Whitbread profits set to rise but so will wages bill
Costa Coffee and Premier Inn owner Whitbread unveiled a hike in half-year profits, but warned it will face up to an extra £20m a year in staff costs from the new national living wage.
The group, which is one of the UK's biggest employers with around 48,000 staff, said it had already increased pay for baristas in its Costa Coffee chain by around 10% this month to take pay above the incoming national living wage.
This will cost it around £5m over the second half of its financial year, while wider wage hikes across the group to meet the new minimum pay rules and its own pay plans will add £15m to £20m a year to annual costs.
The operation of around 20 Costa outlets in Northern Ireland is run by a franchisee, and the living wage will not be applied here.
There are seven of its Premier Inn hotels in Northern Ireland.
The group said it cannot rule out price rises as it looks to offset the higher wage bill, but stressed it hoped to make savings in other ways, such as through moves to improve productivity across the business, including better use of staff rosters.
Outgoing chief executive, Andy Harrison, insisted the group wants to maintain a "good value proposition".
Its first-half results showed a 13.8% jump in underlying pre-tax profits to £291.3 million for the six months to August 27, after seeing robust sales growth across its Premier Inn hotel and Costa chains.
From next April, firms will have to pay all workers aged over 25 at least £7.20 an hour - up from the current national minimum wage of £6.50 - and this will rise to £9 an hour by 2020.
Whitbread said: "This increase is one of the inflationary factors which Whitbread manages every year. We can continue to mitigate this cost inflation over time through a combination of economies of scale as we grow, procurement benefits and investment in training and systems to deliver increases in productivity."