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Whitbread PLC on Tuesday said it swung to an interim profit and brought back dividends as the hotel sector recovered, while demand levels remain robust.
In the first half ended September 1, the Bedfordshire-based owner of the Premier Inn chain said revenue more than doubled year-on-year to £1.35 billion from £661.6 million.
Compared to the first half of financial 2020 - the last financial period before the pandemic - revenue was 25% higher from £1.08 billion.
"The strong recovery in UK accommodation sales continued during the first half, and while Food & Beverage sales remained challenging and 5% behind pre-pandemic levels," Whitbread said.
Demand for leisure remained strong, and Premier Inn saw success in its efforts to attract more business customers, it said. The revenue mix of leisure and business returned to "broadly equal shares".
Whitbread swung to a pretax profit of £307.4 million, compared to a loss of £19.3 million a year before. Compared to the same period of financial 2020, pretax profit was 40% higher than £219.9 million.
The recent pretax profit figure benefited from £33.5 million of net property impairment reversals and £2.0 million profit from property disposals.
"Inflationary pressures and volume growth meant that operating costs increased in the period; however the phasing of a number of these increases towards the second half meant that profit margins recovered strongly in the first half and were broadly in line with pre-pandemic levels at 24.4%," the company said.
Margins are expected to narrow in the second half, however. This will be due to higher costs for operations resulting from inflationary pressures, which will be around £30 million in the year as a whole. Whitbread also will spend another £15 million on IT and marketing, to help drive revenue growth. In addition, it announced a £15 million increase in pay for its staff.
Shares in Whitbread fell 2.3% to 2,552.00 each in London on Tuesday morning, following the announcement.
Whitbread declared a dividend of 24.4 pence per share, compared to no payout a year before. It plans to grow the dividend "broadly in line" with earnings across the cycle.
Looking ahead, Whitbread expects a typical seasonal slowdown in leisure travel, but remains "vigilant" for any signs of a slowdown in demand. Overall volumes remain strong, however.
It noted a declining independent hotel sector increases its growth potential in the UK and Ireland to 125,000 rooms, and it remains on course to add 1,500 to 2,000 rooms in the UK and 2,000 to 2,500 in Germany in the year as a whole.
"Despite macroeconomic uncertainties, our current trading performance is strong and our business has proven its resilience in previous downturns. With a robust balance sheet and significant growth potential in both the UK and Germany, we remain confident in the full year outlook and our ability to deliver long-term value for all our stakeholders," said Chief Executive Officer Alison Brittain.
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