Whitbread swings to losses in pandemic-marred year

Whitbread’s said its financial performance for the 2021 financial year reflected the closure of the vast majority of its business in the first half on Tuesday, followed by a second half that after operating throughout August and September with occupancy levels of over 50% in the UK, saw market demand fall “significantly” from November onwards, as increasingly severe Covid-19 restrictions were once again implemented.

The FTSE 100 operator of the Premier Inn brand said that as a result, statutory revenue for the year ended 25 February was down 71.5% at £589.4m, with UK statutory revenue falling 71.8%.

Germany statutory revenue was 2.5% lower year-on-year, with the material growth in the size of that estate mostly offset by the impact of coronavirus restrictions.

The significant decline in revenue resulted in an adjusted loss before tax of £635.1m, swinging from a profit of £258.3m in the 2020 financial year.

Whitbread reported a statutory loss before tax of £1.01bn, which included a non-cash impairment charge of £348.0m relating to goodwill in Germany, property, plant and equipment and right-of-use assets, as a result of impairment reviews triggered by the pandemic and its impact on current and future growth rates.

The financial results did benefit from around £270m in Covid-19-related government support schemes, including the UK Job Retention Scheme and from business rates relief in the UK.

Whitbread said it retained a “strong” balance sheet and liquidity position, enhanced by the successful £1bn rights issue completed in June, and the £550m green bond issue in February.

At the end of the financial year, the company had access to £1.26bn of cash and cash equivalents, and an undrawn revolving credit facility of £950m.

On the operational front, Whitbread said it “significantly outperformed” the midscale and economy hotel market in the UK since reopening in August, with customer scores also remaining “very strong” throughout this period, despite the significant disruption.

In Germany, the market and its hotels operated at low levels of occupancy due to the pandemic.

Despite that, it said it was able to “materially accelerate” the growth of its hotel network during the year, with a total open and committed pipeline now standing at 72 hotels, providing a “very strong platform” from which to increase the Premier Inn brand presence.

Currently, over 92% of the firm’s UK hotels were open, with the company saying it was “ready” to welcome leisure guests from the next phase of the lifting of restrictions on 17 May, alongside the full reopening of all of its restaurants.

Strong demand was expected for 'staycations' in UK tourist destinations through the summer, with business and event-led leisure demand starting to gradually recover thereafter.

Currently, 18 of Whitbread’s 30 operational hotels were open in Germany, with six of the temporarily closed hotels being refurbished and rebranded to Premier Inn.

Despite the recent tightening of government restrictions, the board said the company’s “significantly enlarged” estate put it in a strong position to win market share when demand returned.

The company also said it was now targeting net-zero carbon emissions by 2040, a decade faster than originally targeted.

“The last financial year was one of the most challenging in our 279 year history, as we operated under significant Covid-19 restrictions which had many implications for our businesses, our customers and our people,” said chief executive officer Alison Brittain.

“Our business model enabled us to respond rapidly to the changing restrictions and to quickly adapt our operations as required, prioritising the health and safety of our colleagues and our customers.

“Our ability to navigate through this period, with the advantages of our unique operating model, the strength of the Premier Inn brand, and our market-leading direct distribution model, has enabled us to continue to deliver strong market share gains in the UK.”

Brittain said the firm’s exposure to the “faster-recovering” budget sector, its “resilient” customer mix, and the enhanced structural opportunities that the crisis had created, positioned Whitbread well to continue its outperformance.

“The vaccination programme in the UK means we can look forward to the planned relaxation of Government restrictions as we move into summer, with the first major milestone being the return of leisure guests to our hotels, and the full reopening of restaurants from 17 May.

“We expect a significant bounce in leisure demand in our tourist locations during the summer, followed by a gradual recovery in business and event-driven leisure demand.”

The company was continuing to take action to ensure it exited the crisis as a “leaner, stronger and more resilient” business, including beginning the next three-year phase of our efficiency programme that would target £100m of cost savings.

“Combined with our financial flexibility and strong balance sheet, this gives us the ability and the confidence to invest with discipline and focus on strong long-term returns.

“We are well-placed to enhance our market leadership position even further in the UK, and accelerate our growth in Germany, capitalising on the enhanced structural growth opportunities that will exist and driving long-term value for all our stakeholders.”

At 0810 BST, shares in Whitbread were down 1/58% at 3,357p.