Interim Results- 1998 Decision Working as Intended
WHITBREAD PLC
27 October 1999
Unaudited results for the 6 months to August 28, 1999
1999 1998 % change
Adjusted turnover including share 1688 1648 +2.4
of joint ventures (£m) *
Profit before exceptional items 213.6 207.3 +3.0
and tax (£m)
Adjusted EPS (p) 34.42 32.95 +4.5
Dividend per share (p) 7.65 7.28 +5.1
Gearing (%) 32 32
Interest cover - times 9.4 8.8
* see Turnover section of Finance Review
Sir Michael Angus, Chairman, said:
'Adjusted earnings per share growth of 4.5% was a reasonable performance in
subdued markets. Management action to control costs meant that profits rose 3%
despite an additional pension charge of £5.8m following the valuation of the
pension fund as at March, 1999. Excluding the additional pension charge,
profit before exceptional items and tax grew by 5.8%.
'The decision taken in 1998 to switch capital expenditure into those brands
which had better growth prospects is now producing the intended outcome.
These results show good performances from the Marriott and Travel Inn hotel
brands, David Lloyd Leisure and Costa.
'The exceptional charge of £7.6m against operating profit relates to the costs
of the bid for Allied Domecq Retailing. A further exceptional charge against
non-operating profit of £7.1m was taken as Whitbread's share of the
fundamental restructuring costs of First Quench, the drinks retailing joint
venture.
'Whitbread withdrew its offer for the Allied Domecq businesses following the
decision of the Secretary of State to refer the acquisition to the Competition
Commission. The board took the view that a delay of at least three months
while the Commission deliberated would have severely damaged the trading
performance and prospects of the businesses we wished to acquire.
'The high profile of the Allied Domecq transaction served to obscure a great
deal of work taking place within the company to secure Whitbread's goal of
becoming the UK's leading leisure company.
'Some £194 million has been invested during the period mainly to extend
Whitbread's leadership of the budget hotel, active leisure and coffee markets.
The acquisition in September of Racquets and Healthtrack Group for £78m took
David Lloyd Leisure's membership total to 170,000, a third larger than that of
the nearest competitor.
'All Whitbread businesses took action to improve efficiency - not just in
response to short-term market conditions but also to improve their future
competitive positions. Resources released through more cost effective working
methods are being re-invested in improved customer amenities, brand marketing
and enhanced service quality.
'Earlier this month we announced a major restructuring of the pubs and
restaurant businesses which is expected to lead to cost savings of around £15
million in the 2001/2 financial year while creating the opportunity for the
more effective management of the brands. The new Restaurant Division will be
the largest business in the British eating-out market with over 1300
restaurants, while the Pubs and Bars Division will control over 2900 pubs.
There will be major scale advantages in the use of assets, procurement, shared
'back of house' services and brand marketing.
Outlook
While like-for-like sales are still negative, the trends have improved in the
course of the year. We have restructured our pub and restaurant businesses to
sharpen their competitive edge and improve returns. We continue to invest in
growth segments of the leisure market through organic expansion and well
chosen acquisitions. We are confident about our prospects as our markets
return to growth.
Dividend
'On January 11th, 2000, the interim dividend of 7.65p per share, an increase
of 5.1%, will be paid to all shareholders on the register at the close of
business on November 12th, 1999. A dividend re-investment alternative will be
offered.'
Operating Review
Beer
Turnover: £559m +1.5%
Operating profit before transfer price adjustment £35.9m +9.8%
Operating profit after transfer price adjustment £30.7m -6.1%
The Whitbread Beer Company once again grew profit ahead of sales - prior to an
adjustment in the transfer price of beer and related services to other
Whitbread businesses. The profit growth was a result of sales mix
improvements and continuing cost savings. Beer volumes were down in line with
the market. Year-on-year, market share has grown to 15.7%. The best
performing brand was Stella Artois which grew 16% by volume. The Beer Company
continued to protect margins through efficiency gains including a 29%
improvement in manufacturing productivity and a 7% improvement, in real terms,
in logistics costs.
Pub Partnerships
Turnover £73m -4.9%
Operating profit £35.6m +12%
Whitbread Pub Partnerships performed very strongly to grow operating profit by
12% despite having an average of 256 (13%) fewer pubs trading. Like-for-like
profit grew 12% and the business generated £24m of positive cash flow before
interest and tax. 71 capital developments took place and 104 leases were
assigned generating an average premium for
each lessee of £63,000. In an independent survey 82% of lessees expressed
satisfaction with their working relationships with WPP once again
demonstrating its strength as a well run leased pub business.
Inns
Turnover £427m +1.9%
Operating profit £97.2m +1.0%
Total sales grew 1.9% despite an average of 60 fewer pubs trading. Sales per
pub grew 5.5%. Like-for-like sales improved towards the end of the period but
were down 1.3% compared with minus 3.4% last year.
There was a strong geographical bias in trading with the South outperforming
the North throughout the period. Encouraging results were obtained from 32
Brewers Fayre pubs which were redesigned to make them more attractive to
families with children. Average sales rose 10% following conversion.
Restaurants
Turnover £351m +3.9%
Operating profit £28.9m -4.0%
Beefeater like-for-like sales were down by 1.0%. Pelican sales grew by 1.8%
with like-for-like sales down by 1.8%. Like-for-like sales in Pizza Hut were
down by 1.2% and by 0.6% in T.G.I. Friday's. Like-for-like sales were 2.1%
ahead in Bella Pasta and 8.3% ahead in Costa where 28 new units were opened
bringing the total to 162.
Hotels
Turnover £128m +19%
Operating profit £27.0m +11%
Both the Marriott and Travel Inn brands performed strongly. Marriott achieved
occupancy of 78% and had a yield premium to the market of 11%. Achieved room
rates grew by 5% to £74.71 and room yield was up 4%. Travel Inn achieved
occupancy across the network of 89%. 17 new Travel Inns were opened bringing
the total to 224 with a further 16 in the pipeline. Overall, the Hotel
Company grew like-for-like sales by 3.3%. Total hotel profits for Whitbread,
including those Travel Inns reported under other businesses, grew 11% to
approximately £50m in the period.
Sports, health and leisure
Turnover £46m +22%
Operating profit £ 13.2m +18%
Like-for-like sales growth of 9% from mature clubs coupled with the opening of
two David Lloyd Leisure Clubs and two Curzon gyms helped to achieve strong
turnover and profit growth. Membership exceeded 135,000 before the
acquisition of the Racquets and Healthtrack Group business in September which
added a further 35,000. Membership renewals are on course to reach around 80%
and a further six new clubs will open in the second half of the year.
Other drinks
Turnover £302m -3.0%
Operating profit £13.1m -14%
This reporting segment includes a 50% share of First Quench turnover and
profit, while last year it included 100% of Thresher. Like-for-like sales in
First Quench grew by 2.2% although total sales declined as a result of over
300 shop closures in its first year of operation. Profit from First Quench
was down in a very competitive market place but the business is on track to
achieve the syngergies envisaged at the time it was established. The balance
of the segment comprises the profit contribution from Britannia Soft Drinks.
Finance review
Accounting policies
There has been only one, minor, policy change in this period. This is
described in note 1 to the accounts.
Turnover
Turnover, including joint ventures, increased by 7.5% to £1,799 million.
Under the terms of FRS 9 ('Associates and Joint Ventures'), however, there is
some double-counting of turnover within this figure. It includes turnover of
the group and our share of the turnover of our joint ventures (First Quench
and Pizza Hut) without the elimination of turnover from Whitbread to the joint
ventures and vice versa. If this double-counting is eliminated, turnover
increased by 2.4%.
Operating profit
Operating profit before exceptional items grew by 2.1% to £238.9 million.
Profit growth was held back by an additional pension cost of £5.8 million.
This additional charge arose as a consequence of the normal three yearly
valuation of the pension fund as at March 1999. The previous valuation took
place in 1996, before the withdrawal of the dividend tax credit for pension
funds.
The group profit margin (operating profit as a percentage of turnover
including joint ventures - adjusted for comparability as described earlier)
remained at 14.2%.
The contribution to operating profit of each division is described in the
preceding operating review and detailed in the segmental analysis (note 2 to
the accounts). With effect from the beginning of the current financial year,
inter-divisional pricing for the supply of beer and related services was
rebased to reflect current market conditions. The effect of this and some
other minor changes is described in notes 1 and 2 to the accounts.
Earnings before interest, tax, depreciation and amortisation grew by 1.8% to
£295.7 million.
Exceptional items
The costs relating to the bid for Allied Domecq Retailing, amounting to £7.6
million, have been charged against operating profit as an exceptional item.
Our share of the period's fundamental restructuring costs of First Quench have
been treated as a non-operating exceptional item. The loss on the disposal of
a business, also charged as a non-operating exceptional item, represents the
final loss, after taking account of the provision made in 1998/9 and of
goodwill previously written off, on the sale of Gatehouse Nurseries.
The costs associated with the recently announced restructuring will be
accounted for as an exceptional charge against operating profit.
Interest
The net interest charge fell by £1.3 million to £25.3 million. The higher
level of net borrowings over the period was more than compensated by
reductions in interest rates. Net interest was covered 9.4 times by operating
profit before exceptional items.
The weighted average rate of interest on fixed rate debt at the period end was
7.5%. Of the total debt at the period end, 32% was at fixed rates of interest
and 68% was at floating rates.
Taxation
As explained in note 1 to the accounts, the tax charge for the interim period
is calculated by reference to the forecast effective tax rate for the full
year. The charge against profit before exceptional items for the period of
£42.9 million represents an underlying rate of 20.1%. The charge, and the
underlying tax rate, reflect the recent levels of capital expenditure.
Cash flow
Net cash inflow from operating activities was £31 million higher for the
period at £284 million. This improvement results primarily from a year over
year improvement in working capital.
Net cash outflow from capital expenditure was £189 million, compared with £156
million in the corresponding period. Investment in property and plant was
£194 million, down from £237 million last year. This reduced level of
investment reflects lower levels of expenditure within Inns and Hotels. Last
year's property and plant sales included the disposal of 40 Beefeater houses
and 233 leased pubs.
The underlying cash inflow for the period (after adjusting for the cash
outflow from the acquisition and disposal of businesses and investment in new
retail outlets of £99 million) was £65 million.
Share capital
Following the special resolution which was passed at the extraordinary general
meeting in July, the preference share capital of the company has been repaid
and the stock cancelled. As a result of the cancellation, an amount equal to
the nominal value of the stock was transferred from distributable reserves to
the capital redemption reserve fund. The premium on redemption of £0.2
million has been charged against the profit and loss reserve.
FRS 15
Work is in progress to prepare for the implementation of FRS 15 ('Tangible
Fixed Assets'). The group is required to adopt this new accounting standard
no later than for its 2000/1 financial year. Our current estimate of the full
year impact of FRS 15 is an increase in depreciation, and a consequent
reduction in operating profit, of the order of £40 to £45 million. There will
be no impact on the cash flows of the Group.
Year 2000
As stated in the 1998/9 annual report, a group-wide programme to address the
impact of the Year 2000 has been in place since 1996. At the end of September
1999, all of the group's critical, and nearly all of the non-critical, systems
had been modified or replaced, where necessary, in order to accommodate the
Year 2000 date change. Plans are in place to deal with the remaining systems
before the end of 1999.
Formal assurance has been sought from our key customers and suppliers about
their Year 2000 readiness programmes and plans for the Year 2000 changeover
period and beyond. Visits have been made to critical suppliers to determine
and address any potential risks to the supply chain.
While the board believes that the overall programme has properly addressed the
Year 2000 issue, there can be no guarantee that there will be no disruption.
Consequently, each of our businesses has been developing business continuity
plans over the past year.
Much of the cost of implementing the Year 2000 action plans and the business
continuity plans has been subsumed into the recurring activities of each
business. The estimated total cost of modifications to our computer hardware
and software remains at £8 million, most of which was spent in previous years.
Copies of the interim statement will be sent to shareholders during November
and also will be available from: The Secretary, Whitbread PLC, Chiswell
Street, London EC1Y 4SD
For further information please contact:
City:
David Reed Tel: 0171 615 1324
Chris Wilkins Tel: 0171 615 1066
Harriet Brodrick Tel: 0171 615 1297
Media:
Lesly Hughes Tel: 0171 615 1059
Jeremy Probert Tel: 0171 615 1445
Group profit and loss account
Six months to 28 August 1999
6 months to 6 months to Year to
28.8.1999 29.8.1998 27.2.1999
-------------------------------------------------
Before Excep- After Before After After
except- tional excep- excep- excep- excep-
ional items tional ional ional tional
Notes items (note 3) items items items items
£m £m £m £m £m £m
----- -------------------------------------------------
Turnover - continuing
operations
Group and share of
joint ventures 1,798.9 - 1,798.9 1,674.0 1,674.0 3,385.0
Less share of joint
ventures' turnover (359.0) - (359.0) (55.0) (55.0) (443.6)
---------------------------------------------------
Group turnover 2 1,439.9 - 1,439.9 1,619.0 1,619.0 2,941.4
===================================================
Group operating profit -
continuing operations 224.8 (7.6) 217.2 223.9 212.4 369.5
Share of operating
profit in:
Joint ventures 4.6 - 4.6 1.3 1.3 9.3
Associates 9.5 - 9.5 8.7 8.7 9.9
Operating profit of the
group, joint ventures ---------------------------------------------------
and associates 2 238.9 (7.6) 231.3 233.9 222.4 388.7
Non operating items -
continuing operations
Net profit on disposal
of fixed assets
Group excluding joint
ventures and associates - 1.3 1.3 - 16.6 14.0
Associates - (0.1) (0.1) - 0.1 -
Loss on the disposal of
businesses 8 - (1.6) (1.6) - (20.3) (17.9)
Share of joint venture's
restructuring costs - (7.1) (7.1) - - (6.9)
---------------------------------------------------
Profit before interest 238.9 (15.1) 223.8 233.9 218.8 377.9
Interest (25.3) - (25.3) (26.6) (26.6) (53.2)
---------------------------------------------------
Profit before taxation 213.6 (15.1) 198.5 207.3 192.2 324.7
Taxation 4 (42.9) 2.0 (40.9) (44.8) (43.2) (75.5)
---------------------------------------------------
Profit after taxation 170.7 (13.1) 157.6 162.5 149.0 249.2
Equity minority interests (0.1) - (0.1) (0.2) (0.2) (0.2)
Preference dividends (0.3) - (0.3) (0.2) (0.2) (0.4)
---------------------------------------------------
Profit earned for ordinary
shareholders 170.3 (13.1) 157.2 162.1 148.6 248.6
Ordinary dividends (38.0) - (38.0) (35.9) (35.9) (137.2)
---------------------------------------------------
Retained profit for the
period 132.3 (13.1) 119.2 126.2 112.7 111.4
===================================================
Dividends per share
(pence)
Interim 7.65 7.28 7.28
Final 20.50
Earnings per share
(pence) 5
Basic 31.77 30.21 50.50
Adjusted basic 34.42 32.95 58.24
Diluted 31.46 29.85 50.00
Adjusted diluted 34.08 32.57 57.66
Statement of total recognised gains and losses
6 months to 6 months to Year to
28.8.1999 29.8.1998 27.2.1999
Six months to 28 August 1999 £m £m £m
-----------------------------------------
Profit earned for ordinary
shareholders
Group excluding joint
ventures and associates 153.4 142.7 245.0
Joint ventures (2.0) 0.3 (1.7)
Associates 5.8 5.6 5.3
------------------------------------------
Group including joint
ventures and associates 157.2 148.6 248.6
Premium on cancellation of
preference stock (0.2) - -
Unrealised surplus on
revaluation of fixed assets - - 7.3
------------------------------------------
157.0 148.6 255.9
Currency translation differences
on net foreign investment 1.4 1.2 (0.8)
------------------------------------------
Total gains and losses
recognised since previous
year end 158.4 149.8 255.1
==========================================
Cash flow statement
6 months to 6 months to Year to
Notes 28.8.1999 29.8 1998 27.2.1999
------- -------------------------------------------
Six months to 28 August 1999 £m £m £m
Cash inflow from
operating activities 6 283.5 252.5 519.0
Dividends received from
joint ventures and
associates - - 2.4
Returns on investments and
servicing of finance
Interest received 6.1 7.3 13.5
Interest paid (32.8) (36.1) (79.6)
Other dividends received 0.1 0.1 0.1
Loan interest received 1.1 0.8 2.2
Preference dividends paid (0.4) (0.2) (0.4)
-------- ------- -------
Net cash outflow from returns
on investments and servicing
of finance (25.9) (28.1) (64.2)
Taxation
UK Corporation Tax paid (8.6) (5.6) (72.5)
Capital expenditure and
financial investment
Property and plant purchased (193.7) (237.3) (443.2)
Investments purchased and
loans advanced (5.6) (4.6) (10.7)
Property and plant sold 4.1 77.2 116.6
Investments sold and loans
realised 6.3 8.8 14.9
------- ------- -------
Net cash outflow from capital
expenditure and financial
investment (188.9) (155.9) (322.4)
Acquisitions and disposals
New businesses acquired 7 (0.1) (1.5) (3.2)
Businesses sold 8 11.3 (6.0) (6.6)
------- ------- -------
Net cash inflow/(outflow)
from acquisitions and
disposals 11.2 (7.5) (9.8)
Equity dividends paid (101.4) (94.5) (130.4)
-------- ------ -------
Net cash outflow before
use of liquid resources
and financing (30.1) (39.1) (77.9)
Management of liquid
resources
Net movement on short
term securities and
bank deposits 9 0.7 (11.0) 14.6
Financing
Issue of shares 7.2 1.6 8.5
Repayment of preference
stock (10.0) - -
Net movement on short
term bank borrowings 9 21.5 64.7 8.7
Loan capital issued* 9 62.1 - 64.3
Loan capital repaid 9 (10.2) (27.2) (42.2)
------- ------ ------
Net cash inflow from
financing 70.6 39.1 39.3
------ ------ ------
Increase/(decrease)
in cash 9 41.2 (11.0) (24.0)
====== ====== ======
*The net of receipts and payments on revolving credits is included in loan
capital issued.
Balance sheet
-------------
28 August 1999
----------------
Notes 28.8.1999 29.8.1998 27.2.1999
--------------------------------------------
£m £m £m
Fixed assets
Intangible assets 8.3 8.8 8.5
Tangible assets 3,775.3 3,549.4 3,669.4
Investments
Joint ventures
Share of gross assets 292.9 297.4 302.8
Share of gross liabilities (124.2) (124.7) (132.0)
-------- ------- -------
168.7 172.7 170.8
Associates 50.2 45.5 43.9
Other investments 25.4 30.8 27.3
-------- -------- --------
4,027.9 3,807.2 3,919.9
-------- -------- --------
Current assets and liabilities
Stocks 67.3 77.2 65.2
Debtors 266.0 310.6 190.5
Cash at bank and in hand 69.3 84.3 48.3
-------- ------- -------
402.6 472.1 304.0
Creditors - amounts falling due within
one year (807.1) (901.1) (764.5)
-------- -------- --------
Net current liabilities (404.5) (429.0) (460.5)
-------- -------- --------
Total assets less current liabilities 3,623.4 3,378.2 3,459.4
Creditors - amounts falling due after
more than one year
Loan capital (841.8) (745.4) (794.4)
Provisions for liabilities and charges (14.7) (8.7) (28.4)
-------- -------- --------
2,766.9 2,624.1 2,636.6
======== ======== ========
Capital and reserves
Called up share capital 124.0 133.0 133.4
Share premium account 193.0 168.9 180.8
Revaluation reserve 668.5 659.4 661.5
Other reserves - non distributable 24.6 15.6 10.9
Profit and loss account 1,754.6 1,645.1 1,647.9
-------- ------- --------
Shareholders' funds 10 2,764.7 2,622.0 2,634.5
Equity minority interests 2.2 2.1 2.1
-------- ------- --------
2,766.9 2,624.1 2,636.6
======== ======= ========
Notes to the accounts
---------------------
1. Basis of preparation of accounts
The interim accounts, which were approved by the board on 26 October 1999 and
are abridged and unaudited, have been prepared on the basis of the accounting
policies set out in the 1998/9 group accounts, with one exception. The
company has amended its policy regarding the treatment of discounts and
promotional costs. Costs previously classified within administration and other
costs and cost of sales have been reclassified and deducted from turnover.
The half year effect of this adjustment on the profit and loss account is to
reduce turnover by £12.4m (1998 - £13.7m), administration and other costs by
£8.3m (1998 - £8.8m) and cost of sales by £4.1m (1998 - £4.9m). The effect on
the segmental analysis is to reduce the turnover of Beer by £2.6m (1998 -
£2.6m), Inns by £5.4m (1998 - £5.8m) and Restaurants by £4.4m (1998 - £5.3m).
There is no effect on operating profit. Comparative amounts for 1998 and the
full year 1998/9 have been restated to reflect the revised policy.
The taxation charge is calculated by applying the forecast annual effective
tax rate to the profit for the period. The balance sheet as at 27 February
1999 and the profit and loss account and cash flow statement for the year
ended on that date are extracts from the statutory accounts which have been
delivered to the Registrar of Companies. The auditors' report on the
statutory accounts was unqualified and did not contain a statement under
section 237 of the Companies Act 1985.
2. Segmental analysis of turnover, profit and net assets
6 months to 28.8.1999 6 months to 29.8.1998
------------------------- ------------------------
Operat- Operat-
ing Net ing Net
Turnover profit assets Turnover profit assets
------- ------- ------- -------- ------- -------
£m £m £m £m £m £m
Beer 559.2 30.7 312.3 550.9 32.7 351.6
Pub Partnerships 73.1 35.6 412.4 76.9 31.9 401.4
Inns 427.2 97.2 1,338.0 419.4 96.2 1,281.2
Restaurants 350.7 28.9 709.2 337.5 30.1 674.1
Hotels 127.6 27.0 583.7 106.8 24.4 515.7
Sports, health and
fitness 46.0 13.2 310.0 37.8 11.2 221.5
Other drinks 302.3 13.1 182.3 312.1 15.2 184.5
Segmental turnover, --------------------------------------------------
operating profit and
net assets 1,886.1 245.7 3,847.9 1,841.4 241.7 3,630.0
Inter-segment turnover
(see note below) (120.5) (197.6)
Share of joint ventures'
turnover (359.0) (55.0)
Central services 33.3 (6.8) (184.0) 30.2 (7.8) (170.9)
Exceptional items
(see note 3) (7.6) (11.5)
--------------------------------------------------
1,439.9 231.3 3,663.9 1,619.0 222.4 3,459.1
==================================================
By geographical segment
United Kingdom 1,406.4 229.3 3,641.7 1,586.4 221.4 3,437.6
Rest of the world 33.5 2.0 22.2 32.6 1.0 21.5
---------------------------------------------------
1,439.9 231.3 3,663.9 1,619.0 222.4 3,459.1
===================================================
Inter-divisional pricing for the supply of beer and related services has been
rebased to reflect current conditions in the market. The impact of this in
the current period is to reduce the profit of the Beer segment by £5.2m and to
increase the profits of Pub Partnerships, Inns and Restaurants by £2.2m, £2.7m
and £0.3m respectively. Comparative figures have not been changed.
The comparative turnover for Beer and the inter-segment turnover have been
adjusted by £39.6m to take account of inter-divisional sales previously
excluded.
The exceptional costs are detailed in note 3. Those in 1999 do not relate to
the trading segments, while those in 1998 relate to Beer.
Restaurants' segmental turnover includes the group's share of joint venture
turnover amounting to £56.7m (1998 - £55.0m) and Other drinks turnover is
derived wholly from the group's share of a joint venture (1998 - nil).
Inter-segment turnover is from Beer to the other segments. Central services
turnover comprises, primarily, food distribution services provided to a joint
venture. The geographical analysis of turnover and profit is by source. The
analysis of turnover by destination is not materially different. Sales between
geographical segments are not material. The results and net assets of the
majority of Travel Inns are included in the divisions that operate them, not
in Hotels. Net assets included above are total net assets plus net debt.
In the profit and loss account, turnover of the group and share of joint
ventures includes sales from the group to joint ventures amounting to £111.4m
(1998 - £25.5m).
3. Exceptional items 6 months to 6 months to Year to
28.8.1999 29.8.1998 27.2.1999
----------------------------------------
£m £m £m
Major rationalisation costs - (11.5) (16.6)
Impairment of leasehold properties - - (13.2)
Abortive acquisition costs (7.6) - -
------ ------ ------
Charged against operating profit (7.6) (11.5) (29.8)
Non operating items
Net profit on disposal of fixed assets
Group excluding joint ventures and
associates 1.3 16.6 14.0
Associates (0.1) 0.1 -
Loss on the disposal of businesses
(note 8) (1.6) (20.3) (17.9)
Share of joint venture's fundamental
restructuring costs (7.1) - (6.9)
------ ------ ------
(15.1) (15.1) (40.6)
====== ====== ======
The abortive acquisition costs relate to the lapsed Allied Domecq Retailing
offer. The share of joint venture's fundamental restructuring costs relates to
First Quench. The rationalisation costs in 1998/9 relate to the exit from two
breweries and a regional distribution depot and customer service centre in the
six months to 29 August 1998, plus a bottling plant in the second half of
1998/9.
4. Taxation
Current taxation on profits for the year
UK Corporation Tax at 30.083%
(1998 - 31%) 39.6 41.2 75.2
Overseas tax 0.1 0.1 0.4
------ ------- -------
39.7 41.3 75.6
Adjustments to earlier periods
Corporation Tax - (0.3) (3.9)
------ ------- -------
39.7 41.0 71.7
Joint ventures (1.0) 0.5 1.8
Associates 2.2 1.7 2.0
------ ------ ------
40.9 43.2 75.5
====== ====== ======
The UK and joint venture Corporation Tax charges have been reduced by nil and
£2.0m respectively (six months to 29 August 1998 by £1.6m and nil, 1998/9 by
£1.7m and £0.8m respectively) in respect of tax relief on exceptional items.
5. Earnings per share
Basic earnings per share is calculated by dividing earnings for ordinary
shareholders of £157.2m (1998 - £148.6m) by the weighted average number of
ordinary shares in issue during the period, 494.8m (1998 - 491.9m). Adjusted
basic earnings per share is calculated as follows:
Earnings (£m) Earnings per share (p)
------------------------------ ------------------------------
6 months 6 months 6 months 6 months
to to to to
28.8. 29.8. Year to 28.8. 29.8. Year to
1999 1998 27.2.1999 1999 1998 27.2.1999
------------------------------ ------------------------------
Earnings and basic
earnings per share 157.2 148.6 248.6 31.77 30.21 50.50
Earnings and basic
earnings per share
attributable to:
Exceptional costs,
net of tax 7.6 9.9 27.3 1.54 2.01 5.55
Non operating items,
net of tax 5.5 3.6 10.8 1.11 0.73 2.19
----------------------------------------------------------
Adjusted earnings
and basic earnings
per share 170.3 162.1 286.7 34.42 32.95 58.24
==========================================================
The adjusted earnings per share is presented so as to show more clearly the
underlying performance of the group.
Diluted earnings per share is the basic and adjusted basic earnings per share
after allowing for the dilutive effect of the conversion into ordinary shares
of the weighted average number of options outstanding during the period. The
number of shares used for the diluted calculation is 499.6m (1998 - 497.8m).
6. Net cash inflow from operating activities
6 months to 6 months to Year to
28.8.1999 29.8.1998 27.2.1999
£m £m £m
-----------------------------------
Group operating profit 217.2 212.4 369.5
Investment income (0.2) (0.2) (0.4)
Depreciation/amortisation 56.8 56.7 110.6
Impairment of leasehold properties - - 13.2
Other non cash items 4.7 3.8 15.1
Rationalisation costs associated with
acquired businesses - (0.3) (0.6)
(Increase)/decrease in stocks (2.6) (5.7) 32.2
Increase in debtors (78.0) (72.1) (25.6)
Increase in creditors 85.6 57.9 5.0
--------- -------- -------
Cash inflow from operating activities 283.5 252.5 519.0
========= ======== =======
7. Acquisitions
Cash outflow in respect of new
businesses acquired
Payments in respect of previous
years' acquisitions 0.1 1.5 3.2
======== ======== ========
8. Disposals 6 months to
28.8.1999
£m
-----------
Tangible fixed assets 11.3
Net working capital, excluding cash and overdraft (0.2)
Cash and overdraft (0.1)
---------
11.0
Goodwill written back 8.0
Provided in 1998/9 (6.2)
Loss on disposal (1.6)
---------
Net sale proceeds 11.2
Cash and overdraft on disposal 0.1
---------
Cash inflow 11.3
=========
The above relates to the disposal of Gatehouse Nurseries
on 28 May 1999.
9. Reconciliation of net cash flow to movement in net debt
6 months to 6 months to Year to
28.8.1999 29.8.1998 27.2.1999
£m £m £m
------------------------------------
Increase/(decrease) in cash in the
period 41.2 (11.0) (24.0)
Cash (inflow)/outflow from movement
in loan capital (51.9) 27.2 (22.1)
Cash (inflow)/outflow from movement
in liquid resources (0.7) 11.0 (14.6)
Cash inflow from movement in short
term borrowings (21.5) (64.7) (8.7)
-------------------------------
Changes in net debt resulting from
cash flows (32.9) (37.5) (69.4)
Foreign exchange movements 2.5 0.9 (2.0)
Amortisation of premiums and discounts 1.7 1.6 3.1
-------------------------------
Movement in net debt in the period (28.7) (35.0) (68.3)
Opening net debt (868.3) (800.0) (800.0)
-------------------------------
Closing net debt (897.0) (835.0) (868.3)
===============================
10. Shareholders' funds 28.8.1999 29.8.1998 27.2.1999
£m £m £m
--------------------------------
Movements in shareholders' funds
Shareholders' funds at 27 February 1999 2,634.5 2,477.3 2,477.3
Profit earned for ordinary shareholders 157.2 148.6 248.6
Dividends (38.0) (35.9) (137.2)
--------------------------------
119.2 112.7 111.4
Revaluation of tangible fixed assets - - 7.3
Other recognised gains and losses
relating to the period 1.4 1.2 (0.8)
Goodwill on disposal 8.0 24.3 24.3
Other reserve movements - - (0.1)
Share capital issued 11.6 6.5 15.1
Cancellation of preference stock (10.0) - -
--------------------------------
Shareholders' funds at 28 August 1999 2,764.7 2,622.0 2,634.5
================================
Analysis of shareholders' funds
Equity shareholders' funds 2,764.7 2,612.2 2,624.7
Non-equity shareholders' funds - 9.8 9.8
--------------------------------
2,764.7 2,622.0 2,634.5
================================
11. Post balance sheet event
On 30 September 1999 the group acquired the Racquets and Healthtrack Group
Ltd, a chain of six health and fitness clubs, for £78.3m.
Friday, 10th January 2025
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