraging progress with our efficiency programme, ensuring we remain on track with our plans for the current year.

“We are now looking forward to dedicating our focus to the significant structural growth opportunities available to Premier Inn in the UK and internationally.”

The latest figures cap a busy few months for Whitbread, which earlier this year said it would split off Costa and list it as a separate entity, following pressure from activist investor Elliott.

But in August the company announced the sale to Coca-Cola, claiming it is “in the best interests of shareholders”.

Whitbread acquired Costa in 1995 for £19m from founders Sergio and Bruno Costa when it had just 39 outlets. It now has more than 2,400 and is also embarking on overseas expansion.

Laith Khalaf of Hargreaves Lansdown noted: “Whitbread will be a slower and steadier business once Coke has swallowed Costa, though this latest announcement showcases the company’s ambitions for Premier Inn, which are due to be further fleshed out in February. The real growth opportunity lies in Germany, where the hotel market is 35 per cent larger than the UK.”