Whitbread has released its interim management statement showing total sales growth of 13.0%, confirming that it is on track to deliver full year results in line with expectations, and announcing that Patrick Dempsey is to step down as MD of Whitbread Hotels and Restaurants.
Andy Harrison, Chief Executive of Whitbread, commented:
“As we said in our interim results on 21st October, our strong trading momentum has continued into the third quarter, with total sales growing by 13.2% and like for like sales up 6.0%. We remain confident of delivering full year results in line with expectations, mindful that the fourth quarter last year was particularly strong, boosted by the absence of snow.
“In the quarter, Premier Inn grew total sales by 15.4% and like for like sales by 8.5%, with rooms available growing by 6.2%, total revpar up 8.6% and occupancy up 2.6% pts to 84.8%. Our Restaurants continue to perform well and like for like sales grew by 1.6%. Costa once again extended its excellent track record, with total sales growth of 17.0% and UK like for like sales growth of 5.2%.
“Our strong brands continue to win market share, reinforced by our ambitious organic network expansion. We remain on track to open around 4,500 new Premier Inn UK rooms and around 230 net new Costa stores worldwide this year. Our committed UK room pipeline stands at around 12,400 new rooms, with a number of attractive London freehold opportunities at various stages of negotiation.”
Robust performance welcomed
Analyst reaction to this strong performance has been favourable overall, with hub by Premier Inn encouraging belief in both UK and international expansion – and speculation growing about Costa being de-merged.
Ken Odeluga a senior market analyst at www.cityindex.co.uk commented:
“A more robust performance from Whitbread in the third quarter than the last two, most notably with a 6% rise in 3Q underlying (like-for-like) revenues and 13.2% rise in gross group revenues.
“Whilst I have been less impressed with the pub/restaurant operations this year due to what seems to me like a somewhat incoherent programme of new pub openings backed up with sacrificed margins, it’s reassuring to see the group affirm that its more high-margin operations will enable it to deliver on full-year expectations.
“We spotlight the firm’s coffee operations, which are returning to profitability with consistent volume growth (and probably winning market share) as providing potential for some sort of corporate action, possibly being spun off (de-merged).
“With the group trading at a discount to the sum-of-parts, we regard a potential Costa Coffee de-merger as a way of providing investors with a better way of assessing the value of perhaps the group’s prize asset, at least in terms of potential for international growth.
“We also like the launch of ‘hub by Premier Inn’ the small-room concept for city centres, for further penetration in the UK and an easier expansion in Asia.”
Patrick Dempsey steps down
After ten successful years with the company, Patrick Dempsey, Managing Director of Whitbread Hotels & Restaurants (WHR), will be stepping down from the Board and leaving the company on 28 February 2015.
Paul Flaum, currently head of Whitbread Restaurants, will become the new MD WHR on
1st March 2015. Paul has worked for Whitbread for 11 years and was Chief Operating Officer for WHR prior to becoming MD Restaurants. Reporting to Paul will be Simon Jones, who becomes MD Premier Inn UK and hub by Premier Inn (currently Marketing & Strategy Director) and Mark Anderson who will add responsibility for Premier Inn Germany to his existing responsibilities for Property, Procurement and Logistics.
Sales update (% change vs. prior year)
Trading highlights:
Hotels and Restaurants
- For the 39 weeks Premier Inn has continued to win market share and grew total sales by 14.9%, total revpar by 8.7% and the total number of rooms available by 5.8%. Total occupancy grew by 3.3% pts to a high of 84.2% and total room nights sold increased by 10.1% to 12.7 million.
- In London total sales grew by 17.2% in the quarter, with a 14.8% increase in the number of rooms available, whilst maintaining strong occupancy at 89.0% with total revpar growth of 2.0%. The London hotel market total revpar grew by 1.8% and the Midscale and Economy sector grew by 7.2%.
- In the UK regions total sales grew by 14.8% in the quarter, with a 5.1% increase in the number of rooms available, combined with total revpar growth of 9.3% and occupancy rising 2.9% pts to 84.2%. The regional hotel market total revpar grew by 10.8% and the Midscale and Economy sector grew by 13.4%.
- Restaurants delivered a solid performance in the quarter, with like for like sales growth of 1.6% and like for like covers marginally down by 0.2%.
- 2,177 UK rooms have been opened in the year to date, including the first hub by Premier Inn, and for the full year the plan is to open around 4,500 new UK rooms and five joint site restaurants. The committed UK pipeline now stands at around 12,400 rooms.
Costa
- Costa continues to perform strongly, growing total system sales in the 39 weeks by 15.9% to £1,022.0 million, (17.5% at constant currency). Within this, franchise sales were up 14.7% to £398.1 million.
- UK Retail system sales grew by 16.7% to £552.5 million, with equity stores delivering like for like sales growth of 5.8%. 127 net new UK stores opened in the year to date.
- Costa Enterprises (including Costa Express) grew system sales to £258.3 million, up 19.3%.
- International system sales grew by 10.7% to £213.5 million (18.3% at constant currency), with a growth of 6.8% (14.8% at constant currency) in EMEI and 18.9% (25.6% at constant currency) in Costa Asia.
- plan to open around 230 net new stores worldwide and to install around 800 Costa Express units in the full year.
Group
The strong financial position remains unchanged. With the strength of Premier Inn’s performance, the exciting new hub by Premier Inn and the strong balance sheet, Whitbread is continuing to see a number of attractive London freehold opportunities which are at various stages of negotiation. The successful completion of these would result in the capital investment for the full year increasing to around £575 million. These freehold properties replace leasehold opportunities, and exchange off balance sheet lease liabilities for on balance sheet debt. They also reduce business risk, increase flexibility and capture property appreciation.
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Note: Ken Odeluga is a senior market analyst at www.cityindex.co.uk