The Role of UK Family Businesses in the Growing Hotel Industry

2. Introduction & role of UK family businesses • Grew up with my father never there! Working all days and nights…. • School, Exeter University, politics, City of London, ten years in London before the bombshell • Joined £3.5m business, highly complex, jack of all trades, master of none, breaking even – lifestyle business • Change in strategy and direction = “in order to get bigger, we went smaller” • Closed my father’s workwear uniform business he set up in 2001 – sold it off • Family businesses are the lifeblood of the UK economy • Over 30,000 family owned businesses set up since 2010 • 9.4 million people employed • 5.2% more people employed by family businesses than 4 years ago • 39% private sector employment in family businesses • ¼ of UK GDP – gross value added of £360 billion!

3. UK Hotel Market – Size and Growth Park Plaza, Cardiff Total UK hotel market equates to around 700,000 rooms Total UK branded hotel market 296,000 rooms Total budget sector 111,700 rooms but rapidly growing and estimated to rise from 18% of market in 2010 to 25% by 2015 Independent sector in terminal decline? – from 58% down to 51% between 2010 and 2016 CAGR of UK Hotel industry is 5% over eight years In economic downturn, budget sector proved resilient with increased volumes for laundry suppliers – shorter stays = more linen changed Increased move to branded sector and franchisee model from Accor, IHG, Hilton which plays to Afonwen strengths as consolidation and franchisee model delivers brands but variable companies, pricing and risk but lower operating costs, delivering to smaller number of larger sites 750 hotels in various stages of planning permission on approvals or under application and new hotels typically larger today - upsizing of hotels generally

4. UK Hotel Market – Market Dynamics “Staycation” theme – Here to Stay and “a long term trend” – Colliers Budget sector upped its game and narrowed gap between budget and 4 star sectors – 4 star sector become much more price competitive to deliver volumes and moved away from business and conference travellers – focus on “bums in beds” and increasing trend for “shoebox” accommodation – e.g. Bloc, Sleeperz, Tune, Z Hotels Strong demand in weekend leisure market – offsetting reduction in business travellers Amazing growth in new builds e.g. Liverpool: 25 hotels to 42 since 2006 – 45% increase in rooms and with lots more planned including ACC, Hilton By Doubletree, Ibis, Marriott, Neptune, Premier Inn Manchester to have more hotels built than any other European city in next 5 years! Evidence of shorter stays, increased competition, driving volumes = boost in linen/laundry requirements – RevPar decline does not mean we suffer! – Average length of stay getting shorter. Afonwen analysis supported by RBS Bank: “UK's major cities between 2012 and 2014:  We see London 10.7% growth driven by Budget & 4 Star, Manchester 11.4% growth driven by Budget & 4 Star, Birmingham 10.9% growth driven by 4 Star & Budget and Edinburgh 10.3% growth driven by Budget & 4 Star.  The branded operators appear to be expanding at all cost and as you mentioned the current economic conditions suit (Afonwen’s) business as people shorten their stay.” Lack of investment in UK laundry industry creates a huge opportunity for land grab

5. A Little History…. 1936 Established by William George 1999 North Wales operation moved to purpose-built site 2006 500,000 of processed items per week 2010 Cardiff expands 2013 Reading opens 1976 Purchased by P Woolfenden 2004 M Woolfenden, MD, joins the company 2008 Cardiff production unit opens 2014 2,800,000 processed items per week 2012 1,800,000 processed items per week Partnership Award – Supplier of the year 2014 Overall Winner Fastest Growing Company in Wales

6. Afonwen Laundry & Linen Hire Today • One of the UK’s leading independent laundry and linen hire companies • Supplies over 70,000 Hotel Bedrooms across England & Wales • Fastest growing major company in the industry in the last ten years 15-25% sales growth p.a. • Exclusively focused on UK hotel sector – corporate and budget hotel sector specialisation • Invested over £24m expenditure since 1999 • Operational performance ahead of industry average • Production facilities - Cardiff, Reading (x 2) and North Wales and distribution hub in Leeds • Number 2 supplier in a highly fragmented market, 750+ staff, £40m a year business – the largest privately owned, family-run laundry in the UK • Investing over £4m in next six months to increase capacity and grow further as business moves towards nationwide supply across England and Wales

7. Laundry Activities and Business Strategy UK Coverage • Specialises in supplying hotels predominantly in the four star corporate hotel market and nationwide hotel groups in the rapidly growing budget hotel sector and smaller number of boutique hotels – focus on volume • Focused operation avoiding additional costs of supplying healthcare, nursing homes, chefswear/workwear markets, smaller B&Bs • Largest most narrowly focused business in its sector – “Thinking big by getting smaller” • Investment delivered one of the highest productivity rates in the industry, reliable service and high quality service • Delivered substantial growth in market with limited spare capacity, proven track record of consistent growth • Expanded beyond Wales into large parts of England but huge potential - only supply 12% of market – potential to double in size? • Geographically expand to maintain business model over compromise on strategy • Pro-active management with local accountability and maintaining long term relationships with key customers is critical Virtuous circle of Investment leading to Reliability to more new business – to increased profit and Increased Investment

8. Production Facilities • North Wales: operation moved in 1999 to purpose-built site supported by WAG and Gwynedd Council. £8m invested, processing over 850,000 items/week • Cardiff: Invested £10m in state-of-the-art production facility in Cardiff, largest commercial laundry in South Wales, opened June 2008. Capacity to handle over1.2 million items a week • Reading: opened in July 2013 following £6m investment. Further £4m investment announced in January 2015 to build second laundry in Reading by May • Mobics scanning technology to help control quality, leading company in adopting automatic quality control to minimise rejects in a highly automated industry • Factories operate seven days a week in line with customer baseCustomer base in range from 25 to 900 bedrooms per hotel • Strong team in charge of day-to-day operations, General Manager, Production/Operations Manager, Customer Service Manager, Transport Manager, Engineering Manager • Delivered over 2.8 million items a week and over 100 million items in 2014 Leading edge technology delivering efficiency and reliability”

9. Blue Chip Customer Base “Supporting leading brands in hotel sectors”

10. Sales Growth • Laundry industry known to be on of the oldest professions! • Afonwen growth shows how new management and approach from second generation can transform a small regional business into an increasingly nationwide supplier • Focused on long term not short term decision making process – benefit of private ownership

11. Questions?