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Whitbread shares hit by lacklustre outlook after Costa deal

Whitbread shares hit by lacklustre outlook after Costa deal
FILE PHOTO: A worker walks above a Costa Coffee under going maintenance work in Loughborough, Britain April 25, 2018. REUTERS/Darren Staples/File Photo   -   Copyright  Darren Staples(Reuters)
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(Reuters) – Whitbread Plc <WTB.L> warned that profit would not grow in 2019-20 as the British hotel owner, which has just sold its Costa coffee chain, faces an uncertain economic outlook.

Shares of the FTSE 100 company fell in morning trading as investors shrugged off a 2.4 percent increase in quarterly sales and focussed on the cautious outlook.

The owner of the Premier Inn chain said it expected annual results to be in line with expectations in the current financial year that runs until around the start of March but added that there would be no progress in underlying profit before tax in 2019-20.

Whitbread this month completed the sale of Costa to Coca-Cola Co <KO.N> for 3.9 billion pounds.

Its hotel business faces rising competition from online services such as Airbnb and OYO Hotels, as well as a tough economic climate and political turmoil that is prompting Britons to rein in spending.

Like-for-like sales in the UK have fallen 0.7 percent so far in the current fiscal year as weakness in regional markets overshadowed a strong Central London.

Whitbread, which has 6,000 rooms across 34 hotels in Germany, reported a 3.5 percent fall in third-quarter sales in that country. It expects losses there to hit nearly 12 million pounds ($15.5 million) in the next fiscal year due to expansion.

Liberum analyst Anna Barnfather said she remained concerned about the weaker UK sales and capital intensity of German growth plans, which has been dragging on returns.

In response to industry changes, Whitbread is aggressively expanding internationally, specifically in Germany and is targeting the UK budget market with “Zip” pod-style rooms that start from 19 pounds per day, in an aim to boost sales at home.

The former brewing company, which traces its history back to 1742, also began an initial share buyback programme of up to 500 million pounds on Thursday.

(Reporting by Karina Dsouza and Arathy S Nair in Bengaluru; Editing by Bernard Orr/Keith Weir)

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