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Whitbread boosted by strong Costa Coffee sales

Source: Reuters - Tue 20th Oct 2009

Whitbread, Britain's biggest hotel operator, reported a better-than-expected first-half pre-tax profit boosted by strong growth at its Costa Coffee chain and its shares led the FTSE 100 risers on Tuesday.

The group, which owns budget hotel operator Premier Inn and the Beefeater and Brewers Fayre pub restaurant chains, said underlying pre-tax profit had fallen by 2.7 percent to 118.2 million pounds in the six months to August 27.

That was ahead of the consensus forecast which had stood at 113 million pounds, according to a poll of 7 analysts supplied by Whitbread.

Chief Executive Alan Parker said the group had made encouraging progress in the face of the "toughest trading conditions for years".

"Whitbread's value for money brands have considerable appeal for today's price conscious customers. We remain confident about the outturn for the year" he said.

On a conference call with reporters, Parker however painted a downbeat picture of the consumer outlook.

"I think it's far too early to call the end of the recession. We're bumping along the bottom at best. We've got storm clouds on the horizon with VAT going up, an income tax increase and, no doubt, increasing unemployment," he said.

Whitbread said total sales increased by 3.1 percent to 703.3 million pounds, with Costa Coffee revenue up 20.6 percent driven by new openings, pub restaurants sales rising 6.5 percent, and Premier Inn revenue increasing by 0.4 percent. 

The group opened over 100 new Costa stores during the period, helping the division increase its underlying operating profit by 73 percent to 12.6 million pounds.

At Premier Inn, which accounts for about 70 percent of profits, revenue per available room (RevPAR) fell by 9.2 percent out performing an 11 percent decline across the overall British hotel market.

Around two-thirds of customers at Premier Inn's 571 UK hotels are currently businesses and the group has benefited from corporate clients trading down from four and five-star hotels.

Upmarket rivals such as InterContinental Hotels and Millennium & Copthorne have been hit even harder by the global economic downturn.

Inter Continental Hotels, the world's biggest hotelier, reported a 38 percent fall in first-half profit in August while M&C saw a 48 percent decline.

Shares in Whitbread, which have outperformed the FTSE All Share Travel & Leisure Index by 14 percent since the start of the year, were up 1.9 percent to 1,315 pence at 0840GMT, having earlier been up as much as 4.7 percent.

"These results show Whitbread coping well in the most challenging consumer environment for decades. Strong brands and value products are helping the top line" said KBC Peel Hunt analyst Nick Batram.

The group is paying an unchanged interim dividend of 9.65 pence per share.

The consensus forecast for full-year pre-tax profit current stands at 202 million pounds, according to a Thomson Reuters I/B/E/S poll of 18 analysts.

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