Whitbread earnings steam higher but CEO Harrison announces retirement

LONDON (ShareCast) - Costa Cofee and Premier Inn owner Whitbread (LSE: WTB.L - news) served up impressive results for the year to 26 February but announced that chief executive Andy Harrison will retire by the end of the current financial year. Revenue rose 13.7% to £2.61bn and underlying profits before tax by 18.5% to £488.1m, leading to a 19.4% increase in earnings to 213.67p per share, well ahead of the consensus forecast.

The board of the FTSE 100 group proposed a final dividend payment of 56.95p per share, making for a 19.4% increase in the total dividend for the year.

Premier Inn grew total sales by 15.3%, as revenue per available room (revpar) increased 8.7% and the number of rooms available rose 6.1%.

The year finished with record occupancy of 81.3%, up 3.2% points.

Costa's total sales growth soared to 17.9%, driven by UK like-for-like sales growth of 6.0%, 219 net new stores worldwide and 777 net new Costa Express machines.

Harrison said the group was "on track" to deliver the growth milestones for 2016 and 2018 and published new targets for 2020, which are broadly the same pace as previously.

By 2020 the group expects to have 75,000 Premier Inn rooms, almost 27% higher than the current 59,138, and to generate Costa system sales of £2bn, which would be a 42% increase on last year's £1.4bn.

"Trading in the new financial year has begun on plan, with good momentum for Premier Inn and Costa, and our restaurants business is trading slightly ahead of a subdued market outside the M25," he said.

Shore Capital's Gary Greenwood said the results were circa £9m better than expected due primarily to lower interest charge.

He said he expected forecasts for the current year to rise modestly to roughly £555m, with EPS of 245p, reflecting like-for-like sales growth of around 4%.

Hargreaves Lansdown (LSE: HL.L - news) analyst Keith Bowman said the news was somewhat mixed, with Harrison's departure raising some uncertainty, and moves to target selected overseas markets "bring increased risk and potential currency headwinds", whilst the company's current valuation is seen as "leaving little room for error".

"In all, Whitbread remains highly regarded. Its record for consistent delivery is as yet unblemished, with the company's brands continuing to appeal to cost conscious consumers. Furthermore, some hopes that the hotel and coffee businesses could eventually be separated also injects some additional appeal."