RNS Number:3845V
Whitbread PLC
24 April 2007
24th April, 2007
Whitbread PLC Preliminary results for the financial year to 1st March 2007
STRONG OPERATING PERFORMANCE CREATING VALUE FOR SHAREHOLDERS
Highlights
Financial
*Total revenue for Continuing Whitbread (1) up 10.3% to £1,304.5m (2005/6:
£1,182.3m)
*Group like for like sales up 4.3% for the 52 weeks
*Profit before tax and exceptional items from Continuing operations (2) up
24.5% to £213.0m (2005/6: £171.1m)
*Basic EPS for Continuing operations 63.3p: total pre-exceptional EPS
66.3p up 17% on prior year
*Final dividend up 11% to 22.15p; full-year dividend up 10.8% to 30.25p
(2005/6: 27.3p)
Statutory
*Total profit for the year up 6.5% at £281.5m (2005/6: £264.4m)
*Total EPS up 23.6% at 123.4p (2005/6 99.85p)
*Year end net debt £898.6m
Operational
*Strong performance at Premier Travel Inn and Costa
*Improved results from Restaurants
*Turnaround at David Lloyd Leisure underpinning value for shareholders
Financial Structure
*Further increase in leverage planned following balance sheet review
*Restaurant and hotel properties valued on a portfolio basis at £3.6bn
*Successful disposal of stand alone pub restaurants, Pizza Hut and TGI
Friday's
*£750m has been returned to shareholders and an additional £100m paid into
the pension fund
Alan Parker, chief executive Whitbread PLC, said:
"We have delivered improved operational performance across all our businesses.
Premier Travel Inn and Costa have shown strong growth and our plans for
international expansion are progressing well. Early results for the revamped
Restaurants business are very encouraging and the joint site Premier Travel
Inn/Restaurant model is delivering excellent returns. We are considering
approaches for David Lloyd Leisure but in the meantime, the turnaround and
performance of the business is underpinning value.
The current year has started well. The momentum achieved in the final quarter of
last year is continuing. We have a clear strategy to concentrate our management
and capital on growing those businesses in which we have market leading
positions and strong growth prospects. We will continue to manage our businesses
aggressively and our balance sheet efficiently to create value for
shareholders."
For further information contact:
Whitbread investor relations
Christopher Rogers, Group Finance Director 01582 889418
Tulchan Communications
Andrew Grant/Celia Gordon Shute 0207 353 4200
A presentation for analysts will be held at London Stock Exchange, 10
Paternoster Square, London. EC4M 7LS. Registration is from 9.00am; the
presentation is at 9.30am. A live audio webcast of the presentation will be
available on the investors section of the website at: www.whitbread.co.uk.
Alternatively, you can listen to the presentation by dialling: +44 (0) 207 162
0025 and enter the passcode: 745581 and quote Whitbread Preliminary Results.
This will be available as a replay for 30 days. To listen dial in number 020
7031 4064 and enter the passcode: 745581
(1) Continuing Whitbread
Continuing Whitbread comprises Premier Travel Inn, the retained Restaurant
estate, David Lloyd Leisure and Costa but excludes the disposed pub restaurant
sites, 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 pub
restaurant sites during the period of Whitbread ownership and supply chain
sales to third parties.
Revenue by business segment
2006/07 2005/06 change
£m £m
Premier Travel Inn 458.5 392.9* 16.7%
David Lloyd Leisure 237.3 224.6 5.7%
Restaurants: retained 436.4 424.5* 2.8%
Costa 175.1 143.0 22.4%
Less: inter-segment (2.8) (2.7) (3.7)%
Sales from Continuing Whitbread 1,304.5 1,182.3 10.3%
Restaurants: disposed** 82.5 195.4 (57.8)%
Other 23.8 114.2 (79.2)%
Revenue from continuing operations 1,410.8 1,491.9 (5.4)%
* After restatement for breakfast sales amounting to £14.9m
** Part year impact in 2006/07
Chief Executive's Review
Financial Results
Group revenue from Continuing Whitbread grew year-on-year by 10.3% to £1.3bn and
like for like sales were up 4.3%. Profit before tax and exceptional items from
Continuing operations for the year was up almost a quarter at 24.5% to £213.0m.
Total pre-exceptional EPS was 66.3p, up 17% on the prior year. The Board has
proposed a final dividend of 22.15p, an increase of 11%, bringing the total
dividend for the year to 30.25p (2005/6 27.3p)
Operating review
This past year has seen us work hard at the continuing transformation of
Whitbread into a more focused hospitality company delivering strong underlying
growth. We set ourselves a number of strategic objectives at the beginning of
the year and I am pleased to report that we have made good progress towards
meeting them. A key priority was to improve the operating performance of our
wholly owned branded businesses.
Premier Travel Inn has continued its strong growth trajectory where we have
combined expansion of the estate with a range of measures to improve the customer
experience, including an extensive refurbishment programme.
Our Restaurants business saw the greatest change, both operationally and
structurally. During the year we took the decision to dispose of 239 of our pub
restaurant sites in order to concentrate on those restaurants that were or had
potential to be co-located with our Premier Travel Inns.
The new Restaurants management team has achieved a substantial improvement in
performance especially in the second half. This included an extensive
remodelling programme, new menus and improved levels of service. The year saw
these successfully introduced across the whole of the Beefeater estate and
extensively rolled out across selected Brewers Fayre outlets. The initial
results have been very encouraging.
The disposal of the pub restaurant sites raised £497m and the disposal of our
interest in Pizza Hut UK realised net proceeds of £99m. The sale of TGI Friday's
for £70 million completed after the year end.
We have been working hard to improve the performance of David Lloyd Leisure. I
am pleased to report that, at the end of the first full year of the new
management's actions, membership numbers, sales and profits had all improved.
They have introduced a range of initiatives to improve the services for our
members and improve the efficiency of the business. At the end of March we
announced that we had received some unsolicited approaches for the business.
Whilst no decision has been taken to dispose of the business we are currently
examining these proposals.
Costa has had another very strong year. The expansion of the brand in the UK has
been complemented by international openings with new franchise and partnership
agreements. Both sales and profits have grown strongly and we are convinced that
Costa has the potential to be built into a global coffee brand.
Property and Balance Sheet Review
During the year we returned £750 million to our shareholders and a further £100
million was contributed to the pension fund.
Further, in the second half of the year we have reviewed the balance sheet to
ascertain the appropriate medium term financing structure for the Group.
Following this review we have decided to increase the level of leverage in the
business (on a pension and lease adjusted basis) from under four times adjusted
net debt to EBITDAR to under five times, an increase of around £400m.
To effect this change it is our intention during the first half of the financial
year to finance the Group through issuing bonds secured on the hotel and
restaurant assets. In the absence of any further value creating opportunities
and based on our current investment plans, we would look to return the
additional monies raised through this financing to shareholders net of any
further payments made into the pension fund.
As part of this review and to support the financing we have also undertaken an
independent review of our restaurant and hotel assets. The reported market value
of this portfolio of assets for existing use as a single entity is £3.6bn.
Outlook
The current year has started well. The momentum achieved in the final quarter of
last year is continuing. We have a clear strategy to concentrate our management
and capital on growing those businesses in which we have market leading
positions and strong growth prospects, whilst continuing to deliver improved
operational performance.
Premier Travel Inn 2006/7 Change
Revenue £458.5m 16.7%
Like for like sales growth 8.2%
Operating profit (pre exceptionals) £156.2m 20.3%
Operating profit (post exceptionals) £156.0m 19.9%
Premier Travel Inn has delivered another strong performance in 2006/7. Total
revenue for the year increased by 16.7% to £458.5m with operating profit up by
20.3% to £156.2m, driven by an accelerated expansion programme and a 4.8%
increase in revenue per available room to £37.68. Profit per room now exceeds
£5,000 for the first time. Like for like sales increased by 8.2%.
Premier Travel Inn continues to have one of the highest occupancy levels of any
national branded hotel chain in the UK with like for like occupancy at 79.5% for
the year.
During 2006/7 we opened 2,500 new guest bedrooms and 19 new sites in the UK,
including the acquisition and conversion of 7 Holiday Inn sites. We continued to
invest in our existing estate to improve the guest experience and spent £26m on
improving the quality of our guest bedrooms and the ongoing rollout of our new
bedroom design.
We have increased focus on customer satisfaction and recently launched a new
Guest Satisfaction Survey, receiving 400,000 responses to date. The results were
encouraging and over 90% said they were likely to return and stay again. Our
"good night guarantee" is still unrivalled - we promise that guests who have not
been entirely satisfied with their stay get their money back.
We are driving efficiency throughout the business, and our leading edge
reservation system has continued to make excellent progress in developing routes
to market. In the last quarter we reached a record high of 50% of all
reservations being taken online. Business account card revenues were up 49%
generating £75.1m of revenue. Over the course of the year we have seen PBIT
margins improve by 1.1% points, due largely to efficiencies made in the overhead
cost base.
Premier Travel Inn is investing for growth and has a UK room target of 45,000
rooms opened by 2010/11, an average rate of 3,000 rooms per annum. This year
approximately half of the rooms opened will be on Whitbread owned land and
alongside a Whitbread restaurant.
Internationally, work has commenced on building our first hotel in Dubai,
through our joint venture with Emirates and a pipeline of further sites has been
identified in the Gulf region. We are also in the early stages of assessing
further opportunities outside of the UK.
Restaurants 2006/7 Change
Revenue £518.9 -16.3%
Like for like sales 0.9%
Operating profit (pre-exceptionals) £52.3m -30.2%
Operating profit (post-exceptionals) £247.8m 256.0%
There has been a significant shift in the shape of our Restaurants business. In
July we disposed of 239 pub restaurant sites for £497m in order to concentrate
on those restaurants that were co-located with our Premier Travel Inns, or where
there was potential to build a Premier Travel Inn alongside. This business is
now more focused and performing well. Like for like sales growth has clearly
improved, growing by 2.7% in the second half.
This growth was as a result of the initiatives that have been put in place by
the new management team since June 2006. The performance has been driven by the
investment in the estate, the newly remodelled and repositioned Beefeater sites,
with an improved guest proposition and enhanced food platform and environment.
There has also been an improved performance in the underlying business.
The remodelling of the Beefeater estate is now complete, with a clear, refreshed
proposition around great grilled food. Despite the substantial reduction of
discounting, volumes are continuing to grow with weekly covers up by 6.6%. We
expect to see further improvement in the coming year as the most recently
remodelled restaurants come on stream and we re-direct marketing spend into
advertising the new, improved Beefeater offering. The Beefeater model is
performing well and we are planning to open the first new Beefeater for six
years later this year.
We have fully trialled the new concept within Brewers Fayre of "informal
contemporary food in a stylish environment" and this was rolled out across 20
units last year with more conversions to be completed this year. This re-image
is delivering strong results and we will undertake a further 100 conversions in
2007/8.
The investment in our restaurant estate and redevelopment of the guest
proposition is already translating into sales growth, with an average sales
uplift of circa 25% flowing through from the converted restaurants.
There is a strong customer focus and we have worked hard to improve the guest
experience. The new and improved menus offer a broader range of choice and we
are sourcing higher specification ingredients.
Processes have been made more efficient. Tighter cash controls are in place with
an emphasis on the reduction of product wastage and better management of stock.
Labour scheduling has also been improved and we have seen greater levels of
productivity.
The co-located restaurant and Premier Travel Inn model is continuing to produce
revenue and cost benefits for both businesses and is moving towards our target
of delivering the best returns in the business. Profits at joint site
restaurants were over 50% higher than stand-alone restaurants. Over the coming
year we will continue to add Premier Travel Inns to the stand-alone restaurants
we retained, as well as opening over ten new joint sites this coming year.
David Lloyd Leisure 2006/7 Change
Revenue £237.3m 5.7%
Like for like sales 2.7%
Operating profit (pre exceptionals) £46.4m 12.3%
Operating profit (post exceptionals) £37.1m 92.2%
David Lloyd Leisure has made significant progress through the year. Total
revenue increased by 5.7% to £237.3m, driven by a more consistent approach to
pricing and improved revenues from ancillary sales across all the clubs. Like
for like sales were up by 2.7% driving profit growth in the like for like
estate.
Membership has remained stable through the year in the like for like clubs,
whilst overall we increased our membership with the opening of a new club in
Aberdeen and continued growth from other recently opened clubs. David Lloyd
Leisure has been reinvesting in the business and in the fabric of the estate.
There have been innovations made in product development, technology and
membership systems, member communications and team member training.
A new management structure has been put in place at all 69 sites and brand
standards have been established across the clubs with the focus on expertise,
service and engagement skills.
We have improved efficiencies and a pricing re-evaluation in October addressed a
number of anomalies. A consistent pricing structure and standard set of terms
and conditions were introduced in January. Utility cost cutting initiatives
have been rolled out across the estate improving productivity, and work hours
have been benchmarked as a way of controlling labour costs, whilst improving the
member experience.
There is now a stronger focus on the food and beverage offering and revenues
have been driven by the launch in September of a completely new menu and the
introduction of Costa Coffee estate-wide. All front of house staff have been
re-trained with a focus on better service and up-selling.
The performance in Europe has also been pleasing. All 10 clubs have been
aligned and now have the same brand standards as the clubs in the UK. David
Lloyd Leisure is committed to Europe and expects to see further growth from its
European clubs.
Going forward, David Lloyd Leisure will improve revenue per member by further
yield management and pricing strategies which reflect further investment in the
quality of the member experience. Key customer groups have now been clearly
identified to help drive membership and we have agreed a number of partnerships
with the aim of maximising revenue opportunities in the off-peak periods.
The new Swindon club is expected to be completed this summer and a further three
UK sites have been secured.
Costa 2006/7 Change
Revenue £175.1m 22.4%
Like for like sales (UK equity) 6.6%
Operating profit (pre exceptionals) £18.1m 36.1%
Operating profit (post exceptionals) £16.4m 82.2%
Costa has had another exceptional year. Total revenue for the year grew 22.4%
to £175.1m, driven in part by an acceleration in the number of new outlets
opened in the UK and internationally. There were also openings in new markets
such as Poland, Romania, Bulgaria and China. Total like for like sales in UK
equity stores were up 6.6%, largely due to an increase in the number of
transactions and improved sales at our re-imaged stores. Pricing was broadly
stable, although more premium products such as speciality coffee were introduced
during the second half of the year. Operating profit (pre exceptionals) for the
year was up 36.1% to £18.1m, with higher productivity reflected in improved
margins.
The re-imaging programme announced last year has proven highly successful and we
are seeing a solid return on our investment, achieving significant like for like
sales growth at the re-imaged stores. The refurbishment programme is now
largely complete. The customer experience has been enhanced with the development
of stronger interiors, further innovation within food and the introduction of
more premium products. Underpinning the customer offer is the fact that we roast
all our own coffee beans and that every cup of coffee served in a Costa store is
hand made by a Barista and is of the highest quality.
In October 2006 the Costa stored value card was launched and has been well
received with fast growing use. Promotional support will be increased over the
coming year to drive customer loyalty and further sales growth.
The Costa Book Awards (formerly the Whitbread Book Prize) have also proved a
success for Costa and have been a great brand building opportunity. In a recent
survey conducted by Costa, 66% of customers said they would strongly recommend
the brand to friends and family, up from 60% at the beginning of the year.
Costa has also increased the rate at which it opens new stores with 127 new
stores opened in the UK and 72 overseas, making a total of 199 for the year
compared to 146 in the previous year. Since the year end our total number of UK
stores has grown to 545, on a par with Starbucks.
Costa has aggressive expansion plans and is on track to achieve its target of
2000 stores by 2010/11, with growth in both the UK and internationally.
FINANCE REVIEW
Changes in Group operations
There have been four major changes in the Group's operating entities compared to
the prior period.
Marriott
The disposal of Whitbread's Marriott business was completed on 21 April 2006.
On 5 May 2005 Whitbread sold its Marriott business into a joint venture company,
owned 50% each by Whitbread and a subsidiary of Marriott International, with a
management contract held by Marriott International.
On 21 April 2006 this joint venture company was sold to the Royal Bank of
Scotland with proceeds being returned to both Whitbread and Marriott
International.
Profit generated from the joint venture has been excluded from the consolidated
income statement, in accordance with IFRS 5, as the investment in the joint
venture was held for sale at the 2005/6 year end. Seven properties were retained
by Whitbread outside of the joint venture and all have been sold during the
period. Trading results for these seven properties are included within
discontinued operations.
Stand-alone restaurants
On 28 July 2006 Whitbread announced the sale of 235 trading restaurants,
together with four sites not yet trading, to Mitchells & Butlers PLC. The sale
of 222 of these assets was completed that day with the remaining 17 sites being
sold by early September. The trading results for the 235 sites up to the date of
sale are aggregated within continuing operations and the 2005/6 comparatives
include a full 52 weeks of trade from all of these sites.
As a result of this sale Whitbread has reviewed the accounting arrangements of
food and beverage sales between the Restaurants and the Premier Travel Inn
businesses.
Historically in joint sites profits arising from breakfast sales in a restaurant
next to a Premier Travel Inn were accounted for within PTI, together with a
share of the profit generated from PTI guests eating in the adjacent restaurant
in the evening (an "adjacency fee"). These arrangements allowed the Restaurants
business to compare the economic performance of its stand-alone sites against
those with an adjacent hotel.
With the focus now on joint sites, the rationale for continuing with this
allocation mechanism has gone and breakfast income is now reported within
Restaurants with no adjacency fee being taken. The prior year has been restated
and the impact in 2005/6 is to move £10.0 million of profit from Premier Travel
Inn to the Restaurants business.
Pizza Hut
On 31 July 2006 Whitbread announced an agreement to sell its 50% shareholding in
Pizza Hut UK to Yum! Restaurants Holdings. This sale was completed on 12
September 2006.
In line with IFRS 5, profit generated by the joint venture has been excluded
from the consolidated income statement in 2006/7 and prior year income has been
moved into discontinued operations.
TGI Friday's
On 2 March 2007 Whitbread completed the sale of the TGIF business to Carlson
Restaurants Worldwide Inc.
Profit generated by the business in 2006/7 has been included within discontinued
operations, with prior year comparatives restated accordingly. The net assets of
the business have been classified as held for sale at the year-end.
Details of the financial performance of the discontinued businesses and the
effects of the disposals can be found in note 10 to the accounts.
Revenue
Group Revenue from continuing operations fell 5.4% year-on-year to £1,410.8
million. This reduction was driven by the part-year impact of the restaurant
disposals. Revenue from continuing Whitbread grew by 10.3%. Like for like sales
were up by 4.3% with the remainder of the turnover growth coming from the net
increase in outlets, notably in Premier Travel Inn and Costa.
Results
Total profit for the year is £281.5 million up 6.5% on last year. Profit before
tax and exceptional items from the continuing operations was £213.0 million, up
24.5% on last year.
Exceptional Items
Net exceptional profits after tax amounted to £130.4 million. This amount is
analysed in more detail in note 6 to the accounts.
The major items included within this category are noted below.
Business disposals
The three principal businesses disposed of during the year generated pre-tax
profits of £245.1 million; £20.3 million loss on the Marriott Hotels
transactions offset by £196.6 million profit for stand-alone restaurants and
£68.8 million profit for Pizza Hut UK.
Impairment provisions
Following the annual assessment of trading of all of the Group's individual
cash generating units we have made £12.6 million of provisions against the
carrying value of assets of which £8.2m related to David Lloyd Leisure and
the remainder to a small number of restaurants and Costa outlets.
Reorganisation costs
Following the sale of the pub restaurants we announced a further review of
head office costs and the savings arising from this reorganisation will
amount to £15 million in 2007/8.
Total reorganisation costs incurred during the year were £21.4m which include
the final cost of the restructuring announced in October 2005 plus the cost
of the reorganisation following the sale of the 239 pub restaurant sites.
Interest
Underlying net interest costs have fallen by 39.3% year-on-year to £38.1
million. This is a result of lower average net debt during the year following
receipt of the business disposal proceeds, and, with a reduction in the pension
deficit, an improvement in the pension finance charge.
Taxation
The UK tax expense of £68.8 million represents an effective rate of 32.3% on the
continuing businesses before exceptional items, which compares with 33.3% for
the full year in 2005/6. The charge includes deferred tax.
Earnings per share
Underlying basic earnings per share increased by 17.0% to 66.3p. Details can be
found in note 11 to the accounts.
Dividend
A final dividend of 22.15p per share, an increase of 11% over last year, will,
subject to approval at the AGM, be paid on 6 July 2007 to all shareholders on
the register at the close of business on 4 May 2007. This gives a total dividend
for the year of 30.25p, an increase of 10.8% on last year.
Capital expenditure
Total Group capital expenditure on property, plant and equipment and intangible
assets was £243.3 million. This included £233 million relating to continuing
operations, split between acquisition expenditure, which includes the
acquisition and development of properties, (£146.3million) and maintenance
expenditure (£86.7 million).
Financing
Net debt at the year-end amounted to £898.6 million, compared to £970.3 million
as at 2 March 2006. The principal non-trading movements leading to the reduction
were £849.1 million of business and asset disposals and a £24.4 million
favourable fair value movement, partially offset by a £732.9 million capital
return to shareholders and two additional pension fund payments of £50 million
each.
Pensions
An additional £100 million was injected into the fund during the year and at 1
March 2007 there was a gross pension fund deficit of £196.0 million (net deficit
after deferred tax of £137.2 million). This compares to a gross deficit £338
million as at 2nd March 2006 (net deficit after deferred tax of £236.4 million).
Under the agreement signed with Whitbread Pension Trustees Limited in April 2003
and updated in October 2005 the Group expects to make further contributions
totalling £140m over the next four years including £50m per annum in 2007/8 and
2008/9.
Balance Sheet Structure
During the second half of the year we have reviewed the balance sheet to
ascertain the appropriate medium term financing structure for the Group. This
review has led us to conclude that it would be appropriate to increase the level
of leverage in the business (on a pension and lease adjusted basis) from under
four times adjusted net debt to EBITDAR to under five times, an increase of
around £400m.
To effect this change it is our intention, during the first half of the
financial year to finance the Group through issuing bonds secured on the hotel
and restaurant assets. In the absence of any further value creating
opportunities and based on our current investment plans we would look to return
the additional monies raised through this financing to shareholders net of any
further payments to the pension fund.
These decisions on the most appropriate level of leverage and the method of
financing have been taken in the light of the ambitious organic growth and
investment plans we have for our businesses and the benefits from retaining
control over our assets as we drive shareholder value through extending and
reconfiguring large parts of the restaurant and hotel estate. Today's results
continue to demonstrate that there is still much value to be added to our
properties by further improving our operations.
Property
As an integral part of the review of the appropriate medium term financing
structure for the Group, we have, as a one off exercise, commissioned a review
by Gerald Eve of the value of our restaurants and hotels assets on a portfolio
basis as at 1 March 2007. The reported market value of this portfolio of assets
for existing use as a single entity is £3.6bn.
Post Balance Sheet Event Review
On 2 March 2007 the Group sold its interest in TGI Friday's for a consideration
of £70.4m.
Consolidated income statement
Restated
Year to 1 March 2007 Year to 2 March 2006
----------------- ----------------
Before Exceptional Total Before Exceptional Total
exceptional items exceptional items
items (note 4) items (note 4)
------- ------- ------ ------- ------- ------
Notes £m £m £m £m £m £m
Continuing
operations
Revenue 3 1,410.8 - 1,410.8 1,491.9 - 1,491.9
Cost of sales (199.0) - (199.0) (274.7) - (274.7)
------- ------- ------ ------- ------- ------
Gross profit 1,211.8 - 1,211.8 1,217.2 - 1,217.2
Distribution costs (841.9) (13.6) (855.5) (839.4) (20.7) (860.1)
Administrative
expenses (119.4) (20.8) (140.2) (145.1) (23.9) (169.0)
------- ------- ------ ------- ------- ------
Operating profit 250.5 (34.4) 216.1 232.7 (44.6) 188.1
Share of
profit from
joint ventures - - - 0.3 - 0.3
Share of
profit from
associates 0.6 - 0.6 0.9 - 0.9
------- ------- ------ ------- ------- ------
Operating
profit of the
Group, joint
ventures and
associates 251.1 (34.4) 216.7 233.9 (44.6) 189.3
Net loss on
disposal of
business and
investments - - - - (8.7) (8.7)
Net profit on
disposal of
pub restaurants - 196.6 196.6 - - -
------- ------- ------ ------- ------- ------
Profit before
financing and
tax 251.1 162.2 413.3 233.9 (53.3) 180.6
Finance costs (40.1) - (40.1) (64.0) (25.5) (89.5)
Finance revenue 2.0 - 2.0 1.2 - 1.2
------- ------- ------ ------- ------- ------
Profit before tax 213.0 162.2 375.2 171.1 (78.8) 92.3
Tax expense 5 (68.8) (77.0) (145.8) (57.0) 12.8 (44.2)
------- ------- ------ ------- ------- ------
Net profit
from continuing
activities 144.2 85.2 229.4 114.1 (66.0) 48.1
Discontinued
operations:
------- ------- ------ ------- ------- ------
Net profit on
disposal of
businesses - 48.5 48.5 - 208.0 208.0
Profit for the
year from
discontinued
operations 6.9 (3.3) 3.6 36.0 (27.7) 8.3
------- ------- ------ ------- ------- ------
6 6.9 45.2 52.1 36.0 180.3 216.3
------- ------- ------ ------- ------- ------
Profit for the
year 151.1 130.4 281.5 150.1 114.3 264.4
======= ======= ====== ======= ======= ======
Attributable to:
Parent
shareholders 151.4 130.4 281.8 150.0 114.3 264.3
Equity minority
interest (0.3) - (0.3) 0.1 - 0.1
------- ------- ------ ------- ------- ------
151.1 130.4 281.5 150.1 114.3 264.4
======= ======= ====== ======= ======= ======
Dividends paid and proposed per share in respect of the period (pence)
Special - 135.00
B share dividend 155.00 -
C share dividend 159.00 -
Interim 8.10 7.35
Final 22.15 19.95
====== ======
Earnings* Earnings per share Earnings per share
Earnings per
share 7 Continuing Total Continuing Total Continuing Total
Operations Operations Operations Operations Operations Operations
------- ------- ------- ------- ------- -------
£m £m p p p p
- basic for profit for
the period 229.7 281.8 100.61 123.43 18.17 99.85
- basic for
underlying profit £ 144.5 151.4 63.29 66.31 43.10 56.67
- diluted for
profit for the 229.7 281.8 99.83 122.47 18.02 99.03
period
- diluted for
underlying profit £ 144.5 151.4 62.80 65.80 42.75 56.20
* Earnings used for earnings per share calculations are after the add back of minority interests.
£ Underlying profit is profit before exceptional items.
Consolidated statement of recognised income and expense
Year to 1 March Year to 2 March
2007 2006
-------- -----------
£m £m
Cash flow and net investment hedges:
Loss taken to equity (1.1) (0.3)
Exchange differences on translation of foreign
operations (0.9) 1.4
Actuarial gains/(losses) on
defined benefit pension schemes 38.0 (93.5)
Tax on items taken directly to or from equity (11.9) 28.6
-------- -----------
Net gain/(loss) recognised directly in equity 24.1 (63.8)
Profit for the period 281.5 264.4
-------- -----------
Total recognised income and expense for the period 305.6 200.6
======== ===========
Attributable to:
Parent shareholders 305.9 200.5
Equity minority interest (0.3) 0.1
-------- -----------
305.6 200.6
======== ===========
Effect of changes in accounting policy on the consolidated statement of
recognised income and expense:
Equity holders of the parent
Net loss on cash flow hedges on
first time adoption of IAS 39 - (3.2)
======== ===========
Consolidated balance sheet
1 March 2007 2 March 2006
--------- --------
Notes £m £m
ASSETS
Non-current assets
Intangible assets 78.5 79.0
Property, plant and equipment 2,487.6 2,677.1
Investment in joint ventures 1.1 35.2
Investment in associates 0.9 0.8
Other financial assets 1.1 5.4
Derivative financial instruments 56.8 78.5
--------- --------
2,626.0 2,876.0
--------- --------
Current assets
Inventories 12.8 17.5
Trade and other receivables 67.5 119.0
Income tax prepayment 7.1 21.0
Derivative financial instruments 8.3 10.2
Cash and cash equivalents 70.5 49.6
--------- --------
166.2 217.3
--------- --------
Assets classified as held for sale 6 59.1 302.6
--------- --------
TOTAL ASSETS 2,851.3 3,395.9
--------- --------
Current liabilities
Financial liabilities 86.3 145.1
Provisions 6.2 0.6
Derivative financial instruments - 0.3
Trade and other payables 287.1 277.8
--------- --------
379.6 423.8
--------- --------
Non-current liabilities
Financial liabilities 882.8 874.8
Preference shares 3.2 3.1
Provisions 15.2 32.5
Derivative financial instruments 5.9 3.0
Deferred income tax liabilities 309.5 174.2
Pension liability 196.0 338.0
--------- --------
1,412.6 1,425.6
--------- --------
TOTAL LIABILITIES 1,792.2 1,849.4
--------- --------
NET ASSETS 1,059.1 1,546.5
========= ========
EQUITY
Share capital 151.9 151.1
Share premium 38.1 36.1
Capital redemption reserve 4.7 -
Retained earnings 2,738.9 3,231.8
Currency translation 0.8 1.7
Other reserves (1,875.6) (1,877.0)
--------- --------
Equity attributable to equity holders of the
parent 9 1,058.8 1,543.7
Equity minority interest 0.3 2.8
--------- --------
TOTAL EQUITY 9 1,059.1 1,546.5
========= ========
Alan Parker
Chief Executive
Christopher Rogers
Finance Director
24 April 2007
Consolidated cash flow statement
Year to 1 March Year to 2 March
2007 2006
----------- -----------
Notes £m £m
Profit for the year 281.5 264.4
Adjustments for:
Taxation charged on total operations 5 153.3 39.2
Net finance cost 37.4 89.0
Total income from joint ventures - (6.3)
Totalincome from associates (0.6) (10.3)
Gain on disposal of property,
plant and equipment (195.7) (3.0)
Net profit on disposal of
businesses and investments (48.5) (191.7)
Impairment loss on
revaluation of Condor joint venture - 29.3
Depreciation and amortisation 102.8 118.8
Impairment of property and goodwill 12.6 35.2
Reorganisation costs - 13.3
Other non-cash items (8.2) 2.8
----------- -----------
Operating profit before working
capital changes 334.6 380.7
Decrease in inventories 4.1 2.3
Decrease/(increase) in trade
and other receivables 74.7 (18.3)
(Decrease) in trade and other payables (4.0) (10.3)
Payments against provisions (8.7) (16.6)
Payment to pension fund (102.3) (103.0)
----------- -----------
Cash generated from operations 298.4 234.8
Interest paid (39.3) (91.5)
Taxes paid (12.8) (40.7)
----------- -----------
Net cash flows from operating activities 246.3 102.6
----------- -----------
Cash flows from investing activities
Disposal of investments,
subsidiaries and joint
ventures - discontinued * 6 361.5 889.2
Disposal of investments - continuing - 6.9
Net cash disposed of - (18.2)
Purchase of property, plant and equipment (241.2) (228.6)
Purchase of intangible assets (2.1) (1.6)
Proceeds from disposal of
property, plant and equipment 487.6 12.0
Acquisition of subsidiary,
net of cash acquired (2.7) (0.2)
Dividends from joint venture - 11.1
Dividends from associates - 71.6
Interest received 3.2 1.5
----------- -----------
Net cash flows from investing activities 606.3 743.7
----------- -----------
Cash flows from financing activities
Proceeds from issue of share capital 7.6 14.4
Costs of purchasing own shares (275.8) (9.5)
Increase in short-term borrowings 26.1 6.1
Proceeds from long-term borrowings 49.1 610.0
Issue costs of long-term borrowings - (1.4)
Repayment of long-term borrowings (123.4) (1,013.0)
Dividends paid 8 (529.0) (475.5)
----------- -----------
Net cash flows used in financing activities (845.4) (868.9)
----------- -----------
Net increase/(decrease) in
cash and cash equivalents 7.2 (22.6)
Net foreign exchange difference (1.2) 0.6
Opening cash and cash equivalents 30.1 52.1
----------- -----------
Closing cash and cash equivalents 36.1 30.1
=========== ===========
Reconciliation to cash and cash equivalents
in the balance sheet:
Cash and cash equivalents shown above 36.1 30.1
Add back overdrafts 34.4 19.5
----------- -----------
Cash and cash equivalents shown within
current assets on the balance sheet 70.5 49.6
=========== ===========
* including disposed of net overdraft
Notes to the consolidated financial statements
At 1 March 2007
1 Authorisation of financial statements and statement of compliance with
IFRS
The consolidated financial statements of Whitbread PLC for the year ended 1
March 2007 were authorised for issue by the board of directors on 23 April 2007.
Whitbread PLC is a public limited company incorporated and fully domiciled in
England and Wales. The Company's ordinary shares are traded on the London Stock
Exchange.
The significant activities of the Group are described in note 3.
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted for use in the
European Union and as applied in accordance with the provisions of the Companies
Act 1985.
2 Accounting policies
Basis of preparation
The consolidated financial statements of Whitbread PLC and all its subsidiaries
have been prepared in accordance with IFRS.
The consolidated financial statements are presented in pounds sterling and all
values are rounded to the nearest hundred thousand except when otherwise
indicated. The significant accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the accounts of Whitbread PLC
and all its subsidiaries, together with the Group's share of the net assets and
results of joint ventures and associates incorporated within these financial
statements using the equity method of accounting. These are adjusted, where
appropriate, to conform to Group accounting policies. The financial statements
of 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 are
accounted for under the acquisition method and any goodwill arising is
capitalised as an intangible fixed asset. The results of subsidiaries acquired
or disposed of during the year are included in the consolidated accounts from or
up to the date that control passes respectively. All intra-group transactions,
balances, income and expenses are eliminated on consolidation. Unrealised losses
are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
The income statement for the comparative period has been restated to reflect the
decision to dispose of the interest in TGI Friday's and the Pizza Hut joint
venture, both of which have been classified as discontinued operations. The
segmental note for the comparative period has been restated to reflect the
segmental analysis implemented during 2006/7, see note 3 for more details.
Significant accounting policies
Goodwill
Goodwill arising on acquisition is capitalised and represents the excess of the
cost of acquisition over the Group's interest in the fair value of the
identifiable assets and liabilities of a subsidiary at the date of acquisition.
Goodwill is reviewed for impairment annually or more frequently if events or
changes in circumstances indicate that the carrying value may be impaired. On
disposal of a subsidiary the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Intangible assets
Intangible assets are carried at cost less accumulated amortisation and
accumulated impairment losses.
Intangible assets acquired separately from a business are carried initially at
cost. An intangible asset acquired as part of a business combination is
recognised outside goodwill if the asset is separable or arises from contractual
or 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 useful life
of the asset, estimated between three and ten years. The carrying values are
reviewed for impairment if events or changes in circumstances indicate that
their carrying value may not be recoverable.
Other
Other intangible assets are amortised over periods of up to ten years. The
carrying values are reviewed for impairment if events or changes in
circumstances indicate that their carrying value may not be recoverable.
Property, plant and equipment
Prior to the 1999/0 financial year, properties were regularly revalued on a
cyclical basis. Since this date the Group policy has been not to revalue its
properties and, while previous valuations have been retained, they have not been
updated. As permitted by IFRS 1, the Group has elected to use the UK GAAP
revaluations before the date of transition to IFRS as deemed cost at the date of
transition. Fixed assets are stated at cost or deemed cost at transition to
IFRS, less accumulated depreciation and any impairment in value. Gross interest
costs incurred on the financing of major projects are capitalised until the time
that they are available for use. Depreciation is calculated on a straight-line
basis over the estimated useful life of the asset as follows:
Freehold land is not depreciated.
Freehold buildings are depreciated to their estimated residual values over
periods up to 50 years.
Plant and equipment is depreciated over three to 30 years.
The carrying values of property, plant and equipment are reviewed for impairment
if events or changes in circumstances indicate that their carrying values may
not be recoverable. Any impairment in the value of fixed assets is charged to
the income statement.
Profits and losses on disposal of fixed assets reflect the difference between
net selling price and the carrying amount at the date of disposal and are
recognised in the income statement.
Payments made on entering into or acquiring leaseholds that are accounted for as
operating leases represent prepaid lease payments. These are amortised on a
straight-line basis over the lease term.
Impairment
The Group assesses assets or groups of assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. Individual assets are grouped for impairment assessment purposes at
the lowest level at which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets (cash generating units
or "CGUs"). If such indication of impairment exists or when annual impairment
testing for an asset group is required, the Group makes an estimate of its
recoverable amount.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset's recoverable amount
since the last impairment loss was recognised. If that is the case, the carrying
amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior
years. 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's
carrying amount, less any residual value, on a systematic basis over its
remaining useful life.
For the purposes of impairment testing all centrally held assets are allocated
in line with IAS 36 to CGUs based on management's view of the consumption of the
asset. Any resulting impairment is recorded against the centrally held asset.
Goodwill and intangibles
Goodwill acquired through business combinations is allocated to groups of CGUs
at the level management monitor goodwill, which is at brand level. The Group
performs an annual review of its goodwill to ensure that its carrying amount is
not greater than its recoverable amount. In the absence of a comparable recent
market transaction that demonstrates that the fair value less costs to sell of
goodwill and intangible assets exceeds their carrying amount, the recoverable
amount is determined from value in use calculations. An impairment is then made
to reduce the carrying amount to the higher 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 the
Group considers CGUs to be all trading outlets.
The carrying values of property, plant and equipment are reviewed for impairment
when events or changes in circumstances indicate the carrying value may not be
recoverable.
The recoverable amount is the greater of net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For
an asset that does not generate largely independent cash inflows, the
recoverable amount is determined with reference to the CGU to which the asset
belongs. Impairment losses are recognised in the income statement in the
administrative and distribution line items.
Consideration is also given where appropriate to the market value of the asset,
either from independent sources, or in conjunction with an accepted industry
valuation methodology.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
calculated on the basis of first in, first out and net realisable value is the
estimated selling price less any costs of disposal.
Provisions
Provisions for warranties, onerous contracts and restructuring costs are
recognised when the Group has a present legal or constructive obligation as a
result of a past event; it is probable that an outflow of resources will be
required to settle the obligation; and a reliable estimate can be made of the
amount of the obligation.
Provisions are discounted to present value where the effect is material using a
pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the liability. The amortisation of the discount is
recognised as a finance cost.
Exceptional items
The Group presents on the face of the income statement those items, which are
separately identified by virtue of their size or incidence so as to allow a
better understanding of the underlying trading performance of the Group.
The Group will include the profit or loss on disposal of property, plant and
equipment and impairment in exceptional items.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated
into 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 foreign
currency are translated using the exchange rates as at the dates of initial
transactions.
Trading results are translated into the functional currency (generally sterling)
at average rates of exchange for the year. Day to day transactions in a foreign
currency are recorded in the functional currency at an average rate for the
month in which those transactions take place, which is used as a reasonable
approximation to the actual transaction rate. Translation differences on
monetary items are taken to the income statement except where they are part of a
net foreign investment hedge, then translation differences are taken directly to
equity. The differences that arise from translating the results
of foreign entities at average rates of exchange, and their assets and
liabilities at closing rates, are also dealt with in a separate component of
equity. On disposal of a foreign entity, the deferred cumulative amount
recognised in equity relating to that particular foreign operation is recognised
in the income statement. All other currency gains and losses are dealt with in
the income statement.
A number of subsidiaries within the Group have a euro functional currency. These
are translated into sterling in the Group accounts. Balance sheet items are
translated at the rate applicable at the balance sheet date. Transactions
reported in the income statement are translated using an average rate for the
month in which they occur.
Revenue recognition
Generally, revenue is the value of goods and services sold to third parties as
part of the Group's trading activities, after deducting discounts and
sales-based taxes. The following is a description of the composition of revenues
of the Group:
Sale of goods
Sale of food and beverages - revenue is recognised when food and beverages are
sold.
Franchise fees - received in connection with the franchise of the Group's brand
names. Revenue is recognised when earned.
Leisure club subscriptions - subscriptions are recognised over the period that
membership 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 sales
from a network of hotels. Revenue is recognised when rooms are occupied and food
and beverage is sold.
Finance revenue
Interest income is recognised as the interest accrues using the effective
interest method.
Dividend income
Dividend income is recognised when the Group's right to receive the payment is
established.
Cash flows are included net of recoverable VAT.
Leases
Leases where the lessor retains substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Rental payments in
respect of operating leases are charged against operating profit on a
straight-line basis over the period of the lease. Lease incentives are
recognised 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 are
incurred, except for gross interest costs incurred on the financing of major
projects which, under the allowed alternative treatment, are capitalised until
the time that the projects are available for use.
Retirement benefits
In respect of defined benefit pension schemes, the obligation recognised in the
balance sheet represents the present value of the defined benefit obligation as
adjusted for any unrecognised past service cost, reduced by the fair value of
the scheme assets. The cost of providing benefits is determined using the
projected unit credit actuarial valuation method. Actuarial gains and losses are
recognised in full in the period in which they occur in the statement of
recognised income and expense.
For defined benefit plans, the employer's portion of the past and current
service cost is charged to operating profit, with the interest cost net of
expected return on assets in the plans reported within finance costs. The
expected return on plan assets is based on an assessment made at the beginning
of the year of long-term market returns on scheme assets, adjusted for the
effect on the fair value of plan assets of contributions received and benefits
paid during the year.
Curtailments and settlements relating to the Group's defined benefit plan are
recognised in the period that the curtailment or settlement occurs.
Payments to defined contribution pension schemes are charged as an expense as
they fall due.
Share-based payment transactions
Certain employees and directors of the Group receive equity-settled remuneration
in the form of share-based payment transactions, whereby employees render
services in exchange for shares or rights over shares. The cost of
equity-settled transactions with employees are measured by reference to the fair
value, determined using a stochastic model, at the date at which they are
granted. The cost of equity-settled transactions are recognised, together with a
corresponding increase in equity, over the period in which the performance
conditions are fulfilled, ending on the relevant vesting date. The cumulative
expense recognised for equity-settled transactions at each reporting date until
the vesting date reflects the extent to which the vesting period has expired,
and is adjusted to reflect the directors best available estimate of the number
of equity instruments that will ultimately vest. The income statement charge or
credit for a period represents the movement in cumulative expense recognised as
at the beginning and end of that period.
Tax
The income tax charge represents both the income tax payable, based on profits
for the year, and deferred income tax.
Deferred income tax is recognised in full, using the liability method, in
respect of all temporary timing differences between the tax base of the Group's
assets and liabilities, and their carrying amounts, that have originated but not
been reversed by the balance sheet date. No deferred tax is recognised if the
temporary timing difference arises from goodwill or the initial recognition of
an asset or liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss. Deferred income tax is recognised in respect of taxable
temporary differences associated with investments in associates and interests in
joint ventures, except where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences
will not reverse in the foreseeable future.
Deferred income tax assets are recognised to the extent that it is probable that
taxable profit will be available against which the deductible temporary timing
differences can be utilised. The carrying amount of deferred income tax assets
is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or
part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates that have been enacted or substantively enacted at
the balance sheet date.
Tax relating to items recognised directly in equity is recognised in equity and
not in the income statement.
Treasury shares
Own equity instruments which are held by the Group (treasury shares) are
deducted from equity. No gain or loss is recognised in the income statement on
the purchase, sale, issue or cancellation of the Group's own equity instruments.
Investments in joint ventures and associates
Joint ventures are established through an interest in a company (a jointly
controlled entity).
Investments in joint ventures and associates are initially recognised at cost,
being the fair value of the consideration given and including acquisition
charges associated with the investment.
After initial recognition, investments in joint ventures and associates are
accounted for using the equity method.
Financial instruments
Other financial assets
Investments in available-for-sale assets are initially recognised at cost, being
the fair value of the consideration given and including acquisition charges
associated with the investment.
After initial recognition available-for-sale investments are measured at fair
value. Gains and losses arising from changes in the fair value of
available-for-sale investments are recognised directly in equity, until the
investment is disposed of or until the investment is determined to be impaired,
at which time the cumulative gain or loss previously reported in equity is
included in the income statement for the period.
Some assets held by the Group are classified as financial assets at fair value
through profit or loss. On initial recognition these assets are recognised at
fair value, subsequent measurement is also at fair value with changes recognised
through the interest line in the income statement.
Impairment of financial assets
The Group assesses at each balance sheet date whether a financial asset or group
of financial assets is impaired.
- Assets carried at amortised cost
If there is objective evidence that impairment has occurred the amount of the
impairment loss is measured as the difference between the carrying value and the
present value of estimated future cash flows. The discount rate is the original
effective rate of interest. The carrying amount of the asset is reduced, with
the amount of the loss recognised in administrative costs.
If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be objectively related to an event occurring after the impairment
loss is recognised, the previously recognised impairment loss is reversed in the
income statement to the extent that the carrying value
of the asset does not exceed its amortised cost at the reversal date.
- Assets carried at cost
If there is objective evidence that impairment has occurred the amount of the
impairment loss is measured as the difference between the carrying value and the
present value of estimated future cash flows. The discount rate is the original
effective rate of interest. The carrying amount of the asset is reduced, with
the 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 difference
between its cost and its fair value is transferred from equity to the income
statement. Reversals of impairment losses on debt instruments are recognised in
the income statement, if the loss can be objectively related to an event
occurring after the impairment loss was recognised. Reversals in respect of
equity instruments classified as available-for-sale are not recognised in the
income statement.
Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less any
uncollectible amounts. An estimate for doubtful debts is made when collection of
the full amount is no longer probable. Bad debts are written-off when
identified.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in
hand and short-term deposits with an original maturity of three months or less.
For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
Borrowings
Borrowings are initially recognised at fair value of the consideration received
net of any directly associated issue costs. Borrowings are subsequently recorded
at amortised cost, with any difference between the amount initially recorded and
the redemption value recognised in the income statement using the effective
interest method.
Derivative financial instruments
Derivative financial instruments used by the Group are stated at fair value on
initial recognition and at subsequent balance sheet dates. Hedges are classified
as either fair value hedges when they hedge the exposure to changes in the fair
value of a recognised asset or liability; or cash flow hedges where they hedge
exposure to variability in cash flows that is either attributable to a
particular risk associated with a recognised asset or liability or a forecasted
transaction.
Hedge accounting is only used where, at the inception of the hedge, there is
formal designation and documentation of the hedging relationship and it meets
the Group's risk management objective strategy for undertaking the hedge and it
is expected to be highly effective.
Gains or losses from remeasuring fair value hedges, which meet the conditions
for hedge accounting, are recorded in the income statement, together with the
corresponding changes in the fair value of the hedged instruments attributable
to the hedged risk. Where the adjustment is to the carrying amount of a hedged
financial instrument, the adjustment is amortised to the income statement such
that it is fully amortised by maturity.
The portion of any gains or losses of cash flow hedges, which meet the
conditions for hedge accounting and are determined to be effective hedges, are
recognised directly in equity. The gains or losses relating to the ineffective
portion are recognised immediately in the income statement.
When a firm commitment that is hedged becomes an asset or a liability recognised
on 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 are
included in the initial measurement of the acquisition cost or other carrying
amount of the asset or liability. For all other cash flow hedges, the gains or
losses that are recognised in equity are transferred to the income statement in
the same period in which the transaction that results from a firm commitment
that is hedged affects the income statement.
For derivatives that do not qualify for hedge accounting, any gains or losses
arising from changes in fair value are recognised immediately in the income
statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold,
terminated, exercised or no longer qualifies for hedge accounting. At that point
in time, for cash flow hedges, any cumulative gain or loss on the hedging
instrument recognised in equity is kept in equity until the forecasted
transaction occurs. If a hedged transaction is no longer expected to occur, the
net cumulative gain or loss recognised in equity is transferred to the income
statement.
Recognition and derecognition of financial instruments
The recognition of financial instruments occurs when the Group becomes party to
the contractual provisions of the instrument.
The derecognition of a financial instrument takes place when the Group no longer
controls the contractual rights that comprise the financial instrument, which is
normally the case when the instrument is sold, or all the cash flows
attributable 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, at
the balance sheet date have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial
year.
The Group determines whether goodwill is impaired at least on an annual basis.
This requires an estimation of the value in use of the CGUs to which the
goodwill is allocated. Estimating the value in use requires the Group to make an
estimate of the expected future cash flows from the CGU and also to choose a
suitable discount rate in order to calculate the present values of those cash
flows.
Standards issued by the IASB not effective for the current period and not
adopted by the Group.
The following standards and interpretations have been issued by the IASB, they
become effective after the current year-end and have not been early adopted by
the Group:
Adopted by the
Group
during periods
International Financial Reporting Standards (IFRS) Effective commencing
date
IFRS 7 Financial Instruments: Disclosures (1) 1 January 2007 2 March 2007
IAS 1 Amendment - Presentation of Financial 1 January 2007 2 March 2007
Statements: Capital Disclosures (2)
IFRS 8 Operating Segments (2) 1 January 2009 27 February 2009
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 8 Scope of IFRS 2 (2) 1 May 2006 2 March 2007
IFRIC 9 Reassessment of Embedded Derivatives (2) 1 June 2006 2 March 2007
IFRIC 10 Interim Financial Reporting and Impairment (2) 1 November 2006 2 March 2007
IFRIC 11 IFRS 2 - Group and Treasury Share Transactions (2) 1 March 2007 2 March 2007
IFRIC 12 Service Concession Arrangements (2) 1 January 2008 29 February 2008
(1) This standard requires additional disclosures to be made for financial
instruments. There will be no impact
on the reported amounts of financial instruments as a result of adopting
this financial standard.
(2) The impact on the Group's financial statements is not
expected to be material.
3 Segment information
The Group's primary reporting format is business segments and its secondary
format is geographical segments. The operating businesses are organised and
managed separately according to the nature of the products and services
provided, with each segment representing a strategic business unit that offers
different products and serves different markets.
The Group has four core areas of operation:
Operation Nature of operation
Premier Travel Inn Operation of budget hotels.
Restaurants Operation of full service and self service
pub restaurants.
Costa Operation of coffee shops.
David Lloyd Leisure Operation of fitness clubs across the UK,
Ireland, the Netherlands, Belgium and Spain,
providing racquets, health and fitness club
facilities and expertise.
Following the recent reorganisation of the Group and business disposals the
segments have been changed to reflect the resultant size and shape of the
Group's activities. This has resulted in the renaming of the Pub Restaurants
segment to Restaurants and Costa being reported in its own segment. In addition
prior year comparatives have been restated to include TGI Friday's and Pizza Hut
as discontinued operations.
Inter-segment revenue is from Costa to the other segments. Transactions were
entered into on an arm's length basis in a manner similar to transactions with
third parties.
Included within unallocated operations are those that are managed by a central
division.
The Group's geographical segments are determined by the location of the Group's
assets and operations. The Group materially operates within the UK and as such
the secondary format of geographical segments is not presented.
The following tables present revenue and profit information and certain asset
and liability information regarding business segments for the years ended 1
March 2007 and 2 March 2006.
Total
contin- Discon-
Premier David uing tinued Total
Travel Rest- Lloyd Unallo- Elimin- oper- oper- oper-
Year ended 1 March 2007 Inn aurants Costa Leisure cated ation ations ations ations
£m £m £m £m £m £m £m £m £m
Revenue
Revenue from external
customers 458.5 518.9 172.3 237.3 23.8 - 1,410.8 113.5 1,524.3
Inter-segment revenue - - 2.8 - - (2.8) - - -
------- -------- ------ ------ -------- -------- -------- -------- --------
Total revenue 458.5 518.9 175.1 237.3 23.8 (2.8) 1,410.8 113.5 1,524.3
======= ======== ====== ====== ======== ======== ======== ======== =========
EBIT (1) 156.2 52.3 17.8 46.4 (21.6) - 251.1 8.0 259.1
Add back loss made by
minority interest - - 0.3 - - - 0.3 - 0.3
------- -------- ------ ------ -------- -------- -------- -------- --------
EBIT attributable to 156.2 52.3 18.1 46.4 (21.6) - 251.4 8.0 259.4
shareholders
======= ======== ====== ====== ======== ======== ======== ======== =========
---------------------------------------------------------------------------------------------------------
EBIT attributable to
shareholders 156.2 52.3 18.1 46.4 (21.6) - 251.4 8.0 259.4
Segment exceptional items:
- Net profit/(loss) on
disposal of property, plant
and equipment (0.2) 0.7 (0.5) (1.1) 0.7 - (0.4) (0.5) (0.9)
- Net release of provision - - - - - - - 8.2 8.2
- Impairment of property
and other assets - (1.8) (1.2) (8.2) (1.4) - (12.6) - (12.6)
- Provision for loan
write-down - - - - - - - (5.3) (5.3)
- Reorganisation - - - - (21.4) - (21.4) - (21.4)
Share of profit from
associates (0.6) - - - - - (0.6) - (0.6)
Profit attributable to
minority interests - - (0.3) - - - (0.3) - (0.3)
------- -------- ------ ------ -------- -------- -------- -------- --------
Segment result 155.4 51.2 16.1 37.1 (43.7) - 216.1 10.4 226.5
---------------------------------------------------------------------------------------------------------
Operating profit 216.1 10.4 226.5
Share of profit from
associates 0.6 - - - - - 0.6 - 0.6
Non-operating exceptionals:
Net profit on disposal of
pub restaurants - 196.6 - - - - 196.6 - 196.6
Net profit on disposal of
businesses and investments - - - - - - - 48.5 48.5
------- --------- ---------
Profit before financing and
tax 413.3 58.9 472.2
Net finance costs (38.1) 0.7 (37.4)
------- --------- ---------
Profit before income tax 375.2 59.6 434.8
------- --------- ---------
Income tax expense (145.8) (7.5) (153.3)
------- --------- ---------
Net profit for the year 229.4 52.1 281.5
------- --------- ---------
Assets and
liabilities
Segment assets 1,267.9 622.1 75.4 568.0 - - 2,533.4 65.4 2,598.8
Investment in joint ventures 1.1 - - - - - 1.1 - 1.1
Investment in associates 0.9 - - - - - 0.9 - 0.9
Unallocated assets - - - - 114.9 - 114.9 - 114.9
------- -------- ------ ------ -------- -------- -------- -------- --------
Total assets 1,269.9 622.1 75.4 568.0 114.9 - 2,650.3 65.4 2,715.7
------- -------- ------ ------ -------- -------- -------- -------- --------
Segment liabilities (50.9) (61.5) (18.5) (44.6) - - (175.5) (11.9) (187.4)
Unallocated
liabilities - - - - (629.8) - (629.8) - (629.8)
------- -------- ------ ------ -------- -------- -------- -------- --------
Total liabilities (50.9) (61.5) (18.5) (44.6) (629.8) - (805.3) (11.9) (817.2)
------- -------- ------ ------ -------- -------- -------- -------- --------
------- -------- ------ ------ -------- -------- -------- -------- --------
Net assets 1,219.0 560.6 56.9 523.4 (514.9) - 1,845.0 53.5 1,898.5
======= ======== ====== ====== ======== ======== ======== ======== =========
Reconciliation of assets and liabilities reported above to those reported on the balance sheet
Assets reported above 1,269.9 622.1 75.4 568.0 114.9 - 2,650.3 65.4 2,715.7
Non-current derivative - - - - 56.8 - 56.8 - 56.8
assets
Current derivative assets - - - - 8.3 - 8.3 - 8.3
Cash - - - - 70.5 - 70.5 - 70.5
------- -------- ------ ------ -------- -------- -------- -------- --------
Assets per balance sheet 1,269.9 622.1 75.4 568.0 250.5 - 2,785.9 65.4 2,851.3
======= ======== ====== ====== ======== ======== ======== ======== =========
Liabilities reported above (50.9) (61.5) (18.5) (44.6) (629.8) - (805.3) (11.9) (817.2)
Current financial - - - - (86.3) - (86.3) - (86.3)
liabilities
Non-current financial - - - - (882.8) - (882.8) - (882.8)
liabilities
Non-current derivative - - - - (5.9) - (5.9) - (5.9)
liabilities
------- -------- ------ ------ -------- -------- -------- -------- --------
Liabilities per balance (50.9) (61.5) (18.5) (44.6) (1,604.8) - (1,780.3) (11.9) (1,792.2)
sheet
======= ======== ====== ====== ======== ======== ======== ======== =========
Other segment information
Capital
expenditures:
Property, plant and
equipment - cash basis 119.6 58.0 23.0 25.6 4.7 - 230.9 10.3 241.2
Property, plant and
equipment - accruals basis 124.1 61.8 24.9 28.7 4.1 - 243.6 8.5 252.1
Intangible fixed assets - - 0.3 1.8 - - 2.1 - 2.1
Depreciation 35.0 27.0 10.6 22.3 2.3 - 97.2 3.1 100.3
Amortisation - - - - 2.5 - 2.5 - 2.5
(1) EBIT shows the segment result before exceptional items. It is profit before financing and tax and
exceptional items.
Total
contin- Discon-
Premier David uing tinued Total
Year ended 2 Travel Rest- Lloyd Unallo- Elimin- oper- oper- oper-
March 2006 (restated) Inn aurants Costa Leisure cated ation ations ations ations
£m £m £m £m £m £m £m £m £m
Revenue
Revenue from external
customers 392.9 619.9 140.3 224.6 114.2 - 1,491.9 200.3 1,692.2
Inter-segment
revenue - - 2.7 - - (2.7) - - -
------- -------- ------ ------ -------- -------- -------- -------- --------
Total revenue 392.9 619.9 143.0 224.6 114.2 (2.7) 1,491.9 200.3 1,692.2
======= ======== ====== ====== ======== ======== ======== ======== =========
EBIT (1) 129.8 74.9 13.3 41.3 (25.4) - 233.9 39.3 273.2
---------------------------------------------------------------------------------------------------------
EBIT (1) 129.8 74.9 13.3 41.3 (25.4) - 233.9 39.3 273.2
Segment exceptional items:
- Net profit/(loss) on
disposal of property, plant
and equipment 0.3 1.5 (1.0) - - - 0.8 2.2 3.0
- Impairment of property
and goodwill - (5.7) (3.3) (18.3) (7.3) - (34.6) (0.6) (35.2)
- Reorganisation - - - - (10.8) - (10.8) - (10.8)
Share of profit from joint
ventures (0.3) - - - - - (0.3) (6.0) (6.3)
Share of profit from
associates (0.6) - - (0.3) - - (0.9) (9.4) (10.3)
------- -------- ------ ------ -------- -------- -------- -------- --------
Segment result 129.2 70.7 9.0 22.7 (43.5) - 188.1 25.5 213.6
---------------------------------------------------------------------------------------------------------
Operating profit 188.1 25.5 213.6
Share of profit from joint
ventures 0.3 - - - - - 0.3 6.0 6.3
Share of profit from
associates 0.6 - - 0.3 - - 0.9 9.4 10.3
Non-operating exceptionals:
Net loss on disposal of
businesses and investments - (1.1) - (3.7) (3.9) - (8.7) 200.4 191.7
Impairment loss on
revaluation of Condor joint
venture - - - - - - - (29.3) (29.3)
-------- -------- ---------
Profit before financing and
tax 180.6 212.0 392.6
Net finance costs (88.3) (0.7) (89.0)
-------- -------- ---------
Profit before income tax 92.3 211.3 303.6
-------- -------- ---------
Income tax expense (44.2) 5.0 (39.2)
-------- -------- ---------
Net profit for 48.1 216.3 264.4
the year
-------- -------- ---------
Assets and
liabilities
Segment assets 1,140.4 876.3 60.5 574.5 - - 2,651.7 149.5 2,801.2
Investment in joint ventures 5.4 - - - - - 5.4 264.4 269.8
Investment in associates 0.8 - - - - - 0.8 10.0 10.8
Unallocated assets - - - - 175.8 - 175.8 - 175.8
------- -------- ------ ------ -------- -------- -------- -------- --------
Total assets 1,146.6 876.3 60.5 574.5 175.8 - 2,833.7 423.9 3,257.6
------- -------- ------ ------ -------- -------- -------- -------- --------
Segment
liabilities (42.3) (55.4) (14.0) (45.4) - - (157.1) (15.1) (172.2)
Unallocated
liabilities - - - - (654.0) - (654.0) - (654.0)
------- -------- ------ ------ -------- -------- -------- -------- --------
Total liabilities (42.3) (55.4) (14.0) (45.4) (654.0) - (811.1) (15.1) (826.2)
------- -------- ------ ------ -------- -------- -------- -------- --------
Net assets 1,104.3 820.9 46.5 529.1 (478.2) - 2,022.6 408.8 2,431.4
======= ======== ====== ====== ======== ======== ======== ======== =========
Reconciliation of assets and liabilities reported above to those reported on the balance sheet
Assets reported above 1,146.6 876.3 60.5 574.5 175.8 - 2,833.7 423.9 3,257.6
Non-current derivative
assets - - - - 78.5 - 78.5 - 78.5
Current derivative assets - - - - 10.2 - 10.2 - 10.2
Cash - - - - 49.6 - 49.6 - 49.6
------- -------- ------ ------ -------- -------- -------- -------- --------
Assets per balance sheet 1,146.6 876.3 60.5 574.5 314.1 - 2,972.0 423.9 3,395.9
======= ======== ====== ====== ======== ======== ======== ======== =========
Liabilities reported above (42.3) (55.4) (14.0) (45.4) (654.0) - (811.1) (15.1) (826.2)
Current financial
liabilities - - - - (145.1) - (145.1) - (145.1)
Current derivative
liabilities - - - - (0.3) - (0.3) - (0.3)
Non-current financial
liabilities - - - - (874.8) - (874.8) - (874.8)
Non-current derivative
liabilities - - - - (3.0) - (3.0) - (3.0)
------- -------- ------ ------ -------- -------- -------- -------- --------
Liabilities per balance (42.3) (55.4) (14.0) (45.4) (1,677.2) - (1,834.3) (15.1) (1,849.4)
sheet
======= ======== ====== ====== ======== ======== ======== ======== =========
Other segment information
Capital
expenditures:
Property, plant and
equipment - cash basis 65.4 54.1 20.9 43.3 5.2 - 188.9 39.7 228.6
Property, plant and
equipment - accruals basis 61.9 58.0 21.3 39.2 2.8 - 183.2 35.3 218.5
Intangible fixed assets - - - - 1.6 - 1.6 - 1.6
Depreciation 32.5 34.8 9.0 22.5 1.9 - 100.7 11.1 111.8
Amortisation 0.2 - - - 6.8 - 7.0 - 7.0
(1)EBIT shows the segment result before exceptional items. It is profit before financing and tax and
exceptional items.
4 Exceptional items
Restated
2006/7 2005/6
£m £m
Continuing activities:
Reorganisation costs (1) (21.4) (10.8)
Impairment of property, plant and equipment (12.6) (21.5)
Net (loss)/profit on disposal of property, plant and equipment (0.4) 0.8
Impairment of goodwill - (5.8)
Impairment of intangible assets - (7.3)
------- -------
Operating exceptionals (34.4) (44.6)
Net profit on disposal of pub restaurants (2) 196.6 -
Net loss on sale of businesses and investments - (8.7)
Interest cost of early redemption of debentures - (25.5)
------- -------
162.2 (78.8)
------- -------
Tax on continuing exceptional items (77.0) 12.8
------- -------
Total continuing exceptional items 85.2 (66.0)
======= =======
Discontinued activities:
Net (loss)/profit on disposal of property, plant and equipment (0.5) 2.2
Warranty and onerous contract provisions (3) 8.2 -
Provision for loan write-down (4) (5.3) -
Impairment loss on revaluation of Condor joint venture - (29.3)
Impairment of property, plant and equipment - (0.6)
------- -------
Operating exceptionals 2.4 (27.7)
Net profit on disposal of businesses 48.5 200.4
------- -------
50.9 172.7
------- -------
Tax on discontinued exceptional items (5.7) 7.6
------- -------
Total discontinued exceptional items 45.2 180.3
======= =======
Total exceptional items 130.4 114.3
======= =======
Distribution costs include impairment of £12.6m, reorganisation expenses of
£0.6m and loss on disposals of property, plant and equipment of £0.4m.
Administration costs include reorganisation costs of £20.8m.
(1) During 2005/6 the Board instigated a fundamental reorganisation of all
central support functions and the financial impact of this decision has
continued into the current period. In addition the announced disposal of
235 pubs led to a further restructuring during 2006/7 to reflect the
resultant shape of the Group. The costs principally relate to redundancy,
closure costs and a pension curtailment credit.
(2) During the period 235 trading pubs, together with four sites not yet
trading, have been disposed of to Mitchells & Butlers resulting in a
profit on disposal after costs of £196.6m. Contingent deferred
consideration of as much as £7.5m may be due to Whitbread in future
periods. This has not been accounted for due to uncertainty regarding
whether it will be received.
(3) During the year a provision for an onerous contract was released resulting
in a credit to the profit and loss account of £13.3m. In addition, new
provisions for warranties on disposals and onerous contracts were created
which resulted in a charge to the income statement of £5.1m.
(4) As a result of Swallow Hotels Limited going into administration in 2006 we
have provided for the deferred consideration on the sale of Swallow
branded hotels which occurred during 2003/4. We continue to pursue the
outstanding balance and are liaising with the administrators in this
matter.
5 Taxation
Consolidated income statement for continuing operations
Major components of the tax charge for continuing operations for the years ended
1 March 2007 and 2 March 2006 are:
2006/7 2005/6
£m £m
Current tax
Current tax expense 17.7 1.1
Adjustments in respect of current tax of (0.3) (0.4)
previous periods ------ ------
17.4 0.7
Deferred tax
Origination and reversal of temporary 128.4 43.5
differences ------ ------
128.4 43.5
------ ------
Tax reported in the consolidated ncome statement for continuing
operations 145.8 44.2
====== ======
Consolidated statement of recognised income and expense
Pensions 11.9 (28.6)
------ ------
Tax reported in equity 11.9 (28.6)
====== ======
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 1 March 2007 and 2 March 2006
respectively was as follows:
Accounting profit before tax from continuing
operations 375.2 92.3
Accounting profit before tax from discontinuing
operations 59.6 211.3
------ ------
Profit reported in the consolidated income
statement 434.8 303.6
Tax at current UK tax rate of 30% (2006 - 30%) 130.4 91.1
Effect of different tax rates in overseas companies - 0.7
Effect of associated and joint venture companies (0.2) (5.0)
Expenditure not allowable/income not taxable in
relation to discontinuing operations 11.9 (43.9)
Adjustments to tax expense in respect of previous
years 7.0 (0.4)
Adjustments to deferred tax expense in respect of
previous years 4.2 (3.3)
------ ------
153.3 39.2
====== ======
Tax expense reported in the consolidated income
statement for continuing operations 145.8 44.2
Tax expense/(recovery) attributable to discontinued
operations 7.5 (5.0)
------ ------
153.3 39.2
====== ======
Deferred tax
Deferred tax at 1 March 2007 relates to the following:
Consolidated Consolidated
balance sheet income statement
2007 2006 2006/7 2005/6
£m £m £m £m
Deferred tax
liabilities
Accelerated
capital
allowances 102.3 101.5 2.2 7.9
Property
valuation 272.6 184.5 88.1 5.2
------ ------
Gross deferred
tax
liabilities 374.9 286.0
------ ------
Deferred tax assets
Pensions (58.8) (101.6) 30.9 31.0
Tax losses (2.8) (1.9) (1.2) -
Other (3.8) (8.3) 8.4 (0.6)
------ ------
Gross deferred
tax assets (65.4) (111.8)
------ ------
------ ------
Deferred tax
expense 128.4 43.5
------ ------ ====== ======
Net deferred
tax liability 309.5 174.2
====== ======
At 1 March 2007 there was no recognised deferred tax liability for taxes
that would be payable on the unremitted earnings of overseas
subsidiaries of £3.1m.
Tax relief on total interest capitalised amounts to £0.5m (2006 - £0.6m).
6 Discontinued operations
On 21 April 2006 Whitbread and Marriott completed the sale of the Marriott joint
venture to the Royal Bank of Scotland. The Group's share of the proceeds was
£217.6m. The transaction resulted in a loss on disposal before tax for the Group
of £25.0m in the current year. On 8 May 2006 the preference and ordinary shares
held by Marriott International in Condor 2 were redeemed. As a result Condor 2
became a wholly owned subsidiary of Whitbread PLC.
Outside of the joint venture, Whitbread retained its investment in a further
seven of the original properties which have been sold during the year resulting
in a net profit on disposal of £4.7m.
On 12 September 2006 Whitbread sold its 50% investment in Pizza Hut UK Limited
to Yum! Restaurants Holdings for an agreed value of £112.0m. After adjustments
for debt and other liabilities £99m in cash was received resulting in a profit
on disposal of £68.8m. Prior periods presented in these financial statements
have been restated to reflect its status as a discontinued operation.
On 17 January 2007 Whitbread announced its intention to dispose of its TGI
Friday's business for an aggregate price of £70.4m. Completion took place on 2
March 2007. The associated assets are classified as held for sale at 1 March
2007.
All the properties and investments described above have been reported within
discontinued operations for the years presented.
The effect of the disposals during the period is as follows:
Marriott Pizza
hotels Hut Total
£m £m £m
------- -------- -------
Sale proceeds 291.3 112.0 403.3
Total net assets sold (300.5) (42.8) (343.3)
Costs of disposal (11.1) (0.4) (11.5)
------- -------- -------
(20.3) 68.8 48.5
------- -------- -------
Net (loss)/profit on disposal of
businesses (20.3) 68.8 48.5
======= ======== =======
Sale proceeds are made up as
follows:
Cash 274.0 99.0 373.0
Cash foregone in lieu of payment
of debt - 13.0 13.0
Deferred consideration 17.3 - 17.3
------- -------- -------
Total consideration 291.3 112.0 403.3
======= ======== =======
On the face of the cash flow, disposals of subsidiaries and investments reported
as discontinued operations are the net of cash proceeds of £373.0m and the costs
of disposal of £11.5m.
Total net assets sold comprises the following assets and Total
liabilities:
£m
-------
Investment in associate 10.0
Investment in joint venture 277.4
Fixed assets 53.6
Debtors 8.1
-------
Total assets sold 349.1
-------
Creditors (5.8)
-------
Total liabilities sold (5.8)
-------
Total net assets sold 343.3
=======
Cash flows relating to discontinued operations are as follows:
Year to 1 March Year to 2 March
2007 2006
£m £m
-------- -------
Marriott hotels
Net cash inflows from operating
activities 1.2 14.7
Net cash flows from investing
activities (5.4) (10.2)
-------- -------
Net (decrease)/increase in cash and cash
equivalents (4.2) 4.5
======== =======
TGI Friday's
Net cash inflows from operating
activities 9.5 7.5
Net cash flows from investing
activities (2.5) (8.6)
-------- -------
Net increase/(decrease) in cash
and cash equivalents 7.0 (1.1)
======== =======
Profit for the year from discontinued operations is made up as follows:
Year to 1 March 2007
Before Exceptional Total Restated
exceptional Items Year to 2 March
items (note 4) 2006
£m £m £m £m
------- ------- -------- -------
Revenue 113.5 - 113.5 200.3
Cost of sales (36.9) - (36.9) (48.0)
------- ------- -------- -------
Gross profit 76.6 - 76.6 152.3
Distribution
costs (60.3) (0.5) (60.8) (110.3)
Administrative
expenses (8.3) 2.9 (5.4) (16.5)
------- ------- -------- -------
Operating
profit 8.0 2.4 10.4 25.5
Share of
profit from
joint ventures - - - 6.0
Share of
profit from
associates - - - 9.4
Exceptional items (note 4)
Net profit on
disposal of
businesses - 48.5 48.5 200.4
Impairment
loss on
revaluation of
Condor joint
venture - - - (29.3)
------- ------- -------- -------
Profit before
financing and
tax 8.0 50.9 58.9 212.0
Finance costs - - - (1.5)
Finance income 0.7 - 0.7 0.8
------- ------- -------- -------
Profit before
tax 8.7 50.9 59.6 211.3
Income tax expense:
- related to pre-tax profit (1.8) - (1.8) (2.6)
- related to pre-tax profit
exceptional - 1.4 1.4 -
- related to prior year
disposals - (7.1) (7.1) -
- related to profit on
disposal - - - 7.6
------- ------- -------- -------
Profit for the
year from
discontinued
operations 6.9 45.2 52.1 216.3
======= ======= ======== =======
Assets classified as held for sale
The major classes of assets classified as held for sale and measured at the
lower of carrying amount and fair value less cost to sell are as follows:
Year ended 1 Year ended 2
March 2007 March 2006
£m £m
-------- -------
Assets Property, plant and equipment 56.8 58.0
Investment in joint venture - 234.6
Investment in associates - 10.0
Inventories 0.6 -
Trade and other receivables 1.7 -
-------- -------
Total assets 59.1 302.6
======== =======
7 Earnings per share
Basic earnings per share is calculated by dividing the net profit for the year
attributable to ordinary shareholders of £281.8m (2005/6 - £264.3m) by the
weighted average number of ordinary shares outstanding during the year of 228.3m
(2005/6 - 264.7m).
The adjusted earnings per share is presented so as to show more clearly the
underlying performance of the Group.
Diluted earnings per share is the basic and adjusted basic earnings per share
after allowing for the dilutive effect of the conversion into ordinary shares of
the weighted average number of options outstanding during the period. The number
of shares used for the diluted and adjusted diluted calculation is as follows:
2006/7 2005/6
m m
------- -------
Weighted average number of ordinary shares for
basic earnings per share 228.3 264.7
Effect of dilution - share options 1.8 2.2
------- -------
Adjusted weighted average number of ordinary shares
for diluted earnings per share 230.1 266.9
======= =======
Where the share price at the year end is lower than the option price
the options become anti-dilutive. At the year end no such options were
in issue (2005/6 - 104,671).
Earnings per share on discontinued operations Restated
2006/7 2005/6
p p
------- -------
basic earnings per share 22.82 81.68
- diluted for profit for the period 22.64 81.00
Adjusted basic earnings per share is calculated as
follows:
Earnings Earnings per share
Total operations 2006/7 2005/6 2006/7 2005/6
£m £m p P
------- ------- ------- -------
Earnings and basic earnings per share 281.8 264.3 123.43 99.85
Earnings and basic earnings per share
attributable to:
Exceptional items - gross (note 4) (213.1) (93.9) (93.34) (35.47)
Adjust for tax on exceptional items
(note 4) 82.7 (20.4) 36.22 (7.71)
------- ------- ------- -------
Underlying profit and basic earnings
per share for profit for the period 151.4 150.0 66.31 56.67
======= ======= ======= =======
Earnings Earnings per share
Restated Restated
Continuing operations 2006/7 2005/6 2006/7 2005/6
£m £m p P
------- ------- ------- -------
Earnings and basic earnings per share 229.7 48.1 100.61 18.17
Earnings and basic earnings per share
attributable to:
Exceptional items - gross (note 4) (162.2) 78.8 (71.04) 29.77
Adjust for tax on exceptional items
(note 4) 77.0 (12.8) 33.72 (4.84)
------- ------- ------- -------
Underlying profit and basic earnings
per share for profit for the period 144.5 114.1 63.29 43.10
======= ======= ======= =======
Earnings Earnings per share
Restated Restated
Discontinued operations 2006/7 2005/6 2006/7 2005/6
£m £m p P
Earnings and basic earnings per share 52.1 216.2 22.82 81.68
Earnings and basic earnings per share
attributable to:
Exceptional items - gross (note 4) (50.9) (172.7) (22.30) (65.24)
Adjust for tax on exceptional items
(note 4) 5.7 (7.6) 2.50 (2.87)
------- ------- ------- -------
Underlying profit and basic earnings
per share for profit for the period 6.9 35.9 3.02 13.57
======= ======= ======= =======
Underlying profit is reported on net profit from continuing activities before
exceptional items, these being impairment of property, plant and equipment,
impairment of goodwill, impairment of intangibles, reorganisation costs, net
profit on disposal of fixed assets, net profit on disposal of businesses and
investments, interest charge on early redemption of debentures, provision for
loan write-down and other material, non-recurring items.
8 Dividends paid and proposed
2006/7 2005/6
£m £m
------- -------
Declared and paid in the year:
Equity dividends on ordinary shares:
Final dividend for 2005/6 - 19.95 pence (2004/5 -
18.35 pence) 51.3 54.6
Interim dividend for 2006/7 - 8.10 pence (2005/6 -
7.35 pence) 17.8 18.9
Special dividend - 135.00 pence - 402.0
------- -------
69.1 475.5
------- -------
Dividends on other shares:
B share dividend - 155.00 pence 264.4 -
C share dividend - 159.00 pence 195.5 -
------- -------
459.9 -
------- -------
Total dividends paid 529.0 475.5
======= =======
Proposed for approval at AGM:
Equity dividends on ordinary shares
Final dividend for 2006/7 - 22.15 pence (2005/6 -
19.95 pence) 43.8 51.7
======= =======
9 Reserves
Share Share premium Capital Other reserves Retained Currency Total Minority Total
capital redemption earnings translation interest equity
reserve
£m £m £m £m £m £m £m £m £m
At 3 March 149.6 23.2 - (1,870.2) 3,507.4 0.3 1,810.3 5.8 1,816.1
2005
------ ------ -------- ------ ------ ------- ------ ------ ------
Effect of
adopting IAS - - - (3.2) 2.3 - (0.9) (3.1) (4.0)
32 & 39
------ ------ -------- ------ ------ ------- ------ ------ ------
At 4 March 149.6 23.2 - (1,873.4) 3,509.7 0.3 1,809.4 2.7 1,812.1
2005
------ ------ -------- ------ ------ ------- ------ ------ ------
Total
recognised
income and
expense for
the year - - - (0.3) 199.4 1.4 200.5 0.1 200.6
Ordinary
shares issued 1.5 12.9 - - - - 14.4 - 14.4
Cost of ESOT
shares
purchased - - - (9.5) - - (9.5) - (9.5)
Loss on ESOT
shares issued
to - - - 6.2 (6.2) - - - -
participants
Accrued share
based - - - - 7.4 - 7.4 - 7.4
payments
Movement in
joint venture
and - - - - (3.0) - (3.0) - (3.0)
associates
reserves
Equity
dividends - - - - (475.5) - (475.5) - (475.5)
------ ------ -------- ------ ------ ------- ------ ------ ------
At 2 March 151.1 36.1 - (1,877.0) 3,231.8 1.7 1,543.7 2.8 1,546.5
2006
------ ------ -------- ------ ------ ------- ------ ------ ------
Total
recognised - - - (1.1) 307.9 (0.9) 305.9 (0.3) 305.6
income and
expense
for the year
Ordinary
shares issued 0.8 6.8 - - - - 7.6 - 7.6
Bonus issue
of
preference
shares - (4.8) - - - - (4.8) - (4.8)
Preference
shares
cancelled - - 4.7 - (275.7) - (271.0) - (271.0)
Reimbursement
of ESOT - - - 1.2 - - 1.2 - 1.2
shares
Loss on ESOT
shares issued
to - - - 1.3 (1.3) - - - -
participants
Accrued share
based - - - - 5.2 - 5.2 - 5.2
payments
Additions - - - - - - - 0.6 0.6
Disposals - - - - - - - (2.8) (2.8)
Equity
dividends - - - - (529.0) - (529.0) - (529.0)
------ ------ -------- ------ ------ ------- ------ ------ ------
At 1 March 151.9 38.1 4.7 (1,875.6) 2,738.9 0.8 1,058.8 0.3 1,059.1
2007 ====== ====== ======== ====== ====== ======= ====== ====== ======
Nature and purpose of reserves:
Share capital
Share capital includes the nominal value on issue of the Company's share
capital, comprising 76.80p ordinary shares.
Share premium
The share premium reserve is the premium paid on the Company's 76.80p ordinary
shares.
Retained earnings
A portion of retained earnings is undistributable following the adoption of
IFRS. The 'revaluation reserve' reported under UK GAAP has been reclassified as
retained profit at the date of transition to IFRS.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences
arising from the translation of the financial statements of foreign subsidiaries
and other foreign currency investments.
Capital redemption reserve
A capital redemption reserve has been created on the cancellation of the Group's
B and C preference shares.
10 Events after the balance sheet date
On 2 March 2007 the Group sold its interest in TGI Friday's for consideration of
£70.4m.
A final dividend of 22.15p per share (2006 - 19.95p) amounting to a dividend of
£43.8m (2006 - £51.7m) was declared by the Directors at their meeting on 23
April 2007. These financial statements do not reflect this dividend payable.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKNKKBBKBFQB
