Whitbread PLC Interim results 2007/08 Anthony Habgood Chairman Christopher Rogers Finance Director Summary H1 2007/08
H1 2007/08 H1 2006/07 % change PBT from continuing £99.4m £87.7m 13.3% operations, pre exceptionals
EPS pre exceptionals 44.25p 30.72p 44.0%
Proposed interim dividend 9.10p 8.10p 12.3% Summary – profit & loss H1 2007/08
£m H1 2007/08 H1 2006/07 % change Revenue 605.8 623.6 (2.9)%
Profit from operations 130.0 120.0 8.3%
Central costs (12.9) (11.4) (13.2)%
Interest (17.7) (20.9) 15.3%
PBT from continuing 99.4 87.7 13.3% operations, pre exceptionals Summary – profit & loss continued H1 2007/08
£m H1 2007/08 H1 2006/07
PBT from continuing 99.4 87.7 operations, pre exceptionals Taxation (31.8) (29.9) Net profit from continuing 67.6 57.8 operations Discontinued operations 19.0 16.6 Total profit pre exceptionals 86.6 74.4
Exceptionals 412.8 61.6
Profit for the year 499.4 136.0 Treatment of businesses within segmental analysis
• Premier Inn/Restaurants
• Re-classification of adjacency fee and breakfast income from Premier Inn to Restaurants (detail in appendix)
• David Lloyd Leisure
• Profit disclosed within discontinued operations for both H1 2007/08 and H1 2006/07
• T.G.I.Friday’s
• Profit from H1 2006/07 reclassified within discontinued operations Revenue by business segment
£m H1 2007/08 H1 2006/07 % change Premier Inn 264.1 230.8* 14.4% Restaurants: retained estate 229.5 222.5* 3.1% Costa 98.1 81.0 21.1% Less: inter-segment revenue (1.5) (1.5)
Sales from Continuing Whitbread 590.2 532.8 10.8% Pub Restaurants: disposal estate - 82.5 Other 15.6 8.3 88.0%
Revenue from continuing 605.8 623.6 (2.9)% operations
* After restatement for breakfast sales amounting to £8.4m Like-for-like sales
% H1 2007/08 H1 2006/07 Premier Inn 10.9 7.0
Restaurants 1.5 (0.8)
Costa 6.8 6.0
Total 6.3 3.3 Profit by business segment
£m H1 2007/08 H1 2006/07 % change Premier Inn - UK 95.6 78.6* 21.6% Premier Inn – overseas (0.9) - Total Premier Inn 94.7 78.6 20.5%
Restaurants 28.7 35.7* (19.6)%
Costa - UK 7.6 6.0 26.7% Costa – overseas (1.0) (0.3) (233.3)% Total Costa 6.6 5.7 15.8%
Profits from operations 130.0 120.0 8.3%
* After restatement for adjacency fee and breakfast income amounting to £5.7m Summary – profit & loss continued H1 2007/08
£m H1 2007/08 H1 2006/07 % change Revenue 605.8 623.6 (2.9)%
Profit from operations 130.0 120.0 8.3%
Central costs (12.9) (11.4) (13.2)%
Interest (17.7) (20.9) 15.3%
PBT from continuing 99.4 87.7 13.3% operations, pre exceptionals Continuing Interest charge
£m H1 2007/08 H1 2006/07
Interest on borrowings (24.4) (21.0)
Interest on deposits 2.7 0.6
Pension credit/(charge) 2.7 (1.0)
Other 1.3 0.5
Net interest charge (17.7) (20.9) Summary – profit & loss continued H1 2007/8
£m H1 2007/08 H1 2006/07 PBT from continuing 99.4 87.7 operations, pre exceptionals Taxation (31.8) (29.9) Net profit from continuing 67.6 57.8 operations Discontinued operations 19.0 16.6
Exceptionals 412.8 61.6
Profit for the year 499.4 136.0 Exceptional items
£m H1 2007/08 Business disposals: David Lloyd Leisure 384.1 T.G.I.Friday’s 12.6 Other exceptional items: Exceptional pension credit 10.0 Interest on debenture redemption (12.5) Other (1.2) Corporation Tax on exceptionals (1.2) Deferred Tax on exceptionals 21.0 Total net exceptional profit 412.8 Cash flow Group year-on-year by items
£m H1 2007/08 H1 2006/07
EBITDA 182 168
Working capital movements (15) 68
Cashflow from operations 167 236
Cash capital expenditure (134) (125)
Disposal of fixed assets (2) 455
Interest, tax and dividends paid (82) (72)
Interest and dividends received 4 1
Business cashflows (47) 495 Cash flow – continued Group year-on-year by items
£m H1 2007/08 H1 2006/07
Business cashflows (47) 495
Additional pension payments (50) (50)
Disposal/(acquisition) of businesses 982 249
Special dividend, share buybacks (22) (392)
Other 6 7
869 309
Non-cash share buyback accrual (270) -
Decrease in net debt 599 309 Capital expenditure
£m H1 2007/08 H1 2006/07
Premier Inn 57 63
Restaurants 40 27
Costa 16 11
Corporate/Discontinued 21 24
Total 134 125
CAPEX for the full year to be c.£300m Balance sheet review update
• Commitment to increasing leverage remains
• Process begun with on-market buyback programme which has reached £174m as of 15 October
• Timing and appropriateness of asset-backed bond issues remains unclear
• £300m debentures repaid in September – facilities now stand at £980m
• On market buyback to continue; shareholder authority to be refreshed later this year Other financial items
• Pension deficit decreases from £196m at the 2006/07 year end to £25m • £50m cash injection in August • Change in discount rates
• Effective tax rate on profit from continuing operations of 32.0%
• Premier Inn rebranding commenced; exceptional revenue cost of £13m, of which £10m in 2007/08
• Tulip Inns integration underway; small negative impact this financial year
• Food cost inflation more noticeable Financial summary
• Sales from Continuing Whitbread up 10.8%
• Like-for-like sales up by 6.3%
• PBT from continuing operations, pre exceptionals up 13.3% to £99.4m
• EPS pre exceptionals up 44%
• Interim dividend up 12.3% to 9.10p
• Re-leveraging of the Group begun Alan Parker Chief Executive Highlights in the first half 2007/08
• Continuing positive trends across all businesses • Premier Inn – market out performance
Sales up 14.4% • Restaurants – 4th quarter of like-for-like growth
Profit per house up 23% • Costa – outgrowing peers, net 118 new stores opened
Total now 825
• Successful disposal of David Lloyd Leisure for £925m
• Announced share buyback with £174m achieved to date Premier Inn Interim results 2007/08
£m 2007/08 2006/07 % change Revenue 264.1 230.8 14.4% Profit 94.7 78.6 20.5% Like-for-like sales 10.9%
• Like-for-like occupancy up 1.3% points to 82.1%
• RevPar up 7.6% across the business to £41.34
• Operating margins improved by 1.8% points to 35.9%
• The Tulip Inn business acquisition – 2,000 rooms over the next 24 months
• On track to exceed full year UK room expansion target (3,000+) Premier Inn The hotel market
1st March to 31st August 2007 Average occupancy levels %
Source: Hotstats by TRI Hospitality Consulting using a sampling approach Premier Inn Growth breakdown %
FY FY HY 2005/06 2006/07 2007/08 Occupancy 0.0 1.1 1.5 Average rate 5.2 4.5 5.6 Food & beverage 0.8 0.7 0.9 Extensions 1.1 1.9 2.9
Total like-for-like 7.1 8.2 10.9
Expansion 19.6 8.5 3.5
Total sales growth 26.7 16.7 14.4 Premier Inn Re-brand Premier Inn British domestic hotel market – demand forecast
• Stronger growth is set to continue for the next five years
Room nights
E E
Source: bdrc Premier Inn Premier Inn as a proportion of total hotel supply
• Premier Inn is the UK’s biggest hotel company but only has 5% of the total number of UK hotel rooms (710,000)
• Branded budget hotel rooms account for only 13% of the market
Source: TRI Hospitality Consulting Premier Inn Budget hotel market comparison
UK France US Total hotel market (rooms) 710,062 662,000 4.4 million
Branded budget sector 91,865 155,000 1.1 million (rooms) Branded budget sector by 13% 23% 25% number of rooms (%)
Source: TRI Hospitality Consulting, 2007 Premier Inn International expansion – filling the gap for value hotels in selected markets
• Gulf JV¹, target of 30 hotels and some 5,000 rooms
• Dubai opening on track for Spring 2008
• Indian JV², plan is to open 80 hotels and some 12,000 rooms
• Evaluating opportunities in other countries Picture of Dubai – to be added/considered
¹ With Emirates ² With Emaar – MGF, one of India’s leading real estate developers Restaurants Interim results 2007/08
£m 2007/08 2006/07 % change Revenue¹ 229.5 305.0 (24.8%)
Profit¹ 28.7 35.7 (19.6%)
Like-for-like sales 1.5%
• 4 consecutive quarters of positive like-for-like sales growth • Continuing revenue up 3.1% • Profit per house up by an average of 23% • Good progress made on remodelling sites • Beefeater completed • Focus on rest of the estate
¹ Revenue and profit decline due to disposal of 235 restaurants in 2006/07 for £497m on 28/07/2006 Restaurants Managing for efficiency
% Food sales discount: indexed vs 2005/06 % Beefeater Continued improvement
• Beefeater remodelling complete
• Market leading awareness
• H1 underlying profit per house up 47%
• Like-for-like covers up 10.2%
• Continued menu development
• H2 11 Beefeaters converted from Brewers Fayre and first new restaurant to open in six years Restaurants The co-located model
• 5 successful new openings
• Breakfast offering improved – total covers up 10%, like-for-like H1 on H1
• Almost half new rooms on Whitbread’s land bank Costa Interim results 2007/08
£m 2007/08 2006/07 % change Revenue 98.1 81.0 21.1% Profit 6.6 5.7 15.8% Like-for-like sales 6.8%
• Fastest growing and now largest coffee shop chain in the UK
• Profit up 15.8% led by UK profit up 26.7%
• UK margins improved by 0.5% points to 8.1%
• International investment for the future Costa Improved food offering
• Food offering improved, capture rate continues to improve
• All our food is GM and hydrogenated fat free Costa New store layout Costa Scope to improve productivity
Employee hours
Sales £ Hours
07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00
Sales per hour 2007-08 Target schedules 2006-07 Average schedule
• A more studied approach to labour scheduling
Source: bdrc Costa Key areas targeted for growth
• Significant scope for further UK growth supported by demographic analysis • Where Costa not yet represented • Where Costa is under-represented
• Significant opportunities in new evolving markets • Retail parks • Travel gateways • Supermarkets
• Target of 1,000 stores (700 UK, 300 internationally) by Spring 2008 Costa Tesco agreement Costa Points of differentiation Whitbread - well positioned for sustainable growth
• Portfolio: Now a focused hospitality company with leading brands operating in large scale value markets
• Premier Inn • UK market leader, consistent like for like growth , outperforming peers • Significant further UK growth potential • Excellent long term scope in international markets, filling a gap for quality budget hotels
• Restaurants • Strong underlying profit increase, significant scope to further improve returns • Beefeater success highlights scale of improvement achievable post remodelling • Maximising Premier Inn competitive advantage
• Costa • UK market leader with significant further opening opportunities • Improving food capture rate • Excellent international growth opportunities Whitbread PLC Interim results 2007/08 Appendix Standard Information Premier Inn HY 2007/08 HY 2006/07 HY HY FY Headline Financials Hotel Details 2007/08 2006/07 2006/07 Sales £m 264.1 230.8 Number of Rooms - Managed 16,046 15,570 16,306 PBITDA £m 113.9 95.1 - Whitbread Pub Restaurants 16,024 14,508 14,937 - Joint Venture 281 281 281 PBIT £m 94.7 78.6 - Franchise & Management Contract 1,082 1,079 1,079 33,433 31,438 32,603 Net Assets £m 1,262.2 1,179.7 Number of Hotels - Managed 177 175 176 Cash Capital Expenditure £m 57.3 63.1 - Whitbread Restaurants 287 272 279 - Joint Venture 1 1 1 Key Operating Measures - Franchise & Management Contract 28 28 28 493 476 484 ARR £ £50.76 £48.03
Occupancy % 81.4% 80.0%
Yield £ £41.34 £38.42
Like for Like Sales Growth % 10.9% 7.0%
IBFC Margin % 55.9% 54.2%
Operating Margin % 35.9% 34.1%
PBIT Per Room £ 2,949 2,596
ROCE (MAT) % 13.7% 12.0% Standard Information Restaurants HY 2007/08 HY 2006/07* HY HY FY Headline financials Outlet details 2007/08 2006/07 2006/07 - Beefeater 134 133 134 Sales £m 229.5 305.0 - Brewers Fayre 268 262 265 Pub Restaurants 402 395 399 PBITDA £m 41.3 50.0 Numbers with adjacent Premier Travel Inns PBIT £m 28.7 35.7 - Beefeater 93 90 93 Net Assets £m 595.6 559.8 - Brewers Fayre 194 182 186
Capital expenditure £m 39.6 27.3
Key operating measures
Like-for-like sales % 1.5% (0.8)%
Operating margin % 12.5% 11.7%
ROCE (MAT) % 7.6% 13.2%
* includes results from disposal estate and a write back of depreciation of £2.9m on the 235 assets held for sale. ROCE based on period end net assets which excludes disposal estate. Standard Information Premier Inn and Restaurants
Impact of Breakfast and Adjacency Fee in H1 2006/07
Premier Inn Restaurants £m
Sales as reported 239.2 296.6
Breakfast sales (8.4) 8.4
Restated sales 230.8 305.0
Operating profit as reported 84.3 30.0
Breakfast profit (2.8) 2.8
Adjancency fee (2.9) 2.9
Restated operating profit 78.6 35.7 Standard Information Costa Coffee HY 2007/08 HY 2006/07 HY HY FY Headline financials Outlet details 2007/08 2006/07 2006/07 UK Equity 459 382 416 Sales £m 98.1 81.0 UK Franchise 144 96 116 International 222 147 175 PBITDA £m 12.7 10.7 Costa Coffee 825 625 707
PBIT £m 6.6 5.7
Net Assets £m 70.6 57.3
Capital expenditure £m 16.1 11.2
Key operating measures
Like-for-like sales % 6.8% 6.0%
Operating margin % 6.7% 7.0%
ROCE (MAT) % 26.5% 25.4% General Like-for-like sales Period over period change in total sales, less sales generated by businesses acquired or disposed of and retail outlets opened or closed during 2006/07 and 2007/08 Return on Capital Profit before interest, tax and exceptional items (less tax, interest and exceptional items on joint ventures and associates) divided by period end net assets
Premier Inn Achieved Room Rate (ARR) Hotel accommodation income divided by the number of rooms occupied by guests Occupancy Number of hotel bedrooms occupied by guests expressed as a percentage of the number of bedrooms available in the period Yield Also known as "revenue per available room" this hotel measure is achieved by multiplying the ARR by the occupancy rate Income before fixed costs Hotel operating profit before directly attributable fixed costs (such as rent, rates, insurance, etc) and central costs divided by hotel sales Profit per room Hotel operating profit (after allocating central costs) divided by the number of rooms available)