Whitbread Reports Profit Decline Amidst UK Market Challenges, Confident in Future Growth

Whitbread, the FTSE 100 leisure group, has announced a 22% decline in pre-tax profits for the first half of the year, reflecting softer demand in the UK market. The company reported flat revenues of £1.57 billion for the six months ending August 29, with pre-tax profits dropping to £309 million. A notable factor in this downturn was a 7% decline in food and drink sales, attributed to a major restructuring of its restaurant operations.

Despite these challenges, Whitbread has reaffirmed its full-year guidance and remains optimistic about a potential recovery in the second half of the year. The company noted an increase in bookings for October and November, suggesting a rebound in consumer confidence.

As part of its growth strategy, Whitbread is focused on expanding its room capacity. The company plans to increase Premier Inn’s UK room count from 86,000 to 98,000 and double its presence in Germany from 10,500 to 20,000 rooms. To facilitate this expansion, Whitbread has accepted offers for 51 of the 126 restaurants it intends to sell. Additionally, plans are underway to convert 112 more restaurants into approximately 3,500 hotel rooms, with planning applications already submitted for a third of these new rooms.

The restructuring plan, which is expected to cost £500 million over the next four years, is reportedly “on track,” according to the company. Notably, Whitbread’s German operations have experienced a 21% revenue boost, driven by what the company describes as the “progressive maturity” of its hotel estate in that market.

Chief Executive Dominic Paul, who took the helm from Alison Brittain last year, expressed confidence in the company’s growth plans. “We are making excellent progress with our plans, and over the next five years, we are set to deliver a step change in our performance, which will fund significant returns to shareholders,” he stated. He emphasized a clear pathway for extending Whitbread’s market-leading position in the UK and capitalizing on favorable supply conditions.

As part of its commitment to returning value to shareholders, Whitbread has announced an interim dividend of 36.4p per share and a £100 million share buyback program. Founded in 1742 as a brewery by Samuel Whitbread, the company has undergone significant transformations over the years, selling its brewing business in 1999 and shifting its focus to hospitality. In 2019, Whitbread divested its Costa Coffee chain to Coca-Cola for £3.9 billion and has since expanded into the German market, which remains a crucial area for growth.

Following the announcement, Whitbread shares rose by 3.6%, or 111p, to £31.83, reflecting investor confidence in the company’s future prospects.