Investors appeared to be content today with the direction of travel at Whitbread, the leisure giant which owns Premier Inn and pub brands Beefeater and Brewers Fayre, albeit there are a few issues for shareholders to contemplate.
Shares rose around 2.5% as the company highlighted “strengthening” trading over the first quarter and signalled that it remains confident in the outlook for the full year, after reporting group sales had risen by 1% to £739 million. Total accommodation sales at Premier Inn in the UK rose by 0.3% to £492.8m although total UK food and beverage sales dipped by 0.2% to £686.5m.
Chief executive Dominic Paul declared this confidence “reflects a more encouraging trading performance in the UK, our strong commercial programme and increased cost efficiencies, as well as good progress in Germany” where it now has more than 90 Premier Inn hotels.
However, there are still challenges to face. Derren Nathan, head of equity research at Hargreaves Lansdown, observed there were “some signs of softness” in the UK hotels division.
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“After stripping out new room openings, UK accommodation sales were down 2%, with customers appearing to pull back on last-minute weekend breaks. Both occupancy and room rates have slipped a little, most noticeably in London,” he noted. “This isn’t hugely concerning though, as Whitbread is up against some very strong comparatives and continues to outperform the market.
“In the younger German accommodation division, growth is much stronger and remains on track to cross the break-even threshold later in the year. Euro 2024 is likely to provide something of a boost in this market too.”
Mr Nathan warned further that there could be “some more testing times” in store for its food and beverage operation following a “mixed” opening quarter, given the backdrop of stagnant economic growth in the UK which he said was “reflected by recent weakness in the valuation”.
But, from an investors’ standpoint, he observed that the company’s programme to convert lower-yielding restaurants into hotel rooms was “likely to provide a strong return on capital over time”.
Market trends are not the only thing Whitbread is having to contend with, though. Trade union Unite was planning to demonstrate outside the company’s annual meeting in Dunstable today in protest over plans to slash around 1,500 jobs and shut 200 restaurants.
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Unite declared that, despite having hundreds of members at 100 of the locations affected, some of whom live in accommodation tied to their workplaces, the company has refused to consult with the union or answer basic questions on the redundancy process.
United noted that Whitbread was progressing with the redundancies after reporting a 36% rise in [adjusted pre-tax] profits to £561m on April 30. The company also proposed a 26% rise in the final dividend to 62.9p per share, taking the total dividend for the year to 97p per share, and a further share buyback worth £150m.
General secretary Sharon Graham said: “Rarely is a company so shameless as to celebrate leaping profits and dividends by announcing mass job cuts.”
Shares in Whitbread were trading up 2.52%, or 73p, at 2,976p at 4.10pm.
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