Whitbread announces Costa spin-out

However, Ms Brittain is sticking to her guns, at least to an extent. She previously said that while she was open to offers for the coffee chain, the timing was inopportune as it was going through a multi-year transformation programme, including the implementation of a new procurement IT system. So the demerger, which will see Costa trade as a separate listed entity, will take place as quickly as is practical within the next 24 months, although some analysts expect it to be completed sooner.

Both Costa and Premier Inn are looking to expand their operations in overseas markets, so their respective moves in China and Germany should be aided by a more dedicated management focus, and there is little in terms of synergies keeping the coffee chain tied to Whitbread’s portfolio of hotels, pubs and restaurants. The group’s defined benefit-pension scheme is expected to be a potential stumbling block, as its £289m deficit will have to be covered.

Demergers aside, the group’s full-year figures show that existing efficiency programmes are paying off, prompting management to raise its savings target from £150m to £250m. Reduced cost commitments have helped to increase the respective return on capital for Premier Inn and Costa by 40 and 60 basis points, even as like-for-like sales growth slowed in the former business and reversed to a 0.4 per cent decline for Costa’s UK equity stores. Overall, however, underlying profits, up 5 per cent to £622m, were broadly in line with expectations.

Recent macro-economic and industry data hasn't been promising, and the cost of the group’s investment programme means profit growth is expected to slow in the near term. Noting this, analyst Numis expects a slowing growth rate for adjusted pre-tax profits, which it estimates at £612m for FY2019, leading to earnings per share of 264p (from £591m and 260p in 2018).