Whitbread plc (WTBDY) Q2 2026 Earnings Call Prepared Remarks Transcript

2025-10-16 05:36:37 ET

Whitbread plc (WTBDY) Q2 2026 Earnings Call October 16, 2025 3:00 AM EDT

Company Participants

Dominic Paul - CEO & Director
Hemant Patel - CFO & Director

Presentation

Dominic Paul
CEO & Director ...

Good morning, everyone. I'm Dominic Paul, Group CEO, and I'd like to welcome you to Whitbread's 2026 Interim Results Presentation. Today's presentation will take place by remote webcast, followed by a live Q&A session at 9:15 a.m. U.K. time, and Hemant Patel, our Group CFO, and I will be happy to answer your questions. Details of how to join the call can be found on our website. I'm going to start by taking you through the excellent progress we have made during the first half and provide a summary of our results. I'll then hand over to Hemant, who will take you through our results in detail. I'll then come back to cover the strategic initiatives, which ladder up to our 5-year plan.

But first, I just want to spend a few moments on the strategic progress we are making to transform our business. When I rejoined Whitbread nearly 3 years ago, it was already a fantastic business, but with the potential to go even further. Since then, we have announced our Accelerating Growth Plan, which, together with our other strategic initiatives, became our 5-year plan that sets out the scale of our ambition. I'm really pleased with the progress we are making in what has been a more challenging environment. In the U.K., as the overall market returned to growth in the second quarter, I'm pleased to say that we maintained our outperformance versus the market in the first half, driven by our strong guest proposition and ongoing commercial program.

In Germany, we are making great progress and remain on track to deliver profitability in full year 2026. And with increasing scale and maturity, we expect to deliver GBP 70 million of profit before tax by full year '30. By focusing on what we can control, we continue to make excellent progress on each of the key initiatives underpinning our confidence in the medium term. As a result, our 5-year plan remains on track to deliver a step change in our profits, generating GBP 2 billion for shareholder returns by full year '30. We are executing well and are on a clear path to become a much bigger and an even better business, delivering for our guests, teams and shareholders.

Having seen a return to market growth in the second quarter, U.K. total accommodation sales were broadly in line with last year. We made good progress in Germany despite softer market demand in the second quarter, delivering 7% accommodation sales growth, resulting in a reduced loss of GBP 3 million. Despite inflationary pressures, our U.K. cost base reduced by 3% with the impact of our accelerating growth plan and increased cost efficiencies. Lower U.K. profit before tax meant the U.K. return on capital employed for the first half was 11.8%. While group PBT was back 10%, the strength of our vertically integrated model meant that group EBITDA was down just 2% year-on-year and still 41% up versus full year '20.

As a result, we generated significant free cash flow that helped fund our program investment as well as GBP 182 million of shareholder returns in the period. And despite lower earnings with the impact of share buybacks completed over the last 12 months, adjusted earnings per share reduced by just 2%. Moving now to the outlook for full year 2026. While forward visibility remains limited and despite some uncertainty around the forthcoming U.K. budget, I am pleased with the progress we are making across each of our 3 strategic pillars and remain confident in the full year outlook. First, in the U.K. As you will have seen, the positive momentum has continued into the current trading period, and our forward booked position is ahead of last year.

We remain on track to open 1,000 to 1,200 new rooms this year, and we're making excellent progress with our accelerating growth plan, having now opened the first of our new extension rooms, and we're on track to fully reverse the impact on full year 2025 profits. Second, in Germany, demand has stepped up in recent weeks, and we are delivering a more positive trading performance. We have significantly grown our pipeline with the agreement to acquire 8 new hotels in prime city locations and remain on track to open 400 new rooms by the end of this year. And we're on course to deliver profitability in Germany this year, albeit we are moderating our guidance slightly and now expect to deliver adjusted PBT of up to GBP 5 million this year, reflecting softer-than-expected market demand in the second quarter.

And third, we will continue to drive long-term growth. Having made great progress in the year-to-date, we will recycle GBP 250 million to GBP 300 million worth of property this year to help fund our network expansion and accelerating growth plan. We now expect to deliver GBP 65 million to GBP 70 million of efficiencies this year, up from GBP 60 million guided previously, partially mitigating high levels of inflation, and we are on track to complete our previously announced GBP 250 million share buyback by the time of our full year 2026 results.

The excellent progress that we are making on our initiatives means that we remain confident in delivering a step change in profitability and significant returns for shareholders. Our accelerating growth plan will boost U.K. margins and returns by optimizing our food and beverage offering at a number of sites and unlock 3,500 extension rooms. We will also open at least 8,000 new high-returning hotel rooms, reaching 98,000 rooms across the U.K. and Ireland. Together, these 2 elements will deliver over GBP 220 million of incremental profit by full year '30. In Germany, we aim to have 20,000 rooms open by the end of full year '30. With greater scale and brand maturity, we remain on track to reach GBP 70 million of profit by full year '30, an uplift of GBP 80 million versus full year 2025.

And as a budget hotel brand, we remain focused on managing our costs and will deliver GBP 250 million worth of savings by full year '30. Our commercial program is expected to drive positive like-for-like sales momentum in the U.K. and together with our efficiencies, our assumption is that we'll be able to offset cost inflation over the life of the plan. This plan is fully funded, and we will keep average net CapEx of GBP 500 million, which is net of proceeds from property-related transactions. We have made great progress, having completed a number of sale and leasebacks at attractive yields in the year-to-date. We are pleased with the updated valuation of our estate and are confident that we can recycle at least GBP 1 billion worth of property over the life of the plan.

I will now hand over to Hemant, who will take you through our performance in more detail.

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