Whitbread's expansion drive continues as Costa Coffee and Premier Inn sales jump

Jake Cordell
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A total of 103 new Costa Coffee shops were opened in the 12 months to March 2016
A total of 103 new Costa Coffee shops were opened in the 12 months to March 2016 (Source: Getty)

Costa Coffee and Premier Inn owner Whitbread has promised more expansion is on the way for the food, beverage and hotel chain as it posted improved profits in its full year results out this morning.

Investors had clearly had their morning dose of caffeine as they bought up Whitbread with vigour on Tuesday morning, sending it up 2.97 per cent to 3,982p at the top of the FTSE 100 leaderboard.

The figures

Profits before tax in the 53 weeks to 3 March 2016 were £487.7m. This was a 5.2 per cent improvement compared to the previous year, but 2.2 per cent once the extra accounting week is stripped out.

Sales at Costa Coffee grew by 2.9 per cent on a like for like basis, but were up by 16.3 per cent overall to £1.1bn as the coffee chain opened a total of 103 new outlets.

Revenues at Whitbread's hotels and restaurants branch also climbed by 9.8 per cent to £1.8bn.

Whitbread said it would pay a final year dividend of 61.85p per share, marking a ten per cent jump in the full year payout to shareholders.

Why it's interesting

Revenues grew significantly faster than profits at Whitbread over the year to March 2016 as the company continues to focus on the space race - more coffee shops, more restaurants and more hotel rooms.

The chain is targeting 85,000 hotel rooms and £2.5bn of coffee sales by the end of the decade. The expansion drive, however, came at a price as net debt passed £900bn - up 56 per cent over the year.

Whitbread Whitbread | mobile image

Shares in Whitbread are down by nearly one-third over the year, and investors will be hoping that profits - and thus, dividends and the share price - keep up with the increasing footprint of the firm.

What Whitbread said

Alison Brittain, cheif executive at Whitbread, said:

The world around us is shifting, with rising customer expectations, an evolving competitor landscape, rapid technological developments and changing cost structures. In responding to this change, I am especially keen to reinforce our relentless focus on our customers and on innovation to develop our brand propositions ensuring we stay ahead and become more productive.

Both Premier Inn and Costa benefit from attractive market growth opportunities and we will continue to capitalise on these by developing our network and brand strength as we fulfil our ambitions to reach c. 85,000 UK hotel rooms and c. £2.5 billion system sales in Costa, by 2020.