25th Oct 2022 19:21
(Alliance News) - Whitbread PLC on Tuesday said it swung to an interim profit and brought back dividends as the hotel sector recovered from Covid-19, but analysts warned that the firm wouldn't be immune to a prolonged downturn.
In the first half that ended September 1, the Bedfordshire-based owner of the Premier Inn chain said revenue more than doubled year-on-year to GBP1.35 billion from GBP661.6 million.
Compared to the first half of financial 2020 - the last financial period before the pandemic - revenue was 25% higher from GBP1.08 billion.
This was driven by a strong rebound in UK accommodation sales as meetings and events returned.
Whitbread also swung to a pretax profit of GBP307.4 million, compared to a loss of GBP19.3 million a year before. Compared to the same period in financial 2020, pretax profit was 40% higher than GBP219.9 million.
The recent pretax profit figure benefited from GBP33.5 million of net property impairment reversals and GBP2.0 million profit from property disposals.
AJ Bell analyst Danni Hewson dubbed the results "genuinely impressive."
Derren Nathan, an analyst at Hargreaves Lansdown, said: "Whitbread's Premier Inn has driven a strong first-half performance. Its UK hotels are fuller than pre-covid levels, but not at the expense of room rates which have also been going up. This is a testament to Premier Inn's increasing market share as the independent hotel sector continues to decline."
Food & Beverage sales for the firm, meanwhile, remained challenging - lagging 5% behind pre-pandemic levels due to pressures from cost inflation.
The company reassured that the phasing of these increases towards the second half meant that profit margins recovered strongly in the first half and were broadly in line with pre-pandemic levels at 24.4%.
Hargreaves Lansdown's Darren Nathan added that, compared to its competitors, Whitbread also has the advantage of high occupancy in its hotels providing a "captive market for the restaurants".
"Whitbread is better placed than many of its peers. It won't be immune to a prolonged downturn but we think it has the resilience to come out the other side," he continued.
Danni Hewson agreed: "The one fly in the ointment which seems to be preventing investors from getting too excited about any of these strengths is the surge in costs which Whitbread is facing. However, Whitbread has the financial resources to continue to invest in and grow the business despite these inflationary pressures."
Victoria Scholar, head of investment at interactive investor, was less certain: "Premier Inn UK has enjoyed a strong summer thanks to the release of pent-up demand for travel post-pandemic which has helped to boost sales of hotel rooms. While sales have held up going into the third quarter so far, there is likely to be a reduction in demand with a post-summer lull with schools going back and the warm weather fading."
Whitbread closed up 0.1% at 2,613.14 pence on Tuesday in London. In the year-to-date, the stock is down 17%.
By Heather Rydings; [email protected]
Copyright 2022 Alliance News Limited. All Rights Reserved.
Related Shares:
Whitbread