Costa owner Whitbread bumps up dividend but stays cautious amid a "tougher consumer environment"

Rebecca Smith
The Costa owner has brewed up a solid year of growth
The Costa owner has brewed up a solid year of growth (Source: Getty)

Costa and Premier Inn owner Whitbread has eyes on another year of growth and has raised its dividend six per cent, but has warned of a "tougher consumer environment".

Shares dropped 6.85 per cent at the time of writing to 4, 012p.

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The figures

Revenues for the year to 2 March rose 6.3 per cent compared with the year before, to £3.1bn, which was in line with analyst expectations.

Profits grew more slowly, rising 5.7 per cent to £515.4m from £487.7m the year before.

Although Costa showed it was on the right track after slowing growth, the company's Premier Inn hotel chain did have weaker growth. Total revenues rose by 8.9 per cent, though this was propelled by the opening of new hotels and rooms.

Revenue per available room, the hotel industry's preferred performance measure, fell by 0.6 per cent over the year.

It may have been hoping to treat investors, raising its dividend by six per cent, but shares fell in early trading on the results.

Why it's interesting

The company has been focused on growing and grow it has. Costa opened 255 net new stores worldwide, while it continues to roll out travel formats.

Despite this, the firm has remained cautious in the face of volatile trading conditions. Its last set of results showed that despite a bump in Costa sales, the Premier Inn chain had been hampered by a slowdown in the London hotels market.

The company launched a £150m cost efficiency programme last November, which included new supplier deals to protect its exposure to rising import costs due to the fall in the value of sterling in the wake of the Brexit vote.

Whitbread directors also said they will continue to monitor the "risk of a wider macro-economic effect as a result of the UK leaving the EU, including foreign exchange and interest rate fluctuations".

What the company said

Alison Brittain, the firm's chief executive, said:

In the year ahead we will continue to focus on organic growth and investing in our customer proposition.

This, together with our efficiency programme and disciplined capital management gives us confidence in delivering another year of good progress, in line with overall expectations.

Whilst we are only seven weeks into our new financial year Premier Inn has had a good start to the year and Costa has also seen positive like for like sales growth, although we remain cautious and expect a tougher consumer environment than last year.

Read more: Whitbread's restaurant sales disappoint investors

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