TIDMWTB
RNS Number : 4447Q
Whitbread PLC
18 October 2023
Strong H1 performance driven by our differentiated business
model
Positive outlook based on current trading and favourable supply
backdrop
Increased dividend and further GBP300m capital return
H1 FY24 Group Financial Summary
GBPm H1 FY24 H1 FY23 vs H1
FY23
======================================== ========== ========= ==========
Statutory revenue 1,574 1,350 17%
Adjusted EBITDAR 628 512 23%
Adjusted profit before tax 391 272 44%
Statutory profit before tax 395 307 29%
Statutory profit after tax 293 234 25%
Adjusted basic EPS 146.1p 107.0p 37%
Statutory basic EPS 147.6p 115.7p 28%
Dividend per share 34.1p 24.4p 40%
Group ROCE 12.6% 9.0% 360bps
Net cash 67 182 (115)
Net cash and lease liabilities (3,882) (3,567) (315)
======================================== ========== ========= ==========
Overview
-- Group adjusted profit before tax up 44% which was ahead of
our expectations, driven by our strong brand, clear strategy and
powerful business model
-- UK hotel demand is strong and with supply not now expected to
return to pre-pandemic levels for at least five years. We are
therefore seeking opportunities to grow our pipeline towards our
long-term potential of 125,000 rooms across the UK and Ireland,
whilst continuing to maintain our financial discipline
-- UK adjusted pre-tax margins increased to 27.5% (H1 FY23:
24.4%), and UK ROCE was 14.9% (H1 FY23: 11.0%), well ahead of
pre-pandemic levels
-- In Germany, we continue to make good progress and reconfirm
our previous guidance for FY24. We remain on course to achieve our
long-term ambition of reaching 10-14% return on capital
-- The Group's strong revenue performance, focus on cost
efficiencies and vertically integrated business model has generated
significant cash flow in the period
-- GBP300m share buy-back completed on 3 October 2023 , in
accordance with our capital allocation framework; further GBP300m
buy-back to be completed by the time of the FY24 preliminary
results
-- Current trading and outlook: recent trends continuing with
forward booked revenue position ahead of last year and no change to
cost guidance; visibility on UK supply underpins our confidence in
the outlook for FY24 and beyond
Financial highlights
-- Premier Inn UK: total UK accommodation sales were 15% ahead
of H1 FY23 and 55% above H1 FY20, with strong RevPAR growth in both
London and the Regions
-- F&B sales increased by 10% vs H1 FY23, driven by a return
to year-on-year growth in covers and spend per head
-- Premier Inn Germany: total accommodation sales were up 82% vs
H1 FY23 reflecting further room openings and the progressive
maturity of the existing estate
-- Group statutory revenue increased by 17% vs H1 FY23 to GBP1,574m
-- Despite ongoing inflationary pressures, adjusted profit
before tax increased by 44% to GBP391m, including reduced adjusted
losses before tax in Germany of GBP14m; GBP4m of adjusting items
meant that statutory profit before tax increased by 29% to
GBP395m
-- Strong cashflow generation: adjusted operating cash flow
increased by GBP73m to GBP483m funding further investment in the UK
and Germany as well as GBP364m paid to shareholders during the
first half
-- Strong balance sheet: lease-adjusted net debt: adjusted EBITDAR of 2.5x
-- Interim dividend per share increased by 40% to 34.1 p per
share (H1 FY23: 24.4p) reflecting the strong H1 performance and our
confidence in the outlook. The dividend will be paid on 8 December
2023
Segment highlights
Premier Inn UK
GBPm H1 FY24 H1 FY23 vs H1 FY23
============================== ======== ========= ========== ==============
Statutory revenue 1,479 1,298 14%
Adjusted profit before
tax 407 317 28%
Revenue per available
room (GBP) 71.02 62.39 14%
============================== ======== ========= ========== ==============
Premier Inn Germany
GBPm H1 FY24 H1 FY23 vs H1 FY23
============================= ======== ========= ========== ==============
Statutory revenue 95 52 81%
Adjusted loss before
tax (14) (25) 44%
Revenue per available
room (GBP) 45.79 35.06 31%
============================= ======== ========= ========== ==============
Current trading (six weeks to 12 October 2023)
-- The positive drivers seen during the first half have
continued into Q3 FY24 with sustained strong levels of demand
across both leisure and business and in London and the Regions
-- Premier Inn UK: total UK accommodation sales were up 13 %
versus the same period in FY23, with a RevPAR premium of GBP6.64
versus the M&E market(1)
-- Premier Inn UK: forward booked occupancy is broadly in-line
with last year but at higher ARRs, with the result that booked
revenue for Q3 and Q4 is well-ahead of last year
-- F&B: total sales were 8% ahead of FY23
-- Premier Inn Germany: Total accommodation sales were 44% ahead
of the same period in FY23 and overall RevPAR was EUR65 while in
aggregate the cohort of more established hotels had RevPAR of
EUR71
Outlook and FY24 guidance
-- We remain optimistic about the outlook; leisure and business
demand remains strong as evidenced by our forward booked position;
favourable supply dynamics are set to continue for some time with
the continued decline of independent hotels and constrained UK room
supply growth
-- There are no changes to our previous FY24 guidance other than
the following amendment to gross capex and disposals:
o Having taken advantage of a number of high returning freehold
purchases in the UK, Ireland and Germany, we are increasing our
FY24 gross capex guidance to GBP500-GBP550m (up from GBP400-GBP450m
previously), partially funded by expected disposal proceeds
relating to property transactions of between GBP50m and GBP100m
signifies an alternative performance measure ('APM') - further
information can be found in the glossary and reconciliation of APMs
at the end of this document.
1: STR UK data, standard basis, 1 September 2023 to 5 October
2023, Midscale & Economy ('M&E') market excludes Premier
Inn
Commenting on today's results, Dominic Paul, Whitbread Chief
Executive Officer, said:
"This is an impressive first half performance. In the UK, we
maintained high levels of occupancy whilst continuing to attract
excellent guest scores and offering great value for our customers.
The strengths of our operating model and our continued focus on
driving cost efficiencies across the business resulted in UK
margins exceeding pre-pandemic levels. In Germany, we are making
good progress and are continuing to refine our strategy based on
our learnings to-date and whilst there is much work to do as we
continue to grow, we remain on course to achieve our long-term
ambition of 10-14% return on capital.
"We are generating significant operating cash flow that we are
redeploying into future profit growth as well as returning value to
shareholders through increased dividends and share buy-backs. Given
the structural shift in hotel supply and by continuing to invest in
our assets, our brand and our teams, we remain confident that we
can both extend our market leading position in the UK and replicate
that success in Germany.
"The Group is in excellent shape, trading well and has
significant growth potential, both in the UK and Germany. Based on
our strong performance to-date and an encouraging forward booked
position, we remain optimistic about the full year outlook and look
forward with confidence as reflected by our increased interim
dividend and further planned share buy-back."
For more information please contact:
Investor Relations - Whitbread
investorrelations@whitbread.com
Peter Reynolds, Director of Investor Relations
peter.reynolds@whitbread .com
Sophie Nottage, Investor Relations Manager
sophie.nottage@whitbread.com
Media - Teneo whitbread@teneo.com
Jessica Reid +44 (0) 20 7353 4200
A webcast for investors and analysts will be made available at
8:00am on 18 October 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.
Business Review
The Group has delivered another impressive first half
performance. This is thanks to the inherent strengths of our
vertically integrated business model, the continued execution of
our strategy and the structural shift in hotel supply, with a
significant reduction in the number of independent hotels following
the pandemic and a marked reduction in new hotel construction. Our
continued programme of investment has delivered further room growth
and helped to ensure the consistent delivery of a quality guest
experience.
The UK market remained buoyant during the period with strong
levels of consumer demand from both leisure and business customers
. London was particularly strong, boosted both by domestic and
international inbound demand, as well as by a year-on-year increase
in office-based business travel that had remained constrained until
the second quarter of FY23. High levels of occupancy in our hotels
helped to drive food and beverage ('F&B') sales, especially in
our integrated restaurants, while a series of commercial
initiatives meant that we also saw good revenue growth in our
branded restaurants, with both covers and spend per head increasing
versus the prior year.
In Germany, we continued to make good progress with a further
1,200 rooms and six hotels opened in the first half. Revenues were
up strongly year-on-year, driven by new openings and the increasing
maturity of our open hotels. The impact of some changes as we
continued to test and tailor our UK model for the German market,
together with some market softness over the summer months, were
partially offset by a better-than-expected contribution from the
portfolio of recently acquired hotels that joined the Group at the
end of FY23. Reflecting our increasing scale in Germany, we have
strengthened our German management team to accelerate our pathway
to becoming the country's number one hotel brand.
Group Results
The strong trading performance resulted in total statutory
revenues of GBP1,574m, a 17% increase versus H1 FY23. The high
operating leverage inherent in our business model and a continued
focus on driving cost efficiencies meant that, despite inflationary
pressures, adjusted operating profit increased by 30% to GBP445m.
The phasing of certain cost inflation in the UK meant that the
first half performance was particularly strong with a substantial
increase in operating profit margins and cashflow. A further
interest credit from the pension fund of GBP8m (see note 11),
together with a full period benefiting from higher interest rates
on our cash balances, meant that adjusted profit before tax
increased by 44% to GBP391m and adjusted pre-tax profit margins
increased to 24.9%. Adjusting items of GBP4m (H1 FY23: GBP36m)
meant that statutory profit before tax increased to GBP395m (H1
FY23: GBP307m). Tax expenses of GBP102m resulted in a 25% increase
in statutory profit after tax to GBP293m. The strong growth in
post-tax earnings, together with a lower number of shares in issue
as a result of the share buy-back, meant that statutory basic
earnings per share increased by 28% versus H1 FY23 to 147.6p (H1
FY23: 115.7p).
The strong trading performance delivered an 18% increase in
adjusted operating cashflow that reached GBP483m in the period (H1
FY23: GBP410m). The phasing of our ongoing programme of investment
in both expansionary (GBP91m) and non-expansionary capex (GBP122m),
together with an increased final dividend and cash returns to
shareholders meant that net cash outflow increased to GBP104m.
However, given the strong operating performance, we ended the
period with total cash balances of GBP1,061m and a net cash balance
of GBP67m.
Further details regarding the Group's first half performance,
both in the UK and Germany, are set out below.
Premier Inn UK - sustained strong performance
Strong demand for our hotel rooms coupled with a weak supply
backdrop helped drive UK accommodation sales up 15% vs H1 FY23.
After a very strong first quarter, the year-on-year growth rate
softened during the second quarter, reflecting the pace of recovery
in the previous year. Versus FY20, our ongoing estate expansion and
RevPAR growth of 42% meant that UK accommodation sales were up 55%.
F&B sales were up 10% versus H1 FY23, helped by a number of
commercial initiatives introduced during the second half of FY23.
As a result, total UK revenue grew by 14% to GBP1,479m (H1 FY23:
GBP1,298m).
The growth in accommodation sales was particularly strong in
London (+24% vs H1 FY23 and +68% vs H1 FY20), boosted by a
combination of strong leisure and business demand as well as an
uptick in inbound volumes that drove both occupancy and average
room rate ('ARR'). The fact that London took a little longer to
recover from the pandemic in the prior year also provided a further
boost to year-on-year growth. The Regions also delivered an
impressive performance, with accommodation sales up 13% versus the
prior year and 52% up
versus H1 FY20. With occupancy already at high levels, the main
driver of revenue growth in the Regions was ARR. Overall, we
maintained a well-balanced mix of leisure and business customers,
thereby maximising the chances that we can reach the optimal level
of occupancy to maximise revenue and profit.
The strength of our brand in conjunction with our proprietary,
automated trading engine ('ATE'), helped Premier Inn UK increase
its RevPAR premium versus the wider M&E market to GBP6.73, up
from GBP5.58 in H1 FY23 and GBP2.28 in H1 FY20. As a result, the
growth in our total accommodation sales was 2.6pp ahead of the
market. Several external and internal factors are contributing to
this continued outperformance, a summary of which is outlined
below:
Differentiated business model - Our approach is different from
many other large hotel groups - being vertically integrated, we
have a large capital base and are able to capture a significant
proportion of the value chain. Our model also provides greater
control over the customer journey, enabling us to offer a
consistent and high-quality customer experience at scale - a
combination that has proven its ability to attract large numbers of
customers, generate significant cashflow and a high return on
capital.
Strong market position - Premier Inn is the UK's largest hotel
group. Having added 430 new rooms and closed 72 rooms during the
first half, as at 31 August 2023 we had 849 hotels and 83,934 rooms
open across the UK and Ireland, with the result that, for most of
our guests, wherever they might need to stay, there is always a
Premier Inn nearby.
Market supply remains below pre-pandemic levels - The breadth of
our coverage has meant that we have been able to capture the demand
left by the marked contraction of the independent sector over the
last four years. Subsequent internal analysis has shown that up to
70% of those hotels identified as having closed following the
pandemic, have already been converted to alternative use. New hotel
and leisure construction starts are also constrained, with the
three-month average value of new starts in July 2023 some 40% lower
than a year earlier(1) .
1: Glenigan Construction Industry Forecast 2023-2025, June 2023
and company estimates
Brand strength supported by effective marketing - Thanks to many
years of investment, the quality of our offer and customer service,
Premier Inn is widely recognised as one of the UK's favourite
brands. It is why we are able to continue to drive large volumes of
traffic to our website and why we continue to attract large numbers
of repeat guests - in H1 FY24, approximately 86% of the five
million bookings made were by consumers that have booked with us
before. A shift towards a more regular frequency of brand marketing
in H1 FY24 has been rewarded with further growth in the percentage
of consumers that would consider booking at Premier Inn and higher
ad awareness scores.
Dynamic and proprietary automated trading engine ('ATE') -
Strong yield management is a core requirement for any successful
hotel business and our in-house trading team is committed to a
continuous process of improvement, seeking ways that we can
increase and maximise revenue. Given the scale of our historic
database, ATE is particularly well-placed to improve our
performance by optimising the trade-off between ARR, occupancy and
marketing spend in order to maximise revenue and profit. Through
improvements to our pricing strategies, we have been able to reduce
the proportion of rooms sold at GBP80 or less from 51% last year to
37% in H1 FY24, increasing ARR and RevPAR.
Further improvements to our proposition for business customers -
As business customers travel more frequently, are more likely to
book one of our flexible rates and are easier to serve, we have
continued to broaden our appeal through several different channels.
Our Business Booker portal, that is free to join and enables
corporates to receive a discount of up to 15% off our fully
flexible rates, is continuing to prove popular with SMEs. At the
end of H1 FY24 Business Booker represented approximately 10% of
total accommodation sales, up from 8% the previous year. Having
deepened our relationships with a number of Travel Management
Companies ('TMCs') over the past few years, we have also increased
the proportion of revenues coming through this channel to 10% (H1
FY23: 8%). Our Premier Inn Business Account provides SMEs with a
free-to-use tool to help manage travel-related expenses and
payments and also offers interest-free payment terms for up to six
weeks, enhancing our appeal to small businesses.
A focus on operational excellence - Our position as the UK's
number one hotel brand is not something we take for granted. It is
the result of years of investment, strategic planning and most
importantly, the dedicated commitment and support of our 39,000
team members that deliver for our guests every day. Their
performance has been particularly impressive during H1 FY24 where,
despite high levels of occupancy in our hotels and strong
year-on-year growth in F&B, we continued to see improvements in
our guest scores. When operating at close to full capacity,
ensuring that all of our teams are appropriately rewarded,
well-trained and able to progress in their careers, safeguards
their individual wellbeing and allows them to focus on delivering a
great experience for our guests. As a result of these efforts, we
have seen a strong stabilisation of our teams with retention rates
improving by 5pp relative to last year and 69% of our team members
now have more than one year's service.
Continuing to deliver a quality guest experience - The scale and
breadth of our business means we receive almost continuous and
immediate feedback from our guests across a broad variety of
metrics. This is invaluable in enabling us to both track our
performance and identify new ways we can improve our service.
Recent additions to our customer offer have included an ability to
opt for early check-in/late check-out and an option to pre-book a
made-up twin room rather than having a room with a double bed and a
sofa bed. As part of our regular refurbishment programme, we have
started to replace some of our older format rooms with our new ID5
format and are also well-advanced with our bed-replacement
programme - as at 31 August 2023, we had replaced 48,500 beds out
of 65,000 beds in total. Our Premier Plus rooms continue to achieve
high levels of occupancy and at a GBP15 - GBP20 premium to the
standard room rate, are providing a healthy RevPAR uplift versus a
standard room in the same hotel. We have increased the number of
Premier Plus rooms across our UK estate to over 4,400 in H1 FY24
and plan to open another 200 rooms in the second half of the
year.
Whilst difficult to apportion the impact of these factors on our
overall performance, we believe each is and will continue to help
us sustain a RevPAR premium to the rest of the M&E market.
High levels of occupancy in our hotels and a steady proportion
of hotel guests taking breakfast and dinner, provided a
year-on-year boost to F&B sales that were up 10% versus the
prior year. Food and beverage is important to our hotel guests and
drives a RevPAR uplift in our hotels. Whilst our branded
restaurants enjoyed an uplift in sales versus the prior year, with
increases in both numbers of covers and spend-per-head thanks to a
number of commercial initiatives, revenues have only just returned
back to pre-pandemic levels. Given the impact of inflation, we are
continuing to look at a range of options to help improve the
performance and returns of our F&B business whilst ensuring
that we safeguard the quality experience for our hotel guests and
will provide further updates as we make progress.
While cost inflation, together with high occupancy, meant that
our operating costs increased significantly in the period, the
inherent operating leverage of our business model and the benefit
of our ongoing cost savings programme meant that adjusted pre-tax
profit grew by 28% to GBP407m (H1 FY23: GBP317m) and margins
increased to 27.5% (H1 FY23: 24.4%), which is well ahead of the
24.3% achieved in H1 FY20.
Premier Inn Germany - still on-track despite softer summer
trading
With a total of 57 hotels and over 10,000 rooms open at the half
year, plus a further 6,000 rooms in the pipeline, we remain on
course to become the number one hotel chain in Germany. Whilst we
effectively lost two years of progress during the pandemic, in
aggregate our cohort of more established hotels(1) are continuing
to lead the way from a performance perspective. They are also
providing invaluable insights that we are using to both tailor our
customer offer and refine our operating model so that we can drive
revenue growth and efficiencies, as we head towards achieving
10-14% return on capital.
After a strong first quarter performance, we were impacted in
the second quarter by some changes as we continued to test and
tailor our UK model for the German market and by some softness in
market demand over the summer months. Having still been subject to
travel restrictions until May the previous year, German
holidaymakers returned to overseas markets for their summer
holiday, resulting in a return to a more normalised level of
domestic leisure demand. While these factors together softened our
revenue performance in Q2 FY24, our cohort of more established
hotels(1) delivered a robust performance in the first half with
RevPAR of EUR60 in aggregate (H1 FY23: EUR51), which was in line
with the wider M&E market. Despite having opened another six
hotels and 1,200 rooms during the first half, total estate RevPAR
increased to EUR53, reflecting the progressive maturity of the
estate as well as a positive contribution from the six hotels
acquired just before the end of FY23 and that will start to be
refurbished during H2 FY24. We continue to be encouraged by the
performance of our cohort of more established hotels which achieved
a profit(2) of GBP6m for the 12 months to the end of H1 FY24 (12
months to H1 FY23: loss of GBP1m). The net result was that that
Germany as a whole delivered a reduced adjusted loss before tax of
GBP14m (H1 FY23: loss of GBP25m).
1: Cohort of 17 more established German hotels that were open
and trading under the Premier Inn brand for 12 consecutive months
as at
4 March 2022
2: In aggregate adjusted profit before tax excluding non-site
related administration and overhead costs
Having improved our pricing strategies during the period, we
have started to see a positive impact on performance, however we
also recognise the need to continue to refine our commercial
strategy as we progress towards our target levels of return. Key
areas of focus include: continuing to evolve our pricing strategy,
particularly around events; the introduction of additional rate
classes and taking advantage of the enhanced capabilities of our
upgraded hotel reservation system that is now in place across
Germany. We are also conducting a trial on Booking.com in order to
test whether an indirect distribution channel can help accelerate
incremental sales and profit growth, whilst also increasing the
awareness of our brand among both domestic and international
guests.
With a recovery in market demand and the benefit of the pricing
changes outlined above, we have an encouraging forward booked
position and remain on course to achieve an adjusted loss before
tax of between GBP30m and GBP40m in the current financial year, in
line with our previous guidance. Looking further ahead, while
macroeconomic uncertainties remain and while we still have much
work to do in order to reach break-even in 2024 and to then
progress towards the 10-14% return on capital that we expect to
achieve over the long-term, we remain on-track.
Capital allocation - increased dividend and further GBP300m
share buy-back
Having set out our capital allocation framework in October 2022,
we sought to provide investors with a clear view of our approach
and confirmed a GBP100m final dividend together with an initial
GBP300m share buy-back at the time of FY23 results. Our thinking
around capital allocation has not changed and we remain focused on
the following key priorities:
-- maintaining our investment grade status by operating within our leverage threshold;
-- continuing to fund our ongoing capital expenditure
requirements and investing through the cycle;
-- selective freehold acquisitions and M&A opportunities that meet our returns thresholds;
-- growing dividends in line with earnings; and
-- returning excess capital to shareholders dependent on outlook and market conditions.
The strength of our first half performance meant that, even
after capital expenditure of GBP213m (H1 FY23: GBP304m), and
GBP364m on shareholder returns, we retained a strong balance sheet
and were pleased to receive an upgrade to our credit rating to BBB
(previously BBB-)(1) .
Fitch Ratings ('Fitch') have recently amended their methodology
used to assess the Group's credit rating by switching to a
lease-adjusted net debt: adjusted EBITDAR multiple, aligning the
approach with that of other hotel groups. Lease liabilities at the
end of the period were GBP3.9bn (H1 FY23: GBP3.7bn) and as a
result, our ratio of EBITDAR(1) to lease-adjusted net debt was
2.5x, which is within our policy of managing to our internal
threshold of less than 3.5x.
Having completed the previous GBP300m share buy-back on 3
October 2023 as planned, the Board has reapplied the capital
allocation framework outlined above. Given the strength of our
financial performance, our confidence in the outlook and the
headroom available against our investment grade metrics, the Board
has declared an increased interim dividend totalling GBP66m and
intends to conduct an additional GBP300m share buy-back, to be
completed by the time of the FY24 preliminary results.
1: Fitch Ratings, 17 August 2023
Business strategy
Our vertically integrated business model and strong balance
sheet, in conjunction with our business strategy and a clear focus
on operational excellence, are combining to deliver impressive
financial results. While the three pillars of our strategy remain
unchanged, the following sections outline some of our future plans
and initiatives that we believe will continue to drive the business
forward and create additional value for our shareholders and other
key stakeholders.
1. Continuing to grow and innovate in the UK
The Group is a focused hospitality group, providing our guests
with a quality night's sleep and great F&B, all at an
affordable price. With our differentiated business model and a
determination to continue to invest through the cycle, Premier Inn
has become the clear market leader in the UK M&E market, a
segment that remains highly attractive:
-- The budget branded model is structurally advantaged : The
M&E segment remains one of the highest growth segments of the
UK hotel market and has also demonstrated its resilience during
previous downturns as leisure and business customers alike look to
'trade down' in search of greater value;
-- Significant opportunities for growth: our latest network
planning exercise highlighted the significant and structural
decline in the independent hotel sector following the pandemic.
This increased the potential opportunity for Premier Inn in the UK
and Ireland to 125,000 rooms (up from 110,000 rooms previously).
This compares with our total open and committed pipeline of over
91,000 rooms today.
-- Enhanced structural opportunities: Since completing our
network planning exercise in the summer of 2022, inflation and
interest rates have increased substantially. As a result, based on
our latest view of UK pipelines and new construction projects, we
have revised our previous view and do not now expect the market
level of supply to return to pre-pandemic levels for at least five
years. This favourable market backdrop underpins our prospects for
further room growth and an increased opportunity for Premier Inn to
grow market share.
Given this market context, extending our market leading position
is a key priority for the Group. Our scale and vertically
integrated approach mean we can offer both quality and value to the
millions of guests that stay with us each year. Our guest appeal is
universal as evidenced by our well-balanced mix between leisure and
business, that itself is broadly balanced between tradespeople and
office workers. Our direct distribution model, with less than 1% of
accommodation sales going through online travel agents, ensures we
have complete control of the customer relationship. Our
distribution model also helps minimise customer acquisition and
retention costs and allows us to integrate our digital marketing
into our pricing decisions, reducing acquisition costs and
enhancing our ability to maximise RevPAR.
Ongoing commercial initiatives
We are continuing to drive a number of commercial initiatives
that are focused on delivering further revenue growth and increased
returns. These include the ongoing evolution of ATE in response to
changes in consumer behaviour as well as the competitive landscape.
Developed over many years, our ability to price dynamically remains
a substantial source of value for the Group and ensures that we
optimise the balance between occupancy and ARR in order to maximise
revenues and profits. The scale of our operations requires that we
continue to drive millions of visitors directly to our website each
week and so we will continue to sustain high levels of brand
awareness through a combination of both national brand advertising
as well as more targeted offline and digital marketing campaigns.
We will also continue to invest in developing and improving our
customer journey and online experience so that we can maximise the
conversion of visits into bookings. Efforts to broaden our appeal
through further product development and segmentation are another
area of focus: we now have 16 hub hotels and over 4,400 Premier
Plus rooms across our UK estate with a plan to increase both over
the coming years. We will also continue to progress our bed
replacement programme, with 48,500 of the 65,000 beds now left to
replace over the coming months. In F&B, we are continuing to
pursue a number of options to help improve performance and will
provide further updates as we make progress.
Each of these investments and developments are in addition to
our regular programme of room upgrades and refurbishments, all of
which help to ensure that our guests always enjoy their stay with
us and want to come back again in the future.
2. Growing at scale in Germany
Germany represents a significant opportunity for the Group. As
well as being approximately 40% larger than the UK in terms of
numbers of rooms, no brand has more than a 2% share of the German
market and there is a very large independent hotel sector (67% of
the market in 2022) that has declined significantly since the
pandemic. In contrast, Premier Inn Germany has grown from having
just six hotels with around 1,000 rooms in FY20 to having 57 hotels
and over 10,000 rooms open with a further 6,000 rooms in the
pipeline.
Whilst we have expanded our coverage and network significantly
over the past few years, the time it takes for new hotels to mature
and the fact that we lost two years of progress during the pandemic
have delayed our delivery of profitability in Germany. Whilst we
remain on course to reduce losses this financial year, we are
on-track but still have work to do in order to reach break-even in
2024 and to then progress towards the 10-14% return on capital that
we expect to achieve over the long-term.
Key tasks include increasing our brand awareness among domestic
and international consumers - while we continue to make good
progress, we need to accelerate this through effective marketing
and brand promotion, as well as by continuing to increase the
appeal of our proposition to corporate customers. We are testing
the efficacy of Booking.com as an additional distribution channel
to help drive incremental revenue and profit growth whilst
increasing the visibility of our brand. Taking the learnings from
all of our hotel openings to-date, we are continuing to refine our
operating model and improve both our dynamic pricing as well as our
customer offer so that they are better suited to the German
market.
To help ensure these initiatives are implemented effectively, we
have recently strengthened our German management team with the
appointment of Erik Friemuth who will become CEO of Premier Inn
Germany on
1 January 2024 and will report directly to Dominic Paul, Group
CEO. Erik joins from TUI AG where he is Group Chief Marketing
Officer and also Managing Director of TUI Hotels & Resorts.
Erik brings a wealth of experience from his time spent in the
German hospitality and leisure sector having been at TUI since
April 2014 and where he is responsible for around 400 hotels with
EUR2bn of revenues and around 15,000 employees.
3. Enhancing our capabilities to support long term growth
Our 'investing to win' approach of continuing to invest in our
business, our teams and our brands, through the cycle, is only
possible thanks to the following key drivers:
Financial strength: Our adjusted operating cashflow in the six
months to 31 August 2023 was GBP483m. Even after having invested
GBP213m in expansionary and non-expansionary capex and having
rewarded shareholders with GBP364m in dividends and share buy-backs
in the first half, the Group's balance sheet remains robust with
net cash of GBP67m (H1 FY23: GBP182m). The improvement in the
Group's credit rating to BBB(1) (previously
BBB-) ensures access to the debt markets and helps to minimise
the Group's cost of funding. When entering into leasehold or other
transactions, the strength of our covenant means we are viewed as a
highly attractive partner, thus creating a competitive advantage
for the Group. Our financial strength also means we can continue to
add more rooms, improve our customer offer, invest in our teams and
enhance our systems infrastructure, all of which help drive
revenues and reduce costs. Financial flexibility also allows us to
complete strategic M&A deals, subject to our rigorous capital
appraisal process, underpinning our planned future growth.
1 Fitch Ratings - 17 August 2023
Asset-backed balance sheet : Our large freehold estate provides
us with a number of commercial and financial advantages when
compared with alternative, more 'asset-lite' models:
o total control over the location and initial development of the
hotel as well as all maintenance and redevelopment;
o access to development profits through sale and leasebacks;
o a strong financial covenant, helping to secure more favourable
lease terms with landlords and attractive financing terms with
lenders;
o protection from increasing property costs and therefore lower
earnings volatility during periods of high or persistent inflation;
and
o an additional and flexible source of funding, one that can
often be available at more attractive rates than other sources of
finance.
As we are flexible between taking on freehold or leasehold
opportunities, we have a much better prospect of securing the sites
that we want and in the best locations. It also means we are better
able to optimise the size and format of our assets in order to
maximise returns. Since the period end, we completed a number of
property transactions including the purchase of a freehold site in
Fenchurch Street, London for GBP57m and the sale of an office
building that we built as part of a hotel development in
Clerkenwell for GBP39m.
Lean and agile cost model: As the largest vertically integrated
hospitality group in the UK and with a growing presence in Germany,
we have a sizeable cost base. With the sharp rise in inflation over
the past 18 months and our positioning as a low-cost operator, our
focus on driving cost efficiencies has become even more important.
We have a long history and culture of continuously seeking out new
and improved ways of working to deliver operational efficiencies
and reduce costs. We remain on course to deliver a total of GBP140m
of cost savings in the four years to FY25.
Operating responsibly and sustainably: As a major employer in
the UK and with a growing presence in Germany, we recognise our
responsibilities in those communities where we have a physical
presence - to our teams, customers and other key stakeholders.
Through our Force for Good sustainability programme, we seek to
drive our social and environmental agenda that has stretching
targets in areas such as employee diversity and wellbeing, climate
change and community, each of which are embedded within our overall
business strategy.
The execution of each of these three elements of our business
strategy remain central to our long-term success and underpin our
strong financial performance which has continued in the current
trading period.
Current Trading - six weeks to 12 October 2023
The positive trading performance enjoyed during the first six
months has continued into the third quarter. Total UK sales were
12% ahead of the same period in FY23 and total accommodation sales
were up by 13% and a RevPAR premium versus the wider M&E market
of GBP6.64(1) . Occupancy in the period was 86.5% versus 85.8% last
year and average room rate was GBP86.35 up from GBP78.56 last
year.
UK food and beverage sales were 8% ahead of the same period last
year.
In Germany, we saw an uplift in performance helped by strong
demand during September which benefited from a number of events and
trade fairs taking place in key cities. Total accommodation sales
were 44% ahead of the same period in FY23 and overall RevPAR was
EUR65 (FY23: EUR60) while in aggregate the cohort of more
established hotels had RevPAR of EUR71 (FY23: EUR68).
1: STR UK data, standard basis, 1 September 2023 to 5 October
2023, Midscale & Economy ('M&E') market excludes Premier
Inn
Outlook
We remain confident about the Group's prospects for the full
year, led by a continued strong performance in the UK, reduced
losses in Germany and the benefit of having a strong balance
sheet.
Current trading in the UK remains strong and our forward booked
revenue position is well ahead of the same period last year. Our
view on UK market supply has also improved with continued pressures
on the independent hotel sector from rising interest rates and
inflation and a lack of developer funding contributing to a 40%
reduction in the value of new hotel and leisure construction versus
a year ago. As a result, we now expect that UK supply will remain
constrained and is unlikely to return to pre-pandemic levels for at
least five years. Given the timescales required for new hotel
development, this backdrop gives us confidence beyond FY24 and
while we continue to monitor consumer demand trends closely,
Premier Inn represents excellent value relative to its peers as
well as the upscale segments, that have seen room rates increase
significantly versus FY20.
In Germany, having overcome a few short-term challenges over the
summer months, we remain on course. We have a clear plan for
replicating our UK success in this large and exciting market and
whilst not immune from macroeconomic pressures and concerns, we
remain encouraged by our performance to-date. Our more established
hotels are continuing to improve and are providing invaluable
learnings for our more recent openings. With a strengthened
management team and a committed pipeline taking us to over 16,000
rooms, we remain confident in becoming the number one hotel chain
in Germany. We are on-track to reach break-even with the current
estate on a run-rate basis during 2024 and thereafter to achieve
our long-term goal of 10-14% return on capital.
Summary of Additional Guidance FY24
FY24 guidance was set out in our FY23 full year results and our
Q1 FY24 trading update. While sales sensitivities remain unchanged,
our cost guidance is updated to include the following:
UK
-- Inflation: no change to previous guidance of 7-8%
Germany
-- No change to previous guidance: FY24 loss before tax expected to be GBP30m-GBP40m
Balance sheet
-- Gross capex: now expected to be GBP500-GBP550m reflecting a
number of recent freehold purchases in the UK, Ireland and
Germany
-- Disposal proceeds: expected to be between GBP50m and GBP100m
-- Interest on cash: no change to previous guidance, in line with Bank of England rates
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. Our
programme comprises three core pillars: opportunity, responsibility
and community and revolves around stretching targets based on
robust materiality analysis that focuses on our commitment to
enable everyone to live and work well and to look after the
environment and resources upon which we, and our business
depend.
Opportunity
Our commitment is to give everyone at Whitbread the opportunity
to grow and develop, with no barriers to entry and no limits to
ambition. Our investment in opportunity is centred around three
themes - diversity & inclusion ('D&I'), wellbeing, and
training.
We have eight D&I commitments that underpin opportunity at
Whitbread. At the end of H1 FY24 we are tracking well against
stretching targets set for leadership representation, of 40% female
representation and 8% ethnic representation by the end of 2023. Our
four employee networks - enAble (disability inclusion), GEN (gender
equality), GLOW (LGBTQIA+) and RRCH Network (race, religion, and
cultural heritage) have matured in H1 FY24, increasing their reach
and engagement through a greater number of events than were ever
held before. Our work on education, awareness and allyship has been
recognised and we were proud to have been awarded 'Exemplary
Employer' status by the Investing in Ethnicity Awards, the only
hospitality company in the top 25 employers ranking.
As well as D&I - mental, financial, and physical wellbeing
is central to creating an environment that creates opportunity. In
H1 FY24 we increased the number of Mental Health First Aiders and
Champions from 121 to 172. We also launched a financial education
programme so everyone who works for us has access to live, and
recorded, webinars providing excellent support. In the physical
well-being space, we launched a new digital platform that gives
employees greater access to a range of services to allow them to
self-support their physical and mental wellbeing.
Training and development is also integral to our approach for
creating opportunity for our people. This year we have made a
significant investment in developing over 500 Hotel Managers and
General Managers, giving our site leaders the chance to develop
first class technical skills and management capability and to
re-establish and refresh our standards and expectations.
All our new joiners have a mandated training journey when they
join us. In H1 FY24 we launched a new, simplified, induction
journey, which has been positively received by new joiners and site
managers. We are particularly proud of our award-winning
apprenticeship programmes. Over 2,000 people, across a range of
levels, are currently on a programme and we are delighted to have
been rated #1 by the apprentices themselves in 'Rate My
Apprenticeship'. At our Support Centres, we have new development
opportunities to support colleagues in developing and growing their
careers. In addition, we now offer internship positions, designed
to get members of our local Luton and Dunstable communities onto
the Whitbread career ladder. In September 2023, we were also
delighted to welcome our 2023 cohort from our long-standing
partnership with Derwen and Hereward Colleges, providing supported
internships for young adults with special educational needs to find
employment at Premier Inn.
Responsibility
Within our responsibility pillar and noting the fast-evolving
regulatory environment in which we operate, during H1 FY24 we have
reviewed carefully the upcoming requirements, identifying any gaps
that may exist between our current position and where we need to
be. In the short term, our efforts will be focused on the upcoming
German Supply Chain Act ('GSCA)' and over the medium-term, on
compliance with the EU Deforestation Regulation ('EUDR'), and the
upcoming Corporate Sustainability Reporting Directive ('CSRD') as
well as the requirements set by the International Sustainability
Standards Board ('ISSB'). We are also undertaking an estate-wide
biodiversity baseline assessment as the first step under the new
reporting requirements and are working on our next disclosure under
the Taskforce on Climate-related Financial Disclosures ('TCFD'). As
we outlined in our last TCFD report , we undertake a full review of
our climate-related risks and opportunities every other year.
Having been working through this process during H1 FY24, we are now
looking forward to taking the most material risks and opportunities
through the scenario analysis and
quantification process.
In our ESG report at the end of last year, we outlined that our
carbon targets were going through the Science-Based Targets
Initiative ('SBTi') validation process. We are delighted to report
that this validation was confirmed during H1 FY24. Under this
validation, we have committed to reach net-zero greenhouse gas
('GHG') emissions across the value chain by FY50. We have committed
to a near-term target of reducing scope 1 and 2 GHG emissions by
84.1% per square meter by FY30 from a FY16 base year and a scope 3
GHG emissions reduction of 58.1% per square meter by FY30 from a
FY18 base year. Our long-term targets are to reduce scope 1 and 2
GHG emissions by 99.6% by FY40 from a FY16 base year and to reduce
scope 3 GHG emissions by 90% by FY50 from a FY18 base year.
To achieve our SBTi validated targets, we have published our
first full Transition Plan to Net Zero . This was created in line
with the Transition Plan Taskforce's guidance and outlines the
steps we will take in order to meet our net zero carbon goals. It
sets out the priority steps for our Scope 1 and 2 emissions
reduction and we have been progressing well with these over the
first half of the year. Our site refurbishment to net zero plans
are developing and with some encouraging early results, we look
forward to reporting the final outcome and impact at the end of the
year. We are also progressing our estate-wide net zero 'readiness'
audit and look forward to reporting the results of this at the year
end. This audit will feed into the transition plan and enable a
site level refurbishment roll-out plan that aligns both our
commercial and our environmental ambitions.
We are delighted to have opened our first all-electric Premier
Inn hotel, powered by renewables, in Swindon during October 2023.
This site paves the way for the construction of future Premier Inn
hotels, demonstrating the feasibility of a site run purely on
renewable energy. We look forward to sharing more news about this
hugely innovative milestone and the impact it will have once the
site is launched.
As part of our progress towards reaching our Scope 3 carbon
target, we are in the process of completing an analysis of our
sustainable soy footprint and starting work to analyse our menus to
identify the opportunities for reduction, recognising that F&B
is one of our most significant categories for carbon emissions in
our value chain.
At the end of FY23, we announced a new water reduction target,
focused on reducing water usage across our estate by 20% per
sleeper by 2030. We have been rolling out the interventions
involved in driving this reduction over the past few months and
early indications show that we are tracking ahead of where we
thought we would be at this stage in the roll out plan, with a
greater than expected reduction in water usage. We are pleased with
these results and are now looking at how best we can roll out the
interventions across the remainder of the estate.
Our commitment to cut food waste in half by 2030 and to
eliminate single-use plastics by 2025 remain challenging but we are
working hard on both these projects to enable a positive end of
year progress report.
Community
Under our community pillar, our commitment to our charity
partner Great Ormond Street Hospital Charity ('GOSH') continues and
we have raised GBP1m in the first half of the year, bringing our
total since 2012 to GBP23m. Our partnership achieved Highly
Commended recognition at the Corporate Engagement Awards for Most
Effective Long-term commitment and won the Best Partnership with a
Children's Charity at the Better Society Awards.
We also look to support those in need on an ad hoc basis.
Following on from our donations to the Ukraine through DEC
('Disaster Emergency Committee') and as part of our new bedding
roll out last year, we have in the first half of FY24, begun
donating mattresses coming out of our hotels as we roll out our new
version across our estate with our charity partner Hope and Aid
Direct.
Our charity work is also important to our Inclusion Networks,
and this year the sale of a Pride cocktail across our estate helped
to raise funds for LGBTQ+ charity 'akt' who support LGBTQ+ young
people aged 16-25 in the UK who are facing or experiencing
homelessness or living in a hostile environment, as part of our
ongoing commitment to LGBTQIA+ inclusion.
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
Premier Inn UK(1)
GBPm H1 FY24 H1 FY23 vs H1
FY23
============================================ =========== =========== ==========
Statutory Revenue 1,479 1,298 14%
Other income (excl rental income) - - n/a
Operating costs before depreciation,
amortisation & rent (852) (771) (11)%
Adjusted EBITDAR 627 528 19%
Net turnover rent and rental income (1) 1 (183)%
Depreciation: Right-of-use asset (70) (66) (6)%
Depreciation and amortisation:
Other (86) (83) (3)%
Adjusted operating profit 472 380 24%
Interest: Lease liability (65) (62) (4)%
Adjusted profit before tax 407 317 28%
============================================ =========== =========== ==========
ROCE 14.9% 11.0% 390bps
============================================ =========== =========== ==========
PBT Margins 27.5% 24.4% 310bps
============================================ =========== =========== ==========
Premier Inn UK (1) key performance
indicators
===================
H1 FY24 H1 FY23 vs H1
FY23
============================================ =========== =========== ==========
Number of hotels 849 844 1%
Number of rooms 83,934 82,773 1%
Committed pipeline (rooms) 7,291 8,875 (18)%
============================================ =========== =========== ==========
Occupancy 84.4% 84.8% (40)bps
Average room rate GBP84.13 GBP73.54 14%
Revenue per available room GBP71.02 GBP62.39 14%
============================================ =========== =========== ==========
Sales growth(2) :
Accommodation 15%
Food & beverage 10%
Total 14%
Like-for-like sales(2) growth:
Accommodation 13%
Food & beverage 10%
Total 12%
============================================ =========== =========== ==========
1: Includes one site in each of: Guernsey and the Isle of Man,
two sites in Jersey and three sites in Ireland
2: Total and like-for-like versus H1 FY23
Total statutory revenue was 14% ahead of H1 FY23, led by the
performance of our UK hotels that delivered a very strong
performance. Total accommodation sales were up 15% in the period,
with occupancy broadly flat at 84% and average room rates
increasing by 14% to GBP84.13. The strength of performance in the
period was underpinned by the favourable supply environment in the
UK hotel market, continued strong business and leisure demand and
our continued focus on operational and commercial excellence.
Premier Inn extended its RevPAR premium versus the wider M&E
market throughout the period, consolidating our strong market
position and demonstrating the strengths of our scale, brand,
direct distribution, proprietary automated trading engine and
vertically integrated operating model.
UK performance vs M&E market
Q1 Q2 H1
FY24 FY24 FY24
==================================================== ========= ========= =========
PI accommodation sales growth performance
(vs FY23) (1) +1.1pp +3.8pp +2.6pp
--------- --------- ---------
PI occupancy growth performance (vs FY23)
(1) (0.4)pp (0.8)pp (0.6)pp
--------- --------- ---------
PI ARR growth performance (vs FY23) (1) (0.3)pp 2.9pp 1.5pp
--------- --------- ---------
PI RevPAR premium (absolute) (1) +GBP6.27 +GBP7.20 +GBP6.73
--------- --------- ---------
PI market share (2) 8.9% 8.6% 8.8%
--------- --------- ---------
PI market share gains pp (vs FY23) (2) (0.1)pp 0.2pp 0.1pp
==================================================== ========= ========= =========
1: STR data, standard basis, Premier Inn accommodation revenue,
occupancy, ARR and RevPAR 3 March 2023 to 31 August 2023, M&E
market excludes Premier Inn
2: STR data, revenue share of total UK market, 3 March 2023 to
31 August 2023
Total F&B sales were 10% ahead of H1 FY23 assisted by the
high levels of occupancy in our hotels and the success of a number
of commercial initiatives which were put in place during the second
half of FY23.
Operating costs of GBP852m were 11% higher than the same period
last year (H1 FY23: GBP771m) reflecting cost inflation and estate
growth, partially offset by savings from our ongoing cost
efficiency programme. EBITDAR margins increased to 42.4% (H1 FY23:
40.6%) and total EBITDAR was GBP627m, an increase of GBP100m.
Right-of-use asset depreciation was GBP70m and lease liability
interest was GBP65m. We opened three new hotels during the half,
totalling 430 rooms and we closed 72 rooms, as we continue to
optimise our estate when suitable opportunities arise. At the end
of the period, the total estate stood at 849 hotels with 83,934
rooms open.
Adjusted profit before tax in the UK increased by 28% to GBP407m
(H1 FY23: GBP317m), driven by the strength of our UK hotel
performance. As a result, pre-tax profit margins increased to
27.5%, 310bps ahead of H1 FY23 and 320bps ahead of FY20.
Premier Inn Germany
GBPm H1 FY24 H1 FY23 vs H1
FY23
=============================================== ========= ========= ==========
Statutory revenue 95 52 81%
Other income (excl. rental income) 3 - n/a
Operating costs before depreciation,
amortisation and rent (75) (51) (47)%
Adjusted EBITDAR 23 2 >1,000%
Net turnover rent and rental income - - 0%
Depreciation: Right-of-use asset (20) (15) (31)%
Depreciation and amortisation:
Other (7) (5) (33)%
Adjusted operating loss (4) (19) 80%
Interest: Lease liability (10) (6) (65)%
Adjusted loss before tax (14) (25) 44%
=============================================== ========= ========= ==========
Premier Inn Germany (1) key performance
indicators
================================================ ========= ========= ==========
H1 FY24 H1 FY23 vs H1
FY23
================================================ ========= ========= ==========
Number of hotels 57 42 36%
Number of rooms 10,251 7,608 35%
Committed pipeline (rooms) 5,830 7,080 (18)%
================================================ ========= ========= ==========
Occupancy 64.1% 63.4% 70bps
Average room rate GBP71.44 GBP55.27 29%
Revenue per available room GBP45.79 GBP35.06 31%
================================================ ========= =========
Sales growth(2) :
Accommodation 82%
Food & beverage 74%
Total 81%
Like-for-like sales(2) growth:
Accommodation 34%
Food & beverage 30%
Total 33%
================================================ ========= ========= ==========
1: Includes one site in Austria
2: Total and like-for-like versus H1 FY23
Total statutory revenue in Germany was 81% ahead of H1 FY23,
reflecting the increased size of our estate and the progressive
maturity of our hotels. During the half we opened six new hotels
including our second hotel in Dresden and our first in Darmstadt,
taking our open estate to 57 hotels with a total of 10,251 rooms
open and a further 5,830 rooms in the committed pipeline (H1 FY23:
7,608 rooms open; committed pipeline of 7,080 rooms). With the
lifting of all pandemic-related restrictions in April 2022, our
first quarter performance in FY24 reflected the strong market
recovery versus a much weaker comparator period. Our performance in
the second quarter was softer than expected. This reflected some
changes as we continued to test and tailor our UK model for the
German market and also by the fact that many German consumers
returned to international travel for their summer holiday with the
result that the market returned to a more normalised level of
domestic leisure travel. Overall, total estate RevPAR increased to
GBP45.79, with further growth in both occupancy and ARR.
Other income includes the release of a GBP3m provision relating
to a prior period claim for Government support which has now been
finalised (H1 FY23: GBPnil).
Operating costs in the period increased by GBP24m to GBP75m
reflecting the continued growth in our estate as well as high
levels of cost inflation, particularly in labour and F&B.
Drawing upon our growing trading experience across each of our
hotels, we are continuing to tailor our proposition for the German
consumer as well as refine our operating model, thereby reducing
costs whilst continuing to deliver a quality guest experience. We
are also exploring ways in which we might accelerate our revenue
growth further and have commenced a trial on Booking.com to
understand whether it can help drive incremental RevPAR and
profitability whilst at the same time, increasing our brand
awareness.
Right-of-use asset depreciation costs increased by GBP5m to
GBP20m as we opened five new leasehold hotels in the period. Other
depreciation and amortisation costs increased to GBP7m and lease
liability interest costs were GBP10m, reflecting the material
estate growth over the last year.
Despite ongoing macroeconomic uncertainties, adjusted operating
losses in the period reduced to GBP14m
(H1 FY23: GBP25m), reflecting the progressive maturity of our
existing hotels, together with a continued focus on costs. We
maintain our previous guidance of delivering a loss before tax of
between GBP30m and GBP40m in FY24, including the refurbishment of
hotels acquired at the end of FY23 which commenced during the
second half of the year.
Central and other costs
GBPm H1 FY24 H1 FY23 vs H1
FY23
============================================ ======== ======== ==========
Operating costs before depreciation,
amortisation and rent (22) (17) (28)%
Share of loss from joint ventures (0) (0) 0%
Adjusted operating loss (23) (18) (28)%
Net finance income / (costs) 21 (3) 885%
Adjusted loss before tax (1) (20) 94%
============================================ ======== ======== ==========
Central operating costs of GBP22m were GBP5m higher than H1
FY23, primarily driven by consultancy and systems upgrade-related
costs. Net finance costs decreased by GBP24m to a GBP21m credit
reflecting interest receivable on the Group's cash balances
following the increases in interest rates to GBP26m (H1 FY23:
GBP6m) and GBP8m of IAS 19 pension finance income (H1 FY23:
GBP7m).
Financial review
Financial highlights
GBPm H1 FY24 H1 FY23 vs H1
FY23
============================================ ======== ======== ===========
Statutory revenue 1,574 1,350 17%
Other income (excl rental income)(1) 3 - n/a
Operating costs before depreciation,
amortisation and rent (949) (839) (13)%
Adjusted EBITDAR 628 512 23%
Net turnover rent and rental income (1) 1 (183)%
Depreciation: Right-of-use asset (89) (81) (11)%
Depreciation and amortisation: Other (93) (88) (5)%
Adjusted operating profit 445 343 30%
Net finance income / (costs) (excl.
lease liability interest) 21 (3) 885%
Interest: Lease liability (75) (69) (9)%
Adjusted profit before tax 391 272 44%
Adjusting items 4 36 (90)%
Statutory profit before tax 395 307 29%
Tax expense (102) (74) (39)%
Statutory profit after tax 293 234 25%
============================================ ======== ======== ===========
Statutory revenue
Statutory revenues were up 17% versus last year, driven by the
combination of a robust demand environment coupled with reduced
level of supply in the UK hotel market, an improved performance
from F&B and continued growth of our hotel estate in
Germany.
Adjusted EBITDAR
Other income includes a GBP3m provision release relating to a
prior period claim for Government support which has now been
finalised (H1 FY23: GBPnil). Operating costs of GBP949m were 13%
higher than H1 FY23, driven by cost inflation and estate growth in
both the UK and Germany, partially offset by further savings from
our cost efficiency programme. As a result, adjusted EBITDAR was
GBP628m, 23% ahead of last year and demonstrating the operational
leverage of our business model.
Adjusted operating profit
The leasehold estate in the UK grew by net two hotels and by
five hotels in Germany with the result that right-of-use
depreciation increased by GBP8m to GBP89m. Our continued programme
of investment and new hotel openings resulted in other depreciation
and amortisation charges increasing by GBP5m to GBP93m. Given the
strong growth in adjusted EBITDAR, adjusted operating profit
increased by 30% from GBP343m in H1 FY23 to GBP445m in the first
half of the year.
Net finance costs
Strong cashflow and a marked increase in interest rates resulted
in higher interest receivable on the Group's cash balances. An
interest credit from the pension fund of GBP8m resulted in a net
finance credit (excluding lease liability interest) for the period
of GBP21m compared to a GBP3m charge in H1 FY23. Lease liability
interest of GBP75m was GBP6m higher than the same period last year,
primarily driven by the opening of two leasehold hotels in the UK
and five leaseholds in Germany.
Adjusting items
Total adjusting items before tax were a credit of GBP4m for the
period compared to a GBP36m credit in H1 FY23.
During the period, the Group received a settlement of GBP3m in
relation to a legal claim made against a payment card scheme
provider and received reimbursements for the costs of remedial
works on cladding material from property developers totalling
GBP2m.
In addition, the Group made a profit on six property disposals
totalling GBP2m (H1 FY23: GBP1m) as we continue to optimise the
estate, as and when suitable opportunities arise. The Group also
released provisions of GBP4m (HY23 GBPnil) relating to historic
indirect tax matters.
The Group has assessed the presentation of costs incurred in
relation to the implementation of both current and future strategic
IT programmes. The programmes currently scheduled include the
upgrade to both the Group's Hotel Management System as well as its
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 expected to last for multiple
years.
Cash costs incurred on the programmes and presented within
adjusting items in the period were GBP9m with cumulative cash costs
to date being GBP22m (FY23: GBP14m). At this time, the Group
expects to incur future costs, presented within adjusting items
across the current and future financial years, as follows: for the
second half of FY24 between GBP15m and GBP20m, during FY25 between
GBP10m and GBP20m and during FY26 up to GBP5m.
Taxation
The statutory tax charge of GBP102m (H1 FY23: GBP74m) represents
an effective tax rate on statutory profit for the six-month period
ended 31 August 2023 of 25.8% (H1 FY23: 20.4%). This is higher than
the UK statutory corporate tax rate of 25.0% (H1 FY23: 19.0%)
primarily due to the impact of overseas tax losses for which no
deferred tax has been recognised.
Statutory profit after tax
Statutory profit after tax for the period was GBP293m in H1
FY24, compared to a profit of GBP234m in H1 FY23.
Earnings per share
H1 FY24 H1 FY23 vs H1 FY23
=================================== =========== =========== ===========
Adjusted basic profit / earnings
per share 146.1p 107.0p 37%
Statutory basic profit / earnings
per share 147.6p 115.7p 28%
=================================== =========== =========== ===========
Adjusted basic profit per share of 146.1p and statutory basic
profit per share of 147.6p reflect the adjusted and statutory
profits reported in the period and are based on a weighted average
number of shares of 199m (H1 FY23: 202m). The reduction in the
weighted average number of shares reflects shares purchased and
cancelled as part of the Group's previously announced share
buy-back programme.
Dividend
The Board has declared an increased interim dividend of 34.1
pence per share (H1 FY23: 24.4 pence), reflecting the Group's
performance in the first half, its strong balance sheet, continued
current trading momentum and confidence in the full year outlook.
This will result in a total interim dividend payment of GBP66m. The
interim dividend will be paid on 8 December 2023 to all
shareholders on the register at the close of business on
3 November 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 8 to the accompanying
financial statements.
Cashflow
GBPm H1 FY24 H1 FY23
================================================ ======== ========
Adjusted EBITDAR 628 512
Change in working capital 4 29
Net turnover rent and rental income (1) 1
IFRS 16 interest and principal lease payments (149) (132)
Adjusted operating cashflow 483 410
Interest (excl. IFRS 16) 9 (16)
Corporate taxes (26) (7)
Pension (3) (2)
Capital expenditure: non-expansionary (122) (82)
Capital expenditure: expansionary(1) (91) (222)
Disposal Proceeds 8 56
Non-cash other 6 13
Other (4) (4)
======== ========
Cashflow before shareholder returns / receipts
and debt repayments 260 144
Dividend (99) (70)
Shares purchased for Employee Share Ownership
Trust ('ESOT') - (33)
Share buy-back (265) -
Net cashflow (104) 42
--------
Opening net cash 171 141
Repayment of long-term borrowings - -
Closing net cash 67 182
================================================ ======== ========
1: H1 FY24 includes GBPnil payment of contingent consideration
(GBP6.4m payment of contingent consideration)
The Group's strong trading performance coupled with a focus on
cost efficiencies delivered a 23% increase in adjusted EBITDAR to
GBP628m. Lease liability interest and lease repayments increased by
GBP17m to GBP149m reflecting the increase in our leasehold estate
in the UK and Germany. A reduction in other debtors reflected a
number of property transactions offset by a decrease in creditors
resulting in a GBP4m working capital inflow in the period (H1 FY23:
GBP29m inflow). This contributed to an adjusted operating cashflow
of GBP483m, GBP73m higher than H1 FY23.
The corporation tax net outflow in the period was GBP26m. This
comprises payments of GBP27m in the UK and GBP0.2m in Germany, net
of a GBP1m repayment of historic taxes.
Non-expansionary capital expenditure was GBP122m and reflected
an increase in refurbishment activity, our systems replacement
projects and our bed replacement programme. Expansionary capital
expenditure was GBP91m, GBP131m lower than last year which included
three large freehold purchases in London and Dublin. With
additional freehold purchases already announced and planned in the
second half of the year, full year gross capex spend is expected to
be between GBP500m and GBP550m.
Disposal proceeds of GBP8m (H1 FY23: GBP56m) include the
disposal of three properties as the Group continues to optimise its
estate when suitable opportunities arise. The prior year includes
GBP46m relating to the sale and leaseback of a property in
Marylebone. Additional property disposals, either already announced
or expected in the second half of FY24, mean we expect to receive
total disposal proceeds between GBP50m and GBP100m in FY24.
The GBP6m of other non-cash items includes inflows relating to
share-based payments of GBP9m (H1 FY23: GBP7m), and GBP3m
representing non-cash pension scheme administration costs (H1 FY23:
GBP2m), partially offset by outflows relating to GBP6m of net
provision movements (H1 FY23: GBP3m inflow).
The increase in operating cashflow funded the capital
expenditure in the period and therefore resulted in a cash inflow
before shareholder returns of GBP260m (H1 FY23: GBP144m).
Following the strong financial and operating performance in
FY23, the Board recommended a final dividend of 49.8p per share on
25 April 2023. This resulted in a payment of GBP99m which was paid
on 7 July 2023. On 24 April 2023 the Board approved a GBP300m share
buy-back to be completed by 18 October 2023. In the period 8m
shares were repurchased and cancelled for consideration of GBP265m
with the remaining shares to be repurchased before the completion
date.
Following the payment of the increased final dividend and share
buy-back, the net cash outflow was GBP104m and net cash at the end
of the period was GBP67m .
Debt funding facilities & liquidity
GBPm Facility Utilised Maturity
================================ ========== ========== =========
Revolving Credit Facility (775.0) - 2028
Bond (450.0) ( 450.0) 2025
Green Bond (300.0) (300.0) 2027
Green Bond (250.0) (250.0) 2031
========== ========== =========
(1,775.0) (1,000.0)
Cash and cash equivalents 1,061
Total facilities utilised, net
of cash (1) 61
========== ==========
Net cash 67
Net cash and lease liabilities (3,882)
---------- ==========
The Group's objective is to manage to investment grade metrics
and specifically to a lease-adjusted
net debt : adjusted EBITDAR ratio of less than 3.5x over the
medium term(2) . We received confirmation of an upgrade to our
investment grade status on 17 August 2023 from BBB- to BBB. During
the first half, the Group's lease-adjusted net debt was GBP2,529m
(H1 FY23: GBP2,217m) and the lease-adjusted net debt : adjusted
EBITDAR ratio was 2.5x (H1 FY23: 2.8x).
As at 31 August 2023, GBP35m of the GBP775m Revolving Credit
Facility is carved-out as an ancillary guarantee facility for the
Group's use in Germany. This facility replaces an existing credit
line previously made available to the Group outside of the RCF.
Guarantees totalling EUR23m were in issue at 31 August 2023 (March
2023: EUR22m).
1: Excludes unamortised fees associated with the debt
instrument
2: This measure has been changed to align to Fitch methodology
on an adjusted EBITDAR basis and as a result has reset the leverage
threshold to 3.5x lease-adjusted net debt : adjusted EBITDAR
(previously 3.7x)
Capital investment
GBPm H1 FY24 H1 FY23
=========================================== ========= ========
UK maintenance and product improvement 120 81
New / extended UK hotels(1) 39 182
Germany and Middle East(2) 54 42
========= ========
Total 213 304
=========================================== ========= ========
1: H1 FY24 includes GBPnil capital contributions to joint
ventures (H1 FY23: GBPnil)
2: H1 FY24 includes GBPnil payment of contingent consideration
(H1 FY23: GBP6.4m)
Total capital expenditure in H1 FY24 was GBP213m, which was
approximately GBP90m lower than the previous year. UK maintenance
and product improvement spend was GBP120m, GBP39m higher than H1
FY23, reflecting hotel refurbishments, systems-related projects and
the Group's ongoing bed replacement programme. UK expansionary
expenditure included GBP39m on developing new sites. This was
GBP143m lower than in H1 FY23 that included the purchase of
freehold properties in London and Dublin. In Germany, capital spend
was driven by the purchase of a freehold property in Lindau and the
continued development of our committed pipeline. As a result, gross
capital expenditure in FY24 is now expected to be between GBP500m
and GBP550m with between GBP50m and GBP100m expected to be received
from disposals.
Property, plant and equipment of GBP4.6bn was higher than H1
FY23 (GBP4.5bn), 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% 24%:76%
Group 53%:47% 51%:49%
========================= ============ ================
1: Open plus committed pipeline
The current UK estate is 57% freehold and 43% leasehold, a mix
that is expected to change to 55% freehold and 45% leasehold as the
existing pipeline is brought onstream. The higher leasehold mix in
Germany reflects the greater proportion of city centre
locations.
The new site openings in Germany and continued expansion in the
UK resulted in right-of-use assets increasing to GBP3.5bn (H1 FY23:
GBP3.3bn) and lease liabilities increasing to GBP3.9bn (H1 FY23:
GBP3.7bn).
Return on Capital (1) - Premier Inn UK
Returns H1 FY24 H1 FY23
Group ROCE 12.6% 9.0%
UK ROCE 14.9% 11.0%
============================================ ========== ===========
1: Germany ROCE not included as losses were incurred in the
year
The strong revenue and profit performance meant that Group ROCE
increased to 12.6% and UK ROCE increased to 14.9% and 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 longstanding efficiency programme and our
ability to drive ARRs through improvements to our proprietary
automated trading engine and the continuous evolution of our
product.
Pension
The Group's defined benefit pension scheme, the Whitbread Group
Pension Fund (the 'Pension Fund'), had an IAS19 Employee Benefits
surplus of GBP236m at the end of the period (H1 FY23: GBP429m). The
change in surplus was primarily driven by increases in gilt yields
which, due to the liability hedging strategies in place for the
Fund, resulted in a lower value being placed on the assets as at 31
August 2023 compared to 1 September 2022. This was partially offset
by increases in corporate bond yields, and therefore the discount
rate, which reduces the value of the pension obligations.
There are currently no deficit reduction contributions being
paid to the Pension Fund, however annual contributions continue to
be paid to the Fund through the Scottish Partnership arrangements
which amount to approximately GBP11m per annum. The Trustee holds
security over approximately 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. The Pension Fund is currently in the process of
conducting the triennial actuarial valuation of the Fund as at
31 March 2023.
Going concern
The directors have concluded that it is appropriate for the
consolidated financial statements to be prepared on the going
concern basis. Full details are set out in note 1 of the attached
financial statements.
Risks and uncertainties
The directors have reconsidered the principal risks and
uncertainties of the Group and have determined that those reported
in the Annual Report and Accounts ('Annual Report') 2022/23 remain
relevant for the remaining half of the financial year, when read
together with the following considerations.
The overall risk environment continues to be uncertain with
global economic weakness, political tensions and environmental
events increasing complexity and changing the nature of current and
emerging risks. As previously noted, Whitbread's risks have a high
degree of inter-connectivity (e.g. securing talent or surety of
supply chain) which amplifies any movements and can result in
significa nt costs to the business. The most significant risk
remains the economic outlook including geopolitical risks and the
resulting impact on inflation across key costs and cost-of-living
pressures potentially subduing demand.
We remain vigilant surrounding cyber risk and the highly dynamic
nature and increasing sophistication of attacks enabled by
Artificial Intelligence ('AI'). Internally, we recognise the
increased risks driven by an accumulation of change via programmes
and strategic priorities, especially during the next six months as
we roll-out a new reservation system across our hotels. The
likelihood that the property market stagnation slows growth has
increased as we see less developer led opportunities, conversely
this reduces the likelihood of brand challenges impacting demand
from supply therefore balancing the overall risk to Whitbread.
The following summarises the risks and uncertainties set out in
the Annual Report including current emerging themes:
-- Uncertain economic outlook - threat of a recession which is
deep and prolonged, wider macro-economic trends and current
geopolitical conflicts, resulting in changeable demand, weak public
and consumer confidence; reduced international travel; structural
and significant inflation; leading to an inability to meet customer
demand;
-- Cyber and data security - reduces the effectiveness of systems or results in loss of data;
-- Technology-led business change and interdependencies -
ability to execute the significant volume of change under
time-bound pressures, for example, the replacement of legacy
systems;
-- Germany profitable growth - the inability to successfully execute our strategy in Germany;
-- Increased and extended focus on the proposition in
Restaurants - driven by a divergence in performance of
accommodation and F&B sales;
-- Extended stagnation of the UK Property market slows UK growth;
-- Talent attraction and retention - continued pressure
following structural changes to the labour market with functional
and geographical specific challenges, a reduction in our talent
pools and low levels of senior diversity;
-- Third party arrangements and supply chain rigour - business
interruption as a result of the withdrawal of services below
acceptable standards or reputational damage as a result of
unethical supplier practices;
-- Brand challenges impacting demand - driven by brand
oversupply, new budget competitors and the threat of disruptors
exploiting current consumer price sensitivity, resulting in a loss
of market share;
-- Health and safety - death or serious injury as a result of
company negligence or a significant incident resulting from food,
fire or another safety failure; and
-- ESG - uncertainty as to how these collective risks, including
climate change, will evolve and impact our ability to deliver on
our commitments.
Our Board and management team continue to review and monitor our
risk profile and emerging trends arising externally or internally,
our risk management arrangements and internal control measures.
The detail of our principal risks can be found on pages 62 to 66
of the Annual Report which is available on the website
www.whitbread.co.uk .
American Depositary Receipts
Whitbread has established a sponsored Level 1 American
Depositary Receipt ('ADR') programme for which 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 basic profit /
earnings per share, net cash / (debt), net cash / (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.
Responsibility statement
We confirm that to the best of our knowledge:
a) The condensed set of financial statements, which has been
prepared in accordance with IAS 34 Interim Financial Reporting,
gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the issuer, or the undertakings
included in the consolidation as a whole;
b) The interim management report includes a fair review of the
information required by the Financial Statements Disclosure and
Transparency Rules (DTR) 4.2.7R - indication of important events
during the first six months and their impact on the financial
statements and description of principal risks and uncertainties for
the remaining six months of the year; and
c) The interim management report includes a fair review of the
information required by DTR 4.2.8R - disclosure of related party
transactions and changes therein.
By order of the Board
Dominic Paul Hemant Patel
Chief Executive Chief Financial
Officer
Interim consolidated income statement
(Reviewed) (Reviewed)
6 months to 31 August 2023 6 months to 1 September 2022
Adjusting
Before items Before Adjusting
adjusting (Note adjusting items
items 4) Statutory items (Note 4) Statutory
Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -----
Revenue 2 1,574.0 - 1,574.0 1,350.4 - 1,350.4
Other income 3 4.3 3.3 7.6 1.7 - 1.7
Operating costs (1,132.7) 0.4 (1,132.3) (1,008.6) 35.5 (973.1)
Operating profit before
joint ventures 445.6 3.7 449.3 343.5 35.5 379.0
Share of loss from joint
ventures (0.3) - (0.3) (0.3) - (0.3)
Operating profit 445.3 3.7 449.0 343.2 35.5 378.7
Finance costs 5 (87.7) - (87.7) (84.2) - (84.2)
Finance income 5 33.8 - 33.8 12.9 - 12.9
---------- --------- --------- ---------- --------- ---------
Profit before tax 391.4 3.7 395.1 271.9 35.5 307.4
Tax expense 6 (101.1) (0.8) (101.9) (55.5) (18.0) (73.5)
Profit for the period
attributable to parent
shareholders 290.3 2.9 293.2 216.4 17.5 233.9
---------- --------- --------- ---------- --------- ---------
Earnings per share (Note
7)
Basic (pence) 146.1 1.5 147.6 107.0 8.7 115.7
Diluted (pence) 145.0 1.5 146.5 106.4 8.6 115.0
All of the results shown above relate to continuing
operations.
Interim consolidated statement of comprehensive income
(Reviewed) (Reviewed)
6 months
to 6 months to
31 August 1 September
2023 2022
Notes GBPm GBPm
--------------------------------------------- ----- ----------- ------------
Profit for the period 293.2 233.9
Items that will not be reclassified
to the income statement:
Remeasurement loss on defined benefit
pension scheme 11 (96.4) (100.6)
Current tax on defined benefit pension
scheme 0.5 0.3
Deferred tax on defined benefit pension
scheme 23.5 24.8
(72.4) (75.5)
Items that may be reclassified subsequently
to the income statement:
Net loss on cash flow hedges (0.8) -
Deferred tax on cash flow hedges 0.8 -
Net gain/(loss) on hedge of a net investment 4.4 (21.4)
Deferred tax on hedge of a net investment - 2.5
Current tax on hedge of a net investment (0.6) -
Cost of hedging 0.5 0.5
4.3 (18.4)
Exchange differences on translation
of foreign operations (21.8) 24.6
Deferred tax on exchange differences
on translation of foreign operations - (2.1)
Current tax on exchange differences
on translation of foreign operations 2.7 -
----------- ------------
(19.1) 22.5
Other comprehensive loss for the period,
net of tax (87.2) (71.4)
Total comprehensive income for the
period, net of tax 206.0 162.5
----------- ------------
Interim consolidated statement of changes in equity
6 months to 31 August 2023 (Reviewed)
Capital Currency
Share Share redemption Retained translation Other Total
capital premium reserve earnings reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- -------- ----------- --------- ------------ --------- -------
At 2 March 2023 164.9 1,026.6 50.2 5,230.1 35.0 (2,395.4) 4,111.4
Profit for the period - - - 293.2 - - 293.2
Other comprehensive loss - - - (72.4) (14.8) - (87.2)
-------- -------- ----------- --------- ------------ --------- -------
Total comprehensive income/(loss) - - - 220.8 (14.8) - 206.0
Ordinary shares issued on
exercise of employee share
options - 1.5 - - - - 1.5
Loss on ESOT shares issued - - - (6.0) - 6.0 -
Accrued share-based payments - - - 9.3 - - 9.3
Tax on share-based payments - - 0.6 - - 0.6
Equity dividends paid (Note
8) - - - (99.3) - - (99.3)
Share buyback and commitment
(Note 13) (6.0) - 6.0 - - (301.3) (301.3)
At 31 August 2023 158.9 1,028.1 56.2 5,355.5 20.2 (2,690.7) 3,928.2
-------- -------- ----------- --------- ------------ --------- -------
6 months to 1 September 2022 (Reviewed)
Capital Currency
Share Share redemption Retained translation Other Total
capital premium reserve earnings reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- -------- ----------- --------- ------------ --------- -------
At 3 March 2022 164.8 1,024.7 50.2 5,225.3 24.3 (2,370.3) 4,119.0
Profit for the period - - - 233.9 - - 233.9
Other comprehensive (loss)/income - - - (75.5) 4.1 - (71.4)
-------- -------- ----------- --------- ------------ --------- -------
Total comprehensive income - - - 158.4 4.1 - 162.5
Ordinary shares issued on
exercise of employee share
options - 0.3 - - - - 0.3
Loss on ESOT shares issued - - - (1.9) - 1.9 -
Accrued share-based payments - - - 7.4 - - 7.4
Equity dividends paid - - - (70.1) - - (70.1)
Purchase of ESOT shares
(Note 13) - - - - - (12.3) (12.3)
At 1 September 2022 164.8 1,025.0 50.2 5,319.1 28.4 (2,380.7) 4,206.8
-------- -------- ----------- --------- ------------ --------- -------
Interim consolidated balance sheet
(Reviewed) (Reviewed) (Audited)
31 August 1 September
2023 2022 2 March 2023
Notes GBPm GBPm GBPm
------------------------------------- ------ ----------- ------------ -------------
Non-current assets
Goodwill and other intangible assets 189.5 165.9 179.6
Right-of-use assets 3,476.8 3,310.1 3,504.6
Property, plant and equipment 4,616.3 4,465.8 4,554.2
Investment in joint ventures 45.2 47.2 48.2
Derivative financial instruments 10 0.8 - -
Defined benefit pension surplus 11 236.4 429.2 324.7
8,565.0 8,418.2 8,611.3
Current assets
Inventories 22.1 20.8 21.7
Derivative financial instruments 10 0.3 - -
Trade and other receivables 123.8 138.2 141.8
Cash and cash equivalents 1,061.3 1,174.8 1,164.8
1,207.5 1,333.8 1,328.3
Assets classified as held for sale 7.1 5.8 3.2
Total assets 9,779.6 9,757.8 9,942.8
Current liabilities
Lease liabilities 153.6 138.8 144.1
Provisions 8.9 24.6 20.2
Derivative financial instruments 10 0.8 - -
Current tax liabilities 12.2 13.9 4.6
Trade and other payables 640.8 578.5 676.7
Other financial liabilities 13 36.6 - -
----------- ------------ -------------
852.9 755.8 845.6
Non-current liabilities
Borrowings 9 994.3 992.7 993.4
Lease liabilities 3,795.1 3,610.0 3,814.3
Provisions 8.8 10.1 8.3
Derivative financial instruments 10 1.3 2.8 7.8
Deferred tax liabilities 6 199.0 178.3 158.2
Trade and other payables - 1.3 3.8
4,998.5 4,795.2 4,985.8
Total liabilities 5,851.4 5,551.0 5,831.4
Net assets 3,928.2 4,206.8 4,111.4
----------- ------------ -------------
Equity
Share capital 13 158.9 164.8 164.9
Share premium 13 1,028.1 1,025.0 1,026.6
Capital redemption reserve 13 56.2 50.2 50.2
Retained earnings 5,355.5 5,319.1 5,230.1
Currency translation reserve 20.2 28.4 35.0
Other reserves (2,690.7) (2,380.7) (2,395.4)
----------- ------------ -------------
Total equity 3,928.2 4,206.8 4,111.4
----------- ------------ -------------
Interim consolidated cash flow statement
(Reviewed) (Reviewed)
6 months
to 6 months to
31 August 1 September
2023 2022
Notes GBPm GBPm
------------------------------------------------- ----- ----------- ------------
Cash generated from operations 12 638.6 554.2
Payments against provisions (4.1) (1.0)
Pension payments 11 (2.7) (2.4)
Interest paid - lease liabilities (75.1) (68.6)
Interest paid - other (15.2) (21.4)
Interest received 23.7 5.4
Corporation taxes paid (26.0) (6.5)
----------- ------------
Net cash flows generated from operating
activities 539.2 459.7
Cash flows used in investing activities
Purchase of property, plant and equipment (194.5) (282.6)
Proceeds from disposal of property,
plant and equipment 8.3 55.5
Investment in intangible assets (18.7) (15.2)
Payment of deferred and contingent consideration - (6.4)
Net cash flows used in investing activities (204.9) (248.7)
Cash flows used in financing activities
Proceeds from issue of shares on exercise
of employee share options 1.5 0.3
Payment of facility fees (0.8) (4.0)
Net lease incentives received 0.4 2.0
Payment of principal of lease liabilities (73.8) (65.4)
Purchase of own shares for ESOT - (32.5)
Purchase of own shares, including transaction
costs 13 (264.7) -
Dividends paid 8 (99.3) (70.1)
Net cash flows used in financing activities (436.7) (169.7)
Net (decrease)/increase in cash and
cash equivalents (102.4) 41.3
Opening cash and cash equivalents 1,164.8 1,132.4
Foreign exchange differences (1.1) 1.1
----------- ------------
Closing cash and cash equivalents 1,061.3 1,174.8
----------- ------------
Notes to the accounts
1. Basis of accounting and preparation
The interim condensed consolidated financial statements were
authorised for issue in accordance with a resolution of the Board
of Directors on 17 October 2023.
The financial information for the year ended 2 March 2023 is
extracted from the statutory accounts of the Group for that year
and does not constitute statutory accounts as defined in Section
434 of the Companies Act 2006. A copy of the statutory accounts for
that year has been delivered to the Registrar of Companies. These
published accounts were reported on by the auditor without
qualification, did not draw attention to any matters by way of
emphasis and did not contain a statement under Sections 498(2) or
(3) of the Companies Act 2006.
The interim condensed consolidated financial statements are
prepared in accordance with UK listing rules and with United
Kingdom adopted IAS 34 Interim Financial Reporting.
The interim condensed consolidated financial statements for the
six months ended 31 August 2023 and the comparatives to 1 September
2022 are unaudited but have been reviewed by the auditor; a copy of
their review report is included at the end of this report.
Going concern
A combination of the strong cash flows generated by the
business, and the significant available headroom on its credit
facilities, support the directors' view that the Group has
sufficient funds available for it to meet its foreseeable working
capital requirements. The directors have concluded therefore that
the going concern basis of preparation remains appropriate.
Accounting policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 2 March 2023.
As a result of the adjusting items recorded in the period, the
accounting policy used in determining adjusting items is set out
below.
Adjusting items and use of alternative performance measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way the business performance is
measured internally by the Board and Executive Committee. A
glossary of APMs and reconciliations to statutory measures is given
at the end of this report.
The term adjusted profit is not defined under IFRS and may not
be directly comparable with adjusted profit measures used by other
companies. It is not intended to be a substitute for, or superior
to, statutory measures of profit. Adjusted measures of
profitability are non-IFRS because they exclude amounts that are
included in, or include amounts that are excluded from, the most
directly comparable measure calculated and presented in accordance
with IFRS.
The Group makes certain adjustments to the statutory profit
measures in order to derive many of its APMs. The Group's policy is
to exclude items that are considered to be significant in nature
and quantum, not in the normal course of business or are consistent
with items that were treated as adjusting in prior periods or that
span multiple financial periods. Treatment as an adjusting item
provides users of the accounts with additional useful information
to assess the year-on-year trading performance of the Group.
On this basis, the following are examples of items that may be
classified as adjusting items:
-- net charges associated with the strategic 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 programmes;
-- 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.
Seasonality
The Group operates hotels and restaurants, located in the UK and
internationally. The Group generally earns higher profits during
the first half of the financial year because of lower demand in the
final quarter of the financial year.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported as assets and liabilities at the balance sheet date and
the amounts reported as revenues and expenses during the period.
Although these amounts are based on management's best estimates,
events or actions may mean that actual results ultimately differ
from those estimates, and these differences may be material. These
judgements and estimates and the underlying assumptions are
reviewed regularly.
With the exception of the performance of impairment reviews of
the Group's goodwill, property, plant and equipment and
right-of-use assets, in preparing these condensed consolidated
financial statements the critical judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were principally the same as those applied
to the Group's consolidated financial statements for the year ended
2 March 2023.
Critical accounting judgement
Adjusting items
Judgement is applied as to whether adjusting items meet the
necessary criteria as per the accounting policy disclosed earlier
in this note. Note 4 describes the items identified and separately
disclosed as adjusting items.
Impairment review - property, plant and equipment and
right-of-use assets(1)
Where there are indicators of impairment or impairment
reversals, management performs an impairment assessment.
During the period, there were no indicators of impairment or
impairment reversals and as such, no impairment assessment was
deemed necessary. Accordingly, no impairment disclosures are
provided within these interim condensed consolidated financial
statements.
Key sources of estimation uncertainty
Defined benefit pension
The Group makes significant estimates in relation to the
discount rates, inflation rates and mortality rates used to
calculate the present value of the defined benefit obligation. Note
11 describes the sensitivity of the defined benefit pension
obligation to changes in key assumptions.
2. Segmental analysis
The Group provides services in relation to accommodation, food
and beverage ('F&B') in both the UK and internationally.
Management monitors the operating results of its operating segments
separately for the purpose of making decisions about allocating
resources and assessing performance. Segment performance is
measured based on adjusted operating profit before joint ventures.
Included within central and other in the following tables are the
costs of running the public company, other central overhead costs
and share of losses from joint ventures.
The following tables present revenue and profit information
regarding business operating segments for the six months to 31
August 2023 and 1 September 2022.
6 months to 31 August 2023 6 months to 1 September 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 1,084.1 81.1 - 1,165.2 940.0 44.5 - 984.5
Food, beverage and other
items 395.0 13.8 - 408.8 358.0 7.9 - 365.9
-------- ------- ---------- ------- ------------ ------- ---------- -------
Revenue 1,479.1 94.9 - 1,574.0 1,298.0 52.4 - 1,350.4
------- -------
6 months to 31 August 2023 6 months to 1 September 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 471.6 (3.8) (22.2) 445.6 379.5 (18.7) (17.3) 343.5
Share of loss from joint
ventures - - (0.3) (0.3) - - (0.3) (0.3)
-------- ------- ---------- ------ ------------ ------- ---------- ------
Adjusted operating
profit/(loss) 471.6 (3.8) (22.5) 445.3 379.5 (18.7) (17.6) 343.2
Net finance (costs)/income (64.9) (10.2) 21.2 (53.9) (62.4) (6.2) (2.7) (71.3)
Adjusted profit/(loss)
before tax 406.7 (14.0) (1.3) 391.4 317.1 (24.9) (20.3) 271.9
Adjusting items (Note
4) 3.7 35.5
------ ------
Profit before tax 395.1 307.4
------ ------
6 months to 31 August 6 months to 1 September
2023 2022
--------------------- -----------------------
Other segment information UK &
Ireland Germany Total UK & Ireland Germany Total
GBPm GBPm GBPm GBPm GBPm GBPm
Capital expenditure:
Property, plant and equipment
- cash basis 140.7 53.8 194.5 247.3 35.3 282.6
Property, plant and equipment
- accruals basis 120.3 53.5 173.8 241.8 33.2 275.0
Intangible assets 18.7 - 18.7 15.2 - 15.2
Cash outflows from lease interest
and payment of principal of
lease liabilities 123.0 25.9 148.9 116.5 17.5 134.0
Depreciation - property, plant
and equipment 76.8 7.1 83.9 74.2 5.3 79.5
Depreciation - right-of-use
assets 69.7 19.7 89.4 65.8 15.1 80.9
Amortisation 8.8 0.1 8.9 8.6 0.1 8.7
Segment assets and liabilities are not disclosed as they are not
reported to, or reviewed by, the Chief Operating Decision
Maker.
3. Other income
6 months
to 6 months to
31 August 1 September
2023 2022
GBPm GBPm
------------------------------------
Rental income 1.6 1.7
Government payments(1) 2.5 -
Other 0.2 -
---------- ------------
Other income before adjusting items 4.3 1.7
Legal claim settlement 3.3 -
Other income 7.6 1.7
---------- ------------
(1) GBP2.5m has been released during this period from a brought
forward provision relating to Government payments claimed in
Germany during previous periods.
4. Adjusting items
As set out in the policy in Note 1, we use a range of measures
to monitor the financial performance of the Group. These measures
include both statutory measures in accordance with IFRS and APMs
which are consistent with the way that the business performance is
measured internally. We report adjusted measures because we believe
they provide both management and investors with useful additional
information about the financial performance of the Group's
businesses. Adjusted measures of profitability represent the
equivalent IFRS measures adjusted for specific items that we
consider hinder the comparison of the financial performance of the
Group's businesses either from one period to another or with other
similar businesses.
6 months
to 6 months to
31 August 1 September
2023 2022
GBPm GBPm
------------------------------------------------------------ ---------- ------------
Adjusting items were as follows:
Other income:
Legal Claim Settlement(1) 3.3 -
Adjusting other income 3.3 -
Operating costs:
Net impairment reversals - property, plant and equipment,
right-of-use assets and other intangible assets(2) - 33.5
Gains on disposals, property and other provisions(3) 8.9 2.0
Strategic IT programme costs(4) (8.5) -
Adjusting operating costs 0.4 35.5
Adjusting items before tax 3.7 35.5
---------- ------------
Tax adjustments included in reported loss after tax,
but excluded in arriving at adjusted loss after tax:
Tax on adjusting items (0.6) (10.5)
Effect of in-year rate differential/change in tax
rates (0.2) (7.5)
Adjusting tax expense (0.8) (18.0)
---------- ------------
(1) During the period, the Group received a settlement of
GBP3.3m in relation to a legal claim made against a payment card
scheme provider.
(2) During the period, there were no indicators of impairment or
impairment reversals and as such, no impairment assessment was
performed.
During the comparative period, an impairment review of assets
held by the Group was undertaken, resulting in a total net
impairment reversal of GBP35.9m. The net impairment reversal was
comprised of GBP23.4m relating to property, plant and equipment and
GBP12.5m relating to right-of-use assets. In addition, an
impairment charge of GBP2.4m was recorded in relation to assets
classified as held for sale.
(3) From FY18 to FY20, the Group established a provision for the
performance of remedial works on cladding material at a small
number of sites. During the period the Group has received
reimbursements of costs of remedial works on cladding material from
property developers totalling GBP2.4m. In addition, during the
period, the Group made a profit on other property disposals of
GBP2.1m (HY23: GBP0.6m) and released provisions of GBP4.4m (HY23:
GBPnil) relating to historic indirect tax matters.
During the comparative period, the Group entered into a sale and
lease transaction of land and a hotel currently under construction.
As a result of this transaction, the Group received proceeds of
GBP46.4m and recognised a net gain of GBP1.4m, the completed hotel
and land will be leased back at practical completion to the
Group.
(4) 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 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 commercial
and strategic benefit seen as lasting multiple years.
Cash costs incurred on the programmes and presented within
adjusting items in the period were GBP8.5m with cumulative cash
costs to date being GBP22.3m (FY23: GBP13.8m). At this time the
Group expects to incur future costs presented within adjusting
items across future financial periods as follows: for the second
half of the financial year ended 2024 between GBP15.0m and
GBP20.0m, during the financial year ended 2025 between GBP10.0m and
GBP20.0m and during the financial year ended 2026 up to
GBP5.0m.
5. Finance (costs)/income
6 months
to 6 months to
1 August 1 September
2023 2022
GBPm GBPm
Finance costs
Interest on bank loans and overdrafts (2.3) (2.9)
Interest on other loans (11.9) (12.1)
Interest on lease liabilities (75.1) (68.6)
Interest capitalised 2.1 0.1
Unwinding of discount on contingent consideration - (0.2)
Cost of hedging (0.5) (0.5)
(87.7) (84.2)
Finance income
Bank interest receivable 25.8 6.1
IAS 19 pension net finance income (Note 11) 8.0 6.8
33.8 12.9
Total net finance costs (53.9) (71.3)
--------- ------------
6. Taxation
The Group effective tax rate applied to the profit before tax
before adjusting items for the six months to 31 August 2023 is
25.8% (H1 FY23: 20.4%).
The tax charge for the six months to 31 August 2023 has been
calculated in line with IAS 34 by applying the effective rate of
tax which is expected to apply in each jurisdiction in which the
Group operates for the year ending 29 February 2024.
A UK current tax rate of 24.5% and a deferred tax rate of 25%
has been applied to discrete and adjusting items.
In addition, a forecast effective tax rate of 0% has been
applied to the German pre-tax loss as the Group does not currently
deem it appropriate to recognise a deferred tax asset. The impact
on the effective tax rate from the non-recognition of German tax
losses in the current period is 0.7% (HY23: 3.1%).
6 months 6 months
to to
31 August 1 September
2023 2022
Consolidated income statement GBPm GBPm
---------------------------------------------------- ----------- -------------
Current tax:
Current tax expense 36.6 20.9
Adjustments in respect of previous periods (0.4) -
----------- -------------
36.2 20.9
Deferred tax:
Origination and reversal of temporary differences 65.5 45.2
Effect of in-year rate differential/change in tax
rates 0.2 7.5
Adjustments in respect of previous periods - (0.1)
65.7 52.6
----------- -------------
Tax reported in the consolidated income statement 101.9 73.5
----------- -------------
Deferred tax
The major deferred tax (liabilities)/assets recognised by the
Group and movements during the period are as follows:
Rolled
Accelerated over gains
capital and property
allowances revaluations Pensions Leases Losses Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 2 March 2023 (87.2) (93.8) (116.4) 44.3 97.5 (2.6) (158.2)
(Charge)/credit to consolidated
income statement (25.1) 0.4 (1.4) (1.5) (33.6) (4.5) (65.7)
Credit to statement of comprehensive
income - - 23.5 - - 0.8 24.3
Credit to statement of changes
in equity - - - - - 0.3 0.3
Foreign exchange and other
movements - - - (0.6) 0.5 0.4 0.3
------------ -------------- --------- ------- ------- ------ --------
At 31 August 2023 (112.3) (93.4) (94.3) 42.2 64.4 (5.6) (199.0)
------------ -------------- --------- ------- ------- ------ --------
The UK's main corporation tax rate increased to 25% on 1 April
2023. All UK deferred tax balances have been recognised at this
rate.
The Group has unrecognised German tax losses of GBP208.5m (March
2023: GBP199.9m) 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 tax group at the reporting period and does not
currently deem it appropriate to recognise any German deferred tax
asset in excess of deferred tax liabilities. Recognition of German
deferred tax assets in their entirety would result in an increase
in the reported deferred tax asset of GBP66.6m (March 2023:
GBP63.8m).
Finance (No. 2) Bill 2023, that includes Pillar Two legislation,
was substantively enacted on 20 June 2023 for IFRS purposes. The
Group has applied the exemption from recognising and disclosing
information about deferred tax assets and liabilities related to
Pillar Two income taxes as required by the amendments to IAS 12 -
International Tax Reform - Pillar Two Model Rules, issued in May
2023.
7. Earnings per share
The basic earnings per share (EPS) figures are calculated by
dividing the net profit for the period attributable to parent
shareholders by the weighted average number of ordinary shares in
issue during the period after deducting treasury shares and shares
held by an independently managed employee share ownership trust
(ESOT).
The diluted earnings per share figures allow for the dilutive
effect of the conversion into ordinary shares of the weighted
average number of options outstanding during the period. Where the
average share price for the period is lower than the option price
or the Group is loss making, the options become anti-dilutive and
are excluded from the calculation. There are nil (H1 FY23: 1.1m)
share options excluded from the diluted earnings per share
calculation because they would be anti-dilutive.
The number of shares used for the earnings per share
calculations are as follows:
6 months
to 6 months to
31 August 1 September
2023 2022
million million
--------------------------------------------------- ---------- ------------
Basic weighted average number of ordinary shares 198.7 202.1
Effect of dilution - share options 1.5 1.2
---------- ------------
Diluted weighted average number of ordinary shares 200.2 203.3
---------- ------------
The profits used for the earnings per share calculations
are as follows:
6 months
to 6 months to
31 August 1 September
2023 2022
GBPm GBPm
Profit for the period attributable to parent shareholders 293.2 233.9
Adjusting items before tax (Note 4) (3.7) (35.5)
Adjusting tax expense (Note 4) 0.8 18.0
Adjusted profit for the period attributable to parent
shareholders 290.3 216.4
6 months
to 6 months to
31 August 1 September
2023 2022
pence pence
Basic EPS on profit for the period 147.6 115.7
Effect of adjusting items before tax (1.9) (17.6)
Effect of adjusting tax expense 0.4 8.9
Basic EPS on adjusted profit for the period 146.1 107.0
Diluted EPS on profit for the period 146.5 115.0
Diluted EPS on adjusted profit for the period 145.0 106.4
8. Dividends
6 months to 31 August 6 months to 1 September
2023 2022
pence per pence per
share GBPm share GBPm
------------------------------------- --------------- ------ ---------------- -------
Equity dividends on ordinary shares:
Final dividend for prior year 49.80 99.2 34.70 70.1
------ -------
99.2
Dividends on other shares:
B share dividend 2.60 0.1 0.10 -
------ -------
Total dividends paid 99.3 70.1
------ -------
An interim dividend of 34.1p per ordinary share (2023: 24.4p)
amounting to a total dividend of GBP65.7m (2023: GBP49.0m) was
declared by the directors on 17 October 2023. A dividend
reinvestment plan (DRIP) alternative will be offered. These
consolidated financial statements do not reflect this dividend
payable.
B shareholders are entitled to an annual non-cumulative
preference dividend paid in arrears. There are 2.0m (H1 FY23: 2.0m)
B shares in issue. The Group paid a dividend of 2.6p per share (H1
FY23: 0.1p per share) during the period.
9. Borrowings, net debt and liquidity risk
Amounts drawn down on the Group's borrowing facilities are as
follows:
Current Non-current
31 August 31 August
2023 2 March 2023 2023 2 March 2023
GBPm GBPm GBPm GBPm
Revolving credit facility (GBP775.0m) - - - -
Senior unsecured bonds - - 994.3 993.4
- - 994.3 993.4
------------------------------------------------- -------------- --------- --------------
Revolving credit facility
In May 2023 the Group signed an extension to the existing 5 year
GBP775.0m multicurrency Revolving Credit Facility Agreement,
extending the final maturity date by one year to now expire on 25
May 2028. The facility's other terms remain consistent, being a
Multicurrency Revolving Facility Agreement and having variable
interest rates with GBP being linked to SONIA and EUR being linked
to EURIBOR.
The revolving credit facility agreement contains one financial
covenant ratio, being:
Net Debt/Adjusted EBITDA <3.5x
As at 31 August 2023, GBP35.0m of the GBP775.0m Revolving Credit
Facility is carved-out as an ancillary guarantee facility for the
Group's use in Germany. This facility replaces an existing credit
line previously made available to the Group outside of the RCF.
Guarantees totalling EUR22.5m were in issue at 31 August 2023
(March 2023: EUR21.6m).
Senior unsecured bonds
The Group has senior unsecured bonds with coupons and maturities
as shown in the following table.
Title Year issued Principal Maturity Coupon
value
16 October
2025 senior unsecured bonds 2015 GBP450.0m 2025 3.375%
2027 senior unsecured green use
of proceeds bonds 2021 GBP300.0m 31 May 2027 2.375%
2031 senior unsecured green use
of proceeds bonds 2021 GBP250.0m 31 May 2031 3.000%
Movement in cash and net debt
Share buyback
commitments
including Amortisation
2 March transaction Net new Foreign of premiums 31 August
2023 costs Cash flow lease liabilities exchange and discounts 2023
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- --------- ------------- --------- ------------------ --------- -------------- ---------
Cash and cash
equivalents 1,164.8 - (102.4) - (1.1) - 1,061.3
Liabilities from
financing
activities
Borrowings (993.4) - - - - (0.9) (994.3)
Lease liabilities (3,958.4) - 73.8 (92.4) 28.3 - (3,948.7)
Committed share buyback - (301.3) 264.7 - - - (36.6)
Total liabilities from
financing activities (4,951.8) (301.3) 338.5 (92.4) 28.3 (0.9) (4,979.6)
Less: lease liabilities 3,958.4 - (73.8) 92.4 (28.3) - 3,948.7
Less: committed share
buyback - 301.3 (264.7) - - - 36.6
Net cash 171.4 - (102.4) - (1.1) (0.9) 67.0
--------- ------------- --------- ------------------ --------- -------------- ---------
Liquidity Risk
The Group has re-presented the time bands to better reflect the
maturity profile that it monitors in its liquidity management
activities and has amended the comparative total lease liability
amount. The tables below summarise the Group's financial
liabilities at 31 August 2023 and 2 March 2023 based on contractual
undiscounted payments, including interest:
Between Between
Less than Between 3 and 10 10 and 20 More than
12 months 1 and 3 years years years 20 years Total
31 August 2023 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ---------- -------------- --------- ---------- --------- -------
Non-derivative financial
liabilities:
Interest-bearing loans and
borrowings 29.8 509.6 594.6 - - 1,134.0
Lease liabilities 305.8 606.6 2,058.4 2,200.1 1,523.0 6,693.9
Other financial liabilities 36.6 - - - - 36.6
Trade and other payables 187.7 - - - - 187.7
---------- -------------- --------- ---------- --------- -------
559.9 1,116.2 2,653.0 2,200.1 1,523.0 8,052.2
---------- -------------- --------- ---------- --------- -------
Derivative financial assets/liabilities:
Cross currency swaps:
Derivative contracts - receipts (15.2) (480.4) ---(495.6)
Derivative contracts - payments 9.4 466.0 --- 475.4
------ ------- -------
(5.8) (14.4) --- (20.2)
------ ------- -------
Total 554.1 1,101.8 2,653.0 2,200.1 1,523.0 8,032.0
----- ------- ------- ------- ------- -------
Less than Between 1 Between 3 Between 10 More than
12 months and 3 years and 10 years and 20 years 20 years Total
2 March 2023 (re-presented) GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------ ---------- ------------ ------------- ------------- --------- -------
Non-derivative financial
liabilities:
Interest-bearing loans and
borrowings 29.8 509.6 609.3 - - 1,148.7
Lease liabilities 301.6 604.6 2,044.0 2,232.3 1,578.0 6,760.5
Trade and other payables 198.9 3.8 - - - 202.7
---------- ------------ ------------- ------------- --------- -------
530.3 1,118.0 2,653.3 2,232.3 1,578.0 8,111.9
---------- ------------ ------------- ------------- --------- -------
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 524.9 1,119.3 2,653.3 2,232.3 1,578.0 8,107.8
---------- ------------ ------------- ------------- --------- -------
10. Financial instruments
IFRS 13 Fair Value Measurement requires that the classification
of financial instruments measured at fair value be determined by
reference to the source of inputs used to derive the fair value.
The classification uses the following three-level hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 - Other techniques for which all inputs, which have a
significant effect on the recorded fair value, are observable,
either directly or indirectly; and
Level 3 - Techniques which use inputs, which have a significant
effect on the recorded fair value, that are not based on observable
market data.
The following financial instruments are measured at fair
value:
Derivative financial instruments
The Group has in place a net investment hedge in relation to the
investment made in Germany.
The fair value of derivative instruments classified as level 2
is calculated by discounting all future cash flows by the relevant
market discount rate at the balance sheet date.
31 August 1 September 2 March
2023 2022 2023
GBPm GBPm GBPm
Financial assets
Derivative financial instruments - level 2 1.1 - -
Financial liabilities
Derivative financial instruments - level 2 (2.1) (2.8) (7.8)
Deferred and contingent consideration - level 3 (3.6) (19.9) (3.8)
There were no transfers between levels during any period
disclosed.
11. Defined benefit pension surplus
During the six-month period to 31 August 2023, the defined
benefit pension scheme has moved from a surplus of GBP324.7m to
GBP236.4m. The key movements in the surplus are as follows:
GBPm
------------------------------------------------- --- ------- ------
Pension surplus as at 2 March 2023 324.7
Remeasurement due to:
Changes in financial assumptions 57.3
Return on plan assets lower than discount
rate (153.7)
-------
(96.4)
Contributions from employer 2.6
Net interest on pension liability and assets 8.0
Benefits paid direct by the company in relation 0.1
to an unfunded pension scheme
Administrative expenses (2.6)
------
Pension surplus as at 31 August 2023 236.4
------
The surplus has been recognised as, under the governing
documentation of the Whitbread Group Pension Fund, the Group has an
unconditional right to receive a refund, assuming the gradual
settlement of the scheme liabilities over time until all members
and their dependants have either died or left the scheme, in
accordance with the provisions of IFRIC 14 IAS 19 - The Limit on a
Defined Benefit Asset, Minimum Funding Requirements and their
Interaction.
With the pensioner buy-in policy purchased in June 2022, the
defined benefit scheme has now insured around 50% of pensioners,
under which the benefits payable to defined benefit members covered
under the policy became fully insured, thus reducing the Group's
exposure to changes in longevity, interest rates inflation and
other relevant factors.
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 31 August 2023 for IAS 19
Employee Benefits purposes were:
31 August 2 March
2023 2023
% %
Pre-April 2006 rate of increase in pensions in payment 3.10 3.20
Post-April 2006 rate of increase in pensions in payment 2.10 2.20
Pension increases in deferment 3.10 3.20
Discount rate 5.30 5.00
Inflation assumption 3.30 3.30
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 (March 2023: 19.7 years) if they are male and for a further
22.4 years (March 2023: 22.4 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 (March 2023: 20.7
years) after retirement if they are male and for a further 23.6
years (March 2023: 23.6 years) after retirement if they are
female.
The assumptions in relation to discount rate, mortality and
inflation have a significant effect on the measurement of scheme
liabilities. The following table shows the sensitivity of the
valuation of gross liabilities to changes in these assumptions:
Decrease/(increase)
in gross
defined benefit liability
----------------------------
31 August 2 March
2023 2023
------------------------------------- ------------- -------------
Discount rate
2.00% increase to discount rate 337.0 357.0
2.00% decrease to discount rate (512.0) (548.0)
Inflation
0.25% increase to inflation rate (36.0) (39.0)
0.25% decrease to inflation rate 36.0 38.0
Life expectancy
One-year increase to life expectancy (69.0) (71.3)
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. Where the discount rate is changed
this will have an impact on the valuation of scheme assets in the
opposing direction. The above sensitivities table shows only the
expected changes to the gross defined benefit obligation
(liability). When calculating the sensitivity of the defined
benefit obligation to significant actuarial assumptions, the same
method (projected unit credit method) has been applied as when
calculating the pension surplus recognised within the consolidated
balance sheet. The methods and types of assumptions did not
change.
12. Analysis of cash flows given in the cash flow statement
6 months
to 6 months to
31 August 1 September
2023 2022
GBPm GBPm
Cash generated from operations
Profit for the period 293.2 233.9
Adjustments for:
Tax expense 101.9 73.5
Net finance costs (Note 5) 53.9 71.3
Share of loss from joint ventures 0.3 0.3
Depreciation and amortisation 182.2 169.1
Share-based payments 9.3 7.4
Net impairment reversals - (33.5)
Gains on disposals, property and other provisions
(Note 4) (2.1) (2.0)
Other non-cash items (3.6) 5.0
---------- ------------
Cash generated from operations before working
capital changes 635.1 525.0
Increase in inventories (0.5) (1.4)
Decrease in trade and other receivables 19.8 8.7
(Decrease)/Increase in trade and other payables (15.8) 21.9
---------- ------------
Cash generated from operations 638.6 554.2
---------- ------------
Other non-cash items include an outflow of GBP6.1m (H1 FY23:
inflow of GBP2.7m) as a result of net provision movements, an
outflow of GBP0.1m (H1 FY23: inflow of GBP0.2m) representing bad
debt charges and an inflow of GBP2.7m (H1 FY23: GBP2.0m)
representing non-cash pension scheme administration costs.
13. Share capital and reserves
The Company purchased and cancelled 7.8m shares with a nominal
value of GBP6.0m under the share buyback programme which commenced
on 25 April 2023. Consideration of GBP263.4m together with
associated fees and stamp duty of GBP1.3m was paid during the
period. The buyback represents an irrevocable commitment and
therefore the liability to purchase the remaining shares of
GBP36.6m is recorded as a liability on the consolidated balance
sheet. As at 3 October 2023, this share buyback programme was
completed.
14. Related party disclosure
In Note 33 to the Annual Report and Accounts for the year ended
2 March 2023, the Group identified its related parties as its key
management personnel (including directors), the Group pension
schemes and its joint ventures for the purpose of IAS 24 Related
Party Disclosures. There have been no significant changes in those
related parties identified at the year end and there have been no
transactions with those related parties during the six months to 31
August 2023 that have materially affected, or are expected to
materially affect, the financial position or performance of the
Group during this period. Details of the relevant relationships
with those related parties will be disclosed in the Annual Report
and Accounts for the year ending 29 February 2024. All transactions
with subsidiaries are eliminated on consolidation.
15. Capital expenditure commitments
Capital expenditure commitments for which no provision has been
made are set out in the table below:
31 August 1 September 2 March
2023 2022 2023
GBPm GBPm GBPm
Property, plant and equipment 90.6 85.1 125.4
Intangible assets 9.7 11.0 7.7
16. Events after the balance sheet date
The Board of Directors approved a share buy-back on 17 October
2023 for GBP300.0m and is in the process of appointing the relevant
brokers to undertake the programme in accordance with that
approval.
INDEPENT REVIEW REPORT TO WHITBREAD PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31August 2023 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, consolidated statement of changes of equity, the
consolidated balance sheet, the consolidated cash flow statement
and related notes 1 to 16.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
August 2023 is not prepared, in all material respects, in
accordance with United Kingdom adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
17 October 2023
Glossary
Adjusted property rent
Property rent less a proportion of contingent rent. Property
rent is defined as 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.
Basic earnings per share (Basic EPS)
Profit attributable to the parent shareholders divided by the
basic weighted average number of ordinary shares in issue during
the year after deducting treasury shares and shares held by an
independently managed share ownership trust ('ESOT').
Committed pipeline
Sites where we have a legal interest in a property (that may be
subject to planning/other conditions) with the intention of opening
a hotel in the future.
Direct bookings/distribution
Based on stayed bookings in the financial year made direct to
the Premier Inn website, Premier Inn app, Premier Inn customer
contact centre or hotel front desks.
Food and beverage (F&B) sales
Food and beverage revenue from all Whitbread owned 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
Rent expense
Rental costs recognised in the income statement prior to the
adoption of IFRS 16.
Alternative Performance Measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way that the business performance is
measured internally.
APMs are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
The APM titled cohort of established German hotels adjusted
profit before tax is no longer reported as the Group does not see
this as a useful APM going forwards. The nature of a maturity
profile is such that the cohorts will evolve over time in
comparison to the fixed nature of an APM meaning that there is not
a consistent basis on which to report. The APM titled funds from
operations is no longer reported as the Group's credit rating
agency no longer utilises this measure in calculating leverage. The
APM titled three-year UK like-for-like revenue growth is no longer
reported as the Group's comparative period no longer contains the
impact of the COVID-19 pandemic.
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS
measure
------------------ ------------- ----------------- -------------------------------------------------------
REVENUE MEASURES
------------------ ------------- ----------------- -------------------------------------------------------
Accommodation Revenue Exclude Premier Inn accommodation revenue excluding
sales non-room non-room income such as
revenue food and beverage. The growth in accommodation
such as sales on a year-on-year basis is a good
food and indicator of the performance of the business.
beverage Reconciliation: Note 2
------------------ ------------- ----------------- -------------------------------------------------------
Average room No direct Refer Accommodation sales divided by the number
rate (ARR) equivalent to definition of rooms occupied
by guests. The directors consider this
to be a useful measure as this is a commonly
used industry metric which facilitates
comparison between companies.
Reconciliation 6 months
to 31 6 months
August to 1 September
2023 2022
UK Accommodation sales
(GBPm) 1,084.1 940.0
Number of rooms occupied
by guests ('000) 12,885 12,783
--------- ----------------
UK average room rate
(GBP) 84.13 73.54
--------- ----------------
Germany Accommodation
sales (GBPm) 81.1 44.5
Number of rooms occupied
by guests ('000) 1,135 805
--------- ----------------
Germany average room
rate (GBP) 71.44 55.27
--------- ----------------
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. The
sales per non like-for-like directors consider this to be a useful
segment information measure as it is a commonly used performance
(Note 2) metric and provides an indication of
underlying revenue trends.
Reconciliation 6 months
to 31 6 months
August to 1 September
2023 2022
UK like-for-like revenue
growth 13.3% 93.4%
Contribution from net
new hotels 2.0% 8.0%
--------- ----------------
UK Accommodation sales
growth 15.3% 101.4%
--------- ----------------
Revenue per No direct Refer to Revenue per available room is also known
available equivalent definition as 'yield'. This hotel measure is achieved
room (RevPAR) by dividing accommodation sales by the
number of rooms available. The directors
consider this to be a useful measure
as it is a commonly used performance
measure in the hotel industry.
Reconciliation 6 months
to 31 6 months
August to 1 September
2023 2022
UK Accommodation sales
(GBPm) 1,084.1 940.0
Available rooms ('000) 15,264 15,067
--------- ----------------
UK RevPAR (GBP) 71.02 62.39
--------- ----------------
Germany Accommodation
sales (GBPm) 81.1 44.5
Available rooms ('000) 1,771 1,268
--------- ----------------
Germany RevPAR (GBP) 45.79 35.06
--------- ----------------
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS
measure
------------------ ------------------- ------------------ -----------------------------------------------------
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 4) Reconciliation: Consolidated income statement
------------------ ------------------- ------------------ -----------------------------------------------------
Adjusted(1) Tax charge/credit Adjusting Tax charge/credit before adjusting items.
tax items Reconciliation: Consolidated income statement
(Note 4)
------------------ ------------------- ------------------ -----------------------------------------------------
Adjusted(1) Profit/loss Adjusting Profit/loss before tax and adjusting items.
profit/loss before tax items Reconciliation: Consolidated income statement
before tax (Note 4)
------------------ ------------------- ------------------ -----------------------------------------------------
Adjusted(1) Basic EPS Adjusting Adjusted profit/loss attributable to the
basic EPS items parent shareholders divided by the basic
(Note 4) 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 7
Profit/PBT No direct Refer to Segmental adjusted profit before tax divided
margin equivalent definition by segmental adjusted revenue, to demonstrate
profitability margins of the segmental
operations.
Reconciliation: Business review
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS
measure
------------------ ------------------- ------------------ -----------------------------------------------------
BALANCE SHEET MEASURES
--------------------------------------- ------------------ -----------------------------------------------------
Net cash/debt Total liabilities Exclude Cash and cash equivalents after deducting
from financing lease total borrowings. The directors consider
activities liabilities, this to be a useful measure of the financing
other financial position of the Group. Reconciliation:
liabilities Note 9
and derivatives
held to
hedge financing
activities
------------------ ------------------- ------------------ -----------------------------------------------------
Adjusted net Total liabilities Exclude Net cash/debt adjusted for cash, assumed
cash/debt from financing lease by ratings agencies to not be readily
activities liabilities, available, and excluding unamortised debt
other financial related fees. The measure has been amended
liabilities in the year to exclude unamortised debt
and derivatives related fees. The directors consider this
held to to be a useful measure as it is aligned
hedge financing with the method used by ratings agencies
activities, to assess the financing position of the
adjusted Group.
for cash
assumed
by ratings
agencies
to not
be readily
available
Reconciliation As at As at
31 August 1 September
2023 2022
GBPm GBPm
----------- ----------------
Net cash (67.0) (182.1)
Less: Unamortised debt
costs 5.7 7.3
Restricted cash adjustment 10.0 10.0
----------- ----------------
Adjusted net cash (51.3) (164.8)
----------- ----------------
Unamortised debt costs of GBP5.7m including arrangement fees of GBP2.3m
are included within the carrying value of borrowings.
Lease-adjusted Cash and Exclude In line with methodology used by credit
net debt/cash cash equivalents lease liabilities rating agencies, lease-adjusted net debt
less total and derivatives includes lease debt which is calculated
liabilities held to as 8x adjusted property rent. The directors
from financing hedge financing consider this to be a useful measure as
activities activities. it forms the basis of the Group's leverage
Includes targets.
an adjustment
for cash
assumed
by ratings
agencies
to not
be readily
available
------------------
Reconciliation As at As at
31 August 1 September
2023 2022
GBPm GBPm
------------------ ----------- ----------------
Adjusted net cash (51.3) (164.8)
Lease debt 2,580.8 2,381.5
----------- ----------------
Lease-adjusted net debt 2,529.5 2,216.7
----------- ----------------
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 useful
liabilities less total measure of the financing position of the
liabilities Group.
from financing
activities
Reconciliation As at As at
31 August 1 September
2023 2022
GBPm GBPm
----------- ----------------
Net cash (67.0) (182.1)
Lease liabilities 3,948.7 3,748.8
----------- ----------------
Net cash and lease liabilities 3,881.7 3,566.7
----------- ----------------
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS
measure
------------------ ------------------- ------------------ -----------------------------------------------------
CASH FLOW MEASURES
--------------------------------------- ------------------ -----------------------------------------------------
Lease-adjusted No direct Refer to This measure is a ratio of lease-adjusted
net debt to equivalent definition net debt compared against the Group's
adjusted EBITDAR adjusted EBITDAR. The Directors use this
for leverage to monitor the leverage position of the
Group. This measure may not be directly
comparable with similarly titled measures
utilised by credit rating agencies, however
on a normalised basis these measures would
be expected to move proportionally in
the same direction.
Reconciliation 12 months 12 Months
to 31 to
August 1 September
2023 2022
GBPm GBPm
----------- ----------------
Lease-adjusted net debt 2,529.5 2,216.7
Rolling 12 month adjusted
EBITDAR 1,004.3 806.0
Lease-adjusted net debt
to adjusted EBITDAR for
leverage 2.5x 2.8x
----------- ----------------
Adjusted(1) Cash generated Refer to Adjusted operating profit/loss adding
operating from in 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 and shareholder returns, tax, pension
and interest payments.
Reconciliation 6 months 6 months
to 31 to 1 September
August 2022
2023 GBPm
GBPm
Adjusted operating profit 445.3 343.2
Depreciation - right-of-use
assets 89.4 80.9
Depreciation - property,
plant and equipment 83.9 79.5
Amortisation 8.9 8.7
Interest paid - lease
liabilities (75.1) (68.6)
Payment of principal of
lease liabilities (73.8) (65.4)
Net lease incentives received 0.4 2.0
Movement in working capital 3.5 29.2
----------- ----------------
Adjusted operating cash
flow 482.5 409.5
----------- ----------------
Cash capital No direct Refer to Cash flows on property, plant and equipment
expenditure equivalent definition and investment property and investment
(cash capex) in intangible assets, adding net cash
proceeds on acquisitions and loans and
capital contributions to joint ventures.
APM Closest Adjustments Definition and purpose
equivalent to reconcile
IFRS to IFRS
measure
-------------------- -------------- --------------- ----------------------------------------------------------
OTHER MEASURES
------------------------------------ --------------- ----------------------------------------------------------
Adjusted(1) Operating Refer to Adjusted EBITDA (post-IFRS 16) is profit
EBITDA (post-IFRS profit/loss definition before tax, adjusting items, interest,
16), depreciation and amortisation.
Adjusted(1) Adjusted EBITDA (pre-IFRS 16) is further
EBITDA (pre-IFRS adjusted to remove rent expense.
16) and Adjusted EBITDAR is profit before tax,
Adjusted(1) adjusting items, interest, depreciation,
EBITDAR amortisation, variable lease payments
and rental income.
The directors consider this measure to
be useful as it is a commonly used industry
metric which facilitate comparison between
companies. The Group's RCF covenants include
measures based on Adjusted EBITDA (pre-IFRS
16).
Reconciliation 6 months
to 31 6 months
August to 1 September
2023 2022
GBPm GBPm
Adjusted operating profit 445.3 343.2
Depreciation - right-of-use
assets 89.4 80.9
Depreciation - property,
plant and equipment 83.9 79.5
Amortisation 8.9 8.7
Adjusted EBITDA (post-IFRS
16) 627.5 512.3
--------- ----------------
Variable lease payment
expense 2.1 1.1
Rental income (1.6) (1.7)
--------- ----------------
Adjusted EBITDAR 628.0 511.7
--------- ----------------
Rental expense, variable
lease payments and rental
income (143.1) (131.2)
--------- ----------------
Adjusted EBITDA (pre-IFRS
16) 484.9 380.5
--------- ----------------
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.
Reconciliation 12 months 12 months
to to
31 August 1 September
2023 2022
UK UK
Total & Ireland Total & Ireland
GBPm GBPm GBPm GBPm
Adjusted operating profit 645.6 470.0
Depreciation - right-of-use
assets 174.3 158.8
Rent expense (281.7) (253.6)
Adjusted operating profit
pre-IFRS 16 538.2 563.7 375.2 410.5
---------- ----------- ---------- -----------
Net assets 3,928.2 4,206.8
Net cash (67.0) (182.1)
Current tax liabilities 12.2 13.9
Deferred tax liabilities 199.0 178.3
Pension surplus (236.4) (429.2)
Derivative financial assets (1.1) -
Derivative financial liabilities 2.1 2.8
Lease liabilities 3,948.7 3,748.8
Right-of-use assets (3,476.8) (3,310.1)
Other financial liabilities 36.6 -
IAS 17 rent adjustments (65.0) (65.0)
---------- ----------- ---------- -----------
Adjusted net assets 4,280.5 3,780.8 4,164.2 3,722.1
---------- ----------- ---------- -----------
Return on capital employed 12.6% 14.9% 9.0% 11.0%
---------- ----------- ---------- -----------
------------------ ------------ ----------------------------------------------------------------------------------------
(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.
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IR GPGWGUUPWGRM
(END) Dow Jones Newswires
October 18, 2023 02:00 ET (06:00 GMT)
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