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Whitbread's Brittain sticking to 2020 targets despite winter stumble

The Premier Inn and Costa Coffee owner isn't growing at levels seen in the recent past but new boss Alison Brittain is still aiming high.
April 26, 2016

Hotel and coffee chain giant Whitbread (WTB) got over its winter blues with a set of full-year numbers that will no doubt put a spring in new chief executive Alison Brittain's step. The Costa Coffee and Premier Inn owner had reported a weak end to 2015 as warmer weather meant fewer hot drinks were consumed on the high street, but the business still stumped up like-for-like sales growth of 3 per cent for the full year. The growth rate across its two major brands is still roughly half that of the prior year, but management is sticking to its 2020 growth targets, including 85,000 UK hotel rooms and £2.5bn of Costa sales.

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Interestingly, management has re-evaluated the disruptive impact businesses such as accommodation sharing site Airbnb could have. Bosses now believe it could take 3 per cent of demand from the market. But Whitbread finance director Nicholas Cadbury suggested Premier Inn's focus on short stays and the business market would insulate it from the long stay, leisure-focused sharing economy industry. He also thinks there could be more joint model sites - where one of its hotels and restaurants were in the same location - as revenue per available room (RevPAR) tends to be higher in such circumstances. RevPAR grew by 2.6 per cent in the 2016 financial year, which was some way off the 8 per cent growth in the prior year.

Much scrutiny will fall on building stronger comparable sales growth at Costa. Mr Cadbury says the chain would be tapping into the evolving demands of coffee consumers, including trends such as single-origin coffee - meaning beans sourced from just one source. Its newly launched Costa Fresco concept focuses on fresh food, while Costa Pronto will focus on coffee-on-the-go.

Elsewhere, the company incurred £43m in exceptional costs linked to factors including onerous leases on historically disposed businesses (£14.7m) and the closure of lossmaking Costa stores in China and Europe.

Analysts at Numis expect pre-tax profit of £576m for the year ending February 2017, leading to EPS of 244p, compared with £546m and 239p in FY2016.

WHITBREAD (WTB)
ORD PRICE:3,982pMARKET VALUE:£7.27bn
TOUCH:3,981-3,984p12-MONTH HIGH:5,475pLOW: 3,641p
DIVIDEND YIELD:2.3%PE RATIO:18
NET ASSET VALUE:1,316pNET DEBT:38%

Year to 3 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20121.7830615251.3
20132.0334316657.4
20142.2934718368.8
20152.6146420582.2
2016*2.9248821690.4
% change+12+5+5+10

Ex-div: 26 May

Payment: 1 Jul

*53-week period