What Whitbread (WTB) Said on Its H1 Earnings Call

Key Points

• First-half performance improved: Revenue rose 2% and EBITDAR increased 1% to £608 million, as stronger hotel sales in the U.K. and Germany and £39 million of cost savings offset inflation and lower food-and-beverage revenue. The interim dividend was held at 36.4 pence per share.
• U.K. hotels continued to outperform: U.K. accommodation sales grew 3%, with 81% occupancy and a RevPAR premium of nearly £8 over the market. Third-quarter trading also strengthened, with accommodation sales up more than 4% in the first five weeks.
• Whitbread is shifting toward a hotel-focused model: The company is closing and selling branded restaurants, adding hotel rooms and recycling property to fund higher-return investments. It targets £250 million of five-year savings, £1.5 billion in property recycling and £100 million of incremental profit from its Accelerating Growth Plan by 2031.

Whitbread LON: WTB reported higher first-half revenue and EBITDAR as accommodation sales growth in the U.K. and Germany and cost-efficiency measures offset inflationary pressures and an expected decline in food-and-beverage revenue related to its Accelerating Growth Plan.

Group revenue rose 2% year over year, while EBITDAR increased 1% to £608 million. Adjusted profit before tax was £287 million, after £102 million returned to shareholders and higher interest and lease costs, according to Group CFO Hemant Patel. Statutory profit before tax was £109 million, reflecting £178 million of adjusting items, most of which Patel said were non-cash charges associated with the growth plan and the exit of lower-returning sites.

The company declared an interim dividend of 36.4 pence per share, unchanged from a year earlier. Earnings per share declined 6%, which Group CEO Dominic Paul attributed to the planned shape of Whitbread's investment and transformation program.

U.K. trading outpaces market

In the U.K., accommodation sales rose 3%, supported by high occupancy, higher room rates and continued market outperformance. Occupancy was 81% during the half, while average room rate increased 2% to more than £87. Revenue per available room, or RevPAR, increased 2%, and accommodation sales reached £1.1 billion.

Patel said Whitbread delivered a RevPAR premium of nearly £8 versus the market, compared with approximately £2 before the pandemic, while continuing to gain market share. U.K. food-and-beverage sales declined as expected due to the closure and disposal of branded restaurants under the Accelerating Growth Plan.

Despite cost inflation, including higher business rates, U.K. operating costs were flat year over year. The company reported £39 million of efficiencies and cost reductions connected to its transformation plan during the first half and said it remains on track to achieve £60 million of savings in fiscal 2027. Whitbread is targeting cumulative savings of £250 million over its five-year plan.

U.K. EBITDAR rose to £588 million, while adjusted profit before tax was £313 million. U.K. return on capital employed increased to 13%, from just under 12% a year earlier, helped by the exit from lower-returning branded restaurants.

Current trading also improved, management said. During the first five weeks of the third quarter, U.K. accommodation sales rose more than 4% and RevPAR increased 3% from a year earlier. Food-and-beverage sales remained lower, in line with expectations, following the closure of the remaining branded restaurants in September.

Germany sales rise as new hotels open

Germany delivered 18% growth in accommodation sales, aided by the opening of 10 hotels and a more mature estate. Whitbread opened 1,800 rooms in the country during the first half.

Germany EBITDAR increased 10%, despite an expected £10 million of one-off costs for the year, primarily related to converting recently acquired hotels. Patel said most of those costs fell in the first half. The German business recorded an adjusted loss before tax in line with the company's expectations, but Whitbread said it remains on track to deliver its second consecutive profitable year in fiscal 2027.

While the German hotel market was down year over year in the first half, Whitbread's total-estate RevPAR was 1% ahead of the market. Its cohort of 17 more established hotels posted 2% RevPAR growth in local currency, according to the company.

Paul said the company has revised its German strategy to focus on proven hotel formats, optimize its estate and reduce capital spending. Whitbread expects its German operations to become cash-flow positive in fiscal 2029 and to generate total-estate ROCE of 13% to 15% by fiscal 2031.

Accelerating Growth Plan reshapes portfolio

Whitbread said its Accelerating Growth Plan is designed to transition the business toward a more efficient, hotel-focused model. The company has closed all 430 branded restaurants over the past 24 months and replaced them with a tailored integrated food-and-beverage offering. It has also sold more than 170 branded restaurant sites and said only 21 of the original 240 sites being marketed remained unsold.

The plan includes adding extension rooms at existing locations. Around 850 extension rooms have already opened, and Whitbread expects to have one-third of all planned extension rooms open by the end of the current financial year. The company is targeting £100 million of incremental profit from the plan by February 2031, with expected returns on capital employed of 15% to 20%.

Management said completed sites are delivering higher accommodation sales than before the plan and improved guest scores. Whitbread expects to open 750 extension rooms and 1,000 other new rooms during the current year.

Property recycling and capital targets

Gross capital expenditure declined to £280 million in the half, while the company received £21 million from property disposals. Whitbread said it had raised more than £50 million from property-related disposals year to date and remains on track to recycle £450 million to £500 million of property during the full year.

Over the five-year plan, Whitbread expects to recycle £1.5 billion of property through disposals and sale-and-leaseback transactions, using proceeds to fund higher-returning investment. The company expects total net capital expenditure to fall to £200 million to £250 million annually, from around £500 million previously.

Group ROCE improved 60 basis points to 10.9%. Net debt was £663 million, and lease-adjusted leverage was 3.4 times, within Whitbread's stated investment-grade threshold of 3.5 times. The company expects to generate £2 billion of free cash flow available for shareholder returns by fiscal 2031.

Paul said Whitbread's board continues to support the integrated hotel and property model following its strategic review. He also said the board has recommended that shareholders vote against a proposal from Corvex for its nominee to join the board, arguing that the nominee would not add relevant expertise and could distract management from executing the five-year plan.

About Whitbread (LON:WTB)

Whitbread is the owner of Premier Inn, the UK's biggest hotel brand, with 86,000 rooms in over 850 hotels and a growing presence in Germany with 10,500 rooms in 59 hotels, offering quality accommodation at affordable prices in great locations. People are at the heart of our business. We employ over 38,000 team members in over 900 Premier Inn hotels across the UK and Germany.

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