Whitbread Annual Report 2014

FY2014 Annual Report · Whitbread
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Whitbread PLC 
Annual report and accounts 2013/14

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Annual Report and Accounts 2013/14

“ Making everyday experiences special”

Financial highlights
Whitbread has delivered another year of strong  
double–digit growth in sales, profit and dividend.

 More on our financial performance

p4  Chairman’s statement 
p6  Chief Executive’s review
p38  Finance Director’s review

Total revenue

Underlying basic EPS2

£2,294.3m 

+13.0%

179.02p 

2013/14
2012/13
2011/12
2010/11

£2,294.3m

£2,030.0m

£1,778.0m

£1,599.6m

2013/14
2012/13
2011/12
2010/11

+20.1%

179.02p

149.10p1

133.60p1

116.01p1

Underlying profit 2 before tax

Full–year dividend

£411.8m 

+16.5%

68.80p 

2013/14
2012/13
2011/12
2010/11

£411.8m

£353.4m1

£318.3m1

£285.7m1

2013/14
2012/13
2011/12
2010/11

+19.9%

68.80p

57.40p

51.25p

44.50p

Group return on capital3

Cash flow from operations4

13.9%1 to 15.3%

£526.0m to £601.3m

Net debt

Group like for like sales

£471.1m to £391.6m

Up 4.2%

1   Restated for the impact of IAS 19 (revised 2011).  

3    Return on capital is the return on invested capital 

See Note 2 of the consolidated financial statements 
for 2012/13.

2   Underlying profit excluding amortisation of acquired 
intangibles, exceptional items and the impact of the 
pension finance cost as accounted for under IAS 19. 
Underlying EPS represents the earnings per share 
based on the above underlying profit definition and 
the tax thereon.

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

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

An interactive PDF of our Report and 
Accounts is available to download online.

  www.whitbread.co.uk/investors 

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2

 
 
 
 
 
 
 
 
 
 
Whitbread is all about people. As the UK’s  
leading hospitality company, our success  
is thanks to 43,000 motivated and engaged  
team members delivering outstanding service  
to 22 million customers every month across  
our hotels, coffee shops and restaurants.

We use this simple model, which we call  
The Whitbread Way, to describe our business 
philosophy.

 More on Winning Teams on p12 and p22

 More on Customer Heartbeat on p14 and p24

 More on Profitable Growth on p17 and p27 

 More on Good Together on p9, p19 and p29

Our vision is to grow legendary brands  
by building a strong Customer Heartbeat  
and innovating to stay ahead. It’s our Winning  
Teams that make everyday experiences  
special for our customers so they come back  
time and again, driving Profitable Growth.  
Our Good Together programme makes  
us a force for good in our communities.

Contents

Overview 

Financial highlights
Introduction 
1 
2  Group at a glance
4 

Chairman’s statement

Strategic report 
6 
8 

Chief Executive’s review 
 Our business model: 
The Whitbread Way
9 
 Good Together
10  Hotels & Restaurants
20  Costa 
30  Risk management 
34  Key Performance  

Indicators 
 Finance Director’s 
review
 HR Director’s report

38 

42 

 Corporate governance

Governance 
44 
46  Board of Directors
53  Audit Committee report
 Nomination Committee 
56 
report

58  Remuneration report 
77  Directors’ report

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Consolidated accounts 
2013/14 
84 

85 

88 

93 

 Directors’ responsibility 
statement
 Independent auditor’s 
report
 Consolidated  
financial statements
 Notes to the 
consolidated  
financial statements 

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Company accounts 
2013/14 
136   Directors’ responsibility 

statement

137   Independent auditor’s 

report

138  Balance sheet 
139  Notes to the accounts

Shareholder information
144  Shareholder services
146  Glossary
148  Our charities

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1
1

Whitbread 
Annual Report and Accounts 2013/14

 
 
 
 
 
 
 
 
 
 
 
 
Group at 
a glance

The Group

Whitbread

Whitbread has built some of the  
UK’s most successful hospitality 
brands including Premier Inn and 
Costa. We employ over 43,000  
people in the UK and serve  
22 million customers every month. 
Our strategy is to grow  our  
leading brands with a clear focus  
on returns to deliver substantial 
shareholder value.

We’ve set our sights on ambitious and fast–paced profitable 
growth and last year announced new growth milestones.  
By 2018 we plan to increase the size of Premier Inn to around 
75,000 UK rooms and the system sales of Costa to around  
£2 billion. 

Our businesses share common values and a clear vision  
on responsibility. We have demonstrated our ability to  
build strong brands through the consistent delivery of 
operational excellence and a great customer experience  
in people–intensive businesses.

Listed on the London Stock Exchange, Whitbread PLC  
is a member of the FTSE 100 and the FTSE4Good indices.

Our businesses

Hotels & Restaurants

  More on p10 
to p19

Premier Inn is the UK’s leading hotel 
business, with over 670 hotels and more 
than 55,000 rooms across the UK. 

We have more rooms in more locations than our competitors, 
which allows our customers to stay closer to where they  
want to be.

We offer our customers a 100% money–back guarantee  
of a good night’s sleep with a quality room, comfortable 
surroundings and friendly service. We call it our Good  
Night Guarantee.

All Premier Inn UK bedrooms have an ensuite bathroom,  
TV with Freeview and Wi–Fi internet access. All our hotels  
have a bar and restaurant, either inside the building or next  
to it, offering a wide range of dishes. Whitbread’s unique  
joint site model means that 377 of these hotels are located 
alongside our own restaurant brands: Beefeater; Brewers  
Fayre; Table Table; and Taybarns. A further 149 hotels  
include one of our Thyme restaurants.

Internationally, we have five hotels in the Middle East and  
three in India with more in the pipeline.

For the Hotels & Restaurants Investor Day presentations  
please see www.whitbread.co.uk/investordays

Whitbread 
Annual Report and Accounts 2013/14

Group at 
a glance

2

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2

 
 
 
 
 
 
 
 
 
 
  More on p17 
and p27

Growth

Premier Inn
Rooms
2013/14
2012/13

Restaurants
2013/14
2012/13

Costa
Stores
2013/14
2012/13

  More on p20 
to p29

Premier Inn is the UK’s  
leading hotel business.

Costa was again voted the  
UK’s favourite coffee shop.

  More on p38

Revenue by business

Hotels & Restaurants
Revenue
2013/14
2012/13

Costa
Revenue
2013/14
2012/13

£1,494.0m

£1,360.1m

Up 9.8%

£807.7m

£672.4m

Up 20.1%

Costa

Costa, voted the UK’s favourite coffee 
shop, has grown significantly over  
the past five years and now has 1,755  
coffee shops in the UK and 1,106 
overseas. 

Only 1% of the world’s coffee beans are good enough  
to create the unique taste and aroma of our Costa Mocha 
Italia blend. Almost all the coffee we serve in the UK,  
and most of that served in the rest of the world, is roasted  
at our Lambeth roastery.

Costa is an international brand represented in 30 countries.  
It has a multi–channel strategy, with equity stores, franchise 
stores and stores operated by joint ventures, as well as a 
wholesale operation. Costa Express now has over 3,500 
self–service machines.

For the Costa Investor Day presentations please see  
www.whitbread.co.uk/investordays

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56,738

52,967

3,771
net new rooms

401
397

4
net new restaurants

2,861

2,527

334
net new stores

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Whitbread 
Annual Report and Accounts 2013/14

Group at 
a glance

3

 
 
 
 
 
 
 
 
 
 
Chairman’s
statement

Anthony Habgood
Chairman

 This is another set of good results. Once again strong  
cash flow funded the necessary capital investment for  
our growth engines, Premier Inn and Costa, to increase  
their share of the market. We have recommended  
an increase in the full–year dividend by 19.9% while 
maintaining debt at a prudent level. I am confident  
that the brand strength of Premier Inn and Costa will  
continue to fuel the Company’s growth into the future.

Whitbread continues to evolve in a fast changing trading and economic environment.  
Premier Inn has, for example, responded to the growing competitive presence of online  
travel agents by significantly increasing its digital capability and resources. It has also 
announced the launch of ‘hub by Premier Inn’ which is a new city centre focused hotel  
concept. Costa is consistently looking to find new ways of ensuring that its customers  
are never far from a cup of Costa Coffee — for example through new distribution channels 
such as drive–thru and a new generation of Costa Express machine. Our restaurants have  
also been updating their brand propositions. This focus on innovation is essential for a  
modern company to prosper.

Dividend
The Board recommends a final dividend of 47.00p per share, making a total dividend of 
68.80p per share, up by 19.9%. The final dividend will be paid on 4 July 2014 to shareholders 
on the register at the close of business on 30 May 2014. The Scrip Dividend Scheme,  
which was introduced in 2009, has been closed. It has been replaced by a new Dividend 
Reinvestment Plan, which will not have the effect of diluting shareholdings. Further  
information on how to participate in this new plan can be found on the Company’s website. 

Full–year dividend

2013/14
2012/13
2011/12
2010/11

57.40p

51.25p

44.50p

68.80p

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Premier Inn has gone from  
strength to strength.

Costa has grown into an international  
brand present in 30 countries.

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Whitbread 
Annual Report and Accounts 2013/14

Chairman’s 
statement

4

 
 
 
 
 
 
 
 
 
 
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Board
In December 2013, we announced that Susan Hooper would be stepping down from her 
position as a non–executive director of the Company so that she could focus her attention  
on her new role at British Gas. I would like to thank Susan for her contribution to the Board 
over the last two years and wish her well in her new role.

We also announced changes to the roles and responsibilities of two of our other non–
executive directors. Sir Ian Cheshire became Senior Independent Director with effect from  
1 January 2014, taking over from Stephen Williams who had fulfilled that role since March 
2008. Stephen took over from Sir Ian as Chairman of the Remuneration Committee with 
effect from the same date.

Nine fascinating years of transformation and focused growth
This is the final Annual Report during my tenure as Chairman of Whitbread. It has been a 
privilege to lead the Board during nine exciting and transformational years for the Company.

When I joined Whitbread in 2005, the Group had a collection of brands including, among 
others, David Lloyd Leisure, T.G.I. Friday’s and Pizza Hut. Premier Travel Inn, as it was  
called then, had 28,400 UK rooms with no international presence and represented 15%  
of Whitbread sales. Nine years on, Premier Inn has 55,035 rooms in the UK and Ireland,  
with hotels also in India, Dubai and Abu Dhabi. Premier Inn’s sales have grown at over  
13% per annum and now represent 42% of Whitbread revenues. It is the country’s leading 
hotel brand. Costa, which had 426 stores in 2005 and represented 6% of Whitbread  
sales, has grown into an international brand with 2,861 stores in 30 countries. Its sales have 
grown at 23% a year and represent 38% of Whitbread’s revenues. It is now the UK’s leading 
coffee shop brand. Meanwhile we have focused our Restaurants business onto those 
sharing a site with a Premier Inn and we have almost doubled the number of these joint  
sites over the period.

This transformation has been achieved in a period that included the worst recession  
in living memory and has delivered significant value to our shareholders. The share price  
when I joined the Company in 2005 was £8.54 and we had delivered underlying basic  
EPS of 61.25p. At the time of writing the share price is £40.46 and our EPS for 2013/14  
was 179.02p.

In addition, I am immensely proud of the achievements of our Good Together programme.  
From a standing start five years ago, we are now fully engaged in many major and highly 
relevant areas to the business. These range from, for example, our leading apprenticeship 
programme to the highly successful school building programme in coffee–growing areas 
through the Costa Foundation. We are making a real difference.

None of this could have been achieved without the dedication and professionalism  
of thousands of members of the Whitbread team. I would like to take this opportunity  
to thank not just the 43,000 people currently working at Whitbread, but also thousands  
more that have contributed to this Company’s success during my time as Chairman.

Finally, on a personal note, I would like to thank my colleagues on the Board and in 
management for their support and wish Andy and his team every success as they lead  
the next phase of Whitbread’s development.

Anthony Habgood
Chairman 
28 April 2014

Whitbread 
Annual Report and Accounts 2013/14

Chairman’s 
statement

5

 
 
 
 
 
 
 
 
 
 
 
Chief 
Executive’s 
review

Andy Harrison
Chief Executive

Making everyday 
experiences special

2013/14 was another record year for Whitbread, delivering 
excellent results for all our stakeholders: our customers:  
our people; the communities in which we work; and of 
course our shareholders. 

Strategy
Our strategy focuses on strengthening and growing our leading brands, Premier Inn and 
Costa. We have set ambitious growth milestones for 2018 to increase the number of Premier 
Inn rooms from 55,000 in the UK today to around 75,000 and to reach around 10,000 rooms 
overseas. We will achieve this by winning share from independents and other branded hotels 
and growing the brand in selected international markets using a capital right model. In Costa 
we have targeted around £2 billion of system sales by 2018, up from the £1.2 billion of system 
sales last year. This will see us reach more than 2,200 UK stores by 2018 at the same time as 
growing our franchise and equity business internationally, with particular focus on extending 
our footprint in China.

We have a simple but powerful business philosophy which is encapsulated in our ‘Customer 
Heartbeat’ model which puts the customer at the heart of everything we do. It can be 
found throughout Whitbread, from our Boardroom wall to the back of house in every single 
Whitbread operated hotel, restaurant and coffee shop.

We are a hugely people–intensive business, with our 43,000 team members in the UK aiming  
to make everyday experiences special for each and every one of our 22 million customers each 
month. Our Customer Heartbeat model forms the foundation of our strategy. The delivery of a 
consistently great customer experience drives strong unit sales growth, delivering the margins 
and cash flow to finance our rapid and focused organic growth and achieve our 2016 and 2018 
growth milestones.

Delivering for our customers — building a strong Customer Heartbeat
We aim to build strong brands by putting customers at the heart of everything we do and we  
are proud to have the UK’s No. 1 coffee shop brand and No. 1 budget hotel brand as measured  
by Allegra Strategies and YouGov respectively. We measure our success through customer 
feedback in the form of both brand preference scores and net guest scores. We focus on 
increasing the number of customers who are very satisfied with their experience (and more likely 
to recommend us to their friends and family) and reducing the percentage who are dissatisfied. 
Once again we have delivered record guest scores for all our brands in the UK. 

Great customer service needs to be backed up with great products and we have invested  
over £100 million in the year in maintaining and upgrading our existing hotels, restaurants and 
coffee shops to ensure that they are the best in their markets. An enduring focus on innovation is 
producing exciting fresh experiences for our customers, whether that’s a new range of speciality 
lattes or a completely new hotel concept in ‘hub by Premier Inn’, which launches later this year.

Delivering for our people — building Winning Teams
We are passionate about building highly engaged Winning Teams and we are committed to 
making sure we have a great place to work. In this Report you can read about some of the inspiring 
work we are doing to create jobs for young, often long–term unemployed people who need that all 
important break to get into work and, once they’ve joined, to give them the opportunity to develop 
their skills in a structured way through industry–leading training programmes.

We ask our teams through a six monthly ‘Your Say’ survey about what it feels like to work  
at Whitbread. This year we achieved record engagement scores across all our brands and 
improved our rankings in the Sunday Times Best Big Companies to Work For 2014 and the  
UK Top Employers surveys, where we ranked 8th and 3rd respectively.

Whitbread 
Annual Report and Accounts 2013/14

Chief Executive’s 
review

6

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2

 
 
 
 
 
 
 
 
 
 
the passion and commitment of our team members.  
Let me take this opportunity to thank them all, on  

 ‘‘ Our continuing success is a result of, and a tribute to,  
behalf of the Board, for their contribution.’’

Delivering for our communities — Good Together
Businesses should be a force for good in the communities and economies in which they 
operate. Our corporate responsibility programme, Good Together, has gone from strength  
to strength in the five years it has been running. We’ve set ambitious targets and in this 
Report you can read how we are delivering these. We are also proud to hear the real–life 
stories from around our business that illustrate the difference we make to people’s lives  
and the environment that we all share.

Delivering for our shareholders — driving Profitable Growth
It is no coincidence that record performance scores for our Winning Teams and our 
Customer Heartbeat have driven record financial results. In 2013/14 we grew our total sales 
by 13.0% to £2.3 billion. This growth in total sales was a combination of a 4.2% increase  
in like for like sales and continuing expansion of our network. During the year we opened  
23 net new Premier Inn hotels in the UK with 3,364 net new rooms. We are also continuing 
to grow Premier Inn in selected international markets. We opened a new Premier Inn hotel  
in Abu Dhabi, another in Pune, India and have firm agreements to build 22 hotels in three 
target regions. Alongside our new Premier Inn hotels in the UK we constructed eight new 
restaurants, reinforcing the unique Whitbread joint site model, consisting of a Premier Inn 
hotel closely adjacent to a Whitbread restaurant. Costa has also continued its strong organic 
growth with the opening of 334 net new coffee shops worldwide, including 177 in the UK, 
together with the installation of 955 net new Costa Express machines.

Our strong sales performance translated into a 16.5% growth in underlying pre–tax profit  
to £411.8 million and a 20.1% growth in earnings per share, helped by a reduction in the 
corporation tax rate. We have maintained our strong balance sheet with our net debt  
falling from £471.1 million to £391.6 million over the course of the financial year. This was 
driven by our strong cash flow, which also financed capital reinvestment in the business  
of over £300 million. Our strong profit growth and cash flow have led the Board to propose 
a 24.0% increase in the final dividend, which would deliver a full–year dividend of 68.80p,  
an increase of 19.9%.

During the year we held a Costa Investor Day and a Hotels & Restaurants Investor Day.  
These provided an opportunity for investors to understand the strategy better for each 
business. We outlined how we will continue to focus on winning share in our domestic UK 
market and how we will grow Costa and Premier Inn in selected overseas markets where  
we believe they will prosper. Costa is now in 29 countries overseas with over 1,000 stores 
including 326 in China. Premier Inn has eight hotels in the Middle East and India and is 
exploring additional developing markets such as Indonesia and Thailand.

It is fitting that, in a year of record performance, our Board thanks our Chairman, Anthony 
Habgood, for his outstanding contribution to Whitbread’s success. When he joined Whitbread 
in May 2005 it was a very different business to that today. Together with the Board, he 
embarked upon a journey to transform Whitbread into a focused company, committed  
to investing in and building wholly–owned market leading brands which create sustained 
shareholder value. Under his stewardship shareholders have enjoyed significant returns, with  
a total shareholder return (which includes share price growth, dividends and capital returns)  
5.5 times greater than that of the FTSE 100 over the same period. He leaves Whitbread 
stronger and sharper, with a firm platform upon which to deliver our exciting growth ambitions.

In the following pages we have included more detail on the work our Winning Teams are 
doing to build a strong Customer Heartbeat and to drive Profitable Growth and create 
shareholder value. I hope you find this interesting and informative.

Andy Harrison
Chief Executive
28 April 2014 

Whitbread 
Annual Report and Accounts 2013/14

Chief Executive’s 
review

7

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The Whitbread Way 

Winning Teams

Customer
CCustomerr
Heartbeat
HHHeartbeaaatt

Proﬁtable Growth

A force for good

Business philosophy 

We build highly engaged teams who make everyday 
experiences special for our millions of customers —  
by recruiting the best people, investing in training and 
development, growing talented leaders and recognising  
and rewarding success.

Measures

•	Team engagement
•	Team turnover
•	Health and safety

We put the customer at the heart of everything we do, as well 
as developing innovative new products and services to meet 
and exceed customer expectations, building brand preference 
and winning market share. We are committed to maintaining 
the quality of our estate through ongoing refurbishment. 

•	Net guest scores
•	Brand performance
•	Brand standards

We create shareholder value by growing profits and delivering 
good returns through focused investment in Premier Inn 
(including our unique joint site restaurant model) and Costa, 
where we pursue organic growth in domestic and selected 
international markets. We maximise Group synergies through  
a focus on delivering a consistently good customer experience 
in a service and people–intensive environment and utilising our 
central property expertise.

We aim to be a force for good within the communities in 
which we operate by embedding our CSR principles into the 
way we do business. Our plan has three main pillars: Teams 
and Community; Customer Wellbeing; and Environment.

•	Growth milestones
•	Underlying profit
•	Underlying basic EPS
•	Returns on investment
•	Like for like sales growth
•	Market performance

•	Good Together targets
•	Carbon consumption
•	Waste diverted 
from landfill

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WINcard
We set key performance indicators for Winning Teams, Customer Heartbeat, Profitable Growth and Good Together. Behind 
each of these headings are clear and measurable targets which together make up our balanced scorecard or WINcard as  
we call it (Whitbread In Numbers). The Remuneration Committee takes account of a range of factors when setting targets,  
but in most cases the following principles are applied:

   A green score is achieved where the performance is better than both target and the previous year.

  An amber score is for performance which is better than the prior year but below target.

  A red score is for a result below the previous year.

  More on p34 
to p37

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Whitbread 
Annual Report and Accounts 2013/14

Group
Business model

8

  
 
 
 
 
 
 
 
 
 
 
 
Good 
Together

Winning Teams

Customer
CCustomerr
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Targets 2016/17

Teams and Community
Job creation
•	10,000 new UK jobs.
Charitable activity
•	Hotels & Restaurants has committed 
to raise £7.5 million towards The 
Premier Inn Clinical Building at Great 
Ormond Street Children’s Hospital, 
which is due to open in 2017.

•	Costa Foundation to educate 50,000 

children and build 50+ schools  
in coffee–growing communities. 

Customer Wellbeing
Accreditation and sustainable  
supply of:
•	tea/coffee;
•	timber;
•	palm oil;
•	fish;
•	meat; and
•	all Costa hot drinks will be Rainforest 

Alliance certified.

Qualifications and training 
•	Hotels & Restaurants — 10,000 
qualifications (including 3,000 
apprenticeships).

•	Costa — enhanced skills training  

to 20,000 team members.

•	Hotels & Restaurants — 4,500 school 

work experience placements.

Activity in the year

Teams and Community
•	Around 3,000 net new UK jobs 

created. 

•	Over 690 apprentices in learning 
with 557 awarded in 2013/14. 

•	Over 20,000 team members received 
training and development and took 
part in skills programmes. 

•	Raised over £1.5 million for the Costa 
Foundation, with eight new school 
projects opening during the year. 
•	Raised over £2.2 million to date  

for Great Ormond Street Hospital 
Children’s Charity with almost  
£1.5 million being raised this year.

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.

Customer Wellbeing
•	New Costa hot chocolate powder, 
with 100% Rainforest Alliance  
cocoa, for worldwide distribution  
from March 2014 mirroring our 
commitment to coffee and tea. 
•	We have updated our models  
and policies to deliver against  
our challenging 2017 sustainable  
sourcing targets ahead of  
supplier engagement in 2014. 

•	Upweighted activity on development 
within our food and drink portfolio, 
delivering further focus on calorific 
content and nutritional value. 

Environment
•	25% carbon reduction1.
•	25% reduction in water consumption1.
•	Zero waste to landfill1.
•	10% carbon reduction across 

the supply chain.

Environment
•	Relative to sales, carbon emission 
efficiency has improved by 10.3%  
pts year on year. We now stand at a 
32.8% reduction in carbon intensity 
from our 2009 baseline and have  
hit our target three years early.  
We are reviewing our medium–term 
environment strategy and will  
develop new programmes and 
targets for release in 2015.

•	We have achieved a 7.7% reduction  
in water use year on year, relative  
to sales. We have now reduced  
water usage by 28.2% from our 2009 
baseline and have hit our amended 
target. We are developing the next 
phase of our water reduction strategy 
and will launch new targets in 2014.
•	At the end of the financial year we 

were diverting 92.7% of waste from  
all hotels and restaurants from landfill 
and 94.6% from all directly operated 
hotels and restaurants. 

•	In Costa we were diverting 67.0% 

of all waste from landfill by the end 
of the year.

1 

 From Whitbread direct operations and based on 2009 baselines.

Whitbread 
Annual Report and Accounts 2013/14

Group 
Good Together

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Hotels & Restaurants
Business model

The Whitbread Way — the foundation of our strategy

Winning Teams

Customer
CCustomerr
Heartbeat
HHHeartbeaaatt

Proﬁtable Growth

A force for good

•	We recruit, reward, train and develop  

our 30,000 team members to build highly 
engaged teams who deliver great 
customer service and make everyday 
experiences special.

•	With over 670 UK hotels, Premier Inn 
offers customers the greatest choice.
•	Premier Inn offers a consistently high 

quality product supported by our Good 
Night Guarantee.

•	Our dynamic pricing system means  

we can offer customers the best value  
and deliver occupancy targets.
•	We are a leading online retailer —  

nearly four out of every five bookings  
is made at www.premierinn.com

•	We invest in high returning, consistently 

profitable sites and are increasing  
our share of the UK market with rapid 
expansion of Premier Inn, especially  
in London.

•	We are entering into selected international 

markets with the Premier Inn brand.

•	We offer jobs with opportunity, and  
an industry–leading apprenticeship 
programme to grow talented leaders.

•	We build brand awareness and loyalty 
through targeted marketing and sales.
•	At every Premier Inn we serve great  

food and drink.

•	Over half of our Premier Inns have a 

Whitbread branded restaurant next door.

•	Our restaurants have distinctive brand 
propositions and serve great quality  
value food appealing to a local customer 
base and our hotel guests.

•	We continually refurbish our estate  

to maintain its quality.

•	We maximise synergies and efficiencies 

with our joint site restaurants.

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•	We are raising £7.5 million towards  
The Premier Inn Clinical Building at  
Great Ormond Street Children’s Hospital.

•	We are creating more than 1,000 job 
opportunities every year with a focus  
on 16 to 24 year olds and the long–term 
unemployed.

•	We are committed to sustainable 

sourcing.

•	We seek to minimise our carbon,  
waste and water usage often  
using innovative technology and 
construction methods.

For Hotels & Restaurants Investor Day presentations please see www.whitbread.co.uk/investordays

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Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Business model

10

 
 
 
 
 
 
 
 
 
 
Hotels & Restaurants
Highlights

Highlights
•	Achieved our highest 

ever engagement scores 
in the ‘Your Say’ survey.
•	Created new employee 

propositions for  
both Premier Inn and 
Restaurants.

•	Participated in industry–
led forums focusing  
on youth unemployment, 
apprenticeships and  
work experience.

•	Recognised as one of the 
 ‘Top 100 Apprenticeship 
Employers’ by the 
National Apprenticeship 
Service.

Highlights
•	A quality restaurant is 
critical to Premier Inn’s 
guests and our joint  
site model continues  
to be popular with our 
customers.

•	 ‘hub by Premier Inn’  

was launched in 2013, 
with the first hotel due  
to open in the second 
half of 2014.

•	Premier Inn was rated 
the ‘best value hotel’  
for the fourth year 
running by YouGov.

•	Following the successful 
launch of the Beefeater 
Rewards Club, loyalty 
schemes have been 
rolled out in Brewers 
Fayre and Table Table.

Highlights
•	Strong cash flow 

generation fuelled both 
reinvestment in the 
business and organic 
growth.

•	Premier Inn’s committed 
pipeline remains strong 
and puts us on track 
to deliver our growth 
milestones.

•	Our restaurants 

outperformed the  
Coffer Peach industry 
benchmark outside  
of the M25.

•	Expanding the Premier 
Inn brand across the 
Middle East, India and 
South East Asia.

Highlights
•	Recognised for the fourth 
year running by Business 
in the Community, with  
re–accreditation of the 
 ‘Skills in the Workplace’ 
award 2013.

•	Carbon heat map process 
and reporting system 
established to engage 
the supply chain  
in carbon reduction.
•	Doubled the amount  
of renewable energy 
purchased.

•	Continued focus and 
progress to reduce  
salt content in our dishes 
in line with Department  
of Health targets.

Figures

Figures

Figures

Figures

93%
of team members completed  
the ‘Your Say’ survey

£1.1 million
paid to team members through 
the ‘My Rewards’ programme

1,045
work placements completed  
by unemployed people and 
school students

1,200
new jobs created

672
hotels in the UK. Premier Inn’s 
scale allows our customers to 
stay closer to where they want

70%
of Premier Inn guests scored 
their stay as nine or ten out  
of ten

377
of our Premier Inns are  
adjacent to one of our  
branded restaurants

89%
of guests eating in our 
restaurants rated the food  
as four or five out of five

3,771
net new Premier Inn rooms  
were opened in the year

11,500
rooms in our committed pipeline

36%
of all visits to the Premier Inn 
website are now via mobile 
devices

1.7 million
customers in the email database 
of our restaurants brands

£2.2 million+
raised for Great Ormond  
Street Hospital Children’s 
Charity

16,900+
volunteering hours given

23.1%
less carbon emitted since  
2009 relative to sales

21.2%
reduction in water  
consumption since 2009  
relative to sales

  More on p12 

  More on p14  

  More on p17  

  More on p19  

Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Highlights

11

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Proﬁtable GrowthWinning TeamsA force for goodCustomerHeartbeatCCustomerrHHHeartbeaaatt 
 
 
 
 
 
 
 
 
 
Hotels & Restaurants
Winning Teams

Winning Teams

CCustomerr
Customer
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Across our 672 Premier Inns and  
401 restaurants we employ more than 
30,000 people. Success is all about 
making everyday experiences feel 
special for our customers and we rely 
on our Winning Teams to do just that. 
That’s why it’s so vital that our teams 
are highly engaged and passionate 
about what they do. 

We measure engagement through our six–monthly ‘Your Say’ 
survey and, in the most recent survey, we achieved our 
highest engagement scores to date.

Team engagement survey: ‘Your Say’

Engagement  Engagement  Response 
rate 
Oct 2012  Oct 2013 

score  
Oct 2013 

score 

Response 
rate 
Oct 2012

Hotels & Restaurants 

80% 

75% 

93% 

96%

 ‘Your Say’ lets us know the things that matter most to our 
teams and we use the results to develop specific action plans. 
One of the priorities identified is to have better two–way 
communication and we have taken a number of steps to 
address this, including new listening forums. These have taken 
place in over 100 sites, enabling team members to have a 
voice and speak freely with the leaders of the business and  
to share ideas for improvement. This year, we launched 
 ‘Avenue’ to the business. This is a digital internal social media 
platform which allows ideas to be shared across the Group 
and successes to be celebrated.

Premier Inn
At Premier Inn’s annual conference this year, we launched  
our Guest Purpose: ‘Making our guests feel brilliant through  
a great night’s sleep’. At the same time, we launched the  
new Premier Inn ‘People Promise’: ‘Premier Inn, a place  
made by you’. The main purpose is to ensure that every  
team member understands the part they play in delivering  
our Guest Purpose.

Premier Inn’s ‘People Promise’ is split into four areas:
•	I feel really special — we have developed a programme  
of management and leadership development as well  
as a programme of team member training. Its intention  
is to ensure that every member of the team understands  
the importance of the role that they play in delivering  
our Guest Purpose. 

•	How will I know I am doing a good job? — we have 

launched new training tools, an Ambassador programme 
to support our new starters, and we have launched our  
new induction ‘Brilliant Beginnings’ ensuring our teams 
know how they’re doing every step of the way.

•	I have lots of opportunities to grow — we are focused  

on building our talent and succession pipeline in all regions  
and countries where we operate to meet our ambitious 
growth plans. In total we have held 3,180 days of 
management development training and a total of  
557 people completed an Intermediate or Advanced 
apprenticeship. We have also launched a ‘Stretch 
Development’ 12 month programme for our leaders with 
high potential. In total, 71% of Premier Inn’s appointments 
were internal. 

•	I am rewarded and recognised — this year has seen the 
launch of ‘My Rewards’ in Premier Inn. An innovative 
programme which uses pre–loadable, pre–paid VISA debit 
cards for all reward and recognition payments. So far this 
year we have paid out £520,000 to our teams through  
 ‘My Rewards’, as recognition of their contribution to the 
reduction in complaints and improvement in guest 
feedback scores. To date over 13,000 (80%) of our team 
members have registered for their ‘My Rewards’ card and 
we are committed to continuing to create a culture of 
celebrating and recognising our teams who go the extra 
mile for our guests.

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Record team engagement  
scores in 2013/14. 

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Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Winning Teams

12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Restaurants
This year Restaurants have focused on a single purpose;  
to ensure our 14,000 team members are willing and able to 
‘Serve up Great Memories’. Over the last 12 months, we have 
developed a clear message to our team members under  
the heading ‘You’re the Main Ingredient’ with the belief that  
we all have a vital part to play in the success of Restaurants. 

Our progress in Restaurants is detailed below:
•	I know you care — as in Premier Inn, this year we introduced 
our new rewards programme ‘My Rewards’ to our teams, 
with over 90% of teams receiving financial recognition for 
their role in serving up great memories. We equipped our 
Regional Managers with mobile access to the ‘My Rewards’ 
system and recognition tools to enable them to instantly 
celebrate their teams’ successes. Teams across Restaurants 
took part in a range of incentives to a total value of 
£550,000, which rewarded their contribution and boosted 
sales at key trading periods throughout the year.

•	I know how to progress my career — in total we have 

delivered 472 days of management development training  
in the year, helping our teams to improve their skills and 
realise their potential. We developed a simplified career 
journey to make progression accessible to a wider 
population. More recently we have launched our new 
 ‘Progressing Into General Management’ programme, which 
aims to fast track our most high potential team members 
into general management positions. Out of our 333 
management appointments this year, 56% were internal 
development moves.

•	I know what is expected of me — we have focused on 

improving communications and engagement around our 
purpose of Serving up Great Memories across our business, 
enlisting the support of our team members to shape our 
two–way communication strategy.

•	I know how I’m doing — in partnership with our teams and 
managers, we have launched new ‘team chat’ tools at site  
to support regular open dialogue, ensuring our teams know 
how they’re doing every step of the way.

•	I know my stuff — 350 of our very best team members 

graduated from our four day Heroes training programme 
during the year. The programme creates ambassadors,  
who help train others, improve guest experiences  
and engage their teams. 1,072 delegates attended a 
restaurants management academy course and 7,500  
days of training were delivered in our kitchen skills 
academies across the UK. 

•	I feel part of something special — we achieved record 
engagement scores and our most improved areas were 
 ‘open and honest two–way conversation’, ‘the Company 
really listens to what I have to say’, ‘my manager gives me 
helpful feedback’ and ‘I see how I can develop my career’.

Skills development
Developing the skills and abilities of our teams is core to 
enabling our people to achieve their ambitions, have a good 
sense of wellbeing at work and deliver great experiences  
to our millions of customers. In 2013/14 we broadened our 
approach and are now reaching out into the communities  
in which we operate, supporting our Good Together goal  
to be a force for good.

We have hosted and taken part in several industry–led forums,  
 ‘Big Conversations in Hospitality’, to focus on three areas: 
youth unemployment; apprenticeships; and work experience. 
This has resulted in over 30,000 pledges from Whitbread  
and other industry employers to offer jobs, work experience 
and apprenticeships to young people. 

We have developed our WISE Programme (Whitbread 
Investing in Skills and Employment), which secured funding 
from the Government’s Employer Ownership of Skills project 
to support a number of initiatives including:
•	building links with schools, colleges and universities;
•	providing sustainable and inspirational work experience  

to young people;

•	transitioning the unemployed into work; and
•	developing a progression of apprenticeships.

Work placements
This year, we have provided opportunities to young and 
unemployed people who may struggle to gain experience  
and access to employment. In total over 1,045 placements 
were completed with structured work experience for school 
students and unemployed people to give them experience 
working in a highly customer–focused environment.

Apprenticeships
We were proud to be recognised as one of the ‘Top 100 
Apprenticeship Employers’ by the National Apprenticeship 
Service and were highly commended in the National 
Apprenticeship Awards for an outstanding contribution  
to raising the profile of apprenticeships and raising skills 
across our industry.

Since we introduced the programme in 2009, 7,000 
qualifications have been awarded including awards for 
 ‘Skills for Life’ and functional English and maths. 

Creating opportunities
Our ambitious growth plans, both in the UK and 
internationally, make our Hotels & Restaurants business 
an exciting place to work with plenty of opportunities and  
we are proud of our ability to develop people and build 
exciting and diverse careers.

This year we have appointed over 17,000 people into positions 
across the business including 657 management roles. Out of 
these over 1,200 were brand new jobs in newly opened sites. 
We have a target to ensure that 50% of new roles go to 
people not in education, employment or training.

Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Winning Teams

13

 
 
 
 
 
 
 
 
 
 
Hotels & Restaurants
Customer Heartbeat

Winning Teams

CCustomerr
Customer
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Whitbread’s hotels and restaurants 
welcome five million customers every 
month, whether that’s to enjoy a  
meal out or a great night’s sleep in a 
Premier Inn bed. We are committed  
to maintaining the excellent standards 
and levels of service that our guests 
expect, by growing the number of 
locations and investing in our product 
to ensure that we have brands that  
are the best in their marketplace and  
win share.

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We’re guest obsessed
We operate the largest consumer survey in Europe with  
over 900,000 guests responding every year to our email 
questionnaire, providing daily feedback for every single site. 
We use this data to produce scores for each site and for  
the brand as a whole. In 2013/14 70% of our guests gave us  
nine or ten out of ten and the overall score has improved  
by 12% pts in the last three years.

At Premier Inn we really care about our guest experience  
and we offer a ‘Good Night Guarantee’, which gives the guest 
the ultimate guarantee that they can book our rooms with 
confidence. If they don’t get a good night’s sleep they get  
a full refund. 

Enhancing the customer experience
As well as giving our guests confidence, the Good Night 
Guarantee also gives our teams confidence as it alerts them  
to issues and encourages them to fix them quickly. This helps 
us to target our investment to maintain standards and in 
2013/14 we invested around £80 million in repairs, maintenance, 
refurbishment and systems. To ensure a consistently superior 
product we follow a systematic refurbishment cycle across 
our estate which involves a light refurbishment after years 
three and nine, the replacement of TV and soft furnishings 
after six years and a full refurbishment every 12 years.

To maintain our leadership position, this year we have 
launched three key innovations, our new bed; our new room; 
and a new brand — ‘hub by Premier Inn’.

Our mission is to make every one of our guests  
feel brilliant by giving them a great night’s sleep.

Largest network
With over 670 hotels around the UK, Premier Inn is the UK’s 
largest hotel chain. We offer more rooms in more locations, 
which allows us to be closer to where our customers want to 
stay — whether that’s to attend a family gathering, a business 
meeting or enjoy a weekend break.

New TV advert featuring Lenny Henry  
promoting the new bed.

Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Customer Heartbeat

14

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At the heart of a great night’s sleep lies a great bed and we 
have partnered with leading bed–maker, Hypnos, to develop 
our next generation bed. With 1,200 individual pocket coil 
springs, a super–comfortable integrated topper, and a 
mattress made from 100% recyclable materials supporting 
our Good Together programme, our bed sets the standards 
for the sector and is now being rolled out.

We have also been developing the next generation of our 
room and, whilst the bed is clearly the hero, the new room 
also features a 40–inch flat screen TV, enhanced energy–
efficient lighting, aerated power shower, excellent working 
space and a fresh modern design. All the new hotels that we 
build will feature the new room and bed, which we will also roll 
out to our existing rooms in line with our refurbishment cycle.

Launched in July 2013, ‘hub by Premier Inn’ is a new 
generation of compact, city centre hotels with contemporary 
room design that will offer good value for money and appeal 
to customers who value price, location and design over  
space. It will target major UK city centres such as London and 
Edinburgh. The first one is due to open in the second half of 
2014 in St. Martin’s Lane, right in the heart of London’s West 
End and a further eight sites are in the pipeline, including two 
in Edinburgh.

 ‘hub by Premier Inn’ — a new generation  
of compact city centre hotels.

Brand awareness
Premier Inn continues to top the YouGov brand index and  
has been rated ‘Best Value Hotel’ for the fourth year in a row.

YouGov — value measure

35

30

25

20

15

10

5

0

–5

–10

Key

January
2010

January
2011

January
2012

January
2013

January
2014

Premier Inn
Travelodge
Holiday Inn

Ibis
Marriott
Hilton

Source: YouGov Brand Index 52 week rolling average at 1 January.  
Score is calculated by taking negative answers from positive answers  
and dividing by the total number of responses.

We’ve also picked up some major industry awards in the  
year including Best Budget Hotel Chain 2013 at the Business 
Traveller Awards and Favourite Hotel Chain according to 
Travel Weekly and the Daily Mail. We were also delighted to 
be the highest ranked budget brand in the ‘Which? Hotel 
Report 2013’.

In January 2014, we launched a new £15 million multi–channel 
TV advertising campaign, once more featuring Lenny Henry. 
The aim of the campaign was to emphasise our commitment 
to delivering a great night’s sleep, build our emotional 
connection with consumers and reinforce the scale of our 
national network.

Vision to be ‘best in class digital retailer’
Premier Inn is an online business and we have significantly 
increased our investment in digital to improve the overall 
customer experience.

We are doing this in a number of ways. Firstly, we drive  
traffic to our web and mobile sites through broad reach  
TV advertising and email promotions; secondly we are 
creating engaging and relevant content on our sites including 
customer reviews, Trip Advisor ratings and social media 
activity, to improve our presence on the web and enhance  
the customer experience; and thirdly once customers have  
come to our sites we then seek to convert as many of them  
as possible to book with us. Our seamless online check in  
facility means guests can book, pay and check in, all online.

Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Customer Heartbeat

15

 
 
 
 
 
 
 
 
 
 
Hotels & Restaurants
Customer Heartbeat 
continued 

Customers access our website using mobile devices more  
and more and we are responding to these changes by 
developing rapidly in this area. We are increasingly active  
on social media helping to improve brand engagement.  
We now have more than 34,000 followers on Twitter and  
over 96,000 Facebook fans; double that of two years ago.

Restaurants that serve up great memories
With around 47 million guests a year eating in our restaurants 
our teams are committed to making every single experience  
a memorable one.

Serving up great memories.

Of our 672 Premier Inn hotels in the UK and Ireland, 377 are 
adjacent to either a Beefeater, Brewers Fayre, Table Table  
or Taybarns restaurant and our Restaurants business plays  
an important role in supporting Premier Inn’s growth and 
success. A quality restaurant is critical to Premier Inn guests, 
especially for breakfast which is enjoyed by 60% of all guests. 
25 to 30% of Premier Inn guests also choose to have dinner  
in the adjacent restaurant and like the choice and great  
value dining experience that our Restaurant brands offer.

However, around 85% of our Restaurants’ customer base are 
people who live locally and are not Premier Inn guests, so it is 
equally important to ensure that our Restaurant brands have  
a broad appeal within their communities.

We are equally guest obsessed in our Restaurants business 
and run a Guest Recommend survey receiving over 400,000 
responses annually. We use the responses to produce a guest 
score and in 2013/14 we achieved record guest scores across 
our three main brands of Beefeater Grill, Brewers Fayre and 
Table Table. For all Restaurant brands combined, the overall 
score increased in the year by 3.2% pts to 66.1%. 

The areas where we saw the most significant improvements  
in guest scores were in food quality and customer service. 
89% of our guests rated our food four or five out of five and 
92% of our guests rated our staff friendliness four or five out 
of five. The improvement in guest scores is down to a number 
of measures that internally we refer to as our ‘recipe for 
success’. This recipe boils down to having highly engaged 
team members, quality food and a great menu choice.

Another major factor in improving our guest scores has been 
the greater choice of dishes on the menus, improved food 
quality and better presentation on the plate. We have spiced 
up our menus with a more exciting range of dishes, including 
a greater choice of salads in Beefeater Grill and a new range 
of burgers in Table Table.

Building a loyal fan base
On the back of the highly popular Beefeater Rewards Club,  
we have rolled out loyalty schemes in our other two main 
brands during the year. The Brewers Fayre Bonus Club was 
launched in April 2013 and the ‘Table Table Tasty Rewards’ 
was launched in August 2013.

These programmes help us to understand our guests much 
better than ever before. We know how often they dine with 
us, who they bring, what they eat and other facts such  
as their birthdays. We have already rewarded our most loyal 
customers with 57,000 free birthday meals and the good 
news is they invite friends and family. 

2013/14 has also been the year when our social media presence 
took off across our Restaurant brands and has helped us to 
really engage our customer base. We launched the Beefeater 
Facebook and Twitter accounts in June 2013 with the ‘Boss  
of Beef’ campaign headed up by Sir Ian Botham and we now  
have 294,000 fans on Facebook and 6,100 followers on  
Twitter across our Restaurants business.

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Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Customer Heartbeat

16

 
 
 
 
 
 
 
 
 
 
Hotels & Restaurants
Profitable Growth

Winning Teams

CCustomerr
Customer
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

During 2013/14 our Hotels & 
Restaurants business delivered  
a good performance with revenue 
increasing by 9.8% to £1,494.0 million. 

Premier Inn grew total sales by 13.4% to £967.9 million with 
the opening of 3,771 net new rooms worldwide and like for  
like sales growth of 5.0%. Restaurants grew total sales by  
3.9% to £526.1 million with like for like sales growth of 1.6% 
and the opening of eight restaurants. Underlying profit rose 
by 11.2% to £348.1 million and Hotels & Restaurants’ return  
on capital increased by 0.9% pts to 13.3%.

Our strong cash flow generation fuelled both reinvestment in 
the business and organic growth as we invested £231.1 million 
during the period. At the same time, we delivered consistently 
strong returns as we focus on growing profits and improving 
shareholder value year after year. 

Continued structural change provides opportunity  
to grow to c.75,000 rooms by 2018

2018

2016

2012

2010

46%

26%

Premier Inn rooms* c.75,000 (c.11.0% share)

49%

26%

Premier Inn rooms* 65,000 (c.9.0% share)

Total 
UK hotel 
market

28%

700,000
rooms

25%

690,000
rooms

Premier Inn rooms* 51,000 (7.0% share)

54%

25%

21%

Premier Inn rooms* 43,000 (6.0% share)

57%

24%

19%

682,000
rooms

679,000
rooms

Key

Independents

Other branded

Budget branded

We held an Investor Day in July 2013 and the presentation  
can be found at www.whitbread.co.uk/investordays

*UK and Ireland

UK hotel market
Whilst the UK hotel market has seen little volume growth 
since the onset of recession in 2008 there are important shifts 
taking place. The independent sector has been in decline  
to the benefit of branded chains which are gaining share. We 
expect the structural change in the hotel sector to continue, 
providing further opportunity for branded penetration within 
the UK market. By using our competitive advantage of the 
largest hotel network, a consistent superior product and great 
value for money, combined with our brand strength and 
operational excellence, Premier Inn is ideally placed to benefit 
from this structural shift. 

Premier Inn offers more rooms in more locations, allowing  
our customers to stay closer to where they want to be.

Source: BDRC, IPS (ONS), STR, TRI, Oxford Economics, Visit Britain, 
OC&C analysis. 

Growth milestones
At the end of 2012/13 we extended our growth milestone  
to reach around 75,000 UK rooms by 2018 through the 
addition of 23,000 rooms and for our share of the total hotel 
market to rise from 7.6% to around 11.0% across this period.  
In 2013/14 we made good progress against our growth 
objectives opening 3,364 net new Premier Inn rooms in  
23 net new hotels including eight new joint site restaurants. 
This increased our total number of rooms to 55,035 and  
hotels to 672. 

We analyse supply and demand in some 500 micro markets 
across the UK and see a significant growth opportunity in 
London where we currently have 8,729 Premier Inn rooms.  
We have plans to grow our London estate to 20,000 rooms 
by 2018 and our central London rooms from around 2,900  
to 8,250. The business case for operating in central London  
is particularly compelling with the profits of a leasehold room 
being twice that of a leasehold room in the regions due to 
higher RevPAR and a faster maturity profile. 

Our 2018 growth milestone includes 3,000 rooms of our  
new compact city centre hotel brand, ‘hub by Premier Inn’.  
The footprint of a ‘hub’ room is 45% smaller than that of a 
Premier Inn room and, with 25% lower build and operating 
costs, would deliver similar returns on capital to a Premier  
Inn hotel at a 30% lower price point. Our first ‘hub’ hotel  
is due to open in the second half of this year.

Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Profitable Growth

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Hotels & Restaurants
Profitable Growth 
continued 

Our committed pipeline remains strong with 11,500 rooms  
of which 5,500 are in London. This puts us on track to achieve  
our 2016 growth milestone of 65,000 rooms and well on our 
way towards reaching our target of around 75,000 rooms  
by 2018.

Whilst we focus on delivering our organic growth strategy  
it is also important that we continue to deliver good like  
for like growth. Our focus on the quality and consistency  
of our product and services combined with the key levers  
of dynamic pricing, digital, reinvestment in our estate  
and network strength improved like for like sales by 5.0%  
for Premier Inn during 2013/14. 

Dynamic pricing
Dynamic pricing has been an important contributor to our 
sales growth as we have introduced more sophistication into 
our pricing. Today, we have two separate price points — Flex 
and Saver — each of which carry different benefits targeted  
at specific consumer segments.

As we build our digital capability this directly benefits our 
dynamic pricing model. By linking our online data, together 
with our customer data and bookings performance,  
we can get detailed information on demand and purchase 
patterns, which allows us to make more precise and  
profitable pricing decisions.

We continue to invest significantly in this key area of our 
business to enable us to improve our sales per available  
room, win market share and enhance overall returns.

Digital
Premier Inn is a leading digital retailer with over 85%  
of bookings derived through our digital channels. Online 
distribution remains a key focus for Premier Inn and we 
continue to invest in mobile innovation and driving direct  
sales to our website. The latter is our preferred method of 
distribution representing 77% of our bookings, compared  
with only 8% for a third–party affiliate with the remainder 
being by telephone or walk–in guests.

Mobile platforms are a major contributor to growth with  
visits to our websites doubling across the past 12 months  
to represent 36% of all visits. We launched our first mobile 
app in 2011 with an updated version in 2012, for which there 
has been some two million downloads. Mobile development  
is an area of rapid growth and we are responding to this 
changing environment through investing in our digital 
capabilities. 

We believe digital offers a huge opportunity in our market, 
allowing us to maximise the capacity across our network 
through up selling and cross selling in order to deliver better 
cost efficiencies and greater profitability.

Restaurants
Restaurants made good progress in the year with like for like 
sales growth of 1.6%, outperforming the Coffer Peach industry 
benchmark outside of the M25. The growth in like for like  
sales has been driven by management actions including new 
menu ranges, better procurement, continuing focus on coffee 
and breakfast sales combined with smarter promotions as  
we have grown our email database to 1.7 million customers.

The joint site model continues to provide significant  
benefits to Whitbread through offering a superior customer 
experience. It also allows access to smaller catchment areas 
where there is demand for only 50 to 80 Premier Inn rooms, 
enabling us to offer consumers the widest choice of locations 
in comparison to our competitors. Together this translates 
into a higher guest recommend score which is a driver for 
RevPAR growth and better return on capital. 

International
Overseas, our five hotels in the Middle East and three hotels  
in India made good progress with like for like occupancy  
rising 10.9% pts to 77.5% and like for like RevPAR growing 
20.0%. Our hotels business in the Gulf is now generating 
profits and, whilst India has proven more challenging, we 
remain confident about our longer–term prospects in India 
and the underlying trends in the market.

We started our international journey in 2008 through building 
Premier Inn hotels in the Middle East and India to establish  
the brand. We are now accelerating our growth through 
transitioning from an asset heavy to an asset light strategy  
and focusing on a small number of high growth, selected 
emerging markets which have attractive leisure and business 
fundamentals. We have a good committed pipeline of 22 hotels 
and 16 signed memoranda of understanding as we continue  
to expand the Premier Inn brand across the Middle East, India 
and South East Asia. 

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Bringing the Premier Inn brand  
to the Middle East and India.

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Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Profitable Growth

18

 
 
 
 
 
 
 
 
 
 
Hotels & Restaurants
Good Together

Winning Teams

CCustomerr
Customer
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Team and Community

Approach
We will make lives  
better for our teams and  
communities through  
education, employment  
and opportunity.

Programmes
•	Charitable giving
•	Job opportunities
•	Career development
•	Team member wellbeing

Customer Wellbeing

Approach
We will make lives better  
for our customers by  
providing goods and  
services they can trust  
and helping them  
make informed choices.

Programmes
•	Sustainable sourcing
•	Menu development
•	Customer engagement

Environment

Approach
We will make lives  
better for everyone  
by reducing our impact  
on the environment  
through our energy,  
carbon, water and waste  
programmes.

Programmes
•	Consuming less — energy saving 
•	Generate own renewable energy 
•	Sustainable new build  

and sourcing 
•	Carbon custody 
in supply chain 

•	Water reduction and efficiency 
•	Waste as a positive resource 
•	Engagement — switch it off 

campaign

Aim by 2017
•	To raise £7.5 million for The Premier Inn 
Clinical Building at Great Ormond Street 
Children’s Hospital, which is due to open 
in 2017.

•	10,000 nationally recognised qualifications  

for team members (including 3,000 
apprenticeships).

•	5,000 new jobs created (50% of these filled  

by young and long–term unemployed).
•	4,500 school work experience placements.
•	5,000 local community hours given.
•	Team member health and wellbeing 

programme in place.

Progress
•	Over £2.2 million raised for Great Ormond Street 

Hospital Children’s Charity. 

•	Over 690 apprentices in learning with 557 awarded  

in 2013/14.

•	Over 1,100 new jobs (many filled by young and  

long–term unemployed). 

•	784 work placements completed with 36% 
successfully hired into permanent jobs. 

•	16,905 volunteering hours given. The original 

target is now under review. 

•	Recognised in Top 100 Apprenticeship Employers. 
•	277 individuals completed school work experience 

placements.

Aim by 2017
•	Accreditation and sustainable supply  

of global critical products.

•	Progressive improvement of information  
on nutritional content across our food  
and drink portfolio enabling customers  
to make informed choices.

Progress
•	Updated models and policies to deliver against  

our challenging 2017 sustainable sourcing 
targets ahead of supplier engagement in 2014. 
•	Continued focus and progress within our food 
platforms to reduce salt content in line with 
Department of Health targets.

•	We will communicate with our customers 

openly and transparently about our actions, 
plans and achievements.

•	Upweighted activity on development within  

our food and drink portfolio, delivering further  
focus on calorific content and nutritional value.
•	Continued high levels of traceability and audits  

for meat products.

Aim by 2017
•	25% carbon reduction from direct 

operations (relative to sales against  
a 2009 baseline). 

•	10% carbon reduction across supply  

chain activities (against a 2014 baseline). 

•	25% water consumption reduction  

(relative to sales against a 2009 baseline). 

•	Zero waste to landfill from direct 

operations. 

•	Certified energy and environmental 

induction training for all team members. 

•	Conduct energy assessment audits  

across all properties. 

Progress
•	23.1% less carbon emitted than in 2009 relative  

to sales. 

•	Doubled amount of renewable energy purchased  
to 32% and self–generated over 300,000 kWh  
from on–site Solar PV. 

•	Carbon heat map process and reporting system 
established to engage supply chain in carbon 
reduction. 

•	21.2% water consumption reduction relative  

to sales against our 2009 baseline. 

•	94.6% of waste now diverted from landfill  

from direct operations. 

•	Energy audit assessments carried out in over  

20% of Hotels & Restaurants properties. 

Whitbread 
Annual Report and Accounts 2013/14

Hotels & Restaurants 
Good Together

19

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Costa
Business model

The Whitbread Way — the foundation of our strategy

Winning Teams

Customer
CCustomerr
Heartbeat
HHHeartbeaaatt

Proﬁtable Growth

A force for good

•	 We recruit, reward, train and develop  
our team members to build highly 
engaged teams who deliver a great  
coffee experience for our customers. 

•	We develop talented leaders and offer  
jobs with opportunities and exciting 
international career prospects.

•	The size of our network and the number 
of distribution channels mean you are 
never far from a cup of Costa coffee.

•	 We serve the best quality coffee.
•	We constantly develop new food  

and drink ideas.

•	We design our stores to create  

a warm and welcoming experience.

•	We use customer insight to build 

customer satisfaction.

•	We maintain quality through ongoing 

refurbishment.

•	We invest in our stores to strengthen our 
position as UK market leader and expand 
in selected international markets where 
we can build significant presence. 

•	 We raise money for the Costa Foundation, 
which builds school projects in coffee–
growing communities.

•	Our teams take pride in supporting  

their local communities.

•	We are creating 1,500 new job 

opportunities every year.

•	We use a number of different ownership 
models including Costa–owned equity 
stores, franchise and joint ventures. 
Internationally, we continue to build  
a strong franchise business and are 
extending our Costa–owned equity  
model into key countries.

•	All our coffee is 100% Rainforest Alliance 

accredited and all our products are 
sustainably, ethically and, wherever 
possible, locally sourced.

•	We are reducing waste to landfill and  
our carbon footprint in relative terms.

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For Costa Investor Day presentations please see www.whitbread.co.uk/investordays

Costa: strength and breadth

UK Retail
Equity stores
Individual franchise

System sales
£650.3m (+17.5%)

Shops
1,397 (+12.3%)

Costa Enterprises
Costa Express
Corporate partnerships

System sales
£287.2m (+22.0%)

Shops
358 (+7.2%)
Machines
3,515 (+37.3%)

Costa EMEI
Europe, Middle East 
and India

System sales
£190.3m (+10.6%)

Shops
764 (+10.4%)

Costa Asia
China and South
East Asia

System sales
£71.4m (+48.2%)

Shops
342 (+33.1%)

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Whitbread 
Annual Report and Accounts 2013/14

Costa 
Business model

20

 
 
 
 
 
 
 
 
 
 
Costa
Highlights

Highlights
•	The quality of our coffee 
and expertise of our 
baristas is vital to Costa’s 
success. 

•	We have worked with  

the Prince’s Trust on ‘Get 
into Coffee’ programmes.

•	We continue to pay 
above the national 
minimum wage  
and we also offer  
an incentive scheme  
called ‘Feel Good’.
•	Tony Huang, from 

Guangzhou, China was 
the winner of the 8th 
annual Costa Barista  
of the Year competition.

Highlights
•	In the UK we have built 
a store network that is 
bigger than the second 
and third brands 
combined. 

•	Our ‘Listen and Learn’ 

customer insight 
programme inspires our 
teams to deliver great 
customer service.
•	All our stores must be 

warm, clean and inviting.

•	We added new drinks  
to our Costa Ice range 
which achieved record 
breaking sales in the UK.

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Highlights
•	We use the data derived 
from our Coffee Club 
card along with detailed 
demographic to plot  
our UK expansion. 
•	Costa has delivered  

48 quarters of strong  
like for like growth.
•	We have commenced  
a trial programme of 
opening equity stores  
in France.

•	In addition to our store 
portfolio, we provide 
access to Costa through 
a number of different 
channels such as 
Wholesale, Costa Express 
and Costa at Home. 

Highlights
•	An additional eight 
schools have been 
completed with six  
more still under 
construction.

•	All of our coffee comes 
from Rainforest Alliance 
Certified farms. A similar 
commitment to cocoa  
for our hot chocolate 
powder has been made 
for 2014 production.
•	Costa became the  
first UK coffee shop 
brand to carry front  
of pack nutritional  
value information  
on our food products.
•	Costa’s coffee sacks  

are recycled and used  
as carpet underlay  
in Premier Inn hotels.

Figures

Figures

Figures

Figures

88%
‘Your Say’ response rate

1,800
new UK jobs

3,000+
baristas taken through Barista 
Maestro and Coffee Champion 
training

1,000
team members participated  
in management training 
workshops

17 million
customers use  
Costa every month

34%
of customers score Costa  
nine or ten out of ten for  
brand warmth

69%
of our UK estate is new 
or refurbished in the last  
three years

2.3 million
active Coffee Club card holders

334
net new Costa stores opened

29
the number of countries  
in which Costa is present  
outside the UK

49%
of total sales are coffee 
purchases

£3.82
average UK transaction value

£1.5 million+
raised for the  
Costa Foundation

26,000
children provided access  
to education via the Costa 
Foundation

28%
reduction in carbon emissions 
relative to sales versus  
the 2009 baseline in UK  
equity stores

67%
of waste diverted from 
landfill in our UK stores

  More on p22  

  More on p24  

  More on p27  

  More on p29  

Whitbread 
Annual Report and Accounts 2013/14

Costa 
Highlights

21

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Proﬁtable GrowthWinning TeamsA force for goodCustomerHeartbeatCCustomerrHHHeartbeaaatt 
 
 
 
 
 
 
 
 
 
Costa
Winning Teams

Winning Teams

CCustomerr
Customer
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

We believe that if we create a great 
place to work for our team members 
this will build Winning Teams who will 
make everyday experiences special  
for our millions of Costa customers.

Costa uses Whitbread’s six–monthly team engagement 
survey, ‘Your Say’, to measure how well we are doing at 
building a great place to work.

Team engagement survey: ‘Your Say’

Engagement  Engagement  Response 
rate 
Oct 2012  Oct 2013 

score  
Oct 2013 

score 

Response 
rate 
Oct 2012

Costa 

82% 

83% 

88% 

93%

We had very high ‘Your Say’ scores again this year, with 88%  
of people completing the survey and an overall engagement 
score of 82%. We use ‘Your Say’ to help us understand how  
it feels to work at Costa and have a rigorous action planning 
process at stores and in our support teams to learn from  
the results and continuously strive to make Costa a better 
place to work.

Communication is a key area where we know we can improve. 
This year, we launched ‘Avenue’ to the business, an online 
social media platform, encouraging conversation and 
enabling teams to showcase excellence and talk to each  
other as well as networking across our Whitbread brands.  
We also run regular focus groups at stores, in regions and  
in our support functions to explore important topics with our 
teams. Feedback from our teams has informed and fed into 
our ‘Whole Package’ principles, a way of rewarding our  
teams and driving engagement even further.

Leadership and development
We offer exciting leadership opportunities around the world 
and are committed to developing talented leaders. This year 
we have focused on development and progression across  
all business divisions. We have done this in a number of  
ways. More than 1,000 barista maestros, assistant managers 
and store managers have been developed through one  
of Costa’s management development training workshops  
and 12 store managers have progressed through our high 
potential development programme, Shining Stars.

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We work hard to encourage and enable moves and 
promotions across our business divisions, giving our team 
members the opportunity to develop their careers in 
stretching roles within a different business unit, including 
international positions and secondments.

We are passionate about our coffee and have taken over 
3,000 baristas through Barista Maestro and Coffee Champion 
training programmes at our academies, to ensure that perfect 
hand–crafted coffees are created in all our stores and that we 
deliver an unbeatable coffee experience.

Skills development
The quality of our coffee and expertise of our baristas  
are vital to Costa’s success. This year we focused on further 
developing the knowledge of our skills trainers and we have 
given a facelift to our Newbury training academy with new, 
more advanced equipment and state of the art technology  
for the students to experience and learn from. We will  
shortly open our fifth academy, as demand for development 
programmes increases.

Job opportunities
With our ambitious growth plans, opening a store almost 
every day around the world, Costa is creating jobs and careers 
for thousands of people. In the UK, new openings of Costa 
stores have created over 1,800 new jobs in 2013/14. New roles 
have also been added in our Equity business in France, as well 
as support functions across the globe.

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Our baristas enhance the  
customer experience.

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Whitbread 
Annual Report and Accounts 2013/14

Costa 
Winning Teams

22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Local communities
Being part of the community is increasingly important to our 
team members and there is pride and passion for the Costa 
Foundation. This year, we have responded to teams who  
want to help the local communities where they work and have 
launched programmes to deliver this. Costa For Schools is 
another programme we have introduced. This is a website 
that informs and educates both teachers and pupils, linking  
to the national curriculum for geography.

Work experience programmes have been launched across  
all stores — designed to bring students into Costa and  
inspire them in the world of work and the possibility of a 
career with Costa. 

We have worked with the Prince’s Trust on ‘Get into Coffee’ 
programmes, across the country, in Manchester, Leeds, 
Bristol, Glasgow and Bedfordshire, resulting in young people 
being offered roles within our stores on completion of the 
programmes. 

Career progression
Katja Bispo do Carmo started her career with Costa  
in 2006 as a part–time barista while she was studying.  
Her dedication, hard work and skill saw her progress quickly 
through store roles as a Barista Maestro and then Assistant 
Manager in our equity business. Katja then moved to work  
in one of our individual franchise partner stores as a Store 
Manager, where her attention to detail and natural coaching 
ability made her the natural candidate for a key role in the 
HR team. Katja’s passion for development and drive for 
excellence in everything she does, led her to be promoted  
to her current role as Global Brand Excellence Manager.  
In this role Katja leads a team of six, supporting our franchise 
partners, as well as our equity and international businesses, 
to ensure consistency and excellence in Costa brand 
standards across the globe. She is inspirational to her team 
and peer group, delivering fantastic results in a way that  
very much reflects our Costa values.

Opportunities to share in Costa’s success 

The Whole Package 
Since implementing pay for progression in our UK Retail 
stores there has been a major shift in the way we reward  
our baristas after they complete their basic training.

We continue to pay above the national minimum wage and 
we also offer an incentive scheme called ‘Feel Good’ that all 
our baristas can participate in. This year, we have significantly 
improved the scheme, particularly for our Barista Maestro 
population, in recognition of the level of responsibility in  
the role.

As part of our continued focus on improving Costa as a  
great place to work, we have talked to our teams about their 
‘Whole Package’ and communicated all the benefits on offer. 
We have also worked on increasing the base rates of pay for 
our Barista Maestros and Assistant Managers, and recognising  
an increase in skill and specialism across our teams.

Reward and recognition
Other ways in which we reward and recognise our teams 
include campaign incentives, introduced at the beginning  
of our summer and Christmas campaigns to improve team 
engagement, enhance the customer experience and drive 
sales. Across all levels of the business, individuals and teams 
are recognised through the use of ‘Grazie’ cards, which give  
a personalised ‘thank you’ message, and recognition pins  
in the form of flying coffee beans. Many of these individuals 
and teams are also celebrated at award events held across  
the business.

Costa Barista of the Year 
The 8th annual Costa Barista of the Year competition took 
place in October 2013 which saw Baristas from across our 
business come together to compete in the global Champion  
of Champions final in London. The competition tests 
competitors’ pride, passion and personality in delivering 
exceptional coffee experiences. They are judged on their 
technical skill and coffee knowledge through a range  
of coffee–based challenges throughout the two–day 
competition before the winner is crowned Champion  
of Champions in front of a live audience made up of 
representatives from across Costa and its supply chain.  
This year’s winner was Tony Huang, an Assistant Store 
Manager from Guangzhou Grand View Mall store in China. 

Whitbread 
Annual Report and Accounts 2013/14

Costa 
Winning Teams

23

 
 
 
 
 
 
 
 
 
 
 
Costa
Customer Heartbeat

Winning Teams

CCustomerr
Customer
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Social and economic changes have 
played their part in the phenomenal 
growth of coffee shop culture around 
the world. Over the past decade Costa 
has both benefitted from and fuelled 
this growth. Going from strength 
to strength in 2013/14 Costa has 
cemented its place as the UK’s and 
Europe’s leading coffee shop brand 
and is welcoming more and more 
customers every day around the world.

Day in and day out, we rely on our 30,000 colleagues across  
the world and our success is based on delivering a consistently 
great coffee experience, for each one of the millions of customers 
who use Costa every month. The secret, in our view, is friendly 
teams providing service that is fast and efficient for some and 
warm and friendly for others with more time. Understanding what 
our customers want is key and our ‘Hierarchy of Needs’ model 
is the cornerstone of our business, informing our decision 
making and focusing our time and energy. 

Customer hierarchy of needs

Making it easy for customers to choose Costa
Customers won’t travel too far for a cup of coffee, which  
is why it is so important to make it convenient for them  
to choose Costa. The quickest way to get the convenience  
is through presence and hence our relentless drive to open 
stores at a fast pace in the UK and overseas. In the UK we 
have built a network that is bigger than the second and  
third brands combined. Our success in the UK has allowed  
us to extend the reach of the Costa brand across the world  
and develop new channels so that customers in 30 countries 
can now enjoy the special Costa ‘experience’. This year  
we celebrated the opening of our 1,000th overseas store  
in Bangkok, Thailand.

We are present across a broad range of channels — from  
high street to shopping centres, from airports to cinemas, 
from motorway service stations and drive–thrus to corporate 
offices, hospitals and health clubs. Costa Express, our  
self–serve coffee bars, have enabled us to access even more 
locations and provide customers with a quick and easy way  
to grab a great tasting Costa coffee on the go. In all, we  
have nearly 10,000 points of distribution in the UK alone, 
making it easier for our customers to get a great cup of  
Costa as part of their daily routines. 

Coffee lovers can also enjoy our Tassimo ‘Costa at Home’ 
range, which has been on sale in supermarkets for just  
over a year and already includes the two biggest–selling 
Tassimo lines in the UK.

Convenience

Quality coffee

Staff friendliness

Atmosphere

Value for money

Other

35%

73%

71%

62%

Source: YouGov C–SAT annual data March 2013 to January 2014.

84%

84%

Serving only the best quality coffee
Coffee quality is at the heart of what we do and we are 
passionate about only buying the best beans (only 1% of the 
world’s beans are good enough) and roasting them in our  
own roastery in London under strict quality control to create 
our famous unique Mocha Italia blend. 

We are constantly looking to enhance the customer 
experience by giving them more choice of drinks that 
leverage our superior Mocha Italia blend. In 2013/14 we 
launched a new range of Mocha drinks as well as launching 
the popular ‘Flat White’ in the Emirates market.

Creating a warm and welcoming experience
Of course, what really creates the atmosphere and keeps  
the customers returning is our people, they provide the Costa 
magic — the friendly smile and the great service. And this is 
why we work so hard to ensure that we have highly motivated 
and engaged teams who always put the customer first.  
Our ‘Listen and Learn’ customer insight programme inspires 
our teams to deliver great customer service as it provides  
real time customer feedback to each UK store and lets them  
know directly what their customers are saying about their 
experience. On average, each store receives 30 unique pieces 
of feedback each month, providing a snapshot of what  
is going well, what needs to be improved and opportunities  
to delight customers even further.

We make it easy for customers to choose Costa.

Whitbread 
Annual Report and Accounts 2013/14

Costa 
Customer Heartbeat

24

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Another important part of the overall customer experience  
is a store’s environment. All our stores must be warm, clean, 
inviting and geared to meeting the individual customer need, 
whether that’s fast and efficient service for those on the run 
or more inviting and comfortable for those who wish to relax.

We have distinct store formats that we use around the world. 
Our ‘Evolution’ store design is perhaps the most familiar, 
whilst our ‘Metro’ design is aimed at city locations potentially 
with a younger more style–conscious customer demographic. 
We recently used the ‘Metro’ design in Paris and Bangkok.

We have not confined our innovation to just coffee and have 
broadened our range of high quality teas into long jing green 
tea as well as trialling loose leaf teas. 

One of our new Paris stores. 

Our drive–thru format is proving very successful and we  
now have 15 stores in the UK and one in the Middle East. 

Over the past three years 69% of our UK estate is new or 
refurbished and in 2013/14 we invested £10 million in 
refurbishing 139 stores.

Innovating our food and drink to keep customers happy
At Costa we recognise the imperative of a strong focus  
on innovation to stay ahead of our competition and to keep 
delighting our customers.

Costa provides a moment  
of relaxation. 

For the summer months, we added new drinks to our Costa 
Ice range which achieved record breaking sales in the UK.  
This year has also seen us putting much greater emphasis  
on seasonal innovation with the launch of our first Halloween 
campaign as well as great Christmas ‘character’ cups that 
proved extremely popular with customers.

Record breaking Costa Ice sales.

Around 40% of all transactions include food and we have to 
ensure that we continue to offer customer favourites whilst 
regularly introducing new and exciting ranges. We have also 
introduced lower entry point foods, such as small cakes in 
China, which have driven higher food capture rates.

Our Christmas ‘character’ cups proved  
extremely popular with customers.

Whitbread 
Annual Report and Accounts 2013/14

Costa 
Customer Heartbeat

25

 
 
 
 
 
 
 
 
 
 
Costa
Customer Heartbeat 
continued 

No. 1 UK coffee shop brand
Recognised by YouGov and Allegra as the UK’s favourite 
coffee shop, over the past year Costa has extended its lead  
in the UK against its two nearest competitors.

We’ve also picked up some major industry awards in the  
year including the Allegra Strategies award for Best Branded 
Coffee Shop Chain in Europe and Best Coffee Shop Chain  
in Europe by the European Coffee Symposium.

Brand preference 

31%

22%

11%

34%

20%

12%

39%

17%

11%

2008

2009

2010

2011

2012

2013

40

35

30

25

20

15

10

0

Key

Costa

Starbucks

Caffè Nero

Brand preference YouGov U&A annual study, “If there were a Costa, 
Starbucks and a Caffè Nero next door to each other which would be  
your first choice to visit for a break and/or a chat?”

Brand warmth, or maybe it is better described as the 
emotional connection with Costa, is well ahead of our 
competitors with one third surveyed giving us nine or ten  
out of ten.

Brand warmth 

H2 2012/13
2013

H1 2013/14
2013

H2 2013/14

H2 2012/13

H1 2013/14

H2 2013/14

31%
31%

32%
31%

34%

23%

20%

20%

H2 2012/13

11%

H1 2013/14

14%

H2 2013/14
2014

13%
13%

Key
Key

Costa
Costa

Starbucks
Starbucks

Caffè Nero
Caffè Nero

Brand warmth TNS Equity Study, “How do you feel about each  
of these brands?” percentage scoring nine or ten out of ten. 

Understanding and engaging our customers 
Our Coffee Club card is a valuable tool that provides us with 
real time customer insight and tells us what we are getting 
right and how we keep them happy in the future. With  
2.3 million active card members we receive nearly 48,000 
pieces of customer feedback every month. Our ‘Listen and 
Learn’ customer insight programme is used to create our 
guest scores, which have risen by 7% pts to 54% in the year. 
This is fundamental to our success in creating an emotional 
connection between our customers and the Costa brand. 

Particularly exciting for our Coffee Club members is the 
recent trial of a mobile app which enables the collection  
and redemption of Coffee Club points using a mobile  
phone and we plan to roll this out to all members in 2014/15.

Our social media and digital presence is steadily improving 
and over the last few months we have achieved over a  
million Facebook fans. On Twitter we have recently been  
rated Number 3 on the leader board of ‘UK Twitter Customer  
Care’ and are the only coffee shop operators to feature  
in the Top 100. 

A coffee shop is often at the heart of a local community  
and our Costa teams do some tremendous work in their 
communities to support local causes, at the same time 
strengthening customer engagement and connections. 

Our teams get involved 
in their local communities.

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Whitbread 
Annual Report and Accounts 2013/14

Costa 
Customer Heartbeat

26

 
 
 
 
 
 
 
 
 
 
 
 
Costa
Profitable Growth

Winning Teams

CCustomerr
Customer
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Costa delivered another outstanding 
performance during the year, with 
total sales up 20.1% driven by good  
like for like growth and a strong store 
opening programme. 

Total system sales, which are sales derived from Costa–owned 
and franchise stores, grew 19.4% to £1,199.2 million. Following  
a strong top line performance, underlying operating profit 
increased by 21.9% to £109.8 million. Once again, a disciplined 
approach to capital deployment combined with good cash 
flow generation has increased return on capital by 5.8% pts  
to 40.5%. 

Growth milestones
During 2013/14 we continued to invest in our position as the 
UK’s leading coffee shop as well as growing our international 
presence. We opened 177 net new stores in the UK taking  
the total to 1,755 and 157 net new stores internationally taking 
the total to 1,106, leading to a total of 2,861 stores worldwide. 

At the end of 2012/13 we extended our growth milestone  
to double our system sales to around £2 billion by 2018 and 
for the share of international to grow from 22% to around 33%. 
Organic growth has underpinned our success in the UK and 
we expect to open a further 400 to 500 equity stores and 100 
new franchise stores over this period. We use the data derived 
from our Coffee Club card along with detailed demographic 
analysis across some 40,000 micro markets to plot our  
UK expansion. 

We held an ‘Investor Day’ in December 2013 and the 
presentation can be found at www.whitbread.co.uk/investordays

Future UK Retail stores by channel to 2018

The UK coffee market
Over the last fifteen years there have been a series of social 
trends which have been of benefit to the coffee shop market. 
According to coffee experts Allegra Strategies, weekly coffee 
sales from UK branded chains have grown at a 9% CAGR 
since 2008 with further growth expected over the next few 
years. Five years ago there were just under 11,000 outlets  
in the UK, today there are over 16,000 and by 2018 this is 
expected to rise to over 20,000. Consumers increasing their 
knowledge and awareness of coffee, the changing face of  
the high street to become more leisure orientated and the rise 
of female spending power and mobile working are cited as 
some of the major drivers behind the growth of this sector. 
Our relentless focus on understanding the customer’s needs 
and our rigorous approach to providing excellent execution 
has played a major part in our success and helped 
differentiate us from the competition.

Costa UK in numbers

Retail park/drive–thru

University/office/other

Concession

Transport

Shopping centre/high street

200+

100+

80+

25+

100+

Internationally we are present in 29 countries with a total  
of 1,106 stores and we expect to open a further 750 to 950 
stores by 2018. This includes some 250 to 350 franchise stores, 
400 stores in China and 100 to 200 stores in new markets. 

The economics of our targets

Base economics1

Target growth by 2017/18

• UK’s favourite coffee shop with 12% market share.1
• 2.3 million active loyalty card members.
68%
£3.82
Average
Sales
% eat and
transaction
drink in
value

41%
Transactions
Food
capture
rate2

71:29
Sales
Drink:Food
ratio

Costa UK 
Equity 

Franchise 

Costa Express

49%
Sales
Coffee as
% sales

£94,000 
contribution per store
£32,000 
contribution per store
£6,000 
contribution per unit

+400 to 500 stores

+c.100 stores

+2,500 to 3,500 units

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All transaction metrics as at the end of the financial year.

1  Allegra Strategies — Project Café 2013 Report, based on turnover.

2  Percentage of transactions which include a food item.

Costa International 
Franchise 

China 

New markets

£18,000 
contribution per store
£25,000 
contribution per store
n/a

Overheads

£26 million

c.250 to 350 stores 

+c.400 stores 

+100 to 200 stores

Grow in steps, 
slower than sales

Total potential capital investment £330 million to £400 million

1  As at the Costa Investor Day on 12 December 2013.

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Whitbread 
Annual Report and Accounts 2013/14

Costa 
Profitable Growth

27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costa
Profitable Growth 
continued 

In addition to our successful roll–out programme, Costa has 
also delivered 48 quarters of strong like for like growth and 
we ended 2013/14 with like for like growth of 5.7%, mainly  
as a result of a 5.0% growth in transactions. 

Investment in our stores is a key differentiator and more  
than 69% of our UK store estate has either been opened  
or refurbished in the past three years. 

International
Internationally we have continued to grow our franchise 
network in Europe, the Middle East and India, with a net  
86 openings outside of the UK. We also entered Spain  
for the first time and added Thailand to our new South  
East Asia region. 

Progress in Poland has been difficult due to weak consumer 
confidence, the impact of a VAT increase on milk–based 
drinks and the distraction to the business as we rebrand from 
coffeeheaven to Costa. However, market fundamentals are 
still positive and we remain focused on rebranding the estate 
and further expanding our presence. China, where we operate 
two joint ventures, remains an exciting opportunity for the 
Group. During the year we opened 73 new stores in China 
taking our total number of stores to 326 in 30 cities. Like for 
like stores in China made good progress, although some new 
openings have taken longer than expected to reach maturity.

We remain excited about the international opportunity for 
Costa and have commenced a programme of opening trial 
equity stores in France. The first equity store opened in 
October 2013 and we currently have a total of four equity 
stores with a further five expected to open in the next  
12 months. We also have two franchise stores in France.

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Diverse operating model
In addition to our store portfolio, we provide access to Costa 
through a number of different channels such as Wholesale, 
Costa Express and Costa at Home. As already stated, Costa 
Express had a highly successful year adding 955 net new  
units taking the total to 3,515. We are now in the process of 
testing our new Costa Express machine which we believe will 
facilitate growth in new channels, including universities and 
hospitals, as well as spearhead our international expansion. 
Through this, we see the opportunity for an additional  
2,500 to 3,500 units by 2018. 

Number of Costa stores worldwide

2013/14
2012/13
2011/12
2010/11

2,861

2,527

2,203

1,871

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Our innovative new Costa Express 
machine launched in 2013/14.

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Whitbread 
Annual Report and Accounts 2013/14

Costa 
Profitable Growth

28

 
 
 
 
 
 
 
 
 
 
Costa 
Good Together

Winning Teams

CCustomerr
Customer
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Team and Community

Approach
We will develop  
our people  
and support the  
community.

Programmes
•	Charitable giving
•	Job and career development
•	Community engagement

Customer Wellbeing

Approach
We will be proud  
of the provenance  
of our products.

Programmes
•	Sustainable sourcing
•	Menu development
•	Customer education

Environment

Approach
We will achieve the  
lowest environmental  
impact we can.

Programmes
•	Consuming less
•	Waste reduction
•	Influence in partnership

Aim by 2017
•	The Costa Foundation will build 50 schools  

to educate 50,000 children.

•	Provide enhanced skills training to 20,000 

team members. 

•	Give our team members over 5,000 

management progression opportunities.

Aim by 2017
•	All our hot drinks will be sustainably  

sourced and certified.

•	Our products will be locally/ethically  

sourced wherever possible.

•	We will improve the nutritional value  

of our products and enable our customers  
to make a fully informed choice when they 
visit our stores.

Aim by 2017
•	25% carbon reduction from direct  

operations (relative to sales against  
a 2009 baseline).

•	Zero waste to landfill  

(from UK equity stores).

•	We will provide clear guidance to  

our partners to achieve similar results.

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Progress 2013/14
•	Over £1.5 million raised for the Costa Foundation.
•	An additional eight school projects have been 

completed with six more still under construction.
•	Since the year–end, six more projects have been 

approved and are at planning stage with committed 
funding in place bringing support from the Costa 
Foundation to 52 communities in eight countries 
around the world.

•	The Costa Foundation has now provided access  

to education to nearly 26,000 children.

•	Costa skills training programmes have now 

enhanced the capability of 10,000 baristas across 
the UK.

•	Our management development programmes  

have now reached over 3,000 people.

•	More than 1,800 new UK jobs have been created  

in new Costa stores.

Progress 2013/14
•	All of our coffee comes from Rainforest Alliance 
Certified farms. A similar commitment to cocoa  
for our hot chocolate powder has been made  
for 2014 production.

•	Costa became the first UK coffee shop brand  

to carry front of pack nutritional value information  
on our food products.

•	Our developments in packaging production  

this year helped reduce card waste by a further  
18 tonnes per annum.

•	Accreditation was received from the Sustainable 
Restaurant Association for work in sourcing,  
social and environmental practices.

Progress 2013/14
•	Costa’s carbon reduction activities in UK stores  
have now reduced emissions by 28% versus a 
2009 baseline relative to sales. A new target  
will now be set.

•	The ISO 50001 registered roastery has continued  

to make carbon reductions. Recent changes  
to coffee packaging has reduced emissions  
from its manufacture by 5% whilst saving 1,000s  
of litres of ink.

•	40% of the energy used in Costa–owned stores 

coming from renewable sources.

•	Diversion from landfill has increased once again  
with 67% of all waste from Costa–owned stores 
diverted from landfill.

•	Costa’s jute coffee sacks continue to be recycled  

and 114,000 of them contributed to the high quality 
carpet underlay used in Premier Inn hotels.

•	This year Costa introduced a new uniform and by  

back–hauling the old garments were able to recycle  
nine tonnes of fibre which was used as sound 
proofing in motor car manufacture.

Whitbread 
Annual Report and Accounts 2013/14

Costa 
Good Together

29

 
 
 
 
 
 
 
 
 
 
Risk 
management

The matrices, together with the detailed risk registers 
containing current controls, mitigating actions and  
planned future actions, are reviewed on a regular basis  
by the management board of each business. The outputs  
of the process carried out by the businesses form the basis  
of the risk matrix for the Group. In addition a top–down  
risk assessment exercise is conducted, to capture the  
Board’s views on the principal risks facing Whitbread. 

The most significant business–level risks are included in the 
Group risk matrix, together with other risks identified by  
the Executive Committee. The Group risk matrix is reviewed  
on a quarterly basis by the Board and annually by the Audit 
Committee.

The process:
•	identifies risk to the achievement of strategy;
•	assesses risks based on the impact and likelihood of a risk 
occurring on a gross (before taking controls and mitigating 
factors into consideration), net (post control and mitigation) 
and target basis;

•	outlines key controls and mitigating factors; 
•	assigns a risk owner to each risk; and
•	ensures that risks, controls and mitigating factors are 

reviewed quarterly and updated as necessary.

The risk and control matrices form the basis of the annual 
assurance plan, which provides for the independent testing  
of controls and mitigating actions by NSF (an independent 
health and safety auditing company), the Company’s internal 
control evaluation process or PwC as part of the operational 
audit programme.

The current status 
In total, there were 16 risks (2013: 21 risks) identified on  
the Group risk matrix considered by the Audit Committee  
in March 2014. After taking account of the controls and 
mitigation plans the Audit Committee and the Board 
considered that six of the risks would be either unlikely to 
occur or would have a low impact. For this reason, these  
risks have not been categorised as principal risks for the 
purposes of this report.

The ten principal risks identified, together with a summary  
of controls, mitigation and assurance plans are summarised 
on pages 32 and 33. None of these risks are considered to 
have a high likelihood of occurring after taking account of 
controls and mitigation. The new risks included since last 
year’s report include the potential for death or serious injury 
as a result of Company negligence, the inability to operate the 
Costa roastery for an extended period and two information 
systems risks relating to the Premier Inn booking system and 
the ineffective implementation of a major systems upgrade.

Effective risk management is vital to 
the successful delivery of Whitbread’s 
strategy and helps us create legendary 
brands across all of our businesses.  
The principal risks to the achievement 
of our strategy have been identified.

Risks linked to strategy

•	Health and safety risks
•	Management retention

•	Health and safety risks
•	Reputational risk
•	Market risk

•	Financial risk
•	Third–party risk
•	Operational risk

•	Food provenance

Structure
Whitbread’s approach to risk management has been 
reinvigorated this year, with additional focus being placed  
on ensuring there is a consistent methodology used across 
each business. 

The structure and governance over the risk management 
process at Whitbread is shown in the diagram on page 31. 
Both Whitbread Hotels & Restaurants and Costa maintain risk 
matrices aligned to their own business model. These matrices 
analyse the risks to the achievement of each business’s strategic 
goals and prioritise those risks using a four level impact and 
likelihood scale. 

Whitbread 
Annual Report and Accounts 2013/14

Risk 
management

30

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Group risk proﬁle

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Board
Accountable for strategic risk management
and ensuring a sound system of internal 
control and risk management is in place

Audit Committee
Oversight and challenge of the effectiveness
of risk management and mitigating controls

t
h
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Executive Committee
Review, challenge and approval of Group risks

Corporate team
Coordination and analysis

Group
functions

Costa

Whitbread Hotels
& Restaurants

Whitbread Hotels
& Restaurants
International

Accountable for risk management in the respective business and risk submissions to the Executive Committee

,

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Our food development teams follow stringent food  
safety policies and a detailed sourcing policy.

We have developed a detailed contingency  
plan for Costa’s roastery in Lambeth.

Whitbread 
Annual Report and Accounts 2013/14

Risk 
management

31

Illustrative risk ‘heatmap’

t

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Unlikely

Possible

Probable

Highly likely

Key

Gross (assessed before ‘existing controls and mitigation)

Net risk (assessed after ‘existing controls and mitigation)

Likelihood

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk 
management 
continued 

Principal risks

Risk 

Mitigation controls 

Monitoring and assurance 

Current trend

Health and safety risk:  
death or serious injury  
as a result of Company 
negligence.

Health and safety risk:  
serious health or  
provenance issue  
relating to food.

Market risk:  
improvement in competitor 
financial health and/or 
competitor activity results 
in a loss of market share.

Financial risk:  
significant increase  
in the pension scheme’s 
actuarial and/or accounting 
deficit resulting in higher 
pension contributions  
or the re–rating of the 
Company’s credit.

Expertise of the Whitbread safety 
and security team.

External risk engineering programme.

Extensive health and safety policies 
and training.

The expertise of members of the 
procurement, food development  
and safety and security teams. 

Stringent food safety policies  
and a detailed sourcing policy.

New traceability and testing 
requirements introduced in respect 
of meat and other products.

Focus on predicting other potential 
issues in the supply chain.

Actions to outperform the 
competition are developed  
on a strategic and tactical basis. 
Significant customer research is 
carried out. 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.

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. The 
Finance Director attends Pension 
Investment Committee meetings.

Stable

Stable

NSF, an independent company, 
carries out health and safety 
audits on every site. Health  
and safety is a hurdle on the 
WINcard. Regular updates are 
provided to the management 
boards and to the Board.

NSF, an independent company, 
carries out regular audits on  
all suppliers to measure their 
performance against a range  
of health and safety standards. 
Health and safety is a hurdle  
on the WINcard. Regular 
updates are provided to the 
management boards and  
to the Board.

Relative market share 
information and timely trading 
performance data is produced 
and monitored by the executive 
teams and the Board.

Premier Inn
Improving

Restaurants
Improving

Costa
Stable

Stable

The Pensions Director  
and the external pensions 
advisers to the Company report 
regularly to the Board on the 
funding level and investment 
strategy of the fund.

Whitbread 
Annual Report and Accounts 2013/14

Risk 
management

32

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Risk 

Mitigation controls 

Monitoring and assurance 

Current trend

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.

Stable

Asset management team  
and credit controllers monitor 
risks. There is a regular review 
of the debtors’ registers by the 
management boards. Financial 
controllers review status at  
half and full–year.

Operational risk:  
loss of, or failure to attract, 
key employees.

It is important that the Company 
continues to offer key employees 
appropriate levels of reward and 
recognition in order to retain them. 
The Company’s programme of 
development and talent planning 
delivers a strong succession plan.

The Group HR function 
monitors the number of  
key employees leaving the 
Company and conducts  
exit interviews to understand 
the reasons. Succession  
plans are reviewed regularly.

Stable

Operational risk:  
inability to operate the  
Costa roastery for more  
than one week.

Information systems risks:
•	disruption to the business  

due to ineffective 
implementation of a  
major systems upgrade  
or installation;

•	data security breach 

resulting in the loss of,  
or improper access to, 
customer or confidential 
data; or

•	failure of the Premier Inn 

booking system.

Long standing and experienced 
workforce.

Regular testing of contingency 
plan.

Deteriorating

Contingency plan, including for 
coffee to be roasted elsewhere  
if required.

Independent risk engineering 
report provided.

The expertise of the IS team in 
protecting the systems and network. 

Systems are continually 
monitored for irregular activity.

Stable

IS security training has been 
delivered to employees. 

Third–party expertise is utilised  
as appropriate.

Legal advisers monitor new 
legislation and advise the IS team.

Operational audit reviews.

The disaster recovery plans  
are reviewed by the Audit 
Committee.

Regular reporting of 
information security issues  
to management.

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Whitbread 
Annual Report and Accounts 2013/14

Risk 
management

33

 
 
 
 
 
 
 
 
 
 
Key Performance 
Indicators

Our key performance indicators are 
based on the strategic framework  
of the Company — Winning Teams, 
Customer Heartbeat, Profitable 
Growth and Good Together. Behind 
each of these headings are clear and 
measurable targets which together 
make up our balanced scorecard  
or WINcard as we call it (Whitbread  
In Numbers). It is used throughout  
the Company. Every hotel, restaurant  
and coffee shop has its own WINcard. 
All support centres, each business  
and the Group as a whole have their 
own WINcards. Every month the results 
are published throughout the Group  
so that everyone knows exactly how 
they are doing against the key targets  
for the year.

As these are key strategic measures  
a number of them form an important 
part of the incentive schemes for our 
teams. Details of how the executive 
directors are rewarded for their 
WINcard performance are described  
in the remuneration report on page 68.

The WINcard targets are set at the 
beginning of each year and agreed  
with the Remuneration Committee. 
They are usually set above the level 
achieved in the previous year to  
improve performance. In general,  
a green WINcard is achieved where  
the performance is better than  
both target and the previous year.  
An amber score is for performance  
which is better than the prior year  
but below target and a red score  
is for a result below the previous year.

Winning Teams

Customer
CCustomerr
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Winning Teams

Team engagement
Engagement measures how  
our teams feel about working for  
the Company. We find out by  
asking everyone in the Company  
to complete a survey twice a year  
that asks questions that give us  
a very clear idea as to how they  
are feeling at that time. 

Why this is important
We want our people to enjoy what  
they do and to know we will work  
to improve things if they tell us they  
are not happy. We also know that the 
happier our teams feel about their  
work the better they will serve our 
customers. We will attract as well  
as retain great people if we can  
achieve high levels of engagement. 

How we have done in 2013/14 

Group
80.3%
Hotels & Restaurants
79.5%
Costa
82.4% 

WINcard results

  Group

Health & Safety
Nothing could be more important  
than the safety of our teams and  
our customers. Independent audits  
are carried out throughout the  
year to check that standards are  
being maintained with certain  
key areas resulting in automatic  
failure if they are not met.

Why this is important
Our people have a right to work  
in a safe environment and our 
customers rightly expect us to  
look after them when they choose  
to sleep, eat or drink with us.  
A significant health and safety  
failure would also affect confidence  
in our business.

How we have done in 2013/14 
We strengthened the targets this year 
and also increased the proportion  
of sites required to pass the audit for 
each business to achieve a green score. 
Both Costa and Hotels & Restaurants 
exceeded the tougher targets set.

WINcard results

  Group

  Hotels & Restaurants

  Hotels & Restaurants

  Costa

  Costa

Our goals for 2014/15
We intend to continue to achieve  
the tough targets, which were 
strengthened significantly in 2013/14.

Our goals for 2014/15
Team engagement is important to us, 
and remains on the WINcard. However, 
it has been replaced as an incentivised 
measure for 2014/15 by team turnover, 
as we refresh our team engagement 
methodology.

Team turnover targets are:  
Group 40.2%; Premier Inn 38.0%; 
Restaurants 45.0%; and Costa 39.2%.

Whitbread 
Annual Report and Accounts 2013/14

Key Performance 
Indicators

34

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Winning Teams

Customer
CCustomerr
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Customer Heartbeat

Brand standards —  
Costa
Our customers rightly expect a 
consistently high standard of service 
and physical surroundings in our  
coffee shops. We have developed  
brand standards, which are designed  
to ensure we meet our customers’ 
expectations.

Family measures —  
Hotels & Restaurants
The provision of a quality restaurant  
is important to our Premier Inn guests 
and our joint site model provides us 
with good synergies.

Brand performance
With our aim to make everyday 
experiences special it is vital  
that we have a robust way of  
measuring how our customers  
rate our performance in terms  
of recommendations and  
preference over other brands. 

Why this is important
We know that our customers have a 
choice when they are choosing a coffee 
shop and that we have to be able to 
show that we operate at consistently 
high levels that make them want to 
choose us.

Why this is important
Measures have been developed  
to make sure that our Premier Inn and 
Restaurants teams work well together 
for the benefit of guests. For Premier 
Inn, we measure the proportion  
of guests that have breakfast in the 
restaurant. We audit breakfast 
standards for Restaurants.

Why this is important
Without this information we would  
not be able to measure and improve  
our customers’ experience or  
compare the experience we provide  
to that provided by our competitors.

How we have done in 2013/14 

How we have done in 2013/14 

Costa
92.1%

Premier Inn
66.5%
Restaurants
59.3%

How we have done in 2013/14 
Each of the businesses has developed  
its own customer measures which track 
elements particularly relevant to them. 
Costa had an average brand preference 
score of 37.3% during the year which 
was better than Starbucks, Premier Inn 
had a net recommend score of 59.8% 
and Restaurants achieved 66.1%. The 
Group score is a combination of the 
Costa and Hotels & Restaurants scores.

WINcard results

WINcard results

WINcard results

  Hotels & Restaurants

  Group

  Group1

  Costa

Our goals for 2014/15
The brand standards measure for  
Costa has been replaced as an 
incentivised measure for 2014/15 by  
a net recommend target based on the 
Costa Listen and Learn programmes. 
The target is 57.7%.

Our goals for 2014/15
The target for the year ahead is to 
improve on each measure by 1% pt.

  Hotels & Restaurants

  Costa

Our goals for 2014/15
Costa’s target is to further improve  
on its brand preference score and  
also to stay ahead of Starbucks. 
Restaurants has a target of 67.1% for  
net recommend in the first half. The 
Premier Inn net recommend measure 
has been replaced with a new target  
to reduce the number of guests  
scoring zero to six out of ten to 8.9%.

1   The Group WINcard result shown under brand standards was a combination of the Costa brand standards 

score and the Hotels & Restaurants family measures.

Whitbread 
Annual Report and Accounts 2013/14

Key Performance 
Indicators

35

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Key Performance 
Indicators 
continued 

Winning Teams

Customer
CCustomerr
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Profitable Growth

Profit
As with all businesses we measure  
our financial success by the profits  
we make through growing our 
brands and operating our businesses 
efficiently. A budget is agreed  
with the Board each year which  
sets a target profit level.

Like for like sales growth
We closely follow the sales  
growth performance of those  
hotels, restaurants and coffee  
shops that have been open  
for more than a year. 

Market performance/growth
Our strategy is based on the  
profitable growth of our brands  
which we measure in terms  
of our sales growth per available 
room compared to our  
competitors in hotels and the  
number of net new stores in Costa. 

Why this is important
Recognising that our shareholders have 
a choice in investing their money we 
need to be able to demonstrate that  
our businesses can produce sustainable 
profit growth. This should mean that  
the underlying value of the Company 
will increase and dividends can be  
paid in line with that growth.

Why this is important
While we are investing so much in the 
organic growth of Hotels & Restaurants 
and Costa we need to keep a close eye 
on how the mature parts of the business 
are performing. This enables us to make 
better investment decisions in terms  
of our new developments as well as 
being able to react to shorter–term 
performance trends.

Why this is important
We need to be able to understand  
how we are performing on a constant 
basis to show our shareholders  
how we are performing against the  
rest of the market and to develop  
our strategy accordingly. 

How we have done in 2013/14
We grew our Group underlying profit 
before tax by 16.5% last year, with 
Hotels & Restaurants growing its  
profits by 11.2% and Costa by 21.9%. 

How we have done in 2013/14
The strength of our brands has meant 
we have beaten our like for like sales 
targets across the Company with  
Group at 4.2%, Hotels & Restaurants  
at 3.7% and Costa at 5.7%. 

How we have done in 2013/14
We opened 334 net new Costa stores 
worldwide, which was more than in the 
prior year, but marginally below our 
target of 346 stores.

We grew market share in Premier Inn, 
with 4.3% RevPAR growth and an 
increase of 3,364 net new rooms.  
Our budget competitors grew  
RevPAR by 8.3% from a low base.

WINcard results

  Group

WINcard results

  Group

WINcard results

  Group

  Hotels & Restaurants

  Hotels & Restaurants

   Hotels & Restaurants

  Costa

  Costa

  Costa

Our goals for 2014/15
Our profit targets are commercially 
sensitive. They will remain stretching,  
but achievable. 

Our goals for 2014/15
Our like for like sales targets are  
commercially sensitive but are  
set in the budget process against  
a realistic but stretching view  
of the markets in the coming year.

Our goals for 2014/15
These targets are commercially 
sensitive but are set in the  
context of continued brand  
growth and outperformance.

Whitbread 
Annual Report and Accounts 2013/14

Key Performance 
Indicators

36

 
 
Returns on investment 
A crucial factor in measuring our 
performance is how well we have  
invested our shareholders’ money.  
We calculate this by dividing  
the underlying profit of an asset  
or business by the capital value  
of the asset it has been invested in. 

Why this is important
Our investors want to be able to  
judge how well we are using their 
money in comparison to other 
investments that they could make.  
We also want to be able to compare 
the performance of different types  
of businesses and assets to focus  
our own plans, and measuring  
returns helps us to do so.

How we have done in 2013/14
The Group returns grew from  
13.9% to 15.3%. Hotels & Restaurants 
return on capital grew from 12.4%  
to 13.3% and Costa grew returns  
from 34.7% to 40.5%.

Winning Teams

Customer
CCustomerr
HHHeartbeaaatt
Heartbeat

Proﬁtable Growth

A force for good

Good Together

Carbon consumption/waste to landfill
Our corporate responsibility 
programme covers a number  
of areas against which we measure 
ourselves. Hotels & Restaurants  
has a carbon reduction target  
and Costa has a target to divert  
waste from landfill.

Why this is important
Companies have a responsibility  
to reduce their impact on the 
environment which we fully endorse. 
There are also clear economic  
benefits in reducing carbon 
consumption primarily through  
reduced energy bills.

How we have done in 2013/14
Costa now diverts 67.0% of waste  
from landfill, which is in excess of the 
64.0% target. Hotels & Restaurants 
achieved a 6.1% reduction in like for  
like carbon consumption versus a  
target of 3.0%.

Return on capital is an important 
indicator used when considering all 
investment decisions and is a key 
measure for the Company’s Long  
Term Incentive Plan, but is not on  
the WINcard.

Our goals for 2014/15
We want to make more profit from  
an investment than it costs to raise  
the money to pay for it whether  
it has been borrowed, invested  
as equity or paid as rent.

WINcard results

  Group

  Hotels & Restaurants

  Costa

Our goals for 2014/15
Hotels & Restaurants has an annual 
targets of a 3% reduction in like  
for like carbon consumption. Costa’s  
target is to reach 72% of waste  
diverted from landfill next year.

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Our Restaurants business  
achieved record guest scores.

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Whitbread 
Annual Report and Accounts 2013/14

Key Performance 
Indicators

37

 
 
 
 
 
 
 
 
 
 
Finance 
Director’s 
review

Nicholas Cadbury
Finance Director

Revenue
Revenue by business segment

Hotels & Restaurants 

Costa 

Less: inter–segment 

Revenue before exceptional 

Exceptional revenue 

Revenue 

Whitbread has continued its strong financial performance, 
with revenue up 13.0% to £2.3 billion, underlying profit 
before tax up 16.5% to £411.8 million, operating cash flow 
(before pension payments) of £601.3 million up 14.3%  
and underlying basic earnings per share up 20.1%.

2013/14 
 £m 

1,494.0 

807.7 

(2.8) 

2012/13 
£m 

1,360.1 

672.4 

(2.5) 

Change 
% 

9.8

20.1

2,298.9 

2,030.0 

13.2

(4.6) 

— 

2,294.3 

2,030.0 

13.0

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Hotels & Restaurants
Revenue rose to £1,494.0 million, up 9.8%, with Premier Inn growing by 13.4% and Restaurants by 3.9%. 

Premier Inn UK grew its market share with total sales of £966.1 million. We opened 28 hotels with 3,546 new rooms increasing 
our rooms stock by 6.5% to 55,035. Like for like sales grew by 5.0% driven by an increase in the like for like revenue per 
available room of 4.3%. Internationally we opened two new hotels one in Abu Dhabi and the other in Pune, India. Restaurants 
like for like sales grew by 1.6% and eight new restaurants were opened during the year.

Hotels & Restaurants in the UK had a particularly strong fourth quarter, with like for like sales growth of 7.3% compared to 2.7% 
for the previous three quarters. This was caused by a combination of successful Christmas and New Year campaigns, unusually 
benign weather in January and February and softer comparatives last year. We also experienced higher than expected sales and 
margins in the quarter due to strong average room rates in the hotel market and less promotional discounting in Restaurants.

Costa
Costa’s revenue grew by 20.1% to £807.7 million continuing to benefit from the socio–economic changes favouring coffee 
shops, further strengthening of the consumer’s preference for the Costa brand and a growing estate both in the UK and 
internationally. Costa’s UK sales grew to £708.1 million, up 19.6%, with retail like for like sales increasing by 5.7% and 177 net 
new UK coffee shops. International sales grew to £99.6 million with 157 net new stores. Costa Enterprises grew strongly  
with 955 net new Costa Express coffee machines taking the total to 3,515, with 178 installed internationally.

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Whitbread 
Annual Report and Accounts 2013/14

Finance Director’s 
review

38

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Profit

Underlying profit by business segment 

Hotels & Restaurants — UK and Ireland 
Hotels & Restaurants — International 

Totals Hotels & Restaurants 

Costa 

Profit from operations 

Central costs 

Underlying operating profit 

Interest 

Underlying profit before tax 

1  Restated for the impact of IAS 19 (revised 2011).

2013/14 
 £m 

2012/13 1 
£m 

Change 
%

354.1 
(6.0) 

348.1 

109.8 

457.9 

(27.2) 

430.7 

(18.9) 

411.8 

319.2 
(6.1) 

313.1 

90.1 

403.2 

(26.2) 

377.0 

(23.6) 

353.4 

10.9 
1.6

11.2

21.9

13.6

(3.8)

14.2

19.9

16.5

Whitbread’s underlying profit before tax was up 16.5% to £411.8 million. Underlying profit before tax excludes the pension 
interest charge, the amortisation of acquired intangibles and exceptional items.

Hotels & Restaurants profits grew to £348.1 million up 11.2% with the UK profits up 10.9% to £354.1 million. Due to the 
particularly strong fourth quarter, UK profits were up 15.2% in the second half of the year compared to 7.9% in the first  
half. Rent costs increased by 27.5% to £88.5 million, reflecting the higher mix of leasehold openings. Our depreciation  
and amortisation charge also rose above the rate of sales at 15.2% to £98.6 million (2012/13: £85.6 million) as we aligned  
our depreciation period to our new refurbishment cycle, reducing a room’s economic useful life from 15 to 12 years. This  
change is applied to this and future years such that there is incremental depreciation of £6.0 million in 2013/14 and 2014/15. 

As we continue to invest in our customer offering we will increase our refurbishment programme in 2014/15 to approximately  
12,700 rooms (5,433 in 2013/14) carrying out both a light and full programme and installing some 2,500 air conditioning  
units. In addition we will upgrade our customer Wi–Fi offering and increase our revenue investment in technology and  
process improvements as we evolve our systems to support future growth. These revenue investments will amount to 
approximately £10.0 million in 2014/15.

International hotel losses were £6.0 million with good progress in the Middle East. In 2014/15 we will continue our development 
of South East Asia with further revenue investments to create an operational hub.

Costa’s strong performance was led by UK Retail and Costa Enterprises with profits increasing by 26.5% to £110.9 million. 
Internationally Costa made a loss of £1.1 million (2012/13: profit £2.4 million). We improved profitability in the Middle East,  
in our European franchises and in the like for like stores in China. Offsetting this, we are continuing to invest in new stores,  
the infrastructure and team in China and we have also invested in the start up of our equity business in France. In Poland  
we have seen a decline in our like for like sales and our profitability caused by a weak macro environment, an increase in  
VAT on milk based drinks, which took affect in April 2013, and some disruption as we reviewed our estate and rebranded  
the stores to Costa. These latter activities continue into the new year.

Total profit after tax and exceptional items was £323.4 million up 10.7% on last year.

Interest
The underlying interest charge for the year was £18.9 million, a reduction of £4.7 million compared to last year. This resulted 
from the decrease in the proportion of fixed interest rate debt following the maturity of a number of fixed rate swaps  
in December 2012 and the strong cash flow generated in the year reducing net debt by £79.5 million to £391.6 million.  
The effective interest rate on average net debt reduced from 4.8% to 4.7%.

The total pre exceptional interest cost is £42.5 million (2012/13: £50.6 million) including the IAS 19 pension finance charge  
of £23.6 million (2012/13: £27.0 million).

Whitbread 
Annual Report and Accounts 2013/14

Finance Director’s 
review

39

 
 
 
 
 
 
 
 
 
 
 
 
Finance 
Director’s 
review 
continued 

Exceptional items
Exceptional items for the year amounted to a benefit of £25.9 million. Full details are set out in Note 6 to the financial 
statements.

There are a number of significant items. The first item relates to a £18.6 million release of the deferred tax liability following  
a reduction in the corporation tax rate from 23% to 20%. Secondly, we reassessed the indexation allowance on rolled over 
capital gains which gave rise to a further £40.2 million release of deferred tax liability. Thirdly, there is a net impairment  
charge and loss on disposals of £31.9 million of which £10.5 million relates to the reorganisation of our Costa Poland business 
and £6.8 million relates to additional provisions relating to property reversions. Lastly, in previous periods the Group disclosed  
a contingent liability in respect of a claim for repayment of VAT on gaming machine income of £4.6 million. Following the  
Court of Appeal decision in October 2013 in favour of HMRC against the Rank Group Plc, Whitbread has decided to recognise 
this expected cash outflow plus a further amount of £1.1 million in respect of interest on late payment.

Taxation
Underlying tax for the year amounts to £94.1 million, an increase of 3.6% on the prior year. The effective tax rate was 22.9% 
(2012/13: 25.7%) following the reduction in corporation tax rates and one off adjustments in respect of previous years crediting 
the tax charge by £4.7 million.

Earnings per share
Underlying earnings per share for the year is 179.02p up 20.1% on last year as a result of the strong profit growth, combined with 
a lower effective tax rate as explained above. Underlying diluted earnings per share for the year is 177.14p up 19.8% on last year.

Dividend 
The recommended final dividend is 47.00p, an increase on last year of 24.0%, making the total dividend for the year 68.80p  
up 19.9% in line with the Group’s basic earnings per share growth. With the final dividend we will offer our shareholders the 
option to participate in a dividend reinvestment plan. The scrip plan has been terminated.

Net debt and free cash
The principal movements in net debt are as follows:

Cash flow from operations before pension 

Capital expenditure 

Overseas investment 

Disposal proceeds 

Interest 

Tax 

Pensions 

Dividends 

Other 

Net cash flow 

Net debt brought forward 

Net debt carried forward 

2013/14 
 £m 

601.3 

(306.2) 

(1.6) 

1.0 

(19.1) 

(81.4) 

(71.2) 

(62.4) 

19.1 

79.5 

(471.1) 

(391.6) 

2012/13 
£m

526.0

(343.6)

(4.8)

51.0

(26.2)

(46.7)

(45.7)

(77.8)

1.0

33.2

(504.3)

(471.1)

Cash generated from operations before pension increased by 14.3% to £601.3 million. This strong cash flow enabled Whitbread 
to fund its growth from internal resources, grow its dividend and reduce its net debt. Investment in capital expenditure  
was £306.2 million (2012/13: £343.6 million) ensuring that the Group continued to grow its market share through new site 
developments whilst improving the existing estate. The pension payments were £71.2 million with the defined benefit 
contribution being in line with the triennial scheduled payments agreed with the pension trustee in 2011.

Dividend payments amounted to £62.4 million. In the year there was a high take up of the scrip dividend at 41.6%. The gross 
dividend payment without the scrip dividend would have been £106.9 million. It should be noted that the dividend reinvestment 
plan will replace the scrip dividend for the final dividend payment.

Whitbread 
Annual Report and Accounts 2013/14

Finance Director’s 
review

40

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Corporation tax paid in the year was £81.4 million (2012/13: £46.7 million).

As a result of the strong cash flow, net debt as at 27 February 2014 reduced by £79.5 million to £391.6 million (2012/13:  
£471.1 million).

Capital expenditure
On an accruals basis, the Group’s capital spend was £336.6 million (2012/13: £341.1 million). 

The Group’s cash capital expenditure was £306.2 million, with £231.1 million in Hotels & Restaurants and £74.2 million in  
Costa. Capital expenditure is split between expansionary (which includes the acquisition and development of properties)  
and maintenance. 

Expansionary cash expenditure was £199.7 million (2012/13: £220.1 million). Of this £147.4 million relates to Hotels & Restaurants, 
supporting the 3,955 gross new rooms worldwide and eight new restaurants. Of this amount we spent £127.8 million on 
freehold property (2012/13: £134.0 million). Freehold property remains Whitbread’s preferred route to market for Hotels & 
Restaurants. It provides operational flexibility to develop the property to our requirements and the financial benefits of 
retaining a greater share of the value generated from the sites’ performance.

Costa spent £52.3 million (2012/13: £61.9 million) on the opening of 423 gross new coffee shops and 1,149 gross new Costa 
Express machines. The lower spend this year was principally due to the timing of the rollout of Costa Express machines.

Maintenance cash expenditure was £106.5 million (2012/13: £123.5 million). In Hotels & Restaurants, cash expenditure was  
£83.7 million compared to £103.1 million last year with an additional c.£30 million due to be paid in 2014/15 relating to 
refurbishments carried out at the end of 2013/14. In Costa we spent £21.9 million (2012/13: £18.2 million), a considerable  
amount of which was upgrading 139 Costa UK stores.

In 2014/15 we plan to open c.4,500 UK hotel rooms, with approximately 70% opening in the second half. Costa is planning  
to open c.300 coffee shops and install around 600 Costa Express machines. Our committed UK hotel pipeline is made up  
of 75% leasehold properties which will result in Hotels & Restaurants’ rent increasing by approximately £20 million. We expect 
capital expenditure to be around £360 million with the exact amount depending on the timing of freehold land acquisitions. 

Pension
As at 27 February 2014, there was an IAS 19 pension deficit of £534.3 million (2012/13: £541.7 million). The decrease on last  
year was mainly as a result of the strong asset performance and the cash contribution of £71.2 million from the Company, 
partially offset by an increase in the liability due to a reduction in the discount rate from 4.60% to 4.30%. The next triennial 
actuarial pension review will be based on a valuation as of 31 March 2014.

Financial status and funding 
Whitbread aims to maintain its financial position and capital structure consistent with retaining its investment grade status.  
To this end we work within a financial framework of net debt to EBITDAR (pension and lease adjusted) of less than 3.5 times.

In January 2014 we announced that Whitbread had signed an amendment to its existing £650 million syndicated bank facility, 
extending its maturity by two years to 4 November 2018, and introducing two options to extend it by a year sequentially 
beyond that date, with the consent of the banks. The facility pricing remained unchanged. The maturity extension of the loan 
facility, together with our existing private placement notes, has ensured that the Group has access to facilities to meet the 
needs of our growth programme.

Return on capital
Return on capital is a prime focus for Whitbread. In the year the Group’s return on capital improved by 1.4% pts to 15.3%  
with Costa’s returns up 5.8% pts to 40.5% and Hotels & Restaurants up 0.9% pts to 13.3%. Of the 1.4% pts improvement  
to the Group’s return, 0.6% pts was due to the higher mix of leases within our Hotels & Restaurants estate. 

Nicholas Cadbury
Finance Director
28 April 2014

Whitbread 
Annual Report and Accounts 2013/14

Finance Director’s 
review

41

 
 
 
 
 
 
 
 
 
 
HR Director’s 
report

At its heart, Whitbread is a people business. We believe  
that creating a great place to work, supporting our people 
to realise their full potential and building leadership strength 
is vital to the success of the Company.

Louise Smalley
Group HR Director

We ensure that we recruit the best people and invest in training and development to grow 
talented future leaders. We believe in equal opportunities for all. Further details of how we 
build our engaged teams in both Hotels & Restaurants and Costa can be found on pages  
12 to 13 and 22 to 23 respectively.

Diversity
We operate in a number of countries working with people, customers and suppliers from a 
broad range of backgrounds and cultures. We believe that a diverse organisation encourages  
a full range of ideas and leads to better decision making.

In order to champion the importance of diversity within all levels of the business, we have 
established a cross business diversity group that meets on a quarterly basis with attendees 
representing different areas of the business.

Various matters are discussed during these meetings and actions during the year have 
included:
•	development of diversity targets and plans for each business; 
•	a review of recruitment strategies and processes; and
•	a review of the maternity and paternity policies.

A breakdown of gender, split between directors of the Company, senior managers (defined  
as those in the Directors’ Forum) and all Whitbread employees as at 27 February 2014  
is set out below:

Directors

Male

Female

25%

Senior managers

All Whitbread employees

Male

Female

27%

Male

Female

38%

62%

75%

73%

Diversity is discussed regularly by the Executive Committee and reports are received and 
discussed by the Nomination Committee.

Whitbread 
Annual Report and Accounts 2013/14

HR Director’s 
report

42

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The strategic report on pages 6 to 43 was approved by the Board and signed on its  
behalf by Simon Barratt, General Counsel and Company Secretary on 28 April 2014.

Internal policies
We have a range of policies and programmes which are regularly reviewed and communicated 
to employees through various training modules. These include our Code of Conduct, human 
rights, anti–bribery, hospitality and gifts, and anti–fraud and theft policies.

Code of Conduct and human rights
We recognise the importance of taking care of our people by providing a healthy and safe 
working environment and working responsibly to be a positive part of the communities in 
which we operate. 

We have updated our Global Code of Conduct, which is applicable to all employees in all 
countries. This outlines the expected standards of behaviour and the core values of the 
Company. The Code of Conduct also includes details of our independent speaking out service, 
enabling employees to report any concerns regarding harmful behaviour or conduct in a 
confidential manner.

Everyone deserves the right to live and work with dignity. There are basic standards of human 
rights that Whitbread respects at all times. These relate to issues such as child labour, humane 
treatment, working conditions and fair pay. We expect our business partners to respect these 
standards and we will only work with organisations that have the same respect for people’s 
working conditions that we do.

Our environment
The impact of our business on the environment and the communities in which they operate  
is a key part of our business model and is incorporated in the Good Together element  
of the Customer Heartbeat diagram. Further details regarding Good Together in Hotels & 
Restaurants and Costa can be found on pages 19 and 29 respectively.

Disclosures regarding our Greenhouse Gas emissions as required by the Companies Act 2006 
(Strategic and Directors’ Report) Regulations 2013 can be found on pages 79 and 80.

Awards and recognition
We believe that Whitbread is a great place to work and I am proud to report that we were 
recently ranked 8th in The Sunday Times Best Big Companies to Work For 2014 and were 
recognised as the third top employer in the UK by the Top Employers Institute. External 
recognition such as this is helpful as we look to recruit around 3,000 new people every year  
to support our ambitious growth plans.

Louise Smalley
Group HR Director
28 April 2014

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Whitbread 
Annual Report and Accounts 2013/14

HR Director’s 
report

43

 
 
 
 
 
 
 
 
 
 
 
Corporate
governance

Anthony Habgood
Chairman

Introduction from Anthony Habgood, Chairman
At Whitbread we recognise that corporate governance touches all aspects of our business  
and affects all of our employees in many different ways. We are committed to maintaining  
high standards of governance to ensure that the Company is managed with integrity and 
transparency.

During the year key governance activities have included:
•	an internal evaluation of the Board;
•	a talent review and succession plan for key executive roles;
•	a review of the way the Audit Committee reports to the Board on how it has carried out  

its responsibilities in relation to the Annual Report and Accounts; and

•	developing the new form of remuneration report.

Statement of Compliance
The Board takes responsibility for leading on high standards of accountability and ethical 
behaviour. The 2012 UK Corporate Governance Code (‘the Code’), which can be found  
at www.frc.org.uk, was applicable to the financial year covered by this Report and is the 
standard against which we measured ourselves. In order to ensure our compliance we 
undertook a thorough review of our corporate governance arrangements including our:
•	overall compliance with the 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.

We are pleased to report that the Board considered that it and the Company complied with  
all the provisions of the Code throughout the financial year.

Details of how Whitbread has applied the main and supporting principles of the Code with 
regard to remuneration can be found in the remuneration report on pages 58 to 76. Details  
of the members and activities of the Remuneration Committee can be found on page 67. 
Details of the members and activities of the Audit and Nomination committees can be found 
on pages 53 to 57.

Maintaining high standards of corporate governance is vital to supporting our financial 
performance and protecting your Company. Further details are provided in the following 
pages on how Whitbread complied this year in the following areas:
•	leadership and the Board of Directors;
•	Board effectiveness;
•	shareholder relations; 
•	accountability and internal control; and
•	Board committees.

The year ahead
Corporate governance is an area that continues to change. We keep all developments under 
review and always aim for a level of governance that is appropriate and relevant to the Company.

Anthony Habgood
Chairman
28 April 2014

Whitbread 
Annual Report and Accounts 2013/14

Corporate 
governance

44

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Leadership and the Board of Directors

The Board of Directors
There are 12 members of the Board including the Chairman, 
Chief Executive and Senior Independent Director. The 
composition of the Board is shown in the chart below.

Composition of the Board

Chairman: 1

Executive directors: 5

Independent 
non–executive directors: 6

Male: 9

Female: 3

The Chairman and Chief Executive have clearly defined roles 
which are separate and distinct. The specific duties and division 
of responsibilities between the Chairman and Chief Executive 
have been agreed by the Board and are set out below.

Chairman

•	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.

•	Maintaining contact with major shareholders and ensuring that Board 

members understand their views concerning the Company.

•	Ensuring a culture of openness and debate around the Board table.

•	Leading the annual evaluation of the Board, the committees and 

individual directors.

•	Ensuring, through the General Counsel, that the members of the 

Board receive accurate, timely and clear information.

Chief Executive

Biographical details of each of the directors can be found  
on pages 46 and 47. 

We believe that it is vital for the Board to contain a diverse 
range of skills, backgrounds and experiences to enable a 
broad evaluation of all matters considered and to contribute 
to a positive culture of mutual respect and constructive 
challenge. The mix of skills and experience represented on  
the Board is outlined below.

•	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.

•	Leading the activities of the Whitbread Leadership Forum — a group 

of the Company’s most senior executives.

Board experience

Number of directors 

Number of directors

Retail sector 

Travel and hospitality sector 

Marketing 

Legal 

Financial 

International 

Commercial property 

Technology 

Human Resources 

9

1

2

2

5 

4 

2 

1 

5

Board responsibilities
The Board is responsible for the long–term success of  
the Company and ensures that there are effective controls  
in place which enable risk to be assessed and managed.  
All Board members have responsibility for strategy, 
performance, risk and people. 

Senior Independent Director
The Senior Independent Director provides a sounding board 
for the Chairman and supports him in the delivery of his 
objectives. The Senior Independent Director is 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. He also leads the 
evaluation of the Chairman on behalf of the other directors.

The Senior Independent Director can be contacted directly  
or through the Company Secretary.

Executive directors
The executive directors are responsible for the day–to–day 
running of the business and for implementing the operational 
and strategic plans of the Company.

Non–executive directors
The non–executive directors play a key role in constructively 
challenging and scrutinising the performance of the 
management of the Company and helping to develop 
proposals on strategy.

Whitbread 
Annual Report and Accounts 2013/14

Corporate 
governance

45

 
 
 
 
   
 
 
 
 
 
 
 
Board of 
Directors

Anthony Habgood
Chairman
Date of appointment to the Board:
May 2005

Andy Harrison
Chief Executive
Date of appointment to the Board:
September 2010

Age: 67

Age: 56

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 to 2005. Prior to this, he held 
the roles of Managing Director of 
Courtaulds International Fabrics 
and Finance Director of Courtaulds 
Textiles plc. Andy has also held  
a non–executive directorship at 
Emap plc, where he was Chairman 
of the Audit Committee. 

Patrick Dempsey OBE
Managing Director 
Whitbread Hotels  
& Restaurants
Date of appointment to the Board:
January 2009

Age: 55

Experience:
Patrick joined Whitbread in 2004 
as Managing Director of Marriott  
in the UK, and has worked 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 and  
is now Managing Director of 
Whitbread Hotels & Restaurants.

External appointments:
•	Talent & Skills 

(Business in the Community) 
(Leadership Team Member)
•	British Hospitality Association  

(Director)

•	Great Ormond Street Hospital 
Children’s Charity (Corporate 
Partnerships Board Member)

Richard Baker
Independent non–executive 
director 
Date of appointment to the Board:
September 2009

Wendy Becker
Independent non–executive 
director
Date of appointment to the Board:
January 2008

Age: 51

Age: 48

Experience:
Richard is Chairman of Virgin 
Active Group and DFS Furniture 
Holdings Plc as well as Chairman  
of the Global Advisory Council of 
Aimia. Richard previously served  
as Chief Executive of Alliance Boots 
Group plc and Chief Operating 
Officer at Asda Group plc.

External appointments:
•	Virgin Active Group and 
Subsidiaries (Chairman)

•	Global Advisory Council, Aimia 

(Chairman)

•	DFS Furniture Holdings Plc 
(Non–executive Chairman)

•	Advent International Plc 

(Operating Partner)

Committee membership:
•	Audit Committee
•	Remuneration Committee

Experience:
Wendy is the Chief Executive  
of Jack Wills Limited. Previously, 
she was Group Chief Marketing 
Officer for Vodafone, Managing 
Director of TalkTalk and a partner 
at McKinsey & Company. 

External appointments:
•	Jack Wills Limited  
(Chief Executive)

•	Cancer Research UK (Trustee)
•	Princes Trust (Trustee)
•	English National Ballet (Trustee)
•	Advisory Board of Oxford’s Said 

Business School

Committee membership:
•	Audit Committee
•	Nomination Committee
•	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 
Mölnlycke 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.

Anthony will be stepping down 
from the Board later this year.

External appointments:
•	Reed Elsevier plc and NV 

(Chairman)

•	Preqin Holding Limited 

(Chairman)

•	Norwich Research Park 

(Chairman)

Committee membership:
•	Nomination Committee 

(Chairman)

•	Remuneration Committee

Sir Ian Cheshire
Senior Independent Director
Date of appointment to the Board:
February 2011

Age: 54

Experience:
Sir Ian is 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  
Sears and Guinness.

External appointments:
•	Kingfisher Plc  

(Group Chief Executive)
•	British Retail Consortium 

(Chairman)

•	Cambridge Institute for 

Sustainability Leadership  
(Chairman of Advisory Board)

•	Department for Work and 

Pensions (Lead non–executive 
director)

•	Business Disability Forum 

President’s Group (President)

Committee membership:
•	Remuneration Committee
•	Nomination Committee

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Whitbread 
Annual Report and Accounts 2013/14

Corporate governance: 
Board of Directors

46

 
 
 
 
 
 
 
 
 
 
Nicholas Cadbury
Group Finance Director
Date of appointment to the Board:
November 2012

Louise Smalley
Group HR Director
Date of appointment to the Board:
November 2012

Age: 48

Age: 46

Experience:
Nicholas joined Whitbread in 
November 2012 as Group Finance 
Director. He previously worked at 
Dixons Retail PLC, in a variety of 
management roles, including Chief 
Financial Officer from 2008–2011. 
Nicholas also held the position of 
Chief Financial Officer of Premier 
Farnell PLC, which he joined in 2011. 
Nicholas originally qualified as an 
accountant with Price Waterhouse.

Experience:
Louise joined Whitbread in 1995 
and has held the position as  
Group Human Resources Director 
since 2007. During her time at 
Whitbread, Louise has held a 
variety of HR roles across the 
Whitbread businesses, including 
HR Director of David Lloyd  
Leisure and Whitbread Hotels  
& Restaurants. She previously 
worked in the oil industry, with  
BP and Esso Petroleum.

External appointments:
•	People 1st (Trustee)
•	DS Smith Plc  

(Non–executive director) — 
with effect from 23 June 2014

Christopher Rogers
Managing Director  
Costa Coffee
Date of appointment to the Board:
May 2005

Age: 54

Experience:
Christopher joined Whitbread nine 
years ago as Group Finance Director, 
a role he held until November 2012. 
He was appointed Managing 
Director of Costa Coffee in July 
2012. Christopher previously worked 
at 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. 

External appointments:
•	Travis Perkins Plc 

(Non–executive director)

Simon Melliss
Independent non–executive 
director
Date of appointment to the Board:
April 2007

Susan Taylor Martin
Independent non–executive 
director
Date of appointment to the Board:
January 2012

Stephen Williams
Independent non–executive 
director
Date of appointment to the Board:
April 2008

Age: 61

Age: 50

Age: 66

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.

External appointments:
•	Hermes Property Unit Trust 

(Chairman)

•	University College London 
(Treasurer and member  
of the Council)

Committee membership:
•	Audit Committee (Chairman)
•	Nomination Committee

Experience:
Susan is President of the Legal 
business at Thomson Reuters. 
Other roles she has held at that 
company include: a President, 
Thomson Reuters Media, Media 
President of Global Investment 
Focus Accounts and a Managing 
Director of Legal in the UK and 
Ireland. Prior to this she was Global 
Head, Corporate Strategy for 
Reuters, which she joined in 1993. 

External appointments:
•	Thomson Reuters  
(President, Legal)

•	Confederation of British Industry  

(Chair, London Council)
•	The Powerlist Foundation 

(Trustee)

Committee membership:
•	Audit Committee

Experience:
Stephen retired as General Counsel 
and Chief Legal Officer of Unilever 
during 2010, having originally joined 
in that position in 1986. Prior to that, 
Stephen spent 11 years at Imperial 
Chemical Industries plc. From 1995 
to 2004 he was a non–executive 
director of Bunzl plc and from 2004 
to 2010 he was Senior Independent 
Director of Arriva plc. He joined the 
Board of Croda International Plc  
in 2010 as a non–executive director.

External appointments:
•	Croda International Plc  
(Non–executive director)

•	Eversheds LLP  

(Non–executive director)

•	Spencer Stuart LLP 
(Senior Advisor)

•	Moorfields Eye Hospital  

NHS Trust (Trustee)

•	De La Warr Pavilion Trust 

(Chairman)

•	Amicus Curie Limited (Director)
Committee membership:
•	Remuneration Committee 

(Chairman)

•	Nomination Committee

Whitbread 
Annual Report and Accounts 2013/14

Corporate governance: 
Board of Directors

47

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2

 
 
 
 
 
 
 
 
 
 
Corporate 
governance 
continued 

Board activities during the year
In advance of each Board meeting, a set of Board papers, 
including monthly financial and trading reports, is circulated 
so that directors have sufficient time to review them and 
arrive at the meeting fully prepared.

The Board has a rolling agenda which sets 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. The Board gives its 
attention to each area of the business in turn so that a  
strong understanding of the entire Company is maintained. 
The rolling agenda is regularly reviewed and updated  
and is circulated as part of the secretariat report before  
each meeting.

The agendas for individual Board meetings are agreed with 
the Chairman and the Chief Executive on a monthly basis  
so that current events and potential future issues can be 
discussed alongside the regular reports. Standard items for 
each meeting are a review of the minutes from the previous 
meeting, matters arising and progress on action points, 
reports from the Chief Executive, the Finance Director and  
the Managing Directors of Whitbread Hotels & Restaurants 
and Costa and the secretariat report.

The Chairman meets with the non–executive directors  
without the executives present after Board meetings.

There is a schedule of matters reserved exclusively to the 
Board; all other decisions are delegated to management. 
These matters reserved exclusively to the Board 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 capital projects, acquisitions 
and disposals valued at over £12 million; 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 2014 Board meeting and is available on our website. 

At the meetings during the year, the Board discharged its 
responsibilities and considered a range of matters, details  
of which can be found below:

Board agenda 2013/14

Standing agenda items
•	Chief Executive’s report
•	Finance Director’s report
•	Health and Safety report 

(quarterly)

Q1
•	Approval of Annual Report  

and Accounts

•	Recommendation of final 

dividend

•	Approval of year–end 

announcement
•	Costa EMEI update
•	Costa Enterprises update
•	Premier Inn digital update
•	Business Plan focus areas
•	Whitbread Hotels & 
Restaurants update

Q3
•	Good Together activity
•	Interim results
•	Recommendation of interim 

dividend

•	Premier Inn International 

projects

•	International talent review
•	Costa Retail update
•	Premier Inn digital update
•	 ‘hub by Premier Inn’
•	Strategy review

•	Internal Controls (quarterly)
•	Secretariat report

Q2
•	Premier Inn International update
•	Pensions update
•	Costa Asia update
•	Talent review

Q4
•	Whitbread Hotels &  
Restaurants update

•	2014/15 budget
•	Corporate governance review
•	Costa Good Together
•	Premier Inn digital update
•	Costa global brand positioning

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Whitbread 
Annual Report and Accounts 2013/14

Corporate 
governance

48

Costa is growing rapidly in China.

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Board meetings and attendance
The Board generally holds meetings at monthly intervals 
during the year and on an ad hoc basis as and when required. 
Ten meetings were held during the year and attendance at 
meetings by directors is set out below:

Board

Audit 
Committee

Nomination 
Committee

Remuneration 
Committee

Anthony Habgood

10/10

Andy Harrison

Nicholas Cadbury

Patrick Dempsey

10/10

10/10

10/10

Christopher Rogers

10/10

Louise Smalley

Richard Baker

Wendy Becker

Sir Ian Cheshire

Susan Hooper

Simon Melliss

10/10

10/10

10/10

10/10

7/8

10/10

Susan Taylor Martin

10/10

Stephen Williams

10/10

—

—

—

—

—

—

3/4

4/4

—

—

4/4

4/4

—

2/2

4/4

—

—

—

—

—

—

1/1

4/4

—

4/4

—

4/4

—

—

—

—

—

4/4

3/4

4/4

—

—

—

4/4

Members of the executive team attended committee meetings as 
appropriate. Anthony Habgood is not a member of the Audit Committee 
but attended all four meetings during the year. 

Two of the Nomination Committee meetings dealt with the appointment  
of the successor to the Chairman, therefore Anthony Habgood did not 
attend these meetings.

Wendy Becker was appointed as a member of the Nomination Committee 
in February 2014 and was therefore only eligible to attend one of the four 
scheduled meetings.

Susan Hooper resigned from the Board with effect from 1 January 2014 
and was therefore only eligible to attend 8 of the 10 scheduled meetings.

Insurance cover
The Company has appropriate directors’ and 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.

Effectiveness
The effectiveness of the Board, committees and individual 
directors is reviewed annually in accordance with the Code.

Composition of the Board
It is believed that the Board and its committees have the 
appropriate balance of skills, experience, independence  
and knowledge of the Company to enable them to discharge 
their responsibilities effectively. The Board has a majority  
of independent non–executive directors. After assessing 
independence against the Code, the Board considers all  
non–executive directors to be independent in judgement and 
character. On appointment, the Board also considered the 
Chairman to be independent in character and judgement. 

No new directors were appointed during the financial year. 
Details of the appointment procedure can be found in the 
report of the Nomination Committee on pages 56 and 57.

External directorships
Non–executive directors may serve on other boards provided 
they continue to demonstrate the required commitment to 
discharge their duties effectively. The Nomination Committee 
has reviewed the extent of other interests of the non–executive 
directors and the Board is satisfied that the Chairman and  
each of the non–executive directors commit sufficient time  
to their duties and fulfil their obligations to the Company.

No executive director has taken on more than one non–
executive directorship in a FTSE 100 company. During the 
year Christopher Rogers became a non–executive director  
of Travis Perkins PLC. No other executive directors hold any 
non–executive directorships in any FTSE 100 companies.

Training and development
On appointment, all directors receive a full and formal 
induction that is tailored to their specific needs. Meetings are 
arranged with the Chairman, Chief Executive and all executive 
and non–executive directors. Meetings are also arranged  
with members of the senior management team, the Group’s 
advisers and, if appropriate, major investors. A detailed review 
of all our businesses is provided and several site visits to our 
brands are arranged to provide insight into the Company  
and to develop an understanding of each business.

In order to become more familiar with the international 
businesses, the November Board meeting was held in 
Bangalore, forming part of the Board visit to India and the 
United Arab Emirates.

During this visit the Board met the local teams in both India 
and the United Arab Emirates and received presentations 
from local experts on the economy and hospitality industry. 
Site visits to Whitbread hotels and coffee shops were 
undertaken, as well as visits to competitor sites.

Whitbread 
Annual Report and Accounts 2013/14

Corporate 
governance

49

 
 
 
 
 
 
 
 
 
 
Corporate 
governance 
continued 

Training and development continues beyond the induction 
process and is an ongoing process for all Board members. The 
Chairman reviews and agrees the training and development 
needs with each director on an annual basis.

Directors are made aware of formal training events to ensure 
that their skills and knowledge are continually updated. 
Training events were attended by Board members during 
the year on a range of issues including: 
•	Board effectiveness;
•	Audit Committee key issues;
•	regulatory and legal updates; 
•	cyber security; and
•	remuneration updates.

Investor relations and market updates were also considered 
by the Board and regular updates from each of the brands are 
presented to the Board to ensure that familiarity with the 
Company is maintained. The Company’s auditor also prepared 
a paper for the Board on the key developments in accounting 
and governance practice. 

All directors have access to independent professional advice 
at the Company’s expense. Directors serving on the Board 
committees confirmed that they are satisfied that they 
received sufficient resources to enable them to undertake 
their duties effectively. Each director has access to the 
Company Secretary for advice on governance.

The Company Secretary prepares a monthly report that 
includes updates on corporate legislation and best practice 
on matters including corporate governance. This Report is 
presented and discussed at each Board meeting.

Evaluation
An evaluation of the Board, its committees, individual 
directors and the Chairman is carried out each year. 

Board and committees
An external evaluation was conducted in 2012 and in 
accordance with the Code, we intend to have an externally 
facilitated evaluation of the Board at least every three years. 
This year’s Board evaluation was conducted internally and  
had two aspects:
•	each director completed a formal questionnaire on  
the performance of the Board and each of the Board 
committees, considering the balance of skills, independence 
and knowledge of the Company on the Board, how the 
Board works together as a unit, and other factors relevant  
to its effectiveness; and

•	the Chairman met or spoke to all directors on a  

one–to–one basis.

The conclusions of the review were discussed at the February 
Board meeting and actions in response to the results have 
been developed. One particular area for discussion was the 
need to develop further international management capability 
and more reports will be made to the Board on this subject.

In response to last year’s evaluation, the following action  
has been taken:
•	greater emphasis on the reporting of the WINcard at  

Board meetings;

•	familiarisation with the Premier Inn International markets; 

and

•	improvements in the presentation of Board papers.

Individual directors
The Chairman has one–to–one meetings with all directors  
to discuss their performance and to identify whether they 
continue to contribute effectively to the Board and 
demonstrate commitment to the role.

Chairman
The Senior Independent Director would normally meet with  
the non–executive directors without the Chairman present  
to discuss the performance of the Chairman. The Senior 
Independent Director would also speak with the executive 
directors to gain their views before discussing the results  
with the Chairman. It was decided that this process was not 
necessary this year in light of the Chairman stepping down 
later in the year and the positive feedback arising from the 
internal review questionnaire.

Conflicts of interests
Directors are required to disclose any conflicts of interest 
immediately as and when they arise throughout the year.  
In addition, a formal process is undertaken each year in 
February when each director confirms to the Board details  
of their external interests including any other directorships 
which they hold.

These are 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.

Whitbread 
Annual Report and Accounts 2013/14

Corporate 
governance

50

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Shareholder relations
In accordance with the Code, the Board recognises that it has 
responsibility for ensuring that a satisfactory dialogue with 
shareholders takes place and any major shareholders’ issues 
and concerns are communicated to the Board.

The Company communicates with both the institutional  
and private shareholders through the following means:

Interaction with all shareholders
•	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 
strategy, business models 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–year and interim results to analysts  

and shareholders, which are also available on the 
Company’s website.

Interaction with institutional shareholders
•	the Chief Executive, Group Finance Director and Director  

of Investor Relations held meetings with institutional 
investors following the full–year and interim results;
•	the Chairman meets with institutional shareholders  

on request;

•	the Board received updates on the views of major 
shareholders from the Company’s brokers; and
•	investor days took place for both Costa and Hotels  

& Restaurants.

Interaction with private shareholders
•	live webcast presentations of the full–year and interim 
results as well as the Costa and Hotels & Restaurants 
investor days; and

•	electronic communications with shareholders including  

use of the online share portal.

The Annual General Meeting
The Annual General Meeting (AGM) provides all shareholders 
with the opportunity to communicate directly with the  
Board and encourages their participation at the meeting. 

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In accordance with the Code, the Notice of AGM and related 
papers are sent to the 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 end of 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.

Share capital
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 78 and 79.

Accountability and internal control

Internal control and risk management
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 2013/14 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 Code. A report of the key risks 
can be found on pages 32 and 33.

Risk analysis
•	The Board identifies the principal risks of the Company on a 
regular basis and throughout the year it reviews the actions 
in place to mitigate the risks together with assurance and 
monitoring activity. The analysis covers health and safety, 
financial, market, operational and reputational risks which 
the Company may face as well as specific areas identified  
in the business plan and budget process.

•	Each of the businesses also carries out its own risk  

analysis together with PwC as operational auditor and  
this is reviewed regularly by the management boards.
•	All major capital and revenue projects, together with 

significant change programmes, include the consideration 
of the risks involved and an appropriate action plan.

Whitbread 
Annual Report and Accounts 2013/14

Corporate 
governance

51

 
 
 
 
 
 
 
 
 
 
Corporate 
governance 
continued 

Controls
•	The Company reviews and confirms its compliance with  
the Corporate Governance Code on an annual basis.
•	The matters reserved to the Board require that major 
projects and programmes must have specific Board 
approval.

•	Limits of delegation and authority are prescribed to ensure 

that the appropriate approvals are obtained if Board 
authority is not required to ensure appropriate segregation 
of tasks.

•	Group financial policies, controls and procedures are in 

place and regularly reviewed and updated. 

•	The Whitbread Code of Conduct, setting out required levels 
of ethics and behaviour, is communicated to employees.
•	The Code of Conduct makes reference to specific policies 

and procedures which have to be followed.

•	Management is responsible for ensuring the appropriate 

maintenance of financial records and processes that ensure 
that financial information is relevant, reliable, in accordance 
with applicable laws and regulations and is distributed both 
internally and externally in a timely manner.

•	A review of the 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 and the Board.
•	An annual review of internal controls is undertaken by  
the Board with the assistance of the Audit Committee. 

Assurance
•	The Board, with the assistance of the Audit Committee, 
approves an audit programme which ensures that the 
significant areas of risk identified are independently 
reviewed within at least a three year period. 

•	The programme and the results of the audits are regularly 

assessed during the year.

•	The Audit Committee reviews the major findings from  

both operational and external audits.

•	PwC, as operational auditor, has been appointed to carry 
out the independent audits. Its reports are reviewed  
by the Audit Committee and on a monthly basis by the 
management team to ensure that the actions required  
to address issues identified are implemented. 

•	PwC reports annually to the Audit Committee on the 

effectiveness of operational and financial controls across 
the Group.

•	EY review and report on the significant issues identified 

in their audit report. 

•	An internal control evaluation process is overseen by the 

management team which assesses the level of compliance 
with the controls, policies and processes and the results  
are reviewed and tested on a sample basis by PwC.

•	Post completion reviews of major projects and investments 

are carried out and reported on to the Board.

Statement of the directors in respect of the Annual Report 
and Accounts
As required by the Code, the directors confirm their 
responsibility for preparing the Annual Report and Accounts 
and consider that the Annual Report, taken as a whole, is fair, 
balanced and understandable and provides the information 
necessary for shareholders to assess the Company’s 
performance, business model and strategy. Further detail on 
how this conclusion was reached can be found in the report  
of the Audit Committee on pages 53 to 55.

Statements by the auditors in respect of their reporting 
responsibilities 
Statements by the auditor about its reporting responsibilities 
can be found in the auditor’s report on pages 85 and 137.

Going concern
The directors’ going concern statement can be found in the 
directors’ report on page 80.

Business model, value and strategy
Information on the Group’s business model and the strategy 
for delivering the objectives of the Company can be found  
on pages 6 to 8.

Board committees
The Board is supported by three committees; the Audit 
Committee, the Nomination Committee and the Remuneration 
Committee. Their terms of reference are reviewed annually 
and updated in line with best practice. They have been 
reviewed in 2014 and approved by each of the Committees. 
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 58 to 76. Reports for the Audit 
and Nomination Committees can be found on pages 53 to 57.

Whitbread 
Annual Report and Accounts 2013/14

Corporate 
governance

52

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Audit Committee 
report

Simon Melliss
Chairman, Audit Committee

Members of the  
Audit Committee

•	Simon Melliss (Chairman)

•	Richard Baker

•	Wendy Becker

•	Susan Taylor Martin

•	Simon Barratt (Secretary)

Role of the Audit Committee
The principal role of the Audit Committee is to monitor and review the integrity of the 
Company’s financial results, to review the Company’s internal controls and risk management 
systems, to monitor and review the effectiveness of the Company’s internal audit function  
and to make recommendations to the Board in relation to the external auditor.

Key responsibilities
The key responsibilities of the Committee are to:
•	review the half–year and full–year results and financial statements;
•	report to the Board on the appropriateness of our accounting policies and practices 

including critical accounting policies and practices;
•	oversee the relationship with the external auditor;
•	review the external audit plans and report;
•	review and evaluate the effectiveness of the internal controls and risk management system;
•	review the operational audit process;
•	review the Group’s contingent liabilities; and
•	review the speaking out facility and consider any matters raised.

The full terms of reference are available on the Company’s website.

Committee meetings
The Committee meets at least three times a year and will hold additional meetings as and 
when required. Meetings are attended by the members of the Committee and, by invitation, 
the Chairman of the Board, the Chief Executive, the Group Finance Director, the Group 
Financial Controller and other relevant people from the business when appropriate. The 
external and operational auditors are also invited to meetings.

Main activities during the year
During the year, the Committee focused on the following matters:

Financial reporting
•	the quality and acceptability of accounting policies and practices;
•	the clarity of the disclosures and compliance with financial reporting standards and  

relevant financial and governance reporting requirements;

•	material areas in which significant judgements have been applied or where there has  

been discussion with the external auditor;

•	whether the Annual Report and Accounts, taken as a whole, is fair, balanced and 

understandable and provides the information necessary for shareholders to assess  
the Company’s performance, business model and strategy; 

•	the regulatory announcement of the results;
•	a going concern assessment; and
•	any correspondence from regulators in relation to our financial reporting.

To aid its review, the Committee considers reports from the Group Financial Controller,  
the Tax Director and from PwC as operational auditor and also reports from the external 
auditor on the outcomes of their half–year review and annual audit. The Committee looks 
for constructive challenge from EY as external auditor.

Whitbread 
Annual Report and Accounts 2013/14

Audit Committee 
report

53

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Audit Committee 
report 
continued 

The key areas of judgement considered by the Committee in relation to the 2013/14  
accounts were:

Taxation
The method of calculating the Group’s tax expense and liability and the provisioning for 
potential tax liabilities were considered. The Committee considered and challenged the nature 
of the exceptional tax items recorded in the year and the assumptions made by management 
used to determine the amounts recorded. The Committee reviewed the judgements exercised 
on tax provisioning as part of its annual review of key provisions.

Pension scheme 
The assumptions used to calculate the pension scheme assets and liabilities under IAS 19.  
The Committee considered the consistency of the basis of calculation of the assumptions  
with those used in 2012/13 and agreed with the judgements reached by management.

Liability provisioning 
The level of provisioning for contingent and other liabilities is an issue where management views 
and legal advice are important. These are addressed through the Committee discussing with 
management and challenging the key judgements made.

Asset impairment
The judgements in relation to asset impairment largely relate to the assumptions underlying 
the calculation of the value in use of the business being tested, primarily the achievability of 
the long–term business plan and macroeconomic assumptions underlying the valuation 
process. The Committee addresses these matters through receiving reports from management 
outlining the basis for the assumptions used. In addition, the EY reporting to the Committee  
is considered.

During the year, the Board delegated authority to the Audit Committee to advise the Board  
on whether the Annual Report and Accounts, taken as a whole is fair, balanced and 
understandable and provides the information necessary for shareholders to assess the 
Company’s performance, business model and strategy.

In order to confirm this position to the Board in addition to the processes described above, 
there has been a thorough verification and approval process for the Annual Report and 
Accounts, as outlined below:
•	the Annual Report is drafted by the appropriate senior management with overall  

coordination by the Secretariat team to ensure consistency;

•	comprehensive reviews of the drafts of the Report and Accounts are undertaken by 
management, the Main Board Committee and me, as the Audit Committee Chairman;

•	the final draft is reviewed by the Audit Committee prior to consideration by the Board; and
•	formal approval of the Annual Report and Accounts is given by a Committee of the Board.

Internal control and risk management
The Audit Committee holds an annual evaluation of internal controls in March. The Committee 
reviews the Group risk matrix and assesses the effectiveness of the internal processes that 
have been implemented to enable those risks to be mitigated and monitored. This review is 
completed in conjunction with an Internal Controls Effectiveness Review from PwC as 
operational auditor. Each risk is assessed and the level of assurance required is determined.

The Audit Committee then approves a plan from PwC to carry out reviews of the chosen  
risk areas during the following year.

At the meeting this year the Committee considered a revised version of the Group risk  
analysis (see risk management section on pages 30 to 33). This was discussed in detail and 
management were asked to provide further information on the mitigation plans for some  
of the key risks identified. 

Whitbread 
Annual Report and Accounts 2013/14

Audit Committee 
report

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Information systems and data security
During the year the Audit Committee reviewed the cyber security framework and monitoring 
processes and made recommendations on how they could be enhanced. A further review  
will be held during the year.

Operational audit 
The Audit Committee monitors and reviews the scope, extent and effectiveness of the 
Company’s internal audit function. Reports from PwC as operational auditor are reviewed  
and contain updates on audit activities, the results of unsatisfactory audits and any relevant 
action plans to address these areas. Private discussions are held with the operational  
auditors as and when necessary and I also meet with PwC regularly outside of the formal 
Committee process.

External audit
The Committee oversees the relationship with the external auditor. There is a review of the 
performance of the external auditor and its independence and effectiveness.

The effectiveness of the external audit process is dependent on appropriate audit risk 
identification at the start of the audit cycle. We receive from EY a detailed audit plan, 
identifying their assessment of these key risks. For the 2013/14 financial year, the primary  
risks identified were in relation to the defined benefit pension scheme, taxation and revenue 
recognition. These risks were reviewed and the work done by the auditors was challenged  
to test management’s assumptions and estimates around these areas, as well as other areas 
reported upon, which included impairment and property provisions. The effectiveness  
of the audit process was assessed in addressing these matters through the reporting we 
received from EY at both the half–year and year–end. In addition feedback was sought from 
management on the effectiveness of the audit process.

We hold private meetings with the external auditor at the half–year and full–year Committee 
meetings to provide additional opportunities for open dialogue and feedback from the 
Committee and the auditor without management being present.

In accordance with the Code it is intended that the external audit contract is put out to tender 
at least every ten years. A competitive tender of the external audit was carried out in 2010/11 
and it was recommended that EY be reappointed. In accordance with new EU regulations  
it is intended that the audit will be put out to tender again within the next six years. EY has 
been the external auditor for over 50 years.

To safeguard the objectivity and independence of the external auditor, the Committee’s  
Terms of Reference set out the non–audit services that are permitted in certain circumstances 
and those not permitted at all. This prevents the auditor being able to provide certain services 
such as internal audits.

For certain specified audit and audit–related services, the Group can employ the external auditor 
without reference to the Audit Committee, subject to a specified fee limit. For the services 
permitted in certain circumstances, agreement must be sought from me, as Chairman of the 
Committee where fees are less than the limit specified, or with full Audit Committee approval 
where fees are anticipated to be greater. A tender process would be held where appropriate.

Committee evaluation
The Committee’s activities formed part of the internal review of the Board effectiveness 
undertaken during the year. Details of this process can be found on pages 49 and 50.

Simon Melliss
Chairman, Audit Committee
28 April 2014

Whitbread 
Annual Report and Accounts 2013/14

Audit Committee 
report

55

 
 
 
 
 
 
 
 
 
 
Nomination 
Committee report

Anthony Habgood
Chairman, Nomination 
Committee

Members of the 
Nomination Committee

•	Anthony Habgood (Chairman)

•	Wendy Becker

•	Sir Ian Cheshire

•	Simon Melliss

•	Stephen Williams

•	Simon Barratt (Secretary)

Role of the Nomination Committee
The role of the Nomination Committee is to review the composition of the Board and to 
identify and nominate directors who could enhance the Board’s performance. The Committee 
is also responsible for evaluating the directors on an annual basis.

The Committee meets at least twice a year. The main activities during 2013/14 included:
•	the annual planning and review meeting;
•	a review of the Board size, structure and composition;
•	a review of the talent and succession planning for the Board;
•	changing the Senior Independent Director and Chairman of the Remuneration Committee; 

and

•	the re–election of directors at the AGM.

The Committee is responsible for ensuring that Board and committee membership is 
progressively refreshed and that there is no undue reliance on any one individual. This is 
reviewed at the annual meeting in March.

The full terms of reference are available on the Company’s website.

Board appointments and diversity 
Appointments to the Board are based on merit against objective criteria having due regard  
for diversity, including gender. 

Diversity and equality have always been core values at Whitbread. The Board believes  
that diversity is highly important, not only for Board effectiveness but for the effectiveness  
of the Company as a whole. Whitbread appoints members of the Board on the basis  
of qualification and merit and does not discriminate on any grounds. We are committed  
to an active policy of equal opportunities and embrace diversity at all levels.

Our approach to the appointment of new directors
The Nomination Committee annually evaluates the balance of skills, experience, independence 
and knowledge on the Board and, if necessary, prepares a description of the role and 
capabilities required for a particular appointment.

If necessary, an external search consultant would be engaged and a number of candidates 
identified. Selected candidates would meet with the Nomination Committee and further 
interviews would take place before an appointment was made.

Our approach to the annual re–election of directors
As required by the Code, all directors will be subject to re–election at the next AGM. The 
Nomination Committee held a planning and review meeting in March when the contribution 
and commitment of each member of the Board was reviewed. Following this discussion,  
it was recommended that all directors be proposed for reappointment at this year’s AGM. 
Details setting out why each director is deemed to be suitable for reappointment will be 
included with the AGM papers circulated to all shareholders.

Whitbread 
Annual Report and Accounts 2013/14

Nomination 
Committee report

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Wendy Becker’s second three–year term came to an end in January 2014 and Stephen 
Williams’ second three–year term came to an end in April 2014. The Nomination Committee 
was satisfied that their reappointment would be beneficial to the Company and recommended 
that both Wendy and Stephen be reappointed for a further three–year period. The only other 
non–executive director of the Board that has been a director for a term longer than six years  
is Simon Melliss. He was reappointed for a further three–year term on 1 April 2013.

Length of tenure of directors

Anthony Habgood
Andy Harrison
Nicholas Cadbury
Patrick Dempsey
Christopher Rogers
Louise Smalley
Richard Baker
Wendy Becker
Ian Cheshire
Simon Melliss
Susan Taylor Martin
Stephen Williams

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Board and committee changes
As announced in December 2013, Susan Hooper decided to step down as a non–executive 
director of the Company in January 2014 so that she could focus all her attention on her  
new role at British Gas. There are no current plans to replace Susan on the Board. It was also 
decided that Sir Ian Cheshire would become the Senior Independent Director and Stephen 
Williams would, in turn, become the Chairman of the Remuneration Committee. In February 
2014, Wendy Becker was appointed as a member of the Nomination Committee.

As announced in January 2014, I will be stepping down from the Board later this year. The 
process to find my successor will be led by Sir Ian Cheshire, the Senior Independent Director 
and he will chair the Nomination Committee when it is dealing with the appointment of  
my successor. A number of meetings have already been held to appoint advisers and agree  
a shortlist of candidates.

Anthony Habgood
Chairman, Nomination Committee
28 April 2014

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Whitbread 
Annual Report and Accounts 2013/14

Nomination 
Committee report

57

 
 
 
 
 
 
 
 
 
 
 
Remuneration report

Statement from 
Stephen Williams

Stephen Williams
Chairman, Remuneration 
Committee

Introduction
This year’s remuneration report is the first Whitbread has produced under the new disclosure 
regulations. You will see that, after this introductory statement, there is a policy report followed  
by our annual report on remuneration.

The policy report sets out details of our remuneration structure, which shareholders will be 
asked to approve at the 2014 AGM. The annual report on remuneration explains what directors 
were paid in 2013/14, including the awards under the incentive schemes, and also gives some 
detail on how our policy will be implemented in 2014/15.

Two years ago, we explained that we had taken the opportunity to redefine Whitbread’s 
remuneration principles and these have not changed. The intention of the principles, which 
have been used to guide the content of the new policy report, is to ensure that remuneration 
arrangements are aligned to and support the delivery of the Group’s business strategy and 
shareholder value creation.

Whitbread’s aim is to be competitive in each employee category so as to attract and retain as high a calibre of person as 
appropriate to the specific role. This central aim remains the same whether we are talking about senior executives or the 
thousands of team members in our hotels, restaurants and coffee shops. It is important that we employ the best people 
available in these vital customer–facing roles and we must therefore remain an attractive employer. We achieve this by 
investing significant resources in the development of team members, giving them real opportunities to progress through  
the organisation and providing incentive schemes such as ‘My Rewards’ and ‘Feel Good’ to reward high performance.  
Further details can be found on pages 12 to 13 and 22 to 23. 

Remuneration linked to strategy
Whitbread’s 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, and dependent 
upon, delivering earnings growth and returns above our cost of capital. 

The Customer Heartbeat schematic, which is described by Andy Harrison on page 6 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. We intend to deliver these aims whilst being a force for good 
in the communities in which we operate. The diagram on page 59 shows how elements of the remuneration package are linked  
to this model.

Along with profit and returns targets, the WINcard remains a key element of our remuneration structure. It is designed  
to ensure that all executives are incentivised on both non–financial and financial measures. WINcard measures are ‘SMART’  
(i.e. specific, measurable, achievable, relevant and timely). In addition to the WINcard measures, where appropriate, the 
Remuneration Committee may introduce further measures specific to an individual’s role. 

New Long Term Incentive Plan (‘LTIP’)
The 2004 LTIP has now reached the end of its ten–year life and we are therefore asking for shareholders to approve a new  
LTIP at the 2014 AGM. The Committee believes that the expiring plan, as amended in 2012 following a shareholder consultation, 
was effective in incentivising the delivery of the Company’s strategy and, as such, the proposed new plan is substantially the 
same as the expiring plan. Amendments include the introduction of new clawback and malus provisions and a new holding 
period post vesting. 

The 125% of salary limit in the expiring LTIP rules was set in 2004 and all executive directors, including the Chief Executive, 
currently receive awards at this level. As I explained above, our strategy is to be competitive in each employee category  
in order to attract and retain high calibre individuals. To bring the Chief Executive’s package closer to competitive market 
practice, in terms of the absolute level of LTIP award and its relative level in comparison to the other executive directors,  
the Committee is proposing an increase in the level of award for the Chief Executive to 175% of salary with effect from 2015. 
There is no current intention to change the level of awards to the other executive directors.

LTIP awards made in 2014 under the current LTIP will be subject to a new one–year holding period post vesting, with awards 
made under the new LTIP from 2015 being subject to a two–year holding period post vesting. You will see in the policy table  
on page 61 that the maximum potential level of award under the new LTIP has been set at 200% of salary, although we have  
no current plans to make awards up to that maximum level. Any increase above this maximum would be put to shareholders  
for approval in a future policy report. 

Whitbread 
Annual Report and Accounts 2013/14

Statement from 
Stephen Williams

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 The statement below, the remuneration policy report and the annual report on remuneration  
form the directors’ remuneration report, which was approved by the Board and signed on  
its behalf by Stephen Williams on 28 April 2014.

Whitbread is a fast–growing, capital–intensive business. The Group’s growth is based on a five–year business plan and the 
delivery of our growth milestones along with strong returns is vital for the future success of the Company. It is for this reason 
that the LTIP performance conditions, a combination of ROCE and EPS, have been selected. For the second year running  
the Committee, having reviewed the latest performance and the changing mix of assets in the Group, has strengthened the 
ROCE targets. Further details can be found on page 76.

Shareholding requirement
A feature of Whitbread’s remuneration structure for some years now has been that a significant proportion of the incentives 
available to executives are paid in shares, a material element of which is deferred. This remains core to our remuneration 
structure. The Remuneration Committee believes that executives should build a significant shareholding in the Company  
in order to provide greater alignment between executives and shareholders. During the year we have further strengthened  
our position on this by replacing the previous guidelines with a new shareholding requirement and increasing the value of 
shares executives are required to hold. 

Reward for the successful delivery of strategy
It has been another very good year for Whitbread, with underlying PBIT up by 14.2% to £430.7 million, underlying basic EPS  
up by 20.1% to 179.02p and Group return on capital up from 13.9% to 15.3%. Meanwhile, the Company remains on track to meet 
its growth milestones. In the light of this performance, it is entirely right that executives are rewarded for the successful delivery  
of the Group’s strategy during the year and, as you will see from this report, the incentive schemes have paid out towards the 
top end of the range.

Stephen Williams
Chairman, Remuneration Committee
28 April 2014

Scheme

Measure

•	Annual Incentive Scheme

•	Annual Incentive Scheme

•	LTIP
•	Annual Incentive Scheme

•	Annual Incentive Scheme

•	Team engagement
•	Health and safety (hurdle)

•	Costa brand standards
•	Hotels & Restaurants family measures
•	Brand performance
•	Health and safety (hurdle)

•	Underlying basic EPS
•	Return on capital
•	Underlying profit
•	Market performance/brand growth
•	Like for like sales

•	Carbon consumption
•	Waste diverted from landfill

Whitbread 
Annual Report and Accounts 2013/14

Statement from 
Stephen Williams

59

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Remuneration 
policy report

Introduction
This report outlines the Company’s remuneration policy, which shareholders will be asked to approve at the 2014 AGM. Subject 
to shareholder approval the policy will be effective from the date of the 2014 AGM and is intended to apply for three years. 

For executives, our approach is designed to:
•	align with the business strategy and the achievement of planned business goals;
•	support the creation of sustainable long–term shareholder value;
•	provide an appropriate balance between remuneration elements that attract, retain and motivate the highest calibre of 

executive talent; and

•	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.

The policy table below provides more detail on each key element of remuneration, including the maximum potential value  
of each element, a brief summary of how it works and details of any performance metrics.

Future policy table

Element

Base 
salary

Purpose and  
link to strategy

•	Base salaries are set so as to 
be sufficient to attract and 
retain the calibre of executive 
talent needed to support the 
long–term interests of the 
business.

Operation

Salaries are reviewed annually 
taking account of:
•	the salary review across  

the Group;

•	trading circumstances;
•	personal performance  

against agreed objectives;  
and

•	market data for an 

appropriate comparator 
group of companies.

Benefits

•	Benefits are intended to be 

competitive in the market so 
as to assist the recruitment 
and retention of executives.

•	Executive directors are 

entitled to benefits relating  
to car/participation in the 
Sharesave scheme/
healthcare/personal 
insurances. Assignee 
allowances or local market 
terms may be necessary for 
directors based overseas. 

Performance 
metrics

None

None

Maximum  
potential value

•	Annual salary increases will 

not normally exceed average 
increases for employees  
in other appropriate parts  
of the Group. 

•	On occasion, increases  
may be larger where the 
Committee considers this to 
be necessary. Circumstances 
where this may apply include 
growth into a role, to reflect  
a change in scope of role and 
responsibilities, where market 
conditions indicate a level of 
under competitiveness and the 
Committee judges that there  
is a risk in relation to attracting 
or retaining executives. 
•	Where the Committee 

exercises its discretion to 
award increases above the 
average for other employees, 
the resulting salary will not 
exceed the competitive 
market range.

•	In 2013/14 the benefits 

received by the executive 
directors amounted to 
between 3.5% and 6.5% of 
salary. We do not anticipate 
that the maximum payable 
would exceed 10% of salary. 
However, the Committee  
may provide benefits above 
this level in certain situations 
where it deems it necessary. 
This may include, for  
example, the appointment  
of a director based overseas 
or a significant increase  
in the cost of the benefits.

Whitbread 
Annual Report and Accounts 2013/14

Remuneration  
policy report

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Purpose and  
link to strategy

Operation

Maximum  
potential value

Performance 
metrics

•	Targets for both financial  

and non–financial measures 
set at the beginning of the 
incentive year.

•	167% of base salary (73%  

of salary paid in cash  
and 94% of salary paid  
in deferred shares).

Element

Annual 
Incentive 
Scheme

Long 
Term 
Incentive 
Plan

Pension

•	To provide a direct link 

between annual performance 
and reward.

•	To incentivise the 

achievement of outstanding 
results across appropriate  
key stakeholder measures.
•	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 incentive  
in deferred equity.

•	To align the interests of  

senior executives closely  
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.
•	To retain executives over  
the performance period  
of the awards and beyond.

•	Pension benefits are provided 

in order to offer a market 
competitive remuneration 
package that is sufficient  
to attract and retain  
executive talent.

•	Cash awards paid following 
the end of the financial year.
•	Deferred shares awarded and, 
under normal circumstances, 
released three years after  
the date of award.

•	Malus provisions apply to 
unvested deferred shares  
in the event of a material 
misstatement of results.

•	Awards made annually.
•	Awards vest after three years 

subject to performance 
conditions.

•	Two–year holding period  

post vesting.

•	Subject to clawback and 

malus provisions.

•	Executive directors are 
entitled to participate  
in the Company’s pension 
scheme (or other pension 
arrangements relevant to their 
location if based overseas).
•	Defined contribution scheme.
•	Can elect for cash in lieu  
of pension contributions.
•	If cash is taken, the amount  
is reduced by the value  
of the employer’s national 
insurance liability.

•	A maximum of 137% of  
base salary is payable  
based on underlying profit 
performance, calculated  
on a straight–line basis 
between 95% of target 
(threshold) to 100% of 
target and from 100% to  
110% of target (maximum).
•	A maximum of 30% of base 
salary is payable based  
on performance against 
WINcard and/or other 
appropriate stakeholder 
measures.

•	Annual awards to a maximum 

of 200% of base salary.

•	75% of award based on  

EPS growth.

•	No element of the award will 
vest unless a minimum level  
of ROCE, as determined by 
the Remuneration Committee 
on an annual basis, is achieved 
in the final year of the 
performance period.

•	ROCE also acts as a multiplier 
on a straight–line sliding scale 
to increase the EPS element 
by up to a further third.

•	27.5% of base salary.

None

Illustration of application of remuneration policy
The graphs shown on page 62 show how the remuneration 
policy will be applied in 2014/15, with details of expected 
remuneration levels for each director for below threshold 
performance, for on–target performance and for maximum 
performance.

Performance measures
With the exception of base salary, benefits, pension and 
participation in the Sharesave scheme, all other elements  
of the remuneration packages of the executive directors  
are linked to performance.

Annual Incentive Scheme
The Annual Incentive Scheme has been designed to 
incentivise outstanding performance across a number of  
key stakeholder measures and it rewards approximately  
90 executives with both a cash payment and an award  
of deferred shares. The scheme operates over a four–year 
period as follows:
•	performance in the first year is measured against  

both financial and non–financial measures to determine  
the level of awards;

•	measures are set by the Remuneration Committee  
so that ‘on–target’ performance is challenging;

•	at the end of the first year, cash payments are made and  

any deferred shares are awarded as appropriate;

•	there is a further three–year holding period for the deferred 

shares before they vest to the executive; and

•	malus provisions apply to the deferred share awards  
in the event of a material misstatement of results.

Whitbread 
Annual Report and Accounts 2013/14

Remuneration  
policy report

61

 
 
 
 
 
 
 
 
 
 
Remuneration  
policy report 
continued 

Executive directors — potential value of 2014/15 package

Andy Harrison

Below threshold

£934,250

On–target

£1,915,568

Maximum

£4,193,303

80%

20%

80%

20%

Nicholas Cadbury

Below threshold

£585,781

39%

10% 20% 16% 15%

On–target

£1,081,914

Maximum

£2,002,068

43%

11% 11% 18% 17%

18%

4%

48%

17%

13%

23%

6%

32%

22%

17%

£million

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

£million

0

0.5

1.0

1.5

2.0

2.5

Patrick Dempsey

Below threshold

£584,508

Christopher Rogers

Below threshold

£670,308

78%

22%

78%

22%

On–target

£1,131,121

Maximum

£2,292,460

41%

11% 16% 17% 15%

On–target

£1,360,581

Maximum

£2,962,774

39%

11% 20% 16% 15%

20%

5%

41%

19%

15%

18%

5%

48%

17%

13%

£million

0

0.5

1.0

1.5

2.0

2.5

£million

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Louise Smalley

Below threshold

£406,250

80%

20%

On–target

£753,423

Maximum

£1,395,103

43%

11%

11% 18%

17%

23%

6%

31%

£million

0

0.5

22%

1.0

17%

1.5

Key

Fixed elements

Salary

Pension 

Variable elements

LTIP

Deferred shares

Cash bonus

 On–target performance assumes on–target profit, a mix of green and amber WINcard scores and threshold vesting under the LTIP. Maximum 
performance assumes maximum profit, all green WINcard scores and maximum LTIP vesting. In both cases, for simplicity, no share price growth  
is assumed.

Whitbread 
Annual Report and Accounts 2013/14

Remuneration  
policy report

62

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0

500 1000 1500 2000 2500 3000 3500 4000 4500

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500 1000 1500 2000 2500 3000 3500 4000 4500

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500 1000 1500 2000 2500 3000 3500 4000 4500

0

500 1000 1500 2000 2500 3000 3500 4000 4500

0

500 1000 1500 2000 2500 3000 3500 4000 4500

 
 
 
 
 
 
 
 
 
 
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Service contracts and external appointments
The key terms of the executive directors’ service contracts  
are as follows:
•	notice period — six months by the director and 12 months 

by the Company;

•	termination payment — see policy on payment for loss  

of office below;

•	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, which 
can be found on the Company’s website, are as follows:

Andy Harrison

Nicholas Cadbury

Patrick Dempsey

Christopher Rogers

Louise Smalley

3 March 2010

3 September 2012

26 March 2013

18 February 2013

25 October 2012

The executive directors are entitled to retain fees from 
external directorships. 

Policy on payment for loss of office

Base salary and contractual benefits
All of the executive directors have a rolling service contract 
with a 12–month notice period from the Company. The 
Company may make a payment in lieu of notice to include up 
to 12 monthly payments of base salary and the cash equivalent 
of pension contributions. The Company may either allow for 
contractual benefits to continue during this time or, at its sole 
discretion, pay the value of those benefits on a monthly basis. 
Neither notice nor payment in lieu of notice would be given  
if a director left by reason of gross misconduct. 

A director is under a contractual duty to mitigate his or  
her position by actively seeking an alternative remunerated 
position and the Company will make a corresponding  
reduction in any payment made for loss of office. Where  
a payment in lieu of notice is not applicable, the payment  
of salary and contractual benefits would cease on the 
individual’s leaving date.

There are two types of measure used to determine the  
level of awards under the scheme. There is a profit measure 
and there are a number of WINcard measures (or other 
stakeholder measures as may be deemed appropriate by  
the Remuneration Committee). The scheme is designed to 
incentivise executives to deliver great results by providing  
an excellent environment for our people, and giving them the 
tools to make everyday experiences special for our customers. 
One Winning Teams measure and one Customer Heartbeat 
measure have been upweighted to reflect the importance  
of those elements to Whitbread’s success. In addition,  
there is a health and safety measure, which acts as a hurdle, 
demonstrating our determination to provide a safe 
environment for employees and customers alike. The profit 
measure is the most incentivised element with an award  
to the value of 137% of salary available for maximum 
performance, whilst the WINcard element has a potential 
value of 30% of salary.

Long Term Incentive Plan
For the LTIP, subject to shareholder approval of the new 
scheme at the 2014 AGM, the performance conditions  
will be structured as follows:
•	EPS and ROCE measures on a matrix basis (as shown  

on page 76);

•	up to 75% of awards are dependent on EPS growth  
over the three–year performance period, subject  
to a satisfactory ROCE performance;

•	ROCE will 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 will vest if a minimum level  
of ROCE, which is set materially above the Group’s  
cost of capital, is not achieved in the final year of the 
performance period;

•	awards will be subject to clawback and malus provisions; and
•	a two–year post vesting holding period will apply.

These performance conditions were selected because the 
Committee believes that they closely align the LTIP with the 
strategic aims of the Group; to grow its leading brands whilst 
delivering returns in excess of the cost of capital in order to 
create significant shareholder value. The performance range 
for awards to be made in 2015 will be determined by the 
Remuneration Committee in April 2015 taking account of 
available information at that time. 

Changes to the remuneration policy in 2013/14
With the exception of the new LTIP scheme outlined in the 
Policy Table, which will be put to shareholders for approval  
at the 2014 AGM, and some amendments to the company  
car scheme there have been no other changes to the Group’s 
remuneration policy during the year and no new elements  
of remuneration have been introduced. Under the updated 
company car scheme, executive directors will no longer be 
entitled to a company car, but will receive cash in lieu of a car. 
As explained on page 71, new strengthened shareholding 
requirements have been introduced.

Whitbread 
Annual Report and Accounts 2013/14

Remuneration  
policy report

63

 
 
 
 
 
 
 
 
 
 
 
Remuneration  
policy report 
continued 

Annual Incentive Scheme
If a director leaves the Company for a ‘permitted reason’ 
under the rules of the scheme (or if the Committee decides  
to apply ‘good leaver’ status in accordance with the discretion 
outlined on page 66 of this report), the default position would 
be that deferred shares would vest on the date of leaving and 
a pro–rated cash award would be made for the incentive year. 
No new deferred shares would be awarded and the director 
would receive a pro–rated cash payment in lieu of the 
deferred shares. Notwithstanding the above, the Committee 
has the discretion to make a deferred shares award for the 
incentive year, with such award due to vest at the same time 
as the awards made to continuing employees for that year.

If a director leaves the Company for any other reason, 25%  
of an outstanding award of deferred shares would vest if the 
leaving date was between one and two years from the date  
of grant and 50% of an outstanding award would vest if the 
leaving date was between two and three years from the date 
of grant. Any other unvested deferred shares would lapse  
on the date of leaving. The director would receive no cash 
incentive payment for the financial year in which they leave 
and no deferred shares would be awarded. 

In the event that a director was to leave the Company by 
reason of gross misconduct, the malus provisions may be 
applied and no deferred shares would vest.

Long Term Incentive Plan
If a director leaves the Company for a ‘permitted reason’ 
under the rules of the plan (or if the Committee decides to 
apply ‘good leaver’ status in accordance with the discretion 
outlined on page 66 of this report), the default position would 
be that any unvested LTIP awards would be pro–rated for  
time served. Performance would be tested at the end of the 
standard three–year performance period and the pro–rated 
awards would vest at the same time as for continuing 
employees. No LTIP award would be made in the final year  
of employment if the Company was aware that the director 
would be leaving at the point that awards are made.

If a director leaves the Company for any other reason any 
unvested LTIP awards would lapse at the date of leaving. 
Vested, but unexercised, LTIP awards (including those subject 
to a holding period) would be exercisable for the latter of six 
months from the date of leaving or six months from the end  
of the holding period. 

In the event that a director was to leave the Company by 
reason of gross misconduct, the clawback and/or malus 
provisions may be applied. 

Approach to remuneration on recruitment
Our approach to recruitment is that remuneration should  
be set in line with the policy table on pages 60 and 61.  
Whilst we would not seek to vary this approach there may  
be circumstances in which it is necessary to do so.

On the appointment of a new executive director, base salary 
levels will be set taking into account a range of factors 
including market levels, experience, internal salaries and cost. 
If an individual is appointed on a base salary below the market 
positioning contingent on individual performance, the 
Committee retains the discretion to realign base salary over 
the one–to–three years following appointment which may 
result in an exceptional rate of annualised increase. If the 
Committee intends to rely on this discretion, it will be noted  
in the first directors’ remuneration report following an 
individual’s appointment. 

Other elements of annual remuneration will be set in line  
with the policy set out in the policy table. As such, variable 
remuneration will be capped at 167% of salary under the 
Annual Incentive Scheme and an award of up to 200% of 
salary under the Long Term Incentive Plan. The following 
exceptions will apply:
•	in the event that an internal appointment is made, the 

Committee retains the discretion to continue with existing 
remuneration provisions relating to pension and benefits;

•	as deemed necessary and appropriate to secure an 

appointment, the Committee retains the discretion to  
make additional payments linked to relocation; and

•	the Committee retains the discretion to make an additional 
award in exceptional circumstances up to 200% of salary 
under the Long Term Incentive Plan and/or an award on 
similar terms, to provide an immediate interest in company 
performance; and

•	the Committee may also make an additional award of  

cash or shares on appointment of a new director in order  
to compensate for the forfeiture of an award from a 
previous employer. Such awards would be on a comparable 
basis, taking account of performance, the proportion of  
the performance period remaining and the type of award.  
The Committee will set appropriate performance conditions 
and vesting would be on the same time horizon as the 
forfeited award. The Committee would take into account 
the strategy at Whitbread and may also require the 
appointee to purchase shares in Whitbread to a pre–agreed 
level prior to vesting.

Service contracts will be entered into on terms similar to those 
for the existing executive directors, summarised in our service 
contract policy section. However, if necessary the Committee 
would authorise the payment of a relocation allowance and 
repatriation, as well as other associated international mobility 
terms or agree terms appropriate to the local market for a 
director based overseas.

Whitbread 
Annual Report and Accounts 2013/14

Remuneration  
policy report

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With respect to the appointment of a new Chairman or 
non–executive director, the approach will be consistent with 
that currently adopted. Variable pay will not be considered 
and as such no maximum applies. With respect to non–
executive directors, fees will be consistent with policy at the 
time of appointment. If necessary, to secure the appointment 
of a new Chairman not based in the UK, payments relating  
to relocation and/or housing could be considered.

A timely announcement with respect to any director 
appointment will be made to the regulatory news services  
and posted on Whitbread’s website.

Comparison of executive remuneration policy  
with wider employee population
This section of the report describes each element of the 
executive remuneration package and explains the extent  
to which those elements are made available to the wider 
employee population. The Committee did not consult 
employees, other than those in relevant roles, when 
developing the directors’ remuneration policy.

Base salary
All employees, including the executive directors, receive an 
annual review of base salary. Under normal circumstances the 
annual increase in salary for an executive director will be in the 
same range as the increase for employees across the Group. 

However, the individual circumstances of each employee are 
taken into account and, if exceptional circumstances exist, any 
employee may receive an increase higher than the standard 
rate. In the case of the executive directors, the Remuneration 
Committee would take into account a range of factors when 
setting the level of a pay increase including changes to 
salaries across the Group, the personal performance of the 
director measured against agreed objectives, current trading 
circumstances and our remuneration policy.

Benefits
Approximately 840 employees across the Group are entitled 
to a company car or cash in lieu of a company car. The 
scheme is structured so that the level of the allowance is on  
a sliding scale with employees on higher grades receiving  
a larger allowance. The executive directors are no longer 
entitled to a company car under this scheme, but are entitled 
to receive cash in lieu of a car. 

Approximately 2,000 employees are entitled to participate  
in the Group’s private healthcare scheme, with 660 of these, 
including the executive directors, entitled to family cover.  
In addition, a small number of senior executives, including the 
executive directors, are entitled to annual health screening.

All employees receive discounts on Company products,  
but the directors have waived their right to this benefit. 
Employees, including the executive directors, have access  
to subsidised restaurants within the Company’s offices  
in Dunstable and Luton and to free Costa coffee within  
the Company’s offices.

Whitbread’s Sharesave scheme is a standard HMRC approved 
SAYE scheme. It is offered to all UK employees, including  
the executive directors, on equal terms. The Company has 
shareholder approval to extend its share schemes overseas 
and the Remuneration Committee retains the discretion to 
establish a Sharesave scheme outside of the UK in the future.

Annual Incentive Scheme
Approximately 6,000 employees are eligible to receive an 
annual incentive payment linked to the achievement of the 
same profit and WINcard targets as those described on pages 
75 and 76 for executives under the Annual Incentive Scheme. 
The majority of participants are entitled to earn a maximum 
annual incentive payment of 10% of salary paid in cash.  
As employees progress into more senior roles the maximum 
payment that can be achieved rises to 40%. Approximately  
90 executives, including the executive directors, are entitled  
to participate in the Annual Incentive Scheme with maximum 
payouts, split between cash and deferred shares, ranging  
from 60% to 167%.

Long Term Incentive Plan
Approximately 40 executives, including the executive 
directors, participate in the LTIP. This scheme is not available 
to the wider employee population.

Pension
Like all employees, the executive directors are entitled to 
participate in the Company’s pension scheme. The scheme is 
a defined contribution scheme. The levels of contribution for 
employees vary depending on the job grade of the individual, 
with employees at the entry level able to contribute 2% of 
their salary and receive a Company contribution of 3% of 
salary. Life assurance is provided to employees who choose  
to join the pension scheme. Employees who do not choose to 
participate may be automatically enrolled with contributions 
in line with the automatic enrolment regulations.

The policy on pension contributions for the executive 
directors is that there is an upper limit for Company 
contributions of 27.5% of salary. No future executive director 
will receive contributions above 25% of salary.

Whitbread 
Annual Report and Accounts 2013/14

Remuneration  
policy report

65

 
 
 
 
 
 
 
 
 
 
Remuneration  
policy report 
continued 

Consideration of shareholder views
We contacted our twenty largest investors, as well as the  
ABI and ISS, in February 2014 to consult on our proposed  
new LTIP. The responses received were positive and 
supportive and provided some helpful feedback on our 
proposals. In particular, the new post vesting holding period, 
the introduction of clawback and malus clauses and the 
strengthening of our shareholding requirements were 
welcomed.

Legacy matters
As previously disclosed, Alan Parker received 27,901 deferred 
shares under the Annual Incentive Scheme on 1 March 2011  
in respect of his final year with the Company. These shares are 
due to vest on 29 April 2014. There are no other outstanding 
share awards or payments due to former directors of the 
Company.

Remuneration Committee discretion
The Remuneration Committee retains the discretion to apply 
‘good leaver’ terms to leavers in respect of both the Annual 
Incentive Scheme and the LTIP. In exercising its discretion, the 
Committee must consider the individual circumstances in the 
particular case and must not exercise its discretion in a way 
which would be discriminatory on grounds of sex, race, age  
or any other protected characteristic within the meaning of 
Section 4 of the Equality Act 2010. 

The Committee must also, so far as it is able to do so, exercise 
its discretion in a way which is consistent as between 
individuals who are in the same position.

Under the rules of the Annual Incentive Scheme, if ‘good 
leaver’ terms apply, any deferred share awards vest in full on 
the date of leaving and may be exercised within six months. 
Under the rules of the LTIP, the award would vest subject to 
the satisfaction of performance conditions, at the end of the 
performance period. The number of shares vesting would be 
on a pro–rata basis taking account of the proportion of the 
performance period that the individual had been employed 
within the Group. The vested award would be exercisable for  
a period of six months from the date on which the award is 
declared to be vested. On occasions where the Committee 
exercises this discretion the participant would be expected  
to continue to meet the shareholding requirement until the 
award vests and failure to do so would result in the lapsing of 
the award. No LTIP grants will be made within the last twelve 
months of employment to any employee who has requested, 
and been granted, ‘good leaver’ status.

In addition the Remuneration Committee has a number  
of discretions relating to the appointment of new directors  
as outlined on pages 64 and 65.

In exceptional circumstances, the Remuneration Committee 
has the discretion to amend the profit range (normally 
between 95% and 110% of target) as well as the split between 
the awards based on profit measures and WINcard or other 
stakeholder measures, and the split between awards paid  
in cash and deferred shares, for a new incentive year under 
the Annual Incentive Scheme.

The Committee sets the performance targets for the LTIP  
and the Annual Incentive Scheme on an annual basis. The 
Committee may change a performance target from time to 
time in the event that it considers it fair and reasonable to do 
so. Any change to an existing performance target must not 
have the effect, in the opinion of the Committee, of making 
the target materially easier or materially more difficult to 
achieve than it was when the award was initially granted.

The Chairman and non–executive directors’ fees
Although the fees paid to the non–executive directors  
are not a matter for the Remuneration Committee, details  
are provided in this report in order to comply with regulations. 
The Chairman receives an annual fee and the non–executive 
directors receive a base fee, with additional fees for acting  
as the Senior Independent Director or for chairing, or being  
a member of, the Audit or Remuneration Committees. 

The fees are reviewed every two years by the executive 
directors taking into account a range of factors including  
the time commitment required of the directors, the 
responsibilities of the role and the fees paid by other similar 
companies. 

The Chairman and non–executive directors are entitled to 
claim business expenses, but do not receive any other fees  
or remuneration in connection with their roles at Whitbread.

Neither the Chairman nor any of the non–executive directors 
has a service contract. 

Whitbread 
Annual Report and Accounts 2013/14

Remuneration  
policy report

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Annual report 
on remuneration

Remuneration Committee —  
membership, key duties and advisers

Members of the Remuneration Committee

•	Stephen Williams 

(Chairman)
•	Richard Baker
•	Wendy Becker

•	Sir Ian Cheshire

•	Anthony Habgood
•	Simon Barratt (Secretary)

Key duties
Full terms of reference are available on the Company’s website.

Remuneration Committee — key duties

•	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, 
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.
•	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.

Internal advisers
Simon Barratt — General Counsel 
Louise Smalley — Group HR Director

External advisers
Towers Watson were appointed remuneration consultants  
by the Committee following a rigorous tender process.  
A separate part of Towers Watson provides investment  
advice and actuarial services in relation to the pension fund. 
Fees paid to Towers Watson in respect of advice received  
by the Committee amounted to £48,969.

Slaughter and May — legal advisers (Slaughter and May  
also provide legal services to the Company). Fees paid to 
Slaughter and May in respect of remuneration issues 
amounted to £16,450.

The Committee is satisfied that the advice received  
is independent and objective.

Remuneration Committee agenda — 2013/14

•	Approval of Annual Incentive Scheme targets for 2013/14.
•	Approval of awards of cash and deferred shares to 

executive directors under the Annual Incentive Scheme.

•	Executive directors’ salary review.
•	Approval of 2013 LTIP awards.
•	Confirmation of the performance conditions for  

the 2013 LTIP awards.

•	Confirmation of the vesting percentages for the LTIP 

award made in 2010 and vesting in 2013.
•	Approval of the 2013 remuneration report.
•	Approval of updated terms of reference.
•	Design of new LTIP and consultation with shareholders.
•	Remuneration principles and structure for 2014/15.
•	Approval of strengthened shareholding requirements.

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Whitbread 
Annual Report and Accounts 2013/14

Annual report  
on remuneration

67

 
 
 
 
 
 
 
 
 
 
Annual report  
on remuneration  
continued 

Single total figure of remuneration (audited information) — executive directors

Director 

Andy Harrison 
Nicholas Cadbury 2 
Patrick Dempsey 
Christopher Rogers 
Louise Smalley 2 

Basic salary

Benefits

Annual Incentive 
Scheme

LTIP

Pension

Total

2013/14 
£’000 

2012/13 
£’000 

2013/14 
£’000 

2012/13 
£’000 

2013/14 
£’000 

2012/13 
£’000 

2013/14 
£’000 

2012/13 
£’000 

2013/14 
£’000 

2012/13 
£’000 

2013/14 
£’000 

2012/13 
£’000

731 
460 
446 
514 
300 

718 
136 
425 
505 
100 

26 
21 
21 
22 
19 

26 
6 
21 
23 
6  

1,012 
635 
566 
702 
414 

897 
169 
499 
684 
124 

4,444 1 
— 
854 
1,308 
129 

1,633 
— 
640 
890 
22 

161 
107 
113 
124 
72 

158 
27 
109 
122 
24 

6,374 
1,223 
2,000 
2,670 
934 

3,432
338
1,694
2,224
276

1   Includes £2.58 million in respect of a one–off matching award made to Andy Harrison on appointment.

2   Nicholas Cadbury and Louise Smalley joined the Board during the year 2012/13. For Louise Smalley, the figures shown relate only to the time 

served as a director.

Details of each of the elements included in the table above  
are as follows:

Base salary
The base salary numbers shown in the table include two 
months’ of pay based on the director’s salary from 1 May 2012 
(or at the date of appointment as applicable) and ten months’ 
pay based on the director’s salary from 1 May 2013.

Awards based on WINcard measures
The WINcard targets in 2013/14 were appropriate to the 
director’s role. For example, Patrick Dempsey had WINcard 
measures specific to Hotels & Restaurants and Christopher 
Rogers had Costa specific measures. Nicholas Cadbury,  
Andy Harrison and Louise Smalley each had Group targets, 
some of which are a combination of the Costa and Hotels  
& Restaurants measures.

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Benefits
The benefits received by each executive director include 
family private healthcare and a cash allowance in lieu of a 
company car.

Annual Incentive Scheme
The Annual Incentive Scheme payments shown above include 
both a cash payment to be made in May 2014 and deferred 
shares to be issued in April 2014. The awards were calculated 
as described below.

Awards based on profit measure
The profit targets for 2013/14 have not been disclosed, 
because the Board considers them to be commercially 
sensitive. Many of Whitbread’s competitors are private 
companies and not therefore subject to the same disclosure 
requirements. We believe that it would give those companies 
an advantage if they were able to see our profit targets.  
The Committee will keep this disclosure under review. 

The awards to be made based on the profit measure are  
as follows: 

Director

Andy Harrison

Nicholas Cadbury

Patrick Dempsey

Christopher Rogers

Louise Smalley

% of salary 
in cash

% of salary in 
deferred shares

Total % 
of salary

39.5

39.5

36.7

38.3

39.5

71.5

71.5

66.7

69.3

71.5

111.0

111.0

103.4

107.6

111.0

The WINcard results are as shown in the table below:

WINcard measure

Winning Teams

Team engagement 1

Health and safety 2

Customer Heartbeat

Family measure/ 
brand standards

Brand performance1

Profitable Growth

Brand growth/ 
market performance

Like for like sales growth

Good Together

Energy consumption/
wastage

Andy Harrison 
Nicholas Cadbury 
Louise Smalley 
% of salary

Patrick 
Dempsey 
% of salary

Christopher 
Rogers 
% of salary

9.0

n/a

3.0

9.0

0

3.0

3.0

9.0

n/a

3.0

4.5

0

3.0

3.0

9.0

n/a

3.0

9.0

1.5

3.0

3.0

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Total

27.0

22.5

28.5

1   The team engagement and brand performance measures are 

upweighted, meaning that 9% of salary is payable for a green score  
and 4.5% of salary for an amber score. Payments in respect of all other 
measures (except for health and safety) are 3% of salary for a green 
score and 1.5% of salary for an amber score.

2   The health and safety measure acts as a hurdle. If the health and safety 
score had been red, payouts for the other WINcard measures would 
have been reduced by 20%. If the score had been amber, a 10% 
reduction would have applied.

More information on the actual targets and outcomes for 
these measures can be found on pages 34 to 37.

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Whitbread 
Annual Report and Accounts 2013/14

Annual report  
on remuneration

68

 
 
 
 
 
 
 
 
 
 
 
27.0

27.0

22.5

28.5

27.0

Total 
£’000

1,012

635

566

702

414

As a result, the awards to be made based on WINcard 
measures are as follows:

% of salary 
in cash

% of salary in 
deferred shares

Total % 
 of salary

Director

Andy Harrison

Nicholas Cadbury

Patrick Dempsey

Christopher Rogers

Louise Smalley

21.6

21.6

18.0

22.8

21.6

5.4

5.4

4.5

5.7

5.4

Total awards
The split between cash and deferred shares is as follows:

Director

Andy Harrison

Nicholas Cadbury

Patrick Dempsey

Christopher Rogers

Louise Smalley

Cash award 
£’000

Cash value 
of deferred 
shares award 
£’000

448

281

246

315

183

564

354

320

387

231

The deferred shares will, under normal circumstances, vest  
on 1 March 2017, subject to continued employment within the 
Group. No further performance conditions apply to these 
awards. Malus provisions apply to the deferred share awards 
in the event, for example, of a material misstatement of 
results. The share price used to calculate the awards was the 
average of closing price of a Whitbread share for the five 
business days preceding 1 March 2014 (i.e. 4,289.0p). 

The number of deferred shares awarded to each director  
will be as follows:

Director

Andy Harrison

Nicholas Cadbury

Patrick Dempsey

Christopher Rogers

Louise Smalley

Number of deferred shares awarded

13,151

8,246

7,463

9,028

5,377

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Long Term Incentive Plan
The amounts shown in the table on page 68 refer to the  
value of the LTIP awards made in 2011 and vesting in 2014.  
For Louise Smalley, the amount is pro–rated based on the 
proportion of the performance period that she has been  
a director (i.e. 16 months out of 36). Andy Harrison’s figure 
also includes a matching award that was made to him on  
his appointment, which was contingent on Andy purchasing, 
and retaining, Whitbread shares to the value of £1 million.

The value given for the LTIP awards is based on the average 
market value over the last quarter of the financial year  
(3,816.8p), as the awards will not vest until after the date  
of this Report.

The LTIP awards made to executives in 2011 were subject  
to independently operating performance conditions as  
set out in the table below. The outcome of each condition  
is also shown in the table.

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).

Outcome

Whitbread was  
ranked 5th out of 52 
representing upper 
quartile performance.

Performance  
versus target

100%

Underlying basic EPS 
growth must be at least 
equal to or exceed RPI + 
4% per annum (25% 
vests) to RPI + 10% per 
annum (100% vests).

The EPS growth over 
the three–year 
performance period  
was in excess of RPI  
+ 10% per annum.

100%

As a result, 100% of the shares awarded under the 2011 LTIP 
will vest. The awards vesting to the executive directors are  
as follows:

Director

Andy Harrison

Patrick Dempsey

Christopher Rogers

Louise Smalley

Number of shares vested

48,953

22,378

34,267

3,3801

1   The numbers shown represent the shares vesting based on the 

proportion of the performance period that Louise Smalley was a 
director as required by the regulations. This was 16 months out of 36. 
The total number of shares vesting to Louise will be 7,606.

In addition Andy Harrison was given a matching award  
over 67,468 shares on his appointment. This was disclosed  
in the 2010/11 Annual Report. The award was subject to 
performance conditions, which were in line with those for the 
general 2011 LTIP award. In addition Andy was required to 
retain at least the same number of shares until vesting, which 
he has done. As explained above, the performance conditions 
have been met in full and 67,468 shares will vest.

Whitbread 
Annual Report and Accounts 2013/14

Annual report  
on remuneration

69

 
 
 
 
 
 
 
 
 
 
 
Annual report  
on remuneration  
continued 

Pension
The percentage of salary received by the executive directors 
in pension contributions is shown in the table below.

Director

Andy Harrison

Nicholas Cadbury

Patrick Dempsey

Christopher Rogers

Louise Smalley

% of salary

25.0

25.0

27.5

27.5

25.0

Executives are able to 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 Nicholas Cadbury, 
Patrick Dempsey and Louise Smalley each receive a pension 
contribution and a cash supplement representing the  
balance over and above the annual allowance set by HMRC 
for pension contributions. With effect from March 2014, 
Patrick Dempsey has elected to receive a cash payment  
in lieu of his pension contribution.

Single total figure of remuneration (audited information) — Chairman and non–executive directors

Director 

Anthony Habgood 
Richard Baker 
Wendy Becker 
Sir Ian Cheshire 
Susan Hooper1 
Simon Melliss 
Susan Taylor Martin 
Stephen Williams 

Base fee

Senior Independent 
Director fee

Fee as Chairman 
of a Board Committee

Fee as a member 
of a Board Committee

Total

2013/14 
£’000 

2012/13 
£’000 

2013/14 
£’000 

2012/13 
£’000 

2013/14 
£’000 

2012/13 
£’000 

2013/14 
£’000 

2012/13 
£’000 

2013/14 
£’000 

2012/13 
£’000

325 
55 
55 
55 
46 
55 
55 
55 

325 
55 
55 
55 
55 
55 
55 
55 

— 
— 
— 
2 
— 
— 
— 
8 

— 
— 
— 
— 
— 
— 
— 
10  

— 
— 
— 
12 
— 
15 
— 
3 

— 
— 
— 
15 
— 
15 
— 
— 

— 
10 
10 
1 
4 
— 
5 
4 

— 
10 
10 
— 
5 
— 
5 
5 

325 
65 
65 
70 
50 
70 
60 
70 

325
65
65
70
60
70
60
70

1  Fees for part year. Susan stepped down from the Board on 1 January 2014.

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Whitbread 
Annual Report and Accounts 2013/14

Annual report  
on remuneration

70

 
 
 
 
 
 
 
 
 
 
 
Statement of directors’ shareholding and share interests 
(audited information)
The Committee believes that the shareholding requirements 
for executives, which have replaced the previous guidelines, 
play an important role in the alignment of the interests of 
executives and shareholders and help to incentivise 
executives to deliver sustainable long–term performance.

The Chief Executive is required to build and hold a 
shareholding at least equal to 200% of salary, whilst the other 
executive directors are expected to reach a holding to the 
value of 125% of salary and other senior executives 75%  
of salary. Until they reach this level, executives are expected  
to retain 100% of vested awards (after the deduction of 
income tax, national insurance contributions and dealing  
fees). In addition, a newly appointed executive director is 
expected to build a shareholding in the Company in advance 
of any share awards vesting. The failure to adhere to these 
requirements may lead to the executive being excluded  
from participation in future share scheme awards. It should  
be noted that any vested LTIP awards subject to a holding 

period will not be counted for the purpose of calculating 
whether an executive has met his or her requirement. When 
determining whether a director has met the requirement,  
both the current market price and the price at the point  
the shares were acquired will be taken into consideration. 

All of the executive directors except for Nicholas Cadbury, 
who was appointed in November 2012, have already met  
the increased requirement. Nicholas has begun to build  
a holding in the Company in advance of the first vesting  
of an award, which is due in 2015 subject to the satisfaction  
of performance conditions.

Since the year–end, shareholding requirements have  
been introduced for the Chairman and the non–executive 
directors. They are each required to build a holding to the 
value of 100% of their annual fee over a three–year period.  
We will report on progress against this requirement in  
next year’s report.

The table below shows the holdings of executive directors as at 27 February 2014:

Counting towards requirement

Performance versus requirement

Additional awards

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Director 

Andy Harrison 
Nicholas Cadbury 
Patrick Dempsey 
Christopher Rogers 
Louise Smalley 

Number 
of 
ordinary 
shares 

232,236 
1,100 
35,326 
50,000 
20,943 

Value 
based on 
purchase 
price 
£’000 

Value 
based on 
market 
price 
£’000 

4,065 
34 
602 
600 
571 

8,864 
42 
1,348 
1,908 
799 

Shareholding 
requirement 
% of salary 

  % of salary  % of salary 
based on 
market 
price 

based on 
purchase 
price 

Awards 
subject to 

Awards not 
subject to 
performance  performance 
conditions2

conditions1 

200 
125 
125 
125 
125 

554 
7 
134 
116 
190  

1,208 
9 
300 
370 
266 

88,039 
39,270 
45,693 
61,928 
29,578 

183,955
11,918
67,554
130,573
36,879

1  Includes outstanding LTIP awards for which performance has not yet been tested.

2   Includes unvested/unexercised deferred shares under the Annual Incentive Scheme and unexercised LTIP awards for which the performance 

targets have already been met. 

The table below shows the holdings of the Chairman and the  
non–executive directors as at 27 February 2014:

Director

Anthony Habgood

Richard Baker

Wendy Becker

Sir Ian Cheshire

Susan Hooper 1

Simon Melliss

Susan Taylor Martin

Stephen Williams

Number of ordinary shares

50,275

12,445

6,000

313

800

3,000

500

10,884

1   Details shown for Susan Hooper are as at 1 January 2014. 

There has been no change to the interests in the tables shown 
on this page between the end of the financial year and the 
date of this Report. However, the column showing awards not 
subject to performance conditions in the executive directors’ 
table do include the deferred shares issued under the 
incentive scheme in 2014 even though these awards were 
actually made after the year–end. 

Whitbread 
Annual Report and Accounts 2013/14

Annual report  
on remuneration

71

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Annual report  
on remuneration  
continued 

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:

Director 

Andy Harrison 

Balance at 
1 March 

2013  Awarded  Lapsed  Exercised 

Balance at 
  27 February 
2014 

Conditional 
award 
granted 

  Market 
Performance  price at 
award 
p 

period 
concludes 

Date 
vested 
award 
exercised 

  Monetary 
value of 
exercised 
award 
£’000

Price at 
exercise 
p 

86,584  
48,953 
67,468 1  
52,565  
—  

—   8,858 
— 
—  
 —  
—  
— 
—  
— 
 35,474  

77,726  
— 
—  
— 
— 

—   01/09/2010 
 48,953   01/03/2011 
 67,468   01/03/2011 
 52,565   01/03/2012 
 35,474   01/03/2013 

28/02/2013  1414.8 
27/02/2014  1787.4 
27/02/2014  1787.4  
26/02/2015  1687.0 
03/03/2016  2554.0 

16/05/2013 
— 
— 
— 
— 

2716.0 
— 
— 
— 
— 

255,570  

35,474   8,858 

77,726 

 204,460  

Nicholas Cadbury 

Patrick Dempsey 

16,527 
— 

— 
22,743 

16,527 

22,743 

— 
— 

— 

— 
— 

 — 

 16,527  01/03/2012 
 22,743  01/03/2013 

26/02/2015  1687.0 
03/03/2016  2554.0 

— 
— 

— 
—

39,270 

28,272 
22,378  
24,616 
—  

—  2,893 
— 
—  
— 
—  
— 
 21,077 

25,379 
— 
— 
— 

 —  01/03/2010 
22,378  01/03/2011 
24,616  01/03/2012 
 21,077   01/03/2013 

28/02/2013  1414.8 
27/02/2014  1787.4 
26/02/2015  1687.0 
03/03/2016  2554.0 

15/05/2013 
— 
— 
— 

2709.7 
— 
— 
— 

75,266 

21,077  2,893 

25,379 

68,071 

Christopher Rogers 

60,612  
39,334  
34,267  
36,975  
—  

— 
— 
— 
—  
 24,953 

— 
4,024 
— 
— 
— 

60,612 
— 
— 
— 
— 

 —  01/03/2009 
 35,310   01/03/2010 
34,267  01/03/2011 
 36,975   01/03/2012 
 24,953   01/03/2013 

734.5 
01/03/2012 
28/02/2013  1414.8 
27/02/2014  1787.4 
26/02/2015  1687.0 
03/03/2016  2554.0 

09/05/2013 
— 
— 
— 
— 

2644.5 
— 
— 
— 
— 

171,188  

 24,953   4,024 

60,612 

131,505 

Louise Smalley 

16,827  
8,736  
7,606  
14,746  
—  

— 
— 
— 
— 
 14,832 

— 
894 
— 
— 
— 

16,827 
7,842 
— 
— 
— 

 —   01/03/2009 
 —   01/03/2010 
7,606  01/03/2011 
 14,746   01/03/2012 
 14,832   01/03/2013 

01/03/2012 
734.5 
28/02/2013  1414.8 
27/02/2014  1787.4 
26/02/2015  1687.0 
03/03/2016  2554.0 

16/05/2013 
16/05/2013 
— 
— 
— 

2716.0 
2716.0 
— 
— 
— 

47,915  

 14,832  

894 

24,669 

37,184 

1   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 was subject to the satisfaction of performance conditions and the retention of the same number of shares previously 
purchased by Andy. The performance conditions were in line with those for the general 2011 LTIP award, except that there would have been no 
vesting at median performance. This award will vest in full, as explained on page 69.

2,111 
— 
— 
— 
—

2,111 

— 

—

668 
— 
— 
—

668

1,603 
— 
— 
— 
—

1,603 

457 
213 
— 
— 
—

670

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Whitbread 
Annual Report and Accounts 2013/14

Annual report  
on remuneration

72

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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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).

2012/13 underlying basic EPS — less than 92p, 
nil vesting; 92p, 25% vests; 107p or more, 100% 
vests; and between 92p and 107p, pro–rating 
between 25% and 100% vesting applies.

2008, 2010
and 2011  
awards

2012 award

2013 award

50% TSR and 50% EPS.

TSR growth against selected FTSE 51—150 
constituents — median (25% vests) to upper 
quartile (100% vests).

Underlying basic EPS growth must be at least 
equal to or exceed RPI + 4% per annum (25% 
vests) to RPI + 10% per annum (100% vests).

Based on underlying basic EPS growth above RPI per annum of 4% to 10% on a sliding scale with a one–third multiplier based  
on ROCE in 2015/16 of 12% to 16.7%. ROCE also acts as a hurdle.

Based on underlying basic EPS growth above RPI per annum of 4% to 10% on a sliding scale with a one–third multiplier based  
on ROCE in 2015/16 of 12% to 17.0%. ROCE also acts as a hurdle.

LTIP performance conditions — future awards
Details of the performance conditions for the awards to be made in 2014 can be found on page 76.

Annual Incentive Scheme (‘the Scheme’) (audited information)
At 27 February 2014 the directors held the following deferred shares under the Scheme:

Awarded 

Lapsed 

Balance at 
  27 February 
2014 

Exercised 

Director 

Andy Harrison 

Nicholas Cadbury 

Patrick Dempsey 

Christopher Rogers 

Louise Smalley 

Year of 
award 

2011 
2012 
2013 
2014 

Balance at 
1 March 
2013 

18,281 
16,618 
19,484 
— 

— 
— 
— 
13,151 

54,383 

13,151 

2013 
2014 

2010 
2011 
2012 
2013 
2014 

2010 
2011 
2012 
2013 
2014 

2010 
2011 
2012 
2013 
2014 

3,672 
— 

3,672 

26,210 
19,698 
7,291 
10,724 
— 

 63,923  

 29,579  
25,316 
11,689 
14,963 
— 

81,547 

13,686 
11,393 
5,302 
7,201  
—  

37,582 

— 
8,246 

8,246 

— 
— 
— 
— 
7,463 

7,463 

— 
— 
— 
— 
9,028 

9,028 

— 
— 
— 
— 
5,377 

5,377 

Release 
date 

29/04/2014 1 
01/03/2015 
01/03/2016 
01/03/2017 

Market 
price at 
award 
p 

1787.4 
1687.0 
2554.0 
4487.0 

18,281 
16,618 
19,484 
13,151 

67,534 

  Monetary 
  Market  value of 
vested 
award 
£’000

price at 
vesting 
p 

Date 
award 
exercised 

— 
— 
— 
— 

— 
— 

— 
— 
— 
— 

— 
— 

3,672 
8,246 

01/03/2016 
01/03/2017 

2554.0 
4487.0 

11,918 

— 
19,698 
7,291 
10,724 
7,463 

30/04/2013 1  1414.8  02/05/2013 
29/04/2014 1 
— 
1787.4 
— 
1687.0 
01/03/2015 
— 
2554.0 
01/03/2016 
— 
4487.0 
01/03/2017 

2616.1 
— 
— 
— 
— 

— 
— 
— 
— 

— 

— 
— 

— 

26,210 
— 
— 
— 
— 

 26,210  

45,176 

29,579 
— 
— 
— 
— 

—   30/04/2013 1  1414.8  08/05/2013  2644.5 
— 
— 
— 
— 

29/04/2014 1 
01/03/2015 
01/03/2016 
01/03/2017 

1787.4 
1687.0 
2554.0 
4487.0 

— 
— 
— 
— 

25,316 
11,689 
14,963 
9,028 

29,579  

60,996 

13,686 
— 
— 
— 
— 

 —   30/04/2013 1  1414.8  16/05/2013 
— 
— 
— 
— 

29/04/2014 1 
01/03/2015 
01/03/2016 
01/03/2017 

1787.4 
1687.0 
2554.0 
4487.0 

11,393 
5,302 
7,201 
5,377 

2716.0 
— 
— 
— 
— 

 13,686  

29,273 

— 
— 
— 
—

—

— 
—

—

686 
— 
— 
— 
—

686

782 
— 
— 
— 
—

782

372
— 
— 
— 
—

372

— 
— 
— 
— 

— 

— 
— 

— 

— 
— 
— 
— 
— 

— 

— 
— 
— 
— 
— 

— 

— 
— 
— 
— 
— 

— 

1   Under the rules of the Scheme awards cannot vest during a close or prohibited period. The normal release dates for the 2010 and 2011 awards 

would have been 1 March 2013 and 1 March 2014 respectively. However, as these dates were during close periods the 2010 awards actually released 
on 30 April 2013 and the 2011 awards will become exercisable on the next day on which dealings are permitted. It is anticipated that this will be  
29 April 2014, the date on which the full–year results are released.

Whitbread 
Annual Report and Accounts 2013/14

Annual report  
on remuneration

73

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual report  
on remuneration  
continued 

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 27 February 2014 the directors held the following share options under the Scheme, with the latest exercise date being  
July 2017. Savings–related share options have a six–month exercise period.

Number 
of shares 

Date of grant 

Exercise price 
p 

Exercise date 

Last exercise date

 672  

02/12/2011 

1339.2 

01/02/2015 

31/07/2015

672  

(672 at 28/02/2013) 

 327  

327  

 1,076 

29/11/2013 

2746.4 

01/02/2017 

31/07/2017

(nil at 28/02/2013) 

03/12/2010 

1414.0 

01/02/2016 

31/07/2016

1,076  

(1,076 at 28/02/2013) 

 1,076  

03/12/2010 

1414.0 

01/02/2016 

31/07/2016

 1,076  

(1,076 at 28/02/2013) 

 470  

30/11/2012 

1913.6 

01/02/2016 

31/07/2016

 470  

(470 at 28/02/2013) 

Director 

Andy Harrison 

Total 

Nicholas Cadbury 

Total 

Patrick Dempsey 

Total 

Christopher Rogers 

Total 

Louise Smalley 

Total 

Total shareholder return

600

500

400

300

200

100

0

26 February
2009

Key

4 March
2010

3 March
2011

1 March
2012

28 February
2013

27 February
2014

Whitbread PLC

FTSE 100 Index

The chart looks at the value over ﬁve years of £100 invested in Whitbread PLC on 26 February 2009 compared, on a consistent basis, with that of £100 invested in the FTSE 100 index
based on 30 trading day average values. The FTSE 100 Index has been used because, given the Company’s position within that index, the Committee believes it to be the most appropriate.

Source: Thomson Reuters Datastream.

Whitbread 
Annual Report and Accounts 2013/14

Annual report  
on remuneration

74

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260

240

220

200

180

160

140

120

100

80

60

40

20

0

28 Feb

2008

26 Feb

2009

4 Mar

2010

3 Mar

2011

1 Mar

2012

1 Mar

2013

Whitbread PLC

FTSE 100 Index

The chart looks at the value over ﬁve years of £100 invested in Whitbread PLC

on 28 February 2008 compared, on a consistent basis, with that of £100 invested 

in the FTSE 100 Index based on 30 trading day average values.

Source: Thomson Reuters Datastream

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Payments to past directors (audited information)
With the exception of regular pension payments and 
dividends on Whitbread shares, no payments were made 
during the year to past directors.

Chief Executive’s remuneration 
The Chief Executive’s remuneration (including base salary, 
benefits and annual incentive payment) increased by 7.8%  
in the year, compared with an increase of 3.1% for the Group’s 
employees as a whole.

The following table shows the Chief Executive’s pay over  
the last five years, with details of the percentage of maximum 
paid out under the annual incentive scheme and the LTIP 
vesting percentage for each year.

Year

Chief Executive

2013/141 Andy Harrison

2012/13 Andy Harrison

2011/12 Andy Harrison

2010/11 Andy Harrison

Alan Parker
Combined

2009/10 Alan Parker

Single total 
figure of 
remuneration 
£’000

% of maximum 
incentive 
achieved

% of LTIP 
award vesting

6,374

3,432

1,444

534
2,509
3,043

2,634

82.6

74.9

45.6

94.4
94.4
94.4

100.0

100.0

89.8

n/a

n/a
82.4
82.4

75.9

1   The single total figure of remuneration for Andy Harrison in 2013/14 
includes a one–off matching award, valued at £2.58 million. This 
award was given to Andy on his appointment.

Relative importance of spend on pay
The graph below compares the change in total expenditure 
on employee pay during the year to the changes in profit  
after tax and dividend payments.

£million

600

500

400

300

200

100

0

Key

Proﬁt
after tax

Dividends

Employee
costs

2012/13

2013/14

Whitbread 
Annual Report and Accounts 2013/14

292.1  323.4  94.5 

106.9  502.4  559.9

Fees from external directorships
Christopher Rogers became a non–executive director of 
Travis Perkins Plc with effect from 1 September 2013 and 
retained a fee of £20,625 in respect of that directorship.  
None of the other executive directors received any fees  
from external directorships during the year.

Implementation of remuneration policy in 2014/15

Base salary
The base salaries of the executive directors with effect from  
1 May 2014 will be as follows:

Director

Andy Harrison

Nicholas Cadbury

Patrick Dempsey

Christopher Rogers

Louise Smalley

Base salary at  
1 May 2014 
£’000

Base salary at  
1 May 2013 
£’000

750

470

460

528

330

734

460

450

516

300

Louise Smalley will receive a 10% salary increase to reflect  
her significant and growing contribution to the Company.  
The other executive directors will receive an increase of 2.25%, 
which is the same as the general increase being given to 
employees across the Group.

Benefits
The benefits received by each executive director will continue 
to include family private healthcare and a cash allowance  
in lieu of a company car.

Annual Incentive Scheme
The Annual Incentive Scheme will continue to operate on  
the same terms as it did in 2013/14. Executive directors will  
be able to earn up to 137% of salary based on performance 
against a profit target and a further 30% of salary based  
on performance against WINcard targets.

The profit measures set for the executive directors for 2014/15 
are appropriate to each director’s role. Nicholas Cadbury, Andy 
Harrison and Louise Smalley have a Group underlying PBIT 
measure. Patrick Dempsey will have a profit measure split on  
a 40:60 basis between Group underlying PBIT and Whitbread 
Hotels & Restaurants underlying PBT, whilst Christopher 
Rogers will have a profit measure split on a 40:60 basis 
between Group underlying PBIT and Costa underlying PBT.

600

500

400

300

200

100
Annual report  
on remuneration

0

75

 
 
 
 
 
 
 
 
 
 
 
 
Annual report  
on remuneration  
continued 

As explained on page 68, the profit targets are commercially 
sensitive and, for that reason, are not disclosed. The 
Committee will keep this disclosure under review.

Cash awards will be made in May 2015, with deferred  
equity issued in April 2015 and due to vest on 1 March 2018, 
with no further performance conditions applying.

Profit performance (% of salary)

150

120

90

60

30

0

Threshold

On–target

Stretch
(maximum)

Key

Total

Deferred shares

Cash

Each executive director will be incentivised based on WINcard 
targets appropriate to the director’s role. The targets include 
upweighted measures and standard measures. 80% of any 
awards made in relation to these WINcard measures are made 
in cash, with the remaining 20% being deferred equity. The 
WINcard targets and the percentage of salary payable based 
on each measure are outlined below:

Long Term Incentive Plan
The awards to be made in 2014 will be based on 125% of the 
director’s base salary, calculated by reference to the average 
of closing price of a Whitbread share for the five business 
days preceding 1 March 2014 (i.e. 4,289.0p). The awards will 
be subject to strengthened performance conditions as shown 
in the matrix below. They will vest in April 2017, subject to 
the continued employment within the Group of the director 
and satisfaction of the performance conditions. The awards 
will be subject to a one–year holding period post vesting.

The matrix below shows how the performance conditions  
will operate.

e
v
o
b
a
h
t
w
o
r
g
S
P
E

m
u
n
n
a
r
e
p

I

P
R

Threshold

  Sliding

  Scale

Maximum

<4%
4%
6%
8%
10%

ROCE 2016/17

Threshold

Sliding Scale

Maximum

12%

0%

0%

0%

0%

0%

13%

0%

19%

37%

56%

75%

14%

0%

19%

37%

56%

75%

15%

0%

20%

40%

61%

82%

16%

0%

22%

44%

66%

89%

17%

0%

24%

47%

71%

96%

18%

0%

25%

50%

75%

100%

The number of shares awarded under the LTIP to each 
director will be as follows:

Andy Harrison 
Nicholas Cadbury 
Louise Smalley 
% of salary

Patrick 
Dempsey 
% of salary

Christopher 
Rogers 
% of salary

WINcard measure

Winning Teams

Team turnover

9.0

4.5

0

7.5 3.75

0

9.0

4.5

0

Health and safety1

n/a n/a n/a n/a n/a n/a n/a n/a n/a

Guest Heartbeat

Director

Andy Harrison

Nicholas Cadbury

Patrick Dempsey

Christopher Rogers

Family measures

n/a n/a n/a

3.0

1.5

0 n/a n/a n/a

Louise Smalley

Number of  
shares awarded

21,381

13,406

13,114

15,040

8,743

Value of  
award 
£’000

917

575

563

645

375

Guest recommend

9.0

4.5

0

7.5 3.75

0

6.0

3.0

0

Profitable Growth

Market 
performance

Brand growth

Like for like  
sales growth

Good Together

Energy 
consumption

3.0

1.5

3.0

1.5

3.0

1.5

0

0

0

3.0

1.5

3.0

1.5

3.0

1.5

0

0

0

6.0

3.0

3.0

1.5

3.0

1.5

0

0

0

3.0

1.5

0

3.0

1.5

0 n/a n/a n/a

Wastage

n/a n/a n/a n/a n/a n/a

3.0

1.5

0

1   The health and safety measure is a hurdle. If the health and safety score 
is amber, payouts for the other WINcard measures will be reduced by 
10% and if it is red they will be reduced by 20%. 

Pension
There will be no changes to the pension arrangements  
in 2014/15.

Statement of shareholder voting
At the Annual General Meeting in 2013 the advisory resolution 
to approve the remuneration report was passed, with  
98.5% of votes received being in favour of the resolution.  
In total 110,583,636 votes were cast on the resolution, with 
108,910,620 in favour and 1,673,016 against. There were 
1,739,866 votes withheld. There were no questions raised  
by shareholders at the meeting relating to the Company’s 
remuneration policy.

Whitbread 
Annual Report and Accounts 2013/14

Annual report  
on remuneration

76

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2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Directors’ 
report

The directors present their Report and Accounts for  
the year ended 27 February 2014
Certain information required for disclosure in this report is 
provided in other appropriate sections of the Annual Report 
and Accounts. These include 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.

Results and dividends

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 2012 
all directors will stand for annual re–election at each AGM.

The Company may, by special resolution, remove any 
directors before the expiration of his/her term of office.

Group profit before tax and exceptional items 

£411.8 million

Directors automatically stop being directors if:

Group profit before tax and after exceptional items 

£347.0 million

Interim dividend paid on 10 January 2014 

21.80p per share

i. 

they give the Company a written notice of resignation  
(at the date such notice expires);

Recommended final dividend 

47.00p per share

ii.   they give the Company a written notice in which they  

Total dividend for the year 

68.80p per share

Subject to approval at the Annual General Meeting (AGM),  
the final dividend will be payable on 4 July 2014 to the 
shareholders on the register at the close of business on  
30 May 2014.

Board of Directors
The directors at the date of this Report are listed on pages  
46 and 47. All these directors served throughout the year. 
Susan Hooper resigned as a director of the Company with 
effect from 1 January 2014. 

Details of the directors’ service contracts are given in the 
remuneration report on page 63. None of the non–executive 
directors has a service contract.

Details of directors’ training are given in the corporate 
governance report on page 50.

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.

offer to resign and the other directors decide to accept  
the offer;

iii.  all of the other directors (who must comprise at least three 
people) pass a resolution or sign a written notice requiring 
the director to resign;

iv.  they are or have been suffering from mental or physical  

ill health and the directors pass a resolution removing the 
director from office;

v.  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;

vi.  a bankruptcy order is made against them or they make 
any arrangement or composition with their creditors 
generally;

vii.  they are prohibited from being a director under any 

applicable legislation; or

viii. 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
Details regarding the share 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 on pages 71 to 74.

Whitbread 
Annual Report and Accounts 2013/14

Directors’ 
report

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Directors’ 
report 
continued

Share capital
Details of the issued share capital can be found in Note 26  
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 AGMs.

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 or she 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.

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 six 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. 

Whitbread 
Annual Report and Accounts 2013/14

Directors’  
report

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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 2014 AGM.

The Company did not purchase any of its own shares during 
the year. 13.3 million shares (representing 6.85% of the total 
called up share capital at the beginning of the year) are held 
as treasury shares (28 February 2013: 13.8 million). During  
the course of the year, the Company transferred 453,000 
shares from treasury to the Employee Share Ownership  
Trust for the future satisfaction of awards under the 
Company’s incentive schemes.

Employee share schemes
Whitbread does not have any employee share schemes 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 (the 
percentages shown are the percentages at the time of the 
disclosure and have not been re–calculated based on the 
issued share capital at the year–end):

Number of shares % of issued share capital

BlackRock

17,184,930

Capital Group Companies, Inc. 

10,646,212

Schroders PLC

Standard Life Investments

10,531,421

7,233,278

9.73

5.87

5.35

4.08

The Company was informed on 12 March 2014 that Capital 
Group Companies, Inc. had decreased its holding to 
9,000,289 shares, being 4.96% of the issued share capital.  
No other 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 28 April 2014.

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 under any 
circumstances (including in relation to training, career 
development and promotion) against current or prospective 
employees because of any disability. Fair and full 
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 
into 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 Winning Teams sections on pages 12 to 13 and 22 to 23.

Mandatory Greenhouse Gas (‘GHG’) reporting 
In order to comply with the requirements of the Companies 
Act 2006 (Strategic and Directors’ Report) Regulations 2013 
we have amended our environmental reporting accordingly. 

We have considered the six main GHGs and report emissions 
in tonnes of CO2 equivalent (‘CO2 e’) for our Scope 1 (direct) 
and Scope 2 (indirect) CO2 emissions. We have used the  
GHG Protocol Corporate Accounting and Reporting Standard 
methodology to calculate our emissions and DEFRA GHG 
Conversion Factors for Company Reporting. 

Scope 1 relates to the direct emissions from the fuels we  
use in our hotels, restaurants, offices and coffee shops such  
as natural gas and liquid petroleum gas. It also includes 
emissions from owned vehicles (including company cars)  
but excludes logistics as this is an outsourced operation.  
We have reported our refrigerant gas and F–Gas emissions 
only in respect of our UK operations due to more limited 
reporting capabilities at other sites.

Scope 2 relates to the indirect emissions associated with  
the generation of the electricity consumed in our sites. 

When defining the scope of our data we do not report on 
operations under joint venture agreements where we do not 
have operational control such as Costa Beijing and Premier 
Inn (UAE). For reasons of materiality, small, one person offices  
in the Far East have been excluded. All other sites throughout 
the world are included. 

Whitbread 
Annual Report and Accounts 2013/14

Directors’  
report

79

 
 
 
 
 
 
 
 
 
 
Directors’ 
report 
continued

Where possible we have reported billed or Automatic  
Meter Reader data which represents 88% of our total global 
emissions. For those operations which are currently beyond 
our reporting capabilities, such as Costa Shanghai, we have 
used an estimation approach using known sales data and  
local conversion factors. For further information about our 
estimation techniques and the number and location of 
Whitbread sites please view the Corporate Responsibility 
pages on our website. 

An intensity ratio of tonnes of CO2 e per £1 million turnover 
has been selected, which will allow a comparison of our 
performance over time and with other similar types of 
organisation.

Direct emissions

Scope 1 Natural gas

Source of emissions

Fuel oil

LPG

F–Gas

Owned transport

Indirect emissions Scope 2 Electricity

Gross emissions

2013/14 
tonnes of 
CO2 e

53,857.84

400.00

3,245.82

7,572.61

1,864.30

187,733.39

254,673.96

Turnover (£m)
Tonnes CO2 e per £1m turnover 

2,294.30

111.00

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 2006 by way of special resolution.

Significant agreements
The Company’s facility agreements and the private  
placement loan notes agreement, details of which can  
be found in Note 20 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 24 to the consolidated financial 
statements.

Political donations
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
EY LLP have expressed their willingness to continue in office 
as auditor of the Company and a resolution proposing their 
reappointment will be put to shareholders at the 2014 AGM. 
After proper consideration, the Audit Committee is satisfied 
that the Company’s auditor, EY LLP, continues to be objective 
and independent of the Company. In coming to this 
conclusion, the Audit Committee gave full consideration  
to any non–audit work carried out by EY LLP.

The Audit Committee has considered what work should not 
be carried out by the external auditor and has concluded that 
certain services will not be carried out by EY LLP, as outlined 
in the Committee’s terms of reference.

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 affect its future development, performance and 
position are set out in the strategic report on pages 6 to 43. 
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 38 to 41. 
In addition there are further details in the financial statements 
on the Group’s financial risk management, objectives and 
policies (Note 23) and on financial instruments (Note 24).

A combination of the strong operating cash flows generated 
by the business and the significant headroom on its credit 
facilities supports 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.

Whitbread 
Annual Report and Accounts 2013/14

Directors’  
report

80

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Annual General Meeting
The AGM will be held at 2pm on 17 June 2014 at Church  
House Conference Centre, Dean’s Yard, Westminster, London 
SW1P 3NZ. The Notice of Meeting is enclosed with this  
report for shareholders receiving hard copy documents,  
and is available at www.whitbread.co.uk for those who elected 
to receive documents electronically. At the 2014 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 28 April 2014 and signed.

Simon Barratt
General Counsel and Company Secretary

Registered Office: 
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 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.

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Whitbread 
Annual Report and Accounts 2013/14

Directors’  
report

81

 
 
 
 
 
 
 
 
 
 
 
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Consolidated 
accounts 
2013/14

84   Directors’ responsibility statement 
85   Independent auditor’s report
88   Consolidated income statement 
89   Consolidated statement  
of comprehensive income
90   Consolidated statement  
of changes in equity 

91   Consolidated balance sheet 
92   Consolidated cash flow statement 
93   Notes to the consolidated  

financial statements 

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Whitbread 
Whitbread 
Annual Report and Accounts 2013/14
Annual Report and Accounts 2013/14

Consolidated  
Section heading
accounts 2013/14

83
83

 
 
 
 
 
 
 
 
 
 
Directors’ responsibility 
statement

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 International 
Financial Reporting Standards (IFRSs) as adopted by the 
European Union.

Responsibility statement
The directors are responsible for preparing the strategic 
report (including the Corporate Governance Report) and  
the directors’ remuneration report in accordance with the 
Companies Act 2006 and applicable regulations, including 
the Listing Rules and the Disclosure and Transparency Rules.

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

•	make judgements and estimates that are reasonable  

and prudent;

•	state that the consolidated financial statements comply 
with IFRS subject to any material departures being 
disclosed and explained in the consolidated financial 
statements;

•	prepare the consolidated financial statements on a going 
concern basis unless it is inappropriate to presume that  
the Group will continue in its business;

•	present information, including accounting policies, in a 
manner that provides relevant, reliable, comparable and 
understandable information; and

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

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

The directors are responsible for the maintenance and 
integrity of the Annual Report included on the Group’s 
website, in accordance with the UK legislation governing  
the preparation and dissemination of financial statements. 
Legislation in the UK governing the preparation and 
dissemination of financial statements may differ from 
legislation in other jurisdictions.

Each of the directors, whose name and functions are 
disclosed on pages 46 and 47, confirms that, to the best  
of their knowledge:
•	the consolidated financial statements, which have been 

prepared in accordance with IFRSs as adopted by the EU, 
give a true and fair view of the assets, liabilities, financial 
position and result of the Group; and

•	the strategic report includes a fair review of the 

development and performance of the business and the 
position of the Group, together with a description of the 
principal risks and uncertainties that it faces.

The directors are responsible for preparing the Annual Report 
in accordance with applicable law and regulations. Having 
taken advice from the Audit Committee, the Board considers 
the Report and consolidated financial statements, taken as  
a whole, to be fair, balanced and understandable and that it 
provides the information necessary for shareholders to assess 
the Company’s performance, business model and strategy.

By order of the Board,

Andy Harrison 
Chief Executive 

Nicholas Cadbury
Finance Director

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

84

 
 
 
 
 
 
 
 
 
 
Independent auditor’s report  
to the members of Whitbread PLC

Independent auditor’s report to the members  
of Whitbread PLC 
We have audited the consolidated financial statements  
of Whitbread PLC for the year ended 27 February 2014  
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 statement  
of cash flows and the related Notes 1 to 32. 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 of auditor 
As explained more fully in the directors’ responsibility 
statement set out on page 84, the directors are responsible 
for the preparation of the consolidated 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 consolidated 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 consolidated financial statements sufficient 
to give reasonable assurance that the consolidated 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 consolidated financial statements.  
In addition, we read all the financial and non–financial 
information in the Annual Report to identify material 
inconsistencies with the audited consolidated financial 
statements and to identify any information that is apparently 
materially incorrect based on, or materially inconsistent  
with, the knowledge acquired by us in the course of 
performing the audit. If we become aware of any apparent 
material misstatements or inconsistencies we consider the 
implications for our report.

Opinion on the consolidated financial statements
In our opinion the consolidated financial statements:
•	give a true and fair view of the state of the Group’s  

affairs as at 27 February 2014 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.

Our assessment of risks of material misstatement
We identified the following risks of material misstatement 
which had the greatest effect on the overall audit strategy;  
the allocation of resources in the audit; and directing the 
efforts of the engagement team:
•	the accounting for current and deferred taxation balances 

and assessment of uncertain taxation positions;

•	revenue recognition — including the treatment of franchise 

revenue;

•	the accounting for the defined benefit pension scheme; and
•	the risk of management override of internal control.

Our application of materiality
Materiality is a key part of planning and executing our audit 
strategy. For the purposes of determining whether the 
financial statements are free from material misstatement,  
we define materiality as the magnitude of an omission or 
misstatement that, individually or in the aggregate, in light  
of the surrounding circumstances, could reasonably be 
expected to influence the economic decisions of the users  
of the financial statements. As we develop our audit  
strategy, we determine materiality at the overall consolidated 
financial statement level and at the individual account level. 
Performance materiality is the application of materiality  
at the individual account level.

Planning the audit solely to detect individually material 
misstatements, overlooks the fact that the aggregate  
of individually immaterial misstatements may cause the 
consolidated financial statements to be materially misstated, 
and leaves no margin for possible undetected misstatements. 
Performance materiality is set to reduce to an appropriately 
low level the probability that the aggregate of uncorrected 
and undetected misstatements exceeds materiality for the 
consolidated financial statements as a whole.

When establishing our overall audit strategy, we determined  
a magnitude of uncorrected misstatements that we judged 
would be material for the consolidated financial statements  
as a whole. We determined materiality for the Group to be 
£18.0 million (2012/13: £17.7 million), which is approximately 
5% (2012/13: 5%) of pre–tax profit. This provided the  
basis for determining the nature, timing and extent of our 
audit procedures, and identifying and assessing the risk  
of material misstatement.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

85

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2

 
 
 
 
 
 
 
 
 
 
Independent auditor’s report  
to the members of Whitbread PLC 
continued 

On the basis of our risk assessments, together with our 
assessment of the Group’s overall control environment,  
our judgement was that overall performance materiality  
(i.e. our tolerance for misstatement in an individual account  
or balance) for the Group should be 75% (2012/13: 75%)  
of planning materiality, namely £13.5 million (2012/13:  
£13.3 million). Our objective in adopting this approach  
was to ensure that the total detected and undetected  
audit differences did not exceed our planning materiality  
of £18.0 million for the consolidated financial statements  
as a whole.

We agreed with the Audit Committee that we would  
report to the Committee all audit differences in excess  
of £0.9 million (2012/13: £0.9 million), as well as differences 
below that threshold that, in our view warranted reporting  
on qualitative grounds.

An overview of the scope of our audit
In assessing the risk of material misstatement to the 
consolidated financial statements, our Group audit scope 
focused on the two operating segment locations in the UK, 
which were subject to full scope audits for the year ended  
27 February 2014. The audit of these two locations was 
performed at a materiality level calculated by reference to  
a proportion of Group materiality appropriate to the relevant 
scale of the individual business unit. Together with the  
Group functions, which were also subject to a full scope  
audit, these locations represent the principal business units  
of the Group and account for 97% of the Group’s total  
assets, 96% of the Group’s revenue and 96% of the Group’s 
operating profit. 

The Senior statutory auditor visited both of the full scope 
operating segment locations during the year and for each 
segment the Group audit team remained in continuous 
contact with component teams and reviewed the work  
on key audit areas.

Our response to the risks of material misstatement identified 
above included the following procedures.

The accounting for current and deferred taxation balances 
and assessment of uncertain taxation positions
•	We challenged management’s calculation of current and 

deferred taxation liabilities and assessed the reasonableness 
of assumptions used by management in determining these 
estimates, particularly with respect to the deferred tax 
liabilities related to property, plant and equipment.
•	We agreed a sample of amounts within management’s 
taxation calculations to those submitted within taxation 
returns and/or correspondence with HM Revenue and 
Customs.

•	We critically evaluated the positions adopted by 

management in relation to uncertain taxation positions.
•	We assessed whether specific taxation issues were treated 

correctly in accordance with tax law and practice.
•	We ensured that the consolidated financial statement 

disclosures were in accordance with accounting standards.

Revenue recognition — including the treatment  
of franchise revenue
•	We tested a sample of franchise revenue transactions  
to identify anomalous entries potentially impacting  
Group revenue.

•	We carried out testing relating to controls over revenue 
recognition, including the timing of revenue recognition. 

•	We performed analytical procedures, cut–off testing  

around the year–end and journal testing around revenue.

•	We ensured that the consolidated financial statement 

disclosures were in accordance with accounting standards.

The accounting for the defined benefit pension scheme
•	We challenged the assumptions used in the pension  
liability valuations and we used a pensions specialist  
to assist us with this procedure.

•	We understood and challenged management’s input  
into the assumptions underpinning the determination  
of the liability.

•	We tested a sample of the pension asset valuations  

to ensure they had been reasonably calculated.

•	We ensured that the consolidated financial statement 

disclosures were in accordance with accounting standards.

The risk of management override of internal control
•	We performed tailored procedures, sufficient to address  
the identified risk in respect of subjective areas which  
were considered to be most susceptible to management 
override.

Opinion on other matter prescribed by the  
Companies Act 2006
In our opinion the information given in the strategic report 
and the directors’ report for the financial year for which  
the consolidated financial statements are prepared  
is consistent with the consolidated financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following: 

Under the ISAs (UK and Ireland), we are required to report 
to you if, in our opinion, information in the Annual Report is: 
•	materially inconsistent with the information in the audited 

consolidated financial statements; or 

•	apparently materially incorrect based on, or materially 

inconsistent with, our knowledge of the Group acquired  
in the course of performing our audit; or 

•	is otherwise misleading.

In particular, we are required to consider whether we have 
identified any inconsistencies between our knowledge 
acquired during the audit and the directors’ statement that 
they consider the Annual Report is fair, balanced and 
understandable and whether the Annual Report appropriately 
discloses those matters that we communicated to the Audit 
Committee which we consider should have been disclosed.

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

86

 
 
 
 
 
 
 
 
 
 
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 80, in relation  

to going concern; and 

•	the part of the corporate governance statement relating  
to the Company’s compliance with the nine provisions  
of the UK Corporate Governance Code specified for  
our review.

Other matter
We have reported separately on the parent Company financial 
statements of Whitbread PLC for the year ended 27 February 
2014 and on the information in the directors’ remuneration 
report that is described as having been audited.

Richard Wilson
(Senior statutory auditor) 
for and on behalf of Ernst & Young LLP 
Statutory Auditor 
London

28 April 2014

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

87

 
 
 
 
 
 
 
 
 
 
Consolidated income statement
Year ended 27 February 2014

Revenue 
Operating costs 

Operating profit 

Share of profit 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 adjustments 

Tax expense 

Profit for the year 

Attributable to: 
  Parent shareholders 
  Non–controlling interest 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2.

Earnings per share 
(Note 10) 

Earnings per share 
Basic 
Diluted 

Earnings per share before exceptional items 
Basic 
Diluted 

Underlying earnings per share 
Basic 
Diluted 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2.

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Notes 

3, 4 
5 

15 
16 

8 
8 

4 

4 
6 
6 

4 
6 

9 
6 

9 

Year to 
27 February 
2014 
£m 

Year to  
28 February 
2013* 
£m 

2,294.3 
(1,905.3) 

 2,030.0  
(1,647.2)

389.0 

 382.8 

1.6 
0.9 

391.5 

(45.2) 
0.7 

347.0 

411.8 
(2.7) 
(23.6) 

385.5 
(38.5) 

347.0 

(94.1) 
70.5 

(23.6) 

0.5 
 0.8 

 384.1 

(52.5) 
 11.6 

 343.2 

 353.4  
 (2.8) 
 (27.0)

 323.6  
19.6 

343.2 

(90.8) 
39.7

(51.1)

323.4 

292.1

327.9 
(4.5) 

323.4 

 294.3  
(2.2)

 292.1 

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Year to 
27 February 
2014 
pence 

Year to  
28 February 
2013* 
pence 

182.98 
181.06 

165.71 
164.32

167.74 
165.99 

136.37 
135.23

179.02 
177.14 

149.10 
147.85

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

88

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated statement of comprehensive income
Year ended 27 February 2014

Profit for the year 

Items that will not be reclassified to the income statement: 
Re–measurement (loss)/gain on defined benefit pension scheme 
Current tax on pensions 
Deferred tax on pensions 
Deferred tax: change in rate of corporation tax on pensions 

Items that may be reclassified subsequently to the income statement: 
Net gain on cash flow hedges 
Deferred tax on cash flow hedges 
Deferred tax: change in rate of corporation tax on cash flow hedges 

Exchange differences on translation of foreign operations 

Other comprehensive (loss)/income for the year, net of tax 

Total comprehensive income for the year, net of tax 

Attributable to: 
  Parent shareholders 
  Non–controlling interest 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2.

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Notes 

Year to 
27 February 
2014 
£m 

Year to  
28 February 
2013* 
£m 

323.4 

 292.1 

30 
9 
9 
9 

24 
9 
9 

(37.7) 
14.4 
(5.7) 
(11.8) 

(40.8) 

1.4 
(0.3) 
(0.5) 

0.6 

(7.8) 

(48.0) 

41.4 
 9.0  
(19.0)  
(8.5)

22.9

 8.3 
 (2.0)  
(0.5)

 5.8

1.0

29.7

275.4 

 321.8 

279.9 
(4.5) 

275.4 

 324.0  
(2.2)

 321.8 

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

89

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated statement of changes in equity
Year ended 27 February 2014

Share 
Share 
capital  premium 
(Note 26)  (Note 27) 
£m 

£m 

Capital 
redemption 
reserve 
(Note 27) 
£m 

Retained 
earnings 
(Note 27) 
£m 

Currency 

reserve 

translation  Treasury 
reserve 
(Note 27)  (Note 27) 
£m 

£m 

Merger  Hedging 
reserve 
reserve 
(Note 27)  (Note 27) 
£m 

£m 

Non– 
  controlling 
interest 
£m 

Total 
£m 

Total 
equity 
£m

At 1 March 2012 

 147.5  

 53.7  

 12.3    3,163.0  

 3.7    (220.3)  (1,855.0)   (28.1)   1,276.8  

 6.4   1,283.2 

Profit for the year* 
— 
Other comprehensive income*  — 

Total comprehensive income 

— 

0.2  

— 
— 

Ordinary shares issued 
Cost of ESOT shares  
  purchased 
Loss on ESOT shares issued  
Accrued share–based  
  payments 
—  
Tax on share–based payments  — 
Tax rate change on historical  
  revaluation 
Equity dividends 
Scrip dividends 
Additions 

— 
— 
0.6  
— 

— 
— 

— 

 2.0  

— 
— 

— 
— 

— 
— 
 (0.6) 
— 

— 
—  

 294.3  
 20.4 

— 

— 

— 
— 

— 
—  

— 
—  
— 
— 

 314.7  

— 

— 
 (3.6) 

 9.2  
 2.2  

 1.1  
 (94.5) 
 16.7  
— 

— 
 1.0 

 1.0 

— 

— 
— 

— 
— 

— 
— 
— 
— 

— 
— 

— 

—  

 (3.2) 
 3.6  

—  
— 

— 
— 
— 
— 

— 
— 

— 

— 

— 
— 

— 
— 

— 
— 
— 
— 

— 
 8.3 

294.3  
 29.7 

 (2.2)   292.1  

— 

29.7

 8.3 

 324.0  

 (2.2)  321.8 

— 

— 
— 

— 
— 

— 
— 
— 
— 

 2.2  

— 

 2.2 

 (3.2) 
— 

 9.2  
 2.2  

 1.1  
 (94.5) 
 16.7  
— 

—  
— 

— 
— 

— 
— 
— 
 6.6 

 (3.2) 
— 

9.2  
 2.2  

 1.1  
(94.5) 
 16.7  
 6.6 

At 28 February 2013 

 148.3  

 55.1  

 12.3    3,408.8  

 4.7    (219.9)  (1,855.0)   (19.8)  1,534.5  

 10.8   1,545.3 

Profit for the year 
Other comprehensive loss 

 — 
— 

Total comprehensive income  — 

0.2 
— 

Ordinary shares issued 
Loss on ESOT shares issued 
Accrued share–based  
  payments 
— 
Tax on share–based payments  —  
Tax rate change on historical  
  revaluation 
Equity dividends 
Scrip dividends 
Additions 

—  
—  
1.1 
—  

— 
— 

— 

2.2 
— 

— 
— 

— 
— 
(1.1) 
— 

— 
— 

— 

— 
— 

— 
— 

— 
— 
— 
— 

327.9 
(41.6) 

286.3 

— 
(7.3) 

10.6 
6.6 

1.9 
(106.9) 
44.5 
— 

— 
(7.8) 

(7.8) 

— 
— 

— 
— 

— 
— 
— 
— 

— 
— 

— 

— 
7.3 

— 
— 

— 
— 
— 
— 

— 
— 

— 

— 
— 

— 
— 

— 
— 
— 
— 

— 
1.4 

1.4 

— 
— 

— 
— 

— 
— 
— 
— 

327.9 
(48.0) 

(4.5)  323.4 
(48.0)

— 

279.9 

(4.5)  275.4

2.4 
— 

10.6 
6.6 

— 
— 

— 
— 

2.4 
— 

10.6 
6.6 

1.9 
(106.9) 
44.5 
— 

1.9 
— 
—  (106.9) 
44.5 
— 
3.2
3.2 

At 27 February 2014 

149.6  

56.2 

12.3  3,644.5 

(3.1)  (212.6)  (1,855.0)  (18.4)  1,773.5 

9.5  1,783.0

 *Restated for the impact of IAS 19 (revised 2011), see Note 2.

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated balance sheet
At 27 February 2014

ASSETS 

Non–current assets 
Intangible assets 
Property, plant and equipment 
Investment in joint ventures 
Investment in associate 
Derivative financial instruments 
Trade and other receivables 

Current assets 
Inventories 
Derivative financial instruments 
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 

28 April 2014

Nicholas Cadbury
Finance Director

27 February 
2014 
£m 

28 February 
2013 
£m 

Notes 

12 
13 
15 
16 
24 
18 

17 
24 
18 
19 

13 

20 
22 
24 
9 
25 

20 
22 
24 
9 
30 
25 

26 
27 
27 
27 
27 
27 

223.0  
2,894.1  
24.9 
2.0 
— 
6.0 

 215.4  
 2,748.9  
24.0  
 1.7  
 7.1  
 5.3

3,150.0  

 3,002.4 

30.5 
— 
124.1 
41.4 

196.0 

1.5 

 26.5 
1.4  
 102.1  
 40.8 

170.8 

 1.5 

 3,347.5 

 3,174.7 

— 
12.9 
4.3 
35.1 
423.0 

475.3 

433.0 
32.7 
24.7 
46.8 
534.3 
17.7 

 9.0  
 10.3  
4.6  
 37.7  
347.6 

409.2

 502.9  
 32.6  
 18.7  
 106.7  
 541.7  
 17.6 

1,089.2 

1,220.2 

1,564.5 

 1,629.4 

1,783.0  

 1,545.3 

149.6  
56.2  
12.3  
3,644.5  
(3.1)  
(2,086.0) 

 148.3  
 55.1  
 12.3  
 3,408.8  
 4.7  
 (2,094.7)

 1,773.5 

 1,534.5 

9.5  

 10.8 

1,783.0  

 1,545.3 

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

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Consolidated cash flow statement
Year ended 27 February 2014

Profit for the year 

Adjustments for: 
  Taxation charged on total operations 
  Net finance cost 
  Total income from joint ventures 
  Total income from associate 
  Loss/(gain) on disposal of property, plant and equipment and property reversions 
  Loss on investment and disposal of business 
  Depreciation and amortisation 

Impairment of property, plant and equipment and intangibles  

  Share–based payments 
  Other non–cash items 

Cash generated from operations before working capital changes 

Increase in inventories 
Increase in trade and other receivables 
Increase in trade and other payables 
Payments against provisions 
Pension payments 

Cash generated from operations 

Interest paid 
Corporation 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 
Sale of business 
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 
Cost of purchasing ESOT shares 
Capital contributions from non–controlling interests 
Decrease in short–term borrowings 
Repayments of long–term borrowings 
Renegotiation costs of long–term borrowings 
Dividends paid 

Net cash flows from financing activities 

Net increase in cash and cash equivalents 
Opening cash and cash equivalents 
Foreign exchange differences 

Notes 

9 
8 
15 
16 
6 
6 
12, 13 
12, 13 
29 

22 
30 

11 

Closing cash and cash equivalents shown within current assets on the balance sheet 

19 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2.

Year to 
27 February 
2014 
£m 

Year to  
28 February 
2013* 
£m 

323.4 

 292.1 

23.6 
44.5 
(1.6) 
(0.9) 
11.7 
— 
152.5 
20.2 
10.6 
7.0 

591.0 

(4.2) 
(25.5) 
45.1 
(5.1) 
(71.2) 

530.1 

(19.8) 
(81.4) 

428.9 

(286.3) 
(19.9) 
1.0 
— 
— 
(1.6) 
0.7 
0.7 

(305.4) 

2.4 
— 
4.0 
(9.0) 
(54.9) 
(1.7) 
(62.4) 

 51.1  
40.9  
 (0.5)  
(0.8) 
 (18.6) 
3.3  
 128.4  
5.4  
 9.2  
 4.1

 514.6 

(3.3) 
 (17.4) 
 38.4  
(6.3) 
(45.7)

 480.3 

(26.6) 
(46.7)

 407.0 

(329.3) 
(14.3) 
 51.0 
 (0.7)  
(0.2)  
 (4.8) 
 0.7  
 0.4 

(297.2)

 2.2  
 (3.2) 
 5.9  
 (4.5)  
(32.0) 
— 
(77.8)

(121.6) 

(109.4)

1.9 
40.8 
(1.3) 

41.4 

 0.4 
 39.6  
 0.8 

 40.8 

Whitbread 
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Consolidated  
accounts 2013/14

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Notes to the consolidated financial statements
At 27 February 2014

1  Authorisation of consolidated financial statements

The consolidated financial statements of Whitbread PLC for the year ended 27 February 2014, were authorised for issue  
by the Board of Directors on 28 April 2014. 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 consolidated financial statements for the year ended 28 February 2013, except as follows:

IAS 19 Employee Benefits (Amendment)
IAS 19 (revised 2011) has been applied retrospectively from 2 March 2012 and comparatives have been restated for the  
impact of its adoption. The standard replaces interest cost and expected return on plan assets with a net interest amount  
that is calculated by applying the discount rate to the net pension liability. In addition, certain administration costs in relation  
to the scheme, which were previously recognised as a reduction to the expected return on assets, are now recognised as an 
operating expense.

The impact of the adoption of IAS 19 (revised 2011) on the consolidated income statement, consolidated statement of 
comprehensive income and the calculation of earnings per share for each year was as follows:

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Impact on the consolidated income statement 

Operating costs 
Net financing costs 

Net decrease in profit before tax 

Analysed as: 
Decrease in underlying profit before tax 

IAS 19 income statement charge for pension finance cost 

Decrease in profit before tax 

Underlying tax expense  
Exceptional tax and tax on non GAAP adjustments 

Decrease in tax expense 

Net decrease in profit for the year 

Impact on the consolidated statement of comprehensive income 

Decrease in profit for the year 

Re–measurement gain on defined benefit pension scheme 
Deferred tax on pensions 

Increase in other comprehensive income for the year, net of tax 

Net movement in total comprehensive income 

2013/14 
£m 

2012/13 
£m 

2.5 
14.8 

17.3 

2.5 
14.8 

17.3 

(0.6) 
(3.4) 

(4.0) 

13.3 

3.1 
 9.0

12.1 

3.1 
9.0

12.1

(0.7) 
(2.2)

(2.9)

9.2

2013/14 
£m 

(13.3) 

17.3 
(4.0) 

13.3 

— 

2012/13 
£m 

(9.2)

12.1 
(2.9)

9.2

—

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

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Notes to the consolidated financial statements
At 27 February 2014

2 Accounting policies continued 

Impact on earnings per share (EPS) 

Basic on profit for the year 
Exceptional items — gross 
Exceptional items — taxation 
Exceptional items — non–controlling interest 

Basic on profit before exceptional items for the year 
Non GAAP adjustments — gross 
Non GAAP adjustments — taxation 

Basic on underlying profit for the year 

Diluted on profit for the year 
Diluted on profit before exceptional items for the year 
Diluted on underlying profit for the year 

2013/14 
pence 

2012/13 
pence 

7.42  
—  
—  
—  

7.42  
(8.26) 
1.90  

1.06 

7.34 
7.34 
1.05 

 5.18  
 —  
 —  
 — 

 5.18  
(5.07) 
 1.24 

 1.35 

 5.14 
 5.14 
 1.34 

In addition, the above decreases to profit and increases to other comprehensive income, have impacted the consolidated 
statement of changes in equity and the reconciliation of operating profit to cash generated from operating activities  
(see consolidated cash flow statement) for both financial years. There were no impacts on the consolidated balance sheet.

IFRS 13 Fair Value Measurement
The standard 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. Application 
of IFRS 13 has not materially impacted the fair value measurements in the consolidated financial statements of the Group.

In addition to the above, the Group has adopted the following standards and interpretations which have been assessed  
as having no financial impact or disclosure requirements at this time:
•	IAS 1 Presentation of items of Other Comprehensive Income;
•	IFRS 7 Offsetting financial assets and liabilities; and
•	The IASB’s annual improvement process, 2009—2011.

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 2000/01, which was accounted for using merger 
accounting, acquisitions by the Group are accounted for under the acquisition method and any goodwill arising is capitalised  
as an intangible asset. The results of subsidiaries acquired or disposed of during the year are included in the consolidated 
financial statements from, or up to, the date that control passes respectively. All intra–Group transactions, balances, income  
and expenses are eliminated on consolidation. Unrealised losses are also eliminated, unless the transaction provides evidence  
of an impairment of the asset transferred.

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.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

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2 Accounting policies continued 

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

Intangible assets acquired separately from a business are 
carried initially at cost. An intangible asset acquired as part  
of a business combination is recognised outside 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 15 years;
•	IT software and technology is amortised over periods  

of three to ten years;

•	the asset in relation to acquired customer relationships  

is amortised over 15 years; and

•	operating rights agreements are amortised over the  

life of the contract.

The carrying values are reviewed for 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, whilst 
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; and

•	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 values 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 pre–paid 
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 a 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 of disposal 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 operating costs.

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.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

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Notes to the consolidated financial statements
At 27 February 2014

2 Accounting policies continued 

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 the costs of 
disposal, 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 costs of disposal and the value in use.

Property, plant and equipment
For the purposes of the impairment review of property,  
plant and equipment, the Group considers each trading  
outlet to be a separate CGU.

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.

Investments in joint ventures and associates
The Group assesses investments for impairment whenever 
events or changes in circumstances indicate that the carrying 
value may not be recoverable. If any such indication of 
impairment exists, the carrying amount of the investment  
is compared with its recoverable amount, being the higher  
of its fair value less costs to sell and value in use. Where  
the carrying amount exceeds the recoverable amount,  
the investment is written down to its recoverable amount.

Assets held for sale
Non–current assets and disposal groups are classified  
as held for sale only if available for immediate sale in  
their present condition and a sale is highly probable and  
expected to be completed within one year from the date  
of classification. Such assets are measured at the lower  
of carrying amount and fair value less costs to sell and  
are not depreciated or amortised.

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

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

Provisions are discounted to present value, 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
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 the non GAAP performance measure 
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;

IAS 19 income statement finance charge/credit for defined 
benefit pension scheme
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; and

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

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

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2 Accounting policies continued

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 the 
initial transactions.

Customer loyalty programmes
Where award credits are granted as part of a sales 
transaction, a portion of revenue equal to the fair value  
of the reward points earned is deferred until redemption.  
The fair value of points awarded is determined with  
reference to the discount received upon redemption  
and the level of redemption; and

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. 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. The financial performance and end 
position of these entities are translated into sterling in the 
consolidated financial statements. 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
Revenue is recognised when the significant risks and rewards 
of the goods or services provided have transferred to the 
buyer, the amount of revenue can be measured reliably and  
it is probable that the economic benefits associated with the 
transaction will flow to the Group.

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

Revenue of the Group comprises the following streams:

Sale of goods
Revenue from the sale of food, beverages and merchandise  
is recognised at the point of sale, with the exception of 
wholesale transactions which are recognised on delivery; 

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

Franchise fees
Revenue from fees received in connection with the franchise 
of the Group’s brand names is recognised when earned;

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, reduced by the fair 
value of the scheme assets. The cost of providing benefits is 
determined using the projected unit credit actuarial valuation 
method. Re–measurements are recognised in full in the  
period in which they occur in the statement of comprehensive 
income and are not classified to the income statement in 
subsequent periods.

For defined benefit plans, the employer’s portion of the  
past and current service cost is charged to operating  
profit, with net interest costs reported within finance costs.  
In addition, all administration costs, other than those relating 
to the management of plan assets or taxes payable by the 
plan itself, are charged as incurred to operating costs in the  
income statement. Net interest is calculated by applying  
the opening discount rate to the opening net defined benefit 
obligation taking into account the expected contributions  
and benefits paid.

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.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

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2

 
 
 
 
 
 
 
 
 
 
 
Notes to the consolidated financial statements
At 27 February 2014

2 Accounting policies continued

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. 
Where an equity–settled award is forfeited, the related 
expense recognised to date is reversed.

Cash–settled transactions
The cost is fair–valued at grant date and expensed over  
the period until the vesting date, with a recognition of  
a corresponding liability. The liability is re–measured to  
fair value at each reporting date, up to and including the 
settlement date, with changes in fair value recognised  
in the income statement for the period.

Tax
The income tax charge represents both the income tax 
payable, based on profit 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. 

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, 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.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

98

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2

 
 
 
 
 
 
 
 
 
 
 
 
2 Accounting policies continued

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 or 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, cash in hand and short–term deposits with  
an original maturity of three months or less. For the purpose  
of the 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 and currency 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 mitigate 
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 mitigate 
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 derivative instruments is calculated by 
discounting all future cash flows by the applicable market 
yield curves at the balance sheet date. 

The portion of any gains or losses on cash flow hedges  
which meet the conditions for hedge accounting and are 
determined to be effective, is recognised directly in the 
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 derivatives designated as part  
of a fair value hedge, 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.

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 uncertainty, 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 cash flow approach. Note 14 
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 22 provides details of the value 
of the provisions carried;

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

99

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2

 
 
 
 
 
 
 
 
 
 
 
Notes to the consolidated financial statements
At 27 February 2014

2 Accounting policies continued

•	defined benefit pension plans are accounted for in 

accordance with actuarial advice using the projected unit 
credit method. Note 30 describes the assumptions used 
together with an analysis of the sensitivity to changes  
in key assumptions; and

•	the calculation of the Group’s total tax charge necessarily 
involves a degree of estimation and judgement in respect  
of certain items, where the tax treatment cannot be finally 
determined until resolution has been reached with the 
relevant tax authority. The final resolution of some 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 may be made for uncertain exposures or 
recoveries, which can have an impact on both deferred  
and current tax. Assumptions are also made around the  
tax net book value of assets to which capital allowances 
apply, the level of capital allowances, the extent of  
rollover gains, indexation thereon and the tax base  
into which they have been rolled.

 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, 
subject to EU ratification, become effective after the current 
year–end and have not been early adopted by the Group:

Amendments to IAS 36: Recoverable Amount Disclosures  
for Non–Financial Assets
This amendment addresses the disclosure of information 
about the recoverable amount of impaired assets if that 
amount is based on fair value less costs of disposal and is 
effective for annual periods beginning on or after 1 January 
2014. The impact on the Group is on disclosure in the 
consolidated financial statements only;

IFRS 9 Financial Instruments
IFRS 9 Financial Instruments was first issued in November 
2009 and has since been amended several times. The 
standard will eventually replace IAS 39 and covers the 
classification, measurement and derecognition of financial 
assets and financial liabilities, together with a new hedge 
accounting model. The IASB intends to expand IFRS 9 to  
add new requirements for impairment and for it to become  
a complete replacement of IAS 39 for periods beginning  
on or after 1 January 2018. The adoption of the first  
phase of IFRS 9 will have an effect on classification and 
measurement of the Group’s financial assets, but will not  
have an impact on classification and measurements of 
financial liabilities. The Group will quantify the effect in 
conjunction with the other phases, when the final standard 
including all phases is issued; and

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 consolidated financial 
statements only, where summarised information may need  
to be provided. The standard becomes effective for annual 
periods beginning on or after 1 January 20141.

Whilst the following standards and interpretations are relevant 
to the Group, they have been assessed as having no financial 
impact or additional disclosure requirements at this time1:
•	IAS 28 Investments in Associates and Joint Ventures  

(as revised in 2011);

•	IAS 32 Offsetting Financial Assets and Financial  

Liabilities — Amendments to IAS 32;

•	IAS 39 Novation of Derivatives and Continuation  
of Hedge Accounting — Amendments to IAS 39;

•	IFRIC Interpretation 21 Levies (IFRIC 21);
•	IFRS 10 Consolidated Financial Statements; and
•	IFRS 11 Joint Arrangements.

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

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

100

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3 Revenue

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

Rendering of services 
Franchise fees 
Sale of goods 

Revenue 

4 Segment information

2013/14 
£m 

967.9 
25.6 
1,300.8 

2012/13 
£m 

 853.8  
 22.2  
 1,154.0 

2,294.3 

 2,030.0

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

The UK and International Hotels & Restaurants segments have been aggregated on the grounds that the International  
segment is immaterial.

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. 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.

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

101

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the consolidated financial statements
At 27 February 2014

4 Segment information continued

The following tables present revenue and profit information and certain asset and liability information regarding business 
operating segments for the years ended 27 February 2014 and 28 February 2013.

Year ended 27 February 2014  

Revenue 
Underlying revenue from external customers 
Inter–segment revenue 
Exceptional revenue 

Total revenue 

Underlying operating profit before exceptional items 
Underlying interest 

Underlying profit before tax 
Amortisation of acquired intangibles 
IAS 19 income statement charge for pension finance cost 

Profit before tax and exceptional items 
Exceptional items: 
  VAT on gaming machine income 
  Net loss on disposal of property, plant and equipment 

  and property reversions 
Impairment 
Impairment reversal 
  Exceptional interest 

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 
Share of profit from associate 
Share of profit/(loss) from joint ventures 

Total property rent (Note 5) 

Capital expenditure: 
  Property, plant and equipment — cash basis 
  Property, plant and equipment — accruals basis 

Intangible assets 

Depreciation 
Amortisation 

Hotels &  
Restaurants 
£m 

 1,494.0 
— 
(4.6) 

 1,489.4 

 348.1 
—  

348.1  
— 
— 

348.1  

Unallocated 
and 
elimination 
£m 

Total 
operations 
£m

— 
(2.8) 
— 

2,298.9 
— 
(4.6)

(2.8) 

2,294.3

(27.2) 
(18.9) 

(46.1) 
— 
(23.6) 

(69.7) 

430.7 
(18.9)

411.8 
(2.7) 
(23.6)

385.5 

Costa 
£m 

804.9 
2.8 
— 

807.7 

109.8 
— 

109.8 
(2.7) 
— 

107.1 

(4.6)  

— 

— 

(4.6) 

(1.2) 
 (15.5) 
 5.4 
— 

332.2 

(3.7) 
(10.6) 
0.5 
— 

93.3 

(6.8) 
— 
— 
(2.0) 

(78.5) 

(11.7) 
(26.1) 
5.9 
(2.0)

347.0  
(23.6) 

323.4 

 2,914.5 
—  

2,914.5 

350.9 
— 

350.9 

— 
82.1 

82.1 

3,265.4 
82.1

3,347.5 

(293.0)  

 — 

(79.5) 
— 

— 
(1,192.0) 

(372.5) 
(1,192.0)

(293.0)  

(79.5) 

(1,192.0) 

(1,564.5)

 2,621.5 

271.4 

(1,109.9) 

1,783.0

0.9  
2.2  

89.0 

214.2 
245.1  
 16.9 

 (94.8) 
 (4.9) 

— 
(0.6) 

92.5 

72.0 
71.6 
2.2 

(48.5) 
(3.8) 

— 
— 

0.2 

0.1 
— 
0.8 

— 
(0.5) 

0.9 
1.6

181.7

286.3 
316.7 
19.9

(143.3) 
(9.2)

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

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4 Segment information continued

Year ended 28 February 2013* 

Revenue 
Underlying revenue from external customers 
Inter–segment revenue 
Exceptional revenue 

Total revenue 

Underlying operating profit before exceptional items 
Underlying interest 

Underlying profit before tax 
Amortisation of acquired intangibles 
IAS 19 income statement charge for pension finance cost 

Profit before tax and exceptional items 
Exceptional items: 
  Net gain/(loss) on disposal of property, plant and equipment 

  and property reversions 
Impairment 
Impairment reversal 
  Loss on investment 
  Sale of business 
  Exceptional interest 

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 
Share of profit from associate 
Share of profit/(loss) from joint ventures 

Total property rent (Note 5) 

Capital expenditure: 
  Property, plant and equipment — cash basis 
  Property, plant and equipment — accruals basis 

Intangible assets 

Depreciation 
Amortisation 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2. 

Hotels &  
Restaurants 
£m 

1,360.1 
— 
— 

1,360.1 

313.1 
— 

313.1 
— 
— 

313.1 

19.5 
(13.6) 
9.7 
— 
— 
— 

328.7 

Costa 
£m 

669.9 
2.5 
— 

672.4 

90.1 
— 

90.1 
(2.8) 
— 

87.3 

(1.1) 
(1.7) 
0.2 
(1.4) 
(1.9) 
— 

81.4 

Unallocated 
and 
elimination 
£m 

Total 
operations 
£m

— 
(2.5) 
— 

(2.5) 

(26.2) 
(23.6) 

(49.8) 
— 
(27.0) 

(76.8) 

0.2 
— 
— 
— 
— 
9.7 

(66.9) 

2,030.0  
—  
— 

2,030.0 

377.0  
(23.6) 

353.4  
(2.8)  
(27.0) 

323.6  

18.6  
(15.3)  
9.9  
(1.4) 
(1.9)  
9.7 

343.2  
(51.1) 

292.1 

2,755.6 
— 

2,755.6 

(233.1) 
— 

(233.1) 

329.0 
— 

329.0 

— 
90.1 

90.1 

3,084.6  
90.1 

3,174.7 

(69.1) 
— 

— 
(1,327.2) 

(302.2)  
(1,327.2) 

(69.1) 

(1,327.2) 

(1,629.4) 

2,522.5 

259.9 

(1,237.1) 

1,545.3 

0.8 
0.9 

70.0 

252.6 
247.2 
8.7 

(81.9) 
(4.6) 

— 
(0.4) 

80.2 

76.7 
79.6 
3.4 

(38.4) 
(3.5) 

— 
— 

0.2 

— 
— 
2.2 

— 
— 

0.8  
0.5 

150.4

329.3 
326.8  
14.3 

(120.3)  
(8.1)

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

103

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Notes to the consolidated financial statements
At 27 February 2014

4 Segment information continued

Revenues from external customers are split geographically as follows:

United Kingdom1 
Non United Kingdom 

2013/14 
£m 

2,211.8 
82.5 

2012/13 
£m

 1,965.8  
 64.2 

2,294.3 

 2,030.0 

1   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 assets1 are split geographically as follows:

United Kingdom 
Non United Kingdom 

1  Non–current assets exclude derivative financial instruments.

5 Group operating profit

This is stated after charging/(crediting):

Cost of inventories recognised as an expense 
Employee benefits expense (Note 7) 
Operating lease payments net of sublease receipts 
Amortisation of intangible assets (Note 12) 
Depreciation of property, plant and equipment (Note 13)  
Utilities, rates and other site property costs  
Net foreign exchange differences  
Other operating charges  
Exceptional items (Note 6) 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2.

Minimum lease payments attributable to the current period 
IAS 17 — Impact of future minimum rental uplifts 

Minimum lease payments recognised as an operating expense   
Contingent rents 

Total property rent  
Plant and machinery operating lease payments  
Operating lease payments — sublease receipts  

Total operating lease payments net of sublease receipts 

Fees paid to the auditor during the period consisted of:

Audit of the consolidated financial statements 
Audit of subsidiaries 

Total audit fees 
Non–audit services 

Included in other operating charges 

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

2014 
£m 

3,084.6 
65.4 

3,150.0 

2013 
£m

2,931.6  
 63.7 

2,995.3 

2013/14 
£m 

2012/13 
£m

304.5 
607.8 
189.1 
9.2 
143.3 
517.3 
0.5 
101.7 
31.9 

269.3 
541.0 
 156.9  
8.1 
120.3  
462.6  
(0.5)  
99.4  
(9.9)

1,905.3 

1,647.2

2013/14 
£m 

2012/13 
£m

169.0 
(0.2) 

168.8 
12.9 

181.7 
8.8 
(1.4) 

189.1 

141.9 
(1.5)

 140.4  
10.0

150.4  
9.2  
(2.7)

156.9

2013/14 
£m 

2012/13 
£m

0.3 
0.2 

0.5 
0.1 

0.6 

 0.3  
 0.2 

 0.5  
— 

 0.5 

104

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6 Exceptional items and other non GAAP adjustments

Exceptional items before tax and interest:

Revenue 
  VAT on gaming machine income1 

Operating costs 
  Net (loss)/gain on disposal of property, plant and equipment and property reversions2   

Impairment of property, plant and equipment (Note 14) 
Impairment reversal (Note 14) 

  Loss on investment3 

Impairment of other intangibles (Notes 12, 14) 

  Sale of business4 

Exceptional operating costs 

Exceptional items before interest and tax 

Interest on exceptional tax1, 5 
Unwinding of discount rate 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 (Note 12) 
IAS 19 income statement charge for pension finance cost (Note 30) 

Items included in reported profit before tax, but excluded in arriving at underlying profit before tax  

 *Restated for the impact of IAS 19 (revised 2011), see Note 2.

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 — tax base cost7 
Exceptional tax items — disputed claims 5 
Deferred tax relating to UK tax rate change  
Tax on non GAAP adjustments 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2.

2013/14 
£m 

2012/13* 

£m

(4.6) 

— 

(11.7) 
(22.4) 
5.9 
— 
(3.7) 
— 

(31.9) 

(36.5) 

(1.1) 
(0.9) 

(2.0) 

(38.5) 

(2.7) 
(23.6) 

(26.3) 

(64.8) 

 18.6  
 (15.3) 
 9.9  
(1.4) 
— 
(1.9) 

 9.9

9.9

10.8 
(1.1)

9.7

19.6 

 (2.8) 
 (27.0)

 (29.8)

 (10.2)

2013/14 
£m 

2012/13* 

£m

5.6 
40.2 
— 
18.6 
6.1 

70.5 

 (1.3) 
 3.5  
13.5 
 16.8  
 7.2 

 39.7

1   In the year ended 3 March 2011, the Group received a refund of VAT charged on gaming machine income of £4.6m together with some associated 
interest. HMRC appealed against the original ruling and the decision was overturned on 30 October 2013. Hence a liability has been booked this  
year for £4.6m of revenue and £1.1m of associated interest costs.

2   In 2013/14, a £6.8m provision has been raised for previously sublet properties that have reverted back to Whitbread. In addition to this, a £4.9m  
loss on disposal was recorded, mainly relating to Costa store closures in the international business. The non–controlling interest portion of this  
cost was £0.7m (2012/13: £nil). In 2012/13, a net gain of £18.6m was recognised on disposals of property, plant and equipment, the majority of  
which related to a sale and leaseback agreement for seven properties.

3   This represents the net loss on the sale of the joint venture in Rosworth Investments to the joint venture partner in 2012/13.

4   During the year ended 28 February 2013, Coffeeheaven Hungary was closed and subsequently liquidated. The costs incurred in this process  

were classed as loss on disposal of business.

5   This was the partial release of a provision in the prior year, of £13.5m, for an item which had been disputed by HMRC but has now been agreed.  

Interest which had been accrued for the late payment, amounting to £10.8m, was also released.

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   Reduction in deferred tax liability for differences between the tax deductible cost and accounts’ residual value of assets.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

105

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Notes to the consolidated financial statements
At 27 February 2014

7 Employee benefits expense

Wages and salaries  
Social security costs  
Pension costs  

2013/14 
£m 

559.9 
40.4 
7.5 

607.8 

2012/13 
£m

 502.4  
 33.7  
 4.9 

 541.0 

Included in wages and salaries is a share–based payments expense of £11.2m (2012/13: £9.5m), which arises from transactions 
accounted for as equity–settled and cash–settled share–based payments.

The average number of people directly employed in the business segments on a full time equivalent basis was as follows:

Hotels & Restaurants  
Costa  
Unallocated  

Total operations 

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

Directors’ remuneration is disclosed below:

Directors’ remuneration  
Aggregate contributions to defined contribution pension schemes 
Aggregate gains on the exercise of share options 

Number of directors accruing benefits under defined contribution schemes   

2013/14 
Number 

24,957 
11,432 
58 

36,447 

2012/13 
Number

 23,628  
 10,031  
 57 

 33,716 

2013/14 
£m 

2012/13 
£m

3.8 
0.1 
6.9 

3.1  
0.1 
1.0

2013/14 
£m 

2012/13 
£m

3 

3

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

106

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8 Finance (costs)/revenue

Finance costs 
Bank loans and overdrafts  
Other loans 
Interest capitalised (Note 13) 

Impact of ineffective portion of cash flow and fair value hedges  

Net pension finance cost (Note 30) 

Finance costs before exceptional items  
Exceptional finance costs  
Unwinding of discount rate on provisions (Note 22) 

Total finance costs 

Finance revenue 
Bank interest receivable  
Other interest receivable 

Impact of ineffective portion of cash flow and fair value hedges  

Finance revenue before exceptional items 
Exceptional finance revenue 

Total finance revenue 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2. 

9 Taxation

Consolidated income statement 

Current tax: 
  Current tax expense  
  Adjustments in respect of previous periods  

Deferred tax: 
  Origination and reversal of temporary differences  
  Adjustments in respect of previous periods 
  Change in UK tax rate to 20% (2012/13: 23%) 

Tax reported in the consolidated income statement 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2. 

Consolidated statement of comprehensive income 

Current tax: 
  Pensions 

Deferred tax: 
  Cash flow hedges 
  Pensions 
  Change in UK tax rate to 20% (2012/13: 23%) — pensions 
  Change in UK tax rate to 20% (2012/13: 23%) — cash flow hedges 

Tax reported in other comprehensive income 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2. 

2013/14 
£m 

2012/13* 

£m

(20.9) 
(0.4) 
2.6 

(18.7) 

(0.9) 

(23.6) 

(43.2) 
(1.1) 
(0.9) 

(45.2) 

0.1 
0.6 

0.7 

— 

0.7 
— 

0.7  

 (26.5) 
(0.6) 
 2.7 

(24.4)

— 

 (27.0)

(51.4) 
— 
(1.1)

(52.5)

 0.1  
 0.3 

 0.4 

 0.4 

 0.8  
10.8 

 11.6

2013/14 
£m 

2012/13* 

£m

100.1 
(4.6) 

95.5 

(13.0) 
(40.3) 
(18.6) 

(71.9) 

23.6 

 92.1  
(15.0)

77.1 

(6.7) 
(2.5) 
 (16.8)

 (26.0)

 51.1

2013/14 
£m 

2012/13* 

£m

(14.4) 

(9.0)

0.3 
5.7 
11.8 
0.5 

3.9 

2.0 
 19.0 
 8.5  
 0.5 

 21.0

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

107

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Notes to the consolidated financial statements
At 27 February 2014

9 Taxation continued 

A reconciliation of the tax charge applicable to underlying profit before tax and profit before tax at the statutory tax rate,  
to the actual tax charge at the Group’s effective tax rate, for the years ended 27 February 2014 and 28 February 2013 
respectively is as follows:

Profit before tax as reported in the consolidated income statement  

Tax at current UK tax rate of 23.08% (2012/13: 24.17%)  
Effect of different tax rates and unrecognised losses in overseas companies   
Effect of joint ventures and associate 
Expenditure not allowable 
Adjustments to current tax expense in respect of previous years1 
Adjustments to deferred tax expense in respect of previous years 2 
Impact of change of tax rate on deferred tax balance 

Tax expense reported in the consolidated income statement    

 *Restated for the impact of IAS 19 (revised 2011), see Note 2. 
1  The £15.0m in the prior year includes a £13.5m exceptional item which is disclosed in Note 6.

2  The £40.3m in the current year includes £40.2m exceptional item which is disclosed in Note 6.

The corporation tax balance is a liability of £35.1m (2013: liability of £37.7m).

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  

2013/14 

2012/13*

Tax on 
underlying 
profit 
£m 

411.8 

95.1 
3.8 
(0.6) 
0.5 
(4.6) 
(0.1) 
— 

94.1 

Tax on 
profit 
£m 

347.0 

80.1 
6.2 
(0.6) 
1.4 
(4.6) 
(40.3) 
(18.6) 

23.6 

Tax on 
underlying 
profit 
£m 

353.4 

 85.5 
 2.9 
(0.3) 
 3.2 
(1.5) 
1.0 
 — 

90.8 

Tax on 
profit 
£m

343.2

83.0  
2.9  
(1.2) 
0.7  
(15.0) 
(2.5)  

(16.8)

51.1 

Consolidated 
balance sheet 

Consolidated  
income statement

2014 
£m 

2013 
£m 

2013/14 
£m 

2012/13* 

£m

50.3 
86.0 

136.3 

(78.7) 
(10.8) 

(89.5) 

 57.8  
 146.8 

 204.6  

 (92.2) 
 (5.7) 

 (97.9)

46.8 

 106.7

(7.5) 
(59.0) 

 (4.9) 
 (18.1) 

(4.0) 
(1.4) 

 (2.4) 
 (0.6) 

(71.9) 

 (26.0)

 *Restated for the impact of IAS 19 (revised 2011), see Note 2. 

Total deferred tax liabilities released as a result of disposals during the year was £nil (2013: £0.2m).

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 assets. If the Group were to 
recognise these deferred tax assets in their entirety, profits would increase by £6.2m (2013: £6.8m), of which, the share 
attributable to parent shareholders is £5.0m (2013: £5.4m).

At 27 February 2014, there was no recognised deferred tax liability (2013: £nil) for taxes that would be payable on any 
unremitted earnings, as all such amounts are permanently reinvested or, where they are not, there are no corporation tax 
consequences of such companies paying dividends to parent companies.

Tax relief on total interest capitalised amounts to £0.6m (2013: £0.7m).

Factors affecting the tax charge for future years
The Finance Act 2013 reduced the main rate of UK corporation tax to 21% from 1 April 2014 and to 20% from 1 April 2015.  
The effect of the new rate is to reduce the deferred tax provision by a net £7.0m, comprising a credit of £18.6m to the 
consolidated income statement, a charge of £12.3m to the consolidated statement of comprehensive income and a credit  
of £0.7m to reserves.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

108

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10 Earnings per share

The basic earnings per share (EPS) 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 year. Where the average share price for the year is lower than the option 
price, the options become anti–dilutive and are excluded from the calculation. The number of such options was nil (2013: 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 

2013/14 
million 

179.2 
1.9 

181.1 

2012/13 
million

 177.6  
 1.5 

 179.1 

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 194.7m, less 13.3m treasury shares held by Whitbread PLC and 1.2m held by the ESOT (2013: 193.0m,  
less 13.8m treasury shares held by Whitbread PLC and 1.1m 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 
Exceptional items — non–controlling interest 

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 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2. 

Basic on profit for the year 
Exceptional items — gross 
Exceptional items — taxation 
Exceptional items — non–controlling interest 

Basic on profit before exceptional items for the year 
Non GAAP adjustments — gross 
Non GAAP adjustments — taxation 

Basic on underlying profit for the year 

Diluted on profit for the year 
Diluted on profit before exceptional items for the year 
Diluted on underlying profit for the year 

 *Restated for the impact of IAS 19 (revised 2011), see Note 2. 

2013/14 
£m 

327.9 
38.5 
(64.4) 
(1.4) 

300.6 
26.3 
(6.1) 

320.8 

2013/14 
pence 

182.98 
21.48 
(35.94) 
(0.78) 

167.74 
14.68 
(3.40) 

179.02 

181.06 
165.99 
177.14 

2012/13* 

£m

 294.3  
 (19.6) 
(32.5) 
—

 242.2  
 29.8  
 (7.2)

 264.8 

2012/13* 
pence

 165.71  
(11.04) 
(18.30) 

—

 136.37  
 16.78  
(4.05)

 149.10 

 164.32  
 135.23  
 147.85

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

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Notes to the consolidated financial statements
At 27 February 2014

11 Dividends paid and proposed

Final dividend relating to the prior year 
Settled via scrip issue (Note 26) 

Paid in the year 

Interim dividend for the current year  
Settled via scrip issue (Note 26) 

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:

2013/14 

2012/13

pence 
per share 

37.90 

21.80 

1.30 
0.70 

pence 
per share 

33.75  

19.50 

1.28 
1.66 

£m 

67.7  
(28.2) 

39.5  

39.2 
(16.3) 

22.9 

62.4 

— 
— 

— 

62.4 

£m

 59.8 
 (10.9)

48.9

34.7 
 (5.8)

 28.9 

 77.8 

—  
— 

— 

77.8

Final dividend for the current year 

47.00 

84.7 

37.90 

67.5

12 Intangible assets

Cost 
At 1 March 2012  
Additions  
Assets written off  
Transfers 
Foreign currency adjustment 

At 28 February 2013 

Additions  
Assets written off 
Transfers 
Foreign currency adjustment 

At 27 February 2014 

Amortisation and impairment 
At 1 March 2012  
Amortisation during the year 
Transfers 

At 28 February 2013 

Amortisation during the year 
Amortisation on assets written off 
Impairment 

At 27 February 2014 

Net book value at 27 February 2014 

Net book value at 28 February 2013 

Goodwill 
£m 

Brand 
£m 

Customer 
relationships 
£m 

IT software 
 and  
technology 
£m 

Other 
£m 

Total 
£m

176.8  
0.7 
— 
—  
0.1  

177.6  

— 
— 
— 
— 

177.6 

—  
— 
— 

— 

— 
— 
— 

— 

177.6 

177.6  

 5.6  
— 
(0.5) 
— 
— 

 5.1  

— 
— 
— 
— 

5.1 

 (1.2) 
 (0.3) 
 0.5 

 (1.0) 

(0.4) 
— 
(3.7) 

(5.1) 

— 

 4.1  

 5.9  
— 
— 
— 
— 

 5.9  

— 
— 
— 
— 

5.9 

(0.4) 
 (0.6) 
— 

 (1.0) 

(0.4) 
— 
— 

(1.4) 

4.5 

 64.9  
 11.7  
 (30.0)  
 1.8  
 —  

 48.4  

18.5 
(3.1) 
0.2 
— 

64.0 

 (47.2) 
 (6.9) 
30.0 

 (24.1) 

(7.9) 
3.1 
— 

(28.9) 

35.1 

 4.2  
 2.6  
 (1.0)  
— 
— 

 5.8  

1.4 
— 
0.5 
(0.1) 

7.6 

 (2.0) 
 (0.3) 
1.0 

 (1.3) 

(0.5) 
— 
— 

(1.8) 

5.8 

 257.4  
 15.0  
 (31.5)  
 1.8 
 0.1 

 242.8

19.9 
(3.1) 
0.7 
(0.1)

260.2

(50.8) 
 (8.1) 
31.5

(27.4)

(9.2) 
3.1 
(3.7)

(37.2)

223.0 

 4.9  

 24.3  

 4.5  

 215.4 

Included in the amortisation for the year is amortisation relating to acquired intangibles amounting to £2.7m (2012/13: £2.8m).

Whitbread 
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Consolidated  
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12 Intangible assets continued

The carrying amount of goodwill allocated by segment is presented below:

Hotels & Restaurants 
Costa 

Total 

2014 
£m 

112.6 
65.0 

177.6 

2013 
£m

 112.6  
 65.0 

 177.6 

The carrying amount of goodwill at 27 February 2014 comprised £112.6m for Hotels & Restaurants and £65.0m 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 acquisition of Coffeeheaven in 2009/10. This has been impaired in 2013/14, as the 
Coffeeheaven stores are to be rebranded to Costa.

The customer relationships asset arose with the acquisition of Coffee Nation in a 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 ten years from the date the asset became fully operational. 

Other intangibles
Other intangibles comprise Costa overseas trading licences and territory fees, and Costa Express operating rights agreements 
and development costs.

The trading licences, which have a carrying value of £1.8m (2013: £1.8m), are deemed to have infinite lives as there is no  
time limit associated with them. The operating rights agreements are being amortised between six years and ten years and 
have a carrying value of £2.0m (2013: £2.3m). Development costs have a carrying value of £1.7m (2013: £nil) and are being 
amortised over six years. The balance of £0.4m (2013: £0.4m) relates to territory fees which are being amortised over 20 years.

Capital expenditure commitments
Capital expenditure commitments in relation to intangible assets at the year–end amounted to £2.7m (2013: £2.6m).

13 Property, plant and equipment

Cost 
At 1 March 2012 
Additions  
Interest capitalised  
Reclassified 
Assets written off 
Foreign currency adjustment 
Transfers 
Movements to held for sale in the year 
Disposals 

At 28 February 2013 

Additions  
Interest capitalised  
Assets written off 
Foreign currency adjustment 
Transfers 
Movements to held for sale in the year 
Disposals 

At 27 February 2014 

Land and 
buildings 
£m  

Plant and 
equipment 
£m  

Total 
£m

2,176.8  
138.6  
2.7  
(3.5) 
(51.4) 
(0.8) 
— 
(6.9) 
(27.6) 

962.2  
188.2  
— 
3.5  
(59.8) 
1.5 
(1.8) 
(0.6) 
 (14.3) 

 3,139.0 
 326.8  
 2.7  
—  
(111.2) 
 0.7 
(1.8) 
(7.5) 
(41.9)

2,227.9  

1,078.9  

 3,306.8 

141.9 
2.6 
(2.4) 
(4.4) 
(0.5) 
 (6.0) 
(7.4) 

174.8 
— 
(82.9) 
(3.6) 
(0.2) 
(1.3) 
(3.4) 

316.7 
2.6 
(85.3) 
(8.0) 
(0.7) 
(7.3) 
(10.8)

2,351.7 

1,162.3 

3,514.0

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

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Notes to the consolidated financial statements
At 27 February 2014

13 Property, plant and equipment continued

Depreciation and impairment 
At 1 March 2012  
Depreciation charge for the year 
Reclassified 
Impairment (Note 14) 
Depreciation on assets written off 
Foreign currency adjustment 
Movements to held for sale in the year 
Disposals 

At 28 February 2013 

Depreciation charge for the year  
Impairment (Note 14) 
Depreciation on assets written off 
Foreign currency adjustment 
Movements to held for sale in the year 
Disposals 

At 27 February 2014 

Net book value at 27 February 2014 

Net book value at 28 February 2013 

Land and 
buildings 
£m  

Plant and 
equipment 
£m  

(189.2) 
(13.4) 
0.3  
(2.6) 
51.4  
— 
5.1 
1.6  

 (369.3) 
 (106.9) 
(0.3) 
 (2.2) 
59.8  
(0.5)  
0.3  
8.0  

Total 
£m

(558.5) 
(120.3) 
— 
(4.8) 
111.2  
(0.5)  
5.4  
9.6 

(146.8) 

(411.1) 

(557.9)

(14.9) 
(14.8) 
2.4 
0.6 
2.0 
5.3 

(128.4) 
(1.3) 
82.9 
1.4 
0.6 
2.2 

(143.3) 
(16.1) 
85.3 
2.0 
2.6 
7.5

(166.2) 

(453.7) 

(619.9)

 2,185.5 

708.6 

2,894.1

2,081.1  

667.8  

2,748.9

There is a charge in favour of the pension scheme over properties with a market value of £408.0m. See Note 30 for further 
information. 

A change in estimate of the useful lives of certain assets within the Hotels & Restaurants estate has been implemented in 2013/14  
to bring them in line with the new refurbishment programme. This has led to an accelerated depreciation charge of £6.0m in 2013/14 
and will have a £6.0m impact in 2014/15. 

Capital expenditure commitments 

Capital expenditure commitments for property, plant and equipment  
  for which no provision has been made  

2014 
£m 

2013 
£m

 52.3 

 50.1 

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 dependant upon 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 £210.0m over the next five years (2013: £177.5m).

Capitalised interest
Interest capitalised during the year amounted to £2.6m, using an average rate of 4.1% (2012/13: £2.7m, using an average  
rate of 4.5%).

Assets held for sale
During the year, certain property assets with a net book value of £4.7m (2012/13: £2.1m) were reclassified as assets held  
for sale. Property assets sold during the year had a net book value of £4.3m (2012/13: £0.6m), and three trading sites  
with a combined net book value of £1.5m (2012/13: £1.5m) continued to be classified as held for sale at the year–end.  
An impairment loss of £0.4m (2012/13: £0.6m) was recognised in the year.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
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14 Impairment

During the year impairment losses of £22.4m (2012/13: £15.3m) and impairment reversals of £5.9m (2012/13: £9.9m) were 
recognised.

Impairment losses 
Hotels & Restaurants 
Costa  

Total impairment losses  

Impairment reversals 
Hotels & Restaurants 
Costa  

Total impairment reversals  

Total net impairment charge 

2013/14 
Property,  
plant and 
equipment 
£m 

2012/13 
Property, 
plant and 
equipment 
£m

15.5 
6.9 

22.4 

(5.4) 
(0.5) 

(5.9) 

16.5 

 13.6  
 1.7

 15.3

 (9.7) 
(0.2)

(9.9)

5.4 

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

In assessing whether an asset has been 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 of disposal 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 9.9%  
in the UK (2012/13: 9.1%), 10.6% in China (2012/13: 10.2%) and 11.1% in Poland (2012/13: 10.6%). 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, ranging from 2.0% to 6.0% with the UK, the most 
significant country, being 2.0% (2012/13: 2.0%).

The events and circumstances that led to the impairment charge of £22.4m are set out below:

Hotels & Restaurants
The impairment of £15.5m at 14 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;
•	decisions to exit some sites where current market values are lower than book values; and
•	high asset prices in the market at the point of acquisition for acquired sites and also anticipated higher growth rates  

at that time than are now expected.

Costa
The £6.9m impairment charge includes assets affected by the rebranding of Coffeeheaven to Costa and three UK and  
45 international sites, where stores are to be closed or are underperforming. The non–controlling interest portion of this  
cost was £0.7m (2012/13: £nil).

Impairment reversals
Following an improvement in trading performance and an increase in amounts of estimated future cash flows of previously 
impaired sites, reversals of £5.9m have been recognised, £5.4m 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 
rates 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 plans and in the pre–tax discount rates would be an incremental impairment charge of:

Incremental impairment charge 

Impairment if business plan growth rates were reduced by 1% pt 
Impairment if discount rates were increased by 1% pt 

Hotels & 
Restaurants 
£m 

5.7 
5.3 

Costa 
£m 

— 
— 

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

Total 
£m

5.7 
5.3

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Notes to the consolidated financial statements
At 27 February 2014

14 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 of disposal and value in use. In the absence of a recent market 
transaction the recoverable amount is determined from value in use calculations. The future cash flows are based on 
assumptions from the business plans and cover a five–year period. These business plans and forecasts include management’s 
most recent view of medium–term trading prospects. Cash flows beyond this period are extrapolated using a 2.0% growth  
rate (2012/13: 2.0%). The pre–tax discount rate applied to cash flow projections is 9.9% (2012/13: 9.1%).

The resultant impairment review required no impairment of goodwill allocated to either the Hotels & Restaurants CGU  
or the Costa CGU.

Brand
The brand intangible arose upon the acquisition of the Coffeeheaven business. At the time, the stores were trading as 
Coffeeheaven branded stores. A decision has been taken to rebrand these stores to Costa and therefore the asset has been 
fully impaired by £3.7m (2012/13: £nil).

15 Investment in joint ventures

Principal joint ventures 

Investment held by 

Principal activity 

Country of incorporation 

Premier Inn Hotels LLC  

PTI Middle East Limited 

Hotels  

United Arab Emirates  

Hualian Costa (Beijing)  
Food & Beverage  
Management 
Company Limited

Costa Beijing Limited 

Coffee shops 

China 

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  
Operating costs  
Finance costs  

Profit before tax  
Tax 

Net profit 

% equity interest

2014 

49.0  

50.0  

2013

 49.0 

 50.0 

2014 
£m 

8.7 
46.4 

55.1 

(5.4) 
(27.1) 

(32.5) 

2.3 

24.9 

2013 
£m

 7.1  
 46.9 

 54.0 

(4.6) 
(27.9)

(32.5)

2.5

24.0 

2013/14 
£m 

2012/13 
£m

21.5 
(18.8) 
(1.1) 

1.6 
— 

1.6 

 17.3  
 (15.6) 
 (1.2)

0.5 
— 

0.5

At 27 February 2014, the Group’s share of the capital commitments of its joint ventures amounted to £2.9m (2013: £5.5m).

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Annual Report and Accounts 2013/14

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16 Investment in associate

Principal associate 

Investment held by 

Principal activity 

Country of incorporation 

Morrison Street 
Hotel Limited

Whitbread Group PLC 

Hotels  

Scotland  

% equity interest

2014 

40.0 

2013

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  

17 Inventories

Raw materials and consumables (at cost)  
Finished goods (at cost)  

Total inventories at lower of cost and net realisable value  

2014 
£m 

2.2 
5.1 

7.3 

(0.7) 
(4.6) 

(5.3) 

2.0 

2013 
£m

 1.8  
 5.1 

 6.9 

(0.5) 
(4.7)

(5.2)

1.7 

2013/14 
£m 

2012/13 
£m

2.9 
0.9 

 2.7  
 0.8 

2014 
£m 

2.4 
28.1 

30.5 

2013 
£m

3.5  
 23.0 

 26.5 

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

115

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the consolidated financial statements
At 27 February 2014

18 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 27 February 2014 was £2.8m (2013: £2.9m).

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 

19 Cash and cash equivalents

Cash at bank and in hand  
Short–term deposits 

2014 
£m 

66.9 
46.5 
16.7 

2013 
£m

 54.2  
 39.0  
 14.2

130.1 

 107.4

124.1 
6.0 

130.1 

102.1  
 5.3 

107.4 

2014 
£m 

54.6 
8.5 
2.8 
1.0 

66.9 

2014 
£m 

41.3 
0.1 

41.4 

2013 
£m

41.0  
 9.9  
 1.9  
 1.4 

54.2 

2013 
£m

39.2  
1.6

40.8

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 £41.4m (2013: £40.8m).

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  

2014 
£m 

41.3 
0.1 

41.4 

2013 
£m

39.2  
1.6

 40.8 

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

116

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20 Financial liabilities

Bank overdrafts  
Short–term borrowings  

Unsecured 
Revolving credit facility (£650m) 
Private placement loan notes 

Total  

Maturity 

On demand  
On demand  

2018 
2017 to 2022 

Current 

Non–current

2014 
£m 

— 
— 

— 

— 
— 

— 

2013 
£m 

 —  
 9.0 

9.0  

— 
— 

 9.0  

2014 
£m 

— 
— 

— 

186.4 
246.6 

433.0 

2013 
£m

— 
—

—

242.0  
 260.9 

 502.9 

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 originally ran until November 2016. An extension has been 
agreed to take the loan to November 2018. Loans have variable interest rates linked to LIBOR. The facility is multi–currency.

Private placement loan notes
The Group 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 

2011 

2011 

2011 

2011 

US$40.0m 

US$75.0m 

£25.0m 

US$60.0m 

US$56.5m 

US$93.5m 

13 August 2017 

13 August 2020 

13 August 2020 

26 January 2019 

26 January 2019 

26 January 2022 

£25.0m 

06 September 2021 

4.55%

5.23%

5.19%

3.92%

4.12%

4.86%

4.89%

The Group entered into a number of cross–currency swap agreements in relation to the loan notes to eliminate any foreign 
exchange risk on interest rates or on the repayment of the principal borrowed. These swaps expire in line with the loan notes 
and are discussed in Note 24.

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

Year ended 27 February 2014 

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  

Within  
1 year  
£m  

1 to 2  
years  
£m  

— 
— 
— 

— 

— 
— 
— 

— 

— 

— 
— 
— 

— 

— 
— 
— 

— 

— 

2 to 5  
years  
£m  

93.8 
— 
50.0 

143.8 

186.4 
— 
(50.0) 

136.4 

280.2 

Over 
5 years  
£m  

152.8 
(50.1) 
50.0 

152.7 

— 
50.1 
(50.0) 

0.1 

152.8 

Total 
£m 

246.6 
(50.1) 
100.0

296.5

186.4 
50.1 
(100.0)

136.5

433.0

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

117

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2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the consolidated financial statements
At 27 February 2014

20 Financial liabilities continued

Year ended 28 February 2013 

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  

Within  
1 year  
£m  

1 to 2  
years  
£m  

 —  
 —  
—  

 —  

 9.0  
 —  
 — 

9.0 

9.0  

 —  
 —  
 —  

 —  

 —  
 —  
 —  

 —  

 —  

2 to 5  
years  
£m  

 26.7  
 —  
 50.0  

 76.7  

 242.0  
 —  
 (50.0) 

 192.0  

 268.7  

Over 
5 years  
£m  

 234.2  
 (50.1) 
 50.0  

 234.1  

 —  
 50.1  
 (50.0) 

 0.1  

234.2  

Total 
£m 

 260.9  
 (50.1) 
 100.0 

 310.8 

 251.0  
 50.1  
(100.0)

 201.1 

 511.9 

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

There are £50.0m of swaps (2013: £100.0m) with maturities beyond the life of the current revolving credit facility (2018), which 
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 27 February 2014, the Group had available £460.0m (2013: £405.0m) of undrawn committed borrowing facilities in respect  
of revolving credit facilities on which all conditions precedent had been met.

21 Movements in cash and net debt

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Year ended 27 February 2014 

Cash at bank and in hand  
Short–term deposits 
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 28 February 2013 

Cash at bank and in hand  
Short–term deposits 
Overdrafts 

Cash and cash equivalents  

Short–term bank borrowings  

Loan capital under one year  
Loan capital over one year  

Total loan capital  

Net debt  

28 February 
2013 
£m  

Cost of 
borrowings 
£m 

Cash flow 
£m  

Foreign 
exchange 
£m  

Fair value 
adjustments 
to loans 
£m  

Amortisation 
of premiums 
and discounts 
£m 

27 February 
2014 
£m

39.2 
1.6 
— 

40.8 

(9.0) 

 — 
(502.9) 

 (502.9) 

 (471.1) 

— 

— 

1.7 

1.7 

1.9 

9.0 

54.9 

65.8 

(1.3) 

— 

8.2 

6.9 

— 

— 

6.5 

6.5 

— 

— 

(1.4) 

(1.4) 

41.3  
0.1 
—

41.4

—

— 
(433.0)

(433.0)

(391.6)

1 March 
2012 
£m  

Cost of 
borrowings 
£m 

Cash flow 
£m  

Foreign 
exchange 
£m  

Fair value 
adjustments 
to loans 
£m  

Amortisation 
of premiums 
and discounts 
£m 

28 February 
2013 
£m

 40.3  
 — 
 (0.7) 

 39.6  

 (13.5)  

 — 
 (530.4) 

 (530.4) 

 (504.3) 

 —  

 —  

 —  

 —  

 0.4  

4.5 

32.0 

36.9 

 0.8  

 —  

 —  

 0.8  

 —  

 —  

 —  

 —  

 (3.1) 

 (3.1) 

 (1.4) 

 (1.4) 

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 39.2  
 1.6 
 —

 40.8 

 (9.0)

 —  
(502.9)

(502.9)

(471.1)

118

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22 Provisions

At 1 March 2012  
Created 
Unwinding of discount rate 
Utilised 

At 28 February 2013  

Created 
Unwinding of discount rate 
Utilised  

At 27 February 2014 

Analysed as: 
  Current  
  Non–current  

At 27 February 2014 

Analysed as: 
  Current  
  Non–current  

 At 28 February 2013 

Onerous 
contracts 
£m 

40.6 
— 
1.1 
(6.2) 

35.5 

6.8 
0.9 
(5.0) 

38.2 

12.9 
25.3 

38.2 

10.3 
25.2 

35.5 

Other 
£m  

7.2 
0.3 
— 
 (0.1)  

7.4 

0.1 
— 
(0.1) 

7.4 

— 
7.4 

7.4 

 —  
7.4  

7.4  

Total 
£m

47.8  
0.3  
1.1  
 (6.3)

42.9 

6.9 
0.9 
(5.1)

45.6

12.9 
32.7

45.6

10.3  
 32.6 

 42.9

Onerous contracts
Onerous contract provisions relate primarily to property reversions. Provision is made for rent and other property related  
costs for the period that a sublet or assignment of the lease is not possible. Where the 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 sublet, 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 estimated cost incurred by the Group.

Onerous lease provisions are discounted using a discount rate of 3.74% (2013: 3.74%) based on an approximation for the time 
value of money.

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.

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

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

119

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the consolidated financial statements
At 27 February 2014

23 Financial risk management objectives and policies

The Group’s principal financial instruments, other than derivatives, comprise bank loans, private placement loans, cash,  
short–term deposits, trade receivables and trade payables. The Group’s financial instrument policies can be found in the 
accounting policies in Note 2. The Board agrees policies for managing the financial risks summarised below:

Interest rate risk 
The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s long–term sterling debt 
obligations. Interest rate swaps are used to achieve the desired mix of fixed and floating rate debt in conjunction with private 
placement loan notes. The Group’s policy is to fix, on a long–term basis, between 35% and 65% of projected net interest cost  
but significant transactions can lead to a short–term deviation from this policy. This policy reduces the Group’s exposure  
to the consequences of interest rate fluctuations. At the year–end, £296.5m (68.5%) of Group debt was fixed for an average  
of 5.88 years at an average interest rate of 5.0% (2013: £310.8m, (61.8%), for 6.87 years, at 5.1%). 

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 27 February 2014 and 28 February 
2013 respectively. Consequently, the analysis relates to the situation at those dates and is not representative of the years then  
ended. The following assumptions were made:
•	balance sheet sensitivity to interest rates applies only to derivative financial instruments, as the carrying value of debt  

and deposits does not change as interest rates move;

•	gains or losses are recognised in equity or the income statement in line with the accounting policies set out in Note 2; and
•	cash flow hedges were effective.

Based on the Group’s net debt position at the year–end, a 1% pt change in interest rates would affect the Group’s profit before  
tax by approximately £1.4m (2012/13: £1.9m), and equity by approximately £5.2m (2013: £6.6m).

Liquidity risk
In its funding strategy, the Group’s objective is to maintain a balance between the continuity of funding and flexibility through 
the use of overdrafts and bank loans. This strategy includes monitoring the maturity of financial liabilities to avoid the risk  
of a shortage of funds.

Excess cash used in managing liquidity is placed on interest–bearing deposit where maturity is fixed at no more than three 
months. Short–term flexibility is achieved through the use of short–term borrowing on the money markets. 

The tables below summarise the maturity profile of the Group’s financial liabilities at 27 February 2014 and 28 February 2013 
based on contractual undiscounted payments, including interest:

27 February 2014 

Interest–bearing loans and borrowings 
Derivative financial instruments 
Trade and other payables 
Accrued financial liabilities 
Provisions in respect of financial liabilities 

28 February 2013 

Interest–bearing loans and borrowings 
Derivative financial instruments 
Trade and other payables 
Accrued financial liabilities 
Provisions in respect of financial liabilities 

On 
demand 
£m 

Less than 
3 months 
£m 

— 
— 
— 
— 
— 

— 

0.3 
2.1 
156.4 
— 
3.2 

162.0 

On 
demand 
£m 

Less than 
3 months 
£m 

9.0  
—  
—  
—  
—  

9.0  

 0.4  
 2.3  
 159.2  
 —  
 2.6  

 164.5  

3 to 12 
months 
£m 

11.5 
2.1 
— 
158.2 
9.6 

181.4 

3 to 12 
months 
£m 

 11.7  
2.3  
 —  
 113.6  
 7.7  

 135.3  

1 to 5 
years 
£m 

333.1 
12.2 
17.7 
— 
12.6 

375.6 

1 to 5 
years 
£m 

 316.5  
 16.2  
 17.6  
 —  
 14.7  

 365.0  

More than 
5 years 
£m 

173.0 
6.1 
— 
— 
16.9 

196.0 

More than 
5 years 
£m 

 259.3  
 9.1  
 —  
 —  
 17.2  

 285.6  

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

Total 
£m

517.9 
22.5 
174.1 
158.2 
42.3

915.0

Total 
£m

 596.9  
 29.9  
 176.8  
 113.6  
 42.2 

959.4 

120

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23 Financial risk management objectives and policies continued

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

The Group is exposed to a small amount of credit risk that is primarily attributable to its trade and other receivables.  
This is minimised by dealing with counterparties with high credit ratings. The amounts included in the balance sheet are  
net of allowances for doubtful debts, which have been estimated by management based on prior experience and any  
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 18.

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 difficulty, the Group is exposed to the risk of withdrawal of  
currently undrawn committed facilities. This risk is mitigated by the Group having a range of counterparties to its facilities  
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.

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 38 to 41 
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 EBITDAR) on a pensions lease adjusted basis  
at 3.5 times or below, which was achieved for the year ended 27 February 2014. This calculation takes account of net debt, 
the pension deficit and the 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.  
In addition, the Group may carry out a number of small sale and leaseback transactions to provide further funding for growth.

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

24 Financial instruments

Fair values
As in the prior year, the carrying value of financial assets and liabilities disclosed in Notes 18, 19, 20, 21, 22 and 25 are  
considered to be reasonable approximations of their fair values.

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 using level 2 techniques.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

121

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Notes to the consolidated financial statements
At 27 February 2014

24 Financial instruments continued

Hierarchical classification of financial assets and liabilities measured at fair value
IFRS 13 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.

27 February 2014 

Financial assets 
Derivative financial instruments 

Financial liabilities 
Derivative financial instruments 

28 February 2013 

Financial assets 
Derivative financial instruments 

Financial liabilities 
Derivative financial instruments 

Level 1 
£m 

Level 2 
£m 

Level 3 
£m 

— 

—  

— 

29.0 

— 

— 

Level 1 
£m 

Level 2 
£m 

Level 3 
£m 

 —  

 —  

 8.5 

 23.3  

 —  

 —  

Total 
£m

— 

29.0

Total 
£m

 8.5 

 23.3 

During the year ended 27 February 2014, there were no transfers between fair value measurement levels. Derivative financial 
instruments include £nil assets (2013: £7.0m) and £24.7m liabilities (2013: £18.7m) due after one year.

Derivative financial instruments 

Hedges 

Cash flow hedges
At 27 February 2014, the Group has interest rate swaps in place to swap a notional amount of £100.0m (2013: £100.0m) 
whereby, it receives variable interest rates based on LIBOR on the notional amount and pays fixed rates of between 5.145%  
and 5.372% (2013: 5.145% and 5.372%). The swaps are being used to hedge the exposure to changes in future cash flows  
from variable rate debt. The Group also has cross–currency swaps in place whereby it receives a fixed interest rate of  
between 3.92% and 4.86% (2013: 3.92% and 4.86%) on a notional amount of US$250.0m (2013: US$250.0m) and paid  
an average of 4.72% on a notional sterling balance of £158.2m (2013: 4.72% on £158.2m).

There are £50.0m of swaps (2013: £100.0m) with maturities beyond the life of the current revolving credit facility (2018)  
which are in place to hedge against the core level of debt the Group will hold.

Fair value hedges
At 27 February 2014, the Group has cross–currency swaps in place whereby it receives a fixed interest rate of 5.23% (2013: 
5.23%) on a notional amount of US$75.0m (2013: US$75.0m) and pays a spread of between 1.715% and 1.755% (2013: 1.715%  
and 1.755%) over 6m GBP LIBOR on a notional sterling balance of £50.1m (2013: £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 23.

The cash flow hedges were assessed to be highly effective at 27 February 2014 and a net unrealised gain of £1.4m (2012/13:  
net unrealised gain of £8.3m) has been recorded in other comprehensive income. The fair value hedges were also assessed  
to be highly effective at 27 February 2014, with a debit of £0.9m recorded within finance costs in the income statement 
(2012/13: a credit of £0.4m). During the year, a loss of £3.8m (2012/13: £7.0m) was charged to the income statement in  
respect of hedged items affecting the net finance charge for the year.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

122

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25 Trade and other payables

Trade payables  
Other taxes and social security  
Deferred income  
Accruals  
Other payables  

Analysed as: 
  Current 
  Non–current 

26 Share capital

Ordinary share capital

Allotted, called up and fully paid ordinary shares of 76.80p each (2013: 76.80p each)   

At 1 March 2012  
Issued  
Issued in lieu of dividends: 
  2011/12 final  
  2012/13 interim 

At 28 February 2013 

Issued 
Issued in lieu of dividends: 
  2012/13 final  
  2013/14 interim 

At 27 February 2014  

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2014 
£m 

109.3  
56.4  
52.0 
158.2 
64.8 

440.7 

423.0 
17.7 

440.7 

2013 
£m

 111.6  
 39.6  
35.2 
 113.6  
 65.2 

 365.2 

 347.6  
 17.6 

 365.2 

million  

 192.0  
 0.2  

 0.6  
0.2  

£m

 147.5  
 0.2  

 0.4  
 0.2 

193.0  

 148.3 

0.2  

1.0 
0.5  

0.2 

0.8  
0.3

194.7  

149.6

At the 2013 Annual General Meeting, the Company was authorised to purchase up to 17.9m of its own shares on the open market. 

During the year, no ordinary shares were acquired (2012/13: nil). No shares were cancelled in the year (2012/13: nil).  
The remainder are being held in the treasury reserve (Note 27).

During the year, options over 0.2m ordinary shares, fully paid, were exercised by employees under the terms of various share 
option schemes (2012/13: 0.2m).

Shareholders were offered a scrip alternative to the 2012/13 cash final dividend of 37.90p and to the 2013/14 cash interim 
dividend of 21.80p. Ordinary shares issued in respect of this totalled 1,482,215. 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 194.7m, less 13.3m treasury shares held by Whitbread PLC and 1.2m held by the employee share 
ownership trust (ESOT) (2013: 193.0m, less 13.8m treasury shares held by Whitbread PLC and 1.1m held by the ESOT).

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

123

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Notes to the consolidated financial statements
At 27 February 2014

26 Share capital continued

Preference share capital

Allotted, called up and fully paid shares of 1p each (2013: 1p each)  

At 1 March 2012 
Repurchased and cancelled  

At 28 February 2013 

Repurchased and cancelled 

At 27 February 2014 

B shares 

million 

2.0  
 —  

 2.0  

 —  

2.0 

£m 

 —  
 —  

 —  

 —  

— 

C shares

million 

 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 consolidated financial statements.

27 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 £1.1m were issued in lieu of the 2012/13 final and 2013/14 interim cash dividends 
(2012/13: £0.6m).

Capital redemption reserve
A capital redemption reserve was created on the cancellation of the Group’s B and C preference shares (Note 26) 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 consolidated 
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 2000/01 of Whitbread Group PLC and Whitbread PLC.

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

124

 
 
 
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
27 Reserves continued

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

The total of the treasury, merger and hedging reserves equals other reserves in the consolidated balance sheet.

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

At 1 March 2012  
Transferred 
Purchased 
Exercised during the year 

At 28 February 2013 

Transferred 
Exercised during the year 

At 27 February 2014  

Treasury shares held by 
Whitbread PLC 

ESOT shares held

million 

 14.1  
 (0.3) 
—  
—  

13.8  

 (0.5) 
—  

13.3 

£m 

million 

 206.6  
 (5.1) 
 —  
 —  

 201.5  

(6.8) 
— 

194.7 

 0.9  
 0.3  
 0.1  
 (0.2) 

 1.1  

0.5 
(0.4) 

1.2 

£m

 13.7  
 5.1  
 3.2  
 (3.6)

 18.4 

6.8 
(7.3)

17.9

The treasury shares reduce the amount of reserves available for distribution to shareholders by £212.6m (2013: £219.9m).

28 Commitments and contingencies

Operating lease commitments
The Group leases various buildings which are used within the Hotels & Restaurants and Costa businesses. The leases are  
non–cancellable operating leases with varying terms, escalation clauses and renewal rights. The Group also leases various  
plant and equipment under non–cancellable operating lease agreements.

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

Future minimum rentals payable under non–cancellable operating leases, on an undiscounted basis, 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 

2014 
£m 

173.0 
598.2 
543.3 
1,263.2 

2013 
£m

 163.1  
 554.6  
 502.1  
 1,240.7 

2,577.7 

 2,460.5 

Future minimum rentals payable under non–cancellable operating leases disclosed above includes £109.7m in relation to  
privity contracts (2013: £123.0m). Future lease costs in respect of these privity contracts are included within the onerous 
contracts provision (Note 22). Onerous contracts are under constant review and every effort is taken to reduce this obligation.

The weighted average lease life of future minimum rentals payable under non–cancellable operating leases is 14.0 years  
(2013: 14.7 years).

Group companies have sublet space in certain properties. The future minimum sublease payments expected to be received 
under non–cancellable sublease agreements as at 27 February 2014 are £13.6m (2013: £11.8m).

Contingent liabilities
There are no contingent liabilities to be disclosed in the year ended 27 February 2014. In the prior year, there was a £5.3m 
contingent liability which has been recognised as a liability in this financial year. See Note 6 for further details.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

125

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Notes to the consolidated financial statements
At 27 February 2014

29 Share–based payment plans

Long Term Incentive Plan (LTIP)
The LTIP awards shares to directors and senior executives of the Group. Vesting of all shares under the scheme will depend  
on continued employment and meeting earnings per share (EPS) performance targets over a three–year period (the vesting 
period). In addition, awards from 2012 onwards are dependent on meeting a return on capital employed (ROCE) target over 
the vesting period. Grants prior to this were dependent on meeting a total shareholder return (TSR) target over the vesting 
period. Details of the performance targets for the LTIP awards can be seen in the remuneration report on pages 67 to 76.

The awards are settled in equity once exercised.

Movements in the number of share awards are as follows:

Outstanding at the beginning of the year  
Granted during the year  
Exercised during the year  
Expired during the year  

Outstanding at the end of the year  

Exercisable at the end of the year  

2014 
Awards 

2013 
Awards

958,874  
320,130 
(250,299)  
(51,357) 

 888,885  
 339,816  
(227,087) 
(42,740)

 977,348 

 958,874 

35,310 

 119,293 

Deferred equity awards
Awards are made under the Whitbread Leadership Group Incentive Scheme implemented during 2004/05.

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 vest 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 awards vest, 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 

2014 
Awards 

2013 
Awards

503,887  
187,693  
(192,120)  
(20,966) 

 393,243  
 154,203  
(13,751) 
(29,808)

478,494 

503,887 

— 

 — 

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Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

126

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
29 Share–based payment plans continued

Employee sharesave scheme
The employee sharesave 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 weighted average exercise price (WAEP) are as follows:

2014 

2013

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  

WAEP 
£ per share 

Options 

WAEP 
£ per share

Options 

1,125,508 
385,072 
(225,863) 
(185,695) 

16.27  
27.46  
10.79 
16.84  

 1,160,139  
 399,084  
 (221,547) 
 (212,168) 

1,099,022 

19.58 

 1,125,508 

23,226 

10.93 

 15,881 

 11.91  
 19.14  
9.85  
15.51 

16.27 

10.44 

The weighted average contractual life of the share options outstanding as at 27 February 2014 is between two and three years. 
Outstanding options to purchase ordinary shares of 76.80 pence between 2013 and 2018 are exercisable at prices between 
£7.28 and £27.46 (2013: between 2012 and 2017 at prices between £7.28 and £19.14). 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 
£37.62 (2013: £24.51).

Total charged to the income statement

Long Term Incentive Plan 
Deferred equity  
Employee share scheme  

Equity–settled 
Cash–settled 

2013/14 
£m 

2012/13 
£m

5.4  
4.0 
1.8 

11.2 

10.6  
0.6 

11.2 

 4.1  
 3.5  
 1.9 

 9.5 

 9.2  
 0.3 

9.5 

The following table lists the inputs to the model used for the years ended 27 February 2014 and 28 February 2013:

Grant 
date 

Number 
of shares 
granted 

Fair 
value 
% 

Fair  Exercise 
price 
£ 

value 
£ 

grant  Expected 
term 
date 
Years 
£ 

dividend  Expected 
volatility 
% 

yield 
% 

Price at 

  Expected 

LTIP 
awards 

Deferred 
equity 
awards 

SAYE —  
3 years 

SAYE — 
5 years 

02/05/2013  320,130  92.8 
19/06/2012  339,816  91.4 

7,783,513 
6,109,341 

30/04/2013 
187,693  92.8 
26/04/2012  154,203  91.4 

4,450,276 
2,707,487 

29/11/2013  311,010  22.8 
30/11/2012  335,917  23.0 

2,529,370 
1,853,489 

29/11/2013 
30/11/2012 

74,062  24.6 
63,167  24.9 

649,881 
377,720 

— 
— 

— 
— 

27.46 
19.14 

27.46 
19.14 

26.20 
19.67 

25.55 
19.21 

35.67 
23.99 

35.67 
23.99 

3.00 
3.00 

3.00 
3.00 

3.25 
3.25 

5.25 
5.25 

2.5 
3.0 

2.5 
3.0 

2.5 
2.5 

2.5 
2.5 

n/a 
n/a 

n/a 
n/a 

20.0 
25.0 

20.0 
25.0 

Risk– 
free 
rate 
% 

Vesting 
conditions

n/a  Non–market 1, 2, 3 
n/a  Non–market 1, 2, 3

n/a 
n/a 

0.97 
0.46 

1.71 
0.92 

Service 3 
Service 3 

Service 3 
Service 3

Service 3 
Service 3

1  Return on capital employed.

2  Earnings per share.

3  Employment service.

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

127

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Notes to the consolidated financial statements
At 27 February 2014

29 Share–based payment plans continued

Expected volatility reflects the assumption that historical volatility is indicative of future trends, which may not necessarily  
be the actual outcome.

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

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

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

Employees share ownership trust (ESOT)
The Company funds an ESOT to enable it to acquire and hold shares for the LTIP. The ESOT held 1.2m shares at 27 February 2014 
(2013: 1.1m). All dividends on the shares in the ESOT are waived by the Trustee.

30 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 had  
a contracted–out defined contribution pension scheme which was wound up during 2012.

The Group contributes a specified percentage of earnings for members of the above defined contribution scheme, and thereafter 
has no further obligations in relation to the scheme. The total cost charged to income in relation to the defined contribution 
scheme in the year was £6.8m (2012/13: £4.1m).

At the year–end, 25,770 employees (2013: 2,897) were active members of the scheme, which also had 4,172 deferred members 
(2013: 4,104).

Defined benefit scheme
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.

At the year–end the scheme had no active members (2013: nil), 24,161 deferred pensioners (2013: 24,851) and 16,681 pensions  
in payment (2013: 16,662).

The liability recognised in the balance sheet in respect of the defined benefit pension scheme is the present value of the defined 
benefit obligation at the end of the reporting period less the fair value of plan assets. The IAS 19 (revised 2011) 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 calculations provided by Towers Watson, using the projected unit credit method. The present value of the 
defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality 
corporate bonds that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and 
losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other 
comprehensive income in the period in which they arise. As the scheme is closed to future accrual, there is no future service cost.

The weighted average duration of the defined benefit plan obligation at the end of the reporting period is 17.5 years  
(2013: 17.5 years). 

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128

 
 
 
 
 
 
 
 
 
 
30 Retirement benefits continued

Funding
Expected contributions to be made in the next reporting period total £76.4m (2013: £66.1m). In 2013/14, contributions were 
£71.2m with £62.4m from the employer, £8.7m from Moorgate SLP and £0.1m of benefits settled by the Group in relation  
to an unfunded scheme (2012/13: £45.7m, with £37.2m from the  employer, £8.4m from Moorgate SLP and £0.1m of benefits  
settled by the Group in relation to an unfunded scheme).

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 2011. A deficit recovery plan and some protection whilst  
the scheme remains in deficit, have been agreed with the Trustee. The Group made a £60.0m payment in 2013/14 and will  
make the following payments to the Fund: £65.0m in each of August 2014 and August 2015; £70.0m in August 2016; £80.0m  
in August 2017 and £70.0m in August 2018. For the period of the deficit, the Group has agreed to give undertakings to the 
Trustee similar to some of the covenants provided in respect of its banking agreements, up to the value of any outstanding 
recovery plan payments or the remaining deficit, if lower. Until the next valuation, the Trustee has also been given a promise  
of accelerated payments of up to £5.0m per annum where increases in ordinary dividends exceed RPI and the right to 
consultation before any special distributions 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 (SLP), 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 (SP), which was also established 
by the Group during 2009/10. Property assets with a market value of £221.0m 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 £228.0m. The Group retains control 
over both partnerships and, as such, they are fully consolidated in these consolidated 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 11 years. At the end of this period, the partnership capital allocated to the Pension Scheme partner will, depending 
on the funding position of the Pension Scheme at that time, be transferred in cash to the Pension Scheme up to a value of 
£150.0m (2013: £150.0m). 

Under IAS 19 (revised 2011), the investment held by the Pension Scheme in Moorgate SLP, a consolidated entity, does not 
represent a plan asset for the purposes of the consolidated financial statements. Accordingly the pension deficit position  
in these consolidated financial statements does not reflect the £141.0m (2013: £141.0m) investment in Moorgate SLP held  
by the Pension Scheme. 

During the year ended 28 February 2013, the Group entered into a charge in favour of Whitbread Pension Trustees Limited  
over properties with a market value totalling £180.0m at that date. The charge was to secure the obligations of the Group  
to make payments to the Pension Fund as part of the recovery plan to reduce the deficit. This, together with the properties 
secured as a consequence of the arrangement surrounding the Scottish Limited Partnerships, secures properties totalling 
£408.0m in favour of the Pension Scheme. 

Risks
Through its defined benefit scheme, the Group is exposed to a number of risks in relation to the IAS 19 deficit, the most 
significant of which are detailed below:

Risk

Description

Market volatility

The defined benefit obligation is linked to AA–rated corporate bonds whilst scheme 
assets are invested in equities, gilts, bonds, property and cash. This exposes the  
Group to risks including those relating to interest rates, equity markets, property 
markets and foreign exchange. Changing market conditions, in conjunction with 
discount rate fluctuations, will lead to volatility in the Group’s net pension liability on 
the balance sheet, pension expense in the income statement and re–measurement 
movements in other comprehensive income.

Principal impact on assets  
and obligation reconciliations

Return on plan assets

Inflationary risk 

Due to the link between the scheme obligation and inflation, an increased rate  
of inflation will lead to higher scheme liabilities. 

Actuarial movements in financial 
assumptions

Accounting 
assumptions

The defined benefit obligation is calculated by projecting the future cash flows  
of the scheme for many years into the future. Consequently, the assumptions used  
can have a significant impact on the balance sheet position and income statement 
charge. In practice, future Scheme experience may not be in line with the assumptions 
adopted. For example, an increase in the life expectancy of members would increase 
scheme liabilities.

Discount rate: interest income on 
scheme assets and cost on liabilities

Mortality: actuarial movements  
in demographic assumptions

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

129

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Notes to the consolidated financial statements
At 27 February 2014

30 Retirement benefits continued

The principal assumptions used by the independent qualified actuaries in updating the most recent valuation carried out as at 
31 March 2011 of the UK scheme to 27 February 2014 for IAS 19 (revised 2011) purposes were:

Pre–April 2006 rate of increase in pensions in payment 
Post–April 2006 rate of increase in pensions in payment  
Pension increases in deferment 
Discount rate  
Inflation assumption  

At 
27 February 
2014 
% 

At 
28 February 
2013 
%

3.10 
2.20 
3.10 
4.30 
3.25 

3.20 
2.20 
3.20 
4.60 
3.35

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 20.0 years (2013: 19.9 years) if they are male 
and for a further 22.6 years (2013: 22.5 years) if they are female. For a member who retires in 2034 at age 65, the assumptions 
are that they will live on average for a further 21.9 years (2013: 21.8 years) after retirement if they are male and for a further  
24.4 years (2013: 24.4 years) after retirement if they are female.

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

Amounts recognised in operating profit for service costs or curtailment are £nil (2012/13: £nil).

Net interest on net defined benefit liability 
Administrative expenses 

Total expense recognised in the income statement (gross of deferred tax)  

The amounts taken to the consolidated statement of comprehensive income are as follows:

Actuarial losses 
Return on plan assets greater than discount rate 

Re–measurement effects recognised in other comprehensive income 

The amounts recognised in the balance sheet are as follows:

Present value of defined benefit obligation  
Fair value of scheme assets  

Liability recognised in the balance sheet  

2013/14 
£m 

2012/13 1 

£m

23.6 
2.5 

26.1 

 27.0  
 3.1 

 30.1

2013/14 
£m 

77.7 
(40.0) 

 37.7 

2012/13 1 

£m

 74.7  
(116.1)

(41.4)

2014 
£m 

2013 
£m

(2,104.9) 
1,570.6 

(2,021.6) 
1,479.9 

(534.3) 

(541.7)

During the year, the accounting deficit decreased from £541.7m at 28 February 2013 to £534.3m at 27 February 2014. The 
principal reason for this gain was due to improved asset performance and the fact that employer contributions exceeded the 
pension expense for the year. These two positive factors were offset by an increase in the defined benefit obligation as a result 
of the reduction in the discount rate.

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

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Opening defined benefit obligation  
Interest cost  
Re–measurement due to: 
  Changes in financial assumptions 
  Changes in demographic assumptions 
  Experience adjustments 
Benefits paid  
Benefits settled by the Group in relation to an unfunded pension scheme3 

Closing defined benefit obligation  

2014 
£m 

2,021.6 
91.1 

2013 1 
£m

1,939.7 
88.4 

74.0 
— 
3.7 
(85.4) 
(0.1) 

80.0 
— 
(5.3) 
(81.1) 
(0.1)

2,104.9 

2,021.6

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130

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30 Retirement benefits continued

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

Opening fair value of scheme assets  
Interest income on scheme assets 
Return on plan assets greater than discount rate 
Contributions from employer3 
Additional contributions from Moorgate SLP3 
Benefits paid  
Administrative expenses 

Closing fair value of scheme assets  

The major categories of plan assets are as follows:

2014 
£m 

1,479.9  
67.5 
40.0 
62.4 
8.7 
(85.4) 
(2.5) 

2013 1 
£m

1,341.0 
61.4 
116.1 
37.2 
8.4 
(81.1) 
(3.1)

1,570.6 

1,479.9

Equities  
Government bonds  
Corporate bonds  
Property  
Other2  

Quoted and 
pooled 
£m 

829.2 
322.8 
154.5 
63.6 
77.4 

1,447.5 

2014 

Unquoted 
£m 

108.3 
— 
— 
14.8 
— 

123.1 

Total 
£m 

937.5 
322.8 
154.5 
78.4 
77.4 

Quoted and 
pooled 
£m 

771.6 
317.1 
173.5 
53.8 
52.2 

2013

Unquoted 
£m 

96.9 
— 
— 
14.8 
— 

Total 
£m

868.5 
317.1 
173.5 
68.6 
52.2

1,570.6 

1,368.2 

111.7 

1,479.9

The fair values of the assets have not materially changed due to the adoption of IFRS 13.

The assumptions in relation to discount rate, inflation 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:

Discount rate 
0.25% increase to discount rate 
0.25% decrease to discount rate 
Inflation 
0.25% increase to inflation rate 
0.25% decrease to inflation rate 
Life expectancy 
Additional one year increase to life expectancy 

(Increase)/decrease 
in liability

2014 
£m 

2013 
£m

88.0 
(88.0) 

(84.0) 
84.0 

83.0 
(83.0) 

(80.0) 
80.0 

(75.0) 

(70.0)

The above sensitivity analyses are based on a change in an assumption whilst holding all other assumptions constant.  
In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the  
sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (projected unit credit 
method) has been applied as when calculating the pension liability recognised within the balance sheet. The methods and 
types of assumption did not change.

1   IAS 19 (revised 2011) has been adopted for the year ended 27 February 2014 and the comparatives for the year ended 28 February 2013 have  

been restated accordingly. Refer to Note 2 of the consolidated financial statements. 

2  Other relates to assets held in respect of cash and net current assets. 

3   The total of these three items equals the cash paid by the Group as per the consolidated cash flow statement. 

Whitbread 
Annual Report and Accounts 2013/14

Consolidated  
accounts 2013/14

131

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Notes to the consolidated financial statements
At 27 February 2014

31 Related party disclosure

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

Principal subsidiaries 

Principal activity 

Country of incorporation 

Whitbread Group PLC  

Hotels & Restaurants 

Premier Inn Hotels Limited  

Hotels  

Whitbread Restaurants Limited  

Restaurants  

Premier Inn Limited 

Hotels 

Costa Limited 

 Operators of coffee shops 
and roasters and wholesalers  
of coffee beans

England  

England  

England 

England 

England  

% equity interest 
and votes held

2014 

 100.0 

 100.0 

 100.0 

 100.0 

 100.0 

2013

 100.0 

 100.0 

 100.0 

 100.0 

 100.0 

Yueda Costa (Shanghai)  
Food & Beverage Management  
Company Limited 

Coffeeheaven International Limited 

Coffee Nation Limited 

Operators of coffee shops 

China 

51.0  

 51.0 

 Operators of coffee shops  
in Eastern Europe 

 Operators of customer–facing, 
espresso–based self–serve 
coffee bars 

England 

England 

 100.0 

 100.0 

 100.0 

 100.0 

The Group holds 6% as a general partnership interest in Moorgate Scottish Limited Partnership (SLP) with Whitbread  
Pension Trustees holding the balance as a limited partner. Moorgate SLP holds a 67.8% investment in a further partnership, 
Farringdon Scottish Partnership (SP), which was established by the Group to hold property assets. The remaining 32.2% 
interest in Farringdon SP is owned by the Group. 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 consolidated financial statements. Further details can be found in Note 30.

Shares in Whitbread Group PLC are held directly by Whitbread PLC. Shares in the other subsidiaries are held directly or 
indirectly 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.

Related party

Joint ventures 
2013/14 
2012/13 

Associate 
2013/14 
2012/13 

Compensation of key management personnel (including directors):

Short–term employee benefits  
Post employment benefits  
Share–based payments  

Sales to 
related party 
£m 

Amounts 
owed by 
related party 
£m 

Amounts 
owed to 
related party 
£m

3.1  
2.7  

3.8  
3.1  

1.2  
 1.2  

0.7 
 0.4  

— 
 — 

— 
 — 

2013/14 
£m 

2012/13 
£m

6.8 
0.2 
4.5 

11.5 

 5.8  
 0.2  
 4.2 

 10.2 

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Annual Report and Accounts 2013/14

Consolidated  
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132

 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
31 Related party disclosure continued

Joint ventures
For details of the Group’s investments in joint ventures see Note 15.

Associate
For details of the Group’s investment in associate see Note 16.

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 27 February 2014, the Group has not raised a provision for doubtful debts relating  
to amounts owed by related parties (2013: £nil). An assessment is undertaken, each financial year, through examining  
the financial position of the related parties and the markets in which the related parties operate.

Transactions with other related parties
Details of transactions with directors are detailed in the remuneration report on pages 67 to 76.

32 Events after the balance sheet date

A final dividend of 47.00p per share (2013: 37.90p) amounting to a dividend of £84.7m (2013: £67.5m) was recommended  
by the directors at their meeting on 28 April 2014. A dividend reinvestment plan (DRIP) alternative will be offered. These 
consolidated financial statements do not reflect this dividend payable.

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133

 
 
 
 
 
 
 
 
 
 
 
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Whitbread 
Annual Report and Accounts 2013/14

Section heading

134

 
 
 
 
 
 
 
 
 
 
Company 
accounts 
2013/14

136   Directors’ responsibility for the 
Company financial statements 

137  Independent auditor’s report
138   Balance sheet
139   Notes to the accounts

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Whitbread 
Whitbread 
Annual Report and Accounts 2013/14
Annual Report and Accounts 2013/14

Company  
Section heading
accounts 2013/14

135
135

 
 
 
 
 
 
 
 
 
 
Directors’ responsibility for  
the Company financial statements

Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report 
and the Company financial statements in accordance with 
applicable law and regulations. Company law requires the 
directors to prepare Company financial statements for each 
financial year. Under that law, the directors have elected to 
prepare the Company financial statements in accordance with 
United Kingdom Generally Accepted Accounting Practice 
(United Kingdom accounting standards and applicable law). 

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

consistently;

•	make judgements and estimates that are reasonable  

and prudent;

•	state whether applicable UK accounting standards  

have been followed, subject to any material departures 
disclosed and explained in the Company financial 
statements; and

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

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

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Whitbread 
Annual Report and Accounts 2013/14

Company  
accounts 2013/14

136

 
 
 
 
 
 
 
 
 
 
Independent auditor’s report  
to the members of Whitbread PLC

Independent auditor’s report to the members  
of Whitbread PLC
We have audited the Company financial statements of 
Whitbread PLC for the year ended 27 February 2014 which 
comprise the Balance Sheet and 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).

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 of auditor 
As explained more fully in the statement of directors’ 
responsibilities set out on page 136, the directors are 
responsible for the preparation of the Company 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 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 Company financial statements
An audit involves obtaining evidence about the amounts  
and disclosures in the Company financial statements  
sufficient to give reasonable assurance that the Company 
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 Company financial statements. In addition, 
we read all the financial and non–financial information in  
the Annual Report to identify material inconsistencies with  
the audited Company financial statements. If we become 
aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report.

Opinion on the Company financial statements
In our opinion the Company financial statements:
•	give a true and fair view of the state of the Company’s 

affairs as at 27 February 2014;

•	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 strategic report for the  
financial year for which the consolidated financial 
statements are prepared is consistent with the 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 Company financial statements and 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 consolidated  
financial statements of Whitbread PLC for the year ended  
27 February 2014.

Richard Wilson
(Senior statutory auditor) 
for and on behalf of Ernst & Young LLP 
Statutory Auditor 
London

28 April 2014

Whitbread 
Annual Report and Accounts 2013/14

Company  
accounts 2013/14

137

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2

 
 
 
 
 
 
 
 
 
 
Balance sheet
At 27 February 2014

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 

28 April 2014 

Nicholas Cadbury
Finance Director

27 February 
2014 
£m 

28 February 
2013 
£m 

Notes 

5 

2,256.1 

 2,256.1

2,256.1 

2,256.1 

6 

7 

8 
9 
9 
9 
9 

9 

74.9 

 132.5 

(7.9) 

67.0 

 (8.7)

 123.8 

2,323.1 

 2,379.9 

149.6 
56.2 
12.3 
2,299.7 
(194.7) 

 148.3  
 55.1  
 12.3  
 2,365.7  
(201.5)

2,323.1 

 2,379.9 

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Whitbread 
Annual Report and Accounts 2013/14

Company  
accounts 2013/14

138

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the accounts
At 27 February 2014

1 Basis of accounting

The financial statements of Whitbread PLC for the year ended 27 February 2014 were authorised for issue by the Board  
of Directors on 28 April 2014.

The financial statements 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 financial 
statements of the parent Company amounted to £3.2m (2012/13: £5.9m).

4 Dividends paid and proposed

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 

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 share:

2013/14 

2012/13

pence 
per share 

37.90 

21.80 

1.30 
0.70 

pence 
per share 

33.75 

19.50 

1.28 
1.66 

£m 

67.7 
(28.2) 

39.5 

39.2 
(16.3) 

22.9 

62.4 

— 
— 

— 

62.4 

£m

59.8 
(10.9)

48.9

34.7 
(5.8)

28.9

77.8

— 
—

—

77.8

Final dividend for the current year 

47.00 

84.7 

37.90 

67.5

A final dividend of 47.00p per share (2013: 37.90p) amounting to a dividend of £84.7m (2013: £67.5m) was recommended  
by the directors at their meeting on 28 April 2014. A dividend reinvestment plan (DRIP) alternative will be offered. These 
financial statements do not reflect this dividend payable.

Whitbread 
Annual Report and Accounts 2013/14

Company  
accounts 2013/14

139

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Notes to the accounts
At 27 February 2014

5 Investment in subsidiary undertakings

Shares at cost 

At 28 February 2013 and 27 February 2014 

Principal subsidiary undertakings  

Principal activity 

Whitbread Group PLC  

Hotels & Restaurants 

Premier Inn Hotels Limited  

Hotels  

Whitbread Restaurants Limited  

Restaurants  

2014 
£m 

2013 
£m 

2,256.1  

2,256.1

Country of 
incorporation 
or registration 

Country of 
principal 
operations 

% of 
equity and 
votes held

England  

England  

England  

England  

England  

England  

England 

England 

100.0

100.0

100.0

100.0

England  

England  

100.0 

Premier Inn Limited 

Costa Limited  

Yueda Costa (Shanghai)  
Food & Beverage Management  
Company Limited

Hotels 

 Operators of coffee shops and roasters 
and wholesalers of coffee beans 

Operators of coffee shops 

China 

China 

51.0 

Coffeeheaven International Limited 

 Operators of coffee shops in Eastern Europe 

England  

Poland 

Coffee Nation Limited 

 Operators of customer–facing  
espresso–based self–serve coffee bars 

England 

England 

100.0

100.0 

The Company holds 6% as a general partnership interest in Moorgate Scottish Limited Partnership (SLP) with Whitbread 
Pension Trustees holding the balance as a limited partner. Moorgate SLP holds a 67.8% investment in a further partnership, 
Farringdon Scottish Partnership (SP) which was established by the Company to hold property assets. The remaining 32.2% 
interest in Farringdon SP, is owned by the Company. The partnerships were set up in 2009/10 as part of a transaction with 
Whitbread Pension Trustees. Further details can be found in Note 30 of the Whitbread PLC consolidated financial statements.

Shares in Whitbread Group PLC are held directly by Whitbread PLC. Shares in the other subsidiaries are held directly  
or indirectly 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 

Unclaimed dividends  
Corporation tax payable 

2014 
£m 

74.9 

74.9 

2014 
£m 

6.9 
1.0 

7.9 

2013 
£m 

132.5

132.5

2013 
£m 

6.8  
1.9

8.7

Whitbread 
Annual Report and Accounts 2013/14

Company  
accounts 2013/14

140

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2

 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
8 Share capital

Allotted, called up and fully paid ordinary shares of 76.80p each (2013: 76.80p each)   

At 1 March 2012 
Issued  
Issued in lieu of dividends: 
  2011/12 final 
  2012/13 interim 

At 28 February 2013 

Issued  
Issued in lieu of dividends: 
  2012/13 final 
  2013/14 interim 

At 27 February 2014 

million  

 192.0  
0.2  

0.6  
0.2  

£m

 147.5  
 0.2  

 0.4  
 0.2 

193.0  

 148.3 

0.2 

1.0  
0.5  

0.2  

0.8 
0.3

194.7  

149.6

At the 2013 Annual General Meeting, the Company was authorised to purchase up to 17.9m of its own shares on the open market. 

During the year, no ordinary shares were acquired (2012/13: nil). No shares were cancelled in the year (2012/13: nil).  
The remainder are being held in the treasury reserve (Note 9).

During the year, options over 0.2m ordinary shares, fully paid, were exercised by employees under the terms of various share 
option schemes (2012/13: 0.2m).

Shareholders were offered a scrip alternative to the 2012/13 cash final dividend of 37.90p and to the 2013/14 cash interim 
dividend of 21.80p. Ordinary shares issued in respect of this totalled 1,482,215. 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 1 March 2012, 28 February 2013 and 27 February 2014 

B shares 

C shares

million 

2.0 

£m 

— 

million 

1.9 

£m

—

At 27 February 2014 there were outstanding options for employees to purchase up to 1.1m (2013: 1.1m) ordinary shares  
of 76.80 pence each between 2013 and 2018 at prices between £7.28 and £27.46 per share (2013: between 2012 and 2017  
at prices between £7.28 and £19.14 per share).

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Whitbread 
Annual Report and Accounts 2013/14

Company  
accounts 2013/14

141

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the accounts
At 27 February 2014

9 Shareholders’ funds

At 1 March 2012 
Ordinary shares issued  
Transfer of shares 
Scrip dividends 
Profit for the financial year  
Equity dividends 

At 28 February 2013 

Ordinary shares issued  
Transfer of shares 
Scrip dividends 
Profit for the financial year  
Equity dividends 

At 27 February 2014 

Share 
capital 
£m  

 147.5  
 0.2  
 —  
 0.6  
 —  
 —  

 148.3  

0.2 
— 
 1.1 
— 
—  

Share  
premium 
£m  

Capital 
 redemption 
reserve  
£m  

Retained 
 earnings  
£m  

 2,442.7  
 —  
 (5.1) 
 16.7  
 5.9  
 (94.5) 

Treasury 
shares 
£m  

 (206.6) 
 —  
 5.1  
 —  
 —  
 —  

Total 
£m

 2,449.6  
2.2  
 —  
16.7  
5.9  
(94.5)

 12.3  
 —  
 —  
 —  
 —  
 —  

 12.3  

 2,365.7  

 (201.5) 

 2,379.9 

— 
— 
— 
—  
— 

— 
(6.8) 
44.5 
3.2 
(106.9) 

— 
6.8 
— 
— 
— 

2.4  
—  
44.5 
3.2 
(106.9)

 53.7  
 2.0  
 —  
 (0.6) 
 —  
 —  

 55.1  

2.2 
— 
(1.1) 
— 
— 

149.6 

56.2 

12.3 

2,299.7 

(194.7) 

2,323.1

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

At 28 February 2013 

Transferred during the year 

At 27 February 2014 

10 Related parties

Treasury shares held 
by Whitbread PLC

million 

£m

13.8  

(0.5) 

13.3 

 201.5 

(6.8)

194.7

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 £27.5m (2013: £23.2m).

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Whitbread 
Annual Report and Accounts 2013/14

Company  
accounts 2013/14

142

  
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholder 
information

144   Shareholder services 
146  Glossary
148   Our charities

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Whitbread 
Whitbread 
Annual Report and Accounts 2013/14
Annual Report and Accounts 2013/14

Shareholder 
Section heading
information

143
143

 
 
 
 
 
 
 
 
 
 
Shareholder 
services

Contact details 

Registrars
Capita Asset Services 
Whitbread Share Register 
The Registry 
34 Beckenham Road 
Beckenham 
Kent 
BR3 4TU

The website address is 
www.capitaassetservices.com

For enquiries regarding your shareholding please telephone 
0844 855 2327 from the UK and +44 (0)20 8639 3400  
from outside the UK. Alternatively you can email:  
whitbread@capita.co.uk

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 Service1;
•	view your holding and get an indicative valuation; and
•	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.

Share Dealing Service1
Capita Share Dealing Services, telephone 0871 664 0446 
(calls cost 10p per minute plus network extras, lines are open  
8am to 4.30pm, Monday to Friday) www.capitadeal.com1

1   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.

Registered office
Whitbread PLC 
Whitbread Court 
Houghton Hall Business Park 
Porz Avenue 
Dunstable 
Bedfordshire 
LU5 5XE

General Counsel and Company Secretary
Simon Barratt

Dividend Reinvestment Plan
We have decided to end the Scrip Dividend Scheme and,  
as an alternative, to offer you the chance to join a new 
Dividend Reinvestment Plan (the ‘DRIP’). To reinvest your 
dividend you will need to sign up for the DRIP. The Terms  
and Conditions of the DRIP and a Shareholder Dividend Form  
are available on the Company’s website or can be requested 
from Capita Asset Services.

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 ring the  
registrars on +44 (0)844 855 2327. 

Dividend history 

2013/14
2012/13
2011/12
2010/11
2009/10

68.80p

57.40p

51.25p

44.50p

38.00p

Dividend diary 2014/15 

Ex dividend date for final dividend

Record date for final dividend

DRIP election date

Payment of final dividend

Ex dividend date for interim dividend

Record date for interim dividend

Payment of interim dividend

Financial reporting calendar
Dates subject to confirmation

Half year–end

Announcement of half–year results

End of financial year

28 May 2014

30 May 2014

16 June 2014

4 July 2014

4 December 2014

5 December 2014

9 January 2015

28 August 2014

21 October 2014

26 February 2015

Capital gains tax
For further information on:
•	the market value of shares in the Company as at  

31 March 1982;

•	the reduction of Capital on 10 May 2001; and
•	the special dividend and share consolidation  

in May 2005,

or if you require any further information on capital gains  
tax allocations, please refer to the investors’ section  
of the Company’s website www.whitbread.co.uk

Whitbread 
Annual Report and Accounts 2013/14

Shareholder  
services

144

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2

 
 
 
 
 
 
 
 
 
 
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 27 February 2014

Number 
of holders 

% of 
holders 

Number 
of shares 

% of 
share 
capital

24,130 

51.45 

880,30 

40.45

15,929  

33.97 

 3,841,630 

1.97

 3,646  

7.77 

 2,581,347  

1.33

 2,273  

4.85 

 4,227,144  

 223  

0.48 

 1,585,970  

2.17

0.81

347  

104  

176  

30  

34  

5  

0.74 

 8,260,570  

4.24

0.22 

 7,334,788  

3.77

0.38 

 35,820,452  

18.39

0.06 

 20,383,258  

10.46

0.07 

 63,715,046  

32.71

0.01 

 46,155,329  

23.70

46,897  

100.00 

 194,785,838   100.00

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 

Share price history 

How can I find the current share price?
It is easy to keep up to date with the current share price  
at the Company’s website www.whitbread.co.uk

I have lost my share certificate, how can I get  
a replacement?
If you have lost your certificate please contact the Company 
registrars, Capita Asset Services, on the shareholder helpline 
(0844 855 2327). They will be able to assist you in arranging  
a replacement.

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 known as ‘boiler rooms’. 
These ‘brokers’ can be very persistent and extremely 
persuasive, and a 2006 survey by the Financial Conduct 
Authority (FCA) reported that 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:
•	make sure you get the correct name of the person  

or organisation;

•	check that they are properly authorised by the  

FCA before getting involved by visiting www.fca.org.uk  
and contact the firm using the details on the register;

4397p

•	report the matter to the FCA either by calling  

0800 111 6768 or visiting www.fca.org.uk/scams;

•	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 FCA can be contacted by completing an online form  
at www.fca.org.uk/scams or you can call the FCA Consumer 
Helpline on 0800 111 6768 or Action Fraud on 0300 123 2040.

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 FCA website, www.fca.org.uk/consumer

2013/14

2012/13

2011/12

2392p

2692p

1637p

1737p

1409p

2010/11

1887p

1266p

2009/10

1497p

693.5p

High
Low

Annual General Meeting 2014
The 2014 AGM will be held at 2pm on Tuesday 17 June 2014  
at Church House Conference Centre, Dean’s Yard,  
Westminster, London SW1P 3NZ.

Shareholder FAQs

Where can I find information about B and 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.

Whitbread 
Annual Report and Accounts 2013/14

Shareholder  
services

145

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Glossary

Average Room Rate (ARR)
Hotel accommodation income divided by the number  
of rooms occupied by guests.

IAS 
International Accounting Standards.

Barista
An individual with specific training to expertly prepare  
and serve hand–made espresso–based coffees.

Compound Annual Growth Rate (CAGR)
The year–on–year growth rate of an annualised gain over  
a specified number of years.

Co–location
A site which has both a Premier Inn and a pub restaurant  
in one location where the pub restaurant is not a Whitbread–
owned brand or business.

IFRS 
International Financial Reporting Standards. 

Income before fixed costs (IBFC)
Hotels & Restaurants’ operating profit before directly 
attributable fixed costs (such as rent, rates, insurance, etc.), 
head office and central costs. To obtain the IBFC margin  
IBFC is divided by sales.

Income after fixed costs (IAFC)
Hotels & Restaurants’ operating profit after directly 
attributable fixed costs but before allocating head office  
and central costs. To obtain the IAFC margin, IAFC is  
divided by sales.

Costa@Home
Costa have teamed up with Tassimo to bring a range  
of Costa At Home drinks for customers to enjoy at home.

Joint sites
A site which has both a Premier Inn and Whitbread–owned 
pub restaurant in one location. 

Costa for schools
This is a comprehensive human and physical geography 
resource for students aged 11 to 14. It explores coffee–growing 
communities around the world and how the coffee trade 
affects their lives.

Like for like sales
Period over period change in total sales, less sales  
generated by businesses acquired or disposed of and  
retail outlets opened or closed during the current year  
and the previous year.

Directors’ forum
The group of Whitbread’s 40 senior leaders.

Dynamic pricing system
The system which we deploy to vary our prices according  
to demand levels and room availability within certain 
prescribed limits.

Earnings
Profit after tax which is attributable to the parent 
shareholders.

Earnings per share (EPS)
Earnings divided by the weighted average of ordinary  
shares in issue during the year after deducting treasury  
shares and shares held by an independently managed  
share ownership trust (‘ESOT’).

EBITDAR 
Earnings before interest, tax, depreciation, amortisation  
and rent. 

Equity stores
Costa stores leased or owned by Whitbread, as opposed 
to those leased or operated under franchise agreements.

Net Guest Score
Based on the fundamental perspective that every company’s 
customers can be divided into three categories when 
completing a survey with ten score choices: Promoters (score 
nine to ten), Passives (score seven to eight), and Detractors 
(score zero to six). The net guest score can be calculated  
by taking the percentage of customers who are Promoters 
and subtract the percentage who are Detractors.

Occupancy
Number of hotel bedrooms occupied by guests expressed  
as a percentage of the number of bedrooms available  
in the period.

Operating margin
Operating profit expressed as a percentage of total revenue.

Whitbread 
Annual Report and Accounts 2013/14

Glossary

146

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Profit per outlet
Operating profit (after allocation of overheads but before 
exceptional items) divided by the average of the opening  
and closing number of outlets.

RevPAR/yield
Revenue per available room, also known as ‘yield’, this hotel 
measure is achieved by multiplying the ARR by the occupancy 
rate. This measure ignores non–room income such as food 
and beverage.

Returns, Return on Capital Employed or ROCE
Dividing the underlying profit before interest and tax for  
the year by net assets at the balance sheet date, adding  
back debt, taxation liabilities and the pension deficit.

Solus sites
Consist of standalone Premier Inn hotels with an integrated 
restaurant (e.g. County Hall) or Premier Inn hotels with  
a third–party restaurant.

System sales
Retail sales from Costa outlets irrespective of whether  
it is an equity or a franchise store.

Tassimo
The Tassimo Hot Beverage System is a consumer  
single–serve coffee system that prepares one–cup  
servings of espresso, regular coffee, tea, hot chocolate  
and various other coffee drinks.

Total Shareholder Return (TSR)
The total return of a stock to an investor (capital gain  
plus dividends).

Turnover per outlet
Turnover in a period divided by the average of opening  
and closing outlets.

Underlying basic EPS 
Underlying profit attributable to the parent shareholders 
divided by the basic weighted average number of ordinary 
shares. 

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

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Whitbread 
Annual Report and Accounts 2013/14

Glossary

147

 
 
 
 
 
 
 
 
 
 
Our charities

 The Costa Foundation 

We don’t just make coffee; we make a difference 
We’re committed to looking after coffee–growers and 
that’s why we established the Costa Foundation in 2007. 
Originally it worked under the registration of Charities  
Trust, an independently registered charity with the  
UK Charity Commission. In 2012 the Costa Foundation 
registered as a stand–alone charity.

The Costa Foundation was set up to give something  
back to coffee–growing communities and since 2008,  
40 schools or school projects have been completed in 
Colombia, Costa Rica, Ethiopia, Guatemala, Peru, Uganda 
and Vietnam. At the date of this Report, six projects are  
still under construction and a further six projects have  
been approved and are at the planning stage with 
committed funding in place. This brings the support from 
the Costa Foundation to 52 communities in eight countries.

The Costa Foundation’s objectives are the relief of  
poverty and the advancement of education, health and 
environmental protection within coffee–growing 
communities and surrounding areas.

The money raised through the Costa Foundation has given 
thousands of children access to education and ensured that 
the people who grow coffee receive the long–term support 
needed to ensure sustainable and improved futures.

In 2013/14 alone we raised over £1.5 million as a result  
of dedicated fundraising and generous donations.  
We have an aspiration to provide educational facilities  
to 50,000 children. 

Help us to continue the good work by donating: 
http://www.costafoundation.com/donations

 Great Ormond Street Hospital  
 Children’s Charity

Raise a smile and help a child
In May 2012, Whitbread Hotels & Restaurants chose  
Great Ormond Street Hospital Children’s Charity  
as its long–term charity partner.

Each year, Great Ormond Street Hospital responds  
to over 220,000 patient visits from children all over  
the UK who are often suffering from rare, complex  
and life–threatening conditions.

The charity needs to raise at least £50 million a year  
to help support the hospital’s work and the very special 
children it cares for. The hospital is in the process of 
redeveloping and replacing some of its oldest clinical 
buildings so that families can benefit from world class  
care in 21st century facilities and have more space  
to be together at the bedside. 

In June 2013, we announced that Whitbread Hotels  
& Restaurants had pledged £7.5 million towards the 
construction of a new clinical building at Great Ormond 
Street Hospital which is to be called The Premier Inn  
Clinical Building. The building will provide much needed  
new in–patient wards, more operating theatres and  
a recovery unit. It will contain a new surgery centre, 
respiratory ward and a specialist ward for children  
with severe forms of arthritis, skin conditions or  
infectious diseases.

At the date of this Report we have raised over  
£2.2 million towards the £7.5 million target.

Help us to continue the good work by donating: 
http://www.gosh.org/donate/single-donation-
form/?reasonid=219

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Registered charity number 1147400.

Registered charity number 235825.

Whitbread 
Annual Report and Accounts 2013/14

Our 
charities

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Whitbread 
Annual Report and Accounts 2013/14

Section heading

Designed and produced by  
Bostock and Pollitt Limited, London

Main photography by George Brooks 
Board photography by Ian Phillips–McLaren

149

Whitbread PLC
Whitbread Court
Houghton Hall Business Park
Porz Avenue
Dunstable
Bedfordshire
LU5 5XE

 www.whitbread.co.uk/investors