Interim Results 2010/11 19 October 2010 1
Anthony Habgood Chairman 2
Christopher Rogers Group Finance Director 3
Summary H1 2010/11 H1 2010/11 H1 2009/10 Change Underlying profit before tax 151.8m 118.2m 28.4% Profit before tax, pre-exceptional 146.0m 110.5m 32.1% EPS underlying (diluted) 61.27p 47.33p 29.5% Proposed interim dividend 11.25p 9.65p 16.6% 4
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
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, pre-exceptional 146.0 110.5 32.1% 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
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
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% 8 1 Revenue from joint site and stand alone restaurants 2 Revenue arising from refund of VAT on gaming machine income
Like for like sales H1 2010/11 12.0% 10.0% 8.0% 10.1% 8.2% 8.5% 6.0% 4.0% 2.0% 1.8% 1.7% 4.2% 2.5% 0.0% -2.0% -4.0% -0.8% Restaurants (2 openings, net 1) Costa (137 new stores, net 116) -6.0% H1 2009/10-8.0% -10.0% -7.5% Premier Inn (795 new rooms, net 789) H2 2009/10 H1 2010/11 9
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 - Overseas (3.1) (1.7) 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
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
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
Exceptional items H1 2010/11 m H1 2010/11 H1 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
Cash flow H1 2010/11 200 180 160 197.6 Half year debt down 46.2m to 467.2m 140 m 120 100 (88.8) 80 60 1.8 46.2 40 (59.5) (4.9) 20 0 Cash flow from operations Cash capital expenditure Interest and dividends Tax Other Decrease in net debt 14
Capital expenditure HY 2010/11 Split between businesses m Expansionary v Maintenance m 17 34 72 55 Hotels and Restaurants Costa Expansionary Maintenance 15
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
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
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
Summary Underlying profit before tax 151.8m + 28.4% EPS, Underlying diluted 61.27p + 29.5% Proposed interim dividend 11.25p + 16.6% 19
Alan Parker Chief Executive 20
Agenda 1. What we ve achieved 2. How we ve done it 3. Prospects for the future 21
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
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
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
2010/11 dual-track strategy 1. Expand market share and achieve brand leadership 2. Improve efficiency and margins 25
Revpar outperformance Premier Inn outperformed budget sector by 5.7ppts and total market by 3.5ppts 15.0% Like for like Revpar year-on-year 10.0% 5.0% 0.0% -5.0% -10.0% Premier Inn Branded Hotel Market Budget Hotel Sector -15.0% Q1 Q1 Q2 Q3 Q4 Q1 Q2 Source: TRI/Whitbread 2009/10 2009/10 2010/11 2010/11 26
UK s favourite hotel brand in just two years Net score % Premier Inn 19.9% Hilton Marriott 16.2% 15.8% Travelodge Holiday Inn 10.7% 12.7% Best Western Express by Holiday Inn 6.7% 5.8% Ibis 2.3% Comfort Inn -1.7% Source YouGov Brand Index for hotels March - August 2010 27
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
like for like sales Outperforming with strong % Like for like sales 14.0% 12.0% 10.0% Costa UK like for like sales 8.0% 6.0% 4.0% 2.0% 0.0% BRC-KPMG like for like retail sales -2.0% -4.0% Mar 2009 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2010 Feb Mar Apr May Jun Jul Aug 29
shop the UK s favourite coffee 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
Project 80% occupancy Launched Spring 2009 1 Increased & focused advertising Leading choice for leisure travellers 2 Dynamic pricing Like for like occupancy +9.2ppts: Revpar +9.4% 3 Widened on-line distribution Re-launched Premierinn.com plus new international booking channels 4 Business Account sales +24% driven by new accounts 31
Increased & focused advertising Leading choice for leisure guests 25 20 Premier Inn 15 Travelodge 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. Sept 2010. Base: All leisure travellers 32
33 Advertising
Dynamic pricing Premier Offers selectively drives leisure volume 30% Average 8.5% of rooms sold 25% New Year s Eve Easter weekend % rooms sold 20% 15% Valentine s weekend May Bank Holiday Whitsun Bank Holiday August Bank Holiday 10% Launch of Premier Offers October Half Term 5% 0% 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 July 2009 Sept 2009 Nov 2009 Jan 2010 March 2010 May 2010 Aug 2010 Source: Whitbread internal data 34
Widen on-line distribution On-line now 65% of reservations Over 20% increase in revenue via Premierinn.com Twice benchmarked best travel website and won Best Hotel Website Incremental overseas reservations: Bookings.com, GDS and our new international websites 35
Business Account sales Year to date revenues top 100m for the first time - up 24% More large businesses are using Premier Inn!()'*+',$""#!$""#,('"#!('"#,(&"#!(&"#,(%"#!(%"#,($"#!($"#,(""#!(""#!"##"$%&','"#!'"#,&"#!&"#,%"#!%"#,$"#!$"#,"#!"# $""&#-#$"".#,-&"%.&&'(//$-%0'1.2.%-.' $"".-$""'# $""'-$""/# 01234#56#7898:;<=>#3;:>3# )*+# $%?#1@72>;3>#A>;2#B@#A>;2# 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source: Whitbread internal data $""/-$"("# )*+# $"("-$"((# First half year cumulative sales MAT 36
Restaurants Barnsley, joint site opened April 2010 with 110 rooms 37
Successful volume and value strategy 30% take up value offers on the menu Over 250,000 20 meal deals sold up 48% New theme nights and buffets introduced 38
Maintained high quality estate 71 restaurants refurbished in H1 Contemporary estate: 70% refurbished in last two and a half years Average cost of refurbishment 125,000 39
2010/11 commercial action plan 1 Flat White 5.5% of coffee sales. Premium product 2 Costa Coffee Club Over 3 million members since March 3 Ice Cold Costa 16% of summer beverage sales. Like for like s +39% 4 Brand building Press and online + 1 st Costa TV campaign 40
41 Advertising
Pipeline targets 25% increase in UK rooms No. rooms &"D"""# EED"""# EED"""# E"D"""# %.D(""# %ED"""# %CD&""# %"D"""# CED"""# C"D"""# 0B2>7;34#$"("F((# 0B2>7;34#$"((F($# +;2G>4#$"(CF(%# Planned UK estate 42
International Build understanding Middle East India 3 hotels (819 rooms) 1 hotel under construction in Abu Dhabi 1 hotel (105 rooms) 1 hotel under construction in New Delhi Prove model and maximise performance 43
Continual growth Stores CD"""# $DE""# $D"""# (DE""# (D"""# E""# 1,850 &E"#1@4>2@;<B@;:# 34B2>3# (D$""#HI#34B2>3# 3,000 (D%""# 1@4>2@;<B@;:# 34B2>3# (D&""#HI#34B2>3# "# 0B2>7;34#$"("F((# +;2G>4#$"(%F(E# 44
International Focus on big 5 markets Delivering on our potential H1 2010/11: 582 stores, to c.1,400 by 2014/15 Middle East Current stores: 228 Central Europe Current stores: 198 Russia Current stores: 25 China Current stores: 71 India Current stores: 60 45
Coffeeheaven More potential identified Now operate 77 stores in Poland to grow by 30% to 100 stores over next 2 years Strong platform to grow Central Europe Performance in line with plan 46
47 Burgess Hill Targeted 70% energy and 60% water savings
New schools in coffee growing communities New recyclable cup Reduced milk packaging Rain Forest Alliance 48
Strong prospects for the future Strong brands Strong balance sheet Premier Inn and Restaurants No.1 UK hospitality brand Costa No.2 world wide coffee shop brand Valuable asset base Flexible funding options Strong team Relentless focus on customers Disciplined approach to cost control 49
50 APPENDIX
Standard Information General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
Standard Information Hotels & Restaurants HY 2010/11 HY 2009/10 FY 2009/10 Solus 1 Sales m 201.9 176.2 363.7 IBFC m 115.7 99.4 205.2 IAFC 2 m 64.7 54.4 112.0 Net Assets m 955.6 956.1 995.1 Joint 3 Sales - Joint Sites m 401.1 372.6 732.3 IBFC m 180.3 158.4 304.9 IAFC 2 m 129.7 109.4 205.3 Net Assets m 1,313.9 1,290.5 1,271.3 Total Sales - Premier Inn m 355.7 312.1 629.8 Sales - Restaurants m 247.3 236.7 466.2 Total Sales pre - exceptionals m 603.0 548.8 1,096.0 IBFC 296.0 257.8 510.1 IAFC m 194.4 163.8 317.3 EBITDA from Operations m 193.8 166.0 325.1 EBIT from Operations before exceptionals m 154.0 127.4 247.0 Total Net Assets m 2,269.5 2,246.6 2,266.4 Cash Capital Expenditure 4 m 71.7 67.9 114.2 ROIC 5 % 11.8% 10.9% 10.9% Key Operating Measures (UK) ARR (Total) 54.26 56.09 54.85 Occupancy (Total) % 78.5% 69.7% 69.3% Occupancy (Like for Like) % 79.3% 70.0% 70.2% Yield (Total) 42.60 39.09 37.99 Like for Like Sales Growth PI % 10.1% -7.5% -4.3% Like for Like Sales Growth REST % 4.2% 1.8% 1.7% Operating Margin % 25.5% 23.2% 22.5% 1 Solus includes India and Ireland. 2 Fixed costs include: Rent, Rates, Depreciation and Other (including insurance and pre-opening) costs. 3 Includes both joint site and standalone restaurants. 4 Includes intangible capital expenditure 5 ROIC is based upon segmental net assets with no allocation for UK debt, taxation liabilities, pension and centrally held provisions. 52
Standard Information Hotels & Restaurants cont. HY 2010/11 HY 2009/10 FY 2009/10 Number of Rooms Solus - Managed 21,586 20,694 21,127 - Associate 282 282 282 - Franchise & Management Contract 1,082 1,082 1,082 Total Solus 22,950 22,058 22,491 Joint Sites 19,559 19,115 19,229 Total UK 42,509 41,173 41,720 International 1,079 693 1,079 43,588 41,866 42,799 Number of Hotels Solus - Managed 224 218 221 - Associate 1 1 1 - Franchise & Management Contract 28 28 28 Total Solus 253 247 250 Joint Sites 339 331 333 Total UK 592 578 583 International 5 3 5 597 581 588 Restaurant Outlet Details - Beefeater 129 130 130 - Brewers Fayre 127 130 127 - Table Table 111 108 109 - Taybarns 7 7 7 - Managed 374 375 373 Numbers with adjacent Premier Inns - Beefeater 116 114 114 - Brewers Fayre 114 113 113 - Table Table 102 97 99 - Taybarns 7 7 7 339 331 333 53
Standard Information Costa Headline financials HY 2010/11 HY 2009/10 FY 2009/10 Sales m 198.5 155.4 340.9 EBITDA from Operations m 29.9 21.5 54.0 EBIT from Operations m 19.6 12.6 36.2 Net Assets m 121.4 85.9 98.6 Cash Capital Expenditure m 17.1 9.1 17.2 Key Operating Measures Like for Like Sales Growth % 8.5% 2.5% 5.5% Operating Margin % 9.9% 8.1% 10.6% ROIC 1 - Total Business % 35.6% 32.7% 36.7% 1 ROIC is based upon segmental net assets with no allocation for UK debt, taxations liabilities, pension and centrally held provisions HY 2010/11 HY 2009/10 FY 2009/10 Outlet details - Equity 689 637 657 - UK Franchise 445 337 412 Total UK 1,134 974 1,069 - International Equity 92 89 - International JV 2 96 51 69 - International Franchise 394 364 373 Total International 582 415 531 1,716 1,389 1,600 2 International JV includes Shanghai which is a subsidary with a 51% interest 54
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