TIDMWTB
RNS Number : 2930X
Whitbread PLC
25 April 2023
Premier Inn UK drives significant profit uplift versus FY22 and
FY20
Strength of operating model underpins long-term growth
opportunities in UK and Germany
Increased dividend plus GBP300m share buy-back in H1 FY24
Throughout this release all percentage growth comparisons are
made comparing the current year (FY23) performance for the 52 weeks
to 2 March 2023 to FY22 (53 weeks to 3 March 2022) that was
partially impacted by the pandemic and FY20 (52 weeks to 27
February 2020), with FY20 being the last financial period before
the onset of the pandemic.
Overview
-- Significant profit uplift to above pre-pandemic levels,
driven by Premier Inn UK that continues to outperform the UK
midscale and economy ('M&E') market
-- We are making good progress in Germany, with 51 hotels open,
giving us confidence that we can achieve our long-term target of
10-14% return on our GBP1bn of committed capital
-- We see considerable opportunities for growth, both in the UK
and Germany, driven by the strength of our operating model and the
structural decline in the independent hotel sector
-- Current trading remains strong, despite macroeconomic
uncertainty, with encouraging lead indicators
-- The Board is recommending an increased final dividend of GBP100m or 49.8p per share
-- Confidence in outlook reflected with initial share buy-back
of GBP300m, to be completed during H1 FY24
FY23 Group Financial Summary
GBPm FY23 FY22 FY20 vs FY22 vs FY20
(1)
================================ ======== ========= ======== ========= ==========
Statutory revenue(2) 2,625 1,703 2,072 54% 27%
Adjusted EBITDAR 888 473 753 88% 18%
Adjusted profit / (loss)
before tax (3) 413 (16) 358 >1,000% 15%
Statutory profit before
tax 375 58 280 544% 34%
Statutory profit after
tax 279 43 218 556% 28%
Adjusted basic EPS 162.9p (2.5)p 166.3p >1,000% (2)%
Statutory basic EPS 138.4p 21.1p 125.3p 556% 11%
Dividend per share 74.2p 34.7p 32.7p 114% 127%
Net cash / (debt) 171 141 (323) 31 494
Net cash / (debt) and
lease liabilities (3,787) (3,561) (2,944) (6)% (29)%
================================ ======== ========= ======== ========= ==========
Financial highlights
-- Premier Inn UK: total UK accommodation sales were 55% ahead
of FY22 and 37% ahead of FY20 representing a 25.2pp outperformance
versus the M&E market(4)
-- F&B sales were 40% ahead of FY22 and 4% behind
pre-pandemic levels with increased spend per head outweighed by a
decline in customer volumes
-- UK pre-tax margins increased to 19.6% (FY22: 4.5%) despite
sector-wide inflationary pressures, driven by strong revenue growth
and our ongoing cost efficiency programme
-- UK ROCE increased to 12.9% up from 11.2% in FY20
-- Premier Inn Germany: ongoing expansion meant that adjusted
loss before tax was GBP50m; our cohort of 18 established hotels
performed in line with the market(5) and was profitable in
aggregate(6) in FY23; acquisition of six hotels completed on 2
March 2023
-- Statutory revenue was 54% ahead of FY22 and 27% ahead of FY20
-- Adjusted profit before tax was GBP413m (FY22: loss of GBP16m)
and statutory profit before tax was GBP375m (FY22: GBP58m) after
charging GBP39m of adjusting items (FY22: GBP74m credit), including
GBP1m of net property impairment credits in the UK and GBP31m
property impairment charges in Germany (FY22: GBP42m net impairment
credit), GBP14m of technology-related project costs and GBP 4 m
profit from property disposals (FY22: GBP33m). The Group recognised
GBPnil government support relating to FY23 (FY22: GBP17 1 m)
-- Strong balance sheet: lease adjusted leverage reduced to 2.7x
(FY22: 4.4x) and net cash increased to GBP171 m (FY22: GBP141m);
pension fund surplus was GBP 325m at the end of the period (FY22:
GBP523m)
Segment highlights
Premier Inn UK
`
===== ==== =====================================================================
GBPm FY23 FY22 FY20 vs FY22 vs FY20
============================== ======= ======= ======= ========= ============
Statutory revenue 2,508 1,668 2,050 50% 22%
Adjusted profit before
tax 492 75 414 556% 19%
Revenue per available
room (GBP) 59.45 38.69 46.91 54% 27%
============================== ======= ======= ======= ========= ============
Premier Inn Germany
`
======= ====== ================================================================
GBPm FY23 FY22 FY20 vs FY22 vs FY20
============================== ======= ======= ======= ========= ===========
Statutory revenue 118 35 12 234% 896%
Adjusted (loss) before
tax (50) (24) (14) (108)% (265)%
Revenue per available
room (GBP) 37.04 16.49 40.53 125% (9)%
============================== ======= ======= ======= ========= ===========
Current trading (seven weeks to 20 April 2023)
-- Our strong trading momentum has continued into Q1 FY24 - we
are adding new rooms and filling them at attractive rates
-- Premier Inn UK: Total UK accommodation sales up 17% versus
FY23, with RevPAR GBP6.08 ahead of the M&E market(7)
-- Premier Inn UK: forward booked occupancy is in-line with last
year but at higher ARRs, providing positive revenue momentum into
Q1 FY24
-- UK F&B: sales were 10 % ahead of FY23, reflecting softer
trading in the base year and the benefit of a number of commercial
initiatives
-- Premier Inn Germany: market demand has rebounded after a soft
Q4 FY23 and our cohort of 18 established hotels continue to perform
in line with the wider M&E market (8)
Outlook and guidance for FY24
-- Current trading is strong despite macroeconomic
uncertainties, and we remain confident in the outlook for FY24
-- We expect UK inflation of between 7-8% in FY24 and are
confident in being able to offset the impact on UK profits through
like-for-like sales growth, new room expansion and a focus on cost
efficiencies
-- In Germany, we continue to expect to incur a loss before tax
in FY24 of between GBP20m and GBP30m, with an additional GBP10m
adverse profit before tax impact relating to the refurbishment of
the c.900 rooms acquired at the end of FY23
-- In the UK, we have a current pipeline of 7,400 rooms and
expect to open 1,500 - 2 ,000 rooms in FY24
-- In Germany, we have a pipeline of 7,000 rooms and expect to
open 1,000-1,500 rooms in FY24, in addition to the refurbishment of
c.900 rooms from our latest acquisition
-- We expect total capex expenditure in FY24 to be between GBP400m - GBP450m
-- Reflecting these points, we have updated our year-on-year
guidance for FY24 within this release
1: FY22 was a 53-week period, the impact of week 53: GBP42m
total sales and estimated profit before tax of GBP4m
2: FY20 revenue includes GBP9m relating to the Costa disposal
transitional service agreement
3: FY22 includes GBP62m received from the UK Coronavirus Job
Retention Scheme, GBP44m of Germany Government COVID-related
grants, GBP56m of UK business rates relief and GBP8m of other
COVID-related support grants
4: STR data, full inventory basis, 4 March 2022 to 2 March 2023,
M&E market excludes Premier Inn
5: STR data, standard basis, 4 March 2022 to 2 March 2023,
M&E market includes Premier Inn
6: Aggregate adjusted profit before tax excluding administration
and overhead costs for hotels that were open and trading for a full
12 months as at 4 March 2022 (see alternative performance measure
('APM') in the glossary and reconciliation at the end of this
document)
7: STR data, standard basis, 3 March 2023 to 13 April 2023,
M&E market excludes Premier Inn
8: STR data, standard basis, 3 March 2023 to 13 April 2023,
M&E market includes Premier Inn
Signifies an alternative performance measure ('APM') - further
information can be found in the glossary and reconciliation of APMs
at the end of this document
Commenting on today's results, Dominic Paul, Whitbread Chief
Executive, said:
"These are a fantastic set of results. Whilst the recovery in
market demand in conjunction with a structural decline in the
independent sector has provided a helpful backdrop, it is the
combination of our own initiatives and our clearly differentiated
business model that has sustained our brand strength and delivered
such an impressive operational and financial performance.
"These results reflect the strength of our business model and
our persistent focus on delivering an excellent and consistent
guest experience across all of our hotels and restaurants. That
focus is embedded within our business strategy, that my
predecessor, Alison Brittain and the whole Executive team executed
brilliantly through one of the Group's most challenging trading
periods. It has also created a platform for future growth, both in
the UK and in Germany. This sets us apart from our competitors as
we continue to invest through the cycle with a clear focus on
capital discipline and operational excellence.
"Having spent time out in the business operations, both in the
UK and Germany, I am clear that our strategy is the right one and I
am hugely excited about the opportunities we now have in front of
us. I want us to strengthen further our position as the UK's
leading hotel brand, improve our F&B performance, continue to
drive our efficiency programme, complete some important technology
projects and replicate our UK model at scale in Germany.
"I am confident that we can deliver on each of these tasks and
more. To do so will require the continued dedication and hard work
of our Executive team and all of our 40,000 team members, each of
whom plays a vital role in driving our success. I am excited to be
leading such a great team and I am optimistic about our prospects.
"
For more information please contact:
Investor Relations - Whitbread
investorrelations@whitbread.com
Peter Reynolds, Director of Investor Relations
peter.reynolds@whitbread.com
Abigail Cammack, Investor Relations Manager
abigail.cammack@whitbread.com
Sophie Nottage, Investor Relations Manager
sophie.nottage@whitbread.com
Media - Tulchan whitbread@tulchangroup.com
Jessica Reid +44 (0) 20 7353 4200
A webcast for investors and analysts will be made available at
8:15am on 25 April 2023 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.
Chief Executive's Review
Group Results
Premier Inn UK was the key driver behind the Group's strong
financial performance in FY23. Total statutory revenue increased by
27% versus FY20 to GBP2,625m and adjusted operating profit
increased to GBP544m, up 12% versus FY20. This performance reflects
the strength of our brand and operating model as well as our
ability to mitigate inflationary pressures with strong pricing,
estate growth and our continued focus on cost efficiency. An
interest credit from the pension fund surplus and higher interest
receivable on our cash balances, see note 7, resulted in a 15%
increase in adjusted profit before tax to GBP413m (FY22: loss of
GBP16m and FY20: profit of GBP358m). Adjusting items in the period
resulted in a charge of GBP39m, including net impairment charges of
GBP33m, to deliver statutory profit before tax of GBP375m (FY22:
GBP58m and FY20: GBP280m). A tax charge of GBP96m led to a
statutory profit after tax of GBP279m (FY22: GBP43m and FY20:
GBP218m) resulted in an adjusted basic earnings per share of 162.9p
(FY22: (2.5)p and FY20: 166.3p) and a statutory basic earnings per
share of 138.4p (FY22: 21.1p and FY20: 125.3p).
This strong performance generated substantial free cashflow in
the period, funding our continued programme of investment. While
total capital expenditure of GBP546m was GBP285m higher than FY22,
reflecting further investments in our estate, infrastructure and
product, net cash also increased to GBP171m (FY22: GBP141m).
Against this backdrop and with strong current trading and a
positive outlook, the Board is recommending a final dividend of
GBP100m, an increase of 43% versus FY22. The final dividend of
49.8p per share will be paid to eligible shareholders on 7July 2023
and further details can be found in note 11.
Having set out the Group's capital allocation framework at the
time of the half year results in October 2022, the Board has also
announced a GBP300m share buy-back to be completed during the first
half of FY24. The programme will commence on 25 April 2023 and end
no later than 25 October 2023. Further details regarding the
Group's share buy-back can be found in a separate announcement
issued today.
Premier Inn UK - Extending our market leading proposition
Having continued to invest in our estate, teams and
infrastructure during the pandemic, we were well-placed to
capitalise on the uplift in demand once restrictions were lifted.
Total accommodation sales rose by 37% versus FY20, driven by
increased occupancy, higher average room rate ('ARR') and estate
growth. Whilst the performance across the year was evenly spread
between London and the Regions, London revenue performance lagged
the Regions during the first quarter of the year, but quickly
recovered thanks to a rebound in office-based business demand and
ended the year 40% ahead of FY20 while the Regions were 36% ahead
of FY20.
We saw a return to our well-balanced revenue mix of 50% business
and 50% leisure. UK leisure demand remained strong throughout the
year with our leisure guests continuing to travel for a broad range
of reasons including weddings, events and weekend breaks, helping
to drive higher average room rates in the peak leisure periods. UK
business demand was also strong, with both office-based and
tradespeople volumes remaining robust throughout the year,
supported by our own efforts to further improve our business
proposition and relationships with Travel Management Companies
('TMCs').
The strength of our trading performance continues to be driven
by our 'investing to win' strategy that is enabling us to
capitalise on the structural opportunities in the market, increase
revenue and continue to deliver annual cost savings. Further
details on the individual drivers behind this performance are
outlined below:
Structural market opportunities : The accelerated decline in the
independent sector during the pandemic contributed to a 4%
reduction in total hotel supply in the UK. This supply contraction,
in conjunction with strong hotel demand projections, has created an
increased opportunity for Premier Inn as we continue to broaden our
network coverage and strengthen our customer offer.
Scale and estate optimisation : We opened over 1,700 new rooms
across the UK estate in FY23, providing more great quality hotels
in locations where our guests want to stay. We continue to optimise
our estate, opening bigger more-efficient hotels and closing
smaller, less profitable ones, increasing catchment RevPAR and
overall levels of return. At the end of FY23 we had a total of
83,576 rooms across 847 hotels confirming our position as the UK's
largest hotel chain.
Integrated trading and pricing engine : Having designed and
developed our own proprietary, automated trading engine, we are
able to manage our pricing strategies across all of our hotels
centrally, thereby providing a clear view of demand and creating
further opportunities to maximise revenue. Improvements over the
last two years have also meant we can now integrate our pricing
with our digital marketing to help maximise yields across every
hotel, every night of the week.
Best in class operations: Our focus on operational execution has
cemented Premier Inn as the UK's number one hotel brand, synonymous
with high quality and great value. This achievement is thanks to
our 39,000 UK team members who work tirelessly to deliver
outstanding experiences for our guests every day.
Increased consumer choice: By providing more flexible pricing
options, for a modest premium to our standard room rate, our guests
can secure the flexibility they might need when staying at one of
our hotels. Our latest product innovation, Premier Plus, is proving
popular with our guests that are attracted by the additional
in-room benefits for a modest premium to our standard room rate.
The result is a meaningful uplift to RevPAR versus a standard room
in the same hotel and we now have 4,300 Premier Plus rooms across
our estate, up from 2,000 at the end of FY22.
Improved business proposition : The increase in business revenue
in FY23 is in part down to the investments we have made in our
business proposition over the last two years. By establishing more
relationships with TMCs and enhancing the appeal of our Business
Account and Business Booker portal, we have increased the volume of
business guests whilst also driving incremental RevPAR through our
business flex rates.
Each of these factors combined during FY23 to deliver a
consistent outperformance, with total accommodation sales 25.2pp
and RevPAR GBP9.63 ahead of the M&E market, reinforcing our
position as the UK market leader.
F&B remains an important element of the Premier Inn
proposition and also helps drive incremental RevPAR in our hotels.
Whilst the hotel market has recovered strongly, the UK pub
restaurant market remains challenging with the cost-of-living
crisis and high inflationary pressures impacting the recovery in
demand. Although higher levels of hotel occupancy meant that
F&B sales were 40% ahead of FY22, they remained 4% behind FY20.
Despite an increase in spend per head, customer volumes at our
branded restaurants, that are focused at the value-end of the
market, remained below pre-pandemic levels.
While increased occupancy in our hotels, growth in our estate
and increased inflationary pressures drove an increase in total
operating costs, strong revenue growth and high operational gearing
resulted in UK pre-tax profit margins increasing substantially to
be well-ahead of FY22 and only slightly below FY20 levels, at 19.6%
(FY22: 4.5%, FY20: 20.2%). This drove a marked increase in UK ROCE
to 12.9% which is above that achieved in FY20 (FY20: 11.2%).
A challenging F&B trading environment, together with an
increase in market interest rates and a corresponding increase in
the weighted average cost of capital ('WACC'), impacted 13
standalone restaurants and sites where F&B represent a more
significant proportion of total sales. As a result, the Group
incurred an impairment charge of GBP54m. However, this was more
than offset by the reversal of GBP55m of previously recorded
impairments in Premier Inn UK following a strong trading
performance during FY23. The net result was a net impairment
reversal of GBP1m being recorded by Premier Inn UK.
Premier Inn Germany - Aiming to become the No.1 hotel chain
In Germany, pandemic-related restrictions lasted longer than in
the UK and were only lifted during the first quarter of FY23. Once
lifted, the market rebounded strongly with an increasing number of
leisure events, trade fairs and the return of business travel. This
led to a strong trading performance throughout the first half and
into the third quarter with our cohort of 18 established hotels
(those which had been trading for more than 12 months at the start
of FY23) trading in line with the M&E market. Whilst the fourth
quarter is traditionally our lowest occupancy quarter, market
demand was a little softer than expected.
Having executed an ambitious growth strategy over the last three
years, that included two large acquisitions being completed during
the pandemic, most of our hotels traded 'restriction-free' for the
first time in FY23. The pace of our expansion also means that the
majority of our hotels are not yet mature and will take some time
to reach their full profit potential. We are however encouraged by
the performance of our cohort of 18 established hotels, which was
profitable in aggregate in FY23. Given our pace of growth over the
last three years, together with inflationary pressures, operating
costs increased significantly versus FY20 resulting in an adjusted
loss before tax of GBP50m, which was within our previous
guidance.
In order to reach scale as quickly as possible, the Group
acquired a number of hotel portfolios, each comprising of hotels
with a broad range of financial performance. Following an increase
in market discount rates and the pace of our expansion in Germany,
it has been necessary to impair the value of a small number of
hotels resulting in an impairment charge of GBP31m which is
included within adjusting items.
We added 3,167 rooms during the year and now have over 9,000
rooms open in Germany after completing a bolt-on acquisition of six
hotels (900 rooms), including a freehold in Austria, at the end of
FY23. The hotels we acquired will be refurbished and rebranded as
Premier Inn during FY24. We now have almost 7,000 rooms in the
committed pipeline and whilst our brand is not yet well known in
Germany, with 51 hotels now open (including the newly acquired
hotels) and a growing customer base, we are increasing our brand
awareness, leveraging our digital marketing and are starting to
drive greater guest volumes through our business channels.
We have a clear plan and having invested and committed GBP1bn on
our open estate and committed pipeline, we are determined to become
the largest hotel chain in Germany and remain on-track to achieve
our long-term target of between 10-14% return on capital.
Capital allocation and share buy-back
The strength of our balance sheet gives us the confidence to
continue to invest and seize opportunities which meet our strict
investment criteria. Total capital expenditure was GBP546m (FY22:
GBP261m) and included three freehold purchases and other
expansionary capex totalling GBP362m. Non-expansionary capex of
GBP184m included the planned replacement of 25,000 new beds across
our UK estate, our ongoing refurbishment programme and a number of
ongoing IT projects including the upgrade to our hotel management
system. Our strong operating cashflow meant that, despite the
increased level of investment year-on-year, net cash increased to
GBP171m (FY22: GBP141m) and cash and cash equivalents were
GBP1,165m. Having added over 4,200 additional leasehold rooms
during FY23 across the UK and Germany, lease liabilities increased
to GBP3,958m and our ratio of funds from operations ('FFO') to
lease adjusted net debt was 2.7x and within our target leverage
threshold of 3.7x.
At the time of our interim results in October 2022 and having
reconfirmed our investment grade status, we set out our framework
for capital allocation, outlining our key priorities over the next
few years, based upon future profit and cash generation under a
range of potential scenarios. These priorities include:
-- maintaining our investment grade status by operating within our leverage target;
-- continuing to fund our ongoing capital expenditure
requirements and investing through the cycle;
-- selective freehold acquisitions and M&A opportunities that meet our return thresholds;
-- growing dividends in line with earnings; and
-- returning excess capital to shareholders dependent on outlook and market conditions.
Having applied the framework at the year-end as planned, and
underlining our confidence in the outlook, we have announced an
initial GBP300m share buy-back to be completed during the first
half of FY24. Future returns will be subject to the Group's
financial performance, outlook and the availability of alternative,
more value-enhancing opportunities.
Our teams
Our teams are at the heart of our business. They deliver
outstanding experiences for our guests and are key to our excellent
operational and financial performance, underpinning our position as
the UK's number one hotel brand. With record levels of occupancy,
our teams have been working harder than ever to ensure we continue
to deliver a consistent, high-quality experience for our
guests.
We remain committed to supporting our people and safeguarding
their mental, physical and financial wellbeing in addition to
helping them develop their careers. Recognising the impact of the
challenging macroeconomic environment and cost-of-living crisis, we
continued to invest in team member pay, reward, development and
wellbeing, helping to support our teams during this difficult time.
In return, we have seen high levels of engagement, an increase in
average tenure and a sustained quality experience for our guests.
We are delighted to have been recognised as a 'Top Employer' from
the Top Employers Institute for the thirteenth consecutive year,
which is a testament to our efforts and the strength of our
business culture.
Business strategy
Our strategy is focused on driving the performance of our hotels
and restaurants whist working with our stakeholders to ensure we
are driving positive change through our Force for Good
sustainability programme. Our vertically integrated business model
and strong balance sheet underpin the three pillars of our business
strategy:
-- continuing to grow and innovate in the UK;
-- focus on our strengths to grow in Germany; and
-- enhancing our capabilities to support long-term growth .
Excluding the pandemic, we have a strong track record of
delivering consistent rates of return for shareholders on our
growing capital base, whilst continuing to deliver a high-quality
proposition at a great price for our guests. As we look forward
into FY24, we plan to continue to execute each of these three
strategic pillars as summarised below.
1. Continuing to grow and innovate in the UK
Our UK strategy is focused on growing and strengthening our
position as the nation's number one hotel brand, delivering a
consistent, high-quality and great value proposition for our guests
whilst maximising returns for shareholders. With an estimated 162m
room nights, the UK remains a large and important market for the
Group and has significant scope for future growth. The independent
hotel sector declined substantially during the pandemic, but still
represents approximately 45% of the UK market. We believe that
operational challenges created by labour shortages and cost
inflation may put further pressures on the independent sector,
creating structural growth opportunities for Premier Inn across the
UK. The budget branded hotel sector has consistently delivered
attractive rates of room growth and has also proven its resilience
during economic downturns, as guests trade down to lower cost
alternatives.
Our plans for the coming year include the execution of the
following initiatives:
-- Expand and optimise our estate : We currently have over
83,500 rooms with a further 7,400 in our committed pipeline. The
reduction in hotel supply, combined with projected strong demand
for hotels has created an opportunity to increase our UK and
Ireland footprint from 110,000 to 125,000 rooms. The pace and
extent of expansion will be driven by the levels of financial
return available, drawing upon our suite of potential development
options including new builds, conversions, single-site acquisitions
and extensions. We will also continue to optimise our estate by
repurposing, selling or exiting underperforming properties.
-- Effective marketing and dynamic pricing improvements: With
less than 1% of our bookings delivered through third party online
travel agents ('OTAs'), our direct distribution model provides
complete ownership of the customer relationship and lowers
acquisition and retention costs. Our brand marketing, including our
latest 'Rest Easy' campaign, is a powerful tool in driving
bookings, reducing customer acquisition costs and sustaining our
market-leading brand awareness scores. Our automated trading engine
benefits from a continuous process of improvement and uses
predictive algorithms to accurately forecast and price demand,
deploying digital marketing spend only where it can drive
incremental volume or higher room rates.
-- Increase consumer choice through product and pricing
innovation : The latest iteration of our standard Premier Inn room
(ID5) is in test and is already achieving higher guest scores than
our previous standard room type. It is also expected to deliver
operational savings when it is rolled out during FY24. We have
launched our 'bed of the future' in partnership with Silentnight
and are on course to replace 89,000 beds by the end of FY24. We are
also introducing more Premier Plus rooms and twin rooms, broadening
our appeal and attracting a premium to our standard room rate. We
offer a broad range of value and flexibility through our different
pricing options that are proving popular with our guests. As we
look forward, we believe that each of these exciting innovations
will drive higher ARRs and enhance our reputation for choice,
quality and value so that we stay ahead of the market.
-- Further improve our business proposition : We are determined
to attract more business customers who tend to drive higher RevPAR
and travel more frequently than leisure guests. Having grown our
Business Booker and Business Account programmes substantially over
the past few years, we plan to drive revenues further through
website improvements and by integrating both programmes into a
single offering for the benefit of users. We have established good
relationships with a number of TMCs over the past few years and
these are continuing to drive incremental booking volumes that
represented 8% of accommodation sales in FY23.
-- Driving F&B: All of our UK hotels have a bar and
restaurant, either within the hotel or located next door. Our
F&B offer is central to our overall customer offering, helping
drive higher RevPAR in our hotels and generating additional revenue
from non-hotel guests. Whilst we have continued to try and improve
the revenue performance of F&B over the past couple of years,
revenues are not yet back to pre-pandemic levels. We will continue
to work on improving our F&B performance to get us back on
track. Initiatives include: new menus, brand-led initiatives
focusing on key events and further procurement improvements - all
driven by market research and customer feedback.
2. Focus on our strengths to grow in Germany
Our ambition is to become the market leader in Germany,
replicate our UK model and create substantial value. We have
committed GBP1bn of capital to date and expect to deliver long-term
return on capital between 10-14%. The German hotel market today is
very similar to where the UK was 15 years ago: it is highly
fragmented, with a large independent hotel sector, a relatively
small, branded budget hotel segment and high volumes of domestic
and inbound travel. The market re-opened fully following the
pandemic during the first quarter of FY23 and rebounded strongly
during the first three quarters, albeit with a softer market
performance during the seasonally quiet fourth quarter.
Our estate now stands at 51 hotels, with over 9,000 rooms open
and a further 7,000 rooms in the committed pipeline. With our
continued planned expansion, we are determined to become the
largest budget hotel brand in Germany. We plan to grow our estate
through organic growth and bolt-on M&A, with our latest
acquisition of six hotels, including a freehold in Austria, having
completed at the end of FY23.
Whilst we are not yet at our target levels of return, we remain
on-track with our plan and are making good progress towards
becoming a business of scale. As our German network expands, we are
raising our brand awareness through digital marketing and other
promotional campaigns and channels. With a high number of
international trade fairs and a large, short-stay domestic business
travel market, we are focused on improving our business proposition
and have established a network of local sales managers to help
build and secure relationships with corporates whilst also
promoting our Business Booker and Business Account programmes. We
are continuing to refine our operating model as well as tailor our
customer offer for localised preferences such as modified breakfast
menus and new payment methods. We are also trialling several new
products which have been successful in our UK hotels including
Premier Plus, additional pricing options and our new standard room
format (ID5) to help drive revenue growth.
The trajectory of our cohort of 18 established hotels underpins
our confidence in replicating our UK model. This cohort of hotels
was profitable in aggregate in FY23 and we remain on-course for our
entire estate to breakeven on a run-rate basis during calendar year
2024. Having increased the size of our estate rapidly, through both
organic growth and acquisitions, we are building a scalable
platform in Germany from which we plan to grow further.
3. Enhancing our capabilities to support long term growth
In order to safeguard the execution of the first two pillars of
our strategy, we need to continue to invest in our infrastructure
and core capabilities. Over many decades, we have developed a lean,
financially strong and resilient operating model. Whilst this
requires ongoing investment, it also continues to deliver
attractive long-term returns. Given our scale and asset-backed
balance sheet, we have the financial flexibility to continue to
invest in our teams and systems, extract further cost efficiencies
and ensure we remain a Force for Good by continuing to conduct
business in the right way.
Financial flexibility: The Group's balance sheet is strong, with
net cash of GBP171m at the end of FY23. This means we can continue
to invest with confidence, even during periods of heightened
macroeconomic uncertainty. Having reaffirmed our investment grade
status during 2022, the strength of our financial covenant makes us
a highly attractive partner when being considered for leasehold and
other transactions, both in the UK and Germany. Our financial
strength and significant cash flow mean we can self-fund our
capital expenditure programme that is integral to our 'investing to
win' strategy. It also means we can grow dividends in line with
earnings and return excess capital to shareholders. Having the
flexibility to purchase attractive freeholds and execute bolt-on
M&A in Germany without the need for external financing is a
competitive advantage and underpins our long-term growth plans. Our
capital discipline and rigorous investment appraisal process
ensures an efficient allocation of capital to drive attractive
long-term returns.
Freehold backing : Approximately 54% of the Group's hotels are
freehold with the remaining 46% operated as leaseholds. Whilst this
mix of assets differentiates the Group from many of its
competitors, such a significant freehold estate also provides us
with a number of operational and financial advantages:
-- total control over the initial development of the hotel as
well as all maintenance and redevelopment;
-- access to development profits through sale and leasebacks;
-- a strong financial covenant, helping to secure more
favourable lease terms with landlords and attractive financing
terms with lenders;
-- protection from increasing property costs and therefore lower
earnings volatility during economic downturns; and
-- an additional and flexible source of funding, one that can
often be available at more attractive rates than other sources of
finance.
Being flexible between freehold or leasehold when approaching
new property opportunities improves our prospects of securing the
best assets in the best locations. It also means we can optimise
the size and format of our assets in order to maximise returns.
Technology : We continue to invest in our IT platforms and
infrastructure, enhancing our digital capability, driving
additional revenue growth and cost savings opportunities. During
the second half of FY24, we will start to roll-out our upgraded
hotel management system in both the UK and Germany as well as begin
the process of improving our digital networks and HR system. These
multi-year projects are ongoing and are expected to release
operational and financial benefits in the future.
Lean and agile cost model: We have a long track record of
delivering material cost efficiencies. Our teams continue to seek
new and alternative ways of working to both improve the service to
our guests and drive savings through procurement and process
improvements. With heightened inflationary pressures, such
initiatives are more important than ever, and we remain on-track to
meet our previous commitment to deliver GBP140m of savings between
FY22 and FY25.
Operating responsibly and sustainably: Our scale and national
coverage mean we have a significant presence across the UK and a
growing presence in Germany. Recognising our responsibilities in
those communities where we have a presence, our long-established
Force for Good sustainability programme continues to drive our
social and environmental agenda. Stretching targets are embedded
within our overall business strategy and hold us accountable for
the change we seek to implement, whether that is reducing our
environmental footprint, supporting our team members or
contributing to our communities.
Current Trading - seven weeks to 20 April 2023
UK trading has remained buoyant with strong demand in both
London and the Regions. Total UK sales were 17% ahead of the same
period last year, with a RevPAR of GBP60.98 and representing a
continued RevPAR outperformance versus the wider M&E market(1)
of GBP6.08. Occupancy in the period was 81% and average room rate
was GBP74.94.
Total UK food and beverage sales were up 10% vs the same period
in FY23, reflecting softer trading in the base year as well as a
number of commercial initiatives put in place since the start of
the year.
In Germany, demand has picked up steadily during the first
quarter helped by a number of trade fairs and rising business and
leisure volumes. Total accommodation sales were 140% ahead of the
same period in FY23 and RevPAR was EUR47.94 with occupancy at 61%.
RevPAR for our cohort of 18 established hotels was EUR56.47, which
continues to be in line with the M&E market(2) .
1: STR data, standard basis, 3 March 2023 to 13 April 2023,
M&E market excludes Premier Inn
2: STR data, standard basis, 3 March 2023 to 13 April 2023,
M&E market includes Premier Inn
Outlook and FY24 Guidance
Despite ongoing macroeconomic uncertainty, with strong current
trading, a healthy balance sheet, significant structural
opportunities in both the UK and German M&E hotel markets and
an ongoing programme of cost efficiencies, we remain confident in
the outlook for FY24.
As FY23 was a full trading period which was largely unaffected
by pandemic-related restrictions, we are returning to providing
year-on-year guidance. A summary of our guidance for FY24 is
detailed below.
UK
-- Sales: every 1% change in accommodation sales vs FY23 has a
GBP15m - GBP16m impact on profit before tax and every 1% change in
F&B sales vs FY23 has a GBP4m impact on profit before tax
-- Inflation: year-on-year net inflation is expected to be
between 7-8% (no change to our guidance at the time of our Q3
trading update), including labour, F&B and utilities which are
now 100% hedged for FY24, mitigated by a positive movement in
business rates
-- New rooms: 1,500 - 2,000 (c.90% leasehold)
Germany
-- Expect a loss before tax in FY24 between GBP20m and GBP30m
with an additional GBP10m adverse profit before tax impact relating
to the refurbishment of the c.900 rooms acquired at the end of
FY23
-- New rooms: 1,000 - 1,500 (c.70% leasehold)
Central and other costs
-- Interest on cash balances in line with Bank of England rates
Cashflow
-- Total capex: GBP400-GBP450m - depending on future M&A
opportunities and leasehold/freehold mix
A Force for Good
Being a Force for Good is vital to the sustainable and long-term
growth of our business. This is why our sustainability programme is
embedded across all business functions, ensuring that responsible
business practices are integrated into our operations. We have set
some stretching targets and while our programme is broad, it is
based on robust materiality analysis and focuses on our commitment
to enable everyone to live and work well and to look after the
environment and resources on which we, and our business depend.
Our Force for Good programme is central to our business culture
and provided a strong foundation as we exited the pandemic and
moved back into revenue growth. With an ever-increasing focus and
more stringent regulatory demands, we are proud to have moved
forward on many of our sustainability objectives and to have set
new targets to address our material issues.
Last year we committed to obtaining SBTi accreditation and this
year both short-term, and long-term, targets for Scopes 1, 2 and 3
have been submitted and are undergoing review. We hope to receive
validation early in FY24. In the meantime, we have been making good
progress against all of our carbon targets and we will soon publish
our first Transition Plan. This is in line with the Transition Plan
Taskforce guidance and presents our action plan for how we will get
to net zero carbon over the coming years. Trials undertaken over
the last year relating to the electrification of our estate have
gone well and we are continuing at pace with our first gasless
hotel in Swindon. We continue to build new hotels to the BREEAM
Excellent standard and have also begun working on our turnkey
specification, with the aim that all new hotels will be built to
this gasless standard. These are all important steps towards our
net zero goal and we will continue our work this year by
undertaking site 'net zero ready' audits and testing new technology
to start to move the existing estate away from gas through
refurbishments. We ended the year with a carbon intensity figure of
52.5% against our baseline year of FY17.
Our latest TCFD report, together with the 2023 Annual Report,
outlines the most material risks and opportunities for our business
in relation to climate change. We have once again worked through
the scenario analysis and quantification process, assessing which
risks and opportunities have the potential for the highest
financial cost or gain. This helps to ensure that climate change is
considered in our financial decisions. We are also currently
analysing the best approach to setting an internal carbon target to
strengthen the linkage between financial planning and climate
impact. Our approach to green finance is illustrated by the use of
our Green Bond proceeds, with GBP504m having now been allocated
over the last two years on green projects across the business. We
plan to allocate the remaining proceeds during the coming financial
year.
Carbon in our supply chain has also been an area of focus.
Having set our Scope 3 reduction target, we have worked with our
suppliers to understand where they are on their emission reduction
journey. We have started to work on some of the most material
categories as a priority, such as F&B and Construction. We
recalculated our Scope 3 emissions this year for the first time
since the base year of FY19 and results show that we have reduced
our carbon emissions intensity by 28.1% since the base year. We
will be working on developing specific supply chain strategies for
our highest emitting categories in the coming year.
During the past year we have been working on a new target to
reduce our environmental impact by setting a water reduction target
to both minimise water usage across our estate and to prioritise
water management in high-risk areas. This new target is to reduce
water usage by 20% per sleeper by 2030. We have also been working
through the initial guidelines from the Taskforce on Nature-related
Financial Disclosures ('TNFD') to begin setting our biodiversity
strategy and understand what our company-wide target should be,
aligning with a nature positive approach. We plan to provide an
update on this during FY24.
Our commitment to cut food waste in half by 2030 and to
eliminate single-use plastics by 2025 remain challenging. The
impact of the pandemic on our food waste has been material and as
we return to more normalised figures post-pandemic, our food waste
has reduced by 12% from our baseline year. We have continued our
partnership with FareShare to donate food to charity partners and
in FY24 we will adopt a renewed focus on strategic food waste
reduction with our team members, suppliers and waste service
provider to identify potential routes for further waste reduction.
With single use plastics, through collaboration and engagement with
wider industry groups, it has become clear that elimination targets
are difficult to meet. We have been working hard on our target and
have further defined our scope to align with the UK Plastics Pact,
focusing in on the shared 'problematic' plastics and prioritising
the elimination of them as we continue to tackle the wider
challenge of capturing data for single use plastic across the
global value chain.
Having raised nearly GBP22m for Great Ormond Street Hospital
('GOSH') over the past 12 years, we have reset our commitment to
continue to fundraise for the charity and set new fundraising
targets of GBP3m per year with an overarching total of GBP20m. We
are excited to start this new phase in our partnership with GOSH as
we continue to help them to raise money to support some of the most
seriously ill children across the UK.
We also look to support those in need on an ad hoc basis. For
example, during a new bedding roll out, we partnered with a charity
partner to send over 50,000 duvets and pillows to those displaced
by the war in Ukraine. This is in addition to the GBP688,000 that
we raised for DEC ('Disaster Emergency Committee') at the beginning
of the year.
Having conducted a survey to monitor team member engagement
across Operations and Support Centre, we received a 79% positive
response to 'recommend this as a place to work'. We are pleased
that so many of our team members feel this way as we strive to
ensure they are listened to, developed in their career paths and
are part of a diverse and inclusive community.
We continue to make good progress on bringing to life our eight
Diversity and Inclusion commitments across Whitbread. We are
on-track to meet our female representation target, with 40% of
senior leadership positions already held by women and are working
towards our target to have 8% ethnic minority representation. Our
four inclusion networks, enAble (disability), Gender Equality, GLOW
(LGBTQ+) and Race, Religion and Cultural Heritage are now all
well-established, and, alongside providing a community for our
teams, are taking an active role consulting with our teams on
initiatives such as: listening with our Black colleagues to further
understand their experience of working for Whitbread; consulting on
our new accessible rooms concept (supported by the Business
Disability Forum); and launching a new workplace adjustments policy
and process.
We celebrated several cultural events during FY23 to support our
communities and provide education to our teams. Our Pride
celebrations were a particular highlight, where our sites got
involved and GLOW participated in the Manchester Pride march in
August 2022 with participation from our teams from across the UK
and Germany. Representation is important to us and we continue to
be guided by our 2023 and 2026 representation targets on gender and
ethnicity. Our recently released 2022 Gender and Ethnicity Pay Gap
report demonstrates the action we are continuing to take as an
organisation on this important issue.
We believe that our sustainability credentials set us apart from
many of our peers and so have been working to share more of what we
do with our team members, shareholders and customers. We have
started to embed ESG messages into our brand and marketing
strategies (consumer and B2B), using in-site activations and
through our 'Rest Easy' marketing campaign. This is an ongoing
process and one that we will continue during FY24. We actively
engage with our key stakeholders and are pleased to report our
sustainability ratings with MSCI (AA) and Sustainalytics (medium
risk). We were also placed in the Dow Jones Sustainability Index
and in the Corporate Sustainability Assessment Yearbook, a
reflection of the work that we are doing in this space and scored B
in both the Carbon Disclosure Project's climate change and water
disclosures this year. It is through these activities that we are
able to drive meaningful change with the overall aim of enabling
people to live and work well.
For further information on our Force for Good programme, please
see our most recent ESG Report:
https://www.whitbread.co.uk/sustainability/our-strategy-targets/
.
Business Review | Strong outperformance driving margin
recovery
Premier Inn UK(1)
GBPm FY23 FY22 FY20 vs FY22 vs FY20
============================================ ========= =========== =========== ============ ========
Statutory Revenue 2,508 1,668 2,050 50% 22%
Other income (excl rental income)(2) 5 70 14 (93)% (65)%
Operating costs before depreciation,
amortisation & rent (1,595) (1,249) (1,270) (28)% (26)%
========= =========== =========== ============ ========
Adjusted EBITDAR 918 490 794 87% 16%
Net turnover rent and rental
income 1 4 2 (77)% (57)%
Depreciation: Right-of-use
asset (134) (125) (103) (7)% (30)%
Depreciation and amortisation:
Other (169) (169) (163) 0% (3)%
========= =========== =========== ============ ========
Adjusted operating profit 617 200 529 209% 17%
Interest: Lease liability (125) (125) (115) 0% (9)%
Adjusted profit before tax 492 75 414 557% 19%
============================================ ========= =========== =========== ============ ========
PBT Margins 19.6% 4.5% 20.2% 1,510bps (60)bps
============================================ ========= =========== =========== ============ ========
ROCE 12.9% 2.3% 11.2% 1,060bps 170bps
============================================ ========= =========== =========== ============ ========
Premier Inn UK(1) key performance indicators
FY23 FY22 FY20 vs FY22 vs FY20
============================================ ========= =========== =========== ============ ========
Number of hotels 847 841 820 1% 3%
Number of rooms 83,576 82,286 78,547 2% 6%
Committed pipeline (rooms) 7,425 8,332 13,011 (11)% (43)%
============================================ ========= =========== =========== ============ ========
Occupancy 82.7% 68.3% 76.3% >1,000bps 640bps
Average room rate GBP71.84 GBP56.67 GBP61.50 27% 17%
Revenue per available room GBP59.45 GBP38.69 GBP46.91 54% 27%
============================================ ========= =========== =========== ============ ========
Sales growth(3) :
Accommodation 37%
Food & beverage (4)%
Total 22%
Like-for-like sales(3) growth:
Accommodation 27%
Food & beverage (7)%
Total 14%
============================================ ========= =========== =========== ============ ========
1: Includes one site in each of: Guernsey and the Isle of Man
and two sites in each of: Jersey and Ireland
2: FY22 includes Government support - see note 8 of the
accompanying financial statements for further details
3: Total and like-for-like on a three-year basis versus FY20
The impact of the pandemic on the FY22 results meant that the
FY23 comparative performance was stronger than versus FY20. Total
statutory revenue was 22% ahead of FY20, driven by the strength of
our UK hotel performance. UK accommodation sales were 37% ahead of
FY20, driven by a 640bps increase in occupancy and 17% increase in
average room rates as well as the addition of over 6,000 rooms to
our estate. Factors behind our strong performance included external
drivers such as strong consumer demand, a reduced level of supply
and a robust pricing environment.
While these factors benefited the M&E sector as a whole,
Premier Inn remained well-ahead of the M&E market throughout
the period thanks to the inherent strengths of our vertically
integrated business model, direct distribution, market-leading
position and the execution of several commercial initiatives.
UK performance vs M&E market
Q1 Q2 Q3 Q4
FY23 FY23 FY23 FY23 FY23
========================================== ======== =========== ======== ======== =========
PI Accommodation sales performance +25.6 +25.0 + 23.9 + 26.9 + 25.2
(vs FY20) (1) pp pp pp pp pp
-------- ----------- -------- -------- ---------
PI Occupancy performance (vs 11.6pp 10.9pp 9.9pp 10.7pp 10.7pp
FY20) (1)
-------- ----------- -------- -------- ---------
PI ARR performance (vs FY20) (2.6)pp (2.7)pp (1.9)pp (3.6)pp (2.8)pp
(1)
-------- ----------- -------- -------- ---------
PI RevPAR performance (absolute) GBP9.90 GBP10.50 GBP9.70 GBP8.48 GBP9.63
(1)
-------- ----------- -------- -------- ---------
PI Market share (2) 9.5% 8.8% 8.7% 8.9% 8.9%
-------- ----------- -------- -------- ---------
PI Market share gains pp (vs 2.0pp 1.7pp 1.5pp 1.8pp 1.7pp
FY20) (2)
========================================== ======== =========== ======== ======== =========
1: STR data, full inventory basis, Premier Inn accommodation
revenue, occupancy, ARR and RevPAR 4 March 2022 to 2 March 2023,
M&E market excludes Premier Inn
2: STR data, revenue share of total UK market, 4 March 2022 to 2
March 2023
F&B sales were well-ahead of FY22, driven by the commercial
initiatives we implemented during the year and the market recovery
following the pandemic. Despite this recovery and the benefits of
high hotel occupancy and a number of commercial initiatives helping
to drive F&B sales, the value pub restaurant sector remains
challenging with the result that overall F&B sales were 4%
behind pre-pandemic levels.
Other income of GBP5m related to a provision release following
the completion of an HMRC review of the Group's COVID-related
support claims, for further information see note 8. Whilst in FY22,
other income of GBP70m included GBP62m benefit from the Coronavirus
Job Retention Scheme and GBP8m benefit from other COVID-related
grants, no claims for COVID-related Government support were made in
FY23.
Operating costs of GBP1,595m were 28% higher than FY22 driven by
increased occupancy across a higher number of rooms, higher
inflation, the absence of any benefit received in relation to the
Government's business rates holiday (FY22: GBP56m) and after the
benefit of our ongoing cost efficiency programme. EBITDAR margins
recovered strongly to 37% (FY22: 29%) and total EBITDAR increased
to GBP918m which was 16% above pre-pandemic levels. Right-of-use
asset depreciation was GBP134m and lease liability interest was
GBP125m reflecting the addition of net 1,495 more leasehold rooms
during the year. A total of ten new hotels and an extension added
1,722 new rooms while four hotels totalling 432 rooms were closed
as the Group continues to optimise its estate when suitable
opportunities arise. At the end of the year, the UK and Ireland
estate stood at 847 hotels with a total of 83,576 rooms and a
committed pipeline of 7,425 rooms.
The increase in EBITDAR meant that adjusted profit before tax
increased to GBP492m, significantly ahead of FY22 and 19% ahead of
FY20. Despite the challenge of sector-wide inflationary pressures,
pre-tax profit margins reached 19.6% which was a marked increase
from FY22 and almost back to the 20.2% achieved in FY20.
The strong profit performance coupled with our disciplined
approach to capital allocation fed through into a marked recovery
in ROCE that was 12.9% for the year, up from 2.3% in FY22 and 11.2%
in FY20.
Premier Inn Germany(1)
GBPm FY23 FY22 FY20 vs FY22 vs FY20
====================================== ========= ========= ========= ========= ==============
Statutory revenue 118 35 12 234% 896%
Other income (excl. rental
income)(2) 0 44 0 (100)% (33)%
Operating costs before
depreciation, amortisation
and rent (110) (66) (24) (68)% (362)%
========= ========= ========= ========= ==============
Adjusted EBITDAR 7 14 (12) 46% 163%
Net turnover rent and rental
income 0 4 1 (97)% (88)%
Depreciation: Right-of-use
asset (32) (23) (1) (41)% >(1,000)%
Depreciation and amortisation:
Other (11) (10) (2) (13)% (600)%
========= ========= ========= ========= ==============
Adjusted operating loss (36) (15) (13) (133)% (168)%
Interest: Lease liability (14) (9) (0) (62)% >(1,000)%
========= ========= ========= ========= ==============
Adjusted loss before tax (50) (24) (14) (108)% (265)%
====================================== ========= ========= ========= ========= ==============
Premier Inn Germany(1) key performance indicators
==================================================================================================
FY23 FY22 FY20 vs FY22 vs FY20
========= ========= ========= ========= ==============
Number of hotels 51 35 6 46% 750%
Number of rooms 9,042 5,875 1,085 54% 733%
Committed pipeline (rooms) 6,907 8,454 8,709 (18)% (21)%
====================================== ========= ========= ========= ========= ==============
Occupancy 59.4% 40.7% 58.3% 1,870bps 110bps
Average room rate GBP62.36 GBP40.53 GBP69.47 54% (10)%
Revenue per available room GBP37.04 GBP16.49 GBP40.53 125% (9)%
====================================== ========= ========= ========= ========= ==============
Sales growth(3) :
Accommodation 924%
Food & beverage 738%
Total 892%
Like-for-like sales(3)
growth:
Accommodation 32%
Food & beverage 13%
Total 29%
====================================== ========= ========= ========= ========= ==============
1: Includes one site in Austria
2: FY22 includes Government support - see note 6 of the
accompanying financial statements for further details
3: Total and like-for-like on a three-year basis versus FY20
Pandemic-related restrictions were finally lifted during the
first quarter which prompted an uplift in leisure demand throughout
the summer months. This continued into the third quarter with
leisure demand remaining buoyant, supported by a high number of
leisure events, as well as a rebound in business travel including
the return of a number of large international trade fairs. Despite
the popularity of Christmas markets in a number of German cities,
market demand in the seasonally quiet fourth quarter was softer
than expected. The net result was that total statutory revenue
increased by 234% versus FY22 and given the increase in the size of
our estate, was significantly ahead of FY20.
Other income was significantly less than last year, with no
claims being made for COVID-related Government support in FY23
(FY22: GBP44m).
Operating costs increased by GBP44m versus FY22 reflecting the
continued growth in our estate and inflationary pressures. We made
good progress on continuing to refine our operating model and
tailor our customer proposition. We also continued to drive cost
efficiencies without compromising our ability to drive revenue
growth. The addition of 2,706 new leasehold rooms to the estate
meant that right-of-use-asset depreciation increased by 41% to
GBP32m and lease liability interest increased by 63% to GBP14m.
During the year we opened ten hotels and acquired six hotels
including a freehold hotel in Austria, ending the period with 51
hotels and 9,042 rooms open.
With the softer than expected market demand in the fourth
quarter, the adjusted loss before tax of GBP50m was towards the
upper end of our previous guidance. Whilst the overall result is
heavily influenced by our pace of opening and the fact that most of
our hotels are not yet mature, we remain encouraged by the
performance of our cohort of 18 established hotels, which became
profitable in aggregate during the year.
Central and other costs
GBPm FY23 FY22 FY20 vs FY22 vs FY20
============================================ ===== ===== ===== ======== ==========
Operating costs before depreciation,
amortisation and rent (40) (31) (27) (26)% (46)%
Share of loss from joint ventures 2 0 (2) 475% 210%
Adjusted operating loss (37) (31) (29) (20)% (27)%
Net finance costs 9 (36) (13) 124% 165%
Adjusted loss before tax (29) (67) (42) 57% 33%
============================================ ===== ===== ===== ======== ==========
Central operating costs of GBP40m were 26% higher than FY22 and
46% higher than FY20 reflecting consultancy fees, staff-related
costs and project costs. Higher interest rates prompted a marked
increase in interest receivable on the Group's cash balances which,
together with IAS 19 pension finance income of GBP14m (FY22:
GBP4m), resulted in a net finance benefit of GBP9m (FY22: charge of
GBP36m).
Financial review
Financial highlights
GBPm FY23 FY22 FY20 vs FY22 vs FY20
FY22 FY20
============================================ ======== ======== ======== ========== =========
Statutory revenue 2,625 1,703 2,072 54% 27%
Transitional service agreement
revenue - - 9 0% (100)%
Adjusted revenue 2,625 1,703 2,062 54% 27%
Other income (excl rental
income)(1) 5 115 14 (96)% (65)%
Operating costs before depreciation,
amortisation and rent (1,742) (1,345) (1,323) (30)% (32)%
Adjusted EBITDAR 888 473 753 88% 18%
Net turnover rent and rental
income 1 8 3 (87)% (66)%
Depreciation: Right-of-use
asset (166) (148) (104) (12)% (59)%
Depreciation and amortisation:
Other (180) (179) (165) (0)% (9)%
Adjusted operating profit 544 153 487 255% 12%
Net finance costs (excl.
lease liability interest) 9 (36) (13) (124)% (165)%
Interest: Lease liability (139) (133) (115) (4)% (20)%
Adjusted profit / (loss)
before tax 413 (16) 358 >(1,000)% 15%
Adjusting items (39) 74 (78) (152)% (51)%
Statutory profit before
tax 375 58 280 544% 34%
Tax expense (96) (16) (62) (512)% (55)%
Statutory profit after
tax 279 43 218 556% 28%
============================================ ======== ======== ======== ========== =========
1: Includes UK and German Government support received in FY22
(GBPnil Government support was received in FY23) - see note 8 of
the accompanying financial statements for further details.
Statutory revenue
Statutory revenues were up 54% compared to FY22 and 27% ahead of
FY20 driven by our continued estate growth and the continued
outperformance by our UK hotels of the wider M&E market.
Adjusted EBITDAR
Other income was GBP5m in FY23 (FY22: GBP115m), as the Group
made no claims for any COVID-related support in the UK or in
Germany (FY22: GBP114m). Operating costs were 30% higher than FY22,
driven by an increase in revenue-related variable costs as a result
of higher occupancy, estate growth, cost inflation and no benefit
being received relating to the UK Government's business rates
holiday (FY22: GBP56m credit). Adjusted EBITDAR was GBP888m, up 88%
versus FY22 reflecting strong trading in the UK and the lifting of
pandemic-related restrictions.
Adjusted operating profit
The leasehold estate in the UK grew by net 1,495 rooms and in
Germany by 2,706 rooms resulting in a 12% increase in right-of-use
asset depreciation charges to GBP166m. Other depreciation and
amortisation charges were in line with FY22. The strength of our UK
trading performance meant that adjusted operating profit increased
to GBP544m, significantly ahead of FY22 and 12% ahead of FY20, even
after increased operating losses in Germany of GBP36m (FY22: GBP15m
loss).
Net finance costs
Higher interest receivable on the Group's cash balances and an
interest credit of GBP14m on the pension fund surplus resulted in a
net finance credit (excluding lease liability interest) of GBP9m
(FY22: charge of GBP36m). Lease liability interest of GBP139m was
marginally ahead of FY22 reflecting the growth in our leasehold
estate in the UK and Germany.
Adjusting items
Total adjusting items resulted in a GBP39m charge (FY22: credit
of GBP74m) and include GBP33m of net property impairment charges
(FY22: GBP36m net impairment credit), GBP14m of technology-related
project costs, GBP4m profit from property disposals (FY22: GBP33m
credit) and other adjusting items credits of GBP5m (FY22: GBP5m
credit).
Rising interest rates have driven higher discount rates and
increased levels of impairment in both the UK and Germany. Gross
impairment losses of GBP46m in the UK impacted 13 standalone
restaurants and those sites where F&B revenues represent a more
significant proportion of total sales. The consequential increase
in the WACC resulted in further impairments of GBP9m which were
offset by impairment reversals of GBP55m as a number of previously
impaired sites returned to more normal levels of trading. The
result was a total net impairment reversal of GBP1m being recorded
in the UK. In Germany, the increase in market discount rates and
the pace of our expansion resulted in a GBP31m impairment charge
relating to a small number of hotels.
During the year, the Group has assessed the presentation of
costs incurred in relation to the current and future implementation
of strategic IT programmes. The programmes currently scheduled
include upgrades to the Group's hotel management system and HR
& payroll system. These represent significant business change
costs for the Group rather than replacements of IT systems, with
the system products being Software as a Service ('SaaS'). The start
date of these projects varies and as such we expect costs to be
incurred within this category over the next few financial years,
with their strategic benefit seen as lasting multiple years. The
Group incurred GBP14m costs in FY23 and expects to incur costs
presented within adjusting items across future financial years as
follows: FY24: GBP15m to GBP25m; FY25: GBP5m to GBP15m; and FY26:
GBP0m to GBP5m.
On 7 March 2022, the Group disposed of a property in Marylebone
as part of a property transaction, receiving gross proceeds of
GBP46m. A profit of GBP1m was recognised on disposal of the
property. During the period, the Group has recorded aggregate
profits on other property disposals of GBP3m.
Other adjusting items include a settlement of GBP5m in relation
to a legal claim.
Taxation
The tax charge of GBP85m on the profit before adjusting items
(FY22: GBP11m credit) represents an effective tax rate on the
profit before adjusting items of 21% (FY22: 68%). This is higher
than the UK statutory corporate tax rate of 19%, primarily due to
the impact of overseas tax losses for which no deferred tax has
been recognised, partially offset by the impact of the super
deduction tax relief.
The statutory tax charge for the period of GBP96m (FY22: GBP16m
charge) represents an effective tax rate of 26% (FY22: 27%). This
effective tax rate is driven by the impact of overseas losses not
yet being recognised as well as the tax impact of certain adjusting
items, primarily relating to the effect of the in-year UK rate
differential and gains on property disposals, partially offset by
the impact of the super deduction tax relief.
Statutory profit after tax
Statutory profit after tax for the year was GBP279m, compared to
a profit of GBP43m in FY22, which was impacted by COVID-related
restrictions in the UK and Germany.
Earnings per share
FY23 FY22 FY20(1) vs FY22 vs FY20
=============================== ========= ======= ======== ======== ========
Adjusted basic earnings per >1,000 (2)
share 162.9p (2.5)p 166.3p % %
Statutory basic earnings per 556
share 138.4p 21.1p 125.3p % 10 %
=============================== ========= ======= ======== ======== ========
1: Restated to include the impact of the Rights Issue completed
in June 2020
Adjusted basic earnings per share of 162.9 p and statutory basic
earnings per share of 138.4 p reflect the adjusted and statutory
profits reported in the period (see note 10).
Dividend
The Board has recommended a final dividend of 49.8p per share,
reflecting the Group's strong FY23 performance, its strong balance
sheet, continued momentum of current trading and confidence in the
full year outlook. If approved by shareholders at the AGM to be
held on 22 June 2023, this would result in a total dividend payment
for the year of GBP149m and the final dividend will be paid on 7
July 2023 to all shareholders on the register at the close of
business on 26 May 2023. Shareholders will be offered the option to
participate in a dividend re-investment plan. The Group's dividend
policy is to grow the dividend broadly in line with earnings across
the cycle. Full details are set out in note 11 to the accompanying
financial statements.
Cashflow
GBPm FY23 FY22
=============================================== ====== ======
Adjusted EBITDAR 888 473
Change in working capital 99 183
Net turnover rent and rental income 1 8
Lease liability interest and principal lease
payments (269) (258)
Adjusted operating cashflow 719 404
Interest (excl. IFRS 16) (9) (18)
Corporate taxes (30) (0)
Pension (16) (15)
Capital expenditure: non-expansionary (184) (94)
Capital expenditure: expansionary(1) (362) (168)
Disposal Proceeds 60 56
Other 4 20
====== ======
Cashflow before shareholder returns and debt
repayments 182 187
Dividend (119) -
Shares purchased for Employee Share Ownership (32) -
Trust ('ESOT')
Replacement of long-term borrowings - (304)
Net cashflow 31 (117)
Opening net cash/(debt) 141 (47)
Issuance of debt - 304
Closing net cash 171 141
=============================================== ====== ======
1: FY23 includes GBP2m loans advanced to joint ventures and
GBP25m payment of contingent consideration (FY22 includes GBP2m
loans advanced to joint ventures, GBP36m payment of contingent
consideration and GBP1m capital contributions to joint
ventures)
Adjusted EBITDAR increased by 88% to GBP888m (FY22: GBP473m),
driven by the strength of the trading performance of Premier Inn
UK, resulting in an adjusted operating cashflow of GBP719m (FY22:
GBP404m). Expansionary and maintenance capital expenditure
increased to GBP546m in FY23 (FY22: GBP261m) resulting in total
cashflow before shareholder returns and debt repayments of GBP182m
broadly in line with last year (FY22: GBP187m).
The GBP99m working capital inflow was driven by an increase in
trade creditors, accruals and customer deposits as a result of the
strong trading performance. This was partially offset by an
increase in debtors driven by an increase in the volume of Business
Accounts and accrued income relating to property disposals.
Corporate tax outflows of GBP30m relate to payments on account
for the FY23 UK corporation tax liability.
Non-expansionary capital expenditure was GBP184m and
expansionary capital expenditure was GBP362m which included the
purchase of three freehold properties. Lease liability interest and
lease repayments increased by GBP11m to GBP269m reflecting the
increase in our leasehold estate.
Other items include an inflow of GBP4m (FY22: GBP3m) of non-cash
pension scheme administration costs. Disposal proceeds of GBP60m
include GBP46m relating to a property transaction in Marylebone and
the disposal of other properties as the Group continues to optimise
its estate when suitable opportunities arise.
Following the recommencement of dividend payments at the FY22
results, the Board recommended a final dividend of 34.7 pence per
share on 27 April 2022. This resulted in a dividend payment of
GBP70m paid on 1 July 2022. At the interim results in October 2022,
the Board declared an interim dividend of 24.4 pence per share,
resulting in a GBP49m total interim dividend payment. During the
year, 1.3m shares were purchased by the Group's independently
managed Employee Share Ownership Trust ('ESOT') for consideration
of GBP32m.
Net cash at the end of the period was GBP171m.
Debt funding facilities & liquidity
GBPm Facility Utilised Maturity
=================================== ========= ========= =========
Revolving Credit Facility (775) - 2027
Bond (450) ( 450) 2025
Green Bond (300) (300) 2027
Green Bond (250) (250) 2031
========= ========= =========
(1,775) (1,000)
Cash and cash equivalents 1,165
Total facilities utilised, net of
cash (1) 165
=========
Net cash 171
Net cash and lease liabilities (3,787)
=========
1: Excludes unamortised fees associated with debt instrument
The Group received confirmation of its investment grade status
on 20 February 2023 and aims to manage to investment grade metrics
of lease adjusted net debt of less than 3.7x(1) funds from
operations over the medium term. During the first half, the Group
returned to below this level and as at the end of FY23 the
ratio
was 2.7x.
1: Fitch methodology post-IFRS 16
Revolving Credit Facility
During the first half of FY23, the Group entered into a new
GBP775m revolving credit facility ('RCF'), replacing the previous
GBP850m facility that was due to expire in September 2023. The new
five-year facility, with two one-year extension options, is a
multi-currency revolving credit facility and is provided by a
syndicate of seven banks led by Banco Santander, Barclays, NatWest
and Bank of China. The RCF has variable interest rates with GBP
linked to SONIA and EUR being linked to EURIBOR.
Capital investment
GBPm FY23 FY22
============================================== ========== =========
UK maintenance and product improvement 182 91
New / extended UK hotels(1) 265 80
Germany and Middle East(2) 99 90
========== =========
Total 546 261
============================================== ========== =========
1: FY23 includes GBP2m and FY22 includes GBP2m loans advanced to
joint ventures
2: FY23 includes GBP25m payment of contingent consideration,
FY22 includes GBP36m payment of contingent consideration and GBP1m
capital contributions to joint ventures
Total capital expenditure in FY23 was GBP546m driven by the
development of new sites and extensions in the UK including
freehold purchases in London and Dublin. UK maintenance and product
improvement spend was focused on investing in the refurbishment
programme of our core UK estate, a number of transformational
technology projects and the roll-out of our new bed proposition. In
Germany, capital expenditure of GBP99m was driven by the
development of our committed pipeline in addition to the
acquisition of six hotels made at the end of FY23.
Property, plant and equipment of GBP4,554m was ahead of FY22
(GBP4,227m), with an increase in capital expenditure partially
offset by depreciation charges.
Property-backed balance sheet
Freehold / leasehold mix Open estate Total estate(1)
========================= ============ ================
Premier Inn UK 57%:43% 55%:45%
Premier Inn Germany 22%:78% 23%:77%
Group 54%:46% 51%:49%
========================= ============ ================
1: Open plus committed pipeline
The current UK estate is 57% freehold and 43% leasehold and once
the committed pipeline has been constructed the estate will be 55%
freehold and 45% leasehold. The higher leasehold mix in Germany
reflects the greater proportion of city centre locations.
Our continued expansion in the UK and Germany resulted in
right-of-use assets increasing to GBP3,505m (FY22: GBP3,268m) and
lease liabilities increasing to GBP3,958m (FY22: GBP3,702m).
Return on capital (1) - Premier Inn UK
Returns FY23 FY22 FY20
======================================= ========= ======== =========
UK ROCE 12.9% 2.3% 11.2%
======================================= ========= ======== =========
1: Germany ROCE not included as losses were incurred in the
year
We remain confident in being able to deliver long-term
sustainable returns on incremental investment. We believe that our
vertically integrated business model means we are particularly
well-placed to capitalise on the significant structural
opportunities in both the UK and Germany. Despite ongoing
inflationary pressures, we believe that such headwinds can be
mitigated through a combination of continued estate growth, our
long-standing efficiency programme and our ability to drive ARRs
through improvements to our proprietary pricing engine and the
continuous evolution of our product.
Events after the balance sheet date
The Board of Directors approved a share buy-back on 24 April
2023 for GBP300m and is in the process of appointing the relevant
brokers to undertake the programme in accordance with that
approval.
Pension
The Group's defined benefit pension scheme, the Whitbread Group
Pension Fund (the 'Pension Fund'), had an IAS19 Employee Benefits
surplus of GBP325m at the end of the year (FY22: GBP523m). The
lower funding position was primarily driven by asset performance
being lower than the discount rate and the remeasurement effect of
entering into a pensioner buy-in contract. This was partially
offset by a decrease in the assumed rates of future inflation and
an increase in corporate bond yields resulting in an increase in
the discount rate and changes to the mortality assumptions which
reduced the value of the pension obligations.
During the year, the Pension Fund became fully funded on the
Secondary Funding Target basis, following which the Trustee has
reduced the investment risk in line with the de-risking journey
agreed between the Trustee and Whitbread. There has been further
risk reduction as a result of the Trustee entering into a GBP661m
buy-in with Standard Life. There are currently no deficit reduction
contributions being paid to the Pension Fund, however annual
contributions of approximately GBP10m continue to be paid to the
Fund through the Scottish Partnership arrangements. The Trustee
holds security over GBP532m of Whitbread's freehold property which
will remain at this level until no further obligations are due
under the Scottish Partnership arrangements, which is expected to
be in 2025. Following that, the security held by the Trustee will
be the lower of: GBP500m; and 120% of the buy-out deficit and will
remain in place until there is no longer a buy-out deficit.
Going concern
The directors have concluded that it is appropriate for the
consolidated financial statements to be prepared on the going
concern basis. Full details are set out in note 2 of the attached
financial statements.
Risks and uncertainties
The directors have reconsidered the principal risks and
uncertainties of the Group, which are detailed below.
We have previously recognised the significant risk from the
COVID-19 pandemic on our operations and trading activities more
latterly due to the government trading restrictions which have now
been removed. We demonstrated our resilience over this period and
have included the lessons learned into our business-as-usual
processes in all functional and operational areas. We do, however,
remain alert and responsive, and will monitor updates from the
World Health Organisation ('WHO') with regards to both COVID-19 and
any new viruses; their associated vaccine developments and
efficacy, which will be assessed and reported via the emerging risk
framework highlighting where there is the potential to impact the
business.
We have recognised two new principal risks in the period, being
(1) the possible impact on our pipeline of future sites from any
stagnation in the property market; and (2) the increasing
divergence of performance between the hotel business and the food
and beverage business, and the impact this could have on our
ability to maintain a RevPAR premium in our hotels.
-- Uncertain economic outlook - both in the UK and Germany, with
the threat of a deep and prolonged recession, exacerbated by the
impact from wider macroeconomic trends and current geopolitical
conflicts.
-- Cyber and data security - data breaches or operational
disruption caused by malware such as ransomware, result in a loss
of brand trust and regulatory fines.
-- Technology-led business change and interdependencies - we are
unable to successfully deliver major transformational programmes
particularly under time bound pressures and realise benefits due to
a high volume of change.
-- Germany profitable growth - the inability to successfully execute our strategy in Germany.
-- Talent attraction and retention - continued labour market
challenges, compounded by real cost-of-living pressures, with
functional specific challenges, a reduction in our talent pool and
low levels of senior diversity.
-- Third party arrangements - business interruption due to
withdrawal of services for one or more critical suppliers,
provision of services below acceptable standards, or reputational
damage as a result of unethical supplier practices.
-- Structural shifts impacting demand - changes to working
practices, reduced international travel and demand-led occasions
for hotel stays, including the impact from the cost-of-living
crisis, along with potential new disruptors entering the market
driving a decline in brand strength and loss of market share.
-- Health and safety - adverse publicity and brand damage due to
death or serious injury as a result of company negligence, or a
significant incident resulting from food, in particular the risk
from allergens, fire, terrorism or another safety failure.
-- Environmental, Social and Governance including climate change
risk - uncertainty as to how these collective risks will
materialise for example, our inability to meet carbon targets,
natural resource scarcity, and long-term impact from growing social
trends such as veganism.
-- Increased and extended focus on food and beverage
propositions - continued challenges in the pub and restaurant
market, with headwinds from inflation and the cost-of-living impact
on demand yet to be fully understood, drives a disproportional
focus to satisfy any investment required in a short timeframe.
-- Extended stagnation of the UK property market - stagnation
continues for longer than expected and impacts our ability to
maintain the UK pipeline, putting pressure on our returns and UK
growth in subsequent years.
We consider a wide range of emerging risks and their potential
impact on our ability to successfully deliver on our strategic
objectives. The most notable being: continued geopolitical
conflicts that could impact Whitbread's operations, including
movement of key resources and willingness to travel and the
scarcity of computer chips. We are also impacted by increased
regulatory change and compliance, which has the potential to impact
many areas across the business including governance and controls,
external disclosure requirements and sustainability. Across the
people-related risks, talent retention and labour supply and how
this will change over time as younger generations drive change in
workforce requirements and expectations is closely monitored. Our
approach to identifying and managing emerging risks is embedded
into the risk management framework and integrated through policies
and risk control mechanisms.
American Depositary Receipts
Whitbread has a sponsored Level 1 American Depositary Receipt
('ADR') programme for which JP Morgan perform the role of
depositary bank. The Level 1 ADR programme trades on the U.S.
over-the-counter ('OTC') markets under the symbol WTBDY (it is not
listed on a U.S. stock exchange).
Notes
The Group uses certain APMs to help evaluate the Group's
financial performance, position and cashflows, and believes that
such measures provide an enhanced understanding of the Group's
results and related trends and allow for comparisons of the
financial performance of the Group's businesses either from one
period to another or with other similar businesses. However, APMs
are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
APMs used in this announcement include adjusted revenue,
like-for-like sales, revenue per available room ('RevPAR'), average
room rate, direct bookings/distribution, adjusted operating (loss)/
profit, return on capital employed ('ROCE'), profit margin,
adjusted (loss)/ profit before tax, adjusted (loss)/ profit before
tax of our cohort of 18 established German hotels in aggregate,
adjusted basic earnings per share, net debt, net debt and lease
liabilities, adjusted 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.
Consolidated income statement
Year ended 2 March 2023
52 weeks to 2 March 2023 53 weeks to 3 March 2022
Adjusting
Before items Before Adjusting
adjusting (Note adjusting items
items 6) Statutory items (Note 6) Statutory
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- ---------- --------- --------- ---------- --------- ----------
Revenue 3 2,625.2 - 2,625.2 1,703.4 - 1,703.4
Other income 4 8.0 4.7 12.7 122.4 8.7 131.1
Operating costs 5 (2,090.5) (43.2) (2,133.7) (1,671.1) 65.3 (1,605.8)
Impairment of loans to
joint ventures (1.5) - (1.5) (1.8) - (1.8)
---------- --------- --------- ---------- --------- ----------
Operating profit/(loss)
before joint ventures 541.2 (38.5) 502.7 152.9 74.0 226.9
Share of profit/(loss)
from joint ventures 2.3 - 2.3 0.4 - 0.4
Operating profit/(loss) 543.5 (38.5) 505.0 153.3 74.0 227.3
Finance costs 7 (166.9) - (166.9) (173.6) - (173.6)
Finance income 7 36.8 - 36.8 4.5 - 4.5
---------- --------- --------- ---------- --------- ----------
Profit/(Loss) before tax 413.4 (38.5) 374.9 (15.8) 74.0 58.2
Tax credit/(expense) 9 (85.2) (10.9) (96.1) 10.7 (26.4) (15.7)
Profit/(Loss) for the
year attributable to parent
shareholders 328.2 (49.4) 278.8 (5.1) 47.6 42.5
---------- --------- --------- ---------- --------- ----------
52 weeks to 2 March 2023 53 weeks to 3 March 2022
Earnings per share (Note pence pence pence pence pence pence
10)
------------------------- ------ ------ ----- ------ ----- -----
Basic 162.9 (24.5) 138.4 (2.5) 23.6 21.1
Diluted 161.8 (24.3) 137.5 (2.5) 23.4 20.9
Consolidated statement of comprehensive income
Year ended 2 March 2023
52 weeks
to 2 March 53 weeks to
2023 3 March 2022
Notes GBPm GBPm
---------------------------------------------------------- ----- ----------- -------------
Profit for the year 278.8 42.5
Items that will not be reclassified to the income
statement:
Remeasurement (loss)/gain on defined benefit pension
scheme 25 (223.6) 318.8
Current tax on defined benefit pension scheme 9 0.7 (2.3)
Deferred tax on defined benefit pension scheme 9 54.7 (88.0)
(168.2) 228.5
Items that may be reclassified subsequently to the
income statement:
Net (loss)/gain on cash flow hedges (1.3) 2.4
Deferred tax on cash flow hedges 9 - (0.5)
Net (loss)/gain on hedge of a net investment (22.2) 9.0
Deferred tax on net loss/(gain) on hedge of a net
investment 9 2.1 (0.8)
Cost of hedging 1.1 2.5
(20.3) 12.6
Exchange differences on translation of foreign operations 37.3 (16.0)
Deferred tax on exchange differences on translation
of foreign operations (4.0) 2.7
----------- -------------
33.3 (13.3)
Other comprehensive (loss)/income for the year,
net of tax (155.2) 227.8
Total comprehensive income for the year, net of
tax 123.6 270.3
----------- -------------
Consolidated statement of changes in equity
Year ended 2 March 2023
Capital Currency
Share Share redemption Retained translation Other
capital premium reserve earnings reserve reserves Total
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
Profit for the year - - - 42.5 - - 42.5
Other comprehensive income - - - 228.5 (4.4) 3.7 227.8
-------- -------- ----------- --------- ------------ ---------- --------
Total comprehensive income - - - 271.0 (4.4) 3.7 270.3
Ordinary shares issued
on exercise of employee
share options (Note 23) 0.1 1.8 - - - - 1.9
Loss on ESOT shares issued - - - (3.2) - 3.2 -
Accrued share-based payments - - - 12.9 - - 12.9
Tax on share-based payments - - - (0.2) - - (0.2)
At 3 March 2022 164.8 1,024.7 50.2 5,225.3 24.3 (2,370.3) 4,119.0
Profit for the year - - - 278.8 - - 278.8
Other comprehensive income - - - (168.2) 10.7 2.3 (155.2)
-------- -------- ----------- --------- ------------ ---------- --------
Total comprehensive income - - - 110.6 10.7 2.3 123.6
Ordinary shares issued
on exercise of employee
share options (Note 23) 0.1 1.9 - - - - 2.0
Loss on ESOT shares issued - - - (4.3) - 4.3 -
Accrued share-based payments - - - 17.7 - - 17.7
Tax on share-based payments - - - (0.1) - - (0.1)
Equity dividends paid - - - (119.1) - - (119.1)
Purchase of ESOT shares - - - - - (31.7) (31.7)
At 2 March 2023 164.9 1,026.6 50.2 5,230.1 35.0 (2,395.4) 4,111.4
-------- -------- ----------- --------- ------------ ---------- --------
Consolidated balance sheet
At 2 March 2023
2 March 2023 3 March 2022
Notes GBPm GBPm
----------------------------------- ------- ------------ ------------
Non-current assets
Intangible assets 12 179.6 159.3
Right-of-use assets 3,504.6 3,267.6
Property, plant and equipment 13 4,554.2 4,227.1
Investment in joint ventures 48.2 41.1
Derivative financial instruments - 15.8
Defined benefit pension surplus 25 324.7 522.6
8,611.3 8,233.5
Current assets
Inventories 15 21.7 19.4
Trade and other receivables 16 141.8 116.4
Cash and cash equivalents 17 1,164.8 1,132.4
1,328.3 1,268.2
Assets classified as held for sale 13 3.2 64.8
Total assets 9,942.8 9,566.5
Current liabilities
Borrowings 18 - -
Lease liabilities 144.1 129.3
Provisions 20 20.2 19.6
Current tax liabilities 4.6 -
Trade and other payables 22 676.7 570.7
845.6 719.6
Non-current liabilities
Borrowings 18 993.4 991.9
Lease liabilities 3,814.3 3,572.5
Provisions 20 8.3 11.7
Derivative financial instruments 7.8 -
Deferred tax liabilities 9 158.2 150.6
Trade and other payables 22 3.8 1.2
4,985.8 4,727.9
Total liabilities 5,831.4 5,447.5
Net assets 4,111.4 4,119.0
------------ ------------
Equity
Share capital 23 164.9 164.8
Share premium 1,026.6 1,024.7
Capital redemption reserve 50.2 50.2
Retained earnings 5,230.1 5,225.3
Currency translation reserve 35.0 24.3
Other reserves (2,395.4) (2,370.3)
------------ ------------
Total equity 4,111.4 4,119.0
------------ ------------
Consolidated cash flow statement
Year ended 2 March 2023
52 weeks
to 53 weeks to
2 March 2023 3 March 2022
Notes GBPm GBPm
------------------------------------------------- ----- ------------- -------------
Cash generated from operations 24 996.3 693.7
Payments against provisions (2.7) (18.9)
Defined benefit pension scheme payments 25 (15.7) (14.8)
Interest paid - lease liabilities (138.7) (133.2)
Interest paid - other (32.0) (20.2)
Interest received 22.6 2.2
Corporation taxes paid (29.9) (0.1)
------------- -------------
Net cash flows from operating activities 799.9 508.7
Cash flows (used in)/from investing
activities
Purchase of property, plant and equipment
and investment properties 3 (482.0) (200.4)
Proceeds from disposal of property,
plant and equipment 59.6 56.4
Investment in intangible assets 12 (36.8) (21.1)
Payment of deferred and contingent consideration 22 (25.3) (36.3)
Capital contributions to joint ventures - (1.4)
Loans advanced to joint ventures (1.5) (1.8)
Net cash flows used in investing activities (486.0) (204.6)
Cash flows (used in)/from financing
activities
Proceeds from issue of shares on exercise
of employee share options 2.0 1.9
Drawdowns of long-term borrowings - 50.0
Repayments of long-term borrowings - (353.9)
Payment of facility fees (4.2) -
Net lease incentives received 3.5 2.0
Payment of principal of lease liabilities (133.9) (127.1)
Purchase of own shares for ESOT (31.7) -
Dividends paid (119.1) -
Net cash flows used in financing activities (283.4) (427.1)
Net increase/(decrease) in cash and
cash equivalents 19 30.5 (123.0)
Opening cash and cash equivalents 19 1,132.4 1,256.0
Effect of foreign exchange rate changes 19 1.9 (0.6)
------------- -------------
Closing cash and cash equivalents 17 1,164.8 1,132.4
------------- -------------
Notes to the consolidated financial statements
1. General information
The consolidated financial statements and preliminary
announcement of Whitbread PLC for the year ended 2 March 2023 were
authorised for issue in accordance with a resolution of the Board
of Directors on 24 April 2023.
The financial year represents the 52 weeks to 2 March 2023
(prior financial year: 53 weeks to 3 March 2022).
The financial information included in this preliminary statement
of results does not constitute statutory accounts within the
meaning of Section 435 of the Companies Act 2006 (the "Act"). The
financial information for the year ended 2 March 2023 has been
extracted from the statutory accounts on which an unqualified audit
opinion has been issued. Statutory accounts for the year ended 2
March 2023 will be delivered to the Registrar of Companies in
advance of the Group's annual general meeting.
The statutory accounts for the year ended 3 March 2022, have
been delivered to the Registrar of Companies, and the Auditors of
the Group made a report thereon under Chapter 3 of part 16 of the
Act. That report was unqualified and did not contain a statement
under sections 498 (2) or (3) of the Act.
The consolidated financial statements of Whitbread PLC and all
its subsidiaries have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and UK-adopted international
accounting standards.
2. Accounting policies
The accounting policies adopted in the preparation of these
consolidated financial statements are consistent with those
followed in the preparation of the consolidated financial
statements for the year ended 3 March 2022, except for the adoption
of the new standards and interpretations that are applicable for
the year ended 2 March 2023 .
Basis of consolidation
The consolidated financial statements incorporate the accounts
of Whitbread PLC and all its subsidiaries, together with the
Group's share of the net assets and results of joint ventures
incorporated using the equity method of accounting. These are
adjusted, where appropriate, to conform to Group accounting
policies.
A subsidiary is an entity controlled by the Group. Control is
achieved when the Company:
-- has power over the investee;
-- is exposed, or has rights, to variable returns from its involvement with the investee; and
-- has the ability to use its power to affect its returns
The Company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
Apart from the acquisition of Whitbread Group PLC by Whitbread
PLC in 2000/01, which was accounted for using merger accounting,
acquisitions by the Group are accounted for under the acquisition
method and any goodwill arising is capitalised as an intangible
asset. The results of subsidiaries acquired or disposed of during
the year are included in the consolidated financial statements
from, or up to, the date that control passes respectively. All
intra-Group transactions, balances, income and expenses are
eliminated on consolidation. Unrealised losses are also eliminated,
unless the transaction provides evidence of an impairment of the
asset transferred.
Going concern
A combination of the strong cash flows generated by the
business, and the significant available headroom on its credit
facilities, support the directors' view that the Group has
sufficient funds available for it to meet its foreseeable working
capital requirements. In reaching this conclusion, the directors
have considered all elements of the capital allocation framework.
The directors have also determined that, over the period of the
going concern assessment, there is not expected to be a significant
impact as a result of climate change.
The directors have therefore concluded that the going concern
basis of preparation remains appropriate.
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 review of the
Group's hotel and restaurant property estate;
-- significant restructuring costs and other associated costs
arising from strategy changes that are not considered by the Group
to be part of the normal operating costs of the business;
-- significant pension charges arising as a result of changes to
UK defined benefit scheme practices;
-- net impairment and related charges for sites which are/were
underperforming that are considered to be significant in nature
and/or value to the trading performance of the business;
-- costs in relation to non-trading legacy sites which are
deemed to be significant and not reflective of the Group's ongoing
trading results;
-- transformation and change costs associated with the
implementation of the Group's strategic IT programme;
-- 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 Group income statement is presented in a columnar format to
enable users of the accounts to see the Group's
performance before adjusting items, the adjusting items, and the
statutory total on a line-by-line basis. 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.
Changes in accounting policies
The Group has adopted the following standards and amendments for
the first time for the annual reporting period commencing 4 March
2022:
-- Amendments to IAS 16 Property, Plant and Equipment - proceeds
before intended use (effective for periods beginning on or after 1
January 2022)
-- Amendments to IAS 37 - Onerous Contracts - Cost of Fulfilling
a Contract (effective for periods beginning on or after 1 January
2022)
-- Amendments to IFRS 3 - Reference to the Conceptual Framework
(effective for periods beginning on or after 1 January 2022)
-- Annual Improvements to IFRS Standards 2018-2020 Cycle
Standards issued by the IASB not effective for the current year
and not early adopted by the Group
Whilst the following standards and amendments are relevant to
the Group, they have been assessed as having minimal or no
financial impact or additional disclosure requirements at this
time:
-- IFRS 17 Insurance Contracts (effective for periods beginning
on or after 1 January 2023)
-- Amendments to IAS 1 - Classification of Liabilities as
Current or Non-Current (effective for periods beginning on or after
1 January 2023)
-- Amendments to IAS 1 - Disclosure of Accounting Policies
(effective for periods beginning on or after 1 January 2023)
-- Amendments to IFRS 10 Consolidated Financial Statements and
IAS 28 - Sale or Contribution of Assets Between an Investor and its
Associate or Joint Venture
-- Amendments to IAS 8 - Definition of Accounting Estimate
(effective for periods beginning on or after 1 January 2023)
-- Amendments to IAS 12 - Deferred Tax Related to Assets and
Liabilities Arising from a Single Transaction (effective for
periods beginning on or after 1 January 2023)
The Group does not intend to early adopt any of these new
standards or amendments.
Critical accounting judgements and key sources of estimation
uncertainty
The critical accounting judgements and key sources of estimation
uncertainty are consistent with those disclosed in the Group's
annual financial statements for the year ended 3 March 2022 except
for the inclusion of property transaction including sale and
leaseback of land.
Critical accounting judgements
Adjusting items
During the year certain items are identified and separately
disclosed as adjusting items. Judgement is applied as to whether
the item meets the necessary criteria as per the accounting policy
disclosed earlier in this note. This assessment covers the nature
of the item, cause of occurrence and the scale of impact of that
item on reported performance. Reversals of previous adjusting items
are assessed based on the same criteria. Note 6 provides
information on all of the items disclosed as adjusting in the
current year and comparative financial statements.
Property transaction including sale and leaseback of land
During the period, the Group entered into a sale and lease
transaction of a single property, comprising land and a hotel
currently under construction. Under the agreement, the Group is
acting as the developer of the site. As a part of the transaction,
the property is being developed into a completed hotel asset via a
forward funding agreement with a counterparty. The transaction's
sale, development and subsequent lease contracts were all
negotiated together as one commercial transaction, with the
transaction prices allocated based on the negotiated position
rather than standalone contracts.
In relation to the land portion of the site sold, management has
reviewed the criteria within IFRS 15 Revenue from Contracts with
Customers and IFRS 16 Leases, concluding that a sale and leaseback
for the land has occurred to the counterparty.
In relation to the hotel under construction asset, management
has reviewed IFRS 15, concluding that a sale for this asset has
occurred to the counterparty and the building leased back in the
future will be the completed hotel, not the same asset that was
sold. Therefore, management has concluded that the current year
sale and future lease of the completed hotel does not represent a
sale and leaseback under IFRS 16.
Treatment of sale and leaseback of land
The land on which the hotel is being developed has been sold
with Whitbread holding no rights to re-obtain the legal title. The
performance obligation for the sale of land has been satisfied as
defined under IFRS 15. A gain of GBP3.1m is recognised on the sale
of the land, which represents the proportion of the land assessed
as having been sold and subject to leaseback at practical
completion of the site sold. In assessing the gain to be recognised
on the sale and leaseback transaction, management has considered
the fair value of the land at the sale date against the
consideration allocated for the sale of the land.
Treatment for sale of hotel under construction
During the period, the performance obligation associated with
the sale of the hotel under construction was assessed as being
satisfied such that the asset has been derecognised. Nil gain was
recognised as allocated proceeds were substantially similar to the
carrying value of the building. The Group is exposed to cost
overruns on the development of the hotel. Due to the allocation of
the transaction's proceeds to the land, net costs of GBP1.7m have
been recognised, reducing the overall transaction's gain in the
reporting period as the commercial terms were negotiated together.
The net gain recognised on this transaction of GBP1.4m has been
based on an assessment of the obligations completed under the terms
of the agreement.
Key sources of estimation uncertainty
Defined benefit pension
Defined benefit pension plans are accounted for in accordance
with actuarial advice using the projected unit credit method. The
Group makes significant estimates in relation to the discount
rates, mortality rates and inflation rates used to calculate the
present value of the defined benefit obligation. Note 25 describes
the assumptions used together with an analysis of the sensitivity
to changes in key assumptions.
Impairment testing - Goodwill, property, plant and equipment and
right-of-use assets
The performance of the Group's impairment review requires
management to make a number of estimates. These are set out
below:
Identification of indicators of impairment and reversal
The Group assesses each of its CGUs for indicators of impairment
or reversal on an annual basis and, where there are indicators of
impairment or reversal, management performs an impairment
assessment.
Inputs used to estimate value in use
The estimate of value in use is most sensitive to the following
inputs:
-- Five-year business plan -forecast cash flows for the initial
five-year period are based on the five-year business plan, which is
based on results from FY23.
-- Discount rate - judgement is required in estimating the
Weighted Average Cost of Capital (WACC) of a typical market
participant and in assessing the specific country and currency
risks associated with the Group. The rate used is adjusted for the
Group's gearing, including equity, borrowings and lease
liabilities.
-- Immature sites - judgement is required to estimate the time
taken for sites to reach maturity and the sites' trading level once
they are mature.
Methodology used to estimate fair value
Fair value is determined using a range of methods, including
present value techniques using assumptions consistent with the
value in use calculations and market multiple techniques using
externally available data.
Key estimates and sensitivities for impairment of assets are
disclosed in Note 14.
3. Segment information
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
profit from joint ventures.
The following tables present revenue and profit information
regarding business operating segments for the years ended 2 March
2023 and 3 March 2022.
52 Weeks to 2 March 2023 53 Weeks to 3 March 2022
------------------------ ------------------------
Revenue UK & Central Central
Ireland Germany and other Total UK & Ireland Germany and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- ------- ---------- -------- ------------ ------- ---------- --------
Accommodation 1,795.0 100.1 - 1,895.1 1,157.8 29.1 - 1,186.9
Food, beverage and other
items 712.7 17.4 - 730.1 510.4 6.1 - 516.5
-------- ------- ---------- -------- ------------ ------- ---------- --------
Revenue 2,507.7 117.5 - 2,625.2 1,668.2 35.2 - 1,703.4
52 Weeks to 2 March 2023 53 Weeks to 3 March 2022
------------------------ ------------------------
Profit/(loss) UK & Central Central
Ireland Germany and other Total UK & Ireland Germany and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- ------- ---------- -------- ------------ ------- ---------- --------
Adjusted operating
profit/(loss) before
joint ventures(1) 616.6 (35.9) (39.5) 541.2 199.6 (15.4) (31.3) 152.9
Share of profit/(loss)
from joint ventures - - 2.3 2.3 - - 0.4 0.4
-------- ------- ---------- -------- ------------ ------- ---------- --------
Adjusted operating
profit/(loss) 616.6 (35.9) (37.2) 543.5 199.6 (15.4) (30.9) 153.3
Net finance costs (124.9) (13.8) 8.6 (130.1) (124.7) (8.5) (35.9) (169.1)
Adjusted profit/(loss)
before tax 491.7 (49.7) (28.6) 413.4 74.9 (23.9) (66.8) (15.8)
Adjusting items before
tax (Note 6) (38.5) 74.0
-------- --------
Profit/(loss) before
tax 374.9 58.2
-------- --------
In relation to the previous year's results, adjusted operating
profit/(loss) for the UK & Ireland segment included the impact
of GBP126.5m from Government Grants whilst the German segment
included the impact of GBP44.3m. The UK & Ireland segment
includes the impact of the release of a previously held provision
of GBP4.7m. Refer to Note 8 for details.
52 Weeks to 2 March 2023 53 Weeks to 3 March 2022
------------------------ ------------------------
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 and investment
property - cash basis 405.9 76.1 - 482.0 148.1 52.3 - 200.4
Property, plant and
equipment and investment
property - accruals
basis 430.4 73.7 - 504.1 165.8 54.2 - 220.0
Intangible assets 36.7 0.1 - 36.8 21.1 - - 21.1
Cash outflows from lease
interest and payment
of principal of lease
liabilities 234.0 38.6 - 272.6 234.5 25.8 - 260.3
Depreciation - property,
plant and equipment
and investment property 152.2 11.0 - 163.2 148.3 9.6 - 157.9
Depreciation - right-of-use
assets 133.6 32.2 - 165.8 125.2 22.9 - 148.1
Amortisation 16.3 0.2 - 16.5 20.6 0.3 - 20.9
Segment assets and liabilities are not disclosed because they
are not reported to, or reviewed by, the Chief Operating Decision
Maker.
The Group's revenue, split by country in which the 2022/23 2021/22
legal entity resides, is as follows: GBPm GBPm
---------------------------------------------------- --------- ---------
United Kingdom 2,487.7 1,661.8
Germany 117.5 35.2
Other 20.0 6.4
--------- ---------
2,625.2 1,703.4
--------- ---------
The Group's non-current assets(1) , split by country 2023 2022
in which the legal entity resides, are as follows: GBPm GBPm
------------------------------------------------------ --------- ---------
United Kingdom 6,869.2 6,571.3
Germany 1,216.2 1,009.1
Other 201.2 114.7
--------- ---------
8,286.6 7,695.1
--------- ---------
(1) Non-current assets exclude derivative financial instruments
and the surplus on the Group's defined benefit pension scheme.
4. Other income
An analysis of the Group's other income is as follows:
2022/23 2021/22
GBPm GBPm
------------------------------------
Rental income 3.1 7.9
Government grants(1) (Note 8) 4.7 113.8
Other 0.2 0.7
------- -------
Other income before adjusting items 8.0 122.4
Legal claim settlement (Note 6) 4.7 -
VAT settlement (Note 6) - 8.7
------- -------
Other income 12.7 131.1
------- -------
(1) GBP4.7m has been released from a previously held provision
relating to Government grants. Refer to Note 8 for details.
5. Operating costs
2022/23 2021/22
GBPm GBPm
------------------------------------------------
Cost of inventories recognised as an expense(1) 229.0 146.6
Employee benefits expense(2) 784.3 678.9
Amortisation of intangible assets (Note
12) 16.5 20.9
Depreciation - property, plant and equipment
and investment property (Note 13) 163.2 157.9
Depreciation - right-of-use-assets 165.8 148.1
Utilities 117.2 87.8
Rates 125.0 71.2
Other site property costs 384.3 277.3
Variable lease payment expense 2.1 0.3
Net foreign exchange (gain)/loss (2.1) 2.1
Other operating charges(2) 105.2 80.0
Adjusting operating costs(2) (Note 6) 43.2 (65.3)
-------- ---------
2,133.7 1,605.8
-------- ---------
(1) Cost of inventories recognised as an expense includes
GBP6.7m (2021/22: GBP6.1m) of inventory write downs recorded during
the year.
(2) Adjusting operating costs includes a charge for net
impairments of GBP33.4m (2021/22: credit of GBP36.2m), a charge of
GBP9.8m (2021/22: credit of GBP28.8m) relating to other operating
charges and a charge of GBP0.5m (2021/22: credit of GBP0.3m)
relating to employee benefit expenses.
Employee costs are split between hourly paid and salaried
employees as below:
2022/23 2021/22
GBPm GBPm
-----------------------------
Employee costs - hourly paid 520.1 440.3
Employee costs - salaried 264.2 238.6
------------------ ------------------
784.3 678.9
------------------ ------------------
6. Adjusting items
As set out in the policy in Note 2, 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.
2022/23 2021/22
GBPm GBPm
----------------------------------------------------------- ------- -------
Adjusting items were as follows:
Other income:
VAT settlement(1) - 8.7
Legal claim settlement(2) 4.7 -
Adjusting other income 4.7 8.7
Operating costs:
Net impairment (charges)/reversals - property, plant
and equipment and right-of-use assets(3) (33.4) 36.2
UK restructuring(4) - 0.3
Net gains on disposals, property and other provisions(5) 4.0 28.8
Strategic IT programme costs(6) (13.8) -
Adjusting operating costs (43.2) 65.3
Adjusting items before tax (38.5) 74.0
------- -------
Tax on adjusting items (1.1) (13.3)
Impact of change in tax rates (9.8) (13.1)
Adjusting tax expense (10.9) (26.4)
------- -------
(1) During 2021/22, 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 2006 to 2013. The Group has submitted claims
for the repayment of overpaid VAT amounting to GBP8.7m which are
substantially similar.
(2) During the year, the Group received a settlement of GBP4.7m
in relation to a legal claim made against a payment card scheme
provider.
(3) During the year, the Group identified impairment indicators
and indicators of impairment reversals relating to assets held by
the Group both at the half-year end date and at the year-end date.
An impairment review of those assets was undertaken, resulting in
adjusting net impairment charges of GBP30.1m. This is made up of
impairment charges on trading sites of GBP85.0m (GBP76.1m relating
to property, plant and equipment and GBP8.9m relating to
right-of-use assets) offset by impairment reversals of GBP54.9m
(GBP35.5m relating to property, plant and equipment and GBP19.4m
relating to right-of-use assets). In addition, impairment charges
of GBP3.3m have been recorded in relation to assets held for sale
during the year. This brings the total adjusting net impairment
charges to GBP33.4m within operating costs. Further information is
provided in Note 14.
During 2021/22, a total net impairment reversal of GBP42.0m was
recorded, made up of GBP10.5m of impairment charges on trading
sites (GBP10.1m relating to property, plant and equipment and
GBP0.4m relating to right-of-use assets), offset by impairment
reversals of GBP52.5m (GBP30.4m relating to property, plant and
equipment and GBP22.1m relating to right-of-use assets). In
addition, an impairment charge of GBP5.8m was recorded in relation
to assets classified as held for sale. This brings the total
adjusting net impairment reversals to GBP36.2m within operating
costs.
(4) During 2021/22, the Group released the remaining provision
of GBP0.3m following the completion of its restructuring of the
Support Centre and site operations after it had recognised
redundancy and project costs of GBP12.1m during 2020/21.
(5) During the year, the Group entered into a sale and lease
transaction of land and a hotel currently under construction. As a
result of this transaction, the Group received proceeds of GBP46.4m
and recognised a net gain of GBP1.4m. The completed hotel and land
will be leased back at practical completion to the Group. In
addition, the Group increased its property related provision by
GBP0.4m and made a profit on other property disposals of
GBP3.0m.
During 2021/22, the Group disposed of a single property 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. In addition, during 2021/22, the Group made a profit on
other property disposals of GBP5.7m and recognised other provisions
of GBP4.4m relating to historic indirect tax matters.
(6) During the year, the Group has assessed the presentation of
costs incurred in relation to the current and future strategic IT
programme implementations. The programmes currently scheduled
include the Group's Hotel Management System and HR & Payroll
System. These represent significant business change costs for the
Group rather than replacements of IT systems with Software as a
Service (SaaS). The start date of these projects varies and as such
we expect costs to be incurred within this category over the next
few financial years, with their strategic benefit seen as lasting
multiple years. At this time, the Group expects to incur costs
relating to the Group's Hotel Management System and HR &
Payroll System presented within adjusting items across future
financial years as follows; during the financial year ended 2024
between GBP15.0m and GBP25.0m, during the financial year ended 2025
between GBP15.0m and GBP25.0m and during the financial year ended
2026 up to GBP5.0m.
7. Finance (costs)/income
2022/23 2021/22
GBPm GBPm
Finance costs
Interest on bank loans and overdrafts (5.1) (7.4)
Interest on other loans (24.3) (30.0)
Interest on lease liabilities (138.7) (133.2)
Unwinding of discount on contingent consideration
(Note 22) (0.2) (1.4)
Interest capitalised 2.5 0.9
Impact of ineffective portion of cash flow
and cost of hedging (1.1) (2.5)
(166.9) (173.6)
Finance income
Bank interest receivable 23.2 0.7
Other interest receivable - 0.2
IAS 19 pension finance income (Note 25) 13.6 3.6
36.8 4.5
Total net finance costs (130.1) (169.1)
-------- -------
8. Government grants and assistance
During the year, the Group submitted its German Bridge Aid III
Plus and IV claims, for which it received net cash of GBP17.3m.
These amounts were recognised in the 2021/22 year for costs the
Group incurred from July 2021 - January 2022. No further claims for
COVID-related Government support were made in the UK or in Germany,
and hence the Group has not recognised COVID-related Government
support during this financial year. A provision being held in
relation to any potential repayments required in respect of the
interpretations and assumptions made by Whitbread for UK
Coronavirus Job Retention Scheme claims was released during FY23 as
management is satisfied that no repayments are required following
completion of an HMRC review. This has resulted in a credit to the
consolidated income statement of GBP4.7m as shown below.
During the previous year, the Group had claimed Government
support designed to mitigate the impact of COVID-19.
Grants recognised in the previous year and the provision
released in the current year by type are shown below:
2022/23 2021/22
GBPm GBPm
----------------------------------------
Release of provisions previously made
relating to Government grant claims 4.7 -
UK Coronavirus Job Retention Scheme - 61.7
Ireland Employment Wage Subsidy Scheme - 0.2
Jersey Co-Funded Payroll Scheme - 0.1
UK Hospitality and Leisure Grant - 8.2
German Fixed Cost Grant - 43.3
German Kurzarbeit Scheme - compensation
for social security payments - 0.3
------- -------
Included in other income 4.7 113.8
------- -------
The Group benefitted from the following schemes which led to
savings in operating costs:
2022/23 2021/22
GBPm GBPm
------------------------------------- -------- -------
German Kurzarbeit Scheme - employees
support - 0.7
UK Business Rate Relief - 56.3
Reduction in operating costs - 57.0
------ -------
9. Taxation
2022/23 2021/22
Consolidated income statement GBPm GBPm
---------------------------------------------------- ---------- ----------
Current tax:
Current tax expense 35.3 -
Adjustments in respect of previous periods 0.7 (1.0)
---------- ----------
36.0 (1.0)
Deferred tax:
Origination and reversal of temporary differences 51.5 16.5
Effect of in-year rate differential/change in tax
rates 9.8 13.1
Adjustments in respect of previous periods (1.2) (12.9)
60.1 16.7
---------- ----------
Tax reported in the consolidated income statement 96.1 15.7
---------- ----------
In relation to the previous year, the adjustments in respect of
prior periods arose mainly due to a reassessment of deferred tax on
property, plant and equipment.
2022/23 2021/22
Consolidated statement of other comprehensive income GBPm GBPm
-------------------------------------------------------- ---------- ----------
Current tax:
Defined benefit pension scheme (0.7) 2.3
Deferred tax:
Cash flow hedges - 0.5
Tax on net (loss)/gain on hedge of a net investment (2.1) 0.8
Tax on exchange differences on translation of foreign
operations 4.0 (2.7)
Defined benefit pension scheme (54.7) 88.0
---------- ----------
(52.8) 86.6
Tax reported in other comprehensive income (53.5) 88.9
---------- ----------
A reconciliation of the tax expense/(credit) applicable to
adjusted profit/(loss) before tax and profit before tax at the
statutory tax rate, to the actual tax expense at the Group's
effective tax rate, for the years ended 2 March 2023 and 3 March
2022 respectively is set out below. All items have been tax
effected at the UK statutory rate of 19%, with the exception of the
effect of unrecognised losses in overseas companies, which has been
tax effected at the statutory rate in the relevant jurisdictions
with an adjustment to account for the differential tax rates
included in the effect of different tax rates.
2022/23 2022/23 2021/22 2021/22
---------------------------------------------
Tax on Tax on
adjusted Tax on adjusted Tax on
profit profit loss profit
GBPm GBPm GBPm GBPm
--------------------------------------------- ---------- ---------- ---------- ----------
Profit/(loss) before tax as reported
in the consolidated income statement 413.4 374.9 (15.8) 58.2
Tax at current UK tax rate of 19% (2021/22:
19%) 78.5 71.2 (3.0) 11.1
Effect of different tax rates (7.5) (11.5) (3.8) (3.8)
Unrecognised losses in overseas companies 19.5 29.4 11.8 11.8
Effect of super deduction in respect
of tax relief for fixed assets (4.5) (4.5) (2.7) (2.7)
Expenditure not allowable 2.4 1.4 3.6 1.9
Adjustments to current tax expense
in respect of previous years 0.7 0.7 (1.0) (1.0)
Adjustments to deferred tax expense
in respect of previous years (1.2) (1.2) (13.8) (12.9)
Impact of deferred tax in respect of - 3.4 - -
sale and lease transaction (Note 6)
Impact of deferred tax being at a different
rate from current tax rate - 9.8 - 13.1
Other movements (2.7) (2.6) (1.8) (1.8)
Tax expense/(credit) reported in the
consolidated income statement 85.2 96.1 (10.7) 15.7
---------- ---------- ---------- ----------
Deferred tax
The major deferred tax (liabilities)/assets recognised by the
Group and movement during the current and prior financial years are
as follows:
Rolled
Accelerated over gains
capital and property
allowances revaluations Pensions Leases Losses Other(3) 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)
(Expense)/credit to
consolidated
income statement(1) (28.3) (34.7) (15.4) 12.6 53.7 (4.6) (16.7)
(Expense)/credit to statement
of comprehensive income(2) - - (88.0) - 1.9 (0.5) (86.6)
Expense to statement
of changes in equity - - - - - (0.3) (0.3)
Foreign exchange and
other movements - - - 0.1 - (2.5) (2.4)
------------------------------- ------------ -------------- --------- ------- -------- --------- --------------
At 3 March 2022 (72.5) (92.5) (165.9) 48.7 139.3 (7.7) (150.6)
(Expense)/credit to
consolidated
income statement(1) (14.7) (2.1) (5.2) (3.3) (39.9) 5.1 (60.1)
Credit/(expense) to statement
of comprehensive income(2) - - 54.7 - (1.9) - 52.8
Expense to statement
of changes in equity - - - - - 0.1 0.1
Foreign exchange and
other movements - 0.8 - (1.1) - (0.1) (0.4)
------------------------------- ------------ -------------- --------- ------- -------- --------- --------------
At 2 March 2023 (87.2) (93.8) (116.4) 44.3 97.5 (2.6) (158.2)
------------ -------------- --------- ------- -------- --------- --------------
(1) The total charge to the consolidated income statement of
GBP60.1m (2022: GBP16.7m) relates largely to the utilisation of tax
losses carried forward in the period GBP33.0m and accelerated
capital allowances arising from super deduction relief GBP15.0m
(2022: comprises a rate change charge of GBP13.1m), these being the
largest components of the net charge.
(2) The total credit to other comprehensive income of GBP52.8m
(2022: charge of GBP86.6m) relates predominantly to a net deferred
tax credit on defined benefit pension scheme movements through
other comprehensive income GBP54.7m (2022: charge of GBP88.0m).
(3) The Other category includes a deferred tax liability of
GBP12.5m (2022: GBP12.4m) in respect of capitalised interest and a
deferred tax asset of GBP7.1m (2022: GBP4.0m) in respect of
share-based payments.
The Group recognises UK deferred tax assets to the extent that
taxable profits will be available to utilise deductible temporary
differences or unused tax losses. At 2 March 2023, no UK deferred
asset is unrecognised (2022: GBPnil).
The Group has unrecognised German tax losses of GBP199.9m (2022:
GBP128.2m) which can be carried forward indefinitely and offset
against future taxable profits in the same tax group. The Group
carries out an assessment of the recoverability of these losses for
each reporting period and, to the extent that they exceed deferred
tax liabilities within the same tax group, does not think it is
appropriate at this stage to recognise any deferred tax asset.
Recognition of these assets in their entirety would result in an
increase in the reported deferred tax asset of GBP63.8m (2022:
GBP40.9m). The impact on the effective tax rate from the
non-recognition of these assets in the current year is 6.1% (2022:
23.8%).
At 2 March 2023, no deferred asset is recognised (2022: GBPnil)
on gross temporary differences of GBP11.1m (2022: GBP13.9m)
relating to the accumulated losses of other international
subsidiaries as the Group is able to control the timings of the
reversal of these temporary differences and it is probable that
they will not reverse in the foreseeable future.
Tax relief on total interest capitalised amounts to GBP0.5m
(2021/22: GBP0.2m).
Factors affecting the tax charge for future years
The UK Budget 2021 announcement on 3 March 2021 included an
increase to the UK's main corporation tax rate to 25%, effective
from 1 April 2023. This was substantively enacted in May 2021 and
remains the position at the signing of these financial statements.
As such, the Group continues to estimate that all UK deferred tax
balances expected to be utilised or crystallise after 1 April 2023
should be recognised at the rate of 25%.
10. Earnings per share
The basic earnings per share (EPS) figures are calculated by
dividing the net profit/(loss) for the period attributable to
ordinary shareholders of the parent by the weighted average number
of ordinary shares in issue during the period after deducting
treasury shares and shares held by an independently managed
employee share ownership trust (ESOT).
The diluted earnings per share figures allow for the dilutive
effect of the conversion into ordinary shares of the weighted
average number of options outstanding during the period. Where the
average share price for the period is lower than the option price,
the options become anti-dilutive and are excluded from the
calculation. There are 1.0m (2022: 0.7m) 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:
2022/23 2021/22
Million million
--------------------------------------------------- -------- --------
Basic weighted average number of ordinary shares 201.5 201.9
Effect of dilution - share options 1.3 1.0
-------- --------
Diluted weighted average number of ordinary shares 202.8 202.9
-------- --------
The total number of shares in issue at the year-end, as used in
the calculation of the basic weighted average number of ordinary
shares, was 214.6m, less 12.5m treasury shares held by Whitbread
PLC and 1.2m held by the ESOT (2022: 214.5m, less 12.5m treasury
shares held by Whitbread PLC and 0.2m held by the ESOT).
The profits/(losses) used for the earnings per share
calculations are as follows:
2022/23 2021/22
GBPm GBPm
Profit/(loss) for the year attributable to parent
shareholders 278.8 42.5
Adjusting items before tax (Note 6) 38.5 (74.0)
Adjusting tax expense (Note 6) 10.9 26.4
Adjusted profit/(loss) for the year attributable
to parent shareholders 328.2 (5.1)
2022/23 2021/22
pence pence
Basic EPS on profit for the year 138.4 21.1
Adjusting items before tax 19.1 (36.7)
Adjusting tax expense 5.4 13.1
Basic EPS on adjusted profit/(loss) for the year 162.9 (2.5)
Diluted EPS on profit/(loss) for the year 137.5 20.9
Diluted EPS on adjusted loss for the year 161.8 (2.5)
11. Dividends paid and proposed
2022/23 2021/22
pence per pence per
share GBPm share GBPm
----------------------------------------------- --------- ----- --------- ----
Final dividend, proposed and paid, relating
to the prior year 34.70 70.1 - -
Interim dividend, proposed and paid, for
the current year 24.40 49.0 - -
----------------------------------------------- --------- ----- --------- ----
Total equity dividends paid in the year 119.1 -
Dividends on other shares:
B share dividend - - 0.30 -
C share dividend 1.00 - - -
Total dividends paid 119.1 -
----- ----
Proposed for approval at annual general
meeting:
Final equity dividend for the current year 49.80 100.0 34.70 70.0
A final dividend of 49.80p per share amounting to a dividend of
GBP100.0m was recommended by the directors at their meeting on 24
April 2023. A dividend reinvestment plan (DRIP) alternative will be
offered. The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these consolidated financial
statements.
12. Intangible assets
IT software
Goodwill and technology Total
GBPm GBPm GBPm
Cost
At 25 February 2021 350.1 110.0 460.1
Additions - 21.1 21.1
Assets written off - (10.8) (10.8)
Foreign currency translation - (0.1) (0.1)
----------------------------------- ------------------------ ------------------------ ------------------------
At 3 March 2022 350.1 120.2 470.3
Additions - 36.8 36.8
Assets written off - (10.5) (10.5)
Foreign currency translation - 0.2 0.2
----------------------------------- ------------------------ ------------------------ ------------------------
At 2 March 2023 350.1 146.7 496.8
Amortisation and impairment
At 25 February 2021 (239.6) (61.4) (301.0)
Amortisation during the year - (20.9) (20.9)
Amortisation on assets written off - 10.8 10.8
Foreign currency translation - 0.1 0.1
At 3 March 2022 (239.6) (71.4) (311.0)
Amortisation during the year - (16.5) (16.5)
Amortisation on assets written off - 10.5 10.5
Foreign currency translation - (0.2) (0.2)
At 2 March 2023 (239.6) (77.6) (317.2)
Net book value at 2 March 2023 110.5 69.1 179.6
------------------------ ------------------------ ------------------------
Net book value at 3 March 2022 110.5 48.8 159.3
------------------------ ------------------------ ------------------------
Other than goodwill, there are no intangible assets with
indefinite lives. IT software and technology assets, which are made
up entirely of internally generated assets, have been assessed as
having finite lives and are amortised under the straight-line
method over periods ranging from three to ten years from the date
the asset became fully operational.
Note 14 contains details of the impairment review conducted on
goodwill as at the year-end date.
Capital expenditure commitments
Capital expenditure commitments in relation to intangible assets
at the year-end amounted to GBP7.7m (2022: GBP7.3m).
13. Property, plant and equipment and investment property
Total
property,
Land Plant plant Investment
and buildings and equipment and equipment property Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------------- --------------- --------------- ----------- -----------
Cost
At 25 February 2021 3,640.6 1,517.6 5,158.2 21.8 5,180.0
Additions 92.0 128.0 220.0 - 220.0
Interest capitalised 0.9 - 0.9 - 0.9
Movements to assets held for
sale in the year (62.2) (4.5) (66.7) - (66.7)
Disposals (8.8) - (8.8) - (8.8)
Assets written off (4.1) (57.9) (62.0) - (62.0)
Transfers 21.4 - 21.4 (21.4) -
Foreign currency translation (17.8) (2.5) (20.3) (0.4) (20.7)
At 3 March 2022 3,662.0 1,580.7 5,242.7 - 5,242.7
Additions 295.7 208.4 504.1 - 504.1
Interest capitalised 2.5 - 2.5 - 2.5
Movements to assets held for
sale in the year 6.1 3.8 9.9 - 9.9
Disposals (7.0) (2.0) (9.0) - (9.0)
Assets written off (3.9) (73.7) (77.6) - (77.6)
Asset reclassified from right-of-use
asset (3.3) - (3.3) - (3.3)
Foreign currency translation 30.4 4.5 34.9 - 34.9
At 2 March 2023 3,982.5 1,721.7 5,704.2 - 5,704.2
Depreciation and impairment
At 25 February 2021 (287.3) (657.8) (945.1) (0.2) (945.3)
Depreciation charge for the
year (22.9) (135.0) (157.9) - (157.9)
Net impairment reversal/(charge)
(Note 14) 16.9 (2.4) 14.5 - 14.5
Net movements to assets held
for sale in the year 7.3 2.4 9.7 - 9.7
Disposals 0.6 - 0.6 - 0.6
Depreciation on assets written
off 4.1 57.9 62.0 - 62.0
Transfers (0.2) - (0.2) 0.2 -
Foreign currency translation 0.1 0.7 0.8 - 0.8
--------------------------------------- --------------- --------------- --------------- ----------- -----------
At 3 March 2022 (281.4) (734.2) (1,015.6) - (1,015.6)
Depreciation charge for the
year (23.5) (139.7) (163.2) - (163.2)
Net impairment charge (Note
14) (26.4) (15.5) (41.9) - (41.9)
Net movements from assets
held for sale in the year (6.1) (1.8) (7.9) - (7.9)
Disposals 2.2 2.0 4.2 - 4.2
Depreciation on assets written
off 3.9 72.1 76.0 - 76.0
Foreign currency translation (0.4) (1.2) (1.6) - (1.6)
--------------------------------------- --------------- --------------- --------------- ----------- -----------
At 2 March 2023 (331.7) (818.3) (1,150.0) - (1,150.0)
Net book value at 2 March
2023 3,650.8 903.4 4,554.2 - 4,554.2
--------------- --------------- --------------- ----------- -----------
Net book value at 3 March
2022 3,380.6 846.5 4,227.1 - 4,227.1
--------------- --------------- --------------- ----------- -----------
Included above are assets under construction of GBP426.9m (2022:
GBP260.5m).
There is a charge in favour of the pension scheme over
properties with a market value of GBP531.5m (2022: GBP531.5m). See
Note 25 for further information.
Investment property
During 2019/20, the Group acquired a freehold site which was
leased to a third party and was recorded within investment
property. The Group recognised rental income of GBPnil (2021/22:
GBP0.2m) within other income and GBPnil (2021/22: GBP0.1m) of
direct operating expenses in relation to this property.
During 2021/22, the property was transferred to property, plant
and equipment as the lease ended and the Group took over the
operations of the hotel.
Capital expenditure commitments
2023 2022
GBPm GBPm
Capital expenditure commitments for property, plant
and equipment for which no provision has been made 125.4 106.4
Capitalised interest
Interest capitalised during the year amounted to GBP2.5m, using
an average rate of 2.5% (2021/22: GBP0.9m, using an average rate of
2.7%).
Assets held for sale
During the year, eight property assets with a combined net book
value of GBP5.2m (2021/22: four at GBP57.0m) were transferred to
assets held for sale. Seven property assets with a combined net
book value of GBP7.9m were transferred back to property, plant and
equipment (2021/22: no properties). Seven property assets sold
during the year had a net book value of GBP57.5m (2021/22: seven at
GBP11.2m). An impairment charge of GBP1.4m (2021/22: GBPnil) was
recognised relating to assets classified as held for sale. By the
year-end, there were five sites with a combined net book value of
GBP3.2m (2022: eleven at GBP64.8m) classified as assets held for
sale. There are no gains or losses recognised in other
comprehensive income with respect to these assets. Sites are
classified as held for sale only if they are available for
immediate sale in their present condition and a sale is highly
probable and expected to be completed within one year from the date
of classification. If the site does not meet these criteria, it is
subsequently transferred back to property, plant and equipment.
Included within assets held for sale are assets which were
written down to fair value less costs to sell of GBP1.5m (2022:
GBP15.4m). The fair value of property assets was determined based
on current prices in an active market for similar properties. Where
such information is not available, management consider information
from a variety of sources including current prices for properties
of a different nature or recent prices of similar properties,
adjusted to reflect those differences. The key inputs under this
approach are the property size and location.
14. Impairment
During the year, net impairment charges of GBP33.4m (2021/22:
net impairment reversals of GBP36.2m) were recognised within
operating costs. The increase in market interest rates has driven
higher discount rates and has increased impairments in the UK and
Germany. Gross impairment losses in the UK of GBP45.6m, impacted 13
standalone restaurants and those sites where F&B revenues
represent a more significant proportion of total sales. The WACC
increase resulted in further impairments of GBP8.6m which was
offset by impairment reversals of GBP54.9m as the Group recovered
from the COVID-19 pandemic and sites returned to a more normal
level of trading. This resulted in a total net impairment reversal
of GBP0.7m being recorded in the UK. In Germany, the pace of
expansion and a number of portfolio acquisitions where there is a
distribution of performance, which when combined with an increase
in market discount rates, has resulted in a GBP30.8m impairment
charge. In addition, impairment charges of GBP3.3m (2021/22:
impairment charges of GBP5.8m) have been recorded in relation to
assets held for sale during the year. The charges/(reversals) were
recognised on the following classes of assets:
2022/23 2021/22
GBPm GBPm
----------------------------------------------------- ------- -------
Impairment charges/(reversals) included in operating
costs
Property, plant and equipment - impairment charges 76.1 10.1
Property, plant and equipment - impairment reversals (35.5) (30.4)
Property, plant and equipment - transfer to assets
held for sale 1.3 5.8
Right-of-use assets - impairment charges 8.9 0.4
Right-of-use assets - impairment reversals (19.4) (22.1)
Assets held for sale 2.0 -
Total charges/(reversals) for impairment included
in operating costs 33.4 (36.2)
------- -------
All of the impairment assessments take account of expected
market conditions which include future risks including climate
change and climate change related legislation.
Property, plant and equipment and right-of-use assets -
impairment review
Where indicators of impairment are identified, an impairment
assessment is undertaken. The Group considers each trading site to
be a CGU. A trading site will offer a combination of accommodation
and food & beverage services. Some trading sites provide food
& beverage services only. In assessing whether an asset has
been impaired, the carrying amount of the CGU is compared to its
recoverable amount. The recoverable amount is the higher of its
value in use (VIU) and its fair value less costs of disposal
(FVLCD).
The Group calculates a value in use (VIU) for each site. Where
the VIU is lower than the carrying value of the CGU, the Group uses
a range of methods for estimating the fair value less costs of
disposal (FVLCD). These include applying a market multiple to the
CGU EBITDAR and, for leasehold sites, present value techniques
using a discounted cash flow method. Both FVLCD methods rely on
inputs not normally observable by market participants and are
therefore level 3 measurements in the fair value hierarchy.
The key assumptions used by management in estimating value in
use were:
Discount rates
The discount rate is based on the Weighted Average Cost of
Capital (WACC) of a typical market participant, taking into account
specific country and currency risks associated with the Group. The
discount rate has decreased, reflecting market volatility in the
spot risk-free rate and equity risk premium inputs used in the
Group's WACC calculation.
2022/23 2021/22
UK Germany UK Germany
--------------------------------
Average pre-tax discount rate 11.1% 9.9% 8.7% 7.3%
Average post tax discount rate 8.9% 7.5% 7.0% 5.6%
Approved budget period
Forecast cashflow for the initial five-year period are based on
actual cash flows for FY23 and applying management's assumptions of
the
performance of the Group over the next five years.
The key assumptions used by management in setting the Board
approved financial budgets for the initial five-year period were as
follows:
-- Forecast period cashflows: The initial five-year period's
cashflows are drawn from the 5-year business plan which is based on
results from FY23.
-- Forecast growth rates: Forecast growth rates are based on the
Group business plan, which includes assumptions around the UK and
German economies over the next five years.
-- Operating profits are forecast based on historical experience
of operating margins, adjusted for the impact of inflation and cost
saving initiatives.
-- Local factors impacting the site in the current year or
expected to impact the site in future years Key assumptions include
the maturity profile of individual sites, the future potential of
immature sites and the impact of increasing or reducing market
supply in the local area.
Long-term growth rates
A long-term growth rate of 2.0% (2022: 2.0%) was used for cash
flows subsequent to the five-year approved budget/plan period. This
long-term growth rate is a conservative rate and is considered to
be lower than the long-term historical growth rates of the
underlying territories in which the CGUs operate and the long-term
growth rate prospects of the sectors in which the CGUs operate.
The key assumptions used by management in estimating the FVLCD
were:
EBITDAR multiple
An EBITDAR multiple is estimated based on a normalised trading
basis and market data obtained from external sources. This resulted
in a multiple in the range of 7 to 11 times.
Discounted cash flows
The key assumptions used by management in estimating the FVLCD
on a discounted cash flow method were similar to those used in the
value in use assessment, modified to reflect estimated cost of
disposal and lease payments. The inclusion of lease payments is
reflected in the discount rate, increasing WACC for the specific
asset class from 11.1% to 12.3% in the UK and from 9.9% to 11.0% in
Germany.
Sensitivity to changes in assumptions
The level of impairment is predominantly dependent upon
judgements used in arriving at future growth rates and the discount
rates applied to cash flow projections. The impact on the
impairment charge of applying a reasonably possible change in
assumptions to the growth rates used in the five-year business
plan, long-term growth rates, pre-tax discount rates and EBITDAR
multiple would be an incremental impairment charge/(reversal) in
the year to 2 March 2023 of:
Total
GBPm
----------------------------------------------------------------- ------
Increase to impairment charge/(reversal) if year one's cashflows
reduced by 10% 2.0
Increase to impairment charge/(reversal) if discount rates
increased by 2% 14.5
Increase to impairment charge/(reversal) if long-term growth
rates reduced by 1% 9.0
Increase to impairment charge/(reversal) if EBITDAR multiple
reduced by 10% 14.1
Decrease to impairment charge/(reversal) if year one's cashflows
increased by 10% (2.9)
Decrease to impairment charge/(reversal) if discount rates
reduced by 2% (29.3)
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.
The impairment sensitivities above show the downside risk from a
reasonably possible change in the modelled assumptions and are in
line with disclosure requirements.
Goodwill
Goodwill acquired through business combinations is allocated to
groups of CGUs at an operating segment level, being the level at
which management monitors goodwill. All of the Group's goodwill is
allocated to the UK and Ireland segment.
The recoverable amount is the higher of fair value less costs of
disposal and value in use using the same assumptions as those used
in the site level impairment reviews. The recoverable amount has
been determined from value in use calculations. The future cash
flows are based on assumptions from the approved budget and cover a
five-year period. These forecasts include management's most recent
view of medium-term trading prospects. Cash flows beyond this
period are extrapolated using a 2.0% (2022: 2.0%) growth rate. The
pre-tax discount rate applied to cash flow projections is 11.1% for
the UK (2022: 8.7%).
As a result of the German goodwill being impaired in previous
years and the level of headroom within the UK segment, there is no
reasonably possible change that could result in a further material
impairment of goodwill.
Investments in joint ventures
Changes in consumer behaviour following the COVID-19 pandemic
continue to have a significant impact on trading and future
forecasts for trading at one of the Group's joint ventures.
Additional loan funding of GBP1.5m has been provided to Healthy
Retail Limited in the year to 2 March 2023 and subsequently
impaired.
Property, plant and equipment - assets held for sale
During the period, eight hotels were transferred to assets held
for sale, resulting in an impairment charge of GBP1.3m (2021/22:
four hotels resulting in an impairment charge of GBP5.8m) at the
point of transfer. In addition, during 2022/23, an impairment
charge of GBP2.0m (2021/22: GBPnil) was recorded in relation to
assets which had previously been classified as held for sale as a
result of a reduction in expected sales proceeds.
15. Inventories
2023 2022
GBPm GBPm
------------------------------- ----- -----
Finished goods held for resale 15.5 15.0
Consumables 6.2 4.4
----- -----
21.7 19.4
----- -----
The carrying value of inventories is stated net of a provision
of GBP3.2m (2022: GBP2.5m).
16. Trade and other receivables
2023 2022
GBPm GBPm
------------------------------- ------ ------
Trade receivables 46.0 45.5
Prepayments and accrued income 49.8 24.2
Other receivables 46.0 46.7
------ ------
141.8 116.4
------ ------
Analysed as:
Current 141.8 116.4
Non-current - -
------ ------
141.8 116.4
------ ------
Trade and other receivables are non-interest bearing and are
generally on 30-day terms. Trade receivables includes GBP45.1m
(2022: GBP44.2m) relating to contracts with customers.
The allowance for expected credit loss relating to trade and
other receivables at 2 March 2023 was GBP1.7m (2022: GBP2.0m).
During the year, credit losses of GBP1.2m (2021/22: GBP2.7m) were
recognised within operating costs in the consolidated income
statement.
17. Cash and cash equivalents
2023 2022
GBPm GBPm
------------------------- -------- -------
Cash at bank and in hand 60.2 43.5
Money market funds 769.6 757.3
Short term deposits 335.0 331.6
-------- -------
1,164.8 1,132.4
-------- -------
Short-term deposits are made for varying periods of between one
day and three months depending on the immediate cash requirements
of the Group. They earn interest at the respective short-term
deposit rates.
The Group does not have material cash balances which are subject
to contractual or regulatory restrictions.
For the purposes of the consolidated cash flow statement, cash
and cash equivalents comprise the amounts as disclosed above.
18. Borrowings
Amounts drawn down on the Group's borrowing facilities are as
follows:
Current Non-current
-------------- -------------
2023 2022 2023 2022
GBPm GBPm GBPm GBPm
-------------------------- ------ ------ ------ -----
Revolving credit facility - - - -
Senior unsecured bonds - - 993.4 991.9
------ ------
- - 993.4 991.9
------ --------------------------------- ------ -----
Revolving credit facility and covenant
The revolving credit facility which at 3 March 2022 was
GBP850.0m, was replaced on 25 May 2022 with a new 5 year GBP775.0m
multicurrency
revolving credit facility agreement. The new revolving credit
facility agreement contains one financial covenant ratio, being
net Debt/adjusted EBITDA <3.5x
At 2 March 2023, the Group had available GBP775.0m (2022:
GBP850.0m) of undrawn committed borrowing facilities in respect of
revolving credit facilities on which all conditions precedent had
been met.
Senior unsecured bonds
The Group has issued 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 bond 2021 GBP300.0m 31 May 2027 2.375%
2031 senior unsecured green use
of proceeds bond 2021 GBP250.0m 31 May 2031 3.000%
Amortised arrangement fees of GBP2.6m (2022: GBP3.4m) directly
incurred in relation to the bonds are included in the carrying
value and are being amortised over the term of the bonds. The bonds
contain an early prepayment option which meets the definition of an
embedded derivative.
19. Movements in cash and net debt
Fair value Amortisation
3 March Cash Net new Foreign adjustments of premiums 2 March
2022 flow lease liabilities exchange to loans and discounts 2023
Year ended 2 March 2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- ------- ------------------ --------- ------------ --------------- ----------
Cash and cash
equivalents 1,132.4 30.5 - 1.9 - - 1,164.8
Liabilities from
financing
activities:
Borrowings (991.9) - - - - (1.5) (993.4)
Lease liabilities (3,701.8) 133.9 (346.1) (44.4) - - (3,958.4)
--------- ------- ------------------ --------- ------------ --------------- ----------
Total liabilities from
financing activities (4,693.7) 133.9 (346.1) (44.4) - (1.5) (4,951.8)
Less: Lease liabilities 3,701.8 (133.9) 346.1 44.4 - - 3,958.4
Net cash 140.5 30.5 - 1.9 - (1.5) 171.4
--------- ------- ------------------ --------- ------------ --------------- ----------
Fair value Amortisation
25 February Cash Net new Foreign adjustments of premiums 3 March
2021 flow lease liabilities exchange to loans and discounts 2022
Year ended 3 March 2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ----------- ------- ------------------ --------- ------------ --------------- ---------
Cash and cash
equivalents 1,256.0 (123.0) - (0.6) - - 1,132.4
Liabilities from
financing
activities:
Borrowings (1,302.5) 303.9 - 8.1 - (1.4) (991.9)
Lease liabilities (3,231.6) 127.1 (619.4) 22.1 - - (3,701.8)
Derivatives held to
hedge
financing activities 5.8 - - - (5.8) - 0.0
----------- ------- ------------------ --------- ------------ --------------- ---------
Total liabilities from
financing activities (4,528.3) 431.0 (619.4) 30.2 (5.8) (1.4) (4,693.7)
Less: Lease liabilities 3,231.6 (127.1) 619.4 (22.1) - - 3,701.8
Less: Derivatives held
to hedge financing
activities (5.8) - - - 5.8 - -
Net (debt)/cash (46.5) 180.9 - 7.5 - (1.4) 140.5
----------- ------- ------------------ --------- ------------ --------------- ---------
20. Provisions
Onerous Property Insurance Government
Restructuring contracts costs claims payments Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ------------------ ----------- ------------ ----------- ---------------- ----------- ----------
At 25 February
2021 1.1 10.1 15.7 7.2 3.6 1.8 39.5
Created 0.4 0.9 - 3.0 11.8 - 16.1
Utilised (0.8) (5.3) (9.1) (2.0) (3.8) - (21.0)
Released (0.3) (0.7) - - (2.3) - (3.3)
At 3 March
2022 0.4 5.0 6.6 8.2 9.3 1.8 31.3
Created - 2.0 - 2.8 - 0.8 5.6
Transferred - - - - 2.3 - 2.3
Utilised - (1.4) (1.0) (2.3) (0.1) (0.1) (4.9)
Released (0.4) (0.9) - - (4.7) - (6.0)
Foreign
exchange - - - - 0.2 - 0.2
------------------ ----------- ------------ ----------- ---------------- ----------- ----------
At 2 March
2023 - 4.7 5.6 8.7 7.0 2.5 28.5
------------------ ----------- ------------ ----------- ---------------- ----------- ----------
Analysed as:
Current - 4.7 5.6 0.4 7.0 2.5 20.2
Non-current - - - 8.3 - - 8.3
------------------ ----------- ------------ ----------- ---------------- ----------- ----------
At 2 March
2023 - 4.7 5.6 8.7 7.0 2.5 28.5
------------------ ----------- ------------ ----------- ---------------- ----------- ----------
Restructuring
A provision of GBP0.4m was brought forward in relation to the
restructure of the Group's Support Centre and site operations.
During the year the Group released the remaining provision to the
income statement.
Onerous contracts
Onerous contract provisions relate primarily to property,
software licences and supplier contracts where the contracts have
become onerous. Provision is made for property-related costs for
the period that a sublet or assignment of the lease is not
possible.
Onerous contract provisions are discounted using a discount rate
of 2.0% (2022: 2.0%) based on an approximation for the time value
of money.
Property-related
The amount and timing of the cash outflows are subject to
variation. The Group utilises the skills and expertise of both
internal and external property experts to determine the provision
held. Provisions are expected to be utilised over a period of up to
12 years and GBP0.2m has been utilised in the year. During the
year, the Group created GBP1.8m and released GBP0.9m of
property-related onerous provisions.
Software
Certain software licence agreements were deemed to be onerous
when, following the disposal of Costa, it was no longer beneficial
to the Group to use the software. In addition, a provision was
created in FY20 as a result of the cancellation of a contract
relating to the supply of IT equipment. A provision of GBP0.8m was
brought forward in relation to these contracts. During the year,
the Group utilised GBP0.3m (2022: GBP0.4m) of this provision, with
the provision carried forward to be utilised over a two-year
period. The software intangible assets associated with these
contracts have been fully impaired in previous financial years.
Supplier contracts
Certain supplier contract arrangements were deemed to be onerous
where, as a result of the reduced trading brought on by the
COVID-19 pandemic restrictions minimum order commitments were not
going to be met. A provision of GBP1.1m was brought forward in
relation to these contracts. During the year the Group utilised
GBP0.9m of the provision and created a further GBP0.2m of
provision.
Property costs
From FY18 to FY20, the Group established a provision for the
performance of remedial works on cladding material at a small
number of the Group's sites. As a result, a provision of GBP6.6m is
brought forward in relation to these costs. During the year GBP1.0m
of the provision has been utilised. All of the remaining provision
is expected to be utilised within one year.
Insurance
A provision of GBP8.2m was brought forward in relation to the
estimate of the cost of future claims against the Group from
employees and the public. The claims covered typically relate to
accidents and injuries sustained in Whitbread's sites. During the
year further provisions of GBP2.8m were created and GBP2.3m of the
provision was utilised.
Government payments
The Group has made various claims for government support which
are subject to the review by relevant agencies. The provision
recognised represented the Group's best estimate of amounts
potentially repayable under previously submitted claims, and for
potential historical indirect tax repayments. A provision of
GBP9.3m was brought forward in relation to these claims. During the
year, on confirmation of receipt for grants recognised in the
previous financial year for costs related to that year the accrued
provision against the other receivable of GBP2.3m was transferred
into provisions, GBP0.1m of the provision was utilised with GBP4.7m
of the provision released. Due to the complex nature and fast pace
of changes in the rules around certain Government payments, the
Group has always endeavoured to apply and adhere to the rules in
place. In certain areas where a rule interpretation was required,
the Group has claimed in accordance with its assumptions.
Subsequent third-party review had highlighted that an
alternative assumption could be formed and, on the basis of a
probable outflow, a provision based on that approach has been made.
As disclosed within Note 9, during the year, a provision being held
in relation to any potential repayments required in respect of the
interpretations and assumptions made by Whitbread for UK
Coronavirus Job Retention Scheme claims was released as management
is satisfied that no repayments are required following an HMRC
review.
Other
In July 2016, the Group announced its intention to exit hotel
operations in South East Asia. This resulted in the recognition of
a provision of GBP3.7m for risks arising from tax affairs and
indemnity agreements. At 2 March 2023, GBP0.1m of the provision had
been utilised in the year, with GBP1.7m of the provision still held
for risks arising from indemnity agreements. The remaining costs
are expected to be utilised within one year.
The Group operates leases where it neither anticipates nor
intends exiting a lease, therefore the Group has determined that
the circumstances in which these leases would end mean that an
outflow of resources is not considered probable and therefore it
does not hold a material dilapidations provision.
21. Financial risk management and objectives
The Group's principal financial instruments, other than
derivatives, comprise bank loans, senior unsecured bonds, cash,
short-term deposits, trade receivables and trade payables. The
Board agrees policies for managing the financial risks summarised
below:
Interest rate risk
The Group's exposure to market risk for changes in interest
rates relates primarily to the Group's long-term debt obligations.
Interest rate swaps are used where necessary to maintain a mix of
fixed and floating rate borrowings to manage this risk, in line
with the Group treasury policy. At the year-end, (100%) of Group
debt was fixed for an average of 4.5 years at an average interest
rate of 3.0% (2022: 100% for 5.5 years at 3.0%). The interest rate
swaps for sterling expired in February 2022.
In accordance with IFRS 7 Financial Instruments: Disclosures,
the Group has undertaken sensitivity analysis on its financial
instruments which are affected by changes in interest rates. This
analysis has been prepared on the basis of a constant amount of net
debt, a constant ratio of fixed to floating interest rates, and on
the basis of the hedging instruments in place at 2 March 2023 and 3
March 2022 respectively. Consequently, the analysis relates to the
situation at those dates and is not representative of the years
then ended. The following assumptions were made:
-- balance sheet sensitivity to interest rates applies only to
derivative financial instruments, as the carrying value of debt and
deposits does not change as interest rates move; and
-- gains or losses are recognised in equity or the consolidated
income statement in line with the Groups accounting policies set
out in Note 2.
Based on the Group's net debt/cash position at the year-end, a
1% pt increase in interest rates would increase the Group's profit
before tax by GBP11.6m (2022: GBP11.3m).
Liquidity risk
In its funding strategy, the Group's objective is to maintain a
balance between the continuity of funding and flexibility through
access to a revolving credit facility, additional uncommitted
credit lines and the bond market. This strategy includes monitoring
the maturity of financial liabilities to avoid the risk of a
shortage of funds.
Excess cash used in managing liquidity is placed on
interest-bearing deposit where maturity is fixed at no more than
three months. Short-term flexibility is achieved through the use of
short-term borrowing on the money markets.
The tables below summarise the maturity profile of the Group's
financial liabilities at 2 March 2023 and 3 March 2022 based on
contractual undiscounted payments, including interest:
Less More
than 3 to 1 to than Carrying
On demand 3 months 12 months 5 years 5 years Total value
2 March 2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------------- -------------- --------------- ---------------- ------------- -------------
Non-derivative
financial
assets/liabilities:
Interest-bearing
loans and borrowings - 14.6 15.2 824.3 294.6 1,148.7 993.4
Lease liabilities(1) - 70.9 217.6 862.1 5,437.3 6,587.9 3,958.4
Trade and other
payables - 198.9 - 3.8 - 202.7 202.7
- 284.4 232.8 1,690.2 5,731.9 7,939.3 5,154.5
Derivative financial
assets/liabilities:
Cross-currency
swaps
Derivative contracts
- receipts - - (15.2) (480.4) - (495.6)
Derivative contracts
- payments - - 9.8 481.7 - 491.5
- - (5.4) 1.3 - (4.1)
Total - 284.4 227.4 1,691.5 5,731.9 7,935.2
------ -------------- ------------ ----------- ------------
Less More
than 3 to 1 to than Carrying
On demand 3 months 12 months 5 years 5 years Total value
3 March 2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------------- --------------- --------------- ---------------- ------------- -------------
Non-derivative
financial
assets/liabilities:
Interest-bearing
loans and borrowings - 19.0 15.2 554.1 594.6 1,182.9 991.9
Lease liabilities(1) - 67.3 206.5 1,116.5 4,918.3 6,308.6 3,701.8
Trade and other
payables - 163.6 12.4 1.2 - 177.2 176.9
- 249.9 234.1 1,671.8 5,512.9 7,668.7 4,870.6
Derivative financial
assets/liabilities:
Cross-currency
swaps
Derivative contracts
- receipts - - (15.2) (495.6) - (510.8)
Derivative contracts
- payments - - 9.1 459.1 - 468.2
- - (6.1) (36.5) - (42.6)
Total - 249.9 228.0 1,635.3 5,512.9 7,626.1
------ -------------- ------------- ----------- -------------
(1) Contractual undiscounted payments relating to lease
liabilities due in more than 5 years includes GBP1,401.2m (2022:
GBP1,324.5m) due between 5 and 10 years, GBP2,271.1m (2022:
GBP1,925.3m) due between 10 and 20 years and GBP1,765.0m (2022:
GBP1,668.5m) due in more than 20 years.
Credit risk
Due to the high level of cash held at the year-end, the most
significant credit risk faced by the Group is that arising on cash
and cash equivalents. The Group's exposure arises from default of
the counterparty, with a maximum exposure equal to the carrying
value of these instruments. The Group seeks to minimise the risk of
default in relation to cash and cash equivalents by spreading
investments across a number of counterparties and dealing in
accordance with Group Treasury Policy which specifies acceptable
credit ratings and maximum investments for any counterparty.
In the event that any of the Group's banks get into financial
difficulty, the Group is exposed to the risk of withdrawal of
currently undrawn committed facilities. This risk is mitigated by
the Group having a range of counterparties to its facilities.
The Group is exposed to a small amount of credit risk
attributable to its trade and other receivables. This is minimised
by dealing with counterparties with good credit ratings. The
amounts included in the balance sheet are net of expected credit
losses, which have been estimated by management based on prior
experience and any known factors at the balance sheet date.
The Group's maximum exposure to credit risk arising from trade
and other receivables, loans to joint ventures, derivatives and
cash and cash equivalents is GBP1,256.9m (2022: GBP1,240.4m).
Foreign currency risk
The Group monitors the growth and risks associated with its
overseas operations and will undertake hedging activities as and
when they are required. In October 2019, the Group entered into a
net investment hedge to manage the impact of movements in the
GBP:EUR exchange rate on the value of the Group's investment in its
business in Germany.
Capital management
The Group's primary objective in regard to capital management is
to ensure that it continues to operate as a going concern and has
sufficient funds at its disposal to grow the business for the
benefit of shareholders. The Group seeks to maintain a ratio of
debt to equity that balances risks and returns and also complies
with the Group's net debt to EBITDA covenant. See the Financial
review within the preliminary results announcement for the policies
and objectives of the Board regarding capital management, analysis
of the Group's credit facilities and financing plans for the coming
years.
The Group aims to maintain sufficient funds for working capital
and future investment in order to meet growth targets. The
management of equity through share buybacks and new issues is
considered as part of the overall leverage framework balanced
against the funding requirements of future growth. In addition, the
Group may carry out a number of sale and leaseback transactions to
provide further funding for growth.
The revolving credit facility, which at 3 March 2022 was
GBP850.0m, was replaced on 25 May 2022 with a new 5 year GBP775.0m
multicurrency revolving credit facility agreement. The new
revolving credit facility agreement contains one financial covenant
ratio, being: Net Debt/Adjusted EBITDA <3.5x.
The above matters are considered at regular intervals and form
part of the business planning and budgeting processes. In addition,
the Board regularly reviews the Group's dividend policy and funding
strategy.
22. Trade and other payables
2023 2022
GBPm GBPm
-------------------------- ----------------- -----------------
Trade payables 95.2 73.7
Other taxes and social
security 40.2 25.8
Contract liabilities 197.8 146.2
Accruals 239.8 223.0
Other payables 103.7 78.1
Contingent consideration 3.8 25.1
680.5 571.9
Analysed as:
Current 676.7 570.7
Non-current 3.8 1.2
680.5 571.9
Included with contract liabilities is GBP195.8m (2022:
GBP141.4m) relating to payments received for accommodation where
the stay will take place after the year-end and GBP4.0m (2022:
GBP4.8m) revenue deferred relating to the Group's customer loyalty
programmes. During the year, GBP146.2m presented as a contract
liability in 2022 has been recognised in revenue (2022:
GBP41.3m).
Trade payables typically have maturities up to 60 days depending
on the nature of the purchase transaction and the agreed terms.
2023 2022
GBPm GBPm
--------------------------------- --------------- -----------------
Opening deferred and contingent
consideration 25.1 62.8
Recognised on acquisition 2.5 -
of assets (Note 27)
Unwinding of discount rate
(Note 7) 0.2 1.4
Paid during the period (25.3) (36.3)
Foreign exchange movements 1.3 (2.8)
Closing deferred and contingent
consideration 3.8 25.1
The Group has contingent consideration in relation to four
pipeline sites from acquisitions in the current and previous years
which is held at fair value. The amounts payable are fixed and
become payable once development of the site is complete and the
site has been handed over to the Group, which is expected to occur
within two years. The fair value is calculated by discounting the
future payments from their expected handover date using a risk
adjusted discount rate. A 1% decrease/increase in the discount rate
would increase/decrease the value of contingent consideration by
GBP0.1m.
Foreign exchange movements on contingent consideration are
recognised within exchange differences on translation of foreign
operations in the consolidated statement of comprehensive
income.
23. Share capital
Ordinary share capital
Allotted, called up and fully paid ordinary shares of
76.80p each (2022: 76.80p each) million GBPm
------------------------------------------------------- ------------ ---------------
At 3 March 2022 214.5 164.8
Issued on exercise of employee share options 0.1 0.1
At 2 March 2023 214.6 164.9
During the year, 1.3m shares were purchased by the Group's
independently managed Employee Share Ownership Trust (ESOT) for
consideration of GBP31.7m.
24. Analysis of cash flows given in the cash flow statement
2022/23 2021/22
GBPm GBPm
----------------------------------------- -------------- ---------------
Profit for the year 278.8 42.5
Adjustments
for:
Tax expense 96.1 15.7
Net finance costs (Note
7) 130.1 169.1
Share of profit from joint
ventures (2.3) (0.4)
Depreciation and amortisation 345.5 326.9
Share-based payments 17.7 12.9
Net impairment charge/(reversals)
(Note 14) 34.9 (34.4)
Gains on disposals, property,
and other provisions (4.0) (28.8)
Other non-cash
items 0.6 7.7
Cash generated from operations before
working capital changes 897.4 511.2
Increase in inventories (2.3) (7.3)
Increase in trade and other receivables (10.9) (45.4)
Increase in trade and other payables 112.1 235.2
Cash generated from operations 996.3 693.7
-------------- ---------------
Other non-cash items include an outflow of GBP0.3m representing
bad debt charges (2021/22: GBP0.8m inflow), an outflow of GBP0.7m
(2021/22: GBP4.3m inflow) as a result of net provision movements,
an inflow of GBP3.6m (2021/22: GBP2.6m inflow) representing
non-cash pension scheme administration costs and an outflow of
GBP2.1m (2021/22: GBPnil) from foreign exchange gains.
25. Retirement benefits
Defined benefit scheme
During the year to 2 March 2023, the defined benefit pension
scheme has moved from a surplus of GBP522.6m to a surplus of
GBP324.7m. The main movements in the surplus are as follows:
GBPm
-------------------------------------------------- -------
Pension surplus at 3 March 2022 522.6
Administrative expenses (3.6)
Net interest on pension liability and assets 13.6
Losses recognised in other comprehensive income (223.6)
Contributions from employer 15.6
Benefits paid directly by the Company in relation
to an unfunded pension scheme 0.1
Pension surplus at 2 March 2023 324.7
-------
The surplus has been recognised as 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 IFRIC14.
The defined benefit scheme entered into a GBP660.7m buy-in
transaction covering 50% of pensioners on 23 June 2022 whereby the
assets of the plan were invested in a bulk purchase annuity policy
with the insurer, Standard Life, under which the benefits payable
to defined benefit members covered under the policy became fully
insured. The difference between the cost of the insurance policy
and the accounting value of the liabilities secured was GBP68.7m
and has been recorded within actuarial losses in the consolidated
statement of other comprehensive income.
The principal assumptions used by the independent qualified
actuaries in updating the most recent valuation carried out as at
31 March 2020 of the UK scheme to 2 March 2023 for IAS 19 Employee
benefits purposes were:
At At
2 March 2023 3 March 2022
% %
--------------------------------------------------------- ------------- -------------
Pre-April 2006 rate of increase in pensions in payment 3.20 3.40
Post-April 2006 rate of increase in pensions in payment 2.20 2.30
Pension increases in deferment 3.20 3.40
Discount rate 5.00 2.60
Inflation assumption 3.30 3.60
The mortality assumptions are based on standard mortality tables
which allow for future mortality improvements. The mortality
improvements assumption has been updated to use the CMI 2021 model
(2022: CMI 2020). The CMI 2021 model parameters include some
weighting for 2021 mortality experience. The assumptions are that a
member currently aged 65 will live on average for a further 19.7
years (2022: 20.0 years) if they are male and for a further 22.4
years (2022: 22.6 years) if they are female. For a member who
retires in 2043 at age 65, the assumptions are that they will live
on average for a further 20.7 years (2022: 21.1 years) after
retirement if they are male and for a further 23.6 years (2022:
23.8 years) after retirement if they are female.
During the previous year, the Group changed its methodology for
determining the discount rate to include single-AA corporate
bonds.
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:
Decrease/(increase) in liability
2023 2022
GBPm GBPm
------------------------------------------------- ------------ ---------------------
Discount rate
2.00% increase to discount rate 357.0
2.00% decrease to discount rate (548.0)
1.00% increase to discount rate 359.0
1.00% decrease to discount rate (458.0)
Inflation
0.25% increase to inflation rate (39.0) (73.0)
0.25% decrease to inflation rate 38.0 72.0
Life expectancy
Additional one-year increase to life expectancy (71.3) (126.0)
The above sensitivity analyses are based on a change in an
assumption whilst holding all other assumptions constant. In
practice, this is unlikely to occur and changes in some of the
assumptions may be correlated. Where the discount rate is changed,
this will have an impact on the valuation of scheme assets in the
opposing direction. The above sensitivities table shows only the
expected changes to the gross defined benefit obligation
(liability). When calculating the sensitivity of the defined
benefit obligation to significant actuarial assumptions, the same
method (projected unit credit method) has been applied as when
calculating the pension liability recognised within the
consolidated balance sheet. The methods and types of assumptions
did not change.
26. Events after the Balance Sheet Date
Share buy-back
The Board of Directors approved a share buy-back on 24 April
2023 for GBP300.0m and is in the process of appointing the relevant
brokers to undertake the programme in accordance with that
approval.
27. Asset Acquisitions
Acquisition in 2022/23
On 1 March 2023, the Group acquired the freehold interest of one
hotel in Austria and was assigned the leasehold of five hotels
within Germany for cash consideration of GBP25.9m and deferred
consideration of GBP2.5m.
This transaction has been accounted for as an asset acquisition
under IFRS 3 Business Combinations as the fair value of the assets
is concentrated in a single group of similar assets. On
acquisition, the Group has recognised PPE of GBP26.3m, right-of-use
assets of GBP47.1m and lease liabilities of GBP44.4m in relation to
the hotels acquired. The transaction formed part of the Group's
strategic priority of international growth.
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
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 the Group has 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 restaurants
and integrated hotel restaurants.
GOSH charity
Great Ormond Street Hospital Children's Charity.
IFRS
International Financial Reporting Standards.
Lease debt
Eight times adjusted property rent.
Occupancy
Number of hotel bedrooms occupied by guests expressed as a
percentage of the number of bedrooms available in the period.
Operating profit
Profit before net finance costs and tax.
OTAS
Online travel agents.
Property rent
IFRS 16 property lease interest and depreciation plus variable
lease payments, adjusted for deferred rental amounts. This is used
as a proxy for rent expense as recorded under IAS 17 in arriving at
funds from operations.
Rent expense
Rental costs recognised in the income statement prior to the
adoption of IFRS 16.
Team retention
The number of permanent new starters that we retain for the
first 90 days/three months.
Trading site
A joint hotel and restaurant or a standalone hotel or
restaurant.
WINcard
Whitbread In Numbers - balanced scorecard to measure progress
against key performance targets.
YourSay
Whitbread's annual employee opinion survey to provide insight
into the views of employees.
Alternative Performance Measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way that the business performance is
measured internally.
APMs are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS measure to IFRS measure
REVENUE MEASURES
Accommodation Revenue Exclude non-room Premier Inn accommodation revenue excluding
sales revenue such non-room income such as
as food and food and beverage. The growth in accommodation
beverage sales on a year-on-year basis is a good
indicator of the performance of the
business.
Reconciliation: Note 3
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 2022/23 2021/22
UK Accommodation sales
(GBPm) 1,795.0 1,157.8
Number of rooms occupied
by guests ('000) 24,984 20,430
--------- --------
UK average room rate
(GBP) 71.84 56.67
Germany Accommodation
sales (GBPm) 100.1 29.1
Number of rooms occupied
by guests ('000) 1,606 718
Germany average room
rate (GBP) 62.36 40.53
--------- --------
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
the segment useful measure as it is a commonly used
information performance metric and provides an indication
(Note 3) of underlying revenue trends.
Reconciliation 2022/23 2021/22
UK like-for-like revenue
growth 50.0% 189.8%
Contribution from net
new hotels 5.0% 8.2%
-------- --------
UK Accommodation sales
growth 55.0% 198.0%
Three year Movement Accommodation Change in revenue for outlets open for
UK like-for-like in accommodation sales from at least three years. This is a
revenue growth sales per non like-for-like temporary measure introduced to provide
segment information a comparison between the
(Note 3) current year and the comparative period
before the impact of the
COVID-19 pandemic.
Reconciliation 2022/23 2021/22
UK like-for-like revenue
growth 26.5% (15.5%)
Contribution from net
new hotels 10.4% 3.8%
-------- --------
UK Accommodation sales
growth 36.9% (11.7%)
Revenue per No direct Refer to Revenue per available room is also known
available equivalent definition as 'yield'. This hotel measure is achieved
room (RevPAR) by dividing accommodation sales by the
number of rooms
available. The directors consider this
to be a useful measure as it is a commonly
used performance measure in the hotel
industry.
Reconciliation 2022/23 2021/22
UK Accommodation sales
(GBPm) 1,795.0 1,157.8
Available rooms ('000) 30,193 29,928
--------- --------
UK REVPAR (GBP) 59.45 38.69
Germany Accommodation
sales (GBPm) 100.1 29.1
Available rooms ('000) 2,703 1,765
--------- --------
Germany REVPAR (GBP) 37.04 16.49
INCOME STATEMENT MEASURES
Adjusted(1) Profit/loss Adjusting Profit/loss before tax, finance costs/income
operating before tax items and adjusting items
profit/loss (Note 6), Reconciliation: Consolidated income
finance income/costs statement
(Note 7)
Adjusted(1) Tax expense/credit Adjusting Tax expense/credit before adjusting
tax items items.
(Note 6) Reconciliation: Consolidated income
statement
Adjusted(1) Profit/loss Adjusting Profit/loss before tax and adjusting
profit/loss before tax items items.
before tax (Note 6) Reconciliation: Consolidated income
statement
Adjusted(1) Basic EPS Adjusting Adjusted profit attributable to the
basic EPS items parent shareholders divided by the basic
(Note 6) 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 10
Cohort of Germany adjusted Refer to Germany adjusted loss before tax for
established loss before definition the cohort of established German hotels,
German hotels tax those defined as open and trading for
adjusted(1) more than 12 months as at the beginning
profit before of the financial year. This excludes
tax administration and overhead costs. The
directors consider this to be a useful
measure to assess the performance of
the established hotels operating within
Germany.
Reconciliation 2022/23
GBPm
Germany adjusted loss
before tax (Note 3) (49.7)
Loss for hotels open
and trading for less
than 12 months from beginning
of the financial year 27.9
Administration and overhead
costs 26.2
--------
Cohort of established
German hotels adjusted
profit before tax 4.4
Allocation of German
segment hotels 2022/23
Established German hotels 18
Hotels open and trading
for less than 12 months
from beginning of the
financial year(2) 33
--------
German segment hotels 51
Profit margin No direct Refer to Segmental adjusted profit before tax
equivalent definition divided by segmental adjusted revenue,
to demonstrate profitability margins
of the segmental operations.
Reconciliation: Business review
BALANCE SHEET MEASURES
Net cash/debt 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.
financing Reconciliation: Note 21
activities
Adjusted net Total liabilities Exclude lease Net cash/debt adjusted for cash, assumed
cash/debt 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.
an adjustment
for cash
assumed by
ratings agencies
to not be
readily available
2022/23 2021/22
Reconciliation GBPm GBPm
Net cash (171.4) (140.5)
Restricted cash adjustment 10.0 10.0
Adjusted net cash (161.4) (130.5)
Lease-adjusted Total liabilities Exclude lease This measure has been changed to align
net debt/cash from financing liabilities to Fitch methodology post IFRS16. Adjusted
activities and derivatives net debt plus lease debt. The directors
held to hedge consider this to be
financing a useful measure as it forms the basis
activities. of the Group's leverage targets.
Includes
an adjustment
for cash
assumed by
rating agencies
to not be
readily available
2022/23 2021/22
Reconciliation GBPm GBPm
Adjusted net cash (161.4) (130.5)
Lease debt 2,436.0 2,250.3
--------- --------
Lease-adjusted net debt 2,274.6 2,119.8
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
2022/23 2021/22
Reconciliation GBPm GBPm
Net cash (171.4) (140.5)
Lease liabilities 3,958.4 3,701.8
-------- --------
Net debt and lease liabilities 3,787.0 3,561.3
CASH FLOW MEASURES
Discretionary Cash generated Refer to Cash generated from operations after
free cash from operations definition payments for interest, tax, payment
flow of principal of lease liabilities and
maintenance capital expenditure. The
directors consider this to be a useful
measure as it is a good indicator of
the cash generated which is available
to fund future growth or shareholder
returns.
Reconciliation: Business review
Funds from Net cash Refer to This measure has been changed to align
operations flows from definition to Fitch methodology post IFRS16. Net
(FFO) operating cash flows from operating activities
activities after adding back working capital movements,
cash interest and interest on lease
liabilities.
2022/23 2021/22
Reconciliation GBPm GBPm
Net cash flow from operations 799.9 508.7
Working capital movements (98.9) (182.5)
Cash interest 9.4 18.0
Interest on lease liabilities 138.7 133.2
--------
Funds from operations 849.1 477.4
Lease-adjusted No direct Refer to This measure has been changed to align
net debt to equivalent definition to Fitch methodology post IFRS16. Ratio
FFO of lease-adjusted net debt compared
with FFO.
2022/23 2021/22
Reconciliation GBPm GBPm
Lease-adjusted net debt 2,274.6 2,119.8
Funds from operations 849.1 477.4
--------
Lease-adjusted net debt
to FFO 2.7x 4.4x
Adjusted(1) Cash generated Refer to Adjusted operating profit/loss adding
operating from operations definition back depreciation and amortisation and
cash flow 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,
shareholder returns, tax, pension and
interest payments.
2022/23 2021/22
Reconciliation GBPm GBPm
Adjusted operating profit 543.5 153.3
Depreciation - right-of-use
assets 165.8 148.1
Depreciation - property,
plant and
equipment 163.2 157.9
Amortisation 16.5 20.9
--------- --------
Adjusted EBITDA (post-IFRS
16) 889.0 480.2
Interest paid - lease
liabilities (138.7) (133.2)
Payment of principal
of lease liabilities (133.9) (127.1)
Net lease incentives
received 3.5 2.0
Movement in working capital 98.9 182.5
--------- --------
Adjusted operating cash
flow 718.8 404.4
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, payments of deferred
and contingent consideration, and capital
contributions or loans to joint ventures.
OTHER MEASURES
Adjusted(1) Operating Refer to Adjusted EBITDA (post-IFRS 16) is profit
EBITDA profit/loss definition before tax, adjusting items, interest,
(post-IFRS depreciation and amortisation. Adjusted
16), EBITDA (pre-IFRS 16) is further adjusted
Adjusted(1) to remove rent expense. Adjusted EBITDAR
EBITDA is profit before tax, adjusting items,
(pre-IFRS interest, depreciation, amortisation,
16) variable lease payments and rental income.
and Adjusted(1) The directors consider these measures
EBITDAR to be useful as they are commonly used
industry metrics which facilitate comparison
between companies on a before and after
IFRS 16 basis.
2022/23 2021/22
Reconciliation GBPm GBPm
Adjusted operating profit 543.5 153.3
Depreciation - right-of-use
assets 165.8 148.1
Depreciation - property,
plant and equipment 163.2 157.9
Amortisation 16.5 20.9
-------- --------
Adjusted EBITDA (post-IFRS
16) 889.0 480.2
Variable lease payment
expense 2.1 0.3
Rental income (3.1) (7.9)
-------- --------
Adjusted EBITDAR 888.0 472.6
Rent expense, variable
lease payments and rental
income (269.9) (230.7)
-------- --------
Adjusted EBITDA (pre-IFRS
16) 618.1 241.9
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/cash, right-of-use assets,
lease liabilities, taxation assets/liabilities,
the pension surplus/deficit and derivative
financial assets/liabilities, other
financial liabilities and IFRS 16 working
capital adjustments. The directors consider
this to be a useful measure as it expresses
the underlying operating efficiency
of the Group and is used as the basis
for remuneration targets. A comparative
is not disclosed as this measure was
not utilised during those financial
periods heavily impacted by COVID-19.
2022/23 2022/23
UK &
Total Ireland
Reconciliation GBPm GBPm
Adjusted operating profit 543.5
Depreciation - right-of-use
assets 165.8
Rent expense (270.9)
-------- ---------
Adjusted operating profit
(pre-IFRS 16) 438.4 477.6
Net assets 4,111.4
Net cash (171.4)
Current tax liabilities 4.6
Deferred tax liabilities 158.2
Pension surplus (324.7)
Derivative financial
liabilities 7.8
Lease liabilities 3,958.4
Right-of-use assets (3,504.6)
IAS 17 rent adjustments (65.0)
----------- --------
Adjusted net assets 4,174.7 3,694.8
Return on capital employed 10.5% 12.9%
------ ------
(1) Adjusted measures of profitability represent the equivalent
IFRS measures adjusted for specific items that we consider relevant
for comparison of the Group's business either from one period to
another or with similar businesses. We report adjusted measures
because we believe they provide both management and investors with
useful additional information about the financial performance of
the Group's businesses.
(2) Of these 33 hotels open and trading for less than 12 months
from the beginning of the financial year, there are five hotels
that were open for more than 12 months but did not trade
continuously for more than 12 months from the beginning of the
financial year.
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END
FR BZLLLXZLFBBZ
(END) Dow Jones Newswires
April 25, 2023 02:00 ET (06:00 GMT)
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