Continuing to benefit from the £3.9 billion sale of Costa Coffee to Coca-Cola, Whitbread shares had a strong start to 2019, eventually climbing above £51 in early April for the first time in almost 4 years.
Yet most of that goodwill dissipated across the rest of that month, culminating in a very poorly received set of full year results.
Since then it has picked up a bit, benefiting from the announcement of a £2 billion share buyback at the end of May. Whitbread shares now sit at a current trading price of £47.12.
Back in April, Whitbread revealed a 2.1% rise in underlying revenue to £2.049 million, alongside a 1.2% increase in underlying pre-tax profit of £438 million and a 1.3% jump in underlying basic earnings to 193.2p per share. This meant each figure came in well below analysts’ expectations.
Given that the brand is now effectively the be all and end all for Whitbread, Premier Inn’s performance was worrying. UK like-for-like accommodation sales actually fell 0.6%, with revenue per available room tumbling 1.7%. The firm said a ‘decline in business and leisure confidence’ resulted in weaker domestic hotel demand in the fourth quarter.
This softness carried over into March and April, especially in the ‘regional business market’, due to the UK’s Brexit uncertainty, meaning Whitbread is going to find it difficult to post some positive Q1 results on Wednesday. Its FY20 outlook suggested as much, with the company working on the assumption of ‘weak UK market RevPar’ throughout the year, as evidenced by March’s 4.4% plunge.
Beyond those RevPar numbers, investors will want an update on its additional charges for the year, which appeared to stand at around £40 million to £50 million in April, as it expands in Germany and the UK, processes ‘operational dis-synergies’ following the sale of Costa and deals with higher costs only partially countered by its efficiency programme.
Whitbread shares have a consensus rating of ‘Hold’ alongside an average target price of £50.04.
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