Hospitality giant Whitbread has offloaded a number of its Premier Inn hotels to property group Londonmetric for £89m as it looks to boost profits.
The group sold nine South Eastern hotels to the group, ranging from Southampton Airport to Warwick, as part of its plan to reuse £250m-£300m of property proceeds for growth opportunities, including turning Whitbread branded restaurants such as Beefeater into hotels.
The sale follows the recent £44m hotel portfolio acquisition from Whitbread and increases Londonmetric’s Premier Inn hotel ownership to 22.
Whitbread will continue to run the Premier Inn’s owned by the property group as the deal is a ‘sale and leaseback transaction’, with the group on a 30 year lease.
The sale also makes Whitbread Londonmetric’s fourth largest occupier, contributing £11.3m of annual rent and accounting for 2.7 per cent of the group’s total rent.
Andrew Jones, chief executive of Londonmetric, said: “This transaction adds high quality and mission critical assets that generate a long, strong and growing NNN (triple net lease) income in a sector that continues to benefit from evolving consumer preferences for travel, entertainment and experience.”
Whitbread’s share price jumped 4.28 per cent in morning trading to 2,694.64 pence, while Londonmetric’s share price inched up 0.26 per cent to 195.80 pence.
UK and Germany sales jump
Whitbread total group sales inched up two per cent to £781m, with positive accommodation sales in both Germany and the UK, but this was partially offset by a reduction in UK food and beverage sales as a result of transforming restaurants into hotel extensions.
Total UK accommodation sales were up two per cent, with revenue per available room maintaining a £5.63 premium.
Germany accommodation sales hiked up 12 per cent in local currency, partially driven by commercial initiatives, while revenue per available room jumped seven per cent to €76 (£65.82).
The FTSE 100 company also expects to deliver cost efficiencies of £75m-£80m across labour, technology and procurement, up from the previous £65m-£70m.
It also expects to complete its £250m share buyback programme by April 30, with 7.7m shares purchased for roughly £217m.
Business rate impact
Whitbread’s shares have been feeling the pressure since the November Budget, with investors questioning if the group can absorb the business rate impact.
But chief executive Dominic Paul said the group expects the cost impact of business rates to be £35m in the 2027 financial year, which is lower than the initial estimate of £40m to £50m.
Paul also noted that despite the predicted lower cost impact, the changes are ultimately “damaging”.
He said: “We continue to believe the proposed changes to business rates are damaging for the overall sector and will impact future investment and job creation and we, along with the wider hospitality industry, continue to press the UK Government for changes.”
In response to the Autumn Budget the group is also exploring a number of options to further drive profits, margins and returns beyond restaurant transitions.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Whitbread’s shares have been under pressure…today’s Q3 statement should provide some relief for investors, with demand accelerating in both the core UK and fledgling German operations.
“It’s also playing its part in the growing clamour by the hospitality industry for more supportive government policy. Whether this is enough to keep activist shareholder Corvax happy remains to be seen.”