- Premier Inn Germany sales grow 22%
- Additional £300 million adjusted pre-tax profit expected by 2030
- 125,000 rooms in UK & Ireland in the long-term
Shares in Whitbread (WTB) were 5% higher at £32.24 in morning trading despite the Premier Inn-owner reporting a 22% fall in pre-tax profit to £309 million and flat revenue of £1.5 billion for the 26 weeks to 29 August.
The UK’s leading hospitality and hotel group said its results reflected a ‘slightly softer UK demand environment.’
Despite this, the company announced an increase in the interim dividend to 36.4p per share and a further £100 million share buyback to be completed by 1 May 2025.
The company also said it was making progress with network expansion – there are plans to increase to 98,000 rooms by full year 2030, with a long-term potential of 125,000 rooms across UK & Ireland.
Whitbread is growing in Germany and there is progress with the company’s five-year plan.
The plan involves increasing adjusted pre-tax profit by at least £300 million by 2030 and ‘generating more than £2 billion for dividends, share buybacks and, if suitable opportunities arise, additional high returning investments.’
LONG TERM VIEW
Russ Mould, investment director at AJ Bell said: ‘Whitbread is in it for long term and seeing up and down periods is perfectly normal. Tougher market conditions just happened to coincide with changes to its restaurant business, creating a double whammy of headwinds that has derailed its earnings growth.
‘The restructuring process is now underway, and it’s caused a 7% decline overall in food and beverage sales during the half-year. This trend has worsened with a 14% decline reported over the past six weeks. Whitbread might argue this is simply a period of readjustment, but investors will be upset that it isn’t shifting more sausages and eggs.
‘To Whitbread’s credit, it is still outperforming the mid-scale and economy hotel markets. That is one reason why investors haven’t punished the company today. The shares are up as it is doing its best in a tough environment.
‘Boosting the interim dividend by 6.7% to 36.4p and committing to buying back a further £100 million of shares by May 2025 also implies that management is confident about better times ahead and hasn’t been shaken by reporting a decline in profits. The buyback is smaller than the £150 million programme announced six months ago, but something is better than nothing in the eyes of investors.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell
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