Whitbread shares rise on buyback plan, confident outlook

(Sharecast News) - Shares in Whitbread were rising strongly on Thursday after the hospitality group unveiled a £250m share repurchase programme alongside a solid update on current trading. The Premier Inn and Beefeater owner said that it remains on track to deliver more than £2bn in shareholder returns via buybacks and dividends over the next five years, and the new buyback is part of an "acceleration" of these plans.

Meanwhile, the company held its total dividend stable at 97p per share.

Full-year results from the company revealed that adjusted pre-tax profits slumped 14% in the 12 months to 27 February to £483m, with headline revenues down 1% at £2.92bn.

Whitbread said results reflected lower food and beverage sales as a result of its Accelerating Growth Plan (AGP) and softer market conditions in the UK, partially offset by strong growth in Germany, where it is poised to turn a profit in the coming year.

Analyst Greg Johnson from Shore Capital said that adjusted earnings came in around 1-2% below both the broker's and the market's forecasts due to a weaker performance in the UK. However, "current trading may be better than feared", he said.

For the current financial year, Whitbread said it expects to make £60m cost efficiencies in the UK, £10m than previously expected, while net inflation should have a lesser impact on its cost base. Meanwhile, the £20-25m one-off impact from AGP on the bottom line should be "fully reversed".

Accommodation sales at Premier Inn UK fell 1% over the first seven weeks of the new financial year, though was a 2 percentage-point outperformance on the wider market, while the forward booked position is ahead of last year.

In Germany, where it expects to open 400 new rooms this year, Premier Inn accommodation sales are 23% higher than the previous year over the first seven weeks.

"Investors in Premier Inn owner Whitbread won't be losing too much sleep over today's final results, which have come in a little better than analysts had been forecasting," said Derren Nathan, head of equity research, Hargreaves Lansdown. "It's tough out there for hoteliers but the UK's largest hotel brand is continuing to outperform the competition."

Johnson from Shore Capital reiterated a 'buy' rating on Whitbread, saying that upside from its five-year growth plan isn't yet reflected in the stock's current valuation, "especially with the building opportunity in Germany".

Whitbread shares were up nearly 3% at 2,660p by 0958 GMT.