Premier Inn owner Whitbread warns of stalling profits as it launches share buyback scheme

Whitbread will kick off the process of giving £500m back to shareholders today after completing the £3.9bn sale of Costa, but warned that uncertainty would stall profits next year.

It said Premier Inn has added over 2,000 new rooms since the financial year began in March.

The company has grown sales in its accomodation business by 4.4 per cent in the year to date, however growth fell in the third quarter to 3.5 per cent.

Whitbread also warned that “uncertain” economic conditions and high inflation would cause profits to stall. Like-for-like sales in the UK fell 0.6 per cent, it said.

“Outside of London the regional market has been weak, the reported numbers for occupancy, average room rates and revenue per available room are all marginally lower and the cost savings programme is also currently light of the figure which the company had previously guided,” said Richard Hunter, head of markets at Interactive Investor.

Shares fell by 1.6 per cent to 4,698p this morning.

So far this year the company’s sales contracted in Germany. It is becoming an increasingly important market for Premier Inn, and the group plans to open 6,000 rooms over 34 hotels in the country.

Losses in Germany are expected to increase to around £12m next year as it invests in its hotels, Whitbread said.

Over two decades since buying Costa for just £19m, the company said last year it hoped the nearly £4bn spin-off would allow it to reduce debt, and boost its pension pot. But it also promised most of the money would be returned to shareholders.

Julie Palmer, partner at Begbies Traynor, said: “Following the sale of Costa to Coca-Cola, Whitbread has been left cash-rich and will be looking to directly reinvest that money with plans to expand its hotel business in the UK and Germany. But with Brexit and Germany’s current economic slowdown very much in the limelight, this may not be the right timing.”