Whitbread warns of £60m increase in costs due to inflation
The owner of Premier Inn and restaurant chains including Beefeater has reported a bounceback in profits to above pre-Covid levels but warned of a £60m increase in costs this year fuelled by soaring inflation.
Whitbread, which runs 844 Premier Inn hotels, also said it was increasing its target of number of rooms from 110,000 to 125,000 to take advantage of independent accommodation operators going bust in the UK and Ireland.
The company, which operates hotels in the UK, Ireland and Germany as well as chains including Bar & Block and Brewers Fayre, beat forecasters’ expectations, reporting pre-tax profits of £307.4m in the six months to 1 September.
This compares with a loss of £19m in the same period last year, and is 40% ahead of the same period 2019, before the pandemic struck.
Total revenues of £1.35bn were 25% above pre-Covid levels, although its food and beverage business remains 5% below 2019.
In the UK, revenues at Whitbread’s Premier Inn business – which in January said it would raise room prices to help offset cost increases – hit £1.3bn with profits of £317m, each up 21% on pre-pandemic levels.
“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,” said Victoria Scholar, the head of investment at Interactive Investor.
“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 said a combination of inflation in labour, utility bills including those for energy and food and beverage costs – as well as increased investment in IT and marketing – would cause its total costs to increase by £60m for the year to March.
The company, which will have a new chief executive in Domino’s Pizza boss Dominic Paul come next year, said that demand for rooms looking forward remains strong but the pub and restaurant sector “remains challenging”.
It said that total UK sales from 1 September until 20 October were running 23% ahead of the same period in 2019, while accommodation sales were up 37%.
Earlier this month, Whitbread increased staff hourly pay to a minimum of £10 with effect from next month, and provided a one-off payment of £300 that 34,000 employees were eligible to receive. The pay award cost £15m.
“Despite macroeconomic uncertainties, our current trading performance is strong and our business has proven its resilience in previous downturns,” said Alison Brittain, the chief executive of Whitbread.
“With a robust balance sheet and significant growth potential in both the UK and Germany, we remain confident in the full year outlook and our ability to deliver long-term value for all our stakeholders.”