Leisure group Whitbread is going through tough times as it posted low first-half profits. Reacting to the news, the stocks of the company plunged to a five-week low on Tuesday.
Chief Executive Alan Parker expected the “consumer environment to remain challenging” and also said it would “take time” to reverse the slowdown at pubs and restaurants that have been declining in their performance levels for quite some time.
Whitbread, whose services got affected after July 7 bombings and subsequent failed attempts, is also laying off 250 employees in a bid to return more cash back to its shareholders. The company’s pubs and restaurant business is on the wane as higher energy costs and taxes do not make consumers visit them frequently.
Pretax profit rose 11 percent to 102.9 million pounds in the six months up to September 1st. Sales were up by13 percent to 809 million pounds. Like-for-like sales managed to rise only by 0.4 percent in this period.
Parker, nevertheless, said: "This result has been achieved despite a difficult consumer and cost environment". What saved the day for Whitbread was its strong trading at its Premier Travel Inn budget hotels. Its high street businesses showed mixed fortunes. TGI Friday and Pizza Hut have fared disappointingly urging the company to dispose them off.
Whitbread shares fell by 3 percent at 935 pence by 0800 GMT. Now, the firm is valued at 2.4 billion pounds. It is venturing on a 400 million pound share buyback on Tuesday in a bid to shore up the share price.
Morgan Stanley, on the other hand, feels that these disappointing margins have forced it cut its full year forecasts. Currently, its price target for Whitbread shares is 1,000 pence.
Apart from UK Marriott hotels, Chiswell Street brewery site and Whitbread’s stake in the Britvic soft drinks group are to be disposed off. But directors of the company are firm in their resolve to continue their large pub operations which is worth more than £1 billion, with the Brewsters chain being rebranded as Brewers Fayre.
Meanwhile, there is near unanimity in the board to go ahead with further expansion plans of Premier Travel Inns. The goal is to take the number of rooms beyond 30,000 by the year end.
Posted
on : Tue, 25 Oct 2005 12:10 GMT | Business News
By : Pippa Fielding
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