City snapshot: Double-digit Costa sales rise boosts Whitbread's annual profits

April 25 Whitbread Plc, which runs British brands such as Costa Coffee and Premier Inn hotels, warned on Tuesday of the impact of a tougher consumer environment, sending its shares seven percent lower.

Chief executive Alison Brittain said Whitbread made "good progress" in delivering on its strategic priorities to grow and innovate in its core United Kingdom businesses, to focus on global growth and to build the capability and infrastructure to support long-term growth.

Costa Coffee's slowdown took the shine off results showing full-year pretax profit of 565 million pounds ($665 million), exceeding the average analyst estimate of 554 million pounds.

Alison Brittain, the chief executive of Whitbread - the company behind the coffee chain and Premier Inn hotels, said she was "encouraged" by the Government aiming to tackle the employment issue after the United Kingdom leaves the trading bloc.

Brittain said some changes to spending patterns had already started to feed through, although adding that the company was confident of meeting overall expectations in the current financial year.

United Kingdom inflation has risen to 2.3 per cent, but forecasts by the Bank of England expect that number to rise to 2.7 per cent by the end of 2017, before peaking at 2.8 per cent in the first half of 2018 and easing to 2.4 per cent by 2019.

Although total sales at the coffee chain jumped 10.7pc, this was thanks to the opening of 255 new stores worldwide and an acceleration of the roll-out of its Costa Express machines, with 1,585 installations.

Commenting on the future, chief executive Alison Brittain said: "In the year ahead we will continue to focus on organic growth and investing in our customer proposition".

For the year to 2 March 2017, Whitbread's board has recommended a final dividend of 65.9p per share, making a total dividend for the year of 95.8p per share, an increase of 6 per cent.

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

He added: "One big issue is the growth of artisan coffee - smaller independent outlets are a bit more fashionable these days, which is denting growth prospects at Costa".

Premier Inn saw total sales growth of 9%, and like for like sales up 2.3%.

"A number of key metrics have demonstrated strong growth, not least revenues, profit, and earnings per share, whilst the return on capital remains robust and in excess of 15%".

  • Zachary Reyes