Whitbread lines-up £300m share buyback as profits soar

Premier Inn’s parent company has launched another £300million share buyback after first-half profits rose by a quarter on bumper demand.

FTSE 100-listed Whitbread’s statutory profits rose to £293million for the six months ending August, from £234million in the equivalent period last year.

Due to the strength of its result, the business lined-up a further £300milllion share repurchase, having just completed one earlier this month.

In addition, the group has announced a 40 per cent hike in its interim dividend to 34.1p per share, set to be paid out in early December.

Whitbread shares were the top riser on the FTSE 100 on Wednesday morning, up 4 per cent at £34.55, having grown by around a third over the past 12 months.

Sweet dreams: Premier Inn owner Whitbread has launched a £300million share buyback

Revenues at Whitbread’s much-larger domestic arm grew by 14 per cent to £1.48billion over the period, with trade supported by the continued recovery in leisure and business travel following the end of Covid-related restrictions. 

Occupancy rates remained relatively flat, but the company’s average rooms went for £84.13 per night, compared to £73.54 the previous year.

The hospitality giant also said it received an uplift from constrained supply in the UK accommodation sector, which it does not forecast rebounding to pre-pandemic volumes for at least five years.

Bumper hotel demand across Britain and Germany helped boost Whitbread’s food and beverage sales by 12 per cent to £408.8million.

Although ongoing inflationary burdens continued to affect the group, the large number of hotel bookings, combined with massive cost savings, helped its adjusted pre-tax profits surpass expectations, growing by 44 per cent to £391million.

Dominic Paul, chief executive of Whitbread, said: ‘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.’ 

Demand has been healthy since September, the group added, with third and fourth-quarter booked sales at its Premier Inn UK segment ‘well ahead’ of last year.

Much of Whitbread’s growth in recent years has been due to a decline in independent hotels, especially since the pandemic started, partly because of rising inflation and interest rates.

The cost-of-living crisis has also done little to stop consumers from taking holidays but has led many to seek more affordable places to stay.

Julie Palmer, partner at Begbies Traynor, nonetheless warned that Whitbread ‘will have to sleep with one eye open’ as its food offering ‘continues to trail behind Premier Inn’s success and remains more exposed to wider market pressures’.

She added: ‘For now, it is clear that the hospitality giant remains well insulated against outward cost pressures, as its differentiated model and strong balance sheet provide vital shelter from headwinds that smaller players are struggling to weather.’