Whitbread sees profits tumble, but cheers recent trading pick-up
The Premier Inn owner posted a 22% tumble in pre-tax profits to £309 million for the six months to August 29.
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Your support makes all the difference.Premier Inn owner Whitbread has ramped up cost-saving efforts as its first half profits slumped by more than a fifth, but cheered improved trading in more recent weeks.
The hotel and pub group, which also owns the Beefeater and Brewers Fayre brands, posted a 22% tumble in pre-tax profits to £309 million for the six months to August 29.
Sales across its food and drink brands dropped 7% in the first half due partly to an overhaul across the division, which has seen it axe hundreds of sites and cut around 1,000 jobs.
We never rule out changes to our structure and job changes and every organisation is the same, but what we're really focused on overall is growth
It said it was now aiming to cut costs by £60 million over the full year, up from a previous target of £40 million to £50 million.
The group will also now look to deliver annual savings of £50 million on average for the following five years.
Dominic Paul, chief executive of Whitbread, said savings would be made from measures including better workforce scheduling and use of technology, such as a current trial using robot vacuums in some UK hotels.
He told the PA news agency he could not rule out further job cuts from the cost-saving plans.
We are making excellent progress with our plans and over the next five years are set to deliver a step change in our performance which will fund significant returns to shareholders
He said: “We never rule out changes to our structure and job changes and every organisation is the same, but what we’re really focused on overall is growth.”
“If we have anything that we do that results in a restructure then our people are the first to hear,” he added.
The firm said trading had improved since the first half, with a “good pick-up” in bookings across October and into November, which it forecasts will drive a return to like-for-like sales growth in the final six months of its financial year.
But food and drink sales plunged 14% in the six weeks to October 10, while UK accommodation sales fell 1% in the period.
Whitbread said cost actions and recent moves to make savings would help the group boost profits and deliver more returns to shareholders by 2030.
We are determined to build on our significant outperformance since the pandemic and whilst the market has been slightly softer than last year, we remain on course to grow our UK returns substantially over the medium-term
It now expects to increase underlying pre-tax profits by at least £300 million in 2029/30 compared with 2024/25 and generate more than £2 billion for dividends and share buybacks and potentially “high-returning investments”.
Mr Paul said: “We are making excellent progress with our plans and over the next five years are set to deliver a step change in our performance which will fund significant returns to shareholders.”
“We are determined to build on our significant outperformance since the pandemic and whilst the market has been slightly softer than last year, we remain on course to grow our UK returns substantially over the medium-term,” he added.
In April, Whitbread revealed a shake-up at its food and beverage division, due to weak performances among some brands.
It said it would cut its branded restaurants by more than 200 in favour of building more hotel rooms, leading to around 1,000 redundancies.
Mr Paul told PA that the firm had been able to find alternative roles for the majority of the 3,000 workers initially put at risk of redundancy as part of the review.
The most important thing is to get the UK economy back to strong growth
Whitbread also outlined plans in April to sell 126 of its less profitable branded restaurants and convert another 112 into hotel rooms.
It said on unveiling half-year results that it had accepted offers on 51 of its pub restaurant sites for £56 million.
Mr Paul added that he would back the Government if it increased employers’ national insurance contributions in the upcoming Budget, as widely speculated, if it was part of a pro-growth agenda overall.
“The most important thing is to get the UK economy back to strong growth,” he said.
“That would outweigh any increases in national insurance.”