Whitbread, the parent company of Costa Coffee, has announced its results for the full year 2017/18. Revenue has increased by 7.5% to £1,292m.
The news comes as Whitbread announces it is demerging Costa to focus on its structural growth opportunities.
Strong performance in the UK market
UK revenue was up 7.3%, now at £1,131m.
Costa has attributed strong revenue growth to store and Express expansion. £47m was invested in new Costa stores in the last year, with 243 new stores opened. £22m was invested in Express installations, with 1,187 net new machines installed. This has taken the UK store network to 2,422 stores, and the UK Express network to 7,248 machines.
Costa Express has continued to perform strongly. UK Express revenue has seen a large increase for the year of 18% to £210m. The success of Express has helped the company to extend its reach beyond traditional high street locations and into areas such as transport locations.
Costa also turned its attention to improving the customer proposition through product innovation and a focus on value. Most recently, the company trialled product bundle deals in the form of a lunch meal deal. Within the UK core estate same store growth has been slowing. Indeed core like-for-like sales from UK equity stores were negative for the quarter.
International expansion focused in China
International revenue saw a strong increase of 8.5% to £161m.
Costa's international expansion has been heavily focused in China. The completed acquisition of South China joint-venture partner Yueda has granted Costa with full control of its stores outside of Beijing, allowing Costa to accelerate expansion. In the last year, 249 new Express machines were installed internationally, along with 198 new store openings. This has taken the China store network to 449 stores.
Future growth plans
Going forward, Costa are focusing on consistent investment in the business for sustainable growth. The coffee specialist plans to grow the UK estate by 100-150 net stores FY19, along with an increase in Express machines, to help offset investment.
Costa are also continuing to concentrate on international expansion. The company aims to install over 1,300 new Express machines worldwide. In China, Costa plan to open approximately 100 new outlets, with a vision of 1,200 stores in China by 2022.
Alongside full year results, Whitbread announced the decision to separate Premier Inn and Costa via a demerger of Costa. The split is expected to be completed within 24 months.
We expect the move to enable management to put more focus on innovation and expansion at Costa.
Alison Brittain, Chief Executive of Whitbread PLC, said "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"
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