Whitbread to boost hotels
Thursday 04 May 1995
The expenditure compares with £282m in the year to February and £194m in 1993-94.
Besides expanding existing businesses such as Beefeater, TGI Friday's, Pizza Hut and Travel Inn, the company will develop Hot Shots pool bars, Hogs Head cask ale bars and PJ Peppers, a wine bar.
Whitbread's balance sheet can cope easily with the increased spending. Borrowing as a percentage of shareholders' funds is 2.6 per cent, and cash flow will ensure the figure does not rise much above 6 per cent this year.
Sir Michael Angus, chairman, remained coy, however, about Whitbread's plans for a big acquisition.
The company recently withdrew from bidding for Courage, the second largest brewer in the UK.
He refused to comment on strong rumours that Whitbread was looking to buy Allied Domecq out of its joint brewing venture with Carlsberg, known as Carlsberg-Tetley.
The expansion plans were announced with results for the year to 25 February, which produced underlying growth of 10.1 per cent in profits before tax to £255.1m.
The figures, accompanied by a 7.4 per cent dividend increase to 20.2p, were well received by the City and the shares rose 10p to 573p.
Profits improved in all divisions, encompassing brewing, leased pubs, tied pubs, and restaurants and leisure.
Star performers were Travel Inns, at the budget end of the hotel market, and Beefeater and Brewers Fayre, which are benefiting strongly from the general growth in the eating-out market in the UK.
David Thomas, director of restaurants and leisure, said five more Travel Inns would be opened this year and there were plans "in the pipeline" to add another 25-30 outlets.
This would take the number of hotel rooms from 2,840 to more than 4,000.
New Travel Inns, where possible, will be sited alongside Whitbread's pubs.
Only five of the current 66 hotels are managed separately or on stand- alone sites, with 47 housed next to Beefeater pubs, 13 next to Brewers Fayres, and one at a TGI Friday's.
Budget hotels, typically priced at £34.50 a night for a room for four, is by far the fastest growing part of the hotel market. Whitbread is achieving a 17.5 per cent return on its investment in this business.
Pub food, coupled with a shift in drinking habits to higher-margin premium beers, is also a prime part of the company's expansion plans.
Beefeater's sales rose 7 per cent last year, generating a 12 per cent increase in profits.
Most of the growth is coming from the family sector.
The number of children accompanying adults to a pub restaurant has virtually doubled in the last two years, according to statistics compiled by Taylor Nelson, the market research group.
The group's Pizza Hut business, however, was affected by last year's hot summer weather and profits fell by an unspecified amount.
However, Mr Thomas remained confident about the long-term future despite the fierce price competition in the market.
Investment Column, page 34
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