Premier Inn UK drives significant profit uplift versus FY22 and FY20
Strength of operating model underpins long-term growth opportunities in UK and Germany
Increased dividend plus £300m share buy-back in H1 FY24
Throughout this release all percentage growth comparisons are made comparing the current year (FY23) performance for the 52 weeks to 2 March 2023 to FY22 (53 weeks to 3 March 2022) that was partially impacted by the pandemic and FY20 (52 weeks to 27 February 2020), with FY20 being the last financial period before the onset of the pandemic.
Overview
• Significant profit uplift to above pre-pandemic levels, driven by Premier Inn UK that continues to outperform the UK midscale and economy (‘M&E’) market
• We are making good progress in Germany, with 51 hotels open, giving us confidence that we can achieve our long-term target of 10-14% return on our £1bn of committed capital
• We see considerable opportunities for growth, both in the UK and Germany, driven by the strength of our operating model and the structural decline in the independent hotel sector
• Current trading remains strong, despite macroeconomic uncertainty, with encouraging lead indicators
• The Board is recommending an increased final dividend of £100m or 49.8p per share
• Confidence in outlook reflected with initial share buy-back of £300m, to be completed during H1 FY24
FY23 Group Financial Summary
| £m | FY23 | FY22 1 | FY20 | vs FY22 | vs FY20 | ||
| Statutory revenue2 | 2,625 | 1,703 | 2,072 | 54% | 27% | ||
| Adjusted EBITDAR†| 888 | 473 | 753 | 88% | 18% | ||
| Adjusted profit / (loss) before tax†3 | 413 | (16) | 358 | >1,000% | 15% | ||
| Statutory profit before tax | 375 | 58 | 280 | 544% | 34% | ||
| Statutory profit after tax | 279 | 43 | 218 | 556% | 28% | ||
| Adjusted basic EPS†| 162.9p | (2.5)p | 166.3p | >1,000% | (2)% | ||
| Statutory basic EPS | 138.4p | 21.1p | 125.3p | 556% | 11% | ||
| Dividend per share | 74.2p | 34.7p | 32.7p | 114% | 127% | ||
| Net cash / (debt)†| 171 | 141 | (323) | 31 | 494 | ||
| Net cash / (debt) and lease liabilities†| (3,787) | (3,561) | (2,944) | (6)% | (29)% | ||
Financial highlights
• Premier Inn UK: total UK accommodation sales were 55% ahead of FY22 and 37% ahead of FY20 representing a 25.2pp outperformance versus the M&E market4
• F&B sales were 40% ahead of FY22 and 4% behind pre-pandemic levels with increased spend per head outweighed by a decline in customer volumes
• UK pre-tax margins†increased to 19.6% (FY22: 4.5%) despite sector-wide inflationary pressures, driven by strong revenue growth and our ongoing cost efficiency programme
• UK ROCE†increased to 12.9% up from 11.2% in FY20
• Premier Inn Germany: ongoing expansion meant that adjusted loss before tax was £50m; our cohort of 18 established hotels performed in line with the market5 and was profitable in aggregate6 in FY23; acquisition of six hotels completed on 2 March 2023
• Statutory revenue was 54% ahead of FY22 and 27% ahead of FY20
• Adjusted profit before tax was £413m (FY22: loss of £16m) and statutory profit before tax was £375m (FY22: £58m) after charging £39m of adjusting items (FY22: £74m credit), including £1m of net property impairment credits in the UK and £31m property impairment charges in Germany (FY22: £42m net impairment credit), £14m of technology-related project costs and £ 4 m profit from property disposals (FY22: £33m). The Group recognised £nil government support relating to FY23 (FY22: £17 1 m)
• Strong balance sheet: lease adjusted leverage †reduced to 2.7x (FY22: 4.4x) and net cash increased to £171 m (FY22: £141m); pension fund surplus was £ 325m at the end of the period (FY22: £523m)
Segment highlights
Premier Inn UK
| ` | |||||||
| £m | FY23 | FY22 | FY20 | vs FY22 | vs FY20 | ||
| Statutory revenue | 2,508 | 1,668 | 2,050 | 50% | 22% | ||
| Adjusted profit before tax†| 492 | 75 | 414 | 556% | 19% | ||
| Revenue per available room (£)†| 59.45 | 38.69 | 46.91 | 54% | 27% | ||
Premier Inn Germany
| ` | |||||||
| £m | FY23 | FY22 | FY20 | vs FY22 | vs FY20 | ||
| Statutory revenue | 118 | 35 | 12 | 234% | 896% | ||
| Adjusted (loss) before tax†| (50) | (24) | (14) | (108)% | (265)% | ||
| Revenue per available room (£)†| 37.04 | 16.49 | 40.53 | 125% | (9)% | ||
Current trading (seven weeks to 20 April 2023)
• Our strong trading momentum has continued into Q1 FY24 – we are adding new rooms and filling them at attractive rates
• Premier Inn UK: Total UK accommodation sales up 17% versus FY23, with RevPAR £6.08 ahead of the M&E market7
• Premier Inn UK: forward booked occupancy is in-line with last year but at higher ARRs, providing positive revenue momentum into Q1 FY24
• UK F&B: sales were 10 % ahead of FY23, reflecting softer trading in the base year and the benefit of a number of commercial initiatives
• Premier Inn Germany: market demand has rebounded after a soft Q4 FY23 and our cohort of 18 established hotels continue to perform in line with the wider M&E market 8
Outlook and guidance for FY24
• Current trading is strong despite macroeconomic uncertainties, and we remain confident in the outlook for FY24
• We expect UK inflation of between 7-8% in FY24 and are confident in being able to offset the impact on UK profits through like-for-like sales growth, new room expansion and a focus on cost efficiencies
• In Germany, we continue to expect to incur a loss before tax in FY24 of between £20m and £30m, with an additional £10m adverse profit before tax impact relating to the refurbishment of the c.900 rooms acquired at the end of FY23
• In the UK, we have a current pipeline of 7,400 rooms and expect to open 1,500 – 2 ,000 rooms in FY24
• In Germany, we have a pipeline of 7,000 rooms and expect to open 1,000-1,500 rooms in FY24, in addition to the refurbishment of c.900 rooms from our latest acquisition
• We expect total capex expenditure in FY24 to be between £400m – £450m
• Reflecting these points, we have updated our year-on-year guidance for FY24 within this release
1: FY22 was a 53-week period, the impact of week 53: £42m total sales and estimated profit before tax of £4m
2: FY20 revenue includes £9m relating to the Costa disposal transitional service agreement
3: FY22 includes £62m received from the UK Coronavirus Job Retention Scheme, £44m of Germany Government COVID-related grants, £56m of UK business rates relief and £8m of other COVID-related support grants
4: STR data, full inventory basis, 4 March 2022 to 2 March 2023, M&E market excludes Premier Inn
5: STR data, standard basis, 4 March 2022 to 2 March 2023, M&E market includes Premier Inn
6: Aggregate adjusted profit before tax excluding administration and overhead costs for hotels that were open and trading for a full 12 months as at 4 March 2022 (see alternative performance measure (‘APM’) in the glossary and reconciliation at the end of this document)
7: STR data, standard basis, 3 March 2023 to 13 April 2023, M&E market excludes Premier Inn
8: STR data, standard basis, 3 March 2023 to 13 April 2023, M&E market includes Premier Inn
†Signifies an alternative performance measure (‘APM’) – further information can be found in the glossary and reconciliation of APMs at the end of this document
Commenting on today’s results, Dominic Paul, Whitbread Chief Executive, said:
“These are a fantastic set of results. Whilst the recovery in market demand in conjunction with a structural decline in the independent sector has provided a helpful backdrop, it is the combination of our own initiatives and our clearly differentiated business model that has sustained our brand strength and delivered such an impressive operational and financial performance.
“These results reflect the strength of our business model and our persistent focus on delivering an excellent and consistent guest experience across all of our hotels and restaurants. That focus is embedded within our business strategy, that my predecessor, Alison Brittain and the whole Executive team executed brilliantly through one of the Group’s most challenging trading periods. It has also created a platform for future growth, both in the UK and in Germany. This sets us apart from our competitors as we continue to invest through the cycle with a clear focus on capital discipline and operational excellence.
“Having spent time out in the business operations, both in the UK and Germany, I am clear that our strategy is the right one and I am hugely excited about the opportunities we now have in front of us. I want us to strengthen further our position as the UK’s leading hotel brand, improve our F&B performance, continue to drive our efficiency programme, complete some important technology projects and replicate our UK model at scale in Germany.
“I am confident that we can deliver on each of these tasks and more. To do so will require the continued dedication and hard work of our Executive team and all of our 40,000 team members, each of whom plays a vital role in driving our success. I am excited to be leading such a great team and I am optimistic about our prospects. “