Bullish Whitbread to step up expansion

Whitbread said yesterday it would step up the pace of rolling out brands such as Travel Inn and David Lloyd Leisure as it unveiled a strong rise in underlying profits.

The leisure group rose above the current war-inspired gloom in the hotels market to paint a buoyant picture of recent trading across most of its businesses. Marriott, its four-star hotels group, was the one exception with a 4 per cent decline in like-for-like sales in the past two months.

David Thomas, the chief executive, said: "It hasn't been the best environment to trade in, with the build up to war in Iraq, the war itself and the occasional Sars [severe acute respiratory syndrome] threat thrown in. [During the war] there was almost a cessation of business activity and inbound US tourism – the only people flying West to East had uniforms on."

Mr Thomas said the group's improved performance during the two years since selling off its brewing and pubs businesses had given it the confidence to expand most of its brands by "50 per cent over the medium term". He added: "There's a track record now, which is providing us with the confidence to put our foot down on the accelerator to grow brands like Brewsters, Travel Inn, Costa Coffee and David Lloyd Leisure even more rapidly."

Asked whether Whitbread was looking at the parcel of some 1,500 managed pubs put up for sale by Scottish & Newcastle earlier this week, he said: "Organic growth is the name of the name, if we can pick up assets at the right price that drive shareholder value, then why not? The challenge is for us to cherry pick at the right price but that's not something we need to do."

Whitbread plans to add up to 2,000 new rooms a year to Travel Inn, its budget hotel chain; a 590-room outlet opened at London's Heathrow airport this week. The chain was one of the group's star-performing brands last year, with like-for-like sales rising 6 per cent.

In the year to 1 March, Whitbread reported a 14 per cent rise in underlying profits to £214m on sales that fell from £2bn to £1.79bn. Pre-tax profits were £203m against £7m a year earlier (reflecting a hefty write-down at its Pelican restaurant group).

The group said it was close to exchanging contracts on 34 of the 51 Beefeater sites it was seeking to sell. Mr Thomas said a new format for the tired restaurant brand was "exceeding expectations" at six trial sites. He plans to revamp the remaining 150-odd units over the next few years – largely by changing the décor and improving the traditional steak-based menu as well as the bar area. "It's [the décor] no longer black, white and red, so people don't just think 'God, I was here 20 years ago'," Mr Thomas said.