Whitbread plans to double Premier Inn hotel rooms and Costa Coffee outlets

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The Independent Online

Whitbread bucked the leisure industry's gloomy mood with analyst-beating full-year results and plans to double its Premier Inn hotel presence to 55,000 rooms and its Costa Coffee chain to 2,000 outlets within the next five years.

The leisure group reported full-year operating profits up 26.3 per cent to £210.3m – about 3 per cent higher than analyst expectations – and confirmed a strong on-going performance. "We are not saying that Whitbread is recession-proof, but the positive sales numbers have continued over the past couple of months into this financial year," Alan Parker, the chief executive, said.

The Costa chain did particularly well last year. Revenue shot up by 23.5 per cent, making it the seventh consecutive year of like-for-like sales growth. The chain has already doubled its estate since 2004 and plans another 1,000 outlets in the next five years, adding 300 in the UK and 700 internationally. Central London, retail trading parks and concessionary relationships will be key growth areas at home. The international expansion plan includes 200 coffee shops in Russia.

Whitbread's Premier Inn business is also looking strong. Like-for-like sales grew 10.4 per cent last year, and operating profits were up 9.6 per cent to £171m. The average occupancy rate for Premier Inns was 79 per cent and the division added another 3,400 rooms last year, taking its total to more than 36,000. This month, a hotel was opened in Dubai, the first of eight planned for the Gulf as part of a joint venture with the airline Emirates. And last year, Whitbread signed another joint venture, with Emaar-MGF, to open 80 hotels, with 12,000 rooms, in India over the next decade. "One of the great things about the budget hotel business is that almost everywhere you look in the world, there are opportunities," Mr Parker said. "India, for example, has a very underdeveloped market. Outside the palace hotels, the options are pretty inferior, so there is a big opportunity there."

As part of its strategy to focus the business on core activities, Whitbread sold the David Lloyd leisure chain for £925m and the TGI Fridays restaurants for £70m last year. Mr Parker says the financial results for the year vindicate the policy. "This is the result of the strategy we've been implementing for the last two years – which is to create a focused, expanded Whitbread, with money put behind the budget hotels and Costa in particular because that is where we can see great growth opportunities," he said.

Slowing consumer spending and rising commodity prices driving up the price of food are affecting the leisure sector. But the upside is the potential for strategic acquisitions. Whitbread bought the six-strong Golden Tulip estate in the autumn, and more recently purchased three London hotels, with 400 rooms, from the Real Hotel Company for £18.5m. "Companies that are not in such a good position and are being affected by the credit crunch may present acquisition opportunities in the next year," Mr Parker said. "But we are only interested in things that bolt on to existing business and can be acquired at the right price."

The final dividend for financial 2007 is up 21.4 per cent to 26.9p. Whitbread shares closed up 3.1 per cent at 1,227p.

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