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FY18 FULL YEAR RESULTS | APRIL 2018
FY18 Full Year ResultsApril 2018
FY18 FULL YEAR RESULTS | APRIL 2018
Contents
Highlights Alison Brittain p3
Financial performance Nicholas Cadbury p6
Strategic update Alison Brittain p16
Structure update Alison Brittain p34
Appendices p39
2
FY18 FULL YEAR RESULTS | APRIL 2018
Summary | Strong momentum in delivering our plan
• Deliver capacity growth in Premier Inn to over 100,000 rooms
• Grow Costa to over 3,000 sites in the UK
• Double the Costa Express network
Structural growth opportunity
Market leading brands and loyal customers
Continued disciplined capital management
• Replicate Premier Inn UK success in Germany
• Increasing ambition to grow Costa in China
• Accelerate Costa Express growth internationally
• Increased efficiency target from £150m to £250m with £100m delivered over next 2 years
• Deliver modern & stable IT platforms
• Be a Force for Good
Long term growth in earnings and dividends combined with strong return on capital
3
Focus on our strengths to grow
internationally
Build capability to support long-term
growth
Grow & innovate in core UK markets1 2 3
FY18 FULL YEAR RESULTS | APRIL 2018
Committed to creating two high-quality independent companies
4
• Decision to demerge Costa following regular & rigorous Board review
• Two highly attractive businesses- attractive economics- leading market positions- structural growth opportunities
• Clear plans in both businesses to create long-term sustainable value
• Strong progress in delivery of strategy enables separation
• Separation will enhance focus on structural growth opportunities in both businesses
• Committed to demerge as fast as practical & appropriate to optimise value
• Expected to complete within 24 months
UK’s largest and most successful hotel business, with attractive international growth opportunities
The clear UK market leader in the out-of-home coffee market and the second largest internationally
FY18 FULL YEAR RESULTS | APRIL 2018
Good profit growth
Consistentlyhigh return on capital
Strong discretionary cash conversion
Sustainable dividendgrowth
4.5% to
£591m
Highlights | Good financial performance in line with expectations
The #1 hotel chain in the UK
Good return on capital
Good total revenue growth
Strong profitgrowth
The UK’s favourite coffeeshop… again!
Strong return on capital
Strong total revenue growth
Consistent profits
15.4%
0.5% to
£159m
7.5% to
£1.3b
8th
year in a row
5.2% to
£2.0b
72,466 rooms
6.5% to
£498m
94% to
£585m
5.6% to
101.15p
5
13.4% 46.0%
FY18 FULL YEAR RESULTS | APRIL 2018
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FINANCIAL PERFORMANCE | Nicholas Cadbury – CFO
66 FY18 FULL YEAR RESULTS | APRIL 20186
FY18 FULL YEAR RESULTS | APRIL 2018
FY17 FY18 !
Revenue £3,106m £3,295m 6.1%
Underlying PBT £565m £591m 4.5%
Underlying EPS 246.5p 260.2p 5.6%
Discretionary FCF £532m £585m 9.9%
Capital expenditure £610m £555m £(55)m
Return on capital 15.2% 15.4% 20bps
Lease-adjusted leverage 3.2x 2.9x
Full year dividend 95.80p 101.15p 5.6%
Financial highlights | Good overall performance
• Good revenue growth across all businesses
• Disciplined cost management delivering expected profit growth
• Strong cash generation supporting investment in strong returning areas
• Return on capital increased despite recent investments
• Financial flexibility for UK and international expansion
• Dividend growth in line with EPS
7
FY18 FULL YEAR RESULTS | APRIL 2018
Premier Inn | Continued strong financial performance
FY17 FY18 !
Revenue £1,908m £2,007m 5.2%
UK & Germany £1,902m £2,004m 5.4%
International £6m £3m n.m.
Underlying op. profit £468m £498m 6.5%
UK & Germany £472m £498m 5.7%
International £(4)m £0m n.m.
Return on capital 13.0% 13.4% 40bps
Other metrics
UK accommodation sales growth 6.9% 7.1%
UK F&B sales growth 0.7% 2.5%
Total Premier Inn sales growth 4.7% 5.2%
UK accommodation LFL sales growth 2.5% 2.2%
• Strong revenue growth delivered through market leading occupancy and new capacity
• Continued market share gain- London hotel sales growth of 9.1%- Regions hotel sales growth of 6.6%
• Removed international losses through exit of India and South East Asia operations
• Accelerated efficiencies supported margin growth of 40 basis points
• Maintaining good return on capital on a growing capital base
8
FY18 FULL YEAR RESULTS | APRIL 2018
Costa | Revenue growth & earnings in line with expectations
FY17 FY18 ;’ !
Revenue £1,202m £1,292m 7.5%
UK Stores £876m £921m 5.2%
UK Express £178m £210m 18.0%
Total UK £1,054m £1,131m 7.3%
International £148m £161m 8.5%
Underlying op. profit £158m £159m 0.5%
Total UK £154m £151m (2.3)%
International £4m £8m n.m.
Return on capital 45.4% 46.0% 60bps
Other metrics
Total UK LFL sales growth (Equity stores + Express) 1.2%
China total sales growth 3.2%
• Strong revenue growth underpinned by store and Express expansion
• UK like-for-like sales remain positive against tough retail conditions
• Strong Costa UK Express growth with revenues up 18% to £210 million
• UK profit includes c.£10 million additional investment in IT, digital, marketing and product innovation
• Positive LFL performance in China
• Underlying margin in line with guidance
• Consistently strong return on capital
9
FY18 FULL YEAR RESULTS | APRIL 2018
Margin progression | Efficiency programme supporting investment
0.9%
2.3%
0.2%(1.0)%
(0.9)%
(0.9)%
(0.3)%
24.5%24.8%
FY17 LFL + newcapacity
Inflation Labour+ NLW
Rent+ rates
Efficiency Investment International FY18
• Margins up 30 bps despite ongoing inflation
• Accelerated efficiencies gains during the year
• Gain from exit of India & South East Asia operations
10
13.1%12.3%
0.7%
1.7%(0.5)%
(1.1)%
(0.2)%
(1.4)%
FY17 LFL + newcapacity
Inflation Labour+ NLW
Rent+ rates
Efficiency Investment FY18
• Efficiency programme offsetting inflation
• Investments continue to maintain our market leading position and support future growth
FY18 FULL YEAR RESULTS | APRIL 2018
Cash generation | Strong & consistent to fund investments
• Good discretionary FCF conversion of 94%
• Business model enables consistent working capital management
• Discretionary FCF used to fund:
� Growth CapEx – £396 million
� Pensions – £101 million
� Dividends – £178 million
• Property sale & leaseback transactions and business exits generated £132 million cash
£622m
£585m
£230m
£13m
£12m
£(159)m
£(34)m
£(99)m
Underlying Op.profit
Depreciation &amortisation
Other non-cashitems
Working capital
MaintenanceCapEx
Interest
Tax
Discretionary FCF
11
FY18 FULL YEAR RESULTS | APRIL 2018
Investment | Compelling opportunities to invest capital
• Significant investment in new capacity delivering strong return on capital
• Maintenance CapEx- IT transformation- Refurbishments to
maintain brand strength- Smarter refurbishment
reducing spend per room
• Return on capital diluted in short term as investments mature
• Germany will deliver long-term growth pipeline, but dilute short-term returns
FY17 FY18Last 2 years
Maturity duration
Mature ROC
Maintenance & product improvement
- Premier Inn (inc. refurbs) £148m £118m £266m - -
- Costa £58m £41m £99m - -
Growth
- New / extended hotels £303m £227m £530m 1-3 yrs >13%
- PI Germany + Intl. £35m £65m £100m 3-5 yrs >10%
- New Costa stores £41m £47m £88m 1-3 yrs >30%
- South China JV buy-out - £35m £35m - -
- Costa Express machines £25m £22m £47m 1-3 yrs >30%
Total £610m £555m £1,165m - -
12
FY18 FULL YEAR RESULTS | APRIL 2018
2,820
3,209
3,7283,903
4,037
15.3% 15.7% 15.3% 15.2% 15.4%
0%
5%
10%
15%
2 0%
2 5%
30%
35%
40%
45%
50%
0
500
1000
1500
2 000
2 500
3000
3500
4000
4500
FY14 FY15 FY16 FY17 FY18
Invested capital (£m) Return on capital
Return on capital | Consistently strong returns on a growing base
• Over the same period, invested capital has increased 43%
• Capital invested for future openings of £292 million
13
19.0
20.2
22.2
23.8
25.5
13.3% 13.5% 12.9% 13.0% 13.4%
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
10
12
14
16
18
20
22
24
26
28
FY14 FY15 FY16 FY17 FY18Room nights available (million p.a.) Return on capital
6,3767,372
8,493
10,333
12,058
40.5%
46.3%49.9%
45.4% 46.0%
0
0.1
0.2
0.3
0.4
0.5
0.6
10
2010
4010
6010
8010
10010
12010
14010
FY14 FY15 FY16 FY17 FY18Number of outlets (stores & Express machines)
Return on capital
• Consistent returns despite dilution from new and immature rooms
• Room capacity growth of 34% over the same period
• Long-term, high return on capital
• Strong network growth of 90% in number of outlets
FY18 FULL YEAR RESULTS | APRIL 2018
Capital discipline | Asset-backed balance sheet provides flexibility
14
Maintaining an appropriate leverage position
• Whitbread’s scale & diversity of operations enables low-cost funding from diverse sources
• Balanced maturity profile ensures stability
• Freehold to leasehold mix 64% : 36%
Diverse & flexible funding options
Lease debt
Bond£[email protected]%
RCF (unutilised)
USPP£432m
@2.6-5.2%
471 392583
910 890 833
542534
554
288 377264
1,2031,454
1,670
1,878
2,058 2,227
3.23.1
3.2
3.0
3.2
2.9
2 .5
2 .7
2 .9
3 .1
3 .3
3 .5
3 .7
3 .9
4.1
4.3
4.5
0
500
1000
1500
2 000
2 500
3000
3500
FY13 FY14 FY15 FY16 FY17 FY18Net debt Pension
Lease-debt Adjusted debt : EBITDAR
Column1
3.5 target ceiling
• Ended FY18 with £833 million total net debt
• Current leverage position provides stability & flexibility to take advantage of opportunities
• Good headroom to fund German acquisitions
Balanced debt maturity profile
Flexible source of
funds
£73m £75m £84m£200m
£450m
£950m
2019 2020 2021 2022 2025 2027
USPP Bond RCF (unutilised)
FY18 FULL YEAR RESULTS | APRIL 2018
FY19 outlook | Consistent investment for sustainable growth
• Early in the year, London market remains challenging, but overall forward bookings in line with our plans
• 4,000-4,500 new room openings in FY19 in the UK & Germany
• Growing pipeline in Germany – organically and acquisitions
• Efficiencies offset inflation of c.£50m, German losses consistent at c.£5m
UK� Growth in stores (100-150 net) & Express machines, helping offset investment� Efficiency programme to offset c.£20m inflation� Cautious on consumer outlook, expect recent retail trend to continue
Express & international� Over 1,300 new Express machines installed worldwide (£5m incremental OpEx)� China stores: approx. 100 gross new and 20-40 closures (£5m incremental OpEx)
15
• Confident of new capacity delivery, but cautious of consumer environment
• Increased efficiency target from £150m to £250m, with £100m delivered over next 2 years
• Continued investment in strategy (Gross Capex of £600-700m)
FY18 FULL YEAR RESULTS | APRIL 2018
STRATEGIC UPDATE | Alison Brittain – CEO
1616 FY18 FULL YEAR RESULTS | APRIL 201816
FY18 FULL YEAR RESULTS | APRIL 2018
A clear plan for growth | Strong operational momentum
17
Focus on our strengths to grow
internationally
Grow & innovate in core UK markets
Network
Performance
Stores
Express
1 2
Germany
• 4,385 net rooms opened
• 4,600 rooms added to pipeline
• 87% rooms in latest format
• 79.3% occupancy
• 97% booking directly
• 4.2 avg. Trip Advisor score
• 1st acquisition (19 hotels)
• 5,500 rooms in pipeline
• 3 hotels opening in FY19
• 62% occupancy
• 100% booking directly
• 4.6 avg. Trip Advisor score
• 243 stores opened, 39 closed
• ~40% sales with Costa Club
• ~40% food capture rate
• 1,187 net new machines
• 805 partners
• 198 stores opened, 113 closed
• JV buy-out, enabling more control in China
• 16 China stores in latest format
• 249 net new machines
• 6 countries trading
Build capability to support long-term
growth
Winning Teams
Property
Digital
£Efficiency
3
Force for Good
• 8th Best Big Company to work for Sunday Times 2017
• 3,000 apprenticeships
• 14,750 UK rooms in the pipeline
• £56m sale & leaseback deals
• 152 Costa stores churned
• >85% PI direct digital booking
• 1.3m active Costa App users
• 30 Express trialling loyalty
• £105m cumulative savings
• 15 major IT projects complete
• 17 major IT projects underway
• £4.6m charitable contributions
• >14m coffee cups recycled
• 500m cup target in new scheme
Network
Stores
Express
FY18 FULL YEAR RESULTS | APRIL 2018
• Direct distribution increased to 97%
• Ongoing optimisation of digital assets and customer acquisition & retention
• Growth ahead of peers
• Pipeline secured to 85,000 rooms by 2020
• Majority of new hotels maturing faster
• 87% rooms in latest format
• Invest in what matters to guests: bed, shower, breakfast & WiFi
• Leading combined quality & value scores
• #1 for business, families & leisure
Premier Inn | Structural opportunity exploited by our unique model
Structural opportunity in the growing UK hotel market
59%52% 46% <43%
23%24%
25% >26%
12%15%
18% >19%
6% 9% 11% >12%
2010 2016 2020 Beyond 2020
Budget branded
Other branded
Independents
684k rooms 700k rooms 740k rooms >750k rooms
• Independents increasingly under pressure from industry headwinds
• Premier Inn’s unique mix of quality & value enables market share gains through new capacity at good return on capital
Source: Company data
Premier Inn’s unique business model
18
Strong ROC @ 13.4%
High occupancy Sustainable sales growth
Direct d
igital
distributio
n Network
strength
Consistent
quality
Value formoney
Growth in the UK1 International focus2 Build capabilities3
FY18 FULL YEAR RESULTS | APRIL 201819
Detailed catchment
analysis
Superior capacity
growth over last 3 years
Balanced pipeline of
new capacity
• Postcode-level analysis
• Detailed mapping of existing supply and changes over time
• Optimisation of location and size
Catchment case study: Southwark
• Total cluster accommodation sales doubled through new capacity (221 new rooms)
• Strong maturity of new capacity in approx. 1 year supported by the Automated Trading Engine
• Short-term RevPAR decline as expected, followed by recovery in 2-3 years
Growth in the UK1
Premier Inn | Network plan focused on optimising sales & returnsInternational focus2 Build capabilities3
Attractive unit economics
• 1-3 year maturity duration
• >13% ROC at maturity
13,842 rooms
3,454 rooms 1,392 rooms 562 rooms10
2010
4010
6010
8010
10010
12010
14010
16010
Premier Inn Travelodge Holiday Inn Express Ibis
New catchments
40%
Low capacity
catchments30%
High capacity & high demand catchments
30%
Committed pipeline of 14,750 rooms to 2020
0
2 0, 000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
70
75
80
85
90
95
100
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18Total area accomodation sales Exisiting sites
Tate Modern Borough High St
RevPAR, £
FY18 FULL YEAR RESULTS | APRIL 2018
1.5
1.6
1.7
1.8
1.9
2.0
16,000,00016,010,00016,02 0,00016,030,00016,040,00016,050,00016,060,00016,07 0,00016,080,00016,090,00016,100,00016,1 10,00016,120,00016,130,00016,140, 00016,150,00016,160,00016,170,00016,180,00016,190,00016,2 00,00016,2 10,00016,2 20,00016,2 30,00016,2 40, 00016,2 50,00016,2 60,00016,2 70,00016,2 80,00016,2 90,00016,300,00016,3 10,00016,320,00016,330,00016,340,00016,350,00016,360,00016,370,00016,380,00016,390,00016,400,00016,410, 00016,42 0, 00016,430,00016,440,00016,450,00016,460,00016,470,00016,480,00016,490,00016,500,00016,5 10,00016,520,00016,530,00016,540,00016,550,00016,560,00016,570,00016,580,00016,590,00016,600,00016,610,00016,620,00016,630,00016,640,00016,650,00016,660,00016,670,00016,680,00016,690,00016,7 00,00016,7 10,00016,7 20,00016,7 30,00016,7 40,00016,7 50,00016,7 60,00016,7 70,00016,7 80,00016,7 90,00016,800,00016,810,00016,820,00016,830,00016,840,00016,850,00016,860,00016,870,00016,880,00016,890,00016,900,00016,910,00016,920,00016,930,00016,940,00016,950,00016,960,00016,970,00016,980,00016,990,00017,000,00017,010,00017,020,00017,030,00017,040,00017,050,00017,060,00017,070,00017,080,00017,090,00017,100,00017,1 10,00017,120,00017,130,00017,140,00017,150,00017,160,00017,170,00017,180,00017,190,00017,2 00,00017,2 10,00017,2 20,00017,2 30,00017,2 40,00017,2 50,00017,2 60,00017,2 70,00017,2 80,00017,2 90,00017,300,00017,3 10,00017,320,00017,330,00017,340,00017,350,00017,360,00017,370,00017,380,00017,390,00017,400,00017,410,00017,420,00017,430,00017,440,00017,450,00017,460,00017,470,00017,480,00017,490,00017,500,00017,5 10,00017,520,00017,530,00017,540,00017,550,00017,560,00017,570,00017,580,00017,590,00017,600,00017,610,00017,620,00017,630,00017,640,00017,650,00017,660,00017,670,00017,680,00017,690,00017,700,00017,710,00017,72 0,00017,730,00017,740,00017,750,00017,760,00017,77 0,00017,780,00017,790,00017,800,00017,810,00017,820,00017,830,00017,840,00017,850,00017,860,00017,870,00017,880,00017,890,00017,900,00017,910,00017,920,00017,930,00017,940,00017,950,00017,960,00017,970,00017,980,00017,990,00018,000,00018,010,00018,02 0,00018,030,00018,040,00018,050,00018,060,00018,07 0,00018,080,00018,090,00018,100,00018,1 10,00018,120,00018,130,00018,140,00018,150,00018,160,00018,170,00018,180,00018,190,00018,2 00,00018,2 10,00018,2 20,00018,2 30,00018,2 40,00018,2 50,00018,2 60,00018,2 70,00018,2 80,00018,2 90,00018,300,00018,3 10,00018,320,00018,330,00018,340, 00018,350,00018,360,00018,370,00018,380,00018,390,00018,400,00018,410,00018,420,00018,430, 00018,440,00018,450,00018,460,00018,470,00018,480,00018,490,00018,500,00018,5 10,00018,520,00018,530,00018,540,00018,550,00018,560,00018,570,00018,580,00018,590,00018,600,00018,610,00018,620,00018,630,00018,640,00018,650,00018,660,00018,670,00018,680,00018,690,00018,7 00,00018,7 10,00018,7 20,00018,7 30,00018,7 40,00018,7 50,00018,7 60,00018,7 70,00018,7 80,00018,7 90,00018,800,00018,810,00018,820,00018,830,00018,840,00018,850,00018,860,00018,870,00018,880,00018,890,00018,900,00018,910,00018,920,00018,930,00018,940,00018,950,00018,960,00018,970,00018,980,00018,990,00019,000,00019,010,00019,02 0,00019,030,00019,040,00019,050,00019,060,00019,07 0,00019,080,00019,090,00019,100,00019,1 10,00019,120,00019,130,00019,140, 00019,150,00019,160,00019,170,00019,180,00019,190,00019,2 00,00019,2 10,00019,2 20,00019,2 30,00019,2 40, 00019,2 50,00019,2 60,00019,2 70,00019,2 80,00019,2 90,00019,300,00019,3 10,00019,320,00019,330,00019,340,00019,350,00019,360,00019,370,00019,380,00019,390,00019,400,00019,410, 00019,42 0, 00019,430,00019,440,00019,450,00019,460,00019,470,00019,480,00019,490,00019,500,00019,5 10,00019,520,00019,530,00019,540,00019,550,00019,560,00019,570,00019,580,00019,590,00019,600,00019,610,00019,620,00019,630,00019,640,00019,650,00019,660,00019,670,00019,680,00019,690,00019,7 00,00019,7 10,00019,7 20,00019,7 30,00019,7 40,00019,7 50,00019,7 60,00019,7 70,00019,7 80,00019,7 90,00019,800,00019,810,00019,820,00019,830,00019,840,00019,850,00019,860,00019,870,00019,880,00019,890,00019,900,00019,910,00019,920,00019,930,00019,940,00019,950,00019,960,00019,970,00019,980,00019,990,0002 0, 000,0002 0, 010,0002 0, 02 0,0002 0, 030,0002 0, 040,0002 0, 050,0002 0, 060,0002 0, 07 0,0002 0, 080,0002 0, 090,0002 0, 100,0002 0, 110, 0002 0, 12 0, 0002 0, 130,0002 0, 140,0002 0, 150,0002 0, 160,0002 0, 170,0002 0, 180,0002 0, 190,0002 0, 200,0002 0, 210, 0002 0, 22 0, 0002 0, 230,0002 0, 240,0002 0, 250,0002 0, 260,0002 0, 270,0002 0, 280,0002 0, 290,0002 0, 300,0002 0, 310,0002 0, 32 0,0002 0, 330,0002 0, 340,0002 0, 350,0002 0, 360,0002 0, 37 0,0002 0, 380,0002 0, 390,0002 0, 400,0002 0, 410,0002 0, 42 0,0002 0, 430,0002 0, 440,0002 0, 450,0002 0, 460,0002 0, 47 0,0002 0, 480,0002 0, 490,0002 0, 500,0002 0, 510,0002 0, 52 0,0002 0, 530,0002 0, 540,0002 0, 550,0002 0, 560,0002 0, 57 0,0002 0, 580,0002 0, 590,0002 0, 600,0002 0, 610,0002 0, 62 0,0002 0, 630,0002 0, 640,0002 0, 650,0002 0, 660,0002 0, 67 0,0002 0, 680,0002 0, 690,0002 0, 700,0002 0, 710,0002 0, 720,0002 0, 730,0002 0, 740,0002 0, 750,0002 0, 760,0002 0, 770,0002 0, 780,0002 0, 790,0002 0, 800,0002 0, 810,0002 0, 82 0,0002 0, 830,0002 0, 840,0002 0, 850,0002 0, 860,0002 0, 87 0,0002 0, 880,0002 0, 890,0002 0, 900,0002 0, 910,0002 0, 92 0,0002 0, 930,0002 0, 940,0002 0, 950,0002 0, 960,0002 0, 97 0,0002 0, 980,0002 0, 990,0002 1,000,000
P1 FY17 P4 FY17 P7 FY17 P10 FY17 P1 FY18 P4 FY18 P7 FY18 P10 FY18
Room nights sold (LTM) Marketing cost per room night sold (LTM)
Premier Inn | Enhancing our advantage through technology
20
Growth in the UK1 International focus2 Build capabilities3
Digital innovation driving direct distribution model
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
75
77
79
81
83
85
P1 FY17 P4 FY17 P7 FY17 P10 FY17 P1 FY18 P4 FY18 P7 FY18 P10 FY18
PI.com visits (LTM) Direct digital booking
78m visits
>85% direct digital
bookings
84m visits
Broadening digital reach• Diverse customer acquisition approach
� website, app
� search, metasearch
• Continuous enhancements to reservation and inventory management systems underway
Digital capabilities lowering marketing costs
Premier Inn’s Business Booker platform increases direct reservations and enhances the experience for corporate customers• Fast booking
• Exclusive rates
• Easy amends
• Spend controls and reporting
18m 20m
Index = 100
75
95
80
85
90
FY18 FULL YEAR RESULTS | APRIL 2018
Premier Inn | Ongoing enhancements to our customer offer
21
Growth in the UK1 International focus2 Build capabilities3
Optimising room refurbishments
• Continued investment supports our price and value for money position
• Faster, more cost effective refurbishments are achieving product consistency across more of the estate
Room refurbishment
cost reduced by 1/3…
…while enhancing guest
scores
Product consistency key to Premier Inn
model
Unrivalled quality and value creates strong brand
Value score
Quality score
• Broadens appeal to Business and Leisure guests
• Facilitates high occupancy across the week
• Drives continued customer loyalty
• Encourages direct bookings by limiting the need to ‘shop around’
Premier Inn
Travelodge
Marriott
AirbnbIbis
Hilton
Holiday Inn Express
Holiday Inn
0
5
10
15
20
25
30
35
-5 5 15 25 35
YouGov Brand Index
Source: YouGov BrandIndex 52 week moving average as at 22/2/2018
FY18 FULL YEAR RESULTS | APRIL 2018
4,6697,476 8,040 8,570 9,074 9,578 10,081
5,336
6,755 7,018 7,306 7,606 7,933 8,274
4,385
9,830 10,441 11,092 11,750 12,407 13,064
10.7
21.123.3
25.628.0
30.733.6
0
5
10
15
2 0
2 5
30
35
40
0
5000
10000
15000
2 0000
2 5000
30000
35000
2010 2017E 2018F 2019F 2020F 2021F 2022F
No. of branded outlets No. of independent outletsNo. of non-specialist outlets Coffee cups per day (m)
Costa | Market Growth opportunity unlocked by Costa’s model
The leader in the growing UK coffee market
• UK coffee consumption market continues to grow, but customer habits and preferences are changing
• Costa’s strong coffee credentials and store / Express machine network agility enables expansion
Source: Derived from Allegra Project Café UK 2017, December 2017
22
Costa’s market-leading business model
Focused network plan• >10,000 locations to buy a Costa coffee
• Strong returns & cash generation in all channels
Diversified channel mix• Responding to increased consumer demand for
convenience through channel shift
• Two-thirds of pipeline in growth channels
Coffee credentials & improving food offer• Consistently the UK’s favourite coffee shop
• Strong food capture rate, with opportunity to improve offer further
Enhanced customer experience• Comfortable store environments with c.60%
customers ‘drinking in’
• >5m active Costa Coffee Club members
2
1
3
4
Growth in the UK1 International focus2 Build capabilities3
10% coffee consumption CAGR
FY18 FULL YEAR RESULTS | APRIL 2018
Stores above ROC threshold
90%
Stores above ROC threshold
2.5
Stores below ROC threshold8%
Stores below ROC threshold
4.4
Cash Loss making stores2%
Loss making stores
2
Costa | Network plan focused on optimising sales & returns
Channel
FY18 Total Sales
growth
FY18 ROC(Stores <3 years old)
Current Estate
Estate growth
to 2020
Tradition channels(High Street, Shopping Centre,& Retail Park)
2% >30% 897 equity stores c.5%
Growth channels(Drive Thru, Travel & Concession)
14% >40% 475 equity stores
>20%
Costa Express 18% >40% 7,248 machines >20%
23
Growth in the UK1 International focus2 Build capabilities3
Detailed catchment
analysis
Flexible model
Attractive unit economics
• Postcode level analysis
• National presence provides unrivalled market knowledge
• Plans designed to maximise catchment level returns
• Equity or franchise model
• Format differentiation: traditional, pronto, drive-thrus, Express
• Short lease breaks (WALE <5 yrs)
• Proactive network churn
• Low capital requirements
• 1-3 year maturity profile
• >35% return on capital at maturity
Strong UK Equity Store ROC distribution
FY18 FULL YEAR RESULTS | APRIL 2018
Costa | Optimising catchment level sales & return on capital
24
Growth in the UK1 International focus2 Build capabilities3
Network planning• Integrated plan across
stores & Express
• Objective to maximise catchment sales at a good return on capital
Sales• Sales in FY15: £1.3m
• Sales in FY18: £2.4m
EBITDA• Profit in FY15: £0.3m
• Profit in FY18: £0.5m
Return on capital• ROC in FY15: >50%
• ROC in FY18: >50%
High St. Shopping Centre (2000)
Retail Park (2011)
Concession (2016)
Drive Thru (2015)
Hotel
Rail
C-Store
Hospital
Education
C-Store
C-Store
C-Store
C-Store
C-Store
Banbury Catchment
15 existing outlets4 stores9 Express2 ‘Proud to Serve’
10 outlet opportunities1 travel store8 Express1 ‘Proud to Serve’
Petrol
Petrol
Education
Petrol
C-Store
FY18 FULL YEAR RESULTS | APRIL 2018
Costa | Momentum in improving the customer propositionGrowth in the UK1 International focus2 Build capabilities3
Focus areas for FY19
Network• Continue new store focus on
fast-growing convenience channels
Product• Build on momentum of new
product development
• Enhance promotion and visibility of expanded range
Value• Trial product bundle deals
• Maintaining entry pricing, whilst encouraging upsell
Format• Faster roll-out of updated
refurbishment model
Customers enjoying improved food offer
• Good uplift in savoury food capture rate following launch of new breakfast in May
• Uplift sustained with an improved salad range in June
• Further improvement in September with launch of new hot lunch range
P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12
Costa savoury food capture rate uplift
FY17 FY18
Breakfast launched
New lunch launched
Salads launched
25
FY18 FULL YEAR RESULTS | APRIL 2018
Costa | Accelerating use of technology
26
Growth in the UK1 International focus2 Build capabilities3
Activities completed Work underway 2018/2019 focus
Click & Collect• Extend trial of click &
collect
• Payment functionality embedded
Loyalty• Trial targeted offers
delivered via direct email and through the Costa Club App
• Loyalty platform embedded into Express machines
New POS terminals• New tills implementation almost
complete in all UK stores
Systems• Workforce planning system
implemented
• New loyalty data management systems implemented
Loyalty• 5.3 million
active Costa Club card users and >1 million on the app
• New iOS and Android apps launched in November ‘17
Systems• New core finance
system implementation underway (already implemented in Premier Inn)
Click & Collect• 16 store trial
underway
Loyalty• Migrate more card
users to mobile app
FY18 FULL YEAR RESULTS | APRIL 2018
Costa Express | Rapid growth in the UK and internationally
• Unrivalled quality, technology and design� All machines connected through in-house
telemetry to assess performance
� Modular design enables lower cost maintenance & reduces down-time
� Embedding Costa Club loyalty platform
• Attractive unit economics� Low capital outlay per machine
� Attractive returns for Whitbread and partners
• Investing in expansion opportunities� Existing strong UK presence in petrol stations
� UK convenience stores: only 600 machines so far
� UK workplaces: less than 500 machine so far
� International: less than 1,000 machines so far
27
Machine unit economics
Capex per machine c.£13,000
Revenue c.£30,000
Operating margin 15-18%
ROC at maturity >35%
Growth in the UK1 International focus2 Build capabilities3
3,515
4,292
5,216
6,801
8,237
87121
153
185
226
80
100
120
140
160
180
200
220
240
10
1010
2010
3010
4010
5010
6010
7010
8010
9010
FY14 FY15 FY16 FY17 FY18Number of machines Sales (£m)
FY18 FULL YEAR RESULTS | APRIL 2018
Germany | Accelerating the new hotel pipeline
28
Growth in the UK1 International focus2 Build capabilities3
OrganicTo be
acquired Total
Open and trading
1 hotel(210 rooms)
13 hotels(2,140 rooms)
14 hotels(2,350 rooms)
Committed pipeline
11 hotels(2,400 rooms)
6 hotels(970 rooms)
17 hotels(3,370 rooms)
Total 12 hotels(2,610 rooms)
19 hotels(3,110 rooms)
31 hotels(5,720 rooms)
Long-term opportunity to replicate UK success
• Expecting double-digit ROC for organic sites at maturity
• Acquisitions used to build scale, with ROC above cost of capital
FY19 openings
• Munich (216 rooms)
• Hamburg (182 rooms)
• Leipzig (182 rooms)
• 13 hotels open and trading, 6 hotels in pipeline
• Organic and M&A committed pipeline delivers:
• All good quality hotels in prime locations
Transaction details• Conditional on landlord consent & franchise
termination (c.2 years)
• Consideration not paid until hotels transferred
Financial considerations• Earnings enhancing the year after acquisition
(2020/21)
Acquiring 19 quality hotels in key target cities
FY18 FULL YEAR RESULTS | APRIL 2018
Costa China | Ambition growing and expansion gaining
1) Enables full control of operations and store estate• Network optimisation
� 79 opened
� 39 closed
• New product trials
• Improving digital
2) Allows Costa to accelerate expansion• 18 stores now open in Wanda
cinemas
• New MoU signed with Suning
• Promotional partnership with AliPay
3) Strong partnership with BHG in Beijing to continue
29
Growth in the UK1 International focus2 Build capabilities3
Future ambition
Updated ambition: 1,200 stores by 2022
South China JV acquisitionThe investible model
1) Organic store growth• Prioritise transport and
shopping centres
• Continue to churn non-core city stores
2) Franchise partner agreements• Negotiations with more
franchise partners underway to accelerate expansion
3) Increasing Investment• £5 million increase in FY19
OpEx to accelerate expansion
• 16 stores now in latest format, after a successful trial of 5 stores last year
• Key aspects of new store blueprint� Store design� Appealing to young professionals� New food and beverage
products
FY18 FULL YEAR RESULTS | APRIL 2018
Efficiency | Programme extending targetGrowth in the UK1 International focus2 Build capabilities3
30
Case study on procurement & distribution
3rd party Distribution Centre
Last
10 y
ears
Multiple suppliers
Outsourced transport, logistics & warehousing
Sub-optimal delivery schedule & loads
New
5 y
ear-
agre
emen
tConsolidated
supplyDirect delivery with fuller
loads & fewer miles travelledOptimised delivery schedules & loads
Focus areas
Updated ambition• Increased target from £150 million to
£250 million• Savings of £100 million to be delivered over
next 2 years
Optimising the value chain• UK supply chain transformation• International supply pipeline• End-to-end costing• Centralised inventory planning• Optimising supplier sourcing & production• Business expansion simplification
Everyday Efficiencies• Workforce productivity• IT & technology share services
70% of 3rd
party volume
Saved £4 million
Dairy A
Dairy B
Dairy C
Dairy A
Dairy B
Dairy C
Dairy D
Dairy E
Dairy F
FY18 FULL YEAR RESULTS | APRIL 2018
Technology | Delivery through Group-wide team
31
Growth in the UK1 International focus2 Build capabilities3
Infrastructure replacement
Customer facing
systems
Internal support systems
• COMPLETE | Mobile app updates• COMPLETE | Business booking• UNDERWAY | Website re-platform• UNDERWAY | Hotel management system• UNDERWAY | Automated marketing
• COMPLETE | In-sourced website• COMPLETE | POS (tills) UK & China• COMPLETE | New Loyalty platform• UNDERWAY | Click & Collect roll out• UNDERWAY | Costa Club loyalty for Express
• COMPLETE | Automated yield mgt.• COMPLETE | Kitchen management• COMPLETE | Finance & Procurement system• UNDERWAY | Business intelligence tools• UNDERWAY | Supply chain systems• UNDERWAY | New HR System
• COMPLETE | Store communications website launched• COMPLETE | Workforce planning systems• UNDERWAY | Finance & Procurement system• UNDERWAY | Business intelligence tools• UNDERWAY | Supply chain systems• UNDERWAY | New HR System
• COMPLETE | Hardware replacement• COMPLETE | Network upgrades• UNDERWAY | Call Centre replacement• UNDERWAY | GDPR enhancements• UNDERWAY | IT security enhancements
• COMPLETE | IT security increased• COMPLETE | Store network updated• UNDERWAY | China system upgrades• UNDERWAY | GDPR enhancements• UNDERWAY | IT security enhancements
Whitbread shared IT team successfully delivering complex IT transformation
FY18 FULL YEAR RESULTS | APRIL 2018
Property | A significant competitive advantage
32
Growth in the UK1 International focus2 Build capabilities3
Strong covenant
Superior site
access
Strong operating cash flow
Flexible funding options
Proven value
creation
Balanced portfolio
Majority freehold
Good returns
Superior site access
• 1,700 freehold rooms added to pipeline
• 2,900 leasehold rooms added to pipeline
• 2,250 rooms through freehold extension over last 2 years
• 110 Costa Drive Thrus in pipeline
Flexible funding options
• Weighted-average cost of debt at 3.8%
• Adjusted gearing below 3.5x target ceiling
• Credit rating consistent at BBB
• £56 million of property transactions at c.4% yield
FY18 FULL YEAR RESULTS | APRIL 2018
A Force for Good
OpportunityBeing a place where everyone
can reach their potential
CommunityMaking meaningful contributions
to the communities we serve
• Targeting 5,000 apprenticeships by 2020 (>3,000 fully completed)
• Sunday Times 8th Best Big Companies to work for
• Member of ‘30% Club’, aiming for 30% female in senior leadership roles
• >£10m raised for the Premier Inn Clinical Building at Great Ormond Street Hospital, opened January 2018
• Costa Foundation has helped more than 60,000 children across 78 projects
• Launched ‘Nutrition Code of Practice’ across all our brands
• Industry-leading cup recycling initiative launched – targeting 500m cups p.a. by 2020
• Reducing plastic waste through non-plastic straws and the plastic bottle Refill scheme
• UK property estate now supplied with 100% renewable energy
ResponsibilityTreating people and the planet
with respect
33
Growth in the UK1 International focus2 Build capabilities3
FY18 FULL YEAR RESULTS | APRIL 2018
COSTA DEMERGER | Alison Brittain – CEO
3434 FY18 FULL YEAR RESULTS | APRIL 201834
FY18 FULL YEAR RESULTS | APRIL 2018
Committed to creating two high-quality independent companies
35
The clear UK market leader in the out-of-home coffee market and the second largest internationally
UK’s largest and most successful hotel business, with attractive international growth opportunities
• Decision to demerge Costa following regular & rigorous Board review
• Two highly attractive businesses- attractive economics- leading market positions- structural growth opportunities
• Clear plans in both businesses to create long-term sustainable value
• Strong progress in delivery of strategy enables separation
• Separation will enhance focus on structural growth opportunities in both businesses
• Committed to demerge as fast as practical & appropriate to optimise value
• Expected to complete within 24 months
FY18 FULL YEAR RESULTS | APRIL 2018
Maintain performance & structured transition
Timing | Committed to demerge as fast as practical & appropriate
36
Solid foundations for international growth
Modern & stable platforms in both businesses
2
4
• Completion of complex replacement and upgrades of critical & end-of-life IT systems and supply chain infrastructure
• Shared Whitbread teams are delivering this transformation programme
• Both Premier Inn & Costa are in the formative stages of international growth
• Whitbread’s combined scale is instrumental in evolving investible models in Germany and China, from which separate entities can thrive
• Maintain momentum in trading and transformation initiatives
• Appropriate management of pension deficit and funding facilities
• Ensure optimal governance structures in place
3
Supply chain & procurement transformation
1• Deliver a further £100 million of efficiency savings over next 2 years
• Ensure 2,000+ procurement and supply chain agreements are optimised for separation
FY18 FULL YEAR RESULTS | APRIL 2018
Structure update | Two high-quality businesses with scale
37
Market position
• The owner of Premier Inn –UK’s leading hotel chain with almost 800 hotels comprising 74,000 rooms
• A leading out-of-home coffee business with over 3,800 stores in 32 countries
Competitive & structural advantages
• Largest UK network by comfortable gap• Leading digital & direct distribution model• Strong freehold property underpinnings
• Largest UK network by comfortable gap• Consistently strong customer feedback• Flexible channel & format model
Building strategic momentum
• Significant UK capacity additions with high occupancy, good ROC and fast maturity
• Digital distribution gap widening• Germany pipeline accelerated to 31 hotels
through acquisition
• Delivering enhancements in UK digital, products
• Costa Express network growth accelerating• Acquired JV partner in South China to
accelerate growth
Strong return on capital
• Almost 35% capacity increase in last 4 years• Returns consistently above 13%
• 90% increase in Costa outlets in last 4 years• Returns consistently above 40%
Long-term structural opportunity
• Declining independent sector in UK & Germany• Line-of-sight to over 100,000 rooms in the UK• Replicating UK success in Germany
• Growing global consumption of coffee• Greater demand for convenience & quality• International expansion in China & Express
FY18 FULL YEAR RESULTS | APRIL 2018
QUESTIONS | Alison Brittain & Nicholas Cadbury
3838 FY18 FULL YEAR RESULTS | APRIL 201838
FY18 FULL YEAR RESULTS | APRIL 2018
Appendices
393939
I. Definitions p40II. Supplementary information p41III. Cautionary statement p42
Whitbread ADR programmeWhitbread has established a sponsored Level I American Depositary Receipt (ADR) programme for which Deutsche Bank perform the role of depositary bank. The Level I programme trades on the U.S. over-the-counter (OTC) markets under the symbol WTBDY (it is not listed on a U.S. stock exchange).
FY18 FULL YEAR RESULTS | APRIL 2018
FY18 FULL YEAR RESULTS | APRIL 201840
Appendix I. | Definitions
Average Room Rate (ARR) Hotel accommodation revenue divided by the number of rooms occupied by guests.
Discretionary free cash flow (Discretionary FCF) Cash generated from operations after payments for interest, tax and maintenance capital.
EBITDA Underlying earnings before interest, tax, depreciation and amortisation excluding income from Joint Ventures and Associates.
EBITDAR Underlying earnings before interest, tax, depreciation, amortisation and rent excluding income from Joint Ventures and Associates.
Fixed charge cover Ratio of underlying operating profit before total property rent compared to interest plus total property rent.
Like-for-like sales growth Period over period change in revenue for outlets open for at least one year.
NLW National Living Wage.
Operating profit (Op. Profit) Profit before interest and tax.
Revenue per available room (RevPAR)
Revenue per available room is also known as yield. This hotel measure is achieved by multiplying the ARR by occupancy.
Underlying basic EPS Underlying profit attributable to the parent shareholders divided by the basic weighted average number of ordinary shares.
Underlying operating profit Underlying profit before non-underlying operating costs.Underlying PBT Profit before tax and non-underlying items.
FY18 FULL YEAR RESULTS | APRIL 201841
Appendix II. | Supplementary information
Further information is available in a supporting supplementary information pack (both Adobe PDF and Microsoft Excel formats) from www.whitbread.co.uk/investors. This information includes:
A. Estate analysis
B. Sales, profit & return on capital
C. Group income statement
D. Non-underlying items
E. Lease commitments
FY18 FULL YEAR RESULTS | APRIL 201842
Appendix III. | Cautionary statement
Nothing contained in this presentation is intended to constitute an offer, invitation or inducement to engage in an investment activity for the purposes of the prohibition on financial promotions under the Financial Services and Markets Act 2000. In making this presentation available, Whitbread plc makes no recommendation to purchase, sell or otherwise deal in shares in Whitbread plc or any other securities or investments whatsoever and you should neither rely nor act upon, directly or indirectly, any of the information contained in this presentation in respect of such investment activity.
The securities referred to in this presentation have not been and will not be registered under the U.S. Securities Act of 1933 (the “US Securities Act”) and may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act.
No representations, express or implied, are given in, or in respect of, this presentation. To the extent permitted by law, Whitbread plc, and its subsidiaries, shareholders, affiliates, representatives, partners, directors, officers, employees, advisors or agents shall not be liable for any direct, indirect or consequential loss or loss of profit arising from the use of this presentation, its content or otherwise arising in connection therewith.
Certain statements included or incorporated by reference within this presentation may constitute “forward looking statements” inrespect of Whitbread plc’s operations, performance, prospects and/or financial condition. Such statements are based on Whitbread plc’s current expectations and beliefs concerning future events and are subject to a number of known and unknown risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements. Such statements are also based on numerous assumptions regarding Whitbread plc’s present and futurestrategy and the environment in which it operates, which may not be accurate. Whitbread plc undertakes no obligation to update any forward looking statements contained in this presentation or any other forward looking statements it may make.
Nothing in this presentation should be construed as a profit forecast. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial advisor.
FY18 FULL YEAR RESULTS | APRIL 2018
CONTACTS Matt JohnsonInvestor Relations DirectorE [email protected] +44 7848 146 761
W www.whitbread.co.uk | E [email protected] | T +44 1582 888 633
Whitbread plc Whitbread Court, Houghton Hall Business Park, Porz Avenue, Dunstable, LU5 5XE
Matt HolmanInvestor Relations ManagerE [email protected] +44 7712 243 322
43
Ann HyamsInvestor Relations ManagerE [email protected] +44 7796 709 087
vCard
FY18 FULL YEAR RESULTS | APRIL 2018