ALAN Parker, the chief executive of Whitbread, is expected to unveil a modest jump in profits fuelled by the resilience of the budget hotel sector when he reports full-year results this week.
The group, which owns the Premier Inns budget hotel chain, Costa Coffee shops and restaurants Beefeater and Brewers Fayre, has been relatively unaffected by the financial meltdown due to the strength of its brands in the value for money sector.
Ov
erall revenue is expected to remain flat during the next two years at around £1.3bn, but the group has stated that it will not lose sight of its three main objectives: cashflow, reduction in costs and outperforming the competition. Parker is expected to post underlying pre-tax profits of around £221.4m for the year to 28 February, compared with £210.3m the previous year.
But any good news is likely to be tempered by an expected large jump in its pension fund deficit. Analysts are expecting the accounting deficit in Whitbread's pension scheme to widen from £33m to about £250m for the year as a result of sharp falls in global equity markets and declining yields on government bonds.
It is understood that the company's pension trustees could be asked to increase contributions. Whitbread, which employs more than 33,000 people across its hotel, pubs and restaurant estate, is one of many UK companies that are facing a sharp rise in their pension deficits.
Numis Securities analyst Wyn Ellis said trading conditions were "very difficult", but expects Whitbread to tough it out. He added: "The budget sector has historically been resilient during an industry downturn. Budget hotels have a share of just 13% of the UK market and they are gaining ground."
In March's trading update the firm reported lower occupancy rates at Premier Inn and said recent like-for-like sales had been "predominantly negative".
Premier reported comparative sales growth of 6.2% for the 50 weeks to 12 February, still above the 4.9% seen by the group overall, but well below the 8.5% sales growth reported in December.
Analysts have said an increase in funding to the pension scheme was unlikely to have a significant effect on cash flow over the next few years.
