Whitbread to sell off 10% of restaurant division

Whitbread, the Marriott hotels to David Lloyd Leisure group, announced plans yesterday to cull 10 per cent of its restaurants portfolio as part of a wider shake-up aimed at increasing profitability.

Whitbread, the Marriott hotels to David Lloyd Leisure group, announced plans yesterday to cull 10 per cent of its restaurants portfolio as part of a wider shake-up aimed at increasing profitability.

Whitbread, which last month put its 3,000-strong pub estate up for sale to focus on faster growing areas of the leisure market, said it had earmarked for disposal 30 of its 103 Café Rouge sites and a total of 110 other outlets in its restaurants division. In addition, two thirds of the company's 259 Beefeater outlets will be rebranded and refurbished to take full advantage of the well-positioned but underperforming sites. The more successful concepts, such as Costa Coffee and Brewsters, will double in number by 2005.

Sir John Banham, Whitbread's chairman, described the reorganisation as "the final piece in the [strategic] jigsaw". He said: "The case for Marriott, Travel Inn and David Lloyd is well established. It is perfectly fair to say that the jury is still out on the restaurants business."

The group's half-year results, issued yesterday, showed healthy sales growth at the company's Brewers Fayre and Brewsters, Pizza Hut and Costa Coffee units. But high street restaurants performed badly. Like-for-like sales at Café Rouge and Bella Pasta were down 0.9 per cent and TGI Friday's fell 6.1 per cent. Beefeater grew its comparable sales by 0.9 per cent.

Sir John said Whitbread had established four criteria which its restaurants will have to meet if they are to remain part of the portfolio. He said the businesses would be given two years to demonstrate like-for-like sales growth of about 5 per cent, double digit earnings growth, steadily improving return on capital and operating profits of at least £10m. After that time, if the brands are still not meeting their potential, they are likely to be sold.

Commenting on the sale of Whitbread's pubs and bars division, which is expected to fetch about £1.5bn, Sir John said: "We have had serious expressions of interest from all the people we had hoped would be interested as well as some who we hadn't expected." He said the line-up of potential buyers included both trade buyers and venture capital groups. Whitbread will issue a sale memorandum to interested parties by the end of November.

The company reported pre-tax profits down 5.9 per cent at £182.1m for the six months to 2 September. The profits fall was largely due to less than three months of contribution from the Whitbread beer division, which was sold to Belgium's Interbrew for £400m earlier this year. Whitbread shares closed up 5p at 507.5p.