Whitbread lines up £300m sale of brewing arm

Whitbread, the Marriott Hotels to Costa Coffee group, yesterday gave its clearest indication yet that it is poised to sell its brewing arm as it unveiled a 7.1 per cent rise in underlying full-year profits.

David Thomas, the chief executive, said: "Our drinks businesses are not core holdings for Whitbread... The UK and European brewing industry is going through a great deal of consolidation. This could create an opportunity for us to create added value for our shareholders. If such an opportunity arises, I firmly intend to take it."

Interbrew, the Belgian company that recently announced plans to float, is seen as the most likely contender to take on the business, which contributed £49.5m to Whitbread's £391.2m pre-tax profits. Interbrew owns the Stella Artois brand, brewed by Whitbread in the UK and the leisure company's top-selling beer. Other possible bidders for the division, which could fetch £300m, include Heineken.

Mr Thomas also fuelled speculation that Whitbread could launch a bid for the De Vere hotels chain. He said: "We do want to enlarge our hotel business... We are in a position to contemplate significant acquisitions. But they must be at the right price and capable of adding shareholder value."

After the effect of the new Financial Reporting Standard (FRS15) accounting policy, which limits companies' ability to restate income, Whitbread's hotels division, including the Marriott and Travel Inn brands, contributed almost a quarter of the group's operating profits.

At David Lloyd Leisure arm, profits jumped 31 per cent to £23m on turnover up by 33 per cent at £103.6m. Mr Thomas said Whitbread would expand the brand by bringing its Marriott hotel health clubs under the David Lloyd banner. The chain is the biggest in the UK, with 43 clubs and 190,000 members.

Profits fell 23 per cent to £14.4m at the First Quench and Britannia joint ventures. Earnings at the leased pubs division were up 18 per cent to £64.3m, while the owned pubs' profits were up by 7.2 per cent to £173.5m.Branded restaurants, including Beefeater, Pizza Hut and TGI Friday's, did better in the second half, giving an overall profit rise of 2.5 per cent.

Whitbread shares closed down 3p at 577p on disappointment at a lack of news on its strategy after its failed attempt to take over Allied Domecq's retail operations last year.