Whitbread plc Preliminary Results Announcement FY 2022

Sustained outperformance in UK with strong current trading momentum; rapid estate growth in Germany; dividend restored

FY22 financial year is a 53 week period ended 3 March 2022. FY21 is a 52 week period. Percentage comparisons are on a 53 week versus 52 week basis unless stated otherwise. Where relevant, comparisons are made to either last year (FY21) or to FY20, the last financial period before the onset of the COVID pandemic which was 52 weeks ended 27 February 2020.

FY22 highlights

• Continued significant market outperformance in the UK, driven by the strength of our commercial and operational initiatives along with the inherent strengths of our brand, scale and direct distribution
• Premier Inn total accommodation sales growth was 14.8pp ahead of the midscale and economy market in FY22, and 17.3pp ahead in H2
• Strong recovery from last year – total UK accommodation sales were 198.0% ahead of FY21 with total UK food and beverage sales 170.2% ahead
• Versus FY20 (pre-COVID):

o  As a result of our business being open to only essential business travel for the majority of the first quarter, UK total accommodation sales were 11.7% behind pre-COVID levels (and like-for-like 15.5% behind). However, from Q2 onwards, performance improved significantly, quickly returning to, and then exceeding pre-COVID levels

o  In H2, total UK accommodation sales were 12.5% ahead (7.9% ahead on a 52-week basis) of pre-COVID levels, and like-for-like 7.5% ahead (3.2% ahead on a 52-week basis, despite the impact of the Omicron COVID variant in Q4

o  Total UK food and beverage sales were 30.9% behind FY20 (32.7% behind on a 52-week basis), again due to lockdown closures, recovering in H2 to 9.7% behind (13.3% behind on a 52-week basis)

• Germany total open and committed pipeline now stands at 78 hotels, with 37 open hotels, compared to 6 open hotels at the start of the pandemic, with the rapid estate growth driving statutory revenue 206.1% ahead of FY21 and 198.3% ahead of FY20
• Resumption of dividend payments with the Board declaring a final dividend per share of 34.7p resulting in a total dividend payment of £70m, payable on 1 July 2022, reflecting both the Group's encouraging trading, and confidence in the outlook

Financial summary

• FY22 statutory revenues were 189.0% ahead of FY21 reflecting the strong recovery in sales post COVID restrictions, and the estate growth in the UK and Germany
• FY22 statutory profit before tax of £58.2m, compared to a loss of £1,007.4m in FY21. Adjusting items before tax in the year were a net credit of £74.0m, including £33.2m profit from property disposals, and £42.0m of net property impairment reversals (FY21: £109.2m charge)
• Both the FY22 statutory profit and the adjusted loss before tax of £15.8m benefitted from £126.5m of COVID related UK Government support schemes, a significant reduction from the prior year (FY21: £260.3m), and £44.3m of COVID related support schemes in Germany (FY21: £11.8m)
• The Group retains a strong balance sheet and liquidity position, as it targets a return to investment grade metrics, enabling on-going investment in our comprehensive growth strategy. Cash inflow before debt repayments was £80.3m in the second half and net cash at the end of the year was £140.5m.

Outlook

• Premier Inn UK's hotel trading in the 7 weeks to 21 April 2022 remains well ahead of the market; total accommodation sales were 326.6% ahead of the same period last year and 29.9% ahead of FY20 (pre-COVID), representing a 28.3pp outperformance of the midscale and economy market
• The Group's network planning exercise has identified an acceleration in the exit of independent operators from the UK market, providing further opportunity for Premier Inn to take market share. The Group expects to add c.1,500 – 2,000 rooms in the UK and c.2,000 – 2,500 rooms in Germany in FY23
• Thevalue pub and restaurant sector in which we operate remains behind pre-COVID levels. Premier Inn UK food and beverage sales improved to be well ahead of FY22 and 4.6% behind FY20 levels in the seven weeks to 21 April 2022
• Sector cost year-on-year inflation in FY23 is now anticipated to be around 8%-9%, c.1% higher than previously guided at our Q3 results. The Group expects to largely offset these higher levels of inflation through cost efficiencies, estate growth and pricing power
• Three-year cost saving programme extended by one year to FY25, delivering c.£140m across FY22 to FY25
• Premier Inn Germany occupancy levels were at 51.2% in the first seven weeks of FY23, performing in-line with the market. Government COVID restrictions acted as a significant headwind in the German hotel market throughout FY22 and into FY23. While restrictions were largely removed at the beginning of April 2022, the market is still some way behind pre-COVID levels. FY23 Germany loss before tax is expected to be c.£60m-£70m, reflecting the slower recovery of the hotel market in Germany, and the maturity impact of our new estate. We have no reason to believe the market won't come back strongly in due course.
• Resumption of dividend payments with the Board declaring a final dividend per share of 34.7p resulting in a total dividend payment of £70m, payable on 1 July 2022, reflecting both the Group's encouraging trading, and confidence in the outlook

Driving long-term value

• In the UK, we will grow by leveraging the powerful competitive advantages of our scale, brand, direct distribution, best-in-class operating model, and broad customer reach, returning to pre-COVID RevPAR levels in the short-term and profit before tax margins thereafter
• In Germany, we are expanding at pace, investing in both organic and inorganic growth, and building the Premier Inn brand proposition as we establish a nationwide footprint
• Whitbread is well-placed to take advantage of both the accelerated supply contraction in the market, that we are now beginning to see, 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, delivering ambitious commitments to operate responsibly and sustainably, and reflecting the positive impact we can make for our employees, customers, suppliers, investors, communities and the environment

FY22 Financial summary

1: Includes revenue relating to the Costa disposal transitional service agreement of £0.5m in FY21 and £9.4m in FY20

† signifies an alternative performance measure (APM) – Further information can be found in the glossary and reconciliation of APMs at the end of this document.

Sales growth comparisons:

• Week 53 total sales were £41.9m and the estimated profit before tax was c.£4m.

Alison Brittain, Whitbread Chief Executive Officer, commented:

“Whitbread's performance in the year was strong, with revenues and profits recovering exceptionally well from last year. Our hotels traded well-ahead of the market in the UK driven by our 'investing to win' commercial initiatives and the strong appeal of our customer offer. As restrictions eased after the first quarter, high levels of leisure demand and improving business demand helped drive UK accommodation sales ahead of pre-COVID levels throughout the summer and into autumn, with sales remaining resilient through Q4 despite the emergence of the Omicron COVID variant. As we move into the next phase of our COVID recovery, this excellent performance, combined with confidence in the Group's outlook, means that the Board is now proposing the reinstatement of dividend payments.

Our operational performance throughout the year was outstanding and testament to the hard work and dedication of our employees, adapting at short notice to the implementation of Government restrictions, while at all times ensuring the safety of our customers. The summer period in particular saw very high levels of demand in our hotels, with many continuously at full occupancy. Our teams really stepped up, and I am extremely grateful for their commitment and effort during this period.

Whilst our hotel performance was excellent, the value pub and restaurant sector in which we operate has seen a slower recovery post reopening in May 2021. We are seeing an improvement in our UK restaurants performance, and we are confident the commercial initiatives we have recently launched will help drive a further improvement in sales.

We hold a uniquely advantaged position in the UK market as the largest operator with the strongest brand, alongside our direct distribution, best-in-class operating model and broad customer reach. Furthermore, backed by our strong balance sheet, we have invested through the cycle, in new hotels, Premier Plus rooms and high levels of refurbishments, ensuring we maintain our stand-out customer proposition in the budget sector. This, combined with the evidence of an acceleration of supply contraction within the independent hotel sector, presents Premier Inn with the opportunity to accelerate its market share gains, an opportunity on which we are fully capitalising as we continuously strengthen our customer offer.

The hotel market in Germany is recovering at a slower pace than the UK due to the higher level of Government restrictions which have lasted longer. However, we have no reason to believe the market won't come back strongly in due course. During the summer, when restrictions were eased, we saw good trading momentum, particularly in those destinations with a greater leisure exposure. With our open hotel estate now standing at 37 hotels, all now branded Premier Inn, with a further 41 hotels in the pipeline, the foundations of a successful business are already in place. We have great quality hotels in prime locations, appealing to a broad customer base, and scoring highly with our guests. The opportunity for the Group to create value in Germany remains compelling as we look forward to being able to fully trade the estate, in the majority of cases for the first time, in the absence of Government restrictions. We will also continue to take opportunities to grow our German estate, and our commitment to that market will deliver attractive long-term returns.

Our Force for Good sustainability programme underpins everything we do. During the year we set further stretching targets, including accelerating our net zero Carbon target to be achieved by 2040, and setting eight clear diversity and inclusion commitments, including a target of 40% female representation in our senior leadership roles, which we have already surpassed. We are making good progress across our ESG agenda and have worked hard to ensure it is fully embedded within the operations of the business; we look forward to discussing this further at our Force for Good investor teach-in on 24 May 2022.

As we move into the next phase of our post-COVID recovery, Whitbread is well-placed to enhance our market leadership position further in the UK, to accelerate our growth in Germany, and drive long-term value for all our stakeholders.”