Costa Coffee adds shot to Whitbread despite Living Wage costs

Lynsey Barber
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Costa coffee owner Whitbread had a good first half
Costa coffee owner Whitbread had a good first half (Source: Getty)

The figures

Pre-tax profits at Whitbread jumped 13 per cent to £291.3m in the six months to the end of August, beating expectations.

Underlying profit at Costa Coffee steamed ahead 28.4 per cent to £67.3m while Whitbread's hotel and restaurant business ticked up 10.8 per cent to £249.4 per cent.

Meanwhile, total revenues came in at £1.4bn, a rise in 11.3 per cent and group like-for-like sales rose 3.6 per cent.

Its interim dividend came in at 28.5 pence, up 13 per cent on last year.

Whitbread shares opened up 2.65 per cent.

Why it's interesting

Whitbread has demonstrated double digit growth across the board and Costa Coffee shows the nation's love of skinny lattes and the like are not dwindling. The company said it is on track to hit full-year forecasts.

With the Living Wage on the horizon for Costa staff from April 2016, Whitbread expects it to cost £15m - £20m per year, but said it was just one of the "inflationary factors" which it manages every year.

"We can continue to mitigate this cost inflation over time through a combination of economies of scale as we grow, procurement benefits and investment in training and systems to deliver increases in productivity and efficiency, while offering our customers outstanding value for money."

What Whitbread said

Our two leading brands have delivered strong organic growth and continue to win market share. Premier Inn, the UK's favourite hotel chain, grew its total sales by 12.6 per cent, combining revpar growth of 4.6 per cent with an 8.0 per cent increase in rooms available and maintaining strong occupancy of 83.7 per cent. Costa, the UK's favourite coffee shop chain, delivered an excellent performance, with total sales growth of 16.2 per cent and continued strong like for like sales growth of 4.4 per cent in our UK equity stores. Restaurants made progress in a soft market with total sales growth of 1.2 per cent and like for like sales up 0.1 per cent.

In short

Full steam ahead for Whitbread as it continues to, in its own words, "deliver profitable growth" to shareholders, despite the increased costs from introducing the Living Wage.

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