Whitbread deliver impressive first half performance

Strong H1 performance driven by our differentiated business model

Positive outlook based on current trading and favourable supply backdrop

Increased dividend and further £300m capital return

Whitbread Plc (LON:WTB) have relased a trading update for the first 6 months of FY24.

H1 FY24 Group Financial Summary

Overview

•   Group adjusted profit before tax up 44% which was ahead of our expectations, driven by our strong brand, clear strategy and powerful business model

•   UK hotel demand is strong and with supply not now expected to return to pre-pandemic levels for at least five years.  We are therefore seeking opportunities to grow our pipeline towards our long-term potential of 125,000 rooms across the UK and Ireland, whilst continuing to maintain our financial discipline

•   UK adjusted pre-tax margins increased to 27.5% (H1 FY23: 24.4%), and UK ROCE was 14.9% (H1 FY23: 11.0%), well ahead of pre-pandemic levels

•   In Germany, we continue to make good progress and reconfirm our previous guidance for FY24. We remain on course to achieve our long-term ambition of reaching 10-14% return on capital

•   The Group’s strong revenue performance, focus on cost efficiencies and vertically integrated business model has generated significant cash flow in the period 

•   £300m share buy-back completed on 3 October 2023, in accordance with our capital allocation framework; further £300m buy-back to be completed by the time of the FY24 preliminary results

•   Current trading and outlook: recent trends continuing with forward booked revenue position ahead of last year and no change to cost guidance; visibility on UK supply underpins our confidence in the outlook for FY24 and beyond

Financial highlights

•   Premier Inn UK: total UK accommodation sales were 15% ahead of H1 FY23 and 55% above H1 FY20, with strong RevPAR growth in both London and the Regions

•   F&B sales increased by 10% vs H1 FY23, driven by a return to year-on-year growth in covers and spend per head

•   Premier Inn Germany: total accommodation sales were up 82% vs H1 FY23 reflecting further room openings and the progressive maturity of the existing estate

•   Group statutory revenue increased by 17% vs H1 FY23 to £1,574m

•   Despite ongoing inflationary pressures, adjusted profit before tax increased by 44% to £391m, including reduced adjusted losses before tax in Germany of £14m; £4m of adjusting items meant that statutory profit before tax increased by 29% to £395m

•   Strong cashflow generation: adjusted operating cash flow increased by £73m to £483m funding further investment in the UK and Germany as well as £364m paid to shareholders during the first half

•   Strong balance sheet: lease-adjusted net debt: adjusted EBITDAR^† of 2.5x

•   Interim dividend per share increased by 40% to 34.1p per share (H1 FY23: 24.4p) reflecting the strong H1 performance and our confidence in the outlook. The dividend will be paid on 8 December 2023

Segment highlights

Premier Inn UK

Premier Inn Germany

Current trading (six weeks to 12 October 2023)

•   The positive drivers seen during the first half have continued into Q3 FY24 with sustained strong levels of demand across both leisure and business and in London and the Regions

•   Premier Inn UK: total UK accommodation sales were up 13% versus the same period in FY23, with a RevPAR premium of £6.64 versus the M&E market¹

•   Premier Inn UK: forward booked occupancy is broadly in-line with last year but at higher ARRs, with the result that booked revenue for Q3 and Q4 is well-ahead of last year

•   F&B: total sales were 8% ahead of FY23

•   Premier Inn Germany: Total accommodation sales were 44% ahead of the same period in FY23 and overall RevPAR was €65 while in aggregate the cohort of more established hotels had RevPAR of €71

Outlook and FY24 guidance

•   We remain optimistic about the outlook; leisure and business demand remains strong as evidenced by our forward booked position; favourable supply dynamics are set to continue for some time with the continued decline of independent hotels and constrained UK room supply growth

•   There are no changes to our previous FY24 guidance other than the following amendment to gross capex and disposals:

o Having taken advantage of a number of high returning freehold purchases in the UK, Ireland and Germany, we are increasing our FY24 gross capex guidance to £500-£550m (up from £400-£450m previously), partially funded by expected disposal proceeds relating to property transactions of between £50m and £100m

† signifies an alternative performance measure (‘APM’) – further information can be found in the glossary and reconciliation of APMs at the end of this document.

1: STR UK data, standard basis, 1 September 2023 to 5 October 2023, Midscale & Economy (‘M&E’) market excludes Premier Inn

Commenting on today’s results, Dominic Paul, Whitbread Chief Executive Officer, said:

“This is an impressive first half performance. In the UK, we maintained high levels of occupancy whilst continuing to attract excellent guest scores and offering great value for our customers. The strengths of our operating model and our continued focus on driving cost efficiencies across the business resulted in UK margins exceeding pre-pandemic levels. In Germany, we are making good progress and are continuing to refine our strategy based on our learnings to-date and whilst there is much work to do as we continue to grow, we remain on course to achieve our long-term ambition of 10-14% return on capital.  

“We are generating significant operating cash flow that we are redeploying into future profit growth as well as returning value to shareholders through increased dividends and share buy-backs. Given the structural shift in hotel supply and by continuing to invest in our assets, our brand and our teams, we remain confident that we can both extend our market leading position in the UK and replicate that success in Germany.

“The Group is in excellent shape, trading well and has significant growth potential, both in the UK and Germany. Based on our strong performance to-date and an encouraging forward booked position, we remain optimistic about the full year outlook and look forward with confidence as reflected by our increased interim dividend and further planned share buy-back.”