- Food and drink sales decline
- Total room revenue down 2%
- Five-year growth plan on track
Shares in Whitbread (WTB) fell over 2% to £27.13 in morning trading despite the Premier Inn-owner saying it was making progress in the first quarter with its five-year growth plan and UK network expansion.
Investors may have been perturbed by the 16% fall in ‘F&B’ (food and beverage sales) and the 2% fall in total accommodation sales.
Total RevPar (revenue per available room) was also down 2% in the first quarter, although there was a strong performance in the group’s London hotels.
While he was upbeat about some parts of the business, chief executive Dominic Paul did express concern over the ‘challenging market backdrop in the UK.’
Paul, however, was quick to add that the company still remains on course to deliver £60 million of cost efficiencies and meet its target of £250 million to £300 million of property disposals this year.
GERMANY OUTPERFORMING
Germany didn’t disappoint, delivering another strong trading performance with total accommodation sales up 16% in local currency ‘led by the increasing maturity of our brand and estate, together with the benefit of our commercial initiatives,’ said the company.
The company also said the £250 million share buyback which was announced earlier in the year was on track with 1.2 million shares purchased for a total consideration of £34 million.
The five-year plan is also ‘on track’ to deliver incremental profit of at least £300 million by full year 2030, generating more than £2 billion returns to shareholders.
EXPERT VIEW
Russ Mould, investment director at AJ Bell, commented: ‘The Premier Inn owner has a proposition which is relatively affordable and reliable – anyone booking a room knows what they are going to get and that is a key selling point.
‘However, the key revenue per available room metric is still trending negative for its domestic business thanks to the weak backdrop for the UK hotel market as a whole amid an uncertain economic backdrop.
‘With visibility limited, all the company can do is control what it can and hope that it comes out of this difficult period with its competitive position enhanced thanks to weaker players and independent operators falling by the wayside.
Whitbread needs to keep things running as efficiently as possible so it can keep prices low to attract business and leisure customers, advised Mould.
‘The latest trading statement reflects the company’s rejigging of its food and drink operations – with Whitbread converting several sites into hotels and selling others. Sales were down significantly for this part of the business.
‘Investors will be pleased about the progress being made in Germany, where its operations are enjoying strong growth, albeit from a lower base than in the UK, and where it remains on track to achieve a maiden profit in 2026.’
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DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Ian Conway) own shares in AJ Bell.
