Costa Coffee owner Whitbread (WTB) has reported an 8.1% rise in first half revenues, partly driven by double-digit UK growth for Costa as it builds its food and artisan coffee credentials.

In total, Premier Inn owner Whitbread’s revenues rose to £1.56bn and a 5.4% rise in underlying profit before tax of £307m.

The group said it was winning market share in both Premier Inn and Costa with like-for-like sales growth of 1.9% in the six months to 1 September.

Costa delivered “another good sales performance” with total sales growth of 10.7% and UK equity like-for-like sales growth of 2.3%.

During the first half of the year it opened 87 net new stores in the UK taking the total number of stores to 2,121, over a thousand more than its closest UK competitor.

Whitbread also opened 124 net Costa stores worldwide year on year as international system sales increased by 17.6% to £182m, representing 9.1% growth at constant currency.

It said it is has expanded its fresher food concept into a further 13 stores in London during the quarter, while it opened our first ‘finer coffee’ concept store in Covent Garden in June 2016 and a second store opened in Wandsworth in October.

However, it said Costa’s margin in the first half was down year on year due to the early phasing of its investments in refurbishments, IT infrastructure and early introduction of the National Living Wage rates in October 2015.

Operating margins at Costa fell 1.8% pts resulting in operating profit down 4% year on year. It expects margins in the second half to improve in the second half of the year as its National Living Wage commitment annualises and the benefits of its first half investment kick in.

Chief executive Alison Brittain said: “This is another good set of results from Whitbread and we continue to deliver strong growth.”

“In Costa we are trialling new ‘finer’ coffee concepts, introducing a new fresher food range and making good progress rolling out our Costa Pronto and Drive Thru formats.”

“Whilst it is early in the second half and there is uncertainty in the UK’s economic outlook, we expect to deliver in line with full year expectations.”

Whitbread shares dropped 4% today to 3,690p on worries over Costa’s profitability. The shares are 25% down year-on-year.

During the first half of the year we opened 87 net new stores in the UK taking the total number of stores to 2,121, over a thousand more than our closest competitor.

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