Good morning, everyone. Thank you for joining the call for our Q1 trading update.

I'm joined today by Hemant Patel, our Group CFO, and we look forward to answering your questions shortly. Hopefully, you've had a chance to read the Q1 release, which we published this morning.

I'm going to start with a very brief overview for those who haven't seen it, and then we'll open up the call for Q&A. It's been a strong start to the year.

In the UK, trading has been positive, with total accommodation sales up 3% and RevPAR up 2% versus last year. Reflecting the strength of our brand, commercial program, we increased our outperformance versus the market on both accommodation sales and RevPAR growth, delivering a healthy RevPAR premium.

In Germany, we continue to make good progress and significantly outperform the wider market, which has been softer due to a lower number of high-impact events this year. Total accommodation sales grew by 16%, driven by the opening of six leasehold hotels in the period and the benefit of our commercial initiatives.

Whilst visibility remains limited, our forward booked position in both the UK and Germany is ahead of last year, supported by strong leisure bookings, and we remain confident in the full year outlook. Before moving to Q&A, I wanted to just say a few words on our new five-year plan.

As a reminder, on the 30th of April, just six weeks ago, following a comprehensive review of all options to maximize value creation, we outlined our plan that will accelerate our strategy, enhance the quality of our business, and deliver significant value for shareholders. We are executing each of our key initiatives at pace, and our plan will increase margins and returns, reduce capital intensity by £1 billion, and generate £2 billion of free cash flow available for shareholder returns by full year 31.

Now, as you probably know, we have our AGM today, we only have half an hour this morning for questions. Given it's only been a few weeks since our last update, can I please ask you to limit yourselves to just two questions?

Thank you. I'll now hand back to Elliot to host the Q&A.

Hi, good morning. Just two questions.

Wanted to ask on cost inflation in the UK and Germany. Since you presented at the end of April, just wanted to check if there was anything worth flagging more recently that makes you think your guidance is I don't know, perhaps too conservative?

I have just another question on the environment. Given how things are looking and airline tickets are getting any cheaper, I guess, any signs of increased staycation in the UK this summer that could further support trading momentum?

Thanks, Estelle. Let me take the second part of your question, and then I'll hand over to Hemant about the cost inflation.

As you can see, we've had a strong start to the year, healthy demand in the UK, and we're outperforming the market in strongly. It's interesting.

It's a mix of leisure and business demand. We're seeing good leisure demand, but also seeing good business demand as well.

Obviously, business demand generally comes in much later. We're in a good position for this summer.

We're booked ahead of where we were last year. Should more people stay in the UK this summer, we will be well placed to maximize revenue from that.

I think you're right about airline prices. They are high for the summer.

Quite a bit of capacity has come out. If more people do choose to stay in the UK, I think we're well placed for that.

Obviously, you have the same kind of situation in Germany as well. Airline prices they're out of Germany also similarly high.

I think we've shown a really strong track record of maximizing revenue where demand is strong, and we're very focused on that as we lead into the summer. Overall, we're feeling good about the year ahead.

From a cost inflation point of view, nothing to call out specifically. We're well hedged for this year, but just hand over to Hemant.

Estelle, no change to guidance at this stage. We previously guided to a range of 6.5% to 7.5% on our gross cost inflation.

That included £35 million of impact obviously from business rates, as we talked about earlier this year. Net inflation therefore net of the £60 million of cost efficiencies, which again we're on target for, kind of up in the kind of 3% to 4% range at the top end of that range.

It's early, I think, at this stage. As Dominic mentioned, we're substantially hedged on the UK and Germany in terms of utilities for this year, there's no change there.

It's a bit early, obviously. We'll see what happens with the change in the status of the war, how that continues, whether oil prices remain at lower rates going forward, whether that has knock-on impact to F&B inflation in particular.

At this stage, we're not changing our guidance. We'll update at the half year.

Thank you.

Thanks, Estelle. Thank you.

Hi, Dominic. Hi, Hemant.

Two questions from me as well. I noticed you put a line in around business rates, and I wondered if you could just update us on your thoughts and whether there's any incremental confidence on whether there could be changes to policy coming up, and any timelines on when you expect to hear an update from the government there?

Then second question is around the AGP. Can you update us on how many sites you've exited, and also kind of the phasing of AGP progress over the year?

Thank you.

Thanks, Jaina. Nice to hear from you.

On business rates, as we spoke about six weeks ago at Capital Markets Day, that's a significant part of the inflation that we're facing over the next few years. We've had a really strong example to give the government of what happens when there are significant tax increases like business rates because it's been one of the drivers of announcing our extended Accelerating Growth Plan.

That, obviously, we're in the process of consultation at the moment with our people, but that's very likely to result in quite significant job losses. I think the government understands that the implication of increased taxation does lead companies to take tough commercial decisions.

We've been at the forefront, I'd say, of showing them that, and working hand in glove with UKHospitality on that point as well. Whether that means the government ends up adjusting their business rates plans, particularly for 27 and 28, it's hard to know and time will tell, but we've been very clear in messaging that to the government, showing them the implications of policies like this, and we will continue to do that.

If the business rates situation doesn't change, we've laid out a really clear five-year plan that more than mitigates the increases in business rates, leading to a focused hotel business, significantly increased returns and profitability over the next few years. Even if the business rates situation stays as it is, we have laid out a super strong plan that is going to see significantly increased profits and returns.

Should the government adjust their position, then that would be very welcome upside to us as a business. The short answer is we continue to push the government hard on understanding the implications from decisions like business rates.

From the Accelerating Growth Program, I'll hand over to Hemant, but let me just say a couple of points overall. We are very pleased with the progress of the first phase of accelerating growth.

We've now got 66 of the new food and beverage spaces open. We signaled six weeks ago on the number of properties that we've exchanged on.

We're making good progress in that area, and the guest feedback from the new spaces is very strong, and financially, this is categorically transformative for us, and we can see that very clearly. As the new extension rooms are now coming online, we've got circa 600 extension rooms open, and the revenue performance from those extension rooms Remember, it's one of our highest-returning ways of adding rooms is adding extension rooms.

are coming in well, and the guest feedback, both from the extension rooms, but also from the new food and beverage spaces, is really strong. We feel super comfortable that the extended Accelerating Growth Program, the phase two, is categorically the right direction for us to be going as a business, and genuinely transforms our return on investment and profitability over the next few years.

Jaina, there's not much to add there because as Dominic says, we are still in consultation with our team members. We haven't enacted anything yet until that phase goes through.

At the moment, it's still the proposed change. In terms of the first phase of the program, as Dominic mentioned, at the Capital Markets Day, we've sold 51 of those restaurants.

We've got another 60 sites that are agreed terms, subject to conditions at this stage. With the extended program, we would add another 197 branded restaurants overall, and 110 of those we would be looking to sell.

That will happen then over the next two years. In terms of the revenue impact from the phasing of the revenue impact, it will build over to the end of the summer, where we'll get into more of a steady state in terms of that revenue impact.

We'll update more at the half year if we go through consultation and then go through.

Thank you.

Thank you, Jaina. The plans are coming together really well, and we're feeling good about progress.

Thank you.

Hi, good morning, both. I guess two questions for me.

Yes, if I look at your comps, aesthetically, they get about 5% harder from Q1 to Q3. That's in the UK.

Are you sort of confident that there's been a shift in seasonality that those comps won't matter and you can maintain the current sort of trading pace through the next couple of quarters? Then secondly, I guess one of your shareholders reacted fairly aggressively against your five-year plan and wrote a letter suggesting you should stop all CapEx and put the business up for sale and otherwise would nominate a new slate of directors.

Given it's your AGM today, just your response to that letter. Are there any director nominations that you're seeing and any changes you've making or any discussions you're having in relation to that letter?

Oh, hi, Richard, thanks. Let me take the trading question first.

This last summer, we also had relatively higher comps to lap, and we ended up having a good summer. As we said in the release, we're feeling good about our booked position for the summer.

We're ahead of where we were last year. The events calendar does shift around a bit.

You'll see slightly bumpy STR data probably. Reminder, we're comfortably outperforming the market and feel good about being able to continue that.

There are events coming up as well for this. Harry Styles, for example, has just started.

Bad Bunny, who I'm sure, Richard, you are both aware of and enjoy, will be kicking off shortly. Then there's the other point about just general demand in the UK feeling pretty positive.

We're a relatively late booking business. We don't guide on it.

As we stand here today, we're feeling good about the position that we're in. To your point about the activist investor feedback that we had a few weeks ago about the five-year plan, obviously, we spent a lot of time with our shareholders both before we outlined the five-year plan and post that.

Generally, really supportive from our shareholders. Very understanding of the fact there've been some macroeconomic shocks, particularly on business rates and some of the other increase.

Also, I think very pleased that we're taking pretty radical action in terms of extending our Accelerating Growth Program to become a focused hotel business, reducing our gross CapEx overall, recycling more of our freehold property to fund future growth, and really quite radically adjusting the German plan, becoming more leasehold moving forward, driving higher returns, becoming free cash flow positive by full year 29. A very strong set of actions to drive very material increases in profits and returns.

Obviously, this year is a challenging year because extending our Accelerating Growth Program means we have to go a bit backwards in order to go significantly forward. Investors with a medium-term timeframe are understanding of that and do believe we're making the right kind of decisions.

Actually, if you look at what the activist investor, Corvex, laid out, we agree on the key point, which is that extending the Accelerating Growth Program is the right thing to do. Now, that is one of the big drivers of our capital expenditure, actually, over the next few years.

It's good that we're aligned on that. In terms of reducing UK CapEx further, we think the plan we've laid out is the right plan.

We are focused very much on opening hotels which are going to be very high returning. A lot of our future growth, as we laid out, is coming in London, where currently we under-index.

You will have seen in the numbers we outlined today, London continues to do really well, we feel very positive about adding this capacity in London. Stopping that kind of investment would not be the right thing to do.

These hotels are generally profitable from day one and drive very high returns, we're very comfortable about investing that money in the UK. In terms of Germany, we've laid out a plan which is quite significantly changed from the original plan for Germany, and again, that's going to drive returns and profitability in that market.

Of course, there are elements with a plan that people agree with and elements they don't, but fundamentally, what we're really confident in is the plan that we've laid out is going to drive very significantly increased returns and profitability over the medium term of the business. It's important that we both keep reinforcing that, but also show the momentum that we're building in the business.

Although it's only the first quarter, this first quarter points to that. I think it's our third consecutive quarter of RevPAR growth.

It shows the momentum building, both in terms of the underlying trading driven by our commercial program, the progress we're making on accelerating growth, and the progress we're making in Germany overall. We're very focused on delivering that plan, and we're making good progress.

Thanks, Richard.

Thanks. Morning, both of you.

First question was actually

on London.

Hiya. On London, a lot of the outperformance for the group has come there.

Can you just talk a bit about how you're achieving that, and I suppose just to get an idea of the sustainability? Then secondly on Germany, if I'm right, constant currency RevPAR went a little bit backwards.

It feels that you're going to need RevPAR growth for the year to offset that £10 million of recent additions costs. How do you feel about that at this stage?

Thanks very much.

Thanks, Tim. Let me take the second part of the question first on Germany.

The first quarter for Germany overall as a market, there were quite significantly fewer events. Remember, it's a very event-driven market.

Music, business, fairs, it's a very, very kind of idiosyncratic element of the German market. Being able to trade events well is a critical part of driving revenue and occupancy in that market.

The events calendar in quarter one was certainly softer than last year, but the events calendar moving forward gets richer. We've got really good at trading events.

We've completely adjusted our commercial strategy for trading events, and we're seeing really good evidence of that. One of the ways you can see that is our overall market outperformance is significantly growing in Germany.

The year looking forward has got more events. Overall, actually, we're feeling good about Germany, and the new leasehold hotels that we've just opened are actually trading very well already and building very strong momentum in them.

Overall, we feel good about the position that we've got in Germany. To answer your question about London, we have felt very positive about London for a while, and I think I've said that on pretty much every call that we've had.

London is just this amazing market of a lot of domestic demand, both leisure and business, and a lot of inbound demand. The gift that we've got is we under-index in London, which is why a lot of our future growth comes in London.

The reason this is such big news for us is the London hotels are generally the most profitable, they have the highest RevPAR, and very strong average room rate, and very strong accommodation, and therefore, high RevPAR. The fact that we're under-indexed in London is a gift for us, and we're taking advantage of that.

The commercial strategy we've got for London is very clear. It's made up of a strong mix of maximizing leisure demand at certain periods at weekends, for example, and holiday times in London, all pricing strategies to support that, really harvesting the business demand.

Midweek demand in London is very strong. Then also maximizing events demand as well.

We feel a lot of that. Then adding in on top of that, getting more of the inbound market, which is a great opportunity for us.

Overall, we don't think this is a flash in the pan, the London performance. We've seen a strong London market for quite a while now.

We under-index there. A lot of our growth is coming in London.

This will be a really good tailwind for us as we execute the plan.

Thanks, Dominic.

Thanks, Tim. Cheers.

Hi, Jarrod.

Hello, sorry about that. I was just asking, do you have any comments in terms of the market as it currently stands in terms of recycling hotels, what demand is when you put your hotels up for disposal or sale and leaseback at the moment?

Then, any comments on kind of tourist taxes? I see some kind of mayors are already pushing things through, if there's been any impact on your business, but yeah, just any views on that.

Thanks.

Thanks, Jarrod. The sale and leaseback market for us has been strong, actually, and we're seeing that continue.

It's one of the key benefits that we've got as a business. We've got strong balance sheet, we've got an excellent covenant.

Investors like hotels, particularly hotels that belong to a business with an extraordinarily strong brand, very strong market position, and a strong financial covenant. We're seeing that market continue.

I think there're reasons to believe over the next few years that that market will probably get stronger as interest rates potentially go down. Actually, we're seeing a good market for that, and we can be picky and choosy about the deals that we do.

It's one of the reasons why we feel positive about the plan that we've got to recycle some of that freehold property into higher-returning growth.

I would say, Jarrod, that we're really happy with the guidance we've given for this year. It's £1.5 billion of capital recycling over the next five years.

We'll manage that carefully and make sure we get the right pricing. We have different types of assets, different types of buyers.

We're matching those very carefully. As Dominic says, the strength of our covenant means we'll get the best possible pricing.

We're very happy with that. Then

on the tourist taxes, no one likes higher and more taxes, do they? We've worked very closely with UKHospitality.

You might have seen some of the particularly social media that they've been doing on that. They called it holiday tax.

There is certainly kind of quite strong consumer support for the pushback on those tourist taxes. You're right that they are already in place in a number of cities like Edinburgh, for example.

We're better placed than most. We got ahead of this a little while ago from a technical point of view, which means we can show the tax listed separately from a financial point of view.

Whilst no one wants more taxes and more tourist taxes, I think we're better placed than most to deal with that. The strength of our brand helps offset those things.

Remember, this is something that will affect all businesses in a similar way. We're not fans of it, but we are well placed to set ourselves up to deal with it if it spreads into further cities, and we believe better placed than a number of our competitors.

Right, thanks very much. Thanks a lot.

Cheers.

Morning, thanks for taking the question. Just one in the interest of time.

Obviously, Fitch downgraded the rating after the full year results. Did you get sort of feedback from them on your plan?

Obviously, a big driver of the increased capital generation is shifting from sort of owned assets to long-term liability leases. Has there been any pushback on that from them?

Thanks.

Thanks, Alex. We were going to BBB flat with a negative watch through pretty much all of last year.

We obviously engaged with Fitch and we've been talking through as we developed our five-year plan. What's encouraging is, although we were downgraded to BBB- negative, it's stable, and they very much emphasized that, actually, they understood the plan that we had.

We expressed our confidence. They've modeled it obviously prudently because they're a credit rating agency, but in the way that we would expect them to, and the sign of assigning us as stable is a good sign that, actually, they understand the plan.

Actually, again, I think we feel pretty confident in terms of where we are in terms of leverage, how that will manage going forward, and credit rating agency's view of our plan going forward.

Thanks, Alex.

Brilliant, thank you.

thank you very much for taking my question. I just have one left on cost inflation.

We've heard recently from some catering companies on this front and their perspective is because of the supply chain and how oil price inflation flows through the agricultural supply chain, it's more likely to have an inflationary impact into the second half of this calendar year because of the timing of the transmission. I was just wondering if this is something you see as well, maybe it's more stable currently, but there might be a knock-on effect into the second half of the year?

Thank you.

Thank you, thanks. Thanks for the question.

Yes, I'll take that. When we guided at the full year results to this year, we'd talked about being at the top end of our gross inflation range.

We said 6.5% to 7.5%, we've said we'll be the top end of that because of the impact of the war, including the knock-on impact on fertilizer prices and food and beverage inflation. I guess we've taken account of that, we're expecting it to remain high through this year.

If, obviously, it falls away and we see it fall away, the half year results, we'll guide at that stage. That's not a further risk to the guidance we've given.

Potentially, it would be an upside depending on what does happen, but we've assumed a prudent case.

Thank you. It also reinforces the importance of our overall efficiency program that we outlined.

Remember, £250 million worth of efficiencies over the next five years. We're all very glad we got well ahead of that program a few years ago.

That helps offset some of these inflationary pressures that have been seen. It also reinforces the strategic shift that we're making.

Remember, as we move into a phase two of AGP, we have much lower exposure to food and beverage inflation moving forward. In a typical branded restaurant in the evening, 70% of the guests, 70% of the customers are not guests at the hotel.

Moving forward, we'll have integrated food and beverage areas where the guests in the food and beverage areas are just our hotel guests. That means we have a lower exposure to things like food and beverage inflation moving forward as we go through the plan.

It's one of the drivers of becoming higher profit, higher margin business, and one of the benefits of becoming a focused hotel company. I think we're probably on time.

Really appreciate everybody being succinct with their questions. Thank you very much.

As you've seen today, we've made a really strong start to the year, and we feel really good about the momentum that we're building overall. Thank you for your time.

We do appreciate it. Any follow-up questions you've got, you know where we are.

We'll be happy to help. Thank you.