As with many other sectors, Brexit seems to be taking a toll on Travel and Leisure
Falling demand causes short term uncertainty for Whitbread (WTB)
- As shares drop 3%, we suggest a ‘medium risk hold’ for investors seeking a balance of income and growth.
- Management confidence in the Group’s ability to deliver long term growth remains high despite clouds on the horizon in the short term.
- Group confirms share buyback using proceeds from Costa sale will be in June.
Premier Inn hotel owner Whitbread came out with its full year results this morning – it’s first since the sale of Costa Coffee and though confident about its ability to grow over the longer-term, the shorter-term outlook is less clear.
The fourth quarter saw a fall in demand as a result of a decline in business and leisure confidence; a trend which has continued into March and April. The CEO stated “it is too early to know how business confidence and its impact on the market will evolve”, which has led to early weakness in the share price with a fall of 3%.
Pre-tax profit came in slightly below expectations at £260 million with a final dividend of £0.67 and the group confirmed the share buyback using the proceeds from the Costa sale would be in June. Expectations for the year ahead are for weaker revenue per room in the UK and efficiency savings will be less than higher costs, along with continued investment in order to expand in the UK and especially Germany.
Our View on Whitbread - Hold
There is every chance for analysts to adjust their forecasts downward on the back of the cautious tone; we stick with a hold recommendation for medium risk investors seeking a balance of income and growth.
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