Annual Report and
Accounts 2009/10
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www.whitbread.co.uk
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Annual Report 2009/10
The Whitbread Way Forward
Our aim is to build the best
large-scale hospitality brands in
the world by becoming the most
customer focused organisation
there is. Anywhere.
We’ll do this by providing outstanding
value and making everyday experiences
feel special – so that our customers
come back time and time again.
Contents
Financial highlights
Group at a glance
Chairman’s statement
Business review –
Chief Executive
Our strategy
Our people
Our customers
Hotels and Restaurants
Costa
Finance Director
Corporate responsibility
Key performance indicators
Group risks and uncertainties
Board of directors
Senior management
Directors’ report
Corporate governance report
Remuneration report
Accounts 2009/10
1
2
4
6
6
10
12
14
16
24
28
30
32
34
36
38
39
43
47
57
Financial highlights
Whitbread has performed strongly in the most
challenging hotel and restaurant trading conditions
for a generation. Underlying profits have been
increased by virtue of outperforming our markets
and improving operating efficiency.
1
Total revenue1 (£m)
Underlying diluted EPS2 (p)
2009/10
2008/09
2007/08
2006/07
1,435.0
1,334.6
1,216.7
1,173.5
2009/10
2008/09
2007/08
2006/07
96.74
90.69
86.40
65.96
Underlying profit3 before tax (£m)
Full year dividend (p)
2009/10
2008/09
2007/08
2006/07
239.1
224.4
203.3
167.0
2009/10
2008/09
2007/08
2006/07
38.00
36.55
36.00
30.25
1. Total revenue from continuing businesses.
2. Based on total operations.
3. Underlying profit for the continuing business excluding
exceptional items and the impact of the volatile pension
finance cost/credit as accounted for under IAS 19.
http://annualreport.whitbread.co.uk
2
Annual Report 2009/10
Group at a glance
Whitbread is the UK’s largest and
fastest growing hospitality group.
Hotels and restaurants
Our brands
Number of units
588
hotels
42,799
hotel rooms
130
restaurants
127
restaurants
Premier Inn is the only UK hotel company
to guarantee a good night’s sleep.
Our pub restaurants offer great
value family dining.
Beat those winter blues
and get away from £29*
When it’s cold outside you can always be
sure of a warm welcome at Premier Inn,
with rooms from £29*.
Minimum 2 night stay may apply.
Book now at premierinn.com
* Selected Premier Inns & dates. Book 21 days in advance.
Subject to availability. Details at premierinn.com.
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PI4660_Half Term_655x290_S06_AW.1 1
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3
Coffee shops
7
restaurants
1,069
UK stores
531
overseas
stores
Costa Coffee is the second largest
international coffee shop business.
Our Baristas make coffee by hand, not by pushing a button.
*Source: independent survey by Tangible Branding Limited, November and December 2008. In blind head-to-head taste tests between Costa’s cappuccino and a cappuccino from Starbucks or Caffè Nero 70% of respondents who identified themselves as ‘Coffee Lovers’ preferred Costa cappuccino. Total sample size of coffee lovers = 174. For more information please visit www.costa.co.uk.
WE MAKE IT BETTER
Sunday
Dining
Kids’ Meal Deal
any child’s main meal
& dessert
£4.99†
1 course for £7.99‡
2 courses for £9.99‡
3 courses for £11.99‡
Pub Restaurant
109
restaurants
Some yummy starters are available on our
Kids’ menu
Kids’ Sunday Roasts £3.99
£3.99
Hand Carved Sunday Roasts
Choose from:
• Roast Loin of Pork • Roast Topside of Beef
Beef
• Roast Crown of Turkey
Served with mash, roast potatoes, carrots,
a Yorkshire pudding, garden peas and gravy
vy
Kids’ Mains
£3.99
£3.99
Chicken Dinner
Chicken Nuggets
Spaghetti Bolognese
Beef Burger
Cheese and Bacon Burger
Fish** and Chips
Minced Beef & Onion Pie
Chicken Wrap
Vegetarian Wrap (v)
sh (v)
Veggie Sausages and Mash (v)
Create Your Own Pizza
Chicken Curry
Tomato Pasta (v)
Kids’ Meal Deal
any child’s main meal
& dessert
£4.99†
Only £1.25
Desserts
Fondue
Mini Chocolate Indulgence
Ice Cream
Jelly and Ice Cream
Fruit Salad
Available for children up to the age of 10
A tasty way to collect Nectar Points.
Collect 2 Nectar points for every £1 you spend at Table Table.
For further details about what you can and cannot collect
points on, please visit www.nectar.com
‡This menu is only available on Sundays, is not available in December 2010 and is subject
to availability. Two courses cannot be ordered from the same section. Meal prices do
not include any drinks or sides. All prices include VAT. We may occasionally sell out of
some of the more popular dishes. If we do, we’ll do our very best to offer you the nearest
alternative. Menu descriptions may not list every individual ingredient. Guests concerned
about the presence of allergens in our food are welcome to ask a team member for
assistance when choosing their meal. All cash tips are retained by your server. Credit card
tips will be processed by the payroll department and paid to your server after deduction of
Income Tax and National Insurance contributions only. No other deductions will apply .
If you have any comments or suggestions our team will be more than happy to receive
them. Alternatively, you are welcome to write to us at: Whitbread Group PLC, PO Box 777,
Dunstable, Beds. LU5 5XG. Telephone: 01582 844360
Email: customer.relations@whitbread.com
tabletable.co.uk
TT464BTT9P1U
Feb 2010
http://annualreport.whitbread.co.uk
4 Annual Report 2009/10
Chairman’s statement
Whitbread has come through a difficult economic
period very creditably. It is trading well and has
opportunities for growth, both in the UK and
internationally.
When I wrote to you at this time last
year we were all facing a period of
unprecedented economic turmoil.
As I said at the time, Whitbread
had already taken action to prepare
itself for a downturn and we entered
2009/10 with a robust balance
sheet, market-leading brands
in value for money sectors and
proven operational expertise. That
preparation stood us in good stead.
During 2009/10 Premier Inn took
action to reinforce its value for
money credentials and to attract
more leisure customers against
the backdrop of a falling hotels
market. This delivered beneficial
results, particularly in the second
half of the year. Our restaurants
also focused on more value for
money offers which contributed
to improved performance. Costa
had a very successful year with
strong marketing activity and
the introduction of new products
including Flat White coffee.
Whitbread has come through a
difficult economic period very
creditably. It is trading well and has
opportunities for growth, both in the
UK and internationally. Revenues at
our Hotels and Restaurants business
increased by 3.2% ending the year
on an improving trend. Revenues
at Costa increased by 23.4% – an
excellent performance. Premier Inn
grew, as planned, by over 2,200 rooms
while also securing land for future
development. We added five new
pub restaurants and over 300 new
coffee shops.
Our increased focus on cash
management and continuing cost
reduction programmes were key
Anthony Habgood
Chairman, Whitbread PLC
Sir Michael Angus
It is with great sadness that I report that Sir Michael
Angus, who was a director of Whitbread from 1986
to 2000 and Chairman for the last eight of those
years, died on 13 March 2010. Sir Michael was a highly
respected businessman and his experience in many
roles, but principally as Chief Executive of Unilever,
was invaluable to the Company. Having worked with
Sir Michael as a fellow non-executive director at
another company I saw at first hand his fast mind
and quick wit. He will be sorely missed.
5
I am delighted that Andy Harrison
will be joining us to succeed
Alan Parker on his retirement
in November. Andy’s skills and
experience are ideally suited
to build on Alan’s successful
management of the Company
and to take advantage of our
growth opportunities.
Andy Harrison, Chief Executive Designate
to our success in the year and the
Company has ended the period
with a positive cash flow of nearly
£110 million – exceeding our target
for cash neutrality.
We believe that 2010/11 will
continue to be a difficult economic
environment for our customers and
we will therefore remain focused
on prudent and tight management.
Growth remains a priority and, in
the short term, this will be on a
measured basis until we see more
sustained signs of recovery.
Chief Executive succession
On 3 March 2010, we announced that
Alan Parker has decided to retire on
25 November 2010, his 64th birthday.
Alan has made an invaluable
contribution to the growth and
development of Whitbread during
his six years as Chief Executive.
Under his leadership Whitbread has
grown to become the UK’s leading
hospitality company with a strong
focus on value for money brands.
In anticipation of Alan’s retirement,
the non-executive directors under
my chairmanship, began the search
for his successor. We conducted a
thorough international search and
selection process, the details of which
can be found on page 45, and had a
number of high quality candidates.
The result of this process was that
we decided to appoint Andy Harrison
to succeed Alan. Andy is currently
Chief Executive at easyJet PLC,
which he joined in 2005, having
previously spent nine years as Chief
Executive of RAC PLC. He will join
us on 1 September and take over
from Alan as Chief Executive in
late November.
http://annualreport.whitbread.co.uk
We are delighted with this
appointment. Andy has 14 years’
proven experience as a successful
leader of two significant consumer-
facing and service oriented public
listed companies. Most recently, at
easyJet, he has successfully led and
profitably internationalised a leading
value for money brand in a highly
competitive market. Whitbread has
opportunities for growth, both in
the UK and through developing our
international presence. We believe
that Andy’s skills and experience
are ideally suited to lead Whitbread
and to take advantage of these
opportunities.
Dividend
The Board recommends a final
dividend of 28.35p per share,
making a total dividend for the
year of 38.00p per share, up by 4%.
The final dividend will be paid on
14 July 2010 to shareholders on the
register at the close of business on
14 May 2010. Once again, a scrip
dividend alternative will be offered
and further information on how
shareholders can elect to participate
in the scrip dividend scheme are
available from the registrars or
on the Company’s website.
Board
Charles Gurassa stepped down
from the Board in September
2009 having served for nine years
as an independent non-executive
director and for much of that time
as Chairman of the Remuneration
Committee. I would like to thank
Charles for his significant input to the
Board. He was a major contributor
at an extraordinarily important time
as Whitbread evolved into a focused
hotel and restaurant company.
Also in September 2009, Richard
Baker joined the Board as an
independent non-executive director.
Richard was Chief Executive of
Alliance Boots from 2003 until 2007
having led the merger of the Boots
Group and Alliance Unichem in
2005. Before that time Richard held
a number of roles, including Chief
Operating Officer at Asda. He is
currently Chairman of Virgin Active
and Groupe Aeroplan Europe as
well as being an Operating Partner
of Advent International. We are
delighted to welcome Richard to
our Board. His wealth of experience
in consumer-facing industries, as
well as at senior Board level, will
be a great asset to Whitbread.
Our people
Being a truly customer focused
organisation requires our people
to make everyday experiences
feel special to our customers. All
our employees are extraordinarily
committed to providing excellent
service and I would like to thank
them on behalf of the Board for
their efforts over the past year.
Anthony Habgood
Chairman
28 April 2010
6
Annual Report 2009/10
Chief Executive
Business review –
Whitbread outperformed its markets and
increased profits in 2009/10, despite the
challenging economic backdrop.
Alan Parker, CBE
Chief Executive, Whitbread PLC
The fundamentals of
Whitbread are strong and
provide a firm foundation
for sustained profitable
growth in both the short
and medium term.
Whitbread has performed strongly
in the most challenging hotel and
restaurant trading conditions for
a generation. Underlying profits
have been increased by virtue of
outperforming our markets and
improving operating efficiency.
We have achieved a significant
reduction in net debt while, at the
same time, increasing the number
of new sites acquired for our future
development.
Group underlying profit before tax
increased by 6.6% to £239.1 million
(2008/09: £224.4 million), with
underlying earnings per share
(diluted) increasing by 6.7% to
96.7p. We achieved our three stated
priorities: to outperform the market;
to reduce operating costs; and to
achieve cash flow neutrality.
Group revenue grew year on year
by 7.5% to £1,435.0 million, driven
by the growth in the number of
hotels, restaurants and coffee shops
despite a modest decline in like for
like sales of 0.5%. At Premier Inn,
sales rose 4.7%, with like for like
sales declining 4.3%. Sales at our
restaurants rose 1.3%, with like for
like sales up 1.7%. At Costa, sales
increased by 23.4%, with like for like
sales up 5.5%.
Trading in the first half of the year
was impacted by the challenging
operational environment, but this
improved in the second half. In
the last quarter of 2009/10 all our
businesses demonstrated positive
momentum with Group like for like
sales growth of 3.1%.
One of our new
solus sites on
Citadel Way in Hull
7
At the year end, net debt was
reduced by £109.7 million to £513.4
million compared to £623.1 million
last year.
The Board recommends a final
dividend payment of 28.35p per
share, making a total dividend for
the year of 38.0p per share. The
final dividend will be paid on 14 July
2010 to shareholders on the register
at the close of business on 14 May
2010. A scrip dividend alternative
will again be offered.
Successfully achieving our three
key priorities
Whitbread is a focused hospitality
company with brand leadership in
attractive, value for money sectors.
In 2009/10 we set out a clear
action plan with three priorities
to manage through the downturn.
We have successfully achieved all
these priorities and have become
a stronger, more competitive and
efficient business.
1. Outperforming the market
Premier Inn outperformed its
competitors during 2009/10. Regional
revpar was down 6.4% during the
year, compared to a decline of 8.5% in
the regional budget hotel sector and
a decline of 9.6% across the whole
regional hotel market. We set out a
commercial action plan to reinforce
our status as the preferred hotel
brand for corporate travellers and to
attract more leisure customers. We
are pleased to report good progress
on all fronts.
Our restaurants have continued
to achieve like for like growth,
consistently outperforming the
market. Customers have been
attracted to the great value for
money food and drink, offered in
well-maintained environments.
Costa has seen 32 consecutive
quarters of like for like sales growth.
Costa achieved a 59.5% increase in
pre exceptional operating profit in
2009/10 and grew like for like sales
by 5.5%. The key drivers behind this
outstanding performance are Costa’s
clear position as the coffee lovers’
preferred brand and our continued
expansion in the UK and overseas.
2. Reducing operating costs
We have reduced overheads
by streamlining management,
improving the efficiency of
our back-office processes and
delivering a series of procurement
initiatives. As we expand our
outlet numbers, we have been able
to offer over 1,200 new jobs for
frontline employees.
3. Achieving cash flow neutrality
We have exceeded our cash
flow targets by £109.7 million.
Tight management of working
capital, lower capital spend and
rescheduled payments to the
pension fund have all contributed
to the improved position. Net
debt at the year end has therefore
reduced to £513.4 million (2008/09:
£623.1 million). The Group’s total
debt facilities currently stand at
£1,155 million and provide ample
headroom for the future.
Looking ahead: building market share
Growth from a relentless focus on
our customers
• Premier Inn – growing like for like
occupancy back to 80%.
• Restaurants – driving a value
strategy to gain volume.
• Costa – market innovation to
strengthen leading position.
Improving momentum during the year
was seen from our engines of growth:
Premier Inn, with its restaurant joint
site model; and Costa, the great
food and beverage success story,
both at home and internationally.
There are significant further growth
opportunities across all our brands
by building brand preference and
from outlet expansion. We will
leverage these opportunities using
a sophisticated approach towards
understanding our customers.
In 2009/10 we set out a commercial
action plan for Hotels and Restaurants,
to build on our competitive edge for
the business market and to attract
more leisure customers. We put
in place four key levers: focused
advertising; increased sales activity;
Premier Offers; and widening
reservation distribution. This work will
continue during the course of 2010/11
as we make an additional £8 million
marketing investment and realise the
full benefits of dynamic pricing.
Our value for money restaurants
have never been more relevant to
today’s family dining needs. Our well
established meal deal offers, such as
two meals for £9 at Brewers Fayre,
have achieved significant success and
now over a quarter of all diners take up
these attractively priced menu options.
http://annualreport.whitbread.co.uk
8
Annual Report 2009/10
Our customers can
kick-start their day
with one of our
delicious breakfasts
made from great
quality ingredients
At Costa, our fundamental
proposition is the quality of our hand
made coffee, served in a welcoming
environment. A strong driver of
success was our breakthrough
marketing campaign derived from
independent customer research
showing 7 out of 10 coffee lovers
preferred Costa’s cappuccino. Costa
also used its understanding of
customer preference to introduce
the new Flat White coffee, which
has been an excellent contributor to
incremental sales since its launch in
January 2010. At the start of the new
financial year Costa launched a new
points-based loyalty card which has
exceeded initial targets.
Expanding our network
We have clear short and medium
term growth plans:
• Premier Inn to increase room
numbers in 2010/11 by over 2,500
rooms (+6%) and target a 32%
increase to 55,000 rooms in the
UK by the end of 2014/15, as well
as international expansion; and
• Costa to increase store numbers
in 2010/11 by net 250 stores
(+16%) and target an 88%
increase to 3,000 stores by
2014/15, maintaining market
leadership in the UK and building
five key overseas businesses; in
China, India, Russia, the Middle
East and Central Europe.
We benefit from our robust balance
sheet and strong freehold asset
base. We have grown our secured
future pipeline of hotel sites to
10,000 rooms by taking advantage
of the reduced property market
prices.
This pipeline underpins our stated
strategy to expand Premier Inn to
55,000 rooms in the UK by the end
of 2014. In 2010/11 the target opening
schedule is 29 new Premier Inns
(over 2,500 rooms), which include
ten new restaurants on joint sites.
Costa is the UK’s largest coffee shop
brand, and has grown to become
the second largest international
coffee shop business with 1,600
stores worldwide. In the UK, we
plan to open around 130 stores
during 2010/11. This growth includes
opening in new high street locations,
adding stores in established retail
outlets, such as our partnership
with Tesco, and bringing the
Costa experience to hospitals
and universities.
Our international business will
be the focus of the next phase of
Costa’s growth, boosted by the
acquisition of Coffeeheaven. This
transaction completed in the last
quarter of 2009/10 and added 89
new stores in the important Central
European region. Costa plans to
increase overseas outlet numbers
by around 120 stores during 2010/11
in the key target markets of China,
India, Russia, the Middle East and
Central Europe.
Good Together corporate
responsibility programme
Whitbread has always put a high
value on being a responsible
business. In January 2010 we
launched Good Together, the
umbrella programme for company-
wide initiatives to drive sustainable
performance and further deepen
our corporate responsibility. We
have set targets for CO2 reduction,
sustainable sourcing and waste
management. We will open the UK’s
first totally new build green hotel and
restaurant in the autumn. We have
also reaffirmed our commitment to
offer career enhancement to our
people through apprenticeships and
professional skills attainment. We
aim to lead the hospitality sector
towards a more sustainable way of
working and create an important
differentiator, valued by our
customers, in the future.
Current trading and outlook
We are confident we have the
right hospitality brands, positioned
to offer value for money in
attractive, underpenetrated and
growing segments of the market.
The fundamentals of Whitbread
are strong and provide a firm
foundation for sustained profitable
growth in both the short and
medium term. This growth will be
delivered through our expansion
plans as well as by relentlessly
focusing on meeting the needs of
our customers. While the level of
economic recovery remains unclear,
the first seven weeks of the financial
year have started well, with positive
momentum across the business.
Leading Whitbread
As you know, I announced in March
this year that I will retire from
the Company in November 2010.
When I became Chief Executive of
Whitbread in June 2004, Whitbread
was a very different company. We
had ten businesses, including David
Lloyd Leisure and a number of
brands that we didn’t own such as
T.G.I. Friday’s, Pizza Hut and Marriott.
We are confident we have the right
hospitality brands, positioned to
offer value for money in attractive,
underpenetrated and growing
segments of the market.
I was very pleased when Andy
accepted the role and I am
confident that he will be an
outstanding Chief Executive for
Whitbread. I would like to take
this opportunity to wish Andy
and everyone at Whitbread
every success for the future.
In the meantime, I am looking
forward to the coming six months
or so and to continuing the
Whitbread Way Forward.
Alan Parker
Chief Executive
28 April 2010
Six years on we are the UK’s
largest hotel and restaurant group
focused on our joint site Premier
Inn and restaurant model and the
extremely successful Costa brand.
In 2004 we had 302 budget hotels
under the Travel Inn name and less
than 19,000 rooms. Today we have
over 42,000 rooms in 588 Premier
Inn hotels. The growth of Costa
during the last six years has been
exceptional and the 1,600 stores
we have today compares to 346
in 2004. Costa is now the largest
coffee shop business in the UK and
the second largest international
coffee shop business.
Whilst continuing to expand our
Premier Inn and Costa businesses
in the UK, we have also started
to exploit opportunities overseas.
We now have hotels operating in
the Middle East and India and Costa
stores can be found in 24 different
countries. I am very proud of the
progress that has been made to
make the Company what it is today.
I am delighted that we have
been able to deliver excellent
results for our shareholders, with
£2 billion returned to date, whilst
transforming the Company. This
would not have been possible
without the fantastic support of
Whitbread’s people. It has been a
privilege to work alongside such
a committed group of people
throughout the organisation and
I’d like to thank all of them for
their continuing contribution to
the Company.
When I retire, I will be handing
over the reins to Andy Harrison.
http://annualreport.whitbread.co.uk
9
Cash returned
to shareholders
TSR
EPS growth
Improvement
in ROCE
£2bn
+134%
76%
25%
Progress since 2004
Structural transformation
2003/04 profit
15%
7%
3%
2%
1%
20%
23%
3%
7%
19%
Ten business units
Marriott
Maredo
David Lloyd Leisure
Premier Inn
Britvic
Beefeater
T.G.I. Friday’s
Brewers Fayre
Pizza Hut UK
Costa
2009/10 profit
13%
87%
Hotels and Restaurants
Costa
10 Annual Report 2009/10
our strategy
Business review –
Our clear strategy underpins our aim
of building the best large-scale hospitality
brands in the world by becoming the most
customer-focused organisation there is.
Our strategy has remained very
clear and constant – to increase
our leadership position in the
hotels, restaurants and coffee shop
markets in the UK and to become
number one or two in our chosen
overseas markets.
The scale of the growth of our
hotels since 2003/04 from 18,000
rooms to over 42,000 rooms (136%)
demonstrates our commitment to
this strategy. This is mirrored in the
growth of Costa from 346 stores to
1,600 (362%) in the same period.
This is supported by our financial
strength and the skills of our
development and operating teams.
We have continued to grow in the
last two years, despite the more
difficult economic conditions.
We took the decision to reduce
the number of hotel rooms being
opened during the last year while
we assessed the length and depth
of the recession and its effect on
the business. In the meantime we
have been buying land ready for
future development and we have a
secured pipeline of 10,000 rooms.
There is still room for significant
growth in the UK for our hotels
business with our current target
of 55,000 Premier Inn rooms. This
is supported by the projected
growth in the total hotels market
and our view of the potential of
the budget hotel sector within that
market. We have detailed analysis
of every town in the UK which looks
at the population in the area and
the suitability for our brands. This
analysis has also been carried out for
our restaurants and coffee shops.
We have assessed overseas markets
both for our ability to win, together
with their growth prospects, and
developed clear plans to work in
those markets at the appropriate
time.
In terms of the overseas development
of our hotels, we will continue to
concentrate on the Middle East and
India in order to demonstrate the
commercial and economic model
and create value in those territories.
We are more advanced in coffee
shops where Costa is already
represented in 24 overseas countries.
Costa’s international growth has been
augmented by the Coffeeheaven
acquisition in Central Europe.
Next year we plan to continue with
our disciplined growth with 29 new
hotels (2,500 rooms) and ten new
pub restaurants. In Costa we plan
to open 130 new stores in the UK
and 120 overseas.
We continue to believe that our
property ownership should be
predominantly on a freehold basis,
although it is possible that we may
selectively use our property as an
alternative source of funding for
our pipeline of developments.
At present 84% of our Hotels and
Restaurants estate is freehold,
although this mix is changing as
many of the new sites we have
acquired are leasehold. During the
year we undertook a small sale
and leaseback of five properties
which was very successful both in
terms of investor interest and the
price achieved (an initial yield of
around 5.5%).
We believe that a key part of
building and maintaining our
leadership position, as well as the
trust and loyalty of our customers,
is corporate responsibility. For
this reason we launched our Good
Together programme in 2009.
To learn more about this initiative
please visit our Good Together
Report at http://cr.whitbread.co.uk.
There is still room
for significant
growth in the UK.
Our target is to
grow Premier Inn
by 32% to 55,000
rooms in the UK
by 2014/15.
11
01 UK budget hotel
sector: Strong
long-term
prospects with
projected CAGR
of circa 10% over
the next 10 years
02 The UK budget
hotel sector today:
• 111,700 rooms
• four brands
account for
80% of rooms
01
02
22.0%
Budget sector
share of total
market
15.0%
£4.0bn
Budget
sector
value
Other
budget
hotels
£1.6bn
2009/10
2018/19
Source: OC&C Strategy Consultants
Source: TRI
In 2009/10 we highlighted three clear priorities
in response to the turbulent economic conditions.
2009/10 strategic priorities
Action
Result
Outperform market
Reduce operating costs
Achieve cash flow neutrality
Developing detailed action plans
to focus on our customers’ needs,
and particularly on establishing
our value for money credentials.
Streamlining management,
improving the efficiency of back
office processes and delivering a
series of procurement initiatives.
Prioritising cash management
and working capital together
with the sale and leaseback of
five properties.
All our businesses have
outperformed in their markets.
On track to achieve £25 million of
annual savings, with £20 milllion
realised to date.
Positive cash flow for the year
of £109.7 million, with net debt
reducing to £513.4 million.
Growth transformation over six years
Rooms
Stores
2003/04
18,173
2003/04
346
2009/10
02
42,799*
2009/10
1,600*
Rooms – Growth 136%
* Including 1,079 international rooms
Stores – Growth 362%
* Including 531 international stores
http://annualreport.whitbread.co.uk
£bn4.54.03.53.02.52.01.51.00.50.041,720roomsOtherbudgethotels 12 Annual Report 2009/10
our people
Business review –
Our people are at the heart of our business.
It is important that we provide them with
the development opportunities to reach
their full potential.
There is something very special
about the people who work
at Whitbread. We listen to our
people, because they are best
placed to understand what it is
that our customers want. We want
our people to flourish and it is
important that we provide them
with development opportunities so
that they can reach their potential.
A culture of leadership
In 2009 we made significant steps to
define our culture more clearly, with
a revitalised core purpose and set of
values – the Whitbread Way Forward.
This was defined using a series of
workshops and interviews with a wide
cross-section of Whitbread people.
At the same time we refreshed
the corporate identity to more
appropriately represent Whitbread.
A new Leadership Framework,
which describes the skills
expected from our leaders, was
developed during the year. It has
already become an important
tool in supporting the process of
leadership engagement behind
our goal of customer focus. It
has reinvigorated the leadership
development agenda to engage
our leaders in how we will lead
the Whitbread Way Forward, and
achieve stretching personal and
team development.
YOUR SAY
In 2009, Whitbread relaunched
its engagement survey, YOUR SAY
into the business. It accurately
measures engagement, in a way
that is meaningful to every person
in the organisation and enables
timely action.
The 2009 survey measured
engagement through 18 questions,
and provided a promising start.
The results can be seen in the
table below. All parts of the
business outperformed the
benchmark UK norm group.
Following the publication of the
results, action plans were developed
and implemented.
2009/10 team engagement scores
Whitbread overall
Whitbread Hotels
and Restaurants
Costa
UK norm group
60%
60%
61%
54%
Learning & Development
This year we launched our
groundbreaking apprenticeship
programme, which uniquely gives
all of our team members within
Whitbread Hotels and Restaurants
the opportunity to gain a nationally
recognised qualification in the
workplace. The programme is a
real demonstration of our strategic
approach and commitment to
having the best skilled team in
the industry.
Alongside the suite of vocational
qualifications we also launched our
Skills for Life programme, providing
tutoring and support in the vital life
areas of literacy and numeracy. To
date we are proud to announce that
over 1,400 qualifications have been
awarded to our team members.
The Government inspectorate,
Ofsted, has graded the hospitality
and catering provision that is
offered to our team members as
“Outstanding”. Meanwhile the
Skills for Life programme has
been awarded the Business in
the Community “Big Tick”.
In 2010 the survey has been
expanded to help us understand
how our teams view our new
corporate responsibility strategy,
Good Together, and their experience
of customer focus in Whitbread.
In the future, employee engagement
will be reported as part of the
WINcard, demonstrating our
genuine commitment to driving
engagement.
We have successfully launched
into the business a full suite
of management development
programmes called Shooting Stars.
The objective of these programmes
is to assist all our operational
managers to develop to the next
suitable role in their career with us.
The programmes help us to develop
people all the way from Hotels
and Restaurants team member to
Regional Operations Manager.
13
“ Being given a chance to gain
qualifications has opened my
eyes to the opportunities within
Whitbread.”
Leon Commissiong, Chef, Orchard Beefeater, Ruislip
“ Coffee is not only my profession
but also my passion.”
Gabor Kamondi, Barista of the Year for 2009
Over the past 18 months, over
600 of our people have been, or
currently are being, developed
through these programmes.
Whitbread Hotels and Restaurants
appoint over 75% of General
Managers internally.
In Costa we have relaunched our
in-store induction and training
processes. As coffee is at the
heart of Costa’s business, we have
developed the Barista Maestro
workshop on coffee-making skills.
Workshops are held at a number of
Costa training academies around
the world.
Costa has also developed the
Shooting Stars programme. It has
been operational within the Costa
business since 2007 and comprises
core skills development and training
on management behaviours over a
six-month period.
In 2009 the next stage of
development to enable Costa’s
assistant managers to become store
managers was launched. The Rising
Stars programme follows a similar
format to Shooting Stars and so far
over 50% of attendees have been
placed into a store manager role.
http://annualreport.whitbread.co.uk
“ Completing my Skills for Life
programme has given me a
huge confidence boost.”
Chloe Croft, Receptionist, Gatwick Crawley East Premier Inn
14 Annual Report 2009/10
our customers
Business review –
Understanding our customers better
than anyone else will give us real
competitive edge.
Guest satisfaction scores –
Premier Inn
Recommend
86.2%
Satisfaction
87.5%
Intention to return
91.4%
Value for money
81.3%
Source: Surveys conducted independently
by ORC International
Customer focus
Customer focus is about
understanding our customers. It is
about targeting specific customer
segments and providing the products
and services that people want at a
price they are prepared to pay.
We learn about our customers from
talking to them directly and from
listening to our people who serve
them every day. We also look at our
competitors to understand what
they offer to their customers and
what we might learn from them.
Once we have that information we
aim to get as much insight on our
customers as we can and then use
that to find ways in which to serve
them even better.
This is all part of what we call our
relentless focus on the customer.
Customer segmentation
During 2009/10 we embarked on
customer segmentation projects
across Whitbread. The initial phases
of the segmentation work have
been completed for Premier Inn and
Costa, while the project for the pub
restaurants is in progress. The aim
was to define customer segments,
establish the size of the opportunity
and Whitbread’s share of each
segment. This deep insight allows
us to develop strategies to build on
successes and to win new customers.
In Premier Inn we will give greater
focus to new parts of the leisure and
business markets. For example we
will look at ways of attracting more
‘retired sightseers’ and ‘short break
travellers’ to stay with us. In Costa
we will be looking for ways to meet
the needs of the different customer
groups identified – from the ‘grab
and go commuters’ to those looking
to spend more time relaxing with
a coffee. By understanding our
customers in this way we will be
able to look after them better than
ever before.
Committed to listening to customers
We hold regular customer focus
groups to explore the thoughts and
feelings of customers. We consider
customer feedback in all decision
making.
Premier Inn guest satisfaction
programme
Key to delivering the Whitbread
vision of being the most customer-
focused hospitality company in the
world is ensuring that we accurately
and robustly measure customer
feedback. It is important that we
always focus on what’s important to
the customer at both a brand and
outlet level.
The Premier Inn guest satisfaction
programme e-mails approximately
1.5 million customers within 24
hours of their stay to ask them
for their feedback. We receive
a massive 500,000 responses
every year, making the Premier Inn
guest satisfaction programme one
of the biggest and most robust
programmes in Europe.
We focus on comfort,
quality and value for
money. All Premier
Inn room attendants
are trained to deliver
the standards our
customers expect
15
Premier Offers – inspired
by our customers
A clear example of how Whitbread
has used customer feedback to
inform strategic decision making
is ‘Premier Offers’.
Using the Premier Inn guest
satisfaction survey we conducted
a major research project to
understand the needs of leisure
users and price elasticity.
Since the launch of Premier Offers
we have seen significant increases
in weekend occupancy and a huge
improvement on customer value for
money scores.
Costa customer satisfaction
Costa uses independent market
research agency, YouGov, to
deliver robust feedback from
our customers. In addition
Costa obtains insight from key
competitors in order to provide
benchmarking data.
Costa has significantly improved its
customer scores achieving a score
of 73% for overall satisfaction. The
results of this study help to inform
strategic decisions and marketing
campaigns such as the successful
‘7 out of 10’ campaign.
Brand standards –
Hotels and Restaurants
Whitbread Hotels and Restaurants
use an independent audit company,
‘Hospitality Now’, to measure
compliance to brand standards.
Every site is audited at least twice
per year using a 1,000 question audit
to keep us delivering a consistent
product to all our customers on
every visit.
Brand standards – Costa
Costa uses customer satisfaction
data to identify what is really
important to the customer and,
from this, has developed a robust
set of standards which can be
measured to track operational
performance. This is achieved
through a mystery customer
programme which is conducted
by independent agency, Re Act,
together with our brand standards
audit, which is completed by our
internal team of auditors. Over the
past year Costa has completed over
9,000 mystery customer visits and
brand standards audits, with stores
receiving a minimum of one visit
per quarter.
YouGov BrandIndex for hotels
YouGov BrandIndex for coffee shops
Rank Brand
Rank Brand
1
2
3
4
Premier Inn
Hilton
Travelodge
Holiday Inn
1
2
3
4
Costa
Caffé Nero
Starbucks
Coffee Republic
Source: YouGov BrandIndex scores from quarter 1 2010
Both Premier Inn and Costa use the YouGov
BrandIndex to benchmark performance
relative to other Brands. YouGov is the
only daily measure of public perception of
consumer brands across a wide selection of
industry sectors. Respondents are drawn from
the YouGov on-line consumer panel and 2,000
on-line interviews are conducted every day in
the UK for the BrandIndex measure.
http://annualreport.whitbread.co.uk
16 Annual Report 2009/10
Hotels and Restaurants
Business review –
The budget sector is the most attractive
of the UK hotel market and Premier Inn
is the best operator of budget hotels.
Patrick Dempsey
Managing Director,
Whitbread Hotels and Restaurants
Our Hotels and Restaurants have
achieved a strong performance in the
challenging operating environment
of 2009/10. Total revenues increased
by 3.2% to £1,096.0 million with pre
exceptional operating profit down
3.1% year on year to £247.0 million.
Like for like sales were positive in
the fourth quarter by 1.6%, but down
1.8% over the year.
We have strengthened Premier
Inn’s status as the leading budget
brand by implementing a thorough
commercial action plan to drive our
revpar forward through a volume-
led strategy. This included investing
in sales and marketing, widening
our distribution channels and
launching Premier Offers in
June 2009. Our new website,
www.premierinn.com went live in
November and has increased visits
by 80%. The site now attracts over
three million visits per month.
Premier Inn maintained its
outperformance versus the hotel
market, with business and leisure
customers continuing their flight to
value. Total sales at Premier Inn are
up 4.7% to £629.8 million (2008/09:
£601.5 million) with like for like sales
down by 4.3%. Regional revpar was
down 6.4% against a decline of 9.6%
for the total regional hotel market.
Premier Inn maintained
its outperformance
versus the hotel market.
Hotels and Restaurants
2009/10
£m
2008/09
£m
%
Change
Premier Inn revenues
Restaurants revenues
629.8
466.2
601.5
460.1
Total revenues
1,096.0
1,061.6
Premier Inn like for like sales %
Restaurants like for like sales %
4.7
1.3
3.2
(4.3)
1.7
Operating profit, pre exceptional
Operating profit, post exceptional
247.0
259.9
254.9
(3.1)
240.4
8.1
17
Winning
corporate
accounts
“ We have had great success in
attracting new large corporate
customers to Premier Inn.
Business account sales grew
to £175.4 million in 2009/10.”
Paul Flaum
Chief Operating Officer,
Whitbread Hotels and Restaurants
http://annualreport.whitbread.co.uk
18 Annual Report 2009/10
For the third year
running Premier Inn
won Best Hotel Group
Brand at the Business
Travel Awards
for like covers increase of 1.4%.
In 2009/10 we opened five new
restaurants. Some 333 of our 373
strong restaurant portfolio are
located adjacent to a Premier Inn.
This joint-site strategy enables
us to deliver a superior customer
experience and generate enhanced
return on capital.
Strategic drivers
The key strategic drivers for the
Hotels and Restaurants business are:
Premier Inn – volume share gain to
80% occupancy;
Restaurants – market share through
a volume and value strategy;
Development – growth in UK network
from 42,000 to 55,000 rooms; and
International – establish Premier Inn
in existing markets.
Premier Inn is the leading choice
brand among business travellers
and, for the third year running,
won Best Hotel Group Brand at the
Business Travel Awards. Business
guests can save over £33 per
night compared to 3 and 4 star
hotels and we attracted over 20
large corporate customers such as
E.On, Honda, Lidl and some central
Government departments to switch
to Premier Inn during the year.
Increased sales activity helped to
grow business accounts with users
up 13% on last year. Sales grew by
2.6% to £175.4 million.
In 2009/10, Premier Inn opened
2,240 new rooms (UK 1,624 rooms)
and refurbished over 8,000 rooms.
At the year end Premier Inn had a
total of 42,799 rooms in 588 hotels
(UK 41,720 rooms).
Eleven new Premier Inns were
opened in regional locations and
one new hotel in London, where
Premier Inn has maintained its
position as London’s leading
budget hotel operator. We have
commenced development of a
new 267 bedroom budget hotel at
Stratford, located adjacent to the
Olympic Stadium, creating some
90 jobs.
in Tamworth, Staffordshire, which
opened its doors to guests in
December 2008. The 60 bedroom
Premier Inn at Burgess Hill, due to
open in autumn 2010, will adopt
the best performing sustainable
construction materials to deliver
70% carbon and 60% water savings.
Our continuous focus on tight cost
control, through both procurement
and operating efficiencies, has helped
underpin our operating margin.
Internationally, we opened three
new hotels this year across the
UAE and India. We acquired the
50.1% stake we did not already own
in the Indian joint venture with real
estate developer Emaar-MGF and
will take forward the development
of new properties independently.
Our restaurants continued to
outperform the market as we
attracted customers looking
for great value food and drink
in a comfortable environment.
We refurbished 95 restaurants,
spending on average £125,000
per site, to ensure a quality
environment with value for money
at the heart of everything we do.
Our restaurants increased customer
recommendation metrics by 5.6%.
Premier Inn also announced its
first purpose built green hotel
and Beefeater Grill restaurant.
It represents the latest stage in
sustainable technology and follows
our pioneering green hotel pilot
Revenues have increased by
1.3% to £466.2 million (2008/09:
£460.1 million). Our restaurants
achieved consistent like for like
sales growth of 1.7%, driven by
increases in average spend and like
Increasing
leisure
business
19
“ Premier Offers is designed to
attract leisure customers who
are looking for a great deal.
We now own the £29 price
point in the market.”
Gerard Tempest
Marketing Director,
Whitbread Hotels and Restaurants
http://annualreport.whitbread.co.uk
20 Annual Report 2009/10
Examples of our great
value for money offers
KPIs
The WINcard results for Whitbread
Hotels and Restaurants are shown
below:
2009/10 WINcard results
PBIT
Brand standards
Profit conversion
•
•
•
Guest recommend (Premier Inn) •
Guest recommend (restaurants) •
Like-for-like sales growth •
•
•
Health and safety
Team turnover
More information on the WINcard,
together with the Group WINcard
results, can be found on pages 32
and 33.
Markets and competition
Premier Inn’s 42,000 rooms account
for 6% of the total UK hotel market.
Today four brands account for 80%
of the budget sector of the market.
The sector has strong long-term
growth prospects with projected
compound annual growth rate of
approximately 10% over the next
ten years.
The total UK hotel market has an
annual value of around £10.9 billion,
of which approximately £1.6 billion
can be attributed to the budget
sector. In 2009/10, Premier Inn
outperformed the budget sector
in terms of regional RevPAR by
2.1% points.
Whitbread’s pub restaurants
compete in the total out-of-home
eating market of £40 billion.
Whitbread has outperformed the
pub restaurant sector of the market
over the last two years in terms
of like-for-like sales.
Our people
We are dependent on our people
to deliver our brand promises,
day in and day out. We offer every
team member the chance to work
towards NVQs and Skills for Life.
In 2009 Whitbread achieved
an ‘Outstanding’ grade for our
Apprenticeship training programme
following an inspection by Ofsted.
This year we will help our people
gain over 3,000 new qualifications.
We have continued to be recognised
for quality and value. Premier
Inn has been named the leading
economy hotel brand in Europe for
the second year running. Premier
Inn also scooped the Business Travel
Awards Best Hotel Group for the
third year running.
This is an excellent achievement
for the Premier Inn brand and is a
testament to the hard work and
dedication of our team members.
21
Opening
new
locations
where our
customers
want to be
“ London is an important growth
market for Premier Inn and since
the start of 2009 we have acquired
13 new locations at sites ranging
from Greenwich and Islington to
right next door to the Olympic
Village in Stratford.”
Mark Anderson
Commercial and Property Director,
Whitbread Hotels and Restaurants
http://annualreport.whitbread.co.uk
22 Annual Report 2009/10
Whitbread Hotels and
Restaurants’ team
members aim to raise
£1 million for WaterAid
Corporate responsibility
We promise our guests a good
night’s sleep. Our people serve
great value food and drink in clean,
comfortable and well looked after
environments. We intend to deliver
this in a sustainable manner. Key
areas of progress for the Hotels
and Restaurants team have been:
• We will open our first
purpose-built green hotel and
Beefeater Grill at Burgess Hill,
in West Sussex. This follows
Whitbread’s pioneering green
hotel pilot project in Tamworth,
Staffordshire. The 60-bedroom
Premier Inn at Burgess Hill, due to
open in the autumn of 2010, will
adopt the best-performing green
technologies from our test in
Tamworth, targeting 70% carbon
and 60% water savings. Adjacent
to the hotel, we will develop our
first low-carbon restaurant, a
220-cover Beefeater Grill;
•
In 2009/10 we rolled out an
Environment and Energy Guide
to all outlets. Our teams now
have information and tools to
help reduce energy and water
wastage. Teams at our support
centres can also see how their
efforts can make a difference
with energy monitors located
in reception areas;
• We have been working in
Risks and uncertainties
Details of the risks and uncertainties
for the Group are outlined on pages
34 and 35. Many of the risks and
uncertainties at Group level are also
applicable to Whitbread Hotels and
Restaurants.
Risks specific to the hotels and
restaurants business include:
• the integrity of booking channels
partnership with our waste
management providers Veolia,
and with Biogen, towards our
target of achieving 80% of waste
diverted from landfill by 2012;
and other key systems;
• the failure to deliver rooms
growth profitably;
• the failure to deliver market
leading performance;
• We are very proud of our
• the failure to attract and maintain
commitment to the communities
where we live and work. We
have raised over £300,000 for
WaterAid during 2009/10, a
good start towards our £1 million
target; and
• We offer development
opportunities for our team
members as described on
pages 12 and 13.
high calibre teams;
• the failure of health and safety
policies and procedures;
• the inability to achieve profitable
international growth; and
• the potential financial failure of
a key third party supplier.
Mitigation plans are in place for
each of the risks and uncertainties
outlined above and are reviewed
by the Whitbread Hotels and
Restaurants Management Board
on a quarterly basis. The potential
failure of a key third party supplier
has been a particular focus during
the year due to the general
economic conditions.
23
Improved
guest
scores
“ We listen to our people, because
they are best placed to understand
what it is that our customers want.”
Patrick Dempsey
Managing Director, Whitbread
Hotels and Restaurants
http://annualreport.whitbread.co.uk
24 Annual Report 2009/10
Business review –
Costa
Costa delivered a strong and accelerating
performance during the year.
John Derkach,
Managing Director, Costa
2009/10 was an outstanding
year for Costa. Pre exceptional
operating profit grew by 59.5% to
£36.2 million; 312 net new stores
were acquired or opened; like for
like sales increased by 5.5%; and
our international business became
profitable.
Costa also made its first acquisition,
Coffeeheaven, with stores in
Poland and other Central European
countries. Costa operates in 25
countries and is now the number
two international coffee shop
operator with 1,600 stores: 1,069
in the UK; and 531 overseas.
In addition to the 89 Coffeeheaven
stores acquired at the end of the
year, Costa opened 223 net new
units in 2009/10. Of these, 188 were
in the UK, further demonstrating
that the brand’s domestic market
is far from saturated. Sales
performance improved strongly
across the year, confirming the
brand’s resilience, even in a
recessionary environment.
Our international business became
profitable in the year, despite
continued investments in China
and Russia. This reflected a strong
contribution from our franchise
businesses and continued progress
in the joint ventures.
Costa’s commitment to delivering
an unbeatable coffee experience
gained momentum with three
significant initiatives:
• Our ‘7 out of 10’ campaign
emphasised how consumers
are discerning in their coffee
choice. The campaign played
a central role in enhancing like
for like sales which grew, almost
entirely, as a consequence of
more customer visits;
• The addition of Costa’s new Flat
White coffee added another
option for coffee lovers, with over
a million Flat Whites sold since the
launch at the end of January; and
• Costa launched the sector’s
first electronic loyalty scheme
and customer database. The
Costa Coffee Club card enables
Total number of cups of Costa
coffee consumed worldwide1
211.4m
Costa
179.0m
146.1m
2007/08
2008/09
2009/10
1 Based on coffee volumes produced at our
roastery in Lambeth.
System sales
Revenues
Like for like sales %
Operating profit, pre exceptional
Operating profit, post exceptional
2009/10
£m
2008/09
£m
%
Change
515.7
340.9
36.2
35.9
401.9
276.3
22.7
22.6
28.3
23.4
5.5
59.5
58.8
25
Costa’s
international
growth
opportunity
“ China has a large,
fast-growing urban
population and is one
of Costa’s core international
target markets together
with India, the Middle East,
Russia and Central Europe.”
Andy Marshall
Chief Operating Officer,
Costa International
http://annualreport.whitbread.co.uk
26 Annual Report 2009/10
love free coffee?
join
the club.
Customers can now
earn points with every
purchase using the
new Costa Coffee
Club card. Since its
launch in March 2010
over one and a half
million customers
have used their cards.
Pick up a card.
Join the Coffee Club today.
A
3
0
0
1
3
0
C
C
0
1
/
5
0
/
5
0
P
O
C
:
e
t
a
d
e
v
o
m
e
R
0
1
/
3
0
/
4
0
:
e
t
a
d
t
r
a
t
S
customers to earn points with
every purchase at Costa. In the
first month since its introduction
on 4 March this year, well over one
million cards have been used by
Costa customers.
Good Together website (see pages
30 to 31).
KPIs
The WINcard results for Costa are
shown below:
During 2009/10 Costa demonstrated
outstanding growth momentum,
forged even stronger engagement
with its customers and set the
platform for growth.
Three key themes
Outstanding, consistent growth
trends – in both sales and number
of units;
Strong, customer-driven market
position – a compelling proposition
and robust business model; and
Significant future growth potential
– in the UK and overseas.
Corporate responsibility
The key elements of the Costa
corporate responsibility agenda are:
• our coffee which will be sourced
entirely from Rainforest Alliance
accredited farms;
• our milk which we can trace
100% to a single UK supplier
based in the south-west and is
delivered in lightweight plastic
pouches, which significantly
reduce waste; and
• our new, more environmentally-
friendly, takeaway cup.
We are also very proud of the
Costa Foundation which was set
up to fund the building of schools
in coffee-growing regions. More
details and case studies are on the
2009/10 WINcard results
PBIT
Cash
Store openings
Brand standards
•
•
•
•
•
Like-for-like sales growth •
•
•
Health and safety
Guest measure
Team turnover
More information on the WINcard,
together with the Group WINcard
results, can be found on pages 32
and 33.
Markets and competition
It is estimated that there are around
9,400 coffee shops in the UK, with
4,000 of these being branded coffee
shops. The growth projection for this
market is around 8%. Costa is well
positioned with 1,000 stores and we
plan to double in size in the UK. This
is a very competitive market which
Costa leads in terms of numbers of
stores, superior coffee and service.
Overseas, Costa is focused on large
and fast growing regions such as
China, India, Russia, Central Europe
and the Middle East, where it sees
significant potential for the brand.
Our people
The very successful year Costa has
had reflects the excellent teams in
its stores. Our very low employee
turnover is good evidence of the
strength of those teams which
is backed up by the training
academies which focus on the
importance of coffee making skills.
Risks and uncertainties
Many of the risks and uncertainties
at Group level are also applicable to
Costa. Some more specific risks are:
failure to achieve growth targets;
failure of a franchise, joint venture
partner or third party supplier;
failure of a significant health and
safety procedure; and interruption
of production at the Costa roastery.
27
Grab a Costa
on the go
“ Costa is the UK’s largest
coffee shop brand with
over 1,000 stores.”
Adrian Johnson
Chief Operating Officer,
Costa UK
http://annualreport.whitbread.co.uk
28 Annual Report 2009/10
Finance Director
Business review –
The policy of the Board is to manage its
financial position and capital structure in a
manner which is consistent with Whitbread
maintaining its investment grade status.
for the Group were down (0.5%)
with Costa up 5.5% and Hotels and
Restaurants down (1.8%). The trend
in like for like sales performance
improved as we went through
the year.
Quarterly like for like sales
performance 2009/10
%
Q1
Q2 Q3 Q4
Premier Inn
(7.9)
(7.1)
(3.1)
Restaurants
2.0
1.6
2.3
WHR
Costa
Group
(3.7)
(3.6)
(1.0)
2.6
2.4
(2.7)
(2.7)
6.7
0.3
2.0
1.1
1.6
9.6
3.1
Results
Last year we introduced an underlying
profit measure on the face of the
consolidated income statement.
The directors believe that this
measure provides useful information
for shareholders on the underlying
trends and performance of the
Group as it excludes exceptional
items and the impact of volatile
financial costs under IAS 19.
Underlying profit for the year is
£239.1 million, up 6.6% on the prior
year and underlying diluted earnings
per share 96.7p (2008/09: 90.7p).
Total profit for the year is
£160.0 million which compares
to £90.3 million last year.
Exceptional items
Exceptional items are analysed in
more detail in note 6. The principal
items are the final costs of the
£25 million cost reduction programme
announced in 2008 amounting to
£9.9 million, a net impairment charge
of £1.5 million and a provision of
£21.2 million for lease reversions offset
by profits arising from the disposal
of a number of properties (primarily
relating to the sale and leaseback
transaction) announced earlier in
the year of £14.6 million. The lease
reversions are largely in respect of
the expected cost of leases arising
as a result of the administration of
First Quench Retailing Limited on
29 October 2009, a company to
which the Group had previously
transferred a significant number of
leasehold properties. A provision has
been made for the costs we will incur
on approximately 130 properties until
the leases expire or are reassigned.
Interest
The underlying interest charge is
£25.7 million, a reduction of 16.0%
on the previous year, reflecting lower
interest rates that the Group has
been charged during the year.
The total pre exceptional interest cost
amounted to £41.2 million. Included
within this figure is an IAS 19 pension
charge of £15.5 million (2008/9
pension credit of £5.5 million). This
charge represents the difference
between the expected return on
scheme assets and the interest cost
of the scheme liabilities. In 2010/11
this is expected to be a pension
charge of £11.5 million.
Tax
An underlying tax expense of
£71.1 million represents an effective
tax rate of 29.8% on the underlying
profits, which compares with
30.3% last year. The year on year
movement has been predominantly
Christopher Rogers,
Finance Director
Revenue
Group revenue in the year increased
by 7.5% to £1,435.0 million.
Revenue by business segment
£m
2009/10 2008/09
%
Change
Hotels and
Restaurants
1,096.0
1,061.6
3.2%
Costa
340.9
276.3*
23.4%
Less: other**
(1.9)
(3.3)
Revenue
1,435.0 1,334.6
7.5%
*Sales of £12.5 million to Costa franchise
partners, which were previously recorded as
other but are now included in Costa revenues.
**Predominantly inter-segment revenue.
The increase in revenue has come
from growth in the number of units
and like for like sales: Premier Inn
added 15 new hotels and 2,240
rooms; five new restaurants were
opened; and Costa opened 188 net
stores in the UK and 35 overseas
excluding the acquisition of
Coffeeheaven which added a further
89 overseas stores. Like for like sales
29
Moorgate used this investment
from the Pension Fund together
with further investments from
other Whitbread Group companies
to invest in a second partnership,
Farringdon Scottish Partnership
(“Farringdon”) in which another
Whitbread Group company also
invested. Farringdon used the funds
to acquire a number of hotels and
restaurants from Group subsidiaries
for around £221 million. These
properties were leased back to the
selling subsidiary and continue to be
operated by that Group company.
The assets and activities of the
partnerships will be consolidated
within the Group accounts of
Whitbread PLC by virtue of the
Group’s interest in the controlling
general partner of Moorgate and
its interest in Farringdon.
The Pension Fund has received
benefit through its interest in
Moorgate as it now holds security
over property and other assets
as noted above. In addition, the
Pension Fund will receive an annual
payment for the duration of the
lease arrangements, expected to
be 15 years, being its share of the
profits from its interest in Moorgate.
This arrangement has replaced the
previous charge over certain assets
given to the Pension Fund prior to
entering into the above transaction.
At the end of these arrangements
if there is a pension deficit, the
Pension Fund will receive a cash
payment of the amount of the deficit
up to a maximum of £109.95 million.
As a result of the above transaction,
the Group has received a current
tax credit of £28.6 million in
respect of its £102 million funding
of the Pension Fund. There is a
corresponding deferred tax charge
of £28.6 million reflecting the lower
tax deductions now available in
future periods from the Group’s
funding of the deficit position.
Christopher Rogers
Finance Director
28 April 2010
driven by the impact of the rising
share price on the tax associated
with share-based payments.
An exceptional tax credit of
£16.8 million occurred during the
year as a result of a reduction of
the deferred tax liability on rolled
over gains.
Earnings per share
Diluted underlying earnings per
share increased by 6.7% to 96.7p.
EPS
2009/10 2008/09
Underlying (diluted)
96.7p
90.7p
Non GAAP adjustments:
Pension finance cost
(6.4p)
2.3p
Exceptional items
1.9p (40.2p)
Total operations
(diluted)
92.2p
52.8p
Details can be found in note 11.
Dividend
A final dividend of 28.35p will,
subject to approval at the AGM, be
paid on 14 July 2010 to shareholders
on the register at the close of
business on 14 May 2010. The total
dividend for the year at 38.0p is up
by 4.0%. A scrip dividend alternative
will again be offered.
Net debt and cash flow
During the year there was a
cash flow inflow of £109.7 million
reducing year end net debt
to £513.4 million (2008/09
£623.1 million). The principal
movements were:
£m
2009/10 2008/09
Cash flow from
operations*
375.8
334.7
Capital expenditure
(131.7)
(276.3)
Acquisitions /
overseas investment
(42.0)
(47.5)
Pension contribution
–
(50.0)
Disposal proceeds
41.8
(1.0)
Interest, tax and
dividends
(132.1)
(134.6)
Other
(2.1)
(22.6)
Net cash flow
109.7
(197.3)
Net debt bfwd
(623.1)
(425.8)
Net debt cfwd
(513.4)
(623.1)
* This agrees to cash generated from
operations in the accounts excluding
the pension payments.
The improvement in cash generated
from operations was as a result
of increased profitability and an
http://annualreport.whitbread.co.uk
£18 million improvement in working
capital. The disposal proceeds
relate to a sale and leaseback of five
properties undertaken in December
2009, plus proceeds from the sale of
a number of standalone restaurants.
The weighted average net debt
in the year was £569.2 million
compared to £531.0 million last year.
As at 4 March 2010 the Group had
committed revolving credit facilities
of £1,155 million. The facilities reduce
to £930 million in December 2010,
£855 million in December 2011 and
£455 million in December 2012
with the remaining facility maturing
in March 2013. In 2010, subject to
market conditions, we will begin to
diversify our sources of financing.
The policy of the Board is to
manage its financial position
and capital structure in a manner
which is consistent with Whitbread
maintaining its investment
grade status.
Capital expenditure and
business acquisitions
Total Group cash capital expenditure
during the year was £131.7 million
with Hotels and Restaurants
spend amounting to £111.6 million,
Costa £15.2 million and Corporate
£4.9 million. Capital expenditure
on the businesses is split between
acquisition expenditure, which
includes the acquisition and
development of properties
(£65 million) and maintenance
expenditure (£61 million). In addition
£38.8 million (net of cash acquired)
was spent on business acquisitions,
including the acquisition of
Coffeeheaven, and £3.2 million
on international investments. This
brings the total cash outflow on
capital expenditure and business
acquisitions, including the purchase
of intangible assets, to £173.7 million.
Pensions
As at 4 March 2010 there was
an IAS 19 pension deficit of
£434.0 million, (£341.0 million
after tax) which compares to
£233.0 million (£167.8 million
after tax) as at 26 February 2009.
During the year the Group entered
into a transaction with Whitbread
Pension Trustees described in further
detail in note 32.
In summary, the Group contributed
£102 million to the Pension Fund
which was then invested by
Whitbread Pension Trustee into
a newly formed partnership within
the Group, Moorgate Scottish
Limited Partnership (“Moorgate”).
30 Annual Report 2009/10
Business review –
corporate responsibility
Whitbread has always put a high value on
being a responsible business. Good Together
is our way of uniting the power of our people,
customers and suppliers.
VENTILATION HEAT RECOVERY SYSTEM
SUSTAINABLY-SOURCED
TIMBER FRAME
RAINWATER
HARVESTING
HIGH-PERFORMANCE INSULATION
USING NATURAL & RECYCLED MATERIALS
RAINWATER HARVESTING
ENHANCED
BIODIVERSITY
SUSTAINABLY SOURCED
TIMBER FRAME
WASTE WATER HEAT RECOVERY SYSTEM GREY WATER RECYCLING
ENERGY-EFFICIENT
ROOM TEMPERATURE CONTROL
LED LOW-ENERGY LIGHTING
GROUND SOURCE
HEAT PUMP
HIGH EFFICIENCY
REFRIGERATION,
DISHWASHER
& FRYERS
We will be opening our first
purpose-built joint ‘green hotel
and restaurant’ site at Burgess Hill,
West Sussex in autumn 2010.
In January 2010, Whitbread
launched Good Together, an
umbrella programme to improve
sustainable performance and
corporate responsibility.
Customer research tells us that
our customers really care about
environmental and social issues
even in these times of recession. On
average, 65% of respondents across
all our brands rated the issues as
important. We recognise that we are
at the start of an exciting journey
and our ambition is to lead the
hospitality sector in providing our
customers with outstanding green
products and services, without a
significant price premium attached.
Good Together strategy
We have focused our efforts on
six important streams of activity,
setting targets for achievement
and behavioural change in each.
These themes were identified by
our customers, our teams and
from market research as those
that are most material to our
business. They are: environment;
employee engagement; sourcing
of products and services;
customer engagement; health; and
community. Delivering against these
six areas is an important part of
Whitbread’s strategy.
We believe that Good Together is
important in making Whitbread a
business in which people will want
to work, investors will want to invest
and customers will be proud to visit
and come back to again and again.
31
Jodie Slater,
Manager of Costa
in Sutton Coldfield,
experienced a
life-changing trip
with the Costa
Foundation. Jodie
opened La Esperanza
School in Colombia
Developing carbon and water
efficient buildings
We will deliver carbon efficiency
by incorporating retrofit measures
across our estate and by opening
new sustainable properties. In 2008,
we built our first carbon and water
efficient Premier Inn at Tamworth,
which achieved an 86% reduction
in carbon emissions and a 66%
reduction in water usage versus
a standard hotel of a similar size.
We are now building a carbon and
water-efficient hotel and restaurant
in Burgess Hill which we will open
in autumn 2010.
Achieving the Carbon Trust
Standard
In December 2009 we were
awarded the Carbon Trust Standard.
This award requires organisations
to measure, manage and reduce
their carbon footprint and make
reductions year on year. Between
2007 and 2009 Whitbread achieved
a 4% improvement in carbon
efficiency, which is equivalent
to saving 8,562 tonnes of CO2,
or taking 2,446 cars off the road.
Further information can be found
in our Good Together report at
http://cr.whitbread.co.uk.
Targets
We have set important initial targets
as follows:
• Reduce CO2 emissions from our
operations by 26% by 2020;
• Achieve 80% of waste diverted
from landfill from Whitbread
Hotels and Restaurants sites by
February 2012;
Communication and engagement
In October 2009, we started to
communicate Good Together. Key
elements of our communications
plan included newsletters, intranet
micro-site, line managers’ support
packs and a Good Together launch
week of activity during which team
members made personal pledges.
Driving and measuring performance
We have included a fourth
stakeholder, called Good Together,
on the WINcard. Now we measure
and reward our people based partly
on our success in reducing energy
consumption.
WaterAid partnership
For team members one of the key
motivators is their desire to raise
money for both local and national
charities. As a hospitality business
we use a lot of water. We wanted
to give back to those communities
that go without the most basic
requirements of life – safe water and
sanitation. In June 2009 we joined
forces with globally recognised
charity, WaterAid.
Costa Foundation
In 2006, we launched the Costa
Foundation. This was the beginning
of our journey in helping the coffee-
growers by raising money to build
schools in their communities.
• 100% of all Costa coffee
production to be Rainforest
Alliance certified by June 2010;
• Launch a purpose-built ‘green
hotel and restaurant’ at Burgess
Hill, West Sussex (to open in
autumn 2010) – as shown in the
diagram on page 30;
• Achieve 3,000 qualifications
from the Hotels and Restaurants
apprenticeship scheme and train
four hundred Costa learners
by the end of 2011;
• Raise £1 million for WaterAid
over two years; and
• Enable 15,000 children to be
educated as part of the Costa
Foundation.
An integrated programme
We are working to embed
sustainability into everything we
do to build even stronger brands,
inspire and motivate our team
members, delight our customers and
ultimately make our business better
prepared to deliver continued value
to our shareholders. We know that,
in an international organisation of
over 33,000 people, this is a cultural
and behavioural transition that will
take time, but we have already taken
some important steps forward.
http://annualreport.whitbread.co.uk
32 Annual Report 2009/10
key performance indicators
Business review –
We use a balanced scorecard, called the
WINcard to measure our performance
against key indicators.
Whitbread in numbers
The WINcard is our unique balanced
scorecard. It drives high performance
and maps our progress against the
Whitbread Way Forward. Every
leader in the business from the
management teams in our Costa
stores, restaurants and Premier
Inns, to the Chief Executive has a
WINcard which is relevant to their
role and level of contribution. All
team members in Whitbread can
see their achievements and progress
on a monthly basis wherever they
work. The WINcard measures
our performance around our key
stakeholders: our customers, our
people, our shareholders and a more
recent stakeholder addition, our
community which is better known
as our ‘Good Together’ strategy.
The WINcard aligns our day-to-day
activities to the overall vision and
strategy of the Company and helps
us to measure our progress.
The WINcard has enabled a
performance culture to thrive across
all levels of the organisation and
mobilises our people to act around
shared goals. The WINcard measures
are used as key indicators in
personal development planning, for
recognising excellent performance,
in coaching and performance
management, supporting talent
management and succession
planning. It is a core component of
our incentive framework at all levels.
The WINcard educates, motivates
and engages our leaders and
teams across the business to
focus, prioritise and deliver what
is required to achieve success.
WINcard results in 2009/10
The measures on the WINcard
were updated in 2009/10 to include
central costs and cash. The new
measures replaced ROCE growth
and brand expansion. These
changes were made to reflect the
Group’s new priorities in light of the
general economic conditions.
During the year, Whitbread
achieved an ‘all green’ WINcard
at Group level. This is an excellent
result and means that we met or
exceeded our targets on all key
measures. Information on our
achievements during the year and
on our targets for the year ahead
are set out in the table opposite.
In addition, the WINcard results
for Hotels and Restaurants and
Costa are set out on pages 20
and 26 respectively.
Changes for the year ahead
We have given careful consideration
as to what the appropriate indicators
should be going forward and to the
setting of targets for the year ahead.
A fundamental change of approach
made following consultation with
the Remuneration Committee was
that the WINcard should have a
longer-term perspective and should
not be set with just the year ahead
in mind. As such, provisional targets
have been established for each
of the WINcard measures for the
next five years, with the overriding
principle being one of continuous
improvement. The targets for
2010/11 are simply the first step.
Targets will still be set annually, but
with a longer-term perspective.
Health and safety has been a key
measure on the WINcard since it
was first established, and continues
to be so. However, rather than being
included simply as a bonusable
measure, health and safety is now
a hurdle and 20% of the total
WINcard bonus payable will be lost
if health and safety targets are not
met. This further demonstrates the
importance of health and safety
to Whitbread and our ongoing
commitment to looking after the
welfare of our customers and
employees.
As detailed on pages 30 and 31
of this report, we have launched
Good Together during the year.
For 2010/11 we have added a new
measure at Group level of electricity
and carbon reduction. We have also
replaced the team turnover measure
with team engagement, which is
described in more detail on page
12. Another new measure is Premier
Inn market performance, which
measures Premier Inn’s RevPAR
against the budget hotel sector.
The WINcard is
designed to ensure
that we are meeting
our objectives to our
stakeholder groups;
investors, customers,
our people; and
community.
33
Achievements in 2009/10
Targets for 2010/11
Investor measures
Central costs
Cash
Profit
• Achieved £20 million of cost efficiencies.
• Positive cash flow of £109.7 million,
• Underlying profit ahead of budget at
exceeding cash neutrality target.
£239.1 million.
Premier Inn market
performance*
Premier Inn outperformed the budget
hotel sector on RevPAR.
Customer measures
growth
Group like for like sales down by 0.6%.
A good result in light of the general
economic conditions.
Like-for-like sales •
Brand standards • Both businesses achieved a green rating in
Customer recommend • Targets exceeded in Costa and Restaurants.
2009/10. At Group level, the measure is a
combination of the brand standards scores
for both Costa and WHR.
Premier Inn improved on the previous
year, but did not reach the tough target
and achieved an amber rating. At Group
level, the combined results produced a
green rating.
Not a WINcard measure in 2010/11,
but a further annual saving of
£5 million is targeted.
Cash neutrality.
Improved profit performance.
This will be a new measure
on the WINcard requiring
continued outperformance.
Improved like for like sales
growth.
The audit benchmark
has been raised for both
businesses.
The target in all businesses
has been increased for
the year ahead.
People measures
Health and safety • The Group and each of the businesses met
health and safety targets. The health and
safety audit had been made tougher, so
this was an excellent result.
Team turnover
Team engagement*
• Team turnover across Whitbread in
2009/10 was 40.1%, compared to
49.0% in the prior year.
The team engagement score across the
Group, as obtained from the YOUR SAY
survey, was 60.0%, outperforming the
UK norm.
The health and safety audit
benchmark has been raised
for all businesses.
Continued improvement
in retention.
Improved team
engagement result.
Good Together
Electricity/carbon
reduction*
This was not a WINcard measure in 2009/10.
Decrease in consumption
relative to sales.
The WINcard
Performance significantly below budget
Performance marginally below budget
Performance has met or exceeded the budget
* Note: measures in the table above without a result
were not 2009/10 measures, but will be in 2010/11
http://annualreport.whitbread.co.uk
34 Annual Report 2009/10
Business review –
Group risks and uncertainties
We have a clear method of managing key risks
to the Company.
The Board, as well as the
Whitbread Hotel and Restaurants
and Costa management boards,
regularly review key risks and the
status of mitigation plans. The
Audit Committee, on behalf of the
Board, reviews this process on an
annual basis with the internal and
external auditors. This risk analysis
is used to plan the operational
audit’s activity and to highlight
new areas for focus.
The risks are categorised into the
following areas:
Health, safety and security
With around nine million
customers per month and 33,000
employees it is vital that the
Company focuses on their well-
being and safety. With this as a
priority we have a well established
Safety and Security team that
works with our businesses to
implement a rigorous health
and safety programme. We
commission CMi, an independent
company, to carry out audits of all
our outlets every year to measure
their performance against set
critical standards. All employees
have health and safety on the
WINcard and this influences the
level of any bonus received in the
year. Regular updates are given to
the management boards and the
Whitbread PLC Board.
During the year we were aware
that the threat of a swine flu
pandemic could severely affect our
customers and employees. A task
force was set up to update plans
for this contingency, to monitor the
issue within the Company and to
set up communication channels.
These plans remain in place in the
event of any new threat of this kind.
Strategic business risks
All our businesses operate in a
highly competitive environment
which is significantly influenced
by the UK economy.
As has been mentioned earlier in
the report, the Company reacted
to the recession by adopting a plan
to outperform competitors, achieve
cash neutrality and cut costs. The
growth programme in the UK
was slowed but advantage was
taken of the fall in the property
market to secure sites for future
development.
The Company continued to review
significant economic indicators
as part of the business plan and
budgeting process and to reflect
them as appropriate.
In terms of competitive activity,
each of the businesses measures
its performance against the closest
competitors and the market as a
whole. Actions to outperform the
competition are developed on a
strategic and tactical basis with
success being monitored regularly.
Significant customer research is
carried out with the Premier Inn
guest feedback form eliciting
500,000 responses in the year.
Each of the businesses carries out
market research and analysis of
consumer trends in the UK and
overseas. This market information
is reviewed by the Board and the
management boards.
Financial loss
In a group the size of Whitbread
there are a number of areas where
there could be a significant financial
loss if appropriate controls were
not in place. Millions of pounds in
cash are collected and transferred
between bank accounts. The treasury
policy sets the level of authority and
segregation of duties which protect
against such losses and PwC as
operational auditor reviews these
controls each year. The overseas
businesses also have clear rules and
policies over the operation of bank
accounts and the transfer of funds.
Funding
The availability of funds from
the Company’s banking facilities
is important for the day to day
running of the businesses as well as
its growth. There are regular reviews
of the level of funds available to the
Group. Such reviews also check that
the terms of the loan agreements
are being complied with. The Board
approves a funding policy by which
the level and service of borrowings
for the Group is set.
Market expectations
It is important that the market
receives regular and accurate
information concerning the Company
and that the external expectations
for the year are accurate.
There are a number of management
processes designed to keep track
of progress against internal targets
and market expectations. Each part
of the Group has an agreed budget.
Monthly management reports are
produced which are reviewed by
the management boards, and the
main Board.
35
The workplace
environment,
particularly kitchens,
can be dangerous
without proper
training. Ensuring
the health and safety
of our people and
customers is a
key priority
International
As Costa operates in 24 overseas
territories and Premier Inn is
now establishing a presence in
the Middle East and India there
is a risk of a loss arising from a
lack of controls. To counter this
risk, a rigorous approval process
and controls environment has
been established and is reviewed
by the operational audit team.
Monthly updates are given to the
management boards.
Reputational risk
A strong corporate reputation
amongst our stakeholders is
vital to the long term strength
and resilience of our brands, our
ability to attract and retain talent
and investment, and our license
to operate in new locations and
markets. Effective risk management
contributes to a positive reputation.
However, we believe that this alone
is no longer enough. It is important
to understand and respond to the
opportunities and risks presented
by corporate responsibility and
to engage our investors, our
people and our customers on key
sustainability issues. For this reason
we launched our Good Together
programme in 2009. To learn more
about this initiative please visit
our Good Together Report at
http://cr.whitbread.co.uk.
The market is kept informed
through quarterly trading updates
and the interim and full year
financial statements.
Business continuity
It is crucial that we can continue
to serve our customers with high
quality products every day of the
week. Our supply chain for food
and drink along with key systems
underlying the businesses are
critical to that process.
To guard against the risk of failure in
any of those suppliers or services we
have developed contingency plans
including sources of alternative
supply and back up of information.
Auditing and monitoring of suppliers
also protects against this risk. There
is a robust audit programme for our
suppliers who have to pass exacting
food safety and provenance pre-
qualification. Training programmes
for our employees endeavour to
ensure that the food and drink
served is of the appropriate quality.
Counterparty and third party
contract
The Group is party to a number of
contracts which are important to
the businesses. There is a continued
risk that a counterparty fails to be
able to fulfil its part of a contract.
A current risk is the failure of a
tenant of a lease to which a group
company was originally a party.
This could mean that the Group
becomes liable once more to meet
the obligations under the lease.
This risk is carried by all companies
selling leasehold interests, but is
highlighted in times of economic
downturn.
http://annualreport.whitbread.co.uk
Credit control checks are carried
out on parties to significant
contracts along with continued
auditing and monitoring of such
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.
Customers/key relationships
None of the Group’s businesses
are over-reliant on any particular
customer or supplier. Key suppliers
have been identified and mitigation
plans have been put in place for
the potential failure of those
suppliers. Other key relationships
include those with joint venture
partners, franchise partners and
the operators of restaurants on
co-located sites.
Pensions
The Company has obligations in
relation to the Whitbread defined
benefit pensions scheme and any
valuation deficit that arises. There
is a clear risk that the deficit will
increase and therefore involve the
Company in having to make further
contributions as part of the funding
plan required by the Pensions
Regulator. The scheme is now
closed to new members and for
future service to existing members.
The Board receives regular reports
from the pension trustee on its
asset allocation and is consulted
on changes to investment policy.
The advisers to the Company work
with those of the trustee to mitigate
the risk.
36 Annual Report 2009/10
Board of directors
01
Anthony Habgood
Position:
Chairman (since August 2005)
Date of appointment to the Board:
May 2005
Age: 63
Committee membership:
Nomination Committee (Chairman),
Remuneration Committee
External appointments:
Reed Elsevier PLC and NV (Chairman)
Previous experience:
Director of The Boston Consulting
Group Inc from 1977 to 1986. Director,
and then Chief Executive of Tootal Group
PLC until 1991. Chief Executive and then
Chairman of Bunzl PLC until 2009.
Having been Chairman of Mölnlycke
Healthcare (UK) Limited he has also held
non-executive directorships at Geest PLC,
Marks and Spencer Group plc, National
Westminster Bank Plc, Powergen plc and
SVG Capital PLC.
02
Alan Parker, CBE
Position:
Chief Executive (since June 2004)
Date of appointment to the Board:
May 2000 – retiring in November 2010
Age: 63
Committee membership:
Nomination Committee
External appointments:
Jumeirah Group LLC (Non-executive
director), British Hospitality Association
(Director), University of Surrey (Visiting
Professor), World Travel & Tourism
Council (Director), West Buckland School
Foundation (Trustee & Director)
Previous experience:
Managing Director of Crest Hotels Europe,
based in Frankfurt. Senior Vice-President
of Holiday Inn Europe, Middle East and
Africa, based in Brussels. Joined Whitbread
in 1992 as Managing Director of Whitbread
Hotel Company.
03
Patrick Dempsey
Position:
Executive Director
Date of appointment to the Board:
January 2009
Age: 51
External appointments:
Hospitality Action (Trustee), Business in the
Community – talent and skills leadership
team, DCMS – Tourism Advisory Council
Previous experience:
Patrick joined Whitbread in 2004 and has
been in the hotel and restaurant business
for the past thirty years. Patrick was with
Forte Hotels for twenty years, then went
on to join Compass Group as CEO of
Restaurant Associates. In 2005, Patrick
became Managing Director of Premier Inn.
04
Christopher Rogers
Position:
Finance Director
Date of appointment to the Board:
May 2005
Age: 50
External appointments:
HMV Group plc (Non-executive director)
Previous experience:
Qualified as an accountant with Price
Waterhouse before joining Kingfisher plc
in 1988. Subsequent roles included Group
Financial Controller at Kingfisher plc,
Finance Director, and then Commercial
Director, at Comet Group plc before
becoming Finance Director at Woolworths
Group plc and Chairman of Woolworths
Group Entertainment business.
01 Anthony Habgood
02 Alan Parker, CBE
03 Patrick Dempsey
04 Christopher Rogers
05 Stephen Williams
06 Simon Melliss
07 Philip Clarke
08 Wendy Becker
09 Richard Baker
01
03
02
04
37
07
Philip Clarke
Position:
Independent non-executive director
Date of appointment to the Board:
January 2006
Age: 50
Committee membership:
Remuneration Committee (Chairman)
External appointments:
Tesco PLC (Director)
Previous experience:
Has eleven years’ board experience gained
at Tesco where he has responsibility for
operations in eleven countries across Asia
and Europe together with the IT function.
05
Stephen Williams
Position:
Senior Independent Director
Date of appointment to the Board:
April 2008
Age: 62
Committee membership:
Remuneration Committee,
Nomination Committee
External appointments:
Unilever PLC and NV (General Counsel
and Chief Legal Officer), Arriva PLC
(Senior Independent Director),
Arts and Business (Chairman),
De la Warr Pavilion Trust (Chairman)
Previous experience:
After spending three years in the tax
planning and commercial departments
at Slaughter and May, Stephen joined the
legal department of Imperial Chemical
Industries PLC, before joining Unilever PLC
in 1986. He became General Counsel at
Unilever in 1993.
06
Simon Melliss
Position:
Independent non-executive director
Date of appointment to the Board:
April 2007
Age: 57
Committee membership:
Audit Committee (Chairman),
Nomination Committee
External appointments:
Hammerson PLC (Group Financial
Director), Member of the Committee of
Management of Hermes Property Unit Trust
Previous experience:
Having trained as an accountant
he held a number of financial
roles at Reed International PLC
and Sketchley PLC, before joining
Hammerson in 1991 where he became
Group Finance Director in 1995. Simon
has also previously held a non-executive
directorship at Associated British Ports
Holdings PLC.
08
Wendy Becker
Position:
Independent non-executive director
Date of appointment to the Board:
January 2008
Age: 44
Committee membership:
Audit Committee,
Remuneration Committee
External appointments:
Vodafone (Group Chief Marketing Officer)
Working Families (Trustee)
Vodafone Foundation (Trustee)
Previous experience:
Previously Managing Director of Talk Talk.
Partner of McKinsey & Company for 14 years.
Brand Manager of Procter & Gamble and
Boston Consulting Group.
09
Richard Baker
Position:
Independent non-executive director
Date of appointment to the Board:
September 2009
Age: 47
Committee membership:
Audit Committee
External appointments:
Virgin Active Group (Non-executive
Chairman), Group Aeroplan Inc (Chairman,
European Advisory Board), Member of
Heidrick & Struggles Advisory Board, Advent
International PLC (Operating Partner)
Previous experience:
Chief Executive of Alliance Boots
Group plc and Chief Operating Officer
at Asda Group plc.
07
05
08
http://annualreport.whitbread.co.uk
06
09
38 Annual Report 2009/10
Senior management
This table shows the membership
of the Executive Committee, the
Whitbread Hotels and Restaurants
(WHR) Management Board and
the Costa Management Board. The
biographical details of Alan Parker,
Christopher Rogers and Patrick
Dempsey are shown on the previous
page. The biographical details of
the other members of the Executive
Committee, John Derkach, Louise
Smalley and Simon Barratt are
shown to the right of the table.
Executive
Committee
WHR
Management
Board*
Costa
Management
Board*
Board and
committee
members
Alan Parker
Simon Barratt
Patrick Dempsey
John Derkach
Christopher Rogers
Louise Smalley
Mark Anderson
Paul Flaum
Maria Horn
Andrew Pellington
Gerard Tempest
Ben Wishart
Clive Bentley
Russell Fairhurst
Helen Hardy
Adrian Johnson
Andrew Marshall
Matthew Price
Jim Slater
* The members of the Executive Committee are
also members of both Management Boards,
although John Derkach is not a member of
the WHR Management Board and Patrick
Dempsey is not a member of the Costa
Management Board.
01
John Derkach
Position:
Managing Director, Costa
Age: 53
At Whitbread:
John joined Whitbread in 1995 as Marketing
Director of Whitbread Beer Company,
before becoming Managing Director of
Beefeater in 1999. Appointed CEO of Pizza
Hut (UK) in 2002 and Managing Director of
Costa in 2006.
Previous Experience:
Spent three years at Procter & Gamble
and ten years with Pepsi Cola International
in the roles of UK Marketing Manager, UK
Operations Director, Northern Europe
Marketing Director and Area Vice President
for Spain and Portugal.
02
Louise Smalley
Position:
Group Human Resources Director
Age: 42
At Whitbread:
Joined Whitbread in 1995 as HR Projects
Manager of Pizza Hut (UK). Served as HR
Director of David Lloyd Leisure and then
Whitbread Restaurants before becoming
Group Human Resources Director in 2007.
External appointments:
People 1st (Trustee).
Previous Experience:
Spent five years working as a human
resources professional in the oil industry
with BP and Esso Petroleum.
03
Simon Barratt
Position:
General Counsel
Age: 50
At Whitbread:
Joined the Group in 1991 as Group Legal
Adviser, before becoming Company
Secretary and Group Legal Affairs
Director in 1997. Has had accountability
for group development and was a director
of Whitbread Pension Trustees Limited
between 1997 and 2009.
Previous experience:
Trained as a solicitor at Slaughter and May
and then held positions in the legal teams
at Rio Tinto and Heron prior to joining
Whitbread.
01
02
03
01 John Derkach
02 Louise Smalley
03 Simon Barratt
Directors’ report
The directors present their report
and accounts for the year ended
4 March 2010
Certain information required for
disclosure in this report is provided
in other appropriate sections of
the Annual Report and Financial
Statements. These include the
Business Review, the Corporate
Governance and Remuneration
Reports and the Group Financial
Statements and accordingly these
are incorporated into the report
by reference.
Principal activities and review
of business
The principal activity of the
Group is the operation of hotels,
restaurants and coffee shops.
These operations are largely
carried out in the UK, although
Premier Inn operates one hotel in
Ireland, one hotel in India and three
hotels in Dubai via a joint venture.
Costa operates coffee shops in 24
international markets through joint
ventures or on a franchise basis,
and, following the acquisition of
Coffeeheaven International plc,
wholly owned coffee shops in
five Central European countries.
Details of the Group’s activities,
developments and performance
for the year, the main trends and
factors likely to affect its future
development and performance
and information required by the
Companies Act 2006 relating to
the business review are set out
on pages 4 to 35. Details of the
Company’s WINcard, containing
the key performance indicators,
can be found on pages 32 and 33.
http://annualreport.whitbread.co.uk
39
Results and dividends
Group profit before
tax and exceptional
items
Group profit before
tax and after
exceptional items
£223.6m
£208.0m
Interim dividend paid
on 5 January 2010
9.65p per
share
Recommended final
dividend
28.35p
per share
Total dividend for
the year
38.0p per
share
Subject to approval at the Annual
General Meeting, the final dividend
will be payable on 14 July 2010 to
shareholders on the register at the
close of business on 14 May 2010.
Board of directors
The directors at the date of this
report are listed on pages 36 and
37. Richard Baker joined the Board
on 7 September 2009, Charles
Gurassa stepped down from the
Board on 7 September 2009 and all
others served throughout the year.
Richard Baker will stand for election
and Anthony Habgood, Simon
Melliss and Christopher Rogers
will stand for re-election at the
forthcoming AGM in accordance
with the Company’s Articles of
Association.
Details of the directors’ service
contracts are given in the
remuneration report on page 47.
None of the non-executive directors
has a service contract.
Details of continuing professional
development for all directors are
given in the corporate governance
report on page 44.
share capital). However, subject
to approval of the new Articles of
Association at the Annual General
Meeting, the Company will cease to
have an authorised share capital in
accordance with the Companies
Act 2006.
Details of the issued share capital can
be found in note 28 to the accounts.
Holders of ordinary shares are
entitled to attend and speak at
general meetings of the Company,
to appoint one or more proxies and,
if they are corporations, corporate
representatives to attend general
meetings and to exercise voting
rights. Holders of ordinary shares
may receive a dividend and on
a liquidation may share in the
assets of the Company. Holders
of ordinary shares are entitled
to receive the Company’s annual
report and accounts. Subject to
meeting certain thresholds, holders
of ordinary shares may requisition
a general meeting of the Company
or the proposal of resolutions at
annual general meetings.
Voting rights
On a show of hands at a general
meeting of the Company, every
holder of ordinary shares present
in person or by proxy and entitled
to vote has one vote and on a poll
every member present in person
or by proxy and entitled to vote
has one vote for every ordinary
share held. Voting rights for any
ordinary shares held in treasury are
suspended. None of the ordinary
shares carry any special rights
with regard to control of the
Company. Electronic and paper
proxy appointments and voting
instructions must be received by the
Company’s Registrars not later than
(i) 48 hours before a meeting or
adjourned meeting, or (ii) 24 hours
before a poll is taken, if the poll is
not taken on the same day as the
meeting or adjourned meeting.
Share capital
Throughout the year, the authorised
share capital has been £319,889,877
divided into 410,170,050 ordinary
shares of 76122/153 p each
(representing 98.47% of the total
share capital), 265 million B non-
cumulative preference shares of
1 penny each (representing 0.83%
of the total share capital) and
224 million C non-cumulative
preference shares of 1 penny each
(representing 0.70% of the total
Unless the directors decide
otherwise, a shareholder cannot
attend or vote shares at any general
meeting of the Company or at any
separate general meeting of the
holders of any class of shares in
the Company or upon a poll or
exercise any other right conferred
by membership in relation to
general meetings or polls if he has
not paid all amounts relating to
those shares which are due at the
time of the meeting.
40 Annual Report 2009/10
Restrictions on transfer of shares
There are the following restrictions
on the transfer of shares in the
Company:
• certain restrictions which may
from time to time be imposed by
laws and regulations (for example,
insider trading laws);
• pursuant to the Company’s share
dealing code, the directors and
senior executives of the Company
require approval to deal in the
Company’s shares;
• where a person with at least a
0.25% interest in a class of shares
has been served with a disclosure
notice and has failed to provide
the Company with information
concerning interests in those
shares;
• the subscriber ordinary shares
may not be transferred without
the prior written consent of the
directors;
• the directors can, without giving
any reason, refuse to register the
transfer of any shares which are
not fully paid; and
• transfers cannot be in favour
of more than four joint holders.
The Company is not aware of any
agreements between shareholders
that may result in restrictions
on the transfer of shares or on
voting rights.
B shares and C shares
Holders of B shares and C shares
are entitled to receive an annual
non-cumulative preferential
dividend calculated at a rate of 75%
of 6 month LIBOR on a value of 155
pence per B share and 159 pence
per C share respectively, but are
not entitled to any further right of
participation in the profits of the
Company. They are also entitled
to the payment of 155 pence per
B share and 159 pence per C share
respectively on a return of capital
on winding-up (excluding any
intra-group reorganisation on a
solvent basis).
Except in limited circumstances,
the holders of the B shares and
C shares are not entitled, in their
capacity as holders of such shares,
to receive notice of any general
meeting of the Company nor to
attend, speak or vote at any such
general meeting.
Employee share schemes
Whitbread does not have any
employee share scheme with shares
which have rights with regard to
the control of the Company that
are not exercisable directly by the
employees.
Appointment and replacement
of directors
Directors shall be no less than
two and no more than twenty
in number. Directors may be
appointed by the Company by
ordinary resolution or by the Board
of directors. A director appointed
by the Board holds office until the
next Annual General Meeting and
is then eligible for election by the
members.
At every Annual General Meeting
the following directors shall retire
from office:
• Any director who has been
appointed by the directors since
the last Annual General Meeting;
• Any director who held office at
the time of the two preceding
Annual General Meetings and
who did not retire at either of
them; and
• Any director who has been in
office, other than as a director
holding an executive position,
for a continuous period of nine
years or more at the date of
the meeting.
Any director who retires at an
annual general meeting may
offer himself for reappointment
by the shareholders.
The Company may by special
resolution remove any director
before the expiration of his term
of office.
Any director automatically stops
being a director if (i) he gives
the Company a written notice
of resignation, (ii) he gives the
Company a written notice in
which he offers to resign and the
directors decide to accept this
offer, (iii) all of the other directors
(who must comprise at least
three people) pass a resolution
or sign a written notice requiring
the director to resign, (iv) he is or
has been suffering from mental
ill health and the directors pass a
resolution removing the director
from office, (v) he has missed
directors’ meetings (whether or
not an alternate director appointed
by him attends those meetings)
for a continuous period of six
months without permission from
the directors and the directors pass
a resolution removing the director
from office, (vi) a bankruptcy order
is made against him or he makes
any arrangement or composition
with his creditors generally, (vii) he
is prohibited from being a director
under any applicable legislation,
or (viii) he ceases to be a director
under any applicable legislation or
he is removed from office under the
Company’s Articles of Association.
Amendment of the Company’s
Articles of Association
Any amendments to the Articles
of Association of the Company
may be made in accordance with
the provisions of the Companies Act
by way of special resolution.
Powers of the directors
The business of the Company is
managed by the directors who
may exercise all the powers of
the Company, subject to the
Company’s Memorandum and
Articles of Association, any
relevant legislation and any
directions given by the Company
by passing a special resolution at
a general meeting. In particular,
the directors may exercise all the
powers of the Company to borrow
money, issue shares, appoint and
remove directors and recommend
and declare dividends.
Significant agreements
The Company’s facility
agreements, details of which
can be found in note 22 to the
accounts, contain provisions
entitling the counterparties to
exercise termination or other
rights in the event of a change
of control of the Company.
Contractual arrangements
The Group has contractual
arrangements with numerous
third parties in support of its
business activities, none of
which are considered individually
to be essential to its business
and, accordingly, it has not been
considered necessary for an
understanding of the development,
performance or position of the
Group’s business to disclose
information about any of those
third parties.
Financial Instruments
Information on the Company’s use
of financial instruments, financial
risk management objectives and
policies and exposure is given
in note 26 of the consolidated
financial statements.
41
Directors’ share interests
The interests of directors and their connected persons at the end of
the year in the ordinary shares of 76122/153p each in the Company are
shown below:
Held at
28/04/2010
Held at
04/03/2010
Held at
26/02/2009
Anthony Habgood
Alan Parker
Patrick Dempsey
Christopher Rogers
Richard Baker
Wendy Becker
Philip Clarke
Charles Gurassa
Simon Melliss
Stephen Williams
50,797
45,263
27,086
47,976
1,450
6,000
3,939
n/a
1,500
4,000
50,797
45,263
15,938
34,821
1,450
6,000
3,939
1,821(1)
1,500
4,000
50,797
65,263
1,984
14,319
–(2)
2,500
3,797
1,821
1,500
4,000
The share interests shown above include the non-beneficial interests
of Anthony Habgood in 522 ordinary shares of 76122/153p each.
(1) at date stepped down from the Board
(2) at date of appointment
Further details regarding the interests of the directors in the share capital
of the Company, including with respect to options to acquire ordinary
shares, are set out in the remuneration report.
Charitable and political donations
No direct charitable donations
have been made by the Company.
The Whitbread Charitable Trust
made donations totaling £41,872
during the year. Costa Limited, a
subsidiary of the Company, made a
direct donation of £176,307 to the
Costa Foundation. Further details
about the Costa Foundation can be
found on page 31. In addition, the
Company organised and supported
a number of charitable events and a
number of its employees carried out
charitable activities during working
hours. The value of these activities
has not been quantified.
The Company has not made any
political donations during the
year and intends to continue its
policy of not doing so for the
foreseeable future.
Employment policies
Whitbread has a range of
employment policies covering such
issues as diversity, employee well-
being and equal opportunities.
The Company takes its
responsibilities to the disabled
seriously and seeks not to
discriminate against current or
prospective employees because
of any disability. Employees who
become disabled during their career
at Whitbread will be retained in
employment wherever possible
and given help with rehabilitation
and training.
Employee involvement
The importance of good relations
and communications with
employees is fundamental to
the continued success of our
business. Each of the Group’s
operating businesses maintains
employee relations and consults
employees as appropriate to its
own particular needs. Regular
internal communications are made
to all employees to ensure that
they are kept well informed of the
performance of the Group. Further
information can be found on pages
12 and 13.
Directors’ indemnity
A qualifying third party indemnity
provision (as defined in Section 236
(1) of the Companies Act 2006)
is in force for the benefit of the
directors.
Compensation for loss of office
There are no agreements between
the Company and its directors
or employees providing for
compensation for loss of office or
employment that occurs as a result
of a takeover bid.
Supplier payment policy
The Company has no trade creditors
(26 February 2009: nil). The Group
keeps to the payment terms which
have been agreed with suppliers.
Where payment terms have not been
specifically agreed, it is the Group’s
policy to settle invoices close to
the end of the month following the
month of invoicing. The Group’s
ability to keep to these terms is
dependent upon suppliers sending
accurate and adequately detailed
invoices to the correct address on a
timely basis. The Group had 48 days’
purchases outstanding at 4 March
2010 (26 February 2009: 46 days),
based on the trade creditors at that
date and purchases made during
the year.
Major interests
As at 28 April 2010, the Company
had received formal notification,
under the Disclosure and
Transparency Rules, of the following
material holdings in its shares:
No. of
shares
% of
issued
share
capital
BlackRock
17,667,678 10.03%
Schroders Plc
10,531,421 5.35%
Legal &
General
6,978,034 3.97%
http://annualreport.whitbread.co.uk
42 Annual Report 2009/10
Purchase of own shares
The Company is authorised to
purchase its own shares in the
market. Approval to renew this
authority for a further year will be
sought from shareholders at the
2010 AGM.
The Company did not purchase
any of its own shares during
the year. 14.7 million shares
(representing 7.8% of the total
called up share capital at the
beginning of the year) are held as
treasury shares. This number has
not changed throughout the year.
Auditor
Ernst & Young LLP have expressed
their willingness to continue in
office as auditor of the Company
and a resolution proposing their
reappointment will be put to
shareholders at the 2010 AGM. After
proper consideration, the Audit
Committee is satisfied that the
Company’s auditor, Ernst & Young
LLP, continues to be objective and
independent of the Company. In
coming to this conclusion, the Audit
Committee gave full consideration
to the non-audit work carried out
by Ernst & Young LLP.
The Audit Committee has
considered what work should not
be carried out by the external
auditor and have concluded that
certain services, including internal
audit, acquisition due diligence and
IT consulting services, will not be
carried out by Ernst & Young LLP.
Disclosure of information to auditor
The directors have taken all
reasonable steps to make
themselves aware 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 auditor.
Going concern
The Group’s business activities,
together with the factors likely
to effect its future development,
performance and position are set
out in the Business Review on pages
6 to 35. The financial position of
the Company, its cash flows, net
debt and borrowing facilities and
the maturity of those facilities are
set out in the Finance Director’s
report on pages 28 and 29. In
addition there are further details
in the financial statements on the
Group’s financial risk management,
objectives and policies (note
25) and details of the financial
instruments (note 26 and 27).
The Group has considerable
financial resources and, as a
consequence, the directors believe
that the Group is well placed to
manage its business risks.
The directors have a reasonable
expectation that the Company has
adequate resources to continue
in operational existence for the
foreseeable future. Thus they
continue to adopt the going
concern basis of accounting in
preparing the financial statements.
Annual General Meeting
The AGM will be held at 2.00pm
on 22 June 2010 at the Queen
Elizabeth II Conference Centre,
Broad Sanctuary, Westminster,
London SW1P 3EE. The notice of
meeting is enclosed with this report
for those shareholders receiving
hard copy documents, and available
at www.whitbread.co.uk for those
who elected to receive documents
electronically. At the 2010 AGM, all
voting will be by poll. Electronic
handsets will be utilised and results
will be displayed on the screen at
the meeting.
By order of the Board.
Simon Barratt
General Counsel and Company
Secretary
28 April 2010
Registered Office:
Whitbread Court
Houghton Hall Business Park
Porz Avenue
Dunstable
Bedfordshire
LU5 5XE
Registered in England: No. 4120344
The directors’ report has been
drawn up and presented in
accordance with and in reliance
upon applicable English company
law and any liability of the directors
in connection with this report shall
be subject to the limitations and
restrictions provided by such law.
The directors’ report includes the
Chairman’s statement on pages
4 and 5, the Business Review on
pages 6 to 35 and this report on
pages 39 to 42.
The Annual Report and Accounts
contain certain statements about
the future outlook for the Group.
Although the Company believes
that the expectations are based
on reasonable assumptions, any
statements about future outlook
may be influenced by factors that
could cause actual outcomes and
results to be materially different.
Corporate governance report
43
At Whitbread, we believe that good
corporate governance is essential
protection for our shareholders.
It is about ensuring that we run
the Company with integrity and
transparency. In this report Simon
Barratt, General Counsel, explains
how the main and supporting
principles of the June 2008
Combined Code on Corporate
Governance (which is available at
www.frc.org.uk) are being applied.
Did Whitbread comply with the
Combined Code?
During the year the Company
complied with all provisions set out
in Section 1 of the Combined Code
with the exception of A.4.1, which
deals with the membership of the
Nomination Comittee. The Board
believes that the membership of
the Committee was appropriate for
the activities it carried out during
the year and detailed information
on these activities can be found on
pages 44 and 45.
How did the Board satisfy itself
of the adequacy of its governance
procedures?
The General Counsel prepared
a full report on the Company’s
governance arrangements, which
was considered at the January
Board meeting. In addition,
the Company takes the view
that corporate governance is
not a matter for the Board or
its committees alone and has
developed a Code of Conduct for
employees. This covers dealings
with customers, suppliers and
government officials; safeguarding
the Company’s assets; keeping
accurate and reliable records;
and avoiding conflicts of interest.
Its principal message is that all
employees must observe a code of
conduct based on honesty, integrity
and fair dealing. The code was
updated during the year.
Details of how Whitbread has
applied the main and supporting
principles of the Combined Code
with regard to remuneration can be
found in the Remuneration report
on page 45. In addition, details of
the membership and activities
of the Remuneration Committee
can be found on page 45.
http://annualreport.whitbread.co.uk
The Board
Who is on the Board of directors?
The Board currently comprises the
Chairman, three executive directors
and five independent non-executive
directors, one of whom has been
appointed Senior Independent
Director. Biographies of each of the
Directors are set out on pages 36
and 37 of the Annual Report.
Is there clarity between the roles of
the Chairman and Chief Executive?
The roles of Chairman and Chief
Executive are separate, with
responsibilities clearly divided
between them.
The Chairman is responsible for:
• running the Board and setting
its agenda;
• ensuring, through the General
Counsel, that the members of
the Board receive accurate,
timely and clear information
and that there is a good flow
of information;
• managing the Board to ensure
that sufficient time is allowed
for the discussion of complex
or contentious issues;
• ensuring that the directors
continually update their
knowledge and capabilities;
• ensuring that the members of the
Board develop an understanding
of the views of the major
investors; and
• the annual evaluation of the
performance of the Board and its
committees and implementing
the action required following such
evaluation.
The Chief Executive is responsible for:
• setting the strategic direction for
the Company;
• overseeing the day-to-day
management of the Company;
• the line management of senior
executives;
• the activities of the Whitbread
Directors’ Forum – a group of
the Company’s most senior
executives; and
• ensuring effective communication
with shareholders and employees.
How does the Board demonstrate
independence?
The Board is committed to
ensuring a majority of directors are
independent. The non-executive
directors all act in an independent
and challenging manner at
meetings. Additionally, the
Combined Code lists a number
of circumstances that might call
Board
Audit
Committee
Nomination
Committee6
Remuneration
Committee
Number of meetings
in the financial year
Anthony Habgood
Alan Parker
Patrick Dempsey
Christopher Rogers
Richard Baker1
Wendy Becker2
Philip Clarke3
Charles Gurassa4
Simon Melliss
11
11
11
11
11
6
11
8
5
11
Stephen Williams5
10
3
–
–
–
–
1
2
–
2
3
–
5
5
3
–
–
3
2
1
–
2
5
7
7
–
–
–
–
7
6
–
–
7
Anthony Habgood, Alan Parker and Christopher Rogers all attended Audit Committee
meetings although they are not members of that committee. Alan Parker attended
Remuneration Committee meetings (except when his own remuneration was being
discussed), but is not a member of the Remuneration Committee.
(1) Richard Baker was appointed as a director on 7 September 2009. Six Board meetings
and one Audit Committee meeting were held after that date.
(2) Wendy Becker was absent from one Audit Committee meeting due to work
commitments.
(3) Philip Clarke was absent from two Board meetings due to illness and one Board meeting
due to work commitments abroad.
(4) Charles Gurassa resigned as a director on 7 September 2009. Five Board meetings and
two Audit Committee meetings were held up to that date.
(5) Stephen Williams was absent from one Board meeting due to work commitments.
(6) Number of meetings includes three Chief Executive Succession Committee meetings.
44 Annual Report 2009/10
the independence of a director into
question and the Board is satisfied
that no such circumstances exist for
any of the Company’s non-executive
directors.
How does the Board operate
and what were its key activities
during the year?
The Board holds meetings regularly
and, additionally, for specific
purposes, as and when required.
During the year there were 11
Board meetings. Attendance by
directors at Board meetings and
Board committees is set out in
the table on page 43. Before each
Board meeting directors are given
timely and appropriate information,
including monthly financial and
trading reports.
During the year the Board agreed
the business plans for the Group,
Hotels and Restuarants and
Costa, set the budget for the year,
reviewed the half year and full year
results, monitored the performance
of the businesses and approved
significant transactions such as the
acquisition of Coffeeheaven.
How does the Board review
its performance?
During the year the performance of
the Board, and individual directors’
contributions to the Board, are
appraised by the Chairman. This
year each director completed a
formal questionnaire on the Board’s
performance and the Chairman met
or spoke to each director on a one
to one basis. The performance of
the Board’s committees was also
reviewed during the year.
The results of the review were
discussed by the Board and
appropriate action plans were
agreed. There was a consistently
positive response from directors on
the effectiveness of the Board and its
committees. The main themes arising
from the review were around target
setting and training. Actions to deal
with the points raised have been
implemented.
The performance of the Chairman
is evaluated during the year by
the Senior Independent Director
who reviews the Chairman’s
performance with each of the
directors and discusses the results
with the Chairman.
How are directors kept up to date
with new developments?
During the year directors attended
training courses and seminars, or
received tailored training, on a number
of relevant issues including:
• company law;
• pensions; and
• corporate governance.
appraising and approving all
major capital and revenue
projects and change programmes.
A post completion review of each
major project is undertaken;
• financial policies, controls and
procedures manuals, which are
regularly reviewed and updated;
• the limits of authority, which
The Board receives a regular investor
relations report, which includes share
price performance, movements in
institutional holdings and the reaction
of investors to the communications
programme.
Internal control
Does the Company maintain
adequate systems of internal control?
The Board is responsible for the
Group’s systems of internal control
and risk management, and for
reviewing their effectiveness. These
systems are designed to manage
rather than eliminate risk of failure
to achieve business objectives.
They can only provide reasonable,
and not absolute, assurance against
material misstatement or loss.
The Board has established an
ongoing process for identifying,
evaluating and managing the
Group’s significant risks. This process
was in place throughout the 2009/10
financial year and up to the date of
this report. The process is regularly
reviewed by the Board and accords
with the internal control guidance
for directors in the Combined Code.
A report of the key risks can be
found on pages 34 and 35.
Key elements of the Group’s risk
management and internal control
system include:
• the formulation, evaluation and
annual approval by the Board
of business plans and budgets.
Actual results are reported
monthly against budget and the
previous year’s figures. Key risks
are identified and action plans
prepared accordingly;
• the production by each business
of a risks and controls matrix,
covering major risks and plans
which are considered regularly
by the management boards and
form the basis of the Group risks
matrix considered by the Audit
Committee;
• a regular review by the Board of
changes in the major risks facing
the Group and development of
appropriate action plans;
• the consideration of risks and
appropriate action plans, when
are prescribed for employees.
Whitbread’s organisational
structure allows the appropriate
segregation of tasks;
• the Code of Conduct, which is
communicated to employees;
• the PwC operational audit team
activity, which reports on the
effectiveness of operational and
financial controls across the Group;
• the Audit Committee regularly
reviews the major findings from
both operational and external
audit. Further details can be
found on page 45.
Management and specialists
within the finance department
are responsible for ensuring
the appropriate maintenance of
financial records and processes that
ensure all financial information is
relevant, reliable, in accordance with
the applicable laws and regulations,
and distributed both internally
and externally in a timely manner.
A review of the consolidation and
financial statements is completed
by management to ensure that the
financial position and results of the
Group are appropriately reflected.
All financial information published
by the Group is subject to the
approval of the Audit Committee.
The Board, acting through the
Audit Committee, has directed the
work of PwC’s operational audit
team towards those areas of the
business that are considered to be
of the highest risk. The Committee
approves a rolling audit programme,
ensuring that all significant areas
of the business are independently
reviewed within at least a three year
period. The programme and findings
of the reviews are continually
assessed to ensure they take
account of the latest information
and, in particular, the results of the
annual review of internal controls.
The effectiveness of the operational
audit team is reviewed annually by
the Committee. The Committee
considers the principal risks
identified by the risk management
process which are also considered
by the main and management
boards throughout the year.
45
a series of interviews with each
candidate was held in January
and February. Psychometric
assessments were carried out
and references were taken. At a
meeting of the Committee on 24
February 2010, it was unanimously
agreed that Andy Harrison be
recommended to the Board for
the role of Chief Executive. At a
Board Meeting on 3 March 2010
the Chairman made a formal
proposal (which was seconded by
Alan Parker) that Andy Harrison
be appointed as Chief Executive
Designate, joining the Company on
1 September in that role and then
as Chief Executive on 25 November
2010 on Alan Parker’s retirement.
This proposal was unanimously
agreed and Andy's appointment
was publicly announced.
Nomination Committee – General
Members of Committee:
Anthony Habgood (Chairman)
Simon Mellis
Alan Parker
Stephen Williams
The Nomination Committee
assesses the level of experience
and capability of the Board and
makes recommendations to the
Board on new appointments. During
the current year it recommended
the appointment of Richard Baker
having appointed an external search
consultancy. The appointment
followed the retirement of Charles
Gurassa. Richard Baker was chosen
for his wealth of experience in
customer-facing industries and his
experience at senior Board level.
Board committees
What committees does the
Board have?
The Company has an Audit
Committee, a Nomination Committee
and a Remuneration Committee. The
committees operate within defined
terms of reference, copies of which
can be found on the Company’s
website: www.whitbread.co.uk. The
Board is satisfied that at least one
member of the Audit Committee
has recent and relevant financial
experience but has determined not
to identify any individual as having
such experience.
Audit Committee
Members of Committee:
Simon Melliss (Chairman)
Richard Baker
Wendy Becker
The Audit Committee comprises
three non-executive directors under
the chairmanship of Simon Melliss
who is Group Financial Director of
Hammerson PLC. Richard Baker
replaced Charles Gurassa on this
committee when he retired from
the Board.
The Committee generally holds
three meetings in a year. In
October and April each year the
Committee considers the half
and full year financial statements
respectively. As part of that process
the management team present
the statements to the Committee
with the external auditors (Ernst &
Young) and operational auditors
(PwC) present. Ernst & Young
present a paper on the audit/review
process and the main points of
discussion that have arisen. PwC
report on the internal audits carried
out in the respective periods.
In March each year the Committee
considers internal control processes
including Treasury, Tax and retail
audit reports along with a Group
risk analysis.
The terms of reference of the
external and operational audits are
considered each year along with
the effectiveness of the Committee
itself. The Committee also meets
with both the external and
operational auditors without the
executive team being present.
Remuneration Committee
Members of Committee:
Philip Clarke (Chairman)
Anthony Habgood
Wendy Becker
Stephen Williams
The Remuneration Committee’s
role is to assist the Board in
determining the remuneration of
the executive directors and the
Chairman, approving the executive
incentive schemes and monitoring
the remuneration of other senior
executives. Full details of the
Committee’s work are set out in the
remuneration report on pages 47
to 50.
Nomination Committee –
Chief Executive succession
Members of Committee:
Anthony Habgood (Chairman)
Richard Baker
Wendy Becker
Philip Clarke
Simon Melliss
Stephen Williams
It was announced in early March
that Andy Harrison will succeed
Alan Parker as Chief Executive
when he retires in November 2010.
A Committee of the Chairman and
all the non-executive directors was
set up to oversee the selection
process. The recruitment firm,
Spencer Stuart was appointed
by the Committee. Following a
review of their initial report, a list of
candidates was compiled and
http://annualreport.whitbread.co.uk
How does the Company interact
with private investors?
Annual and interim results
presentations are webcast live so
that all shareholders can receive
the same information at the same
time. The Company has taken
advantage of the provisions in the
Companies Act 2006, which allows
communication to be made to
shareholders electronically unless
they have requested hard copy
documentation. The Company’s
website provides comprehensive
information for private shareholders,
with the Annual Report and
Accounts, trading statements,
interim management statements
and public announcements all being
available at www.whitbread.co.uk.
Private shareholders have the
opportunity to put questions to
the Board at the Annual General
Meeting and at all other times
by emailing or writing to the
Company. Wherever possible, all
directors attend the AGM. At the
2010 AGM, all voting will be by
poll. Electronic handsets will be
utilised and results will be displayed
on the screen at the meeting. In
addition, the audited poll results
will be disclosed on the Company’s
website following the meeting,and
announced by regulatory news
service. The information that is
required by DTR 7.2.6, information
relating to the share capital of the
Company, can be found within the
Directors’ Report on pages 39
and 40.
46 Annual Report 2009/10
Shareholder relations
Any shareholder may contact the
Chairman or, if appropriate, the
Senior Independent Director to
raise any issue, including those
relating to strategy and governance.
Alternatively, shareholders may
raise any such issues with one or
all of the non-executive directors
of the Company. The General
Counsel can facilitate any such
communication if requested.
Recent topics of interest to investors
have been the performance of
Premier Inn during the recession
and its growth in the UK.
How does the Company interact
with institutional investors?
Institutional shareholders, fund
managers and analysts are briefed at
regular meetings and presentations.
Following the full year and interim
results in April and October
respectively, the Chief Executive
and the Finance Director have
meetings with institutional investors.
An Investor Day was held on 28
January 2010, at which presentations
were made by the Chief Executive,
Finance Director and the Managing
Directors of the businesses. A large
number of investors attended. The
Chairman and a non-executive
director were also present at that
meeting. The Chairman also had
meetings with a number of the
largest shareholders in the Company
during the year and spoke to them
following the announcement of
Andy Harrison's appointment. At
the annual Board Strategy meeting
on 17 November 2009, reports were
presented which described the
views of major shareholders of the
Company and its current strategy. It
is therefore believed that the Board,
including the Senior Independent
Director, has an adequate
understanding of the issues and
concerns of major shareholders.
No other meetings have been
requested by shareholders with the
Chairman or Senior Independent
Director. Non-executive directors
are able to attend these meetings
and would do so if requested by
major shareholders.
Remuneration report
47
Introduction from Philip Clarke
The future success of Whitbread
is dependent on the skills and
enthusiasm of the people who
work in our businesses. It is
important that our employees
are appropriately incentivised
and rewarded to continue to
deliver outstanding service to
our customers and value to our
shareholders.
In this report you will find a
summary of key facts, information
about our remuneration policy
and the TSR graph, followed
by a series of questions and
answers. The usual tables outlining
directors’ remuneration, pension
arrangements and share scheme
participation are at the back of this
report. The remuneration report
will be the subject of a shareholder
resolution to be proposed at the
AGM. There are parts of this report
that have to be audited and these
are clearly marked as ‘audited
information’.
There have been no substantive
changes to the remuneration policy
for 2009/10. The Remuneration
Committee will be undertaking a full
review of the remuneration policy
during 2010/11. Key points I wish to
highlight to shareholders are:
• senior executives, including
•
the executive directors, did not
receive any salary increases
in 2009;
in light of the economic
uncertainty the maximum annual
bonus potential for 2009/10 was
reduced from the 2008/09 level
and a wider bonus range was set.
This principle has been retained
for 2010/11;
• the increase in profits has resulted
in good bonuses deservedly being
awarded, with about two-thirds
of these bonuses paid in deferred
shares; and
• the 2007 LTIP award has vested
at 75.9% of its maximum.
Membership of the
Remuneration Committee
External advisers
Philip Clarke (Chairman since
1 September 2009)
Wendy Becker
Anthony Habgood
Stephen Williams
Simon Barratt (Secretary)
Hewitt New Bridge Street
Towers Watson
Slaughter and May
Internal adviser
Louise Smalley (Group HR Director)
Remuneration policy
Directors’ service contracts
(all available for inspection at
the Company’s registered office)
Chairman and non-executive
directors – Dates of appointment
letters
(all available for inspection at the
Company’s registered office)
(Note: none of the non-executive
directors has a service contract)
Non-executive directors’ fees
To pay our people fairly in a
manner that supports our goals,
incentivises them to achieve those
goals and is responsible having
regard to the interests of all the
Group’s stakeholders
All executive directors have
rolling contracts of employment
with notice periods of 12 months.
Commencement dates for the
contracts are:
Patrick Dempsey: 8 September 2004
Alan Parker: 1 September 1992
Christopher Rogers: 1 May 2005
Anthony Habgood – 14 April 2005
Wendy Becker – 17 January 2008
Philip Clarke – 29 November 2005
Simon Melliss – 23 March 2007
Stephen Williams – 25 April 2008
Richard Baker – 4 September 2009
Base fee: £55,000
Chair of Audit/Remuneration
Committee: £10,000
Senior Independent
Director: £10,000
Fees retained from external
directorships
Alan Parker: £59,435
Christopher Rogers: £45,000
Terms of reference
Available at www.whitbread.co.uk
Total shareholder return
Source: Thomson Reuters
250
200
150
100
50
0
3 Mar 05
2 Mar 06
1 Mar 07
28 Feb 08
26 Feb 09
4 March 10
This graph looks at the value, by 4 March 2010, of £100 invested in Whitbread PLC on 3 March 2005
compared, on a consistent basis, with that of £100 invested in the FTSE 100 Index based on
30 trading day average values.
Whitbread PLC
FTSE 100 Index
http://annualreport.whitbread.co.uk
48 Annual Report 2009/10
Questions & Answers
In this section, Philip Clarke answers
questions on how remuneration is
managed at Whitbread.
is sufficiently competitive to attract,
retain and motivate executives with
the necessary attributes.
Does Whitbread’s Remuneration
Committee fully meet the
requirements of the Combined
Code on Corporate Governance?
Yes, the membership of the
Committee is compliant with the
Combined Code.
The Combined Code (which is
available at www.frc.org.uk) sets
out the duties and powers which
companies are expected to delegate
to their remuneration committees.
Whitbread’s Committee has terms
of reference (available at www.
whitbread.co.uk or by requesting
a copy in writing from the General
Counsel’s office) which set out
its duties and powers and these
terms of reference comply with the
Combined Code.
The Committee met seven times
in 2009/10. The attendance
of individual members of the
Committee at meetings is shown
on page 43.
Who provides advice to the
Committee?
The Committee has appointed
independent remuneration
consultants Hewitt New Bridge
Street and Towers Watson to provide
external advice. Internal advice is
received from the Group Human
Resources Director, Louise Smalley.
Simon Barratt, General Counsel, acts
as Secretary to the Committee.
The Whitbread Group receives
advice on the implementation of
the Committee’s decisions and
recommendations from Hewitt
New Bridge Street, Towers Watson
and Slaughter and May. Neither
Hewitt New Bridge Street or Towers
Watson provide other services to
the Whitbread Group, although a
different part of the Hewitt group
provides services to the trustee
of the Company’s pension fund.
Slaughter and May provides legal
services to the Whitbread Group.
We are determined to ensure
that the interests of executives
and shareholders are aligned and
we recognise the importance of
having a significant proportion of
an executive’s remuneration being
linked to performance as well as the
importance of the balance between
short and long-term rewards.
How are base salaries determined?
We review base salaries on an
annual basis and consider a number
of factors, including market data
as well as pay and employment
conditions across the Group. When
awarding a base salary increase to
an executive director, we take into
account the personal performance
of the director measured against
agreed objectives as well as the
trading circumstances across the
whole Group. Any salary increases
take effect from 1 May. In 2009
we applied a salary freeze and
have maintained this approach
for executive directors in 2010.
The Committee has awarded a
10% salary increase to Christopher
Rogers as a market adjustment,
with effect from 1 May 2010.
Fees for the Chairman and non-
executive directors will remain
unchanged this year.
Are executives entitled to
other benefits?
All executives are entitled to life
assurance and private health cover.
Non-core benefits, for which cash
alternatives are available, are family
health cover and a fully expensed
company car.
What are the pension arrangements
for executive directors?
The final salary section of the
Whitbread Group Pension Fund was
closed to new entrants, including
directors, on 31 December 2001. New
recruits since that date are offered
the opportunity to participate in the
defined contribution section of the
scheme.
What are the main principles of
Whitbread’s remuneration policy?
It is important that our senior
executives have the skills, expertise,
enthusiasm and drive to achieve the
Group’s objectives and to enhance
shareholder value. Our job is to ensure
that the overall remuneration package
Our policy is to pay a Company
contribution of 25% of salary for
executive directors, with these
contributions being increased
by a further 2.5% of salary after
each of five and ten years’ service.
Executives are given the option
of receiving a monthly amount
in cash (less an amount equal to
the employer’s national insurance
payable on the amount) instead of
the company pension contribution.
Alan Parker opted out of the final
salary section of the pension
scheme on 31 May 2005 and
receives a cash supplement instead.
Christopher Rogers and Patrick
Dempsey participate in the defined
contribution scheme and receive
cash or pension contributions in line
with their selection. Full details of
the directors’ pension entitlements,
including cash supplements, can be
found on page 51.
What is the Directors’
Incentive Scheme (DIS)?
The DIS, which was implemented in
2004/05 and was formerly known
as the Leadership Group Incentive
Scheme, is a bonus scheme which
applies to over 50 executives. The
scheme is intended to provide a
clear link between performance
and reward in order to motivate key
executives. It promotes alignment
with shareholders by providing an
emphasis on equity rewards and
promotes retention by deferring a
significant part of the awards.
How does the DIS work?
At the beginning of each financial
year profit targets are set for the
Group and its businesses. Depending
on the performance achieved
during the year, awards of cash and
deferred shares may be made at the
end of the year. The cash element of
the bonus is payable immediately.
The deferred shares will normally be
transferred into the executive’s name
three years after the award date
as long as the executive remains
employed by the Whitbread Group
during that period. Staggered
vesting, with one third of the award
vesting on each of the first, second
and third anniversaries of grant
applies to executives who are not
Executive Committee members.
The threshold, target and stretch
bonus potential will remain the
same for the 2010/11 financial
year, although the level of stretch
above budget has been marginally
reduced. The levels of cash and
deferred shares (expressed as
percentages of base salaries) that
can be awarded at different levels of
performance to executive directors
are as follows:
49
(TSR) and earnings per share (EPS)
growth as shown on page 50.
The measurement of relative TSR
will compare Whitbread’s TSR
with that of a comparator group
of companies over a three-year
period. For the 2010 awards, this
is from 5 March 2010 to 1 March
2013. Averaging will take place
before the start and end of the
performance period to reduce the
impact of short-term share price
fluctuations. The Committee has
decided that the most appropriate
comparator group for 2010 awards
continues to be the FTSE 51-150
excluding certain sectors: asset
managers, consumer finance, equity
investment instruments, investment
services, life insurance, non-life
insurance, mining, oil & gas and
speciality finance.
Our policy for the EPS targets is
that there must be real growth of
4% to 10% per annum from the most
recent EPS figure at the time of
grant. Again this is measured over
three years with the third year’s EPS
determining the vesting level. For
the 2009 awards, and as disclosed
in last year’s remuneration report,
the Committee had to adapt this
policy to take account of 2008/09’s
record EPS figure and the economic
uncertainty. The EPS and TSR
targets for the 2009 awards, as well
as those made in 2006, 2007 and
2008 are set out in the table on
page 53.
The TSR calculations are produced
for the Committee by Hewitt
New Bridge Street, while the EPS
calculations are verified by the
Company’s auditor Ernst & Young
LLP. The results are considered by
the Committee before the vesting
level is confirmed.
Have any LTIP awards vested
in 2010?
The awards made in 2007 were
subject to a relative TSR performance
condition and EPS condition. The EPS
performance condition was met in full
and TSR condition was met to 51.8%
(Whitbread was between the median
and upper quartile of the FTSE 51-150
comparator group), resulting in an
overall vesting level of 75.9%.
Below threshold Nil
At threshold
On target
2% cash
4% deferred
shares
20% cash
42% deferred
shares
Stretch or above 53% cash
(maximum
payable)
94% deferred
shares
Straight lines will operate between
the above levels of performance.
Threshold will be the minimum
target at which awards will be
earned, targeted level of
performance will be consistent with
budgeted performance and stretch
will be significantly above budget.
In addition to the profit targets
explained above, the Group,
together with each business, has a
financial target. The failure to meet
this target would result in the
reduction of cash and deferred
shares payable as outlined above
being reduced by 25%.
In view of the importance of the
Chief Executive transition process,
the Committee has set an additional
range of non-profit targets for Alan
Parker this year. The maximum
bonus payable for achieving all
these targets will be 50% of salary.
Alan will not be granted an LTIP
award in 2010.
Targets for future financial years
will be determined by the
Committee at, or near to, the
beginning of each financial year.
The Committee assesses the profit
results at the end of each financial
year, as well as the performance
of each executive director against
pre-determined targets before
agreeing the awards, which are then
independently verified by Hewitt
New Bridge Street.
Whitbread uses the WINcard to
manage its businesses, but to what
extent are executives incentivised
based on WINcard measures?
Profit growth, a key WINcard
measure, is the basis for awards
made under the DIS. Executives
may also earn a maximum cash
bonus of 20% of base salary
for meeting other WINcard
http://annualreport.whitbread.co.uk
targets. These targets apply to
all management throughout the
Company. They are set at the
beginning of the financial year
and, for directors, they are reviewed
and approved by the Committee
after the year-end. For the first
time, in 2010/11, the WINcard
bonus will be reduced in the event
that a health and safety hurdle is
not achieved. Further details on
the WINcard can be found on
page 32.
Is the Long Term Incentive Plan
(LTIP) another incentive scheme?
Yes, although it serves to drive future
performance and retention rather
than to reward past performance.
The DIS rewards executives for
their performance at the end of a
successful year, with an immediate
cash bonus and an award of
deferred shares. Once those
deferred shares have been awarded,
they will normally be transferred to
the executive as long as they remain
a Whitbread employee.
The LTIP, by contrast, is all about
the future. It rewards executives
if earnings and relative total
shareholder return over a three-year
period exceed specified hurdles.
Executive directors will be granted
awards in 2010/11 as follows:
Christopher Rogers
125%
Patrick Dempsey
100%
Alan Parker
0%
The shares will normally only be
transferred into the executive’s
name in the event that the
executive remains a Whitbread
employee and that performance
conditions are met over a three-
year performance period.
How are the LTIP performance
conditions selected and what
are they?
The Committee selects conditions
that it believes will closely align
the interests of executives to those
of shareholders.
For awards made in 2010, as
was the case for grants made in
2008 and 2009, two performance
conditions have been selected.
Each condition will apply to half
of the awards. The two conditions
are relative total shareholder return
50 Annual Report 2009/10
The LTIP awards granted in 2010 will vest in three years’ time as follows:
TSR Condition
Position at which the Company is ranked
Proportion of award vesting to executive
Upper quartile and above
Full vesting of half the award
Between median and upper quartile
Median (threshold)
Below Median
EPS Condition
Pro rata on a straight line between
quarter and full vesting of half the award
Quarter of half the award vests
This half of the award does not vest
2012/13 EPS: required annual percentage growth
above Whitbread’s 2009/10 EPS
Proportion of award vesting to executive
RPI +10% or above per annum
Full vesting of half the award
Between RPI +4% and RPI +10% per annum
Pro rata on a straight line between
quarter and full vesting of half the award
RPI +4% per annum (threshold)
Quarter of half the award vests
Below RPI +4% per annum
This half of the award does not vest
Are executive directors required
to hold Whitbread shares?
Under our share ownership
guidelines executive directors
are required to build and hold a
shareholding equal to 100% of their
salary within five years and other
senior executives 50% of salary.
What will the new Chief Executive
be paid?
When Andy Harrison joins
Whitbread in September 2010
he will receive £700,000 per
annum together with 25% in lieu
of pension contribution. He will join
the Directors’ Incentive Scheme for
2010/11 on the same basis as the
other executive directors.
He will be granted shares to the
value of 175% of salary subject to
the terms of the LTIP. Provided
he acquires £1 million worth of
shares by the end of the financial
year 2010/11, he will be granted a
matching award, with vesting three
years later depending on continued
service, retention of all of his
acquired shares and satisfaction of
performance conditions based on
the 2010 LTIP award, but with no
vesting at threshold performance.
Full details will be disclosed in next
year’s remuneration report.
51
Directors’ remuneration for the year to 4 March 2010 (audited information)
The table below shows a breakdown of the various elements of pay received by the directors for the period from
27 February 2009 to 4 March 2010
Basic salary
Cash in
lieu of
pension
Taxable
benefits
Performance related
awards*
Total excluding
pensions
£
Chairman
Anthony Habgood
300,000
Executive directors
Patrick Dempsey
400,216(1)
£
–
–
Alan Parker
741,564(1)
190,293
£
–
26,723
13,434
Cash
Deferred
equity
2009/10
2008/09
£
–
£
–
£
£
300,000
300,000
275,261
370,827
1,073,027
798,269(6)
522,315
672,570
2,140,176
1,695,005
Christopher Rogers
465,540(1)
98,670
981
324,996
418,488
1,308,675
1,037,787
Non-executive directors
Richard Baker
Wendy Becker
Philip Clarke
Charles Gurassa
Simon Melliss
Stephen Williams
26,533(2)
55,000
60,000(4)
33,555(2)(4)
65,000(3)
65,000(5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26,533(2)
55,000
60,000
–
55,000
55,000
33,555
(2)(4)
65,000
65,000
65,000
65,000
50,603(2)
–
–
–
–
–
Total emoluments for the year were £5,131,966 (2008/09: £4,127,081)
*
The performance related awards include two cash elements (one of which is based on WINcard targets) and a deferred equity
element described on pages 48 and 49. In addition, Patrick Dempsey and Christopher Rogers received awards under the Long Term
Incentive Plan (LTIP) to the value of £400,000 and £556,500 respectively. The LTIP awards are conditional on the achievement of a
combined TSR/EPS target described on pages 49 and 50.
Includes a non-pensionable car allowance.
(1)
(2) Fees/salary for part-year.
(3) Includes fees as Chairman of the Audit Committee.
(4) Includes fees for part-year as Chairman of the Remuneration Committee.
(5) Includes fees as Senior Independent Director.
(6) Total for the full year, of which £134,503 was received following his appointment as an executive director.
Directors’ pension entitlements
(audited information)
None of the executive directors are
accruing benefits under any other
company pension arrangements. No
elements of the executive directors’
pay packages are pensionable
other than base salaries. Neither
the Chairman nor any of the non-
executive directors are entitled to
participate in any of these pension
arrangements.
Defined Benefit
Alan Parker was the only executive
director remaining in the defined
benefit scheme and he elected to
take his pension on 28 February
2010 as permitted by the Fund’s
rules. No discretion was applied
and he will receive a pension of
£135,439 p.a. (accumulated accrued
benefit at 28 February 2009 was
£128,990). As a result of his decision
to take the pension, the transfer
value* as provided for him in the
Fund is reduced to zero (2008/09:
£2,945,158).
In respect of his service up to
31 March 2005 Alan Parker was also
entitled to a defined benefit pension
under the Whitbread Group Pension
Fund. As disclosed in the 2005/06
annual report (and every report since
then) in 2005 we decided to end
future accrual under this pension
arrangement and crystalised the
capital sum payable under it. The
advantages for Whitbread in doing
this included breaking the link
between this pension entitlement
and future salary increases and
derisking the liability to make cash
payments in the years following
Alan’s retirement. Alan’s decision to
take his pension triggered payment
of this capital pension payment of
£5,418,190 in cash from the pension
scheme to him.
* Transfer values represent a liability of
the pension fund, not a sum paid to
the individual.
Defined Contribution
Christopher Rogers received no
employer pension contributions into
the Company’s money purchase
scheme (28 February 2009: £nil).
He received a cash supplement of
£98,670 during the year.
Patrick Dempsey received
employer contributions of
£104,666 into the Company’s
money purchase scheme.
http://annualreport.whitbread.co.uk
52 Annual Report 2009/10
Long Term Incentive Plan (‘the LTIP’)
(audited information)
Potential share awards held by the executive directors under the LTIP at the beginning and end of the year, and
details of awards vesting during the year and their value, are as follows:
Year of
award
26/02/09 Awarded Lapsed Vested 04/03/10
Conditional
award
granted
Performance
period
concludes
Market
price at
award
Price at
exercise
Date
vested
award
exercised
Monetary
value of
exercised
award (£)
Patrick
Dempsey
2006
13,172
2007
20,193
2008
14,894
2009
54,458
–
–
–
–
2010
–
28,272
102,717
28,272
Alan
Parker
Christopher
Rogers
2007
47,127
2008
67,145
2009
121,766
236,038
2006
34,835
2007
29,454
2008
33,423
2009
60,612
–
–
–
–
–
–
–
–
2010
–
39,334
–
13,172
–
01/03/06
28/02/09 1076.5p 06/05/09 925.0p
121,841
–
–
–
–
–
–
–
–
–
–
–
–
–
20,193
01/03/07
28/02/10 1671.0p
14,894
01/03/08
28/02/11 1256.6p
54,458
01/03/09
29/02/12
734.5p
28,272
01/03/10
28/02/13 1414.8p
13,172
117,817
–
–
–
–
47,127
01/03/07
28/02/10 1671.0p
67,145
01/03/08
28/02/11 1256.6p
121,766
01/03/09
29/02/12
734.5p
236,038
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
121,841
–
–
–
–
– 34,835
–
01/03/06
28/02/09 1076.5p 06/05/09 925.0p
322,224
–
–
–
–
–
–
–
–
29,494
01/03/07
28/02/10 1671.0p
33,423
01/03/08
28/02/11 1256.6p
60,612
01/03/09
29/02/12
734.5p
39,334
01/03/10
28/02/13 1414.8p
–
–
–
–
–
–
–
–
–
–
–
–
322,224
158,324
39,334
– 34,835
162,823
Information on the awards made in 2006 and 2007
The 2006 and 2007 awards were made as part of the Whitbread Leadership Group Incentive Scheme. Executive
directors were entitled to an award based on 25% of salary at the threshold level of performance, 62.5% at on target
performance and 125% at stretch performance, with a straight line operating in between. The 2006 award made
to Christopher Rogers reflected the fact that he was a recent joiner with a low level of equity incentives and was
not made as part of the Leadership Group Incentive Scheme. The intention was that he should be appropriately
incentivised to deliver excellent shareholder value.
Information on awards made in 2008 and 2009
The awards made in 2008 and 2009 were calculated as a percentage of the director’s base salary. In both years Alan
Parker received an award to the value of 125% of his base salary and Christopher Rogers received an award to the
value of 100% of his base salary. In 2009 Patrick Dempsey received an award to the value of 100% of his base salary.
Details of the performance conditions and comparator groups for awards made from 2006 to 2009 are shown on
page 53.
Information on the awards made in 2010
Details on the policy with regard to the 2010 awards under the Plan can be found on page 49.
Changes since 4 March 2010
On 19 March 2010, the Remuneration Committee determined that the 2007 LTIP awards had vested at a level of
75.9% and the vested awards were converted to nil cost options. On 22 March 2010, pursuant to Trading Plans
entered into by the executive directors prior to the close period, the nil cost options were automatically exercised.
Alan Parker sold all of the shares at 1511.93p each. Christopher Rogers and Patrick Dempsey sold enough shares to
settle the income tax and NIC liability and retained the balance.
53
LTIP performance conditions
The performance conditions for awards made between 2006 and 2009 are shown below:
Performance
metrics
TSR condition
EPS condition
2006 award
100% TSR
N/A
TSR growth against FTSE
Hotels, Restaurant & Bars and
Recreational Services subsectors
of the FTSE All Share Travel
& Leisure Index with a market
capitalisation above £150 million
– median (25% vests) to upper
quartile (100% vests)
2007 and
2008 awards
50% TSR and
50% EPS
TSR growth against FTSE 51–150
constituents – median (25% vests)
to upper quartile (100% vests)
EPS growth must be at least equal
to or exceed RPI + 4 p.a. (25% vests)
to RPI + 10% p.a. (100% vests)
2009 award
50% TSR and
50% EPS
TSR growth against FTSE 51–150
constituents – median (25% vests)
to upper quartile (100% vests)
2011/12 EPS – less than 92 pence,
nil vesting; 92 pence, 25% vests;
107 pence or more, 100% vests; and
between 92 pence and 107 pence,
pro-rating between 25% and 100%
vesting applies
Deferred Bonus Plan (‘the Plan’) (audited information)
At 4 March 2010 the directors held the following deferred shares under the Plan, which forms part of the
Directors’ Incentive Scheme described on pages 48 and 49:
Patrick
Dempsey
Alan
Parker
Christopher
Rogers
Year of
award
Balance
at
26/02/09
Awarded Lapsed Vested
Balance
at
04/03/10
Release
date
Market price
at award
Date
award
vested
Market
price at
vesting
Monetary
value of
vested
award
2006
2007
2008
2009
2010
2007
2008
2009
2010
2007
2008
2009
2010
10,538
16,154
22,341
26,353
–
–
–
–
–
26,210
– 10,538
– 16,154
–
–
–
–
1076.5p
01/03/09
882.0p
£92,945
1671.0p
04/03/10
1447.7p
£233,861
–
–
–
–
–
–
22,341
01/03/11
1256.6p
26,353
01/03/12
734.5p
26,210
01/03/13
1414.8p
–
–
–
–
–
–
–
–
–
75,386
26,210
– 26,692
74,904
37,701
53,716
58,426
–
–
–
47,538
149,843
47,538
23,563
–
33,423
36,354
–
29,579
93,340
29,579
–
–
–
–
–
–
–
–
–
37,701
–
–
1671.0p
04/03/10
1447.7p
£545,797
–
–
–
53,716
01/03/11
1256.6p
58,426
01/03/12
734.5p
47,538
01/03/13
1414.8p
–
–
–
–
–
–
–
–
–
37,701
159,680
23,563
–
–
1671.0p
04/03/10
1447.7p
£341,122
33,423
01/03/11
1256.6p
36,354
01/03/12
734.5p
29,579
01/03/13
1414.8p
–
–
–
–
–
–
–
–
–
–
–
23,563
99,356
The awards are not subject to performance conditions and will vest in full on the release date subject to the
director remaining an employee of Whitbread to that date. If the director ceases to be an employee of Whitbread
prior to the release date by reason of redundancy, retirement, death, injury, ill health, disability or some other
reason considered to be appropriate by the Remuneration Committee the awards will be released in full. If the
director ceases to be an employee of Whitbread for any other reason the proportion of award which vests
depends upon the year in which the award was made and the date the director ceases to be an employee.
If the director leaves within 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.
http://annualreport.whitbread.co.uk
54 Annual Report 2009/10
Share options
(audited information)
The Remuneration Committee has no intention of granting any further executive options. Executive directors may
participate in the Company’s Savings-related Share Option Scheme which is open to all employees on the same terms.
The exercise periods shown below are the normal exercise periods at the date of grant. Actual exercise periods
are subject to change in accordance with the rules of the schemes when a director ceases to be employed by
the Company.
At 4 March 2010 the directors held the following share options under the Savings-related Share Option Scheme.
All of the executive share options held by directors at the beginning of the year were exercised during the year.
The earliest date on which any of the executive options could have been exercised was June 2005, with the latest
being May 2015. Savings-related share options have a six-month exercise period.
Patrick Dempsey
Number
Date of grant
Exercise price
Exercise date
Last exercise
date
Savings-related Share
Option Scheme
Total number of shares
under option
2,129
30/11/05
756.0p
February 2011
July 2011
2,129
(2,129 at
26/02/09)
Alan Parker
Number
Date of grant
Exercise price
Exercise date
Last exercise
date
Savings-related Share
Option Scheme
Total number of shares
under option
1,318
2/12/08
728.0p
February 2012
July 2012
1,318
(181,318* at
26/02/09)
Christopher Rogers
Number
Date of grant
Exercise price
Exercise date
Last exercise
date
Savings-related Share
Option Scheme
Total number of shares
under option
2,129
30/11/05
756.0p
February 2011
July 2011
2,129
(52,129* at
26/02/09)
* Options held at 26/02/09 included executive share options which have been exercised during the year.
55
Options exercised
(audited information)
Executive Share Option Schemes
Date of
grant
Number
granted
Option
price
Exercise
period
Exercise
date
Number
exercised
Price on
exercise(1)
Gain (£)
Name
Alan
Parker
30/05/02
50,000
641.0p
09/06/03
50,000
642.5p
17/05/04
80,000
756.0p
Christopher
Rogers
23/05/05
50,000
841.0p
June 2005
to June 2012
June 2006
to June 2013
May 2007
to May 2014
May 2008
to May 2015
11/05/09
50,000
867.20p
113,100
11/05/09
50,000
867.20p
112,350
16/12/09
80,000 1388.46p 505,968
08/01/10
25,000
1416.40p
143,850
04/03/10
25,000
1471.53p
157,633
The aggregate gain made by directors on the exercise of options was £1,032,901 (2008/09: £nil).
(1) The price on exercise is either the actual price attained where the shares were sold on exercise, or the mid-market price on the day of
exercise where the shares were retained.
Employee Share Ownership Trust
(ESOT)
The Company funds an ESOT
to enable it to acquire and hold
shares for the LTIP, executive share
option schemes and the Directors’
Incentive Scheme. As at 28 April
2010, the ESOT held 384,190 shares.
The executive directors each have a
technical interest in these shares as
potential beneficiaries of the trust.
All dividends on shares in the ESOT
are waived by the Trustee. During
the period from 5 March 2010 to
28 April 2010, 99,902 shares have
been transferred from the ESOT.
Share price information
(audited information)
The mid-market price of Whitbread
ordinary shares on 4 March 2010
was 1,472.0p (26 February 2009:
748.5p). The highest and lowest
price paid for ordinary shares
during the year were as 1,479.0p
and 693.5p respectively.
Changes since 4 March 2010
The changes in directors’ interests
in ordinary shares since 4 March
2010 are disclosed in the Directors’
Report on page 41 and beneath the
LTIP table on page 52. There have
been no other changes since
4 March 2010.
Signed and approved on behalf
of the Board
Philip Clarke
Chairman, Remuneration
Committee
28 April 2010
http://annualreport.whitbread.co.uk
56 Annual Report 2009/10
Annual Report 2009/10
57
Annual Report 2009/10
57
Consolidated accounts 2009/10
Contents
Consolidated accounts 2009/10
Directors’ responsibility for
the consolidated financial
statements/audit report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement of
changes in equity
62
Consolidated balance sheet
63
Consolidated cash flow statement 64
Notes to the consolidated
financial statements
58
60
61
65
Company accounts 2009/10
Directors’ responsibility for
the Company financial
statements/audit report
Balance sheet
Notes to the accounts
Analysis of shares
Shareholder services
101
102
103
106
107
58 Annual Report 2009/10
Directors’ responsibility for the consolidated financial
statements/audit report
Responsibility statement
We confirm on behalf of the Board
that, to the best of our knowledge:
• the financial statements, prepared
in accordance with International
Financial Reporting Standards as
adopted by the EU, 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
Alan Parker
Chief Executive Finance Director
Christopher Rogers
Statement of directors’
responsibilities
The directors are responsible for
preparing the Annual Report and the
financial statements in accordance
with applicable company law
and those International Financial
Reporting Standards as adopted by
the European Union.
Under Company law the directors
must not approve the Group
financial statements unless they are
satisfied that they present fairly the
financial position of the Company
and of the Group and the results
and cash flows of the Group for that
period. In preparing those financial
statements, the directors are
required to:
• select suitable accounting
policies in accordance with IAS 8:
Accounting policies, changes in
accounting estimates and errors
and then apply them consistently;
• make judgements and estimates
that are reasonable and prudent;
• state that the Group financial
statements comply with IFRS
subject to any material departures
being disclosed and explained in
the financial statements;
• prepare the accounts on a
going concern basis unless it is
inappropriate to presume that the
Group will continue in its business;
• present 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 of 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 accounts 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.
59
reasonableness of significant
accounting estimates made by the
directors; and the overall presentation
of the financial statements.
Opinion on financial statements
In our opinion the Group financial
statements:
• give a true and fair view of the state
of the Group’s affairs as at 4 March
2010 and of its profit for the year
then ended;
• have been properly prepared in
accordance with IFRSs as adopted
by the European Union; and
Other matter
We have reported separately on the
parent company financial statements
of Whitbread PLC for the year ended
4 March 2010 and on the information
in the Directors’ Remuneration
Report that is described as having
been audited.
Les Clifford
(Senior statutory auditor)
for and on behalf of Ernst & Young
LLP, Statutory Auditor
• have been prepared in accordance
London
with the requirements of the
Companies Act 2006 and Article 4
of the IAS Regulation.
28 April 2010
Opinion on other matter prescribed
by the Companies Act 2006
In our opinion:
• the information given in the directors’
Report for the financial year for
which the financial statements are
prepared is consistent with the
Group financial statements; and
• the information given in the
Corporate Governance Statement
set out on pages 43 to 46 in the
Annual Report and Accounts
2009/10 with respect to internal
control and risk management
systems in relation to financial
reporting processes is consistent
with the 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; or
• a Corporate Governance Statement
has not been prepared by the
Company.
Under the Listing Rules we are
required to review:
• the directors’ statement, set out
on page 42, in relation to going
concern; and
• the part of the Corporate
Governance Statement on pages
43 to 46 in the Annual Report and
Accounts 2009/10 relating to the
Company’s compliance with the
nine provisions of the June 2008
Combined Code specified for
our review.
Independent auditor’s report to
the members of Whitbread PLC
We have audited the Group financial
statements of Whitbread PLC for
the year ended 4 March 2010
which comprise the Consolidated
Income Statement, the Consolidated
Statement of Comprehensive
Income, the Consolidated
Statement of Changes in Equity,
the Consolidated Balance Sheet,
the Consolidated Cash Flow
Statement and the related notes
1 to 34. The financial reporting
framework that has been applied
in their preparation 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 auditor’s report and for no
other purpose. To the fullest extent
permitted by law, we do not accept
or assume responsibility to anyone
other than the Company 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 auditors
As explained more fully in the
directors’ Responsibilities Statement
set out above, the directors are
responsible for the preparation of the
Group financial statements and for
being satisfied that they give a true
and fair view. Our responsibility is to
audit the Group financial statements
in accordance with applicable law and
International Standards on Auditing
(UK and Ireland). Those standards
require us to comply with the Auditing
Practices Board’s Ethical Standards
for Auditors.
Scope of the audit of the
financial statements
An audit involves obtaining evidence
about the amounts and disclosures
in the financial statements sufficient
to give reasonable assurance that
the financial statements are free
from material misstatement, whether
caused by fraud or error. This includes
an assessment of: whether the
accounting policies are appropriate
to the Group’s circumstances and
have been consistently applied
and adequately disclosed; the
http://annualreport.whitbread.co.uk
60
Annual Report 2009/10
Consolidated income statement
Year ended 4 March 2010
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit
Share of loss from joint ventures
Share of profit from associate
Operating profit of the Group, joint ventures and associate
Finance costs
Finance revenue
Profit before tax
Analysed as:
Underlying profit before tax
IAS 19 Income Statement (charge)/credit for pension finance cost
Profit before tax and exceptional items
Exceptional distribution costs
Exceptional administrative expenses
Exceptional finance costs
Profit before tax
Underlying tax expense
Exceptional tax and tax on non GAAP adjustment
Tax expense
Notes
3, 4
5
16
17
4
8
8
6
6
6
6
6
9
Profit for the year
Attributable to:
Parent shareholders
Equity minority interest
Earnings per share (note 11)
Earnings per share
Basic for profit for the year
Diluted for profit for the year
Earnings per share before exceptional items
Basic for profit for the year
Diluted for profit for the year
Underlying earnings per share
Basic for profit for the year
Diluted for profit for the year
All operations are continuing
Year to 4 March
2010
£m
Year to 26 February
2009
£m
1,435.0
(213.5)
1,221.5
(830.3)
(138.0)
253.2
(3.1)
0.7
250.8
(43.9)
1.1
208.0
239.1
(15.5)
223.6
(8.1)
(5.9)
(1.6)
208.0
(71.1)
23.1
(48.0)
160.0
161.0
(1.0)
160.0
1,334.6
(193.0)
1,141.6
(782.3)
(132.1)
227.2
(2.1)
1.1
226.2
(35.4)
7.8
198.6
224.4
5.5
229.9
(15.5)
(13.3)
(2.5)
198.6
(68.1)
(40.2)
(108.3)
90.3
91.8
(1.5)
90.3
Year to 4 March
2010
p
Year to 26 February
2009
p
92.37
92.16
90.53
90.33
96.95
96.74
52.82
52.76
93.10
92.99
90.80
90.69
Consolidated statement of comprehensive income
Year ended 4 March 2010
61
Profit for the year
Net gain/(loss) on cash flow hedges
Deferred tax
Actuarial losses on defined benefit pension schemes
Current tax
Deferred tax
Exchange differences on translation of foreign operations
Other comprehensive loss for the year, net of tax
Total comprehensive profit/(loss) for the year, net of tax
Attributable to:
Parent shareholders
Equity minority interest
Year to 4 March
2010
£m
Year to 26 February
2009
£m
Notes
9
32
9
9
160.0
3.0
(0.8)
2.2
(195.7)
28.6
26.3
(140.8)
(0.2)
(138.8)
21.2
22.2
(1.0)
21.2
90.3
(29.6)
8.3
(21.3)
(255.5)
14.0
57.5
(184.0)
5.3
(200.0)
(109.7)
(108.2)
(1.5)
(109.7)
http://annualreport.whitbread.co.uk
62
Annual Report 2009/10
Consolidated statement of changes in equity
Year ended 4 March 2010
Share
capital premium
(note 28) (note 29)
£m
Capital
Share redemption
reserve
(note 29)
£m
£m
Retained Currency Treasury
reserve
earnings translation
(note 29) (note 29)
(note 29)
£m
£m
£m
Merger Hedging
reserve
reserve
(note 29) (note 29)
£m
£m
Minority
interest
£m
Total
£m
Total
equity
£m
At 28 February 2008
148.8 43.8
8.5 3,261.2
– (281.0) (1,855.0)
(9.1) 1,317.2
– 1,317.2
Profit for the year
Other comprehensive income
Total comprehensive income
–
–
–
–
–
–
–
–
–
91.8
(175.7)
(83.9)
–
5.3
5.3
–
–
–
–
(1.5) 90.3
–
91.8
– (29.6) (200.0)
– (200.0)
– (29.6) (108.2) (1.5) (109.7)
Ordinary shares issued
Ordinary shares cancelled
Purchase of own shares
Preference shares cancelled
Cost of ESOT shares
purchased
Loss on ESOT shares issued
to participants
Accrued share-based
payments
Equity dividends
Additions
At 26 February 2009
Profit for the year
Other comprehensive income
Total comprehensive income
Ordinary shares issued
Loss on ESOT shares issued
to participants
Accrued share-based
payments
Deferred tax on
share-based payments
Equity dividends
Scrip dividends
Additions
At 4 March 2010
0.3 2.3
–
(3.8)
–
–
–
–
–
3.8
–
–
–
(73.9)
–
(4.5)
–
–
–
–
–
–
–
–
–
–
145.3 46.1
–
–
–
(2.0)
–
–
–
6.0
(64.1)
–
12.3 3,038.8
–
–
–
–
–
–
–
73.9
(20.0)
–
(1.2)
2.0
–
–
–
–
–
–
–
–
–
–
–
–
2.6
–
(20.0)
(4.5)
(1.2)
–
–
–
–
6.0
(64.1)
–
5.3 (226.3) (1,855.0) (38.7) 1,127.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.6
–
(20.0)
(4.5)
(1.2)
–
–
6.0
–
(64.1)
2.2
2.2
0.7 1,128.5
–
–
–
–
–
–
0.4
3.7
–
–
–
–
0.7
–
–
–
–
–
(0.7)
–
146.4 49.1
–
3.0
3.0
161.0
(138.8)
22.2
(1.0) 160.0
– (138.8)
21.2
(1.0)
–
–
–
–
–
–
161.0
(141.6)
19.4
–
(0.2)
(0.2)
–
(4.3)
5.9
–
–
–
–
–
–
–
4.3
–
–
–
–
–
–
–
–
–
–
4.1
–
5.9
–
–
–
–
0.9
(63.7)
9.8
–
12.3 3,006.8
–
–
–
–
0.9
(63.7)
9.8
–
5.1 (222.0) (1,855.0) (35.7) 1,107.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.1
–
5.9
–
0.9
–
(63.7)
–
9.8
1.3
1.3
1.0 1,108.0
63
26 February
2009
£m
118.9
2,301.1
22.8
1.3
0.9
2,445.0
16.5
.–
67.0
44.5
128.0
–
2,573.0
1.9
19.3
11.8
16.4
243.6
293.0
665.7
21.6
27.6
195.7
233.0
7.9
1,151.5
1,444.5
1,128.5
145.3
46.1
12.3
3,038.8
5.3
(2,120.0)
1,127.8
0.7
1,128.5
4 March
2010
£m
150.0
2,310.7
18.1
1.2
0.9
2,480.9
17.0
6.5
93.9
47.0
164.4
2.3
2,647.6
31.4
21.4
18.9
–
286.3
358.0
529.0
32.4
17.2
160.8
434.0
8.2
1,181.6
1,539.6
1,108.0
146.4
49.1
12.3
3,006.8
5.1
(2,112.7)
1,107.0
1.0
1,108.0
Notes
13
14
16
17
18
19
20
21
14
22
24
26
27
22
24
26
9
32
27
28
29
29
29
29
29
Consolidated balance sheet
At 4 March 2010
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment in joint ventures
Investment in associate
Other financial asset
Current assets
Inventories
Income tax recoverable
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Total assets
Liabilities
Current liabilities
Financial liabilities
Provisions
Derivative financial instruments
Income tax liabilities
Trade and other payables
Non-current liabilities
Financial liabilities
Provisions
Derivative financial instruments
Deferred income tax liabilities
Pension liability
Trade and other payables
Total liabilities
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Retained earnings
Currency translation reserve
Other reserves
Equity attributable to equity holders of the parent
Equity minority interest
Total equity
Alan Parker
Chief Executive
Christopher Rogers
Finance Director
28 April 2010
http://annualreport.whitbread.co.uk
64
Annual Report 2009/10
Consolidated cash flow statement
Year ended 4 March 2010
Profit for the year
Adjustments for:
Taxation charged on total operations
Net finance cost
Total loss from joint ventures
Total income from associate
(Gain)/loss on disposal of property, plant and equipment
and property reversions
Depreciation and amortisation
Impairments of property, plant and equipment
Pension curtailment
Reorganisation provision
Share-based payments
Other non-cash items
Cash generated from operations before working capital changes
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Payments against provisions
Benefits settled by the Company in relation to an unfunded
pension scheme
Additional payment to pension fund
Cash generated from operations
Interest paid
Taxes paid
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds/(costs) from disposal of property, plant and equipment
Business combinations, net of cash acquired
Capital contributions to joint ventures
Dividends from associate
Interest received
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Costs of purchasing own shares
Increase/(decrease) in short-term borrowings
(Repayments)/proceeds from long-term borrowings
Issue costs of long-term borrowings
Dividends paid
Net cash flows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Opening cash and cash equivalents
Foreign exchange differences
Closing cash and cash equivalents
Reconciliation to cash and cash equivalents in the balance sheet
Cash and cash equivalents shown above
Add back overdrafts
Cash and cash equivalents shown within current assets
on the balance sheet
Notes
9
8
16
17
6
13, 14
15
32
31
24
32
32
13
10
12
23
Year to 4 March
2010
£m
Year to 26 February
2009
£m
160.0
90.3
48.0
42.8
3.1
(0.7)
6.6
95.9
1.5
(4.0)
1.3
5.9
8.0
368.4
0.1
(21.6)
39.7
(10.8)
(6.0)
–
369.8
(26.9)
(51.6)
291.3
(127.1)
(4.6)
41.8
(38.8)
(3.2)
0.7
0.3
(130.9)
4.1
–
25.5
(137.1)
–
(53.9)
(161.4)
(1.0)
42.7
(0.2)
41.5
41.5
5.5
47.0
108.3
27.6
2.1
(1.1)
(6.9)
96.3
16.7
–
2.8
6.0
6.1
348.2
(3.3)
(0.6)
10.6
(20.2)
–
(50.0)
284.7
(35.8)
(37.0)
211.9
(275.7)
(0.6)
(1.0)
(30.4)
(17.1)
0.6
2.3
(321.9)
2.6
(25.7)
(9.2)
231.1
(2.3)
(64.1)
132.4
22.4
20.3
.–
42.7
42.7
1.8
44.5
Notes to the consolidated financial statements
At 4 March 2010
65
1 Authorisation of financial statements
The consolidated financial statements of Whitbread PLC for the year ended 4 March 2010 were authorised for
issue by the Board of Directors on 28 April 2010. Whitbread PLC is a public limited company incorporated and fully
domiciled in England and Wales. The Company’s ordinary shares are traded on the London Stock Exchange.
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 PLC and all its subsidiaries have been prepared in accordance
with International Financial Reporting Standards (IFRSs) 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 sterling and all values are rounded to the nearest
hundred thousand except when otherwise indicated. The significant accounting policies adopted are set out below.
As noted in the policy on non GAAP performance measures below, the definition of underlying profit has been amended.
The accounting policies adopted in the preparation of these consolidated financial statements are consistent with
those followed in the preparation of the Group’s annual financial statements for the year ended 26 February 2009,
except for the adoption of the following new Standards and Interpretations that are applicable for the year ended
4 March 2010:
IFRS 2 Share-based Payment – Vesting Conditions and Cancellations
The standard has been amended to clarify the definition of vesting conditions and to prescribe the accounting of an
award that is effectively cancelled because a non-vesting condition is not satisfied. The adoption of this amendment
did not have any material impact on the financial position or performance of the Group.
IFRS 7 Financial Instruments: Disclosures
The amended standard requires additional disclosures of fair value measurement and liquidity risk. Fair value
measurements relating to items recorded at fair value are to be disclosed by source of inputs using a three level fair
value hierarchy, by class, for all financial instruments recognised at fair value. In addition, a reconciliation between
the beginning and ending balance for level 3 fair value measurements is now required, as well as significant transfers
between levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures
with respect to derivative transactions and assets used for liquidity management. The fair value measurement
disclosures are presented in note 26. The liquidity risk disclosures are not significantly impacted by the amendments
and are presented in note 25. As permitted by the amended standard, comparative information for the disclosures
required by the amendments has not been provided in the first year of implementation.
IFRS 8 Operating Segments
This standard sets out requirements for disclosure of information about an entity’s operating segments, its products
and services, the geographical areas in which it operates, and its major customers. The Group determined that the
operating segments were the same as the business segments previously identified under IAS 14 Segment Reporting.
Additional disclosures about each of these segments are shown in note 4, including revised comparative information.
IAS 1 Revised Presentation of Financial Statements
The revised standard has required the reconciliation of movements in equity, previously disclosed in the notes, to be
presented as a primary statement entitled Consolidated Statement of Changes in Equity. In addition, the Consolidated
Statement of Recognised Income and Expense has been replaced with the Consolidated Statement of Comprehensive
Income. The revised standard requires this statement to present all items of recognised income and expense, either in
one single statement, or in two linked statements. The Group has elected to present two statements.
IAS 23 Borrowing costs (revised)
The standard has been revised to require capitalisation of borrowing costs when such costs relate to a qualifying
asset. The revision to this standard has had no effect on the financial position or performance of the Group as
borrowing costs have already been capitalised under the previously allowed alternative treatment.
IFRIC 13 Customer Loyalty Programmes
This interpretation requires customer loyalty award points to be accounted for as a separate component of the
sales transaction in which they are granted. Where award credits are collected on behalf of a third party, they should
not be disclosed as revenue. The adoption of this amendment did not have any impact on the financial position or
performance of the Group.
Basis of consolidation
The consolidated financial statements incorporate the accounts of Whitbread PLC and all its subsidiaries, together
with the Group’s share of the net assets and results of joint ventures and associates incorporated within these
financial statements using the equity method of accounting. These are adjusted, where appropriate, to conform to
Group accounting policies. The financial statements of material subsidiaries are prepared for the same reporting year
as the parent Company.
http://annualreport.whitbread.co.uk
66
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
2 Accounting policies (continued)
Basis of consolidation (continued)
Apart from the acquisition of Whitbread Group PLC by Whitbread PLC in 2000/1, which was accounted for using
merger accounting, acquisitions by the Group are accounted for under the acquisition method and any goodwill
arising is capitalised as an intangible asset. The results of subsidiaries acquired or disposed of during the year are
included in the consolidated financial statements from or up to the date that control passes respectively. All intra-
Group transactions, balances, income and expenses are eliminated on consolidation. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Significant accounting policies
Goodwill
Goodwill arising on acquisition is capitalised and represents the excess of the cost of acquisition over the Group’s
interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill
is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the
carrying value may be impaired. On disposal of a subsidiary, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses.
Intangible assets acquired separately from a business are carried initially at cost. An intangible asset acquired as part
of a business combination is recognised outside goodwill if the asset is separable or arises from contractual or other
legal rights and its fair value can be measured reliably.
With the exception of overseas trading licences, which are deemed to have an infinite life, intangible assets are
amortised over periods of up to 15 years. Amortisation is reported within administrative expenses in the income
statement. The carrying values are reviewed for impairment if events or changes in circumstances indicate that they
may not be recoverable.
Property, plant and equipment
Prior to the 1999/2000 financial year, properties were regularly revalued on a cyclical basis. Since this date the
Group policy has been not to 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 to IFRS as deemed cost at the date of transition. Property, plant and equipment are stated at cost or
deemed cost at transition to IFRS, less accumulated depreciation and any impairment in value. Gross interest costs
incurred on the financing of qualifying assets are capitalised until the time that the 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 buildings are depreciated to their estimated residual values over periods up to 50 years
• Plant and equipment is depreciated over three to 30 years
The carrying values of property, plant and equipment are reviewed for impairment if events 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 carrying amount at the date of disposal and are recognised in the income statement.
Payments made on entering into or acquiring leaseholds that are accounted for as operating leases represent
prepaid lease payments. These are amortised on a straight-line basis over the lease term.
Impairment
The Group assesses assets or groups of assets for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. Individual assets are grouped for impairment assessment
purposes at the lowest level at which there are identifiable cash flows that are largely independent of the cash flows
of other groups of assets (cash generating units or CGUs). If such indication of impairment exists or when annual
impairment testing for an asset group is required, the Group makes an estimate of the recoverable amount.
An assessment is made at each reporting date as to whether there is any indication 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 previously recognised impairment loss is reversed only if there has been a change in the
estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that
is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is recognised in the income statement. After such a reversal, the
depreciation charge is adjusted in future periods to allocate the asset’s carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
67
2 Accounting policies (continued)
Impairment (continued)
The recoverable amount of an asset or CGU is the greater of its fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments 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 amount is determined with
reference to the CGU to which the asset belongs. Impairment losses are recognised in the income statement in the
administrative and distribution line items.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable
amount. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of
any goodwill allocated to the units 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 intangibles
Goodwill acquired through business combinations is allocated to groups of CGUs at the level management monitor
goodwill, which is at strategic business unit level. The Group performs an annual review of its goodwill to ensure
that its carrying amount is not greater than its recoverable amount. In the absence of a comparable recent market
transaction that demonstrates that the fair value less costs to sell of goodwill and intangible assets exceeds their
carrying amount, the recoverable amount is determined from value in use calculations. An impairment is then made
to reduce the carrying 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 are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable.
Consideration is also given, where appropriate, to the market value of the asset, either from independent sources or
in conjunction with an accepted industry valuation methodology.
Assets held for sale
Non-current assets and disposal groups are classified as held for sale only if available for immediate sale in their
present condition and a sale is highly probable and expected to be completed within one year from the date of
classification. Such assets are measured at the lower of carrying amount and fair value less costs to sell and are
not depreciated or amortised.
Inventories
Inventories 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 restructuring costs are recognised when the Group has a present
legal or constructive obligation as a result of a past event, when it is probable that an outflow of resources will be
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 the effect is material, using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the liability. The amortisation of the
discount is recognised as a finance cost.
Non GAAP performance measure
In the prior year, the Group introduced an underlying profit measure on the face of the income statement. The
directors have continued with this measure but refined it so that it now excludes only exceptional items and the
impact of IAS 19 Income Statement finance charge/credit for pensions.
The face of the income statement presents underlying profit before tax and reconciles this to profit before tax as
required to be presented under the applicable accounting standards. Underlying earnings per share is calculated
having adjusted profit after tax for the same items, their tax effect and the effect of any exceptional tax items. The
term underlying profit is not defined under IFRS and may not be comparable with similarly titled profit measures
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:
http://annualreport.whitbread.co.uk
68
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
2 Accounting policies (continued)
Exceptional items
The Group includes in non GAAP performance measures those items which are exceptional by virtue of their size
or incidence so as to allow a better understanding of the underlying trading performance of the Group. The Group
includes the profit or loss on disposal of property, plant and equipment, property reversions and impairment in
exceptional items.
IAS 19 Income Statement finance charge/credit for defined benefit pension schemes
Underlying profit includes the service costs but excludes the volatile finance cost/revenue element of IAS 19.
Taxation
The tax impact of the above items is also excluded in arriving at underlying earnings.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange
quoted at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of initial transactions.
Trading results are translated into the functional currency (generally sterling) at average rates of exchange 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 transactions take place, which is used as a reasonable approximation to the actual transaction
rate. Translation differences on monetary items are taken to the income statement except where they are part of a
net foreign investment hedge, in which case translation differences are reported in other comprehensive income.
The differences that arise from translating the results of foreign entities at average rates of exchange, and their assets
and liabilities at closing rates, are also dealt with in a separate component of equity. On disposal of a foreign entity,
the deferred cumulative amount recognised in equity relating to that particular foreign 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 sterling functional currency. These are translated into sterling in
the Group accounts. Balance sheet items are translated at the rate applicable at the balance sheet date. Transactions
reported in the income statement are translated using an average rate for the month in which they occur.
Revenue recognition
Generally, revenue is the value of goods and services sold to third parties as part of the Group’s trading activities,
after deducting discounts and sales-based taxes. The following is a description of the composition of revenues of
the Group:
Rendering of services
Owned hotel revenue, including the rental of rooms and food and beverage sales from a network of hotels, is
recognised when rooms are occupied and food and beverages are sold. Revenue from franchise fees received in
connection with the franchise of the Group’s brand names is recognised when earned.
Royalties
Royalties are recognised as the income is earned.
Sale of goods
Revenue from the sale of food and beverages is recognised when they are sold.
Finance revenue
Interest income is recognised as the interest accrues, using the effective interest method.
Leases
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 operating profit on a
straight-line basis over the period of the lease. Lease incentives are recognised as a reduction of rental costs over
the lease term.
Borrowing costs
Borrowing costs are recognised as an expense in the period 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 pension schemes, the obligation recognised in the balance sheet represents the present
value of the defined benefit obligation as adjusted for any unrecognised past service cost, reduced by the fair value
of the scheme assets. The cost of providing benefits is determined using the projected unit credit actuarial valuation
method. Actuarial gains and losses are recognised in full in the period in which they occur in the Consolidated
Statement of Comprehensive Income.
69
2 Accounting policies (continued)
Retirement benefits (continued)
For defined benefit plans, the employer’s portion of the past and current service cost 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 assets is based on an assessment made at the beginning of the year of long-term market returns on scheme
assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year.
Curtailments and settlements relating to the Group’s defined benefit plan 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.
Share-based payment transactions
Certain employees and directors of the Group receive equity-settled remuneration in the form of share-based
payment transactions, whereby employees render services in exchange for shares or rights over 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 equity-settled transactions is recognised, together with a
corresponding increase 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 until the vesting date reflects the extent to which
the vesting period has expired, and is adjusted to reflect the directors’ best available estimate of the number of
equity instruments that will ultimately vest. The income statement charge or credit 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 cumulatively 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 is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately.
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 full, using the liability method, in respect of temporary differences between
the tax base of the Group’s assets and liabilities, and their carrying amounts, that have originated but have not been
reversed by the balance sheet date. No deferred tax is recognised if the temporary difference arises from goodwill
or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable profit or loss. Deferred income tax is recognised in
respect of taxable temporary differences associated with investments in associates and interests in joint 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 future.
Deferred income tax assets are recognised to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences can be utilised. The carrying amount of deferred income tax assets is
reviewed at each balance sheet date and reduced to the extent 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.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at
the balance sheet date.
Tax relating to items recognised directly in equity is recognised in equity and not in the income statement.
Treasury shares
Own equity instruments which are held by the Group (treasury shares) are deducted from equity. No gain or loss is
recognised in the income statement on the purchase, sale, issue or cancellation of the Group’s own equity instruments.
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 initially recognised at cost, being the fair value of the consideration
given and including acquisition charges associated with the investment.
After initial recognition, investments in joint ventures and associates are accounted for using the equity method.
Recognition and derecognition of financial assets and liabilities
The recognition of financial assets and liabilities occurs when the Group becomes party to the contractual provisions
of the instrument. The derecognition of financial assets takes place when the Group no longer has the right to cash
flows, the risks and rewards of ownership, or control of the asset. The derecognition of financial liabilities occurs
when the obligation under the liability is discharged, cancelled or expires.
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70
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
2 Accounting policies (continued)
Financial Assets
Financial assets at fair value through profit or loss
Some assets held by the Group are classified as financial assets at fair value through profit or loss. On initial
recognition these assets are recognised at fair value. Subsequent measurement is also at fair value with changes
recognised through finance revenue or costs in the income statement.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed 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 profit
and loss or available-for-sale. Such assets are carried at amortised cost using the effective interest method if the
time value of money is significant. Gains and losses are recognised in the income statement when the loans and
receivables are derecognised or impaired, as well as through the amortisation process.
Trade receivables are recognised and carried at original invoice amount less any uncollectable amounts. An estimate
for doubtful 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 in hand and short-term deposits with
an original maturity of three months or less. For the purpose of the Consolidated Cash Flow Statement, cash and
cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
Derivative financial instruments
The Group enters into derivative transactions with a view to managing interest risks associated with underlying
business activities and the financing of those activities. Derivative financial instruments used by the Group are stated
at fair value on initial recognition and at subsequent balance sheet dates. Cash flow hedges hedge exposure to
variability in cash flows that are either attributable to a particular risk associated with a recognised asset or liability or
a forecast transaction.
Hedge accounting is only used where, at the inception of the hedge, there is formal designation and documentation
of the hedging relationship, 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 or 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 losses relating to the ineffective portion are recognised immediately in the income statement.
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 liability is recognised, the associated gains or losses that had previously been recognised
in equity are included in the initial measurement of the acquisition cost or other carrying amount of the asset or
liability. For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the income
statement in the same period in which the transaction that results from a firm commitment that is hedged affects
the income statement.
Gains or losses arising from changes in fair value of derivatives that do not qualify for hedge accounting are
recognised immediately in the income statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised or no
longer qualifies for hedge accounting. At that point in time, for cash flow hedges, any cumulative gain or loss on
the hedging instrument recognised in equity is kept in equity until the forecast transaction occurs. If a hedged
transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the
income statement.
Borrowings
Borrowings are initially recognised at fair value of the consideration received net of any directly associated issue
costs. Borrowings are subsequently recorded at amortised cost, with any difference between the amount initially
recorded and the redemption value recognised in the income statement using the effective interest method.
Significant accounting judgements and estimates
Key assumptions concerning the future, and other key sources of estimation, at the balance sheet date have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year.
71
2 Accounting policies (continued)
Significant accounting judgements and estimates (continued)
Note 15 describes the assumptions used in impairment testing of property, plant and equipment together with an
analysis of the sensitivity to changes in key assumptions.
Note 32 describes the assumptions used in accounting for retirement benefit obligations 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 tax treatment cannot be finally determined until resolution has been reached with the relevant
tax authority. The final resolution of certain of these items may give rise to material income statement and/or cash
flow variances.
Standards issued by the International Accounting Standards Board (IASB) not effective for the current year and not
adopted by the Group
The following standards and interpretations, which have been issued by the IASB and are relevant for the Group,
become effective after the current year end and have not been early adopted by the Group:
IFRS 3 Business Combinations (revised)
IFRS 3 (revised) introduces significant changes in the accounting for business combinations occurring after this date.
Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition
and subsequent measurement of a contingent consideration and business combinations achieved in stages. These
changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs
and future reported results.
IAS 27 Consolidated and Separate Financial Statements (amended)
IAS 27 (amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is
accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no
longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the
accounting for losses by the subsidiary as well as the loss of control of a subsidiary.
The changes by IFRS 3 (revised) and IAS 27 (amended) will affect future acquisitions or loss of control of subsidiaries
and transactions with non-controlling interests.
3 Revenue
An analysis of the Group’s revenue is as follows:
Rendering of services
Royalties
Sale of goods
Revenue
2009/10
£m
629.8
12.6
792.6
1,435.0
2008/9
£m
601.5
9.0
724.1
1,334.6
4 Segment information
For management purposes, the Group is organised into two strategic business units (Hotels & Restaurants and
Costa) based upon their different products and services:
• Hotels & Restaurants provide services in relation to food and accommodation
• Costa generates income from the operation of its branded, owned and franchised coffee shops.
No operating segments have been aggregated to form the above reportable operating segments.
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72
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
4 Segment information (continued)
Management monitors the operating results of its strategic business units separately for the purpose of making
decisions about allocating resources and assessing performance. Segment performance is measured based on
operating profit before exceptional items. Included within the unallocated and elimination columns in the tables
below are functions managed by a central division (including the costs of running the public company). The
unallocated assets and liabilities are cash and debt balances (held and controlled by the central treasury function),
taxation, pensions, certain property, plant and equipment and central working capital balances. Sales to Costa
franchise partners were previously categorised as unallocated but are now included within Costa (restated for 2009).
Inter-segment revenue is from Costa to the Hotels & Restaurants segment and is eliminated on consolidation.
Transactions were entered into on an arm’s length basis in a manner similar to transactions with third parties.
All activities are continuing.
The following tables present revenue and profit information and certain asset and liability information regarding
business operating segments for the years ended 4 March 2010 and 26 February 2009.
Year ended 4 March 2010
Revenue
Revenue from external customers
Inter-segment revenue
Total revenue
Operating profit before exceptional items
Exceptional items:
Pension curtailment
Net gain on disposal of property, plant and
equipment and property reversions
Reorganisation
Impairment
Impairment reversal
Operating profit of the Group
Net finance costs
Profit before tax
Tax expense
Profit for the year
Assets and liabilities
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Net assets
Other segment information
Income from associate
Loss from joint ventures
Capital expenditure:
Hotels &
Restaurants
£m
1,096.0
–
1,096.0
247.0
–
14.5
–
(10.7)
9.1
259.9
2,393.9
–
2,393.9
(127.5)
–
(127.5)
2,266.4
0.7
(2.2)
Property, plant and equipment – cash basis
111.6
Property, plant and equipment – accruals basis 106.6
Intangible assets
2.6
Depreciation
Amortisation
(74.6)
(3.5)
Costa
£m
339.0
1.9
340.9
36.2
–
(0.4)
–
(0.6)
0.7
35.9
155.3
–
155.3
(56.7)
–
(56.7)
98.6
–
(0.9)
15.2
17.3
2.0
(17.4)
(0.4)
Unallocated and
elimination
£m
Total operations
£m
–
(1.9)
(1.9)
(18.4)
4.0
(20.7)
(9.9)
–
–
(45.0)
–
98.4
98.4
–
(1,355.4)
(1,355.4)
(1,257.0)
–
–
0.3
0.1
–
–
–
1,435.0
–
1,435.0
264.8
4.0
(6.6)
(9.9)
(11.3)
9.8
250.8
(42.8)
208.0
(48.0)
160.0
2,549.2
98.4
2,647.6
(184.2)
(1,355.4)
(1,539.6)
1,108.0
0.7
(3.1)
127.1
124.0
4.6
(92.0)
(3.9)
4 Segment information (continued)
Year ended 26 February 2009 (restated*)
Revenue
Revenue from external customers
Inter-segment revenue
Total revenue
Operating profit before exceptional items
Exceptional items:
Net gain on disposal of property, plant and
equipment and property reversions
Premier Inn rebranding
Reorganisation
Impairment
Impairment reversal
Operating profit of the Group
Net finance costs
Profit before tax
Tax expense
Profit for the year
Assets and liabilities
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Net assets
Other segment information
Income from associate
Loss from joint ventures
Capital expenditure:
Hotels &
Restaurants
£m
1,061.6
–
1,061.6
254.9
6.3
(5.7)
–
(15.3)
0.2
240.4
2,327.7
–
2,327.7
(110.3)
–
(110.3)
2,217.4
1.1
(0.8)
Property, plant and equipment – cash basis
241.5
Property, plant and equipment – accruals basis 228.6
Intangible assets
0.2
Depreciation
Amortisation
(68.6)
(0.2)
73
Unallocated
and elimination
£m
Total
operations
£m
0.3
(3.6)
(3.3)
(22.6)
0.4
–
(13.3)
(1.3)
–
(36.8)
–
130.3
130.3
–
(1,302.7)
(1,302.7)
(1,172.4)
–
–
4.1
5.1
–
(3.9)
(6.6)
1,334.6
–
1,334.6
255.0
6.9
(5.7)
(13.3)
(17.8)
1.1
226.2
(27.6)
198.6
(108.3)
90.3
2,442.7
130.3
2,573.0
(141.8)
(1,302.7)
(1,444.5)
1,128.5
1.1
(2.1)
275.7
263.2
0.6
(89.5)
(6.8)
Costa
£m
272.7
3.6
276.3
22.7
0.2
–
–
(1.2)
0.9
22.6
115.0
–
115.0
(31.5)
–
(31.5)
83.5
–
(1.3)
30.1
29.5
0.4
(17.0)
–
* Sales of £12.5m to Costa franchise partners were previously categorised as unallocated but are now included within Costa revenue.
Revenues from external customers are split geographically as follows:
United Kingdom*
Non United Kingdom
2009/10
£m
1,421.4
13.6
1,435.0
2008/9
£m
1,323.2
11.4
1,334.6
* United Kingdom revenue is revenue where the source of the supply is the United Kingdom. This includes Costa franchise income invoiced
from the United Kingdom.
Non-current assets** are split geographically as follows:
United Kingdom
Non United Kingdom
**Non-current assets exclude financial instruments and deferred tax assets
http://annualreport.whitbread.co.uk
2009/10
£m
2,457.4
22.6
2,480.0
2008/9
£m
2,425.9
18.2
2,444.1
74
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
5 Group operating profit
This is stated after charging/(crediting):
2009/10
£m
2008/9
£m
Property operating lease payments
Minimum lease payments recognised as an operating lease expense:
Minimum lease payments attributable to the current period
IAS 17 – impact of future minimum rental uplifts
Contingent rents
Total property rent
Plant and machinery operating lease payments
Operating lease payments
Operating lease payments – sublease receipts
Amortisation of intangible assets (note 13)
Depreciation of property, plant and equipment (note 14)
Cost of inventories recognised as an expense
Employee benefits expense (note 7)
Net foreign exchange differences
Principal auditor’s fees
Audit of the Group financial statements
Other fees to auditors:
Auditing the accounts of subsidiaries
All other services
6 Exceptional items and other non GAAP adjustments
Exceptional items before tax and interest:
Distribution costs
Net profit/(loss) on disposal of property, plant and equipment,
and property reversions1
Premier Inn rebranding2
Impairment of property, plant and equipment (note 15)
Impairment reversal (note 15)
Administrative expenses
Pension curtailment3
Reorganisation costs4
Exceptional interest:
Interest on exceptional tax5
Movement in discount on provisions
Other non GAAP adjustments made to underlying profit before
tax to arrive at reported profit before tax:
IAS 19 Income Statement (charge)/credit for pension finance cost
Items included in reported profit before tax, but excluded in
arriving at underlying profit before tax
Tax adjustments included in reported profit after tax, but excluded in
arriving at underlying profit after tax
Tax on continuing exceptional items
Tax on non GAAP adjustment
Exceptional tax items6
Deferred tax arising on abolition of Industrial Buildings Allowances7
78.6
2.8
6.3
87.7
8.2
95.9
(1.5)
3.9
92.0
212.7
409.8
0.2
0.5
0.1
0.1
0.7
67.4
3.4
5.9
76.7
8.9
85.6
(2.5)
6.8
89.5
181.9
390.7
(0.2)
0.6
0.1
0.1
0.8
2009/10
£m
2008/9
£m
(6.6)
–
(11.3)
9.8
(8.1)
4.0
(9.9)
(5.9)
(14.0)
(0.7)
(0.9)
(1.6)
(15.5)
(31.1)
2009/10
£m
2.0
4.3
16.8
–
23.1
6.9
(5.7)
(17.8)
1.1
(15.5)
–
(13.3)
(13.3)
(28.8)
(1.7)
(0.8)
(2.5)
5.5
(25.8)
2008/9
£m
5.4
(1.5)
–
(44.1)
(40.2)
1. During the year a net profit of £14.6m was recognised on disposals of property, plant and equipment. In addition, following the entry of First Quench
Retailing into administration on 29 October 2009, a provision has been raised for a total of 130 properties for which the Group has an obligation.
2. Premier Inn rebranding costs in the prior year relate to asset write off and brand relaunch costs.
3. The pension curtailment credit arose due to the closure of the defined benefit scheme to future accrual on 31 December 2009 (note 32).
4. In 2007/8, the Group sold its interests in David Lloyd Leisure Limited and TGI Friday’s. Following these disposals it was announced that the Restaurant
and Hotels divisions would merge and that the shared service teams would be disbanded. This restructuring includes the final costs associated with the
aligning of IT with the new structures. This then completes the income statement impact of the restructuring programme that was announced in 2007/8.
5. The interest arising on late payment of an item claimed in a previous year, which is disputed, is included in exceptional interest charges.
6. Reduction in deferred tax liability on rolled over gains for differences between the tax deductible cost and accounts residual value of the reinvestment assets.
The deferred tax charge in the prior year arose as a result of the enactment by the UK government, in July 2008, of the abolition of Industrial Buildings
7.
Allowances for hotel buildings.
7 Employee benefits expense
Wages and salaries
Social security costs
Pension costs
75
2008/9
£m
360.2
24.0
6.5
390.7
2009/10
£m
377.5
25.0
7.3
409.8
Included in wages and salaries is a share-based payments expense of £5.8m (2008/9: £5.5m), all of which arises
from transactions accounted for as equity-settled share-based payments.
The average number of persons directly employed in the business segments on a full time equivalent basis was as follows:
Hotels & Restaurants
Costa
Unallocated
Total operations
All operations are continuing.
2009/10
20,452
5,285
57
25,794
2008/9
21,320
4,928
129
26,377
Excluded from the above are employees of joint ventures and associated undertakings.
Details of directors’ emoluments are disclosed in the Remuneration report on pages 47 to 56.
8 Finance (costs)/revenue
Finance costs
Bank loans and overdrafts
Other loans
Interest capitalised
Net pension finance cost (note 32)
Impact of ineffective portion of cash flow hedges
Finance costs before exceptional items
Exceptional finance costs (note 6)
Movement in discount on provisions (note 6)
Total finance costs
Finance revenue
Bank interest receivable
Other interest receivable
Income from investments
Net pension finance revenue (note 32)
Impact of ineffective portion of cash flow hedges
Total finance revenue
9 Taxation
Consolidated income statement
Current tax:
Current tax expense
Adjustments in respect of current tax of previous periods
Deferred tax:
Origination and reversal of temporary differences
Adjustments in respect of previous periods
Tax reported in the consolidated income statement
All operations are continuing.
http://annualreport.whitbread.co.uk
2009/10
£m
2008/9
£m
(27.2)
(0.1)
0.5
(26.8)
(15.5)
–
(42.3)
(0.7)
(0.9)
(43.9)
0.1
0.8
–
0.9
–
0.2
1.1
2009/10
£m
57.5
(0.2)
57.3
4.4
(13.7)
(9.3)
48.0
(35.3)
(0.2)
3.0
(32.5)
–
(0.4)
(32.9)
(1.7)
(0.8)
(35.4)
0.4
1.6
0.3
2.3
5.5
–
7.8
2008/9
£m
61.3
(1.3)
60.0
48.3
–
48.3
108.3
76
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
9 Taxation (continued)
Consolidated statement of comprehensive income
Current tax:
Pensions
Deferred tax:
Cash flow hedge
Pensions
Tax reported in other comprehensive income
2009/10
£m
(28.6)
0.8
(26.3)
(54.1)
2008/9
£m
(14.0)
(8.3)
(57.5)
(79.8)
A reconciliation of the tax charge applicable to profit from operating activities before tax at the statutory tax rate
to the actual tax charge at the Group’s effective tax rate for the years ended 4 March 2010 and 26 February 2009
respectively is as follows:
Profit before tax as reported in the consolidated income statement
Tax at current UK tax rate of 28.00% (2009: 28.17%)
Effect of different tax rates in overseas companies
Effect of joint ventures and associate
Expenditure not allowable/(income not taxable)
Adjustments to tax expense in respect of previous years
Adjustments to deferred tax expense in respect of previous years
Exceptional adjustments to deferred tax expense in respect of prior years
Deferred tax arising on abolition of Industrial Buildings Allowances
Revaluation reserve realisation
Tax expense reported in the consolidated income statement
All operations are continuing.
Deferred tax
Deferred tax relates to the following:
Deferred tax liabilities
Accelerated capital allowances
Rolled over gains and property revaluations
Gross deferred tax liabilities
Deferred tax assets
Pensions
Other
Gross deferred tax assets
Deferred tax expense
Net deferred tax liability
Consolidated
balance sheet
2009
£m
98.7
174.8
273.5
(65.2)
(12.6)
(77.8)
195.7
2010
£m
102.1
160.3
262.4
(93.0)
(8.6)
(101.6)
160.8
2009/10
£m
208.0
58.2
1.2
0.7
1.8
(0.2)
3.1
(16.8)
–
–
48.0
2008/9
£m
198.6
55.9
1.6
0.5
10.1
(1.3)
–
–
44.1
(2.6)
108.3
Consolidated
income statement
2009/10
£m
2008/9
£m
2.5
(14.4)
(1.4)
4.0
(9.3)
41.1
3.8
1.5
1.9
48.3
Total deferred tax liabilities released as a result of disposals during the year was £0.1m (2009: £2.6m).
As a result of the transaction referred to in note 32, a current tax benefit of £28.6m has been obtained in the current
year. The deferred tax balance associated with the pension deficit has been adjusted to reflect this benefit.
The Group has not provided deferred tax of £1.7m (2009: £1.7m) in respect of the unremitted earnings of overseas
subsidiaries. Following the enactment of the Finance Act 2009, the Group considers that the receipt of those
earnings would be exempt from UK tax.
Tax relief on total interest capitalised amounts to £0.1m (2009: £0.8m).
10 Business combinations
On 18 February 2010 Costa Coffee Limited acquired the entire issued share capital of Coffeeheaven International plc
for a total cash consideration of £37.2m, equivalent to 24 pence per ordinary share. Coffeeheaven International plc is
the leading coffee chain in central and eastern Europe, with 89 stores throughout Poland, the Czech Republic, Hungary,
Bulgaria and Latvia.
77
10 Business combinations (continued)
The fair value of the identifiable assets and liabilities of the acquired businesses as at the date of acquisition, and the
corresponding carrying amounts immediately before the acquisition were:
Book
value
£m
Provisional fair
value to Group
£m
Property, plant and equipment (note 14)
Inventories
Cash
Trade and other receivables
Overdrafts and loans
Trade and other payables
Net assets
Intangible assets in relation to the Coffeeheaven brand name
Deferred tax liability in relation to the Coffeeheaven brand name
Goodwill arising on acquisition (note 13)
Total consideration
Cash flow on acquisition:
Cash acquired
Overdrafts and loans acquired
Cash paid
Net cash outflow
10.6
0.6
3.0
4.4
(0.3)
(6.1)
12.2
8.3
0.6
3.0
4.4
(0.3)
(6.1)
9.9
5.1
(1.0)
23.2
37.2
3.0
(0.3)
(37.2)
(34.5)
The consideration includes £1.1m of costs associated with the acquisition, paid in cash.
Fair values are described as provisional due to the proximity of the acquisition date to the year end.
In arriving at the fair value of property, plant and equipment an adjustment of £2.3m has been made to impair the
carrying value of a number of leasehold sites. Goodwill arising on the acquisition of Coffeeheaven International
plc arises as a result of the expected synergies from the business combination together with the benefits of the
assembled workforce of the acquired business.
From the date of acquisition, the company acquired contributed £1.0m revenue and no profit to the net profit of
the Group. If the acquisition had taken place at the beginning of the year, the profit for the Group would have been
decreased by £1.2m and the revenue from continuing operations would have been increased by £22.8m.
On 18 February 2010 Premier Inn India Limited acquired 50.1% of Premier Inn India Private Limited, which it
previously did not own, for £5.5m in cash.
The fair value of the identifiable assets and liabilities of the acquired businesses as at the date of acquisition, and the
corresponding carrying amounts immediately before the acquisition were:
Property, plant and equipment (note 14)
Cash
Trade and other receivables
Loan from Premier Inn India Limited
Trade and other payables
Net assets
Existing investment in joint venture
Goodwill arising on acquisition (note 13)
Total consideration
Cash flow on acquisition:
Cash acquired
Cash paid
Net cash outflow
Book value
£m
5.8
2.4
5.8
(4.8)
(0.6)
8.6
Provisional fair
value to Group
£m
5.4
2.4
5.8
(4.8)
(0.6)
8.2
(4.3)
1.6
5.5
1.2
(5.5)
(4.3)
The consideration includes £0.1m of costs associated with the acquisition, paid in cash.
Fair values are described as provisional due to the proximity of the acquisition date to the year end.
In arriving at fair value of property, plant and equipment an adjustment of £0.4m has been made to write off costs
which had been inappropriately capitalised.
No goodwill arose on the original investment in the joint venture.
From the date of acquisition, the company acquired contributed no revenue and a loss of £0.1m to the net profit of
the Group. If the acquisition had taken place at the beginning of the year, the profit for the Group would have been
decreased by £1.6m and the revenue from continuing operations would have been increased by £0.1m.
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78
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
10 Business combinations (continued)
Prior year business combinations
In 2008/9, four business combinations were effected for a total consideration of £101.0m; £30.2m cash and £78.0m
fair value of assets given as consideration. Overdrafts and loans acquired totalled £0.8m and goodwill of £23.9m was
recognised. There have been no adjustments to the provisional fair values allocated and disclosed in the financial
statements of 2008/9. The book and fair value of assets acquired in 2008/9 were:
Book
value
£m
Fair value
to Group
£m
Property, plant and equipment (note 14)
Cash
Trade and other receivables
Overdrafts and loans
Trade and other payables
Deferred tax
84.7
0.6
0.6
(0.8)
(0.6)
(0.2)
84.3
84.7
0.6
0.6
(0.8)
(0.6)
(0.2)
84.3
11 Earnings per share
The basic earnings per share figures are calculated by dividing the net profit for the year attributable to ordinary
shareholders, therefore before minority interests, by the weighted average number of ordinary shares in issue during
the year after deducting treasury shares and shares held by an independently managed employee share ownership
trust (ESOT).
The diluted earnings per share figures allow for the dilutive effect of the conversion into ordinary shares of the
weighted average number of options outstanding during the period. Where the share price at the year end is lower
than the option price the options become anti-dilutive and are excluded from the calculation. The number of such
options was nil (2009: 694,753).
The numbers of shares used for the earnings per share calculations are as follows:
Basic weighted average number of ordinary shares
Effect of dilution – share options
Diluted weighted average number of ordinary shares
2009/10
million
174.3
0.4
174.7
2008/9
million
173.8
0.2
174.0
The total number of shares in issue at the year end, as used in the calculation of the basic weighted average number
of ordinary shares, was 190.6m less 14.7m treasury shares held by Whitbread PLC and 0.5m held by the ESOT (2009:
189.1m less 14.7m treasury shares held by Whitbread PLC and 0.8m held by the ESOT).
The profits used for the earnings per share calculations are as follows:
Profit for the year attributable to parent shareholders
Exceptional items – gross
Exceptional items – taxation
Profit for the year before exceptional items attributable to parent shareholders
Non GAAP adjustments – gross
Non GAAP adjustments – taxation
Underlying profit for the year attributable to parent shareholders
All operations are continuing.
Basic for profit for the year
Exceptional items – gross
Exceptional items – taxation
Basic for profit before exceptional items for the year
Non GAAP adjustments – gross
Non GAAP adjustments – taxation
Basic for underlying profit for the year
Diluted for profit for the year
Diluted for profit before exceptional items for the year
Diluted for underlying profit for the year
All operations are continuing.
2009/10
£m
161.0
15.6
(18.8)
157.8
15.5
(4.3)
169.0
2009/10
p
92.37
8.95
(10.79)
90.53
8.89
(2.47)
96.95
92.16
90.33
96.74
2008/9
£m
91.8
31.3
38.7
161.8
(5.5)
1.5
157.8
2008/9
p
52.82
18.01
22.27
93.10
(3.16)
0.86
90.80
52.76
92.99
90.69
12 Dividends paid and proposed
2009/10
2008/9
Final dividend relating to the prior year
Settled via scrip issue (note 28)
Paid in the year
Interim dividend for the current year
Settled via scrip issue (note 28)
Paid in the year
Total equity dividends paid in the year
Dividends on other shares:
B share dividend
C share dividend
Total dividends paid
pence
per share
26.90
9.65
7.13
2.93
pence
per share
26.90
9.65
7.11
6.64
£m
46.7
(6.0)
40.7
16.8
(3.8)
13.0
53.7
0.1
0.1
0.2
53.9
79
£m
47.1
–
47.1
16.7
–
16.7
63.8
0.2
0.1
0.3
64.1
Proposed for approval at Annual General Meeting:
Equity dividends on ordinary shares:
Final dividend for the current year
28.35
49.7
26.90
46.7
13 Intangible assets
Cost
At 28 February 2008
Additions
Businesses acquired
At 26 February 2009
Additions
Businesses acquired
Foreign currency adjustment
At 4 March 2010
Amortisation and impairment
At 28 February 2008
Amortisation during the year
At 26 February 2009
Amortisation during the year
At 4 March 2010
Net book value at 4 March 2010
Net book value at 26 February 2009
Goodwill
£m
Brand
£m
IT software
£m
Other
£m
86.6
–
23.9
110.5
–
24.8
0.5
135.8
–
–
–
–
–
135.8
110.5
–
–
–
–
–
5.1
–
5.1
–
–
–
–
–
5.1
–
36.5
–
–
36.5
4.6
–
–
41.1
(23.7)
(6.6)
(30.3)
(3.7)
(34.0)
7.1
6.2
2.3
0.6
–
2.9
–
–
–
2.9
(0.5)
(0.2)
(0.7)
(0.2)
(0.9)
2.0
2.2
The carrying amount of goodwill allocated by segment is presented below:
Hotels & Restaurants
Costa
Total
2010
£m
112.6
23.2
135.8
Total
£m
125.4
0.6
23.9
149.9
4.6
29.9
0.5
184.9
(24.2)
(6.8)
(31.0)
(3.9)
(34.9)
150.0
118.9
2009
£m
110.5
–
110.5
The carrying amount of goodwill at 26 February 2009 relates to Hotels & Restaurants. Additions during the year
comprise £23.2m arising on the acquisition of Coffeeheaven International plc and £1.6m arising on the acquisition of
Premier Inn India Private Limited. Of the £24.8m of goodwill relating to additions in the year, £1.6m has been allocated
for impairment testing purposes to the cash generating unit Hotels & Restaurants, with the remaining £23.2m being
allocated to the Costa cash generating unit. Both of these cash generating units are also reportable segments and
represent the lowest level within the Group at which goodwill is monitored for internal management purposes.
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80
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
13 Intangible assets (continued)
IT software has been assessed 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. During the prior year the useful economic
life of elements of the Group’s ERP system was reduced as a result of the reorganisation referred to in note 6. The IT
software amortisation charge for the year includes an accelerated amortisation charge of £1.4m (2008/9: £4.3m) as
a result of this revision and is included within exceptional items in both the current and prior years.
Other intangibles
Other intangibles comprise Costa overseas trading licences and the brand name and franchise fee agreements
acquired with the Premier Lodge business.
The trading licences, which have a carrying value of £0.6m (2009: £0.7m), are deemed to have an infinite life as there
is no time limit associated with them. The brand name and franchise fee agreements are being amortised over their
estimated useful economic lives of periods up to 15 years.
Capital expenditure commitments
There are no capital expenditure commitments in relation to intangible assets at the year end (2009: £nil).
14 Property, plant and equipment
Cost
At 28 February 2008
Additions
Businesses acquired
Interest capitalised
Reclassified
Assets written off
Foreign currency adjustment
Movements to held for sale in the year
Disposals
At 26 February 2009
Additions
Businesses acquired (note 10)
Interest capitalised
Reclassified
Assets written off
Movements to held for sale in the year
Disposals
At 4 March 2010
Depreciation and impairment
At 28 February 2008
Depreciation charge for the year
Impairment (note 15)
Depreciation written off
Foreign currency adjustment
Movements to held for sale in the year
Disposals
At 26 February 2009
Depreciation charge for the year
Impairment (note 15)
Depreciation written off
Reclassified
Movements to held for sale in the year
Disposals
At 4 March 2010
Net book value at 4 March 2010
Net book value at 26 February 2009
Land and
buildings
£m
1,820.2
119.5
75.1
3.0
2.3
(0.9)
–
(59.9)
(0.9)
1,958.4
41.1
12.5
0.5
1.2
(0.5)
(6.2)
(26.7)
1,980.3
(125.8)
(17.7)
(14.2)
0.6
–
2.6
0.8
(153.7)
(12.9)
(1.0)
–
0.6
2.0
3.9
(161.1)
1,819.2
1,804.7
Plant and
equipment
£m
676.3
143.7
9.6
–
(2.3)
(14.4)
0.8
(20.2)
(31.2)
762.3
82.9
1.2
–
(1.2)
(46.0)
(2.4)
(8.8)
788.0
(243.3)
(71.8)
(2.5)
13.1
(0.1)
7.5
31.2
(265.9)
(79.1)
0.1
41.2
(0.6)
1.6
6.2
(296.5)
491.5
496.4
Total
£m
2,496.5
263.2
84.7
3.0
–
(15.3)
0.8
(80.1)
(32.1)
2,720.7
124.0
13.7
0.5
–
(46.5)
(8.6)
(35.5)
2,768.3
(369.1)
(89.5)
(16.7)
13.7
(0.1)
10.1
32.0
(419.6)
(92.0)
(0.9)
41.2
–
3.6
10.1
(457.6)
2,310.7
2,301.1
14 Property, plant and equipment (continued)
Capital expenditure commitments
Capital expenditure commitments for property, plant and equipment for
which no provision has been made
2010
£m
41.9
81
2009
£m
54.2
In addition to the capital expenditure commitments disclosed above, the Group has also signed agreements
with certain third parties to develop new trading outlets within the Hotels & Restaurants strategic business unit.
These developments are dependent on the outcome of future events such as the granting of planning permission,
and consequently do not represent a binding capital commitment at the year end. The directors consider that
developments likely to proceed as planned will result in further capital investment of £111.1m over the next five years
(2009: £41.7m).
Capitalised interest
Interest capitalised during the year amounted to £0.5m, using an average rate of 4.4% (2008/9: £3.0m, using an
average rate of 5.8%).
Assets held for sale
During the year, certain property assets with a combined net book value of £5.0m (2008/9: £70.0m) were transferred
to assets held for sale. These property assets were sold during the year, with the exception of three trading sites with
a combined net book value of £2.3m (2008/9: £nil) which continue to be classified as assets held for sale at the year
end. An impairment loss of £0.6m (2008/9: £nil) was recognised in the year relating to assets classified as held for sale.
15 Impairment
During the year impairment losses of £11.3m (2008/9: £17.8m) and impairment reversals of £9.8m (2008/9: £1.1m)
were recognised.
Impairment losses
Hotels & Restaurants
Costa
Unallocated
Impairment reversals
Hotels & Restaurants
Costa
Total
2009/10
2008/9
Property, plant
and equipment
£m
Property, plant
and equipment
£m
10.7
0.6
–
(9.1)
(0.7)
1.5
15.3
1.2
1.3
(0.2)
(0.9)
16.7
Property, plant and equipment
The Group considers each trading outlet to be a cash generating unit (CGU) and each CGU is reviewed annually for
indicators of impairment.
In assessing whether an asset has been impaired, the carrying amount of the CGU is compared to its recoverable
amount. The recoverable amount is the higher of its fair value less costs to sell and its value 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-tax discount rate of 10.0%
(2008/9: 10.0%). The future cash flows are based on assumptions from the business plans and cover a five year
period. These business plans and forecasts include management’s most recent and cautious view of medium term
trading prospects. Cash flows beyond this period are extrapolated using a 2.0% growth rate (2008/9: 2.0%).
The events and circumstances that led to the impairment loss of £11.3m are set out below:
Hotels & Restaurants
The impairment at 25 sites in the strategic business unit was driven by a number of factors
• Changes in the local competitive environment in which the hotels are situated
• Impairment of assets held for sale to their recoverable value
• High asset prices in the market at the point of acquisition for acquired sites which also anticipated higher growth
rates at that time than are now expected.
Costa
Nine Costa sites with an established trend of poor performance against the required capital investment have been
impaired where their expected future cash flows have fallen to such a level that their value in use is below carrying value.
Impairment reversals
Following an improvement in trading performance and an increase in amounts of estimated future cash flows of
previously impaired sites, reversals of £9.8m have been recognised.
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82
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
15 Impairment (continued)
Sensitivity to changes in assumptions
The level of impairment is predominantly dependent upon judgements used in arriving at future growth rates and
the discount rate applied to cash flow projections. The impact on 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 as
follows:
Impairment if business plan growth rates were reduced by 1%
Impairment if discount rate was increased by 1%
17.1
16.7
Hotels & Restaurants
£m
Costa
£m
1.3
1.3
Total
£m
18.4
18.0
Goodwill
Goodwill acquired through business combinations is allocated to groups of CGUs at strategic business unit level,
being the level at which management monitor goodwill.
The recoverable amount is the higher of fair value less costs to sell and value in use. In the absence of a recent market
transaction the recoverable amount is determined from value in use calculations. This is calculated using the five year
business plans approved by senior management. The key assumptions in these calculations relate to revenue and the
increase in rooms. The calculation is most sensitive to revenue assumptions, however senior management believe
that the assumptions used are reasonable. Cash flows beyond this period are extrapolated using a 2.0% growth rate
(2008/9: 2.0%). The pre-tax discount rate applied to cash flow projections is 10.0% (2008/9: 10.0%).
The resultant impairment review required no impairment of goodwill allocated to the Hotels & Restaurants CGU.
A review of goodwill created during the year concluded that there is insufficient post acquisition trading history to
suggest any impairment. Goodwill acquired in 2009/10 as part of the Coffeeheaven International plc acquisition will
be assessed for impairment as part of the Costa goodwill impairment review in future years.
16 Investment in joint ventures
Principal joint ventures
Investment held by
Premier Inn Hotels LLC
PTI Middle East
Limited
Rosworth Investments
Limited
Costa International
Limited
Hualian Costa (Beijing) Food Costa Beijing
& Beverage Management
Company Limited
Limited
% equity interest
Principal
activity
Hotels
Coffee
shops
Coffee
shops
Country of
incorporation
United Arab
Emirates
Cyprus
China
2010
49.0
50.0
50.0
2009
49.0
50.0
50.0
As disclosed in note 10, on 18 February 2010 Premier Inn India Limited acquired the remaining 50.1% of share capital of
Premier Inn India Private Limited. Premier Inn India Private Limited was previously accounted for as a joint venture.
The following table provides summarised information of the Group’s investment in joint ventures:
Share of joint ventures’ balance sheets
Current assets
Non-current assets
Share of gross assets
Current liabilities
Non-current liabilities
Share of gross liabilities
Loans to joint ventures
Share of net assets
2010
£m
4.0
34.5
38.5
(3.1)
(18.7)
(21.8)
1.4
18.1
2009
£m
4.7
28.1
32.8
(2.1)
(10.0)
(12.1)
2.1
22.8
16 Investment in joint ventures (continued)
Share of joint ventures’ revenue and expenses
Revenue
Cost of sales
Administrative expenses
Finance costs
Loss before tax
Tax
Net loss
83
2009/10
£m
2008/9
£m
4.2
(0.8)
(6.1)
(0.4)
(3.1)
–
(3.1)
2.5
(1.0)
(3.5)
(0.2)
(2.2)
0.1
(2.1)
At 4 March 2010 the Group’s share of the capital commitments of its joint ventures amounted to £16.9m (2009: £12.2m).
17 Investment in associate
Principal associate
Investment held by
Principal
activity
Country of
incorporation
Morrison Street Hotel Limited Whitbread Group PLC Hotels
Scotland
% equity interest
2010
40.0
2009
40.0
The associate is a private entity which is not listed on any public exchange and therefore there 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:
Share of associate’s balance sheet
Current assets
Non-current assets
Share of gross assets
Current liabilities
Non-current liabilities
Share of gross liabilities
Share of net assets
Share of associate’s revenue and profit
Revenue
Profit
18 Other financial asset
Opening cost or valuation
Disposals
Closing cost or valuation
Non-current
2010
£m
1.2
5.2
6.4
(0.6)
(4.6)
(5.2)
1.2
2009/10
£m
2.4
0.7
2010
£m
0.9
–
0.9
0.9
0.9
2009
£m
1.6
4.9
6.5
(0.7)
(4.5)
(5.2)
1.3
2008/9
£m
2.6
1.1
2009
£m
0.9
–
0.9
0.9
0.9
The Group’s other financial asset relates to an investment in a German hotel held at fair value, with any changes in
value taken through the income statement. The investment is in unlisted ordinary shares and has no fixed maturity
date or coupon rate and as a result is not directly exposed to interest rate risk.
Fair value is calculated based on the expected cash flows of the underlying net asset base of the investment.
19 Inventories
Raw materials and consumables (at cost)
Finished goods (at cost)
Total inventories at lower of cost and net realisable value
2010
£m
1.3
15.7
17.0
2009
£m
2.2
14.3
16.5
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84 Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
20 Trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
Trade and other receivables are non-interest bearing and are generally on 30 day terms.
The provision for impairment of receivables at 4 March 2010 was £3.3m (2009: £3.5m).
The ageing analysis of trade receivables is as follows:
Neither past due nor impaired
Less than 30 days
Between 30 and 60 days
Greater than 60 days
21 Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
2010
£m
49.7
39.5
4.7
93.9
2010
£m
40.4
7.0
1.9
0.4
49.7
2010
£m
40.1
6.9
47.0
2009
£m
35.7
27.5
3.8
67.0
2009
£m
23.6
9.0
1.4
1.7
35.7
2009
£m
23.0
21.5
44.5
Short-term deposits are made for varying periods of between one day and one month depending on the immediate
cash requirements of the Group. They earn interest at the respective short-term deposit rates. The fair value of cash
and cash equivalents is £47.0m (2009: £44.5m).
For the purposes of the consolidated cash flow statement, cash and cash equivalents comprise the following:
Cash at bank and in hand
Short-term deposits
Bank overdrafts (note 23)
22 Financial liabilities
Bank overdrafts
Short-term borrowings
Secured
Other loans
Unsecured
Other loans
Revolving credit facility (£700m)
Revolving credit facility (£455m)
Total
2010
£m
40.1
6.9
(5.5)
41.5
2009
£m
23.0
21.5
(1.8)
42.7
Maturity
On demand
On demand
2010 to 2014
2012
2013
Current
Non-current
2010
£m
5.5
25.5
31.0
–
0.4
–
–
31.4
2009
£m
2010
£m
2009
£m
1.8
–
1.8
0.1
–
–
–
1.9
–
–
–
–
–
–
–
–
0.6
528.4
–
529.0
–
665.7
–
665.7
Revolving credit facility (£455m)
The revolving credit facility was entered into on 20 March 2008 and runs until 20 March 2013. Loans have variable
interest rates linked to LIBOR. The facility is multi-currency.
85
22 Financial liabilities (continued)
Revolving credit facility (£700m)
The revolving credit facility was entered into on 9 December 2005 and runs until 8 December 2010. Two one-year
extensions have been agreed with Whitbread PLC’s banking group such that £700m is available until December
2010, £475m is available until December 2011 and £400m is available until December 2012. Loans have variable
interest rates linked to LIBOR. The facility is multi-currency.
Short-term borrowings
Short-term borrowings are typically overnight borrowings, repayable on demand. Interest rates are variable and
linked to LIBOR.
An analysis of the interest rate profile and the maturity of the borrowings, together with related interest rate swaps,
is as follows:
Total
31.4
0.2
528.8
–
560.4
Year ended 4 March 2010
Fixed rate
Floating to fixed interest rate swaps
Floating rate
Floating to fixed interest rate swaps
Year ended 26 February 2009
Fixed rate
Floating to fixed interest rate swaps
Floating rate
Floating to fixed interest rate swaps
Total
Within
1 year
£m
1-2
years
£m
2-5
years
£m
Over
5 years
£m
0.2
200.0
200.2
0.4
100.0
100.4
–
100.0
100.0
0.1
–
0.1
31.3
–
31.3
–
(200.0)
(200.0)
528.4
(100.0)
428.4
–
(100.0)
(100.0)
559.7
(400.0)
159.7
Within
1 year
£m
1-2
years
£m
2-5
years
£m
Over
5 years
£m
–
10.0
10.0
1.9
(10.0)
(8.1)
1.9
–
–
–
–
–
–
–
–
300.0
300.0
–
100.0
100.0
665.7
(300.0)
365.7
–
(100.0)
(100.0)
667.6
(410.0)
257.6
665.7
–
667.6
Total
£m
0.7
400.0
400.7
Total
£m
–
410.0
410.0
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 (2013) 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.
At 4 March 2010, the Group had available £626.6m (2009: £489.3m) of undrawn committed borrowing facilities in
respect of revolving credit facilities on which all conditions precedent had been met.
http://annualreport.whitbread.co.uk
86 Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
23 Movements in cash and net debt
Cash at bank and in hand
Overdrafts
Cash and cash equivalents
Short-term bank borrowings
Loan capital under one year
Loan capital over one year
Total loan capital
Net debt
24 Provisions
At 28 February 2008
Arising during the year
Unwinding of discount rate
Utilised
Released
Transferred
At 26 February 2009
Arising during the year
Unwinding of discount rate
Utilised
Released
Transferred
At 4 March 2010
Analysed as:
Current
Non-current
26 February
2009
£m
Cash flow
£m
Foreign
exchange
£m
Amortisation
of premiums
& discounts
£m
44.5
(1.8)
42.7
–
(0.1)
(665.7)
(665.8)
(623.1)
(1.0)
(25.5)
137.1
110.6
(0.2)
–
–
(0.2)
–
–
(0.7)
(0.7)
Onerous contracts
£m
Reorganisation
£m
26.8
–
0.8
(6.3)
(0.3)
3.5
24.5
21.7
0.9
(5.2)
–
2.8
44.7
19.3
25.4
44.7
19.4
2.8
–
(13.9)
–
–
8.3
1.3
–
(5.5)
–
(2.8)
1.3
1.3
–
1.3
Other
£m
12.1
–
–
–
(0.5)
(3.5)
8.1
0.3
–
(0.1)
(0.5)
–
7.8
0.8
7.0
7.8
4 March
2010
£m
47.0
(5.5)
41.5
(25.5)
(0.4)
(529.0)
(529.4)
(513.4)
Total
£m
58.3
2.8
0.8
(20.2)
(0.8)
–
40.9
23.3
0.9
(10.8)
(0.5)
–
53.8
21.4
32.4
53.8
Onerous contracts
Onerous contract provisions relate primarily to property reversions and are expected to be used over periods of up
to 30 years.
Reorganisation
Reorganisation provisions relate to the overhead review carried out after the disposal of David Lloyd Leisure Limited
and TGI Friday’s, and to the outsourcing of the Group’s logistics operations and the simplification of IT. The
remaining provision relates to the final costs of the IT simplification project and will be utilised over the next year.
Other
Other provisions relate to warranties given on the disposal of businesses. These are expected to be used over periods
of up to 25 years.
87
25 Financial risk management objectives and policies
The Group’s principal financial instruments, other than derivatives, comprise bank loans, cash and short-term
deposits. The Group’s financial instrument policies can be found in the accounting policies in note 2. The Board
agrees policies for managing the risks summarised below:
Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s long-term sterling
debt obligations. Interest rate swaps are used to achieve the desired mix of fixed and floating rate debt. The Group’s
policy is to fix on a long-term basis between 35% and 65% of projected net interest cost over the next 15 years, which
is beyond the life of the Group’s existing revolving credit facilities. This policy reduces the Group’s exposure to the
consequences of interest rate fluctuations. Most of the swaps held at the balance sheet date were entered into in
January 2007 as part of a long-term fixing strategy. However, following the reduction in debt during the year, at year
end £400.0m (71.4%) of Group debt was fixed for an average of 4.0 years (2009: £410.0m, 61.0%, for 4.9 years),
using floating rate borrowings and interest rate swaps. The intention is that the fixed rate debt ratio will reduce
going forward to come back in line with Group policy. The average rate of interest on this fixed rate debt was 5.6%
(2008/9: 5.6%).
In accordance with IFRS 7 the Group has undertaken sensitivity analysis on its financial instruments which are
affected by changes in interest rates. This analysis has been prepared on the basis of a constant amount of net debt,
a constant ratio of fixed to floating interest rates, and on the basis of the hedging instruments in place at 4 March
2010 and 26 February 2009 respectively. Consequently, the analysis relates to the situation at those dates and is not
representative of the years then ended. The following assumptions were made:
• balance sheet sensitivity to interest rates applies only to derivative financial instruments, as the carrying value of
debt and deposits does not change as interest rates move;
• gains or losses are recognised in equity or the 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% change in interest rates would affect the Group’s profit
before tax by approximately £1.2m (2008/9: £2.2m), and equity by approximately £13.8m (2009: £19.6m).
Liquidity risk
The Group mitigates liquidity risk by managing cash generated by its operations combined with bank borrowings
and long-term debt. In its funding strategy the Group’s objective is to maintain a balance between the continuity of
funding and flexibility through the use of overdrafts and bank loans. This strategy includes monitoring the maturity
of financial liabilities to avoid the risk of a shortage of funds.
Excess cash used in managing liquidity is placed on interest-bearing deposit with maturities fixed at no more than
three months. Short-term flexibility is achieved through the use of short-term borrowing on the money markets.
The tables below summarise the maturity profile of the Group’s financial liabilities at 4 March 2010 and 26 February
2009 based on contractual undiscounted payments, including interest:
4 March 2010
Interest-bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Accrued financial liabilities
Provisions in respect of financial liabilities
26 February 2009
Interest-bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Accrued financial liabilities
Provisions in respect of financial liabilities
http://annualreport.whitbread.co.uk
On Less than
3 to 12
demand 3 months months
£m
£m
£m
1 to 5 More than
5 years
years
£m
£m
31.3
–
–
–
–
31.3
3.0
9.4
153.9
–
–
166.3
2.9
9.4
–
79.4
19.3
111.0
539.1
34.9
8.2
–
19.1
601.3
–
19.6
–
–
9.6
29.2
On Less than
3 to 12
demand 3 months months
£m
£m
£m
1 to 5 More than
5 years
years
£m
£m
Total
£m
576.3
73.3
162.1
79.4
48.0
939.1
Total
£m
1.9
–
–
–
–
1.9
8.3
5.9
134.5
–
–
148.7
8.3
5.9
–
73.3
13.3
100.8
702.3
30.9
7.9
–
10.5
751.6
–
16.4
–
–
6.5
720.8
59.1
142.4
73.3
30.3
22.9 1,025.9
88
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
25 Financial risk management objectives and policies (continued)
Credit risk
There are no significant concentrations of credit risk within the Group.
The Group is exposed to a small amount of credit risk that is primarily attributable to its trade and other receivables.
This is minimised by dealing with counterparties with high credit ratings. The amounts included in the balance sheet
are net of allowances for doubtful debts, which have been estimated by management based on prior experience
and known factors at the balance sheet date which may indicate that a provision is required. The Group’s maximum
exposure on its trade and other receivables is the carrying amount as disclosed in note 20.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash
equivalents, the Group’s exposure arises from default of the counterparty, with a maximum exposure equal to the
carrying value of these instruments. The Group seeks to minimise the risk of default in relation to cash and cash
equivalents by spreading investments across a number of counterparties.
In the event that any of the Group’s banks get into financial difficulties the Group is exposed to the risk of withdrawal
of currently undrawn committed facilities. This risk is mitigated by the Group having a range of counterparties to its
facilities and by maintaining headroom.
Foreign currency risk
Foreign exchange exposure is currently not significant to the Group. Sensitivity analysis has therefore not been
carried out.
Overseas investments are generally start-up businesses undertaken through joint venture arrangements. The Group
monitors the growth and risks associated with its overseas operations and will undertake hedging activities as and
when they are required.
Capital management
The Group’s primary objectives in regard to capital management are to ensure that it continues to operate as a going
concern and has sufficient funds, depending on the economic environment, at its disposal to grow the business for
the benefit of shareholders.
The Group seeks to maintain a ratio of debt to equity that balances risks and returns and also complies with lending
covenants. It aims to maintain sufficient funds for working capital, further investment in order to meet growth
targets and to ensure that access is available to the capital markets. The Group has adopted a framework to keep
leverage on a pensions lease adjusted basis at 3.5 times or below.
All of these matters are considered at regular intervals and form part of the business planning and budgeting
processes. In addition, the Board regularly reviews the Group’s dividend policy and funding strategy.
26 Financial instruments
Fair values
Set out below is a comparison by category of carrying amounts and fair values of the Group’s financial instruments.
The fair value of loan capital and derivative instruments is calculated by discounting all future cash flows by the
market yield curve at the balance sheet date.
Financial assets
Cash and cash equivalents
Other financial asset
Financial liabilities
Bank overdrafts and short-term borrowings
Interest-bearing loans and borrowings
Derivative financial instruments – non-current
Derivative financial instruments – current
Carrying values
Fair values
2010
£m
47.0
0.9
31.0
529.4
17.2
18.9
2009
£m
44.5
0.9
1.8
665.8
27.6
11.8
2010
£m
47.0
0.9
31.0
529.4
17.2
18.9
2009
£m
44.5
0.9
1.8
665.8
27.6
11.8
Hierarchical classification of financial assets and liabilities measured at fair value
IFRS 7 requires that the classification of financial instruments at fair value be determined 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.
89
26 Financial instruments (continued)
Level 2
Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either
directly or indirectly.
Level 3
Techniques which use inputs which have a significant effect on the recorded fair value that are not based on
observable market data.
4 March 2010
Financial Assets
Other financial asset
Financial Liabilities
Derivative financial instruments
Level 1
£m
–
–
Level 2
£m
–
36.1
Level 3
£m
0.9
–
Total
£m
0.9
36.1
During the year ended 4 March 2010 there were no transfers between levels 1, 2 or 3 fair value measurements.
Derivative financial instruments
Hedges
Cash flow hedges
At 4 March 2010 the Group had interest rate swaps in place to swap a notional amount of £400.0m (2009: £410.0m)
whereby it receives a variable interest rate based on LIBOR on the notional amount and pays fixed rates of between
5.145% and 5.695% (2009: 5.145% and 5.745%). The swaps are being used to hedge the exposure to changes in
future cash flows from variable rate debt.
Cash flow hedges are expected to impact on the income statement in line with the liquidity risk table shown in note 25.
The swaps with maturities beyond the life of the current revolving credit facilities (2013) are in place to hedge against
the core level of debt the Group will hold.
The cash flow hedges were assessed to be highly effective at 4 March 2010 and a net unrealised gain of £3.0m
(2008/9: net unrealised loss of £29.6m) has been recorded in other comprehensive income. During the year, a loss of
£15.9m (2008/9: £0.3m) was recycled from equity to the income statement in respect of hedged items affecting the
net finance charge for the year.
2010
£m
124.8
49.9
81.0
38.8
294.5
286.3
8.2
294.5
2009
£m
106.6
34.7
74.4
35.8
251.5
243.6
7.9
251.5
27 Trade and other payables
Trade payables
Other taxes and social security
Accruals and deferred income
Other payables
Analysed as:
Current
Non-current
http://annualreport.whitbread.co.uk
90
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
28 Share capital
Ordinary share capital
Authorised
Ordinary shares of 76.80p each (2009: 76.80p each)
Allotted, called up and fully paid ordinary shares of 76.80p each (2009: 76.80p each)
At 28 February 2008
Issued
Cancelled
At 26 February 2009
Issued
Issued in lieu of dividends:
2008/9 final
2009/10 interim
At 4 March 2010
2010
million
410.2
million
193.8
0.3
(5.0)
189.1
0.5
0.7
0.3
190.6
2009
million
410.2
£m
148.8
0.3
(3.8)
145.3
0.4
0.5
0.2
146.4
At the 2007 Annual General Meeting, the Company was authorised to purchase up to 19.7m of its own shares on the
open market. This authorisation was extended at a General Meeting on 27 November 2007 by a further 17.8m shares.
During the year no ordinary shares were acquired (2008/9: 1.6m at a cost of £20.0m). No shares were cancelled in
the year (2008/9: five million). The remainder are being held in the treasury reserve (note 29).
During the year to 4 March 2010 options over 0.2m ordinary shares, fully paid, were exercised by employees under
the terms of various share option schemes (2008/9: 0.3m).
On 5 May 2009 the Company announced a scrip alternative to the cash final dividend of 26.90 pence per share,
resulting in the issue of 674,971 ordinary shares. A scrip alternative was also announced for the 2009/10 9.65 pence
per share interim dividend. Ordinary shares issued in respect of the interim dividend totalled 298,754. The issue
of shares in lieu of cash dividends is treated as a bonus issue, with the nominal value of the shares being charged
against the share premium account.
The total number of shares in issue at the year end used in the calculation of the basic weighted average number of
ordinary shares was 190.6m, less 14.7m treasury shares held by Whitbread PLC and 0.5m held by the ESOT (2009:
189.1m, less 14.7m treasury shares held by Whitbread PLC and 0.8m held by the ESOT).
Preference share capital
B Shares
C Shares
Authorised
Shares of 1p each (2009: 1p each)
Allotted, called up and fully paid
shares of 1p each (2009: 1p each)
At 28 February 2008
Repurchased and cancelled
At 26 February 2009
Repurchased and cancelled
At 4 March 2010
Deferred shares
Authorised
Deferred shares*
Allotted, called up and fully paid
shares of 1p each
At 28 February 2008, 26 February 2009
and 4 March 2010
2010
million
265.0
2009
million
265.0
2010
million
224.0
million
£m
million
2.0
–
2.0
–
2.0
2010
million
170.6
million
–
–
–
–
–
–
4.6
(2.7)
1.9
–
1.9
B Shares
C Shares
2009
million
170.6
£m
–
2010
million
123.0
million
–
2009
million
224.0
£m
–
–
–
–
–
2009
million
123.0
£m
–
* Under the terms of the share issues, deferred shares have a total nominal value of 1 pence.
91
28 Share capital (continued)
B shareholders are entitled to an annual non-cumulative preference dividend paid in arrears on or around 2 July each
year on a notional amount of 155 pence per share.
C shareholders are entitled to an annual non-cumulative preference dividend paid in arrears on or around 14 January
each year on a value of 159 pence per share.
Other than shares issued in the normal course of business as part of the share-based payments schemes and those
issued in respect of scrip dividends, there have been no transactions involving ordinary shares or potential ordinary
shares since the reporting date and before the completion of these financial statements.
29 Reserves
Share premium
The share premium reserve is the premium paid on the Company’s 76.80p ordinary shares. The issue of shares in lieu
of cash dividends is treated as a bonus issue, with the nominal value of the shares being charged against the share
premium account. During the year, shares with a nominal value of £0.7m were issued in lieu of the 2008/9 final and
2009/10 interim cash dividends (2008/9: £nil).
Capital redemption reserve
A capital redemption reserve was created on the cancellation of the Group’s B and C preference shares (note 28) and
also includes the nominal value of cancelled 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 translation of the
financial statements of foreign subsidiaries and other foreign currency investments.
Merger reserve
The merger reserve arose as a consequence of the merger in 2000/1 of Whitbread Group PLC and Whitbread PLC.
Hedging reserve
This reserve records movements for effective cash flow hedges measured at fair value.
Treasury reserve
This reserve relates to shares held by an independently managed employee share ownership trust (ESOT) and
treasury shares held by Whitbread PLC. The shares held by the ESOT were purchased in order to satisfy
outstanding employee share options and potential awards under the Long-Term Incentive Plan (LTIP) and other
incentive schemes.
The movements in treasury shares during the year is set out in the table below:
At 28 February 2008
Acquired during the year
Exercised during the year
Cancelled during the year
At 26 February 2009
Exercised during the year
At 4 March 2010
Treasury shares held by Whitbread PLC
ESOT shares held
million
18.1
1.6
–
(5.0)
14.7
–
14.7
£m
269.9
20.0
–
(73.9)
216.0
–
216.0
million
0.8
0.1
(0.1)
–
0.8
(0.3)
0.5
£m
11.1
1.2
(2.0)
–
10.3
(4.3)
6.0
The treasury shares reduce the amount of reserves available for distribution to shareholders by £222.0m
(2009: £226.3m).
http://annualreport.whitbread.co.uk
92
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
30 Commitments and contingencies
Operating lease commitments
The Group leases various buildings which are used within the Hotels & Restaurants and Costa businesses. The leases
are non-cancellable operating leases with varying terms, escalation clauses and renewal rights. The Group also leases
various plant and equipment under non-cancellable operating lease agreements.
Contingent rents are the portion of the lease payment that is not fixed in amount but based upon the future amount
of a factor that changes other than with the passage of time (e.g. percentage of future sales, amount of future use,
future price indices, future market rates of interest).
Future minimum rentals payable under non-cancellable operating leases are as follows:
Due within one year
Due after one year but not more than five years
Due after five years but not more than ten years
Due after ten years
2010
£m
93.0
312.2
266.9
957.1
1,629.2
2009
£m
74.6
248.3
206.9
791.2
1,321.0
Future minimum rentals payable under non-cancellable operating leases disclosed above includes £84.3m in relation
to privity contracts. Future lease costs in respect of these privity contracts are included within the onerous contracts
provision (note 24). 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-cancellable operating leases is 17.3
years (2009: 18.6 years).
Group companies have sub-let space in certain properties. The future minimum sublease payments expected to be
received under non-cancellable sublease agreements as at 4 March 2010 are £21.8m (2009: £25.1m).
Contingent liabilities
There were no material contingent liabilities at 4 March 2010.
31 Share-based payment plans
Long-Term Incentive Plan (LTIP)
The LTIP awards shares to directors and senior executives of the Group. Vesting of shares under the scheme will
depend on continued employment and meeting total shareholder return (TSR) and earnings per share (EPS)
performance targets over a three year period. Details of the performance targets for the LTIP awards can be seen
in the Remuneration report on pages 47 to 56.
The awards are settled in equity once exercised.
Movements in the number of share awards are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2010
Awards
359,254
356,380
(71,088)
(14,324)
630,222
2009
Awards
266,413
163,236
(53,348)
(17,047)
359,254
–
–
93
31 Share-based payment plans (continued)
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 ceases to be an employee of Whitbread prior to the release date, normally
three years after the award, by reason of redundancy, retirement, death, injury, ill health, disability or some other reason
considered to be appropriate by the Remuneration Committee the awards will be released in full. If employment
ceases for any other reason the proportion of awards which vests depends upon the year in which the award was
made and the date that employment 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% vests and between the second and third anniversary
50% vests.
Movements in the number of share awards are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2010
Awards
385,729
249,371
(172,047)
(11,687)
451,366
–
2009
Awards
227,834
235,765
(77,797)
(73)
385,729
–
Executive Share Option Scheme (ESOS)
Annual grants of share options have been discontinued, however options may be granted in exceptional
circumstances, for example, on a senior recruitment or following an acquisition of a business. No changes will be
made to options already granted.
An earnings per share based performance condition will apply to any such options, and to the extent that the
performance is not satisfied after three years, the option shall lapse as there is no opportunity to retest performance.
This was the case for the options granted in 2004, for which the performance target requires earnings per share
growth of RPI plus 12% over the three year performance period. For options granted in 2005 the performance target
requires earnings per share growth of RPI plus 4% per annum over the three consecutive financial years, these have
now been met. For options granted between June 2000 and June 2003 the performance conditions required the
Company’s adjusted earnings per share to exceed RPI plus 4% per annum measured over any three consecutive
years out of the 10 year performance period starting from June 2000 and ending June 2013 depending on when the
options were granted.
Movements in the number of share options and the related weighted average exercise price (WAEP) are as follows:
Outstanding at the beginning of the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2010
WAEP
(£ per share)
7.06
6.92
11.01
5.39
5.39
Options
584,616
(561,349)
(21,500)
1,767
1,767
2009
WAEP
(£ per share)
7.11
7.69
–
7.06
7.06
Options)
631,516)
(46,900)
–)
584,616
584,616)
The weighted average contractual life for the share options outstanding as at 4 March 2010 is between one and two
years and they are exercisable at a price of £5.39 (2009: prices between £5.39 and £11.01).
The weighted average share price at the date of exercise for ESOS options exercised during the year was £12.99.
http://annualreport.whitbread.co.uk
94
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
31 Share-based payment plans (continued)
Employee share scheme
The employee share save scheme 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 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 WAEP are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2010
WAEP
(£ per share)
8.40
10.08
8.58
8.85
8.76
10.15
Options
1,478,954
379,528
(171,364)
(346,976)
1,340,142
22,931
2009
WAEP
(£ per share)
9.71
7.28
6.86
11.53
8.40
7.19
Options)
1,246,337)
958,965)
(349,048)
(377,300)
1,478,954)
56,388)
The weighted average contractual life for the share options outstanding as at 4 March 2010 is between two and three
years and are exercisable at prices between £6.53 and £14.17 (2009: £6.11 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 exercise for employee share scheme options exercised during the
year was £12.93.
Total charged to the income statement
Long-Term Incentive Plan and uplift awards
Deferred equity
Employee share scheme
Year to
4 March
2010
£m
1.9
2.3
1.7
5.9
Year to
26 February
2009
£m
1.4
2.3
2.3
6.0
The following table lists the inputs to the model used for the years ended 4 March 2010 and 26 February 2009:
Number
Grant of shares
granted
date
Fair Exercise
Price at Expected Expected
Fair
value
value
£
price grant date
p
p
term dividend Expected
yield volatility
(years)
Risk-
free
rate
Vesting
conditions
LTIP awards
28.04.2009
28.04.2009
28.04.2008
28.04.2008
178,190
178,190
81,618
81,618
52.4%
843,145
88.6% 1,425,623
464,100
46.3%
917,200
91.6%
Deferred equity
awards
28.04.2009
28.04.2008
249,371
235,765
88.6%
1,995,113
91.6% 2,649,400
–
–
–
–
–
–
903.0
903.0
1,227.0
1,227.0
903.0
1,227.0
SAYE – 3 years
01.12.2009
02.12.2008
293,478
735,703
33.7% 1,286,300 1,008.0
728.0
22.2% 1,278,000
1,299.0
782.5
SAYE – 5 years
01.12.2009
86,050
02.12.2008 223,262
34.2%
21.0%
382,300 1,008.0
728.0
366,900
1,299.0
782.5
3
3
3
3
3
3
3.25
3.25
5.25
5.25
4.05%
4.05%
2.93%
2.93%
4.05%
2.93%
39% 1.95%
n/a
27% 4.50%
n/a
Market1,3
n/a Non-market2,3
Market1,3
n/a Non-market2,3
n/a
n/a
n/a Non-market3,3
n/a Non-market3,3
2.81%
4.67%
40% 1.91% Non-market3,3
36% 2.38% Non-market3,3
2.81%
4.67%
34% 2.63% Non-market3,3
30% 2.90% Non-market3,3
1. Total shareholder return (TSR)
2. Earnings per share
3. Employment service
95
31 Share-based payment plans (continued)
Expected volatility reflects the assumption that historical volatility is indicative of future trends, which may not
necessarily be the actual outcome.
The risk-free rate is the rate of interest obtainable from government securities over the expected life 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.
At 4 March 2010 there were outstanding options for employees to purchase up to 1.3m (2009: 2.1m) ordinary shares
of 76.80 pence each between 2010 and 2015 at prices between £5.39 and £14.17 per share (2009: between 2009
and 2015 at prices between £5.39 and £14.17 per share).
Employee Share Ownership Trust (ESOT)
The Company funds an ESOT to enable it to acquire and hold shares for the LTIP and executive share option
schemes. The ESOT held 0.5m shares at 4 March 2010 (2009: 0.8m). All dividends on the shares in the ESOT are
waived by the Trustee.
32 Retirement benefits
Defined contribution schemes
The Group operated a defined contribution Pension Scheme which closed to new members on 31 December
2001. Members of the scheme are contracted out of the State Second Pension. A replacement, contracted-in,
defined contribution arrangement was established as a section of the Whitbread Group Pension Fund with effect
from 1 April 2002. Contributions by both employees and Group companies are held in externally invested trustee-
administered funds.
The Group contributes a specified percentage of earnings for members of the above defined contribution schemes,
and thereafter 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 £2.0m (2008/9: £2.0m).
At the year end, 1,641 employees (2009: 782) were active members of the schemes, which also had 6,769 deferred
members (2009: 6,747).
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 accrual on 31 December 2009. The scheme
is funded, and contributions by both employees and Group companies are held in externally invested trustee
administered funds. Members of the scheme are contracted out of the State Second Pension.
At the year end the scheme had no active members (2009: 885), 26,744 deferred pensioners (2009: 27,584) and
15,998 pensions in payment (2009: 15,645).
A scheme specific actuarial valuation for the purpose of determining the level of cash contributions to be paid
into the Whitbread Group Pension Fund was undertaken as at 31 March 2008. A deficit recovery plan and some
protection whilst the scheme remains in deficit have been agreed with the Trustee. The Group will make the following
payments to the Fund: £55m in each of August 2011, August 2012 and August 2013; £65m in each of August 2014
and August 2015; £70m in August 2016; £80m in each of August 2017 and 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 deficit, if lower.
Until the next valuation the Trustee has also been given a promise of participation in increases in ordinary dividends
where these exceed RPI and the right to consultation before any special distribution can be made.
In addition to the scheduled deficit contribution payments described above, the Pension Scheme will receive a share
of the income, profits and a variable capital payment from its investment in Moorgate Scottish Limited Partnership,
which was established by the Group during the year (the share in profits will be accounted 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 following a £102m investment made by the Pension Scheme Trustee during the year.
http://annualreport.whitbread.co.uk
96
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
32 Retirement benefits (continued)
Defined benefit schemes (continued)
Moorgate SLP holds an investment in a further partnership, Farringdon Scottish Partnership, which was also
established by the Group during the year. Property assets with a market value of £221m have been transferred from
other Group companies to Farringdon 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 alternative properties. However,
the Trustee 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 in these Group financial
statements.
The Pension Scheme is a partner in Moorgate SLP and, as such, is entitled to an annual share of the profits of the
partnership over the next 15 years. At the end of this period, the partnership capital allocated to the Pension Scheme
partner will be changed, depending on the funding position of the Scheme at that time, to a value up to £110m.
At that point, the Group may be required to transfer this amount in cash to the Scheme.
Under IAS 19 the investment held by the Pension Scheme in Moorgate SLP, a consolidated entity, does not represent a
plan asset for the purposes of the Group’s consolidated financial statements. Accordingly the pension deficit position
in these Group financial statements does not reflect the £102m investment in Moorgate SLP held by the Pension Scheme.
The total service cost contributions to the Whitbread Group Pension Fund in 2010/11 are expected to be £nil.
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 Hewitts, using the projected unit credit method.
As the scheme is now closed to future accrual, there will be no service cost in the future.
The principal assumptions used by the independent qualified actuaries in updating the most recent valuation carried
out as at 31 March 2008 of the UK schemes to 4 March 2010 for IAS 19 purposes were:
Rate of increase in salaries
Pre April 2006 rate of increase in pensions in payment and deferred pensions
Post April 2006 rate of increase in pensions in payment and deferred pensions
Discount rate
Inflation assumption
At
4 March
2010
n/a1
3.30%
2.20%
5.60%
3.50%
At
26 February
2009
4.10%
3.00%
2.10%
6.60%
3.10%
1. The Whitbread Group Pension Fund was closed to future accrual on 31 December 2009. From this point active members’ benefits only
increase in line with inflation.
The mortality assumptions are based on standard mortality tables which allow for future mortality improvements.
The assumptions are that a member currently aged 65 will live on average for a further 20.6 years (2009: 20.4) if
they are male and for a further 23.1 years (2009: 23.0) if they are female. For a member who retires in 2030 at age
65, the assumptions are that they will live on average for a further 22.5 years (2009: 22.4) after retirement if they are
male and for a further 24.9 years (2009: 24.8) after retirement if they are female.
The Group employs a building block approach in determining the long-term rate of return on pension plan assets.
Historical markets are studied and assets with higher volatility are assumed to generate higher returns consistent
with widely accepted capital market principles. The assumed long-term rate of return on each asset class is set out
within this note. The overall expected rate of return on assets is then derived by aggregating the expected return for
each actual asset allocation for the Fund at 4 March 2010 (rounded to the nearest 0.1% per annum).
97
32 Retirement benefits (continued)
Defined benefit schemes (continued)
The main valuation assumptions were that the return on investments would be 3.3% (2009: 3.6%) per annum
above inflation.
The amounts recognised in the income statement in respect of defined benefit schemes are as follows:
Current service cost
Curtailments
Recognised in arriving at operating profit
Expected return on scheme assets
Interest cost on scheme liabilities
Other finance (revenue)/cost (note 8)
2009/10
£m
4.5
(4.0)
0.5
(70.5)
86.0
15.5
The amounts taken to the consolidated statement of comprehensive income are as follows:
Actual return on scheme assets
Less: expected return on scheme assets
Other actuarial gains and losses
2009/10
£m
243.8
(70.5)
(369.0)
(195.7)
2008/9
£m
4.5
–
4.5
(90.5)
85.0
(5.5)
2008/9
£m
(247.5)
(90.5)
82.5
(255.5)
The current service cost has been included in administrative expenses. Actuarial gains and losses have been
recognised in the consolidated statement of comprehensive income.
The amounts recognised in the balance sheet are as follows:
Present value of defined benefit obligations
Fair value of scheme assets
Liability recognised in the balance sheet
2010
£m
(1,715.0)
1,281.0
(434.0)
2009
£m
(1,340.0)
1,107.0
(233.0)
During the year the accounting deficit increased from £233.0m at 26 February 2009 to £434.0m at 4 March 2010.
The main contributors to the increase were the change to the rate of interest used to discount the liabilities from 6.6%
to 5.6% and the change to the rate of assumed inflation underlying the liabilities from 3.05% to 3.50%. Both of these
were offset by the actual return on assets over the year being higher than that needed to keep pace with the interest
on liabilities.
Changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligation
Current service cost
Net interest cost
Actuarial losses/(gains) on scheme liabilities
Contributions from scheme members
Benefits paid
Curtailments
Benefits settled by the Company in relation to an unfunded pension scheme
Closing defined benefit obligation
2010
£m
1,340.0
4.5
86.0
369.0
0.5
(75.0)
(4.0)
(6.0)
1,715.0
2009
£m
1,405.0
4.5
85.0
(82.5)
0.5
(72.5)
–
–
1,340.0
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98
Annual Report 2009/10
Notes to the consolidated financial statements
At 4 March 2010
32 Retirement benefits (continued)
Defined benefit schemes (continued)
Changes in the fair value of the scheme assets are as follows:
Opening fair value of scheme assets
Expected return on scheme assets
Actuarial gains/(losses) on scheme assets
Contributions from scheme members
Contributions from employer
Additional contributions from employer
Benefits paid
Closing fair value of scheme assets
2010
£m
1,107.0
70.5
173.3
0.5
4.7
–
(75.0)
1,281.0
The analysis of the scheme assets and the expected rate of return at the balance sheet date were as follows:
Equities
Government bonds
Corporate bonds
Property
Cash
History of experience gains and losses:
Expected return
Fair value of assets
2010
%
8.2
4.5
5.4
7.0
4.5
2009
%
8.1
4.4
5.6
6.9
4.4
2010
£m
673.5
163.9
332.9
35.9
74.8
1,281.0
2009
£m
1,372.0
90.5
(338.0)
0.5
4.5
50.0
(72.5)
1,107.0
2009
£m
5 7 7.0
132.0
3 0 7.0
29.0
62.0
1,107.0
2010
£m
2009
£m
2008
£m
2007
£m
2006
£m
Present value of defined benefit obligations
Fair value of scheme assets
Liability recognised in the balance sheet
Experience adjustments on scheme liabilities (£m)
Percentage of scheme liabilities (%)
Experience adjustments on scheme assets (£m)
Percentage of scheme assets (%)
(1,715.0)
1,281.0
(434.0)
(3.0)
0.17%
173.0
13.51%
(1,340.0)
1,1 0 7 .0
(233.0)
(7.5)
0.60%
(338.0)
(30.50%)
(1,405.0)
1,372.0
(33.0)
(7.5)
0.50%
(66.5)
(4.80%)
(1,562.0)
1,366.0
(196.0)
(6.0)
0.40%
9.5
0.70%
(1,576.0)
1,238.0
(338.0)
(17.5)
1.10%
105.5
8.50%
The cumulative amount of actuarial gains and losses recognised since 4 March 2004 in the Group statement of
comprehensive income is £(385.6)m (2009: £(189.9)m).
The assumptions in relation to discount rate and mortality have a significant effect on the measurement of scheme
liabilities. The following table shows the sensitivity of the valuation to changes in these assumptions:
0.25% increase to discount rate
Additional one year increase to life expectancy
(Increase)/decrease in liability
£m
70.0
(50.0)
99
33 Related party disclosure
The Group’s principal subsidiaries are listed in the following table:
Principal subsidiaries
Whitbread Group PLC
Premier Inn Hotels Limited
Whitbread Restaurants Limited
Premier Inn Limited
Costa Limited
Principal activity
Restaurants and hotels
Hotels
Restaurants
Hotels
Operators of coffee shops
and roasters and wholesalers
of coffee beans
Yueda Costa (Shanghai) Food & Beverage Operators of coffee shops
Management Company Limited
Coffeeheaven International plc
Operators of coffee shops
Country of
incorporation
England
England
England
England
% equity interest and
votes held
2010
2009
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
England
China
100.0
51.0
100.0
51.0
England
100.0
–
Shares in Whitbread Group PLC are held directly by Whitbread PLC. Shares in the other subsidiaries 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 and the recently acquired Coffeeheaven International plc whose year
end will be aligned with that of the Group. All the above companies 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.
Sales to related party
£m
Amounts owed
by related party
£m
Amounts owed
to related party
£m
Related party
Joint ventures
2009/10
2008/9
Associate
2009/10
2008/9
Compensation of key management personnel (including directors):
Short-term employee benefits
Post employment benefits
Share-based payments
Associate
For details of the Group’s investment in associate see note 17.
Joint ventures
For details of the Group’s investment in joint ventures see note 16.
0.7
1.3
2.5
–
0.5
2.5
0.5
–
2009/10
£m
5.1
5.4
7.4
17.9
–
–
2.5
–
2008/9
£m
4.6
0.2
3.8
8.6
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made at normal market prices. Outstanding balances 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 4 March 2010, the Group has not raised any provision for doubtful debts relating to
amounts owed by related parties (2009: £nil). 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 on pages 47 to 56.
34 Events after the balance sheet date
A final dividend of 28.35p per share (2009: 26.90p) amounting to a dividend of £49.7m (2009: £46.7m) was
recommended by the directors at their meeting on 28 April 2010. A scrip alternative will be offered. These financial
statements do not reflect this dividend payable.
http://annualreport.whitbread.co.uk
100
100
Annual Report 2009/10
Company accounts 2009/10
Directors’ responsibility for the Company financial
statements/audit report
101
Opinion on other matter prescribed
by the Companies Act 2006
In our opinion:
• the part of the Directors’
Remuneration Report to be audited
has been properly prepared in
accordance with the Companies Act
2006; and
• the information given in the
Directors’ Report for the financial
year for which 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 Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records
have not been kept by the parent
company; or
• the parent company financial
statements and the part of the
Directors’ Remuneration Report to
be audited 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 Group financial statements of
Whitbread PLC for the year ended
4 March 2010.
Les Clifford
(Senior statutory auditor)
for and on behalf of Ernst & Young
LLP, Statutory Auditor
London
28 April 2010
Statement of directors’
responsibilities
The directors are responsible for
preparing the Annual Report and the
financial statements in accordance
with applicable law and regulations.
Company law requires the directors to
prepare financial statements for each
financial year. Under that law the
directors have elected to prepare the
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 financial
statements unless they are satisfied
that they give a true and fair view of
the state of affairs of the Company
and of the profit or loss of the
Company for that period. In preparing
those 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 financial statements; and
• prepare the 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
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 PLC
We have audited the parent
company financial statements of
Whitbread PLC for the year ended
4 March 2010 which comprise the
parent company Balance Sheet and
the related notes 1 to 11. The financial
reporting framework that has been
applied in their preparation is
applicable law and United Kingdom
Accounting Standards (United
Kingdom Generally Accepted
Accounting Practice).
http://annualreport.whitbread.co.uk
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 auditor’s report and for no
other purpose. To the fullest extent
permitted by law, we do not accept
or assume responsibility to anyone
other than the company 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 auditors
As explained more fully in the
Directors’ Responsibilities Statement
set out above, the directors are
responsible for the preparation
of the parent company financial
statements and for being satisfied
that they give a true and fair view.
Our responsibility is to audit the
parent company financial statements
in accordance with applicable law and
International Standards on Auditing
(UK and Ireland). Those standards
require us to comply with the Auditing
Practices Board’s Ethical Standards
for Auditors.
Scope of the audit of the
financial statements
An audit involves obtaining evidence
about the amounts and disclosures
in the financial statements sufficient
to give reasonable assurance
that the financial statements are
free from material misstatement,
whether caused by fraud or error.
This includes an assessment of:
whether the accounting policies are
appropriate to the parent company’s
circumstances and have been
consistently applied and adequately
disclosed; the reasonableness of
significant accounting estimates
made by the directors; and the
overall presentation of the
financial statements.
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 4 March 2010;
• have been properly prepared in
accordance with United Kingdom
Generally Accepted Accounting
Practices; and
• have been prepared in accordance
with the requirements of the
Companies Act 2006.
102 Annual Report 2009/10
Balance sheet
At 4 March 2010
Fixed assets
Investment in subsidiaries
Total non-current assets
Current assets
Debtors: amounts falling due within one year
Current liabilities
Creditors: amounts falling due within one year
Net current assets
Net Assets
Capital and reserves
Share capital
Share premium
Capital redemption reserve
Retained earnings
Other reserves
Shareholders’ funds
Alan Parker
Chief Executive
Christopher Rogers
Finance Director
28 April 2010
Notes
5
6
7
8
9
9
9
9
9
2010
£m
2,256.1
2,256.1
2009
£m
2,256.1
2,256.1
324.9
368.7
(1.9)
323.0
2,579.1
146.4
49.1
12.3
2,587.3
(216.0)
2,579.1
(0.2)
368.5
2,624.6
145.3
46.1
12.3
2,636.9
(216.0)
2,624.6
Notes to the accounts
At 4 March 2010
103
1 Basis of accounting
The financial statements of Whitbread PLC for the year ended 4 March 2010 were authorised for issue by the Board
of Directors on 28 April 2010.
The accounts are prepared under the historical cost convention and in accordance with applicable UK Accounting
Standards.
The Company has taken advantage of the provisions of FRS 1 (revised) which exempts companies which are part of a
group for which a consolidated cash flow statement is prepared, from preparing a cash flow statement. The required
consolidated cash flow statement has been included within the consolidated financial statements of the Group.
2 Summary of significant accounting policies
Investments
Investments held as fixed assets are stated at cost less provision for any impairment. The carrying value of
investments are reviewed for impairment when events or changes in circumstances indicate that the carrying
amount may not be recoverable.
3 Profit earned for ordinary shareholders
The profit and loss account of the parent Company is omitted from the Company’s accounts by virtue of the
exemption granted by Section 408 of the Companies Act 2006. The profit earned for ordinary shareholders and
included in the accounts of the parent Company amounted to £4.3m (2009: £1,385.3m).
4 Dividends paid and proposed
2009/10
2008/9
Final dividend relating to the prior year
Settled via scrip issue
Paid in the year
Interim dividend for the current year
Settled via scrip issue
Paid in the year
B share dividend
C share dividend
Total dividends paid
pence
per share
26.90
9.65
7.13
2.93
Proposed for approval at Annual General Meeting:
Final dividend for the current year
28.35
£m
46.7
(6.0)
40.7
16.8
(3.8)
13.0
0.1
0.1
0.2
53.9
49.7
pence
per share
26.90
9.65
7.11
6.64
26.90
£m
47.1
–
47.1
16.7
–
16.7
0.2
0.1
0.3
64.1
46.7
The final dividend for the current year was recommended by the directors on 28 April 2010 and is not reflected in
these accounts. This dividend will be paid in 2010/11 assuming that it is approved by shareholders at the Annual
General Meeting. A scrip alternative will be offered.
http://annualreport.whitbread.co.uk
104
Annual Report 2009/10
Notes to the accounts
At 4 March 2010
5 Investment in subsidiary undertakings
Shares at cost
At 26 February 2009 and 4 March 2010
Principal subsidiary undertakings
Principal activity
2010
£m
2009
£m
2,256.1
2,256.1
Country of
incorporation
or registration
Country of
principal
operations
% of equity
and votes held
Whitbread Group PLC
Premier Inn Hotels Limited
Whitbread Restaurants Limited
Premier Inn Limited
Whitbread Hotel Company Limited
Costa Limited
Yueda Costa (Shanghai) Food &
Beverage Management Company Limited
Coffeeheaven International plc
Restaurants and hotels
Hotels
Restaurants
Hotels
Hotels
Operators of coffee shops
and roasters and wholesalers
of coffee beans
Operators of coffee shops
England
England
England
England
England
England
England
England
England
England
England
England
China
China
Operators of coffee shops
England
Poland
100
100
100
100
100
100
51
100
Shares in Whitbread Group PLC are held directly by Whitbread PLC. Shares in the other subsidiaries 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 and the newly acquired Coffeeheaven International plc whose year
end will be aligned with that of the Group.
6 Debtors
Amounts falling due within one year
Amounts owed by subsidiary undertakings
Corporation tax recoverable
7 Creditors
Amounts falling due within one year
Other creditors
Corporation tax payable
8 Share capital
Authorised
Ordinary shares of 76.80p each (2009: 76.80p each)
2010
£m
324.9
–
324.9
2010
£m
0.2
1.7
1.9
2010
million
410.2
Allotted, called up and fully paid ordinary shares of 76.80p each (2009: 76.80p each)
million
At 28 February 2008
Issued
Cancelled
At 26 February 2009
Issued
Issued in lieu of dividends:
2008/9 final
2009/10 interim
At 4 March 2010
193.8
0.3
(5.0)
189.1
0.5
0.7
0.3
190.6
2009
£m
362.9
5.8
368.7
2009
£m
0.2
–
0.2
2009
million
410.2
£m
148.8
0.3
(3.8)
145.3
0.4
0.5
0.2
146.4
At the 2007 Annual General Meeting the Company was authorised to purchase up to 19.7m of its own shares on the
open market. This authorisation was extended at a General Meeting on 27 November 2007 by a further 17.8m shares.
During the year no ordinary shares were acquired (2008/9: 1.6m at a cost of £20.0m). No shares were cancelled in
the year (2008/9: 5.0m). The remainder are being held in the treasury reserve (note 9).
During the year to 4 March 2010, options over 0.2m ordinary shares, fully paid, were exercised by employees under
the terms of various share option schemes (2008/9: 0.3m).
B Shares
C Shares
8 Share capital (continued)
Preference shares*
Authorised
Shares of 1p each
2010
million
265.0
Allotted, called up and fully paid shares of 1p each million
At 28 February 2008
Repurchased and cancelled
At 26 February 2009 and 4 March 2010
Deferred shares*
Authorised
Deferred shares in issue
2.0
–
2.0
2010
million
170.6
B Shares
Allotted, called up and fully paid shares of 1p each million
At 28 February 2008, 26 February 2009
and 4 March 2010
–
2009
million
265.0
£m
–
–
–
2009
million
170.6
£m
–
2010
million
224.0
million
4.6
(2.7)
1.9
2010
million
123.0
million
–
C Shares
105
2009
million
224.0
£m
–
–
–
2009
million
123.0
£m
–
*Refer to note 28 of the Whitbread PLC consolidated accounts for further details of the preference and deferred share issues.
At 4 March 2010 there were outstanding options for employees to purchase up to 1.3m (2009: 2.1m) ordinary shares
of 76.80 pence each between 2010 and 2015 at prices between £5.39 and £14.17 per share (2009: between 2009
and 2015 at prices between £5.39 and £14.17 per share).
9 Shareholders’ funds
Share
capital premium
£m
Capital
Share redemption
reserve
£m
£m
Treasury Retained
earnings
£m
shares
£m
Total
£m
At 28 February 2008
148.8
43.8
8.5
(269.9) 1,394.1 1,325.3
Ordinary shares issued
Ordinary shares cancelled
Purchase of own shares
Preference shares cancelled
Profit for the financial year
Equity dividends
At 26 February 2009
Ordinary shares issued
Scrip dividends
Profit for the financial year
Equity dividends
At 4 March 2010
0.3
(3.8)
–
–
–
–
145.3
0.4
0.7
–
–
146.4
2.3
–
–
–
–
–
46.1
3.7
(0.7)
–
–
49.1
–
3.8
–
–
–
–
12.3
–
–
–
–
12.3
The movement in treasury shares during the year is set out in the table below:
–
(73.9)
–
(4.5)
–
73.9
(20.0)
–
–
–
2.6
–
(20.0)
(4.5)
1,385.3 1,385.3
(64.1)
(64.1)
(216.0) 2,636.9 2,624.6
4.1
9.8
4.3
(63.7)
2,579.1
–
9.8
4.3
(63.7)
(216.0) 2,587.3
–
–
–
–
At 28 February 2008
Acquired during the year
Cancelled during the year
At 26 February 2009 and 4 March 2010
Treasury shares held by Whitbread PLC
£m
million
18.1
1.6
(5.0)
14.7
269.9
20.0
(73.9)
216.0
10 Related parties
The Company has taken advantage of the exemption given in FRS 8 not to disclose transactions with other Group
companies that are wholly owned.
11 Contingent liabilities
Whitbread PLC is a member of Whitbread Group PLC VAT group. All members are jointly and severally liable for the
liability. At the balance sheet date the Group liability stood at £68.3m (2009: £20.0m).
http://annualreport.whitbread.co.uk
106 Annual Report 2009/10
Analysis of shares
Analysis of shares at 4 March 2010
Band
1 – 100
101 – 500
501 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
100,001 – 500,000
500,001 – 1,000,000
1,000,001 – 5,000,000
5,000,001+
Total
Number of holders
% of holders
Number of shares % of share capital
27,276
19,529
4,792
2,911
231
321
99
161
38
28
4
49.24
35.26
8.65
5.25
0.42
0.58
0.18
0.29
0.07
0.05
0.01
1,024,308
4,770,304
3,379,642
5,268,055
1,634,576
7,923,751
7,077,225
34,409,372
26,213,590
61,036,815
37,930,771
0.54
2.50
1.77
2.76
0.86
4.16
3.71
18.05
13.75
32.01
19.89
55,390
100.00
190,668,409
100.00
Shareholder services
For further information about the
Company and its businesses please
visit the Whitbread website at
www.whitbread.co.uk
Capital gains tax
Market values of shares in the
Company as at 31 March 1982
were as follows:
Registrars
Capita Registrars, Northern House,
Woodsome Park, Fenay Bridge,
Huddersfield, West Yorkshire
HD8 0GA.
‘A’ limited voting shares of 25p
each 103.75p
‘B’ limited shares of 25p each
103.75p
The website address is
www.capitaregistrars.com
For enquiries regarding your
shareholding please telephone
0844 855 2327, or email
whitbread@capitaregistrars.com
You can also view up-to-date
information about your holdings by
visiting www.whitbread-shares.com
Please ensure that you advise
Capita promptly of any change
of address.
Scrip dividend scheme
The scheme enables you to increase
your shareholding in the Company
by electing to receive all dividends
in new shares. Full details are
available from the registrars at the
address given above.
Dividend payment by BACS
We can pay your dividends direct
to your bank or building society
account using the Bankers’
Automated Clearing Service
(BACS). This means that your
dividend will be in your account
on the same day we make the
payment. Your tax voucher will be
posted to your home address. If you
would like to use this method of
payment please ring the registrars
on 0844 855 2327.
Sharegift
If you have a small number of
Whitbread PLC shares, with a value
that makes it uneconomical to sell
them, you may donate the shares
to charity through the Sharegift
scheme operated by the Orr
Mackintosh Foundation. Further
information on Sharegift can be
obtained from their website
www.sharegift.org or by calling
020 7930 3737.
Whitbread has had discussions with
the Inland Revenue (now HMRC)
concerning the capital gains tax
cost of Whitbread shares following
the reduction of capital on 10 May
2001. It is confirmed that the market
value of each Whitbread share on
10 May 2001 for these purposes
was 606.5p and the market value
of each Fairbar share was 230p.
For the purposes of calculating UK
tax on chargeable gains which may
arise on a disposal of shares in the
Company, subsequent alterations
to the Company’s capital should
be taken into account. In particular,
the special dividend and share
consolidation in May 2005, the
share consolidation and B share
issue effected in June 2006 and
the share consolidation and C share
issue in January 2007 should be
considered in accordance with the
information provided in the related
shareholder circulars. Further
information on capital gains tax
allocations in relation to the B and
C share issues can be found in the
investors/private shareholders
section of the Company’s website
www.whitbread.co.uk
Unsolicited mail
We are aware that some
shareholders have had occasion
to complain of the use, by outside
organisations, of information
obtained from Whitbread’s share
register. Whitbread, like other
companies, cannot by law refuse to
supply such information provided
that the organisation concerned
pays the appropriate statutory fee.
If you are a resident in the UK and
wish to stop receiving unsolicited
mail then you should register with
the Mailing Preference Service,
telephone: 020 7291 3310 or you
may prefer to write to: The Mailing
Preference Service Freepost 22,
London W1E 7EZ.
http://annualreport.whitbread.co.uk
107
General Counsel and
Company Secretary
Simon Barratt
Registered Office
Whitbread PLC
Whitbread Court
Houghton Hall Business Park
Porz Avenue
Dunstable
Bedfordshire
LU5 5XE
Shareholder enquiries:
0844 855 2327
Share dealing service
Capita Share Dealing Services
Tel: 0871 664 0446
www.capitadeal.com
These details have been provided for
information only and any action you take is at
your own risk. If you are in any doubt about
what action to take, please consult your own
financial adviser. Should you not wish to use
these services you could find a broker in your
local area, on the internet or enquire about
share dealing at any high street bank or
building society. The availability of this service
should not be taken as a recommendation
to deal.
Financial diary – 2010/11
(dates subject to confirmation)
29 April
12 May
14 May
22 June
14 July
Results
announcement
Ex dividend
date for final
dividend
Record date for
final dividend
AGM at QEII
Conference
Centre
Payment of final
dividend
2 September
Half year-end
19 October
27 October
29 October
11 January 2011
3 March 2011
Announcement
of half year
results
Ex dividend
date for interim
dividend
Record date for
interim dividend
Payment of
interim dividend
End of financial
year
Annual Report 2009/10
The Whitbread Way Forward
Our aim is to build the best
large-scale hospitality brands in
the world by becoming the most
customer focused organisation
there is. Anywhere.
We’ll do this by providing outstanding
value and making everyday experiences
feel special – so that our customers
come back time and time again.
Contents
Financial highlights
Group at a glance
Chairman’s statement
Business review –
Chief Executive
Our strategy
Our people
Our customers
Hotels and Restaurants
Costa
Finance Director
Corporate responsibility
Key performance indicators
Group risks and uncertainties
Board of directors
Senior management
Directors’ report
Corporate governance report
Remuneration report
Accounts 2009/10
1
2
4
6
6
10
12
14
16
24
28
30
32
34
36
38
39
43
47
57
Annual Report and
Accounts 2009/10
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