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Evidence of difficult trading for businesses increases

Evidence of difficult trading for businesses increases
Whitbread has reported UK like-for-like sales fell 3.7% in its first quarter “due to weak trading conditions”. Like-for-like UK accommodation sales were down 4.6% while UK food and beverage like-for-likes fell 2.1%. Total UK sales were down 1.1%, with accommodation sales falling 1.5% and food and beverage 0.4%. UK and international sales fell 1.0%, with accommodation down 1.3% and food and beverage down 0.4%.
Whitbread said the accommodation sales decline in the UK was predominantly due to declining business confidence, impacting short-lead bookings. During the quarter 282 new bedrooms were added in the UK, with 3,000 to 3,500 rooms expected to be added during the financial year. In London, the company has increased bedroom capacity at Premier Inn by 9.4% over the past year, which contributed to Premier Inn’s total accommodation sales growth of 1.0% in the capital. However, like-for-like accommodation sales declined 4.2%, reflecting weaker market conditions. Whitbread said London continued to be a good long-term market with strong demand and high occupancy levels, and further capacity would be added. The company said the regional market continued to be impacted to a greater extent by declining business confidence, with total accommodation sales for the regional midscale and economy market declining 1.5% in the first quarter.
Whitbread said its first German hotel in Frankfurt continued to perform well, with occupancy levels of about 70%. Its second German hotel, in Hamburg, has been open for three months, “performing ahead of expectations”. This year, two organic hotels in Germany will be opened and Whitbread will complete the first tranche of the Foremost Hospitality acquisition of 19 hotels, with 13 being rebranded to Premier Inn in the first half of next year. Whitbread said it expects to add more than 2,000 bedrooms in Germany. Most of the German bedroom additions are part of the Foremost acquisition and will require a period of closure to be rebranded into Premier Inn hotels early in FY21.
The company said the current pipeline of almost 20,000 bedrooms is secured through a mixture of freehold, leasehold and acquisitions, with almost a third of the pipeline committed in Germany. Whitbread said it had now completed the first phase of its plan to return up to £2.5bn to shareholders as a result of Costa Coffee to Coca-Cola. A total of £482m has do far been returned to shareholders through a share buyback programme, which ended in May. For the second phase, Whitbread intends to pursue a tender offer to repurchase up to a further £2bn of shares, subject to shareholder approval. If less than £2bn is returned through the tender offer, Whitbread will consider a possible third phase to return any remaining surplus cash. Chief executive Alison Whitbread said: “We have delivered a resilient performance in the first quarter despite more challenging market conditions and we continue to make good progress with our efficiency programme, which is helping to partially offset another year of high industry cost inflation. Our expansion into Germany is firmly on target. While we are cautious about short-term market conditions, we are confident in our plans given the significant growth opportunities in the UK and internationally. Given our strong balance sheet, efficiency programme and robust business model, we are in a strong position and we will continue to invest in order to maintain Premier Inn’s competitive advantages and to capitalise on our structural growth opportunities.”
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