Interim Results
Whitbread PLC
16 October 2007
Whitbread PLC - interim results for the six months from 2 March - 30 August 2007
Financial
• Total revenue from Continuing Whitbread(1) up 10.8% to £590.2m (2006/07:
£532.8m)
• Group like for like sales up 6.3%
• Profit before tax and exceptional items from Continuing operations(2) up
13.3% to £99.4m (2006/07: £87.7m)
• Basic pre-exceptional EPS for Continuing operations up 44.9% to 34.57p
• Interim dividend up by 12.3% to 9.10p (2006/07: 8.10p)
• Half year net debt £29.7m(3)
Statutory
• Total Group sales £605.8m (2006/07: £623.6m)
• Profit for the period £499.4m (2006/07: £136.0m)
• Total basic EPS 254.43p (2006/07: 56.15p)
Key Highlights
• Sale of David Lloyd Leisure for £925m
• Announced an acquisition of 2000 rooms for Premier Inn
• Fourth consecutive quarter of like for like sales growth in Restaurants
• Costa expansion accelerating with over 800 sites worldwide
• £174m returned to shareholders through share buybacks(3)
Anthony Habgood, Chairman Whitbread PLC, said: 'These are good results stemming
from a combination of focused investment in growing markets where we have strong
competitive positions and judicious divestments. We are now seeing the results
of this strategy'.
Alan Parker, Chief Executive Whitbread PLC, said: 'We have had strong first half
growth in all our businesses. The disposal of David Lloyd Leisure has now
completed. We have announced the acquisition of the Tulip Inn UK business adding
another 2000 rooms to Premier Inn which continues to outperform the market.
We expect the budget hotel sector to continue growing and within that we plan
for Premier Inn to increase its share. Costa is now the leading coffee shop
brand in the UK, with strong growth potential at home and internationally. The
successful Beefeater remodelling is now complete and our focus continues to be
on achieving similar improvements in the rest of the restaurant estate.
We are returning cash to shareholders through share buybacks and remain
committed to increasing the leverage of the business further.
The second half has started well. We are confident about the outcome for the
full year.'
For further information contact:
Whitbread Investor Relations
Christopher Rogers 01582 844439
Tulchan Communications
David Allchurch / Wendy Watherston 0207 353 4200
A presentation for analysts will be held at London Stock Exchange, 10
Paternoster Square, London, EC4M 7LS. Registration is from 9:00am; presentation
is at 9:30am. A live audio webcast of the presentation will be available on the
investors' section of the website at: www.whitbread.co.uk. Alternatively, you
can listen live to the presentation by dialling: +44 (0)20 7162 0025
(participants must quote the 'Whitbread Interim Results' to connect). The
conference call will be available as a reply for 30 days. To listen dial in
number: 020 7031 4064 and enter passcode: 768373.
Revenue by business segment
£m 2007/08 2006/07 Change
Premier Inn 264.1 230.8(4) 14.4%
Restaurants (retained) 229.5 222.5(4) 3.1%
Costa 98.1 81.0 21.1%
Less inter-segment (1.5) (1.5)
Sales from Continuing Whitbread 590.2 532.8 10.8%
Restaurants (disposed) - 82.5
Other 15.6 8.3 88.0%
Revenue from Continuing operations 605.8 623.6 (2.9%)
Notes
(1) Continuing Whitbread
Continuing Whitbread comprises Premier Inn, the retained restaurant estate and
Costa but excludes the disposed restaurant sites.
(2) Continuing operations
Continuing operations comprises Continuing Whitbread plus the disposed
restaurant sites during the period of Whitbread ownership and supply chain sales
to third parties.
(3) Net Debt
Excludes a non-cash accrual of £270.3m for share buybacks, as required by IAS32.
The Company entered into a contingent agreement with the Company's brokers to
purchase shares during the close period. It is this commitment of £270.3m, being
the amount authorised by shareholders at that time, which is recognised as a
financial liability in the balance sheet. During the close period, the period
between the period end and the half year announcement, the Company is prevented
from purchasing its own shares by the UK Listing Rules and therefore entered
into the arrangement described above.
(4) After restatement for breakfast sales amounting to £8.4m.
CHIEF EXECUTIVE'S REVIEW
Total sales for Continuing Whitbread for the first six months of the year were
up 10.8% to £590.2m. This growth has been driven by increased revenue in all
three of our businesses, led by Premier Inn and Costa. Like for like sales for
Continuing Whitbread have grown by 6.3%, the highest level in recent years.
Profit before tax and exceptional items for the half year from Continuing
operations was up 13.3% to £99.4m.
Premier Inn, the largest hotel chain in the UK, has once again delivered an
industry leading performance. Like for like occupancy for the half was 82.1%, up
1.3% points and ahead of the industry average. On 26 September 2007 we announced
the acquisition of the Tulip Inn UK business with some 770 rooms currently
trading and an additional pipeline of 1,300 rooms. We are well on our way to
opening over 3,500 rooms by the full year and beating our 3,000 room target. We
are progressing well with our plans for bolt-ons, extensions and new site
openings.
We have maintained the roll out of the co-located model which continues to show
strong returns. Five new sites were opened in the first six months.
Restaurants have reported their fourth consecutive quarter of like for like
sales growth. Overall sales for the retained estate increased by 3.1%. We have
made solid progress on remodelling Beefeater. Going forward the main focus will
be on achieving similar improvements in the rest of the restaurant estate and we
have remodelled 41 sites in the first half. On average profit per house of the
retained estate was up 23%.
Costa is now the fastest growing and largest coffee shop chain in the UK. Both
national and international growth have been impressive and worldwide we have a
current total of 825 Costa sites. As with Premier Inn we see significant
potential for growth within the UK market in areas where we are not represented
or under represented. This is a brand with room to grow.
At the half-year date net debt stood at £29.7m(3) and as previously announced we
remain committed to increasing the leverage of the Group. This process has begun
with our on market buyback programme which, as of yesterday, had reached £174m.
In September we repaid £300.5m of debentures reducing our facilities to £980m.
This was an important precursor to our plan to increase leverage through the
issue of asset-backed bonds, work on which is largely complete. Given the
current state of the debt market the timing and appropriateness of any such
issue remains unclear. In the meantime, we are continuing to increase our
leverage through our on market buyback. We anticipate needing to renew our
shareholder authority to purchase Whitbread shares later this year.
The pension deficit has reduced from £196.0m at the end of the previous
financial year to £25.0m, benefiting from the increase in bond rates, a further
£50m cash injection and a beneficial change as a result of the adoption of the A
day legislation. The next triennial valuation of the Fund will take place in
2008.
As previously announced we also completed the disposal of David Lloyd Leisure in
the first half of the financial year for £925m.
Outlook
The second half-year has started well. Premier Inn and Costa are maintaining
their strong performance and the benefits from the Restaurants' remodelling are
now evident in a sector which is showing some signs of softening. We remain
confident about the outcome for the full year.
Premier Inn 2007/08 Change
Sales £264.1m 14.4%
Like-for-like sales 10.9%
Operating Profit £94.7m 20.5%
Our newly re-branded Premier Inn business has delivered another industry leading
performance. Sales for the six months increased by 14.4% to £264.1m and
operating profit was up by 20.5% to £94.7m. Operating margins also improved, up
1.8% points to 35.9% and like for like sales grew year on year by 10.9%.
At 86.7% Premier Inn achieved 2% points higher occupancy in London than its peer
group and the total market sample. Outside London at 81.1% it had 7.7% points
higher occupancy than the total market sample and 7.1% points higher than the
peer group. (Comparisons are to benchmark data compiled by hotel consultants
TRI).
Our expansion plans are on target with 842 rooms opened in the first half via
bolt-ons, extensions and new openings. Nearly half of the rooms opened were on
Whitbread owned land, again confirming the benefits from retaining our own land
and property.
In late September we announced the acquisition, for £44m, of six hotels with a
total of 770 rooms trading under the Tulip Inn and Golden Tulip brands in the UK
and a secured pipeline of nine further sites with a total of 1,300 rooms. As a
result of this acquisition we are well on our way to opening over 3,500 rooms in
the full year, beating our expansion target of 3,000 additional rooms.
The rebranding process is underway with 25 sites re-signed to date. The roll out
will be completed by the end of the current financial year supported by a
national advertising campaign which is to be launched next year. As previously
announced the total revenue cost will be £13m of which £10m will be incurred in
the second half of this financial year.
International expansion is also progressing. In Dubai we are looking forward to
our first hotel opening in the Spring of 2008. During the half year we were
pleased to announce a joint venture in India to open 80 hotels with some 12,000
rooms over the next 10 years.
Restaurants 2007/08 Change
Revenue(1) £229.5m (24.8%)
Like for like sales 1.5%
Operating profit £28.7m (19.6%)
Our Restaurants business has reported its fourth consecutive quarter of like for
like sales growth at 1.5% with sales from the retained estate up 3.1%. On a
house by house level, profits this year have increased some 23%.
Half year profit at £28.7m is 19.6% lower than last year, however last year
benefited from the additional 235 sites for five months to 28 July 2006, and
four months without depreciation on these sites.
Guest discounting has been significantly reduced across the estate along with
improvements in cost controls which have helped contribute to the increase in
the overall margin of 1.7%(2) for the first six months of the financial year.
We have introduced new menus to our Beefeater estate. As a result of working
closely with customer tasting panels, we are introducing a total of 16 new
dishes alongside the familiar favourites. Our daytime set menu deal has also
really helped build off-peak business with over 60% of guests dining at this
time enjoying this option.
The Beefeater remodelling is now complete with the estate enjoying market
leading awareness and strong like for like sales. Average profit per Beefeater
site was up 47%, whilst like for like covers were up 10.2%. The focus is now on
the remodelling of the rest of the estate with 41 sites now completed during
this half, 25 completed in the prior year and a target of 100 by year end. We
anticipate a sustained improvement in performance through the remodelling
programme and the application of many of the operational disciplines implemented
at Beefeater.
As previously announced, the co-located restaurant and Premier Inn model
continues to produce revenue and cost benefits for both businesses and we have
successfully opened a further five restaurants co-located with a Premier Inn
which are performing ahead of our expectations.
(1) Revenue and profit decline due to disposal of 235 restaurants in 2006/07 for
£497m on 28/07/2006
(2) After adjusting for non depreciation of assets sold to Mitchells and
Butlers PLC in 2006/7.
Costa 2007/08 Change
Revenue £98.1m 21.1%
Like for like sales (UK equity) 6.8%
Operating profit £6.6m 15.8%
Costa is now both the fastest growing and largest coffee shop chain in the UK.
At the half year there were 825 Costa stores worldwide, an increase of 118 units
on the year-end. Operating profit is 15.8% ahead of the prior year, although
international opening costs have impacted overseas profitability.
Costa's sales for the period have increased by 21.1% driven by a combination of
new store openings and a strong like for like sales performance.
In the UK 84 Stores have been added (71 net of closures) including our 600th
store which opened in Wimbledon in August; overseas 61 new stores were added (47
net of closures) bringing the total in the UK and overseas of 603 and 222
respectively. Of these, franchises account for 144 stores in the UK and almost
all of the overseas units.
Like for like sales growth for the period has been 6.8%. This has been achieved
through a combination of increased volumes and a growth in transaction values.
An important driver of transaction value has been food capture (the number of
transactions including a food item), which has continued to improve, and now
stands at over 40% in the UK. All our food is GM and hydrogenated fat free.
Differentiation of the brand is an important part of Costa's strategy. As well
as roasting our own coffee we are continuing to develop the stored value card
and the Costa Foundation. During the period, the first school built by the
Foundation was opened in Colombia.
The opportunity to grow Costa remains strong. In the UK there are still many
towns where Costa is not represented or where it is under represented. In
addition there are significant growth opportunities in evolving markets such as
retail parks, at travel gateways and supermarkets. We have signed an agreement
with Tesco to open around 50 Costa in-store coffee shops this financial year,
with 15 opened to date. Internationally, the opportunities for further growth
are considerable.
FINANCE REVIEW
Changes in Group
In the first half of the financial year there have been further changes to the
structure of the Group:
David Lloyd Leisure
On 2 August 2007 Whitbread completed the sale of David Lloyd Leisure to
Versailles Bidco Limited, a company owned by London and Regional Holdings
Limited and Bank of Scotland Corporate.
Profit generated by the business up to the point of sale has been included
within discontinued operations, with prior year comparatives restated
accordingly. The 2007/8 results include a benefit of £3.7m, in accordance with
IFRS 5, as no depreciation was charged on David Lloyd Leisure assets from the
time the Group decided to sell the business to completion of the sale.
TGI Friday's
On 2 March 2007 Whitbread completed the sale of the TGI Friday's property and
business to British Land, Carlson Restaurants Worldwide Inc. and ABN Amro
Capital. Profit generated by the business in 2006/7 has been included within
discontinued operations.
Stand-alone restaurants
On 28 July 2006 Whitbread announced the sale of 235 trading restaurants,
together with four sites not yet trading, to Mitchells & Butlers PLC. The
trading results for the 235 sites up to the date of sale are included within the
2006/07 comparatives for the Restaurant business.
Revenue
Group revenue from Continuing operations fell by 2.9% year on year to £605.8m,
driven by the impact of the restaurant disposals. Excluding the disposed
restaurants, revenue from Continuing Whitbread grew by 10.8%.
Revenue by business segment
£m 2007/8 2006/7 Change
Premier Inn 264.1 230.8(1) 14.4%
Restaurants (retained) 229.5 222.5(1) 3.1%
Costa 98.1 81.0 21.1%
Less inter-segment (1.5) (1.5)
Sales from Continuing Whitbread 590.2 532.8 10.8%
Restaurants (disposed) - 82.5
Other 15.6 8.3 88.0%
Revenue from continuing operations 605.8 623.6 (2.9)%
(1) After restatement for breakfast sales amounting to £8.4m. This was a direct
transfer between Premier Inn and Restaurants with a corresponding profit
adjustment of £5.7m.
Like for like sales grew by 6.3% with the remainder of the turnover growth
coming from the net increase in outlets, notably in Premier Inn and Costa.
Results
Total profit for the year is £499.4m, up 267.2% on last year. Profit before tax
and exceptionals is £99.4m, up 13.3% on last year.
Exceptional items
Net exceptional profit after tax amounted to £412.8m. This amount is analysed in
more detail in note 4 to the financial statements. The major items included
within this category are noted below.
Business disposals
The two principal businesses disposed of during the year generated pre-tax
profits of £396.7m; £384.1m on David Lloyd Leisure and £12.6m for TGI Friday's.
Pensions credit
During the half year it was agreed with the Trustee of the Group pension scheme
to reflect new arrangements for commutation of pension rights on retirement into
cash following a change in the government limits, 'The A Day Changes'. The
actuarial impact of this decision, coupled with a change in commutation factors,
gave rise to £10.0m of income which is treated as exceptional.
Interest on debenture redemption
At the 2006/7 year end Whitbread's capital structure included redeemable
debenture stock with a nominal value of £300.5m. These debentures were due for
repayment in 2011 and 2021. During the first half of the year, as part of our
restructuring of the balance sheet, we sought early redemption. This was agreed
on 30 August 2007 with the debentures being repaid on 6 September 2007. The
debentures and the amount repayable under the early redemption, are included in
the Group's balance sheet at the half year-end and this has given rise to an
exceptional interest charge of £12.5m.
Finance Act 2007
The Finance Act 2007 reduced the rate of UK corporation tax to 28% with effect
from April 2008. The effect of the reduced rate is a deferred tax credit of
£21.0m, included in the tax credit of £22.0m in continuing exceptional items.
Further UK tax changes, subject to consultation and future enactment are a
reduction in the rate of capital allowances applicable to plant and machinery to
25% to 20% on a reducing balance; a new category of fixtures qualifying for
capital allowances at 10% on a reducing balance basis and the phased abolition
of allowances for hotel buildings. The Group is currently calculating the effect
that these proposed changes may have.
Interest
Underlying net interest costs have fallen year-on-year by 15.3% to £17.7m. This
is a result of an increase in interest received, including interest earned on
the David Lloyd Leisure sale proceeds and, following a reduction in the pension
deficit, a movement in the pension finance 'charge' which generated £2.7m of
income this half year compared to a cost in the first half of last year of
£1.0m.
Taxation
The UK tax expense of £31.8m represents an effective tax rate of 32.0% on the
continuing businesses before exceptional items. This compares with 34.1% last
year.
Earnings per share
Basic earnings per share pre exceptional increased by 44.0% to 44.25p. Details
can be found in note 7 to the accounts.
Dividend
An interim dividend of 9.10p, an increase of 12.3% over last year, will be paid
on 8th January 2008 to all shareholders on the register at the close of business
on 2 November 2007.
Capital expenditure
Total Group capital expenditure on property, plant and equipment in the half was
£133.6m. This included £119.3m on Continuing operations, split between
acquisition expenditure, which includes the acquisition and development of
properties (£84.1m), and maintenance expenditure (£35.2m).
Financing
Net debt at the half year, before making a non-cash accrual of £270.3m for share
buy backs in the close period as required by IAS32, was £29.7m, compared to
£898.6m as at 1 March 2007.
As at 30 August 2007 the Group has committed revolving credit facilities
totaling £980m of which £280m expires in March 2008.
As previously announced we remain committed to increasing the leverage of the
Group. This process has begun with our on market buyback programme which, as of
15 October has reached £174m.
In September we repaid £300.5m of debentures reducing our facilities to £980m.
This was an important precursor to our plan to increase leverage through the
issue of asset-backed bonds, work on which is largely complete. Given the
current state of the debt market the timing and appropriateness of any such
issue remains unclear, so in the meantime we will continue to increase our
leverage through our on market buyback. We anticipate needing to renew
shareholder authority later this year to allow the Company to repurchase its own
shares.
Pensions
As at 30 August 2007 there was a gross pension deficit of £25.0m this compares
to £196.0m as at 1 March 2007. This fall is due to three factors: an actuarial
gain as a result of the increase in bond rates, the change in policy with
respect to lump sum payments (see above) and the payment of a further £50m into
the fund.
Under the agreement signed with Whitbread Pension Trustees Limited in April
2003, and updated in October 2005, the Group expects to make further
contributions of £50m in 2008/9 and £20m in each of 2009/10 and 2010/11.
Other Post Balance Sheet Event
On 26 September 2007 we announced the purchase of six hotels (770 rooms)
currently trading in the UK under the Tulip Inn and Golden Tulip brands and a
secured pipeline of nine further sites (1300 rooms) for £44m. The pipeline
hotels are planned to open in the next two years.
The 15 leasehold hotels will be converted to the Premier Inn brand at a cost of
£9m. The current franchise arrangements with Golden Tulip Worldwide have been
terminated and the six open hotels will be rebranded by the year end. Taking
account of the costs of integration it is anticipated that the transaction will
be marginally dilutive in the current financial year.
The hotels have been purchased through the acquisition of Golden Tulip (UK)
Limited and Pilot Hotels Limited from funds managed by Graphite Capital and
management shareholders. The consideration, which included the discharge of
existing debt, was paid in cash on completion.
Consolidated income statement
Six months to 31 August 2006
Six months to 30 August 2007 (restated) Year to
---------------------------------------------------------------------- 1 March
Before Before 2007
exceptional Exceptional exceptional Exceptional (restated)
items items Total items items Total Total
Notes £m £m £m £m £m £m £m
----------------------------------------------------------------------------------------------------------
Revenue 2 605.8 - 605.8 623.6 - 623.6 1,173.5
Cost of sales (92.5) - (92.5) (103.8) - (103.8) (188.5)
--------------------------------------------------------------------------------
Gross profit 513.3 - 513.3 519.8 - 519.8 985.0
Distribution
costs (342.8) (3.9) (346.7) (362.0) (0.3) (362.3) (702.6)
Administrative
expenses (53.6) 10.0 (43.6) (49.7) (10.3) (60.0) (103.4)
--------------------------------------------------------------------------------
Operating
profit 2 116.9 6.1 123.0 108.1 (10.6) 97.5 179.0
Share of (loss)/
profit from joint
ventures (0.3) - (0.3) 0.1 - 0.1 -
Share of
profit from
associates 0.5 - 0.5 0.4 - 0.4 0.6
--------------------------------------------------------------------------------
Operating profit
of the Group,
joint ventures
and associates 117.1 6.1 123.2 108.6 (10.6) 98.0 179.6
Non-operating
items:
Net profit on
disposal of
restaurants - - - - 188.1 188.1 196.6
--------------------------------------------------------------------------------
Profit before
financing and
tax 117.1 6.1 123.2 108.6 177.5 286.1 376.2
Finance costs 5 (24.1) (12.5) (36.6) (21.5) - (21.5) (40.1)
Finance revenue 5 6.4 - 6.4 0.6 - 0.6 1.9
--------------------------------------------------------------------------------
Profit/(loss)
before tax 99.4 (6.4) 93.0 87.7 177.5 265.2 338.0
Tax (expense)/credit (31.8) 22.0 (9.8) (29.9) (79.7) (109.6) (133.7)
--------------------------------------------------------------------------------
Net profit
from continuing
operations 67.6 15.6 83.2 57.8 97.8 155.6 204.3
Discontinued
operations:
Net profit/(loss)
on disposal of
businesses - 397.2 397.2 - (32.5) (32.5) 48.5
Profit/(loss) for
the period from
discontinued
operations 19.0 - 19.0 16.6 (3.7) 12.9 28.7
--------------------------------------------------------------------------------
3 19.0 397.2 416.2 16.6 (36.2) (19.6) 77.2
--------------------------------------------------------------------------------
Profit for the
period 86.6 412.8 499.4 74.4 61.6 136.0 281.5
================================================================================
Attributable to:
Parent
shareholders 86.9 412.8 499.7 74.4 61.6 136.0 281.8
Equity
minority
interest (0.3) - (0.3) - - - (0.3)
--------------------------------------------------------------------------------
86.6 412.8 499.4 74.4 61.6 136.0 281.5
================================================================================
Dividends proposed per share in respect of the period (pence):
B share dividend - 155.00 155.00
C share dividend - - 159.00
Interim 9.10 8.10 8.10
Final - - 22.15
======= ======= =======
Six months to Six months to
30 August 2007 31 August 2006 Year to
(restated) 1 March
------------------------------------------------ 2007
Continuing Continuing (restated)
Earnings per share (note 7) operations Total operations Total Total
--------------------------------------------------------------------------------------------------------
Profit for the period*(£m) 83.5 499.7 155.6 136.0 281.8
Profit for the period before
exceptional items*(£m) 67.9 86.9 57.8 74.4 151.4
Earnings per share (pence):
basic for profit for the period 42.52 254.43 64.24 56.15 123.43
basic for profit before exceptional items 34.57 44.25 23.86 30.72 66.32
diluted for profit for the period 42.21 252.63 63.84 55.81 122.47
diluted for profit before exceptional items 34.33 43.93 23.71 30.53 65.81
* Earnings used for earnings per share calculations are those attributable to parent shareholders
Consolidated statement of recognised income and expense
6 months to 6 months to Year to
30 August 31 August 1 March
2007 2006 2007
£m £m £m
--------------------------------------------------------------------------------------------------
Cash flow and net investment hedges:
Profit/(loss) taken to equity 8.2 0.8 (1.1)
Exchange differences on translation of foreign operations (0.7) (0.3) (0.9)
Actuarial gains/(losses) on defined benefit pension schemes 107.8 (3.8) 38.0
Tax on items taken directly to or from equity (21.7) 15.6 (11.9)
---------------------------------------
Net gain recognised directly in equity 93.6 12.3 24.1
Profit for the period 499.4 136.0 281.5
---------------------------------------
Total recognised income and expense for the period 593.0 148.3 305.6
=======================================
Attributable to:
Parent shareholders 593.3 148.3 305.9
Equity minority interest (0.3) - (0.3)
---------------------------------------
593.0 148.3 305.6
=======================================
Consolidated balance sheet
30 August 31 August 1 March
2007 2006 2007
Notes £m £m £m
--------------------------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 75.6 75.7 78.5
Property, plant and equipment 1,998.0 2,486.4 2,487.6
Investment in joint ventures 2.3 - 1.1
Investment in associates 1.0 0.9 0.9
Other financial assets 0.9 0.2 1.1
Derivative financial instruments 2.7 66.6 56.8
---------------------------------------
2,080.5 2,629.8 2,626.0
=======================================
Current assets
Inventories 12.6 14.4 12.8
Trade and other receivables 92.5 64.6 67.5
Income tax prepayment - - 7.1
Derivative financial instruments 53.1 9.9 8.3
Cash and cash equivalents 8 544.9 70.8 70.5
---------------------------------------
703.1 159.7 166.2
---------------------------------------
Assets classified as held for sale - 79.9 59.1
---------------------------------------
TOTAL ASSETS 2,783.6 2,869.4 2,851.3
=======================================
LIABILITIES
Current liabilities
Financial liabilities 8 734.6 183.8 86.3
Provisions 4.7 5.3 6.2
Derivative financial instruments - 1.0 -
Trade and other payables 279.6 291.4 287.1
Income tax payable 13.3 14.8 -
---------------------------------------
1,032.2 496.3 379.6
---------------------------------------
Non-current liabilities
Financial liabilities 8 110.3 547.9 882.8
Preference shares 3.1 3.1 3.2
Provisions 16.2 26.0 15.2
Derivative financial instruments - 0.7 5.9
Deferred income tax liabilities 280.4 247.3 309.5
Pension liability 9 25.0 288.0 196.0
--------------------------------------
435.0 1,113.0 1,412.6
---------------------------------------
TOTAL LIABILITIES 1,467.2 1,609.3 1,792.2
---------------------------------------
NET ASSETS 1,316.4 1,260.1 1,059.1
=======================================
EQUITY
Share capital 152.3 151.5 151.9
Share premium 41.1 37.0 38.1
Capital redemption reserve 4.7 2.6 4.7
Retained earnings 3,276.5 2,896.0 2,738.9
Currency translation 0.2 2.0 0.8
Other reserves (2,158.8) (1,831.8) (1,875.6)
---------------------------------------
Equity attributable to equity holders
of the parent 10 1,316.0 1,257.3 1,058.8
Equity minority interest 0.4 2.8 0.3
---------------------------------------
TOTAL EQUITY 1,316.4 1,260.1 1,059.1
=======================================
Consolidated cash flow statement
6 months to Year to
6 months to 31 August 1 March
30 August 2006 2007
2007 (restated) (restated)
Notes £m £m £m
------------------------------------------------------------------------------------------------
Profit for the period 499.4 136.0 281.5
Adjustments for:
Taxation charged on total operations 20.8 124.7 153.3
Net finance cost 30.0 20.5 37.4
Total income from joint ventures 0.5 (0.1) -
Total income from associates (0.5) (0.4) (0.6)
Loss/(profit) on disposal of property, plant and equipment 3.9 (188.4) (195.7)
Net(profit)/loss on disposal of
businesses and investments (399.4) 23.9 (48.5)
Depreciation and amortisation 45.0 52.4 102.8
Impairment of property and goodwill - - 12.6
Reorganisation costs - 1.4 -
Net profit arising on change of pension scheme rules (10.0) - -
Other non-cash items (7.4) 3.7 (8.2)
------------------------------------
Operating profit before working capital changes 182.3 173.7 334.6
(Increase)/decrease in inventories (0.4) 3.1 4.1
(Increase)/decrease in trade and other receivables (51.2) 57.7 74.7
Increase/(decrease) in trade and other payables 36.6 8.1 (4.0)
Payments against provisions (0.4) (0.6) (8.7)
Special contributions to pension fund (50.0) (56.0) (102.3)
------------------------------------
Cash generated from operations 116.9 186.0 298.4
Interest paid (27.6) (18.2) (39.3)
Taxes paid (11.1) (2.4) (12.8)
------------------------------------
Net cash flows from operations 78.2 165.4 246.3
------------------------------------
Cash flows from investing activities
Disposal of investments and subsidiaries - discontinued* 983.6 251.5 361.5
Purchase of property, plant and equipment (133.6) (125.3) (241.2)
Purchase of investments and loans advanced (1.5) - -
Purchase of intangible assets (0.5) - (2.1)
(Costs)/proceeds from disposal of property,
plant and equipment (1.6) 454.9 487.6
Acquisition of subsidiary, net of cash acquired - (2.7) (2.7)
Dividends from associates 0.4 0.2 -
Interest received 4.0 0.9 3.2
------------------------------------
Net cash flows from investing activities 850.8 579.5 606.3
------------------------------------
Cash flows from financing activities
Proceeds from issue of share capital 3.4 3.8 7.6
Cost of purchasing own shares (21.9) (127.2) (275.8)
(Decrease)/increase in short-term borrowings (51.9) 21.3 26.1
Proceeds from long-term borrowings - - 49.1
Repayment of long-term borrowings (360.7) (323.1) (123.4)
Equity dividends paid 6 (43.5) (315.7) (529.0)
------------------------------------
Net cash flows used in financing activities (474.6) (740.9) (845.4)
------------------------------------
Net increase in cash and cash equivalents 454.4 4.0 7.2
Net foreign exchange difference (0.2) (0.1) (1.2)
Opening cash and cash equivalents 36.1 30.1 30.1
------------------------------------
Closing cash and cash equivalents 8 490.3 34.0 36.1
====================================
Reconciliation to cash and cash equivalents on the balance sheet:
Cash and cash equivalents shown above 490.3 34.0 36.1
Add back overdrafts 54.6 36.8 34.4
------------------------------------
Cash and cash equivalents shown within current assets
on the balance sheet 544.9 70.8 70.5
====================================
* including disposed of net overdraft
Notes to the accounts
1. Basis of accounting and preparation
The interim results announcement is prepared in accordance with the IFRS
accounting policies expected to apply at 28 February 2008 and which were applied
at 1 March 2007. It has been prepared in accordance with UK listing rules and
with IAS 34 'Interim Financial Reporting'. It was approved by the Board of
directors on 15 October 2007.
Comparative periods have been restated to reflect the following changes in
accounting treatment:
- where operations have subsequently been classified as discontinued,
prior periods have been restated to present the income statements of
those operations within discontinued operations (see note 3).
- the segmental note for the comparative period has been restated to
reflect the segmental analysis implemented during 2006/07. The
segments have been changed to reflect the resultant size and shape of
the Group's activities. This has resulted in the renaming of the Pub
Restaurants segment to Restaurants and Costa being reported in its own
segment. Breakfast sales amounting to £8.4m have also been adjusted
for in the comparative half year. This was a direct transfer between
Premier Inn and Restaurants with a corresponding profit adjustment of
£5.7m. In addition comparative numbers have been restated to include
TGI Friday's and David Lloyd Leisure as discontinued operations.
The financial information for the year ended 1 March 2007 is extracted from the
statutory accounts of the Group for that year and does not constitute statutory
accounts as defined in Section 240 of the Companies Act 1985. These published
accounts were reported on by the auditors without qualification or statement
under Sections 237(2) or (3) of the Companies Act 1985 and have been delivered
to the Registrar of Companies.
The interim accounts for the six months ended 30 August 2007 and the
comparatives to 31 August 2006 are unaudited but have been reviewed by the
auditors; a copy of their review report is included at the end of this report.
2. Segmental analysis
The Group's primary reporting format is business segments and its secondary
format is geographical segments. The operating businesses are organised and
managed separately according to the nature of the products and services
provided, with each segment representing a strategic business unit that
offers different products and serves different markets.
The Group has three core areas of operation:
Operation Nature of operation
Premier Inn Operation of budget hotels
Restaurants Operation of full and limited service pub restaurants
Costa Operation of coffee shops
Inter-segment revenue is from Costa to the other segments. Transactions were
entered into on an arm's length basis in a manner similar to transactions with
third parties. Included within unallocated operations are those that are managed
by a central division.
The Group's geographical segments are determined by the location of the Group's
assets and operations. The Group's material operations are in the UK and, for
this reason, the secondary format of geographical segments is not presented.
Unallocated Total Dis-
Premier and continuing continued Total
Inn Restaurants Costa elimination operations operations operations
£m £m £m £m £m £m £m
---------------------------------------------------------------------------------------------------------------------
Half year ended 30 August 2007
Revenue
Revenue from external customers 264.1 229.5 96.6 15.6 605.8 103.4 709.2
Inter-segment revenue - - 1.5 (1.5) - - -
-----------------------------------------------------------------------------
Total revenue 264.1 229.5 98.1 14.1 605.8 103.4 709.2
=============================================================================
EBIT (a) 94.7 28.7 6.6 (12.9) 117.1 27.6 144.7
Add back loss made by minority interest - - 0.3 - 0.3 - 0.3
-----------------------------------------------------------------------------
EBIT attributable to shareholders 94.7 28.7 6.9 (12.9) 117.4 27.6 145.0
=============================================================================
EBIT attributable to shareholders 94.7 28.7 6.9 (12.9) 117.4 27.6 145.0
Segment exceptional items:
Net loss on disposal of property,
plant and equipment - (2.6) (0.8) (0.5) (3.9) - (3.9)
Net surplus arising on change of
pension scheme rules - - - 10.0 10.0 - 10.0
Share of loss from joint ventures 0.3 - - - 0.3 0.2 0.5
Share of profit from associates (0.5) - - - (0.5) - (0.5)
Loss attributable to minority interests - - (0.3) - (0.3) - (0.3)
-----------------------------------------------------------------------------
Segment result 94.5 26.1 5.8 (3.4) 123.0 27.8 150.8
-----------------------------------------------------------------------------
Operating profit 123.0 27.8 150.8
Share of loss from joint ventures (0.3) (0.2) (0.5)
Share of profit from associates 0.5 - 0.5
------------------------------
Operating profit of the Group, joint ventures and associates
Non-operating exceptionals: 123.2 27.6 150.8
Net profit on disposals of businesses - 399.4 399.4
Profit before financing and tax 123.2 427.0 550.2
Net finance costs (30.2) 0.2 (30.0)
------------------------------
Profit before income tax 93.0 427.2 520.2
Income tax expense (9.8) (11.0) (20.8)
-------------------------------
Net profit for the period 83.2 416.2 499.4
===============================
-----------------------------------------------------------------------------
Net assets/(liabilities) 1,262.2 595.6 70.6 (367.8) 1,560.6 - 1,560.6
-----------------------------------------------------------------------------
Reconciliation of assets and liabilities reported above to those reported on the balance sheet
Net assets reported above 1,560.6 - 1,560.6
Non-current derivative assets 2.7 - 2.7
Current derivative assets 53.1 - 53.1
Cash 544.9 - 544.9
Current financial liabilities (734.6) - (734.6)
Non-current financial liabilities (110.3) - (110.3)
-------------------------------
Net assets per balance sheet 1,316.4 - 1,316.4
===============================
(a) EBIT shows the segment profit/(loss) before exceptional items
Unallocated Total Dis-
Premier and continuing continued Total
Inn Restaurants Costa elimination operations operations operations
£m £m £m £m £m £m £m
Half year ended 31 August 2006 (restated)
Revenue
Revenue from external customers 230.8 305.0 79.5 8.3 623.6 177.6 801.2
Inter-segment revenue - - 1.5 (1.5) - - -
-----------------------------------------------------------------------------
Total revenue 230.8 305.0 81.0 6.8 623.6 177.6 801.2
=============================================================================
EBIT attributable to shareholders (a) 78.6 35.7 5.7 (11.4) 108.6 22.7 131.3
=============================================================================
EBIT attributable to shareholders 78.6 35.7 5.7 (11.4) 108.6 22.7 131.3
Segment exceptional items:
Net profit/(loss) on disposal of property,
plant and equipment - 0.3 (0.3) (0.3) (0.3) 1.5 1.2
Provision for loan write down - - - - - (5.2) (5.2)
Reorganisation - - - (10.3) (10.3) - (10.3)
Share of profit from joint ventures (0.1) - - - (0.1) - (0.1)
Share of profit from associates (0.4) - - - (0.4) - (0.4)
-----------------------------------------------------------------------------
Segment result 78.1 36.0 5.4 (22.0) 97.5 19.0 116.5
-----------------------------------------------------------------------------
Operating profit 97.5 19.0 116.5
Share of profit from joint ventures 0.1 - 0.1
Share of profit from associates 0.4 - 0.4
---------------------------------
Operating profit of the Group, joint ventures and associates 98.0 19.0 117.0
Non-operating exceptionals:
Net loss on disposals of businesses - (23.9) (23.9)
Net profit on disposal of restaurants 188.1 - 188.1
---------------------------------
Profit before financing and tax 286.1 (4.9) 281.2
Net finance costs (20.9) 0.4 (20.5)
---------------------------------
Profit before income tax 265.2 (4.5) 260.7
Income tax expense (109.6) (15.1) (124.7)
---------------------------------
Net profit/(loss) for the period 155.6 (19.6) 136.0
=================================
-----------------------------------------------------------------------------
Net assets/(liabilities) 1,179.7 559.8 57.3 (607.1) 1,189.7 656.5 1,846.2
-----------------------------------------------------------------------------
Reconciliation of assets and liabilities reported above to those reported on the balance sheet
Net assets reported above 1,189.7 656.5 1,846.2
Non-current derivative assets 66.6 - 66.6
Current derivative assets 9.9 - 9.9
Cash 70.8 - 70.8
Current financial liabilities (183.8) - (183.8)
Current derivative liabilities (1.0) - (1.0)
Non-current financial liabilities (547.9) - (547.9)
Non-current derivative liabilities (0.7) - (0.7)
---------------------------------
Net assets per balance sheet 603.6 656.5 1,260.1
=================================
(a) EBIT shows the segment profit/(loss) before exceptional items
Unallocated Total Dis-
Premier and continuing continued Total
Inn Restaurants Costa elimination operations operations operations
-----------------------------------------------------------------------------------------------------------------------
Year ended 1 March 2007 (restated)
Revenue
Revenue from external customers 458.5 518.9 172.3 23.8 1,173.5 350.8 1,524.3
Inter-segment revenue - - 2.8 (2.8) - - -
-----------------------------------------------------------------------------
Total revenue 458.5 518.9 175.1 21.0 1,173.5 350.8 1,524.3
=============================================================================
EBIT (a) 156.2 52.3 17.8 (21.6) 204.7 54.4 259.1
Add back loss made by minority interest - - 0.3 - 0.3 - 0.3
----------------------------------------------------------------------------
EBIT attributable to shareholders 156.2 52.3 18.1 (21.6) 205.0 54.4 259.4
=============================================================================
EBIT attributable to shareholders 156.2 52.3 18.1 (21.6) 205.0 54.4 259.4
Segment exceptional items:
Net profit/(loss) on disposal of
property, plant and equipment (0.2) 0.7 (0.5) 0.7 0.7 (1.6) (0.9)
Net release of provision - - - - - 8.2 8.2
Impairment of property and other assets - (1.8) (1.2) (1.4) (4.4) (8.2) (12.6)
Provision for loan write down - - - - - (5.3) (5.3)
Reorganisation - - - (21.4) (21.4) - (21.4)
Share of profit from associates (0.6) - - - (0.6) - (0.6)
Profit attributable to minority interests - - (0.3) - (0.3) - (0.3)
-----------------------------------------------------------------------------
Segment result 155.4 51.2 16.1 (43.7) 179.0 47.5 226.5
-----------------------------------------------------------------------------
Operating profit 179.0 47.5 226.5
Share of profit from associates 0.6 - 0.6
---------------------------------
Operating profit of the Group and associates 179.6 47.5 227.1
Non-operating exceptionals:
Net profit on disposals of businesses - 48.5 48.5
Net profit on disposal of restaurants 196.6 - 196.6
---------------------------------
Profit before financing and tax 376.2 96.0 472.2
Net finance costs (38.2) 0.8 (37.4)
---------------------------------
Profit before income tax 338.0 96.8 434.8
Income tax expense (133.7) (19.6) (153.3)
---------------------------------
Net profit for the year 204.3 77.2 281.5
=================================
------------------------------------------------------------------------------
Net assets/(liabilities) 1,219.0 560.6 56.9 (514.9) 1,321.6 576.9 1,898.5
------------------------------------------------------------------------------
Reconciliation of assets and liabilities reported above to those reported on the balance sheet
Net assets reported above 1,321.6 576.9 1,898.5
Non-current derivative assets 56.8 - 56.8
Current derivative assets 8.3 - 8.3
Cash 70.5 - 70.5
Current financial liabilities (86.3) - (86.3)
Non-current financial liabilities (882.8) - (882.8)
Non-current derivative liabilities (5.9) - (5.9)
---------------------------------
Net assets per balance sheet 482.2 576.9 1,059.1
=================================
(a) EBIT shows the segment profit/(loss) before exceptional items
3. Discontinued operations
On 2 March 2007 the Group sold its interest in TGI Friday's for consideration of £70.4m. On 2 August 2007 the Group sold
its interest in David Lloyd Leisure for £925.0m.
All the properties and investments described above have been reported within discontinued operations for the periods
presented.
David
TGI Lloyd
Friday's Leisure Other Total
£m £m £m £m
-----------------------------------------------------------------------------------------------------------------
The effect of the disposals during the period is as follows:
Sale proceeds 70.4 925.0 2.1 997.5
Working capital adjustment (0.6) 4.7 - 4.1
--------------------------------------------------
Total proceeds 69.8 929.7 2.1 1,001.6
Total net assets sold (55.3) (528.9) - (584.2)
Costs of disposal/(release of accrual) (1.9) (16.7) 0.6 (18.0)
--------------------------------------------------
12.6 384.1 2.7 399.4
Tax effect of disposal - (2.2) - (2.2)
==================================================
Profit on disposal 12.6 381.9 2.7 397.2
==================================================
Sale proceeds are made up as follows:
Cash 69.8 675.5 2.1 747.4
Repayment of inter-company debt - 252.6 - 252.6
Received in cash since period-end - 1.6 - 1.6
==================================================
69.8 929.7 2.1 1,001.6
==================================================
Total net assets sold comprise the following assets:
Intangible assets 2.0
Property, plant and equipment 562.5
Investment in joint ventures 0.2
Inventories 0.6
Trade and other receivables 27.6
Cash 2.7
Assets classified as held for sale 55.3
Trade and other payables (29.1)
Loan capital (1.5)
Provisions (36.1)
---------
Total net assets sold 584.2
=========
6 months to Year to
6 months to 31 August 1 March
30 August 2006 2007
2007 (restated) (restated)
£m £m £m
------------------------------------------------------------------------------------------------------------
Reported profit/(loss) from discontinued operations:
Revenue 103.4 177.6 350.8
Cost of sales (4.4) (24.7) (47.4)
------------------------------------
Gross profit 99.0 152.9 303.4
Distribution costs (63.0) (114.5) (220.3)
Administrative expenses (8.2) (15.7) (28.7)
Non-recurring items: ------------------------------------
Provision for loan write down (note 4) - (5.2) (5.3)
Warranty and onerous contract provisions - 0.9 8.2
Impairment of property, plant and equipment - - (8.2)
Profit/(loss) on disposal of property,
plant and equipment - 0.6 (1.6)
------------------------------------
- (3.7) (6.9)
------------------------------------
Operating profit 27.8 19.0 47.5
Share of loss from joint ventures (0.2) - -
Non-recurring items:
Net profit/(loss) on disposal of
businesses 399.4 (23.9) 48.5
------------------------------------
Profit/(loss) before financing and tax 427.0 (4.9) 96.0
Finance costs (0.1) - -
Finance income 0.3 0.4 0.8
------------------------------------
Profit/(loss) before tax 427.2 (4.5) 96.8
Income tax expense:
Related to pre-tax profit (8.8) (6.5) (13.9)
Related to pre-tax profit exceptional - - 1.4
Related to profit/(loss) on disposal (2.2) (8.6) -
Related to prior year disposals - - (7.1)
------------------------------------
Net profit/(loss) from discontinued operations 416.2 (19.6) 77.2
====================================
The major classes of assets classified as held for sale and measured at lower of carrying amount and fair
value less cost to sell are:
30 August 31 August 1 March
2007 2006 2007
£m £m £m
------------------------------------------------------------------------------------------------------------
Property, plant and equipment - 47.6 56.8
Investment in joint venture - 29.8 -
Investment in associate - 2.5 -
Inventories - - 0.6
Trade and other receivables - - 1.7
Total - 79.9 59.1
====================================
4. Exceptional items
6 months to Year to
6 months to 31 August 1 March
30 August 2006 2007
2007 (restated) (restated)
£m £m £m
------------------------------------------------------------------------------------------------------------
Continuing operations:
Reorganisation costs (a) - (10.3) (21.4)
Impairment of property, plant and equipment - - (4.4)
Net (loss)/profit on disposal of property, plant and equipment (3.9) (0.3) 0.7
Net surplus arising on change of pension scheme rules (b) 10.0 - -
------------------------------------
Operating exceptionals 6.1 (10.6) (25.1)
Net profit on disposal of pub restaurants (c) - 188.1 196.6
Interest cost on early redemption of debentures (d) (12.5) - -
------------------------------------
(6.4) 177.5 171.5
Tax on continuing exceptional items 1.0 (79.7) (77.0)
Deferred tax relating to UK tax rate change (e) 21.0 - -
------------------------------------
15.6 97.8 94.5
------------------------------------
Discontinued operations:
Net profit/(loss)on disposal of property, plant and equipment - 0.6 (1.6)
Warranty and onerous contract provisions - 0.9 8.2
Impairment of property, plant and equipment - - (8.2)
Provision for loan write down (f) - (5.2) (5.3)
------------------------------------
Operating exceptionals - (3.7) (6.9)
Net profit/(loss) on disposal of businesses (note 3) 399.4 (23.9) 48.5
------------------------------------
399.4 (27.6) 41.6
Tax on discontinued exceptional items (2.2) (8.6) (5.7)
------------------------------------
397.2 (36.2) 35.9
------------------------------------
------------------------------------
Total exceptional items 412.8 61.6 130.4
====================================
(a) During 2005/06 the Board instigated a fundamental reorganisation of
all central support functions and the financial impact of the decision
taken then continued into 2006/07. In addition the announced disposal
of 235 pubs led to a further restructuring during the period to
reflect the resultant shape of the Group. The costs of this
reorganisation have been reported in administrative expenses. The
costs relate principally to redundancy, closure costs and a pension
curtailment credit.
(b) The Board agreed with the Trustees of the Group pension scheme to
reflect new arrangements for commutation of pension rights on
retirement into cash following a change in the government limits. The
actuarial impact of this decision is reflected in exceptional items.
(c) During 2005/06 235 trading pubs, together with four sites not yet
trading, were disposed of to Mitchells & Butlers resulting in a profit
on disposal after costs of £196.6m. Contingent deferred consideration
of up to £7.5m may be due to Whitbread in future periods. This has not
been accounted for due to the uncertainty regarding whether it will be
received.
(d) The exceptional interest charge of £12.5m is made up of a combination
of a premium paid to debenture holders arising on early redemption and
the cost from closing out the associated interest rate swaps. The
debenture holders agreed to accept early redemption on 30 August 2007
and were repaid on 6 September 2007.
(e) The Finance Act 2007 reduced the rate of UK Corporation Tax to 28%
with effect from 1 April 2008. The effect of the reduced rate is a
deferred tax credit of £21.0m, included in the tax credit of £22.0m in
continuing exceptional items.
Further UK tax changes, subject to consultation and future enactment,
are a reduction in the rate of capital allowances applicable to plant
and machinery from 25% to 20% on a reducing balance basis, a new
category of fixtures qualifying for capital allowances at 10% on a
reducing balance basis and the phased abolition of allowances for
hotel buildings. The Group is currently calculating the effect that
these proposed changes may have.
(f) As a result of Swallow Hotels Limited going into administration, in
2006/07 a provision was made for the deferred consideration on the
sale of Swallow branded hotels during 2003/04. The deferred
consideration remains unpaid and efforts continue to pursue this
payment.
5. Finance (costs)/revenue
6 months to Year to
6 months to 31 August 1 March
30 August 2006 2007
2007 (restated) (restated)
£m £m £m
------------------------------------------------------------------------------------------------------
Finance costs
Bank loans and overdrafts (14.6) (9.1) (16.4)
Other loans (9.8) (11.9) (24.5)
Interest capitalised 0.3 0.5 1.3
------------------------------------
(24.1) (20.5) (39.6)
Net pension finance charge - (1.0) (0.5)
------------------------------------
Finance costs before exceptional items (24.1) (21.5) (40.1)
Exceptional finance costs (12.5) - -
------------------------------------
Total finance costs (36.6) (21.5) (40.1)
====================================
Finance revenue
Bank interest receivable 2.6 0.5 1.1
Income from investments 0.1 0.1 0.2
------------------------------------
2.7 0.6 1.3
Net pension finance credit 2.7 - -
------------------------------------
5.4 0.6 1.3
Impact of hedging arrangements 1.0 - 0.6
------------------------------------
Total finance revenue 6.4 0.6 1.9
====================================
6. Dividends paid
6 months to 6 months to Year to
30 August 31 August 1 March
2007 2006 2007
£m £m £m
-------------------------------------------------------------------------------------------------------
Declared and paid in the period:
Equity dividends on ordinary shares:
Final dividend for 2006/07 - 22.15 pence (2005/06 - 19.95 pence) 43.5 51.3 51.3
Interim dividend for 2006/07 - 8.10 pence (2005/06 - 7.35 pence) - - 17.8
------------------------------------
43.5 51.3 69.1
------------------------------------
Dividends on other shares
B share dividend - 155.0 pence - 264.4 264.4
C share dividend - 159.0 pence - - 195.5
------------------------------------
- 264.4 459.9
------------------------------------
------------------------------------
43.5 315.7 529.0
====================================
7. Earnings per share
Basic earnings per share are calculated by dividing net profit for the period attributable to ordinary shareholders of
£499.7m (2006 - £136.0m) by the weighted average number of ordinary shares in issue during the period, 196.4m
(2006 - 242.2m). Adjusted earnings per share are calculated as follows:
Earnings (£m) Earnings per share (p)
--------------------------------------------------------------------------
6 months to Year to 6 months to Year to
6 months to 31 August 1 March 6 months to 31 August 1 March
30 August 2006 2007 30 August 2006 2007
2007 (restated) (restated) 2007 (restated) (restated)
----------------------------------------------------------------------------------------------------------------------
Total operations
Earnings and basic earnings per share 499.7 136.0 281.8 254.43 56.15 123.43
Earnings and basic earnings per share
attributable to:
Exceptional items (393.0) (149.9) (213.1) (200.10) (61.89) (93.33)
Tax on exceptional items (19.8) 88.3 82.7 (10.08) 36.46 36.22
---------------------------------------------------------------------------
Profit and basic earnings per share before
exceptional items 86.9 74.4 151.4 44.25 30.72 66.32
===========================================================================
Continuing operations
Earnings and basic earnings per share 83.5 155.6 204.6 42.52 64.24 89.62
Earnings and basic earnings per share
attributable to:
Exceptional items 6.4 (177.5) (171.5) 3.25 (73.29) (75.12)
Tax on exceptional items (22.0) 79.7 77.0 (11.20) 32.91 33.73
---------------------------------------------------------------------------
Profit and basic earnings per share before
exceptional items 67.9 57.8 110.1 34.57 23.86 48.23
===========================================================================
Discontinued operations
Earnings and basic earnings per share 416.2 (19.6) 77.2 211.91 (8.09) 33.81
Earnings and basic earnings per share
attributable to:
Exceptional items (399.4) 27.6 (41.6) (203.35) 11.40 (18.21)
Tax on exceptional items 2.2 8.6 5.7 1.12 3.55 2.49
---------------------------------------------------------------------------
Profit and basic earnings per share
before exceptional items 19.0 16.6 41.3 9.68 6.86 18.09
===========================================================================
Diluted earnings per share and diluted adjusted basic earnings per share are 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 and adjusted diluted calculation is as follows:
Weighted number of shares (m)
--------------------------------------
6 months to 6 months to Year to
30 August 31 August 1 March
2007 2006 2007
-----------------------------------------------------------------------------------------------------------------------
Weighted average number of ordinary shares for the purposes of earnings per share 196.4 242.2 228.3
Effect of dilutive potential ordinary shares:
Share options - number of shares to be issued for nil consideration 1.4 1.5 1.8
---------------------------------------
Weighted average number of ordinary shares for the purposes of diluted
earnings per share 197.8 243.7 230.1
=======================================
8. Movements in cash and debt
Provision Amortisation
1 March for share of premiums 30 August
2007 Disposals Cash flow buy-back and discounts 2007
£m £m £m £m £m £m
-----------------------------------------------------------------------------------------------------------------
Cash at bank and in hand 70.5 544.9
Overdrafts (86.3) (54.6)
------- -------
(15.8) (2.7) 508.8 - - 490.3
Less short term bank borrowings 51.9 - (51.9) - - -
------------------------------------------------------------------
Cash and cash equivalents 36.1 (2.7) 456.9 - - 490.3
Short term bank borrowings (51.9) - 51.9 - - -
Provision for share buy-backs in close period - - - (270.3) - (270.3)
Loan capital under one year - (409.7)
Loan capital over one year (882.8) (110.3)
------- -------
Total loan capital (882.8) 1.5 360.7 - 0.6 (520.0)
------------------------------------------------------------------
Net debt (898.6) (1.2) 869.5 (270.3) 0.6 (300.0)
==================================================================
Net Debt includes a non-cash accrual of £270.3m for share buy backs, as required
by IAS 32. The Company entered into a contingent agreement with the Company's
brokers to purchase shares during the close period. It is this commitment of
£270.3m being the amount authorised by shareholders at that time which is
recognised as a financial liability in the balance sheet. During the 'close
period', the period between the period end and the half year announcement, the
Company is prevented from purchasing its own shares by the UK listing rules and
therefore entered into the arrangement described above.
9. Pension liability
The pension liability in the period has fallen from £196.0m to £25.0m. The main
reasons for this reduction are actuarial gains of £108.0m reflected in the
statement of recognised income and expense, a special cash contribution from the
Company of £50.0m and an exceptional profit reflected in the income statement of
£10.0m relating to new arrangements for commutation of pension rights on
retirement into a cash lump sum.
10. Shareholders' funds
6 months to 6 months to Year to
30 August 31 August 1 March
2007 2006 2007
£m £m £m
------------------------------------------------------------------------------------------------------------------
Total equity attributable to parent shareholders at beginning of period 1,058.8 1,543.7 1,543.7
Total recognised income and expense for the period 593.3 148.3 305.9
Accrued share based payments 2.3 2.8 5.2
Reimbursement of cost of ESOT shares purchased - 1.2 1.2
Cost of ESOT shares purchased (6.1) - -
Ordinary shares issued 3.4 3.8 7.6
Bonus issue of preference shares - - (4.8)
Preference shares cancelled (7.0) (127.1) (271.0)
Movement in associates reserves - 0.3 -
Equity dividends paid (see note 6) (43.5) (315.7) (529.0)
Treasury shares purchased (14.9) - -
Change in provision for share buy-backs (270.3) - -
-------------------------------------
Total equity attributable to parent shareholders at end of period 1,316.0 1,257.3 1,058.8
=====================================
11. Related party transactions
The Group's principal subsidiaries are listed in the following table:
% equity interest
--------------------------
30 August 31 August 1 March
Principal activity Country of incorporation 2007 2006 2007
-----------------------------------------------------------------------------------------------------------------------
Principal subsidiaries
Whitbread Group PLC Restaurants and hotels England 100 100 100
Premier Inn Hotels Limited Hotels England 100 100 100
Whitbread Hotel Company Limited Hotels England 100 100 100
Costa Limited Roasters, wholesalers
and retailers of coffee England 100 100 100
David Lloyd Leisure Limited Leisure England - 100 100
Principal joint ventures
PTI Gulf Hotels LLC Hotels United Arab Emirates 49 49 49
Pizza Hut (UK) Limited Restaurants England - 50 -
Principal associate
Morrison Street Hotel Limited Hotels Scotland 40 40 40
Shares in Whitbread Group PLC are held directly by Whitbread PLC. All principal subsidiary undertakings have the same
year-end as Whitbread PLC. All the above companies have been included in the Group consolidation. The companies listed
above are those that materially affect the amount of profit and the assets of the Group.
The following table provides the total amount of transactions which have been entered into with related parties.
Amounts
Sales to owed by
related related
parties parties
£m £m
------------------------------------------------------------------------------
Joint ventures
30 August 2007 - -
31 August 2006 0.7 -
1 March 2007 0.7 -
Associates
30 August 2007 - -
31 August 2006 - -
1 March 2007 - -
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made at normal market prices. Outstanding balances at year-end are
unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party
receivables. For the six months ended 30 August 2007, the Group has not raisedany provision for doubtful debts relating
to amounts owed by related parties (2006: £ nil). An assessment of bad debts is undertaken each financial year
through examining the financial position of the related party and the market in which it operates.
12. Capital expenditure commitments
30 August 31 August 1 March
2007 2006 2007
£m £m £m
------------------------------------------------------------------------------------------------------------------------
The Group had the following capital commitments for which no provision has been made:
Property, plant and equipment 47.8 32.5 43.1
Intangible assets - - 0.5
13. Post balance sheet events
An interim dividend of 9.10p per share (2006: 8.10p) amounting to a dividend of
£16.8m (2006: £17.8m) was declared by the Directors at their meeting on 15
October 2007. These financial statements do not reflect this dividend payable.
The holders of the Company's redeemable debenture stocks agreed to accept early
redemption on 30 August 2007 and the debentures were repaid on 6 September 2007.
The debentures were included in the balance sheet at the amount repayable of
£366.1m.
In the Company's trading statement issued on 29 August 2007 a share buyback
programme was announced. Included in net debt (note 6) is the financial
liability recorded under IAS 32 in recognition of the contingent agreement with
a third party for the purchase of the Company's shares during a close period.
As at 15 October 2007 the Company had purchased 9.8m shares at a cost of £159.4m
since the period end.
On 26 September 2007, the Company announced the acquisition of six hotels
currently trading in the UK under the Tulip Inn and Golden Tulip brands for
£44.0m. The hotels have been purchased through the acquisition of 100% of the
share capital of Golden Tulip (UK) Limited and Pilot Hotels Limited. The
consideration, which included the discharge of existing debt, was paid in cash
on completion.
14. Risks and Uncertainties
The principal risks and uncertainties affecting the business activities of the
Group, which now exclude those relating to David Lloyd Leisure, are detailed on
pages 3 and 4 of the Directors' Report and Accounts for the year ended 1 March
2007. A copy of the Directors' Report and Accounts is available on the Company's
website at www.Whitbread.co.uk. Set out above within the Chief Executive's
Review is a commentary on the outlook for the Group for the remaining six months
of the financial year.
15. Responsibility Statement
We confirm that to the best of our knowledge:
a) The condensed set of financial statements has been prepared in accordance
with IAS 34;
b) The interim management report includes a fair review of the information
required by the Financial Statements Disclosure and Transparency Rules (DTR)
4.2.7R - indication of important events during the first six months and their
impact on the financial statements and description of principal risks and
uncertainties for the remaining six months of the year; and
c) The interim management report includes a fair review of the information
required by DTR 4.2.8R - disclosure of related party transactions and changes
therein.
By order of the Board
Alan Parker Christopher Rogers
Chief Executive Group Finance Director
Independent review report to Whitbread PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 August 2007 which comprises the Consolidated income
statement, Consolidated statement of recognised income and expense, Consolidated
balance sheet, Consolidated cash flow statement and the related notes 1 to 15.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial
data, and, based thereon, assessing whether the accounting policies and
presentation have been consistently applied, unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 August 2007.
Ernst & Young LLP
London
15 October 2007
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