Whitbread outperforming the market in the UK and accelerating growth in Germany with 15 new hotels

27 October 2020

Whitbread has reported H1 performance was in-line with expectations and reflects the closure of the vast majority of their businesses during the lockdown period from the end of March.

The company rapidly reopened its estate, with 97% of UK hotels reopened by the end of July, and have subsequently grown our market share. In Germany Whitbread have more than trebled their open hotel network to 21 hotels from the beginning of the year.

Whitbread's balance sheet was enhanced by the successful £1bn Rights Issue completed in June, and provides a strong platform for the continued successful execution of it's structural growth strategy in the UK and Germany, and Whitbread have today announced a transaction which will accelerate growth in Germany with the addition of up to 15 hotels.

"Given the fast-changing nature of the COVID-19 environment in which we are operating, and increased levels of local and regional lockdowns, near-term visibility remains limited. However, as the situation evolves, Premier Inn remains well-placed to capitalise on the enhanced structural growth opportunities that will exist, driving attractive returns on investment in the long-term."

FY21 H1 operational highlights - outperforming and growing market share
· H1 total sales were significantly down year-on-year reflecting the closure of the vast majority of our hotels and restaurants for a large part of the period

· When permitted, we reopened quickly and safely, with 97% of UK hotels open by the end of July

· Since reopening, UK accommodation sales performance has been ahead of the market, benefitting from the fast reopening, the strength of the Premier Inn brand and our leading customer proposition

· UK occupancy levels steadily improved on a weekly basis, averaging 51% in August, while UK Restaurant performance was boosted by the positive impact of the Eat Out to Help Out scheme. August UK total sales improved to 38.5% down year-on-year

· Customer scores remained very strong during the first half, despite the significant disruption

· In Germany, we grew our open hotel network from 6 to 19 hotels by the end of the half, and by a further 2 in October to take the total to 21 open hotels today

Ongoing decisive action to protect the business
· Our financial response to the COVID-19 crisis included significant reductions in discretionary spend and capital expenditure, suspension of the dividend, voluntary pay cuts for the Board and management team, and use of UK and German Government support packages

· Further actions taken include a restructure of head office and site level operations to ensure that we emerge from the crisis with a lower cost base, a more flexible operating model and a stronger more resilient business

· A £1bn Rights Issue was successfully completed in June, enhancing our financial flexibility

· We supported the community and national effort during lockdown by making rooms available to NHS staff and donating over 335,000 meals to charities

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 German pipeline and believe we have a long-term line-of-sight to over 60,000 rooms through both organic and inorganic investment

· We have also today announced the signing of up to a further 15 hotels in Germany that are currently operating under the Centro, Ninetynine and Fourside brands, of which 8 are open and 7 are pipeline. Subject to competition clearance, the open hotels are expected to join the Premier Inn estate in December 2020, and would take our open estate to 29 hotels and our total open and committed pipeline in Germany to 68 hotels

· Recent lockdown measures announced by the UK Government mean we will continue to manage our cash position carefully. However, our balance sheet, enhanced by the successful Rights Issue, provides a strong platform for future growth and investment to drive market share gains

Alison Brittain, Whitbread Chief Executive Officer, commented: "Our performance following the reopening of our hotels and restaurants in the summer was encouraging and we continue to trade ahead of the market. Taking market share in the UK demonstrates the strength of our trusted Premier Inn brand and the benefits of our unique operating model.

Since March we have trebled our open hotel network in Germany to 21 hotels and today announced the acquisition of up to 15 more hotels. This takes our network of open and pipeline hotels to nearly 70 hotels, with broad geographic coverage across many major cities and towns.

Throughout the crisis we have taken decisive action and we continue to focus on protecting our guests, our teams and our business in light of the impact of the recent increase in regional and national restrictions. We are also improving the flexibility of our cost model to respond to changes in demand. As a result, we enter this second-wave period in a position of strength, with our customer scores higher than they have ever been, our market share growing in the UK and extending a meaningful network of hotels in Germany, giving us the opportunity to achieve national brand awareness and operate at scale.

I am extremely proud of and grateful to our teams for their resilience and for the part they have played in enabling us to successfully navigate this difficult period. I would like to take this opportunity to thank them for their tremendous hard work and commitment. I would also like to thank our shareholders for their ongoing support as our successful £1bn Rights Issue ensures that our strong balance sheet continues to be a source of competitive advantage and positions the business for long-term growth.

Whitbread's long-term strategy remains as relevant and compelling as ever. The impact of the COVID pandemic on the hotel sector will undoubtedly be significant and we are already seeing signs of distress and constraint in the competitive landscape. This is likely to accelerate the structural changes in the market with supply contraction and constrained investment amongst independent and budget branded operators in both the UK and Germany.

We hold a uniquely advantaged position in the UK market as the largest player with the strongest brand. Our financial flexibility and resilience, combined with a strong balance sheet, give us the ability and the confidence to invest with discipline and focus on strong long-term returns. We will be well placed to enhance our market leadership position even further in the UK, and accelerate our growth in Germany, supporting our guests and teams and driving long-term value for all our stakeholders."