ii view: Germany winning at Premier Inn owner Whitbread

First-quarter results to 29 May

• Total revenue down 4% to £711 million
• Groupwide Revenue Per Available Room (RevPAR) down 2%
• UK accommodation sales down 2%
• Total currency adjusted German accommodation sales up 16%
• German RevPAR up 12%

Guidance:

• Five-year plan on track to deliver incremental profit of at least £300 million by full year 2030, generating more than £2 billion for shareholder returns 

Chief executive Dominic Paul said:

"We continue to execute our strategic priorities at pace and are making excellent progress with our Accelerating Growth Plan and network expansion in both the UK and Germany.”

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ii round-up:

Whitbread (LSE:WTB) via its Premier Inn brand is the UK’s largest hotelier. The FTSE 100 company operates around 86,000 rooms in the UK and Ireland and is targeting 125,000 rooms. 

Its Food and Beverage (F&B) restaurant brands include Beefeater, Bar + Block, Brewer’s Fayre, and Table Table. 

The group began business in Germany in 2016 and now operates around 11,000 rooms. With a hotel market 40% bigger than the UK, Whitbread has a long-term target to become Germany’s number one hotel brand. 

For a round-up of this this latest trading update announced on 19 June, please click here.

ii view:

Founded by Samuel Whitbread in 1742 as a brewery, Whitbread’s Premier Inn hotels today compete against rivals like Travelodge, Accor SA (EURONEXT:AC) and Holiday Inn owner InterContinental Hotels Group (LSE:IHG). Headquartered in Dunstable in the UK, the hotelier employs over 30,000 people. Accommodation generated its biggest slug of sales during this latest quarter at around three-quarters, with food and drink the balance. 

Geographically, the UK made most sales during its last financial year at 90.7%. That was followed by Germany at 7.7%, Ireland at 1% and a small joint venture in the Middle East the balance of 0.6%.

For investors, squeezed consumer incomes and a return to more normal demand following a post pandemic boom are seeing UK revenues moving lower. Disruption to restaurant operations under format changes and in conversions to hotel rooms are hindering F&B sales, which fell 16% this latest quarter. The weather and the timing of bank holidays can impact performance, while Whitbread lacks the geographical diversity of other players such as InterContinental.

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On the upside, management expects a move into profit for the German business this financial year. Initiatives under a five-year growth plan include increasing adjusted pre-tax profit by at least £300 million between 2025 and 2030. Cost savings include a £60 million target over the current financial year, while shareholder returns include an ongoing £250 million share buyback programme and forecast dividend yield of 3.6%. 

On balance, and while risks remain, a five-year growth plan and a consensus analyst fair value estimate close to £34 per share look to offer grounds for longer-term hope.  

Positives: 

• Expanding in both the UK and Germany
• Asset-backed balance sheet

Negatives:

• Lacks the geographical diversity of other hotel operators
• Uncertain economic outlook

The average rating of stock market analysts:

Buy