Premier Inn owner Whitbread says trade has picked up after profits tumble
Premier Inn owner Whitbread has ramped up cost saving plans after its first half profits slumped, but it said trading had improved in recent weeks.
The hotel and pub group, which also owns the Beefeater and Brewer’s Fayre brands, posted a 22 per cent tumble in pre-tax profits to £309m for the six months to August 29.
On an underlying basis, pre-tax profits fell 13 per cent to £340m.
It said it was now aiming to cut costs by £60m over the full year, up from a previous target of £40m to £50m.
The group will also now look to deliver annual savings of £50m on average for the following five years.
The group said trading had improved since the first half, with a “good pick-up” in bookings across October and into November, which it forecasts will drive a return to like-for-like sales growth in the final six months of its financial year.
Whitbread said cost actions and recent moves to make savings would help the group boost profits and deliver more returns to shareholders by 2030.
It now expects to increase underlying pre-tax profits by at least £300m in 2029-30 compared with 2024-25 and generate more than £2bn for dividends and share buybacks and potentially “high-returning investments”.
Dominic Paul, chief executive of Whitbread, said: “We are making excellent progress with our plans and over the next five years are set to deliver a step change in our performance which will fund significant returns to shareholders.
“We are determined to build on our significant outperformance since the pandemic and whilst the market has been slightly softer than last year, we remain on course to grow our UK returns substantially over the medium-term,” he added.
In April, Whitbread revealed a shake-up at its food and beverage division, due to weak performances among some brands.
It said it would cut its branded restaurants by more than 200 in favour of building more hotel rooms, leading to 1,500 job cuts.
Whitbread also outlined plans to sell 126 of its less profitable branded restaurants and convert another 112 into hotel rooms.
Richard Hunter, Head of Markets at interactive investor, commented: “Whitbread has outlined a new and ambitious strategy, which seeks finally to draw a line under any lingering pandemic repercussions.
“The sale of its jewel in the crown, Costa Coffee to Coca-Cola in 2019 for £3.9bn somewhat left Whitbread flying on one engine, largely reliant on its Premier Inn business.
"The situation was then compounded by the onset of the pandemic, and more recently the rise in interest rates and inflation.
"Indeed, the shares remain down by 16 per cent over the last five years although despite these major challenges there are certainly signs that the group is on the road to recovery.
He added: “The irony of the ravages wrought by the pandemic is that it provided Whitbread with some major opportunities given a structural shift in the sector.
"Many independent hotels went to the wall as a result and there was next to no new hotel construction activity, which opened up the market to the larger operators. This contributed to Premier Inn becoming the largest hotel chain in the UK, with a 12 per cent share of total hotel room supply.”