Premier Inn owner, Whitbread, looks to be feeling the effects of Brexit uncertainty as it revealed a profit slump in its latest half-yearly report.

The hotel and leisure chain announced that pre-tax profits were down by 7.1 per cent to £220m compared to £237m the previous year. The chain has attributed the loss to a faltering business travel market, which has impacted on its Premier Inn brand, high inflation across the travel and leisure sector and the company’s large investment in Germany.

Whitbread’s shares fell 1.9 per cent after the results were released, now back up to 4172p at the time of writing. Investors and analysts are showing some lack of confidence in the leisure chain though, despite fears of a profit warning turning out to be unfounded.

Share prices were buoyed earlier in the year by the chain’s £3.9 billion sale of its Costa Coffee arm to Coca-Cola and its £2.5 billion payout to shareholders. Tough trading conditions have had an impact on the chain’s performance though since they sold Costa, and shares took a tumble at the end of last month when Barclays downgraded Whitbread’s stock from ‘Overweight’ to ‘Equal Weight’.

Whitbread currently operates around 800 hotels in the UK, Germany and the Middle East, under its Premier Inn and Premier Inn Hub brands, and it also runs around 400 Beefeater, Brewers Fayre and Table Table restaurants, the majority of which are located next to the chain’s hotels. It is the Premier Inn brands that have taken the hardest hit, as firms trim their business travel budgets in anticipation of Brexit complications. Chief Executive, Alison Brittain highlighted challenging market conditions in the UK as the cause of the dip in profits but was optimistic about ‘long term structural opportunities’ in the UK and Germany.

So, can Whitbread give its investors a good night’s sleep or will its decision to offload Costa Coffee turn out to be a mistake? Opinions are divided on this one – analysts trimmed their consensus forecast for full year profits to between £395-£390 million but stopped short of a profit warning.

Ultimately, the sale of Costa Coffee means the focus is almost entirely on Premier Inn and despite lowering its prices the hotel chain is still seeing fewer visitors. However, some analysts remain convinced by the strength of the product, citing the largest pipeline it has ever had at 20,000 rooms and the potential of the German expansion. Currently, though, only three hotels are open in Germany although two have occupancy levels of around 70% and a further 7,280 rooms are now planned in the region. Most of the company’s hotels are owned rather than leased, offering a significant cushion against debt. The 25-year old chain has shown a chameleon like ability to reinvent itself in the past, and some analysts believe this will continue and with its shares currently trading at 17.9 times future earnings, Whitbread could have long-term potential.

Others, however, are not convinced, saying that its decision to sell off the most profitable arm of its business in Costa Coffee, which generated more profit than the rest of the chain, was a mistake. Concerns have also been raised about the decision to use £2.5 billion of the £3.9 billion it received from the sale of Costa to buy back its own shares, with some questioning whether the timing of the share purchase was great.

Whether Whitbread can weather the storm of Brexit uncertainty and the downright gloomy climate of the hotel and leisure sector remains to be seen – much will depend if it can turn words into action as far as its ambitious expansion plans are concerned.