Press Release
November 6, 2001
| Financial highlights Future Whitbread* Total Group Divisions | ||||
|
|
Total Group* | Future Whitbread** | ||
|
|
% change | % change | ||
|
Sales including share of joint ventures £m |
1141 | (35) | 908 | 7.1 |
|
EBITDA before exceptional items £m |
239.4 | (24) | 197.1 | 9.4 |
|
Operating profit before exceptional items £m |
172.0 | (26) | 137.2 | 10.1 |
|
Profit before exceptional terms and tax £m |
135.7 | (25) | - | - |
|
Adjusted earnings per share p |
25.77 | 3.0 | - | - |
|
Dividend per share p |
5.05 | (37) | ||
|
Net assets per share £ |
6.44 | 27 | ||
Highlights
Sir John Banham, Chairman, said: "Whitbread has made good progress towards the achievement of our financial targets with all continuing businesses improving sales, like-for-like sales, and operating profit.
"These results include ten weeks trading for the Pubs and Bars division which was demerged in May and subsequently acquired by a Morgan Grenfell Private Equity company. The gross value of £1.625 billion represented a £487 million premium over the book value of these assets. £1.129 billion was returned to shareholders, on schedule, in June. Even after this transaction, net assets per share were £6.44.
"For the future Whitbread businesses, like-for-like sales for the period were ahead 1.8% in hotels, 3.7% in restaurants and 18.2% in sports, health and fitness leading to total like-for-like sales growth of 4.2%. Operating margins also improved and total operating profit grew 10.1%. Returns on capital were stronger for both restaurants and sports, health and fitness although London market conditions meant hotel returns were flat.
"For the major brands, trading since September 2nd has, for the most part, been very encouraging. Like-for-like sales for the two months were ahead 5.6% in Travel Inn, 7.9% in Brewers Fayre, 5.2% in Beefeater and 16.7% (for September only) in David Lloyd Leisure. Core Marriott hotels, however, suffered a 4.7% fall in like-for-like sales reflecting a 3.9% growth in the provinces but a 24.6% decline in London.
"Only some 10% of future Whitbread profitability is generated in London. The rest of the country continues to trade satisfactorily. It may well be that this trend continues but until the market outlook becomes more certain, particularly in hotels, we have taken a number of actions across the business to ensure we have additional flexibility as to costs and cash flow.
"Plans have been put in place to reduce overhead and operating costs and to give us the option to defer some £150 million of capital expenditure in the current and next financial years. In hotels, £60 million of this deferment is being implemented now along with a reduction of £10 million in operating costs for the 2002/3 financial year.
"Future Whitbread has strong brands, a skilled and committed team of people and high quality assets. The last six months have demonstrated the potential of the future Whitbread businesses to outperform their markets and to achieve significant progress towards the demanding financial targets the board has set."
The interim dividend of 5.05 pence per share will be paid on January 8th, 2002 to all shareholders on the register at the close of business on November 9th, 2001.
Copies of the interim report and accounts will be sent to shareholders by 8th November, 2001 and will be available to the public on the Whitbread website www.whitbread.co.uk or from Simon Barratt, Company Secretary, Whitbread PLC, CityPoint, One Ropemaker Street, London EC2Y 9HX.
For further information please contact:-
City
Media
Chief Executive's Review
Operating profit and EBITDA (see Finance Review) are stated before exceptional items (see note 3 to the accounts).
Like-for-like sales are total sales less sales of retail outlets opened for the first time or disposed of since the beginning of 2000/1.
|
Marriott/Swallow |
Sales £m | Like-for-like sales growth | Operating profit £m | Operating profit growth |
|
|
203.7 | 1.3% | 42.4 | 5.7% |
The Marriott / Swallow business achieved a 1.8% increase in sales and a 5.7% increase in operating profit, despite the decline in US visitors to London throughout the period and the inevitable disruption caused by converting a further 12 Swallow hotels to the Marriott brand.
The core Marriott hotels, grew total operating profit by 20.6% following a 36.6% increase in the provinces but an 8.9% decline in London. Achieved room rate grew 3.3% to £83.34. The brand's yield premium to the 4-star market continued to grow to 21% in London and 20% in the provinces. The first ten Swallow conversions also grew operating profit strongly at 24.4% ahead of last year.
Excluding the disposal hotels, profit per room, Marriott's key shareholder value target, grew 6.3% to an annual rate of £8,400 helped by the expected yield improvement of the converted Swallow hotels and by a 2.3% improvement in non-room revenue. Operating margins improved slightly.
|
Travel Inn |
Sales £m | Like-for-like sales growth | Operating profit £m | Operating profit growth |
|
|
87.9 | 3.0% | 31.5 | 9.4% |
Travel Inn grew sales by 9.3% and operating profit by 9.4%. Occupancy in like-for-like hotels was 86.0% and achieved room rate was 4.2% ahead at £38.09. The number of rooms grew in the half-year from 14,186 to 15,106.
|
Pub Restaurants |
Sales £m | Like-for-like sales growth | Operating profit £m | Operating profit growth |
|
|
299.1 | 4.5% | 44.2 | 10% |
The 10% improvement in pub restaurants' operating profit was driven by the Brewers Fayre brand which grew its operating profit by 18%. Brewers Fayre like-for-like sales were up 4.2%, and operating margin was 1.7% points ahead at 18.5%. A further nine Brewsters were opened bringing the total to 129.
Beefeater like-for-like sales grew 5.0% but operating profit fell by 8.5% as a result of the associated costs and trading weeks lost through the new brand conversion programme. Operating profit for the comparable Beefeater estate was up 7.4%. Average weekly sales for the 27 Out & Out units were up 15%.
|
High Street Restaurants |
Sales £m | Like-for-like sales growth | Operating profit £m | Operating profit growth |
|
|
237.1 | 2.7% | 3.1 | 19% |
Pizza Hut was the main contributor to the 19% increase in high street operating profit. The brand's like-for-like sales grew 6.9% and operating profit doubled. The other high street brands also grew like-for-like sales - Costa by 6.2%, T.G.I. Friday's by 2.8%, and Pelican by 1.4%. The UK high street brands' total like-for-like sales were up 4.4% with the German restaurants still negative at (7.3%) following the BSE scare last year.
During the period the review of high street brands was concluded. Pizza Hut, Costa and T.G.I. Friday's all have the potential to achieve the required level of performance, based on Whitbread's overall financial criteria, but a number of smaller brands including Bella Pasta, Café Rouge, Abbaye and Mamma Amalfi are unlikely to achieve the necessary scale. A new operating structure is being established to manage these brands separately from the Restaurants Division and in due course, they will be sold.
In addition, the restaurant management team has largely completed the previously announced disposal of 140 sites. In October, 44 pub restaurants, including eight under the Dragon Inn brand, were acquired by the Noble House Pub Company for £31m.
|
Sports, health & fitness |
Sales £m | Like-for-like sales growth | Operating profit £m | Operating profit growth |
|
|
80.4 | 18% | 16.0 | 24% |
David Lloyd Leisure's operating profit growth of 24% was achieved largely through improving the performance of the existing business. Like-for-like sales growth of 18% for the segment and 20% for David Lloyd Leisure clubs led the UK health and fitness industry. The total number of David Lloyd Leisure members grew 12% from 222,000 in February to 248,000 at September 1st. Operating margins improved slightly over the same period last year.
Membership fees are the dominant source of revenue for this business but income from other sources such as food and beverage sales and personal tuition represent a significant opportunity. Management action increased 'non-fee' income by 13% in the period.
David Lloyd Leisure clubs have, in the past, taken three years to reach mature operating levels and to contribute a return on capital in excess of 15%. The number of fee-paying members is the key determinant. Pre-opening marketing activity has boosted initial member totals to an average of 1,780 for the four most recent club openings which is over 60% ahead of previous experience.
Pubs and Bars turnover for the first ten weeks of the financial year prior to the demerger in May was £126 million with operating profit of £30.5 million.
Beer and other drinks turnover of £38.6 million relates to Whitbread's continuing contractual relationship with Heineken and operating profit of £11.3m relates primarily to Whitbread's 25% holding in Britannia Soft Drinks.
Finance Review
Accounting Policies
FRS19 (Deferred Tax) has been adopted for these accounts. Deferred tax is the tax attributable to the timing differences arising from the inclusion of items of income and expenditure in one period for tax purposes (in accordance with tax legislation) and another for accounting (in accordance with UK company law and financial reporting standards). The principal timing difference for Whitbread relates to hotel buildings and furniture, fixtures and equipment in all our properties. For these assets, tax relief normally exceeds the charge against profit for depreciation in the early years of their life. The position reverses in later years.
The impact of adopting FRS19 is detailed in note 1 to the accounts. It should be emphasised that FRS19 has no impact on tax paid nor cash flows.
Year over year comparisons of performance
The last 21 months has been a period of transformation for Whitbread, inevitably hindering year over year comparisons
of performance. During this time the following strategic initiatives have been completed:
These transactions have created value for shareholders and enabled Whitbread to focus on those growth segments of the UK leisure market where the group already occupies leading positions.
Wherever possible, the results in this report are presented in a way which helps the measurement of performance trends in future Whitbread.
Demerger of Pubs and Bars
The demerger of the Pubs and Bars division was concluded in May at a value of £1612 million, after adjustments
for working capital. £1129 million of cash was returned directly to shareholders and £483 million was
retained by the group to pay transaction costs and reduce long term borrowings. The transaction realised a gain
on the book value of Pubs and Bars of £487 million. This gain is included in the movement on shareholders
funds but, for technical reasons, it is not included in the profit and loss account.
Turnover
On a like-for-like basis, turnover including joint ventures grew by 4.2%. Total turnover for future Whitbread grew
by 7.1%. As a consequence of the transactions described earlier, total turnover including joint ventures fell by
35%
Operating profit
All future Whitbread businesses contributed profit increases, as described in the Chief Executive's Review. The
operating profit before exceptional items of future Whitbread businesses grew by 10%. Total operating profit before
exceptional items fell by 26% to £172.0 million, reflecting the transactions described earlier.
The group's profit margin (operating profit before exceptional items as a percentage of turnover including joint ventures) increased from 13.1% to 15.1%. This increase is mainly attributable to the exit from the lower margin beer and off-licence businesses and the expansion of the higher margin hotels and sports, health and fitness businesses.
Earnings before exceptional items, interest, tax, depreciation and amortisation ('EBITDA')
EBITDA is a good indicator of the operating cash generated by each division. For future Whitbread, EBITDA grew
by 9.4% to £197.1 million.
Exceptional items
Exceptional non-operating items before interest and tax amounted to a net charge of £24.1 million. This amount
is analysed in note 3 to the accounts. The main items are charges of £14.4 million and £5.9 million
for transaction and reorganisation costs, respectively, associated with the demerger of the Pubs and Bars division.
Interest
The net interest charge fell by £12.2 million to £37.1 million. This reduction reflects both a lower
level of net debt and lower interest rates this year. Net interest was covered 4.7 times by operating profit before
exceptional items. The weighted average rate of interest on fixed rate sterling debt at the period end was 7.0%.
Of the net sterling debt at the period end, 47% was at fixed rates of interest.
Taxation
As explained in note 1 to the accounts, the tax charge on profit before exceptional items for the interim period
has been calculated by applying the forecast effective tax rate for the full year. The charge against profit before
exceptional items for the period of £45.1 million represents an underlying rate of 33.2%. The charge includes
deferred tax, as described under "Accounting Policies" above and in note 1. The tax charge for 2000/1
has been restated to reflect the adoption of FRS19.
Earnings per share
As explained in note 11 to the accounts, a 3 for 5 share capital consolidation was implemented at the time of the
Pubs and Bars demerger. This reflected the value returned to shareholders by the demerger. Adjusted earnings per
share, calculated on the weighted average number of shares in issue during the period, increased by 3.0% to 25.77
pence.
Dividend per share
The Chairman's Statement in the last annual report indicated the board's intention to adopt a new dividend policy
after the disposal of Pubs and Bars and the reduction in share capital. The intention is to pay dividends of approximately
40% of profits after tax for future Whitbread, giving a dividend cover of some 2.5 times. An interim dividend of
5.05 pence per share will be paid on 8 January 2002 to all shareholders on the share register at the close of business
on 9 November 2001.
Cash flow
Net cash inflow from Operating activities was £180 million. This is in line with the level expected following
the transactions described earlier.
Investment in property and plant was £156 million, compared with £170 million in the previous first half.
Cash inflow before financing was £296 million. The underlying cash outflow (after adjusting for the £462 million cash inflow from the demerger of Pubs and Bars and businesses sold and for an outflow in respect of expenditure on new retail outlets of £86 million) was £80 million. The underlying cash flow for this period reflects this year's lower operating profit from a smaller business whereas the dividend and tax payments relate to last year's profits from a larger business.
Net debt
Net debt at the end of the period amounted to £992 million, resulting in a balance sheet gearing ratio of
52%.
Net asset value
Net asset value per share at the period end was £6.44.
Post balance sheet event
Since the balance sheet date we have announced, the intention to sell in due course a number of smaller restaurant
brands including Bella Pasta, Café Rouge, Abbaye and Mamma Amalfi. The book value of the assets of these
businesses in the group accounts as at 1 September 2001 amounted to £50 million.
SOURCE: Whitbread, Plc