Whitbread boss to face questions over potential sell-off of Costa Coffee

Costa is being circled by investors – opening the door to a potential £3bn sale

The company said earlier this year that it will split the Costa chain and list it as a separate entity (Reuters)

Whitbread boss Alison Brittain will be quizzed over the firm’s plans for Costa Coffee on Wednesday when the group reports on first-quarter trading.

The company said earlier this year that it would split the Costa chain and list it as a separate entity, following pressure from activist investor Elliott.

But it has since emerged that Costa is being circled by a clutch of private equity firms – including Bain Capital, CVC and TPG – opening the door to a potential £3bn sale of the high street chain.

It was reported last month that Whitbread has been approached informally over a potential buyout of the firm, and investors will be keen to learn more alongside the company’s trading update.

Graham Spooner, investment research analyst at The Share Centre, said: “The sales and revenues figures will most likely be overshadowed by the media and investors demanding to know more of the possible demerger of the Costa coffee business where management have suggested a possible separate share listing. However, it has been rumoured that several private equity vehicles have been interested and we’ll wait to see if management have been lured.”

Costa, which Whitbread acquired in 1995 from founders Sergio and Bruno Costa, has more than 2,400 outlets and is embarking on overseas expansion.

It is thought that a private buyer would continue the expansion and tighten up costs at the group.

Premier Inn, which Whitbread also owns, will stay with the group.

Analysts also expect Costa to book a 2.3 per cent fall in like-for-like sales in the first quarter, dragged down by woes affecting the British high street.

“The group gave a warning that the state of the UK high street would affect them despite the coffee chain seeing continued growth in the UK.

“Investors will also expect a progress report on their German expansion of their Premier Inn hotel chain,” Mr Spooner added.

At its full-year results in April, Whitbread reported annual sales growth of 6.1 per cent to £3.3bn, while pre-tax profits rose 6.4 per cent to £548m.

Annual figures also showed that Costa booked a 1.2 per cent rise in like-for-like sales over the year, ahead of expectations.

PA