Interim Results 2010/11 19 October 2010 1 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Anthony Habgood Chairman 2 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Christopher Rogers Group Finance Director 3 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Summary H1 2010/11 H1 2010/11 H1 2009/10 Change Underlying profit before tax £151.8m £118.2m 28.4% Profit before tax, £146.0m £110.5m 32.1% pre-exceptional EPS underlying (diluted) 61.27p 47.33p 29.5% Proposed interim dividend 11.25p 9.65p 16.6% 4 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Summary – Profit & loss H1 2010/11 £m H1 2010/11 H1 2009/10 Change Revenue 1 805.4 703.3 14.5% Profit from operations 173.6 140.0 24.0% Central costs (10.2) (9.2) (10.9)% Interest (11.6) (12.6) 7.9% Underlying profit before tax 151.8 118.2 28.4% 1 includes exceptional revenue of £5.0m in respect of VAT refund on gaming machine income 5 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Summary – Underlying profit & loss H1 2010/11 £m H1 2010/11 H1 2009/10 Change Underlying profit before tax 151.8 118.2 28.4% Pension finance cost - IAS 19 (5.8) (7.7) 24.7% Profit before tax, 146.0 110.5 32.1% pre-exceptional Taxation (42.7) (34.1) (25.2)% Net profit, pre-exceptionals 103.3 76.4 35.2% Exceptionals 12.7 (3.3) Profit for the year 116.0 73.1 58.7% 6 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Revenue by business segment H1 2010/11 £m H1 2010/11 H1 2009/10 Change Hotels & Restaurants 608.0 548.8 10.8% Costa 198.5 155.4 27.7% Less: inter-segment 1 (1.1) (0.9) (22.2)% Revenue 805.4 703.3 14.5% 1 Sales between segments 7 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Hotels & Restaurants revenue H1 2010/11 £m H1 2010/11 H1 2009/10 Change Premier Inn revenue 355.7 312.1 14.0% Restaurants revenue 1 247.3 236.7 4.5% Exceptional revenue 2 5.0 - Hotels & Restaurants 608.0 548.8 10.8% 1 Revenue from joint site and stand alone restaurants 2 Revenue arising from refund of VAT on gaming machine income 8 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Like for like sales H1 2010/11 12.0% 10.1% 10.0% 8.2% 8.5% 8.0% 6.0% 4.2% 4.0% 2.5% 1.8% 1.7% 2.0% 0.0% -0.8% -2.0% Restaurants Costa -4.0% (2 openings, net 1) (137 new stores, net 116) -6.0% H1 2009/10 -8.0% -7.5% H2 2009/10 H1 2010/11 -10.0% Premier Inn (795 new rooms, net 789) 9 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Profit by business segment H1 2010/11 £m H1 2010/11 H1 2009/10 Change Hotels & Restaurants - UK 157.1 129.1 21.7% Hotels & Restaurants - (3.1) (1.7) Overseas Total Hotels & Restaurants 154.0 127.4 20.9% Costa - UK 19.3 12.5 54.4% Costa - Overseas 0.3 0.1 Total Costa 19.6 12.6 55.6% Profit from operations 173.6 140.0 24.0% 10 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Summary - Profit & loss H1 2010/11 £m H1 2010/11 H1 2009/10 Change Revenue 1 805.4 703.3 14.5% Profit from operations 173.6 140.0 24.0% Central costs (10.2) (9.2) (10.9)% Interest (11.6) (12.6) 7.9% Underlying profit before tax 151.8 118.2 28.4% 1 includes exceptional revenue of £5.0m in respect of VAT refund on gaming machine income 11 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Interest charge H1 2010/11 £m H1 2010/11 H1 2009/10 Underlying interest charge (11.6) (12.6) Pension finance cost – IAS 19 (5.8) (7.7) Interest charge, pre-exceptional (17.4) (20.3) Average debt in first half £484.2m (2009/10 £599.7m) 12 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Exceptional items H1 2010/11 £m H1 H1 2010/11 2009/10 Refund of VAT on gaming machine income 5.0 - Reduction in tax rate 9.3 - Tax on exceptional items (1.6) 1.3 Reorganisation costs - (4.3) Other - (0.3) Exceptional items 12.7 (3.3) 13 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Cash flow H1 2010/11 197.6 200 Half year debt down £46.2m to £467.2m 180 160 140 120 £m (88.8) 100 80 1.8 60 46.2 40 (59.5) (4.9) 20 0 Cash flow from Cash capital Interest and Tax Other Decrease in net operations expenditure dividends debt 14 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Capital expenditure HY 2010/11 Split between businesses Expansionary v Maintenance £m £m 17 34 72 55 Hotels and Restaurants Costa Expansionary Maintenance 15 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Capital expenditure • Total Capex for 2010/11 to be c.£265m • Capex for 2011/12 currently planned at c.£330m as room openings will now be at least 3,500 16 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Pension • IAS 19 pension deficit at half year £500m (£403m net of tax) compares to £434m (£341m net of tax at full year) • Full year pension fund interest charge £11.5m • Second £39m tranche of new pension structure implemented bringing total to £141m with total cash tax benefit of £39m over 2010 - 2012 17 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Other financial items • Effective tax rate for the year of c.29.5% • £102m Private Placement in August 2010 at blended rate of 3.8%, first move towards diversification of funding • 25% of £8m customer-facing initiatives and marketing expenditure spent in the first half, balance to be spent in the second half • Minimum wage increase in October 2010 2.2%: modest food inflation on the horizon 18 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Summary • Underlying profit before tax £151.8m + 28.4% • EPS, Underlying diluted 61.27p + 29.5% • Proposed interim dividend 11.25p + 16.6% 19 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Alan Parker Chief Executive 20 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Agenda 1. What we’ve achieved 2. How we’ve done it 3. Prospects for the future 21 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Highlights 1. Underlying PBT £151.8m +28.4% 2. Group PBIT margin: 20.4% (2009/10: 18.6%) 3. 12 month TSR: +53.3% (FTSE 100 +15.3%) 4. ROIC: 13.1% (2009/10: 11.2%)* Excellent results that build on the increased profits achieved in 2009/10 * Calculated on an annualised basis 22 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Highlights Hotels & Restaurants • Occupancy up 9.2ppts to 79.3% • 7% more restaurant customers: menu value strategy and increased hotel occupancy • Secured pipeline of c.11,000 rooms + 25% growth in UK + 3,500 to open 2011/12 23 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Highlights Costa • Operating profits up 55.6%. Like for like sales up 8.5% • 34 consecutive quarters of like for like growth • 116 new stores: worldwide total 1,716 stores 24 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 2010/11 dual-track strategy 1. Expand market share and achieve brand leadership 2. Improve efficiency and margins 25 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Revpar outperformance Premier Inn outperformed budget sector by 5.7ppts and total market by 3.5ppts 15.0% 10.0% 5.0% year-on-year 0.0% Premier Inn Revpar Branded Hotel Market -5.0% Budget Hotel Sector -10.0% Like for like Like -15.0% Q1Q1 Q2Q2 Q3Q3 Q4Q4 Q1Q1 Q2Q2 2009/10 2009/10 2010/112010/11 Source: TRI/Whitbread 26 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 UK’s favourite hotel brand in just two years Net score % Premier Inn 19.9% Hilton 16.2% Marriott 15.8% Travelodge 12.7% Holiday Inn 10.7% Best Western 6.7% Express by Holiday Inn 5.8% Ibis 2.3% Comfort Inn -1.7% Source – YouGov Brand Index for hotels March - August 2010 27 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Restaurants outperforming the market Like for like % growth 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Market Whitbread Source: Coffer Peach Business Tracker 28 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Outperforming with strong like for like sales % Like for like sales 14.0% 12.0% Costa UK like for like sales 10.0% 8.0% 6.0% 4.0% 2.0% BRC-KPMG like for like retail sales 0.0% -2.0% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2009 2010 -4.0% 29 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 the UK’s favourite coffee shop Net score % Costa 14% Pret a Manger 13% Nero 9% Subway 8% EAT 5% Starbucks 3% 0 2 4 6 8 10 12 14 16 Source – YouGov BrandIndex for coffee and sandwich shops March - August 2010 30 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Project 80% occupancy Launched Spring 2009 Increased & 1 focused Leading choice for leisure travellers advertising 2 Dynamic Like for like occupancy +9.2ppts: pricing Revpar +9.4% Widened Re-launched Premierinn.com plus new 3 on-line distribution international booking channels Business 4 +24% driven by new accounts Account sales 31 WorldReginfo - 20d918fe-2d6a-4615-8cdd-b4ab68419400 Increased & focused advertising Leading choice for leisure guests 25 Premier Inn 20 Travelodge 15 Upper full service 10 Mid-market full service 5 0 2005 2006 2007 2008 2009 2010 Source: BDRC British Hotel Guest Survey 2010: Wave 4.