Whitbread PLC: announces FY 2016 financial results

Dunstable / UK. (wbp) Costa Coffee, Europe’s largest coffee shop chain and part of British Whitbread PLC, opened 255 net new stores worldwide in the 52-week financial year to 02 March 2017. Whitbread PLC continues to roll out its successful and fast growing Costa travel formats, the company said in its statement. Costa Express had a great year installing over 1’500 machines of which 248 were in international markets.

2016/2017 was a 52-week year whereas 2015/2016 was a 53-week year. In order to provide a clearer comparison, year-on-year growth relating to revenue, underlying profit and underlying earnings per share are shown on a 52-week comparative and a number of alternative performance measures are included in addition to the various statutory measures.

Financial Results

  • Group total sales growth of 8.2 percent and underlying profit before tax up 6.2 percent to 565.2 million GBP
  • Premier Inn total sales growth of 9.0 percent, and like for like sales2 up 2.3 percent
  • Costa total sales growth of 10.7 percent, system sales up 12.7 percent and UK equity like for like sales2 up 2.0 percent
  • Group return on capital3 of 15.2 percent (2015/16: 15.3 percent)
  • Cash generated from operations of 860.1 million GBP, which funded cash capital investment of 609.8 million GBP and a proposed full year dividend up 6.0 percent to 95.80 Pence

Chief Executive’s Comment

Chief Executive Alison Brittain said: «Whitbread has had another year of strong growth and continued investment with total Group sales increasing 8.2 percent to 3.1 billion GBP and underlying basic earnings per share increasing by 6.0 percent, demonstrating the strength of our core brands. Total basic earnings per share increased by 7.3 percent.

In 2016/2017 we made good progress in delivering on our three strategic priorities: to grow and innovate in our core UK businesses; to focus on our strengths to grow internationally; and to build the capability and infrastructure to support long-term growth.

Premier Inn’s strong sales growth benefited from the 3’816 gross new UK rooms we opened this year and the accelerated maturity of the c.9’000 rooms we have opened over the last two years. We delivered high customer satisfaction by leading the market on quality and value, achieved occupancy of over 80 percent with record levels of direct bookings at 94 percent, all of which supported our strong return on capital.

Costa opened 255 net new stores worldwide and we continue to roll out our successful and fast growing Costa travel formats. Costa Express had a great year installing over 1’500 machines of which 248 were in international markets. We are innovating to drive our sales growth and are pleased with the investment we are making to introduce ‘finer’ coffee concepts, leveraging our new state of the art Roastery and delivering fresher food that our customers will enjoy later this year.

Internationally, in Germany we grew our hotel pipeline to five hotels and our Frankfurt hotel received great guest feedback. We continue to have success with our profitable joint venture in the Middle East while our phased withdrawal from South East Asia is on plan. China remains an exciting platform of growth for Costa and we have a clear plan to enhance our business. We have launched five new concept stores, the results of which give us further confidence that we can capitalise on this market opportunity and grow to significant scale.

During the year we continued to strengthen our capabilities to support our long-term, growth, including developing the senior team with a number of new hires and promotions. In November we announced a 150 million GBP cost efficiency programme to help offset investment and sector cost pressures. We have made good progress this year in areas such as procurement, supplier consolidation and labour scheduling, which has helped maintain margins.

In the year ahead we will continue to focus on organic growth and investing in our customer proposition. This, together with our efficiency programme and disciplined capital management gives us confidence in delivering another year of good progress, in line with overall expectations. Whilst we are only seven weeks into our new financial year Premier Inn has had a good start to the year and Costa has also seen positive like for like sales growth, although we remain cautious and expect a tougher consumer environment than last year.

In the longer term we remain confident that, with our significant structural growth opportunities, the power of our brands and the investments we are making, we will continue to deliver strong returns and sustainable long-term growth for our shareholders».

Chairman’s Comment

Chairman Richard Baker said: «Whitbread is one of Britain’s longest established and most successful companies and celebrates 275 years in business this year. We are very aware of our responsibilities to ensure that this great British company continues to thrive and, as such, we are focused on driving growth while managing risk and demonstrating excellent corporate governance. We operate a conservative approach to the management of our balance sheet and this provides us with a solid base in turbulent and changing times. Our strong cash flow generation has enabled us to increase the full year dividend by 6.0 percent to 95.80 pence».


    Hint: The complete news release «Whitbread delivers another year of strong sales and profit growth – Whitbread PLC results for the 52-week financial year to 02 March 2017» is available on the company’s web server.

Costa Coffee

In Costa we offer the largest network of coffee shops in the UK and, with our strong brand, we are in a great position to capitalise on future market growth opportunities, growing from 2’218 stores today to over 3’000 stores in the medium-term. Costa has been named as the UK’s favourite coffee shop chain for the seventh year in a row, underpinned by our relentless focus on quality coffee and on achieving high customer satisfaction scores.

UK Retail

Costa UK Retail continues its track record of delivery, with UK retail system sales growing by 10.5 percent, 169 net new stores and like for like sales in UK equity stores increasing by 2.0 percent.

Investing to drive like for like growth

The market and competitive landscape continue to evolve with more food-led operators now offering coffee and, while convenience and coffee quality remain the top decision criteria, customers are becoming more demanding in the way their priorities are met. At Costa we are focused on meeting this challenge and serving the best quality coffee and fresher food via more tailored store designs, with a complementary digital experience. During the year we invested in new MerryChef ovens and microwaves across the estate, which will facilitate the roll-out of new hot food ranges during 2017/18, starting with the launch of our new better breakfast offering during the first half. We also recently extended our coffee range through new initiatives in the Cortado family and will build on this innovation with the launch of cold brew and new single origin blends during this year.

Investing in the brand and digital capability

We continue to invest in our digital capability and our new till system will be installed during 2017/18, enabling faster service and new functionality to provide the platform for further Pay + Collect trials towards the end of this year and a wider roll-out thereafter. To increase our engagement with our c.5.2 million active Costa Coffee Club members we are enhancing our app to enable a better customer experience and more targeted offers, as well as gaining a much richer source of customer data, habits and insight. The new-look app will be released in the first half of 2017/18.

Pipeline weighted towards high performing channels

Future growth will also be underpinned through diversification of our channels and formats as we recognise that customer requirements differ by location. For example, our Pronto format is optimised to sell our hand-crafted coffee quickly in high footfall locations, such as travel hubs at peak times, taking advantage of the volume opportunity presented. Drive Thrus are also delivering very high sales volumes and returns and, together with travel channels, are our fastest growing category and will become a greater proportion of our estate going forward.

Costa EMEI

Internationally we continue to build on our strengths and look to broaden our footprint in quality markets that have the opportunity for scale. In Poland we have 131 stores, achieving strong single digit like for like sales growth, driven using successful initiatives including fresher food, innovative drink ranges and new store formats. We reached profitability in 2016/2017 and see potential to significantly increase the number of stores in this market. We also have 259 Costa Express machines in Poland, which are performing well.

We continue to see strong growth in our profitable franchise business with a total of 731 stores across 23 countries. Our franchise business has grown rapidly over a number of years through our successful business model of great partnerships, efficient logistics and a focus on localisation and customer demographics. Going forward we will select target markets with the highest potential for us to grow profitably and win market share. In France we have decided to pursue a franchise only strategy resulting in the recent closure of our five equity stores.

Costa Asia

China is a large market with a burgeoning middle class and the propensity to drink coffee is on the rise. This presents an exciting opportunity for Costa to become the clear number two in the market. We have built a solid foundation from which to grow, but will take a more strategic approach as we narrow our focus across ten top tier cities to build scale and a brand presence. We will also exit or turnaround poor performing stores to improve the overall profitability of our estate. We will enhance our brand awareness through digital media, build our coffee credentials and create the meeting place of choice for our target customer through improved store formats.

During the year we opened 63 gross new stores and exited 37 stores in China. In addition, we have introduced five new-look concept stores with an improved customer proposition and, although early days, results have been promising, and we aim to add additional new concept stores over the course of 2017/18. The success of these stores so far gives us greater confidence in our ability to build scale successfully in this growing market and look for opportunities to accelerate our strategy.

Costa Express

Costa Express is an exciting global growth engine for Costa and we see potential to double the size of this part of the business. This year we installed 1’585 net new machines bringing our total to 6’801, including 740 internationally. As well as renewing our key UK customer contract, we also embarked on our entry into a number of new markets with plans to roll out in 2017/18.

We are upgrading our machines with new management systems, which will enhance our scalability and allow us to monitor and control the machines and their content remotely. This will be important to the success of our international roll-out. We are upgrading the customer screens to bring the best quality experience and benefit our partners by enabling options such as site specific advertising.

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