Whitbread to cut 3,800 jobs as part of new five-year plan

(Sharecast News) - Whitbread announced a new five-year plan on Thursday that will involve the sale and leaseback of £1.5bn of its freehold properties, target £2bn of free cash flow, reduce gross capital expenditure by £1bn and result in the loss of around 3,800 jobs. The Premier Inn owner said it will "recycle" £1.5bn of its freehold property to fund new growth and will increasingly "look to grow on a leasehold basis", resulting in net capex of £200m - £250m per year, equating to a reduction of more than £1bn versus the previous five-year plan.

Whitbread expects to reduce the proportion of freehold property held from around 50% to 30%-40% over time.

The Premier Inn owner said its refocused growth plans in the UK and Germany will drive increased margins and returns. By 2031, the plan will deliver £275m of incremental adjusted pre-tax profit contribution from key growth initiatives and increase return on capital employed by 500 basis points.

As part of the new plan, Whitbread will replace all of its remaining 197 branded restaurants with a more efficient integrated restaurant. It said that moving to a 100% integrated food and beverage offering will improve the guest experience and add more higher returning extension rooms.

Chief executive Dominic Paul said that following the business review, Whitbread has concluded that its model is the right one.

"Owning a significant proportion of our property is a unique strength which powers the growth of Premier Inn while supporting our resilience as a business, underpinned by a strong balance sheet. But we can improve our approach," he said.

"We will refocus our capital spend and recycle more of our freehold real estate, driving increased margins and returns, reducing our capital intensity and increasing cash returns for shareholders. By making our assets work harder and focusing on the highest returning projects, we will be able to continue to take advantage of constrained supply to strengthen our position in both of our core markets, whilst at the same time deliver attractive financial outcomes for shareholders.

"Our New Five-Year Plan builds on our strengths and drives a significant acceleration of our strategy."

The plan is expected to result in a reduction of around 3,800 roles out of a total UK and Ireland workforce of around 30,000. This is still subject to employee consultation and Whitbread said it will look to find alternative opportunities wherever possible.

The five-year plan was announced alongside the company's results for the year to 26 February, which showed that revenue was flat at £2.9bn, while adjusted pre-tax profit was also flat, at £483m.

Whitbread said positive growth in UK and Germany accommodation sales was offset by the expected lower food and beverage revenues as a result of the Accelerating Growth Plan.

At 0830 BST, the shares were down 5.6% at 2,254p.

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