Final Results
Whitbread PLC
1 May 2002
Embargoed until 7am Wednesday, May 1st, 2002
1st May 2002
Whitbread PLC
A year of transformation
Strong trading results, value creation and promising outlook
- Group profit before tax £213.4m *
- Adjusted earnings per share 47.85p
- Cash inflow before financing of £309m
- Good profit growth for continuing businesses
- Healthy like-for-like sales growth in Travel Inn, Pub and High Street
Restaurants, David Lloyd Leisure
- Core Marriott outperforms with 21% yield premium
- A promising start to the new financial year
Whitbread (continuing businesses) 2001/2 % change
Sales, including joint ventures, (£m) 1821.8 + 6.6
Operating profit (£m) 249.5 + 5.9
Proforma profit before tax (£m) 187.0 +7.6
Proforma profit after tax (£m) 131.4 +10.9
Dividends per share (p) 17.8
Net assets per share (£) 6.37
(*Group profit before tax includes 10 weeks trading from the Pubs & Bars
business demerged in May, 2001. All figures are before exceptional items.)
Sir John Banham, chairman, said: 'These were strong trading results with most of
our brands exceeding 5% like-for-like sales growth.
'Restaurants and David Lloyd Leisure also were ahead of their 10% earnings
growth targets and made excellent progress in terms of ROCE. Profit in our
London hotels was held back significantly in the aftermath of September 11th but
prompt management action led to continuing market out-performance.
'Management has set about improving the returns from the continuing businesses
with considerable vigour and these results show the first signs of their
success.
'Hotels grew sales in a difficult market and virtually completed the integration
and conversion of the Swallow hotels. Core Marriott increased operating profit
and a nationwide programme to improve efficiency is expected to save £10 million
within Marriott in the current financial year. Travel Inn grew sales,
like-for-like sales and operating profit.
'Restaurants grew like-for-like sales by over 5% in its continuing businesses,
increased returns and completed its brand review, leading to the decision to
sell the Pelican Group. The division also undertook a re-organisation to reduce
future operating costs.
'David Lloyd Leisure grew sales, operating profit, margin, and returns as well
as making good progress in ensuring its new clubs generate mature levels of
return more quickly.
Corporate transactions
'Some £3 billion of corporate transactions in the last 30 months have completely
transformed Whitbread and the prospects for the business.
'During the year these transactions included the demerger of Pubs & Bars, the
disposal of 45 pub restaurants and the decision to dispose of the Pelican Group.
'Net proceeds generated during the year were £1.7 billion with the Pelican
disposal yet to come. £1.1 billion, equivalent to £2.30 per share, was returned
to shareholders in June 2001, with the balance being used to reduce group debt
and invest in future growth. Goodwill of £147 million relating to the Pelican
Group, previously written off to reserves, has been charged to the Profit and
Loss account in this year. This is a non-cash item and has no impact on
shareholders' funds. The net effect of the year's corporate transactions has
been to generate a surplus over book value of £422 million.
Impact of current year corporate
transactions £m
Surplus over Exceptional
book profit and
value loss account
Pubs & Bars
- Surplus over book value 477 NIL
- Costs (25) (25)
Net impact Pubs & Bars 452 (25)
Pelican
- Write down (26) (26)
- Goodwill - previously written off to reserves - (147)
- Reorganisation (2) (2)
Net impact - Pelican (28) (175)
Other - including taxation (2) (2)
Surplus over book value / exceptional items 422 (202)
Current trading and outlook
The new financial year has got off to a promising start. Marriott is still
experiencing softness in London although yield has been sustained ahead of the
market. Our other major brands continue in like-for-like sales growth ahead of
the 5% target.
'The outlook for our markets is positive with growth expected in the UK economy
and consumer confidence remaining high. Our brands are strong and we are
continuing to invest in their future.
'The board is confident that the transformed Whitbread will build on the success
already achieved and will continue to make good progress towards the achievement
of our ambitious financial targets.'
Dividend
A final dividend of 12.75p is proposed which will make a total dividend for the
year of 17.8p. This will be paid on 12 July, 2002 to shareholders on the
register at the close of business on 10 May, 2002.'
Copies of the report and accounts and/or the annual review will be sent to
shareholders on 15 May, 2002 and will be available to the public on the
Whitbread website www.whitbread.co.uk or from Simon Barratt, company secretary,
Whitbread PLC, CityPoint, One Ropemaker Street, London EC2Y 9HX.
For further information please contact:-
City:
David Reed 020 7806 5436
Jeremy Probert 020 7806 5443
Media:
David Reed 020 7806 5436
Jeremy Probert 020 7806 5443
Dan Waugh 020 7806 5442
(Pictures available at www.newscast.co.uk - 020 7608 1000)
(A presentation for analysts will be held at Deutsche Bank, Winchester House,
1 Great Winchester Street, London EC2N 2DB. Registration from 9.00am,
presentation at 9.30am. The presentation also will be available on the
Whitbread website on www.whitbread.co.uk )
Operating Review
Hotels
Hotels grew sales by 3.7% but saw operating profit decline by 2.4% as a result
of lower yields following September 11th. Return on capital employed improved
in core Marriott but declined overall for the same reason. Travel Inn grew
like-for-like sales by 3.6% and like-for-like ROCE by 0.5% points to 15.0%.
Marriott / Swallow
Sales £404.5m + 0.4%
Like-for-like sales - 0.1%
Operating profit £71.6m - 8.9%
ROCE 5.8% - 0.8% point
To maintain sales in a difficult market was a considerable achievement. The
operating profit decline of 8.9% also compared favourably with the 4-star market
in general. These results were achieved by compensating for the decline in US
visitors, especially to London, with leisure business at lower short-term rates.
The long-term positioning of Marriott as an upscale hotel brand, therefore,
has been protected.
The 36 Marriott hotels that have carried the brand for more than two years, grew
operating profit and margin despite a slight decline in occupancy and room
rates. Annual operating profit per room grew from £7,600 to £7,900.
The 10 Swallow hotels that were converted to the Marriott brand in the 2000/1
financial year grew sales by 13% and achieved a 9% yield premium to the 4-star
market. The 12 hotels that were converted in 2001/2 grew sales by 6% and have
achieved a 4% premium since conversion.
Travel Inn
Sales £177.3m + 12%
Like-for-like sales + 3.6%
Operating profit £60.2m + 6.7%
ROCE 12.5% - 0.8 % point
The Travel Inn brand added 1,738 new rooms and 20 new units during the year
bringing the totals to 15,924 rooms and 282 hotels. This makes Travel Inn the
UK's leading branded hotel network. Unprompted brand awareness grew from 18% to
29%.
Overall occupancy fell slightly from 82% to 81% mainly as a result of fewer
visitors to London. The provincial network of 200 hotels maintained occupancy
at 82.2%. Achieved room rate grew by 4.4% to £38.59 and yield grew 1.9% to
£31.29. Like-for-like return on capital employed also grew from 14.5% to 15%.
Travel Inn's new reservation system was introduced across the network giving
on-line access to the entire room stock. Room bookings via the website are now
running at up to 15% of the weekly total leading to cost and occupancy benefits.
Restaurants
Whitbread Restaurants grew sales by 6.4%, operating profit by 13% and return on
capital employed by 1.5%.
Pub Restaurants
Sales £576.1m + 6.1%
Like-for-like sales + 5.6%
Operating profit £71.3m + 5.5%
ROCE 9.3% + 0.6% point
Operating profit growth of 5.5% was a mix of a 9.6% increase in Brewers Fayre
and a 3.4% decline in Beefeater as trading weeks were lost and costs incurred
through the new brand conversion programme.
Brewers Fayre had a highly successful year growing like-for-like sales by 5.6%
and operating margin from 14.8% to 15.0%. The Brewster's brand won the Tommy's
award as the UK's most family-friendly restaurant and 14 new units were added
bringing the total to 134.
Beefeater also continued its segmentation strategy. Some 16% of the estate was
disrupted by this process leading to increased costs and the decline in
operating profit. The comparable Beefeater estate grew sales by 5.4% and
operating profit by 12.6%
High Street Restaurants
Sales £498.3m + 6.7%
Like-for-like sales + 3.3%
Operating profit £16.9m + 64%
ROCE 12.9% + 6.5% points
Overall, like-for-like sales growth, excluding Pelican, exceeded 5%. Although
Pizza Hut was again the biggest contributor to the 64% growth in operating
profit, both TGI Friday's and Costa made significant progress, particularly, in
the second half of the year. Like-for-like sales were up 6.0% in Pizza Hut,
4.4% in TGI Friday's and 5.7% in Costa.
Some 72 poorly performing sites were disposed of during the year and in October
Whitbread Restaurants announced the decision to dispose of the Pelican brands
including Cafe Rouge and Bella Pasta.
Sports, health and fitness
Sales £165.6m + 19%
Like-for-like sales + 15%
Operating profit £34.4m + 22%
ROCE 7.6% + 1.0% point
David Lloyd Leisure exceeded its sales and profit targets and grew return on
capital employed by 1.0 percentage point. There was a particularly strong
performance from the new and maturing clubs which led to a further improvement
in operating margin to 20.8%.
Five new clubs were opened during the year bringing the total to 49. First year
memberships are running at over double previous levels following effective
pre-opening marketing. This is expected to reduce the time taken to reach
mature club ROCE levels in excess of 16%.
The total number of David Lloyd Leisure club members grew from 220,000 to
261,000. Retention rates fell slightly to 73% following the introduction of a
new 3 month contract but remained well above the industry average of 60%.
Member satisfaction scores increased during the period by 3.7% to 74.7%. 10
sites were in the pipeline at the end of the year with 5 planned to open in 2002
/3.
Other
Pubs & Bars turnover for the first ten weeks of the financial year prior to the
demerger in May was £125.9 million with operating profit of £30.5 million.
Beer and other drinks turnover of £78.3 million relates to Whitbread's
continuing contractual relationship with Heineken and operating profit of
£15.8million relates, primarily, to Whitbread's 25% holding in Britannia Soft
Drinks.
FINANCE REVIEW
Year over year comparisons of performance
The last two years has been a period of transformation for Whitbread, inevitably
hindering year over year comparisons of performance. During this time the
following strategic initiatives have been completed:
- the disposal of Whitbread Beer Company in May 2000.
- the disposal of Whitbread's 50% interest in the First Quench off-licence joint
venture in October 2000.
- the demerger of the Pubs & Bars division in May 2001.
These transactions have created value for shareholders and enabled Whitbread to
focus on those growth segments of the UK leisure market where the group already
occupies leading positions.
Wherever possible, the results in this report are presented in a way which helps
the measurement of performance trends in continuing Whitbread. Continuing
Whitbread represents all businesses within the group at the end of the financial
year. It excludes the continuing beer activity - see note 3 to the accounts.
Operating profit and EBITDA figures, where referred to in this review, are
stated before exceptional items (see note 4 to the accounts).
Like-for-like sales figures exclude sales of outlets first opened or disposed of
during 2000/1 or 2001/2.
Proforma profit and loss account for
continuing Whitbread £(m)
2001/2 2000/1
Turnover including joint ventures 1822 1709
Operating profit before exceptional items 250 236
Interest (63) (62)
Profit before tax and exceptional items 187 174
Taxation (56) (55)
Profit after tax before exceptional items 131 119
Turnover
On a like for like basis, turnover including joint ventures increased by 4.2%.
Total turnover of continuing Whitbread increased by 6.6%. As a result of the
demerger and disposals described earlier, total turnover including joint
ventures fell by 30%.
Operating profit
Operating profit before exceptional items of continuing Whitbread divisions
increased by 5.9%. The profit contribution of each business is described in the
Operating Review. The results of all Travel Inns operated by Whitbread are now
reported under 'Hotels'. Previously, Travel Inns adjacent to Restaurants'
outlets and David Lloyd Leisure clubs were reported within the results of those
divisions. The figures for last year have been adjusted accordingly. Total
operating profit before exceptional items declined by 35%, reflecting the
demerger and disposals.
Earnings before interest, tax, depreciation and amortisation (EBITDA)
EBITDA is a good indicator of cash generation. EBITDA for continuing Whitbread
grew by 5.6%.
Interest
The net interest charge fell by £26.3 million to £67.4 million. This reduction
reflects a lower level of net debt and lower interest rates this year. Net
interest was covered 4.2 times by operating profit before exceptional items.
Profit before exceptional items and tax
On a proforma basis, see table above, profit before exceptional items and tax
for continuing Whitbread was up by 7.6%. Total profit before exceptional items
and tax, which was significantly affected by the disposals and demerger, was
down by 36%.
Taxation
The charge against profit before exceptional items for the period of £63.5
million represents an underlying rate of 29.8%. The charge includes deferred
tax, as described under 'Accounting policies' below and in note 2 to the
accounts. The tax charge for 2000/1 has been restated to reflect the adoption
of FRS19 (Deferred Tax).
The exceptional charges for impairment, totalling £173 million, do not attract
relief against current tax.
Exceptional items
A further £25 million of reorganisation and transaction costs, relating to the
demerger of Pubs & Bars, were charged as exceptional items in the year. A
charge of £26.3 million for impairment of certain high street restaurants
operated by our Pelican business was taken, also as an exceptional item, in the
year. Following the decision to dispose of the Pelican business, the related
goodwill of £146.5million, created and previously written off to reserves at the
time of acquisition, has now been written off to the profit and loss account and
credited to reserves. This accounting treatment, which accords with FRS10, has
no cash impact or effect on shareholders funds. These exceptional costs, and
other more minor charges, are fully explained in note 4 to the accounts.
Adjusted earnings per share (E.P.S) and dividend
Adjusted E.P.S. was up by 0.1%. The proposed final dividend is 12.75 pence per
share. The full year's dividend per share, interim plus final, is 17.80 per
share. This level of payment reflects the board's proposal for the current year
to pay dividends of approximately 40% of post-tax profits.
Capital expenditure
£287 million was invested in property and plant, compared with £332 million last
year. Of this amount, £130 million related to the acquisition and development
of new sites.
Capital expenditure (£m) 2001/2 2000/1
Hotels - Marriott/Swallow 71 82
-Travel Inn 71 45
Restaurants - pub restaurants 53 36
- high street restaurants 18 31
Sports, health and fitness
Other 57 33
3 8
Continuing Whitbread 273 235
Pubs & Bars 14 85
Beer - 12
287 332
Cash Flow
Cash inflow before financing was £309 million. This figure was significantly
impacted by the net cash received as a result of disposals and the Pubs and Bars
demerger together with the outflow of the costs of that demerger. The tax and
dividend payments relating to businesses that are not part of continuing
Whitbread also impacted the figure. On a proforma basis, continuing Whitbread
cash flow is:
Proforma Cash Flow - continuing Whitbread 2001/2 (£m)
As Published Continuing Notes Relating to Demerger/
Whitbread Disposals
Cashflow from Operations 352 336 16
Dividends Received 3 3 -
Interest Costs etc. (72) (67) (5)
Taxation (84) (37) (1) (47)
Capital Expenditure (net) (224) (212) (12)
Acquisitions and Disposals 462 - 462
Dividends (128) (49) (2) (79)
Net Cash Inflow/ (Outflow) 309 (26) 335
Notes:
(1) Estimated Taxation paid in current year on profits of continuing Whitbread
(2) Apportioned dividend on basis of 2001/2 Dividend Policy
The net cash outflow for continuing Whitbread of £26 million is after the group
invested £130 million of expenditure in new outlets, leaving the group with an
underlying cash inflow of c.£100 million per annum.
Demerger of Pubs & Bars
The demerger of the Pubs & Bars division was concluded in May 2001 at a value of
£1,612 million, after adjustments for working capital. £1,129 million of cash
was returned directly to shareholders and £483 million was retained by the group
to pay transaction costs and reduce long-term borrowings. The transaction
realised a gain on the book value of Pubs & Bars of £477 million. This gain is
reported in the movement in shareholders' funds (see note 13 to the accounts)
but, for technical reasons, it is not included in the profit and loss account.
Second half year
Profit for the second half was lower than that for the first half. The first
half benefited from 10 weeks trading of Pubs & Bars, while the second half
suffered from the consequences of September 11th on our hotels businesses.
Shareholder return
A 3 for 5 share capital consolidation was implemented at the time of the Pubs &
Bars demerger. This reflected the £2.30 per share returned to shareholders in
June 2001.
Adjusted earnings per share, calculated on the weighted average number of shares
in issue during the period, increased by 0.1% to 47.85 pence. The total
dividend for the year, interim plus final, amounts to 17.80 pence per share.
The company's share price opened the year at 628 pence and closed the year at
633 pence. Net asset value per share at the balance sheet date was 637 pence,
compared with 507 pence (restated for FRS19 - see note 2 to the accounts) at the
previous year end.
Accounting policies
FRS19 (Deferred Tax) has been adopted for these accounts. Deferred tax is the
tax attributable to the timing differences arising from the inclusion of items
of income and expenditure in one period for tax purposes (in accordance with tax
legislation) and another for accounting (in accordance with UK company law and
financial reporting standards). The principal timing difference for Whitbread
relates to hotel buildings and to furniture, fixtures and equipment in all our
properties. For these assets, tax relief normally exceeds the charge against
profit for depreciation in the early years of their life. The position reverses
in later years.
The impact of adopting FRS19 is detailed in note 2 to the accounts. It should
be emphasised that FRS19 has no impact on tax paid or cash flows.
Pension costs and assets and liabilities have continued to be accounted for on
the basis of SSAP 24 (Accounting for pension costs).
Pensions
FRS17 requires the pension fund assets to be valued at market value at the
balance sheet date. This method, by requiring a valuation on a specific day,
introduces a higher level of volatility into the method of accounting for
pensions. On an FRS17 basis, there would have been a pension fund deficit of
£84 million at the balance sheet date. This equates to c7% of the value of the
fund. This shortfall would be reduced to £59 million after tax. The defined
benefit scheme has now been closed to new members.
Financial risks and treasury policies
The main financial risks faced by the group relate to: the availability of funds
to meet business needs; fluctuations in interest rates; and the risk of default
by a counterparty in a financial transaction.
The Treasury Committee, which is chaired by the Finance Director, reviews and
monitors the treasury function. The undertaking of financial transactions of a
speculative nature is not permitted.
The group finances its operations by a combination of internally-generated cash
flow, bank borrowings and long-term debt market issues. The group seeks to
achieve a spread in the maturity of its debts.
Interest rate swaps and interest rate caps are used to achieve the desired mix
of fixed and floating rate debt. The group's policy is to fix or cap a
proportion of projected net interest costs over the next five years. This
policy reduces the group's exposure to the consequences of interest rate
fluctuations.
The group maintains an approved list of counterparties for interest rate swaps
and caps, foreign exchange contracts and term deposits. The group monitors its
positions with, and the credit ratings of, its counterparties.
Financial position
Net debt at the year end amounted to £976 million, resulting in a balance sheet
gearing ratio of 52%. Net interest was covered 4.2 times by operating profit
before exceptional items.
Following the demerger of Pubs & Bars we reduced the £625 million bank facility,
which expires in April 2003, by £400 million. The £625 million facility
expiring in April 2005 remains in place. At the year end, £452 million of the
total committed credit facility of £850 million was unused.
Interest rate risk management
At the year end £548 million (58%) of group net sterling debt was fixed for a
weighted average of 8 years, using fixed rate borrowings and interest rate
swaps. The average rate of interest on this fixed rate sterling debt was 6.8%.
Based on the group's net debt position at the year end, a 1% change in interest
rates would affect costs by approximately £4 million, or around 1.5% of the 2001
/2 operating profit before exceptional items.
Foreign currency risk management
At the year end foreign currency borrowings amounted to £47 million. All
foreign currency borrowings, other than those made to hedge overseas
investments, have been swapped into sterling.
Transaction exposures resulting from purchases in foreign currencies may be
hedged by forward foreign currency transactions and currency options.
Group Profit and Loss Account
Year Ended 2 March 2002 Notes 2001/2
Before exceptional Exceptional items
items (note 4) Total
£m £m £m
Turnover
Group and share of joint ventures 2,171.6 - 2,171.6
Less share of joint ventures' turnover (157.3) - (157.3)
------------ ------------- -------------
Continuing operations 1,888.4 - 1,888.4
Discontinued operations 125.9 - 125.9
------------ ------------- -------------
Group turnover 3 2,014.3 - 2,014.3
============ ============= =============
Group operating profit 250.9 (174.5) 76.4
Share of operating profit in:
Joint ventures 12.2 - 12.2
Associates 16.9 - 16.9
----------- ----------- -----------
Continuing operations 249.5 (174.5) 75.0
Discontinued operations 30.5 - 30.5
------------- ------------- -------------
Operating profit of the group, joint
ventures and associates 3, 4 280.0 (174.5) 105.5
Non-operating items - continuing
operations
Net profit/(loss) on disposal of fixed
assets
Group excluding joint ventures and
associates
- (2.0) (2.0)
Joint ventures - - -
Associates - (0.2) (0.2)
Net loss on the disposal of businesses 10 - (3.9) (3.9)
Fundamental restructuring costs - (25.0) (25.0)
--------- ------------ ------------
Profit before interest 280.0 (205.6) 74.4
Interest 5 (66.6) (0.8) (67.4)
----------- ------------ -------------
Profit before taxation 213.4 (206.4) 7.0
Taxation 6 (63.5) 4.1 (59.4)
------------ ------------- -------------
Profit/(loss) after taxation 149.9 (202.3) (52.4)
Non-equity minority interests (0.2) - (0.2)
------------ ------------- -------------
Profit/(loss) earned for ordinary
shareholders
149.7 (202.3) (52.6)
Ordinary dividends (52.6) - (52.6)
------------ ------------- -------------
Retained profit/(loss) for the year 97.1 (202.3) (105.2)
======= ======= ========
Earnings per share (pence) 7
Basic (15.91)
Adjusted basic 47.85
Diluted (15.91)
Adjusted diluted 47.68
Dividends per share (pence)
Interim 5.05
Proposed final 12.75
Group Profit and Loss Account (Continued)
Year ended 2 March 2002 Notes 2000/1 (restated)
Before exceptional Exceptional
items items (note 4) Total
£m £m £m
Turnover
Group and share of joint ventures 3,095.2 - 3,095.2
Less share of joint ventures' turnover
(500.6) - (500.6)
------------- -------------- --------------
Continuing operations 1,916.9 - 1,916.9
Discontinued operations 677.7 - 677.7
------------- -------------- --------------
Group turnover 3 2,594.6 - 2,594.6
======= ======= =======
Group operating profit 404.0 (2.2) 401.8
Share of operating profit in:
Joint ventures 10.0 (0.9) 9.1
Associates 13.8 - 13.8
----------- ----------- ------------
Continuing operations 250.8 (3.1) 247.7
Discontinued operations 177.0 - 177.0
----------- ----------- ------------
Operating profit of the group, joint
ventures and associates 3, 4 427.8 (3.1) 424.7
Non-operating items - continuing
operations
Net profit/(loss) on disposal of fixed
assets
Group excluding joint ventures and
associates - (5.0) (5.0)
Joint ventures - 0.2 0.2
Associates - 0.5 0.5
Net loss on the disposal of businesses 10 - (8.8) (8.8)
Fundamental restructuring costs - (26.0) (26.0)
----------- ---------- ------------
Profit before interest 427.8 (42.2) 385.6
Interest 5 (93.4) (0.3) (93.7)
----------- ------------ ------------
Profit before taxation 334.4 (42.5) 291.9
Taxation 6 (106.4) (1.4) (107.8)
------------ ------------ ------------
Profit/(loss) after taxation 228.0 (43.9) 184.1
Non-equity minority interests (0.1) - (0.1)
------------ ------------ ------------
Profit/(loss) earned for ordinary
shareholders
227.9 (43.9) 184.0
Ordinary dividends (153.1) - (153.1)
------------ ------------ ------------
Retained profit/(loss) for the year 74.8 (43.9) 30.9
======= ======= =======
Earnings per share (pence) 7
Basic 37.18
Adjusted basic 47.79
Diluted 37.16
Adjusted diluted 47.76
Dividends per share (pence)
Interim 8.05
Proposed final 23.10
Statement of total recognised gains and losses
Year ended 2 March 2002 2000/1
2001/2 (restated)
£m £m
Profit/(loss) earned for ordinary shareholders
Group excluding joint ventures and associates (71.0) 171.6
Joint ventures 7.4 3.9
Associates 11.0 8.5
--------- ---------
Group including joint ventures and associates (52.6) 184.0
Currency translation differences on net foreign investment (1.5) 1.5
--------- ---------
(54.1) 185.5
Prior year adjustment arising from the implementation of
FRS19 (158.0) -
--------- ---------
Total gains and losses recognised since previous year end (212.1) 185.5
===== =====
Note:
The surplus over net assets of £477.3m recorded on the demerger of Pub & Bars
has been reported in shareholders funds (note 13).
Group cash flow statement
Year ended 2 March 2002 Notes 2001/2 2000/1
£m £m
Cash flow from operating
activities 8 352.1 492.3
Dividends received from joint
ventures and associates 2.8 3.5
Returns on investments and
servicing of finance
Interest received 1.8 2.0
Interest paid (75.0) (94.9)
Debt issue costs - (5.3)
Loan interest received 1.3 1.3
--------- ---------
Net cash outflow from returns on
investments and servicing of
finance (71.9) (96.9)
Taxation
UK Corporation Tax paid (83.4) (92.9)
Capital expenditure and financial
investment
Property and plant purchased (286.8) (331.9)
Investments purchased and loans
advanced (9.9) (6.7)
Property and plant sold 64.4 130.8
Investments sold and loans
realised 8.0 22.1
--------- ---------
Net cash outflow from capital
expenditure and financial
investment (224.3) (185.7)
Acquisitions and disposals
New businesses acquired 9 - (11.0)
Businesses sold and demerged 10, 11 461.6 500.3
--------- ---------
Net cash inflow from acquisitions
and disposals 461.6 489.3
Equity dividends paid (128.1) (148.2)
---------- ---------
Net cash inflow before use of
liquid resources and financing 308.8 461.4
Management of liquid resources
Net movement on short term
securities and bank deposits 12 0.2 0.8
Financing
Minority dividends (0.2) (0.1)
Issue of shares 6.3 6.2
Repurchase of shares - (42.6)
Net movement on short term bank
borrowings
12 (16.0) (28.0)
Loan capital issued 12 5.0 285.0
Loan capital repaid * 12 (303.5) (669.5)
---------- ----------
Net cash outflow from financing (308.4) (449.0)
---------- ----------
Increase in cash 12 0.6 13.2
===== =====
* The net of receipts and payments on revolving credits is included in loan
capital repaid.
Group balance Sheet
2 March 2002 Notes 2001
2002 (restated)
£m £m
Fixed assets
Intangible assets 149.9 159.2
Tangible assets 2,996.1 4,138.1
Investments
In joint ventures
- Share of gross assets 70.9 69.2
- Share of gross liabilities (31.6) (28.3)
---------- ----------
39.3 40.9
In associates 63.6 53.0
Other investments 6.9 2.4
---------- ----------
3,255.8 4,393.6
---------- ----------
Current assets and liabilities
Stocks 28.1 36.1
Debtors 112.0 165.9
Cash at bank and in hand 73.1 66.9
---------- ----------
213.2 268.9
Creditors - amounts falling due within one
year (431.8) (689.9)
---------- ----------
Net current liabilities (218.6) (421.0)
---------- ----------
Total assets less current liabilities 3,037.2 3,972.6
Creditors - amounts falling due after more
than one year
Loan capital (978.5) (1,272.6)
Provisions for liabilities and charges (170.2) (207.0)
---------- ----------
1,888.5 2,493.0
====== ======
Capital and reserves
Called up share capital 147.7 2,207.8
Share premium account 4.4 -
Revaluation reserve 140.4 621.5
Other reserves (1,815.5) (1,830.5)
Profit and loss account 3,405.0 1,488.9
------------ ------------
Shareholders' funds 13 1,882.0 2,487.7
Equity minority interests 3.4 2.2
Non-equity minority interests 3.1 3.1
------------ ------------
1,888.5 2,493.0
====== ======
Notes to the accounts
1. Restructuring of the Whitbread Group
The Group restructuring in February 2001 was accounted for in accordance with
the principles of merger accounting set out in Financial Reporting Standard No 6
(FRS6) and schedule 4A to the Companies Act 1985. In accordance with merger
accounting principles, the shares issued in connection with the scheme of
arrangement to acquire Whitbread Group PLC, as adjusted to reflect the issue of
options and repurchase of shares, have been treated as if issued throughout the
year and the corresponding year.
2. Changes to accounting policies
FRS 19 (Deferred Tax) has been adopted in the current year. The comparative
amounts have been restated to comply with the new standard. The effect on the
profit and loss account is to increase the taxation charge for the Group by
£11.1m (2001 - increase the taxation charge by £13.2m). The balance sheet
effect is to increase provisions in Central Costs by £139.4m (2001 - £165.4m)
and to increase goodwill in Marriott/Swallow hotels by £7.0m (2001 - £7.4m).
Provisions for deferred tax have not been discounted.
FRS 18 (Accounting Policies) has been adopted in the current year. It had no
effect on the reported figures.
Although the first stage of the FRS 17 (Retirement Benefits) transitional
arrangements has been adopted in the current year there have been no changes to
the reported figures which continue to be prepared on the basis of SSAP 24.
3. Segmental analysis of turnover, profit and net assets
Year ended 2 March 2002 Operating profit #
Turnover EBITDA (S) Net assets
By business segment £m £m £m £m
Hotels - Marriott/Swallow 404.5 112.2 71.6 1,234.2
- Travel Inn 177.3 75.3 60.2 481.7
------------ ------------ ------------ ------------
581.8 187.5 131.8 1,715.9
------------ ------------ ------------ ------------
Restaurants
- Pub Restaurants 576.1 100.2 71.3 769.1
- High Street Restaurants 498.3 34.0 16.9 131.3
------------ ------------ ------------ ------------
1,074.4 134.2 88.2 900.4
------------ ------------ ------------ ------------
Sports, Health and Fitness 165.6 53.6 34.4 453.5
------------ ------------ ------------ ------------
1,821.8 375.3 254.4 3,069.8
Pubs & Bars
- managed 99.4 21.1 16.2 -
- leased 26.5 14.9 14.3 -
Beer and Other Drinks 78.3 15.8 15.8 56.5
------------ ------------ ------------ ------------
Segmental turnover, profit and
net assets 2,026.0 427.1 300.7 3,126.3
Inter-segment turnover (see note
below) (2.9)
Share of joint ventures'
turnover (157.3)
Central Costs 148.5 (16.9) (20.7) (261.8)
Exceptional items (note 4) (174.5) (174.5)
------------ ------------ ------------ ------------
2,014.3 235.7 105.5 2,864.5
====== ====== ====== ======
By geographical segment
United Kingdom 1,942.6 228.4 101.9 2,828.0
Rest of the world 71.7 7.3 3.6 36.5
------------ ------------ ------------ ------------
2,014.3 235.7 105.5 2,864.5
====== ====== ====== ======
3. Segmental analysis of turnover, profit and net assets (continued)
Year ended 3 March 2001 Operating
Turnover EBITDA * profit ** Net assets
(restated) (restated) (restated) (restated)
By business segment £m £m £m £m
Hotels - Marriott/Swallow 402.7 115.6 78.6 1,199.7
- Travel Inn 158.1 70.0 56.4 424.2
------------ ------------ ------------ ------------
560.8 185.6 135.0 1,623.9
------------ ------------ ------------ ------------
Restaurants
- Pub Restaurants 542.9 96.2 67.6 779.4
- High Street Restaurants 466.8 26.8 10.3 161.9
------------ ------------ ------------ ------------
1,009.7 123.0 77.9 941.3
------------ ------------ ------------ ------------
Sports, Health and Fitness 138.7 45.8 28.1 425.7
------------ ------------ ------------ ------------
1,709.2 354.4 241.0 2,990.9
Pubs & Bars
- managed 530.9 132.5 105.4 770.6
- leased 146.8 74.8 71.6 390.1
Beer and Other Drinks 683.8 34.5 25.9 49.5
Acquired businesses for disposal 16.3 1.7 1.7 (1.6)
*
------------ ------------ ------------ ------------
Segmental turnover, profit and
net assets 3,087.0 597.9 445.6 4,199.5
Inter-segment turnover (see note
below) (65.0)
Share of joint ventures'
turnover (500.6)
Central Costs 73.2 (12.6) (17.8) (415.2)
Exceptional items (note 4) (3.1) (3.1)
------------ ------------ ------------ ------------
2,594.6 582.2 424.7 3,784.3
====== ====== ====== ======
By geographical segment
United Kingdom 2,525.6 575.9 422.1 3,762.2
Rest of the world 69.0 6.3 2.6 22.1
------------ ------------ ------------ ------------
2,594.6 582.2 424.7 3,784.3
====== ====== ====== ======
* EBITDA is earnings before interest, tax, depreciation and amortisation.
** Operating profit is stated after charging the amortisation of goodwill as
follows:
2000/1
2001/2 (restated)
£m £m
Hotels 8.1 8.2
Sports, Health and Fitness 0.4 0.4
------------ ------------
* The acquired business for disposal relates mainly to the pubs business
acquired with Swallow Group Ltd, which was sold on 7 June 2000.
The turnover, profit and net assets of Travel Inn have been reported separately
for the first time. In addition Restaurants has been sub-analysed between Pub
Restaurants and High Street Restaurants. Comparatives have been restated
accordingly.
Following the sale of the Whitbread Beer Company there remains a continuing
activity within the Beer segment. This is as a result of the terms of the sale
of the Whitbread Beer Company to Interbrew which included arrangements for
Whitbread to retain the people and the necessary production capacity to ensure
compliance with its obligations for the remaining period of the Heineken and
Murphy licences.
3. Segmental analysis of turnover, profit and net assets (continued)
Segmental turnover includes the group's share of joint venture turnover as
follows:-
2001/2 2000/1
£m £m
Hotels - Marriott/Swallow 0.8 2.6
- Travel Inn 1.6 0.3
High Street Restaurants 154.9 138.2
Beer and Other Drinks - 359.5
------------ ------------
157.3 500.6
====== ======
Inter-segment turnover was from Beer, High Street Restaurants and Sports, Health
& Fitness to the other segments. Central Costs turnover comprises, primarily,
food distribution services provided to a third party and a joint venture. The
geographical analysis of turnover and profit is by source. The analysis of
turnover by destination was not materially different. Sales between
geographical segments were not material.
Net assets included above are total net assets excluding net debt.
The exceptional costs included in operating profit are detailed in note 4. The
analysis is as follows:
2001/2 2000/1
£m £m
Pub Partnerships, Inns and Restaurants * - 2.9
High Street Restaurants 174.5 -
Other drinks - 0.9
Central Costs - (0.7)
------------ ------------
174.5 3.1
====== ======
* These costs relate to the restructuring of these divisions into Pubs & Bars
and Restaurants. This was a combined project and there was no suitable basis
for allocating the costs to individual divisions.
4. Exceptional items
2001/2 2000/1
£m £m
Restructuring/rationalisation costs (1.7) (2.2)
Impairment of leasehold properties (26.3) -
Impairment of goodwill (146.5) -
------------ ------------
Group excluding joint ventures and associates (174.5) (2.2)
Joint venture reorganisation costs - (0.9)
------------ ------------
Charged against operating profit (174.5) (3.1)
Non-operating items
Net profit/(loss) on disposal of fixed assets
- Group excluding joint ventures and associates (2.0) (5.0)
- Joint ventures - 0.2
- Associates (0.2) 0.5
Net loss on the disposal of businesses (note 10) (3.9) (8.8)
Fundamental reorganisation costs
- Demerger of Pubs & Bars - transaction costs (14.6) (11.0)
Reorganisation costs (10.4) (15.0)
------------ ------------
(205.6) (42.2)
====== ======
The restructuring costs in 2001/2 relate to the planned disposal of the Pelican
High Street Restaurants business. The restructuring costs, charged against
operating profit in 2000/1 relate mainly to the reorganisation of Pub
Partnerships, Inns and Restaurants into the new Pubs & Bars and Restaurants
divisions.
The impairment of leasehold properties relates to leasehold properties operated
by Pelican. The impairment of goodwill relates to the goodwill created, and
previously written off to reserves, on the acquisition of the Pelican and
BrightReasons businesses. An equivalent amount has been added to reserves.
The transaction costs are principally advisers' fees and legal costs. The
fundamental reorganisation costs relate to the demerger of Pubs & Bars in May
2001 and the sale of the Whitbread Beer Company in May 2000.
5. Interest
2001/2 2000/1
£m £m
Interest payable 71.4 96.7
Interest receivable (3.1) (3.2)
Interest capitalised (3.3) (3.4)
------------ ------------
65.0 90.1
------------ ------------
Interest payable by:
Joint ventures 0.9 1.5
Associates 0.7 1.8
------------ ------------
66.6 93.4
Exceptional interest payable * 0.8 0.3
------------ ------------
67.4 93.7
====== ======
* The exceptional interest payable represents refinancing costs associated with
the demerger of the Pubs and Bars business.
6. Taxation
2000/1
2001/2 (restated)
£m £m
Current taxation on profits for the year before exceptional
items
UK Corporation Tax 47.8 82.8
Adjustments to UK Corporation Tax for earlier periods (4.0) (11.0)
------------ ------------
43.8 71.8
Overseas tax (0.2) -
Adjustments to overseas tax for earlier periods (0.1) -
Joint ventures 3.8 2.8
Associates 5.0 3.5
------------ ------------
52.3 78.1
Current tax on operating exceptional items (0.5) (0.4)
Group
Current tax on non-operating exceptional items
Group (3.6) 16.9
------------ ------------
Total current taxation 48.2 94.6
------------ ------------
Deferred tax on profit before exceptional items
Timing differences - Group 11.1 28.3
- Joint Ventures 0.1 -
Deferred tax on exceptional items
Timing differences - Group - (15.1)
------------ ------------
Total deferred taxation 11.2 13.2
------------ ------------
Total taxation charge 59.4 107.8
====== ======
7. Earnings per share
Basic earnings per share is calculated by dividing earnings for ordinary
shareholders of £(52.6m) (2000/1 - £184.0m) by the weighted average number of
ordinary shares in issue during the year, 330.6m (2000/1 - 494.9m). Adjusted
basic earnings per share is calculated as follows:
Earnings (£m) Earnings per share (p)
2000/1 2000/1
2001/2 (restated) 2001/2 (restated)
Earnings and basic earnings per
share (52.6) 184.0 (15.91) 37.18
Earnings and basic earnings per
share attributable to:
Goodwill amortisation 8.5 8.6 2.57 1.74
Exceptional costs, net of tax 202.3 43.9 61.19 8.87
---------- ------------ ------------ ------------
Adjusted earnings and basic
earnings per share 158.2 236.5 47.85 47.79
====== ====== ====== ======
Earnings includes a number of exceptional items. In order to demonstrate the
effect of these, together with the impact of goodwill amortisation, an adjusted
earnings per share figure is also presented. 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 330.6m
(2000/1 - 495.2m) and for the adjusted diluted calculation 331.8m (2000/1 -
495.2m).
8. Net cash inflow from operating activities
2000/1
2001/2 (restated)
£m £m
Group operating profit 76.4 401.8
Investment income - (0.1)
Depreciation/amortisation 130.2 157.5
Impairment of leasehold properties and goodwill 172.8 -
Payments against provisions (24.6) (29.4)
Other non-cash items (1.9) 5.4
Increase in stocks (0.1) (12.6)
(Increase)/decrease in debtors 10.3 (109.0)
Increase/(decrease) in creditors (11.0) 78.7
------------ ------------
Cash flow from operating activities 352.1 492.3
====== ======
9. Acquisitions
2001/2 2000/1
£m £m
Payments in respect of previous years'
acquisitions. - 11.0
====== ======
10. Disposals
2001/2
£m
Intangible fixed assets 0.8
Tangible fixed assets 3.3
------------
Carrying value of net assets 4.1
Gross proceeds 1.5
Less costs (1.3)
Net proceeds 0.2
------------
Profit/(loss) on disposal (3.9)
======
Net sale proceeds 0.2
Accrued costs 0.4
------------
Cash inflow 0.6
======
The above relates primarily to the disposal of Life Cafe in June 2001.
11. Demerger of Pubs & Bars division
2001/2
£m
Fixed assets 1,193.4
Investments 0.4
Net working capital, excluding cash and overdraft (22.4)
Deferred tax provision (37.1)
------------
Gross assets demerged from group 1,134.3
Net cash received (482.5)
------------
Net assets demerged 651.8
======
Net cash received 482.5
Total transaction costs (25.6)
Less - paid in prior year 3.8
- accrued costs 0.3
------------
Transaction costs paid in current period
(21.5)
------------
Cash inflow from demerger 461.0
======
12. Reconciliation of net cash flow to movement in net debt
2001/2 2000/1
£m £m
Increase in cash in the period 0.6 13.2
Cash outflow from movement in loan capital 298.5 389.8
Cash inflow from movement in liquid resources
Cash outflow from movement in short-term borrowings (0.2) (0.8)
16.0 28.0
------------ ------------
Changes in net debt resulting from cash flows 314.9 430.2
Foreign exchange movements 0.3 (1.1)
Amortisation of premiums and discounts 0.1 0.8
------------ ------------
Movement in net debt in the period 315.3 429.9
Opening net debt (1,291.3) (1,721.2)
------------ ------------
Closing net debt (976.0) (1,291.3)
====== ======
13. Shareholders' funds
2002 2001
£m £m
Movements in shareholders' funds
Equity shareholders' funds at 3 March 2001 -as reported 2,645.7 2,536.3
Adjust for the implementation of FRS19 (see note 2) (158.0) (144.4)
------------ ------------
Equity shareholders' funds at 3 March 2001 - restated 2,487.7 2,391.9
Profit/(loss) earned for ordinary shareholders (52.6) 184.0
Dividends (52.6) (153.1)
------------ ------------
(105.2) 30.9
Other recognised gains and losses relating to the year (1.5) 1.5
Goodwill on disposal - 95.6
Share capital issued 6.3 10.4
Share capital repurchased - (42.6)
Value of Pubs & Bars demerger (1,611.6)
Gain over book value 477.3
------------
Gross assets demerged from group (1,134.3)
Value of debt demerged 482.5
------------
Net Assets demerged (651.8) -
Impairment of goodwill (see note 4) 146.5 -
------------ ------------
Equity shareholders' funds at 2 March 2002 1,882.0 2,487.7
====== ======
14. Accounts
The financial information above, which has been prepared on the same basis as
set out in the 2000/1 financial statements, with the exception of the accounting
for deferred tax (see note 2), does not constitute statutory accounts as defined
in the Companies Act 1985. The financial information for the period ended 2
March 2002 has been extracted from the statutory accounts on which an
unqualified audit opinion has been issued. Statutory accounts for the period
ended 2 March 2002 will be delivered to the Registrar of Companies in due
course. The comparative financial information is based on the statutory accounts
for the financial period ended 3 March 2001. Those accounts, upon which the
auditors issued an unqualified opinion, have been delivered to the Registrar of
Companies.
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