Whitbread makes progress on Costa infrastructure work ahead of spin-off

Whitbread this morning said it has taken “constructive” early steps in preparation for the demerger of Costa.

The company unveiled long-mooted plans to spin off the coffee shop chain back in April in a bid to optimise value for shareholders.

And today it said it was seeking to make that happen as fast “as practical and appropriate”, adding that it has already made “good progress” on the core infrastructure and efficiency work that was already underway.

It could take up to two years before the restructuring is fully complete, with Whitbread revealing that it will provide a further update on the demerger in October when it publishes interim results.

Whitbread today also unveiled first quarter results, showing a 3% increase in total sales.

Overall F&B sales declined slightly due to lower footfall from adverse weather, but Costa UK grew total sales by 5% in the quarter through the strong contribution from new stores and Express machines.

Alison Brittain, chief executive of Whitbread, said: “Both the budget hotel market and the coffee market present long-term structural growth opportunities, and whilst we are cautious of shorter-term trading conditions in the UK, due to well-publicised consumer trends, we are confident that we have the right strategies in place to enhance our UK and international market positions and ensure each business is well-positioned to thrive as a separate entity.”

Although Costa’s revenues increased, the growth was down to the addition of new stores and Express machines in attractive convenience-based locations. On a like-for-like basis sales declined, which resulted principally from footfall weakness in traditional shopping locations, whereas travel locations continued to show good growth.

New products included an expanded selection of savoury snacks and the new ‘Flat Black’ and ‘Flat Mocha’ coffees to sit alongside the popular Flat White.

The upgrade of point-of-sale terminals across the UK was completed in April, which has already enabled a lunch-time value bundle to be introduced across the country. The technology upgrade has also enabled the trial of mobile ordering of coffee in 16 stores in London.

Costa operators 1,397 equity stores in the UK and 1,070 franchise stores. The number of Express machines now installed total 8,228 worldwide.

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