6C digs deep as global hotel profits crash

Global hotelier and UK retail operator Six Continents will spend a further £250m developing 600 pubs and restaurants this year.

The company has already invested heavily in its Retail division, spending an estimated £80m on its Ember Inns brand alone.

The announcement came as the company revealed half-year results heavily affected by the downturn in global travel following the events of September 11.

While the pubs and restaurants division showed a profits hike of 8.1 per cent to £146m, the hotels division saw profits nosedive 41.1 per cent to £109m.

The company steered clear of any speculation regarding the mooted deal with Scottish & Newcastle that will see the two companies combine their pubs division.

Such a deal would create a 3,500-strong managed house business that would be listed seperatly on the stock market at an estimated £4.5bn. Annual sales would be around £2.4bn.

The company said it would return up £1bn to shareholders through a share buy-back, if it could not find a suitable acquisition by the end of this calendar year.

Such an acquisition would come in Six Continents hotels division. Chief executive Tim Clarke said the company would focus its acquisitional activities on growing its hotel presence in gateway cities around the world.

The business, which has come under much fire for not spending enough cash and maximising shareholder value, defended its strategy.

It said its acquisition programme had been "going along very nicely" until September 11, since when neither Six Continents nor any other operator had looked to do a deal.

The 2,000-strong Retail division, comprising pubs and restaurants, is now averaging weekly sales of £14,200 across the estate.

This, said Tim Clarke, was three times the national average of UK pubs.

In its pubs and restaurant business, 6C will focus on organic growth. It will spend £250m on 600 sites this year.

Much of the cash will go on converting existing sites to its key retail brands, such as Ember Inns, or Goose, its growing discount offering. There are now 41 Goose pubs, with 11 having opened this year.

The company plans to acquire about 30 sites.

Breaking the Retail division down, the 1,361-strong pubs and bars arm saw sales rise 5.4 per cent to $465m. Drinks sales were up 5.5 per cent and food sales rose 8.1 per cent.

The restaurant division, which comprises 617 food-led outlets, saw sales climb 12.5 per cent to £321m. Drinks sales were up 6.9 per cent and food sales, 15.8 per cent.

Chief executive Tim Clarke said: "We expect continue sales growth driven by the high uplifts seen through our conversion."

The company took a £10m red tape hit and predicts total legislative costs for the year will top £20m - the highest ever.

The costs were a direct result of the impact of rising business rates, the working times directive, the climate change levy and the minimum wage.

Despite efforts last year, the company said it did not plan to sell the soft drinks business Britvic Soft Drinks. Britvic profits soared 45.5 per cent to £16m.

The City was clearly expecting worse figures. Despite the adverse results, the shares were trading up, following the announcement.