Top story

Whitbread (WTB) has announced its intention to demerge Costa following pressure from activist American investors.

The news came on the morning the group announced underlying pre-tax profit up 4.5% from £565m to £591m on revenue up 6.1% from £3.1bn to £3.3bn. Pre-tax profit climbed 6.4% to from £515m to £548m.

The company said it had been of the view for “some time” that separating Premier Inn and Costa at the right time would enable long-term value to be optimised.

Demerger of Costa would be pursued as fast as would be practical and appropriate to optimise value for shareholders, it said in a statement to the London Stock Exchange this morning.

Appropriate time would be taken to complete critical transformation and infrastructure improvement objectives that would put both Premier Inn and Costa in a strong position to thrive as separate entities.

Whitbread would retain ownership of Premier Inn, which had “attractive UK and international growth opportunities”.

Adam Crozier, Whitbread chairman, said the board had 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.”

Whitbread would ensure that each business was sufficiently developed and well-positioned to take advantage of the structural growth opportunities available to them in the UK and internationally prior to separation.

“Announcing our intention now provides clarity of our strategic direction to our shareholders, team members and other stakeholders.”

Crozier said the management team had continued to deliver strong strategic and operational performance, while 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,” he said.

Alison Brittain, Whitbread chief executive, added that over the past two years, Whitbread had made tremendous progress in innovation and growth in its core UK businesses and it had 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.”

Brittain said she was excited that at the point of separation, both businesses would 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,” she said.

Commenting on the full-year results, Brittain said: “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.”

Morning update

Global nutrition group Glanbia (GLB) has reported 4.8% revenue growth in the first quarter of 2018 at constant currency with a solid performance from its nutrition interests, US cheeses and its joint ventures.

Glanbia Performance Nutrition (‘GPN’) delivered good revenue growth in the first three months of 2018. Revenue increased by 9.3% year on year – driven by volume growth of 5.5%. The Body & Fit acquisition delivered 7.8%, offset by a price decline of 4.0%.

Glanbia Nutritionals delivered revenue growth in line with expectations in the first three months of 2018. Revenues increased 1.1%, driven by a volume increase of 8.6% offset by a price decline of 7.5%.

Nutritional Solutions revenue declined by 3.6% in the period, driven by volume growth of 2.6% which was across dairy and non-dairy ingredients offset by a price decline of 6.2% which was related to relatively lower year on year dairy prices.

US Cheese revenue increased 5%, helped by volume growth of 13.7% because of the timing of customer off-takes versus the previous year. Pricing declined by 8.7% as a result of reduced cheese markets year on year.

Siobhán Talbot, group managing director, said: “Glanbia delivered positive revenue growth of 4.8%, constant currency, in the first quarter of 2018 from wholly owned continuing operations.

“Glanbia Performance Nutrition was the main driver of revenue growth with continued good volume momentum across key markets. Glanbia Nutritionals also delivered volume growth across its portfolio.

“The year has started as planned and we reiterate our full year guidance of 5% to 8% growth in adjusted earnings per share, constant currency, from the continuing group (pro-forma) in 2018 with growth to be delivered in the second half of the year.”

Crawshaw Group (CRAW), the value butcher, has reported full-year pre-tax losses of £13.5m, compared with a pre-tax loss last time of £1.4m, attributed to a one off non cash impairment charge of £10.6m and £0.8m exceptional costs. Group revenue climbed 1% from £44.2m to £44.6m.

Noel Collett, chief executive, said: “This has been a disappointing year for group sales. Whilst we have been pleased with the strong performance of our factory shop outlets, sales across our high street estate have proven more challenging, exacerbated by the well documented high street pressures.

“Against this, however, we have made operational progress to strengthen the business. We are confident that the rollout of our unique factory shops format and improvements in profitability across the high street estate will leave the Group well-placed for future growth.”

Jim McCarthy, chairman, said: “While sales for the year have been challenging, I am confident that the repositioning of the group towards our successful factory shop model will improve long-term profitability.

“I expect to provide an update on a new management team in due course, who I am confident will help further develop Crawshaw’s market leading value and drive improved performance in both factory shops and high street stores.”

Devro (DVO), one of the world’s leading manufacturers of collagen products for the food industry, has announced trading for the period form 1 January to the current date in line with board expectations.

The Devro 100 programme continued to progress well, with actions on track to deliver the targeted cost savings for the year. As part of the phased plan to achieve the targeted levels of productivity and output efficiencies at its US plant, good progress was made during the period.

The China plant continued to perform well and, as previously indicated, Devro’s focus was now on improving the pricing for the products from this plant, and progress was made during the period.

“While recognising the ongoing pressures from input cost inflation and exchange rate volatility, the board remains confident that Devro is well placed to make good progress in 2018,” it said in a trading update.

British American Tobacco (BATS) will hold its AGM today where chairman Richard Burrows will refer to “a dynamic period of change” in the industry, creating “the opportunity to make a substantial leap forward in our long-held ambition to provide consumers with less risky tobacco and nicotine choices”.

“The group’s wide range of potentially less harmful products which provide the enjoyment of smoking without burning tobacco, means that your company is ideally positioned to further shape the future of the business during a period of profound change which can deliver benefits for: consumers, who will have a range of potentially safer choices; society, which could benefit from real progress in tobacco harm reduction; and shareholders, who will own a sustainable and profitable business,” he will say.

John Nichols, non-executive chairman of Nichols (NICL) will tell shareholders at the AGM today that UK revenue for the first quarter of 2018 is ahead of the same period last year both on a reported and like- for-like basis – excluding the incremental sales from D J Drink Solutions acquired in June – and compares favourably to the total UK soft drinks market growth of 2.6% (Nielsen year to date to 24 March 2018).

“As previously reported and as anticipated, the ongoing conflict in Yemen and the timing of the majority of shipments for Ramadan 2018 falling into Q4 2017 has impacted international sales in Q1 2018,” he will say.

The soft drinks group will say it is maintaining its previous guidance for 2018 and currently expect full year earnings to be in line with market expectations.

Majestic WINE (WINE) has announced Naked Wine has “met in full the second year of the acquisition earn-out relating to return on investment performance conditions” and, as a result, application has been made for 498,071 new ordinary shares of 7.5p each in the Company to be admitted to trading on AIM. It is expected admission will take place tomorrow.

Supermarket Income REIT (SUPR) has announced its intention to raise up to £65m through the issue of up to 64,356,435 new by way of a placing and offer for subscription at 101p per new share.

The £65m target issue size is expected to enable the REIT to buy two of its target assets for about £104m in total, excluding acquisition costs.

On the markets this morning, the FTSE 100 fell 0.3% at 7,401.1p in early trading

Early risers include Whitbread (WTB), up 1.7% at 4,235p following this morning’s full-year results and demerger announcement, Imperial Brand (IMB), up 1% at 2,412p and C&C Group (CCR), up 0.5% at €3.28.

Fallers so far today include Fevertree Drinks (FEVR), which retreated 1.4% to 2,785p, PZ Cussons (PZC), off 1.1% at 241.8p and Glanbia (GLB), down 2.9% at €13.8 following this morning’s statement.

Yesterday in the City

The FTSE 100 closed up 0.3% at 7,421p.

The Coca-Cola Company reported what it called “solid” operating results and a “positive” start to 2018.

The soft-drinks giant said while refranchising continued to impact reported net revenues, it delivered non-GAAP organic revenue and volume growth across all geographic operating groups and it gained value share globally.

Net revenues fell 16% in the first quarter to $7.6bn (£5.4bn), driven, it said, by a 26% headwind from refranchising bottling territories. Non-GAPP organic revenues grew 5%.

FTSE 100 fallers included Marks & Spencer (MKS), off 1.7% at 279.2p, Ocado Group (OCDO), down 2.3% at 519.4p, SSP Group (SSPG) moved 2% lower at 634.1p, WH Smith (SMWH), slipped 1.4% to 1,917p, Greene King (GNK), fell 2.5% to 547p, Devro (DVO) dipped 3.7% to 220.5p and McBride (MCB) moved 3.2% lower to close at 152.2p.

Stocks on the up included Fevertree Drinks (FEVR), up 3.1% at 2,814p, Purecircle (PURE), pushed 4.9% higher at 393.5p, Majestic Wine (WINE), moved 2.4% higher to close at 2.4%, CARR’s Group (CARR) climbed 2.8% to 149p and Nichols (NICL) lifted 1.26% to 1,483.5p.