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.

Decline in demand for the regional market

UK accommodation sales have been dragged down by the weak domestic demand for the regional market, mainly due to the decline in business and leisure confidence resulting from the political and economic uncertainty related to Brexit. The challenging trading environment due to the macro uncertainty should continue to weigh on the group’s profitability in the near term.

Pure economy hotelier

H1 revenues were £1.1bn (+2.6% yoy) and underlying operating profit came in at £286m (+2.9% yoy), both below consensus expectations. Costa is now reported as a discontinued operation, statutory profit for the period increased by 3.5% to £47m. The Costa deal (£3.9bn) with Coca-Cola has been approved by the shareholders and is now waiting for regulatory approval in the EU and China. More detail of the growth plan will be released in February 2019. Outlook for 2019 Given the recent economic a

SHORE CAPITAL - ScS Group+ (SCS, House Stock at 180p)

LIBERUM: Tortilla Mexican Grill* - Costs under control, rollout on track

LIBERUM: Ten Entertainment Group* - Value pricing and innovation driving higher sales density

H1 performance below expectations; strong start to Q3

JDW’s H1 FY23 performance was below our expectations. Compared with FY19, the group’s lfl sales grew by 5% and the adjusted PBT was down 90.9%. Investors cheered the market outperformance during the initial seven weeks of Q3 (+14.9% yoy). The easing of supply chain issues is also a positive. However, the c.10% jump in the stock price jump seems something of an overreaction. Volumes remain under pressure and inflationary/macro-economic headwinds are here to stay, at least in the near-term. We mai

Hybridan Small Cap Feast - 27 Mar 23

27 March 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 objectiv

Hybridan Small Cap Feast - 22 Mar 23

22 March 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 objectiv

Inchcape PLC (INCH LN) - FY22 results – small beat to forecasts

Inchcape’s FY22 results are ahead of Zeus forecasts on most measures, with a strong performance across all regions. Underlying trading is said to be in line with expectations, and we don’t anticipate much change to headline forecasts. We remain comfortable with our medium-term SOTP valuation estimate of 1,436p.

BOTB - Beats forecasts, £6.275m return of capital announced

BOTB prelims were slightly ahead of our forecasts, which we recently raised post the May trading statement. Trading continues to normalise despite the uncertain consumer outlook, driven by constant fine-tuning to changing market conditions. BOTB also declared a 6p/share (£0.565k) final dividend and a £6.275m return of capital via tender offer, equivalent to 66.7p/share; and 72.7p and £6.84m combined. We have increased our EPS (Dil. Adj.) forecasts by 23% to 53.9p from 43.9p for FY23E, and by 21%

SHORE CAPITAL - Marks & Spencer+ (MKS) - House Stock at 142p - FY23 and FY24 upgrades!

Year-end trading ahead of expectation

Thanks to the better-than-expected trading performance during the Christmas period, Next reported an encouraging trading update for Q4 22/23. The group remain cautious for the year ahead. Next expects full-price sales to decrease 1.5% and profit before tax to be £795m, implying a contraction of 7.6% versus the FY22/23.

Hybridan Small Cap Feast - 01 Feb 23

01 February 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 objec

ME Group - Positive trading momentum has continued

ME Group has confirmed that the strong recovery seen across Continental Europe in H1 has continued throughout H2. Consumer demand has been stronger for all the Group’s services. The Asian market has remained more subdued due to pandemic restrictions remaining in place for longer than in the Group’s other regions. Updated guidance details revenue is now expected to be between £256m and £262m (our forecast £259m) and EBITDA between £82m and £85m (our forecast £84m). Hence, we make no changes to th

Hybridan Small Cap Feast - 30 Mar 23

30 March 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 objectiv

Inchcape (INCH LN) - FY22 results, strong execution

Inchcape’s FY22 results last week came in slightly ahead of our expectations on most headline measures. The Group continues to deliver on its strategy and is generating high returns and cash conversion. Due to acquisition related outflows, the Group’s net debt balance (£377.7m, 0.6x pro-forma EBITDA) was greater than we expected (£286.1m), but still well below the Group’s stated comfortable leverage level (1.0x EBITDA). We update forecasts for guidance on higher interest cost and tax rates, whic

Let the Party begin

GVC has now completed its game-changing acquisition of bwin.party, a deal designed to propel the company into the upper reaches of the online gambling industry in terms of size and profitability. The focus now turns to delivering the €125m of projected cost synergies and re-energising bwin’s sizable asset base to drive sustainable growth. We reintroduce our forecasts and expect GVC’s EBITDA to rise from €51m in 2015 to €236.5m in 2017, with strong underlying cash flows driving rapid debt reducti