Annual Report
and Accounts
2011/12
Contents
Introduction
Business
review
Governance
Consolidated
accounts
1
Financial highlights
2 Chairman’s statement
22 Board of directors
45 2011/12
4
Chief Executive’s
review
8 Strategic approach
24 Directors’ report
28 Corporate
governance
9 – Team engagement
35 Remuneration report
consolidated
accounts
Company
accounts
93 2011/12
Company
accounts
12 – Customer heartbeat
15 – Profitable growth
17 – Good Together
18 Finance Director’s
review
20 Risk management
Group at a glance
Premier Inn
626Hotels
Premier Inn is the UK’s
largest budget hotel
chain, with more than
47,000 rooms across
the UK and Ireland. Over
75% of the UK population
live within five miles of a
Premier Inn.
Overseas we have three
hotels in Dubai, one in
Abu Dhabi and two in
India with more on the way.
Premier Inn bedrooms
have an en-suite bathroom,
TV with Freeview, and
WiFi internet access.
All our hotels have a bar
and restaurant, either
inside the building, or
next to it, offering a wide
range of dishes.
Premier Inn has been
named the UK’s ‘best value
hotel chain’ by YouGov.
Restaurants
Beefeater Grill
Brewers Fayre
Table Table
Taybarns
Beefeater Grill’s expert
chefs have been serving
up our famous steaks
for nearly 40 years. Our
warm and welcoming
restaurants are ideal for
any occasion: from a
quick bite to celebrating
with friends or family.
Brewers Fayre serves
the nation’s favourite
pub food, at great value
prices, in a family friendly
environment. The majority
of Brewers Fayres include
an ‘all you can eat’ Buffet
Place, which offers
fantastic variety and value.
Our Table Table restaurants
offer a range of pub
classics served by friendly
staff at great prices.
There’s a table for every
occasion, from quiet nooks
for a chilled out evening
to dining room tables for
a traditional Sunday lunch.
Taybarns is the
ultimate eatery, with
great choice, value
and convenience. It
offers an ‘all you can
eat’ experience with
seven restaurants
under one roof.
135 Restaurants
129 Restaurants
116 Restaurants
7 Restaurants
Costa
Costa is the largest and
fastest growing coffee
shop chain in the UK.
In both 2010 and 2011 it
was voted the nation’s
favourite coffee shop.
Costa is about serving
great quality coffee in
convenient locations
and great surroundings.
Costa stores can be found
in 25 countries overseas
and serve more than 900
cups of coffee across the
world every minute.
Costa Express self-serve
coffee bars now provide
customers with even more
opportunities to enjoy a
cup of Costa coffee.
2,203
Stores worldwide
Financial highlights
Financial highlights
Whitbread performed well in 2011/12.
Sales grew by 11.2%, driven by our
strong brands, with an increase in
underlying pre-tax profits of 11.3%.
Total revenue (£m)
Underlying diluted EPS (p)
2011/12
2010/11
2009/10
2008/09
1,778.0
1,599.6
1,334.6
2011/12
2010/11
2009/10
2008/09
Underlying profit before tax1 (£m)
Full year dividend (p)
2011/12
2010/11
2009/10
2008/09
320.1
287.5
224.4
2011/12
2010/11
2009/10
2008/09
134.1
116.4
51.25
44.50
90.7
36.55
Hotels & Restaurants return on capital2
Cash flow from operations
up from
12.3% to 12.4%
up from
£415.2m to £478.3m
Costa return on capital2
Capital expenditure on new and existing units
up from
28.3% to 32.4%
up from
£202.2m to £307.9m
1. Underlying profit excluding amortisation of acquired intangibles, exceptional items
and the impact of the pension finance cost as accounted for under IAS 19.
2. Return on capital is the return on invested capital which is calculated by taking
underlying profit before interest and tax for the year divided by net assets excluding
debt, taxation liabilities and the pension deficit at the balance sheet date.
1
96.71,435.0239.138.00 Chairman’s statement
Chairman’s
statement
We are focused on
putting the customer at
the heart of everything
we do. We continually
develop our products
and services while
investing in our brands
to build ever stronger
consumer propositions.
2
I am pleased to report another good set of results
for Whitbread, with double-digit revenue and
profit growth, as well as 15% growth in both EPS
and dividends during the year. We are focused on
putting the customer at the heart of everything we
do. We continually develop our products and services
while investing in our brands to build ever stronger
consumer propositions, all the time keeping a tight
control on costs. This has enabled us to perform well
in tough market conditions giving us the confidence
to expand in line with our ambitious growth plans.
In a challenging hotel market, the increasing strength of
the Premier Inn brand and our dynamic pricing system
have ensured we continue to outperform competitors.
The sharper focus in our restaurants business delivered
a turnaround in performance in the second half of the
year. Costa remains one of the success stories of the
UK high street with like for like sales growth of 5.5%,
while some 22% of total system sales now come from
its international businesses.
It has been a record year for expansion in our main
growth engines of Premier Inn and Costa. We opened
4,430 new rooms (31 hotels), 12 restaurants, over 330
Costa stores around the world and now have 1,192 Costa
Express machines. This puts us well on track to achieve
the 2016 milestones we laid out last April. Overseas,
Costa continues to build presence in some 25 countries
and in the year we celebrated our 100th store in China.
Premier Inn is developing a ‘capital right’ strategy to
expand in the emerging budget hotel markets of the
Middle East, India and Asia Pacific.
As we invest in growing our brands the focus is very
much on delivering good returns that create substantial
shareholder value. To further this end, we are proposing
to introduce a ROCE measure to our senior management
long-term incentive plan for 2012/13.
whitbread.co.uk Dividend
As we said at this time last year, we have re-balanced
the interim and final dividend payments to reflect
the earnings profile during the year more closely.
The Board recommends a final dividend of 33.75p
per share, making a total dividend for the year of
51.25p per share, up by 15.2%.
The final dividend will be paid on 13 July 2012 to
shareholders on the register at the close of business
on 18 May 2012. Once again, a scrip dividend alternative
will be offered and further information on how
shareholders can elect to participate in the scrip
dividend scheme is available from the registrars
or on the Company’s website.
Board
During the year, we appointed two new non-executive
directors, Susan Hooper and Susan Taylor Martin.
They are both highly talented multi-lingual executives
with international experience. Each of them brings a
different range of skills to the Whitbread Board as we
continue to grow our market-leading businesses both
in the UK and selectively around the world.
Susan Hooper is an experienced international leisure
sector executive holding the position of Chief Executive
at Acromas Travel where she has been responsible
for the Saga, AA and Titan Hi Tours holiday and
travel businesses since 2009. Her other leisure
and consumer experience includes Senior VP, EMEA
at Royal Caribbean Cruises International, where she
also represented them on the board of First Choice
Holidays PLC, and senior roles at Avis Europe. Her
appointment was effective from 1 September 2011.
Susan Taylor Martin has held executive roles in rapidly
changing markets. She was appointed President, Media
at Thomson Reuters in July 2011 and has held a number
of other roles at Thomson Reuters during a period
of extensive technological innovation and corporate
change. These roles included, President, Global
Investment Focus Accounts and Managing Director,
UK and Ireland within Thomson Reuters Markets.
Prior to that she was Global Head, Corporate Strategy
for Reuters, which she joined in 1993. Her appointment
was effective from 1 January 2012.
Earlier this month we announced a change of
responsibilities for Christopher Rogers, who will
become Managing Director of Costa with effect from
1 August 2012 when John Derkach leaves us to
become Chief Executive of Tragus. Christopher joined
Whitbread as Finance Director in 2005 and has played
a key role in the Company’s transformation over the
last seven years. Prior to joining Whitbread, he had
developed a wealth of experience in consumer-facing
businesses such as Kingfisher, where he held product
marketing, commercial and finance roles. Christopher
has served on the Costa Management Board since
it was formed in 2008 and has played an active role
in Costa’s development. We have started the search
process for a new Finance Director.
Governance
As Chairman of the Company, I believe that corporate
governance is not simply something for the Board to
consider as an agenda item at our monthly meetings.
Corporate governance affects all aspects of our
operations and I am pleased with the high standards
we maintain in this regard. On pages 28 to 34, there is
a comprehensive report which sets out our approach
to governance.
People
The dedication and energy of our employees is a key
part of our ‘customer heartbeat’ strategy, which is
described in more detail later in this report. I would like
to pay tribute to the tremendous contribution of our
people and the high quality service they provide to
our customers every single day of the year. On behalf
of the Board and the executive team, I wish to express
our thanks to each of them for their hard work this
year and the contribution they have made to our
overall performance.
Anthony Habgood
Chairman
25 April 2012
3
Chief Executive’s review
Chief
Executive’s
review
Central to creating
shareholder value
is combining growth
with a strong focus
on improving return
on capital.
4
Whitbread delivered a good performance in 2011/12,
in a challenging economic environment. Strong
organic expansion, combined with like for like sales
growth, increased Group total sales by 11.2% to
£1,778.0 million. Premier Inn sales grew by 8.3% to
£755.9 million, Restaurants by 1.8% to £483.4 million
and Costa by 27.5% to £541.9 million.
Group underlying profit before tax increased by 11.3% to
£320.1 million (2010/11: £287.5 million), with underlying
diluted EPS increasing by 15.2% to 134.1p. Group return
on capital grew to 13.6% from 12.9%.
Our continuing focus on improving customer
propositions drove Group like for like sales up by 2.6%.
Premier Inn’s like for like sales growth of 3.2% was
impacted by a slowdown in the total hotel market in
the second half of the year, particularly in the regions.
Restaurants full year like for like sales fell by 0.2%, with
an improvement in performance in the second half of
the year, as management actions drove like for like
sales growth. Costa continues its success story and
delivered another strong performance with like for like
sales up 5.5%.
Central to creating shareholder value is combining
growth with a strong focus on improving return on
capital. Our openings in Hotels & Restaurants over the
last three years have shown good returns as the new
sites mature and the return on capital for the division
increased slightly to 12.4%. Return on capital in Costa
grew to 32.4%, up from 28.3%.
Our strong cashflow from operations of £478.3 million
funded increased capital investment of £307.9 million,
as well as the proposed growth in the dividend. We
maintain our strong balance sheet. Year end debt
increased by £16.4 million to £504.3 million.
The Board recommends a final dividend payment of
33.75p per share, making a total dividend for the year
of 51.25p per share, an increase of 15.2%. The final
dividend will be paid on 13 July 2012 to shareholders
on the register at the close of business on 18 May 2012.
A scrip dividend alternative will be offered again.
Our success depends on the hard work and
professionalism of our 40,000 team members and I
would like to thank them for their enormous contribution.
Strong brands getting stronger
As the UK’s largest hotel and restaurant group, with
over 2,000 outlets, Whitbread’s brands are visited
by some 19 million customers a month. The Premier
Inn management and team members are focused
on delivering a consistently high quality, great value,
customer experience, in well designed hotels to ensure
we are the number one choice in every local market.
We continue to outperform our competitive set and
were named ‘Best Value Hotel Chain’ by YouGov and
whitbread.co.uk awarded ‘Most Improved Brand of the Year 2012’ by
BDRC. We are passionate about improving customer
experience. Premier Inn has one of the UK’s largest
customer satisfaction surveys with over 814,000
responses in 2011/12. Of these, 66% scored their stay
nine or ten out of ten and a further 23% scored it seven
or eight out of ten.
Costa delivered another excellent performance and,
demonstrating its growing reputation, was voted ‘Best
Brand’ by Marketing Week and ”Best Branded Coffee
Shop Chain – Europe” by Allegra Strategies. Costa
has also increased its lead over Starbucks in YouGov’s
‘Brand Preference’ measure.
Whitbread Hotels & Restaurants
Premier Inn
Premier Inn continued to outperform its competitive
set and delivered a resilient performance in the
midscale and economy hotel sector, which became
more challenging as the year progressed. Premier Inn
like for like revpar grew by 1.8% in the year, with an
increase of 0.8% in the regions and 7.3% in London.
Our outperformance is a result of the quality and
consistency of our product and service, the breadth of
our network, our continued investment in the Premier
Inn brand and the evolution of our dynamic pricing
model. Our online channel, PremierInn.com, has also
made good progress with visitor numbers increasing
by 26.9% to 44 million in the year. 77% of bookings
are now made through automated channels. In the
year ahead, Premier Inn will maintain its advertising
expenditure both on TV and online. We will also
continue to invest in our estate and are spending
around £70 million refurbishing some 13,000 rooms
over the two financial years to February 2013.
Dynamic pricing continues to evolve and enables us
to optimise room rate whilst working towards our
occupancy target of 80%. During the year we trialled
a new dual pricing structure with ‘Premier Saver’ rates
(which are non-refundable and payable on booking)
and ‘Premier Flexible’ rates (which are fully refundable
and payable either on check-in or at booking). The dual
pricing structure will be rolled out across the remaining
estate in 2012/13.
We delivered our highest organic room growth to
date in 2011/12, opening 4,055 new rooms and 29 new
hotels. This takes our total number of hotels in the UK
& Ireland to 620 with 47,429 rooms. We plan to open
4,200 new rooms during 2012/13. Together with the
remainder of our committed pipeline of 6,300 rooms,
this will take us to nearly 58,000 rooms putting us
on track to achieve our milestone of 65,000 rooms
by 2015/16.
London is an important focus of our expansion and
from our committed pipeline we expect to increase
our presence from 7,225 rooms to over 10,500 rooms.
Our pipeline for London is predominantly leasehold
which offers attractive returns with the EBITDA of
a leasehold room significantly higher than that of a
comparable room in the regions.
In the year, we implemented a new organisation
structure within Hotels & Restaurants under WHR
Managing Director, Patrick Dempsey. This created
more focused management teams in Premier Inn
and Restaurants whilst maintaining our joint site
benefits. As part of this change we introduced cluster
management to the Premier Inn estate which is now
divided into 112 clusters. This structure provides
greater focus at site level, delivering a better customer
experience and sharing of best practice.
Last year, we announced a ‘capital right’ approach
for our international expansion. We appointed a
new Managing Director, Paul Macpherson, who has
valuable experience in this field. We now have six
hotels internationally, four in the Middle East and two
in India, which performed well in 2011/12 with increasing
revpar and occupancy. The hotel market remains
fragmented within these markets and with no dominant
international players. Combined with strong economic
growth and changing demographics this underpins
the opportunity for expansion. We will broaden our
presence with our pipeline of five hotels and then
pursue a ‘capital light’ strategy. During 2011/12, we
invested £4.4 million in Premier Inn International and
expect to invest a further £10-15 million in 2012/13.
Restaurants
Restaurants made steady progress with an increase
in like for like sales of 1.2% and covers up 4.8% in the
second half of the year, after a disappointing first half.
We are focused on improving operational performance
by strengthening our brands and customer
propositions. To achieve this we have appointed a
dedicated management team, both centrally and at
site level, which has helped drive sales, operational
excellence and cost efficiencies.
Our Restaurants management has pursued a number of
activities aimed at increasing sales and attracting more
customers. These included the continued roll out of the
Buffet Place concept within the Brewers Fayre estate.
A total of 71 sites were converted in the year taking the
total to 95 and these achieved an average sales uplift
of 6% on conversion. In addition we made our Premier
Inn breakfast fully available to the public and installed
Costa ‘bean to cup’ coffee machines across the estate.
To improve operational performance we launched
three Skills Academies, which were set up to improve
the training for managers and team members in food
quality and service. Already 1,700 delegates have
passed through these Academies and there are
plans for 9,000 team members to attend in 2012/13.
5
Chief Executive’s review
To mitigate food, labour and utilities inflation we plan
to improve cost efficiency through better procurement,
menu management and labour scheduling.
We continue to expand our restaurant estate and
opened 12 new sites in the year, taking our total to 387.
We plan to open a further six new sites in 2012/13.
Costa
Costa produced another excellent performance
during the year with underlying profits up 38.0%
to £69.7 million, worldwide system sales up 24.3%
to £819.3 million and like for like sales in UK equity
stores up 5.5%.
Last year
This year
In early 2012 we organised Costa into four divisions:
Costa UK Retail; Costa Enterprises (which includes
wholesale, corporate franchise and Costa Express);
Costa EMEI (which covers operations in Europe,
Middle East and India); and Costa Asia. This reflects
the increasing breadth and globalisation of the brand
and supports our growth strategy for the future.
Premier Inn guest recommend scores
s
t
n
e
d
n
o
p
s
e
r
f
o
%
80
70
60
50
40
30
20
10
0
66%
61%
25%
23%
14%
11%
0-6
7-8
Net recommend score (out of 10)
(based on 814,000 responses in 2011/12)
9-10
Financial performance
Hotels &
Restaurants
2011/12
(£m)
2010/11
(£m)
%
Change
Premier Inn revenue
Restaurants revenue
Total revenue
pre exceptional
Restaurants
exceptional revenue
Total revenue
post exceptional
Underlying profit
Operating profit,
post exceptional
Costa
System sales*
Revenue
Underlying profit
755.9
483.4
1,239.3
697.8
474.9
1,172.7
–
4.6
1,239.3
1,177.3
295.6
310.7
283.4
283.6
8.3
1.8
5.7
5.3
4.3
9.6
2011/12
(£m)
2010/11
(£m)
%
Change
819.3
541.9
69.7
659.0
425.0
50.5
46.4
24.3
27.5
38.0
42.2
Operating profit,
post exceptional
*System sales excludes intersegment.
66.0
6
Costa UK Retail has delivered consistently good like
for like sales growth across all channels and regions.
Key drivers of success include the Ice Cold Costa
Summer campaign which saw category sales rise by
44%, further investment in the estate with some 128
refurbishments and the rollout of new store designs
including four Metro stores. We also strengthened our
distribution through new channels such as Drive Thru,
of which there are now five across the country, with an
opportunity for a further 70 locations.
Costa Express had a good year with growth ahead of
our original expectations. Typically, the number of cups
sold per machine increases by around 20% once it is
rebranded to Costa Express from Coffee Nation. There
are now 1,192 Costa Express machines in the UK which
includes 622 conversions. We plan to roll out more than
1,000 Costa Express machines in 2012/13 supported by
a new contract with Shell for over 500 machines.
Costa’s EMEI region is growing in significance with
a total of 647 stores including 95 in India and 93 in
Poland. In the year 88 net new stores were opened.
Costa Asia has seen strong growth in China with 69
net stores opened in 2011/12 taking the total to 164,
with plans to open a further 100 stores in the year
ahead. We expect Costa’s Chinese business to break
even in the second half of 2012/13.
In 2011/12 we opened 332 net new stores; 175 in the UK
and 157 overseas taking our total number of stores to
2,203. We plan to open 350 stores in 2012/13 putting
us well on track to achieve our growth milestones of
£1.3 billion system sales, 3,500 stores worldwide and
around 3,000 Costa Express machines by 2015/16.
whitbread.co.uk
Current trading and outlook
In 2012/13 we shall continue with our progress towards
our 2016 growth milestones together with a strong
focus on return on capital. This year we plan to open
4,200 new Premier Inn UK rooms, six new restaurants
and 350 new Costa stores worldwide.
In the new financial year both Premier Inn and
Restaurants have shown positive like for like sales
growth and Costa has continued its good momentum,
both in the UK and internationally. Trading in 2011/12
was variable month-by-month and we expect this to
continue with short term comparatives affected by the
phasing of bank holidays and the Olympics.
Andy Harrison
Chief Executive
25 April 2012
Good Together
We are delighted to have been awarded Platinum
status in the 2012 BITC Corporate Responsibility index,
which recognises the results we are achieving through
our Good Together programme. The programme is
focused on three main pillars which are Team and
Community, Customer Well-being and Environment.
Within the area of Team and Community, our focus
is on providing industry leading apprenticeship
schemes and training for our 40,000 team members
and supporting community programmes around the
world. We created 2,500 new UK jobs in 2011/12 (a
significant percentage of which went to the long-
term unemployed) and 3,600 nationally recognised
qualifications, including apprenticeships, have been
awarded to our team members. Our teams have raised
over £1 million for WaterAid and helped build 24 new
Costa Foundation schools providing an education to
over 14,500 children in coffee-growing communities.
As part of our Customer Well-being strategy we
aim to provide trusted products that are sustainably
sourced as well as ensuring our customers are given an
informed choice. As signatories to the Government’s
Responsibility Deal we are working closely with the
Department of Health to support efforts to reduce
salt and artificial additives and make customers more
aware of the nutritional content of food and drink.
Under the Environment workstream we aim to have
the best in sector energy, waste and water initiatives.
To date, we have achieved an 11% reduction in energy
consumption (relative to sales) and the diversion of
83% of all our waste from our hotels and restaurants
from landfill. We have set targets for zero waste to
landfill, 15% reduction in water usage and 25% carbon
reduction by 2016/17.
Management team
Earlier this month we announced that John Derkach
will leave us to become Chief Executive of Tragus on
1 August 2012. John has done an outstanding job in
leading Costa’s successful growth over the last six
years. We wish him every success in his new role.
Following John’s departure, Christopher Rogers will
take over as Managing Director of Costa and we have
already started the search for a new Finance Director.
Our values
Genuine
Really caring about customers
Confident
Striving to be the best
at what we do
Committed
Working hard for each other
7
Strategic
approach
Team engagement
Customer
heartbeat
Profitable growth
GOOD TOGETHER
A force for good
The Whitbread Way Forward
• We will grow legendary brands
by building a strong customer
heartbeat and innovating to
stay ahead.
• Our Genuine, Confident and
Committed teams make everyday
experiences special for customers
so they come back time and
again, driving profitable growth.
• Good Together will make
us a force for good in our
communities.
Our strategy is to create substantial sustainable value
for our shareholders, by building strong brands based
on consistently delivering a great customer experience.
Internally we refer to this under the heading of ‘Success
to Legend’. This is because a successful company
becomes a legend by delivering outstanding results
for all its stakeholders decade after decade.
In the UK we already have strong brands in Premier Inn
and Costa and we intend to continue to expand those
brands into selected attractive international markets.
Strong brands are built on a strong customer heartbeat
and it is vital that we continue to provide a superior
experience for every one of the 19 million customers
a month who visit one of our brands.
We will achieve this by motivating our 40,000 team
members to provide consistently high levels of
customer service and maintaining high levels of
team engagement is key to that aim.
As well as providing our customers with the quality
of service that will delight them, we must also ensure
that the environments we provide for them, and for our
teams, are well-maintained, clean and welcoming. It is
important therefore that we continue to re-invest in the
quality of our estate.
We intend to create substantial value for our
shareholders by delivering on our five-year growth
milestones and by increasing return on capital. This is
why ROCE is, subject to shareholder approval, being
introduced as a central measure in a revised long-term
incentive scheme for senior management.
An integral part of our approach is the Good Together
programme. We want Whitbread to be a force for
good in all the communities in which we operate.
Good Together encompasses a range of corporate
responsibility activities including training to enrich the
8
lives of our team members, improving the nutritional
content of the food we serve to aid the well-being of
our customers and a reduction in energy consumption,
which saves the Company money as well as having a
positive impact on the environment. More details on
Good Together can be found on page 17 and details
of our achievements in this area can be found in the
sections on team engagement, customer heartbeat
and profitable growth on pages 11 to 16.
The customer heartbeat schematic
The schematic at the top of the page illustrates our
strategic approach. The following sections of this
report describe each of the three key elements of our
philosophy and explain how we have performed in
those areas in 2011/12. You will also see the schematic
in other parts of the report to demonstrate how risk
management, governance and remuneration are also
linked to our strategy.
The WINcard
The WINcard is our balanced scorecard and contains
our key performance indicators. It is used throughout
the Company and measures our performance in each
of the key strategic areas. It also reinforces the
customer heartbeat schematic.
The WINcard results for 2011/12 can be seen in the
following sections. These results have a direct link to
remuneration and information about how the executive
directors are rewarded for WINcard performance can
be found in the remuneration report on page 39.
In general, a green WINcard score is achieved where
performance is better than both target and the prior
year performance. An amber score is for performance
better than the prior year but below target and a red
score is for a result worse than the prior year. Targets
are set for each measure at the start of the year.
whitbread.co.ukStrategic approach Team
engagement
We believe that if we create a great place to work for
our people, they will provide our customers with special
experiences so that they come back time and time again.
with a commitment to pilot a Higher Apprenticeship,
which is new to the hospitality sector and equivalent
to a Foundation Degree.
We measure our success in creating a great place to
work through the Your Say survey, with the key metrics
being the response rate and the engagement score.
Your Say
Your Say, our employee opinion survey, is conducted twice
a year and provides us with great insight into what matters
most to our teams. Action plans are developed after each
survey to focus on improving our team members’ ability to
provide a great experience for our customers.
The Your Say results for 2011/12 are based on feedback
from 31,000 employees and demonstrate good
progress as shown below:
Engagement
score 2011
Engagement
score 2010
Response
rate 2011
Response
rate 2010
72%
67%
87%
79%
78%
73%
72%
67%
73%
86%
70%
77%
Whitbread
Hotels &
Restaurants
Costa
Total Group
Work has recently begun to refresh the survey to
help deliver greater insights and understanding of
our teams. This in turn will lead to stronger and more
effective action planning which we believe will enable
engagement levels to improve further.
Leadership
A critical focus area for the year ahead is to build our
talent and succession pipeline to meet our ambitious
growth strategy. We continue to invest in building
leadership capability and have developed a leadership
framework which describes the leadership behaviours
we believe will make us successful. Our two-day
leadership development programme allows space
and time for our leaders to understand how they can
engage with their teams to create an environment
for success. To date more than 320 leaders have
experienced this programme and benefited from the
intensive focus on their personal development. The
programme is run and facilitated by our own leadership
team and continues to receive excellent feedback.
Skills development
An important component of improving team
engagement is providing Whitbread people with
the ability to progress through the organisation. We
operate a number of programmes aimed at giving team
members the tools to help them develop as individuals.
In March, a new Advanced Apprenticeship in Hospitality
Supervision and Leadership, integrated into our
management development programmes, was launched
The four key elements of our skills development
programme continue to be:
• English and mathematics;
• Whitbread Apprenticeships;
• specialist technical skills training; and
• management skills and development.
This growing range of opportunities is critical to
attracting and developing great people, who value
the chance to progress.
In our Costa stores we serve an unbeatable cup of
handmade coffee. All Baristas begin their coffee-making
education in store with us as soon as they join. We
continue to nurture their skill and development through
our Barista Maestro programme. With a commitment
to on-the-job learning and career progression, our
Baristas and assistant managers need expert coaching
and leadership from our store managers. To achieve this
we have stepped up our management training through
Costa’s leadership development programme.
3,600
Skills based
qualifications achieved
650Team members
currently ‘in learning’
93%Success rate
for mathematics
course students
90%Success rate for English
course students
29%Apprentices progressing
onto ‘Shooting
Stars’ management
development
programme
500Number of participants
in ‘Shooting Stars’
management
development
programme
12,000
Management skills
modules/courses
completed in 2011/12
4,000
Number of Costa
Baristas attending
a Costa Academy
in 2011/12
800Number of Costa
managers attending
the leadership
development
programme
9
Job opportunities
Our growth strategy makes Whitbread an exciting
place to work with numerous opportunities available
for talented people to progress. We are proud of our
ability to develop people throughout our business
and to build exciting and diverse careers for them.
As well as the opportunities presented by UK growth,
our international expansion through Costa and
Premier Inn offers exciting opportunities for some of
our talented team members to experience working
overseas in our international business.
We are working with our business partners to ensure
that there are innovative ways of involving people that:
• enable the delivery of the brand promise;
• support the creation of a high team engagement
culture; and
• drive high performance.
Our aim is to develop a global people framework that
will enable our leaders to meet future organisational
challenges and opportunities and to deliver sustainable
performance.
We focus our energy on developing the skills that
equip our teams to confidently deliver an unbeatable
customer experience. We recognise this is pivotal to
our commitment to maintaining our highly engaged
teams, who in turn serve our customers with pride
for the product and pride for their place of work.
WINcard and link to remuneration strategy
As explained on page 8, team engagement is key to the
Company’s ability to achieve its strategic aims. For this
reason, leaders throughout the organisation, including
the executive directors, are incentivised to achieve
excellent levels of engagement within their teams.
UK opportunities
Whitbread created 2,500 new jobs during the year,
with half of these roles being filled by the young or
long-term unemployed. We are focused on providing
long-term career opportunities for all of our people
by creating a great place to work. In total there
were 10,000 roles filled in the hotels and restaurants
businesses and from our management appointments
82% were filled internally.
Within our Costa business we also believe in developing
our talent internally and this year we have celebrated
the graduation of over 2,500 of our team members
from our talent development programmes – Barista
Maestro and Stars.
International opportunities
Our talent management and global mobility strategies
are developing the international leadership capability
to support our expansion plans.
In addition, we measure how well we take care of
our people and our customers via our health and
safety audits. You will see we have achieved a green
health and safety audit score for 2011/12, which is a
fundamental hurdle to achieve bonus payouts across
other WINcard measures.
The Your Say measure was amber for the Group.
As shown on page 9 the team engagement score was
73% which didn’t quite meet the stretching target set
despite being an improvement on the prior year. Team
turnover was also amber at the Group level in 2011/12,
driven by a green score for Costa and a red score
for Hotels & Restaurants. The Hotels & Restaurants
team turnover target was very challenging for 2011/12,
although the trend has improved over a longer period,
with a 6%pts improvement since 2009. Our team
turnover remains consistently better than it is for
our competitors.
“We will create
the conditions for
all to flourish in a high
performance, customer
focused organisation”
(Louise Smalley,
Group HR Director)
The ‘team’ WINcard results for 2011/12
Whitbread Group
Your Say
Team turnover
Health and Safety
Hotels & Restaurants
Your Say
Team turnover
Health and Safety
Costa
Your Say
Team turnover
Health and Safety
10
Please see page 8 for an explanation of how green, amber
and red scores are calculated.
whitbread.co.ukStrategic approach
Team members – opportunities to share in Whitbread’s success
Our teams are integral to Whitbread’s ability to deliver its strategy. Providing opportunities for them to earn
additional rewards for contributing to great results and to share in Whitbread’s success is very important.
New incentive
schemes
In 2011 we launched ‘Feel Good’ in Costa and ‘Guest Promise’ in WHR which provides an
incentive for all team members to really care for our customers and be inspired to deliver
great service. All our front line teams now have an opportunity to earn additional rewards
above their base pay and we have made over 15,000 team member awards since the launch
of the two schemes in the second half of 2011.
Sharesave
We actively encourage our teams to connect to the success of the organisation through our
Sharesave scheme, which is available to all employees and offers an option price discounted
by 20%. The three and five year schemes which matured in February 2012 delivered a return
of approximately £4.3 million, shared between more than 1,100 employees. This is an excellent
way for our teams to share in the success of the Company.
Pay for
progression
Giving team members the opportunity to develop and progress is very important, but it is
equally important that we reward them appropriately as they do progress. Offering a clear
route of pay progression to all team members will drive team engagement and help to create
a great place to work and learn.
All team members currently have the opportunity to progress their pay through development
into more skilled roles or into management through ‘Shooting Stars’. Our growth depends on
attracting bright people with potential and retaining our skilled team members. Our aim is to
map out a clear route to pay progression for all roles, motivating and inspiring all to achieve
their potential.
Recognition
and celebration
Recognition and the celebration of success help to create an environment in which people
see that their work is valued and important and are inspired to achieve.
Whether it is our ‘Team Member of the Quarter’ award, our ‘General Manager of the Year’
award or one of the many customer compliments recognising the day-to-day service excellence
of our teams, we want it to be meaningful recognition which is celebrated and shared.
‘Good Together’ people pledges
We have developed a new set of people pledges that
feed into our ‘Good Together’ corporate responsibility
programme. Our people pledges are focused on
improving the lives of the people who work for us
and the lives within the communities in which we
operate. Our aim is to positively impact the following
social issues:
• reducing the skills gap;
• reducing youth unemployment;
• championing healthier lifestyles; and
• supporting charities and good causes.
Awards
BITC CR
Index 2012
Platinum
standard
Payroll
Giving
Best overall
campaign 2012
CRF Institute
One of Britain’s
top employers
2012
Good Together
Results 2011/12
• 3,600 skills-based nationally recognised
qualifications awarded to our Hotels &
Restaurants team members, with a further
650 people in learning;
• 558 Costa team members have graduated
from our development programme and we
have trained 2,000 Barista Maestros;
• In our restaurants we worked with the Prince’s
Trust to pilot a two week Work Inclusion scheme
with 12 disadvantaged young people – four of
whom now have jobs with us. Following this
success we will be rolling this programme out
across our hotels and restaurants;
• Our charity target of raising £1 million for
WaterAid was achieved in late 2011, helping
more than 66,000 people in India gain access
to a long-term supply of safe water, improved
sanitation and hygiene education;
• This year we have raised £750,000 for the Costa
Foundation, bringing our total to £2.5 million
enabling the opening of 24 schools, providing
education to 14,518 children and jobs to 312
teachers and support staff;
• A further £421,000 has been raised for other
charities through our Raise and Match and
Payroll Giving schemes; and
• 74% of respondents to our Your Say survey
believe that the Company is working hard
to operate according to the principles of
Good Together.
11
Customer
heartbeat
We believe that to achieve our vision to become a
legendary business the customer has to be at the
heart of everything we do. Building a strong customer
heartbeat is the key to delivering outperformance
across all our brands.
We build a strong customer heartbeat by listening to
and understanding our customers better; providing
outstanding value; delighting them with innovative
new products; and making everyday experiences
special through great service provided by our
40,000 team members.
Customer insight
Hotels & Restaurants
Premier Inn is passionate about listening to and
learning from customers. As well as running regular
focus groups, Premier Inn has one of the UK’s largest
and most robust customer satisfaction surveys with
over 800,000 responses a year, up 20% on last year.
The survey rates customer satisfaction across 200
areas of the business from comfort of the bed to
friendliness of the team.
Listening to customers in this way has led to some
significant operational changes designed to improve
the customer experience:
Action taken
Result
The pillow
specification
was changed
and customers
were given a
choice of hard
or soft pillows.
WiFi access
is now free for
30 minutes in
Premier Inn
rooms.
Satisfaction
scores for
comfort of
pillows have
increased by
15%pts.
2Two-years old
Satisfaction
scores for WiFi
increased by
17%pts.
6.5m6.5 million
activated cards
What we learnt
from customers
Scores for the
comfort of
pillows were not
as high as those
for the comfort
of the bed.
Customers,
particularly
business
customers,
told us that
they wanted
an improved
WiFi facility
in their rooms.
In September 2011 Restaurants introduced a new
mystery diner programme whereby each site receives
a visit twice a month. The mystery diners are real
customers who are asked to test out a customer
journey with 25 key touch points and scores are
running at an industry-leading 85%. We also operate a
Guest Recommend programme that allows customers
to give their feedback either via telephone or online.
We have introduced a new incentive for customers
to complete the survey. This has led to a doubling of
12
responses with each site receiving an average of 60
per month giving the management team a much better
understanding of the customer experience on a site-by-
site basis.
As with Premier Inn, monthly customer focus groups
are a valuable means of gaining insight for the
Restaurants team. A direct learning from one of these
groups was a better understanding of what customers
like about the breakfast offer, which led to greater
focus on the breakfast proposition, helping to drive
breakfast sales up by 14% in the year.
Restaurants have also increased their Customer
Relationship Management capabilities growing the
CRM database to over 770,000 customers, up from
450,000 in February 2011. This provides a targeted way
of communicating with customers who are sent three to
four emails a month that are relevant to them. Brewers
Fayre, Beefeater Grill and Table Table have all launched
new websites in the year, where customers can submit
online booking requests and find out information about
individual restaurants. The new websites have seen
traffic increase by over 100% since launch.
Costa
Central to developing Costa’s understanding and insight
into the customer has been the introduction of the
‘Listen and Learn’ scheme across the entire UK estate.
Launched in September 2011 ‘Listen and Learn’ provides
real time customer feedback by store. The online survey
consists of just six key questions based on the consumer
hierarchy of needs. Customers are then able to give
verbatim feedback on their visit, which is analysed
and categorised by the system. This allows Costa to
understand what is important to customers and act on
their feedback. 97% of all feedback comes from our
Coffee Club database as customers are sent an email
on a quarterly basis asking for feedback on their recent
store visit.
Costa Coffee Club – Facts and Figures
+31%Visit frequency of
members increased
by 31% since 2010
12.9m12.9 million promotional
emails sent to members
in 2011/12
£1.9mEmails drove an average
incremental spend of
15p each, producing
£1.9 million of
additional turnover.
1.9m1.9 million members
registered on the
website
+5%Members spend
5% more than non-
members on average
whitbread.co.ukStrategic approach The impact of this scheme has been tremendous
in driving team engagement and enabling store
managers to address any concerns, significantly
improving the quality of the customer experience.
In addition the business has used key insights from
the data, as well as insights gained from research
and focus groups, to inform business and marketing
strategies. This measure will become bonusable from
2012/13 onwards, cementing the customer’s place at
the heart of the business.
In a highly value sensitive market our Restaurant
brands have been innovating new value-led menus and
concepts to attract more covers. Within Brewers Fayre
the Buffet Place concept is proving hugely popular with
customers. Converted sites have seen a sales uplift of
c6%. 71 new Buffet Place sites opened in 2011/12 taking
the total to 95 and it will be rolled out to the remaining
34 Brewers Fayre sites in 2012/13. New food nights such
as ‘Mexican Night’ keep the concept fresh but the most
popular remain ‘Curry Night’ and ‘Chip Shop Night’.
Making everyday experiences special
Hotels & Restaurants
The secret of Premier Inn’s success is our focus on
delivering a ‘good night guaranteed’ for 12 million
customers a year. Testament to this is the low level
of invocations of the guarantee (when a customer
asks for their money to be refunded) at just 0.64%
of total rooms sold.
These invocations are used positively to signpost
where the Company should focus to improve its
customer experience. For example, the most common
reason for a customer invoking the guarantee is noise.
To address this issue the building specifications have
been enhanced to reduce the amount of noise in
rooms. At the new Leicester Square hotel, due to
open in May 2012, we have created a ‘room within
a room’ for additional soundproofing.
Customers have also been given new rates to
choose from this year with the introduction of great
value ‘Premier Savers’ ranging from £19 to £99. Over
1.8 million of these Premier Savers have been sold
this year, representing £56 million worth of revenue.
For customers that value flexibility Premier Inn has
also introduced the ‘Premier Flex’ product, which is
available at a higher rate and allows them to cancel
the room up until the day of arrival with no charge.
Premier Inn awards
Beefeater Grill and Table Table both introduced new
£4.99 menus this year to meet the increasing demand
for greater value dishes. These menus still include
the customers’ favourite dishes such as fish and
chips. Beefeater Grill has dialled up the brand’s steak
credentials with new steak seasonings and butters
to appeal to its core customer. New styles of
food, presented in creative ways, such as dipping
breads, bottomless salads and the use of wooden
boards instead of plates ensure the quality and style
of food remains enticing.
In October 2011 we implemented a new organisation
structure in our Hotels & Restaurants business. We put in
place a dedicated management team for Restaurants to
focus on delivering a best-in-class customer experience.
Key drivers include the introduction of a team member
incentive scheme launched in September, which enables
team members to earn bonus payments based on their
guest promise scores.
New Skills Academies have been set up to train people
in food quality and service. The first of these opened in
April in Hockley followed by Swindon and Manchester
in January 2012. Already 1,700 delegates have passed
through these Academies and there are plans for
9,000 team members to attend in 2012/13. Both the
Academies and incentive scheme are having a direct
impact on the customer service experience and the
results can be seen in improved guest scores and like
for like sales since the half year.
World Travel
Awards
World’s Leading
Budget Hotel
Brand
British Travel
Awards
Hotel Chain
of the Year
Best CR
programme
Business Travel
Awards
Best Budget
Hotel Brand
Alison
McCaig-White,
Regional Operations
Manager for Beefeater,
saw sites in her region
improve their guest scores
by 24% in the three months
after they had attended
the Beefeater Perfect
programme.
13
Costa
Once again Costa has enjoyed external independent
recognition as the UK’s No. 1 coffee brand. YouGov’s
U&A study conducted in January 2012 showed that
Costa still has the highest levels of usage in the UK of
the key branded coffee shop chains and when it comes
to ‘preference’ 30% of the UK adult population said
they would choose Costa, compared to 24% who
would choose Starbucks and 10% for Caffé Nero.
“If these three brands were next to each other,
which would you choose?”
YouGov
“ If these three brands were next to
each other, which would you choose?”
YouGov
30%
24%
10%
Caffé Nero
Starbucks
Costa
Costa’s success comes from giving customers a quality
coffee experience at their convenience whether it’s from
a Costa Express self-serve coffee bar, a new Metro store,
a concession in Tesco or a Beefeater Grill restaurant. Over
2011/12 Costa invested in 128 store refurbishments and
opened four of their new Metro design stores, including
the first outside of London in Leeds.
Over the course of the year Costa has delighted
customers with a number of new products including
Costa Light, the ‘Have it Your Way Costamisation’
campaign and delicious new flavours in the Ice Cold
Costa range.
The ‘customer’ WINcard results for 2011/12
Whitbread Group
Brand standards
Guest heartbeat
Like for like sales
Hotels & Restaurants
Brand standards
Guest heartbeat
Like for like sales
Costa
Brand standards
Guest heartbeat
Like for like sales
14
Please see page 8 for an explanation of how green,
amber and red scores are calculated.
Costa awards
Marketing Week
Engage Awards
2011
Brand of the Year
Data Strategy
Awards
2011
Winners in
Retail and
Home Shopping
European
Coffee Awards
2011
Best Branded
Coffee Shop
Chain – UK &
Ireland
Best Branded
Coffee Shop
Chain – Europe
Last summer’s Ice Cold Costa campaign was the most
successful ever; with sales up over 40% driven by best
sellers ‘Mango and Passion Fruit Cooler’ and a new
‘Coffee Cooler’. Costa Light was launched in July 2011
and was a direct response to customer insight that
showed customers wanted lower calorie coffee products.
This is now around 2% of the coffee drinks sales mix.
WINcard performance
Although like for like sales were positive, the
WINcard score was red for both the Group and
Hotels & Restaurants as performance was impacted
by challenging economic conditions. All businesses
achieved green scores for brand standards, whilst
Costa achieved amber scores for like for like sales
and ‘guest heartbeat’ as they narrowly failed to meet
challenging targets.
Good Together
Results 2011/12
• We serve 100% RFA certified Costa coffee globally
(in India we will meet this target in June 2012);
• We introduced calorific values on the Thyme
menus within Premier Inn and provide full
nutritional information online for every dish
we serve in our restaurants, whilst Costa will
be providing calorie information in-store from
May 2012 across the UK;
• We are on track to meet the Department of
Health’s 2012 salt targets which will deliver a
further 15% reduction on 2010 targets;
• We offer more choice of fruit and vegetables
on our children’s menus in line with the Food
Standards Agency’s 5–a-day guidelines;
• All pork, beef and poultry sourced for Costa in
the UK is from British Farms;
• All our meat, wherever it is sourced, is produced
to stringent animal welfare standards which meet
the international Farm Animal Welfare Council’s
(FAWC) Five Freedoms principles; and
• We achieved several awards this year,
including: Platinum status on the BITC CR Index,
inclusion in the FTSE4Good Index and Best
CR Programme at the Business Travel
Industry Awards.
whitbread.co.ukStrategic approach
Profitable
growth
Our strategy is designed to deliver outstanding results
for all our stakeholders decade after decade. We
intend to create shareholder value by delivering on
our five-year growth milestones, growing like for like
sales and driving returns on capital.
Growth
During 2011/12 we continued with our expansion plans in
Hotels & Restaurants and opened 4,055 new bedrooms
in 29 hotels as well as 12 new restaurants delivering
our highest organic growth to date. There are now 619
hotels (47,274 rooms) in the UK and 387 restaurants, of
which the great majority are adjacent to a Premier Inn.
We plan to open a further 4,200 new rooms by the end
of 2012/13. This, combined with the remainder of the
committed pipeline of 6,300 rooms, puts us on track
to achieve our milestone of 65,000 UK rooms by 2016.
Premier Inn UK – number of rooms
7,226
65,000
6,300
4,200
47,274
43,219
s
m
o
o
r
f
o
r
e
b
m
u
n
–
n
n
I
i
r
e
m
e
r
P
70000
60000
50000
40000
30000
20000
10000
0
2010/11
2011/12
2012/13
Committed
pipeline
Unconfirmed
2015/16
As well as our expansion plans we also continue to
invest in our existing estate and over the two financial
years to February 2013 we plan to have invested around
£70 million refurbishing some 13,000 rooms. This aligns
with our strategy of delivering quality and consistency
across our estate. Furthermore we have implemented
a new cluster management system to enhance the
efficiency and structure of our business and to
strengthen our position for future growth.
Overseas, we now have four hotels in the Middle East
and two hotels in India. We will continue to expand
our presence in these markets, with five hotels in
the pipeline. Beyond the pipeline, we will pursue a
‘capital right’ strategy to grow Premier Inn’s presence
in international markets. This means increasingly
concentrating new developments on management
contracts once we have established our brand in
each market with owned hotels.
In Costa, we had a strong store opening programme
during the period and opened a total of 332 net new
stores. Our international presence continued to grow
as we opened 157 net new stores, including 69 in China
while our UK business further strengthened through the
addition of 175 net new stores. This increased our
total number of stores to 2,203: 1,392 in the UK and
811 overseas.
Following the acquisition of Coffee Nation in March last
year and subsequent launch of Costa Express, we are
pleased by the progress made during the year with our
growth plans ahead of our original expectations. We
ended the year with 1,192 Costa Express units which
included 622 conversions.
In early 2012, we organised Costa into four divisions:
Costa UK Retail; Costa Enterprises (which includes
our key contract businesses of wholesale, corporate
franchise and Costa Express); Costa Europe, Middle
East and India (EMEI); and Costa Asia. This reflects
the increasing breadth and globalisation of Costa
and supports our growth strategy for the future.
Return on capital
Our growth plans require a significant investment of
capital and in 2011/12 we invested £307.9 million in
new and existing units. It is important therefore that
we invest this money well and deliver a good return
for our shareholders. The hotels and restaurants that
we have opened in the last three years are currently
on track to deliver a ROCE in excess of 20% at maturity.
In 2011/12 Costa delivered a ROCE of 32.4%, with Hotels
& Restaurants delivering a ROCE of 12.4%.
The importance of delivering strong returns is
demonstrated by the proposed changes to the LTIP
performance conditions. The Remuneration Committee
has concluded that, in order to more closely align the
LTIP to the strategic aims of the Company, it would be
appropriate to include ROCE both as a hurdle and a
multiplier to a base award generated by performance
against an EPS measure. Further details on the
proposed changes, which are subject to approval
at the AGM in June, can be found on page 40.
Like for like growth
Whilst it is important that we deliver on our growth
milestones and re-invest in our estate to maintain
the quality of our customer proposition, it is equally
important that we deliver good like for like growth.
In 2011/12, strong initiatives combined with our
continued focus on customer propositions drove
Group like for like sales up by 2.6%. Premier Inn
delivered a like for like sales increase of 3.2% despite
an overall slowdown in the hotel market in the second
half of the year, particularly in the regions. Like for
like revpar grew by 1.8% for the year. Revpar growth
remains a key focus for Premier Inn and during the
second half of the year we trialled our new pricing
system for both Premier Saver and Premier Flexible
rates. We are pleased with the success of this trial
and plan to roll it out to the remainder of the estate
during 2012/13.
15
Restaurants like for like sales fell by 0.2% for the
full year with an improvement in the second half as
management actions drove covers growth of 4.8%.
Costa delivered another outstanding performance
with like for like sales up 5.5%. Meanwhile, Costa’s
international business continued to strengthen with
positive like for like sales growth across all regions
except Europe which has been affected by the financial
crisis in Greece.
2011/12 performance
Whitbread delivered a good performance in 2011/12
amid a challenging economic backdrop for the UK of
low consumer confidence and poor economic growth.
For the full year total Group sales rose by 11.2% to
£1,778.0 million and Group underlying profit before tax
increased by 11.3% to £320.1 million.
Our hotels and restaurants achieved a solid performance
during the year in an increasingly competitive and
challenging environment. Total revenues increased by
5.3% to £1,239.0 million with underlying operating profit
up 4.3% year on year to £295.6 million.
In the midscale and economy hotel market which
became progressively more challenging, particularly
outside of London, Premier Inn continued to
outperform its competitive set and delivered a resilient
performance with total sales up 8.3% to £755.9 million
(2010/11: £697.8 million).
Overseas, Premier Inn continued to perform well with
revpar and occupancy increasing across the board as
the Premier Inn brand established its position within
the Middle East and India.
The ‘profitable growth’ WINcard results for 2011/12
Whitbread Group
Brand expansion
Profit
Hotels & Restaurants
Brand expansion
Profit
Costa
System sales
Brand expansion
Profit
16
Please see page 8 for an explanation of how green,
amber and red scores are calculated.
Our restaurants made steady progress during the
second half of the year. A key feature has been a
more focused management team for our restaurants
which are predominantly located alongside a Premier
Inn. In addition we have improved our customer
offering through better value food and drink.
Revenues have increased by 1.8% to £483.4 million
(2010/11: £474.9 million) with covers growth of 1.5%.
Costa has produced another excellent performance
during the year, with total sales increasing by 27.5%
driven by good like for like sales growth and a strong
store opening programme. Following a strong top line
performance, underlying operating profit increased by
38.0% to £69.7 million.
Total system sales, which are sales derived from
Costa owned and franchise stores, were up 24.3%
to £819.3 million.
WINcard performance
Hotels & Restaurants achieved its WINcard performance
target for brand expansion, but missed its WINcard
profit target for the year. Costa achieved its targets for
brand expansion, profit and system sales. At a Group
level, Whitbread achieved its expansion targets, but
marginally failed to meet a stretching profit target.
Good Together
Results 2011/12
• We lead our sector in sustainable construction
and energy efficiency – opening our tenth ‘green’
site in January 2012: The Beefeater restaurant
and Premier Inn in Camborne, Cornwall includes
numerous energy and water-saving features
including solar PV and electric car charging pods;
• Our significant investment and innovation in
energy reduction initiatives has enabled us to
achieve an absolute carbon emission reduction of
0.75% whilst opening 29 new sites (incorporating
4,055 new bedrooms) and growing revenue
by 11.2%. Relative to sales, our carbon emission
efficiency has improved by 11.0%. This puts us
well on track to meeting our carbon reduction
target of 25% by 2016/17;
• These achievements helped to secure our re-
certification by the Carbon Trust and our score
in the 2011 Carbon Disclosure Project placed us
ahead of the majority of our competitors;
• We achieved 1SO 500001 compliance for the
Energy Management System at our Costa
Roastery in Lambeth;
• We achieved a 5% reduction in water use relative
to sales; and
• We diverted 83% of waste from our hotels and
restaurants away from landfill.
whitbread.co.ukStrategic approach
Good
Together
Targets 2016/17
We have continued to develop our corporate
responsibility programme, Good Together, this
year to establish ourselves as sector leaders.
We have more closely aligned the programme to
our business model and now have three clear pillars
of activity: team & community, customer well-being
and environment. Our new five-year targets, which
we aim to meet by 2016/17, are shown below and
are firmly embedded in our strategic plans.
Team engagement
Customer
heartbeat
Profitable growth
GOOD TOGETHER A force for good
Team & community
Customer well-being
Environment
Charitable activity
• Accreditation and sustainable
• 25% carbon reduction*;
• 15% reduction in water
consumption*; and
• Zero waste to landfill.*
• £5 million to be raised for charities
by WHR. Costa Foundation to
educate 50,000 children and
build 50+ schools.
supply of:
Tea/coffee;
Timber;
Palm oil;
Fish; and
Meat.
Qualifications and training
• 6,000 recognised qualifications
Rainforest Alliance certified.
• Costa hot drinks will be
for WHR team members (including
1,100 apprenticeships) and 1,000
structured school placements
created (16 to 18 year olds).
• Enhanced skills training provided
to 20,000 Costa team members.
Job creation
• Group – 10,000 new UK
jobs created.
• We will progressively improve
the nutritional content across
our food and drink portfolio,
enabling customers to make
informed choices. As part of
this, calorific labelling will be
introduced into outlets.
*From Whitbread direct operations and based on 2009 baseline.
WINcard
Hotels & Restaurants achieved the Good Together
WINcard target during the year as significant
investment and innovation in energy reduction initiatives
enabled us to achieve an absolute carbon emission
reduction of 0.75% whilst opening 4,055 new rooms and
growing revenue by 11.2%. Relative to sales, our carbon
emission efficiency has improved by 11.0%.
The Costa WINcard target was to reduce food wastage
as a percentage of sales. While the WINcard target was
marginally missed, Costa saw an improvement in food
wastage as a percentage of sales over the second half
of the year.
To learn more about our Good Together programme, our
business specific targets and our achievements please
visit the corporate responsibility pages on our website:
www.whitbread.co.uk/whitbread/responsibility.html
The ‘Good Together’ WINcard results for 2011/12
Whitbread Group
Energy consumption
Hotels & Restaurants
Energy consumption
Costa
Food wastage
Please see page 8 for an explanation of how green, amber
and red scores are calculated.
17
Finance Director’s review
Finance
Director’s
review
Revenue
Group revenue increased by 11.2% year on year
to £1,778.0 million.
Revenue by business segment
Hotels &
Restaurants
Costa
Less: inter-
segment
Revenue
2011/12
(£m)
1,239.3
2010/11
(£m)
1,177.3
541.9
(3.2)
425.0
(2.7)
%
Change
5.3%
27.5%
1,778.0
1,599.6
11.2%
The growth in revenue during the year was driven by
a combination of new openings and improved sales in
like for like units. 332 net new Costa Stores, eight net
new Restaurants and 4,430 net new Premier Inn rooms
opened and 315 net Costa Express machines were added.
Like for like sales across the Group grew by 2.6% with
Costa up 5.5% and Hotels & Restaurants up 1.8%.
The growth in Premier Inn rooms included 375 net
international rooms split across the Middle East and
India with one new hotel opened in each region. In
the UK and Ireland 4,055 new rooms were opened.
At Costa 175 net stores opened in the UK and 157 net
internationally. The development of Costa Express
continues at a pace with 315 net new machines installed
and 622 rebranded to Costa Express from Coffee
Nation. The installed base of the business is now
1,192 machines.
Like for like sales growth in Premier Inn benefited from
the further development of dynamic pricing which
saw the business continue to outperform its midscale
and economy sector competitors. In Restaurants the
establishment of a focused team is driving covers
growth, which was up 3.7% in the year, although a
reduction in spend per head resulted in like for like sales
falling marginally in the year by 0.2%. Costa achieved
5.5% like for like sales growth driven by a strong brand
preference, further take-up of the loyalty card and
product innovation both in the food and the drink ranges.
Results
Underlying profit before tax for the year is
£320.1 million, up 11.3% on last year. The underlying
profit before tax measure excludes the pension interest
charge, the amortisation of acquired intangibles and
exceptional items. Underlying diluted earnings per
share is 134.1p compared to 116.4p last year, up 15.2%.
Total profit for the year is £266.0 million which
compared to £222.1 million last year, up 19.8%.
18
Exceptional items
Exceptional items are set out in detail in note 6. In total
they amount to a £2.3 million benefit before tax and
£42.6 million after tax. A net profit on disposal of assets
of £14.4 million has been offset by the net impairment
of tangible and intangible assets amounting to
£11.3 million and an increase in the interest charged on
provisions of £0.8 million. Taken together these make
up a total pre tax exceptional credit of £2.3 million.
The exceptional tax credit of £40.3 million comprises
four items: a credit of £16.6 million arising from the
agreement of capital allowance claims by HMRC
following the review carried out after the abolition of
Industrial Buildings Allowances; the enactment during
the year of the reduction in the rate of Corporation
Tax to 25% from 1 April 2012 giving rise to a deferred
tax credit of £17.0 million; a reduction in deferred
tax liabilities of £9.2 million in respect of roll over
gains; and finally a charge of £2.5 million for tax on
exceptional items.
Interest
The underlying interest charge for the year is
£25.3 million compared to £24.3 million in 2010/11.
Although average net debt during the year fell
just over £10 million to £441.3 million, the blended
interest charged on borrowings rose as a result of
the refinancing that took place during the year.
Further details are set out below.
The total pre exceptional interest cost amounted to
£39.3 million. Included within this figure is an IAS 19
pension charge of £14.0 million (2010/11: £11.5 million).
This charge represents the difference between the
expected return on scheme assets and the interest
cost of the scheme liabilities.
Tax
An underlying tax expense of £84.4 million represents
an effective tax rate of 26.4% on the underlying profits,
which compares with 29.1% last year. This reduction in
rate is largely due to the reduction in UK Corporation
Tax of 2%pts to 26.2% for 2011/12. In 2012/13 the
effective tax rate is expected to be around 25%.
Earnings per share
Underlying diluted EPS increased by 15.2% to 134.1p.
EPS
2011/12
2010/11
Underlying (diluted)
Non GAAP adjustments
(inc. pensions interest)
Exceptional items
Total operations (diluted)
134.1p
(7.0)p
24.0p
151.1p
116.4p
(5.0)p
15.3p
126.7p
Further details can be found in note 11.
Dividend
Following a decision last year end to rebalance the
dividend between the interim and final payments,
the interim dividend was increased by 56%. As a
consequence, the recommended final dividend of
33.75p represents an increase on last year of 1.5%. The
proposed final dividend will take the total dividend for
the year to 51.25p, an increase of 15.2%. The dividend is
planned to be paid on 13 July 2012 to all shareholders
on the register at the close of business on 18 May 2012.
A scrip dividend alternative will again be offered.
whitbread.co.uk Net debt and cashflow
The principal movements in net debt are as follows:
was the final step in the Group’s medium-term financing
plan. The Group now has total facilities of £908 million,
of which £535 million was drawn at the year end.
The policy of the Board continues to be to manage
its financial position and capital structure in a manner
consistent with Whitbread maintaining its investment
grade status.
Capital expenditure
Total Group cash capital expenditure on property,
plant and equipment and intangible assets during
the year was £307.9 million with Hotels & Restaurants
spend amounting to £244.2 million and Costa
£63.7 million. Capital expenditure is split between
development expenditure, which includes the
acquisition and development of properties, and
maintenance expenditure. Development expenditure
has increased by £65.3 million to £196.0 million as
the Group stepped up its investment in new units and
maintenance expenditure increased by £40.4 million
to £111.9 million. A large part of the maintenance
expenditure was on room refurbishment to maintain
Premier Inn’s consistent standards.
Our current plans indicate that total Group capital
expenditure for the year ahead will be at similar
levels to 2011/12. In addition a further sale and
leaseback, similar in size to that in the last financial
year, is planned.
Pensions
As at 1 March 2012, there was an IAS 19 pension deficit
of £598.7 million, which compares to £488.0 million
as at 3 March 2011. The main movement in the deficit
from year to year is the actuarial loss of £177.2 million
in the year on the scheme liabilities principally as a
result of the 95 basis point fall in the discount rate.
This has been offset by amounts paid into the fund
of £95.4 million.
The payments into the scheme of £95.4 million include
the agreed deficit funding of £60.0 million for 2011/12
and an advanced payment of £25.0 million in respect
of the agreed deficit funding for 2012/13. This early
payment is part of the ongoing triennial valuation
discussions. These discussions will be finalised in 2012.
Christopher Rogers
Finance Director
25 April 2012
Cashflow from operations*
478.3
415.2
2011/12
(£m)
2010/11
(£m)
Capital expenditure
UK acquisition
Overseas investment and
acquisition
Disposal proceeds
Interest
Tax
Pensions
Dividends
Other
Net cashflow
(307.9)
(202.2)
-
(59.5)
(1.6)
(3.4)
58.7
(26.8)
(31.3)
(95.4)
(87.0)
(3.4)
(16.4)
3.1
(24.3)
(34.5)
(8.9)
(61.5)
1.5
25.5
Net debt brought forward
(487.9)
(513.4)
Net debt carried forward
(504.3)
(487.9)
* This agrees to cash generated from operations in the
financial statements excluding the pension payments.
The Group has again generated strong cash flows
from operations in the year which are up on last
year by £63.1 million to £478.3 million. The Group,
as announced, has increased its investment in new
and existing units by increasing capital expenditure
to £307.9 million, up 52.3% on the prior year.
During the year the Group undertook a sale and
leaseback transaction selling seven properties for
£53.8 million.
The low level of cash tax reflects tax relief on recovery
plan payments to the pension fund plus a £23 million
cash tax benefit from the re-submission of capital
allowance claims following the abolition of Industrial
Buildings Allowances for hotels.
The total payments to the pension scheme were
£95.4 million, an increase of £86.5 million. Further
details are set out below.
Net debt as at 1 March 2012 was £504.3 million, an
increase in the year of £16.4 million. This compares to
a weighted average debt in the year of £441.3 million
which is £10.5 million less than last year.
During the year, the Group issued further private
placement loan notes in both US dollars and £ sterling
in line with the policy to diversify both sources and
maturity of debt. These loan notes were issued in
four series with maturities of seven and ten years and
coupons from 3.9% to 4.9%. The US dollar component
was swapped to £ sterling with the total transaction
having a value of £156.4 million and £ sterling interest
rates were fixed, ranging from 4.3% to 5.2%. The
proceeds, which were receivable in two tranches
in September 2011 and January 2012, were used to
repay drawings under the shorter maturity bank
debt. In November 2011 the Group completed a new
£650 million five year revolving credit facility with its
relationship banks to replace the pre-existing facilities
amounting to £855 million as at December 2011. This
19
Risk management
Risk
management
Risk at Whitbread is measured by reference to
the strategic goals and reputational interests of
the Company. The link between the Company’s
strategy and the six categories of risk used can
be seen in the schematic below.
Team engagement
Customer
heartbeat
Profitable growth
Risks linked to strategy
Health and
safety risks
Reputational
risks
Market risks
Financial risks
Third-party risks
Operational
risks
Structure
The structure of the risk management process at
Whitbread is shown in the diagram at the bottom of
the page. Both Whitbread Hotels & Restaurants and
Costa maintain risk matrices aligned to their respective
strategic goals. The matrices analyse the risks to the
achievement of those goals and prioritise those risks
as low, medium or high based on both the likelihood
and potential impact of each risk. The matrices are
accompanied by supporting schedules outlining the
controls in place to manage each risk. These matrices,
together with controls and mitigations, are reviewed on
a quarterly basis by the respective management boards.
The outputs from the process carried out at business
level form the basis of a Group-level risk matrix. This
includes the most significant business risks as well as
other risks specific to the Group. The Group risk matrix
is reviewed quarterly by the Board and annually by the
Audit Committee.
The process:
• links risks to strategic objectives;
• prioritises risks based on likelihood and impact;
• articulates the key controls on which the business
relies in mitigating and/or monitoring the key risks;
and
• drives quarterly updates to the status of risks
and controls.
The risk and control matrices are used as the
foundation on which to develop the annual assurance
map, which ensures risks and controls are reviewed
and tested either by Ernst & Young, CMi or PwC
as part of the operational audit. Operational audit
work provides a level of independent assurance
on the application of key controls put in place by
management to mitigate both the likelihood and
impact of key risks to the Group and its businesses.
The current status
In total, there were 18 risks identified on the Group risk
matrix considered by the Audit Committee in March
2012. These risks were categorised into the following
six categories: health and safety; reputational; market;
financial; third-party; and operational.
Mitigating controls are in place for all 18 risks, together
with appropriate assurance processes. After taking
account of these controls the Audit Committee and the
Board considered that 13 of the risks either had a low
likelihood of occurring or would have a low impact in
the event that they did occur. For this reason, these 13
risks have not been categorised as principal risks for the
purposes of this report. The Board considers that for all
13 of these risks there has been no deterioration of the
position during the year.
The five principal risks identified, together with details
of mitigating controls, monitoring and assurance
processes and an indication of the current trend for
each are summarised in the table on page 21. The
Board does not consider any of these risks to have
a high likelihood of occurring.
Whitbread Group risk matrix
Reviewed quarterly by the Executive Committee and the Whitbread PLC Board and annually by the Audit Committee
Whitbread Hotels & Restaurants risk matrix
Reviewed quarterly by the
Whitbread Hotels & Restaurants
Management Board
Costa risk matrix
Reviewed quarterly by the
Costa Management Board
Operational audit
Scope agreed by Audit Committee to address key risks identified and carried out by PwC
Reviewed regularly by the Audit Committee
20
whitbread.co.uk Principal risks
Risk
Mitigation controls
Monitoring and assurance
Current trend
Health and
safety risk:
serious health or
provenance issue
relating to food.
The quality of expertise of members of the
procurement, food development and safety
and security teams mitigates the risk of
serious food safety or provenance issues.
The Company monitors media reports to
help it to predict future issues and the Board
emphasises the importance of this area. The
Company has stringent food safety policies
and a detailed sourcing policy.
Market risk:
consumer spending
being adversely
affected by the
macro-economic
environment.
Commercial action plans have been
developed by the Group’s businesses in
order to ensure that, in the challenging
consumer economy, we continue to offer
excellent value to our customers so that
our hotels, restaurants and coffee shops
are the number one choice in their market.
Trading results and economic indicators
are monitored to allow for speedy action
when required.
Market risk:
change in the
market or
competitor activity
adversely affecting
trading in any of
the Company’s
businesses.
Actions to outperform the competition are
developed on a strategic and tactical basis.
Significant customer research is carried out
with Premier Inn, for example, receiving
more than 800,000 responses in 2011/12.
The customer insight received is used to
develop action plans. Consumer trends,
both in the UK and overseas, are analysed
and competitor activity is monitored.
Monthly reports are produced by each
business for the Board.
Stable
CMi, an independent
company, carries out
regular audits on all
outlets to measure their
performance against a
range of health and safety
standards, including food
safety standards. Health
and safety is a hurdle
on the WINcard and
influences bonus payments
to employees. Regular
updates are provided to
the management boards
and to the Whitbread
PLC Board.
The executive teams
and the Whitbread
PLC Board review the
commercial plans and
monitor performance.
Stable
Relative market share
information and timely
trading performance data
is produced and monitored
by the executive teams
and the Board.
Premier Inn
Stable
Restaurants
Stable
Costa
Improving
Deteriorating
Financial risk:
significant increase
in the pension
scheme’s actuarial
and/or statutory
deficit resulting
in higher pension
contributions or
the re-rating of the
Company’s credit.
The Company’s defined benefit pension
scheme is closed to new members and, for
future service, to existing members. The
Pension Investment Committee and its
advisers, as well as the internal pensions
team, have significant expertise in the area
and provide good quality oversight. The
investment strategy has been designed
to reduce volatility and risk and hedging
opportunities are utilised as appropriate.
Lane Clark & Peacock
have been appointed as
pensions advisers to the
Company. Pension fund
reports are reviewed by
the Board.
Third-party risk:
third-party failing
and consequently
breaching the terms
of a significant
contract or giving
rise to a privity of
contract claim.
Credit control checks are carried out on
parties to significant contracts, along with
the continued auditing and monitoring
of those contracts. Regular reviews are
carried out on the potential for privity
of contract claims and, when they are
received, all efforts are made to lessen the
financial liability through negotiation with
the landlord or sale of the lease.
Credit controllers
monitor risks and there
is a regular review of the
debtors registers by the
management boards.
Stable
21
Board of
directors
22
(Left to right)
Patrick Dempsey,
Richard Baker,
Susan Hooper,
Anthony Habgood.
Andy Harrison,
Wendy Becker,
Ian Cheshire,
Stephen Williams.
Simon Melliss,
Christopher Rogers,
Susan Taylor Martin.
Board of directorswhitbread.co.uk “The Board functions well
and in line with first class
corporate governance”
Lorna Parker,
External Board evaluation
March 2012
Board agenda 2011/12
During the year the Board considered the following matters:
Standing
agenda
items
Quarter 3
• Chief Executive’s report
• Finance Director’s report
• Health and safety report
(quarterly)
• Internal controls (quarterly)
• Secretariat report (including
corporate governance updates)
• Approval of major capital
projects
• Costa International
• Strategy day
• Half-year results announcement
• Innovation project
• Post completion review
• WHR update (Restaurants)
• Costa update
• Talent review
Quarter 1
• Approval of Annual Report
Quarter 4
Quarter 2
and Accounts
• Approval of year-end
announcement
• Innovation project
• Premier Inn International
• Bribery Act
• WHR update (Restaurants)
• Annual General Meeting
• Premier Inn International
• Good Together
• Approval of code of conduct
• Premier Inn revenue
management
• Private placement
• Pensions update
• Innovation project
• Hotels & Restaurants
commercial action plans
• 2012/13 budget
• Costa Enterprises update
• Annual corporate
governance review
• Insurance renewal
• Conflicts of interest
annual review
Length of tenure of directors
Anthony Habgood
Andy Harrison
Patrick Dempsey
Christopher Rogers
Richard Baker
Wendy Becker
Ian Cheshire
Susan Hooper
Simon Melliss
Susan Taylor Martin
Stephen Williams
Area of expertise
Retail sector
Travel and hospitality sector
Marketing
Legal
Financial
International
Commercial property
’05 ’06 ’07 ’08 ’09 ’10 ’11
’12
Technology
Date appointed to the Board
Number of
directors
6
5
3
1
4
7
2
1
23
Anthony Habgood
Andy Harrison
Stephen Williams
Chairman (since August 2005)
Date of appointment to the Board:
May 2005
Age: 65
External appointments:
Reed Elsevier plc and NV (Chairman)
Preqin Holding Limited (Chairman)
Committee membership:
Nomination Committee (Chairman)
Remuneration Committee
Experience:
Between 1991 and 2009 Anthony
served first as Chief Executive and
then as Chairman of Bunzl plc.
Prior to that he had served as Chief
Executive of Tootal Group plc and as
a director of the Boston Consulting
Group Inc. In addition, Anthony
has held the role of Chairman of
Molnlycke Healthcare (UK) Limited
and non-executive directorships at
Geest plc, Marks and Spencer Group
plc, National Westminster Bank Plc,
SVG Capital plc and Powergen plc.
Chief Executive
Date of appointment to the Board:
September 2010
Age: 54
External appointments:
None
Committee membership:
None
Experience:
Andy served as Chief Executive
of easyJet plc from 2005 to 2010
and was Chief Executive of RAC
plc (previously Lex Services plc)
from 1996-2005. Prior to this, he
held the roles of Managing Director
of Courtaulds International Fabrics
and Finance Director of Courtaulds
Textiles plc. In the past, Andy has also
held a non-executive directorship at
Emap plc, where he was Chairman
of the audit committee.
Senior Independent Director
Date of appointment to the Board:
April 2008
Age: 64
External appointments:
Croda International Plc (NED)
Eversheds LLP (NED)
Committee membership:
Remuneration Committee
Nomination Committee
Experience:
Stephen retired as General Counsel
and Chief Legal Officer of Unilever
during 2010, having originally
joined them in 1986. Prior to that,
Stephen spent 11 years at Imperial
Chemical Industries plc. He was a
non-executive director of Bunzl plc
and Senior Independent Director of
Arriva plc.
Patrick Dempsey
Christopher Rogers
Richard Baker
Executive director
Date of appointment to the Board:
January 2009
Age: 53
External appointments:
Business in the Community – talent
and skills leadership team member
British Hospitality Association
(Council member)
Hospitality Action (Trustee)
Committee membership:
None
Experience:
Patrick joined Whitbread in 2004 as
Managing Director of Marriott in the
UK, and has been in the hotel and
restaurant business for 30 years. He
was with Forte Hotels for 20 years,
prior to joining Compass Group
as Chief Executive of Restaurant
Associates. In 2005, Patrick became
Managing Director of Premier Inn.
Finance Director
Date of appointment to the Board:
May 2005
Age: 52
External appointments:
HMV Group plc (NED)
Committee membership:
None
Experience:
Christopher joined Whitbread over
seven years ago from Woolworths
Group plc where he was Finance
Director and also held the position
of Chairman of the Woolworths
Group Entertainment business. He
originally qualified as an accountant
with Price Waterhouse before
joining Kingfisher plc in 1988.
Christopher held a number of roles
in his time at Kingfisher, including
Group Financial Controller, Finance
Director and Commercial Director
of Comet Group plc.
Independent non-executive director
Date of appointment to the Board:
September 2009
Age: 49
External appointments:
Virgin Active Group (Chairman)
European Advisory Board,
Aimia (Chairman)
Advent International Plc
(Operating Partner)
DFS Furniture Holdings Plc
(Chairman)
Committee membership:
Audit Committee
Remuneration Committee
Experience:
Previously Richard served as Chief
Executive of Alliance Boots Group
plc and Chief Operating Officer at
Asda Group plc.
Wendy Becker
Susan Hooper
Susan Taylor Martin
Independent non-executive director
Date of appointment to the Board:
January 2008
Age: 46
External appointments:
Ocado Group plc (NED)
Committee membership:
Audit Committee
Remuneration Committee
Experience:
Wendy was Managing Director of
TalkTalk and Group Chief Marketing
Officer for Vodafone. Prior to this,
Wendy held the position of partner
at McKinsey & Company for 14
years. In the past, Wendy also held
the roles of brand manager with
Procter & Gamble and consultant
with Boston Consulting Group.
Independent non-executive director
Date of appointment to the Board:
September 2011
Age: 52
External appointments:
Acromas Travel (Chief Executive)
Committee membership:
Audit Committee
Experience:
Susan was Senior VP, EMEA at Royal
Caribbean Cruises International,
where she also represented them
on the board of First Choice
Holidays PLC. Prior to that she
worked at Pepsico International.
Susan previously served as a
member of the SC Johnson
European Advisory Board and
as a non-executive director of
Transcom, Royal & Sun Alliance,
Courtaulds Textiles and the
Suzy Lamplugh Trust.
Independent non-executive director
Date of appointment to the Board:
January 2012
Age: 48
External appointments:
Thomson Reuters (President, Media)
Committee membership:
Audit Committee
Experience:
Susan previously held a number
of other roles at Thomson Reuters
including President, Global
Investment Focus Accounts and
Managing Director, UK and Ireland
within Thomson Reuters Markets.
Prior to this she was Global Head,
Corporate Strategy for Reuters,
which she joined in 1993.
Ian Cheshire
Simon Melliss
Independent non-executive director
Date of appointment to the Board:
February 2011
Age: 52
External appointments:
Kingfisher Plc (Group Chief Executive)
Department for Work and Pensions
(Lead Non-Executive Director)
Cambridge Programme for
Sustainability Leadership
(Chairman of Advisory Board)
Committee membership:
Remuneration Committee (Chairman)
Nomination Committee
Experience:
Ian is currently Group Chief
Executive of Kingfisher plc, having
previously served as Chief Executive
of B&Q UK from June 2005. Prior
to joining Kingfisher in 1998, he
worked for a number of retail
businesses including Sear & Guinness.
Independent non-executive director
Date of appointment to the Board:
April 2007
Age: 59
External appointments:
Member of the Committee
of Management of Hermes
Property Unit Trust
University College London
(Member of the Council)
Committee membership:
Audit Committee (Chairman)
Nomination Committee
Experience:
Simon, a chartered accountant,
was Chief Financial Officer of
Hammerson plc from 1995 to
2011, having originally joined
the company in 1991 as Group
Financial Controller. Prior to
that, he served as the Group
Financial Controller of Sketchley
PLC and held senior finance
positions with Reed International.
Simon also previously held a non-
executive directorship at Associated
British Ports Holdings plc.
Directors’
report
The directors present their report and accounts
for the year ended 1 March 2012.
Certain information required for disclosure in this report
is provided in other appropriate sections of the Annual
Report and Accounts. These include the business
review, the corporate governance and remuneration
reports and the Group financial statements and notes
to those financial statements and accordingly these are
incorporated into the report by reference.
Number of Premier Inn rooms, restaurants
and Costa stores in the UK and overseas
International
UK
International
UK
90,000
90,000
90,000
Premier Inn rooms
Premier Inn rooms
costa stores
Premier Inn
Restaurants
UK & Ireland
47,429
UK
387
Overseas
1,296
Costa
UK
1,392
Overseas
811
Geographical location of operations
Europe
Russia
Latvia
Ireland
UK
Poland
Ukraine
Czech Republic
Portugal
Hungary
Serbia
Montenegro
Bulgaria
Greece
Cyprus
Asia and the Middle East
China
India
Kuwait
Bahrain
Qatar
UAE
Oman
Lebanon
Syria
Jordan
Egypt
Saudi
Arabia
24
Principal activities and review of business
The principal activities of the Group are the operation
of a hotels and restaurants business and a coffee shop
business. These operations are largely carried out in the
UK, although Premier Inn operates one hotel in Ireland,
two hotels in India, one hotel in Abu Dhabi and three
hotels in Dubai via a joint venture. Costa operates coffee
shops in 25 overseas markets through joint ventures or
on a franchise basis, and wholly owns coffee shops in
Eastern Europe.
International
UK
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
are set out on pages 2 to 21. Details of the Company’s
WINcard, containing the key performance indicators
can be found on pages 8, 10, 14, 16 and 17.
Results and dividends
Group profit before tax and
exceptional items
Group profit before tax and
after exceptional items
Interim dividend paid on
10 January 2012
£303.5 million
£305.8 million
17.50p per share
Recommended final dividend
33.75p per share
Total dividend for the year
51.25p per share
Subject to approval at the Annual General Meeting,
the final dividend will be payable on 13 July 2012 to the
shareholders on the register at the close of business on
18 May 2012.
Board of directors
The directors at the date of this report are listed on
page 22. All except Susan Hooper and Susan Taylor
Martin served throughout the year. Susan Hooper joined
the Board on 1 September 2011 and Susan Taylor Martin
joined on 1 January 2012.
Details of the executive directors’ service contracts are
given in the remuneration report on page 41. None of
the non-executive directors has a service contract.
Details of directors’ training are given in the corporate
governance report on page 30.
Powers of 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 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.
Directors’ reportwhitbread.co.uk 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. There has been no
change to the interests shown above between the
end of the financial year and the date of this report.
Share capital
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 (unless the proxy is appointed by more than one
member in which case the proxy has one vote for and
one vote against if the proxy has been instructed by
one or more members to vote for the resolution and by
one or more members to vote against the resolution)
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 (excluding non-
working days), 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.
Unless the directors decide otherwise, a shareholder
cannot attend or vote 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.
Where a shareholder with at least a 0.25% interest in a
class of shares has been served with a disclosure notice
in relation to a particular holding of shares and has failed
to provide the Company with information concerning
those shares, those shares will no longer give that
shareholder any right to vote at a shareholders’ meeting.
Appointment and replacement of directors
Directors shall be no less than two and no more than 20
in number. Directors may be appointed by the Company
by ordinary resolution or by the Board of directors.
In accordance with the UK Corporate Governance Code
2010 it has been decided that all directors will stand for
annual re-election at each AGM.
The Company may by special resolution remove any
director before the expiration of his or her term of office.
Directors automatically stop being a director if:
• they give the Company a written notice of resignation;
• they give the Company a written notice in which they
offer to resign and the other directors decide to accept
the offer;
• 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;
• they are or have been suffering from mental or physical
ill health and the directors pass a resolution removing
the director from office;
• they have missed directors’ meetings (whether or
not an alternate director appointed 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;
• a bankruptcy order is made against them or they
make any arrangement or composition with their
creditors generally;
• they are prohibited from being a director under any
applicable legislation; or
• they cease to be a director under any applicable
legislation or are removed from office under the
Company’s Articles of Association.
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.
Directors’ share interests
Held at
01/03/2012
Held at
03/03/2011
Anthony Habgood*
Andy Harrison
Patrick Dempsey
Christopher Rogers
Richard Baker
Wendy Becker
Ian Cheshire
Susan Hooper
Simon Melliss
Susan Taylor Martin
Stephen Williams
50,797
191,106
24,957
50,000
8,198
6,000
300
–
3,000
–
9,440
50,797
161,673
24,957
50,000
4,966
6,000
–
– 1
1,500
– 1
4,258
1. At date of appointment
* The share interests shown above include the non-beneficial
interests of Anthony Habgood in 522 shares.
25
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;
• transfers cannot be in favour of more than four joint
holders; and
• the directors can refuse to register the transfer of an
uncertificated share in the circumstances set out in
the uncertificated securities rules (as defined in the
Company’s Articles of Association).
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 155p per B share and 159p 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 payment of 155p per B share and 159p 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.
Purchase of own shares
The Company is authorised to purchase its own shares
in the market. Approval to renew this authority will be
sought from the shareholders at the 2012 AGM.
The Company did not purchase any of its own shares
during the year. 14.1 million shares (representing 7.35%
of the total called up share capital at the beginning of
the year) are held as treasury shares (3 March 2011:
14.3 million). During the course of the year, the Company
transferred 143,000 shares from treasury to the Employee
Share Ownership Trust for the future satisfaction of
awards under the Long Term Incentive Plan.
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.
Major interests
As at the end of the financial year, 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
Schroders PLC
Legal & General
Standard Life
Investments
Capital Group
International, Inc.
17,184,930
10,531,421
6,960,723
7,233,278
5,986,397
9.73%
5.35%
3.97%
4.08%
3.38%
No changes to the above have been disclosed to the
Company in accordance with rule 5 of the Disclosure
and Transparency Rules between the end of the
financial year and 25 April 2012.
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.
Full and fair consideration is given to applications for
employment made by disabled persons, having regard
to their aptitudes and abilities. 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.
In addition, our employee opinion survey Your Say, is
conducted twice a year to provide insight in to the
views of employees.
Our employees are actively encouraged to take part
in our Sharesave scheme, which is available to all
employees and offers an option price discounted by 20%.
Regular internal communications are made to
all employees to ensure that they are kept well
informed of the performance of the Group and of
financial and economic factors that may affect the
Company’s performance.
Further information on employee involvement can
be found in the section ‘Team engagement’ on
pages 9 to 11.
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.
26
Directors’ reportwhitbread.co.uk
Significant agreements
The Company’s facility agreements and the private
placement loan notes agreement, 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 25 of the
consolidated financial statements.
Supplier payment policy
The Company has no trade creditors (3 March 2011: nil).
The Group has a standard term of 60 days in respect
of payments to suppliers. Where this standard term
does not apply, operating companies are responsible
for agreeing terms and conditions for their business
transactions when orders for goods and services
are placed, so that suppliers are aware of the terms
of payment and the relevant terms are included in
contracts where appropriate. 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 47 days’ purchases
outstanding at 1 March 2012 (3 March 2011: 48 days)
based on the trade creditors at that date and purchases
made during the year.
Charitable and political donations
No direct charitable donations have been made by the
Company. Costa Limited, a subsidiary of the Company,
made a direct donation of £368,014 to the Costa
Foundation. Further details about the Costa Foundation
can be found on pages 11 and 17. 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.
More information on charitable activities can be found
on page 17.
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.
Auditor
Ernst & Young LLP have expressed their willingness
to continue in office as auditor of the Company and a
resolution proposing their re-appointment will be put to
shareholders at the 2012 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 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 2
to 21. 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
review on pages 18 and 19. 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).
A combination of the strong operating cash flows
generated by the business and the significant
headroom on its credit facilities support the directors’
view that the Group has sufficient funds available for
it to meet its forseeable working capital requirements.
The directors have concluded that the going concern
basis remains appropriate.
Annual General Meeting
The AGM will be held at 2.00pm on 19 June 2012 at
the Queen Elizabeth II Conference Centre, Broad
Sanctuary, Westminster, London SW1P 3EE. The
Notice of Meeting is enclosed with this report for
shareholders receiving hard copy documents, and
available at www.whitbread.co.uk for those who
elected to receive documents electronically. At
the 2012 AGM, all voting will be by poll. Electronic
handsets will be utilised and results will be displayed
on the screen at the meeting.
Approved by the Board on 25 April 2012 and signed.
Simon Barratt
General Counsel and Company Secretary
Registered Office:
Whitbread PLC
Whitbread Court
Houghton Hall Business Park
Porz Avenue
Dunstable
Bedfordshire
LU5 5XE
Registered in England: No. 4120344
The directors’ report that 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 business review on pages 2
to 21 and this report on pages 24 to 27.
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.
27
Simon Barratt, General Counsel and Company Secretary
The new UK Corporate Governance Code (‘CG Code’)
came into effect in 2010 and 2011/12 was the first
financial year in which it was applicable to Whitbread.
This is the key source of guidance on corporate
governance matters. In light of the CG Code, and
as part of our commitment to high standards of
governance, we undertook a thorough review of
Whitbread’s corporate governance arrangements
including reviewing our:
• overall compliance with the CG Code with
respect to business and corporate practices;
• matters reserved to the Board; and
• terms of reference for each of the three Board
committees.
The results of this review were presented at the
January Board meeting and formally adopted by
the Board. During the year the Company complied
with all provisions set out in the CG Code.
Details of how Whitbread has applied the main and
supporting principles of the CG Code with regard to
remuneration can be found in the remuneration report
on pages 35 to 44. Details of the membership and
activities of the Remuneration Committee can be
found on page 37.
In addition to this, a new global code of conduct
has been adopted to take into account the 2010
UK Bribery Act and has been briefed to employees.
The information below sets out Whitbread’s compliance
in the following areas:
• The Board;
• Shareholder relations;
• Internal control; and
• Board committees.
Corporate
governance
Introduction from Anthony Habgood, Chairman
As I mentioned in my statement on page 3, I believe
that corporate governance is not simply something
for the Board to consider as an agenda item at our
monthly meetings. For me, corporate governance is
something that touches all aspects of our business
and affects all of our employees in many different ways.
At an executive level this includes managers ensuring
that decisions are taken by the right people in the
Company in accordance with the schedule of matters
reserved to the Board and other relevant policies.
For our employees this includes having access to
our whistleblowing system so that any potential
problems can be raised in confidence through
independent channels.
Although corporate governance flows through all of
our operations, the Board takes responsibility for
leading on high standards of accountability and ethical
behaviours. During this year key governance activities
have included:
• a review of the Company’s compliance with the
updated UK Corporate Governance Code which
came into force for financial years commencing
on or after 29 June 2010;
• an evaluation of the Board by an independent
external consultant;
• a talent review and succession plan for key
executive roles;
• a Nomination Committee review of the Board
composition and completion of a recruitment
process resulting in the appointment of two
new non-executive directors; and
• the Audit Committee’s review of the external
and operational audits.
I am proud of our core commitment to high
standards of governance as this is key to supporting
our financial performance and protecting your
Company. Simon Barratt our General Counsel and
Company Secretary provides further details below
on how Whitbread complied this year with corporate
governance requirements.
28
Corporate governancewhitbread.co.uk The Board
Who is on the Board of directors?
There are eleven members of the Board including the
Chairman, Chief Executive and Senior Independent
Director.
Composition of the Board
Chairman
Executive directors
1
3
Independent
non-executive directors 7
As announced in April 2012, Christopher Rogers will
become Managing Director of Costa in August 2012.
He will remain a director when he takes on his new
role and, as the Board intends to appoint a new Group
Finance Director, it is anticipated that the number of
executive directors will increase at that time.
Details of each of the directors can be found by
folding out page 23. In that section, we have provided
information on the mix of skills and experience
represented on the Board. The Board brings together
individuals with a diverse range of experience and
expertise, which contributes to a positive culture of
mutual respect and constructive challenge.
What were the key activities of the Board this year?
The Board holds meetings at monthly intervals during
the year and on an ad hoc basis as and when required.
During the year, 11 meetings were held. Attendance at
meetings by directors is set out in the chart on page 34.
A set of Board papers, including monthly financial and
trading reports, is circulated in advance of each meeting
so that directors have sufficient time to review them
and arrive at the meeting fully prepared.
At each meeting, the Board starts with a review of the
minutes from the previous meeting, matters arising and
progress on action points. This is followed by reports
from the Chief Executive and the Finance Director
describing the operational and functional performance.
Reports from specific parts of the business and new
business opportunities are presented before a review
of the secretariat report which sets out any updates on
best practice and corporate legislation.
The Board has a rolling agenda which sets out matters
to be considered throughout the year. This allows all
directors to contribute to the setting of the agenda.
Having a rolling agenda ensures that there is a
structured approach to the consideration of recurring
issues with such items being evenly spread across
the calendar. This facilitates good management of
the agenda providing sufficient time for the Board to
discuss ad hoc items that arise during the year without
any loss of focus on standing items. The rolling agenda
is structured such that the Board gives its attention
to each area of the business in turn so that a strong
understanding of the entire Company is maintained.
This year, the Board has considered a range of matters,
details of which can be found on page 23.
There is a schedule of matters reserved exclusively
to the Board. These matters include:
• approval of Group financial statements and the
preliminary announcement of half and full year
results;
• changes relating to the Group’s capital structure;
• the annual budget and the Group’s business plan;
• approving acquisitions and disposals over a certain
threshold value;
• interim dividends and recommendation of final
dividends;
• establishment of Board committees, terms of
reference and membership of Board committees; and
• maintaining sound risk management and internal
control systems.
The schedule of matters reserved was reviewed at
the January 2012 Board meeting and was updated
to take account of best practice guidelines. The full
schedule of matters reserved to the Board is available
on our website.
How and why did the Board appoint new
non-executive directors this year?
This year, a routine review of Board composition led
to the conclusion that two new non-executive directors
could enhance the Board’s performance. The starting
point for this review was for the Nomination Committee
to determine the additional skills and experience
necessary. This was then compared with the range of
expertise of current Board members to identify any areas
which required increased representation. The Committee
then prepared a description of the capabilities required.
The Committee recommended that the Board could
be strengthened with the appointment of candidates
with experience of finance, hospitality, consumer-
branding, digital media and international businesses.
An external search consultancy, Spencer Stuart, was
engaged and a number of candidates were identified.
Selected candidates met with the Nomination
Committee. Further discussion by the Committee
led to a recommendation to the Board for the
appointment of Susan Hooper and Susan Taylor Martin.
29
How does the Board keep up to date with
new developments?
A monthly report, prepared by the Company Secretary,
is presented at each Board meeting. This report
provides updates on corporate legislation and best
practice on matters including corporate governance.
Formal training events were attended by Board
members during the year on a range of issues including:
workshops on cyber security, managing risk and
corporate governance. Investor relations and market
updates were also considered by the Board.
All directors have access to independent professional
advice at the Company’s expense. Directors serving on
Board committees confirmed they are satisfied that they
receive sufficient resources to enable them to undertake
their duties effectively. Each director has access to the
Company Secretary for advice on governance.
How does the Board identify and consider
directors’ conflicts of interest?
A formal process is undertaken each year in February
when each director discloses to the Board details
of their external interests including any other
directorships which they hold.
The list of interests is assessed by the Board to determine
whether the director’s ability to act in the best interests
of the Company could be compromised. If there are no
such potential or actual conflicts, the external interests
are authorised by the Board. All authorisations are for a
period of 12 months. No director is counted as part of a
quorum in respect of the authorisation of his or her own
conflict situation.
It is recognised that all organisations are potential
customers of Whitbread and, in view of this,
the Board has authorised all directors’ current
external directorships.
Case study with Susan Taylor Martin
Induction process
The induction process was tailored for Susan
and focused on Whitbread’s businesses.
Initial meetings were held with the Chairman,
Chief Executive, the Group HR Director, the
Finance Director and the Company Secretary,
followed by time with:
• the Managing Director of Hotels & Restaurants,
visiting Premier Inn sites;
• the Managing Director of Restaurants, visiting
sites for each of the restaurant brands;
• the Managing Director of Costa, visiting
Costa outlets; and
• the Group’s lawyers and brokers.
Training and development goes well beyond the
induction process and is an ongoing process for
all Board members. Further training opportunities
will be offered to Susan depending on her needs.
The Chairman facilitates training for all Directors
in this way to ensure that the Board is able to
perform at an optimum level.
How is the independence of directors assessed?
The Board has a majority of independent non-executive
directors. Independence is assessed annually against
the CG Code. None of the provisions listed in the CG
Code which may compromise independence apply to
any of Whitbread’s non-executive directors.
Does the Company have appropriate insurance cover
in respect of legal action against its directors?
The Company has appropriate directors & officers
liability insurance in place. In addition to this, the
Company provides an indemnity for directors against
the costs of defending certain legal proceedings.
These are reviewed periodically.
What are each of the Board members responsible for?
All Board members have responsibilities in the areas of strategy, performance, risk and people.
Specific duties of the Chairman, Chief Executive and Senior Independent Director are set out below:
Chairman
Chief Executive
Senior Independent Director
• leadership of the Board and
setting its agenda including
approval of the Group’s strategy,
business plans,
annual budget and key areas
of business importance;
• ensuring, through the General
Counsel, that the members of
the Board receive accurate,
timely and clear information;
• ensuring a culture of openness
and debate around the Board
table;
• ensuring that Board members
understand the views of major
investors; and
• leading the annual evaluation of
the Board, the committees and
individual directors.
• optimising the performance
of the Company;
• ensuring effective
communication with
shareholders and employees;
• the creation of shareholder
value by delivering profitable
growth and a good return
on capital;
• ensuring the Company has a
strong team of high-calibre
executives, and putting in
place appropriate management
succession and development
plans; and
• leading the activities of the
Whitbread Leadership Forum –
a group of the Company’s most
senior executives.
• being available to shareholders
if they have concerns which the
normal channels have failed
to resolve or which would be
inappropriate to raise with the
Chairman or the executive team;
• supporting the Chairman in the
delivery of his objectives;
• providing a sounding board
for the Chairman;
• being available to serve as
an intermediary for the other
directors if necessary; and
• leading the evaluation of the
Chairman on behalf of the
other directors.
30
Corporate governancewhitbread.co.uk How is performance evaluated?
Board and committees:
There were three aspects to this year’s evaluation:
• as in previous years, each director completed a
formal questionnaire on the performance of the
Board and each of the Board committees;
• the Chairman also met or spoke to all directors
on a one-to-one basis; and
• an external evaluation of the Board was facilitated
this year by Lorna Parker, an independent consultant
and former Managing Director and Partner of
Spencer Stuart. As part of this review, Lorna met
each of the directors, the Company Secretary and
the Group HR Director to discuss the effectiveness
of the Board and its processes.
The outcome of the review was discussed with the
Chairman and Senior Independent Director and then
as an agenda item at the Board meeting in March
2012, which was attended by Lorna Parker. The review
concluded that there is “an open, supportive, cohesive
but challenging and disciplined culture within the board
room.” All the directors expressed a high degree of
satisfaction with their experience on the Board.
Shareholder relations
How does the Company interact with shareholders?
Suggestions for improvement included:
• the introduction of a formal annual update from
the Company Secretary and auditors on legal or
regulatory issues directly affecting the Company;
• holding meetings at Company sites when there are
new concepts/developments; and
• holding the planning and review meeting for the
Nomination Committee in March each year when
confirming the recommendation for re-election
of directors.
Individual directors:
The Chairman has one-to-one meetings with each
director to discuss their performance.
Chairman:
Every year the Senior Independent Director meets
with the non-executive directors without the Chairman
present to discuss the performance of the Chairman.
The Senior Independent Director also speaks with the
executive directors to gain their views before discussing
the results of the evaluation with the Chairman.
All shareholders
The Company communicates with both institutional and private shareholders through the following means:
• the Company’s website (www.whitbread.co.uk), where information and news is regularly updated;
• the Annual Report, which sets out details of the Company’s operations and performance over the past
financial year and plans for future growth;
• the Annual General Meeting, where all shareholders have the opportunity to vote on the resolutions
proposed and to put questions to the executive team; and
• presentations of full and half-year results to analysts and shareholders.
In addition, all shareholders are able to contact the Company by email, telephone or post to raise issues.
The Company also takes opportunities to interact more directly with institutional and private shareholders.
During 2011/12 this included the following:
Institutional shareholders
• the Chief Executive and Group Finance Director
held meetings with institutional investors
following the full year and interim results;
• the Board received regular updates on the views
of major shareholders from the Company’s
stockbrokers and independent researchers;
• an ‘Investor Day’ was organised by Costa; and
• a consultation was held with major shareholders
on the proposed amendments to the LTIP (Long
Term Incentive Plan) scheme.
• live webcast presentations of the annual and
Private shareholders
interim results;
• electronic communications with shareholders
including use of the online share portal; and
• executives presented to members of the UK
Shareholders’ Association.
How are shareholders able to participate in the AGM?
The Notice of AGM and related papers are sent to
all shareholders at least 20 working days before the
meeting. The Company proposes a separate resolution
on each substantially separate issue including a specific
resolution to approve the report and accounts. For
each resolution, proxy appointment forms provide
shareholders with the option to vote in advance of
the AGM if they are unable to attend in person. All
valid proxy votes received for the AGM are properly
recorded and counted by Whitbread’s registrars.
As in previous years, all voting by shareholders
will be by poll using electronic handsets. The voting
results, including proxy votes received, will be displayed
on a screen at the meeting. In addition, the audited
poll results will be disclosed on the Company’s website
following the meeting, and announced through the
regulatory news service.
The information that is required by DTR 7.2.6, relating
to the share capital of the Company can be found
within the directors’ report on pages 25 and 26.
31
The Board assesses the appropriate areas of risk upon
which assurance should be sought. 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
Audit Committee. The Audit Committee considers
the principal risks identified by the risk management
process which are also considered by the Board and
the management boards throughout the year.
An annual review of internal controls is undertaken by
the Board with the assistance of the Audit Committee,
which reports to the March Board meeting.
Going concern
The directors’ going concern statement can be found
in the directors’ report on page 27.
Business model and strategy
Information on the Group’s business model and
strategy can be found in the business review on pages
2 to 21.
Board Committees
The Board is supported by three committees, the
Audit Committee, the Nomination Committee and the
Remuneration Committee. The terms of reference for
each committee are reviewed annually and updated in
line with best practice. They are available in full on the
Company’s website.
A detailed report from the Chairman of the
Remuneration Committee is set out on pages
35 to 44. Summary reports for the Audit and
Nomination Committees can be found on page 33
and 34 respectively, followed by details of directors’
attendance at meetings during this financial year.
Internal Control
How 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 2011/12 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 CG Code. A report of the key risks can
be found on pages 20 and 21.
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 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 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; and
• the Audit Committee regularly reviews the major
findings from both operational and external audit.
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.
32
Corporate governancewhitbread.co.uk
Audit Committee report
Members of the
Audit Committee
Simon Melliss (Chairman)
Richard Baker
Wendy Becker
Susan Hooper
Susan Taylor Martin
Simon Barratt (Secretary)
All members of the Committee are independent non-executive directors.
The Board regards Simon Melliss, with his previous experience as Finance Director
at Hammerson plc, to have recent and relevant financial experience as required
by the CG Code.
Key duties
(Full terms of reference
are available on the
Company’s website)
Monitor, review and report to the Board on the:
• financial statements, risk management system and internal controls; and
• objectivity and effectiveness of the operational auditors and the external auditor.
Manage the engagement and review of performance of the external auditor
including approval of their remuneration.
Hold meetings with external and operational auditors without management
being present.
Assist the Board in fulfilling its corporate governance and oversight responsibilities.
Develop policy on the supply of non-audit services by the external auditor.
Review the adequacy and security of the Company’s whistleblowing facilities.
Review the Company’s systems and controls for the prevention of bribery.
Audit Committee agenda – 2011/12
Quarter 1
Quarter 3
Review of effectiveness of internal controls
Review of risk matrix
Agreed scope of operational audit
Review of year end items including draft accounts and an update on tax matters
Review of whistleblowing incidents
Approval of Audit Committee terms of reference
Review of 2010/11 financial statements and auditor’s report
Operational audit report on year-end processes
Meeting of Committee with external auditor without executive directors present
Approval of interim results for 2011/12
Interim review of external auditor including review of audit planning report
Interim review of operational audit
Tax update
Meeting of Committee with auditor without executive directors present
A statement relating to non-audit work carried out by the auditor is included in the directors’ report on page 27.
33
Nomination Committee report
Members of the
Nomination Committee
Anthony Habgood (Chairman)
Ian Cheshire
Simon Melliss
Stephen Williams
Simon Barratt (Secretary)
Key duties
(Full terms of reference
are available on the
Company’s website)
Review the size, structure and composition of the Board and its committees
Manage the selection and appointment process for new directors to be
recommended to the Board
Agree the recommendation for re-election of directors at the AGM
Nomination Committee agenda – 2011/12
Quarter 1
Commenced appointment process for two new non-executive directors
Review of committee membership
Review of terms of reference
Review of directors for re-election at the AGM
Quarter 2
Final decision on the appointment of two new non-executive directors
How does the Company approach the annual
re-election of directors?
As required by the CG Code, all directors will be
subject to re-election at the next AGM. The Nomination
Committee has reviewed the contribution and
commitment of each member of the Board and has
recommended their re-appointment at this year’s AGM.
Details setting out why each director is deemed to be
suitable for re-appointment will be included with the
AGM papers circulated to all shareholders.
None of the non-executive directors has been a
director for a term longer than six years. If any non-
executive director was to serve for more than six
years, the Nomination Committee’s policy would be to
scrutinise their role more closely before recommending
re-appointment to ensure that the Board remains fresh
and dynamic.
In accordance with the CG Code, none of the executive
directors has more than one non-executive directorship
in a FTSE-100 company or a chairmanship of a FTSE-
100 company.
2011/12 attendance record of Board and Committee members
Type of Meeting
Anthony Habgood
Andy Harrison
Patrick Dempsey
Christopher Rogers
Richard Baker
Ian Cheshire
Wendy Becker
Simon Melliss
Stephen Williams
Susan Taylor Martin
Susan Hooper
Board
Attendance
record*
Audit
Committee
Attendance
record
11/11
11/11
11/11
11/11
10/11
8/11
10/11
10/11
9/11
3/3
4/6
–
–
–
–
3/3
–
3/3
3/3
–
–
–
Nomination
Committee
Attendance
record
4/4
–
–
–
–
–
–
4/4
4/4
–
–
Remuneration
Committee
Attendance
record
6/6
–
–
–
6/6
6/6
6/6
–
5/6
–
–
Members of the executive team attended committee meetings as appropriate. Anthony Habgood is not formally a member of
the Audit Committee, but attended all three meetings during the year.
* Includes one meeting of the Board, which was held at short notice, to approve a major capital project. The meeting was attended by the
Chairman, the three executive directors and Susan Taylor Martin. The other directors were unable to attend due to prior engagements,
but all confirmed their agreement to the project by email.
34
Corporate governancewhitbread.co.uk
Remuneration
report
Introduction from Ian Cheshire
This was my first full year as Chairman of the
Remuneration Committee. In this report, you will
see that we have taken the opportunity to re-define
Whitbread’s remuneration principles. In doing so we
aimed to ensure that remuneration arrangements are
aligned with and support the delivery of the Group’s
business strategy and shareholder value creation.
The Whitbread strategy, which is to invest in growing its
leading brands, Premier Inn and Costa, has stretching
targets which if delivered successfully will create
significant value for our shareholders. The Committee
believes that the executive team should be rewarded for
the achievement of the strategy and therefore incentives
should be clearly aligned to delivering earnings growth
and returns above our cost of capital. To this end,
amendments to the Long Term Incentive Plan (LTIP)
have been proposed and are outlined later in this report.
The WINcard is a key element of our remuneration
structure. It is designed to ensure that executives
are incentivised on both non-financial and financial
measures. The customer heartbeat schematic, which is
described on page 8 shows how we intend to deliver
our strategic aims by providing a great place to work
for our people, so that they care for our customers and
provide them with an experience that will make them
come back time and time again. The diagram below
shows how measures driving remuneration are linked
to this model:
Contents
35 Introduction from Ian Cheshire
36 2011/12 highlights
37 Remuneration Committee governance
38 Remuneration principles and
structure for 2012/13
39 Annual Incentive Scheme
40 Long Term Incentive Plan (LTIP)
41 Other information relating to
executive directors
41 The Chairman and the non-executive
directors
42 Appendices
Parts of this report have been audited and these
are clearly marked as ‘audited information’.
Team engagement
Customer
heartbeat
Profitable growth
Strategic measures driving remuneration
Long Term Incentive Plan
Annual Incentive Scheme –
profit element
Annual Incentive Scheme –
WINcard element
Your Say score
Health and safety hurdle
Guest net promoter score
Brand standards
EPS growth
ROCE
Profit
Market performance
Like for like sales
Carbon consumption
35
2011/12 highlights
Performance in 2011/12
The Group had another successful year, with sales
growth of 11.2% and pre-tax profits up 11.3%. This
profit growth, combined with good return on capital,
produced an operating cash inflow which funded
reinvestment of £307.9 million in maintaining our
estate and the proposed growth in the dividend.
Despite achieving double-digit profit growth, at Group
level we did not quite reach our profit target for the year.
On the WINcard measures, which are outlined on page
39 we achieved four green scores, one amber score
and one red score. You also will see on page 39 that the
combination of these results has led to reduced bonus
awards to the executive directors under the Annual
Incentive Scheme when compared to the prior year.
The performance conditions for the 2009 Long
Term Incentive Plan were met in full. There were two
independently operating conditions each relating to half
of the total award. Whitbread achieved top quartile TSR
performance against its comparator group over the last
three years, which was a very good result. The 2011/12 EPS
target required for full vesting was set, at a time of great
economic uncertainty, at 107p. The actual EPS achieved was
134.35p. This represents growth of RPI +9.6% per annum,
which is an excellent result in turbulent economic times.
Remuneration principles review
During the course of 2011, the Remuneration Committee
undertook a review of Whitbread’s approach to senior
executive remuneration to ensure that the remuneration
arrangements were aligned with and supported the
delivery of the Group’s current business strategy and
shareholder value creation. Updated remuneration
principles were agreed and details can be found on
page 38.
As part of the review it was agreed that the LTIP scheme
should be adapted so that it would be more closely
aligned to the Group’s strategic aims. After consulting
with the top 20 shareholders, as well as with the ABI and
RREV, we intend to seek approval for changes to the LTIP
at the AGM in June 2012, with awards being made under
the amended plan soon after the AGM rather than in April
under the current arrangements.
Clawback
The rules of the Annual Incentive Scheme were
amended in November 2011 to allow the Committee,
in the exceptional circumstances of a material
misstatement of the results on which an award was
based, to adjust unvested share awards.
2012 salary review
When reviewing the salaries of the executive directors we
take into account a range of factors including changes to
salaries across the Group, the personal performance of
the director measured against agreed objectives, current
trading circumstances and market data.
The general level of salary increases across Whitbread in
May 2012 will be 2.25%. In a year when levels of inflation
are expected to produce budgetary pressure it was
decided that a lower increase of 1.5% for members of
the Whitbread Directors’ Forum (the top 40 executives)
would be appropriate. As members of the Whitbread
Directors’ Forum, the executive directors are eligible
for an increase of 1.5%. However, Andy Harrison and
Christopher Rogers confirmed to the Committee that
they did not wish to receive a salary increase in 2012, so
their salaries will be the same as those reported last year.
36
The basic salaries of the executive directors with effect
from 1 May 2012 will be:
Patrick Dempsey
Andy Harrison
Christopher Rogers
£426,300
£717,500
£504,700
Total remuneration received by executive directors
The following table shows the total amount of
remuneration received by each of the executive directors
in 2011/12. This includes their salary and bonus (cash
bonus applicable to the 2011/12 financial year and to be
paid in May 2012), any cash paid in lieu of pension or
other benefits and an amount representing the vesting
of any share awards during the year. For deferred equity
awarded under the Annual Incentive Scheme in 2009 this
is the actual gain made at the point of vesting on 1 March
2012. For the 2009 LTIP this is based on the share price
at the close of business on 1 March 2012 as the awards
will not become exercisable until after the date of this
report. The table does not include share awards made
during the year, which are due to vest in 2015.
Patrick Dempsey
Andy Harrison
Christopher Rogers
Total remuneration
received in 2011/12
£1,981,403
£1,159,212
£2,465,252
Christopher Rogers – new role
As announced earlier this month, Christopher Rogers
will become Managing Director of Costa with effect from
1 August 2012. The Committee considered how this change
would impact his remuneration package and agreed that:
• his basic salary will remain unchanged as a result of
the change of role;
• the quantum available to him under the Annual
Incentive Scheme will be unchanged at 167% of
salary, but that the WINcard element will be based
on the Costa WINcard results and the profit element
will be based on a 50:50 split between Costa PBIT
and Group underlying profit; and
• the level of his LTIP award will remain unchanged
at 125%.
The changes to the method of calculating awards due
under the Annual Incentive Scheme will be made at the
half year, with Group performance still being used as
the measure in the first half of the year.
Total shareholder return graph
Source: Thomson Reuters
250
200
150
100
50
0
1 Mar 07
28 Feb 08
26 Feb 09
4 Mar 10
3 Mar 11
1 Mar 12
The graph looks at the value, by 1 March 2012, of £100 invested in Whitbread PLC
on 1 March 2007 compared, on a consistent basis, with that of £100 invested in the FTSE 100
Index based on 30 trading day average values. It is assumed that dividends are re-invested
Whitbread PLC
FTSE 100 Index
Remuneration reportwhitbread.co.uk Remuneration Committee – membership, key duties and advisers
Members of the
Remuneration
Committee
Ian Cheshire (Chairman)
Richard Baker
Wendy Becker
Anthony Habgood
Stephen Williams
Simon Barratt (Secretary)
Key duties
(Full terms of reference
are available on the
Company’s website)
Set the broad policy for the remuneration of the Chairman and the executive directors;
Within the terms of the agreed policy, to determine the total individual remuneration
package (including bonuses, incentive payments, share awards and other benefits) of
the Chairman and each executive director;
Monitor the structure and level of remuneration of executive committee members;
Approve the design of and determine the targets for incentive schemes;
Approve awards to be made to executive directors and other senior executives
under incentive schemes; and
Ensure that contractual terms on termination, and any payments made, are fair
to the individual and the Company, that failure is not rewarded and that the duty
to mitigate loss is fully recognised.
Simon Barratt – General Counsel
Louise Smalley – Group HR Director
Towers Watson – Remuneration Consultants (appointed by the Committee; a separate
part of Towers Watson provides accounting services in relation to the pension fund.)
Slaughter and May – Legal Advisers (they also provide legal services to the Company.)
Internal advisers
External advisers
Remuneration Committee agenda – 2011/12
Quarter 1
Approval of 2011 LTIP awards and performance conditions.
Approval of matching award, as agreed on his appointment, for Andy Harrison.
Approval of 2011/12 WINcard incentive targets.
Approval of awards of cash and deferred equity to executive directors
under the Annual Incentive Scheme.
Executive directors’ salary review.
Confirmation of the vesting percentages for the LTIP awards made in 2008
and vesting in 2011.
Approval of updated terms of reference
Approval of new rules for the Sharesave Scheme, subject to shareholder
approval at the AGM.
Noting of the salary review and incentive payments to executives below Board level.
Quarter 2
Discussion about the terms of the planned remuneration review.
Review of the Chairman’s fee.
Quarter 3
Approval of senior executive remuneration principles, including the introduction
of clawback provisions in the Annual Incentive Scheme.
Changes to the performance conditions for future LTIP awards, subject to
shareholder approval at the AGM.
Adjustments to the 2011/12 incentive targets to reflect changes to the business
during the year, including the acquisition of Coffee Nation.
Quarter 4
Approval of a letter to the 20 largest shareholders, the ABI and RREV to request
views on the proposal to amend the LTIP performance conditions.
Consideration of responses to the shareholder consultation on proposed
amendments to the LTIP performance conditions.
Proposed incentive framework for the 2012/13 Annual Incentive Scheme.
37
Remuneration principles and structure for 2012/13
In November 2011, the Committee approved the
following remuneration principles:
Overall Remuneration Principles
Our approach to senior executive remuneration is
designed to:
• provide an appropriate balance between
remuneration elements that attract, retain and
motivate the right calibre of executive talent;
• be aligned to the business strategy and the
achievement of planned business goals;
• encourage a high-performance culture by ensuring
performance-related remuneration constitutes a
substantial proportion of the remuneration package
and by linking maximum payout opportunity to
outstanding results; and
• support the creation of sustainable long-term
shareholder value.
The table below outlines the principles behind each
key element of remuneration, the opportunity for each
director in the year ahead and a brief summary of how it
works. A more detailed explanation of how the incentive
schemes work can be found on pages 39 and 40.
Base
salary
Principles
How it works
• Sufficient to attract and retain the
highest calibre executive talent
needed to support the long-term
interests of the business; and
• Periodically reviewed taking into
account the organisation’s annual
review process, business performance,
appropriate market data and an
individual’s contribution to the Group.
Salaries are reviewed annually
taking account of:
• changes to salaries across
the Group;
• trading circumstances;
• personal performance against
agreed objectives; and
• benchmarking data against
the FTSE 51-150.
2012/13 potential
remuneration
• Patrick Dempsey
£426,300
• Andy Harrison
£717,500
• Christopher
Rogers
£504,700
Annual
Incentive
Scheme
• To provide a direct link between
annual performance and reward;
• To incentivise the achievement of
outstanding results across appropriate
key stakeholder measures;
• To use a consistent profit incentive
range which will only be altered for
a new incentive year in exceptional
circumstances; and
• To align with the long-term interests
of shareholders and help participants
build a significant stake in the business
over time, by awarding a material part
of the annual bonus in deferred equity.
• Targets for both financial
• On-target
and non-financial measures
set at the beginning of the
bonus year;
• Cash awards paid in May
following the end of the
financial year;
• Deferred shares awarded and,
under normal circumstances,
released three years after the
date of award; and
• Clawback provisions apply
to unvested deferred shares
in the event of a material
misstatement of results.
performance:
80% of salary
(38.5% paid
in cash, 41.5%
paid in deferred
shares)
• At stretch
performance:
167% of salary
(79% paid in
cash, 88% paid
in deferred
shares)
Long Term
Incentive
Plan
• To closely align the interests of senior
executives with sustainable long-term
shareholder value creation;
• To focus rewards on both the
sustained delivery of absolute
long-term earnings growth and
the efficient use of capital over
the long-term; and
• To retain executives over the
three-year performance period
of the awards.
• Awards made annually;
• Awards vest after three years
subject to performance
conditions;
• 75% of award based on EPS
growth, subject to a ROCE
hurdle*; and
• ROCE also acts as a multiplier
on a straight-line sliding scale
to increase the EPS element
by up to a further third.*
• Patrick Dempsey:
100% of salary;
• Andy Harrison:
125% of salary;
and
• Christopher
Rogers: 125%
of salary.
*Subject to approval at the AGM
Executive directors – potential value of package 2012/13
Patrick Dempsey
Andy Harrison
Christopher Rogers
LTIP*
3.0
Deferred Shares
2.5
£2.99m
n
o
i
l
l
i
m
£
3.0
2.5
2.0
1.5
1.0
0.5
0
£1.68m
2.0
n
Cash Bonus
o
£1.64m
i
l
l
i
1.5
Pension
m
£
Base Salary
1.0
£0.97m
On-target
Stretch
3.0
LTIP*
2.5
Deferred Shares
n
Cash Bonus
o
2.0
£2.12m
i
l
l
i
1.5
Pension
m
£
Base Salary
1.0
£1.17m
Variable elements
LTIP†
Deferred element
of Annual Incentive
Scheme
Cash Bonus
Fixed elements
Pension and
other benefits
Base Salary
0.5
0
On-target
Stretch
0.5
0
On-target
Stretch
† On-target performance assumes on-target bonus and threshold vesting under the LTIP. Stretch performance assumes maximum
bonus and maximum LTIP vesting. In both cases, for simplicity, no share price growth is assumed.
38
Remuneration reportwhitbread.co.uk
Total
Cash
Deferred Shares
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
90
95
100
105
110
115
Annual Incentive Scheme
The Annual Incentive Scheme is the Company’s
annual bonus scheme, which applies to around
76 executives. The scheme has been designed to
incentivise outstanding performance across a number
of key stakeholder measures and it rewards executives
with both a cash payment and an award of deferred
shares. The scheme operates over a four-year period
as outlined at the foot of the page.
There are two elements to the scheme. There is a profit
measure and there are a number of WINcard measures,
as shown below, which are subject to a health and
safety hurdle. The scheme is designed to incentivise
executives to deliver great results by providing an
excellent environment for our people, in which they in
turn can make everyday experiences feel special for our
customers. The team engagement and guest heartbeat
scores are up-weighted to reflect the importance
of those elements to Whitbread’s success. Further
information on the WINcard targets can be found
earlier in this report on pages 8 to 17. For executive
directors, awards will be calculated as follows at the
end of 2012/13:
% of salary
on target
57.5%
% of salary
at maximum
137%
% of salary
for amber
WINcard score
% of salary
for green
WINcard score
1.5% or 4.5%
for each
measure
3% or 9%
for each
measure
Profit Measure
Underlying PBT
WINcard
measures
Your Say
results (team
engagement)
Brand standards
Guest heartbeat
Brand expansion
Like for like
sales growth
Energy
consumption
% of salary
on target
% of salary
at maximum
Total*
80%
167%
* On-target WINcard performance is a combination of green
and amber scores. Maximum performance has been defined
as all green scores. Targets for green and amber scores are
set at the beginning of the bonus year for each measure.
The following graph shows the percentage of salary
received at different levels of profit performance as
well as the split between cash and deferred equity
in respect of the profit element.
Total
Deferred
shares
Cash
y
r
a
l
a
s
f
o
%
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
Threshold
On-target
Stretch
(maximum)
Profit performance
For the WINcard element 80% of any awards are made
in cash with the remaining 20% in deferred equity.
Awards for 2011/12
For 2012, Andy Harrison and Christopher Rogers
received 76.1% of salary and Patrick Dempsey received
60.5% of salary under the Annual Incentive Scheme.
These awards were split between cash and deferred
shares as follows:
% of salary
in cash
% of salary
in deferred
shares
Total
% of salary
30.9%
29.6%
60.5%
36.6%
39.5%
36.6%
39.5%
76.1%
76.1%
Patrick
Dempsey
Andy
Harrison
Christopher
Rogers
For Andy Harrison and Christopher Rogers, incentive
awards were based on Group performance. As the
profit target was not quite met they each received
53.6% of salary split between cash and deferred equity
based on the profit element. They also received 22.5%
of salary based on the WINcard measures, with four
green scores, one amber score and one red score.
Patrick Dempsey’s awards were based on a combination
of Group and Whitbread Hotels & Restaurants targets.
He received 38% of salary based on the profit element
and 22.5% based on the WINcard element.
Timeline for the Annual Incentive Scheme
1
2
3
4
Beginning of year 1
End of year 1
Financial and non-financial
targets set (with the
target for profit being
consistent with budgeted
performance and stretch
being significantly
above budget)
• Performance measured
against targets
• Immediate cash award
• Award of deferred
shares
End of year 4
Release of deferred
shares (subject
to continued
employment)
39
Long Term Incentive Plan (LTIP)
While the Annual Incentive Scheme rewards sustainable
performance in the prior year and a long-term
commitment to the Company, the LTIP is all about the
future. Approximately 40 executives are invited to
participate in the LTIP.
Executives receive an annual grant of shares under the
LTIP, based on a percentage of their salary, which will
then vest three years later in the event that performance
conditions are met over the three-year period. In 2011,
the awards made were subject to an EPS performance
condition for half of the award and a Total Shareholder
Return (TSR) condition for the other half as described
on page 44.
Proposed changes to the LTIP
The Committee has agreed that it would be appropriate
to make changes to the LTIP for future awards in order
to align them more closely with the Company’s strategic
aims (as shown at the foot of this page). The proposed
changes, which are subject to approval at the AGM are
as follows:
• Independently operating EPS (underlying basic EPS)
and TSR measures would be replaced by EPS and
ROCE measures operating on a matrix basis;
• the ROCE measure would operate as both a hurdle
and a multiplier to a base award generated by
performance against the EPS measure;
• up to 75% of the award would be dependent on
EPS growth over the three-year performance period
subject to a satisfactory return on capital performance;
• ROCE would be used as a multiplier on a straight-line
sliding scale basis to increase the EPS element by up
to a further third;
• no element of the award would vest if a minimum
threshold level of ROCE in 2014/15 (final year of
the 2012 award) of 12% is not achieved; and
• the Committee will have the discretion to reduce the
vesting of awards if it believes that performance has not
been sufficiently value-enhancing during the period.
We believe it is the combination of the two measures
that will incentivise executives to deliver on the stretching
growth plans and create significant long-term shareholder
value. No changes to the quantum of awards is proposed.
Proposed awards for 2012
If the proposals are approved at the AGM, grants to
senior executives, including the executive directors,
will be made shortly after the meeting.
ROCE 2014/15
Threshold
Sliding scale
Maximum
11%
0%
0%
0%
0%
0%
12%
13%
14%
15%
16%
16.6%
0%
0%
0%
0%
0%
19%
19%
20%
22%
24%
37%
37%
40%
44%
47%
56%
56%
61%
66%
71%
0%
25%
50%
75%
75%
75%
82%
89%
96%
100%
EPS
Growth
above
RPI per
annum
<4%
Threshold 4%
Sliding
Scale
6%
8%
Maximum 10%
It is intended that Patrick Dempsey would receive an
award to the value of 100% of his salary, with Andy
Harrison and Christopher Rogers receiving awards to
the value of 125% of their salaries.
Awards vesting in 2012
The LTIP awards made to executives in 2009 were subject
to independently operating performance conditions as
set out in the table, which also outlines the outcome:
Performance
conditions
(each applicable
to half of the
total award)
TSR growth against
selected FTSE 51-150
constituents – median
(25% vests) to upper
quartile (100% vests).
2011/12 EPS – less
than 92p, nil vesting;
92p, 25% vests; 107p
or more, 100% vests;
and between 92p
and 107p, pro-rating
applies between 25%
and 100% vesting.
Outcome
Whitbread
was ranked
14th out of 56
representing
upper quartile
performance.
The 2011/12
EPS was
134.35p
representing
growth of
RPI + 9.6%
per annum.
Proportion
of relevant half
of the award
vesting
100%
100%
As a result, 100% of the shares awarded under the
2009 LTIP have vested. The awards vesting to the
executive directors are as follows:
The matrix at the top of the page shows the potential
vesting under the proposed 2012 LTIP awards based
on the new approach:
Patrick Dempsey
Christopher Rogers
Link between strategy and LTIP reward
Number of
shares vested
54,458
60,612
Strategy
LTIP reward
Whitbread’s strategy is to invest in growing its
leading brands, Premier Inn and Costa. Last year
we set milestones for the next five years which
will take Premier Inn to at least 65,000 rooms
and double the size of Costa to 3,500 stores.
This will involve substantial capital commitment
as we continue to grow in the UK and develop
in our international markets.
To reward executives for those elements of
performance responsible for the achievement of
the strategy and therefore clearly realign incentives
towards delivering earnings growth and strong
returns on capital. There are no proposals to change
the ongoing award levels of the plan which are
currently set at a maximum of 125% of salary for
executive directors. Details of the changes can
be found above.
40
Remuneration reportwhitbread.co.uk
Other information relating to executive directors
Pension
In addition to the main elements of the remuneration
package shown on page 38, executive directors are
entitled to a Company pension contribution of 25% of
salary, with these contributions increasing by a further
2.5% of salary after each of five and ten years’ service.
Alternatively, executives can elect to receive a monthly
amount in cash (less an amount equal to the employer’s
national insurance contribution) in lieu of the pension
contribution. Currently, Andy Harrison and Christopher
Rogers have elected to receive a cash payment, while
Patrick Dempsey receives a pension contribution and
a cash supplement representing the balance over and
above the £50,000 annual allowance set by HMRC for
pension contributions.
Other benefits
All executive directors 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.
Shareholding guidelines
Executive directors are required to build and hold a
shareholding equal to 100% of salary within five years
of appointment, whilst other senior executives are
expected to reach a holding to the value of 50% of
salary. The table below shows the holdings of executive
directors as at 1 March 2012:
Value of
shareholding at
1 March 2012 % of salary
£421,025
£3,223,958
£843,500
100%
449%
167%
Patrick Dempsey
Andy Harrison
Christopher Rogers
Terms of executive directors’ service contracts
The key terms of the contracts of the executive
directors are as follows:
• Notice period – six months by the director and
12 months by the Company;
• Termination payment – under none of the contracts
is any specific compensation payable on termination
of employment. For Andy Harrison, the Company
may terminate his contract by paying his salary,
together with pension contributions (or cash in lieu
of pension) and benefits for a 12-month period,
with payments ceasing to the extent he obtains
another remunerated post. For Patrick Dempsey,
the Company may, if it chooses, terminate his
employment by making a payment of 140% of
basic salary;
• Sickness – full salary for a maximum of 12 months
in any three-year period or for a maximum of nine
consecutive months; and
• Non-compete – for six months after leaving.
The dates of the executive directors’ service contracts
are as follows:
Patrick Dempsey
Andy Harrison
Christopher Rogers
22 June 2009
3 March 2010
19 May 2005
Executive directors – fees from external directorships
The executive directors are entitled to retain fees from
any external directorships. Christopher Rogers is a
non-executive director of HMV Group plc and received
£45,000 during the year as a result of that directorship.
Neither Andy Harrison nor Patrick Dempsey received
any fees from external directorships.
The Chairman and the non-executive directors
Anthony Habgood has been Chairman since August
2005 and, during his time as Chairman, he has overseen
a very successful period in Whitbread’s history. The
fee paid to him had remained unchanged since 2007.
In July 2011 the Remuneration Committee met without
Anthony to discuss his fee and determined that it
would be appropriate to increase his fee to £325,000
with effect from 1 August 2011. The date of his letter
of appointment is 14 April 2005.
Also in July 2011, the Board met (excluding the
non-executive directors) to discuss the ongoing
appropriateness of the fee structure for non-executive
directors. This structure had also remained unchanged
since 2007. It was agreed that, whilst the base fee
continued to be appropriate, the fee for being the
Chairman of the Audit or Remuneration Committees
would increase from £10,000 to £15,000 and a new
fee would be introduced of £5,000 for being a member
of those two committees.
As a result, the non-executive director fees were
changed with effect from 1 August 2011 and the current
position is shown in the table at the foot of this page.
Neither the Chairman nor any of the non-executive
directors has a service contract. The dates of their
letters of appointment, all of which are available for
inspection at the Company’s registered office, are also
shown in the table below.
Name
Richard Baker
Wendy Becker
Ian Cheshire
Susan Hooper
Simon Melliss
Susan Taylor Martin
Stephen Williams
Base Fee
Additional Fees
Total Fees
Date of
appointment letter
£55,000
£55,000
£55,000
£55,000
£55,000
£55,000
£55,000
£10,000
£10,000
£15,000
£5,000
£15,000
£5,000
£15,000
£65,000
4 September 2009
£65,000
£70,000
£60,000
£70,000
£60,000
£70,000
17 January 2008
21 January 2011
3 August 2011
23 March 2007
3 August 2011
25 April 2008
41
Employee Share Ownership Trust (ESOT)
The Company funds an ESOT to enable it to acquire
and hold shares for the Annual Incentive Scheme, the
LTIP and the matching share award made to Andy
Harrison on his appointment in 2010. In addition, the
Company transferred 143,000 shares from treasury
to the ESOT during 2011 to be utilised for the future
satisfaction of vested LTIP awards.
As at 25 April 2012, the ESOT held 942,938 shares.
The executive directors each have a technical interest
in these shares as potential beneficiaries of the Trust,
but no shares in the ESOT have been earmarked to
any individual. All dividends on shares in the ESOT are
waived by the trustee. During the period from 2 March
2012 to 25 April 2012, no director has exercised an
option to call for the transfer of shares from the ESOT.
Dilution limits
Whitbread’s share plans comply with recommended
guidelines on dilution limits and the Company has always
operated within these limits. The current Association
of British Insurers (‘ABI’) guidance on headroom limits
provide that overall dilution under all plans should not
exceed 10% over a ten-year period in relation to the
Company’s issued share capital, with a further limitation
of 5% in any ten-year period on executive plans.
Assuming none of the extant options lapse and will be
exercised, and having included all exercised options
as well as shares transferred from treasury in order to
settle LTIP awards, the Company has utilised 3.24% of
the 10% in ten years and 1.24% of the 5% in ten years in
accordance with the ABI guidance on dilution limits.
Signed and approved on behalf of the Board.
Share price information
The mid-market price of a Whitbread PLC ordinary share
on 1 March 2012 was 1687p (3 March 2011: 1708p). The
highest and lowest price paid for ordinary shares during
the year were 1737p and 1409p respectively.
Changes since 1 March 2012
There have been no changes in the directors’ interests
in ordinary shares since 1 March 2012.
Ian Cheshire
Chairman, Remuneration Committee
25 April 2012
Directors’ remuneration for the year to 1 March 2012 (audited information)
The table below shows a breakdown of the various elements of pay received by the directors for the period
from 4 March 2011 to 1 March 2012.
Basic
salary
£
Chairman
Anthony Habgood
314,583
Cash in lieu
of pension
Taxable
benefits
Awards under the
Annual Incentive Scheme*
Total excluding pension
contributions
Cash Deferred equity
2011/12
2010/11
£
–
£
–
£
–
£
–
£
£
314,583
300,000
Executive directors
Patrick Dempsey
Andy Harrison
Alan Parker
416,667
714,583
–
52,358
20,549
129,834
124,399
743,807
1,024,908
157,095
26,237
262,454
283,536
1,443,905
1,004,115 (1)
–
–
–
–
–
1,924,482 (1)
Christopher Rogers
502,250
121,456
22,445
184,620
199,438
1,030,209
1,393,571
Non-executive directors
Richard Baker
Wendy Becker
Ian Cheshire
Philip Clarke
Susan Hooper
Simon Melliss
Susan Taylor Martin
Stephen Williams
60,833 (5)(6)
60,833 (5)(6)
67,917 (3)
–
27,500 (1)
67,917 (2)
9,167 (1)
67,917 (4)(6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60,833
60,833
67,917
55,000
55,000
5,417 (1)(3)
–
65,000 (3)
27,500
67,917
9,167
67,917
–
65,000 (2)
–
65,000 (4)
Total emoluments for the year were £3,894,588. The total for 2010/11 was £5,957,493. The totals shown in this
table intentionally differ from those shown for the executive directors on page 36 as they do not include a
value for vested share awards, but do include deferred shares awarded in 2012, but not due to vest until 2015.
* The performance-related awards include a cash element and a
deferred shares element as described on page 39. In addition, it is
anticipated that Andy Harrison, Patrick Dempsey and Christopher
Rogers will receive awards under the Long Term Incentive
Plan (LTIP) to the value of £896,875, £426,300 and £630,875
respectively following the AGM. Subject to shareholder approval
at the AGM the LTIP awards will be conditional on the achievement
of a combined EPS/ROCE target described on page 38.
42
1. Fees/salary for part-year.
2.
3.
4.
5.
6.
Includes fees as Chairman of the Audit Committee.
Includes fees as Chairman of the Remuneration Committee.
Includes fees as Senior Independent Director.
Includes fees as member of the Audit Committee.
Includes fees as member of the Remuneration Committee.
Remuneration reportwhitbread.co.uk
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 the Company’s
pension arrangements.
Andy Harrison and Christopher Rogers elected
to receive a cash supplement in lieu of pension
contributions. Patrick Dempsey receives employer
contributions, but following the introduction of
tax reforms in April 2011 limiting the tax allowable
contribution to £50,000, he now receives the balance
of his entitlement as a cash supplement. The executive
directors received the following cash supplements
during the year:
Patrick Dempsey
Andy Harrison
Christopher Rogers
Amount of cash
supplement
£52,358
£157,095
£121,456
Patrick Dempsey received employer contributions of
£55,000 (2010/11: £110,000) into the defined contribution
section of the Whitbread Group Pension Fund.
Annual Incentive Scheme (the ‘Scheme’) (audited information)
Deferred share awards held by the executive directors under the Scheme at the beginning and end of the year,
and details of awards vesting during the year and their value, are as follows:
Name
Patrick Dempsey
Andy Harrison
Christopher Rogers
Year of
award
Balance at
04/03/2011 Awarded Lapsed Vested
Balance at
01/03/2012
Release
date
Market
price at
award
Date award
vested
Market
price at
vesting
Monetary
value of
vested
award
2009
2010
2011
2012
2011
2012
2009
2010
2011
2012
26,353
26,210
19,698
–
–
–
–
7,291
72,261
7,291
18,281
–
–
16,618
18,281 16,618
36,354
29,579
25,316
–
–
–
–
11,689
91,249
11,689
– 26,353
–
–
734.5p 01/03/2012
1686.5p
£444,446
–
–
–
–
–
–
–
–
–
–
26,210 01/03/2013
1414.8p
19,698 01/03/2014
1787.4p
7,291 01/03/2015
1687.0p
26,353
53,199
–
–
–
18,281 01/03/2014
1787.4p
16,618 01/03/2015
1687.0p
34,899
–
–
–
–
–
–
–
–
–
–
––
–
–
£444,446
–
–
–
– 36,354
– 01/03/2012
734.5p 01/03/2012
1686.5p
£613,114
–
–
–
–
–
–
–
29,579 01/03/2013
1414.8p
25,316 01/03/2014
1787.4p
11,689 01/03/2015
1687.0p
–
–
–
–
–
–
–
–
–
36,354
66,584
£613,114
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 at that date. If the director ceases to be an employee of Whitbread
prior to the release date by reason of redundancy, 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.
43
Long Term Incentive Plan (the ‘Plan’) (audited information)
Potential share awards held by the executive directors under the Plan at the beginning and end of the year,
and details of awards vesting during the year and their value, are as follows:
04/03/2011 Awarded
Lapsed
Vested 01/03/2012
Conditional
award
granted
Performance
period
concludes
Market
price at
award
Date
vested
award
exercised
Price at
exercise
Monetary
value of
exercised
award
Patrick
Dempsey
Andy
Harrison*
Christopher
Rogers
14,894
54,458
28,272
22,378
120,002
86,584
48,953
135,537
33,423
60,612
39,334
34,267
167,636
–
–
–
–
–
–
–
–
–
–
–
–
–
2,622
12,272
–
01/03/2008
28/02/2011
1256.6p 12/05/2011 1605.96p
£197,083
–
–
–
–
–
–
54,458
01/03/2009
29/02/2012
734.5p
28,272
01/03/2010
28/02/2013
1414.8p
22,378
01/03/2011
28/02/2014
1787.4p
2,622
12,272
105,108
–
–
–
–
86,584
01/03/2010
28/02/2013
1414.8p
–
–
48,953
01/03/2011
28/02/2014
1787.4p
135,537
–
–
–
–
–
–
–
–
–
–
–
–
–
£197,083
–
–
–
5,883
27,540
–
01/03/2008
28/02/2011
1256.6p 12/05/2011 1605.96p
£442,281
–
–
–
–
–
–
60,612
01/03/2009
29/02/2012
734.5p
39,334
01/03/2010
28/02/2013
1414.8p
34,267
01/03/2011
28/02/2014
1787.4p
5,883
27,540
134,213
–
–
–
–
–
–
–
–
–
£442,281
The aggregate value of exercised awards was £639,364 (2010/11: £1,110,362).
* As explained in the 2010/11 Annual Report, under the terms of Andy Harrison’s appointment, he received a matching award over 67,468
shares on 1 March 2011. The award is subject to the satisfaction of performance conditions and the continued retention of the same
number of shares previously purchased by Andy. The performance conditions are the same as those for the general 2010 LTIP award,
except that the performance period runs for three years up to the end of the 2013/14 financial year and that there is no vesting at
median performance.
LTIP performance conditions – past awards
Performance metrics
TSR condition
EPS condition
2009 award
50% TSR and 50% EPS TSR growth against selected FTSE 51–150
constituents – median (25% vests) to
upper quartile (100% vests)
2008, 2010
and 2011 awards
50% TSR and 50% EPS TSR growth against selected 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
EPS growth must be at least equal to or exceed RPI +
4% p.a. (25% vests) to RPI + 10% p.a. (100% vests)
LTIP performance conditions – future awards
Details of the performance conditions proposed for the 2012 awards can be found on page 38.
Share options (audited information)
Executive directors may participate in the Company’s Savings-related Share Option Scheme (the ‘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 Scheme if a director ceases to be employed by
the Company.
At 1 March 2012 the directors held the following share options under the Scheme, with the latest exercise date
being July 2016. Savings-related share options have a six-month exercise period.
Number
Date of grant
Exercise price
Exercise date
Last exercise date
1,076
1,076
672
672
1,076
1,076
03/12/2010
1414.0p
29/02/2016
31/07/2016
(1,076 at 03/03/2011)
02/12/2011
1339.2p
28/02/2015
31/07/2015
(nil at 03/03/2011)
03/12/2010
1414.0p
29/02/2016
31/07/2016
(1,076 at 03/03/2011)
Patrick Dempsey
Total
Andy Harrison
Total
Christopher Rogers
Total
44
Remuneration reportwhitbread.co.uk 2011/12
Consolidated
Accounts
Consolidated accounts 2011/12
46 Directors’ responsibility for
the consolidated financial
statements/audit report
48 Consolidated income statement
49 Consolidated statement
of comprehensive income
50 Consolidated statement
of changes in equity
51 Consolidated balance sheet
52 Consolidated cash flow statement
53 Notes to the consolidated
financial statements
45
Directors’ responsibility for the
consolidated financial statements/
audit report
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 Group
financial statements comply with the
Companies Act 2006 and Article 4
of the IAS Regulation. They are also
responsible for safeguarding the
assets of the Group and hence, taking
reasonable steps for the prevention
and detection of fraud and other
irregularities.
Responsibility statement
We confirm on behalf of the Board
that, to the best of our knowledge:
• the financial statements, prepared
in accordance with IFRSs as
adopted by the European Union,
give a true and fair view of the
assets, liabilities, financial position
and profit of the Group taken as a
whole; and
• the Directors' report includes a
fair review of the development
and performance of the business
and the position of the Group
taken as a whole, together with a
description of the principal risks
and uncertainties that they face.
By order of the Board
Andy Harrison
Chief Executive Finance Director
Christopher Rogers
Statement of directors’
responsibilities
The directors are responsible for
preparing the Annual Report and the
consolidated financial statements in
accordance with applicable company
law and those International Financial
Reporting Standards (IFRSs) 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 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 IFRSs
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.
46
whitbread.co.ukConsolidated accounts
Governance Statement on pages
28 to 34 in the Annual Report and
Accounts 2011/12 relating to the
Company’s compliance with the
nine provisions of the UK Corporate
Governance Code specified for our
review; and
• certain elements of the report
to shareholders by the Board on
directors' remuneration.
Other matter
We have reported separately on
the parent company financial
statements of Whitbread PLC for
the year ended 1 March 2012 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
London
25 April 2012
Independent auditor’s report to
the members of Whitbread PLC
We have audited the Group financial
statements of Whitbread PLC
for the year ended 1 March 2012
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
on page 46, 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 and express an opinion
on 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 reasonableness of
significant accounting estimates
made by the directors; and the
overall presentation of the financial
statements. In addition, we read
all the financial and non-financial
information in the Annual Report
to identify material inconsistencies
with the audited financial statements.
If we become aware of any
apparent material misstatements
or inconsistencies we consider the
implications for our report.
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 1 March
2012 and of its profit for the year
then ended;
• have been properly prepared in
accordance with IFRSs as adopted
by the European Union; and
• have been prepared in accordance
with the requirements of the
Companies Act 2006 and Article 4
of the IAS Regulation.
Opinion on other matter prescribed
by the Companies Act 2006
In our opinion the information given
in the Directors’ report for the
financial year for which the Group
financial statements are prepared
is consistent with the Group
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.
Under the Listing Rules we are
required to review:
• the directors’ statement, set out
on page 27, in relation to going
concern; and
• the part of the Corporate
47
Year ended 1 March 2012
Consolidated income
statement
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
Amortisation of acquired intangible assets
IAS 19 Income Statement charge for pension finance cost
Profit before tax and exceptional items
Exceptional items
Profit before tax
Underlying tax expense
Exceptional tax and tax on non GAAP adjustment
Tax expense
Profit for the year
Attributable to:
Parent shareholders
Non-controlling 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
48
Notes
3, 4
5
16
17
4
8
8
6
6
6
6
9
Year to 1 March
2012
£m
Year to 3 March
2011
£m
1,778.0
(288.4)
1,489.6
(969.2)
(174.7)
345.7
(0.7)
0.9
345.9
(43.4)
3.3
305.8
320.1
(2.6)
(14.0)
303.5
2.3
305.8
(84.4)
44.6
(39.8)
266.0
267.3
(1.3)
266.0
1,599.6
(237.1)
1,362.5
(886.6)
(166.0)
309.9
(2.8)
0.8
307.9
(38.1)
1.4
271.2
287.5
(0.4)
(11.5)
275.6
(4.4)
271.2
(83.7)
34.6
(49.1)
222.1
223.3
(1.2)
222.1
Year to 1 March
2012
p
Year to 3 March
2011
p
151.53
151.19
127.38
127.09
134.35
134.05
127.16
126.73
111.79
111.41
116.75
116.35
whitbread.co.ukConsolidated accounts
Year ended 1 March 2012
Consolidated statement of
comprehensive income
Profit for the year
266.0
222.1
Notes
Year to 1 March
2012
£m
Year to 3 March
2011
£m
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit pension schemes
Current tax
Deferred tax
Deferred tax: change in rate of corporation tax
Items that may be reclassified subsequently to profit or loss:
Net (loss)/gain on cash flow hedges
Deferred tax
Deferred tax: change in rate of corporation tax
Exchange differences on translation of foreign operations
Other comprehensive loss for the year, net of tax
Total comprehensive profit for the year, net of tax
Attributable to:
Parent shareholders
Non-controlling interest
32
9
9
9
9
9
(192.1)
22.2
27.9
(8.2)
(150.2)
(1.0)
0.3
(0.6)
(1.3)
(0.6)
(152.1)
113.9
115.2
(1.3)
113.9
(51.4)
10.9
3.5
(3.4)
(40.4)
8.6
(2.4)
(0.3)
5.9
(0.8)
(35.3)
186.8
188.0
(1.2)
186.8
49
Year ended 1 March 2012
Consolidated statement
of changes in equity
Capital
Currency
Share
capital premium
(note 28) (note 29)
£m
Share redemption Retained translation Treasury
earnings
reserve
reserve
(note 29) (note 29) (note 29)
£m
reserve
(note 29)
£m
£m
£m
£m
Merger Hedging
reserve reserve
(note 29) (note 29)
£m
£m
Non-
controlling
interest
£m
Total
£m
Total
equity
£m
At 4 March 2010
146.4 49.1
12.3 3,006.8
5.1
(222.0) (1,855.0) (35.7) 1,107.0
1.0 1,108.0
223.3
–
8.6
(35.3)
8.6 188.0
(1.2) 222.1
(35.3)
(1.2) 186.8
–
Profit for the year
Other comprehensive income
Total comprehensive income
Ordinary shares issued
Cost of ESOT shares
purchased
Loss on ESOT shares
issued to participants
Accrued share-based
payments
Deferred tax on
share-based payments
Rate change on historic
revaluation
Equity dividends
Scrip dividends
Additions
At 3 March 2011
Profit for the year
Other comprehensive income
Total comprehensive income
Ordinary shares issued
Cost of ESOT shares
purchased
Loss on ESOT shares
issued to participants
Accrued share-based
payments
Tax on share-based payments
Rate change on
historic revaluation
Equity dividends
Scrip dividends
Additions
At 1 March 2012
–
–
–
–
–
–
0.2
2.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
223.3
(43.1)
180.2
–
(0.8)
(0.8)
–
–
(6.2)
7.7
1.2
–
–
–
–
–
–
–
–
–
(5.1)
6.2
–
–
–
–
–
–
–
–
–
–
–
2.3
–
–
–
–
(5.1)
–
7.7
1.2
–
–
0.4
–
–
–
(0.4)
–
147.0 50.8
–
–
–
–
0.6
(69.4)
7.9
–
12.3 3,128.8
–
–
–
–
0.6
(69.4)
7.9
–
4.3 (220.9) (1,855.0) (27.1) 1,240.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
3.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
267.3
(150.5)
116.8
–
(0.6)
(0.6)
–
–
(5.8)
7.9
1.0
–
–
–
–
–
–
–
–
–
(5.2)
5.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.4
(5.2)
–
7.9
1.0
–
–
0.1
–
–
–
(0.1)
–
147.5 53.7
–
–
–
–
1.3
(89.6)
2.6
–
12.3 3,163.0
–
–
–
–
1.3
(89.6)
2.6
–
3.7 (220.3) (1,855.0) (28.1) 1,276.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.3
(5.1)
–
7.7
1.2
0.6
–
(69.4)
–
7.9
–
2.0
2.0
1.8 1,242.0
–
–
–
–
–
3.4
(5.2)
–
7.9
1.0
1.3
–
(89.6)
–
2.6
–
5.9
5.9
6.4 1,283.2
–
267.3
(1.0) (152.1)
(1.0) 115.2
(1.3) 266.0
–
(152.1)
(1.3) 113.9
50
whitbread.co.ukConsolidated accounts
At 1 March 2012
Consolidated
balance sheet
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment in joint ventures
Investment in associate
Trade and other receivables
Other financial assets
Current assets
Inventories
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
Non-controlling interest
Total equity
Andy Harrison
Chief Executive
Christopher Rogers
Finance Director
25 April 2012
Notes
13
14
16
17
20
18
19
20
21
14
22
24
26
9
27
22
24
26
9
32
27
28
29
29
29
29
29
1 March
2012
£m
206.6
2,580.5
18.7
1.6
3.6
–
2,811.0
23.1
85.0
40.3
148.4
0.6
2,960.0
14.2
10.7
6.6
15.4
321.3
368.2
530.4
37.1
20.1
105.9
598.7
16.4
1,308.6
1,676.8
1,283.2
147.5
53.7
12.3
3,163.0
3.7
(2,103.4)
1,276.8
6.4
1,283.2
3 March
2011
£m
204.3
2,415.9
17.4
1.4
2.9
0.9
2,642.8
18.4
84.3
38.2
140.9
4.0
2,787.7
4.2
15.4
16.3
15.4
280.2
331.5
521.9
29.8
16.6
142.7
488.0
15.2
1,214.2
1,545.7
1,242.0
147.0
50.8
12.3
3,128.8
4.3
(2,103.0)
1,240.2
1.8
1,242.0
51
Year ended 1 March 2012
Consolidated cash
flow statement
Profit for the year
Adjustments for:
Notes
Year to 1 March
2012
£m
Year to 3 March
2011
£m
266.0
222.1
Taxation charged on total operations
Net finance cost
Total loss from joint ventures
Total income from associate
(Profit)/loss on disposal of property, plant and equipment
and property reversions
Loss on disposal of business
Depreciation and amortisation
Impairments of financial assets, property, plant and equipment
and intangibles
Share-based payments
Other non-cash items
Cash generated from operations before working capital changes
9
8
16
17
6
6
13, 14
13, 14, 18
31
Increase in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Payments against provisions
Pension payments
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 from disposal of property, plant and equipment
Business combinations, net of cash acquired
Capital contributions and loans 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 ESOT shares
Capital contributions from non-controlling interests
Increase/(decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of 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
52
24
32
13
10
12
23
39.8
40.1
0.7
(0.9)
(14.6)
–
109.7
11.3
7.9
7.6
467.6
(4.7)
(0.7)
25.3
(9.2)
(95.4)
382.9
(29.4)
(31.3)
322.2
(305.7)
(2.2)
58.7
–
(1.6)
0.7
2.6
(247.5)
3.4
(5.2)
5.5
13.5
156.4
(150.6)
(5.4)
(87.0)
(69.4)
5.3
34.2
0.1
39.6
39.6
0.7
40.3
49.1
36.7
2.8
(0.8)
0.4
2.4
101.2
4.6
7.7
(0.1)
426.1
–
8.8
(10.2)
(9.5)
(8.9)
406.3
(25.7)
(34.5)
346.1
(199.6)
(2.6)
3.1
(59.5)
(3.4)
0.6
1.4
(260.0)
2.3
(5.1)
–
(25.5)
101.8
(104.1)
(1.1)
(61.5)
(93.2)
(7.1)
41.5
(0.2)
34.2
34.2
4.0
38.2
whitbread.co.ukConsolidated accounts
At 1 March 2012
Notes to the consolidated
financial statements
1 Authorisation of financial statements
The consolidated financial statements of Whitbread PLC for the year ended 1 March 2012 were authorised for issue by
the Board of Directors on 25 April 2012. 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.
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 3 March 2011,
except for the definition of underlying profit which is noted in the policy on non GAAP performance measures, the
presentation of the Consolidated Statement of Comprehensive Income noted below and the adoption of the following
new Standards and Interpretations that are applicable for the year ended 1 March 2012.
In the current year, the directors have elected to voluntarily change the presentation of the Consolidated Statement
of Comprehensive Income to present those items of other comprehensive income which could be reclassified to profit
or loss at a future point separately from those items which will never be reclassified. The directors consider that the
change provides additional information and allows users to more easily identify the potential impact of items within
the Consolidated Statement of Comprehensive Income. Comparatives have been restated accordingly. This change
is presentational only and has no impact on the Group’s reported income in the current or prior period.
IAS 24 Related Party Disclosures (Amendment)
The amended standard clarifies the definition of a related party to simplify the identification of such relationships and
to eliminate inconsistencies in its application. There is no impact on the Group's financial position or performance.
IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment)
The amendment provides guidance on assessing the recoverable amount of a net pension asset. It permits an entity
to treat the prepayment of a minimum funding requirement as an asset. The adoption of this interpretation has had
no effect on the financial statements 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 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.
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 fair value of consideration 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.
53
At 1 March 2012
Notes to the consolidated
financial statements
2 Accounting policies (continued)
Intangible assets (continued)
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 of goodwill if the asset is separable or arises from contractual or other
legal rights, and its fair value can be measured reliably.
Amortisation is calculated on a straight-line basis over the estimated life of the asset as follows:
• Trading licences have an infinite life
• Brand assets are amortised over periods of two to 15 years
• IT software and technology are amortised over periods of three to 10 years
• The asset in relation to acquired customer relationships is amortised over 15 years
• Franchise fee and brand name agreements are amortised over periods 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 and long leasehold 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 whenever 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 straight-line
basis over its remaining useful life.
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.
54
whitbread.co.ukConsolidated accounts
2 Accounting policies (continued)
Impairment (continued)
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 the 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 the cost 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 order for this measure to reflect the underlying performance of the Group the measure has been refined to include
the amortisation on acquired intangibles.
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 on the same basis. The term underlying profit is not defined under IFRSs 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:
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 also
includes the profit or loss on disposal of property, plant and equipment, property reversions, profit or loss on the sale
of a business, impairment and exceptional interest and tax.
55
At 1 March 2012
Notes to the consolidated
financial statements
2 Accounting policies (continued)
IAS 19 Income Statement finance charge/credit for defined benefit pension schemes
Underlying profit excludes the finance cost/revenue element of IAS 19.
Amortisation charge on acquired intangible assets
Underlying profit excludes the amortisation charge on acquired intangible assets.
Taxation
The tax impact of the above items is also excluded in arriving at underlying earnings.
Foreign currency translation
Monetary assets and liabilities denominated 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. Under IFRIC 13, a portion of revenue equal to the fair
value of the reward earned under the 'Great Night Giveaway' scheme is deferred until the reward is recognised.
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. Under IFRIC 13, a portion of revenue
equal to the fair value of the reward points earned under Costa loyalty card transactions is deferred until those points
are redeemed.
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.
56
whitbread.co.ukConsolidated accounts
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
Equity-settled 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 or non-vesting 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.
Cash-settled transactions
The cost is fair valued at grant date and expensed over the period until the vesting date with a recognition of
a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the
settlement date, with changes in fair value recognised in profit or loss for the period.
Tax
The income tax charge represents both the income tax payable, based on profits for the year, and deferred
income tax.
Deferred income tax is recognised in 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.
Income tax is charged or credited to other comprehensive income if it relates to items that are charged or credited
to other comprehensive income. Similarly income tax is charged or credited directly to equity if it relates to items that
are charged or credited directly to equity. Otherwise income tax is recognised 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.
57
At 1 March 2012
Notes to the consolidated
financial statements
2 Accounting policies (continued)
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.
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. Fair value hedges hedge exposure to changes in the fair value of a recognised asset or liability
or an unrecognised firm commitment and include foreign currency swaps.
Hedge accounting is only used where, at the inception of the hedge, there is formal designation 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.
The change in fair value of a fair value hedging derivative is recognised in the income statement in finance costs.
The change in the fair value of the hedged asset or liability that is attributable to the hedged risk is also recognised
in the income statement within finance costs.
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.
58
whitbread.co.ukConsolidated accounts 2 Accounting policies (continued)
Derivative financial instruments (continued)
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. When a fair value hedge item is derecognised, the unamortised fair value is recognised immediately
in the income statement.
Borrowings
Borrowings are initially recognised at fair value of the consideration received net of any directly associated issue
costs. Borrowings are 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.
The main assumptions and sources of estimation uncertainty are outlined below:
An impairment test of tangible and intangible assets is undertaken each year on both an EBITDA multiple approach
and a discounted cashflow approach. Note 15 describes the assumptions used together with an analysis of the
sensitivity to changes in key assumptions.
Judgement involving estimates is used in determining the value of provisions carried for onerous contracts. This is
primarily based around assumptions on rent and property related costs for the period the property is vacant and then
assumptions over future rental incomes or potential reverse lease premiums paid. Note 24 provides details of the value
of the provision carried.
Defined benefit pension plans are accounted for in accordance with actuarial advice using the projected unit
credit method. Note 32 describes the assumptions used together with an analysis of the sensitivity to changes in
key assumptions.
The calculation of the Group’s total tax charge necessarily involves a degree of estimation and judgement in respect
of certain items whose 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.
Corporation tax is calculated on the basis of income before taxation, taking into account the relevant local tax rates
and regulations. For each operating entity, the current income tax expense is calculated and differences between the
accounting and tax base are determined, resulting in deferred tax assets or liabilities.
Assumptions are also made around the assets which qualify for capital allowances and the level of disallowable
expenses and this affects the income tax calculation. Provisions are also made for uncertain exposures which can
have an impact on both deferred and current tax.
A deferred tax asset shall be recognised for the carry forward of unused tax losses, pension deficits and unused tax
credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses
and unused tax credits can be utilised.
Detailed amounts of the carrying value of corporation and deferred tax can be found in note 9.
Standards issued by the International Accounting Standards Board (IASB) not effective for the current year and
not early 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:
IAS 1 Financial Statement Presentation – Presentation of Items of Other Comprehensive Income
The amendment provides guidance on the requirement for entities to group items presented in the Statement of
Other Comprehensive Income (OCI) on the basis of whether they can be reclassified to profit and loss subsequently.
This amendment results in a change in the format of the Statement of Other Comprehensive Income only and
becomes effective for annual periods beginning on or after 1 July 2012.
59
At 1 March 2012
Notes to the consolidated
financial statements
2 Accounting policies (continued)
IAS 19 Employee Benefits (Amendment)
The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing
the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and rewording.
The impact on the Group is on disclosure in the financial statements but there will also be an impact on the income
statement due to the change in interest rate used to calculate the return on assets. The amendment becomes effective
for annual periods beginning on or after 1 January 2013.
IAS 27 Separate Financial Statements (as revised in 2011)
As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries,
jointly controlled entities, and associates in separate financial statements. The Group does not present separate
financial statements and so there will be no impact. The amendment becomes effective for annual periods beginning
on or after 1 January 2013.
IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the new IFRS 11 and IFRS 12. IAS 28 has been renamed IAS 28 Investments in Associates and
Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition
to associates. As the Group already consolidates using the equity method this will have no impact on the financial
statements. The amendment becomes effective for annual periods beginning on or after 1 January 2013.
IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities
The amendment requires that, if financial assets and liabilities have the right of set off, (and we would account as
such) then disclosure is required to explain what asset has been derecognised and the reasons for doing so. In addition,
the amendment requires disclosures about the continuation of set off to enable the user to evaluate the nature of,
and risks associated with, the entity’s continuing involvement in those derecognised assets. The Group, under IAS
39, offsets assets and liabilities and therefore will be required to provide disclosure of this in the financial statements
going forward but there will be no impact on the Group's financial position or performance. The amendment becomes
effective for annual periods beginning on or after 1 January 2013.
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 9 as issued reflects the first phase of the IASB's work on the replacement of IAS 39 and applies to classification
and measurement of financial assets and financial liabilities as defined in IAS 39. In subsequent phases, the IASB will
address hedge accounting and impairment of financial assets. The completion of this project is expected over the
course of 2012. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement
of the Group’s financial assets, but will potentially have no impact on classification and measurements of financial
liabilities. The Group will quantify the effect in conjunction with the other phases, when issued, to present a
comprehensive picture. The amendment becomes effective for annual periods beginning on or after 1 January 2013.
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the
accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation – Special
Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose
entities. The Group has reviewed the current structure and does not believe that this will have any impact on the financial
statements. The amendment becomes effective for annual periods beginning on or after 1 January 2013.
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities – Non-monetary Contributions
by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate
consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method.
The application of this new standard will not impact the financial position of the Group as our investments are Joint
Ventures not Joint Arrangements and as such we account for under the equity method already. The amendment
becomes effective for annual periods beginning on or after 1 January 2013.
IFRS 12 Disclosure of Involvement with Other Entities
IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as
well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s
interests, where they are material, in subsidiaries, joint arrangements, associates and structured entities. The impact on
the Group is on disclosure in the financial statements only where summarised information may need to be provided.
The amendment becomes effective for annual periods beginning on or after 1 January 2013.
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change
when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS
when fair value is required or permitted. The Group will need to disclose how the fair value has been reached in the
financial statements. The amendment becomes effective for annual periods beginning on or after 1 January 2013.
60
whitbread.co.ukConsolidated accounts 3 Revenue
An analysis of the Group’s revenue is as follows:
Rendering of services
Royalties
Sale of goods
Revenue
2011/12
£m
755.1
21.0
1,001.9
1,778.0
2010/11
£m
698.6
16.2
884.8
1,599.6
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 accommodation and food
• Costa generates income from the operation of its branded, owned and franchised coffee outlets.
No operating segments have been aggregated to form the above reportable operating segments.
Management monitors the operating results of its strategic business units separately for the purpose of making
decisions about allocating resources and assessing performance. Segment performance is measured based on
underlying operating profit before exceptional items. Included within the unallocated and elimination columns in
the tables below are the costs of running the public company. The unallocated assets and liabilities are cash and
debt balances (held and controlled by the central treasury function), taxation, pensions, certain property, plant
and equipment, centrally held provisions and central working capital balances.
Inter-segment revenue is from Costa to the Hotels & Restaurants segment and is eliminated on consolidation.
Transactions were entered into on an arm’s length basis in a manner similar to transactions with third parties.
The following tables present revenue and profit information and certain asset and liability information regarding
business operating segments for the years ended 1 March 2012 and 3 March 2011.
Year ended 1 March 2012
Revenue
Revenue from external customers
Inter-segment revenue
Total revenue
Underlying operating profit before
exceptional items
Amortisation of acquired intangibles
Operating profit before exceptional items
Exceptional items:
Net gain/(loss) on disposal of property, plant
and equipment and property reversions
Net loss on disposal of property, plant and
equipment on joint ventures
Impairment of investment
Impairment
Impairment reversal
Operating profit of the Group, joint
ventures and associates
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
Hotels &
Restaurants
£m
1,239.3
–
1,239.3
295.6
–
295.6
25.1
–
–
(12.8)
2.8
310.7
2,603.0
–
2,603.0
(213.4)
–
(213.4)
2,389.6
Costa
£m
538.7
3.2
541.9
69.7
(2.6)
67.1
(0.5)
(0.2)
–
(0.9)
0.5
66.0
279.2
–
279.2
(63.9)
–
(63.9)
215.3
Unallocated
and elimination
£m
–
(3.2)
(3.2)
(19.9)
–
(19.9)
(10.0)
–
(0.9)
–
–
(30.8)
–
77.8
77.8
–
(1,399.5)
(1,399.5)
(1,321.7)
Total
operations
£m
1,778.0
–
1,778.0
345.4
(2.6)
342.8
14.6
(0.2)
(0.9)
(13.7)
3.3
345.9
(40.1)
305.8
(39.8)
266.0
2,882.2
77.8
2,960.0
(277.3)
(1,399.5)
(1,676.8)
1,283.2
61
At 1 March 2012
Notes to the consolidated
financial statements
4 Segment information (continued)
Year ended 1 March 2012
Other segment information
Income from associate
Loss from joint ventures
Capital expenditure:
Property, plant and equipment – cash basis
Property, plant and equipment – accruals basis
Intangible assets
Depreciation
Amortisation
Year ended 3 March 2011
Revenue
Revenue from external customers
Inter–segment revenue
Total revenue
Underyling operating profit before
exceptional items
Amortisation of acquired intangibles
Operating profit before exceptional items
Exceptional items:
Refund of VAT on gaming machine income
Net loss on disposal of property, plant and
equipment and property reversions
Impairment
Impairment reversal
Share of impairment of assets in joint ventures
Sale of business
Operating profit of the Group, joint
ventures and associates
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:
Property, plant and equipment – cash basis
Property, plant and equipment – accruals basis
Intangible assets
Depreciation
Amortisation
62
0.9
–
243.5
254.0
0.7
(78.0)
(1.5)
Hotels &
Restaurants
£m
1,177.3
–
1,177.3
283.4
–
283.4
4.6
–
(12.3)
7.9
–
–
283.6
2,473.6
–
2,473.6
(175.4)
–
(175.4)
2,298.2
0.8
(0.5)
168.6
177.4
0.6
(77.9)
(1.8)
Hotels &
Restaurants
£m
Costa
£m
Unallocated
and elimination
£m
Total
operations
£m
–
(0.7)
62.2
63.2
1.5
(27.0)
(3.2)
Costa
£m
422.3
2.7
425.0
50.5
(0.4)
50.1
–
(0.4)
(1.5)
1.3
(0.7)
(2.4)
46.4
230.5
–
230.5
(52.2)
–
(52.2)
178.3
–
(2.3)
31.0
30.2
2.0
(20.3)
(1.1)
–
–
–
–
–
–
–
0.9
(0.7)
305.7
317.2
2.2
(105.0)
(4.7)
Unallocated
and elimination
£m
Total
operations
£m
–
(2.7)
(2.7)
(22.1)
–
(22.1)
–
–
–
–
–
–
(22.1)
–
83.6
83.6
–
(1,318.1)
(1,318.1)
(1,234.5)
–
–
–
–
–
(0.1)
–
1,599.6
–
1,599.6
311.8
(0.4)
311.4
4.6
(0.4)
(13.8)
9.2
(0.7)
(2.4)
307.9
(36.7)
271.2
(49.1)
222.1
2,704.1
83.6
2,787.7
(227.6)
(1,318.1)
(1,545.7)
1,242.0
0.8
(2.8)
199.6
207.6
2.6
(98.3)
(2.9)
whitbread.co.ukConsolidated accounts
4 Segment information (continued)
Revenues from external customers are split geographically as follows:
United Kingdom*
Non United Kingdom
2011/12
£m
1,729.4
48.6
1,778.0
2010/11
£m
1,582.1
17.5
1,599.6
* United Kingdom revenue is revenue where the source of the supply is the United Kingdom. This includes Costa franchise income invoiced
from the UK.
Non-current assets** are split geographically as follows:
United Kingdom
Non United Kingdom
**Non-current assets exclude financial assets.
5 Group operating profit
This is stated after charging/(crediting):
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:
Revenue
Refund of VAT on gaming machine income1
Distribution costs
Net gain/(loss) on disposal of property, plant and equipment,
and property reversions2
Impairment of property, plant and equipment (note 15)
Impairment reversal (note 15)
2012
£m
2,769.2
41.8
2,811.0
2011
£m
2,610.9
31.0
2,641.9
2011/12
£m
2010/11
£m
108.3
2.8
8.1
119.2
8.6
127.8
(1.4)
4.7
105.0
233.4
475.9
0.2
0.3
0.2
0.1
0.6
95.4
4.8
6.2
106.4
7.8
114.2
(1.2)
2.9
98.3
207.5
437.9
0.1
0.3
0.2
0.2
0.7
2011/12
£m
2010/11
£m
–
4.6
14.6
(13.5)
3.3
4.4
(0.4)
(13.0)
9.2
(4.2)
63
At 1 March 2012
Notes to the consolidated
financial statements
6 Exceptional items and other non GAAP adjustments (continued)
Administrative expenses
Impairment of financial assets (note 18)
Impairment of other intangibles (note 15)
Sale of businesses3
Net loss on disposal of fixed assets in joint ventures
Share of impairment of fixed assets in joint ventures4
Exceptional interest:
Interest on VAT refunded1
Interest on exceptional tax5
Movement in discount on provisions6
Exceptional items before tax
Other non GAAP adjustments made to underlying profit before tax to arrive at
reported profit before tax:
Amortisation of acquired intangibles
IAS 19 Income Statement charge 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
Exceptional tax items – capital allowances claims7
Exceptional tax items – rolled over gains8
Deferred tax relating to UK tax rate change
Tax on non GAAP adjustment
2011/12
£m
2010/11
£m
(0.9)
(0.2)
–
(1.1)
(0.2)
–
3.1
–
–
(0.8)
(0.8)
2.3
(2.6)
(14.0)
(16.6)
(14.3)
(2.5)
16.6
9.2
17.0
4.3
44.6
–
(0.8)
(2.4)
(3.2)
–
(0.7)
(3.5)
0.7
(0.7)
(0.9)
(0.9)
(4.4)
(0.4)
(11.5)
(11.9)
(16.3)
(1.3)
7.6
16.7
8.4
3.2
34.6
1.
The £4.6m of VAT refunded had previously been charged on income from gaming machines operated in the restaurants of the Group.
HMRC refunded the amount paid, plus accrued interest of £0.7m, on the basis of a ruling that VAT may not be applicable on certain
types of gaming machine income. HMRC continues to appeal the ruling, but the Group does not consider it probable that an appeal
will be successful. Accordingly no provision for repayment has been made although a contingent liability is disclosed in note 30.
2. During the year a net gain of £25.6m was recognised on disposals of property, plant and equipment, the majority of which relates
to the sale and leaseback agreement for seven properties. In addition, a provision has been raised in relation to the properties that
reverted to Whitbread following difficulties with Southern Cross. Furthermore a worsening of the property market has led to a further
requirement of provision on the onerous contract portfolio.
3. Following a strategic review the Bulgarian and Czech businesses acquired as part of the Coffeeheaven acquisition were disposed of
as going concerns.
4. An impairment review of the Costa operating stores in Russia resulted in an impairment of 74.1m Roubles. This is a joint venture
partnership and hence the Group incurred a joint venture exceptional loss of £0.7m.
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. The interest arising from the unwinding of the discount rate within provisions is included in exceptional interest, reflecting the
exceptional nature of the provisions created.
7. Following the abolition of Industrial Buildings Allowances for hotel buildings, the Group reviewed and resubmitted prior year capital
allowance claims. These claims have now been agreed with HMRC.
8. Reduction in deferred tax liability on rolled over gains for differences between the tax deductible cost and accounts residual value of
the reinvestment assets.
64
whitbread.co.ukConsolidated accounts
7 Employee benefits expense
Wages and salaries
Social security costs
Pension costs
2011/12
£m
441.8
29.7
4.4
475.9
2010/11
£m
407.1
26.8
4.0
437.9
Included in wages and salaries is a share-based payments expense of £8.0m (2010/11: £7.8m), which arises from
transactions accounted for as equity-settled and cash-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
2011/12
No.
22,235
8,196
53
30,484
2010/11
No.
21,121
6,747
55
27,923
Excluded from the above are employees of joint ventures and associated undertakings.
Details of directors’ emoluments are disclosed in the Remuneration report on pages 35 to 44.
8 Finance (costs)/revenue
Finance costs
Bank loans and overdrafts
Other loans
Interest capitalised
Net pension finance cost (note 32)
Finance costs before exceptional items
Movement in discount on provisions (note 6)
Total finance costs
Finance revenue
Bank interest receivable
Other interest receivable
Impact of ineffective portion of cash flow and fair value hedges
Total finance revenue
2011/12
£m
2010/11
£m
(31.5)
(0.2)
3.1
(28.6)
(14.0)
(42.6)
(0.8)
(43.4)
0.4
2.2
2.6
0.7
3.3
(28.2)
(0.3)
2.8
(25.7)
(11.5)
(37.2)
(0.9)
(38.1)
0.2
1.2
1.4
–
1.4
65
At 1 March 2012
Notes to the consolidated
financial statements
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
Change in UK tax rate to 25% (2010/11: 27%)
Tax reported in the consolidated income statement
Consolidated statement of comprehensive income
Current tax:
Pensions
Deferred tax:
Cash flow hedge
Pensions
Change in UK tax rate to 25% (2010/11: 27%) – pension
Change in UK tax rate to 25% (2010/11: 27%) – cash flow hedges
Tax reported in other comprehensive income
2011/12
£m
79.1
(22.9)
56.2
6.6
(6.0)
(17.0)
(16.4)
39.8
2011/12
£m
(22.2)
(0.3)
(27.9)
8.2
0.6
(41.6)
2010/11
£m
81.9
(10.7)
71.2
1.8
(15.5)
(8.4)
(22.1)
49.1
2010/11
£m
(10.9)
2.4
(3.5)
3.4
0.3
(8.3)
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 1 March 2012 and 3 March 2011 respectively
is as follows:
Profit before tax as reported in the consolidated income statement
Tax at current UK tax rate of 26.17% (2011: 28.00%)
Effect of different tax rates in overseas companies
Effect of joint ventures and associate
Expenditure not allowable
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 previous years
Impact of change of tax rate on deferred tax balance
Tax expense reported in the consolidated income statement
The corporation tax balance is a liability of £15.4m (2011: liability of £15.4m).
2011/12
£m
305.8
80.0
3.0
(0.4)
3.1
(22.9)
3.2
(9.2)
(17.0)
39.8
2010/11
£m
271.2
76.0
1.9
0.6
5.2
(10.7)
(2.9)
(12.6)
(8.4)
49.1
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
66
Consolidated
balance sheet
Consolidated
income statement
2012
£m
62.8
163.3
226.1
(114.4)
(5.8)
(120.2)
105.9
2011
£m
104.9
138.2
243.1
(93.7)
(6.7)
(100.4)
142.7
2011/12
£m
(41.8)
26.4
(1.1)
0.1
(16.4)
2010/11
£m
(0.2)
(21.5)
(0.7)
0.3
(22.1)
whitbread.co.ukConsolidated accounts
9 Taxation (continued)
Total deferred tax liabilities released as a result of disposals during the year was £0.6m (2011: £nil).
The Group has incurred overseas tax losses which, subject to any local restrictions, can be carried forward and offset
against future taxable profits in the companies in which they arose. The Group carries out an annual assessment of the
recoverability of these losses and does not think it appropriate at this stage to recognise any deferred tax asset. If the
Group were to recognise these deferred tax assets in their entirety, profits would increase by £5.1m (2011: £4.9m).
Following the enactment of the Finance Act 2009, the Group considers that the receipts of unremitted earnings from
overseas entities would be exempt from UK tax and therefore the temporary difference in relation to unremitted
earnings is £nil.
Tax relief on total interest capitalised amounts to £0.8m (2011: £0.8m).
Factors affecting the tax charge for future years
The Finance Act 2011 reduced the main rate of UK corporation tax to 26% from 1 April 2011 and to 25% from 1 April
2012. The effect of the new rate is to reduce the deferred tax provision by a net £9.3m, comprising a credit of £17.0m
to the Income Statement, a charge of £8.8m to the Consolidated Statement of Comprehensive Income, and a reserves
movement of £1.1m.
In his budget of 21 March 2012, the Chancellor of the Exchequer announced an additional 1% reduction in the rate of
UK corporation tax, with effect from April 2012. Further changes to corporation tax are also proposed, to reduce the
main rate by 1% per annum to 22% by 1 April 2014. These changes had not been substantively enacted at the balance
sheet date and consequently are not included in these financial statements. The effect of these proposed reductions
would be to reduce the net deferred tax liability by £11.4m. Further tax changes are a reduction from 1 April 2012 in the
rate of capital allowances applicable to plant and machinery and to integral features from 20% to 18% and from 10% to
8% respectively.
10 Business combinations
There have been no acquisitions in the year.
Prior year business combinations
In 2010/11, Costa Limited acquired the entire issued share capital of Coffee Nation for a total consideration of
£59.5m paid in cash. Goodwill of £41.0m was recognised. There have been no adjustments to the provisional fair
values allocated and disclosed in the financial statements of 2010/11. The fair and book value of assets acquired in
2010/11 were:
Property, plant and equipment (note 14)
Inventories
Trade and other receivables
Deferred tax asset
Trade and other payables
Net assets
Intangible assets in relation to the acquired brand name
Intangible assets in relation to the acquired technology
Intangible assets in relation to the customer relationships
Deferred tax liability in relation to the above intangibles
Goodwill arising on acquisition
Book
value
£m
7.0
1.7
1.6
1.1
(2.3)
9.1
9.1
Fair value
to Group
£m
6.6
1.6
1.5
1.1
(2.8)
8.0
0.5
8.0
5.9
(3.9)
41.0
59.5
67
At 1 March 2012
Notes to the consolidated
financial statements
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 non–controlling 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 (2011: nil).
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
2011/12
million
176.4
0.4
176.8
2010/11
million
175.6
0.6
176.2
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 192.0m less 14.1m treasury shares held by Whitbread PLC and 0.9m held by the ESOT (2011: 191.4m
less 14.2m treasury shares held by Whitbread PLC and 0.9m 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
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 year1
Diluted for profit for the year
Diluted for profit before exceptional items for the year
Diluted for underlying profit for the year1
2011/12
£m
267.3
(2.3)
(40.3)
224.7
16.6
(4.3)
237.0
2011/12
pence
151.53
(1.30)
(22.85)
127.38
9.41
(2.44)
134.35
151.19
127.09
134.05
2010/11
£m
223.3
4.4
(31.4)
196.3
11.9
(3.2)
205.0
2010/11
pence
127.16
2.51
(17.88)
111.79
6.78
(1.82)
116.75
126.73
111.41
116.35
1The definition for underlying has been amended and therefore the prior year numbers have been recalculated to reflect this.
68
whitbread.co.ukConsolidated accounts
12 Dividends paid and proposed
2011/12
2010/11
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
Proposed for approval at Annual General Meeting:
Equity dividends on ordinary shares:
Final dividend for the current year
13 Intangible assets
pence per
share
33.25
17.50
1.18
1.28
pence per
share
28.35
11.25
1.60
1.01
£m
58.6
(1.5)
57.1
31.0
(1.1)
29.9
87.0
–
–
–
87.0
£m
49.7
(1.7)
48.0
19.7
(6.2)
13.5
61.5
–
–
–
61.5
33.75
59.7
33.25
58.6
Goodwill
£m
Brand
£m
Customer
relationships
£m
IT software
and
technology
£m
Other
£m
Total
£m
Cost
At 4 March 2010
Additions
Businesses acquired
At 3 March 2011
Additions
Transferred
At 1 March 2012
Amortisation and impairment
At 4 March 2010
Amortisation during the year
Impairment
At 3 March 2011
Amortisation during the year
Transfers
Impairment
At 1 March 2012
135.8
–
41.0
176.8
–
–
176.8
–
–
–
–
–
–
–
–
Net book value at 1 March 2012
Net book value at 3 March 2011
176.8
176.8
5.1
–
0.5
5.6
–
–
5.6
–
(0.4)
–
(0.4)
(0.6)
–
(0.2)
(1.2)
4.4
5.2
–
–
5.9
5.9
–
–
5.9
–
–
–
–
(0.4)
–
–
(0.4)
5.5
5.9
41.1
2.6
8.0
51.7
0.9
12.3
64.9
(34.0)
(2.3)
–
(36.3)
(3.6)
(7.3)
–
(47.2)
17.7
15.4
2.9
–
–
2.9
1.3
–
4.2
(0.9)
(0.2)
(0.8)
(1.9)
(0.1)
–
–
(2.0)
184.9
2.6
55.4
242.9
2.2
12.3
257.4
(34.9)
(2.9)
(0.8)
(38.6)
(4.7)
(7.3)
(0.2)
(50.8)
2.2
206.6
1.0
204.3
Included in the amortisation for the year is the amortisation relating to acquired intangibles amounting to £2.6m
(2010/11: £0.4m).
69
At 1 March 2012
Notes to the consolidated
financial statements
13 Intangible assets (continued)
The carrying amount of goodwill allocated by segment is presented below:
Hotels & Restaurants
Costa
Total
2012
£m
112.6
64.2
176.8
2011
£m
112.6
64.2
176.8
The carrying amount of goodwill at 1 March 2012 is comprised of £112.6m for Hotels & Restaurants and £64.2m for
Costa. The Hotels & Restaurants CGU and the Costa CGU are also operating segments and represent the lowest level
within the Group at which goodwill is monitored for internal management purposes.
The brand intangible asset arose with the acquisitions of Coffeeheaven and of Coffee Nation in previous financial
years. It is being amortised over a period of two to 15 years.
The customer relationships asset arose with the acquisition of Coffee Nation in the previous financial year. It is being
amortised over a period of 15 years.
IT software and technology 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.
Other intangibles
Other intangibles comprise Costa overseas trading licences and the franchise fee and brand name agreements
acquired with the Premier Lodge business.
The trading licences, which have a carrying value of £1.8m (2011: £0.6m), are deemed to have an infinite life as there
is no time limit associated with them. The franchise fee and brand name agreements are being amortised over their
estimated useful economic lives of periods up to 15 years.
Capital expenditure commitments
Capital expenditure commitments in relation to intangible assets at the year end amounted to £nil (2011: £0.2m).
14 Property, plant and equipment
Cost
At 4 March 2010
Additions
Businesses acquired
Interest capitalised
Reclassified
Assets written off
Foreign currency adjustment
Movements to held for sale in the year
Disposals
At 3 March 2011
Additions
Interest capitalised
Reclassified
Assets written off
Foreign currency adjustment
Transfers
Disposals
At 1 March 2012
70
Land and
buildings
£m
Plant and
equipment
£m
1,980.3
99.5
–
2.8
0.3
(0.8)
(0.5)
(5.0)
(2.4)
2,074.2
135.6
3.1
(5.0)
(2.2)
(1.6)
–
(27.3)
2,176.8
788.0
108.1
6.6
–
(0.3)
(55.8)
(0.4)
(1.9)
(1.8)
842.5
181.6
–
5.0
(45.9)
(0.1)
(12.3)
(8.6)
962.2
Total
£m
2,768.3
207.6
6.6
2.8
–
(56.6)
(0.9)
(6.9)
(4.2)
2,916.7
317.2
3.1
–
(48.1)
(1.7)
(12.3)
(35.9)
3,139.0
whitbread.co.ukConsolidated accounts
14 Property, plant and equipment (continued)
Land and
buildings
£m
Plant and
equipment
£m
Depreciation and impairment
At 4 March 2010
Depreciation charge for the year
Impairment (note 15)
Depreciation written off
Foreign currency adjustment
Movements to held for sale in the year
Disposals
At 3 March 2011
Depreciation charge for the year
Reclassified
Impairment (note 15)
Depreciation on assets written off
Foreign currency adjustment
Transfers
Disposals
At 1 March 2012
Net book value at 1 March 2012
Net book value at 3 March 2011
Capital expenditure commitments
(161.1)
(18.6)
(1.8)
0.3
0.1
2.5
1.1
(177.5)
(11.5)
2.3
(7.2)
2.2
–
–
2.5
(189.2)
1,987.6
1,896.7
Capital expenditure commitments for property, plant and equipment for which
no provision has been made
(296.5)
(79.7)
(1.6)
52.2
0.1
1.2
1.0
(323.3)
(93.5)
(2.3)
(3.0)
41.9
0.1
7.3
3.5
(369.3)
592.9
519.2
2012
£m
62.0
Total
£m
(457.6)
(98.3)
(3.4)
52.5
0.2
3.7
2.1
(500.8)
(105.0)
–
(10.2)
44.1
0.1
7.3
6.0
(558.5)
2,580.5
2,415.9
2011
£m
63.9
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 as part of
its pipeline. 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 £179.3m over the next five
years (2011: £169.1m).
Capitalised interest
Interest capitalised during the year amounted to £3.1m, using an average rate of 5.4% (2010/11: £2.8m, using an average
rate of 5.0%).
Assets held for sale
During the year, no property assets (2010/11: £3.3m) were transferred to assets held for sale. Property assets sold
during the year had a net book value of £3.4m (2010/11: £1.2m), and two trading sites with a combined net book value
of £0.6m (2010/11: £4.0m) continued to be classified as assets held for sale at the year end.
71
At 1 March 2012
Notes to the consolidated
financial statements
15 Impairment
During the year impairment losses of £13.5m (2010/11: £13.0m) and impairment reversals of £3.3m (2010/11: £9.2m)
were recognised.
Impairment losses
Hotels & Restaurants
Costa
Impairment reversals
Hotels & Restaurants
Costa
Total
2011/12
Property,
plant and
equipment
£m
12.8
0.7
(2.8)
(0.5)
10.2
2010/11
Property,
plant and
equipment
£m
12.1
0.9
(7.9)
(1.3)
3.8
Property, plant and equipment
The Group considers each trading outlet to be a 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
9.3% in the UK with geographic specific percentages overseas (2010/11: 9.7%). The future cash flows are based
on assumptions from the business plans and cover a five year period. These business plans and forecasts include
management’s most recent view of medium-term trading prospects. Cash flows beyond this period are extrapolated
using a growth rate based upon the relevant country's inflation target. For the UK this is 2.0% (2010/11: 2.0%).
The events and circumstances that led to the impairment charge of £13.5m are set out below:
Hotels & Restaurants
The impairment of £12.8m at 16 sites in this strategic business unit was driven by a number of factors:
• Changes in the local competitive environment in which the hotels are situated
• Economic climate affecting some key regions
• 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
Six UK Costa sites, two sites in Shanghai and five in the Coffeeheaven business all with an established trend of poor
performance against the required capital investment have been impaired by £0.7m 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 £3.3m have been recognised, £2.8m in Hotels & Restaurants and £0.5m in Costa.
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:
Incremental impairment charge
Impairment if business plan growth rates were reduced by 1ppt
Impairment if discount rate was increased by 1ppt
Hotels &
Restaurants
£m
5.0
4.6
Costa
£m
–
–
Total
£m
5.0
4.6
72
whitbread.co.ukConsolidated accounts
15 Impairment (continued)
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
(2010/11: 2.0%). The pre-tax discount rate applied to cash flow projections is 9.3% (2010/11: 9.7%).
The resultant impairment review required no impairment of goodwill allocated to either the Hotels & Restaurants CGU
or the Costa CGU.
Brand
The brand intangible asset comprises Coffeeheaven and Coffee Nation brand names. Costa have reviewed the brand
intangible asset in relation to Coffee Nation and impaired it down by £0.2m to nil value reflecting the quicker than
expected rebranding of Coffee Nation machines to Costa Express (2010/11: £nil).
16 Investment in joint ventures
Principal joint ventures
Investment held by
Premier Inn Hotels LLC
PTI Middle East
Limited
Costa International
Limited
Rosworth Investments
Limited1
Hualian Costa (Beijing) Food Costa Beijing
& Beverage Management
Company Limited
Limited
% equity interest
Principal
activity
Hotels
Holding
company
Coffee
shops
Country of
incorporation
United Arab
Emirates
Cyprus
China
2012
49.0
50.0
50.0
1Rosworth Investments hold an investment in a subsidiary in Russia that operates coffee shops.
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
Share of joint ventures’ revenue and expenses
Revenue
Cost of sales
Administrative expenses
Finance costs
Operating loss before tax and exceptionals
Disposal of fixed assets
Impairment of fixed assets
Loss before tax
Tax
Net loss
2012
£m
5.4
40.9
46.3
(3.6)
(28.8)
(32.4)
4.8
18.7
2011/12
£m
14.1
(2.8)
(10.8)
(1.0)
(0.5)
(0.2)
–
(0.7)
–
(0.7)
2011
49.0
50.0
50.0
2011
£m
4.5
34.2
38.7
(2.5)
(23.6)
(26.1)
4.8
17.4
2010/11
£m
9.5
(1.7)
(8.9)
(1.0)
(2.1)
–
(0.7)
(2.8)
–
(2.8)
At 1 March 2012 the Group’s share of the capital commitments of its joint ventures amounted to £7.3m (2011: £5.9m).
73
At 1 March 2012
Notes to the consolidated
financial statements
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
2012
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 assets – non-current
Opening cost or valuation
Impairment
Closing cost or valuation
2012
£m
1.5
5.2
6.7
(0.4)
(4.7)
(5.1)
1.6
2011/12
£m
2.9
0.9
2012
£m
0.9
(0.9)
–
2011
40.0
2011
£m
1.3
5.2
6.5
(0.5)
(4.6)
(5.1)
1.4
2010/11
£m
2.8
0.8
2011
£m
0.9
–
0.9
The Group’s other financial asset related to an investment in a German hotel which was held at fair value. This asset
has been assessed and the Group believe that its value is impaired.
19 Inventories
Raw materials and consumables (at cost)
Finished goods (at cost)
Total inventories at lower of cost and net realisable value
20 Trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
Analysed as:
Current
Non-current – other receivables
Trade and other receivables are non-interest bearing and are generally on 30 day terms.
The provision for impairment of receivables at 1 March 2012 was £3.6m (2011: £3.3m).
74
2012
£m
3.9
19.2
23.1
2012
£m
47.7
32.9
8.0
88.6
85.0
3.6
88.6
2011
£m
2.1
16.3
18.4
2011
£m
49.9
29.7
7.6
87.2
84.3
2.9
87.2
whitbread.co.ukConsolidated accounts
20 Trade and other receivables (continued)
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
2012
£m
39.0
7.6
0.7
0.4
47.7
2012
£m
40.3
–
40.3
2011
£m
39.2
5.9
1.4
3.4
49.9
2011
£m
33.9
4.3
38.2
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 £40.3m (2011: £38.2m).
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
Unsecured
Other loans
Revolving credit facility (£650m)
Revolving credit facility (£700m)
Revolving credit facility (£455m)
Private placement loan notes
Total
2012
£m
40.3
–
(0.7)
39.6
2011
£m
33.9
4.3
(4.0)
34.2
Maturity
On demand
On demand
2010 to 2014
2016
n/a
n/a
2017 to 2022
Current
Non-current
2012
£m
0.7
13.5
14.2
–
–
–
–
–
14.2
2011
£m
4.0
–
4.0
0.2
–
–
–
–
4.2
2012
£m
–
–
–
–
272.9
–
–
257.5
530.4
2011
£m
–
–
–
0.5
–
426.1
–
95.3
521.9
Short-term borrowings
Short-term borrowings are typically overnight borrowings, repayable on demand. Interest rates are variable and linked
to LIBOR.
Revolving credit facility (£650m)
The revolving facility was entered into on 4 November 2011 and runs until November 2016. Loans have variable interest
rates linked to LIBOR. The facility is multi-currency.
Revolving credit facility (£700m)
With the introduction of the £650m facility, this facility was cancelled.
Revolving credit facility (£455m)
With the introduction of the £650m facility, this facility was cancelled.
75
At 1 March 2012
Notes to the consolidated
financial statements
22 Financial liabilities (continued)
Private placement loan notes
The Group completed a financing transaction in the United States Private Placement market on 6 September 2011 with
issue notes amounting to $210m and £25m. This is in addition to the transaction entered into in the previous financial
year. The Group now holds loan notes with coupons and maturities as shown in the following table:
Title
Series A loan notes
Series B loan notes
Series C loan notes
Series A loan notes
Series B loan notes
Series C loan notes
Series D loan notes
Year issued
Principal value
Maturity
Coupon
2010
2010
2010
201 1
201 1
201 1
201 1
$40.0m
$75.0m
£25.0m
$60.0m
$56.5m
$93.5m
£25.0m
13-Aug-17
13-Aug-20
13-Aug-20
26-Jan-19
26-Jan-19
26-Jan-22
06-Sep-21
4.55%
5.23%
5.19%
3.92%
4.12%
4.86%
4.89%
Following the issue of loan notes in September 2011, the Group then entered into a number of cross-currency swap
agreements which swapped USD to GBP at 1.5978 giving a total funding of £156.4m. In addition the Group receives
interest payments which match the rates payable under the notes of between 4.2% and 5.1% and pays between 4.3% and
5.2%. These swaps eliminate any foreign exchange risk on interest rates or on the repayment of the principal borrowed.
These swaps have been formally designated as cash flow hedges and expire in line with the loan notes.
An analysis of the interest rate profile and the maturity of the borrowings, together with related interest rate swaps,
is as follows:
Year ended 1 March 2012
Fixed rate
Fixed to floating rate swaps
Floating to fixed interest rate swaps
Floating rate
Fixed to floating rate swaps
Floating to fixed interest rate swaps
Total
Year ended 3 March 2011
Fixed rate
Fixed to floating rate swaps
Floating to fixed interest rate swaps
Floating rate
Fixed to floating rate swaps
Floating to fixed interest rate swaps
Within
1 year
£m
–
–
100.0
100.0
14.2
–
(100.0)
(85.8)
14.2
Within
1 year
£m
0.2
–
200.0
200.2
4.0
–
(200.0)
(196.0)
1–2
years
£m
–
–
–
–
–
–
–
–
–
1–2
years
£m
0.2
–
100.0
100.2
426.1
–
(100.0)
326.1
2–5
years
£m
–
–
50.0
50.0
272.9
–
(50.0)
222.9
Over
5 years
£m
257.5
(50.1)
50.0
257.4
–
50.1
(50.0)
0.1
Total
£m
257.5
(50.1)
200.0
407.4
287.1
50.1
(200.0)
137.2
272.9
257.5
544.6
2–5
years
£m
0.3
–
–
0.3
–
–
–
–
Over
5 years
£m
95.3
(50.1)
100.0
145.2
–
50.1
(100.0)
(49.9)
Total
£m
96.0
(50.1)
400.0
445.9
430.1
50.1
(400.0)
80.2
Total
4.2
426.3
0.3
95.3
526.1
Maturity analysis is grouped by when the debt is contracted to mature rather than by repricing dates, as allowed
under IFRS.
The swaps with maturities beyond the life of the current revolving credit facilities (2016) are in place to hedge against
the core level of debt the Group will hold.
The carrying amount of the Group’s borrowings is denominated in sterling and US dollars.
At 1 March 2012, the Group had available £373.0m (2011: £503.9m) of undrawn committed borrowing facilities in
respect of revolving credit facilities on which all conditions precedent had been met.
76
whitbread.co.ukConsolidated accounts
23 Movements in cash and net debt
Year ended 1 March 2012
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
Year ended 3 March 2011
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 4 March 2010
Unwinding of discount rate
Utilised
Transferred
At 3 March 2011
Created
Unwinding of discount rate
Utilised
Transferred
At 1 March 2012
Analysed as:
Current
Non-current
3 March
2011
£m
Cost of
borrowings
£m
Cash flow
£m
Foreign
Fair value Amortisation
adjustments of premiums
exchange to loan capital and discounts
£m
£m
£m
1 March 2012
£m
38.2
(4.0)
34.2
–
(0.2)
(521.9)
(522.1)
(487.9)
–
–
–
–
–
–
5.4
5.4
–
–
5.3
(13.5)
–
–
(5.8)
(14.0)
–
–
0.1
–
–
–
–
0.1
–
–
–
–
–
–
(6.4)
(6.4)
–
–
–
–
–
–
(1.5)
(1.5)
40.3
(0.7)
39.6
(13.5)
–
(530.4)
(530.4)
(504.3)
4 March
2010
£m
Cost of
borrowings
£m
Cash flow
£m
Foreign
Fair value Amortisation
adjustments of premiums
exchange to loan capital and discounts 3 March 2011
£m
£m
£m
£m
47.0
(5.5)
41.5
(25.5)
(0.4)
(529.0)
(529.4)
(513.4)
–
–
–
–
–
–
1.1
1.1
–
–
(7.1)
25.5
–
–
2.3
20.7
–
–
(0.2)
–
–
–
–
(0.2)
–
–
–
–
–
–
4.7
4.7
–
–
–
–
–
–
(0.8)
(0.8)
38.2
(4.0)
34.2
–
(0.2)
(521.9)
(522.1)
(487.9)
Onerous contracts
£m
Reorganisation
£m
44.7
0.9
(9.4)
0.6
36.8
11.0
0.8
(8.0)
–
40.6
10.7
29.9
40.6
1.3
–
(0.1)
–
1.2
–
–
(1.2)
–
–
–
–
–
Other
£m
7.8
–
–
(0.6)
7.2
–
–
–
–
7.2
–
7.2
7.2
Total
£m
53.8
0.9
(9.5)
–
45.2
11.0
0.8
(9.2)
–
47.8
10.7
37.1
47.8
Onerous contracts
Onerous contract provisions relate primarily to property reversions. Provision is made for rent and other property
related costs for the period that a sub-let or assignment of the lease is not possible.
Where the property is deemed likely to be assigned, provision is made for the best estimate of the reverse lease
premium payable on the assignment. Where the property is deemed likely to be sub-let, the rental income and the
timing of the cash flows are estimated by both internal and external property specialists and a provision is maintained
for the cost incurred by the Group.
Onerous lease provisions are discounted using a discount rate of 3.74% (2011: 3.74%) based on an approximation for
a risk-free rate. The amount and timing of the cash outflows are subject to variations. The Group utilises the skills and
expertise of both internal and external property experts to determine the provision held.
Provisions are expected to be utilised over a period of up to 25 years.
77
At 1 March 2012
Notes to the consolidated
financial statements
24 Provisions (continued)
Reorganisation
The reorganisation provision related to the final redundancy costs of the IT simplification project. The provision has
now been fully utilised.
Other
Other provisions relate to warranties given on the disposal of businesses. These are expected to be used over periods
of up to five years.
25 Financial risk management objectives and policies
The Group’s principal financial instruments, other than derivatives, comprise bank loans, private placement 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. At the year end, £407.4m (74.8%) of Group debt was
fixed for an average of 5.50 years (2011: £445.9m, 84.7%, for 3.75 years), using floating rate borrowings and interest
rate swaps. The intention is that the fixed rate debt ratio will reduce going forward as £100m of fixed rate debt
expires within the financial year. The average rate of interest on this fixed rate debt was 5.3% (2010/11: 5.5%).
Although the private placement loan notes are US dollar denominated, cross-currency swaps mean that the interest
rate risk is effectively sterling only.
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 1 March 2012 and
3 March 2011 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 1ppt change in interest rates would affect the Group’s profit
before tax by approximately £1.3m (2010/11: £0.7m), and equity by approximately £7.8m (2011: £11.3m).
Liquidity risk
In its funding strategy the Group’s objective is to maintain a balance between the continuity of funding and flexibility
through the use of overdrafts and bank loans. This strategy includes monitoring the maturity of financial liabilities to
avoid the risk of a shortage of funds.
Excess cash used in managing liquidity is placed on interest-bearing deposit 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.
78
whitbread.co.ukConsolidated accounts 25 Financial risk management objectives and policies (continued)
The tables below summarise the maturity profile of the Group’s financial liabilities at 1 March 2012 and 3 March 2011
based on contractual undiscounted payments, including interest:
1 March 2012
On demand
£m
Less than
3 months
£m
Interest-bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Accrued financial liabilities
Provisions in respect of financial liabilities
14.2
–
–
–
–
14.2
0.7
3.3
159.3
–
2.7
166.0
3 March 2011
On demand
£m
Less than
3 months
£m
Interest-bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Accrued financial liabilities
Provisions in respect of financial liabilities
4.0
–
–
–
–
4.0
2.9
8.2
149.1
–
3.1
163.3
3-12
months
£m
12.7
3.3
–
105.5
8.0
129.5
3-12
months
£m
7.1
8.2
–
88.6
9.9
113.8
Credit risk
There are no significant concentrations of credit risk within the Group.
1-5
years
£m
More than
5 years
£m
322.6
13.7
16.4
–
18.5
371.2
298.0
7.6
–
–
18.6
324.2
1-5
years
£m
More than
5 years
£m
447.4
16.5
–
15.2
15.7
494.8
117.7
10.1
–
–
12.5
140.3
Total
£m
648.2
27.9
175.7
105.5
47.8
1,005.1
Total
£m
579.1
43.0
149.1
103.8
41.2
916.2
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. Although the Group has US dollar denominated
loan notes these have been swapped into sterling thereby eliminating foreign currency risk. Sensitivity analysis has
therefore not been carried out.
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 objective in regard to capital management is to ensure that it continues to operate as a going
concern and has sufficient funds at its disposal to grow the business for the benefit of shareholders. The Group seeks to
maintain a ratio of debt to equity that balances risks and returns and also complies with lending covenants. See pages 18
and 19 of this report for the policies and objectives of the Board regarding capital management, analysis of the Group’s
credit facilities and financing plans for the coming years.
The Group aims to maintain sufficient funds for working capital and future investment in order to meet growth targets.
The Group has adopted a framework to keep leverage (debt divided by EBITDA) on a pensions lease adjusted basis
at 3.5 times or below which was achieved for the year ended 1 March 2012. This calculation takes account of net debt,
pensions deficit and capital value of leases. The management of equity through share buy backs and new issues is
considered as part of the overall leverage framework balanced against the funding requirements of future growth.
79
At 1 March 2012
Notes to the consolidated
financial statements
25 Financial risk management objectives and policies (continued)
The Group's financing is subject to financial covenants. These covenants relate to measurement of EBITDA against
consolidated net finance charges (interest cover) and total net debt (leverage ratio, on a not adjusted for pensions
and property leases basis). The Group has complied with all covenants.
The above matters are considered at regular intervals and form part of the business planning and budgeting processes.
In addition, the Board regularly reviews the Group’s dividend policy and funding strategy.
26 Financial instruments
Fair values
As in the prior year the fair value of financial assets and liabilities disclosed in notes 18, 20, 21, 22, 23, 24 and 27 are
considered to be approximately the same as their carrying amounts.
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.
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.
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.
1 March 2012
Financial liabilities
Derivative financial instruments
3 March 2011
Financial assets
Other financial asset
Financial liabilities
Derivative financial instruments
Level 1
£m
Level 2
£m
Level 3
£m
–
26.7
–
Level 1
£m
–
–
Level 2
£m
–
32.9
Level 3
£m
0.9
–
Total
£m
26.7
Total
£m
0.9
32.9
During the year ended 1 March 2012 there were no transfers between levels 1, 2 or 3 fair value measurements. However,
the other financial asset in the prior year level 3 classification has been impaired as per note 18. Derivative financial
instruments include £20.1m (2011: £16.6m) due after one year. There are no material differences between the carrying
values and fair values of derivative financial instruments.
Derivative financial instruments
Hedges
Cash flow hedges
At 1 March 2012 the Group had interest rate swaps in place to swap a notional amount of £200.0m (2011: £400.0m)
whereby it receives a variable interest rate based on LIBOR on the notional amount and pays fixed rates of between
5.145% and 5.643% (2011: 5.145% and 5.695%). The swaps are being used to hedge the exposure to changes in future
cash flows from variable rate debt. The Group also had cross-currency swaps in place whereby it received a fixed
interest rate of between 3.92% and 4.86% (2011: 4.55%) on a notional amount of $210.0m (2011: $40.0m) and paid
an average of 4.72% on a notional sterling balance of £158.2m (2011: 4.53% on £26.7m).
Refer to note 22 for details of current year cross-currency swaps entered into, following the issue of Series A, B, C
and D loan notes in the US Private Placement market.
The swaps with maturities beyond the life of the current revolving credit facilities (2016) are in place to hedge against
the core level of debt the Group will hold.
80
whitbread.co.ukConsolidated accounts
26 Financial instruments (continued)
Fair value hedges
At 1 March 2012, the Group had cross-currency swaps in place whereby it received a fixed interest rate of 5.23% (2011:
5.23%) on a notional amount of $75.0m (2011: $75.0m) and paid a spread of between 1.715% and 1.755% (2011: 1.715%
and 1.755%) over 6m GBP LIBOR on a notional sterling balance of £50.1m (2011: £50.1m).
Cash flow and fair value hedges are expected to impact on the income statement in line with the liquidity risk table
shown in note 25.
The cash flow hedges were assessed to be highly effective at 1 March 2012 and a net unrealised loss of £1.0m (2010/11:
net unrealised gain of £8.6m) has been recorded in other comprehensive income. The fair value hedges were also
assessed to be highly effective at 1 March 2012 and a credit of £0.7m was recorded within interest in the income
statement (2010/11: £nil). During the year, a loss of £16.9m (2010/11: £18.4m) was charged to the income statement
in respect of hedged items affecting the net finance charge for the year.
27 Trade and other payables
Trade payables
Other taxes and social security
Accruals and deferred income
Other payables
Analysed as:
Current
Non-current
28 Share capital
Ordinary share capital
Allotted, called up and fully paid ordinary shares of 76.80p each (2010: 76.80p each)
At 4 March 2010
Issued
Issued in lieu of dividends:
2009/10 final
2010/11 interim
At 3 March 2011
Issued
Issued in lieu of dividends:
2010/11 final
2011/12 interim
At 1 March 2012
2012
£m
116.1
36.4
125.6
59.6
337.7
321.3
16.4
337.7
million
190.6
0.3
0.2
0.3
191.4
0.5
0.1
–
192.0
2011
£m
112.9
41.7
89.4
51.4
295.4
280.2
15.2
295.4
£m
146.4
0.2
0.1
0.3
147.0
0.4
0.1
–
147.5
At the 2011 Annual General Meeting, the Company was authorised to purchase up to 17.7m of its own shares on the
open market.
During the year no ordinary shares were acquired (2010/11: nil). No shares were cancelled in the year (2010/11: nil).
The remainder are being held in the treasury reserve (note 29).
During the year to 1 March 2012 options over 0.5m ordinary shares, fully paid, were exercised by employees under the
terms of various share option schemes (2010/11: 0.3m).
Shareholders were offered a scrip alternative to the 2010/11 cash final dividend of 33.25p and to the 2011/12 cash interim
dividend of 17.50p. Ordinary shares issued in respect of this totalled 157,741. 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, as used in the calculation of the basic weighted average number of
ordinary shares, was 192.0m less 14.1m treasury shares held by Whitbread PLC and 0.9m held by the ESOT (2011: 191.4m
less 14.2m treasury shares held by Whitbread PLC and 0.9m held by the ESOT).
81
At 1 March 2012
Notes to the consolidated
financial statements
28 Share capital (continued)
Preference share capital
Allotted, called up and fully paid shares of
1p each (2011: 1p each)
At 4 March 2010
Repurchased and cancelled
At 3 March 2011
Repurchased and cancelled
At 1 March 2012
B Shares
C Shares
million
£m
million
2.0
–
2.0
–
2.0
–
–
–
–
–
1.9
–
1.9
–
1.9
£m
–
–
–
–
–
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 £0.1m were issued in lieu of the 2010/11 final and
2011/12 interim cash dividends (2010/11: £0.4m).
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.
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.
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.
The total of the Treasury, Merger and Hedging reserve equals other reserves in the Consolidated Balance Sheet.
82
whitbread.co.ukConsolidated accounts
29 Reserves (continued)
The movement in treasury shares during the year is set out in the table below:
Treasury shares held by Whitbread PLC
ESOT shares held
At 4 March 2010
Transferred
Purchased
Exercised during the year
At 3 March 2011
Transferred
Purchased
Exercised during the year
At 1 March 2012
million
14.7
(0.5)
–
–
14.2
(0.1)
–
–
14.1
£m
216.0
(7.3)
–
–
208.7
(2.1)
–
–
206.6
million
0.5
0.5
0.4
(0.5)
0.9
0.1
0.3
(0.4)
0.9
£m
6.0
7.3
5.1
(6.2)
12.2
2.1
5.2
(5.8)
13.7
The treasury shares reduce the amount of reserves available for distribution to shareholders by £220.3m (2011: £220.9m).
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 and 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
2012
£m
132.1
465.5
393.3
996.3
1,987.2
2011
£m
109.5
385.8
326.0
1,025.0
1,846.3
Future minimum rentals payable under non-cancellable operating leases disclosed above includes £127.7m in relation
to privity contracts (2010/11: £94.3m). 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 13.9
years (2011: 16.0 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 1 March 2012 are £16.6m (2011: £18.8m).
Contingent liabilities
As disclosed in note 6, in the previous year the Group received £4.6m refund of VAT charged on gaming machine
income, together with associated interest of £0.7m. The refund was made following a ruling that the application of
VAT to certain types of gaming machine income contravened the Europeans Union's principle of fiscal neutrality.
HMRC have appealed against the ruling, and if HMRC's appeal is upheld the refund and associated interest of £5.3m
would be repayable.
83
At 1 March 2012
Notes to the consolidated
financial statements
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 35 to 44.
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
2012
Awards
701,386
336,402
(115,735)
(33,168)
888,885
2011
Awards
630,222
196,104
(95,072)
(29,868)
701,386
Exercisable at the end of the year
–
–
Deferred equity awards
Awards are made under the Whitbread Leadership Group Incentive Scheme implemented during 2004/5.
The awards are not subject to performance conditions and will vest in full on the release date subject to continued
employment at that date. If the director or senior executive of the Group ceases to be an employee of Whitbread
prior to the release date, normally three years after the award, by reason of redundancy, 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
2012
Awards
406,878
302,014
(313,861)
(1,788)
393,243
2011
Awards
451,366
338,233
(379,869)
(2,852)
406,878
–
–
Executive Share Option Scheme (ESOS)
Annual grants of share options have been discontinued and there is no current intention to grant any further options.
No changes will be made to options already granted.
The only option still outstanding at the beginning of the year was granted in 2001, and 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 in March 2001 and ending in March 2011. This option
was exercised during the year and no further options remain outstanding.
84
whitbread.co.ukConsolidated accounts
31 Share-based payment plans (continued)
Executive Share Option Scheme (ESOS) (continued)
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
Outstanding at the end of the year
Exercisable at the end of the year
2012
WAEP
(£ per share)
5.39
5.39
–
–
Options
897
(897)
–
–
2011
WAEP
(£ per share)
5.39
5.39
5.39
5.39
Options
1,767
(870)
897
897
No executive share options remained outstanding as at 1 March 2012.
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
2012
WAEP
(£ per share)
9.74
13.39
7.53
11.55
11.91
7.46
Options
1,304,032
514,594
(455,411)
(203,076)
1,160,139
52,036
2011
WAEP
(£ per share)
8.76
14.14
10.72
9.37
9.74
11.50
Options
1,340,142
313,617
(142,975)
(206,752)
1,304,032
23,081
The weighted average contractual life for the share options outstanding as at 1 March 2012 is between two and three
years and are exercisable at prices between £7.28 and £14.17 (2011: £7.28 and £14.17). The fair value of share options
granted is estimated as at the date of grant using a stochastic model, taking into account the terms and conditions
upon which the options were granted.
The weighted average share price at the date of exercise for employee share scheme options exercised during the
year was £16.68 (2011: £17.22).
Total charged to the income statement
2011/12
£m
2010/11
£m
Long-Term Incentive Plan
Deferred equity
Employee share scheme
Equity-settled
Cash-settled
2.4
3.7
1.9
8.0
7.9
0.1
8.0
2.2
4.0
1.6
7.8
7.7
0.1
7.8
85
At 1 March 2012
Notes to the consolidated
financial statements
31 Share-based payment plans (continued)
The following table lists the inputs to the model used for the years ended 1 March 2012 and 3 March 2011:
Number
Grant of shares
granted
date
Fair Exercise
Price at Expected Expected
Fair
value
value
£
price grant date
£
£
term dividend Expected
yield volatility
(years)
Risk-
free
rate
Vesting
conditions
LTIP awards
09.05.2011 168,201
09.05.2011 168,201
98,052
28.04.2010
98,052
28.04.2010
44.1% 1,220,271
92.2% 2,551,228
819,563
54.1%
1,407,345
92.9%
Deferred equity
awards
09.05.2011 302,014
28.04.2010 338,233
92.2% 4,580,868
92.9% 4,853,996
–
–
–
–
–
–
SAYE – 3 years
02.12.2011 425,494
01.12.2010 226,344
27.4% 1,912,000
1,347,000
33.4%
13.39
14.14
SAYE – 5 years
02.12.2011
01.12.2010
89,100
87,273
33.1%
35.4%
483,600
550,200
13.39
14.14
16.45
16.45
15.45
15.45
16.45
15.45
16.42
17.82
16.42
17.82
3
3
3
3
3
3
3.25
3.25
5.25
5.25
2.71%
2.71%
2.46%
2.46%
37% 1.33%
Market1,3
37% 1.33% Non-market2,3
Market1,3
42% 1.73%
42% 1.73% Non-market2,3
2.71%
2.46%
37% 1.33% Non-market3,3
42% 1.73% Non-market3,3
3.10%
2.22%
36% 0.50% Non-market3,3
40% 1.22% Non-market3,3
3.10%
2.22%
35% 1.10% Non-market3,3
35% 2.14% Non-market3,3
1. Total shareholder return (TSR).
2. Earnings per share.
3. Employment service.
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 1 March 2012 there were outstanding options for employees to purchase up to 1.2m (2011: 1.3m) ordinary shares of
76.80 pence each between 2011 and 2016 at prices between £7.28 and £14.17 per share (2011: between 2011 and 2016
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 0.9m shares at 1 March 2012 (2011: 0.9m). All dividends on the shares in the ESOT are waived by the Trustee.
32 Retirement benefits
Defined contribution schemes
The Group operates a contracted-in defined contribution scheme under the Whitbread Group Pension Fund.
Contributions by both employees and Group companies are held in externally invested trustee-administered funds.
The Group also has a contracted-out defined contribution pension scheme which closed to new members on 31
December 2001.
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 £3.6m (2010/11: £3.3m).
At the year end, 1,812 employees (2011: 1,743) were active members of the schemes, which also had 6,777 deferred
members (2011: 6,791).
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.
86
whitbread.co.ukConsolidated accounts
32 Retirement benefits (continued)
Defined benefit schemes (continued)
At the year end the scheme had no active members (2011: nil), 25,500 deferred pensioners (2011: 26,101) and 16,511
pensions in payment (2011: 16,258).
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 made a £85m payment in 2011/12,
which included an accelerated payment of £25m, and will make the following payments to the Fund: £30m in August
2012 and £55m in 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 in the year ended 4 March 2010 (the share in profits is 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.
Moorgate SLP holds an investment in a further partnership, Farringdon Scottish Partnership, which was also established
by the Group during 2009/10. 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 13 years. At the end of this period, the partnership capital allocated to the Pension Scheme
partner will be transferred in cash to the Pension Scheme up to a value of £150m (2011: £150m), depending on the
funding position of the Pension Scheme at that time.
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 £141m (2011: £141m) investment in Moorgate SLP held by the
Pension Scheme.
The total service cost contributions to the Whitbread Group Pension Fund in 2012/13 will 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 Towers Watson, using the projected unit credit
method. As the scheme is now closed to future accrual, there will be no service cost in the future.
87
At 1 March 2012
Notes to the consolidated
financial statements
32 Retirement benefits (continued)
Defined benefit schemes (continued)
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 1 March 2012 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
Pension increases in deferment
Discount rate
Inflation assumption
At
1 March
2012
n/a1
3.00%
2.20%
3.00%
4.65%
3.15%
At
3 March
2011
n/a1
3.25%
2.15%
3.45%
5.60%
3.45%
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 20.8 years (2011: 20.7) if they
are male and for a further 23.3 years (2011: 23.2) if they are female. For a member who retires in 2031 at age 65, the
assumptions are that they will live on average for a further 22.6 years (2011: 22.6) after retirement if they are male and
for a further 25.1 years (2011: 25.0) 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 1 March 2012 (rounded to the nearest 0.1% per annum).
The weighted average of the expected rates of return on the asset base is assumed to be 2.45% (2011: 3.25%) per annum
above inflation.
The amounts recognised in the income statement in respect of defined benefit schemes are as follows:
Amounts recognised in operating profit for service costs or curtailment are £nil (2010/11: £nil).
Expected return on scheme assets
Interest cost on scheme liabilities
Other finance cost (note 8)
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
2011/12
£m
(81.6)
95.6
14.0
2011/12
£m
66.7
(81.6)
(177.2)
(192.1)
2010/11
£m
(82.5)
94.0
11.5
2010/11
£m
42.9
(82.5)
(11.8)
(51.4)
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
88
2011/12
£m
(1,939.7)
1,341.0
(598.7)
2010/11
£m
(1,745.0)
1,257.0
(488.0)
whitbread.co.ukConsolidated accounts
32 Retirement benefits (continued)
Defined benefit schemes (continued)
During the year the accounting deficit increased from £488.0m at 3 March 2011 to £598.7m at 1 March 2012. The asset
performance was worse than expected over the period which has led to a modest loss. However, the principal reason
for the increase is the reduction in the discount rate.
Changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligation
Net interest cost
Actuarial losses on scheme liabilities
Benefits paid
Benefits settled by the Company in relation to an unfunded pension scheme
Closing defined benefit obligation
Changes in the fair value of the scheme assets are as follows:
Opening fair value of scheme assets
Expected return on scheme assets
Actuarial losses on scheme assets
Contributions from employer
Additional contributions from Moorgate SLP
Benefits paid
Closing fair value of scheme assets
2012
£m
1,745.0
95.6
177.2
(77.6)
(0.5)
1,939.7
2012
£m
1,257.0
81.6
(14.9)
86.8
8.1
(77.6)
1,341.0
2011
£m
1,715.0
94.0
11.8
(75.6)
(0.2)
1,745.0
2011
£m
1,281.0
82.5
(39.6)
1.8
6.9
(75.6)
1,257.0
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
2012
%
7.2
3.2
4.6
5.7
3.2
2011
%
8.2
4.5
5.4
7.0
4.5
2012
£m
727.3
374.8
131.3
45.8
61.8
1,341.0
2011
£m
696.2
124.0
302.1
41.6
93.1
1,257.0
2012
£m
2011
£m
2010
£m
2009
£m
2008
£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 (%)
(1,939.7)
1,341.0
(598.7)
12.8
(0.66)%
(14.9)
(1.11)%
(1,745.0)
1,257.0
(488.0)
(25.8)
1.48%
(39.6)
(3.15)%
(1,715.0)
1,281.0
(434.0)
(3.0)
0.17%
173.0
13.51%
(1,340.0)
1,107.0
(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)%
The cumulative amount of actuarial gains and losses recognised since 4 March 2004 in the Group Consolidated
Statement of Comprehensive Income is £(629.1)m (2011: £(437.0)m).
89
At 1 March 2012
Notes to the consolidated
financial statements
32 Retirement benefits (continued)
Defined benefit schemes (continued)
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
33 Related party disclosure
The Group’s principal subsidiaries are listed in the following table:
Principal subsidiaries
Principal activity
Whitbread Group PLC
Premier Inn Hotels Limited
Whitbread Restaurants Limited
Premier Inn Limited
Costa Limited
Hotels & Restaurants
Hotels
Restaurants
Hotels
Operators of coffee shops and roasters
and wholesalers of coffee beans
Operators of coffee shops
Yueda Costa (Shanghai)
Food & Beverage Management
Company Limited
Coffeeheaven International Limited Operators of coffee shops in eastern Europe England
England
Coffee Nation Limited
China
Operators of customer facing espresso
based coffee vending machines
(Increase)/decrease in liability
2011
2012
£m
£m
80.0
(70.0)
70.0
(55.0)
Country of
incorporation
England
England
England
England
England
% equity interest and
votes held
2012
2011
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
51.0
100.0
100.0
100.0
100.0
The Group holds a 6% partnership interest in Moorgate Scottish Limited Partnership with Whitbread Pension
Trustees. Moorgate SLP holds a 67.8% investment in a further partnership, Farringdon Scottish Partnership which was
established by the Group to hold property assets. The partnerships were set up in 2009/10 as part of a transaction
with Whitbread Pension Trustees and the Group retains control over both partnerships and as such they are fully
consolidated in these Group financial statements. Further details can be found in note 32.
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. 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
2.8
1.8
3.1
3.1
1.3
0.3
–
–
–
–
2.5
2.5
Related party
Joint ventures
2011/12
2010/11
Associate
2011/12
2010/11
90
whitbread.co.ukConsolidated accounts
33 Related party disclosure (continued)
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 investments in joint ventures see note 16.
2011/12
£m
5.1
0.3
5.5
10.9
2010/11
£m
6.0
0.3
4.8
11.1
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 1 March 2012, the Group has not raised a provision for doubtful debts relating to
amounts owed by related parties (2011: £0.2m). 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 35 to 44.
34 Events after the balance sheet date
A final dividend of 33.75p per share (2011: 33.25p) amounting to a dividend of £59.7m (2011: £58.6m) was
recommended by the directors at their meeting on 25 April 2012. A scrip alternative will be offered. These financial
statements do not reflect this dividend payable.
91
92
whitbread.co.ukConsolidated accounts 2011/12
Company
Accounts
Company accounts 2011/12
94 Directors’ responsibility for
the Company financial
statements/audit report
95 Balance sheet
96 Notes to the accounts
100 Shareholder services
93
Directors’ responsibility for the
Company financial statements/
audit report
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 1 March 2012
which comprise the 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).
94
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 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. In
addition, we read all the financial
and non-financial information in the
Annual Report to identify material
inconsistencies with the audited
financial statements. If we become
aware of any apparent material
misstatements or inconsistencies
we consider the implications for
our report.
Opinion on financial statements
In our opinion the parent Company
financial statements:
• give a true and fair view of the
state of the Company's affairs
as at 1 March 2012;
• have been properly prepared in
accordance with United Kingdom
Generally Accepted Accounting
Practice; and
• have been prepared in accordance
with the requirements of the
Companies Act 2006.
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 returns adequate for
our audit have not been received
from branches not visited by us; 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
1 March 2012.
Les Clifford
(Senior statutory auditor)
for and on behalf of Ernst & Young
LLP, Statutory Auditor
London
25 April 2012
whitbread.co.ukCompany accounts
At 1 March 2012
Balance sheet
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
Andy Harrison
Chief Executive
Christopher Rogers
Finance Director
25 April 2012
Notes
2012
£m
2011
£m
5
6
7
8
9
9
9
9
9
2,256.1
2,256.1
2,256.1
2,256.1
197.6
266.9
(4.1)
(1.0)
193.5
2,449.6
147.5
53.7
12.3
2,442.7
(206.6)
2,449.6
265.9
2,522.0
147.0
50.8
12.3
2,520.6
(208.7)
2,522.0
95
At 1 March 2012
Notes to the accounts
1 Basis of accounting
The financial statements of Whitbread PLC for the year ended 1 March 2012 were authorised for issue by the Board
of Directors on 25 April 2012.
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 £11.2m (2011: £2.1m).
4 Dividends paid and proposed
2011/12
2010/11
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
33.25
17.50
1.18
1.28
pence per
share
28.35
11.25
1.60
1.01
£m
58.6
(1.5)
57.1
31.0
(1.1)
29.9
–
–
0.0
87.0
Proposed for approval at Annual General Meeting:
Final dividend for the current year
33.75
59.7
33.25
£m
49.7
(1.7)
48.0
19.7
(6.2)
13.5
–
–
0.0
61.5
58.6
A final dividend of 33.75p per share (2011: 33.25p) amounting to a dividend of £59.7m (2011: £58.6m) was recommended
by the directors at their meeting on 25 April 2012. A scrip alternative will be offered. These financial statements do not
reflect this dividend payable.
96
whitbread.co.ukCompany accounts
5 Investment in subsidiary undertakings
Shares at cost
At 3 March 2011 and 1 March 2012
Principal subsidiary undertakings
Principal activity
2012
£m
2011
£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
Costa Limited
Yueda Costa (Shanghai) Food &
Beverage Management Company Limited
Coffeeheaven International Limited
Coffee Nation Limited
Hotels and restaurants
Hotels
Restaurants
Hotels
Operators of coffee shops
and roasters and wholesalers
of coffee beans
Operators of coffee shops
Operators of coffee shops
in eastern Europe
Operators of customer
facing espresso based coffee
vending machines
England
England
England
England
England
England
England
England
England
England
China
China
England
Poland
England
England
100
100
100
100
100
51
100
100
The Company holds a 6% partnership interest in Moorgate Scottish Limited Partnership with Whitbread Pension
Trustees. Moorgate SLP holds a 67.8% investment in a further partnership, Farringdon Scottish Partnership
which was established by the Group to hold property assets. The partnerships were set up in 2009/10 as part
of a transaction with Whitbread Pension Trustees. Further details can be found in note 32 of the Whitbread PLC
consolidated accounts.
Shares in Whitbread Group PLC are held directly by Whitbread PLC. Shares in the other subsidiaries are held by
Whitbread Group PLC or its subsidiaries. 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. The companies listed above are those which materially affect
the amount of profit and the assets of the Group.
6 Debtors
Amounts falling due within one year
Amounts owed by subsidiary undertakings
7 Creditors
Amounts falling due within one year
Other creditors
Corporation tax payable
2012
£m
197.6
197.6
2012
£m
0.2
3.9
4.1
2011
£m
266.9
266.9
2011
£m
0.2
0.8
1.0
97
Company accounts
At 1 March 2012
Notes to the accounts
8 Share capital
Allotted, called up and fully paid ordinary shares of 76.80p each (2011: 76.80p each)
At 4 March 2010
Issued
Issued in lieu of dividends:
2009/10 final
2010/11 interim
At 3 March 2011
Issued
Issued in lieu of dividends:
2010/11 final
2011/12 interim
At 1 March 2012
million
190.6
0.3
0.2
0.3
191.4
0.5
0.1
–
192.0
£m
146.4
0.2
0.1
0.3
147.0
0.4
0.1
–
147.5
At the 2011 Annual General Meeting, the Company was authorised to purchase up to 17.7m of its own shares on the
open market.
During the year no ordinary shares were acquired (2010/11: nil). No shares were cancelled in the year (2010/11: nil).
The remainder are being held in the treasury reserve (note 9).
During the year to 1 March 2012, options over 0.5m ordinary shares, fully paid, were exercised by employees under
the terms of various share option schemes (2010/11: 0.3m).
Shareholders were offered a scrip alternative to the 2010/11 cash final dividend of 33.25p and to the 2011/12 cash interim
dividend of 17.50p. Ordinary shares issued in respect of this totalled 157,741. 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.
Preference shares
Allotted, called up and fully paid
shares of 1p each
At 4 March 2010, 3 March 2011
and 1 March 2012
B Shares
C Shares
million
2.0
£m
–
million
1.9
£m
–
At 1 March 2012 there were outstanding options for employees to purchase up to 1.2m (2011: 1.3m) ordinary shares of
76.80 pence each between 2011 and 2016 at prices between £7.28 and £14.17 per share (2011: between 2011 and 2016
at prices between £5.39 and £14.17 per share).
98
whitbread.co.uk
9 Shareholders’ funds
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Treasury
shares
£m
Total
£m
At 4 March 2010
146.4
49.1
12.3
2,587.3
(216.0)
2,579.1
Ordinary shares issued
Transfer of shares
Scrip dividends
Profit for the financial year
Equity dividends
At 3 March 2011
Ordinary shares issued
Transfer of shares
Scrip dividends
Profit for the financial year
Equity dividends
At 1 March 2012
0.2
–
0.4
–
–
147.0
0.4
–
0.1
–
–
147.5
2.1
–
(0.4)
–
–
50.8
3.0
–
(0.1)
–
–
53.7
–
–
–
–
–
12.3
–
–
–
–
–
12.3
–
(7.3)
7.9
2.1
(69.4)
2,520.6
–
(2.1)
2.6
11.2
(89.6)
2,442.7
–
7.3
–
–
–
(208.7)
–
2.1
–
–
–
(206.6)
2.3
–
7.9
2.1
(69.4)
2,522.0
3.4
–
2.6
11.2
(89.6)
2,449.6
The movement in treasury shares during the year is set out in the table below:
At 3 March 2011
Transferred during the year
At 1 March 2012
Treasury shares held by Whitbread PLC
£m
million
14.2
(0.1)
14.1
208.7
(2.1)
206.6
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 £13.7m (2011: £20.5m).
99
Shareholder services
Contact details
Registrars:
Capita Registrars
Whitbread Share Register
34 Beckenham Road
Beckenham
Kent
BR3 4TU
The website address is
www.capitaregistrars.com
For enquiries regarding your shareholding
please telephone 0844 855 2327 from
the UK and +44 (0)20 8636 3400 from
outside the UK. Alternatively you can email:
whitbread@capitaregistrars.com
You can also manage your shareholding
by visiting www.whitbread-shares.com.
This is a secure online site where you can:
• Sign up to receive shareholder information
by emails instead of post
• Buy and sell shares via the Capita Share
Dealing Service*
• View your holding and get an indicative valuation
• Change your personal details
(Please have your investor code to hand which can
be found on any of the following documentation,
share certificate, dividend voucher or proxy card.)
Please ensure that you advise Capita promptly of
any change of address.
Registered office
Whitbread PLC
Whitbread Court
Houghton Hall Business Park
Porz Avenue
Dunstable
Bedfordshire
LU5 5XE
General Counsel and Company Secretary
Simon Barratt
Share dealing service*
Capita Share Dealing Services tel: 0871 664 0446
(calls cost 10p per minute plus network extras,
lines are open 8am to 4.30pm, Monday to Friday)
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.
100
Dividend payments 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 please call
the registrars on 0844 855 2327.
Five-year dividend history*
)
e
c
n
e
p
(
e
r
a
h
s
r
e
p
d
n
e
d
i
v
i
D
60
50
40
30
20
10
0
2007/08
2008/09
2009/10
2010/11
2011/12
Year
*Excluding special dividend payments and returns of capital.
Dividend diary 2012/13
Ex dividend date for final dividend
16 May 2012
Record date for final dividend
Payment of final dividend
18 May 2012
13 July 2012
Ex dividend date for interim dividend 7 November 2012
Record date for interim dividend
9 November 2012
Payment of interim dividend
10 January 2013
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 contact details given above.
Financial reporting calendar
(dates subject to confirmation)
Half year end
30 August 2012
Announcement of half year results
23 October 2012
End of financial year
28 February 2013
whitbread.co.uk
Shares price analysis
High
Low
)
e
c
n
e
p
(
e
c
i
r
p
e
r
a
h
S
2000
1500
1000
500
0
2007/08
2008/09
2009/10
2010/11
2011/12
Year
Annual General Meeting 2012
The 2012 AGM will be held at 2.00pm on Tuesday
19 June 2012 at The Queen Elizabeth Conference Centre,
Broad Sanctuary, Westminster, London SW1P 3EE.
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.
Capital gains tax
Please refer to the investor section of the Company’s
website www.whitbread.co.uk for mor information on:
• the market value of shares in the Company
as at 31 March 1982;
• the reduction of capital on 10 May 2001;
• the special dividend and share consolidation
in May 2005; and
• allocations relating to the B and C shares.
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:
0845 703 4599 or you may prefer to register online:
www.mpsonline.org.uk
Analysis of shares at 1 March 2012
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
25,843
17,771
4,295
2,621
211
312
88
176
32
28
6
51,383
50.29
34.59
8.36
5.10
0.41
0.61
0.17
0.34
0.06
0.05
0.01
951,258
4,307,619
3,031,027
4,796,141
1,457,724
7,647,614
6,321,931
38,409,949
21,468,564
50,761,856
52,862,572
192,016,255
0.50
2.24
1.58
2.50
0.76
3.98
3.29
20.00
11.18
26.44
27.53
101
Shareholder FAQs
What are my benefits as a shareholder?
Shareholders who have a holding of 64 or more
ordinary shares are eligible to receive shareholder
discount vouchers. To obtain these you will need to
contact the Company registrars by telephone, email
or letter. (The registrars’ contact details can be found
on page 100.)
I have lost my share certificate, how can I get
a replacement?
If you have lost your certificate please contact the
registrars, Capita Registrars, on the shareholder
helpline (0844 855 2327) to advise them the certificate
is missing. They will then be able to assist you in
arranging a replacement.
Where can I find the current share price?
You can keep up to date with the current share
price by visiting the Company’s website
www.whitbread.co.uk
Will I have an opportunity to redeem my
B and/or C shares?
As outlined in the original circulars, the Company
made two separate purchase offers for the B and
C Shares. There will be no further purchase offers.
The Company does have the right to convert the
B and C Shares to Ordinary Shares but there is no
current intention to do so. The B and C Shares will
continue to attract an annual dividend payment.
Shareholder services
Warning to shareholders – boiler room scams
In recent years, many companies have become aware
that their shareholders have received unsolicited
phone calls or correspondence concerning investment
matters. These are typically from overseas based
‘brokers’ who target UK shareholders, offering to sell
them what often turn out to be worthless or high risk
shares in US or UK investments. These operations are
commonly know as ‘boiler rooms’. These ‘brokers’ can
be very persistent and extremely persuasive, and a
2006 survey by the Financial Services Authority (FSA)
has reported the average amount lost by investors is
around £20,000, with around £200m lost in the UK
each year.
It is not just the novice investor that has been duped
in this way; many of the victims had been successfully
investing for several years. Shareholders are advised
to be wary of unsolicited advice, offers to buy shares
at a discount or offers of free company reports.
If you receive any unsolicited investment advice:
• Check that they are properly authorised by
the FSA before getting involved by visiting
www.fsa.gov.uk/fsaregister and contact the
firm using the details on the register;
• Report the matter to the FSA either
by calling 0845 606 1234 or visiting
www.fsa.gov.uk/pages/consumerinformation;
• If the calls persist, hang up; and
• REMEMBER: if it sounds too good to be true,
it probably is!
If you deal with an unauthorised firm, you will not be
eligible to receive payment under the Financial Services
Compensation Scheme (FSCS) if things go wrong. The
FSA can be contacted by completing an online form at
http://www.fsa.gov.uk/Pages/Doing/Regulated/Law/
Alerts/form.shtml
Details of any share dealing facilities that the Company
endorses will be included in Company mailings.
More detailed information on this or similar activity
can be found on the FSA website
www.fsa.gov.uk/pages/consumerinformation
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