Whitbread PLC · LSE:WTB
Whitbread — FY2015/16 Earnings Presentation
72 slides from Whitbread's earnings presentation, Apr 26, 2016
Slide 1: Full Year Results 2015/16
26 APRIL 2016 FULL YEAR RESULTS 2015/16
Slide 2: Richard Baker, Chairman
WHITBREAD Richard Baker Chairman nn eeC—C—“‘C:CCSCis
Slide 3: Alison Brittain, Chief Executive
Alison Brittain Chief Executive 3
Slide 4: Agenda
Agenda 1. Welcome 2. Financial Highlights and Strategic Update 3. Group Full Year Results 4. Q&As 4
Slide 5: Group highlights – a good year
Group highlights – a good year Total Like for Profit Earnings Full Year Return Leverage revenue like before tax* per share dividend on capital 12.0% 3.0% 11.9% 11.7% 10.0% 15.3% 3.1x £2.9bn £546.3m 238.65p 90.35p * Underlying profit before tax for 53 weeks to 3 March 2016 5
Slide 6: Strategic update
Strategic update 6
Slide 7: Continuing to focus on strong fundamentals
Continuing to focus on strong fundamentals Significant Unique Disciplined Clear strategy Focus on market brand capital for profitable shareholder opportunities strength management growth delivery Leading Great customer Strong balance Premier Inn Growing EPS and market propositions sheet c.85,000 Div
Slide 8: Continued focus on Whitbread customers, teams and communities
Continued focus on Whitbread customers, teams and communities Investing in our people Investing in our customers UK Top Employer UK’s favourite coffee shop Top quartile Employee Best Coffee Chain, Southern Engagement Europe Allegra 5,000 apprenticeships by Good together Best UK Economy Hotel Brand 2
Slide 9: The external environment is evolving
The external environment is evolving • Broader competitor dynamics and market disruptors • Rising customer demands and expectations Sustained growth through • Technological developments investment and • Changing cost structures innovation • Competition for skills and people • Productivity and effici
Slide 10: Building a Bigger and Better Whitbread
Building a Bigger and Better Whitbread 1 Grow and innovate in our core UK businesses 2 Focus on our strengths to grow internationally Build capability and infrastructure 3 to support long term growth 10
Slide 11: Delivering long term shareholder value
Delivering long term shareholder value Structural growth Market leading brands Continued disciplined opportunity and loyal customers capital management Build capability Grow and innovate Focus on our strengths to support in core UK to grow internationally long term growth c.85,000 c.£2.5bn 2020 grow
Slide 12: Grow and innovate in our core UK businesses
1 Grow and innovate in our core UK businesses 2 Focus on our strengths to grow internationally Build capability and infrastructure 3 to support long term growth 12
Slide 13: Structural growth opportunities remain strong
Structural growth opportunities remain strong Total UK hotel market 684,000 676,000 688,000 700,000 721,000 740,000 New model assumptions rooms Budget branded 18% 20% • Supply 22% 24% 27% 29% – Branded budget c.+6% p.a. Other branded 23% 25% including Premier Inn 25% 24% 25% 25% – Independents c.-1%
Slide 14: Premier Inn – drivers of success
Premier Inn – drivers of success Continue to grow UK rooms – offering 80% direct booking to greater choice of location premierinn.com Digital Consistent direct distribution Customers quality delivery Investing in our Dynamic pricing – product 81% occupancy Good Night Guarantee 14
Slide 15: Offering customers consistency and the greatest choice of locations
Offering customers consistency and the greatest choice of locations Number of UK hotels Continue to invest to deliver 737* 672* 697* consistency 649* Gap Gap Gap Gap of 217 • Continuing 6 and 12 year of 130 of 172 of 194 519 500 503 520 refurbishment cycle • Net Recommend scores higher post refurbis
Slide 16: Value for money for our customers
Value for money for our customers • Prioritise occupancy and value to build YouGov value for money long term loyalty 35.0 • Maintain pricing discipline 30.0 UK hotel market – ARR and occupancy £61.68 25.0 £57.41 Occupancy Travelodge £57.01 20.0 £54.87 5.1%pts 80.9% 15.0 £50.31 78.1% 75.8% 10.0 Holid
Slide 17: Digital direct distribution – 86% share of bookings
Digital direct distribution – 86% share of bookings Volume of reservations by channel 8% 9% 7% Indirect Channels • Direct booking is better 11% 7% Premier Inn other for our customers 15% – Lowest price channel – Greater location content – Relevant customer offers • Direct booking is better Premier I
Slide 18: Good growth opportunity in the regions
Good growth opportunity in the regions • Rooms open 53,363 • Pipeline c.8,500 rooms • Extensions – 39% of opportunity to 2020 Future rooms by type of opportunity, to 2020 Extensions 39% 28% New catchments Existing 33% catchments Source: Internal data, OC&C Analysis 18
Slide 19: London market opportunity still strong
London market opportunity still strong Premier Inn hotel rooms and sales growth (£m) Sales CAGR 16.7% • Low Premier Inn market sharec.85,000 c.7% £260m Sales £164m £192m £220m • High occupancy maintained at c.86% Rooms 10,214 11,236 • New hotels performing well open 8,066 8,729 • Disciplined returns
Slide 20: hub – enables growth in high property cost locations
hub – enables growth in high property cost locations • 4 hub hotels now open (585 rooms) c.85,000 – London: Covent Garden, Brick Lane, Tower Bridge – Edinburgh: Royal Mile • TripAdvisor score 4.5 across all sites – 86% excellent or very good experience • 2,270 rooms committed; 12 hotels – London: 1,
Slide 21: Ambitious growth with good returns
Ambitious growth with good returns UK rooms* c.7,700 c.85,000 c.12,700 c.77,300 64,599 • Maintaining good returns – Whitbread Hotels and Restaurants (UK) deliver 13.7%† 41,409 return – UK pipeline expected to deliver similar returns by 2020 – Accretive thereafter at maturity 23,190 (year 4) 2015/16:
Slide 22: Restaurants – critical to Premier Inn customers
Restaurants – critical to Premier Inn customers • Restaurant providing a vital service to Premier Inn guests – Customers demand a good breakfast – Dinner very important to our B2B guests • Joint sites restaurant increases Premier Inn revpar and returns – Deliver a better guest experience and build l
Slide 23: Grow and innovate in our core UK businesses
1 Grow and innovate in our core UK businesses 2 Focus on our strengths to grow internationally Build capability and infrastructure 3 to support long term growth 23
Slide 24: UK retail – structural growth opportunities remain strong
UK retail – structural growth opportunities remain strong UK coffee shop market, number of outlets* Global coffee consumption 2010 to 2020 (kg/capita/year)† 27,412 2015-2020 Finland 11.4 Sweden 10.4 CAGR 20,728 11,109 6.9% Norway 8.7 Germany 6.3 14,341 7,976 Italy 5.8 CAGR Czech Republic 5.4 4,312 7
Slide 25: UK's favourite coffee shop – focusing on our customers' needs
UK’s favourite coffee shop – focusing on our customers’ needs in the greatest choice of locations Number of UK stores* Brand Preference: Costa is the UK’s favourite 2,034 • Quality of coffee remains 36% important 31% • Convenience remains essential • Customers demanding more 849 22% – Faster service
Slide 26: Investing in fresher, finer, faster products and digital capabilities
Investing in fresher, finer, faster products and digital capabilities for our customers Fresher Fresco Barista Chop’d and Further Extension of fresh food reductions in healthy concept Smoothie food stores range extension salt and ranges added sugar Finer Old Paradise Single origin Costa at Home Coff
Slide 27: Driving growth throughout the day
Driving growth throughout the day Morning Food Breakfast Healthy Hot, chilled, capture to go and fresh baked Transaction Lunch Healthy Hot, chilled, Lunch value to go and fresh baked Afternoon and Extending Pairing and Small early evening hours sharing plates 27
Slide 28: Good growth opportunities
Good growth opportunities • Offering customers the greatest choice and convenience • Our new network plan shows gaps in our UK coverage • Future growth opportunities showing strong performance – Drive Thru, Travel, Retail Parks – strong fundamentals • New stores performing well and delivering good r
Slide 29: Focus on our strengths to grow internationally
1 Grow and innovate in our core UK businesses 2 Focus on our strengths to grow internationally Build capability and infrastructure 3 to support long term growth 29
Slide 30: Focus on our strengths internationally
Focus on our strengths internationally • Middle East – Successful Joint Venture and profitable • India and South East Asia – Assessing the opportunity – Challenging operating environment • Germany – good market opportunity – Leveraging off the UK model and capabilities – Freehold equity strategy 30
Slide 31: Focus on our strengths internationally – Germany
Focus on our strengths internationally – Germany Germany c.900,000 • A great opportunity in a large hotel market rooms – Low branded budget penetration c.5% 5% UK c.700,000 – Fragmented branded competitor set rooms 21% – Revpar + land cost + construction = good return on capital Budget branded 24% 7
Slide 32: Build capability and infrastructure
1 Grow and innovate in our core UK businesses 2 Focus on our strengths to grow internationally Build capability and infrastructure 3 to support long term growth 32
Slide 33: Costa Express – significant growth opportunity
Costa Express – significant growth opportunity • Growing from c.5,000 to 8,000+ machines by 2020 • Strong market position and partnerships • Telemetry management • Strong returns • Exciting international expansion – c.500 machines in 9 different markets including Poland, Ireland, Czech Republic, Mid
Slide 34: EMEI – investing to grow
EMEI – investing to grow • Franchise – strong and profitable business – Total system sales growth 13.6%* – c.700 stores • Poland – on track to achieve profitability in 2017 – Re-brand to Costa completed – Good like for like growth • France – evaluating the opportunity for franchise and equity *At co
Slide 35: China – disciplined and profitable growth
China – disciplined and profitable growth building brand awareness Costa China store openings • The opportunity remains strong c.700 – Coffee shop culture – aspirational, international players – 383 stores in 30 cities – Medium term growth focussed on 15 cities • Confidence to succeed 383 – Experien
Slide 36: Build capability and infrastructure
1 Grow and innovate in our core UK businesses 2 Focus on our strengths to grow internationally Build capability and infrastructure 3 to support long term growth 36
Slide 37: Invest to build Whitbread's capability and infrastructure
Invest to build Whitbread’s capability and infrastructure Phased investment to support future growth to 2020 and beyond: Selecting, training, developing Engaging teams through technology Winning teams Developing new Group skills Labour management Supporting long term Faster networks, better data, cl
Slide 38: Digital – develop capability and infrastructure
Digital – develop capability and infrastructure to support long term growth 2016 • Customer • 1.7m members – Restaurants c.30% of sales - Restaurants Targeted Partner Costa Coffee • content & Club loyalty • 5m active users - Costa >40% transactions - Costa offers trials relaunch Website • 78m Premie
Slide 39: Grow Whitbread's capability to deliver growth, productivity and efficiency
Grow Whitbread’s capability to deliver growth, productivity and efficiency New opportunities to explore: Finance and Procurement Supporting long term growth for Supply chain and logistics 39
Slide 40: Delivering long term shareholder value
Delivering long term shareholder value Structural growth Market leading brands Continued disciplined opportunity and loyal customers capital management Build capability Grow and innovate Focus on our strengths to support in core UK to grow internationally long term growth c.85,000 c.£2.5bn 2020 grow
Slide 41: Nicholas Cadbury, Group Finance Director
Nicholas Cadbury Group Finance Director 41
Slide 42: Underlying profit before tax on expectations
Underlying profit before tax on expectations £m 2014/15 2015/16 Change 53 weeks v 52 weeks (14/15) Revenue 2,608.1 2,921.8 12.0% Profit from operations 533.9 600.4 12.5% Central costs (29.5) (31.6) (7.1)% Underlying operating profit 504.4 568.8 12.8% Interest (16.3) (22.5) (38.0)% Underlying profit
Slide 43: Good performance in both Hotels and Restaurants and Costa
Good performance in both Hotels and Restaurants and Costa Profit (£m) 2014/15 2015/16 Change Hotels and Restaurants – UK and Ireland* 406.6 451.5 11.0% Hotels and Restaurants – International (5.2) (4.6) 11.5% Total Hotels and Restaurants 401.4 446.9 11.3% Costa - UK 131.4 151.0 14.9% Costa - Interna
Slide 44: Continued good revenue growth
Continued good revenue growth Revenue (£m) 2015/16 Growth UK like for like Like for like revpar 2.6%: Premier Inn 1,260.1 12.9% 4.2% London -0.4% Regions 3.4% Restaurants 561.9 3.5% 0.8% Spend per head 1.4% Total Hotels and Restaurants 1,822.0 9.8% 3.1% Costa - UK 975.9 16.3% 2.9% Like for like tran
Slide 45: Margin progression
Margin progression Hotels and Restaurants (%) 1.1 1.4 2.7 1.2 0.9 24.2 24.5 2014/15 Like for like Efficiency Inflation Investment Rent/Rates 2015/16 Costa (%) 0.3 0.7 1.5 1.0 13.9 0.1 13.9 2014/15 Like for like Efficiency Inflation Investment Rent/Rates 2015/16 45
Slide 46: Underlying profit after tax and exceptionals
Underlying profit after tax and exceptionals £m 2014/15 2015/16 Change Underlying profit before tax 488.1 546.3 11.9% Pension finance cost - IAS 19(R) (21.6) (17.2) 20.4% Amortisation of acquired intangibles (2.5) (4.3) (72.0)% Profit before tax, pre exceptionals 464.0 524.8 13.1% Taxation* ETR 21.3
Slide 47: Strong funds from operations support capital investment
Strong funds from operations support capital investment £m 2014/15 2015/16 EBITDA* 666 748 Working capital and share based payments 48 34 Cash generated from operations 714 782 Product improvement and maintenance capital (176) (215) Operating cash flow after maintenance capital 538 567 Interest and
Slide 48: A strong balance sheet
A strong balance sheet 3,116 £m 2,775 Net Debt 910 583 Pension* 476 259 878 990 Lease commitments (Rent x 8) Adj Debt EBITDAR Adj Debt EBITDAR 2014/15 2015/16 Leverage ratios Adjusted net debt: EBITDAR 3.2x 3.1x Target <3.5x <3.5x Net debt : EBITDA 0.9x 1.2x Total funding facilities £0.9bn £1.7bn Pe
Slide 49: Diverse and flexible funding
Diverse and flexible funding Sources of funding (£m) • Funds from operations (EBITDA £748m*) 120 Committed bank facility 258 • Uncommitted money markets lines: £120m Bond 950 US$ PP • Committed bank facility: £950m, 2020 450 Uncommitted MM – Option to extend +1yr +1yr • US private placements (US$PP)
Slide 50: Capital expenditure driving future EBITDA growth
Capital expenditure driving future EBITDA growth Cash capital (£m) Full Year Year on year Hotels and Restaurants 622 +139 Expansion capital - growing pipeline and room openings 455 +122 • Acquisition of UK freehold properties – £165m • Opened 1,467 extension rooms – £117m • Freehold and leasehold co
Slide 51: Delivered strong returns
Delivered strong returns Hotels and Restaurants Costa Group Adjusted returns* 13.7% 14.2% 14.4% 15.7% 16.5% 16.9% Investment in future 0.4% pts 0.7% pts 1.5% pts 49.9% openings UK and 46.3% Germany 15.3% 15.7% 15.3% Reported 13.3% 13.5% 12.9% 40.5% returns 2013/14 2014/15 2015/16 2013/14 2014/15 201
Slide 52: Financials – considerations for 2016/17: Hotels and Restaurants
Financials – considerations for 2016/17: Hotels and Restaurants £m 2015/16 2016/17 estimate Market* revpar 3.2% 2.6% Greater impact in quieter Impact of extensions on revpar -1.0% pts c.-1.5% pts demand Q1 and Q4 Impact of extension on like for like sales +2.0% pts c.+1.5% pts Impact of mix of Londo
Slide 53: Financials – considerations for 2016/17: Costa
Financials – considerations for 2016/17: Costa £m 2015/16 2016/17 estimate UK like for like assumption 2.9% c.2% - 3% New stores (net) 197 c.230 – 250 • UK 52% 55% • International 48% 45% New Express machines (net) 924 c.1,000 • UK 83% c.60% • International 17% c.40% Incremental P&L investment c.£6m
Slide 54: Financials – considerations for 2016/17: Capital
Financials – considerations for 2016/17: Capital Cash capital (£m) 2015/16 2016/17 estimate Hotels and Restaurants 622 c.560 Expansion capital 393 c.315 Germany 62 c.60 Product improvement and maintenance capital 192 c.185 • Refurbishment/Product 91 c.90 • Maintenance 58 c.45 • IT/Systems 43 c.50 Ti
Slide 55: Current trading
Current trading • Early days in the new financial year (week 6) with year on year trading comparison impacted by the timing of Easter • Whitbread’s early indications are: – Costa good start to the year – Premier Inn growing market share in a flat hotel market • Q1 trading update 21 June • Confident
Slide 56: Other consideration for 2016/17
Other consideration for 2016/17 • Trading updates changing to 4 per annum – Q1, 13 weeks to be announced 21 Jun 2016 – Interims, 26 weeks to be announced 25 October 2016 – Q3, 44 weeks to be announced January 2017 – Full year, 52 weeks to be announced April 2017 • Capital markets update – November 2
Slide 57: Delivering long term shareholder value
Delivering long term shareholder value Structural growth Market leading brands Continued disciplined opportunity and loyal customers capital management Build capability Grow and innovate Focus on our strengths to support in core UK to grow internationally long term growth c.85,000 c.£2.5bn 2020 grow
Slide 58: Appendices
Appendices 58
Slide 59: Standard information
Standard information General Average Room Rate (ARR) Hotel accommodation income divided by the number of rooms occupied by guests Income before fixed costs (IBFC) Whitbread Hotels and Restaurants operating profit before directly attributable fixed costs (such as rent, rates, insurance, etc.), head o
Slide 60: Whitbread Hotels and Restaurants
Whitbread Hotels and Restaurants Full Year Full Year 2015/16 2014/15 1 Solus Sales £m 808.2 704.8 IBFC £m 471.1 403.6 IAFC 2 £m 263.6 228.4 3 Net Assets £m 1,704.6 1,379.1 Return on Capital 4 % 15.5% 16.6% Joint 5 Sales £m 1,012.4 954.0 IBFC £m 461.7 420.2 Hotels and Restaurants IAFC £m 322.6 293.4
Slide 61: Standard information – Hotels and Restaurants continued
Standard information Hotels and Restaurants continued 61
Slide 62: Costa
Costa Full Year Full Year 2015/16 2014/15 Costa System Sales - Total £m 1,612.8 1,398.7 Sales - Total £m 1,103.2 951.9 EBITDA from Operations £m 215.6 187.9 Underlying operating profit £m 153.5 132.5 Segmental Net Assets £m 307.6 286.1 Cash - Capital Expenditure - Total 1 £m 102.5 71.8 Cash - Busine
Slide 63: Strength and breadth – 2015/16
Strength and breadth – 2015/16 Costa EMEI Costa Asia UK UK Retail Retail Costa Enterprises Costa Enterprises Europe, Costa EMEI China Asia Costa and Equity stores Costa Express Equity stores EquityPartnerships stores Middle Europe, East East Middle South East China andAsia Individual franchise Corpo
Slide 64: Exceptional items
Exceptional items £m 2014/15 2015/16 Loss on disposal of PPE and property revisions (3.3) (20.9) - principally onerous leases on historically disposed businesses Intangible assets accelerated amortisation - (10.1) - on IT software for which there is now no future economic benefit Impairment 2.3 (5.4
Slide 65: Extensions provide low risk and good returns
Extensions provide low risk and good returns Hotel example 2015/16: 50 room hotel 20 room extension 2016/17 budget: 70 rooms +35.9% (% & £) 82.1 814k -4.6% 4.1% 1,105k 53.79 292k -1.8% 44.17 77.5 65.5 55.97 43.38 63.12 41.33 Occupancy Rate Revpar Room sales Occupancy Rate Revpar Room sales Occupancy
Slide 66: Lease commitments and depreciation
Lease commitments and depreciation Annual rent £m 2014/15 2015/16 Hotels & Restaurants 107.5 123.4 • Hotel and Restaurants rent expected to increase by Costa 101.0 111.2 c.£15-20m in 2016/17 Total property rent* 208.7 234.7 Plant & Machinery operating lease 7.8 3.4] payments Annual depreciation £m 2
Slide 67: Interest and taxation
Interest and taxation • Underlying interest charge of £22.5m (2014/15 £16.3m) £m 2014/15 2015/16 Loans and overdraft charge (21.1) (32.7) Interest capitalised 4.3 10.0 Other 0.5 0.2 Underlying interest charge (16.3) (22.5) Effective interest rate 4.3% 4.7% • Effective tax rate – 2014/15 21.5% – 2015
Slide 68: Underlying profit before tax on expectations (including week comparison)
Underlying profit before tax on expectations (including 52 week comparison) Change £m 2014/15 2015/16 Change 52 wks Revenue 2,608.1 2,921.8 12.0% 10.1% Profit from operations 533.9 600.4 12.5% 9.8% Central costs (29.5) (31.6) (7.1)% (6.4)% Underlying operating profit 504.4 568.8 12.8% 10.0% Interest
Slide 69: Good performance in both Hotels and Restaurants and Costa (52 week comparison)
Good performance in both Hotels and Restaurants and Costa (including 52 week comparison) Change Profit (£m) 2014/15 2015/16 Change 52 wks Hotels and Restaurants – UK & Ireland* 406.6 451.5 11.0% 8.3% Hotels and Restaurants – International (5.2) (4.6) 11.5% 11.5% Total Hotels and Restaurants 401.4 44
Slide 70: Continued good revenue growth (52 week comparison)
Continued good revenue growth (52 week comparison) Growth Revenue (£m) Total sales Growth UK like for like 52 wks Like for like revpar 2.8%: Premier Inn 1,260.1 12.9% 10.8% 4.2% London -0.1% Regions 3.6% Restaurants 561.9 3.5% 1.7% 0.7% Spend per head 1.4% Total Hotels and 1,822.0 9.8% 7.8% 3.2% Res
Slide 71: Whitbread
TBREAD
Slide 72: Disclaimer
Disclaimer This presentation (the “Presentation”) is provided on a strictly lawfully communicated, falling within Article 49 of the Order or the Company. Recipients of this Presentation should each make their private and confidential basis for information purposes only. otherwise. own evaluation of