City snapshot: Double-digit Costa sales rise boosts Whitbread’s annual profits

Total sales were up 6.3% (and 8.2% on a 52 week basis) to £3.1bn.

Costa Cofee’s UK retail system sales were up by 10.5%, driven by 169 net new stores and like for like sales in UK equity stores increasing by 2%.

Costa recorded total sales growth of 10.7% after opening 255 net new stores worldwide and an acceleration in its roll-out of Costa Express machines, with 1,585 net new installations.

Costa’s underlying operating profit was up 5.3% to £158.0m, though margins were down 0.8% which was slightly ahead of previous guidance due to the phasing of investments into 2017/18.

In 2017/18, Whitbread said it expects its various Costa initiatives to drive positive like for like sales growth, with the investments in the first half delivering benefits in the second half.

However, it warned it does expect the consumer environment to be “tougher than last year”.

Premier Inn saw total sales growth of 9%, and like for like sales up 2.3%. The hotel chain’s underlying operating profits was up 4.7% to £468m (and up 6.2% on a 52-week basis).

Alison Brittain, Chief Executive, said: “In 2016/17 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.

“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”.

Whitbread raised its full-year investor dividend by 6% to 95.8p per share.

Morning update

The FTSE 100 has held onto yesterday’s gains, rising another 0.1`% to 7,274.1pts so far this morning.

Whitbread, however, has dropped 5.7% to 4,057.5p despite its strong profits and sales growth as market expectations for its underlying profits performance were higher than the group delivered this morning.

Early risers include Applegreen (APGN), up 2.7% to 401p, Total Produce (TOT), up 2.2% to 169.6p and Stock Spirits Group (STCK), up 2% to 175p.

Fallers include Science in Sport (SIS), down 2.4% to 82p, Hilton Food Group (HFG), down 1.3% to 735p and PureCircle (PURE), down 1.3% to 316p.

Yesterday in the City

The FTSE 100 jumped 2.1% to 7,264.6pts yesterday amid a surge in international markets, boosted by mainstream candidate Emmanuel Macron beating far-right candidate Marine Le Pen in the first round of voting in the French presidential election on Sunday.

A host of big FTSE fmcg names were up on the news, with British American Tobacco (BATS) up 2.5% to 5,328p, Coca-Cola HBC (CCH) up 2.4% to 2,148p, Imperial Brands (IMB) up 2.4% to 3,736p, Diageo (DGE) up 2.4% to 2,261p, Associated British Foods (ABF) up 2.3% to 2,879p and Unilever (ULVR) up 2.1% to 2,879p.

Grocery retailers undershot overall market growth, but were still strongly up – with Sainsbury’s (SBRY) up 2% to 271.4p, Marks & Spencer (MKS), up 1.8% to 367.1p, Tesco (TSCO), up 1.8% to 367.1p and Ocado (OCDO) up 2.2% to 254.1p.

The one exception was Morrisons (MRW), which was flat at 231.4p.

The day’s few fallers were mostly on AIM, including Distil (DIS), down 7.1% to 2.6p, Hotel Chocolat (HOTC), down 1.7% to 338.3p, Nichols (NICL), down 1.3% to 1,871p and McColl’s (MCLS), down 1.2% to 197.6p.