TIDMWTB
RNS Number : 1884D
Whitbread PLC
25 April 2017
25 April 2017
WHITBREAD DELIVERS ANOTHER YEAR OF STRONG SALES AND PROFIT
GROWTH
Whitbread PLC results for the 52-week financial year to 2 March
2017
2016/17 was a 52-week year whereas 2015/16 was a 53-week year.
In order to provide a clearer comparison, year-on-year growth
relating to revenue, underlying profit and underlying earnings per
share are shown on a 52-week comparative and a number of
alternative performance measures are included in addition to the
various statutory measures. For details see the notes section at
the end of the document.
2016/17 2015/16 Change Change
52 weeks 53 weeks
to 2 to 3
March March 53 week 52 week
Financial Highlights 2017 2016 comparative comparative
--------------------------------- ---------- ---------- -------------- --------------
Total revenue (GBPm) 3,106.0 2,921.8 6.3% 8.2%
--------------------------------- ---------- ---------- -------------- --------------
Underlying profit(1) before
tax (GBPm) 565.2 546.3 3.5% 6.2%
--------------------------------- ---------- ---------- -------------- --------------
Premier Inn & Restaurants
underlying operating profit(1)
(GBPm) 468.0 446.9 4.7% 7.4%
--------------------------------- ---------- ---------- -------------- --------------
Costa underlying operating
profit(1) (GBPm) 158.0 153.5 2.9% 5.3%
--------------------------------- ---------- ---------- -------------- --------------
Profit for the year (GBPm) 415.9 387.3 7.4%
--------------------------------- ---------- ---------- -------------- --------------
Underlying basic EPS(1)
(pence) 246.48 238.65 3.3% 6.0%
--------------------------------- ---------- ---------- -------------- --------------
Total basic EPS (pence) 231.39 215.66 7.3%
--------------------------------- ---------- ---------- -------------- --------------
Full year dividend (pence) 95.80 90.35 6.0%
--------------------------------- ---------- ---------- -------------- --------------
Financial Results
-- Group total sales growth of 8.2% and underlying profit before tax up 6.2% to GBP565.2 million
-- Premier Inn total sales growth of 9.0%, and like for like sales(2) up 2.3%
-- Costa total sales growth of 10.7%, system sales up 12.7% and
UK equity like for like sales(2) up 2.0%
-- Group return on capital(3) of 15.2% (2015/16: 15.3%)
-- Cash generated from operations of GBP860.1 million, which
funded cash capital investment of GBP609.8 million and a proposed
full year dividend up 6.0% to 95.80 pence
Alison Brittain, Chief Executive, said:
"Whitbread has had another year of strong growth and continued
investment with total Group sales increasing 8.2% to GBP3.1 billion
and underlying basic earnings per share increasing by 6.0%,
demonstrating the strength of our core brands. Total basic earnings
per share increased by 7.3%.
In 2016/17 we made good progress in delivering on our three
strategic priorities: to grow and innovate in our core UK
businesses; to focus on our strengths to grow internationally; and
to build the capability and infrastructure to support long-term
growth.
Premier Inn's strong sales growth benefitted from the 3,816
gross new UK rooms we opened this year and the accelerated maturity
of the c.9,000 rooms we have opened over the last two years. We
delivered high customer satisfaction by leading the market on
quality and value, achieved occupancy of over 80% with record
levels of direct bookings at 94%, all of which supported our strong
return on capital.
Costa opened 255 net new stores worldwide and we continue to
roll out our successful and fast growing Costa travel formats.
Costa Express had a great year installing over 1,500 machines of
which 248 were in international markets. We are innovating to drive
our sales growth and are pleased with the investment we are making
to introduce 'finer' coffee concepts, leveraging our new state of
the art Roastery and delivering fresher food that our customers
will enjoy later this year.
Internationally, in Germany we grew our hotel pipeline to five
hotels and our Frankfurt hotel received great guest feedback. We
continue to have success with our profitable joint venture in the
Middle East while our phased withdrawal from South East Asia is on
plan. China remains an exciting platform of growth for Costa and we
have a clear plan to enhance our business. We have launched five
new concept stores, the results of which give us further confidence
that we can capitalise on this market opportunity and grow to
significant scale.
During the year we continued to strengthen our capabilities to
support our long-term, growth, including developing the senior team
with a number of new hires and promotions. In November we announced
a GBP150 million cost efficiency programme to help offset
investment and sector cost pressures. We have made good progress
this year in areas such as procurement, supplier consolidation and
labour scheduling, which has helped maintain margins.
In the year ahead we will continue to focus on organic growth
and investing in our customer proposition. This, together with our
efficiency programme and disciplined capital management gives us
confidence in delivering another year of good progress, in line
with overall expectations. Whilst we are only seven weeks into our
new financial year Premier Inn has had a good start to the year and
Costa has also seen positive like for like sales growth, although
we remain cautious and expect a tougher consumer environment than
last year.
In the longer term we remain confident that, with our
significant structural growth opportunities, the power of our
brands and the investments we are making, we will continue to
deliver strong returns and sustainable long-term growth for our
shareholders".
Richard Baker, Chairman, said:
"Whitbread is one of Britain's longest established and most
successful companies and celebrates 275 years in business this
year. We are very aware of our responsibilities to ensure that this
great British company continues to thrive and, as such, we are
focused on driving growth while managing risk and demonstrating
excellent corporate governance. We operate a conservative approach
to the management of our balance sheet and this provides us with a
solid base in turbulent and changing times. Our strong cash flow
generation has enabled us to increase the full year dividend by
6.0% to 95.80 pence".
For further information contact:
Whitbread
Nicholas Cadbury, Group Finance +44 (0) 20
Director 7806 5491
+44 (0) 1582
Anna Glover, Director of Communications 844 244
Joanne Russell, Director of +44 (0) 1582
Investor Relations 888 633
Tulchan
+ 44 (0) 20
David Allchurch 7353 4200
For photographs and videos, please visit the corporate media
library:
www.whitbreadimages.co.uk
There will be a presentation for analysts at 9.30am in the
Auditorium at Deutsche Bank, Winchester House, 1 Great Winchester
Street, EC2N 2DB London. There will also be a live webcast of the
presentation at 9.30am which will be available on the investors'
section of the website at:
http://www.whitbread.co.uk/investors/results-centre/index.html
CHIEF EXECUTIVE'S REVIEW
Financial performance
Whitbread has had another successful year. Strong organic growth
combined with like for like sales growth drove Group revenue up
8.2% to GBP3.1 billion. Group underlying profit before tax rose
6.2% to GBP565.2 million and underlying basic earnings per share
increased 6.0% to 246.48 pence. Profit for the year was up 7.4% to
GBP415.9 million and total basic earnings per share were up 7.3% to
231.39 pence.
Premier Inn & Restaurants' underlying operating profit was
up 7.4% to GBP468.0 million. Premier Inn grew total sales by 9.0%
and the number of rooms available by 9.3%, as we opened 3,816 gross
new UK rooms during the year, whilst achieving high total occupancy
of 80.2%. Like for like sales grew by 2.3%, benefitting from good
revpar growth of c.1.4% in catchments where we did not add capacity
and from our hotel extension programme which, as expected, diluted
our like for like revpar by c.2%, but overall grew our like for
like sales by c.1%.
Restaurants' total sales increased 1.2% benefitting from the
eight net new sites opened during the year and like for like sales
declined by 0.3%, slightly ahead of our competitor set(4) .
Costa's underlying operating profit was up 5.3% to GBP158.0
million, with total sales growth of 10.7%. This was driven by UK
like for like sales growth of 2.0%, 255 net new stores worldwide
and an acceleration in our roll-out of Costa Express machines, with
1,585 net new installations. Margins were down 0.8% pts, slightly
ahead of our previous guidance due to the phasing of investments
into 2017/18.
As we align our business towards our three strategic priorities
we incurred a net non-underlying charge of GBP49.8 million
(2015/16: GBP58.6 million) predominately relating to the estimated
cost of Premier Inn International's withdrawal from India and South
East Asia and re-organisation costs associated with our cost
efficiency programme.
Whitbread is highly cash generative with cash generated from
operations of GBP860.1 million which supports our dividend and
capital investment programme. Our total cash capital investment for
2016/17 was GBP609.8 million as we maintained our market leading
position through re-investment in our estate and by delivering
organic growth. Our continual focus on returns and disciplined
financial management enabled us to deliver a good return on capital
of 15.2% (2015/16: 15.3%).
During the year, in line with our property strategy, Whitbread
carried out a number of sale and leaseback transactions generating
total in year proceeds of GBP186.2 million. These transactions
highlight the strength of Whitbread's covenant and strong asset
backing, as well as our ability to recycle the value we create from
our freehold developments into new opportunities.
The Board recommends a final dividend of 65.90 pence per share,
making a total dividend for the year of 95.80 pence per share, an
increase of 6.0%. The final dividend will be paid on 30 June 2017
to shareholders on the register at the close of business on 26 May
2017.
Operational review and progress on strategic priorities
In April 2016, we outlined our three strategic priorities to
deliver long-term sustainable growth and shareholder value. Since
then, we have made positive progress across all three areas.
1. Grow and innovate in our core UK businesses;
2. Focus on our strengths to grow internationally; and
3. Build capability and infrastructure to support long-term
growth.
1. Grow and innovate in our core UK business
The UK is our largest market and we will continue to invest in
our people, our brands and our systems to capture the significant
growth opportunities available in both coffee and branded budget
hotels.
In the UK hotel market, the independent sector which accounts
for c.50% of the market is in decline, while the budget branded
sector is benefitting from continued growth, reflecting customers'
desire for quality and value for money. The coffee sector has a
high growth forecast benefitting from a global consumer lifestyle
trend, demand for quality coffee and habitual purchase
behaviours.
Premier Inn UK
As the UK's number one hotel company our business model is
clearly well placed to capture the shift to value brands with our
compelling proposition, loyal guests, direct distribution model and
focus on operational excellence. Our network strength gives
customers the greatest choice of locations and we offer the best
value for money which results in our high occupancy across the
estate, and 94% of our guest bookings direct with Premier Inn. Our
market leading occupancy and direct distribution means our growth
continues to be at high returns with our committed UK pipeline
expected to achieve similar returns to the c.13% achieved
today.
Network strength
Premier Inn is the leading hotel brand in the UK with 68,081 UK
hotel rooms and some 9,000 rooms opened during the last two years.
Our committed hotel room pipeline is strong and stands at c.14,500
rooms, and we are well on track to achieve our 2020 milestone of
c.85,000 UK rooms, with line of sight to 100,000 rooms.
In 2016/17, we opened 25 net new hotels taking our total number
of hotels in the UK to 762, over 200 more than our nearest
competitor. During this period Premier Inn UK has grown total sales
by 8.9% and total rooms available by 9.3%, whilst retaining high
occupancy. Our unrivalled network coverage means we bring our
customers closer to their destination, a key consideration for both
leisure and business guests.
Quality and value for money
We focus on delivering a consistent, quality product across our
network through our systematic refurbishment programme and, by the
end of the year, over 80% of our estate were our most recent
designs, c.14% more than two years ago. We prioritise high
occupancy and value for money to build long-term customer loyalty
and this approach has resulted in Premier Inn growing its occupancy
to 80.2% and enabled us to achieve consistently high scores for
both quality and value from You Gov.
Automated Trading Engine
In June this year we launched our new Automatic Trading Engine
(ATE) to build on our value for money credentials, as well as
optimising our rate, occupancy and new hotel maturity going
forward.
We are very much in the 12-18 month 'test and learn' phase.
However, we expect ATE to drive our total sales growth as we focus
on further occupancy growth, optimising rate to match the demand
and accelerating the maturity of our new rooms.
Direct distribution
Our focus on providing our guests with the best digital booking
platform has been vital to our success. We have grown our direct
digital distribution from 77% in 2013/14 to 88% in 2016/17, driving
incremental revenue and reducing our reliance on third party
distribution. Not only does direct distribution provide our lowest
cost booking channel, it also enables a direct relationship with
our customers, helping to build loyalty over time. Our total direct
distribution now stands at a record 94%.
The London opportunity
Our share of the London hotel market remains relatively low at
c.8% providing a substantial growth opportunity. Over the last
three years we have increased our rooms available by 49.4%,
compared with 12.5% for the Midscale and Economy market(5) , and
grown accommodation sales by 43.7% compared with 21.4% respectively
as we continue to win market share. Our London sites mature rapidly
with new hotels reaching occupancy of c.80% in their first year
whilst at the same time maintaining the total London estate's
occupancy at over 85%.
Our compact city centre hotel concept 'hub by Premier Inn' has
been a great success giving us access to profitable city centre
locations with high property costs, delivering a good return on
capital, whilst offering customers great value, high quality rooms
in great locations.
We now have four hub hotels open in London and one in Edinburgh,
with a committed pipeline of 11 hotels over the next three years.
Customer feedback on the proposition has been excellent, with 4.5/5
TripAdvisor score across all sites and 89% of guests rating hub an
"excellent" or "very good" experience. Furthermore, occupancy has
been c.85% for our hub sites in London, which are expected to
deliver returns in line with our existing Premier Inn estate at
maturity.
UK Regions
Over the last three years we have increased our rooms available
by 22.0% and grown accommodation sales by 38.3%, compared with
growth in the Midscale and Economy sector of 6.7% and 30.5%
respectively, as we continue to win market share.
Our new hotels continue to perform well, maturing fast and
becoming profitable with occupancy of c.75% in the first year,
reaching full maturity in 3-4 years. We continued to achieve high
occupancy in the total regional estate of c.80%.
Further growth with good returns
Our UK committed pipeline has grown to 14,500 rooms, of which
c.5,900 are in London and c.8,600 are in the regions. Moreover, our
extension programme has been driving incremental like for like
sales growth and good returns and constitutes c.20% of our
committed pipeline outside of London.
Food and beverage offering for Premier Inn customers
Our Joint Site Restaurants continue to play an important role in
serving Premier Inn guests and delivering higher revpar and
returns. Restaurants' grew total sales by 1.2%, with a marginal
reduction in like for like sales of 0.3%, albeit we continued to
perform ahead of our competitor set. We continue to focus on our
guests and our teams, with high customer satisfaction scores and a
significant reduction in team turnover, achieved with the help of
investment initiatives such as our new labour scheduling tool.
We continue to make good progress in rejuvenating our restaurant
brands, converting a further 53 restaurants to our modern 'Orange
Cow' Beefeater concept and are on track to complete the remaining
conversions in the first half of 2017/18. Our new contemporary city
centre restaurant format, Bar + Block, is trading well and
receiving very high customer satisfaction scores. We now have one
open in London, one in Birmingham and one in Fareham, with five
planned to open during 2017/18.
Costa
In Costa we offer the largest network of coffee shops in the UK
and, with our strong brand, we are in a great position to
capitalise on future market growth opportunities, growing from
2,218 stores today to over 3,000 stores in the medium-term.
Costa has been named as the UK's favourite coffee shop chain(6)
for the seventh year in a row, underpinned by our relentless focus
on quality coffee and on achieving high customer satisfaction
scores.
UK Retail
Costa UK Retail continues its track record of delivery, with UK
retail system sales growing by 10.5%, 169 net new stores and like
for like sales in UK equity stores increasing by 2.0%.
Investing to drive like for like growth
The market and competitive landscape continue to evolve with
more food-led operators now offering coffee and, while convenience
and coffee quality remain the top decision criteria, customers are
becoming more demanding in the way their priorities are met.
At Costa we are focused on meeting this challenge and serving
the best quality coffee and fresher food via more tailored store
designs, with a complementary digital experience. During the year
we invested in new MerryChef ovens and microwaves across the
estate, which will facilitate the roll-out of new hot food ranges
during 2017/18, starting with the launch of our new better
breakfast offering during the first half. We also recently extended
our coffee range through new initiatives in the Cortado family and
will build on this innovation with the launch of cold brew and new
single origin blends during this year.
Investing in the brand and digital capability
We continue to invest in our digital capability and our new till
system will be installed during 2017/18, enabling faster service
and new functionality to provide the platform for further Pay &
Collect trials towards the end of this year and a wider roll-out
thereafter.
To increase our engagement with our c.5.2 million active Costa
Coffee Club members we are enhancing our app to enable a better
customer experience and more targeted offers, as well as gaining a
much richer source of customer data, habits and insight. The
new-look app will be released in the first half of 2017/18.
Pipeline weighted towards high performing channels
Future growth will also be underpinned through diversification
of our channels and formats as we recognise that customer
requirements differ by location. For example, our Pronto format is
optimised to sell our hand-crafted coffee quickly in high footfall
locations, such as travel hubs at peak times, taking advantage of
the volume opportunity presented. Drive Thrus are also delivering
very high sales volumes and returns and, together with travel
channels, are our fastest growing category and will become a
greater proportion of our estate going forward.
2. Focus on our strengths to grow internationally
Premier Inn Germany
Our first German hotel opened in Frankfurt in February 2016 and
the feedback has been excellent, with the hotel constantly ranked
between first and third on TripAdvisor out of c.270 hotels in
Frankfurt. We have a committed pipeline of five more hotels and
will have opened six to eight by 2020 with a capital commitment of
GBP60-100 million per annum over the next few years. The aim is to
accelerate our roll-out and we continue to look for further
opportunities to grow more quickly.
Premier Inn International
Our six hotels in the Middle East continue to perform well in a
challenging market and we will maintain our profitable Joint
Venture here with two further hotels in the pipeline. Our
withdrawal from India and South East Asia is on plan with a view to
exiting the market over the next twelve months.
Costa EMEI
Internationally we continue to build on our strengths and look
to broaden our footprint in quality markets that have the
opportunity for scale. In Poland we have 131 stores, achieving
strong single digit like for like sales growth, driven using
successful initiatives including fresher food, innovative drink
ranges and new store formats. We reached profitability in 2016/17
and see potential to significantly increase the number of stores in
this market. We also have 259 Costa Express machines in Poland,
which are performing well.
We continue to see strong growth in our profitable franchise
business with a total of 731 stores across 23 countries. Our
franchise business has grown rapidly over a number of years through
our successful business model of great partnerships, efficient
logistics and a focus on localisation and customer demographics.
Going forward we will select target markets with the highest
potential for us to grow profitably and win market share.
In France we have decided to pursue a franchise only strategy
resulting in the recent closure of our five equity stores.
Costa Asia
China is a large market with a burgeoning middle class and the
propensity to drink coffee is on the rise. This presents an
exciting opportunity for Costa to become the clear number two in
the market. We have built a solid foundation from which to grow,
but will take a more strategic approach as we narrow our focus
across ten top tier cities to build scale and a brand presence. We
will also exit or turnaround poor performing stores to improve the
overall profitability of our estate. We will enhance our brand
awareness through digital media, build our coffee credentials and
create the meeting place of choice for our target customer through
improved store formats.
During the year we opened 63 gross new stores and exited 37
stores in China. In addition, we have introduced five new-look
concept stores with an improved customer proposition and, although
early days, results have been promising, and we aim to add
additional new concept stores over the course of 2017/18. The
success of these stores so far gives us greater confidence in our
ability to build scale successfully in this growing market and look
for opportunities to accelerate our strategy.
Costa Express
Costa Express is an exciting global growth engine for Costa and
we see potential to double the size of this part of the business.
This year we installed 1,585 net new machines bringing our total to
6,801, including 740 internationally. As well as renewing our key
UK customer contract, we also embarked on our entry into a number
of new markets with plans to roll out in 2017/18.
We are upgrading our machines with new management systems, which
will enhance our scalability and allow us to monitor and control
the machines and their content remotely. This will be important to
the success of our international roll-out.
We are upgrading the customer screens to bring the best quality
experience and benefit our partners by enabling options such as
site specific advertising.
3. Build capability and infrastructure to support long-term
growth
During the year we continued to strengthen our capabilities to
support long-term growth. In the senior executive team this
included the promotion of Simon Jones to Managing Director of
Premier Inn & Restaurants, and the appointment of Dominic Paul
to Managing Director of Costa. Mark Anderson, Managing Director of
Property and Premier Inn International, has been promoted to the
Executive Committee reflecting the importance of his new role. We
have created a new Group Transformation Director role to support
our journey to become a more efficient company and we recently
announced that we have hired Nigel Jones to take up this role later
this year.
With our focus on our winning teams we were also proud to be
voted eighth in the Sunday Times' 'Best Big Companies to Work
For'.
In November we announced c.GBP150 million of cost efficiencies
over five years to help offset investment and cost pressures facing
our sector, such as National Living Wage and business rates.
Through this we will become a leaner and more agile business,
sustaining good margins as we grow.
During the year we have made good progress against these
initiatives with the renegotiation and consolidation of key
supplier contracts and the implementation of new labour management
tools across Costa and Restaurants, to facilitate better scheduling
and communications with team members. We have also completed the
in-sourcing of our digital teams and will shortly commence the
roll-out of new tills across Costa.
As part of our plan to build a better infrastructure, in March
we opened our new state of the art Roastery to drive innovation and
efficiency, facilitating Costa's global growth for the next twenty
years. This GBP38 million investment will increase roasting
capacity from 11,000 tonnes to 45,000 tonnes a year and use fully
automated systems to achieve increased productivity and
sustainability.
Force for Good
Our aim is to build a long-term sustainable business and how we
do things is just as important as what we do. We have a
responsibility to act as a Force for Good for all our stakeholders
and we take this responsibility seriously. We break our
sustainability programme into three pillars:
-- Team and Community;
-- Customer Wellbeing; and
-- Energy and Environment.
Each of these pillars has its own targets.
Team and Community
We are committed to ensuring that our 50,000 employees have the
opportunity to succeed. During the year, we had over 800
apprentices in learning and invested significant sums in our WISE
programme, which focuses on creating employment opportunities,
often for people from difficult backgrounds. Whitbread's commitment
to apprenticeships was recognised through being 'Highly Commended'
at the 2016 National Apprenticeship Awards.
Our teams have once again been busy raising money for our chosen
charities this year, with over GBP2.8 million being raised for
Great Ormond Street Hospital Charity and GBP1.8 million being
raised for the Costa Foundation. We have now met the GBP7.5 million
target to fund the new Premier Inn Clinical Building at Great
Ormond Street Hospital, which will open in 2017 coinciding with
Whitbread's 275(th) anniversary.
Customer Wellbeing
We serve 28 million customers every month, and ensure that they
are buying products and services that they can trust and that we
provide a great choice of food and drink, including healthier
options. Animal welfare is also important to us and we have
recently committed to achieving cage-free status on all whole shell
eggs by 2020, and all ingredient eggs by 2025. Meanwhile, we are
the largest restaurant business in the UK to serve Marine
Stewardship Council certified fish in all our restaurants,
demonstrating to our customers that the fish they are served has
been caught in a sustainable and responsible way.
Energy and Environment
Our innovative work to build sustainable buildings continues and
we were delighted to win the prestigious Asda Environmental
Leadership Award at the BITC Responsible Business Awards. We also
participated in the Dow Jones Sustainability Index for the first
time, scoring best in class in Governance, Philanthropy and
Eco-efficiency. We have recently announced that, from this month,
all of the electricity we buy for our UK operations will be 100%
renewable.
GROUP FINANCE DIRECTOR'S REVIEW
Whitbread has continued its good financial performance, with
total revenue up 8.2% to GBP3,106.0 million driven by strong
organic growth combined with good like for like sales growth of
1.6%, albeit below our stretching internal target. Underlying
profit before tax was up 6.2% to GBP565.2 million, with cash
generated from operations of GBP860.1 million and underlying basic
earnings per share up 6.0%. Profit before tax was GBP515.4 million
(2015/16: GBP487.7 million).
Revenue
2016/17 2015/16 Change Change Like for like(2) growth %
52 weeks to 2 March 2017 53 weeks to 3 March 2016 53 week comparative 52 week comparative
GBPm GBPm % %
--------------- -------------------------- -------------------------- --------------------- --------------------- --------------------------
Premier Inn &
Restaurants 1,907.9 1,822.0 4.7 6.6 1.5
--------------- -------------------------- -------------------------- --------------------- --------------------- --------------------------
Costa 1,201.7 1,103.2 8.9 10.7 2.0
--------------- -------------------------- -------------------------- --------------------- --------------------- --------------------------
Less:
inter-segment (3.6) (3.4)
--------------- -------------------------- -------------------------- --------------------- --------------------- --------------------------
Revenue 3,106.0 2,921.8 6.3 8.2 1.6
--------------- -------------------------- -------------------------- --------------------- --------------------- --------------------------
Premier Inn & Restaurants' revenue rose to GBP1,907.9
million, up 6.6%. Within this, Premier Inn achieved total sales
growth of 9.0% to GBP1,349.1 million and grew its market share
through new hotel openings and good like for like sales growth in
the UK. Premier Inn's new UK hotels contributed 6.4% to sales
growth, and like for like sales grew 2.3%. Like for like sales
growth was driven by the good performance of hotels in catchments
where we did not add capacity and by our strong returning hotel
extension programme. Our hotel extensions as previously indicated,
together with new hotels diluted our like for like revpar by
c.2.0%, resulting in a decline of 0.6%. In 2017/18 we expect new
hotels to contribute around 5-6% to total sales growth and
extensions to contribute net c1.0% to like for like sales
growth.
Restaurants' total sales grew by 1.2% with like for like sales
down 0.3%. Eight net new restaurants were opened during the
year.
Costa's revenue grew by 10.7% to GBP1,201.7 million. Costa's UK
sales grew to GBP1,054.0 million, up 10.0%, with equity like for
like sales increasing by 2.0% and 184 net new coffee shops opened
during the year. International sales grew to GBP147.7 million, up
16.3% (7.1% in constant currency) with 71 net new stores. Costa
Express delivered a strong performance with 1,585 net coffee
machines installed taking the total to 6,801, of which 740 are
overseas. In 2017/18, we expect our Costa initiatives to drive
positive like for like sales growth, with the investments we are
making in the first half delivering benefits in the second half. We
do, however, expect the consumer environment to be tougher than
last year.
Profit
2016/17 2015/16 Change Change
52 weeks 53 weeks 53 week 52 week
to 2 to 3 comparative comparative
March March
2017 2016
GBPm GBPm % %
----------------------------- ---------- ---------- -------------- --------------
Premier Inn & Restaurants
- UK, Ireland and Germany 471.5 451.5 4.4 7.0
----------------------------- ---------- ---------- -------------- --------------
Premier Inn International (3.5) (4.6) 23.9 23.9
----------------------------- ---------- ---------- -------------- --------------
Premier Inn & Restaurants 468.0 446.9 4.7 7.4
----------------------------- ---------- ---------- -------------- --------------
Costa - UK 154.3 151.0 2.2 4.4
----------------------------- ---------- ---------- -------------- --------------
Costa - International 3.7 2.5
----------------------------- ---------- ---------- -------------- --------------
Costa 158.0 153.5 2.9 5.3
----------------------------- ---------- ---------- -------------- --------------
Profit from operations 626.0 600.4 4.3 6.8
----------------------------- ---------- ---------- -------------- --------------
Central costs (33.6) (31.6) (6.3) (7.0)
----------------------------- ---------- ---------- -------------- --------------
Underlying operating profit 592.4 568.8 4.1 6.8
----------------------------- ---------- ---------- -------------- --------------
Net finance costs (27.2) (22.5) (20.9) (22.5)
----------------------------- ---------- ---------- -------------- --------------
Underlying profit before
tax 565.2 546.3 3.5 6.2
----------------------------- ---------- ---------- -------------- --------------
Non-underlying operating
costs (39.7) (40.7)
----------------------------- ---------- ---------- -------------- --------------
Non-underlying finance
costs (10.1) (17.9)
----------------------------- ---------- ---------- -------------- --------------
Profit before tax 515.4 487.7 5.7
----------------------------- ---------- ---------- -------------- --------------
Underlying taxation (119.1) (116.1)
----------------------------- ---------- ---------- -------------- --------------
Non-underlying tax items 19.6 15.7
----------------------------- ---------- ---------- -------------- --------------
Profit for the year 415.9 387.3 7.4
----------------------------- ---------- ---------- -------------- --------------
Profit before tax was GBP515.4 million up 5.7% and, after
taxation, statutory profit for the year was GBP415.9 million, up
7.4% on last year.
Premier Inn & Restaurants' profits grew to GBP468.0 million
up 7.4%, with UK profits of GBP471.5 million, up 7.0%. Within this,
rent costs increased by 15.8% to GBP139.8 million, reflecting the
high level of leasehold openings across the last two years. Our
depreciation and amortisation charge increased by 19.3% to GBP144.3
million as we continued to invest in enhancing our hotels and
restaurants and upgrading our systems. In line with previous
guidance, margins held steady at 24.5% compared to 2015/16,
benefitting from like for like sales growth and our cost efficiency
programme that offset inflation, and our increased investments.
International hotel losses reduced to GBP3.5million (2015/16:
loss of GBP4.6 million). In July last year we announced that
Premier Inn will focus its international strategy on continuing to
grow its businesses in Germany and the Middle East and will
commence a phased withdrawal from its operations in India and South
East Asia. The associated costs of withdrawal are detailed in the
non-underlying items section.
Costa's profits increased 5.3% to GBP158.0 million, with good
growth in our UK retail business and continued strong growth from
Costa Express. Costa's margins were down 0.8% pts year on year on a
53 week basis, to 13.1%, due to the National Living Wage,
investments in refurbishments and IT and increased investment in
brand marketing. This was slightly better than previous guidance
due to investment re-phased into 2017/18.
Costa International made a profit of GBP3.7 million (2015/16:
GBP2.5 million), with a good performance in our international
franchise business and in Poland.
Looking forward, our sectors continue to face a number of cost
headwinds from the National Living Wage, business rates, commodity
price inflation and foreign exchange rates. We are incurring
additional rent from the sale and leaseback transactions we
successfully completed last year and are planning to carry out this
year. We are also investing in line with our strategy of improving
our customer proposition and building digital and IT capabilities
and infrastructures that will enable the delivery of long-term
sustainable growth. Over time these costs will be partially offset
as we benefit from: the cost efficiency programme announced in
November 2016, which plans to deliver c.GBP150 million of savings
over five years; the investments we are making; our dynamic pricing
model; and through the scale benefits of our organic growth. In
2017/18 we expect margins in Costa to reduce by around 1.2% pts
which is in line with previous guidance, including the re-phasing
of investments from 2016/17. In Premier Inn & Restaurants we
expect margins to reduce between 0% to 0.2% pts, again in line with
previous guidance.
Non-underlying items
Non-underlying items, including tax related adjustments,
amounted to a charge of GBP30.2 million (2015/16: GBP42.9
million).
This includes a GBP30.0 million charge in respect of Premier Inn
International's withdrawal from India and South East Asia,
comprising impairment of assets, the costs of exiting contracts,
and the closure of regional offices. Also included in
non-underlying items are one-off restructuring costs of GBP36.1
million relating to reorganisation costs in the UK as part of our
cost efficiency programme and a charge in respect of the strategic
review and resulting restructuring of Costa's international
operations in France and China. The restructuring in China is
on-going and there are expected to be further closure costs in the
next financial year. In addition an impairment charge of GBP7.5
million was recognised relating principally to underperforming
stores.
These charges are partially offset by: a net gain of GBP19.3
million on the disposal of property, plant and equipment and
property reversions, a significant part of which relate to our
strategy to carry out moderate sale and leaseback transactions; a
net gain of GBP11.8 million on the disposal of our investment in
associate (a hotel in Edinburgh); and a GBP5.3 million refund on
the settlement of a historic VAT claim.
Non-underlying items also include amortisation of acquired
intangible assets (GBP2.5 million) and the IAS 19 pension finance
charge (GBP9.4 million).
Full details are set out in note 5 to the financial statements.
Our policy on underlying performance measure that defines what
items may be classified as non-underlying is set out in note 3.
Net finance costs
The underlying net finance cost for the year was higher than
last year at GBP27.2 million (2015/16: GBP22.5 million) due to an
increase in average net debt(7) , as a result of our continued
capital investments detailed below. In 2017/18 we expect underlying
interest to increase to around GBP32 million as a result of the
incremental cost of the recent US private placement loan notes.
The effective interest rate on average borrowings decreased from
4.7% to 3.8%.
Total net finance costs, including non-underlying finance costs,
were GBP37.3 million (2015/16: GBP40.4 million) including the IAS19
pension finance charge of GBP9.4 million (2015/16: GBP17.2
million).
Taxation
Underlying tax for the year amounted to GBP119.1 million at an
effective tax rate of 21.1% (2015/16: 21.3%). The statutory tax
expense for the year was GBP99.5 million (2015/16: GBP100.4
million).
Further details are set out in note 6 to the financial
statements.
Earnings per share
Earnings per share 2016/17 2015/16 Change % Change %
52 weeks to 2 March 2017 53 weeks to 3 March 2016 53 week comparative 52 week comparative
pence pence
-------------------- -------------------------- -------------------------- --------------------- ---------------------
Underlying basic 246.48 238.65 3.3% 6.0%
-------------------- -------------------------- -------------------------- --------------------- ---------------------
Underlying diluted 245.95 236.82 3.9% 6.5%
-------------------- -------------------------- -------------------------- --------------------- ---------------------
Total basic 231.39 215.66 7.3%
-------------------- -------------------------- -------------------------- --------------------- ---------------------
Total diluted 230.89 214.00 7.9%
-------------------- -------------------------- -------------------------- --------------------- ---------------------
Underlying basic earnings per share for the year were 246.48
pence, up 6.0% on last year, and underlying diluted earnings per
share for the year were 245.95 pence, up 6.5% on last year. Full
details are set out in note 7 to the financial statements.
Dividend
The Group's dividend policy is to grow the dividend broadly in
line with earnings across the cycle.
The recommended final dividend is 65.90 pence, an increase on
last year of 6.5%, making the total dividend for the year 95.80
pence, a growth of 6.0%. With the final dividend, we will offer our
shareholders the option to participate in a dividend reinvestment
plan. Further details are set out in note 8 to the financial
statements.
Cash flow and net debt
The principal movements in net debt are as follows:
GBPm 2016/17 2015/16
------------------------------------- -------- --------
Cash generated from operations 860.1 782.2
------------------------------------- -------- --------
Product improvement and maintenance
capital* (206.4) (214.8)
------------------------------------- -------- --------
Operating cash flow after
maintenance capital 653.7 567.4
------------------------------------- -------- --------
Interest (34.6) (25.0)
------------------------------------- -------- --------
Tax (86.8) (85.1)
------------------------------------- -------- --------
Pensions (90.3) (84.3)
------------------------------------- -------- --------
Dividends (167.1) (155.1)
------------------------------------- -------- --------
Other (58.7) (34.2)
------------------------------------- -------- --------
Cash flow before expansionary
capital 216.2 183.7
------------------------------------- -------- --------
Expansionary capital* (403.4) (510.1)
------------------------------------- -------- --------
Proceeds from sale & leaseback 186.2 -
------------------------------------- -------- --------
Proceeds from cash disposals 20.8 (0.2)
------------------------------------- -------- --------
Net cashflow 19.8 (326.6)
------------------------------------- -------- --------
Net debt brought forward (909.8) (583.2)
------------------------------------- -------- --------
Net debt carried forward (890.0) (909.8)
------------------------------------- -------- --------
*Total cash capital expenditure 609.8 724.9
------------------------------------- -------- --------
Cash generated from operations was strong at GBP860.1 million,
an increase of 10.0% on last year.
Cash capital expenditure in total was GBP609.8 million (2015/16:
GBP724.9 million), with further details set out below whilst, on an
accruals basis the Group's capital expenditure was GBP615.8 million
(2015/16: GBP751.8 million). Capital expenditure is split between
expansionary (which includes the acquisition and development of
properties) and product improvement and maintenance.
Premier Inn & Restaurants' cash capital expenditure was
GBP485.5 million (2015/16: GBP622.3 million), with expansionary
expenditure of GBP337.6 million (2015/16: GBP455.2 million) as we
opened 4,763 gross new rooms and continued to invest in our hotel
room pipeline including freehold property purchases. We maintained
our gross UK pipeline at c.14,500 rooms, including c.5,900 in
London. Our freehold pipeline is now c.34% of the total pipeline
compared to 52% at the end of 2015/16. Expansionary cash
expenditure includes GBP69.6 million acquisition of freehold
properties which includes GBP28.3 million on expansion in Germany
and GBP268.0 million on freehold and leasehold hotel and hotel
extension construction.
Non-expansionary product improvement and maintenance cash
capital expenditure in Premier Inn & Restaurants was GBP147.9
million (2015/16: GBP167.1 million). This was a decrease on the
previous year due to the successful roll-out of lower cost full
room refurbishments, reactive maintenance efficiencies and savings,
as we annualised the roll-out of air-conditioning units and new
beds across the estate last year.
Costa's cash capital expenditure was GBP124.3 million (2015/16:
GBP102.6 million) with the increase from last year principally due
to the construction of our new Roastery and a higher number of
Costa Express machines. Expansionary cash capital was GBP65.8
million as we opened 255 net new coffee shops and installed 1,585
net new Costa Express machines. Costa's non-expansionary product
improvement and maintenance expenditure was GBP58.5 million
(2015/16: GBP47.7 million), with the increase driven by investment
in the new Roastery to create more capacity for future growth.
In addition to capital expenditure, our future leasehold
commitments increased by GBP242.0m to GBP3,138.7 million with
Premier Inn & Restaurants at GBP2,681.3 million (2015/16:
GBP2,567.6 million) and Costa at GBP430.9 million (2015/16:
GBP282.0 million).
Net proceeds of GBP186.2 million were received from the
successful sale and leaseback of our hub hotel in Kings Cross, our
hub hotel in Tothill Street, Westminster, and our Premier Inn hotel
in West Smithfield, Farringdon. Proceeds from cash disposals of
GBP20.8 million include GBP14.1 million for the disposal of our
investment in associate.
In 2017/18, we expect our gross cash capital expenditure to be
between GBP650 million and GBP700 million and around GBP500-600
million net of the proceeds of around GBP100-150 million from sale
and lease back transactions. Premier Inn & Restaurants' spend
is expected to be c.GBP500-550 million, with around 4,200 room
openings. Premier Inn & Restaurants' non-expansionary product
improvement and maintenance investment will be maintained, as we
continue to improve our customer experience and competitive edge
and continue to improve our digital and systems capabilities. Costa
cash capital expenditure is expected to be a similar level to
2016/17 at around GBP140 million, with around 60% being
expansionary capital, which will include larger stores such as
Drive Thrus, and the remainder comprising refurbishments, systems,
product improvement and innovation. Costa is planning to open a
similar level of coffee shops and to install c.1,250 Costa Express
machines.
Pension payments totalled GBP90.3 million, in line with the
schedule of contributions agreed at the last triennial review in
March 2014.
Dividend payments amounted to GBP167.1 million (2015/16:
GBP155.1 million), with the 6.0% increase in the full year dividend
of 95.80 pence consistent with the Group's basic underlying
earnings per share growth of 6.0%.
Corporation tax paid in the year was GBP86.8 million (2015/16:
GBP85.1 million).
Other cash items of GBP58.7 million (2015/16: GBP34.2 million)
include payments of GBP22.3 million principally relating to last
year's provision for onerous leases on historically disposed
businesses, GBP7.1 million for the acquisition of our interest in
Healthy Retail Ltd, (trading as 'Pure'), and foreign exchange
movements on net debt.
We maintained our adjusted net debt to EBITDAR(8) ratio (see
financial status and funding) with net debt as at 2 March 2017 of
GBP890.0 million (2015/16: GBP909.8 million)
Return on capital
Return on capital is a prime focus for Whitbread. In the year,
the Group's return on capital of 15.2% (2015/16: 15.3%) continued
to deliver a good premium to our cost of capital. Costa continued
to deliver excellent returns at 45.4% but were down 4.5% pts on
last year, after increasing for six consecutive years, principally
due to the higher capital spend on the new Roastery. Premier Inn
& Restaurants' returns were up 0.1% pt at 13.0% (2015/16
year-end: 12.9%). Excluding the investment in freehold developments
under construction totalling more than GBP200 million, returns in
Premier Inn & Restaurants would have been 1.6% pts higher at
14.6%.
Pension
As at 2 March 2017, there was an IAS19 pension deficit of
GBP425.1 million (2015/16: GBP288.1 million). The main movements
during the year were the reduction in the discount rate from 3.70%
to 2.60%, driven by the ongoing volatility in corporate bond
yields, partly offset by the payment of the cash contribution of
GBP90.3 million.
The recovery plan schedule of Company contributions is GBP80
million per annum for 2017 to 2021 and GBP2.6 million in 2022. The
payments will be accelerated by up to GBP5 million per year where
increases in ordinary dividends exceed RPI. The Company also makes
payments of c.GBP9-10 million per year into the pension fund
through the Scottish Partnership arrangements.
Financial Status and funding
Whitbread aims to maintain its financial position and capital
structure consistent with retaining its investment grade debt
status. To this end, we work within a financial framework aimed at
keeping net debt to EBITDAR (pension and lease adjusted) not
greater than 3.5 times. The net debt to EBITDAR for 2016/17 was 3.2
times, providing us with comfortable headroom.
Our majority freehold hotel estate also provides us with
significant capital flexibility, with the pace of freehold
acquisition and construction and hotel extensions within our
control. Freehold hotel properties, compared to leasehold, also
reduce profit volatility and provide Whitbread with a flexible
source of capital funding through sale and leaseback
transactions.
The Group has sufficient facilities to finance our short and
medium-term requirements with total committed facilities of
c.GBP1.9 billion, compared to net debt as at 2 March 2017 of
GBP890.0 million. Committed debt facilities include US Private
Placement loans of GBP258 million (at the hedged rate), a GBP450
million bond with a coupon of 3.375% which matures in October 2025
and a syndicated bank revolving credit facility ("RCF") of GBP950
million. During the year the maturity of the RCF facility was
extended to September 2021, with the option of a further one year
extension potentially taking the facility to September 2022.
On 1 March 2017, the Group successfully secured a further GBP200
million US Private Placement loan notes in pounds sterling. These
loan notes were issued in two series with a ten year maturity fixed
at c.2.6%. The proceeds will be drawn during the year, in May and
August.
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.
Post balance sheet events
A final dividend of 65.90 pence per share (2015/16: 61.85 pence)
amounting to a total of GBP120.1 million was declared by the Board
on 24 April 2017.
Risks and uncertainties
The Directors have reconsidered the principal risks and
uncertainties of the Group and added two new risks reflecting the
risks around the extensive programme of change we have embarked
upon, and business interruption risks for services managed by third
parties. 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.
Trading highlights for the 13 weeks (unaudited) and for the 52
weeks to 2 March 2017
% change 13 weeks 52 weeks
vs. prior to 2 March 2017 to 2 March 2017
year
-------------------------- --------------------------
2015/16 Like for Total sales Like for Total sales
comparative like sales like sales
to 25 February
2016
-------------------- ------------ ------------ ------------ ------------
Premier
Inn 2.7% 9.3% 2.3% 9.0%
-------------------- ------------ ------------ ------------ ------------
Restaurants (0.7)% 2.2% (0.3)% 1.2%
-------------------- ------------ ------------ ------------ ------------
Premier
Inn & Restaurants 1.5% 6.9% 1.5% 6.6%
-------------------- ------------ ------------ ------------ ------------
Costa (0.8)% 9.0% 2.0% 10.7%
-------------------- ------------ ------------ ------------ ------------
Total 0.9% 7.8% 1.6% 8.2%
-------------------- ------------ ------------ ------------ ------------
% change Premier Inn UK only Total Midscale
vs. prior UK market & economy
year market
2015/16
comparative
to 25 February
2016
------------------------------ ----------- -----------
Total Like for Total Total Total
sales Like revpar revpar revpar revpar
----------------- ------ ------------ -------- ----------- -----------
Q4
----------------- ------ ------------ -------- ----------- -----------
Total 8.9% (0.6)% 0.4% 6.1% 2.0%
----------------- ------ ------------ -------- ----------- -----------
Regional 7.8% (0.8)% 0.0% 3.6% 1.0%
----------------- ------ ------------ -------- ----------- -----------
London 13.4% 1.1% 0.0% 9.6% 4.9%
----------------- ------ ------------ -------- ----------- -----------
FY
----------------- ------ ------------ -------- ----------- -----------
Total 8.7% (0.6)% (0.4)% 1.9% 1.1%
----------------- ------ ------------ -------- ----------- -----------
Regional 9.1% 0.3% 0.5% 3.1% 2.1%
----------------- ------ ------------ -------- ----------- -----------
London 7.3% (3.3)% (5.2)% 0.6% (2.1)%
----------------- ------ ------------ -------- ----------- -----------
Premier Inn & Restaurants
-- In the 13 weeks to 2 March 2017 Premier Inn had very good
total sales growth of 9.3% and like for like sales growth of 2.7%.
As we focused on driving our total sales, we have been able to
accelerate the maturity of the c.9,000 new rooms opened in the last
two years which contributed 6.5% to our total sales growth. Our
like for like revpar was down 0.6% impacted by new capacity and
extensions which, as previously indicated, have their greatest
impact in the lower occupancy quarters. Revpar in catchments where
we have not added capacity increased by c.2.1%, with catchments
where we have added capacity expected to benefit over time as the
new rooms mature.
-- In the regions total sales grew by 7.8% in the quarter, like
for like sales grew by 2.5%, and like for like revpar declined
0.8%. Revpar in catchments where we had not added capacity was up
c.2.1%.
-- In London we had an excellent quarter with total sales growth
up 13.4%, with 11.3% contribution from new hotels, total occupancy
of 78.7%, like for like sales growth of 2.1% and like for like
revpar growth of 1.1%. The shortfall in Premier Inn's revpar growth
compared to the Midscale and Economy market resulted from our focus
on filling our new hotel rooms faster and our value for money
proposition. There were also learnings in the quarter as we adapted
our new ATE's pricing curves, especially to surges in demand.
-- Restaurants' total sales increased by 2.2% in the quarter
with like for like sales down 0.7%.
Costa
-- Costa total sales were up 9.0% and like for like sales were
down 0.8% in the quarter. As indicated in the previous trading
statement the third quarter benefitted from the timing of the
quarter end. Excluding this timing effect like for like sales in
the fourth quarter were up 0.6%.
-- Sales growth in travel and Drive Thrus, which account for
nearly 30% of our future store growth, continued to do very well
with high street stores' like for like sales down just over 1%,
reflecting the general retail trend and a more cautious consumer
environment.
-- China returned to positive like for like sales growth.
Notes
The financial year to 2 March 2017 was a 52-week year and the
financial year to 3 March 2016 was a 53-week year. In order to
provide a clearer comparison, year-on-year growth in numbers
relating to revenue, underlying profit and underlying earnings per
share are shown on a 52-week comparative, which excludes the final
week of the 2015/16 financial year. All other statutory
comparatives, and numbers shown as at the balance sheet date,
reflect the financial statements and do not exclude the 53(rd) week
of the prior year.
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 and return on capital.
(1) Underlying profit and underlying EPS
Profit excluding non-underlying items. Underlying EPS represents
the earnings per share based on the above underlying profit
definition and the tax thereon.
(2) 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 calculated as the 52 weeks to 2 March 2017 vs the
52 weeks to 25 February 2016
(3) Return on capital
Calculated by dividing the underlying operating profit for the
year by net assets at the balance sheet date adding back debt,
taxation liabilities and the pension deficit.
(4) Coffer Peach benchmark pub restaurants outside of the
M25
(5) STR Global
(6) Allegra
(7) Net debt
Total company borrowings after deducting cash and cash
equivalents.
(8) EBITDAR
Earnings before interest, tax depreciation, amortisation and
rent, excluding income from Joint Ventures and Associates.
Consolidated income statement
Year ended 2 March 2017
52 weeks 53 weeks
to to
2 March 3 March
2017 2016
Notes GBPm GBPm
---------------------------------------- ------ ----------
Revenue 4 3,106.0 2,921.8
Operating costs (2,557.2) (2,397.9)
---------- ----------
Operating profit before joint ventures
and associate 548.8 523.9
Share of profit from joint ventures 3.2 3.3
Share of profit from associate 0.7 0.9
---------- ----------
Operating profit 552.7 528.1
Finance costs (37.6) (41.2)
Finance revenue 0.3 0.8
---------- ----------
Profit before tax 4 515.4 487.7
Analysed as:
Underlying profit before tax 4 565.2 546.3
Non-underlying items 5 (49.8) (58.6)
Profit before tax 515.4 487.7
---------------------------------------- ------ ---------- ----------
Tax expense (99.5) (100.4)
Analysed as:
Underlying tax expense 6 (119.1) (116.1)
Non-underlying tax credit 5 19.6 15.7
---------- ----------
Tax expense 6 (99.5) (100.4)
---------------------------------------- ------ ---------- ----------
Profit for the year 415.9 387.3
---------- ----------
Attributable to:
Parent shareholders 421.6 391.2
Non-controlling interest (5.7) (3.9)
---------- ----------
415.9 387.3
---------- ----------
Year to Year to
2 March 3 March
2017 2016
Earnings per share (Note 7) pence pence
------------------------------ -------- --------
Earnings per share
Basic 231.39 215.66
Diluted 230.89 214.00
Underlying earnings per share
Basic 246.48 238.65
Diluted 245.95 236.82
Consolidated statement of comprehensive income
Year ended 2 March 2017
52 weeks 53 weeks
to to
2 March 3 March
2017 2016
Notes GBPm GBPm
-------------------------------------------- ----- -------- --------
Profit for the year 415.9 387.3
Items that will not be reclassified
to the income statement:
Re-measurement (loss)/gain on defined
benefit pension scheme (214.8) 201.6
Current tax on pensions 6 15.6 14.7
Deferred tax on pensions 6 26.7 (55.4)
Deferred tax: change in rate of corporation
tax on pensions 6 (3.1) (0.7)
-------- --------
(175.6) 160.2
Items that may be reclassified subsequently
to the income statement:
Net (loss)/gain on cash flow hedges (0.2) 6.5
Current tax on cash flow hedges 6 0.5 (0.9)
Deferred tax on cash flow hedges 6 (0.6) (0.4)
Deferred tax: change in rate of corporation
tax on cash flow hedges 6 (0.1) (0.1)
-------- --------
(0.4) 5.1
Exchange differences on translation
of foreign operations 22.9 7.1
Other comprehensive (loss) / income
for the year, net of tax (153.1) 172.4
Total comprehensive income for the
year, net of tax 262.8 559.7
-------- --------
Attributable to:
Parent shareholders 268.4 563.5
Non-controlling interest (5.6) (3.8)
-------- --------
262.8 559.7
-------- --------
Consolidated statement of changes in equity
Year ended 2 March 2017
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 26 February
2015 149.8 59.2 12.3 3,833.0 (1.4) (2,080.9) 1,972.0 5.9 1,977.9
Profit for
the year - - - 391.2 - - 391.2 (3.9) 387.3
Other
comprehensive
income - - - 158.8 7.0 6.5 172.3 0.1 172.4
-------- -------- ----------- --------- ------------ ---------- -------- ---------------- --------
Total
comprehensive
income - - - 550.0 7.0 6.5 563.5 (3.8) 559.7
Ordinary
shares
issued 0.2 3.4 - - - - 3.6 - 3.6
Loss on ESOT
shares issued - - - (6.7) - 6.7 - - -
Accrued
share-based
payments - - - 17.3 - - 17.3 - 17.3
Tax rate
change
on historical
revaluation - - - 1.3 - - 1.3 - 1.3
Equity
dividends - - - (155.1) - - (155.1) - (155.1)
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
-------- -------- ----------- --------- ------------ ---------- -------- ---------------- --------
Consolidated balance sheet
At 2 March 2017
2 March 3 March
2017 2016
Notes GBPm GBPm
-------------------------------------- ----- ---------- ----------
ASSETS
Non-current assets
Intangible assets 275.7 258.1
Property, plant and equipment 3,972.4 3,831.0
Investment in joint ventures 53.0 39.5
Derivative financial instruments 43.3 21.6
Trade and other receivables 6.8 7.7
4,351.2 4,157.9
Current assets
Inventories 48.2 44.8
Derivative financial instruments 12.3 3.2
Trade and other receivables 163.6 140.0
Cash and cash equivalents 9 63.0 57.1
---------- ----------
287.1 245.1
Assets held for sale 50.5 2.3
Total assets 4,688.8 4,405.3
LIABILITIES
Current liabilities
Borrowings 9 157.4 94.0
Provisions 36.3 14.7
Derivative financial instruments 2.3 4.4
Current tax liabilities 6 45.9 41.2
Trade and other payables 596.9 538.2
---------- ----------
838.8 692.5
Non-current liabilities
Borrowings 9 795.6 872.9
Provisions 12.3 22.7
Derivative financial instruments 8.3 9.6
Deferred tax liabilities 6 62.0 94.7
Pension liability 425.1 288.1
Trade and other payables 21.9 20.1
---------- ----------
1,325.2 1,308.1
Total liabilities 2,164.0 2,000.6
Net assets 2,524.8 2,404.7
---------- ----------
EQUITY
Share capital 150.2 150.0
Share premium 68.0 62.6
Capital redemption reserve 12.3 12.3
Retained earnings 4,330.9 4,239.8
Currency translation reserve 28.4 5.6
Other reserves (2,061.5) (2,067.7)
---------- ----------
Equity attributable to equity holders
of the parent 2,528.3 2,402.6
Non-controlling interest (3.5) 2.1
Total equity 2,524.8 2,404.7
---------- ----------
Alison Brittain Nicholas Cadbury
Chief Executive Finance Director
24 April 2017
Consolidated cash flow statement
Year ended 2 March 2017
52 weeks 53 weeks
to to
2 March 3 March
2017 2016
Notes GBPm GBPm
------------------------------------------------ ----- -------- --------
Profit for the year 415.9 387.3
Adjustments for:
Tax expense 6 99.5 100.4
Net finance cost 37.3 40.4
Share of profit from joint ventures (3.2) (3.3)
Share of profit from associate (0.7) (0.9)
Net (gain)/loss on disposal of property,
plant and equipment and property reversions 5 (16.3) 20.9
Net gain on disposal of investment
in associate (11.8) -
Depreciation and amortisation 220.1 197.6
Impairment of property, plant and
equipment, intangible assets and investments 5 30.0 5.4
Restructuring provisions created 28.0 -
Share-based payments 17.7 17.3
Other non-cash items 8.6 5.6
-------- --------
Cash generated from operations before
working capital changes 825.1 770.7
Increase in inventories (3.1) (7.6)
Increase in trade and other receivables (7.1) (15.2)
Increase in trade and other payables 45.2 34.3
-------- --------
Cash generated from operations 860.1 782.2
Payments against provisions (22.3) (15.1)
Pension payments (90.3) (84.3)
Interest paid (34.9) (25.6)
Interest received 0.3 0.6
Corporation taxes paid (86.8) (85.1)
-------- --------
Net cash flows from operating activities 626.1 572.7
Cash flows from investing activities
Purchase of property, plant and equipment 4 (571.2) (680.3)
Investment in intangible assets 4 (38.6) (35.4)
Proceeds/(costs) from disposal of
property, plant and equipment 192.9 (0.2)
Proceeds from disposal of investment
in associate 14.1 -
Business combinations, net of cash
acquired - (9.2)
Capital contributions and loans to
joint ventures (7.7) (3.0)
Dividends from associate 0.4 0.8
-------- --------
Net cash flows from investing activities (410.1) (727.3)
Cash flows from financing activities
Proceeds from issue of share capital 5.6 3.6
Increase in short-term borrowings 9 17.6 20.8
Proceeds from long-term borrowings 9 - 445.2
Repayments of long-term borrowings 9 (67.4) (101.9)
Renegotiation costs of long-term borrowings 9 (0.6) (3.6)
Dividends paid 8 (167.1) (155.1)
-------- --------
Net cash flows from financing activities (211.9) 209.0
Net increase in cash and cash equivalents 9 4.1 54.4
Opening cash and cash equivalents 9 57.1 2.1
Foreign exchange differences 9 1.8 0.6
-------- --------
Closing cash and cash equivalents 9 63.0 57.1
-------- --------
Notes to the accounts
1. Basis of accounting and preparation
The consolidated financial statements and preliminary
announcement of Whitbread PLC for the year ended 2 March 2017 were
authorised for issue by the Board of Directors on 24 April
2017.
The financial year represents the 52 weeks to 2 March 2017
(prior financial year: 53 weeks to 3 March 2016).
The financial information included in this preliminary statement
of results does not constitute statutory accounts within the
meaning of Section 435 of the Companies Act 2006 (the "Act"). The
financial information for the year ended 2 March 2017 has been
extracted from the statutory accounts on which an unqualified audit
opinion has been issued. Statutory accounts for the year ended 2
March 2017 will be delivered to the Registrar of Companies
following the Group's Annual General Meeting.
The statutory accounts for the year ended 3 March 2016, have
been delivered to the Registrar of Companies, and the Auditors of
the Group made a report thereon under Chapter 3 of part 16 of the
Act. That report was unqualified and did not contain a statement
under sections 498 (2) or (3) of the Act.
The consolidated financial statements of Whitbread PLC, and all
its subsidiaries, have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted for
use in the European Union and as applied in accordance with the
provisions of the Companies Act 2006.
2. Basis of consolidation
The consolidated financial statements incorporate the accounts
of Whitbread PLC, and all its subsidiaries, together with the
Group's share of the net assets and results of joint ventures and
associate incorporated using the equity method of accounting. These
are adjusted, where appropriate, to conform to Group accounting
policies. The financial statements of significant trading
subsidiaries are prepared for the same reporting year as the parent
Company except for Yueda Costa (Shanghai) Food & Beverage
Management Company Limited which has a year-end of 31 December as
per Chinese legislation.
A subsidiary is an entity controlled by the Group. Control is
the power to direct the relevant activities of the subsidiary which
significantly affect the subsidiary's return, so as to have rights
to the variable return from its activities.
Apart from the acquisition of Whitbread Group PLC by Whitbread
PLC in 2000/01, which was accounted for using merger accounting,
acquisitions by the Group are accounted for under the acquisition
method and any goodwill arising is capitalised as an intangible
asset. The results of subsidiaries acquired or disposed of during
the year are included in the consolidated financial statements
from, or up to, the date that control passes respectively. All
intra-Group transactions, balances, income and expenses are
eliminated on consolidation. Unrealised losses are also eliminated,
unless the transaction provides evidence of an impairment of the
asset transferred.
3. Accounting policies
The accounting policies adopted in the preparation of these
consolidated financial statements are consistent with those
followed in the preparation of the consolidated financial
statements for the year ended 3 March 2016 except for the adoption
of new standards and interpretations that are applicable for the
year ended 2 March 2017.
The Group has adopted the following standards and
interpretations which have been assessed as having no financial
impact or disclosure requirements at this time:
-- The IASB's annual improvement process, 2012-14;
-- IAS 1 Disclosure Initiative - Amendments to IAS 1;
-- IAS 16 and IAS 38: Clarification of Acceptable Methods of
Depreciation and Amortisation - Amendments to IAS 16 and IAS
38;
-- IAS 16 and IAS 41 Bearer Plants - Amendments to IAS 16 and IAS 41;
-- IAS 27 Equity Method in Separate Financial Statements - Amendments to IAS 27;
-- IFRS 10, IFRS 12 and IAS 28 Investments Entities: Applying
the Consolidation Exception - Amendments to IFRS 10, IFRS 12 and
IAS 28; and
-- IFRS 11 Accounting for Acquisitions of Interests in Joint
Operations - Amendments to IFRS 11.
Non-underlying items and use of underlying 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 (APM's)
which are consistent with the way that the business performance is
measured internally.
The term underlying profit is not defined under IFRS and may not
be comparable with similarly titled profit measures reported by
other companies. It is not intended to be a substitute for, or
superior to, statutory measurements of profit. Underlying 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.
We report underlying measures because we believe they provide
both management and investors with useful additional information
about the financial performance of the Group's businesses.
Underlying measures of profitability represent the equivalent
IFRS measures adjusted for specific items that we consider hinder
comparison of the financial performance of the Group's businesses
either from one period to another or with other similar
businesses.
The face of the income statement presents underlying profit
before tax and reconciles this to profit before tax. Underlying
earnings per share is calculated using underlying profit after tax
attributable to the parent shareholders.
The adjustments made to reported profit in the consolidated
income statement, in order to derive our underlying results, may
include:
-- Profit or loss on disposal of property, plant and equipment,
property reversions and onerous leases. On occasion we may dispose
of properties, either as part of a sale and leaseback financing
transaction or because the property is no longer required in our
ongoing business. In addition, the Group may recognise liabilities
in respect of lease obligations on properties which have been
previously disposed of but where the lease obligations have
reverted to the Group under privity. Profits or losses on these
items may be significant and are not reflective of the Group's
ongoing trading results.
-- Profit or loss on the sale of a business or investment. These
disposals are not part of the Group's ongoing trading business and
are therefore excluded.
-- Significant one-off restructuring costs, resulting from a
strategic review of the Group's businesses or operations, the
inclusion of which would distort the year-on-year comparability of
the Group's trading results.
-- Impairment of assets as the result of restructuring or
closure of a business and impairment of sites which are
underperforming or are to be closed, the inclusion of which would
distort the year-on-year comparability of the Group's trading
results.
-- Amortisation of intangible assets recognised as part of a
business combination or other transaction outside of the ordinary
course of business.
-- Finance charge/credit for defined benefit pension scheme.
These costs are non-cash and do not relate to the Group's ongoing
activities as the scheme is closed to future accrual.
-- Finance costs resulting from the unwinding of discounts on provisions created in respect of non-underlying items.
-- Significant and one-off 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
non-underlying items identified above.
4. Segment information
For management purposes, the Group is organised into two
strategic business units (Premier Inn & Restaurants and Costa)
based upon their different products and services:
-- Premier Inn & Restaurants 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 & Restaurants 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 &
Restaurants 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 years ended 2 March 2017 and 3 March
2016.
Premier Unallocated
Inn
& and Total
Restaurants Costa elimination operations
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 costs - - (27.2) (27.2)
----------------- --------------- ---------------- ----------------
Underlying profit before tax 468.0 158.0 (60.8) 565.2
Non-underlying items (Note 5):
Net gain/(loss) on disposal of
property, plant and equipment
and property reversions 26.0 (5.9) (0.8) 19.3
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)
Settlement of historic VAT claim - 5.3 - 5.3
Net gain on disposal of investment
in associate 11.8 - - 11.8
Amortisation of acquired intangibles - (2.5) - (2.5)
Impairment (net of reversals) (2.9) (4.6) - (7.5)
IAS 19 income statement charge
for 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 (Note 6) (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)
Premier Unallocated
Inn
& and Total
Restaurants Costa elimination operations
Year to 3 March 2016 GBPm GBPm GBPm GBPm
--------------------------------------------- ----------------- --------------- ---------------- ----------
Revenue
Revenue from external customers 1,822.0 1,099.8 - 2,921.8
Inter-segment revenue - 3.4 (3.4) -
Total revenue 1,822.0 1,103.2 (3.4) 2,921.8
Underlying operating profit 446.9 153.5 (31.6) 568.8
Underlying net finance cost - - (22.5) (22.5)
----------------- --------------- ---------------- ----------
Underlying profit before tax 446.9 153.5 (54.1) 546.3
Non-underlying items (Note 5):
Net loss on disposal of property,
plant and equipment and property
reversions (0.4) (5.5) (15.0) (20.9)
Intangible assets accelerated amortisation (7.2) (0.9) (2.0) (10.1)
Amortisation of acquired intangibles - (4.3) - (4.3)
Impairment (net of reversals) 0.3 (5.7) - (5.4)
IAS 19 income statement charge
for pension finance cost - - (17.2) (17.2)
Unwinding of discount on provisions - - (0.7) (0.7)
----------------- --------------- ---------------- ----------
Total non-underlying items (7.3) (16.4) (34.9) (58.6)
Profit before tax 439.6 137.1 (89.0) 487.7
Tax expense (Note 6) (100.4)
----------
Profit for the year 387.3
Assets and liabilities
Segment assets 3,842.2 444.4 - 4,286.6
Unallocated assets - - 118.7 118.7
----------------- --------------- ---------------- ----------
Total assets 3,842.2 444.4 118.7 4,405.3
----------------- --------------- ---------------- ----------
Segment liabilities (366.4) (136.8) - (503.2)
Unallocated liabilities - - (1,497.4) (1,497.4)
----------------- --------------- ---------------- ----------
Total liabilities (366.4) (136.8) (1,497.4) (2,000.6)
----------------- --------------- ---------------- ----------
Net assets 3,475.8 307.6 (1,378.7) 2,404.7
----------------- --------------- ---------------- ----------
Other segment information
Share of profit from joint ventures 3.3 - - 3.3
Share of profit from associate 0.9 - - 0.9
Investment in joint ventures 36.3 3.2 - 39.5
Total property rent 123.4 111.2 0.1 234.7
Capital expenditure:
Property, plant and equipment -
cash basis 581.0 99.3 - 680.3
Property, plant and equipment -
accruals basis 604.6 102.6 - 707.2
Intangible assets 32.2 3.2 - 35.4
Depreciation - underlying (112.0) (59.4) - (171.4)
Amortisation - underlying (9.0) (2.7) (0.1) (11.8)
Revenues from external customers 2016/17 2015/16
are split geographically as follows: GBPm GBPm
--------------------------------------- -------- --------
United Kingdom* 2,985.0 2,822.4
Non-United Kingdom 121.0 99.4
-------- --------
3,106.0 2,921.8
* United Kingdom (UK) revenue is revenue where the source of the
supply is the UK. This includes Costa franchise income invoiced
from the UK.
Non-current assets** are split 2017 2016
geographically as follows: GBPm GBPm
-------------------------------- -------- --------
United Kingdom 4,123.4 3,973.1
Non-United Kingdom 184.5 163.2
-------- --------
4,307.9 4,136.3
** Non-current assets exclude derivative financial
instruments
5. Non-underlying items
As set out in the policy in Note 3, 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 underlying measures because we
believe they provide both management and investors with useful
additional information about the financial performance of the
Group's businesses. Underlying measures of profitablility 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.
Previously this note was reported as exceptional items and
non-underlying adjustments. The definition and policy has been
simplified in 2016/17 to refer to non-underlying items only. There
has been no change in definition or metric and therefore
presentation is reflected in the comparative disclosure without any
restatement of values.
2016/17 2015/16
GBPm GBPm
------------------------------------------------- -------- --------
Non-underlying items were as follows:
Operating costs:
Net gain/(loss) on disposal of property,
plant and equipment and property reversions
(a) 19.3 (20.9)
PI International business exit (b) (30.0) -
Costa international restructuring (14.5) -
(c)
UK restructuring (d) (21.6) -
Settlement of historic VAT claim (e) 5.3 -
Net gain on disposal of investment 11.8 -
in associate (f)
Intangible assets accelerated amortisation
(g) - (10.1)
Amortisation of acquired intangibles (2.5) (4.3)
Impairment of property, plant and
equipment (net of reversals) (h) (7.5) (5.4)
Non-underlying operating costs (39.7) (40.7)
Net finance costs:
IAS 19 pension finance cost (9.4) (17.2)
Unwinding of discount on provisions
(i) (0.7) (0.7)
-------- --------
Non-underlying net finance costs (10.1) (17.9)
Non-underlying items before tax (49.8) (58.6)
-------- --------
Tax adjustments included in reported
profit after tax, but excluded in arriving
at underlying profit after tax:
Tax on non-underlying items 12.3 2.8
Non-underlying tax items - tax base
cost 2.1 (0.1)
Deferred tax relating to UK tax rate
change (j) 5.2 13.0
Non-underlying tax credit 19.6 15.7
-------- --------
(a) During the year, the Group made a net gain on asset
disposals of GBP26.0m through three sale and leaseback
transactions. The balance relates to changes in onerous contract
provisions in the UK of GBP2.4m, Poland release of GBP(0.4)m and
Singapore of GBP2.9m and minor disposals in the year of
GBP1.8m.
(b) On 13 July 2016, the Group announced its intention to exit
hotel operations in South East Asia. This has resulted in the
recognition of impairment losses on assets of GBP11.0m, investment
in joint ventures of GBP0.9m and goodwill of GBP3.0m as well as the
recognition of a restructuring provision of GBP15.1m for costs of
exiting management agreements and closure of regional offices.
(c) During the year Costa has undergone a strategic review of
its international operations. This has led to the decision to exit
its French equity business and to restructure its Chinese
operations. In France this has resulted in the recognition of
impairment losses of GBP1.5m, store closure costs of GBP0.8m and
restructuring costs of GBP6.8m (including a restructuring provision
of GBP6.6m for redundancy and lease exit costs). In China the
review has led to impairment losses of GBP3.2m, store closure costs
of GBP1.6m and onerous lease provisions of GBP0.6m. The restructure
is ongoing and there are expected to be further closure costs in
the next financial year. The share attributable to the parent
shareholders is GBP2.7m.
(d) During the year, the Group undertook significant operational
reorganisation of support centre operations. This restructuring has
resulted in costs of GBP12.4m, including staff redundancy and
consultation costs, asset impairments of GBP2.9m as well as the
recognition of a restructuring provision of GBP6.3m covering staff
redundancy and consultation costs.
(e) During the year, the Group received a refund on settlement
of a historic VAT claim.
(f) During the year the Group disposed of its investment in
Morrison Street Hotel Limited resulting in a net gain of
GBP11.8m.
(g) Following a review of IT software and technology assets
during the prior year, additional amortisation of GBP10.1m was
recognised in the income statement in respect of systems for which
there was no future economic benefit.
(h) Net impairment losses arising on sites which are to be
closed or underperforming.
(i) The finance cost arising from the unwinding of the discount
rate within provisions is included in non-underlying finance costs,
reflecting the non-underlying nature of the provisions created.
(j) Impact of the reduction in the main rate of UK corporation
tax to 19% from 1 April 2017 and to 17% from 1 April 2020.
6. Taxation
2016/17 2015/16
Consolidated income statement GBPm GBPm
----------------------------------------- ---------- ----------
Current tax:
Current tax expense 111.6 116.1
Adjustments in respect of previous
periods (1.7) (8.0)
---------- ----------
109.9 108.1
Deferred tax:
Origination and reversal of temporary
differences (6.0) (2.9)
Adjustments in respect of previous
periods 0.8 8.2
Change in UK tax rate to 17% (2015/16:
18%) (5.2) (13.0)
(10.4) (7.7)
---------- ----------
Tax reported in the consolidated income
statement 99.5 100.4
---------- ----------
Consolidated statement of comprehensive 2016/17 2015/16
income GBPm GBPm
----------------------------------------- -------- --------
Current tax:
Cash flow hedges (0.5) 0.9
Pensions (15.6) (14.7)
Deferred tax:
Cash flow hedges 0.6 0.4
Pensions (26.7) 55.4
Change in UK tax rate to 17% (2015/16:
18%) - pensions 3.1 0.7
Change in UK tax rate to 17% (2015/16:
18%) - cash flow hedges 0.1 0.1
-------- --------
Tax reported in other comprehensive
income (39.0) 42.8
-------- --------
A reconciliation of the tax charge applicable to underlying
profit before tax and profit before tax at the statutory tax rate,
to the actual tax charge at the Group's effective tax rate, for the
years ended 2 March 2017 and 3 March 2016 respectively is as
follows:
2016/17 2015/16
---------------------------------
Tax on Tax on
underlying Tax on underlying Tax on
profit profit profit profit
GBPm GBPm GBPm GBPm
--------------------------------- ------------ -------- ------------ --------
Profit before tax as reported
in the consolidated income
statement 565.2 515.4 546.3 487.7
Tax at current UK tax rate
of 20.00% (2015/16: 20.08%) 113.0 103.1 109.7 98.0
Effect of different tax
rates and unrecognised losses
in overseas companies 4.3 8.3 3.5 5.1
Effect of joint ventures
and associate (0.5) (0.5) (0.9) (0.9)
Expenditure not allowable 3.1 (4.9) 4.0 11.0
Adjustments to current tax
expense in respect of previous
years (2.1) (1.6) (8.0) (8.0)
Adjustments to deferred
tax expense in respect of
previous years 1.8 0.8 7.8 8.2
Impact of deferred tax being
at a different rate from
current tax rate (0.5) (0.5) - -
Impact of change of tax
rate on deferred tax balance - (5.2) - (13.0)
------------ -------- ------------ --------
Tax expense reported in
the consolidated income
statement 119.1 99.5 116.1 100.4
------------ -------- ------------ --------
Current tax liability
The corporation tax balance is a liability of GBP45.9m (2016:
liability of GBP41.2m).
Deferred tax
Deferred tax relates to the following:
Consolidated Consolidated
balance sheet income statement
---------------------------- ---------------------
2017 2016 2016/17 2015/16
GBPm GBPm GBPm GBPm
-------------------------------- ------------- ------------- ---------- ---------
Deferred tax liabilities
Accelerated capital allowances 44.0 48.7 (4.7) (3.3)
Rolled over gains and property
revaluations 68.1 73.3 (4.5) (8.0)
------------- -------------
Gross deferred tax liabilities 112.1 122.0
Deferred tax assets
Pensions (53.1) (28.7) (0.7) (2.2)
Other 3.0 1.4 (0.5) 5.8
------------- -------------
Gross deferred tax assets (50.1) (27.3)
---------- ---------
Deferred tax expense (10.4) (7.7)
------------- -------------
Net deferred tax liability 62.0 94.7
Total deferred tax liabilities relating to disposals during the
year were GBPnil (2016: GBPnil).
The Group has incurred overseas tax losses which, subject to any
local restrictions, can be carried forward and offset against
future taxable profits in the companies in which they arose. The
Group carries out an annual assessment of the recoverability of
these losses and does not think it appropriate at this stage to
recognise any deferred tax asset. If the Group were to recognise
these deferred tax assets in their entirety, profits would increase
by GBP16.5m (2016: GBP10.7m), of which, the share attributable to
the parent shareholders is GBP13.9m (2016: GBP8.9m).
At 2 March 2017, there was no recognised deferred tax liability
(2016: GBPnil) for taxes that would be payable on any unremitted
earnings, as all such amounts are permanently reinvested or, where
they are not, there are no corporation tax consequences of such
companies paying dividends to parent companies.
Tax relief on total interest capitalised amounts to GBP1.8m
(2016: GBP2.0m).
Factors affecting the tax charge for future years
The Finance (No 2) Act 2015 reduced the main rate of UK
corporation tax to 19% from 1 April 2017 and to 18% from 1 April
2020. The effect of these rates was included in the financial
statements in 2015/16. The Finance Act 2016 further reduced the
main rate of UK corporation tax to 17% with effect from 1 April
2020. The effect of the new rate is a reduction of the deferred tax
liability by a net of GBP2.7m comprising a credit of GBP5.2m to the
income statement, a charge of GBP3.2m to the statement of
consolidated income, and a reserves movement of GBP0.7m. The rate
changes will also impact the amount of the future cash tax payments
to be made by the Group.
7. Earnings per share
The basic earnings per share figures (EPS) are calculated by
dividing the net profit for the year attributable to ordinary
shareholders, therefore before non-controlling interests, by the
weighted average number of ordinary shares in issue during the year
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 year. Where the
average share price for the year is lower than the option price the
options become anti-dilutive and are excluded from the calculation.
The number of such options was nil (2016: nil).
The numbers of shares used for the earnings per share
calculations are as follows:
2016/17 2015/16
million million
------------------------------------------- --------- ---------
Basic weighted average number of ordinary
shares 182.2 181.4
Effect of dilution - share options 0.4 1.4
--------- ---------
Diluted weighted average number of
ordinary shares 182.6 182.8
--------- ---------
The total number of shares in issue at the year-end, as used in
the calculation of the basic weighted average number of ordinary
shares, was 195.4m, less 12.1m treasury shares held by Whitbread
PLC and 1.0m held by the ESOT (2016: 195.2m, less 12.6m treasury
shares held by Whitbread PLC and 0.9m held by the ESOT).
The profits used for the earnings per share calculations are as
follows:
2016/17 2015/16
GBPm GBPm
Profit for the year attributable to
parent shareholders 421.6 391.2
Non-underlying items - gross 49.8 58.6
Non-underlying items - taxation (19.6) (15.7)
Non-underlying items - non-controlling
interest (2.7) (1.2)
-------- --------
Underlying profit for the year attributable
to parent shareholders 449.1 432.9
2016/17 2015/16
pence pence
Basic on profit for the year 231.39 215.66
Non-underlying items - gross 27.33 32.30
Non-underlying items - taxation (10.76) (8.65)
Non-underlying items - non-controlling
interest (1.48) (0.66)
-------- --------
Basic on underlying profit for the
year 246.48 238.65
Diluted on profit for the year 230.89 214.00
Diluted on underlying profit for the
year 245.95 236.82
8. Dividends paid and proposed
2016/17 2015/16
pence pence
per share GBPm per share GBPm
-------------------------------- ---------- ----- ---------- -----
Final dividend, proposed and
paid, relating to the prior
year 61.85 112.6 56.95 103.4
Interim dividend, proposed
and paid, for the current year 29.90 54.5 28.50 51.7
Total equity dividends paid
in the year 167.1 155.1
Dividends on other shares:
B share dividend 0.80 - 0.80 -
C share dividend 0.80 - 0.80 -
----- -----
- -
Total dividends paid 167.1 155.1
Proposed for approval at Annual
General Meeting:
Final equity dividend for the
current year 65.90 120.1 61.85 112.4
A final dividend of 65.90p per share (2016: 61.85p) amounting to
a dividend of GBP120.1m (2016: GBP112.4m) was recommended by the
directors at their meeting on 24 April 2017. A dividend
reinvestment plan (DRIP) alternative will be offered. These
financial statements do not reflect this dividend payable.
9. Movements in cash and net debt
Fair
value Amortisation
Year ended 2 March 3 March Cost Cash Foreign adjustments of premiums 2 March
2017 2016 of borrowings flow exchange to loans and discounts 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------- -------------- ------- --------- ------------ --------------- --------
Cash at bank and
in hand 57.0 62.9
Short-term deposits 0.1 0.1
Overdrafts - -
----------- --------
Cash and cash
equivalents 57.1 - 4.1 1.8 - - 63.0
Short-term bank
borrowings (92.0) - (17.6) - - - (109.6)
Loan capital under
one year (2.0) (47.8)
Loan capital over
one year (872.9) (795.6)
----------- --------
Total loan capital (874.9) 0.6 67.4 (28.1) (6.5) (1.9) (843.4)
----------- -------------- ------- --------- ------------ --------------- --------
Net debt (909.8) 0.6 53.9 (26.3) (6.5) (1.9) (890.0)
----------- -------------- ------- --------- ------------ --------------- --------
Fair
value Amortisation
Year ended 3 March 26 February Cost Cash Foreign adjustments of premiums 3 March
2016 2015 of borrowings flow exchange to loans and discounts 2016
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------- -------------- ------- --------- ------------ --------------- --------
Cash at bank and
in hand 1.9 57.0
Short-term deposits 0.2 0.1
Overdrafts - -
----------- --------
Cash and cash
equivalents 2.1 - 54.4 0.6 - - 57.1
Short-term bank
borrowings (71.2) - (20.8) - - - (92.0)
Loan capital under
one year (1.9) (2.0)
Loan capital over
one year (512.2) (872.9)
----------- --------
Total loan capital (514.1) 3.6 (343.3) (14.1) (5.1) (1.9) (874.9)
----------- -------------- ------- --------- ------------ --------------- --------
Net debt (583.2) 3.6 (309.7) (13.5) (5.1) (1.9) (909.8)
----------- -------------- ------- --------- ------------ --------------- --------
Net debt includes US$ denominated loan notes of US$325.0m (2016:
US$325.0m) retranslated to GBP267.8m (2016: GBP233.8m). These notes
have been hedged using cross-currency swaps. At maturity, GBP208.3m
(2016: 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 GBP830.5m (2016:
GBP884.3m).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKQDDDBKBAQB
(END) Dow Jones Newswires
April 25, 2017 02:00 ET (06:00 GMT)
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