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Whitbread PLC (WTB)

  Print      Mail a friend       Annual reports

Tuesday 23 October, 2012

Whitbread PLC

Whitbread Interim Results

RNS Number : 2669P
Whitbread PLC
23 October 2012
 



WHITBREAD DELIVERS DOUBLE DIGIT GROWTH

 

WHITBREAD PLC RESULTS FOR THE SIX MONTHS ENDED 30TH AUGUST 2012

 

Financial Highlights

 

·     Total revenue up 14.2% to £1,018.1 million (2011/12: £891.3 million)

·     Group like for like sales1 up 4.3%

·     Underlying profit2 before tax up 10.6% to £193.4 million (2011/12: £174.9 million)

·     Group return on capital3 increased to 13.7% (2011/12: 13.4%)

·     Whitbread Hotels and Restaurants underlying profit2 up 8.5% to £181.3 million (2011/12: £167.1 million)

·     Costa underlying profit2 up 29.9% to £36.1 million (2011/12: £27.8 million)

·     Underlying diluted EPS up 13.1% to 81.65p (2011/12: 72.20p)

·     Strong cashflow from operations4 up 11.0% to £285.3 million (2011/12: £257.1 million) funding capital investment of £187.6 million (2011/12: £129.0 million)

·     Strong balance sheet, half year net debt of £525.8 million (versus £520.1 million at 1St September 2011)

·     Interim dividend up 11.4% to 19.50p (2011/12: 17.50p)

 

Statutory Highlights

 

·     Profit after tax and exceptional items for the half year up 8.9% to £173.4 million (2011/12: £159.2 million)

·     Total basic EPS 98.20p up 8.2% (2011/12: 90.79p)

 

Growing Strong Brands

 

·      Premier Inn UK grew total sales by 12.9%, with significant outperformance against its competitive5 set. Like for like sales1 up 3.7%

·      Premier Inn opened 1,591 net UK rooms taking the total to 49,020; with a secured pipeline of over 11,000 rooms; on track for 2016 milestone of 65,000 rooms

·      Restaurants performance continued to improve with total sales up 5.3% and like for like sales1 up 3.4%

·      Costa delivered another outstanding performance. Total sales up 25.0%, UK like for like sales1 up 6.8% and underlying profits up 29.9%

·      141 net new coffee shops taking total to 2,344, up 6.4% from 2011/12

·      1,500 new UK jobs created by Whitbread brands, with 10,000 expected over the next three years

 

Anthony Habgood, Chairman, said:

 

"Whitbread is continuing on its rapid profitable organic growth path in difficult economic conditions. This is due to our unrelenting customer focus and the use of our strong balance sheet to invest in building powerful brands, developing our people and renewing our estate."

 

Andy Harrison, Chief Executive, said:

 

"Whitbread delivered a strong first half performance with total sales growth of 14.2% and underlying earnings per share growth of 13.1%, driven by our outperformance in a broadly flat market.

 

The combination of our strong sales growth and good returns drove an 11% increase in cash flow from operations to £285.3 million. This created the financial capacity to continue investing in our brands and the quality and breadth of our estate, finance our organic growth and the 11.4% increase in the interim dividend.


Premier Inn delivered a 2.4% growth in revpar during the first half, compared to a decline of 3.6% in the Midscale and Economy5 sector. As expected, the London hotel market is settling post the Olympics and we wait for a clearer trend to emerge. The regional hotel market has continued its revpar decline. More generally, our consumer market context continues to be broadly flat. Against this background we expect to continue to outperform our competitors and like for like sales growth to be more moderate than the high levels achieved in the first half.

We expect continuing rapid growth in total sales on track towards our five year milestones. Premier Inn is benefitting from a structural shift in the UK towards strong branded hotels. Costa's growth is supported by its leading UK position in a robust category, together with exciting international opportunities. This growth in total sales, coupled with our clear focus on good financial returns, is creating substantial value."



For further information contact:

 


Whitbread


Christopher Rogers, Group Finance Director

+ 44 (0) 20 7806 5491

Anna Glover, Director of Communications

Joanne Russell, Director of Investor Relations

 +44 (0) 7768 917 651

 +44 (0) 1582 888 633



Tulchan, David Allchurch/Rebecca Scott

+ 44 (0) 20 7353 4200



    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.

 

3      Return on capital

 

Return on capital is the return on invested capital which is calculated by dividing the underlying profit before interest and tax for the year by net assets at the balance sheet date adding back debt, taxation liabilities and the pension deficit.

 

4     Cashflow from operations 

 

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

 

5      STR Global - UK Midscale and Economy sector


Further information

 

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

www.whitbreadimages.co.uk

 

A presentation for analysts will be held at Nomura, 1 Angel Lane, Upper Thames Street, London, EC4R 3AB. The presentation is at 9.30 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

 

CHIEF EXECUTIVE'S REVIEW


Every month Whitbread serves around 21 million customers through around 2,500 outlets in the UK and our success is built on delivering high and consistent levels of customer experience. As such, we are particularly grateful to our 40,000 employees who are at the heart of our success. I would like to thank them on behalf of the Board for their contribution.

 

Whitbread delivered good sales and profit growth in the first half of the year despite the continued challenging economic environment. Strong organic expansion, combined with good like for like sales growth across the business, increased Group total sales by 14.2% to £1,081.1 million. Premier Inn grew sales by 12.9% to £443.5 million, Costa by 25.0% to £313.4 million and Restaurants by 5.3% to £262.4 million.

 

Group underlying profit before tax increased by 10.6% to £193.4 million (2011/12: £174.9 million), with underlying diluted EPS increasing by 13.1% to 81.65p.

 

Our continuing focus on investing in our strong brands and winning market share drove Group like for like sales up by 4.3%, with Premier Inn and Costa's UK equity stores delivering like for like sales growth of 3.7% and 6.8% respectively. Restaurants' performance continued to improve in the first half with like for like sales up 3.4%.

 

The Group return on capital increased to 13.7% (from 13.4% in H1 11/12). This combined with our strong revenue growth delivered an increase in cashflow from operations to £285.3 million, which funded capital expenditure of £187.6 million.

 

We maintained our strong balance sheet and ended the half year with net debt of £525.8 million, little changed year on year despite a significant increase in capital expenditure. In the half year we agreed the pension scheme triennial valuation and as a result the future pension deficit funding payment plan remains unchanged.

 

We are on track to deliver our five year growth milestones announced in April 2011. This organic growth combined with a strong focus on return on capital is creating substantial value.

 

The interim dividend has been increased by 11.4% to 19.50p (2011/12: 17.50p). This will be paid on 10th January 2013 to all shareholders on the register at close of business on the 9th November 2012. A scrip dividend alternative will again be offered.

 

Whitbread Hotels and Restaurants

 

Hotels and Restaurants had a good first half performance with revenue rising by 10.0% to £705.9 million. Within Hotels and Restaurants, Premier Inn revenue increased by 12.9% to £443.5 million and Restaurants revenue by 5.3% to £262.4 million. Underlying profit grew by 8.5% year on year to £181.3 million and return on capital was maintained at 12.5%.

 

Premier Inn

 

Premier Inn continues to outperform and win market share, growing room capacity by 9.8% in the UK and Ireland and delivering total occupancy of 79.0%.  The key levers which drive our success are the strength of our hotel network, the quality and consistency of the Premier Inn guest experience, the power of the Premier Inn brand backed up by our good night sleep guarantee, together with the development of our dynamic pricing system.  The increasing strength of the Premier Inn brand is highlighted by a further increase in our guest recommend scores and the rapid growth in visitors to our website, premierinn.com.

 

During the first half of the year, Premier Inn outperformed its competitive set delivering total revpar growth of 2.4% compared to a decline of 3.6% for the Midscale and Economy5 sector and growth of 2.1% for the total UK hotel market. Within the UK regions, revpar remained weak and Premier Inn outperformed substantially delivering like for like revpar growth of 1.9% compared to a decline of 3.6% for the Midscale and Economy5 hotel sector during the period. In London, the hotel market was variable with revpar growth benefiting from the Royal holiday comparative in April and the Olympics in the second quarter. We estimate the revpar benefit from the Olympics on the overall Premier Inn business was around 0.7%pts in the first half. The London market is settling post the Olympics and we are waiting for a clear trend to emerge. For the half year, Premier Inn delivered like for like revpar growth of 4.4% in London compared to a decline of 3.5% for the Midscale and Economy5 sector. 

 

Our dynamic pricing model continues to evolve and we extended our two tier pricing system, Premier Flexible and Premier Saver, to two-thirds of our estate, which has provided a modest uplift to revpar. We expect this model to be fully rolled out across the estate by the end of 2012/13. We maintained our investment in marketing and our website traffic increased to 29 million visits during the first half of 2012/13, up 22%. Our percentage of automated bookings has also risen from 76% to 82% year on year.

 

We continue to invest in our strong brands to reinforce our competitive position and plan to spend around £75 million on refurbishing and maintaining the Premier Inn estate this year. Our experience is that refurbished rooms lead to an increase in our guest net recommend score, reinforcing a consistently higher guest experience across our estate.

 

We continue to strengthen our network and plan to open a total of 31 new hotels (c.4,500 new rooms, which implies an increase in the UK of 9.5%) this year, offering our customers greater choice compared to our competitors. Our committed pipeline, beyond the balance of this financial year, of over 8,000 new rooms puts us on track to achieve our growth milestone of 65,000 rooms by 2016. This expansion is driven by our network plan which is based on detailed analysis of supply and demand at the local level. Growing our market share in London continues to be a focus for the Group and our room capacity has increased by 26% over the past 12 months as we have built 9 new hotels with 1,576 rooms. Despite this increase in capacity our total occupancy level in London remains high at 86%. London represents 33% of our committed pipeline.

 

International

 

During the first half, Premier Inn International made progress with total occupancy up 6.1%pts to 56.2% and like for like revpar up 34.8%. During this period we expanded our international development team and have signed 11 letters of intent for 18 hotels with a focus on three territories - India, Middle East and Asia Pacific. This is part of our strategy of moving to a 'capital light' business model for our international expansion.

 

Restaurants

 

Our Restaurants performance continued to improve in the first half with like for like sales up 3.4% and total covers up 8.6%. This is a result of our dedicated focus on menu management, margins and operating efficiencies to deliver a better and more consistent guest experience. This has been achieved through stronger menu propositions, increased breakfast sales, which have risen by 20% year on year, Buffet Place conversions, which provided a 7% sales uplift, and value meals, which now represent 40% of total sales. We are also improving our operational performance through our three Skills Academies which have been attended by 2,600 team members. A key tool within Restaurants is the 'Guest Recommend Survey' that captures feedback from our customers. During the first half of the year we received 170,000 responses to our Guest Recommend survey for Restaurants and we saw an overall improvement in guest scores. We have also implemented a Mystery Guest programme to check we are delivering on our service and product.

 

We will deliver cost efficiencies of some £4-5 million this year and implement selective price increases. This will help offset inflationary cost pressures as well as part funding additional investment in our dedicated restaurant management team to drive future performance.

 

We are committed to the Whitbread joint site model, which delivers a return on capital of 17.7%, on a site basis, as well as facilitating access to the sub 80 hotel room sector. This compares with a return on capital of 15.3% for our Solus estate. Currently of our 49,020 rooms in the UK and Ireland, 45% of these are located next to one of our restaurants ('joint sites'), 40% are Solus with an integrated restaurant and 15% are co-located next to a restaurant operated by a third party ('co-los'). The Whitbread joint site model benefits from a higher revpar and offers a superior guest experience for Premier Inn customers, compared to that of a co-located restaurant, especially for breakfast. We estimate that this is worth around £1 additional revpar for Premier Inn joint sites. Returns on joint sites are also higher than co-los due to operating and capital efficiencies. Whitbread joint sites represent around 20% of our Premier Inn growth pipeline.

 

Costa

 

Costa had another outstanding performance during the first half of the year with underlying profits up 29.9% to £36.1 million and return on capital at 31.2%. Worldwide system sales were up 23.3% to £472.8 million and total reported sales up 25.0% to £313.4 million.

 

In the UK, Costa had another strong performance, partially helped by the poor summer weather, with like for like sales in UK equity stores up 6.8%. The brand continues to strengthen and during the first half, the launch of the new Ice Cold Costa range was a great success with sales rising 29%. We continue to invest in the business and refurbished 91 stores in the period and opened 87 net new UK stores. Innovation remains at the heart of the Costa strategy and we have recently launched a range of new hot drinks including Cortado, Caffe Caramella and Chai Latte as well as successfully introducing a new food range. Costa remains the UK's favourite coffee shop and the continuous development of our product range combined with investment in the brand has further widened the preference gap with our competitors.

 

Costa Enterprises continue to perform well with both our Corporate business and Costa Express making strong progress. We added a further 794 new Costa Express units in the first half taking the total number of units to 1,986. This includes over 400 units from our partnership with Shell. Costa Express sales are up 86.8% year on year. On conversion of a Coffee Nation machine to a Costa Express machine there has been an increase in cups sold per machine of 20%.

 

Costa EMEI continues to grow with 16 net new stores opened in the first half taking our total number of stores to 663. System sales grew by 13.8% and like for like sales by 6.8% with a strong performance in the Middle East offsetting a more difficult period in Central Europe. We continue to expand our international footprint and are now trading in 26 countries within EMEI.

 

Costa Asia has seen strong growth with China delivering a like for like sales increase of 19.2% in the first half and opening 37 new stores taking our total number of stores to 201. We continue to expand our presence outside of tier one cities and now have stores in 25 cities in China. We have also expanded into new markets and opened one store in Singapore during the first half of the year.

 

Good Together

 

We have made good progress against our new five year targets announced earlier in the year.  In our focus on 'Teams and Community' we have created 1,500 jobs.  Team members have achieved 1,000 nationally recognised qualifications and 100 apprenticeships have been created.  Under 'Customer Wellbeing,' calorific labelling is in place in Costa and Premier Inn solus restaurants with trials to take place in the wider Restaurants estate.  We are constantly looking at ways to provide healthier choices for our customers on our menus.  We have updated our Responsible Sourcing policy and have developed a specific Timber Sourcing policy.  In reducing our 'Environmental' impact, we are on track against our carbon reduction and water consumption targets.  Likewise with our waste target, where we now divert 88% from landfill. 

 

Outlook

 

Whitbread delivered a good first half performance in flat market conditions. Revpar in the total UK hotel market grew by 2.1%, with London up 5.4% benefiting from the Olympics, and the UK regions continued to decline. As expected, the London hotel market is settling post the Olympics and we wait for a clearer trend to emerge. The regional hotel market has continued its revpar decline. More generally, our consumer market context continues to be broadly flat. Against this background we expect to continue to outperform our competitors and like for like sales growth to be more moderate than the high levels achieved in the first half.

We expect continuing rapid growth in total sales on track towards our five year milestones. Premier Inn is benefitting from a structural shift in the UK towards strong branded hotels. Costa's growth is supported by its leading UK position in a robust category, together with exciting international opportunities. This growth in total sales, coupled with our clear focus on good financial returns, is creating substantial value.

 

Whitbread Hotels and Restaurants

H1 2012/13

£m

H1 2011/12

£m

%

Change

Premier Inn revenue

443.5

392.8

12.9

Restaurants revenue

262.4

249.1

5.3

Total revenue

705.9

641.9

10.0

Premier Inn like for like sales %1

3.7

5.2

Premier Inn rooms UK & Ireland (no.)

49,020

44,639

9.8

Premier Inn like for like revpar growth %*

2.3

4.4

Premier Inn occupancy (total) %*

79.0

79.1

Restaurants like for like sales %1

3.4

(1.6)

Restaurants like for like covers growth %

6.0

(1.4)

Underlying profit

181.3

167.1

8.5

Operating profit, post exceptional

181.2

191.9

(5.6)

WHR ROCE %

12.5

12.5

 

* UK & Ireland

 

Costa

H1 2012/13

£m

H1 2011/12

£m

%

Change

System sales**

472.8

383.6

23.3

Revenue

313.4

250.8

25.0

Like for like sales % (UK)**

6.8

6.7

UK stores (no.)

1,479

1,302

13.6

International stores (no.)

865

701

23.4

Underlying profit

36.1

27.8

29.9

Operating profit, post exceptional

33.2

26.1

27.2

ROCE %**

31.2

28.5

 

** System sales and like for like sales excludes intersegment and pre IFRIC 13.

 

FINANCE DIRECTOR'S REVIEW

 

Revenue

 

Group revenue increased year on year by 14.2% to £1,018.1 million. The revenue in our Hotels and Restaurant segment rose by 10.0% to £705.9 million whilst Costa revenue increased by 25.0% to £313.4 million. Within Hotels and Restaurants, Premier Inn increased revenue by 12.9% to £443.5 million and restaurants by 5.3% to £262.4 million. The increase in revenue is driven by a combination of like for like sales* growth and the opening of new units.

 

All of our businesses delivered like for like sales growth with Premier Inn at 3.7%, Restaurants 3.4% and Costa at 6.8%. Premier Inn like for like sales benefited from the impact of the London Olympics, estimated to have increased revpar by 0.7%pts across the period and our continued development of dynamic pricing. Restaurants continued to focus on value for money and the roll out of Buffet Place. Costa benefitted from the poor spring and summer weather and continued innovation in the product range.

 

Growth in units again played an important part in the overall increase in revenue with 1,621 new Premier Inn rooms opened in the first half, one restaurant and 174 Costa stores, of which 80 were outside the UK. During the first half an additional 818 Costa Express machines were installed.

 

Results

 

Underlying profit before tax for the half is £193.4 million, up 10.6% on last year. The underlying profit before tax measure excludes the pension interest charge, the amortisation of acquired intangibles and exceptional items. Sales growth outperformed profit growth which was impacted by mix and a rise in Group central costs. Costa, which has a lower margin than the rest of the Group, grew faster than the higher margin Hotels and Restaurants.  In the case of central costs, the strong share price has increased the national insurance due on share based payments. Underlying diluted earnings per share is 81.7p compared to 72.2p last year, up 13.1% reflecting the earnings growth and benefiting from an effective tax rate which fell by 2.1%pts to 25.3%. 

 

Total profit for the half is £173.4 million, which compared to £159.2 million last year, is up 8.9%.

 

Return on capital

 

The return on capital, calculated by dividing the underlying profit before interest and tax for the 12 months ended on 30th August 2012 by net assets at the balance sheet date adding back debt, taxation liabilities and the pension deficit, remains a key focus for the Group. Overall the return on capital has improved by 0.3%pts year on year to 13.7%.

 

Exceptional items

 

Exceptional items are set out in detail in note 3. In total they amount to an £8.4 million benefit before tax and £36.5 million after tax compared to £23.1 million and £39.0 million respectively last year.

 

The major exceptional items relate to tax. A tax claim dating back to 2004 was settled with HMRC which resulted in the release of a tax provision of £13.5 million with associated interest income of £10.6 million. In addition, following the enactment of The Finance Act 2012 which reduced the UK corporation tax rate from 25% to 23%, there has been a tax release of £17.1 million to income.

 

Interest

 

The underlying interest charge for the half year is £12.6 million compared to £11.4 million in the prior year as a result of average net debt increasing by 9.7% to £499.1 million. 

The total pre exceptional interest cost amounted to £21.2 million, up 10.4% as it includes the IAS 19 pension charge of £8.6 million (2011/12: £7.8 million). This charge represents the difference between the expected return on scheme assets and the interest cost on the scheme liabilities.

Tax 

The effective tax rate for the half is 25.3% compared to 27.4% last year with the reduction as a result of the fall in the UK corporation tax rate of 2%pts.  This gives rise to an underlying tax expense of £49.0 million compared to £47.9 million last year. 

 

Earnings per share

 

Underlying diluted EPS increased by 13.1% to 81.7p. 

 

EPS

2012/13

2011/12

Underlying (Diluted)

81.7p

72.2p

Non GAAP adjustments (inc pensions interest)

(4.2)p

(3.9)p

Exceptional items

20.5p

22.1p

Total operations (diluted)

98.0p

90.4p

 

Further details can be found in note 6.

 

Dividend

 

An interim dividend of 19.50p will paid on 10thJanuary 2013 to all shareholders on the register at the close of business on 9th November 2012. This represents an increase of 11.4%. A scrip dividend alternative will again be offered.

 

Net Debt and Cash flow

 

The principal movements in net debt are as follows:

 

£m

2012/13

2011/12

Cash flow from operations4

285.3

257.1

Capital expenditure

(187.6)

(129.0)

Interest

(13.2)

(14.0)

Tax

(19.1)

(26.8)

Pensions

(36.0)

(61.0)

Dividends

(48.9)

(57.1)

Other

(2.0)

(1.4)

Net cash flow

(21.5)

(32.2)

Net debt brought forward

(504.3)

(487.9)

Net debt carried forward

(525.8)

(520.1)

 

The Group generated strong cash flow from operations in the half year which at £285.3 million were up by 11.0%. Capital expenditure increased by 45.4% to £187.6 million (see below for a more detailed explanation).  

 

The level of cash tax reflects tax relief on pension fund recovery plan payments.

 

The total payments to the pension scheme were £36.0 million, a reduction of £25.0 million compared to last year following the decision in the second half of 2011/12 to make an advanced payment of £25 million.  We plan to return to the payment schedule previously announced and make payments of £55 million in August 2013, £65 million in August 2014 and 2015, £70 million in August 2016, £80 million in August 2017 and £70 million in August 2018.

 

Dividend payments decreased by £8.2 million to £48.9 million. This largely reflects the significant increase in the scrip dividend take up of £9.4 million to £10.5 million.

 

Net debt increased by £21.5 million to £525.8 million whilst the Group's loan facilities remained at £908 million. The first maturity of these facilities will be in November 2016 when the £650 million revolving credit facility is due to expire.

 

The policy of the Board continues to be to manage its financial position and capital structure in a manner consistent with Whitbread maintaining its investment grade status. 

 

Capital expenditure

 

The Group spent £187.6 million on capital in the half compared to £129.0 million last year. This increase in expenditure was in line with our stated plans to continue to grow the business and re-invest to maintain the quality of the existing estate.

 

In total £111.3 million was spent on driving new growth in the half, up 22.3%. This increase reflects the step up in room openings in Premier Inn and the accelerated roll out of Costa Express machines. Maintenance expenditure has also materially increased. A large part of the maintenance expenditure is spent on refurbishing rooms to ensure that we continue to offer customers a well maintained room which is consistent in quality throughout our estate.

 

Pensions

 

As at 30th August 2012, there was an IAS 19 pension deficit of £640.0 million, which compares to £598.7 million at 1st March 2012 and £517.0 million as of 1st September 2011. The main movement in the deficit from year to year is the actuarial loss which is driven by the fall in the discount rate, which is now at 4.10%, down from 4.65% at the year end and 5.40% as at 1st September 2011, offset by payments into the fund of £36.0 million in the half.

 

During this half the triennial valuation was agreed with a deficit of £432 million as of 31st March 2011 and with no change to the pensions deficit funding arrangements. The triennial valuation is not comparable with the IAS 19 pensions deficit as it takes into account the benefit that the scheme receives as a result of the Scottish Limited Partnership arrangements whilst the IAS 19 valuation does not.

 

Related Parties

 

Related parties have been considered in detail in note 9 and therefore not included within this Finance Review.

 

Post Balance Sheet Events

 

An interim dividend of 19.50p per share (2011/12: 17.50p) amounting to a total of £34.7 million was declared by the Board on 22nd October 2012.

 

Risks and uncertainties

 

The principal risks and uncertainties affecting the business activities of the Group are detailed on pages 20 and 21 of the Annual Report and Accounts for the year ended 1st March 2012. The risks are categorised into the following areas: health and safety, market, financial and third party. Certain additional financial risks are also detailed in note 25 to the financial statements dated 1st March 2012, 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 Directors' 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

Christopher Rogers

Chief Executive

Group Finance Director

 

 

Interim unaudited consolidated income statement


Notes

6 months to

30 August

 2012

£m

6 months to

1 September

2011

£m

Year to

1 March

2012

£m






Revenue

2

1,018.1

891.3

1,778.0

Cost of sales


(167.2)

(140.3)

(288.4)

Gross profit


850.9

751.0

1,489.6






Distribution costs


(541.3)

(455.2)

(969.2)

Administrative expenses


(106.8)

(86.9)

(174.7)

Operating profit


202.8

208.9

345.7






Share of loss from joint ventures


(0.4)

(0.6)

(0.7)

Share of profit from associate


0.6

0.6

0.9






Operating profit of the Group, joint venture and associate

2

203.0

208.9

345.9






Finance costs

4

(22.2)

(22.1)

(43.4)

Finance revenue

4

11.1

2.1

3.3

Profit before tax


191.9

188.9

305.8






Analysed as:





Underlying profit before tax


193.4

174.9

320.1

  Amortisation of acquired intangible assets

3

(1.3)

(1.3)

(2.6)

  IAS 19 Income Statement charge for pension finance cost

3

(8.6)

(7.8)

(14.0)

Profit before tax and exceptional items


183.5

165.8

303.5

  Exceptional items

3

8.4

23.1

2.3

Profit before tax


191.9

188.9

305.8






Underlying tax expense


(49.0)

(47.9)

(84.4)

Exceptional tax and tax on non GAAP adjustments

3

30.5

18.2

44.6

Tax expense


(18.5)

(29.7)

(39.8)






Profit for the period


173.4

159.2

266.0






Attributable to:





   Parent shareholders


174.1

159.7

267.3

   Non-controlling interest


(0.7)

(0.5)

(1.3)



173.4

159.2

266.0

 

Earnings per share (note 6)

6 months to

30 August

2012

p

6 months to

1 September

2011

P

Year to

1 March

2012

P

Earnings per share




Basic for profit for the period

98.20

90.79

151.53

Diluted for profit for the period

97.97

90.43

151.19

Earnings per share before exceptional items




Basic for profit for the period

77.61

68.62

127.38

Diluted for profit for the period

77.43

68.35

127.09

Underlying earnings per share




Basic for profit for the period

81.84

72.48

134.35

Diluted for profit for the period

81.65

72.20

134.05

 

 

Interim unaudited consolidated statement of comprehensive income                    


6 months to

30 August

2012

 £m

  6 months to

1 September

2011

£m

Year to

1 March

2012

£m





Profit for the period

173.4

159.2

266.0





Items that will not be reclassified to profit or loss:




Actuarial losses on defined benefit pension schemes

(68.7)

(82.2)

(192.1)

Current tax

8.7

15.7

22.2

Deferred tax

7.9

5.8

27.9

Deferred tax: change in rate of corporation tax

(9.6)

(7.2)

(8.2)


(61.7)

(67.9)

(150.2)

Items that may be reclassified subsequently to profit or loss:




Net loss on cash flow hedges

(3.2)

(4.1)

(1.0)

Deferred tax

0.8

1.1

0.3

Deferred tax: change in rate of corporation tax

(0.5)

(0.6)

(0.6)


(2.9)

(3.6)

(1.3)





Exchange differences on translation of foreign operations

(1.9)

(0.1)

(0.6)





Other comprehensive loss for the period, net of tax

(66.5)

(71.6)

(152.1)





Total comprehensive profit for the period, net of tax

106.9

87.6

113.9





Attributable to:




  Parent shareholders

107.6

88.1

115.2

  Non-controlling interest

(0.7)

(0.5)

(1.3)


106.9

87.6

113.9

 

 

Interim unaudited consolidated statement of changes in equity

 

6 months to 30 August 2012


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

-

-

-

174.1

-

-

174.1

(0.7)

173.4

 

Other comprehensive income

-

-

-

(61.4)

(1.9)

(3.2)

(66.5)

-

(66.5)

 

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)

 

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

 

 

 

6 months to 1 September 2011


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 3 March 2011

147.0

50.8

12.3

3,128.8

4.3

(2,103.0)

1,240.2

1.8

1,242.0

 











 

Profit for the period

-

-

-

159.7

-

-

159.7

(0.5)

159.2

 

Other comprehensive income

-

-

-

(67.4)

(0.1)

(4.1)

(71.6)

-

(71.6)

 

Total comprehensive income

-

-

-

92.3

(0.1)

(4.1)

88.1

(0.5)

87.6

 











 

Ordinary shares issued

-

0.2

-

-

-

-

0.2

-

0.2

 

Loss on ESOT shares issued

-

-

-

(2.1)

-

2.1

-

-

-

 

Accrued share-based payments

-

-

-

3.6

-

-

3.6

-

3.6

 

Equity dividends

-

-

-

(58.6)

-

-

(58.6)

-

(58.6)

 

Scrip dividends

0.1

(0.1)

-

1.5

-

-

1.5

-

1.5

 

Additions

-

-

-

-

-

-

-

3.8

3.8

 

At 1 September 2011

147.1

50.9

12.3

3,165.5

4.2

(2,105.0)

1,275.0

5.1

1,280.1

 

 

 

Year to 1 March 2012


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 3 March 2011

147.0

50.8

12.3

3,128.8

4.3

(2,103.0)

1,240.2

1.8

1,242.0

 











 

Profit for the period

-

-

-

267.3

-

-

267.3

(1.3)

266.0

 

Other comprehensive income

-

-

-

(150.5)

(0.6)

(1.0)

(152.1)

-

(152.1)

 

Total comprehensive income

-

-

-

116.8

(0.6)

(1.0)

115.2

(1.3)

113.9

 











 

Ordinary shares issued

0.4

3.0

-

-

-

-

3.4

-

3.4

 

Cost of ESOT shares purchased

-

-

-

-

-

(5.2)

(5.2)

-

(5.2)

 

Loss on ESOT shares issued

-

-

-

(5.8)

-

5.8

-

-

-

 

Accrued share-based payments

-

-

-

7.9

-

-

7.9

-

7.9

 

Tax on share-based payments

-

-

-

1.0

-

-

1.0

-

1.0

 

Rate change on historical revaluation

-

-

-

1.3

-

-

1.3

-

1.3

 

Equity dividends

-

-

-

(89.6)

-

-

(89.6)

-

(89.6)

 

Scrip dividends

0.1

(0.1)

-

2.6

-

-

2.6

-

2.6

 

Additions

-

-

-

-

-

-

-

5.9

5.9

 

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

 

 

 

Interim unaudited consolidated balance sheet



30 August

1 September

1 March



2012

2011

2012


Notes

£m

£m

£m

ASSETS





Non-current assets





Intangible assets


205.6

203.8

206.6

Property, plant and equipment


2,696.1

2,455.9

2,580.5

Investment in joint ventures


21.1

17.9

18.7

Investment in associate


1.8

2.0

1.6

Trade and other receivables


4.2

3.3

3.6



2,928.8

2,682.9

2,811.0

Current assets





Inventories


26.7

24.7

23.1

Trade and other receivables


104.8

140.5

85.0

Cash and cash equivalents

7

49.6

39.4

40.3



181.1

204.6

148.4






Assets classified as held for sale


0.6

3.9

0.6






TOTAL ASSETS


3,110.5

2,891.4

2,960.0






LIABILITIES





Current liabilities





Financial liabilities

7

-

49.3

14.2

Provisions


10.7

15.4

10.7

Derivative financial instruments


4.8

12.1

6.6

Income tax liabilities


27.1

14.6

15.4

Trade and other payables


340.9

300.5

321.3



383.5

391.9

368.2






Non-current liabilities





Financial liabilities

7

575.4

510.2

530.4

Provisions


34.9

26.9

37.1

Derivative financial instruments


23.6

19.8

20.1

Deferred income tax liabilities


86.7

131.4

105.9

Pension liability

8

640.0

517.0

598.7

Trade and other payables


17.7

14.1

16.4



1,378.3

1,219.4

1,308.6






TOTAL LIABILITIES


1,761.8

1,611.3

1,676.8






NET ASSETS


1,348.7

1,280.1

1,283.2






EQUITY





Share capital


148.0

147.1

147.5

Share premium


53.6

50.9

53.7

Capital redemption reserve


12.3

12.3

12.3

Retained earnings


3,229.0

3,165.5

3,163.0

Currency translation reserve


1.8

4.2

3.7

Other reserves


(2,103.5)

(2,105.0)

(2,103.4)

Equity attributable to equity holders of the parent


1,341.2

1,275.0

1,276.8






Non-controlling interest


7.5

5.1

6.4






TOTAL EQUITY


1,348.7

1,280.1

1,283.2






 

Interim unaudited consolidated cash flow statement



6 months to

6 months to

Year to



30 August

 2012

1 September

2011

1 March

2012


Notes

£m

£m

£m

Profit for the period


173.4

159.2

266.0

Adjustments for:





Taxation charged on total operations


18.5

29.7

39.8

Net finance cost

4

11.1

20.0

40.1

Total loss from joint ventures


0.4

0.6

0.7

Total income from associate


(0.6)

(0.6)

(0.9)

Loss / (gain) on disposal of property, plant and equipment, and property reversions  

3

0.3

(24.8)

(14.6)

Depreciation and amortisation


58.7

55.4

109.7

Impairment of financial assets, investments and property

3

1.4

0.9

11.3

Share-based payments


4.3

3.6

7.9

Other non-cash items


7.9

3.5

7.6

Cash generated from operations before working capital changes


275.4

247.5

467.6






Increase in inventories


(3.7)

(6.3)

(4.7)

(Increase) / decrease in trade and other receivables


(19.9)

1.3

(0.7)

Increase in trade and other payables


36.2

17.9

25.3

Payments against provisions


(2.7)

(3.3)

(9.2)

Pension payments


(36.0)

(61.0)

(95.4)

Cash generated from operations


249.3

196.1

382.9






Interest paid


(13.2)

(14.0)

(29.4)

Taxes paid


(19.1)

(26.8)

(31.3)

Net cash flows from operating activities


217.0

155.3

322.2






Cash flows from investing activities





Purchase of property, plant and equipment


(184.9)

(127.6)

(305.7)

Purchase of intangible assets


(2.7)

(1.4)

(2.2)

Proceeds from disposal of property, plant and equipment


1.0

0.5

58.7

Capital contributions and loans to joint ventures


(3.5)

(0.9)

(1.6)

Dividends from associate


0.3

-

0.7

Interest received


0.2

0.2

2.6

Net cash flows from investing activities


(189.6)

(129.2)

(247.5)






Cash flows from financing activities





Proceeds from issue of share capital


0.4

0.2

3.4

Cost of purchasing ESOT shares


-

-

(5.2)

Capital contributions from non-controlling interests


1.8

3.8

5.5

(Decrease) / increase in short-term borrowings


(13.5)

49.1

13.5

Proceeds from long-term borrowings


43.0

-

156.4

Repayments of long-term borrowings


-

(17.0)

(150.6)

Issue costs of long-term borrowings


-

-

(5.4)

Dividends paid

5

(48.9)

(57.1)

(87.0)

Net cash flows used in financing activities


(17.2)

(21.0)

(69.4)






Net increase in cash and cash equivalents


10.2

5.1

5.3

Opening cash and cash equivalents


39.6

34.2

34.2

Foreign exchange differences


(0.2)

0.1

0.1

Closing cash and cash equivalents

7

49.6

39.4

39.6






Reconciliation to cash and cash equivalents on the balance sheet





Cash and cash equivalents shown above


49.6

39.4

39.6

Add back overdrafts


-

-

0.7

Cash and cash equivalents shown within current assets on the balance sheet

49.6

39.4

40.3

 

 

 

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 22 October 2012.

 

The interim 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 1 March 2012 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 financial statements for the six months ended 30 August 2012 and the comparatives to 1 September 2011 are unaudited but have been reviewed by the auditors; 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 director's 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 1 March 2012 except for the adoption of new Standards and Interpretations applicable as of 2 March 2012, none of which have had an impact on the Group's financial statements.

 

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

·      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 before exceptional items.  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 30 August 2012 and 1 September 2011 and for the full year ended 1 March 2012.

 

 

 

 




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 before exceptional items

181.3

36.1

(11.4)

206.0

Amortisation of acquired intangible assets

-

(1.3)

-

(1.3)

Operating profit before exceptional items

181.3

34.8

(11.4)

204.7

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 associates

181.2

33.2

(11.4)

203.0

Net finance costs




(11.1)

Profit before tax




191.9

Tax expense




(18.5)

Profit for the period




173.4






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

6 months to 1 September 2011

£m

£m

£m

£m

Revenue





Revenue from external customers

641.9

249.4

-

891.3

Inter-segment revenue

-

1.4

(1.4)

-

Total revenue

641.9

250.8

(1.4)

891.3






Underlying operating profit before exceptional items

167.1

27.8

(8.6)

186.3

Amortisation of acquired intangible assets

-

(1.3)

-

(1.3)

Operating profit before exceptional items

167.1

26.5

(8.6)

185.0

Exceptional items:





Loss on investment

-

-

(0.9)

(0.9)

Net gain / (loss) on disposal of property, plant and equipment

24.8

(0.4)

0.4

24.8

Operating profit of the Group, joint venture and associates

191.9

26.1

(9.1)

208.9

Net finance costs




(20.0)

Profit before tax




188.9

Tax expense




(29.7)

Profit for the period




159.2






Assets and liabilities





Segment assets

2,556.2

261.4

-

2,817.6

Unallocated assets

-

-

73.8

73.8

Total assets

2,556.2

261.4

73.8

2,891.4






Segment liabilities

(193.1)

(55.6)

-

(248.7)

Unallocated liabilities

-

-

(1,362.6)

(1,362.6)

Total liabilities

(193.1)

(55.6)

(1,362.6)

(1,611.3)






Net assets

2,363.1

205.8

(1,288.8)

1,280.1

 

 

 




Unallocated



Hotels &


and

Total


Restaurants

Costa

elimination

Operations

Year to 1 March 2012

£m

£m

£m

£m

Revenue





Revenue from external customers

1,239.3

538.7

-

1,778.0

Inter-segment revenue

-

3.2

(3.2)

-

Total revenue

1,239.3

541.9

(3.2)

1,778.0






Underlying operating profit before exceptional items

295.6

69.7

(19.9)

345.4

Amortisation of acquired intangible assets

-

(2.6)

-

(2.6)

Operating profit before exceptional items

295.6

67.1

(19.9)

342.8

Exceptional items:





Net gain / (loss) on disposal of property, plant and equipment and property reversions

25.1

(0.5)

(10.0)

14.6

Net loss on disposal of property, plant and equipment in joint ventures

-

(0.2)

-

(0.2)

Loss on investment

-

-

(0.9)

(0.9)

Impairment

(12.8)

(0.9)

-

(13.7)

Impairment reversal

2.8

0.5

-

3.3

Operating profit of the Group, joint venture and associates

310.7

66.0

(30.8)

345.9

Net finance costs




(40.1)

Profit before tax




305.8

Tax expense




(39.8)

Profit for the year




266.0






Assets and liabilities





Segment assets

2,603.0

279.2

-

2,882.2

Unallocated assets

-

-

77.8

77.8

Total assets

2,603.0

279.2

77.8

2,960.0






Segment liabilities

(213.4)

(63.9)

-

(277.3)

Unallocated liabilities

-

-

(1,399.5)

(1,399.5)

Total liabilities

(213.4)

(63.9)

(1,399.5)

(1,676.8)






Net assets

2,389.6

215.3

(1,321.7)

1,283.2

 

 

3. Exceptional items and other non GAAP adjustments


6 months to

30 August 2012

£m

 6 months to 1 September 2011

£m

Year to

1 March 2012

£m

Exceptional items before tax and interest:








 Distribution costs




    Net (loss) / profit on disposal of property, plant and equipment, and property reversions

(0.3)

24.8

14.6

    Impairment of property, plant and equipment (a)

-

-

(13.5)

    Impairment reversal

-

-

3.3


(0.3)

24.8

4.4





 Administrative expenses




    Loss on investments (b)  

(1.4)

(0.9)

(0.9)

    Impairment of other intangibles

-

-

(0.2)


(1.4)

(0.9)

(1.1)





 Net loss on disposal of fixed assets in joint ventures

-

-

(0.2)


(1.7)

23.9

3.1

 Exceptional interest:




 Interest on exceptional tax (c)

10.6

(0.4)

-

 Movement in discount on provisions

(0.5)

(0.4)

(0.8)


10.1

(0.8)

(0.8)





 Exceptional items before tax

8.4

23.1

2.3





 Other non GAAP adjustments made to underlying profit before tax to arrive at reported profit before tax:




 Amortisation of acquired intangibles

(1.3)

(1.3)

(2.6)

 IAS 19 Income Statement charge for pension finance cost

(8.6)

(7.8)

(14.0)

 

(9.9)

(9.1)

(16.6)





 Items included in reported profit before tax but excluded from underlying profit before tax

(1.5)

14.0

(14.3)

 

 


6 months to

30 August 2012

£m

  6 month to 1 September 2011

£m

Year to

1 March 2012

£m

 Tax adjustments included in reported profit after tax, but excluded from underlying profit  after tax:




 Tax on continuing exceptional items

(2.5)

(7.7)

(2.5)

 Exceptional tax items - capital allowances claims (d)

-

5.3

16.6

 Exceptional tax items - rolled over gains (e)

-

-

9.2

 Exceptional tax items - disputed claims (c)

13.5

-

-

 Deferred tax relating to UK tax rate change (f)

17.1

18.3

17.0

 Tax on non GAAP adjustments

2.4

2.3

4.3


30.5

18.2

44.6

 

(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) This is a 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 £10.6m, has also been released.

(d) Following the abolition of Industrial Buildings Allowances for hotel buildings, the Group had reviewed and resubmitted prior year capital allowance claims.  These claims have now been agreed with HMRC.

(e) Reduction in deferred tax liability on rolled over gains for differences between the tax deductible cost and accounts residual value of the reinvestment assets.

(f) The Finance Act 2012 reduced the main rate of UK Corporation tax to 24% from 1 April 2012 and 23% from 1 April 2013.  The effect of the new rate is to reduce the deferred tax provision by a net £8.0m, comprising a credit of £17.1m to the Income Statement, a credit of £1.0m to the reserves and a charge of £10.1m to the Consolidated Statement of Comprehensive Income.

 

Additional changes to the main rate of UK Corporation Tax are proposed, to reduce the rate to 22% by 1 April 2014.  These changes had not been substantively enacted at the balance sheet date and consequently are not included in these financial statements.  The effect of these proposed reductions would be to reduce the net deferred tax liability by £4.5m. 

 

4. Finance (costs) / revenue


6 months to

6 months to

Year to


30 August

1 September

1 March


2012

2011

2012

  

£m

£m

£m

Finance costs




Bank loans and overdrafts

(14.0)

(15.0)

(31.5)

Other loans

-

-

(0.2)

Interest capitalised

0.9

1.5

3.1


(13.1)

(13.5)

(28.6)





Net pension finance cost

(8.6)

(7.8)

(14.0)

Finance costs before exceptional items

(21.7)

(21.3)

(42.6)

Exceptional finance costs

-

(0.4)

-

Movement in discount on provisions (note 3)

(0.5)

(0.4)

(0.8)

Total finance costs

(22.2)

(22.1)

(43.4)





Finance revenue




Bank interest receivable

0.1

0.1

0.4

Other interest receivable

0.1

1.8

2.2


0.2

1.9

2.6





Impact of ineffective portion of cash flow and fair value hedges

0.3

0.2

0.7

Finance revenue before exceptional items

0.5

2.1

3.3

Exceptional finance revenue (note 3)

10.6

-

-

Total finance revenue

11.1

2.1

3.3

 

 

5. Dividends paid


6 months to

6 months to

Year to


30 August

1 September

1 March


2012

2011

2012

  

£m

£m

£m

Paid in the period:








Equity dividends on ordinary shares:




Final dividend for 2011/12 - 33.75 pence

59.8

-

-

Settled via scrip issue

(10.9)

-

-

Final dividend for 2010/11 - 33.25 pence

-

58.6

58.6

Settled via scrip issue

-

(1.5)

(1.5)

Interim dividend for 2011/12 - 17.50 pence

-

-

31.0

Settled via scrip issue

-

-

(1.1)


             48.9

57.1

87.0





Dividends on other shares:




B share dividend

-

-

-

C share dividend

-

-

-


-

-

-





Total dividends paid

            48.9

57.1

87.0

 

Shareholders were offered a scrip alternative to the 2011/12 cash final dividend of 33.75p.  Scrip elections were received on 32.3m shares, resulting in the issue of new shares with a nominal value of £0.5m.

 

6. Earnings per share

 

The basic earnings per share figures are calculated by dividing the net profit for the year attributable to ordinary shareholders, therefore before non-controlling interests, by the weighted average number of ordinary shares in issue during the year after deducting treasury shares and shares held by an independently managed employee share ownership trust (ESOT).

 

The diluted earnings per share figures allow for the dilutive effect of the conversion into ordinary shares of the weighted average number of options outstanding during the period.

 

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

 


6 months to

30 August 2012

million

6 months to

1 September 2011

million

Year to

1 March 2012

million

Basic weighted average number of ordinary shares

177.3

175.9

176.4

Effect of dilution - share options

0.4

0.7

0.4

Diluted weighted average number of ordinary shares

177.7

176.6

176.8

 

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

 


6 months to

30 August 2012

£m

6 months to

1 September 2011

£m

Year to

1 March 2012

£m

Profit for the period attributable to parent shareholders

174.1

159.7

267.3

Exceptional items - gross

(8.4)

(23.1)

(2.3)

Exceptional items - taxation

(28.1)

(15.9)

(40.3)

Profit for the period before exceptional items attributable to parent shareholders

137.6

120.7

224.7

Non GAAP adjustments - gross

9.9

9.1

16.6

Non GAAP adjustments - taxation

(2.4)

(2.3)

(4.3)

Underlying profit for the period attributable to parent shareholders

145.1

127.5

237.0

 

 


6 months to

30 August 2012

p

  6 months to

1 September 2011

p

Year to

     1 March 2012

p

Basic for profit for the period

98.20

90.79

151.53

Exceptional items - gross

(4.74)

(13.13)

(1.30)

Exceptional items - taxation

(15.85)

(9.04)

(22.85)

Basic for profit before exceptional items for the period

77.61

68.62

127.38

Non GAAP adjustments - gross

5.58

5.17

9.41

Non GAAP adjustments - taxation

(1.35)

(1.31)

(2.44)

Basic for underlying profit for the period

81.84

72.48

134.35





Diluted for profit for the period

97.97

90.43

151.19

Diluted for profit before exceptional items for the period

77.43

68.35

127.09

Diluted for underlying profit for the period

81.65

72.20

134.05

 

 

7. Movements in cash and net debt
















1 March   2012

Cash flow

Foreign exchange

Fair value adjustments to loan capital

 Amortisation of  premiums and discounts

30 August 2012


£m

£m

£m

£m

£m

£m








Cash at bank and in hand

40.3

-

-

-

-

49.6

Overdrafts

(0.7)

-

-

-

-

-

Cash and cash equivalents

39.6

10.2

(0.2)

-

-

49.6








Short-term bank borrowings

(13.5)

13.5

-

-

-

-

Loan capital under one year

-

-

-

-

-

-

Loan capital over one year

(530.4)

-

-

-

-

 (575.4)

Total loan capital

(530.4)

(43.0)

-

(1.3)

(0.7)

 (575.4)

Net debt

(504.3)

(19.3)

(0.2)

(1.3)

(0.7)

(525.8)

 

 

8. Pension liability

 

The pension liability in the period has increased from £598.7m to £640.0m.  The main movements in the deficit are as follows:

 



£m

Pension liability at 1 March 2012


598.7

Net actuarial losses


68.7

Employer contributions


(36.0)

Net interest cost


8.6

Pension liability at 30 August 2012


640.0

 

The actuarial losses on scheme liabilities are primarily due to the reduction in the discount factor from 4.65% to 4.10%.This was partially offset by the employer contribution paid during the period.

 

9. Related party disclosure

 

The Group's principal subsidiaries, joint ventures and associate are listed in the following table:




% equity interest




30 August

1  September

1 March


Principal activity

Country of incorporation

2012

2011

2012

Principal subsidiaries




Whitbread Group PLC

Hotels & restaurants

England

100.0

100.0

100.0

Premier Inn Hotels Limited

Hotels

England

100.0

100.0

100.0

Whitbread Restaurants Limited

Restaurants

England

100.0

100.0

100.0

Premier Inn Limited

Hotels

England

100.0

100.0

100.0

Costa Limited

Operators of coffee shops and roasters and wholesalers of coffee beans

England

100.0

100.0

100.0

Yueda Costa (Shanghai) Food & Beverage Management Company Limited

Operators of coffee shops

China

51.0

51.0

51.0

Coffeeheaven International Limited

Operators of coffee shops in eastern Europe

England

100.0

100.0

100.0

Coffee Nation Limited

Operators of customer facing espresso based coffee vending machines

England

100.0

100.0

100.0







Principal joint ventures




Premier Inn Hotels LLC

Hotels

United Arab Emirates

49.0

49.0

49.0

Rosworth Investments Limited*

Holding Company

Cyprus

0.0

50.0

50.0

Hualian Costa (Beijing) Food & Beverage Management Company Limited

Coffee shops

China

50.0

50.0

50.0







Principal associate




Morrison Street Hotel Limited

Hotels

Scotland

40.0

40.0

40.0

 

*During the period, the joint venture in Rosworth investments was sold to the joint venture partner.

 

The Group holds a 6% partnership interest in Moorgate Scottish Limited Partnership with Whitbread Pension Trustees.  Moorgate SLP holds a 67.8% investment in a further partnership, Farringdon Scottish Partnership which was established by the Group to hold property assets.  The partnerships were set up in 2009/10 as part of a transaction with Whitbread Pension Trustees and the Group retains control over both partnerships and as such they are fully consolidated in the Group financial statements.

 

Shares in Whitbread Group PLC are held directly by Whitbread PLC.  Shares in the other subsidiaries are held by Whitbread Group PLC.  All principal subsidiary undertakings have the same year end as Whitbread PLC, with the exception of Yueda Costa (Shanghai) Food & Beverage Management Company Limited which has a year end of 31 December as required by Chinese legislation.  All the above companies have been included in the Group consolidation.  The companies listed above are those which materially affect the amount of profit and the assets of the Group.

 

Transactions and balances with related parties are shown in the table below.

 


Sales to related party

£m

Amounts owed by related party

£m

Amounts owed to related party

£m

Joint ventures




  6 months to 30 August 2012

1.1

0.7

-

  6 months to 1 September 2011

0.9

0.4

-

  Year to 1 March 2012

2.8

1.3

-





Associate




  6 months to 30 August 2012

1.7

0.1

-

  6 months to 1 September 2011

1.6

-

2.5

  Year to 1 March 2012

3.1

-

2.5

 

Terms and conditions of transactions with related parties

 

Sales to and purchases from related parties are made at normal market prices.  Outstanding balances are unsecured and settlement occurs in cash.  There have been no guarantees provided or received for any related party receivables.  For the six months ended 30 August 2012, the Group has not raised any provision for doubtful debts relating to amounts owed by related parties (2011: £nil).  An assessment of bad debts is undertaken each financial year through examining the financial position of the related party and the market in which it operates.

 

 

10. Capital expenditure commitments

 

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

 


30 August

1 September

1 March


2012

2011

2012


£m

£m

£m

Property, plant and equipment

80.4

90.8

62.0

Intangible assets

0.7

-

-

 

 

11. Events after the balance sheet date

 

An interim dividend of 19.50p per share (2011: 17.50p) amounting to a dividend of £34.7m (2011: £31.0m) was declared by the Directors.  A scrip alternative will be offered.  These financial statements do not reflect this dividend payable.

 

12. Contingent liability

 

The Group received a £4.6m refund of VAT charged on gaming machine income in 2010/11, 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 HMRC's appeal is upheld the refund and associated interest of £5.3m 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 30 August 2012 which comprises 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 12.  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 Services 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 30 August 2012 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 Services Authority.

 

 

Ernst & Young LLP

London

 

22 October 2012

 


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