Whitbread PLC — Annual Report 2013

Feb 28, 2013

Consolidated Report & Accounts

28 February 2013

Registered Number: 29423

្រុក ស្រុក

Directors:	AJ Habgood A Harrison CCB Rogers NT Cadbury (appointed 14 November 2012)
Secretary:	Sc Barratt
Auditors:	Ernst & Young LLP 1 Colmore Square Birmingham West Midlands B4 SHO
Registered Office:	Whitbread Court Houghton Hall Business Park Porz Avenue Dunstable Bedfordshire 山东5XE
Registered Number:	29423

Directors' report

The directors present their report and accounts for the year ended 28 February 2013.

Principal activities and review of business

The principal activities of the Group are the operation of a hotels and a coffee shop business. These operations are largely carried out in the UK, although Premier Inn operates one hotels in India, the latest of wrich opened in Pune in Pune in Pune in Pune in August 2013. It also has a joint venture, which operates one hotels in Dubai. Costa operates office shops in 28 overseas markets through a mixture of franchise arrangements, joint ventures in China and wholly owned coffee shops in Eastern Europe.

The growth in revenue during the year was driven by a combination of new openings and improved sales in like for like units. 324 not new Costa stores, ten net new restaurants and 4,242 net new Premier Inn rooms opened and 1.368 not Costa Express machines were added. Although Premier Inn International did not open any new rooms in the year, it benefitted from a full year of sales on the 375 net noms spened in the previous year.

Like for like sales across the Group grew by 3.7% with Costa up 6.8% and Hotels & Restaurants up 2.8%. Like for like sales growth in Premier Inn of 3.1% was driven by maintaining the quality of the rooms refurbished in the year, investment in our online distribution and the continued development of dynamic prising. This enabled us to outperform our Midscale and Economy sector competitors, with revoar growth of 1.7%. Restaurants' like for like sales grew 2.3%, led by improvements to our menu offering and the growing customer base staying at the adjacont hotels. Through our continued tocus on the customer and by deinering value for money, the for like covers increased 3.0% compared to last year. Costa achieved 6.8% Ike for like sales growth benefitting from the innovation in new food and be growing customer preference for the Costa brand.

Consolidated Group profit before tax and exceptional items was £327.9m (2011/12. £286.4m). Profit for the year after tax and exceptional itams was £274.7m (2011/12: £275.5m).

As a result of the free cash inflow the net debt as at 26 February 2013 reduced by £33.2 million (2011/12 5504 3 million). The Group has total facilities of £908 million, of which £503 million was drawn at the year end.

The directors did not declare a dividend in the year (2011/12: £nil).

Events post the balance sheet date

None.

Future likely developments

In April 2011 we established ambitious milestones to grow Premier Inn UK rooms and to dauble Costa's worldwide system sales to £1.3bn. We are well on track to achieve these and have announced new 2018 milestines to grow Fremier inn UK by 45% to around 75,000 rooms and to double Casters system sales to around £2bn. This exciting organic growth a clear focus on returns, will continue to create substantial shareholder value.

For further information on future likely developments please see the business review included in the Annual Report and Accounts of Whitbread PLC (the immediate and ultimate parent company) for the year ended 26 February 2013.

Directors

Details of the directors who served during the year end up to the date of this report are listed on page 2.

Directors' remuneration and interests in shares

Details of the directors' remuneration and interes and options to subscribe for shares in the parent company of the Group are shown in the Annual Report and Accounts of Whitbread PLC for the year ended 28 Fabruary 2013.

Political donations

No political donations were made during the year (2011/12: £ril),

Corporate responsibility

Our corporate responsibility programme, which is focused on three main areas; Team and Community, Customer Wellbeing and Environment, We have Platinum status in the Community Corporate Responsibility Index and continue to get good recognition for our carbon reduction activity.

In Team and Carymunity our job creation, and training programmes have continued to grow with 3,000 net new UK iobs in the year and 2,600 recognised qualifications actived together with 415 apprentices. The Coste Foundation raised £1.5 million and is now supporting over 30 school projects in coffee growing communities around Street Hospital Children's Charity was chosen by an employee vote as the Hotels and Restaurants charity during the year and we have stready raised £800.000.

For Customer Wellbeing we have been focusing our responsible sourcing policy to a new level through greater support and enclossement from our suppliers. We have also developed a new timber policy. We have strengthened our testing and traces and have implemented the lessons learned from the industry wide horsement contamination issue.

We are on Irack to achieve our carbon reduction targes caused by the cold weather. We are progressing will with our waste reduction target. Our activities on saving water have are maining our 2017 target from a reduction of 15% to 25%.

For further details of the corporate responsibility strategy, please see the Annual Report and Accounts of Whithread PLC for the year ended 28 February 2013 and http://www.whitbread.co.uk/corporate-responsibility/index.html

Supplier payment policy

The Group has a standard lern of 60 days in respect of payments to suppliers. Where this standard term dees not apply, operating companies are ressonsible for agreeing terms and conditions fransactions when orders for goods and services are claced, so that suppliers are awage of the terms of payment and the relevant terms are included in contracts where appropriate. Where payment terms have not been specifically agreed, it is the Group's policy in settle invoices to the end of the morth of invaining. The Group's ability to keep to these terms is dependent upon suppliers sending and adequately delailed invoices to the correct address on a timely basis. The Group had 47 devel purchases outstanding at 28 February 2013 (1 March 2012) 47 days) based on the trade and purchases maps during the year.

Employment policies

Whitbread has a range of employment policias covering such issues as diversity, employee well-being and equal opportunities

The Company takes its responsibilities to the discriminate under any circumstances (including in relation to training, career development and promotion) against current or prospective employees because of any disability. Full and fair consideration is qiven to applications for employment made by disabled persons, having regard to their aptitudes and sbillies. Employees who become disabled during their career at Whitbread will be retained in employment wherever possible and given help with rehabilitation and training.

Directors' indemnity

A qualifying third-party indemnity provision (as defined in Section 236 (1) of the Companies Act 2006) is in force for the directors.

Risks and uncertainties

The starting point for the assessment of risks at Whitbread is the Company's business model. The process:

• links risks to the Group's business model and strategic objectives;
• · analyses risks based on likelihood and potential impact;
• · outlines kev controls and mitigating actions', and
• ensures that nsks and controls are reviewed quarterly and updated as necessary

The six principal risks identified, together with details of controls, miligation and assurance processes and an indication of the current trend for each are summarlsed below. The Board considers that two of these risks have a high likelihood of occuring. The first is the risk of a serious food provenance issue, which has increased during the year due to Europe-wide problems with the processed meat supply chain. This issue has been given significant toous and we have strengthened our testing and traces a result. The other risk deemed to have a high likelihod is the loss of key employees who have been targed by recultures. We have taken action to ensure that our key employees understand the benefits of staying with the Company, both in terms of development opportunities and long-term remuseration benefits,

Hisk Health and safety risk: serious health or provenance issue relating to food.	Mitigation controls The expertise of members of the procurement, food development and safely and security teams. Stringent foud safety policies and a detailed sourcing policy New traceability and testing requirements introduced in respect of processed meat. Focus now on predicting other potential issues in the supply chain.	Monitoring and assurance NSF, an independent company, carries out regular audits on all suppliers to measure their performance against a range of health and safety standards. Health and safety is a hurdle on the WINcard. Regular updates are provided to the management boards and to the Whitbread PLC Board.	Current trend Stable
Market risk: improvement in competitor financial health and/or competitor activity can result in a loss of market share.	developed on a strategic and tactical basis. Significant customer research is carried out with Premier Inn, for example, Whitbread PLC Board. receiving more than 800,000 responses in 2012/13. The customer Insight received is used to develop action plans. Consumer trends, both in the UK and overseas, are analysed and competitor activity is monitored. Monthly reports are produced by each business for the Whitbread PLC Board.	Actions to outperform the competition are Relative market share information and timely trading performance data is produced and monitored by the executive teams and the	Premier Inn Stable Restaurants Stable Costa Improving
Financial risk: significant increase in the and/or statutory deficit resulting in higher pension contributions or the re- rating of the Company's credit.	The Company's nefined benefit pension scheme is closed to new members and, pension scheme's actuarial for future service, to existing members. The Pension Investment committee and its advisers, as well as the internal pensions team, have significant expertise in the area and provide good quality oversight. The investment strategy has been designed to reduce volatility and risk and hedging opportunities are utilised as appropriate. The Finance Director attends Pension Investment Committee maetings.	The Pensions Director and the external pensions advisors to the Company report regularly to the Whitbread PLC Board on the funding level and investment strategy of the fund.	Stable
Third-party risk: third-party failing and terms of a significant contract or giving nise to a privity of contract claim.	consequently breaching the the continued auditing and monitoring of those contracts. Regular reviews are carried out on the potential for privity of contract claims and, when they are received, all efforts are made to lessen the financial liability through negotiation with the landlord or sale of the lease.	Credit control checks are carried out on Asset management team and credit controllers parties to significant contracts, along with monitor risks. There is a regular review of the debtors registers by the management boards. Financial controllers review status at half and full-year.	Seble
Operational risk: loss of key employees.	to offer key employees appropriate levels key employees leaving the Company and of reward and recognition in order to retain conducts exit interviews to understand the them. The Company's programme of reasons. Succession plans are reviewed development and talent planning delivers regularly. a strong succession plan.	It is important that the Company continues The Group HR function monitors the number of	Stable
Operational risk: data security brach resulting in the loss, or improper access to, customer or confidential data.	the systems and network. IS security training has been delivered to employees. reviewed by the Audit Committee. Legal advisors monitor new legislation and advise the IS team.	The expertise of the IS team in protecting Systems are continually monitored for irregular activity. The disaster recovery plans are	Stable

Disclosure of information to auditor

The directors have taken all reasonable steps to make of relevant audit information and to establish that the auditor is aware of that information. The directors are not aware of any relevant audit information which has not been disclosed to the audition

Going concern

The Group has considerable resources and as a consequence, the directors believe that the Group is well placed to manage its business inst. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements,

Auditors

Ernst & Young LLP have expressed their willingness to continue in office as auditor of the Group and Company

The consolidated financial statements of Whitbread Group PLC for the year ended 28 February 2013 were approved and authorised by the Boerd of directors on 27 August 2013.

On belgating the boar ડ દ્વારા Secretary

27 August 2013

Statement of directors' responsibilities

The directors are responsible for preparing the Annual Report and the consolidated financial statements in accordance with applicable company law and those International Financial Reporting Standards (IFF(Ss) as adopted by the European Union.

Under company law the directors must not approve the consolidated financial statements unless they are satisfied that they present fairly the financial position of the Group and the results and cash flows of the Group for that period. In preparing those consolidated financial statements, the directors are required to. · select suitable accounting policies in accordance with IAS 8: Accounting policles, changes in accounting estimates and errors, and then apply them consistently;

· make judgements and estimates that are reasonable and prudent; · state that the consolidated tinancial statements comply with IFRS subject to any material departures being disclosed and explained in the consolidated financial statements;

· prepare the accounts on a going concern basis unless it is inappropriate to presume thai the Group will continue in its business;

· prosent information, including accounting policies. In a manner that provides relevant, reliable, comparable and understandable information; and

· provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact or particular transactions, other events and conditions on the Group's financial position and financial performance.

The directors are responsible for keeping adequate accounting records, which disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the consolidated financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence, taking reasonable steps for the prevention and detection of fraud and other irregularities.

Responsibility statement

We confirm on behalf of the Board that, to the best of our knowledge:

· the consolidated financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group taken as a whole; and

· the directors' report includes a fair review of the development and performance of the business and the position of the Group taken as a whole together with a description of the principal risks and uncertainties that they face.

By order of the Board

Nicholas Cadbury Finance Director

Independent auditor's report to the members of Whitbread Group PLC

We have audited the consolidated financial statements of Whitbread Group PLC for the year ended 28 February 2013 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolicital Balace Sheet, the Consolidated Cash Flow Statement and the related to 31. The financel reporting framework that has been applied in their repartion is applicable law and international Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an audicos's report of for no other purpose. To the fullest extent permitted by law, we do not assume responsibility to anyone other the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and of auditor

As explained more fully in the Statement of drectors' responsibilities on page 7, the directors are responsible for the consolidated financial statements and for being satisfied that they jive a true and falr view. Our responsibility is to audif and express an opinion on the councilidated financel statements in accordance your internal Standards on Auditing (UK and Intellection) Those standards require is in consider with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the consolidated financial statements

An audit Involves obtaining evidence about the amounts and disclosures in the consolidated financial statements sufficient to give reasonable assurance that the consolidated financial statements are from material misstatoment, whether caused by fraud or error. This Includes an reserved ad: whether the accounting policies are appropriate to the Group's circumstances and have been consisted in assessment reasonableness of significant accounting stimates made by the directors, and the overall presentation of the conscious and the

In addition, we read all the financial Information in the Consolidated Report and Accounts to identify material inconsistencies with the audited consolidated financial statements. If we become aware of any apparent material misstation we consider the inconsider with inconsiderity with incons for our report

Opinion on consolldated financial statements

In our opinion the consolidated financial statements:

• · give a true and fair view of the Group's affairs as at 28 February 2013 and of its profit for the year then ended;
• · have been properly prepared In accordance with IFRSs as adopted by the European Union; and
• · have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given In the Directors' report for the inancial year for which the consolidated financial statements are prepared is consistent with the consolidated financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

· certain disclosures of directors' remuneration specified by law are not made; or

· we have not received all the Information and explanations we require for our audit.

Other matter

We have reported separately on the parent Company thancial statements of Whilbread Group PLC for the year ended 28 February 2013 and on the information in the directors' remuneration report that is described as having been audited.

Simon O'Neill (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Birmingham 20 August 2013

Consolidated income statement

		Year to 28 February
		2013	2012
Revenue	Notes	Em	Em
	3, 4	2,030.0	1,778.0
Operating costs		(1,643.0)	(1,431.4)
Operating profit	5	387.0	346.6
Share of profit / (loss) from joint ventures	14	0.5	(0.7)
Share of profit from associate	15	0.8	0.9
Operating profit of the Group, joint ventures and associate	4	388.3	346.8
Finance costs	8	(52.4)	(59.4)
Finance revenue	8	1.8	13.1
Profit before tax		337.7	300.5
Analysed as
Underlying profit before tax		348.7	305 0
Amortisation of acquired intangible assets	6	(2.8)	(2.6)
IAS 19 income statement charge for pension finance cost	6	(18.0)	(14.0)
Profit before tax and exceptional items		327 9	288.4
Exceptional items	6	9.8	12.1
Profit before tax		337.7	300.5
Underlying tax expensa		(89.6)	(80.5)
Exceptional tax and tax on non GAAP adjustments	6	26.6	55.5
Tax expense	9	(63.0)	(25.0)
Profit for the year		274.7	275.5
Attributable to:
Parent shareholders		276.9	276.8
Non-controlling interest		(2.2)	(1 3)
		274.7	275.5

Consolidated statement of comprehensive income

		Year 10	Year to 1 March
		28 February
		2018	2012
	Notes	Sun	2m
Profit for the year		274.7	275.5
Items that will not be reclassified to profit or loss:
Actuarial gain / (loss) on defined benefit pension scheme	30	29.3	(192.1)
Current fax on pensions	9	9.0	22.2
Defenied tax on pensions	9	(16.1)	27.9
Deferred tax: change in rate of corporation tax on pensions	g	(8.5)	(8.2)
		13.7	(150.2)
items that may be reclassified subsequently to profit or loss:
Net gain / (loss) on cash flow hedges		83	(1.0)
Deterred tax on cash flow hedges	9	(2.0)	0.3
Deferred tax: change in rate of corporation tax on cash flow hedges	9	(0.5)	(0.6)
		5.8	(1.3)
Exchange differences on translation of foreign operations		1.0	(0.6)
Other comprehensive income / (loss) for the year, net of tax		20,5	(152.1)
Total comprehensive Income for the year, net of tax		295.2	123.4
Attributable to:
Parent shareholders		2.77.4	124.7
Non-contralling interest		(2.2)	(1.3)
		225-22	123.4

Consolidated statement of changes in equity

	Share capital	Share premium	Retained earnings 200	Currency translation reserve 277	ESOT Shares	Hedging reserve	Total	Non- controlling	Interest Total equity Sum
	am	Em			Em	2m	200	Em
At 3 March 2011	133.7	207.7	680.9	4.3	(12 2)	(27-1)	967.3	1,8	989.1
Profit for the year			2768				276.8	(1.3)	275.5
Other comprehensive income			(150.5)	(0.6)		(1.0)	(152.1)		(152.1)
Total comprahensive Income			126.3	(0.6)		(1.0)	124.7	(1.3)	123.4
Cost of ESOT shares purchased					(7.3)	e	(7.3)
Loss on ESOT shares issued		+	(5.8)		5.8	=		. +	(7.3)
Accrued share-based payments		1	78	e	11		7.9		7.9
Tax on share-based payments			1.0				1.0
Rate change on historical revaluation			1.3				1.3		1.0
Additions								5,9	1.3
At 1 March 2012	133.7	207-7	791.6	3.7	(13.7)	(28.1)	1,094.9	5-4	5.9 1,101,3
Profit for the year			276.9				276.9	(2.2)	274.7
Other comprehensive Income			11.2	1.0	-	8.3	20.5		20.5
Total comprehensive Income			288.1	1.0		8.3	297 4	(2.2)	295.2
Cost of ESOT shares purchassed			:	4	(8.3)	11	(13)
Loss on ESOT shares Issued			({{.\$)		3.6			4	(8.3)
Accrued share-based payments			9.2				ਹੈ ਨੇ	1
Tax on share-based payments			2.2				2.2	-	9.2
Rate change on historical revaluation			1.1				1.1		2.2
Additions								6.6	1.1 6.6
At 28 February 2013	188.7	2017-7	1,088.6	4.7	(18.4)	(19.8)	1,396.5	10.8	1,407.3

Consolidated balance sheet

Company Number: 29423

At 28 February 2013
		28 February	1 March
		2013	2012
	Notes	Sim	£m
BETH
Non-current assets
Intengible assets	11	215.4	206.6
Property, plant and equipment	12	2,748.9	2,580.5
Investment in joint ventures	14	24.0	18.7
Investment in associate	15	1.7	1.6
Derivative financial instruments	24	7.1
Trade and other receivables	18	5.3	3.6
Other financial assets	16
		3,002.4	2,811.0
Current assets	17
Inventories		26.5	23.1
Trade and other receivables	18	102.1	85.0
Cash and cash equivalents	19	40.8	40.3
Derivative financial instruments	24	14 170.8	148.4
Assets held for sale	12	1.5	0.6
Total assets		3,174.7	2,860.0
LIABILITIES
Current habilities
Financial liabilities	20	9.0	14.2
Provisions	22 24	10.3	10.7
Derivative financial instruments	9	4.6	6.6
Income lax llabilities	25	35.8	1.8
Trade and other payables		487.5 547-2	516.7 550.1
Non-current liablities
Financial liabilities	20	50729	530 4
Provisions	22	32.6	37.1
Derivative financial instruments	24	18.7	20 1
Deferred income tax liabilities	9	106.7	105.9
Pension liability	30	541.7	598.7
Trade and other payables	જિલ્લ	17.6	16.4
		1,220,2	1,308.6
Total liabilities		1,767.4	1,858.7
Net assets		1,407.3	1.101 3
Equity	26
Share capital	27	133.7	138.7
Share premium	27	207.7	207 7
Retained earnings	27	1,088.6	791.6
Currency translation reserve	27	4.7	3.7
Other reserves Equity attributable to equilty holders of the parent		(38.2) 1,386.5	(41.8) 1,094.9
Non-controlling interest		10.8	6.4
Total equity		1,407.3	1,101 3

Nicholas Cedbury

Finance Director

27 August 2013

Consolidated cash flow statement

	Year to 28 February		Year to 1 March
		2013	2012
	Notes	Sm	£m
Profit for the year		274.7	275.5
Adjustments for:
Taxation charged on total operations	9	63.0	25.0
Net finance cost	13	50.6	46.3
Total (income) / loss from joint ventures	14	(0.5)	0.7
Total income from associate	15	(0.8)	(0.9)
Profit on disposal of property, plant and equipment and property reversions	tr	(18.6)	(14.6)
Loss on investment and disposal of business	6	3.3	0.9
Depreciation and amortisation	11,12	128.4	109.7
Impairment of financial assets, property, plant and equipment and intengibles	11,12,16	5.4	10.4
Share-based payments	29	9.2	7.9
Other non-cash items		1.0	6.7
Cash generated from operations before working capital changes		515.7	467.6
Increase in inventories		(3.3)	(4.7)
Increase in trade and other receivables		(17.4)	(0.7)
Increase in tracte and other payables		38.4	25.3
Payments against provisions	25	(6.3)	(8 ක්
Pension payments	30	(45.7)	(95.4)
Cash generated from operations		481.4	382 0
Interest paid		(26.6)
Corporation taxes paid		(45.7)	(29.4)
Not cash flows from operating activities		408.1	(31.3) 322.2
Cash flows from investing activities
Purchase of property, plant and equipment		(423.3)	(305-7)
Purchase of intangible assets	11	(14.3)	(2.2)
Proceeds from disposal of property, plant and equipment		51.0	58.7
Business combinations, net of cash acquired	11	(0.7)
Sale of business		(0.2)
Movement in funding of parent company		(71.6)	(81.5)
Capital contributions and loans to joint vantures		(4.B)	(1.8)
Dividends from associate		0.7	0.7
Interest received		0.4	2.6
Net cash flows from investing activities		(368.8)	(329.0)
Cash flows from financing activities
Cost of purchasing ESOT shares		(8-2)	(7 3)
Capital contributions from non-controlling interests		5.9	5.5
(Decrease) / increase in short-term borrowings		(4.5)	ાડિ રે
Proceeds from long-term borrowings			156.4
Repayments of long-term borrowings		(32.0)	(150.6)
Issue costs of long-term borrowings			(5.4)
Net cash flows used in financing activities		(38.9)	12.1
Net increase in cash and cash equivalents		0.4	5.3
Opening cash and cash equivalents		39.6	34.2
Foreign exchange differences		0.8	0.1
Closing cash and cash equivalents	19	40.8	39 €
Reconcillation to cash and cash equivalents in the balance sheet
Cash and cash equivalents shown above	19	40.8	38.6
Add back overdrafts			0.7
Cash and cash equivalents shown within current assets on the balance sheet		40.8	40.3

Notes to the consolidated financial statements

At 28 February 2013

1 Authorisation of consolidated financial statements

The consolidated financial statements of Whitbread Group PLC for the year endromed for issue by the Board of Directors on 27August 2013. Whitbread Group PLC is a public limited company incorporated and fully domiciled in England and Wales.

The significant activities of the Group are described in Note 4, Segment information.

2 Accounting policies

Basis of accounting and preparation

The consolidated financial statements of Whitbread Group PLC and all its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union and as applied in accordance with the provisions of the Companies Act 2006.

The consolidated financial statements are presented in pounds stering and all values are rounded thousand except when otherwise indicated. The significant accounting policies adopted are set out below.

The accurring policies adopted in the preparation of these consistent with those followed in the preparation of the consolidated financial statements for the year ended 1 March 2012, except for the change in presentation of the Consultation income statement noted below and the adoption of the new Standards and interpretations that are applicable for the year ended 28 February 2013.

Change in presentation

The calegorisation of expenses within the consolidated income statement have been amended to combine the previously disclosed cost of sales distribution costs and administrative expense ine above operating profit called operating costs. The directors believe that the revised consolidated income statement present to the nature of the business and is consistent with the practice of others within the industry. Prior year comparatives have been re-presented accordingly to provide a consistent comparison. Cost of sales of £377.8m for the vear ended 28 February 2013 and £288.4m for the year ended 1 March 2012, distribution costs of £1,059.4m for the year ended 28 February 2013 and £969.2m for the year ended 1 March 2012 and administrative expenses of £205.8m for the year ended 28 February 2013 and £173.8m for the year ended 1 March 2012 have been amalgamated into operating costs.

Amendment to IFRS 7 Financial instruments: Disclosures - on transfer of financial assets

These amendments promote transparency in the reporting of transactions and improve users' understanding of the risk exposures relating to thansfers of financial assets and the effect of the an entity's financial position, particularly those involving securitisation of financial assets. The adoption of this interpretation has had no effect on the consolidated financial statements of the Group.

Basis of consolidation

The consolidated financial statements incorporate the accounts of Whitbread Group PLC and all its subsidiaries, together with the Group's share of the net assets and results of joint ventures and associates incorporated using the equity . These are adjusted, where appropriate, to conform to Group accounting policies. The timaterial subsidiaries are prepared for the same reporting year as the parent Company.

Acquisitions by the Group are accounted for under the any goodwill arising is capitalised as an intengible asset. The results of subsidiaries acquired or disposed of during the conscidated financial statements from or up to the date that control passes respectively, All intra-Group transactions, balances are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Significant accounting policies

Goodwill

Goodwill arising on acquisition is capitalised and represents the easieration over the Group's interest in the tair value of the identifialie assets and liabilities of a subsition. Goodwill is reviewed for impairnent annually, or nore frequently, it wents or changes in circumstances incicate that the carrying value may be impaired. On disposal of a subsidiary, the attributable amount of goodwill is neluded in the determination of the profit or loss on disposal.

Intengible assets

Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Notes to the consolidated financial statements

At 28 February 2013

2 Accounting policies (continued)

Irhangible assets acquired separately from a business are carried initially at cost. An intengible as part of a business combination is recognised outside of goodwill if the asset is separable or arises from contractual or other legal rights, and its fair value can be measured reliably.

Amortisation is calculated on a straight-line basis over the estimated life of the asset as follows:

• · trading licences have an infinite life,
• · brand assets are amortised over periods of 15 years:
• · IT software and technology are amortised over periods of three to ten years;
• · the asset in relation to acquired customer relationships is amortised over 15 years; and
• operating rights agreements are amortised over the life of the contract.

The carrying values are reviewed for imparment if events or changes indicate that they may not be recoverable.

Property, plant and equipment

Prior to the 1999/200 tinancial year, properties were regularly revalued on a cyclical basis. Since this date its revalue its properties and, while previous valuations have been retained, they have not been updated. As permitted by IFRS 1, the Group has elected to use the UK GAAP revaluations before the date of transition. Property, plant and equipment and equipment are stated at cost or deemed cost at transition to IFRS, less acumulated depreciation and any impalment in value. Gross incurred on the financing of qualifying assets are capitalised unlil the time projects are available for use. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

• · freehold land is not depreciated;
• · freehold and long leasehuld buildings are depreciated to their estimated residual values over periods up to 50 years; and
• · plant and equipment is depreciated over three to 30 years.

The carrying values of property, plant and equipment are revents or changes in circumstances indicate that their carrying values may not be recoverable. Any impairment in the value of property, plant and equipment is charged to the income statement.

Profits and losses on disposal of property, plant and equipment reflect the difference between net selling price and the date of disposal and are recognised in the income staternent.

Payments made on entering into or acquiring leaseholds that are accounted for as operating feases represent prepaid laase payments. These are amortised on a straight-line basis over the lease term.

lmpairment

The Group assesses assets or groups of assets for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. Individual assess are grouped for imparment assessment purposes at the bere are identifiable cash flows that are largely independent of the cash flows of other groups of assets (cash generating units or CGUs). It such indication of impartment exists or when annual impairment testing for an asset gioup is required, the Group makes an estimate of the recoverable amount.

An assessment is made at each reporting date as to whether that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the CGU's recoverable amount is estimated. A proviously recognised imparment loss is reversed only if there has been a change in the estimates used to recoverable arnount since the last impairment loss was recognied. If that is the case, the carying amount of the asset is its recoverable amount. That increased amount cannot exceed the carrying anount that would have been determined, net of depreciation, had no impairned tor the asset in prior years. Such reversal is recognised in the income statement. After such a reversalion charge is adjusted in future periods to allocate the assels carrying anount, less any residual value, on a straight-line basis over its remaining useful life.

The recoverable amount of an asset or CGU is the greater of its fair value in use. In assessing value in use, the estimated future cash 1lows are discounted to their present value using a pre-tax discount rate that reflects current of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable annount is determined with reference to the CGU to which the asset belongs. Impairment losses are recognised in the income statement in operating costs.

Notes to the consolidated financial statements

At 28 February 2013

2 Accounting policies (continued)

An impairment loss is recognised it the carying an asset or CGU exceeds its estimated recoverable amount. Impairment losses resgnised in respect of CGUs are allocated first to reduce the carrying amount of any grociville allection the urits and then to reduce the carrying amounts of other assets in the CGU on a pro-rata basis.

For the purposes of impairment testing, all centrally held assets are allocated in line with IAS 36 to CGUs based on management's view of the consumption of the asset. Any resulting impairment is recorded against the centrally held asset.

Goodwill and intanaibles

Goodwill acquired through business combinations is allecated to groups of CGUs at the level management monitor goodwill, which is at strategis business unit level. The Group performs an annual review of its goodwill to ensure that its carrying anount is not greater than its recoverable anount. In the absence of a comparable recent market that demonstrates that the fair value less the cost to sell of goodwill and intenglible assess exceeds their carying amount the recoverable anount is deternined from value in use calculations. An impairment is then made to reacying amount to the higher of the fair value less cost to sell and the value in use.

Property, plant and equipment

For the purposes of the impairment review of property, plant and equipment the Group considers CGUs to be each trading outlet.

The carrying values of property, plant and equipment when events or changes in circumstances indicale the carying value may not be recoverable.

Consideration is also given, where appropriate, to the asset, elther from independent sources or in conjunction with an accepted industry valuation methodology.

Investments in joint ventures and associates

The group assesses Investment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication of impairment exists, the carrying anount of the investment is compared with its recoverable annount, being the higher of its fair value less costs to sell and value in use. Where the recoverable anount, the investment is written down to is recoverable amount

Assets held for sale

Non-current assess and disposal groups are classified as held for immeliate sale in their present condition and a sale is highly probable and expected to be completed within one year from the date of classfication. Such assets are measured at the lower of carrying amount and fair value less the cost to sell and are not depreciated or amortised.

Inventories

Invertigies are stated at the lower of cost and net realisable value. Cost is calculated on the basis of first in, first out and net realisable value is the estimated selling price less any costs of disposal.

Provisions

Provisions for warranties, onerous contracts and recognised when the Group has a present legal or constructive obligation as a result of a past event, when it is probable that and the required to settle the obligation, and when a reliable estimate can be made of the amount of the obligation.

Provisions are discounted to present value, where is material, using a pre-lax discount rate that reflects current of the time value of money and the risks specific to the llability. The amortisation of the discount is recognised as a finance cost.

Non GAAP performance measure

The face of the income statement presents underlying profit before tax and reconclies this to profit before tax as required to be presented under the applicable accounting standards. Underlying per share is calculated hawng adjusted profit affer tax on the same basis. The tem underlying oroft is not defined under IFRSs and may not be comparable with similarly titled profit messures reported by other companies. It is not intended to be a substitute for, or superior to, GAAP measurements of profit. The adjustments made to reported profit in the income statement in order to present an underlying performance measure include:

Exceptional items

The Group includes in the non GAAP performance measure their size or incidente of their size or incidence so as to allow a beter understanding of the underlying trading performance of the Group also includes the profit or boss on disposal of property, plant and equipment, property reversions, profit or loss on the sale of a business, impairment and exceptional interest and tax.

Notes to the consolidated financial statements

At 28 February 2013

2 Accounting policies (continued)

IAS 19 income statement finance charge/credit for defined benefit pension schemes. Underlying profit excludes the finance cost/revenue element of IAS 19.

Amortisation charge on acquired intangible assets

Underlying profit excludes the amortisation charge on acquired intangible assets.

Taxation

The tax impact of the above items is also excluded in arriving at underlying earnings.

Foreign currency translation

Monetary assets and liabilities denominated into stering at the rates of exchange quoted at the balance sheet date. Nor-monetary items that are measured in a foreign currency are translated using the extransition the extranse rates as at the datast of indial transactions.

Trading results are translated into the functional currency (generally steering) at average for the year. Day-to-day transactions in a foreign currency are recorded in the functional currency at an average rate for the month in which those Ire also which bused a a reasonable approximation to the actual Iranslation differences on monetary items are taken to the income statement execed where they are part of a nel foreign in estimal headle, in which case translation differences are reported in other comprehensive income. The offerences and a cliferences and from translating the results of foreign entities at axchange, and their assets and liabilities at closing rates, are also delatin a separate component of equity (On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that parison for for for for rorent mark operation is recognised in the income statement. All other currency gains and losses are dealt with in the income statement.

A number of subsidiaries within the Group have a non-stelling functional currency. These are translated into sterling in the Group accounts. Balance sheet the frankated at the rate applicable at the bale. Transactions reported in the income statement and are transalated using an average rate for the month in which they occur

Revenue recognition

Revenue is reoognised when the significant risks and rewards of the goods or services provided have transterred to the buyer, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group.

Revenue is measured at the fair value of the consideration receivable from the sale of goods and services to third parties after deducting discounts, allentes for customer loyally and other promotional activities. Revenue includes duties which the Group pays as principal, but excludes anounts collected on behalf of other parties, such as value added tax. All material sales between Group businesses are eliminated.

Revenue of the Group comprises the following streams:

Sale of goods

Revenue from the sale of food, beverages and merchandles is recognised at the point of sale, with the exceptions which are recognised on delivery.

Rendering of services

Revenue from room sales and other guest services is recognised when rooms are occupied and as services are provided.

Franchise fees

Revenue from fees received in connection with the franchise of the Group's brand names is recognised when earned.

Customer loyalty programmes

Where award crecits are granted as part of a sales fransaction, a portion of revenue of the fair value of the rained is defered until redemption The fair value of points awarded is delemined with reference to the discount received upon redemption.

Finance revenue

Interest income is recognised as the interest accrues, using the effective interest method.

Notes to the consolidated financial statements

At 28 February 2013

2 Accounting policies (continued)

Lasses

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Rental payments in respect of operating leases are charged against on a straight-ine basis over the period of the lease. Lease incentives are recognised as a reduction of rental costs over the lease term.

Borrowing costs

Borowing costs are recognised as an expensed, in which they are incurred, except for gross interest costs incurred on the financing of major projects, which are capitalised until the time that the projects are available for use.

Retirement benefits

In respect of defined benefit persion schemes, the oblance sheet represents the presents the presents the presents the present value of the defined benefit obligation as adjusted for any unrecognised past, reduced by the fair value of the scheme assets. The cost of providing benefits is determined using the projected unit credit actuation method. Actuatial gains and losses are recognised in full in the period in which they occur in the Consolidated statement of comprehensive income.

For delined benefit plans, the employer's portion of the past is charged to operating profit, with the interest cost net of expected return on assets in the plans reported within finance costs: The expected return on plan assessment made at the beginning of the year of long-term market returns on scheme assets, adjusted for the fair value of plan assets of contributions received and benefits pati during the year.

Curtailments and settlements relating to the Group's defined benefit plan are recognised in which the curtailment or settlement occurs.

Payments to defined contribution pension schemes are charged as an expense as they fall due.

Share-based payment transactions

Equity-settled transactions

Certain employaes and directors of the Group receive equity-settled remuneration in the form of than actions, whereby employees render services in exchange to shares. The cost of equity-settled transactions with employees is measured by reference to the fair value, determined using a stochastic model, at the date at which they are granted. The cost of ecognised, together with a corresponding increase in equity, over the performance conditions or non-resting conditions are fufilied, ending on the relevant vesting date. Except for awards subject to market related conditions for vesting, the cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflect the vesting period has expired, and is adjusted to reflect the best available estimal of the number of equity instruments that will ultimately vest. The income statement charge or crecit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. If options are subject to market related conditions, awards are not curn latively adjusted for the likelihood of these targets being met. Instead these conditions are included in the fair value of the awards.

Where an equity-settled award is cancelled it it hat vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. Where an equity-settled award is forfeited the related expensed to date is reversed

Cash-settled transactions

The cost is fair valued at grant date and expensed over the period until the vesting date with a recognition of a corresponding liability. Where material, the liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognised in profit or loss for the period.

Tax

The income tax charge represents both the income tax payable, based on profits for the year, and deferred income tax.

Deferred income tax is recognised in tull, using the liablity method, in respect of temporary differences between the tax base of the Group's assets and liabilities, and their carrying amounts, that have not been reversed by the balance sheet date. No deferred to: is recognised if the temporary difference arises from goodwill or the intiness on liability in a transaction that is not a business combination and, al the time of the transaction, affects neither the accounting profit or loss. Deferred income tax is recognised in respect of taxable temporary differences associated with investments in jont ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable fulure.

Deferred income tax assets are recognised to the extent it is probable that taxable profit will be decludible temporary differences can be utilised The carrying amount of deferred income tax assets is reviewed at each balance sheet that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Notes to the consolidated financial statements

At 28 February 2013

2 Accounting policies (continued)

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the lability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date,

Income tax is charged or credited to other comprehensive income if it relates to items that are charged or credited to other comprehensive income. Similarly income tax is charged or credited directly to equity if it relates to tems that are charged or credited directly to aquity. Otherwlsove income is is recognised in the income statement.

Investments in joint ventures and associates

Joint ventures are established through an interest in a company (a jointly controlled entity).

Investments in joint ventures and associates are intitlely recognised at cost, being the fair value of the consideration given and including acquistion charges associated with the investment.

Atter initial recognition, investments in joint ventures and associates are accounted for using the equity method.

Recognition and derecognition of financial assets and Habilities

The recognition of financial assets and liabilities occurs when the Group becomes party to the instrument. The derecognition of financial assets takes place when the Group no longer has the risks and rewards of newerds of newnership, no control of the assel. The derecognition of financial liabilities occurs when the ilability is discharged, cancelled or expires.

Financial assets

Financial assets at fair value through profit or loss

Some assets held by the Group are classilied as line value through profit or bss. On Intial recognition these assets are recognised at fair value. Subsequent measurement is also at tair value with changes recognised through finance revenue or costs in the incorder on the

Loans and receivables

Loans and receivables are non-derivative lines or determinable payments that are not quoted in an active market, do not qualify as trading assets and have not been designated as either fair value through proit or loss or available-for-sale. Such assess are arried at amor worlded at an order of stren using the effective interest method it the time value of money is significant. Gains and losses are recognised in the income statement anner locuse and receivables are derecognised or imparred, as well as through the amortisation process.

Trade receivables are recognised and carried at original invoice arnounts. An estimate for doubtul debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and short-tern deposits with an original maturity of three months or less. For the purpose of the Consolidated cash flow statement, cash and cash equivalents and cash and cash engineer net or outstanding bank overdrafts.

Derlyative financial instruments

The Group enters into demetive transactions with a view to managing interest and currency risks associated with underlying business activities and the financing of those activities. Derivative financed instruments used by the Group are stated at fair value on intitled recognition and at also commers and the sheet dates. Cash flow hedges hedge exposure to variability in cash flows that are either attributable to a particular risk associated with a roognitud asset or liability or a forecast transaction. Fair value hedges hedge exposure to changes in the fair value of a recognised asset ou hability or an unrecognised firm commitment and include foreign currency swaps

Hedge accounting is only used where, at the inception of the hedge, there is formal designation of the hedging reletionship, it meets the Group's risk management objective strategy for undertaking the hedge and it is expected to be highly effective.

The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

The portion of any gains of losses of cash flow hedges, which meet the conditions for hedge accounting and are determined to be effective hedges, is recognised directly in the Consolidated statement of comprehensive income. The gains or the inefiestive portion vired immediately in the income statement.

The change in lair value of a fair value hedging derivative is recognised in the income statement in finance costs. The charge in the taily of the hedged asset or liablity that is attributable to the hedged risk is also recognised in the income statement within finance costs.

Notes to the consolidated financial statements

At 28 February 2013

2 Accounting policies (continued)

When a firm commitment that is hedged becomes an asset or a liability recognised on the balance sheet then, at the time the asset or liebility is recognised, the associated gains ar losses that had previously in equity are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liables, the gains or losses that are recognised in equily are transform of the income statement in the same period in which the results from a firm commitment that is hedged affects the income statement.

Gains or losses arising from changes in fair value of deine that do not qualify for hedge accounting are recognised in the income statement.

Hedge accounting is discontinued when the heaters or is sold, terminated, exercised or no tonger qualifies for helge acounting. Al that point in time, for cash flow hedges, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity unit the forecast transaction occurs. It a hadged transaction is no occur, the net cumulative gain or loss recognised in equity is transferred to the income statement. When a fair value hedge them is derecognised fair value is recognised immediately in the income statement.

Borrowings

Borrowings are initially recognised at fair value of the consideration received net of any directly associated issue costs. Borrowings are subsequantly recorded at amorised cost, with any difference between the amount initially recorded and the income statement using the effective interest method.

Significant accounting judgements and estimates

Key assumptions concerning the future, and other sources of estimation uncertainty at the balance sheet date, have a significant risk if causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

The main assumptions and sources of estimation uncertainty are outlined below,

An impairment test of tangible assets is undertaken each year on both an EBTTDA multiple approach and a discounted cash flow approach. Note 13 describes the assumptions used together with an analysis of the sensitivity to changes in key assumptions.

Judgement involving estimates is used in determing the value of provisions carred for onerous contracts. This is primarily based around assumptions on rent and property-related costs for the property is vacant and then assumptions over future rental incomes or potential reverse lease premiums paid. Note 22 provides details of the value of the provision carried.

Defined benefit pension plans are accounted for in actuatial advine using the projected unit aredit method. Note 30 describes the assumptions used together with an analysis of the sensitivity to changes in key assumptions.

The calculation of the Group's total tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose ax treatment cannot be finally determined until the relevant tax authority. The final resolution of certain of these items may give rise to material income statement and/or cash flow variances.

Corporation tax is calculated on the basion, taking into account the relevant local tax rates and regulations. For each operating entity, the current income tax expense is calculated and differences between the accounting and tax base are determined, resulting in deferred tax assets or liabilities.

Assumptions are also made around the assets which for capital allowances and the level of disallowable expenses and this affects the income tax calculation. Provisions are also made for uncertain exposures which can have an impact on both deferred and current tax. A delerred tax assel shall be recognised for the carry forward of unused tax losses, pension delicits and unused tax credits to the extent that it is

probable that future taxable profit will be available against which the unused tax credits can be ufilised,

Detailed amounts of the carrying value of corporation and deferred tax can be found in Note 9.

Notes to the consolidated financial statements

At 28 February 2013

2 Accounting policies (continued)

Standards issued by the International Accounting Standards Board (IASB) not effective for the current year and not early adopted by the Group

The following stardards and interpretations, which have been issued by the EU ard are relevant for the Group, become offective after the current year end and have not been early adopted by the Group:

IAS 19 Employee Benefits (Amendment)

The IASB has issued numerous amends to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected relums on planned clarifications and re-wording. The impact on the Group is on disclosure in the consolidated financial statements but here will also be an impact on the change in interest no included in the cursulation in the resume in calculate the return na ssets and the reclassified of the administration and related to asset management to operating costs. The amendment become triedly of a annual periods beginning on or after 1 January 2013.

If the Group had adopted IAS 19 revised as at 28 February 2013, net pension linance costs would have been higher by £9.0m and operating costs higher by £3.1m.

IFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities

The amendment requires that, if financial assets and liabilities have the right of set of, (and we would account as such) then disclosure is required to explain what asset has been dere the reasons for doing so. In addition, the amendment requires diseasures about the contruction of set of to erable the use to evaluated with the estated will , the entity's cortinues decised as agoing of security of security of security of security of security under IAS 39, oftests and libilities and the required to provide discoure of this in the consolidated financel statements going forward but there will be no impact on the Group's financial position or performance. The amendment infective for annual porcode beginning on or after 1 January 2013.

IFRS 9 Financial Instruments: Classification and Measurement

IFFS 9, as issued, reflects the lists of the IASE's work on the replacement of IAS 39 and applies to cleasification and measurement of Inancial assets and financial libelities as defined in INS 39. The standard was intitally effective to annual periods beginning on or after 1 January 2013, but Antendrents to IFRS 9. Marcel on I FRS 9 and Transition Disclosures, issued in December 2011, moved the mandator effective date to 1 January 2015. In subsequent phases , the lAB will address in election and mindine in the me me member of the lines of IFFS 9 will have an effection and measurement of the Group's financial assets, but will not have an impact on classification and measurement of financial liabilities. The Group will quartify the other phases, when the final stardard in cluding all phases is issued.

IFRS 12 Disclosure of Involvement with Other Entities

IFFS 12 includes all of the disclosures that were previously in IAS 27 related to consoidated inancial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity's interests, where there are material, in subsidiares, including system arrangements, associates and structured entitles. The impact on the Group is on the consolidated financials statements only where summarised information may need to be provided. The amendment becomes effective for annual periods besinning on a fiter in any 2014

Whillst the following standards and interpretations are relevant to the Group, they have been assessed as having no thancial impact or additional disclosure requirements at this time:

IAS 1 Financial Statement Presentation (Amendment)

IAS 28 Investments in Associates and Joint Ventures (revised 2011)

Amendment to IAS 32 "Financial Instruments Presentation"

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 13 Fair Value Measurement

As the accounts have been prepared in accordance with IFRSs as adopted by the European Union. the adoption date is as per the EU, not the IASB,

Notes to the consolidated financial statements

At 28 February 2013

3 Revenue

An analysis of the Group's revenue is as follows:

	2012/13	2011/12
	Em	Sm
Rendering of services	853.8	755.1
Franchise fees	222	21.0
Sale of goods	1,154.0	1,001.9
Revenue	2,030.0	1.778.0

4 Segment information

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

• · Hotels & Restaurants provide services in relation to accommodation and food; and
• 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 resulross and assessing performance . Segment performance is measured based on underlying operating profit. The unallocated assets and liabilities are cash and debt balances (held and controlled by the central treasury function, certain property, plant and equipment, centrally held provisions and central working capital balances.

Inter-segment revenue is trom 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 lollowing tables present revenue and pertain asset and liability information regarding business operating segments for the years ended 28 February 2013 and 1 March 2012.

Notes to the consolidated financial statements

At 28 February 2013

4 Segment information (continued)

			Unallocated
	Hotels & Restaurants	Costa	and elimination	To al operations
Year ended 28 February 2013	2m	Sm	Em	Em
Revenue
Revenue from external customers	1,350.1	ਰਜਾ) 9		2030.0
Inter-segment revenue		2.5	(2.5)
Total revenue	1,360.1	6724	(2.5)	2,030.0
Underlying operating profit	313.1	90-1	(22.0)	381-2
Amortisation of acquired intangibles		(243)		(2.8)
Operating profit before exceptional items	313.1	67.3	(220)	378.4
Exceptional items;
Net gain ((loss) on disposal of property, plant and equipment and property reversions	19.5	(1.1)	0.2	13.6
Impairment	(136)	(1.73)		(15.3)
Impairment reversal	9.7	0.2		9.9
Loss on investment		(1-4)		(1.4)
Sale of business		(1-9)		(1.9)
Operating profit of the Group, joint ventures and associate	328.7	81.4	(21.8)	ਹੈ। ਹਵਾਲੇ ਵਿ
Net finance costs				(2018)
Profit before tax				387.7
Tax expense				(63.0)
Profit for the year				274.7
Assets and liabilities
Segment assets	2,755.6	329.0	-	3,084.6
Unallocated assets			90.1	:0.1
Total assets	2,755.6	329.0	30.1	3,174.7
Segment liabilities	(223.1)	(59.1)		(302-2)
Unallocated liabilities			(1,465,2)	(1,465.2)
Total liabilities	(220.1)	(69.1)	(1,465.2)	(1,767.4)
Net assets	2,522.5	259.9	(1,375.1)	1,407,3
Other segment information
Share of profit from associate	03			0.8
Share of profit / (loss) from joint ventures	0.9	(0.4)	P	0.5
Minimum lease payments attributable to the current period	69.7	74.50	0.2	141,9
Capital expenditure.
Property, plant and equipment - cash basis	25976	76.7		3293
Property plant and equipment - accruals basis	247-2	79.6		325.8
Intangible assets	8.7	રોની	22	14.3
Depreciation	(81.9)	(33.4)	l	(120.3)
Amortisation	(4.6)	(3.5)	11	(8.1)

Notes to the consolidated financial statements

At 28 February 2013

4 Segment information (continued)

		Unallocated
	Hotels & Restaurants	Costa	and elimination	rotal operations
	Em	am	2m	Sm
Year ended 1 March 2012 Revenuo
Revenue from external customers	1,239.3	538.7		1,778.0
		3.2	(3.2)
Inter-segment revenue		541.9		1,778.0
Total revenue	1,239.3		(3.2)
Underyling operating profit	295.6	69 7	(19.0)	346.3
Amortisation of acquired intangibles		(2.6)		(2.6)
Operating profit before exceptional items	295.6	67.1	(19.0)	343.7
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			(0.3)	(0.9)
Impairment	(12.8)	(0.9)		(13.7)
Impairment reversal	2.8	0.5		3.3
Operating profit of the Group, Joint ventures and associate	310.7	35.0	(29.9)	346.8
Net finance costs				(46.3)
Profit before tax				300.5
Tax expense				(25.0)
Profit for the year				275.5
Assets and liabilities
Segment assets	2,603.0	279.2		2,882.2
Unallocated assets			77.8	77.8
Total assets	2,603.0	279.22	378	2,960.0
Segment liabilities	(213.4)	(63.9)		(277.3)
Unallocated flabilities			(1,581.4)	(1,581-4)
Total liabilities	(213.4)	(23.9)	(1,581.4)	(1,858.7)
	2,389.6	215.3	(1,503.6)	1,101.3
Nat assets
Other segment information
Share of profit from associate	0,9			0.9
Share of loss from joint ventures		(0 7)		(0.7)
Minimum lease payments attributable to the current period	51.4	56.5	0.4	108.3
Capital expenditure:
Property, plant and equipment - cash basis	243.5	62.2		305.7
Property, plant and equipment - accruals basis	254.0	63.2	14	317.2
Intangible assets	0.7	1.5		2.2
Depreciation	(78.0)	(27.0)		(105.0)
Amortisation	(1.5)	(3.2)	+	(4.7)

Notes to the consolidated financial statements

At 28 February 2013

4 Segment information (continued)

	2012/13	2011/12
Revenues from external customers are split geographically as follows:	201	2m
United Kingdom "	1,965.8	1,729,4
Non United Kingdom	64.2	48.6
	2,030.0	1,778.0
* United Kingdom revenue is revenue where the supply is the United Kingdom. This includes Costa franchise income invoiced from the UK.
Non-current assets ** are split geographically as follows
	2018	2012
	Sm	2m
United Kingdom	2,031.6	2,769.2
Non United Kingdom	68.7	41.8
	2,995.3	2,811 0
** Non-current assets exclude derivative financial instruments
5 Operating profit
This is stated after charging / (crediting):
	201224 3	2011/12
	30	2m
Property operating lease payments
Minimum lease payments recognised as an operating lease expense:
Minimum lease payments attributable to the current period	141.9	108.3
IAS 17 - impact of future minimum rental uplifts	(1.5)	2.8
Contingent rents	10.0	8.1
Total property rent	1-30.4	119.2
Plant and machinery operating lease payments	9.2	8.3
Operating lease payments	159.6	127.8
Operating lease payments - sublease receipts	(2.7)	(1.4)
Amortisation of intangible assets (note 11)	8.1	4.7
Depreciation of property, plant and equipment (note 12)	120 3	105.0
Cost of inventones recognised as an expense	269.3	2004.4
Employee benefits expense (note 7)	540.1
Net foreign exchange differences	(0.5)	475.9 0.2
Principal auditor's fees Audit of the consolidated financial statements
	03	03
Audit of subsidiaries	042	0.2
Total audit fees	0-5	0.5
Taxation advisory services		0.1
Total fees	0.5	n. G

Notes to the consolidated financial statements

At 28 February 2013

6 Exceptional items and other non GAAP adjustments

	2012/13	2011/12
	Em	Em
Exceptional items before tax and interest:
Operating costs
Net gain on disposal of property, plant and equipment and property reversions 1	18.6	14.6
Impairment of property, plant and equipment (note 13)	(153)	(13.5)
Impairment reversal (note 13)	9.9	3.3
Loss on investments 2	(1.4)	(0.9)
Impairment of other intangibles (note 11)		(0.2)
Sale of businesses 3	(1 19)
	9.9	3.3
Net loss on disposal of fixed assets in joimt ventures		(0.2)
	9.9	3.1
Exceptional interest:
Interest on exceptional tax *	1.0	8.8
Unwinding of discount rate on provisions 5	(1.1)	(0.8)
	(0.1)	9.0
Exceptional items before tax	9.8	12.1
Other non GAAP adjustments made to underlying profit before tax to arrive at reported profit before tax:
Amortisation of acquired intangibles (note 11)	(2.8)	(2.6)
IAS 19 income statement charge for pension finance cost (note 30)	(18.0)	(14.0)
	(20.8)	(16.6)
ltems included in reported profit before tax, but excluded in arriving at underlying profit before tax	(11.0)	(4.5)
Tax adjustments included in reported profit atter tax, but excluded in arriving at underlying profit after tax:	程而	டோ
Tax on continuing exceptional items	13	(5.1)
Exceptional tax items - capital allowances claims 6		166
Exceptional tax items - tax base cost 7	8.5	9.2
Exceptional tax items - disputed claims 4		13.5
Defened tax relating to UK tax rate change	16.8	17.0
Tax on non GAAP adjustments	5.0	4.3
	25.6	55.5

Notes to the consolidated financial statements

At 28 February 2013

6 Exceptional items and other non GAAP adjustments (continued)

• II In 2012/13, a net gain of £18 6m was recognised on disposals of property, plant and equipment, the majority of which relates to the sale and leaseback agreement for seven properties. In 2011/12, a net gain of £25.5m was recognised on disposals of property, plant and equipment, the majority of which related to a sale and leaseback agreement for seven properties. In addition, a provision was raised in relation to properties that reverted to Whitbread following difficulties with Southern Cross and a further requirement for a provision on the onerous contract portfolio.
• 2 In 2012/13, this is the net loss on the sale of the joint venture in Rosworth Investments to the juint venture partner. In 2011/12, there was an impairment of an investment in a German hotel (note 16).
• 3 During the year Coffeeheaven Hungary was closed and subsequently liquidated. The costs incurred in this process have been classed as loss on disposal of business.
• 4 This was the partial release of a provision, of £13.5m, for an item which had been disputed by HMFC but has now been agreed. Interest which had been accrued for the late payment was also released. This interest amounted to a total of £10.8m, £1.0m of which was released in the current year (2012: £9.8m).
• 5 The interest arising trom the unwinding of the discount rate within provisions is included in exceptional interest, reflecting the exceptional nature of the provisions created.
• 6 Following the abolition of Industrial Buildings Allowances for hotel buildings, the Group reviewed and resubmitted prior year capital allowance claims. These claims have now been agreed with HMRC.
• 7 Reduction in deferred tax liability for differences between the tax deductible cost and accounts' residual value of assels.

7 Employee benefits expense

	2012/13	2011/12
	2m	Em
Wages and salaries	501.6	441.8
Social security costs	3.6	29.7
Pension costs	4.9	4.4
	540.1	475.9

Included in wages and salaries is a share-based payments expense of £9.5m (2011/12: £8.0m), which arises from transactions accounted for as equitysettled and cash-settled share-based payments.

The average number of people directly employed in the business segments on a full lime equivalient basis was as tollows:

	2012/13	2011/12
	No.	No.
Hotels & Restaurants	23,628	22,235
Costa	10.031	8,196
Unallocated	57	53
Total operations	33,716	30,484

Excluded from the above are employees of joint ventures and associated undertakings.

Notes to the consolidated financial statements

At 28 February 2013

7 Employee benefits expense (continued)

Directors' emoluments are disclosed below:

	201777 K	2011/12 Sm
	Sm
Aggregate remuneration in respect of qualifying services	3.5	2.5
Aggregate amounts receivable under long term incentive plans	2.1	1.5
	2017-13	2011/12
	No.	No.
Number of directors receiving shares in respect of qualifying services	3	2
Number of directors who exercised share options	L	1
Number of directors accruing benefits under defined benefit schemes	1	0
In respect of the highest paid director:
	2017713	2011/12
	Em	Sm
Aggregate remuneration	1.8	14

The highest paid director received shares under the Group's long-term incentive scheme during the year.

8 Finance (costs)/revenue

Aggregate pension

	2012/13	2011/12
	Ann	2m
Finance costs
Bank loans and overdrafts	(26.5)	(31.5)
Other loans	(0.6)	(0.2)
Interest payable to parent company	(8.9)	(18.0)
Interest capitalised	2.7	3.1
	(33.3)	(44.6)
Net pension finance cost (note 30)	(18.0)	(14:0)
Finance costs before exceptional items	(51.3)	(58.6)
Unwinding of discount rate on provisions (note 22)	(1.1)	(0.8)
Total finance costs	(52.4)	(59.4)
Finance revenue
Bank interest receivable	0.1	0.4
Other interest receivable	0.8	12.0
	0.4	12.4
Impact of ineffective portion of cash flow and fair value hedges	0.4	0.7
Finance revenue before exceptional items	0.8	13.1
Exceptional finance revenue	1.0	-
Total finance revenue	1.8	13.1

Notes to the consolidated financial statements

At 28 February 2013

9 Taxation

	20172113	2011/12
Consolidated Income statement	201	2m
Current tax:
Current tax expense	87.8	77.8
Adjustments in respect of current tax of previous periods	(1.70)	(36.4)
	86.1	41.4
Deferred tax:
Origination and reversal of temporary differences	(3.8)	6.6
Adjustments in respect of previous periods Change in UK tax rate to 23% (2011/12: 25%)	(2.5)	(6.0)
	(18.8)	(17.0)
Tax reported in the Consolidated income statement	(22.1)	(16.4)
	63.0	25.0
	2012/13	2011/12
Consolidated statement of comprehensive Income	Am	am
Current tax:
Pensions	(9.0)	(22.2)
Deferred tax:
Cash flow hedges	2.0	(0.3)
Pensions	16.1
Change in UK tax rate to 23% (2011/12: 25%) - pensions	8.5	(27.9)
Change in UK tax rate to 23% (2011/12: 25%) - cash flow hedges		8.2
Tax reported in other comprehensive income	0.5	0.6
	18.1	(41.6)

A reconclilation of the tax charge applicable to underlying profit before tax at the statutory tax rate to the actual tax charge at the Group's effective tax rate for the years ended 28 February 2013 and 1 March 2012 respectively is as follows.

	201 Park		2011/12
	חס צפו underlying profit	Tax on profit	Tax on underlying profit	Tax on profit
	200	Sm	Am	200
Profit before tax as reported in the Consolidated income statement	348.7	24977	305.0	300 5
Tax at current UK tax rate of 24.17% (2011/12: 26.17%)	84 %	81.6	79.8	78.6
Effect of different tax rates and unrecognised losses in overseas companies	20	2.9	23	3.1
Effect of joint ventures and associate	(0-3)	(1.2)	(0.1)	(0.4)
Expenditure not allowable	3.2	0.7	1.6	3.1
Adjustments to tax expense in respect of previous years	(1.5)	(1-3)	(6.3)	(33.2)
Adjustments to deferred tax expense in respect of previous years	1.0	(2.5)	3.2	(9.2)
Impact of change of tax rate on defenred tax balance	I	(16.8)		(17.0)
Tax expense reported in the Consolidated income statement	BB.G	68.0	30 5	25.0

The corporation tax balance is a liability of £35.8m (2012: liability of £1.9m)

Notes to the consolidated financial statements

At 28 February 2013

9 Taxation (continued)

Deferred tax

Deferred tax relates to the following:

	Consolidated		Consolidated
		balance sheet		income statement
	2013	2012	2012/13	2011/12
	Em	2m	Em	£m
Deferred tax liabilities
Accelerated capital allowances	57.8	62 8	(4.9)	(41.8)
Rolled over gains and property revaluations	146.8	163.3	(153)	26.4
Gross deferred tax liabilities	204.6	226.1
Deferred tax assets
Pensions	(92.2)	(114.4)	(2.3)	(1.1)
Other	(5.7)	(5.8)	(0.6)	0.1
Gross deferred tax assets	(97.9)	(120 2)
Deferred tax expense			(23.1)	(16.4)
Net deferred tax liability	106.7	105.9

Total deferred tax liabilities released as a result of disposals during the year was £0,2m (2012: £0.6m).

The Group has incurred overseas tax losses which, subject to any local restrictions, can be carried forward and offset against fin the companies in which they arose. The Group caries out an annual assessment of these losses and does not think it approxiate at this stage to recognise any deferred tax assets. It the Group were to recognise these deferred tax assess in their entirely, profits would increase by £6.8m (2012. £5.1m).

The Group considers that receipts of unremitted earnings from overseas entitles would be exempt from UK tax and therefore the temporary difference in relation to unremitted eamings is Enil.

Tax relief on total interest capitalised amounts to £0.7m (2012: £0.8m).

Factors affecting the tax charge for future years

The Finance Act 2012 reduced the main rate of UK corporation tax to 24% from 1 April 2013. The effect of the new rate is to reduce the deferred tax provision by a net £6.9m, comprising a credit of £16.8m to the Consolidated income statement, a charge of £9.0m to the Consolidated statement of comprehensive income and a reserves movement of £1,1m.

In his budget of 20 March 2013, the Chancellor of the Exchequer confirmed the planned additional reduction in the rate of UK corporation lax to 21% from 1 April 2014 and announced a further reduction to 20% from 1 April 2015. These changes had not been substantively enacted at the balance sheet date and consequently are not included in these conscilidated innancial statements. The effect of these proposed reductions would be to reduce the net deferred tax liability by £12.3m

10 Dividends paid

	2012/13 - 11	2011/12
	Em	£m
Divideoda poid during the voor

Notes to the consolidated financial statements

At 28 February 2013

11 Intangible assets

	Goodwill	Brand	Customer relationships	IT software and technology	Other	Tota
	Sm	Em	Em	£m	£m	£m
Cost
At 3 March 2011	176.8	5.6	59	51.7	2.9	242.9
Additions			+	0.9	1.3	2.2
Transfers				12 3		12.3
At 1 March 2012	176.8	5.6	5.9	64.9	4.2	257.4
Additions	0.7		4	11.7	2.6	15.0
Assets written off		(0.5)		(30.0)
Transfers				1.8	(1.0)	(31.5)
Foreign currency adjustment	0.1		4			1.8
At 28 February 2013	177.6	5,1	5,9	48.4	5.8	0.1 242.8
Amortisation and impairment
At 3 March 2011		(0.4)		(36.3)
Amortisation during the year		(0.6)	(0.4)		(1.9)	(38.6)
Transfers	-			(3.6)	(0 1)	(4.7)
Impairment		(0.2)		(73)		(7.3)
At 1 March 2012		(1.2)	(0.4)			(0.2)
Amortisation during the year		(0.3)		(47.2)	(2.0)	(50.8)
Amortisation on assets written off		0.5	(0 8)	(6.9)	(0.3)	(8.1)
At 28 February 2013				30.0	1.0	31.5
		(1.0)	(1.0)	(24.1)	(1.3)	(27.4)
Net book value at 28 February 2013	177.6	4.1	4.9	24.3	4.5	215.4
Net book value at 1 March 2012	176 8	4.4	5.5	17.7	2.2	206.6

Included in the amortisation for the year is the amortisation relating to acquired intengibles amounting to £2.8m (2011/12, £2.6m).

The carrying amount of goodwill allocated by segment is presented below:	2013	2012
	170	am
Hotels & Restaurants	112.6	112-6
Costa	65.0	64.2
rotal	7776	176.8

Notes to the consolidated financial statements

At 28 February 2013

11 Intangible assets (continued)

The carrying amount of goodwill at 26 February 2013 is comprised of £112.6m for Costaurants and £65.0m for Costa. The Hotels & Restaulants CGU and the Costa GGU are also operating segments and represent the Group at which goodwill is montored for internal management purposes.

There has been a small addition in the year, £0.7m, for the Costa CGU which relates to Coffeeheaven Poland, which acquired by the Costa franchise partner, E-Coftee in Poland, on 15 May 2012.

The brand intangible asset arose with the acquisition of Coffeeheaven in 2009/10. It is being amortised over a period of 15 years.

The customer relationships asset arose with the previous linancial year. It is being anotised over a period of 15 years.

TT software and technology has been as having finite lives and will be amortised under the straight-line method over periods ranging from three to 10 years from the date it became fully operational.

Other intangibles

Other intangibles comprise Costa overseas trading licences and Costa Express operating rights agreements.

The trading licences, which have a carrying value of £1.8m), are deemed to have an infinite life as there is no time limit associaled with them. The operating rights agreements are being and 10 years and 10 years have a carrying value of £2.3m (2012. Enil). The balance of £0.4m (2012: £0.4m) relates to territory fees which are being amortised over 20 years.

Capital expenditure commitments

Capital expenditure commitments in relation to intangible assets at the year end amounted to £2.6m (2012) 2nil)

12 Property, plant and equipment

	Land and	Plant and
	buildings	equipment	Total
	Am	Sm	2m
Cost
At 3 March 2011	2,074.2	842.5	2,916.7
Additions	135.6	181.6	317.2
Interest capitalised	3.1		3.1
Reclassified	(5.0)	5.0	-
Assets written off	(2.2)	(45.9)	(48.1)
Foreign currency adjustment	(1 8)	(0.1)	(1.7)
Transters		(123)	(12.3)
Disposals	(27.3)	(8.6)	(35.9)
At 1 March 2012	2,176.8	962.2	3,139.0
Additions	138.6	188.2	326.8
Interest capitalised	2.7	6	2.7
Reclassified	(3.5)	3.5	1
Assets written off	(51.4)	(59.8)	(111.2)
Foreign currency adjustment	(0.8)	1.5	0.7
Transfers		(1.8)	(1.8)
Movements to held for sale in the year	(6.9)	(0.6)	(7.5)
Disposals	(27.6)	(14.3)	(41.9)
At 28 February 2013	2,227.9	1,078.9	3,306.8

Notes to the consolidated financial statements

At 28 February 2013

12 Property, plant and equipment (continued)

	Land and	Plant and
	buildings	equipment	Total
	Em	Sm	தா
Depreciation and Impairment
At 3 March 2011	(177 5)	(323.3)	(500.8)
Depreciation charge for the year	(11.5)	(83.5)	(105.0)
Reclassified	2.3	(2.3)
Impairment (note 13)	(72)	(3.0)	(10.2)
Depreciation on assets written off	22	41.9	44.1
Foreign currency adjustment		0.1	0.1
Transfers		7.3	73
Disposals	2.5	3.5	6.0
At 1 March 2012	(189.2)	(369.3)	(558.5)
Depreciation charge for the year	(13.4)	(106.9)	(120.3)
Reclassified	0.3	(0.3)
Impairment (note 13)	(2.6)	(2.2)	(4.8)
Depreciation on assets written off	51 4	59.8	111.2
Foreign currency adjustment		(0.5)	(0.5)
Movements to held for sale in the year	5.1	0.3	5.4
Disposals	1.6	8.0	96
At 28 February 2013	(146.8)	(411.1)	(557.9)
Net book value at 28 February 2013	2,081.1	667.8	2,748.9
Net book value at 1 March 2012	1,987.6	592.9	2,580.5

There is a charge in favour of the persion scheme over properties with a market value of £408m. See note 30 for further information.

	2018	2012
Capital expenditure commitments	רחב	E
Capital expenditure commitments for property, plant and equipment for which no provision has been made	50 1	82 ก

In addition to the capital arpendlure commitments disolosed above, the Group has also signed agreements with certain third parties to develop new trading outlets within the Hotels & Restaurants strategic business unit as part of its pipeline. These developments are dependant on the outcome of titure events such as the pranting of planning permission, and consequently do not represent a bincing capital commitment at the year end. The directors consider that developments likely to proceed as planned will result in further capital investment of £177.5m over the next five years (2012. £179.3m).

Capitalised interest

Interest capitalised during the year amounted to £2.7m, using an average rate of 4.5% (2011/12: £3.1m, using an average rate of 5.4%).

Assets held for sale

During the year, certain property assets with a nel book value of £2.1m (2011/12). End) were transferred to assets netd for sale. Property assets sold during the year had a net book value of £0.6m), and five trading sites with a combined net book value of £1.5m (2011/12: £0.6m) continued to be classified as assets hald for sale at the year end. An impairment loss of £0.6m (2011/12: £nil) was recognised in the year.

Notes to the consolidated financial statements

At 28 February 2013

13 Impairment

During the year impairment losses of £15.3m (2011/12: £13.5m) and impairment reversals of £9.6m (2011/12: £3.3m) were recognised.

	2012/13	2011/12
	Property, plant and equipment Em	Property, plant and equipment ലന
Impairment losses
Hotels & Restaurants	13.6	12.8
Costa	1.7	0.7
Impairment reversals
Hotels & Restaurants	(9.7)	(2.8)
Gosta	(0.2)	(0.5)
Total	5.4	10.2

Property, plant and equipment

The Group considers each trading site to be a CGU and each CGU is reviewed annually for indicators of impairment.

In assessing whether an asset has been imparity of the CGL is compared to its recoverable amount. The recoverable ancum' is the higher of its fair value less costs to sell and in use. In the absence of any information about the fair value of a CGU, the recoverable amount is deemed to be its value In use.

The Group estimates value in use using a discounted cash flow model, which applies a pre-lax discount rate of 9.1% in the UK (2011/12: 9.3%), 10.2% in Chine (2011/12 10.4%) and 10.6% in Poland (2011/12: 10.8%) The future cash flows are based on assumptions tron 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. Gash flows beyond this period are extrapolated using a growth relevant country's inflation target, ranging from 2.0% to 3.1% with the UK, the most significant country, being 2.0% (2011/12: 2.0%).

The events and circumstances that led to the impairment charge of £15.3m are set out below:

Hotels & Restaurants

The impairment of £13,6m at 16 sites in this strategic business unit was driven by a number of factors:

• changes in the local competitive environment in which the hotels are situated;
• the economic climate affecting some key regions; and
• high asset prices in the market at the point of acquired sites which also anticipated higher growth rates at that time than are now expected.

Costa

Five UK Costa sites, nine sites in Shanghai and niness, all with an established trand of por performance against the required capital investment, have been impaired by £1.7m where their expected future cash filows have in use in use is below carrying value.

Impairment reversals

Following an improvement in trading performance and an increase in amounts of estimated future of previously imparied sites, reversals of £9.9m have been recognised, £9.7m in Hotels & Restaurants and £0.2m in Costa.

Notes to the consolidated financial statements

At 28 February 2013

13 Impairment (continued)

Sensitivity to changes in assumptions

The level of impairnent is predominantly dependent upon judgements used in arriving at future growth rates applied to cash 1low projections. The impairment charge of applying different assumptions to the growth rates used in the five-year business plan and in the pre-tax discount rates would be an incremental impairment charge of:

	Hotels & Restaurants	Costa	Total
Incremental impairment charge	am	2m	2m
Impairment if business plan growth rates were reduced by 1ppt	5.1		5.1
Impairment if discount rates were increased by 1ppt	48		4.8

Goodwill

Goodwill acquired through business combinations is allocated to groups of CGUs at strategic business unit level at which management monitor goodwill.

The recoverable amount is the higher of fair value in use. In the absence of a recent market transaction the recoverable amount is determined from value in use cash lows 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 byond this period are extrapolaled using a 2,0% growth rate (2011/12:2,0%). The pre-tax discount rate applied to cash (2011/12/ 9.3%).

The resultant impairnent review required no impairment of goodwill allocated to either Holels & Restaurants CGU.

14 Investment in joint ventures

Principal joint ventures	Investment held by	Principal activity	Country of Incorporation	% equity Interest
				2018	2012
Premier Inn Hotels LLC	PTI Middle East Limited	Hotels	United Arab Emirates	49.0	4:10
Rosworth Investments Limited 1	Costa International Limited	Holding company	Cyprus		50.0
Hualian Costa (Beijing) Food & Beverage Management Company limitad	Costa Beijing Limited	Coffee shops	China	50.0	50.0

1 During the year the joint venture in Rosworth Investments Limited was sold to the joint venture partner.

The following table provides summarised information of the Group's investment in joint ventures:

Share of joint ventures' balance sheets	2018	2012 Sm
	Em
Current assets	7.1	5.4
Non-current assets	46.9	40.9
Share of gross assets	54.0	46.3
Current liabilities	(4.5)	(3.6)
Non-current liabilities	(27.9)	(28.8)
Share of gross liabilities	(825)	(32 4)
Loans to joint ventures	2.5	48
Share of net assets	24.0	18.7

Notes to the consolidated financial statements

At 28 February 2013

14 Investment in joint ventures (continued)

Share of Joint ventures' revenue and expenses	2012/13	2011/12
	Sm	இரா
Reveriue	17.3	14.1
Operating costs	(15.6)	(13.6)
Finance costs	(1.2)	(1.0)
Operating profit / (loss) before tax and exceptionals	0.5	(0.5)
Disposal of fixed assets	I	(0.2)
Profit / {loss} before tax	0.5	(0.7)
lax	1
Net profit / (loss)	0.5	(0.7)

0010

At 28 February 2013 the Group's share of the capital commitments of its joint ventures amounted to £5.5m (2012: £7.9m).

15 Investment in associate

				% equity interest
Principal associate	Investment held by	Principal activity	Country of Incorporation	2013	2012
Morrison Street Hotel Limited	Whitbread Group PLC	Hotels	Scotland	40.0	40.0

The associate is a private entity which is not listed on any published quotation price is no published quotation price for the fair value of this investment.

The following table provides summarised information of the Group's investment in the associated undertaking;

	4413	EUIL
Share of associate's balance sheet	Em	2m
Current assets	1.8	1.5
Non-current assets	5.1	5.2
Share of gross assets	6.9	6.7
Current liabilities	(0.5)	(0.4)
Non-current liabilities	(4-7)	(4.7)
Share of gross liabilities	(52)	(5.1)
Share of net assets	1.7	1.6
	2012/13	2011/12
Share of associate's revenue and profit	Sim	Em
Revenue	2.7	2.9
Profit	0.8	0.9

Notes to the consolidated financial statements

At 28 February 2013

16 Other financial assets - non current

	2013	2012
	2m	Em
Opening cost or valuation		0.9
Impairment	1	(0.9)
Closing cost or valuation	t

The Group's other financial asset related to an investment in a German hotel which was held at fair value. This asset has the Group believe that its value is impaired.

17 Inventories

	2013	2012
	2 m	2m
Raw materials and consumables (at cost)	3.5	3.9
Finished goods (at cost)	28.0	19.2
Total Inventories at lower of cost and net realisable value		28.1

18 Trade and other receivables

	2018	2012
	Sm	£m
Trade receivables	54.2	47.7
Prepayments and accrued income	39.0	32.9
Other receivables	14.2	8.0
	107.4	88.6
Analysed as:

Current	102.1	85 0
Non-current - other receivables	5.3	3.6
	107.4	88.6

Trade and other receivables are non-interest bearing and are generally on 30 day terms.

The provision for impairment of receivables at 28 February 2013 was £2 9m (2012: £3.6m).

	2013	2012
The ageing aralysis of trade receivables is as follows:	ிற	£m
Neither past due nor impaired	41.0	39.0
Less than 30 days	9.9	7.6
Between 30 and 60 days	1.9	0.7
Greater than 60 days	1.4	0.4
	54.2	47.7

Notes to the consolidated financial statements

At 28 February 2013

19 Cash and cash equivalents

	2013	2012
	em	Em
Cash at bank and in hand	39.2	40.3
Short-term deposits	1.6
	40.8	40 3

Short-herm deposits are made for variods of between one day and one month depending on the immediate ossh requirements of the Group They earn interest at the respective short-lem deposit rates. The tair value of cash equivalents is £40.8m (2012: £40.3m).

For the purposes of the Consolidated cash flow statement, cash and cash equivalents comprise the following:

	2018	2012
	Sm	2m
Cash at bank and in hand	39.2	40.3
Short-term deposits	1.6
Bank overdrafts (note 21)	문	(0.7)
	40.8	39.6

20 Financial liabilities

		Current		Non-current
	Maturity	2018	2012	2013
		200	இற	ਬੋਗ	2m
Bank overdrafts	On demand	I	0.7	4
Short-term borrowings	On demand	9.0	13.5
		9.0	14.2	-	1
Unsecured
Revolving credit facility (£650m)	2016		-	2420	272.9
Private placement loan notes	2017 to 2022	0	4	260.9	257.5
Total		9.0	14.2	F02 9	530.4

Short-term borrowings

Short-term barrowings are typically overnight borrowings, repayable on demand. Interest rates are variable and linked to LIBOR.

Revolving credit facility (£650m)

The revolving facility was entered into on 4 November 2016. Loans have variable interest raters rates linked to LBOR. The facility is multi-currency.

Notes to the consolidated financial statements

At 28 February 2013

20 Financial liabilities (continued)

Private placement loan notes

The Group holds loan notes with coupons and maturities as shown in the following table:

TIle	11:22 ISSUBO	Principal value	Maturity	Coupon
Series A loan notes	2010	US\$40.0m	13 August 2017	4.55%
Series B loan notes	20110	US\$75.0m	13 August 2020	5 220%
Series C loan notes	2010	925.0m	13 August 2020	5.19%
Series A loan notes	2011	US\$60.0m	26 January 2019	3.92%
Series B loan notes	2011	USS 6.5m	26 January 2019	4.12%
Series C loan notes	2011	08:33:50	26 January 2022	4.86%
Series D loan notes	2011	925.0m	06 September 2021	4.89%

The Group ontered into a number of cross-currents in relation to the loan notes to eliminate any foreign exchange risk on interest rates or on the repayment of the principal borrowed. These swaps expire in line with the loan notes and are discussed in note 24.

An analysis of the interest rate profile and the maturity of the borrowings, together with related interest rate swaps, is as tollows:

	Willin	1-2	2-5	Over
	1 year	yours	years	5 years	TOTal
Year ended 28 February 2013	Am	Em	Em	270	201
Fixed rate			26.7	234.2	260.9
Fixed to floating rate swaps	-		-	(50.1)	(50.1)
Floating to fixed interest rate swaps		1	50.0	50.0	100-0
	-		76.7	234.1	310-8
Floating rate	9.0	-	242.0	-	2-11-0
Fixed to floating rate swaps	ﺮ			50.1	5.0.1
Floating to fixed interest rate swaps			(50.0)	(50.0)	(100.0)
	9.0		192.0	0 1	201.1
Tota	9.0		268.7	234.2	511.9

Notes to the consolidated financial statements

At 28 February 2013

20 Financial liabilities (continued)

	Within	1-2	2-5	Over
	1 year	years	years	5 years	Total
Year ended 1 March 2012	am	Em	Em	Sim	2m
Fixed rate	11	-		257.5	257,5
Fixed to floating rate swaps		-	-	(50.1)	(50.1)
Floating to fixed interest rate swaps	100.0	-	50.0	50.0	200.0
	100.0		50.0	257 4	407 4
Floating rate	14.2	. +	272.9		287.1
Fixed to floating rate swaps		4	-	50.1	50.1
Floating to fixed interest rate swaps	(100.0)	11	(50.0)	(50.0)	(200,0)
	(85.8)	-	222.9	0.1	137.2
Total	14.2	-	272.9	257 5	544.6

Maturity analysis is grouped by when the debt is contracted to mature rather than by repricing dates, as allowed under IFRS.

The swaps with maturities beyond the life of the current revolving credit facilities (2016) are in place to hedge against the core level of debt the Group will hold.

The carrying amount of the Group's borrowings is denominated in sterling and US dollars.

At 28 February 2013, the Group had available £405.0m) of undrawn committed borrowing facilities in respect of revolving credit facilities on which all conditions precedent had been met.

21 Movements in cash and net debt

Year ended 28 February 2013	1 March 2012	Cost of borrowings	Gash flow	Foreign exchange	Fair value adjustments to oans	Amortisation of premiums and discounts	28 February 2018
	Am	am	2m	Am	Sm	Sm	Sm
Cash at bank and in hand	40.3						39.2
Short-term deposits	l						1.6
Overdrafts	(0.7)						=
Cash and cash equivalents	39.6		0.4	0.8	-		40.8
Short-term bank borrowings	(13.5)	15	4.5			ﺑﻪ	(9.0)
Loan capital under one year	+
Loan capital over one year	(530.4)						(502.9)
Total loan capital	(530.4)		32.0		(3.1)	(1.4)	(502.9)
Net debt	(504.3)		36.9	0.8	(3.1)	(1.4)	(471.1)

Notes to the consolidated financial statements

At 28 February 2013

21 Movements in cash and net debt (continued)

Year ended 1 March 2012	3 March 2011	Cost of borrowings	Cash flow	Foreign exchange	Fair value adjustments to oans	Amortisation of premiums and discounts	1 March 2012
	Em	Sm	200	2m	2m	Sm	Em
Cash at bank and in hand	38.2						40.3
Overdrafts	(4.0)						(0.7)
Cash and cash equivalents	34.2		5.3	0.1			39.6
Short-term bank borrowings			(13.5)			4	(13.5)
Loan capital under one year	(0.2)						-
Loan capital over one year	(521 8)						(-30.4)
Total loan capital	(522.1)	5.4	(5 8)	-	(6.4)	(1.5)	(530.4)
Net debt	(487.9)	5.4	(14.0)	0.1	(6.4)	(1.5)	(-104-3)

22 Provisions

	Onerous contracts	Reorganisation Em	Other £m	Total Em
	2m
At 3 March 2011	36.8	1.2	7.2	45.2
Created	11.0		-	11.0
Unwinding of discount rate	0,8	-	-	0.8
Utilised	(8.0)	(1.2)		(9.2)
At 1 March 2012	40.6	-	7.2	47.8
Created			0.3	0.3
Unwinding of discount rate	1.1			1.1
Utilised	(6.2)		(0.1)	(6.3)
At 28 February 2013	35.5	1	7,4	42.9
Analysed as:
Current	108	-		10.3
Non-current	25.2	4	7.4	32.8
At 28 February 2013	35.5		7.4	42.9
Analysed as:
Current	10.7			10.7
Non-current	29.9		7.2	37.1
At 1 March 2012	40.6		7.2	47.8

Notes to the consolidated financial statements

At 28 February 2013

22 Provisions (continued)

Onerous contracts

Onerous contract provisions relate primarily to property reversions. Provision is made for rent and other property related costs for the period that a sublet or assignment of the lease is not possible. Where the properly is deemed likely to be assigned, provision is made for the best estimate of the reverse lease oremium payable on the assignment. Where the property is deemed likely to be sublet, the rental income and the timing of the cash flows are estimated by both internal property specialists and a provision is maintained for the cost incurred by the Group

Onerous lease provisions are discount rate of 3.74% (2012: 3.74%) based on an approximation for the time value of money. The amount and timing of the cash outhows are subject to variations. 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 25 years.

Other

Other provisions relate to warranties given on the disposal of businesses. These are expected to be four years.

23 Financial risk management objectives and policies

The Group's principal financial instruments, other thank bans, private placement loans, cash and short-term deposits. The Group's financial instrument policies can be founding policies in note 2. The Board agrees policies for managing the risks summarised helow:

Interest rate risk

The Group's exposure to market isk for changes in interest rates primarily to the Group's long-term sterling debt obligations. Interest rate swaps are used to achieve the desired mix of fixed and floating rate debt in conjunction with private placement (oan notes. The Group's policy is to fix, on a long-term basis, between 35% and 65% of projected net interest cost. This policy reduces the Group's exposure of interest rate fluctuations. At the year-end, £310.8m (61.8%) of Group debt was fixed for an average of 6.87 years at an average interest rate of 5.1% (2012: £407 4m. 74 8%, for 5.50 vears, at 5.9%).

Although the private placement toan notes are US dollar denominated, cross-currency swaps mean that the interime only.

in accordance with IFRS 7 the Group has undertaken senativity analysis on its financial instruments writch are affected by changes in interest rates, This analysis has been propared on the basis of a constant arnount of net debt, a constant ratio of fixed to the basis of the hedging instruments in place at 28 February 2013 and 1 March 2012 respectively, the analysis relation 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 derivalive 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 income statement in line with the accounting policies set out in note 2. and
• cash flow hedges were effective.

Based on the Group's net debt position at the year end, a 1 ppt change in interest retes would affect the Group's profit before tax by approximately £1.9m (2011/12 £1.3m) and equity by approximately £6.6m (2012/ £7.8m).

Liquidity risk

in its funding strategy the Group's colence between the continuity of funding and flexibility through the use of overdrate and bank loans. This strategy includes monitoring the maturity of financial liabilities to avoid the risk of a shortege of funds.

Excess cash vsed in managing liquidity is placed on interest-bearing deposit with maturifies fixed at no more than three months. Short-term (lexibility 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 28 February 2013 and 1 March 2012 based on contractual undiscounted payments, including interest:

Notes to the consolidated financial statements

At 28 February 2013

23 Financial risk management objectives and policies (continued)

28 February 2013	Om demand	Less than 3 months	3 - 12 months	1 - 5 years	More than 5 years	Total
	200	201	ann	2 m	2m	277
Interest-bearing loans and borrowings	9.0	0.4	11.7	316.5	25313	596.9
Derivative financial instruments	1	23	2.3	16.2	9.1	29.9
Trade and other payables	6:	159.22		17.6	t	176.8
Accrued financial liabilities			113.6	1		113.6
Provisions in respect of financial liabilities		2.6	7.7	14.7	172	42.2
	9.0	164.5	135.3	365.0	285.6	959.4

1 March 2012	3 Sess than 3 demand montas		3 - 12 months	7 - 5 vears	More than 5 vears	Tota
	भा	Sm	Sm	201	2m	Em
Interest-bearing loans and borrowings	14.2	0.7	12.7	3228	298.0	648.2
Derivative financial instruments		3.8	3.3	13.7	7.6	27.9
Trade and other payables	t	1593		16.4	-	175.7
Accrued financial liabilities			105.5			105.5
Provisions in respect of financial liabilities		2.7	8.0	18.5	18.6	47.8
	14.2	166.0	129.5	371.2	324.2	1 005 1

Credit risk

There are no significant concentrations of credit risk within the Group.

The Group is exposed to a small amount of credit is primarily altribulable to its trade and other receivebles. This is minimised by dealing with counterparties with high crecit ratings. The amounts included in the balances for coubtful debt, which have been estimated by management based on prior experience and known factors at the balance sheet date which may incicate that a provision is required. The Group's maximum exposure on its trade and other receivables is the carrying amount as disclosed in note 18.

With respect to credit risk arising from the other financial assels of the Group, which comprise cash and cash exposure arises from default of the counterpary, with a maximum exposure equal to 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.

In the event that any of the Group's banks get into lines 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 counterparities and by maintaining headroom.

Foreign currency risk

Foreign exchange exposure is currently not significant to the Group has US dollar denominated ban 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 indertake hedging activities as and when they are regured.

Notes to the consolidated financial statements

At 28 February 2013

23 Financial risk management objectives and policies (continued)

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 railio of debt to equility that balances risks and relums and also complies with lending coverants. See pages 30 to 33 of the Annual Report and Accounts of Whitbread PLC for the policies and objectives of the Board regarding captial management, analysis of the Group's credit facilities and financing plans for the coming years.

The Group aims to maintain sufficient functs for working capital and future investment in order to meet growth targets. The Group has adopted a framework to keep leverage (debt divided by EBITDAR) on a pensions lease at 3.5 times or below which was achieved to the year ended 28 February 2013. This calculation takes account of net debt, pensions deficit and the capital value of leases. The management of equily through share buy backs and new issues is considered as part of the overall leverage framework balanced against the future growth. In addition the Group may cary out a number of small sale and leaseback transactions to provide further funding for growth.

The Group's financing is subject to financial covenants relate to the measurement of EBITDA against consolidated net finance charges (interest cover) and total net debt (leverage ratio, on a not adjusted for pensions and property leases basis). The Group has complied with all these covenants.

The above matters are considered at regular interness planning and budgeting processes. In addition, the Board regulary reviews the Group's dividend policy and funding strategy.

24 Financial instruments

Fair values

As in the prior year the tair value of financial assets and liabilities disclosed in notes 16,18,19,20,21,22 and 25 are considered the same as their carrying amounts.

The fair value of loan capital and derivative instruments is calculated by discounting all tuture cash flows by the market yield curve at the balance sheet date.

Hierarchical classification of financial assets and liabilities measured at fair value

IFFRS 7 requires that the classification of financels at fair value be delermined by reference to the source of inputs used to derive the fair value. The classification uses the following three-level hierarchy:

Level 1

Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2

Other techniques for which all inputs which have a signiticant effect on the recorded fair value are observable, either directly.

Level 3

Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

Notes to the consolidated financial statements

At 28 February 2013

24 Financial instruments (continued)

	Level 1	Level 2	Level 3	Total
28 February 2013	237	Sm	200	2m
Financial assets
Derivative financial instruments		8.5	:	8.5
Financial liabilities
Derivative financial instruments		28	+	23.3
	Leve 1	Laval 2	Level 3	Total
1 March 2012	Em	Sm	Sm	2m
Financial liabilities
Denvative financial instruments	1	26.7	수	26.7

During the year ended 28 February 2013 there were no transfers between levels 1, 2 or 3 fair value measurements. Derivative financial instruments include £7 1m assels (2012: £nil) and £18.7m liabilities (2012: £20.1m) due after one year. There are no material differences between the carrying values and fair values of derivative financial instruments.

Derlyative financial instruments

Hedges

Cash flow hedges

At 28 February 2013 the Group had interest rate swaps in place to swap a notional amount of £100.0m (2012: £200.0m) whereby it reseives valiable interest rates based on LIBOR on the notional amount and pays fixed rates of between 5.145% and 5.372% (2012: 5.145% and 7.643%), The swaps are being used to hadge the exposure to changes in future cash flows from variable rate debt. The Group also had cross currency swaps, in place whereby it receives fixed interest rates of between 3.92% and 4.86% (2012. 3.92% and 4.86%) on a notional amount of US\$210.000 (2012: US\$210.0m) and paid an average of 4.72% on a notional sterling balance of £158.2m (2012: 4.72% on £158.2m).

The swaps with maturities beyond the of the current revolving credit facilities (2016) are in place to hedge against the core lovel of debt the Group will hold.

Fair value hedges

At 28 February 2013, the Group had cross-currency it received a fixed interest rate of 5.23% (2012: 5.23%) on a notional amount of US\$75.0m (2012: US\$75.0m) and paid a spread of between 1.715% and 1.75% and 1.75% and 1.75%) over &m GBP LIBOR on a notional sterling balance of £50.1m (2012 £50.1m).

Cash flow and fair value hedges are expected to impact on the income statement in line with the Ilquidity risk table shown in note 23.

The cash flow hedges were assessed to be highly effective at 28 February 2013 and a net unrealised gain of 23.3m (2011/12: nel unrealited loss of E1.0m) has been recorded in other comprehensive income. The fair value hedges were also assessed to be highly effective at 28 February 2013 with a credit of £0.4m recorded within finance revenue in the income statement (2011/12; £0.7m). During the year, a loss of £7.0m (2011/12: £15.9m) vas charged to the income statement in respect of hedged items affecting the net finance charge for the vear.

Notes to the consolidated financial statements

At 28 February 2013

25 Trade and other payables

	2013	2012 Em
	இரா
Trade payables	111.6	116.1
Other taxes and social security	39.6	36.4
Deferred income	35.2	20.1
Accruals	113.6	94.4
Amounts owed to parent undertakings	140.1	206.7
Other payables	65.0	59.4
	505.1	533.1
Analysed as:
Current	487.5	516.7
Non-current	17.6	16.4
	505 1	522 1

26 Share capital

	2018	2012
Allotted, called up and fully paid	2m	Sm
"A" Ordinary shares of 25 pence each (2012: 25 pence each)	11.0	11.0
Ordinary shares of 25 pence each (2012: 25 pence each)	122.7	122.7
	1887	1 € 3,7
Number of "A" ordinary shares in issue (m)	44.0	44.0
Number of ordinary shares in issue (m)	490.6	490.6
Total shares in issue (m)	534 6	534.6

The "A" shares have the same rights and rank equally with the ordinary shares, save that:

i. a holder of "A" shares shall, on return of a winding-up or otherwise, be entitled to participate proportionately in the suplus assets of the Company remaining after the payment of its liabilities provided that the maximum extent of such participation shall be the amount paid up, credited as paid up, on such shares at the time of the return of assets;

li. a holder of "A" shares has no right as such to receive notice of or attend or vote at any general meeting of the Company unless a resolution to vary or abrogate the rights attaching to such shares as proposed; and

ili. a holder of "A" shares is not entitled to any dividend or any other distribution (except as provided for in (i) above),

Notes to the consolidated financial statements

At 28 February 2013

27 Reserves

Nature and purpose of reserves

Share capital

Share capital comprises the nominal value of the Company's ordinary shares of 25 pence each.

Share premium

The share premium reserve is the premium paid on the Company's 25 pence ordinary shares.

Retained earnings

In accordance with IFRS practice, retained earnings include revaluation reserves which are not distributable under UK law.

Currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the financial statements of forelgn subsidiaries and other foreign currency investments.

Hedging reserve

This reserve records movements for effective cash flow hedges measured at fair value.

ESOT shares

This reserve ralates to shares teld by an independently managed employee share ownership trust (ESOT). The shares hald by the ESOT were purchased in order to satisiy outstanding employee share options and potential awards under (LTP) and other incentive schemes,

The movement in ESOT shares during the year is set out in the table below:

		ESOT shares held
	million	Ein
At 3 March 2011	0.9	12.2
Transferred	0.1	2.1
Purchased	0.3	5.2
Exercised during the year	(0.4)	(5.8)
At 1 March 2012	0.9	13.7
Transferred	03	5.1
Purchased	0.1	3.2
Exercised during the year	(0.2)	(3.6)
At 28 February 2013	1.1	19.4

The ESOT shares reduce the amount of reserves available for distribution to shareholders by £18.4m (2012: £13.7m).

Notes to the consolidated financial statements

At 28 February 2013

28 Commitments and contingencies

Operating lease commitments

The Group leases various buildings which the Hotels & Restaurants and Costa businesses. The leases are non-cancellable copeating leases with varing terms, escalation clauses and renews incus plant and equipment under non-sancellable operating lease agreements.

Contingent rents are the portion of the is not fixed in amount but based upon the future amount of a factor than with the passage of time (e.g. percentage of future sales, amount of future price indices, future market rates of interest)

Future minimum rentals payable under non-cancellable operating leases on an undiscounted basis are as follows:

	2017	2012
	200	2m
Due within one year	163-1	132.1
Due after one year but not more than five years	-134-6	465.5
Due after five years but not more than ten years	5021	392.3
Due after ten years	1,240.7	896.3
	2,460.5	1,987.2

Future minimum rentals payable under non-ancellable speating leases disclosed above includes £123.0m in relation to privity contracts (2011/12. £1.27.7m). Future lease cosis in respect of these privity contracts are included within the onerous contracts provision (note 22). Onerous contracts are under constant review and every effort is taken to reduce this obligation.

The weighted average lease life of future minimum rentals payable under non-carcellable operating leases is 14.7 years).

Group companies have sublet space in certain properties. The future minimum sublease payments expected to be received under non-cancellable sublease agreements as at 28 February 2013 are £11.8m (2012; £16.6m).

Contingent liabilities

In the financial year ended 3 March 2011 the Group received a £4.6m refund of VAT charged on gaming machine income, together with associated interest of £0,7m. The refund was made following a ruling that the application of VAT to certain types of gaming machine incorne contravened the European Union's principle of fiscal neurality. HMRC have appeal is upheld the ruling and it HMRC's appeal is upheld the refund and associated interest of £5.3m would be repayable.

29 Share-based payment plans

Long-Term Incentive Plan (LTIP)

The LTP awards shares to directors and series of the Group. Vesting of shares under the scheme will depend on continued employment and meeting total shareholder return (TSR), earnings per share (EPS) performance and return on capital employed (ROCE) targels over a three-year period. Details of the performance targets for the LTP awards can be seen in the Annual Report and Accounts of Whitbread PLC for the year ended 28 February 2013.

The awards are settled in equity once exercised.

Notes to the consolidated financial statements

At 28 February 2013

29 Share-based payment plans (continued)

Movements in the number of share awards are as follows:

	AUTO	2016
	Awards	Awards
Outstanding at the beginning of the year	888,885	701,386
Granted during the year	339,816	336,402
Exercised during the year	(227,087)	(115,735)
Expired during the year	(42,740)	(33,168)
Outstanding at the end of the year	958,874	888,885
Exercisable at the end of the year	119,293

Deferred equity awards

Awards are made under the Whitbread Leadership Group Incentive Scheme implemented during 2004/5.

The awards are not subject to periormance conditions and will vest in full on the release date subject to continued employment at Ihat date. It he director or senior executive of the Group ceases to be an employee of Whitaread prochally three years after the award, by reason of redundancy, relirement, death, injury, ill health, disability or some other reason considered to be Remuneration Committee, the awards will be released in full. It employnent ceason the proportion of awards which vests depends upon the year in which the award was made and the date that employment ceases in the first year after an award is made none of the award vests, between the first and second anniversary 25% vests and between the second and third anniversary 50% vests.

Movements in the number of share awards are as follows!

	2013	2012
	Awards	Awards
Outstanding at the beginning of the year	393,243	406.878
Granted during the year	154,203	302.014
Exercised during the year	(13,751)	(313,861)
Expired during the year	(29,808)	(1,788)
Outstanding at the end of the year	503,887	393,243

Exercisable at the end of the year

Notes to the consolidated financial statements

At 28 February 2013

29 Share-based payment plans (continued)

Employee share scheme

The employee Sharesave Scheme is open to employees with the required minimum period of service and provides for a purchase price equal lo the market price on the date of grant. The shares can be purchased over the six-morth period following the third or fifth anniversary of the commencement date, depending on the length chosen by the employee.

Movements in the number of share options and the related weighted average exercise price (WAEP) are as follows,

		2013		2012
		WAEP		WAEP
	Options	£ per share	Options	£ per share
Outstanding at the beginning of the year	1,160,139	11.91	1,304,032	9.74
Granted during the year	399,084	19.14	5 4.594	13.39
Exercised during the year	(221,547)	9.85	(455,411)	7.53
Expired during the year	(212,168)	15.5	(202,076)	11.55
Qutstanding at the end of the year	1,125,508	16.77	1,160,139	11.9
Exercisable at the end of the year	15,881	10 44	52,036	7.46

The weighted average contractual life for the share opions outstanding as at 26 February 2013 is between two and three years. Oulstanding options to purchase ordinary shares of 76.80 pence between 2012 and 2017 are exercusable at prices between 27.28 and £19.14 (2012. between 2011 and 2016 at prices between £7.28 and £14.17). The fair value of share oplined is estimated as at the date of grant using a stochastic model, taking into account the terms and conditions upon which the options were granted.

The waighted average share price at the date of exercise for employee share scheme options exercised during the year was £24,51 (2012. £16.68).

Total charged to the income statement

	2012/13	2011/12
	Em	£m
Long-Term Incentive Plan	4.1	2.4
Deferred equity	3.5	3.7
Employee share scheme	1.9	1.9
	9.5	8.0
Equity-settled	92	7.9
Cash-settled	0.3	0.1
	9.5	8.0

Notes to the consolidated financial statements

At 28 February 2013

29 Share-based payment plans (continued)

The following table ilsts the inputs to the model used for the years ended 28 February 2013 and 1 March 2012:

		Grant Number of	Fair	Fair	Exercise	Price at	Expected	Expected	Expected	Risk-free	Vasting
	date	shares	value	value	price	grant date	term	dividend yield	volallity	rate	concil or s
		grented	ಕ್ಕೆ	2	8	ਦੇ	(years)	9%	ಳಿಕ	ళం
Lanp awards	19.05.2012	339 816	91.4	6,109,341		19.67	3.00	3.00	n/a	na	Non-market 23,4
	09.05.2011	168,201	44.1	1,220,271	. .	16.45	3.00	2.71	37.00	1 33	Market 1.3
	09.05.2011	168,201	82.2	2,551,228		16.45	3.00	2 71	37.00	1.35	Non-market 2.3
Deferred equity	26.04 2012	154,203	91.4	2,707,487	-	19.21	3.00	3.00	n/a	n/a	Servica 9
aveards	09.05.2011	302,014	92.2	4,580,888	4	16.45	3.0.0	2.71	37.00	1.33	Service 3
SAYE - 3 years	30,11,2012	335,917	23.0	1,853,489	19 14	20.99	3.25	2.50	25 00	0.46	Service "
	02.12.2011	425,494	27 4	1.912,000	13 39	16.42	3.25	3.10	36.00	0.50	Service 3
SAYE-5 yours	30-11-2012	Ex 167	24.5	377,720	18.14	ਟਰ ਭੇਰ	રે રહે	2.50	25.00	0.92	Service S
	02.12.2011	89,100	33.1	483,600	13 39	18.42	5,25	3.10	35.00	1 10	Service 3

Total shareholder return (TSR)

² Earnings per share

3 Employment service

4 Return on capital employed

Expected volatility reflects the assumption that his indicative of future tends, which may not necessarily be the actual outcome.

The risk-free rate is the rate of interest obtainable from government securities over the expected iffe of the equity incentive.

The expected dividend yield is calculated on the basis of publicly available information at the time of the grant date which, in most cases, is the historic dividend yield.

No other features relating to the granting of options were incorporated into the measurement of fair value.

Employee Share Ownership Trust (ESOT)

The Company funds an ESOT to enable it to acquire and hold shares for the LTP and executive share option schemes. The ESOT held 1.1m shares at 28 February 2013 (2012: 0.9m). All dividends on the ESOT are waived by the Trustee.

Notes to the consolidated financial statements

At 28 February 2013

30 Retirement benefits

Defined contribution schemes

The Group operates a contracted in deline under the Whitbread Group Pension Fund. Contributions by both employees and Group companies are held in externally invested turds. The Group also has a contracted-out defined contribution pension scheme which was wound up during 2012.

The Group contributes a specified percentage of earnings for members of the above delined contribution schemes, and thereatler has no further obligations in relation to the schemes. The total cost charged to income in relation to defined contribution schemes in the year was £4.1m (2011.12: 23.8m),

At the year end, 2,897 employees (2012: 1,812) were active members of the scheme, which also had 4,104 deferred members (2012: 6,777).

Defined benefit schemes

The defined benefit (final salary) section of the principal Group Pension scheme, the Whitbread Group Pension Fund, was closed to new members on 31 December 2001 and to future actual on 31 December is funded, and contributions by both employees and Group companies are held in externally invested tustee-administered funds. Members of the scheme are contracted out of the State Second Pension.

At the year-end the scheme had no active members (2012: 25,500) and 16,662 persions in payment (2012: 16,511).

A scheme spectific actuarial valuation for the level of cash contributions to be paid into the Whittered Group Pension Fund was undertaken as at 31 March 2011. A deticit recovery plan and some remains in deficit have been agreed with the Trustee. The Group made a £35m payment in 2012/13 and will make the following payments to the Fund: £55m in August 2013, £65m in each of August 2014 and August 2015; 270m in August 2017 and £75m in August 2018, For the period of the deficit, the Group has agreed to give undertakings to the Trustee similar to some of the covenants provided in respect of its banking agreements, up to the value of any outstanding recovery plan payments or the remaining delicit, if lower. Until the Trustee has also been given a promise of participation in increases in ordinary divise exceed RPI and the right to consultation before any special distribution can be made.

In addition to the scheduled delicit contribution payments described above, the Pension Scheme will receive a share of the income profits and a variable capital payment from is investment in Moorgate Scottish Limited Partnership (SLP), which was established by the year ended 4 March 2010 the share in profits is acounted for by the Group as contributions when paid). The partnership interests in Moorgate SLP are held by the Group, the general partner and by the Pension Scheme.

Moorgate SLP holds an investment in a faringdon Scottish Partnership (SP), which was also established by the Group during 2009/10. Proparty assets with a market value of £221m have been transferred from other to Faringdon SP and leased back to Whitbread Group PLC and Premier Inn Hotels Limited. The Group retains control over these properties, including the flexibility to substitute allernalive properties. However, the Truster has first charge over the property portfolio and certain other assets with an aggregate value of £228m. The Group retains control over both partnerships and as such they are fully consolidated financial statements.

The Pension Scheme is a partner in Moorgate SLP and, is entitled to an annual share of the partnership over the nat 12 years. At the end of this period, the perhership capital allocated to the Pension Scheme partner will, depending on the funding position of the Pension Scheme at that time, be transferred in cash to the Pension Scheme up to a value of £150m (2012: £150m).

Under JAS 19 the investment held by the Pension Scheme in Morgate SLP, a consolidated entity, does not represent a plan asset for the purposes of the consolidated financial statements. Accordingly the persion in these consolidated financial statements does not reflect the £14 m (2012: £141m) investment in Moorgate SLP held by the Pension Scheme.

During the year the Group agreed to enter into a charge in favour of Whitbread Pension Trustees Limited over properties with a market value totalling £180m at that date which was completed on 17 April 2013. The charge was to secure the Group to make payments to the Fension Fund as part of the recovery plan to reduce the mith the properties secured as a consequence of the arrangement in the Sottish Limited Partnerships, secures properties totalling £408m in favour of the pension scheme.

The total service cost contributions to the Whitbread Group Pension Fund in 2013/14 will be £nil.

Notes to the consolidated financial statements

At 28 February 2013

30 Retirement benefits (continued)

The IAS 19 pension cost relating to the defined benefit section of the Whitbread Group Pension Fund is assessed in accordance with actuarial advice from Lane, Clark & Peacock and Towers Walson, using the projected unit credit method. As the scheme is now is be will be no service cost in the future.

The principal assumptions used by the independent qualified actuation, carried out as at 31 March 2011, of the UK schemes to 28 February 2013 for IAS 19 purposes were:

	At	At
	28 February	1 March
	2018	2012
	%	%
Pre-April 2006 rate of increase in pensions in payment and deferred pensions	320	3.00
Post-April 2006 rate of increase in pensions in payment and deferred pensions	220	2.20
Pension increases in deferment	8 200	3.00
Discount rate	4.60	4.65
Inflation assumption	3.35	3.15

The morality assumptions are based on started in allow for future mortality improvements. The assumptions are that a nember currently aged 65 will live on average for a futher 20.9 years (2012; 20.8) it they are male and for a further 23.4 years (2012; 23.4) it they are innise. For a member who relies in 2032 at age 65, the assumptions are that they will live on average for a further 22.7 year (2012); 22,6) a fither retirement if they are male and for a further 25.2 years (2012: 25.1) after retirement if they are female,

The Group employs a building block approach in delemining the long-lerm rate of return on pension plan assets. Historical markets are studied and assels with higher volatily are assumed to generate higher returns consisted with widely acceptal market principles. The assumed ing-term rate of return on each asset class is set out within this note. The of return on essess is then clerined by aggregation the presel in return for each actual asset allocation for the Fund at 28 February 2013 (rounded to the nearest 0.1% per annum).

Notes to the consolidated financial statements

At 28 February 2013

30 Retirement benefits (continued)

The amounts recognised in the income statement in respect of the defined benefit scheme are as follows:

Amounts recognised in operating profit for service costs or curtailment are £mil (2011/12: £nil).

	201748 K	2011/12/2
	Sina	2m
Expected return on scheme assets	(70.4)	(81.6)
Interest cost on scheme liabilities	88.4	05-8
Other finance cost (note 8)	18.0	14.0
The amounts taken to the consolidated statement of comprehensive income are as follows:
	2012/13	2011/12
	Sm	Em
Actual retum on scheme assets	174.4	66.7
Less: expected return on scheme An 40 . 16 . 00	(70.4)	(81.6)
Other actuarial gains and losses	(74.70)	(1772)
	29.3	(192.1)

Actuarial gains and losses have been recognised in the consolidated statement of comprehensive income.

The amounts recognised in the balance sheet are as follows:

	2013	2012
	Em	Em
Present value of defined benefit obligations	(2,021.6)	(1,939.7)
Fair value of scheme assets	1,479.9	1,341.0
Liability recognised in the balance sheet	(541.7)	(598.7)

During the year the accounting deficil decreased from £598.7m at 1 March 2012 to £541.7m at 28 February 2013. The principal reason for this reduction was the actual asset performantly better than expected while actual pension increases were also bwer than assumed,

Changes in the present value of the defined benefit obligation are as follows.

	2013	2012
	217	200
Opening defined benefit obligation	1,939.7	1,745.0
Net interest cost	BB 4	95.6
Actuarial losses on scheme liabilities	74.7	177.2
Benefits paid	(61.1)	(77.6)
Benefits settled by the Company in relation to an unfunded pension scheme	(0.1)	(0.5)
Closing defined benefit obligation	2,021.6	1.939.7

Notes to the consolidated financial statements

At 28 February 2013

30 Retirement benefits (continued)

Changes In the fair value of the scheme assets are as follows:

	2018	2012 am
	200
Opening fair value of scheme assets	1,341.0	1.257.0
Expected return on scheme assets	70.4	81.6
Actuarial gains / (losses) on scheme assets	104.0	(14.9)
Contributions from employer	372	86.8
Additional contributions from Moorgate SLP	8.4	8.1
Benefits paid	(81.1)	(776)
Closing fair value of scheme assets	1,479.9	1,341.0

The analysis of the scheme assets and the expected rate of return at the balance sheet date were as follows:

	Expected return		Fair value of assets
	2013	2012 % 9/8			2013		2012
			Ern	am
Equities	n/a	7.2	868.5	727.3
Government bonds	n/a	3.2	317.1	374.8
Corporate bonds	n/a	4.6	173.5	131.3
Property	n/a	5.7	68.6	45 8
Cash	n/a	3.2	52.2	61.8
			1.47.9	1.341.0

As the Group is adopting IAS 19 (2011) from 1 March 2013, there are no expected relum on asset assumptions (and consequently no weighted average expected rate of return on the assel at 28 February 2013, as these will no longer be required. Expected may will be replaced by recording interest income, calculated by using the discount rate used to measure the pension obligation.

History of experience gains and losses:

	2018	2012	2011	2010	2009
Present value of defined benefit obligations (£m)	(2,021.6)	(1,989.74)	(1,745.0)	(1,715.0)	(1,340.0)
Fair value of scheme assets (Em)	1,479.9	1,341.0	1,257.0	1,281.0	1,107.0
Liability recognised in the balance sheet (£m)	(541.7)	(598.7)	(488.0)	(434.0)	(233 0)
Experience adjustments on scheme liabilities (Em)	5.8	12.8	(25.8)	(3.0)	(7.5)
Percentage of scheme liabilities (%)	(0.26)%	(0.66)%	1.48%	0.17%	0.60%
Experience adjustments on scheme assets (£m)	104.0	(14.9)	(39.6)	173.0	(338.0)
Percentage of scheme assets (%)	74085%	(1.11)%	(3.15)%	13.51%	(30.50)%

The cunulative amount of actuarial gains and losses recognised since 4 March 2004 in the consolidated statement of come is £(599.8)m (2012: £(629.1)m).

The assumptions in relation to discount rate and mortally 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

	2013 277	2012 am
0.25% increase to discount rate	83.0	80.0
Additional one-year increase to life expectancy	(70.0)	(70.0)

Notes to the consolidated financial statements

At 28 February 2013

31 Related party disclosure

The Group's principal subsidiaries are listed in the following table:

	Principal activity		ം ജനന്ദു സ്വീതിലൊന്നു ഗ്രീലോ held
Principal subsidiaries		Country of Incorporation	2018	2012
Premier Inn Hotels Limited	Hotels	England	109.0	100.0
Whitbread Restaurants Limited	Restaurants	England	1000	100.0
Premier Inn Limited	Hotels	England	100.0	100.0
Costa Limited	Operators of coffee shops and roasters and wholesalers of coffee beans	England	100-0	1000
Yueda Costa (Shanghai) Food & Beverage Management Company Limited	Operators of coffee shops	China	-31.0	51.0
Coffeeheaven International Limited	Operators of coffee shops in eastern Europe	England	100.0	10.000
Coffee Nation Limited	Operators of customer facing espresso based coffee vending machines	England	10.0.0	100.0

The Group holds a 6% partnership interest in Moorgale Scottish Limited Partnership with Whitbread Pension Trustees. Morgate SLP holds a 67.8% investment in a further partnership, Farringship which was established by the Group to hold propenty assets. The partnerships were set up in 2009/10 as part of a transaction Trustees and the Group retains control over both partnerships and as such they are fully consolidated in these consolidated financial statements. Further details can be found in note 30.

Shares in Whitbread Group PLC are held directly by Whitbead PLC. Shares in the other subsitiation are held by Whitbread Group PLC. All principal subsidiary undertakings have the same year end as Whitbread PLC, with the exception of Yueda Costa (Shanghai) Food & Beverage Management Company Limited which has a year end of 31 December as required by Chinese legislation. All the above companias have been included in the Group consolidation. The companies listed above are those which materially affect the amount of profit and the assets of the Group.

Related party	Sales to related party am	Amounts owed by related party related party Sim	Amounts owed to 2011
Joint ventures
2012/13	2.7	1.2
2011/12	2.8	13
Associate
2012/13	3.1	0.4	m
2011/12	3.1	+	2.5

Compensation of key management personnel (including directors):

	2017-11-21	2018/07/2
	£m	am
Short-term employee benefits	5.0	4.4
Post-employment benefits	0.2	0.9
Share-based payments	4_2	5.5
	9.4	10.2

Notes to the consolidated financial statements

At 28 February 2013

31 Related party disclosure (continued)

Joint ventures

For details of the Group's investments in joint ventures see note 14.

Associate

For details of the Group's investment in associate see note 15.

Terms and conditions of transactions with related partles

Sales to and purchases from related parties are made at normal market prices. Outstances at year end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables. For the year ended 28 February 2013, the Coup has not raised a provision for doubtul debts relains owed by related parties (2012. Enli). An assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Transactions with other related parties

Details of transactions with directors are detailed in the remuneration report in the Annual Report and Accounts of Whibread PLC for the year encled 28 February 2013.

Company Report and Accounts 28 February 2013

Directors' responsibility for the Company financial statements

Statement of directors' responsibilities

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare Company financial statements for each financial year. Under that law the directors have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law),

Under company law the directors must not approve the Company financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the profit or loss of the Company for that period. In preparing those Company financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the Company financial statements; and

· prepare the Company financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Independent auditor's report to the members of Whitbread Group PLC

We have audited the parent Company of Whilbread Group PLC for the year ended 28 February 2013 which comprise the Balance Sheet and the related ndes 1 to 19 The financial reporting framework that has been applicable law and United Kirgdom Accounted and the leads (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company's members, as a body. in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to been in and in no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to aryone other than the Company and the Company and to members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and of auditor

As explained more fully in the Directors' Responsibilities Siatement set out above. the directors are responsible for the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to such and express and origin on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those of ard not require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the Company financial statements

An audit involves obtaining evidence about the amounts and disclosures in the innancial statements sufficient to give reasonable assurance that the linancial statements are from material misstationent, whether caused by fraud or error This includes an assessment of who the counting policies are appropriate to the Company's circumstances and have been consistently disclosed, the reasonal for any the accounting estimates made by the directors, and the overall presentation of the consolidated financial statements.

In addition, we read all the financial information in the Consulidated Report and Accounts to identify material inconsistencies with the audited consolidated financial siatements of any apparent material missatements or inconsistences we consider in inconsistences we consider in inconsistences we consider in i for our report.

Opinion on financial statements

In our opinion the parent company financial statements:

• · give a true and fair view of the state of the Company's affairs as at 28 February 2013;
• · have been properly prepared in accordance with United Kingdom Generally Accounting Practice: and
• · have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Directors' report for the financial statements are prepared is consistent with the parent company financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company or returns adequate for our audit have not been received from branches not visited by us: or

• · the parent company financial statements are not in agreement with the accounting records and returns; or
• · certain disclosures of directors' remuneration specified by law are not made; or
• · we have not received all the information and explanations we require for our audit.

Other matter

We have reported separately on the consolicated linancial statements of Whitbread Group PLC for the year ended 28 February 2013.

Emstk Your

Simon O'Neill (Senior statutory auditor) for and on behalf of Emst & Young LLP. Statutory Bimingham 28 August 2013

Balance sheet

At 28 February 2013

		2013	2012
	Notes	2m	Sm
Fixed assets
Intangible assets	5	20.3	12.1
Tangible assets	ੇ ਦ	469.7	463.5
Investment in subsidiaries and associates	7	1,117.9	904.0
Total non-current assets		1,607.9	1,379 6
Current assets
Slock	8	B.B	7.4
Debtors: amounts failing due within one year	g	1,367.4	1,633.7
Cash			0.5
		1,376.2	1,641 6
Current liabilities
Creditors: amounts falling due within one year	10	(225.7)	(216.9)
Net current assets		1,150.5	1,424.7
Creditors: amounts falling due after more than one year	10. 11	(503.9)	(537.1)
Pension deficit	12	(308.5)	(343.3)
Provisions for liabilities and charges	ન કે	(39.8)	(44.2)
		(852-2)	(924.6)
Net assets		1,906.2	1,879,7
Capital and reserves
Share capital	14	183.7	1337
Share premium	15	207.7	207.7
Revaluation reserve	15	17.7	17.2
Retained earnings	15	278.0	252.0
Other reserves	15	1,269.1	1,269.1
Shareholders' funds		1,906,2	1.879.7

Nicholas Cadbury Finance Director

27 August 2013

Notes to the accounts

At 28 February 2013

1 Basis of accounting

The financial statements of Whitbread Group PLC for the year ended 28 February 2013 were authorised for issue by the Board of Directors on 27 August 2013

As permitted by Financial Reporting Standard No 1 (revised) a cash flow statement has not been prepared as the Company is a wholly-owned subsidiary.

The accounts are prepared under the historical cost convention and in accordance with applicable UK Accounting Standards.

2 Summary of significant accounting policies

Turnover and revenue recognition

Turnover is the value of goods and services sold within the UK as part of the Company's continuing ordinary activities after deducting sales based taxes.

Revenue from the sale of food and beverages is recognised when they sold

Hotel revenue is recognised when rooms are occupied.

Intangible fixed assets

Goodwill is the difference between amounts paid on the acquisition of a business and the identifiable assets and libilities. It is amortised to the Profit and Loss Account over its estimated economic life.

Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses

Amortisation is calculated on a straight-line basis over the estimated life of the asset as follows:

· IT software is amortised over periods of three to 10 years.

The carrying value of intangible fixed assets are reviewed for impairment if events or changes incircumstances incircate that the carring value may not be recoverable.

Tangible fixed assets

Prior to the adoption of FRS 15 in the 1999/2000 financial year, properties were regularly revalued on a cyclical basis. Since the adoption of FRS 15, the Group policy has not been to revalue its properies. Consequently, the transitional provisions of FRS 15 have been applied and, while previous valuations have been retained, they have not been updated. Details of the last revaluations are given in note 6. Other fixed assets are stated at cost. Gross interest costs incurred on the financing of major projects are capitalised until the time that they are available for use.

Depreciable fixed assets are written off on a straight line basis over their estimated useful lives as follows:

• · Freehold land is not depreciated.
• · Freehold and long leasehold buildings are depreciated to their estimated residual values over periods up to 50 years.
• · Fixtures furniture and equipment is depreciated over three to 30 years.

The carrying values of property, plant and equipment are revents or changes in changes in circumstances indicate that their carrying values may not be recoverable. Any impairment in the value of property, plant and equipment is charged to the income statement. Profits and losses on disposal of fixed assets rellect the differences between net selling price and nel book value at the date of disposal

Investments

Investments held as lised assets are stated at cost less provincient. The carrying value of investments are reviewed to impairment when avents or changes in circumstances indicate that the carrying amount may not be recoverable.

Stocks

Stocks are stated at the lower of cost and net realisable value.

Leases

Leases where the lessor relains substantially all the risks of ownership of the asset are classified as operating leases. Rental payments in respect of operating leases are charged against operating profit on a straight-line basis over the period of the lease incentives are recognised as a reduction of rental costs over the lease term.

Notes to the accounts

At 28 February 2013

2 Summary of significant accounting policies (continued)

Interest rate swaps

The company uses interest rate swaps to manage exposure to interest rate volatify. The swaps qualify for hedge accounting when they are related to an assel and liability and when the character of the interest rate by converting a variable rate to a fixed rate or vice versa.

Pension funding

In respect of defined benefit pension schemised in the balance sheet represents the presents the present value of the defined benefit obligation as adjusted for any unrecognised past, teduced by the fair value of the scheme assets. The cost of providing benefits is determined using the projected unit credit actuation method. Actuarial gains and losses are recognised in which they occur in the statement of recognised income and expense,

For defined benefit plans, the employer's portion of the past and current service cast is charged to operating profit, with the interest cost net of expected return on assels in the plans reported within other inance costs The expected return on plan assessment made at the beginning of the year of long-term market relums on scheme assets, adjusted for the fair value of plan assets of contributions received and benefits paid during the year.

Curtailments and settlements are recognised in the period in which the curtailment or settlement occurs.

Payments to defined contribution pension schemes are charged as an expense as they fall due.

Provisions for liabilities

A provision is recognised when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.

Deferred taxation

Full provision is made for deferred tax assess and liming differences between the recognition of gains and losses in the financial statements and recognition in the tax computation.

A net deferred tax asset is recognised only if it can be regarded as more likely than not that there will be suitable profits from which the tuture reversal of the underlying timing differences can be deducted.

Deferred tax assets and liabilities are calculated at the tax rates expected to be time timing differences are expected to reverse, using rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and liabilities are not discounted.

Share based payments

Certain employees and directors of the Company received remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares. The cost of equity-selled transactions with employees is measured by reference to the fair value, determined using a stochastic model, at the cate at which they are granted. The cost of equity settled transactions is recognised, together with a corresponding in equity, over the period in which the performance conditions are fulfilled, ending on the relevant vesting date. Except for awards subject to market related conditions for vesting, the cumulative expense recognised for equity-settled transactions at each reporting date rellects the extent to wrich the vesting period has expired, and is adjusted to rellect the directors' best available of the number of equity instruments that will ultimately vest. The profit and loss account charge or croait tor a period represents the movement in cumulative expense recognised as at the beginning and end of that period. If options are subject to market related conditions, awards are not cumulatively adjusted for the likelinod of these targets being met. Instead these conditions are included in the fair value of the awards.

3 Profit earned for ordinary shareholders

The profit and loss account of the parent Company's accounts by virue of the exemption granted by Section 408 of the Companies Act 2006. The loss incurred by ordinated in the accounts of the parent Company anounted to £2.5m (2012: profit of £419.1m).

Notes to the accounts

At 28 February 2013

				4 Dividends paid and proposed
--	--	--	--	-------------------------------

Duidonde naid
	Sm	&m
	2013	2012

5 Intangible assets

	IT software	Goodwill	Total
	Smo	200	2m
Cost
At 3 March 2011	39.9	4,1	44.0
Additions	0.7	+	0.7
Transfers	12.2		12.2
At 1 March 2012	52.8	4.1	56.9
Additions	10.7	-	10.7
Assets written off	(29.5)	-	(59.5)
Transfers	1.8	1	1.8
At 28 February 2013	35.8	4.1	ਦਰ ਰ
Amortisation and impairment
At 3 March 2011	(35.5)	(0.5)	(36.0)
Amortisation during the year	(1.4)	(0.2)	(1.6)
Transfers	(7.2)		(7.2)
At 1 March 2012	(44.1)	(0.7)	(44.8)
Amortisation during the year	(4.1)	(0.2)	(4.3)
Amortisation on assets written off	29.5		29.5
Transfers
At 28 February 2013	(18.7)	(0.9)	(19.6)
Net book value at 28 February 2013	17.1	32	20.3
Net book value at 1 March 2012	8.7	3.4	12.1

Capital expenditure commitments in relation to intangible assets at the year end amounted to Enil (2012. Enil)

Notes to the accounts

At 28 February 2013

6 Tangible fixed assets

	Land & buildings	Furniture, fixtures & equipment	Total
	Sm	Sm	2m
Cast
At 1 March 2012	346.7	198.4	545 1
Additions	8.3	20.7	29.0
Transfers	2.3	(2.1)	0.2
Assets written off		(8.7)	(8.7)
Reclassifications	01	(0.1)
At 28 February 2013	357.4	208.2	565.6
Depreciation
At 1 March 2012	(163)	(65.3)	(81.6)
Depreciation during the year	(2.1)	(18.1)	(20.2)
Transfers		(0.1)	(0.1)
Assets written off		8.7	8.7
Impairment charge	(2.1)	(0.6)	(2.7)
At 28 February 2013	(20.5)	(75.4)	(95.9)
Net book valua at 28 February 2013	336.9	132.8	469.7
Net book value at 1 March 2012	330.4	188.1	463.5

Additions to land and buildings include £0.1m of interest capitalised during the year at an average rate of 4.5% (2012: £0.3m at 5.4%),

If the revaluations up to 1998/99 had not taken place, the net book amounts of fixed assets would have been:

Cost	380.9	208.2	539.1
Depreciation	(20.5)	(75.4)	(95.9)
Net book amounts 28 February 2013	310.4	1328	448.1
Net book amounts 1 March 2012	308 a	133.1	437.0
		2013	2012
		Sm	Em
Capital expenditure commitments for which no provision has been made		6.7	12.1

Notes to the accounts

At 28 February 2013

7 Investment in subsidiary undertakings

	Subsidiary undertakings	Associates	l otal
Shares at cost	Em	Em	2m
At 1 March 2012	903 3	0.7	904.0
Additions	218.9	1	213.9
At 28 February 2013	1,117.2	0.7	1,117.9

Principal subsidiary undertakings	Principal Activity	Country of Incorporation or registration	Country of principal operations	% of equity and votes held
Premier Inn Hotels Limited	Hotels	England	England	100
Whitbread Restaurants Limited	Restaurants	England	England	190
Premier Inn Limited	Hotels	England	England	100
Whitbread Hotel Company Limited	Hotels	England	England	100
Costa Limited	Roasters, wholesalers and retailers of coffee	England	England	100
Milton (SC) 2 Limited	Investment in property partnership	Scotland	Scotland	100
Principal associate	Principal Activity	Country of incorporation or registration	Country of principal operations	% of equilty and votes neld
Morrison Street Hotel Limited	Hotels	Scotland	Scotland	40
8 Stock
			2013	2012
			2m	இ
Finished goods			8.8	7.4
9 Debtors
			2018	20192
Amounts talling due within one year			Sm	Em
Trade Debtors			13.2	8.7
Amounts owed by group and parent undertakings			1,323,0	1,574.4
Other debtors			1.6	0.6
Corporation tax			16.8	38.2
Prepayments and accrued income			12.8	12.1
			1,367.4	1,633,7

Notes to the accounts

At 28 February 2013

10 Creditors

	2013	2012
Amounts falling due within one year	Sm	Sm
Bank overdraft	11.6	14.9
Trade creditors	48.3	38.0
Other taxes and social security	41.2	36.8
Other creditors	40.8	32.8
Accruals and deferred income	:0.8	94.4
	225,7	216.9
Amounts falling due after more than one year
Loan capital	43.7	528.7
Stepped rent adjustment	5.2	8.4
	503.9	587.1

11 Loan capital

	2018	20172
Loans repayable, included within creditors, are analysed as follows:		am
Repayable in less than one year, or on demand	11.6	149
Repayable in between one and two years
Repayable in between two and five years	240.4	270.4
Repayable in more than five years	259.3	258.3
	510 3	543.6

Full details of the loans repayable are given in note 21 of the Whitbread Group PLC Annual Accounts

12 Pension deficit

	2013	2012
	Sm	போ
Pension deficit	400.7	457.7
Deferred tax asset	(92.2)	(114.4)
Net pension deficit	308.5	343.3

During the year the accounting deficit decreased trom £343.3m at 1 March 2012 to £300.5m at 28 February 2013. The principal reason for this reduction was the actual asset performance being significantly better than expected while actually of to T the pincillation increases were also lower han assumed.

As explained in note 32 of the Whitbread PLC Annual Report and Accounts for the year ended 28 February 2013, the Whitbread Group established a partnership, Moorgate SLP, in which the Group is a general partner to rither partnership, Ferringsho, Ferrington SF in March 2010.

Under FRS 17 the partnership interest held by the pension scheme represents a plan asset for the purposes of this company's accounts, and acoordingly the pension deficit position in these company account has been and papeases in ils curipted the interest in Morgale SLP held by the pension scheme.

For information onceming the assets and liabilities of the pension scheme, and details of the actuarial valuation, please see note 31 of the Whitbread PLC Annual Report and Accounts for the year ended 28 February 2013.

Notes to the accounts

At 28 February 2013

13 Provisions for liabilities and charges

	Onerous contracts	Other 2m	Deferred tax 2m	Total £m
	2m
At 1 March 2012	26.6	7.6	10.0	44.2
Utilised	(5.8)		(0.5)	(6.3)
Unwinding of discount rate	1.9			1.9
Transfer	0.6	(0.6)
At 28 February 2013	23.3	7.0	9.5	39.8

Onerous contract provisions relate primarily to propaty reversions. Provision is made for rent and other property related costs for the period that a Bub-let or assignment of the lease is not possible. Where the property is deemed likely to be assigned, provision is made for the best estimate of the reverse laase premium payable on the assignment. Where the property is deemed likely to be sublet, the rental income and the timing of the cash flows are estimated by both internal property specialists and a provision is maintained for the cost incurred by the Group.

Onerous lease provisions are discounted using a discount rate of 3.74%) based on an approximation for the time value of money, The arround and timing of the cash outfows are subject to variations. The Group utilises the skills and external property experts to determine the provision held.

Provisions are expected to be utilised over a period of up to 25 years.

Other provisions relate to warranties given on the disposal of businesses. These are expected to be used over periods of up to four years.

14 Share capital
	2013	2012
Allotted, called up and fully paid	Am	am
"A" Ordinary shares of 25 pence each (2012: 25 pence each)	11.0	11.0
Ordinary shares of 25 pence each (2012: 25 pence each)	1227	122.7
	133.7	133.7
Number of "A" ordinary shares in issue (m)	44.0	44.0
Number of ordinary shares in issue (m)	490.6	490.6
Total shares in issue (m)	534.6	534 6

The "A" shares have the same rights and rank equally with the ordinary shares, save that:

i, a holder of "A" shares shall, on return of a winding-up or otherwise, be entitled to participate proportionalely in the surplus assets of the Company remaining after the payment of its liabilities provided that the maximum extert of such participation shall be the amount paid up, credited as paid up, on such shares at the time of assets;

il. a holder of "A" shares has no right as such to receive notice of of attend or vote at any general meeting of the Company unless a resolution to vary or abrogate the rights attaching to such shares as proposed; and

ii. a holder of "A" shares is not entitled to any dividend or any other distribution (except as provided for in (i) above)

Notes to the accounts

At 28 February 2013

15 Shareholders' funds

	Share capital Share premium	Revaluation reserve	Other non- distributable reserves	Retained earnings	Total
	2m	2m	am	£m	Em	Em
188.7 At 1 March 2012		207.7	172	1,269 1	252.0	1,879.7
Loss for the year		:		=	(2.5)	(2.5)
Other recognised gains and losses					222	222
Equity share-based payments				-	6.8	6.8
Realised revaluation gain transferred to profit and loss account			0.5		(0.5)	P
1 - 3 - 7 At 28 February 2013		207-7	17.7	1,269.1	278.0	1,906,2

Nature and purpose of reserves

Share capital

Share capital comprises the nominal value of the Company's ordinary shares of 25 pence each,

Share premium

The share premium reserve is the piemium paid on the Company's 25 pence ordinary shares

Revaluation reserve

The revaluation reserve includes the amounts that were re-valued on the UK properties up to and including 1980/9. Since the adoption of FRS15, it has been the Company's policy not to revalue fixed assets and the reserve is unwinding over a period of time as the re-valued properies are disposed of.

Other non-distributable reserves

The other non-distributiable reserves related on the cancellation of shares and to profit on disposals of group companies.

Retained earnings

Retained earnings are the accumulated profits of the Company.

16 Lease commitments

	Land and Buildings
	2018	2012
Annual payments under operating leases which expire:	200	E
Within one year	0.1	4
In one to five years	1.0	1.6
In over five years	23.1	16.1
	24.8	17.7

17 Share-based payments

All awards of shares referred to below are in the parent company, Whitbread PLC.

Long-Term Incontive Plan (LTIP)

The LTIP awards shares to directors and serior execulives of the Group. Vesting of shares will depend on continued employment and meeting total shareholder relurn (TSR) and earnings per share (EPS) performance targets over a firee year period.

The awards are settled in equity once exercised.

Notes to the accounts

At 28 February 2013

17 Share-based payments (continued)

Movements in the number of share awards are as follows:

	2013	2012 Awards
	Awards
Outstanding at the beginning of the year	738,168	594,932
Granted during the year	254,630	256,987
Exercised during the year	(170,160)	(88.413)
Expired during the year	(32,036)	(25,338)
Outstanding at the end of the year	790,602	738,168
Exercisable at the end of the year

Deferred equity awards

Awards are made under the Whitbread Leadership Group Incentive Scheme implemented during 2004/5.

The awards are not subject to performance conditions and will vest in full on the release date subject to continued employment at that date, if the director or senior executive of the Group ceases to be an employee of Whitbread prior to the release date, normally three years after the award, by reason of redundancy, retrement, death, injury, ill health, disability or some other reason considered to the Remuneration Committee, the awards will be released in full. If employment ceason the proportion of awards which vests depends upon the year in which the award was made and the circleyment ceased . If employment ceases in the first year after an award is made none of the award vests, between the first and second anniversary 25% vosts and between the second and third anniversary 50% vests.

Movements in the number of share awards are as follows:

	2018	2012
	Awards	Awards
Outstanding at the beginning of the year	362,918	373,334
Granted during the year	115,547	230.717
Exercised during the year	(10,304)	(239,767)
Expired during the year	(22,336)	(1,366)
Outstanding at the end of the year	445,825	362.918

Exercisable at the end of the year

Notes to the accounts

At 28 February 2013

17 Share-based payments (continued)

Employee share scheme

The employee Sharesave Scherne is open to employees with the required minimum period of service and provides for a purchase price equal to the market price on the date of grant, less a 20% discount. The shares can be purchased over the six-month period tollowing the third on fithin anniversary of the commencement date, depending on the length chosen by the employee.

Movements in the number of share options and the related WAEP are as follows;

		2013		2012
		WAEP		WAEP
	Options	{E per share)	Options	(£ per share)
Outstanding at the beginning of the year	1,089,214	11 91	1,222,833	9.74
Granted during the year	374,524	19.14	482,893	13.39
Exercised during the year	(208,033)	9.85	(426.575)	7.53
Expired during the year	(198,603)	15.51	(189,957)	11.35
Outstanding at the end of the year	1,057,102	16.747	1.03:214	11.91
Exercisable at the end of the year	14,934	10.44	48,855	7.46

The weighted average contractual life for the share options outstanding as at 28 February 2013 is between two and fitree years. Outstanding options to purchase ordinary shares of 76.80 pence between 2012 and 2017 are exercisable at prices between 27.28 and £19.14 (2012: between 2011 and 2016 at prices between £7.28 and £14.17). The fair value of share options granted is estimated as at the date of grant using a stochastic model, taking into account the terms and conditions upon which the options were granted.

The weighted average share price at the date of exployee share scheme oplions exercised during the year was £24.51 (2012: £16.68).

Total charged to the income statement

	2012/13	2011/12
	Em	ட்ட
Long-Term Incentive Plan	3.1	1,8
Deferred equity	2.6	2.8
Employee share scheme	1.4	1.4
	7.1	6.0
Equity settled	6.8	6.0
Cash settled	0.3
	7.1	6.0

For details of the inputs to the model used for Whitbread Group PLC for the year ended 28 February 2013, please refer io note 30 of the Annual Report and Accounts of Whitbread PLC.

18 Related parties

The Company is a wholly-owned subsidiary of Whitbread PLC, the ultimate parent, and has taken advantage of the exemption given in Financial Reporting Standard No. 8 not to disclose transactions with other group companies.

19 Parent undertaking

The immediate and ultimate parent undertaking is Whitbread PLC, registered in England and Wales.

The parent undertaking of the largest group of unch group accounts are drawn up and of which the Company is a member is Whitbread PLC, registered in England and Wales. Copies of their accounts an be obtained from Whitbread Court, Houghton Hall Business Pax, Porz Avenue, Dunstable, Bedfordshire. LU5 5XE.