Whitbread LON:WTB, the owner of Premier Inn, reported a steady first half as resilient hotel trading in the UK and Germany helped offset weaker food and beverage sales caused by the overhaul of its restaurant estate.
The group, which is implementing its “Accelerating Growth Plan” to convert underperforming branded restaurants into hotel extensions, posted adjusted pre-tax profits of £316mn for the six months to the end of August. That compared with £340mn a year earlier, reflecting broadly flat UK accommodation revenues and continued investment in the strategy. Statutory pre-tax profit fell to £287mn from £309mn.
Premier Inn’s UK accommodation sales were roughly in line with the prior year. Revenue per available room (RevPAR) slipped 1 per cent as a soft first quarter gave way to improving market conditions in the summer, leaving the company marginally ahead of the wider mid-scale and economy hotel market. UK profit margins narrowed to 23.4 per cent from 24.6 per cent, as cost inflation and lower food and beverage takings weighed on performance.
Whitbread’s food and beverage sales down 11 per cent
Whitbread said UK food and beverage sales were down 11 per cent, largely reflecting the planned closure of lower-returning restaurants. The group is replacing more than 200 such sites with integrated dining concepts, unlocking space for 3,500 higher-yielding hotel rooms. About 500 to 700 of those rooms are due to open during the current financial year.
Despite the short-term hit, the company said its five-year plan remained on course to deliver at least £300mn in incremental adjusted pre-tax profit by 2030. Of that, £100mn is expected from the Accelerating Growth Plan, £120mn from UK network expansion, and £80mn from the group’s growing German operation.
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In Germany, where Whitbread has been expanding Premier Inn to challenge local rivals, sales grew 9 per cent. The unit narrowed its first-half adjusted loss before tax to £3mn from £9mn a year earlier.
Although market demand softened in the second quarter, the group said it still expected its German business to reach profitability this year, with revised full-year guidance for adjusted profit before tax of up to £5mn. An agreement to acquire 1,500 additional rooms was also announced, supporting the goal of 20,000 rooms and £70mn profit by 2030.
Whitbread steps up cost savings
Whitbread has stepped up cost-saving efforts to offset inflation, achieving £43mn of efficiencies in the half and targeting £250mn by the end of the decade. It said UK cost inflation would be kept within its 2–3 per cent guidance range. The company also plans to recycle up to £300mn of property proceeds this year, including £99mn from recent sale-and-leaseback deals, while maintaining average annual capital expenditure below £500mn.
The group valued its freehold and long-leasehold estate at between £5.5bn and £6.4bn, underpinning plans to reinvest £1bn into high-returning projects such as hotel extensions.
Whitbread declared an interim dividend of 36.4p per share, unchanged from a year earlier, and reaffirmed its intention to return £2bn to shareholders by 2030 through dividends and buy-backs. About £108mn of its current £250mn buy-back has been completed.
Analysts struck a cautiously optimistic tone. Dan Lane, lead analyst at Robinhood UK, said: “It’s not that the restaurant-to-rooms plan is a bad one — it’s just that it’s taking time. Execution speed really is the focus now.”
Shares in Whitbread have rallied from April lows, but investors remain focused on whether the group can “shrink the steak and grow the rooms” quickly enough to deliver the promised returns.
