ii view: Whitbread winning market share

A reduced loss, a £100 million savings programme and ongoing German expansion. Buy, sell or Hold?

First-half results to 26 August 2021

• Revenue down 39% to £662 million
• Adjusted pre-tax loss of £56.6 million, down from a loss of £367 million H1 2020
• No interim dividend payment

Chief executive Alison Brittain said:

"Whitbread traded significantly ahead of the market in the UK during the first half of the year, with our regional hotels trading ahead of pre-Covid-19 levels in the last six weeks of the half. This strong performance has continued into the second half, with sustained high levels of leisure demand and resilient demand from tradespeople. 

“Whilst some uncertainty remains over the speed and timing of the market recovery for office-based and international demand and the evolution of the pandemic in the winter months, we believe that UK like-for-like RevPAR run rates have the potential to reach full recovery in at some point during 2022.”

ii round-up:

Whitbread (LSE:WTB) operates over 800 Premier Inn hotels, giving customers access to more than 80,000 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. Today its German room numbers run to nearly 5,000.

For a round-up of these latest results, please click here.

ii view:

Starting life as brewery over 250 years ago, Whitbread today generates around two-thirds of sales from its hotel operations and the remaining third from its pubs and restaurant outlets. 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. Rising costs, supply chain pressures and a tight hospitality labour market all add to current challenges, while VAT has recently returned to 12.5%. The dividend payment remains halted, and management is still only able to offer limited forward guidance.

But recent bookings have been promising, Whitbread is expected to continue taking market share, while its £1 billion rights issue in 2020 offers both a strengthened balance sheet and room for ongoing investment. A £100 million cost saving programme is being executed, while the estimated share price-to-current net asset value sits below the three-year average. In all, and with competitors potentially suffering more, Whitbread 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

The average rating of stock market analysts:

Strong buy