Shares in Whitbread jumped over 3% early on Tuesday (26 April), after the owner of Costa Coffee and Premier Inn reported a solid increase in revenue and earnings for the full year.
In the 53 weeks leading to 3 March, the FTSE 100-listed company saw underlying profit, before tax climbed up 11.9%, year-on-year, to £546.3m (€704.1m, $794.1m), while its total profit for the year was up 5.8% from the previous year at £387.3m.
Total revenue was up 12% to £2.91bn, while group sales grew 3.0% from the corresponding period in 2015 on a like-for-like basis, while the company lifted its final year dividend by 10%, year-on-year, to 61.85p per share.
The Whitbread group's Premier Inn brand saw a total sales growth of 12.9% and like-for-like growth of 4.2%, while coffee chain Costa posted a 15.9% improvement in total sales and a 2.9% like-for-like growth across the UK.
However, the group's net debt at the end of the year was significantly higher than last year, as it rose to £909.8m from £583.2m. That was partly as a result of an aggressive expansion plan, as the group aims to reach 85,000 hotel rooms and £2.5bn in coffee sales by the end of the decade.
"Both Premier Inn and Costa benefit from attractive market growth opportunities and we will continue to capitalise on these by developing our network and brand strength," said group chief executive Alison Brittain.
Steve Clayton, head of equity research at Hargreaves Lansdown, said that while Premier Inn had got off to a slow start overseas, the group's growth prospects remained positive.
"Premier Inn has been slow to gain traction overseas, but the UK estate's growth has more than compensated," he said.
"The balance sheet is strong, with plenty of freehold hotel assets, so Whitbread looks capable of funding its growth, without recourse to shareholders."