Whitbread has recommended that its shareholders vote against the resolution proposed by the activist shareholder, Corvex, to appoint a new director of its own choosing to the firm’s board.

The hospitality firm, which owns Premier Inn, said in its interim results update that it has delivered “excellent strategic progress and strong current trading momentum”, demonstrating that its five-year plan is working.

The update comes after Corvex suggested that the hotel operator could not justify UK and German expansion plans given the current market conditions.

In the 26 weeks to 27 August, Whitbread reported that its statutory revenue increased by 2% year-on-year to £1.57bn, while its adjusted profit before tax fell by 9% to £287m.

Despite the drop, the firm said its profit reflects a “strong trading performance” in the UK and Ireland, and Germany, offset by temporary transition costs in line with its accelerating growth plan (AGP), high cost inflation and in-year impacts in Germany.

It added that as part of its business and strategic review, it has reduced growth capex by £1bn and reprioritised its “highest returning opportunities”, including the extension of its AGP, which is set to deliver double-digit returns to shareholders.

Furthermore, Whitbread said that this is a "critical year" for the delivery of the plan, with all branded restaurants now being replaced with a “more tailored F&B offering. Having agreed the sale of 173 sites, and offers received for the majority of the remaining sites, it is "on track" to deliver as planned.

Chief executive at Whitbread, Dominic Paul, stated: "Whitbread is a business with increasing strategic momentum and, having announced the outcome of our comprehensive business and strategic review in April, we are executing our Five-Year Plan at pace, building on the unrivalled strength of the Premier Inn brand to deliver increased returns for shareholders.

"With excellent strategic progress and strong current trading momentum, our plan is working. Against this positive backdrop, the Board strongly recommends that all shareholders vote against the resolution proposed by Corvex at the forthcoming shareholder meeting."

In its outlook, Whitbread said it is making "excellent strategic progress" in both the UK and Germany, with trading momentum being "encouraging".

It added that while visibility of market demand remains limited, its forward booked position is positive and it remains confident in its full-year outlook.

Head of markets at AJ Bell, Dan Coatsworth, said the message appears to be that the business has positive momentum with a growth plan in place.

He concluded: "This looks like a classic situation of a company not wanting the distractions of an activist investor and being determined to show it has the right plan in place. The financial results tell a different story. Profit is falling and there is no growth in the dividend. While revenue per available room – a key metric for the hotels sector – went up in the first half, cost inflation is an issue.

"Activists typically want to shake things up for some easy wins, thereby pushing up the share price and making them some money. They rarely think about what’s best for a company in the long term. In Whitbread’s case, the leisure group is investing now to increase its foothold in two important countries. In effect, it is spending money now to make money in the future.

"Market conditions aren’t currently favourable, so the financials don’t look great. But fast forward five to 10 years and Whitbread might be vindicated in its decision to have expanded its footprint. It just needs investors to think that way and not worry about a depressed share price. It’s a tough job to do when an activist is banging the drum and saying, ‘no, no, no’."

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