UK keeping buoyant; German business on the right path

In the past quarter, Whitbread continued its success in the UK hotel market and its UK restaurants bore fruit after effective commercial initiatives. Its German business also benefited from the overall restoring market demand and improving performance. The group reconfirmed its upbeat stance on the FY outlook.

Thriving in a sluggish economy

Whitbread’s share price rose by up to 5% today following the announcement of stronger-than-expected FY figures and a share buy-back programme that is scheduled to complete in the coming HY. The current trading looks supportive, which is hoped to be further supported by expanding the hotel portfolio and the seemingly less-worrying unfavourable macros. We expect an increase in consensus estimates and our target price.

Cheerful H1; H2 looks softer but manageable

Both the in-line revenue and the market-beating adjusted profit exceeded their pre-pandemic levels in the past HY as the inspiring trading trend extended into Q3. Whitbread now foresees tougher market conditions on the back of inflation, but diminishing interest costs and the slightly more favourable loss outlook in Germany should allow an offset effect. Additionally, the group has managed to upsize its long-term network target following a contraction for independent operators. We expect an upgr

FY23 looks rosy despite macro headwinds

The market reacted positively to Whitbread’s consensus-beating FY22 results, resumption of dividend distribution and compelling to-date trading update. Despite the heavier inflationary pressures, the group seems to be managing to demonstrate its ability to cope with the current economic downturn.

Resurrecting in the UK but challenging in Germany

Whitbread’s revenue surpassed its pre-crisis level in the past quarter and was especially good in the UK hotel business. The group maintains its confidence in UK hotel trading, while the restrictions-led delay in recovery in the German market remains a concern.

Whitbread - Strength in depth

Whitbread continues to show that the strong get stronger with Premier Inn, much the largest UK hotel chain, materially outperforming the market throughout H1 to August and to date (by 14% in the seven weeks to 14 October). Notwithstanding seasonality, accentuated by the staycation boon, management expects leisure demand to remain buoyant, with tradespeople business resilient and office-based custom recovering, thereby a potential return of UK like-for-like RevPAR to pre-pandemic levels ‘at some

Supportive H1 but margin rebuilding under pressure

Despite the encouraging H1 performance, which was partially explained by the staycation-driven increase in demand, and a faster revenue recovery for its UK hotel business, Whitbread’s H2 profit generation should be limited by inflationary pressures and the restrained activities in Germany.

Whitbread - The strong get stronger

Confirmation of recovery ‘much broader than staycations’, backed by continued significant outperformance of the midscale and economy hotel market in the quarter to May, highlights a predictably positive update by Whitbread. That is not to play down expected ‘very strong’ demand throughout the summer at tourist locations (c 15% of the estate). While key office-based demand may not pick up meaningfully until the autumn, robust finances, brand strength and economies of scale should allow Whitbread

Encouraging recovery signs seen

Whitbread’s Q1 was largely constrained by the travel restrictions in the UK, like its rivals, while it managed to enlarge its outperformance to the M&E market compared to past quarters. The outlook remains unchanged despite the staycations-driven positives and the encouraging pick-ups in leisure demand from 17 May.

Improved cost management, staycation hopes

Whitbread delivered a better-than-expected FY21 adjusted pre-tax loss despite a weaker-than-expected revenue, demonstrating an improved cost base. The budget hotel leader now expects FY22 to take advantage of a staycation bounce in the UK this summer and further cost efficiency, but forecasts enlarged losses in Germany.

Weighed down by sanitary policy and Brexit uncertainties

Despite outperforming other local operators over the summer period, the UK-based restaurant and (the largest) hospitality group, Whitbread, remains burdened by the UK government’s very stringent Coronavirus restrictions. Only minor improvements have been seen in the past quarter and we expect the group to continue suffering from the policy-driven tough market conditions, along with the Brexit uncertainties.

Can it catch opportunities in a time of crisis?

After launching a £1bn recapitalisation by way of a rights issue at a price with a heavy discount, the UK-based restaurant and (the largest) hospitality group, Whitbread, saw its share price plummet by 13%. The market movement reflects investors’ concern about the uncertain duration of Whitbread’s business downturn. Whitbread was on our list of issuers likely to be wrongfooted by the crisis the day before the rights issue announcement.

Macro-led weak H1 performance

Whitbread released weak H1 trading results due to the Brexit-related uncertain domestic environment and reported that it is “difficult” to forecast the H2 performance.

Hybridan Small Cap Feast - 11 Sep 23

11th September 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment ob

Cornerstone FS+ (CSFS, House Stock at 12.5p) - Disposal of another non-trading subsidiary

Hybridan Small Cap Feast - 19 Sep 23

19th September 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment ob

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SP Angel Technology: Cornerstone FS (CSFS.LN) - H1 2023 Strong Performance YTD

CSFS reported its financial results for the period ended 30 June 2023 with revenue of £3.6m and Adj. EBITDA of £0.2m, and profit before tax of £0.023m, in line with the trading update provided in May 2023, but well ahead of what our full year forecasts would indicate.

Morning Note – 25 September 2023

Hybridan Small Cap Feast 15-09-2023

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Announced ITF 12 July: Substrate Artificial Intelligence, an artificial intelligence company based in Spain that creates, buys and scales companies around AI in diverse sectors such as fintech, agritech, energy, human resources, and health, intends to join the Access Segment of the AQSE Growth Market. Admission delayed. Announced ITF 6 July: Blackpoint Biotech plc, a medical cannabinoids co

Despite decent sales performance, profit warning spooks investors!

Kingfisher’s H1 FY23/24 lfl sales was 40bp ahead of market expectations but the PBT was 5.4% weaker. Although UK&I sales remained in the black, the performances in France and Poland were the pain-points. The Q3 lfl performance (to date) of -2.4% yoy is also below market expectations. We expect the pressure on earnings to continue during H2. Management has lowered FY23/24 PBT guidance to £590m (vs £634m earlier). We will reduce the target price by 7-8% but maintain our positive recommendation.

Pendragon (PDG LN) - High potential in Pinewood

Earlier in the week Pendragon announced a proposed deal to dispose of its UK motor retail and leasing businesses to Lithia Motors for £250m, after which it will become a standalone, listed SaaS business with its Pinewood dealership management software (DMS) product. On the day, we set out a high level view of the transaction and the growth and valuation implications. This note dives further into these topics, in particular the potential for the deal to significantly accelerate the growth in Pine

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LIBERUM: City Pub Group: Strong trading and robust balance sheet

Vertu Motors (VTU LN) - Positive trading continues

Vertu has released a positive trading update ahead of its interim results for the six months to 31 August.

Pendragon (PDG LN) - Proposed disposal and transition

Pendragon has announced a proposed deal to dispose of its motor retail and leasing businesses to Lithia Motors for £250m, after which it will become a standalone, listed SaaS business with its Pinewood dealership management software (DMS) product. The aggregate equivalent value for shareholders, including the retained stake in the continuing business, was 27.4p per share on announcement, above our 26.8p per share SOTP estimate from 17 January. Going forward, we think the disposal could focus inv

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Cenkos: Consumer Q1/23

Key Observations Despite a second successive decline in CPI during the quarter, inflation remained at one of the highest levels in 40 years (10.5% in December) contributing to a winter of discontent, with each day in December facing some form of industrial action. The industrial action materially impacted the consumer sector and provided an insight into the simmering frustration around the decline in real wages of the UK population. There were multiple examples of consumer corporate failures d