Andy Harrison, chief executive of leisure group Whitbread, has moved to deny links between the announcement that Costa Coffee managing director John Derkach is to leave the company and a possible demerger of its coffee business.
Whitbread announced that Derkach is to leave Costa to become chief executive of Tragus, the c.300-strong operator of Café Rouge and Strada, on 1 August. Derkach’s role will be taken by Whitbread group finance director Chris Rogers.
At a conference call for journalists, Harrison was asked whether Derkach’s departure is linked to a move to sell off Costa at some point.
“There’s no hidden agenda here,” said Harrison. “This decision is driven by John’s decision to join Tragus. Chris’ appointment is [because] we think he is the right man for the job."
Asked if Whitbread would consider demerger in the future, he added: “The future is a long time and we’ve always said never say never, but we’re 100% focused on delivering Costa’s growth plan.”
However, quoted in the Telegraph, Shore Capital analyst Greg Johnson said the announcement "sets a demerger in motion".
"Clearly they are getting their ducks in a row for that."
However, leading sector analyst Geof Collyer, of Deutsche Bank, said: “We have written extensively that we see Costa remaining within the group for some time so shareholders can benefit from the significant growth expected from the plan to double the estate size by 2016E.
“We have an EBITDA forecast of £175m for that year, and if demerger was a near term option, why is the MD leaving?
“We see an early demerger of Costa as potentially limiting the realisable value from the Costa growth plans for investors. However, we estimate that the implied value of Costa within the current EV is barely 5x EBITDA, (assuming that the hotels business is being valued on 10x EBITDA).”
Collyer predicted a 5.9% rise in sales and 5% rise in EBITA at Whitbread at its full year results on 26 April. He predicted top line growth of 26% at Costa, with margins set to rise 75 basis points and EBITA up 35%. Revenues at Premier Inn are predicted to rise 8.7%, with restaurant sales up 1.9%.
Meanwhile, Rogers told journalists he didn’t think changes would be “dramatic” at Costa after he joins. “It’s more of the same, with more emphasis on business to business and international but never forgetting the UK business.”
