Whitbread Reports 14% Drop in Adjusted Profit Amid Challenging Market Conditions
Why we think this is bad
The hospitality giant faces significant headwinds, with adjusted profit before tax falling 14% to £483m. Despite revenue only dipping 1%, the company is grappling with softer market demand and an uncertain UK macroeconomic outlook. Margins are under pressure, with UK adjusted pre-tax margins declining from 21.2% to 18.8%. The increase in net debt from £298m to £483m is concerning, although partially offset by a strong cash position. While progress in Germany and a £250m share buy-back show some positives, the overall picture suggests challenges ahead in the core UK market.
Key Points
- Adjusted profit before tax decreased 14% to £483m
- Group statutory revenue down 1% to £2,922m
- UK adjusted pre-tax margins reduced to 18.8% from 21.2%
- Net debt increased to £483m from £298m last year
- Excellent progress in Germany, with losses reduced and profitability expected in FY26
- Announced £250m share buy-back program
- Final dividend of 60.6p per share recommended, making 97.0p for the year
- Softer market demand and uncertain UK macroeconomic outlook reported
- Accelerating Growth Plan on track, with 1,075 new rooms opened in FY25
- Targeting at least £300m incremental adjusted profit before tax by FY30
Summary
Whitbread PLC's preliminary results for FY25 reveal a challenging year with adjusted profit before tax down 14% to £483m. The company faced softer market demand, particularly in the UK, leading to a slight 1% decrease in group statutory revenue. UK adjusted pre-tax margins declined to 18.8% from 21.2%, indicating pressure on profitability. However, there were some positive developments, including excellent progress in Germany with reduced losses and expectations of profitability in FY26. The company maintains a strong balance sheet with £909m in cash, although net debt increased to £483m. Whitbread announced a £250m share buy-back, demonstrating confidence in its financial position despite the challenges. The outlook remains cautious, with the company noting an uncertain UK macroeconomic environment. Broker targets suggest a mixed view, with some maintaining 'Buy' recommendations while others have downgraded to 'Neutral'.