Premier and Costa bring in the profits for buoyant Whitbread

Premier Inn and Costa Coffee are proving popular with cash-strapped customers, boosting half year profits at parent company Whitbread.

Whitbread, which is now the UK’s biggest hotel and coffee shop operator, said underlying pre-tax profits rose 15 per cent to £174.9m in the six months to September 1, beating expectations.

The group, which also operates the Beefeater and Brewers Fayre pub restaurant chains, said Premier Inn has performed strongly throughout the downturn.

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The budget hotel chain, which has about 40 hotels in Yorkshire including Harrogate, York, Leeds, Sheffield, Hull and Doncaster, has benefited from business customers trading down from four and five star hotels.

Revenue per available room (RevPAR) – a key industry measure – rose 4.4 per cent, incorporating 11.4 per cent growth in London and three per cent elsewhere as visitors to London sought out affordable deals.

A £29 per room offer also attracted leisure customers in off-peak periods, leading to a five per cent increase in like-for-like sales.

Chairman Anthony Habgood said: “This is a good set of results demonstrating the strength of our brands in tough market conditions.”

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Costa Coffee, which has around 270 shops in Yorkshire and the Humber region, reported a 42 per cent increase in half-year profits.

The chain appeals to consumers who are seeking an affordable luxury during the downturn.

It has also benefited from the success of new drinks such as its extended iced coffee range and the roll-out of coffee machines at motorway service stations.

The Iced Cold Costa range reported a 44 per cent increase in sales to £12.4m. The chain recently introduced a Costa Light range, which has fewer calories and less caffeine.

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The coffee chain has also been rapidly expanding. Underlying profits at the chain rose to £27.8m in the six months to September 1 after it opened its 2,000th store, including its 100th in China.

Whitbread aims to double the size of its Costa Coffee business over the next five years and increase the number of Premier Inn rooms in the UK by 50 per cent.

Costa opened 167 new stores in the half year, 85 of which were in the UK. It aims to bring the number of Costa outlets to 3,000 over the next five years.

Costa bought Coffee Nation earlier this year, which operates 900 self-service vending machines in service stations.

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It is rebranding the machines under the Costa Express banner and aims to have opened 250 new outlets in the second half of its financial year.

The strong performance of Premier and Costa helped offset a sales decline at the pub restaurants business, which has suffered as customers cut back on spending.

Its Brewers Fayre brand is outperforming its higher priced Table Table and Beefeater brands.

Sales at the group’s pub restaurants open more than a year fell 1.6 per cent as customers looking for cheaper deals steered away from its more expensive brands.

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Whitbread’s chief executive Andy Harrison said: “The restaurant business is facing a very value-driven customer base and we’re working hard to sharpen up our value proposition. That means looking at the menus as well as promotion.” The group has put in a new management team to turn around the performance of its restaurants.

Early initiatives include £4.99 offers on meals at Beefeater and Table Table and an all-you-can-eat buffet in Brewers Fayre for £5.99.

Total group sales increased 10.7 per cent to £891.3m, with Premier Inn sales up 10.6 per cent to £393.4m, Costa sales rising 26.3 per cent to £250.8m and restaurant sales up 0.5 per cent to £248.5m.

Whitbread said it would pay an interim dividend of 17.5p per share, up from 11.25p last year and ahead of the consensus forecast of 16.5p.

ros.snowdon@ypn.co.uk

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