FY21 operational highlights
· Whitbread's FY21 performance reflected the significant COVID-19 restrictions that were in place for the majority of the year in both the UK and Germany
· As a result, total sales were down 71.4% year-on-year reflecting the impact of these restrictions and the closure of our hotels and restaurants for substantial periods of the year
· In the UK, we have significantly outperformed the midscale and economy hotel market since reopening in August, with customer scores also remaining very strong throughout this period, despite the significant disruption
· In Germany, the market and our hotels operated at low levels of occupancy due to the pandemic. Despite this, we were able to materially accelerate the growth of our hotel network during the year, with a total open and committed pipeline now standing at 72 hotels, providing a very strong platform from which to increase our brand presence
React, Protect and Restore
· Our response to the COVID-19 crisis was rapid and robust, ensuring the safety of our guests and our staff, and protecting our balance sheet
· At the outset of the crisis, protective actions included pausing discretionary P&L spend, stopping non-essential capex and suspension of the dividend, and utilising UK and German Government support schemes
· Subsequently, both central office and hotel and restaurant headcounts were reduced, ensuring our labour model can respond more effectively to changes in demand
· The successful completion of a £1bn Rights Issue in June 2020, strengthened the balance sheet and enhanced our financial flexibility
· £550m Green Bonds issued in February 2021 provided further financial flexibility, while also underlining the Group's sustainability credentials and long-established Force for Good programme
Investing to win in FY22
· Expecting to invest over £350m of capital in this financial year
· Commercial initiatives, including the first major above-the-line Premier Inn marketing campaign for three years, are set to help both leisure and business demand recovery
· Continued disciplined investment in room refurbishments will ensure our hotels remain well-invested
· Opening 2-3,000 of our pipeline rooms in the UK and c.2,000 rooms in Germany
· Roll-out of 'Premier Plus' rooms recommenced, delivering superior returns
· Continued expansion of our pipeline in Germany; two organic hotels already added to our pipeline in FY22
· Next phase of efficiency programme launched, targeting an additional £100m of cost savings by FY24
Operational update
· In the UK, currently over 92% of our hotels are open, and we are ready to welcome leisure guests back to our hotels from 17 May, alongside the full reopening of all of our restaurants
· Strong demand is expected for 'staycations' in UK tourist destinations throughout the summer, with business and event-led leisure demand starting to gradually recover thereafter
· Currently 18 of our 30 operational hotels are open in Germany, with six of the temporarily closed hotels being refurbished and rebranded to Premier Inn. Despite the very recent tightening of Government restrictions, our significantly enlarged estate puts us in a strong position to win market share when demand returns
· Now targeting net-zero carbon emissions by 2040, a decade faster than originally targeted
Driving long-term value
· In the UK, we will continue to grow and innovate, by leveraging the powerful competitive advantages of our brand, market-leading direct distribution, our best-in-class operating model and our broad customer reach, while capitalising on the enhanced structural opportunities that will exist post COVID-19
· In Germany, we have a compelling opportunity to replicate our UK success story, and our aim is for Premier Inn to be the number one budget hotel operator. We will continue to invest in growing our pipeline and believe we have a long-term line-of-sight to over 60,000 rooms through both organic and inorganic investment
· Whitbread is well-placed to take advantage of the likely market structural changes, with supply contraction and constrained investment amongst independent and budget-branded operators in the UK and Germany
· Our strategy is underpinned by our well-established Force for Good programme, reflecting our ambitious commitments to operate responsibly and sustainably, reflecting the positive impact we can make for our employees, customers, suppliers, investors, communities and the environment
· Whitbread's brands, business model and balance sheet provides a strong platform for future growth and investment, which together with our ongoing efficiency programme enables us to drive attractive returns in the long-term
Alison Brittain, Whitbread Chief Executive Officer, commented:
“The last financial year was one of the most challenging in our 279 year history, as we operated under significant COVID restrictions which had many implications for our businesses, our customers and our people. Our business model enabled us to respond rapidly to the changing restrictions and to quickly adapt our operations as required, prioritising the health and safety of our colleagues and our customers. This response was possible due to the efforts of our colleagues in our hotels, restaurants and support centre, who continue to work tirelessly to maintain our very high operating standards, customer service and health and safety. I am extremely proud of, and grateful for, their incredible hard work and commitment in this most difficult year.
Our ability to navigate through this period, with the advantages of our unique operating model, the strength of the Premier Inn brand, and our market-leading direct distribution model, has enabled us to continue to deliver strong market share gains in the UK. Our exposure to the faster recovering budget sector, our resilient customer mix, and the enhanced structural opportunities that the COVID crisis has created, positions us well to continue this outperformance.
The vaccination programme in the UK means we can look forward to the planned relaxation of Government restrictions as we move into Summer, with the first major milestone being the return of leisure guests to our hotels, and the full reopening of restaurants from 17 May. We expect a significant bounce in leisure demand in our tourist locations during the summer, followed by a gradual recovery in business and event-driven leisure demand.
We hold a uniquely advantaged position in the UK market as the largest operator with the strongest brand, and we will continue to invest in our estate to enhance our customer proposition. Our investment in marketing includes the first major above-the-line Premier Inn marketing campaign for three years, branded 'Rest Easy”. In Germany, we remain confident of the opportunity to replicate our model in the UK and have materially grown our estate from six hotels at the start of the year to 30 operational hotels currently, and a total open and committed pipeline of 72 hotels, representing a nation-wide footprint with a presence in most major towns and cities.
We continue to take actions to ensure that we exit the crisis as a leaner, stronger and more resilient business, including commencing the next three-year phase of our efficiency programme that will target £100m of cost savings. Combined with our financial flexibility and strong balance sheet, this gives us the ability and the confidence to invest with discipline and focus on strong long-term returns. We are well-placed to enhance our market leadership position even further in the UK, and accelerate our growth in Germany, capitalising on the enhanced structural growth opportunities that will exist and driving long-term value for all our stakeholders.”
Financial highlights
|
|
|||
|
£m |
FY21 |
FY20 |
Change |
|
Statutory revenue1 |
589.4 |
2,071.5 |
(71.5)% |
|
Adjusted EBITDAR† |
(194.9) |
752.7 |
(125.9)% |
|
|
|
|
|
|
Adjusted (loss) / profit before tax† |
(635.1) |
358.3 |
(277.3)% |
|
Statutory (loss) / profit before tax |
(1,007.4) |
280.0 |
(459.8)% |
|
Statutory (loss) / profit for the year |
(906.5) |
217.9 |
(516.0)% |
|
|
|
|
|
|
Adjusted basic EPS† |
(287.6)p |
166.3p |
(272.9)% |
|
Statutory basic EPS |
(481.9)p |
125.3p |
(484.6)% |
|
Dividend |
– |
32.7p |
(100.0)% |
|
|
|
|
|
|
Cash and cash equivalents |
1,256.0 |
502.6 |
753.4 |
|
Net debt† |
(46.5) |
(322.9) |
276.4 |
|
Net debt and lease liabilities† |
(3,278.1) |
(2,943.5) |
(11.4)% |
1: Includes £0.5m of revenue relating to the Costa disposal transitional service agreement (FY20: £9.4m)
† signifies an alternative performance measure (APM) – Further information can be found in the glossary and reconciliation of APMs at the end of this document.
· The Group's FY21 financial performance reflected the closure of the vast majority of the business in the first half of the financial year, followed by a second half that, after operating throughout August and September with occupancy levels of over 50% in the UK, saw market demand fall significantly from November onwards, as increasingly severe COVID-19 restrictions were implemented
· As a result, FY21 statutory revenue was down 71.5%, with UK statutory revenue down 71.8%. Germany statutory revenue was behind 2.5% year-on-year, with the material growth in the size of the estate mostly offset by the impact of COVID restrictions
· The significant decline in revenue resulted in an adjusted loss before tax of £635.1m. Statutory loss before tax of £1,007.4m includes a non-cash impairment charge of £348.0m relating to goodwill in Germany, property, plant and equipment and right-of-use assets, as a result of impairment reviews triggered by the COVID-19 situation and its impact on current and future growth rates. The financial results benefited from c.£270m COVID related Government support schemes, including the UK Job Retention Scheme and from the UK business rates relief
· The business retains a strong balance sheet and liquidity position, enhanced by the successful £1bn Rights Issue completed in June 2020, and the £550m Green bond issuance in February 2021. At the end of the financial year, the business had access to £1,256.0m of cash and cash equivalents, and an undrawn Revolving Credit Facility of £950.0m.
FY22 Guidance
|
UK (FY22 vs FY20) |
|
· Sales: every 1% change in total sales vs FY20 has a £16.5m impact on profit before tax (improved from £18m due to increased flexibility in cost base)
In addition to the above:
· Net cost inflation partially offset by efficiencies: £30m · Marketing and channel investment: £20m · One-off FY22 COVID-19 costs and credits: o Government support: £80m credit (c.£40m business rates holiday, c.£40m furlough) o Additional COVID secure costs (e.g. social distancing) .c.£20-30m · New rooms (c.80% leasehold): FY22, c.2-3,000 |
|
Germany (absolute) |
|
· Accommodation sales: Every 1% decline in RevPAR vs our Pre-COVID expectations of c.£60 will result in a £1m reduction in profit before tax · Refurbishment of c700 Centro rooms has a c.£10m adverse PBT impact · F&B sales: c.15% of total accommodation sales · Central costs: £20m-£25m · New rooms (c.75% leasehold): FY22, c.2,000 |
|
Central and other costs (FY22 vs FY20) |
|
· Increase in financing costs vs FY20 due to debt refinancing and lower cash held on deposit (FY20 benefitted from holding Costa disposal proceeds): c.£15m- £20m |
|
Cashflow (absolute) |
|
· Breakeven: Group EBITDA (pre IFRS 16) breakeven (including the one-off benefits of furlough and business rates) for FY22 full year is at occupancy of c55% and ARR down c6% year-on-year vs FY20 · Capex: c.£350m of which c.£235m is in the UK, and c.£115m is in Germany |