Whitbread Plc · LSE:WTB
Whitbread — Investor Day (February 2019)
104 slides from Whitbread's investor day presentation, Feb 13, 2019
Slide 1: Capital Markets Day February 2019
Capital Markets Day February 2019 CAPITAL MARKETS DAY | FEBRUARY 2019
Slide 2: Welcome & Introduction
WELCOME & INTRODUCTION 2 2 2 CAPITAL MARKETS DAY |DAY CAPITAL MARKETS FEBRUARY | FEBRUARY2019 2019
Slide 3: Agenda for today
Agenda for today Welcome & introduction Alison Brittain p4 1 Long-term structural growth opportunities Alison Brittain p14 2 Unique model for sustainable value creation Alison Brittain p25 3 Best-in-class operational performance Simon Jones, Simon Ewins, Nigel Jones & Mark Anderson p37 4 Optimising
Slide 4: Our mission | The world's best budget hotel business
Our mission | The world’s best budget hotel business World’s strongest hotel brand UK’s favourite hotel 11% 10-year Sales CAGR 11% 10-year EBIT CAGR 80% 80% cash conversion occupancy Strong return on capital 97% rooms booked directly Best-in-class operations Strong financial performance 4 CAPITAL MA
Slide 5: Our purpose | Delivering guests the best value-for-money
Our purpose | Delivering guests the best value-for-money Widest customer advantage Integrated Best value-for-money & trading Scale best-in-class direct reach & economies distribution of scale F&B model Consistent flexibility In-house Property Superior network-wide breakfast network access Operationa
Slide 6: Our ambition | The best hotel business in key markets
Our ambition | The best hotel business in key markets Long-term Leveraging scale to extend UK advantage UK growth & create >110k room network International Replicating the scale & success of our UK expansion business over the long-term in Germany Accelerating Enhancing our international organic grow
Slide 7: 2016 plan | A consistent strategy over the last three years
2016 plan | A consistent strategy over the last three years Strong fundamentals + Evolving environment Clear plan for growth • Broader ✓ Significant competitor Grow and innovate in structural dynamics & market 1 core UK markets opportunities disruptors ✓ Unique brand • Rising customer Focus on our s
Slide 8: Our team | An experienced & proven team
Our team | An experienced & proven team Executive Team Independent Board • Consumer & business- Alison Brittain Chief Executive to-business experience Adam Crozier Non-Executive Chairman Nicholas Cadbury • Hospitality industry Richard Gillingwater Finance Director knowledge Senior Independent Direct
Slide 9: Our delivery | We've executed our plans & created value
Our delivery | We’ve executed our plans & created value Grow and innovate in Focus on our strengths to Build capability to core UK markets grow internationally support long-term growth • Opened 14,000 rooms over • Completed exit of non- • Invested £1.5 billion over last 3 years, with faster core & u
Slide 10: Our delivery | Creating & realising value from Costa
Our delivery | Creating & realising value from Costa Grow and innovate in Focus on our strengths to Build capability to core UK markets grow internationally support long-term growth • Multi-channel network • Re-focused international • Global centre of roasting & focus developed operations on growth
Slide 11: Our performance | Long-term growth at strong ROCE
Our performance | Long-term growth at strong ROCE 35 00 Compounding, profitable growth 7 0 45 00 Strong ROCE on a growing capital base 17 % 622 400 592 15.7% 3 00 569 60 15.3% 15.3% 15.4% 15.2% 35 00 15 % 504 13.9% 2 5 00 50 13.6% 3 00 431 12.9% 13 % 377 11.7% 2 00 40 2 5 00 11.5% 11.3% 344 310 3,29
Slide 12: Our creation of value | Strong long-term TSR growth
Our creation of value | Strong long-term TSR growth TSR since our last Capital Markets Day £1,000 in 2009 now worth £6,800 Dec'16 Jun'17 Dec'17 Jun'18 Dec'18 Jan'09 Jan'10 Jan'11 Jan'12 Jan'13 Jan'14 Jan'15 Jan'16 Jan'17 Jan'18 Jan'19 Whitbread FTS E 100 FTS E 350 FTS E 350 Travel & Leisure Source:
Slide 13: Attractive opportunity for ongoing investment
Attractive opportunity for ongoing investment Long-term structural • Attractive long-term structural growth opportunities in UK & Germany 1 growth opportunities • Highly fragmented markets with declining independent share Unique model for • Vertically integrated model enables growth at good ROCE 2 s
Slide 14: 1. Long-term structural growth opportunities
1. LONG-TERM STRUCTURAL GROWTH OPPORTUNITIES 14 14 14 CAPITAL MARKETS DAY |DAY CAPITAL MARKETS FEBRUARY | FEBRUARY2019 2019
Slide 15: Long-term structural growth opportunities
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Long-term structural growth opportunities The budget hotel markets in UK & Germany are highly attractive a long-term structural growth opportunities Both UK & Germany are hig
Slide 16: UK market | Long-term growth opportunity
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure UK market | Long-term growth opportunity • UK market is large with UK hotel demand (million room nights p.a.) good characteristics • Market remains very 36.3 38.1 39.4 fragme
Slide 17: UK market | A large market with good characteristics for growth
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure UK market | A large market with good characteristics for growth Market fragmentation provides opportunity for Premier Inn Large Regional market critical for domestic scale (A
Slide 18: UK market | Fragmentation allows long-term market share gain
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure UK market | Fragmentation allows long-term market share gain 6% 9% 11% 12% • Significant independent 12% market continuing to lose 15% 18% 19% share Budget branded 23% • Asse
Slide 19: UK market | We have been winning share from independents
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure UK market | We have been winning share from independents Independent capacity (’000 rooms) continues to decline • Premier Inn has won market share at a catchment level 2015 3
Slide 20: German market | Stand-out growth opportunity in Europe
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure German market | Stand-out growth opportunity in Europe • German market is large German hotel demand (million room nights p.a.) with good characteristics • No clear market lea
Slide 21: German market | Strong domestic, short-stay customer base
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure German market | Strong domestic, short-stay customer base High industrial dispersion • Germany has high regional High population dispersion dispersion of economic activity &
Slide 22: German market | Low budget-branded market penetration
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure German market | Low budget-branded market penetration High market fragmentation (‘000 room supply) 10 0 0 • Top 10 brands in Germany account for 136 142 145 150 154 158 162 1
Slide 23: UK & Germany | Short-stay customers require excellent essentials
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure UK & Germany | Short-stay customers require excellent essentials What is important for short-stay customers? • Surveys of >10k customers conducted in 2018 45% Basics 39% 39%
Slide 24: UK & Germany | Highly compelling markets for long-term investment
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure UK & Germany | Highly compelling markets for long-term investment Large • UK & Germany are large, growing hotel markets fragmented markets • Markets fragmented with large & d
Slide 25: 2. Unique model for sustainable value creation
2. UNIQUE MODEL FOR SUSTAINABLE VALUE CREATION 25 25 CAPITAL MARKETS DAY |DAY CAPITAL MARKETS FEBRUARY | FEBRUARY2019 2019
Slide 26: Unique model for sustainable value creation
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Unique model for sustainable value creation New capacity, consistent high quality & scale are required to access a structural growth opportunities Our vertically integrated m
Slide 27: Accessing growth | Through specific new capacity, control & scale
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Accessing growth | Through specific new capacity, control & scale Network & • Our hotels are fully booked on most nights capacity addition required • Investment in new capaci
Slide 28: Hotel industry | Segregated ownership across the value chain
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Hotel industry | Segregated ownership across the value chain Hotel industry value chain Property Property Brand Hotel Inventory development ownership operation distribution S
Slide 29: Hotel industry | Profit pools split across the value chain reduce scale
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Hotel industry | Profit pools split across the value chain reduce scale Brand 80 Indicative EBIT margin / ROCE Brand licensing delivers high margins & ROCE but low share of r
Slide 30: Our model | Vertically integrated to deliver quality & value-for-money
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Our model | Vertically integrated to deliver quality & value-for-money Hotel industry value chain Property Property Hotel Inventory Brand development ownership operation dist
Slide 31: Our model | Maximising access to domestic budget sector growth
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Our model | Maximising access to domestic budget sector growth Wholly asset-light Full separation of Integrated & mixed Fully integrated & & fully franchised property & opera
Slide 32: Investment model | Highly attractive unit economics
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Investment model | Highly attractive unit economics Illustrative new UK non-London Illustrative maturity curve 100-room hotel £m 10 0 90 Revenue 2.5 80 Rent (if leasehold) (0
Slide 33: Investment model | A long runway of growth at strong ROCE
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Investment model | A long runway of growth at strong ROCE >50k Further format 8k potential TBD 2k >20k 2k >170k 14k Long runway Significant >110k of growth in potential Germa
Slide 34: Investment model | Near-term challenges do exist
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Investment model | Near-term challenges do exist £ Inflation remains Confidence is Investing for high weakening long-term growth 4.0 10 3.5 5 3.0 0 455 2.5 333 338 2.0 -5 292
Slide 35: Investment model | Rewards flexibility & through-cycle focus
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Investment model | Rewards flexibility & through-cycle focus Premier Inn delivers long-term sustainable performance 0 .2 • We have delivered long-term growth at good ROCE 2 0
Slide 36: Our plan | A proven strategy to create shareholder value
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Our plan | A proven strategy to create shareholder value We have highly compelling Our unique model delivers We are optimising our capital long-term structural growth best-in
Slide 37: 3. Best-in-class operational performance
3. BEST-IN-CLASS OPERATIONAL PERFORMANCE 37 37 37 CAPITAL MARKETS DAY |DAY CAPITAL MARKETS FEBRUARY | FEBRUARY2019 2019
Slide 38: Best-in-class operational performance
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Best-in-class operational performance We have a unique operating model which delivers a best-in-class performance & enables growth b Operational excellence ensures industry-l
Slide 39: Unique operating model | The world's best budget hotel business
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Unique operating model | The world’s best budget hotel business • Leading value-for-money • Strongest hotel brand advantage Integrated trading • 97% direct booking • Largest
Slide 40: Unique operating model | Industry-leading scale & performance
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Unique operating model | Industry-leading scale & performance Holiday Inn Travelodge IBIS Express Best-in-class direct 89% ~80% ~80% 97% distribution 42,561 total rooms 16,78
Slide 41: Unique operating model | #1 choice for business & leisure
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Unique operating model | #1 choice for business & leisure The first choice for more travellers Excellent quality and value creates strong brand First choice consideration: “X
Slide 42: Unique operating model | A winning customer proposition
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Unique operating model | A winning customer proposition Which? Top rated hotel chain Which? Score out of 5 Holiday (Ranked in order of Inn Travelodge Express Ibis Premier Inn
Slide 43: Integrated trading | Strong preference for direct distribution
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Integrated trading | Strong preference for direct distribution Acquiring • Domestic, short-stay guests have high travel Acquisition Cost per new Likelihood frequency channel
Slide 44: Integrated trading | Market-leading customer acquisition capabilities
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Integrated trading | Market-leading customer acquisition capabilities Digital innovation driving direct distribution model Digital capabilities lowering marketing costs 2.0 I
Slide 45: Integrated trading | Dynamic pricing enhances our brand proposition
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Integrated trading | Dynamic pricing enhances our brand proposition Pricing supports our customer proposition Maximising yield within our customer proposition Prices are • We
Slide 46: Integrated trading | Improving pricing efficiency
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Integrated trading | Improving pricing efficiency Significant improvement in pricing efficiency • We have created a system that allows 0.9 Index evolution & flexibility Room
Slide 47: Integrated trading | Enhanced service for large corporates
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Integrated trading | Enhanced service for large corporates Dedicated business booker platform Pricing benefits for business customers Customer value Automated Bespoke discoun
Slide 48: In-house F&B model | Our guests value good F&B
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure In-house F&B model | Our guests value good F&B F&B is fundamental to achieving high occupancy Our guests prefer our in-house F&B offer 25% of Premier Inn guests would not sta
Slide 49: In-house F&B model | Format flexibility to optimise site-level ROCE
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure In-house F&B model | Format flexibility to optimise site-level ROCE Opportunity to sell F&B to Type of Regional Local Yes external catchment demographic customers? Occasions
Slide 50: In-house F&B model | Proposition, innovation and driving spend
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure In-house F&B model | Proposition, innovation and driving spend Investing in the F&B experience Innovation to increase customer scores & spend Beefeater refurbishment programm
Slide 51: Operational control | Consistent quality through central control
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Operational control | Consistent quality through central control • Delivering great service • Focus on customer • The right team, in the right satisfaction drivers place, at
Slide 52: Operational control | Highly engaged team
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Operational control | Highly engaged team Recruitment Engagement Development Consistently ranked as Apprenticeship • Pay for skill-set We have ~30,000 a top UK employer progr
Slide 53: Operational control | Strong brand standards
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Operational control | Strong brand standards One high standard for Consistent product & Comprehensive site all sites service audits Warm, friendly Arrival welcome by team Man
Slide 54: Operational control | Refurbishment cycle
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Operational control | Refurbishment cycle Central decisions made Importance of consistent Reducing the costs of across the estate refurbishments refurbishment • Prioritises h
Slide 55: Operational control | Refurbishment cycle
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Operational control | Refurbishment cycle Initial investment £10k initial investment focusing on what matters most to short-stay guests High quality hypnos mattress and choic
Slide 56: Operational control | Clear site-level KPIs
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Operational control | Clear site-level KPIs Clear KPIs aligned to business-wide objectives driving site-level performance Customer Heartbeat Profitable growth Winning Teams F
Slide 57: Operational control | Site labour models
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Operational control | Site labour models Controlled labour models using a number of tools Examples of labour cost savings • Automation of compliance activities through Co-Pil
Slide 58: Format innovation | Hub enabling greater site & customer reach
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Format innovation | Hub enabling greater site & customer reach Key aspects of hub • City centre locations • Close to attractions & business destinations • Well-connected to t
Slide 59: Format innovation | New catchment opportunities with hub
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Format innovation | New catchment opportunities with hub Current hub rooms and pipeline Unit economics (vs Premier Inn) London 1,497 1,047 Revenue £2.5m Higher Rent (if lease
Slide 60: Format innovation | Zip trial targeting new customer groups
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Format innovation | Zip trial targeting new customer groups Unit economics (vs Premier Inn) Revenue £2.5m Lower Prices start at £19 Rent (if leasehold) £(0.6)m Lower per room
Slide 61: 15 Minute Break
15 MINUTE BREAK (PLEASE DO ZIP OVER TO OUR MOCK-UP ROOM) 61 61 61 CAPITAL MARKETS DAY |DAY CAPITAL MARKETS FEBRUARY | FEBRUARY2019 2019
Slide 62: Everyday efficiency | We have made strong progress over last 3 years
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Everyday efficiency | We have made strong progress over last 3 years We have delivered our committed programme • We began our first efficiency programme 3 years ago covering
Slide 63: Everyday efficiency | End-to-end approach delivers significant saving
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Everyday efficiency | End-to-end approach delivers significant saving Case study: Television procurement Case study: Furniture procurement • Large flat-screen TV is a key • A
Slide 64: Everyday efficiency | A focused separation of Costa is underway
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Everyday efficiency | A focused separation of Costa is underway • Significant work already delivered in Significant, but manageable IT separation underway 125 days since Tran
Slide 65: Everyday efficiency | We've run a lean 'Group' model for many years
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Everyday efficiency | We’ve run a lean ‘Group’ model for many years Executive Finance Legal HR Board Reporting Internal Audit Tax Company Secretariat Talent development Pensi
Slide 66: Everyday efficiency | Evolving to a single business structure
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Everyday efficiency | Evolving to a single business structure Executive Committee Chief Executive | Alison Brittain UK Operations Property & Human Supply Chain CoSec & Financ
Slide 67: Everyday efficiency | Extending our medium-term ambition
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Everyday efficiency | Extending our medium-term ambition A £1.6 billion total cost base Opportunity for Everyday Efficiency Above site costs • Central overheads • End-to-end
Slide 68: Everyday efficiency | Delivering sustainable, long-term savings
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Everyday efficiency | Delivering sustainable, long-term savings • Efficiency is Central • Utilising being embedded PMO technology to oversight into our everyday enable focus
Slide 69: Force for Good | Integrated throughout our operating model
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Force for Good | Integrated throughout our operating model Opportunity Community Responsibility Solar panels • Making meaningful • Being a place where contributions to the •
Slide 70: Property flexibility | Delivering growth & improving asset efficiency
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property flexibility | Delivering growth & improving asset efficiency Rigorous • Flexible approach to property is network essential to deliver growth ambition planning • Rigo
Slide 71: Property flexibility | A strong, valuable property portfolio
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property flexibility | A strong, valuable property portfolio Property portfolio valuation Broad range of mature property sizes (# rooms) • Current market value of the freehol
Slide 72: Property flexibility | A strong, valuable property portfolio
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property flexibility | A strong, valuable property portfolio Strategic No Is the site Yes Value creation No Yield Strong Strong yield reason to hold? mature? opportunity? pot
Slide 73: Property flexibility | Superior site access
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property flexibility | Superior site access London presents the biggest opportunity for growth Mixed freehold / leasehold model unlocks opportunity Premier Inn future estate
Slide 74: Property flexibility | Rigorous network planning
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property flexibility | Rigorous network planning Hotel market analysis Hotel market forecast Premier Inn opportunity Current supply Forecast supply Addressable share Branded
Slide 75: Property flexibility | Improving asset maturity
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property flexibility | Improving asset maturity Catchment case study: Southwark London Southwark RevPAR (£) (Borough Market) 100 16 0 ,0 0 14 0 ,0 0 London Southwark 95 (Tate
Slide 76: Property flexibility | Catchment optimisation
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property flexibility | Catchment optimisation “Perfect portfolio” strategy Catchment case study: Preston • Calculate total room opportunity Look at • Determine best location
Slide 77: Property flexibility | Intensifying assets
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property flexibility | Intensifying assets Strategies for asset intensification Case study: Newbury a Current Premier Inn Space optimisation & extension 1 opportunity b Poten
Slide 78: Germany | Leveraging UK model & scale advantages
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Germany | Leveraging UK model & scale advantages • 100% direct booking in Frankfurt • Build the brand quickly Integrated advantage trading • Selective OTA use on expansion •
Slide 79: Germany | Proving the business case in Frankfurt
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Germany | Proving the business case in Frankfurt Frankfurt hotel performing well • Opened February 2016 • 210 rooms • 65% business / 35% leisure guests • 85% domestic German
Slide 80: Germany | Premier Inn proposition positioned to win in Germany
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Germany | Premier Inn proposition positioned to win in Germany High quality brassware & sanitaryware Hot powerful shower Integrated ground floor Large TV & Luxury Hypnos F&B
Slide 81: Germany | Emulating the UK direct distribution model
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Germany | Emulating the UK direct distribution model Start with a • Focus on high quality rooms Unit economics (vs Premier Inn UK) great product • Differentiating value propo
Slide 82: Germany | Utilising UK network planning expertise & local knowledge
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Germany | Utilising UK network planning expertise & local knowledge Network planning process replicates the UK model Continuously extending the German pipeline Forecast suppl
Slide 83: Germany | Approach to growth & site access
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Germany | Approach to growth & site access Property flexible to maximise site opportunity M&A to accelerate scale To be • In February 2018 we announced the acquisition of Org
Slide 84: 4. Optimising our capital structure
4. OPTIMISING OUR CAPITAL STRUCTURE 84 84 84 CAPITAL MARKETS DAY |DAY CAPITAL MARKETS FEBRUARY | FEBRUARY2019 2019
Slide 85: Optimising our capital structure
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Optimising our capital structure Maintaining a strong balance sheet is fundamental to delivering a our value-creating long-term strategy Our flexible approach to property own
Slide 86: Capital structure | Value creation through investing at good ROCE
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Capital structure | Value creation through investing at good ROCE Compelling opportunities to invest over the long-term Generating a good premium to WACC 0 .18 UK • Key to ma
Slide 87: Capital structure | Strong balance sheet to ensure flexibility
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Capital structure | Strong balance sheet to ensure flexibility 7 0 Strong cash conversion 35 00 Controlled debt management 4 .5 94% 60 4 .3 3 00 90% 2,227 4 .1 50 2,058 2 5 0
Slide 88: Property ownership | Creates a significant competitive advantage
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property ownership | Creates a significant competitive advantage Supporting growth strategy Rational funding choice • Pursuit of freehold site opportunities without • We conv
Slide 89: Property ownership | Our mixed approach delivers our growth plans
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property ownership | Our mixed approach delivers our growth plans Fully asset OpCo / Prop Co Accelerated Current balanced Wholly light separation sale & leaseback model freeh
Slide 90: Property ownership | Considerations for accessing property value
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Property ownership | Considerations for accessing property value • Assets that have maximised the use potential should be Asset considered for property-backed finance • Poten
Slide 91: Capital structure | Funding choices for incremental investment
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Capital structure | Funding choices for incremental investment Other benefits / Marginal cost Flexibility Speed to access issues Funding choice attractiveness Limited short-t
Slide 92: Surplus capital | Use of £3.9b Costa sale proceeds
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Surplus capital | Use of £3.9b Costa sale proceeds • Separation activity progressing well & Total proceeds £3,900m in line with our expectations Separation & £100m • Agreemen
Slide 93: Surplus capital | Illustrative optimal pro-forma structure
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Surplus capital | Illustrative optimal pro-forma structure H1 FY19 Actual H1 FY19 Pro Forma H1 FY19 Pro Forma (inc. Costa) (post Costa sale) (ceiling position) FFO (12 months
Slide 94: Surplus capital | Efficient return to shareholders
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Surplus capital | Efficient return to shareholders One-off surplus capital from Costa sale Sustainable dividend policy • Initially aiming to repurchase • Reduced earnings fol
Slide 95: Surplus capital | Pursuing a tender offer in June 2019
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Surplus capital | Pursuing a tender offer in June 2019 Costa Sale Buybacks Capital Full-Year AGM Completion started Markets Day Results 19 June 3 January 17 January 13 Februa
Slide 96: Outlook | Sustainable growth at good ROCE over long-term
1 Long-term structural opportunity 2 Unique model creates value 3 Best-in-class operations 4 Optimising our capital structure Outlook | Sustainable growth at good ROCE over long-term • Domestic travel market typically grows in line with GDP through the cycle Revenue • Whitbread total revenue growth
Slide 97: Our plans for long-term growth
OUR PLANS FOR LONG-TERM GROWTH 97 97 97 CAPITAL MARKETS DAY |DAY CAPITAL MARKETS FEBRUARY | FEBRUARY2019 2019
Slide 98: Conclusions | A proven strategy to create shareholder value
Conclusions | A proven strategy to create shareholder value We have highly compelling Our unique model delivers We are optimising our capital long-term structural growth best-in-class performance & structure & capabilities to opportunities enables growth support long-term growth Focus on our Optimis
Slide 99: Questions
QUESTIONS 99 99 99 CAPITAL MARKETS DAY |DAY CAPITAL MARKETS FEBRUARY | FEBRUARY2019 2019
Slide 100: Appendices
APPENDICES I. Definitions p101 II. Lease-adjusted net debt to FFO p102 III. Cautionary statement p103 Whitbread ADR programme – WTDBY Whitbread has established a sponsored Level I American Depositary Receipt (ADR) programme for which Deutsche Bank perform the role of depositary bank. The Level I pro
Slide 101: Appendix I | Definitions
Appendix I | Definitions Adjusted net debt Net debt adjusted for cash not readily available Adjusted property rent Property rent less a proportion of contingent rent Average Room Rate (ARR) Hotel accommodation revenue divided by the number of rooms occupied by guests Discretionary free cash flow Cas
Slide 102: Appendix II | Lease-adjusted net debt to FFO
Appendix II | Lease-adjusted net debt to FFO FY14 FY15 FY16 FY17 FY18 H1 FY19* Net cash flow from operations 430 519 573 626 621 650 Movement in working capital (16) (27) (12) (35) (12) (22) Unadjusted funds from operations 414 492 561 591 609 628 Cash interest 19 18 25 35 34 35 Adjusted property re
Slide 103: Appendix III | Cautionary statement
Appendix III | Cautionary statement Nothing contained in this presentation is intended to constitute an offer, invitation or inducement to engage in an investment activity for the purposes of the prohibition on financial promotions under the Financial Services and Markets Act 2000. In making this pr
Slide 104: Contacts
CONTACTS Matt Johnson Investor Relations Director E matt.johnson@whitbread.com Ann Hyams Investor Relations Manager E ann.hyams@whitbread.com Amit Mistry Investor Relations Manager E amit.mistry@whitbread.com M +44 7848 146 761 M +44 7796 709 087 M +44 7540 150350 Whitbread plc Whitbread Court, Houg