18th Jun 2024 10:45
(Alliance News) - Whitbread PLC's first quarter trading statement provides confidence in the full-year outcome despite some signs of softness in its UK hotels.
On Tuesday, Whitbread said trading strengthened over the course of the first quarter of its financial year after a sluggish start, leaving it confident in its annual outlook.
In the 13 weeks that ended May 30, the Dunstable, Bedfordshire-based owner of Premier Inn said group total sales grew 1% to GBP739 million, driven by improved UK trading and continued progress in Germany.
"Having been 1% behind last year in the first seven weeks, our trading performance strengthened during the remainder of the quarter," Whitbread said.
Shares in Whitbread were up 2.8% to 2,983.00 pence each in London on Tuesday.
Midweek business demand and peak leisure demand remained robust, but weekend demand at short-lead was slightly softer, particularly in London, the company noted.
At Premier Inn UK, trading performance strengthened during the quarter and accommodation sales were in line with last year and up 55% versus financial 2020.
At Premier Inn Germany, total accommodation sales were up 15%, with total estate RevPAR increased to EUR57 and more established hotels RevPAR at EUR61, outperforming the wider market.
Liberum said the improved UK trading towards the end of the period "gives confidence in the full year" as it moves into the seasonal peak trading period.
The broker highlighted a positive strong forward booked position and that inflation is now expected to be at the low end of guidance range.
Derren Nathan, head of equity research, Hargreaves Lansdown said that some softness in UK hotels was not "hugely concerning" as Whitbread is up against some very strong comparatives and continues to outperform the market.
In the German accommodation division, growth is much stronger and remains on track to cross the break-even threshold later in the year, he added.
Euro 2024 is likely to provide something of a boost in this market too, Nathan thinks.
Nathan stated while the growth trajectory may have "flatlined" for the moment, its competitors are likely to be finding things even harder.
"Forward visibility is somewhat limited and economic growth remains stagnant in the UK so there could be some more testing times ahead reflected by recent weakness in the valuation. However, Whitbread is best-in-class and the ongoing program to convert lower yielding restaurants into hotel rooms is likely to provide a strong return on capital over time," Nathan believes.
Nathan also noted a "respectable" dividend yield of over 3%.
Shore Capital analyst Greg Johnson said it was an "encouraging update, especially against recent negative sentiment."
"With forward bookings remaining positive, we would anticipate trading strengthening heading into peak summer season," Johnson added.
Johnson thinks Whitbread can build earnings per share from just over 200 pence per share comfortably above 300p over the medium term, through a combination of Germany moving into profitability, the accelerated growth plan and broader UK expansion targets.
"We do not believe this opportunity is anywhere near reflected in the current share price," he added, restating a 'buy' rating.
By Jeremy Cutler, Alliance News reporter
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