Whitbread has reported a contraction in profit for the fiscal year ending February 26. The hotel group stated that its property disposal initiative is expected to boost adjusted pre-tax profit by fiscal year 2031.

The company, parent of the Premier Inn chain, unveiled a new five-year strategic plan. The plan includes disposing of property assets worth £1.5 billion (approximately $2.02 billion) via sale-and-leaseback transactions, accompanied by a restructuring program that may involve thousands of job cuts. Following the announcement, the company's share price declined.

Under the new strategy, Whitbread aims to add £275 million in adjusted pre-tax profit by fiscal 2031. Net capital expenditure is projected to be reduced by over £1 billion. Future growth capital spending will be funded through the sale, recycling, and utilization of the company's freehold properties.

Whitbread indicated that the plan is expected to release £2 billion in free cash flow, which could subsequently be returned to shareholders. The restructuring may lead to the elimination of more than 10% of the workforce in the UK and Ireland, where the company currently employs around 30,000 people. Whitbread noted that the final plans are subject to consultation with employees and that efforts will be made to redeploy staff internally.

The company's London-listed shares fell sharply in early trading, dropping 5.4% to £22.56, bringing the year-to-date decline to over 11%.

Dominic Paul, Chief Executive of Whitbread, stated that refocusing the capital expenditure structure would help improve profitability and shareholder returns. "Owning a significant property portfolio has been a unique strength, supporting Premier Inn's expansion and providing resilience through a strong balance sheet. However, we can further optimize how we operate our existing assets," he said.

Analysts at Jefferies noted in a report that the shift towards a higher proportion of leased properties could be a point of contention for investors. The institution also cautioned that weak UK consumer spending combined with a high-inflation environment poses a downside risk to consensus earnings expectations.

This strategic announcement comes shortly after Whitbread disclosed its full-year results for the period ending February 26, which showed a clear weakening in profit. Statutory pre-tax profit fell 19% year-on-year to £298 million, primarily due to a £130 million asset impairment related to the new growth and transformation plan and a £32 million net non-cash impairment charge.

Adjusted pre-tax profit, which excludes one-off special items, remained flat at £483 million. Total annual revenue was unchanged at £2.92 billion; growth in accommodation revenue was offset by a decline in food and beverage sales, as the company scales back its food and beverage operations as part of its transformation plan.

According to a company-compiled analyst consensus, the market had expected pre-tax profit of £473 million and total group revenue of £2.92 billion. While revenue met expectations, statutory profit fell short. The board declared a full-year dividend of 97 pence per share, unchanged from the previous year.