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Premier Inn owner Whitbread swings back to profit as COVID measures ease

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·Business Reporter, Yahoo Finance UK
·2-min read
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logo of Whitbread's Premier Inn hotel chain
Premier Inn owner Whitbread says inflation this financial year is now expected to hit around 8% to 9% – 1% higher than its previous guidance. Photo: Mike Egerton/PA Images via Getty Images

Premier Inn owner Whitbread (WTB.L) received a welcomed lift of more than 3.8% on Thursday after it said bookings are now above pre-COVID levels.

Profit before tax for 2021 came in at £58.2m ($73m), compared with a loss of around £1bn the year before, as coronavirus restrictions eased, tourism increased, and more people booked staycations.

UK accommodation sales surged 198% from last year, while food and drink sales at its Beefeater and Brewers Fayre chains rose 170.2%. Group revenue increased to £1.70bn during the period, up from £589.4m.

However, the group did warn that cost inflation this financial year was now expected to hit around 8% to 9%, which was 1% higher than its previous guidance.

Whitbread said it would use its pricing power to offset these higher-than-anticipated costs, along with cost efficiencies, and growing its estate.

It also cautioned on its German operation, which is set to record a loss for the current financial year in the range of £60m to £70m. This reflects the slower recovery of the local hotel market as well as the maturity effect of its new portfolio.

"We have no reason to believe the market won't come back strongly in due course," the company said.

Read more: European markets gain as energy firms set to cave in to Russia

Alison Brittain, Whitbread chief executive officer, said: “Whitbread’s performance in the year was strong, with revenues and profits recovering exceptionally well from last year.

“As we move into the next phase of our COVID recovery, this excellent performance, combined with confidence in the group’s outlook, means that the board is now proposing the reinstatement of dividend payments.”

It also declared a final dividend of 34.7p a share, resulting in a total dividend of £70m.

Matt Britzman, equity analyst at Hargreaves Lansdown said: “Investors will be pleased to see the dividend return for the Premier Inn owner, following a period of suspension where flexibility offered by lenders meant distribution taps had to turn off.

“With it back on the table, it sends a clear message to markets that sentiment is vastly improved and the return to profitability plus beat on top and bottom-line estimates adds weight.

“The recoveries by no means complete and there’s still a way to go before the group’s out of the woods, but it’s pleasing to hear UK sales over the last couple of months are only around 5% down on pre-COVID levels.”

Watch: How does inflation affect interest rates?

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