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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Whitbread Plc | LSE:WTB | London | Ordinary Share | GB00B1KJJ408 | ORD 76 122/153P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -26.00 | -0.84% | 3,059.00 | 3,077.00 | 3,078.00 | 3,090.00 | 3,031.00 | 3,055.00 | 615,742 | 16:35:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Hotels And Motels | 2.64B | 278.8M | 1.4465 | 21.28 | 5.93B |
From Apr 2019 to Apr 2024
TIDMWTB
RNS Number : 3908U
Whitbread PLC
24 October 2017
24 October 2017 - Whitbread PLC results for six months to 31 August 2017
Significant strategic progress in the UK and Internationally
-- Over 2,000 new Premier Inn rooms opened in the UK in the first half and maturing well -- New Costa breakfast and lunch ranges successfully launched throughout the UK -- Premier Inn Germany accelerating new hotel pipeline - 1 open & 9 secured pipeline hotels
-- Costa South China joint venture partner buy-out in October for GBP35 million enabling full control
Hot Features
Premium
-- Efficiency programme gaining momentum with over GBP60 million delivered over last two years
Good financial performance in line with expectations and on track
for the full year
=========================================================================
H1 FY18 H1 FY17 Change
========== ========== =======
Revenue GBP1,671m GBP1,556m 7.4%
Underlying operating profit(1) GBP342m GBP320m 7.1%
Underlying profit before tax(1) GBP328m GBP307m 6.7%
Statutory operating profit GBP336m GBP282m 19.3%
Statutory profit before tax GBP316m GBP264m 19.9%
Underlying basic earnings per share(1) 143.7p 133.9p 7.4%
Statutory basic earnings per share 137.7p 111.4p 23.6%
Interim dividend per share 31.4p 29.9p 5.0%
Discretionary free cash flow(2) GBP293m GBP269m 9.3%
Capital expenditure GBP269m GBP329m GBP60m
Return on capital(3) 15.4% 15.1% 30bps
======================================== ========== ========== =======
-- Strong revenue growth of 7.4% and market share gains in both Premier Inn(4) and Costa
-- Disciplined cost management enabling underlying profit growth of 6.7% to GBP328 million
-- Premier Inn underlying operating profit growth to GBP295 million, Costa constant at GBP65 million
-- Good discretionary free cash flow conversion of 86%, delivering GBP293 million to reinvest -- Strong balance sheet with net debt(5) reduced to GBP852 million -- Return on capital increased 30 bps to 15.4%, despite scale of recent investment
Alison Brittain, Whitbread Chief Executive Officer, commented:
"I am pleased with the progress we have made in executing the plan we set out in November last year, with earnings per share up 7.4% in the half and return on capital of 15.4%. Our plan is based on growing in our core UK markets; focusing on structural growth opportunities for Premier Inn in Germany, Costa in China and Costa Express; and strengthening our capabilities and efficiency to deliver these attractive opportunities.
In our core UK markets, we have:
-- opened over 2,000 Premier Inn rooms in the last six months;
-- developed digital capabilities central to our operating model in Premier Inn, which has enabled new tools such as our automated trading engine and business booker;
-- increased the proportion of hotel customers booking with us directly to 95%; -- strengthened new Costa store pipeline, focused on growth channels; and
-- developed product innovation capability in Costa which has already launched new breakfast and lunch ranges, combined with new coffees and cold drinks.
We have also made significant progress in simplifying our international business and creating platforms for sustainable growth over the longer term. This progress includes:
-- completion of the exit of non-core international operations, including hotels in India, Thailand, Singapore and Indonesia and our equity owned Costa business in France;
-- the buy-out of our joint venture partner for Costa in South China giving us full strategic and funding flexibility to unlock Costa's potential in China; and
-- accelerating the expansion of Premier Inn in Germany, with nine hotels now in our committed pipeline in addition to our existing hotel, resulting in an open and secured pipeline of over 2,000 rooms.
This amount of change and growth requires us to manage and execute in a more efficient and technology enabled manner. Whitbread's investment in improving shared capabilities are critical to enable both Premier Inn and Costa to deliver their plans in the UK and internationally. Work to improve our capabilities over the last two years has included:
-- building a strong management team, completed with the new Group Transformation Director; -- creating a shared digital and technology infrastructure;
-- delivering over GBP60 million of efficiency savings over the last two years as part of our GBP150 million target with growing confidence on the long-term potential; and
-- enhancing our property capability and strategy.
We have significant structural growth opportunities, in the UK and internationally, and confidence in our plans to capitalise on these opportunities. Despite the well known short-term economic uncertainty, our performance in the first half was good and we expect to meet expectations for the full year. Although we remain cautious on the current environment, we are confident that ongoing disciplined allocation of capital and focus on executing our plans will deliver long-term growth in earnings and dividends and a strong return on capital."
Richard Baker, Whitbread Chairman commented:
"In the year that Whitbread celebrates its 275(th) birthday, I am pleased to see another good performance as we continue to invest in the compelling long-term opportunities available to our businesses. We have maintained a strong balance sheet and continue to generate excellent cash flow, which together provides the Board with confidence to increase the interim dividend to 31.4p."
For more information please contact:
Investor queries
Matt Johnson, Whitbread PLC | matt.johnson@whitbread.com | +44 (0) 7848 146 761
Ann Hyams, Whitbread PLC | ann.hyams@whitbread.com | +44 (0) 7796 709 087
Matt Holman, Whitbread PLC | matt.holman@whitbread.com | +44 (0) 7712 243 322
Media queries
Anna Glover, Whitbread PLC | +44 (0) 7768 917 651
David Allchurch, Tulchan Communications | +44 (0) 20 7353 4200
Footnotes and definitions are contained immediately prior to the financial statements.
For photographs and video please visit our media library on www.whitbreadimages.co.uk.
A presentation for analysts will be at 9.30am on 24 October 2017 at Deutsche Bank, 1 Great Winchester Street, London, EC2N 2DB. A webcast of the presentation will be available through www.whitbread.co.uk/investors or https://3xscreen.videosync.fi/2017-10-24_whitbread.
Strong progress with our clear plan for growth
In November 2016, Whitbread set out a plan for sustainable long-term growth. This plan was based on the strong fundamentals that underpin Whitbread, Premier Inn and Costa:
-- there are significant structural growth opportunities for Premier Inn and Costa, both in the UK and internationally;
-- Premier Inn and Costa both have unrivalled brand strengths; -- Whitbread has a strong track record for disciplined capital management; -- Whitbread has clear plans to grow Premier Inn and Costa at a good return on capital; and -- Whitbread has a consistent history of focusing on creating shareholder value.
Despite continued uncertainty in the near term economic and political environment, these fundamentals are as relevant as ever.
The plan remains consistent in focusing on:
1. Grow and innovate in the core UK markets for Premier Inn and Costa
2. Focus on the strengths developed by Whitbread in the UK to grow internationally, in particular in Premier Inn in Germany, Costa in China, and Costa Express in multiple countries
3. Build and enhance the necessary capabilities and infrastructure to support long-term growth and efficiency.
Disciplined execution of this plan will enable long-term growth in earnings and dividends, combined with a strong return on capital.
Significant structural opportunities
Whitbread's plan for growth is centred on compelling structural growth opportunities being available for both Premier Inn and Costa in the UK and select markets internationally.
UK - Premier Inn
Premier Inn has a unique business model and position in the UK budget branded hotel market, supported by a significant food and beverage offer. Through a significant degree of freehold property ownership and an owner-manager approach, Premier Inn ensures high quality, consistency and good value for money throughout its hotel estate. This ensures hotel guests have a strong preference for Premier Inn, which provides an industry leading proportion of direct bookings that has recently increased to 95%.
This unique business model provides Premier Inn with a strong opportunity to grow market share versus the structurally disadvantaged independent segment. The independent segment currently holds more than 50% market share, but this has been declining by approximately one percentage point per annum. Through building new hotels, extending existing hotels, and further enhancing the operational model, Premier Inn expects to continue to win market share, increasing its position from approximately 9% in 2016 to over 12% beyond 2020. Premier Inn has a strong track record of maintaining occupancy above 80%, despite increasing room capacity by 25% over the last three years.
UK - Costa
Costa has a leading position in the structurally attractive UK coffee market, with more than 2,300 stores throughout the country. This leading position has been built on Costa's strong coffee credentials, combined with Whitbread's strengths as an employer of choice and in property management.
Allegra, the leading coffee industry body in the UK, has forecast coffee outlets to grow in the UK by 5-6% per annum over the next few years. The UK is also entering the 'third wave' of coffee - a period in which consumers' preferences for coffee become more sophisticated and are willing to spend more per cup for higher quality and innovative drinks. As market leader, Costa has a prime opportunity to capitalise on these attractive structural trends.
International - Premier Inn in Germany
The hotel market in Germany is a highly attractive opportunity:
-- the hotel market is currently 35% larger than the UK; -- the budget branded sector is less mature with 6% market share (24% in the UK);
-- the market is highly fragmented with independents accounting for approximately 75% of the hotel market;
-- there is currently no clear market leader, with the largest hotel operator having just 2% market share; and
-- given the regional dispersal of industrial development, there is a higher degree of business travel.
Premier Inn's unique business model of high quality, consistency and value for money resonates well with guests in the first Premier Inn hotel, which was opened in Frankfurt in 2016.
International - Costa in China
The coffee market in China is still relatively new, with fewer than 4,000 specialist coffee shops - half of which being the market leader. The coffee shop market in China is expected to more than double in size by 2020 and an opportunity exists to position Costa as the strongest challenger to the market leader.
1. Grow and innovate in our core UK markets
Premier Inn
-- Majority of 85,000 rooms target now secured in new hotel pipeline
-- Around 85% of rooms now refurbished to our modern room formats
-- Over 95% of customers booking direct
-- The clear first choice hotel for business and leisure travellers with over 80% occupancy
Premier Inn UK estate metrics
=========================================================================
H1 FY18 H1 FY17 Change
========= ========= ========
# hotels 771 746 3.4%
# rooms 70,120 65,770 6.6%
Direct booking 95% 93% 200bps
Occupancy 81.8% 82.6% (80)bps
Average rate per room GBP65.40 GBP63.62 2.8%
Revenue per available room GBP53.46 GBP52.53 1.8%
Total hotel & restaurant revenue growth 6.4% 6.5% (10)bps
========================================= ========= ========= ========
Premier Inn is firmly on track to have 85,000 rooms by 2020 from 70,120 rooms at the end of the half, with over 2,000 new rooms opened in the last six months. The majority of the pipeline to 85,000 rooms is now secure, with property and network planning teams now turning their attention to capacity growth beyond this milestone.
Despite the significant increase in rooms over recent years, occupancy remained above 80% and the proportion of rooms being sold directly increased to 95%. This industry-leading rate of 95% was made possible through recent investments in premierinn.com which further enhanced the automated trading engine, improved the overall online and booking experience and introduced a new business booking tool. Approximately 24% of Premier Inn revenue is generated from business account customers. These customers now have access to a dedicated online portal, which provides enhanced management information and offers special rates.
Improvements in the booking tool have been matched by further investment in improving quality and consistency throughout the hotel network. Around 85% of Premier Inn rooms are now in the most recent room formats, ensuring more customers can enjoy a high quality and consistent experience.
Our Hub by Premier Inn hotel format has gained further traction, with eight hotels comprising 1,600 rooms now open in London and Edinburgh. Hub provides a high quality and affordable experience in inner city locations and embeds technology throughout the customer journey, from booking via mobile, paperless check-in and in-room functions controlled via a dedicated mobile app. Strong customer response to this innovative format and integrated direct booking through premierinn.com enables new Hub hotels to mature quickly, with all hotels achieving a 4.5 rating on TripAdvisor.
Costa
-- Over 230 new equity & franchised stores (net 205) opened in the last year with 32 closures
-- Network plan focusing on fast growing retail and travel channels
-- Costa Express expanding with 25% increase in machines over last 12 months and new partners
-- New breakfast and lunch ranges launched throughout the UK
-- Loyalty technology re-platformed to enable better digital interaction
-- Upweighted coffee and food innovation capability in place
Costa UK metrics
===================================================================
H1 FY18 H1 FY17 Change
======== ======== =======
H1 UK equity stores like for like
sales growth(6) 0.6% 2.3%
# high street stores 447 426 4.9%
# shopping mall & retail park stores 393 376 4.5%
# drive thru stores 68 42 61.9%
# concessions & transport stores 384 356 7.9%
# office stores 33 32 3.1%
# franchise 1,001 889 12.6%
# Costa Express machines 6,688 5,323 25.6%
====================================== ======== ======== =======
Costa has undertaken a significant amount of strategic activity over the past 18 months. This has included reshaping store network plans towards growth channels, creating a strong pipeline of coffee and food product innovation and progress with our digital initiatives.
Costa has a large store estate of 2,326 stores throughout the UK in a number of channels and formats. Costa generates a high return on capital and, with a short-leasehold model, ensures estate management is focused on higher growth channels and provides flexibility in churning the existing estate. In the year ahead, approximately two-thirds of new stores will be in the high growth channels of drive thru stores, transport locations and retail parks.
Following the development of our new product innovation team, a new range of breakfast food was launched in the first quarter. Customer feedback has been strong with like for like breakfast food volume growing by 9% in the period since launch. Further work is underway to supplement this new breakfast offering. To complement the strong launch of the breakfast range, a new range of salads was launched over the summer and new hot food in September. Initial performance has been encouraging.
In addition to the introduction of the new food range, Costa launched new cold drinks in advance of the summer, including cold brew coffee, frostino iced drinks and a trial of nitro coffee. The recently formed innovation team has also created a strong pipeline of new hot and cold drinks to launch in the year ahead.
Costa and Whitbread digital teams continued to work at pace during the half, which resulted in the completion of a new loyalty data platform. This platform will enable further improvements in 2018 to the Costa Club digital application, enhanced direct communication with customers and improvements to the in-store experience for Costa Club members.
The growth of Costa Express also continued with 1,365 new machines in the last 12 months in the UK, adding 25% capacity. Costa Express machines offer a high incremental return on capital to Whitbread and provide partners with an attractive income stream. All Costa Express machines are connected through in-house developed telemetry, which ensures low maintenance for partners and greater consistency of availability. During the period a new partnership was agreed with WM Morrisons Supermarkets.
2. Focus on our strengths to grow internationally
Completed exit of non-core and underperforming operations
We have now completed the exit of all non-core international operations for both Premier Inn and Costa. This activity has included the closure of the equity owned Costa business in France and the disposal and exit of all 11 hotels and management agreements in India, Thailand, Singapore and Indonesia. These exits have been completed slightly ahead of previous financial guidance and now enable the teams to focus international efforts on developing Premier Inn in Germany and Costa in China.
Premier Inn Germany
Given the scale and attractive nature of the opportunity in Germany, a further four property deals have been completed, bringing the total committed pipeline to nine hotels, comprising 2,000 rooms. This is in addition to the existing 210 room hotel in Frankfurt, which continues to perform well and consistently ranks as the #1 hotel of 272 listed in Frankfurt by TripAdvisor.
The 10 open or committed hotels, and supporting team, provide a strong platform for further organic expansion and the evaluation of other opportunities to accelerate Premier Inn's ambition in this attractive market.
Costa China | Completed buy-out of South China joint venture partner
On 10 October 2017 Whitbread announced the buy-out of the 49% share in the South China joint venture held by Yueda for RMB 310 million (GBP35 million). The South China operation comprises approximately 250 stores. The partnership with Yueda was essential in the first phase of Costa's development in China, but full control will enable a greater level of focus on improving the overall proposition and reshaping the store network to have broader and deeper representation in key cities. The strong partnership with BHG in North China will continue unaffected.
Work to improve the proposition in China has continued alongside the ownership changes, to ensure store level economics support the strong growth planned. Last year, five underperforming stores were selected to trial a new concept. The improvements included significant changes in store design, new products and team training. These stores have delivered a strong uplift in sales. This strong performance provides confidence in the customer offer and the opportunity to extend the store network to approximately 700 stores by 2020, with significant opportunity beyond this over the longer term.
Other international activity
Costa Express continued its international expansion with a further 140 machines in Europe, the Middle East and Malaysia. Costa Express has been introduced to Malaysia, with over 100 machines installed to date. This has been received well, following a tailored launch with iced coffees. Customer feedback has been excellent, with many machines serving more than 70 cups per day.
Costa Poland performed well with good like for like sales growth. There are now approximately 140 Costa stores across 21 cities. During the half, new products were successfully launched including bacon baguettes and cold brew coffee.
Premier Inn in the Middle East continues to perform well against tough market conditions, with good occupancy levels and strong customer feedback. We have a productive partnership with Emirates, with a hotel recently opened in Doha, comprising 219 rooms, and plans for one further 389 room hotel in Dubai, due to open in 2018. Costa in the Middle East has also experienced tough market conditions, resulting in a decline in sales during the half.
3. Build capability to support long-term growth
Winning teams
The breadth and scale of Whitbread enables superior attraction and retention of talented people. As Whitbread entered a new phase of growth, a different mix of skills was required. The Executive Team was completed in September with the appointment of a new Group Transformation Director, responsible for improving our supply chain and procurement capabilities. New labour scheduling tools have also been implemented in both Restaurants and Costa to ensure that the right level of service can be delivered, at the right time.
Everyday efficiency
Last year Whitbread began a multi-year programme to generate GBP150 million of efficiency savings. This programme has already delivered approximately GBP60 million of savings from a combination of procurement benefits and shared services, which provides growing confidence in the longer-term potential. The new Group Transformation Director will oversee the second phase of activity involving further shared procurement and evolving the supply chains across Premier Inn and Costa. Work in the period included consolidation of housekeeping supply and laundry contracts in Premier Inn and shared procurement of software and IT services.
Property expertise
Whitbread owns and manages more than 3,000 sites in the UK and internationally, and supports more than 1,400 franchised outlets. As such, property site selection, development, management and longer-term optimisation is a core capability. Freehold property development and ownership is a core competitive advantage as it provides superior access to sites (which may not be available through leasehold) and ensures hotels are designed and constructed to the best possible specification for the Premier Inn model. Ongoing freehold ownership provides flexibility to extend hotels, reduces profit volatility through the cycle and provides Whitbread with a strong covenant for superior access to leasehold properties. During the half, the property teams added 1,870 rooms to the Premier Inn pipeline, including six new hotels.
As laid out in our property strategy in November 2016, the level of freehold sale and leaseback transactions has been increased in order to recycle capital into new developments, improve liquidity and demonstrate the strength of Whitbread's balance sheet. To this end, a forward funding transaction was completed in relation to a 246-room Hub hotel development in Shoreditch in London. Whitbread receives GBP52 million and will enter into a 25-year lease, at a yield of 3.9%, on completion of the development. Total proceeds of circa GBP100 million are expected to be received from sale and leaseback transactions in the year.
Improving digital capabilities
Whitbread's scale enabled the creation of a shared digital and technology function. This team has been instrumental in the advances made in developing premierinn.com and re-platforming Costa's legacy loyalty platform. During the half, the replacement of core finance systems in Premier Inn was also completed, which enables enhanced performance insight and reduces manual intervention. Work has already begun to extend these systems to support improvements in the finance function of Costa. The roll-out of new tills in Costa is also progressing, which will speed up transactions and enable click and collect to be completed in 2018.
A Force for Good
Earlier this year the Force for Good programme was initiated to integrate the numerous activities Whitbread conducts to ensure the long-term sustainability of its businesses. The Force for Good programme focuses on three central themes:
-- Providing a working environment where all team members can reach their potential; -- Making meaningful contributions to the communities in which Whitbread operates; and -- Treating people and the environment with respect.
Whitbread's attractiveness as an employer includes a large-scale apprenticeship programme, broad training and development programmes, and pay for progression as a key underlying principle. This enables Whitbread to compete well in attracting people to all positions and provide rewarding careers, which increases team retention. Whitbread has invested almost GBP2 million to date and over 11,000 qualifications have been gained. Over 2,000 full apprenticeships have been achieved since 2009 and more than 750 are currently underway. This year, Whitbread was also listed 8(th) in the Sunday Times 'Best Big Companies to Work For' ranking.
The Premier Inn team completed fund raising activities to support the construction of a new clinical building at Great Ormond Street Hospital, which is set to open in November. The Costa Foundation provides education through 75 schools in nine coffee growing regions and, to date, more than 60,000 children have benefitted.
The initiative begun by Costa to recycle not only its own cups, but also those from other coffee shops, gained further traction, with now over 9 million cups recycled through us in 8 months. This year, Whitbread also moved to a 100% renewable supply contract, under which all electricity comes from green sources including wind and hydro power.
Long-term ambition
Whitbread has achieved a significant amount in the past 18 months to improve capabilities and ensure a strong platform is in place to deliver sustainable growth over the medium-term in the UK and internationally. Progress has been made whilst maintaining a strong balance sheet, growing revenue and earnings and maintaining a strong return on capital.
In the UK, Premier Inn has a secure pipeline to 85,000 rooms and clear ambition to beyond 100,000 rooms. Despite significant capacity growth, Premier Inn remains the hotel group with the highest value for money scores. Costa has made good progress in building a pipeline of innovation for new drinks, new food ranges, improvements in digital technology and investment in store standards. These improvements enable Costa to continue to be the UK's favourite coffee shop(7) and grow to 3,000 stores over the longer term.
Internationally, Premier Inn's expansion into Germany has accelerated and a strong foundation has been established to enable longer-term growth, in order to replicate the success of Premier Inn in the UK. Costa in China is now in a stronger position to deliver its plans following the buyout of its joint venture in South China, combined with its existing successful partnership with BHG in North China.
Investing in Whitbread's capabilities to achieve these ambitious plans has continued, but more remains to be done. Supply chain development, procurement efficiency and technology advancements are now possible following the improvements in the team over the past two years. The property strategy has been refined, with an increase in sale and leaseback transactions, whilst remaining majority freehold in the Premier Inn estate. These improvements enable the plan to be executed which will deliver long-term, sustainable growth in earnings and dividends, combined with strong return on capital.
Good financial performance in line with expectations
-- Strong revenue growth across all businesses
-- Disciplined cost management delivering profit growth of 6.7% to GBP328 million, in line with expectations
-- Strong discretionary cash generation of GBP293 million supports ongoing investment -- Strong balance sheet with net debt reduced to GBP852 million -- Return on capital increased to 15.4%, despite recent investments yet to mature -- Confidence in sustainable growth supports increase in interim dividend to 31.4p
Premier Inn | Continued strong financial performance
-- Good revenue growth of 6.4% delivered through market leading occupancy and room growth
-- Restaurants performance improved with 1.1% like for like sales growth
-- Efficiency programmes supporting sustainable profit growth
-- International exits reducing losses and profitability drag
-- Maintaining high return on capital on a growing capital base
Premier Inn financial highlights
======================================================================
H1 FY18 H1 FY17 Change
========== ======== =======
Revenue GBP1,052m GBP988m 6.4%
UK (inc. restaurants / F&B) GBP1,049m GBP985m 6.4%
International GBP3m GBP3m n.m.
Underlying operating profit GBP295m GBP272m 8.9%
UK (inc. restaurants / F&B) GBP297m GBP275m 8.1%
International GBP(2)m GBP(3)m n.m.
Statutory profit before tax GBP295m GBP233m 26.5%
Other metrics
H1 Premier Inn total sales growth* 8.3% 8.9%
H1 UK Premier Inn like for like sales
growth* 3.6% 2.4%
Q2 UK Premier Inn like for like sales
growth* 2.6% 2.7%
H1 Restaurants like for like sales
growth 1.1% 0.3%
Q2 Restaurants like for like sales
growth 1.6% 0.5%
Return on capital 13.4% 13.0%
======================================= ========== ======== =======
*Excludes Restaurants
Premier Inn (including Restaurants) had another good performance in the first half, with revenue increasing 6.4% to GBP1,052 million (H1 FY17: GBP988 million) and underlying operating profit growing 8.9% to GBP295 million (H1 FY17: GBP272 million). This strong profit growth led to an increase in return on capital to 13.4% (H1 FY17: 13.0%), despite further capital investment in Premier Inn of GBP214 million.
In the UK, Premier Inn (including Restaurants) increased revenue by 6.4% to GBP1,049 million (H1 FY17: GBP985 million) and grew underlying operating profit at a faster rate of 8.1% to GBP297 million (H1 FY17: GBP275 million). Good revenue growth was a mix of high like for like room sales growth and the benefit of new rooms opened in the last 12 months. Like for like Premier Inn sales growth (excluding Restaurants) of 3.6% (H1 FY17: 2.4%) was the result of an increase in the average rate charged per room of 2.8% to GBP65.26 (H1 FY17: GBP63.48) and the benefit of hotel extensions, offset by a modest reduction in occupancy to 81.8% (H1 FY17: 82.6%). Like for like RevPAR was up 1.8% with RevPAR in catchments with no Premier Inn capacity growth up circa 3.3%, comparable with the midscale and economy market RevPAR growth of 3.5%.
In London, we were pleased with Premier Inn's performance with total sales up 9.9%, with 8.2% growth coming from new hotels. Despite the additional capacity, like for like occupancy was high at 86.4% and like for like RevPAR increased 2.2%. The midscale and economy market RevPAR was up 4.9%.(8)
In the regions, Premier Inn's total sales growth was again strong, increasing 7.7%, with like for like RevPAR up 1.9% and like for like sales growth of 4.0%, supported by 1,400 extension rooms opened over the last 12 months. The midscale and economy market RevPAR was up 3.2%.
This strong growth is due to maintaining consistent high quality throughout the hotel estate, combined with offering excellent value for money, which has been enhanced through the introduction of the automated trading engine last year.
Strong progress in efficiency activities, combined with the benefit of sales growth, enabled underlying operating profit margins to increase to 28.1% (H1 FY17: 27.5%). The ongoing everyday efficiency programme provided a benefit to underlying operating margin of 160 basis points, whilst increased sales and new capacity contributed 180 basis points. This ensured that that the increase in product costs, labour costs and business rates, which impacted margins by 260 basis points, could be offset. However, the timing of investment in FY18 is more weighted towards the second half of the year.
The food and beverage offer, which is integral to the overall Premier Inn experience, also performed well. Restaurants revenue grew 2.0%, with like for like sales growth of 1.1% (H1 FY17: 0.3%). The good like for like growth was a result of all Beefeater restaurants now being refurbished to the latest "orange cow" format, enhancements to menus across Thyme, Beefeater and Brewers Fayre restaurants and increased take-up of hotel guests for breakfast.
During the half the exit of all hotels in India, Thailand, Singapore and Indonesia was completed. As a result of these exits, underlying operating losses from Premier International were reduced to GBP(2) million (H1 FY17: GBP(3) million).
Costa | Revenue growth and earnings as expected
-- Strong revenue growth underpinned by ongoing UK & international expansion
-- UK like for like sales remain positive against tough market conditions
-- Improvement in like for like performance in China
-- Costa Express growth in the UK and international continues with 767 net new machines
-- Underlying operating profit in line with expectations
-- Strong return on capital returning to normalised levels following recent investment
Costa financial highlights
================================================================
H1 FY18 H1 FY17 Change
======== ======== =======
Revenue GBP622m GBP570m 9.1%
UK GBP542m GBP500m 8.3%
International GBP80m GBP70m 15.4%
Underlying operating profit GBP65m GBP65m 0.3%
UK GBP61m GBP64m (4.6)%
International GBP4m GBP1m n.m.
Statutory profit before tax GBP59m GBP65m (9.8)%
Other metrics
H1 UK equity stores like for like
sales growth 0.6% 2.3%
Q2 UK equity stores like for like
sales growth 0.1% 2.0%
H1 UK Express total sales growth 17.7% 21.9%
Return on capital 39.9% 41.8%
=================================== ======== ======== =======
Costa grew well during the half, with revenue increasing 9.1% to GBP622 million (H1 FY17: GBP570 million). Recent significant increases in industry cost structures were offset to an extent by volume benefits and efficiency savings which enabled underlying operating profit to remain flat at GBP65 million (H1 FY17: GBP65 million). Holding underlying operating profit flat, combined with recent investment in technology, new stores and the new Roastery, led to return on capital returning to normalised levels at 39.9% (H1 FY17: 41.8%).
In the UK, Costa increased revenue by 8.3% to GBP542 million (H1 FY17: GBP500 million). This strong sales growth was principally driven by the addition of 108 net new stores, and the continued strong performance of Costa Express, which grew revenues by 17.7% to GBP98 million (H1 FY17: GBP83 million). Like for like sales growth in UK equity Costa stores remained positive at 0.6% following the introduction of an improved breakfast food range and a broader range of cold drinks.
Costa UK underlying operating profit declined by 4.6% to GBP61 million (H1 FY17 GBP64 million), in line with previous margin guidance, resulting from a mix of significant increases in labour costs, business rates and foreign exchange impacts on coffee imports, together impacting underlying operating profit margins by 180 basis points. However, these expected cost increases were largely offset by efficiency savings, which delivered a benefit of 150 basis points to underlying margins.
The contribution from Costa's international operations grew to GBP4 million during the half (H1 FY17: GBP1 million), following the completion of the exit of operations in France and improvements in China. With further improvements to come in China, along with the buy-out of the joint venture partner in South China, continued growth is expected, requiring greater investment in the short term.
Profit growth | Disciplined cost control underpins profit growth
H1 FY18 H1 FY17 Change
========== ========== ========
Premier Inn underlying operating profit GBP295m GBP272m 8.9%
Costa underlying operating profit GBP65m GBP65m 0.3%
Central costs GBP(18)m GBP(17)m (9.8)%
========== ========== ========
Underlying operating profit GBP342m GBP320m 7.1%
Underlying net finance costs GBP(14)m GBP(13)m (16.5)%
========== ========== ========
Underlying profit before tax GBP328m GBP307m 6.7%
Non-underlying items GBP(12)m GBP(43)m -
========== ========== ========
Profit before tax GBP316m GBP264m 19.9%
Tax GBP(66)m GBP(63)m (4.6)%
========== ========== ========
Profit for H1 GBP250m GBP201m 24.7%
========================================= ========== ========== ========
Growth in profits was due to the strong performance of Premier Inn with an 8.9% increase in underlying operating profit to GBP295 million (H1 FY17: GBP272 million). This was partially offset by a small increase in central costs to GBP18 million (H1 FY17: GBP17 million), reflecting the ongoing investment building the capabilities across technology, property, supply chain and procurement functions.
Non-underlying items
H1 FY18 H1 FY17
========= =========
Disposal of PPE and property provisions GBP(8)m GBP4m
PI international business exit GBP6m GBP(35)m
UK restructuring - GBP(11)m
Historic indirect tax disputes GBP(4)m GBP5m
IAS 19 pension finance cost GBP(5)m GBP(5)m
Amortisation of acquired intangibles GBP(1)m GBP(1)m
========= =========
Total non-underlying items GBP(12)m GBP(43)m
======================================== ========= =========
During the first half, the international business exits were substantially completed, ahead of schedule and at a lower cost than expected, resulting in a GBP6 million benefit in the period.
The cash impact of the above non-underlying operating costs was a net cash inflow of GBP72 million (H1 FY17: GBP39 million net cash inflow) made up of a cash outflow from operating activities of GBP14 million (H1 FY17: GBP15 million outflow) and a cash inflow from investing activities of GBP86 million (H1 FY17: GBP54 million inflow).
Further information on non-underlying items is contained in note 3 to the financial statements.
Net finance costs
The underlying net finance cost for the half year was GBP1 million higher than last year at GBP14 million (H1 FY17: GBP13 million), which was principally due to a lower proportion of interest being capitalised against construction projects in progress.
Total net finance costs were GBP20 million (H1 FY17 GBP18 million) including the IAS19 pension finance charge of GBP5 million (H1 FY17: GBP5 million charge).
Taxation
Underlying tax for the half year amounted to GBP66 million at an effective tax rate of 20.2% (H1 FY17: 21.2%). Total tax for the half year amounted to GBP66 million at an effective tax rate of 20.8% (H1 FY17: 23.9%).
Earnings per share
H1 FY18 H1 FY17 Change
======== ======== =======
Statutory basic earnings per share 137.7p 111.4p 23.6%
Statutory diluted earnings per share 137.3p 111.1p 23.6%
Underlying basic earnings per share 143.7p 133.9p 7.4%
Underlying diluted earnings per share 143.3p 133.4p 7.4%
======================================= ======== ======== =======
Full details are set out in Note 5 to the financial statements.
Dividend
The interim dividend is 31.4 pence, an increase on last year of 5.0%. Full details are set out in Note 6 to the financial statements. The dividend will be paid on 15 December 2017 to all shareholders on the register at the close of business on 10 November 2017. Shareholders will again be offered the option to participate in a dividend re-investment plan.
Cash generation | Consistent & strong to fund investments
H1 FY18 H1 FY17
========== ==========
Underlying operating profit GBP342m GBP320m
Non-cash items GBP126m GBP113m
Change in working capital GBP(27)m GBP(1)m
Maintenance capital expenditure GBP(90)m GBP(117)m
Interest GBP(8)m GBP(10)m
Tax GBP(50)m GBP(36)m
========== ==========
Discretionary free cash flow GBP293m GBP269m
Pensions GBP(48)m GBP(44)m
Dividends GBP(120)m GBP(113)m
Expansionary capital expenditure GBP(179)m GBP(212)m
Proceeds from sale & leaseback transactions GBP41m GBP46m
Proceeds from disposal of business GBP45m GBP8m
Other GBP6m GBP(32)m
========== ==========
Net cash flow GBP38m GBP(78)m
Opening net debt GBP890m GBP910m
========== ==========
Closing net debt GBP852m GBP988m
============================================ ========== ==========
Cash generation remained strong in the first half, converting 86% of underlying operating profit into discretionary free cash. This discretionary free cash flow was used to fund our pension contributions of GBP48 million, dividends payments of GBP120 million and expansionary capital expenditure of GBP179 million.
Capital investment | Compelling opportunities to invest at high ROC
H1 FY18 H1 FY17 Last 2 years
======== ======== =============
Maintenance and product improvement
Premier Inn GBP72m GBP92m GBP316m
Costa GBP18m GBP25m GBP108m
Growth
New / extended UK hotels GBP122m GBP148m GBP626m
Premier Inn Germany & International GBP20m GBP29m GBP127m
New Costa stores & Express machines GBP37m GBP35m GBP133m
Total GBP269m GBP329m GBP1,310m
==================================== ======== ======== =============
Capital expenditure during the half decreased to GBP269 million (H1 FY17: GBP329 million). The reduction was principally due to the timing of new hotels and hotel refurbishments. Investments in new and extended hotels mature over a 1-3 year period and deliver return on capital above 13%. The pace of investment in new Costa stores and Costa Express machines continued in the half, with a further GBP37 million of capital. New Costa stores take 1-3 years to reach maturity and deliver return on capital of 30-40%.
Capital discipline | Asset-backed balance sheet provides flexibility
H1 FY18 FY17 H1 FY17
========== ========== ==========
Net debt GBP852m GBP890m GBP988m
Pension (net of tax) GBP335m GBP377m GBP356m
Lease commitments (@8x) GBP2,128m GBP2,058m GBP1,985m
========== ========== ==========
Adjusted net debt GBP3,315m GBP3,325m GBP3,329m
========== ========== ==========
Freehold / leasehold mix 64:36% 64:36% 63:37%
Adjusted net debt : EBITDAR(9) 3.0x 3.2x 3.3x
Net debt : EBITDA(10) 1.0x 1.1x 1.3x
Fixed charge cover(11) 3.0x 3.0x 3.0x
================================ ========== ========== ==========
Whitbread is focused on maintaining its strong financial position and capital structure. To this end, we work within the financial framework of pension and lease adjusted net debt to EBITDAR of less than 3.5 times. At the half year leverage was 3.0 times, providing us with appropriate headroom.
Whitbread has a preference for freehold hotel properties, which provides significant capital flexibility and reduces profit volatility of earnings. Freehold ownership also provides the opportunity to realise development profits through sale and leaseback transactions for properties with limited further development potential.
Sufficient headroom in debt funding facilities are also in place to finance short and medium-term requirements with total committed facilities of approximately GBP1.8 billion, compared to net debt as at 31 August 2017 of GBP852 million. Committed debt facilities include US Private Placement loans of GBP432 million (at the hedged rate), a GBP450 million bond and a syndicated bank revolving credit facility ("RCF") of GBP950 million which has recently been extended to September 2022.
Pension
As at 31 August 2017 there was an IAS19 pension deficit of GBP375 million, which compares to GBP425 million at 2 March 2017 and GBP404 million at 1 September 2016. The reduction in deficit of GBP50 million was primarily due to deficit contributions of GBP48 million.
Return on capital | Consistently delivering above cost of capital
H1 FY18 FY17 H1 FY17
========= ========= =========
Premier Inn 13.4% 13.0% 13.0%
Costa 39.9% 45.4% 41.8%
Whitbread 15.4% 15.2% 15.1%
Impact on the Group of capital (130)bps (170)bps (190)bps
invested for future openings
================================ ========= ========= =========
There is currently GBP253 million of capital invested for future openings. This has an impact on reported return on capital of both Premier Inn and Whitbread of (130)bps.
FY18 outlook | No overall change to Group expectations
We have significant structural growth opportunities in the UK and internationally and confidence in our plans to capitalise on these opportunities. Despite the well known short-term economic uncertainty, our performance in the first half was good and we expect to meet expectations for the full year. Although we remain cautious on the current environment, we are confident that ongoing disciplined allocation of capital and focus on executing our plans will deliver sustainable growth in earnings and dividends and a strong return on capital.
New hotels within the UK are expected to contribute approximately 5-6% to total sales growth for the full year, comprising approximately 4,200 rooms openings this year. Costa remains on track to deliver 230-250 new stores and approximately 1,200 new Costa Express machines in the full year.
Going concern
A combination of the strong operating cash flows generated by the business and the significant headroom on its credit facilities supports the Directors' view that the Group has sufficient funds available for it to meet its foreseeable working capital requirements. The Directors have concluded that the going concern basis remains appropriate.
Related parties
Related parties have been considered in Note 10 and are therefore not included within this Finance Review.
Post balance sheet events
On 10 October 2017, the Group announced it had acquired the non-controlling interest in Yueda Costa (Shanghai) Food & Beverage Management Company Limited for GBP35 million. The enterprise was previously fully consolidated, therefore the acquisition will not have an impact on underlying earnings.
An interim dividend of 31.4 pence per share (H1 FY17: 29.9p) amounting to a total of GBP57 million was declared by the Board on 23 October 2017.
Risks and uncertainties
The directors have reconsidered the principle risks and uncertainties of the Group and these remain unchanged from those reported in the Annual Report and Accounts 2017. The risk of a wider macro-economic effect as a result of the UK leaving the EU, including foreign exchange and interest rate fluctuations, is addressed by the Group's existing economic climate risk. Going forward we will closely monitor and evaluate any potential areas of risk.
Supplementary information
Further information is available in MS Excel and PDF form from www.whitbread.co.uk/investors. This information includes:
-- Premier Inn and Costa hotel and store estate data; -- Premier Inn and Costa sales, profit and return on capital information; -- Comparison of Premier UK sales performance to market trends; -- Group income statement; and -- Lease commitments.
American Depositary Receipts
Whitbread has established a sponsored Level I American Depositary Receipt (ADR) programme for which Deutsche Bank perform the role of depositary bank. The Level I 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 performance of the Group is monitored internally using a variety of statutory and alternative performance measures (APMs). APMs are not defined within IFRS and are used to assess the underlying operational performance of the Group and as such these measures should be considered alongside IFRS measures. APMs used in this announcement include like for like sales, underlying operating profit, underlying profit, underlying basic earnings per share, net debt, return on capital, and discretionary free cash flow.
1 Underlying profit and underlying EPS
Profit excluding non-underlying items. Full details of the non-underlying
items are set out note 3 to the financial statements. Underlying
earnings per share based on the above underlying profit definition
and the tax thereon.
2 Discretionary free cash flow
Cash generated from operations after payments for interest,
tax and maintenance capital
3 Return on capital
Calculated by dividing the underlying operating profit for the
12 months to 31 August 2017 by net assets at the balance sheet
date adding back debt, taxation liabilities and the pension
deficit.
4 Unless otherwise stated, "Premier Inn" includes Premier Inn
UK, Premier Inn Germany, Premier Inn International and Restaurants.
This was previously referred to as Premier Inn & Restaurants.
5 Net Debt
Total company borrowings after deducting cash and cash equivalents
6 Like for like sales
Period over period change in total sales, less sales generated
by businesses acquired or disposed of and retail outlets opened
or closed during the current year and the previous year. This
is stated pre-IFRIC 13 for Premier Inn - UK and Ireland, Costa
and Restaurants - UK
7 Source: Allegra
8 Source: STR Global
9 EBITDAR
Underlying earnings before interest, tax, depreciation, amortisation
and rent excluding income from Joint Ventures and Associates.
10 EBITDA
Underlying earnings before interest, tax, depreciation and amortisation
excluding income from Joint Ventures and Associates.
11 Fixed charge cover
Ratio of underlying operating profit before rent compared to
interest plus rent
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, 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 as required by DTR 4.2.4R;
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 Nicholas Cadbury Chief Executive Finance Director
Interim consolidated income statement
(Reviewed) (Reviewed) (Audited)
6 months to 6 months to Year to
31 August 1 September
2017 2016 2 March 2017
Notes GBPm GBPm GBPm
--------------------------------------- -----
Revenue 2 1,671.4 1,555.9 3,106.0
Operating costs (1,336.2) (1,275.9) (2,557.2)
------------ ------------ -------------
Operating profit before joint ventures
and associate 335.2 280.0 548.8
Share of profit from joint ventures 0.8 1.0 3.2
Share of profit from associate - 0.7 0.7
------------ ------------ -------------
Operating profit 336.0 281.7 552.7
Finance cost 4 (20.2) (18.3) (37.6)
Finance revenue 4 0.2 0.2 0.3
------------ ------------ -------------
Profit before tax 316.0 263.6 515.4
Analysed as:
Underlying profit before tax 327.6 307.0 565.2
Non-underlying items 3 (11.6) (43.4) (49.8)
------------ ------------ -------------
Profit before tax 316.0 263.6 515.4
--------------------------------------- ----- ------------ ------------ -------------
Tax expense (65.8) (62.9) (99.5)
Analysed as:
Underlying tax expense (66.1) (65.0) (119.1)
Non-underlying tax credit 3 0.3 2.1 19.6
------------ ------------ -------------
Tax expense (65.8) (62.9) (99.5)
--------------------------------------- ----- ------------ ------------ -------------
Profit for the period 250.2 200.7 415.9
------------ ------------ -------------
Attributable to:
Parent shareholders 251.6 202.9 421.6
Non-controlling interest (1.4) (2.2) (5.7)
------------ ------------ -------------
250.2 200.7 415.9
------------ ------------ -------------
(Reviewed) (Reviewed) (Audited)
6 months to 6 months to Year to
31 August 1 September
2017 2016 2 March 2017
Earnings per share (Note 5) pence pence pence
------------------------------ ------------ ------------ ------------- Earnings per share Basic 137.71 111.42 231.39 Diluted 137.26 111.06 230.89 Underlying earnings per share Basic 143.74 133.88 246.48 Diluted 143.26 133.44 245.95
Interim consolidated statement of comprehensive income
(Reviewed) (Reviewed) (Audited)
6 months to 6 months to Year to
31 August 1 September
2017 2016 2 March 2017
Notes GBPm GBPm GBPm
-------------------------------------------- ----- ------------ ------------ -------------
Profit for the period 250.2 200.7 415.9
Items that will not be reclassified
to the income statement:
Re-measurement gain / (loss) on defined
benefit pension scheme 9 9.2 (152.5) (214.8)
Current tax on pensions 8.9 8.6 15.6
Deferred tax on pensions (9.7) 20.4 26.7
Deferred tax: change in rate of corporation
tax on pensions (0.9) - (3.1)
7.5 (123.5) (175.6)
Items that may be reclassified subsequently
to the income statement:
Net gain / (loss) on cash flow hedges 2.2 (1.5) (0.2)
Current tax on cash flow hedges (0.2) 0.5 0.5
Deferred tax on cash flow hedges (0.2) (0.2) (0.6)
Deferred tax: change in rate of corporation
tax on cash flow hedges - - (0.1)
1.8 (1.2) (0.4)
Exchange differences on translation
of foreign operations 8.4 13.8 22.9
Other comprehensive income / (loss)
for the period, net of tax 17.7 (110.9) (153.1)
Total comprehensive income for the period,
net of tax 267.9 89.8 262.8
------------ ------------ -------------
Attributable to:
Parent shareholders 269.3 91.9 268.4
Non-controlling interest (1.4) (2.1) (5.6)
------------ ------------ -------------
267.9 89.8 262.8
------------ ------------ -------------
Interim consolidated statement of changes in equity
6 months to 31 August 2017 (Reviewed)
Capital Currency
Share Share redemption Retained translation Other Non-controlling Total
capital premium reserve earnings reserve reserves Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------- -------- ---------- --------- ----------- --------- ------- --------------- -------
At 2 March
2017 150.2 68.0 12.3 4,330.9 28.4 (2,061.5) 2,528.3 (3.5) 2,524.8
Profit for the
period - - - 251.6 - - 251.6 (1.4) 250.2
Other
comprehensive
income - - - 7.1 8.4 2.2 17.7 - 17.7
-------- -------- ---------- --------- ----------- --------- ------- --------------- -------
Total
comprehensive
income - - - 258.7 8.4 2.2 269.3 (1.4) 267.9
Ordinary
shares
issued - 1.4 - - - - 1.4 - 1.4
Loss on ESOT
shares
issued - - - (1.7) - 1.7 - - -
Accrued
share-based
payments - - - 7.9 - - 7.9 - 7.9
Equity
dividends - - - (120.3) - - (120.3) - (120.3)
At 31 August
2017 150.2 69.4 12.3 4,475.5 36.8 (2,057.6) 2,686.6 (4.9) 2,681.7
-------- -------- ---------- --------- ----------- --------- ------- --------------- -------
6 months to 1 September 2016 (Reviewed)
Capital Currency
Share Share redemption Retained translation Other Non-controlling Total
capital premium reserve earnings reserve reserves Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------- -------- ---------- --------- ----------- --------- ------- --------------- -------
At 3 March
2016 150.0 62.6 12.3 4,239.8 5.6 (2,067.7) 2,402.6 2.1 2,404.7
Profit for the
period - - - 202.9 - - 202.9 (2.2) 200.7
Other
comprehensive
loss - - - (123.2) 13.7 (1.5) (111.0) 0.1 (110.9)
-------- -------- ---------- --------- ----------- --------- ------- --------------- -------
Total
comprehensive
income - - - 79.7 13.7 (1.5) 91.9 (2.1) 89.8
Ordinary
shares
issued 0.1 1.6 - - - - 1.7 - 1.7
Loss on ESOT
shares
issued - - - (5.6) - 5.6 - - -
Accrued
share-based
payments - - - 8.2 - - 8.2 - 8.2
Equity
dividends - - - (112.6) - - (112.6) - (112.6)
At 1 September
2016 150.1 64.2 12.3 4,209.5 19.3 (2,063.6) 2,391.8 - 2,391.8
-------- -------- ---------- --------- ----------- --------- ------- --------------- -------
Year to 2 March 2017 (Audited)
Capital Currency
Share Share redemption Retained translation Other Non-controlling Total
capital premium reserve earnings reserve reserves Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------- -------- ---------- --------- ----------- --------- ------- --------------- -------
At 3 March
2016 150.0 62.6 12.3 4,239.8 5.6 (2,067.7) 2,402.6 2.1 2,404.7
Profit for the
year - - - 421.6 - - 421.6 (5.7) 415.9
Other
comprehensive
loss - - - (175.8) 22.8 (0.2) (153.2) 0.1 (153.1)
-------- -------- ---------- --------- ----------- --------- ------- --------------- -------
Total
comprehensive
income - - - 245.8 22.8 (0.2) 268.4 (5.6) 262.8
Ordinary
shares
issued 0.2 5.4 - - - - 5.6 - 5.6
Loss on ESOT
shares
issued - - - (6.4) - 6.4 - - -
Accrued
share-based
payments - - - 17.7 - - 17.7 - 17.7
Tax on
share-based
payments - - - 0.4 - - 0.4 - 0.4
Tax rate
change
on historical
revaluation - - - 0.7 - - 0.7 - 0.7
Equity
dividends - - - (167.1) - - (167.1) - (167.1)
At 2 March
2017 150.2 68.0 12.3 4,330.9 28.4 (2,061.5) 2,528.3 (3.5) 2,524.8
-------- -------- ---------- --------- ----------- --------- ------- --------------- -------
Interim consolidated balance sheet
Notes (Reviewed) (Reviewed) (Audited)
31 August 1 September
2017 2016 2 March 2017
GBPm GBPm GBPm
-------------------------------------- ----- ---------- ------------ -------------
ASSETS
Non-current assets
Intangible assets 282.2 263.2 275.7
Property, plant and equipment 4,040.0 3,970.9 3,972.4
Investment in joint ventures 51.7 50.2 53.0
Derivative financial instruments 8 35.9 31.6 43.3
Trade and other receivables 6.4 8.3 6.8
4,416.2 4,324.2 4,351.2
Current assets
Inventories 52.0 46.7 48.2
Derivative financial instruments 8 3.3 6.8 12.3
Trade and other receivables 221.0 147.9 163.6
Cash and cash equivalents 7 129.7 73.2 63.0
406.0 274.6 287.1
Assets held for sale 5.1 2.6 50.5
Total assets 4,827.3 4,601.4 4,688.8
LIABILITIES
Current liabilities
Borrowings 7 18.3 132.7 157.4
Provisions 38.9 12.9 36.3
Derivative financial instruments 8 2.6 1.1 2.3
Current tax liabilities 53.6 60.1 45.9
Trade and other payables 579.3 529.8 596.9
---------- ------------ -------------
692.7 736.6 838.8
Non-current liabilities
Borrowings 7 963.8 928.7 795.6
Provisions 10.7 33.1 12.3
Derivative financial instruments 8 7.4 12.5 8.3
Deferred tax liabilities 72.6 73.4 62.0
Pension liability 9 374.5 403.5 425.1
Trade and other payables 23.9 21.8 21.9
---------- ------------ -------------
1,452.9 1,473.0 1,325.2
Total liabilities 2,145.6 2,209.6 2,164.0
Net assets 2,681.7 2,391.8 2,524.8
---------- ------------ -------------
EQUITY
Share capital 150.2 150.1 150.2
Share premium 69.4 64.2 68.0
Capital redemption reserve 12.3 12.3 12.3
Retained earnings 4,475.5 4,209.5 4,330.9
Currency translation reserve 36.8 19.3 28.4
Other reserves (2,057.6) (2,063.6) (2,061.5)
---------- ------------ -------------
Equity attributable to equity holders
of the parent 2,686.6 2,391.8 2,528.3
Non-controlling interest (4.9) - (3.5)
Total equity 2,681.7 2,391.8 2,524.8
---------- ------------ -------------
Interim consolidated cash flow statement
(Reviewed) (Reviewed) (Audited)
6 months to 6 months to Year to
31 August 1 September
2017 2016 2 March 2017
Notes GBPm GBPm GBPm
--------------------------------------------- ----- ------------ ------------ -------------
Profit for the period 250.2 200.7 415.9
Adjustments for:
Tax expense 65.8 62.9 99.5
Net finance cost 4 20.0 18.1 37.3
Share of profit from joint ventures (0.8) (1.0) (3.2)
Share of profit from associate - (0.7) (0.7)
Non-underlying operating costs 3 6.4 38.0 39.7
Cash outflow from non-underlying operating
costs - (2.8) (7.3)
Underlying depreciation and amortisation 2 112.8 104.2 217.6
Share-based payments 7.9 8.2 17.7
Other non-cash items 5.9 5.2 8.6
------------ ------------ -------------
Cash generated from operations before
working capital changes 468.2 432.8 825.1
Increase in inventories (3.7) (1.7) (3.1)
Increase in trade and other receivables (33.3) (7.1) (7.1)
Increase in trade and other payables 9.9 7.4 45.2
Cash generated from operations 441.1 431.4 860.1
Payments against provisions (14.1) (12.1) (22.3)
Pension payments 9 (48.1) (43.7) (90.3)
Interest paid (8.2) (9.7) (34.9)
Interest received 0.2 0.2 0.3
Corporation taxes paid (49.7) (35.9) (86.8)
------------ ------------ -------------
Net cash flows from operating activities 321.2 330.2 626.1
Cash flows from investing activities
Purchase of property, plant and equipment 2 (252.0) (312.9) (571.2)
Investment in intangible assets 2 (16.8) (16.1) (38.6)
Proceeds from disposal of property,
plant and equipment 41.3 53.6 192.9
Proceeds from disposal of investment
in associate - - 14.1
Proceeds from disposal of business 44.9 - -
Capital contributions and loans to joint
ventures - (7.6) (7.7)
Dividends from associate - 0.4 0.4
Net cash flows from investing activities (182.6) (282.6) (410.1)
Cash flows from financing activities
Proceeds from issue of share capital 1.4 1.7 5.6
(Reduction) / increase in short-term
borrowings 7 (109.6) 4.5 17.6
Proceeds from long-term borrowings 7 200.0 - -
(Repayments of) / increases in long-term
borrowings 7 (43.5) 73.9 (67.4)
Renegotiation costs of long-term borrowings 7 (0.8) (0.6) (0.6)
Dividends paid 6 (120.3) (112.6) (167.1)
------------ ------------ -------------
Net cash flows from financing activities (72.8) (33.1) (211.9)
Net increase in cash and cash equivalents 65.8 14.5 4.1
Opening cash and cash equivalents 63.0 57.1 57.1
Foreign exchange differences 0.9 1.6 1.8
------------ ------------ -------------
Closing cash and cash equivalents 7 129.7 73.2 63.0
------------ ------------ -------------
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 23 October 2017.
The interim condensed consolidated financial statements are prepared in accordance with UK listing rules and with IAS 34 'Interim Financial Reporting'. The interim financial report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The financial information for the year ended 2 March 2017 is extracted from the statutory accounts of the Group for that year and does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. These published accounts were prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted for use in the European Union, and reported on by the auditor without qualification or statement under Sections 498(2) or (3) of the Companies Act 2006 and have been delivered to the Registrar of Companies.
The interim condensed consolidated financial statements for the six months ended 31 August 2017 and the comparatives to 1 September 2016 are unaudited but have been reviewed by the auditor; a copy of their review report is included at the end of this report.
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.
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 2 March 2017.
2. Segmental analysis
For management purposes, the Group is organised into two strategic business units (Premier Inn and Costa) based upon their different products and services:
-- Premier Inn provide services in relation to accommodation and food; and
-- Costa generates income from the operation of its branded, owned and franchised coffee outlets.
The UK and International Premier Inn segments have been aggregated on the grounds that the International segment is immaterial.
Management monitors the operating results of its strategic business units separately for the purpose of making decisions about allocating resources and assessing performance. Segment performance is measured based on underlying operating profit. Included within the unallocated and elimination columns in the tables below are the costs of running the public company. The unallocated assets and liabilities are cash and debt balances (held and controlled by the central treasury function), taxation, pensions, certain property, plant and equipment, centrally held provisions and central working capital balances.
Inter-segment revenue is from Costa to the Premier Inn segment and is eliminated on consolidation. Transactions were entered into on an arm's length basis in a manner similar to transactions with third parties.
The following tables present revenue and profit information and certain asset and liability information regarding business operating segments for the six months to 31 August 2017 and 1 September 2016 and for the full year ended 2 March 2017.
Unallocated
and Total
Premier Costa elimination Operations
Inn
6 months to 31 August 2017 GBPm GBPm GBPm GBPm
-------------------------------------------- ------- ------- ----------- ----------
Revenue
Revenue from external customers 1,051.7 619.7 - 1,671.4
Inter-segment revenue - 2.0 (2.0) -
Total revenue 1,051.7 621.7 (2.0) 1,671.4
Underlying operating profit 295.6 64.8 (18.0) 342.4
Underlying net finance cost (Note 4) - - (14.8) (14.8)
------- ------- ----------- ----------
Underlying profit before tax 295.6 64.8 (32.8) 327.6
Non-underlying items (Note 3):
Disposal of property, plant and equipment
and property provisions (7.4) (0.6) - (8.0)
PI International business exit 6.7 - - 6.7
Historic indirect tax disputes - (4.0) - (4.0)
Amortisation of acquired intangibles - (1.1) - (1.1)
IAS 19 pension finance cost - - (5.2) (5.2)
------- ------- ----------- ----------
Total non-underlying items (0.7) (5.7) (5.2) (11.6)
Profit before tax 294.9 59.1 (38.0) 316.0
Tax expense (65.8)
----------
Profit for the period 250.2
----------
Assets and liabilities
Segment assets 4,082.5 543.5 - 4,626.0
Unallocated assets - - 201.3 201.3
------- ------- ----------- ----------
Total assets 4,082.5 543.5 201.3 4,827.3
------- ------- ----------- ----------
Segment liabilities (403.7) (147.0) - (550.7)
Unallocated liabilities - - (1,594.9) (1,594.9)
------- ------- ----------- ----------
Total liabilities (403.7) (147.0) (1,594.9) (2,145.6)
------- ------- ----------- ----------
Net assets 3,678.8 396.5 (1,393.6) 2,681.7
------- ------- ----------- ----------
Other segment information
Share of profit from joint ventures 0.5 0.3 - 0.8
Investment in joint ventures 39.5 12.2 - 51.7
Total property rent 73.8 61.9 - 135.7
Capital expenditure:
Property, plant and equipment - cash basis 199.5 52.5 - 252.0
Property, plant and equipment - accruals
basis 160.7 46.7 - 207.4
Intangible assets 14.4 2.4 - 16.8
Depreciation - underlying (66.4) (37.1) - (103.5)
Amortisation - underlying (7.6) (1.7) - (9.3)
Unallocated
and Total
Premier Costa elimination Operations
Inn
6 months to 1 September 2016 GBPm GBPm GBPm GBPm
-------------------------------------------- ------- ------- ----------- ----------
Revenue
Revenue from external customers 988.1 567.8 - 1,555.9
Inter-segment revenue - 1.9 (1.9) -
Total revenue 988.1 569.7 (1.9) 1,555.9
Underlying operating profit 271.5 64.6 (16.4) 319.7
Underlying net finance cost (Note 4) - - (12.7) (12.7)
------- ------- ----------- ----------
Underlying profit before tax 271.5 64.6 (29.1) 307.0
Non-underlying items (Note 3):
Disposal of property, plant and equipment
and property provisions 6.3 (1.7) (0.7) 3.9
PI International business exit (35.0) - - (35.0)
UK restructuring (9.6) (1.1) - (10.7)
Historic indirect tax disputes - 5.0 - 5.0
Amortisation of acquired intangibles - (1.2) - (1.2)
IAS 19 pension finance cost - - (5.0) (5.0)
Unwinding of discount on provisions - (0.1) (0.3) (0.4)
------- ------- ----------- ----------
Total non-underlying items (38.3) 0.9 (6.0) (43.4)
Profit before tax 233.2 65.5 (35.1) 263.6
Tax expense (62.9)
----------
Profit for the period 200.7
----------
Assets and liabilities
Segment assets 3,963.5 495.3 - 4,458.8
Unallocated assets - - 142.6 142.6
------- ------- ----------- ----------
Total assets 3,963.5 495.3 142.6 4,601.4
------- ------- ----------- ----------
Segment liabilities (367.9) (134.2) - (502.1)
Unallocated liabilities - - (1,707.5) (1,707.5)
------- ------- ----------- ----------
Total liabilities (367.9) (134.2) (1,707.5) (2,209.6)
------- ------- ----------- ----------
Net assets 3,595.6 361.1 (1,564.9) 2,391.8
------- ------- ----------- ----------
Other segment information
Share of profit from joint ventures 0.7 0.3 - 1.0
Share of profit from associate 0.7 - - 0.7
Investment in joint ventures 39.0 11.2 - 50.2
Total property rent 68.7 58.2 - 126.9
Capital expenditure:
Property, plant and equipment - cash basis 257.6 55.3 - 312.9
Property, plant and equipment - accruals
basis 227.5 57.4 - 284.9
Intangible assets 11.1 5.0 - 16.1
Depreciation - underlying (62.9) (34.2) - (97.1)
Amortisation - underlying (6.2) (0.9) - (7.1)
Unallocated
and Total
Premier Costa elimination operations
Inn
Year to 2 March 2017 GBPm GBPm GBPm GBPm
-------------------------------------------------- ------- ------- ----------- ----------
Revenue
Revenue from external customers 1,907.9 1,198.1 - 3,106.0
Inter-segment revenue - 3.6 (3.6) -
Total revenue 1,907.9 1,201.7 (3.6) 3,106.0
Underlying operating profit 468.0 158.0 (33.6) 592.4
Underlying net finance cost (Note 4) - - (27.2) (27.2)
------- ------- ----------- ----------
Underlying profit before tax 468.0 158.0 (60.8) 565.2
Non-underlying items (Note 3):
Disposal of property, plant and equipment
and property provisions 23.1 (10.5) (0.8) 11.8
PI International business exit (30.0) - - (30.0)
Costa international restructuring - (14.5) - (14.5)
UK restructuring (15.6) (5.9) (0.1) (21.6)
Historic indirect tax disputes - 5.3 - 5.3
Net gain on disposal of investment in associate 11.8 - - 11.8
Amortisation of acquired intangibles - (2.5) - (2.5)
IAS 19 pension finance cost - - (9.4) (9.4)
Unwinding of discount on provisions - (0.2) (0.5) (0.7)
------- ------- ----------- ----------
Total non-underlying items (10.7) (28.3) (10.8) (49.8)
Profit before tax 457.3 129.7 (71.6) 515.4
Tax expense (99.5)
----------
Profit for the year 415.9
----------
Assets and liabilities
Segment assets 4,020.2 511.4 - 4,531.6
Unallocated assets - - 157.2 157.2
------- ------- ----------- ----------
Total assets 4,020.2 511.4 157.2 4,688.8
------- ------- ----------- ----------
Segment liabilities (427.8) (163.3) - (591.1)
Unallocated liabilities - - (1,572.9) (1,572.9)
------- ------- ----------- ----------
Total liabilities (427.8) (163.3) (1,572.9) (2,164.0)
------- ------- ----------- ----------
Net assets 3,592.4 348.1 (1,415.7) 2,524.8
------- ------- ----------- ----------
Other segment information
Share of profit from joint ventures 2.5 0.7 - 3.2
Share of profit from associate 0.7 - - 0.7
Investment in joint ventures 41.0 12.0 - 53.0
Total property rent 139.8 121.4 - 261.2
Capital expenditure:
Property, plant and equipment - cash basis 459.7 111.5 - 571.2
Property, plant and equipment - accruals
basis 455.7 121.5 - 577.2
Intangible assets 25.8 12.8 - 38.6
Depreciation - underlying (131.0) (71.5) - (202.5)
Amortisation - underlying (13.3) (1.8) - (15.1)
3. Non-underlying items
6 months to 6 months to
31 August 1 September Year to
2017 2016 3 March 2017
GBPm GBPm GBPm
--------------------------------------------------------- ----------- ------------ -------------
Non-underlying items are as follows:
Operating costs:
Disposal of property, plant and equipment and property
provisions (a) (8.0) 3.9 11.8
PI International business exit (b) 6.7 (35.0) (30.0)
Costa international restructuring - - (14.5)
UK restructuring - (10.7) (21.6)
Historic indirect tax disputes (4.0) 5.0 5.3
Net gain on disposal of investment in associate - - 11.8
Amortisation of acquired intangibles (1.1) (1.2) (2.5)
Non-underlying operating costs (6.4) (38.0) (39.7)
Net finance cost:
IAS 19 pension finance cost (5.2) (5.0) (9.4)
Unwinding of discount on provisions - (0.4) (0.7)
----------- ------------ -------------
Non-underlying net finance cost (5.2) (5.4) (10.1)
----------- ------------ -------------
Non-underlying items before tax (11.6) (43.4) (49.8)
----------- ------------ -------------
Tax adjustments included in reported profit after
tax, but excluded in arriving at underlying profit
after tax:
Tax on non-underlying items 0.3 1.0 12.3
Non-underlying tax items - tax base cost - 1.1 2.1
Deferred tax relating to UK tax rate change - - 5.2
----------- ------------ -------------
Non-underlying tax credit 0.3 2.1 19.6
----------- ------------ -------------
(a) During the period, the Group made a net gain of GBP18.5m from disposal and development profit on sale and leaseback transactions, disposal of sites previously held for sale and other minor disposals, offset by impairment losses on hotel sites transferred to assets held for sale of GBP11.3m, and provision for other one-off property costs of GBP15.2m.
(b) On 13 July 2016, the Group announced its intention to exit hotel operations in South East Asia. In the prior year the Group recognised impairment losses of GBP14.9m and a provision of GBP15.1m for costs of exiting management agreements and closure of regional offices. During the current period the Group disposed of its businesses in Thailand, India and Indonesia, achieving net sales proceeds in excess of those assumed in the initial impairment calculation resulting in a net credit of GBP6.7m in the period.
4. Finance (costs) / revenue
6 months to 6 months to
31 August 1 September Year to
2017 2016 2 March 2017
GBPm GBPm GBPm
Finance cost
Bank loans and overdrafts (1.9) (2.8) (5.3)
Other loans (15.8) (15.5) (31.0)
Interest capitalised 2.9 5.5 8.9
Impact of ineffective portion of cash flow
and fair value hedges (0.2) (0.1) (0.1)
(15.0) (12.9) (27.5)
Finance revenue
Bank interest receivable 0.1 0.1 0.1
Other interest receivable 0.1 0.1 0.2
0.2 0.2 0.3
Underlying net finance cost (14.8) (12.7) (27.2)
----------- ------------ -------------
Non-underlying net finance cost
IAS 19 pension finance cost (Note 9) (5.2) (5.0) (9.4)
Unwinding of discount on provisions - (0.4) (0.7)
----------- ------------ -------------
(5.2) (5.4) (10.1)
----------- ------------ -------------
Total net finance cost (20.0) (18.1) (37.3)
----------- ------------ -------------
Total finance cost (20.2) (18.3) (37.6)
Total finance revenue 0.2 0.2 0.3
Total net finance cost (20.0) (18.1) (37.3)
----------- ------------ -------------
5. Earnings per share
The basic earnings per share (EPS) figures are calculated by dividing the net profit for the period attributable to parent shareholders, therefore before non-controlling interests, 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, the options become anti-dilutive and are excluded from the calculation. The number of such options for all disclosed periods was nil.
The numbers of shares used for the earnings per share calculations are as follows:
6 months to 6 months to
31 August 1 September Year to
2017 2016 2 March 2017
million million million
---------------------------------------------------------- ----------- ------------ -------------
Basic weighted average number of ordinary shares 182.7 182.1 182.2
Effect of dilution - share options 0.6 0.6 0.4
----------- ------------ -------------
Diluted weighted average number of ordinary shares 183.3 182.7 182.6
----------- ------------ -------------
The profits used for the earnings per share calculations
are as follows:
6 months to 6 months to
31 August 1 September Year to
2017 2016 2 March 2017
GBPm GBPm GBPm
Profit for the period attributable to parent shareholders 251.6 202.9 421.6
Non-underlying items- gross 11.6 43.4 49.8
Non-underlying items - taxation (0.3) (2.1) (19.6)
Non-underlying items - non-controlling interest (0.3) (0.4) (2.7)
----------- ------------ -------------
Underlying profit for the period attributable to
parent shareholders 262.6 243.8 449.1
6 months to 6 months to
31 August 1 September Year to
2017 2016 2 March 2017
pence pence pence
Basic on profit for the period 137.71 111.42 231.39
Non-underlying items - gross 6.35 23.83 27.33
Non-underlying items - taxation (0.16) (1.15) (10.76)
Non underlying items - non-controlling interest (0.16) (0.22) (1.48)
----------- ------------ -------------
Basic on underlying profit for the period 143.74 133.88 246.48
Diluted on profit for the period 137.26 111.06 230.89
Diluted on underlying profit for the period 143.26 133.44 245.95
6. Dividends paid
6 months to 6 months to Year to
31 August 2017 1 September 2016 2 March 2017
pence pence
pence per per
per share GBPm share GBPm share GBPm
------------------------------------- ---------- ----- ---------- ------- -------- -----
Equity dividends on ordinary shares:
Final dividend for prior year 65.90 120.3 61.85 112.6 61.85 112.6
Interim dividend for the year - - 29.90 54.5
120.3 112.6 167.1
Dividends on other shares:
B share dividend - - 0.80 -
C share dividend - - 0.80 -
----- ------- -----
- - -
Total dividends paid 120.3 112.6 167.1
----- ------- -----
An interim dividend of 31.40p per share (2016: 29.90p) amounting to a dividend of GBP57.3m (2016: GBP54.5m) was declared by the directors. A dividend reinvestment plan (DRIP) alternative will be offered. These consolidated financial statements do not reflect this dividend payable.
7. Movements in cash and net debt
Fair value
adjustments Amortisation
2 March Cost of Foreign to loan of premiums 31 August
2017 borrowings Cash flow exchange capital and discounts 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------- ----------- --------- --------- ------------ --------------- ---------
Cash at bank and
in hand 62.9 40.5
Short-term deposits 0.1 89.2
Overdrafts - -
------- ---------
Cash and cash equivalents 63.0 - 65.8 0.9 - - 129.7
Short-term bank
borrowings (109.6) - 109.6 - - - -
Loan capital under
one year (47.8) (18.3)
Loan capital over
one year (795.6) (963.8)
------- ---------
Total loan capital (843.4) 0.8 (156.5) 14.7 3.0 (0.7) (982.1)
------- ----------- --------- --------- ------------ --------------- ---------
Net debt (890.0) 0.8 18.9 15.6 3.0 (0.7) (852.4)
------- ----------- --------- --------- ------------ --------------- ---------
Net debt includes US$ denominated loan notes of US$285.0m (March 2017: US$325.0m) retranslated at period end to GBP223.5m (March 2017: GBP267.8m). These notes have been hedged using cross-currency swaps. At maturity, GBP181.6m (March 2017: GBP208.3m) will be repaid taking into account the cross-currency swaps. If the impact of these hedges is taken into account, reported net debt would be GBP810.5m (March 2017: GBP830.5m).
8. Financial instruments
The Group entered into a number of cross-currency swap agreements in relation to the US$ denominated loan notes to eliminate any foreign currency exchange risk on interests or on the repayment of principle borrowed.
IFRS 13 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 fair value of derivative instruments is calculated by discounting all future cash flows by the market yield curve at the balance sheet date:
31 August 1 September 2 March
2017 2016 2017
GBPm GBPm GBPm
Financial assets
Derivative financial instruments - level 2 39.2 38.4 55.6
--------- ----------- -------
Financial liabilities
Derivative financial instruments - level 2 10.0 13.6 10.6
--------- ----------- -------
There were no transfers between levels during any period disclosed.
9. Pension liability
During the six month period to 31 August 2017, the pension liability has decreased from GBP425.1m to GBP374.5m. The main movements in the deficit are as follows:
GBPm
------------------------------------------------- ------ ------
Pension liability at 2 March 2017 425.1
Re-measurement due to:
Changes in financial assumptions 48.2
Experience adjustments 11.3
Return on plan assets greater than discount rate (68.7)
------
(9.2)
Contributions from employer (48.1)
Net interest on pension liability 5.2
Administrative expenses 1.5
------
Pension liability at 31 August 2017 374.5
------
The deficit has decreased by GBP50.6m from 2 March 2017 driven by deficit contributions of GBP48.1m and actual returns on assets being higher than the discount rate offset by a reduction in the discount rate from 2.60% to 2.40%
10. Related party disclosure
In note 30 to the Annual Report and Accounts for the year ended 2 March 2017, the Group identified its related parties as its key management personnel (including directors), the Group pension schemes, its joint ventures and its associate for the purpose of IAS 24 'Related Party Disclosure'. 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 31 August 2017 that have materially effected, or are expected to materially effect, 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 1 March 2018. All transactions with subsidiaries are eliminated on consolidation.
11. Capital expenditure commitments
Capital expenditure commitments for which no provision has been made are set out in the table below:
31 August 1 September 2 March
2017 2016 2017
GBPm GBPm GBPm
Property, plant and equipment 208.0 191.2 156.4
Intangible assets 5.5 12.5 8.2
12. Events after the balance sheet date
On 10 October 2017 the Group announced it had acquired the non-controlling interest in Yueda Costa (Shanghai) Food & Beverage Management Company Limited for GBP35m.
Independent review report to Whitbread PLC
Introduction
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 31 August 2017 which comprise the interim consolidated income statement, the interim consolidated statement of comprehensive income, the interim consolidated statement of changes in equity, the interim consolidated balance sheet, the interim consolidated cash flow statement and the related notes 1 to 12. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. 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.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in the accounting policies, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
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 Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, 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.
Conclusion
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 31 August 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, UK
23 October 2017
This information is provided by RNS
The company news service from the London Stock Exchange
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