Equities Update: Whitbread, Berkeley, Ashstead…

Whitbread’s Premier Inn is still a hit with customers

 
Mark Crouch, analyst at investment platform eToro, says “In what is a sticky period for the hospitality sector, Whitbread say they are confident in delivering their full year projections.

“Plans to boost investment in Whitbread’s Premier Inn hotel chain are well underway, with the major expansion adding around 3500 new rooms across the regions as occupancy rates remain robust for the hospitality powerhouse.

“Premier Inn Germany was the standout performer in Q2 as total accommodation sales grew by 15%, while the UK region managed to just about match their performance over the same period last year, as weekend demand, specifically in London dropped off following the post COVID surge in demand.

“Higher energy and inflation-hit food costs continue to squeeze the hospitality sector and Whitbread’s restaurant chains Beefeater and Brewers Fayre have dragged on performance. Food and beverage sales were 1% behind last year, not a disaster by any means, however that number could have been much worse if not for strong breakfast demand from Premier Inn.

“The hotel sector is Whitbread’s bread and butter, and despite economic challenges, the brand is clearly carrying weight with customers at a time when consumer spending is falling. With Premier Inn making up over 70% of Whitbread’s revenue, it’s little surprise the company is moving more of its eggs into their Premier Inn basket.”

Ashtead profit lower than last year amid US switch rumours 

Adam Vettese, analyst at investment platform eToro, says: “Ashtead has reported a softer performance than last year, highlighting the higher interest rate environment affecting the firm which largely utilises debt to service its plant rental demand. The writers strike was also detrimental to the firms film and TV arm.

“The dividend has seen a 5% increase which will please investors to some degree although many may well be wondering whether the rumoured switch to a US listing is actually better long term due to the more favourable valuation metrics. Given the majority of the firms business in North America it could be argued that this makes a lot of sense, albeit a big blow to the FTSE100.”
 

Berkeley group raises forecasts despite tough market

Adam Vettese, analyst at investment platform eToro, says: “Housebuilders have been having a torrid time of late with higher interest rates putting the brakes on home purchases as buyers wait for better deals when rates start to fall. This would be a very fair excuse for underwhelming performance, but this is not the case for Berkeley Group. They have raised guidance for next year as their adaptations to these conditions pay dividends – literally – with a special one on its way to shareholders too. Berkeley tends to have a London focus which is one of the most undersupplied markets where demand is strongest. This is where the new build-to-rent stream will also be aimed, which mitigates the lack of activity from homebuyers.

“Granted the numbers came in softer than last year but they did come in ahead of analyst expectations and unlike many of its peers, Berkeley shares are actually up this year, only around 6% off their pre-pandemic high. Investors will hope their robust management of tough conditions will stand them in good stead for when rate cuts do eventually start and we see the market heat up.“