Whitbread Plc (LON:WTB) has announced its interim results.
UK accommodation sales in line with H1 FY24; excellent progress in Germany
Increased interim dividend and further £100m share buy-back
Five-Year Plan: at least £300m more profit and over £2bn available for shareholder returns
Throughout this release all percentage growth comparisons are made comparing the current period performance (H1 FY25) for the 26 weeks to 29 August 2024 with H1 FY24 (26 weeks to 31 August 2023).
Overview
| • | Premier Inn continues to consolidate its position as the UK’s leading hotel brand, underpinned by our consistent delivery of high-quality, great value hotel rooms; with a growing presence in Germany, we are focused on replicating our UK success to become the country’s number one hotel brand | |
| • | H1 FY25 results reflect a slightly softer UK demand environment, investment in our Accelerating Growth Plan (‘AGP’) and lower interest receivable, partially offset by positive momentum in Germany | |
| • | We are making excellent progress on our Five-Year Plan that is set to deliver a step change in our performance: | |
| o Network expansion: plans in place, including AGP, to grow our estate to 98,000 rooms by FY30, as we progress towards our long-term potential of 125,000 rooms across the UK and Ireland; | ||
| o Accelerating Growth Plan (‘AGP’): optimisation of our UK food and beverage (‘F&B’) offer at a number of sites to deliver a more tailored guest proposition, is on track; planning applications for over a third of the 3,500 extension rooms have been submitted; we have also accepted offers on 51 sites for a total consideration of £56m; | ||
| o Commercial programme: initiatives unlocked by our new reservation system include: broadening our reach; improving our digital journey; and a number of ancillary revenue opportunities. These will begin to launch in the second half of FY25 and are expected to support UK like-for-like† sales; | ||
| o Efficiencies: additional £10m of cost efficiencies now expected in FY25 (£60m in total) and we have increased and extended our programme to deliver £50m cost savings on average each year to FY30; | ||
| o Germany: strong performance is underlining our confidence in reaching breakeven on a run-rate basis in the second half of the year. We expect to reach 20,000 open rooms and £70m1 of adjusted profit before tax† in FY30, with continued progress thereafter | ||
| • | As a result, by FY30 we expect to increase adjusted profit before tax† versus FY25 by at least £300m and generate more than £2bn for dividends, share buy-backs and, if suitable opportunities arise, additional high-returning investments | |
| • | Reflecting our confidence in the outlook and the delivery of our plans, the interim dividend has increased to 36.4p per share (H1 FY24: 34.1p) and we have announced our intention to launch a further £100m buy-back to be completed by the time of our preliminary results on 1 May 2025 | |
1: Using a GBP: EUR exchange rate of 1.18
H1 FY25 Group Financial Summary
| £m | H1 FY25 | H1 FY24 | vs H1 FY24 | |||
| Statutory revenue | 1,570 | 1,574 | 0% | |||
| Adjusted EBITDAR† | 611 | 628 | (3)% | |||
| Adjusted profit before tax† | 340 | 391 | (13)% | |||
| Statutory profit before tax | 309 | 395 | (22)% | |||
| Statutory profit after tax | 220 | 293 | (25)% | |||
| Adjusted basic EPS† | 137.1p | 146.1p | (6)% | |||
| Statutory basic EPS | 121.0p | 147.6p | (18)% | |||
| Dividend per share | 36.4p | 34.1p | 7% | |||
| Group ROCE† | 11.9% | 12.6% | (70)bps | |||
| Net (debt) / cash† | (370) | 67 | (437) | |||
| Lease-adjusted leverage† | 3.1x | 2.5x | (0.6)x | |||
Financial highlights
| • | Premier Inn UK: after three years of significant outperformance versus the Midscale and Economy (‘M&E’) market, relative performance in H1 FY25 was robust, with total UK accommodation sales broadly in line with last year and slightly ahead of the wider M&E market1 |
| • | In line with our expectations, total F&B sales were down 7%, reflecting the changes made to a number of our branded restaurants as part of AGP, partially offset by stronger trading in our integrated restaurants as a result of sustained high levels of hotel occupancy |
| • | Premier Inn Germany: total accommodation sales grew by 22% reflecting the impact of a number of commercial initiatives, our progress in trading key events over the summer and the increasing maturity of our estate |
| • | Group statutory revenue was £1,570m, in line with last year (H1 FY24: £1,574m) |
| • | Adjusted profit before tax† of £340m (H1 FY24: £391m) reflected the transitionary impact of AGP on UK revenues, net inflation and lower interest receivable; these movements were mitigated in part by a strong performance in Germany that remains on course to reach run-rate breakeven later this year |
| • | Adjusted basic EPS† decreased by 6% to 137.1p per share (H1 FY24: 146.1p) |
| • | Adjusting items before tax in the period resulted in a charge of £31m (H1 FY24: £4m credit). As a result, statutory profit before tax was £309m (H1 FY24: £395m) and statutory EPS was 121.0p (H1 FY24: 147.6p) |
| • | The Group remains highly cash generative and adjusted operating cashflow† was £411m reflecting the movement in adjusted operating profit† and working capital (H1 FY24: £483m). This cashflow funded our expansion in both the UK and Germany, as well as £278m of dividends and share buy-backs completed in the period |
| • | Strong balance sheet: net debt was £370m (H1 FY24: £67m net cash) and lease-adjusted leverage† increased to 3.1x (H1 FY24: 2.5x), below our internal threshold of 3.5x |
Current trading (six weeks to 10 October 2024)
| • | We have seen an improving trend across the current trading period, after a soft start to September, with the result that total UK accommodation sales for the first six weeks were down 1% versus last year. However, with the continued deployment of our commercial initiatives, our outperformance versus the market increased to 1pp2 | |
| • | Occupancy remained strong over the period at 84.2%, with London at 82.5% and the Regions at 84.6%. We are also maintaining high levels of ARR resulting in total UK RevPAR of £72, 4% behind last year and well ahead of pre-pandemic levels | |
| • | F&B sales were down 14% in the period, in line with our expectations, reflecting the impact of our AGP | |
| • | In Germany, we continued to deliver a strong performance through September, which is an events-led period, with total accommodation sales 26% ahead of last year | |
| o | RevPAR for the total estate was €79, 22% ahead of last year | |
| o | Our cohort of more established3 hotels delivered a RevPAR of €87, 22% ahead of last year and significantly ahead of the market4 | |
1: STR data, standard basis, 1 March 2024 to 29 August 2024, UK M&E market excludes Premier Inn
2: STR data, standard basis, 30 August 2024 to 3 October 2024, UK M&E market excludes Premier Inn
3: Cohort of 17 more established German hotels that were open and trading under the Premier Inn brand for 12 consecutive months as at 4 March 2022
4: STR data, standard basis, 30 August 2024 to 3 October 2024, Germany M&E market excludes Premier Inn
FY25 outlook
| • | We have seen an improvement in recent weeks with a good pick-up in bookings across October and into November. Our positive forward booked position, together with the continued deployment of our commercial initiatives, means that we remain confident in driving like-for-like† sales in the second half |
| • | In Germany, we are continuing to build on the excellent progress we have made in the first half. With the increased maturity of our brand and estate, we have a strong forward booked position, and remain on track to breakeven on a run-rate basis this calendar year |
| • | Since the period end, we have completed two sale and leasebacks for a total consideration of £56m, representing an average yield of 4.1% |
| • | Having also accepted offers on 51 branded restaurants for a total consideration of £56m, we remain on course to realise expected proceeds from property-related transactions of between £175m and £225m in FY25 |
| • | No changes to our previous FY25 guidance other than: with increased cost efficiencies of £60m in FY25 (previously £40m-£50m), we now expect UK net inflation to be between 2% and 3% |
| • | We are executing well and remain on course to deliver a step change in our profits, margins and returns as reflected in our Five-Year Plan |
Five-Year Plan
Reflecting our increased confidence in the delivery of our plans over the period to FY30, we expect to:
· increase adjusted PBT versus FY25 by at least £300m, and
· generate more than £2bn for dividends, share buy-backs and, if suitable opportunities arise, additional high-returning investments
Commenting on today’s results, Dominic Paul, Whitbread Chief Executive, said:
“We are making excellent progress with our plans and over the next five years are set to deliver a step change in our performance which will fund significant returns to shareholders. Demonstrating our confidence, we have today announced details of our Five-Year Plan that sets out the scale of our ambition to FY30.
“In the UK, we have a clear pathway to further extend our market-leading position and capitalise on the favourable UK supply backdrop. We are determined to build on our significant outperformance since the pandemic and whilst the market has been slightly softer than last year, we remain on course to grow our UK returns substantially over the medium-term whilst continuing to deliver for our customers, as evidenced by our high guest scores. Our passion for operational excellence, together with our brand strength, scale and value proposition are sustaining our strong performance and RevPAR premium versus the rest of the UK M&E sector.
“In Germany, we are really encouraged by our progress to date. Our trading performance and the progressive maturity of our estate mean we are set to reach breakeven on a run-rate basis later this year. Our longer-term plans to become the country’s number one hotel brand are also on track, as we move towards replicating our success in the UK market, delivering double digit returns on our current open portfolio by FY30.
“Having laid the foundations for future growth, we are executing at pace and remain confident in the outlook as reflected by our increased interim dividend and further share buy-back.”
