Whitbread plc

Good morning. I'm Alison Brittain, and I'd like to welcome you to Whitbread's Interim Results Presentation.

Today's presentation will take place by remote webcast, followed by a live call Q&A session at 9:15 a.m. when Nicholas Cadbury and I will be delighted to answer your questions.

Details of how to join us for the Q&A can be found on our website. Turning to our agenda this morning.

I'll start by taking you through our operational performance during the first half, recapping on our ongoing response to the COVID-19 pandemic. I'll then hand over to Nicholas, who will explain our financial performance for the first half, talk you through our current trading performance and cover our strong balance sheet.

And finally, I will come back and finish by covering our strategy to drive long-term shareholder value. For those of you who watched our full year presentation in May, you'll be familiar with the structure that you can see on this slide.

Our half 1 headline financial performance was well trailed a month ago in our half 1 post close trading update. And so I won't dwell on it today, except to note that it reflects the closure of our businesses for a large part of the period.

So let's fast forward to where we are today. We reopened our businesses quickly and safely with almost all our estate open by the end of August.

We've benefited from the strength of the Premier Inn brand, our leading customer proposition and our operating model. And as a result, our U.K.

accommodation sales performance has materially outperformed the market, and we've taken market share. In Germany, we've more than tripled our open estate to 21 hotels and have secured a network of 53 open and pipeline hotels.

And today, we've announced the signing of up to a further 15 hotels that will take our open and committed pipeline to 68 hotels, another big step on our journey to developing a national network in Germany. As you can see from this slide, we describe our plans to manage the business through this difficult period as having three parts: protect, restore and drive long-term value.

It's important to note that these phases are not linear, but rather they happen in parallel, which allows us to react quickly to manage changes brought about by the response of the pandemic in both the U.K. and Germany.

During September, we started to see local restrictions and lockdowns introduced to control the spread of the COVID virus. And recently, the governments of all 4 devolved nations in the U.K.

have introduced national restrictions. As such, the near-term environment is challenging, and we need to be nimble and agile to respond to changing conditions as they happen.

In the short term, the extension of local and regional lockdowns brings significant operational challenges, drives increased levels of uncertainty and means that we'll have to continue to protect our business and carefully manage our cash flow. However, our long-term strategy remains unchanged.

We see a significant opportunity for our business to leverage the competitive advantages of our ownership model, our strong brand, direct distribution and broad customer reach. And we've already seen the evidence of this in our strong performance since reopening.

We'll be operating in a weakened sector, and we are already seeing signs of distress and constraint in the competitive landscape. It's worth remembering that some of our best returns have been achieved by investing during periods of weakened supply growth and competition.

And our strong financial position gives Whitbread the confidence to invest to take advantage of the enhanced structural opportunities that will undoubtedly exist in both the U.K. and Germany.

This slide summarizes the extensive actions we took in response to the COVID crisis, including a robust operational response to protect our guests and our people. A series of measures to act responsibly and support the national effort, a series of rapid actions to strengthen our financial position, including the rights issue in May.

And continuing to take further protective action where needed, including the recent actions to rightsize the business and ensure that we emerge with a more flexible, cost-effective and resilient operating model. I don't intend to go through each one of these points as we've covered a lot of the detail in our previous releases.

However, I don't want to lose sight of what's been an incredible team effort by everyone in our business. Helping position us in the best possible way, the benefits of which we're already starting to see.

I'm extremely proud of and grateful to our teams for the resilience during this very difficult period. And I'd like to take this opportunity to thank them for their tremendous hard work and commitment.

This slide shows that since reopening in the U.K., we're taking significant market share. Our share of the total hotel market has grown by 3.5 percentage points to around 10.5%, market share growth of almost 50%.

Our reopening strategy was to maximize total sales, and we achieved this by leveraging the strength of the trusted Premier Inn brand and our direct distribution model, supported with targeted direct marketing. We introduced new flexible rate classes that's enabled customers to cancel or amend bookings, which helped drive conversion rates by allowing customers to book with confidence.

Using the learnings from the 39 hotels we kept opened for NHS workers during the lockdown period, we implemented robust new hygiene and cleaning standards. And this allowed guests not to stay with confidence and has driven even higher brand scores.

Importantly, our operating model enables revenue to contribute to fixed costs at very low occupancy levels, meaning the opening of the vast majority of the estate has reduced both losses and cash outflows. All of these factors combine together to help us deliver these impressive market share gains.

In Germany, our open estate has increased from 6 hotels at the start of the year to 19 hotels at the end of the first half. And after the half year, a further 2 hotels were opened, taking the total open estate to 21.

As you can see from the map on the slide, this network now gives us a natural footprint with a presence in many major German cities. During the lockdown period, which, in Germany started at the end of March and lasted until mid-May, we took the opportunity to refurbish and rebrand 13 of the hotels that were acquired from the Foremost Hospitality Group at the end of February.

These new hotels all showcase completely new reception areas and restaurants and each guest room has been converted to a high-quality recognizable Premier Inn product. During the reopening phase, we replicated our strategy from the U.K.

by leveraging direct distribution, implementing enhanced cleaning and hygiene protocols and introducing new flexible rate classes. Post the reopening, occupancy levels grew steadily across all open sites, driven predominantly by leisure demand.

Our current performance in Germany is encouraging despite the testing conditions, with strong customer scores reflecting the strength of the customer offering and an accelerating pipeline. We believe Germany provides Premier Inn with a compelling structural long-term growth opportunity as we look to replicate our U.K.

success. We have both the ambition and the capability to become the #1 budget brand in Germany, and we're gathering momentum with more to come.

And as clear evidence of these opportunities, we've today announced the signing of up to 15 hotels in Germany though subject to competition clearance, would extend our open and committed pipeline to 68 hotels. Our business strategy is underpinned by our Force for Good ESG program.

The 3 elements of our Force for Good Program, opportunity, community and responsibility, helps us do business in the right way and supports our teams, the environment, our communities, our suppliers and our guests. The benefits are clear and as part of our overall strategy will help drive long-term value.

As you can see from the slide, the Force for Good program covers a wide range of areas from championing inclusivity and diversity to delivering challenging environmental targets through to ensuring the integrity of our supply chain, to name just three. Operating responsibly and sustainably is embedded in what we do, and we've made very good progress and have recently set new stretching targets in a number of the environmental areas.

This slide showcases some of the things we did during the pandemic to support our guests, colleagues and the wider community. I'm extremely proud of what we achieved and how we help support the national effort from keeping our hotels open for NHS workers to providing meals for the needy and also raising a significant sum of money for our charity partner.

It was a fantastic effort by everyone involved, a one that forms another chapter in our very proud 278-year history. Having taken a series of decisions to protect the business and successfully reopen, our focus is continuing to protect and also to restore our strength by continuing to drive long-term value and to increase our leading position as a clear winner in the sector.

The impact of the COVID pandemic on the hospitality sector will be significant, and it will change the competitive landscape with potentially a material slowdown in room growth significantly constrained future investment and an acceleration in the structural decline of the independent sector. Whilst we will not be immune in the short term, we are the largest player with the #1 brand, and our considerable financial resilience and strong balance sheet give us confidence to invest.

And so we will be well placed to emerge as a winner. Whitbread's long-term strategy for value creation in the U.K.

and Germany remains unchanged, and it's highly compelling. We have a track record of deploying capital with discipline and with focus on strong returns, and this will continue.

We have great opportunities to grow and optimize our large network in the U.K., whilst Germany offers enormous potential for structural growth. I'll now hand over to Nicholas to talk you through the H1 financials, after which I will talk in more detail about Whitbread's strategy to drive long-term value.

Thank you, Alison, and good morning, everyone. Our performance in the half year was in line with our guidance and our expectations.

And reflects the closure of the vast majority of our business from the end of March through to May in Germany and to July in the U.K. With the closures, the first half's revenue was down 77% year-on-year.

We also had other income of GBP 86 million from the benefit we received from the government's job retention scheme. As we reacted quickly to the environment, operating costs were GBP 168 million lower than last year, driven by the discretionary cost savings, the reduction in revenue related costs and the benefit of the suspension of business rates.

This decline in revenue, partly offset by the cost reductions, led to an adjusted loss before tax of GBP 367 million. We also had noncash adjusting items, including an impairment of GBP 348 million triggered by COVID-19, taking our statutory loss before tax to GBP 725 million.

The adjusting items were predominantly impairment of goodwill in Germany and of assets in the U.K. The quantum of the impairment charge, as I've said, is COVID-related and is largely due to an increase in the discount rate, reflecting the greater volatility in our sector and the environment and a reduction in anticipated cash flow in both countries over the next 12 to 24 months.

We finished the half with a strong balance sheet and good liquidity position, enhanced by the successful GBP 1 billion rights issue we completed in June. Turning to our cash flow, this chart shows a waterfall from our EBITDAR on the left to our net cash outflow before the rights issue and debt repayment on the right.

Our net cash outflow for the period was GBP 462 million, compared to the guidance we gave in May of GBP 600 million. This improvement was driven by the faster ramp-up of our hotels over the summer.

There was a working capital outflow of GBP 129 million, primarily from the GBP 58 million reduction in customer deposits and GBP 28 million owed to us by the government for their support schemes, including the job retention scheme and the eat out to help our scheme. Maintenance capital expenditure of GBP 40 million and expansionary capital expenditure of GBP 81 million, was in line with the guidance we gave earlier in the year and relates to the expenditure already committed in March and essential IT repairs and maintenance.

On the bottom left of the chart, you can see that we started the year with net debt of GBP 323 million, which together with the cash outflow and the rights issue proceeds resulted in net cash at the end of the half of GBP 200 million. Right now, having good liquidity and a strong balance sheet is paramount.

And as we continue to manage our cash flow carefully, this will help protect us through the tough environment and ensure we can invest at previous levels in our unassailable winning platform in the future. On the left of this slide, you can see our total available facilities of GBP 1.7 billion, of which GBP 734 million is utilized with our RCF totally undrawn on our cash and cash equivalent, following the rights issue of GBP 900 million, giving us a net debt cash position of GBP 200 million.

We also have access to the Bank of England's 12-month COVID corporate funding facility scheme with an issuer limit of GBP 600 million, which is currently undrawn and could be drawn on as late as next March. Including the CCF, we have total available facilities of GBP 2.3 billion.

In May, we announced that an 18-month covenant waiver had been agreed with our lenders and our pension trustees, meaning that the existing covenants will not be tested again until March 2022. In addition to our good liquidity position, it is especially in times like this that we really benefit from our valuable 60% freehold property estate.

It gives us tremendous financial flexibility, providing a strong covenant to our stakeholders, and importantly, giving us options to support future funding for investments or to further protect our balance sheet. This really sets us apart from our nearest U.K.

competitors. This slide reiterates that, although, we are not immune, the strength of our operating model and our brand and as Alison explained, led us to perform 6% ahead of the market in September, with the outperformance in both London and the regions, a market share growth of 3.4%.

Since the government announcement in early October, instructing working from home where possible and the recent regional lockdowns, you can see on the bottom left of this page that we have seen a slowdown in the overall market performance. Our performance has continued to be well ahead of the market.

As I'm sure you can appreciate, with the fast-changing nature of the COVID environment, we do not have any meaningful forward-looking visibility. Despite this, our profit and cash sensitivities remain largely unchanged from May.

It still stands that a 1% movement in sales is equivalent to an GBP 18 million impact on profit. This is before taking into account the benefit from the business rates holiday, the job retention scheme and a significant reduction in discretionary costs offsetting inflationary pressures.

The guidance around the job retention scheme grant has been updated since May, with now GBP 85 million in the first half of the year and approximately GBP 15 million to GBP 20 million in the second half, of which approximately GBP 10 million is offset by later than originally anticipated labor savings. In terms of cash flow, looking forward to the second half of the year, the cash flow will, of course, depend on the sales levels, but with all our sites now open, any outflow will be substantially less than we had experienced in the year-to-date.

As a guide, breakeven EBITDA this year, on a pre-IFRS 16 basis, is broadly achieved at an occupancy level of approximately 55% and a price rate that is 20% down on last year. This includes the one-off benefits of furlough and business rates.

With the exception of the acquisition we have announced in Germany today, CapEx guidance remains broadly unchanged, with GBP 120 million in the first half of the year and GBP 250 million across the whole year with half of this on German expansion. In addition, the acquisition of the 15 hotels in Germany will acquire around GBP 40 million of capital, of which well over half of this is the cost of refurbishing each hotel.

All these hotels are leaseholds. Working capital will depend on the revenue projections, but we will see an inflow of around GBP 30 million for government scheme payments that we recognized in the P&L in the first half but were outstanding at the end of the half.

We also expect adjusting items, cash outflows of approximately GBP 20 million in respect of the head office and site restructuring programs. So just to summarize, we have a strong balance sheet and good liquidity.

With the recent further lockdowns, we have very limited visibility, but remain absolutely focused on our cash flow and maintaining this balance sheet strength. With this position and focus together with our freehold backing, we have financial flexibility to continue to protect the business and to recover successfully, emerging from this crisis in a position of strength, deliver strong returns where others will weaken.

I will now hand over to Alison to build on how we will continue to capitalize on structural opportunities and our competitive advantages, both in the U.K. and Germany.

Thank you.

Thank you, Nicholas. I'm now going to take you through the reasons why Whitbread is well placed to drive long-term value by gaining market share in the U.K., growing in Germany as we replicate our U.K.

success and delivering long-term growth at good returns. I'll start by talking about the U.K.

business and then explain why the same winning factors underpin the very exciting growth opportunity in Germany. This slide lays out the reasons why we believe Premier Inn is best placed in the U.K.

to capitalize on the recovery opportunity, to take market share and to reinforce our market-leading position. These are the enhanced structural opportunities that will exist in the U.K., the advantaged budget hotel model, our best-in-class operations and ownership model combined with our very strong brand, direct distribution model and a broad customer reach.

I'll talk you through each of these points in more detail on the slides that follow. And as Nicholas has already highlighted, we have a lean and agile cost base, and our strong balance sheet and freehold property value provide us with both offensive and defensive financial flexibility.

These factors set Premier Inn apart from our competitors. We have an amazing platform in the U.K.

with no competitor coming close, meaning we are very well placed to accelerate market share gains and reinforce our leading position. The U.K.

market remains a highly compelling long-term growth opportunity for Premier Inn. The chart on the left-hand side shows how fragmented the market is, with 48% of the U.K.

market taken up by independent operators. Since 2010, there's been a consistent decline in supply from independence with share declining by around 1 to 2 percentage points each year.

This leaves a clear opportunity for Premier Inn to gain share. The current COVID crisis will accelerate the structural growth drivers.

The downward pressure faced by both independents and budget-branded competitors will materially increase as a result of the pandemic, both through demand weaknesses and increased structural cost pressures. And we expect this to worsen as government support schemes are reduced.

We are already seeing clear signs of structural distress amongst our main competitors whose brands may be capital constrained, weakening them further. We have a committed pipeline of over 13,000 rooms, which will support our growth strategy for the next 3 to 4 years.

We will, however, ensure our capital is carefully deployed to ensure it matches market demand and is at the right asset price. In addition, we'll also look to grow through estate optimization.

For example, building on product innovations such as our Premier Plus upgrade rooms, that have proven so very popular with both leisure and business guests. The budget hotel segment, in which we operate, is higher growth than the rest of the hotel market and is more resilient in downturns as people seek value and quality.

The top chart on this slide shows that budget-branded hotels have outperformed the market in every year since 2008, including a material outperformance during and after the financial crisis. The bottom chart shows the mid-scale and economy segment is also outperforming in the current COVID crisis with total sales recovered around 17 percentage points ahead of the rest of the market from the start of August to mid-October.

Premier Inn's U.K. customer base is very broad with a roughly even split of business and leisure customers.

Our business customers include a significant proportion of manual professions that is those workers who need to be physically present to perform their jobs whilst our white collar workers are from a wide variety of sectors. Premier Inn under indexes on group business bookings, and we believe we are less exposed to those areas of business travel that may see a structural shift to virtual meetings.

Our leisure guests travel for a very wide range of reasons and the strong leisure demand evidenced during July and August demonstrates that people's propensity to travel for a domestic leisure, when allowed, remains high. Our geographic spread with over 80% of our rooms sold based in the U.K.

regions, combined with our domestic focus with over 90% of guests based in the U.K., means that we operate within the areas that should recover quickly. The success of our customer proposition is based on customer choice by virtue of having the largest network in the U.K., value for money, outstanding product quality, excellent customer service and very high hygiene standards, meaning we can offer guests great value, comfort and safety wherever they want to sleep.

As you can see from the charts on this slide, Premier Inn is by some way the strongest hotel brand in the U.K. Remarkably, and as shown on the right-hand chart, our brand scores have increased over the last 12-month rolling period despite the operational disruption caused by COVID.

This is testament to our very high standards being maintained throughout the crisis and the recognition of those high standards as customers rely on their favorite and most trusted brands more than ever. Premier Inn's vertically integrated model provides a clear competitive advantage, enabling the delivery of a winning customer proposition that has strong appeal to guests.

In addition to our brand strength, the key components of the model are: industry-leading low cost direct distribution with over 97% of our bookings made direct; scale, providing customers with choice and driving efficiencies; operational control; ownership of all aspects of our hotel results in a high-quality experience delivered on a relentlessly consistent basis throughout the estate. The operating model delivers best-in-class operational performance as evidenced by the very high staff and customer scores that the business regularly achieves.

Property flexibility, we have end-to-end control of our value chain, providing an economic advantage over others and helping realize increased profits and returns. Our freehold properties, which make up around 60% of our estate, mean we have a strong asset-backed balance sheet that has long been a source of strength and competitive advantage, whilst historically, also providing a source of funding when needed.

Controlling and funding our property development enables us to get the right hotels in the right locations. Our flexible approach to property ownership improves our ability to manage our property and make decisions to optimize the estate.

When combined, these factors mean we can deliver a standout customer proposition, and we have an unrivaled platform from which to optimize and grow. Let's now move on to the German market where we have a significant opportunity to replicate our success in the U.K.

As you can see from the slide, we believe the same success factors that have made Premier Inn the #1 operator in the U.K., either already exist in Germany, or in the case of building the Premier Inn brand and a national direct distribution model of a material opportunity for us. The German market is very attractive, larger than the U.K.

with high levels of domestic business and leisure travelers with a fragmented competitor set dominated by a large declining independent sector. Our ambition is to be the #1 budget hotel operator, replicating the success of our model in the U.K.

Our strategy is clear, and we're already making very good progress with an open and committed network of 53 hotels and soon to be almost 70 with the signing of up to 15 new leases announced today. As in the U.K.

We will be ready to capitalize on structural market changes, which may accelerate as a result of the pandemic. To date, we've invested over GBP 397 million of capital and have committed to a further GBP 394 million of capital to build our pipeline.

In the long term, we believe the opportunity still exists to deliver returns of between 10% and 14%. The German market remains a highly compelling long-term growth opportunity for Premier Inn, similar to the U.K.

The chart on the left-hand side shows the level of fragmentation within the market with 72% of the market taken up by the independent operators. Since 2010, there's been a consistent decline in supply from the independence, with share declining by around 1 percentage point each year.

The impact of COVID will accelerate these trends providing Premier Inn with an enhanced opportunity to take market share, and we've already seen clear signs of distress in the market amongst both independent and budget-branded competitors. We are actively looking to grow our estate organically and inorganically, and we'll continue to assess a number of opportunities.

Our current German pipeline of just over 10,000 rooms, excluding the lease held signings announced today, would represent just over 1% of the current market. We have initial line of sight to over 60,000 rooms, which would represent around a 5% market share, still under half our equivalent market share in the U.K.

This slide shows that our current 53 hotel network provides us with a national framework with the presence across many major cities, and this will soon grow to 68 hotels. We have, today, announced the signing of up to 15 hotels in Germany that are currently operating under the Centro, NinetyNine and FourSide brands, of which 8 are open and 7 a pipeline.

The transaction involves the transfer of leases from the existing operator to Whitbread. And is subject to competition clearance by the German Federal Cartel office, which, if cleared, would see the hotels become part of the Premier Inn estate in December 2020.

The hotels are a good fit with the existing estate with all occupying prominent locations across Tier 1 and Tier 2 cities and towns. The total investment for the deal is expected to be between EUR 40 million and EUR 50 million, mainly driven by the investment required to refurbish and rebrand the hotels to Premier Inn, which we expect to happen in the first half of 2021.

In the meantime, the open hotels will continue to operate in the Premier Inn estate under their existing branding. The economics of this transaction demonstrate the enhanced structural opportunities that now exist in the German market that Premier Inn is well placed to take advantage of.

We are now well on the way to being able to build national brand awareness and operate at scale. Our fully opened network of 68 hotels represents meaningful progress in our target to becoming the #1 budget hotel operator in Germany.

Overall, we believe all of the factors that underpin our competitive advantage and long-term success in the U.K. either already exist or we are on a clear path to replicating in Germany, providing a significant opportunity for us to drive long-term value.

To summarize, we are thinking about our business in 2 ways: managing the current situation and positioning ourselves to extend our market leadership thereafter. We're not immune in the short term, and the market outlook is difficult to read, and so we will continue to protect the business and ensure that we manage our cash position wisely.

The current operating environment is also tough as we navigate our way through government advice and restrictions, which brings challenges to our operations and impacts consumer sentiment. However, our strong and experienced management team and owner managed model means that we're doing this well and enhancing our brand.

The impact of the COVID pandemic on the hotel sector will be significant and will change the competitive landscape with potentially a material slowdown in room growth significantly constrained investment and an acceleration in the structural decline of the independent sector. We hold a uniquely advantaged position in the market.

We are the largest player with the #1 brand, and our considerable financial resilience and strong balance sheet give us the ability and the confidence to invest. We'll be well placed to enhance our market leadership position as a sector winner with the opportunity for structural outperformance.

Whitbread's long-term strategy for value creation in the U.K. and Germany remains unchanged and is highly compelling.

We will capitalize on the enhanced structural opportunities in our markets, continuing to grow and innovate in the U.K., leveraging the competitive advantages provided by our operating model and growing through our existing pipeline and optimization. Germany offers us an exciting structural opportunity to increase our presence as the large fragmented independent sector declines.

We will create value in Germany by replicating our proven U.K. model, growing both organically and through M&A.

We will enhance our capabilities to support long-term growth by maintaining our strong balance sheet and financial flexibility, ensuring we have an efficient and flexible cost base that appropriately reflects demand levels and by acting responsibly through our Force For Good program. These factors will enable the business to perform well in the U.K.

and to take market share and to capitalize on the material growth opportunity in Germany. These strong fundamentals, combined with our strong balance sheet, will enable Whitbread to drive long-term value for our shareholders and support our people, guests, suppliers and stakeholders.

Thank you all for listening today. There will now be a short break before we start our live call Q&A session at 9:15 a.m., when Nicholas and I look forward to answering your questions.

Details of how to join us for the question-and-answer session can be found on our website.

Good morning, everybody. Thanks for dialing in to the Q&A session.

I hope you've had the opportunity of listening to the presentation this morning and looking at the RMS statement, which went out at 7:00 a.m. The presentation was live at 8.

And if you haven't, I think you can listen to it as and when you wish. So we're not going to cover any of the presentation on the grounds that many of you will have already heard it.

But very happy to dive straight into the Q&A. So Adam, if we have people wanting to ask a question, that would be great.

Three questions, please. The first is just about the -- our performance in September as opposed to August.

I mean, it's really quite stark. And I'm wondering what's sort of has driven that?

Is Premier Inn discounting more? Or do you think it's just really due to the lower corporate and London sales mix?

Obviously, September is more of a corporate month than August? And how did our performance continued into October?

Secondly, on the cash brand. You've given us helpfully on Slide 15, your sort of breakeven maths.

So I assume that means you weren't burning cash in August and September. But does that number give you -- does that factor in the cost savings?

And if you could please quantify those cost savings? And what impact that might have on cash burn in the second half of the year?

And any sort of time lines you could give us there? And the other one was just on property.

You've taken an intangible write-off -- the goodwill write-off. Any thoughts on the freeholds?

Should we expect that write down, if at all, to come at the year-end or the value is holding up well?

So...

I thought that, that was 5 questions, Jamie.

I will throw you again some questions. I'll stop doing that.

Jamie, thanks. Let's start with the sort of performance year.

I mean, in a year where we're in a world that we're in, it's hard to say this, but we are actually pleased with performance from the perspective of outperformance of the market. And we're pleased with how we emerged from lockdown, from full closure in August, July.

The operational teams have really come into their own. They're doing an absolutely outstanding job.

They did a great job of closing the business and at the same time, already in their minds, preparing to reopen, which is why we got a fast start on reopening. And we -- and our plan all the way through was to maximize total accommodation sales.

And because we have a low breakeven point at unit level, we -- having the business open or in full, is better for us as it reduces the cash outflows and it improves our profitability or reduces our loss, whichever way you like to look at that. And so the ops team has done a great job.

And not just in terms of -- we expected to come out fast and we opened fast, and we opened across the pitch. So we were not just opening new key or places with a nice view where the leisure travelers were in July and August.

We were opening cities as well, which were at low demand, and we were still outperforming the market, many of whom had not opened in those low demand places. So it was excellent.

And that has carried on and that outperformance has continued all the way through even to today from what we can see now. Of course, the smaller the market gets and the more it shrinks, the less you can outperform it.

You must understand as that's just math. So -- but whilst we -- whilst the market is open and we are capturing share, we're pleased to be able to do that.

The other thing we're pleased about is notwithstanding what is quite disruptive guest journey in many cases, for example, having breakfast is quite different to how it used to be. There's no big buffet and serving breakfast is incredibly difficult for the team.

So notwithstanding the changed journey for the guest on the constraint that they're under while staying with us, our guest scores have continued to improve. And the distance between us and the market in the YouGov survey, so not our own surveys, but the independent surveys have grown, not shrunk.

And so I'm really pleased with the way the ops teams have managed and the commercial teams have returned us to profitability -- well, not to profitability, but to break even. So we do expect that to continue and for that performance -- outperformance to continue.

And I think it is a function of the quality of the brand and the quality of the offer, the direct distribution and the makeup of our broad customer base, which is quite distinctly different to others. Do you want to talk about cash?

Yes. Your second question was how it continued into October and our performance versus the market, it's really 10-day kind of 2 weeks into it, but it has encouragingly...

Continued. Yes.

Which is good. The next question was about kind of breakeven in August and September.

On the slide that Jamie was kind of referring to Page 15 of the presentation, it talks about our EBITDA, and that's -- this is a old-fashioned EBITDA. So this is kind of pre-IFRS 16, so it includes lease payments.

We get to a breakeven point when we are at 55% of occupancy and our rate is down 20% year-on-year. And you can see that in August and September, that is roughly where we were overall.

So from an EBITDA point of view, we were at kind of -- you're right, we were at cash breakeven. And that's the kind of guidance we've given for the full year.

On top of that, you also have kind of CapEx movements and then you also have working capital. Probably just I can help you on working capital.

We had GBP 130 million of working capital outflow in the first half of the year, which was a lot of that was due to kind of customers canceling -- their cancellations, which we honored and also the fact that the government schemes, we hadn't received the cash for a lot of them, it was quite a significant amount of that. We expect to receive the second half of the year.

So we expect kind of roughly about GBP 50 million worth of big working capital to unwind in the second half of the year as a result of that, but the real working capital depends of course, on the sales trajectory. The next question was about cost savings.

Because we announced a few weeks ago in our post-close statement some of the cost savings, and we didn't actually give a specific number because what we're actually building is a more variable labor cost base. But what it enables us to do is to make sure that we can still stick with our guidance for the full year, where 1% of sales movement equals GBP 80 million worth of profitability up or down.

So that -- the cost savings is really -- because it's already baked into our assumptions from the beginning of the year. And the last question was about property, overall kind of thoughts on property.

I mean, there's very little evidence out there of any transactions in the hotel market over the last few months. And we -- and I would expect kind of yields to have moved out overall, against us in that period just because they have done in most of the property markets out there.

What I would say though is that we are one of the few hotel chains who has continued to pay all of its rent. And with our strong liquidity, actually, we have a good covenant around it overall.

So we haven't been tested in the market. We haven't got any intention of testing it right now, but we would expect our yields to move out, to actually just move out less than -- far less than rest of the market overall.

And that gives us tremendous kind of confidence: one, to be able to -- one, for our stakeholders, giving us that reassurance that we've got many billions of pounds pre-call sitting behind us, but most important right now, if we needed to raise additional cash even for investments for liquidity we have got options out there at the moment. Does that answer your questions, Jamie.

Okay. If I could ask a follow-on the first one, the -- you haven't mentioned RevPAR, but presumably there's is it still good RevPAR outperformance in August, September?

Yes.

Yes.

Yes. Yes.

Yes, we did. We outperformed on RevPAR it was not a discounting issue.

Correct. So yes, total sales are pretty much tracking total RevPAR performance at the moment.

Yes.

Yes. Just 3 for me.

Firstly the mix you talked about in the presentation is the better skewed towards more essential and sort of manual business travel. Just any way of quantifying that?

I'm keen to understand if you've got any sense of what percent of your business travel exposure is actually coming from that sort of more essential versus the type that could be replaced by calls? Any sort of rough data would be great.

In terms of the U.K. rollout, obviously, you called out in the presentation that you see COVID slowing down the room growth in the U.K.

more broadly. Just how are you thinking about your own appetite for actual room additions over the next few years?

And then just finally, circling back on the asset. So a few years ago, you, obviously, had a plan in place to do around GBP 150 million to GBP 200 million of sale and leasebacks a year.

As you say, there's clearly no transactions going on in the market right now as things stand. But just so how are you viewing that opportunity to release cash in the estates?

Is that very much about opportunistic opportunities where you see investments in Germany, for example, or anything sort of more proactive on your side?

Okay. Let me start, and Nicholas can just chip in.

But Vicki, for everybody, because I know not everybody knows us as well as you do. But broadly speaking, we've got a business, which is 50-50 business in leisure mix, which, obviously, in normal times, stands us in very good stead because you get the weekends and the weekday business, and therefore, we get higher levels of occupancy.

We're also not terribly exposed to inbound. So we are mostly domestic business, both in Germany and in the U.K., but the U.K.

is the bigger business. So it's domestic business for leisure travelers who know the brand and book directly with us rather than going through travel agencies.

And in the leisure section of our business, we have a massive variety of leisure travel, really huge, and therefore, it's got a lot of diversity to it and is diversified. On the business side, we don't index on conferences and meetings because we don't do conference and meeting facilities in our hotels.

And so we don't have those big group bookings. That's the same.

We don't have much tour operator business on the leisure side, particularly inbound tours because we don't do that business. And we don't do big conferences and meeting activity in the business side.

In the white-collar end of our business, again, a huge variety of travel -- rationale for travel sectors and everything. So there's no one big bit that dominates that.

But what we do have, which is very different to the 4-star market or the upper mid-scale market, is we have a lot of people who travel for work that cannot be done remotely. So we have a lot of contracts with project people who have got electricians and chippies and people digging roads and putting in pipes, white vans who are physically laboring on sites and in projects.

And so that business, which is more SME business -- big contracts with big companies, plus SME, and that business is going to hold up and is less exposed. I don't really want to get into the detail of what percentage we think of each, but that's the broad thrust of what we do from a customer perspective.

And it's why we think -- of course, we also have the 20% London, 80% regional bias as well. So within all of that, that's a relatively robust position given the pandemic that we're facing into.

If I roll on to your second question, which is about rollout, we've got a pipeline of about 13,000 rooms. We -- I mean we always review that pipeline pretty much every quarter anyway.

And obviously, we've been doing that to make sure that hurdle rates -- we've obviously amended all of our models about when hotels -- how hotels will perform, when they will roll up and their NPVs have all changed and how many years out before we return to normality. All of the models have been rerun, and we've not reduced our hurdle rates, et cetera.

So -- and we have paused some things some of our extensions that we might have done. We can do those later.

Because you know, once we've got planning permission, we've got 3 years or longer to do undertake that. So we will phase our 13,000 rooms.

We're happy. Some things will come in, some things will go out, but we're pretty comfortable with that as a U.K.

rollout plan. There may be opportunities in the U.K.

for infill activity in line with the competitive landscape, which is more challenged. But that's very much cherrypicking.

So it's not taking great big blocks of other people's business. It will be cherrypicking things that fitted perfectly into our network plan and with our hurdle.

And in Germany -- sorry, back on -- 6-week and I'll move to Germany. In the U.K., we do have a enormous opportunity for optimization, though.

And when we came back from lockdown, one of the things we wanted to check as early as we could was whether or not the outperformance of the Premier Plus rooms would remain an outperformance in the new world as it were. And actually, if anything, the outperformance has extended, and we've seen an increase in the return profile of Premier Plus rooms there and the rate is higher and occupancy level higher than it was pre lockdown.

So again, with an 840-odd hotel estate in the U.K., there's lots of opportunity for that investment and optimization and improving the yields and returns. In Germany, again, 72% independents, not a huge budget branded sector.

And the same levels of early distress signs that we've already seen. And you can see we took one opportunity just lately to cherrypick 15 hotels from a bigger operation that fitted with our network plan.

We're good for refurbishment to Premier Inn and hit our hurdles for returns. And so that's the sort of infill acquisition that I suspect you would see us be very interested in doing over this period and beyond.

Nicholas, anything to add on either of those so well you want to pick up the [Indiscernible].

Yes.. So in 2015, we announced we'd do GBP 150 million, GBP 200 million, and we did do that in the following years after I think it's about GBP 300 million of term lease backs.

I mean, right now, when we think about our balance sheet, we're sitting in a place where we've got good liquidity, good facilities in place. We've got the freehold behind us, which kind of helps back us as well, which gives our stakeholders -- all of our stakeholders, with good reassurance in this marketplace and reduces our kind of volatility going forward.

You don't have to look that far to our nearest to the biggest competitors to see what a full leasehold business can look like in this environment at the moment. It does give us options, though, the sale lease backs, as I mentioned earlier, in terms of -- primarily, it gives us options if we do need more -- if we are looking at doing further acquisitions in Germany, particularly to go to that market and have a look at it.

And it also gives us further options if we need to look at our balance sheet, providing more security to our balance sheet, overall, actually. So right now, it's not front of mind to actually kind of liquidate any of our sale leasebacks as well, but we do have nice options there if we do need if this kind of virus carries on in a detrimental way, or if opportunities come up in Germany for us to do further acquisitions.

And we really -- we've protected the quality of our covenant and tenancy. And so you can imagine, we had lots of inbound interest from landlords who would like to have a Premier Inn covenant.

So we don't doubt that we've got the options should we need them, but we don't currently need them. Yes that covered everything?

Yes.

Three questions from me, if I could. The first, just on the business leisure mix, 50-50 on average through the year.

Just wondered if you could give us some sense of how that varies through the year. So as we are going into sort of, I guess, what would traditionally be the more corporate quarter, if that mix changes at all or if it's relatively constant?

Secondly, just on Germany, you seem to have signed a deal at what seems a very attractive price. Just wondered if you could give some indication of how pricing for deals in Germany has been changing over the past year and few months as a result of COVID-19.

And in your presentation, you talked about the enhanced structural opportunity as a result. So just wondered what more we could see there?

And then finally, just wondered if you had any thoughts on the pricing environment towards the end of October and as we go into November, when the most generous of the government furlough schemes start to roll off? And I guess a lot of the smaller hotels and independents will need to be, well, making sure they get to a certain level of occupancy to ensure survival.

Okay. Good.

Let's go for that. In terms of business and leisure mix, I mean, clearly, what you would expect is the obvious pattern in the July and August was -- what it was this year and is often predominantly -- more predominantly leisure based.

And so you see less business travel during those summer months because people are themselves off on holidays and more leisure. And certainly, this year, we absolutely saw that this year, we were absolutely round full in any location that had a beach or a mountain or a view.

And our metropolitan cities were incredibly quiet and London was moribund. So that's what we saw.

And then what you would normally see is that switch over and switch out in September for a much higher business mix as we go into September. And you -- so you follow the patterns of holidays, you'll follow the pattern of where you get higher leisure.

But broadly speaking, business travelers aren't often with us at the weekends. That's mostly leisure travel so our occupancy levels.

We get good leisure travel throughout the year. And reasonable business travel throughout the year with the exception of the darkest nights of Christmas and the highest summer months, if that helps with that.

On Germany, I mean, if you -- in some respect, it's too soon to tell. Germany, is, as we know, very fragmented market.

The biggest players are -- or the biggest brand is probably Motel One, which has had been in the press a lot in terms of managing their leasehold portfolio and dealing with rents and all of the other issues. And the other big players are B2B and -- no, no -- and IBIS, yes, which weren't seeing growth anyway.

But the over 70% of the market is independents and is quite constrained, as you might imagine. And those independents were already in decline, structural decline.

So I think you should expect to see an acceleration in the structural declines. So quite a number of structural shifts in the world are being accelerated by COVID, the shift from -- on retail from high street to online, et cetera.

This is another shift, which I think will occur. And certainly, a lot of supply, including the budget branded actually, will be quite constrained in terms of the investments coming out of this, and we'll see lower supply growth in the market and some great opportunities for transactions.

I mean, there are -- in Germany, as you know, the sort of transaction we've just done, which was a cherry-pick of 15 hotels that really suited us, that you had to take on, and we will rebrand those, principally, the cost that we bear is to rebrand them to Premier Inn and refit the rooms and reception areas, which we will be able to do early in next year, those are the sorts of transactions, which will work well for us in Germany. And at the moment, we've had a lot -- we've seen a lot of, I guess, distress but they've been of things that potentially we haven't wanted to look at.

They haven't fitted our network. They haven't fitted our brand standards.

They haven't been the right room size or type, et cetera. But you would expect that the weakest will go first and some of the stronger players will hold on for longer.

And in terms of pricing, you've seen in the marketplace or the mid scale in the current market in August and September, pricing was down about 25% overall. It's dropped a couple of percent in early October, but it's -- as I said, it's only a few days, kind of 10 days of October data we've got today.

So you mentioned the kind of JRS rolling off, but actually it also -- the new JRS that was announced last week, also it rolls back on again. So I think it kind of -- for some people that might give them a breath of fresh air.

But they don't need to chase pricing there. But we're seeing it's -- I said it's good pricing, not overly aggressive pricing, and we're trying to keep -- make sure we're keeping our kind of rational pricing just the prior kind of pricing where we're seeing demand, and pricing up where we're giving people more flexibility overall.

Is that helpful?

Yes. Yes, that's very helpful.

Just your room count, it's broadly stable, your hotel count has gone down a little bit. Is there a plan to kind of when you do develop, develop bigger hotels or convert existing hotels into bigger hotels at the moment?

So that's question one. Question two, just kind of related to that, your own -- the number of restaurants also went up slightly, again, on a slight decrease in the number of U.K.

hotels. So just wondering what's going on in terms of restaurant development.

And then it's a business that's not really touched on much, but what is happening in the Middle Eastern business at the moment? And do you still think it's worth having that presence there of circa 3,000 rooms?

Okay. Let me kick off with the network plan.

We brought, very broadly speaking, the new hotels that we opened, are larger. I think that would be true, and they'll, therefore, sort of have better economics.

And to some extent, if you recall the history of Whitbread, at the beginning of all of this, hotels were opened in the car parks of restaurants on a roads, and they were usually 40 bed hotels that were in adjunct to a pub. So obviously, we've got a tail of small sites that looked like that and a tail of under 80 bed sites.

But the new sites that we open are predominantly over 100 beds, and therefore, that bring the size of the estates and number of rooms up. And we do have -- we have talked in optimization terms previously at probably the last Capital Markets Day, actually, which was a couple of years ago now, around part of the optimization of the estate is to, within catchments, look at our total position in a catchment, and make sure that we're optimized in that catchment.

And we -- I think, historically, we've used Preston as an example, where we've got 6 or 7 hotels, but a couple of them are very small in the sort of 40-bed categories. We've got some in the center.

We definitely want to regear and extend the lease, and we're building something new in places where the industry now is based or the silicon parks, et cetera. And so optimizing the estate definitely gives us optionality.

When you've got a big U.K. business like ours, the investment in optimization is returns enhancing.

And you could do that probably even more than room growth, actually. And so yes, we have sold a couple of hotels this year, even in the lockdown period and opened as well.

So you'll see that happening and that being a planned activity for us. If I pick up -- there was a middle question, I'll pick up the Middle East question and then tell me if we missed one.

The Middle East business is stable. It's a joint venture with the Emirates Group, so we own half of it.

We're predominantly in Dubai buy in Abu Dhabi and it is going through exactly the same scenario, as you are seeing here and in Germany, which is they are subject to restrictions and the occupancy levels are low. And they -- and the business is sort of managing on its -- is close to breakeven as they can and keeping tight watch on their cash flows.

There's probably not really -- it's such a small part of our business that it's probably not worth saying anything more at this stage on it. And did we missed the question in the middle?

Yes. And just -- I mean, would you consider disposing of the other 50% in the Middle East?

And the middle question was just about the U.K. restaurants.

The count has gone up from 765 at year-end to 768. And obviously, the hotel count has gone down.

So just a bit of color in terms of restaurant development as well?

That's just the mix of joint sites we've opened just versus the ones we've -- yes, it's just a mix of joint versus solos overall?

Yes. So there's no -- we don't open restaurants that aren't stashed to a hotel.

Yes, yes. The 768.

That is all of our restaurants. So that's overall.

Yes.

Yes. So there's no yes, but there's no issue there.

And to be honest with you, at this stage, we're not in a position to even think about what we may or not want to do strategically with the Middle East at this stage.

Yes.

Yes. Just maybe just a point of clarification.

On your last slide, you said your -- the growth opportunity in the U.K. is now restricted to the pipeline and optimization.

Are you stepping away, therefore, from the 110,000 room plan you had a few years ago? And is the kind of cap long-term now 90,000?

A question on the Germany market as well. Obviously, you've pointed out in the U.K., you're skewed away from group.

But you've said in the Germany in the past that, that is a conference market. Your first hotel was right by the Frankfurt, the Frankfurt market.

So how are you feeling about the recovery there? When do you expect sort of German -- your German hotels to recover?

And just in the German deal that you've done for the 15 hotels, a quick look, makes it look like Centro has 41 hotels. So did you pick those hotels out of the portfolio?

Or were those ones for sale? Is the potential to do more of a deal there with Centro?

Okay. So first of all, no, you shouldn't -- there's a difference between plan and potential.

So potential, over time, we'll have to assess that as we come through the pandemic. And actually, it's not impossible the potential might increase because we're going to see rooms coming out of the market and very much likely to be constrained competitor environment for room growth.

And so actually, as you know, some of -- from history, some of our best investments have taken place with highest has taken place in a period of constrained competitor set and this sort of environment. Albeit not quite on this scale, as you might imagine.

But what we are -- we're sort of looking more near and midterm here and so -- and saying, broadly speaking, we're looking at the next 3 or 4 years or 2 or 3 years, with what we've got in '21 to deal with in terms of the pandemic and hopefully the end of that period. And then the recovery period thereafter.

We're perfectly comfortable with our 13,000 pipeline rooms to build-out. And we may replace some of that pipeline as it comes out.

But we're not anticipating sort of doubling the pipeline during this period. But we do want to invest in some optimization activity in the U.K.

Whereas in Germany, of course, it is much more about pure growth because we'll have about 70 hotels in our open and pipeline as a result of this latest transaction, which is a great place to be, given we went from a standing start a few years ago to that. And -- but obviously, we think there is another long-term potential, 50,000 rooms there.

So there's a long way to go a long runway for growth to go. So we will have to balance our capital and our returns profile in an appropriate way.

We always do that with discipline, as you know, and with the right hurdle. So that's the sort of near-term issue as opposed to do you think that there isn't a future runway for the business or further growth, should we wish it in the future?

I'm sure there is. So that's the answer to the first question.

The second question was...?

The German conference one.

German conference. Yes.

So we have 1 or 2 hotels in Germany near conferences. The Frankfurt has a -- as you say, that was the first hotel we opened in Germany not because we picked it from a network perspective because it was half built.

And so we could get the test of Premier Inn open and running quickly, not because we had a particular love of the conferences and not a large proportion of our estate is not in conference territory it is in City Center, just sort of Tier 1, Tier 2 city center locations. And if we think about Germany's recovery during the summer, we had a very similar sort of recovery to the U.K.

and Germany. We had extremely strong occupancy in tourist type destinations like Hamburg.

And low recovery in business traveler locations. So there was the same sort of mix that we saw in the U.K.

and we don't anticipate that Germany would recover differently post pandemic, particularly on the U.K. and then finally, I think you said, did we cherrypick?

Yes, we cherrypicked. So we had a -- there was 53 hotels.

The company owned 53 hotels and we went through a process of picking the ones that we liked and started with a bigger list and then knocked off the ones that didn't meet our returns threshold, weren't quite on point for the refurbishment plan, didn't fit in the right Tier 1 location that we wanted, et cetera. So we ended up with our group of 15 out of the bigger hole.

If it's okay, can I just ask a little follow-up to the last 1 there. And Monique said that the deal looks -- that's good compared to what you paid for the Foremost deal.

But obviously, you've now written off the purchase price of Foremost. And you've now, once again, paid for leasehold hotels in Germany.

So what -- is there anything we should read from the Foremost impairment into what is the real value of a leasehold property in Germany?

I'll let Nicholas talk about the technical side of the impairment answer. But just just on the -- I mean, we've given you a sort of capital number for this transaction.

The majority of that is our refurbishment costs. So it's quite an interesting process: one, is we're taking the lease obligation away from the company that currently have it.

We've renegotiated with landlords the lease transaction, and they signed a new lease with Whitbread on our lease terms with the right rental levels that may be different to the old rental levels, but with our covenant. And we agree with them what portion of the refurbishment the landlord pays and what we pay.

But the predominant -- the majority of the capital spend there is refurbishment costs, which, obviously, we have to do to have a Premier Inn branded product in the market at the right quality level to build the brands nationally in Germany of quality and high standards. So not at all uncomfortable that, that isn't a very clear demonstration of the fact that we can -- we are seeing constraint in the market, and that we can capitalize on that.

And Nicholas, do you want to deal with impairment?

Yes. Perhaps on the impairment of -- in Germany, we still -- you buy a company at that moment in time.

If you look forward with Foremost, we think this will be a really valuable part of our shareholder value that we can bring to the whole of our German acquisition overall. So we're still hoping it could.

In terms of the goodwill, the goodwill is a reflection of the market volatility at risk out there. So it's a market kind of discount rate that we have to use, which has, of course, gone up in this marketplace and also reflects the fact that, over the next year, 18 months, 2 years, the cash flow is going to be less than we thought -- we initially thought it would be.

It doesn't necessarily mean that in the long-term the cash flow value is still there. So it's a moment in time in terms of where that discount rate is and the kind of the next couple of years, that's kind of cash flow neutral I think it will.

I think I had 2 things left, please. Firstly, a data question, and apologies because I know you give laser data points.

But can you help us with the jigsaw here? In terms of August, can you say what the food and beverage performance was just so we can get a view on each to help out?

And then in September, you've had a healthy occupancy pick up. But can you say what total sales were in September, please?

And then the second question was the inevitable COVID one. Tier 3 is has come in since you last updated the market.

And as far as I can tell, it does limit mobility because people are meant to move in and out of travel in and out of Tier 3 regions. So what are you seeing in those areas where you have Tier 3 exposure?

It sounds like you won't close hotels, but can you just confirm that as well, what your response is?

Yes. Let me start with the rebound and Nicholas, just thinks about what stats we do or don't want to disclose and well won't disclose on stats.

Let's just deal with the sort of knock down question. We've got some hotels that are closed in what is the welsh developed nation restrictions.

And we've got nearly 40 hotels in Wales that are actually closed because that is the legal position in Wales for them. You're right that in none of the tiers at present, are we required to close our hotels in England and Scotland, and so we haven't, but they are subject to restrictions.

And if you take our estate, we've got nearly 440, including the 40 in Wales that are under some form of local or national restriction. But even those that are not, obviously, trading is impacted when people don't move from areas that are under restriction to areas that are not.

So of course, the whole thing sort of is going to impact us. And so yes, you're quite right, we are expecting not to hold up the occupancy level that we have in September.

We're seeing those drop I mean October has dropped to about 50%, just maybe top 40s, 50% occupancy in October. And as the restrictions bite and we add places to them during November and December, we'd expect that to drop further.

In terms of our various scenarios, I mean, the thing about running a business in this environment is a, A plan is useless. Planning is brilliant.

So the A plan does not work, but planning as a function does. And we run, all the time, a very large number of financial scenarios and operational scenarios, which is quite taxing for the team, but they've got pretty good and agile at running it.

And we did that all the way through the pandemic from the get-go right back from the end of January onwards in terms of thinking about this. And when we did the scenarios in order to have the rights issue, and we looked at our sort of reasonable, best and worst cases in rights issue time, we were cognizant of the fact that things were likely to go in waves.

And as the R rate came down and we unlocked the country in July and August that the R rate would go back up. And the likelihood would be that we would have local or indeed a second national lockdown at some stage.

And we have -- we've sort of planned on that basis from a financial perspective and an operational perspective. We've got quite good at opening and closing and managing restrictions.

So yes, of course, it will impact. And of course, we will see lower occupancies as we go through it.

And that may last until probably the springtime -- that during the winter months. There'll be a higher requirement for the government to keep the virus under control because the highest use of the NHS and critical beds is during the winter for non-COVID cases, generally.

And as you get into the spring, and people get outside again, and treatment and vaccines become more of a reality, then that's when you start to expect to see some relief.

And I think your question was -- you asked about F&B in August. We're not going to give kind of specific F&B numbers just for a month, Tim.

But we did say in our trading statement a few weeks ago, that the kind of accommodation and F&B was down about 38% in August overall. And I think you were asking is what the total sales were for September.

We won't give the actual numbers. But what we have said is the occupancy in September was 58% and rate was about 20% to 25% down year-on-year.

Yes. I was looking for the equivalent to the 38.5% really, but would you want to just assume that momentum was similar to the occupancy trend absent food and beverage, I guess?

Yes. Yes.

You saw occupancy grew in September from August.

Yes. Certainly F&B would be lower.

And our market share would be good to go as it was in August.

I might just ask a follow-up on Germany, please. In terms of -- as the market recovers in terms of RevPAR in Germany, at what point do you think the Germany estate will positively contribute to your returns?

And if you don't want to sort of give a precise point of time or sort of number of rooms, in terms of the modeling, would you expect to see a similar kind of operational leverage in the Germany business in the recovery to the -- overall to the U.K.?

Okay. Well, I'll let me hand this to Nicholas in 1 second.

But when we assess an addition to our German network, either through a transaction the one we just talked about, which is a sort of bulk transaction or an individual site organically, it has to pass the returns threshold, which is -- and we've often said 10% to 14% is quite a wide range, but it's a similar returns profile for the U.K. capital deployment.

And that is what we expect over time in those sites. And our model -- so anything we're doing currently, our models are adjusted for COVID impacts and recovery and recession recovery.

So that we're not assuming that there's a bounce back to pre-COVID levels with any form of immediacy. We've taken down RevPARs, and we've kept them down in the modeling.

So we make sure that we've got the opportunity to get the right return profile over time. Because you are more on the leverage.

Yes, we've talked in terms of profitability that would it be -- kind of we expect it to be in profitability by kind of 2022 overall. But I think in this environment, you can -- we're not going to give specific guidance, but you expect that to be pushed back a year at the moment I think overall.

And in terms of the leverage, I mean, the U.K. has got a tremendous scale of 800 hotels.

But actually, each of the hotels that we've got in Germany is quite significantly bigger than the U.K., about twice the size of the ones we've got in the U.K. So we expect similar sort of leverage to come through once you kind of come through before you take your central overheads and we're also kind of leveraging quite significantly of the U.K.

So we have a lot of the commercial team, pricing team, the web team, leveraged off the U.K. team as well.

So you're going to get the benefit of that as well. Is that helpful?

Yes. That's helpful.

And if I might just ask a quick one on distribution commentary that in the market has been that distribution mix has moved to OTAs with leisure mix increasing. For you, it looks like direct booking is as strong or stronger than it has been.

Yes.

Any sort of reasons for the sort of change in propensity for people to book direct? And do you think you can hold on?

Yes, they've always looked direct with us, and they've continued to book direct, and we continue to make sure that, that is the preferred option for a guest. We -- and without a doubt, that is helping us overperform in the market because OTAs generally would be inbound.

There hasn't been any inbound. I think some of the OTAs themselves have announced restructurings, which tells me that they are under pressure.

So there must be sort of huge reduction in their own revenue lines. But for us, it's an important differentiating component of our mix and our operational margin by not having to pay commission rates, et cetera.

And so we're very comfortable with where we are. And we are adding to our distribution mix, but the places we're adding are places that don't cannibalize the business we take anyway.

Because when we have a -- when we have guests who would stay with us, they will come to us paying an OTA as a middle person. The middle does not help us at all strategically or financially.

But for things like travel agents for business who have to book through a business travel agent, then that's different. That's not cannibalization.

And we definitely will increase our distribution reach through noncannibalizing channels.

And definitely, you go through an OTA, you get a whole lot of kind of names of hotels you don't know, but actually right now, having a hotel you can book that you trust is so important and that's why people think of coming to us directly more than ever.

Just a couple, please. First one, sort of big picture and long term, what are you expecting to happen now to the openings pipeline?

I'm thinking -- sorry, I'm thinking a number of rooms in the industry. Are you expecting to see it start to shrink at all?

I think the commentary has been that you're expecting it to continue to grow albeit at a lower rate. So anything you could just give there on your thoughts?

And then secondly, and on sort of a bit more detail, the sensitivity, the 1% revenue swing and a GBP 80 million impact on profit. Can you just tell -- or give us a sense of what the moving parts are within that?

And as revenues start to recover, whether we should expect to see that decline significantly?

Okay. Well, let me pick the first one up.

I mean, people will think hard about their current pipeline. And it's almost open, it will probably will open into a very difficult market.

Because, at a certain point, you're past the point of no return for the investment. And if you're a leasehold -- you're doing it through a lease, the developer will have developed and be on schedule, and actually, you'll be unable to withdraw from it.

So I think about sort of general supply coming into the market. And that's particularly difficult because you're dropping supply in a world where you're not -- especially if you're a full star player in the London market, for example, at the moment, that would look very bleak to be opening up growth.

What normally happens in these periods are, therefore, at the worst point, some supply goes into the market because it's the finishing off of projects, which are 3 quarters or 5, 6 of the way through, and they finish off and drop into the market, which does not help the position for those operators because it drains cash and profitability. And then people stop only because they haven't got the capital to put in or they haven't got the cash flow.

And they also stop investing. And so you see a slower room growth, and you also see supply drop out of the market because people come out of the market as for alternative use or because they, frankly, go out of business.

And so over the course of a period of months and years, you go through a period of quite constrained supply growth in the market and very low investment in the quality of room products, which, of course, 3 or 4 years later, comes home to roost in the form of higher demand, but without the supply to beat it and/or very poor quality room product that hasn't kept up with guest expectations. So if you go back in history, some of our best returns have come from investing in those periods of constraint, where asset prices are lower or rents are lower, and when nobody else is going to be putting in room growth or investing in the quality of their product.

And so that's why we're quite keen that we continue with, particularly for us, the optimization program to get some of our Premier Plus rooms further across our 800 hotel estate. Because they have -- their yields, their returns, their occupancy level and their rates have held up even post COVID at a much stronger way than they did actually pre-covet.

So we are looking at sort of maintaining pipeline, but not necessarily extending it at this stage and -- but doing some work on investing in optimization in the U.K, whereas in the -- in Germany, it will be about growth.

And Joe, you asked a question about sensitivity on the 1% of GBP 80 million, what the moving parts in there. I guess we haven't given that on purpose because there are so many moving parts across the business.

I mean what we have said before is if you look at the U.K., it's about 1% or about GBP 50 million. But the rest is adding Germany and the restaurants on top of that overall.

And that's before you take into account the furlough scheme and the business rates, which we have to wait see how those continue into the new year. So probably won't go into any more detail than that, I'm afraid.

Just 1 very last -- very quick last question. Just on Travelodge and market share gains, is that where you would have picked up market share in August and September and October?

Or is it just coming across the market as a whole?

Across the board.

It's across the board, actually. I mean, the market is kind of interesting.

Actually, if you put it in list, I think we've gained the most market share, actually travel launch probably next and then and then you've got the cetera underneath that, I actually had even a tougher time than travel launch. And that's before you're going to get into the independent market, who I mentioned it had an even worse time overall.

So it's really across the board.

Just 2 related questions for me, please. In terms of acquisition spend, are you able to quantify how much headroom for acquisitions you have within the current financing?

I'm asking again because you said previously you wouldn't do anything transformational with that financing, but you could continue to do infill deal just happens to be much more. So how much in total do you think is doable without acquiring new equity?

And as a related question, you said, for example, you don't have the bandwidth at the moment to look at things like the Middle East. But more generally, what's the universe of opportunistic investments you're looking at in terms of businesses and infantile geographies?

This is a company that has a history of owning all sorts of leisure assets. You still have almost 2 levels of management, Premier Inn management and then Whitbread management.

So is there a scenario where in this crisis, somewhat upon another non accommodation business with attractive long-term features that you like?

Okay. I mean, your -- apologies for sort of potentially being a bit weakly in the answer is that your questions are highly speculative.

And I know you know that. And so it's quite hard actually to give you a specific answer to the question.

We're not politicians. So we do actually normally like to answer the question we've been as asked as opposed to a question we wish we've been asked.

But it's incredibly difficult to answer your question. So a couple of -- let me frame that.

In the -- we've got a really strong balance sheet. We have a strong asset back, unencumbered asset back, which allows us funding flexibility.

We've got a really strong business. We're #1 brand.

We've got direct distribution platform that is sort of unrivaled across the globe. And we're brilliant operationally, and we own and manage.

So we're in a really good place. And financially, we feel that we did the right thing by raising equity earlier in this crisis, and that's going to in good stead.

We've got good liquidity, we've got good facilities and we've got good access to funding. So from that perspective, we have a lot of flexibility.

We are also, however, in the middle of a pandemic, where the outcome of it is yet unknown. And so we're managing the uncertainty of navigating our way through all of this.

And so we do think about the business in those 2 ways, managing the current situation and positively positioning ourselves to extend our market leadership afterwards because we think that we will be a sector winner. We're not immune in the short term.

And the market outlook is difficult. And that's why we've been protecting the business and managing our cash wisely and managing the operating environment, which is tough.

But we have a strong and experienced management team that are doing that really well. And I can't thank them enough for that.

But we do think that, overall, you are -- where I think you're going to is that only the hotel sector will be significantly changed and the competitive landscape will be materially changed, but also adjacent industries probably similarly so. And Whitbread does have a long history of optionality.

So with all of that sort of significant constraints in investment and acceleration in structural decline and/or consolidation opportunities, of course, we believe that we will have a good role to play in the future in that activity, but we're unable to confirm right now what that's going to look like. But we're trying to think about rolling the business with both horizons in mind.

And that's why you saw kind of rather strangely that we've executed our first transaction for growth in Germany at the same time as we are really rather tightly managing a constrained environment. So we are thinking about both of those time horizons and managing to getting our shareholders the best possible returns that we can with the capital that we've raised.

That makes a lot of sense. I didn't [Indiscernible] and maybe as a sort of follow-up, something of the scale of the Foremost portfolio, which was in the hundreds rather than in the dozens...

Well, so don't forget the Foremost portfolio, however, was only 19 hotels, and we've just acquired 15 million so it's not a dissimilar scale, but of course, the landscape's changed of it. The competitors and the asset price landscape have unrecognizably changed than pre-COVID.

So that's why we think there will be more opportunities, not less going forward for the strongest players with the best brands. Yes.

Thank you. I think we might add them need to be on the last question if there is one, we may have come to a natural end.

But if we haven't, perhaps we're into last question.

We did come to a natural end. And in that case, can I just thank everybody for their time this morning.

And just to say, if you have follow-up questions, both Nicholas and the IR team, Paul and Amit and Ani are here to help. So feel free to get in touch and we can answer anything specific that you have in mind.

Good. Thank you.

Have a great day, everyone.

Thank you.