Its shares have halved in 2020 due to Covid-19, but management isn’t lying down.
First-half trading update to 27 August
- Total UK & overseas sales down 76.8%
Chief executive Alison Brittain said:
"Our teams have worked very hard to reopen our hotels and restaurants and we are now firmly in the "restore" phase of our response to the Covid-19 crisis. Our performance following the reopenings has been ahead of the market, however, it has been clear from the beginning of this crisis that even as restrictions are eased and hospitality businesses such as ours reopen their doors, that demand would be materially lower than FY20 levels for a period of time. Given this backdrop, we have already taken extensive action to protect the business, retain financial flexibility and position it for long-term success.”
Hotel and restaurant owner Whitbread (LSE:WTB) today announced up to 6,000 job losses as the coronavirus continued to take its toll and the UK government prepared to wind down its job support scheme.
The owner of Premier Inn hotels and restaurants such as Beefeater and Brewers Fayre hopes the 18% cut to its total workforce will come predominantly from voluntary redundancies.
Whitbread shares fell by more than 3% in early UK trading and have halved year-to-date. Shares for the more geographically diverse owner of Holiday Inns brand InterContinental Hotels (LSE:IHG) have fallen by around a quarter in 2020.
Whitbread's unscheduled update came on the same day as the UK government moved to retighten social distancing measures as the number of virus cases continued their upward trend.
Total sales for the half-year to the end of August fell by more than 75% compared to last year, as the group was forced to close its outlets in both the UK and Germany under March onward lockdowns.
Whitbread operates over 1,200 Premier Inn hotels and restaurants across the UK, along with a small but expanding German hotel chain.
Since reopening hotels, good summer demand for traditional tourist Premier Inn destinations had been offset by subdued demand in city locations such as London.
The UK government’s Eat Out to Help Out scheme had helped boost sales at its eateries, with accommodation and food sales in August down by nearly 40% year-over-year compared to a fall of nearly 80% seen earlier in the year.
First-half results are scheduled for 27 October.
Whether coincidental or not, today’s update from this budget hotel and restaurant owner is likely to serve as a bleak reminder of the degree of support businesses potentially require under pandemic conditions. A near one-fifth cut to its 30,000 plus workforce is significant. The boost to restaurant sales from the government’s Eat Out to Help Out scheme is also noteworthy.
For investors, the degree of action being taken by management to reduce costs is favourable, with moves also including scrapping the dividend and cuts to head office. The bolstering of its balance sheet by £1 billion back in June also looks sensible, bookings are, according to management, running ahead of the industry, while some geographical diversity is being pursued given a blossoming German hotel network. But with government pandemic measures now retightening, its former shining light, London, still dark given a lack of overseas tourists and little sign of any return to dividend payments, there looks to be little rush just yet to add to any existing shareholdings.
- Continuing to cut costs
- Balance sheet previously boosted by £1 billion
- Covid hit first half total sales down 76.8%
- Lacks the geographical diversity of other hotel operators
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