Morning Note: Market news and an update from Whitbread.
Market News
US equity markets moved higher last night – S&P 500 (+0.6%); Nasdaq (+0.8%) – ahead of today’s key inflation data. Core CPI is forecast to ease to the slowest annual pace since May 2021. For December, prices are seen rising 3.8% from a year earlier. The Federal Reserve’s Williams said monetary policy now tight enough to guide inflation back to the Fed’s target. The dollar slid, while gold edged up to at $2,034 an ounce. The 10-year Treasury currently yields just under 4%.
This morning in Asia, markets were also firm: Nikkei 225 (+1.8%); Hang Seng (+1.5%); Shanghai Composite (+0.3%).
The FTSE 100 is currently trading 0.4% higher at 7,686. Stocks trading ex-dividend today include Ashtead (0.25%), Sage (1.10%), and SSE (1.07%). In the industrial property sector, LXI REIT and Londonmetric Property have agreed on an all-share merger. Sterling trades at $1.2757 and €1.1622.
Bitcoin briefly hit $47,000 after the SEC approved the launch of Bitcoin ETFs by funds including BlackRock and Fidelity. Trading will start later today.
US pension funds are selling out of China. An analysis of 14 funds with exposure to the country’s stocks shows most have reduced their holdings since 2020. It suggests what started as a performance-driven exodus risks becoming a structural shift. “Foreign investors no longer fear leaving China out of their investment universe,” said Dalma Capital’s Gary Dugan.
Oil moved up to $77.40 a barrel. Uranium prices rose above $92 per pound, extending the surge from late 2023 to the highest since late 2007, amid increasing signs of strong demand and risks to supply. The biggest wave ever of LNG mega projects is about to ramp up as the sector bets on its place in the clean-energy transition.
Source: Bloomberg
Company News
Whitbread has today released a trading update for the 13 weeks to 30 November which highlights continued strong performance in the UK. The company remains confident in its full-year outlook, and in response, the shares are up 3% in early trading.
Whitbread is the UK’s largest operator of hotels (Premier Inn) and restaurants (Beefeater, Brewers Fayre, Table Table and Bar + Block). Premier Inn has over 850 hotels and more than 84,000 rooms across the UK and Germany. A joint site model means that more than half of the group’s hotels are located alongside its own restaurant brands. Overall, the business is expected to benefit from the lack of branded hotel supply growth and permanent decline in the independent sector.
During the latest quarter, total group sales were up 11% year-on-year (or 8% on a like-for-like (LFL) basis), made up of 9% growth in the UK (+8% LFL) and 47% in Germany (+14% LFL).
Total UK accommodation sales were up 11% (+9% LFL), with strong demand in both London and the Regions. RevPAR (revenue per available room) rose by 9% to £69.90 and is now 39% ahead of pre-pandemic levels. This was driven by a combination of increased occupancy (to 84.9%), higher average room rate (£82.30) and estate growth.
The group is competitively well-placed to outperform other budget branded and independent operators, as both have become increasingly financially constrained. In the latest quarter, the group enjoyed continued outperformance versus the wider midscale and economy market with a RevPAR premium of £6.06.
UK Food and Beverage LFL sales grew by 6% year-on-year. Although trading at the value end of the pub restaurant market remains challenging, the business has benefitted from several commercial initiatives put in place during the second half of last year.
In Germany, total accommodation sales were up 47% led by the continued expansion of the estate. Overall market demand continued to recover during the latest quarter with new hotels maturing in line with management expectations. Total estate RevPAR was €60, and €66 at the more established hotels, in line with the wider midscale and economy market.
The group’s strong operating cashflow has continued to fund the ongoing investment in both the UK and Germany whilst maintaining a healthy balance sheet – net cash less lease liabilities was £3.9bn at the end of August. The £300m share buyback is on track with £226m of shares purchased so far.
Strong trading has continued into the current quarter, with UK accommodation sales up 12%, with RevPAR up 10%. UK Food and Beverage sales were up 7% following a robust trading performance over the festive period. In Germany, total accommodation sales were up 61% and the company remains comfortable with its full-year guidance of a pre-tax loss between £30m and £40m. There is no change to the guidance for the financial year to end February 2024 (FY24).
Looking further ahead to FY25, the group expects net UK cost inflation between 3% and 4% on a £1.7bn-£1.8bn cost base, including operational efficiencies of between £40m and £50m. With a positive forward booked position in the UK, a favourable supply environment, a clear commercial plan and cost efficiencies, the group remains confident in the overall outlook. In Germany, the business remains on-track to break-even on a run-rate basis during calendar year 2024.
Source: Bloomberg