Whitbread – Confident Outlook, Dividend Hiked 43.5%

Whitbread plc (LON:WTB)’s underlying full year revenues climbed 27% above pre-pandemic levels to £2.6bn. That reflected growth in Premier Inn, helped by fuller hotels, more rooms on offer and higher prices. This more than offset weakness in food & beverage sales.

Underlying operating profit rose more slowly than revenue, rising 12% to £544m. The slower growth partly reflected higher operating losses in Germany.

Whitbread generated free cash flow of £243.6m. Net debt of £3.8bn, including lease liabilities, was up 29% from March 2020. This largely reflected the extra leases taken on in expanding the hotel estate.

In the first seven weeks of this year UK sales were up 17% compared to last year, with hotels continuing to outperform the wider market. UK cost inflation guidance remains unchanged  at 7-8%. 

In Germany, accommodation sales were up 140% reflecting smaller size of the German business. Whitbread expects to add between 2,500 and 3,500 rooms across the UK and Germany this year.

The Board has recommended a final dividend of 49.8p, a 43.5% increase on last year. This is alongside a new £300m buyback plan,  to be completed in the first half of the current financial year.

The shares were up 3.8% in following the announcement.

Whitbread’s Earnings

Derren Nathan, Head of Equity Research at Hargreaves Lansdown:

“There’s plenty of cheer in Whitbread’s results today. Revenue growth of over 50% has seen Whitbread surpass pre-pandemic levels at both the top and bottom line. Its strong brand in UK midscale hotels sees it consistently outperform the wider market and hoover up market share, while still maintaining price discipline. 

The Food & Beverage performance was a drag on last year’s numbers but recent initiatives seem to have sewn the seeds of a recovery. Despite inflationary pressures across the cost base and growth in the estate, margins in the UK hotels division were well ahead of last year and only slightly below those seen in 2020.

Whitbread has got off to a strong start in the current year and its confidence is reflected in the increase in pay outs to shareholders.

Despite continuing market out performance from UK Hotels, the room opening team at Premier Inn isn’t checking in for a night’s sleep just yet. The opportunity in Germany is much larger, but not without risk and Whitbread isn’t expecting to breakeven there in the current year.

There’s work to do on branding in Germany, but it’s bedding down in the country and given  the strong track record we wouldn’t bet against Whitbread making a success of its expansion. While the pipeline of room openings in both markets is impressive, the challenging market for smaller competitors means Whitbread’s well placed for further consolidation.

The market has responded well to today’s results, but the valuation doesn’t look too demanding if Whitbread can execute the growth plan. That said, with pressure continuing to build on discretionary income, it’s unlikely to be plain sailing all the way.”

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