Andy Harrison will relinquish the chief executive’s reins at Whitbread on a high after the Premier Inn and Costa Coffee operator served up a forecast-beating 14 per cent jump in first-half profits.
Mr Harrison, who hands over to Alison Brittain from Lloyds Banking Group in early December, said that both brands had continued to win market share and he was confident of their ability to carry on growing, creating substantial value for shareholders.
During his five-year tenure, Whitbread’s share price has almost tripled, while sales have grown by £1 billion, but the former easyJet chief executive, who has tried to keep a low profile, insisted that he merely had been part of “a big business with a big team of people leading it”.
Asked for the formula of his success, he replied: “A lot of the structural changes were made before I arrived and what we’ve done is focus on organic growth, building the brands we’ve got, making them stronger, delivering returns and putting the customer at the heart of everything we do while focusing on our people. Really simple things. Absolutely no rocket science about it at all.”
He admitted to being proud that Premier Inn and Costa had gone from being “good brands” to “the UK’s favourite hotel chain and the UK’s favourite coffee shop chain”, adding: “Whitbread has been around for 270 years and I hope that when they update the history books there’ll be a nice short, positive paragraph on my tenure.”
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The key has been investment in its two key brands, with £700 million earmarked for this year alone. “We have delivered a consistently good return on capital,” he said. “Whitbread has got into a virtuous circle of good like-for-like sales growth, which means good unit margins, which means good profit, good returns, growing ebitda, which finances rapid organic growth, which creates future profit growth.”
Mr Harrison, 58, who cited the “relentless way of life” of a public company chief executive when announcing his surprise retirement in April, plans to have a holiday and spend time flying his light aircraft before deciding whether to add any directorships to his chairmanship of Dunelm.
Some observers expect his successor to review Whitbread’s ownership of Costa and its Beefeater and Brewers Fayre pub-restaurants, but Mr Harrison would be “very surprised” if Ms Brittain made many changes to its present strategy.
“We think Whitbread is a good owner of Costa,” he said. “We’ve looked at the alternatives and can’t see a better ownership model and therefore we are focused on delivering our milestones. We will grow the sales by 80 per cent by 2020 and that will create a huge amount of value for our shareholders.”
Mr Harrison signed off with a 13.8 per cent increase in underlying pre-tax profits to £291.3 million, from revenues up 11.3 per cent to £1.44 billion. The interim dividend is being increased by 13.1 per cent to 28.5p a share.
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Like-for-like sales for the group rose by 3.6 per cent in the six months to August 27, with growth at Premier Inn up 5 per cent and Costa’s UK business up 4.4 per cent. The company reiterated its estimate that implementing the national living wage would be £15 million to £20 million, while its decision to increase the pay of its Costa baristas early would be about £5 million.
Shares of Whitbread rose by 157p, or 3.3 per cent, to £48.82.