REG - Whitbread PLC - Whitbread Interim Results
16/10/2024 07:00
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RNS Number : 3182I Whitbread PLC 16 October 2024
UK accommodation sales in line with H1 FY24; excellent progress in Germany
Increased interim dividend and further £100m share buy-back
Five-Year Plan: at least £300m more profit and over £2bn available for
shareholder returns
Throughout this release all percentage growth comparisons are made comparing
the current period performance (H1 FY25) for the 26 weeks to 29 August 2024
with H1 FY24 (26 weeks to 31 August 2023).
Overview
• Premier Inn continues to consolidate its position as the UK's leading hotel
brand, underpinned by our consistent delivery of high-quality, great value
hotel rooms; with a growing presence in Germany, we are focused on replicating
our UK success to become the country's number one hotel brand
• H1 FY25 results reflect a slightly softer UK demand environment, investment in
our Accelerating Growth Plan ('AGP') and lower interest receivable, partially
offset by positive momentum in Germany
• We are making excellent progress on our Five-Year Plan that is set to deliver
a step change in our performance:
o Network expansion: plans in place, including AGP, to grow our estate to
98,000 rooms by FY30, as we progress towards our long-term potential of
125,000 rooms across the UK and Ireland;
o Accelerating Growth Plan ('AGP'): optimisation of our UK food and beverage
('F&B') offer at a number of sites to deliver a more tailored guest
proposition, is on track; planning applications for over a third of the 3,500
extension rooms have been submitted; we have also accepted offers on 51 sites
for a total consideration of £56m;
o Commercial programme: initiatives unlocked by our new reservation system
include: broadening our reach; improving our digital journey; and a number of
ancillary revenue opportunities. These will begin to launch in the second half
of FY25 and are expected to support UK like-for-like(†) sales;
o Efficiencies: additional £10m of cost efficiencies now expected in FY25
(£60m in total) and we have increased and extended our programme to deliver
£50m cost savings on average each year to FY30;
o Germany: strong performance is underlining our confidence in reaching
breakeven on a run-rate basis in the second half of the year. We expect to
reach 20,000 open rooms and £70m(1) of adjusted profit before tax(†) in
FY30, with continued progress thereafter
• As a result, by FY30 we expect to increase adjusted profit before tax(†)
versus FY25 by at least £300m and generate more than £2bn for dividends,
share buy-backs and, if suitable opportunities arise, additional
high-returning investments
• Reflecting our confidence in the outlook and the delivery of our plans, the
interim dividend has increased to 36.4p per share (H1 FY24: 34.1p) and we have
announced our intention to launch a further £100m buy-back to be completed by
the time of our preliminary results on 1 May 2025
1: Using a GBP: EUR exchange rate of 1.18
H1 FY25 Group Financial Summary
£m H1 FY25 H1 FY24 vs H1 FY24
Statutory revenue 1,570 1,574 0%
Adjusted EBITDAR(†) 611 628 (3)%
Adjusted profit before tax(†) 340 391 (13)%
Statutory profit before tax 309 395 (22)%
Statutory profit after tax 220 293 (25)%
Adjusted basic EPS(†) 137.1p 146.1p (6)%
Statutory basic EPS 121.0p 147.6p (18)%
Dividend per share 36.4p 34.1p 7%
Group ROCE(†) 11.9% 12.6% (70)bps
Net (debt) / cash(†) (370) 67 (437)
Lease-adjusted leverage(†) 3.1x 2.5x (0.6)x
Financial highlights
• Premier Inn UK: after three years of significant outperformance versus the
Midscale and Economy ('M&E') market, relative performance in H1 FY25 was
robust, with total UK accommodation sales broadly in line with last year and
slightly ahead of the wider M&E market(1)
• In line with our expectations, total F&B sales were down 7%, reflecting
the changes made to a number of our branded restaurants as part of AGP,
partially offset by stronger trading in our integrated restaurants as a result
of sustained high levels of hotel occupancy
• Premier Inn Germany: total accommodation sales grew by 22% reflecting the
impact of a number of commercial initiatives, our progress in trading key
events over the summer and the increasing maturity of our estate
• Group statutory revenue was £1,570m, in line with last year (H1 FY24:
£1,574m)
• Adjusted profit before tax(†) of £340m (H1 FY24: £391m) reflected the
transitionary impact of AGP on UK revenues, net inflation and lower interest
receivable; these movements were mitigated in part by a strong performance in
Germany that remains on course to reach run-rate breakeven later this year
• Adjusted basic EPS(†) decreased by 6% to 137.1p per share (H1 FY24: 146.1p)
• Adjusting items before tax in the period resulted in a charge of £31m (H1
FY24: £4m credit). As a result, statutory profit before tax was £309m (H1
FY24: £395m) and statutory EPS was 121.0p (H1 FY24: 147.6p)
• The Group remains highly cash generative and adjusted operating cashflow(†)
was £411m reflecting the movement in adjusted operating profit(†) and
working capital (H1 FY24: £483m). This cashflow funded our expansion in both
the UK and Germany, as well as £278m of dividends and share buy-backs
completed in the period
• Strong balance sheet: net debt was £370m (H1 FY24: £67m net cash) and
lease-adjusted leverage(†) increased to 3.1x (H1 FY24: 2.5x), below our
internal threshold of 3.5x
Current trading (six weeks to 10 October 2024)
• We have seen an improving trend across the current trading period, after a
soft start to September, with the result that total UK accommodation sales for
the first six weeks were down 1% versus last year. However, with the continued
deployment of our commercial initiatives, our outperformance versus the market
increased to 1pp(2)
• Occupancy remained strong over the period at 84.2%, with London at 82.5% and
the Regions at 84.6%. We are also maintaining high levels of ARR resulting in
total UK RevPAR of £72, 4% behind last year and well ahead of pre-pandemic
levels
• F&B sales were down 14% in the period, in line with our expectations,
reflecting the impact of our AGP
• In Germany, we continued to deliver a strong performance through September,
which is an events-led period, with total accommodation sales 26% ahead of
last year
o RevPAR for the total estate was €79, 22% ahead of last year
o Our cohort of more established(3) hotels delivered a RevPAR of €87, 22%
ahead of last year and significantly ahead of the market(4)
1: STR data, standard basis, 1 March 2024 to 29 August 2024, UK M&E market
excludes Premier Inn
2: STR data, standard basis, 30 August 2024 to 3 October 2024, UK M&E
market excludes Premier Inn
3: 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
4: STR data, standard basis, 30 August 2024 to 3 October 2024, Germany M&E
market excludes Premier Inn
FY25 outlook
• We have seen an improvement in recent weeks with a good pick-up in bookings
across October and into November. Our positive forward booked position,
together with the continued deployment of our commercial initiatives, means
that we remain confident in driving like-for-like(†) sales in the second
half
• In Germany, we are continuing to build on the excellent progress we have made
in the first half. With the increased maturity of our brand and estate, we
have a strong forward booked position, and remain on track to breakeven on a
run-rate basis this calendar year
• Since the period end, we have completed two sale and leasebacks for a total
consideration of £56m, representing an average yield of 4.1%
• Having also accepted offers on 51 branded restaurants for a total
consideration of £56m, we remain on course to realise expected proceeds from
property-related transactions of between £175m and £225m in FY25
• No changes to our previous FY25 guidance other than: with increased cost
efficiencies of £60m in FY25 (previously £40m-£50m), we now expect UK net
inflation to be between 2% and 3%
• We are executing well and remain on course to deliver a step change in our
profits, margins and returns as reflected in our Five-Year Plan
Five-Year Plan
Reflecting our increased confidence in the delivery of our plans over the
period to FY30, we expect to:
· increase adjusted PBT versus FY25 by at least £300m, and
· generate more than £2bn for dividends, share buy-backs and, if
suitable opportunities arise, additional high-returning investments
Commenting on today's results, Dominic Paul, Whitbread Chief Executive, said:
"We are making excellent progress with our plans and over the next five years
are set to deliver a step change in our performance which will fund
significant returns to shareholders. Demonstrating our confidence, we have
today announced details of our Five-Year Plan that sets out the scale of our
ambition to FY30.
"In the UK, we have a clear pathway to further extend our market-leading
position and capitalise on the favourable UK supply backdrop. We are
determined to build on our significant outperformance since the pandemic and
whilst the market has been slightly softer than last year, we remain on course
to grow our UK returns substantially over the medium-term whilst continuing to
deliver for our customers, as evidenced by our high guest scores. Our passion
for operational excellence, together with our brand strength, scale and value
proposition are sustaining our strong performance and RevPAR premium versus
the rest of the UK M&E sector.
"In Germany, we are really encouraged by our progress to date. Our trading
performance and the progressive maturity of our estate mean we are set to
reach breakeven on a run-rate basis later this year. Our longer-term plans to
become the country's number one hotel brand are also on track, as we move
towards replicating our success in the UK market, delivering double digit
returns on our current open portfolio by FY30.
"Having laid the foundations for future growth, we are executing at pace and
remain confident in the outlook as reflected by our increased interim dividend
and further share buy-back."
For more information please contact:
Investor Relations - Whitbread investorrelations@whitbread.com (mailto:investorrelations@whitbread.com)
Peter Reynolds, Director of Investor Relations peter.reynolds@whitbread.com
Sophie Nottage, Investor Relations Manager sophie.nottage@whitbread.com (mailto:sophie.nottage@whitbread.com)
Kirsten O'Reilly, Investor Relations Manager kirsten.oreilly@whitbread.com (mailto:kirsten.oreilly@whitbread.com)
Media - Brunswick whitbread@brunswickgroup.com
Tim Danaher +44 (0) 20 7404 5959
A webcast for investors and analysts will be made available at 8:00am on 16
October 2024 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
(https://whitbread.sharepoint.com/sites/InvestorRelations753/Shared%20Documents/General/2.%20Results%20Announcements/FY23/H1%20FY23/2.%20RNS/www.whitbread.co.uk/investors)
).
( )
(†)Alternative performance measures
We use a range of measures to monitor the financial performance of the Group.
These measures include both statutory measures in accordance with IFRS and
alternative performance measures ('APMs') which are consistent with the way
that the business performance is measured internally. We report adjusted
measures because we believe they provide both management and investors with
useful additional information about the financial performance of the Group's
businesses.
Adjusted measures of profitability represent the equivalent IFRS measures
adjusted for specific items that we consider relevant for comparison of the
financial performance of the Group's businesses, either from one period to
another, or with other similar businesses. APMs are not defined by IFRS and
therefore may not be directly comparable with similarly titled measures
reported by other companies. APMs should be considered in addition to, and are
not intended to be a substitute for, or superior to, IFRS measures. Further
information can be found in the glossary and reconciliation of APMs at the end
of this document.
Chief Executive's Review
Group Results
The Group has made excellent progress in executing several strategic and
commercial initiatives which are set to deliver a step change in our financial
performance over the next few years. These initiatives include: our continued
network expansion to take our total estate to 98,000 rooms in the next five
years; our Accelerating Growth Plan ('AGP') to deliver a more tailored food
and beverage ('F&B') offer for our guests whilst adding 3,500 room
extensions to our estate; our commercial programme to drive revenue growth and
extend our market-leading position in the UK; our increased efficiency
programme to help mitigate the impact of cost inflation and support margin
growth; and the execution of our plans in Germany to become the number one
hotel brand. Together, these initiatives will deliver increased profits,
substantial cashflow and attractive long-term returns for shareholders.
Premier Inn UK continued to deliver a robust performance in a slightly softer
market. Although RevPAR was marginally behind last year, our estate growth
meant that total accommodation sales were flat versus H1 FY24. In line with
our expectations, total UK F&B revenues decreased 7% due to the changes we
are making to our F&B offer through AGP, which was partially offset by
stronger trading in our integrated restaurants. In Germany, total
accommodation sales were up 22%, led by an increase in both occupancy and
average room rates ('ARR') as our hotels continue on their pathway towards
maturity and our cohort of more established(1) hotels remained ahead of the
market. As a result, total statutory revenue was broadly in line with last
year at £1,570m (H1 FY24: £1,574m).
Our vertically-integrated operating model sets us apart from our competitors.
With greater control of our customer proposition, we are able to offer
high-quality hotel rooms at affordable rates. Our cost efficiency programme is
ahead of schedule, which helped to mitigate inflationary pressures in the
period. The softer UK hotel market and the expected impact of AGP resulted in
adjusted operating profit decreasing by 7% to £413m (H1 FY24: £445m). With a
reduction in interest receivable due to lower cash balances, adjusted profit
before tax(†) decreased to £340m (H1 FY24: £391m). Adjusting items in the
year resulted in a net charge of £31m (H1 FY24: £4m credit). The result was
a 22% decrease in statutory profit before tax to £309m (H1 FY24: £395m). A
tax charge of £89m (H1 FY24: £102m) led to a statutory profit after tax of
£220m (H1 FY24: £293m). The impact of the lower profits on EPS was mitigated
by a reduction in the weighted average number of shares following share
buy-backs across the last 12 months so that adjusted basic earnings per
share(†) decreased by 6% to 137.1p (H1 FY24: 146.1p). The impact of
increased adjusting items meant that statutory basic earnings per share
decreased by 18% to 121.0p (H1 FY24: 147.6p).
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
Further detail on the drivers behind the Group's performance is set out below.
Premier Inn UK - Executing our strategic priorities at pace
Premier Inn UK has grown revenues significantly since the pandemic, taking
advantage of the structural shift in UK hotel supply and extending its
market-leading position. Our performance strengthened across the period as we
entered the seasonally strong demand period over the summer months. In London,
occupancy for the period remained high at 81.5% (H1 FY24: 84.0%) although ARRs
were slightly behind last year, reflecting the particularly strong comparable
trading period in FY24. The resulting 4% decline in London RevPAR was offset
by our continued estate growth, resulting in total accommodation sales being
1% ahead of last year. In the Regions, occupancy was also strong at 83.5% (H1
FY24: 84.5%) while ARRs were in line with last year, resulting in total
accommodation sales being broadly in line with H1 FY24.
Having outperformed the market significantly over the last few years, Premier
Inn UK has maintained its market-leading position and total accommodation
sales performed slightly ahead the wider M&E market. We also continued to
maintain a healthy RevPAR premium versus the rest of the M&E market of
£5.85 (H1 FY24: £6.69). This performance was underpinned by the following
key drivers:
· Structural shift in supply: Our last detailed analysis(1) of UK
hotel supply highlighted the significant and structural decline in the
independent sector following the pandemic. Since we completed this exercise,
inflation and interest rates have increased substantially, adding further
pressures on distressed hotel operators and limiting hotel construction
activity. These two factors together mean we believe it is unlikely that the
total UK market will return to 2019 levels of supply until at least 2028,
creating further opportunities for Premier Inn.
1: Company data, 2022
· Continued network expansion: Premier Inn has a 12% share of
total hotel room supply and is the UK's largest hotel chain. This means we can
offer guests the greatest choice when booking their next stay, whether it be
for a business or leisure trip. During the period we opened 780 rooms,
including our first joint Premier Inn and 'hub by Premier Inn' development in
Paddington, London. We also closed 304 rooms as we continue to optimise our
estate, as we seek to drive higher returns. As at 29 August 2024, we had 855
hotels and almost 86,000 rooms open.
· Commercial programme: The key elements of our commercial
programme, that are focused on driving like-for-like(†) sales and sustaining
and extending our market leadership in the UK, include:
o Improving our trading performance: Our automated trading engine is a key
source of competitive advantage for the Group, striking the optimum balance
between occupancy and ARR in order to maximise revenue. During H1 FY25, our
in-house trading teams continued to 'test and learn' a range of strategies,
drawing upon our extensive trading history and market knowledge to refine our
pricing and marketing plans in order to improve our financial performance.
o Unlocking the capabilities of our new digital platform: By the end of FY24,
we had successfully migrated all 900 of our hotels in the UK and Germany onto
our new, cloud-based reservation system which is already increasing our
digital agility and unlocking a number of commercial opportunities that are
currently under development. Further details of these opportunities can be
found in the UK strategy section of this release.
o Expanding our product offer: Continuing to delight our guests is critical to
ensuring we maintain our market-leading reputation for both quality and value.
We are accelerating our refurbishment programme with the roll-out of our
latest standard room format ('ID5'), with its improved layout and features
opening 3,000 rooms in the period and we are nearing the completion of our
'Bed of the Future' bed replacement programme. We also continued to add
Premier Plus rooms, as well as more Twin room formats in the period, both of
which offer our guests even more choice and drive incremental RevPAR.
o Enhancing our business proposition: Business demand remains a key area of
focus as business guests tend to travel more frequently and are more likely to
book flexible rates than leisure guests. We improved access to both domestic
and inbound business demand by expanding our Travel Management Company ('TMC')
network, in addition to increasing the number of users signed up to our direct
Business Booker platform. Taken together, these two channels generated 20% of
total accommodation sales, up from 19% in H1 FY24.
· Accelerating Growth Plan ('AGP'): In April 2024, we announced
plans to optimise our F&B offer at a number of sites and unlock 3,500 new
room extensions through our AGP, which will increase site level margins and
returns whilst delivering a more tailored proposition for our guests. We are
making good progress, with planning submitted for over a third of extension
rooms and the conversion of a number of branded restaurants into the new
integrated formats already underway. Reflecting this transition and in line
with our previous expectations, F&B revenues have been impacted at those
sites where we are making a change, either through disruption as we move to
the new format, or as we look to exit some of these sites. This impact was
partially offset by stronger trading in our integrated restaurants that
continue to be popular with our hotel guests. The net result was that total
F&B revenues were down 7% versus last year, in line with our expectations.
· Best-in-class operations: Premier Inn is the UK's No.1 hotel
chain and remains the YouGov 'Best Value Hotel Chain', reflecting our
relentless focus on delivering a consistent, high-quality product for a great
price. Our teams remain dedicated to providing guests with the service they
expect, increasing customer loyalty and repeat business. Despite high levels
of occupancy in our hotels, we are continuing to attract excellent guest
scores, reflecting the evolution of our systems and processes as well as the
continued commitment and dedication of our teams. Whilst always seeking ways
in which we can increase efficiency, we are also continuing to invest in the
pay, development and wellbeing of our people. This is a formula that is
achieving high levels of staff engagement and further improvements in team
retention, lowering recruitment costs and increasing operational efficiencies.
With UK accommodation sales being broadly in line with last year and a 7%
decline in F&B revenue, UK statutory revenue was 2% behind H1 FY24.
Operating costs increased by 1%, reflecting our continued estate growth and
cost inflation, partially mitigated by the delivery of increased cost
efficiencies. The net result was that UK adjusted profit before tax(†) was
12% behind last year at £357m (H1 FY24: £407m), pre-tax margins(†) were
24.6% (H1 FY24: 27.5%) and UK ROCE(†) was 14.0% (H1 FY24: 14.9%).
Subsequent to the FY24 balance sheet date, a further 24 sites were identified
to be disposed of as part of our AGP. In addition, we have also updated the
cashflow assumptions for sites originally included in the scope of the plan
resulting in a net impairment charge of £23m being incurred in the period.
Gross impairment charges of £4m (H1 FY24: £nil) have also been incurred in
relation to assets held for sale outside of our AGP, as we continue to
optimise our estate to drive higher returns.
Premier Inn Germany - Accelerating our momentum towards profitability
In Germany, we are making excellent progress. We are on course to reach
breakeven on a run-rate basis later this year and are progressing towards our
longer-term ambition of becoming the country's number one hotel brand,
delivering attractive and long-term returns for our shareholders.
During the period, we continued to drive revenue growth by increasing our
brand awareness and by enhancing our trading capabilities. Market demand
strengthened over the peak summer months, reflecting a strong events calendar
that included the European Football Championship and several high-profile
concerts. Our first, online-focused brand marketing campaign launched in June
2024 and was centred around the delivery of a quality night's sleep for our
guests. Whilst we are still in the early phases of the campaign, we are seeing
some positive signs, with an increase in new customer volumes driving
incremental sales. Having trialled the use of Online Travel Agents ('OTAs')
over the past year, we are now delivering meaningful levels of incremental
RevPAR and profitability, whilst also raising the profile of our brand.
Complemented by demand from our network of TMCs, we are achieving increased
levels of occupancy and ARRs which is allowing us to improve our pricing
strategies as we enhance our understanding of the German market. The net
result was that total accommodation sales grew by 22% versus H1 FY24 and our
cohort of 17 more established(1) hotels increased their outperformance versus
the market.
In addition to growing our revenues, we also made good progress towards
refining our operating model, ensuring we have an efficient, scalable
platform, capable of delivering our target levels of return. Key developments
in the period include expanding our payment methods to include Apple and
Google Pay which are delivering a healthy uplift to booking conversion rates.
We are also continuing to drive efficiencies across our estate through
improved labour scheduling and procurement.
As previously guided, the impact of the pandemic on construction activity in
Germany meant that room openings this year will be lower than our previous
run-rate. However, we are continuing to make use of our strong balance sheet
and added a further 500 rooms to the committed pipeline and we remain on track
to open c.400 rooms this year. Our current open and committed pipeline stands
at 17,000 rooms (H1 FY24: 16,000 rooms). With the increasing maturity of both
our brand and individual hotels, we remain on track to reach breakeven(2) on a
run-rate basis later this year. Our cohort of 17 more established hotels(1)
delivered a profit(3) of £10m for the 12 months to the end of H1 FY25 (12
months to H1 FY24: £6m) and are progressing well towards reaching their
targeted levels of return. Overall, the operation delivered a reduced adjusted
loss before tax(†) of £9m (H1 FY24: £14m loss), in line with overall
expectations.
Having grown at pace, through both organic and portfolio acquisitions in order
to access key German markets, we have subsequently identified impairment
indicators at a small number of those sites. For those sites, we have updated
for the latest available site-level cashflow forecasts, which has resulted the
impairment of two sites totalling £9m (H1 FY24: £nil).
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: On an adjusted profit before tax basis
3: In aggregate, adjusted profit before tax excluding non-site related
administration and overhead costs
Capital allocation - Investing in high-returning growth opportunities
Maintaining a strong balance sheet with an investment grade credit rating is a
key pillar of the Group's capital allocation framework, allowing us to strike
an appropriate balance between investing in high-returning growth
opportunities and returning excess capital to shareholders. The pillars of our
framework remain unchanged:
· maintaining our investment grade status by operating within our
leverage threshold;
· continuing to fund our ongoing capital expenditure requirements and
investing through the cycle;
· completing 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 the outlook
and market conditions.
One feature of our vertically-integrated operating model is its ability to
convert revenue growth into substantial free cashflow. Following capital
expenditure of £199m (H1 FY24: £213m) and £278m of share buy-backs and
dividends in the period, we maintained a strong balance sheet with
lease-adjusted leverage(†) of 3.1x (H1 FY24: 2.5x), which is below our
internal threshold of 3.5x.
Since April 2023, the Group has returned over £1bn of capital to shareholders
via dividends and share buy-backs. Reflecting our confidence in the
medium-term outlook, we have announced an interim dividend of 36.4p per share,
which is a 7% increase versus the prior year (H1 FY24: 34.1p), totalling £65m
(H1 FY24: £65m). We have also announced our intention to launch a further
£100m share buy-back to be completed by the time of our preliminary results
on 1 May 2025. Further details can be found in the separate announcement
issued today.
Current Trading - six weeks to 10 October 2024
We have seen an improving trend across the current trading period, after a
soft start to September, with the result that total UK accommodation sales for
the first six weeks were down 1% versus last year. However, with the continued
deployment of our commercial initiatives, our outperformance versus the market
increased to 1pp(2).
Occupancy remained strong over the period at 84.2%, with London at 82.5% and
the Regions at 84.6%. We are also maintaining high levels of ARR resulting in
total UK RevPAR of £72, 4% behind last year and well ahead of pre-pandemic
levels.
F&B sales were down 14% in the period, in line with our expectations,
reflecting the impact of our AGP.
In Germany, we continued to deliver a strong performance through September,
which is an events-led period, with total accommodation sales 26% ahead of
last year. RevPAR for the total estate was €79, 22% ahead of last year and
our cohort of more established(2) hotels delivered a RevPAR of €87, 22%
ahead of last year and significantly ahead of the market(3).
1: STR data, standard basis, 30 August 2024 to 3 October 2024, UK M&E
market excludes Premier Inn
2: Premier Inn more established hotels: open and trading under the Premier Inn
brand for 12 consecutive months as at 29 August 2022: 17 hotels
3: STR data, standard basis, 30 August 2024 to 3 October 2024, Germany M&E
market excludes Premier Inn
FY25 Outlook and guidance
We have seen an improvement in recent weeks with a good pick-up in bookings
across October and into November. Our positive forward booked position,
together with the continued deployment of our commercial initiatives, means
that we remain confident in driving like-for-like(†) sales in the second
half.
In Germany, we are continuing to build on the excellent progress we have made
in the first half. With the increased maturity of our brand and estate, we
have a strong forward booked position, and remain on track to breakeven on a
run-rate basis later this calendar year.
There are no changes to our previous FY25 guidance other than with increased
cost efficiencies of £60m in FY25 (previously £40m-£50m), we now expect UK
net inflation to be between 2% and 3%. Our full FY25 guidance can be found in
our FY24 full year results announcement.
Business strategy
Our ambition is to be the world's leading budget hotel brand, delivering
long-term, sustainable returns for our shareholders whilst driving positive
change through our Force for Good sustainability programme. Our three-pronged
strategy outlines the pathway to achieve this ambition:
• continuing to grow and innovate in the UK;
• focus on our strengths to grow in Germany; and
• enhancing our capabilities to support long-term growth.
The driving force behind the successful execution of our strategy is our
vertically-integrated operating model, which together with the strength of our
balance sheet, gives us complete control over the customer experience and
underpins our market-leading position.
Further detail on our future plans within the three pillars of our strategy is
outlined below:
1. Continuing to grow and innovate in the UK
We are the UK's leading hotel brand, a position we have held for over a
decade, delivering a consistent, high-quality, value proposition for our
guests, whilst maximising returns for our shareholders.
We are continuing to execute a number of strategic and commercial initiatives
which will extend our market-leading position and deliver a step change in our
financial performance:
· Network expansion - opening our committed pipeline and adding
further rooms over the next five years
· Accelerating Growth Plan - optimising our F&B offer to unlock
3,500 new room extensions
· Strong commercial programme - series of initiatives to deliver
incremental revenue growth
· Cost efficiencies - we are increasing and extending our cost
efficiency programme to deliver cost savings of £50m on average per year to
FY30
Our progress towards each of these objectives is outlined below:
Network expansion - significant room growth over the next five years
Our latest network planning exercise identified a significant structural shift
in the UK hotel market, led by a material decline in the independent sector
post-pandemic, with the result that UK supply in 2022 was 4% below 2019
levels. The impact of the pandemic, followed by a sustained period of high
inflation and increased interest rates, prompted a marked reduction in hotel
construction activity. We therefore believe it is unlikely that the total
market will return to 2019 levels of supply until at least 2028, creating a
significant opportunity for Premier Inn.
To capitalise on this favourable supply backdrop, we are continuing with our
expansion plans towards our long-term potential of 125,000 rooms across the UK
and Ireland. Our committed pipeline today stands at over 6,000 rooms and we
expect to continue adding more rooms to our pipeline over the coming months
and years. These will be in locations where we have already identified a
shortfall in supply or an opportunity to take market share. As we add more
rooms, our automated trading engine seeks to maximise catchment revenue and
deliver competitive levels of RevPAR across our estate. With increased scale,
we can also drive further cost efficiencies, helping to mitigate the impact of
cost inflation on our performance. As a result, our new UK hotels are expected
to deliver a positive profit contribution from their first year of opening and
the addition of new rooms will deliver meaningful incremental profit growth.
As set out in our Five-Year Plan, together with the 3,500 rooms unlocked
through AGP (see below), we are planning to open more rooms over the next five
years, reaching 98,000 rooms by the end of FY30. Further details are provided
in the 'Five-Year Plan' section below.
Accelerating Growth Plan ('AGP') - optimising our F&B offer to unlock
high-returning extensions
By optimising the delivery of F&B at some of our sites and converting a
number of our lower returning branded restaurants into a more efficient,
integrated F&B offer, we will unlock 3,500 new room extensions. Our plan
will further improve the guest experience through a tailored F&B offering,
whilst increasing our rooms pipeline in locations where we already know that
there is a need for more rooms, capitalising on the favourable UK supply
backdrop. Together, this will result in a significant improvement to site
level margins and returns.
Following the completion of an extensive consultation with affected team
members in July 2024, we are progressing with the execution of our plans at
pace. A summary of our progress on the two elements of the plan is outlined
below:
1. Conversion of 112 branded restaurants into 3,500 hotel rooms with
integrated F&B offer
Planning applications for over a third of these sites have been made, with the
first sites already approved and construction now underway. We are on track to
progress the remainder of the planning applications, with the first rooms
expected to become operational towards the end of FY26.
2. Exit 126 branded restaurants, replace F&B proposition with
integrated offer
We have accepted offers on 51 sites for a total consideration of £56m, with
construction already underway to build an integrated F&B offer at a number
of these sites and with the first sites expected to complete before the end of
the financial year. Working with our advisers, we remain confident in being
able to exit the remaining sites over the next 18 months.
The majority of our hotels, including those serviced by one of our existing
387 integrated restaurants or our remaining portfolio of 196 higher returning
branded restaurants, are continuing to operate as normal and are unaffected by
AGP. A summary of the expected financial impacts of our plan can be found in
the Five-Year Plan section of this release.
Strong commercial programme to drive revenue growth
Our commercial strategy is focused on driving the factors that we can control
to deliver incremental revenue growth and extend our market-leading position.
The main initiatives included within this programme include:
· New ancillary revenue streams: Our new reservation system has
already unlocked a series of opportunities to enhance the offer to our guests
and drive further revenue growth. In addition to offering early check-in, late
check-out, 'Rooms with a View', adjoining rooms and Twin rooms, we will also
be able to price each of these add-ons dynamically in the future, helping to
drive further revenue growth. We are exploring several other product
enhancements which will both improve the guest experience and unlock
additional revenue streams.
· Growing our business base: Business guests tend to travel more
frequently than leisure guests and also tend to book our more flexible rates,
driving higher levels of RevPAR. We are continuing to increase our volumes
through TMCs and have extended our reach by adding connectivity to Sabre who
are one of the big three Global Distribution Systems. This gives us access to
new corporate partners, in the UK and internationally.
· Enhancing the guest experience: We will continue to roll-out our
new standard room format ('ID5') with 5,000 rooms planned this year and will
conclude our 'Bed of the Future" bed-replacement programme, sustaining our
reputation for a high-quality guest proposition. We are on track to add 500
Premier Plus rooms this year, which will broaden our appeal and deliver a
RevPAR premium to our standard rooms. We are also optimising our website and
app functionality to further improve the digital experience for our guests.
Early progress is encouraging, with our app generating 8% of total
accommodation sales in H1 FY25, an increase of 1 percentage point versus last
year.
· Targeted marketing: Continuing to attract new guests is essential
as we seek to extend our leadership and grow market share. We have launched
our latest iteration of our 'Rest Easy' marketing campaign helping to ensure
we retain our market-leading position with 93% brand awareness(1). Alongside
this, we are making good progress broadening our digital footprint and
distribution. For example, we have increased the range of inventory we can
sell through the platforms of our digital partners by making family rooms and
cancellable rates available.
1: YouGov, Brand Consideration as at 29 August 2024 based on a nationally
representative 52-week moving average
· Making further improvements in F&B: In addition to AGP, we
will roll out our new integrated ground floor concept across our estate,
improving the guest experience and generating additional F&B revenue.
Sites that have already been upgraded to the new format have seen an increase
in sales and received positive feedback from our guests. Commercial
initiatives in our more focused portfolio of 196 branded restaurants are in
place to help drive sales and profitability, including enhanced pricing and
trading mechanics for key events.
· Investing in operational excellence: We take nothing for granted
and are continuing to invest in improving our brand proposition so that we can
both maintain and increase guest loyalty. By refining and investing in our
operating model, we seek to improve our operations and ensure that our teams
are properly motivated and have the right tools to deliver a high-quality
guest experience.
Whilst difficult to apportion the impact of each of these initiatives on our
performance, we believe that each will make a positive contribution and help
drive like-for-like(†) sales.
Extending our efficiency programme
We have a long track record of delivering material cost savings which, in
turn, help to mitigate the impact of inflation on our UK cost base. Given the
excellent progress we have made so far this year, we have increased our cost
savings target for FY25 to £60m (from £40m to £50m). We are also extending
our overall programme which will now deliver £50m of savings on average per
year from FY26 to FY30. Key areas of focus include: improvements to our
operating model, more efficient labour scheduling and further savings unlocked
by our new technology stack.
2. Focus on our strengths to grow in Germany
Our goal is to become the number one hotel brand in Germany, leveraging the
success of our UK model to create significant, long-term value for
shareholders. The German hotel market remains highly attractive: it is 40%
larger than the UK, highly fragmented with a large, declining independent
sector and no clear market leader, creating an exciting opportunity for an
owner-operator such as Premier Inn.
We have grown considerably over the last five years and now have 59 hotels and
over 10,500 rooms open, with a further 7,000 rooms in the pipeline. We are
continuously looking at new opportunities to grow our pipeline, through a
combination of organic growth and bolt-on M&A in our target locations. Our
current open portfolio is progressing in line with our expectations,
particularly our cohort of 17 more established(1) hotels that is performing
ahead of the wider M&E market.
Our commercial and operational initiatives include:
· Building brand awareness: As we become a business of real scale
in Germany, we are focused on increasing our brand awareness to attract
greater numbers of guests to our hotels. As well as using online brand
campaigns, we will continue to explore how we can use other distribution
channels such as OTAs and aggregators to help accelerate RevPAR growth and
profitability.
· Refining our commercial strategy: Drawing upon an expanding
pool of trading data, we are improving our performance by applying the
learnings from trading our growing estate. Events are a key feature of the
German market, with event nights accounting for 20% of total demand on
average, and drawing upon our previous experience, we are already seeing a
positive impact from some of the changes made over the past year.
· Enhancing our business proposition: Maintaining a well-balanced
mix of business and leisure guests ensures we can maximise occupancy levels
across any given week. Offering availability through the optimum mix of
channels ensures we can continue to attract high volumes of both domestic and
international business demand. As in the UK, we are expanding our distribution
through TMCs which is increasing our addressable customer base.
· Optimising our model and product offer: Our proposition
continues to attract excellent guest scores, helping to drive increasing guest
volumes into our hotels. As well as continuing to roll-out more Premier Plus
rooms, we are also testing product add-ons such as early check-in and late
check-out, each of which can drive incremental RevPAR. Our new reservation
system will also unlock further commercial benefits including the ability to
price certain product enhancements dynamically, increasing yield in response
to demand. With increased scale, we will continue to refine our operating
model to both drive revenue and reduce costs so that margins increase.
With the initiatives outlined above, we remain on track to reach breakeven on
a run-rate basis in the second half of this year and as set out as part of our
Five-Year Plan below, we expect Germany to deliver significant revenue and
profit growth by FY30.
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
3. Enhancing our capabilities to support long-term growth
The third pillar of our strategy seeks to ensure we have the infrastructure
required to execute our plans.
Financial strength: Our financial strength underpins our confidence in
continuing to grow our estate, improve our guest offer, invest in our teams
and enhance the quality of our systems, each of which help us to both drive
revenues and reduce costs. It also means that we can take advantage of
selective M&A opportunities that meet our returns requirements and deliver
incremental value for the Group. Despite the scale of our capital expenditure
programme and over £1bn of capital being returned to shareholders over the
last 18 months, our balance sheet remains strong, with lease-adjusted
leverage(†) at 3.1x (H1 FY24: 2.5x). Our strict approach to capital
discipline, alongside our capital allocation framework, helps us to strike an
appropriate balance between investing in profitable growth at attractive
levels of return and returning capital to shareholders.
Asset-backed balance sheet: We have a significant freehold property estate. It
differentiates us from our asset-light peers and unlocks a number of
commercial and operational advantages including:
o total control over the location and initial development of the hotel as
well as all maintenance and redevelopment, including extensions;
o enables the commercial opportunity in any location to be maximised for the
Group;
o protection from increasing property costs and therefore lower earnings
volatility during periods of high or persistent inflation;
o recycle capital to release development profits through sale and
leasebacks; and
o a strong financial covenant, helping to secure more favourable lease terms
with landlords and attractive financing terms with lenders.
Having access to both freehold and leasehold opportunities means that we
maximise our chances of securing the right assets in our target locations. We
also have the ability to unlock room growth through freehold hotel extensions
as evidenced by our AGP.
Upgraded technology: With digital channels generating the majority of our
revenues, our technology infrastructure is central to our long-term success.
Having completed the multi-year upgrade to our reservation system and
technology stack across over 900 hotels in the UK and Germany, we are
continuing to drive further improvements to our digital networks and systems
that will improve the quality of service to our guests as well as unlock new
revenue opportunities and cost efficiencies.
Lean and agile cost model: Our vertically-integrated operating model gives us
end-to-end control over our customer proposition and our cost structure. We
have a clear roadmap to ensure we can continue to drive material cost
efficiencies to mitigate inflationary pressures across the UK and Germany. Key
areas of focus include: operations, procurement and technology.
Being a Force for Good: Our sustainability programme, Force for Good, drives
our ESG agenda and is underpinned by stretching targets that are embedded
across all areas of our business, holding us accountable for the changes we
are seeking to make. Given we are the UK's largest hotel chain with a growing
presence in Germany, we have the opportunity to enact positive change in the
communities where we operate whilst delivering operational efficiencies in the
longer-term. Further details regarding our progress during the period are set
out in the 'Force for Good' section of this release.
Five-Year Plan: delivering a step change in profits, margins and returns
With the execution of our plans set out above, we are on course to add more
rooms in the UK, deliver AGP, extend our efficiency programme and grow Germany
towards our ambition of becoming the country's number one hotel brand.
Maintaining a steady level of capital intensity and leverage, by FY30 the
Group will:
· increase Group adjusted PBT(†) versus FY25 by at least £300m(1);
and
· generate more than £2bn available for dividends, share buy-backs
and, if suitable opportunities arise, additional high-returning investments.
Further details regarding the financial impact of our plans included within
our Five-Year Plan are summarised below.
1. UK: network expansion (+£120m adjusted PBT(†) by FY30)
In addition to the 3,500 new extension rooms from AGP (see below), we also
expect to open the 6,000 rooms in our committed pipeline as well as a further
2,000 rooms that will be added by FY30. Before the benefits of our AGP
outlined below, the addition of 8,000 rooms will deliver incremental PBT of
£120m by FY30.
2. UK: Accelerating Growth Plan ('AGP') (+£100m adjusted PBT(†) by FY30)
By optimising the delivery of F&B at some of our sites and converting a
number of our lower returning branded restaurants into a more efficient,
integrated F&B offer, we will unlock 3,500 new room extensions and deliver
incremental adjusted PBT of £100m by FY30.
4. Germany: network expansion and RevPAR uplift (+£80m adjusted PBT† by
FY30)
We are on course to reach breakeven on a run-rate basis later this year. We
expect to open a further 9,000 rooms by FY30 taking our open estate to 20,000
rooms, moving us closer towards our ambition of becoming the country's number
one hotel brand. To reflect the increasing maturity of our estate, improved
distribution and increased brand awareness, we expect to achieve a network
RevPAR of c.€80 and reach double digit returns on our current open portfolio
by FY30. With the benefit of operating leverage, improvements to our operating
model and additional scale benefits, we expect Germany to deliver adjusted
PBT(†) of at least £70m(1) by FY30, representing an uplift of at least
£80m versus current consensus expectations for FY25. Thereafter, we expect to
make further progress as our estate and brand continue to mature.
5. Cost efficiencies: £50m per annum from FY26 to FY30
Building on our strong track record of driving efficiencies across all areas
of our business, we are announcing a further £150m of incremental cost
savings by FY30, equating to £50m per annum on average.
We have the ability to mitigate the impact of UK cost inflation through the
delivery of cost efficiencies and positive UK like-for-like(†) sales growth,
supported by our commercial programme. Across the next five years, our
efficiency programme will offset approximately 3% of gross cost inflation per
annum on our £1.7bn UK cost base. Therefore, if gross inflation is above 3%,
we would need to deliver 1% of UK like-for-like(†) sales growth to offset
every 1% of additional cost inflation. The £300m of incremental profit
generated by our plan assumes our UK life-for-like sales(†) growth plus
efficiencies equals UK cost inflation. However, we expect UK
like-for-like(†) sales growth and our cost efficiencies to be in excess of
UK cost inflation over the life of the plan.
6. Maintaining a strong balance sheet with average net capex of £500m per
annum
To fund the plans outlined above as well as our ongoing programme of
investment, we expect average annual net capex of £500m per annum to FY30,
after net receipts from property-related transactions, including sale and
leasebacks. We assume our lease-adjusted leverage(†) ratio remains broadly
in line with current levels and below our internal threshold of 3.5x.
1: Using a GBP: EUR exchange rate of 1.18
Force for Good
Being a Force for Good is fundamental to the sustainable and long-term growth
of our business. Our programme comprises three core pillars: opportunity,
responsibility and community, and has stretching targets that are embedded
across all areas of our business, ensuring that responsible business practices
are integrated into our operations.
Opportunity
We are a team where everyone can reach their potential, with no barriers to
entry and no limits to ambition. Opportunity at Whitbread is anchored to three
key themes within our overall People Plan - diversity and inclusion
('D&I'), wellbeing, and training.
We have set stretching targets for leadership diversity to take us through to
the end of FY26 and are making steady progress against them; our ethnicity
target is 10% and we now have over 9% ethnic representation(1) while we are
striving for 45% female representation(2) and currently stand at 43%. A
highlight of our external recognition for our D&I efforts in the period
was our Top 10 placing and award of "Gold Employer", in the Stonewall 2024
Workplace Equality Index.
Our wellbeing activity has built on the foundations set last year and we have
a proactive set of communications around monthly themes, such as the menopause
and we have also focused on financial wellbeing, delivering specific webinars
on financial education topics.
We have enabled several training and development initiatives in the period:
over 400 Operations Managers graduated from our 'Leading For Tomorrow'
programme, we completed our 'Progressing Into Management' pilots in
Operations, we upskilled over 200 managers in Employee Relations training, 126
team members completed their apprenticeships and over 5,000 classroom or
virtual classroom sessions were attended across the UK and Germany.
Additionally, we continue to support social mobility and have expanded our
Thrive partnership with Derwen and Hereward Colleges, helping young people
with special educational needs into employment, whilst we are also launching a
pilot for care experienced young people, in partnership with Barnado's.
1: UK only
2: UK and Germany
Responsibility
Last year we published our Transition Plan which outlines our glidepath
towards meeting our net zero carbon goals. An important part of this plan is
our shift away from fossil fuels to renewable electricity. We have now
completed six retrofits of existing hotels, where we have removed the gas
connection so that hot water, heating and kitchen facilities are all now
powered by renewable electricity. This year we will be retrofitting more sites
using a range of technology options. This will give us a better overview of
costs and performance in different contexts, so that we can find appropriate
solutions right across our very diverse estate. We are seeing tangible
benefits from our water stewardship activities and are on track to meet our
target of reducing water usage per guest by 20% by 2030. Through the
installation of water-efficient showerheads and tap connectors, we are
lowering our water usage whilst also reducing our gas consumption used to heat
it. In line with our commitment to reduce Scope 3 emissions by 90% by 2050, we
are continuing to develop our approach to working with suppliers on the
decarbonisation of our supply chain through data analysis and engagement.
Reducing our food waste remains a key priority for the Group. We want to make
sure that we both meet our target of reducing food waste by 50% by 2030 whilst
also improving the quality and quantity of our recycling. Progress made in the
period includes convening a multifunctional working group which is examining
the drivers of waste - from looking at the minimum quantities of products we
buy, to the data we receive from our waste contractor. We are trialling a
range of partnerships, including: technology solutions to generate the
insights we need into what we are throwing away; and redistribution
partnerships to ensure any edible waste is diverted from the bin. We are also
launching a campaign with our operational teams to boost awareness of
recycling and drive improvements.
As we evolve our approach to animal welfare, we have implemented updated
species-specific animal welfare standards, supported by an approved schemes
list. This is in addition to implementing our 'Welfare Outcome Measures' and
we continue to collect independently verified data via supplier submissions.
We have also mapped out our supply chain across our F&B proposition using
a data cloud-based system that allows us to manage our end-to-end supply
chain, delivering cost efficiencies while maximising transparency and
traceability.
In the period we have created cross-functional teams working to ensure that we
are ready for the broad requirements of the Corporate Sustainability Reporting
Directive and EU Deforestation Regulation.
Community
We have continued our proud partnership with Great Ormond Street Hospital
Children's Charity, raising £1.5m in the first half of this year, resulting
in £25m of funds raised since 2012. Our teams across the UK participated in
their largest ever fundraise, raising £140,000 throughout May 2024 by
committing to a broad range of individual commitments.
During H1 FY25, we also launched our partnership with Children's Health
Foundation Ireland. We have committed to raising €30,000 over three-years to
fund an interdisciplinary rehabilitation programme for children living with
chronic and disabling pain, a first of its kind in Ireland.
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/
(https://www.whitbread.co.uk/sustainability/our-strategy-targets/) .
Business Review
Premier Inn UK(1)
£m H1 FY25 H1 FY24 vs H1 FY24
Statutory Revenue 1,455 1,479 (2)%
Operating costs before depreciation, amortisation & rent (856) (852) (1)%
Adjusted EBITDAR(†) 599 627 (5)%
Net turnover rent and rental income 0 (1) 180%
Depreciation: Right-of-use asset (76) (70) (8)%
Depreciation and amortisation: Other (95) (86) (10)%
Adjusted operating profit(†) 430 472 (9)%
Interest: Lease liability (72) (65) (11)%
Adjusted profit before tax(†) 357 407 (12)%
ROCE(†) 14.0% 14.9% (90)bps
PBT Margins(†) 24.6% 27.5% (290)bps
Premier Inn UK(1) key performance indicators
H1 FY25 H1 FY24 vs H1 FY24
Number of hotels 855 849 1%
Number of rooms 85,920 83,934 2%
Committed pipeline (rooms) 6,262 7,291 (14)%
Occupancy 83.1% 84.4% (130)bps
Average room rate(†) £84.16 £84.13 0%
Revenue per available room(†) £69.93 £71.02 (2)%
Sales growth(2):
Accommodation 0%
Food & beverage (7)%
Total (2)%
Like-for-like(†) sales(2) growth:
Accommodation (2)%
Food & beverage (3)%
Total (2)%
1: Includes one site in each of: Guernsey and the Isle of Man, two sites in
Jersey and six sites in Ireland
2: Total and like-for-like(†) versus FY24
Following a very strong performance last year, Premier Inn UK's total
statutory revenue was down 2%, reflecting a slightly softer UK demand
environment and the impact of our AGP on F&B sales. Total accommodation
sales were broadly in line with last year and slightly ahead of the wider
M&E market, with the small decline in RevPAR offset by our continued
estate growth. Despite slightly softer UK demand, Premier Inn maintained its
market-leading position, commanding a healthy RevPAR premium of £5.85 (H1
FY24: £6.69), demonstrating the inherent strengths of our scale, brand,
commercial expertise, operational excellence and vertically-integrated
operating model.
UK performance vs M&E market
Q1 Q2 H1
FY25 FY25 FY25
PI accommodation sales growth performance (vs FY24)(1) 0.3pp 0.1pp 0.2pp
PI occupancy growth performance (vs FY24)(1) (1.1)pp (1.5)pp (1.3)pp
PI ARR growth performance (vs FY24)(1) 0.3pp 0.7pp 0.5pp
PI RevPAR premium (absolute)(1) +£5.44 +£6.29 +£5.85
PI market share(2) 8.7% 8.2% 8.4%
PI market share gains (vs FY24)(2) (0.2)pp (0.4)pp (0.4)pp
1: STR data, standard basis, Premier Inn accommodation revenue, occupancy, ARR
and RevPAR, 1 March 2024 to 29 August 2024, M&E market excludes Premier
Inn
2: STR data, revenue share of total UK market, 1 March 2024 to 29 August 2024
F&B revenues were impacted by AGP as we transition half of our branded
restaurants from a full-service offering for both external customers and our
hotel guests, to a more efficient, integrated format, tailored to the needs of
our hotel guests. This impact was partially offset by strong trading in our
integrated restaurants, supported by high levels of occupancy in our hotels,
with the result that total F&B revenues were 7% behind last year.
Operating costs of £856m were up 1% (H1 FY24: £852m), reflecting cost
inflation and our estate growth over the last 12 months, mitigated by good
progress on cost efficiencies in the period. The transitionary impact of AGP
flowed into adjusted EBITDAR(†) which was 5% behind last year at £599m (H1
FY24: £627m). Right-of-use asset depreciation in the period increased by 8%
to £76m and lease liability interest increased by 11% to £72m reflecting the
growth in our leasehold estate. So far this year we have opened five hotels
and have closed three hotels as we continue to optimise our portfolio to drive
higher returns. As at 29 August 2024, the total open estate comprised 855
hotels and 85,920 rooms.
UK adjusted profit before tax(†) decreased by 12% to £357m (H1 FY24:
£407m) reflecting the short-term impact of AGP and the softer UK
like-for-like(†) accommodation sales performance. As a result, UK adjusted
pre-tax margins(†) reduced to 24.6% (H1 FY24: 27.5%) and UK ROCE(†) was
14.0% (H1 FY24: 14.9%).
Premier Inn Germany(1)
H1 FY25 H1 FY24 vs H1 FY24 vs H1 FY24(3)
£m
Statutory revenue 115 95 21% 23%
Other income (excl. rental income) - 3 n/a n/a
Operating costs before depreciation, amortisation and rent (85) (75) (14)% (16)%
Adjusted EBITDAR(†) 30 23 29% 32%
Net turnover rent and rental income 0 - 100% 100%
Depreciation: Right-of-use asset (21) (20) (5)% (7)%
Depreciation and amortisation: Other (8) (7) (11)% (13)%
Adjusted operating profit / (loss)(†) 1 (4) 134% 134%
Interest: Lease liability (11) (10) (4)% (5)%
Adjusted loss before tax(†) (9) (14) 34% 32%
Premier Inn Germany(1) key performance indicators
H1 FY25 H1 FY24 vs H1 FY24 vs H1 FY24(3)
Number of hotels 59 57 4% -
Number of rooms 10,506 10,251 3% -
Committed pipeline (rooms) 6,790 5,830 17% -
Occupancy 68.3% 64.1% 420bps -
Average room rate(†) £75.78 £71.44 6% 8%
Revenue per available room(†) £51.78 £45.79 13% 15%
Sales growth(2):
Accommodation 22% 24%
Food & beverage 15% 17%
Total 21% 23%
Like-for-like(†) sales(2) growth:
Accommodation 17% 19%
Food & beverage 9% 12%
Total 16% 18%
1: Includes one site in Austria
2: Total and like-for-like(†) versus FY24
3: On a constant currency basis, EUR
Total statutory revenue in Germany was 21% ahead of last year, reflecting the
increasing maturity of our hotels, our progress in trading key events and our
continued estate growth. Total estate RevPAR for the period was €61, an
increase of 15%, with a particularly encouraging performance during the second
quarter thanks to a strong events calendar. Our cohort of 17 more established
hotels(5) continued on their pathway towards maturity, delivering a RevPAR of
€67 and outperforming the wider M&E market.
Germany performance vs M&E market
Q1 Q2 H1
FY25 FY25 FY25
Germany M&E RevPAR performance(4) €56 €66 €61
PI more established hotels RevPAR performance(5) €61 €72 €67
PI total hotels RevPAR performance(5) €57 €65 €61
4: STR data, standard methodology basis, 1 March 2024 to 29 August 2024,
M&E excludes Premier Inn
5: Premier Inn more established hotels: open and trading under the Premier Inn
brand for 12 consecutive months as at 4 March 2022: 17 hotels and Premier Inn
total: 59 hotels
Other income in the period was £nil, while H1 FY24 included the release of a
£3m provision relating to a prior year claim for Government support which has
since been finalised.
Operating costs in the period increased to £85m reflecting our continued
estate growth and cost inflation (H1 FY24: £75m). As we continue to build
scale, we are refining and tailoring our operating model to ensure we continue
to provide a quality guest experience whilst managing our costs and driving
margin growth. Reflecting the increase to our leasehold estate, right-of-use
asset depreciation increased by 5% to £21m and lease liability costs
increased by 4% to £11m. Other depreciation and amortisation charges
increased by 11% to £8m reflecting the increasing scale of our operations.
At 29 August 2024, our open estate stood at 59 hotels with a total of 10,506
rooms and a further 6,790 rooms in our committed pipeline. We remain on track
to open c.400 rooms this year, in line with our previous guidance.
Reflecting the positive impact of our commercial programme, the progressive
maturity of our estate and our focus on driving cost efficiencies, the
adjusted loss before tax(†) reduced by 34% to £9m (H1 FY24: £14m loss).
Central and other costs
£m H1 FY25 H1 FY24 vs H1 FY24
Operating costs before depreciation, amortisation and rent (19) (22) 15%
Share of profit from joint ventures 1 (0) (367)%
Adjusted operating loss(†) (18) (23) 20%
Net finance income 10 21 (51)%
Adjusted loss before tax(†) (8) (1) (492)%
Central operating costs reduced by £3m to £19m (H1 FY24: £22m), driven by
lower consultancy related costs. Net finance income reduced to £10m (H1 FY24:
£21m) reflecting a reduction in interest receivable on the Group's cash
balances to £17m (H1 FY24: £26m) and a reduction in IAS 19 pension net
finance income to £4m (H1 FY24: £8m).
Financial review
Financial highlights
£m H1 FY25 H1 FY24 vs H1 FY24
Statutory revenue 1,570 1,574 0%
Other income (excl rental income) - 3 n/a
Operating costs before depreciation, amortisation and rent (959) (949) (1)%
Adjusted EBITDAR(†) 611 628 (3)%
Net turnover rent and rental income 1 (1) 200%
Depreciation: Right-of-use asset (96) (89) (8)%
Depreciation and amortisation: Other (103) (93) (11)%
Adjusted operating profit(†) 413 445 (7)%
Net finance income (excl. lease liability interest) 10 21 (51)%
Interest: Lease liability (83) (75) (10)%
Adjusted profit before tax(†) 340 391 (13)%
Adjusting items (31) 4 (943)%
Statutory profit before tax 309 395 (22)%
Tax expense (89) (102) 12%
Statutory profit after tax 220 293 (25)%
Statutory revenue
Statutory revenue was in line with what was a strong performance last year,
reflecting the slightly softer UK hotel demand, a reduction in F&B
revenues as a result of AGP, offset by our continued estate growth across the
UK and the encouraging progress we are making in Germany.
Adjusted EBITDAR
Other income in the period was £nil, while H1 FY24 other income included a
£3m provision release relating to a prior year claim for Government support
which has since been finalised. Operating costs in the period were £959m, 1%
higher than last year (H1 FY24: £949m), with increased levels of cost
inflation and our continued estate growth across the UK and Germany, largely
mitigated by good progress on cost efficiencies. As a result, adjusted
EBITDAR(†) decreased by 3% to £611m (H1 FY24: £628m).
Adjusted operating profit
The increase in the size of our leasehold estate across the UK and Germany
resulted in an 8% uplift to right-of-use asset depreciation to £96m (H1 FY24:
£89m). The addition of new hotels in combination with our continued focus of
investing in our core estate meant that other depreciation and amortisation
charges increased by 11% to £103m (H1 FY24: £93m). As a result, adjusted
operating profit(†) decreased by 7% to £413m (H1 FY24: £445m).
Net finance costs
Lower cash balances reflected our increased capital expenditure programme and
share buy-backs resulting in lower interest receivable of £17m (H1 FY24:
£26m). An interest credit from the pension fund of £4m (H1 FY24: £8m),
partially offset by debt interest of £10m (H1 FY24: £14m), resulted in a
reduced net finance credit (excluding lease liability interest) for the period
of £10m (H1 FY24: £21m credit). Lease liability interest increased by 10% to
£83m, primarily driven by the opening of new leasehold hotels across the UK
and Germany.
Adjusting items
Total adjusting items before tax were a charge of £31m for the period
compared to a £4m credit in H1 FY24.
The Group has completed a review of site-level H1 FY25 performance that
identified a number of sites for an impairment review. This resulted in
adjusting net impairment charges of £9m relating to two hotels in Germany. A
further impairment charge of £4m has been recorded in relation to assets held
for sale during the year outside the scope of our AGP, as we continue to
optimise our estate to drive higher returns. This brings the total adjusting
net impairment charges, excluding the impact of AGP to £13m (H1 FY24: £nil).
Subsequent to the FY24 balance sheet date, a further 24 sites were identified
to be disposed of as part of our AGP. In addition, we have also updated the
cashflow assumptions for sites originally included in the scope of the plan,
resulting in a net impairment charge of £23m being incurred in the period.
During the period, the Group made gains on other property disposals of £31m
including the sale of a hotel in Manchester for redevelopment into student
accommodation (H1 FY24: £9m).
The Group has incurred significant business change costs in relation to the
implementation of the new hotel management system, HR & payroll system and
our strategic network programme, upgrading the IT networks across our estate.
Cash costs and write-offs incurred on the programmes and presented within
adjusting items in the period were £13m, with cumulative cash costs and
write-offs to date being £54m. At this time, the Group expects to incur
future costs presented within adjusting items across future financial periods
as follows: during the financial year ended 2025 between £10m and £20m and
during the financial year ended 2026 between £5m and £15m.
The Group has incurred legal, advisory and project management costs regarding
the announced changes to facilitate AGP, as well as redundancy costs. The plan
represents a significant business change for the Group's strategic focus in
relation to F&B. Execution of AGP is also expected to incur costs over the
next few financial years. Cash costs incurred on the programme and presented
within adjusting items in the period were £13m, with cumulative cash costs to
date being £19m. At this time the Group expects to incur future costs
presented within this adjusting item across the next three financial years of
up to £10m.
During the year, the Group received settlements of £1m (H1 FY24: nil) in
relation to business interruption insurance claims and did not receive any
settlements in relation to legal claims in relation to other legal matters (H1
FY24: £3m).
Taxation
The statutory tax charge of £89m (H1 FY24: £102m) represents an effective
tax rate on statutory profit for the six-month period ended 29 August 2024 of
26.8% (H1 FY24: 25.8%). This is higher than the UK statutory corporate tax
rate of 25.0% (H1 FY24: 24.5%) 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 year was £220m in period, compared to a
profit of £293m in H1 FY24.
Earnings per share
H1 FY25 H1 FY24 vs H1 FY24
Adjusted basic profit / earnings per share(†) 137.1p 146.1p (6)%
Statutory basic profit / earnings per share 121.0p 147.6p (18)%
Adjusted basic profit per share(†) of 137.1p and statutory basic profit per
share of 121.0p reflect the adjusted and statutory profits reported in the
year and are based on a weighted average number of shares of 182m (H1 FY24:
199m). 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 programmes.
Dividend
The Board has declared a 7% increase in the interim dividend per share to 34.6
pence (H1 FY24: 34.1 pence). This reflects the Group's robust performance in
the period, its strong balance sheet and the Board's confidence in delivering
a step change in performance, as outlined by our Five-Year Plan. This will
result in a total interim dividend payment of £65m. The interim dividend will
be paid on 6 December 2024 to all shareholders on the register at the close of
business on 1 November 2024. 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
£m H1 FY25 H1 FY24
Adjusted EBITDAR(†) 611 628
Change in working capital (46) 4
Net turnover rent and rental income 1 (1)
Lease liability interest and lease repayments (155) (149)
Adjusted operating cashflow(†) 411 483
Interest (excl. lease liability interest) 2 9
Corporate taxes (34) (26)
Pension (3) (3)
Capital expenditure: non-expansionary (118) (122)
Capital expenditure: expansionary(1) (81) (91)
Disposal Proceeds 44 8
Other (15) 2
Cashflow before shareholder returns / receipts and debt repayments 206 260
Dividend (115) (99)
Share buy-back (163) (265)
Net cashflow (72) (104)
Opening net cash(†) (298) 171
Closing net (debt) / cash(†) (370) 67
1: H1 FY25 includes £2m payment of contingent consideration (H1 FY24: £nil
payment of contingent consideration)
The strength of our vertically-integrated operating model meant that despite
the lower UK revenues, we made strong progress on cost efficiencies and
together with an improved performance in Germany, adjusted EBITDAR(†) was
£611m (H1 FY24: £628m). Lease liability interest and lease repayments
increased by £6m to £155m reflecting the addition of new leasehold hotels in
the UK and Germany. A reduction in payables as a result of lower customer
deposits drove a working capital outflow of £46m (H1 FY24: £4m inflow).
Together, this meant that adjusted operating cashflow(†) decreased to £411m
(H1 FY24: £483m).
The corporation tax net outflow in the period was £34m (H1 FY24: £26m). This
comprises payments of £33m in the UK, £1m in Germany.
Non-expansionary capital expenditure in the period of £118m partly reflects
activity relating to our accelerated refurbishment programme, in addition to
spend incurred for the Group's strategic IT projects. Expansionary capital
expenditure of £81m was £10m lower than last year, reflecting the continued
development of our committed pipelines in both the UK and Germany.
We continue to optimise our estate and seek to take advantage of
value-enhancing opportunities. Disposal proceeds of £44m includes the
disposal of seven properties, including a hotel development sold with planning
to convert into student accommodation in Manchester.
The significant cashflow generated in the period helped to fund our continued
programme of investment, resulting in a cash inflow before shareholder returns
of £206m (H1 FY24: £260m).
As announced with the Group's preliminary results on 30 April 2024, the Board
recommended an increased final dividend of 62.9 pence per share reflecting the
strength of the Group's FY24 performance and confidence in the outlook. The
resulting payment of £115m was paid on 5 July 2024. On 17 October 2023, the
Board approved a £300m share buy-back, of which the final £13m was completed
in the period. The Board approved a further £150m share buy-back on 29 April
2024 which completed on 24 July 2024.
As a result, net debt at the end of the period was £370m (H1 FY24: £67m net
cash).
Debt funding facilities & liquidity
£m Facility Utilised Maturity
Revolving Credit Facility (775) - 2029
Bond (450) (450) 2025
Green Bond (300) (300) 2027
Green Bond (250) (250) 2031
(1,775) (1,000)
Cash and cash equivalents 625
Total facilities utilised, net of cash(1) (375)
Net debt(†) (370)
Net debt and lease liabilities(†) (4,542)
The Group's objective is to manage to investment grade metrics, maintaining a
lease-adjusted
leverage(†) ratio of less than 3.5x over the medium term(2). In July 2024,
we received confirmation from Fitch Ratings that we have maintained our
investment grade status of BBB. The Group's lease-adjusted net debt was
£3,237m (H1 FY24: £2,529m) and the lease-adjusted leverage(†) ratio was
3.1x (H1 FY24: 2.5x). As at 29 August 2024, £35m of the £775m Revolving
Credit Facility is carved-out as an ancillary guarantee facility for the
Group's use in Germany. At 29 August 2024, guarantees issued using the
Commerzbank line totalled €25m (H1 FY24: €23m). The 2025 bond matures on
16 October 2025 and we expect to refinance the bond before this date.
1: Excludes unamortised fees associated with the debt instrument
2: This measure aligns to the Fitch methodology, with the leverage threshold
set at 3.5x lease-adjusted net debt : adjusted EBITDAR
Capital investment
£m H1 FY25 H1 FY24
UK maintenance and product improvement 118 120
New / extended UK hotels 53 39
Germany and Middle East(1) 28 54
Total 199 213
1: H1 FY25 includes £2m payment of contingent consideration (H1 FY24: £nil)
UK maintenance expenditure in the period was broadly in line with last year at
£118m (H1 FY24: £120m), reflecting our accelerated refurbishment programme
and spend relating to the Group's strategic IT projects. UK expansionary spend
of £53m includes the development of our committed pipeline as well as spend
relating to the first phase of AGP. In Germany, capital expenditure in the
period of £28m was £26m lower than last year as spend in the current
financial year is weighted towards the second half of the year. As a result,
total capital expenditure was £199m (H1 FY24: £213m), in line with our
previous guidance and we remain on track to incur £550m to £600m of gross
capital expenditure in FY25.
Property, plant and equipment of £4.6bn was in line with last year as the
increased expenditure in growing and maintaining our estate was mitigated by
depreciation and impairment charges.
Property backed balance sheet
Freehold / leasehold mix Open estate Total estate(1)
Premier Inn UK 56%:44% 57%:43%
Premier Inn Germany 24%:76% 28%:72%
Group 52%:48% 52%:48%
1: Open plus committed pipeline
The current open UK estate is 56% freehold and 44% leasehold, a mix that is
not expected to change materially as the existing committed pipeline is
brought onstream. The current estate in Germany is 24% freehold and 76%
leasehold reflecting the skew towards leasehold properties in city centre
locations.
The new site openings in Germany and continued expansion in the UK resulted in
right-of-use assets increasing to £3.6bn (H1 FY24: £3.5bn) and lease
liabilities increasing to £4.2bn (H1 FY24: £3.9bn).
Return on Capital(1)
Returns H1 FY25 H1 FY24
Group ROCE(†) 11.9% 12.6%
UK ROCE(†) 14.0% 14.9%
1: Germany ROCE not disclosed as losses were incurred in the period
Group ROCE(†) in the period was 11.9% with lower UK revenues partially
mitigated by strong progress in Germany. We believe that our
vertically-integrated operating model means we are particularly well-placed to
capitalise on the significant structural opportunities in both the UK and
Germany. We believe inflationary pressures can be mitigated through a
combination of: continued estate growth, our strategic and commercial plans
including AGP and our cost efficiency programme.
Events after the balance sheet date
The Board of Directors approved a share buy-back on 15 October 2024 for £100m
and is in the process of appointing the relevant brokers to undertake the
programme in accordance with that approval.
On 13 September 2024, the Group entered into sale and leaseback transactions
in relation to two properties, which were included within assets classified as
held for sale at the period end date, receiving proceeds of £56m.
After the balance sheet date, the Group exercised an option to terminate a
contract with a third party for up to £23m, which will deliver future
commercial benefits over and above the cost of termination. These termination
costs will be treated as adjusting items in line with the Group's policy.
Pension
The Group's defined benefit pension scheme, the Whitbread Group Pension Fund
(the 'Pension Fund'), had an IAS19 Employee Benefits surplus of £158m at the
end of the period (H1 FY24: £236m). The change in surplus was primarily
driven by: membership experience being less favourable than expected as a
result of updating for the 31 March 2023 actuarial valuation data; a decrease
in corporate bond yields resulting in a decrease in the discount rate used to
value liabilities; and asset performance being lower than the discount rate.
This was partially offset by changes to the mortality assumptions and a
decrease in the assumed rates of future inflation.
The triennial actuarial valuation of the Pension Fund as at 31 March 2023 has
been completed. This resulted in a surplus of assets relative to Technical
Provisions of £34m. As a result, no deficit reduction contributions are due,
however annual contributions of approximately £11m will continue to be paid
to the Pension Fund through the Scottish Partnership arrangements.
The Trustee holds security over £532m 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. Once
reached, the security held by the Trustee will be the lower of: £500m; and
120% of the buy-out deficit and will remain in place until there is no longer
a buy-out deficit.
Going concern
The directors have concluded that it is appropriate for the consolidated
financial statements to be prepared on the going concern basis. Full details
are set out in note 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') 2023/24 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 and changeable. The
global economic position is more stable recently and we have certainty after
the change in UK government. This is dampened by weaker economic forecasts for
Germany; uncertainty around US elections and escalating geopolitical tensions
that still have the potential to have an impact on global trading and
international travel.
As previously noted, Whitbread's risks have a high degree of
inter-connectivity e.g. strategic business change, which amplifies any
movements and could result in significant 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 consumer demand.
We remain vigilant surrounding cyber and data risk with significant assurance
to mitigate against the changing and complex nature of interconnectivity
across the digital world. As our multiple strategic change programmes are
continuing, this risk remains heightened due to the volume and time bound
pressures involved, although we take confidence from the successful roll-out
of our new reservation system, completed in March 2024.
We recognise the challenging market conditions and comparatives; price
sensitive customer demand and well-invested competitor propositions which have
increased the likelihood of risk relating to Premier Inn brand strength and
customer demand. We have a detailed commercial plan to drive incremental
revenue and guest-focussed initiatives to help mitigate against potential loss
of market share.
The following summarises the risks and uncertainties set out in the Annual
Report including current emerging themes:
l Uncertain economic outlook leads to changeable hotel demand and inflationary
cost pressures;
l Cyber-attacks and data breaches resulting in operational disruption and loss
of income;
l Failure to deliver strategic business and technology-led change programmes due
to the significant volume and under time bound pressures, for example, the
replacement of legacy systems and estate optimisation via AGP;
l Inability to execute our strategy in Germany impacting profitable growth;
l Extended focus on the food and beverage proposition which impacts RevPAR due
to guest disruption;
l Extended stagnation of the UK and Germany property markets slows growth;
l Change in brand-led customer demand for our products and services can be
impacted by sector specific factors resulting in a loss of market share;
l Change in macro labour market and organisational structure impacting talent,
attraction and retention;
l Business interruption within our supply chain and third-party arrangements;
l Adverse publicity and brand damage due to death or serious injury; and
l Uncertainty associated with the collective environmental, social and
governance risks including climate change and compliance with the volume of
new regulations.
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 64 to 71 of the Annual
Report which is available on the website www.whitbread.co.uk
(http://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
like-for-like sales, revenue per available room ('RevPAR'), average room rate
('ARR'), direct bookings/distribution, adjusted operating profit / (loss),
return on capital employed ('ROCE'), adjusted pre-tax profit margins, adjusted
profit / (loss) before tax, adjusted basic profit / earnings per share, net
cash / (debt), net cash / (debt) and lease liabilities, lease-adjusted
leverage, 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.
Interim consolidated income statement
(Reviewed) (Reviewed)
6 months to 29 August 2024 6 months to 31 August 2023
Before adjusting items Adjusting items Statutory Before adjusting items Adjusting items Statutory
(Note 4) (Note 4)
Continuing operations Notes £m £m £m £m £m £m
Revenue 2 1,569.8 - 1,569.8 1,574.0 - 1,574.0
Other income 2.9 0.9 3.8 4.3 3.3 7.6
Operating costs 3 (1,160.7) (32.1) (1,192.8) (1,132.7) 0.4 (1,132.3)
Operating profit before joint ventures 412.0 (31.2) 380.8 445.6 3.7 449.3
Share of profit/(loss) from joint ventures 0.8 - 0.8 (0.3) - (0.3)
Operating profit 2 412.8 (31.2) 381.6 445.3 3.7 449.0
Finance costs 5 (93.6) - (93.6) (87.7) - (87.7)
Finance income 5 21.2 - 21.2 33.8 - 33.8
Profit before tax 2 340.4 (31.2) 309.2 391.4 3.7 395.1
Tax expense 6 (91.2) 1.9 (89.3) (101.1) (0.8) (101.9)
Profit for the period 249.2 (29.3) 219.9 290.3 2.9 293.2
(Reviewed) (Reviewed)
6 months to 29 August 2024 6 months to 31 August 2023
Earnings per share (Note 7) pence pence pence pence pence pence
Basic 137.1 (16.1) 121.0 146.1 1.5 147.6
Diluted 136.1 (16.0) 120.1 145.0 1.5 146.5
Interim consolidated statement of comprehensive income
Notes (Reviewed) (Reviewed)
6 months to 29 August 2024 6 months to 31 August 2023
£m £m
Profit for the period 219.9 293.2
Items that will not be reclassified to the income statement:
Remeasurement loss on defined benefit pension scheme 15 (11.8) (96.4)
Current tax on defined benefit pension scheme 6 (1.0) 0.5
Deferred tax on defined benefit pension scheme 6 3.8 23.5
(9.0) (72.4)
Items that may be reclassified subsequently to the income statement:
Net gain/(loss) on cash flow hedges:
Net fair value movement 4.9 (0.8)
Reclassified and reported in the consolidated income statement 4.0 -
Deferred tax on cash flow hedges 6 (2.2) 0.8
Net gain on hedge of a net investment 8.2 4.4
Current tax on hedge of a net investment 6 (1.0) (0.6)
Cost of hedging 0.5 0.5
14.4 4.3
Exchange differences on translation of foreign operations (12.9) (21.8)
Current tax on exchange differences on translation of foreign operations 6 1.3 2.7
(11.6) (19.1)
Other comprehensive loss for the period, net of tax (6.2) (87.2)
Total comprehensive income for the period, net of tax 213.7 206.0
Interim consolidated statement of changes in equity
6 months to 29 August 2024 (Reviewed)
Share Share Capital Retained Currency Other Total
capital premium redemption earnings translation reserves £m
£m £m reserve £m reserve £m
£m £m
At 29 February 2024 151.8 1,031.8 63.5 4,645.3 25.9 (2,398.9) 3,519.4
Profit for the period - - - 219.9 - - 219.9
Other comprehensive (loss)/income - - - (9.0) (3.9) 6.7 (6.2)
Total comprehensive income - - - 210.9 (3.9) 6.7 213.7
Ordinary shares issued on exercise of employee share options 0.1 1.5 - - - - 1.6
Loss on ESOT shares issued - - - (6.4) - 6.4 -
Accrued share-based payments - - - 8.5 - - 8.5
Tax on share-based payments - - - (0.4) - - (0.4)
Equity dividends paid (Note 8) - - - (114.9) - - (114.9)
Share buy-back, commitment and cancellation (Note 13) (4.3) - 4.3 (151.0) - - (151.0)
At 29 August 2024 147.6 1,033.3 67.8 4,592.0 22.0 (2,385.8) 3,476.9
6 months to 31 August 2023 (Reviewed)
Share Share Capital Retained Currency Other Total
capital premium redemption earnings translation reserves £m
£m £m reserve £m reserve £m
£m £m
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 - - - 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 buy-back, commitment and cancellation (Note 13) (6.0) - 6.0 (#)(301.3) - (#)- (301.3)
At 31 August 2023 158.9 1,028.1 56.2 5,054.2 20.2 (2,389.4) 3,928.2
(#)Re-presentation of the full cost of the share buy-back programme from other
reserves to retained earnings
Interim consolidated balance sheet
(Reviewed) (Reviewed) (Audited)
Notes 29 August 2024 31 August 2023 29 February 2024
£m £m £m
Non-current assets
Intangible assets 180.8 189.5 185.0
Right-of-use assets 3,638.8 3,476.8 3,597.0
Property, plant and equipment 9 4,583.9 4,616.3 4,627.9
Investment in joint ventures 49.4 45.2 50.8
Derivative financial instruments 14.9 0.8 3.8
Defined benefit pension surplus 15 157.6 236.4 165.2
8,625.4 8,565.0 8,629.7
Current assets
Inventories 19.2 22.1 21.2
Derivative financial instruments - 0.3 -
Trade and other receivables 116.7 123.8 119.3
Cash and cash equivalents 625.3 1,061.3 696.7
761.2 1,207.5 837.2
Assets classified as held for sale 11 139.8 7.1 54.4
Total assets 9,526.4 9,779.6 9,521.3
Current liabilities
Lease liabilities 158.2 153.6 155.6
Provisions 9.9 8.9 10.3
Derivative financial instruments 7.0 0.8 11.5
Current tax liabilities 5.9 12.2 10.2
Trade and other payables 610.8 640.8 670.5
Other financial liabilities - 36.6 12.3
791.8 852.9 870.4
Non-current liabilities
Borrowings 995.6 994.3 994.9
Lease liabilities 4,013.3 3,795.1 3,942.8
Provisions 8.6 8.8 8.3
Derivative financial instruments - 1.3 4.4
Deferred tax liabilities 240.2 199.0 181.1
5,257.7 4,998.5 5,131.5
Total liabilities 6,049.5 5,851.4 6,001.9
Net assets 3,476.9 3,928.2 3,519.4
Equity
Share capital 13 147.6 158.9 151.8
Share premium 1,033.3 1,028.1 1,031.8
Capital redemption reserve 67.8 56.2 63.5
Retained earnings 4,592.0 5,054.2(#) 4,645.3
Currency translation reserve 22.0 20.2 25.9
Other reserves (2,385.8) (2,389.4)(#) (2,398.9)
Total equity 3,476.9 3,928.2 3,519.4
(#)Re-presentation of the full cost of the share buy-back programme from other
reserves to retained earnings
Interim consolidated cash flow statement
Notes (Reviewed) (Reviewed)
6 months to 29 6 months to 31
August 2024 August 2023
£m £m
Cash generated from operations 14 552.9 638.6
Payments against provisions (1.5) (4.1)
Defined benefit pension scheme payments 15 (2.9) (2.7)
Interest paid - lease liabilities (82.8) (75.1)
Interest paid - other (15.6) (15.2)
Interest received 17.7 23.7
Corporation taxes paid (34.0) (26.0)
Net cash flows from operating activities 433.8 539.2
Cash flows used in investing activities
Purchase of property, plant and equipment 2 (185.5) (194.5)
Proceeds from disposal of property, plant and equipment 44.2 8.3
Investment in intangible assets 2 (11.9) (18.7)
Payment of deferred and contingent consideration (1.9) -
Net cash flows used in investing activities (155.1) (204.9)
Cash flows used in financing activities
Proceeds from issue of shares on exercise of employee share options 1.6 1.5
Payment of facility fees (0.8) (0.8)
Net lease incentives received 2.9 0.4
Payment of principal of lease liabilities (75.0) (73.8)
Purchase of own shares, including transaction costs (163.3) (264.7)
Dividends paid (114.9) (99.3)
Net cash flows used in financing activities (349.5) (436.7)
Net decrease in cash and cash equivalents 12 (70.8) (102.4)
Opening cash and cash equivalents 12 696.7 1,164.8
Foreign exchange differences 12 (0.6) (1.1)
Closing cash and cash equivalents 625.3 1,061.3
Notes to the consolidated financial statements
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 15 October
2024.
The financial information for the year ended 29 February 2024 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 29 August 2024 and the comparatives to 31
August 2023 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 29
February 2024.
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 key judgements and critical accounting estimates adopted in preparing the
financial statements have been updated to reflect the impact of the
Accelerating Growth Plan on impairment and assets held for sale.
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 29 February 2024.
The Group has considered the impact of climate-related risks on its financial
performance and position, and although the impact represents an uncertainty,
it is not considered to be material.
Critical accounting judgements
The following are the critical accounting judgements, apart from those
involving estimations (dealt with separately below) that management has made
in the process of applying the Group's accounting policies and which have the
most significant effect on the amounts recognised in the financial statements.
Adjusting items
During the year certain items are identified and separately disclosed as
adjusting items. Judgement is applied as to whether the item meets the
necessary criteria as per the accounting policy disclosed earlier in this
note. This assessment covers the nature of the item, cause of occurrence and
the scale of impact of that item on reported performance. Reversals of
previous adjusting items are assessed based on the same criteria. Note 4
provides information on all of the items disclosed as adjusting in the current
year and comparative financial statements.
Assets held for sale
Assets are classified as held for sale only if the asset is available for
immediate sale in their present condition and a sale is highly probable
and expected to be completed within one year from the date of classification.
As a result of the Group's Accelerating Growth Plan the Group is actively
marketing a significant number of sites. Judgement exists on a site-by-site
basis as to whether the sale will complete within one year. In exercising its
judgement management has taken into consideration all available information
including external market expert advice.
Key sources of estimation uncertainty
The following are the key areas of estimation uncertainty that may have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
Defined benefit pension
Defined benefit pension plans are accounted for in accordance with actuarial
advice using the projected unit credit method. The Group makes significant
estimates in relation to the discount rates, mortality rates and inflation
rates used to calculate the present value of the defined benefit obligation.
Note 15 describes the assumptions used together with an analysis of the
sensitivity to changes in key assumptions.
Impairment testing - Property, plant and equipment and right-of-use assets
The performance of the Group's impairment review requires management to make a
number of judgements and estimates which are presented together below for ease
of understanding but identified separately:
Estimates within impairment testing:
Inputs used to estimate value in use
The estimate of value in use is most sensitive to the following inputs:
Forecast period cashflows - the initial five-year period's cashflows are drawn
from the five-year business plan.
Discount rate - judgement is required in estimating the weighted average cost
of capital (WACC) of a typical market participant and in assessing the
specific country and currency risks associated with the Group. The rate used
is adjusted for the Group's gearing, including equity, borrowings and lease
liabilities.
Maturity profile of individual sites - judgement is required to estimate the
time taken for sites to reach maturity and the sites' trading level once they
are mature.
Methodology used to estimate fair value
Fair value is determined using a range of methods, including present value
techniques using assumptions consistent with the value in use calculations and
market multiple techniques using externally available data. For the purpose of
assessing fair value for sites the Group has sought expert valuations based on
insight into local market specific factors.
Judgements within impairment testing:
Strategic impact on composition of CGUs
The Group has judged that where there is a commitment and expectation that
part of a trading site's value will be realised through sale an impairment
review should be completed on the trading site as separate CGUs. This is due
to the change in how the Group now expects to receive cashflows from the
trading site's assets which are largely independent.
Identification of indicators of impairment and reversal
The Group assesses each of its CGUs for indicators of impairment or reversal
at the end of each reporting period and, where there are indicators of
impairment or reversal, management performs an impairment assessment.
2. Segment information
The Group provides services in relation to accommodation, food and beverage
both in the UK and internationally. Management monitors the operating results
of its operating segments separately for the purpose of making decisions about
allocating resources and assessing performance. Segment performance is
measured based on adjusted operating profit before joint ventures. Included
within central and other in the following tables are the costs of running the
public company, other central overhead costs and share of profit from joint
ventures.
The following tables present revenue and profit information regarding business
operating segments for the periods ended 29 August 2024 and 31 August 2023.
6 months to 29 August 2024 6 months to 31 August 2023
Revenue UK & Ireland Germany(1) Central and other Total UK & Ireland Germany(1) Central and other Total
£m £m £m £m £m £m £m £m
Accommodation 1,088.8 99.0 - 1,187.8 1,084.1 81.1 - 1,165.2
Food, beverage and other items 366.2 15.8 - 382.0 395.0 13.8 - 408.8
Revenue 1,455.0 114.8 - 1,569.8 1,479.1 94.9 - 1,574.0
6 months to 29 August 2024 6 months to 31 August 2023
Profit/(loss) UK & Ireland Germany(1) Central and other Total UK & Ireland Germany(1) Central and other Total
£m £m £m £m £m £m £m £m
Adjusted operating profit/(loss) before joint ventures 429.6 1.3 (18.9) 412.0 471.6 (3.8) (22.2) 445.6
Share of profit/(loss) from joint ventures - - 0.8 0.8 - - (0.3) (0.3)
Adjusted operating profit/(loss) 429.6 1.3 (18.1) 412.8 471.6 (3.8) (22.5) 445.3
Net finance (costs)/income (72.2) (10.6) 10.4 (72.4) (64.9) (10.2) 21.2 (53.9)
Adjusted profit/(loss) before tax 357.4 (9.3) (7.7) 340.4 406.7 (14.0) (1.3) 391.4
Adjusting items before tax (Note 4) (31.2) 3.7
Profit before tax 309.2 395.1
6 months to 29 August 2024 6 months to 31 August 2023
Other segment information UK and Ireland Germany(1) Central and other Total UK and Ireland Germany(1) Central and other Total
£m £m £m £m £m £m £m £m
Capital expenditure:
Property, plant and equipment- cash basis 159.3 26.2 - 185.5 140.7 53.8 - 194.5
Property, plant and equipment - accruals basis 151.6 25.6 - 177.2 120.3 53.5 - 173.8
Intangible assets 11.5 0.4 - 11.9 18.7 - - 18.7
Cash outflows from lease interest and payment of principal of lease 131.0 26.8 - 157.8 123.0 25.9 - 148.9
liabilities
Depreciation - property, plant and equipment 78.4 8.0 - 86.4 76.8 7.1 - 83.9
Depreciation - right-of-use assets 75.5 20.7 - 96.2 69.7 19.7 - 89.4
Amortisation 16.1 - - 16.1 8.8 0.1 - 8.9
(1) The Germany segment includes operations of the Group within Austria.
Segment assets and liabilities are not disclosed because they are not reported
to, or reviewed by, the Chief Operating Decision Maker.
The Group's revenue, split by country in which the legal entity resides, is as 6 months to 6 months to
follows:
29 August 2024 31 August 2023
£m £m
United Kingdom 1,430.6 1,462.9
Germany 112.4 92.9
Ireland 16.4 8.2
Other 10.4 10.0
1,569.8 1,574.0
The Group's non-current assets(2), split by country in which the legal entity 29 August 2024 29 February 2024
resides, are as follows:
£m £m
United Kingdom 6,943.1 6,946.3
Germany 1,228.1 1,227.3
Ireland 179.6 182.4
Other 102.1 104.7
8,452.9 8,460.7
(2) Non-current assets exclude derivative financial instruments and the
surplus on the Group's defined benefit pension scheme.
3. Operating costs
6 months to 6 months to
29 August 2024 31 August 2023
£m £m
Cost of inventories recognised as an expense 120.1 131.5
Employee benefits expense 427.0 431.4
Amortisation of intangible assets 16.1 8.9
Depreciation - property, plant and equipment (Note 9) 86.4 83.9
Depreciation - right-of-use-assets 96.2 89.4
Utilities 63.0 66.8
Rates 52.7 50.4
Other site property costs 241.8 219.1
Variable lease payment expense 2.4 2.1
Net foreign exchange differences 0.2 0.3
Other operating charges 54.8 48.9
Adjusting operating costs (Note 4) 32.1 (0.4)
1,192.8 1,132.3
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
29 August 2024 31 August 2023
£m £m
Other income:
Legal claim settlements and insurance proceeds(1) 0.9 3.3
Adjusting other income 0.9 3.3
Operating costs:
Net impairment charges - property, plant and equipment, right-of-use assets (13.2) -
and assets held for sale(2)
Accelerating Growth Plan-related net impairment charges and write-offs(3) (23.2) -
Net gains on disposals, property and other provisions(4) 30.9 8.9
Strategic IT programme costs(5) (13.2) (8.5)
Strategic F&B programme costs(6) (13.4) -
Adjusting operating costs (32.1) 0.4
Adjusting items before tax (31.2) 3.7
Tax on adjusting items 1.9 (0.6)
Impact of change in tax rates - (0.2)
Adjusting tax credit/(expense) 1.9 (0.8)
( )
(1) During the period, the Group received settlements for business
interruption insurance claims of £0.9m (HY24: £nil) and did not receive any
settlements in relation to other legal matters (HY24: £3.3m).
(2) The Group has identified cash-generating unit specific indicators of
impairment and impairment reversals in relation to sites identified as higher
risk and sites impacted by the Accelerating Growth Plan (see separate
footnote).
( )
For those sites identified as higher risk an adjusting impairment charge of
£10.3m has been recognised (£8.0m impairment charge relating to property,
plant and equipment and £2.3m relating to right-of-use assets). In addition,
impairments have been recognised on assets transferred to assets held for sale
in the year of £2.9m. This brings the total adjusting net impairment charges
outside of the Group's Accelerating Growth Plan-related to £13.2m, within
operating costs.
In the comparative period, there were no indicators of impairment or
impairment reversals and as such, no impairment assessment was performed.
(3) Included in the amounts recorded for impairment this period are
impairments as a result of the Group continuing with the optimisation of the
UK F&B strategy, the Accelerating Growth Plan. The net impairment of
£23.2m is comprised of impairment charges on sites of £29.0m (£17.0m
relating to property, plant and equipment, £9.1m relating to right-of-use
assets and £2.9m relating to assets held for sale) offset by impairment
reversals of £5.8m (£1.3m relating to property, plant and equipment and
£4.5m relating to assets held for sale).
At this time the Group expects to incur further net impairment charges and
write downs or accelerated depreciation within adjusting items totalling
between £80.0m and £100.0m in relation to the Accelerating Growth Plan to
transform and exit a number of the Group's branded restaurants.
( )
(4) During the period, the Group made gains on other property disposals of
£30.9m (HY24: gain of £2.1m on other property disposals, released provisions
of £4.4m and had a recovery of remedial works on cladding material totalling
£2.4m).
(5) The Group has assessed the presentation of costs incurred in relation to
the current and future strategic IT programme implementations. The Group has
incurred significant business change costs in relation to the implementation
of the new hotel management system, HR & payroll system and our strategic
network programme, upgrading the IT networks across our estate. These
represent significant business change costs for the Group rather than
replacements of IT systems with the Hotel Management and Payroll 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.
Costs incurred on the programmes and presented within adjusting items in the
period were £13.2m, with cumulative cash costs and write-offs to date being
£54.1m (FY24: £40.9m).
At this time the Group expects to incur future costs presented within
adjusting items across future financial periods as follows: during the rest of
the financial year ended 2025 between £10.0m and £20.0m and during the
financial year ended 2026 between £5.0m and £15.0m.
(6) The Group has incurred legal, advisory and project management costs
regarding the announced changes to facilitate the Accelerating Growth Plan as
well as redundancy costs. This programme represents a significant business
change for the Group's strategic focus in relation to F&B. The programme
is expected to incur costs over the next few financial years.
Cash costs incurred on the programme and presented within adjusting items in
the period were £13.4m, with cumulative cash costs to date being £19.3m
(FY24: £5.9m).
At this time the Group expects to incur future costs presented within this
adjusting item across the next three financial years of up to £10.0m.
5. Finance (costs)/income
6 months to 6 months to
29 August 2024 31 August 2023
£m £m
Finance costs
Interest on bank loans and overdrafts (2.4) (2.3)
Interest on other loans (12.1) (11.9)
Interest on lease liabilities (82.8) (75.1)
Interest capitalised 4.2 2.1
Cost of hedging (0.5) (0.5)
(93.6) (87.7)
Finance income
Bank interest receivable 17.0 25.8
IAS 19 pension net finance income (Note 15) 4.2 8.0
21.2 33.8
Total net finance costs (72.4) (53.9)
6. Taxation
The Group effective tax rate applied to the profit before tax before adjusting
items for the six months to 29 August 2024 is 26.8% (HY24: 25.8%). The tax
charge for the six months to 29 August 2024 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 27 February
2025.
A UK current and deferred tax rate of 25.0% has been applied to discrete and
adjusting items.
A forecast effective tax rate of 0.0% has been applied to the German pre-tax
loss as the Group does not currently deem it appropriate to recognise a
deferred tax asset in this jurisdiction. The impact on the effective tax rate
from the non-recognition of German tax losses in the current period is 0.7%
(HY24: 0.7%).
6 months to 6 months to
Consolidated income statement 29 August 2024 31 August 2023
£m £m
Current tax:
Current tax expense 29.0 36.6
Adjustments in respect of previous periods - (0.4)
29.0 36.2
Deferred tax:
Origination and reversal of temporary differences 60.3 65.5
Effect of in-year rate differential/change in tax rates - 0.2
60.3 65.7
Tax reported in the consolidated income statement 89.3 101.9
Consolidated other comprehensive income 6 months to 6 months to
29 August 2024 31 August 2023
£m £m
Current tax:
Defined benefit pension scheme 1.0 (0.5)
Tax on exchange differences on translation of foreign operations (1.3) (2.7)
Tax on net movement on hedge of a net investment 1.0 0.6
0.7 (2.6)
Deferred tax:
Cash flow hedges 2.2 (0.8)
Defined benefit pension scheme (3.8) (23.5)
(1.6) (24.3)
Tax reported in other comprehensive income (0.9) (26.9)
The Group has unrecognised German tax losses of £233.8m (FY24: £226.6m).
Recognition of these in their entirety would increase deferred tax assets
reported by £74.6m (FY24: £72.4m).
7. Earnings per share
The basic earnings per share (EPS) figures are calculated by dividing the net
profit/(loss) for the period attributable to ordinary shareholders of the
parent by the weighted average number of ordinary shares in issue during the
period after deducting treasury shares and shares held by an independently
managed employee share ownership trust (ESOT).
The diluted earnings per share figures allow for the dilutive effect of the
conversion into ordinary shares of the weighted average number of options
outstanding during the period. Where the average share price for the period is
lower than the option price, the options become anti-dilutive and are excluded
from the calculation.
The number of shares used for the earnings per share calculations are as
follows:
6 months to 29 August 2024 6 months to 31 August 2023
million million
Basic weighted average number of ordinary shares 181.8 198.7
Effect of dilution - share options 1.3 1.5
Diluted weighted average number of ordinary shares 183.1 200.2
The total number of shares in issue at the reporting period date, as used in
the calculation of the basic weighted average number of ordinary shares, was
191.9m, less 12.5m treasury shares held by Whitbread PLC and 0.7m held by the
ESOT.
The profits used for the earnings per share calculations are as follows:
6 months to 29 August 2024 6 months to 31 August 2023
£m £m
Profit for the period attributable to parent shareholders 219.9 293.2
Adjusting items before tax (Note 4) 31.2 (3.7)
Adjusting tax (credit)/expense (Note 4) (1.9) 0.8
Adjusted profit for the period attributable to parent shareholders 249.2 290.3
6 months to 29 August 2024 6 months to 31 August 2023
pence pence
Basic EPS on profit for the period 121.0 147.6
Adjusting items before tax 17.2 (1.9)
Adjusting tax (credit)/expense (1.1) 0.4
Basic EPS on adjusted profit for the period 137.1 146.1
Diluted EPS on profit for the period 120.1 146.5
Diluted EPS on adjusted profit for the period 136.1 145.0
8. Dividends paid and proposed
6 months to 29 August 2024 6 months to 31 August 2023
pence per share £m pence per £m
share
Final dividend, proposed and paid, relating to the prior year 62.90 114.8 49.80 99.2
114.8 99.2
Dividends on other shares:
B share dividend 7.70 0.1 2.60 0.1
Total dividends paid 114.9 99.3
An interim dividend of 36.40p per ordinary share (HY24: 34.1p) amounting to a
total dividend of £65.0m (HY24: £65.7m) was declared by the directors on 15
October 2024. A dividend reinvestment plan (DRIP) alternative will be offered.
These consolidated financial statements do not reflect this dividend payable.
9. Property, plant and equipment
During the reporting period the Group has had additions of £177.2m (HY24:
£173.8m), depreciation charges of £86.4m (HY24: £83.9m), net impairment
charges of £26.6m (HY24: £nil), net movements to assets held for sale of
£95.8m (HY24: to held for sale of £10.2m) and a reduction of net book value
from foreign currency translation of £10.8m (HY24: reduction of £19.5m).
Included in property, plant and equipment are assets under construction of
£561.2m (29 February 2024: £492.7m).
There is a charge in favour of the pension scheme over properties with a
market value of £531.5m (29 February 2024: £531.5m).
Capital expenditure commitments
29 August 2024 29 February 2024
£m £m
Capital expenditure commitments for property, plant and equipment for which no 108.5 56.5
provision has been made
10. Impairment
During this period, net impairment charges of £36.4m (HY24: no net impairment
charges) were recognised within operating costs.
Accelerating Growth Plan:
Net impairment of £23.2m has been recognised in respect of the Group
continuing with the Accelerating Growth Plan (the optimisation of the UK
F&B strategy), with £1.6m of impairment reversal being recorded within
Accelerating Growth Plan-related assets held for sale.
UK:
Outside of Accelerating Growth Plan-related impairments, gross impairment
charges in the UK of £4.2m have been recorded across right-of-use assets and
property, plant and equipment during the period.
Germany:
The Group has completed a review of site-level H1 performance that identified
higher risk sites. An impairment review of those assets was undertaken,
resulting in adjusting net impairment charges of £9.0m (£7.1m impairment
charge relating to property, plant and equipment and £1.9m relating to
right-of-use assets).
The charges/(reversals) were recognised on the following classes of assets:
6 months to 29 August 2024 6 months to 31 August 2023
£m £m
Impairment charges/(reversals) included in operating costs
Property, plant and equipment - impairment charges 8.0 -
Property, plant and equipment - impairment reversals - -
Property, plant and equipment - impact of Accelerating Growth Plan 15.7 -
Property, plant and equipment - on transfer to assets held for sale 2.9 -
Right-of-use assets - impairment charges 2.3 -
Right-of-use assets - impairment reversals - -
Right-of-use assets - impact of Accelerating Growth Plan 9.1 -
Assets held for sale - in period assessment - -
Assets held for sale - impact of Accelerating Growth Plan (1.6) -
Total charges for impairment included in operating costs 36.4 -
Methodology in relation to Group's Accelerating Growth Plan
During the period, the Group continued the plan to optimise its UK F&B
offering through the Accelerating Growth Plan. The following material topics
have been considered in relation to the Group's impairment review:
Extensions programme:
As part of the Group's Extensions programme, some of the Group's branded
restaurants will be repurposed with smaller space devoted to providing
integrated F&B services and remaining space being converted to additional
hotel rooms. No further impairments or write-offs have been recognised during
this period in relation to this programme (FY24: £3.7m impairment charge).
The useful economic life of the relevant assets will be reassessed as more
certainty is obtained over site-level plans.
Disposal sites:
The Group has a committed plan to dispose of a further group of sites to third
parties.
At the reporting period end, sites that are being actively marketed with a
valid expectation that they will be disposed of within 12 months from the
balance sheet date have been moved to Assets Held for Sale (AHFS). As the
economic benefit of these sites is expected to be recovered through sale
rather than by continuing to trade, these sites have been measured at the
lower of cost and expected proceeds less costs of disposal, with the remaining
NBV having been moved to assets held for sale.
11. Assets classified as held for sale
The following table present the major classes of assets and liabilities
classified as held for sale:
29 August 2024 29 February 2024
£m £m
Property, plant and equipment 140.2 56.0
Right-of-use assets 1.3 5.2
Lease liabilities (1.7) (6.8)
Assets classified as held for sale 139.8 54.4
At the period end, there were 107 sites with a combined net book value of
£139.8m (FY24: 73 at £54.4m) classified as assets held for sale (AHFS).
There are no gains or losses recognised in other comprehensive income with
respect to these assets.
The Group disposes of sites as part of its programme to optimise its property
estate as well as continuing its commitment to the Accelerating Growth Plan.
During the period, 49 property assets with a combined net book value of
£97.5m (FY24: ten at £14.6m) were transferred to assets held for sale. Eight
properties with a combined net book value of £0.5m were transferred back to
property, plant and equipment or right-of-use assets (FY24: no properties were
transferred back). Seven property assets were sold during the period having a
net book value of £13.2m (FY24: seven at £9.4m). An impairment reversal of
£1.6m (FY24: impairment loss of £0.2m) was recognised relating to assets
classified as held for sale.
Sites are classified as held for sale only if they are available for immediate
sale in their present condition and a sale is highly probable and expected to
be completed within one year from the date of classification. If a site no
longer meets this criteria at future reporting dates it is transferred back to
property, plant and equipment.
12. Movements in cash and net debt
29 February 2024 Share buy-back commitments including transaction costs Cash flow Net new lease liabilities Foreign exchange Transfers from Assets held for sale Amortisation of premiums and discounts 29 August 2024
£m £m £m £m £m £m £m £m
Cash and cash equivalents 696.7 - (70.8) - (0.6) - - 625.3
Liabilities from financing activities:
Borrowings (994.9) - - - - - (0.7) (995.6)
Lease liabilities (4,098.4) - 75.0 (158.3) 15.3 (5.1) - (4,171.5)
Committed share buy-back (12.3) (151.0) 163.3 - - - - -
Total liabilities from financing activities (5,105.6) (151.0) 238.3 (158.3) 15.3 (5.1) (0.7) (5,167.1)
Less: lease liabilities 4,098.4 - (75.0) 158.3 (15.3) 5.1 - 4,171.5
Less: committed share buy-back 12.3 151.0 (163.3) - - - - -
Net debt (298.2) - (70.8) - (0.6) - (0.7) (370.3)
13. Share capital
Ordinary share capital
Allotted, called up and fully paid ordinary shares of 76.80p each (FY24: million £m
76.80p each)
At 29 February 2024 197.5 151.8
Issued on exercise of employee share options 0.1 0.1
Cancellations following share buy-back (5.7) (4.3)
At 29 August 2024 191.9 147.6
Share buy-back, commitment and cancellation
The Company purchased and cancelled 5.7m shares with a nominal value of £4.3m
under the share buy-back programmes running through this financial period.
Consideration of £163.3m, including associated fees and stamp duty of £1.0m,
was paid during the period. The final payment to shareholders in relation to
the share buy-back programme, that was announced in April 2024, was made on 24
July 2024.
14. Analysis of cash flows given in the cash flow statement
6 months to 6 months to
29 August 2024 31 August 2023
£m £m
Profit for the period 219.9 293.2
Adjustments for:
Tax expense 89.3 101.9
Net finance costs 72.4 53.9
Share of (profit)/loss from joint ventures (0.8) 0.3
Depreciation and amortisation 198.7 182.2
Share-based payments 8.5 9.3
Net impairment (Note 10) 36.4 -
Gains on disposals, property, and other provisions (30.9) (2.1)
Other non-cash items 5.1 (3.6)
Cash generated from operations before working capital changes 598.6 635.1
Decrease/(increase) in inventories 1.9 (0.5)
Decrease in trade and other receivables 1.8 19.8
Decrease in trade and other payables (49.4) (15.8)
Cash generated from operations 552.9 638.6
15. Retirement benefits
Defined benefit scheme
During the period, the defined benefit pension scheme has moved from a surplus
of £165.2m to a surplus of £157.6m. The main movements in the surplus are as
follows:
£m
Pension surplus at 29 February 2024 165.2
Administrative expenses (2.9)
Net interest on pension liability and assets (Note 5) 4.2
Losses recognised in other comprehensive income (11.8)
Contributions from employer 2.8
Benefits paid directly by the Company in relation to an unfunded pension 0.1
scheme
Pension surplus at 29 August 2024 157.6
The principal assumptions used by the independent qualified actuaries in
updating the most recent valuation carried out as at 31 March 2023 of the UK
scheme to 29 August 2024 for IAS 19 Employee benefits purposes (FY24: 31 March
2020 to 29 February 2024) were:
29 August 2024 29 February 2024
Pre-April 2006 rate of increase in pensions in payment 3.00% 3.10%
Post-April 2006 rate of increase in pensions in payment 2.10% 2.10%
Pension increases in deferment 3.00% 3.10%
Discount rate 5.00% 5.00%
Inflation assumption 3.10% 3.20%
Life expectancies
Retiring at the balance sheet date at age 65 - male 19.6 years 19.5 years
Retiring at the balance sheet date at age 65 - female 22.3 years 22.1 years
Retiring at the balance sheet date in 20 years at age 65 - male 20.6 years 20.4 years
Retiring at the balance sheet date in 20 years at age 65 - female 23.5 years 23.3 years
The life expectancies shown above are based on standard mortality tables which
allow for future mortality improvements. The mortality improvement assumption
has been updated to use the CMI 2023 model. The CMI 2023 model parameters
include some weighting for 2023 mortality experience.
The assumptions in relation to discount rate, mortality and inflation have a
significant effect on the measurement of scheme liabilities. The following
table shows the sensitivity of the valuation to changes in these assumptions:
Decrease/(increase) in gross defined benefit liability
29 August 2024 29 February 2024
£m £m
Discount rate
2.00% increase to discount rate 339.0 344.0
2.00% decrease to discount rate (506.0) (518.0)
Inflation
0.25% increase to inflation rate (36.0) (38.0)
0.25% decrease to inflation rate 35.0 37.0
Life expectancy
Additional one-year increase to life expectancy (65.0) (64.4)
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').
16. Asset acquisitions
During this and the previous financial period, the Group has purchased a
number of properties. The legal form of the transactions varies between
acquisition of the property or acquisition of the company holding title of the
property. A number of properties are purchased in a state that means they do
not meet the definition of a business on acquisition and for the remaining
properties which do meet the definition of being a business on acquisition,
these transactions have been accounted for as asset acquisitions under IFRS 3
Business Combinations as the fair value of the assets is concentrated in a
single group of similar assets in each deal analysed. The transactions form
part of the Group's strategic priorities over both international growth and
continued UK market share gains.
17. Events after the balance sheet date
Share buy-back
The Board of Directors approved a share buy-back on 15 October 2024 for
£100.0m and is in the process of appointing the relevant brokers to undertake
the programme in accordance with that approval.
Sale and leasebacks
On 13 September 2024, the Group entered into sale and leaseback transactions
in relation to two properties which were included within assets classified as
held for sale at the period end date, receiving gross proceeds of £56.0m.
Third party contract termination
Post balance sheet the Group exercised an option to terminate a contract with
a third party for up to £23.0m, this delivers future commercial benefits
beyond the termination costs. The termination costs will be treated as
adjusting items in line with the Group's policy.
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
INDEPENDENT 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 29
August 2024 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 17.
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 29 August 2024 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
15 October 2024
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 weighted average
number of ordinary shares in issue during the period after deducting treasury
shares and shares held by an independently managed share ownership trust
('ESOT').
Committed pipeline
Sites where the Group has a legal interest in a property (that may be subject
to planning/other conditions) with the intention of opening a hotel in the
future.
Direct bookings / distribution
Based on stayed bookings in the financial period 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.
OTA's
Online travel agents.
Rent expense
Rental costs recognised in the income statement prior to the adoption of IFRS
16.
Team retention
The number of permanent new starters that we retain for the first 90
days/three months.
Trading site
A joint hotel and restaurant or a standalone hotel or restaurant.
WINcard
Whitbread In Numbers - balanced scorecard to measure progress against key
performance targets.
YourSay
Whitbread's annual employee opinion survey to provide insight into the views
of employees.
†Alternative Performance Measures
We use a range of measures to monitor the financial performance of the Group.
These measures include both statutory measures in accordance with IFRS and
alternative performance measures (APMs) which are consistent with the way that
the business performance is measured internally. APMs are not defined by IFRS
and therefore may not be directly comparable with similarly titled measures
reported by other companies. APMs should be considered in addition to, and are
not intended to be a substitute for, or superior to, IFRS measures.
APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition and purpose
REVENUE MEASURES
Accommodation sales Revenue Exclude non-room revenue such as food and beverage Premier Inn accommodation revenue excluding non-room income such as
food and beverage. The growth in accommodation sales on a year-on-year basis
is a good indicator of the performance of the business.
Reconciliation: Note 2
Average room rate (ARR) No direct equivalent Refer to definition Accommodation sales divided by the number 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 29 August 2024 6 months to 31 August 2023
UK accommodation sales (£m) 1,088.8 1,084.1
Number of rooms occupied by guests ('000) 12,937 12,885
UK average room rate (£) 84.16 84.13
Germany accommodation sales (£m) 99.0 81.1
Number of rooms occupied by guests ('000) 1,307 1,135
Germany average room rate (£) 75.78 71.44
UK like-for-like accommodation sales growth Movement in accommodation sales per the segment information (Note 2) Accommodation sales from non like-for-like Year over year change in accommodation revenue for outlets open for at least
one year with no significant changes in room numbers. The directors consider
this to be a useful measure as it is a commonly used performance metric and
provides an indication of underlying revenue trends.
Reconciliation 6 months to 29 August 2024 6 months to 31 August 2023
UK like-for-like accommodation sales growth (1.6%) 13.2%
Impact of extensions > 5% of rooms 0.0% 0.1%
Contribution from net new hotels 2.0% 2.0%
UK accommodation sales growth 0.4% 15.3%
Revenue per available room (RevPAR) No direct equivalent Refer to definition Revenue per available room is also known as 'yield'. This hotel measure is
achieved 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 29 August 2024 6 months to 31 August 2023
UK accommodation sales (£m) 1,088.8 1,084.1
Available rooms ('000) 15,569 15,264
UK REVPAR (£) 69.93 71.02
Germany Accommodation sales (£m) 99.0 81.1
Available rooms ('000) 1,913 1,771
Germany REVPAR (£) 51.78 45.79
INCOME STATEMENT MEASURES
Adjusted(1) operating profit/loss Profit/loss before tax Adjusting items Profit/loss before tax, finance costs/income and adjusting items.
(Note 4), finance income/costs (Note 5) Reconciliation: Consolidated income statement
Adjusted(1) tax Tax expense/credit Adjusting items Tax expense/credit before adjusting items.
(Note 4) Reconciliation: Consolidated income statement
Adjusted(1) profit/loss before tax Profit/loss before tax Adjusting items Profit/loss before tax and adjusting items.
(Note 4) Reconciliation: Consolidated income statement
Adjusted(1) basic EPS Basic EPS Adjusting items Adjusted profit attributable to the parent shareholders divided by the basic
weighted average number of ordinary shares in issue during the year after
(Note 4) deducting treasury shares and shares held by an independently managed share
ownership trust (ESOT).
Reconciliation: Note 7
Profit/PBT margin No direct equivalent Refer to definition Segmental adjusted profit before tax divided by segmental adjusted revenue, to
demonstrate profitability margins of the segmental operations.
Reconciliation: Business review
BALANCE SHEET MEASURES
Net cash/debt Total liabilities from financing activities Exclude lease liabilities Cash and cash equivalents after deducting total borrowings. The directors
consider this to be a useful measure of the financing position of the Group.
Reconciliation: Note 12
Adjusted net cash/debt Total liabilities from financing activities Exclude lease liabilities. Includes an adjustment for cash assumed by ratings Net cash/debt adjusted for cash, assumed by ratings agencies to not be readily
agencies to not be readily available available, and excluding unamortised debt related fees. The directors consider
this to be a useful measure as it is aligned with the method used by ratings
agencies to assess the financing position of the Group.
Reconciliation As at 29 August 2024 As at 31 August
£m 2023
£m
Net debt/(cash) 370.3 (67.0)
Less: unamortised debt costs 4.4 5.7
Restricted cash adjustment 10.0 10.0
Adjusted net debt/(cash) 384.7 (51.3)
Lease-adjusted net debt/cash Total liabilities from financing activities Exclude lease liabilities. Includes an adjustment for cash assumed by rating In line with methodology used by credit rating agencies, lease-adjusted net
agencies to not be readily available debt includes lease debt which is calculated at 8x adjusted property rent. The
directors consider this to be a useful measure as it forms the basis of the
Group's leverage targets.
Reconciliation As at 29 August 2024 As at 31 August
£m 2023
£m
Adjusted net debt/(cash) 384.7 (51.3)
Lease debt 2,852.0 2,580.8
Lease-adjusted net debt 3,236.7 2,529.5
Net debt/cash and lease liabilities Cash and cash equivalents less total liabilities from financing activities Refer to definition Net debt/cash plus lease liabilities. The directors consider this to be a
useful measure of the financing position of the Group.
Reconciliation As at 29 August 2024 As at 31 August
£m 2023
£m
Net debt/(cash) 370.3 (67.0)
Lease liabilities 4,171.5 3,948.7
Net debt/(cash) and lease liabilities 4,541.8 3,881.7
CASH FLOW MEASURES
Lease-adjusted net debt to EBITDAR for leverage No direct equivalent Refer to definition This measure is a ratio of lease-adjusted net debt compared against the
Group's adjusted EBITDAR. The directors use this 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 to 29 August 2024 12 months to 31
£m August
2023
£m
Lease-adjusted net debt 3,236.7 2,529.5
Adjusted EBITDAR 1,040.1 1,004.3
Lease-adjusted net debt to adjusted EBITDAR for leverage 3.1x 2.5x
Adjusted(1) operating cash flow Cash generated from operations Refer to definition Adjusted operating profit/loss adding back depreciation and amortisation and
after IFRS 16 interest and lease repayments and working capital movement. The
directors consider this a useful measure as it is a good indicator of the cash
generated which is used to fund future growth, shareholder returns, tax,
pension and interest payments.
Reconciliation 6 months to 29 August 2024 6 months to 31 August 2023
£m £m
Adjusted operating profit 412.8 445.3
Depreciation - right-of-use assets 96.2 89.4
Depreciation - property, plant and 86.4 83.9
equipment
Amortisation 16.1 8.9
Adjusted EBITDA (post-IFRS 16) 611.5 627.5
Interest paid - lease liabilities (82.8) (75.1)
Payment of principal of lease liabilities (75.0) (73.8)
Net lease incentives received 2.9 0.4
Movement in working capital (45.7) 3.5
Adjusted operating cash flow 410.9 482.5
Cash capital expenditure No direct equivalent Refer to definition Cash flows on property, plant and equipment and investment in intangible
assets, payments of deferred and contingent consideration, and capital
(cash capex) contributions or loans to joint ventures.
OTHER MEASURES
Adjusted(1) EBITDA Operating profit Refer to definition Adjusted EBITDA (post-IFRS 16) is profit before tax, adjusting items,
interest, depreciation and amortisation. Adjusted EBITDA (pre-IFRS 16) is
(post-IFRS 16), further adjusted to remove rent expense. Adjusted EBITDAR is profit before
tax, adjusting items, interest, depreciation, amortisation, variable lease
Adjusted(1) EBITDA payments and rental income. The directors consider these measures to be useful
as they are commonly used industry metrics which facilitate comparison between
(pre-IFRS 16) companies on a before and after IFRS 16 basis.
and Adjusted(1) EBITDAR
Reconciliation 6 months to 29 August 2024 6 months to 31 August 2023
£m £m
Adjusted operating profit 412.8 445.3
Depreciation - right-of-use assets 96.2 89.4
Depreciation - property, plant and equipment 86.4 83.9
Amortisation 16.1 8.9
Adjusted EBITDA (post-IFRS 16) 611.5 627.5
Variable lease payments 2.4 2.1
Rental income (2.9) (1.6)
Adjusted EBITDAR 611.0 628.0
Rent expense, variable lease payments and rental income (156.9) (143.1)
Adjusted EBITDA (pre-IFRS 16) 454.1 484.9
Return on Capital Employed (ROCE) No direct equivalent Refer to definition Adjusted operating profit/loss (pre-IFRS 16) for the period divided by net
assets 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.
12 months to 29 August 2024
Reconciliation UK &
Total Ireland
£m £m
Adjusted operating profit 641.7
Depreciation - right-of-use assets 190.1
Rent expense (308.9)
Adjusted operating profit (pre-IFRS 16) 522.9 541.1
Net assets 3,476.9
Net debt 370.3
Current tax liabilities 5.9
Deferred tax liabilities 240.2
Pension surplus (157.6)
Derivative financial assets (14.9)
Derivative financial liabilities 7.0
Lease liabilities 4,171.5
Right-of-use assets (3,638.8)
IAS 17 rent adjustments (65.0)
Adjusted net assets 4,395.5 3,860.4
Return on capital employed 11.9% 14.0%
12 months to 31 August 2023
Reconciliation UK &
Total Ireland
£m £m
Adjusted operating profit 645.6
Depreciation - right-of-use assets 174.3
Rent expense (281.7)
Adjusted operating profit (pre-IFRS 16) 538.2 563.7
Net assets 3,928.2
Net cash (67.0)
Current tax liabilities 12.2
Deferred tax liabilities 199.0
Pension surplus (236.4)
Derivative financial assets (1.1)
Derivative financial liabilities 2.1
Lease liabilities 3,948.7
Right-of-use assets (3,476.8)
Other financial liabilities 36.6
IAS 17 rent adjustments (65.0)
Adjusted net assets 4,280.5 3,780.8
Return on capital employed 12.6% 14.9%
(1) Adjusted measures of profitability represent the equivalent IFRS measures
adjusted for specific items that we consider relevant for comparison of the
Group's business either from one period to another or with similar businesses.
We report adjusted measures because we believe they provide both management
and investors with useful additional information about the financial
performance of the Group's businesses.
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