Activities

Welcome Break is the UK’s second largest operator of motorway service areas. The majority have been developed with adjacent budget hotels, mostly using the franchised Days Inns. A small number that still operate under the group’s own Welcome Break brand are being rebadged. The company attracts around 80 million customers a year, including motorists seeking petrol.

Hotel brands: Days Inn (under franchise), Welcome Lodge
Own food brands: Food Connection (self-serve), Red Hen (waitress service) restaurants, Coffee Primo, Piazza
Franchised food brands: Burger King, KFC, McDonalds

Timeline

• 1959: Motorway Services Ltd – whose majority shareholder is Forte – opens the UK’s first motorway service area (MSA) at Newport Pagnell near Milton Keynes. It is still owned today by the company which is now majority-owned by Welcome Break, with Texaco as a minority partner.
• 1986: Trusthouse Forte buys the Welcome Break service areas from the Hanson Trust, which itself acquired them from the Imperial Group. The name is extended to Trusthouse Forte’s existing 16 MSAs. Forte continues to develop the brand alongside Travelodge budget hotels, which it introduces into the UK in 1985 after buying the US Travelodge company in 1973.
• 1996: Forte is acquired in a hostile takeover by the Granada Group, which is forced to sell Welcome Break in order to satisfy monopoly regulations.
• 1997: Bahrain-based private equity group Investcorp buys the 21 Welcome Breaks in February for £476m. The Travelodges are rebranded as Welcome Lodges.
• 1999: Welcome Break signs a deal with Premier Hotels (then the master franchisor in the UK for the Cendant Corporation’s hotel brands) to convert its budget hotels into Days Inns.
• August 2000: After publishing a damning report on motorway food, veteran food critic Egon Ronay agrees to help Welcome Break improve the quality of its meals. By December he has changed two-thirds of the food and drink served. The project concludes in November 2002.
• 2002: Welcome Break introduces quality branded coffees and sandwiches with Coffee Primo. The lounges incorporate sofas, workstations and laptop connections for business customers.  
• 2003: The group reports pre-tax losses of £62.4m.
• 2004: Investcorp launches a £386.9m rescue plan to ward off administration. It involves buying-off disgruntled shareholders and the sale-and-leaseback of 10 MSAs to Robert Tchenguiz’s Rotch Property Group for £24.7m.

Operating data

In the year to 30 September 2004, Welcome Break posted a pre-tax loss of £14.7m (compared with a loss of £62.4m in 2003) on turnover of £580m (£198m excluding petrol). However, in 2004 the group achieved earnings before interest, tax, depreciation and amortisation of £46.1m after stripping out one-off exceptional costs.

The sales breakdown by brand in 2004 is as follows:
Food Connection: £37.8m
Coffee Primo: £9.3m
Burger King: £17.1m
KFC: £15m    
Days Inn: £12.1m    
Retail: £51.6m
Machines & Other: £17m  

Number of MSAs: 24

Number of hotels: 22 (19 Days Inns, four Welcome Lodges)

Number of staff: 4,500

Strategy

“Our mission is to be the best motorway service operator and to overcome the poor reputation that motorway services have had over the last 20 years. We are passionate about delivering friendly, courteous service, providing their customers with great products in an environment that is relaxed, very clean and well maintained.

Many businesses have experienced a shift in the food industry in recent years as consumer tastes become increasingly cosmopolitan.  Greater focus has been placed on international and speciality foods and Welcome Break has taken steps to make sure it caters for this consumer demand for innovation, through a strategy of both responding to consumer demand and developing menus so that customers are offered something new.”

Source: company statement, 2005

Key directors

Chief operating officer: Rod McKie
Chief executive officer: George Charters
Financial director and company secretary: Nick Wright
Property and development director: Ian McKay
Non-executive chairman: Brian Dickie
Non-executive deputy chairman: Michael Guthrie

Contact

2 Vantage Court
Tickford Street
Newport Pagnell
Bucks
MK16 9EZ

Tel: 01908 299 700

Website: http://www.welcomebreak.co.uk

Commentary

Welcome Break, the UK’s oldest MSA, has been undergoing a major modernisation since current chief operating officer Rod McKie joined as operations director in October 2001 and took the helm a year later.

Many of the staff had worked at Welcome Break all their lives. Since McKie took over, around half the managers have left, retired or been sacked. He has shifted responsibility from the centre to site managers, evolved more efficient working systems and speeded up service times.

The drive to improve food quality – which started in 2000 with the help of Egon Ronay –saw the replacement of the old Granary restaurants by Food Connection in 2001, the launch of Coffee Primo in 2002, and the introduction last year of Piazza (which is expected to spread to 12 sites by mid-June). The group is currently installing specialist equipment from Switzerland that is unique to the UK to replace the old hot plates and better preserve the quality of displayed foods.

The fact that Investcorp is felt to have paid £100m too much for Welcome Break has kept profits flat at around £40m for several years. Last year, the group faced financial meltdown after posting a £62.4m pre-tax loss for the year to September 2003.

The losses dropped back to £14.7m following a refinancing deal that included the sale-and-leaseback of 10 sites. However, these figures masked a genuine improvement in underlying performance. Earnings before interest, tax, depreciation and amortisation totalled £46.1m after stripping out one-off exceptional costs that included depreciation of £10.4m, £16m arising from the sales-and-leaseback deal, and refinancing costs of £16.5m.

The group intends to redevelop three forecourts this year and 23 in 2006. Eight Food Connections will also be revamped.