Whitbread Interim Results

RNS Number : 0347R

Whitbread PLC

22 October 2013

 



WHITBREAD PLC RESULTS FOR THE SIX MONTHS ENDED 29^TH AUGUST 2013

WHITBREAD DELIVERS DOUBLE DIGIT SALES, PROFIT AND DIVIDEND GROWTH

Financial Highlights

·     Total revenue up 12.4% to £1,144.7 million (2012/13: £1,018.1 million)

·     Group like for like sales¹ up 2.8%

·     Underlying profit² before tax up 12.6% to £216.1 million (2012/13³: £191.9 million)

·     Underlying diluted EPS up 12.2% to 90.92p (2012/13³: 81.04p)

·     Interim dividend up 11.8% to 21.80p (2012/13: 19.50p)

·     Whitbread Hotels and Restaurants underlying profit² up 7.9% to £195.7 million (2012/13: £181.3 million)

·     Costa underlying profit² up 20.5% to £43.5 million (2012/13: £36.1 million)

·     Premier Inn total sales up 12.2% and like for like sales¹ up 3.3%

·     Costa total sales up 20.9%, worldwide system sales up 19.5% and like for like sales¹ up 5.5%

·     Group return on capital⁴ increased to 14.4% (2012/13³: 13.7%)

·     Strong cash flow from operations⁵ up 7.9% to £307.7 million (2012/13: £285.3 million)

·     Net debt £430.1 million (£471.1 million at 28^th February 2013);

Statutory Highlights

·     Profit after tax and exceptional items for the half year up 4.5% to £175.9 million (2012/13³: £168.3 million)

·     Total basic EPS 99.33p up 4.2% (2012/13³: 95.32p)

On track for our 2016 and 2018 milestones

·      Premier Inn⁶ opened 1,368 net UK rooms taking the total to 53,039. With a secured pipeline of over 10,500 rooms the 2016 milestone of 65,000 rooms is in sight

·      Costa added 153 net new coffee shops taking the total to 2,680 worldwide

·      1,200 new UK jobs created by Whitbread brands, with a further 10,000 expected over the next three years

Anthony Habgood, Chairman, said:

"This is another good set of results with our leading brands going from strength to strength. We continue to have high levels of customer satisfaction and brand preference together with excellent employee engagement. Our financial strength enables us to invest consistently in the business and gain market share while maintaining prudent debt levels.  We have increased the interim dividend by 11.8%."

Andy Harrison, Chief Executive, said:

"Whitbread has delivered another good performance with double digit growth.  The combination of organic network expansion and good like for like sales growth, drove a 12.6% increase in underlying pre-tax profits.  Since the onset of the recession in 2008/9, Whitbread has grown its sales and underlying pre-tax profits by 11.1% and 12.0% per annum respectively, demonstrating the strength of the business and our leading market positions.

Our two growth engines, Premier Inn and Costa, performed well. Premier Inn, the UK's leading hotel chain, continued to win market share, opening 12 new hotels. This contributed to a total sales increase of 12.2%, with especially strong growth in London where sales grew by 18.4%. Like for like sales grew by 3.3% with an increase in occupancy to 80.3%. We also opened three new joint site restaurants and our Restaurants business performed in line with a challenging market⁷, with total sales up 2.9%. Costa, the UK's favourite coffee shop, continued its excellent performance, opening 153 net new stores worldwide and growing total system sales by 19.5%. UK system sales grew by 19.6%, with strong consumer demand driving a 5.5% growth in UK like for like sales. We celebrated the opening in Bangkok of our 1,000th Costa international store. 

This good first half performance puts us on track to deliver this year's business plan and we remain on the right trajectory for our 2016 and 2018 growth milestones. Our combination of strong organic growth, good returns on capital and strong cash flow should continue to create substantial shareholder value."

For further information contact:
Whitbread
Nicholas Cadbury, Group Finance Director	+ 44 (0) 20 7806 5491
Anna Glover, Director of Communications Joanne Russell, Director of Investor Relations	+ 44 (0) 7768 917651 + 44 (0) 7785 451266
Tulchan David Allchurch	+ 44 (0) 20 7353 4200

A presentation for analysts will be held at Nomura, 1 Angel Lane, Upper Thames Street, London, EC4R 3AB. The presentation is at 08.45 am and a live webcast of the presentation will be available on the investors' section of the website at: http://www.whitbread.co.uk/investors/reports-and-presentations/results.html

We will host a Costa Investor Day on the 12^th December 2013

¹  Like for like sales stated pre IFRIC 13 adjustment for Premier Inn - UK and Ireland, Costa and Restaurants - UK

²  Underlying profit

Underlying profit excluding amortisation of acquired intangibles, exceptional items and the impact of the pension finance cost as accounted for under IAS 19 (revised).

³  Restated for the impact of IAS 19 (revised 2011), see note 1 of the interim consolidated financial statements

⁴  Return on capital

Return on capital is the return on net assets which is calculated by dividing the underlying profit before interest and tax for the 12 months to 29^th August 2013 by net assets at 29^th August 2013 adding back debt, taxation liabilities and the pension deficit.

⁵  Cashflow from operations

Cash generated from operations in the financial statements excluding the pension payments

⁶  Premier Inn UK includes one hotel (which is 155 rooms) in Ireland

⁷  Coffer Peach tracker outside of the M25

⁸  STR Global - UK Midscale and Economy sector

Further information

For photographs and videos, please visit the corporate media library:

www.whitbreadimages.co.uk

CHIEF EXECUTIVE'S REVIEW

In the first six months of the year, Whitbread delivered a good performance with underlying profit before tax increasing by 12.6% to £216.1 million (2012/13: £191.9 million) and underlying diluted EPS increasing by 12.2% to 90.92p. Strong organic expansion, combined with good like for like sales growth of 2.8%, drove Group total sales up 12.4% to £1,144.7 million.

The Group's cash generation remains strong with cash flow from operations⁵ up 7.9% year on year to £307.7 million. This enabled us to fund capital expenditure of £121.7 million, as we focus on growing and maintaining the quality of our estate. Group return on capital increased by 0.7% pts to 14.4% and we maintained our strong balance sheet, ending the half year with net debt of £430.1 million (£471.1 million as at 28^th February 2013).

We have increased the interim dividend by 11.8% to 21.80p (2012/13: 19.50p). This will be paid on 10^th January 2014 to all shareholders on the register at close of business on 8th November 2013. A scrip dividend alternative will again be offered.

Whitbread's success is underpinned by the strength of our leading brands Premier Inn and Costa. Through our highly engaged teams, combined with continual investment in the consistency and quality of our product and service, we are continuing to improve the guest experience. This is demonstrated through the results of our guest satisfaction surveys, which continue to strengthen across all of our brands. 

I would like to take this opportunity to thank all of our 40,000 employees for their hard work and contribution to Whitbread's success.

Whitbread Hotels and Restaurants

Hotels and Restaurants had a good first half performance with revenue increasing by 8.7% to £767.3 million. Premier Inn grew like for like sales by 3.3% and opened 1,368 net UK rooms taking the total number of rooms to 53,039. Total sales grew by 12.2% to £497.4 million. Restaurants grew total sales by 2.9% to £269.9 million with flat like for like sales and one net new opening. Underlying profit rose by 7.9% to £195.7 million and return on capital improved by 0.3% pts to 12.8%.

Premier Inn

We delivered a good performance in the first half, as Premier Inn continues to win market share, growing the total number of rooms available by 8.4% and like for like sales by 3.3%. Total revpar grew by 2.7% with occupancy up 1.3% pts to 80.3%. Total revpar for the Midscale and Economy Sector⁸ grew by 4.7% and by 2.1% for the total UK hotel market.

In London, trends in the hotel market were difficult to discern due to the anniversary of the Olympics. However, Premier Inn grew total London sales by 18.4% as we increased the number of rooms available by 16.1% year on year and grew total revpar by 1.7%. In London, the Midscale and Economy sector⁸ saw revpar decline by 0.5%. In the regions, Premier Inn grew total sales by 10.6% with total revpar up 2.1%. The regional Midscale and Economy sector⁸ grew total revpar by 6.0%, benefiting from weaker comparatives last year.

We continue to focus on driving growth and winning market share. In April 2011, we established an ambitious milestone to grow the number of Premier Inn rooms in the UK by around 50% to 65,000 by 2016. Today we have a total of 53,039 UK rooms⁶, which, combined with our committed pipeline of over 10,500 rooms, puts our 2016 milestone in sight. In April 2013, we announced a new five year milestone to reach around 75,000 rooms by 2018. This includes 3,000 rooms of our new compact city centre hotel brand, Hub by Premier Inn. We continue to make good progress in growing the pipeline for Hub and construction has started at the St Martins Lane, London site which is expected to open in the second half of next year. This year we expect to open around 4,000 new Premier Inn rooms and add a further c.4,500 new rooms in 2014/15.

Through our network of 660 UK hotels⁶, Premier Inn offers consumers the widest choice of locations, 30% more than our nearest competitor. With our growth milestones we expect this gap to widen as we grow to around 750 locations in 2016 and around 830 in 2018. 

Our performance is underpinned by our focus on delivering great customer satisfaction through the quality and consistency of our product and service, the best choice of locations and great value for money. 69% of guests in our 'Guest Recommend Survey' rate their stay 9 or 10 out of 10.  Furthermore Premier Inn also represents the best value for money in the Midscale and Economy sector as demonstrated by the YouGov Brand Index Survey.

One of the important levers for revpar growth is our dynamic pricing strategy enabling us to improve room rate whilst working towards our occupancy target of 80% on an annual basis.

Our website, Premierinn.com, also continues to grow in importance with digital now representing 85% of transactions and our Premierinn.com site accounting for 77% of bookings. In both dynamic pricing and our website, we will continue to invest in technology, specialist teams and make further improvements in our customer relationship management capability to enhance the customer experience and grow revpar.

International

During the first half, Premier Inn International made steady progress with total occupancy up 14.7% pts to 70.9% and like for like revpar up 26.4%. Our hotels in the Middle East increased profitability year on year and our hotels in India continue to grow revpar. Alongside our existing seven hotels, our committed pipeline now consists of 13 hotels and 15 signed memoranda of understanding in our target territories of the Middle East, India and South East Asia. Within this, there is a growing proportion of management agreements as part of our strategy of moving to an 'asset light' model for our international expansion in these regions.

Restaurants

The performance of our restaurants was in line with a weather impacted sector⁷ with like for like sales flat year on year with our covers down 2.4% and spend per head up 3.4%. Total sales were up 2.9% to £269.9 million. We continue to work on our menu propositions and have successfully increased our like for like breakfast sales by 10% year on year. As a consequence of these initiatives our 'Guest Recommend Survey', capturing feedback from some 234,000 customers, has shown an improving trend over the past three years.  Mitigating inflation remains a challenge and like for like site contribution margins were impacted by c. 0.8% in the first half. Across the whole year our focus on cost efficiencies, menu management and targeted promotions will play an important part in offsetting a significant proportion of these food and wage cost increases.

Costa

Costa delivered another excellent performance in the first half with underlying profits up 20.5% to £43.5 million. Total sales increased by 20.9% driven by good like for like growth and a strong store opening programme with 153 net new coffee shops. Total worldwide system sales grew by 19.5% to £569.2 million.

UK Retail

Costa is the UK's favourite coffee shop and has delivered another strong performance, with total UK retail sales up 15.8% and like for like sales in UK equity stores up 5.5% mainly as a result of  a 5.1% growth in transactions.

We continue to focus on driving organic growth and, during the first half, we opened 86 net new stores in the UK taking the total number of stores to 1,664, over 800 more than our closest competitor. Product innovation underpins our like for like growth and we achieved great success this summer with our Costa Ice range which represented 33% of sales during the hot July. For autumn, a range of seasonal beverages and a new food range will complement our existing menu offering.

Investment in our people is an important part of our culture and our high team engagement score of 82% reflects this. Furthermore, investment in our stores is a key differentiator and 70% of our UK equity estate has either been opened or refurbished in the past three years.

This investment in organic growth, innovation, our teams and our stores has enabled us to increase our share of the UK coffee market and build customer preference for the Costa brand. The coffee shop brand preference survey (conducted by YouGov) rates us number one with a widening gap compared to our competition.

Costa Enterprises

Costa Enterprises also had great success during the first half of the year with system sales up 25.1%. Costa Express delivered a strong performance as we achieved our 2016 target of 3,000 machines ahead of plan with the addition of 582 net new units during the first half, taking the total to 3,142. For the full year we plan to have installed a total of 850 new machines.  A strong performance was also delivered in the Costa wholesale and Corporate Franchise businesses.

Costa EMEI

In Costa EMEI the total system sales rose by 10.2% during the first half. Our franchise operations grew total system sales by 16.0% with a particularly strong performance in the Middle East and Russia. In Poland, our business continued to suffer from a weak consumer environment and from the VAT rise on milk based drinks which was introduced on 1^st April 2013.

We remain excited about the international opportunity for Costa and have commenced a programme of opening trial stores in France. The first store opened on 16^th October, with a further five stores planned to open between now and the year end. 

Costa Asia

Costa Asia had a good performance with system sales rising by 52.9% and the addition of 35 net new stores during this period. In China we delivered like for like system sales growth of 5.5% during the first half and opened 30 net new stores taking our total stores in China to 283. We are making good progress on the profitability of our like for like estate in China, which gives us encouragement to continue to invest in new store openings and to build critical infrastructure as we expand within the country.  Outside of China we now have 9 stores in South East Asia, with our latest international opening being our first store in Thailand.

Good Together

We have continued to make good progress with our corporate responsibility programme, which we call Good Together.

Our job creation, apprenticeship and training programmes have continued to grow with over 1200 new UK jobs in the half year, over 200 recognised qualifications achieved and over 800 people enrolled in our apprenticeship programme. We have played a leading role with Business in the Community  in setting up the Big Conversation network which encourages companies in the hospitality sector to employ and train more young people.

The Costa Foundation has raised over £0.9 million in the first half of the year with the number of school projects in coffee growing communities reaching 35. We have announced our intention to raise £7.5m over the next six years to contribute towards the costs of the new Premier Inn Clinical Building at Great Ormond Street Hospital.  In the half year, £0.8 million has been raised for this project, with £1.5m now having been counted towards the total.

We have adopted a new method of evaluating suppliers for compliance with our responsibility programme. The clarity of criteria and regularity of monitoring will have a significant effect on our ongoing assessment of their suitability. We have continued with our monitoring and assurance of our processed meat supply chain and will extend these processes to other key risk areas.

Our carbon, water and waste reduction programmes are all on track.  We have received Carbon Trust Standard (CTS) certification both for carbon and water and are preparing a case study for CTS on our waste programme.  Our carbon reporting has also been recognised as being amongst the ten best in the FTSE 100.

Outlook

This good first half performance puts us on track to deliver this year's business plan and we remain on the right trajectory for our 2016 and 2018 growth milestones.  Our combination of strong organic growth, good returns on capital and strong cash flow should continue to create substantial shareholder value."

Whitbread Hotels and Restaurants

	H1 2013/14	H1 2012/13	% Change
Premier Inn revenue £m	497.4	443.5	12.2
Restaurants revenue £m	269.9	262.4	2.9
Total revenue £m	767.3	705.9	8.7
Premier Inn like for like sales %	3.3	3.7
Premier Inn rooms UK & Ireland (no.)	53,039	49,020	8.2
Premier Inn like for like revpar growth % *	2.1	2.3
Premier Inn occupancy (total) %*	80.3	79.0
Restaurants like for like sales %	0.0	3.4
Restaurants like for like covers growth %	-2.4	6.0
Underlying profit £m	195.7	181.3	7.9
Operating profit, post exceptional £m	194.7	181.2	7.5
Return on capital %	12.8	12.5

* UK & Ireland

Costa

	H1 2013/14	H1 2012/13	% Change
System sales ** £m	569.2	476.5	19.5
Revenue £m	378.8	313.4	20.9
Like for like sales % (UK)**	5.5	6.8
UK stores (no.)	1,664	1,479	12.5
International stores (no.)	1,016	865	17.5
Underlying profit £m	43.5	36.1	20.5
Operating profit, post exceptional £m	41.9	33.2	26.2
Return on capital %	35.4	31.2

**System sales and like for like sales excludes inter-segment and are pre-IFRIC 13.

FINANCE DIRECTOR'S REVIEW

Revenue

Group revenue increased year on year by 12.4% to £1,144.7 million due to a combination of like for like growth of 2.8% and the opening of new units.

£m	H1 2013/14	H1 2012/13	Total revenue growth %	Like for Like growth %
Hotels and Restaurants	767.3	705.9	8.7	2.0
Costa	378.8	313.4	20.9	5.5
Less: inter-segment	(1.4)	(1.2)
Revenue	1,144.7	1,018.1	12.4	2.8

Hotels and Restaurants

Revenue rose by 8.7% to £767.3 million with Premier Inn up by 12.2% to £497.4 million and Restaurants up by 2.9% to £269.9 million. Premier Inn and Restaurants benefited from growth in outlets with Premier Inn UK adding 1,368 net new rooms and Restaurants adding one net new site. Our international Premier Inn business added a third hotel in India, a 109 room hotel in Pune. 

Like for like sales in our UK hotels were up 3.3% in the half, principally as a result of like for like revpar growth of 2.1% with an improvement in occupancy to 80.3% and an increase in rate of 0.7%.  These improvements continue to demonstrate the benefit of our dynamic pricing, extensive network and good quality and consistent product. Total revpar grew by 2.7%.  Restaurants revenue performed in line with the Coffer Peach industry tracker outside of the M25 with flat like for like sales year on year.

Costa

Costa's revenue increased by 20.9% to £378.8 million. Costa UK equity stores delivered like for like growth of 5.5% for the half with the first quarter benefiting from the cold weather and producing like for like sales of 8.0%. 

Unit growth played an important part in the overall increase in revenue with 153 net new Costa stores, 86 of which were in the UK taking the total in the UK to 1,664.  Outside of the UK, Costa opened a total of 67 net new stores, with 30 net new openings in China. During the first half an additional 582 net Costa Express machines were installed. Overall Costa's system sales grew by 19.5% to £569.2 million.

Results

Underlying profit before tax increased by 12.6% to £216.1 million. The underlying profit before tax measure excludes the pension finance costs, the amortisation of acquired intangibles and exceptional items.

Underlying profits in both business segments increased with Hotels and Restaurants up by 7.9% to £195.7 million and Costa up by 20.5% to £43.5 million.

In Hotels and Restaurants, operating profit margin declined by 0.2% pts as the benefits of like for like revenue growth and synergies from more sites were offset by higher rent charges due to the increasing mix of leasehold hotel openings.

Costa delivered further strong profit growth, up 20.5% year on year.  The UK continued its excellent performance with profit of £44.0m up 27.2%, with good growth in retail, Costa Express and the corporate franchise and wholesale businesses. International made a small loss of £0.5m, compared to a profit of £1.5m last year, with this year's results including start up costs for France. In China, the like for like growth of 5.5% supported the good store margins enabling us to improve the profitability in our mature stores. This was offset by the continued investment in store openings, the team and the infrastructure to build a platform for future growth.  In EMEI good progress was made in franchising although overall profits were impacted by the reduction in profitability in Costa Poland due to the increase in VAT applied to milk based drinks earlier this year and the challenging economy.

Total Group profit after tax, non underlying and exceptional items is £175.9 million for the half which is up 4.5% compared to £168.3 million last year.

Following amendments to IAS 19, certain pension administration costs are now deducted from underlying profit rather than pension finance costs. In addition, the calculation of pension finance costs on assets and liabilities is now to be based on the discount rate whereas previously the income was calculated for assets using an expected rate of return. As a consequence, last year's interim figures have been restated with an additional pension administration charge of £1.5 million to underlying profits and the non underlying pension finance costs increased by £5.2 million. The 2013/14 full year pension administration charge is expected to be c.£3.0 million. Further details are set out in the notes to the accounts.

Finance costs

The underlying finance costs for the half year are £9.6 million compared to £12.6 million last year, a reduction of 23.8%.  The reduction was as a consequence of a fall in the average net debt of 17.7% to £411.0 million and a reduction of £100 million in the proportion of fixed interest rate debt due to the expiry of swap contracts. 

The non-underlying pension finance cost was £12.3 million. As noted above, the 2012/13 charge has been restated to reflect the requirements of IAS19, with the revised charge for 2012/13 of £13.8 million.

Exceptional items

Exceptional items are set out in detail in note 3 in the financial statements. In total they amount to a credit of £23.8 million compared to a credit of £36.5 million last year.

The major exceptional item is the change in the tax rate which gives rise to a £25.1 million tax benefit. The tax rate reduction follows the enactment of The Finance Act 2013 which reduces the UK corporation tax rate from 23% to 21% from 1 April 2014 and to 20% from 1 April 2015.

Tax 

The effective tax rate for the half is 24.7% compared to 25.3% for the first half last year and 25.7% for the full year. The reduction in the effective rate is as a result of the fall in the UK corporation tax rate of 1% pt when compared to the 2012/13 full year. This contributes to an underlying tax expense of £53.4 million compared to £48.6 million last year. 

Earnings per share

Underlying basic earnings per share for the half is 91.94p up 13.2% and underlying diluted earnings per share is up 12.2% to 90.92p. Further details can be found in note 6.

Dividend

An interim dividend of 21.80p will paid on 10 January 2014 to all shareholders on the register at the close of business on 8 November 2013. This represents an increase of 11.8%. A scrip dividend alternative will again be offered.

Net Debt and Cash flow

The principal movements in net debt are as follows:

£m	H1 2013/14	H1 2012/13
Cash flow from operations5	307.7	285.3
Capital expenditure	(121.7)	(187.6)
Interest	(9.4)	(13.2)
Tax	(37.6)	(19.1)
Pensions	(61.2)	(36.0)
Dividends	(39.5)	(48.9)
Other	2.7	(2.0)
Net movement	41.0	(21.5)
Net debt brought forward	(471.1)	(504.3)
Net debt carried forward	(430.1)	(525.8)

The Group continued to generate strong cash flow from operations in the half year which increased by £22.4 million year on year, up 7.9% to £307.7 million.

Capital expenditure was £121.7 million compared to £187.6 million last year.

The total payments to the pension fund were £61.2 million, an increase of £25.2 million year on year.  This change reflects the decision made in the second half of 2011/12 to make an advanced payment of £25 million which resulted in a reduction of payments in the first half of 2012/13. The payments this year are a return to the previously announced contribution schedule, details of which are set out in our annual report.

Dividend payments amounted to £39.5 million, a decrease on last year of £9.4 million, reflecting the significant increase in the scrip dividend take up at 41.7% compared to 18.2% last year. 

As a result of the above, net debt reduced from 28 February 2013 by £41.0 million to £430.1 million increasing the significant headroom to the Group's loan facilities of £908 million. The first maturity of these facilities will be in November 2016 when the £650 million revolving credit facility is due to expire.

Capital expenditure

The Group spent £121.7 million on capital expenditure in the half compared to £187.6 million last year. 

In Costa, capital expenditure was £35.9 million, supporting the 153 net new coffee shop openings and 96 UK refurbishments.

In Hotels and Restaurants total capital expenditure amounted to £85.2 million, of which £47.8 million was expansionary and £37.4 million was maintenance.  This compares to £79.2 million and £68.0 million for the comparable period last year. The reduction in expansionary capital was a result of the £23.0 million acquisition of a freehold London site last year and this year's hotel openings being biased towards the second half. Maintenance capital is also biased towards the second half of the year, timed to take place in the fourth quarter when occupancy is lower.

Full year capital spend is expected to be around £315 million, lower than originally expected due to the phasing of freehold acquisitions in the UK and a higher proportion of asset light deals in our international hotel business. As we continue to improve the quality and consistency of our hotel rooms, Premier Inn maintenance spend for the full year will be c.£80 million compared to £75 million last year.

Pensions

As at 29 August 2013, there was an IAS 19 pension deficit of £507.4 million, which compares to £541.7 million at 28 February 2013 and £640.0 million at 30 August 2012. The main movement in the deficit from the year end is the payment of the pension contributions of £61.2 million, offset by the pension finance costs of £12.3 million and a re-measurement loss of £13.2 million. The re-measurement loss predominantly reflects a reduction of 0.05% pts in the discount rate to 4.55%.

Return on capital

The management team are focused on ensuring that the Group's operations deliver a good return on capital which is calculated by dividing the underlying profit before interest and tax for the 12 months ended on 29 August 2013 by net assets at the balance sheet date adding back debt, taxation liabilities and the pension deficit. Overall the return on capital for the Group has improved by 0.7% pts year on year to 14.4% with the returns for Costa improving 4.2% pts to 35.4% and Hotels and Restaurants by 0.3% pts to 12.8%.

Funding and financial status

The financial policy remains unchanged; for Whitbread to maintain its financial position and capital structure consistent with retaining its investment grade status. We work within a financial framework of net debt to EBITDA (pension and lease adjusted) of less than 3.5 times.

Related Parties

Related parties have been considered in note 10 and are therefore not included within this Finance Review.

Post Balance Sheet Events

An interim dividend of 21.80p per share (2012/13: 19.50p) amounting to a total of £39.2 million was declared by the Board on 21 October 2013.

Risks and uncertainties

The principal risks and uncertainties affecting the business activities of the Group are detailed on pages 36 and 37 of the Annual Report and Accounts for the year ended 28 February 2013. The risks are categorised into the following areas: health and safety, market, financial, third party and operational. Certain additional financial risks are also detailed in note 24 to the financial statements dated 28 February 2013, for example: interest rate, liquidity, credit and foreign currency. The Directors consider that these key risks and uncertainties continue to be relevant to the Group for the remainder of the financial year. 

A copy of the Annual Report and Accounts is available on the Company's website at www.whitbread.co.uk.

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

Andy Harrison	Nicholas Cadbury
Chief Executive	Finance Director

Interim consolidated income statement

	Notes	(Reviewed) 6 months to 29 August 2013 £m	(Reviewed) 6 months to   30 August 2012* £m	(Audited) Year to 28 February 2013* £m
Revenue	2	1,144.7	1,018.1	2,030.0
Operating costs		(923.0)	(816.8)	(1,647.2)
Operating profit		221.7	201.3	382.8
Share of profit/(loss) from joint ventures		0.7	(0.4)	0.5
Share of profit from associate		0.7	0.6	0.8
Operating profit of the Group, joint ventures and associate	2	223.1	201.5	384.1
Finance costs	4	(22.8)	(27.4)	(52.5)
Finance revenue	4	0.4	11.1	11.6
Profit before tax		200.7	185.2	343.2
Analysed as:
Underlying profit before tax		216.1	191.9	353.4
Amortisation of acquired intangible assets	3	(1.4)	(1.3)	(2.8)
IAS 19 income statement charge for pension finance cost	3	(12.3)	(13.8)	(27.0)
Profit before tax and exceptional items		202.4	176.8	323.6
Exceptional items	3	(1.7)	8.4	19.6
Profit before tax		200.7	185.2	343.2
Underlying tax expense		(53.4)	(48.6)	(90.8)
Exceptional tax and tax on non GAAP adjustments	3	28.6	31.7	39.7
Tax expense		(24.8)	(16.9)	(51.1)
Profit for the period		175.9	168.3	292.1
Attributable to:
Parent shareholders		177.5	169.0	294.3
Non-controlling interest		(1.6)	(0.7)	(2.2)
		175.9	168.3	292.1

*Restated for the impact of IAS 19 (revised 2011), see note 1.

Earnings per share (note 6)	6 months to 29 August 2013 pence	6 months to 30 August 2012* pence	Year to 28 February 2013* pence
Earnings per share
Basic	99.33	95.32	165.71
Diluted	98.23	95.10	164.32
Earnings per share before exceptional items
Basic	86.01	74.73	136.37
Diluted	85.06	74.56	135.23
Underlying earnings per share
Basic	91.94	81.22	149.10
Diluted	90.92	81.04	147.85

*Restated for the impact of IAS 19 (revised 2011), see note 1.

Interim consolidated statement of comprehensive income                       

	(Reviewed) 6 months to 29 August 2013 £m	(Reviewed) 6 months to 30 August 2012* £m	(Audited) Year to 28 February 2013* £m
Profit for the period	175.9	168.3	292.1
Items that will not be reclassified to profit or loss:
Re-measurement (loss)/gain on defined benefit pension schemes	(13.2)	(62.0)	41.4
Current tax on pensions	13.8	8.7	9.0
Deferred tax on pensions	(10.8)	6.3	(19.0)
Deferred tax: change in rate of corporation tax on pensions	(10.6)	(9.6)	(8.5)
	(20.8)	(56.6)	22.9
Items that may be reclassified subsequently to profit or loss:
Net (loss)/gain on cash flow hedges	(0.3)	(3.2)	8.3
Deferred tax on cash flow hedges	0.1	0.8	(2.0)
Deferred tax: change in rate of corporation tax on cash flow hedges	(0.6)	(0.5)	(0.5)
	(0.8)	(2.9)	5.8
Exchange differences on translation of foreign operations	(4.5)	(1.9)	1.0
Other comprehensive (loss)/income for the period, net of tax	(26.1)	(61.4)	29.7
Total comprehensive income for the period, net of tax	149.8	106.9	321.8
Attributable to:
Parent shareholders	151.4	107.6	324.0
Non-controlling interest	(1.6)	(0.7)	(2.2)
	149.8	106.9	321.8

*Restated for the impact of IAS 19 (revised 2011), see note 1.

Interim consolidated statement of changes in equity

6 months to 29 August 2013 (Reviewed)

	Share capital £m	Share premium £m	Capital redemption reserve £m	Retained earnings £m	Currency translation £m	Other reserves £m	Total £m	Non-controlling interest £m	Total equity £m
At 28 February 2013	148.3	55.1	12.3	3,408.8	4.7	(2,094.7)	1,534.5	10.8	1,545.3
Profit for the period	-	-	-	177.5	-	-	177.5	(1.6)	175.9
Other comprehensive loss	-	-	-	(21.3)	(4.5)	(0.3)	(26.1)	-	(26.1)
Total comprehensive income	-	-	-	156.2	(4.5)	(0.3)	151.4	(1.6)	149.8
Ordinary shares issued	-	0.1	-	-	-	-	0.1	-	0.1
Loss on ESOT shares issued	-	-	-	(7.1)	-	7.1	-	-	-
Accrued share-based payments	-	-	-	5.5	-	-	5.5	-	5.5
Tax on share-based payments	-	-	-	(0.8)	-	-	(0.8)	-	(0.8)
Tax rate change on historical revaluation	-	-	-	1.8	-	-	1.8	-	1.8
Equity dividends	-	-	-	(67.7)	-	-	(67.7)	-	(67.7)
Scrip dividends	0.8	(0.8)	-	28.2	-	-	28.2	-	28.2
At 29 August 2013	149.1	54.4	12.3	3,524.9	0.2	(2,087.9)	1,653.0	9.2	1,662.2

6 months to 30 August 2012 (Reviewed)

	Share capital £m	Share premium £m	Capital redemption reserve £m	Retained earnings £m	Currency translation £m	Other reserves £m	Total £m	Non-controlling interest £m	Total equity £m
At 1 March 2012	147.5	53.7	12.3	3,163.0	3.7	(2,103.4)	1,276.8	6.4	1,283.2
Profit for the period*	-	-	-	169.0	-	-	169.0	(0.7)	168.3
Other comprehensive loss*	-	-	-	(56.3)	(1.9)	(3.2)	(61.4)	-	(61.4)
Total comprehensive income	-	-	-	112.7	(1.9)	(3.2)	107.6	(0.7)	106.9
Ordinary shares issued	-	0.4	-	-	-	-	0.4	-	0.4
Loss on ESOT shares issued	-	-	-	(3.1)	-	3.1	-	-	-
Accrued share-based payments	-	-	-	4.3	-	-	4.3	-	4.3
Tax on share-based payments	-	-	-	(0.3)	-	-	(0.3)	-	(0.3)
Tax rate change on historical revaluation	-	-	-	1.3	-	-	1.3	-	1.3
Equity dividends	-	-	-	(59.8)	-	-	(59.8)	-	(59.8)
Scrip dividends	0.5	(0.5)	-	10.9	-	-	10.9	-	10.9
Additions	-	-	-	-	-	-	-	1.8	1.8
At 30 August 2012	148.0	53.6	12.3	3,229.0	1.8	(2,103.5)	1,341.2	7.5	1,348.7

Year to 28 February 2013 (Audited)

	Share capital £m	Share premium £m	Capital redemption reserve £m	Retained earnings £m	Currency translation £m	Other reserves £m	Total £m	Non-controlling interest £m	Total equity £m
At 1 March 2012	147.5	53.7	12.3	3,163.0	3.7	(2,103.4)	1,276.8	6.4	1,283.2
Profit for the period*	-	-	-	294.3	-	-	294.3	(2.2)	292.1
Other comprehensive income*	-	-	-	20.4	1.0	8.3	29.7	-	29.7
Total comprehensive income	-	-	-	314.7	1.0	8.3	324.0	(2.2)	321.8
Ordinary shares issued	0.2	2.0	-	-	-	-	2.2	-	2.2
Cost of ESOT shares purchased	-	-	-	-	-	(3.2)	(3.2)	-	(3.2)
Loss on ESOT shares issued	-	-	-	(3.6)	-	3.6	-	-	-
Accrued share-based payments	-	-	-	9.2	-	-	9.2	-	9.2
Tax on share-based payments	-	-	-	2.2	-	-	2.2	-	2.2
Tax rate change on historical revaluation	-	-	-	1.1	-	-	1.1	-	1.1
Equity dividends	-	-	-	(94.5)	-	-	(94.5)	-	(94.5)
Scrip dividends	0.6	(0.6)	-	16.7	-	-	16.7	-	16.7
Additions	-	-	-	-	-	-	-	6.6	6.6
At 28 February 2013	148.3	55.1	12.3	3,408.8	4.7	(2,094.7)	1,534.5	10.8	1,545.3

*Restated for the impact of IAS 19 (revised 2011), see note 1.

Interim consolidated balance sheet

		(Reviewed)	(Reviewed)	(Audited)
		29 August 2013	30 August 2012	28 February 2013
	Notes	£m	£m	£m
ASSETS
Non-current assets
Intangible assets		217.6	205.6	215.4
Property, plant and equipment		2,782.8	2,696.1	2,748.9
Investment in joint ventures		24.3	21.1	24.0
Investment in associate		2.0	1.8	1.7
Derivative financial instruments	8	-	-	7.1
Trade and other receivables		5.5	4.2	5.3
		3,032.2	2,928.8	3,002.4
Current assets
Inventories		32.0	26.7	26.5
Trade and other receivables		123.8	104.8	102.1
Cash and cash equivalents	7	49.8	49.6	40.8
Derivative financial instruments	8	-	-	1.4
		205.6	181.1	170.8
Assets held for sale		3.9	0.6	1.5
Total assets		3,241.7	3,110.5	3,174.7
LIABILITIES
Current liabilities
Financial liabilities	7	17.3	-	9.0
Provisions		10.3	10.7	10.3
Derivative financial instruments	8	3.5	4.8	4.6
Income tax liabilities		39.2	27.1	37.7
Trade and other payables		374.7	340.9	347.6
		445.0	383.5	409.2
Non-current liabilities
Financial liabilities	7	462.6	575.4	502.9
Provisions		30.0	34.9	32.6
Derivative financial instruments	8	16.0	23.6	18.7
Deferred income tax liabilities		99.4	86.7	106.7
Pension liability	9	507.4	640.0	541.7
Trade and other payables		19.1	17.7	17.6
		1,134.5	1,378.3	1,220.2
Total liabilities		1,579.5	1,761.8	1,629.4
Net assets		1,662.2	1,348.7	1,545.3
Equity
Share capital		149.1	148.0	148.3
Share premium		54.4	53.6	55.1
Capital redemption reserve		12.3	12.3	12.3
Retained earnings		3,524.9	3,229.0	3,408.8
Currency translation reserve		0.2	1.8	4.7
Other reserves		(2,087.9)	(2,103.5)	(2,094.7)
Equity attributable to equity holders of the parent		1,653.0	1,341.2	1,534.5
Non-controlling interest		9.2	7.5	10.8
Total equity		1,662.2	1,348.7	1,545.3

Interim consolidated cash flow statement

		(Reviewed)	(Reviewed)	(Audited)
		6 months to 29 August 2013	6 months to 30 August 2012*	Year to 28 February 2013*
	Notes	£m	£m	£m
Profit for the period		175.9	168.3	292.1
Adjustments for:
Taxation charged on total operations		24.8	16.9	51.1
Net finance cost	4	22.4	16.3	40.9
Total (income)/loss from joint ventures		(0.7)	0.4	(0.5)
Total income from associate		(0.7)	(0.6)	(0.8)
Loss/(profit) on disposal of property, plant and equipment	3	1.2	0.3	(18.6)
Loss on investment and disposal of business		-	1.4	3.3
Depreciation and amortisation		68.7	62.3	128.4
Impairment of property, plant and equipment	3	-	-	5.4
Share-based payments		5.5	4.3	9.2
Other non-cash items		6.1	5.8	4.1
Cash generated from operations before working capital changes		303.2	275.4	514.6
Increase in inventories		(5.5)	(3.7)	(3.3)
Increase in trade and other receivables		(21.2)	(19.9)	(17.4)
Increase in trade and other payables		34.3	36.2	38.4
Payments against provisions		(3.1)	(2.7)	(6.3)
Pension payments		(61.2)	(36.0)	(45.7)
Cash generated from operations		246.5	249.3	480.3
Interest paid		(9.7)	(13.2)	(26.6)
Corporation taxes paid		(37.6)	(19.1)	(46.7)
Net cash flows from operating activities		199.2	217.0	407.0
Cash flows from investing activities
Purchase of property, plant and equipment		(115.3)	(184.9)	(329.3)
Purchase of intangible assets		(6.4)	(2.7)	(14.3)
(Costs)/proceeds from disposal of property, plant and equipment		(0.5)	1.0	51.0
Business combinations, net of cash acquired		-	-	(0.7)
Sale of business		-	-	(0.2)
Capital contributions and loans to joint ventures		-	(3.5)	(4.8)
Dividends from associate		0.3	0.3	0.7
Interest received		0.3	0.2	0.4
Net cash flows from investing activities		(121.6)	(189.6)	(297.2)
Cash flows from financing activities
Proceeds from issue of share capital		0.1	0.4	2.2
Cost of purchasing ESOT shares		-	-	(3.2)
Capital contributions from non-controlling interests		-	1.8	5.9
Increase/(decrease) in short-term borrowings		8.3	(13.5)	(4.5)
Proceeds from long-term borrowings		-	43.0	-
Repayments of long-term borrowings		(37.0)	-	(32.0)
Dividends paid	5	(39.5)	(48.9)	(77.8)
Net cash flows used in financing activities		(68.1)	(17.2)	(109.4)
Net increase in cash and cash equivalents		9.5	10.2	0.4
Opening cash and cash equivalents		40.8	39.6	39.6
Foreign exchange differences		(0.5)	(0.2)	0.8
Closing cash and cash equivalents	7	49.8	49.6	40.8

*Restated for the impact of IAS 19 (revised 2011), see note 1.

Notes to the accounts

1. Basis of accounting and preparation

The interim condensed consolidated financial statements were authorised for issue in accordance with a resolution of the Board of Directors on 21 October 2013.

The interim condensed consolidated financial statements are prepared in accordance with UK listing rules and with IAS 34 'Interim Financial Reporting'.  The interim financial report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The financial information for the year ended 28 February 2013 is extracted from the statutory accounts of the Group for that year and does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.  These published accounts were prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted for use in the European Union, and reported on by the auditors without qualification or statement under Sections 498(2) or (3) of the Companies Act 2006 and have been delivered to the Registrar of Companies.

The interim condensed consolidated financial statements for the six months ended 29 August 2013 and the comparatives to 30 August 2012 are unaudited but have been reviewed by the auditor; a copy of their review report is included at the end of this report.

A combination of the strong cash flows generated by the business, and the significant available headroom on its credit facilities, support the directors' view that the Group has sufficient funds available for it to meet its foreseeable working capital requirements.  The directors have concluded therefore that the going concern basis of preparation remains appropriate.

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 28 February 2013 except for the adoption of new Standards and Interpretations applicable as of 1 March 2013, the following of which have had an impact on the Group's financial statements:

IAS 19 Employee Benefits (revised 2011)

IAS 19 (revised 2011) has been applied retrospectively from 2 March 2012 and comparatives have been restated for the impact of its adoption. The standard replaces interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net pension liability/asset. In addition, certain administration costs in relation to the schemes, which were previously recognised as a reduction to the expected return on assets, are now recognised as an operating expense.

The impact of IAS 19 (revised 2011) on the consolidated income statement and consolidated statement of comprehensive income for each period was as follows:

	6 months to	6 months to	Year to
	29 August 2013	30 August 2012	28 February 2013
Impact on consolidated income statement	£m	£m	£m
Operating expenses	1.4	1.5	3.1
Net financing costs	7.3	5.2	9.0
Net decrease in profit before tax	8.7	6.7	12.1
Analysed as:
Decrease in underlying profit before tax	1.4	1.5	3.1
IAS 19 income statement charge for pension finance cost	7.3	5.2	9.0
Decrease in profit before tax	8.7	6.7	12.1
Underlying tax expense	(0.3)	(0.4)	(0.7)
Exceptional tax and tax on non GAAP adjustments	(1.7)	(1.2)	(2.2)
Decrease in tax expense	(2.0)	(1.6)	(2.9)
Net decrease in profit after tax	6.7	5.1	9.2

	6 months to	6 months to	Year to
	29 August 2013	30 August 2012	28 February 2013
Impact on consolidated statement of comprehensive income	£m	£m	£m
Decrease in profit for the period	(6.7)	(5.1)	(9.2)
Re-measurement gain on defined benefit pension schemes	8.7	6.7	12.1
Deferred tax on pensions	(2.0)	(1.6)	(2.9)
Increase in other comprehensive income, net of tax	6.7	5.1	9.2
Net movement in total comprehensive income	-	-	-

In addition the above decreases to profit and increases to other comprehensive income have impacted the consolidated statement of changes in equity, the reconciliation of operating profit to cash generated from operating activities (see consolidated cash flow statement) and earnings per share (see note 6) for the six month period to 30 August 2012 and the year to 28 February 2013. There were no impacts on the consolidated statement of financial position.

IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The standard has not had an impact on the Group's measurement of position or performance, but has resulted in additional disclosures (see note 8).

Change in presentation

In the year ended 28 February 2013 the categorisation of expenses within the consolidated income statement was amended to combine the previously disclosed cost of sales, distribution costs and administration expenses into one expense line above operating profit called operating costs. The directors believe that the revised consolidated income statement presentation is more relevant to the nature of the business and is consistent with the practice of others within the industry. Prior period comparatives have been re-presented accordingly to provide a consistent comparison. Cost of sales of £167.2m, distribution costs of £541.3m and administrative expenses (adjusted for the impact of IAS 19 (revised 2011)) of £108.3m for the six month period ended 30 August 2012 have been amalgamated into operating costs.   

2. Segmental analysis

For management purposes, the Group is organised into two strategic business units (Hotels & Restaurants and Costa) based upon their different products and services:

·      Hotels & Restaurants provide services in relation to accommodation and food; and

·      Costa generates income from the operation of its branded, owned and franchised coffee outlets.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its strategic business units separately for the purpose of making decisions about allocating resources and assessing performance.  Segment performance is measured based on underlying operating profit.  Included within the unallocated and elimination columns in the tables are the costs of running the public company.  The unallocated assets and liabilities are cash and debt balances (held and controlled by the central treasury function), taxation, pensions, certain property, plant and equipment, centrally held provisions and central working capital balances.

Inter-segment revenue is from Costa to the Hotels & Restaurants segment and is eliminated on consolidation.  Transactions were entered into on an arm's length basis in a manner similar to transactions with third parties. 

The following tables present revenue and profit information and certain asset and liability information regarding business operating segments for the six months to 29 August 2013 and 30 August 2012 and for the full year ended 28 February 2013.

			Unallocated
	Hotels &		and	Total
	Restaurants	Costa	elimination	operations
6 months to 29 August 2013	£m	£m	£m	£m
Revenue
Revenue from external customers	767.3	377.4	-	1,144.7
Inter-segment revenue	-	1.4	(1.4)	-
Total revenue	767.3	378.8	(1.4)	1,144.7
Underlying operating profit	195.7	43.5	(13.5)	225.7
Amortisation of acquired intangibles	-	(1.4)	-	(1.4)
Operating profit before exceptional items	195.7	42.1	(13.5)	224.3
Exceptional items:
Net loss on disposal of property, plant and equipment	(1.0)	(0.2)	-	(1.2)
Operating profit of the Group, joint ventures and associate	194.7	41.9	(13.5)	223.1
Net finance costs				(22.4)
Profit before tax				200.7
Tax expense				(24.8)
Profit for the period				175.9
Assets and liabilities
Segment assets	2,802.1	351.8	-	3,153.9
Unallocated assets	-	-	87.8	87.8
Total assets	2,802.1	351.8	87.8	3,241.7
Segment liabilities	(236.5)	(76.5)	-	(313.0)
Unallocated liabilities	-	-	(1,266.5)	(1,266.5)
Total liabilities	(236.5)	(76.5)	(1,266.5)	(1,579.5)
Net assets	2,565.6	275.3	(1,178.7)	1,662.2

			Unallocated
	Hotels &		and	Total
	Restaurants	Costa	elimination	operations
6 months to 30 August 2012*	£m	£m	£m	£m
Revenue
Revenue from external customers	705.9	312.2	-	1,018.1
Inter-segment revenue	-	1.2	(1.2)	-
Total revenue	705.9	313.4	(1.2)	1,018.1
Underlying operating profit	181.3	36.1	(12.9)	204.5
Amortisation of acquired intangibles	-	(1.3)	-	(1.3)
Operating profit before exceptional items	181.3	34.8	(12.9)	203.2
Exceptional items:
Loss on investment	-	(1.4)	-	(1.4)
Net loss on disposal of property, plant and equipment	(0.1)	(0.2)	-	(0.3)
Operating profit of the Group, joint ventures and associate	181.2	33.2	(12.9)	201.5
Net finance costs				(16.3)
Profit before tax				185.2
Tax expense				(16.9)
Profit for the period				168.3
Assets and liabilities
Segment assets	2,707.1	318.9	-	3,026.0
Unallocated assets	-	-	84.5	84.5
Total assets	2,707.1	318.9	84.5	3,110.5
Segment liabilities	(220.3)	(69.1)	-	(289.4)
Unallocated liabilities	-	-	(1,472.4)	(1,472.4)
Total liabilities	(220.3)	(69.1)	(1,472.4)	(1,761.8)
Net assets	2,486.8	249.8	(1,387.9)	1,348.7

			Unallocated
	Hotels &		and	Total
	Restaurants	Costa	elimination	operations
Year to 28 February 2013*	£m	£m	£m	£m
Revenue
Revenue from external customers	1,360.1	669.9	-	2,030.0
Inter-segment revenue	-	2.5	(2.5)	-
Total revenue	1,360.1	672.4	(2.5)	2,030.0
Underlying operating profit	313.1	90.1	(26.2)	377.0
Amortisation of acquired intangibles	-	(2.8)	-	(2.8)
Operating profit before exceptional items	313.1	87.3	(26.2)	374.2
Exceptional items:
Net gain/(loss) on disposal of property, plant and equipment	19.5	(1.1)	0.2	18.6
Impairment	(13.6)	(1.7)	-	(15.3)
Impairment reversal	9.7	0.2	-	9.9
Loss on investment	-	(1.4)	-	(1.4)
Sale of business	-	(1.9)	-	(1.9)
Operating profit of the Group, joint ventures and associate	328.7	81.4	(26.0)	384.1
Net finance costs				(40.9)
Profit before tax				343.2
Tax expense				(51.1)
Profit for the year				292.1
Assets and liabilities
Segment assets	2,755.6	329.0	-	3,084.6
Unallocated assets	-	-	90.1	90.1
Total assets	2,755.6	329.0	90.1	3,174.7
Segment liabilities	(233.1)	(69.1)	-	(302.2)
Unallocated liabilities	-	-	(1,327.2)	(1,327.2)
Total liabilities	(233.1)	(69.1)	(1,327.2)	(1,629.4)
Net assets	2,522.5	259.9	(1,237.1)	1,545.3

*Restated for the impact of IAS 19 (revised 2011), see note 1.

3. Exceptional items and other non GAAP adjustments

	6 months to 29 August 2013 £m	6 months to 30 August 2012* £m	Year to 28 February 2013* £m
Exceptional items before tax and interest:
Operating costs
Net (loss)/gain on disposal of property, plant and equipment	(1.2)	(0.3)	18.6
Impairment of property, plant and equipment (a)	-	-	(15.3)
Impairment reversal	-	-	9.9
Loss on investments (b)	-	(1.4)	(1.4)
Sale of businesses (c)	-	-	(1.9)
	(1.2)	(1.7)	9.9
Exceptional interest:
Interest on exceptional tax (d)	-	10.6	10.8
Unwinding of discount rate on provisions	(0.5)	(0.5)	(1.1)
	(0.5)	10.1	9.7
Exceptional items before tax	(1.7)	8.4	19.6
Other non GAAP adjustments made to underlying profit before tax to arrive at reported profit before tax:
Amortisation of acquired intangibles	(1.4)	(1.3)	(2.8)
IAS 19 income statement charge for pension finance cost	(12.3)	(13.8)	(27.0)
	(13.7)	(15.1)	(29.8)
Items included in reported profit before tax, but excluded in arriving at underlying profit before tax	(15.4)	(6.7)	(10.2)

	6 months to 29 August 2013 £m	6 months to 30 August 2012* £m	Year to 28 February 2013* £m
Tax adjustments included in reported profit after tax, but excluded from underlying profit  after tax:
Tax on continuing exceptional items	0.4	(2.5)	(1.3)
Exceptional tax items - tax base cost (e)	-	-	3.5
Exceptional tax items - disputed claims (d)	-	13.5	13.5
Deferred tax relating to UK tax rate change (f)	25.1	17.1	16.8
Tax on non GAAP adjustments	3.1	3.6	7.2
	28.6	31.7	39.7

*Restated for the impact of IAS 19 (revised 2011), see note 1.

(a) There were no indicators of impairment in the current period.

(b) This is the net loss on the sale of the joint venture in Rosworth Investments to the joint venture partner.

(c) During the year ended 28 February 2013, Coffeeheaven Hungary was closed and subsequently liquidated. The costs incurred in this process have been classed as loss on disposal of business.

(d) This is the partial release of a provision, of £13.5m, for an item which had been disputed by HMRC but has now been agreed.  Interest which had been accrued for the late payment, amounting to £10.8m, has also been released.

(e) Reduction in deferred tax liability for differences between the tax deductible cost and accounts' residual value of assets.

(f) The Finance Act 2013 reduced the main rate of UK corporation tax to 21% from 1 April 2014 and to 20% from 1 April 2015. The effect of the new rate is to reduce the deferred tax provision by a net £14.9m, comprising a credit of £25.1m to the consolidated income statement, a charge of £11.2m to the consolidated statement of comprehensive income and a credit of £1.0m to reserves.

4. Finance (costs) / revenue

	6 months to	6 months to	Year to
	29 August 2013	30 August 2012*	28 February 2013*
	£m	£m	£m
Finance costs
Bank loans and overdrafts	(10.5)	(14.0)	(26.5)
Other loans	(0.1)	-	(0.6)
Interest capitalised	1.1	0.9	2.7
	(9.5)	(13.1)	(24.4)
Net pension finance cost	(12.3)	(13.8)	(27.0)
Impact of ineffective portion of cash flow and fair value hedges	(0.5)	-	-
Finance costs before exceptional items	(22.3)	(26.9)	(51.4)
Unwinding of discount rate on provisions (note 3)	(0.5)	(0.5)	(1.1)
Total finance costs	(22.8)	(27.4)	(52.5)
Finance revenue
Bank interest receivable	0.1	0.1	0.1
Other interest receivable	0.3	0.1	0.3
	0.4	0.2	0.4
Impact of ineffective portion of cash flow and fair value hedges	-	0.3	0.4
Finance revenue before exceptional items	0.4	0.5	0.8
Exceptional finance revenue (note 3)	-	10.6	10.8
Total finance revenue	0.4	11.1	11.6

*Restated for the impact of IAS 19 (revised 2011), see note 1.

5. Dividends paid

	6 months to	6 months to	Year to
	29 August 2013	30 August 2012	28 February 2013
	£m	£m	£m
Paid in the period:
Equity dividends on ordinary shares:
Final dividend for 2012/13 - 37.90 pence	67.7	-	-
Settled via scrip issue	(28.2)	-	-
Final dividend for 2011/12 - 33.75 pence	-	59.8	59.8
Settled via scrip issue	-	(10.9)	(10.9)
Interim dividend for 2012/13 - 19.50 pence	-	-	34.7
Settled via scrip issue	-	-	(5.8)
	39.5	48.9	77.8
Dividends on other shares:
B share dividend	-	-	-
C share dividend	-	-	-
	-	-	-
Total dividends paid	39.5	48.9	77.8

Shareholders were offered a scrip alternative to the 2012/13 cash final dividend of 37.90p.  Scrip elections were received on 74.4m shares, resulting in the issue of new shares with a nominal value of £0.8m.

6. Earnings per share

The basic earnings per share figures are calculated by dividing the net profit for the period attributable to ordinary shareholders, therefore before non-controlling interests, by the weighted average number of ordinary shares in issue during the period 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 average share price for the period is lower than the option price the options become anti-dilutive and are excluded from the calculation. The number of such options for all disclosed periods was nil.

The numbers of shares used for the earnings per share calculations are as follows:

	6 months to 29 August 2013 million	6 months to 30 August 2012 million	Year to 28 February 2013 million
Basic weighted average number of ordinary shares	178.7	177.3	177.6
Effect of dilution - share options	2.0	0.4	1.5
Diluted weighted average number of ordinary shares	180.7	177.7	179.1

The profits used for the earnings per share calculations are as follows:

	6 months to 29 August 2013 £m	6 months to 30 August 2012* £m	Year to 28 February 2013* £m
Profit for the period attributable to parent shareholders	177.5	169.0	294.3
Exceptional items - gross	1.7	(8.4)	(19.6)
Exceptional items - taxation	(25.5)	(28.1)	(32.5)
Profit for the period before exceptional items attributable to parent shareholders	153.7	132.5	242.2
Non GAAP adjustments - gross	13.7	15.1	29.8
Non GAAP adjustments - taxation	(3.1)	(3.6)	(7.2)
Underlying profit for the period attributable to parent shareholders	164.3	144.0	264.8

	6 months to 29 August 2013 pence	6 months to 30 August 2012* pence	Year to 28 February 2013* pence
Basic EPS on profit for the period	99.33	95.32	165.71
Exceptional items - gross	0.95	(4.74)	(11.04)
Exceptional items - taxation	(14.27)	(15.85)	(18.30)
Basic EPS on profit before exceptional items for the period	86.01	74.73	136.37
Non GAAP adjustments - gross	7.66	8.52	16.78
Non GAAP adjustments - taxation	(1.73)	(2.03)	(4.05)
Basic EPS on underlying profit for the period	91.94	81.22	149.10
Diluted EPS on profit for the period	98.23	95.10	164.32
Diluted EPS on profit before exceptional items for the period	85.06	74.56	135.23
Diluted EPS on underlying profit for the period	90.92	81.04	147.85

*Restated for the impact of IAS 19 (revised 2011), see note 1.

7. Movements in cash and net debt

	28 February 2013	Cash flow	Foreign exchange	Fair value adjustments to loan capital	Amortisation of  premiums and discounts	29 August 2013
	£m	£m	£m	£m	£m	£m
Cash at bank and in hand	39.2					49.7
Short-term deposits	1.6					0.1
Overdrafts	-					-
Cash and cash equivalents	40.8	9.5	(0.5)	-	-	49.8
Short-term bank borrowings	(9.0)	(8.3)	-	-	-	(17.3)
Loan capital under one year	-					-
Loan capital over one year	(502.9)					(462.6)
Total loan capital	(502.9)	37.0	-	4.0	(0.7)	(462.6)
Net debt	(471.1)	38.2	(0.5)	4.0	(0.7)	(430.1)

8. Financial instruments

IFRS 13 requires that the classification of financial instruments measured at fair value be determined by reference to the source of inputs used to derive the fair value. The classification uses the following three-level hierarchy:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities.

Level 2 - Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3 - Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

The fair values of financial assets and financial liabilities disclosed below are calculated by discounting all future cash flows by the appropriate market yield curves at the balance sheet date:

As at 29 August 2013	Level 1 £m	Level 2 £m	Level 3 £m	Total £m
Financial assets
Derivative financial instruments	-	-	-	-
Financial liabilities
Derivative financial instruments	-	19.5	-	19.5

As at 30 August 2012	Level 1 £m	Level 2 £m	Level 3 £m	Total £m
Financial assets
Derivative financial instruments	-	-	-	-
Financial liabilities
Derivative financial instruments	-	28.4	-	28.4

As at 28 February 2013	Level 1 £m	Level 2 £m	Level 3 £m	Total £m
Financial assets
Derivative financial instruments	-	8.5	-	8.5
Financial liabilities
Derivative financial instruments	-	23.3	-	23.3

There were no transfers between levels during any period disclosed. There are no non-recurring fair value measurements.

9. Pension liability

At 1 March 2013 the Group adopted IAS 19 (revised 2011). The impact to the financial statements of applying this standard has been disclosed in note 1. As the Group's existing policy prior to application was to recognise all actuarial gains and losses immediately, there has been no effect on the pension liability at any disclosed date. During the six month period to 29 August 2013, the pension liability has decreased from £541.7m to £507.4m.  The main movements in the deficit are as follows:

		£m
Pension liability at 28 February 2013		541.7
Re-measurement loss on defined benefit pension schemes recognised in other comprehensive income		13.2
Employer contributions		(61.2)
Net interest on pension liability		12.3
Administration costs		1.4
Pension liability at 29 August 2013		507.4

The re-measurement loss on defined benefit pension schemes is primarily due to the reduction in the discount factor from 4.60% to 4.55%. This was offset by the employer contributions paid during the period.

10. Related party disclosure

In note 32 to the Annual Report and Accounts for the year ended February 2013, the Group identified its key management personnel (including directors), the Group pension schemes, its joint ventures and its associate as related parties for the purpose of IAS 24 'Related Party Disclosure'. There have been no significant changes in those related parties identified at the year end and there have been no transactions with those related parties during the six months to 29 August 2013 that have materially effected, or are expected to materially effect, the financial position or performance of the Group during this period. Details of the relevant relationships with those related parties will be disclosed in the Annual Report and Accounts for the year ending 27 February 2014. All transactions with subsidiaries are eliminated on consolidation.

11. Capital expenditure commitments

Capital expenditure commitments for which no provision has been made are set out in the table below:

	29 August	30 August	28 February
	2013	2012	2013
	£m	£m	£m
Property, plant and equipment	72.8	80.4	50.1
Intangible assets	1.4	0.7	2.6

12. Events after the balance sheet date

An interim dividend of 21.80p per share (2012: 19.50p) amounting to a dividend of £39.2m (2012: £34.7m) was declared by the directors.  A scrip alternative will be offered.  These financial statements do not reflect this dividend payable.

13. Contingent liability

In the financial year ended 3 March 2011 the Group received a £4.6m refund of VAT charged on gaming income, together with associated interest of £0.7m. The refund was made following a ruling that the application of VAT to certain types of gaming machine income contravened the European Union's principle of fiscal neutrality. HMRC have appealed against the ruling and if their appeal is upheld the £5.3m refund and additional interest of £0.5m would be repayable.

Independent review report to Whitbread PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 29 August 2013 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Balance Sheet, the Consolidated Cash Flow statement and the related notes 1 to 13.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" 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 half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 29 August 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

London

21 October 2013

 

END

 

 

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