Interim Results - Part 1

Whitbread PLC
31 October 2000


PART 1

WHITBREAD PLC
Interim results for the six months to September 2, 2000

Financial highlights                      Future Whitbread*  Total Group      
                                               Divisions                      
                                                             
Sales (including share of joint ventures)   £848m   +22%      £1766m   -1.9%
EBITDA before exceptional items             £180.0m +31%      £314.3m  +6.1%
Operating profit before exceptional items   £124.8m +30%      £231.4m  +5.8%
Profit before exceptional items and tax                       £182.1m  -5.9%
Adjusted earnings per share                                   27.87p   -8.7%
Dividend per share                                            8.05p    +5.2%  
                                 

* Divisional results for Hotels, Restaurants, and Sports, Health and Fitness

Significant strategic developments:
----------------------------------

Swallow acquisition; Beer Company and First Quench disposals;
announcement of formation of future Whitbread; proposal to unlock value in    
Pubs and Bars and return approximately 75% of net proceeds to shareholders.

Strong like-for-like sales growth in Marriott, Travel Inn, David Lloyd Leisure
and Brewers Fayre 

Outperformance in Pubs and Bars

Review of Restaurant brands/Brewsters to grow to 220/Costa Coffee to 500/     
Beefeater estate to be mainly rebranded. 10% of Restaurants sites to be sold.

Interim dividend increased 

Sir John Banham, Chairman, said:

'This announcement demonstrates the significant progress made with the
transformation of Whitbread and the attractive growth characteristics
underpinning the future shape of the company.

'Throughout the 1990s Whitbread has been focusing its activities on growth
sectors of the UK leisure market and reducing its dependence on profits from
brewing and alcohol-led retailing. The momentum of change has accelerated
dramatically in the last twelve months.

'In January we completed our largest acquisition, the Swallow Group, and in
May the Whitbread Beer Company was sold.  These changes are reflected in the
accounts for the first half of the financial year which includes less than
three months of Beer Company sales and profits.

'Notwithstanding the sale of the Beer Company, total earnings before
exceptional items, interest, tax, depreciation and amortisation (EBITDA)
increased by 6.1% to £314.3m.  Operating profit, before exceptional items,
grew by 5.8% to £231.4m reflecting an improvement in the group's profit margin
from 12.2% to 13.1%.

'At a time of considerable change, these are creditable performances and I
should like to thank every one of the Whitbread people who made them possible.

'On October 16, we completed the sale of our interest in the First Quench
off-licence business and on October 19, we announced our intention to create
future Whitbread and unlock the value of our Pubs and Bars Division - some
3000 properties - and to return approximately 75% of the net proceeds to
shareholder by mid-2001.  We have also announced that, in the meantime, we may
use our existing authority to buy back shares as part of this return of value.

'These results also highlight the quality of our Pubs and Bars division which
has performed well. There have already been numerous expressions of interest
from potential purchasers. Even more important, from the point of view of
shareholders, is that the divisions that comprise future Whitbread have
continued to grow their sales and profits and achieved like-for-like sales
growth of 3.8% in the period - a good performance in the current UK retail
environment.

'Looking forward, this like-for-like sales performance, combined with organic
expansion already in the pipeline, gives future Whitbread attractive growth
characteristics. For the half-year, the profit margin for the future Whitbread
Divisions improved from 13.8% to 14.7%.

'Reflecting the Board's confidence, the interim dividend has been increased by
5.2% to 8.05p per share, and will be paid on 9th January 2001 to all
shareholders on the register at the close of business on  10th November,
2000.' 

There will be a conference call for analysts at 12 noon on Tuesday, October
31st.  Please dial 020 8240 8247 and ask for the Whitbread conference call. 
The conference will be available for replay for seven working days by calling
020 8288 4459 and quoting access code No: 647 432.

Contacts:

David Reed           020 7615 1324
Jeremy Probert       020 7615 1445
Dan Waugh            020 7615 1059



CHIEF EXECUTIVE'S REVIEW 

Operating profit and EBITDA (see Finance Review), where referred to in this
report, are stated before exceptional items (see note 3 to the accounts).


Hotels
Sales £218.6m               + 71%
Like-for-like sales         + 9.8%
EBITDA  £65.1m              + 89%
Operating profit £46.0m     + 85%

The Whitbread Hotel Company grew like-for-like sales by 9.8% with the Marriott
brand ahead 10.2% and the total Travel Inn brand up by 5.4%.  Sales and profit
growth were helped by the acquisition of the Swallow Group and the continuing
rapid expansion of Travel Inn.

On a like-for-like basis the Marriott brand achieved occupancy of 77% while
growing achieved room rates by 8% to £81.47 and yield by 7% to £62.73. 
Marriott continued to achieve a significant yield premium to the market. The
Swallow acquisition is on track to achieve the yield uplift and synergy
benefits that were expected. Ten Swallow hotels have already been converted to
the Marriott brand.

Travel Inn achieved average occupancy across the group of 87% and (including
an estimate of associated food and beverage income) grew its operating profit
contribution to Whitbread to around £33 million.  The results and net assets
of the majority of Travel Inns are currently included within Whitbread
Restaurants.

The total hotel operating profit for Whitbread, including the Travel Inns
reported under other businesses, grew to approximately £74m.

Restaurants
Sales £563.0m              + 8.0% 
Like-for-like sales        + 2.2%
EBITDA £93.0m              + 7.4%
Operating profit £65.7m    + 8.2%

Around 90% of operating profit for Whitbread Restaurants is generated by two
brands - Brewers Fayre and Beefeater including their adjacent Travel Inns. 
Brewers Fayre grew like-for-like sales by 4.6% and Beefeater by 0.9%.

Like-for-like sales were well ahead in Costa Coffee by 9.4% and Pizza Hut by
5.2% with Whitbread Restaurants Germany also ahead by 1.1%.  Like-for-like
sales in High Street restaurants, including Cafe Rouge and Bella Pasta, were
down by 0.9% and T.G.I. Friday's down by 6.1%.

Since the new Whitbread Restaurants Division was formed in March, management
has undertaken a strategic review to ensure its brands are aligned with growth
segments of the eating-out market and to establish rigorous performance
criteria.  One of the outcomes of this review is that over 140 sites, some 10%
of the total, have been identified for disposal including some 50 High Street
sites mostly from the Cafe Rouge estate.  The review of brands is set out
below.

Beefeater occupies 258 of the UK's best restaurant sites generating average
weekly sales of approximately £22,000 per site.  We have concluded that we
will achieve greater returns by segmenting the estate, creating two new
brands:  approximately 80 sites will become Out and Out destination
restaurants and approximately 90 further sites in prime locations will also be
rebranded.  The majority of the remaining sites will be rebranded to other
concepts or retained as Beefeater where there are good trading reasons for
doing so.

Since the beginning of the financial year, the Restaurant Division's new
family brand, Brewsters, has now been introduced successfully to 118 Brewers
Fayre sites.  By 2004 it is intended to grow the Brewsters brand to some 220
while continuing to develop the adult-oriented Brewers Fayre brand.

Costa Coffee is to be expanded rapidly to over 500 sites to take advantage of
its brand strength and the fast growing market.  Plans for the brand include
further strategic alliances such as those with Abbey National and Road Chef.

Pizza Hut will continue to grow the distribution of its successful full
service restaurants.  To meet the growing demand for home delivery a new
strategy of franchising the brand is to be adopted.

In parallel with the disposal of sites, the remaining High Street brands,
along with T.G.I. Friday's, will benefit from new initiatives and more focused
attention.  The early results in Bella Pasta and Cafe Rouge are encouraging.


Sports, Health and Fitness
Sales £66.6m               + 45%
Like-for-like sales        + 5.2%
EBITDA £21.9m              + 34%
Operating profit £13.1m    + 26%

Like-for-like sales growth of over 5% demonstrated the potential for this
division.  Excluding the recently acquired Racquets and Healthtrack clubs, 18
of the 44 large clubs have been open for less than three years and will
contribute to future growth as they approach maturity.

Again excluding Racquets and Healthtrack, total sales grew by 20% with total
memberships up by 19%.  David Lloyd Leisure's sales per member and membership
retention both exceed the industry average.

David Lloyd Leisure is the largest operator in the fast growing active leisure
market with more than 200,000 members,  Whitbread has grown the brand from 14
clubs since its acquisition in 1995 and intends to continue its expansion
through a new club pipeline which already has eight sites and through
extending the David Lloyd Leisure franchise to 48 Marriott and Swallow leisure
clubs.

Pubs and Bars 
Sales £341.3m              + 3.5%
Like-for-like sales        + 0.0%
EBITDA £104.0m             + 3.0%
Operating profit £88.0m    + 2.2%

The Pubs and Bars Division was formed in March and comprises Whitbread's
leased pubs (Pub Partnerships) and its managed pubs (High Street Bars and Pubs
Inn-Line). 

Sales in leased pubs were up 2.3% with profit ahead by 7.1% while managed pubs
achieved sales growth of 3.8% with a marginal decline in profit. Like-for-like
sales in the three main business streams were:  High Street bars including
Hogshead (+2.7%), Pub Partnerships (+2.3%) and Pubs Inn-Line (-0.6%).

Pub Parnerships' operating profit per pub was up 7%. 72 major capital
developments were completed and 56 leases were assigned with average premiums
approximating £69,000.  Pub Partnerships contributed £39m to group cash flow.

High Street Bars grew total sales by 23% with Pubs Inn-Line total sales up
0.2%. Average sales per pub grew 3.9%.

Beer and Other Drinks

For Beer, sales were £288.6m and operating profit was £12.1m.  The Whitbread
Beer Company was sold to Interbrew on May 25, 2000 although there remains a
continuing beer production and sales activity (see note 2 to the accounts).
Other drinks comprises Whitbread's 50% interest in the First Quench
off-licence business and a 25% share of Britannia Soft Drinks. Sales for the
period were £299.5m with operating profit of £9.1m. The sale of First Quench
to Nomura was completed on October 16, 2000. 


FINANCE REVIEW

Like-for-like sales figures exclude sales of retail outlets opened for the
first time or disposed of during 1999/00 or 2000/01.

Accounting policies

FRS15 (Tangible Fixed Assets) was adopted for the 1999/00 annual accounts. 
Since FRS15 was not adopted for the 1999/00 interims, the comparative amounts
in these accounts have been restated to comply with this standard.  FRS16
(Current Tax) and UITF24 (Accounting for start up costs) have been adopted,
for the first time, in these accounts.  These changes, and their impact, are
described in note 1 to the accounts.

Acquisitions and disposals

The results of the period, and year on year comparisons, were impacted
significantly by the acquisitions of Racquets and Healthtrack Group (September
1999) and Swallow Group PLC (January 2000) and the disposal of The Whitbread
Beer Company (May 2000).

Turnover

Turnover, including joint ventures, fell by 1.9% and group turnover (excluding
joint ventures) fell by 2.4%.  On a like-for-like basis, group turnover
(excluding joint ventures) grew by 2.6%.

It should be noted that under the terms of FRS 9 (Associates and Joint
Ventures) there is some double counting, within Turnover including joint
ventures, of turnover from Whitbread to joint ventures and vice versa.

Operating profit

Operating profit before exceptional items grew by 5.8% to £231.4 million.  The
reduced operating profit from Beer reflects the sale of The Whitbread Beer
Company.  The contribution from other drinks, which comprises the non-core
investments in First Quench and Britannia Soft Drinks, also declined.  All
remaining divisions contributed profit increases, as described in the
Operating Review.

The group's profit margin (operating profit before exceptional items as a
percentage of turnover including joint ventures) increased from 12.2% to
13.1%.  This increase is mainly attributable to the exit from the lower margin
beer business and the expansion of the higher margin hotels and sports, health
and fitness businesses.

Earnings before exceptional items, interest, tax, depreciation and
amortisation ('EBITDA').

We have, for the first time, reported EBITDA by division in the segmental
analysis (see note 2 to the accounts).  EBITDA is a good indicator of the
cash, before working capital movements, net capital expenditure and financing
costs, generated by each division.  Group EBITDA grew by 6.1% to £314.3
million.

Exceptional items

Further exceptional costs of £3.3 million were charged against operating
profit in respect of the reorganisation of Pub Partnerships, Inns and
Restaurants into the new Pubs and Bars and Restaurants divisions.  In
addition, an exceptional charge of £0.9 million was incurred in respect of
further restructuring within First Quench.

The loss in the period on the disposal of a business was attributable to the
sale of The Whitbread Beer Company.  The  gross proceeds of the sale were £394
million, which was £53million above book value but which resulted in a
reported loss on sale of £18.8 million.  This is as a result of the
requirement to account for goodwill previously written off of £72 million.

Interest

The net interest charge increased by £24.0 million to £49.3 million.  This was
due to the increase in net debt to £1379 million at the end of the period,
versus £897 million at the end of the comparable period.  Net interest was
covered 4.7 times by operating profit before exceptional items.  The weighted
average rate of interest on fixed rate sterling debt at the period end was
7.1%.  Of the net debt at the period end, 33% was at fixed rates of interest
and 67% was at floating rates.

Taxation

As explained in note 1 to the accounts, the tax charge on profit before
exceptional items for the interim period has been calculated by applying the
forecast effective tax rate for the full year.  The charge against profit
before exceptional items for the period of £47.7 million represents an
underlying rate of 26.2%.  The charge, and the underlying tax rate, reflect
the recent levels of capital expenditure.

The net tax charge on the exceptional losses includes a charge of £20.2
million relating to the sale of The Whitbread Beer Company.  Although this
disposal resulted in a book loss of £18.8 million  (after goodwill written
back), it resulted in a taxable profit.  This apparent anomaly arises because
the rate of tax relief on fixed assets has been faster than the rate of
depreciation used for accounting purposes.  Consequently the accounting net
book value of Beer Company was higher than the tax net book value.

Dividend

On 9th January 2001, the interim dividend of 8.05p per share, an increase of
5.2%, will be paid to all shareholders on the register at the close of
business on 10th November 2000.  A dividend re-investment alternative will be
offered.

Cash flow

Net cash inflow from operating activities was £102 million lower for the
period at £181 million.  This reduction results primarily from a year over
year increase of £95 million in debtors.  The principal reasons for this
increase are: a VAT debtor of £37 million (in respect of the sale of The
Whitbread Beer Company), which was settled in September; and the rise in
debtors within The Whitbread Beer Company, during our period of ownership in
this half year, compared with the movement in the comparative half year.

Investment in property and plant was £170 million, down from £194 million last
year.  This reduced level of investment reflects principally the sale of The
Whitbread Beer Company and a lower level of expenditure in the first half
within David Lloyd Leisure.  The increase of £119 million in receipts from
property and plant sold reflects the proceeds from the sale of the Swallow
Inns and Restaurants business. Consequently, the net cash outflow from capital
expenditure was £38 million, compared with £189 million in the corresponding
period.

Cash inflow before financing was £337 million.  The underlying cash inflow for
the period (after adjusting for the £378 million cash inflow from the
acquisition and disposal of businesses and for an outflow in respect of
investment in new retail outlets of £67 million) was £26 million.

Net debt

Net debt at the end of the period amounted to £1379 million, resulting in a
balance sheet gearing ratio of 52%.

Net asset value

Net asset value per share at the period end was £5.36, an increase of 0.25
pence / 5% over the period.

Post balance sheet events

Two significant events were announced in October:

i. the completion of the sale of First Quench; and

ii. a proposed restructuring of Whitbread which will result in the formation
of 'Future Whitbread' (comprising our hotel, restaurant and leisure club
businesses), the unlocking of the full value of the pubs which comprise the
Pubs and Bars division and the subsequent return of value to shareholders;   

These transactions are described earlier in this report and in note 12 to the
accounts.

Supplementary information

1999/00 financial information restated for the new divisional format,
information on capital expenditure and site numbers at the half-year end are
available on the Whitbread website at www.whitbread.co.uk


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