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Whitbread to Return Cash as Profit Soars

British leisure group Whitbread posted a 24.5% rise in annual profit, ahead of expectations, and said on Tuesday it would return cash to shareholders as the current year had started well.

"It's been a great year for Whitbread and the momentum is continuing. We look forward to another year of strong performance," Chief Executive Alan Parker told journalists.

The group said it was increasing the level of leverage in the business by about 400 million pounds ($801 million) and after making payments into its pension fund would return some of the cash to shareholders.

"It's unlikely they (shareholders) will get the lot but they will get the majority of it," Finance Director Christopher Rogers said.

Whitbread has been looking at its capital structure for 18 months amid speculation that if it does not do more to extract value from its property holdings it could attract a takeover bid from someone who will look to capitalise on those assets.

"The way we have looked at it is what is most efficient level of debt for us given our growth plans going forwards. It is not based on us wanting to defend ourselves, it is based on us wanting to maximise value for our current shareholders," Rogers said.

The group said its restaurant and hotel properties had been valued on a portfolio basis at 3.6 billion pounds.

Whitbread said in March it was considering the sale of its David Lloyd fitness clubs, which analysts calculate is worth around 1 billion pounds, and said it was still considering a number of unsolicited approaches for the unit.

"There has been no decision by the board to sell David Lloyd Leisure," Parker said.

Shares in Whitbread, which have outperformed the U.K. travel and leisure sector by 22% over the last 12 months, were down 0.1% at 1900 pence, valuing the group at around 3.75 billion pounds.

Whitbread trades on a pricey multiple of around 30 times forecast earnings, according to Reuters data, against a U.K. sector average of 24 times.

Whitbread said like-for-like sales were up 4.3% in the year with strong growth in its Premier Travel Inn and Costa coffee units while its plans for international expansion were progressing well.

The group said pretax profit before exceptional items from continuing operations for the year to March 1 was 213 million pounds as sales rose 10.3% to 1.3 billion pounds. A poll of 13 analysts by Reuters Estimates forecast average annual pretax profit of 209.2 million pounds.

The group said it would pay a final dividend of 22.15 pence per share, giving a total for the year of 30.25p per share, compared to 27.3p the year before.