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Premier Inn owner Whitbread to return £2bn to shareholders as it eyes profit growth and expansion

October 16, 2024

Whitbread, the owner of Premier Inn, has announced plans to return more than £2 billion to shareholders over the next five years while boosting profits by at least £300 million.

This comes despite a 22% decline in pre-tax profits for the first half of the year, as the company faces softer demand in the UK market.

The FTSE 100 leisure group reported flat revenues of £1.57 billion for the six months to August 29, with pre-tax profits falling to £309 million. A significant contributor to this decline was a 7% drop in food and drink sales, linked to a major restructuring of its restaurant operations. However, Whitbread reaffirmed its full-year guidance and expressed optimism about a recovery in the second half, noting an uptick in bookings for October and November.

As part of its growth strategy, Whitbread is aiming to expand its room capacity. The company plans to increase Premier Inn’s UK rooms from the current 86,000 to 98,000, and to boost its German footprint from 10,500 rooms to 20,000. Whitbread has already accepted offers for 51 of the 126 restaurants it intends to sell, and it plans to convert 112 more restaurants into 3,500 hotel rooms, with planning applications already in progress for a third of these new rooms.

The restructuring, which will cost £500 million over the next four years, is “on track,” according to Whitbread. Meanwhile, the company’s German operations saw a 21% revenue boost, driven by what it described as the “progressive maturity” of its hotel estate in that market.

Chief Executive Dominic Paul, who took over from Alison Brittain last year, is confident that the company’s plans will drive growth. He stated: “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. In the UK, we have a clear pathway to further extend our market-leading position and capitalise on the favourable UK supply backdrop.”

As part of its commitment to returning value to shareholders, Whitbread announced an interim dividend of 36.4p per share and a further £100 million share buyback programme.

Founded in 1742 as a brewery by Samuel Whitbread, the company has since evolved significantly. It sold its brewing business in 1999 and shifted its focus to hospitality. In 2019, Whitbread sold its Costa Coffee chain to Coca-Cola for £3.9 billion and expanded into the German market, which remains a key area for growth.

Whitbread shares rose by 3.6%, or 111p, to £31.83 on the back of the news.