Whitbread drops on hint of consumer squeeze

Adjusting for the extra trading week in FY2016, the group reported total sales growth of 8.2 per cent to £3.1bn, driven largely by a rapid increase in square footage over the year. Premier Inn added 3,816 new hotel rooms in the UK, reporting an average occupancy rate of 80 per cent, with a record 94 per cent of bookings made directly. Meanwhile, Costa opened 255 new doors worldwide and installed more than 1,500 Costa Express machines - 248 of them abroad. Even without new sites, like-for-like sales still grew at both Premier Inn and Costa, albeit at a more modest rate of 2.3 per cent and 2 per cent respectively. The successes of Premier Inn and Costa compensated for a more lacklustre performance in the restaurant division, which operates the Beefeater and Brewers Fayre brands, where like-for like-sales fell by 0.3 per cent.

Crucially, margins held steady on the Premier Inn side, but contracted by 0.8 percentage points at Costa. But investors shouldn't forget the £150m cost-cutting programme, which kicked off at the end of last year ahead of a number of incoming charges, including rising business rates, a higher national living wage and the impact of foreign exchange movements. The five-year plan is aimed at driving improvements across the supply chain, labour management, procurement and processes. What's more, it seems the group still has some financial wriggle room over on the balance sheet too: its net debt to cash profit ratio currently sits at 3.2 times - below management's 3.5 times cap.

Analysts at Numis have yet to update forecasts, so for the time being still expect adjusted pre-tax profits of £605m for the year ending March 2018, giving EPS of 263p, compared with £565m and 247p in FY2017.