Whitbread PLC has announced results for six months to 31 August 2017 showing strong revenue growth of 7.4% and market share gains in both Premier Inn and Costa.
The group's disciplined cost management has enabled underlying profit growth of 6.7% to £328m.
Premier Inn saw underlying operating profit grow to £295m, and over 2,000 new Premier Inn rooms opened in the UK in the first half. Within the mix, London RevPAR dropped by 1.0% in Q2 (+2.8% in Q1) and Regional RevPAR rose 0.7% (2.9% in Q1).
Costa's underlying profit was constant at £65m, and the period saw new Costa breakfast and lunch ranges successfully launched throughout the UK. Breakfast food volume grew by 9% in the period since launch, and there was 'encouraging' performance of the new summer salad range.
The company opened 128 net new stores in H1 (58 at Q1) and still expects to open 230-250 in FY18.
Costa Enterprises system sales growth was 9%, with 627 net machines installed in the UK and 140 internationally YTD (300 at Q1), and the Costa Express target of around 1,250 has been reconfirmed for the full year.
There was a good discretionary free cash flow conversion of 86%, delivering £293m to reinvest.
Alison Brittain, Whitbread Chief Executive Officer, (pictured), commented, “I am pleased with the progress we have made in executing the plan we set out in November last year, with earnings per share up 7.4% in the half and return on capital of 15.4%.
'Our plan is based on growing in our core UK markets; focusing on structural growth opportunities for Premier Inn in Germany, Costa in China and Costa Express; and strengthening our capabilities and efficiency to deliver these attractive opportunities.
'In our core UK markets, we have: developed digital capabilities central to our operating model in Premier Inn, which has enabled new tools such as our automated trading engine and business booker; increased the proportion of hotel customers booking with us directly to 95%.'
Brittain continued, 'We have also made significant progress in simplifying our international business and creating platforms for sustainable growth over the longer term.
'This progress includes: completion of the exit of non-core international operations, including hotels in India, Thailand, Singapore and Indonesia and our equity owned Costa business in France; the buy-out of our joint venture partner for Costa in South China giving us full strategic and funding flexibility to unlock Costa’s potential in China; and accelerating the expansion of Premier Inn in Germany, with nine hotels now in our committed pipeline in addition to our existing hotel, resulting in an open and secured pipeline of over 2,000 rooms.
'This amount of change and growth requires us to manage and execute in a more efficient and technology enabled manner. Whitbread’s investment in improving shared capabilities are critical to enable both Premier Inn and Costa to deliver their plans in the UK and internationally.
'Work to improve our capabilities over the last two years has included: building a strong management team, completed with the new Group Transformation Director; creating a shared digital and technology infrastructure; delivering over £60 million of efficiency savings over the last two years as part of our £150 million target with growing confidence on the long term potential; and enhancing our property capability and strategy.'
Brittain concluded, 'We have significant structural growth opportunities, in the UK and internationally, and confidence in our plans to capitalise on these opportunities. Despite the well known short term economic uncertainty, our performance in the first half was good and we expect to meet expectations for the full year. Although we remain cautious on the current environment, we are confident that ongoing disciplined allocation of capital and focus on executing our plans will deliver long term growth in earnings and dividends and a strong return on capital.”
Richard Baker, Whitbread Chairman commented, “In the year that Whitbread celebrates its 275th birthday, I am pleased to see another good performance as we continue to invest in the compelling long-term opportunities available to our businesses. We have maintained a strong balance sheet and continue to generate excellent cash flow, which together provides the Board with confidence to increase the interim dividend to 31.4p.”