FTSE 100 hotel and pub operator Whitbread (WTB) delivered an ‘outstanding’ first-half performance according to its chief executive Dominic Paul, culminating with a 40% increase in the interim dividend and an extension of the firm’s share repurchase programme.

Investors shared Paul’s enthusiasm, sending the shares 3.5% higher to £34.40 following the results.

SUPPLY STILL LAGGING DEMAND

Whitbread, the UK’s largest hotel operator in terms of room numbers, posted revenue of £1.57 billion for the six months to 30 September, an increase of 17% on what was already a robust performance in the same period last year and a 55% increase on the same six months before the pandemic.

As well as increased booking numbers, the firm was able to raise rates due to the lack of supply with strong growth in RevPAR (revenue per available room) across the board.

Management now sees the lack of supply in the UK hotel market compared with 2019 lasting until 2028 at the earliest against a previous forecast of 2026, as independent hotels which have closed since the pandemic aren’t being replaced by new capacity.

Appetite is building for pub and hotel group Whitbread’s interim results

Despite ongoing inflationary pressures, adjusted pre-tax profits soared 44% to £391 million, ahead of management expectations, with the UK pre-tax margin rising to 27.5% against 24.4% a year ago and ROCE (return on capital employed) touching 14.9% against 11% last year.

In Germany, a market 40% bigger than the UK, the firm is ‘making good progress’ rolling out the same model and says it is on course to achieve its long-term aim of a 10% to 14% return on capital.

INCREASED SHAREHOLDER RETURNS

The icing on the cake for investors was the news that thanks to its strong cash-flow generation and management’s confidence in the outlook, the firm hiked its interim dividend by 40% from 24.4p to 34.1p and committed to buying back another £300 million of shares by the time of the full-year results next April.

‘We are generating significant operating cash flow that we are redeploying into future profit growth as well as returning value to shareholders through increased dividends and share buy-backs’, said Paul.

‘Given the structural shift in hotel supply and by continuing to invest in our assets, our brand and our teams, we remain confident that we can both extend our market leading position in the UK and replicate that success in Germany.’

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