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28 January, 2019 - 09:47 By Tony Quested

Costa ‘bravo’ as Whitbread starts returning millions to shareholders

Bedfordshire-based Whitbread plc, which is the UK’s largest hotel owner, has instituted an initial £500 million share buyback programme as it starts returning proceeds from the £3.9 million sale of Costa to Coca-Cola.

In a Q3 trading update, Whitbread also announced sales growth of 2.5 per cent. It expects to deliver full-year results in line with expectations and says pre-tax profit will be similar to the last figures as it continued to invest in expansion both in the UK and internationally.

More than 2,000 new rooms have been added to its hotel chain with occupancy continuing high at more than 80 per cent.

The stock was initially hit as Whitbread said it remained cautious on the UK trading environment in the year ahead along with higher inflation.

Chief executive Alison Brittain said: “This has been a momentous year for Whitbread, with the sale of Costa to The Coca-Cola Company for £3.9 billion completed on January 3, much sooner than expected. 

“We are now commencing an initial share buyback programme of up to £500 million, with further details about our plans to return a significant majority of the net cash proceeds to shareholders at our Capital Markets Day on February 13.

“Whitbread is now a focused hotel business with over 800 hotels in the UK, Germany and the Middle East, operating under the Premier Inn brand, with a committed pipeline of over 20,000 additional rooms. 

“Premier Inn has made good progress this year, growing total sales by 2.5 per cent, which along with strong results from our efficiency programme, means we are on track to achieve full year expectations for FY19.

“The UK business achieved total accommodation sales growth of 3.5 per cent in the third quarter. Our performance in the quarter reflects a strong Central London market and a weak regional market. 

“We are cautious about the macro environment for the next financial year due to increased uncertainty and continuing high inflation. Although we are confident in our ability to create value from ongoing investment in the UK and increasing investment in international growth, in this environment we expect underlying profit before tax in FY20 to be consistent with this year.

“We continue to be excited about the opportunity in Germany and our first hotel in Frankfurt remains the number one choice for customers. Our second hotel in Germany will open in Hamburg in February and this year we have continued to extend the total committed pipeline in Germany, which now stands at over 6,000 rooms across 34 hotels.

“Our unique model and leading market position in the UK puts us in a strong position to capture structural growth opportunities in the UK and internationally. Investing in growth through our disciplined approach to capital allocation ensures we can create sustainable value for shareholders over the longer-term.”

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