- 1,075 new rooms opened in UK
- £75 million of savings last year
- Buyback bigger than expected
Shares in Whitbread (WTB) gained nearly 4% to £26.81 in morning trading as the Premier Inn-owner said its five-year plan was on track and announced a £250 million share buyback to be completed over the next 12 months.
IMPROVING MOMENTUM
Group revenue for the year to the end of February was down 1% to £2.92 billion reflecting lower food and beverage ('F&B') sales due to the firm's Accelerating Growth Plan and softer UK market demand, mitigated by decent growth in Germany.
Premier Inn UK accommodation sales were in line with last year, outperforming the market, while RevPAR (revenue per available room) was down 2% which was also better than the market.
Adjusted pre-tax profit was £483 million, 14% lower than the previous year and a shade below the consensus forecast reflecting the impact of the AGP plan, cost inflation and lower interest income, partially offset by increased cost savings and progress in Germany, leading one analyst to describe the results, not unreasonably, as ‘a mixed bag’.
The firm said it was ‘executing at pace’ and its five-year plan was on track to deliver incremental adjusted profit before tax of at least £300m by the 2030 financial year.
Meanwhile, its AGP is progressing well towards its target of adding £100 million in revenue as the gorup replaces lower-returning branded restaurants with an integrated food and beverage offering at a number of our sites and starts to unlock 3,500 extension rooms, with the impact on 2024/25 profit fully reversed this year.
Germany proved to be a bright spot, with much-reduced losses, and the company expects the business to deliver adjusted pre-tax profit of between £5 million to £10 million this year rising to at least £70 million by 2030.
WHAT DID THE COMPANY SAY?
Chief executive Dominic Paul commented: ‘In the UK and Ireland, our AGP is progressing well and as we open our growing committed pipeline, we will reach at least 98,000 open rooms by full year 2030.
‘At the same time, our commercial strategy is driving our outperformance versus the market, and we are continuing to realise material cost savings across all areas of our business without compromising our reputation for both quality and value.’
In terms of current trading, RevPAR was down 1% in the last 7 weeks which is a further improvement relative to the market and potentially better than expected, with forward bookings said to be ahead of last year.
The group plans to recycle at least £1 billion of more mature property in order to fund high-returning growth including network expansion and maintain its average annual net capex spend of £500 million, with £250 million to £300 million of property disposals planned for this year.
With strong operating cashflow, Whitbread is on track to return more than £2 billion to investors and it announced a bigger-than-expected £250 million share buyback to be completed over the next twelve months.
INCREASED COSTS
Russ Mould, investment director at AJ Bell said: ‘Premier Inn owner Whitbread has suffered of late as it faces increased costs – largely related to changes in last year’s Budget – and fairly soft demand with revenue per available room under some pressure.
‘However, there were encouraging signs for shareholders in the company’s first-quarter update. Notably it is outperforming the wider market and sees forward bookings ahead of the levels seen at this time last year.
‘To signal its confidence in the outlook the company has served up another healthy share buyback.
‘At the same time, the German business is on track to break into profitability this year – meaning it will start to make a financial contribution to the business as well as a strategic one.
‘With independent hotels and smaller chains under pressure there is an opportunity for Premier Inn to take market share and the company can look to build on its continuing progress in the German market.’
LEARN MORE ABOUT WHITBREAD
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.
