Get the app today! App Store Play Store

Whitbread Shares Hit By Lacklustre Outlook After Costa Deal

Published on Jan 17 2019 3:50 PM in A-Brands tagged: Costa / Whitbread Plc

Whitbread Shares Hit By Lacklustre Outlook After Costa Deal

Whitbread Plc warned that profit would not grow in 2019-20 as the British hotel owner, which has just sold its Costa coffee chain, faces an uncertain economic outlook.

Shares of the FTSE 100 company fell in morning trading as investors shrugged off a 2.4% increase in quarterly sales and focused on the cautious outlook.

The owner of the Premier Inn chain said it expected annual results to be in line with expectations in the current financial year that runs until around the start of March but added that there would be no progress in underlying profit before tax in 2019-20.

Whitbread this month completed the sale of Costa to Coca-Cola Co for £3.9 billion.

Its hotel business faces rising competition from online services such as Airbnb and OYO Hotels, as well as a tough economic climate and political turmoil that is prompting Britons to rein in spending.

A Strong Central London

Like-for-like sales in the UK have fallen 0.7% so far in the current fiscal year as weakness in regional markets overshadowed a strong central London.

Whitbread, which has 6,000 rooms across 34 hotels in Germany, reported a 3.5% fall in third-quarter sales in that country. It expects losses there to hit nearly £12 million ($15.5 million) in the next fiscal year due to expansion.

Liberum analyst Anna Barnfather said she remained concerned about the weaker UK sales and capital intensity of German growth plans, which has been dragging on returns.

In response to industry changes, Whitbread is aggressively expanding internationally, specifically in Germany and is targeting the UK budget market with "Zip" pod-style rooms that start from 19 pounds per day, in an aim to boost sales at home.

The former brewing company, which traces its history back to 1742, also began an initial share buyback programme of up to £500 million.

News by Reuters, edited by Donna Ahern Checkout. Click subscribe to sign up for the Checkout print edition.

Share on Facebook Share on Twitter Share on LinkedIn Share via Email