Preliminary Results

25th Apr 2006 07:02

Whitbread PLC25 April 2006 25th April, 2006 Whitbread PLC preliminary results for the financial year to 2nd March 2006 Financial Highlights - Continuing Whitbread •Profit before tax and exceptional items up 13.1% to £181.1m (2004/5: £160.1m) •Group sales up 9.2% to £1,584.0m (2004/5: £1,450.5m) •Final dividend up 8.7% to 19.95p; full-year dividend up 8.1% to 27.30p (2004/5: 25.25p) •Proforma basic EPS of continuing operations up 8.8% Statutory •Total profit before tax £264.4m (2004/5: £168.2m) •Profit before tax after exceptional items on continuing operations £101.9m (2004/5: £143.2m) •Total EPS is 99.9p (2004/5: 56.6p) •Basic EPS on continuing operations 21.8p (2004/5 33.4p) Key highlights •Completion of Marriott asset sale •Next steps in execution of strategy: + •Continued expansion of Premier Travel Inn in UK and now overseas + •Focus pub restaurants on joint budget hotel sites with potential to build c. 100 new Premier Travel Inns on the existing estate + •Plan to dispose of solus pub restaurants + •Continued operational improvement at David Lloyd Leisure + •New target to double number of Costa stores •Asset disposals announced last year on track to realise £1.3bn •Accelerated capital return of £400m bringing total to £810m Anthony Habgood, chairman Whitbread PLC, said: "My first year as Chairman hasseen the company continue to evolve. Our announcements today are good evidenceof the progress we are making towards becoming a leaner, sharper and morefocused group. We are intent on continuing to deliver shareholder value throughutilising our assets ever more effectively whilst achieving profitable growth inour chosen markets." Alan Parker, chief executive Whitbread PLC, said: "Over the past 12 months wehave delivered important structural and operational changes across ourbusinesses to improve performance and create value. We have made continuedprogress towards our stated strategic objectives of focusing our management andcapital on those businesses in which we have leading positions and stronggrowth prospects. "Premier Travel Inn continues to deliver outstanding performance. It is clearthat the combination of a Premier Travel Inn and a pub restaurant is acompelling customer proposition and provides industry leading returns. We havedecided to focus our Pub Restaurants business on these joint sites and todevelop c. 100 new Premier Travel Inns from further sites in the existingestate. We intend to dispose of the balance of our freestanding pub restaurants.We will also be reviewing the nature and size of our investments in TGI Friday'sand Pizza Hut. "The encouraging early signs of improvements in the performance of David LloydLeisure have continued and I am confident that our decision to change themanagement and improve the operations of that business will prove to have beenwell founded. Costa's strong performance has continued and it is now establishedas a highly profitable growth brand. We have set a new target to double thenumber of stores by 2010. "Our priority for the coming year is to continue to drive improvements inoperating performance and ensure we put the foundations in place to createsustainable long-term growth". For further information contact: Whitbread investor relationsChristopher Rogers 0207 806 5491 Whitbread corporate communicationsAnna Glover 01582 844 439 Tulchan CommunicationsAndrew Grant / Miranda Acland 0207 353 4200 (Pictures available to press at www.vismedia.co.uk ) A presentation for analysts will be held at London Stock Exchange, 10Paternoster Square, London. EC4M 7LS. Registration is from 9.00am; thepresentation is at 9.30am. A live audio webcast of the presentation will beavailable on the investors section of the website at: www.whitbread.co.ukAlternatively, you can listen to the presentation by dialling: +44 (0) 207 1620125. This will be available as a replay for one week. To listen dial in number020 7031 4064 and enter the passcode: 702602 Chief Executive's Review Group turnover from continuing operations grew year on year by 9.2% to£1,584.0m. This growth was driven by outlet expansion across our businessesparticularly at Premier Travel Inn and Costa, underlying like for like salesgrowth across the Group of 0.4% and the full year effect of the Premier Lodgeacquisition. Sales growth excluding the year on year impact of Premier Lodge was4.7%. Profit before tax and exceptional items for the year from continuing operationswas up 13.1% to £181.1m. On a proforma basis, adjusting for the impact of theMarriott disposal and the special dividend, the underlying basic earnings pershare on a continuing basis is up just under 9% to 46.0p. Premier Travel Inn, the UK's No. 1 hotel brand, continues to deliver outstandingperformance. Occupancy levels remain the highest in the industry at 80.8% on alike for like basis. We have set out an ambitious new growth target of 45,000rooms in the UK by 2010. The brand is also set to launch overseas and we havetoday announced a joint venture agreement with Emirates Group to introducebudget hotels to the Gulf region, initially with three sites identified inDubai. Much work has been done to identify how we will improve the performance of ourpub restaurant business. It is clear that those sites, with a Premier Travel Innand a pub restaurant (271 sites) provide complementary strengths and deliverindustry-leading returns. Accordingly, we have decided to focus on theoperations of these joint sites. Through re-engineering the model to utilise asmaller footprint c. 100 additional Premier Travel Inns could be built thusconverting solus pub restaurants into joint sites. The full potential for theadditional Premier Travel Inn estate will be finalized in the next few monthsafter a comprehensive planning assessment. We plan to sell the balance of thefreestanding pub restaurants. I am pleased to announce the appointment of Mark Phillips, currently ManagingDirector, Costa as the new Managing Director, Pub Restaurants, replacing PhilUrban who will be leaving Whitbread. Mark has done a great job in building Costainto the UK's most successful coffee shop brand. His strong commercial andoperations experience make him the ideal leader to take the pub restaurantsbusiness forward. I am pleased to announce the appointment of John Derkach, currently ManagingDirector, Pizza Hut UK to replace Mark Phillips as the new Managing Director,Costa. John will take over the leadership of a business that has had anexceptional year. Costa's profit and sales results clearly demonstrateout-performance in the UK's coffee shop sector and we have seen a record 29%increase in store growth, opening 146 new stores, 52 of which have beeninternational. At David Lloyd Leisure, despite a competitive marketplace, the new managementteam has successfully reversed the negative trends of the first half and endedthe year with like for like membership growth and total membership at a recordhigh. This success has been achieved through a clear plan focused on twopriorities; new member sales and retention of existing members. During the year we have taken a disciplined approach to capital investment andhave aggressively pursued organic growth in our best performing brands - PremierTravel Inn and Costa. We have largely completed the asset disposals announced last year and are ontrack to realise proceeds of £1.3bn. From the monies raised through the sale ofour Marriott hotels business, our holding in Britvic and The Brewery site atChiswell Street we committed to returning £800m to shareholders. £400m hasalready been returned via a special dividend last May and in October wecommenced an on-market share buy back programme, which, as at the year end, hadreturned £9.5m. Today we are announcing that we will now return a further £400m making a totalsince last May of just under £810m. It is expected that the return will bestructured as a bonus issue of B shares to give shareholders a choice betweenreceiving the cash in the form of income or capital, and, so far as possible, togive those who choose capital some choice as to when the return is made. Thereturn will be accompanied by a share consolidation to maintain comparability ofearnings per share and other company data. A circular seeking shareholderapproval for the return is expected to be issued in May and cash returned inJuly 2006. Finally, the overhead reduction programme announced last October clearlydemonstrates our commitment to tightly controlling costs and we are on track todeliver the £25m of savings over two years. Outlook The new financial year has begun in line with our expectations. Over the comingtwelve months we anticipate that the operating environment will continue to bechallenging. We believe our plans for improving operating performance andefficiencies, combined with accelerated expansion at Premier Travel Inn andCosta, will enable us to achieve further growth in the year ahead. Premier Travel Inn 2005/6 ChangeSales £407.8m 27.7%Like-for-like sales 7.0%Operating Profit (Pre exceptionals) £139.8m 30.4%Operating Profit (Post exceptionals) £139.2m 37.8% Premier Travel Inn has delivered another strong performance in 2005/6 with totalsales increasing from £319.4m to £407.8m and operating profit up by 30.4% to£139.8m. On a like for like basis, sales have increased by 7.0% and Return on CapitalEmployed for the entire estate (including Premier Lodge) has increased from10.0% to 12.7%. Profit per room now stands at £4,982. Premier Travel Inn continues to have the highest occupancy levels of any brandhotel chain in the UK with like for like occupancy at 80.8%. Total brandoccupancy including the former Premier Lodges was 78.4% with a 3% occupancyimprovement to the rebranded Premier Lodge hotels during the second half of 2005/06. Revenue per available room (RevPar) has grown by 4.8% to £35.95. During 2005/6 we have opened 1,638 new bedrooms (14 new sites) and reached themilestone of 30,000 rooms with the opening of the London Hammersmith PremierTravel Inn. We have announced a target of 45,000 rooms in the UK by 2010,representing a 50% increase. With the recently completed purchase of 7 HolidayInns (1,021 rooms), which will be converted to Premier Travel Inn in the firsthalf of 2006/7, we have made a strong start towards this target. In 2005/6 we have made significant investment in the estate to ensure we retainour position as the leading brand in the budget sector. This has been recognisedby the 2006 BDRC Hotel Guest Survey, which awarded Premier Travel Inn 'MostImproved Brand', an award based on improvements in awareness usage andpreference amongst both business and leisure customers. We have started the roll out of the new Premier Travel Inn bedroom design withapproximately half of the estate to be completed by the end of 2006/7. Our leading edge reservation system continues to make good headway in developingour routes to market. We ended the year with a record high of 44% of allreservations taken via the web with 5m room nights booked on-line, the highestin the budget hotel sector. In January 2006 we unveiled a revolutionary onlinebooking tool called XML for corporate travel agents, which provides them withreal-time access to our inventory system. Our business account card now accountsfor over £50m of business per annum. "X sell" (where we offer guests the nearest available Premier Travel Inn bedroomif their first choice location is unavailable) continues to grow from strengthto strength. During the year it generated £49m of revenue, which is a 48%increase on 2004/5. Pub Restaurants 2005/6 Change Sales £605.0m 1.4%Like-for-like sales (1.8)%Operating Profit (Pre exceptionals) £64.9m (12.1)%Operating Profit (Post exceptionals) £60.7m (22.7)% The results of the Pub Restaurants business have been disappointing and,therefore, as part of an ongoing review we have taken the decision going forwardto focus on the substantially more successful joint sites with one of our budgethotels. Despite progress being made with a number of initiatives, the long termperformance decline in Brewers Fayre has not been reversed. A new managementteam has been appointed to speed up the pace of change. The programme ofimprovement focuses on the key areas of pricing, food quality, environment andservice. Encouragingly in the final quarter in our Beefeater estate we have seen thetrend in covers volume start to recover by 2%. This can be attributed primarilyto the following - the impact of the popular £8.95 mid-week two-course menu thatwas rolled out in July 2005 and the successful trial menu that was launchedacross 25 sites on the South Coast (16% of the estate) last November. Across both brands we have developed new menus that offer customers greaterchoice and value for money. These include off peak meal-deals plus premium itemssuch as the Beefeater Steak & Lobster, enabling us to be more competitive whilststill giving customers the opportunity to spend more if they wish to. In terms of food quality, the new menus offer a broader choice of dishes andintroduce a range of lighter and healthy options such as salads, vegetariandishes and pasta. We have also undertaken a re-specification exercise of everysingle menu item to ensure an improvement in food and presentation quality. During the year we opened 17 new Brewers Fayres, 9 of which were located next toa Premier Travel Inn. We converted 16 sites to the new Beefeater format, therebyincreasing the proportion of the estate now in the new format to over 45%. In addition we have refurbished a number of Brewers Fayre sites and the earlyresults from these are encouraging. In Beefeater the new 'science of service programme' roll out was completed,seeing a reduction in service time of 16 minutes. We expect to launch this inBrewers Fayre over the course of the year. David Lloyd Leisure 2005/6 Change Sales £224.6m 2.8%Like-for-like sales (0.6)%Operating Profit (Pre exceptionals) £41.3m (16.2)%Operating Profit (Post exceptionals) £22.7m (41.6)% After a period in which this business had plateaued, the new management team hasdone a good job in improving performance delivering an increase in total salesof 2.8%. We are particularly encouraged by the momentum in membership growth seen overthe past few months. Since October 2005 we have seen continued improvement inmembership levels with growth in new member sales over the last five months of19.4% and a fall in leavers of 7.2% for like for like clubs. Total membership in the UK is now at a record with 319,000 (2005: 307,000) and49,300 (2005: 40,380) in Continental Europe, giving an overall membership of368,350 (2005: 347,500). For the full year we have increased like for likemembership by 1,270 members, with an increase of 4,700 since December. Thissuccess has been achieved through the new management team focus on thepriorities of building membership and retention. A number of initiatives have been introduced across the clubs to grow membershipincluding new sales training and incentive programmes for all sales team membersand refocused marketing plans. We have also launched an improved induction fornew members, introduced new facilities and improved the range and quality of ourfood and beverage. Our new clubs opened this year in Kings Hill in Kent, Southend and Barcelonahave performed well, delivering an additional 13,130 members to the brand withall the sites opening with membership levels exceeding targets. On the back of recent improved membership satisfaction, retention has increasedby 0.8% at 72.4% at the year end compared to a fall of 1.0% in the previousyear. This has been achieved through the recent introduction of brand standardsacross all areas of all clubs together with increased investment in clubmaintenance supported by a robust audit process. The profit contribution from our Continental European clubs has increased to£3.4m. This has been largely driven by our successful new clubs in Amsterdam andBrussels. We will open Aberdeen in June 2006 and Exeter in early 2007 subject to finalplanning consent. High Street Restaurants* 2005/6 Change Sales £235.1m 7.0%Like-for-like sales (excluding Pizza Hut) (0.3)%Operating Profit (Pre exceptionals) £17.3m 3.0%Operating Profit (Post exceptionals) £12.7m (18.6)% * High Street Restaurants includes Costa and TGI Friday's only. The Pizza Hut JVis shown with joint ventures. Costa has had an exceptional year with excellent levels of performance andoutlet growth. Total sales have increased by 13.4% to £143.0m and like for likesystems sales in the UK Retail business (which includes both equity andfranchise stores) were up by 8.9%. Profit for the year was up 25.5% to £13.3m. During the year we have made significant improvements to the Costa food rangeand our new cakes and sandwiches, including lighter low fat items have provedpopular with customers. Food capture rate has grown significantly and we expectfurther improvements in the year ahead as we introduce new products, such as therecent launch of an Italian ice-cream range. We have also undertaken a re-imaging programme to enhance our internal decor andexternal signage. This is proving to be very successful and has given us a quickreturn on our investment. As a result of these positive actions, customer satisfaction continues toimprove and in the regular large sample YouGov study of the coffee sector, Costais consistently voted the number one coffee shop brand, outscoring its maincompetitors on all key customer measures. 2005/6 has been a record year for Costa in terms of expansion. We opened 146 newstores overall, 94 in the UK and 52 internationally. Whilst still relativelysmall with 121 stores, the international business is gaining momentum and scaleand in February we opened our 100th international store in the Middle East inDubai. We have also launched the brand in three new countries during the courseof the year - India, Pakistan and Cyprus. We see potential for a total of over1,000 stores by 2010, which is double our existing estate and are activelypursuing expansion opportunities in new territories. In the UK we are encouraged by the growth in new partnerships and see this as arich seam for growing the brand in the future. This year these included newbusiness partnerships with Virgin Atlantic, P&O and Esso. TGI Friday's has had a difficult year, having been adversely impacted by theconsumer downturn in discretionary spend. The management team has progressedtheir strategy to improve value for money with a new menu offering lower costitems and enhanced customer service. Over the year we opened 3 new stores in Newcastle-upon-Tyne, Fulham in Londonand Swansea. We plan to open two new stores in 2006/7 in Poole and Braehead,Glasgow. FINANCE REVIEW International Financial Reporting Standards (IFRS) Whitbread has adopted IFRS in preparing its group accounts for 2005/6 and assuch the focus of the statements is on continuing operations with fulldisclosure of discontinued operations in note 6. Restated comparisons for thefull-year ended 3 March 2005 have already been published on the Whitbreadwebsite. Accounting policies used in the preparation of these accounts are consistentwith the policies adopted on transition, with the exception of IFRS 32 and 39,which were effective from 4 March 2005. Changes in Group operations There have been three major changes in the Group's operating entities comparedto the prior period, as set out below. Marriott On 5 May 2005 Whitbread sold 46 of its Marriott hotels to a Joint Venture owned50% each by Whitbread and subsidiaries of Marriott International with theintention to sell on these assets to third party property owners. On the sameday, the management of the hotels was transferred to a management company whollyowned by Marriott International. Interests in a further eight properties wereretained by Whitbread pending onward transfer. Details of the financial performance of the discontinued business and theeffects of the disposal can be found in note 6. Whitbread Restaurants Germany The 2005/6 performance includes 9 weeks of trading prior to the disposal of theGerman business operating 67 Maredo restaurants, whilst 2004/5 contained a full52 weeks of trading activity. Premier Lodge The 2005/6 performance includes a full year of trading from the Premier Lodgeacquisition (completed on 25 July 2004), whilst the prior period only included32 weeks of trade. Turnover Group turnover grew by 9.2% year-on-year to £1,584.0m for continuing operations.This growth was underpinned by the full-year benefit of the Premier Lodgeacquisition in July 2004. Excluding the year on year impact of Premier Lodge,group turnover grew by 4.7%. Like for like sales were up by 0.4% with theremainder of the turnover growth coming from the net increase in brand outlets,notably in Premier Travel Inn and Costa. Results Total profit for the year is £264.4m up 57.2% on last year. Profit before taxand exceptional items from the continuing business was £181.1m up 13.1% on lastyear. Exceptional Items Net exceptional profits after tax amounted to £114.3m. This amount is analysedin more detail in note 4. The major items included within this category are noted below. Business disposals The three principal business disposals during the year have generated profits of£67.0m (Marriott and Chiswell St Brewery), £140.1m (Britvic) and £1.0m (Maredo).The Marriott Hotels Joint Venture established in May 2005 had not completed theonward disposal of the hotel assets by the year-end and the completion of thisprocess, along with the sale of the remaining hotel properties retained byWhitbread pending onward transfer, will arise in 2006/7. Impairment revaluation of Marriott Hotels Joint Venture Assets The completion of the sale of the Marriott hotel assets on 21 April 2006 hasresulted in a reduction in the carrying value of the Marriott JV assets held forsale of £29.3m and this is included in 2005/6 results Impairment provisions Following the disappointing trading performance in a number of our brands andafter a review of each individual cash generating unit, we have made provisionsagainst the carrying value of assets, totalling £35.2m. These are focussed onDavid Lloyd Leisure, a limited number of pub restaurants and Costa stores, alongwith a write-down of systems investment reflecting the smaller reshaped group. Reorganisation costs In October 2005 we announced a review of Head Office costs and structures. Therestructuring is taking place over 12 months and the costs associated with thisin 2005/6 amounted to £10.8m. Further costs (approximately £10m) will flowthrough in 2006/07. The savings arising from this reorganisation will amount to£20m in 2006/07 rising to £25m per annum from 2007/08. Debenture redemption On 28 February 2006, we completed the redemption of three debentures originallyacquired with the Swallow Hotels business in 2000. This resulted in a one-offnet cash outflow after tax relief of £7m but with reduced interest costs infuture years. Interest Underlying interest costs (before the redemption costs of debentures (note 4)have fallen year on year from a combination of lower base rates and lower debt,along with more focused capital investment activities. Taxation The UK tax expense of £57.0m represents an effective rate of 32.8% on thecontinuing businesses before exceptional items, which compares with 32.6% forthe full year in 2004/5. The charge includes deferred tax. Earnings per share Underlying basic earnings per share of the continuing business increased by24.7% to 46.88p. The detail can be found in note 7. To aid a meaningful year on year comparison earnings per share has beencalculated on a proforma basis, which allocates interest between continuing anddiscontinued businesses. On this basis the growth in basic earnings per share ofthe continuing business is 8.8% (see table below) 2005/06 2004/05 £m £mProfit after tax 124.1 105.9Adjustment 1 6.9 19.4Adjustment 2 (9.3) -------- -------- 121.7 125.3 -------- -------- Average number of shares 264.7m 296.5mProforma EPS 45.99p 42.26p + 8.8% Adjustment 1 - this allocates interest between continuing and discontinued onthe basis of assets. Adjustment 2 - this reverses the benefit of interest earned on the disposalproceeds from the Marriott sale before their return to shareholders. Dividend A final dividend of 19.95p per share, an increase of 8.7% over last year, willsubject to approval at the AGM, be paid on 7 July 2006 to all shareholders onthe register at the close of business on 5 May 2006. This gives a total dividendfor the year of 27.30p, an increase of 8.1% on last year. Capital expenditure Total group capital expenditure on property, plant and equipment and intangibleassets was £230.2m which included £201.0m relating to continuing operations,allocated between acquisition expenditure (£116.3m) and maintenance expenditure(£84.7m). Financing Net debt at the year-end amounted to £970.3m, compared to £1,348.7m as restatedfor IAS 32 and 39 as at 3 March 2005. The principal non-trading movementsleading to the reduction arose from the retention of some £460m of the proceedsof the sale of Marriott assets and the stake in Britannia Soft Drinks partiallyoffset by an additional pension fund payment of £100m. Pensions At 2 March 2006 there was a gross pension fund deficit of £338m (net deficitafter deferred tax of £237m). The deficit has been adversely affected by acombination of a change in assumptions on life expectancy adopted as part of thetriennial valuation and falls in bond yields. A package of measures announced inOctober 2005 includes further injections over the next 5 years of £190m afterthe company's payment of £100m in the current year. Post Balance Sheet Event On 9 March 2006 we entered into an agreement to acquire the business and assetsof seven Holiday Inn branded hotels for a total consideration of £34.5m. Theseven hotels are being converted to Premier Travel Inn. On 21 April 2006 we announced the completion of the Marriott sale process, withthe hotel assets held by the Joint Venture being acquired by the Royal Bank ofScotland. As a result of this transaction the carrying value of the JointVenture assets held for sale in the 2005/6 accounts has been adjusted (see note6). The completion of the disposal will be reflected in the 2006/7 financialstatements. Going concern The directors have a reasonable expectation that the group has adequateresources to continue operating for the foreseeable future. For this reason, thegoing concern basis continues to be adopted in preparing the accounts. Consolidated income statement Year to 2 March Year to 3 March 2006 2005 Before Exceptional Before Exceptional Total exceptional Items exceptional Items items (note 4) Total items (note 4) Total Notes £m £m £m £m £m £m Revenue 3 1,584.0 - 1,584.0 1,450.5 - 1,450.5Cost of sales (295.7) - (295.7) (288.8) - (288.8) ------- ------ ------ -------- ------- ------Gross profit 1,288.3 - 1,288.3 1,161.7 - 1,161.7 Distribution costs (898.1) (21.0) (919.1) (807.7) (8.1) (815.8)Administrative expenses (153.5) (23.9) (177.4) (132.7) (6.5) (139.2) ------- ------ ------ -------- ------- ------Operating profit 236.7 (44.9) 191.8 221.3 (14.6) 206.7 Share of profit from joint ventures 6.3 - 6.3 11.5 - 11.5Share of profit from associates 0.9 - 0.9 (0.1) - (0.1) ------- ------ ------ -------- ------- ------ Operating profit of the group, joint ventures and associates 243.9 (44.9) 199.0 232.7 (14.6) 218.1 Non-operating items+:Net loss on disposal of business andinvestments - (8.8) (8.8) - (2.3) (2.3) ------- ------ ------ -------- ------- ------Profit before financing and tax 243.9 (53.7) 190.2 232.7 (16.9) 215.8 Finance costs (64.0) (25.5) (89.5) (74.6) - (74.6)Finance revenue 1.2 - 1.2 2.0 - 2.0 ------- ------ ------ -------- ------- ------Profit before tax 181.1 (79.2) 101.9 160.1 (16.9) 143.2 Tax expense 5 (57.0) 12.8 (44.2) (48.5) 4.4 (44.1) ------- ------ ------ -------- ------- ------Net profit from continuingactivities 124.1 (66.4) 57.7 111.6 (12.5) 99.1 Discontinued operations: ------- ------ ------ -------- ------- ------Net profit on disposal ofbusinesses - 208.1 208.1 - - -Profit for the year fromdiscontinued operations 26.0 (27.4) (1.4) 67.4 1.7 69.1 ------- ------ ------ -------- ------- ------ 6 26.0 180.7 206.7 67.4 1.7 69.1 ------- ------ ------ -------- ------- ------Profit for the year 150.1 114.3 264.4 179.0 (10.8) 168.2 ======= ====== ====== ======== ======= ====== Attributable to:Parent shareholders 150.0 114.3 264.3 178.7 (10.8) 167.9Equity minorityinterest 0.1 - 0.1 0.1 - 0.1Non-equity minorityinterest - - - 0.2 - 0.2 ------- ------ ------ -------- ------- ------ 150.1 114.3 264.4 179.0 (10.8) 168.2 ======= ====== ====== ======== ======= ====== Dividends proposed per share in respect of the period (pence) Special 135.00 -Interim 7.35 6.90Final 19.95 18.35 ====== ====== Earnings per share (pence) Continuing Total Continuing Total Operations Operations Operations Operations 7- basic for profit for the period 21.80 99.85 33.36 56.63- basic for underlying profit # 46.88 56.67 37.58 60.28- diluted for profit for the period 21.62 99.03 33.11 56.21- diluted for underlying profit # 46.49 56.20 37.29 59.83 + Non-operating items are those that are not part of the regular operations of the group. # Underlying profit is reported on net profit from continuing activities beforeexceptional items, these being impairment of property, plant and equipment,impairment of goodwill, impairment of intangibles, reorganisation costs, netprofit on disposal of property, plant and equipment, net profit on disposal ofbusinesses and investments and interest charge on early redemption ofdebentures. Consolidated statement of recognised income and expense Year to Year to 2 March 3 March 2006 2005 £m £m Cash flow and net investment hedges:Gains taken to equity (0.3) -Exchange differences on translation of foreign operations 1.4 0.3Actuarial gains/ (losses) on defined benefit pension schemes (93.5) 25.6Tax on items taken directly to or from equity 28.6 (6.6) -------- -----------Net gain/ (loss) recognised directly in equity (63.8) 19.3 Profit for the period 264.4 168.2 -------- -----------Total recognised income and expense for the period 200.6 187.5 ======== =========== Attributable to: Parent shareholders 200.5 187.2Equity minority interest 0.1 0.1Non-equity minority interest - 0.2 -------- ----------- 200.6 187.5 ======== =========== Effect of changes in accounting policy on the consolidated statement of recognised income and expense:Equity holders of the parentNet loss on cash flow hedges on first time adoption of IAS 39 (3.2) - ====== =========== Consolidated balance sheet Notes 2 March 3 MarchASSETS 2006 2005 ---------- ---------- £m £mNon-current assetsIntangible assets 79.0 193.3Property, plant and equipment 2,677.1 2,604.0Investment in joint ventures 35.2 43.1Investment in associates 0.8 45.6Other financial assets 5.4 11.3Derivative financial instruments 78.5 - ---------- ---------- 2,876.0 2,897.3 ---------- ---------- Current assetsInventories 17.5 23.0Trade and other receivables 119.0 147.9Income tax prepayment 21.0 -Derivative financial instruments 10.2 -Cash and cash equivalents 49.6 53.5 ---------- ---------- 217.3 224.4 ---------- ---------- Assets classified as held for sale 6 302.6 992.3 ---------- ----------TOTAL ASSETS 3,395.9 4,114.0 ---------- ---------- Current liabilitiesFinancial liabilities 145.1 98.2Provisions 0.6 3.9Derivative financial instruments 0.3 -Trade and other payables 277.8 341.9Income tax payable - 16.9 ---------- ---------- 423.8 460.9 ---------- ---------- Non-current liabilitiesFinancial liabilities 874.8 1,219.0Minority owned preference shares 3.1 -Provisions 32.5 25.6Derivative financial instruments 3.0 -Deferred income tax liabilities 174.2 246.4Pension liability 338.0 346.0 ---------- ---------- 1,425.6 1,837.0 ---------- ---------- ---------- ----------TOTAL LIABILITIES 1,849.4 2,297.9 ---------- ---------- ---------- ----------NET ASSETS 1,546.5 1,816.1 ========== ========== EQUITY Issued capital 9 151.1 149.6Share premium 9 36.1 23.2Retained earnings 9 3,193.0 3,476.2Currency translation 9 1.7 0.3Other reserves 9 (1,838.2) (1,839.0) ---------- ----------Equity attributable to equity holders of the parent 9 1,543.7 1,810.3Equity minority interest 9 2.8 2.7Non-equity minority interest 9 - 3.1 ---------- ----------TOTAL EQUITY 9 1,546.5 1,816.1 ========== ========== Consolidated cash flow statement Year to Year to Notes 2 March 2006 3 March 2005 ----------- ---------- £m £m Profit for the year 264.4 168.2 Adjustments for:Taxation charged on total operations 5 39.2 54.6Net finance cost 89.0 74.1Total income from joint ventures (6.3) (11.5)Total income from associates (10.3) (11.0)Gain on disposal of property, plant and equipment (3.0) (22.8)Net profit on disposal of businesses and investments (191.7) -Impairment loss on revaluation of Condor joint venture 29.3 -Depreciation and amortisation 118.8 133.6Impairment of property and goodwill 35.2 31.5Reorganisation costs 13.3 -Other non-cash items 2.8 9.8 ---------- ----------Operating profit before working capital changes 380.7 426.5 Decrease in inventories 2.3 1.9Increase in trade and other receivables (18.3) (21.1)Increase/(decrease) in trade and other payables (10.3) 34.1Payments against provisions (16.6) (1.4)Payment to pension fund (103.0) - ---------- ----------Cash generated from operations 234.8 440.0 Interest paid (91.5) (71.8)Taxes paid (40.7) (48.8) ---------- ----------Net cash flows from operating activities 102.6 319.4 ---------- ---------- Cash flows from investing activities Disposal of investments and subsidiaries - discontinued* 6 889.2 -Disposal of investments - continuing 6.9 -Net cash disposed of (18.2) -Purchase of property, plant and equipment (228.6) (251.5)Purchase of investments and loans advanced - (8.6)Purchase of intangible assets (1.6) (9.4)Proceeds from disposal of property, plant and equipment 12.0 64.8Acquisition of subsidiary, net of cash acquired (0.2) (553.8)Dividends from joint venture 11.1 10.8Dividends from associates 71.6 12.3Interest received 1.5 1.4 ---------- ----------Net cash flows from/(used in) investing activities 743.7 (734.0) ---------- ---------- Cash flows from financing activities Proceeds from issue of share capital 14.4 10.6Costs of purchasing own shares (9.5) -Increase/(decrease) in short-term borrowings 6.1 (8.7)Proceeds from long-term borrowings 610.0 513.4Issue costs of long-term borrowings (1.4) -Repayment of long-term borrowings (1,013.0) (29.7)Equity dividends paid 8 (475.5) (68.2)Dividends paid to minority interests - (0.2) ---------- ----------Net cash flows from/(used in) financing activities (868.9) 417.2 ---------- ---------- Net increase/(decrease) in cash and cash equivalents (22.6) 2.6Net foreign exchange difference 0.6 0.4Opening cash and cash equivalents 52.1 49.1 ---------- ----------Closing cash and cash equivalents 30.1 52.1 ========== ========== Reconciliation to cash and cash equivalents in the balance sheet:Cash and cash equivalents shown above 30.1 52.1Add back overdrafts 19.5 1.4 ---------- ----------Cash and cash equivalents shown within current assets onthe balance sheet 49.6 53.5 ========== ========== * including disposed of net overdraft Notes to the consolidated financial statements as at 2 March 2006 1. Authorisation of financial statements and statement of compliance withIFRS The consolidated financial statements of Whitbread PLC for the year ended 2March 2006 were authorised for issue by the board of directors on 24 April 2006.Whitbread PLC is a public limited company incorporated and fully domiciled inEngland and Wales. The company's ordinary shares are traded on the London StockExchange. The significant activities of the group are described in Note 3. The group's financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as adopted for use in theEuropean Union and as applied in accordance with the provisions of the CompaniesAct 1985. The significant accounting policies adopted by the group are set out in note 2. 2. Accounting policies Basis of preparation The consolidated financial statements of Whitbread PLC and all its subsidiarieshave been prepared in accordance with International Financial ReportingStandards (IFRS) for the first time and the comparatives have been restated fromUK Generally Accepted Accounting Practice (UK GAAP) to comply with IFRS, exceptfor IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39'Financial Instruments: Recognition and Measurement' which have been appliedfrom 4 March 2005. The consolidated financial statements are presented in pounds sterling and allvalues are rounded to the nearest hundred thousand except when otherwiseindicated. The significant accounting policies adopted are set out below. Basis of consolidation The consolidated financial statements incorporate the accounts of Whitbread PLCand all its subsidiaries, together with the group's share of the net assets andresults of joint ventures and associates incorporated in these financialstatements using the equity method of accounting. These are adjusted, whereappropriate, to conform to group accounting policies. The financial statementsof subsidiaries are prepared for the same reporting year as the parent company. Apart from the acquisition of Whitbread Group PLC by Whitbread PLC in 2000/01,which was accounted for using merger accounting, acquisitions are accounted forunder the acquisition method and any goodwill arising is capitalised as anintangible fixed asset. The results of subsidiaries acquired or disposed ofduring the year are included in the consolidated accounts from or up to the datethat control passes respectively. All intra-group transactions, balances, incomeand expenses are eliminated on consolidation. Unrealised losses are alsoeliminated unless the transaction provides evidence of an impairment of theasset transferred. Significant accounting policies Goodwill Goodwill arising on acquisition is capitalised and represents the excess of thecost of acquisition over the group's interest in the fair value of theidentifiable assets and liabilities of a subsidiary at the date of acquisition.Goodwill is reviewed for impairment annually or more frequently if events orchanges in circumstances indicate that the carrying value may be impaired. Ondisposal of a subsidiary the attributable amount of goodwill is included in thedetermination of the profit or loss on disposal. Intangible assets Intangible assets are carried at cost less accumulated amortisation andaccumulated impairment losses. Intangible assets acquired separately from a business are carried initially atcost. An intangible asset acquired as part of a business combination isrecognised outside goodwill if the asset is separable or arises from contractualor other legal rights and its fair value can be measured reliably. IT software IT software is amortised, on a straight line basis over the estimated usefullife of the asset, estimated between three and ten years. The carrying valuesare reviewed for impairment if events or changes in circumstances indicate thattheir carrying value may not be recoverable. Other Other intangible assets comprise the brand name and franchise fee agreementacquired with the Premier Lodge business. They are amortised over periods of upto ten years. The carrying values are reviewed for impairment if events orchanges in circumstances indicate that their carrying value may not berecoverable. Property, plant and equipment Prior to the 1999/00 financial year, properties were regularly revalued on acyclical basis. Since this date the group policy has been not to revalue itsproperties and, while previous valuations have been retained, they have not beenupdated. As permitted by IFRS 1, the group has elected to use the UK GAAPrevaluations before the date of transition to IFRS as deemed cost at the date oftransition. Fixed assets are stated at cost or deemed cost at transition toIFRS, less accumulated depreciation and any impairment in value. Gross interestcosts incurred on the financing of major projects are capitalised until the timethat they are available for use. Depreciation is calculated on a straight-linebasis over the estimated useful life of the asset as follows: Freehold land is not depreciated. Freehold buildings are depreciated to their estimated residual values overperiods up to 50 years. Plant and equipment is depreciated over 3 to 30 years. The carrying values of property, plant and equipment are reviewed for impairmentif events or changes in circumstances indicate that their carrying values maynot be recoverable. Any impairment in the value of fixed assets is charged tothe income statement. Profits and losses on disposal of fixed assets reflect the difference betweennet selling price and the carrying amount at the date of disposal and arerecognised in the income statement. Payments made on entering into or acquiring leaseholds that are accounted for asoperating leases represent prepaid lease payments. These are amortised on astraight-line basis over the lease term. Impairment The group assesses assets or groups of assets for impairment whenever events orchanges in circumstances indicate that the carrying value of an asset may not berecoverable. Individual assets are grouped for impairment assessment purposes atthe lowest level at which there are identifiable cash flows that are largelyindependent of the cash flows of other groups of assets. If such indication ofimpairment exists or when annual impairment testing for an asset group isrequired, the group makes an estimate of its recoverable amount. An assessment is made at each reporting date as to whether there is anyindication that previously recognised impairment losses may no longer exist ormay have decreased. If such indication exists, the recoverable amount isestimated. A previously recognised impairment loss is reversed only if there hasbeen a change in the estimates used to determine the asset's recoverable amountsince the last impairment loss was recognised. If that is the case, the carryingamount of the asset is increased to its recoverable amount. That increasedamount cannot exceed the carrying amount that would have been determined, net ofdepreciation, had no impairment loss been recognised for the asset in prioryears. Such reversal is recognised in the profit or loss. After such a reversal,the depreciation charge is adjusted in future periods to allocate the asset'scarrying amount, less any residual value, on a systematic basis over it'sremaining useful life. For the purposes of impairment testing all centrally held assets are allocatedin line with IAS 36 to cash generating units (CGUs) based on managements view ofthe consumption of the asset. Any resulting impairment is recorded against thecentrally held asset. - Goodwill and intangibles For the purposes of the impairment review of goodwill and intangibles the groupconsiders that these CGUs be at brand level. Goodwill acquired through business combinations is allocated to groups of CGUsat the level management monitor goodwill, which is at brand level. The groupperforms an annual review of its goodwill to ensure that its carrying amount ofgoodwill is not greater than its recoverable amount. In the absence of a recentmarket transaction the recoverable amount is determined from value in usecalculations. An impairment is then made to reduce the carrying amount to thehigher of the fair value less cost to sell and the value in use. - Property, plant and equipment For the purposes of the impairment review of property, plant and equipment thegroup considers cash generating units to be all trading outlets. The carrying values of property, plant and equipment are reviewed for impairmentwhen events or changes in circumstances indicate the carrying value may not berecoverable. The recoverable amount is the greater of net selling price and value in use. Inassessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. Foran asset that does not generate largely independent cash inflows, therecoverable amount is determined with reference to the CGU to which the assetbelongs. Impairment losses are recognised in the income statement in theadministrative / distribution line item. Consideration is also given where appropriate to the market value of the asset,either from independent sources, or in conjunction with an accepted industryvaluation methodology as mentioned above. Inventories Inventories are stated at the lower of cost and net realisable value. The costof finished goods includes appropriate overheads. Cost is calculated on thebasis of first in, first out and net realisable value is the estimated sellingprice less any costs of disposal. Provisions Provisions for warranties, onerous contracts and restructuring costs arerecognised when the group has a present legal or constructive obligation as aresult of a past event; it is probable that an outflow of resources will berequired to settle the obligation; and a reliable estimate can be made of theamount of the obligation. Provisions are discounted to present value where the effect is material using apre-tax rate that reflects current market assessments of the time value of moneyand the risks specific to the liability. The amortisation of the discount isrecognised as a finance cost. Exceptional items The group presents on the face of the income statement those material items ofincome and expense which, because of the nature and expected infrequency of theevents giving rise to them, merit separate presentation to allow shareholders tounderstand better the elements of financial performance in the year, so as tofacilitate comparison with prior periods and to better assess trends infinancial performance. Disposals of property, plant and equipment, are reported within operatingexceptional items. Certain exceptional costs are classified as non-operating costs where they arenot part of the normal operating business of the group, such items includeprofit or loss on sale of businesses and investments. Foreign currency translation Monetary assets and liabilities denominated in foreign currencies are translatedinto sterling at the rates of exchange quoted at the balance sheet date.Non-monetary items that are measured in terms of historical cost in a foreigncurrency are translated using the exchange rates as at the dates of initialtransactions. Trading results are translated into sterling at average rates of exchange forthe year. Day to day transactions in a foreign currency are recorded in sterlingat an average rate for the month in which those transactions take place, whichis used as a reasonable approximation to the actual transaction rate.Translation differences on monetary items are taken to the income statementexcept where they are part of a net foreign investment hedge, then translationdifferences are taken directly to equity. The differences that arise fromtranslating the results of overseas businesses at average rates of exchange, andtheir assets and liabilities at closing rates, are also dealt within a separatecomponent of equity. On disposal of a foreign entity, the deferred cumulativeamount recognised in equity relating to that particular foreign operation isrecognised in the income statement. All other currency gains and losses aredealt with in the income statement. A number of subsidiaries within the group have a euro functional currency. Theseare translated into sterling in the group accounts. Balance sheet items aretranslated at the rate applicable at the balance sheet date. Transactionsreported in the income statement are translated using an average rate for themonth in which they occur. Revenue recognition Generally, revenue is the value of goods and services sold to third parties aspart of the group's trading activities, after deducting discounts andsales-based taxes. The following is a description of the composition of revenuesof the group: Sale of goods Sale of food and beverages - revenue is recognised when food and beverages aresold. Franchise fees - received in connection with the franchise of the group's brandnames. Revenue is recognised when earned. Leisure club subscriptions - subscriptions are recognised over the period thatmembership relates to. Royalties Royalties are recognised as the income is earned. Rendering of services Owned hotel revenue - including the rental of rooms and food and beverage salesfrom a network of hotels. Revenue is recognised when rooms are occupied and foodand beverage is sold. Finance revenue Interest income is recognised as the interest accrues using the effectiveinterest method. Dividend income Dividend income is recognised when the group's right to receive the payment isestablished. Cash flows are included net of recoverable VAT. Leases Leases where the lessor retains substantially all the risks and benefits ofownership of the asset are classified as operating leases. Rental payments inrespect of operating leases are charged against operating profit on astraight-line basis over the period of the lease. Lease incentives arerecognised as a reduction of rental income over the lease term. Borrowing costs Borrowing costs are recognised as an expense in the period in which they areincurred, except for gross interest costs incurred on the financing of majorprojects which, under the allowed alternative treatment, are capitalised untilthe time that the projects are available for use. Retirement benefits In respect of defined benefit pension schemes, the obligation recognised in thebalance sheet represents the present value of the defined benefit obligation asadjusted for any unrecognised past service cost, reduced by the fair value ofthe scheme assets. The cost of providing benefits is determined using theprojected unit credit actuarial valuation method. Actuarial gains and losses arerecognised in full in the period in which they occur in the statement ofrecognised income and expense. For defined benefit plans, the employer's portion of the past and currentservice cost is charged to operating profit, with the interest cost net ofexpected return on assets in the plans reported within other finance costs. Theexpected return on plan assets is based on an assessment made at the beginningof the year of long-term market returns on scheme assets, adjusted for theeffect on the fair value of plan assets of contributions received and benefitspaid during the year. Curtailments and settlements relating to the group's defined benefit plan arerecognised in the period that the curtailment or settlement occurs. Payments to defined contribution pension schemes are charged as an expense asthey fall due. Share-based payment transactions Certain employees and directors of the group receive equity-settled remunerationin the form of share-based payment transactions, whereby employees renderservices in exchange for shares or rights over shares. The cost ofequity-settled transactions with employees are measured by reference to the fairvalue, determined using a stochastic model, at the date at which they aregranted. The cost of equity-settled transactions are recognised, together with acorresponding increase in equity, over the period in which the performanceconditions are fulfilled, ending on the relevant vesting date. The cumulativeexpense recognised for equity-settled transactions at each reporting date untilthe vesting date reflects the extent to which the vesting period has expired,and is adjusted to reflect the directors best available estimate of the numberof equity instruments that will ultimately vest. The income statement charge orcredit for a period represents the movement in cumulative expense recognised asat the beginning and end of that period. The group has taken advantage of the transitional provisions of IFRS 2 inrespect of equity-settled awards and has applied IFRS 2 only to equity-settledawards granted after 7 November 2002 that had not vested on or before 1 January2005. Tax The income tax charge represents both the income tax payable, based on profitsfor the year, and deferred income tax. Deferred income tax is recognised in full, using the liability method, inrespect of all temporary timing differences between the tax base of the group'sassets and liabilities, and their carrying amounts, that have originated but notbeen reversed by the balance sheet date. No deferred tax is recognised if thetemporary timing difference arises from goodwill or the initial recognition ofan asset or liability in a transaction that is not a business combination and,at the time of the transaction, affects neither the accounting profit nortaxable profit or loss. Deferred income tax is recognised in respect of taxabletemporary differences associated with investments in associates and interests injoint ventures, except where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differenceswill not reverse in the foreseeable future. Deferred income tax assets are recognised to the extent that it is probable thattaxable profit will be available against which the deductible temporary timingdifferences can be utilised. The carrying amount of deferred income tax assetsis reviewed at each balance sheet date and reduced to the extent that it is nolonger probable that sufficient taxable profit will be available to allow all orpart of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates thatare expected to apply in the year when the asset is realised or the liability issettled, based on tax rates that have been enacted or substantively enacted atthe balance sheet date. Tax relating to items recognised directly in equity is recognised in equity andnot in the income statement. Treasury shares Own equity instruments which are held by the group (treasury shares) arededucted from equity. No gain or loss is recognised in the income statement onthe purchase, sale, issue, or cancellation of the group's own equityinstruments. Investments in joint ventures and associates Joint ventures are established through an interest in a company (a jointlycontrolled entity). Investments in joint ventures and associates are initially recognised at cost,being the fair value of the consideration given and including acquisitioncharges associated with the investment. After initial recognition, investments in joint ventures and associates areaccounted for using the equity method. Financial instruments The group has not restated comparative amounts on first applying IAS 32 and IAS39, as permitted in paragraph 36A of IFRS 1. Other financial assets Investments in available-for-sale assets are initially recognised at cost, beingthe fair value of the consideration given and including acquisition chargesassociated with the investment. After initial recognition available-for-sale investments are measured at fairvalue. Gains and losses arising from changes in the fair value ofavailable-for-sale investments are recognised directly in equity, until theinvestment is disposed of or until the investment is determined to be impaired,at which time the cumulative gain or loss previously reported in equity isincluded in the income statement for the period. Impairment of financial assets The group assesses at each balance sheet date whether a financial asset or groupof financial assets is impaired. - Assets carried at amortised cost If there is objective evidence that impairment has occurred the amount of theimpairment loss is measured as the difference between the carrying value and thepresent value of estimated future cash flows. The discount rate is the originaleffective rate of interest. The carrying amount of the asset is reduced, withthe amount of the loss recognised in administrative costs. If, in a subsequent period, the amount of the impairment loss decreases and thedecrease can be objectively related to an event occurring after the impairmentloss is recognised, the previously recognised impairment loss is reversed in theincome statement to the extent that the carrying value of the asset does notexceed its amortised cost at the reversal date. - Assets carried at cost If there is objective evidence that impairment has occurred the amount of theimpairment loss is measured as the difference between the carrying value and thepresent value of estimated future cash flows. The discount rate is the originaleffective rate of interest. The carrying amount of the asset is reduced, withthe amount of the loss recognised in administrative costs. - Available-for-sale financial assets If an available-for-sale asset is impaired, an amount comprising the differencebetween its cost and its fair value is transferred from equity to the incomestatement. Reversals of impairment losses on debt instruments are taken throughthe income statement, if the loss can be objectively related to an eventoccurring after the impairment loss was recognised. Reversals in respect ofequity instruments classified as available-for-sale are not recognised in theincome statement. Trade and other receivables Trade receivables are recognised and carried at original invoice amount less anallowance for any uncollectible amounts. An estimate for doubtful debts is madewhen collection of the full amount is no longer probable. Bad debts are writtenoff when identified. Cash and cash equivalents Cash and short-term deposits in the balance sheet comprise cash at bank and inhand and short-term deposits with an original maturity of three months or less.For the purpose of the consolidated cash flow statement, cash and cashequivalents consist of cash and cash equivalents as defined above, net ofoutstanding bank overdrafts. Borrowings Borrowings are initially recognised at fair value of the consideration receivednet of any directly associated issue costs. Borrowings are subsequently recordedat amortised cost, with any difference between the amount initially recorded andthe redemption value recognised in the income statement using the effectiveinterest method. Derivative financial instruments Derivative financial instruments used by the group are stated at fair value oninitial recognition and at subsequent balance sheet dates. Hedges are classifiedas either fair value hedges when they hedge the exposure to changes in the fairvalue of a recognised asset or liability; or cash flow hedges where they hedgeexposure to variability in cash flows that is either attributable to aparticular risk associated with a recognised asset or liability or a forecastedtransaction. Hedge accounting is only used where, at the inception of the hedge, there isformal designation and documentation of the hedging relationship and it meetsthe group's risk management objective strategy for undertaking the hedge and itis expected to be highly effective. Gains or losses from remeasuring fair value hedges, which meet the conditionsfor hedge accounting, are recorded in the income statement, together with thecorresponding changes in the fair value of the hedged instruments attributableto the hedged risk. Where the adjustment is to the carrying amount of a hedgedfinancial instrument, the adjustment is amortised to the income statement suchthat it is fully amortised by maturity. The portion of any gains or losses of cash flow hedges, which meet theconditions for hedge accounting and are determined to be effective hedges, arerecognised directly in equity. The gains or losses relating to the ineffectiveportion are recognised immediately in the income statement. When a firm commitment that is hedged becomes an asset or a liability recognisedon the balance sheet, then, at the time the asset or liability is recognised,the associated gains or losses that had previously been recognised in equity areincluded in the initial measurement of the acquisition cost or other carryingamount of the asset or liability. For all other cash flow hedges, the gains orlosses that are recognised in equity are transferred to the income statement inthe same period in which the transaction that results from a firm commitmentthat is hedged affects the income statement. For derivatives that do not qualify for hedge accounting, any gains or lossesarising from changes in fair value are recognised immediately in the incomestatement. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated or exercised, or no longer qualifies for hedge accounting. At thatpoint in time, for cash flow hedges, any cumulative gain or loss on the hedginginstrument recognised in equity is kept in equity until the forecastedtransaction occurs. If a hedged transaction is no longer expected to occur, thenet cumulative gain or loss recognised in equity is transferred to the incomestatement. Recognition and derecognition of financial instruments The recognition of financial instruments occurs when the group becomes party tothe contractual provisions of the instrument. The derecognition of a financial instrument takes place when the group no longercontrols the contractual rights that comprise the financial instrument, which isnormally the case when the instrument is sold, or all the cash flowsattributable to the instrument are passed through to an independent third party. Significant accounting judgements and estimates Estimation uncertainty Impairment of goodwill Key assumptions concerning the future, and other key sources of estimation, atthe balance sheet date have a significant risk of causing a material adjustmentto the carrying amounts of assets and liabilities within the next financialyear. The group determines whether goodwill is impaired at least on an annual basis.This requires an estimation of the value in use of the cash generating units towhich the goodwill is allocated. Estimating the value in use requires the groupto make an estimate of the expected future cash flows from the cash generatingunit and also to choose a suitable discount rate in order to calculate thepresent values of those cash flows. Changes in accounting policies The group has adopted IFRS for the first time this year and comparative amountshave been restated unless a specific exemption from doing so is allowed underthe transitional rules for those standards. The group has decided to apply the exemption allowed by IFRS 1 'First timeadoption of International Reporting Standards' and not apply IAS 32 'FinancialInstruments: Disclosure and Presentation' and IAS 39 'Financial Instruments:Recognition and Measurement' to comparative information. Instead UK GAAP hascontinued to be applied to financial instruments that fall within the scope ofthese standards. Under the provisions of IFRS 1 this is classified as a change in accountingpolicy as at 4 March 2005, the date at which the standards are adopted by thegroup. The main adjustments that the group would have made if the comparativeswere made to comply with IAS 32 and IAS 39 are as follows: Derivative financial instruments would have been recognised on the balance sheetat fair value and changes in the fair value during the year reported withinprofit or loss. Where applicable hedge accounting would have been applied whichfor a cash flow hedge and a hedge of a net foreign investment would see theeffective portion of the change in fair value of the derivative recogniseddirectly in equity via a hedge reserve. Fair value hedges would require the carrying amount of the related hedged itemto be adjusted for the change in fair value of the hedged risk. These changeswould be reported via the income statement, hence the ineffective portion of thehedge would be reported in the profit for the period. Standards issued by the IASB not effective for the current period and notadopted by the group The following standards and interpretations have been issued by the IASB, theybecome effective after the current year end and have not been early adopted bythe group: International Accounting Standards (IAS/IFRS) Effective date, periods commencing IFRS 1 Amendment relating to IFRS 6 - Exploration for and 1 January 2006 Evaluation of Mineral Resources IFRS 4 Insurance Contracts (Amendment to IAS 39 and IFRS 4 - 1 January 2006 Financial Guarantee Contracts) IFRS 6 Exploration for and Evaluation of Mineral Resources 1 January 2006IFRS 6 Amendment relating to IFRS 6 - Exploration for and 1 January 2006 Evaluation of Mineral Resources IFRS 7 Financial Instruments : Disclosures * 1 January 2006IAS 1 Amendment - Presentation of Financial Statements: Capital Disclosures 1 January 2007IAS 19 Amendment to IAS 19 - Employee Benefits Actuarial 1 January 2006 Gains and Losses, Group Plans and Disclosures IAS 21 Amendment to IAS 21 - The Effects of Changes in Foreign 1 January 2006 Exchange Rates Net Investment in a Foreign Operation IAS 39 Fair Value Option 1 January 2006IAS 39 Amendment to IAS 39 - Transition and Initial Recognition 1 January 2006 of Financial Assets and Financial Liabilities (Day 1 profits) IAS 39 Cash Flow Hedge Accounting 1 January 2006IAS 39 Amendment to IAS 39 and IFRS 4 - Financial Guarantee 1 January 2006 Contracts International Financial Reporting Interpretations Committee (IFRIC) IFRIC 4 Determining whether an arrangement contains a lease 1 January 2006IFRIC 5 Rights to Interests Arising from Decommissioning, 1 January 2006 Restoration and Environmental Rehabilitation FundsIFRIC 6 Liabilities arising from Participating in a Specific 1 December 2005 Market - Waste Electrical and Electronic Equipment IFRIC 7 Applying the Restatement Approach under IAS 29 1 March 2006 'Financial Reporting in Hyperinflationary Economies'IFRIC 8 Scope of IFRS 2 1 May 2006IFRIC 9 Reassessment of Embedded Derivatives 1 June 2006 \* This standard requires additional disclosures to be made for financialinstruments and is to be adopted by the group during the year ended 1 March2007. There will be no impact on the reported amounts of financial instruments as aresult of adopting this financial statement. 3. Segment information The group's primary reporting format is business segments and its secondaryformat is geographical segments. The operating businesses are organised andmanaged separately according to the nature of the products and servicesprovided, with each segment representing a strategic business unit that offersdifferent products and serves different markets. The group has four core areas of operation:- Operation Nature of operationPremier Travel Inn Operation of budget hotels.Pub Restaurants Operation of full service and self service pub restaurants with brands including Beefeater and Brewers Fayre.High Street Operation of coffee shops and restaurants including Costa andRestaurants TGI Friday's.David Lloyd Operation of fitness clubs across the UK, the Netherlands,Leisure Belgium and Spain, providing racquets, health and fitness club facilities and expertise. Inter-segment revenue is from High Street Restaurants to the other segments.Transactions were entered into on an arm's length basis in a manner similar totransactions with third parties. Included within unallocated operations are those that are managed by a centraldivision and the group's investment in the Pizza Hut joint venture. The following tables present revenue and profit information and certain assetand liability information regarding business segments for the years ended 2March 2006 and 3 March 2005. High Total Discon- Premier Pub Street David continuing tinued TotalYear ended Travel Restau- Restau- Lloyd Unallo- Elimin- operat- operat- operat-2 March 2006 Inn rants rants Leisure cated ation ions ions ions £m £m £m £m £m £m £m £m £m Revenue Revenue fromexternalcustomers 407.8 605.0 232.4 224.6 114.2 - 1,584.0 108.2 1,692.2Inter-segmentrevenue - - 2.7 - - (2.7) - - - ------ ------- ------ ----- ------- ------ ------ ------- -------Total revenue 407.8 605.0 235.1 224.6 114.2 (2.7) 1,584.0 108.2 1,692.2 ====== ======= ====== ===== ======= ====== ====== ======= ======= EBIT# 139.8 64.9 17.3 41.3 (19.4) - 243.9 29.3 273.2--------------- ------ ------- ------ ----- ------- ------ ------ ------- -------EBIT# 139.8 64.9 17.3 41.3 (19.4) - 243.9 29.3 273.2Segment exceptionalitems:- Net profit/(loss) on disposal of property, 0.3 1.5 (0.7) - - - 1.1 1.9 3.0 plant and equipment- Impairment of property and goodwill - (5.7) (3.9) (18.3) (7.3) - (35.2) - (35.2)- Reorganisation costs - - - - (10.8) - (10.8) - (10.8)Share of profit fromjoint ventures (0.3) - - - (6.0) - (6.3) - (6.3)Share of profit fromassociates (0.6) - - (0.3) - - (0.9) (9.4) (10.3) ------ ------- ------ ----- ------- ------ ------ ------- -------Segment result 139.2 60.7 12.7 22.7 (43.5) - 191.8 21.8 213.6--------------- ------ ------- ------ ----- ------- ------ ------ ------- ------- Operating profit 191.8 21.8 213.6 Share of profit fromjoint ventures 0.3 - - - 6.0 - 6.3 - 6.3Share of profit fromassociates 0.6 - - 0.3 - - 0.9 9.4 10.3Non-operatingexceptionals:Net loss ondisposal ofbusinesses and investments - (1.1) (0.1) (3.7) (3.9) - (8.8) 200.5 191.7 ------ ------- -------Impairment loss onrevaluation of Condor joint venture - - - - - - - (29.3) (29.3) ------ ------- ------- Profit beforefinancing and tax 190.2 202.4 392.6 Net finance costs (88.3) (0.7) (89.0) ------ ------- -------Profit before income tax 101.9 201.7 303.6 ------ ------- ------- Income tax expense (44.2) 5.0 (39.2) ------ ------- ------- Net profit for the year 57.7 206.7 264.4 ====== ======= ======= Assets and liabilitiesSegment assets 1,140. 4 876.3 113.2 574.5 175.8 - 2,880.2 96.8 2,977.0Investment injoint ventures 5.4 - - - 29.8 - 35.2 234.6 269.8Investment inassociates 0.8 - - - - - 0.8 10.0 10.8 ------ ------- ------ ----- ------- ------ ------ ------- -------Total assets 1,146.6 876.3 113.2 574.5 205.6 - 2,916.2 341.4 3,257.6 ------ ------- ------ ----- ------- ------ ------ ------- ------- ------ ------- ------ ----- ------- ------ ------ ------- -------Total liabilities (42.3) (55.4) (20.6) (45.4) (654.0) - (817.7) (8.5) (826.2) ====== ======= ====== ===== ======= ====== ====== ======= =======Net assets 1,104.3 820.9 92.6 529.1 (448.4) - 2,098.5 332.9 2,431.4 ====== ======= ====== ===== ======= ====== ====== ======= ======= Other segmentinformationCapital expenditures:Property, plant andequipment 65.4 54.1 31.5 43.3 5.2 - 199.5 29.1 228.6Intangible fixed assets - - - - 1.6 - 1.6 - 1.6 -Depreciation 32.5 34.8 13.3 22.5 1.9 - 105.0 6.8 111.8Amortisation 0.2 - - - 6.8 - 7.0 - 7.0 # EBIT shows the segment result adjusted for exceptional items. It is profitbefore financing and tax and exceptional items. High Total Discon- Premier Pub Street David continuing tinued TotalYear ended Travel Restau- Restau- Lloyd Unallo- Elimin- operat- operat- operat-3 March 2006 Inn rants rants Leisure cated ation ions ions ions £m £m £m £m £m £m £m £m £m RevenueRevenue fromexternalcustomers 319.4 596.7 216.5 218.5 99.4 - 1,450.5 462.4 1,912.9Inter-segmentrevenue - - 3.2 - - (3.2) - - - ------ ------- ------- ----- ------ ------- ------- -------- --------Total revenue 319.4 596.7 219.7 218.5 99.4 (3.2) 1,450.5 462.4 1,912.9 ====== ======= ======= ===== ====== ======= ======= ======== ======== EBIT# 107.2 73.8 16.8 49.3 (14.4) - 232.7 79.4 312.1--------------- ------ ------- ------- ----- ------ ------- ------- -------- --------EBIT# 107.2 73.8 16.8 49.3 (14.4) - 232.7 79.4 312.1Segmentexceptionalitems:- Net profit/(loss) on disposal of property, plantand equipment - 5.0 (1.2) (0.4) (1.5) - 1.9 23.2 25.1- Impairment of property, plant and equipment - - - (10.0) - - (10.0) (4.3) (14.3)- Reorganisation costs (6.2) (0.3) - - - - (6.5) - (6.5)- Impairment of goodwill - - - - - - - (17.2) (17.2)Share ofprofit fromjoint ventures (0.1) - - - (11.4) - (11.5) - (11.5)Share of(profit)/lossfrom associates 0.1 - - - - - 0.1 (11.1) (11.0) ------ ------- ------- ----- ------ ------- ------- -------- --------Segment result 101.0 78.5 15.6 38.9 (27.3) - 206.7 70.0 276.7--------------- ------ ------- ------- ----- ------ ------- ------- -------- -------- Operating Profit 206.7 70.0 276.7 Share of profit from joint ventures 0.1 - - - 11.4 - 11.5 - 11.5Share ofprofit/(loss)from associates (0.1) - - - - - (0.1) 11.1 11.0Non-operatingexceptionals:Net loss ondisposal ofbusinesses andinvestments - (1.9) - - (0.4) - (2.3) - (2.3) ------- -------- --------Profit beforefinancing andtax 215.8 81.1 296.9 Net financecosts (72.6) (1.5) (74.1) ------- -------- --------Profit beforeincome tax 143.2 79.6 222.8 ------- -------- -------- Income taxexpense (44.1) (10.5) (54.6) ------- -------- --------Net profit forthe year 99.1 69.1 168.2 ======= ======== ======== Assets andliabilitiesSegment assets 1,110.8 858.0 113.7 578.2 84.9 - 2,745.6 1,226.2 3,971.8Investment injoint ventures 4.6 - - - 38.5 - 43.1 - 43.1Investment inassociates 0.8 - - 1.8 35.4 - 38.0 7.6 45.6 ------ ------- ------- ----- ------ ------- ------- -------- --------Total assets 1,116.2 858.0 113.7 580.0 158.8 - 2,826.7 1,233.8 4,060.5 ------ ------- ------- ----- ------ ------- ------- -------- -------- ------ ------- ------- ----- ------ ------- ------- -------- --------Totalliabilities (47.8) (47.9) (35.0) (40.1) (762.7) - (933.5) (47.2) (980.7) ------ ------- ------- ----- ------ ------- ------- -------- --------Net assets 1,068.4 810.1 78.7 539.9 (603.9) - 1,893.2 1,186.6 3,079.8 ====== ======= ======= ===== ====== ======= ======= ======== ======== Other segmentinformationCapitalexpenditures:Property,plant andequipment 50.6 77.2 21.3 58.9 3.2 - 211.2 47.9 259.1Intangiblefixed assets - - - - 9.4 - 9.4 - 9.4 Depreciation 29.2 30.4 11.3 21.7 1.5 - 94.1 34.5 128.6Amortisation 0.1 - - - 4.9 - 5.0 - 5.0 #EBIT shows the segment result adjusted for exceptional items. It is profitbefore financing and tax and exceptional items. 4. Exceptional items 2005/06 2004/05 £m £m Continuing activities: Reorganisation costs # (10.8) (6.5)Impairment of goodwill (5.8) -Impairment of intangible assets (7.3) -Impairment of property, plant and equipment (22.1) (10.0)Net loss on sale of businesses and investments * (8.8) (2.3)Net profit on disposal of property, plant andequipment 1.1 1.9Interest cost of early redemption of debentures (25.5) - ------- ------- (79.2) (16.9) ------- ------- Tax on continuing exceptional items 12.8 4.4 ------- -------Total continuing exceptional items (66.4) (12.5) ======= ======= Discontinued activities: Impairment of goodwill - (17.2)Impairment of property, plant and equipment - (4.3)Net profit on disposal of businesses (note 6) 200.5 -Net profit on disposal of property, plant andequipment 1.9 23.2Impairment loss on revaluation of Condor joint venture (29.3) - ------- ------- 173.1 1.7 ------- ------- Tax on discontinued exceptional items 7.6 - ------- -------Total discontinued exceptional items 180.7 1.7 ======= ======= ------- -------Total exceptional items 114.3 (10.8) ======= ======= # Following recent corporate activity and the resultant shape of the group theboard instigated a fundamental reorganisationof all central support functions. The costs of this reorganisation have beenreported in administrative expenses in 2005/06. These costs principally relateto redundancy, closure costs and a pension curtailment credit. * This cost includes £5.9m for onerous contracts and the remainder is the losson sale of two unlisted investments. 5. Taxation Consolidated income statement for continuing operations Major components of the tax charge for continuing operations for the years ended2 March 2006 and 3 March 2005 are: 2005/06 2004/05 £m £mCurrent tax Current tax expense relating to UK operations (0.3) 41.0 Adjustments in respect of current tax of previous periods relating to UK operations (0.4) (11.1) Current tax expense relating to overseas operations 1.4 - Adjustments in respect of current tax of previous periods relating to overseas operations - - ------- ------- 0.7 29.9Deferred tax Origination and reversal of temporary differences within the UK 43.8 14.2 Origination and reversal of temporary differences overseas (0.3) - ------- ------- 43.5 14.2 ------- -------Tax reported in the consolidated income statement for continuingoperations 44.2 44.1 ======= ======= 2005/06 2004/05Consolidated statement of changes in equity £m £m Pensions 28.6 (6.6) ------- -------Tax reportedin equity 28.6 (6.6) ======= ======= A reconciliation of the tax charge applicable to profit from operating activities before tax at the statutory tax rate to the actual tax charge at the group's effective tax rate for the years ended 2 March was as follows: 2005/06 2004/05 £m £mAccounting profit before tax from continuing operations 101.9 143.2Accounting profit before tax from discontinuing operations 201.7 79.6 ------- -------Tax reported in the consolidated income statement 303.6 222.8 Tax at current UK tax rate of 30% (2005 - 30% ) 91.1 66.8Effect of different tax rates in overseas companies 0.7 (0.9)Effect of associated and joint venture companies (5.0) (11.1)Expenditure not allowable/ income not taxable in relation to discontinuingoperations (43.9) 8.8Adjustments to tax expense in respect of previous years (0.4) (10.6)Adjustments to deferred tax expense in respect ofprevious years (3.3) 1.6 ------- -------At effective tax rate of 12.9% (2005 - 24.5%) 39.2 54.6 ======= ======= Tax expense reported in the consolidated income statement for continuingoperations 44.2 44.1Tax (recovery)/expense attributable to discontinuedoperations (5.0) 10.5 ------- ------- 39.2 54.6 ======= ======= Deferred tax Deferred tax at 2 March relates to the following: Consolidated balance sheet Consolidated income statement 2006 2005 2005/06 2004/05 £m £m £m £mDeferred tax liabilitiesAcceleratedcapitalallowances 101.5 148.7 7.9 10.2Propertyvaluation 184.5 208.8 5.2 2.0 ------- -------Gross deferredtaxliabilities 286.0 357.5 ------- ------- Deferred tax assetsPensions (101.6) (103.8) 31.0 3.7Tax losses (1.9) (1.7) - -Other (8.3) (5.6) (0.6) (1.7) ------- -------Gross deferredtax assets (111.8) (111.1) ------- ------- ------- -------Deferred taxexpense 43.5 14.2 ------- ------- ======= =======Net deferredtax liability 174.2 246.4 ======= ======= At 2 March 2006 there is a deferred tax liability for taxes that would bepayable on the unremitted earnings of overseassubsidiaries of £2.9m. Tax relief on total interest capitalised amounts to £0.6m (2005 -£0.2m). 6. Discontinued operations The three disposals in the period were Marriott hotels, Maredo and BritanniaSoft Drinks Ltd (BSD), resulting in a profit on disposal of £208.1m includedwithin discontinued operations during the period. On 5 May 2005 Whitbread sold 46 of its Marriott hotels to a joint venture owned50% each by Whitbread and Marriott International. On 21 April 2006, Whitbreadcompleted the sale of the Marriott joint venture to Royal Bank of Scotland.Whitbread retains its investment in a further seven properties, which are in theprocess of being marketed. At 2 March 2006 the properties retained by Whitbread, and its investment in thejoint venture, were classified as held for sale and reported within discontinuedoperations within these financial statements, the carrying value of the Marriottjoint venture assets held for sale has been adjusted to reflect the agreed saleproceeds. On 25 April 2005 Whitbread PLC announced the conditional sale of its Germansteak-house business Maredo. The sale took place on 19 May 2005. On 14 November 2005 Whitbread PLC announced the sale of its share in itsassociate, BSD via an initial public offering. The sale took place on 9 December2005. Whitbread PLC disposed of its entire 23.75% holding on that date. The effect of the disposals during the period is as follows:- Marriott brands Maredo BSD Total £m £m £m £m ------ ------- ------- ------- Sale proceeds 1,066.6 15.1 114.4 1,196.1Total net assets sold (870.0) (12.9) 26.7 (856.2)Goodwill written off (96.3) - - (96.3)Costs of disposal (19.4) (1.2) (1.0) (21.6)Unrealised profit onsale of business tojoint venture (21.5) - - (21.5) ------ ------- ------- ------- 59.4 1.0 140.1 200.5Tax on disposal 7.6 - - 7.6 ------ ------- ------- -------Net profit on disposalof businesses 67.0 1.0 140.1 208.1 ====== ======= ======= ======= Sale proceeds are made up as follows: Cash 781.3 15.1 114.4 910.8Deferred consideration 285.3 - - 285.3 ------ ------- ------- -------Total consideration 1,066.6 15.1 114.4 1,196.1 ====== ======= ======= ======= On the face of the cash flow, disposals of subsidiaries and investments reportedas discontinued operations are the net of cash proceeds of £910.8m and the costs of disposal of £21.6m. Total net assets sold comprises the following assets and liabilities: Total £m ------Investment in associate (26.7)Fixed assets 945.0Stock 3.2Debtors 40.7Cash 18.2 ------Total assets sold 980.4 ------ Creditors (46.5)Loan capital (4.0)Deferred tax provision (73.5)Other provisions (0.2) ------Total liabilities sold (124.2) ------ ------Total net assets sold 856.2 ====== Cash flows relating to discontinued operations are as follows: Year to Year to 2 March 3 March 2006 2005 £m £m ------ ------Marriott brands Net cash inflows fromoperating activities 14.7 84.1Net cash flows frominvesting activities (10.2) 11.3 ------ ------Net increase in cashand cash equivalents 4.5 95.4 ====== ====== Maredo Net cash inflows from operating activities 1.4 4.8Net cash flows from investing activities (0.3) (2.6) ------ ------Net increase in cash and cash equivalents 1.1 2.2 ====== ====== Profit for the year from discontinued operations is made up as follows: Year to 2 March Year to 3 March 2006 2005 £m £m -------- -------- Revenue 108.2 462.4Cost of sales (27.0) (193.4) -------- --------Gross profit 81.2 269.0 Distribution costs (53.2) (169.7)Administrative expenses (8.1) (31.0)Exceptional items (note 4) -------- --------Impairment of goodwill - (17.2)Impairment of property, plant andequipment - (4.3)Profit on disposal of property, plant andequipment 1.9 23.2 -------- -------- 1.9 1.7 -------- --------Operating profit 21.8 70.0 Share of profit fromassociates 9.4 11.1 Exceptional items (note 4)Net profit on disposal ofbusinesses 200.5 -Impairment loss onrevaluation ofCondor jointventure (29.3) - -------- -------- Profit before financing and tax 202.4 81.1 Finance costs (1.5) (1.7)Finance income 0.8 0.2 -------- --------Profit before tax 201.7 79.6 Income tax expense:- related to pre-tax profit (2.6) (10.5)- related to profit on disposal 7.6 - -------- --------Profit for the year from discontinuedoperations 206.7 69.1 ======== ======== Assets classified as held for sale The major classes of assets and liabilities classified as held for sale andmeasured at the lower of carrying amount and fair value less cost to sell. Year ended Year ended 2 March 2006 3 March 2005 £m £m Property, plant andequipment 58.0 992.3Investment in joint venture 234.6 -Investment in associates 10.0 - ------- -------Total 302.6 992.3 ======= ======= 7. Earnings per share Basic earnings per share is calculated by dividing the net profit for the yearattributable to ordinary shareholders of £264.3m(2004/05 - £167.9m) by the weighted average number of ordinary sharesoutstanding during the year of 264.7m (2004/05 - 296.5m). The adjusted earnings per share is presented so as to show more clearly theunderlying performance of the group. Diluted earnings per share is the basic and adjusted basic earnings per shareafter allowing for the dilutive effect of the conversioninto ordinary shares of the weighted average number of options outstandingduring the period. The number of shares used for thediluted and adjusted diluted calculation is as follows: 2005/06 2004/05 £m £m Weighted average number of ordinary shares forbasic earnings per share 264.7 296.5 Effect of dilution - share options 2.2 2.2 ------ ------Adjusted weighted average number of ordinary sharesfor diluted earnings per share 266.9 298.7 ====== ====== At the year end there were 104,671 ordinary share options in issue that couldpotentially dilute basic earnings per share in the futurebut are not included in the calculation at the year end because they areanti-dilutive (2004/05 - 290,312) Earnings per share on discontinued operations 2005/06 2004/05 ------ ------ p p basic earning per share 78.05 23.27- diluted for profit for the period 77.41 23.10 Adjusted basic earnings per share is calculated as follows:- Earnings Earnings per shareTotal operations 2005/06 2004/05 2005/06 2004/05 £m £m p pEarnings and basic earnings per share 264.3 167.9 99.85 56.63Earnings and basic earnings per share attributable to:Exceptional items - gross (93.9) 15.2 (35.47) 5.13Adjust for tax on exceptional items (20.4) (4.4) (7.71) (1.48) ------ ------ ------ ------Underlying profit and basic earningsper share for profit for the period 150.0 178.7 56.67 60.28 ====== ====== ====== ====== Earnings Earnings per shareContinuing operations 2005/06 2004/05 2005/06 2004/05 £m £m p pEarnings and basic earnings per share 57.7 98.9 21.80 33.36Earnings and basic earnings per share attributable to:Exceptional items - gross 79.2 16.9 29.92 5.70Adjust for tax on exceptional items (12.8) (4.4) (4.84) (1.48) ------ ------ ------ ------Underlying profit and basic earningsper share for profit for the period 124.1 111.4 46.88 37.58 ====== ====== ====== ====== Earnings Earnings per shareDiscontinued operations 2005/06 2004/05 2005/06 2004/05 £m £m p pEarnings and basic earnings per share 206.6 69.0 78.05 23.27Earnings and basic earnings per share attributable to:Exceptional items - gross (173.1) (1.7) (65.39) (0.57)Adjust for tax on exceptional items (7.6) - (2.87) - ------ ------ ------ ------Underlying profit and basic earningsper share for profit for the period 25.9 67.3 9.79 22.70 ====== ====== ====== ====== 8. Dividends paid and proposed 2005/06 2004/05 £m £m Declared and paid in the year:Equity dividends on ordinary shares: Special dividend - 135.00 pence 402.0 -Final dividend for 2004/05 - 18.35 pence (2003/04 - 16.15pence) 54.6 47.8Interim dividend for 2005/06 - 7.35 pence (2004/05 - 6.90pence) 18.9 20.4 ------ ------ 475.5 68.2 ====== ====== Proposed for approval at AGM:Equity dividends on ordinary sharesFinal dividend for 2005/06 - 19.95 pence (2004/05 - 18.35pence) 51.7 54.6 ====== ====== 9. Reserves Currency Share Share Other Retained tran- Minority Total capital premium reserves earnings slation Total interest equity £m £m £m £m £m £m £m £m At 4 March 2004 148.7 13.5 (1,842.1) 3,360.0 - 1,680.1 6.8 1,686.9 Totalrecognisedincome andexpense forthe year - - - 186.9 0.3 187.2 0.3 187.5 Ordinaryshares issued 0.9 9.7 - - - 10.6 - 10.6Cost of ESOTsharespurchased - - (5.9) - - (5.9) - (5.9)Loss on ESOTshares issuedtoparticipants - - 3.9 (3.9) - - - -Accrued sharebased payments - - 4.1 0.7 - 4.8 - 4.8Movement injoint venturesand associatesreserves - - 1.0 0.7 - 1.7 - 1.7Equitydividends - - - (68.2) - (68.2) (1.3) (69.5) ----- ------ ------ ------ ------ ------ ----- ------At 3 March 2005 149.6 23.2 (1,839.0) 3,476.2 0.3 1,810.3 5.8 1,816.1 ----- ------ ------ ------ ------ ------ ----- ------ Effect ofadopting IAS32 & 39 - - (3.2) 2.3 - (0.9) (3.1) (4.0) ----- ------ ------ ------ ------ ------ ----- ------At 4 March 2005 149.6 23.2 (1,842.2) 3,478.5 0.3 1,809.4 2.7 1,812.1 ----- ------ ------ ------ ------ ------ ----- ------ Totalrecognisedincome andexpense forthe year - - (0.3) 199.4 1.4 200.5 0.1 200.6 Ordinaryshares issued 1.5 12.9 - - - 14.4 - 14.4Cost of ownsharespurchased - - (9.5) - - (9.5) - (9.5)Loss on ESOTshared issuedtoparticipants - - 6.2 (6.2) - - - -Accrued sharebased payments - - 7.4 - - 7.4 - 7.4Movement inassociatesreserves - - (69.9) 66.9 - (3.0) - (3.0)Disposal of BSD - - 70.1 (70.1) - - - -Equitydividends - - - (475.5) - (475.5) - (475.5) ----- ------ ------ ------ ------ ------ ----- ------At 2 March 2006 151.1 36.1 (1,838.2) 3,193.0 1.7 1,543.7 2.8 1,546.5 ===== ====== ====== ====== ====== ====== ===== ====== Nature and purpose of reserves: Share capital Share capital includes the nominal value on issue of the company's sharecapital, comprising 58.33p ordinary shares. Share premium The share premium reserve is the premium paid on the company's 58.33p ordinaryshares. Retained earnings A portion of retained earnings is undistributable following the adoption ofIFRS. The 'revaluation reserve' reported under UK GAAP has been reclassified asretained profit at the date of transition to IFRS. Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differencesarising from the translation of the financial statements of foreign subsidiariesand other foreign currency investments. 10. Events after the balance sheet date On 9th March, Whitbread PLC entered into an agreement to acquire the businessand assets of seven Holiday Inn branded hotels from wholly owned subsidiaries ofLRG Acquisition Limited for a total consideration of £34.5m. The seven hotelsare being converted to Premier Travel Inn. On 21 April 2006 Whitbread Plc announced the completion of the Marriott saleprocess, with the hotel assets held by a joint venture being acquired by theRoyal Bank of Scotland. As a result of this transaction the carrying value ofthe joint venture assets held for sale in the 2005/06 accounts has beenadjusted. The completion of the disposal in 2006/07 may result in a smallbalancing charge. A final dividend of 19.95p per share (2005 - 18.35p) amounting to a dividend of£51.7m (2005 - £54.6m) was declared by the Directors at their meeting on 24April 2006. These financial statements do not reflect this dividend payable. This information is provided by RNS The company news service from the London Stock Exchange

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