FY18 Full Year Results/media/Files/W/Whitbread/report-and presentations/2018...FY18 FULL YEAR...

FY18 FULL YEAR RESULTS | APRIL 2018

FY18 Full Year ResultsApril 2018


Contents

Highlights Alison Brittain p3

Financial performance Nicholas Cadbury p6

Strategic update Alison Brittain p16

Structure update Alison Brittain p34

Appendices p39

2


Summary | Strong momentum in delivering our plan

• Deliver capacity growth in Premier Inn to over 100,000 rooms

• Grow Costa to over 3,000 sites in the UK

• Double the Costa Express network

Structural growth opportunity

Market leading brands and loyal customers

Continued disciplined capital management

• Replicate Premier Inn UK success in Germany

• Increasing ambition to grow Costa in China

• Accelerate Costa Express growth internationally

• Increased efficiency target from £150m to £250m with £100m delivered over next 2 years

• Deliver modern & stable IT platforms

• Be a Force for Good

Long term growth in earnings and dividends combined with strong return on capital

3

Focus on our strengths to grow

internationally

Build capability to support long-term

growth

Grow & innovate in core UK markets1 2 3


Committed to creating two high-quality independent companies

4

• Decision to demerge Costa following regular & rigorous Board review

• Two highly attractive businesses- attractive economics- leading market positions- structural growth opportunities

• Clear plans in both businesses to create long-term sustainable value

• Strong progress in delivery of strategy enables separation

• Separation will enhance focus on structural growth opportunities in both businesses

• Committed to demerge as fast as practical & appropriate to optimise value

• Expected to complete within 24 months

UK’s largest and most successful hotel business, with attractive international growth opportunities

The clear UK market leader in the out-of-home coffee market and the second largest internationally


Good profit growth

Consistentlyhigh return on capital

Strong discretionary cash conversion

Sustainable dividendgrowth

4.5% to

£591m

Highlights | Good financial performance in line with expectations

The #1 hotel chain in the UK

Good return on capital

Good total revenue growth

Strong profitgrowth

The UK’s favourite coffeeshop… again!

Strong return on capital

Strong total revenue growth

Consistent profits

15.4%

0.5% to

£159m

7.5% to

£1.3b

8th

year in a row

5.2% to

£2.0b

72,466 rooms

6.5% to

£498m

94% to

£585m

5.6% to

101.15p

5

13.4% 46.0%


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FINANCIAL PERFORMANCE | Nicholas Cadbury – CFO

66 FY18 FULL YEAR RESULTS | APRIL 20186


FY17 FY18 !

Revenue £3,106m £3,295m 6.1%

Underlying PBT £565m £591m 4.5%

Underlying EPS 246.5p 260.2p 5.6%

Discretionary FCF £532m £585m 9.9%

Capital expenditure £610m £555m £(55)m

Return on capital 15.2% 15.4% 20bps

Lease-adjusted leverage 3.2x 2.9x

Full year dividend 95.80p 101.15p 5.6%

Financial highlights | Good overall performance

• Good revenue growth across all businesses

• Disciplined cost management delivering expected profit growth

• Strong cash generation supporting investment in strong returning areas

• Return on capital increased despite recent investments

• Financial flexibility for UK and international expansion

• Dividend growth in line with EPS

7


Premier Inn | Continued strong financial performance

FY17 FY18 !

Revenue £1,908m £2,007m 5.2%

UK & Germany £1,902m £2,004m 5.4%

International £6m £3m n.m.

Underlying op. profit £468m £498m 6.5%

UK & Germany £472m £498m 5.7%

International £(4)m £0m n.m.


Other metrics

UK accommodation sales growth 6.9% 7.1%

UK F&B sales growth 0.7% 2.5%

Total Premier Inn sales growth 4.7% 5.2%

UK accommodation LFL sales growth 2.5% 2.2%

• Strong revenue growth delivered through market leading occupancy and new capacity

• Continued market share gain- London hotel sales growth of 9.1%- Regions hotel sales growth of 6.6%

• Removed international losses through exit of India and South East Asia operations

• Accelerated efficiencies supported margin growth of 40 basis points

• Maintaining good return on capital on a growing capital base

8


Costa | Revenue growth & earnings in line with expectations

FY17 FY18 ;’ !

Revenue £1,202m £1,292m 7.5%

UK Stores £876m £921m 5.2%

UK Express £178m £210m 18.0%

Total UK £1,054m £1,131m 7.3%

International £148m £161m 8.5%

Underlying op. profit £158m £159m 0.5%

Total UK £154m £151m (2.3)%

International £4m £8m n.m.


Other metrics

Total UK LFL sales growth (Equity stores + Express) 1.2%

China total sales growth 3.2%

• Strong revenue growth underpinned by store and Express expansion

• UK like-for-like sales remain positive against tough retail conditions

• Strong Costa UK Express growth with revenues up 18% to £210 million

• UK profit includes c.£10 million additional investment in IT, digital, marketing and product innovation

• Positive LFL performance in China

• Underlying margin in line with guidance

• Consistently strong return on capital

9


Margin progression | Efficiency programme supporting investment

0.9%

2.3%

0.2%(1.0)%

(0.9)%

(0.9)%

(0.3)%

24.5%24.8%

FY17 LFL + newcapacity

Inflation Labour+ NLW

Rent+ rates

Efficiency Investment International FY18

• Margins up 30 bps despite ongoing inflation

• Accelerated efficiencies gains during the year

• Gain from exit of India & South East Asia operations

10

13.1%12.3%

0.7%

1.7%(0.5)%

(1.1)%

(0.2)%

(1.4)%

FY17 LFL + newcapacity

Inflation Labour+ NLW

Rent+ rates

Efficiency Investment FY18

• Efficiency programme offsetting inflation

• Investments continue to maintain our market leading position and support future growth


Cash generation | Strong & consistent to fund investments

• Good discretionary FCF conversion of 94%

• Business model enables consistent working capital management

• Discretionary FCF used to fund:

� Growth CapEx – £396 million

� Pensions – £101 million

� Dividends – £178 million

• Property sale & leaseback transactions and business exits generated £132 million cash

£622m

£585m

£230m

£13m

£12m

£(159)m

£(34)m

£(99)m

Underlying Op.profit

Depreciation &amortisation

Other non-cashitems

Working capital

MaintenanceCapEx

Interest

Tax

Discretionary FCF

11


Investment | Compelling opportunities to invest capital

• Significant investment in new capacity delivering strong return on capital

• Maintenance CapEx- IT transformation- Refurbishments to

maintain brand strength- Smarter refurbishment

reducing spend per room

• Return on capital diluted in short term as investments mature

• Germany will deliver long-term growth pipeline, but dilute short-term returns

FY17 FY18Last 2 years

Maturity duration

Mature ROC

Maintenance & product improvement

- Premier Inn (inc. refurbs) £148m £118m £266m - -

- Costa £58m £41m £99m - -

Growth

- New / extended hotels £303m £227m £530m 1-3 yrs >13%

- PI Germany + Intl. £35m £65m £100m 3-5 yrs >10%

- New Costa stores £41m £47m £88m 1-3 yrs >30%

- South China JV buy-out - £35m £35m - -

- Costa Express machines £25m £22m £47m 1-3 yrs >30%

Total £610m £555m £1,165m - -

12


2,820

3,209

3,7283,903

4,037

15.3% 15.7% 15.3% 15.2% 15.4%

0%

5%

10%

15%

2 0%

2 5%

30%

35%

40%

45%

50%

0

500

1000

1500

2 000

2 500

3000

3500

4000

4500

FY14 FY15 FY16 FY17 FY18

Invested capital (£m) Return on capital

Return on capital | Consistently strong returns on a growing base

• Over the same period, invested capital has increased 43%

• Capital invested for future openings of £292 million

13

19.0

20.2

22.2

23.8

25.5

13.3% 13.5% 12.9% 13.0% 13.4%

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

10

12

14

16

18

20

22

24

26

28

FY14 FY15 FY16 FY17 FY18Room nights available (million p.a.) Return on capital

6,3767,372

8,493

10,333

12,058

40.5%

46.3%49.9%

45.4% 46.0%

0

0.1

0.2

0.3

0.4

0.5

0.6

10

2010

4010

6010

8010

10010

12010

14010

FY14 FY15 FY16 FY17 FY18Number of outlets (stores & Express machines)

Return on capital

• Consistent returns despite dilution from new and immature rooms

• Room capacity growth of 34% over the same period

• Long-term, high return on capital

• Strong network growth of 90% in number of outlets


Capital discipline | Asset-backed balance sheet provides flexibility

14

Maintaining an appropriate leverage position

• Whitbread’s scale & diversity of operations enables low-cost funding from diverse sources

• Balanced maturity profile ensures stability

• Freehold to leasehold mix 64% : 36%

Diverse & flexible funding options

Lease debt

£2,[email protected]%

Bond£[email protected]%

RCF (unutilised)

~£[email protected]%

USPP£432m

@2.6-5.2%

471 392583

910 890 833

542534

554

288 377264

1,2031,454

1,670

1,878

2,058 2,227

3.23.1

3.2

3.0

3.2

2.9

2 .5

2 .7

2 .9

3 .1

3 .3

3 .5

3 .7

3 .9

4.1

4.3

4.5

0

500

1000

1500

2 000

2 500

3000

3500

FY13 FY14 FY15 FY16 FY17 FY18Net debt Pension

Lease-debt Adjusted debt : EBITDAR

Column1

3.5 target ceiling

• Ended FY18 with £833 million total net debt

• Current leverage position provides stability & flexibility to take advantage of opportunities

• Good headroom to fund German acquisitions

Balanced debt maturity profile

Flexible source of

funds

£73m £75m £84m£200m

£450m

£950m

2019 2020 2021 2022 2025 2027

USPP Bond RCF (unutilised)


FY19 outlook | Consistent investment for sustainable growth

• Early in the year, London market remains challenging, but overall forward bookings in line with our plans

• 4,000-4,500 new room openings in FY19 in the UK & Germany

• Growing pipeline in Germany – organically and acquisitions

• Efficiencies offset inflation of c.£50m, German losses consistent at c.£5m

UK� Growth in stores (100-150 net) & Express machines, helping offset investment� Efficiency programme to offset c.£20m inflation� Cautious on consumer outlook, expect recent retail trend to continue

Express & international� Over 1,300 new Express machines installed worldwide (£5m incremental OpEx)� China stores: approx. 100 gross new and 20-40 closures (£5m incremental OpEx)

15

• Confident of new capacity delivery, but cautious of consumer environment

• Increased efficiency target from £150m to £250m, with £100m delivered over next 2 years

• Continued investment in strategy (Gross Capex of £600-700m)


STRATEGIC UPDATE | Alison Brittain – CEO



A clear plan for growth | Strong operational momentum

17

Focus on our strengths to grow

internationally

Grow & innovate in core UK markets

Network

Performance

Stores

Express

1 2

Germany

• 4,385 net rooms opened

• 4,600 rooms added to pipeline

• 87% rooms in latest format

• 79.3% occupancy

• 97% booking directly

• 4.2 avg. Trip Advisor score

• 1st acquisition (19 hotels)

• 5,500 rooms in pipeline

• 3 hotels opening in FY19

• 62% occupancy

• 100% booking directly

• 4.6 avg. Trip Advisor score

• 243 stores opened, 39 closed

• ~40% sales with Costa Club

• ~40% food capture rate

• 1,187 net new machines

• 805 partners

• 198 stores opened, 113 closed

• JV buy-out, enabling more control in China

• 16 China stores in latest format

• 249 net new machines

• 6 countries trading

Build capability to support long-term

growth

Winning Teams

Property

Digital

£Efficiency

3

Force for Good

• 8th Best Big Company to work for Sunday Times 2017

• 3,000 apprenticeships

• 14,750 UK rooms in the pipeline

• £56m sale & leaseback deals

• 152 Costa stores churned

• >85% PI direct digital booking

• 1.3m active Costa App users

• 30 Express trialling loyalty

• £105m cumulative savings

• 15 major IT projects complete

• 17 major IT projects underway

• £4.6m charitable contributions

• >14m coffee cups recycled

• 500m cup target in new scheme

Network

Stores

Express


• Direct distribution increased to 97%

• Ongoing optimisation of digital assets and customer acquisition & retention

• Growth ahead of peers

• Pipeline secured to 85,000 rooms by 2020

• Majority of new hotels maturing faster

• 87% rooms in latest format

• Invest in what matters to guests: bed, shower, breakfast & WiFi

• Leading combined quality & value scores

• #1 for business, families & leisure

Premier Inn | Structural opportunity exploited by our unique model

Structural opportunity in the growing UK hotel market

59%52% 46% <43%

23%24%

25% >26%

12%15%

18% >19%

6% 9% 11% >12%

2010 2016 2020 Beyond 2020

Budget branded

Other branded

Independents

684k rooms 700k rooms 740k rooms >750k rooms

• Independents increasingly under pressure from industry headwinds

• Premier Inn’s unique mix of quality & value enables market share gains through new capacity at good return on capital

Source: Company data

Premier Inn’s unique business model

18

Strong ROC @ 13.4%

High occupancy Sustainable sales growth

Direct d

igital

distributio

n Network

strength

Consistent

quality

Value formoney

Growth in the UK1 International focus2 Build capabilities3


Detailed catchment

analysis

Superior capacity

growth over last 3 years

Balanced pipeline of

new capacity

• Postcode-level analysis

• Detailed mapping of existing supply and changes over time

• Optimisation of location and size

Catchment case study: Southwark

• Total cluster accommodation sales doubled through new capacity (221 new rooms)

• Strong maturity of new capacity in approx. 1 year supported by the Automated Trading Engine

• Short-term RevPAR decline as expected, followed by recovery in 2-3 years

Growth in the UK1

Premier Inn | Network plan focused on optimising sales & returnsInternational focus2 Build capabilities3

Attractive unit economics

• 1-3 year maturity duration

• >13% ROC at maturity

13,842 rooms

3,454 rooms 1,392 rooms 562 rooms10

2010

4010

6010

8010

10010

12010

14010

16010

Premier Inn Travelodge Holiday Inn Express Ibis

New catchments

40%

Low capacity

catchments30%

High capacity & high demand catchments

30%

Committed pipeline of 14,750 rooms to 2020

0

2 0, 000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

70

75

80

85

90

95

100

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18Total area accomodation sales Exisiting sites

Tate Modern Borough High St

RevPAR, £


1.5

1.6

1.7

1.8

1.9

2.0

16,000,00016,010,00016,02 0,00016,030,00016,040,00016,050,00016,060,00016,07 0,00016,080,00016,090,00016,100,00016,1 10,00016,120,00016,130,00016,140, 00016,150,00016,160,00016,170,00016,180,00016,190,00016,2 00,00016,2 10,00016,2 20,00016,2 30,00016,2 40, 00016,2 50,00016,2 60,00016,2 70,00016,2 80,00016,2 90,00016,300,00016,3 10,00016,320,00016,330,00016,340,00016,350,00016,360,00016,370,00016,380,00016,390,00016,400,00016,410, 00016,42 0, 00016,430,00016,440,00016,450,00016,460,00016,470,00016,480,00016,490,00016,500,00016,5 10,00016,520,00016,530,00016,540,00016,550,00016,560,00016,570,00016,580,00016,590,00016,600,00016,610,00016,620,00016,630,00016,640,00016,650,00016,660,00016,670,00016,680,00016,690,00016,7 00,00016,7 10,00016,7 20,00016,7 30,00016,7 40,00016,7 50,00016,7 60,00016,7 70,00016,7 80,00016,7 90,00016,800,00016,810,00016,820,00016,830,00016,840,00016,850,00016,860,00016,870,00016,880,00016,890,00016,900,00016,910,00016,920,00016,930,00016,940,00016,950,00016,960,00016,970,00016,980,00016,990,00017,000,00017,010,00017,020,00017,030,00017,040,00017,050,00017,060,00017,070,00017,080,00017,090,00017,100,00017,1 10,00017,120,00017,130,00017,140,00017,150,00017,160,00017,170,00017,180,00017,190,00017,2 00,00017,2 10,00017,2 20,00017,2 30,00017,2 40,00017,2 50,00017,2 60,00017,2 70,00017,2 80,00017,2 90,00017,300,00017,3 10,00017,320,00017,330,00017,340,00017,350,00017,360,00017,370,00017,380,00017,390,00017,400,00017,410,00017,420,00017,430,00017,440,00017,450,00017,460,00017,470,00017,480,00017,490,00017,500,00017,5 10,00017,520,00017,530,00017,540,00017,550,00017,560,00017,570,00017,580,00017,590,00017,600,00017,610,00017,620,00017,630,00017,640,00017,650,00017,660,00017,670,00017,680,00017,690,00017,700,00017,710,00017,72 0,00017,730,00017,740,00017,750,00017,760,00017,77 0,00017,780,00017,790,00017,800,00017,810,00017,820,00017,830,00017,840,00017,850,00017,860,00017,870,00017,880,00017,890,00017,900,00017,910,00017,920,00017,930,00017,940,00017,950,00017,960,00017,970,00017,980,00017,990,00018,000,00018,010,00018,02 0,00018,030,00018,040,00018,050,00018,060,00018,07 0,00018,080,00018,090,00018,100,00018,1 10,00018,120,00018,130,00018,140,00018,150,00018,160,00018,170,00018,180,00018,190,00018,2 00,00018,2 10,00018,2 20,00018,2 30,00018,2 40,00018,2 50,00018,2 60,00018,2 70,00018,2 80,00018,2 90,00018,300,00018,3 10,00018,320,00018,330,00018,340, 00018,350,00018,360,00018,370,00018,380,00018,390,00018,400,00018,410,00018,420,00018,430, 00018,440,00018,450,00018,460,00018,470,00018,480,00018,490,00018,500,00018,5 10,00018,520,00018,530,00018,540,00018,550,00018,560,00018,570,00018,580,00018,590,00018,600,00018,610,00018,620,00018,630,00018,640,00018,650,00018,660,00018,670,00018,680,00018,690,00018,7 00,00018,7 10,00018,7 20,00018,7 30,00018,7 40,00018,7 50,00018,7 60,00018,7 70,00018,7 80,00018,7 90,00018,800,00018,810,00018,820,00018,830,00018,840,00018,850,00018,860,00018,870,00018,880,00018,890,00018,900,00018,910,00018,920,00018,930,00018,940,00018,950,00018,960,00018,970,00018,980,00018,990,00019,000,00019,010,00019,02 0,00019,030,00019,040,00019,050,00019,060,00019,07 0,00019,080,00019,090,00019,100,00019,1 10,00019,120,00019,130,00019,140, 00019,150,00019,160,00019,170,00019,180,00019,190,00019,2 00,00019,2 10,00019,2 20,00019,2 30,00019,2 40, 00019,2 50,00019,2 60,00019,2 70,00019,2 80,00019,2 90,00019,300,00019,3 10,00019,320,00019,330,00019,340,00019,350,00019,360,00019,370,00019,380,00019,390,00019,400,00019,410, 00019,42 0, 00019,430,00019,440,00019,450,00019,460,00019,470,00019,480,00019,490,00019,500,00019,5 10,00019,520,00019,530,00019,540,00019,550,00019,560,00019,570,00019,580,00019,590,00019,600,00019,610,00019,620,00019,630,00019,640,00019,650,00019,660,00019,670,00019,680,00019,690,00019,7 00,00019,7 10,00019,7 20,00019,7 30,00019,7 40,00019,7 50,00019,7 60,00019,7 70,00019,7 80,00019,7 90,00019,800,00019,810,00019,820,00019,830,00019,840,00019,850,00019,860,00019,870,00019,880,00019,890,00019,900,00019,910,00019,920,00019,930,00019,940,00019,950,00019,960,00019,970,00019,980,00019,990,0002 0, 000,0002 0, 010,0002 0, 02 0,0002 0, 030,0002 0, 040,0002 0, 050,0002 0, 060,0002 0, 07 0,0002 0, 080,0002 0, 090,0002 0, 100,0002 0, 110, 0002 0, 12 0, 0002 0, 130,0002 0, 140,0002 0, 150,0002 0, 160,0002 0, 170,0002 0, 180,0002 0, 190,0002 0, 200,0002 0, 210, 0002 0, 22 0, 0002 0, 230,0002 0, 240,0002 0, 250,0002 0, 260,0002 0, 270,0002 0, 280,0002 0, 290,0002 0, 300,0002 0, 310,0002 0, 32 0,0002 0, 330,0002 0, 340,0002 0, 350,0002 0, 360,0002 0, 37 0,0002 0, 380,0002 0, 390,0002 0, 400,0002 0, 410,0002 0, 42 0,0002 0, 430,0002 0, 440,0002 0, 450,0002 0, 460,0002 0, 47 0,0002 0, 480,0002 0, 490,0002 0, 500,0002 0, 510,0002 0, 52 0,0002 0, 530,0002 0, 540,0002 0, 550,0002 0, 560,0002 0, 57 0,0002 0, 580,0002 0, 590,0002 0, 600,0002 0, 610,0002 0, 62 0,0002 0, 630,0002 0, 640,0002 0, 650,0002 0, 660,0002 0, 67 0,0002 0, 680,0002 0, 690,0002 0, 700,0002 0, 710,0002 0, 720,0002 0, 730,0002 0, 740,0002 0, 750,0002 0, 760,0002 0, 770,0002 0, 780,0002 0, 790,0002 0, 800,0002 0, 810,0002 0, 82 0,0002 0, 830,0002 0, 840,0002 0, 850,0002 0, 860,0002 0, 87 0,0002 0, 880,0002 0, 890,0002 0, 900,0002 0, 910,0002 0, 92 0,0002 0, 930,0002 0, 940,0002 0, 950,0002 0, 960,0002 0, 97 0,0002 0, 980,0002 0, 990,0002 1,000,000

P1 FY17 P4 FY17 P7 FY17 P10 FY17 P1 FY18 P4 FY18 P7 FY18 P10 FY18

Room nights sold (LTM) Marketing cost per room night sold (LTM)

Premier Inn | Enhancing our advantage through technology

20


Digital innovation driving direct distribution model

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

75

77

79

81

83

85

P1 FY17 P4 FY17 P7 FY17 P10 FY17 P1 FY18 P4 FY18 P7 FY18 P10 FY18

PI.com visits (LTM) Direct digital booking

78m visits

>85% direct digital

bookings

84m visits

Broadening digital reach• Diverse customer acquisition approach

� website, app

� search, metasearch

• Continuous enhancements to reservation and inventory management systems underway

Digital capabilities lowering marketing costs

Premier Inn’s Business Booker platform increases direct reservations and enhances the experience for corporate customers• Fast booking

• Exclusive rates

• Easy amends

• Spend controls and reporting

18m 20m

Index = 100

75

95

80

85

90


Premier Inn | Ongoing enhancements to our customer offer

21


Optimising room refurbishments

• Continued investment supports our price and value for money position

• Faster, more cost effective refurbishments are achieving product consistency across more of the estate

Room refurbishment

cost reduced by 1/3…

…while enhancing guest

scores

Product consistency key to Premier Inn

model

Unrivalled quality and value creates strong brand

Value score

Quality score

• Broadens appeal to Business and Leisure guests

• Facilitates high occupancy across the week

• Drives continued customer loyalty

• Encourages direct bookings by limiting the need to ‘shop around’

Premier Inn

Travelodge

Marriott

AirbnbIbis

Hilton

Holiday Inn Express

Holiday Inn

0

5

10

15

20

25

30

35

-5 5 15 25 35

YouGov Brand Index

Source: YouGov BrandIndex 52 week moving average as at 22/2/2018


4,6697,476 8,040 8,570 9,074 9,578 10,081

5,336

6,755 7,018 7,306 7,606 7,933 8,274

4,385

9,830 10,441 11,092 11,750 12,407 13,064

10.7

21.123.3

25.628.0

30.733.6

0

5

10

15

2 0

2 5

30

35

40

0

5000

10000

15000

2 0000

2 5000

30000

35000

2010 2017E 2018F 2019F 2020F 2021F 2022F

No. of branded outlets No. of independent outletsNo. of non-specialist outlets Coffee cups per day (m)

Costa | Market Growth opportunity unlocked by Costa’s model

The leader in the growing UK coffee market

• UK coffee consumption market continues to grow, but customer habits and preferences are changing

• Costa’s strong coffee credentials and store / Express machine network agility enables expansion

Source: Derived from Allegra Project Café UK 2017, December 2017

22

Costa’s market-leading business model

Focused network plan• >10,000 locations to buy a Costa coffee

• Strong returns & cash generation in all channels

Diversified channel mix• Responding to increased consumer demand for

convenience through channel shift

• Two-thirds of pipeline in growth channels

Coffee credentials & improving food offer• Consistently the UK’s favourite coffee shop

• Strong food capture rate, with opportunity to improve offer further

Enhanced customer experience• Comfortable store environments with c.60%

customers ‘drinking in’

• >5m active Costa Coffee Club members

2

1

3

4


10% coffee consumption CAGR


Stores above ROC threshold

90%

Stores above ROC threshold

2.5

Stores below ROC threshold8%

Stores below ROC threshold

4.4

Cash Loss making stores2%

Loss making stores

2

Costa | Network plan focused on optimising sales & returns

Channel

FY18 Total Sales

growth

FY18 ROC(Stores <3 years old)

Current Estate

Estate growth

to 2020

Tradition channels(High Street, Shopping Centre,& Retail Park)

2% >30% 897 equity stores c.5%

Growth channels(Drive Thru, Travel & Concession)

14% >40% 475 equity stores

>20%

Costa Express 18% >40% 7,248 machines >20%

23


Detailed catchment

analysis

Flexible model

Attractive unit economics

• Postcode level analysis

• National presence provides unrivalled market knowledge

• Plans designed to maximise catchment level returns

• Equity or franchise model

• Format differentiation: traditional, pronto, drive-thrus, Express

• Short lease breaks (WALE <5 yrs)

• Proactive network churn

• Low capital requirements

• 1-3 year maturity profile

• >35% return on capital at maturity

Strong UK Equity Store ROC distribution


Costa | Optimising catchment level sales & return on capital

24


Network planning• Integrated plan across

stores & Express

• Objective to maximise catchment sales at a good return on capital

Sales• Sales in FY15: £1.3m

• Sales in FY18: £2.4m

EBITDA• Profit in FY15: £0.3m

• Profit in FY18: £0.5m

Return on capital• ROC in FY15: >50%

• ROC in FY18: >50%

High St. Shopping Centre (2000)

Retail Park (2011)

Concession (2016)

Drive Thru (2015)

Hotel

Rail

C-Store

Hospital

Education

C-Store

C-Store

C-Store

C-Store

C-Store

Banbury Catchment

15 existing outlets4 stores9 Express2 ‘Proud to Serve’

10 outlet opportunities1 travel store8 Express1 ‘Proud to Serve’

Petrol

Petrol

Education

Petrol

C-Store


Costa | Momentum in improving the customer propositionGrowth in the UK1 International focus2 Build capabilities3

Focus areas for FY19

Network• Continue new store focus on

fast-growing convenience channels

Product• Build on momentum of new

product development

• Enhance promotion and visibility of expanded range

Value• Trial product bundle deals

• Maintaining entry pricing, whilst encouraging upsell

Format• Faster roll-out of updated

refurbishment model

Customers enjoying improved food offer

• Good uplift in savoury food capture rate following launch of new breakfast in May

• Uplift sustained with an improved salad range in June

• Further improvement in September with launch of new hot lunch range

P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12

Costa savoury food capture rate uplift

FY17 FY18

Breakfast launched

New lunch launched

Salads launched

25


Costa | Accelerating use of technology

26


Activities completed Work underway 2018/2019 focus

Click & Collect• Extend trial of click &

collect

• Payment functionality embedded

Loyalty• Trial targeted offers

delivered via direct email and through the Costa Club App

• Loyalty platform embedded into Express machines

New POS terminals• New tills implementation almost

complete in all UK stores

Systems• Workforce planning system

implemented

• New loyalty data management systems implemented

Loyalty• 5.3 million

active Costa Club card users and >1 million on the app

• New iOS and Android apps launched in November ‘17

Systems• New core finance

system implementation underway (already implemented in Premier Inn)

Click & Collect• 16 store trial

underway

Loyalty• Migrate more card

users to mobile app


Costa Express | Rapid growth in the UK and internationally

• Unrivalled quality, technology and design� All machines connected through in-house

telemetry to assess performance

� Modular design enables lower cost maintenance & reduces down-time

� Embedding Costa Club loyalty platform

• Attractive unit economics� Low capital outlay per machine

� Attractive returns for Whitbread and partners

• Investing in expansion opportunities� Existing strong UK presence in petrol stations

� UK convenience stores: only 600 machines so far

� UK workplaces: less than 500 machine so far

� International: less than 1,000 machines so far

27

Machine unit economics

Capex per machine c.£13,000

Revenue c.£30,000

Operating margin 15-18%

ROC at maturity >35%


3,515

4,292

5,216

6,801

8,237

87121

153

185

226

80

100

120

140

160

180

200

220

240

10

1010

2010

3010

4010

5010

6010

7010

8010

9010

FY14 FY15 FY16 FY17 FY18Number of machines Sales (£m)


Germany | Accelerating the new hotel pipeline

28


OrganicTo be

acquired Total

Open and trading

1 hotel(210 rooms)

13 hotels(2,140 rooms)


Committed pipeline


6 hotels(970 rooms)


Total 12 hotels(2,610 rooms)



Long-term opportunity to replicate UK success

• Expecting double-digit ROC for organic sites at maturity

• Acquisitions used to build scale, with ROC above cost of capital

FY19 openings

• Munich (216 rooms)

• Hamburg (182 rooms)

• Leipzig (182 rooms)

• 13 hotels open and trading, 6 hotels in pipeline

• Organic and M&A committed pipeline delivers:

• All good quality hotels in prime locations

Transaction details• Conditional on landlord consent & franchise

termination (c.2 years)

• Consideration not paid until hotels transferred

Financial considerations• Earnings enhancing the year after acquisition

(2020/21)

Acquiring 19 quality hotels in key target cities


Costa China | Ambition growing and expansion gaining

1) Enables full control of operations and store estate• Network optimisation

� 79 opened

� 39 closed

• New product trials

• Improving digital

2) Allows Costa to accelerate expansion• 18 stores now open in Wanda

cinemas

• New MoU signed with Suning

• Promotional partnership with AliPay

3) Strong partnership with BHG in Beijing to continue

29


Future ambition

Updated ambition: 1,200 stores by 2022

South China JV acquisitionThe investible model

1) Organic store growth• Prioritise transport and

shopping centres

• Continue to churn non-core city stores

2) Franchise partner agreements• Negotiations with more

franchise partners underway to accelerate expansion

3) Increasing Investment• £5 million increase in FY19

OpEx to accelerate expansion

• 16 stores now in latest format, after a successful trial of 5 stores last year

• Key aspects of new store blueprint� Store design� Appealing to young professionals� New food and beverage

products


Efficiency | Programme extending targetGrowth in the UK1 International focus2 Build capabilities3

30

Case study on procurement & distribution

3rd party Distribution Centre

Last

10 y

ears

Multiple suppliers

Outsourced transport, logistics & warehousing

Sub-optimal delivery schedule & loads

New

5 y

ear-

agre

emen

tConsolidated

supplyDirect delivery with fuller

loads & fewer miles travelledOptimised delivery schedules & loads

Focus areas

Updated ambition• Increased target from £150 million to

£250 million• Savings of £100 million to be delivered over

next 2 years

Optimising the value chain• UK supply chain transformation• International supply pipeline• End-to-end costing• Centralised inventory planning• Optimising supplier sourcing & production• Business expansion simplification

Everyday Efficiencies• Workforce productivity• IT & technology share services

70% of 3rd

party volume

Saved £4 million

Dairy A

Dairy B

Dairy C

Dairy A

Dairy B

Dairy C

Dairy D

Dairy E

Dairy F


Property | A significant competitive advantage

32


Strong covenant

Superior site

access

Strong operating cash flow

Flexible funding options

Proven value

creation

Balanced portfolio

Majority freehold

Good returns

Superior site access

• 1,700 freehold rooms added to pipeline

• 2,900 leasehold rooms added to pipeline

• 2,250 rooms through freehold extension over last 2 years

• 110 Costa Drive Thrus in pipeline

Flexible funding options

• Weighted-average cost of debt at 3.8%

• Adjusted gearing below 3.5x target ceiling

• Credit rating consistent at BBB

• £56 million of property transactions at c.4% yield


A Force for Good

OpportunityBeing a place where everyone

can reach their potential

CommunityMaking meaningful contributions

to the communities we serve

• Targeting 5,000 apprenticeships by 2020 (>3,000 fully completed)

• Sunday Times 8th Best Big Companies to work for

• Member of ‘30% Club’, aiming for 30% female in senior leadership roles

• >£10m raised for the Premier Inn Clinical Building at Great Ormond Street Hospital, opened January 2018

• Costa Foundation has helped more than 60,000 children across 78 projects

• Launched ‘Nutrition Code of Practice’ across all our brands

• Industry-leading cup recycling initiative launched – targeting 500m cups p.a. by 2020

• Reducing plastic waste through non-plastic straws and the plastic bottle Refill scheme

• UK property estate now supplied with 100% renewable energy

ResponsibilityTreating people and the planet

with respect

33



COSTA DEMERGER | Alison Brittain – CEO



Committed to creating two high-quality independent companies

35

The clear UK market leader in the out-of-home coffee market and the second largest internationally

UK’s largest and most successful hotel business, with attractive international growth opportunities

• Decision to demerge Costa following regular & rigorous Board review

• Two highly attractive businesses- attractive economics- leading market positions- structural growth opportunities

• Clear plans in both businesses to create long-term sustainable value

• Strong progress in delivery of strategy enables separation

• Separation will enhance focus on structural growth opportunities in both businesses

• Committed to demerge as fast as practical & appropriate to optimise value

• Expected to complete within 24 months


Maintain performance & structured transition

Timing | Committed to demerge as fast as practical & appropriate

36

Solid foundations for international growth

Modern & stable platforms in both businesses

2

4

• Completion of complex replacement and upgrades of critical & end-of-life IT systems and supply chain infrastructure

• Shared Whitbread teams are delivering this transformation programme

• Both Premier Inn & Costa are in the formative stages of international growth

• Whitbread’s combined scale is instrumental in evolving investible models in Germany and China, from which separate entities can thrive

• Maintain momentum in trading and transformation initiatives

• Appropriate management of pension deficit and funding facilities

• Ensure optimal governance structures in place

3

Supply chain & procurement transformation

1• Deliver a further £100 million of efficiency savings over next 2 years

• Ensure 2,000+ procurement and supply chain agreements are optimised for separation


Structure update | Two high-quality businesses with scale

37

Market position

• The owner of Premier Inn –UK’s leading hotel chain with almost 800 hotels comprising 74,000 rooms

• A leading out-of-home coffee business with over 3,800 stores in 32 countries

Competitive & structural advantages

• Largest UK network by comfortable gap• Leading digital & direct distribution model• Strong freehold property underpinnings

• Largest UK network by comfortable gap• Consistently strong customer feedback• Flexible channel & format model

Building strategic momentum

• Significant UK capacity additions with high occupancy, good ROC and fast maturity

• Digital distribution gap widening• Germany pipeline accelerated to 31 hotels

through acquisition

• Delivering enhancements in UK digital, products

• Costa Express network growth accelerating• Acquired JV partner in South China to

accelerate growth

Strong return on capital

• Almost 35% capacity increase in last 4 years• Returns consistently above 13%

• 90% increase in Costa outlets in last 4 years• Returns consistently above 40%

Long-term structural opportunity

• Declining independent sector in UK & Germany• Line-of-sight to over 100,000 rooms in the UK• Replicating UK success in Germany

• Growing global consumption of coffee• Greater demand for convenience & quality• International expansion in China & Express


QUESTIONS | Alison Brittain & Nicholas Cadbury



Appendices

393939

I. Definitions p40II. Supplementary information p41III. Cautionary statement p42

Whitbread ADR programmeWhitbread has established a sponsored Level I American Depositary Receipt (ADR) programme for which Deutsche Bank perform the role of depositary bank. The Level I programme trades on the U.S. over-the-counter (OTC) markets under the symbol WTBDY (it is not listed on a U.S. stock exchange).



Appendix I. | Definitions

Average Room Rate (ARR) Hotel accommodation revenue divided by the number of rooms occupied by guests.

Discretionary free cash flow (Discretionary FCF) Cash generated from operations after payments for interest, tax and maintenance capital.

EBITDA Underlying earnings before interest, tax, depreciation and amortisation excluding income from Joint Ventures and Associates.

EBITDAR Underlying earnings before interest, tax, depreciation, amortisation and rent excluding income from Joint Ventures and Associates.

Fixed charge cover Ratio of underlying operating profit before total property rent compared to interest plus total property rent.

Like-for-like sales growth Period over period change in revenue for outlets open for at least one year.

NLW National Living Wage.

Operating profit (Op. Profit) Profit before interest and tax.

Revenue per available room (RevPAR)

Revenue per available room is also known as yield. This hotel measure is achieved by multiplying the ARR by occupancy.

Underlying basic EPS Underlying profit attributable to the parent shareholders divided by the basic weighted average number of ordinary shares.

Underlying operating profit Underlying profit before non-underlying operating costs.Underlying PBT Profit before tax and non-underlying items.


Appendix II. | Supplementary information

Further information is available in a supporting supplementary information pack (both Adobe PDF and Microsoft Excel formats) from www.whitbread.co.uk/investors. This information includes:

A. Estate analysis

B. Sales, profit & return on capital

C. Group income statement

D. Non-underlying items

E. Lease commitments

http://www.whitbread.co.uk/investors/results-centre


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 presentation available, Whitbread plc makes no recommendation to purchase, sell or otherwise deal in shares in Whitbread plc or any other securities or investments whatsoever and you should neither rely nor act upon, directly or indirectly, any of the information contained in this presentation in respect of such investment activity.

The securities referred to in this presentation have not been and will not be registered under the U.S. Securities Act of 1933 (the “US Securities Act”) and may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act.

No representations, express or implied, are given in, or in respect of, this presentation. To the extent permitted by law, Whitbread plc, and its subsidiaries, shareholders, affiliates, representatives, partners, directors, officers, employees, advisors or agents shall not be liable for any direct, indirect or consequential loss or loss of profit arising from the use of this presentation, its content or otherwise arising in connection therewith.

Certain statements included or incorporated by reference within this presentation may constitute “forward looking statements” inrespect of Whitbread plc’s operations, performance, prospects and/or financial condition. Such statements are based on Whitbread plc’s current expectations and beliefs concerning future events and are subject to a number of known and unknown risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward looking statements. Such statements are also based on numerous assumptions regarding Whitbread plc’s present and futurestrategy and the environment in which it operates, which may not be accurate. Whitbread plc undertakes no obligation to update any forward looking statements contained in this presentation or any other forward looking statements it may make.

Nothing in this presentation should be construed as a profit forecast. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial advisor.


CONTACTS Matt JohnsonInvestor Relations DirectorE [email protected] +44 7848 146 761

W www.whitbread.co.uk | E [email protected] | T +44 1582 888 633

Whitbread plc Whitbread Court, Houghton Hall Business Park, Porz Avenue, Dunstable, LU5 5XE

Matt HolmanInvestor Relations ManagerE [email protected] +44 7712 243 322

43

Ann HyamsInvestor Relations ManagerE [email protected] +44 7796 709 087

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