Interim Results - Part 2

Whitbread PLC 30 October 2001 PART 2 Notes to the accounts 1. Basis of preparation of accounts The interim accounts were approved by the board on 29 October 2001. They have been prepared on the basis of the accounting policies set out in the 2000/1 group accounts, except in respect of deferred tax as set out below. The taxation 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 balance sheet as at 3 March 2001 and the profit and loss account and cash flow statement for the year ended on that date are extracts from the statutory accounts which have been delivered to the Registrar of Companies. The auditors' report on the statutory accounts was unqualified and did not contain a statement under section 237 of the Companies Act 1985. FRS18 (Accounting Policies) has been adopted in the current period. It has had no effect on the published numbers. FRS19 (Deferred Tax) has been adopted in the current period. The comparative amounts have been restated to comply with the new standard. Its effect on the profit and loss account is to increase the taxation charge for the Group by £ 11.0m (2000 - decrease the taxation charge by £0.9m, 2000/1 - increase the taxation charge by £13.2m). The balance sheet effect is to increase provisions in Central services by £137.7m (2000 - £151.3m, 2000/1 - £165.4m) and to increase goodwill in Marriott/Swallow Hotels by £7.2m (2000 - £7.6m, 2000/1 - £7.4m). Provisions for deferred tax have not been calculated on a discounted basis. 2. Segmental analysis of turnover, profit and net assets 6 months to 1 September Turnover EBITDA (**) Operating Net assets 2001 profit*** £m £m £m £m By business segment Hotels - Marriott/Swallow 203.7 63.2 42.4 1,243.2 - Travel Inns 87.9 38.7 31.5 448.6 ------------ ------------ ------------ ------------ 291.6 101.9 73.9 1,691.8 ------------ ------------ ------------ ------------ Restaurants - pub restaurants 299.1 58.0 44.2 802.6 - high street restaurants 237.1 11.7 3.1 168.4 ------------ ------------ ------------ ------------ 536.2 69.7 47.3 971.0 ------------ ------------ ------------ ------------ Sports, health and fitness 80.4 25.5 16.0 441.7 ------------ ------------ ------------ ------------ 908.2 197.1 137.2 3,104.5 Pubs & Bars - managed 99.5 21.1 16.2 (4.0) - leased 26.5 14.9 14.3 (0.6) Beer and other drinks 38.6 11.3 11.3 56.1 ------------ ------------ ------------ ------------ Segmental turnover, profit and net assets 1,072.8 244.4 179.0 3,156.0 Share of joint ventures' turnover (70.4) Central services 68.1 (5.0) (7.0) (257.0) ------------ ------------ ------------ ------------ 1,070.5 239.4 172.0 2,899.0 ====== ====== ====== ====== By geographical segment United Kingdom 1,036.4 237.0 171.3 2,862.4 Rest of the world 34.1 2.4 0.7 36.6 ------------ ------------ ------------ ------------ 1,070.5 239.4 172.0 2,899.0 ====== ====== ====== ====== 2. Segmental analysis of turnover, profit and net assets (continued) 6 months to 2 September Turnover EBITDA (**) Operating Net assets 2000 (restated) profit*** £m £m £m £m By business segment Hotels - Marriott/Swallow 200.1 58.3 40.1 1,164.6 - Travel Inns 80.4 35.5 28.8 397.8 ------------ ------------ ------------ ------------ 280.5 93.8 68.9 1,562.4 ------------ ------------ ------------ ------------ Restaurants - pub restaurants 281.9 54.4 40.2 784.2 - high street restaurants 219.6 10.2 2.6 155.7 ------------ ------------ ------------ ------------ 501.5 64.6 42.8 939.9 ------------ ------------ ------------ ------------ Sports, health and fitness 66.2 21.7 12.9 416.2 ------------ ------------ ------------ ------------ 848.2 180.1 124.6 2,918.5 Pubs & Bars - managed 266.5 65.8 51.6 781.8 - leased 74.8 38.1 36.4 387.4 Beer and other drinks 588.1 29.8 21.2 129.2 Acquired businesses for disposal* 16.1 2.6 2.6 7.2 ------------ ------------ ------------ ------------ Segmental turnover, profit and net assets 1,793.7 316.4 236.4 4,224.1 Inter-segment turnover (see note below) (63.7) Share of joint ventures' turnover (360.6) Central services 35.6 (2.1) (5.2) (315.7) Exceptional items (note 3) - (4.2) (4.2) - ------------ ------------ ------------ ------------ 1,405.0 310.1 227.0 3,908.4 ====== ====== ====== ====== By geographical segment United Kingdom 1,371.5 307.5 226.1 3,889.0 Rest of the world 33.5 2.6 0.9 19.4 ------------ ------------ ------------ ------------ 1,405.0 310.1 227.0 3,908.4 ====== ====== ====== ====== (**) EBITDA is earnings before interest, tax, depreciation and amortisation. *** Operating profit is stated after charging the amortisation of goodwill as follows: 6 months to 1.9.2001 6 months to 2.9.2000 £m £m Hotels 4.1 4.1 Sports, health and fitness 0.2 0.2 * The acquired business for disposal relates mainly to the pubs business acquired with the Swallow Group, which was sold on 7 June 2000. Following the sale of the Whitbread Beer Company there remains a continuing activity within the beer and other drinks segment. This is as a result of the terms of the sale of the Whitbread Beer Company to Interbrew which included arrangements for Whitbread to retain the people and the necessary production capacity to ensure compliance with its obligations for the remaining period of the Heineken and Murphy licences. Segmental turnover for high street restaurants includes the group's share of joint venture turnover amounting to £69.0m (2000 - £59.9m), hotels includes £ 1.4m (2000 - £1.2m) and beer and other drinks includes £nil (2000 - £299.5m). Inter-segment turnover is from Beer and other drinks to the other segments. Central services turnover comprises, primarily, food distribution services provided to a joint venture and an external customer. The geographical analysis of turnover and profit is by source. The analysis of turnover by destination is not materially different. Sales between geographical segments are not material. Net assets included above are total net assets excluding net debt. Following the introduction of FRS19, all taxation liabilities are now included within the net assets of central services. The comparatives have been restated accordingly. 2. Segmental analysis of turnover, profit and net assets (continued) 6 months to 6 months to 1.9.2001 2.9.2000 £m £m The exceptional costs are detailed in note 3. The analysis of operating exceptional costs is as follows: Pub & Bars and Restaurants * - (2.9) Beer and other drinks - (0.9) Central services - (0.4) ------------ ------------ - (4.2) ====== ====== * These costs relate to the restructuring of these businesses into the new divisions of Pubs & Bars and Restaurants. This was a combined project and there was no suitable basis for allocating the costs to individual divisions. 3. Exceptional items 6 months to 6 months to 2000/1 1.9.2001 2.9.2000 £m £m £m Restructuring/rationalisation costs Group excluding joint ventures and - (3.3) (2.2) associates Joint venture reorganisation costs - (0.9) (0.9) ------------ ------------ ------------ Charged against operating profit - (4.2) (3.1) Non-operating items Net profit/(loss) on disposal of fixed assets - Group excluding joint ventures and associates 0.2 2.3 (5.0) - Joint ventures - 0.4 0.2 - Associates (0.3) 0.1 0.5 Net loss on the disposal of businesses (note 9) (3.7) (18.8) (8.8) Fundamental reorganisation costs - Demerger of Pubs & Bars - transaction costs (14.4) - (11.0) - Reorganisation costs (5.9) - (15.0) ------------ ------------ ------------ (24.1) (20.2) (42.2) ====== ====== ====== The transaction costs are principally advisers' fees and legal costs. The fundamental reorganisation costs relate to the demerger of Pubs & Bars in May 2001 and the sale of the Whitbread Beer Company in May 2000. 4. Interest 6 months 6 months 2000/1 to 1.9.2001 to 2.9.2000 £m £m £m Interest payable 38.4 50.0 96.7 Interest receivable (1.7) (1.3) (3.2) Interest capitalised (1.5) (1.7) (3.4) ------------ ------------ ------------ 35.2 47.0 90.1 Interest payable by: Joint ventures 0.3 1.1 1.5 Associates 0.8 1.2 1.8 Exceptional interest payable* 0.8 - 0.3 ------------ ------------ ------------ 37.1 49.3 93.7 ====== ====== ====== * The exceptional interest payable represents refinancing costs associated with the demerger of Pubs & Bars. 5. Taxation 6 months 6 months 2000/1 to 1.9.2001 to 2.9.2000 (restated) (restated) £m £m £m Current taxation on profits for the period before exceptional items UK Corporation Tax 30.2 47.6 82.8 Adjustments to earlier periods UK Corporation Tax (1.2) (2.8) (11.0) ------------ ------------ ------------ 29.0 44.8 71.8 Joint ventures 1.4 0.3 2.8 Associates 3.7 2.2 3.5 Overseas tax - 0.4 - Current tax on operating exceptional items Group - - (0.4) Current tax on non-operating exceptional items Group (1.5) 19.2 16.9 Deferred tax Timing differences 11.0 14.2 28.3 Deferred tax on non-operating exceptional items Group - (15.1) (15.1) ------------ ------------ ------------ 43.6 66.0 107.8 ====== ====== ====== 6. Earnings per share Basic earnings per share is calculated by dividing earnings for ordinary shareholders of £67.1m (2000 - £95.6m) by the weighted average number of ordinary shares in issue during the period, 367.9m (2000 - 496.6m). Adjusted basic earnings per share is calculated as follows: Earnings (£m) 6 months 6 months 2000/1 to 1.9.2001 to 2.9.2000 (restated) (restated) Earnings and basic earnings per share 67.1 95.6 184.0 Earnings and basic earnings per share attributable to: Goodwill amortisation 4.3 4.3 8.5 Exceptional items, net of tax 23.4 24.3 44.3 ------------ ------------ ------------ Adjusted earnings and basic earnings per share 94.8 124.2 236.8 ====== ====== ====== Earnings per share (p) 6 months 6 months 2000/1 to 1.9.2001 to 2.9.2000 (restated) (restated) Earnings and basic earnings per share 18.24 19.25 37.18 Earnings and basic earnings per share attributable to: Goodwill amortisation 1.17 0.87 1.72 Exceptional items, net of tax 6.36 4.89 8.95 ------------ ------------ ------------ Adjusted earnings and basic earnings per share 25.77 25.01 47.85 ====== ====== ====== Earnings includes a number of exceptional items. In order to demonstrate the effect of these, together with the impact of goodwill amortisation, an adjusted earnings per share figure is also presented. Diluted earnings per share is the basic and adjusted basic earnings per share after allowing for the dilutive effect of the conversion into ordinary shares of the weighted average number of options outstanding during the period. The number of shares used for the diluted calculation is 369.3m (2000 - 497.0m). 7. Net cash inflow from operating activities 6 months to 6 months to 2000/1 2.9.2000 (restated) 1.9.2001 (restated) £m £m £m Group operating profit 154.7 215.9 401.8 Investment income - (0.1) (0.1) Depreciation/amortisation 67.4 83.1 157.5 Payments against provisions (17.0) (8.1) (29.4) Other non-cash items (3.6) 2.1 5.4 Increase in stocks (1.2) (9.4) (12.6) Increase in debtors (35.7) (171.6) (109.0) Increase in creditors 15.6 69.4 78.7 ------------ ------------ ------------ Cash inflow from operating 180.2 181.3 492.3 activities ====== ====== ====== 8. Acquisitions 6 months 6 months 2000/1 to to 1.9.2001 2.9.2000 £m £m £m Cash outflow in respect of new businesses acquired Payments in respect of previous years' acquisitions. - 11.3 11.0 ====== ====== ====== 9. Disposals 6 months to 1.9.2001 £m Fixed assets 4.1 Net working capital, excluding cash and overdraft (0.2) Cash & overdraft 0.1 ------------ Carrying value of net assets 4.0 ------------ Gross sale proceeds 1.5 Less costs (1.2) ------------ Net sale proceeds 0.3 ------------ Loss on disposal (3.7) ====== Net sale proceeds 0.3 Accrued costs 0.7 ------------ Cash inflow 1.0 ====== 10. Demerger of Pubs & Bars division 6 months to 1.9.2001 £m Fixed assets 1,194.3 Investments 0.4 Net working capital, excluding cash and overdraft (31.5) Deferred tax provision (38.7) ------------ Gross assets demerged from group 1,124.5 Net cash received (482.5) ------------ Net assets demerged 642.0 ====== Net cash received 482.5 ------------ Total transaction costs (25.4) Less - paid in prior year 3.8 - accrued costs 0.2 ------------ Transaction costs paid in current period (21.4) ------------ Cash inflow from demerger 461.1 ====== 11. Share capital Authorised 1.9.2001 2.9.2000 3.3.2001 £m £m £m Equity share capital Ordinary shares of 50 pence each * 4,725.0 4,725.0 4,725.0 ------------ ------------ ------------ 4,725.0 4,725.0 4,725.0 ====== ====== ====== Share capital (continued) Allotted, called up and fully paid 1.9.2001 2.9.2000 3.3.2001 £m £m £m Equity share capital Ordinary shares of 50 pence each * 147.6 2,239.2 2,207.8 ------------ ------------ ------------ 147.6 2,239.2 2,207.8 ====== ====== ====== Ordinary shares in issue (m) 295.2 497.6 490.6 ------------ ------------ ------------ Share Share capital premium £m £m Ordinary shares 3 March 2001 2,207.8 - Movements during the period: Reduction of capital under the arrangement to demerge the Pubs & Bars division ** (2,062.0) - Issued to employees by exercise of options 1.8 3.7 ------------ ------------ 1 September 2001 147.6 3.7 ====== ====== ** On 10 May 2001 the Pubs & Bars division was demerged from Whitbread PLC by means of a reduction of capital under section 135 of the Companies Act 1985. Whitbread PLC then implemented a 3 for 5 share capital consolidation, reducing the number of shares by 40 per cent. This reduction reflected the value returned to shareholders by the demerger as an approximate proportion of Whitbread PLC's market value. Following the capital reduction and share consolidation the nominal value of each Whitbread PLC share is 50 pence. * In accordance with merger accounting principles, the shares issued in connection with the scheme of arrangement to acquire Whitbread Group PLC, as adjusted to reflect the issue of options and repurchase of shares, have been treated as if issued throughout the corresponding year. At 1 September 2001 there were outstanding options for employees to purchase up to 9.5m (2000 - 14.0m) ordinary shares. During the six months to 1 September 2001 options on 0.6m (2000 - 2.0m) ordinary shares were exercised by employees under the terms of various share option schemes. 12. Reserves Revaluation Other Profit & Joint Total reserve reserves loss account ventures ssociates £m £m £m £m £m 3 March 2001 - 621.5 (1,855.0) 1,646.9 24.5 437.9 as reported Prior year adjustment resulting from - - (158.0) - (158.0) the implementation of FRS19 ------------ ------------ ------------ ------------ ------------ 3 March 2001 - 621.5 (1,855.0) 1,488.9 24.5 279.9 restated Currency - - (1.8) - (1.8) translation differences Profit - - 42.2 9.9 52.1 retained Pubs & Bars division demerger - Value of (1,611.6) (1,611.6) demerger - Gain over 487.1 487.1 book value ------------ ------------ - Gross assets (1,124.5) (1,124.5) demerged from group - Value of 482.5 482.5 debt demerged ------------ ------------ Net assets - - (642.0) - (642.0) demerged ------------ ------------ Revaluation surplus transferred to the Profit and (483.1) - 483.1 - - loss account on the demerger of the Pubs & Bars division Capital reduction following the - - 2,062.0 - 2,062.0 demerger of the Pubs & Bars division Discount on shares issued to employees under share option - - (0.2) - (0.2) schemes, less tax Realised revaluation deficit transferred to the profit and 0.3 - (0.3) - - loss account ------------ ------------ ------------ ------------ ------------ 1 September 138.7 (1,855.0) 3,431.9 34.4 1,750.0 2001 ====== ====== ====== ====== ====== 2 September 622.2 (1,892.2) 1,589.3 (34.5) 284.8 2000 ====== ====== ====== ====== ====== Goodwill £m Net amount written off against 488.4 reserves to 3 March 2001 Demerger of (38.9) Pubs & Bars ------------ Net amount written off against 449.5 reserves to 1 September 2001 ====== 13. Reconciliation of net cash flow to movement in net debt 6 months 6 months to 1.9.2001 to 2.9.2000 2000/1 £m £m £m Increase/(decrease) in cash in the 17.1 (23.2) 13.2 period Cash outflow from movement in loan 275.7 341.4 389.8 * capital Cash inflow from movement in liquid resources (0.2) (0.1) (0.8) Cash outflow from movement in short-term borrowings 8.3 19.6 28.0 ------------ ------------ ------------ Changes in net debt resulting from 300.9 337.7 430.2 cash flows Foreign exchange movements (1.2) (1.2) (1.1) Amortisation of premiums and discounts (0.7) 5.7 0.8 ------------ ------------ ------------ Movement in net debt in the period 299.0 342.2 429.9 Opening net debt (1,291.3) (1,721.2) (1,721.2) ------------ ------------ ------------ Closing net debt (992.3) (1,379.0) (1,291.3) ====== ====== ====== * Includes £5.3m debt issue costs. 14. Post balance sheet events Since the balance sheet date the intention to sell, in due course, a number of smaller restaurant brands, including Bella Pasta, Cafe Rouge, Abbaye and Mamma Amalfi, has been announced. The book value of the assets of these businesses in the group accounts as at 1 September 2001 amounted to £50m.

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