Whitbread announces 39.1% pre-tax profit drop as effects of Costa Coffee sale take hold
Whitbread has announced a 39.1% decline in pre-tax profits across the year ending 30 April 2019 as the firm continues to focus on its Premier Inn brand following the sale of Costa Coffee to the Coca-Cola Company.
The hotel company confirmed that statutory pre-tax profit for continuing operations stood at £260m for the year, down on 2018's result of £426m. The figure was driven by £178m of non-underlying items, including £108m of disposal costs relating to the sale of Costa. Underlying revenue showed a slight increase of 2.1%, up to £2049m from £2,007m the previous year.
It comes after the firm sold its Costa Coffee brand to the Coca-Cola Company, a deal completed at the start of the year that was valued at £3.9b. Whitbread announced that it would be looking to return up to £2b of the proceeds of that sales to shareholders. Basic earnings per share for 2019 rose by 751.4% to 2,040.8p, up from 239.7p the year prior.
Describing the last year as "significant" for the firm, which has repositioned itself as a focused hotel business, Alison Brittain, Whitbread chief executive, outlined some concern for the state of the market. She said: "In the fourth quarter, we saw a decline in business and leisure confidence, leading to weaker domestic hotel demand.
"This weakness has increased into March and April, particularly in the regional business market, coinciding with an acute period of political and economic uncertainty in the UK.
"At this stage in the new financial year it is too early to know how business confidence and its impact on the market will evolve. However, it's important to note that our strong balance sheet, ongoing efficiency programme and integrated operating model means we are likely to be more resilient in a weaker market than many of our competitors. In addition, our ability and willingness to continue to invest through this period will place us in an advantaged position in the future.
"Therefore, despite the short-term market challenges, our strong competitive position, ongoing disciplined allocation of capital and focus on executing our strategic plan will ensure we continue to win market share from the declining independent hotel sector in the UK and Germany. This will deliver sustainable growth in earnings and dividends, combined with our strong return on capital over the long-term."
