28th Apr 2008 07:00
Whitbread PLC28 April 2008 Whitbread PLC28 April 2008 Whitbread PLC preliminary results for the financial year to 28 February 2008 Highlights Financial •Profit before tax and exceptional items for Continuing operations (2) up 26.3% to £210.3m (2006/7: £166.5m) •Total revenue for Continuing Whitbread (1) up 11.3% to £1,187.8m (2006/7: £1,067.2m) •Like-for-like sales for Continuing Whitbread up 5.7% •Diluted pre-exceptional EPS up 30.5% to 85.87p •Final dividend up 21.4% to 26.90p; full year dividend up 19.0% to 36.00p (2006/7 30.25p) Statutory •Total Group revenue £1,320.1m (2006/7: £1,524.3m) •Total profit for the year £544.8m (2006/7: £281.5m) •Basic pre-exceptional EPS from Continuing operations (2) up 56.3% at 76.01p (2006/7: 48.62p) •Year end net debt of £425.8m (2006/7: £898.6m) Achievements •Premier Inn had a record year with room growth of 3,400 and sales up 15.1% •Pub Restaurants have delivered significant improvements in profit per pub restaurant, up c.40% •Costa expansion accelerated with 1,000 stores worldwide in March and sales up 23.5% •New £455m facility signed to replace existing £280m facility •Group refocused: sale of David Lloyd Leisure for £925m and TGI Friday's for £70m £€25m pa to be saved through simplified management structure and outsourcing logistics £€338m returned through share buybacks Alan Parker, Chief Executive Whitbread PLC, said: "2007/8 was a year ofexcellent progress with good results across the Company. Whitbread is now amore resilient business with strong growth prospects in the UK and overseas. Inanticipation of a more challenging environment, action has been taken tosimplify processes and reduce costs." "Since the start of the new financial year, two months ago, trading has beenencouraging. We have researched the opportunities for disciplined growth acrossthe Group and have established two longer-term ambitions - in the next five years to increase the size of Premier Inn by 50% to 55,000 rooms and to doubleCosta to 2,000 stores. Whitbread is well placed for the future." For further information contact: Whitbread Investor RelationsChristopher Rogers, Group Finance Director 020 7806 5491Julie Foster, Interim Director of Communications 01582 844244 Tulchan CommunicationsAndrew Grant/David Allchurch 020 7353 4200 For photographs, please visit the new corporate image library: www.whitbreadimages.co.uk A presentation for analysts will be held at The London Stock Exchange, 10Paternoster Square, London, EC4M 7LS. The presentation is at 9.30am and a liveaudio webcast of the presentation will be available on the investors' section ofthe website at: www.whitbread.co.uk. Alternatively, you can listen to the presentation by dialling: +44 (0)20 71620125, enter the passcode: 793474 and quote The Whitbread Results Presentation.This will be available as a replay for 30 days and will be available from approximately 12:00 noon, dial: +44 (0)20 7031 4064 and enter the passcode:793474. (1) Continuing Whitbread Continuing Whitbread comprises Premier Inn, the retained Pub Restaurant Estateand Costa but excludes David Lloyd Leisure, the disposed of pub restaurantsites, the Pizza Hut joint venture, TGI Friday's and any supply chain sales to third parties. (2) Continuing operations Continuing operations comprises Continuing Whitbread plus the disposed of pub restaurant sites during the period of Whitbread ownership and supply chain sales to third parties. Revenue by business segment +-----------------------------------------+-----------+--------------+---------+|£m | 2007/8 | 2006/7 | Change|+-----------------------------------------+-----------+--------------+---------+|Premier Inn | 527.8 | 458.5 | 15.1% |+-----------------------------------------+-----------+--------------+---------+|Pub Restaurants (retained) | 446.1 | 436.4 | 2.2% |+-----------------------------------------+-----------+--------------+---------+|Costa | 216.3 | 175.1 | 23.5% |+-----------------------------------------+-----------+--------------+---------+|Less: inter-segment | (2.4) | (2.8) | |+-----------------------------------------+-----------+--------------+---------+|Revenue from Continuing Whitbread | 1,187.8 | 1,067.2 | 11.3% |+-----------------------------------------+-----------+--------------+---------+|Pub Restaurants (disposed) | - | 82.5 (1) |+-----------------------------------------+-----------+--------------+---------+|Other | 28.9 | 23.8 | 21.4% |+-----------------------------------------+-----------+--------------+---------+|Revenue from continuing operations | 1,216.7 | 1,173.5 | 3.7% |+-----------------------------------------+-----------+--------------+---------+ (1) Part year impact in 2006/7 Chief Executive's Review This year we have made excellent progress. We are now a focused hotel andrestaurant company. All our businesses have delivered growth and performed wellin their respective markets. Premier Inn has delivered another year of industry-leading performance as thelargest and fastest growing hotel group in the UK. Total revenue for the yearis up 15.1% to £527.8m with operating profit up 14.0% year on year to £178.0m. During the year over 3,400 rooms were added to the estate bringing the total toover 36,000 rooms. The majority of this growth was organic. The rest wasthrough acquisitions including the purchase of 771 rooms trading under the TulipInn and Golden Tulip brands in September, together with a secured pipeline of afurther 1,300 rooms. We also announced the signing of a joint venture withEmaar-MGF to open 12,000 rooms (80 hotels) in India within ten years, and thismonth our joint venture with Emirates opened its first hotel in Dubai. Pub Restaurants have reported a second year of positive like-for-like salesgrowth. Total sales from the retained estate are up 2.2%. The Beefeaterremodelling is now complete and we opened our first new Beefeater for six years.Rising cost inflation has been contained in 2007/8 but will be an increasingchallenge in 2008/9. Costa is the fastest growing and largest coffee shop chain in the UK and hasdelivered another outstanding year. Total revenue is up 23.5% to £216.3m and atthe year-end there were 992 Costa outlets in 20 countries worldwide. The number of Costa outlets has more than doubled in the last three years. Costa isdeveloping into a very strong brand with further scope for growth both in theUK and overseas. In parallel, we have worked hard to simplify the business. We sold David LloydLeisure for £925m in August 2007 having already sold TGI Friday's in March 2007for £70m. In February 2008 we announced that the divisional management teams ofthe Hotels and Pub Restaurants businesses would be combined. At the heart ofthis restructuring is a desire to eliminate duplication and better align themanagement teams to the businesses. This will further increase our focus ondelivering growth from our portfolio of Premier Inn hotels situated alongside apub restaurant - a model that generates superior industry returns. We have alsomade the decision to outsource our logistics operation and earlier this monthsigned a contract with Kuehne & Nagel. These combined actions will result inannual cost savings of £25 million from 2009/10. Net debt at the year-end was £425.8m compared to £898.6m as at 1 March 2007.Following the sale of David Lloyd Leisure we repaid £300.5m of debentures andpurchased £338m of shares via an on market share buyback programme. Since theend of the financial year we have arranged a new £455m five-year loan facilityto replace the £280m facility, which has now expired. Combined with theexisting £700m 5-year facility, the company has sufficient committed headroomand maturities to operate the business in line with its plans. The Board has also continued to review the level of leverage in the business. Inthe current uncertain financial markets we believe that the appropriate levelof leverage for the company is one which is consistent with an investment gradecorporate capital structure (i.e. no greater than 3.5X, on a pension and leaseadjusted basis). Over the coming year we will work towards this level through acombination of accelerated investment, bolt on acquisitions and whenappropriate a continuation of the share buyback programme. Dividend A final dividend of 26.90p, an increase of 21.4% over last year, will, subject to approval at the AGM, be paid on 11 July 2008 to all shareholders on the register at the close of business on 9 May 2008. Outlook Since the start of the new financial year, trading has been encouraging with thepositive sales trends from last year continuing. Although a more challengingconsumer environment is widely anticipated, we are confident that the actions we have taken, combined with our investment programme, our resilient brands andour strong balance sheet, put us in a good position to continue the growth ofthe business. Premier Inn +-------------------------------------------+---------+-------------+----------+|Premier Inn | 2007/8| 2006/7| Change|+-------------------------------------------+---------+-------------+----------+|Revenue | £527.8m | £458.5m | 15.1% |+-------------------------------------------+---------+-------------+----------+|Like-for-like sales | | | 10.4% |+-------------------------------------------+---------+-------------+----------+|Operating profit (pre exceptional) | £178.0m | £156.2m | 14.0% |+-------------------------------------------+---------+-------------+----------+|Operating profit (post exceptional) | £171.0m | £156.0m | 9.6% |+-------------------------------------------+---------+-------------+----------+ Premier Inn continues to deliver an industry-leading performance. Total revenuefor the year grew by 15.1% to £527.8m with operating profit up 14.0% year onyear to £178.0m. Full year like-for-like sales have increased by 10.4%. Both total occupancy rate and like-for-like occupancy are in line with 2006/7, eventhough the estate has increased by 10%. The growth prospects for the business, both in the UK and overseas, arecompelling. During the year over 3,400 rooms were added to the estate, beatingour target set for the year of 3,000 rooms. These openings included ouracquisition in September of six hotels, with a total of 771 rooms, tradingunder the Tulip Inn and Golden Tulip brands, together with a secured pipelineof a further 1,300 rooms. The first pipeline site opened in February atManchester Airport adding 195 rooms to the estate, with a second opening inStoke-on-Trent in March 2008 adding 119 rooms. Trading in London has been particularly strong and is an area of focus. Like-for-like occupancy in 2007/8 was up 4.2% pts to 84.0%, which compares to 79.2%for the whole estate. Our yield increased by 17.5% to £55.37. We recently announced that a further 1,200 rooms will open in London over the next threeyears. Of these, 400 rooms have been acquired from the Real Hotel Company for£18.5m, with a further 800 coming from new build hotels and extensions to existing properties. In addition we anticipate being able to announce a further2,000 rooms over the next 12 months. Taken together this increase of 3,200rooms will grow Premier Inn's London estate by over 60% to 8,500 rooms. Our international expansion continues. During the year we announced the signingof a joint venture with Emaar-MGF to open 12,000 rooms (80 hotels) in Indiaover the next ten years and this month our joint venture with Emirates opened its first hotel in Dubai. Currently, we have secured 4 sites in the Gulf andhave a further pipeline of 8. In India we have secured 4 sites with a pipelineof 11. We continue to review opportunities in other markets. During the year we commenced the rebranding of our hotel business to PremierInn. This rebranding will cost £13m, of which £7m has been spent in 2007/8, andwill increase brand awareness, differentiating Premier Inn from its competitors. Pub Restaurants +------------------------------------------+---------+-------------+-----------+|Pub Restaurants | 2007/8| 2006/7| Change|+------------------------------------------+---------+-------------+-----------+|Revenue | £446.1m | £518.9m | (14.0)%|+------------------------------------------+---------+-------------+-----------+|Like-for-like sales | | | 0.8% |+------------------------------------------+---------+-------------+-----------+|Operating profit (pre exceptional) | £55.5m | £52.3m | 6.1% |+------------------------------------------+---------+-------------+-----------+|Operating profit (post exceptional) | £52.6m | £247.8m | (78.8)%|+------------------------------------------+---------+-------------+-----------+ Operating profit of £55.5m is 6.1% up on last year. Profit per pub restaurant,which has increased by around 40% year on year, is a better measure of progressas the 2006/7 results included profits from the 235 sites sold in July 2006. This was achieved through a combination of good cost control and operationalefficiency, in particular a reduction in discounts. Pub Restaurant like-for-like sales are up 0.8% representing the second successive year of like-for-like sales growth. Total revenue from the retained estate is up 2.2%. The Pub Restaurant strategy is to focus on clearly defined market segmentsdepending on their location and surrounding demographics. As a consequence thebusiness is concentrating on Beefeater, a new brand called Table Table and thecore Brewers Fayre estate in which we continue to drive operationalimprovement. Table Table is formed from 102 remodelled Brewers Fayres and is amodern pub experience for adults aged 30 to 45. We are researching other brandand customer propositions. This year has seen the transformation of our Beefeater restaurants. The pubrestaurants have been refurbished, the guest proposition has been radicallyimproved and the results reported for the year demonstrate that the business continues to trade well. We have achieved strong year on year like-for-likecovers growth of 7.7% and in February 2008 we opened our first new Beefeaterfor six years. The co-located pub restaurant and Premier Inn model continues to deliversuperior returns for both businesses. During the year four new pub restaurantsco-located with a Premier Inn were opened. As a result of the operational improvements and capital investment the businessnow has solid foundations. Our pub restaurants are better managed and have moreclearly defined customer propositions. The focus on the joint site model meansthat they are well placed to operate in the tougher cost environment and what iswidely anticipated to be a more challenging consumer environment. Costa +-------------------------------------------+---------+-------------+----------+|Costa | 2007/8| 2006/7| Change|+-------------------------------------------+---------+-------------+----------+|Revenue | £216.3m | £175.1m | 23.5% |+-------------------------------------------+---------+-------------+----------+|Like-for-like sales | | | 6.5% |+-------------------------------------------+---------+-------------+----------+|Operating profit (pre exceptional) | £20.8m | £17.8m | 16.9% |+-------------------------------------------+---------+-------------+----------+|Operating profit (post exceptional) | £19.2m | £16.1m | 19.3% |+-------------------------------------------+---------+-------------+----------+ Costa is the fastest growing and largest coffee shop chain in the UK and hasdelivered another set of outstanding results. Total revenue is up 23.5% to£216.3m and at the year-end there were 992 Costa outlets worldwide, an increase of over 40% year on year. Costa now accounts for over £20m of the Group'strading profits and will be an important driver of the Group's profit growth inthe future. Like-for-like sales are up 6.5%. This is in line with last year's performanceand is the seventh consecutive year of like-for-like sales growth. Theresilience of the brand is demonstrated by the fact that the like-for-like salesperformance was achieved across all regions during a year of significantexpansion. Full year profits are up 16.9% to £20.8m, despite internationalopening costs diluting the profitability of our overseas business. We continue to grow our UK market presence through a variety of differentchannels. By the year-end there were 695 stores in the UK and we believe thatthere is scope to grow the brand significantly. This will be achieved byfocusing on areas where Costa is currently under-represented, such as centralLondon and a number of major towns and cities up and down the country, retailtrading parks and the roadside market. There is also significant opportunity tobuild on concession relationships such as Tesco, where we already have 50 in-store coffee shops. Growth in our international estate continues to accelerate. There are now over300 international Costa stores in 21 different countries. In December 2007 wecommenced our Russian joint venture with Rosinter Restaurant Holdings. Our first store opened last month in Moscow's Pushkin Square, Costa's 1,000th storeworldwide. With this first store open we can now focus on the rollout of afurther 200 stores in Russia. FINANCE REVIEW Changes in the Group During the financial year there have been further changes to the structure of the Group: David Lloyd Leisure On 2 August 2007 Whitbread completed the sale of David Lloyd Leisure for £925mto Versailles Bidco Limited, a company owned by London and Regional HoldingsLimited and Bank of Scotland Corporate. Profit generated by the business up to the point of sale has been included within discontinued operations, with prioryear comparatives restated accordingly. The 2007/8 results include a benefit of£3.7m, in accordance with IFRS 5, as no depreciation was charged on David Lloyd Leisure assets from the time the Group decided to sell the business tocompletion of the sale. TGI Friday's On 2 March 2007 Whitbread completed the sale of the TGI Friday's property andbusiness for £70m to British Land, Carlson Restaurants Worldwide Inc. and ABNAmro Capital. Profit generated by the business in 2006/7 has been included within discontinued operations. Stand-alone pub restaurants On 28 July 2006 Whitbread announced the sale of 235 trading pub restaurants,together with four sites not yet trading. The trading results for the 235 sitesup to the date of sale are included within the 2006/7 comparatives for the Pub Restaurants business. Organisational review Following the substantial reshaping of Whitbread, of which the above disposalsform part, an organisational review was undertaken to ensure that the mostefficient operating structure for the management and growth of our businesses isin place. As a result of this Whitbread announced that the divisionalmanagement of the Hotels and Pub Restaurants businesses would be combined. Atthe heart of this restructuring is a desire to eliminate duplication and betteralign the management teams to the businesses. We have also taken the decision to outsource our logistics operation and havesigned a contract with Kuehne & Nagel who will operate our supply chain usingour existing network of depots before the operation is migrated to a newfacility at the end of September. It is expected that the continued simplification of our businesses will takesome 18 months to implement and will result in savings of £25m per annum from2009/10 at an exceptional total cost of around £35m. As a result of this continued simplification, going forward Whitbread will onlybe reporting two segments: Hotels & Restaurants and Costa. However, we willcontinue to provide sales information on the pub restaurant estate. Revenue Group revenue from Continuing operations increased by 3.7% year on year to£1,216.7m. Excluding the impact of the disposed pub restaurants in 2006/7,sales from Continuing Whitbread grew by 11.3%. Revenue by business segment +-----------------------------------------+-----------+--------------+---------+|£m | 2007/8| 2006/7| Change|+-----------------------------------------+-----------+--------------+---------+|Premier Inn | 527.8 | 458.5 | 15.1% |+-----------------------------------------+-----------+--------------+---------+|Pub Restaurants (retained) | 446.1 | 436.4 | 2.2% |+-----------------------------------------+-----------+--------------+---------+|Costa | 216.3 | 175.1 | 23.5% |+-----------------------------------------+-----------+--------------+---------+|Less: inter-segment | (2.4) | (2.8) | |+-----------------------------------------+-----------+--------------+---------+|Revenue from Continuing Whitbread | 1,187.8 | 1,067.2 | 11.3% |+-----------------------------------------+-----------+--------------+---------+|Pub Restaurants (disposed) | - | 82.5 (1) |+-----------------------------------------+-----------+--------------+---------+|Other | 28.9 | 23.8 | 21.4% |+-----------------------------------------+-----------+--------------+---------+|Revenue from continuing operations | 1,216.7 | 1,173.5 | 3.7% |+-----------------------------------------+-----------+--------------+---------+ 1 Part year impact in 2006/7 Like-for-like sales grew by 5.7% with the remainder of the turnover growthcoming from a net increase in outlets, predominantly in Premier Inn and Costa. Results Total profit for the year is £544.8m, up 93.5% on last year. Profit before taxand exceptionals is £210.3m, up 26.3% on last year. Exceptional items Net exceptional profit before tax amounted to £365.1m. This amount is analysedin more detail in note 6 to the financial statements. The significant itemsincluded within this category are noted below. Net exceptional profit after taxamounted to £382.1m. 1. Business disposals The two principal businesses disposed of during the year generated pre-taxdisposal profits of £413.8m; £400.8m on David Lloyd Leisure and £13.0m for TGIFriday's. 2. Organisational review The organisational review will deliver £25m of annual cost savings from 2009/10.The total exceptional cost of implementation is expected to be around £35m ofwhich £21.2m has been charged this year with the balance to be charged in2008/9. 3. Refinancing costs At the start of the financial year we announced our intention to increase theleverage of the Group through issuing bonds secured on our hotel and pubrestaurant estates. Our work on this issue was undertaken in the first half ofthe year and had been largely completed at the time the capital markets closedto this type of issue. As it is unclear when the markets will reopen we haveexpensed the costs. They relate mainly to advisory and legal fees, incurred inthe process and amount to £9.4m. 4. Premier Inn rebranding On 19 June 2007 we announced that we would be rebranding our hotels businessfrom Premier Travel Inn to Premier Inn. The revenue cost of this rebranding is£7.0m in this financial year, with a further £6.0m to be charged in 2008/9.5. Lease reversions As a result of The Laurel Pub Company Limited going into administration on 27March 2008, a provision of £20.9m has been charged to income to recognise theexpected cost of lease reversions relating to properties that are expected torevert to the Group. 6. Pensions credit During the first half of the year it was agreed with the Trustee of the Grouppension scheme to reflect new arrangements for commutation of pension rights onretirement into cash following a change in the government limits, "The A DayChanges". The actuarial impact of this decision, coupled with a change incommutation factors, gave rise to £10.0m of income, which is treated asexceptional. 7. Interest on debenture redemption At 1 March 2007 Whitbread's capital structure included redeemable debenturestock with a nominal value of £300.5m. These debentures were due for repaymentin 2011 and 2021. During the first half of the year, as part of our restructuring of the balance sheet, we sought early redemption. This was agreedon 30 August 2007 with the debentures being repaid on 6 September 2007 and theassociated interest rate swaps closed out. This resulted in an exceptional interest charge of £14.2m. Finance Act 2007 The Finance Act 2007 reduced the rate of UK corporation tax to 28% with effectfrom April 2008. The effect of the reduced rate is a deferred tax exceptionalcredit of £21.5m. Further UK tax changes, subject to consultation and future enactment are a reduction in the rate of capital allowances applicable to plantand machinery from 25% to 20% on a reducing balance basis; a new category ofintegral features qualifying for capital allowances at 10% on a reducing balance basis and the phased abolition of allowances for hotel buildings. Interest Pre-exceptional net interest costs have fallen year on year by 48.7% to £19.6m.This is a result of an increase in interest received, including interest earnedon the David Lloyd Leisure sale proceeds and, following a reduction in the pension deficit, pension finance income of £7.0m this year compared to a cost of£0.5m in 2006/7. Taxation The UK tax expense of £67.2m represents an effective tax rate of 32.0% on thecontinuing businesses before exceptional items, which compares with 33.5% lastyear. The charge includes deferred tax. Earnings per share Diluted pre-exceptional earnings per for total operations increased by 30.5% to85.87p. Details can be found in note 12 to the accounts. Dividend A final dividend of 26.90p, an increase of 21.4% over last year, will, subjectto approval at the AGM, be paid on 11 July 2008 to all shareholders on theregister at the close of business on 9 May 2008. Capital expenditure Total Group cash capital expenditure on property, plant and equipment during theyear was £283.4m. This included £269.0m on Continuing operations, split betweenacquisition expenditure, which includes the acquisition and development ofproperties, (£154.5m) and maintenance expenditure (£114.5m). Included within our acquisition spend is the purchase of six hotels (771 rooms)previously trading under the Tulip Inn and Golden Tulip brands, together withnine further pipeline sites (1,300 rooms). This transaction was completed on 26 September 2007 for a total consideration of £44m. All six sites were convertedto the Premier Inn brand by the end of the year. Also, in February 2008, wecompleted the purchase of Belgrave Hotel Limited, a single 75-bed hotel fortotal consideration of £7.5m. This is currently being converted to the PremierInn brand, and at the end of the refurbishment will be a new 85-bed hotel witha Beefeater restaurant. Financing Net debt at the full year was £425.8m, compared to £898.6m at 1 March 2007. Thesignificant non-trading items resulting in this decrease were net proceeds of£984.3m from business disposals, partially offset by a £338m return of capitalto shareholders, business acquisitions of £52.2m and a £50.0m payment into thepension scheme, as agreed with Whitbread Pension Trustees Limited in April2003. As at 28 February 2008 the Group had committed revolving credit facilities of£980m of which £280m expired in March 2008. A new £455m five-year revolvingcredit facility has since been agreed which when combined with the £700m facility, put in place in 2005, gives the Group facilities of £1.16bn untilDecember 2010. These facilities then reduce to £930m, with a further £75mexpiring in December 2011, £400m expiring in December 2012 and the balance inMarch 2013. The Board has also continued to review the level of leverage in the business. Inthe current uncertain financial markets it believes that the appropriate levelof leverage for the company is one which is consistent with an investment gradecorporate capital structure (i.e. no greater than 3.5X, on a pension and leaseadjusted basis). Over the coming year we will work towards this level through acombination of accelerated investment, bolt on acquisitions and whenappropriate a continuation of the share buyback programme. Pensions As at 28 February 2008 there was a gross pension deficit of £33.0m, whichcompares to £196.0m as at 1 March 2007. This reduction is due, in the main, tothree factors: an actuarial gain as a result of the increase in bond rates, the change in policy with respect to lump sum payments and the payment of a further£50m into the fund. Under the agreement signed with Whitbread Pension Trustees Limited in April2003, and updated in October 2005, the Group expects to make furthercontributions of £50m in 2008/9 and £20m in each of 2009/10 and 2010/11. Post balance sheet event On 8th April 2008 the Group announced the acquisition of three hotels from Real Hotel Company PLC for £18.5m. The Group's £280m revolving credit facility expired on 8 March 2008 and wasfully utilised at 28 February 2008. Upon expiry of this facility, the Groupentered into a new five-year multi-currency revolving credit facility of £455m,which will expire in March 2013. The variable interest rates charged on thisfacility are linked to LIBOR. As a result of The Laurel Pub Company Limited going into administration on 27March 2008, a provision of £20.9m has been charged to income to recognise theexpected cost of lease reversions relating to properties that are expected torevert to the Group. Consolidated income statementYear ended 28 February 2008 ------------------------ -------------------- Year to 28 February 2008 Restated Year to 1 March 2007 ------------------------ -------------------- -------------------------- ----- ------- ------ ------- -------- ------ ------- Notes Before Exceptional Before Exceptional exceptional items exceptional items items (note 5) Total items (note 5) Total £m £m £m £m £m £m-------------------------- ----- -------- ------ ------- -------- ------ ------- Continuing operationsRevenue 4 1,216.7 - 1,216.7 1,173.5 - 1,173.5Cost of sales (185.5) - (185.5) (188.5) - (188.5) -------- ------ ------- -------- ------ -------Gross profit 1,031.2 - 1,031.2 985.0 - 985.0 Distribution costs (693.9) (46.8) (740.7) (681.9) (4.3) (686.2)Administrative expenses (107.5) (8.0) (115.5) (99.0) (20.8) (119.8) ------- ------ ------- -------- ------ -------Operating profit/(loss) 4 229.8 (54.8) 175.0 204.1 (25.1) 179.0 Share of loss from jointventures (0.5) - (0.5) - - -Share of profit from associate 0.6 - 0.6 0.6 - 0.6 ------- ------ ------- -------- ------ -------Operating profit/(loss) of the Group, joint ventures and associate 229.9 (54.8) 175.1 204.7 (25.1) 179.6Net profit on disposal ofpub restaurants - - - - 196.6 196.6 ------- ------ ------- -------- ------ -------Profit/(loss) before financing and tax 229.9 (54.8) 175.1 204.7 171.5 376.2 Finance costs (30.7) (20.9) (51.6) (40.1) - (40.1)Finance revenue 11.1 - 11.1 1.9 - 1.9 ------- ------ ------- -------- ------ -------Profit/(loss) before tax 210.3 (75.7) 134.6 166.5 171.5 338.0 Tax (expense)/income 6 (67.2) 15.9 (51.3) (55.8) (77.0) (132.8) ------- ------ ------- -------- ------ -------Net profit/(loss)from continuing activities 143.1 (59.8) 83.3 110.7 94.5 205.2 Discontinued operations Net profit on disposal ofbusinesses - 440.8 440.8 - 48.5 48.5Profit/(loss) for the yearfrom discontinuedoperations 19.6 1.1 20.7 40.4 (12.6) 27.8 ------- ------ ------- -------- ------ ------- 8 19.6 441.9 461.5 40.4 35.9 76.3 ------- ------ ------- -------- ------ -------Profit for the year 162.7 382.1 544.8 151.1 130.4 281.5 Attributable to:Parent shareholders 163.5 382.1 545.6 151.4 130.4 281.8Equity minority interest (0.8) - (0.8) (0.3) - (0.3) ------- ------ ------- -------- ------ ------- 162.7 382.1 544.8 151.1 130.4 281.5 Earnings per share (note 9) Year to 28 February 2008 Restated Year to 1 March 2007 Continuing Total Continuing Total operations operations operations operations p p p p------------------------------------------- ----------- -------- --------- --------Earnings per share Basic for profit for the year 44.42 288.22 90.01 123.43Diluted for profit for the year 44.17 286.55 89.31 122.47 Earnings per share before exceptional items Basic for profit for the year 76.01 86.37 48.62 66.32Diluted for profit for the year 75.58 85.87 48.24 65.80 Consolidated statement of recognised income and expenseYear ended 28 February 2008 ------------------------------------------------------------ -------- ------- Year to Year to 28 February 1 March 2008 2007 £m £m------------------------------------------------------------ -------- -------Cash flow and net investment hedges:Loss taken to equity (4.5) (1.1)Exchange differences on translation of foreign operations (0.8) (0.9)Actuarial gains on defined benefit pension schemes 95.5 38.0Tax on items taken directly to or from equity (29.3) (11.9) -------- -------Net gain recognised directly in equity 60.9 24.1Profit for the year 544.8 281.5 -------- -------Total recognised income and expense for the year 605.7 305.6 Attributable to:Parent shareholders 606.5 305.9Equity minority interest (0.8) (0.3) -------- ------- 605.7 305.6 Consolidated balance sheetAt 28 February 2008 --------------------------------------- -------- -------- -------- Notes 28 February 1 March 2008 2007 £m £m--------------------------------------- -------- -------- -------- Assets Non-current assetsIntangible assets 125.2 78.5Property, plant and equipment 2,127.4 2,487.6Investment in joint ventures 3.5 1.1Investment in associate 0.8 0.9Other financial assets 0.9 1.1Derivative financial instruments - 56.8 -------- -------- 2,257.8 2,626.0Current assetsInventories 13.2 12.8Trade and other receivables 62.9 67.5Income tax prepayment - 7.1Derivative financial instruments - 8.3Cash and cash equivalents 107.1 70.5 -------- -------- 183.2 166.2 Assets classified as held for sale - 59.1 -------- --------Total Assets 2,441.0 2,851.3 Liabilities Current liabilitiesFinancial liabilities 377.0 86.3Provisions 30.9 6.2Derivative financial instruments 1.8 -Income tax liabilities 6.8 -Trade and other payables 241.3 287.1 -------- -------- 657.8 379.6Non-current liabilitiesFinancial liabilities 155.9 882.8Preference shares - 3.2Provisions 27.4 15.2Derivative financial instruments 7.6 5.9Deferred income tax liabilities 6 293.0 309.5Pension liability 33.0 196.0Trade and other payables 4.4 - -------- -------- 521.3 1,412.6 -------- --------Total Liabilities 1,179.1 1,792.2 -------- --------Net Assets 1,261.9 1,059.1 EquityShare capital 148.8 151.9Share premium 43.8 38.1Capital redemption reserve 8.5 4.7Retained earnings 3,205.9 2,738.9Currency translation reserve - 0.8Other reserves (2,145.1) (1,875.6) -------- --------Equity attributable to equity holders of theparent 1,261.9 1,058.8 Equity minority interest - 0.3 -------- --------Total Equity 1,261.9 1,059.1 Alan ParkerChief Executive Christopher RogersFinance Director 27 April 2008 Consolidated cash flow statementYear ended 28 February 2008 --------------------------------------- -------- -------- -------- Notes Year to Year to 28 February 1 March 2008 2007 £m £m--------------------------------------- -------- -------- -------- Profit for the year 544.8 281.5 Adjustments for:Taxation charged on total operations 6 58.0 153.3Net finance cost 40.5 37.4Total loss from joint ventures 0.7 -Total income from associate (0.6) (0.6)Loss/(gain) on disposal of property, plant andequipment and property reversions 27.2 (195.7)Net profit on disposal of businesses andinvestments (440.8) (48.5)Depreciation and amortisation 89.0 102.8Impairment of property and goodwill - 12.6Pension credit (10.0) -Reorganisation provision 19.4 -Other non-cash items (6.7) (8.2) -------- --------Cash generated from operations before workingcapital changes 321.5 334.6 (Increase)/decrease in inventories (0.9) 4.1(Increase)/decrease in trade and other (18.6) 74.7receivablesDecrease in trade and other payables (20.1) (4.0)Payments against provisions (6.1) (8.7)Payment to pension fund (50.0) (102.3) -------- --------Cash generated from operations 225.8 298.4 Interest paid (34.5) (39.3)Taxes paid (25.8) (12.8) -------- --------Net cash flows from operating activities 165.5 246.3 Cash flows from investing activitiesDisposal of investments, subsidiaries and jointventures - discontinued* 8 984.3 361.5Purchase of property, plant and equipment (283.4) (241.2)Purchase of intangible assets (1.3) (2.1)(Costs)/proceeds from disposal of property, plant (0.3) 487.6and equipmentAcquisition of subsidiaries, net of cash 7 (52.2) (2.7)acquiredCapital contributions to joint ventures (1.6) -Dividends from associate 0.7 -Interest received 4.2 3.2 -------- --------Net cash flows from investing activities 650.4 606.3 Cash flows from financing activitiesProceeds from issue of share capital 6.4 7.6Costs of purchasing own shares (354.6) (275.8)Repayment of preference shares (3.3) -Increase in short-term borrowings (42.7) 26.1Proceeds from long-term borrowings - 49.1Repayment of long-term borrowings (376.8) (123.4)Dividends paid (60.7) (529.0) -------- --------Net cash flows used in financing activities (831.7) (845.4) Net (decrease)/increase in cash and cashequivalents (15.8) 7.2Net foreign exchange difference - (1.2)Opening cash and cash equivalents 36.1 30.1 -------- --------Closing cash and cash equivalents 20.3 36.1 Reconciliation to cash and cash equivalents inthe balance sheetCash and cash equivalents shown above 20.3 36.1Add back overdrafts 86.8 34.4 -------- --------Cash and cash equivalents shown within currentassets on the balance sheet 107.1 70.5 * including disposed of net overdraft Notes to the consolidated financial statementsAt 28 February 2008 1 Basis of preparation The consolidated financial statements of Whitbread PLC for the year ended 28February 2008 were authorised for issue by the Board of Directors on 27 April2008. The financial information included in this preliminary statement of results doesnot constitute statutory accounts within the meaning of Section 240 of theCompanies Act 1985 (the "Act"). The financial information for the year ended 28February 2008 has been extracted from the statutory accounts on which anunqualified audit opinion has been issued. Statutory accounts for the year ended28 February 2008 will be delivered to the Registrar of Companies following theCompany's Annual General Meeting. The statutory accounts for the year ended 1 March 2007 have been delivered tothe Registrar of Companies, and the Auditors of the Company made a reportthereon under section 235 of the Act. That report was unqualified and did notcontain a statement under sections 237(2) or (3) of the Act. The consolidated financial statements of Whitbread PLC and all its subsidiarieshave been prepared in accordance with International Financial ReportingStatements (IFRSs) as applied in accordance with the provisions of the CompaniesAct 1985. 2 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 within 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 2000/1,which was accounted for using merger accounting, acquisitions by the Group areaccounted for under the acquisition method and any goodwill arising iscapitalised as an intangible asset. The results of subsidiaries acquired ordisposed of during the year are included in the consolidated accounts from or upto the date that control passes respectively. All intra-Group transactions,balances, income and expenses are eliminated on consolidation. Unrealised lossesare also eliminated unless the transaction provides evidence of an impairment ofthe asset transferred. The income statement for the comparative period has been restated to reflect thedisposal of the interest in David Lloyd Leisure Limited, which has beenclassified as a discontinued operation. 3 Accounting policies The accounting policies used in the year ended 28 February 2008 are consistentwith those applied in the financial statements for the year ended 1 March 2007except that the Group has adopted IFRS 7 "Financial Instruments: Disclosures"and the related amendment to IAS 1 "Presentation of Financial Statements:Capital Disclosures". The adoption of IFRS 7 and the amendments to IAS 1 haveresulted in increased disclosures relating to the Group's financial instrumentsand management of capital but have not resulted in any changes to the reportedresults. 4 Segment information The Group's primary reporting format is business segments and its secondaryformat is geographical segments. The Group operates mainly within the UK and assuch the secondary format of geographical segments is not presented. The operating businesses are organised and managed separately according to thenature of the products and services provided, with each segment representing astrategic business unit that offers different products and serves differentmarkets. The Group has three core areas of operation: Operation Nature of operation------------- ----------------------------------------------Premier Inn Operation of budget hotels.Pub Restaurants Operation of full service and self service pub restaurants.Costa Operation of coffee shops. Prior year comparatives have been restated to include David Lloyd LeisureLimited as a discontinued operation. Discontinued operations also include TGIFriday's (see note 8). Inter-segment revenue is from Costa to the other segments. Transactions wereentered into on an arm's length basis in a manner similar to transactions withthird parties. Included within unallocated operations are those that are managedby a central division. The unallocated assets and liabilities are cash and debt balances held andcontrolled by the central treasury function. The following tables present revenue and profit information and certain assetand liability information regarding business segments for the years ended 28February 2008 and 1 March 2007. ----------------------- ------- ------- ------- ------- ------- -------- -------Year ended 28 February Total 2008 Premier Pub Unallocated continuing Discontinued Total Inn Restaurants Costa and elimination operations operations operations £m £m £m £m £m £m £m----------------------- ------- ------- ------- ------- ------- -------- -------Revenue Revenue from externalcustomers 527.8 446.1 213.9 28.9 1,216.7 103.4 1,320.1Inter-segment revenue - - 2.4 (2.4) - - - ------- ------- ------- ------- ------- -------- -------Total revenue 527.8 446.1 216.3 26.5 1,216.7 103.4 1,320.1 EBIT (1) 178.0 55.5 20.8 (24.4) 229.9 27.4 257.3Add back loss made byminority interest - - 0.8 - 0.8 - 0.8 ------- ------- ------- ------- ------- -------- -------EBIT attributableto shareholders 178.0 55.5 21.6 (24.4) 230.7 27.4 258.1----------------------- ------- ------- ------- ------- ------- -------- -------EBIT attributableto shareholders 178.0 55.5 21.6 (24.4) 230.7 27.4 258.1Segment exceptionalitems:Net loss on disposal ofproperty, plant andequipment, and propertyreversions - (2.9) (1.6) (22.7) (27.2) - (27.2)Premier Inn rebranding (7.0) - - - (7.0) - (7.0)Aborted bond issue - - - (9.4) (9.4) - (9.4)Outsourcing of logistics - - - (12.6) (12.6) - (12.6)Net surplus arising onchange of pension schemerules - - - 10.0 10.0 - 10.0Reorganisation - - - (8.6) (8.6) - (8.6)Share of loss from jointventures 0.5 - - - 0.5 0.2 0.7Share of profit fromassociate (0.6) - - - (0.6) - (0.6)Profit attributableto minority interest - - (0.8) - (0.8) - (0.8) ------- ------- ------- ------- ------- -------- -------Segment result 170.9 52.6 19.2 (67.7) 175.0 27.6 202.6----------------------- ------- ------- ------- ------- ------- -------- ------- Operating profit 175.0 27.6 202.6 Share of loss from jointventures (0.5) (0.2) (0.7)Share of profit fromassociate 0.6 - 0.6Non-operatingexceptionals:Net profit on disposal ofbusinesses and investments - 440.8 440.8Exceptional interestcharge (20.9) - (20.9) ------- -------- -------Profit before financing andtax 154.2 468.2 622.4Net finance costs (19.6) - (19.6) ------- -------- -------Profit beforetax 134.6 468.2 602.8Tax expense (51.3) (6.7) (58.0) ------- -------- -------Profit for the year 83.3 461.5 544.8 Assets and liabilitiesSegment assets 1,443.7 679.6 97.2 - 2,220.5 - 2,220.5Investment injoint ventures 2.8 - 0.7 - 3.5 - 3.5Investment in associate 0.8 - - - 0.8 - 0.8Unallocated assets - - - 216.2 216.2 - 216.2 ------- ------- ------- ------- ------- -------- -------Total assets 1,447.3 679.6 97.9 216.2 2,441.0 - 2,441.0 ------- ------- ------- ------- ------- -------- ------- Segment liabilities (67.9) (48.4) (25.3) - (141.6) - (141.6)Unallocatedliabilities - - - (1,037.5) (1,037.5) - (1,037.5) ------- ------- ------- ------- ------- -------- -------Totalliabilities (67.9) (48.4) (25.3) (1,037.5) (1,179.1) - (1,179.1) ------- ------- ------- ------- ------- -------- -------Net assets 1,379.4 631.2 72.6 (821.3) 1,261.9 - 1,261.9 Other segmentinformation Capital expenditure:Property, plant andequipment - cash basis 147.3 79.0 33.2 9.5 269.0 14.4 283.4Property, plant andequipment - accruals basis 148.6 79.6 33.4 7.3 268.9 15.2 284.1Intangible assets 50.3 - 0.6 - 50.9 0.5 51.4 Depreciation 41.7 23.6 13.5 1.9 80.7 5.6 86.3Amortisation 0.2 - - 2.3 2.5 0.2 2.7 ----------------------- ------- ------- ------- ------- ------- -------- -------Year ended 1 March Total 2007 (restated) Premier Pub Unallocated continuing Discontinued Total Inn Restaurants Costa and elimination operations operations operations £m £m £m £m £m £m £m----------------------- ------- ------- ------- ------- ------- -------- -------Revenue Revenue from externalcustomers 458.5 518.9 172.3 23.8 1,173.5 350.8 1,524.3Inter-segment revenue - - 2.8 (2.8) - - - ------- ------- ------- ------- ------- -------- -------Total revenue 458.5 518.9 175.1 21.0 1,173.5 350.8 1,524.3 EBIT (1) 156.2 52.3 17.8 (21.6) 204.7 54.4 259.1Add back loss made byminority interest - - 0.3 - 0.3 - 0.3 ------- ------- ------- ------- ------- -------- -------EBIT attributableto shareholders 156.2 52.3 18.1 (21.6) 205.0 54.4 259.4----------------------- ------- ------- ------- ------- ------- -------- -------EBIT attributableto shareholders 156.2 52.3 18.1 (21.6) 205.0 54.4 259.4Segment exceptional items:Net profit/(loss)on disposal of property,plant and equipment, andpropertyreversions (0.2) 0.7 (0.5) 0.7 0.7 (1.6) (0.9)Net release of provision - - - - - 8.2 8.2Impairment of property andother assets - (1.8) (1.2) (1.4) (4.4) (8.2) (12.6)Provision for loan writedown - - - - - (5.3) (5.3)Reorganisation - - - (21.4) (21.4) - (21.4)Share of profit fromassociates (0.6) - - - (0.6) - (0.6)Profit attributableto minority interest - - (0.3) - (0.3) - (0.3) ------- ------- ------- ------- ------- -------- -------Segment result 155.4 51.2 16.1 (43.7) 179.0 47.5 226.5----------------------- ------- ------- ------- ------- ------- -------- ------- Operating profit 179.0 47.5 226.5 Share of profit fromassociates 0.6 - 0.6Non-operating exceptionals:Net profit on disposal ofpub restaurants 196.6 - 196.6Net profit on disposal ofbusinesses and investments - 48.5 48.5 ------- -------- -------Profit before financing andtax 376.2 96.0 472.2Net finance costs (38.2) 0.8 (37.4) ------- -------- -------Profit before tax 338.0 96.8 434.8Tax expense (132.8) (20.5) (153.3) ------- -------- -------Profit for the year 205.2 76.3 281.5 Assets and liabilitiesSegment assets 1,267.9 622.1 75.4 - 1,965.4 633.4 2,598.8Investment injoint ventures 1.1 - - - 1.1 - 1.1Investment in associates 0.9 - - - 0.9 - 0.9Unallocated assets - - - 250.5 250.5 - 250.5 ------- ------- ------- ------- ------- -------- -------Total assets 1,269.9 622.1 75.4 250.5 2,217.9 633.4 2,851.3 ------- ------- ------- ------- ------- -------- ------- Segmentliabilities (50.9) (61.5) (18.5) - (130.9) (56.5) (187.4)Unallocatedliabilities - - - (1,604.8) (1,604.8) - (1,604.8) ------- ------- ------- ------- ------- -------- -------Totalliabilities (50.9) (61.5) (18.5) (1,604.8) (1,735.7) (56.5) (1,792.2) ------- ------- ------- ------- ------- -------- -------Net assets 1,219.0 560.6 56.9 (1,354.3) 482.2 576.9 1,059.1 Other segmentinformation Capital expenditure:Property, plant andequipment - cash basis 119.6 58.0 23.0 4.7 205.3 35.9 241.2Property, plant andequipment -accruals basis 124.1 61.8 24.9 4.1 214.9 37.2 252.1Intangible assets - - 0.3 - 0.3 1.8 2.1 Depreciation 35.0 27.0 10.6 2.3 74.9 25.4 100.3Amortisation - - - 2.5 2.5 - 2.5 1) EBIT shows the segment result before exceptional items. It is profit beforefinancing and tax and exceptional items. 5 Exceptional items --------------------------------------------- -------- -------- Restated 2007/8 2006/7 £m £m--------------------------------------------- -------- --------Continuing activitiesReorganisation costs (1) (8.6) (21.4)Impairment of property, plant and equipment - (4.4)Net (loss)/profit on disposal of property, plant andequipment, and property reversions (27.2) 0.7Premier Inn rebranding (2) (7.0) -Aborted bond issue (3) (9.4) -Outsourcing of logistics (4) (12.6) -Net surplus arising on change of pension scheme rules (5) 10.0 - -------- --------Operating exceptional items (54.8) (25.1)Net profit on disposal of pub restaurants - 196.6Interest on exceptional tax (6) (6.7) - Interest cost of early redemption of debentures (7) (14.2) - -------- -------- (75.7) 171.5Tax on continuing exceptional items 15.6 (77.0)Exceptional tax items (6) (21.2) -Deferred tax relating to UK tax rate change 21.5 - -------- --------Total continuing exceptional items (59.8) 94.5 Discontinued activitiesImpairment of property, plant and equipment - (8.2)Net loss on disposal of property, plant and equipment, andproperty reversions - (1.6)Warranty and onerous contract provisions - 8.2Provision for loan write-down - (5.3) -------- --------Operating exceptional items - (6.9)Net profit on disposal of businesses (note 8) 440.8 48.5 -------- -------- 440.8 41.6Tax on discontinued exceptional items 1.1 (5.7) -------- --------Total discontinued exceptional items 441.9 35.9 -------- --------Total exceptional items 382.1 130.4 Distribution costs include rebranding costs of £7.0m, logistics outsourcingcosts of £12.6m and loss on disposals of property, plant and equipment, andproperty reversions of £27.2m. Administrative expenses include reorganisationcosts of £8.6m, aborted bond costs of £9.4m and a pension credit of £10.0m. 1. During the year, the Group sold its interests in David Lloyd LeisureLimited and TGI Friday's. A review of overheads was subsequently carried out andit was announced that the Pub Restaurants and Hotels divisions would merge andthat the shared service teams would be disbanded. In 2006/7, the disposal of 235pub restaurants led to a restructuring to reflect the resultant shape of theGroup. 2. Premier Inn rebranding costs relate to asset write-off and brandrelaunch costs. The costs will continue into 2008/9. 3. Uncertainties in the debt market have put the planned bond issue on hold and the Group has written off the bank and advisory fees associated with this refinancing. 4. A restructuring provision in respect of the outsourcing of the Group'slogistics operation has been created. This consists of project, redundancy andproperty related costs. 5. This is the impact of new arrangements for commutation of pension rights on retirement into cash following a change in government limits. 6. Exceptional tax relates to significant adjustments to prior yeardeferred and current tax liabilities. The associated interest arising on latepayment of an item claimed in a previous year, which had been disputed, isincluded in exceptional interest charges. 7. This is a combination of a premium paid to debenture holders arisingon early redemption and the income from closing out the associated interestrate swaps. 6 Taxation--------------------------------------------- -------- --------Consolidated income statement for continuing operations Restated 2007/8 2006/7 £m £m--------------------------------------------- -------- -------- Major components of the tax charge for continuing operationsfor the years ended 28 February 2008 and 1 March 2007 are:Current tax:Current tax expense 14.7 16.8Adjustments in respect of current tax of previous periods 15.7 (0.3) -------- -------- 30.4 16.5Deferred tax:Origination and reversal of temporary differences 36.4 116.3Adjustments in respect of previous periods 6.0 -Change in UK tax rate (21.5) - -------- -------- 20.9 116.3 -------- --------Tax reported in the consolidated income statement forcontinuing operations 51.3 132.8 --------------------------------------------- -------- --------Consolidated statement of recognised income and expense Restated 2007/8 2006/7 £m £m--------------------------------------------- -------- --------Pensions 29.3 11.9 -------- --------Tax reported in equity 29.3 11.9 A reconciliation of the tax charge applicable to profit from operatingactivities before tax at the statutory tax rate to the actual tax charge at theGroup's effective tax rate for the years ended 28 February 2008 and 1 March 2007respectively is as follows: --------------------------------------------- -------- -------- Restated 2007/8 2006/7 £m £--------------------------------------------- -------- --------Accounting profit before tax from continuing operations 134.6 338.0Accounting profit before tax from discontinued operations 468.2 96.8 -------- --------Profit reported in the consolidated income statement 602.8 434.8 Tax at current UK tax rate of 30% (2007: 30%) 180.8 130.4Effect of different tax rates in overseas companies 0.2 -Effect of joint ventures and associate 0.5 (0.2)(Income not taxable)/expenditure not allowable (122.2) 11.9Adjustments to tax expense in respect of previous years 0.2 7.0Adjustments to deferred tax expense in respect of previousyears (17.1) 4.2Exceptional tax charge in respect of previous years 15.6 - -------- -------- 58.0 153.3Tax expense reported in the consolidated income statementfor continuing operations 51.3 132.8Tax expense attributable to discontinued operations 6.7 20.5 -------- -------- 58.0 153.3 Deferred tax Deferred tax at 28 February 2008 relates to the following: --------------- -------------- Consolidated Consolidated balance sheet income statement-------------------------------- --------------- -------------- Restated 2008 2007 2007/8 2006/7 £m £m £m £m-------------------------------- -------- --------- -------- --------Deferred tax liabilitiesAccelerated capital allowances 93.6 102.3 13.2 2.2Rolled over gains and property 211.4 272.6 (11.2) 76.0revaluations -------- ---------Gross deferred tax liabilities 305.0 374.9 Deferred tax assetsPensions (9.2) (58.8) 20.3 30.9Tax losses - (2.8) - (1.2)Other (2.8) (3.8) (1.4) 8.4 -------- ---------Gross deferred tax assets (12.0) (65.4) -------- --------Deferred tax expense 20.9 116.3 -------- ---------Net deferred tax liability 293.0 309.5 Total deferred tax liabilities released as a result of disposals during the yearwas £65.0m (2007: £4.3m). The Group has not provided for any deferred tax that would be payable were it toremit the earnings of overseas subsidiaries of £1.8m (2007: £3.1m). Tax relief on total interest capitalised amounts to £0.5m (2007: £0.5m). The Finance Act 2007 reduced the rate of Corporation Tax to 28% with effect from1 April 2008. The effect of the reduced rate is a credit of £21.5m. Further UK tax changes, subject to future enactment, are a reduction in the rateof capital allowances applicable to plant and machinery from 25% to 20% on areducing balance basis, a new category of integral features qualifying forcapital allowances at 10% on a reducing balance basis and the phased abolitionof allowances for hotel buildings. 7 Business combinations On 26 September 2007, the Group acquired six hotels, previously trading underthe Tulip Inn and Golden Tulip brands, for £41.7m. These hotels, which have nowbeen rebranded as Premier Inn, were purchased through the acquisition of 100% ofthe share capital of Golden Tulip (UK) Limited and Pilot Hotels Limited. Theconsideration, which included the discharge of certain existing debt, was paidin cash and loan notes on completion. In addition to the six trading hotels, theGroup acquired secure arrangements on a further nine pipeline sites that willlead to the signing of operating leases on completion of the hotel premises. From the date of acquisition, the hotels have contributed a loss of £2.7m to thenet profit of the Group. If the acquisition had taken place at the beginning ofthe year, the profit for the Group would have been reduced by £2.6m and therevenue from continuing operations would have been increased by £19.2m. Through its purchase of the former Tulip hotels, the Group has acquired theeconomic benefits of 771 additional guest bedrooms in the year with a further1,300 from pipeline sites. The fair value of the identifiable assets and liabilities of the acquiredcompany as at the date of acquisition, and the corresponding carrying amountsimmediately before the acquisition were: --------------------------------------------- -------- -------- Provisional fair value to Book value Group £m £m--------------------------------------------- -------- --------Intangible assets 3.4 -Property, plant and equipment 1.3 1.3Inventories 0.1 0.1Trade and other receivables 4.7 3.6Overdrafts and loans (5.6) (5.6)Trade and other payables (4.7) (9.6)Deferred tax (0.5) (0.5) -------- --------Net liabilities (1.3) (10.7)Goodwill arising on acquisition 49.6 --------Total consideration 38.9 Cash flow on acquisition:Overdrafts and loans acquired (5.6)Cash paid (38.9) --------Net cash outflow (44.5) The consideration includes £2.0m of costs associated with the acquisition, paidin cash. On 14 February 2008, the Group acquired the Belgrave Hotel Limited under a sharepurchase agreement for the sum of £7.5m. This hotel is now closed and will berebranded as a Premier Inn. The consideration, which included the discharge ofcertain existing debt, was paid in cash on completion. The fair value of the identifiable assets and liabilities of the acquiredcompany as at the date of acquisition, and the corresponding carrying amountsimmediately before the acquisition were: --------------------------------------------- -------- -------- Provisional fair value to Book value Group £m £m--------------------------------------------- -------- --------Intangible assets 0.2 -Property, plant and equipment 2.2 7.4Cash 0.2 0.2Overdrafts and loans (0.8) (0.8)Trade and other payables (0.4) (0.4) -------- --------Net assets 1.4 6.4Goodwill arising on acquisition 0.5 --------Total consideration 6.9 Cash flow on acquisition:Overdrafts and loans acquired (0.8)Cash paid (6.9) --------Net cash outflow (7.7) 8 Discontinued operations On 2 March 2007, the Group completed the sale of its TGI Friday's business to ajoint venture between Carlson Restaurants Worldwide and ABN Amro for anaggregate price of £70.4m. The transaction resulted in a profit on disposal of£13.0m before tax. On 2 August 2007, the Group sold its interest in David Lloyd Leisure Limited toVersailles Bidco (a company owned by London & Regional Holdings Limited and Bankof Scotland Corporate) for £925.0m, generating a profit on disposal of £400.8mbefore tax. Other disposals include the disposal of former Marriott properties and a relateddeferred tax liability. The investments described above have been reported within discontinuedoperations for the years presented. The effect of the disposals during the year is as follows:------------------------------------- -------- ------- ------- ------- David TGI Lloyd Friday's Leisure Other Total £m £m £m £m------------------------------------- -------- ------- ------- -------Sale proceeds 70.4 925.0 3.5 998.9Working capital adjustments (0.6) 4.7 - 4.1 -------- ------- ------- -------Total proceeds 69.8 929.7 3.5 1,003.0Total net assets sold (54.3) (512.9) 22.5 (544.7)Costs of disposal (2.5) (16.0) 1.0 (17.5) -------- ------- ------- -------Net profit on disposal of businesses,before tax 13.0 400.8 27.0 440.8 Sale proceeds are made up as follows:Cash 69.8 677.1 3.5 750.4Repayment of inter-company debt - 252.6 - 252.6 -------- ------- ------- -------Total consideration 69.8 929.7 3.5 1,003.0 On the face of the cash flow, disposals of subsidiaries and investments reportedas discontinued operations are the net of cash proceeds of £1,003.0m and thecash costs of disposal of £18.7m. Total net assets sold comprises the following assets and liabilities:---------------------------------------------------- -------- Total £m---------------------------------------------------- --------Intangible assets 2.0Property, plant and equipment 569.6Inventories 0.6Trade and other receivables 14.7Cash 5.1Assets classified as held for sale 54.3 --------Total assets sold 646.3 Trade and other payables (35.1)Loan capital (1.5)Deferred tax liability (63.4)Provisions (1.6) --------Total liabilities sold (101.6) --------Total net assets sold 544.7 Cash flows relating to discontinued operations are as follows:---------------------------------------------- -------- -------- Restated Year to Year to 28 February 1 March 2008 2007 £m £m---------------------------------------------- -------- --------Net cash (outflows)/inflows from operating activities (0.1) 67.7Net cash outflows from investing activities (29.2) (43.4) -------- --------Net (decrease)/increase in cash and cash equivalents (29.3) 24.3 Profit for the year from discontinued operations is made up as follows: Year to 28 February 2008 Restated ------------------------ Before Exceptional Year to exceptional items 1 March items (note 5) 2007 £m £m £m £m ----------------------------- ------------------------ ------- --------- ----------------------------- ---------- --------- --------- --------- Revenue 103.4 - 103.4 350.8Cost of sales (4.5) - (4.5) (47.4) ---------- --------- --------- ---------Gross profit 98.9 - 98.9 303.4 Distribution costs (63.1) - (63.1) (213.7)Administrative expenses (8.2) - (8.2) (42.2) ---------- --------- --------- --------- Operating profit 27.6 - 27.6 47.5Share of loss from joint ventures (0.2) - (0.2) - ---------- --------- --------- --------- Operating profit of the Groupincluding 27.4 - 27.4 47.5joint venture result Exceptional items (note 5):Net profit on disposal of - 440.8 440.8 48.5businesses ---------- --------- --------- ---------Profit before financing and tax 27.4 440.8 468.2 96.0 Finance costs (0.1) - (0.1) -Finance income 0.1 - 0.1 0.8 ---------- --------- --------- ---------Profit before tax 27.4 440.8 468.2 96.8 Income tax expense:Related to pre-tax profit (7.8) - (7.8) (14.8)Related to exceptional pre-tax - - - 1.3profitRelated to disposals - 1.1 1.1 (7.0) ---------- --------- --------- ---------Profit for the year fromdiscontinued 19.6 441.9 461.5 76.3operations Assets classified as held for sale The major classes of assets classified as held for sale and measured at thelower of carrying amount and fair value less cost to sell are as follows: ---------------------------------------------- -------- -------- 2008 2007 £m £m ---------------------------------------------- -------- --------AssetsProperty, plant and equipment - 56.8Inventories - 0.6Trade and other receivables - 1.7 -------- --------Total assets - 59.1 9 Earnings per share Year to 28 February 2008 Restated Year to 1 March 2007 ------------------- ----------------- Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations p p p p p p------------------------- -------- -------- ------ ------- -------- ------Basic for profit for theyear 44.42 243.80 288.22 90.01 33.42 123.43 Attributableto exceptional items - gross 39.99 (232.86) (192.87) (75.12) (18.21) (93.33)Attributable to exceptionalitems - taxation (8.40) (0.58) (8.98) 33.73 2.49 36.22Basic for profit beforeexceptional items for theyear 76.01 10.36 86.37 48.62 17.70 66.32 Diluted for profit for theyear 44.17 242.38 286.55 89.31 33.16 122.47 Diluted for profit beforeexceptional items for theyear 75.58 10.29 85.87 48.24 17.56 65.80 The basic earnings per share figures are calculated by dividing the net profitfor the year attributable to ordinary shareholders, therefore before minorityinterests, by the weighted average number of ordinary shares in issue during theyear after deducting treasury shares and shares held by an independently managedemployee share ownership trust (ESOT). The diluted earnings per share figures allow for the dilutive effect of theconversion into ordinary shares of the weighted average number of optionsoutstanding during the period. Where the share price at the year end is lowerthan the option price the options become anti-dilutive and are excluded from thecalculation. The number of such options was 320,079 (2007: nil). The numbers of shares used for the earnings per share calculations are asfollows: ---------------------------------------------- -------- -------- 2007/8 2006/7 million million---------------------------------------------- -------- --------Basic weighted average number of ordinary shares 189.3 228.3Effect of dilution - share options 1.1 1.8 -------- --------Diluted weighted average number of ordinary shares 190.4 230.1 The total number of shares in issue at the year end, used in the calculation ofthe basic weighted average number of ordinary shares, was 193.8m less 18.1mtreasury shares held by Whitbread PLC and 0.8m held by the ESOT. The profits used for the earnings per share calculations are as follows: Year to 28 February 2008 Restated Year to 1 March 2007 ------------------- ------------------- Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations operations £m £m £m £m £m £m ------------------------- -------- -------- ------- ------- -------- ------Profit for the yearattributable to parentshareholders 84.1 461.5 545.6 205.5 76.3 281.8Exceptional items - gross 75.7 (440.8) (365.1) (171.5) (41.6) (213.1)Exceptional items - taxation (15.9) (1.1) (17.0) 77.0 5.7 82.7Profit for the year beforeexceptional items attributableto parent shareholders 143.9 19.6 163.5 111.0 40.4 151.4 10 Dividends paid and proposed 2007/8 2006/7 ------------ ------------ pence per share £m pence per share £m------------------------------------- --------------- --- --------------- ---Declared and paid in the year:Equity dividends on ordinary shares:Final dividend relating tothe prior year 22.15 43.5 19.95 51.3Interim dividend for the current year 9.10 17.2 8.10 17.8 ------- ------- 60.7 69.1Dividends on other shares:B share dividend - - 155.00 264.4C share dividend - - 159.00 195.5 ------- ------- - 459.9 ------- -------Total dividends paid 60.7 529.0 Proposed for approval at AnnualGeneral Meeting:Equity dividends on ordinary shares: ------- -------Final dividend for thecurrent year 26.90 47.0 22.15 43.8 11 Movements in cash and net debt ------------------------- -------- ------- ------- -------- -------- -------- Loan Amortisation Fair value 1 March disposed of premiums adjustments to 28 February 2007 of Cash flow and discounts loan capital 2008 £m £m £m £m £m £m------------------------- -------- ------- ------- -------- -------- -------- Cash at bank and in hand 70.5 107.1Overdrafts and short-termborrowings (86.3) (96.0) -------- -------- (15.8) - 26.9 - - 11.1Less short-term bankborrowings 51.9 - (42.7) - - 9.2 -------- ------- ------- -------- -------- --------Cash and cash equivalents 36.1 - (15.8) - - 20.3Short-term bank borrowings (51.9) - 42.7 - - (9.2) -------- --------Loan capital under one year - (281.0)Loan capital over one year (882.8) (155.9) -------- --------Total loan capital (882.8) 1.5 376.8 4.8 62.8 (436.9) -------- ------- ------- -------- -------- --------Net debt (898.6) 1.5 403.7 4.8 62.8 (425.8) 12 Events after the balance sheet date On 8 April 2008, the Group announced the acquisition of three hotels from theReal Hotel Company PLC for £18.5m. The Group's £280m revolving credit facility expired on 8 March 2008 and wasfully utilised at 28 February 2008. Upon expiry of this facility, the Groupentered into a new five year multi-currency revolving credit facility of £455m,which will expire in March 2013. The variable interest rates charged on thisfacility are linked to LIBOR. As a result of The Laurel Pub Company Limited going into administration on 27March 2008, a provision of £20.9m has been charged to income to recognise theexpected cost of lease reversions relating to properties which will revert tothe Group. A final dividend of 26.90p per share (2007: 22.15p) amounting to a dividend of£47.0m (2007: £43.8m) was declared by the directors at their meeting on 27 April2008. These financial statements do not reflect this dividend payable. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Whitbread