Inside Track by Peter Martin
Whitbread’s new chief executive Alan Parker takes over the corporate reins in just a few days time.
Speculation is already growing over what will be his first strategic move. Though investors won’t want any big surprises, sources suggest that the restaurant business will be his first target.
Parker is a hotel man with international ambitions, which is good news for the likes of Travel Inn, David Lloyd and the Marriott hotel business. But what is his view of restaurants?
The first decision has already been made, or so it is understood, and that is that retiring restaurant division boss Bill Shannon will not be replaced. This would mean the managing directors of the individual restaurant brands, such as Beefeater and Brewers Fayre, reporting in future direct to Parker – cutting out a layer of management and the accompanying costs at a stroke.
But it also raises questions about what fate ultimately awaits the restaurant operations at the end of Parker’s strategic review of the group.
There would be obvious and immediate interest in a sell-off of the pub restaurant portfolio of 600 plus sites comprising the Brewers Fayre, Brewsters, Beefeater and Out & Out brands. The pub restaurants had a turnover of £590m last year with operating profits of £84.1m
This is the deal that would make even Mitchells & Butlers lick its lips. A merger would double M&B’s pub restaurant presence, add a family-focussed business in Brewsters and make it the UK’s undisputed casual dining leader.
Certainly it would be a much better fit for than the Laurel community estate, which was the core of Whitbread’s old managed pub estate, which some pundits believe M&B should go after.
But such a juicy prize would certainly attract a raft of private equity suitors. If Whitbread were tempted to dispose, it would expect a hefty premium.
A more candidate for an early sell-off is its high street restaurant business, that my contrast had turnover of £453m last year, but made just £28.5m in operating profits. David Lloyd, Whitbread’s sport and fitness business made £49m on just £202m of sales.
Whitbread’s joint ventures with Pizza Hut and TGI Fridays make money but probably not enough considering the complications they bring. Pizza Hut "once again performed well against key measures", said Whitbread in its last results, but produced a cash dividend for the year of just £9.5m.
Costa, the coffee business which it owns outright and which has an international roll-out potential, might be the only restaurant business to survive.
Whitbread may eventually wave goodbye to pubs and restaurants, as well as its stake in the Britvic soft drinks business which is expected to float in the next couple of years. With the proceeds it would have the opportunity to become a major, focussed, international hotel and leisure management business – something that Alan Parker would like very much.
