Granada reveals timetable for disposals

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The Independent Online
Granada has given itself 15 months to sell pounds 1.5bn worth of unwanted assets inherited from its pounds 3.9bn takeover of Forte, Gerry Robinson, Granada's chairman, said yesterday.

The disposal programme, which includes pounds 1bn worth of Exclusive hotels, a stake in the Savoy Group, and about pounds 300m for the Welcome motorway service stations, would bring gearing down to about 100 per cent from the currently high 389 per cent.

Charles Allen, chief executive, said the disposal timetable had been received positively by shareholders. "They share our confidence and frankly are quite comfortable," he said, unveiling Granada's first set of interim figures since the Forte victory.

Pre-tax profits were up a solid 19 per cent to pounds 183m, on turnover ahead 35 per cent to pounds 1.5bn. All main operating units, including media, rentals and the restaurants business, showed gains, fuelled by tighter margins and early benefits from the bringing together of the Granada and Forte assets.

"Forte is showing us very clearly that it can and will fulfil our expectations for increased profit," Mr Robinson said. During the acrimonious takeover battle, Granada promised to increase the profitability of Forte by pounds 100m a year, and Mr Robinson claimed the company was already on track to do so.

Restaurants and services saw profit growth of 46 per cent to pounds 62.3m year- on-year, on the strength of the Little Chef acquisition from Forte, a new menu with higher charges and the introduction of new formats at roadside and motorway service areas. Spending per head has risen by about 7 per cent since the new menu was introduced in late April.

Catering services saw growth in turnover of about 14 per cent, as profits climbed 27 per cent to pounds 26m. The rentals division managed paltry growth of about 5 per cent, underscoring the lacklustre nature of what is a declining business in the UK.

On the disposal programme, Mr Allen said the 68 per cent stake in the Savoy would be sold "in co-operation with management". A Granada insider suggested a sale could be several months away. A 25 per cent stake in the Alpha airport catering services operations could be sold within a few weeks, however, to a trade buyer interested in mounting a bid for the entire company.

City interest has been directed toward the Welcome Break motorway services, which could generate as much as pounds 300m. The operations had been provisionally sold to Whitbread, the beer and catering giant, during the takeover battle. Granada is currently in talks with Whitbread that could lead to a deal, but both sides caution it could take some time.

Granada is seeking legal advice on whether it can overturn a "lock-out" clause in the provisional deal between Whitbread and Forte, which gave Whitbread a share in any profits above an agreed figure in the event the sites were sold to a third party. That clause runs out in December. "We are of course open to a deal before then," a Granada source said. "But if nothing happens by December, I think we might be able to generate further interest from other buyers."

The group of 17 Exclusive hotels will probably go to four or five buyers, the company said. Sales memoranda have been sent to 75 applicants who have pre-qualified. They will be invited to look at confidential information prior to an auction.

Up for grabs are hotels such as the Grosvenor House in London, which had profits in the most recent financial year of about pounds 20m, and could sell for as much as pounds 300m.

Granada intends to keep the Meridien hotels, although a sale later has not been ruled out.

The rest of the Forte hotels, principally the Posthouse, Crest, Heritage and Travelodge properties will be kept. Granada is currently rebranding the hotels, and has set up three main divisions - international, UK provincial and London. Mr Allen said the London properties were being marketed "almost as a single hotel," allowing joint promotion.