Whitbread PLC

premier travel inn

the acquisition of Premier Lodge
and 19 pub restaurants

July 2004
Alan Parker
chief executive, Whitbread PLC
 Premier Lodge
the transaction
• £536.2m acquisition
— £505m acquisition of 132 hotels + 9 development sites
— £31.2m acquisition of 19 pub restaurants

• Earnings enhancing in first full year (2005/6)

• Togenerate 10%+ return on investment in
second full year (2006/7)
 premier travel inn
• Clear leader in growth sector

• Platform for strong sales growth

— increase occupancy in acquired hotels

— reduce discounts and improve overall sales mix

• Cost synergies
 premier travel inn
• The UK’s biggest hotel brand

• 461 locations* across the UK

• 29,141 bedrooms*

* Includes hotels committed for development but not yet built

 premier travel inn
Number of bedrooms
29,141
30,000

25,000

20,000
14,213
15,000
9,304
10,000
5,503
5,000

0
Premier Travel Travelodge Express by Ibis
Inn Holiday Inn

Source: Whitbread analysis of published company data Travel Inn Premier Lodge Pipeline
 premier travel inn
fast integration
• Detailed integration plans in place:
— People
— Systems
— Properties
— Supply chain
— New brand launch
• Completed by March 2005
a growth sector
use of branded budget hotels
Guests (millions)
6
17% CAGR
5

0
1999 2000 2001 2002 2003

Business Leisure
 an underdeveloped sector
branded budget hotels as a percentage of total rooms available (UK)

14%
12%
12%

10%

8%
6%
6%

4%

2%

0%
Total accommodation Total hotels market
Source: Whitbread analysis of data from BHA/VisitBritain/University of Huddersfield
 premier travel inn
the competitive edge
• Strong product consistency
• Nationwide coverage

• World class reservation system

• Transparent pricing
• 100% Satisfaction Guarantee
• Top quality pub restaurants
David Richardson
finance director, Whitbread PLC
 Premier Lodge
high quality assets
Year of opening Units Bedrooms
Pre-2003 118 7,701
2003 11 903
2004 (to date) 3 529
the pipeline
2004-2007 9 929
Total 141 10,062
Pub restaurants 19 n/a

Source: Vendor information

 Premier Lodge
high quality assets
• 48%of Premier Lodge rooms opened within last
four years

• 88%of lodges built or refurbished completely

within last three years

• 19
pub restaurants re-branded to Brewers Fayre by
March 2005

Source: Vendor information

 the acquisition
assets
Freehold Lease hold Total
(or equivalent*)

bedrooms sites bedrooms sites bedrooms sites

Stand alone hotels 2,994 22 2,015 16 5,009 38

Co-located with 737 17 162 2 899 19

Brewers Fayre
Co-located with 3,953 81 201 3 4,154 84
Spirit restaurant
Total 7,684 120 2,378 21 10,062 141

Source: Vendor information * inc. long leases at peppercorn

incremental capital employed
£m
Acquisition - Premier Lodge 505
- Pub Restaurants 31
Capital to complete pipeline 32
Transaction costs 9
Estimated working capital (8)
Total balance sheet value 569
NB Integration costs (to be expensed 2004/5) 8
 incremental profit
• Existing business

• Underlying growth

• Recent and new openings

• Revenue enhancement

• Cost synergies
 incremental profit
existing business
Calendar 2003 H1 2004 H1 2004
£m £m % change

Sales 114 63 20

Unit profit 37 20 20

Est. overhead (8) (4) -

Est. PBIT 29 16 26

NB Depreciation 12 6 n/a

Source: Vendor information

 incremental profit
from recent and new openings

Bedrooms Profit per Profit growth

room* £m
£k
2003 openings 903 50% x 4.4 2.0

2004 openings 529 4.4 2.3

(to date)
Post-deal 929 4.4 4.1
openings
Total 2,361 - 8.4

* Based on 2003 profit contribution per room

 incremental profit
revenue enhancement
• c.£8m additional PBIT through greater occupancy
and sales synergies:
— reservations
— cross-sell
— estate density
— heightened consumer awareness

Benefits accruing to both Premier Lodge and Travel Inn estates

 incremental profit
cost synergies
£m
Total cost synergies 6
Unit cost reductions
Overhead and marketing savings
Revenue cost of ongoing refurbishment (2)
Net cost synergies 4
one-off costs
£m

Direct cost of integration 5

Refurbishment of non-invested bedrooms 3

Total estimated one-off costs 8

(to be expensed 2004/5)
 a group perspective
• Gearing (2003/4 pro forma) – 65%
(38% pre-acquisition)

• Interest cover (2003/4 pro forma) - 3.7 x

(5.6 x pre-acquisition)

• EPSenhancing in first full year

(2005/6)

• Returnon investment to exceed 10% in second full year

(2006/7)
appendix
key ratios
Cost per bedroom - headline £50k
- fully-built £54k

Cost per pub restaurant £1.7m

EV/EBITDA – historic 13.9 x

EV/EBIT – historic 19.6 x

 key ratios
Travel Inn Premier Lodge
2003/4 CY2003
Average room rate £41.50 £41.71
Occupancy 80% 74%
Yield £33.28 £30.70

Source: Whitbread PLC published accounts/vendor information

 premier travel inn
hotels and bedrooms
Hotels Bedrooms

Travel Inn (at July 2004) 304 18,316

Travel Inn (pipeline) 9 534
Premier Lodge (at July 2004) 132 9,133
Premier Lodge (pipeline) 9 929
premier travel inn (Whitbread) 454 28,912
Franchise premier travel inn (Spirit)* 7 229
Total premier travel inn 461 29,141

* Spirit continues to operate an additional seven hotels (229 bedrooms) under a franchise agreement with Whitbread
Whitbread budget hotels
room growth 1997-2005
30,000

25,000

20,000

15,000

10,000

5,000

0
premier travel inn
management biographies
 Career highlights
• joined Travel Inn as managing
director in 2003
• 2001-3: managing director,
Costa
Also
Mike Tye • marketing & strategic planning
director, Whitbread
Restaurants
managing director, • sales & marketing director,
Whitbread Inns
premier travel inn • managing director, Aramark
Food Services Plc
Age 50
 Career highlights
• joined 2002 as finance director,
Travel Inn
Also
• planning director, Pizza Hut
• strategic finance project

Neil Cooper manager, Whitbread

• PwC Management Consulting
• several senior finance positions
finance director, with Reckitt & Coleman
premier travel inn Age 37
 Career highlights
• joined Travel Inn as
sales and marketing director
in April 2001
Also
• joined Unilever in 1987 as a
Gill Baker systems engineer before
moving into marketing
• gained widespread experience
sales and working across a number of
food brands in different
marketing director, European markets
premier travel inn • in August 98 promoted to
marketing controller for
margarine and spreads
Age 39
 Career highlights
• operations director - Managed
Travel Inn
• previously regional operations
director for MTI’s North
Also
Paul Flaum • strategic planning & business
analysis manager (leisure
division), The Rank Group
operations director, • regional manager London &
South, Odeon Cinemas Ltd
(managed) • regional director, London &
premier travel inn South, Odeon Cinemas Ltd
Age 33
 Career highlights
• operations director for
Travel Inn
• 2 years operations director
Brewers Fayre/Brewsters
Darroch Also
Crowford • 6 years with Hilton Hotels
• 8 years with Forte Hotels
• 13 years with Thistle Hotels –
operations director, trainee to general manager
• general manager White House
premier travel inn
Hotel, Herm, Channel Islands
Age 51
 Career highlights
• joined June 2003 as property
director
Also
• head of acquisitions then head
of development, Kingfisher
Deborah Parker • head of property, BAA
• various senior positions in other
leisure companies such as
property director, Rank/Luminar
• developed property side of the
premier travel inn BigW chain, Woolworths
Age 40
 Career highlights
• joined 2003 as HR Director –
Travel Inn
• HR director – Endeva
Also
• HR director Thorn Managed
Tim Painter Services
• head of HR – Thorn UK
• compensation & benefits mgr,
human resources Thorn UK
• Safeway Stores plc
director,
• Asda stores
premier travel inn
Age 34
 Career highlights
• joined in April 1998 as
IT Director
• previously business systems
manager, finance services
division, Whitbread
Also
Susan Thomas • project accountant, services
division, Whitbread
• senior business consultant,
systems director,
Whitbread
premier travel inn Age 40