Whitbread (WTB.L) has returned to a profit in the first half, but warned rising costs are holding its pubs and restaurants back from their pre-pandemic levels.
The owner of Premier Inn posted a £307m ($348m) pre-tax profit in the six months to the start of September, up from a £19.3m loss a year earlier. The business made £220m in the same period in 2019.
However, costs are increasing rapidly for the hospitality firm and the performance of its pub and restaurant business is less positive, it revealed on Tuesday.
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Inflation, especially in costs for labour and utilities, among other investments will see costs surge by around £60m this financial year, Whitbread said.
"The UK value pub restaurant sector remains challenging and food and beverage sales continue to lag pre-pandemic levels," it said. "We have launched a series of initiatives to return sales to pre-pandemic levels, although this is unlikely to be achieved in the current financial year."
Shares in the FTSE 100 (^FTSE) company fell 1.9% as it warned of higher costs due to inflation.
Premier Inn is faring better than Whitbread’s restaurants in the UK. Demand has been "robust", it said, despite the economic downturn, adding that momentum going into the third quarter has held up.
"We delivered an outstanding trading performance in the first half of the year, with revenues and profit before tax above pre-pandemic levels," chief executive Alison Brittain said. "Our UK hotels traded well ahead of the market."
But other parts of the company are still lagging behind. Whitbread expects a pre-tax loss of between £40m and £50m in its Germany business. That is still better than previous guidance of between £60m and £70m.
Brittain added: "We are making good progress in Germany and remain focused on realising our full potential in this large and exciting market.
"Despite macroeconomic uncertainties, our current trading performance is strong and our business has proven its resilience in previous downturns.
"With a robust balance sheet and significant growth potential in both the UK and Germany, we remain confident in the full year outlook and our ability to deliver long-term value for all our stakeholders."
Watch: How does inflation affect interest rates?
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