Whitbread Shares Rise on £250m Buyback Despite Slower Room Growth

 

Key Highlights:

• Whitbread announces £250m share buyback, beating expectations
• Annual pretax profit falls 14% but operating performance remains strong
• Room expansion lags forecasts; German business narrows losses
• Capex set to rise, with property sales to help fund growth
• Long-term goals reaffirmed despite short-term challenges

Whitbread Shares Climb After Announcing Major Share Buyback

Shares in Whitbread (LON:WTB), the owner of Premier Inn, rose more than 4% on Thursday after the company unveiled a £250 million share buyback, surpassing analyst expectations and helping to offset market concerns about weaker room growth and rising capital expenditure.

The share boost came as Whitbread posted a pretax profit of £483 million for the financial year ending February, a 14% decline from the previous year and slightly below the consensus forecast of £489 million.

Results in Line With Forecasts, Despite Profit Drop

Despite the profit dip, Whitbread delivered solid underlying results:

• Revenue: £2.92 billion, in line with expectations
• Operating profit: £652 million (ahead of Barclays' £629 million forecast)
• Earnings per share: 195p, down 6%
• Free cash flow: £123 million, beating projections
• Net debt (ex-leases): £483 million
• Dividend: Held steady at 97p (just below 98p forecast)

UK Performance Dampened by Site Closures

In the UK, total sales dropped 3% to £2.69 billion, driven by:

• Flat accommodation revenue
• 11% fall in food and beverage sales, linked to site closures under the company’s Accelerating Growth Plan

RevPAR (revenue per available room) declined 1.4% year-on-year in the fourth quarter, but Premier Inn still outperformed the midscale and economy market by 20 basis points. Early figures for the new financial year show a 1.3% fall in RevPAR, again outperforming internal benchmarks.

German Expansion Continues

In Germany, Whitbread saw strong growth:

• Sales up 28% (constant currency) in Q4
• RevPAR up 21%, with mature hotels seeing a 24% gain
• Full-year pretax loss narrowed to £11 million
• Forecasted profit of £5m–£10m for the current year

Room Growth Below Expectations

Room expansion was slower than expected:

• UK: 541 new rooms (well below Barclays’ 1,000-room projection)
• Outlook: Targeting 1,000–1,200 new UK rooms and 400 in Germany this year

Investment and Cost Efficiency Plans

Capital expenditure came in at £488 million, under budget. For the year ahead, Whitbread expects gross capex to rise to £700m–£750m, including £100m–£150m linked to the Accelerating Growth Plan.

To fund this, the company aims to generate £250m–£300m from property disposals, including sale-and-leaseback arrangements. Last year, proceeds were £137 million, below target, but additional sales completed post-year-end are expected to boost figures this year.

Long-Term Strategy Intact

Whitbread reaffirmed its long-term ambitions, including:

• £300 million in annual pretax profit
• £2 billion in cumulative cash returns by 2030

A property revaluation—the first since 2019—is currently underway, with analysts suggesting Whitbread’s asset base may be undervalued compared to its share price.

Conclusion

Despite challenges around room growth and rising costs, Whitbread’s strong operational performance, solid free cash flow, and larger-than-expected buyback have reassured investors. With growth continuing in Germany and a renewed focus on cost efficiency, the Premier Inn owner remains committed to its ambitious 2030 targets—even as it navigates a complex economic landscape.

Sources: (Investing.com, Reuters)