12th Jan 2022 14:59
(Alliance News) - Whitbread PLC on Wednesday reported a resilient performance in the UK with sales ahead of pre-pandemic levels but admitted that sales in Germany had struggled due to Covid restrictions.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “It'll come as welcome news to investors that Omicron doesn't look to be having a major impact on demand for hotel rooms in the UK. Fresh testing requirements for overseas travel is likely to have helped here, with would be travellers forced to find a break closer to home".
For the six weeks to January 5, the Dunstable, England-based hotel and restaurant company said that UK trading had been strong despite the Omicron variant. It reported total UK accommodation sales 5.1% ahead of the same period in financial 2020, the last period before the pandemic, and occupancy levels at 66%.
The variant dampened demand in December and through the festive period, Whitbread explained, but said that Premier Inn UK total accommodation sales had nonetheless continued to outperform the market.
In Germany, Whitbread's Premier Inn division fared worse with occupancy levels at 36%, down from 60% in its quarter. Whitbread explained that increased government restrictions in Germany are acting as a significant market drag to recent trading.
Shore Capital said that Covid has frustrated business in Germany, providing limited time to demonstrate traction for Premier Inn brand. Shore Capital said that, whilst the pipeline expansion has been slower than hoped, its current pipeline when built out would be a top five leading chain in Germany.
In the UK, Whitbread explained that January and February were traditionally its quietest months, noting low levels of forward bookings as it entered the new calendar year.
In Germany, Whitbread said restrictions are expected to last throughout the winter and into financial 2023. The company admitted that this would adversely impact market demand and impact financial 2022 profits.
While the impact of the Omicron variant has resulted in a softening of hotel bookings for Whitbread in recent weeks, the company said it still remains too early to assess what the impact on sales will be for the rest of this financial year.
Following today's update, Shore Capital said it had improved its annual pretax loss estimate for the company to GBP119 million, reflecting the company's improved UK accommodation revenue. This was improved by GBP60 million from a previous estimate of a loss of GBP179 million.
For the financial year to February 25, 2021, the company posted a pretax loss of GBP1.01 billion from a profit of GBP280.0 million a year before.
Shore Capital continued that it maintained its financial 2023 profit before tax estimates of GBP181 million at earnings per share of 71 pence as it believes that Whitbread's business model is "better positioned" to withstand ongoing cost inflation.
For the 13 weeks to November 25, the company's third financial quarter, the company had fared less well than recent weeks with total UK sales 3.1% ahead of sales in the same period of financial 2020.
Nonetheless, Whitbread said high levels of leisure demand and improving business demand helped maintain UK like-for-like accommodation sales ahead of pre-Covid levels in its third quarter. In the UK, like-for-like accommodation sales growth was 5.5% though in Germany it was behind 33%.
In its pub and restaurant sector, Whitbread said things had been "more challenging" with like-for-like sales growth in food and beverage. In the UK it was behind 13% and in Germany it was behind 22%.
Shares in Whitbread were down 0.2% at 3,194.00 pence on Wednesday afternoon in London.
Shore Capital and Peel Hunt both advise to Buy.
By Heather Rydings; [email protected]
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