As Whitbread updates the market Ian Forrest, Investment Research Analyst at The Share Centre, explains what it means for investors.
Whitbread checks in with lower profits
- Pre-tax profits dropped 6% to £251mn on revenue flat at £1.1bn and like-for-like revenue at Premier Inn fell 3.6% and revenue per available room outside London was down 5.9% in Q2
- The market was unsure how to react to the news initially with a drop in early morning trading quickly followed by a positive recovery
- With a strong balance sheet and ongoing investment in the business The Share Centre maintains its ‘Hold’ recommendation
Whitbread today reported a drop in first half profits as trading at its Premier Inn business continued to be weak outside London. Pre-tax profits dropped 6% to £251m on revenue flat at £1.1bn. Like-for-like revenue at Premier Inn fell 3.6% and revenue per available room outside London was down 5.9% in the second quarter. Whitbread cited a slowdown in business travel and noted leisure confidence is also in decline. The company said it was difficult to predict how business confidence would evolve in the second half but it was assuming the weakness would continue for the rest of the year.
The market was clearly unsure how to react to the news with an initial drop in the shares followed quickly by a recovery back into positive territory. There are certainly plenty of warnings from the company today about the operating environment in the UK in the short term, but there’s also no doubt the company has a strong balance sheet and is investing in its business both in Germany and the UK. The shares have underperformed the market so far this year which is hardly surprising but we retain our ‘Hold’ recommendation for medium risk investors seeking a balance of income and growth.