LONDON (ShareCast) - (Sharecast News) - Premier Inn owner Whitbread downgraded its full-year profit outlook for Germany on Thursday as it posted a drop in group interim profits and revenue.
In the 26 weeks to 28 August, adjusted pre-tax profit fell 7% from the same period a year earlier to £316m, while revenue dipped 2% to £1.5bn.

Whitbread said the profit figure reflects broadly flat UK total accommodation sales and positive momentum in Germany, offset by expected lower food and beverage sales due to the continued implementation of its 'Accelerating Growth Plan'.

The company downgraded its FY26 adjusted pre-tax profit guidance for Germany to "up to £5m", from previous guidance of between £5m and £10m. It pointed to a softer market performance in the second quarter as there was a lower number of high-impact events this year.

As far as the UK is concerned, Whitbread said higher-than-expected cost inflation will be partially mitigated by increased cost efficiencies of £65m to £70m, versus previous guidance of £60m, so that net inflation remains within the group's previously guided range of 2% to 3% on its £1.7bn UK cost base.

Chief executive Dominic Paul said: "In the UK, with a return to market growth, we sustained our outperformance versus the market through the strength of our guest proposition and commercial programme. We are making strong progress on our Accelerating Growth Plan which, together with our committed pipeline of both Premier Inn and 'hub by Premier Inn' rooms, means we remain on track to reach at least 98,000 open rooms by FY30, extending our position as the clear market leader.

"In Germany, we maintained our outperformance versus the M&E market, having traded well in what was a softer than expected demand environment over the summer. We are continuing to grow our committed pipeline and having agreed the acquisition of eight hotels in prime city-centre locations, we are building a business of real scale. Our growing market share, together with the increasing maturity of our estate, means that we remain confident in fulfilling our ambition of becoming the country's number one hotel brand, delivering significant revenue and profit growth."

The group said it remains confident in returning £2bn to shareholders through share buy-backs and dividends and is on track to complete the previously announced £250m share buy-back by the time of its FY26 results.

At 1355 BST, the shares were down 9.3% at 2,923p.

Russ Mould, investment director at AJ Bell, said: "Whitbread shareholders will be wondering if Premier Inn's 'good night sleep or your money back' guarantee extends to investors, judging by yet another weak performance.

"Earnings in reverse, higher net debt, and a downgrade to forward profit guidance is the kind of news that makes investors suffer from insomnia.

"The fact Premier Inn is struggling to make decent progress in the UK suggests market conditions remain unfavourable for the hospitality industry.

"There are reasons not to lose hope. Trading has picked up recently in both the UK and Germany, and the group continues to take market share. Unfortunately for the company, the negative share price reaction to its latest results suggests investors lack faith in Whitbread bouncing back any time soon."

Richard Hunter, head of markets at Interactive Investor, said: "It has been and could continue to be a tough environment for Whitbread. The sale of its jewel in the crown, Costa Coffee to Coca-Cola in 2019 for £3.9 billion somewhat left Whitbread flying on one engine, largely reliant on its Premier Inn business. The situation was then compounded by the onset of the pandemic, and more recently the rise in interest rates and inflation, and therefore consumer confidence. Indeed, the shares remain down by 21% since pre-pandemic and by 24% from the previous peak achieved in March 2019.

"Of late, the shares are on an improved trajectory, with a 28% spike over the last six months contributing to the shares having risen by 5% over the last year, as compared to a gain of 13% for the wider FTSE100. The lower profit numbers, although expected, as well as the marginal downgrade to the German business have unfortunately taken centre-stage at the open, with the shares dropping sharply. Further out, however, this long-established and well-regarded company continues to attract the support of investors, with the market consensus of the shares as a buy reflective of optimism for the long haul."

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