TIDMWTB
RNS Number : 1926Q
Whitbread PLC
26 October 2021
Recovery ahead of expectations and outperforming the market
Throughout this release all percentage growth comparisons are
made on a two-year basis, comparing the current year (FY22)
performance for the 26 weeks to 26 August 2021 to the same period
in FY20 (26 weeks to 29 August 2019), with FY20 being the last
financial period before the onset of the COVID-19 crisis
FY22 H1 highlights
-- Premier Inn's recovery in H1 was ahead of expectations
-- Significant market outperformance in the UK, with Premier Inn
total accommodation sales 12.3 pp ahead of the midscale and economy
market in H1, and 13.9 pp ahead in Q2
-- Expansion continuing at pace in Germany with the total open
and committed pipeline now at 73 hotels, with statutory revenue
197.3% ahead of FY20
Operational update
-- Recovery in UK demand was very strong post 17 May when
leisure overnight stays were permitted with total accommodation
sales improving from down 60.9% and 9.6% respectively in Q1 and Q2
vs FY20, and up 10.5% in August
-- Leisure demand remains strong in the UK into H2, with
business demand improving, resulting in September total
accommodation sales up 9.7% vs FY20.
-- Occupancy in Germany grew to 47% in Q2 and over 60% in August and September
-- Better placed than most to deal with the challenging
operating and inflationary environment (wages, utilities)
-- Investing in people, marketing and refurbishments
capitalising on the recovery and market capacity reduction
-- Remain confident in our ability to execute acquisitions at good returns in Germany
Financial summary
-- H1 FY22 statutory revenues were 39.0% down compared to H1
FY20 as a result of the COVID-19 restrictions that were in place
during the first half:
-- COVID-19 restrictions materially impacted the performance of
the UK business in the first quarter. Only essential business
guests were permitted to stay overnight until 17 May, at which
point overnight leisure stays were permitted. Our restaurants were
also not permitted to open for indoor service until the same date,
with the majority remaining temporarily closed until then. The
majority of our hotels and restaurants have operated
restriction-free from 19 July. This resulted in UK statutory
revenue being down 39.4% compared to H1 FY20
-- Restrictions were in place throughout the half in Germany,
the impact of which was offset by the growth in the estate,
resulting in statutory revenue 197.3% ahead of H1 FY20 driven by
the material growth in the estate
-- The adjusted loss before tax of GBP56.6m benefitted from
GBP141.6m(1) of COVID-19 related Government support schemes in the
UK and Germany, and the statutory loss before tax of GBP19.3m also
benefitted from GBP37.3m of adjusting items credits (GBP28.6m
profit in property disposals and GBP8.7m VAT claim)
-- The Group retains a strong balance sheet and liquidity
position with a cash inflow before debt repayments of GBP106.7m in
the half, reflecting the improved trading performance compared to
the same period last year. Net cash at the end of H1 was
GBP60.2m
Outlook
-- Sales recovery is ahead of expectations, and while a number
of uncertainties remain, UK like-for-like RevPAR run rate has the
potential to reach full recovery at some point in 2022
-- Confident on the return to pre-pandemic UK profit margins,
however we will have to wait to assess speed of recovery once we
have greater visibility of longer-term inflation and supply chain
pressures
Driving long-term value
-- In the UK, we will continue to grow by leveraging the
powerful competitive advantages of our scale, brand, direct
distribution, best-in-class operating model, and broad customer
reach
-- In Germany, we are expanding at pace, investing in both
organic and inorganic growth, and building the Premier Inn brand
proposition as we establish a nationwide footprint
-- Whitbread is well-placed to take advantage of the likely
accelerated supply contraction in the market and constrained
investment amongst independent and budget branded operators in the
UK and Germany
-- Our strategy is underpinned by our well-established Force for
Good programme, delivering ambitious commitments to operate
responsibly and sustainably, and reflecting the positive impact we
can make for our employees, customers, suppliers, investors,
communities and the environment
H1 Financial Summary
GBPm H1 FY22 H1 FY21 H1 FY20 vs H1 FY20
========== ========== ========== ===========
Statutory revenue(2) 661.6 250.8 1,084.0 (39.0)%
Adjusted EBITDAR 178.3 (153.7) 426.7 (58.2)%
Adjusted (loss)/ profit before
tax (56.6) (367.4) 235.6 (124.0)%
Statutory (loss)/ profit before
tax (19.3) (724.7) 219.9 (108.8)%
Statutory (loss)/ profit for
the period (37.8) (660.5) 172.2 (122.0)%
Adjusted basic EPS (26.4)p (174.4)p 97.1p (127.2)%
Statutory basic EPS (18.7)p (377.4)p 89.6p (120.9)%
Dividend per share 0p 0p 32.7p (100.0)%
Cash and cash equivalents 1,144.7 936.2 804.9 339.8
Net cash/ (debt) 60.2 196.4 (77.5) 137.7
Net cash/ (debt) and lease
liabilities (3,253.4) (2,765.2) (2,575.1) (26.3)%
================================== ========== ========== ========== ===========
1: GBP60.0m UK Coronavirus Job Retention Scheme, GBP28.6m
Germany Government COVID-19 grants, GBP47.7m UK business rates
relief and GBP5.3m other COVID-19 related support grants
2: Includes revenue relating to the Costa disposal transitional
service agreement of GBP0.3m in H1 FY21 and GBP6.0m in H1 FY20
signifies an alternative performance measure (APM) - Further
information can be found in the glossary and reconciliation of APMs
at the end of this document.
Alison Brittain, Whitbread Chief Executive Officer,
commented:
"Whitbread traded significantly ahead of the market in the UK
during the first half of the year, with our regional hotels trading
ahead of pre-COVID-19 levels in the last six weeks of the half.
This strong performance has continued into the second half, with
sustained high levels of leisure demand and resilient demand from
tradespeople. Whilst some uncertainty remains over the speed and
timing of the market recovery for office-based and international
demand and the evolution of the pandemic in the winter months, we
believe that UK like-for-like RevPAR run rates have the potential
to reach full recovery in at some point during 2022.
The operating environment during the summer and into autumn has
been challenging largely as a result of our very high occupancy
levels, market-wide supply chain issues and a tighter labour supply
in the hospitality sector. Although we are not immune from these
challenges, we are well placed to respond. Our GBP100m efficiency
programme is well underway and we are "investing to win" in our
teams, our hotels and our marketing, in order to continue to grow
our market share as demand recovers and as our competitors continue
to be under pressure.
In Germany, we are well on the way to building a business of
scale with a growing national presence. Our open and committed
hotel network now stands at 73 hotels, and we continue to look for
opportunities to grow our footprint at pace both organically and
through acquisitions. The budget hotel market is recovering ahead
of the overall market and we are seeing growing demand and
occupancy levels in our open hotels, alongside encouraging customer
scores.
Our strong balance sheet enables us to continue investing in
hotel growth in both the UK and Germany and in commercial
initiatives and refurbishments, strengthening our market position
and driving further market share gains. In the UK, our performance
is underpinned by our uniquely advantaged and market-leading
position, built on our scale, direct distribution, and the strength
of the Premier Inn brand. In Germany, we believe the opportunity to
create value is significant and our commitment to that market will
be substantial, delivering good long-term returns. Our strategy of
"investing to win" has driven a strong relative performance through
the first half of the year, and we have the market position and
platform to continue this level of performance into the second half
of this year and beyond."
For more information please contact:
Investor Relations - Whitbread
investorrelations@whitbread.com
Paul Tymms, Director of Investor Relations
paul.tymms@whitbread.com
Abigail Cammack, Investor Relations Manager
abigail.cammack@whitbread.com
Media - Tulchan whitbread@tulchangroup.com
Sunita Chauhan / Jessica Reid +44 (0) 20 7353 4200
A webcast for investors and analysts will be made available at
8:15am on 26 October 2021 and will be followed by a live Q&A
teleconference at 9:15am. Details of both can be found on
Whitbread's website (www.whitbread.co.uk/investors).
Alternative performance measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way that the business performance is
measured internally. We report adjusted measures because we believe
they provide both management and investors with useful additional
information about the financial performance of the Group's
businesses.
Adjusted measures of profitability represent the equivalent IFRS
measures adjusted for specific items that we consider relevant for
comparison of the financial performance of the Group's businesses
either from one period to another or with other similar
businesses.
APMs are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
Further information can be found in the glossary and reconciliation
of APMs at the end of this document.
Business Overview
Driving long-term value
Whitbread's vertically integrated model, which combines the
ownership of property, hotel operations, brand, and inventory
distribution has enabled Premier Inn to grow at a faster pace than
competitors, delivering a consistently superior customer experience
and generating a strong return on capital for shareholders over the
last 15 years. Our strategy is executed across three areas:
continuing to grow and innovate in the UK and take market share,
growing at scale in Germany, and enhancing our capabilities to
support long-term growth by ensuring we have financial flexibility,
a cost base that appropriately reflects demand levels, and acting
responsibly through our Force for Good programme.
We hold a uniquely advantaged position in the UK:
-- The UK's largest hotel chain with over 80k rooms, Premier Inn
provides a diverse portfolio of locations where customers want to
stay
-- R egularly voted as the UK's favourite hotel brand ,
synonymous with high quality and good value, with great customer
service
-- Best in class operations : ownership of all aspects of our
hotel and restaurant operations ensures greater control over the
customer experience, resulting in a high-quality offering delivered
on a consistent basis throughout the estate
-- Industry-leading digital distribution model : with only 1% of
bookings delivered through third party online travel agents (OTAs)
our direct distribution model provides complete ownership of the
customer relationship driving substantially lower acquisition and
retention costs
-- Broad customer reach : o ur customer base is highly
diversified with an approximate 50/25/25 split between leisure /
tradespeople / office workers, and with low levels of group
bookings, meaning we are far less exposed to those areas of
business travel that may be structurally impaired as a result of
changing work habits post COVID-19
The sector and markets in which Premier Inn operates are highly
attractive:
-- The budget branded model is structurally advantaged : The
budget branded hotel sector is historically the highest growth
segment in the hotel market. It has proved more resilient in
previous downturns, and is also significantly outperforming the
rest of the hotel market during this recovery period
-- Long runway for growth: The Group has a long runway for
growth in the UK, with detailed network planning supporting a
network target of at least 110,000 rooms. Our current UK estate
stands at over 80,000 rooms, with a pipeline of almost 10,000 rooms
of which around 3,000 new rooms are opened each year. In the UK we
are able to leverage our brand portfolio to ensure the optimal
hotel and restaurant offering by location. Our new hotels are
larger than the estate average, are more efficient to run, and have
a better operating leverage. In Germany we have an estate of nearly
5,000 rooms and a growing committed pipeline of over 8,000 rooms,
with the potential to replicate our scale in the UK
-- Enhanced structural opportunities: The independent sector
still represents 48% of the UK market and 72% of the German market
but are both in long-term decline as customers migrate from
independent to budget branded hotels. This migration is expected to
accelerate as a result of the COVID-19 crisis and Premier Inn is
well-placed to capitalise on the expected contraction in competitor
supply and to take market share in both the UK and Germany
Opportunity to replicate our UK success in Germany:
We believe all of the five UK success factors detailed above are
either already present in Germany, or, in the case of scale, brand
strength and a direct distribution model, a compelling opportunity
exists for Premier Inn to develop those characteristics in Germany
as the business grows in scale.
We have materially accelerated our growth in Germany since the
end of FY20, growing from just over 1,000 open rooms in 6 hotels to
our open and committed pipeline of 73 hotels and over 13,500 rooms
in H1 FY22. The open and committed pipeline would equate to 1%
share of the market in 2019 (compared to 11% in the UK). The market
is highly fragmented, and we see an opportunity to grow to at least
60,000 rooms, which would represent a 6% market share, still only
half that of Premier Inn in the UK.
Our enlarged estate now provides us with a strong platform from
which to grow our brand recognition. We have a growing presence in
a number of major towns and cities, meaning the Premier Inn brand
can be seen across Germany. As the estate continues to grow, we
focus on brand-building, with nationwide marketing campaigns and
new business corporate relationships supplementing effective
localised brand campaigns. The quality of the hotel and room
offering, which is driving very strong customer scores, is also a
key component in driving brand awareness.
The Group has the capability to support long term growth:
-- Financial flexibility: The Group's strong balance sheet, with
net cash of GBP60.2m and accessible cash of GBP1,144.7m at the end
of H1, enables the Group to invest in the Premier Inn proposition
when others will be constrained and supports our investment grade
leverage metrics through this period of uncertainty. We are
"investing to win" in new hotels, new room products, our IT
platforms and in marketing, helping to provide a platform for
sustained growth in both the UK and Germany. The balance sheet also
provides the flexibility to execute bolt-on M&A in Germany,
further accelerating our growth. At all times, we operate with
capital discipline, ensuring the optimal use of capital to drive
the best returns.
-- Asset backed balance sheet : The Group owns around 60% of its
hotel estate with the remaining 40% operated as leasehold. Hotel
freehold ownership provides:
o control over the initial development of the hotel, and
subsequent maintenance and redevelopment
o a strong financial covenant, resulting in both favourable
lease terms with landlords, and financing terms with lenders
o a reduction in earnings volatility during downturns
o a flexible source of funding
A flexible approach to freehold or leasehold acquisitions also
ensures new sites are in the best locations and have the optimal
size and format.
-- Lean and agile cost model: The well documented market-wide
inflationary pressures and labour shortages in our sector mean the
focus on cost efficiency has never been so important. In April this
year, we announced the next phase of our long running efficiency
programme, with this phase expected to deliver around GBP100m of
cost efficiencies by the end of FY24. We are making good progress
and this target will be achieved through developing our
international sourcing capability, investing in our technology
platforms to enable both marketing and labour scheduling
effectiveness, and optimising the UK estate.
-- Operating responsibly and sustainably: Our long-established
Force For Good sustainability programme covers large aspects of our
ESG agenda and ensures that doing the right thing is embedded in
everything that we do. We have a number of stretching and
industry-leading sustainability targets, including an ambition to
reach net-zero carbon emissions by 2040.
H1 Review - a strong recovery
The Group's financial performance in the first half of this year
was ahead of our expectations with the leisure "bounce" in demand
being far stronger than anticipated. The Group traded significantly
ahead of the midscale and economy ("M&E") market in the UK
during the period, and performance was encouraging in Germany,
despite the market-wide COVID-19 restrictions that were in place
for the majority of the first quarter in the UK, and throughout the
first half in Germany.
In the UK, leisure overnight stays were permitted from 17 May,
and subsequent demand was very strong across the majority of the
estate. In the UK regions, Q2 total accommodation sales were almost
fully recovered to pre COVID levels (0.2% behind the same period in
FY20) and were 18.1% ahead of FY20 in August, driven by both the
"staycation" leisure bounce, the removal of all COVID-19
restrictions from leisure events, and the new hotels we have
opened. The London market has lagged the regions during the
COVID-19 crisis, as a result of very low levels of inbound
international travel, and subdued business commuting, however
trends improved during July and August, helped by the domestic
leisure bounce, office reopening and the gradual return of some
international demand. London total accommodation sales in Q2 were
down 43.5% versus FY20 and down 21.4% in August versus FY20.
Both Average Room Rates ("ARR") and occupancy rates recovered
well in the regions, with high ARRs being achieved in those areas
with high demand, while lower ARR was used to successfully drive
initial occupancy rates in those areas of weaker demand, such as
city centre locations, central London and airports.
Total food and beverage sales were 51.2% behind H1 FY20
reflecting the fact that all restaurants were closed from the start
of the half until 12 April, when outdoor service was permitted in
England. The remaining estate was largely reopened on 17 May. A
revamped menu offering, focusing on traditional favourites and an
enhanced Sunday roast selection, alongside an enhanced drink
offering has been well received by customers, helping drive Q2
total food and beverage sales to 18.1% behind Q2 FY20.
The sustained periods of very high occupancy in our hotels and
the increasing demand in our restaurants during the summer,
combined with market-wide supply chain issues and tightening labour
supply have made the operating environment challenging. Our
flexible operating model has responded well, and alongside some
temporary changes to check-in times and menus, has meant disruption
to our customers has been minimised.
In Germany, trends were largely similar to that evidenced in the
UK, with high levels of domestic leisure demand. However, unlike
the UK, capacity limits on business and leisure events, and greater
Government restrictions for certain social events and hotel stays
remained in place across the half and acted as a market-wide drag
on demand. Digital marketing campaigns aimed at growing Premier Inn
brand recognition, helped build trading momentum especially in
those destinations with a greater leisure exposure, such as Berlin,
Freiburg and Hamburg. Overall, our hotels achieved occupancy rates
of over 60% in August. Premier Inn Germany Q2 total accommodation
sales were over 400% ahead of Q2 FY20, reflecting the larger estate
we now have, with occupancy levels of 47.5%.
The Group's flexible balance sheet has enabled a programme of
investment in expansion and commercial initiatives that are driving
market share gains. The "Rest Easy" above the line multi-channel
campaign launched in April is delivering increased customer
consideration scores and high volumes to the revamped
premierinn.com website. We commenced the roll-out of 1,500 Premier
Plus rooms in this financial year and are aiming to accelerate the
rollout into FY23. These upgraded rooms are targeted at business
customers but have also proved popular with our leisure guests
during the summer, and are delivering a good ARR uplift.
Refurbishment capex is already at pre-COVID-19 levels, ensuring
that our hotel estate remains well-invested, at a time when others
will be constrained. An incremental GBP20m is being invested in
marketing and refurbishment P&L spend this year, to ensure our
strong growth and market share gains continue. We will also
continue to invest in our IT platforms, helping further enhance our
digital capability, including a new CRM platform that will be
introduced in the next two years.
H1 FY22 statutory revenues were 39.0% down compared to H1 FY20
as a result of the COVID-19 restrictions that were in place during
the first half. UK statutory revenue was down 39.4% compared to H1
FY20, while Germany statutory revenue was up 197.3% driven by the
material growth in the estate. The Group was operating cash
positive during H1, further strengthening our balance sheet
flexibility. The statutory loss before tax of GBP19.3m benefitted
from GBP141.6m of COVID-19 related Government support schemes in
the UK and Germany, and GBP37.3m of adjusting items credits
(GBP28.6m profit from property disposals and an GBP8.7m historic
VAT claim). The Group stopped participating in the Government
Coronavirus Job Retention Scheme in May when the restrictions on
domestic travel were lifted.
Current Trading - seven weeks to 14 October
In the current trading period, total UK sales were 1.3% ahead of
the same period in FY20, with total accommodation sales 7.9% ahead
and occupancy at 81.2%. Total UK accommodation sales were 14.1%
ahead of the market. Total UK food and beverage sales were 11.5%
down on the same period in FY20. Germany total sales were 318.7%
ahead of the same period in FY20, with accommodation sales 260.4%
ahead and occupancy at 62.7%, the adverse impact of COVID-19
restrictions offset by the larger estate.
We are about to enter the quieter, lower demand months of the
year. The level of bookings into our fourth quarter are always low
at this time of year, so it is harder to speculate on expected
revenue growth for this quarter. However, we are starting to see
demand momentum moving in the right direction, especially within
the UK Regions.
VAT on hospitality products and services increased from 5% to
12.5% on 1 October, with a full return to the pre-COVID-19 level of
20% scheduled for 1 April 2022.
Outlook
In the UK, the very high levels of leisure demand evidenced
during the summer, have continued into the second half with demand
remaining high in September and into October. Whilst seasonality
will reduce levels of "holiday" demand, the absence of virtually
all UK COVID-19 restrictions on leisure events, such as weddings,
sporting events and eating out, bodes well for ongoing leisure
demand, although the VAT increases in October and April may well
act as a drag on ARR recovery.
Tradespeople business demand (which normally accounts for around
25% of our sales) remains resilient, as has been the case
throughout the COVID-19 crisis, and office-based business demand is
improving. International inbound travel, which represents c.10% of
Premier Inn UK's sales, has shown some signs of recovery but still
remains at very low levels and is not expected to return in earnest
until calendar year 2022. While a number of uncertainties remain,
UK like-for-like RevPAR run rate has the potential to reach full
recovery at some point in 2022.
The operating environment remains challenging, impacted by a
number of well publicised market-wide supply chain issues, labour
shortages and inflationary pressures. We remain well contracted in
FY22 on most goods, although we will see salary inflation into the
second half.
Hospitality wide-labour shortages also persist, particularly in
tourist locations and in London. Whitbread is in a better position
than most due to the action taken last year that resulted in the
retention of a greater number of employees than initially
anticipated. Despite this, a material number of vacancies still
remain unfilled. The resolution of this shortfall may well take
time, and we have therefore invested in our pay rates to remain
competitive, at an additional cost of c.GBP12m-13m in FY22. The
Group will also pay c.GBP10m as a one-off summer retention bonus
for hotel and restaurant staff in H2 FY22, and we will continue to
monitor the market to ensure our pay rates remain competitive.
Despite these actual and potential cost headwinds, we remain
confident in the UK business returning to pre COVID-19 profit
before tax margins. Our ability to take market share, both through
our own growth and the increased pressures faced by competitors,
and our wide-ranging investment in commercial initiatives, will
drive growth and operating leverage improvements. In addition, our
pricing power in an inflationary cycle, the ARR uplift from our
refurbishment programme, investment in Premier Plus rooms, the
improved operating leverage of new hotels and our long standing
cost reduction efficiency programme, combine to give a substantial
operating leverage opportunity. However, we will have to wait to
get a better assessment on the speed of the margin recovery, once
we have greater visibility of how much of the current supply chain
and inflationary pressures are transitional or structural.
In Germany, business demand is steadily improving, but is still
at low levels, and as in the UK, is dependent on the timing of
office workers returning to the office. COVID-19 restrictions
remain in place although these are expected to ease in the near
future, providing a further catalyst to demand. Leisure and
business events are returning, and we are hopeful they will
continue to improve throughout 2022.
We anticipate capex spend returning to GBP350m-GBP450m in FY23,
depending on levels of M&A. In the UK we will grow our estate
by around 3,000 rooms per year, building new, larger hotels and
improving our operational leverage. In Germany we are pursuing an
aggressive growth strategy, both organically and inorganically, as
we look to rapidly establish our footprint and are confident of the
opportunity to acquire assets at prices that will drive good
returns.
The Group will take advantage of the enhanced structural
opportunities that will exist in both the UK and Germany. The
Government's support schemes have undoubtedly helped the
independent sector and weaker budget branded operators navigate the
COVID-19 crisis, however with the ending and tapering down of those
schemes, we are seeing clear signs of distress in that segment, and
we expect to see competitors begin to exit the market as we move
through the next 12-36 months.
Dividend payments are not permitted under the covenant waiver
conditions until March 2023, unless the original covenant tests are
met during that period. The Board intends to return to paying a
dividend at the first available point that it is permitted to do
so.
FY22 Guidance
FY22 guidance was set out in detail in our FY21 full year
results. Sales sensitivities remain unchanged, and cost guidance is
updated for the following cost and capacity changes:
-- Investment driving market share gains: additional GBP20m in
marketing and refurbishments spend
-- Hotel and restaurant staff salary investment: c.GBP12m-GBP13m
(announced 6 October 2021 and accelerated from FY23)
-- Hotel and Restaurant staff summer retention bonus c.GBP10m (one-off)
-- Utility cost inflation: well hedged for FY22
-- Germany Government COVID-19 grants: GBP33m credit (one-off) split GBP28m / GBP5m H1/H2
-- UK new rooms: c.3,500, (was previously 2-3,000)
Net neutral impact of GBP20m increase in UK furlough claims to
GBP60m, as additional claims were made against increased salary
costs incurred during periods of closure.
A Force for Good
Whitbread's sustainability programme, Force for Good, is well
embedded across all business functions, ensuring that being a
responsible business is integrated across our operation, which is
crucial to our long-term success. It is an ambitious programme,
with the overarching objective to enable everyone to live and work
well. Following an incredibly difficult year last year and a
challenging start to FY22, keeping our Force for Good commitments
and ambition central to our response and how we rebuild after the
global pandemic has been of critical importance to us.
Following on from an ambitious move to bring our net zero carbon
target forward from 2050 to 2040, we have been working hard to
embed the changes that need to be made in order to achieve this
bold ambition. We know that a large proportion of our carbon
emissions are linked to our use of gas, particularly related to
cooking, heating, and hot water, so the reduction of gas usage
within our estate will be key to unlocking our net zero future. We
reported a carbon reduction of 61% at the end of the last financial
year (from our 2016 baseline year) but know we have further to go
as we move towards a net zero position and are already working hard
on this agenda. We have also recently aligned all our carbon
targets to the 1.5 degree global warming target, and have set Scope
3 targets, in line with this ambition.
Our carbon strategy was externally recognised at the end of last
year as we improved our Carbon Disclosure Project (CDP) Climate
Change score from a B to an A-, a result that puts us in the
leadership category, granted to those seen to be implementing best
practices on sustainability.
We are making good progress against our target to cut food waste
in half by 2030 which we set last year. We have continued our
partnership with FareShare, adding to the half a million meals
donated to charity partners in 2020 to support those in need. Our
target to eliminate unnecessary single use plastics by 2025 is not
going to be easy, as many of our supplies are delivered to us in
plastic packaging, but we will be working closely with all of our
suppliers to achieve this target. We also continued to fundraise
for Great Ormond Street Hospital despite site closures, coming
close to raising a total of GBP19million since our partnership
began in 2012.
Recognising the increased risk to worker rights brought about
not only by the pandemic itself but also by the pressure on global
supply chains we're facing as we emerge, we have bolstered our
focus on responsible sourcing. We have been working hard with our
partner, Stop the Traffik to reassess our risk and begin deploying
an 'enhanced due diligence' tool, responding to new and emerging
risks across our lower tier suppliers. As factories open up again,
we have been rolling this out across our higher risk supply chains,
with a focus on worker engagement and remediation tools.
We have also moved forward with our response to the Taskforce
for Climate-related Financial Disclosures (TCFD). We have
identified and scored our climate related risks and opportunities
within different areas of the business. From those, we have
prioritised the key ones to take forward to scenario planning and
inclusion with our financial model. We have also carried out a peer
review to identify best practice for our planned reporting in line
with the next ARA.
We continue to build on improving our diversity and inclusion
agenda. In the period, we launched two new networks, dedicated to
gender equality and disability inclusion, taking our total number
of diversity networks to four. Our Race, Religion and Cultural
Heritage colleague network continues to drive change including
amplifying the voices of many of our minority groups, celebrating
key cultural events and more recently celebrating National
Inclusion Week and Black History Month. We also launched our 'The
Guide to Kindness' across all our Premier Inn and restaurant sites,
promoting inclusive behaviours for both our colleagues and guests,
whilst making it clear that we have zero tolerance of any type of
discrimination.
In September we celebrated National Inclusion Week for the
second time, this year involving both our teams and also on our
external social channels, using the theme 'United for Inclusion'.
We used the opportunity for our networks to talk directly to our
site teams, as well as promoting upcoming listening activity and
launching a new video 'what inclusion means to us in Whitbread',
built with our teams, potential employees and guests in mind.
We celebrated key cultural events and religious holidays during
the period. As well as being important dates to recognise for many
of our under-represented groups, they are also an opportunity for
our wider teams to become better informed through greater
education. We also launched a new 'religious leave' holiday policy,
allowing our support centre teams to trade Christian bank holidays
for different religious dates of importance.
2021 Annual General Meeting
At the Annual General Meeting on 17 June 2021, 64.25% of votes
were cast in favour of the resolution to approve the 2020/21
Remuneration Report. We engaged closely with a number of our large
investors in the lead up to that vote and also subsequently, and we
believe we have a good understanding of investor sentiment
regarding the votes cast against. We will continue to engage
constructively with investors on this topic throughout the rest of
the year.
Business Review | Better than expected recovery - taking market
share
Premier Inn UK(1)
`
====================================================================================
GBPm H1 FY22 H1 FY21 H1 FY20 vs H1 FY20
Statutory Revenue 650.6 245.0 1,074.3 (39.4)%
Other income (excl rental income)
(2) 65.3 85.5 6.6 889.4%
Operating costs before depreciation,
amortisation & rent (533.2) (451.1) (633.0) 15.8%
========= ========= ========= ===========
Adjusted EBITDAR 182.7 (120.6) 447.9 (59.2)%
Net turnover rent and rental income 1.9 2.5 0.5 280.0%
Depreciation: Right-of-use asset (59.8) (53.8) (50.2) (19.1)%
Depreciation and amortisation: Other (82.2) (83.0) (80.0) (2.8)%
========= ========= ========= ===========
Adjusted operating profit/ (loss) 42.6 (254.9) 318.2 (86.6)%
Interest: Lease liability (60.4) (58.2) (57.0) (6.0)%
========= ========= ========= ===========
Adjusted (loss)/ profit before tax (17.8) (313.1) 261.2 (106.8)%
======================================= ========= ========= ========= ===========
Premier Inn UK(1) key performance indicators
=====================================================================================
H1 FY22 H1 FY21 H1 FY20 vs H1 FY20
========= ========= ========= ===========
Number of hotels 830 817 810 2.5%
Number of rooms 80,810 78,470 76,837 5.2%
Committed pipeline (rooms) 9,814 12,935 12,928 (24.1)%
======================================= ========= ========= ========= ===========
Direct booking 99% 99% 98% 100bps
======================================= ========= ========= ========= ===========
Occupancy 61.0% 20.3% 78.3% (1730)bps
Average room rate GBP52.63 GBP53.58 GBP64.07 (17.9)%
Revenue per available room GBP32.13 GBP10.87 GBP50.19 (36.0)%
======================================= ========= ========= ========= ===========
Sales growth(3) :
Accommodation (33.1)%
Food & beverage (51.2)%
Total (39.4)%
Like-for-like sales(3) growth:
Accommodation (35.9)%
Food & beverage (52.5)%
Total (41.7)%
======================================= ========= ========= ========= ===========
1: Includes one site in each of: Jersey, Ireland & the Isle
of Man
2: Includes Government support - see note 6 of the accompanying
financial statements for further details
3: Total and like-for-like on a two-year basis versus FY20
COVID-19 restrictions materially impacted the performance of the
UK business in the first quarter. Only essential business guests
were permitted to stay overnight until 17 May, at which point
overnight leisure stays were permitted. Our restaurants were also
not permitted to open for indoor service until the same date, with
the majority remaining temporarily closed until then. The majority
of our hotels and restaurants have operated restriction-free from
19 July driving a significant increase in Q2 quarter-on-quarter
revenues.
As a result of these restrictions, statutory revenue was down
39.4% compared to H1 FY20, total accommodation sales were down
33.1% and total food and beverage sales were down 51.2%.The second
quarter saw total accommodation sales improve to 9.6% below Q2 FY20
(Q1 FY22: 60.9% behind).
Leisure demand was very strong post 17 May across the majority
of the estate. The high levels of demand in seaside & tourist
locations (c.15% of Premier Inn rooms) saw total Q2 accommodation
sales 32.9% up on Q2 FY20 in those hotels. The London market, and
in particular central London (c.7% of Premier Inn rooms) has lagged
the regions during the COVID-19 crisis as a result of the low
levels of inbound international travel, however trends improved
during July and August as some international demand returned, and
to some extent, domestic leisure demand replacing international.
Tradespeople business demand remained resilient and there are early
signs of a recovery in office-based business demand.
Total food and beverage sales were 51.2% behind H1 FY20 with the
vast majority of the estate reopening on 17 May. New menus and an
enhanced drinks offering, helped drive an improvement in Q2 total
food and beverage sales to 18.1% behind Q2 FY20.
Premier Inn total UK accommodation sales growth was consistently
ahead of the M&E market in the first half, driving significant
market share gains versus the total market, and demonstrating the
strengths of our scale, brand, direct distribution model and our
winning customer proposition.
UK outperformance vs M&E market
Mar Apr May Jun July Aug H1 Q3 to
Date
======= ======== ======== ======== ======== ======= ======== ========
PI accommodation sales +7.2pp +11.1pp +14.6pp +14.7pp +16.9pp +9.5pp +12.3pp +14.1pp
outperformance (YoY)
(1)
------- -------- -------- -------- -------- ------- -------- --------
PI market share (2) 14.9% 14.8% 12.5% 10.8% 10.9% 10.1% 11.3% 9.6%
------- -------- -------- -------- -------- ------- -------- --------
PI market share gains +7.4pp +7.3pp +4.9pp +3.7pp +3.9pp +2.9pp +4.0pp +2.5pp
pp (YoY) (2)
========================= ======= ======== ======== ======== ======== ======= ======== ========
1: STR data, full inventory basis, 26 February 2021 to 7 October
2021 , M&E excludes Premier Inn
2: STR data, revenue share of total UK market, 26 February 2021
to 14 October 2021
Other income of GBP65.3m reflects a GBP60.0m benefit from the
Coronavirus Job Retention Scheme. The Group ceased claiming under
this scheme in May following the full reopening of our hotels and
restaurants. Operating costs of GBP533.2m were in line with
guidance and were 15.8% lower than H1 FY20 driven by a reduction in
revenue related variable costs (primarily food and beverage costs
of sales), and GBP47.7m benefit from the Government's business
rates holiday.
Right-of-use asset depreciation was GBP59.8m and lease liability
interest was GBP60.4m with cash rent paid of GBP122.7m. During the
half, 19 new hotels were opened, totalling 2,240 rooms and 6 hotels
were exited, including 5 disposals, totalling 213 rooms, as the
Group continues to take the opportunity to optimise the estate when
opportunities arise. At the end of the period, the total estate
stood at 830 hotels. The committed pipeline of 9,814 rooms
underpins our opportunity to take market share in the UK in the
medium to long-term as competitor supply contracts.
Adjusted loss before tax in the UK was GBP17.8m reflecting the
decline in statutory revenues vs H1 FY20 as a result of the
COVID-19 restrictions that were in place during the financial
year.
Premier Inn Germany
GBPm H1 FY22 H1 FY21 H1 FY20 vs H1 FY20
========= ========= ========= ===========
Statutory revenue 11.0 5.5 3.7 197.3%
Other income (excl rental income)
(1) 28.2 0.5 - 0.0%
Operating costs before depreciation,
amortisation and rent (28.0) (22.6) (8.9) (214.6)%
========= ========= ========= ===========
Adjusted EBITDAR 11.2 (16.6) (5.2) 315.4%
Net turnover rent and rental
income 2.3 2.0 - 0.0%
Depreciation: Right-of-use
asset (10.4) (7.2) (0.1) (10300.0)%
Depreciation and amortisation:
Other (3.6) (1.9) (0.5) (620.0)%
========= ========= ========= ===========
Adjusted operating loss (0.5) (23.7) (5.8) 91.4%
Interest: Lease liability (3.8) (2.8) - 0.0%
========= ========= ========= ===========
Adjusted loss before tax (4.3) (26.5) (5.8) 25.9%
======================================= ========= ========= ========= ===========
Premier Inn Germany key performance indicators
=====================================================================================
H1 FY22 H1 FY21 H1 FY20 vs H1 FY20
========= ========= ========= ===========
Number of hotels 30 19 3 900.0%
Number of rooms 4,927 3,204 589 736.5%
Committed pipeline (rooms) 8,578 6,821 7,280 17.8%
======================================= ========= ========= ========= ===========
Direct bookings 97% 99% 100% (290)bps
======================================= ========= ========= ========= ===========
Occupancy 32.0% 27.5% 60.2% (2820)bps
Average room rate GBP36.49 GBP39.37 GBP64.15 (43.1)%
Revenue per available room GBP11.69 GBP10.83 GBP38.61 (69.7)%
======================================= ========= ========= ========= ===========
Sales growth(2) :
Accommodation 209.3%
Food & beverage 165.0%
Total 197.3%
Like-for-like sales(2) growth:
Accommodation (49.7)%
Food & beverage (63.9)%
Total (52.4)%
======================================= ========= ========= ========= ===========
1: Includes Government support - see note 6 of the accompanying
financial statements for further details
2: Total and like-for-like on a two-year basis versus FY20
Total statutory revenue in Germany was up 197.3% compared to H1
FY20 with the impact of COVID-19 restrictions offsetting the
material growth in the size of the hotel estate. Germany has been
subject to similar restrictions as the UK, albeit in a more complex
framework of national and federal guidelines.
Q2 total accommodation sales were 447.4% ahead of Q2 FY20,
reflecting the larger estate we now have. At the end of the period,
the operational estate stood at 30 hotels of which 27 were open and
3 were temporarily closed due to low demand in those markets. As in
the UK, leisure demand was strong in the summer and our hotels in
leisure-led locations performed well. Business demand remained low
as a result of the COVID-19 work from home directive and the
absence of most trade fairs. A digital marketing campaign, aimed at
establishing the Premier Inn brand credentials in Germany saw
favourable results, with brand recognition scores improving, albeit
still at low levels.
Other income reflects GBP28.0m of COVID-19 grants from the
German Government and Kurzabeit income relating to the Job Support
Scheme in Germany. Operating costs increased by GBP19.1m to
GBP28.0m due to the investment in the business and the increased
estate size, and right-of-use asset depreciation costs increased by
GBP10.3m to GBP10.4m, reflecting the fact that the majority of new
opened properties are leasehold. Other depreciation and
amortisation costs were GBP3.6m, and lease liability interest costs
were GBP3.8m. The adjusted loss before tax for the period decreased
by GBP1.5m to GBP4.3m and cash rent paid for the year was
GBP12.1m.
During the half, one hotel was opened in Stuttgart, and two
hotels in Aachen and Berlin Airport were added to the pipeline and
one site was removed. The open and committed pipeline now stands at
73 hotels and over 13,500 rooms, and we are assessing opportunities
to accelerate growth organically and through acquisitions.
Central and other costs
GBPm H1 FY22 H1 FY21 H1 FY20 vs H1 FY20
======== ======== ======== ===========
Operating costs before depreciation,
amortisation and rent (14.6) (12.0) (13.7) (6.6)%
-------- -------- -------- -----------
Share of loss from joint ventures (1.0) (4.5) (2.3) 56.5%
======== ======== ======== ===========
Adjusted operating loss (15.6) (16.5) (16.0) 2.5%
======== ======== ======== ===========
Net finance costs (18.9) (11.3) (3.8) (397.4)%
======== ======== ======== ===========
Adjusted loss before tax (34.5) (27.8) (19.8) (74.2)%
======== ======== ======== ===========
Central operating costs of GBP14.6m were GBP0.9m higher than H1
FY20 driven by the impairment of a loan to a joint venture. Net
finance costs increased by GBP15.1m to GBP18.9m primarily as a
result of the H1 FY20 charge being net of interest received on the
cash balance held from the proceeds from the sale of the Costa
business, and the current year including financing costs for the
GBP550m Green Bonds issued in February 2021.
Financial review
Financial highlights
GBPm H1 FY22 H1 FY21 H1 FY20 vs H1 FY20
======== ======== ======== ===========
Statutory revenue 661.6 250.8 1,084.0 (39.0)%
Transitional service agreement revenue - 0.3 6.0 (100.0)%
======== ======== ======== ===========
Adjusted revenue 661.6 250.5 1,078.0 (38.6)%
Other income (excl rental income) (1) 93.5 86.0 6.6 1316.7%
Operating costs before depreciation,
amortisation and rent (576.8) (490.2) (657.9) 12.3%
======== ======== ======== ===========
Adjusted EBITDAR 178.3 (153.7) 426.7 (58.2)%
Net turnover rent and rental income 4.2 4.5 0.5 740.0%
Depreciation: Right-of-use asset (70.2) (61.0) (50.3) (39.6)%
Depreciation and amortisation: Other (85.8) (84.9) (80.5) (6.6)%
======== ======== ======== ===========
Adjusted operating (loss)/ profit 26.5 (295.1) 296.4 (91.1)%
Net finance costs (excl lease liability
interest) (18.9) (11.3) (3.8) (397.4)%
Interest: Lease liability (64.2) (61.0) (57.0) (12.6)%
======== ======== ======== ===========
Adjusted (loss)/ profit before tax (56.6) (367.4) 235.6 (124.0)%
Adjusting items 37.3 (357.3) (15.7) 337.6%
======== ======== ===========
Statutory (loss)/ profit before tax (19.3) (724.7) 219.9 (108.8)%
Tax credit / (expense) (18.5) 64.2 (47.7) 61.2%
======== ======== ======== ===========
Statutory (loss)/ profit for the period (37.8) (660.5) 172.2 (122.0)%
========================================== ======== ======== ======== ===========
1: Includes UK and German Government support - see notes 3 and 6
of the accompanying financial statements for further details
Statutory Revenue
Statutory revenues were down 39.0% compared to H1 FY20,
reflecting the impact on the business of the COVID-19 restrictions
that were in place for our hotels and restaurants throughout the
period. Adjusted revenue was down 69.8% in Q1 FY22 versus Q1 FY20,
improving to down 11.2% in Q2 versus Q2 FY20, as restrictions were
largely removed in the UK and the business traded ahead of the
market.
Adjusted EBITDAR
Other income of GBP93.5m includes GBP60.0m of benefit recognised
in respect of the Coronavirus Job Retention Scheme and GBP28.0m of
benefit in relation to German Government grants. Operating costs of
GBP576.8m were 12.3% lower than H1 FY20, driven by the reduction in
revenue-related variable costs, primarily food and beverage costs
of sale, and the GBP47.7m benefit from the UK Government's business
rates holiday and other COVID-19 related German Government grants.
Adjusted EBITDAR of GBP178.3m was GBP248.4m down on H1 FY20 as a
result of the impact of COVID-19 restrictions on the business
throughout the half.
Adjusted operating profit
The leasehold estate grew by net 25 sites in the UK and by 21
sites in Germany compared to the same period in FY20. This resulted
in a GBP19.9m or 39.6% increase in right-of-use depreciation
charges to GBP70.2m. Other depreciation and amortisation charges
increased by GBP5.3m to GBP85.8m, driven by new hotel openings. The
adjusted operating profit of GBP26.5m compared to a loss of
GBP295.1m in H1 FY21 and a profit of GBP296.4 in H1 FY20.
Net finance costs
Net finance costs (excluding lease liability interest) were
GBP18.9m compared to GBP3.8m in H1 FY20. This increase of GBP15.1m
was driven by the H1 FY20 charge being net of interest received on
the cash balance held from the proceeds from the sale of the Costa
business, and the current year including financing costs for the
GBP550m Green Bonds issued in February 202 1.
Lease liability interest of GBP64.2m was GBP7.2m above H1 FY20
primarily driven by the opening of net 25 leasehold sites in the UK
and 21 leasehold sites in Germany.
Adjusting items
Total adjusting items were GBP37.3m. On 28 June 2021, the Group
disposed of a hotel in Putney, London, as part of a sale and
leaseback transaction for gross proceeds of GBP40.0m. A profit on
disposal of GBP27.5m was recognised on disposal of the property.
During the period, the Group has recorded profits on other property
disposals of GBP1.1m.
In August 2021, HMRC confirmed it would not appeal the ruling of
the First-tier Tribunal in the case of Rank Group plc that VAT was
incorrectly applied to revenues earned from certain gaming machines
from 2005 to 2013. The Group has submitted claims which are
substantially similar and expects to receive overpaid VAT of
GBP8.7m.
Taxation
The tax credit on the loss before adjusting items of GBP3.2m (H1
FY21: GBP62.2m) represents an effective tax rate on the loss before
adjusting items of 5.7%. This is lower than the statutory tax rate
due to expenditure not deductible for tax purposes, the impact of
German tax losses, and adjustments to management's estimate of tax
arising in respect of prior years. The statutory tax charge for the
period was GBP18.5m (H1 FY21: GBP64.2m credit), representing an
effective tax rate of negative 95.9% (H1 FY21: 8.9%). The negative
effective rate is as a result of the tax charge on adjusting items,
including a deferred tax charge of GBP15.0m relating to the
enactment of the increase to the UK corporation tax rate from 19%
to 25%, effective from 1 April 2023.
Statutory loss after tax
Statutory loss for the period was GBP37.8m, compared to a profit
of GBP172.2m in H1 FY20, due to the significant decline in revenue
driven by the closure of the majority of the business at the
beginning of the period as a result of the COVID-19 crisis.
Earnings per share
H1 FY22 H1 FY21 H1 FY20(1) vs H1 FY20
======== ========= =========== ===========
Adjusted basic (loss)/ earnings
per share (26.4)p (174.4)p 97.1p (127.2)%
Statutory basic (loss)/ earnings
per share (18.7)p (377.4)p 89.6p (120.9)%
================================== ======== --------- =========== ===========
1: Restated to include the impact of the Rights Issue completed
in June 2020
Adjusted basic loss per share of 26.4p and statutory basic loss
per share of 18.7p reflect the adjusted and statutory losses
reported in the period.
Dividend
Whitbread's dividend policy is to grow the dividend broadly
in-line with earnings across the cycle. However, dividends cannot
be paid during the current covenant waiver period, which lasts
until March 2023, as a condition agreed with Whitbread's lenders
and pension trustees, or until the original covenant tests are
passed. The Board intends to return to paying a dividend at the
first available point that it is permitted to do so.
Cashflow
GBPm H1 FY22 H1 FY21
======== ========
Adjusted EBITDAR 178.3 (153.7)
Change in working capital 112.5 (129.0)
Net turnover rent and rental income 4.2 4.5
Lease liability interest and principal lease
payments (134.8) (105.4)
======== ========
Operating cashflow 160.2 (383.6)
Interest (excl lease liability interest) (4.3) (4.2)
Corporate taxes (0.1) 12.6
Pension (2.3) (2.2)
Capital expenditure: maintenance (42.7) (40.0)
Capital expenditure: expansionary(1) (66.4) (81.1)
Acquisitions - 1.4
Non-cash other 23.3 28.1
Disposal Proceeds 47.8 1.5
Other (8.8) 5.8
======== ========
Cashflow before shareholder returns / receipts
and debt repayments 106.7 (461.7)
Proceeds from Rights Issue - 981.0
Repayment of long-term borrowings (220.4) (75.1)
Net cash flow (113.7) 444.2
Opening net debt (46.5) (322.9)
Repayment of long-term borrowings 220.4 75.1
Closing net cash 60.2 196.4
================================================ ======== ========
1: H1 FY22 includes GBP0.8m loans advanced to joint ventures,
GBP0.5m payment of contingent consideration and GBP1.4m capital
contributions to joint ventures (H1 FY21: GBP1.3m)
Total net cashflow before shareholder returns and debt
repayments was an inflow of GBP106.7m, driven by a recovery in
adjusted EBITDAR to GBP178.3m, which compared to a loss of
GBP153.7m in the same period last year, a working capital inflow of
GBP112.5m and GBP47.8m property disposal proceeds. The net cashflow
also benefitted from the credit of GBP141.6m COVID-19 Government
grants and support schemes.
The GBP112.5m working capital inflow was primarily driven by an
GBP82.7m increase in customer deposits and a general increase in
trade creditors and accruals following the return to more normal
levels of activity in the business compared to the start of the
financial year. This has resulted in current trade and other
payables increasing to GBP482.9m (FY21: GBP316.5m). Trade and other
receivables has increased to GBP120.4m (FY21: GBP74.2m) also as a
result of the return to more normal levels of trading, partly
offset by a reduction in amounts due from the Government in respect
of the Coronavirus Job Retention Scheme, as the Group ceased using
the scheme during the period.
Corporation taxes outflow of GBP0.1m related to Germany. No
corporation tax was paid in relation to UK profits as a loss was
incurred in the period.
Maintenance capital expenditure was GBP42.7m and expansionary
capital expenditure was GBP66.4m, with overall capex spend expected
to skew to the second half and result in an expected full year
spend of c.GBP350m, still in-line with previous guidance. Lease
liability interest and lease repayments increased by GBP29.4m to
GBP134.8m driven by the higher number of leasehold properties
entering the estate, particularly in Germany, and reflect the
delayed payment of a proportion of the December 2020 quarter rent
payment that would normally have been paid in FY21.
The GBP23.3m other inflow is driven by an GBP8.7m VAT claim,
GBP6.3m of share-based payments and GBP5.0m of other provision
movements. Disposal proceeds of GBP47.8m relate to the sale and
leaseback transaction of a hotel in Putney, London, the sale of an
unused corporate office and the disposal of five hotels, as the
Group continues to take the opportunity to optimise the estate when
opportunities arise.
During the period GBP200m of US private placements were repaid,
incurring GBP21.2m of make-whole fees partly offset by a GBP0.8m
credit relating to foreign exchange movements. Net cash at the end
of the period was GBP60.2m.
Debt funding facilities & liquidity
GBPm Facility Utilised Maturity
========== ========== =========
US private placement(1,2) (25.0) (25.0) 2021
US private placement notes(1) (58.5) (58.5) 2022
Revolving Credit Facility (100.0) - 2021
Revolving Credit Facility (125.0) - 2022
Revolving Credit Facility (725.0) - 2023
Bond (450.0) (450.0) 2025
Green Bond (300.0) (300.0) 2027
Green Bond (250.0) (250.0) 2031
========== ========== =========
(2,033.5) (1,083.5)
Cash and cash equivalents 1,144.7
Total facilities utilised, net of
cash (1) 61.2
========== ==========
Net cash 60.2
Net cash and lease liabilities (3,253.4)
========== ==========
It still remains the Group's aim to manage to investment grade
metrics of lease adjusted debt of <3.5x Net Debt(3) over the
medium term. Whilst the Group remains loss making, the strong
balance sheet cash position and freehold assets support our
investment grade rating.
The Group announced in February 2021 that it had extended the
final maturity date of its Revolving Credit Facility from September
2022 to September 2023, and that the existing covenant waiver
period had been extended by 12 months, meaning the financial
covenants will not now be tested until March 2023, at which point
new covenant targets will be introduced, being:
-- March 2023: Net Debt(3) / EBITDA(3) < 5x, EBITDA(3) / Interest(3) >2.0x
-- August 2023: Net Debt(3) / EBITDA(3) < 4.5x EBITDA(3) / Interest(3) >2.0x
The Revolving Credit Facility which is currently GBP950.0m, will
step down to GBP850.0m at 29 December 2021 and to GBP725.0m at 7
September 2022.
The additional requirements outlined in the original waivers
announced on 21 May 2020, including an obligation to retain GBP400m
liquidity headroom, no more than GBP2bn of net debt and to not
declare or pay dividends, will remain for the duration of the
extended waiver period to March 2023. However, these additional
waiver period requirements can be removed if the Group demonstrates
compliance with the original covenant tests, being Net Debt(3) /
EBITDA(3) < 3.5x and EBITDA(3) / Interest(3) >3.0x.
GBP200m 2027 US private placement notes were repaid early on 26
March 2021. Subsequent to the period end on 6 September 2021,
GBP25m of US private placement notes matured and were repaid. The
remaining private placement notes (2022: $93.5m) will be repaid on
or before their scheduled maturity dates of 26 January 2022.
The Group's strong balance sheet, with access to over GBP2bn of
liquidity, and the potential to access funding through our freehold
estate means the Group has financial flexibility, with good
headroom to the temporary covenants.
1: Includes impact of hedging using cross currency swaps and
excludes unamortised fees associated with debt instrument
2: Repaid 6 September 2021
3: Pre-IFRS 16
Capital investment
GBPm H1 FY22 H1 FY21
======== ========
UK maintenance and product improvement 41.9 40.0
New / extended UK hotels(1) 37.3 34.8
Germany and Middle East(2) 29.9 46.3
======== ========
Total 109.1 121.1
======================================== ======== ========
1: H1 FY22 includes GBP0.8m capital contributions to joint
ventures
2: H1 FY22 includes GBP0.5m payment of contingent consideration
and GBP1.4m capital contributions to joint ventures (H1 FY21:
GBP1.3m)
Total capital expenditure in H1 was GBP109.1m. Expenditure in H1
included GBP37.3m on developing new sites and extending existing
sites in the UK. Maintenance and product improvement spend was
focussed on the scale-up of the FY22 refurbishment programme with
the majority of refurbs planned for quieter trading periods in H2.
In Germany, spend was driven by the acquisition of a hotel at
Berlin Airport and refurbishment of the remaining hotels from the
Centro acquisition. Full year capital expenditure is expected to be
c.GBP350m.
Property, plant and equipment of GBP4,239.7m was in-line with H1
FY21 (GBP4,228.2m), with capital expenditure largely offset by
depreciation charges.
Property backed balance sheet
Freehold / leasehold mix Open estate Total estate(1)
============ ==================
Premier Inn UK 59%:41% 55%:45%
Premier Inn Germany 28%:72% 22%:78%
Group 58%:42% 51%:49%
========================= ==== ============ ==================
1: Open + committed pipeline
The current UK estate is 59% freehold and 41% leasehold, a mix
that will change to 55% freehold and 45% leasehold as the existing
pipeline is delivered. The higher leasehold mix in Germany reflects
the start-up nature of the business, where securing optimal site
location, particularly in city centres to help build brand
strength, is key.
The new site openings in Germany and continued expansion in the
UK has resulted in right-of-use assets increasing to GBP2,881.1m
(H1 FY21: GBP2,565.0m) and lease liabilities increasing to
GBP3,313.6m (H1 FY21: GBP2,961.6m).
Return on Capital
The Group remains confident in our ability to deliver long-term
sustainable returns on incremental investment. We believe our
ability to capitalise on the enhanced structural opportunities that
are likely to exist, combined with the competitive advantage of our
ownership and operating model, and ongoing initiatives including
segmentation and site optimisation, will help offset any adverse
structural impact as a result of the COVID-19 crisis. Sector-wide
cost headwinds can be countered by our long-standing efficiency
programme and the benefits of both organic and inorganic
growth.
Events after the Balance Sheet date
On 6 September 2021, the Group repaid US Private Placement notes
on maturity with a value of GBP25.0m.
Pension
The Group's defined benefit pension scheme, the Whitbread Group
Pension Fund (the "Pension Fund"), had an IAS19 surplus of
GBP275.5m at the end of the period (H1 FY21: GBP164.8m). The
improved funding position was primarily driven by; asset
performance being higher than the discount rate, changes to
mortality assumptions and membership experience being more
favourable than expected. This was partially offset by a decrease
in corporate bond yields resulting in a decrease in the discount
rate used to value liabilities and an increase in inflation
expectations. Annual contributions of approximately GBP10m are paid
to the Pension Fund through the Scottish Partnership
arrangements.
The Pension Fund's triennial actuarial valuation as at 31 March
2020 is currently being carried out, with the final agreement due
in November this year.
In May 2020, Whitbread announced that it had reached an
agreement with the Pension Fund Trustee for a covenant waiver
period for the existing EBITDA related covenant which will now not
be tested until March 2022. On this testing date, in the event of a
breach of the original EBITDA related covenant, a cash payment
would be required to improve the funding position to the value of
the Secondary Funding Target. If Whitbread did not settle this
contribution, the Trustee could realise the equivalent value
through the security it holds over GBP450m of Whitbread's freehold
property. New covenants have been introduced during the period of
the waiver in-line with those given to Whitbread's lenders
described above, including an obligation to retain GBP400m
liquidity headroom, no more than GBP2bn of net debt and to not
declare or pay dividends, for the duration of the extended waiver
period to March 2022. An additional GBP50.0m of security has also
been given to the Trustee for the duration of the covenant waiver
period.
Other information
Going concern
The directors have concluded that it is appropriate for the
consolidated financial statements to be prepared on the going
concern basis. Full details are set out in note 1 of the attached
financial statements.
Risks and uncertainties
The directors have reconsidered the principal risks and
uncertainties of the Group and have determined that those reported
in the Annual Report and Accounts 2020/21 remain relevant for the
remaining half of the financial year, when read together with the
information provided below.
The COVID-19 pandemic continues to be the most prominent risk
and there is uncertainty as to how future outbreaks, vaccine
efficacy and resulting restrictions will impact the hospitality
sector specifically. We have considered and broadened the risk
relating to structural shifts to recognise the potential change in
the labour market. This has resulted in shortages in certain hotel
and restaurant roles, inflationary pressures in areas such as
utilities, food costs and construction materials, and supply chain
disruptions due to increased regulations.
Whitbread looks to recruit and retain talent and has recognised
the contribution of its team by increasing pay rates to remain
competitive. We have a well proven efficiency programme and a
strong supplier base for critical services with business continuity
plans in place.
Premier Inn's brand strength has proved resilient as we have
reopened operations and outperformed the market. The risk of any
decline in strength or loss of market share to competitors and
emerging disruptors is tracked regularly via net promoter scores
and customer satisfaction.
The following summarises the risks and uncertainties set out in
the annual report including current emerging themes:
-- Pandemic - impact of reoccurring waves of COVID-19 or any other pandemic on the business
-- Uncertain economic recovery - results in a decline in GDP,
consumer and business spending, an increase in inflationary
pressure and supply chain disruption impacting trading
-- Cyber and Data Security - reduces the effectiveness of systems or results in loss of data
-- Structural shifts - uncertainty as to the permanency of
changes to working practices, international travel and demand led
occasions for hotel stays, along with potential increase in cost
base inflation
-- Germany growth - the inability to successfully execute our strategy in Germany
-- Change delivery and interdependencies - ability to execute
the significant volume of change under time bound pressures, for
example, the replacement of our CRM system
-- Leadership, succession and talent hotspots - decline in
desirability of careers in the hospitality industry with functional
specific challenges, a reduction in our talent pools and low levels
of senior diversity
-- Third party arrangements - business interruption as a result
of the withdrawal of services below acceptable standards or
reputational damage as a result of unethical supplier practices
-- Premier Inn brand - decline in brand strength, loss of market
share to competitors and the threat of disruptors
-- Health and safety - death or serious injury as a result of
company negligence or a significant incident resulting from food,
fire or another safety failure
-- Terrorism - impacts the safety and security of customers or
staff and the consequent impact on trading
Environmental and Social risk, of which sustainability is a key
area, has been an emerging risk for Whitbread that we have been
active in managing such as reducing our carbon emissions, single
use plastics and food waste whilst increasing our representation
and inclusion in our work force. We now recognise this as a
principal risk and acknowledge the importance of the collective
evolving nature of this risk to our wider stakeholder base.
The detail of our principal risks can be found on pages 64 to 66
of the Annual Report and Accounts 2020/21 which is available on the
website www.whitbread.co.uk.
American Depositary Receipts
Whitbread has established a sponsored Level 1 American
Depositary Receipt (ADR) programme for which Deutsche Bank perform
the role of depositary bank. The Level 1 ADR programme trades on
the U.S. over-the-counter (OTC) markets under the symbol WTBDY (it
is not listed on a U.S. stock exchange).
Notes
The Group uses certain APMs to help evaluate the Group's
financial performance, position and cash flows, and believes that
such measures provide an enhanced understanding of the Group's
results and related trends and allow for comparisons of the
financial performance of the Group's businesses either from one
period to another or with other similar businesses. However, APMs
are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
APMs used in this announcement include adjusted revenue,
like-for-like sales, revenue per available room (RevPAR), average
room rate, direct bookings/ distribution, adjusted operating
(loss)/ profit, adjusted (loss)/ profit before tax, adjusted basic
earnings per share, net debt, net debt and lease liabilities,
operating cashflow, adjusted EBITDA (pre IFRS 16) and adjusted
EBITDAR. Further information can be found in the glossary and
reconciliation of APMs at the end of this document.
Responsibility statement
We confirm that to the best of our knowledge:
a) The condensed set of financial statements, which has been
prepared in accordance with IAS 34 Interim Financial Reporting,
gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the issuer, or the undertakings
included in the consolidation as a whole;
b) The interim management report includes a fair review of the
information required by the Financial Statements Disclosure and
Transparency Rules (DTR) 4.2.7R - indication of important events
during the first six months and their impact on the financial
statements and description of principal risks and uncertainties for
the remaining six months of the year; and
c) The interim management report includes a fair review of the
information required by DTR 4.2.8R - disclosure of related party
transactions and changes therein.
By order of the Board
Alison Brittain Nicholas Cadbury
Chief Executive Finance Director
Interim consolidated income statement
(Reviewed) (Reviewed, re-presented(1)
)
6 months to 26 August 6 months to 27 August
2021 2020
Before Adjusting Before Adjusting
adjusting items adjusting items
items (Note 4) Statutory items (Note 4) Statutory
Notes GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- -----
Revenue 2 661.6 - 661.6 250.5 0.3 250.8
Other income 3 97.8 8.7 106.5 89.9 1.8 91.7
Operating costs (731.1) 28.6 (702.5) (631.0) (353.6) (984.6)
Impairment of loans to
joint ventures (0.8) - (0.8) - (5.8) (5.8)
Operating profit/(loss)
before joint ventures 27.5 37.3 64.8 (290.6) (357.3) (647.9)
Share of loss from joint
ventures (1.0) - (1.0) (4.5) - (4.5)
Operating profit/(loss) 26.5 37.3 63.8 (295.1) (357.3) (652.4)
Finance costs 5 (85.1) - (85.1) (76.0) - (76.0)
Finance income 5 2.0 - 2.0 3.7 - 3.7
---------- --------- --------- ---------- --------- ---------
Loss before tax (56.6) 37.3 (19.3) (367.4) (357.3) (724.7)
Tax credit/(expense) 7 3.2 (21.7) (18.5) 62.2 2.0 64.2
Loss for the period attributable
to parent shareholders (53.4) 15.6 (37.8) (305.2) (355.3) (660.5)
---------- --------- --------- ---------- --------- ---------
Earnings per share (Note
8)
Basic (pence) (26.4) 7.7 (18.7) (174.4) (203.0) (377.4)
Diluted (pence) (26.4) 7.7 (18.7) (174.4) (203.0) (377.4)
(1) Amended for presentational changes (Note 1)
All of the results shown above relate to continuing
operations.
Interim consolidated statement of comprehensive income
(Reviewed) (Reviewed)
6 months to 6 months to
26 August 27 August
2021 2020
Notes GBPm GBPm
--------------------------------------------- ----- ------------ ------------
Loss for the period (37.8) (660.5)
Items that will not be reclassified
to the income statement:
Re-measurement gain/(loss) on defined
benefit pension scheme 12 84.8 (27.7)
Current tax on defined benefit pension
scheme (1.9) -
Deferred tax on defined benefit pension
scheme (29.5) 2.6
53.4 (25.1)
Items that may be reclassified subsequently
to the income statement:
Net gain on cash flow hedges 1.2 1.3
Deferred tax on cash flow hedges (0.3) (0.2)
Net gain/(loss) on hedge of a net investment 0.7 (21.6)
Deferred tax on net gain/(loss) on hedge
of a net investment (0.1) -
Cost of hedging 2.8 -
4.3 (20.5)
Exchange differences on translation
of foreign operations (2.8) 34.1
Deferred tax on exchange differences
on translation of foreign operations 0.7 -
------------ ------------
(2.1) 34.1
Other comprehensive income/(loss) for
the period, net of tax 55.6 (11.5)
Total comprehensive income/(loss) for
the period, net of tax 17.8 (672.0)
------------ ------------
Interim consolidated statement of changes in equity
6 months to 26 August 2021 (Reviewed)
Capital Currency
Share Share redemption Retained translation Other Total
capital premium reserve earnings reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- -------- ----------- --------- ------------ --------- -------
At 25 February 2021 164.7 1,022.9 50.2 4,944.8 28.7 (2,377.2) 3,834.1
Loss for the period - - - (37.8) - - (37.8)
Other comprehensive income/(loss) - - - 53.4 (1.5) 3.7 55.6
-------- -------- ----------- --------- ------------ --------- -------
Total comprehensive income/(loss) - - - 15.6 (1.5) 3.7 17.8
Ordinary shares issued on
exercise of employee share
options 0.1 1.6 - - - - 1.7
Loss on ESOT shares issued - - - (2.5) - 2.5 -
Accrued share-based payments - - - 6.3 - - 6.3
Tax on share-based payments - - - (0.2) - - (0.2)
-------- -------- ----------- --------- ------------ --------- -------
At 26 August 2021 164.8 1,024.5 50.2 4,964.0 27.2 (2,371.0) 3,859.7
-------- -------- ----------- --------- ------------ --------- -------
6 months to 27 August 2020 (Reviewed)
Capital Currency
Share Share redemption Retained translation Other Total
capital premium reserve earnings reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- -------- ----------- --------- ------------ --------- -------
At 27 February 2020 112.9 90.8 50.2 5,861.9 18.6 (2,385.6) 3,748.8
Loss for the period - - - (660.5) - - (660.5)
Other comprehensive (loss)/income - - - (25.1) 12.5 1.1 (11.5)
-------- -------- ----------- --------- ------------ --------- -------
Total comprehensive (loss)/income - - - (685.6) 12.5 1.1 (672.0)
Ordinary shares issued on
exercise of employee share
options - 0.4 - - - - 0.4
Ordinary shares issued on
rights issue(1) 51.7 929.3 - - - - 981.0
Loss on ESOT shares issued - - - (3.1) - 3.1 -
Accrued share-based payments - - - 6.7 - - 6.7
Tax on share-based payments - - - (2.4) - - (2.4)
At 27 August 2020 164.6 1,020.5 50.2 5,177.5 31.1 (2,381.4) 4,062.5
-------- -------- ----------- --------- ------------ --------- -------
(1) The share premium amount of GBP929.3m is net of GBP28.2m in
relation to transaction costs associated with the rights issue.
Interim consolidated balance sheet
(Reviewed) (Reviewed) (Audited)
26 August 27 August 25 February
2021 2020 2021
Notes GBPm GBPm GBPm
------------------------------------------ ------ ---------- ---------- ------------
Non-current assets
Goodwill and other intangible assets 154.7 165.4 159.1
Right-of-use assets - property, plant
and equipment 2,818.5 2,511.6 2,738.4
Right-of-use assets - investment property 62.6 53.4 65.0
Property, plant and equipment 4,239.7 4,206.5 4,213.1
Investment property - 21.7 21.6
Investment in joint ventures 38.7 43.2 37.3
Derivative financial instruments 11 11.0 12.2 6.6
Defined benefit pension surplus 12 275.5 164.8 188.0
Trade and other receivables - 5.5 -
---------- ---------- ------------
7,600.7 7,184.3 7,429.1
Current assets
Inventories 14.8 21.7 12.1
Derivative financial instruments 11 9.9 0.4 8.2
Current tax asset 0.4 6.0 -
Trade and other receivables 120.4 87.0 74.2
Cash and cash equivalents 10 1,144.7 936.2 1,256.0
1,290.2 1,051.3 1,350.5
Assets classified as held for sale 11.8 18.7 19.0
Total assets 8,902.7 8,254.3 8,798.6
Current liabilities
Borrowings 10 93.3 - 312.0
Lease liabilities 122.4 100.0 112.1
Provisions 23.5 32.5 30.5
Derivative financial instruments 11 1.2 2.5 2.4
Current tax liabilities - - 1.8
Trade and other payables 482.9 315.2 316.5
---------- ---------- ------------
723.3 450.2 775.3
Non-current liabilities
Borrowings 10 991.2 739.8 990.5
Lease liabilities 3,191.2 2,861.6 3,119.5
Provisions 15.7 18.6 9.0
Derivative financial instruments 11 - 5.0 -
Deferred tax liabilities 7 96.5 80.3 44.6
Trade and other payables 25.1 36.3 25.6
4,319.7 3,741.6 4,189.2
Total liabilities 5,043.0 4,191.8 4,964.5
Net assets 3,859.7 4,062.5 3,834.1
---------- ---------- ------------
Equity
Share capital 164.8 164.6 164.7
Share premium 1,024.5 1,020.5 1,022.9
Capital redemption reserve 50.2 50.2 50.2
Retained earnings 4,964.0 5,177.5 4,944.8
Currency translation reserve 27.2 31.1 28.7
Other reserves (2,371.0) (2,381.4) (2,377.2)
---------- ---------- ------------
Total equity 3,859.7 4,062.5 3,834.1
---------- ---------- ------------
Interim consolidated cash flow statement
(Reviewed) (Reviewed)
6 months to 6 months to
26 August 27 August
2021 2020
Notes GBPm GBPm
--------------------------------------------- ----- ------------ ------------
Cash generated from/(used in) operations 13 318.3 (250.1)
Payments against provisions (8.0) (7.1)
Pension payments 12 (2.3) (2.2)
Interest paid - lease liabilities (64.2) (61.0)
Interest paid - other (5.8) (5.1)
Interest received 1.5 0.9
Corporation taxes (paid)/refunded (0.1) 12.6
------------ ------------
Net cash flows generated from/(used
in) operating activities 239.4 (312.0)
Cash flows used in investing activities
Purchase of property, plant and equipment
and investment property (100.2) (114.8)
Proceeds from disposal of property,
plant and equipment 47.8 1.5
Investment in intangible assets (6.2) (5.0)
Cash acquired on acquisition of a subsidiary - 1.4
Cash recovered on aborted acquisition - 1.3
Payment of contingent consideration 11 (0.5) -
Capital contributions to joint ventures (1.4) (1.3)
Loans advanced to joint ventures (0.8) -
Net cash flows used in investing activities (61.3) (116.9)
Cash flows (used in) / generated from
financing activities
Proceeds from issue of shares on exercise
of employee share options 1.7 0.4
Proceeds from issue of shares on rights
issue, net of fees - 981.0
Drawdowns of long-term borrowings 10 50.0 50.0
Repayments of long-term borrowings 10 (270.4) (125.1)
Costs of long-term borrowings - (1.2)
Payment of principal of lease liabilities (70.6) (44.4)
Net cash flows (used in)/generated from
financing activities (289.3) 860.7
Net (decrease)/increase in cash and
cash equivalents (111.2) 431.8
Opening cash and cash equivalents 1,256.0 502.6
Foreign exchange differences (0.1) 1.8
------------ ------------
Closing cash and cash equivalents 10 1,144.7 936.2
------------ ------------
Notes to the accounts
1. Basis of accounting and preparation
The interim condensed consolidated financial statements were
authorised for issue in accordance with a resolution of the Board
of Directors on 25 October 2021.
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK adopted
international accounting standards, with future changes being
subject to endorsement by the UK Endorsement Board. There was no
impact or changes in accounting policies from the transition.
The financial information for the year ended 25 February 2021 is
extracted from the statutory accounts of the Group for that year
and does not constitute statutory accounts as defined in Section
434 of the Companies Act 2006. A copy of the statutory accounts for
that year has been delivered to the Registrar of Companies. These
published accounts were reported on by the auditor without
qualification, did not draw attention to any matters by way of
emphasis and did not contain a statement under Sections 498(2) or
(3) of the Companies Act 2006.
The interim condensed consolidated financial statements are
prepared in accordance with UK listing rules and with United
Kingdom adopted IAS 34 Interim Financial Reporting.
The interim condensed consolidated financial statements for the
six months ended 26 August 2021 and the comparatives to 27 August
2020 are unaudited but have been reviewed by the auditor; a copy of
their review report is included at the end of this report.
Presentational changes
The income statement for the 6 months to 27 August 2020 has been
re-presented for consistency with the annual report and accounts
for the year ended 25 February 2021.
The tax credit before adjusting items for the 6 months to 27
August 2020 has been re-presented to exclude the impact of deferred
tax rate changes. The rate change impact of GBP13.2m is now
presented within adjusting items. Earnings per share before
adjusting items has also been re-presented to reflect this
change.
Additionally, impairment of loans to joint ventures is now
presented separately from operating costs.
Going Concern
The financial position of the Group, its cash flows, performance
and position are described in the financial review and the
principal risks of the Group are set out in the other information
within the interim management report. Details of the Group's
available and drawn facilities are included in Note 10. At 26
August 2021, the Group had a cash balance of GBP1,144.7m with
available borrowing facilities of GBP2,043.0m for use in the going
concern assessment, of which GBP1,093.0m had been drawn down.
The Group's forecasts indicate that it will continue to have
significant financial resources, continue to settle its debts as
they fall due and operate well within its covenants as outlined in
Note 10 for at least a period of 12 months from the date of these
interim financial statements. Various downside scenarios over and
above those already included in the base case model on the
potential impact of further reductions to cashflows due to further
government restrictions imposed as a result of the COVID-19
pandemic have also been considered in respect of these forecasts.
Under these downside scenarios, the Group can meet its funding
needs through available funds and is able to meet the relaxed
covenants agreed as part of the waivers. In the event that it was
necessary to access additional funding, the directors have a
reasonable expectation that this could be achieved.
After due consideration of the matters set out above, the
directors are satisfied that there is a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future, being at least 12 months from
the date of signing these financial statements. For this reason,
they continue to adopt the going concern basis without material
uncertainties in the preparation of these financial statements.
Accounting policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 25 February 2021.
As a result of the adjusting items recorded in the period, the
accounting policy used in determining adjusting items is set out
below.
Adjusting items and use of alternative performance measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way the business performance is
measured internally by the Board and Executive Committee. A
glossary of APMs and reconciliations to statutory measures is given
at the end of this report.
The term adjusted profit is not defined under IFRS and may not
be directly comparable with adjusted profit measures used by other
companies. It is not intended to be a substitute for, or superior
to, statutory measures of profit. Adjusted measures of
profitability are non-IFRS because they exclude amounts that are
included in, or include amounts that are excluded from, the most
directly comparable measure calculated and presented in accordance
with IFRS.
The Group makes certain adjustments to the statutory profit
measures in order to derive many of its APMs. The Group's policy is
to exclude items that are considered to be significant in nature
and quantum, not in the normal course of business or are consistent
with items that were treated as adjusting in prior periods or that
span multiple financial periods. Treatment as an adjusting item
provides users of the accounts with additional useful information
to assess the year-on-year trading performance of the Group.
On this basis, the following are examples of items that may be
classified as adjusting items:
-- net charges associated with the strategic programme in
relation to the review of the hotel estate, excluding those
relating to financing;
-- significant restructuring costs and other associated costs
arising from strategy changes that are not considered by the Group
to be part of the normal operating costs of the business;
-- significant pension charges arising as a result of changes to
UK defined benefit scheme practices;
-- impairment and related charges for sites which are
underperforming that are considered to be significant in nature
and/or value to the trading performance of the business;
-- costs in relation to non-trading legacy sites which are
deemed to be significant and not reflective of the Group's ongoing
trading results;
-- profit or loss on the sale of a business or investment, and
the associated cost impact on the continuing business from the sale
of the business or investment;
-- acquisition costs incurred as part of a business combination
or other strategic asset acquisitions;
-- amortisation of intangible assets recognised as part of a
business combination or other transaction outside of the ordinary
course of business; and
-- tax settlements in respect of prior years, including the
related interest and the impact of changes in the statutory tax
rate, the inclusion of which would distort year-on-year
comparability, as well as the tax impact of the adjusting items
identified above.
The directors believe that the adjusted profit and earnings per
share measures provide additional useful information to
shareholders on the performance of the business. These measures are
consistent with how business performance is measured internally by
the Board and Executive Committee.
Sale and leaseback
A sale and leaseback transaction occurs when the Group sells an
asset and immediately reacquires the use of the same asset by
entering into a lease with the buyer. A sale occurs when control of
the underlying asset passes to the buyer. A lease liability is
recognised, the associated property, plant and equipment asset is
derecognised, and a right-of-use asset is recognised at the
proportion of the carrying value relating to the right retained.
Any gain or loss arising relates to the rights transferred to the
buyer.
Seasonality
The Group operates hotels and restaurants, located in the UK and
internationally. The Group generally earns higher profits during
the first half of the financial year because of lower demand in the
final quarter of the financial year.
The COVID-19 pandemic and resulting government restrictions led
to the temporary closure of the Group's restaurants as well as
reduced demand for hotels for parts of the six months to 26 August
2021 and as a result has impacted these typical patterns.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported as assets and liabilities at the balance sheet date and
the amounts reported as revenues and expenses during the period.
Although these amounts are based on management's best estimates,
events or actions may mean that actual results ultimately differ
from those estimates, and these differences may be material. These
judgements and estimates and the underlying assumptions are
reviewed regularly.
In preparing these condensed consolidated financial statements,
the critical judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were principally the same as those applied to the Group's
consolidated financial statements for the year ended 25 February
2021, with the exception of the performance of impairment reviews
of the Group's goodwill, property, plant and equipment and
right-of-use assets.
Critical accounting judgement
Adjusting items
Judgement is applied as to whether adjusting items meet the
necessary criteria as per the accounting policy disclosed earlier
in this note. Note 4 describes the items identified and separately
disclosed as adjusting items.
Impairment testing - Property, plant and equipment and
right-of-use assets
The Group has performed an assessment for indicators of
impairment of each of these asset categories. Specifically the
Group have concluded that for the majority of cash generating
units, performance in the year to date has been in line with the
assumptions used in the impairment calculation for the year ended
25 February 2021 and the impact of changes in the discount rate
have not been material and therefore there are no indicators of
impairment. The remaining uncertainty associated with the recovery
from the COVID-19 pandemic means there is insufficient certainty
over future performance such that no impairment reversals have been
recorded.
Key sources of estimation uncertainty
Defined benefit pension
The Group makes significant estimates in relation to the
discount rates, inflation rates and mortality rates used to
calculate the present value of the defined benefit obligation. Note
12 describes the sensitivity of the defined benefit pension
obligation to changes in key assumptions.
2. Segmental analysis
The Group provides services in relation to accommodation, food
and beverage both in the UK and internationally. Management
monitors the operating results of its operating segments separately
for the purpose of making decisions about allocating resources and
assessing performance. Segment performance is measured based on
adjusted operating profit before joint ventures. Included within
central and other in the following tables are the costs of running
the public company, other central overhead costs and share of
losses from joint ventures.
The following tables present revenue and profit information
regarding business operating segments for the six months to 26
August 2021 and 27 August 2020.
6 months to 26 August 2021 6 months to 27 August 2020
-------------------------- --------------------------
Revenue UK and Central UK and Central
Ireland Germany and other Total Ireland Germany and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- ------- ---------- ----- -------- ------- ---------- -----
Accommodation 466.8 9.2 - 476.0 155.4 4.9 - 160.3
Food, beverage and other
items 183.8 1.8 - 185.6 89.6 0.6 - 90.2
-------- ------- ---------- ----- -------- ------- ---------- -----
Revenue before adjusting
items 650.6 11.0 - 661.6 245.0 5.5 - 250.5
Adjusting revenue (Note
4) - 0.3
----- -----
Revenue 661.6 250.8
----- -----
6 months to 26 August 2021 6 months to 27 August 2020
-------------------------- --------------------------
(Loss)/profit UK and Central UK and Central
Ireland Germany and other Total Ireland Germany and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------- ------- ---------- ------ -------- ------- ---------- -------
Adjusted operating profit/(loss)
before joint ventures(1) 42.6 (0.5) (14.6) 27.5 (254.9) (23.7) (12.0) (290.6)
Share of loss from joint
ventures - - (1.0) (1.0) - - (4.5) (4.5)
-------- ------- ---------- ------ -------- ------- ---------- -------
Adjusted operating profit/(loss) 42.6 (0.5) (15.6) 26.5 (254.9) (23.7) (16.5) (295.1)
Net finance costs (60.4) (3.8) (18.9) (83.1) (58.2) (2.8) (11.3) (72.3)
Adjusted loss before
tax (17.8) (4.3) (34.5) (56.6) (313.1) (26.5) (27.8) (367.4)
Adjusting items (Note
4) 37.3 (357.3)
------ -------
Loss before tax (19.3) (724.7)
------ -------
(1) Adjusted operating profit/(loss) for the UK and Ireland
segment includes the impact of Business Rates Relief provided by
the UK Government of GBP47.7m (H1 FY21: GBP55.0m) and income from
the job retention schemes in the UK and Ireland of GBP60.0m (H1
FY21: GBP85.5m). Adjusted loss for the Germany segment includes
income of GBP28.6m (H1 FY21: GBP0.7m) from government grants.
6 months to 26 August 2021 6 months to 27 August 2020
-------------------------- --------------------------
Other segment information UK and Central UK and Central
Ireland Germany and other Total Ireland Germany and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Capital expenditure:
Property, plant and
equipment - cash basis 72.3 27.9 - 100.2 69.8 45.0 - 114.8
Property, plant and
equipment - accruals
basis 63.7 29.0 - 92.7 49.8 43.9 - 93.7
Intangible assets 6.1 0.1 - 6.2 5.0 - - 5.0
Cash outflows from lease
interest and payment
of principal of lease
liabilities 122.7 12.1 - 134.8 95.7 9.4 - 105.1
Depreciation - property,
plant and equipment 71.7 3.5 - 75.2 71.6 1.7 - 73.3
Depreciation - right-of-use
assets 59.8 10.4 - 70.2 53.8 7.2 - 61.0
Amortisation 10.5 0.1 - 10.6 11.4 0.2 - 11.6
Segment assets and liabilities are not disclosed because they
are not reported to, or reviewed by, the Chief Operating Decision
Maker.
3. Other income
6 months to 6 months to
26 August 27 August
2021 2020
GBPm GBPm
------------------------------------
Rental income 4.3 3.9
Government grants (Note 6) 93.3 85.8
Other 0.2 0.2
----------- -----------
Other income before adjusting items 97.8 89.9
VAT settlement 8.7 -
Insurance proceeds - 1.8
----------- -----------
Other income 106.5 91.7
----------- -----------
4. Adjusting items
As set out in the policy in Note 1, we use a range of measures
to monitor the financial performance of the Group. These measures
include both statutory measures in accordance with IFRS and APMs
which are consistent with the way that the business performance is
measured internally. We report adjusted measures because we believe
they provide both management and investors with useful additional
information about the financial performance of the Group's
businesses. Adjusted measures of profitability represent the
equivalent IFRS measures adjusted for specific items that we
consider hinder the comparison of the financial performance of the
Group's businesses either from one period to another or with other
similar businesses.
6 months to 6 months to
26 August 27 August
2021 2020
GBPm GBPm
------------------------------------------------- ----------- -----------
Adjusting items were as follows:
Revenue:
TSA income - 0.3
Adjusting revenue - 0.3
Other income:
Insurance proceeds - 1.8
VAT settlement (a) 8.7 -
Adjusting other income 8.7 1.8
Operating costs:
TSA costs - (0.3)
Costa disposal - separation and other costs - 4.9
Impairment - goodwill - (238.8)
Impairment and write offs - property, plant
and equipment, right-of-use assets and other
intangible assets - (101.1)
Impairment - investment in joint ventures - (8.2)
Aborted acquisition costs - (12.4)
Restructuring costs - (5.3)
Gains on disposals and property provisions
(b) 28.6 1.8
Adjusting operating costs 28.6 (359.4)
Adjusting items before tax 37.3 (357.3)
----------- -----------
Tax adjustments included in reported loss
after tax, but excluded in arriving at adjusted
loss after tax:
Tax on adjusting items (6.7) 15.2
Impact of change in tax rates (c) (15.0) (13.2)
Adjusting tax (expense)/credit (21.7) 2.0
----------- -----------
(a) In August 2021, HMRC confirmed it would not appeal the
ruling of the First-tier Tribunal in the case of Rank Group plc
that VAT was incorrectly applied to revenues earned from certain
gaming machines from 2005 to 2013. The Group has submitted claims
which are substantially similar and expects to receive overpaid VAT
of GBP8.7m.
(b) In June 2021, the Group disposed of a single property as
part of a sale and leaseback transaction for gross proceeds of
GBP40.0m. The Group will continue to rent the property for a period
of five years. A profit of GBP27.5m was recognised on disposal of
the property. During the period, the Group has recorded profits on
other property disposals of GBP1.1m (H1 FY21: GBP0.5m) and released
provisions of GBPnil (H1 FY21: GBP1.3m) which had previously been
recorded for the performance of remedial work on cladding material
at a small number of the Group's sites.
(c) The UK Budget 2021 announcements on 3 March 2021 included an
increase to the UK's main corporation tax rate to 25%, effective
from 1 April 2023. The change has resulted in the remeasurement of
those UK deferred tax assets and liabilities which are forecast to
be utilised or to crystalise after this effective date, using the
higher tax rate and, as a result, a charge of GBP15.0m has been
recorded in the income statement.
5. Finance (costs)/income
6 months to 6 months to
26 August 27 August
2021 2020
GBPm GBPm
Finance costs
Interest on bank loans and overdrafts (3.6) (2.1)
Interest on other loans (15.1) (12.2)
Interest on lease liabilities (64.2) (61.0)
Interest capitalised 0.3 0.4
Unwinding of discount on contingent consideration (0.5) (1.1)
Impact of ineffective portion of cash flow
and fair value hedges and cost of hedging (2.0) -
(85.1) (76.0)
Finance income
Bank interest receivable 0.1 0.9
Other interest receivable 0.1 0.9
Impact of ineffective portion of cash flow
and fair value hedges - 0.4
IAS 19 pension finance income (Note 12) 1.8 1.5
2.0 3.7
Total net finance costs (83.1) (72.3)
----------- -----------
6. Government grants and assistance
During the period, the Group has received government support
designed to mitigate the impact of COVID-19.
In the UK, the Government has provided funding towards the
salary costs of employees who have been 'furloughed' through the
Coronavirus Job Retention Scheme. The scheme rules remain complex
to interpret and apply to the claims. This funding meets the
definition of a government grant under IAS 20 Government Grants and
a total of GBP60.0m (H1 FY21: GBP85.2m) has been recorded within
other income. The Group stopped making claims after May 2021 and
expects no further grants to be received under the scheme. The
related salary costs which are compensated by the scheme are
included within operating costs in the consolidated income
statement.
The UK Government also provided grants to support businesses in
the retail, hospitality and leisure section who had been impacted
by closures and other restrictions. The Group has recognised
GBP5.3m in other income relating to these grants and no further
grants are expected to be received.
In Germany, the Government has provided financial support to
cover certain fixed costs incurred by companies in sectors which
have been significantly impacted by the COVID-19 pandemic and
related restrictions. The Group has recognised a total of GBP27.6m
in relation to the schemes within other income. The schemes have
been extended to December 2021 and therefore the Group may be
entitled to further claims in the second half of the year.
The German Government also provided enhanced benefits directly
to individual employees, with employers partially compensated for
continued social security payments under Kurzarbeit. Support
provided directly to employees reduced the Group's operating costs
by GBP0.6m and a total of GBP0.4m was recognised in other income
relating to compensation for social security payments.
The UK Government and devolved administrations introduced
business rates holidays for retail, hospitality and leisure
businesses. Relief in England ended in July 2021 and the holiday in
Northern Ireland, Wales and Scotland will continue until April
2022. The relief has allowed the Group to reduce operating costs by
GBP47.7m (H1 FY21: GBP55.0m) in the period.
The UK Government announced, on 8 July 2020, that a reduced rate
of VAT would apply to certain supplies in the hospitality and hotel
accommodation sector and this was extended by the Budget in 2021.
As a result, for the period from 15 July 2020 to 30 September 2021,
the Group's sales of accommodation, food and beverage (excluding
alcohol) were charged at 5% VAT. A new reduced rate of 12.5% has
been introduced from 1 October 2021 which will end on 31 March
2022.
7. Taxation
The effective tax rate applied to the loss before tax before
adjusting items for the six-month period ended 26 August 2021 is
5.7% (H1 FY21: 16.9%), determined in line with IAS 34 by applying
management's best estimate of the effective rate of tax which is
expected to apply in each jurisdiction in which the Group operates
for the year ended 3 March 2022.
In calculating the rate applicable to the UK, management
reviewed the standard application of IAS 34 and noted that it gave
rise to a forecast annual effective tax rate of 2,250%, caused by
large forecast permanent adjustments which, whilst consistent with
prior years, are not proportionate to annual forecast results.
Management therefore applied a modified approach, consistent with
IAS 34, whereby an annual effective tax rate was calculated for the
forecast profit/loss before adjusting items for the year excluding
permanent adjustments and applied to the year to date loss on the
same basis. A separate effective tax rate was then calculated for
the permanent adjustments on a year to date basis. Excluding the
impact of prior year adjustments, this resulted in a UK effective
tax rate on the loss before adjusting items for the six-month
period ended 26 August 2021 of 13.0%, which was considered by
management to be more reasonable.
In addition, a forecast effective tax rate of 0% was applied to
the German pre-tax loss before adjusting items on the basis that we
do not have sufficient certainty to recognise a deferred tax asset
for German losses carried forward for offset in a future year.
This gives rise to an overall effective tax rate on the loss
before tax before adjusting items for the six-month period ended 26
August 2021 of 11.1%, reduced to 5.7% due to the impact of prior
year adjustments.
Further, a 25% rate of corporation tax (H1 FY21: 19%) was
applied to adjusting items (which all arise in the UK) on the basis
that these will either increase or decrease tax losses carried
forward which are expected to be utilised in future periods when a
25% rate of corporation tax applies. The resultant total effective
tax rate on the statutory loss for the period is negative 95.9% (H1
FY21: 8.9%). This differs from the statutory corporate tax rate
primarily due to the increase in the future UK rate of corporation
tax which was enacted in the period which increases the net
deferred tax liability recognised at 26 August 2021 together with
German losses not recognised for tax purposes due to the
uncertainly surrounding their recovery.
6 months 6 months
to to
26 August 27 August
2021 2020
Consolidated income statement GBPm GBPm
---------------------------------------------------- ----------- -----------
Current tax:
Current tax credit - -
Adjustments in respect of previous periods (2.1) (3.2)
----------- -----------
(2.1) (3.2)
Deferred tax:
Origination and reversal of temporary differences 0.4 (76.0)
Effect of rate change 15.0 13.2
Adjustments in respect of previous periods 5.2 1.8
20.6 (61.0)
----------- -----------
Tax reported in the consolidated income statement 18.5 (64.2)
----------- -----------
Deferred tax
The major deferred tax assets/(liabilities) recognised by the
Group and movements during the period are as follows:
Rolled
Accelerated over gains
capital and property
allowances revaluations Pensions Leases Losses Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 25 February 2021 (44.2) (57.8) (62.5) 36.0 83.7 0.2 (44.6)
(Charge)/credit to consolidated
income statement (37.4) (25.6) (12.1) 17.4 39.9 (2.8) (20.6)
(Charge)/credit to statement
of comprehensive income - - (29.5) - - 0.3 (29.2)
Credit/(charge) to statement
of changes in equity - - - - 0.1 (0.3) (0.2)
Foreign exchange and
other movements - - - - - (1.9) (1.9)
------------ -------------- --------- ------- ------- ------ -------
At 26 August 2021 (81.6) (83.4) (104.1) 53.4 123.7 (4.5) (96.5)
------------ -------------- --------- ------- ------- ------ -------
The Group has unrecognised German tax losses of GBP100.5m
(February 2021: GBP84.8m) which can be carried forward indefinitely
and offset against future taxable profits in the same tax group.
The Group carries out an assessment of the recoverability of these
losses for each reporting period and, to the extent that they
exceed deferred tax liabilities within the same tax group, does not
think it is appropriate at this stage to recognise any deferred tax
asset. Recognition of these unrecognised assets in their entirety
would result in an increase in the reported deferred tax asset of
GBP31.7m (February 2021: GBP26.2m).
The UK Budget 2021 announcement on 3 March 2021 included
measures to support economic recovery as a result of the ongoing
COVID-19 pandemic. These included an increase to the UK's main
corporation tax rate to 25%, effective from 1 April 2023. The
change has resulted in the remeasurement of those UK deferred tax
assets and liabilities which are forecast to be utilised or to
crystalise after this effective date, using the higher tax rate. A
charge of GBP15.0m has been recorded in the consolidated income
statement and a charge of GBP13.4m in the consolidated statement of
comprehensive income based on the Group's current estimate of how
the balances will unwind. However, the Group has some ability to
control the timing of this unwinding and could vary the value of
the deferred tax liability by up to GBP8.0m.
8. Earnings per share
The basic earnings per share (EPS) figures are calculated by
dividing the net loss for the period attributable to parent
shareholders by the weighted average number of ordinary shares in
issue during the period after deducting treasury shares and shares
held by an independently managed employee share ownership trust
(ESOT).
The diluted earnings per share figures allow for the dilutive
effect of the conversion into ordinary shares of the weighted
average number of options outstanding during the period. Where the
average share price for the period is lower than the option price
or the Group is loss making, the options become anti-dilutive and
are excluded from the calculation. There are 2.1m (H1 FY21: 1.6m)
shares options excluded from the diluted earnings per share
calculation because they would be anti-dilutive.
The number of shares used for the earnings per share
calculations are as follows:
6 months to 6 months to
26 August 27 August
2021 2020
million million
-------------------------------------------- ----------- -----------
Basic weighted average number of ordinary
shares 201.9 175.0
Effect of dilution - share options - -
----------- -----------
Diluted weighted average number of ordinary
shares 201.9 175.0
----------- -----------
The losses used for the earnings per share
calculations are as follows:
6 months to 6 months to
26 August 27 August
2021 2020
GBPm GBPm
Loss for the period attributable to parent
shareholders (37.8) (660.5)
Adjusting items before tax (37.3) 357.3
Adjusting tax expense/(credit) 21.7 (2.0)
Adjusted loss for the period attributable
to parent shareholders (53.4) (305.2)
6 months to 6 months to
26 August 27 August
2021 2020
pence pence
Basic EPS on loss for the period (18.7) (377.4)
Adjusting items before tax (18.5) 204.2
Adjusting tax expense/(credit) 10.8 (1.2)
Basic EPS on adjusted loss for the period (26.4) (174.4)
Diluted EPS on loss for the period (18.7) (377.4)
Diluted EPS on adjusted loss for the period (26.4) (174.4)
9. Dividends
As a condition agreed with Whitbread's lenders and Pension
Trustees, dividends on ordinary shares will not be paid during the
current covenant waiver period which lasts until March 2023 unless
the Group demonstrates compliance with agreed metrics, being net
debt/ EBITDA < 3.5x and EBITDA/interest > 3.0x.
B shareholders are entitled to an annual non-cumulative
preference dividend paid in arrears. There are 2.0m (H1 FY21: 2.0m)
B shares issued. The Group paid a dividend of 0.3p per share (H1
FY21: 0.9p per share) during the period.
10. Borrowings and net debt
Amounts drawn down on the Group's borrowing facilities are as
follows:
Current Non-current
26 August 25 February 26 August 25 February
2021 2021 2021 2021
GBPm GBPm GBPm GBPm
Revolving credit facility (GBP950.0m) - - - -
Private placement loan notes 93.3 312.0 - -
Senior unsecured bonds - - 991.2 990.5
93.3 312.0 991.2 990.5
--------- ----------- --------- -----------
The Group has received covenant test waivers for its revolving
credit facility covering the period to 2 March 2023 and for its
private placement loan notes and defined benefit pension scheme
covering the period to 3 March 2022. Under the terms of the
waivers, the Group is required to maintain GBP400.0m cash and/or
headroom under undrawn committed bank facilities and total net debt
must not exceed GBP2.0bn.
Revolving credit facility
On 29 January 2021, the Group agreed to amend and extend its
revolving credit facility. The new agreement gives total committed
credit of GBP950.0m which is available until 29 December 2021 and
subsequently reduces to GBP850.0m available until 7 September 2022
and GBP725.0m available until 7 September 2023. The facility is
multi-currency and has a variable interest rate linked to GBP LIBOR
or EURIBOR which will transition to SONIA following the
discontinuation of IBOR in December 2021.
Private placement loan notes
The Group holds loan notes with coupons and maturities as shown
in the following table.
Principal
Title Year issued value Maturity Coupon
26 January
Series C loan notes 2011 US$93.5m 2022 4.86%
6 September
Series D loan notes 2011 GBP25.0m 2021 4.89%
On 26 March 2021, the Group repaid loan notes with a principal
value of GBP200.0m originally due for repayment in August 2027. An
early repayment charge of GBP21.2m was recorded in the financial
statements for the year ended 25 February 2021. As a result of the
hedging arrangements in place, the total cash outflow recorded by
the Group was GBP220.4m.
Subsequent to the period end, the Group has repaid the Series D
loan notes with a total cash outflow of GBP25.0m.
Senior unsecured bonds
The Group has senior unsecured bonds with coupons and maturities
as shown in the following table.
Principal
Title Year issued value Maturity Coupon
16 October
2025 senior unsecured bonds 2015 GBP450.0m 2025 3.375%
2027 senior unsecured green use
of proceeds bonds 2021 GBP300.0m 31 May 2027 2.375%
2031 senior unsecured green use
of proceeds bonds 2021 GBP250.0m 31 May 2031 3.000%
Movement in cash and net debt
Amortisation
25 February Net new Foreign Fair value of premiums 26 August
2021 Cash flow lease liabilities exchange adjustments and discounts 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------- --------- ------------------ --------- ------------ -------------- ---------
Cash and cash
equivalents 1,256.0 (111.2) - (0.1) - - 1,144.7
Liabilities from
financing
activities
Borrowings (1,302.5) 220.4 - (1.7) - (0.7) (1,084.5)
Lease liabilities (3,231.6) 70.6 (157.1) 4.5 - - (3,313.6)
Derivatives held to
hedge financing
activities 5.8 - - - 2.9 - 8.7
----------- --------- ------------------ --------- ------------ -------------- ---------
Total liabilities
from
financing
activities (4,528.3) 291.0 (157.1) 2.8 2.9 (0.7) (4,389.4)
Less: lease
liabilities 3,231.6 (70.6) 157.1 (4.5) - - 3,313.6
Less: derivatives
held
to hedge financing
activities (5.8) - - - (2.9) - (8.7)
Net (debt)/cash (46.5) 109.2 - (1.8) - (0.7) 60.2
----------- --------- ------------------ --------- ------------ -------------- ---------
Net (debt)/cash includes US$ denominated loan notes of US$93.5m
(February 2021: US$93.5m) retranslated at period end to GBP68.3m
(February 2021: GBP66.6m). These notes have been hedged using
cross-currency swaps. At maturity, GBP58.5m (February 2021:
GBP58.5m) will be repaid taking into account the cross-currency
swaps. If the impact of these hedges is taken into account,
reported net cash would be GBP70.0m (February 2021: net debt would
be GBP38.4m).
Liquidity Risk
The tables below summarise the maturity profile of the Group's
financial liabilities at 26 August 2021 and 25 February 2021 based
on contractual undiscounted payments, including interest:
Less than 3 to 12 1 to 5 More than
On demand 3 months months years 5 years Total
26 August 2021 GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ------- ------- --------- -------
Interest-bearing loans and
borrowings - 40.8 79.1 119.3 1,044.6 1,283.8
Lease liabilities(1) - 60.8 184.5 979.4 4,539.6 5,764.3
Derivative financial instruments - - 1.3 - - 1.3
Trade and other payables - 109.0 12.3 26.0 - 147.3
--------- --------- ------- ------- --------- -------
- 210.6 277.2 1,124.7 5,584.2 7,196.7
--------- --------- ------- ------- --------- -------
Less than 3 to 12 1 to 5 More than
On demand 3 months months years 5 years Total
25 February 2021 GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ------- ------- --------- -------
Interest-bearing loans and
borrowings - 221.8 102.4 573.7 609.3 1,507.2
Lease liabilities(1) - 54.6 175.1 925.5 4,513.4 5,668.6
Derivative financial instruments - - 2.4 - - 2.4
Trade and other payables - 71.2 37.7 26.8 - 135.7
--------- --------- ------- ------- --------- -------
- 347.6 317.6 1,526.0 5,122.7 7,313.9
--------- --------- ------- ------- --------- -------
(1) Contractual undiscounted payments relating to lease
liabilities due in more than 5 years includes GBP1,185.3m (February
2021: GBP1,140.2m) due between 5 and 10 years, GBP1,877.7m
(February 2021: GBP1,859.4m) due between 10 and 20 years and
GBP1,476.6m (February 2021: GBP1,513.8m) due in more than 20
years.
11. Financial instruments
IFRS 13 Fair value measurement requires that the classification
of financial instruments measured at fair value be determined by
reference to the source of inputs used to derive the fair value.
The classification uses the following three-level hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 - Other techniques for which all inputs, which have a
significant effect on the recorded fair value, are observable,
either directly or indirectly; and
Level 3 - Techniques which use inputs, which have a significant
effect on the recorded fair value, that are not based on observable
market data.
The following financial instruments are measured at fair
value:
Derivative financial instruments
The Group entered into a number of cross-currency swap
agreements in relation to the US$ denominated loan notes to
eliminate foreign currency exchange risk on interest or on the
repayment of principal borrowed and has additionally entered into a
net investment hedge in relation to the investment made in
Germany.
The fair value of derivative instruments classified as level 2
is calculated by discounting all future cash flows by the relevant
market discount rate at the balance sheet date.
Contingent Consideration
The Group has recorded contingent consideration in relation to
acquisitions within trade and other payables.
6 months to 6 months to
26 August 27 August
2021 2020
GBPm GBPm
------------------------------------------ ----------- -----------
Opening contingent consideration 62.8 4.4
Recognised on acquisition of a subsidiary - 56.3
Unwinding of discount (Note 5) 0.5 1.1
Paid during the period (0.5) -
Foreign exchange movements (0.7) 4.4
----------- -----------
Closing contingent consideration 62.1 66.2
----------- -----------
The consideration will become payable upon the handover of hotel
sites which are currently being developed. The fair value of
contingent consideration is classified as level 3 and the fair
value is calculated by discounting the future payments from their
expected handover date using a risk adjusted discount rate. There
have been no remeasurements recorded during the period.
26 August 27 August 25 February
2021 2020 2021
GBPm GBPm GBPm
Financial assets
Derivative financial instruments - level
2 20.9 12.6 14.8
--------- --------- -----------
Financial liabilities
Contingent consideration - level 3 (62.1) (66.2) (62.8)
Derivative financial instruments - level
2 (1.2) (7.5) (2.4)
--------- --------- -----------
There were no transfers between levels during any period
disclosed.
12. Defined benefit pension surplus
During the six-month period to 26 August 2021, the defined
benefit pension scheme has moved from a surplus of GBP188.0m to
GBP275.5m. The main movements in the surplus are as follows:
GBPm
---------------------------------------------- ------- ------
Pension surplus at 25 February 2021 188.0
Re-measurement due to:
Changes in financial assumptions (224.6)
Changes in demographic assumptions 33.9
Experience adjustments (17.3)
Return on plan assets greater than discount
rate 292.8
-------
84.8
Contributions from employer 2.3
Net interest on pension liability and assets 1.8
Administrative expenses (1.4)
------
Pension surplus at 26 August 2021 275.5
------
The surplus has been recognised as, under the governing
documentation of the Whitbread Group Pension Fund, the Group has an
unconditional right to receive a refund, assuming the gradual
settlement of the scheme liabilities over time until all members
and their dependants have either died or left the scheme, in
accordance with the provisions of IFRIC 14 IAS 19 - The Limit on a
Defined Benefit Asset, Minimum Funding Requirements and their
Interaction.
A scheme specific actuarial valuation as at 31 March 2020 is
expected to be finalised in November 2021.
The principal assumptions used by the independent qualified
actuaries in updating the most recent valuation carried out as at
31 March 2017 of the UK scheme to 26 August 2021 for IAS 19
Employee benefits purposes were:
26 August 25 February
2021 2021
% %
Pre-April 2006 rate of increase in pensions
in payment 3.2 3.1
Post-April 2006 rate of increase in pensions
in payment 2.2 2.2
Pension increases in deferment 3.2 3.1
Discount rate 1.5 1.9
Inflation assumption 3.4 3.2
The mortality assumptions are based on standard mortality tables
which allow for future mortality improvements. The assumptions are
that a member currently aged 65 will live on average for a further
20.0 years (February 2021: 20.5 years) if they are male and for a
further 22.5 years (February 2021: 23.1 years) if they are female.
For a member who retires in 2041 at age 65, the assumptions are
that they will live on average for a further 21.0 years (February
2021: 21.5 years) after retirement if they are male and for a
further 23.8 years (February 2021: 24.3 years) after retirement if
they are female.
The assumptions in relation to discount rate, mortality and
inflation have a significant effect on the measurement of scheme
liabilities. The following table shows the sensitivity of the
valuation to changes in these assumptions:
(Increase)/decrease
in liability
----------------------
26 August 25 February
2021 2021
Discount rate
1.00% increase to discount rate 463.0 421.0
1.00% decrease to discount rate (603.0) (546.0)
Inflation
0.25% increase to inflation rate (103.0) (92.0)
0.25% decrease to inflation rate 100.0 90.0
Life expectancy
One-year increase to life expectancy (149.0) (130.0)
The above sensitivity analyses are based on a change in an
assumption whilst holding all other assumptions constant. In
practice, this is unlikely to occur and changes in some of the
assumptions may be correlated. When calculating the sensitivity of
the defined benefit obligation to significant actuarial
assumptions, the same method (projected unit credit method) has
been applied as when calculating the pension surplus recognised
within the consolidated balance sheet. The methods and types of
assumptions did not change.
13. Analysis of cash flows given in the cash flow statement
6 months to 6 months to
26 August 27 August
2021 2020
GBPm GBPm
Cash generated from / (used in) operations
Loss for the period (37.8) (660.5)
Adjustments for:
Tax expense/(credit) 18.5 (64.2)
Net finance costs (Note 5) 83.1 72.3
Share of loss from joint ventures 1.0 4.5
Depreciation and amortisation 156.0 145.9
Share-based payments 6.3 5.2
Impairments - 342.3
Impairment of loans to joint ventures 0.8 5.8
Gains on disposals, property and other provisions
(Note 4) (28.6) (1.8)
Other non-cash items 6.5 29.4
----------- -----------
Cash generated from / (used in) operations
before working capital changes 205.8 (121.1)
Increase in inventories (2.8) (8.1)
(Increase)/decrease in trade and other receivables (46.7) 12.7
Increase/(decrease) in trade and other payables 162.0 (133.6)
----------- -----------
Cash generated from / (used in) operations 318.3 (250.1)
----------- -----------
Other non-cash items includes an inflow of GBP5.0m (H1 FY21:
GBP0.4m) as a result of net provision movements and an inflow of
GBP1.4m (H1 FY21: GBP1.5m) representing non-cash pension scheme
administration costs. Other non-cash items for the six months to 27
August 2020 included an inflow of GBP14.0m representing a timing
difference between the recognition of insurance proceeds and cash
receipts and an inflow of GBP12.4m representing the write off of a
deposit paid in relation to an acquisition.
14. Related party disclosure
In Note 33 to the Annual Report and Accounts for the year ended
25 February 2021, the Group identified its related parties as its
key management personnel (including directors), the Group pension
schemes and its joint ventures for the purpose of IAS 24 Related
Party Disclosures. There have been no significant changes in those
related parties identified at the year end and there have been no
transactions with those related parties during the six months to 26
August 2021 that have materially affected, or are expected to
materially affect, the financial position or performance of the
Group during this period. Details of the relevant relationships
with those related parties will be disclosed in the Annual Report
and Accounts for the year ending 3 March 2022. All transactions
with subsidiaries are eliminated on consolidation.
15. Capital expenditure commitments
Capital expenditure commitments for which no provision has been
made are set out in the table below:
26 August 27 August 25 February
2021 2020 2021
GBPm GBPm GBPm
Property, plant and equipment 132.8 126.4 82.5
Intangible assets 2.6 3.0 0.5
16. Events after the balance sheet date
On 6 September 2021, the Group repaid loan notes on maturity
with a value of GBP25.0m.
INDEPENT REVIEW REPORT TO WHITBREAD PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 26 August 2021 which comprises the income
statement, the statement of comprehensive income, the statement of
changes in
equity, the balance sheet, the cash flow statement and related
notes 1 to 16. We have read the other information contained in the
half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
International Financial Reporting Standards as issued by the IASB.
The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
United Kingdom adopted International Accounting Standard 34,
"Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 26
August 2021 is not prepared, in all material respects, in
accordance with United Kingdom adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
25 October 2021
Glossary
Adjusted property rent
Total property rent less a proportion of contingent rent.
Basic earnings per share (Basic EPS)
Profit attributable to the parent shareholders divided by the
basic weighted average number of ordinary shares in issue during
the year after deducting treasury shares and shares held by an
independently managed share ownership trust ('ESOT').
Committed pipeline
Sites where we have a legal interest in a property (that may be
subject to planning/other conditions) with the intention of opening
a hotel in the future.
Direct bookings / distribution
Based on stayed bookings in the financial year made direct to
the Premier Inn website, Premier Inn app, Premier Inn customer
contact centre or hotel front desks.
Food and beverage (F&B) sales
Food and beverage revenue from all Whitbread owned pub
restaurants and integrated hotel restaurants.
Lease debt
Eight times adjusted property rent.
Occupancy
Number of hotel bedrooms occupied by guests expressed as a
percentage of the number of bedrooms available in the period.
Operating profit
Profit before net finance costs and tax.
Property rent
IFRS 16 property lease liability payments plus variable lease
payments, adjusted for deferred rental amounts. This is used as a
proxy for rent expense as recorded under IAS 17 in arriving at
funds from operations.
Rent expense
Rental costs recognised in the income statement prior to the
adoption of IFRS 16.
Alternative Performance Measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way that the business performance is
measured internally.
We report adjusted measures because we believe they provide both
management and investors with useful additional information about
the financial performance of the Group's businesses.
APMs are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
REVENUE MEASURES
APM Closest equivalent Adjustments Definition and purpose
IFRS to reconcile
to IFRS measure
Accommodation Revenue Exclude non-room Premier Inn accommodation revenue excluding
sales revenue such non-room income such as
as food and food and beverage. The growth in accommodation
beverage sales on a year-on-year basis is a good
indicator of the performance of the
business.
Reconciliation: Note 2
Adjusted* Revenue Adjusting Revenue adjusted to exclude TSA income.
revenue items Reconciliation: Consolidated income
statement
Average room No direct Refer to Accommodation sales divided by the number
rate (ARR) equivalent definition of rooms occupied
by guests. The directors consider this
to be a useful measure as this is a
commonly used industry metric which
facilitates comparison between companies.
Reconciliation 6 months 6 months
to 26 to 27
August August
2021 2020
UK Accommodation sales
(GBPm) 466.8 155.4
Number of rooms occupied
by guests ('000) 8,869 2,901
--------- ---------
UK average room rate
(GBP) 52.63 53.58
--------- ---------
Germany Accommodation
sales (GBPm) 9.2 4.9
Number of rooms occupied
by guests ('000) 252 125
--------- ---------
Germany average room
rate (GBP) 36.49 39.37
--------- ---------
UK like-for-like Movement Accommodation Year over year change in revenue for
revenue growth in accommodation sales from outlets open for at least one year.
sales per non like-for-like The directors consider this to be a
segment information useful measure as it is a commonly used
(Note 2) performance metric and provides an indication
of underlying revenue trends.
Reconciliation 6 months 6 months
to 26 to 27
August August
2021 2020
UK like-for-like revenue
growth 194.3% (78.2)%
Contribution from net
new hotels 6.1% 0.5%
--------- ---------
UK Accommodation sales
growth 200.4% (77.7)%
--------- ---------
Two year UK Movement Accommodation Change in revenue for outlets open for
like-for-like in accommodation sales from at least two years. This is a temporary
revenue growth sales per non like-for-like measure introduced to provide a comparison
segment information between the current year and the comparative
period before the impact of the COVID-19
pandemic.
Reconciliation 6 months
to 26
August
2021
UK like-for-like revenue
growth (35.9)%
Contribution from net
new hotels 2.8%
---------
UK Accommodation sales
growth (33.1)%
---------
Revenue per No direct Refer to Revenue per available room is also known
available equivalent definition as 'yield'. This hotel measure is achieved
room (RevPAR) by multiplying the ARR by Occupancy.
The directors consider this to be a
useful measure as it is a commonly used
performance measure in the hotel industry.
Reconciliation 6 months 6 months
to 26 to 27
August August
2021 2020
UK Accommodation sales
(GBPm) 466.8 155.4
Available rooms ('000) 14,528 14,303
--------- ---------
UK RevPAR (GBP) 32.13 10.87
--------- ---------
Germany Accommodation
sales (GBPm) 9.2 4.9
Available rooms ('000) 787 457
--------- ---------
Germany RevPAR (GBP) 11.69 10.83
--------- ---------
INCOME STATEMENT MEASURES
APM Closest equivalent Adjustments Definition and purpose
IFRS to reconcile
to IFRS measure
Adjusted* Profit/loss Adjusting Profit/loss before tax, finance costs/income
operating before tax items and adjusting items
profit/loss (Note 4) Reconciliation: Consolidated income
statement
Adjusted* Tax charge/credit Adjusting Tax charge/credit before adjusting items.
tax items Reconciliation: Consolidated income
(Note 4) statement
Adjusted* Profit/loss Adjusting Profit/loss before tax and adjusting
profit/loss before tax items items.
before tax (Note 4) Reconciliation: Consolidated income
statement
Adjusted* Basic EPS Adjusting Adjusted profit/loss attributable to
basic EPS items the parent shareholders divided by the
(Note 4) basic weighted average number of ordinary
shares in issue during the year after
deducting treasury shares and shares
held by an independently managed share
ownership trust (ESOT).
Reconciliation: Note 8
BALANCE SHEET MEASURES
APM Closest equivalent Adjustments Definition and purpose
IFRS to reconcile
to IFRS measure
Net debt/cash Total liabilities Exclude lease Cash and cash equivalents after deducting
from financing liabilities total borrowings. The directors consider
activities and derivatives this to be a useful measure of the financing
held to hedge position of the Group. Reconciliation:
financing Note 10
activities
Adjusted net Total liabilities Exclude lease Net debt/cash adjusted for cash, assumed
debt/cash from financing liabilities by ratings agencies to not be readily
activities and derivatives available. The directors consider this
held to hedge to be a useful measure as it is aligned
financing with the method used by ratings agencies
activities. to assess the financing position of
Includes the Group. Adjusted net debt/cash is
an adjustment temporarily not disclosed as a result
for cash of the impact of COVID-19 and a reconciliation
assumed by is therefore not included.
ratings agencies
to not be
readily available
Lease adjusted Cash and Exclude lease Adjusted net debt/cash plus lease debt.
net debt cash equivalents liabilities The directors consider this to be a
less total and derivatives useful measure as it forms the basis
liabilities held to hedge of the Group's leverage targets. Lease
from financing financing adjusted net debt is temporarily not
activities activities. disclosed as a result of the impact
Includes of COVID-19 and a reconciliation is
an adjustment therefore not included.
for cash
assumed by
ratings agencies
to not be
readily available
Net debt/cash Cash and Refer to Net debt/cash plus lease liabilities.
and lease cash equivalents definition The directors consider this to be a
liabilities less total useful measure of the financing position
liabilities of the Group.
from financing
activities
Reconciliation 6 months 6 months
to 26 to 27
August August
2021 2020
GBPm GBPm
---------- ----------
Net cash 60.2 196.4
Lease liabilities (3,313.6) (2,961.6)
---------- ----------
Net cash and lease liabilities (3,253.4) (2,765.2)
---------- ----------
CASH FLOW MEASURES
APM Closest equivalent Adjustments Definition and purpose
IFRS to reconcile
to IFRS measure
Cash capital No direct Refer to Cash flows on property, plant and equipment
expenditure equivalent definition and investment property and investment
(cash capex) in intangible assets, adding net cash
proceeds on acquisitions and loans and
capital contributions to joint ventures.
Funds from Net cash Refer to Net cash flows from operating activities
operations flows from definition after deducting payment of principal
operating of lease liabilities and adding back
activities changes in working capital, adjusted
property rent and cash interest.
While the Group covenant waivers remain
in place, FFO is not considered to be
a key alternative performance measure.
Lease adjusted No direct Refer to Ratio of lease-adjusted net debt/cash
net debt to equivalent definition compared to funds from operations (FFO).
FFO While the Group covenant waivers remain
in place, lease adjusted net debt to
FFO is not considered to be a key alternative
performance measure.
Operating Cash generated Refer to Adjusted operating profit/loss adding
cash flow from/used definition back depreciation and amortisation and
in operations after IFRS 16 interest and lease repayments
and working capital movement.
The directors consider this a useful
measure as it is a good indicator of
the cash generated which is used to
fund future growth and shareholder returns,
tax, pension and interest payments.
Reconciliation 6 months 6 months
to 26 to 27
August August
2021 2020
GBPm GBPm
Adjusted operating profit/(loss) 26.5 (295.1)
Depreciation - right-of-use
assets 70.2 61.0
Depreciation - property,
plant and equipment 75.2 73.3
Amortisation 10.6 11.6
Interest paid - lease
liabilities (64.2) (61.0)
Payment of principal
of lease liabilities (70.6) (44.4)
Movement in working capital 112.5 (129.0)
--------- ---------
Operating cash flow 160.2 (383.6)
--------- ---------
OTHER MEASURES
APM Closest equivalent Adjustments Definition and purpose
IFRS to reconcile
to IFRS measure
Adjusted* Operating Refer to Profit/loss before tax, adjusting items,
EBITDAR profit/loss definition net finance costs, depreciation, amortisation,
variable lease expense and rental income.
The directors consider this measure
to be useful as it is a commonly used
industry metric which facilitates comparison
between companies.
Reconciliation 6 months 6 months
to 26 to 27
August August
2021 2020
GBPm GBPm
Adjusted operating profit/(loss) 26.5 (295.1)
Depreciation - right-of-use
assets 70.2 61.0
Depreciation - property,
plant and equipment 75.2 73.3
Amortisation 10.6 11.6
Variable lease expense/(credit) 0.1 (0.6)
Rental income (4.3) (3.9)
--------- ---------
Adjusted EBITDAR 178.3 (153.7)
--------- ---------
Return on No direct Refer to Adjusted operating profit/loss (pre-IFRS
Capital Employed equivalent definition 16) for the year divided by net assets
(ROCE) at the balance sheet date, adding back
net debt, right-of-use assets, lease
liabilities, taxation assets/liabilities,
the pension surplus/deficit and derivative
financial assets/liabilities, other
financial liabilities and IFRS 16 working
capital adjustments.
Return on capital is temporarily not
disclosed as a result of the impact
of COVID-19 and a reconciliation is
therefore not included.
* Adjusted measures of profitability represent the equivalent
IFRS measures adjusted for specific items that we consider relevant
for comparison of the financial performance of the Group's
businesses either from one period to another or with other similar
businesses.
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