Preliminary Results
Whitbread PLC
28 April 2008
Whitbread PLC
28 April 2008
Whitbread PLC preliminary results for the financial year to 28 February 2008
Highlights
Financial
•Profit before tax and exceptional items for Continuing operations (2) up
26.3% to £210.3m (2006/7: £166.5m)
•Total revenue for Continuing Whitbread (1) up 11.3% to £1,187.8m (2006/7:
£1,067.2m)
•Like-for-like sales for Continuing Whitbread up 5.7%
•Diluted pre-exceptional EPS up 30.5% to 85.87p
•Final dividend up 21.4% to 26.90p; full year dividend up 19.0% to 36.00p
(2006/7 30.25p)
Statutory
•Total Group revenue £1,320.1m (2006/7: £1,524.3m)
•Total profit for the year £544.8m (2006/7: £281.5m)
•Basic pre-exceptional EPS from Continuing operations (2) up 56.3% at 76.01p
(2006/7: 48.62p)
•Year end net debt of £425.8m (2006/7: £898.6m)
Achievements
•Premier Inn had a record year with room growth of 3,400 and sales up 15.1%
•Pub Restaurants have delivered significant improvements in profit per pub
restaurant, up c.40%
•Costa expansion accelerated with 1,000 stores worldwide in March and sales
up 23.5%
•New £455m facility signed to replace existing £280m facility
•Group refocused: sale of David Lloyd Leisure for £925m and TGI Friday's for
£70m
•£25m pa to be saved through simplified management structure and outsourcing
logistics
•£338m returned through share buybacks
Alan Parker, Chief Executive Whitbread PLC, said: '2007/8 was a year of
excellent progress with good results across the Company. Whitbread is now a
more resilient business with strong growth prospects in the UK and overseas. In
anticipation of a more challenging environment, action has been taken to
simplify processes and reduce costs.'
'Since the start of the new financial year, two months ago, trading has been
encouraging. We have researched the opportunities for disciplined growth across
the Group and have established two longer-term ambitions - in the next five
years to increase the size of Premier Inn by 50% to 55,000 rooms and to double
Costa to 2,000 stores. Whitbread is well placed for the future.'
For further information contact:
Whitbread Investor Relations
Christopher Rogers, Group Finance Director 020 7806 5491
Julie Foster, Interim Director of Communications 01582 844244
Tulchan Communications
Andrew Grant/David Allchurch 020 7353 4200
For photographs, please visit the new corporate image library:
www.whitbreadimages.co.uk
A presentation for analysts will be held at The London Stock Exchange, 10
Paternoster Square, London, EC4M 7LS. The presentation is at 9.30am and 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 to the presentation by dialling: +44 (0)20 7162
0125, enter the passcode: 793474 and quote The Whitbread Results Presentation.
This will be available as a replay for 30 days and will be available from
approximately 12:00 noon, dial: +44 (0)20 7031 4064 and enter the passcode:
793474.
(1) Continuing Whitbread
Continuing Whitbread comprises Premier Inn, the retained Pub Restaurant Estate
and Costa but excludes David Lloyd Leisure, the disposed of pub restaurant
sites, the Pizza Hut joint venture, TGI Friday's and any supply chain sales to
third parties.
(2) Continuing operations
Continuing operations comprises Continuing Whitbread plus the disposed of pub
restaurant sites during the period of Whitbread ownership and supply chain sales
to third parties.
Revenue by business segment
+-----------------------------------------+-----------+--------------+---------+
|£m | 2007/8 | 2006/7 | Change|
+-----------------------------------------+-----------+--------------+---------+
|Premier Inn | 527.8 | 458.5 | 15.1% |
+-----------------------------------------+-----------+--------------+---------+
|Pub Restaurants (retained) | 446.1 | 436.4 | 2.2% |
+-----------------------------------------+-----------+--------------+---------+
|Costa | 216.3 | 175.1 | 23.5% |
+-----------------------------------------+-----------+--------------+---------+
|Less: inter-segment | (2.4) | (2.8) | |
+-----------------------------------------+-----------+--------------+---------+
|Revenue from Continuing Whitbread | 1,187.8 | 1,067.2 | 11.3% |
+-----------------------------------------+-----------+--------------+---------+
|Pub Restaurants (disposed) | - | 82.5 (1) |
+-----------------------------------------+-----------+--------------+---------+
|Other | 28.9 | 23.8 | 21.4% |
+-----------------------------------------+-----------+--------------+---------+
|Revenue from continuing operations | 1,216.7 | 1,173.5 | 3.7% |
+-----------------------------------------+-----------+--------------+---------+
(1) Part year impact in 2006/7
Chief Executive's Review
This year we have made excellent progress. We are now a focused hotel and
restaurant company. All our businesses have delivered growth and performed well
in their respective markets.
Premier Inn has delivered another year of industry-leading performance as the
largest and fastest growing hotel group in the UK. Total revenue for the year
is up 15.1% to £527.8m with operating profit up 14.0% year on year to £178.0m.
During the year over 3,400 rooms were added to the estate bringing the total to
over 36,000 rooms. The majority of this growth was organic. The rest was
through acquisitions including the purchase of 771 rooms trading under the Tulip
Inn and Golden Tulip brands in September, together with a secured pipeline of a
further 1,300 rooms. We also announced the signing of a joint venture with
Emaar-MGF to open 12,000 rooms (80 hotels) in India within ten years, and this
month our joint venture with Emirates opened its first hotel in Dubai.
Pub Restaurants have reported a second year of positive like-for-like sales
growth. Total sales from the retained estate are up 2.2%. The Beefeater
remodelling is now complete and we opened our first new Beefeater for six years.
Rising cost inflation has been contained in 2007/8 but will be an increasing
challenge in 2008/9.
Costa is the fastest growing and largest coffee shop chain in the UK and has
delivered another outstanding year. Total revenue is up 23.5% to £216.3m and at
the year-end there were 992 Costa outlets in 20 countries worldwide. The number
of Costa outlets has more than doubled in the last three years. Costa is
developing into a very strong brand with further scope for growth both in the
UK and overseas.
In parallel, we have worked hard to simplify the business. We sold David Lloyd
Leisure for £925m in August 2007 having already sold TGI Friday's in March 2007
for £70m. In February 2008 we announced that the divisional management teams of
the Hotels and Pub Restaurants businesses would be combined. At the heart of
this restructuring is a desire to eliminate duplication and better align the
management teams to the businesses. This will further increase our focus on
delivering growth from our portfolio of Premier Inn hotels situated alongside a
pub restaurant - a model that generates superior industry returns. We have also
made the decision to outsource our logistics operation and earlier this month
signed a contract with Kuehne & Nagel. These combined actions will result in
annual cost savings of £25 million from 2009/10.
Net debt at the year-end was £425.8m compared to £898.6m as at 1 March 2007.
Following the sale of David Lloyd Leisure we repaid £300.5m of debentures and
purchased £338m of shares via an on market share buyback programme. Since the
end of the financial year we have arranged a new £455m five-year loan facility
to replace the £280m facility, which has now expired. Combined with the
existing £700m 5-year facility, the company has sufficient committed headroom
and maturities to operate the business in line with its plans.
The Board has also continued to review the level of leverage in the business. In
the current uncertain financial markets we believe that the appropriate level
of leverage for the company is one which is consistent with an investment grade
corporate capital structure (i.e. no greater than 3.5X, on a pension and lease
adjusted basis). Over the coming year we will work towards this level through a
combination of accelerated investment, bolt on acquisitions and when
appropriate a continuation of the share buyback programme.
Dividend
A final dividend of 26.90p, an increase of 21.4% over last year, will, subject
to approval at the AGM, be paid on 11 July 2008 to all shareholders on the
register at the close of business on 9 May 2008.
Outlook
Since the start of the new financial year, trading has been encouraging with the
positive sales trends from last year continuing. Although a more challenging
consumer environment is widely anticipated, we are confident that the actions
we have taken, combined with our investment programme, our resilient brands and
our strong balance sheet, put us in a good position to continue the growth of
the business.
Premier Inn
+-------------------------------------------+---------+-------------+----------+
|Premier Inn | 2007/8| 2006/7| Change|
+-------------------------------------------+---------+-------------+----------+
|Revenue | £527.8m | £458.5m | 15.1% |
+-------------------------------------------+---------+-------------+----------+
|Like-for-like sales | | | 10.4% |
+-------------------------------------------+---------+-------------+----------+
|Operating profit (pre exceptional) | £178.0m | £156.2m | 14.0% |
+-------------------------------------------+---------+-------------+----------+
|Operating profit (post exceptional) | £171.0m | £156.0m | 9.6% |
+-------------------------------------------+---------+-------------+----------+
Premier Inn continues to deliver an industry-leading performance. Total revenue
for the year grew by 15.1% to £527.8m with operating profit up 14.0% year on
year to £178.0m. Full year like-for-like sales have increased by 10.4%. Both
total occupancy rate and like-for-like occupancy are in line with 2006/7, even
though the estate has increased by 10%.
The growth prospects for the business, both in the UK and overseas, are
compelling. During the year over 3,400 rooms were added to the estate, beating
our target set for the year of 3,000 rooms. These openings included our
acquisition in September of six hotels, with a total of 771 rooms, trading
under the Tulip Inn and Golden Tulip brands, together with a secured pipeline
of a further 1,300 rooms. The first pipeline site opened in February at
Manchester Airport adding 195 rooms to the estate, with a second opening in
Stoke-on-Trent in March 2008 adding 119 rooms.
Trading in London has been particularly strong and is an area of focus. Like-
for-like occupancy in 2007/8 was up 4.2% pts to 84.0%, which compares to 79.2%
for the whole estate. Our yield increased by 17.5% to £55.37. We recently
announced that a further 1,200 rooms will open in London over the next three
years. Of these, 400 rooms have been acquired from the Real Hotel Company for
£18.5m, with a further 800 coming from new build hotels and extensions to
existing properties. In addition we anticipate being able to announce a further
2,000 rooms over the next 12 months. Taken together this increase of 3,200
rooms will grow Premier Inn's London estate by over 60% to 8,500 rooms.
Our international expansion continues. During the year we announced the signing
of a joint venture with Emaar-MGF to open 12,000 rooms (80 hotels) in India
over the next ten years and this month our joint venture with Emirates opened
its first hotel in Dubai. Currently, we have secured 4 sites in the Gulf and
have a further pipeline of 8. In India we have secured 4 sites with a pipeline
of 11. We continue to review opportunities in other markets.
During the year we commenced the rebranding of our hotel business to Premier
Inn. This rebranding will cost £13m, of which £7m has been spent in 2007/8, and
will increase brand awareness, differentiating Premier Inn from its competitors.
Pub Restaurants
+------------------------------------------+---------+-------------+-----------+
|Pub Restaurants | 2007/8| 2006/7| Change|
+------------------------------------------+---------+-------------+-----------+
|Revenue | £446.1m | £518.9m | (14.0)%|
+------------------------------------------+---------+-------------+-----------+
|Like-for-like sales | | | 0.8% |
+------------------------------------------+---------+-------------+-----------+
|Operating profit (pre exceptional) | £55.5m | £52.3m | 6.1% |
+------------------------------------------+---------+-------------+-----------+
|Operating profit (post exceptional) | £52.6m | £247.8m | (78.8)%|
+------------------------------------------+---------+-------------+-----------+
Operating profit of £55.5m is 6.1% up on last year. Profit per pub restaurant,
which has increased by around 40% year on year, is a better measure of progress
as the 2006/7 results included profits from the 235 sites sold in July 2006.
This was achieved through a combination of good cost control and operational
efficiency, in particular a reduction in discounts. Pub Restaurant like-for-
like sales are up 0.8% representing the second successive year of like-for-like
sales growth. Total revenue from the retained estate is up 2.2%.
The Pub Restaurant strategy is to focus on clearly defined market segments
depending on their location and surrounding demographics. As a consequence the
business is concentrating on Beefeater, a new brand called Table Table and the
core Brewers Fayre estate in which we continue to drive operational
improvement. Table Table is formed from 102 remodelled Brewers Fayres and is a
modern pub experience for adults aged 30 to 45. We are researching other brand
and customer propositions.
This year has seen the transformation of our Beefeater restaurants. The pub
restaurants have been refurbished, the guest proposition has been radically
improved and the results reported for the year demonstrate that the business
continues to trade well. We have achieved strong year on year like-for-like
covers growth of 7.7% and in February 2008 we opened our first new Beefeater
for six years.
The co-located pub restaurant and Premier Inn model continues to deliver
superior returns for both businesses. During the year four new pub restaurants
co-located with a Premier Inn were opened.
As a result of the operational improvements and capital investment the business
now has solid foundations. Our pub restaurants are better managed and have more
clearly defined customer propositions. The focus on the joint site model means
that they are well placed to operate in the tougher cost environment and what is
widely anticipated to be a more challenging consumer environment.
Costa
+-------------------------------------------+---------+-------------+----------+
|Costa | 2007/8| 2006/7| Change|
+-------------------------------------------+---------+-------------+----------+
|Revenue | £216.3m | £175.1m | 23.5% |
+-------------------------------------------+---------+-------------+----------+
|Like-for-like sales | | | 6.5% |
+-------------------------------------------+---------+-------------+----------+
|Operating profit (pre exceptional) | £20.8m | £17.8m | 16.9% |
+-------------------------------------------+---------+-------------+----------+
|Operating profit (post exceptional) | £19.2m | £16.1m | 19.3% |
+-------------------------------------------+---------+-------------+----------+
Costa is the fastest growing and largest coffee shop chain in the UK and has
delivered another set of outstanding results. Total revenue is up 23.5% to
£216.3m and at the year-end there were 992 Costa outlets worldwide, an increase
of over 40% year on year. Costa now accounts for over £20m of the Group's
trading profits and will be an important driver of the Group's profit growth in
the future.
Like-for-like sales are up 6.5%. This is in line with last year's performance
and is the seventh consecutive year of like-for-like sales growth. The
resilience of the brand is demonstrated by the fact that the like-for-like sales
performance was achieved across all regions during a year of significant
expansion. Full year profits are up 16.9% to £20.8m, despite international
opening costs diluting the profitability of our overseas business.
We continue to grow our UK market presence through a variety of different
channels. By the year-end there were 695 stores in the UK and we believe that
there is scope to grow the brand significantly. This will be achieved by
focusing on areas where Costa is currently under-represented, such as central
London and a number of major towns and cities up and down the country, retail
trading parks and the roadside market. There is also significant opportunity to
build on concession relationships such as Tesco, where we already have 50 in-
store coffee shops.
Growth in our international estate continues to accelerate. There are now over
300 international Costa stores in 21 different countries. In December 2007 we
commenced our Russian joint venture with Rosinter Restaurant Holdings. Our
first store opened last month in Moscow's Pushkin Square, Costa's 1,000th store
worldwide. With this first store open we can now focus on the rollout of a
further 200 stores in Russia.
FINANCE REVIEW
Changes in the Group
During 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 for £925m
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 for £70m 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 pub restaurants
On 28 July 2006 Whitbread announced the sale of 235 trading pub restaurants,
together with four sites not yet trading. The trading results for the 235 sites
up to the date of sale are included within the 2006/7 comparatives for the Pub
Restaurants business.
Organisational review
Following the substantial reshaping of Whitbread, of which the above disposals
form part, an organisational review was undertaken to ensure that the most
efficient operating structure for the management and growth of our businesses is
in place. As a result of this Whitbread announced that the divisional
management of the Hotels and Pub Restaurants businesses would be combined. At
the heart of this restructuring is a desire to eliminate duplication and better
align the management teams to the businesses.
We have also taken the decision to outsource our logistics operation and have
signed a contract with Kuehne & Nagel who will operate our supply chain using
our existing network of depots before the operation is migrated to a new
facility at the end of September.
It is expected that the continued simplification of our businesses will take
some 18 months to implement and will result in savings of £25m per annum from
2009/10 at an exceptional total cost of around £35m.
As a result of this continued simplification, going forward Whitbread will only
be reporting two segments: Hotels & Restaurants and Costa. However, we will
continue to provide sales information on the pub restaurant estate.
Revenue
Group revenue from Continuing operations increased by 3.7% year on year to
£1,216.7m. Excluding the impact of the disposed pub restaurants in 2006/7,
sales from Continuing Whitbread grew by 11.3%.
Revenue by business segment
+-----------------------------------------+-----------+--------------+---------+
|£m | 2007/8| 2006/7| Change|
+-----------------------------------------+-----------+--------------+---------+
|Premier Inn | 527.8 | 458.5 | 15.1% |
+-----------------------------------------+-----------+--------------+---------+
|Pub Restaurants (retained) | 446.1 | 436.4 | 2.2% |
+-----------------------------------------+-----------+--------------+---------+
|Costa | 216.3 | 175.1 | 23.5% |
+-----------------------------------------+-----------+--------------+---------+
|Less: inter-segment | (2.4) | (2.8) | |
+-----------------------------------------+-----------+--------------+---------+
|Revenue from Continuing Whitbread | 1,187.8 | 1,067.2 | 11.3% |
+-----------------------------------------+-----------+--------------+---------+
|Pub Restaurants (disposed) | - | 82.5 (1) |
+-----------------------------------------+-----------+--------------+---------+
|Other | 28.9 | 23.8 | 21.4% |
+-----------------------------------------+-----------+--------------+---------+
|Revenue from continuing operations | 1,216.7 | 1,173.5 | 3.7% |
+-----------------------------------------+-----------+--------------+---------+
1 Part year impact in 2006/7
Like-for-like sales grew by 5.7% with the remainder of the turnover growth
coming from a net increase in outlets, predominantly in Premier Inn and Costa.
Results
Total profit for the year is £544.8m, up 93.5% on last year. Profit before tax
and exceptionals is £210.3m, up 26.3% on last year.
Exceptional items
Net exceptional profit before tax amounted to £365.1m. This amount is analysed
in more detail in note 6 to the financial statements. The significant items
included within this category are noted below. Net exceptional profit after tax
amounted to £382.1m.
1. Business disposals
The two principal businesses disposed of during the year generated pre-tax
disposal profits of £413.8m; £400.8m on David Lloyd Leisure and £13.0m for TGI
Friday's.
2. Organisational review
The organisational review will deliver £25m of annual cost savings from 2009/10.
The total exceptional cost of implementation is expected to be around £35m of
which £21.2m has been charged this year with the balance to be charged in
2008/9.
3. Refinancing costs
At the start of the financial year we announced our intention to increase the
leverage of the Group through issuing bonds secured on our hotel and pub
restaurant estates. Our work on this issue was undertaken in the first half of
the year and had been largely completed at the time the capital markets closed
to this type of issue. As it is unclear when the markets will reopen we have
expensed the costs. They relate mainly to advisory and legal fees, incurred in
the process and amount to £9.4m.
4. Premier Inn rebranding
On 19 June 2007 we announced that we would be rebranding our hotels business
from Premier Travel Inn to Premier Inn. The revenue cost of this rebranding is
£7.0m in this financial year, with a further £6.0m to be charged in 2008/9.
5. Lease reversions
As a result of The Laurel Pub Company Limited going into administration on 27
March 2008, a provision of £20.9m has been charged to income to recognise the
expected cost of lease reversions relating to properties that are expected to
revert to the Group.
6. Pensions credit
During the first half of the 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.
7. Interest on debenture redemption
At 1 March 2007 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 and the
associated interest rate swaps closed out. This resulted in an exceptional
interest charge of £14.2m.
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 exceptional
credit of £21.5m. 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
integral features qualifying for capital allowances at 10% on a reducing
balance basis and the phased abolition of allowances for hotel buildings.
Interest
Pre-exceptional net interest costs have fallen year on year by 48.7% to £19.6m.
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, pension finance income of £7.0m this year compared to a cost of
£0.5m in 2006/7.
Taxation
The UK tax expense of £67.2m represents an effective tax rate of 32.0% on the
continuing businesses before exceptional items, which compares with 33.5% last
year. The charge includes deferred tax.
Earnings per share
Diluted pre-exceptional earnings per for total operations increased by 30.5% to
85.87p. Details can be found in note 12 to the accounts.
Dividend
A final dividend of 26.90p, an increase of 21.4% over last year, will, subject
to approval at the AGM, be paid on 11 July 2008 to all shareholders on the
register at the close of business on 9 May 2008.
Capital expenditure
Total Group cash capital expenditure on property, plant and equipment during the
year was £283.4m. This included £269.0m on Continuing operations, split between
acquisition expenditure, which includes the acquisition and development of
properties, (£154.5m) and maintenance expenditure (£114.5m).
Included within our acquisition spend is the purchase of six hotels (771 rooms)
previously trading under the Tulip Inn and Golden Tulip brands, together with
nine further pipeline sites (1,300 rooms). This transaction was completed on 26
September 2007 for a total consideration of £44m. All six sites were converted
to the Premier Inn brand by the end of the year. Also, in February 2008, we
completed the purchase of Belgrave Hotel Limited, a single 75-bed hotel for
total consideration of £7.5m. This is currently being converted to the Premier
Inn brand, and at the end of the refurbishment will be a new 85-bed hotel with
a Beefeater restaurant.
Financing
Net debt at the full year was £425.8m, compared to £898.6m at 1 March 2007. The
significant non-trading items resulting in this decrease were net proceeds of
£984.3m from business disposals, partially offset by a £338m return of capital
to shareholders, business acquisitions of £52.2m and a £50.0m payment into the
pension scheme, as agreed with Whitbread Pension Trustees Limited in April
2003.
As at 28 February 2008 the Group had committed revolving credit facilities of
£980m of which £280m expired in March 2008. A new £455m five-year revolving
credit facility has since been agreed which when combined with the £700m
facility, put in place in 2005, gives the Group facilities of £1.16bn until
December 2010. These facilities then reduce to £930m, with a further £75m
expiring in December 2011, £400m expiring in December 2012 and the balance in
March 2013.
The Board has also continued to review the level of leverage in the business. In
the current uncertain financial markets it believes that the appropriate level
of leverage for the company is one which is consistent with an investment grade
corporate capital structure (i.e. no greater than 3.5X, on a pension and lease
adjusted basis). Over the coming year we will work towards this level through a
combination of accelerated investment, bolt on acquisitions and when
appropriate a continuation of the share buyback programme.
Pensions
As at 28 February 2008 there was a gross pension deficit of £33.0m, which
compares to £196.0m as at 1 March 2007. This reduction is due, in the main, 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 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.
Post balance sheet event
On 8th April 2008 the Group announced the acquisition of three hotels from
Real Hotel Company PLC for £18.5m.
The Group's £280m revolving credit facility expired on 8 March 2008 and was
fully utilised at 28 February 2008. Upon expiry of this facility, the Group
entered into a new five-year multi-currency revolving credit facility of £455m,
which will expire in March 2013. The variable interest rates charged on this
facility are linked to LIBOR.
As a result of The Laurel Pub Company Limited going into administration on 27
March 2008, a provision of £20.9m has been charged to income to recognise the
expected cost of lease reversions relating to properties that are expected to
revert to the Group.
Consolidated income statement
Year ended 28 February 2008
------------------------ --------------------
Year to 28 February 2008 Restated
Year to 1 March 2007
------------------------ --------------------
-------------------------- ----- ------- ------ ------- -------- ------ -------
Notes Before Exceptional Before Exceptional
exceptional items exceptional items
items (note 5) Total items (note 5) Total
£m £m £m £m £m £m
-------------------------- ----- -------- ------ ------- -------- ------ -------
Continuing operations
Revenue 4 1,216.7 - 1,216.7 1,173.5 - 1,173.5
Cost of sales (185.5) - (185.5) (188.5) - (188.5)
-------- ------ ------- -------- ------ -------
Gross profit 1,031.2 - 1,031.2 985.0 - 985.0
Distribution costs (693.9) (46.8) (740.7) (681.9) (4.3) (686.2)
Administrative expenses (107.5) (8.0) (115.5) (99.0) (20.8) (119.8)
------- ------ ------- -------- ------ -------
Operating profit/(loss) 4 229.8 (54.8) 175.0 204.1 (25.1) 179.0
Share of loss from joint
ventures (0.5) - (0.5) - - -
Share of profit from
associate 0.6 - 0.6 0.6 - 0.6
------- ------ ------- -------- ------ -------
Operating profit/(loss) of
the Group, joint ventures and
associate 229.9 (54.8) 175.1 204.7 (25.1) 179.6
Net profit on disposal of
pub restaurants - - - - 196.6 196.6
------- ------ ------- -------- ------ -------
Profit/(loss) before financing
and tax 229.9 (54.8) 175.1 204.7 171.5 376.2
Finance costs (30.7) (20.9) (51.6) (40.1) - (40.1)
Finance revenue 11.1 - 11.1 1.9 - 1.9
------- ------ ------- -------- ------ -------
Profit/(loss) before tax 210.3 (75.7) 134.6 166.5 171.5 338.0
Tax (expense)/income 6 (67.2) 15.9 (51.3) (55.8) (77.0) (132.8)
------- ------ ------- -------- ------ -------
Net profit/(loss)
from continuing activities 143.1 (59.8) 83.3 110.7 94.5 205.2
Discontinued operations
Net profit on disposal of
businesses - 440.8 440.8 - 48.5 48.5
Profit/(loss) for the year
from discontinued
operations 19.6 1.1 20.7 40.4 (12.6) 27.8
------- ------ ------- -------- ------ -------
8 19.6 441.9 461.5 40.4 35.9 76.3
------- ------ ------- -------- ------ -------
Profit for the year 162.7 382.1 544.8 151.1 130.4 281.5
Attributable to:
Parent shareholders 163.5 382.1 545.6 151.4 130.4 281.8
Equity minority interest (0.8) - (0.8) (0.3) - (0.3)
------- ------ ------- -------- ------ -------
162.7 382.1 544.8 151.1 130.4 281.5
Earnings per share (note 9) Year to 28 February 2008 Restated Year to 1 March 2007
Continuing Total Continuing Total
operations operations operations operations
p p p p
------------------------------------------- ----------- -------- --------- --------
Earnings per share
Basic for profit for the year 44.42 288.22 90.01 123.43
Diluted for profit for the year 44.17 286.55 89.31 122.47
Earnings per share before exceptional items
Basic for profit for the year 76.01 86.37 48.62 66.32
Diluted for profit for the year 75.58 85.87 48.24 65.80
Consolidated statement of recognised income and expense
Year ended 28 February 2008
------------------------------------------------------------ -------- -------
Year to Year to
28 February 1 March
2008 2007
£m £m
------------------------------------------------------------ -------- -------
Cash flow and net investment hedges:
Loss taken to equity (4.5) (1.1)
Exchange differences on translation of foreign operations (0.8) (0.9)
Actuarial gains on defined benefit pension schemes 95.5 38.0
Tax on items taken directly to or from equity (29.3) (11.9)
-------- -------
Net gain recognised directly in equity 60.9 24.1
Profit for the year 544.8 281.5
-------- -------
Total recognised income and expense for the year 605.7 305.6
Attributable to:
Parent shareholders 606.5 305.9
Equity minority interest (0.8) (0.3)
-------- -------
605.7 305.6
Consolidated balance sheet
At 28 February 2008
--------------------------------------- -------- -------- --------
Notes 28 February 1 March
2008 2007
£m £m
--------------------------------------- -------- -------- --------
Assets
Non-current assets
Intangible assets 125.2 78.5
Property, plant and equipment 2,127.4 2,487.6
Investment in joint ventures 3.5 1.1
Investment in associate 0.8 0.9
Other financial assets 0.9 1.1
Derivative financial instruments - 56.8
-------- --------
2,257.8 2,626.0
Current assets
Inventories 13.2 12.8
Trade and other receivables 62.9 67.5
Income tax prepayment - 7.1
Derivative financial instruments - 8.3
Cash and cash equivalents 107.1 70.5
-------- --------
183.2 166.2
Assets classified as held for sale - 59.1
-------- --------
Total Assets 2,441.0 2,851.3
Liabilities
Current liabilities
Financial liabilities 377.0 86.3
Provisions 30.9 6.2
Derivative financial instruments 1.8 -
Income tax liabilities 6.8 -
Trade and other payables 241.3 287.1
-------- --------
657.8 379.6
Non-current liabilities
Financial liabilities 155.9 882.8
Preference shares - 3.2
Provisions 27.4 15.2
Derivative financial instruments 7.6 5.9
Deferred income tax liabilities 6 293.0 309.5
Pension liability 33.0 196.0
Trade and other payables 4.4 -
-------- --------
521.3 1,412.6
-------- --------
Total Liabilities 1,179.1 1,792.2
-------- --------
Net Assets 1,261.9 1,059.1
Equity
Share capital 148.8 151.9
Share premium 43.8 38.1
Capital redemption reserve 8.5 4.7
Retained earnings 3,205.9 2,738.9
Currency translation reserve - 0.8
Other reserves (2,145.1) (1,875.6)
-------- --------
Equity attributable to equity holders of the
parent 1,261.9 1,058.8
Equity minority interest - 0.3
-------- --------
Total Equity 1,261.9 1,059.1
Alan Parker
Chief Executive
Christopher Rogers
Finance Director
27 April 2008
Consolidated cash flow statement
Year ended 28 February 2008
--------------------------------------- -------- -------- --------
Notes Year to Year to
28 February 1 March
2008 2007
£m £m
--------------------------------------- -------- -------- --------
Profit for the year 544.8 281.5
Adjustments for:
Taxation charged on total operations 6 58.0 153.3
Net finance cost 40.5 37.4
Total loss from joint ventures 0.7 -
Total income from associate (0.6) (0.6)
Loss/(gain) on disposal of property, plant and
equipment and property reversions 27.2 (195.7)
Net profit on disposal of businesses and
investments (440.8) (48.5)
Depreciation and amortisation 89.0 102.8
Impairment of property and goodwill - 12.6
Pension credit (10.0) -
Reorganisation provision 19.4 -
Other non-cash items (6.7) (8.2)
-------- --------
Cash generated from operations before working
capital changes 321.5 334.6
(Increase)/decrease in inventories (0.9) 4.1
(Increase)/decrease in trade and other (18.6) 74.7
receivables
Decrease in trade and other payables (20.1) (4.0)
Payments against provisions (6.1) (8.7)
Payment to pension fund (50.0) (102.3)
-------- --------
Cash generated from operations 225.8 298.4
Interest paid (34.5) (39.3)
Taxes paid (25.8) (12.8)
-------- --------
Net cash flows from operating activities 165.5 246.3
Cash flows from investing activities
Disposal of investments, subsidiaries and joint
ventures - discontinued* 8 984.3 361.5
Purchase of property, plant and equipment (283.4) (241.2)
Purchase of intangible assets (1.3) (2.1)
(Costs)/proceeds from disposal of property, plant (0.3) 487.6
and equipment
Acquisition of subsidiaries, net of cash 7 (52.2) (2.7)
acquired
Capital contributions to joint ventures (1.6) -
Dividends from associate 0.7 -
Interest received 4.2 3.2
-------- --------
Net cash flows from investing activities 650.4 606.3
Cash flows from financing activities
Proceeds from issue of share capital 6.4 7.6
Costs of purchasing own shares (354.6) (275.8)
Repayment of preference shares (3.3) -
Increase in short-term borrowings (42.7) 26.1
Proceeds from long-term borrowings - 49.1
Repayment of long-term borrowings (376.8) (123.4)
Dividends paid (60.7) (529.0)
-------- --------
Net cash flows used in financing activities (831.7) (845.4)
Net (decrease)/increase in cash and cash
equivalents (15.8) 7.2
Net foreign exchange difference - (1.2)
Opening cash and cash equivalents 36.1 30.1
-------- --------
Closing cash and cash equivalents 20.3 36.1
Reconciliation to cash and cash equivalents in
the balance sheet
Cash and cash equivalents shown above 20.3 36.1
Add back overdrafts 86.8 34.4
-------- --------
Cash and cash equivalents shown within current
assets on the balance sheet 107.1 70.5
* including disposed of net overdraft
Notes to the consolidated financial statements
At 28 February 2008
1 Basis of preparation
The consolidated financial statements of Whitbread PLC for the year ended 28
February 2008 were authorised for issue by the Board of Directors on 27 April
2008.
The financial information included in this preliminary statement of results does
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985 (the 'Act'). The financial information for the year ended 28
February 2008 has been extracted from the statutory accounts on which an
unqualified audit opinion has been issued. Statutory accounts for the year ended
28 February 2008 will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.
The statutory accounts for the year ended 1 March 2007 have been delivered to
the Registrar of Companies, and the Auditors of the Company made a report
thereon under section 235 of the Act. That report was unqualified and did not
contain a statement under sections 237(2) or (3) of the Act.
The consolidated financial statements of Whitbread PLC and all its subsidiaries
have been prepared in accordance with International Financial Reporting
Statements (IFRSs) as applied in accordance with the provisions of the Companies
Act 1985.
2 Basis of consolidation
The consolidated financial statements incorporate the accounts of Whitbread PLC
and all its subsidiaries, together with the Group's share of the net assets and
results of joint ventures and associates incorporated within these financial
statements using the equity method of accounting. These are adjusted, where
appropriate, to conform to Group accounting policies. The financial statements
of subsidiaries are prepared for the same reporting year as the parent Company.
Apart from the acquisition of Whitbread Group PLC by Whitbread PLC in 2000/1,
which was accounted for using merger accounting, acquisitions by the Group are
accounted for under the acquisition method and any goodwill arising is
capitalised as an intangible asset. The results of subsidiaries acquired or
disposed of during the year are included in the consolidated accounts from or up
to the date that control passes respectively. All intra-Group transactions,
balances, income and expenses are eliminated on consolidation. Unrealised losses
are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
The income statement for the comparative period has been restated to reflect the
disposal of the interest in David Lloyd Leisure Limited, which has been
classified as a discontinued operation.
3 Accounting policies
The accounting policies used in the year ended 28 February 2008 are consistent
with those applied in the financial statements for the year ended 1 March 2007
except that the Group has adopted IFRS 7 'Financial Instruments: Disclosures'
and the related amendment to IAS 1 'Presentation of Financial Statements:
Capital Disclosures'. The adoption of IFRS 7 and the amendments to IAS 1 have
resulted in increased disclosures relating to the Group's financial instruments
and management of capital but have not resulted in any changes to the reported
results.
4 Segment information
The Group's primary reporting format is business segments and its secondary
format is geographical segments. The Group operates mainly within the UK and as
such the secondary format of geographical segments is not presented.
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.
Pub Restaurants Operation of full service and self service pub restaurants.
Costa Operation of coffee shops.
Prior year comparatives have been restated to include David Lloyd Leisure
Limited as a discontinued operation. Discontinued operations also include TGI
Friday's (see note 8).
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 unallocated assets and liabilities are cash and debt balances held and
controlled by the central treasury function.
The following tables present revenue and profit information and certain asset
and liability information regarding business segments for the years ended 28
February 2008 and 1 March 2007.
----------------------- ------- ------- ------- ------- ------- -------- -------
Year ended 28 February Total
2008 Premier Pub Unallocated continuing Discontinued Total
Inn Restaurants Costa and elimination operations operations operations
£m £m £m £m £m £m £m
----------------------- ------- ------- ------- ------- ------- -------- -------
Revenue
Revenue from external
customers 527.8 446.1 213.9 28.9 1,216.7 103.4 1,320.1
Inter-segment revenue - - 2.4 (2.4) - - -
------- ------- ------- ------- ------- -------- -------
Total revenue 527.8 446.1 216.3 26.5 1,216.7 103.4 1,320.1
EBIT (1) 178.0 55.5 20.8 (24.4) 229.9 27.4 257.3
Add back loss made by
minority interest - - 0.8 - 0.8 - 0.8
------- ------- ------- ------- ------- -------- -------
EBIT attributable
to shareholders 178.0 55.5 21.6 (24.4) 230.7 27.4 258.1
----------------------- ------- ------- ------- ------- ------- -------- -------
EBIT attributable
to shareholders 178.0 55.5 21.6 (24.4) 230.7 27.4 258.1
Segment exceptional
items:
Net loss on disposal of
property, plant and
equipment, and property
reversions - (2.9) (1.6) (22.7) (27.2) - (27.2)
Premier Inn rebranding (7.0) - - - (7.0) - (7.0)
Aborted bond issue - - - (9.4) (9.4) - (9.4)
Outsourcing of logistics - - - (12.6) (12.6) - (12.6)
Net surplus arising on
change of pension scheme
rules - - - 10.0 10.0 - 10.0
Reorganisation - - - (8.6) (8.6) - (8.6)
Share of loss from joint
ventures 0.5 - - - 0.5 0.2 0.7
Share of profit from
associate (0.6) - - - (0.6) - (0.6)
Profit attributable
to minority interest - - (0.8) - (0.8) - (0.8)
------- ------- ------- ------- ------- -------- -------
Segment result 170.9 52.6 19.2 (67.7) 175.0 27.6 202.6
----------------------- ------- ------- ------- ------- ------- -------- -------
Operating profit 175.0 27.6 202.6
Share of loss from joint
ventures (0.5) (0.2) (0.7)
Share of profit from
associate 0.6 - 0.6
Non-operating
exceptionals:
Net profit on disposal of
businesses and investments - 440.8 440.8
Exceptional interest
charge (20.9) - (20.9)
------- -------- -------
Profit before financing and
tax 154.2 468.2 622.4
Net finance costs (19.6) - (19.6)
------- -------- -------
Profit before
tax 134.6 468.2 602.8
Tax expense (51.3) (6.7) (58.0)
------- -------- -------
Profit for the year 83.3 461.5 544.8
Assets and liabilities
Segment assets 1,443.7 679.6 97.2 - 2,220.5 - 2,220.5
Investment in
joint ventures 2.8 - 0.7 - 3.5 - 3.5
Investment in associate 0.8 - - - 0.8 - 0.8
Unallocated assets - - - 216.2 216.2 - 216.2
------- ------- ------- ------- ------- -------- -------
Total assets 1,447.3 679.6 97.9 216.2 2,441.0 - 2,441.0
------- ------- ------- ------- ------- -------- -------
Segment liabilities (67.9) (48.4) (25.3) - (141.6) - (141.6)
Unallocated
liabilities - - - (1,037.5) (1,037.5) - (1,037.5)
------- ------- ------- ------- ------- -------- -------
Total
liabilities (67.9) (48.4) (25.3) (1,037.5) (1,179.1) - (1,179.1)
------- ------- ------- ------- ------- -------- -------
Net assets 1,379.4 631.2 72.6 (821.3) 1,261.9 - 1,261.9
Other segment
information
Capital expenditure:
Property, plant and
equipment - cash basis 147.3 79.0 33.2 9.5 269.0 14.4 283.4
Property, plant and
equipment - accruals
basis 148.6 79.6 33.4 7.3 268.9 15.2 284.1
Intangible assets 50.3 - 0.6 - 50.9 0.5 51.4
Depreciation 41.7 23.6 13.5 1.9 80.7 5.6 86.3
Amortisation 0.2 - - 2.3 2.5 0.2 2.7
----------------------- ------- ------- ------- ------- ------- -------- -------
Year ended 1 March Total
2007 (restated) Premier Pub Unallocated continuing Discontinued Total
Inn Restaurants Costa and elimination operations operations operations
£m £m £m £m £m £m £m
----------------------- ------- ------- ------- ------- ------- -------- -------
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 (1) 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, and
property
reversions (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 interest - - (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
Non-operating
exceptionals:
Net profit on disposal of
pub restaurants 196.6 - 196.6
Net profit on disposal of
businesses and investments - 48.5 48.5
------- -------- -------
Profit before financing and
tax 376.2 96.0 472.2
Net finance costs (38.2) 0.8 (37.4)
------- -------- -------
Profit before tax 338.0 96.8 434.8
Tax expense (132.8) (20.5) (153.3)
------- -------- -------
Profit for the year 205.2 76.3 281.5
Assets and liabilities
Segment assets 1,267.9 622.1 75.4 - 1,965.4 633.4 2,598.8
Investment in
joint ventures 1.1 - - - 1.1 - 1.1
Investment in associates 0.9 - - - 0.9 - 0.9
Unallocated assets - - - 250.5 250.5 - 250.5
------- ------- ------- ------- ------- -------- -------
Total assets 1,269.9 622.1 75.4 250.5 2,217.9 633.4 2,851.3
------- ------- ------- ------- ------- -------- -------
Segment
liabilities (50.9) (61.5) (18.5) - (130.9) (56.5) (187.4)
Unallocated
liabilities - - - (1,604.8) (1,604.8) - (1,604.8)
------- ------- ------- ------- ------- -------- -------
Total
liabilities (50.9) (61.5) (18.5) (1,604.8) (1,735.7) (56.5) (1,792.2)
------- ------- ------- ------- ------- -------- -------
Net assets 1,219.0 560.6 56.9 (1,354.3) 482.2 576.9 1,059.1
Other segment
information
Capital expenditure:
Property, plant and
equipment - cash basis 119.6 58.0 23.0 4.7 205.3 35.9 241.2
Property, plant and
equipment -
accruals basis 124.1 61.8 24.9 4.1 214.9 37.2 252.1
Intangible assets - - 0.3 - 0.3 1.8 2.1
Depreciation 35.0 27.0 10.6 2.3 74.9 25.4 100.3
Amortisation - - - 2.5 2.5 - 2.5
1) EBIT shows the segment result before exceptional items. It is profit before
financing and tax and exceptional items.
5 Exceptional items
--------------------------------------------- -------- --------
Restated
2007/8 2006/7
£m £m
--------------------------------------------- -------- --------
Continuing activities
Reorganisation costs (1) (8.6) (21.4)
Impairment of property, plant and equipment - (4.4)
Net (loss)/profit on disposal of property, plant and
equipment, and property reversions (27.2) 0.7
Premier Inn rebranding (2) (7.0) -
Aborted bond issue (3) (9.4) -
Outsourcing of logistics (4) (12.6) -
Net surplus arising on change of pension scheme rules (5) 10.0 -
-------- --------
Operating exceptional items (54.8) (25.1)
Net profit on disposal of pub restaurants - 196.6
Interest on exceptional tax (6) (6.7) -
Interest cost of early redemption of debentures (7) (14.2) -
-------- --------
(75.7) 171.5
Tax on continuing exceptional items 15.6 (77.0)
Exceptional tax items (6) (21.2) -
Deferred tax relating to UK tax rate change 21.5 -
-------- --------
Total continuing exceptional items (59.8) 94.5
Discontinued activities
Impairment of property, plant and equipment - (8.2)
Net loss on disposal of property, plant and equipment, and
property reversions - (1.6)
Warranty and onerous contract provisions - 8.2
Provision for loan write-down - (5.3)
-------- --------
Operating exceptional items - (6.9)
Net profit on disposal of businesses (note 8) 440.8 48.5
-------- --------
440.8 41.6
Tax on discontinued exceptional items 1.1 (5.7)
-------- --------
Total discontinued exceptional items 441.9 35.9
-------- --------
Total exceptional items 382.1 130.4
Distribution costs include rebranding costs of £7.0m, logistics outsourcing
costs of £12.6m and loss on disposals of property, plant and equipment, and
property reversions of £27.2m. Administrative expenses include reorganisation
costs of £8.6m, aborted bond costs of £9.4m and a pension credit of £10.0m.
1. During the year, the Group sold its interests in David Lloyd Leisure
Limited and TGI Friday's. A review of overheads was subsequently carried out and
it was announced that the Pub Restaurants and Hotels divisions would merge and
that the shared service teams would be disbanded. In 2006/7, the disposal of 235
pub restaurants led to a restructuring to reflect the resultant shape of the
Group.
2. Premier Inn rebranding costs relate to asset write-off and brand
relaunch costs. The costs will continue into 2008/9.
3. Uncertainties in the debt market have put the planned bond issue
on hold and the Group has written off the bank and advisory fees associated
with this refinancing.
4. A restructuring provision in respect of the outsourcing of the Group's
logistics operation has been created. This consists of project, redundancy and
property related costs.
5. This is the impact of new arrangements for commutation of pension
rights on retirement into cash following a change in government limits.
6. Exceptional tax relates to significant adjustments to prior year
deferred and current tax liabilities. The associated interest arising on late
payment of an item claimed in a previous year, which had been disputed, is
included in exceptional interest charges.
7. This is a combination of a premium paid to debenture holders arising
on early redemption and the income from closing out the associated interest
rate swaps.
6 Taxation
--------------------------------------------- -------- --------
Consolidated income statement for continuing operations Restated
2007/8 2006/7
£m £m
--------------------------------------------- -------- --------
Major components of the tax charge for continuing operations
for the years ended 28 February 2008 and 1 March 2007 are:
Current tax:
Current tax expense 14.7 16.8
Adjustments in respect of current tax of previous periods 15.7 (0.3)
-------- --------
30.4 16.5
Deferred tax:
Origination and reversal of temporary differences 36.4 116.3
Adjustments in respect of previous periods 6.0 -
Change in UK tax rate (21.5) -
-------- --------
20.9 116.3
-------- --------
Tax reported in the consolidated income statement for
continuing operations 51.3 132.8
--------------------------------------------- -------- --------
Consolidated statement of recognised income and expense Restated
2007/8 2006/7
£m £m
--------------------------------------------- -------- --------
Pensions 29.3 11.9
-------- --------
Tax reported in equity 29.3 11.9
A reconciliation of the tax charge applicable to profit from operating
activities before tax at the statutory tax rate to the actual tax charge at the
Group's effective tax rate for the years ended 28 February 2008 and 1 March 2007
respectively is as follows:
--------------------------------------------- -------- --------
Restated
2007/8 2006/7
£m £
--------------------------------------------- -------- --------
Accounting profit before tax from continuing operations 134.6 338.0
Accounting profit before tax from discontinued operations 468.2 96.8
-------- --------
Profit reported in the consolidated income statement 602.8 434.8
Tax at current UK tax rate of 30% (2007: 30%) 180.8 130.4
Effect of different tax rates in overseas companies 0.2 -
Effect of joint ventures and associate 0.5 (0.2)
(Income not taxable)/expenditure not allowable (122.2) 11.9
Adjustments to tax expense in respect of previous years 0.2 7.0
Adjustments to deferred tax expense in respect of previous
years (17.1) 4.2
Exceptional tax charge in respect of previous years 15.6 -
-------- --------
58.0 153.3
Tax expense reported in the consolidated income statement
for continuing operations 51.3 132.8
Tax expense attributable to discontinued operations 6.7 20.5
-------- --------
58.0 153.3
Deferred tax
Deferred tax at 28 February 2008 relates to the following:
--------------- --------------
Consolidated Consolidated
balance sheet income statement
-------------------------------- --------------- --------------
Restated
2008 2007 2007/8 2006/7
£m £m £m £m
-------------------------------- -------- --------- -------- --------
Deferred tax liabilities
Accelerated capital allowances 93.6 102.3 13.2 2.2
Rolled over gains and property 211.4 272.6 (11.2) 76.0
revaluations -------- ---------
Gross deferred tax liabilities 305.0 374.9
Deferred tax assets
Pensions (9.2) (58.8) 20.3 30.9
Tax losses - (2.8) - (1.2)
Other (2.8) (3.8) (1.4) 8.4
-------- ---------
Gross deferred tax assets (12.0) (65.4)
-------- --------
Deferred tax expense 20.9 116.3
-------- ---------
Net deferred tax liability 293.0 309.5
Total deferred tax liabilities released as a result of disposals during the year
was £65.0m (2007: £4.3m).
The Group has not provided for any deferred tax that would be payable were it to
remit the earnings of overseas subsidiaries of £1.8m (2007: £3.1m).
Tax relief on total interest capitalised amounts to £0.5m (2007: £0.5m).
The Finance Act 2007 reduced the rate of Corporation Tax to 28% with effect from
1 April 2008. The effect of the reduced rate is a credit of £21.5m.
Further UK tax changes, subject to 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 integral features qualifying for
capital allowances at 10% on a reducing balance basis and the phased abolition
of allowances for hotel buildings.
7 Business combinations
On 26 September 2007, the Group acquired six hotels, previously trading under
the Tulip Inn and Golden Tulip brands, for £41.7m. These hotels, which have now
been rebranded as Premier Inn, were 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 certain existing debt, was paid
in cash and loan notes on completion. In addition to the six trading hotels, the
Group acquired secure arrangements on a further nine pipeline sites that will
lead to the signing of operating leases on completion of the hotel premises.
From the date of acquisition, the hotels have contributed a loss of £2.7m to the
net profit of the Group. If the acquisition had taken place at the beginning of
the year, the profit for the Group would have been reduced by £2.6m and the
revenue from continuing operations would have been increased by £19.2m.
Through its purchase of the former Tulip hotels, the Group has acquired the
economic benefits of 771 additional guest bedrooms in the year with a further
1,300 from pipeline sites.
The fair value of the identifiable assets and liabilities of the acquired
company as at the date of acquisition, and the corresponding carrying amounts
immediately before the acquisition were:
--------------------------------------------- -------- --------
Provisional
fair value to
Book value Group
£m £m
--------------------------------------------- -------- --------
Intangible assets 3.4 -
Property, plant and equipment 1.3 1.3
Inventories 0.1 0.1
Trade and other receivables 4.7 3.6
Overdrafts and loans (5.6) (5.6)
Trade and other payables (4.7) (9.6)
Deferred tax (0.5) (0.5)
-------- --------
Net liabilities (1.3) (10.7)
Goodwill arising on acquisition 49.6
--------
Total consideration 38.9
Cash flow on acquisition:
Overdrafts and loans acquired (5.6)
Cash paid (38.9)
--------
Net cash outflow (44.5)
The consideration includes £2.0m of costs associated with the acquisition, paid
in cash.
On 14 February 2008, the Group acquired the Belgrave Hotel Limited under a share
purchase agreement for the sum of £7.5m. This hotel is now closed and will be
rebranded as a Premier Inn. The consideration, which included the discharge of
certain existing debt, was paid in cash on completion.
The fair value of the identifiable assets and liabilities of the acquired
company as at the date of acquisition, and the corresponding carrying amounts
immediately before the acquisition were:
--------------------------------------------- -------- --------
Provisional
fair value to
Book value Group
£m £m
--------------------------------------------- -------- --------
Intangible assets 0.2 -
Property, plant and equipment 2.2 7.4
Cash 0.2 0.2
Overdrafts and loans (0.8) (0.8)
Trade and other payables (0.4) (0.4)
-------- --------
Net assets 1.4 6.4
Goodwill arising on acquisition 0.5
--------
Total consideration 6.9
Cash flow on acquisition:
Overdrafts and loans acquired (0.8)
Cash paid (6.9)
--------
Net cash outflow (7.7)
8 Discontinued operations
On 2 March 2007, the Group completed the sale of its TGI Friday's business to a
joint venture between Carlson Restaurants Worldwide and ABN Amro for an
aggregate price of £70.4m. The transaction resulted in a profit on disposal of
£13.0m before tax.
On 2 August 2007, the Group sold its interest in David Lloyd Leisure Limited to
Versailles Bidco (a company owned by London & Regional Holdings Limited and Bank
of Scotland Corporate) for £925.0m, generating a profit on disposal of £400.8m
before tax.
Other disposals include the disposal of former Marriott properties and a related
deferred tax liability.
The investments described above have been reported within discontinued
operations for the years presented.
The effect of the disposals during the year is as follows:
------------------------------------- -------- ------- ------- -------
David
TGI Lloyd
Friday's Leisure Other Total
£m £m £m £m
------------------------------------- -------- ------- ------- -------
Sale proceeds 70.4 925.0 3.5 998.9
Working capital adjustments (0.6) 4.7 - 4.1
-------- ------- ------- -------
Total proceeds 69.8 929.7 3.5 1,003.0
Total net assets sold (54.3) (512.9) 22.5 (544.7)
Costs of disposal (2.5) (16.0) 1.0 (17.5)
-------- ------- ------- -------
Net profit on disposal of businesses,
before tax 13.0 400.8 27.0 440.8
Sale proceeds are made up as follows:
Cash 69.8 677.1 3.5 750.4
Repayment of inter-company debt - 252.6 - 252.6
-------- ------- ------- -------
Total consideration 69.8 929.7 3.5 1,003.0
On the face of the cash flow, disposals of subsidiaries and investments reported
as discontinued operations are the net of cash proceeds of £1,003.0m and the
cash costs of disposal of £18.7m.
Total net assets sold comprises the following assets and liabilities:
---------------------------------------------------- --------
Total
£m
---------------------------------------------------- --------
Intangible assets 2.0
Property, plant and equipment 569.6
Inventories 0.6
Trade and other receivables 14.7
Cash 5.1
Assets classified as held for sale 54.3
--------
Total assets sold 646.3
Trade and other payables (35.1)
Loan capital (1.5)
Deferred tax liability (63.4)
Provisions (1.6)
--------
Total liabilities sold (101.6)
--------
Total net assets sold 544.7
Cash flows relating to discontinued operations are as follows:
---------------------------------------------- -------- --------
Restated
Year to Year to
28 February 1 March
2008 2007
£m £m
---------------------------------------------- -------- --------
Net cash (outflows)/inflows from operating activities (0.1) 67.7
Net cash outflows from investing activities (29.2) (43.4)
-------- --------
Net (decrease)/increase in cash and cash equivalents (29.3) 24.3
Profit for the year from discontinued operations is made up as follows:
Year to 28 February 2008 Restated
------------------------
Before Exceptional Year to
exceptional items 1 March
items (note 5) 2007
£m £m £m £m
----------------------------- ------------------------ ------- ---------
----------------------------- ---------- --------- --------- ---------
Revenue 103.4 - 103.4 350.8
Cost of sales (4.5) - (4.5) (47.4)
---------- --------- --------- ---------
Gross profit 98.9 - 98.9 303.4
Distribution costs (63.1) - (63.1) (213.7)
Administrative expenses (8.2) - (8.2) (42.2)
---------- --------- --------- ---------
Operating profit 27.6 - 27.6 47.5
Share of loss from joint ventures (0.2) - (0.2) -
---------- --------- --------- ---------
Operating profit of the Group
including 27.4 - 27.4 47.5
joint venture result
Exceptional items (note 5):
Net profit on disposal of - 440.8 440.8 48.5
businesses ---------- --------- --------- ---------
Profit before financing and tax 27.4 440.8 468.2 96.0
Finance costs (0.1) - (0.1) -
Finance income 0.1 - 0.1 0.8
---------- --------- --------- ---------
Profit before tax 27.4 440.8 468.2 96.8
Income tax expense:
Related to pre-tax profit (7.8) - (7.8) (14.8)
Related to exceptional pre-tax - - - 1.3
profit
Related to disposals - 1.1 1.1 (7.0)
---------- --------- --------- ---------
Profit for the year from
discontinued 19.6 441.9 461.5 76.3
operations
Assets classified as held for sale
The major classes of assets classified as held for sale and measured at the
lower of carrying amount and fair value less cost to sell are as follows:
---------------------------------------------- -------- --------
2008 2007
£m £m
---------------------------------------------- -------- --------
Assets
Property, plant and equipment - 56.8
Inventories - 0.6
Trade and other receivables - 1.7
-------- --------
Total assets - 59.1
9 Earnings per share
Year to 28 February 2008 Restated Year to 1 March 2007
------------------- -----------------
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
p p p p p p
------------------------- -------- -------- ------ ------- -------- ------
Basic for profit for the
year 44.42 243.80 288.22 90.01 33.42 123.43
Attributable
to exceptional items - gross 39.99 (232.86) (192.87) (75.12) (18.21) (93.33)
Attributable to exceptional
items - taxation (8.40) (0.58) (8.98) 33.73 2.49 36.22
Basic for profit before
exceptional items for the
year 76.01 10.36 86.37 48.62 17.70 66.32
Diluted for profit for the
year 44.17 242.38 286.55 89.31 33.16 122.47
Diluted for profit before
exceptional items for the
year 75.58 10.29 85.87 48.24 17.56 65.80
The basic earnings per share figures are calculated by dividing the net profit
for the year attributable to ordinary shareholders, therefore before minority
interests, by the weighted average number of ordinary shares in issue during the
year after deducting treasury shares and shares held by an independently managed
employee share ownership trust (ESOT).
The diluted earnings per share figures allow for the dilutive effect of the
conversion into ordinary shares of the weighted average number of options
outstanding during the period. Where the share price at the year end is lower
than the option price the options become anti-dilutive and are excluded from the
calculation. The number of such options was 320,079 (2007: nil).
The numbers of shares used for the earnings per share calculations are as
follows:
---------------------------------------------- -------- --------
2007/8 2006/7
million million
---------------------------------------------- -------- --------
Basic weighted average number of ordinary shares 189.3 228.3
Effect of dilution - share options 1.1 1.8
-------- --------
Diluted weighted average number of ordinary shares 190.4 230.1
The total number of shares in issue at the year end, used in the calculation of
the basic weighted average number of ordinary shares, was 193.8m less 18.1m
treasury shares held by Whitbread PLC and 0.8m held by the ESOT.
The profits used for the earnings per share calculations are as follows:
Year to 28 February 2008 Restated Year to 1 March 2007
------------------- -------------------
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations operations
£m £m £m £m £m £m
------------------------- -------- -------- ------- ------- -------- ------
Profit for the year
attributable to parent
shareholders 84.1 461.5 545.6 205.5 76.3 281.8
Exceptional items - gross 75.7 (440.8) (365.1) (171.5) (41.6) (213.1)
Exceptional items - taxation (15.9) (1.1) (17.0) 77.0 5.7 82.7
Profit for the year before
exceptional items attributable
to parent shareholders 143.9 19.6 163.5 111.0 40.4 151.4
10 Dividends paid and proposed
2007/8 2006/7
------------ ------------
pence per share £m pence per share £m
------------------------------------- --------------- --- --------------- ---
Declared and paid in the year:
Equity dividends on ordinary shares:
Final dividend relating to
the prior year 22.15 43.5 19.95 51.3
Interim dividend for the current year 9.10 17.2 8.10 17.8
------- -------
60.7 69.1
Dividends on other shares:
B share dividend - - 155.00 264.4
C share dividend - - 159.00 195.5
------- -------
- 459.9
------- -------
Total dividends paid 60.7 529.0
Proposed for approval at Annual
General Meeting:
Equity dividends on ordinary shares:
------- -------
Final dividend for the
current year 26.90 47.0 22.15 43.8
11 Movements in cash and net debt
------------------------- -------- ------- ------- -------- -------- --------
Loan Amortisation Fair value
1 March disposed of premiums adjustments to 28 February
2007 of Cash flow and discounts loan capital 2008
£m £m £m £m £m £m
------------------------- -------- ------- ------- -------- -------- --------
Cash at bank and in hand 70.5 107.1
Overdrafts and short-term
borrowings (86.3) (96.0)
-------- --------
(15.8) - 26.9 - - 11.1
Less short-term bank
borrowings 51.9 - (42.7) - - 9.2
-------- ------- ------- -------- -------- --------
Cash and cash equivalents 36.1 - (15.8) - - 20.3
Short-term bank borrowings (51.9) - 42.7 - - (9.2)
-------- --------
Loan capital under one year - (281.0)
Loan capital over one year (882.8) (155.9)
-------- --------
Total loan capital (882.8) 1.5 376.8 4.8 62.8 (436.9)
-------- ------- ------- -------- -------- --------
Net debt (898.6) 1.5 403.7 4.8 62.8 (425.8)
12 Events after the balance sheet date
On 8 April 2008, the Group announced the acquisition of three hotels from the
Real Hotel Company PLC for £18.5m.
The Group's £280m revolving credit facility expired on 8 March 2008 and was
fully utilised at 28 February 2008. Upon expiry of this facility, the Group
entered into a new five year multi-currency revolving credit facility of £455m,
which will expire in March 2013. The variable interest rates charged on this
facility are linked to LIBOR.
As a result of The Laurel Pub Company Limited going into administration on 27
March 2008, a provision of £20.9m has been charged to income to recognise the
expected cost of lease reversions relating to properties which will revert to
the Group.
A final dividend of 26.90p per share (2007: 22.15p) amounting to a dividend of
£47.0m (2007: £43.8m) was declared by the directors at their meeting on 27 April
2008. These financial statements do not reflect this dividend payable.
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