Whitbread hopes to win back investors with £1.5bn property sell-off

Premier Inn owner Whitbread will hope to win back investors when it announces a £1.5bn sell-off of a shedload of its property portfolio on Thursday.

The FTSE 100 giant is gearing up for its full-year results later this week, and aims to please its investors with a cash injection to turn the corner on a choppy performance in recent years.

Whitbread is set to sell and lease back one in five of its freehold properties, following a strategic review of its business model.

The hospitality giant owns the freehold of around 50 per cent of Premier Inn hotels, and is expected to slash this to 40 per cent this week, according to the Times.

Sell and leaseback is a method by which firms can secure a short-term cash injection, by losing ownership of their property but agreeing to lease the premises. 

While this trick offers a quick cash boost, it can leave companies more exposed to economic headwinds if they are hit with rent hikes. 

Whitbread, which began life as a brewery in the 18th century and continues to own a string of pub brands including Beefeater, saw sales falter last year after it announced it would convert 112 of its food and drink sites into hotels.

Whitbread attacks Budget tax hikes

The firm issued a scathing update after last year’s Budget, saying changes to business rates valuations could leave the business up to £50m poorer.

“We are extremely disappointed with the outcome of this week’s UK Budget which will have a significant impact on our business and the wider hospitality industry,” chief executive Dominic Paul said in November.

Whitbread said it would accelerate cost-cutting this year to soften the blow, aiming to slash up to £60m from its margins this year, and it has since widened these savings to a goal of up to £80m.

The Chancellor announced a shakeup to business rates at the budget which was intended to ease bills for retail and hospitality firms, but reassessments of the property values which dictate this tax sent bills soaring for many hotels and pubs.

Furious pub landlords forced Rachel Reeves into a £300m concession, but this relief package was extended only to pubs, prompting the ire of restaurant and hotel owners.

The business rates bill for the average hotel jumped by £28,900 – or 30 per cent – on 1 April and will have climbed by £111,300, or 115 per cent, by the end of the decade, according to trade body UKHospitality.

Whitbread hopes to woo investors

But Whitbread breathed a sigh of relief in January when it said the hit from last year’s Budget would turn out to be only £35m – lower than first feared. 

Russ Mould, investment director at broker AJ Bell, said Whitbread has “found life harder going in recent years,” but aims to woo the market with this shift to a more “asset-light” model.

He said: “It is increasingly common for hotel operators not to own the buildings in which they operate, and for Whitbread it would mean a big cash injection and a pot of money that could be returned to shareholders.”

Reports of the sell-off boosted Whitbread to the top of the FTSE 100 risers on Monday, but the firm dropped back by nearly three per cent on Tuesday, to 2,402p.