Whitbread PLC WTB Whitbread Interim Results

  Whitbread PLC (WTB) - Whitbread Interim Results

RNS Number : 2669P
Whitbread PLC
23 October 2012




                    WHITBREAD DELIVERS DOUBLE DIGIT GROWTH

                                      

       WHITBREAD PLC RESULTS FOR THE SIX MONTHS ENDED 30^TH AUGUST 2012



Financial Highlights



· Total revenue up 14.2% to £1,018.1 million (2011/12: £891.3 million)

· Group like for like sales^1 up 4.3%

· Underlying profit^2 before tax up 10.6% to £193.4 million (2011/12:
£174.9 million)

· Group return on capital^3 increased to 13.7% (2011/12: 13.4%)

· Whitbread Hotels and Restaurants underlying profit^2 up 8.5% to £181.3
million (2011/12: £167.1 million)

· Costa underlying profit^2 up 29.9% to £36.1 million (2011/12: £27.8
million)

· Underlying diluted EPS up 13.1% to 81.65p (2011/12: 72.20p)

· Strong cashflow from operations^4 up 11.0% to £285.3 million (2011/12:
£257.1 million) funding capital investment of £187.6 million (2011/12: £129.0
million)

· Strong balance sheet, half year net debt of £525.8 million (versus
£520.1 million at 1^St September 2011)

· Interim dividend up 11.4% to 19.50p (2011/12: 17.50p)

                                      

                             Statutory Highlights



· Profit after tax and exceptional items for the half year up 8.9% to
£173.4 million (2011/12: £159.2 million)

· Total basic EPS 98.20p up 8.2% (2011/12: 90.79p)



Growing Strong Brands



·Premier Inn UK grew total sales by 12.9%, with significant
outperformance against its competitive^5 set. Like for like sales^1 up 3.7%

·Premier Inn opened 1,591 net UK rooms taking the total to 49,020; with
a secured pipeline of over 11,000 rooms; on track for 2016 milestone of 65,000
rooms

·Restaurants performance continued to improve with total sales up 5.3%
and like for like sales^1 up 3.4%

·Costa delivered another outstanding performance. Total sales up 25.0%,
UK like for like sales^1 up 6.8% and underlying profits up 29.9%

·141 net new coffee shops taking total to 2,344, up 6.4% from 2011/12

·1,500 new UK jobs created by Whitbread brands, with 10,000 expected
over the next three years



Anthony Habgood, Chairman, said:



"Whitbread is continuing on its rapid profitable organic growth path in
difficult economic conditions. This is due to our unrelenting customer focus
and the use of our strong balance sheet to invest in building powerful brands,
developing our people and renewing our estate."



Andy Harrison, Chief Executive, said:



"Whitbread delivered a strong first half performance with total sales growth
of 14.2% and underlying earnings per share growth of 13.1%, driven by our
outperformance in a broadly flat market.



The combination of our strong sales growth and good returns drove an 11%
increase in cash flow from operations to £285.3 million. This created the
financial capacity to continue investing in our brands and the quality and
breadth of our estate, finance our organic growth and the 11.4% increase in
the interim dividend.

Premier Inn delivered a 2.4% growth in revpar during the first half, compared
to a decline of 3.6% in the Midscale and Economy^5 sector. As expected, the
London hotel market is settling post the Olympics and we wait for a clearer
trend to emerge. The regional hotel market has continued its revpar decline.
More generally, our consumer market context continues to be broadly flat.
Against this background we expect to continue to outperform our competitors
and like for like sales growth to be more moderate than the high levels
achieved in the first half.

We expect continuing rapid growth in total sales on track towards our five
year milestones. Premier Inn is benefitting from a structural shift in the UK
towards strong branded hotels. Costa's growth is supported by its leading UK
position in a robust category, together with exciting international
opportunities. This growth in total sales, coupled with our clear focus on
good financial returns, is creating substantial value."

For further information contact:


Whitbread
Christopher Rogers, Group Finance Director     + 44 (0) 20 7806 5491
Anna Glover, Director of Communications        +44 (0) 7768 917 651

Joanne Russell, Director of Investor Relations +44 (0) 1582 888 633
Tulchan, David Allchurch/Rebecca Scott         + 44 (0) 20 7353 4200

^1 Like for like sales stated pre IFRIC 13 adjustment for Premier Inn -
UK and Ireland, Costa and Restaurants - UK

^

^2 Underlying profit

Underlying profit excluding amortisation of acquired intangibles, exceptional
items and the impact of the pension finance cost as accounted for under IAS
19.



^3 Return on capital



Return on capital is the return on invested capital which is calculated by
dividing the underlying profit before interest and tax for the year by net
assets at the balance sheet date adding back debt, taxation liabilities and
the pension deficit.



^4 Cashflow from operations



Cash generated from operations in the financial statements excluding the
pension payments



^5STR Global - UK Midscale and Economy sector

Further information



For photographs and videos, please visit the corporate media library:

www.whitbreadimages.co.uk



A presentation for analysts will be held at Nomura, 1 Angel Lane, Upper Thames
Street, London, EC4R 3AB. The presentation is at 9.30 am and a live webcast of
the presentation will be available on the investors' section of the website
at: http://www.whitbread.co.uk/investors



CHIEF EXECUTIVE'S REVIEW

Every month Whitbread serves around 21 million customers through around 2,500
outlets in the UK and our success is built on delivering high and consistent
levels of customer experience. As such, we are particularly grateful to our
40,000 employees who are at the heart of our success. I would like to thank
them on behalf of the Board for their contribution.



Whitbread delivered good sales and profit growth in the first half of the year
despite the continued challenging economic environment. Strong organic
expansion, combined with good like for like sales growth across the business,
increased Group total sales by 14.2% to £1,081.1 million. Premier Inn grew
sales by 12.9% to £443.5 million, Costa by 25.0% to £313.4 million and
Restaurants by 5.3% to £262.4 million.



Group underlying profit before tax increased by 10.6% to £193.4 million
(2011/12: £174.9 million), with underlying diluted EPS increasing by 13.1% to
81.65p.



Our continuing focus on investing in our strong brands and winning market
share drove Group like for like sales up by 4.3%, with Premier Inn and Costa's
UK equity stores delivering like for like sales growth of 3.7% and 6.8%
respectively. Restaurants' performance continued to improve in the first half
with like for like sales up 3.4%.



The Group return on capital increased to 13.7% (from 13.4% in H1 11/12). This
combined with our strong revenue growth delivered an increase in cashflow from
operations to £285.3 million, which funded capital expenditure of £187.6
million.



We maintained our strong balance sheet andended the half year with net debt
of £525.8 million, little changed year on year despite a significant increase
in capital expenditure. In the half year we agreed the pension scheme
triennial valuation and as a result the future pension deficit funding payment
plan remains unchanged.



We are on track to deliver our five year growth milestones announced in April
2011. This organic growth combined with a strong focus on return on capital is
creating substantial value.



The interim dividend has been increased by 11.4% to 19.50p (2011/12: 17.50p).
This will be paid on 10^th January 2013 to all shareholders on the register at
close of business on the 9th November 2012. A scrip dividend alternative will
again be offered.



Whitbread Hotels and Restaurants



Hotels and Restaurants had a good first half performance with revenue rising
by 10.0% to £705.9 million. Within Hotels and Restaurants, Premier Inn revenue
increased by 12.9% to £443.5 million and Restaurants revenue by 5.3% to £262.4
million. Underlying profit grew by 8.5% year on year to £181.3 million and
return on capital was maintained at 12.5%.



Premier Inn



Premier Inn continues to outperform and win market share, growing room
capacity by 9.8% in the UK and Ireland and delivering total occupancy of
79.0%. The key levers which drive our success are the strength of our hotel
network, the quality and consistency of the Premier Inn guest experience, the
power of the Premier Inn brand backed up by our good night sleep guarantee,
together with the development of our dynamic pricing system. The increasing
strength of the Premier Inn brand is highlighted by a further increase in our
guest recommend scores and the rapid growth in visitors to our website,
premierinn.com.



During the first half of the year, Premier Inn outperformed its competitive
set delivering total revpar growth of 2.4% compared to a decline of 3.6% for
the Midscale and Economy^5 sector and growth of 2.1% for the total UK hotel
market. Within the UK regions, revpar remained weak and Premier Inn
outperformed substantially delivering like for like revpar growth of 1.9%
compared to a decline of 3.6% for the Midscale and Economy^5 hotel sector
during the period. In London, the hotel market was variable with revpar growth
benefiting from the Royal holiday comparative in April and the Olympics in the
second quarter. We estimate the revpar benefit from the Olympics on the
overall Premier Inn business was around 0.7%pts in the first half. The London
market is settling post the Olympics and we are waiting for a clear trend to
emerge. For the half year, Premier Inn delivered like for like revpar growth
of 4.4% in London compared to a decline of 3.5% for the Midscale and Economy^5
sector.



Our dynamic pricing model continues to evolve and we extended our two tier
pricing system, Premier Flexible and Premier Saver, to two-thirds of our
estate, which has provided a modest uplift to revpar. We expect this model to
be fully rolled out across the estate by the end of 2012/13. We maintained our
investment in marketing and our website traffic increased to 29 million visits
during the first half of 2012/13, up 22%. Our percentage of automated bookings
has also risen from 76% to 82% year on year.



We continue to invest in our strong brands to reinforce our competitive
position and plan to spend around £75 million on refurbishing and maintaining
the Premier Inn estate this year. Our experience is that refurbished rooms
lead to an increase in our guest net recommend score, reinforcing a
consistently higher guest experience across our estate.



We continue to strengthen our network and plan to open a total of 31 new
hotels (c.4,500 new rooms, which implies an increase in the UK of 9.5%) this
year, offering our customers greater choice compared to our competitors. Our
committed pipeline, beyond the balance of this financial year, of over 8,000
new rooms puts us on track to achieve our growth milestone of 65,000 rooms by
2016. This expansion is driven by our network plan which is based on detailed
analysis of supply and demand at the local level. Growing our market share in
London continues to be a focus for the Group and our room capacity has
increased by 26% over the past 12 months as we have built 9 new hotels with
1,576 rooms. Despite this increase in capacity our total occupancy level in
London remains high at 86%. London represents 33% of our committed pipeline.



International



During the first half, Premier Inn International made progress with total
occupancy up 6.1%pts to 56.2% and like for like revpar up 34.8%. During this
period we expanded our international development team and have signed 11
letters of intent for 18 hotels with a focus on three territories - India,
Middle East and Asia Pacific. This is part of our strategy of moving to a
'capital light' business model for our international expansion.



Restaurants



Our Restaurants performance continued to improve in the first half with like
for like sales up 3.4% and total covers up 8.6%. This is a result of our
dedicated focus on menu management, margins and operating efficiencies to
deliver a better and more consistent guest experience. This has been achieved
through stronger menu propositions, increased breakfast sales, which have
risen by 20% year on year, Buffet Place conversions, which provided a 7% sales
uplift, and value meals, which now represent 40% of total sales. We are also
improving our operational performance through our three Skills Academies which
have been attended by 2,600 team members. A key tool within Restaurants is the
'Guest Recommend Survey' that captures feedback from our customers. During the
first half of the year we received 170,000 responses to our Guest Recommend
survey for Restaurants and we saw an overall improvement in guest scores. We
have also implemented a Mystery Guest programme to check we are delivering on
our service and product.



We will deliver cost efficiencies of some £4-5 million this year and implement
selective price increases. This will help offset inflationary cost pressures
as well as part funding additional investment in our dedicated restaurant
management team to drive future performance.



We are committed to the Whitbread joint site model, which delivers a return on
capital of 17.7%, on a site basis, as well as facilitating access to the sub
80 hotel room sector. This compares with a return on capital of 15.3% for our
Solus estate. Currently of our 49,020 rooms in the UK and Ireland, 45% of
these are located next to one of our restaurants ('joint sites'), 40% are
Solus with an integrated restaurant and 15% are co-located next to a
restaurant operated by a third party ('co-los'). The Whitbread joint site
model benefits from a higher revpar and offers a superior guest experience for
Premier Inn customers, compared to that of a co-located restaurant, especially
for breakfast. We estimate that this is worth around £1 additional revpar for
Premier Inn joint sites. Returns on joint sites are also higher than co-los
due to operating and capital efficiencies. Whitbread joint sites represent
around 20% of our Premier Inn growth pipeline.



Costa



Costa had another outstanding performance during the first half of the year
with underlying profits up 29.9% to £36.1 million and return on capital at
31.2%. Worldwide system sales were up 23.3% to £472.8 million and total
reported sales up 25.0% to £313.4 million.



In the UK, Costa had another strong performance, partially helped by the poor
summer weather, with like for like sales in UK equity stores up 6.8%. The
brand continues to strengthen and during the first half, the launch of the new
Ice Cold Costa range was a great success with sales rising 29%. We continue to
invest in the business and refurbished 91 stores in the period and opened 87
net new UK stores. Innovation remains at the heart of the Costa strategy and
we have recently launched a range of new hot drinks including Cortado, Caffe
Caramella and Chai Latte as well as successfully introducing a new food range.
Costa remains the UK's favourite coffee shop and the continuous development of
our product range combined with investment in the brand has further widened
the preference gap with our competitors.



Costa Enterprises continue to perform well with both our Corporate business
and Costa Express making strong progress. We added a further 794 new Costa
Express units in the first half taking the total number of units to 1,986.
This includes over 400 units from our partnership with Shell. Costa Express
sales are up 86.8% year on year. On conversion of a Coffee Nation machine to a
Costa Express machine there has been an increase in cups sold per machine of
20%.



Costa EMEI continues to grow with 16 net new stores opened in the first half
taking our total number of stores to 663. System sales grew by 13.8% and like
for like sales by 6.8% with a strong performance in the Middle East offsetting
a more difficult period in Central Europe. We continue to expand our
international footprint and are now trading in 26 countries within EMEI.



Costa Asia has seen strong growth with China delivering a like for like sales
increase of 19.2% in the first half and opening 37 new stores taking our total
number of stores to 201. We continue to expand our presence outside of tier
one cities and now have stores in 25 cities in China. We have also expanded
into new markets and opened one store in Singapore during the first half of
the year.



Good Together



We have made good progress against our new five year targets announced earlier
in the year. In our focus on 'Teams and Community' we have created 1,500
jobs. Team members have achieved 1,000 nationally recognised qualifications
and 100 apprenticeships have been created. Under 'Customer Wellbeing,'
calorific labelling is in place in Costa and Premier Inn solus restaurants
with trials to take place in the wider Restaurants estate. We are constantly
looking at ways to provide healthier choices for our customers on our menus.
We have updated our Responsible Sourcing policy and have developed a specific
Timber Sourcing policy. In reducing our 'Environmental' impact, we are on
track against our carbon reduction and water consumption targets. Likewise
with our waste target, where we now divert 88% from landfill.



Outlook



Whitbread delivered a good first half performance in flat market conditions.
Revpar in the total UK hotel market grew by 2.1%, with London up 5.4%
benefiting from the Olympics, and the UK regions continued to decline. As
expected, the London hotel market is settling post the Olympics and we wait
for a clearer trend to emerge. The regional hotel market has continued its
revpar decline. More generally, our consumer market context continues to be
broadly flat. Against this background we expect to continue to outperform our
competitors and like for like sales growth to be more moderate than the high
levels achieved in the first half.

We expect continuing rapid growth in total sales on track towards our five
year milestones. Premier Inn is benefitting from a structural shift in the UK
towards strong branded hotels. Costa's growth is supported by its leading UK
position in a robust category, together with exciting international
opportunities. This growth in total sales, coupled with our clear focus on
good financial returns, is creating substantial value.



Whitbread Hotels and Restaurants

                                           H1 2012/13 H1 2011/12      %

                                                   £m         £m Change
Premier Inn revenue                             443.5      392.8   12.9
Restaurants revenue                             262.4      249.1    5.3
Total revenue                                   705.9      641.9   10.0
Premier Inn like for like sales %^1               3.7        5.2
Premier Inn rooms UK & Ireland (no.)           49,020     44,639    9.8
Premier Inn like for like revpar growth %*        2.3        4.4
Premier Inn occupancy (total) %*                 79.0       79.1
Restaurants like for like sales %^1               3.4      (1.6)
Restaurants like for like covers growth %         6.0      (1.4)
Underlying profit                               181.3      167.1    8.5
Operating profit, post exceptional              181.2      191.9  (5.6)
WHR ROCE %                                       12.5       12.5



* UK & Ireland



Costa

                                   H1 2012/13 H1 2011/12      %

                                           £m         £m Change
System sales**                          472.8      383.6   23.3
Revenue                                 313.4      250.8   25.0
Like for like sales % (UK)**              6.8        6.7
UK stores (no.)                         1,479      1,302   13.6
International stores (no.)                865        701   23.4
Underlying profit                        36.1       27.8   29.9
Operating profit, post exceptional       33.2       26.1   27.2
ROCE %**                                 31.2       28.5



** System sales and  like for like sales  excludes intersegment and pre  IFRIC 
13.



FINANCE DIRECTOR'S REVIEW



Revenue



Group revenue increased year on year by 14.2% to £1,018.1 million. The revenue
in our Hotels and Restaurant segment rose by 10.0% to £705.9 million whilst
Costa revenue increased by 25.0% to £313.4 million. Within Hotels and
Restaurants, Premier Inn increased revenue by 12.9% to £443.5 million and
restaurants by 5.3% to £262.4 million. The increase in revenue is driven by a
combination of like for like sales^* growth and the opening of new units.



All of our businesses delivered like for like sales growth with Premier Inn at
3.7%, Restaurants 3.4% and Costa at 6.8%. Premier Inn like for like sales
benefited from the impact of the London Olympics, estimated to have increased
revpar by 0.7%pts across the period and our continued development of dynamic
pricing. Restaurants continued to focus on value for money and the roll out of
Buffet Place. Costa benefitted from the poor spring and summer weather and
continued innovation in the product range.



Growth in units again played an important part in the overall increase in
revenue with 1,621 new Premier Inn rooms opened in the first half, one
restaurant and 174 Costa stores, of which 80 were outside the UK. During the
first half an additional 818 Costa Express machines were installed.



Results



Underlying profit before tax for the half is £193.4 million, up 10.6% on last
year. The underlying profit before tax measure excludes the pension interest
charge, the amortisation of acquired intangibles and exceptional items. Sales
growth outperformed profit growth which was impacted by mix and a rise in
Group central costs. Costa, which has a lower margin than the rest of the
Group, grew faster than the higher margin Hotels and Restaurants. In the case
of central costs, the strong share price has increased the national insurance
due on share based payments. Underlying diluted earnings per share is 81.7p
compared to 72.2p last year, up 13.1% reflecting the earnings growth and
benefiting from an effective tax rate which fell by 2.1%pts to 25.3%.



Total profit for the half is £173.4 million, which compared to £159.2  million 
last year, is up 8.9%.



Return on capital



The return on capital, calculated by dividing the underlying profit before
interest and tax for the 12 months ended on 30^th August 2012 by net assets at
the balance sheet date adding back debt, taxation liabilities and the pension
deficit, remains a key focus for the Group. Overall the return on capital has
improved by 0.3%pts year on year to 13.7%.



Exceptional items



Exceptional items are set out in detail in note 3. In total they amount to an
£8.4 million benefit before tax and £36.5 million after tax compared to £23.1
million and £39.0 million respectively last year.



The major exceptional items relate to tax. A tax claim dating back to 2004 was
settled with HMRC which resulted in the release of a tax provision of £13.5
million with associated interest income of £10.6 million. In addition,
following the enactment of The Finance Act 2012 which reduced the UK
corporation tax rate from 25% to 23%, there has been a tax release of £17.1
million to income.



Interest



The underlying interest charge for the half year is £12.6 million compared to
£11.4 million in the prior year as a result of average net debt increasing by
9.7% to £499.1 million.

The total pre exceptional interest cost amounted to £21.2 million, up 10.4% as
it includes the IAS 19 pension charge of £8.6 million (2011/12: £7.8 million).
This charge represents the difference between the expected return on scheme
assets and the interest cost on the scheme liabilities.

Tax

The effective tax rate for the half is 25.3% compared to 27.4% last year with
the reduction as a result of the fall in the UK corporation tax rate of
2%pts. This gives rise to an underlying tax expense of £49.0 million compared
to £47.9 million last year.



Earnings per share



Underlying diluted EPS increased by 13.1% to 81.7p.



EPS                                          2012/13 2011/12
Underlying (Diluted)                          81.7p   72.2p
Non GAAP adjustments (inc pensions interest) (4.2)p  (3.9)p
Exceptional items                             20.5p   22.1p
Total operations (diluted)                    98.0p   90.4p



Further details can be found in note 6.



Dividend



An interim dividend of 19.50p will paid on 10^thJanuary 2013 to all
shareholders on the register at the close of business on 9^th November 2012.
This represents an increase of 11.4%. A scrip dividend alternative will again
be offered.



Net Debt and Cash flow



The principal movements in net debt are as follows:



£m                          2012/13 2011/12
Cash flow from operations^4  285.3   257.1
Capital expenditure         (187.6) (129.0)
Interest                    (13.2)  (14.0)
Tax                         (19.1)  (26.8)
Pensions                    (36.0)  (61.0)
Dividends                   (48.9)  (57.1)
Other                        (2.0)   (1.4)
Net cash flow               (21.5)  (32.2)
Net debt brought forward    (504.3) (487.9)
Net debt carried forward    (525.8) (520.1)



The Group generated strong cash flow from operations in the half year which at
£285.3 million were up by 11.0%. Capital expenditure increased by 45.4% to
£187.6 million (see below for a more detailed explanation). 



The level of cash tax reflects tax relief on pension fund recovery plan
payments.



The total payments to the pension scheme were £36.0 million, a reduction of
£25.0 million compared to last year following the decision in the second half
of 2011/12 to make an advanced payment of £25 million. We plan to return to
the payment schedule previously announced and make payments of £55 million in
August 2013, £65 million in August 2014 and 2015, £70 million in August 2016,
£80 million in August 2017 and £70 million in August 2018.



Dividend payments decreased by £8.2 million to £48.9 million. This largely
reflects the significant increase in the scrip dividend take up of £9.4
million to £10.5 million.



Net debt increased by £21.5 million to £525.8 million whilst the Group's loan
facilities remained at £908 million. The first maturity of these facilities
will be in November 2016 when the £650 million revolving credit facility is
due to expire.



The policy of the Board continues to be to manage its financial position and
capital structure in a manner consistent with Whitbread maintaining its
investment grade status.



Capital expenditure



The Group spent £187.6 million on capital in the half compared to £129.0
million last year. This increase in expenditure was in line with our stated
plans to continue to grow the business and re-invest to maintain the quality
of the existing estate.



In total £111.3 million was spent on driving new growth in the half, up 22.3%.
This increase reflects the step up in room openings in Premier Inn and the
accelerated roll out of Costa Express machines. Maintenance expenditure has
also materially increased. A large part of the maintenance expenditure is
spent on refurbishing rooms to ensure that we continue to offer customers a
well maintained room which is consistent in quality throughout our estate.



Pensions



As at 30^th August 2012, there was an IAS 19 pension deficit of £640.0
million, which compares to £598.7 million at 1^st March 2012 and £517.0
million as of 1^st September 2011. The main movement in the deficit from year
to year is the actuarial loss which is driven by the fall in the discount
rate, which is now at 4.10%, down from 4.65% at the year end and 5.40% as at
1^st September 2011, offset by payments into the fund of £36.0 million in the
half.



During this half the triennial valuation was agreed with a deficit of £432
million as of 31^st March 2011 and with no change to the pensions deficit
funding arrangements. The triennial valuation is not comparable with the IAS
19 pensions deficit as it takes into account the benefit that the scheme
receives as a result of the Scottish Limited Partnership arrangements whilst
the IAS 19 valuation does not.



Related Parties



Related parties have been considered in detail in note 9 and therefore not
included within this Finance Review.



Post Balance Sheet Events



An interim dividend of 19.50p per share (2011/12: 17.50p) amounting to a total
of £34.7 million was declared by the Board on 22^nd October 2012.



Risks and uncertainties



The principal risks and uncertainties affecting the business activities of the
Group are detailed on pages 20 and 21 of the Annual Report and Accounts for
the year ended 1^st March 2012. The risks are categorised into the following
areas: health and safety, market, financial and third party. Certain
additional financial risks are also detailed in note 25 to the financial
statements dated 1^st March 2012, for example: interest rate, liquidity,
credit and foreign currency. The Directors consider that these key risks and
uncertainties continue to be relevant to the Group for the remainder of the
financial year.



A copy of the Directors' Report and Accounts is available on the Company's
website at www.whitbread.co.uk.







Responsibility statement
We confirm that to the best of our knowledge:

a) The condensed set of financial statements has been prepared in accordance
with IAS 34;
b) The interim management report includes a fair review of the information
required by the Financial Statements Disclosure and Transparency Rules (DTR)
4.2.7R - indication of important events during the first six months and their
impact on the financial statements and description of principal risks and
uncertainties for the remaining six months of the year; and
c) The interim management report includes a fair review of the information
required by DTR 4.2.8R - disclosure of related party transactions and changes
therein.

By order of the Board



Andy Harrison   Christopher Rogers
Chief Executive Group Finance Director





Interim unaudited consolidated income statement

                                               6 months to 6 months to Year to

                                                 30 August 1 September 1 March

                                                     2012        2011    2012

                                         Notes          £m          £m      £m
Revenue                                    2       1,018.1       891.3 1,778.0
Cost of sales                                      (167.2)     (140.3) (288.4)
Gross profit                                         850.9       751.0 1,489.6
Distribution costs                                 (541.3)     (455.2) (969.2)
Administrative expenses                            (106.8)      (86.9) (174.7)
Operating profit                                     202.8       208.9   345.7
Share of loss from joint ventures                    (0.4)       (0.6)   (0.7)
Share of profit from associate                         0.6         0.6     0.9
Operating profit of the Group, joint       2                             345.9
venture and associate                                203.0       208.9
Finance costs                              4        (22.2)      (22.1)  (43.4)
Finance revenue                            4          11.1         2.1     3.3
Profit before tax                                    191.9       188.9   305.8
Analysed as:
Underlying profit before tax                         193.4       174.9   320.1
 Amortisation of acquired intangible      3                             (2.6)
assets                                               (1.3)       (1.3)
 IAS 19 Income Statement charge for       3                            (14.0)
pension finance cost                                 (8.6)       (7.8)
Profit before tax and exceptional items              183.5       165.8   303.5
 Exceptional items                        3           8.4        23.1     2.3
Profit before tax                                    191.9       188.9   305.8
Underlying tax expense                              (49.0)      (47.9)  (84.4)
Exceptional tax and tax on non GAAP        3                              44.6
adjustments                                           30.5        18.2
Tax expense                                         (18.5)      (29.7)  (39.8)
Profit for the period                                173.4       159.2   266.0
Attributable to:
 Parent shareholders                               174.1       159.7   267.3
 Non-controlling interest                          (0.7)       (0.5)   (1.3)
                                                     173.4       159.2   266.0



                                            6 months to 6 months to Year to

                                              30 August 1 September 1 March

                                                   2012        2011    2012

Earnings per share (note 6)                           p           P       P
    Earnings per share
Basic for profit for the period                   98.20       90.79  151.53
Diluted for profit for the period                 97.97       90.43  151.19
Earnings per share before exceptional items
    Basic for profit for the period               77.61       68.62  127.38
Diluted for profit for the period                 77.43       68.35  127.09
Underlying earnings per share
    Basic for profit for the period               81.84       72.48  134.35
Diluted for profit for the period                 81.65       72.20  134.05





Interim unaudited consolidated statement of comprehensive income


                                             6 months to  6 months to Year to

                                               30 August   1 September 1 March

                                                    2012          2011    2012

                                                     £m            £m      £m
Profit for the period                              173.4         159.2   266.0
Items that will not be reclassified to
profit or loss:
Actuarial losses on defined benefit pension
schemes                                           (68.7)        (82.2) (192.1)
Current tax                                          8.7          15.7    22.2
Deferred tax                                         7.9           5.8    27.9
Deferred tax: change in rate of corporation
tax                                                (9.6)         (7.2)   (8.2)
                                                  (61.7)        (67.9) (150.2)
Items that may be reclassified subsequently
to profit or loss:
Net loss on cash flow hedges                       (3.2)         (4.1)   (1.0)
Deferred tax                                         0.8           1.1     0.3
Deferred tax: change in rate of corporation
tax                                                (0.5)         (0.6)   (0.6)
                                                   (2.9)         (3.6)   (1.3)
Exchange differences on translation of
foreign operations                                 (1.9)         (0.1)   (0.6)
Other comprehensive loss for the period, net
of tax                                            (66.5)        (71.6) (152.1)
Total comprehensive profit for the period,
net of tax                                         106.9          87.6   113.9
Attributable to:
 Parent shareholders                              107.6          88.1   115.2
 Non-controlling interest                         (0.7)         (0.5)   (1.3)
                                                   106.9          87.6   113.9





Interim unaudited consolidated statement of changes in equity



6 months to 30 August 2012

                                 Capital

                Share   Share redemption Retained    Currency     Other         Non-controlling   Total

              capital premium    reserve earnings translation  reserves   Total        interest  equity

                   £m      £m         £m       £m          £m        £m      £m              £m      £m
At 1 March      147.5    53.7       12.3  3,163.0         3.7 (2,103.4) 1,276.8             6.4 1,283.2 
2012
                                                                                                        
Profit for                                                                                              
the period          -       -          -    174.1           -         -   174.1           (0.7)   173.4
Other
comprehensive                                                                                           
income              -       -          -   (61.4)       (1.9)     (3.2)  (66.5)               -  (66.5)
Total
comprehensive                                                                                           
income              -       -          -    112.7       (1.9)     (3.2)   107.6           (0.7)   106.9
                                                                                                        
Ordinary            -     0.4          -        -           -         -     0.4               -     0.4 
shares issued
Loss on ESOT        -       -          -    (3.1)           -       3.1       -               -       - 
shares issued
Accrued
share-based         -       -          -      4.3           -         -     4.3               -     4.3 
payments
Tax on
share-based         -       -          -    (0.3)           -         -   (0.3)               -   (0.3) 
payments
Rate change
on historical       -       -          -      1.3           -         -     1.3               -     1.3 
revaluation
Equity              -       -          -   (59.8)           -         -  (59.8)               -  (59.8) 
dividends
Scrip             0.5   (0.5)          -     10.9           -         -    10.9               -    10.9 
dividends
Additions           -       -          -        -           -         -       -             1.8     1.8 
At 30 August                                                                                            
2012            148.0    53.6       12.3  3,229.0         1.8 (2,103.5) 1,341.2             7.5 1,348.7





6 months to 1 September 2011

                                 Capital

                Share   Share redemption Retained    Currency     Other         Non-controlling   Total

              capital premium    reserve earnings translation  reserves   Total        interest  equity

                   £m      £m         £m       £m          £m        £m      £m              £m      £m
At 3 March                                                                                              
2011            147.0    50.8       12.3  3,128.8         4.3 (2,103.0) 1,240.2             1.8 1,242.0
                                                                                                        
Profit for                                                                                              
the period          -       -          -    159.7           -         -   159.7           (0.5)   159.2
Other
comprehensive                                                                                           
income              -       -          -   (67.4)       (0.1)     (4.1)  (71.6)               -  (71.6)
Total
comprehensive                                                                                           
income              -       -          -     92.3       (0.1)     (4.1)    88.1           (0.5)    87.6
                                                                                                        
Ordinary            -     0.2          -        -           -         -     0.2               -     0.2 
shares issued
Loss on ESOT        -       -          -    (2.1)           -       2.1       -               -       - 
shares issued
Accrued
share-based         -       -          -      3.6           -         -     3.6               -     3.6 
payments
Equity              -       -          -   (58.6)           -         -  (58.6)               -  (58.6) 
dividends
Scrip             0.1   (0.1)          -      1.5           -         -     1.5               -     1.5 
dividends
Additions           -       -          -        -           -         -       -             3.8     3.8 
At 1
September                                                                                               
2011            147.1    50.9       12.3  3,165.5         4.2 (2,105.0) 1,275.0             5.1 1,280.1





Year to 1 March 2012

                                 Capital

                Share   Share redemption Retained    Currency     Other         Non-controlling   Total

              capital premium    reserve earnings translation  reserves   Total        interest  equity

                   £m      £m         £m       £m          £m        £m      £m              £m      £m
At 3 March      147.0    50.8       12.3  3,128.8         4.3 (2,103.0) 1,240.2             1.8 1,242.0 
2011
                                                                                                        
Profit for          -       -          -    267.3           -         -   267.3           (1.3)   266.0 
the period
Other
comprehensive       -       -          -  (150.5)       (0.6)     (1.0) (152.1)               - (152.1) 
income
Total
comprehensive       -       -          -    116.8       (0.6)     (1.0)   115.2           (1.3)   113.9 
income
                                                                                                        
Ordinary          0.4     3.0          -        -           -         -     3.4               -     3.4 
shares issued
Cost of ESOT
shares              -       -          -        -           -     (5.2)   (5.2)               -   (5.2) 
purchased
Loss on ESOT        -       -          -    (5.8)           -       5.8       -               -       - 
shares issued
Accrued
share-based         -       -          -      7.9           -         -     7.9               -     7.9 
payments
Tax on
share-based         -       -          -      1.0           -         -     1.0               -     1.0 
payments
Rate change
on historical       -       -          -      1.3           -         -     1.3               -     1.3 
revaluation
Equity              -       -          -   (89.6)           -         -  (89.6)               -  (89.6) 
dividends
Scrip             0.1   (0.1)          -      2.6           -         -     2.6               -     2.6 
dividends
Additions           -       -          -        -           -         -       -             5.9     5.9 
At 1 March      147.5    53.7       12.3  3,163.0         3.7 (2,103.4) 1,276.8             6.4 1,283.2 
2012





Interim unaudited consolidated balance sheet

                                               30 August 1 September   1 March
                                                    2012        2011      2012
                                         Notes        £m          £m        £m
ASSETS
Non-current assets
Intangible assets                                  205.6       203.8     206.6
Property, plant and equipment                    2,696.1     2,455.9   2,580.5
Investment in joint ventures                        21.1        17.9      18.7
Investment in associate                              1.8         2.0       1.6
Trade and other receivables                          4.2         3.3       3.6
                                                 2,928.8     2,682.9   2,811.0
Current assets
Inventories                                         26.7        24.7      23.1
Trade and other receivables                        104.8       140.5      85.0
Cash and cash equivalents                  7        49.6        39.4      40.3
                                                   181.1       204.6     148.4
Assets classified as held for sale                   0.6         3.9       0.6
TOTAL ASSETS                                     3,110.5     2,891.4   2,960.0
LIABILITIES
Current liabilities
Financial liabilities                      7           -        49.3      14.2
Provisions                                          10.7        15.4      10.7
Derivative financial instruments                     4.8        12.1       6.6
Income tax liabilities                              27.1        14.6      15.4
Trade and other payables                           340.9       300.5     321.3
                                                   383.5       391.9     368.2
Non-current liabilities
Financial liabilities                      7       575.4       510.2     530.4
Provisions                                          34.9        26.9      37.1
Derivative financial instruments                    23.6        19.8      20.1
Deferred income tax liabilities                     86.7       131.4     105.9
Pension liability                          8       640.0       517.0     598.7
Trade and other payables                            17.7        14.1      16.4
                                                 1,378.3     1,219.4   1,308.6
TOTAL LIABILITIES                                1,761.8     1,611.3   1,676.8
NET ASSETS                                       1,348.7     1,280.1   1,283.2
EQUITY
Share capital                                      148.0       147.1     147.5
Share premium                                       53.6        50.9      53.7
Capital redemption reserve                          12.3        12.3      12.3
Retained earnings                                3,229.0     3,165.5   3,163.0
Currency translation reserve                         1.8         4.2       3.7
Other reserves                                 (2,103.5)   (2,105.0) (2,103.4)
Equity attributable to equity holders of
the parent                                       1,341.2     1,275.0   1,276.8
Non-controlling interest                             7.5         5.1       6.4
TOTAL EQUITY                                     1,348.7     1,280.1   1,283.2



Interim unaudited consolidated cash flow statement

                                               6 months to 6 months to Year to
                                                 30 August 1 September 1 March

                                                     2012        2011    2012
                                         Notes          £m          £m      £m
Profit for the period                                173.4       159.2   266.0
Adjustments for:
Taxation charged on total operations                  18.5        29.7    39.8
Net finance cost                         4            11.1        20.0    40.1
Total loss from joint ventures                         0.4         0.6     0.7
Totalincome from associate                          (0.6)       (0.6)   (0.9)
Loss / (gain) on disposal of property, plant 3         0.3      (24.8)  (14.6)
and equipment, and property reversions
Depreciation and amortisation                         58.7        55.4   109.7
Impairment of financial assets, investments  3         1.4         0.9    11.3
and property
Share-based payments                                   4.3         3.6     7.9
Other non-cash items                                   7.9         3.5     7.6
Cash generated from operations before                275.4       247.5   467.6
working capital changes
Increase in inventories                              (3.7)       (6.3)   (4.7)
(Increase) / decrease in trade and other            (19.9)         1.3   (0.7)
receivables
Increase in trade and other payables                  36.2        17.9    25.3
Payments against provisions                          (2.7)       (3.3)   (9.2)
Pension payments                                    (36.0)      (61.0)  (95.4)
Cash generated from operations                       249.3       196.1   382.9
Interest paid                                       (13.2)      (14.0)  (29.4)
Taxes paid                                          (19.1)      (26.8)  (31.3)
Net cash flows from operating activities             217.0       155.3   322.2
Cash flows from investing activities
Purchase of property, plant and equipment          (184.9)     (127.6) (305.7)
Purchase of intangible assets                        (2.7)       (1.4)   (2.2)
Proceeds from disposal of property, plant              1.0         0.5    58.7
and equipment
Capital contributions and loans to joint             (3.5)       (0.9)   (1.6)
ventures
Dividends from associate                               0.3           -     0.7
Interest received                                      0.2         0.2     2.6
Net cash flows from investing activities           (189.6)     (129.2) (247.5)
Cash flows from financing activities
Proceeds from issue of share capital                   0.4         0.2     3.4
Cost of purchasing ESOT shares                           -           -   (5.2)
Capital contributions from non-controlling             1.8         3.8     5.5
interests
(Decrease) / increase in short-term                 (13.5)        49.1    13.5
borrowings
Proceeds from long-term borrowings                    43.0           -   156.4
Repayments of long-term borrowings                       -      (17.0) (150.6)
Issue costs of long-term borrowings                      -           -   (5.4)
Dividends paid                               5      (48.9)      (57.1)  (87.0)
Net cash flows used in financing activities         (17.2)      (21.0)  (69.4)
Net increase in cash and cash equivalents             10.2         5.1     5.3
Opening cash and cash equivalents                     39.6        34.2    34.2
Foreign exchange differences                         (0.2)         0.1     0.1
Closing cash and cash equivalents            7        49.6        39.4    39.6
Reconciliation to cash and cash equivalents
on the balance sheet
Cash and cash equivalents shown above                 49.6        39.4    39.6
Add back overdrafts                                      -           -     0.7
Cash and cash equivalents shown within current        49.6        39.4    40.3
assets on the balance sheet







Notes to the accounts



1. Basis of accounting and preparation



The interim condensed consolidated financial statements were authorised for
issue in accordance with a resolution of the Board of Directors on 22 October
2012.



The interim consolidated financial statements are prepared in accordance with
UK listing rules and with IAS 34 'Interim Financial Reporting'. The interim
financial report does not constitute statutory accounts within the meaning of
section 434 of the Companies Act 2006.



The financial information for the year ended 1 March 2012 is extracted from
the statutory accounts of the Group for that year and does not constitute
statutory accounts as defined in Section 435 of the Companies Act 2006. These
published accounts were prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted for use in the European Union, and
reported on by the auditors without qualification or statement under Sections
498(2) or (3) of the Companies Act 2006 and have been delivered to the
Registrar of Companies.



The interim financial statements for the six months ended 30 August 2012 and
the comparatives to 1 September 2011 are unaudited but have been reviewed by
the auditors; a copy of their review report is included at the end of this
report.



A combination of the strong cash flows generated by the business, and the
significant available headroom on its credit facilities, support the
director's view that the Group has sufficient funds available for it to meet
its foreseeable working capital requirements. The directors have concluded
therefore that the going concern basis of preparation remains appropriate.



The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 1
March 2012 except for the adoption of new Standards and Interpretations
applicable as of 2 March 2012, none of which have had an impact on the Group's
financial statements.



2. Segmental analysis



For management purposes, the Group is organised into two strategic business
units (Hotels & Restaurants and Costa) based upon their different products and
services:



· Hotels & Restaurants provide services in relation to accommodation and
food

· Costa generates income from the operation of its branded, owned and
franchised coffee outlets.



No operating segments have been aggregated to form the above reportable
operating segments.



Management monitors the operating results of its strategic business units
separately for the purpose of making decisions about allocating resources and
assessing performance. Segment performance is measured based on underlying
operating profit before exceptional items. Included within the unallocated
and elimination columns in the tables are the costs of running the public
company. The unallocated assets and liabilities are cash and debt balances
(held and controlled by the central treasury function), taxation, pensions,
certain property, plant and equipment, centrally held provisions and central
working capital balances.



Inter-segment revenue is from Costa to the Hotels & Restaurants segment and is
eliminated on consolidation. Transactions were entered into on an arm's
length basis in a manner similar to transactions with third parties.



The following tables present revenue and profit information and certain asset
and liability information regarding business operating segments for the six
months to 30 August 2012 and 1 September 2011 and for the full year ended 1
March 2012.









                                                     Unallocated
                                     Hotels &                and Total
                                  Restaurants  Costa elimination    operations
6 months to 30 August 2012                 £m     £m          £m            £m
Revenue
Revenue from external customers         705.9  312.2           -       1,018.1
Inter-segment revenue                       -    1.2       (1.2)             -
Total revenue                           705.9  313.4       (1.2)       1,018.1
Underlying operating profit             181.3   36.1      (11.4)         206.0
before exceptional items
Amortisation of acquired                    -  (1.3)           -         (1.3)
intangible assets
Operating profit before                 181.3   34.8      (11.4)         204.7
exceptional items
Exceptional items:
Loss on investment                          -  (1.4)           -         (1.4)
Net loss on disposal of property,
plant and equipment                     (0.1)  (0.2)           -         (0.3)
Operating profit of the Group,          181.2   33.2      (11.4)         203.0
joint ventures and associates
Net finance costs                                                       (11.1)
Profit before tax                                                        191.9
Tax expense                                                             (18.5)
Profit for the period                                                    173.4
Assets and liabilities
Segment assets                        2,707.1  318.9           -       3,026.0
Unallocated assets                          -      -        84.5          84.5
Total assets                          2,707.1  318.9        84.5       3,110.5
Segment liabilities                   (220.3) (69.1)           -       (289.4)
Unallocated liabilities                     -      -   (1,472.4)     (1,472.4)
Total liabilities                     (220.3) (69.1)   (1,472.4)     (1,761.8)
Net assets                            2,486.8  249.8   (1,387.9)       1,348.7





                                                     Unallocated
                                     Hotels &                and Total
                                  Restaurants  Costa elimination    operations
6 months to 1 September 2011               £m     £m          £m            £m
Revenue
Revenue from external customers         641.9  249.4           -         891.3
Inter-segment revenue                       -    1.4       (1.4)             -
Total revenue                           641.9  250.8       (1.4)         891.3
Underlying operating profit             167.1   27.8       (8.6)         186.3
before exceptional items
Amortisation of acquired                    -  (1.3)           -         (1.3)
intangible assets
Operating profit before                 167.1   26.5       (8.6)         185.0
exceptional items
Exceptional items:
Loss on investment                          -      -       (0.9)         (0.9)
Net gain / (loss) on disposal of
property, plant and equipment            24.8  (0.4)         0.4          24.8
Operating profit of the Group,          191.9   26.1       (9.1)         208.9
joint venture and associates
Net finance costs                                                       (20.0)
Profit before tax                                                        188.9
Tax expense                                                             (29.7)
Profit for the period                                                    159.2
Assets and liabilities
Segment assets                        2,556.2  261.4           -       2,817.6
Unallocated assets                          -      -        73.8          73.8
Total assets                          2,556.2  261.4        73.8       2,891.4
Segment liabilities                   (193.1) (55.6)           -       (248.7)
Unallocated liabilities                     -      -   (1,362.6)     (1,362.6)
Total liabilities                     (193.1) (55.6)   (1,362.6)     (1,611.3)
Net assets                            2,363.1  205.8   (1,288.8)       1,280.1







                                                     Unallocated
                                     Hotels &                and Total
                                  Restaurants  Costa elimination    Operations
Year to 1 March 2012                       £m     £m          £m            £m
Revenue
Revenue from external customers       1,239.3  538.7           -       1,778.0
Inter-segment revenue                       -    3.2       (3.2)             -
Total revenue                         1,239.3  541.9       (3.2)       1,778.0
Underlying operating profit
before exceptional items                295.6   69.7      (19.9)         345.4
Amortisation of acquired
intangible assets                           -  (2.6)           -         (2.6)
Operating profit before
exceptional items                       295.6   67.1      (19.9)         342.8
Exceptional items:
Net gain / (loss) on disposal of
property, plant and equipment and
property reversions                      25.1  (0.5)      (10.0)          14.6
Net loss on disposal of property,
plant and equipment in joint
ventures                                    -  (0.2)           -         (0.2)
Loss on investment                          -      -       (0.9)         (0.9)
Impairment                             (12.8)  (0.9)           -        (13.7)
Impairment reversal                       2.8    0.5           -           3.3
Operating profit of the Group,
joint venture and associates            310.7   66.0      (30.8)         345.9
Net finance costs                                                       (40.1)
Profit before tax                                                        305.8
Tax expense                                                             (39.8)
Profit for the year                                                      266.0
Assets and liabilities
Segment assets                        2,603.0  279.2           -       2,882.2
Unallocated assets                          -      -        77.8          77.8
Total assets                          2,603.0  279.2        77.8       2,960.0
Segment liabilities                   (213.4) (63.9)           -       (277.3)
Unallocated liabilities                     -      -   (1,399.5)     (1,399.5)
Total liabilities                     (213.4) (63.9)   (1,399.5)     (1,676.8)
Net assets                            2,389.6  215.3   (1,321.7)       1,283.2





3. Exceptional items and other non GAAP adjustments

                                       6 months to
                                                                       Year to
                                         30 August 6 months to 1
                                              2012 September 2011 1 March 2012

                                                £m             £m           £m
Exceptional items before tax and
interest:
Distribution costs
 Net (loss) / profit on disposal of       (0.3)           24.8
property, plant and equipment, and                                        14.6
property reversions
 Impairment of property, plant and            -              -       (13.5)
equipment (a)
 Impairment reversal                          -              -          3.3
                                             (0.3)           24.8          4.4
Administrative expenses
 Loss on investments (b)                 (1.4)          (0.9)        (0.9)
 Impairment of other intangibles              -              -        (0.2)
                                             (1.4)          (0.9)        (1.1)
Net loss on disposal of fixed assets            -              -        (0.2)
in joint ventures
                                             (1.7)           23.9          3.1
Exceptional interest:
Interest on exceptional tax (c)              10.6          (0.4)            -
Movement in discount on provisions          (0.5)          (0.4)        (0.8)
                                              10.1          (0.8)        (0.8)
Exceptional items before tax                  8.4           23.1          2.3
Other non GAAP adjustments made to
underlying profit before tax to arrive
at reported profit before tax:
Amortisation of acquired intangibles        (1.3)          (1.3)        (2.6)
IAS 19 Income Statement charge for          (8.6)          (7.8)       (14.0)
pension finance cost
                                            (9.9)          (9.1)       (16.6)
Items included in reported profit
before tax but excluded from                 (1.5)           14.0       (14.3)
underlying profit before tax





                                     6 months to
                                                                       Year to
                                       30 August      6 month to
                                            2012 1September 2011 1 March 2012

                                              £m               £m           £m
Tax adjustments included in
reported profit after tax, but
excluded from underlying profit
after tax:
Tax on continuing exceptional items       (2.5)            (7.7)        (2.5)
Exceptional tax items - capital               -              5.3         16.6
allowances claims (d)
Exceptional tax items - rolled over           -                -          9.2
gains (e)
Exceptional tax items - disputed           13.5                -            -
claims (c)
Deferred tax relating to UK tax            17.1             18.3         17.0
rate change (f)
Tax on non GAAP adjustments                 2.4              2.3          4.3
                                            30.5             18.2         44.6



(a) There were no indicators of impairment in the current period.

(b) This is the net loss on the sale of the joint venture in Rosworth
Investments to the joint venture partner.

(c) This is a partial release of a provision, of £13.5m, for an item which had
been disputed by HMRC but has now been agreed. Interest which had been
accrued for the late payment, amounting to £10.6m, has also been released.

(d) Following the abolition of Industrial Buildings Allowances for hotel
buildings, the Group had reviewed and resubmitted prior year capital allowance
claims. These claims have now been agreed with HMRC.

(e) Reduction in deferred tax liability on rolled over gains for differences
between the tax deductible cost and accounts residual value of the
reinvestment assets.

(f) The Finance Act 2012 reduced the main rate of UK Corporation tax to 24%
from 1 April 2012 and 23% from 1 April 2013. The effect of the new rate is to
reduce the deferred tax provision by a net £8.0m, comprising a credit of
£17.1m to the Income Statement, a credit of £1.0m to the reserves and a charge
of £10.1m to the Consolidated Statement of Comprehensive Income.



Additional changes to the main rate of UK Corporation Tax are proposed, to
reduce the rate to 22% by 1 April 2014. These changes had not been
substantively enacted at the balance sheet date and consequently are not
included in these financial statements. The effect of these proposed
reductions would be to reduce the net deferred tax liability by £4.5m.



4. Finance (costs) / revenue

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