Slide 1: Annual Results 2009/10
Annual Results 2009/10 29 April 2010 1
Slide 2: Anthony Habgood, Chairman
Anthony Habgood Chairman 2
Slide 3: Christopher Rogers, Group Finance Director
Christopher Rogers Group Finance Director 3
Slide 4: Summary
Summary £m 2009/10 2008/9 Change Underlying profit before tax £239.1m £224.4m 6.6% Profit before tax, pre £223.6m £229.9m (2.7)% exceptional EPS underlying (diluted) 96.7p 90.7p 6.7% Proposed final dividend 28.35p 26.90p 5.4% Total dividend for year 38.00p 36.55p 4.0% 4
Slide 5: Summary - Profit & loss
Summary - Profit & loss £m 2009/10 2008/9 Change Revenue 1,435.0 1334.6 7.5% Profit from operations 283.2 277.6 2.0% Central costs (18.4) (22.6) 18.6% Interest (25.7) (30.6) 16.0% Underlying profit before tax 239.1 224.4 6.6% 5
Slide 6: Summary – Profit & loss (cont.)
Summary – Profit & loss (cont.) £m 2009/10 2008/9 Change Underlying profit before tax 239.1 224.4 6.6% Pension finance cost/credit – (15.5) 5.5 IAS 19 Profit before tax, pre 223.6 229.9 (2.7)% exceptional Taxation (66.8) (69.6) 4.0% Net profit, pre exceptional 156.8 160.3 (2.2)% Exceptionals 3.2 (70
Slide 7: Revenue by business segment
Revenue by business segment £m 2009/10 2008/9 Change Hotels & Restaurants 1,096.0 1061.6 3.2% Costa 340.9 276.3 *1 23.4% Less: inter-segment *2 (1.9) (3.3) Revenue 1,435.0 1,334.6 7.5% * 1 Costa restated in 2008/9 by 12.5m to include sales to franchisees previously shown in other * 2 Sales between s
Slide 8: Hotels & Restaurants revenue
Hotels & Restaurants revenue £m 2009/10 2008/9 Change Premier Inn revenue 629.8 601.5 4.7% Restaurants revenue 466.2 460.1 1.3% Hotels & Restaurants 1,096.0 1,061.6 3.2% • Impacted by swap with M&B in September 2008. Excluding impact of swap total up 4.5% with Restaurants up 7.0% and Premier Inn up
Slide 9: Like-for-like sales
Like-for-like sales % 2009/10 2008/9 Premier Inn (4.3) 6.0 Restaurants 1.7 4.6 Hotels & Restaurants (1.8) 5.4 Costa 5.5 2.0 Total (0.5) 4.9 9
Slide 10: Like-for-like sales
Like-for-like sales An improving trend in Group like-for-like sales (%) % Q1 Q2 Q3 Q4 10
Slide 11: Profit by business segment
Profit by business segment £m 2009/10 2008/9 Change Hotels & Restaurants - UK 251.6 258.2 (2.6)% Hotels & Restaurants - Overseas (4.6) (3.3) (39.4)% Total Hotels & Restaurants 247.0 254.9 (3.1)% Costa - UK 36.0 25.2 42.9% Costa - Overseas 0.2 (2.5) Total Costa 36.2 22.7 59.5% Profit from operations
Slide 12: Summary - Profit & loss
Summary - Profit & loss £m 2009/10 2008/9 Change Revenue 1,435.0 1334.6 7.5% Profit from operations 283.2 277.6 2.0% Central costs (18.4) (22.6) 18.6% Interest (25.7) (30.6) 16.0% Underlying profit before tax 239.1 224.4 6.6% 12
Slide 13: Interest charge
Interest charge £m 2009/10 2008/9 Interest on borrowings (27.3) (35.5) Interest on deposits/investments 0.9 2.3 Other 0.7 2.6 Underlying interest charge (25.7) (30.6) IAS 19 pension finance cost/credit (15.5) 5.5 Interest charge, pre exceptional (41.2) (25.1) • Average debt £569.2m, 2008/9 £531.0m 1
Slide 14: Exceptional items
Exceptional items £m 2009/10 Reorganisation costs (9.9) Impairment* (1.5) Profit/(loss) on property disposals and reversions (6.6) Pension curtailment 4.0 Capital gains roll over* 16.8 Tax and interest exceptional items 0.4 Exceptional items 3.2 * No cash impact 14
Slide 15: Cashflow
Cashflow £m 2009/10 2008/9 Cashflow from operations - EBITDA 361 351 - Working capital 18 7 - Other (3) (23) 376 335 Cash capital expenditure (132) (276) UK business acquisitions - (30) International investment and (42) (17) acquisitions Cashflow after investment 202 12 15
Slide 16: Cashflow (cont.)
Cashflow (cont.) £m 2009/10 2008/9 Cashflow after investment 202 12 Interest, tax and ordinary dividends (132) (135) Pension contributions (unfunded/special) (6) (50) Disposals 42 (1) Other 4 (23) Decrease/(increase) in net debt 110 (197) 16
Slide 17: Capital expenditure
Capital expenditure £m 2009/10 2008/9 Hotels & Restaurants 112 242 Costa 15 30 Corporate/other 5 4 Total 132 276 Expansionary 65 194 Maintenance 61 73 Other 6 9 17
Slide 18: Capital expenditure
Capital expenditure • Hotels & Restaurants – Fewer UK room openings from 4,245 to 1,624 – UK leasehold balance 73% vs 39% in prior year – Pipeline of future sites increased • Costa – UK net openings 186 to 188 – Mix of UK openings between equity and franchise changed from c.50:50 in 2008/9 to c.20:8
Slide 19: Debt maturities
Debt maturities Facilities £m 1400 • Sources of funding to be diversified in 2010/11 1200 1000 800 600 Net debt of £513m at year end 400 200 0 Up Upto to Dec 2010 Dec 2010 Up Upto to Dec 2011 Dec 2011 Up Upto Dec2012 to Dec 2012 UpUptotoMar Dec 2013 2013 19
Slide 20: Pension
Pension • IAS 19 pension deficit £434m (£341m net of tax). Compares to £408m (£294m net of tax) at half year • Payment schedule agreed • New structure in place which delivers cashflow benefit 20
Slide 21: Other financial items – 2010/11
Other financial items – 2010/11 • Capex of £250m for full year – Increased room openings – Building pipeline for 2011/12 – Change in mix of Costa openings • Underlying effective tax rate of c.30% but cash tax reduced by £28m due to new pension structure • Pension fund interest charge £11.5m • Invest
Slide 22: Summary
Summary • Underpinned by good cost control, underlying profit before tax £239.1m, up 6.6% • Cash generation of £110m • EPS, underlying 96.7p up 6.7% • Proposed final dividend 28.35p, up 5.4% 22
Slide 23: Alan Parker, Chief Executive
Alan Parker Chief Executive 23
Slide 24: Agenda
Agenda • 2009/10 – Successfully achieving our three priorities • Looking ahead – Building market share across the business • Growth from customer focus • Expanding our network 24
Slide 25: 2009/10 priorities achieved
2009/10 priorities achieved Outperforming the market Reducing costs and improving efficiency Achieving cash flow neutrality 25
Slide 26: 2009/10 priorities achieved
2009/10 priorities achieved Outperforming the market 26
Slide 27: Hotels & Restaurants
2009/10: Outperforming the market Hotels & Restaurants 27
Slide 28: Recession action plan
2009/10: Outperforming the market Recession action plan FOCUSED • Brand awareness at an all time high* ADVERTISING • Now No.1 hotel brand INCREASED SALES • New Business Account users up 13% ACTIVITY • 20 new large corporate agreements • £29 driving lower price visibility PREMIER OFFERS • Value for m
Slide 29: Building positive sales momentum
2009/10: Outperforming the market Building positive sales momentum Year-on-year % Hotels & Restaurants like-for-like sales 4 0.04 Restaurants 2 0.02 0 Q1 Q2 Q3 Q4 -2 -0.02 Hotels & Restaurants -4 -0.04 -6 -0.06 Premier Inn -8 -0.08 -10 -0.1 Q1 Q2 Q3 Q4 29
Slide 30: Revpar outperformance in a competitive market
2009/10: Outperforming the market Revpar outperformance in a competitive market Regional like-for-like Revpar 0% -2% Like-for-like Revpar year-on-year % -4% -6% -8% Premier Inn -10% -12% -14% Total hotel market Q1 Q2 Q3 Q4 Source: TRI 30
Slide 31: Revpar driven by increased occupancy
2009/10: Outperforming the market Revpar driven by increased occupancy 4.0% Full Week 2.0% 0.0% 1 2 3 4 -2.0% -4.0% -6.0% -8.0% -10.0% Q1 Q2 Q3 Q4 -12.0% Occupancy %pts year-on-year Revpar year-on-year % 31
Slide 32: Commercial demand recovering
2009/10: Outperforming the market Commercial demand recovering 2.0% Midweek 0.0% 1 2 3 4 -2.0% -4.0% -6.0% -8.0% -10.0% Q1 Q2 Q3 Q4 -12.0% Occupancy %pts year-on-year Revpar year-on-year % 32
Slide 33: Leisure demand driven by focused marketing
2009/10: Outperforming the market Leisure demand driven by focused marketing 8.0% Weekend 6.0% 4.0% 2.0% 0.0% 1 2 3 4 -2.0% -4.0% -6.0% -8.0% -10.0% Q1 Q2 Q3 Q4 -12.0% Occupancy %pts year-on-year Revpar year-on-year % 33
Slide 34: Strongest hotel brand in the UK
2009/10: Outperforming the market Strongest hotel brand in the UK 100 point index YouGov brand index • Benchmarked positive net score from an average of six brand health measures Source: YouGov BrandIndex Standard scores moving average 16 weeks (Base: all respondents 57,262) 34
Slide 35: Leading customer preference
2009/10: Outperforming the market Leading customer preference YouGov brand index 30.0 Recommend 30.0 Quality 25.0 25.0 20.0 20.0 15.0 15.0 10.0 10.0 5.0 5.0 0.0 0.0 Dec Jan Feb Mar Apr Dec Jan Feb Mar Apr Premier Inn Travelodge Express by Holiday Inn Source : YouGov Brand Index all Hotels 4 week mov
Slide 36: Strong and improving restaurant customer scores
2009/10: Outperforming the market Strong and improving restaurant customer scores % Relative increase +5.6% +5.7% +2.1% Source: ORC International 36
Slide 37: Consistent improvement in restaurant sales
2009/10: Outperforming the market Consistent improvement in restaurant sales Like-for-like sales variance % 0.08 0.06 0.04 0.02 0 -0.02 -0.04 -0.06 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Source: Coffer Peach Business Tracker The market Whitbread restaurants 37
Slide 38: International expansion continues
2009/10: Successfully achieving our three priorities International expansion continues Bangalore, December 2009 Dubai International Airport, January 2010 38
Slide 39: 2009/10: Successfully achieving our three priorities
2009/10: Successfully achieving our three priorities 39
Slide 40: A step up for Costa
2009/10: Outperforming the market A step up for Costa Profit £m 4 year profit CAGR +21% 60% year-on-year growth 40
Slide 41: Strong like-for-like sales
2009/10: Outperforming the market Strong like-for-like sales % like-for-like sales Costa like-for-like sales % BRC-KPMG like- for-like retail sales % 2009 2010 41
Slide 42: Compelling advertising based on customer preference
2009/10: Outperforming the market Compelling advertising based on customer preference 42
Slide 43: Building our brand network
2009/10: Outperforming the market Building our brand network 1,600 Total stores 24% 1,288 International: 407 International: 531 UK: 881 UK: 1,069 2008/9 2009/10 2009/10 includes Coffeeheaven 43
Slide 44: Costa comes of age
2009/10: Outperforming the market Costa comes of age • Second largest international coffee shop brand • System sales growth up 28% to £516m • ROCE up from 27% to 37% • Operating margin up from 8.2% to 10.6% 44
Slide 45: Acceleration in Central Europe through acquisition
2009/10: Outperforming the market Acceleration in Central Europe through acquisition * Total Latvia 7 - 7 Poland 62 13 75 Czech 13 6 19 Hungary 4 3 7 Bulgaria 3 11 14 Total 89 33 122 * Existing Costa stores 45
Slide 46: Coffeeheaven
2009/10: Outperforming the market Coffeeheaven • An excellent strategic fit 46
Slide 47: 2009/10 priorities achieved
2009/10 priorities achieved Reducing costs and improving efficiency 47
Slide 48: Improving efficiency across the Group
2009/10: Successfully achieving our three priorities Improving efficiency across the Group • Structural programme on track – Total savings +£25m pa by February 2011 • Ongoing savings achieved by: – Outsourcing – logistics, payroll, back office accounting – Simpler systems • Operating cost control: –
Slide 49: 2009/10 priorities achieved
2009/10 priorities achieved Achieving cash flow neutrality 49
Slide 50: +£300m cashflow improvement
2009/10: Successfully achieving our three priorities +£300m cashflow improvement • Growth has continued - 2,240 new rooms - 312 net new Costa stores - 10,000+ rooms secured in pipeline 50
Slide 51: Agenda
Agenda • 2009/10 – Successfully achieving our three priorities • Looking ahead – Building market share across the business • Growth from customer focus • Expanding our network 51
Slide 52: Hull Citadel Way
Hull Citadel Way EAT SLEEP & DRINK WHITBREAD
Slide 53: Moving occupancy towards 80%
Building market share: Growth from customer focus Moving occupancy towards 80% • Growth levers implemented last year to continue occupancy benefits • Dynamic pricing now in place for profitable incremental Revpar – Lower pricing on shoulder nights – More competitive on advanced bookings – Take limit
Slide 54: Pipeline secured for c.25% UK expansion
Building market share: Expanding our network Pipeline secured for c.25% UK expansion Hotels Rooms 2010/11 openings 29 2,508 Future new sites 44 6,417 Extensions - 1,979 Total 73 10,904 NB: Excludes 15 hotels/631 rooms due to exit of Roadchef franchise in 2010/11 54
Slide 55: 30% of pipeline in London
Building market share: Expanding our network 30% of pipeline in London Scotland 913 rooms Greater London 3,002 rooms + 60% increase Northern England 1,124 rooms Midlands & Wales 1,390 rooms Northern Ireland 121 rooms Southern England Room pipeline excluding extensions 2,375 rooms 55
Slide 56: Costa: Second largest international coffee shop brand
Costa Second largest international coffee shop brand 56
Slide 57: Launch of Costa Coffee Club
Building market share: Growth from customer focus Launch of Costa Coffee Club • 1.5m cards activated since 4 March • Loyalty points on total spend to reward frequent customers • Database for ongoing relationship marketing Figures based on first 7 weeks of launch 57
Slide 58: Multiple routes of expansion
Building market share: Expanding the UK network Multiple routes of expansion • Existing markets – New towns – London high streets – Urban micro markets • New markets – Universities – Hospitals – Retail parks – Cinemas 58
Slide 59: Five large, fast-growing under-developed target markets
Building market share: Expanding the international network Five large, fast-growing under-developed target markets • 1.2 billion city China dwellers • c.4,000 branded India coffee shops • 310,000 Russia customers per store Middle East (UK 18,000) • Costa has Central Europe 11% market Source: Bain &
Slide 60: We pledge to turn unnecessary lights off
I pledge to car share once a week We pledge to turn unnecessary lights off 60
Slide 61: Looking ahead: integrated corporate responsibility programme
Looking ahead • An integrated programme of corporate responsibility • Six work streams Environment Employees Sourcing Health Customers Community • 60% of our customers and employees were ‘concerned’ about environmental issues • Achieved Carbon Trust Standard in 2009 61
Slide 62: Summary
Summary • Priorities achieved with profits increased • +£300m improvement in cashflow • Strong value brands in under developed market sectors • Strategy in place to grow market share • Measured network expansion plans • Subject to uncertain economic conditions, strong fundamentals remain 62
Slide 63: 63
63