Premier Inn owner Whitbread warns of cost spikes as it returns to profit

Premier Inn owner Whitbread has warned that its costs will increase faster than expected this year as the war in Ukraine meant raw materials spiked in price.

It upped its cost inflation forecasts to between 8% and 9%, an increase of one percentage point from just three months ago. That means that costs will go up by £15 million, the business said.

It means that Whitbread will try to save more cash over the next few years. It had already planned to save £100 million by 2024, but now hopes to save £140 million by 2025.

Over the year to March, Whitbread returned a £58.2 million pre-tax profit. A year earlier it had lost more than £1 billion because hotels and other sites were closed during lockdowns.

It is still behind pre-pandemic profits, which reached £280 million in the year that ended in March 2020.

The business said: “The strength of our revenue recovery means we are confident of a return to pre-pandemic UK profit levels and profit margins, despite the inflationary cost headwinds that we currently see in the market.”

Compared to last year, sales in its accommodation arm, which includes Premier Inn, grew by 198% in the UK. Its UK food and beverages sales, which includes pubs and restaurants run by the group, grew by 170.2%.

Accommodation sales were still nearly 12% behind pre-Covid levels over the full year, but in the second half of the year they were more than 12% ahead of where they had been before the pandemic.

It came despite the impact of Omicron in the final quarter of the year.

“Whitbread’s performance in the year was strong, with revenues and profits recovering exceptionally well from last year,” said chief executive, Alison Brittain.

“Our hotels traded well ahead of the market in the UK driven by our investing to win, commercial initiatives and the strong appeal of our customer offer.

“As restrictions eased after the first quarter, high levels of leisure demand and improving business demand helped drive UK accommodation sales ahead of pre-Covid levels throughout the summer and into autumn, with sales remaining resilient through the fourth quarter despite the emergence of the Omicron Covid variant.

“As we move into the next phase of our Covid recovery, this excellent performance, combined with confidence in the group’s outlook, means that the board is now proposing the reinstatement of dividend payments.”