TIDMWTB
RNS Number : 9448D
Whitbread PLC
25 October 2022
H1 profits exceed pre-pandemic levels and we remain
significantly ahead of the UK market
Increased structural opportunities for growth underpinned by a
strong balance sheet
Throughout this release all percentage growth comparisons are
made on a three-year basis, comparing the current year (FY23)
performance for the 26 weeks to 1 September 2022 to the same period
in FY20 (26 weeks to 29 August 2019), with FY20 being the last
financial period before the onset of the pandemic.
H1 FY23 Group Financial Summary
GBPm H1 FY23 H1 FY22 H1 FY20 vs H1 FY22 vs H1 FY20
================================= ========== ========== ========== =========== ===========
Statutory revenue(1) 1,350.4 661.6 1,084.0 104% 25%
Adjusted EBITDAR 511.7 178.3 426.7 187% 20%
Adjusted profit / (loss)
before tax (2) 271.9 (56.6) 235.6 580% 15%
Statutory profit / (loss)
before tax 307.4 (19.3) 219.9 >1,000% 40%
Statutory profit / (loss)
after tax 233.9 (37.8) 172.2 719% 36%
Adjusted basic EPS 107.0p (26.4)p 97.1p 505% 10%
Statutory basic EPS 115.7p (18.7)p 89.6p 719% 29%
Dividend per share 24.4p 0.0p 32.7p n/a (25)%
Cash and cash equivalents 1,174.8 1,144.7 804.9 30.1 369.9
Net cash / (debt) 182.1 60.2 (77.5) 121.9 259.6
Net cash / (debt) and
lease liabilities (3,566.7) (3,253.4) (2,575.1) (313.3) (991.6)
================================= ========== ========== ========== =========== ===========
Overview
-- Our sustained programme of investment is delivering significant market outperformance
-- Statutory profit before tax above pre-pandemic levels and ahead of expectations
-- A declining independent sector is increasing our growth
potential in the UK and Ireland to 125,000 rooms
-- In Germany, demand has recovered, we are seeing good trading
momentum and are confident in reaching our long-term return on
capital target of 10-14%
-- Our strong balance sheet with significant asset backing is
integral to the success of our operating model
-- We are continuing to regularly and actively manage our
capital allocation priorities to drive long-term value for our
shareholders and will provide a further update at the FY23
results
-- With strong current trading and positive lead indicators we
remain confident in the full year outlook
Financial highlights
-- Premier Inn UK: continued outperformance with total
accommodation sales 25.9pp ahead of the midscale and economy
('M&E') market in H1, driven by our scale, the strength of our
brand, direct distribution model, operational excellence and our
winning customer proposition
-- Total UK accommodation sales were 101% ahead of H1 FY22 and 35% ahead of H1 FY20
-- F&B sales were 95% ahead of H1 FY22 but 5% behind pre-pandemic levels
-- Premier Inn Germany: continued market recovery following the
easing of restrictions in April, with our more established hotels
being profitable(3) for the first time in Q2 FY23
-- Statutory revenue of GBP1,350.4m was 104% ahead of H1 FY22
and 25% ahead of H1 FY20. Adjusted profit before tax was GBP271.9m,
which included GBP24.9m of adjusted losses before tax in
Germany
-- Statutory profit before tax of GBP307.4m benefited from
adjusting items, including GBP33.5m of net property impairment
reversals (H1 FY22: GBPnil) and GBP2.0m profit from property
disposals (H1 FY22: GBP28.6m)
-- Strong balance sheet: lease adjusted leverage reduced to 2.8x
and net cash increased to GBP182.1m (FY22: GBP140.5m); pension fund
surplus of GBP429.2m at the end of the period (FY22: GBP522.6m)
-- Interim dividend of GBP49m (24.4p per share) in line with our
policy, payable on 16 December 2022
1: H1 FY20 revenue includes GBP6.0m relating to the Costa
disposal transitional service agreement.
2: H1 FY22 includes GBP60.0m received from the UK Coronavirus
Job Retention Scheme, GBP28.6m of Germany Government COVID-related
grants, GBP47.7m of UK business rates relief and GBP5.3m of other
COVID-related support grants.
3: Adjusted profit before tax excluding non-hotel specific
central costs for hotels that have been open and trading for a full
12 months as at 4 March 2022.
signifies an alternative performance measure ('APM') - further
information can be found in the glossary and reconciliation of APMs
at the end of this document.
Segment highlights
Premier Inn UK
`
===== ===== ========================================================================
GBPm H1 FY23 H1 FY22 H1 FY20 vs H1 FY22 vs H1 FY20
============================= ======== ======== ======== =========== ============
Statutory Revenue 1,298.0 650.6 1,074.3 100% 21%
Adjusted profit /
(loss) before tax 317.1 (17.8) 261.2 >1,000% 21%
Revenue per available
room (GBP) 62.39 32.13 50.19 94% 24%
============================= ======== ======== ======== =========== ============
Premier Inn Germany
`
======== ===== ======================================================================
GBPm H1 FY23 H1 FY22 H1 FY20 vs H1 FY22 vs H1 FY20
============================= ======== ======== ======== =========== =============
Statutory Revenue 52.4 11.0 3.7 376% >1,000%
Adjusted loss before
tax (24.9) (4.3) (5.8) (479)% (329)%
Revenue per available
room (GBP) 35.06 11.69 38.61 200% (9)%
============================= ======== ======== ======== =========== =============
Current trading and outlook
-- Premier Inn UK: despite macroeconomic uncertainty, market
demand remains robust and our strong trading performance has
continued; we have a positive forward booked position and the
momentum into Q3 FY23 has been in line with our YTD trend
-- F&B: the UK value pub restaurant sector remains
challenging and F&B sales continue to lag H1 FY20; we have
launched a series of initiatives to return sales to pre-pandemic
levels, although this is unlikely to be achieved in the current
financial year
-- Premier Inn Germany: strong trading has continued, led by our
more established hotels; we now expect a reduced adjusted loss
before tax of between GBP40m and GBP50m in FY23 versus
GBP60m-GBP70m guided at the full year results; with c.GBP1bn of
capital invested, we remain on course to reach break-even on a
run-rate basis on the current estate during 2024 with a long-term
target return on capital of 10-14%
-- The combination of additional inflation in areas such as
labour, utilities and F&B, together with brought forward
investments in IT and marketing, will result in increased costs of
GBP60m in FY23
-- Interest on cash and pension surplus expected to reduce total interest costs by GBP25m in FY23
-- UK margins in H2 FY23 are expected to be lower than H1 FY23
due to normal seasonality and the phasing of investment and
inflationary pressures
-- Network plan: following a contraction of total supply in the
UK and Ireland we have increased the size of our long-term target
from 110,000 to 125,000 rooms
-- We remain on course to add 1,500-2,000 rooms in the UK and
2,000-2,500 rooms in Germany in FY23
-- With strong current trading, a declining independent sector,
and the proven resilience of our business model, we remain
confident in the full year outlook
Commenting on today's results, Alison Brittain, Whitbread Chief
Executive Officer, said:
"We remain focused on maintaining our position as the UK's
number one hotel chain and are well on the way to replicating that
success in the German market. We delivered an outstanding trading
performance in the first half of the year, with revenues and profit
before tax above pre-pandemic levels. Our UK hotels traded
well-ahead of the market, benefiting from our 'investing to win'
commercial and operational initiatives that are continuing to drive
growth. We are making good progress in Germany and remain focused
on realising our full potential in this large and exciting market.
I am incredibly proud of the dedication of our team members who
continue to deliver a fantastic service for our guests.
"The strength of our balance sheet underpins our success and has
given us the confidence to continue to invest, even through the
periods of great uncertainty that we have seen over the past few
years. Our investment in growing our estate, our customer
proposition, commercial initiatives, IT systems and Force for Good
sustainability programme has meant we have been able to take
advantage of improved market conditions and extend our market
leading position.
"Despite macroeconomic uncertainties, our current trading
performance is strong and our business has proven its resilience in
previous downturns. With a robust balance sheet and significant
growth potential in both the UK and Germany, we remain confident in
the full year outlook and our ability to deliver long-term value
for all our stakeholders."
For more information please contact:
Investor Relations - Whitbread
investorrelations@whitbread.com
Peter Reynolds, Director of Investor Relations
peter.reynolds@whitbread.com
Abigail Cammack, Investor Relations Manager
abigail.cammack@whitbread.com
Sophie Nottage, Investor Relations Manager
sophie.nottage@whitbread.com
Media - Tulchan whitbread@tulchangroup.com
Jessica Reid +44 (0) 20 7353 4200
A webcast for investors and analysts will be made available at
8:15am on 25 October 2022 and will be followed by a live Q&A
teleconference at 9:15am. Details of both can be found on
Whitbread's website ( www.whitbread.co.uk/investors ).
Alternative performance measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures ('APMs')
which are consistent with the way that the business performance is
measured internally. We report adjusted measures because we believe
they provide both management and investors with useful additional
information about the financial performance of the Group's
businesses.
Adjusted measures of profitability represent the equivalent IFRS
measures adjusted for specific items that we consider relevant for
comparison of the financial performance of the Group's businesses
either from one period to another or with other similar
businesses.
APMs are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
Further information can be found in the glossary and reconciliation
of APMs at the end of this document.
Business Review
The strength of our performance in the first half reflects the
continued execution of our stated business strategy. Our
longstanding programme of investment meant that the Group was
well-placed to capitalise on a strong market recovery in both the
UK and Germany during H1 FY23.
In the UK, consumer demand picked up significantly at the start
of the year, driven by strong leisure demand and the return of
business travel to pre-pandemic levels. This recovery in revenue
was experienced across both the regions and London and the
combination of high levels of demand, our commercial and
operational initiatives, and a favourable supply backdrop, provided
increased opportunities to drive RevPAR across the estate. Whilst
the recovery in the hotel market provided a boost to our food and
beverage ('F&B') sales, the trading conditions in the value end
of the pub restaurant market remain challenging.
In Germany, COVID-related restrictions were more extensive and
had remained in place for longer than many other European
countries. Once restrictions were removed at the end of April 2022,
the German hotel market saw strong month-on-month growth, with
rising occupancy and room rates as domestic leisure and business
demand increased.
Against this favourable backdrop, we continued to execute the
three pillars of our business strategy, namely:
-- to grow and innovate in the UK;
-- to grow our presence in Germany; and
-- to enhance our capabilities to support long-term growth.
Our strong balance sheet underpinned our confidence in
continuing to invest throughout the pandemic and meant we were able
to take full advantage of the favourable market conditions outlined
above. We remain well-placed for the longer-term, maintaining our
market leading position in the UK, progressing our plans to unlock
significant future value in Germany and ensuring we deliver against
our ambitious commitments set out in our Force for Good
sustainability programme.
Group Results
The first half results were better than expected and total
statutory revenues increased by 25% versus H1 FY20 to GBP1,350.4m
and adjusted operating profit increased by 16% to GBP343.2m. This
uplift reflected both the high operational leverage inherent in our
business model and some timing differences on cost increases that
were delayed until the second half of the year. An interest credit
from the pension fund that remains in surplus (see note 13),
together with higher interest rates on our cash balance, meant that
adjusted profit before tax increased to GBP271.9m. Statutory profit
before tax was GBP307.4m, including adjusting items of GBP35.5m (H1
FY22: GBP37.3m). No COVID-related Government support was recognised
in H1 FY23 in the UK or in Germany (H1 FY22: GBP141.6m). Tax
expense of GBP73.5m resulted in a statutory profit after tax of
GBP233.9m and basic earnings per share increased by 29% versus H1
FY20 to 115.7p (H1 FY20: 89.6p).
The strong trading performance fed through into increased
operational cashflow and while our continued programme of expansion
and high levels of occupancy meant that total capital expenditure
in the first half increased to GBP304.2m, total net cash increased
to GBP182.1m, up from GBP140.5m at the year end.
Further details regarding the Group's strong first half
performance, both in the UK and Germany, are set out below.
Premier Inn UK - continuing to outperform the market
The strong recovery in UK accommodation sales continued during
the first half, and while F&B sales remained challenging and 5%
behind pre-pandemic levels, total UK revenue almost doubled to
GBP1,298.0m
(H1 FY22: GBP650.6m). The growth in accommodation sales was
strong across London and the Regions that were both 35% ahead of H1
FY20, driven by increases in estate growth, occupancy and average
room rate ('ARR'). While leisure demand remained strong during the
period, as highlighted below, our efforts to attract more business
customers meant that the revenue mix of leisure and business
customers returned to broadly equal shares in the period.
Inflationary pressures and volume growth meant that operating
costs increased in the period, however the phasing of a number of
these increases towards the second half meant that profit margins
recovered strongly in the first half and were broadly in line with
pre-pandemic levels at 24.4% (H1 FY20: 24.3%).
Throughout the period, Premier Inn UK continued to outperform
the wider M&E market with accommodation sales 25.9pp ahead of
the market in H1 FY23, an increase of 13.4pp compared with the
level of outperformance during the first half of FY22. This degree
of outperformance was driven by our 'investing to win' strategy in
combination with external factors that meant we were particularly
well-positioned. Further details are provided below:
Increased scale and national coverage - We added 819 more new
rooms during the period, whilst 332 rooms were closed. As at H1
FY23 there were 844 hotels and 82,773 rooms open across the UK and
Ireland, meaning that we are better placed than ever to service the
needs of our guests, wherever they might need to stay.
Market effects - The decline of the independent hotel sector is
accelerating and having now completed our network planning exercise
and our assessment of the UK market, we believe that the total
volume of room supply is currently some 4% lower than it was
pre-pandemic, creating a favourable market backdrop and providing
increased opportunity for Premier Inn to grow market share.
Best in class operations - Premier Inn is the UK's number one
hotel brand and is synonymous with high quality and good value.
This market leading position is thanks to our 37,000 team members
who are at the heart of our operations and we are continuing to
invest in recruitment, training and also rewards for our people.
Having revamped our recruitment process, we reduced the number of
vacancies across our operations versus the previous year, improving
our operational efficiency and helping to mitigate disruption from
team shortages in what remains a tight labour market. Acutely aware
of the challenging macroeconomic conditions and in recognition of
the huge contribution made in the first half, we announced earlier
this month an increase in pay rates for our hourly paid team
members to a minimum of GBP10 per hour with effect from 4 November
2022. Alongside the increase in base pay, we are also providing a
one-off payment of up to GBP300 for all eligible hourly paid and
customer contact centre team members, with over 34,000 of the total
UK workforce eligible for this one-off payment. These investments
in our teams will result in approximately GBP15m of additional cost
in the second half of the current financial year.
Highly effective marketing - Despite the fact that approximately
75% of all bookings made are by consumers that have stayed at
Premier Inn at least once before, it is essential that we continue
to drive traffic to our website through brand and digital
marketing. This includes our latest 'Rest Easy' campaign (launched
in September 2022) and the extension of our relationships with
travel management companies ('TMCs') that are an increasing source
of higher value business customers. The net result of these
marketing initiatives is that we continue to drive large customer
volumes directly to our website without having to give any of our
inventory to online travel agents, thereby avoiding high commission
costs and retaining a direct relationship with the customer.
Dynamic and proprietary pricing platform - We have continued to
make excellent progress in developing and improving the performance
of our proprietary and fully automated trading engine that manages
all of our pricing across both the UK and Germany. Drawing upon our
significant bank of historic trading and performance data, we are
continuing to evolve and develop our trading strategies,
introducing new capabilities to increase yield, whilst still
maintaining a healthy mix of business versus leisure and short
versus long lead sales.
Extended consumer choice with new pricing options and product
innovation - By providing more flexible pricing options, for a
modest premium to our standard room rate, our guests can secure the
flexibility they might need and the majority of our guests choose
flexible options. Separately, we are at an advanced stage of
testing the latest iteration of our standard Premier Inn room that
is achieving higher guest scores and is expected to deliver
operational savings when it is rolled out during FY24. Our Premier
Plus room concept is also proving popular with our guests and is
able to deliver a meaningful uplift to RevPAR versus a standard
room in the same hotel. As a result, we have increased the number
of Premier Plus rooms across our UK estate to over 3,000 in H1 FY23
and plan to add a further 1,000 rooms by the end of the year.
Improved proposition for our business customers - As well as
boosting our availability to business customers through TMCs, we
have also enhanced our appeal to corporate customers through our
Business Account and Business Booker portal. Business Booker
provides business customers with a guaranteed discount off our
headline Flex rate, thereby offering an attractive price point as
well as access to a number of other tools to help them manage their
employees' accommodation needs. Having revamped our sales
organisation, we now have over 76,000 active Business Booker
accounts in the UK and Germany. As a result of these efforts and
despite strong leisure demand during the peak summer season,
Business Booker customers represented approximately 8% of total
accommodation sales in H1 FY23, up from 6% in H1 FY22.
Each of these factors contributed to our continued
outperformance versus the wider market and our total UK
accommodation sales were ahead of the rest of the M&E market by
25.9pp in the first half. As we look forward, we believe that each
of these elements can and will continue to help us to remain ahead
of the wider market.
UK F&B - sales remain behind pre-pandemic levels
Our F&B offer remains central to the Premier Inn guest
experience and while increased occupancy fed through into increased
F&B volumes from hotel guests, the value end of the UK pub and
restaurant sector remains challenging as many customer segments
have still not returned to their pre-pandemic spending levels.
Several initiatives were launched during the first half to help
boost the numbers of covers as well as spend per head in our
restaurants. These included an expanded drinks offering, upgrades
to a number of our gardens, enhancing the appeal of our venues with
outdoor space during the summer months, as well as a number of
targeted promotions. These initiatives helped to drive a marked
recovery versus H1 FY22, however total F&B sales remained 5%
behind H1 FY20.
Premier Inn Germany - strong market recovery and room expansion
driving improved performance
Since the end of COVID-related restrictions at the end of April
2022, the M&E market in Germany has rebounded strongly with
increasing occupancy and ARR driving market RevPAR back to above
pre-pandemic levels. This market recovery, coupled with our
commercial and operational initiatives, delivered a significant
uplift in financial performance. An increase in the number of
leisure events, trade fairs and business conferences, together with
the growth in our estate, meant that total revenue increased
significantly versus H1 FY20.
Given our pace of room openings over the past two years, the
majority of our hotels have only traded restriction-free for a few
months and still have some way to go before reaching maturity in
terms of revenue and profit performance. However, we are achieving
encouraging guest scores and reached an important milestone during
the period as our cohort of 18 hotels that have been trading for
more than one year turned profitable (before overheads) during the
second quarter, with average occupancy of 79%, ARR of GBP62.02 and
RevPAR of GBP49.07.
The delayed opening of the market and our continued investment
in new openings meant that Germany as a whole delivered an adjusted
loss before tax of GBP24.9m (H1 FY22: loss of GBP4.3m). We are
continuing to drive top line growth through our marketing and
improved pricing, as well as by seeking to drive business volumes
through greater use of TMCs and our Business Booker portal. The
strong trading performance since April, particularly by our more
established hotels, tells us we have a product that can compete
effectively in the German market. Having invested approximately
GBP1bn to date, we remain confident that we will reach break-even
at an adjusted profit before tax level on the current estate
sometime during 2024, and that our long-term target return on
capital of between 10-14% is achievable.
Strong balance sheet supports strategic capital allocation
At the heart of our strategy is a significant structural growth
opportunity to increase the number of Premier Inn rooms in the UK,
Ireland and in Germany. Our capital expenditure programme is
focused on investing in new rooms, driving revenue growth
initiatives and sustaining the quality of our customer proposition.
Maintaining a strong balance sheet means we can continue to invest
with confidence whilst also seizing opportunities which meet our
strict investment return requirements.
The strong first half performance resulted in an increase in net
cash to GBP182.1m after total capital expenditure of GBP304.2m (H1
FY22: GBP109.1m), that included the purchase of two freehold
properties. Lease liabilities at the end of the period were
GBP3.7bn. As a result, our ratio of funds from operations ('FFO')
to lease adjusted net debt reduced to 2.8x, which is within our
policy of managing to investment grade metrics of FFO to lease
adjusted net debt of less than 3.7x.
Our performance during the first half demonstrates the
significant benefits of capital strength in times of macroeconomic
uncertainty. Having reconfirmed our investment grade status during
the first half, we are focused on managing an efficient balance
sheet whilst maintaining our capital discipline and driving
long-term returns for our shareholders. Our capital allocation
framework sets out our key priorities for the next few years, based
upon future profit and cash generation under a range of potential
scenarios. The key priorities include:
-- maintaining our investment grade status by operating within our leverage target;
-- continuing to fund our ongoing capital expenditure
requirements and investing through the cycle;
-- selective freehold acquisitions and M&A opportunities that meet our return thresholds;
-- growing dividends in line with earnings; and
-- returning excess capital to shareholders dependent on outlook and market conditions.
We remain focused on actively managing an appropriate balance of
each of these priorities and continue to review them on a regular
basis, taking into account each of factors outlined above. We will
provide a further update at the time of the FY23 results.
Business strategy
Our strong balance sheet and vertically integrated business
model, in conjunction with the careful execution of our business
strategy, has delivered strong growth both in the UK and Germany,
whilst also continuing to deliver a consistent and superior
customer experience. The result has been an impressive track
record, outside the pandemic, of consistent returns for our
shareholders and additional benefits for our other key
stakeholders.
Our strategy comprises three key pillars:
1. Continuing to grow and innovate in the UK
We are determined to maintain our leading position in the UK
M&E hotel market, a position we have secured after many years
of investment and diligent execution of our business strategy. With
over 82,700 rooms, Premier Inn is the UK's largest hotel chain with
extensive national coverage. This helps to ensure that our customer
base is highly diversified between leisure (c.50%) / tradespeople
(c.25%) / office workers (c.25%). However, our scale does not mean
that we compromise on excellence and Premier Inn is regularly voted
as the UK's best value hotel brand with a reputation for high
quality, great value and excellent customer service.
The strength of the Premier Inn brand is attributable to our
vertically integrated operating model. By controlling all elements
of the customer experience, we can ensure that our customer
proposition is delivered consistently and to a high standard. With
less than 1% of bookings delivered through third party online
travel agents, our direct distribution model also provides complete
ownership of the customer relationship, driving substantially lower
acquisition and retention costs.
To drive revenue growth, we are continuing to invest in the
development of our core hotel product, offering even greater choice
to our guests. Recent product developments include: the roll-out of
hotel concepts such as hub by Premier Inn that has a smaller room
layout and is ideally suited to city centre locations; and the
conversion of more standard rooms into our popular Premier Plus
format, offering additional room features such as a complimentary
coffee machine and our Ultimate Wi-fi as standard. Such
developments are in addition to our continuous programme of
upgrades and improvements to our hotel estate, including: the roll
out of our latest standard Premier Inn room that is achieving
outstanding guest scores as well as the upgrade of 65,000 beds,
that will both raise the overall quality of our proposition and
allow us to offer interlocking units for more flexible room
formats.
The M&E segment in which we operate remains highly
attractive:
-- The budget branded model is structurally advantaged : Our
sector has a long history of being the highest growth segment in
the hotel market. It has also proved more resilient in previous
downturns and since the end of the pandemic has continued to
outperform the rest of the hotel market;
-- Significant opportunities for growth: Following completion of
our latest detailed network planning exercise, we have identified
an increased opportunity to develop our network in the UK and
Ireland to 125,000 rooms (up from 110,000 rooms previously). In
addition to our current open UK estate of over 82,700 rooms, we
have a committed pipeline of 8,875 rooms and we expect to open
between 2,000-3,000 new rooms each year.
-- Enhanced structural opportunities: The independent sector has
continued to decline in the aftermath of the pandemic but still
represents approximately 44 % of the UK market. The decline in the
independent market is contributing to the overall reduction in
market supply and we believe that operational challenges created by
labour shortages and cost inflation may accelerate this decline
further, creating additional opportunities for Premier Inn across
the UK and Ireland.
2. Growing at scale in Germany
Whilst the German hotel market is approximately one third larger
than the UK in terms of numbers of rooms, it is highly fragmented,
with the independent hotel sector representing approximately 72% of
the market in 2019. With just six hotels in March 2020, our German
business has grown rapidly and now has 42 hotels, with 7,608 rooms
open and a further 7,080 rooms in the pipeline. Our open and
committed pipeline signals our confidence in the potential for
significant growth in the German market.
As well as seeking to increase our brand awareness among
consumers, we have made good progress in attracting corporate
customers, further expanding our reach. With a presence in over 20
major towns and cities, our hotels are building customer loyalty
and achieving good customer scores, a combination that is
broadening our appeal to landlords as we seek to expand our
portfolio further. Having grown our estate rapidly through both
organic growth as well as acquisitions, we have invested over
GBP1bn to-date and now have over 1,000 team members in Germany
providing us with a solid platform from which we intend to grow
further.
3. Enhancing our capabilities to support long term growth
Our commercial and operational focus is key to the execution of
our plans and in driving our long-term success. Additional
capabilities and attributes that are drivers of long-term value
include:
Financial strength: With a strong first half performance and
positive net cashflow, the Group's balance sheet remained in a
robust position with net cash of GBP182.1m at the end of H1
FY23.The Group's investment grade status(1) enables access to the
debt markets and ensures that the Group's cost of funding remains
competitive. With a strong financial covenant, we are recognised as
a highly attractive partner when being considered for leasehold
and/or other transactions, both in the UK and in Germany, opening
up opportunities that might otherwise be unavailable and creating a
competitive advantage for the Group. Our strong balance sheet also
means we can continue with our 'investing to win' programme that
includes growing our estate, developing new pricing options and
room products, enhancing our IT platforms and driving our marketing
initiatives, all of which help to grow revenues in both the UK and
Germany. Financial flexibility also allows us to complete
attractive M&A deals, underpinning our planned future growth.
All of these investments are subject to our rigorous capital
appraisal process, one that provides strict discipline and helps us
to sustain our strong track record of high returns on capital.
1 Fitch Ratings - 26 August 2022
Asset backed balance sheet : Approximately 55% of the Group's
hotels are freehold with the remaining 45% operated as leasehold.
Whilst this differentiates the Group from many of its competitors,
such a significant freehold estate also provides the Group
with:
o total control over the initial development of the hotel as
well as all maintenance and redevelopment;
o access to development profits through sale and leasebacks;
o a strong financial covenant, helping to secure more favourable
lease terms with landlords and attractive financing terms with
lenders;
o protection from increasing property costs and therefore lower
earnings volatility during economic downturns; and
o an additional and flexible source of funding, one that can
often be available at more attractive rates than other sources of
finance.
Being flexible between freehold or leasehold when approaching
new property opportunities materially improves our prospects of
securing the best sites in the best locations. It also makes it
easier for us to optimise the size and format of our assets in
order to maximise returns.
Lean and agile cost model: The scale and breadth of our estate
means that we have a sizeable cost base. However, our teams are
continuing to find new and alternative ways of working to improve
our processes and procedures in ways that can help to reduce our
costs and drive out operational efficiencies. With heightened
inflationary pressures and a tight labour market, these initiatives
are more important than ever and, having delivered GBP40m of
savings in FY22, we remain on track to deliver an additional
GBP100m of planned savings over the next three years.
Operating responsibly and sustainably: Our scale and national
coverage means we have a meaningful presence across both the UK and
now Germany. Recognising our responsibilities in those communities
where we have a physical presence, our long-established Force for
Good sustainability programme continues to drive our social and
environmental agenda. Our stretching targets are embedded within
our overall business strategy and hold us accountable for the
change we seek to implement, whether that is reducing our
environmental footprint, supporting our team members or
contributing to our communities.
The execution of each of these three elements of our business
strategy lies at the heart of our success and underpins our strong
financial performance which has continued in the current trading
period.
Current Trading - seven weeks to 20 October
Trading has remained well ahead of last year and versus FY20.
Total UK sales were 23% ahead of the same period in FY20, with
total accommodation sales up by 37% and representing a continued
outperformance versus the wider M&E market of 24.5pp. Occupancy
in the period was 85.8% (FY22: 81.3%) and average room rate was
GBP78.15 (FY22: GBP66.47).
The value pub restaurant sector remains challenging and total UK
food and beverage sales continue to lag pre-pandemic levels at
(7.1)% vs H1 FY20. Whilst we have launched a series of initiatives
to help increase sales, it is not expected that a full recovery
will be achieved in the current financial year.
In Germany, our ongoing commercial initiatives coupled with a
continued market recovery helped to deliver a further improvement
in financial performance, led by our more established hotels. Total
sales were 820% ahead of the same period in FY20 and RevPAR was
GBP51.00 with occupancy at 65.3%.
Outlook
As evidenced by our strong current trading performance, the
levels of UK demand experienced during the first half have
continued into the third quarter. We still expect the seasonal
reduction in leisure demand over the coming weeks and while we
remain vigilant for any signs of a slowdown in demand given the
heightened level of macroeconomic uncertainty, overall volumes
remain strong. The early signs are that the launch of our latest
'Rest Easy' marketing campaign is proving successful and, supported
by our other commercial initiatives, the early momentum into Q3
FY23 has been in line with our year-to-date trend.
Overall business demand remains robust thanks in large part to
our continued investment in improving our proposition for business
customers. As well as enhancing our relationships with an
increasing number of TMCs, we continue to grow the number of
accounts on our Business Booker portal, through which an increasing
number of corporates can secure discounts to our standard rates and
benefit from a range of operational tools to help them manage their
corporate travel needs. Within the business segment, the split
between tradespeople and white-collar workers remains broadly
unchanged at approximately 25%:25%.
Despite some ongoing supply chain issues, a tight labour market
and inflationary pressures across large parts of our cost base, our
operating performance remains at a high level thanks to the
dedication and hard work of our operational team members and those
working in our support centre. We remain committed to the wellbeing
of all our team members and pride ourselves on remaining an
attractive employer and recognise the macroeconomic pressures
facing our team and especially those on lower rates of pay. As a
result, we were pleased to announce a GBP15m increase in pay for
our team members, effective from November 2022.
In addition to labour costs, the global energy crisis and
conflict in Ukraine has triggered inflationary pressures across a
range cost lines that we expect will incur incremental operational
expenditure in FY23 of approximately GBP30m. Having announced
GBP20-30m of additional investment at the time of the Q1 results,
the second half of FY23 will also be impacted by a further GBP15m
spend on IT and marketing to help drive revenue growth in the
current financial year and into FY24. The net impact of these cost
increases, coupled with the usual seasonal pattern of demand in the
second half, is that UK profit margins in H2 FY23 are expected to
be lower than in
H1 FY23. As part of our rolling programme of hedging our utility
costs, for FY24 we have increased our hedged utility position from
40% to 70%, adding GBP20m of cost in that year.
In Germany, with further recovery in market demand and as we
seek to increase our brand presence with both leisure and business
customers, we expect the performance of our open hotels to improve
further. Despite ongoing macroeconomic uncertainties and
inflationary pressures, we now expect an adjusted loss before tax
of between GBP40m and GBP50m (versus an expected loss of between
GBP60m-GBP70m previously) and remain on course to reach break-even
for our current estate on a run-rate basis during 2024 with a
long-term target return of
10-14%.
'Investing to win' lies at the heart of our significant capital
expenditure programme and given our long-term targets, we are
committed to growing our estate in both the UK and Germany through
a combination of organic growth as well as acquisition. Following
completion of our network plan, we now expect an even greater
opportunity in the UK and Ireland and have increased the size of
our long-term target from 110,000 to 125,000 rooms.
Other initiatives to drive additional revenue growth include
upgrades to both our IT infrastructure and reservation system that
we expect will be rolled out by the end of calendar year 2023. Once
complete, these investments will start to release substantial value
through the delivery of additional revenue growth and cost savings.
Maintaining our reputation for quality and value is a key driver of
our long-term success and we remain committed to a regular
programme of refurbishments, upgrades and repairs and maintenance.
As a result, we expect capex spend, including the purchase of
freehold properties, to be GBP500-GBP550m in FY23. In the UK, we
remain on course to add 1,500-2,000 rooms this year while in
Germany we expect to add 2,000-2,500 rooms. We will continue to
optimise our existing estate by rationalising those sub-scale
locations where returns can be improved and where opportunities
allow.
With strong current trading, a continued opportunity to grow in
the UK and Germany and the proven resilience of our business model
in previous downturns, we remain confident in the full year
outlook.
Summary of Additional Guidance FY23 and FY24
FY23 guidance was set out in our FY22 full year results and our
Q1 FY23 trading update. While sales sensitivities remain unchanged,
our cost guidance is updated to include the following:
UK
-- Investment to drive further revenue growth: additional GBP15m in marketing and IT spend
-- Inflation: year-on-year inflation now expected to be 10-11%,
a further 1-2% increase vs FY22, equal to GBP30m in FY23
-- Utility cost inflation: fully hedged for FY23, now 70% hedged
for FY24 - additional utility inflation of GBP20m in FY24
-- Increased pay for hourly paid team members and a one-off
bonus totalling GBP9m plus GBP6m of brought forward pay rise from
FY24
Germany
-- FY23 loss before tax now expected to be GBP40m-GBP50m (versus GBP60m-70m guided previously)
-- Expected cost inflation of 10-11%
Balance sheet
-- Capex: GBP500-GBP550m including acquisitions already announced
-- Interest on cash and pension surplus expected to reduce total
interest costs by GBP25m in FY23
We are focused on mitigating the impact of many of these
sector-wide cost headwinds through our scale, our long-standing
efficiency programme, our proprietary pricing model and the
benefits of both organic and inorganic growth.
A Force for Good
Whitbread's sustainability programme, Force for Good, is
embedded across all business functions, ensuring that being a
responsible business is integrated across our operations. It is an
ambitious programme, with the overarching objective to enable
everyone to live and work well. Following an incredibly difficult
year in FY22, keeping our Force for Good commitments has remained
central to our response and how we rebuild after the global
pandemic is of great importance to us.
Following our decision to bring forward our net zero carbon
target from 2050 to 2040 and a commitment to the Science Based
Targets Initiative, we have progressed our validation process and
are aiming for full accreditation of our carbon targets before the
end of the current financial year. In line with the requirements
coming out of COP26, we are in the process of creating our
Transition Plan to net zero and outlining the activity and the
necessary changes and timeframes for delivery in order to meet our
carbon reduction commitments. This is largely focused on removing
gas from our hotels and we now have electric alternatives to gas
boilers in over 40 of our sites. We have begun construction of our
first gasless hotel in Swindon and continue to build our hotels to
the BREEAM Excellent standard and are implementing our energy
efficiency programme across our estate. Our carbon reduction
strategy is not limited to Scope 1 and 2 and we have also started
to roll out our scope 3 target with our suppliers, gathering
information on their own reduction targets and progress.
We are making good progress towards our target of cutting food
waste in half by 2030 and continue our partnership with FareShare,
adding to the half a million meals already donated to charity
partners in support of those in need. After meeting our fundraising
target of GBP20m for Great Ormond Street Hospital, we ran a
companywide review for our next phase of charity partnership.
During this period of review, we continued our fundraising activity
but diverted our focus to the DEC humanitarian appeal for Ukraine,
raising over GBP650,000 in total and supporting this by donating
bedding from our hotels. Following the results of a companywide
vote, GOSH were reinstated as our charity partner in 2022.
Since publishing of our first full report under the Taskforce
for Climate-related Financial Disclosures ('TCFD'), we have been
working on the mitigating actions and on improving our
understanding and quantification of the associated climate change
risks and opportunities. We have also carried out a peer review to
identify best practice for our planned reporting in line with the
next Annual Report.
We have continued to make good progress on bringing to life our
eight Diversity and Inclusion commitments across Whitbread. We have
already met our female representation target, with 41% of senior
leadership positions held by women. Our four inclusion networks,
enAble (disability), Gender Equality, GLOW (LGBTQ+) and Race,
Religion and Cultural Heritage are now all well-established, and,
alongside providing a community for our teams, are taking an active
role consulting with our business on initiatives such as: listening
with our Black colleagues to further understand their experience of
working for Whitbread; consulting on our new concept accessible
rooms (supported by the Business Disability Forum); and launching a
new workplace adjustments policy and process.
We have celebrated many cultural events during H1 FY23 to
support our communities and provide education to our teams. Our
Pride celebrations were a particular highlight, where our sites got
involved and GLOW participated in the Manchester Pride march in
August with participation from our teams from across the UK and
Germany. Representation continues to be important to us and we
continue to be guided by our 2023 and 2026 representation targets
on gender and ethnicity. Our recently released 2022 Gender and
Ethnicity Pay Gap report demonstrates the action we are continuing
to take as an organisation.
This year we are aiming to improve how we communicate our
sustainability credentials as we believe there is a real
opportunity to be recognised as a leader in our industry and we
believe sustainability is becoming more important to our guests and
customers. We actively engage with our stakeholders and have
maintained our leading sustainability ratings with MSCI (AA) and
Sustainalytics (low risk). We have started to embed ESG messages
into our brand and marketing strategies through in-site activations
and through our 'Rest Easy' marketing campaign. It is through these
activities that we are able to drive meaningful change with the
overall aim of enabling people to live and work well.
For futher information on our Force for Good programme, please
visit:
https://www.whitbread.co.uk/sustainability/our-strategy-targets/
.
2022 Annual General Meeting
At the Annual General Meeting on 15 June 2022, 61.56 % of votes
were cast in favour of the resolution to approve the 2022/23
Remuneration Report. We actively engaged with a number of our
larger investors in advance of that vote and have also held a
number of meetings since then to ensure we have a good
understanding of investor sentiment regarding the votes cast
against, as well as regarding any other governance-related issues.
From our engagement, the main reasons behind the votes which were
cast against were largely related to the payment of a bonus in a
year when the Group received Government support. The Remuneration
Committee has noted and discussed that feedback and will take it
into account in the future. We are continuing to engage
constructively with investors on this and other governance-related
topics throughout the rest of the financial year. There has been no
further government support recognised in H1 FY23 and we are not
expecting to make any such claims in H2 FY23.
Business Review | Strong outperformance driving margin
recovery
Premier Inn UK(1)
GBPm H1 FY23 H1 FY22 H1 FY20 vs H1 vs H1
FY22 FY20
========================================== ========== ============ ============ ============ ===========
Statutory Revenue 1,298.0 650.6 1,074.3 100% 21%
Other income (excl rental income)(2) 0.0 65.3 6.6 (100)% (100)%
Operating costs before depreciation,
amortisation & rent (770.5) (533.2) (633.0) (45)% (22)%
Adjusted EBITDAR 527.5 182.7 447.9 189% 18%
Net turnover rent and rental
income 0.6 1.9 0.5 (68)% 20%
Depreciation: Right-of-use
asset (65.8) (59.8) (50.2) (10)% (31)%
Depreciation and amortisation:
Other (82.8) (82.2) (80.0) (1)% (4)%
Adjusted operating profit/
(loss) 379.5 42.6 318.2 791% 19%
Interest: Lease liability (62.4) (60.4) (57.0) (3)% (10)%
Adjusted profit / (loss) before
tax 317.1 (17.8) 261.2 >1,000% 21%
========================================== ========== ============ ============ ============ ===========
ROCE 11.0% n/a 12.1% n/a (110)bps
========================================== ========== ============ ============ ============ ===========
PBT Margins 24.4% (2.7)% 24.3% >1,000% 10bps
========================================== ========== ============ ============ ============ ===========
Premier Inn UK (1) key performance indicators
H1 FY23 H1 FY22 H1 FY20 vs H1 vs H1
FY22 FY20
========================================== ========== ============ ============ ============ ===========
Number of hotels 844 830 810 2% 4%
Number of rooms 82,773 80,810 76,837 2% 8%
Committed pipeline (rooms) 8,875 9,814 12,928 (10)% (31)%
========================================== ========== ============ ============ ============ ===========
Direct booking 99% 99% 98% 0bps 100bps
========================================== ========== ============ ============ ============ ===========
Occupancy 84.8% 61.0% 78.3% >1,000bps 650bps
Average room rate GBP73.54 GBP52.63 GBP64.07 40% 15%
Revenue per available room GBP62.39 GBP32.13 GBP50.19 94% 24%
========================================== ========== ============ ============ ============ ===========
Sales growth(3) :
Accommodation 35%
Food & beverage (5)%
Total 21%
Like-for-like sales(3) growth:
Accommodation 24%
Food & beverage (9)%
Total 13%
========================================== ========== ============ ============ ============ ===========
1: Includes one site in each of: Guernsey and the Isle of Man
and two sites in each of: Jersey and Ireland
2: Includes UK and German Government support - see note 6 of the
accompanying financial statements for further details
3: Total and like-for-like on a three-year basis versus FY20
Total statutory revenue was significantly ahead of H1 FY22 and
up 21% compared to H1 FY20, with total accommodation sales up 35%.
Increased leisure stays and the return of business demand helped to
drive high levels of occupancy that reached 85%, a 650bps increase
versus H1 FY20. The combination of strong consumer demand and a
favourable supply backdrop, coupled with the benefit of our dynamic
pricing model, saw ARR increase by 15% ahead of pre-pandemic levels
with RevPAR increasing to GBP62.39 in H1 FY23.
Premier Inn remained ahead of the M&E market throughout the
period, consolidating our strong market position and demonstrating
the strengths of our scale, brand, direct distribution model and
our winning customer proposition. With our continued programme of
'investing to win' we remain confident of being able to sustain our
outperformance versus the rest of the market.
UK performance vs M&E market
Q1 Q2 Q3 Q4 Q1 Q2 Q3
FY22 FY22 FY22 FY22 FY23 FY23 to Date
============================================= ======== ======== ======== ======== ======== ======== =========
PI accommodation sales performance
(vs FY20) (1) +10.0pp +14.7pp +16.1pp +19.0pp +26.6pp +25.4pp +24.5.pp
-------- -------- -------- -------- -------- -------- ---------
PI occupancy performance (vs
FY20) (2) 10.0% 11.7% 8.6% 9.8% 11.5% 11.4% 9.0%
-------- -------- -------- -------- -------- -------- ---------
PI ARR performance (vs FY20)
(3) (0.9)% (4.6)% (3.6)% (3.5)% (2.7)% (3.8%) (1.1)%
-------- -------- -------- -------- -------- -------- ---------
PI market share (4) 13.9% 10.5% 13.9.% 9.4% 9.5% 8.9% 8.7%
-------- -------- -------- -------- -------- -------- ---------
PI market share gains pp (vs
FY20) (4) 6.4pp 3.4pp 6.4pp 2.2pp 2.0pp 1.8pp 1.6pp
============================================= ======== ======== ======== ======== ======== ======== =========
1: STR data, full inventory basis, Premier Inn accommodation
revenue, 26 February 2021 to 13 October 2022, M&E excludes
Premier Inn
2: STR data, full inventory basis, Premier Inn occupancy, 26
February 2021 to 13 October 2022, M&E excludes Premier Inn
3: STR data, full inventory basis, Premier Inn ARR, 26 February
2021 to 13 October 2022, M&E excludes Premier Inn
4: STR data, revenue share of total UK market, 26 February 2021
to 13 October 2022
Total F&B sales were well ahead of H1 FY22 but 5% behind H1
FY20 demonstrating the challenges faced by the UK value pub
restaurant sector. Whilst we have launched a series of initiatives
to help return sales to pre-pandemic levels, it is not expected
that this will be achieved in the current financial year.
Other income in H1 FY23 was GBPnil with no income being
recognised for COVID-related Government support in the UK in the
period. In H1 FY22, other income of GBP65.3m reflected GBP60.0m
benefit from the Coronavirus Job Retention Scheme.
Operating costs of GBP770.5m were 45% higher than H1 FY22 driven
by revenue-related variable costs, inflation (especially in the
areas of labour, F&B and utilities), estate growth and the
absence of any benefit received in relation to the Government's
business rates holiday (H1 FY22: GBP47.7m).
Right-of-use asset depreciation was GBP65.8m and lease liability
interest was GBP62.4m. Five new hotels and an extension were opened
during the half, totalling 819 rooms and two hotels were closed,
totalling 332 rooms, as the Group continues to optimise its estate
when suitable opportunities arise. At the end of the period, the
total estate stood at 844 hotels with a total of 82,773 rooms. With
a committed pipeline of 8,875 rooms, we remain confident in our
ability to take further market share over the medium to
long-term.
Adjusted profit before tax in the UK was GBP317.1m reflecting
the significant increase in statutory revenues versus H1 FY22 and a
delay to some cost increases that are now expected to fall into the
second half. As a result, pre-tax profit margins increased to
24.4%, in line with the 24.3% level achieved in H1 FY20.
Premier Inn Germany
GBPm H1 FY23 H1 FY22 H1 FY20 vs H1 vs H1
FY22 FY20
====================================== ========= ========= ========= ========== ==============
Statutory revenue 52.4 11.0 3.7 376% >1,000%
Other income (excl. rental
income)(1) 0.0 28.2 0.0 (100)% 0%
Operating costs before
depreciation, amortisation
and rent (50.6) (28.0) (8.9) (81)% (469)%
Adjusted EBITDAR 1.8 11.2 (5.2) (84)% 135%
Net turnover rent and rental
income 0.0 2.3 0.0 (100)% 0%
Depreciation: Right-of-use
asset (15.1) (10.4) (0.1) (45)% (>1,000)%
Depreciation and amortisation:
Other (5.4) (3.6) (0.5) (50)% (980)%
Adjusted operating loss (18.7) (0.5) (5.8) (>1,000)% (222)%
Interest: Lease liability (6.2) (3.8) 0.0 (63)% n/a
Adjusted loss before tax (24.9) (4.3) (5.8) (479)% (329)%
====================================== ========= ========= ========= ========== ==============
Premier Inn Germany key performance indicators
===================================================================================================
H1 FY23 H1 FY22 H1 FY20 vs H1 vs H1
FY22 FY20
========= ========= ========= ========== ==============
Number of hotels 42 30 3 40% >1,000%
Number of rooms 7,608 4,927 589 54% >1,000%
Committed pipeline (rooms) 7,080 8,578 7,280 (18)% (3)%
====================================== ========= ========= ========= ========== ==============
Direct bookings 94% 97% 100% (300)bps (600)bps
====================================== ========= ========= ========= ========== ==============
Occupancy 63.4% 32.0% 60.2% 980bps 320bps
Average room rate GBP55.27 GBP36.49 GBP64.15 52% (14)%
Revenue per available room GBP35.06 GBP11.69 GBP38.61 200% (9)%
====================================== ========= ========= ========= ========== ==============
Sales growth(2) :
Accommodation >1,000%
Food & beverage >1,000%
Total >1,000%
Like-for-like sales(2)
growth:
Accommodation 46%
Food & beverage 18%
Total 41%
====================================== ========= ========= ========= ========== ==============
1: Includes UK and German Government support - see note 6 of the
accompanying financial statements for further details
2: Total and like-for-like on a three-year basis versus FY20
Total statutory revenue in Germany was significantly ahead of H1
FY20, reflecting the material growth in our hotel estate and a
strong market recovery. During the half we opened seven hotels
including hotels in Berlin and Stuttgart, ending the period with 42
hotels and 7,608 rooms open (H1 FY20: three hotels open and 589
rooms). The removal of COVID-related restrictions at the end of
April 2022 prompted a significant uplift in demand and in the
second quarter (Jun-Aug), total sales were 376% ahead of the
comparable period in H1 FY22, reflecting strong growth in both
leisure and business demand and the increased size of our
estate.
Other income in H1 FY23 was GBPnil with no income being
recognised for COVID-related Government support in Germany in the
period. In H1 FY22 other income of GBP28.2m reflected GBP28.0m
benefit from COVID-related grants from the German Government.
Operating costs increased by GBP22.6m versus H1 FY22 driven by
the ongoing expansion of our hotel estate and our continued
investment in a range of commercial initiatives. We are continuing
to seek ways to refine our operating model with a view to reducing
costs without compromising our ability to capture significant
revenue growth. Right-of-use asset depreciation costs increased by
GBP4.7m to GBP15.1m, reflecting the fact that the majority of new
opened properties are leasehold. Other depreciation and
amortisation costs were GBP5.4m and lease liability interest costs
were GBP6.2m.
While the net result was that Germany produced an adjusted loss
before tax of GBP24.9m for the period, this reflects estate growth
and continued COVID-related restrictions until the end of April and
masks a particularly strong performance from our more established
hotels that, taken together, became profitable (before overheads)
in Q2 FY23.
Central and other costs
GBPm H1 FY23 H1 FY22 H1 FY20 vs H1 FY22 vs H1 FY20
=================================== ========= ========= ========= =========== ===========
Operating costs before
depreciation, amortisation
and rent (17.3) (14.6) (13.7) (19)% (26)%
Share of loss from joint
ventures (0.3) (1.0) (2.3) 70% 87%
Adjusted operating loss (17.6) (15.6) (16.0) (13)% (10)%
Net finance costs (2.7) (18.9) (3.8) 86% 29%
Adjusted loss before
tax (20.3) (34.5) (19.8) 41% (3)%
=================================== ========= ========= ========= =========== ===========
Central operating costs of GBP17.3m were GBP2.7m higher than H1
FY22 primarily driven by consultancy-related costs. Net finance
costs decreased by GBP16.2m to GBP2.7m versus H1 FY22 reflecting
GBP6.1m interest receivable on the Group's cash balance (H1 FY22:
GBP0.1m) and GBP6.8m of IAS 19 pension finance income (H1 FY22:
GBP1.8m).
Financial review
Financial highlights
GBPm H1 FY23 H1 FY22 H1 FY20 vs H1 vs H1
FY22 FY20
====================================== ========== ========== ========== ========= =========
Statutory revenue 1,350.4 661.6 1,084.0 104% 25%
Transitional service
agreement revenue 0.0 0.0 6.0 0% (100)%
Adjusted revenue 1,350.4 661.6 1,078.0 104% 25%
Other income (excl rental
income)(1) 0.0 93.5 6.6 (100)% (100)%
Operating costs before
depreciation, amortisation
and rent (838.7) (576.8) (657.9) (45)% (28)%
Adjusted EBITDAR 511.7 178.3 426.7 187% 20%
Net turnover rent and
rental income 0.6 4.2 0.5 (86)% 20%
Depreciation: Right-of-use
asset (80.9) (70.2) (50.3) (15)% (61)%
Depreciation and amortisation:
Other (88.2) (85.8) (80.5) (3)% (10)%
Adjusted operating profit
/ (loss) 343.2 26.5 296.4 >1,000% 16%
Net finance costs (excl.
lease liability interest) (2.7) (18.9) (3.8) 86% 29%
Interest: Lease liability (68.6) (64.2) (57.0) (7)% (20)%
Adjusted profit / (loss)
before tax 271.9 (56.6) 235.6 580% 15%
Adjusting items 35.5 37.3 (15.7) (5)% 326%
Statutory profit / (loss)
before tax 307.4 (19.3) 219.9 >1,000% 40%
Tax expense (73.5) (18.5) (47.7) (297)% (54)%
Statutory profit / (loss)
after tax 233.9 (37.8) 172.2 719% 36%
====================================== ========== ========== ========== ========= =========
1: Includes UK and German Government support - see note 6 of the
accompanying financial statements for further details
Statutory revenue
Statutory revenues were up 25% compared to H1 FY20, driven by
estate growth and the business continuing to trade ahead of the
M&E market in the UK.
Adjusted EBITDAR
Other income was GBPnil in H1 FY23 (H1 FY22: GBP93.5m) as the
Group made no further claims for COVID-related Government support
in the UK or in Germany (H1 FY22: GBP93.3m). Operating costs of
GBP838.7m were GBP261.9m higher than H1 FY22, driven by an increase
in revenue related variable costs, estate growth, cost inflation
and the fact that no benefit was received in relation to the UK
Government's business rates holiday (H1 FY22: GBP47.7m). Adjusted
EBITDAR of GBP511.7m was up GBP333.4m versus H1 FY22 reflecting
strong trading and the absence of COVID-related restrictions in the
UK.
Adjusted operating profit
The leasehold estate in the UK grew by net four hotels and by
six hotels in Germany compared to the same period in FY22. This
resulted in a GBP10.7m increase in right-of-use depreciation
charges to GBP80.9m. Other depreciation and amortisation charges
increased by GBP2.4m to GBP88.2m, driven by new hotel openings. The
strong trading performance meant that, even after increased losses
in Germany totalling GBP18.7m, adjusted operating profit increased
to GBP343.2m compared to profit of GBP26.5m in H1 FY22 and a profit
of GBP296.4m in H1 FY20.
Net finance costs
Net finance costs (excluding lease liability interest) were
GBP2.7m compared to GBP18.9m in H1 FY22. This decrease of GBP16.2m
was driven by increased interest receivable of GBP6.1m on the
Group's cash balances reflecting higher interest rates and an
interest credit of GBP6.8m from the pension fund that remains in
surplus.
Lease liability interest of GBP68.6m was GBP4.4m above H1 FY22
primarily driven by the opening of four leasehold hotels in the UK
and six in Germany.
Adjusting items
Total adjusting items were GBP35.5m and include a GBP10.6m
impairment charge relating to standalone restaurants and other
charges totalling GBP2.3m that together were offset by an
impairment reversal of GBP47.8m. The original impairment to which
the reversal relates was made in FY21 and comprised a GBP109.2m
charge to property, plant and equipment and right of use assets, as
a result of the pandemic. Subsequent impairment reviews, reflecting
the improved outlook for the Group, have resulted in a proportion
of the FY21 charge being reversed. A net GBP42.0m impairment
reversal was recognised in FY22.
On 7 March 2022, the Group disposed of a property in Marylebone
as part of a property transaction, receiving gross proceeds of
GBP46.4m. A profit on disposal of GBP1.4m was recognised on
disposal of the property. During the period, the Group has recorded
profits on three other property disposals of GBP0.6m.
H1 FY22 adjusting items included the disposal of a hotel in
Putney as part of a sale and leaseback transaction for gross
proceeds of GBP40.0m. A profit on disposal of GBP27.5m was
recognised on disposal of the property. During the same period, the
Group recognised profits on other property disposals of
GBP1.1m.
Taxation
The tax charge on the profit before adjusting items of GBP55.5m
(H1 FY22: GBP3.2m tax credit) represents an effective tax rate on
the profit before adjusting items of 20% (H1 FY22: 6%). This is
higher than the UK statutory corporate tax rate of 19%, primarily
due to the impact of overseas tax losses for which no deferred tax
has been recognised.
The statutory tax charge for the period of GBP73.5m (H1 FY22:
GBP18.5m tax charge) represents an effective tax rate of 24% (H1
FY22: (96%). This effective tax rate is driven by the impact of
overseas losses not recognised as well as the tax impact of certain
adjusting items, primarily relating to the effect of the in-year UK
rate differential and gains on property disposals.
Statutory profit after tax
Statutory profit after tax for the period was GBP233.9m in H1
FY23, compared to a loss of GBP37.8m in H1 FY22, which was impacted
by COVID-related restrictions.
Earnings per share
H1 FY23 H1 FY22 H1 FY20(1) vs H1 vs H1
FY22 FY20
========================= ======== ======== =========== ====== ======
Adjusted basic profit /
earnings per share 107.0p (26.4)p 97.1p 505% 10%
Statutory basic profit
/ earnings per share 115.7p (18.7)p 89.6p 719% 29%
========================= ======== ======== =========== ====== ======
1: Restated to include the impact of the Rights Issue completed
in June 2020
Adjusted basic profit per share of 107.0p and statutory basic
profit per share of 115.7p reflect the adjusted and statutory
profits reported in the period.
Dividend
The Board has declared an interim dividend of 24.4 pence per
share, reflecting the Group's performance in the first half, its
strong balance sheet, encouraging current trading and confidence in
the full year outlook. This will result in a total interim dividend
payment of GBP49m. The interim dividend will be paid on 16 December
2022 to all shareholders on the register at the close of business
on 11 November 2022. Shareholders will again be offered the option
to participate in a dividend re-investment plan. The Group's
dividend policy is to grow the dividend broadly in line with
earnings across the cycle. Full details are set out in note 9 to
the accompanying financial statements.
Cashflow
GBPm H1 FY23 H1 FY22
================================================ ======== ========
Adjusted EBITDAR 511.7 178.3
Change in working capital 29.2 112.5
Net turnover rent and rental income 0.6 4.2
IFRS 16 interest and principal lease payments (132.0) (134.8)
Operating cashflow 409.5 160.2
Interest (excl. IFRS 16) (16.0) (4.3)
Corporate taxes (6.5) (0.1)
Pension (2.4) (2.3)
Capital expenditure: maintenance (81.8) (42.7)
Capital expenditure: expansionary(1) (222.4) (66.4)
Disposal Proceeds 55.5 47.8
Non-cash other 12.7 23.3
Other (4.4) (8.8)
======== ========
Cashflow before shareholder returns / receipts
and debt repayments 144.2 106.7
Dividend (70.1) 0.0
Shares purchased for Employee Share Ownership
Trust ('ESOT') (32.5) (0.0)
Repayment of long-term borrowings (0.0) (220.4)
========
Net cashflow 41.6 (113.7)
--------
Opening net cash/(debt) 140.5 (46.5)
Repayment of long-term borrowings 0.0 220.4
Closing net cash 182.1 60.2
================================================ ======== ========
1: H1 FY23 includes GBPnil loans advanced to joint ventures,
GBP6.4m payment of contingent consideration and GBPnil capital
contributions to joint ventures; (H1 FY22 includes GBP0.8m loans
advanced to joint ventures, GBP0.5m payment of contingent
consideration and GBP1.4m capital contributions to joint
ventures)
The strong trading performance delivered a 187% increase in
adjusted EBITDAR to GBP511.7m
(H1 FY22: GBP178.3m) and operating cashflow more than doubled to
GBP409.5m. This funded an increase in expansionary and maintenance
capital expenditure with the result that total net cashflow before
shareholder returns and debt repayments was an inflow of GBP144.2m,
compared to an inflow of GBP106.7m in the same period last
year.
The GBP29.2m working capital inflow was driven by an increase in
trade creditors, accruals and customer deposits as a result of the
strong trading performance as well as cash received in relation to
German Government COVID-related Government support payments for
costs incurred from July 2021 to January 2022.
Corporation taxes outflow of GBP6.5m reflects the Group's return
to profitability and a GBP6.4m payment on account for the FY23 UK
corporation tax liability. It also includes GBP0.1m in respect of
taxes in Germany.
Maintenance capital expenditure was GBP81.0m and expansionary
capital expenditure was GBP223.2m which included the purchase of
two freehold properties. Full year spend is expected to be between
c.GBP500-GBP550m, which is in line with previous guidance, but
adjusting for the acquisition of the two freehold sites. Lease
liability interest and lease repayments decreased by GBP2.8m to
GBP132.0m as H1 FY22 included the deferral of the December 2021
quarterly rent payment.
The GBP12.7m of other non-cash items includes inflows relating
to share-based payments of GBP7.4m (H1 FY22: GBP6.3m), GBP2.7m as a
result of net provision movements (H1 FY22: GBP5.0m) and GBP2.0m
(H1 FY22: GBP1.4m) representing non-cash pension scheme
administration costs. Disposal proceeds of GBP55.5m include
GBP46.4m relating to a property transaction in Marylebone and the
disposal of three hotels as the Group continues to optimise its
estate when suitable opportunities arise.
Following the recommencement of dividend payments at the full
year, the Board recommended a final dividend of 34.7 pence per
share on 27 April 2022. This resulted in a dividend payment of
GBP70.1m paid on 1 July 2022. During the period, 0.5m shares were
purchased by the Group's independently managed Employee Share
Ownership Trust ('ESOT') for consideration of GBP12.3m. Subsequent
to the year end, a further 0.8m shares were purchased. The total
anticipated consideration for these shares of GBP32.5m and is
included within the cashflow statement for the period. Post the
balance sheet date, GBP0.8m was returned to the Group leaving a
final consideration of GBP31.7m.
Net cash at the end of the period was GBP182.1m .
Debt funding facilities & liquidity
GBPm Facility Utilised Maturity
=================================== =========== =========== =========
Revolving Credit Facility (775.0) - 2027
Bond (450.0) ( 450.0) 2025
Green Bond (300.0) (300.0) 2027
Green Bond (250.0) (250.0) 2031
=========== =========== =========
( 1,775.0) ( 1,000.0)
Cash and cash equivalents 1,174.8
Total facilities utilised, net of
cash (1) 174.8
=========== ===========
Net cash 182.1
Net cash and lease liabilities (3,566.7)
=========== ===========
1: Excludes unamortised fees associated with debt instrument
The Group received confirmation of its investment grade status
on 26 August 2022 and aims to manage to investment grade metrics of
lease adjusted net debt of less than 3.7x(1) funds from operations
over the medium term. During the first half, the Group returned to
below this level and as at the end of H1 FY23 the ratio
was 2.8x.
1: This measure has been changed to align to Fitch methodology
post IFRS 16 and has reset the leverage target to 3.7x lease
adjusted net debt : FFO (previously 3.5x)
Revolving Credit Facility
During the first half, the Group entered into a new GBP775m
revolving credit facility ('RCF'), replacing the previous GBP850m
facility that was due to expire in September 2023. The new
five-year facility, with two one-year extension options, is a
multi-currency revolving credit facility and is provided by a
syndicate of seven banks led by Banco Santander, Barclays, NatWest
and Bank of China. The RCF has variable interest rates with GBP
linked to SONIA and EUR being linked to EURIBOR.
Capital investment
GBPm H1 FY23 H1 FY22
============================================= ========== =========
UK maintenance and product improvement 81.0 41.9
New / extended UK hotels(1) 181.5 37.3
Germany and Middle East(2) 41.7 29.9
========== =========
Total 304.2 109.1
============================================= ========== =========
1: H1 FY23 includes GBPnil, H1 FY22 includes GBP0.8m capital
contributions to joint ventures
2: H1 FY23 includes GBP6.4m payment of contingent consideration,
H1 FY22 includes GBP0.5m payment of contingent consideration and
GBP1.4m capital contributions to joint ventures
Total capital expenditure in H1 FY23 was GBP304.2m. UK
expenditure included GBP181.5m on developing new sites and the
purchase of two freehold properties. Maintenance and product
improvement spend was focused on the scale-up of the FY23
refurbishment programme with further refurbishments planned for the
quieter trading period during H2 FY23. In Germany, spend was driven
by the development of our committed pipeline including sites in
Berlin Airport and Duisburg. As a result, total capital expenditure
in FY23 is expected to be between GBP500m and GBP550m.
Property, plant and equipment of GBP4,466m was ahead of H1 FY22
(GBP4,240m), with an increase in capital expenditure partially
offset by depreciation charges.
Property backed balance sheet
Freehold / leasehold mix Open estate Total estate(1)
========================= ============ ================
Premier Inn UK 58%:42% 55%:45%
Premier Inn Germany 24%:76% 22%:78%
Group 55%:45% 50%:50%
========================= ============ ================
1: Open plus committed pipeline
The current UK estate is 58% freehold and 42% leasehold, a mix
that will change to 55% freehold and 45% leasehold as the existing
pipeline is brought on stream. The higher leasehold mix in Germany
reflects the greater proportion of city centre locations.
The new site openings in Germany and continued expansion in the
UK resulted in right-of-use assets increasing to GBP3,310m (H1
FY22: GBP2,819m) and lease liabilities increasing to GBP3,749m (H1
FY22: GBP3,314m).
Return on Capital - Premier Inn UK
Returns H1 FY23 H1 FY22 H1 FY20
UK ROCE 11.0% n/a 12.1%
======================================= ========= ======== ==========
We remain confident in being able to deliver long-term
sustainable returns on incremental investment. We believe our
ability to capitalise on the significant structural opportunities
in both the UK and Germany, given our competitive advantage and
ongoing commercial initiatives, mean we are well-placed to take
market share. Sector-wide cost headwinds can be mitigated by the
combination of our long-standing efficiency programme, our dynamic
pricing model and the benefits of both organic and inorganic
growth.
Events After the Balance Sheet Date
On 19 October 2022 the Group signed an agreement, subject to
various conditions, to acquire a portfolio of six hotels, including
five leasehold operations in Germany and one freehold hotel in
Austria. The purchase price is EUR32.6m including real estate
transfer tax. The deal is due to complete before the end of the
year. On completion the impact of IFRS 16 on the leases acquired
will be assessed.
Pension
The Group's defined benefit pension scheme, the Whitbread Group
Pension Fund (the 'Pension Fund'), had an IAS19 Employee Benefits
surplus of GBP429.2m at the end of the period (H1 FY22: GBP275.5m).
The improved funding position was primarily driven by an increase
in corporate bond yields resulting in an increase in the discount
rate. Aligning the discount rate methodology to reflect common
market practice has also contributed to the improved position. This
was partially offset by asset performance being lower than the
discount rate and higher than expected inflation over the year.
During the period, the Pension Fund became fully funded on the
Secondary Funding Target basis, following which the Trustee has
reduced the investment risk which was in line with the de-risking
journey agreed between the Trustee and Whitbread. There has been
further risk reduction as a result of the Trustee entering into a
GBP660m buy-in with Standard Life. There are currently no deficit
reduction contributions being paid to the Pension Fund, however
annual contributions of approximately GBP10m continue to paid to
the Fund through the Scottish Partnership arrangements. The Trustee
holds security over GBP531.5m of Whitbread's freehold property
which will remain at this level until no further obligations are
due under the Scottish Partnership arrangements, which is expected
to be in 2025. Following that, the security held by the Trustee
will be the lower of: GBP500m; and 120% of the buy-out deficit and
will remain in place until there is no longer a buy-out
deficit.
Going concern
The directors have concluded that it is appropriate for the
consolidated financial statements to be prepared on the going
concern basis. Full details are set out in note 1 of the attached
financial statements.
Risks and uncertainties
The directors have reconsidered the principal risks and
uncertainties of the Group and have determined that those reported
in the Annual Report and Accounts 2021/22 remain relevant for the
remaining half of the financial year, when read together with the
information provided below.
The overall risk environment continues to be uncertain with
global economic, political and environmental events making it
increasingly challenging to monitor and identify emerging risks
ahead of time. The Group's risks have a high degree of
inter-connectivity which amplifies any movements in specific areas
such as supply chain issues or labour challenges resulting in
inflationary pressures. The most significant risk currently is the
economic outlook, including geopolitical risks and the resulting
impact on inflation across key costs and also on consumer
confidence. The pandemic continues to be a significant risk due to
the uncertainty of how any future restrictions might impact the
hospitality industry. We also remain vigilant surrounding cyber
risk with recent incidents in the hospitality sector highlighting
the need to maintain its importance.
We recognise the increasing risk to our supply chain and
third-party resilience due to macroeconomic pressures and the
increase in risk from our technology-led business change. In
contrast, we are more positive about the structural shifts and
potential impacts on consumer demand from business related travel
supported by our current trading performance and the strength of
forward bookings.
The following summarises the risks and uncertainties set out in
the annual report including current emerging themes:
-- Uncertain economic outlook - threat of a recession which is
deep and prolonged, wider macroeconomic trends and current
geopolitical conflicts, resulting in changeable demand, weak public
and consumer confidence; reduced international travel; structural
and significant inflation; leading to an inability to meet customer
demand;
-- Pandemic - uncertainty as to how future variants and
outbreaks, vaccine efficacy and resulting restrictions will
continue to impact the hospitality sector;
-- Cyber and data security - reduces the effectiveness of systems or results in loss of data;
-- Germany growth - the inability to successfully execute our strategy in Germany;
-- Change delivery and interdependencies - ability to execute
the significant volume of change under time bound pressures, for
example, the replacement of legacy systems;
-- Leadership, succession and talent retention - decline in
desirability of careers in the hospitality industry with functional
specific challenges, a reduction in our talent pools and low levels
of senior diversity;
-- Third party arrangements and supply chain - business
interruption as a result of the withdrawal of services below
acceptable standards or reputational damage as a result of
unethical supplier practices;
-- Structural shifts impacting demand - changes to working
practices, reduced international travel and demand-led occasions
for hotel stays along with potential new disruptors entering the
market driving a decline in brand strength and loss of market
share;
-- Health and safety - death or serious injury as a result of
company negligence or a significant incident resulting from food,
fire or another safety failure; and
-- ESG - uncertainty as to how these collective risks, including
climate change, will evolve and our ability to deliver on our
commitments.
Our management team continue to review and monitor our risk
profile and emerging trends arising externally or internally, our
risk management arrangements and internal control measures.
The detail of our principal risks can be found on pages 58 to 60
of the 2021/22 Annual Report and Accounts which is available on the
website: www.whitbread.co.uk .
American Depositary Receipts
Whitbread has established a sponsored Level 1 American
Depositary Receipt ('ADR') programme for which Deutsche Bank
perform the role of depositary bank. The Level 1 ADR programme
trades on the U.S. over-the-counter ('OTC') markets under the
symbol WTBDY (it is not listed on a U.S. stock exchange).
Notes
The Group uses certain APMs to help evaluate the Group's
financial performance, position and cashflows, and believes that
such measures provide an enhanced understanding of the Group's
results and related trends and allow for comparisons of the
financial performance of the Group's businesses either from one
period to another or with other similar businesses. However, APMs
are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
APMs used in this announcement include adjusted revenue,
like-for-like sales, revenue per available room ('RevPAR'), average
room rate, direct bookings/ distribution, adjusted operating
(loss)/ profit, return on capital employed ('ROCE'), profit margin,
adjusted (loss)/ profit before tax, adjusted basic earnings per
share, net debt, net debt and lease liabilities, operating
cashflow, adjusted EBITDA (pre IFRS 16) and adjusted EBITDAR.
Further information can be found in the glossary and reconciliation
of APMs at the end of this document.
Responsibility statement
We confirm that to the best of our knowledge:
a) The condensed set of financial statements, which has been
prepared in accordance with IAS 34 Interim Financial Reporting,
gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the issuer, or the undertakings
included in the consolidation as a whole;
b) The interim management report includes a fair review of the
information required by the Financial Statements Disclosure and
Transparency Rules (DTR) 4.2.7R - indication of important events
during the first six months and their impact on the financial
statements and description of principal risks and uncertainties for
the remaining six months of the year; and
c) The interim management report includes a fair review of the
information required by DTR 4.2.8R - disclosure of related party
transactions and changes therein.
By order of the Board
Alison Brittain Hemant Patel
Chief Executive Chief Financial
Officer
Interim consolidated income statement
(Reviewed) (Reviewed)
6 months to 1 September 6 months to 26 August
2022 2021
Adjusting
Before items Before Adjusting
adjusting (Note adjusting items
items 4) Statutory items (Note 4) Statutory
Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -----
Revenue 2 1,350.4 - 1,350.4 661.6 - 661.6
Other income 3 1.7 - 1.7 97.8 8.7 106.5
Operating costs (1,008.6) 35.5 (973.1) (731.1) 28.6 (702.5)
Impairment of loans to
joint ventures - - - (0.8) - (0.8)
Operating profit before
joint ventures 343.5 35.5 379.0 27.5 37.3 64.8
Share of loss from joint
ventures (0.3) - (0.3) (1.0) - (1.0)
Operating profit 343.2 35.5 378.7 26.5 37.3 63.8
Finance costs 5 (84.2) - (84.2) (85.1) - (85.1)
Finance income 5 12.9 - 12.9 2.0 - 2.0
---------- --------- --------- ---------- --------- ---------
Profit/(loss) before
tax 271.9 35.5 307.4 (56.6) 37.3 (19.3)
Tax (expense)/credit 7 (55.5) (18.0) (73.5) 3.2 (21.7) (18.5)
Profit/(loss) for the
period attributable to
parent shareholders 216.4 17.5 233.9 (53.4) 15.6 (37.8)
---------- --------- --------- ---------- --------- ---------
Earnings per share (Note
8)
Basic (pence) 107.0 8.7 115.7 (26.4) 7.7 (18.7)
Diluted (pence) 106.4 8.6 115.0 (26.4) 7.7 (18.7)
All of the results shown above relate to continuing
operations.
Interim consolidated statement of comprehensive income
(Reviewed) (Reviewed)
6 months
to 6 months to
1 September 26 August
2022 2021
Notes GBPm GBPm
--------------------------------------------- ----- ------------- ------------
Profit/(loss) for the period 233.9 (37.8)
Items that will not be reclassified
to the income statement:
Remeasurement (loss)/gain on defined
benefit pension scheme 13 (100.6) 84.8
Current tax on defined benefit pension
scheme 0.3 (1.9)
Deferred tax on defined benefit pension
scheme 24.8 (29.5)
(75.5) 53.4
Items that may be reclassified subsequently
to the income statement:
Net gain on cash flow hedges - 1.2
Deferred tax on cash flow hedges - (0.3)
Net (loss)/gain on hedge of a net investment (21.4) 0.7
Deferred tax on net (loss)/gain on hedge
of a net investment 2.5 (0.1)
Cost of hedging 0.5 2.8
(18.4) 4.3
Exchange differences on translation
of foreign operations 24.6 (2.8)
Deferred tax on exchange differences
on translation of foreign operations (2.1) 0.7
------------- ------------
22.5 (2.1)
Other comprehensive (loss)/income for
the period, net of tax (71.4) 55.6
Total comprehensive income for the
period, net of tax 162.5 17.8
------------- ------------
Interim consolidated statement of changes in equity
6 months to 1 September 2022 (Reviewed)
Capital Currency
Share Share redemption Retained translation Other Total
capital premium reserve earnings reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- -------- ----------- --------- ------------ --------- -------
At 3 March 2022 164.8 1,024.7 50.2 5,225.3 24.3 (2,370.3) 4,119.0
Profit for the period - - - 233.9 - - 233.9
Other comprehensive (loss)/income - - - (75.5) 4.1 - (71.4)
-------- -------- ----------- --------- ------------ --------- -------
Total comprehensive income - - - 158.4 4.1 - 162.5
Ordinary shares issued on
exercise of employee share
options - 0.3 - - - - 0.3
Loss on ESOT shares issued - - - (1.9) - 1.9 -
Accrued share-based payments - - - 7.4 - - 7.4
Equity dividends paid - - - (70.1) - - (70.1)
Purchase of ESOT shares
(Note 15) - - - - - (12.3) (12.3)
At 1 September 2022 164.8 1,025.0 50.2 5,319.1 28.4 (2,380.7) 4,206.8
-------- -------- ----------- --------- ------------ --------- -------
6 months to 26 August 2021 (Reviewed)
Capital Currency
Share Share redemption Retained translation Other Total
capital premium reserve earnings reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- -------- ----------- --------- ------------ --------- -------
At 25 February 2021 164.7 1,022.9 50.2 4,944.8 28.7 (2,377.2) 3,834.1
Loss for the period - - - (37.8) - - (37.8)
Other comprehensive income/(loss) - - - 53.4 (1.5) 3.7 55.6
-------- -------- ----------- --------- ------------ --------- -------
Total comprehensive income/(loss) - - - 15.6 (1.5) 3.7 17.8
Ordinary shares issued on
exercise of employee share
options 0.1 1.6 - - - - 1.7
Loss on ESOT shares issued - - - (2.5) - 2.5 -
Accrued share-based payments - - - 6.3 - - 6.3
Tax on share-based payments - - - (0.2) - - (0.2)
At 26 August 2021 164.8 1,024.5 50.2 4,964.0 27.2 (2,371.0) 3,859.7
-------- -------- ----------- --------- ------------ --------- -------
Interim consolidated balance sheet
(Reviewed) (Reviewed) (Audited)
1 September 26 August
2022 2021 3 March 2022
Notes GBPm GBPm GBPm
------------------------------------------ ------ ------------- ---------- -------------
Non-current assets
Goodwill and other intangible assets 165.9 154.7 159.3
Right-of-use assets - property, plant
and equipment 3,310.1 2,818.5 3,267.6
Right-of-use assets - investment property - 62.6 -
Property, plant and equipment 4,465.8 4,239.7 4,227.1
Investment in joint ventures 47.2 38.7 41.1
Derivative financial instruments 12 - 11.0 15.8
Defined benefit pension surplus 13 429.2 275.5 522.6
8,418.2 7,600.7 8,233.5
Current assets
Inventories 20.8 14.8 19.4
Derivative financial instruments 12 - 9.9 -
Current tax asset - 0.4 -
Trade and other receivables 138.2 120.4 116.4
Cash and cash equivalents 1,174.8 1,144.7 1,132.4
1,333.8 1,290.2 1,268.2
Assets classified as held for sale 5.8 11.8 64.8
Total assets 9,757.8 8,902.7 9,566.5
Current liabilities
Borrowings 10 - 93.3 -
Lease liabilities 138.8 122.4 129.3
Provisions 24.6 23.5 19.6
Derivative financial instruments 12 - 1.2 -
Current tax liabilities 13.9 - -
Trade and other payables 578.5 482.9 570.7
------------- ---------- -------------
755.8 723.3 719.6
Non-current liabilities
Borrowings 10 992.7 991.2 991.9
Lease liabilities 3,610.0 3,191.2 3,572.5
Provisions 10.1 15.7 11.7
Derivative financial instruments 12 2.8 - -
Deferred tax liabilities 7 178.3 96.5 150.6
Trade and other payables 1.3 25.1 1.2
4,795.2 4,319.7 4,727.9
Total liabilities 5,551.0 5,043.0 5,447.5
Net assets 4,206.8 3,859.7 4,119.0
------------- ---------- -------------
Equity
Share capital 164.8 164.8 164.8
Share premium 1,025.0 1,024.5 1,024.7
Capital redemption reserve 50.2 50.2 50.2
Retained earnings 5,319.1 4,964.0 5,225.3
Currency translation reserve 28.4 27.2 24.3
Other reserves (2,380.7) (2,371.0) (2,370.3)
------------- ---------- -------------
Total equity 4,206.8 3,859.7 4,119.0
------------- ---------- -------------
Interim consolidated cash flow statement
(Reviewed) (Reviewed)
6 months
to 6 months to
1 September 26 August
2022 2021
Notes GBPm GBPm
------------------------------------------------- ----- ------------- ------------
Cash generated from operations 14 554.2 318.3
Payments against provisions (1.0) (8.0)
Pension payments 13 (2.4) (2.3)
Interest paid - lease liabilities (68.6) (64.2)
Interest paid - other (21.4) (5.8)
Interest received 5.4 1.5
Corporation taxes paid (6.5) (0.1)
------------- ------------
Net cash flows generated from operating
activities 459.7 239.4
Cash flows used in investing activities
Purchase of property, plant and equipment
and investment property (282.6) (100.2)
Proceeds from disposal of property,
plant and equipment 55.5 47.8
Investment in intangible assets (15.2) (6.2)
Payment of deferred and contingent consideration 12 (6.4) (0.5)
Capital contributions to joint ventures - (1.4)
Loans advanced to joint ventures - (0.8)
Net cash flows used in investing activities (248.7) (61.3)
Cash flows used in financing activities
Proceeds from issue of shares on exercise
of employee share options 0.3 1.7
Drawdowns of long-term borrowings - 50.0
Repayments of long-term borrowings - (270.4)
Payment of facility fees (4.0) -
Lease incentives received 2.0 -
Payment of principal of lease liabilities (65.4) (70.6)
Purchase of own shares for ESOT 15 (32.5) -
Dividends paid (70.1) -
Net cash flows used in financing activities (169.7) (289.3)
Net increase/(decrease) in cash and
cash equivalents 41.3 (111.2)
Opening cash and cash equivalents 1,132.4 1,256.0
Foreign exchange differences 1.1 (0.1)
------------- ------------
Closing cash and cash equivalents 1,174.8 1,144.7
------------- ------------
Notes to the accounts
1. Basis of accounting and preparation
The interim condensed consolidated financial statements were
authorised for issue in accordance with a resolution of the Board
of Directors on 24 October 2022.
The financial information for the year ended 3 March 2022 is
extracted from the statutory accounts of the Group for that year
and does not constitute statutory accounts as defined in Section
434 of the Companies Act 2006. A copy of the statutory accounts for
that year has been delivered to the Registrar of Companies. These
published accounts were reported on by the auditor without
qualification, did not draw attention to any matters by way of
emphasis and did not contain a statement under Sections 498(2) or
(3) of the Companies Act 2006.
The interim condensed consolidated financial statements are
prepared in accordance with UK listing rules and with United
Kingdom adopted IAS 34 Interim Financial Reporting.
The interim condensed consolidated financial statements for the
six months ended 1 September 2022 and the comparatives to 26 August
2021 are unaudited but have been reviewed by the auditor; a copy of
their review report is included at the end of this report.
Going concern
A combination of the strong cash flows generated by the
business, and the significant available headroom on its credit
facilities, support the directors' view that the Group has
sufficient funds available for it to meet its foreseeable working
capital requirements. The directors have concluded therefore that
the going concern basis of preparation remains appropriate.
Accounting policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 3 March 2022.
As a result of the adjusting items recorded in the period, the
accounting policy used in determining adjusting items is set out
below.
Adjusting items and use of alternative performance measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way the business performance is
measured internally by the Board and Executive Committee. A
glossary of APMs and reconciliations to statutory measures is given
at the end of this report.
The term adjusted profit is not defined under IFRS and may not
be directly comparable with adjusted profit measures used by other
companies. It is not intended to be a substitute for, or superior
to, statutory measures of profit. Adjusted measures of
profitability are non-IFRS because they exclude amounts that are
included in, or include amounts that are excluded from, the most
directly comparable measure calculated and presented in accordance
with IFRS.
The Group makes certain adjustments to the statutory profit
measures in order to derive many of its APMs. The Group's policy is
to exclude items that are considered to be significant in nature
and quantum, not in the normal course of business or are consistent
with items that were treated as adjusting in prior periods or that
span multiple financial periods. Treatment as an adjusting item
provides users of the accounts with additional useful information
to assess the year-on-year trading performance of the Group.
On this basis, the following are examples of items that may be
classified as adjusting items:
-- gross costs and income associated with the strategic
programme in relation to the review of the Whitbread estate;
-- significant restructuring costs and other associated costs
arising from strategy changes that are not considered by the Group
to be part of the normal operating costs of the business;
-- significant pension charges arising as a result of changes to
UK defined benefit scheme practices;
-- net impairment and related charges for sites which are or
were underperforming that are considered to be significant in
nature and/or value to the trading performance of the business;
-- costs in relation to non-trading legacy sites which are
deemed to be significant and not reflective of the Group's ongoing
trading results;
-- profit or loss on the sale of a business or investment and
the associated cost impact on the continuing business from the sale
of the business or investment;
-- acquisition costs incurred as part of a business combination
or other strategic asset acquisitions;
-- amortisation of intangible assets recognised as part of a
business combination or other transaction outside of the ordinary
course of business; and
-- tax settlements in respect of prior years, including the
related interest and the impact of changes in the statutory tax
rate, the inclusion of which would distort year-on-year
comparability, as well as the tax impact of the adjusting items
identified above.
The directors believe that the adjusted profit and earnings per
share measures provide additional useful information to
shareholders on the performance of the business. These measures are
consistent with how business performance is measured internally by
the Board and Executive Committee.
Sale and leaseback
A sale and leaseback transaction occurs when the Group sells an
asset and immediately reacquires the use of that asset by entering
into a lease with the counterparty. A sale occurs when control of
the underlying asset passes to the counterparty. A lease liability
is recognised, the associated property, plant and equipment asset
is derecognised, and a right-of-use asset is recognised at the
proportion of the carrying value relating to the right retained.
The resulting gain or loss arising therefore relates to the rights
transferred to the counterparty and development of the underlying
asset.
Seasonality
The Group operates hotels and restaurants, located in the UK and
internationally. The Group generally earns higher profits during
the first half of the financial year because of lower demand in the
final quarter of the financial year.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported as assets and liabilities at the balance sheet date and
the amounts reported as revenues and expenses during the period.
Although these amounts are based on management's best estimates,
events or actions may mean that actual results ultimately differ
from those estimates, and these differences may be material. These
judgements and estimates and the underlying assumptions are
reviewed regularly.
With the exception of the performance of impairment reviews of
the Group's goodwill, property, plant and equipment and
right-of-use assets, in preparing these condensed consolidated
financial statements the critical judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were principally the same as those applied
to the Group's consolidated financial statements for the year ended
3 March 2022.
Critical accounting judgement
Adjusting items
Judgement is applied as to whether adjusting items meet the
necessary criteria as per the accounting policy disclosed earlier
in this note. Note 4 describes the items identified and separately
disclosed as adjusting items.
Impairment review - property, plant and equipment and
right-of-use assets(1)
Where there are indicators of impairment or impairment
reversals, management performs an impairment assessment.
Further details on the indicators of impairment and impairment
reversals are disclosed in Note 11.
Inputs used to estimate value in use
The estimate of value in use is most sensitive to the following
inputs:
-- Five-year business plan
-- Discount rate
-- Long-term growth rate
Methodology used to estimate fair value
Fair value is determined using a range of methods, including
present value techniques using assumptions consistent with the
value in use calculations and market multiple techniques using
externally available data.
Further details on key assumptions, estimates and sensitivities
are disclosed in Note 11.
Property transaction including sale and leaseback of land
During the period the Group entered into a sale and lease
transaction of a single property, comprising land and a hotel
currently under construction. Under the agreement, the Group is
acting as the developer of the site. As a part of the transaction,
the property is being developed into a completed hotel asset via a
forward funding agreement with a counterparty. The transaction's
sale, development and subsequent lease contracts were all
negotiated together as one commercial transaction, with the
transaction prices allocated based on the negotiated position
rather than stand-alone contracts.
In relation to the land portion of the site sold, management has
reviewed the criteria within IFRS 15 Revenue from Contracts with
Customers and IFRS 16 Leases, concluding that a sale and leaseback
for the land has occurred to the counterparty.
In relation to the hotel under construction asset, management
has reviewed IFRS 15, concluding that a sale for this asset has
occurred to the counterparty and the building leased back in the
future will be the completed hotel, not the same asset that was
sold. Therefore, management have concluded that the current year
sale and future lease of the completed hotel does not represent a
sale and leaseback under IFRS 16.
Treatment of sale and leaseback of land
The land on which the hotel is being developed has been sold
with Whitbread holding no rights to re-obtain the legal title. The
performance obligation for the sale of land has been satisfied as
defined under IFRS 15. A gain of GBP3.1m is recognised on the sale
of the land which represents the proportion of the land assessed as
having been sold and subject to leaseback at practical completion
of the site sold. In assessing the gain to be recognised on the
sale and leaseback transaction, Management have considered the fair
value of the land at the sale date against the consideration
allocated for the sale of the land.
Treatment for sale of hotel under construction
During the period, the performance obligation associated with
the sale of the hotel under construction was assessed as being
satisfied such that the asset has been derecognised, nil gain was
recognised as allocated proceeds were substantially similar to the
carrying value of the building.
The Group is exposed to cost overruns on the development of the
hotel. Due to the allocation of the transaction's proceeds to the
land, net costs of GBP1.7m have been recognised, reducing the
overall transaction's gain in the reporting period as the
commercial terms were negotiated together.
The net gain recognised on this transaction of GBP1.4m has been
based on an assessment of the obligations completed under the terms
of the agreement.
Key sources of estimation uncertainty
Defined benefit pension
The Group makes significant estimates in relation to the
discount rates, inflation rates and mortality rates used to
calculate the present value of the defined benefit obligation. Note
13 describes the sensitivity of the defined benefit pension
obligation to changes in key assumptions.
(1) The Group's impairment testing referred to above is deemed
to include the review of potential impairment charge as well as
potential reversals of any previous impairments as at the reporting
period end date.
2. Segmental analysis
The Group provides services in relation to accommodation, food
and beverage ('F&B') both in the UK and internationally.
Management monitors the operating results of its operating segments
separately for the purpose of making decisions about allocating
resources and assessing performance. Segment performance is
measured based on adjusted operating profit before joint ventures.
Included within central and other in the following tables are the
costs of running the public company, other central overhead costs
and share of losses from joint ventures.
During the six months ended 1 September 2022, the Group
submitted its German Bridge Aid III Plus and IV claims, for which
it received net cash of GBP17.3m. These amounts were recognised in
the prior year for costs the Group incurred from July 2021 -
January 2022. No further claims for COVID-related Government
support were made in the UK or in Germany, and hence the Group has
not recognised COVID-related Government support during the six
months ended 1 September 2022.
The following tables present revenue and profit information
regarding business operating segments for the six months to 1
September 2022 and 26 August 2021.
6 months to 1 September
2022 6 months to 26 August 2021
----------------------- --------------------------
Revenue UK and Central UK and Central
Ireland Germany and other Total Ireland Germany and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- ------- ---------- ------- -------- ------- ---------- -----
Accommodation 940.0 44.5 - 984.5 466.8 9.2 - 476.0
Food, beverage and other
items 358.0 7.9 - 365.9 183.8 1.8 - 185.6
-------- ------- ---------- ------- -------- ------- ---------- -----
Revenue 1,298.0 52.4 - 1,350.4 650.6 11.0 - 661.6
------- -----
6 months to 1 September 6 months to 26 August 2021
2022
----------------------- --------------------------
Profit/(loss) UK and Central UK and Central
Ireland Germany and other Total Ireland Germany and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- ------- ---------- ------ -------- ------- ---------- ------
Adjusted operating
profit/(loss) before
joint ventures(1) 379.5 (18.7) (17.3) 343.5 42.6 (0.5) (14.6) 27.5
Share of loss from joint
ventures - - (0.3) (0.3) - - (1.0) (1.0)
-------- ------- ---------- ------ -------- ------- ---------- ------
Adjusted operating
profit/(loss) 379.5 (18.7) (17.6) 343.2 42.6 (0.5) (15.6) 26.5
Net finance costs (62.4) (6.2) (2.7) (71.3) (60.4) (3.8) (18.9) (83.1)
Adjusted profit/(loss)
before tax 317.1 (24.9) (20.3) 271.9 (17.8) (4.3) (34.5) (56.6)
Adjusting items (Note
4) 35.5 37.3
------ ------
Profit/(loss) before
tax 307.4 (19.3)
------ ------
6 months to 1 September 6 months to 26 August
2022 2021
----------------------- ---------------------
Other segment information UK and UK and
Ireland Germany Total Ireland Germany Total
GBPm GBPm GBPm GBPm GBPm GBPm
Capital expenditure:
Property, plant and equipment - cash
basis 247.3 35.3 282.6 72.3 27.9 100.2
Property, plant and equipment - accruals
basis 241.8 33.2 275.0 63.7 29.0 92.7
Intangible assets 15.2 - 15.2 6.1 0.1 6.2
Cash outflows from lease interest
and payment of principal of lease
liabilities 116.5 17.5 134.0 122.7 12.1 134.8
Depreciation - property, plant and
equipment 74.2 5.3 79.5 71.7 3.5 75.2
Depreciation - right-of-use assets 65.8 15.1 80.9 59.8 10.4 70.2
Amortisation 8.6 0.1 8.7 10.5 0.1 10.6
Segment assets and liabilities are not disclosed because they
are not reported to, or reviewed by, the Chief Operating Decision
Maker.
(1) During the comparative half-year period adjusted operating
profit/(loss) for the UK and Ireland segment included the impact of
Business Rates Relief provided by the UK Government of GBP47.7m and
income from the job retention schemes in the UK and Ireland of
GBP60.0m. Adjusted loss for the Germany segment included income of
GBP28.6m from government grants.
3. Other income
6 months
to 6 months to
1 September 26 August
2022 2021
GBPm GBPm
------------------------------------
Rental income 1.7 4.3
Government grants (Note 6) - 93.3
Other - 0.2
------------ -----------
Other income before adjusting items 1.7 97.8
VAT settlement - 8.7
Other income 1.7 106.5
------------ -----------
4. Adjusting items
As set out in the policy in Note 1, we use a range of measures
to monitor the financial performance of the Group. These measures
include both statutory measures in accordance with IFRS and APMs
which are consistent with the way that the business performance is
measured internally. We report adjusted measures because we believe
they provide both management and investors with useful additional
information about the financial performance of the Group's
businesses. Adjusted measures of profitability represent the
equivalent IFRS measures adjusted for specific items that we
consider hinder the comparison of the financial performance of the
Group's businesses either from one period to another or with other
similar businesses.
6 months
to 6 months to
1 September 26 August
2022 2021
GBPm GBPm
------------------------------------------------------------ ------------ -----------
Adjusting items were as follows:
Other income:
VAT settlement(1) - 8.7
Adjusting other income - 8.7
Operating costs:
Net impairment reversals - property, plant and equipment,
right-of-use assets and other intangible assets(2) 33.5 -
Gains on disposals and property provisions(3) 2.0 28.6
Adjusting operating costs 35.5 28.6
Adjusting items before tax 35.5 37.3
------------ -----------
Tax adjustments included in reported loss after tax,
but excluded in arriving at adjusted loss after tax:
Tax on adjusting items (10.5) (6.7)
Effect of in-year rate differential/change in tax
rates(4) (7.5) (15.0)
Adjusting tax expense (18.0) (21.7)
------------ -----------
(1) During the comparative period, in August 2021, HMRC
confirmed it would not appeal the ruling of the First-tier Tribunal
in the case of Rank Group plc that VAT was incorrectly applied to
revenues earned from certain gaming machines from 2005 to 2013. The
Group has submitted claims which are substantially similar and has
recognised GBP8.7m.
(2) The Group has identified further cash-generating unit
('CGU') specific indicators of impairment and an indicator of
reversal of previously recognised impairment losses relating to
assets held by the Group. An impairment review of those assets was
undertaken, resulting in a total net impairment reversal of
GBP35.9m (HY22: GBPnil). This net impairment reversal is comprised
of GBP23.4m relating to property, plant and equipment (HY22:
GBPnil) and GBP12.5m relating to right-of-use assets (HY22:
GBPnil). In addition, an impairment charge of GBP2.4m (HY22:
GBPnil) was recorded in relation to assets classified as held for
sale.
(3) During the period, the Group entered into a sale and lease
transaction of land and a hotel currently under construction. As a
result of this transaction, the Group received proceeds of GBP46.4m
and recognised a net gain of GBP1.4m, the completed hotel and land
will be leased back at practical completion to the Group. During
the period, the Group has recorded profits on other property
disposals of GBP0.6m (H1 FY22: GBP1.1m).
During the comparative period, in June 2021, the Group disposed
of a single property as part of a sale and leaseback transaction
receiving proceeds of GBP40.0m. The Group will continue to rent the
property for a period of five years. A profit of GBP27.5m was
recognised on disposal of the property.
(4) During the comparative period, the UK Budget 2021
announcements on 3 March 2021 included an increase to the UK's main
corporation tax rate to 25%, effective from 1 April 2023. The
change resulted in the remeasurement of those UK deferred tax
assets and liabilities which were forecast to be utilised or to
crystalise after that effective date, using the higher tax rate
and, as a result, an expense of GBP15.0m was recorded in the income
statement. The current year expense of GBP7.5m relates to the
in-year rate differential, noting that current tax is booked at 19%
and deferred tax is booked at a higher rate.
5. Finance (costs)/income
6 months
to 6 months to
1 September 26 August
2022 2021
GBPm GBPm
Finance costs
Interest on bank loans and overdrafts (2.9) (3.6)
Interest on other loans (12.1) (15.1)
Interest on lease liabilities (68.6) (64.2)
Interest capitalised 0.1 0.3
Unwinding of discount on contingent consideration (0.2) (0.5)
Cost of hedging (0.5) (2.0)
(84.2) (85.1)
Finance income
Bank interest receivable 6.1 0.1
Other interest receivable - 0.1
IAS 19 pension finance income (Note 13) 6.8 1.8
12.9 2.0
Total net finance costs (71.3) (83.1)
------------ -----------
6. COVID-related Government grants and assistance
In prior years, the Group claimed government support designed to
mitigate the impact of COVID-19.
During the six months ended 1 September 2022, the Group
submitted its German Bridge Aid III Plus and IV claims, for which
it received net cash of GBP17.3m. These amounts were recognised in
the prior year for costs the Group incurred from July 2021 -
January 2022. No further claims for COVID-related Government
support were made in the UK or in Germany, and hence the Group has
not recognised COVID-related Government support during the six
months ended 1 September 2022.
7. Taxation
The Group effective tax rate applied to the profit before tax
before adjusting items for the six-month period ended 1 September
2022 is 20.4% (H1 FY22: 5.7%).
The tax charge for the 26 weeks to 1 September 2022 has been
calculated in line with IAS 34 by applying the effective rate of
tax which is expected to apply in each jurisdiction in which the
Group operates for the year ending 2 March 2023.
A UK current tax rate of 19% and a blended UK deferred tax rate
ranging between 19% and 25% has been applied to discrete and
adjusting items.
In addition, a forecast effective tax rate of 0% has been
applied to the German pre-tax loss on the basis that we do not
currently have sufficient certainty to recognise a deferred tax
asset for German losses carried forward for offset in a future
year.
The Group effective tax rate applied to the profit before tax
before adjusting items of 20.4% is higher than the UK statutory
corporate tax rate of 19% primarily due to the impact of overseas
tax losses for which no tax has been recognised.
The overall group effective tax rate on statutory profit for the
six-month period ended 1 September 2022 of 23.9% (H1 FY22: negative
95.9%) is due to the impact of overseas losses not recognised and
the tax impact of certain adjusting items, primarily relating to
the effect of rate change and gains on disposals of property.
6 months 6 months
to to
1 September 26 August
2022 2021
Consolidated income statement GBPm GBPm
---------------------------------------------------- ------------- -----------
Current tax:
Current tax expense 20.9 -
Adjustments in respect of previous periods - (2.1)
------------- -----------
20.9 (2.1)
Deferred tax:
Origination and reversal of temporary differences 45.2 0.4
Effect of in-year rate differential/change in tax
rates(1) 7.5 15.0
Adjustments in respect of previous periods (0.1) 5.2
52.6 20.6
------------- -----------
Tax reported in the consolidated income statement 73.5 18.5
------------- -----------
(1) The current year expense of GBP7.5m relates to the in-year
rate differential, noting that current tax is booked at 19% and
deferred tax is booked at a higher rate.
Deferred tax
The major deferred tax assets/(liabilities) recognised by the
Group and movements during the period are as follows:
Rolled
Accelerated over gains
capital and property
allowances revaluations Pensions Leases Losses Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 3 March 2022 (72.5) (92.5) (165.9) 48.7 139.3 (7.7) (150.6)
Charge to consolidated
income statement (14.2) (11.2) (1.4) (1.9) (21.7) (2.2) (52.6)
Credit to statement of
comprehensive income - - 24.8 - - 0.4 25.2
Credit/(charge) to statement - - - - - - -
of changes in equity
Foreign exchange and
other movements - - - - - (0.3) (0.3)
------------ -------------- --------- ------- ------- ------ --------
At 1 September 2022 (86.7) (103.7) (142.5) 46.8 117.6 (9.8) (178.3)
------------ -------------- --------- ------- ------- ------ --------
The UK Budget 2021 announcement on 3 March 2021 included an
increase to the UK's main corporation tax rate to 25%, effective
from 1 April 2023. This was substantively enacted in May 2021 and
remains the position at the signing of these financial statements.
As such, the Group continues to estimate that all UK deferred tax
balances expected to be utilised or crystallise after 1 April 2023
should be recognised at the rate of 25%.
The Group has unrecognised German tax losses of GBP158.1m (March
2022: GBP128.2m) which can be carried forward indefinitely and
offset against future taxable profits in the same tax group. The
Group carries out an assessment of the recoverability of these
losses for each reporting period and, to the extent that they
exceed deferred tax liabilities within the same tax group, the
Group does not think it is currently appropriate to recognise any
deferred tax asset. Recognition of these unrecognised assets in
their entirety would result in an increase in the reported deferred
tax asset of GBP50.5m (March 2022: GBP40.9m).
8. Earnings per share
The basic earnings per share (EPS) figures are calculated by
dividing the net profit/(loss) for the period attributable to
parent shareholders by the weighted average number of ordinary
shares in issue during the period after deducting treasury shares
and shares held by an independently managed employee share
ownership trust (ESOT).
The diluted earnings per share figures allow for the dilutive
effect of the conversion into ordinary shares of the weighted
average number of options outstanding during the period. Where the
average share price for the period is lower than the option price
or the Group is loss making, the options become anti-dilutive and
are excluded from the calculation. There are 1.1m (H1 FY22: 2.1m)
share options excluded from the diluted earnings per share
calculation because they would be anti-dilutive.
The number of shares used for the earnings per share
calculations are as follows:
6 months
to 6 months to
1 September 26 August
2022 2021
million million
-------------------------------------------- ------------ -----------
Basic weighted average number of ordinary
shares 202.1 201.9
Effect of dilution - share options 1.2 -
------------ -----------
Diluted weighted average number of ordinary
shares 203.3 201.9
------------ -----------
The profits/(losses) used for the earnings
per share calculations are as follows:
6 months
to 6 months to
1 September 26 August
2022 2021
GBPm GBPm
Profit/(loss) for the period attributable
to parent shareholders 233.9 (37.8)
Adjusting items before tax (Note 4) (35.5) (37.3)
Adjusting tax expense (Note 4) 18.0 21.7
Adjusted profit/(loss) for the period attributable
to parent shareholders 216.4 (53.4)
6 months
to 6 months to
1 September 26 August
2022 2021
pence pence
Basic EPS on profit/(loss) for the period 115.7 (18.7)
Adjusting items before tax (Note 4) (17.6) (18.5)
Adjusting tax expense (Note 4) 8.9 10.8
Basic EPS on adjusted profit/(loss) for
the period 107.0 (26.4)
Diluted EPS on profit/(loss) for the period 115.0 (18.7)
Diluted EPS on adjusted profit/(loss) for
the period 106.4 (26.4)
9. Dividends
6 months to 1 September 6 months to 26 August
2022 2021
pence per pence per
share GBPm share GBPm
------------------------------------- ---------------- ------- --------------- ------
Equity dividends on ordinary shares:
Final dividend for prior year 34.70 70.1 - -
------- ------
Dividends on other shares:
B share dividend 0.10 - 0.30 -
------- ------
Total dividends paid 70.1 -
------- ------
An interim dividend of 24.4p per ordinary share (2022:nil p)
amounting to a total dividend of GBP49.0m (2022: GBPnil) was
declared by the directors on 24 October 2022. A dividend
reinvestment plan (DRIP) alternative will be offered. These
consolidated financial statements do not reflect this dividend
payable.
B shareholders are entitled to an annual non-cumulative
preference dividend paid in arrears. There are 2.0m (H1 FY22: 2.0m)
B shares in issue. The Group paid a dividend of 0.1p per share (H1
FY22: 0.3p per share) during the period.
10. Borrowings and net debt
Amounts drawn down on the Group's borrowing facilities are as
follows:
Current Non-current
1 September 1 September
2022 3 March 2022 2022 3 March 2022
GBPm GBPm GBPm GBPm
Revolving credit facility (GBP775.0m) - - - -
Senior unsecured bonds - - 992.7 991.9
- - 992.7 991.9
--------------------------------------------------- -------------- ----------- --------------
Revolving credit facility
The revolving credit facility which at 3 March 2022 was
GBP850.0m, was replaced on 25 May 2022 with a new 5 year GBP775.0m
multicurrency revolving credit facility agreement.
The new revolving credit facility agreement contains one
financial covenant ratio, being:
Net Debt/Adjusted EBITDA <3.5x
Senior unsecured bonds
The Group has senior unsecured bonds with coupons and maturities
as shown in the following table.
Principal
Title Year issued value Maturity Coupon
16 October
2025 senior unsecured bonds 2015 GBP450.0m 2025 3.375%
2027 senior unsecured green use
of proceeds bonds 2021 GBP300.0m 31 May 2027 2.375%
2031 senior unsecured green use
of proceeds bonds 2021 GBP250.0m 31 May 2031 3.000%
Movement in cash and net debt
Amortisation
3 March Net new Foreign Fair value of premiums 1 September
2022 Cash flow lease liabilities exchange adjustments and discounts 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- --------- --------- ------------------ --------- ------------ -------------- -----------
Cash and cash
equivalents 1,132.4 41.3 - 1.1 - - 1,174.8
Liabilities from
financing
activities
Borrowings (991.9) - - - - (0.8) (992.7)
Lease liabilities (3,701.8) 65.4 (87.7) (24.7) - - (3,748.8)
Total liabilities from
financing activities (4,693.7) 65.4 (87.7) (24.7) - (0.8) (4,741.5)
Less: lease
liabilities 3,701.8 (65.4) 87.7 24.7 - - 3,748.8
Net cash 140.5 41.3 - 1.1 - (0.8) 182.1
--------- --------- ------------------ --------- ------------ -------------- -----------
Liquidity Risk
The tables below summarise the maturity profile of the Group's
financial liabilities at 1 September 2022 and 3 March 2022 based on
contractual undiscounted payments, including interest:
Less than 3 to 12 1 to 5 More than
On demand 3 months months years 5 years Total
1 September 2022 GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ---------- --------- ------- ------- --------- -------
Non-derivative financial
liabilities:
Interest-bearing loans and
borrowings - 15.2 14.6 854.1 280.0 1,163.9
Lease liabilities(1) - 70.2 209.6 1,123.9 4,921.9 6,325.6
Trade and other payables - 173.8 - 1.3 - 175.1
---------- --------- ------- ------- --------- -------
- 259.2 224.2 1,979.3 5,201.9 7,664.6
-------------------------------------- --------- ------- ------- --------- -------
Derivative financial assets/liabilities:
Cross currency swaps:
Derivative contracts - receipts - (15.2) -(495.6) -(510.8)
Derivative contracts - payments - 9.5 - 477.5 - 487.0
------ ------- -------
- (5.7) - (18.1) - (23.8)
----------------------------------- ------ ------- -------
Total -253.5 224.2 1,961.2 5,201.9 7,640.8
----- ----- ------- ------- -------
Less than 3 to 12 1 to 5 More than
On demand 3 months months years 5 years Total
3 March 2022 GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- --------- --------- ------- ------- --------- -------
Non-derivative financial
liabilities:
Interest-bearing loans and
borrowings - 19.0 15.2 554.1 594.6 1,182.9
Lease liabilities(1) - 67.3 206.5 1,116.5 4,918.3 6,308.6
Trade and other payables - 163.6 12.4 1.2 - 177.2
--------- --------- ------- ------- --------- -------
- 249.9 234.1 1,671.8 5,512.9 7,668.7
--------- --------- ------- ------- --------- -------
Derivative financial assets/liabilities:
Cross currency swaps:
Derivative contracts - receipts - - (15.2) (495.6) - (510.8)
Derivative contracts - payments - - 9.1 459.1 - 468.2
--------- --------- ------- ------- --------- -------
- - (6.1) (36.5) - (42.6)
--------- --------- ------- ------- --------- -------
Total - 249.9 228.0 1,635.3 5,512.9 7,626.1
--------- --------- ------- ------- --------- -------
(1) Contractual undiscounted payments relating to lease
liabilities due in more than 5 years includes GBP1,367.2m (March
2022: GBP1,324.5m) due between 5 and 10 years, GBP2,061.5m (March
2022: GBP1,925.3m) due between 10 and 20 years and GBP1,493.2m
(March 2022: GBP1,668.5m) due in more than 20 years.
11. Impairment
During the year, net impairment reversals of GBP33.5m (HY22:
GBPnil) were recognised within operating costs. These impairment
reversals are primarily driven by an increase in anticipated cash
flows. The losses/(reversals) were recognised on the following
classes of assets:
Net impairment
loss/(reversal)
6 months to 1 September 2022 GBPm
---------------------------------- -----------------
Property, plant and equipment
Impairment losses 9.6
Impairment reversals (33.0)
Transfer to assets held for sale 0.3
Right-of-use assets
Impairment losses 1.0
Impairment reversals (13.5)
Assets held for sale
Impairment losses 2.1
(33.5)
-----------------
Property, plant and equipment and right-of-use assets
The Group has identified CGU-specific indicators of impairment
and an indicator of reversal of previously recognised impairment
losses relating to assets held by the Group. A review of those
assets was undertaken, resulting in a total net impairment reversal
of GBP35.9m (HY22: GBPnil). This net impairment reversal is
comprised of GBP23.4m relating to property, plant and equipment
(HY22: nil) and GBP12.5m relating to right-of-use assets (HY22:
GBPnil). In addition, an impairment charge of GBP2.4m (HY22:
GBPnil) was recorded in relation to assets classified as held for
sale.
The Group considers each trading site to be a CGU. Where
indicators of impairment are identified, an impairment assessment
is undertaken. In assessing whether an asset has been impaired, the
carrying amount of the site is compared to its recoverable amount.
The recoverable amount is the higher of its value in use and its
fair value less costs of disposal.
The Group calculates a value in use (VIU) for each site. Where
the VIU is lower than the carrying value of the CGU, the Group uses
a range of methods for estimating the fair value less costs of
disposal (FVLCD). These include applying a market multiple to the
CGU EBITDAR and, for leasehold sites, present value techniques
using a discounted cash flow method. Both FVLCD methods rely on
inputs not normally observable by market participants and are
therefore level 3 measurements in the fair value hierarchy.
The key assumptions used by management in estimating value in
use were:
Approved budget period
Forecast cashflow for the initial five-year period are based on
actual cash flows for HY23 and applying management's assumptions of
the performance of the Group over the next five years.
The key assumptions used by management in setting the Board
approved financial budgets for the initial five-year period were as
follows:
-- Recovery of trading: Actual results from HY23 have been used
as a basis for the 5-year business plan as this year represents the
first showing signs of recovery of the Group since the end of
COVID-related restrictions.
-- Forecast growth rates: Forecast growth rates are based on the
Group business plan which includes assumptions around the UK and
German economies over the next five years.
-- Operating profits are forecast based on historical experience
of operating margins, adjusted for the impact of inflation and
cost-saving initiatives.
-- Local factors impacting the site in the current year or
expected to impact the site in future years. Key assumptions
include the maturity profile of individual sites, the future
potential of immature sites and the impact of increasing or
reducing market supply in the local area.
Discount rates
The discount rate is based on the Weighted Average Cost of
Capital (WACC) of a typical market participant, taking into account
specific country and currency risks associated with the Group. The
average pre-tax discount rate used is 10.2% in the UK, and 9.0% in
Germany (March 2022: 8.7% UK and 7.3% Germany). The discount rate
has increased since the year end reflecting market volatility in
the spot risk free rate inputs used in the Group's WACC
calculation.
Long-term growth rates
A long-term growth rate of 2.0% was used for cash flows
subsequent to the 5-year approved budget/plan period. This
long-term growth rate is a conservative rate and is considered to
be lower than the long-term historical growth rates of the
underlying territories in which the CGUs operate and the long-term
growth rate prospects of the sectors in which the CGUs operate.
The key assumptions used by management in estimating the FVLCD
on a market multiple were:
EBITDAR multiple
An EBITDAR multiple is estimated based on a normalised trading
basis and market data obtained from external sources. This resulted
in a multiple in the range of 9 to 11 times.
Discounted cash flows
The key assumptions used by management in estimating the FVLCD
on a discounted cashflow method were similar to those used in the
value in use assessment, modified to reflect estimated cost of
disposal and lease payments. The inclusion of lease payments is
reflected in the discount rate, increasing UK WACC for the specific
asset class from 10.2% to 11.2%.
Sensitivity to changes in assumptions
The level of impairment is predominantly dependent upon
judgements used in arriving at future growth rates and the discount
rates applied to cash flow projections. The impact on the
impairment charge of applying a reasonably possible change in
assumptions to the growth rates used in the 5-year business plans,
long-term growth rates, pre-tax discount rates and EBITDAR multiple
would be an incremental impairment charge in the period to 1
September 2022 of:
Property, plant
and
equipment and
right-of use assets
GBPm
---------------------------------------------------------- ---------------------
Reduction in net impairment reversal if year one and
succeeding years' cashflows reduced by 20% 13.7
Reduction in net impairment reversal if discount rate
increased by 2% 9.0
Reduction in net impairment reversal if long-term
growth rates reduced by 1% 4.6
Reduction in net impairment reversal if EBITDAR multiple
reduced by 10% 2.6
The above sensitivity analyses are based on a change in an
assumption whilst holding all other assumptions constant. In
practice, this is unlikely to occur and changes in some of the
assumptions may be correlated.
12. Financial instruments
IFRS 13 Fair Value Measurement requires that the classification
of financial instruments measured at fair value be determined by
reference to the source of inputs used to derive the fair value.
The classification uses the following three-level hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 - Other techniques for which all inputs, which have a
significant effect on the recorded fair value, are observable,
either directly or indirectly; and
Level 3 - Techniques which use inputs, which have a significant
effect on the recorded fair value, that are not based on observable
market data.
The following financial instruments are measured at fair
value:
Derivative financial instruments
The Group has in place a net investment hedge in relation to the
investment made in Germany.
The fair value of derivative instruments classified as level 2
is calculated by discounting all future cash flows by the relevant
market discount rate at the balance sheet date.
Contingent Consideration
The Group has recorded contingent consideration in relation to
acquisitions within trade and other payables.
6 months
to 6 months to
1 September 26 August
2022 2021
GBPm GBPm
--------------------------------- ------------ -----------
Opening contingent consideration 25.1 62.8
Unwinding of discount (Note 5) 0.2 0.5
Paid during the period (6.4) (0.5)
Foreign exchange movements 1.0 (0.7)
------------ -----------
Closing contingent consideration 19.9 62.1
------------ -----------
The consideration will become payable upon the handover of hotel
sites which are currently being developed. The fair value of
contingent consideration is classified as level 3 and the fair
value is calculated by discounting the future payments from their
expected handover date using a risk adjusted discount rate. There
have been no remeasurements recorded during the period.
1 September 26 August 3 March
2022 2021 2022
GBPm GBPm GBPm
Financial assets
Derivative financial instruments - level
2 - 20.9 15.8
----------- --------- -------
Financial liabilities
Derivative financial instruments - level
2 (2.8) (1.2) -
Contingent consideration - level 3 (19.9) (62.1) (25.1)
----------- --------- -------
There were no transfers between levels during any period
disclosed.
13. Defined benefit pension surplus
During the six-month period to 1 September 2022, the defined
benefit pension scheme has moved from a surplus of GBP522.6m to
GBP429.2m. The main movements in the surplus are as follows:
GBPm
--------------------------------------------- ------- -------
Pension surplus as at 3 March 2022 522.6
Remeasurement due to:
Changes in financial assumptions 631.3
Return on plan assets greater/(lower) than
discount rate (731.9)
-------
(100.6)
Contributions from employer 2.4
Net interest on pension liability and assets 6.8
Administrative expenses (2.0)
-------
Pension surplus as at 1 September 2022 429.2
-------
The surplus has been recognised as, under the governing
documentation of the Whitbread Group Pension Fund, the Group has an
unconditional right to receive a refund, assuming the gradual
settlement of the scheme liabilities over time until all members
and their dependants have either died or left the scheme, in
accordance with the provisions of IFRIC 14 IAS 19 - The Limit on a
Defined Benefit Asset, Minimum Funding Requirements and their
Interaction.
The defined benefit scheme entered into a GBP660.7m buy-in
transaction covering 50% of pensioners on 23 June 2022 whereby the
assets of the plan were invested in a bulk purchase annuity policy
with the insurer, Standard Life, under which the benefits payable
to defined benefit members covered under the policy became fully
insured. The difference between the cost of the insurance policy
and the accounting value of the liabilities secured was GBP68.7m
and has been recorded within actuarial losses in the statement of
other comprehensive income.
The principal assumptions used by the independent qualified
actuaries in updating the most recent valuation carried out as at
31 March 2020 of the UK scheme to 1 September 2022 for IAS 19
Employee Benefits purposes were:
1 September 3 March
2022 2022
% %
Pre-April 2006 rate of increase in pensions
in payment 3.3 3.4
Post-April 2006 rate of increase in pensions
in payment 2.2 2.3
Pension increases in deferment 3.3 3.4
Discount rate 4.4 2.6
Inflation assumption 3.4 3.6
The mortality assumptions are based on standard mortality tables
which allow for future mortality improvements. The assumptions are
that a member currently aged 65 will live on average for a further
20.0 years (March 2022: 20.0 years) if they are male and for a
further 22.6 years (March 2022: 22.6 years) if they are female. For
a member who retires in 2042 at age 65, the assumptions are that
they will live on average for a further 21.1 years (March 2022:
21.1 years) after retirement if they are male and for a further
23.8 years (March 2022: 23.8 years) after retirement if they are
female.
The assumptions in relation to discount rate, mortality and
inflation have a significant effect on the measurement of scheme
liabilities. The following table shows the sensitivity of the
valuation of gross liabilities to changes in these assumptions:
(Increase)/decrease
in gross
defined benefit liability
----------------------------
1 September 3 March
2022 2022
------------------------------------- ---------------- ----------
Discount rate
2.00% increase to discount rate 407.0
2.00% decrease to discount rate (632.0)
1.00% increase to discount rate 359.0
1.00% decrease to discount rate (458.0)
Inflation
0.25% increase to inflation rate (40.0) (73.0)
0.25% decrease to inflation rate 39.0 72.0
Life expectancy
One-year increase to life expectancy (94.0) (126.0)
The above sensitivity analyses are based on a change in an
assumption whilst holding all other assumptions constant. In
practice, this is unlikely to occur and changes in some of the
assumptions may be correlated. Where the discount rate is changed
this will have an impact on the valuation of scheme assets in the
opposing direction. The above sensitivities table shows only the
expected changes to the gross defined benefit obligation
(liability). When calculating the sensitivity of the defined
benefit obligation to significant actuarial assumptions, the same
method (projected unit credit method) has been applied as when
calculating the pension surplus recognised within the consolidated
balance sheet. The methods and types of assumptions did not
change.
14. Analysis of cash flows given in the cash flow statement
6 months
to 6 months to
1 September 26 August
2022 2021
GBPm GBPm
Cash generated from/(used in) operations
Profit/(loss) for the period 233.9 (37.8)
Adjustments for:
Tax expense 73.5 18.5
Net finance costs (Note 5) 71.3 83.1
Share of loss from joint ventures 0.3 1.0
Depreciation and amortisation 169.1 156.0
Share-based payments 7.4 6.3
Net impairment reversals (33.5) -
Impairment of loans to joint ventures - 0.8
Gains on disposals, property and other provisions
(Note 4) (2.0) (28.6)
Other non-cash items 5.0 6.5
------------ -----------
Cash generated from/(used in) operations
before working capital changes 525.0 205.8
Increase in inventories (1.4) (2.8)
Decrease/(increase) in trade and other receivables 8.7 (46.7)
Increase in trade and other payables 21.9 162.0
------------ -----------
Cash generated from operations 554.2 318.3
------------ -----------
Other non-cash items include an inflow of GBP2.7m (H1 FY22:
GBP5.0m) as a result of net provision movements and an inflow of
GBP2.0m (H1 FY22: GBP1.4m) representing non-cash pension scheme
administration costs.
15. Share capital and reserves
During the period, 0.5m shares were purchased by the Group's
independently managed Employee Share Ownership Trust (ESOT) for
consideration of GBP12.3m. Subsequent to the year end, a further
0.8m shares were purchased. The total anticipated consideration for
the 1.3m shares was GBP32.5m and is included in the consolidated
statement of cash flows. Post the balance sheet date GBP0.8m was
returned to the Group leaving a final consideration of
GBP31.7m.
16. Related party disclosure
In Note 33 to the Annual Report and Accounts for the year ended
3 March 2022, the Group identified its related parties as its key
management personnel (including directors), the Group pension
schemes and its joint ventures for the purpose of IAS 24 Related
Party Disclosures. There have been no significant changes in those
related parties identified at the year end and there have been no
transactions with those related parties during the six months to 1
September 2022 that have materially affected, or are expected to
materially affect, the financial position or performance of the
Group during this period. Details of the relevant relationships
with those related parties will be disclosed in the Annual Report
and Accounts for the year ending 2 March 2023. All transactions
with subsidiaries are eliminated on consolidation.
17. Capital expenditure commitments
Capital expenditure commitments for which no provision has been
made are set out in the table below:
1 September 26 August 3 March
2022 2021 2022
GBPm GBPm GBPm
Property, plant and equipment 85.1 132.8 106.4
Intangible assets 11.0 2.6 7.3
18. Events after the balance sheet date
On 19 October 2022 the Group signed an agreement, subject to
various conditions, to acquire a portfolio of six hotels, including
five leasehold operations in Germany and one freehold hotel in
Austria. The purchase price is EUR32.6m including real estate
transfer tax. The deal is due to complete before the end of the
year. On completion the impact of IFRS 16 on the leases acquired
will be assessed.
INDEPENT REVIEW REPORT TO WHITBREAD PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 1st September 2022 which comprises the income
statement, the balance sheet, the statement of comprehensive
income, statement of changes of equity, the cash flow statement and
related notes 1 to 18.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 1st
September 2022 is not prepared, in all material respects, in
accordance with United Kingdom adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
24(th) October 2022
Glossary
Adjusted property rent
Total property rent less a proportion of contingent rent.
Basic earnings per share (Basic EPS)
Profit attributable to the parent shareholders divided by the
basic weighted average number of ordinary shares in issue during
the year after deducting treasury shares and shares held by an
independently managed share ownership trust ('ESOT').
Committed pipeline
Sites where we have a legal interest in a property (that may be
subject to planning/other conditions) with the intention of opening
a hotel in the future.
Direct bookings/distribution
Based on stayed bookings in the financial year made direct to
the Premier Inn website, Premier Inn app, Premier Inn customer
contact centre or hotel front desks.
Food and beverage (F&B) sales
Food and beverage revenue from all Whitbread owned pub
restaurants and integrated hotel restaurants.
GOSH Charity
Great Ormond Street Hospital Children's Charity
IFRS
International Financial Reporting Standards.
Lease debt
Eight times adjusted property rent.
Occupancy
Number of hotel bedrooms occupied by guests expressed as a
percentage of the number of bedrooms available in the period.
OTAs
Online Travel Agents
Operating profit
Profit before net finance costs and tax.
Property rent
IFRS 16 property lease interest and depreciation plus variable
lease payments, adjusted for deferred rental amounts. This is used
as a proxy for rent expense as recorded under IAS 17 in arriving at
funds from operations.
Rent expense
Rental costs recognised in the income statement prior to the
adoption of IFRS 16.
Alternative Performance Measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way that the business performance is
measured internally.
APMs are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS measure
------------------ -------------- ------------------- -------------------------------------------------------
REVENUE MEASURES
------------------ -------------- ------------------- -------------------------------------------------------
Accommodation Revenue Exclude non-room Premier Inn accommodation revenue excluding
sales revenue such non-room income such as
as food and food and beverage. The growth in accommodation
beverage sales on a year-on-year basis is a good
indicator of the performance of the
business.
Reconciliation: Note 2
------------------ -------------- ------------------- -------------------------------------------------------
Adjusted* Revenue Adjusting Revenue adjusted to exclude TSA income.
revenue items
------------------ -------------- ------------------- -------------------------------------------------------
Average room No direct Refer to Accommodation sales divided by the number
rate (ARR) equivalent definition of rooms occupied
by guests. The directors consider this
to be a useful measure as this is a
commonly used industry metric which
facilitates comparison between companies.
Reconciliation 6 months
6 months to 26
to 1 September August
2022 2021
UK Accommodation sales
(GBPm) 940.0 466.8
Number of rooms occupied
by guests ('000) 12,783 8,869
---------------- ---------
UK average room rate
(GBP) 73.54 52.63
---------------- ---------
Germany Accommodation
sales (GBPm) 44.5 9.2
Number of rooms occupied
by guests ('000) 805 252
---------------- ---------
Germany average room
rate (GBP) 55.27 36.49
---------------- ---------
UK like-for-like Movement Accommodation Year over year change in revenue for
revenue growth in accommodation sales from outlets open for at least one year.
sales per non like-for-like The directors consider this to be a
segment information useful measure as it is a commonly used
(Note 2) performance metric and provides an indication
of underlying revenue trends.
Reconciliation 6 months
6 months to 26
to 1 September August
2022 2021
UK like-for-like revenue
growth 93.4% 194.3%
Contribution from net
new hotels 8.0% 6.1%
---------------- ---------
UK Accommodation sales
growth 101.4% 200.4%
---------------- ---------
Three-year Movement Accommodation Change in revenue for outlets open for
UK like-for-like in accommodation sales from at least three years. This is a temporary
revenue growth sales per non like-for-like measure introduced to provide a comparison
segment between the current year and the comparative
information period before the impact of the COVID-19
pandemic being 2020.
Reconciliation 6 months
to 1 September
2022
UK like-for-like revenue
growth 24.4%
Contribution from net
new hotels 10.4%
----------------
UK Accommodation sales
growth 34.8%
----------------
Revenue per No direct Refer to Revenue per available room is also known
available equivalent definition as 'yield'. This hotel measure is achieved
room (RevPAR) by dividing accommodation sales by the
number of rooms available. The directors
consider this to be a useful measure
as it is a commonly used performance
measure in the hotel industry.
Reconciliation 6 months
6 months to 26
to 1 September August
2022 2021
UK Accommodation sales
(GBPm) 940.0 466.8
Available rooms ('000) 15,067 14,528
---------------- ---------
UK RevPAR (GBP) 62.39 32.13
---------------- ---------
Germany Accommodation
sales (GBPm) 44.5 9.2
Available rooms ('000) 1,268 787
---------------- ---------
Germany RevPAR (GBP) 35.06 11.69
---------------- ---------
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS measure
--------------- ----------------- -------------------- -----------------------------------------------------
INCOME STATEMENT MEASURES
---------------------------------- -------------------- -----------------------------------------------------
Adjusted* Profit/loss Adjusting Profit/loss before tax, finance costs/income
operating before tax items and adjusting items
profit/loss (Note 4) Reconciliation: Consolidated income
statement
--------------- ----------------- -------------------- -----------------------------------------------------
Adjusted* Tax Adjusting Tax charge/credit before adjusting items.
tax charge/credit items Reconciliation: Consolidated income
(Note 4) statement
--------------- ----------------- -------------------- -----------------------------------------------------
Adjusted* Profit/loss Adjusting Profit/loss before tax and adjusting
profit/loss before tax items items.
before tax (Note 4) Reconciliation: Consolidated income
statement
--------------- ----------------- -------------------- -----------------------------------------------------
Adjusted* Basic EPS Adjusting Adjusted profit/loss attributable to
basic EPS items the parent shareholders divided by the
(Note 4) basic weighted average number of ordinary
shares in issue during the year after
deducting treasury shares and shares
held by an independently managed share
ownership trust (ESOT).
Reconciliation: Note 8
Profit margin No direct Refer to Segmental adjusted profit before tax
equivalent definition divided by segmental adjusted revenue,
to demonstrate profitability margins
of the segmental operations.
Reconciliation: Business review
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS measure
-------------- ----------------- -------------------- ------------------------------------------------------
BALANCE SHEET MEASURES
--------------------------------- -------------------- ------------------------------------------------------
Net debt/cash Total Exclude lease Cash and cash equivalents after deducting
liabilities liabilities total borrowings. The directors consider
from financing and derivatives this to be a useful measure of the financing
activities held to hedge position of the Group. Reconciliation:
financing Note 10
activities
-------------- ----------------- -------------------- ------------------------------------------------------
Adjusted net Total Exclude lease Net debt/cash adjusted for cash, assumed
debt/cash liabilities liabilities by ratings agencies to not be readily
from financing and derivatives available. The directors consider this
activities held to hedge to be a useful measure as it is aligned
financing with the method used by ratings agencies
activities. to assess the financing position of
Includes the Group.
an adjustment
for cash
assumed by
ratings agencies
to not be
readily available
Reconciliation As at As at
1 September 26 August
2022 2021
GBPm GBPm
Net cash (182.1) (60.2)
Restricted cash
adjustment 10.0 10.0
------------- -------------
Adjusted net cash (172.1) (50.2)
------------- -------------
Lease Cash and Exclude lease Adjusted net debt/cash plus lease debt.
adjusted cash equivalents liabilities The directors consider this to be a
net debt less total and derivatives useful measure as it forms the basis
liabilities held to hedge of the Group's leverage targets.
from financing financing
activities activities.
Includes
an adjustment
for cash
assumed by
ratings agencies
to not be
readily available
Reconciliation As at As at
1 September 26 August
2022 2021
GBPm GBPm
Adjusted net
(cash)/debt (172.1) (50.2)
Lease debt 2,371.1 2,095.0
------------- -------------
Lease adjusted net
(cash)/debt 2,199.0 2,045.0
------------- -------------
Net debt/cash Cash and Refer to Net debt/cash plus lease liabilities.
and lease cash equivalents definition The directors consider this to be a
liabilities less total useful measure of the financing position
liabilities of the Group.
from financing
activities
Reconciliation As at As at
1 September 26 August
2022 2021
GBPm GBPm
------------- -------------
Net cash (182.1) (60.2)
Lease liabilities 3,748.8 3,313.6
------------- -------------
Net debt and lease
liabilities 3,566.7 3,253.4
------------- -------------
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS measure
-------------- ----------------- -------------------- ------------------------------------------------------
CASH FLOW MEASURES
--------------------------------- -------------------- ------------------------------------------------------
Funds from Net cash Refer to This measure has been changed to align
operations flows from definition to Fitch methodology post IFRS16.
(FFO) operating Net cash flows from operating activities
activities after adding back changes in working
capital, interest on lease liabilities
and cash interest. A comparative is
not disclosed as this measure was not
utilised during those financial periods
heavily impacted by COVID-19.
Reconciliation 12 months
to 1
September
2022
GBPm
-------------
Net cash flow from
operations 729.0
Working capital
movements (99.2)
Cash interest 29.7
Interest on lease
liabilities 137.6
-------------
Funds from operations 797.1
-------------
Lease No direct Refer to This measure has been changed to align
adjusted equivalent definition to Fitch methodology post IFRS16. Ratio
net debt to of lease-adjusted net debt/cash compared
FFO to funds from operations (FFO A comparative
is not disclosed as this measure was
not utilised during those financial
periods heavily impacted by COVID-19.
Reconciliation 12 months
to 1
September
2022
GBPm
-------------
Lease adjusted net debt 2,199.0
Funds from operations 797.1
-------------
Lease adjusted net
debt to FFO 2.8
-------------
Operating Cash generated Refer to Adjusted operating profit/loss adding
cash flow from/used definition back depreciation and amortisation and
in operations after IFRS 16 interest and lease repayments
and working capital movement.
The directors consider this a useful
measure as it is a good indicator of
the cash generated which is used to
fund future growth and shareholder returns,
tax, pension and interest payments.
Reconciliation 6 months 6 months
to 1 to 26
September August
2022 2021
GBPm GBPm
Adjusted operating
profit 343.2 26.5
Depreciation -
right-of-use
assets 80.9 70.2
Depreciation -
property,
plant and equipment 79.5 75.2
Amortisation 8.7 10.6
Interest paid - lease
liabilities (68.6) (64.2)
Payment of principal
of lease liabilities (65.4) (70.6)
Lease incentives 2.0 -
received
Movement in working
capital 29.2 112.5
------------- -------------
Operating cash flow 409.5 160.2
Cash capital No direct Refer to Cash flows on property, plant and equipment
expenditure equivalent definition and investment property and investment
(cash capex) in intangible assets, adding net cash
proceeds on acquisitions and loans and
capital contributions to joint ventures.
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS
measure
-------------------- -------------- --------------- ----------------------------------------------------------
OTHER MEASURES
------------------------------------ --------------- ----------------------------------------------------------
Adjusted* Operating Refer to Adjusted EBITDA (post-IFRS 16) is profit
EBITDA (post-IFRS profit/loss definition before tax, adjusting items, interest,
16), depreciation and amortisation.
Adjusted* Adjusted EBITDA (pre-IFRS 16) is further
EBITDA (pre-IFRS adjusted to remove rent expense.
16) and Adjusted EBITDAR is profit before tax,
Adjusted* adjusting items, interest, depreciation,
EBITDAR amortisation, variable lease payments
and rental income.
The directors consider this measure to
be useful as it is a commonly used industry
metric which facilitate comparison between
companies. The Group's RCF covenants include
measures based on Adjusted EBITDA (pre-IFRS
16).
Reconciliation 6 months
6 months to 26
to 1 September August
2022 2021
GBPm GBPm
Adjusted operating profit 343.2 26.5
Depreciation - right-of-use
assets 80.9 70.2
Depreciation - property,
plant and equipment 79.5 75.2
Amortisation 8.7 10.6
Adjusted EBITDA (post-IFRS
16) 512.3 182.5
---------------- ---------
Variable lease payment
expense 1.1 0.1
Rental income (1.7) (4.3)
---------------- ---------
Adjusted EBITDAR 511.7 178.3
---------------- ---------
Rental expense, variable
lease payments and rental
income (131.2) (112.3)
---------------- ---------
Adjusted EBITDA (pre-IFRS
16) 380.5 66.0
---------------- ---------
Return on No direct Refer Adjusted operating profit/loss (pre-IFRS
capital employed equivalent to definition 16) for the year divided by net assets
(ROCE) at the balance sheet date, adding back
net debt/(cash), right-of-use assets,
lease liabilities, taxation assets/liabilities,
the pension surplus/deficit and derivative
financial assets/liabilities, other financial
liabilities and IFRS 16 working capital
adjustments.
The directors consider this to be a useful
measure as it expresses the underlying
operating efficiency of the Group and
is used as the basis for remuneration
targets.
A comparative is not disclosed as this
measure was not utilised during those
financial periods heavily impacted by
COVID-19.
Reconciliation 12 months to
1 September 2022
Total UK &
Ireland
GBPm GBPm
Adjusted operating profit 470.0
Depreciation - right-of-use
assets 158.8
Rent expense (253.6)
Adjusted operating profit
pre-IFRS 16 375.2 410.5
---------- ---------
Net assets 4,206.8
Net cash (182.1)
Current tax (assets)/
liabilities 13.9
Deferred tax liabilities 178.3
Pension surplus (429.2)
Derivative financial assets -
Derivative financial liabilities 2.8
Lease liabilities 3,748.8
Right-of-use assets (3,310.1)
IAS 17 rent adjustments (65.0)
---------- ---------
Adjusted net assets 4,164.2 3,722.1
---------- ---------
Return on capital employed 9.0% 11.0%
---------- ---------
* Adjusted measures of profitability represent the equivalent
IFRS measures adjusted for specific items that we consider relevant
for comparison of the Group's business either from one period to
another or with similar businesses. We report adjusted measures
because we believe they provide both management and investors with
useful additional information about the financial performance of
the Group's businesses.
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IR PPGMWUUPPGRC
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