ii view: time to check in at Premier Inn owner Whitbread?

Improving forward bookings and a staycation destination. Buy, sell or Hold?

First-quarter trading update to 27 May

• 98% of UK hotels and restaurants now open
• 19 of 30 operational hotels open in Germany
• Net debt of £71 million suggests cash burn of £24 million in the quarter

Chief executive Alison Brittain said:

"The group traded significantly ahead of the market during the quarter, despite the impact of the UK Government restrictions that were in place for the majority of the first quarter. Trading in the UK since May 17, when overnight leisure stays were permitted, and when our restaurants fully reopened for indoor service, has been encouraging. Additionally, our forward bookings continue to improve, benefiting from the anticipated post-lockdown bounce in leisure demand, and a continued gradual improvement in business bookings.”

ii round-up:

Whitbread (LSE:WTB) operates over 800 Premier Inn hotels, giving customers access to more than 75,000 UK rooms. It is the largest hotelier in the UK.

Its restaurant brands include Beefeater, Brewer’s Fayre and Cookhouse Pub.

It opened its first Premier Inn in Frankfurt, Germany back in 2016.

For a round-up of this latest trading update, please click here.

ii view:

Starting life as a brewery company over 250 years ago, Whitbread today generates around two-thirds of its sales from its hotel operations and the remaining third from its pubs and restaurants. Its German hotel footprint is being expanded with its open and committed pipeline now running to 73 hotels.

For investors, a Covid clouded outlook remains, with UK infections back on an upward trajectory, and government virus restrictions have been extended for another month. The dividend payment remains halted, and management is still only able to offer limited forward guidance. 

That said, the rollout of vaccines across its core UK market is ongoing and there is potential for vaccinated US citizens to travel to the UK and Europe. The balance sheet was previously strengthened via a significant fundraising, and estimated cash burn of just £24 million over the last quarter is minimal. In all, and with competitors potentially suffering more than Whitbread during the pandemic, the company continues to be seen as a likely post-pandemic winner. 

Positives: 

• German expansion
• Balance sheet previously boosted by £1 billion 

Negatives:

• Dividend payment suspended
• Lacks the geographical diversity of other hotel operators like InterContinental Hotels (LSE:IHG)

The average rating of stock market analysts:

Strong buy