TIDMWTB
RNS Number : 6497W
Whitbread PLC
27 April 2021
Premier Inn market share gains in the UK and building a national
network in Germany
FY21 operational highlights
-- Whitbread's FY21 performance reflected the significant
COVID-19 restrictions that were in place for the majority of the
year in both the UK and Germany
-- As a result, total sales were down 71.4% year-on-year
reflecting the impact of these restrictions and the closure of our
hotels and restaurants for substantial periods of the year
-- In the UK, we have significantly outperformed the midscale
and economy hotel market since reopening in August, with customer
scores also remaining very strong throughout this period, despite
the significant disruption
-- In Germany, the market and our hotels operated at low levels
of occupancy due to the pandemic. Despite this, we were able to
materially accelerate the growth of our hotel network during the
year, with a total open and committed pipeline now standing at 72
hotels, providing a very strong platform from which to increase our
brand presence
React, Protect and Restore
-- Our response to the COVID-19 crisis was rapid and robust,
ensuring the safety of our guests and our staff, and protecting our
balance sheet
-- At the outset of the crisis, protective actions included
pausing discretionary P&L spend, stopping non-essential capex
and suspension of the dividend, and utilising UK and German
Government support schemes
-- Subsequently, both central office and hotel and restaurant
headcounts were reduced, ensuring our labour model can respond more
effectively to changes in demand
-- The successful completion of a GBP1bn Rights Issue in June
2020, strengthened the balance sheet and enhanced our financial
flexibility
-- GBP550m Green Bonds issued in February 2021 provided further
financial flexibility, while also underlining the Group's
sustainability credentials and long-established Force for Good
programme
Investing to win in FY22
-- Expecting to invest over GBP350m of capital in this financial year
-- Commercial initiatives, including the first major
above-the-line Premier Inn marketing campaign for three years, are
set to help both leisure and business demand recovery
-- Continued disciplined investment in room refurbishments will
ensure our hotels remain well-invested
-- Opening 2-3,000 of our pipeline rooms in the UK and c.2,000 rooms in Germany
-- Roll-out of 'Premier Plus' rooms recommenced, delivering superior returns
-- Continued expansion of our pipeline in Germany; two organic
hotels already added to our pipeline in FY22
-- Next phase of efficiency programme launched, targeting an
additional GBP100m of cost savings by FY24
Operational update
-- In the UK, currently over 92% of our hotels are open, and we
are ready to welcome leisure guests back to our hotels from 17 May,
alongside the full reopening of all of our restaurants
-- Strong demand is expected for 'staycations' in UK tourist
destinations throughout the summer, with business and event-led
leisure demand starting to gradually recover thereafter
-- Currently 18 of our 30 operational hotels are open in
Germany, with six of the temporarily closed hotels being
refurbished and rebranded to Premier Inn. Despite the very recent
tightening of Government restrictions, our significantly enlarged
estate puts us in a strong position to win market share when demand
returns
-- Now targeting net-zero carbon emissions by 2040, a decade faster than originally targeted
Driving long-term value
-- In the UK, we will continue to grow and innovate, by
leveraging the powerful competitive advantages of our brand,
market-leading direct distribution, our best-in-class operating
model and our broad customer reach, while capitalising on the
enhanced structural opportunities that will exist post COVID-19
-- In Germany, we have a compelling opportunity to replicate our
UK success story, and our aim is for Premier Inn to be the number
one budget hotel operator. We will continue to invest in growing
our pipeline and believe we have a long-term line-of-sight to over
60,000 rooms through both organic and inorganic investment
-- Whitbread is well-placed to take advantage of the likely
market structural changes, with supply contraction and constrained
investment amongst independent and budget-branded operators in the
UK and Germany
-- Our strategy is underpinned by our well-established Force for
Good programme, reflecting our ambitious commitments to operate
responsibly and sustainably, reflecting the positive impact we can
make for our employees, customers, suppliers, investors,
communities and the environment
-- Whitbread's brands, business model and balance sheet provides
a strong platform for future growth and investment, which together
with our ongoing efficiency programme enables us to drive
attractive returns in the long-term
Alison Brittain, Whitbread Chief Executive Officer,
commented:
"The last financial year was one of the most challenging in our
279 year history, as we operated under significant COVID
restrictions which had many implications for our businesses, our
customers and our people. Our business model enabled us to respond
rapidly to the changing restrictions and to quickly adapt our
operations as required, prioritising the health and safety of our
colleagues and our customers. This response was possible due to the
efforts of our colleagues in our hotels, restaurants and support
centre, who continue to work tirelessly to maintain our very high
operating standards, customer service and health and safety. I am
extremely proud of, and grateful for, their incredible hard work
and commitment in this most difficult year.
Our ability to navigate through this period, with the advantages
of our unique operating model, the strength of the Premier Inn
brand, and our market-leading direct distribution model, has
enabled us to continue to deliver strong market share gains in the
UK. Our exposure to the faster recovering budget sector, our
resilient customer mix, and the enhanced structural opportunities
that the COVID crisis has created, positions us well to continue
this outperformance.
The vaccination programme in the UK means we can look forward to
the planned relaxation of Government restrictions as we move into
Summer, with the first major milestone being the return of leisure
guests to our hotels, and the full reopening of restaurants from 17
May. We expect a significant bounce in leisure demand in our
tourist locations during the summer, followed by a gradual recovery
in business and event-driven leisure demand.
We hold a uniquely advantaged position in the UK market as the
largest operator with the strongest brand, and we will continue to
invest in our estate to enhance our customer proposition. Our
investment in marketing includes the first major above-the-line
Premier Inn marketing campaign for three years, branded 'Rest
Easy". In Germany, we remain confident of the opportunity to
replicate our model in the UK and have materially grown our estate
from six hotels at the start of the year to 30 operational hotels
currently, and a total open and committed pipeline of 72 hotels,
representing a nation-wide footprint with a presence in most major
towns and cities.
We continue to take actions to ensure that we exit the crisis as
a leaner, stronger and more resilient business, including
commencing the next three-year phase of our efficiency programme
that will target GBP100m of cost savings. Combined with our
financial flexibility and strong balance sheet, this gives us the
ability and the confidence to invest with discipline and focus on
strong long-term returns. We are well-placed to enhance our market
leadership position even further in the UK, and accelerate our
growth in Germany, capitalising on the enhanced structural growth
opportunities that will exist and driving long-term value for all
our stakeholders."
Financial highlights
GBPm FY21 FY20 Change
========== ========== =========
Statutory revenue(1) 589.4 2,071.5 (71.5)%
Adjusted EBITDAR (194.9) 752.7 (125.9)%
Adjusted (loss) / profit before tax (635.1) 358.3 (277.3)%
Statutory (loss) / profit before tax (1,007.4) 280.0 (459.8)%
Statutory (loss) / profit for the year (906.5) 217.9 (516.0)%
Adjusted basic EPS (287.6)p 166.3p (272.9)%
Statutory basic EPS (481.9)p 125.3p (484.6)%
Dividend - 32.7p (100.0)%
Cash and cash equivalents 1,256.0 502.6 753.4
Net debt (46.5) (322.9) 276.4
Net debt and lease liabilities (3,278.1) (2,943.5) (11.4)%
======================================== ========== ========== =========
1: Includes GBP0.5m of revenue relating to the Costa disposal
transitional service agreement (FY20: GBP9.4m)
signifies an alternative performance measure (APM) - Further
information can be found in the glossary and reconciliation of APMs
at the end of this document.
-- The Group's FY21 financial performance reflected the closure
of the vast majority of the business in the first half of the
financial year, followed by a second half that, after operating
throughout August and September with occupancy levels of over 50%
in the UK, saw market demand fall significantly from November
onwards, as increasingly severe COVID-19 restrictions were
implemented
-- As a result, FY21 statutory revenue was down 71.5%, with UK
statutory revenue down 71.8%. Germany statutory revenue was behind
2.5% year-on-year, with the material growth in the size of the
estate mostly offset by the impact of COVID restrictions
-- The significant decline in revenue resulted in an adjusted
loss before tax of GBP635.1m. Statutory loss before tax of
GBP1,007.4m includes a non-cash impairment charge of GBP348.0m
relating to goodwill in Germany, property, plant and equipment and
right-of-use assets, as a result of impairment reviews triggered by
the COVID-19 situation and its impact on current and future growth
rates. The financial results benefited from c.GBP270m COVID related
Government support schemes, including the UK Job Retention Scheme
and from the UK business rates relief
-- The business retains a strong balance sheet and liquidity
position, enhanced by the successful GBP1bn Rights Issue completed
in June 2020, and the GBP550m Green bond issuance in February 2021.
At the end of the financial year, the business had access to
GBP1,256.0m of cash and cash equivalents, and an undrawn Revolving
Credit Facility of GBP950.0m
For more information please contact:
Investor queries | Whitbread | investorrelations@whitbread.com
Media queries | Tulchan Communications, Sunni Chauhan / Jessica Reid | +44 (0) 20 7353 4200
A webcast for investors and analysts will be made available at
8:15am on 27 April 2021 and will be followed by a live Q&A
teleconference at 9:15am. Details of both can be found on
Whitbread's website (www.whitbread.co.uk/investors).
Alternative performance measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way that the business performance is
measured internally. We report adjusted measures because we believe
they provide both management and investors with useful additional
information about the financial performance of the Group's
businesses.
Adjusted measures of profitability represent the equivalent IFRS
measures adjusted for specific items that we consider relevant for
comparison of the financial performance of the Group's businesses
either from one period to another or with other similar
businesses.
APMs are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
Further information can be found in the glossary and reconciliation
of APMs at the end of this document.
CEO Overview | Well-placed to drive long-term value
React, Protect and Restore: Positioning the business for a
successful recovery
The start of the financial year saw the COVID-19 situation
develop rapidly, culminating in our restaurants closing to
customers on 21 March 2020, closely followed by the implementation
of the first UK national Iockdown on 23 March 2020. All our hotels
were closed, with the exception of 39 hotels that were kept open to
provide accommodation for NHS staff and other key workers during
this period.
Given the material impact of the lockdown restrictions on
revenues, we focused on immediate actions to reduce cash outflows
to help protect our liquidity. These actions included the
elimination of all discretionary P&L spend and the postponement
of previously announced incremental investments. We placed over
27,000 of our employees on temporary furlough, and reduced capital
expenditure to only essential hotel maintenance, core IT spend and
the rebranding and refurbishing of the acquired Foremost hotels.
Voluntary temporary pay cuts were taken by the Board and senior
management team, and dividend payments were suspended. We utilised
UK Government support schemes during the year including the
business rates holiday and the Job Retention Scheme, and equivalent
schemes and grants in Germany, with a total benefit to the Group of
around GBP270m.
As the year progressed, we took further action to ensure our
cost base reflected the significantly lower levels of demand, and
has greater flexibility to adjust to demand changes. This included
reducing our head office headcount by 13% and implementing changes
to our hotel and restaurants labour model.
Throughout the year we have endeavoured to act responsibly in
this time of crisis. The safety of our colleagues and guests is of
paramount importance, and during the first UK lockdown, when we
operated 39 hotels for key workers, we implemented rigorous hygiene
protocols to minimise the risk of COVID transmission. These
measures included social distancing signage and protective screens,
use of PPE, and enhanced cleaning standards. Learnings from
operating in this environment enabled us to implement our
estate-wide 'CleanProtect' and 'Generous Serving of Safety"
programmes upon reopening our hotels and restaurants at the start
of July 2020. During the first lockdown we also provided full cash
refunds to our customers for all cancelled bookings, and we
subsequently launched a new range of booking conditions providing
guests with greater flexibility to amend and cancel bookings, which
have proved very popular.
Our hotel and restaurant teams have been fundamental in enabling
us to navigate this very difficult period, and we are extremely
mindful of the fact that this has been an incredibly challenging
year for them. Where possible, we have taken action to support our
teams and try to make things easier. Examples include paying the
additional 20% of salaries on top of the Government furlough credit
during the first lockdown and adhering to national minimum wage
increases made for our hourly paid staff. We have also launched a
wide-ranging employee support programme, keeping mental health and
wellbeing front of mind. This programme is centred around a clear
wellbeing communication plan, with regular content including case
studies, healthy recipes and meditation tips, 24/7 support lines
and 'Wellbeing Wednesday' all aimed at continually supporting the
mental and physical wellbeing for our employees across the
business.
In addition to making rooms available to NHS staff and other key
workers, we also supported the community and national effort by
passing fleet delivery capacity to supermarkets and donating over
500,000 meals to charities. Our fundraising programme for our
charity partner Great Ormand Street Hospital has also continued
despite the challenges posed by COVID restrictions, raising almost
GBP900k during the year and taking us very close to our overall
GBP20m fundraising target.
FY21: Growing market share in the UK and accelerating growth in
Germany
Government restrictions have evolved throughout the year, from
the initial lockdowns where our businesses were closed, through to
the reopening in the summer months and operating under social
distancing restrictions, followed by the increasingly severe
restrictions that came into place from October onwards, that
eventually led to lockdowns in November and again from January in
the UK. The fast changing nature of these restrictions, and the
regional approach in both the UK and Germany made for an
exceptionally challenging operating environment, and it is
testament to the hard work and resilience of our teams that we were
able to rapidly adapt our operations and customer offerings in
response to these changes.
Following the UK Government advice that hospitality venues could
reopen from 4 July 2020, we were able to reopen our UK hotel and
restaurant estate quickly and safely in July and into August. Our
business model enables revenue to contribute to fixed costs at very
low levels of occupancy, meaning we were in a good position to open
up the majority of our estate, and by the end of August, 98% of our
UK hotels were open, achieving 51% occupancy in August, along with
the majority of our restaurants.
Occupancy levels recovered to above 50% in September and
October, driven by relatively strong leisure demand in tourist
locations and trades business demand recovering from a very low
base. The implementation of a national lockdown in England in
November, tiered restrictions in December, and the subsequent
tougher UK-wide lockdown that followed from Christmas to beyond the
end of the financial year, saw occupancy levels reduce to 23% in
January and 29% in February, in what are traditionally lower
occupancy months. Throughout the period from August onwards,
Premier Inn has outperformed the Midscale and Economy market each
month by at least 4.8pp(1) . We have seen relatively strong levels
of trades business demand, and high levels of leisure demand in
tourist locations when leisure travel has been permitted.
The Government restrictions have had a greater impact on the
operations of our restaurants, with the national lockdowns forcing
temporary closures at the start of the financial year, and
restrictions in the highest tiers from November onwards again
resulting in temporary closures. Trading in the period from July
2020 to December 2020, when on average 70% of our restaurants were
open, was helped by the national "Eat Out to Help Out Scheme" in
August, however demand remained subdued and capacity reduced in
each restaurant due to social distancing restrictions. For the full
year, total food and beverage sales were down 74.4%, which included
periods of full closure across the three national lockdowns. All of
our restaurants were closed under the third national UK lockdown
that commenced in January 2021. Subsequently 114 restaurants have
reopened in April 2021 to serve customers primarily outdoors, with
the full restaurant estate expected to reopen in-line with
Government guidance from 17 May 2021.
In Germany, the pattern of COVID restrictions largely mirrored
the UK, albeit in a more complex framework of national and federal
restrictions. Customer demand and occupancy levels were higher in
tourist locations, and lower in locations with a greater business
skew. Whilst the COVID-19 restrictions have had a material impact
on total sales, it has also provided an opportunity to accelerate
the expansion of our estate in Germany. We entered the financial
year with just six operational hotels, and ended it with 30
operational hotels, with a presence in most major towns and cities,
with our total and committed pipeline now standing at 72 hotels.
During the first lockdown at the start of the financial year, we
were able to refurbish and rebrand 13 of the acquired Foremost
hotels, reopening them in May 2020. In December, the Group also
completed the acquisition of 13 hotels from the Centro Group, of
which six were operational, and seven pipeline, demonstrating the
enhanced structural opportunities that exist for Whitbread in
Germany. We have subsequently taken advantage of the ongoing
restrictions and resultant subdued demand, to temporarily close the
six acquired operational hotels, and accelerate their refurbishment
and rebranding to Premier Inn. Total sales in Germany were 2.5%
behind year-on-year for the full estate, with the material growth
in the size of the estate offset by the impact of COVID
restrictions. The German market is particularly challenging at this
point in time with occupancy levels below 15%, with tight
restrictions re-introduced this month and the slow roll-out of the
vaccine and the associated political upheaval giving greater
uncertainty on the pace of recovery. However, the scale of our
growing network, combined with the accelerated refurbishment and
rebranding programmes, and the pressure on the independent sector,
provide a strong platform for growth in Germany as restrictions
begin to be lifted and the market recovers.
Overall, full year statutory revenues were down 71.5%
year-on-year reflecting the impact of COVID restrictions on the
business throughout the year. The significant decline in revenue
resulted in an adjusted loss before tax of GBP635.1m. Statutory
loss before tax of GBP1,007.4m includes a non-cash impairment
charge of GBP348.0m relating to goodwill on German acquisitions,
property, plant and equipment and right-of-use assets, as a result
of the ongoing COVID-19 situation and its impact on current and
future growth rates. The quantum of the impairment charge is
primarily driven by the reduction in anticipated cashflows in the
UK and Germany as the market recovers, and market volatility
resulting in an increase in the discount rate that is based on the
Weighted Average Cost of Capital (WACC) used in the impairment
calculation.
The cash outflow for the year, before shareholder receipts and
debt issuance and repayments was GBP704.6m, driven by the
significant decline in revenue, despite the extensive mitigating
actions taken by the business. Our balance sheet and liquidity
position, however, remains strong, enhanced by the successful
GBP1bn Rights Issue completed in June 2020, and the GBP550m Green
Bond issuance in February 2021. At the end of the financial year,
the business had access to GBP1,256.0m cash and cash equivalents
and an undrawn Revolving Credit Facility of GBP950.0m. Part of the
Green Bond proceeds provided liquidity to repay GBP200m of private
placement debt early in March 2021. Our balance sheet, supported by
our freehold properties, gives Whitbread financial flexibility and
is a real competitive advantage, enabling us to carefully invest in
our strategy in a market where others will be constrained.
Investing to win in FY22
92% of our hotels in the UK are currently open to guests staying
for essential business travel, while all of our restaurants, with
the exception of some of our estate in Scotland, remain closed for
indoor dining. The expectation is that overnight stays for leisure
travel will be permitted from 17 May 2021, along with the full
reopening of restaurants.
We anticipate strong leisure demand during the summer in coastal
and other tourist locations, which represent around 15% of our
hotel estate. Whilst this "leisure bounce" is expected to be
significant, a full recovery in leisure demand will require the
return of unrestricted events, including sporting events, weddings,
and all other leisure activities. Trades business demand has
remained resilient throughout the crisis, albeit still some way
below pre COVID levels, and we expect to see a gradual recovery.
Our expectation is that office-based business demand doesn't start
to recover until offices reopen in earnest, while domestic demand,
both leisure and business, is expected to recover significantly
quicker than international demand.
We will continue to invest in our commercial plan in the UK to
ensure that we harness the pent-up demand for domestic leisure
travel during the summer, alongside the slower ongoing recovery of
business demand. At the forefront of our response, is a major
integrated marketing campaign, 'Rest Easy' featuring the voice of
Sir Lenny Henry, who has become synonymous with the Premier Inn
Brand. This campaign launched on 16 April, and will help deliver
front-of-mind consideration with existing and new customers,
through a digital marketing campaign that utilises the depth of our
direct customer database. A new premierinn.co.uk website is driving
higher conversion rates, while an improved 'business booker'
proposition and increased use of Travel Management Companies will
help drive business demand and broaden our reach to business
customers who were previously unable to book with Premier Inn. We
will also continue to invest in our room refurbishments, ensuring
that our hotel estate remains well-invested, as well as
recommencing the roll-out of 'Premier Plus" rooms, after the
programme was paused in FY21.
We continue to take actions to ensure that we exit the crisis as
a leaner, stronger and more resilient business, and the next phase
of our long-standing efficiency programme will target an additional
GBP100m of cost savings by FY24.
In Germany, we are executing our strategy to drive long-term
value through the acceleration of our expansion, and investment to
build a platform of scale, both organically and through the
acquisition of assets at good prices. This, combined with the
ongoing impact of the COVID-19 restrictions, which we expect to
delay the sales maturity of our operating hotels by 12-18 months,
will suppress short-term performance, meaning that losses will
increase in FY22 and continue into FY23. Currently 18 of our 30
operational hotels are open to essential business travel. The
actions we have taken to grow the estate in Germany since the start
of the pandemic mean we are very well-placed when restrictions are
relaxed and market demand recovers.
FY22 Guidance
UK (FY22 vs FY20)
* Sales: every 1% change in total sales vs FY20 has a
GBP16.5m impact on profit before tax (improved from
GBP18m due to increased flexibility in cost base)
In addition to the above:
* Net cost inflation partially offset by efficiencies:
GBP30m
* Marketing and channel investment: GBP20m
* One-off FY22 COVID-19 costs and credits:
o Government support: GBP80m credit (c.GBP40m business rates holiday,
c.GBP40m furlough)
o Additional COVID secure costs (e.g. social distancing) .c.GBP20-30m
* New rooms (c.80% leasehold): FY22, c.2-3,000
Germany (absolute)
* Accommodation sales: Every 1% decline in RevPAR vs
our Pre-COVID expectations of c.GBP60 will result in
a GBP1m reduction in profit before tax
* Refurbishment of c700 Centro rooms has a c.GBP10m
adverse PBT impact
* F&B sales: c.15% of total accommodation sales
* Central costs: GBP20m-GBP25m
* New rooms (c.75% leasehold): FY22, c.2,000
Central and other costs (FY22 vs FY20)
* Increase in financing costs vs FY20 due to debt
refinancing and lower cash held on deposit (FY20
benefitted from holding Costa disposal proceeds):
c.GBP15m- GBP20m
Cashflow (absolute)
* Breakeven: Group EBITDA (pre IFRS 16) breakeven
(including the one-off benefits of furlough and
business rates) for FY22 full year is at occupancy of
c55% and ARR down c6% year-on-year vs FY20
* Capex: c.GBP350m of which c.GBP235m is in the UK, and
c.GBP115m is in Germany
Driving long-term value
A clear strategy to create value
The impact of COVID-19 will be material on our sector,
especially on the large independent sector and on new branded
supply growth. Despite this, Whitbread's long-term strategy for
value creation in the UK and internationally remains unchanged,
with an operating model that is structurally and competitively
advantaged.
Whitbread's strategic priorities remain consistent with its
proven plan to create sustainable shareholder value over the
long-term. Whitbread expects to achieve long-term growth in
earnings and dividends, combined with strong return on capital
through disciplined execution in three key areas:
-- Grow market share in the UK : by continuing to grow and
innovate Premier Inn, by leveraging the competitive advantages of
our operating model and capitalising on the enhanced structural
opportunities that are expected to exist post COVID-19
-- Grow at scale in Germany : by replicating Premier Inn's UK success story
-- Enhance the capabilities to support long-term growth : by
ensuring we have financial flexibility, a cost-base that
appropriately reflects demand levels, and acting responsibly
through our Force for Good programme
Whitbread's vertically integrated model, which combines the
ownership of property, hotel operations, brand, and inventory
distribution has enabled Premier Inn to grow at a significantly
faster pace than competitors, deliver a consistently superior
customer experience and generate a strong return on capital for
shareholders over the last 15 years. The business believes this
operating model is the optimal approach to access the growth
opportunity in the budget hotel sector.
1) Grow market share in the UK: Premier Inn is best-placed to
capitalise on the recovery opportunity and reinforce its
market-leading position
Compelling structural growth opportunities
The UK hotel market is characterised by long-term migration from
independent to budget branded hotels. Between 2010 and 2019(2)
independent hotels' market share fell 9 percentage points in the
UK, while Premier Inn's market share of total rooms in the market
grew from 6% to 11%. Despite this decline, the independent sector
still represents 48% of the UK market. The COVID crisis is expected
to accelerate the decline in independents' share of the market, as
demand significantly weakens and structural cost pressures persist.
We are already seeing clear signs of distress in both the
independent sector and the budget branded sector, and we expect to
see competitors begin to exit the market as the impact of the
Government's financial support schemes begin to lessen. Premier Inn
is well-placed to capitalise on the expected contraction in
competitor supply and to take market share.
Budget branded sector is structurally advantaged
The budget branded hotel sector is the highest growth segment in
the hotel market and has proved more resilient in previous
downturns. Budget branded demand (total rooms booked) has grown
faster than the rest of the sector in every year from 2009 to
2019(2) including material outperformance between 2009 and 2011.
The midscale and economy segment is also outperforming in the
current COVID-19 crisis, with total sales change around 13.7pp(3)
ahead of the rest of the market from the start of August 2020 to
the end of February 2021.
Broad customer reach
Premier Inn's UK customer base is very broad with a roughly even
split of business and leisure customers. Around half of our
business customers are manual professions i.e. those workers who
need to be physically present to perform their jobs, while our
office-based guests tend to be travelling for business-to-business
reasons. In a post COVID-19 world, it is highly likely that the
need for these guests to travel will remain. Premier Inn also under
indexes on Group business bookings (e.g. conferences) and is
therefore less exposed to those areas of business travel that may
see a structural shift to virtual meetings.
Our leisure guests travel for a very wide range of reasons, from
those that are event-driven (e.g. weddings, sporting events,
theatre breaks) to weekends away with friends, visiting friends and
family, to short weekend breaks with the family and through to
those taking longer holidays in our tourist destinations. The
strong leisure demand evidenced during the summer of 2020
demonstrates that people's propensity to travel for domestic
leisure, when allowed, remains high.
Our geographic spread, with over 80% of our rooms sold in the UK
regions, combined with our domestic focus (90% of guests are based
in the UK) means that we are exposed to the areas that are, and
will, recover quickest.
Strong brand
Premier Inn is consistently rated as the strongest hotel brand
in the UK. Unlike the majority of other large-scale hotel
operators, who operate franchise models, ownership of the Premier
Inn brand enables the provision of a consistently high-quality
customer offering across the entire Premier Inn hotel network,
which drives market-leading brand and customer scores. In the most
recent YouGov hotel brand index survey(4) , Premier Inn was voted
number one for customer satisfaction, impression, value and
likelihood-to-recommend. The strength of the brand makes Premier
Inn the first choice for more travellers.
Direct distribution
Premier Inn's direct digital distribution model, with only 1% of
bookings delivered through third party online travel agents (OTAs),
is industry-leading and ensures that Premier Inn's gross RevPAR is
similar to net RevPAR achieved after cost of sales, unlike
independents or most other brands, which pay high commission rates
to third parties. Direct distribution also provides complete
ownership of the customer relationship driving significantly lower
acquisition and retention costs.
Best-in-class operating model
Premier Inn's unique operating model provides a clear
competitive advantage, enabling the delivery of a winning customer
proposition that will have a strong appeal to customers in both the
current and post pandemic environments. The key components of the
model that drive our competitive advantage, combined with our
leading brand and direct distribution, are:
Scale advantage : Our vertically integrated model provides
increased control of network planning and property development
aspects of our hotel operations. This means we can efficiently
access locations where we see opportunities to expand, which has
enabled Premier Inn to almost double its number of rooms in the UK
since 2010 to become the UK's largest hotel network. We therefore
have more hotels in locations where our customers want to stay, and
we are able to drive economies of scale to keep unit costs low and
by rationalising management overheads.
Operational control: Ownership of all aspects of our hotel
operations ensures greater control over the customer experience,
resulting in a high quality offering delivered on a relentlessly
consistent basis throughout the estate. The offering is also
continually evolving through innovative new products such as hub
and Premier Plus. The operating model delivers best-in-class
operational performance, as evidenced by high staff retention
levels and the very high customer satisfaction scores the business
regularly achieves.
All of our hotels have a bar and restaurant, either within the
hotel or next door. Our restaurant brands include Beefeater,
Brewers Fayre, Whitbread Inns and Bar+Block, while our in-hotel
restaurants are branded Thyme. Our restaurant offering, including
the promise of a good value cooked breakfast, form a core part of
our overall customer proposition, helping drive higher RevPAR in
our hotels.
Property flexibility : A willingness to be flexible with respect
to freehold or leasehold acquisitions ensures new sites are in the
best locations and have the optimal size and format. Ownership of
around 60% of the hotel estate gives Premier Inn control over the
initial development of the hotel, and subsequently how it is
maintained, extended, or re-developed. Further opportunities remain
to optimise the network by individual asset, as well as more
broadly through catchment optimisation creating a more optimal
portfolio of assets. Whitbread's asset-backed balance sheet also
supports a strong financial covenant, which means that in
competitive bid situations for new leasehold developments, Premier
Inn is often the preferred tenant and can secure more favourable
lease and rental terms. Our freehold ownership reduces earnings
volatility in the current downturn and provides Whitbread with a
flexible source of funding in the event of further cash
requirements for investments or to further protect our
liquidity.
These components combine to deliver a winning customer
proposition, providing the customer with more choice, value for
money, outstanding product quality, excellent customer service and
consistently high hygiene standards. Going forward, this offering
positions us very well to take market share, as customers are
likely to seek value, quality, and the familiarity of their most
trusted brands.
2) Grow at scale in Germany: A compelling opportunity to replicate Premier Inn's UK success
Premier Inn's aim is to be the number one budget hotel operator
in Germany, by leveraging the strengths and capabilities of the UK
business. We believe all of the six UK success factors detailed
previously are either already present in Germany, or, in the case
of "strong brand" and "direct distribution model" there is a
compelling opportunity for Premier Inn to develop those
characteristics as the business grows in scale. Our current open
and committed pipeline of 13,300 rooms in Germany equates to around
1% share of the market in 2019 (compared to c.11% in the UK). We
continue to grow our German pipeline and believe we have a
long-term line of sight to over 60,000 rooms, which would equate to
around 6% market share, still only around half of that achieved in
the UK. This growth will be achieved through both organic and
inorganic investment.
The German operating model will replicate that used so
successfully in the UK, built on operational control and a flexible
approach to property, driving a winning customer proposition that
appeals to both business and leisure customers. Direct distribution
is already well over 90% in our German business, and, when open,
our organic hotels have received very high customer satisfaction
scores.
The German hotel market has many attractive characteristics that
play to the strengths of our business model. The market is a third
larger than the UK and even more fragmented, with almost
three-quarters of the market still consisting of small independent
operators, which are experiencing a structural decline to the
benefit of branded hotels. Despite this, the branded budget hotel
sector still only represented 10% of the total market in 2019,
compared to 29% in the UK, as franchise operators have historically
struggled to expand with limited property financing options
available. Consequently, Premier Inn's vertically integrated model
and willingness to invest capital in expansion provides a clear
advantage in the budget market, supported by replicating the
leading quality and value credentials from the UK.
As in the UK, the impact of COVID-19 is highly likely to
accelerate the decline of independents and other budget branded
operators, presenting greater opportunities to invest in or acquire
assets that will deliver strong returns in the long-term. The
acquisition of 13 hotels from the Centro Group in December 2020 is
evidence of the stress in the market, with the total investment for
the deal amounting to c.GBP40m, mainly driven by the investment
required to refurbish and rebrand the hotels to Premier Inn. The
hotels were selected according to our Premier Inn property criteria
and are a good fit with the existing estate, with all occupying
prominent locations across Tier 1 and Tier 2 cities and towns.
Whilst COVID-19 restrictions have significantly restricted our
ability to operate our hotels throughout the year, we have used
this period to materially accelerate the growth of our hotel estate
in Germany. During the year we grew our operational estate from six
hotels to 30 hotels by the end of the year. The total open and
committed pipeline in Germany now stands at 13,300 rooms across 72
hotels, including the acquisition of 19 hotels from the Foremost
Group and 13 hotels from the Centro Group.
We also took advantage of these restrictions and the resultant
subdued demand to refurbish and rebrand our acquired hotels, a
process that was completed in May for the hotels acquired from the
Foremost Group, and commenced in January for those hotels acquired
from the Centro Group.
Our significantly enlarged estate now provides us with a very
strong platform from which to grow our brand presence when the
German hotel market reopens and demand returns. We have a presence
in most major towns and cities, meaning the Premier Inn brand can
be seen across Germany. As the estate continues to grow, we can
turn our focus to brand-building, with nationwide marketing
campaigns and new B2B corporate relationships supplementing
effective localised brand campaigns. The quality of the hotel and
room offering, which is driving very high customer scores, is also
a key component in driving brand awareness.
To date we have committed close to GBP870m of capital to the
German market. Given the scale and characteristics of this market,
and despite the significant impact COVID-19 has had on the sector,
we remain focused on continuing our expansion in Germany and
delivering on our ambition to be the number one budget hotel
operator in that market.
3) Enhancing the capabilities to support long-term growth:
Lean and agile cost model
Whitbread has a long track record of delivering material cost
efficiencies, with GBP235m of savings delivered between FY17 and
FY20. Since the start of the pandemic, Whitbread's approach to
generating efficiencies adapted in response to the low demand
environment. Our initial priority was to secure cash savings
through the cancellation or deferral of non-discretionary spend to
help improve the liquidity position of the business. We also
reduced our head office headcount by c13% during the year. As we
entered the "Restore" phase of our strategy, our focus shifted to
ensure that the business model has the flexibility to respond to
changes in demand, and that our overall cost-base reflects the
current demand environment. As part of this plan, we reduced
headcount in our hotels and restaurants, achieved through a
combination of voluntary redundancies and not replacing leavers,
combined with reductions in minimum contracted hours.
We also continue to drive efficiencies through developing our
international sourcing capability, investing in our technology
platforms to enable both marketing and labour scheduling
effectiveness, and optimising the UK estate. These actions will
underpin our evolving efficiency programme, the next phase of which
is expected to deliver around GBP100m of cost efficiencies over the
next three years.
Around 9% of Premier Inn's rooms are in hotels smaller than 60
rooms. The opportunity remains for hotel catchment areas to be
optimised, by managing existing demand in certain locations through
a smaller number of extended or new, larger hotels, driving a more
cost-efficient estate. Three smaller hotels were disposed in FY21,
however the opportunity for a larger programme of optimisation will
exist when the post-COVID supply and demand environment is
clearer.
Financial flexibility
Whitbread's balance sheet and liquidity position was further
enhanced by the GBP1bn Rights Issue successfully completed in June
2020, and the GBP550m Green Bond issuance in February 2021. Our
Revolving Credit Facility was extended until September 2023 with
covenant waivers in place until March 2023. Covenant waivers were
also agreed with our private placement lenders and the Whitbread
Pension Fund meaning that the existing covenants are next tested in
March 2022 and replaced by temporary covenants until that date.
These actions, together with the backing of Whitbread's freehold
properties, give us the financial flexibility to protect our
liquidity and pursue our strategy of both organic and inorganic
growth when the time is right.
This financial flexibility also enables the Group to continue to
invest in the Premier Inn proposition when others will be
constrained. We continue to invest in our IT platforms, helping
further enhance our digital capability, including a new CRM
platform that will be introduced in the coming years. Product
innovation has been a key part of Premier Inn's success in recent
years, and we will be recommencing the rollout of our Premier Plus
rooms in FY22, after a temporary pause in FY21. These upgraded
rooms are targeted especially at business customers and provide an
even more comfortable stay at great value for money. The initial
roll out of 500 rooms in FY20 was successful, delivering good
returns in that year, and a total of over 2,000 Premier Plus rooms
are expected by the end of this year.
A Force for Good
Whitbread's sustainability programme, Force for Good, ensures
that being a responsible business is integrated throughout the way
Whitbread operates and is crucial to our long-term success. It is
an ambitious programme, integrated business-wide with the
overarching objective to enable everyone to live and work well.
This has been an incredibly difficult year for everyone, and
keeping our Force for Good commitments and ambition central to our
response to the global pandemic has been very important to us.
During the first UK lockdown at the start of the financial year,
we kept 39 hotels open to provide essential support to front-line
workers, we topped up the pay for all of our team members who were
furloughed and we're really proud of how our teams have responded
to the challenges we all faced, both individually and as an
organisation.
Despite the challenges of COVID-19, we did not stand still on
our targets and objectives, and in fact, took the opportunity to
stretch some of them and reinforce others. In 2018, Whitbread set a
science-based target to reduce carbon emissions intensity by 50% by
2025 and 84% by 2040. We have already achieved a reduction of
39.8%, but this year, we wanted to go one step further and have
since updated our carbon target to aim for net-zero carbon
emissions by 2040. We know this is a huge task, but it is one that
is vitally important for our business and the battle against global
climate change. Our carbon strategy was externally recognised this
year as we improved our Carbon Disclosure Project (CDP) Climate
Change score from a B to an A-, which was a great result putting us
in the leadership category, granted to those seen to be
implementing best practices on sustainability.
We also took this year to focus on driving forward our target to
cut food waste in half by 2030, having set up a partnership to
ensure any surplus food at our distribution centres does not go to
waste. This has enabled us to donate over half a million meals to
charity partners in 2020 to support those in need. Our target to
eliminate unnecessary single use plastics by 2025 is not going to
be easy, as many of our supplies are delivered to us in plastic
packaging, but we have begun this journey and will be working
closely with all of our suppliers to achieve this target. We also
continued to fundraise for Great Ormond Street Hospital despite
site closures, hitting a total of GBP18million since our
partnership began in 2012.
Diversity and Inclusion was another area of focus for our
strategy this year and we will publish eight commitments to drive
meaningful progress in this space in the FY21 Annual Report and
Accounts. We are also committed to respecting the human rights of
workers across our entire value chain and throughout the year have
continued to work with our suppliers to measure, manage and
mitigate the most material risks they face. We have also begun work
to report against the Taskforce for Climate-related Financial
Disclosures (TCFD) which we look forward to publishing next
year.
We were proud to publish our first ESG report this year and in
February we issued GBP550m in Green Bonds, a testament to
industry-leading work we are already doing to be a more sustainable
business, and a demonstration of how our sustainability strategy is
integrated across our wider business functions. Our Green Bonds
will enable us to use our scale and size to make an increasingly
positive difference, whilst ensuring our available debt remains
broadly the same. The proceeds from the bonds will help us build
our hotels to high environmental standards and continue to ensure
our supply chains are sustainable and ethical.
Notes:
1: STR data, full inventory basis, dates 31 July 2020 to 25
February 2021, M&E market excludes Premier Inn
2 The impact of COVID-19 means that 2020 is not a representative
year, and is therefore excluded from the date range
3: STR data, M&E includes Premier Inn, 'Rest of market' is
total market excluding M&E
4: YouGov BrandIndex. Scores measured as at 3 March 2020 based
on a nationally representative 12-week moving average
Business Review | FY21 performance reflects the closure of our
business for a large part of the year
Premier Inn UK(1)
`
=============================================================================
GBPm FY21 FY20 Change
Statutory revenue 577.4 2,050.3 (71.8)%
Other income (excl rental income)(2) 142.5 13.6 947.8%
Operating costs before depreciation,
amortisation & rent (861.7) (1,270.2) 32.2%
=========== ========== ============
Adjusted EBITDAR (141.8) 793.7 (117.9)%
Net turnover rent and rental income 4.5 2.1 114.3%
Depreciation: IFRS 16 (109.9) (103.2) (6.5)%
Depreciation and amortisation: Other (168.5) (163.2) (3.2)%
=========== ========== ============
Adjusted operating (loss) / profit (415.7) 529.4 (178.5)%
Interest: IFRS 16 (117.1) (115.1) (1.7)%
=========== ========== ============
Adjusted (loss) / profit before tax (532.8) 414.3 (228.6)%
====================================== =========== ========== ============
Premier Inn UK(1) key performance indicators
=============================================================================
FY21 FY20 Change
=========== ========== ============
Number of hotels 817 820 (0.4)%
Number of rooms 78,718 78,547 0.2%
Committed pipeline (rooms) 12,256 13,011 (5.8)%
====================================== =========== ========== ============
Direct booking 99% 97% 200bps
====================================== =========== ========== ============
Occupancy 29.4% 76.3% (4690)bps
Average room rate GBP46.16 GBP61.50 (24.9)%
Revenue per available room GBP13.57 GBP46.91 (71.1)%
====================================== =========== ========== ============
Sales growth:
Accommodation (70.4)%
Food & beverage (74.4)%
Total (71.8)%
Like-for-like sales growth:
Accommodation (70.9)%
Food & beverage (74.7)%
Total (72.3)%
====================================== =========== ========== ============
1: Includes one site in each of: Jersey, Ireland & the Isle
of Man
2: Includes government support - see notes 4 and 8 of the
accompanying financial statements for further details
Premier Inn UK statutory revenue was down 71.8% year-on-year
reflecting the significant COVID-19 restrictions that were in place
for the majority of the year. Total accommodation sales were down
70.4% and total food and beverage sales were down 74.4%.
Our hotel and restaurants were temporarily closed, in-line with
Government guidance, from the end of March until the start of July,
with the exception of 39 hotels which were kept open to provide
accommodation for NHS staff and other key workers. During this
first lockdown period, total revenue was down 99%. From 4 July,
hotels in the UK were permitted to accept non-key worker guests,
and restaurants were allowed to reopen. Our operating model,
whereby revenues contribute to fixed costs at low levels of
occupancy, as well as our learnings from the 39 hotels kept open
during the first lockdown, ensured we were able to reopen quickly
and ahead of the market.
Post reopening, occupancy levels steadily grew through the
summer, reaching 51% in August and 58% in September. Demand was
strong in seaside and tourist areas, with occupancy levels of
almost 80% during August and September in those locations. During
this period, restaurant sales were boosted by the Government's Eat
Out to Help Out Scheme which contributed towards the price of meals
on every Monday, Tuesday and Wednesday throughout August. During
October, the UK Government began to reimpose restrictions, with the
initial introduction of a tiered system followed by a second
lockdown in England from 5 November to 2 December that prohibited
all leisure and non-essential travel. The impact of these
restrictions saw occupancy levels fall from 52% in October to 35%
in November. December saw increased tiered restrictions followed by
a third UK lockdown that commenced at the beginning of January,
resulting in our hotels again only being permitted to accommodate
essential business stays, and all our restaurants being closed.
Despite these restrictions, resilient trades business demand
resulted in around 80% of our hotel estate remaining open, with
occupancy levels of 23% in January and 29% in February, in what are
traditionally lower occupancy months.
Throughout the period from August 2020 to February 2021, Premier
Inn total UK accommodation sales growth was consistently ahead of
the Midscale and Economy market, driving very strong market share
gains, and demonstrating the strengths of our brand, direct
distribution model and our winning customer proposition. Customer
scores have also remained very strong during the year, despite the
operational disruption.
UK outperformance vs M&E market
Aug Sep Oct Nov Dec Jan Feb
======= ======= ======= ======= ======= ======= =======
PI total sales outperformance
(YoY) (1) 5.2% 7.9% 8.4% 10.4% 10.5% 4.8% 5.2%
------- ------- ------- ------- ------- ------- -------
PI market share (2) 10.8% 10.7% 11.0% 13.6% 11.7% 13.7% 14.7%
------- ------- ------- ------- ------- ------- -------
PI market share gains +3.6pp +3.6pp +3.7pp +6.2pp +5.3pp +6.5pp +6.9pp
pp (YoY) (2)
================================ ======= ======= ======= ======= ======= ======= =======
1: STR data, full inventory basis, 31 July 2020 to 25 February
2021 , M&E excludes Premier Inn
2: STR data, revenue share of total UK market, 31 July 2020 to
25 February 2021
Other income increased to GBP142.5m from GBP13.6m, reflecting
the GBP138.3m benefit from the UK Job Retention Scheme. Operating
costs reduced by 32.2% to GBP861.7m, in-line with guidance, and
driven by a reduction in revenue related variable costs (primarily
food and beverage costs of sales), the GBP117.8m benefit of the
Government's business rates holiday, and the impact of cost
initiatives including the postponement and cancellation of all
non-essential costs. IFRS 16 depreciation was GBP109.9m and IFRS 16
interest was GBP117.1m with cash rent paid of GBP173.0m including
the impact of a c.GBP25m deferral of 50% of the December quarterly
rent.
During the year, five new hotels were opened and eight hotels
permanently closed, of which three were sold, bringing the estate
total to 817. The committed pipeline of 12,256 rooms underpins our
opportunity to take market share in the UK in the medium to
long-term as competitor supply contracts.
Adjusted loss before tax in the UK was GBP532.8m reflecting the
significant decline in statutory revenues as a result of the
COVID-19 restrictions that have been in place during the financial
year.
Premier Inn Germany
GBPm FY21 FY20 Change
=========== ========= ============
Statutory revenue 11.5 11.8 (2.5)%
Other income (excl rental income)(1) 11.5 0.3 3733.3%
Operating costs before depreciation,
amortisation and rent (43.9) (23.9) (83.7)%
=========== ========= ============
Adjusted EBITDAR (20.9) (11.8) (77.1)%
Net turnover rent and rental income 3.9 0.8 387.5%
Depreciation: IFRS 16 (16.4) (0.8) (1950.0)%
Depreciation and amortisation: Other (5.4) (1.6) (237.5)%
=========== ========= ============
Adjusted operating (loss) (38.8) (13.4) (189.6)%
Interest: IFRS 16 (6.1) (0.2) (2950.0)%
=========== ========= ============
Adjusted (loss) before tax (44.9) (13.6) (230.1)%
====================================== =========== ========= ============
Premier Inn Germany key performance indicators
============================================================================
FY21 FY20 Change
=========== ========= ============
Number of hotels 30 6 400.0%
Number of rooms 4,880 1,085 349.8%
Committed pipeline (rooms) 8,420 8,709 (3.3)%
====================================== =========== ========= ============
Direct booking 99% 91% 800bps
====================================== =========== ========= ============
Occupancy 22.5% 58.3% (3580)bps
Average room rate GBP40.17 GBP69.47 (42.2)%
Revenue per available room GBP9.02 GBP40.53 (77.7)%
====================================== =========== ========= ============
Sales growth:
Accommodation 4.8%
Food & beverage (34.4)%
Total (2.5)%
Like-for-like sales growth:
Accommodation (71.0)%
Food & beverage (81.2)%
Total (72.7)%
====================================== =========== ========= ============
1: Includes Government support - see notes 4 and 8 of the
accompanying financial statements for further details
Total statutory revenue in Germany was down 2.5%, with the
impact of COVID-restrictions offsetting the material growth in the
size of the hotel estate. Germany has been subject to similar
restrictions as the UK, albeit in a more complex framework of
national and federal restrictions, with limited business travel and
no leisure travel permitted for large parts of the year.
We entered FY21 with six operational hotels, that were trading
well, ahead of the enforced lockdown at the end of March. During
the lockdown period, we took the opportunity to refurbish and
rebrand 13 of the Foremost hotels that were acquired in February
2020, meaning that when permitted by the German Government in May,
we were able to reopen a total of 19 hotels. Following this
reopening, performance in Germany was stronger in tourist-led
locations such as Hamburg and Freiburg and weaker in those
locations with a traditionally higher business mix. The increased
size of the open estate helped drive total sales growth in
September of 58%. However, as in the UK, increasingly onerous
restrictions were implemented from October and through to the end
of the financial year, resulting in very low occupancy levels
across the market, and occupancy in Premier Inn reducing to 9.9% in
Q4. In December we completed the acquisition of 13 hotels from the
Centro Group, and have subsequently taken advantage of the low
demand environment to accelerate their refurbishment and rebranding
to Premier Inn.
Operating costs increased by GBP20.0m to GBP43.9m due to the
investment in the business and the increased estate size, and IFRS
16 depreciation costs increased by GBP15.6m to GBP16.4m, reflecting
the fact that all new opened properties are leasehold. Combined
with other depreciation and amortisation costs of GBP5.4m, and IFRS
16 interest costs of GBP6.1m, the adjusted loss before tax for the
period increased by GBP31.3m to GBP44.9m. Cash rent paid for the
year was GBP21.9m.
We materially accelerated our German hotel pipeline during the
year, and the total open and committed estate now stands at 72
hotels, of which 30 are operational, and over 13,000 rooms. Going
forward we will continue to assess both organic and inorganic
opportunities to exploit the enhanced structural opportunities that
exist in Germany.
Central and other costs
GBPm FY21 FY20 Change
======= ======= =========
Operating costs before depreciation,
amortisation and rent (26.2) (27.1) 3.3%
======= ======= =========
Share of loss from joint ventures (6.0) (2.1) (185.7)%
======= ======= =========
Adjusted operating (loss) (32.2) (29.2) (10.3)%
Net finance costs (25.2) (13.2) (90.9)%
======= ======= =========
Adjusted (loss) before tax (57.4) (42.4) (35.4)%
====================================== ======= ======= =========
Central operating costs of GBP26.2m were GBP0.9m lower than last
year driven by cost savings delivered in response to the COVID-19
situation. Net finance costs increased by 90.9% to GBP25.2m,
primarily due to the prior year charge being net of interest
received on the proceeds from the Costa disposal that was held as
cash on deposit for part of the period.
Financial review
-- The Group's FY21 financial performance reflected the closure
of the vast majority of the business in the first half of the
financial year, followed by a second half that, after operating
throughout August and September with occupancy levels of over 50%
in the UK, saw market demand fall significantly from November
onwards, as increasingly severe COVID-19 Government restrictions
were implemented in both the UK and Germany
-- Consequently, total statutory revenue was 71.5% behind the prior year
-- The significant decline in revenue resulted in an adjusted
loss before tax of GBP635.1m. Statutory loss before tax of
GBP1,007.4m includes a non-cash impairment charge of GBP348.0m
relating to goodwill on acquisitions in Germany, property, plant
and equipment and right-of-use assets, as a result of impairment
reviews triggered by the COVID-19 situation and its impact on
current and future growth rates. The financial results benefited
from c.GBP270m COVID related Government support schemes, including
the UK Job Retention Scheme and from the UK business rates
relief
-- Operating cash outflow was GBP488.5m
-- The business retains a strong balance sheet and liquidity
position, enhanced by the successful GBP1bn Rights Issue completed
in June 2020, and the GBP550m issuance of Green Bonds in February
2021. At the end of the year, the business had access to
GBP1,256.0m cash and cash equivalents, and to an undrawn Revolving
Credit Facility of GBP950.0m. Net debt of GBP46.5m compared to net
debt of GBP322.9m at the end of the previous year. The Green Bond
proceeds also provided liquidity to repay GBP200m of private
placement debt early in March 2021.
Financial highlights
GBPm FY21 FY20 Change
========== ========== =========
Statutory revenue 589.4 2,071.5 (71.5)%
Transitional service agreement revenue 0.5 9.4 (94.7)%
========== ========== =========
Adjusted revenue 588.9 2,062.1 (71.4)%
Other income (excl rental income)(1) 154.0 13.9 1007.9%
Operating costs before depreciation,
amortisation and rent (937.8) (1,323.3) 29.1%
========== ========== =========
Adjusted EBITDAR (194.9) 752.7 (125.9)%
Net turnover rent and rental income 8.4 2.9 189.7%
Depreciation: IFRS 16 (126.3) (104.0) (21.4)%
Depreciation and amortisation: Other (173.9) (164.8) (5.5)%
========== ========== =========
Adjusted operating (loss) / profit (486.7) 486.8 (200.0)%
Net finance costs (excl IFRS 16) (25.2) (13.2) (90.9)%
Interest: IFRS 16 (123.2) (115.3) (6.9)%
========== ========== =========
Adjusted (loss) / profit before tax (635.1) 358.3 (277.3)%
Adjusting items (372.3) (78.3) (375.5)%
========== ========== =========
Statutory (loss) / profit before tax (1,007.4) 280.0 (459.8)%
Tax credit / (expense) 100.9 (62.1) 262.5%
========== ========== =========
Statutory (loss) / profit for the year (906.5) 217.9 (516.0)%
======================================== ========== ========== =========
1: Includes UK and German Government support - see notes 4 & 8
of the accompanying financial statements for further details
Statutory Revenue
Statutory revenues were down 71.5% year-on-year reflecting the
impact on the business of the COVID-19 restrictions that resulted
in the closure of our hotels and restaurants for significant
periods during the year, and when reopened, resulted in
significantly reduced market demand.
Adjusted EBITDAR
Other income of GBP154.0m includes GBP138.3m of benefit
recognised in respect of the UK Job Retention scheme. Operating
costs of GBP937.8m were 29.1% lower than last year driven by the
reduction in revenue-related variable costs, primarily food and
beverage costs of sale, combined with the postponement or deferral
of all non-essential spend, and the GBP117.8m benefit of the UK
Government's business rates holiday and other various COVID related
government grants in the UK and Germany. As a result of the impact
of the COVID-19 restrictions on our business throughout the year,
Adjusted EBITDAR was a loss of GBP194.9m.
Adjusted operating loss
The leasehold estate grew by 4 sites in the UK and by 21 sites
in Germany. This resulted in a GBP22.3m or 21.4% increase in IFRS
16 depreciation charges to GBP126.3m. Other depreciation and
amortisation charges increased by GBP9.1m to GBP173.9m, driven by
new hotel openings. The adjusted operating loss of GBP486.7m
compared to a profit of GBP486.8m in the prior year.
Net finance costs
Net finance costs (excluding IFRS 16) were GBP25.2m (FY20:
GBP13.2m). This was GBP12.0m higher than the prior year due to the
prior year charge being net of interest received on the cash
balance held from the proceeds from the sale of the Costa business.
IFRS 16 lease interest of GBP123.2m was GBP7.9m above last year
primarily driven by the opening of 21 leasehold sites in
Germany.
Adjusting items
GBPm FY21 (charge)
/ credit
==============
Non-cash items:
Impairment - goodwill (238.8)
Impairment & write offs - property, plant and equipment,
right-of-use assets and other intangibles (109.2)
Impairment - investment in joint ventures (8.2)
Impairment - share of loss of joint ventures (1.7)
Aborted acquisition costs (12.4)
Costa separation 6.4
Loss on disposal, property & other provisions 5.0
Guaranteed Minimum Pension (1.1)
(360.0)
Cash items:
Insurance proceeds 1.8
Reimbursement of property remedial works 13.4
TSA income 0.5
TSA costs (0.5)
UK restructuring costs (12.1)
VAT settlement 5.8
Finance costs - early debt repayment charge (21.2)
(12.3)
Total (372.3)
========================================================== ==============
Total adjusting items before tax were GBP372.3 m , including a
non-cash charge, primarily as a result of COVID-19, of GBP 348.0m
in respect of impairments of goodwill on German acquisitions,
property, plant & equipment and right-of-use assets. In the
Group's FY20 full year annual report and accounts , the Group
stated in note 34 (Events after the balance sheet date) that the
assumptions used at the year end were no longer appropriate and
that the impacts of COVID-19 would result in further indicators of
impairment a cross the Whitbread business.
Subsequently, and in respect of the ongoing COVID-19 situation,
impairment reviews were conducted as part of the H1 FY21 and full
year FY21 reporting process, resulting in charges of GBP 238.8m
relating to goodwill arising upon acquisition of the Foremost
Hospitality Hiex GmbH and GBP109.2m relating to property, plant and
equipment, right-of-use assets and other intangibles . The quantum
of the impairment charges is primarily driven by :
-- A reduction in anticipated cashflows in the UK and Germany , as the market recovers
-- An increase in the discount rate that is based on the
Weighted Average Cost of Capital (WACC) of a typical market
participant. The discount rate has increased since the end of FY20,
reflecting market volatility in the spot risk-free rate and equity
risk premium inputs used in the Group's WACC calculation
-- Sites where the Group has decided not to proceed with the project
Further adjusting item charges driven by the COVID-19 pandemic
include an impairment review on our UK joint venture ("Pure")
resulting in a non-cash charge of GBP8.2m, the completion of a
colleague restructure programme incurring GBP12.1m of costs to
achieve, and the decision not to proceed with a call option on a
proposed acquisition in Germany, resulting in a charge of
GBP12.4m.
Other adjusting items include a GBP21.2m charge incurred in
respect of the early repayment of the 2017 US private placement
notes following the successful issuance of Green Bonds in February
2021. A credit of GBP16.7m was recognised in respect of the
reimbursement of cladding remedial costs from property developers
and the release of cladding remedial costs that are no longer
expected to be incurred.
Taxation
A tax credit of GBP100.9m was recognised in the year primarily
due to the losses incurred. The effective tax rate was negative
10.0% for the year compared to the statutory rate of 19.0%, with
the difference primarily driven by GBP241m gross impairment charges
not being tax deductible, the impact of the previously announced UK
corporate tax rate change from 19% to 17% being annulled, Germany
losses not being recognised for tax purposes, and a prior year
adjustment relating to the true up of deferred tax on historic
items . The adjusted tax credit for the year was GBP94.1m (FY20:
GBP69.1m charge) representing an adjusted effective tax rate of
negative 14.8 % (FY20: 19.3%). Further detail can be found in note
9.
Statutory loss after tax
Statutory loss for the year was GBP906.5m, compared to a profit
of GBP217.9m last year, due to the significant decline in revenue
driven by the COVID-19 crisis, and impairment charges recognised as
a result of COVID-19, partly offset by the tax credit recorded in
the year.
Earnings per share
FY21 FY20(1) Change
========= ======== =========
Adjusted basic (loss) / earnings per
share (287.6)p 166.3p (272.9)%
Statutory basic (loss) / earnings per
share (481.9)p 125.3p (484.6)%
======================================= ========= ======== =========
1. Restated to include the impact of the Rights Issue completed
in June
Adjusted basic loss per share of 287.6p and statutory basic loss
per share of 481.9p reflect the adjusted and statutory losses
reported in the period.
Earnings per share figures for the comparative period have been
restated following the Rights Issue completed in June, in
accordance with IAS 33 Earnings per Share. Full details are
included in note 10 of the accompanying financial statements.
Dividend
Whitbread's dividend policy is to grow the dividend broadly
in-line with earnings across the cycle. However, dividends will not
be paid during the current Revolving Credit Facility covenant
waiver period, which lasts until March 2023, as a condition agreed
with Whitbread's lenders and pension trustees, or until the
original covenant tests are passed. The Board hopes to return to
paying dividends again following the normalisation of the Group's
financial position and performance.
Cashflow
GBPm FY21 FY20
======== ==========
Adjusted EBITDAR (194.9) 752.7
Change in working capital (99.8) (13.0)
Net turnover rent and rental income 8.4 2.9
IFRS 16 interest and lease repayments (202.2) (187.4)
Operating cashflow (488.5) 555.2
Interest (excl IFRS 16) (20.8) (19.9)
Corporate taxes 19.1 (8.5)
Transaction and separation costs - (51.0)
Pension (14.8) (288.4)
Capital expenditure: maintenance (69.9) (153.5)
Capital expenditure: expansionary (159.6) (241.9)
Cash flows on acquisitions(1) (1.1) (192.3)
Disposal proceeds 2.6 11.9
Other 28.4 (29.5)
======== ==========
Cashflow before shareholder returns / receipts
and debt repayments (704.6) (417.9)
Dividends - (159.9)
Shares purchased through buyback programme
& tender offer - (2,328.4)
Proceeds from Rights Issue 981.0 -
Repayment of long-term borrowings (75.1) -
Proceeds from green bond 546.8 -
======== ==========
Net cash flow 748.1 (2,906.2)
Opening net (debt) / cash (322.9) 2,583.3
Repayment of long-term borrowings 75.1 -
Issuance of debt (green bonds) (546.8) -
======== ==========
Closing net (debt) / cash (46.5) (322.9)
3
================================================ ======== ==========
1: FY21 includes GBP1.4m cash receipt on Fox acquisition,
GBP1.3m cash receipt on aborted acquisition and GBP3.8m payment of
deferred and contingent consideration
Total net cash inflow for the year was an increase of GBP748.1m
after accounting for the GBP981.0m net proceeds of the Rights Issue
that completed in June 2020, the GBP546.8m Green Bonds net proceeds
in February 2021, and the repayment of GBP75.1m of US private
placement notes in August 2020. Net cash outflow before shareholder
receipts and debt issuance and repayments for the period was
GBP704.6m, reflecting the signficant decline in revenue as a result
of COVID-19 restrictions and subsequant subdued market demand, and
the continued investment in the business.
The GBP99.8m working capital outflow was primarily due to a
GBP71.2m net movement on customer deposits reflecting the refunding
of deposits at the start of the lockdown period, partially offset
by the subsequent receipt of customer deposits for bookings
received by the end the financial year. GBP14.0m of the movement
was driven by outstanding amounts due from the Government in
respect of the Job Retention Scheme, and GBP15.5m representing the
reduction in the VAT creditor driven by the reduced revenue levels
and reduced VAT rate.
Operating cash outflow was GBP488.5m, in-line with previous
guidance. During FY21, the Group's operational cashflow breakeven,
after Government support, was at levels of around 55% occupancy and
a 20% year-on-year fall in price. These levels were surpassed, and
the Group had positive operational cashflow in the period from late
August 2020 through to October 2020.
A corporation tax rebate relating to FY20, combined with the
anticipated lower profits in FY21 driving a reduction in FY21
corporation tax payments on accounts, resulted in a net tax cash
inflow of GBP19.1m.
Maintenance capital expenditure of GBP69.9m and expansionary
capital expenditure of GBP159.6m was in-line with guidance, with
these reduced levels reflecting the decision to postpone or defer
all non-essential spend. IFRS 16 interest and lease repayments
increased by GBP14.8m to GBP202.2m driven by the higher number of
leasehold properties entering the estate, particularly in Germany.
Rent cash payments were GBP194.9m and reflect the impact of the
deferral of c.GBP25m rent payments from the December quarter
payment in the UK.
The GBP28.4m other inflow is driven by GBP14.0m timing of
insurance proceeds, the reversal of non-cash charges of GBP12.4m
representing the write off of a deposit paid in relation to an
acquisition, GBP12.7m share-based payments including the employee
sharesave scheme and long term incentive plan (LTIP) and GBP7.7m
share of loss from joint ventures, offset by payments against
provisions of GBP24.4m.
Debt funding facilities & liquidity
GBPm Facility Utilised Maturity
========== ========== ==========
US private placement notes (25.0) (25.0) 2021
US private placement notes(1) (58.5) (58.5) 2022
Repaid in
US private placement notes (200.0) (200.0) FY22
Revolving Credit Facility (100.0) 0.0 2021
Revolving Credit Facility (125.0) 0.0 2022
Revolving Credit Facility (725.0) 0.0 2023
Bond (450.0) (450.0) 2025
Green Bond (300.0) (300.0) 2027
Green Bond (250.0) (250.0) 2031
========== ========== ==========
(2,233.5) (1,283.5)
Cash and cash equivalents 1,256.0
Total facilities utilised, net of
cash (1) (27.5)
========== ==========
Net debt (46.5)
Net debt and lease liabilities (3,278.1)
Lease debt (1,827.5)
=================================== ========== ========== ==========
Whitbread entered the financial year with a strong balance
sheet, low leverage and good liquidity. In response to the COVID-19
situation, the Group executed a GBP1bn Rights Issue in June 2020 to
help protect its balance sheet, replace the expected cash outflow
whilst Government restrictions were in place, and provide liquidity
to invest in the business during the recovery. The Group further
enhanced its financial position through a GBP550m Green Bond
issuance in February 2021, the proceeds of which provide funds to
invest in Whitbread's ESG programme, with the cash also providing
liquidity to repay the outstanding US Private Placement notes.
During the year, the Group was confirmed as an eligible issuer
under the UK Government's Covid Corporate Financing Facility
(CCFF), with an issuer limit of GBP600.0m. The Group's strong
liquidity position meant this facility was not required, and the
Group's eligibility has subsequently expired. The business is also
backed by a valuable freehold property estate.
The Group announced in May 2020 that an 18-month waiver for debt
and interest related covenants had been accepted by lenders for the
Revolving Credit Facility and the US private placement debt,
meaning that existing covenants would next be tested in March 2022.
Subsequent to this, Whitbread reached an agreement with its
relationship banks in February 2021 to extend the final maturity
date of its Revolving Credit Facility from September 2022 to
September 2023, and to extend the covenant waiver period by 12
months, meaning the financial covenants will not now be tested
until March 2023, at which point new covenant targets will be
introduced, being:
-- March 2023: Net Debt (2) / EBITDA (2) < 5x, EBITDA (2) / Interest (2) >2.0x
-- August 2023: Net Debt (2) / EBITDA (2) < 4.5x EBITDA (2) / Interest (2) >2.0x
The Revolving Credit Facility size, which is currently
GBP950.0m, will step down to GBP850.0m at 29 December 2021 and to
GBP725.0m at 7 September 2022.
The additional requirements outlined in the original waivers
announced on 21 May 2020, including an obligation to retain GBP400m
liquidity headroom, no more than GBP2bn of net debt and to not
declare or pay dividends, will remain for the duration of the
extended waiver period to March 2023. However, these additional
waiver period requirements can be removed if the Group demonstrates
compliance with the original covenant tests, being Net Debt (2) /
EBITDA(2) < 3.5x and EBITDA(2) / Interest(2) >3.0x.
During the period, GBP75.1m of US private placement notes that
matured in August 2020 were repaid, and the Group announced its
intention to repay the 2021 and 2022 notes (GBP25m and $93.5m
respectively) on their scheduled maturity dates of 6 September 2021
and 22 January 2022. Following the successful issuance of GBP550.0m
Green Bonds in February 2021, the GBP200m 2027 US private placement
notes were repaid early on 26 March 2021 incurring GBP21.2m
make-whole costs.
Following the Rights Issue and the debt financing, at the year
end the Group had GBP1,256.0m of cash on deposit and was undrawn on
the GBP950m Revolving Credit Facility. The Group's strong balance
sheet, with access to over GBP2bn of liquidity, and the potential
to access funding through our freehold estate means the Group has
financial flexibility, with good headroom to the temporary
covenants.
Notes:
1: Includes impact of hedging using cross currency swaps and
excludes unamortised fees associated with debt instrument
2: Pre IFRS 16
Capital investment
GBPm FY21 FY20 Last 2 years
====== ====== =============
UK maintenance and product improvement 68.6 144.8 213.4
New / extended UK hotels 63.2 166.6 229.8
Germany and Middle East(1) 98.8 276.3 375.1
====== ====== =============
Total 230.6 587.7 818.3
======================================== ====== ====== =============
1 Includes net cash flows on acquisitions of GBP1.1m in FY21
Total capital expenditure in the year was GBP230.6m, in-line
with expectations, and reflecting the postponement or deferral of
all non-essential capital expenditure. Maintenance and product
improvement spend was limited to only the essential upkeep of our
estate, health and safety and IT development. Hotel and restaurant
refurbishments were deferred, alongside spend on hotel extensions
and new hotels in the UK wherever possible. In Germany. the
acquisition and refurbishment of 13 hotels from the Centro Group,
which completed in December 2020, is expected to require c.GBP40m
of capital expenditure of which GBP11.4m was incurred in FY21.
Property backed balance sheet
Freehold / leasehold mix Open estate Total estate(1)
============ ================
Premier Inn UK 61%:39% 55%:45%
Premier Inn Germany 28%:72% 21%:79%
Group 59%:41% 50%:50%
========================= ============ ================
1. Open + committed pipeline
The current UK estate is 61% freehold and 39% leasehold, a mix
that will change to 55% freehold and 45% leasehold as the existing
pipeline is delivered. The higher leasehold mix in Germany reflects
the start-up nature of the business, where securing optimal site
location, particularly in city centres, to help build brand
strength, is key.
Ownership of around 60% of the hotel estate gives Premier Inn
control over the initial development of the hotel, and subsequently
how it is maintained, extended, or re-developed. Whitbread's
asset-backed balance sheet supports a strong financial covenant,
which means that in competitive bid situations for new leasehold
developments, Premier Inn is often the preferred tenant and can
secure more favourable lease and rental terms. Our freehold
ownership reduces earnings volatility in the current downturn and
provides Whitbread with a flexible source of funding in the event
of further cash requirements for investments or to further protect
our liquidity.
Return on Capital
Despite the losses we have incurred this year, we remain
confident in our ability to deliver long-term sustainable returns
on incremental investment:
-- We believe our ability to capitalise on the enhanced
structural opportunities that are likely to exist, combined with
the competitive advantage of our ownership and operating model, and
ongoing initiatives including segmentation and site optimisation,
will help offset the adverse impact of a weaker macro-economic
environment on demand over the long-term
-- Sector-wide cost headwinds can be countered by the benefits
of both organic and inorganic growth and an efficiency programme
that will ensure the cost base of the business reflects demand.
These factors will enable the business to perform well in the UK
and take market share, and to capitalise on the material growth
opportunity in Germany. These strong fundamentals, combined with an
appropriate capital structure, will enable Whitbread to drive
long-term value.
Events after the Balance Sheet date
Following the year end there were a number of post balance sheet
events:
-- The UK Government announced a number of support measures in
its Budget on 3 March 2021. These included an extension of Business
Rates Relief in England to 30 June 2021, a Restart Grant scheme for
the hospitality and accommodation sector, an extension of reduced
VAT rates, an extension of the Job Retention Scheme until September
2021, and an increase in the main rate of UK corporation tax to 25%
with effect from 1 April 2023. Further details can be found in note
26
-- The removal of a turnover cap in relation to state aid in
Germany was announced on 4 March 2021, meaning that the Group is
now eligible for German Government aid, capped at GBP10.4m, which
will be claimed and become recognisable in FY22
-- The Group's access to the Covid Corporate Financing Facility
(CCFF) expired on 22 March 2021, the facility having remained
undrawn
-- The GBP200m 2027 US private placement notes were repaid early
on 26 March 2021, incurring GBP21.2m make-whole costs
Pension
The Group's defined benefit pension scheme, the Whitbread Group
Pension Fund (the "Pension Fund"), had an IAS19 surplus of
GBP188.0m at the end of the year (FY20: GBP190.3m), with the lower
funding position primarily driven by asset performance being lower
than the discount rate and an increase in the assumed rate of
future inflation, which was partially offset by an increase in
corporate bond yields resulting in an increase in the discount rate
used to value liabilities, changes to mortality assumptions and
both inflation and membership experience being more favourable than
expected. Annual contributions of approximately GBP10m are paid to
the Pension Fund through the Scottish Partnership arrangements.
The Pension Fund's triennial actuarial valuation as at 31 March
2020 is currently being carried out, with the results expected
later this year. As identified in note 25, the Fund had a Technical
Provisions deficit at the date of the last valuation on 31 March
2017.
In May, Whitbread announced that it had reached an agreement
with the Pension Fund Trustee for a covenant waiver period for the
existing EBITDA related covenant which will now not be tested until
March 2022. On this testing date, in the event of a breach of the
original EBITDA related covenant, a cash payment would be required
to improve the funding position to the value of the Secondary
Funding Target. If Whitbread did not settle this contribution, the
Trustee could realise the equivalent value through the security it
holds over GBP450m of Whitbread's freehold property. New covenants
have been introduced during the period of the waiver in-line with
those given to Whitbread's lenders described above, including an
obligation to retain GBP400m liquidity headroom, no more than
GBP2bn of net debt and to not declare or pay dividends, for the
duration of the extended waiver period to March 2022. An additional
GBP50.0m of security has also been given to the Trustee for the
duration of the covenant waiver period.
Other information
Going concern
The directors have concluded that it is appropriate for the
consolidated financial statements to be prepared on the going
concern basis. Full details are set out in note 2 of the attached
financial statements.
Risks and uncertainties
The directors have reconsidered the principal risks and
uncertainties of the Group, summarised below:
-- Pandemic - impact of reoccurrence or variants of COVID-19 or
any other pandemic on the business;
-- Worsening Economic Climate - a decline in GDP, consumer and
business spending, a fall in RevPAR and inflation pressure
impacting growth plans;
-- Cyber and Data Security - attacks resulting in operational
disruption, reduced effectiveness of systems or a loss of data;
-- Structural shifts - uncertainty as to the permanent or
long-term structural shift in working practices and reduction in
international travel caused by COVID-19 pandemic;
-- Germany growth - the inability to successfully execute our strategy in Germany;
-- Change delivery - the inability to execute the planned significant volume of change;
-- Leadership, succession and talent hot spots - a reduction in
our talent pool especially in hot spots such as IT and digital
areas, and low levels of diversity in the senior leadership
team;
-- Third party arrangements - business interruption as a result
of the withdrawal or provision of services below acceptable
standards, or reputational damage due to unethical supplier
practices;
-- Health and safety - adverse publicity and brand damage due to
death or serious injury as a result of company negligence or a
significant incident resulting from food, fire or another safety
failure;
-- Terrorism - impacts the safety and security of customers or
staff, and the consequent impact on trading in key markets or
locations.
The risk of wider macro-economic effects as a result of the UK
leaving the EU, including foreign exchange and interest rate
fluctuations, is considered under the Group's assessment of
Economic Climate risk.
The collective area of environmental, social and governance
(ESG) is considered an emerging risk for the Group. Our approach to
identifying and managing this is embedded into the risk management
framework and integrated through policies and risk control
mechanisms.
American Depositary Receipts
Whitbread has established a sponsored Level 1 American
Depositary Receipt (ADR) programme for which Deutsche Bank perform
the role of depositary bank. The Level 1 ADR programme trades on
the U.S. over-the-counter (OTC) markets under the symbol WTBDY (it
is not listed on a U.S. stock exchange).
Notes
The Group uses certain APMs to help evaluate the Group's
financial performance, position and cash flows, and believes that
such measures provide an enhanced understanding of the Group's
results and related trends and allow for comparisons of the
financial performance of the Group's businesses either from one
period to another or with other similar businesses. However, APMs
are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
APMs used in this announcement include adjusted revenue,
like-for-like sales, revenue per available room (RevPAR), average
room rate, direct bookings/ distribution, adjusted operating
(loss)/ profit, adjusted (loss)/ profit before tax, adjusted basic
earnings per share, net debt, net debt and lease liabilities,
operating cashflow, adjusted EBITDA (pre IFRS 16) and adjusted
EBITDAR. Further information can be found in the glossary and
reconciliation of APMs at the end of this document.
Consolidated income statement
Year ended 25 February 2021
52 weeks to 25 February 2021 52 weeks to 27 February 2020
Before Adjusting Before Adjusting
adjusting items adjusting items
items (Note 6) Statutory items (Note 6) Statutory
Notes GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -----
Continuing operations
Revenue 3 588.9 0.5 589.4 2,062.1 9.4 2,071.5
Other income 4 161.8 6.3 168.1 18.8 18.3 37.1
Operating costs 5 (1,231.4) (351.7) (1,583.1) (1,592.0) (105.6) (1,697.6)
Impairment of loans to
joint ventures - (5.8) (5.8) - - -
---------- --------- --------- ---------- --------- ---------
Operating (loss)/profit
before joint ventures (480.7) (350.7) (831.4) 488.9 (77.9) 411.0
Share of loss from joint
ventures (6.0) (1.7) (7.7) (2.1) (0.4) (2.5)
Operating (loss)/profit (486.7) (352.4) (839.1) 486.8 (78.3) 408.5
Finance costs 7 (153.8) (21.2) (175.0) (144.4) - (144.4)
Finance income 7 5.4 1.3 6.7 15.9 - 15.9
---------- --------- --------- ---------- --------- ---------
(Loss)/profit before tax (635.1) (372.3) (1,007.4) 358.3 (78.3) 280.0
Tax credit/(expense) 9 94.1 6.8 100.9 (69.1) 7.0 (62.1)
(Loss)/profit for the year
attributable to parent
shareholders (541.0) (365.5) (906.5) 289.2 (71.3) 217.9
---------- --------- --------- ---------- --------- ---------
52 weeks to 25 February 2021 52 weeks to 27 February 2020
(restated(1) )
Earnings per share (Note pence pence Pence pence pence Pence
10)
------------------------- ------- ------- ------- ----- ------ -----
Basic (287.6) (194.3) (481.9) 166.3 (41.0) 125.3
Diluted (287.6) (194.3) (481.9) 165.4 (40.7) 124.7
(1) Earnings per share figures for the comparative period have
been restated to reflect the bonus element of the June 2020 rights
issue (see Note 10).
Consolidated statement of comprehensive income
Year ended 25 February 2021
52 weeks 52 weeks to
to 25 February 27 February
2021 2020
Notes GBPm GBPm
--------------------------------------------- ----- --------------- ------------
(Loss)/profit for the year (906.5) 217.9
Items that will not be reclassified
to the income statement:
Re-measurement (loss)/gain on defined
benefit pension scheme 25 (16.3) 19.7
Current tax on defined benefit pension
scheme 9 2.7 18.3
Deferred tax on defined benefit pension
scheme 9 (2.4) (19.6)
Share of other comprehensive loss of
joint ventures - (2.8)
(16.0) 15.6
Items that may be reclassified subsequently
to the income statement:
Net gain on cash flow hedges 2.3 3.5
Deferred tax on cash flow hedges 9 (0.6) (0.6)
Net (loss)/gain on hedge of a net investment (8.5) 13.0
Deferred tax on net (loss)/gain on hedge
of net investment 9 0.8 -
(6.0) 15.9
Exchange differences on translation
of foreign operations 19.3 (12.1)
Deferred tax on exchange differences
on translation of foreign operations (1.5) -
--------------- ------------
17.8 (12.1)
Other comprehensive (loss)/income for
the year, net of tax (4.2) 19.4
Total comprehensive (loss)/income for
the year, net of tax (910.7) 237.3
--------------- ------------
Consolidated statement of changes in equity
Year ended 25 February 2021
Capital Currency
Share Share redemption Retained translation Other
capital premium reserve earnings reserve reserves Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- -------- ----------- --------- ------------ --------- ---------
At 1 March 2019 150.6 81.5 12.3 7,938.3 17.7 (2,547.7) 5,652.7
Profit for the year - - - 217.9 - - 217.9
Other comprehensive income - - - 15.6 0.9 2.9 19.4
-------- -------- ----------- --------- ------------ --------- ---------
Total comprehensive income - - - 233.5 0.9 2.9 237.3
Ordinary shares issued on
exercise of employee share
options 0.2 9.3 - - - - 9.5
Loss on ESOT shares issued - - - (3.3) - 3.3 -
Accrued share-based payments - - - 11.6 - - 11.6
Tax on share-based payments - - - (4.1) - - (4.1)
Reserves transfer - - - (1.4) - 1.4 -
Equity dividends (Note 11) - - - (159.9) - - (159.9)
Release of irrevocable commitment
- share buyback - - - - - 330.1 330.1
Shares purchased in share
buyback - - - - - (315.8) (315.8)
Shares purchased under tender
offer (31.0) - 31.0 (2,012.6) - - (2,012.6)
Shares cancelled (6.9) - 6.9 (140.2) - 140.2 -
At 27 February 2020 112.9 90.8 50.2 5,861.9 18.6 (2,385.6) 3,748.8
Loss for the year - - - (906.5) - - (906.5)
Other comprehensive income - - - (16.0) 10.1 1.7 (4.2)
-------- -------- ----------- --------- ------------ --------- ---------
Total comprehensive income (922.5) 10.1 1.7 (910.7)
Ordinary shares issued on
exercise of employee share
options (Note 23) 0.1 2.8 - - - - 2.9
Ordinary shares issued on
rights issue(1) (Note 23) 51.7 929.3 - - - - 981.0
Loss on ESOT shares issued - - - (6.7) - 6.7 -
Accrued share-based payments - - - 14.0 - - 14.0
Tax on share-based payments - - - (1.9) - - (1.9)
At 25 February 2021 164.7 1,022.9 50.2 4,944.8 28.7 (2,377.2) 3,834.1
-------- -------- ----------- --------- ------------ --------- ---------
(1) The share premium amount of GBP929.3m is net of GBP28.2m in
relation to transaction costs associated with the rights issue.
Consolidated balance sheet
At 25 February 2021
25 February 27 February
2021 2020
Notes GBPm GBPm
--------------------------------------------- ------- ----------- -----------
Non-current assets
Intangible assets 12 159.1 172.8
Right-of-use assets - property, plant
and equipment 2,738.4 2,273.7
Right-of-use assets - investment property(1) 65.0 -
Property, plant and equipment 13 4,213.1 4,232.0
Investment property 13 21.6 20.3
Investment in joint ventures 37.3 54.8
Derivative financial instruments 6.6 28.6
Defined benefit pension surplus 25 188.0 190.3
Trade and other receivables 16 - 5.1
----------- -----------
7,429.1 6,977.6
Current assets
Inventories 15 12.1 13.7
Derivative financial instruments 8.2 9.0
Current tax asset - 14.9
Trade and other receivables 16 74.2 292.8
Cash and cash equivalents 17 1,256.0 502.6
1,350.5 833.0
Assets classified as held for sale 13 19.0 14.9
Total assets 8,798.6 7,825.5
Current liabilities
Borrowings 18 312.0 84.0
Lease liabilities 112.1 79.9
Provisions 20 30.5 40.8
Derivative financial instruments 2.4 2.2
Current tax liabilities 1.8 -
Trade and other payables 22 316.5 440.0
775.3 646.9
Non-current liabilities
Borrowings 18 990.5 741.5
Lease liabilities 3,119.5 2,540.7
Provisions 20 9.0 7.6
Derivative financial instruments - 2.2
Deferred tax liabilities 9 44.6 137.8
Trade and other payables 22 25.6 -
4,189.2 3,429.8
Total liabilities 4,964.5 4,076.7
Net assets 3,834.1 3,748.8
----------- -----------
Equity
Share capital 23 164.7 112.9
Share premium 1,022.9 90.8
Capital redemption reserve 50.2 50.2
Retained earnings 4,944.8 5,861.9
Currency translation reserve 28.7 18.6
Other reserves (2,377.2) (2,385.6)
----------- -----------
Total equity 3,834.1 3,748.8
----------- -----------
(1) Right-of-use assets - investment property represents
leasehold sites which the Group acquired on the acquisition of
Foremost Hospitality Hiex GmbH which are being temporarily
subleased to a third party.
Consolidated cash flow statement
Year ended 25 February 2021
52 weeks 52 weeks to
to 25 February 27 February
2021 2020
Notes GBPm GBPm
------------------------------------------------- ----- --------------- ------------
Cash (used in)/generated from operations (227.0) 686.4
Payments against provisions (24.4) (20.1)
Pension payments 25 (14.8) (288.4)
Interest paid - lease liabilities (123.2) (115.3)
Interest paid - other (22.0) (31.9)
Interest received 1.2 12.0
Corporation taxes received/paid 19.1 (8.5)
--------------- ------------
Net cash flows (used in)/from operating
activities (391.1) 234.2
Cash flows (used in)/from investing
activities
Purchase of property, plant and equipment
and investment property (217.4) (372.7)
Proceeds from disposal of property,
plant and equipment 2.6 11.9
Investment in intangible assets (10.8) (20.7)
Acquisition of a subsidiary, net of
cash acquired(1) 1.4 (179.5)
Cash flows on aborted acquisition(2) 1.3 (12.8)
Payment of deferred and contingent consideration (3.8) -
Capital contributions to joint ventures (1.3) -
Loans advanced to joint ventures - (2.0)
Net cash flows used in investing activities (228.0) (575.8)
Cash flows from/(used in) financing
activities
Proceeds from issue of shares on exercise
of employee share options 2.9 9.5
Proceeds from issue of shares on rights
issue, net of fees 981.0 -
Shares purchased in tender offer - (2,012.6)
Shares purchased in share buyback - (315.8)
Drawdowns of long-term borrowings 596.8 50.0
Repayments of long-term borrowings (125.1) (50.0)
Costs of long-term borrowings (5.5) -
Lease incentives (paid) / received (7.3) 1.0
Payment of principal of lease liabilities (71.7) (73.1)
Dividends paid 11 - (159.9)
--------------- ------------
Net cash flows from financing activities 1,371.1 (2,550.9)
Net increase / (decrease) in cash and
cash equivalents 752.0 (2,892.5)
Opening cash and cash equivalents 17 502.6 3,403.2
Foreign exchange differences 1.4 (8.1)
--------------- ------------
Closing cash and cash equivalents 17 1,256.0 502.6
--------------- ------------
(1) Cash consideration for the Group's acquisition of Foremost
Hospitality Hiex GmbH of GBP157.2m (see Note 27) was included in
the consolidated cash flow statement for the year ended 27 February
2020.
(2) During the year ended 27 February 2020, the Group paid a
deposit of GBP12.8m in advance of an acquisition which was
subsequently aborted. In the consolidated cash flow statement for
the year ended 27 February 2020, this was included within cash paid
in advance of acquisitions. During the year ended 25 February 2021,
the Group recovered GBP1.3m following settlement negotiations.
Notes to the accounts
1. General information
The consolidated financial statements and preliminary
announcement of Whitbread PLC for the year ended 25 February 2021
were authorised for issue in accordance with a resolution of the
Board of Directors on 26 April 2021.
The financial year represents the 52 weeks to 25 February 2021
(prior financial year: 52 weeks to 27 February 2020).
The financial information included in this preliminary statement
of results does not constitute statutory accounts within the
meaning of Section 435 of the Companies Act 2006 (the "Act"). The
financial information for the year ended 25 February 2021 has been
extracted from the statutory accounts on which an unqualified audit
opinion has been issued. Statutory accounts for the year ended 25
February 2021 will be delivered to the Registrar of Companies in
advance of the Group's annual general meeting.
The statutory accounts for the year ended 27 February 2020, have
been delivered to the Registrar of Companies, and the Auditors of
the Group made a report thereon under Chapter 3 of part 16 of the
Act. That report was unqualified and did not contain a statement
under sections 498 (2) or (3) of the Act.
The consolidated financial statements of Whitbread PLC and all
its subsidiaries have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and International Financial
Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
2. Accounting policies
The accounting policies adopted in the preparation of these
consolidated financial statements are consistent with those
followed in the preparation of the consolidated financial
statements for the year ended 27 February 2020 except for the
adoption of new standards and interpretations that are applicable
for the year ended 25 February 2021 .
Basis of consolidation
The consolidated financial statements incorporate the accounts
of Whitbread PLC and all its subsidiaries, together with the
Group's share of the net assets and results of joint ventures
incorporated using the equity method of accounting. These are
adjusted, where appropriate, to conform to Group accounting
policies.
A subsidiary is an entity controlled by the Group. Control is
achieved when the Company:
-- has power over the investee;
-- is exposed, or has rights, to variable returns from its involvement with the investee; and
-- has the ability to use its power to affect its returns
The Company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
Apart from the acquisition of Whitbread Group PLC by Whitbread
PLC in 2000/01, which was accounted for using merger accounting,
acquisitions by the Group are accounted for under the acquisition
method and any goodwill arising is capitalised as an intangible
asset. The results of subsidiaries acquired or disposed of during
the year are included in the consolidated financial statements
from, or up to, the date that control passes respectively. All
intra-Group transactions, balances, income and expenses are
eliminated on consolidation. Unrealised losses are also eliminated,
unless the transaction provides evidence of an impairment of the
asset transferred.
Going concern
The Group's and Company's (the "Group") business activities,
together with the factors likely to affect its future development,
performance and position are set out in the CEO overview section
within the preliminary results announcement. The financial position
of the Group, its cash flows, liquidity position and borrowing
facilities are described in the financial review within the
preliminary results announcement. The principal risks of the Group
are set out in the other information within the preliminary results
announcement. In addition, Note 21 includes the Group's financial
risk management objectives, details of its financial instruments
and hedging activities, its exposure to liquidity risk and details
of its capital structure. The directors have considered these areas
alongside the principal risks and how they may impact going
concern.
The future financial performance of the Group is dependent upon
the wider market in which it operates. The COVID-19 pandemic and
the temporary measures put in place to control the virus spreading,
including social distancing restrictions, and both local and
national lockdowns, has heightened the inherent uncertainty in the
Group's assessment of these factors.
The Group has implemented a number of mitigating actions to
reduce cash outflows and maintain liquidity, as follows:
-- Received covenant test waivers for the period to March 2023
for its revolving credit facility (RCF). Under the terms of the
waivers, the Group is required to maintain GBP400.0m cash and/or
headroom under undrawn bank facilities and total net debt must not
exceed GBP2.0bn.
-- Raised GBP550.0m through the issue of Green Bonds and,
subsequent to the year-end, used GBP220.4m of the proceeds to make
an early repayment of the US private placement loan notes which
were due to be settled in 2027. As a result, all of the Group's US
private placement loan notes will have matured prior to the end of
the covenant waiver period in March 2022.
-- Received covenant test waivers for its defined benefit
pension scheme such that the covenants will not be tested until
March 2022.
-- Raised GBP981.0m net of fees through a rights issue.
-- Significantly reduced the level of capital expenditure,
limiting the outflows to only committed, work in progress
compliance and health and safety related spend, pausing all
non-essential discretionary and variable spending.
-- Did not declare a final dividend for FY20 and FY21. No
dividends will be paid during the covenant waiver period unless the
Group complies with the waived covenants.
-- Participated in Government initiatives to protect the
viability of the business, including the Coronavirus Job Retention
Scheme, Eat Out to Help Out Scheme, Business Rates Relief and
grants specific to the leisure and hospitality sector in the UK and
Germany.
-- Completed a major restructuring programme of the Group's
Support Centre and site operations. In addition, the Board and
management team have taken voluntary reductions in
remuneration.
The Group has modelled two financial scenarios that reflect the
impact of the COVID-19 pandemic on the rate of recovery of the
Group's operations in the UK and Germany:
-- A "base case" in which the Group's operations recover in line
with the UK Government's four-step roadmap.
-- A "severe but plausible case" which sensitises these
forecasts for a slower than expected easing of restrictions and
allows for further national restrictions during winter FY22.
Under both the base case and severe but plausible scenarios, the
Group can meet its funding needs through available funds and is
able to meet the relaxed covenants agreed as part of the waivers
throughout the 12-month going concern assessment period.
In the severe but plausible scenario, the Group would fail to
meet the covenant associated with its defined benefit pension
scheme as at 3 March 2022 and as a result, a further variable
payment, based upon the prevailing market conditions at the time of
calculation, would need to be made into the Group's pension scheme.
Under these variable payment scenarios the Group would have
sufficient liquidity to meet this additional funding need and
continue to be in compliance with other covenants.
The long-term impact of COVID-19 remains uncertain and the
impacts of the pandemic on trading conditions could be more
prolonged or severe than that which the directors have considered
in the severe but plausible scenario.
A reverse stress test was performed to determine the market
conditions in which the Group, without additional mitigating
action, would cease to be able to operate under its current
facilities. The significant reduction in sales modelled was well
beyond what is considered reasonable taking into account the past,
near zero occupancy, closure experience and current economic
forecasts for the Group.
The scenarios modelled do not make any allowance for further
mitigations that are within the control of the directors, including
the sale of parts of the Group's valuable freehold property estate,
which would be subject to the prevailing market conditions.
After due consideration of the matters set out above, the
directors are satisfied that there is a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future, being at least 12 months from
the date of signing these financial statements. For this reason,
they continue to adopt the going concern basis in the preparation
of these financial statements.
Adjusting items and use of alternative performance measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way the business performance is
measured internally by the Board and Executive Committee. A
glossary of APMs and reconciliations to statutory measures is given
at the end of this report.
The term adjusted profit is not defined under IFRS and may not
be directly comparable with adjusted profit measures used by other
companies. It is not intended to be a substitute for, or superior
to, statutory measures of profit. Adjusted measures of
profitability are non-IFRS because they exclude amounts that are
included in, or include amounts that are excluded from, the most
directly comparable measure calculated and presented in accordance
with IFRS.
The Group makes certain adjustments to the statutory profit
measures in order to derive many of its APMs. The Group's policy is
to exclude items that are considered to be significant in nature
and quantum, not in the normal course of business or are consistent
with items that were treated as adjusting in prior periods or that
span multiple financial periods. Treatment as an adjusting item
provides users of the accounts with additional useful information
to assess the year-on-year trading performance of the Group.
On this basis, the following are examples of items that may be
classified as adjusting items:
-- net charges associated with the strategic programme in
relation to the review of the hotel estate, excluding those
relating to financing;
-- significant restructuring costs and other associated costs
arising from strategy changes that are not considered by the Group
to be part of the normal operating costs of the business;
-- significant pension charges arising as a result of changes to
the UK defined benefit scheme practices;
-- impairment and related charges for sites which are
underperforming that are considered to be significant in nature
and/or value to the trading performance of the business;
-- costs in relation to non-trading legacy sites which are
deemed to be significant and not reflective of the Group's ongoing
trading results;
-- profit or loss on the sale of a business or investment, and
the associated cost impact on the continuing business from the sale
of the business or investment;
-- acquisition costs incurred as part of a business combination
or other strategic asset acquisitions;
-- amortisation of intangible assets recognised as part of a
business combination or other transaction outside of the ordinary
course of business; and
-- tax settlements in respect of prior years, including the
related interest and the impact of changes in the statutory tax
rate, the inclusion of which would distort year-on-year
comparability, as well as the tax impact of the adjusting items
identified above.
The directors believe that the adjusted profit and earnings per
share measures provide additional useful information to
shareholders on the performance of the business. These measures are
consistent with how business performance is measured internally by
the Board and Executive Committee.
Government Grants
During the year, the Group has received Government support. A
Government grant is recognised in the consolidated balance sheet
within other receivables when there is reasonable assurance that it
will be received and that the Group will comply with the conditions
attached to it. Grants are recognised within other income in the
consolidated income statement at a point in time to match the
timing of the recognition of the related expenses they are intended
to compensate. Where cash is received in advance of the associated
conditions being met, the grant is recorded within trade and other
payables in the consolidated balance sheet.
Changes in accounting policies
The Group has adopted the following standards and amendments for
the first time for the annual reporting period commencing 28
February 2020:
Covid-19-Related Rent Concessions Amendment to IFRS 16
Covid-19-Related Rent Concessions (Amendment to IFRS 16)
provides practical relief to lessees in accounting for rent
concessions occurring as a direct consequence of COVID-19, by
introducing a practical expedient to IFRS 16. The practical
expedient permits a lessee to elect not to assess whether a COVID-
19-related rent concession is a lease modification. A lessee that
makes this election shall account for any change in lease payments
resulting from the COVID-19-related rent concession the same way it
would account for the change applying IFRS 16 if the change were
not a lease modification.
The practical expedient applies only to rent concessions
occurring as a direct consequence of COVID-19 and only if all of
the following conditions are met:
a) The change in lease payments results in revised consideration
for the lease that is substantially the same as, or less than, the
consideration for the lease immediately preceding the change;
b) Any reduction in lease payments affects only payments
originally due on or before 30 June 2021 (a rent concession meets
this condition if it results in reduced lease payments on or before
30 June 2021 and increased lease payments that extend beyond 30
June 2021); and
c) There is no substantive change to other terms and conditions of the lease.
In the current financial year, the Group has applied the
amendment to IFRS 16 (as issued by the IASB in May 2020) in advance
of its effective date.
Impact of adoption
As a result of early adopting these requirements, rent deferrals
which would otherwise have been treated as lease modifications have
been accounted for as if the change was not a lease modification.
The adoption of the amendments had no impact on the consolidated
income statement.
Amendments to IFRS 3 Definition of a Business
The amendment to IFRS 3 Business Combinations clarifies that to
be considered a business, an integrated set of activities and
assets must include, at a minimum, an input and a substantive
process that, together, significantly contribute to the ability to
create output and clarifies that a business can exist without
including all of the inputs and processes needed to create outputs.
Furthermore, it introduces an optional concentration test that
allows a simplified assessment of whether an acquired set of
activities and assets is not a business.
Impact of adoption
As set out in Note 27, the Group has applied the clarifications
to the definition of a business in determining that the acquisition
of Foremost Hospitality Hiex GmbH is a business combination and has
applied the concentration test in determining that the acquisition
of 13 hotels from Centro Hotel Group is an asset acquisition.
Other standards and interpretations
The Group has adopted the following standards and
interpretations which have been assessed as having no financial
impact or disclosure requirements at this time:
-- Amendments to IAS 1 and IAS 8 Definition of Material
-- Amendments to References to the Conceptual Framework in IFRS Standards
Critical accounting judgements and key sources of estimation
uncertainty
The critical accounting judgements and key sources of estimation
uncertainty are consistent with those disclosed in the Group's
annual financial statements for the year ended 27 February 2020
except for the removal of the key area of estimation uncertainty
for lease liability - discount rates.
Critical accounting judgements
Adjusting items
During the year certain items are identified and separately
disclosed as adjusting items. Judgement is applied as to whether
the item meets the necessary criteria as per the accounting policy
disclosed earlier in this note. This assessment covers the nature
of the item, cause of occurrence and the scale of impact of that
item on reported performance. Reversals of previous adjusting items
are assessed based on the same criteria. Note 6 provides
information on all of the items disclosed as adjusting in the
current year and comparative financial statements.
Key areas of estimation uncertainty
Defined benefit pension
Defined benefit pension plans are accounted for in accordance
with actuarial advice using the projected unit credit method. The
Group makes significant estimates in relation to the discount
rates, mortality rates and inflation rates used to calculate the
present value of the defined benefit obligation. Note 25 describes
the assumptions used together with an analysis of the sensitivity
to changes in key assumptions.
Impairment testing - Goodwill, property, plant and equipment and
right-of-use assets
The performance of the Group's impairment review requires
management to make a number of estimates. These are set out
below:
Identification of indicators of impairment
Where there are indicators of impairment, management performs an
impairment assessment. The speed at which the Group's sites will
recover from the impact of the COVID-19 pandemic is uncertain and
as a result, all of the Group's sites have been tested for
impairment.
Inputs used to estimate value in use
The estimate of value in use is most sensitive to the following
inputs:
-- Five year business plan - Forecast cash flows for the initial
five-year period are based on actual cash flows for FY20 being the
period before the impact of the COVID-19 pandemic and applying
management's assumptions of the impact of the pandemic and expected
recovery period.
-- Discount rate - Judgement is required in estimating the
Weighted Average Cost of Capital (WACC) of a typical market
participant and in assessing the specific country and currency
risks associated with the Group. The rate used is adjusted for the
Group's gearing, including equity, borrowings and lease
liabilities.
-- Immature sites - Judgment is required to estimate the time
taken for sites to reach maturity and the sites' trading level once
they are mature.
Methodology used to estimate fair value
Fair value is determined using a range of methods, including
present value techniques using assumptions consistent with the
value in use calculations and market multiple techniques using
externally available data.
Key estimates and sensitivities for impairment of assets are
disclosed in Note 14.
3. Segment information
For management purposes, the Group is organised into a single
strategic business unit, Premier Inn, which provides services in
relation to accommodation, food and beverage both in the UK and
internationally.
In previous years, the UK & Ireland and Germany Premier Inn
segments have been aggregated on the grounds that the Germany
segment did not meet the thresholds of being a reportable segment.
As a result of the increasing size of the German operations, the
Germany segment will be presented separately going forward. As the
Group's reportable segments have been changed, the comparative
information for 2019/20 has been re-presented.
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. The UK & Ireland segment includes one site in each of
Jersey and the Isle of Man. Included within central and other in
the following tables are the costs of running the public company,
other central overhead costs and share of losses from joint
ventures.
The following tables present revenue and profit information
regarding business operating segments for the years ended 25
February 2021 and 27 February 2020.
52 weeks to 27 February 2020
52 weeks to 25 February 2021 (re-presented)
---------------------------- ----------------------------
Revenue Central UK & Central
UK & Ireland Germany and other Total Ireland Germany and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ ------- ---------- ----- -------- ------- ---------- -------
Accommodation 388.5 10.2 - 398.7 1,311.6 9.8 - 1,321.4
Food, beverage and other
items(1) 188.9 1.3 - 190.2 738.7 2.0 - 740.7
------------ ------- ---------- ----- -------- ------- ---------- -------
Revenue before adjusting
items 577.4 11.5 - 588.9 2,050.3 11.8 - 2,062.1
Adjusting revenue (Note
6) 0.5 9.4
----- -------
Revenue 589.4 2,071.5
----- -------
(1) Revenue from food, beverage and other items for the UK &
Ireland segment includes GBP12.0m (2019/20: GBPnil) of
consideration receivable from HM Revenue & Customs under the
Eat Out to Help Out scheme.
52 weeks to 25 February 2021 52 weeks to 27 February 2020
(re-presented)
---------------------------- ----------------------------
(Loss)/profit Central UK & Central
UK & Ireland Germany and other Total Ireland Germany and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------------ ------- ---------- --------- -------- ------- ---------- -------
Adjusted operating (loss)/profit
before joint ventures(1) (415.7) (38.8) (26.2) (480.7) 529.4 (13.4) (27.1) 488.9
Share of loss from joint
ventures - - (6.0) (6.0) - - (2.1) (2.1)
------------ ------- ---------- --------- -------- ------- ---------- -------
Adjusted operating (loss)/profit (415.7) (38.8) (32.2) (486.7) 529.4 (13.4) (29.2) 486.8
Net finance costs (117.1) (6.1) (25.2) (148.4) (115.1) (0.2) (13.2) (128.5)
Adjusted (loss)/profit
before tax (532.8) (44.9) (57.4) (635.1) 414.3 (13.6) (42.4) 358.3
Adjusting items (Note
6) (372.3) (78.3)
--------- -------
(Loss)/profit before
tax (1,007.4) 280.0
--------- -------
(1) Adjusted operating (loss)/profit for the UK & Ireland
segment includes the impact of Business Rates Relief provided by
the UK Government of GBP117.8m (2019/20: GBPnil) and income from
the job retention schemes in the UK of GBP138.3m (2019/20: GBPnil).
Adjusted operating (loss)/profit for the Germany segment includes
GBP1.5m (2020: GBPnil) from the Kurzarbeit scheme and other
government grants of GBP10.3m (2019/20: GBPnil).
52 weeks 25 February 2021 52 weeks 27 February 2020
(re-presented)
------------------------- -------------------------
Other segment information UK and Central Total UK and Central Total
Ireland Germany and other operations Ireland Germany and other operations
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Capital expenditure:
Property, plant and
equipment - cash basis 121.0 96.4 - 217.4 293.4 79.3 - 372.7
Property, plant and
equipment - accruals
basis 105.9 93.2 - 199.1 288.4 70.6 - 359.0
Intangible assets 10.8 - - 10.8 18.0 2.7 - 20.7
Cash outflows from lease
interest and payment
of principal of lease
liabilities 173.0 21.9 - 194.9 186.6 0.8 - 187.4
Depreciation - property,
plant and equipment 145.2 5.1 - 150.3 143.6 1.4 - 145.0
Depreciation - right-of-use
assets 109.9 16.4 - 126.3 103.2 0.8 - 104.0
Amortisation 23.3 0.3 - 23.6 19.6 0.2 - 19.8
The following table present revenue and profit information and
certain asset and liability information regarding the Premier Inn
segment for the years ended 25 February 2021 and 27 February
2020.
Revenues from external customers are split geographically 2020/21 2019/20
as follows: GBPm GBPm
----------------------------------------------------------- -------- --------
United Kingdom 575.5 2,051.6
Germany 11.5 11.8
Other 2.4 8.1
-------- --------
589.4 2,071.5
-------- --------
Non-current assets(1) are split geographically as 2021 2020
follows: GBPm GBPm
--------------------------------------------------- -------- --------
United Kingdom 6,343.6 6,326.2
Germany 809.3 343.6
Other 81.6 88.9
-------- --------
7,234.5 6,758.7
-------- --------
(1) Non-current assets exclude derivative financial instruments
and the surplus on the Group's defined benefit pension scheme.
4. Other income
2020/21 2019/20
GBPm GBPm
------------------------------------------
Rental income 7.8 4.9
Rates rebates relating to prior financial
years - 13.6
Government grants (Note 8) 153.4 -
Other 0.6 0.3
------- -------
Other income before adjusting items 161.8 18.8
Insurance proceeds (Note 6) 1.8 16.0
Legal settlement (Note 6) - 2.3
VAT settlement (Note 6) 4.5 -
------- -------
Other income 168.1 37.1
------- -------
5. Operating costs
2020/21 2019/20
GBPm GBPm
---------------------------------------------
Cost of inventories recognised as an
expense(1) 72.2 208.5
Employee benefit expense(2) 581.5 612.5
Amortisation of intangible assets (Note
12) 23.6 19.8
Depreciation - property, plant and equipment
and investment property (Note 13) 150.3 145.0
Depreciation - right-of-use-assets 126.3 104.0
Utilities, rates and other site property
costs 220.8 431.8
Variable lease payment expense (0.6) 2.0
Net foreign exchange differences 0.4 (0.2)
Other operating charges(2) 56.9 68.6
Adjusting operating costs(2) (Note 6) 351.7 105.6
------- -------
1,583.1 1,697.6
------- -------
(1) Cost of inventories recognised as an expense includes
GBP14.6m (2019/20: GBP3.6m) of inventory write-downs recorded
during the year.
(2) Adjusting operating costs includes a charge for impairments
and write offs of GBP350.4m (2019/20: GBP67.0m), a credit of
GBP9.0m (2019/20: charge of GBP41.1m) relating to other operating
charges and a charge of 10.3m (2019/20: credit of GBP2.5m) relating
to employee benefit expenses.
6. Adjusting items
As set out in the policy in Note 2, we use a range of measures
to monitor the financial performance of the Group. These measures
include both statutory measures in accordance with IFRS and APMs
which are consistent with the way that the business performance is
measured internally. We report adjusted measures because we believe
they provide both management and investors with useful additional
information about the financial performance of the Group's
businesses. Adjusted measures of profitability represent the
equivalent IFRS measures adjusted for specific items that we
consider hinder the comparison of the financial performance of the
Group's businesses either from one period to another or with other
similar businesses.
2020/21 2019/20
GBPm GBPm
------------------------------------------------------------- ------- -------
Adjusting items are as follows:
Revenue:
TSA income (a) 0.5 9.4
Other income:
Insurance proceeds (b) 1.8 16.0
Legal settlement (c) - 2.3
VAT settlement (d) 4.5 -
------- -------
Adjusting other income 6.3 18.3
Operating costs:
TSA costs (a) (0.5) (8.9)
Costa disposal - separation costs and other costs
(e) 6.4 (15.2)
Impairment - goodwill (f) (238.8) -
Impairment and write offs - property, plant and equipment,
right-of-use assets and other intangible assets (g) (109.2) (67.0)
Impairment - investment in joint ventures (h) (8.2) -
Guaranteed minimum pension (i) (1.1) -
Aborted acquisition costs (j) (12.4) (2.4)
UK restructuring (k) (12.1) 0.2
Gains/(losses) on disposals, property and other provisions
(l) 18.4 (9.3)
Employment tax settlement (m) - (3.0)
Adjusting operating costs (357.5) (105.6)
Share of loss of joint ventures:
Impairment (n) (1.7) (0.4)
Finance (costs)/income:
Early prepayment charge (Note 18) (o) (21.2) -
VAT settlement (d) 1.3 -
------- -------
Adjusting finance costs (19.9) -
Adjusting items before tax (372.3) (78.3)
------- -------
Tax adjustments included in reported profit after
tax, but excluded in arriving at adjusted profit
after tax:
Tax on adjusting items 19.3 7.0
Impact of change in tax rates (12.5) -
Adjusting tax credit 6.8 7.0
------- -------
(a) Following the sale of Costa to The Coca-Cola Company, the
Group entered into a Transitional Services Agreement (TSA) to
provide certain services to facilitate the successful separation of
Costa from the rest of the Whitbread Group. This includes HR, IT
and facilities services. The revenue has been earned since the
completion of the sale on 3 January 2019 and has now been
concluded.
(b) During the year the Group recognised insurance claim
proceeds of GBP1.8m (2019/20: GBP16.0m) in other income covering
property and loss of trade in relation to a fire at a site in the
prior year.
(c) During the prior year, the Group received a legal settlement
of GBP2.3m in relation to leases entered in prior periods.
(d) In May 2020, HMRC confirmed it would not appeal the ruling
of the Upper Tier Tribunal in the cases of Rank Group plc and Done
Brothers (Cash Betting) Ltd that VAT was incorrectly applied to
revenues earned from certain gaming machines prior to 2013. The
Group has submitted claims which are substantially similar and has
received a refund of overpaid VAT of GBP4.5m plus interest on this
amount of GBP1.3m.
(e) In the prior year the Group recognised a charge of GBP15.2m
which included expected costs of GBP4.0m relating to the separation
of Costa and GBP2.4m relating to the impact of the disposal on the
continuing business which the Group no longer expects to incur.
(f) The Group has recorded a goodwill impairment charge of
GBP238.8m in relation to its operations in Germany. The goodwill
was recognised on the acquisition of Foremost Hospitality Hiex GmbH
(see Note 27) which the Group entered into in the year ended 1
March 2018 and has been impaired as a result of the impact of the
COVID-19 pandemic on current and future growth rates.
(g) As a result of the COVID-19 pandemic, the Group identified
impairment indicators relating to assets held by the Group. An
impairment review of those assets was undertaken, resulting in a
total impairment charge of GBP99.6m. This is made up of GBP61.2m
relating to property, plant and equipment, GBP36.7m relating to
right-of-use assets and GBP1.7m relating to IT assets. In addition,
following a review of early stage expansion projects, assets with a
value of GBP5.7m were written off relating to sites where the Group
has decided not to proceed with the project, and an impairment
charge of GBP3.9m was recorded in relation to assets classified as
held for sale. Further information is provided in Note 14. In the
prior year, a total charge of GBP67.0m was recorded, made up of
GBP36.6m of impairment losses on trading sites, GBP10.3m following
a fire at a site, GBP5.0m relating to assets classified as held for
sale and GBP15.1m relating to the cancellation of significant IT
projects.
(h) As a result of the COVID-19 pandemic, the Group identified
impairment indicators relating to its investment in its UK joint
venture, Healthy Retail Limited. Following an impairment review, a
charge of GBP8.2m has been recorded within adjusting items. Further
information is available in Note 14.
(i) A High Court ruling in November 2020 confirmed that pension
schemes should extend the equalisation of guaranteed minimum
pension benefits for men and women to those who transferred
benefits to other plans after 1990. The cost of reflecting this
decision in the obligations of the Whitbread Group defined benefit
scheme at the year-end was estimated at GBP1.1m, which has been
recognised as a past service cost in the income statement in the
current year. The treatment of this is consistent with the GMP
equalisation adjustment in FY18/19. Any future revisions to the
estimate will be recognised in other comprehensive income.
(j) At 27 February 2020, the Group had purchased a call option
for an acquisition as part of the Group's strategy for
international growth. As a result of the COVID-19 pandemic, the
Group decided subsequent to the year-end not to proceed with the
acquisition. An amount of GBP1.3m was recovered following
settlement negotiations resulting in a charge of GBP12.4m,
including fees, being recorded in the income statement. During the
prior year, the Group incurred fees of GBP2.4m in relation to
acquisitions which did not proceed to completion.
(k) During the year, the Group restructured its Support Centre
and site operations resulting in redundancy and project costs of
GBP12.1m. During the prior year, a provision for restructuring of
GBP0.2m was released to the income statement.
(l) From FY18 to FY20, the Group established a provision for the
performance of remedial works on cladding material at a small
number of sites (see Note 20). During the year, the Group has
received reimbursements of those costs from property developers
totalling GBP13.4m (2019/20: GBPnil) and has released costs of
GBP3.3m which are no longer expected to be incurred (2019/20:
provided for costs of GBP14.5m). In addition, during the year, the
Group made a loss on disposal of GBP1.1m (2019/20: gain of GBP5.2m)
and released other provisions of GBP2.8m (2019/20: GBPnil). Further
details of the property and other provisions are included in Note
20.
(m) During the prior year, the Group received an enquiry from
HMRC into its historic PAYE Settlement Agreements and provided for
the potential settlement in full. The enquiry is ongoing and the
provision is unchanged at 25 February 2021.
(n) The Group recorded a cost of GBP1.7m (2019/20: GBP0.4m)
representing its share of a site level impairment in the accounts
of its Middle East joint venture, Premier Inn Hotels LLC.
(o) On 25 February 2021, the Group exercised an early repayment
option associated with the Series A loan notes and Series B loan
notes issued in 2017 and originally due for repayment on 16 August
2027. As a result, an early repayment charge of GBP21.2m was
incurred.
7. Finance (costs)/income
2020/21 2019/20
GBPm GBPm
Finance costs
Interest on bank loans and overdrafts (5.3) (3.7)
Interest on other loans (24.1) (27.3)
Interest on lease liabilities (123.2) (115.3)
Unwinding of discount on provisions - (0.1)
Unwinding of discount on contingent consideration (2.1) -
Interest capitalised 0.9 2.2
Impact of ineffective portion of cash flow
and fair value hedges - (0.2)
(153.8) (144.4)
Finance income
Bank interest receivable 1.2 11.6
Other interest receivable 0.8 0.3
Impact of ineffective portion of cash flow
and fair value hedges 0.4 -
IAS 19 pension finance income (Note 25) 3.0 4.0
5.4 15.9
Adjusted net finance costs (148.4) (128.5)
------- -------
Early prepayment charge (Note 18) (21.2) -
VAT settlement (Note 6) 1.3 -
------- -------
Adjusting net finance costs (19.9) -
------- -------
Total net finance costs (168.3) (128.5)
------- -------
8. Government grants and assistance
During the year, the Group has received government support
designed to mitigate the impact of COVID-19.
In the UK, the Government has provided funding towards the
salary costs of employees who have been 'furloughed' through the
Coronavirus Job Retention Scheme. The scheme rules have evolved
during the period and remain complex to interpret and apply to the
claims. This funding meets the definition of a government grant
under IAS 20 Government Grants and a total of GBP138.3m (2019/20:
GBPnil) has been recorded within other income. The related salary
costs which are compensated by the scheme are included within
operating costs in the consolidated income statement.
In Germany, the Government provide enhanced benefits directly to
individual employees with employers partially compensated for
continued social security payments under Kurzarbeit. Support
provided directly to employees reduced the Group's operating costs
by GBP0.9m and a total of GBP0.6m was recognised in other income
relating to compensation for social security payments.
The UK Government introduced a business rates holiday for
retail, hospitality and leisure businesses for the 2020 to 2021 tax
year. The relief has allowed the Group to reduce operating costs by
GBP117.8m in the year. Subsequent to the year-end, an extension to
this relief of three months in England and one year in Scotland was
announced.
The Group has recognised GBP10.3m within other income as amounts
receivable from the German Government under the November Support
and December Support schemes. Subsequent to the year-end, the
German Government removed a restriction in place on the Bridge Aid
scheme which allowed the Group to make a grant claim under this
scheme. This change is a non-adjusting post balance sheet event. As
a result, the Group expects to make claims of GBP10.4m which will
be recognised in FY22 relating to the period from January 2021 to
June 2021.
The Group registered with the Government's Eat out to Help Out
Scheme during August 2020, which provided government funding for
50% of food and non-alcoholic beverage purchases, capped at GBP10
per head. The Group has claimed GBP12.0m (2019/20: GBPnil) as part
of the scheme which has been recognised as revenue.
The UK Government provided grants to support businesses in the
retail, hospitality and leisure section who had been forced to
close as a result of lockdown restrictions in January and February
2021. The Group has recognised GBP3.5m in other income relating to
these grants.
The Group was confirmed as an eligible issuer under the UK
Government Covid Corporate Financing Facility (CCFF) with an
initial limit of GBP600.0m. The limit was reduced to GBP300.0m
following the reduction in the Group's credit rating to BBB-. The
Group did not draw down on the facility during the year or prior to
its expiry on 22 March 2021.
The UK Government announced on 8 July 2020, that a reduced rate
of VAT would apply to certain supplies in the hospitality and hotel
accommodation sector and this was extended by the Budget in 2021.
As a result, for the period from 15 July 2020 to 30 September 2021,
the Group's sales of accommodation, food and beverage (excluding
alcohol) will be charged at 5% VAT. A new reduced rate of 12.5%
will then be introduced which will end on 31 March 2022.
The Group has taken part in the COVID-19 VAT deferral scheme
allowing it to defer VAT payments totalling GBP14.9m which would
ordinarily have fallen due during FY21 to FY22.
9. Taxation
2020/21 2019/20
Consolidated income statement - continuing operations GBPm GBPm
------------------------------------------------------- ---------- ----------
Current tax:
Current tax (credit)/expense (10.7) 24.7
Adjustments in respect of previous periods 11.9 -
---------- ----------
1.2 24.7
Deferred tax:
Origination and reversal of temporary differences (109.4) 34.3
Effect of rate change 12.5 -
Adjustments in respect of previous periods (5.2) 3.1
(102.1) 37.4
---------- ----------
Tax reported in the consolidated income statement (100.9) 62.1
---------- ----------
Consolidated statement of comprehensive income - continuing 2020/21 2019/20
operations GBPm GBPm
------------------------------------------------------------- ---------- ----------
Current tax:
Defined benefit pension scheme (2.7) (18.3)
Deferred tax:
Cash flow hedges 0.6 0.6
Tax on net gain on hedge of a net investment (0.8) -
Tax on exchange differences on translation of foreign 1.5 -
operations
Defined benefit pension scheme 2.4 19.6
Tax reported in other comprehensive income 1.0 1.9
---------- ----------
A reconciliation of the tax (credit)/charge applicable to
adjusted (loss)/profit before tax and profit before tax at the
statutory tax rate, to the actual tax charge at the Group's
effective tax rate, for the years ended 25 February 2021 and 27
February 2020 respectively is as follows:
2020/21 2020/21 2019/20 2019/20
------------------------------------------
Tax on
Tax on adjusted Tax on
adjusted Tax on profit Profit
profit profit (restated) (restated)
GBPm GBPm GBPm GBPm
------------------------------------------ ---------- ---------- ------------ ------------
Profit before tax as reported
in the consolidated income statement (635.1) (1,007.4) 358.3 280.0
Tax at current UK tax rate of
19.00% (2019/20: 19.00%) (120.7) (191.4) 68.1 53.2
Effect of different tax rates (6.9) (6.9) (1.8) (1.8)
Unrecognised losses in overseas
companies 14.7 17.0 5.4 5.4
Effect of joint ventures 0.3 0.3 0.1 0.1
Tax credit on defined benefit
pension scheme contribution - - (3.8) (3.8)
Expenditure not allowable 10.0 59.1 2.1 6.9
Adjustments to current tax expense
in respect of previous years 9.0 11.9 - -
Adjustments to deferred tax expense
in respect of previous years (1.7) (5.2) - 3.1
Impact of deferred tax being
at a different rate from current
tax rate - 12.5 (1.0) (1.0)
Other movements 1.2 1.8 - -
Tax expense reported in the consolidated
income statement (94.1) (100.9) 69.1 62.1
---------- ---------- ------------ ------------
Deferred tax
The major deferred tax assets/(liabilities) recognised by the
Group and movements during the current and prior financial years
are as follows:
Rolled
Accelerated over gains
Capital and property
Allowances valuations Pensions Leases Losses Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 March 2019 (53.4) (63.0) (4.1) 45.2 - 4.2 (71.1)
Charge to consolidated
income statement (0.9) (1.4) (32.6) (1.9) - (0.6) (37.4)
Charge to statement of
comprehensive income - - (19.6) - - (0.6) (20.2)
Credit to statement of
changes in equity - - - - - (4.4) (4.4)
Arising on acquisitions - - - - - (4.9) (4.9)
Foreign exchange and
other movements - - - - - 0.2 0.2
--------------------------------- ------------ -------------- --------- ------- ------- ------ --------
At 27 February 2020 (54.3) (64.4) (56.3) 43.3 - (6.1) (137.8)
(Charge)/credit to consolidated
income statement 10.0 6.6 (3.8) 0.7 84.4 4.2 102.1
Charge to statement of
comprehensive income - - (2.4) - (0.7) (0.6) (3.7)
Charge to statement of
changes in equity - - - - - (1.9) (1.9)
Transfer - - - (4.7) - 4.7 -
Arising on acquisitions - - - (3.5) - - (3.5)
Foreign exchange and
other movements 0.1 - - 0.2 - (0.1) 0.2
--------------------------------- ------------ -------------- --------- ------- ------- ------ --------
At 25 February 2021 (44.2) (57.8) (62.5) 36.0 83.7 0.2 (44.6)
Total deferred tax liabilities relating to disposals during the
year were GBPnil (2020: GBPnil).
The Group has incurred overseas tax losses of GBP84.8m (2020:
GBP30.0m) which can be carried forward indefinitely and offset
against future taxable profits in the same tax group. The Group
carries out an annual assessment of the recoverability of these
losses and, does not think it is appropriate at this stage to
recognise any deferred tax asset. Recognition of these assets in
their entirety would result in an increase in the reported deferred
tax asset of GBP26.2m (2020: 10.0m).
At 25 February 2021, no deferred tax liability is recognised
(2020: GBPnil) on gross temporary differences of GBP3.0m (2020:
GBP3.1m) relating to the unremitted earnings of overseas
subsidiaries as the Group is able to control the timings of the
reversal of these temporary differences and it is probable that
they will not reverse in the foreseeable future.
Tax relief on total interest capitalised amounts to GBP0.2m
(2019/20: GBP0.4m).
Factors affecting the tax charge for future years
The Finance (No.2) Act 2015 reduced the main rate of UK
corporation tax to 19%, effective from 1 April 2017. A further
reduction in the UK corporation tax rate to 17% was expected to
come into effect from 1 April 2020 (as enacted by Finance Act 2016
on 15 September 2016). However, legislation introduced in the
Finance Act 2020 (enacted on 22 July 2020) repealed the reduction
of the corporation tax rate, thereby maintaining the current rate
of 19%. Deferred taxes on the balance sheet have been measured at
19% (2020: 17%) which represents the future corporation tax rate
that was enacted at the balance sheet date.
The UK Budget 2021 announcements on 3 March 2021 included
measures to support economic recovery as a result of the ongoing
COVID-19 pandemic. These included an increase to the UK's main
corporation tax rate to 25%, effective from 1 April 2023. These
changes were not substantively enacted at the balance sheet date
and hence have not been reflected in the measurement of deferred
tax balances at the period end. If the UK deferred tax balances
that are expected to unwind at 25% were remeasured at the balance
sheet date at 25%, the Group estimates that this would result in an
increase in the net deferred tax liability, which could vary based
on a number of factors and judgements, up to GBP22.0m.
10. Earnings per share
The basic earnings per share (EPS) figures are calculated by
dividing the net (loss)/profit for the period attributable to
ordinary shareholders of the parent by the weighted average number
of ordinary shares in issue during the period after deducting
treasury shares and shares held by an independently managed
employee share ownership trust (ESOT).
The diluted earnings per share figures allow for the dilutive
effect of the conversion into ordinary shares of the weighted
average number of options outstanding during the period. Where the
average share price for the period is lower than the option price,
the options become anti-dilutive and are excluded from the
calculation. There are 2.3m (2020: nil) shares options excluded
from the diluted earnings per share calculation because they would
be anti-dilutive.
Basic and diluted earnings per share figures for the comparative
period have been restated for the bonus factor of 1.1640 to reflect
the bonus element of the June 2020 rights issue, in accordance with
IAS 33 Earnings per Share. Amounts as originally stated at 27
February 2020 were 145.9p basic earnings per share (145.0p diluted)
and 193.6p basic adjusted earnings per share (192.4p diluted).
The number of shares used for the earnings per share
calculations are as follows:
2019/20
2020/21 (restated)
million million
--------------------------------------------------- -------- -----------
Basic weighted average number of ordinary shares 188.1 173.9
Effect of dilution - share options - 0.9
-------- -----------
Diluted weighted average number of ordinary shares 188.1 174.8
-------- -----------
The total number of shares in issue at the year-end, as used in
the calculation of the basic weighted average number of ordinary
shares, was 214.4m, less 12.5m treasury shares held by Whitbread
PLC and 0.4m held by the ESOT (2020: 147.0m, less 12.5m treasury
shares held by Whitbread PLC and 1.0m held by the ESOT).
The (losses)/profits used for the earnings per share
calculations are as follows:
2020/21 2019/20
GBPm GBPm
(Loss)/profit for the period attributable to parent
shareholders (906.5) 217.9
Adjusting items - gross (Note 6) 372.3 78.3
Adjusting items - taxation (Note 6) (6.8) (7.0)
Adjusted (loss)/profit for the period attributable
to parent shareholders (541.0) 289.2
2019/20
2020/21 (restated)
pence pence
Basic EPS on (loss)/profit for the period (481.9) 125.3
Adjusting items - gross 197.9 45.0
Adjusting items - taxation (3.6) (4.0)
Basic EPS on adjusted (loss)/profit for the period (287.6) 166.3
Diluted EPS on (loss)/profit for the period (481.9) 124.7
Diluted EPS on adjusted (loss)/profit for the period (287.6) 165.4
11. Dividends paid
2020/21 2019/20
pence per pence per
share GBPm share GBPm
----------------------------------------------- --------- ---- --------- -----
Equity dividends on ordinary shares:
Final dividend, proposed and paid, relating
to the prior year - - 67.00 116.3
Interim dividend, proposed and paid, for
the current year - - 32.65 43.6
- 159.9
Dividends on other shares:
B share dividend 0.90 - 0.90 -
C share dividend 0.90 - 0.60 -
Total dividends paid - 159.9
---- -----
As a condition agreed with Whitbread's lenders and Pension
Trustees, dividends will not be paid during the current covenant
waiver period which lasts until March 2023 unless the Group
demonstrates compliance with agreed metrics, being net debt/EBITDA
<3.5x and EBITDA/interest >3.0x.
Dividends per share for the comparative period stated above are
as declared and paid to shareholders on shares in issue when
dividends were paid. Restating these amounts to take account of the
bonus element of the June 2020 rights issue would result in final
dividend declared and paid of 57.56p per share and interim dividend
declared and paid of 28.05p per share.
12. Intangible assets
IT software
Goodwill and technology Total
GBPm GBPm GBPm
Cost
At 1 March 2019 113.5 116.1 229.6
Additions - 20.7 20.7
Assets written off (2.2) (27.9) (30.1)
Foreign currency adjustment - (0.1) (0.1)
---------------------------------------------------- -------- --------------- -------
At 27 February 2020 111.3 108.8 220.1
Additions - 10.8 10.8
Recognised on acquisition of a subsidiary (Note 27) 224.2 - 224.2
Assets written off - (9.7) (9.7)
Foreign currency adjustment 14.6 0.1 14.7
---------------------------------------------------- -------- --------------- -------
At 25 February 2021 350.1 110.0 460.1
Amortisation and impairment
At 1 March 2019 (3.0) (51.0) (54.0)
Amortisation during the year - (19.8) (19.8)
Amortisation on assets written off 2.2 24.3 26.5
At 27 February 2020 (0.8) (46.5) (47.3)
Amortisation during the year - (23.6) (23.6)
Impairment during the year (Note 14) (238.8) - (238.8)
Amortisation on assets written off - 8.7 8.7
At 25 February 2021 (239.6) (61.4) (301.0)
Net book value at 25 February 2021 110.5 48.6 159.1
-------- --------------- -------
Net book value at 27 February 2020 110.5 62.3 172.8
-------- --------------- -------
An impairment of GBP238.8m was recorded in relation to goodwill
arising on the acquisition of Foremost Hospitality Hiex GmbH (see
Note 27) reflecting the impact of the COVID-19 pandemic on current
and future growth rates. Further details of the impairment are
included in Note 14.
Other than goodwill, there are no intangible assets with
indefinite lives. IT software and technology assets have been
assessed as having finite lives and are amortised under the
straight-line method over periods ranging from three to ten years
from the date the asset became fully operational.
Capital expenditure commitments
Capital expenditure commitments in relation to intangible assets
at the year-end amounted to GBP0.5m (2020: GBP0.5m).
13. Property, plant & equipment and investment property
Total
property,
Land and Plant plant Investment
buildings and equipment and equipment property Total
GBPm GBPm GBPm GBPm GBPm
------------------------------- ----------- --------------- --------------- ----------- --------
Cost
At 1 March 2019 3,402.5 1,373.4 4,775.9 - 4,775.9
Additions 158.7 178.3 337.0 22.0 359.0
Acquisitions of a subsidiary - 0.6 0.6 - 0.6
Interest capitalised 2.2 - 2.2 - 2.2
Movements to held for sale
in the year (10.1) (3.0) (13.1) - (13.1)
Disposals (1.0) - (1.0) - (1.0)
Assets written off (10.2) (12.8) (23.0) - (23.0)
Foreign currency adjustment (4.0) (0.5) (4.5) (1.6) (6.1)
At 27 February 2020 3,538.1 1,536.0 5,074.1 20.4 5,094.5
Additions 116.0 82.4 198.4 0.7 199.1
Acquisitions of a subsidiary - 6.0 6.0 - 6.0
Interest capitalised 0.9 - 0.9 - 0.9
Movements to held for sale
in the year (11.2) (2.5) (13.7) - (13.7)
Disposals (0.2) - (0.2) - (0.2)
Assets written off (8.1) (104.1) (112.2) - (112.2)
Foreign currency adjustment 5.1 (0.2) 4.9 0.7 5.6
At 25 February 2021 3,640.6 1,517.6 5,158.2 21.8 5,180.0
Depreciation and impairment
At 1 March 2019 (174.6) (511.3) (685.9) - (685.9)
Depreciation charge for
the year (18.0) (126.9) (144.9) (0.1) (145.0)
Impairment charge in the
year (Note 14) (32.3) (2.6) (34.9) - (34.9)
Movements to held for sale
in the year 2.5 2.2 4.7 - 4.7
Disposals 0.9 - 0.9 - 0.9
Depreciation on assets
written off 10.2 7.7 17.9 - 17.9
Foreign currency adjustment 0.1 - 0.1 - 0.1
-------------------------------- ----------- --------------- --------------- ----------- --------
At 27 February 2020 (211.2) (630.9) (842.1) (0.1) (842.2)
Depreciation charge for
the year (16.1) (134.1) (150.2) (0.1) (150.3)
Impairment charge in the
year (Note 14) (63.8) (0.6) (64.4) - (64.4)
Movements to held for sale
in the year 3.8 1.4 5.2 - 5.2
Depreciation on assets
written off - 106.2 106.2 - 106.2
Foreign currency adjustment - 0.2 0.2 - 0.2
-------------------------------- ----------- --------------- --------------- ----------- --------
At 25 February 2021 (287.3) (657.8) (945.1) (0.2) (945.3)
Net book value at 25 February
2021 3,353.3 859.8 4,213.1 21.6 4,234.7
----------- --------------- --------------- ----------- --------
Net book value at 27 February
2020 3,326.9 905.1 4,232.0 20.3 4,252.3
----------- --------------- --------------- ----------- --------
Included above are assets under construction of GBP289.9m (2020:
GBP341.2m).
There is a charge in favour of the pension scheme over
properties with a market value of GBP500.0m (2020: GBP450.0m). See
Note 25 for further information.
Investment property
During the prior year the Group acquired a freehold site which
is currently being leased to a third party and is recorded within
investment property. The Group intends to take over the operations
of the hotel in due course at which point the asset will be
transferred to property, plant and equipment. The Group recognised
rental income of GBP0.4m (2019/20: GBP0.2m) within other income and
GBP0.1m (2019/20: GBPnil) of direct operating expenses in relation
to this property.
The Group has performed an internal appraisal of the value of
the investment property and concluded that the fair value
approximates the carrying value. The fair value of the property was
measured using a discounted cash flow approach taking into account
the forecast performance of the site once the Group has taken over
the operations. This is a level 3 measurement as per the fair value
hierarchy.
Capital expenditure commitments
2021 2020
GBPm GBPm
Capital expenditure commitments for property, plant
and equipment for which no provision has been made 82.5 168.8
Capitalised interest
Interest capitalised during the year amounted to GBP0.9m, using
an average rate of 2.9% (2019/20: GBP2.2m, using an average rate of
3.3%).
Assets held for sale
During the year, seven property assets with a combined net book
value of GBP9.1m (2019/20: four at GBP8.5m) were transferred to
assets held for sale. One property was transferred back to
property, plant and equipment with a net book value of GBP0.6m
(2019/20: one at GBP0.1m). Three property assets sold during the
year had a net book value of GBP3.9m (2019/20: three at
GBP4.1m).
An impairment loss of GBP0.7m (2019/20: GBP1.6m) was recognised
relating to assets classified as held for sale. By the year end
there were 14 sites with a combined net book value of GBP19.0m
(2020: 11 at GBP14.9m) classified as assets held for sale. There
are no gains or losses recognised in other comprehensive income
with respect to these assets. Sites are transferred to assets held
for sale when there is an expectation that they will be sold within
12 months. If the site is not expected to be sold within 12 months
it is subsequently transferred back to property, plant and
equipment.
Included within assets held for sale are assets which were
written down to fair value less costs to sell of GBP11.4m (2020:
GBP9.9m). The fair value of property assets was determined based on
current prices in an active market for similar properties. Where
such information is not available management consider information
from a variety of sources including current prices for properties
of a different nature or recent prices of similar properties,
adjusted to reflect those differences. This is a level 3
measurement as per the fair value hierarchy. The key inputs under
this approach are the property size and location.
14. Impairment
During the year, impairment losses of GBP348.8m (2019/20:
GBP51.2m) and asset write offs of GBP7.4m (2019/20: GBP8.7m) were
recognised within operating costs. These impairments are primarily
driven by a reduction in anticipated cashflows, particularly over
the next 12-24 months, and an increase in the discount rate
reflecting increased market risk and volatility. The losses were
recognised on the following classes of assets:
2020/21 2019/20
GBPm GBPm
------------------------------------------------------ ------- -------
Impairment losses
Property, plant and equipment - impairment review 61.2 21.9
Property, plant and equipment - site fire - 9.6
Property, plant and equipment - transfer to assets
held for sale 3.2 3.4
Intangible assets - goodwill 238.8 -
Right-of-use assets - impairment review 36.7 14.7
Investments in joint ventures 8.2 -
Assets held for sale 0.7 1.6
Asset write offs
Property, plant and equipment - early stage expansion
projects 5.7 -
IT Assets 1.7 8.4
Other - 0.3
------- -------
356.2 59.9
------- -------
Property, plant and equipment and right-of-use assets -
impairment review
As a result of the COVID-19 pandemic, the Group identified
indicators of impairment and as a result performed an impairment
assessment of all trading sites. This resulted in an impairment of
GBP61.2m being recorded in relation to property, plant and
equipment in the UK and GBP36.7m being recorded in relation to
right-of-use assets in the UK.
The Group considers each trading site to be a CGU. Where
indicators of impairment are identified, an impairment assessment
is undertaken. In assessing whether an asset has been impaired, the
carrying amount of the site is compared to its recoverable amount.
The recoverable amount is the higher of its value in use and its
fair value less costs of disposal.
The Group calculates a value in use (VIU) for each site. Where
the VIU is lower than the carrying value of the CGU, the Group uses
a range of methods for estimating the fair value less costs of
disposal (FVLCD). These include applying a market multiple to the
CGU EBITDAR and, for leasehold sites, present value techniques
using a discounted cash flow method. Both FVLCD methods rely on
inputs not normally observable by market participants and are
therefore level 3 measurements in the fair value hierarchy.
The key assumptions used by management in estimating value in
use were:
Discount rates
The discount rate is based on the Weighted Average Cost of
Capital (WACC) of a typical market participant, taking into account
specific country and currency risks associated with the Group. The
average pre-tax discount rate used is 9.5% in the UK, and 8.9% in
Germany (2020: 7.1% UK and 6.2% Germany). The discount rate has
increased reflecting market volatility in the spot risk-free rate
and equity risk premium inputs used in the Group's WACC
calculation.
Approved budget period
Forecast cash flows for the initial five-year period are based
on actual cash flows for FY20 being the period before the impact of
the COVID-19 pandemic and applying management's assumptions of the
impact of the pandemic and expected recovery period. The key
assumptions used by management in setting the Board approved
financial budgets for the initial five-year period were as
follows:
-- Normalised trading: Actual results from FY20 have been used
as a basis for the budget as they represent normalised trading
before the impact of COVID-19.
-- Forecast growth rates: Forecast growth rates are based on the
Group business plan which includes assumptions around the timing
and profile of the UK and German economies' recovery from the
COVID-19 pandemic.
-- Operating profits are forecast based on historical experience
of operating margins, adjusted for the impact of inflation and cost
saving initiatives.
-- Local factors impacting the site in the current year or
expected to impact the site in future years. Key assumptions
include the maturity profile of individual sites, the future
potential of immature sites and the impact of increasing or
reducing market supply in the local area.
Long-term growth rates
A long-term growth rate of 2.0% (2020: 2.0%) was used for cash
flows subsequent to the five-year approved budget/plan period. This
long-term growth rate is a conservative rate and is considered to
be lower than the long-term historical growth rates of the
underlying territories in which the CGUs operate and the long-term
growth rate prospects of the sectors in which the CGUs operate.
The key assumptions used by management in estimating the FVLCD
on a market multiple were:
EBITDAR multiple
An EBITDAR multiple is estimated based on a normalised trading
basis and market data obtained from external sources. This resulted
in a multiple in the range of 9 to 11 times.
Discounted cash flows
The key assumptions used by management in estimating the FVLCD
on a discounted cashflow method were similar to those used in the
value in use assessment, modified to reflect estimated cost of
disposal and lease payments. The inclusion of lease payments is
reflected in the discount rate, increasing WACC for the specific
asset class from 9.5% to 11.0%.
Sensitivity to changes in assumptions
The level of impairment is predominantly dependent upon
judgements used in arriving at future growth rates and the discount
rates applied to cash flow projections. The impact on the
impairment charge of applying a reasonably possible change in
assumptions to the growth rates used in the five-year business
plans, long-term growth rates, pre-tax discount rates and EBITDAR
multiple would be an incremental impairment charge in the year to
25 February 2021 of:
Property,
plant and
equipment
and right-of
use assets
GBPm
-------------
Increase to impairment charge if discount rate
increased by 2% 5.0
Increase to impairment charge if year one and
year two growth rates reduced on average by
33% 8.2
Increase to impairment charge if long-term
growth rates reduced by 1% 5.8
Increase to impairment charge if EBITDAR multiple
reduced by 10% 12.9
The above sensitivity analyses are based on a change in an
assumption whilst holding all other assumptions constant. In
practice, this is unlikely to occur and changes in some of the
assumptions may be correlated.
The impairment sensitivities above show the downside risk from a
reasonable possible change in the modelled assumptions and are in
line with disclosure requirements. Given the current uncertainty
that remains in relation to the timing and length of the recovery
from COVID-19 restrictions and the economic recovery, it may result
in some of the impairments recognised during the year reversing in
the next 12 months.
The long-term impact of COVID-19 remains uncertain and the
impact of the pandemic could be more prolonged or severe than
management has considered in the sensitivities presented.
Goodwill
Goodwill acquired through business combinations is allocated to
groups of CGUs at an operating segment level, being the level at
which management monitors goodwill. An analysis of goodwill by
operating segment is:
UK Germany Total
At 27 February 2020 110.5 - 110.5
Acquisitions (Note 27) - 224.2 224.2
Foreign exchange - 14.6 14.6
Impairment - (238.8) (238.8)
----- ------- -------
At 25 February 2021 110.5 - 110.5
----- ------- -------
An impairment of GBP238.8m was recorded in relation to goodwill
arising on the acquisition of Foremost Hospitality Hiex GmbH (see
Note 27) reflecting the impact of the COVID-19 pandemic on current
and future growth rates.
The recoverable amount is the higher of fair value less costs of
disposal and value in use. The recoverable amount has been
determined from value in use calculations. The future cash flows
are based on assumptions from the business plans and cover a
five-year period. These business plans and forecasts include
management's most recent view of medium-term trading prospects.
Cash flows beyond this period are extrapolated using a 2.0% growth
rate. The pre-tax discount rate applied to cash flow projections is
9.5% for the UK and 8.9% for Germany (2020: 7.1% UK and 6.2%
Germany).
As a result of the German goodwill being impaired in the period
and the level of headroom within the UK segment, there is no
reasonably possible change that could result in a further material
impairment of goodwill.
Investments in joint ventures
The COVID-19 pandemic has had a significant impact on trading
and future forecasts for trading at the Group's joint ventures. As
a result, an impairment review was carried out and an impairment
charge of GBP8.2m has been recorded in the financial statements
relating to the Group's investment in Healthy Retail Limited. This
included GBP5.8m impairment relating to loans advanced to joint
ventures determined under IFRS 9.
Property, plant and equipment - early stage expansionary
projects and assets held for sale
As a result of the impact of the COVID-19 pandemic and the
focussed application of investment cashflows, the Group reviewed
its early stage expansion projects and decided not to proceed with
certain sites resulting in a write off of costs of GBP5.7m that had
been incurred and capitalised.
During the period, six hotels were transferred to assets held
for sale, resulting in an impairment charge of GBP3.2m. In
addition, an impairment charge of GBP0.7m was recorded in relation
to assets which had previously been classified as held for sale as
a result of a reduction in expected sales proceeds.
IT Assets
An impairment review of IT intangible and tangible assets was
carried out as a result of the COVID-19 pandemic which identified a
total of GBP1.7m of assets which are not expected to generate
future economic benefits for the Group.
15. Inventories
2021 2020
GBPm GBPm
------------------------------- ----- -----
Finished goods held for resale 7.5 12.5
Consumables 4.6 1.2
----- -----
12.1 13.7
The carrying value of inventories is stated net of a provision
of GBP5.5m (2020: GBPnil).
Included within inventories at the year-end is GBP2.9m (2020:
GBPnil) of personal protective equipment and other consumables
which are being used to comply with new COVID-19 protocols.
16. Trade and other receivables
2021 2020
GBPm GBPm
------------------------------- ----- -----
Trade receivables 22.1 58.6
Prepayments and accrued income 17.6 204.8
Other receivables 34.5 34.5
----- -----
74.2 297.9
Analysed as:
Current 74.2 292.8
Non-current - 5.1
74.2 297.9
Trade and other receivables are non-interest bearing and are
generally on 30-day terms. Trade receivables includes GBP16.0m
(2020: GBP55.2m) relating to contracts with customers. Other
receivables include GBP14.0m (2020: GBPnil) in relation to grants
and other support receivable from the UK and German governments
(see Note 8).
The allowance for expected credit loss relating to trade and
other receivables at 25 February 2021 was GBP1.3m (2020: GBP0.7m).
During the year, credit losses of GBP0.7m (2019/20: GBP0.1m) were
recognised within operating costs in the consolidated income
statement.
Prepayments includes an amount of GBPnil (2020: GBP169.0m) in
relation to consideration paid in advance of the year-end for the
post-year-end acquisition of Foremost Hospitality Hiex GmbH (see
Note 27) and a deposit of GBPnil (2020: GBP12.8m) in relation to an
acquisition which was written off subsequent to the year-end
following the decision not to proceed with the acquisition.
17. Cash and cash equivalents
2021 2020
GBPm GBPm
------------------------- ------- -----
Cash at bank and in hand 19.2 78.9
Money market funds 1,011.8 253.7
Short term deposits 225.0 170.0
------- -----
1,256.0 502.6
Short-term deposits are made for varying periods of between one
day and three months depending on the immediate cash requirements
of the Group. They earn interest at the respective short-term
deposit rates.
The Group does not have material cash balances which are subject
to contractual or regulatory restrictions.
For the purposes of the consolidated cash flow statement, cash
and cash equivalents comprise the amounts as disclosed above.
18. Borrowings
Amounts drawn down on the Group's borrowing facilities are as
follows:
Current Non-current
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
Revolving credit facility - - - -
Private placement loan notes 312.0 84.0 - 295.6
Senior unsecured bonds - - 990.5 445.9
UK Government CCFF - - - -
----- ----- ------ -----
312.0 84.0 990.5 741.5
----- ----- ------ -----
Covenants
The Group has received covenant test waivers for its revolving
credit facility covering the period to 2 March 2023. In addition,
it has received covenant test waivers for its pension scheme and
private placement loan notes for the period to 3 March 2022 meaning
that the private placement loan note covenants will not be tested
prior to maturity. Under the terms of the waivers, the Group is
required to maintain GBP400.0m cash and/or headroom under undrawn
committed bank facilities and total net debt must not exceed
GBP2.0bn. Dividends will not be paid during the current covenant
waiver period which lasts until March 2023 unless the Group
demonstrates compliance with agreed metrics, being net debt /
EBITDA < 3.5x and EBITDA / Interest > 3.0x. There are no
financial covenants associated with the Group's senior unsecured
bonds.
Revolving credit facility (GBP950m)
On 29 January 2021, the Group agreed to amend and extend its
revolving credit facility (RCF). The new agreement gives total
committed credit of GBP950.0m which is available until 29 December
2021 and subsequently reduces to GBP850.0m available until 7
September 2022 and GBP725.0m available until 7 September 2023. The
facility is multi-currency and has a variable interest rates linked
to GBP LIBOR or EURIBOR which will transition to SONIA following
the discontinuation of IBOR.
At 25 February 2021, the Group had available GBP950.0m (2020:
GBP950.0m) of undrawn committed borrowing facilities in respect of
revolving credit facilities on which all conditions precedent had
been met.
Private placement loan notes
The Group holds loan notes with coupons and maturities as shown
in the following table:
Principal
Title Year issued value Maturity Coupon
26 January
Series C loan notes 2011 US$93.5m 2022 4.86%
6 September
Series D loan notes 2011 GBP25.0m 2021 4.89%
16 August
Series A loan notes(1) 2017 GBP100.0m 2027 2.54%
16 August
Series B loan notes(1) 2017 GBP100.0m 2027 2.63%
(1) On 25 February 2021, the Group exercised an early repayment
option associated with the Series A loan notes and Series B loan
notes issued in 2017 and originally due for repayment on 16 August
2027. As a result, the total repayment due of GBP220.4m, which
includes a charge of GBP21.2m due to the noteholders as a result of
the early repayment is included within current liabilities as at
the balance sheet date. This was settled subsequent to the year end
(see Note 26). The early repayment charge of GBP21.2m has been
recorded within finance costs in the consolidated income statement
(see Note 7). On 25 February 2021, the Group also entered into an
interest rate swap and cross currency swap to hedge interest rate
risk and foreign currency risk associated with the early repayment
charge.
On 13 August 2020, the Group repaid loan notes on maturity with
a value of US$75.0m and GBP25.0m. As a result of fair value hedges
in place, the total cash outflow recorded by the Group was
GBP75.1m.
Senior unsecured bonds
The Group has issued senior unsecured bonds with coupons and
maturities as shown in the following table:
Principal
Title Year issued value Maturity Coupon
16 October
2025 senior unsecured bonds 2015 GBP450.0m 2025 3.375%
2027 senior unsecured green use
of proceeds bond 2021 GBP300.0m 31 May 2027 2.375%
2031 senior unsecured green use
of proceeds bond 2021 GBP250.0m 31 May 2031 3.000%
The 2027 green use of proceeds bonds were issued on 10 February
2021. Interest is payable annually on 31 May. The bonds were
initially priced at 99.516% of face value and are unsecured.
The 2031 green use of proceeds bonds were issued on 10 February
2021. Interest is payable annually on 31 May. The bonds were
initially priced at 99.327% of face value and are unsecured.
On issue of these bonds, the Group received net proceeds of
GBP546.8m and incurred arrangement fees of GBP2.8m. The bonds
contain an early prepayment option which meets the definition of an
embedded derivative. This was assessed to have a value of GBPnil as
at the year end.
Arrangement fees of GBP3.9m (2020: GBP1.3m) directly incurred in
relation to the bond facilities are included in the carrying value
and are being amortised over the term of the facilities.
UK Government CCFF
The Group's eligibility to issue commercial paper under the UK
Government Covid Corporate Financing Facility expired on 22 March
2021. The facility remained undrawn throughout the year. As at 25
February 2021, the Group's issuer limit was GBP300.0m, reduced from
an initial limit of GBP600.0m following the reduction in
Whitbread's credit rating to BBB-.
19. Movements in cash and net debt
Amortisation
Net new Fair value of premiums
27 February Cost of lease Foreign adjustments and 25 February
2020 borrowings Cash flow liabilities exchange to loans discounts 2021
Year ended 25
February 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ----------- ----------- --------- ------------- --------- ------------ ------------- -----------
Cash and cash
equivalents 502.6 - 752.0 - 1.4 - - 1,256.0
Liabilities
from
financing
activities:
Borrowings (825.5) 5.5 (471.7) - 5.8 7.5 (24.1) (1,302.5)
Lease
liabilities (2,620.6) - 79.0 (686.9) (3.1) (3,231.6)
Derivatives
held
to hedge
financing
activities 17.7 - - - - (11.9) - 5.8
----------- ----------- --------- ------------- --------- ------------ ------------- -----------
Total
liabilities
from
financing
activities (3,428.4) 5.5 (392.7) (686.9) 2.7 (4.4) (24.1) (4,528.3)
Less: Lease
liabilities 2,620.6 - (79.0) 686.9 3.1 - 3,231.6
Less:
Derivatives
held to
hedge
financing
activities (17.7) - - - - 11.9 - (5.8)
Net
cash/(debt) (322.9) 5.5 280.3 - 7.2 7.5 (24.1) (46.5)
----------- ----------- --------- ------------- --------- ------------ ------------- -----------
Amortisation of fees and discounts includes an early repayment
charge of GBP21.2m associated with the US Private Placement loan
notes (See Note 18).
Net new Fair value Amortisation
1 March Cost of lease Foreign adjustments of premiums 27 February
2019 borrowings Cash flow liabilities exchange to loans and discounts 2020
Year ended 27
February 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- --------- ----------- --------- ------------- --------- ------------ -------------- -----------
Cash and cash
equivalents 3,403.2 - (2,892.5) - (8.1) - - 502.6
Liabilities
from
financing
activities:
Borrowings (819.9) - - - (2.2) (1.8) (1.6) (825.5)
Lease
liabilities (2,471.8) - 73.1 (222.6) 0.7 - - (2,620.6)
Derivatives
held
to hedge
financing
activities 10.6 - - - 5.5 1.6 - 17.7
--------- ----------- --------- ------------- --------- ------------ -------------- -----------
Total
liabilities
from
financing
activities (3,281.1) - 73.1 (222.6) 4.0 (0.2) (1.6) (3,428.4)
Less: Lease
liabilities 2,471.8 - (73.1) 222.6 (0.7) - - 2,620.6
Less:
Derivatives
held to hedge
financing
activities (10.6) - - - (5.5) (1.6) - (17.7)
Net
cash/(debt) 2,583.3 - (2,892.5) - (10.3) (1.8) (1.6) (322.9)
--------- ----------- --------- ------------- --------- ------------ -------------- -----------
Net cash/(debt) includes US$ denominated loan notes of US$93.5m
(2020: US$168.5m) retranslated to GBP66.6m (2020: GBP131.3m). These
notes have been hedged using cross-currency swaps. At maturity,
GBP58.5m (2020: GBP108.6m) will be repaid taking into account the
cross-currency swaps. If the impact of these hedges is taken into
account, reported net debt would be GBP38.4m (2020: GBP300.1m).
20. Provisions
Onerous Property
Restructuring contracts costs Other Total
GBPm GBPm GBPm GBPm GBPm
------------------------
At 1 March 2019 11.6 15.3 23.1 5.3 55.3
Created - 1.1 14.5 - 15.6
Unwinding of discounts - 0.1 - - 0.1
Utilised (7.3) (5.4) (5.7) (1.7) (20.1)
Released (2.3) - - (0.2) (2.5)
At 27 February 2020 2.0 11.1 31.9 3.4 48.4
Created 5.8 4.9 - 5.8 16.5
Transferred - - - 6.8 6.8
Utilised (5.8) (4.3) (12.9) (2.1) (25.1)
Released (0.9) (1.6) (3.3) (1.3) (7.1)
At 25 February 2021 1.1 10.1 15.7 12.6 39.5
Analysed as:
Current 1.1 8.3 15.7 5.4 30.5
Non-current - 1.8 - 7.2 9.0
------------------------- -------------- ----------- --------- ------ -------
At 25 February 2021 1.1 10.1 15.7 12.6 39.5
Restructuring
A provision of GBP2.0m was carried forward in relation to the
restructure of the Group announced following the disposal of Costa.
During the year, the Group utilised GBP1.1m of the provision and
GBP0.9m was released to the income statement.
As a result of the COVID-19 pandemic, the Group recognised a
provision of GBP5.8m for the restructure its support centre and
site operations. A total of GBP4.7m of costs were utilised during
the period. The remaining costs are expected to be utilised within
one year.
Onerous contracts
Onerous contract provisions relate primarily to property and
software licences where the contracts have become onerous.
Provision is made for property-related costs for the period that a
sublet or assignment of the lease is not possible.
Onerous contract provisions are discounted using a discount rate
of 2.0% (2020: 2.0%) based on an approximation for the time value
of money.
Property
The amount and timing of the cash outflows are subject to
variation. The Group utilises the skills and expertise of both
internal and external property experts to determine the provision
held. Provisions are expected to be utilised over a period of up to
12 years and GBP1.1m has been utilised in the period.
During the year, a new onerous property contract was recognised
for GBP0.8m and an amount of GBP1.6m was released to the income
statement as the Group agreed to exit a number of leases earlier
than expected.
Software
Certain software licence agreements were deemed to be onerous
when, following the disposal of Costa, it was no longer beneficial
to the Group to use the software. At the year end, a provision of
GBP3.0m (2020: GBP5.1m) was held for future unavoidable costs on
such agreements, to be utilised over a period of up to three years.
The software intangible assets associated with these contracts have
been fully impaired in previous financial years.
A provision of GBP1.1m was created in FY20 as a result of the
cancellation of a contract relating to the supply of IT equipment.
At the year-end a provision GBP0.4m was held in relation to this
contract which is expected to be utilised within one year.
Property costs
From FY18-FY20, the Group established a provision for the
performance of remedial works on cladding material at a small
number of the Group's sites. As a result, a provision of GBP31.9m
was brought forward in relation to these costs. During the year
GBP12.9m of the provision has been utilised and GBP3.3m of costs
have been released. The remaining provision is expected to be
utilised within one year.
In addition, the Group has received reimbursements of those
costs from property developers totalling GBP13.4m which are
credited to adjusting operating costs (see Note 6). The Group
continues to pursue further reimbursements which are not recognised
as the recovery is not certain.
The Group utilises the skills and expertise of both internal and
external property experts to determine the provision held.
Other
During the year ended 25 February 2021, an amount of GBP6.8m,
representing an estimate of the cost of future claims against the
Group from employees and the public was transferred from other
payables to other provisions to better reflect the nature of the
liability. The claims covered typically relate to accidents and
injuries sustained in Whitbread's sites. During the year, further
provisions of GBP2.1m were created and GBP1.8m of the provision was
utilised.
In July 2016, the Group announced its intention to exit hotel
operations in South East Asia. This resulted in the recognition of
a provision of GBP3.7m for risks arising from indemnity agreements.
At 25 February 2021, GBP1.8m of the provision was still held for
risks arising from indemnity agreements. The remaining costs are
expected to be utilised within one year.
A provision of GBP0.3m was carried forward and utilised during
the year in relation to certain procurement contracts required as a
result of the Costa disposal.
21. Financial risk management and objectives
The Group's principal financial instruments, other than
derivatives, comprise bank loans, private placement loans, senior
unsecured bonds, cash, short-term deposits, trade receivables and
trade payables. The Board agrees policies for managing the
financial risks summarised below:
Interest rate risk
The Group's exposure to market risk for changes in interest
rates relates primarily to the Group's long-term debt obligations.
Interest rate swaps are used where necessary to maintain a mix of
fixed and floating rate borrowings to manage this risk, in line
with the Group treasury policy. Although the private placement loan
notes are US dollar denominated, cross-currency swaps mean that the
interest rate risk is effectively sterling only. At the year-end,
GBP1,302.5m (100%) of Group debt was fixed for an average of 5.3
years at an average interest rate of 3.0% (2020: GBP817.7m (99%)
for 5.3 years at 3.5%).
In accordance with IFRS 7 Financial Instruments: Disclosures,
the Group has undertaken sensitivity analysis on its financial
instruments which are affected by changes in interest rates. This
analysis has been prepared on the basis of a constant amount of net
debt, a constant ratio of fixed to floating interest rates, and on
the basis of the hedging instruments in place at 25 February 2021
and 27 February 2020 respectively. Consequently, the analysis
relates to the situation at those dates and is not representative
of the years then ended. The following assumptions were made:
-- balance sheet sensitivity to interest rates applies only to
derivative financial instruments, as the carrying value of debt and
deposits does not change as interest rates move;
-- gains or losses are recognised in equity or the consolidated
income statement in line with the Groups accounting policies;
and
-- cash flow hedges were effective.
Based on the Group's net debt/cash position at the year-end, a
1% pt change in interest rates would affect the Group's profit
before tax by GBP12.5m (2020: GBP5.0m), and equity by GBP0.8m
(2020: GBP2.0m).
Liquidity risk
In its funding strategy, the Group's objective is to maintain a
balance between the continuity of funding and flexibility through
the use of overdrafts and bank loans. This strategy includes
monitoring the maturity of financial liabilities to avoid the risk
of a shortage of funds.
Excess cash used in managing liquidity is placed on
interest-bearing deposit where maturity is fixed at no more than
three months. Short-term flexibility is achieved through the use of
short-term borrowing on the money markets.
The tables below summarise the maturity profile of the Group's
financial liabilities at 25 February 2021 and 27 February 2020
based on contractual undiscounted payments, including interest:
More
Less than 3 to 1 to than Carrying
On demand 3 months 12 months 5 years 5 years Total value
25 February 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----------- ---------- ----------- --------- --------- -------- ---------
Interest-bearing loans
and borrowings - 221.8 102.4 573.7 609.3 1,507.2 1,302.5
Lease liabilities(1) - 54.6 175.1 925.5 4,513.4 5,668.6 3,231.6
Derivative financial
instruments - - 2.4 - - 2.4 2.4
Trade and other payables - 71.2 37.7 26.8 - 135.7 134.0
----------- ---------- ----------- --------- --------- -------- ---------
- 347.6 317.6 1,526.0 5,122.7 7,313.9 4,670.5
More
Less than 3 to 1 to than Carrying
On demand 3 months 12 months 5 years 5 years Total value
27 February 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----------- ---------- ----------- --------- --------- -------- ---------
Interest-bearing loans
and borrowings - - 101.0 164.9 673.1 939.0 825.5
Lease liabilities(1) - 48.9 147.9 784.8 3,999.1 4,980.7 2,620.6
Derivative financial
instruments - - 2.2 2.2 - 4.4 4.4
Trade and other payables - 126.3 4.4 - - 130.7 130.7
----------- ---------- ----------- --------- --------- -------- ---------
- 175.2 255.5 951.9 4,672.2 6,054.8 3,581.2
(1) Contractual undiscounted payments relating to lease
liabilities due in more than 5 years includes GBP1,140.2m (2020:
GBP932.3m) due between 5 and 10 years, GBP1,859.4m (2020:
GBP1,653.8m) due between 10 and twenty years and GBP1,513.8m (2020:
GBP1,413.0m) due in more than twenty years
Credit risk
Due to the high level of cash held at the year-end, the most
significant credit risk faced by the Group is that arising on cash
and cash equivalents. The Group's exposure arises from default of
the counterparty, with a maximum exposure equal to the carrying
value of these instruments. The Group seeks to minimise the risk of
default in relation to cash and cash equivalents by spreading
investments across a number of counterparties and dealing in
accordance with Group Treasury Policy which specifies acceptable
credit ratings and maximum investments for any counterparty.
In the event that any of the Group's banks get into financial
difficulty, the Group is exposed to the risk of withdrawal of
currently undrawn committed facilities. This risk is mitigated by
the Group having a range of counterparties to its facilities.
The Group is exposed to a small amount of credit risk
attributable to its trade and other receivables. This is minimised
by dealing with counterparties with good credit ratings. The
amounts included in the balance sheet are net of expected credit
losses, which have been estimated by management based on prior
experience and any known factors at the balance sheet date.
The Group's maximum exposure to credit risk arising from trade
and other receivables, loans to joint ventures, derivatives and
cash and cash equivalents is GBP1,327.4m (2020: GBP639.1m).
Foreign currency risk
Foreign exchange exposure is currently not significant to the
Group. Although the Group has US dollar denominated loan notes,
these have been swapped into sterling, thereby eliminating foreign
currency risk. Sensitivity analysis has therefore not been carried
out.
The Group monitors the growth and risks associated with its
overseas operations and will undertake hedging activities as and
when they are required. In October 2019, the Group entered into a
net investment hedge to manage the impact of movements in the
GBP:EUR exchange rate on the value of the Group's investment in its
business in Germany.
Capital management
The Group's primary objective in regard to capital management is
to ensure that it continues to operate as a going concern and has
sufficient funds at its disposal to grow the business for the
benefit of shareholders. The Group seeks to maintain a ratio of
debt to equity that balances risks and returns and also complies
with lending covenants. See finance review within the preliminary
results announcement for the policies and objectives of the Board
regarding capital management, analysis of the Group's credit
facilities and financing plans for the coming years.
The Group aims to maintain sufficient funds for working capital
and future investment in order to meet growth targets.
The management of equity through share buybacks and new issues
is considered as part of the overall leverage framework balanced
against the funding requirements of future growth. In addition, the
Group may carry out a number of sale and leaseback transactions to
provide further funding for growth.
The Group has received covenant test waivers for its revolving
credit facility covering the period to 2 March 2023. In addition,
it has received covenant test waivers for its pension scheme and
private placement loan notes for the period to 3 March 2022 meaning
that the private placement loan note covenants will not be tested
prior to maturity. Under the terms of the waivers, the Group is
required to maintain GBP400.0m cash and/or headroom under undrawn
committed bank facilities and total net debt must not exceed
GBP2.0bn. The covenants which have been waived relate to
measurement of EBITDA against consolidated net finance charges
(interest cover) and total net debt (leverage ratio, on a
not-adjusted-for pension and property lease basis).
The above matters are considered at regular intervals and form
part of the business planning and budgeting processes. In addition,
the Board regularly reviews the Group's dividend policy and funding
strategy.
Interest Rate Benchmark Reform
The Group has assumed that the interest rate benchmark on which
the hedged risk or the cash flows of the hedged item or hedging
instrument are based is not altered by uncertainties resulting from
the proposed interest rate benchmark reform.
The Group's GBP50.0m interest rate swap in a cash flow hedge is
an IFRS 9 designated hedge relationships that is impacted by IBOR
reform. The swap references six-month GBP LIBOR and uncertainty
arising from the Group's exposure to IBOR reform will cease when
the swaps mature in 2022. The Group has assessed the wider impact
of IBOR reform on the business and concluded that there are no
further material impacts.
The Group's RCF documentation contains transitional provisions
so that borrowings entered into after the later of (a) 31 December
2022 or (b) the relevant LIBOR tenor being replaced are linked to
the agreed Risk Free Rate (SONIA).
22. Trade and other payables
2021 2020
GBPm GBPm
-------------------------------- ----- -----
Trade payables 24.2 55.5
Other taxes and social security 26.5 42.6
Contract liabilities 41.3 110.0
Accruals 140.3 156.7
Other payables 47.0 70.8
Contingent consideration 62.8 4.4
----- -----
342.1 440.0
Analysed as:
Current 316.5 440.0
Non-current 25.6 -
342.1 440.0
Included with contract liabilities is GBP37.5m (2020: GBP106.5m)
relating to payments received for accommodation where the stay will
take place after the year-end and GBP3.8m (2020: GBP3.5m) revenue
deferred relating to the Group's customer loyalty programmes.
During the year, GBP51.0m presented as a contract liability in 2020
has been recognised in revenue (2020: GBP105.4m). The remaining
balance was refunded to customers following hotel closures in
response to the COVID-19 pandemic.
Trade payables typically have maturities up to 60 days depending
on the nature of the purchase transaction and the agreed terms.
Contingent consideration
2020/21 2019/20
GBPm GBPm
---------------------------------------------------- ------- -------
Opening contingent consideration 4.4 -
Recognised on acquisition of a subsidiary (Note 27) 56.3 4.4
Recognised on acquisition of assets (Note 27) 1.9 -
Unwinding of discount (Note 7) 2.1 -
Paid during the year (3.8) -
Foreign exchange movements 1.9 -
------- -------
Closing contingent consideration 62.8 4.4
The Group has contingent consideration in relation to 13
pipeline sites from acquisitions in the current and previous years
which is held at fair value. The amounts payable are fixed and
become payable once development of the site is complete and the
site has been handed over to the Group which is expected to occur
within three years. The fair value is calculated by discounting the
future payments from their expected handover date using a risk
adjusted discount rate. A 1% decrease/increase in the discount rate
would increase/decrease the value of contingent consideration by
GBP0.6m.
Foreign exchange movements on contingent consideration are
recognised within exchange differences on translation of foreign
operations in the consolidated statement of comprehensive
income.
23. Share capital
Allotted, called up and fully paid ordinary shares
of 76.80p each;
million GBPm
At 27 February 2020 147.0 112.9
Issued on exercise of employee share options 0.1 0.1
Issued in rights issue 67.3 51.7
At 25 February 2021 214.4 164.7
Rights issue
In June 2020, the Group offered a fully underwritten rights
issue to existing shareholders on the basis of 1 share for every 2
fully
paid ordinary shares held. The company received acceptances in
respect of 61,452,547 New Ordinary Shares, representing 91.4% of
the total New Ordinary Shares to be issued. The remaining 5,824,869
New Ordinary Shares for which acceptances were not received were
successfully placed at a price of 2,550 pence per New Ordinary
Share.
As a result, a total of 67,277,416 ordinary shares with an
aggregate nominal value of GBP51.7m were issued for cash
consideration of GBP1,009.2m. Transaction costs of GBP28.2m were
incurred resulting in GBP929.3m being recognised in share premium
and net cash proceeds of GBP981.0m.
24. Analysis of cash flows given in the cash flow statement
2020/21 2019/20
GBPm GBPm
--------------------------------------------------- ------- -------
(Loss)/profit for the period (906.5) 217.9
Adjustments for:
Tax (credit)/expense (100.9) 62.1
Net finance costs (Note 7) 168.3 128.5
Share of loss from joint ventures 7.7 2.5
Depreciation and amortisation 300.2 268.8
Share-based payments 12.7 11.6
Impairments (Note 14) 356.2 59.9
(Gains)/losses on disposals, property and
other provisions (5.0) 9.3
Timing difference on insurance proceeds 14.0 (14.0)
Other non-cash items 26.1 3.8
------- -------
Cash (used in)/generated from operations
before working capital changes (127.2) 750.4
Decrease in inventories 1.5 0.9
Decrease/(increase) in trade and other receivables 27.8 (4.1)
Decrease in trade and other payables (129.1) (60.8)
------- -------
Cash (used in)/generated from operations (227.0) 686.4
------- -------
Other non-cash items includes an inflow of GBP12.4m (2020:
GBPnil) representing the write off of a deposit paid in relation to
an acquisition (see Note 6), an inflow of GBP9.2m (2020: GBP0.7m)
as a result of net provision movements and an inflow of GBP3.8m
(2020: GBP2.2m) representing non-cash pension scheme administration
costs.
25. Retirement benefits
Defined benefit scheme
During the year to 25 February 2021, the defined benefit pension
scheme has moved from a surplus of GBP190.3m to a surplus of
GBP188.0m. The main movements in the (liability)/surplus are as
follows:
GBPm
---------------------------------------------------- ------- ------
Pension surplus at 27 February 2020 190.3
Re-measurement due to:
Changes in financial assumptions 130.2
Return on plan assets lower than discount rate (146.5)
-------
(16.3)
Past service cost to recognise additional liability
in respect of guaranteed minimum pensions (1.1)
Contributions from employer 14.8
Net interest on pension liability and assets 3.0
Administrative expenses (2.7)
------
Pension surplus at 25 February 2021 188.0
------
The surplus has been recognised as the Group has an
unconditional right to receive a refund, assuming the gradual
settlement of the scheme liabilities over time until all members
and their dependants have either died or left the scheme, in
accordance with the provisions of IFRIC14.
The principal assumptions used by the independent qualified
actuaries in updating the most recent valuation carried out as at
31 March 2017 of the UK scheme to 25 February 2021 for IAS 19
Employee benefits purposes were:
2021 2020
% %
-------------------------------------------------------- ---- ----
Pre-April 2006 rate of increase in pensions in payment 3.1 2.8
Post-April 2006 rate of increase in pensions in payment 2.2 2.0
Pension increases in deferment 3.1 2.8
Discount rate 1.9 1.6
Inflation assumption 3.2 2.9
The mortality assumptions are based on standard mortality tables
which allow for future mortality improvements. The assumptions are
that a member currently aged 65 will live on average for a further
20.5 years (2020: 20.8 years) if they are male and for a further
23.1 years (2020: 23.3 years) if they are female. For a member who
retires in 2041 at age 65, the assumptions are that they will live
on average for a further 21.5 years (2020: 21.9 years) after
retirement if they are male and for a further 24.3 years (2020:
24.5 years) after retirement if they are female.
The assumptions in relation to discount rate, mortality and
inflation have a significant effect on the measurement of scheme
liabilities. The following table shows the sensitivity of the
valuation to changes in these assumptions:
(Increase)/decrease
in liability
2021 2020
GBPm GBPm
------------------------------------------------ ---------- ---------
Discount rate
1.00% increase to discount rate 421.0 467.0
1.00% decrease to discount rate (546.0) (610.0)
Inflation
0.25% increase to inflation rate (92.0) (101.0)
0.25% decrease to inflation rate 90.0 98.0
Life expectancy
Additional one-year increase to life expectancy (130.0) (102.0)
Funding, charges and covenants
A scheme specific actuarial valuation for the purpose of
determining the level of cash contributions to be paid into the
Whitbread Group Pension Fund was undertaken as at 31 March 2017 by
Willis Towers Watson Ltd using the projected unit credit method.
The valuation showed a deficit of assets relative to technical
provisions of GBP450.0m (31 March 2014: deficit of GBP564.0m). A
deficit recovery plan and some protection whilst the scheme
remained in deficit had been agreed with the Trustee. On completion
of the sale of Costa Limited, the Group paid the Pension Scheme a
cash contribution of GBP381.0m following which there are no ongoing
deficit recovery contributions, Costa Limited was released from its
obligations to the Pension Scheme and new protections were agreed
by the Group and Trustee.
A scheme specific actuarial valuation of the scheme as at 31
March 2020 is currently being carried out and is expected to be
completed by June 2021.
In 2019, as part of the funding arrangement related to the sale
of Costa Limited, two previous charges were released and replaced
with a consolidated charge in favour of Whitbread Pension Trustees
securing properties totalling GBP450.0m that would have reduced to
GBP408.0m following completion of the 2020 actuarial valuation. In
May 2020, the Group agreed with the Trustee covenant waivers for
the defined benefit pension scheme covering the period to March
2022. As a condition of receiving these waivers, the charge was
increased to GBP500.0m for the duration of the waiver and two
further properties were added to the charge. Following the end of
the waiver period, the charge will revert to GBP450.0m and remain
at that level. The charge secures the obligations of various Group
companies to make payments to the scheme.
The Group has received covenant waivers in relation to the
defined benefit pension scheme and therefore the covenants will
next be tested at 3 March 2022. Under the terms of the waiver, the
Group is required to maintain GBP400.0m cash and/or headroom under
undrawn committed bank facilities and total net debt must not
exceed GBP2.0bn. In the event the Group would fail to meet the
covenant test as at 3 March 2022, a further variable payment, based
upon the prevailing market conditions at the time of calculation,
would need to be made into the Group's pension scheme. The scenario
in which this could apply is outlined in the Going concern section
of Note 2.
26. Events after the balance sheet date
Lockdown restrictions
As at the year-end, all of the Group's restaurants were closed
and although the majority of the Group's hotels were open, they
were restricted to use by business customers only in line with the
Government's roadmap for easing restrictions in the UK and similar
restrictions in Germany. On 12 April 2021, the Group opened 65
restaurants where there is capacity for outdoor dining. The Group
expects to continue re-opening in line with the roadmap meaning the
majority of the Group's restaurants will be opened on 17 May and
its UK hotels will open to leisure customers.
On 13 April 2021, the German parliament announced changes to the
Infection Protection Act to further control the COVID-19 pandemic
across the country. The change legally obligates consistent action
across all states where infection rates exceed set levels and will
apply until 30 June 2021. This change is likely to lengthen the
closure of the Group's German sites.
Financing
As set out in Note 18, the Group provided an early repayment
notice to holders of its US private placement loan notes. On 26
March 2021, the Group repaid these loan notes and settled the
associated hedge relationships resulting in total cash outflows of
GBP221.2m.
As at 22 March 2021, the Group had not drawn down the Covid
Corporate Financing Facility (CCFF) and as a result this facility
expired.
Government support
On 4 March 2021, the German Government removed a restriction in
place on the Bridge Aid scheme which allowed the Group to make a
grant claim under this scheme. This change is a non-adjusting post
balance sheet event. As a result, the Group expects to make claims
of GBP10.4m which will be recognised in FY22 relating to the period
from January 2021 to June 2021 (See Note 8).
The UK Government announced a number of support measures in its
Budget of 3 March 2021. These included the following:
-- An extension of Business Rates Relief in England to 30 June 2021
-- An extension of the Coronavirus Job Retention Scheme to 30 September 2021
-- A Restart Grant scheme for the hospitality and accommodation
sector allowing the Group to claim up to GBP18,000 per site
restricted by State Aid allowances.
-- An extension of reduced VAT rates. As a result, for the
period from 15 July 2020 to 30 September 2021, the Group's sales of
accommodation, food and beverage (excluding alcohol) will be
charged at 5% VAT. A new reduced rate of 12.5% will then be
introduced which will end on 31 March 2022.
-- An increase in the main rate of UK corporation tax to 25% with effect from 1 April 2023.
27. Business combinations
Acquisition of Foremost Hospitality Hiex GmbH
On 28 February 2020, the Group acquired 100% of the share
capital of Foremost Hospitality Hiex GmbH for consideration of
GBP225.8m. The acquisition consists of 13 trading hotels which have
been rebranded to Premier Inn as well as the leasehold for a
further six pipeline sites. The transaction forms part of the
Group's strategic priority of international growth.
Trading hotel leases
The Group has recognised right-of-use assets and lease
liabilities in relation to the 13 hotels which have been
rebranded.
Pipeline hotel leases
Three of the pipeline sites are open and will continue to be
operated by a third party. The Group has acquired the headlease for
these sites and is subleasing them for a period of up to two years.
The Group has recognised investment property and lease liabilities
in relation to these sites. Upon expiration of the sublease, the
Group will take over the operations of these sites and the
investment property will be transferred to right-of-use assets.
The remaining three pipeline sites are still undergoing
development with lease commencement tied to the completion of this
work. The Group has committed cash outflows in relation to lease
payments for the sites in development of GBP76.3m. Once development
is complete and the sites are open, the Group will recognise the
related lease liability and right-of-use assets.
Contingent consideration
Contingent consideration is classified as a level 3 financial
instrument and is measured at fair value using the expected future
payments discounted at a risk adjusted discount rate. The
consideration will be paid in instalments when the Group takes
control of the operations of the pipeline hotels. Contingent
consideration is recorded within trade and other payables in the
consolidated balance sheet.
GBPm
Consideration transferred
Cash 169.5
Deferred consideration (0.6)
Contingent consideration 56.9
-------
Total consideration 225.8
-------
Fair value of net assets acquired
Property, plant and equipment 6.0
Right-of-use assets - investment property 51.9
Right-of-use assets - property, plant and
equipment 193.3
Trade and other receivables 0.5
Cash and cash equivalents 1.4
-------
Total assets acquired 253.1
-------
Trade and other payables (2.8)
Deferred tax liabilities (3.5)
Lease liabilities (245.2)
-------
Total liabilities acquired (251.5)
-------
Net identifiable assets acquired at fair
value 1.6
-------
Goodwill arising on acquisition 224.2
-------
Purchase consideration transferred 225.8
-------
Subsequent to the acquisition, an impairment of the goodwill
arising on acquisition has been recorded (see Note 14 for further
details). None of the goodwill recognised is expected to be
deductible for income tax purposes.
Asset acquisition - 13 hotels from Centro Hotel Group
On 1 December 2020, the Group completed the acquisition of 13
hotels from the Centro Hotel Group. The transaction has been
accounted for as an asset acquisition under IFRS 3 Business
Combinations as the fair value of the assets is concentrated in a
single group of similar assets. The transaction consists of 6 open
hotels and 7 pipeline hotels which are due to open between 2021 and
2023. On acquisition, the Group has recognised right-of-use assets
of GBP84.9m and lease liabilities of GBP77.2m in relation to the
open hotels. The Group has also committed to lease commitments of
GBP202.4 in relation to the pipeline hotels. Contingent
consideration of GBP1.9m will become payable once handover of the
pipeline sites is complete.
Glossary
Adjusted property rent
Total property rent less a proportion of contingent rent.
Basic earnings per share (Basic EPS)
Profit attributable to the parent shareholders divided by the
basic weighted average number of ordinary shares in issue during
the year after deducting treasury shares and shares held by an
independently managed share ownership trust ('ESOT').
Committed pipeline
Sites where we have a legal interest in a property (that may be
subject to planning/other conditions) with the intention of opening
a hotel in the future.
Direct bookings / distribution
Based on stayed bookings in the financial year made direct to
the Premier Inn website, Premier Inn app, Premier Inn customer
contact centre or hotel front desks.
Food and beverage (F&B) sales
Food and beverage revenue from all Whitbread owned pub
restaurants and integrated hotel restaurants.
Lease debt
Eight times adjusted property rent.
Occupancy
Number of hotel bedrooms occupied by guests expressed as a
percentage of the number of bedrooms available in the period.
Operating profit
Profit before interest and tax.
Profit from operations
Profit before adjusting items, support and central costs,
interest and tax.
Property rent
IFRS 16 property lease liability payments plus variable lease
payments, adjusted for deferred rental amounts. This is used as a
proxy for rent expense as recorded under IAS 17 in arriving at
funds from operations.
Rent expense
Rental costs recognised in the income statement prior to the
adoption of IFRS 16.
Alternative Performance Measures
We use a range of measures to monitor the financial performance
of the Group. These measures include both statutory measures in
accordance with IFRS and alternative performance measures (APMs)
which are consistent with the way that the business performance is
measured internally. We report adjusted measures because we believe
they provide both management and investors with useful additional
information about the financial performance of the Group's
businesses.
APMs are not defined by IFRS and therefore may not be directly
comparable with similarly titled measures reported by other
companies. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measures.
APM Closest equivalent Adjustments Definition and purpose
IFRS to reconcile
to IFRS measure
REVENUE MEASURES
Accommodation Revenue Exclude non-room Premier Inn accommodation revenue excluding
sales revenue such non-room income such as
as food and food and beverage. The growth in accommodation
beverage sales on a year-on-year basis is a good
indicator of the performance of the
business.
Reconciliation: Note 3
Adjusted* Revenue Adjusting Revenue adjusted to exclude the TSA
revenue items income.
Reconciliation: Consolidated income
statement
Average room No direct Refer to UK Accommodation sales divided by the
rate (ARR) equivalent definition 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 2020/21 2019/20
UK Accommodation sales
(GBPm) 388.5 1,311.6
Number of rooms occupied
by guests ('000) 8,415 21,327
-------- --------
UK average room rate
(GBP) 46.16 61.50
Germany Accommodation
sales (GBPm) 10.2 9.8
Number of rooms occupied
by guests ('000) 255 141
Germany average room
rate (GBP) 40.17 69.47
UK like-for-like Movement Accommodation Year over year change in revenue for
revenue growth in accommodation sales from outlets open for at least one year.
sales per non like-for-like The directors consider this to be a
the segment useful measure as it is a commonly used
information performance metric and provides an indication
(Note 3) of underlying revenue trends.
Reconciliation 2020/21 2019/20
UK like-for-like revenue
growth (70.9%) (2.40%)
Contribution from net
new hotels 0.5% 2.30%
--------- ---------
UK Accommodation sales
growth (70.4%) (0.10%)
Revenue per No direct Refer to Revenue per available room is also known
available equivalent definition as 'yield'. This hotel measure is achieved
room (RevPAR) by multiplying the ARR by Occupancy.
The directors consider this to be a
useful measure as it is a commonly used
performance measure in the hotel industry.
Reconciliation 2020/21 2019/20
UK Accommodation sales
(GBPm) 388.5 1,311.6
Available rooms ('000) 28,620 27,963
--------- ---------
UK REVPAR (GBP) 13.57 46.91
Germany Accommodation
sales (GBPm) 10.2 9.8
Available rooms ('000) 1,135 241
--------- ---------
Germany REVPAR (GBP) 9.02 40.53
INCOME STATEMENT MEASURES
Adjusted* Loss/profit Adjusting Loss/profit before tax, finance costs/income
operating before tax items and adjusting items
loss/profit (Note 6), Reconciliation: Consolidated income
finance costs statement
/ income
(Note 7)
Adjusted* Loss/profit Refer to Operating profit before adjusting items
operating before tax definition and after replacing right-of-use asset
loss/profit depreciation with rent expense. The
(pre-IFRS directors consider this to be a useful
16) measure to enable comparison between
periods following the adoption of IFRS
16.
2020/21 2019/20
Reconciliation GBPm GBPm
Adjusted operating (loss)/profit (486.7) 486.8
Depreciation - right-of-use
assets 126.3 104.0
Rent expense (224.9) (188.2)
-------- --------
Adjusted operating (loss)/profit
(pre-IFRS 16) (585.3) 402.6
Adjusted* Tax charge/credit Adjusting Tax charge/credit before adjusting items.
tax items Reconciliation: Consolidated income
(Note 6) statement
Adjusted* Loss/profit Adjusting Loss/profit before tax and adjusting
loss/profit before tax items items.
before tax (Note 6) Reconciliation: Consolidated income
statement
Adjusted* Loss/profit Refer to Loss/profit before tax and adjusting
loss/profit before tax definition items and after replacing right-of-use
before tax asset depreciation and lease liability
(pre-IFRS interest with rent expense. The directors
16) consider this to be a useful measure
to enable comparison between periods
following the adoption of IFRS 16.
2020/21 2019/20
Reconciliation GBPm GBPm
Adjusted (loss)/profit
before tax (635.1) 358.3
Depreciation - right-of-use
assets 126.3 104.0
Interest on lease liabilities 123.2 115.3
Rent expense (224.9) (188.2)
-------- --------
Adjusted (loss)/profit
before tax (pre-IFRS
16) (610.5) 389.4
Adjusted* Basic EPS Adjusting Adjusted loss/profit attributable to
EPS items the parent shareholders divided by the
(Note 6) basic weighted average number of ordinary
shares in issue during the year after
deducting treasury shares and shares
held by an independently managed share
ownership trust (ESOT).
Reconciliation: Note 10
BALANCE SHEET MEASURES
Net debt Total liabilities Exclude lease Cash and cash equivalents after deducting
from financing liabilities total borrowings. The directors consider
activities and derivatives this to be a useful measure of the financing
held to hedge position of the Group. Reconciliation:
financing Note 19
activities
Adjusted net Total liabilities Refer to Net debt adjusted for cash, assumed
debt from financing definition by ratings agencies to not be readily
activities available. 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.
2020/21 2019/20
Reconciliation GBPm GBPm
Net debt 46.5 322.9
Restricted cash adjustment 10.0 10.0
Adjusted net debt 56.5 332.9
Lease adjusted Profit before Refer to Adjusted net debt plus lease debt. The
net debt tax definition directors consider this to be a useful
measure as it forms the basis of the
Group's leverage targets.
2020/21 2019/20
Reconciliation GBPm GBPm
Adjusted net debt 56.5 332.9
Lease debt 1,771.0 1,490.0
-------- --------
Lease adjusted net debt 1,827.5 1,822.9
CASH FLOW MEASURES
Cash capital No direct Refer to Cash flows on property, plant and equipment
expenditure equivalent definition and investment property and investment
(cash capex) in intangible assets, adding net cash
proceeds on acquisitions and capital
contributions to joint ventures.
Funds from Net cash Refer to Net cash flows from operating activities
operations flows from definition after deducting payment of principal
operating of lease liabilities and adding back
activities changes in working capital, adjusted
property rent and cash interest.
While the Group covenant waivers remain
in place, FFO is not considered to be
a key alternative performance measure.
Lease adjusted No direct Refer to Ratio of lease-adjusted net debt/(cash)
net debt to equivalent definition compared to funds from operations (FFO).
FFO While the Group covenant waivers remain
in place, lease adjusted net debt to
FFO is not considered to be a key alternative
performance measure.
Operating Operating Refer to Adjusted operating loss/profit adding
cash flow loss/profit definition 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 and shareholder returns
and before tax, pension and interest
payments.
2020/21 2019/20
Reconciliation GBPm GBPm
Adjusted operating (loss)/profit (486.7) 486.8
Depreciation - right-of-use
assets 126.3 104.0
Depreciation - property,
plant and equipment 150.3 145.0
Amortisation 23.6 19.8
---------------------------------------------------------------------------- -------- --------
Adjusted EBITDA (post-IFRS
16) (186.5) 755.6
Interest paid - lease
liabilities (123.2) (115.3)
Payment of principal
of lease liabilities (71.7) (73.1)
Lease incentives (paid)/received (7.3) 1.0
Movement in working capital(1) (99.8) (13.0)
-------- --------
Operating cash flow (488.5) 555.2
(1) FY20 excludes GBP51.0m timing of one-off transaction and
separation costs relating to the sale of Costa.
OTHER MEASURES
Adjusted* Operating Refer to Adjusted EBITDA (post-IFRS 16) is loss/profit
EBITDA (post-IFRS loss/profit definition before tax, adjusting items, interest,
16), depreciation and amortisation.
Adjusted* Adjusted EBITDA (pre-IFRS 16) is further
EBITDA adjusted to remove rent expense.
(pre-IFRS Adjusted EBITDAR is profit before tax,
16) adjusting items, interest, depreciation,
and Adjusted* amortisation, variable lease payments
EBITDAR and rental income. The directors consider
these measures to be useful as they
are commonly used industry metrics which
facilitate comparison between companies
on a before and after IFRS 16 basis.
2020/21 2019/20
Reconciliation GBPm GBPm
Adjusted operating (loss)/profit (486.7) 486.8
Depreciation - right-of-use
assets 126.3 104.0
Depreciation - property,
plant and equipment 150.3 145.0
Amortisation 23.6 19.8
------------------------------------------------------------------------------------ -------- --------
Adjusted EBITDA (post-IFRS
16) (186.5) 755.6
Variable lease payments (0.6) 2.0
Rental income (7.8) (4.9)
------------------------------------------------------------------------------------ -------- --------
Adjusted EBITDAR (194.9) 752.7
Rent expense, variable
lease payments and rental
income (216.5) (185.3)
-------- --------
Adjusted EBITDA (pre-IFRS
16) (411.4) 567.4
Return on No direct Refer to Adjusted operating loss/profit (pre-IFRS
Capital Employed equivalent definition 16) for the year divided by net assets
(ROCE) at the balance sheet date, adding back
net debt, right-of-use assets, lease
liabilities, taxation assets/liabilities,
the pension surplus/deficit and derivative
financial assets/liabilities, other
financial liabilities and IFRS 16 working
capital adjustments.
Return on capital is not disclosed and
a reconciliation is therefore not included.
* Adjusted measures of profitability represent the equivalent
IFRS measures adjusted for specific items that we consider relevant
for comparison of the financial performance of the Group's
businesses either from one period to another or with other similar
businesses.
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END
FR BQLLLFZLFBBL
(END) Dow Jones Newswires
April 27, 2021 02:00 ET (06:00 GMT)
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