Whitbread delivers full year results & response to pandemic

Premier Inn's parent firm, Whitbread has released its full year results, which were in line with expectations with commercial initiatives driving an improved H2.

The company has taken decisive action in response to the COVID-19 pandemic, to protect its teams, guests and the business.

It has enhanced its liquidity position and agreed a range of covenant waivers that mean the group is able to withstand many months of its hotels being closed or at low occupancy.

Whitbread said it was ready to reopen quickly and safely, and the business is well positioned to return to strength.

Statutory revenue was up 1.1% to £2,072m supported by contribution from new capacity and improvement in absolute and relative performance through the second half, despite continued weak market conditions.

Adjusted profit before tax decreased by 8.2% to £358m, as a result of weaker UK travel market conditions, particularly in the regions, the high rate of industry-wide inflation, despite mitigating cost saving actions, and the start-up nature of our German operations.

Statutory profit before tax increased 28.4% to £280m and statutory profit for the year increased 23.2% to £218m primarily due to separation costs incurred in the prior year from the disposal of the Costa business.

FY20 Operational Highlights:
• Resilient FY20 performance delivered in-line with expectations; improved UK trading in H2
• Quarterl yperformance improving sequentially through the year, with Q4 total UK
accommodation sales growth 20bps ahead of the market
• Premier Inn customer scores continued to improve demonstrating best-in-class operational performance
• Material acceleration in network growth in Germany – open and committed pipeline now stands at 9,800 rooms across 52 hotels.

COVID-19: Protecting business through rapid & decisive action
• Robust operational response to protect our teams, guests and the continuity of the business
• All restaurants and the vast majority of hotels closed in the last week of March 2020
• Decisive action taken to reduce cash outflows and further enhance liquidity, including significant reductions in capital expenditure and discretionary spend, voluntary pay cuts for Board and management team and use of UK and German Government support packages
• Dividend payment suspended
• Covenant waivers granted from lenders for 18 months
• Strong balance sheet as we entered FY21; cash of £503m and undrawn Revolving Credit Facility (RCF) of £950m
• Confirmed as an eligible issuer under the UK Government’s Covid Corporate Financing Facility (CCFF)
• c.27k furloughed staff remain on full pay and full refunds provided for customers
• Supporting the community and national effort by making rooms available to NHS staff and other key workers at selected hotels, passing fleet delivery capacity to supermarkets and donating enough food to make over 335k meals to charities following our restaurant closures.

COVID-19: Positioning business for successful recovery
• UK hotels ready to open when the government advises; internal scenarios include the assumption that hotels are closed, or at low levels of occupancy, until September 2020. German hotels re- opened 11 May 2020
• Revised operational protocols tested and working in 39 open hotels. Our operating model ensures strict social distancing, significantly enhanced hygiene standards and specific staff training can be rigorously and consistently enforced across the estate
• Well positioned to return to strength as customers seek value and expected to rely on their most trusted brands
• Flexibility to adapt our operating model in a post-lockdown world:
• Direct distribution model provides early visibility on consumer behaviour and dynamics,
supporting rapid adaptation of the consumer proposition
• More flexible-rate products launched to provide booking confidence • Leading brand, network scale, direct bookings, domestic customer bias and value focus will all
support a strong return in a weakened competitor environment.

CEO Alison Brittain commented, “Whitbread delivered a resilient financial performance in FY20 in line with expectations, against a backdrop of low UK business and consumer confidence which particularly impacted the regional hotel market.

'The commercial initiatives we implemented during H1 helped drive a particularly strong end to the year, when we were trading ahead of the market and achieving very strong guest scores. In Germany, we completed the acquisition of the Foremost Hotels on 28 February 2020, growing the number of open and pipeline hotels to 52.

'However, the period after the year-end has been dominated by the impact of the rapidly evolving COVID-19 pandemic. In response, the business took rapid and decisive action to protect our teams and our guests, and to secure our business to ensure that we will be in the best possible position to rebound strongly.

'We are pleased to have been able to help in the national effort, by keeping 39 hotels open that are located near hospitals for use by NHS staff and other front-line key workers. We transferred our vehicle delivery capacity to supermarkets to help their supply chains, and also donated over 158 tonnes of food to charities, producing over 335,000 meals for those in need.

'I would like to take this opportunity to thank all our employees for their hard work over the last year, and the resilience they have shown in the face of the current very challenging situation. I am extremely proud of, and grateful to, all our teams and in particular those colleagues who have volunteered to work in our open hotels.

'Having taken every step we could to ensure that we have the financial capability to withstand the initial period of lockdown, our focus has turned to re-opening and positioning ourselves for a successful recovery. The hotels that we have re-opened in Germany and the UK have given us a head start in implementing new and comprehensive safety, health and hygiene protocols that will give our teams and guests the re-assurance that we can continue to deliver the very high quality standards that they expect from Premier Inn.

'Despite the challenges the industry faces, Whitbread’s strategy to drive long-term value has not changed and remains compelling. We have a significant opportunity to continue to build out our pipeline in the UK, along with optimising our large network of hotels by investing in upgraded formats such as our Premier Plus rooms, which are proving very popular with both our business and leisure guests. Germany offers an enormous opportunity for structural growth, with a large domestic market and a fragmented and declining independent sector. As a result of the current crisis, we expect there to be an impact on the competitive landscape and to see a material slowdown in the supply of rooms in both our key markets, and potentially an acceleration in the decline of the large independent sector. Our ownership and operating model underpins a winning customer proposition, that we believe will thrive as customers return to travelling domestically and continue to seek value and to rely on their most trusted brands.

'Our strong balance sheet has for many years been a source of competitive advantage and has underpinned our long-term success. To enable us to continue to invest with confidence in the compelling structural growth opportunities that we see in the UK and Germany, we are raising £1bn through a fully underwritten rights issue. Optimising the balance sheet in this way will enable the business to be in the best possible position to continue investing and taking market share in our fragmented sector when the current situation normalises.

'Whitbread is a strong and much-loved business that has successfully navigated numerous turbulent periods during its proud 278-year history. The combination of the strengths of our people, business model and our brands, alongside a strong balance sheet and the decisive action that we have taken, means that when the COVID-19 situation passes, we will be in a position of strength to continue to increase market share, support our colleagues and guests and create further significant value for shareholders.”