Whitbread

Ticker WTB

Today's data summary

Market closed
% change
-1.28%
Price Pence
4773.00
Change
-62.00
As of 19:39 16 Jan 2019
Market cap. Pound sterling
8,765.06 million
As of 19:39 16 Jan 2019

Latest updates

Costa clearance

Costa coffee machine
Whitbread

The European Commission has cleared the sale of the Costa Coffee chain to US drinks maker Coca-Cola from British restaurant and hotel owner Whitbread.

"The Commission concluded that the proposed acquisition would raise no competition concerns because the companies do not sell the same products and the links between their activities are limited," the EU executive said in a statement.

Whitbread: 'sentiment remains positive'

Richard Hunter, head of markets at interactive investor, has commented on those Whitbread half-year figures,. He said:

Whitbread is in something of a holding pattern at present, with the Costa sale leaving Coca-Cola requiring regulatory approvals. The separation of the business has long been called for by investors and the sale has helped the share price rise by 13% over the last three months. Although the company is in the throes of an important strategic change, sentiment remains positive, with the market consensus of the shares coming in at a cautious buy.

Whitbread Zips it up

Zip room
Whitbread

Whitbread has revealed a bit more about its "innovative new format" called Zip by Premier Inn in its half-year results today.

The company says it is a "significantly different offer" to the traditional Premier Inn and Hub formats and will attract a different customer segment.

"The essence of Zip is good quality, small, very simple rooms targeting a large segment of the market, which is currently underserved; the extra-value seeking customer. Importantly, these target customers do not currently stay at Premier Inn and are dissatisfied with their current options.

"By reducing the room size to 8.5m2 and carefully engineering the design and fittings, return on capital is expected to be comparable to the rest of the network, whilst offering highly compelling prices."

The first Zip will open in Cardiff in the first quarter of next year.

Whitbread happy with half-year figures

Premier Inn
Reuters

Whitbread says it is on track to meet its full-year forecasts after posting positive figures for the half-year.

Revenue climbed 2.6% to £1,079m while statutory profit before tax was maintained at £257m.

Alison Brittain, Whitbread chief said: "The highlight of the first half was the announcement of our agreement for the sale of Costa to The Coca-Cola Company for £3.9bn."

It said its UK network increased to more than 74,000 rooms.

Yesterday the company announced a new Premier Inn chain called Zip.

Coca-Cola is to buy the Costa coffee chain from owner Whitbread in a deal worth £3.9bn
Coca-Cola is to buy the Costa coffee chain from owner Whitbread in a deal worth £3.9bn.

A potted history of Whitbread

Chris Johnston

Business reporter, BBC News

Whitbread logo
BBC

Whitbread was founded in 1742. Here's what they've done since:

  • 1750 - creates the UK's first mass production brewery in east London
  • 1868 - begins manufacturing beer in bottles.
  • 1968 - starts brewing Heineken under licence, giving it a fifth of the UK lager market in just three years.
  • 1974 - the first Beefeater steakhouse opens
  • 1987 - the first Travel Inn follows
  • 1990s - snaps up UK chains including David Lloyd Leisure, Marriott Hotels, TGI Fridays, Pizza Hut and Premier Lodge hotels.
  • 1995 - pays £19m in for Costa Coffee when it had 39 outlets.
  • 2000 - the brewery business is sold leaving Whitbread to focus on brands like Costa and Premier Inn

Costa was 'exposed'

Costa
Costa

For Coca-Cola, buying Costa is an "ideal way into a frothy market that it’s maybe missed out on so far", according to Neil Wilson, an analyst at Markets.com with a more positive view of the deal.

And if you're looking for an explanation on why Costa would sell, have a look at the numbers, he says. Sales growth is "stalling".

"Costa is exposed to areas like the High Street where lower footfall translates into fewer cups of coffee being sold".

The company has also been struggling to attract hipsters.

"We continue to see Costa facing tougher competition from artisan coffee retailers who are taking market share".

Whitbread will miss 'caffeine high'

Coffee beans
Whitbread

A note of doubt over Whitbread's strategy, despite the strong share performance this morning.

"What remains of Whitbread, essentially just Premier Inn, will focus on expansion plans in the UK and Germany from here on," says Hargreaves Lansdown's Nicholas Hyett.

"Progress has been good and we believe the product is excellent, but it’s a very different business to Costa and growth will be slower and demand more up-front investment. An excellent deal it may be, but Whitbread investors may miss the caffeine highs Costa serves up.”

Coke's plans for Costa

Ms Brittain explains Coca-Cola's rationale for buying Costa.

"They want the coffee product, they have no coffee in their range," she tells the Today programme.

She thinks the beverage giant will use Costa to create "ready to drink, cold brew coffees".

"You could see Costa absolutely everywhere, in vending machines, hotels, restaurants, pubs, cafes - in all the places you see Coke today."