Whitbread serves up grande cup of profits

Coffee shops, restaurants and hotels operator Whitbread topped expectations with full year profits and sales, with the Costa Coffee chain once again driving growth.

Total revenue for the financial year ending on March 1st was up 11.2% to £1,778.0m from £1,599.7m the year before, ahead of expectations of a figure of £1,765.1m. Premier Inn sales grew by 8.3% to £755.9m, Restaurants by 1.8% to £483.4m and Costa by 27.5% to £541.9m.

Group like-for-like sales were up 2.6% from the previous year.

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Underlying profit before tax was up 11.3% to £320.1m from £287.5m the year before. The market had pencilled in a figure of £312.5m.

Underlying diluted earnings per share rose 15.2% to 134.1p (consensus: 130.8p) from 116.4p in the preceding year.

"In the new financial year both Premier Inn and Restaurants have shown positive like-for-like sales growth and Costa has continued its good momentum, both in the UK and internationally. Trading in 2011/12 was variable month by month and we expect this to continue with short term comparatives affected by the phasing of bank holidays and the Olympics," predicted Andy Harrison, Whitbread's Chief Executive.

Divisional breakdownRevenue per available room, or RevPAR in industry jargon, at Whitbread's Premier Inn hotel chain in the UK and Ireland grew by 1.8% on a like-for-like (LFL) basis, with an increase of 0.8% in the regions and a rise of 7.3% in London. In the previous year, LFL RevPAR growth had been a far more impressive 8.2%.

Premier Inn revenue rose by 8.3% to £755.9m from £697.8m in the preceding year, with LFL sales growth easing to 3.2% from the previous year's 8.6% growth rate.

Occupancy levels edged up to 75.8% from 75.5%.

The PremierInn.com web site saw visitor numbers increasing by 26.9% to 44m in the year, and 77% of bookings are now made through automated channels.

The Restaurants business, which includes the Beefeater Grill and Brewers Fayre brands, saw LFL sales turn negative. Over the full year LFL sales were down 0.2% after rising 3.3% the year before, but the second half saw things pick up, with LFL sales 1.2% higher than in the second half of the preceding year.

Total revenue edged up 1.8% to £483.4m from £474.9m the year before, helped by a first time contribution from 12 new restaurants opened during the year. Whitbread plans to open another six in the current financial year.

Together, the Hotels and Restaurants business increased underlying profit by 4.3% to £295.6m from £283.4m the year before.

The jewel in the Whitbread crown, however, is widely regarded to be the Costa Coffee chain, to the extent that many in the City are clamouring for the group to spin it off as a separate company to release the value in the chain more quickly.

Costa's underlying profits were up 38.0% to £69.7m from £50.5m a year earlier, while worldwide system sales were up 24.3% to £819.3m; LFL sales in what Whitbread calls its UK equity stores were up 5.5%.

"We plan to open 350 [Costa] stores in 2012/13 putting us well on track to achieve our growth milestones of £1.3bn system sales, 3,500 stores worldwide and around 3,000 Costa Express machines by 2015/16," the group statement said.

Divi and debtNet debt at the end of the reporting period had fattened to £504.3m from £487.9m at the beginning of March 2011, after the group upped capital expenditure of £307.9m from £202.2m the year before.

Some brokers have suggested that Whitbread's pension fund deficit is a major impediment to any private equity bid for the Costa Coffee business. The group said that at the beginning of March, the scheme's deficit had risen to £598.7m from £488.0m a year earlier. The main movement in the deficit from year to year is the actuarial loss of £177.2m in the year on the scheme liabilities, principally as a result of the 95 basis point fall in the discount rate (there are 100 basis points to a full percentage point). This has been offset by amounts paid into the fund of £95.4m, Whitbread said.

The full year dividend has been hiked by 15.2% to 51.25p from 44.50p last year, which was more generous than the 49.43p the market had been expecting, though some broker forecasts aggregators had a consensus forecast of around 52p.

JH