Q3 FY20 trading update

16 Jan 2020 Financial & business

Solid Third Quarter performance with total sales growth of 1.0%

• UK total sales growth 0.3% for the third quarter, marginally improving the year-to-date run rate
• Further development in Germany with open + committed pipeline extended to almost 50 hotels
• Good progress on optimising the UK network, including 19 hotels trialling Premier Plus rooms
• Efficiency programme progressing in line with plans and partially offsetting structural inflation

¹Q3 = 13-week period ended 28 November 2019 | ²YTD = 39-week period ended 28 November 2019 | ³Includes Germany | ⁴includes Ireland

Alison Brittain, Whitbread PLC Chief Executive, said:

“Whitbread delivered a robust performance in the third quarter, growing total sales by 1%, despite challenging market conditions in the UK. We now have over 80,000 rooms in the UK & internationally, operating under the Premier Inn brand, with a committed pipeline of over 20,000 additional rooms. We also continue to achieve strong results from our efficiency programme, which is helping to partially offset high industry cost inflation and means we are on track to achieve our full year expectations for FY20.

The UK business achieved total sales growth of 0.3% in the third quarter. Our performance in the quarter reflects a good F&B performance and marginally declining total accommodation sales. Weak business and leisure confidence in the regions continued, which was partially offset by the strength of the central London market, where we outperformed.

Our growth in Germany remains firmly on target as our confidence strengthens for the long-term market opportunity. We are pleased with the performance of all three hotels we have opened to-date, in Frankfurt, Hamburg and Munich, and continue to extend the total committed pipeline in Germany. The open plus committed pipeline now stands at around 8,500 rooms across 48 hotels, including 22 hotels from the Foremost Hospitality and AcomHotel acquisitions. We will be opening around 20 hotels through the course of 2020.

Despite the short-term economic uncertainty, there remains significant long-term opportunities for Premier Inn in both the UK and Germany. We can access these due to our strong financial position, resilient model and ongoing investment to improve our market-leading proposition. Continuing to invest in growth and optimisation through our disciplined approach to capital allocation ensures we can create sustainable value for shareholders over the longer-term.”

Outlook for FY21

Whitbread is confident in its plans given the significant structural growth opportunities in the UK and internationally. The UK political & economic environment remains uncertain and the sustained industry inflation continues. It remains difficult to predict business confidence in the short-term and its impact on the market. However, Whitbread’s strong balance sheet, efficiency programme, resilient business model and ongoing investment puts it in a strong relative position to benefit as the environment improves.

Whitbread’s FY21 planning assumptions are as follows:

• Cautious approach to hotel demand, especially relating to business customer demand in the regions.
• Whitbread’s business model has a relatively high degree of operating leverage. This leads to every 1% movement in RevPAR impacting Profit before tax by £12-15 million.
• Total new gross capacity additions of approximately 4,500 new rooms across the UK & Ireland (c.3,000) and Germany (c.1,500)
• Net margin headwind of about £60 million comprising:
  • inflation of about £75 million, including the recently announced higher National Living Wage, higher utility costs and stranded costs following the Costa sale;
  • ongoing investment of £25 million to improve our market-leading proposition and distribution reach that will improve our performance in future years. This includes the addition of Premier Plus rooms, investment in our direct channels and IT infrastructure; and
  • this will be partially offset by the efficiency programme, with savings of around £40 million.
• German losses will improve to around £10 million next year as the pipeline accelerates and around 20 hotels are opened.
• FY21 debt financial interest costs are expected to be £10 million higher than FY20 following the return of capital during the first half of this year.

For more information please contact:

Investor queries | Whitbread | investorrelations@whitbread.com | +44 (0) 1582 888 633
Media queries | Tulchan Communications, David Allchurch / Jessica Reid | +44 (0) 20 7353 4200
Whitbread will host a webcasted briefing at 8am (GMT) on 16 January 2020, which can be accessed at www.whitbread.co.uk/investors.