- Further £150 million buyback
- £150 million of cost savings planned
- Shares down 16% year-to-date
Premier Inn-owner Whitbread (WTB) pleased investors with news of an extension to its buyback programme and a new cost-saving initiative as its full-year profit undershot market estimates.
After languishing around the £30 level to begin with, the shares slowly climbed 110p or 3.5% to £31.50 by late morning.
For the year to the end of February, the group reported revenue of £2.93 billion, an increase of 13%, which was slightly below consensus forecasts, although adjusted pretax profits of £561 million were in line with market expectations.
Premier Inn UK delivered record adjusted pre-tax profit of £588 million and a ROCE (return on capital employed) of 15.5%, while Germany continued to improve, reducing pre-tax losses from £50 million to £36 million and generating a 20% increase in revenue per available room in sterling terms.
The group announced a further £150 million share buyback, to be completed in the first half of the current financial year, and a 26% increase in the interim dividend.
NEW GROWTH PLAN
Much of the attention, however, was on the firm's 'accelerating growth plan' designed to maximise the returns from its estate.
Having previously toyed with the idea of selling its Beefeater and Brewers' Fayre food and beverage outlets, the group now plans to offload 126 low-returning sites - having already negotiated the sale of 21 sites for £28 million - and to convert 112 restaurants into hotel rooms where it already has an integrated restaurant.
This could 'unlock' 3,500 new room extensions and take Premier Inn to its target of 97,000 rooms by the end of 2029 while increasing margins.
The plan will require around £500m of investment over the next four years, which will be funded through the firm's existing annual capital expenditure programme.
There will be a one-off impact of £20 million to £25 million to this year's P&L (profit and loss) but the firm says this will be fully recovered in the 2026 financial year and deliver incremental adjusted pre-tax profit of £30 million to £40 million in 2027 rising to £80 million to £90 million in 2029.
EXPERT VIEW
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot said: ‘Whitbread delivered full year results that were slightly behind on what the market expected.
‘Like its full-year results, current trading to the middle of April has been weak, like much of the industry has been experiencing.
‘The new plan will come at a cost, so profit expectations are being cut, although this should recover in a couple of years. This seems to make sense and be a lower-risk solution to tackling low-performing restaurants and opening new/higher-return rooms in a rather efficient manner.’
