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Wed 25th Apr 2018 - Whitbread to demerge Costa
Whitbread to demerge Costa: Whitbread has announced its intention to demerge Costa Coffee. The company stated: “Over the last few years Whitbread’s board has rigorously and regularly reviewed its strategy and structure and has for some time been of the view that separating Premier Inn and Costa, at the right time, would enable long-term value to be optimised Given the considerable strategic progress that has been made, particularly in developing significant international growth prospects in each business, Whitbread is now committed to a demerger of Costa, providing shareholders with investments in two distinct, focused and market-leading businesses. Demerger of Costa will be pursued as fast as practical and appropriate to optimise value for shareholders. Appropriate time will be taken to complete critical transformation and infrastructure improvement objectives that will put both Premier Inn and Costa in a strong position to thrive as separate entities. Whitbread is to remain the owner of Premier Inn, the UK’s largest and most successful hotel business, with attractive UK and international growth opportunities. Costa is the clear UK market leader and second largest globally, with attractive long-term international opportunities. Today’s announcement of the demerger of Costa will provide clarity to shareholders, team members and other stakeholders on Whitbread’s strategic direction. The board has for some time been of the view that separating Premier Inn and Costa at the right time would enhance focus and enable value to be optimised for shareholders over the longer term. Given the significant strategic progress that has been made and the momentum in the delivery of the plan, the board is confident that both Premier Inn and Costa will soon be businesses of sufficient strength, scale and capability to enable them to thrive as independent companies. The board, therefore, believes that it is in the best long-term interests of Whitbread’s many stakeholders to separate Premier Inn and Costa, via a demerger of Costa. Announcing the demerger of Costa will provide clarity to shareholders, team members and other stakeholders on Whitbread’s strategic direction. The board has carefully considered the optimal timing of the demerger of Costa and concluded it will be pursued as fast as practical and appropriate to optimise value for Whitbread’s shareholders and is expected to be completed within 24 months. This timeframe will allow both Premier Inn and Costa to maintain momentum, complete critical and complex transformation and infrastructure objectives, and drive international expansion, putting each business in a strong position to create further value as separate entities. These objectives include: Completing the complex and critical IT and business system upgrades and improvement programmes, which are delivered by Whitbread shared resources; delivering the recently upgraded efficiency programme, which will offset a significant proportion of the current high level of industry inflation and minimising disruption to trading and product innovation activities, particularly in the UK; further develop the international strategies in both Premier Inn and Costa, to strengthen the foundations for long-term profitable growth; and appropriately managing the Whitbread pension fund deficit and funding facilities and ensuring both Whitbread and Costa have appropriate governance structures in place to thrive as separate entities. Regular updates on progress will be given as part of Whitbread’s standard financial reporting cycle. The board will also begin to consult shareholders in order to align executive incentive structures to this plan.” Adam Crozier, chairman of Whitbread, said: “The Whitbread board has conducted regular and rigorous reviews of its strategy and structure for a number of years. For some time, the board has been of the view that at the right time Premier Inn and Costa should be independent companies. A separation will provide enhanced focus for each business and give shareholders an investment in two high-quality businesses. We will ensure that prior to separation each business is sufficiently developed and well-positioned to take advantage of the structural growth opportunities available to them in the UK and internationally. Announcing our intention now provides clarity of our strategic direction to our shareholders, team members and other stakeholders. The management team have continued to deliver strong strategic and operational performance, whilst building momentum in growth, innovation, international expansion and development of technology and infrastructure. The team will now also be focused on ensuring the demerger of Costa is conducted as fast as practical and appropriate to optimise value for Whitbread’s shareholders. The board fundamentally believes this is the best course of action to optimise value for shareholders over the longer term and will ensure both Premier Inn and Costa are positioned well to thrive as independent companies.” Alison Brittain, Whitbread chief executive, said: “Over the last two years, Whitbread has made tremendous progress in innovation and growth in our core UK businesses and we have recently delivered a step-change in international development through two significant acquisitions in China and Germany. We have considerable momentum in the delivery of a complex multi-year transformation programme which will improve our core operational capability, redevelop our technology platform and deliver significant levels of efficiency. We are confident in our plans to deliver further progress in these areas, which will ensure both Premier Inn and Costa are in a strong position to continue their success as separate entities, creating further value for our shareholders and opportunities for our team members. I am excited that at the point of separation, both businesses will be able to take advantage of the structural growth opportunities available to them in the UK and internationally. Costa will become a listed entity in its own right and the clear market leader in the out-of-home coffee market in the UK. Costa will also be well positioned to build further on its strong international foundations with growth expected in China and Costa Express. Whitbread will remain the owner and operator of the UK’s most successful hotel business. A key priority will be continuing the development of Premier Inn by creating a business of scale in Germany to replicate the success we’ve had in the UK.”

Whitbread reports strong UK performance and a step-change in international momentum: Whitbread has reported sales up 6.1% to £3,295m in its 2018 full financial year. Profit before tax was up 6.4% to £548m. Alison Brittain, Whitbread chief executive said: “Whitbread has produced another strong financial performance this year, with revenue growth of 6.1% to £3,295 million. Disciplined cost management has enabled us to grow underlying profit before tax by 4.5% to £591 million, with statutory profit before tax up 6.4% to £548 million. We have accelerated delivery momentum in all three of our strategic priorities during the year. In the UK, we have increased revenues, profits, cash flow, dividends and return on capital, notwithstanding challenging market conditions. This growth has been underpinned by disciplined investment in new capacity for both Premier Inn and Costa and a relentless focus on improving the overall experience for our millions of customers. With ongoing growth in coffee consumption and our increasing ability to win market share from the independent hotel sector, we are confident of further growth at a good return on capital in the years ahead. Internationally, we announced two strategically significant transactions for Premier Inn in Germany and Costa in China. In our first acquisition in Germany, we have agreed to acquire 19 hotels, comprising 3,100 rooms. In addition to our organic pipeline, this will ensure we have at least 31 hotels, comprising 5,720 Premier Inn rooms by 2021. In China, we completed the buy-out of one of our two joint-venture partners. This acquisition provides Costa with full control of stores outside Beijing and allows us to increase our ambition to target 1,200 stores by 2022. These acquisitions provide solid foundations from which both businesses can grow international operations of increasing significance in the years ahead. In addition to growing our business at a good return on capital, we have also worked hard to generate meaningful savings from our efficiency programme, which have offset the material structural inflation that is impacting the hospitality sector. Our strong execution to date has delivered savings of £105 million, which gives us confidence that we can increase our target from £150 million to £250 million, with £100 million to be delivered over the next two years. These additional efficiencies will help to offset a substantial proportion of anticipated inflationary pressures in the next few years. We are committed to the attractive longer-term structural opportunities for growth in the hotel and coffee markets, both in the UK and internationally. We are therefore continuing to invest throughout our businesses to ensure we retain brand leadership in the UK, build the foundations for long-term international growth and deliver the modern and efficient processes and technology which the businesses need to thrive in the future. Given recent economic and industry data, we do remain cautious on the consumer environment, especially on the high street, which we expect to remain challenging in the near term. The combination of our commitment to the investment programme and the current UK consumer environment naturally means our near-term profit growth may be lower than in previous years. However, I am confident that this strategy will deliver long-term sustainable growth in earnings and dividends, combined with good return on capital for years to come. In addition to delivering our ambitious longer-term growth plan, we remain committed to disciplined allocation of capital, maintaining a strong balance sheet and generating excellent cash flow. As a result, the board is increasing the full-year dividend in line with earnings growth to 101 pence per share.”

Pensions regulator set for Samuel Smith legal action: Tadcaster-based brewer and pub operator Samuel Smith is facing legal action after it failed to hand over pensions information. The Pensions Regulator (TPR) announced yesterday that it will prosecute the company and its chairman Humphrey Smith for failing to provide information in an ongoing investigation. TPR said it had sought details of the company’s finances in order to understand the funding position of some of the brewery’s pension schemes. After the brewery failed to comply, chairman Humphrey Smith and the company have both been ordered to appear at a Magistrates’ court in Brighton charged with neglecting or refusing to provide information without a reasonable excuse. Smith is charged on the basis that the offence by the company was committed with his “consent or connivance or by his neglect”. In previous cases of this nature, defendants found guilty are often ordered to pay a fine. Failure to provide information without a reasonable excuse is a criminal offence for which the fine is unlimited. Samuel Smith, which is known for its very low prices, runs all its pub on a directly managed basis is known for avoiding any kind of publicity and never responds to a Press inquiry.

JD Wetherspoon gets green light for Dublin centre pub: JD Wetherspoon has won judicial backing for a new pub in central Dublin, which is due to open at Christmas. The judge said the development, just opposite the Abbey Theatre, would be an attractive addition to the area. Two protected buildings, which will comprise the 1,600sq m space for JD Wetherspoon’s new site in Dublin city centre, will be connected by a glazed link at ground and first floor levels, a court has heard. The company won a bidding battle with Irish Life for the 150-year-old former Trustee Savings Bank building at 12B and the former 1839 Baptist Chapel at 12C Lower Abbey Street. Irish Life owns a neighbouring development. Judge Terence O’Sullivan, in the Circuit Licensing Court, has granted Wetherspoon’s a declaratory order that will guarantee the company a full drinks license and restaurant providing the development is completed in accordance with planning permissions. Constance Cassidy SC, counsel for Wetherspoon’s, said the company owned six other Republic of Ireland pubs in Dublin, Dún Laoghaire and Cork. Cassidy said part of the conditions laid down in the permission was that there would be no music or any other sound for entertainment amplified in or outside the premises. But this had never been a problem for Wetherspoon’s as the company did not engage in late-night entertainment or in-house music, she said. The pub will also have an outdoor beer garden and roof terrace with a retractable roof.

Côte closes Lincoln site: Côte Brasserie has closed its on Lincoln High Street site with the loss of around 50 jobs. Despite a £1 million investment to renovate the building, the French-inspired eatery closed its doors on Monday (23 April) just over two years after opening. The restaurant, which opened in February 2016, was popular with customers – and had been awarded a certificate of excellence and a 4.5-star rating on TripAdvisor. Users on the site described the food as “exceptional” and the staff as “very attentive”. In January, Cote also closed its restaurant in the Altrincham area less than a year after a £1m revamp, according to Altrincham Today. The Lincoln site operated as Dogma nightclub until it was replaced by Craft Bar and Kitchen in 2013, which was then replaced by Côte in 2016.

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