(Alliance News) - Whitbread PLC on Tuesday launched a new share buyback, alongside a bumper dividend increase, but said 1,500 jobs would go as it sells off underperforming restaurants.
The Dunstable, Bedfordshire-based owner of Premier Inn plans to convert a large number of restaurants into hotel rooms, and sell-off underperforming sites, as it looks to hit a target of 97,000 open rooms in the UK by 2029.
Shares in Whitbread rose 1.0% to 3,076.00 pence in London on Tuesday morning.
In the 52 weeks to February 29, Whitbread said pretax profit rose 21% to GBP451.7 million from GBP374.9 million a year prior. Earnings per diluted share increased by 14% to 159.9 pence from 137.5p.
Sales rose 13% to GBP2.96 billion from GBP2.63 billion.
Reflecting the strong financial performance, Whitbread said it intends to start a further GBP150 million share buy-back, which will be completed during the first half of the new financial year. It also increased the total dividend by 31% to 97.0p per share from 74.2p.
Whitbread said Premier Inn UK delivered record adjusted profit before tax in the year with 15.5% return on capital employed and continues to "outperform" the UK midscale and economy market.
In Germany, Whitbread said it is encouraged by its recent performance and remains "on track" to break-even on a run-rate basis in 2024 as it progresses towards its long-term target of 10% to 14% return on capital.
Cost efficiencies of GBP50 million were delivered in the financial year while a new efficiency programme is targetting GBP150 million more savings over the next three years.
Whitbread said its Accelerating Growth Plan will see the conversion of 112, and the sale of 126, branded restaurants as it plans to unlock 3,500 new room extensions to help it reach at least 97,000 open rooms in the UK by 2029.
This will result in the loss of around 1,500 jobs, Whitbread said.
Whitbread said the plans would require GBP500 million of investment over the next four years which will be funded through its existing annual capital expenditure programme.
The company said the changes would see a one-off reduction of GBP20 million to GBP25 million to UK adjusted pretax profit in financial 2025.
This will be recovered in the following two years, Whitbread said, with the removal of lower-returning restaurants and the addition of new high-returning hotel rooms.
Overall, the plan is expected to deliver a net incremental adjusted pretax profit benefit of between GBP30 million to GBP40 million.
Whitbread said it sees "significant" growth potential in both the UK and Germany and thinks the plans outlined Tuesday will deliver a "step change" in margins and returns.
This further underpins its confidence in the medium-term outlook for the group.
By Jeremy Cutler, Alliance News reporter
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