Annual Report and Accounts 2016/17
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From your morning
coffee to a comfy
place to lay your head,
bringing customers
brands they love
Annual Report and Accounts 2016/17
We are the UK’s largest
hotel, restaurant and
coffee shop operator
with 50,000 employees,
serving millions of
customers every week,
bringing customers
brands they love
Our vision
Our vision is to grow our successful 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. We aim to be a Force
for Good in our communities and, as you will see on
page 2, Everyday Efficiency has now been added
to our Customer Heartbeat model.
In this document
Overview
01 Financial highlights
02 Business overview
Strategic report
04 Chairman’s statement
06 Chief Executive’s review
08 Strategy
14 Business model
16 Key performance indicators
22 Group HR Director’s report
24 Winning Teams
32 Customer Heartbeat
40 Profitable Growth
48 Force for Good
54 Group Finance Director’s review
58 Principal risks and uncertainties
Governance
62 Corporate governance
64 Board of Directors
72 Audit Committee report
75 Nomination Committee report
78 Remuneration report
99 Directors’ report
Consolidated accounts 2016/17
103 Directors’ responsibility statement
104 Independent auditor’s report
109 Consolidated financial statements
115 Notes to the consolidated
financial statements
Company accounts 2016/17
156 Balance sheet
158 Notes to the Company
financial statements
Shareholder information
172 Shareholder services
175 Glossary
2016/17
highlights
Total revenue
£3,106.0m
+8.2%
Underlying profit before tax†
£565.2m
+6.2%
O
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Prior year comparatives
The financial year to 2 March 2017
was a 52-week year and the
financial year to 3 March 2016 was
53-week year. In order to provide
a clearer comparison throughout
this report, year-on-year growth
in numbers relating to revenue,
underlying profit and underlying
earnings per share are shown
using a 52-week comparative,
which excludes the final week
of the 2015/16 financial year.
All other statutory comparatives
and numbers shown at the balance
sheet date reflect the financial
statements and do not exclude
the 53rd week of the prior year.
Performance measures
The performance of the Group
is monitored internally using
a variety of statutory measures
such as total revenue and profit
before tax and alternative
performance measures (APMs)
such as underlying profit before
tax, like for like sales and return
on capital. APMs are not defined
within IFRS and are used to
assess the underlying operational
performance of the Group.
As such these measures should
be considered alongside
IFRS measures.
2016/17
2015/16
2014/15
2013/14
£3,106.0m
£2,921.8m
£2,608.1m
£2,294.3m
2016/17
2015/16
2014/15
2013/14
£565.2m
£546.3m
£488.1m
£411.8m
Cash generated from operations
From £782.2m
to £860.1m
Premier Inn & Restaurants
like for like sales†
Up 2.3%
Costa UK Equity like for
like sales†
Up 2.0%
Profit before tax
£515.4m
+5.7%
Full-year dividend
95.80p
+6.0%
2016/17
2015/16
2014/15
2013/14
£515.4m
£487.7m
£463.8m
2016/17
2015/16
2014/15
2013/14
£347.0m
95.80p
90.35p
82.15p
68.80p
Net debt†
From £909.8m
to £890.0m
Net assets
From £2,404.7m
to £2,524.8m
Group return on capital†
15.2%
-0.1%pts
Underlying basic EPS†
246.48p
+6.0%
2016/17
2015/16
2014/15
2013/14
15.2%
15.3%
15.7%
15.3%
2016/17
2015/16
2014/15
2013/14
246.48p
238.65p
213.67p
179.02p
Total basic EPS was 231.39p (2015/16 215.66p)
Whitbread Annual Report and Accounts 2016/17 01
† Definitions of all APMs are
included in the glossary on
page 175.
Overview Business overview
How our business works
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is the UK’s leading
hospitality company
We have built two of the UK’s most
successful hospitality brands, Premier Inn
and Costa, through consistent operational
excellence and providing a great customer
experience. Our 50,000 team members
deliver outstanding service to more than
28 million customers every month across
our hotels, coffee shops and restaurants.
We serve our customers in the UK and beyond through our two businesses:
Premier Inn & Restaurants
Costa
Premier Inn is the UK’s leading hotel business,
with over 760 hotels and more than 68,000
rooms across the UK. Our unique joint site model
means that more than half of our hotels are
located alongside our own restaurant brands.
We also have hotels in
the Middle East, and
Germany, with more
hotels in the pipeline.
Costa is the UK’s favourite coffee shop, with
over 2,200 coffee shops in the UK, over
1,300 stores in 29 international markets
and over 6,800 Costa Express self-serve units.
We have a multichannel strategy, with equity
stores, franchise stores and stores operated
by joint ventures, as well as a wholesale operation.
We create value for all our
stakeholders through our
Customer Heartbeat model:
We measure our progress
through key performance
targets included in our balanced
scorecard (or Whitbread In
Numbers – WINcard) for
Winning Teams, Profitable
Growth, Customer Heartbeat,
Force for Good and Everyday
Efficiency, which has recently
been added to our model in
order to reflect the importance of
efficiency to our future success.
Force for Good
Everyday Efficiency
Whitbread Annual Report and Accounts 2016/17 02
Overview O
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We are focused on three strategic themes:
1
Grow and innovate
in our core UK
businesses
2
Focus on our strengths
to grow internationally
3
Build the capability
and platform to support
future growth
10 for more information
11 for more information
12 for more information
We are proud of our ability to
deliver great customer service
and create real job opportunities:
We are committed to doing business
responsibly and sustainably:
Our focus on delivering high standards for
our customers through strong employee
engagement is at the heart of our strategy.
We aim to create jobs for people of every
background and help our people to reach their
potential through training and mentoring in
a supportive and inclusive environment.
22
for more information
Through our Team and Community, Customer
Wellbeing and Energy and Environment
programmes we are delivering tangible
improvements across the business and we have
ambitious targets for 2020, covering job creation
and work experience, supply chain, sugar reduction,
carbon and water reduction and recycling.
48
for more information
Supported by a strong risk
management and governance
framework and a disciplined
approach to capital management:
Maintaining high standards of corporate
governance is vital to supporting our
financial performance.
By understanding and responding to risks we
can make informed decisions that strengthen
our capacity to build value.
Whitbread Annual Report and Accounts 2016/17 03
Chairman’s statement
We have a clear plan
and we have made
good progress against
our strategic priorities
Whitbread, one of Britain’s oldest and
most successful companies, celebrates
275 years in business this year.
Richard Baker
Chairman
Although the modern day
Whitbread is very different from
the original brewing business
founded by Samuel Whitbread in
1742, we are immensely proud of
our history and it is a great honour
for me and my colleagues on the
Board to play our own part in the
Whitbread story.
The links to our heritage remain strong.
Our base is still in Bedfordshire and
we are delighted to be able to welcome
members of the Whitbread family to
our Annual General Meeting each year,
whilst our core values of investing in
our Winning Teams and being a Force
for Good in our communities remain as
important to us today as they always
have been.
275
This year is our 275th
anniversary
11
Costa Foundation school
projects completed in 2016/17
£8.9m
Raised since 2012 to fund the
Premier Inn Clinical Building at
Great Ormond Street Hospital
+6.0%
Increase in full year dividend
We are very aware of our responsibility
to ensure that this great British company
continues to thrive and, as such, we are
focused both on driving growth and
managing risk to an appropriate level,
whilst exhibiting excellent corporate
governance. We operate a conservative
approach to the management of our
balance sheet and this provides us
with a solid base in turbulent and
changing times.
Our Winning Teams are the key to our
success and I would like to thank our
50,000 employees for the fantastic
work they do in giving our customers
a great experience.
Consistent strategy
I explained this time last year that the
fundamentals of our strategy, which
is to provide sustainable long-term
value for our shareholders by growing
our successful Premier Inn and Costa
brands, whilst delivering a good
return on capital, were unchanged.
This remains true today, as we continue
undaunted by political upheaval and
economic uncertainty.
We have a clear plan and we have
made good progress against the three
strategic priorities outlined by our
Chief Executive, Alison Brittain, last
April. These are to grow and innovate in
our core UK businesses; to focus on our
strengths to grow internationally; and
to build the capability and platform to
support future growth. More detail on
our strategy can be found on pages
10 to 13 and information on progress
against our strategic objectives can
be found on pages 41 to 45.
We have remained on course to deliver
our objectives, whilst at the same time,
refreshing our Board and the executive
leadership team. I believe that the new
team will enable Whitbread to enter
the next phase of its life with renewed
vigour and confidence.
Force
for Good
Whitbread Annual Report and Accounts 2016/17 04
Strategic reportStrategic report Force for Good
I believe that it is important that
companies act as a Force for Good in
their communities as well as being great
employers and, of course, delivering on
financial objectives for their shareholders.
This has always been a core value at
Whitbread and, once again, we have
made some great progress this year.
I reported in last year’s report that we
had raised £6 million for Great Ormond
Street Hospital Charity towards a
£7.5 million target. I am delighted to
be able to report that this target was
met in November 2016, with the new
Premier Inn Clinical Building due to
open later this year. Meanwhile, a
further £1.8 million has been raised for
the Costa Foundation during the year,
with 72 school projects having been
completed so far, bringing access to
education to thousands of children
in coffee-growing communities.
Modern slavery is a live topic this
year, as companies begin to publish
a statement on the subject on their
websites. As you would expect,
Whitbread has published its own
statement, which can be found
on our website. For us this is not merely
about meeting a requirement though.
I can assure you that it is a subject we
take very seriously and we are in no
way complacent. More information
on our activities in this area can be
found on pages 50 to 51.
Corporate governance
You will see in our remuneration
report on pages 78 to 98 that we
have proposed some updates to
our remuneration policy. The current
policy was approved in 2014 and we
are required to put an updated policy
to shareholders for approval at the
AGM. The Remuneration Committee
has taken the opportunity to ensure
that our policy is well aligned to our
strategy and has re-balanced the
Annual Incentive Scheme so as to focus
a little more on the leading indicators of
future financial performance and a little
less on in-year profit. It is proposed that
LTIP targets be re-set so as to reflect
the business plans and, in particular, the
cost headwinds such as the National
Living Wage, business rates, commodity
price inflation and foreign exchange
rates as well as planned investment
of non-productive capital in Germany,
China and IT.
I believe that our approach to
remuneration is grounded and
conservative and that we are sensibly
positioned relative to other companies.
Dividend
The Board recommends a final
dividend of 65.90 pence per share,
making a total dividend of 95.80
pence per share, up by 6.0%. The final
dividend will be paid on 30 June 2017
to shareholders on the register at the
close of business on 26 May 2017.
The Dividend Reinvestment Plan will
continue to operate. Details of how to
participate in this plan can be found on
the Company’s website. Details of the
Group’s dividend policy can be found
on page 56 in the Group Finance
Director’s review.
Shareholder benefits
Last year, having taken account
of feedback from shareholders on
the previous electronic system, we
introduced a new shareholder benefits
card. I’m pleased that the new card
appears to have been well received by
shareholders and has, for the most part,
worked well. I have certainly noticed
a significant reduction in correspondence
on the subject. Shareholders who
received the card last year, should so
do automatically this year, providing
that they still hold the required 64
shares in Whitbread. Any shareholder
who holds this number of shares, who
did not register for a card last year and
would like to do so, can find further
details on page 173.
The Board
As I mentioned earlier in this statement,
there have been a number of Board
changes during the year, as well as
changes to the senior executive team,
which Alison reports on in her review
on page 7.
Two new independent non-executive
directors, David Atkins and Deanna
Oppenheimer joined the Board on
1 January 2017. David is the Chief
Executive of Hammerson plc, a major
UK property business with interests
across a number of European markets.
Whitbread has a clear growth strategy,
which is underpinned by an extensive
property portfolio, and David’s
experience in the European retail
property sector will provide the
Whitbread Board with invaluable
insights as we expand both in the
UK and overseas.
Deanna is a highly experienced
executive, with a strong background
in mass consumer retail, and will bring
her experience of having worked with
a broad range of leading edge digital
businesses in her role at CameoWorks
to the Whitbread Board. In addition,
Deanna’s experience of chairing the
Tesco Remuneration Committee
makes her well placed to succeed
Stephen Williams as Chair of our
own Remuneration Committee.
I believe that it
is important that
companies act as a
Force for Good in
their communities
as well as being
great employers.”
The third new appointment to the Board
this year is that of Adam Crozier, with
effect from 1 April 2017. Adam is Chief
Executive of ITV plc and has been Chief
Executive of a number of public and
private sector organisations over the
last 21 years, in the media, logistics
and retail sectors. Adam is a very high
quality business leader, with a strong
background in business transformations,
brands, communication and marketing
and his expertise will be of great value
to the Whitbread Board as we continue
to expand our successful Premier Inn
and Costa brands.
Wendy Becker stepped down from
the Board on 31 December 2016 after
nine years of service to Whitbread and
Stephen Williams, who has also just
completed nine years of service, will
step down immediately after the AGM
in June. I would like to thank both
Wendy and Stephen for their much
valued contribution to the Whitbread
Board during a very successful period
for the Company. Wendy has played a
significant role as a member of all three
Board Committees, whilst Stephen has
served both as Senior Independent
Director and, more recently, as Chairman
of the Remuneration Committee. I would
also like to thank Stephen for extending
his membership of the Board so as to
provide handover support to Deanna
as she takes on the leadership of the
Remuneration Committee.
I look forward to seeing as many of you
as possible at our AGM on Wednesday
21 June 2017.
Richard Baker
Chairman
24 April 2017
Whitbread Annual Report and Accounts 2016/17 05
Strategic report
Chief Executive’s review
This is a significant year
in Whitbread’s history
as we celebrate our
275th anniversary
I am delighted to be leading this great
British company at this historic time and,
with such a long and successful history,
it is right that we take a long-term view
of our business in order to safeguard
the Company’s future for many
more years to come.
Whitbread has had another year
of strong growth and continued
investment with total Group sales
increasing 8.2% to £3.1 billion
and underlying basic earnings
per share increasing by 6.0%,
demonstrating the strength of our
core brands. Total basic earnings
per share increased by 7.3%.
Strategic priorities
In 2016/17 we made good progress
in delivering on our three strategic
priorities: to grow and innovate in our
core UK businesses; to focus on our
strengths to grow internationally; and
to build the capability and infrastructure
to support long-term growth.
Premier Inn’s strong sales growth
benefitted from the 3,816 gross new
UK rooms we opened this year and the
accelerated maturity of the c.9,000
rooms we have opened over the last
two years. We delivered high customer
satisfaction by leading the market on
quality and value, achieved occupancy
of over 80% with record levels of direct
bookings at 94%, all of which supported
our strong return on capital.
Costa opened 255 net new stores
worldwide and we continue to roll
out our successful and fast growing
Costa travel formats. Costa Express
had a great year installing over
1,500 machines of which 248 were in
international markets. We are innovating
to drive our sales growth and are
pleased with the investment we are
making to introduce ‘finer’ coffee
concepts, leveraging our new state
3,816
new Premier Inn UK rooms
Alison Brittain
Chief Executive
+8.2%
increase in turnover in 2016/17
6.2%
growth in our underlying
profit before tax to
£565.2 million
255
net new Costa
stores worldwide
Whitbread Annual Report and Accounts 2016/17 06
Strategic reportStrategic report of the art Roastery and delivering
fresher food that our customers will
enjoy later this year.
Internationally, in Germany we grew
our hotel pipeline to five hotels and
our Frankfurt hotel received great
guest feedback. We continue to have
success with our profitable joint venture
in the Middle East while our phased
withdrawal from South East Asia is on
plan. China remains an exciting platform
of growth for Costa and we have a clear
plan to enhance our business. We have
launched five new concept stores,
the results of which give us further
confidence that we can capitalise
on this market opportunity and grow
to significant scale.
During the year we continued to
strengthen our capabilities to support
our long-term growth, including
developing the senior team with a
number of new hires and promotions.
In November we announced a £150
million cost efficiency programme
to help offset investment and sector
cost pressures. We have made good
progress this year in areas such as
procurement, supplier consolidation
and labour scheduling, which has
helped maintain margins.
In the year ahead we will continue
to focus on organic growth and
investing in our customer proposition.
This, together with our efficiency
programme and disciplined capital
management gives us confidence
in delivering another year of
good progress, in line with overall
expectations. Whilst we are only seven
weeks into our new financial year
Premier Inn has had a good start
to the year and Costa has also seen
positive like for like sales growth,
although we remain cautious and
expect a tougher consumer
environment than last year.
In the longer term we remain confident
that, with our significant structural
growth opportunities, the power
of our brands and the investments
we are making, we will continue to
deliver strong returns and sustainable
long-term growth for our shareholders.
More detailed information on our three
strategic priorities can be found on
pages 8 to 13.
2016/17 performance
Group underlying profit before tax rose
6.2% to £565.2 million and underlying
basic earnings per share increased 6.0%
to 246.48 pence. Profit for the year was
up 7.4% to £415.9 million and total basic
earnings per share were up 7.3% to
231.39 pence.
Premier Inn & Restaurants’ underlying
operating profit was up 7.4% to
£468.0 million. Premier Inn grew total
sales by 9.0% and the number of rooms
available by 9.3%, as we opened 3,816
gross new UK rooms during the year,
whilst achieving high total occupancy
of 80.2%. Like for like sales grew by
2.3%, benefitting from good RevPAR
growth of c.1.4% in catchments where
we did not add capacity and from our
hotel extension programme which,
as expected, diluted our like for like
RevPAR by c.2%, but overall grew our
like for like sales by c.1%.
Restaurants’ total sales increased 1.2%
benefitting from the eight net new sites
opened during the year and like for like
sales declined by 0.3%, slightly ahead
of our competitor set.
Costa’s underlying operating profit
was up 5.3% to £158.0 million, with total
sales growth of 10.7%. This was driven
by UK like for like sales growth of 2.0%,
255 net new stores worldwide and an
acceleration in our roll-out of Costa
Express machines, with 1,585 net new
installations. Margins were down
0.8% pts, slightly ahead of our previous
guidance due to the phasing of
investments into 2017/18.
As we align our business towards our
three strategic priorities we incurred
a net non-underlying charge of
£49.8 million (2015/16: £58.6 million),
predominately relating to the estimated
cost of Premier Inn International’s
withdrawal from India and South East
Asia and re-organisation costs
associated with our cost efficiency
programme.
The executive team
As Richard Baker mentioned in his
statement, there has been some
significant change to the executive
team over the last couple of years and
I am grateful to Nicholas Cadbury and
Louise Smalley for the stability they
have provided, which has enabled
our leadership team to be refreshed
so seamlessly.
I reported this time last year that
Dominic Paul would be joining the
team as Managing Director, Costa
Coffee. Dominic joined us in June 2016,
before which he was responsible for
the success of Royal Caribbean outside
the US. Dominic has hit the ground
running, injecting energy and putting
his personal stamp on our strategy
for Costa.
In order to structure ourselves to
meet our strategic objectives I took
the decision to remove the Whitbread
Hotels & Restaurants divisional
infrastructure, with the aim of bringing
the leadership team closer to the
customer and enabling a leaner,
more agile business, with faster
decision-making. This led to a number
of changes to my executive team.
Simon Jones was promoted to
Managing Director of both Premier Inn
& Restaurants and joined the Executive
Committee. Simon joined Whitbread
in 2011 and, since then, has been pivotal
to the Premier Inn story, leading on key
initiatives such as network planning,
pricing and marketing.
Another internal promotion was
Mark Anderson, who has been with
the business for ten years and has led
our property function since 2008.
Mark now reports directly to me, which
I believe appropriately reflects the
importance of property to our business
and the significant potential for value
creation in this area. Mark also became
Managing Director, Premier Inn
International.
Our values
At Whitbread we believe that it is
not just what you achieve, but how
you achieve it. We aim to deliver great
financial results for our shareholders,
have a positive impact on communities,
create fantastic career opportunities for
our employees and great experiences
for our customers, in a safe and
welcoming environment.
We intend to ensure that everyone
who plays a part in delivering the
products and services that our
customers love is treated with respect
and paid appropriately for their work.
This applies not only to our 50,000
team members, but also to the many
people working across the world who
contribute to Whitbread’s success.
I want to take this opportunity to thank
everyone who makes Whitbread the
company it is for their effort and
commitment throughout the year
and I am confident that we will work
together to deliver on our strategic
objectives in the years ahead and that
we will do so in a way that will make
us all proud.
Alison Brittain
Chief Executive
24 April 2017
Whitbread Annual Report and Accounts 2016/17 07
Strategic report Strategy
Our strategy for
long-term growth
Both of our core brands, Premier Inn
and Costa, have a structural growth
opportunity. Our brands are market-leading,
our customers are loyal, and our financial
approach is disciplined and prudent.
On 29 November 2016 we held a Capital
Market Day, in which we reported the
following highlights:
• for Premier Inn, we have clear line of
sight to our 2020 milestone of 85,000
UK rooms and have identified an
extended growth runway beyond
100,000 UK rooms;
As a result of our strong fundamentals,
we have the flexibility to continue to
make progress despite evolving political
and economic uncertainties. We have
done extensive scenario modelling, are
confident in our baseline plan and in our
ability to make decisions with pace and
agility if and when required.
Financially we are in a strong position,
with strong cash generation, a secure
balance sheet and a pattern of
reinvestment in organic growth,
at good returns.
On the following pages you will see
more detail of our structural growth
opportunity, together with further
information on the three strategic
priorities introduced this time
last year:
1 Grow and innovate
in our core UK
businesses
2 Focus on our strengths
to grow internationally
3 Build the capability
and platform to
support future growth
• for Costa, we again have clear line
of sight to our 2020 milestone of
£2.5 billion of system sales and have
identified an extended runway in the
UK to at least 3,000 UK stores;
• we continue to see great potential in
our international business. Germany
has strong market fundamentals
and is a fabulous fit for the Premier
Inn brand. We see a tremendous
long-term opportunity for Costa
China and, at Costa Express, we are
constantly challenging ourselves to
accelerate and double-up;
• to help us offset cost headwinds,
from factors such as increases in
business rates and the National Living
Wage as well as FX-related price
inflation, we have established a
Group-wide efficiency programme
and are targeting £150 million of
gross savings over five years; and
• we operate a unique property model
which is balanced and creates unique
competitive advantage. Our property
strategy directly supports our
structural growth ambitions and we
have recently valued our freehold
property portfolio in the range of
£4.2 billion to £5.1 billion.
Our strategy builds on the
Company’s core strengths and
its proven brands and business
models. It also adds a number
of new elements to enhance our
capability. These come in the form
of increased pace and agility, a
focus on innovation, technology
and efficiency and a clear strategy
for our property portfolio.
• We will continue to invest, to
capture the growth opportunities
available in both coffee and budget
branded hotels.
• We will improve and innovate
our customer offers to retain our
market-leading brand positions.
• We will focus on our strengths
to grow internationally and across
the whole business.
• We will create an efficient
and productive infrastructure,
building capability to support
our long-term growth.
Our leasehold and freehold property
portfolio provides the core long-term
infrastructure and competitively
advantaged access to the best sites
and provides operational and cost
advantages for our business. We will
continue to proactively manage this
key asset to ensure we have the best
locations and to capture freehold
development profit.
We take a long-term view of our
business. Whitbread has a 275-year
history and, with that, comes a
responsibility to protect the long-term
interests of all our stakeholders: our
shareholders, our employees and
pensioners and our customers. We
will continue to focus on growing
earnings and dividends, whilst
maintaining a good return on capital.
Whitbread Annual Report and Accounts 2016/17 08
Strategic reportStrategic report Structural growth
opportunity
Premier Inn today has 762 UK
sites and a 9.5% share of the total
UK hotel market. Premier Inn has
opened around 4,000 UK rooms
per year for the past four years.
Meanwhile Costa has 3,532
stores and 6,801 Costa Express
machines globally.
At Premier Inn, our growth continues to
be at high returns, and can be described
as structural for three reasons:
• the significant ‘independent’ hotel
segment is in structural decline.
Running a hotel is becoming more
complex and costly. Proprietors must
manage to ever higher customer
standards and increasingly must also
be digital entrepreneurs, competing
with online travel agents and
disrupters as well as traditional
local competition;
• the budget branded sector is
capturing the growth, reflecting
customers’ increasing desire for
quality and value for money and
the structural shift to value brands
looks set to continue; and
• Premier Inn is the UK’s Number 1
hotel company. The business model
is clearly advantaged and well-placed
to capture the shift to value brands
as location and value for money are
customers’ top choice. We have the
largest network, the most compelling
value for money proposition and loyal
guests who give us the highest
customer ratings. Our distribution
model is direct, and our operating
DNA delivers consistent quality. We
also have a joint site and property
strategy that gives us a unique
competitive advantage, to be able
to access the best sites at good value.
Meanwhile, we are tremendously
fortunate to operate in the coffee
industry. There aren’t many consumer
product categories that can point
to a global consumer lifestyle tailwind,
habitual purchase behaviour and a
6% global growth forecast. Coffee
has recently overtaken tea as the
UK’s beverage of choice and
international comparisons show
a lot more headroom for growth.
The strength of the category has
attracted a plethora of brands,
independents and non-specialists to
the sector. Our UK business is stepping
forward to meet this challenge head
on. We start from a position of great
strength, as customers’ choice is still
dominated by convenience and coffee
quality, where we are a clear winner
in the UK. We are by far the UK’s
Number 1 coffee chain, with the
strongest network and the best
brand perception in the market.
Structural growth opportunities remain strong
Total UK
hotel market
rooms
Budget
branded
Other
branded
Independents
678,000 686,000 692,000 709,000 729,000 752,000
19%
24%
57%
22%
25%
54%
23%
26%
28%
30%
24%
52%
24%
25%
50%
47%
25%
45%
2011
2013
2015
2017
2019
2021
Premier Inn
rooms
share %
43,000
52,000
59,000
c.68,000
c.77,000
c.86,000
6%
8%
9%
10%
11%
11%
762
UK sites
9.5% share of
UK hotel market
Whitbread Annual Report and Accounts 2016/17 09
Strategic report Strategy continued
Strategic Priority
Premier Inn UK – runway for growth beyond 100,000 rooms
1 Grow and
innovate in
our core UK
businesses
We are confident in our 2020
milestones, but we also have
considerable growth potential
beyond 2020 and our advantaged
business models leave us best able
to capture this market opportunity.
However, we have decided not to
create further milestones from these
opportunities. How and when we take
our opportunities will be a matter for
us, based on sustaining good returns,
delivering earnings growth and
managing the business with flexibility
and agility.
Our Premier Inn network is formidable.
We have 40% more sites than
our nearest competitor and our
consistency of customer satisfaction
is a core strength. Our market-leading
occupancy and direct distribution
translate to good profit generation and
a strong return on capital. We achieve
over 13% returns across the Premier Inn
& Restaurants portfolio, which is
substantially above our cost of capital.
Our ability to deliver growth is proven.
We open around 4,000 UK rooms per
year, which roughly translates to three
new hotels every month. Our network
plan is based on quantitative analysis,
and has been subject to continuous
scrutiny and refinement, taking account
of the long-term UK growth in GDP
and the effect we think disrupters will
have on the market. We remain on
track for our 2020 milestone and have
identified a growth runway beyond
100,000 UK rooms.
During the year we conducted an
extensive strategic review of Costa UK,
and there remains considerable
headroom for growth.
Digital direct
destination
Network
strength
High
occupancy
Over
13%
return on
capital
Continued
growth
Value for
money
Consistent
quality delivery
The chart above represents why Premier Inn is such a unique and
differentiated model.
UK Network strength
40% more sites than closest
competitor
9/10 sites have TripAdvisor
Certificate of Excellence
Strong return on capital
Above hurdle returns for
both freehold and leasehold
providing a substantial
premium to cost of capital
Costa is a proposition for the whole
of the country. We operate in all types
of location from high streets to retail
parks and Drive Thrus, and through
both equity and franchised models.
Across this diverse estate Costa is the
clear Number 1 preferred coffee shop,
reflecting our exceptional coffee, our
loved brand, our formidable network,
and our Winning Teams.
Coffee in the UK is a hive of innovation.
Branded coffee shops, new
independents, non-specialists and
product innovators all want to
participate in the category growth,
but we plan to maintain our position
of leadership.
Continued growth
On track for 85,000 rooms by 2020
and growth runway beyond 100,000
rooms identified, with strong network
planning disciplines
Digital direct
94% of bookings made direct via our
digital channels
Value for money
Premier Inn is rated No. 1 by YouGov
for value for money
Occupancy
Above 80%
Our plans are to enhance the UK offer,
through improvement of the customer
proposition, including building on our
coffee credentials and delivering ‘finer
food’, and smarter thinking about how
we segment and optimise the estate.
Delivering this programme will provide
us with long-term, sustainable like for
like growth.
The structural growth of coffee is
expanding the scope of operations for
coffee shops. In addition to traditional
high street and retail locations, we see
extensive opportunity for Drive Thru
coffee and believe we can access more
of the best transport locations and
retail parks. Our network plan shows
opportunity for at least 3,000 stores
in the UK compared to just over
2,200 today.
Whitbread Annual Report and Accounts 2016/17
10
Strategic reportStrategic report Strategic Priority
2 Focus on
our strengths
to grow
internationally
Costa Express
represents a significant
international growth
opportunity
Germany
The Premier Inn in Frankfurt
is enjoying excellent
customer feedback
Germany is a structurally attractive
market for Premier Inn.
The German customer appreciates
a high quality sleep experience at a
great price and, crucially, can pay an
economic rate to enjoy it. The market is
in steady growth, currently dominated
by independents and with the largest
brands at a fraction of our UK scale.
Our first hotel in Frankfurt is enjoying
excellent customer feedback. Being
one of the top Frankfurt hotels on
TripAdvisor is a great endorsement of
our potential and we are maturing the
hotel without using online travel agents.
We have secured five additional sites
in outstanding locations in key cities
to roll out on this template. Over the
long-term, we believe that Premier Inn
can replicate its UK success in Germany,
and create long-term shareholder
value growth.
In order to focus on Germany and the
Middle East we took the decision to
withdraw Premier Inn from India and
South East Asia and our exit plans are
progressing well.
For Costa, China is a large market with
a growing consumer middle class and
coffee culture and has the potential
to provide a significant future growth
engine. We believe that our current
operations represent a platform to
unlock the potential in China and to
establish a Number 2 position in the
market. We recognise that we have
more work to do to get the proposition
right in China and to re-invigorate
the brand. However, we are given
confidence by the fact that, outside
a tail of underperforming stores, site
performance is credible. We have
learned valuable lessons from our
experience to date and we have now
developed a clear plan to succeed
in the market.
Costa has a growing international
footprint and we intend to make it
work harder for us. We will focus on the
markets with the highest potential, with
a lean regional infrastructure to support
local market growth. We will leverage
our capital light franchise model and
skill in successful partner selection to
replicate and build on our success.
As part of this focus, we have taken
the decision to withdraw from our
equity business in France and to focus
on a franchise model.
Costa Express represents a significant
international growth opportunity.
Costa bought Coffee Nation in 2011 and,
since then, performance has exceeded
our expectations. Costa Express is a
technologically advantaged business,
both at the front-end in the coffee,
and at the back-end through its
infrastructure. It succeeds in the UK,
and is starting to succeed overseas
too. We are excited by the prospects
of Costa Express internationally and
constantly looking to accelerate our
growth and double-up.
China
Costa has the potential
to establish a Number 2
position in the
Chinese market
I’m Here
Whitbread Annual Report and Accounts 2016/17
11
Strategic report Strategy continued
Strategic Priority
3 Build the
capability
and platform
to support
future growth
Outlined in the previous pages
is a multi-faceted growth plan,
with multiple brands operating
in multiple territories and
ambitious plans to develop
our key propositions.
It is essential that we build the capability
to support our long-term growth.
We have identified four themes
under this heading:
Efficiency
We have an opportunity and a need to
drive efficiency through our business.
The UK consumer sector is facing a mixture of
macroeconomic uncertainty and mandated cost
inflation. Strong returns are a non-negotiable part
of the Whitbread story, so we have commenced
an overarching efficiency programme. We plan
to deliver significant efficiency savings, worth
£150 million, over a five year period, to help
mitigate sector cost pressure.
Technology
We must take a proactive approach
to our technology and our platform.
Technology touches all stages of the
customer journey, online, at site and across
our support centre and supplier network.
We will develop scalable platforms, create
a centre of digital excellence and embed
data insight across the business.
Organisation
To grow as a business and succeed on
more fronts we must enhance our
organisation and culture. Culturally speaking,
we need dynamic leadership with
clear executive accountability,
and relentless customer focus
supported by agile decision making.
Property
To grow at around 4,000 or more rooms
and continue the significant growth in our
coffee shop estate, it is essential that we can
efficiently access both freehold and leasehold
site opportunities at a good return on capital.
Property is a key part of the story. Over 60% of
Premier Inn rooms today are freehold, and we
have spent considerable time understanding
the nuances of both our property portfolio and
strategy. We have a unique model, which
creates a competitive advantage.
Whitbread Annual Report and Accounts 2016/17
12
Strategic reportStrategic report Property
The rationale for property ownership
is balanced and interconnected, so
to understand one element you need
the bigger picture. This is captured
in the virtuous circle on this page
and described below.
• Our property strategy is centred on
a balanced portfolio with Costa as
an asset-light leasehold model and
Premier Inn a majority freehold estate.
We are focused on achieving good
returns under all models. This
provides us with a strong covenant.
• Our strong covenant gives us
preferential access to freehold and
leasehold sites, at lower cost and at
lower rents than would be available
to competitors. We are agile in local
markets and can manage planning
risks with confidence. We are the
preferred partner for many vendors,
developers and landlords.
• Our balanced portfolio creates strong
operating cash flows and protection
in the downturn via lower fixed costs.
Our cash flows fund our growth,
and our portfolio also provides
an alternative funding source that
adds flexibility. Our covenant,
underpinned by freehold, lowers
our borrowing costs.
• Finally, we continuously achieve
freehold value creation through
development profits, extensions
and other asset opportunities.
Maintaining this majority freehold
base continually supports our
covenant, which is the critical
element to ensure our access
to the best sites – both freehold
and leasehold.
We have reviewed our portfolio, and
estimate our freehold interests to be
worth £4.2 billion to £5.1 billion.
Valuations are dependent on a number
of factors, including the location type,
trading outlook, rent cover and lease
terms. This value has been based on
a rent cover of 2.25x which we believe
to be a suitable ratio in a cyclical
sector to maintain our market-leading
strengths through the cycle. We have
also used an initial net yield of 4.5%
to 5.5% based on individual sale and
leaseback transactions.
To reach these assumptions, we worked
with a large property consultancy
who conducted a desktop valuation,
sampling 37% of sites and extrapolating
across the estate. Sites were assessed
individually based on available local
benchmarks for rental values and their
trading performance.
Competitive advantage in property
Strong
covenant
Access to
best sites, both
freehold and
leasehold
Balanced portfolio
Majority freehold
Good returns
Freehold
value
creation
Operating
cash flow
Growth
funding
The yields quoted are strong and
represent a robust business with a
good trading outlook. Importantly,
these yields reflect our covenant
strength, so that moving away from
a majority freehold estate would
weaken our covenant, which would
push up both our rental yields and
costs of capital substantially. This
in turn would reduce the value of
the property.
The good yield assumes we optimise
the rate of supply of Premier Inn
freeholds placed into the market.
The greater the supply into the market
at a given time, the higher the yield
and the lower the value we would be
able to achieve.
We have already shown tremendous
value creation through hotel extensions,
and aim to broaden this through more
active management of our property
portfolio. We will pursue small scale sale
and leaseback transactions to reinvest
capital and demonstrate our covenant to
prospective landlords, but Premier Inn’s
objective is to remain a majority
freehold business.
Currently 64% of our Premier Inn
estate is freehold, but this will reduce
to around 60% as the pipeline is built
out. Retaining a majority freehold estate
is important to maintain Premier Inn’s
structural growth story.
£4.2bn
to £5.1bn
We estimate our freehold
interests to be worth
£4.2 billion to £5.1 billion
Whitbread Annual Report and Accounts 2016/17
13
Strategic report Business model
How our
business operates
Whitbread is the UK’s largest
operator of hotels, restaurants
and coffee shops, with some
of the UK’s most successful
hospitality brands. Our brand
strength and sharp focus on
markets where there is great
opportunity for structural growth
provide sustainable development
potential for our business.
Our business operates
in two divisions:
Premier Inn & Restaurants
Shaping your future and ours.
Connected and always on the pulse,
your passion for interaction will give
our guests a new kind of hotel
experience.
Costa
Our assets and resources
Financial strength
Disciplined capital management
and good returns.
Read more on p54
Brand strength
Premier Inn is the UK’s leading
hotel business and Costa is the
UK’s favourite coffee shop.
Read more on p32
Winning Teams
Our 50,000 team members make
everyday experiences special for
our customers.
Read more on p24
Property portfolio
Competitively advantaged access
to the best sites and flexibility.
Read more on p13
Network strength
With 762 UK Premier Inns, 3,532
Costa stores and 6,801 Costa
Express machines worldwide, we
are always close to our customers.
Read more on p40
s
ur stre n g t h
n o
o
s
u
c
o
F
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o
r
o
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r
w
c
a
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e
d
U
i
n
K
n
b
o
u
s
v
a
i
t
n
e
e
s
s
i
n
Our business
performance is
underpinned by
Our values
> Genuine
> Confident
> Committed +
14
Whitbread Annual Report and Accounts 2016/17
Strategic reportStrategic report
Our strategy
for delivery
Enabling us to create
and share value for
our stakeholders
s
ur stre n g t h
w internatio n a ll y
n o
o
s
u
c
o
F
o
r
g
o
t
Customer
Heartbeat
G
o
r
u
o
r
w
c
a
o
r
n
e
d
U
i
n
K
n
b
o
u
s
i
v
a
t
e
n
e
s
s
i
n
B
u
il
d
t
h
e capability and p l a t f o r m f o r g ro wth
Our
customers
No.1
Premier Inn is No.1 for value
for money according
to YouGov and Costa
is the UK’s favourite
coffee shop
Our
shareholders
6.0%
increase in dividend
Profitable
Growth
Our
business
6.0%
EPS growth
Our
communities
£4.6m
donated to our
chosen charities
Our
people
78%
employee engagement
Force for Good and Everyday Efficiency
We are a Force for Good in the communities in which we operate
and we are committed to doing business responsibly and efficiently.
Read more on p48
+
Whitbread Annual Report and Accounts 2016/17
15
Strategic report
Key performance indicators
The progress we’re making
Whitbread’s business model, which
can be found on pages 14 and 15
shows how we create value for our
stakeholders. The model’s foundation
is the Customer Heartbeat schematic
— Winning Teams, Customer Heartbeat,
Profitable Growth, Force for Good and
Everyday Efficiency.
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 WINcard.
Every month the results are published
throughout the Group so that everyone
knows exactly how they are doing
against the key targets, both financial
and non–financial, 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 performance are
described in the remuneration report
on pages 78 to 98.
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 target
improved performance.
What the colours generally
indicate:
A green WINcard is achieved
where the performance is
better than both previous
year and target.
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 and target.
Team engagement
Our annual ‘Your Say’ survey
provides us with insightful analysis
on employee engagement and
enablement. This is a key leading
indicator of future performance,
because it is our Winning Teams
that make everyday experiences
special for our customers so
that they come back time and
time again.
Incentivised?
2016/17 X
2017/18 X
2016/17 Performance
The Group ‘Your Say’
score was 78%.
Team turnover
Health and safety
Brand performance
We measure the percentage of team
Nothing could be more important
With our aim to make everyday
members who leave the business
during the year, with the aim of
keeping team turnover as low as
than the safety of our teams and
customers. Independent audits are
carried out throughout the year
experiences special, it is vital that we
have a robust way of measuring how
our customers rate our performance
possible in order to have more settled
to check that standards are being
in terms of recommendations and
and consistent teams, to provide a
maintained, with certain key areas
preference over other brands.
better service to our customers and to
resulting in automatic failure if they
This is a leading indicator of future
help us to keep the cost of recruitment
are not met.
performance.
and training low.
Incentivised?
2016/17 ✔
2017/18 X
2016/17 Performance
The Group team
Incentivised?
2016/17 Acts as a hurdle
2017/18 Acts as a gateway
Incentivised?
2016/17 ✔
2017/18 ✔
turnover score was 40.5%.
and Costa achieved a green
was 14.8% and for Restaurants
2016/17 Performance
2016/17 Performance
Both Premier Inn & Restaurants
The score for Costa detractors
rating, producing a green
result for the Group on an
add-up basis.
net recommend was 46.0%,
both of which were better
than target. The Premier Inn
net recommend score was
48.6%, which did not meet
a stretching target.
The table on this and the following
pages has been designed so as
to provide greater transparency
for shareholders.
For each measure, the table shows
whether the measure was incentivised
in 2016/17 as well as whether it will
be incentivised in 2017/18. For all
incentivised measures the target for
2016/17 is disclosed in the table.
As explained in last year’s report
the family synergies and market
performance measures were removed
from the list of key performance
indicators for 2016/17.
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
79%+
78% to 79%
Under 78%
2017/18
Team engagement will not be an
incentivised measure in 2017/18.
Whitbread Annual Report and Accounts 2016/17
16
Under 42.65%
43.90% to 42.65%
Above 43.90%
The targets are based on the
performance of sites across the
Group in health and safety audits.
The Group result is an add-up of
results achieved by the businesses.
Costa detractors: 15% or less
Premier Inn net recommend: 53.6%
Restaurants net recommend: 43.0%
The Group result is a combination
of these three measures.
2017/18
2017/18
2017/18
Team turnover will be replaced as
Health and safety will become
The Group Customer Heartbeat
leavers and poor customer service.
to incentive payouts. This is because
The target will be for a year on year
all incentive payments will be at
a gateway to incentives rather than
measure for 2017/18 will be a
a hurdle, which will have the impact
combination of Restaurants net
of increasing the importance of
health and safety performance
the discretion of the Remuneration
Committee in the event of
a red score.
recommend, Costa net recommend
and Premier Inn brand health
score, all of which are leading
indicators of future performance.
In each case a green score would
require improvement beyond the
2016/17 outcome.
an incentivised key performance
indicator by team retention, which
drives the focus on keeping people
longer and reducing the cost of
improvement as follows:
+0.5%pt
+0.0%pt to 0.5%pt
Reduction in team retention
Strategic reportStrategic report
Team engagement
Our annual ‘Your Say’ survey
provides us with insightful analysis
on employee engagement and
enablement. This is a key leading
indicator of future performance,
because it is our Winning Teams
that make everyday experiences
special for our customers so
that they come back time and
time again.
Incentivised?
2016/17 X
2017/18 X
2016/17 Performance
The Group ‘Your Say’
score was 78%.
79%+
78% to 79%
Under 78%
2017/18
Team engagement will not be an
incentivised measure in 2017/18.
Team turnover
We measure the percentage of team
members who leave the business
during the year, with the aim of
keeping team turnover as low as
possible in order to have more settled
and consistent teams, to provide a
better service to our customers and to
help us to keep the cost of recruitment
and training low.
Health and safety
Nothing could be more important
than the safety of our teams and
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.
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.
This is a leading indicator of future
performance.
Incentivised?
2016/17 ✔
2017/18 X
Incentivised?
2016/17 Acts as a hurdle
2017/18 Acts as a gateway
Incentivised?
2016/17 ✔
2017/18 ✔
2016/17 Performance
2016/17 Performance
2016/17 Performance
The Group team
turnover score was 40.5%.
Both Premier Inn & Restaurants
and Costa achieved a green
rating, producing a green
result for the Group on an
add-up basis.
The score for Costa detractors
was 14.8% and for Restaurants
net recommend was 46.0%,
both of which were better
than target. The Premier Inn
net recommend score was
48.6%, which did not meet
a stretching target.
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Under 42.65%
43.90% to 42.65%
Above 43.90%
The targets are based on the
performance of sites across the
Group in health and safety audits.
The Group result is an add-up of
results achieved by the businesses.
Costa detractors: 15% or less
Premier Inn net recommend: 53.6%
Restaurants net recommend: 43.0%
The Group result is a combination
of these three measures.
2017/18
2017/18
2017/18
Team turnover will be replaced as
an incentivised key performance
indicator by team retention, which
drives the focus on keeping people
longer and reducing the cost of
leavers and poor customer service.
The target will be for a year on year
improvement as follows:
+0.5%pt
+0.0%pt to 0.5%pt
Reduction in team retention
Health and safety will become
a gateway to incentives rather than
a hurdle, which will have the impact
of increasing the importance of
health and safety performance
to incentive payouts. This is because
all incentive payments will be at
the discretion of the Remuneration
Committee in the event of
a red score.
The Group Customer Heartbeat
measure for 2017/18 will be a
combination of Restaurants net
recommend, Costa net recommend
and Premier Inn brand health
score, all of which are leading
indicators of future performance.
In each case a green score would
require improvement beyond the
2016/17 outcome.
Whitbread Annual Report and Accounts 2016/17
17
Strategic report
Key performance indicators continued
Underlying profit
before tax
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
annually with the Board each year,
which sets a profit target.
Like for like sales growth
While we are investing in the organic
growth of our hotels, restaurants and
coffee shops, it is important that we
closely watch how the mature parts
of our business are performing.
This enables us to make better
investment decisions.
Brand expansion
We have shown that we are able to
create significant shareholder value
by growing our successful brands.
Growing, both in the UK and overseas,
is integral to our strategic priorities
and it is important that we measure
our progress against the targets
we have set.
Returns on investment
Our investors want to be able to
judge how well we are investing
their money in comparison to other
investments they could make. We also
want to compare the performance
of our businesses and assets in order
to focus our own plans. Measuring
returns helps us to do this.
Premier Inn occupancy/
Electricity consumption
Costa total system sales
The expansion of our successful
Premier Inn and Costa brands is
a key strategic goal. We measure
total Premier Inn occupancy in
order to ensure that we are filling
our rooms and Costa total system
sales is a measure of Costa’s
worldwide growth.
Companies have a responsibility
to reduce their impact on the
environment, which we fully endorse.
There are also clear economic
benefits in reducing electricity
consumption, primarily through
reduced energy bills. Being a Force
for Good in our communities is
important to our stakeholders.
Incentivised?
2016/17 ✔
2017/18 ✔
Incentivised?
2016/17 ✔
2017/18 ✔
Incentivised?
2016/17 ✔
2017/18 ✔
Incentivised?
2016/17 ✔
2017/18 ✔
Incentivised?
2016/17 ✔
2017/18 X
Incentivised?
2016/17 ✔
2017/18 X
2016/17 Performance
2016/17 Performance
2016/17 Performance
2016/17 Performance
2016/17 Performance
2016/17 Performance
The Group underlying profit
before tax for 2016/17 was
£565.2 million.
Group like for like sales growth
was 1.6%. Like for like sales
growth represents the year-on-
year change in total sales, less
sales generated by businesses
acquired or disposed of and
outlets opened or closed
during the current year and
the previous year.
During the year we opened
3,816 Premier Inn rooms, 110 net
new Costa equity stores and
installed 1,585 net new Costa
Express machines.
The Group return on capital was
Premier Inn achieved total
15.2%. The return on capital for
occupancy of 80.2% and
Reduction in electricity
consumption was 3.0%.
the purposes of the Long Term
Costa achieved total system
Incentive Plan is calculated using
sales of £1,781.2 million.
an average of the previous 13
Neither of these results quite
months’ net assets rather than
met stretching targets.
the net assets at the end of the
financial year and this was 15.3%.
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
£562.5 million
3.3%+
2.0% to 3.3%
Under 2.0%
Premier Inn rooms open: 3,700
Costa net new equity store openings: 131
Net new Costa Express machines: 1,390
The Group result is a combination of
these three measures.
Return on capital is an important
indicator used when considering
investment decisions and is a key
measure for the Group’s Long Term
Incentive Plan, for which the target
range set in 2014 for awards vesting
this year was 13.0% to 18.0%.
Premier Inn total
Costa total
occupancy
system sales
80.8%+
79.8% to
80.8%
Under 79.8%
Under
£1,783.0m+
£1,694.0m
to £1,783.0m
£1,694.0m
1.0%+
0% to 1.0%
Under 0%
2017/18
2017/18
2017/18
2017/18
2017/18
2017/18
The 2017/18 profit target is
considered by the Board to be
commercially sensitive at the
current time. However, it will
be disclosed retrospectively
in the 2017/18 Annual Report.
The 2017/18 like for like sales target
is considered by the Board to be
commercially sensitive at the current
time. However, it will be disclosed
retrospectively in the 2017/18 Annual
Report. In 2017/18 like for like sales will
form part of the strategic objectives
of Alison Brittain.
The growth targets for 2017/18 are
considered by the Board to be
commercially sensitive at the current
time, but will be disclosed in next
year’s Annual Report. In 2017/18 these
targets will form part of the strategic
objectives of Alison Brittain.
The target range for returns under the
Premier Inn total occupancy and
We will still measure our electricity
Long Term Incentive Plan for awards
Costa total system sales will not
consumption and we have set a
made in 2015 and due to vest in 2018
be incentivised measures for the
is between 13.0% and 18.0%.
executive directors in 2017/18.
target for a further 1% reduction in
2017/18, but this will no longer be
an incentivised measure.
Whitbread Annual Report and Accounts 2016/17
18
Strategic reportStrategic report Underlying profit
Like for like sales growth
Brand expansion
before tax
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
annually with the Board each year,
which sets a profit target.
While we are investing in the organic
We have shown that we are able to
growth of our hotels, restaurants and
create significant shareholder value
coffee shops, it is important that we
by growing our successful brands.
closely watch how the mature parts
Growing, both in the UK and overseas,
of our business are performing.
This enables us to make better
investment decisions.
is integral to our strategic priorities
and it is important that we measure
our progress against the targets
we have set.
Returns on investment
Our investors want to be able to
judge how well we are investing
their money in comparison to other
investments they could make. We also
want to compare the performance
of our businesses and assets in order
to focus our own plans. Measuring
returns helps us to do this.
Premier Inn occupancy/
Costa total system sales
The expansion of our successful
Premier Inn and Costa brands is
a key strategic goal. We measure
total Premier Inn occupancy in
order to ensure that we are filling
our rooms and Costa total system
sales is a measure of Costa’s
worldwide growth.
Electricity consumption
Companies have a responsibility
to reduce their impact on the
environment, which we fully endorse.
There are also clear economic
benefits in reducing electricity
consumption, primarily through
reduced energy bills. Being a Force
for Good in our communities is
important to our stakeholders.
Incentivised?
2016/17 ✔
2017/18 ✔
Incentivised?
2016/17 ✔
2017/18 ✔
Incentivised?
2016/17 ✔
2017/18 ✔
Incentivised?
2016/17 ✔
2017/18 ✔
Incentivised?
2016/17 ✔
2017/18 X
Incentivised?
2016/17 ✔
2017/18 X
2016/17 Performance
2016/17 Performance
2016/17 Performance
2016/17 Performance
2016/17 Performance
2016/17 Performance
The Group underlying profit
Group like for like sales growth
During the year we opened
before tax for 2016/17 was
was 1.6%. Like for like sales
3,816 Premier Inn rooms, 110 net
£565.2 million.
growth represents the year-on-
new Costa equity stores and
year change in total sales, less
installed 1,585 net new Costa
sales generated by businesses
Express machines.
acquired or disposed of and
outlets opened or closed
during the current year and
the previous year.
The Group return on capital was
15.2%. The return on capital for
the purposes of the Long Term
Incentive Plan is calculated using
an average of the previous 13
months’ net assets rather than
the net assets at the end of the
financial year and this was 15.3%.
Premier Inn achieved total
occupancy of 80.2% and
Costa achieved total system
sales of £1,781.2 million.
Neither of these results quite
met stretching targets.
Reduction in electricity
consumption was 3.0%.
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
Disclosure of 2016/17 target
£562.5 million
3.3%+
2.0% to 3.3%
Under 2.0%
Premier Inn rooms open: 3,700
Costa net new equity store openings: 131
Net new Costa Express machines: 1,390
The Group result is a combination of
these three measures.
Return on capital is an important
indicator used when considering
investment decisions and is a key
measure for the Group’s Long Term
Incentive Plan, for which the target
range set in 2014 for awards vesting
this year was 13.0% to 18.0%.
Premier Inn total
occupancy
Costa total
system sales
80.8%+
79.8% to
80.8%
Under 79.8%
£1,783.0m+
£1,694.0m
to £1,783.0m
Under
£1,694.0m
1.0%+
0% to 1.0%
Under 0%
2017/18
2017/18
2017/18
2017/18
2017/18
2017/18
The 2017/18 profit target is
considered by the Board to be
commercially sensitive at the
current time. However, it will
be disclosed retrospectively
in the 2017/18 Annual Report.
The 2017/18 like for like sales target
The growth targets for 2017/18 are
is considered by the Board to be
considered by the Board to be
commercially sensitive at the current
commercially sensitive at the current
time. However, it will be disclosed
time, but will be disclosed in next
retrospectively in the 2017/18 Annual
year’s Annual Report. In 2017/18 these
Report. In 2017/18 like for like sales will
targets will form part of the strategic
form part of the strategic objectives
objectives of Alison Brittain.
of Alison Brittain.
The target range for returns under the
Long Term Incentive Plan for awards
made in 2015 and due to vest in 2018
is between 13.0% and 18.0%.
Premier Inn total occupancy and
Costa total system sales will not
be incentivised measures for the
executive directors in 2017/18.
We will still measure our electricity
consumption and we have set a
target for a further 1% reduction in
2017/18, but this will no longer be
an incentivised measure.
Whitbread Annual Report and Accounts 2016/17
19
Strategic report Strategic report
Bringing customers brands they love...
when they
have to be
on the 6:37
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
£1.2bn 255
Total Costa sales in
2016/17 (up 10.7%)
Net new stores
opened in 2016/17
£38m £1.8m 15%
Investment in our
new Roastery
Money raised for
Costa Foundation
Reduction in added
sugar across the
Costa Ice range
At Costa we’re
passionate about
coffee and our baristas
are on a mission to
inspire the world
to love great coffee.
We know how important it is that
our customers can get a great cup
of quality coffee, served with a smile
without having to wait in lengthy
queues. That’s why we invest millions
of pounds every year in our teams, our
stores and our coffee club app to make
the customer experience as easy and
enjoyable as possible. Across the world
millions of people love the taste of
Costa’s iconic Mocha Italia blend and
our brand new £38 million Roastery will
ensure we can roast enough beans to
meet demand for decades to come.
7.30
meeting
Whitbread Annual Report and Accounts 2016/17 20
Whitbread Annual Report and Accounts 2016/17 20
“I can’t survive my
day if I don’t get
my daily Costa on
the way to work.”
Whitbread Annual Report and Accounts 2016/17
21
Strategic report Group HR Director’s report
Whitbread has had
another strong year
building Winning
Teams across all of our
businesses and markets
Our success is delivered every day through
our people, so ensuring our teams are
engaged, supported and have the means
to develop their careers is at the core of
our strategy.
Louise Smalley
Group HR Director
Over
Over
50,000
800
employees
apprentices in learning
78%
Team engagement
8th
in the Sunday Times
‘Best Big Companies
to work for’
As detailed in the Winning Teams
Section (pages 24 to 29 of this
report) throughout 2016/17 we
have continued to invest in building
and developing our people, from
our customer-facing teams to our
most senior executives.
Aligned to Whitbread’s strategic
goal to build a bigger and better
Whitbread, significant ongoing focus
has been placed on building our
leadership capability to support future
growth. Over the course of the year
we have made progress against our
key performance measures, which
underpin our business plan through:
• inspiring Winning Teams;
• developing leadership; and
• creating a ‘no limits to ambition’
environment.
Our culture remains strong and our
people consistently report that they
enjoy working at Whitbread, which
was highlighted by an engagement
score of 78% in our annual ‘Your Say’
engagement and enablement survey.
In testament to these results, we have
been recognised as the eighth ‘Best Big
Company to work for’ in the prestigious
Sunday Times listing of best companies
and as a ‘Top Employer’ by the Top
Employers Institute for the seventh
year running.
Developing leadership
Over the last year we have strengthened
our leadership teams at every level and
increased the quality of support behind
our business strategies. Focus has been
placed on bringing the leadership team
closer to the customer and enabling
a leaner and more agile business with
faster decision making. To further
evolve our portfolios, significant effort
has been made to promote talent
moves that broaden our leadership
perspectives and capability and provide
stretching career moves. We continue
to recruit and develop our leaders to
achieve the best talent for a strong
future pipeline.
In our operations we hired over 20,000
employees, and offered over 500 of
our team members the opportunity to
become a site manager and run their
own business with full accountability
for profit and loss.
Whitbread Annual Report and Accounts 2016/17 22
Strategic reportStrategic report In our support centre we have focused
on developing very specific capabilities
including change and transformation,
and we have enhanced the programme
and project management teams
who will deliver significant change
programmes to support our business
plans. Focus has also been placed
on strengthening our commercial
capability, from category management
through to specialised procurement.
We have also taken steps to develop
our IS and digital teams, establishing
digital firmly as a core shared service
across Whitbread.
Creating a ‘no limits to ambition’
environment
In 2016/17 we have increased our focus
on diversity and inclusion and made
further progress towards our internal
targets for nationality mix, gender
and minority ethnic representation.
At senior levels, gender representation
continues to be a key priority across
the Group and we know we need
to continue to work hard to ensure
that women and men are more
equally balanced across our senior
leadership teams.
We have undertaken analysis into
equal pay and gender pay and we
are confident that we offer equal
pay for equal work across the Group.
Our early analysis indicates that we
operate with gender imbalances at
senior levels, with more men than
women in senior roles. We are actively
committed to addressing this and
we continue to use every available
opportunity to improve our gender
balance at senior levels, including
working with other organisations that
have similar challenges to share best
practice. We are proud that over
50% of all our senior hires have been
women, and we have worked with
teams throughout the Company to
sponsor and celebrate women coming
through the business.
In the finance function we have
launched a sponsorship scheme,
listening groups and increased part-time
and job sharing opportunities with the
focus of addressing gender imbalance.
We also proactively sponsor initiatives
such as the ‘Women in Construction’
agenda, where we are extremely proud
to say that our very own Alison Lindsay,
Head of Architecture, was awarded the
‘Lifetime Achievement’ award.
In addition, our focus on creating a
‘no limits to ambition’ environment has
seen us continue to drive leadership
awareness on the importance of
diversity and promoting respect and
inclusion in teams where everyone
can achieve their potential.
A breakdown of the directors of
Whitbread, senior managers and all
Whitbread employees, split by gender
as of 2 March 2017, is set out
on this page.
Reinforcing our values
Our culture and leadership hold at the
core that our people are treated fairly,
empowered to develop their talent and
listened to when they are concerned.
Our Code of Conduct is a critical
reinforcement of how we think and talk
about ethical considerations, and every
employee is required to read and
acknowledge the code every year.
We have recently published our first
modern slavery report in compliance
with the Modern Slavery Act. The full
report outlines what we are doing to
mitigate the risk of modern slavery
taking place in our global supply chain
and across our sites. With regard to
our team members, we have a number
of policies in place, including our
right to work in the UK policy, which
is supported by a comprehensive
compliance programme. We also have
a human trafficking policy which is
available to all employees as well as
‘Speaking Out’ and grievance policies
enabling our team members to report
any concerns they may have.
Louise Smalley
Group HR Director
24 April 2017
Directors
Male
Female
40%
60%
Senior managers
Male
Female
29%
71%
All Whitbread employees
Male
Female
37%
63%
Lifetime
Achievement
We are delighted that our very
own Alison Lindsay, Head of
Architecture, was awarded the
‘Lifetime Achievement’ award at the
Women in Construction awards,
recognising the fantastic work Alison
has done and continues to do in her
30-year career with Whitbread.
Whitbread Annual Report and Accounts 2016/17 23
Strategic report Operating review
Winning Teams
Our approach
• We recruit, reward, train and develop our team members to
build highly engaged teams who deliver a great experience
to our customers.
• We offer jobs and an industry-leading apprenticeship programme
to grow talented leaders and we provide exciting international
career prospects.
Costa
Over
14,500
employees
Premier Inn
Over
18,500
employees
Restaurants
Over
14,000
employees
75%
engagement score
80%
engagement score
77%
engagement score
Across the Group we employ
over 50,000 people. It is our
Winning Teams that make
everyday experiences special for
our customers so they come back
time and time again and that’s
why investing in our people is
so important to us.
Our promise to our Winning Teams
Across our brands we have embedded
promises to our people that underpin
the Whitbread vision. This helps us
attract and retain our employees
and highlights what we stand for
as an organisation.
We know our team members make
the single biggest difference by ‘helping
our guests have a great night’s sleep’
in Premier Inn; by ‘serving up great
memories’ in our restaurants and by
‘being passionate about making people
smile and determined to impact the
world’ in Costa.
We want to make sure that all of our
team members feel valued, recognised
and have the opportunity and support
to reach their full potential. That is why,
in our restaurants, we are committed
to making sure our teams feel they are
‘the main ingredient’ in our recipe for
success; why we strongly believe that
our hotel teams make Premier Inn
‘a place made by them’; and why we
encourage our Costa teams to ‘bring
their unique blend’ to all that they do.
‘Shaping your future and ours’ is our
commitment to our hotel teams at
hub by Premier Inn and reflects the
innovation and tech savvy experience
these hotels offer.
Our promise to our Winning Teams was
highlighted through Whitbread being
recognised as a ‘Top Employer’ for
the seventh year running by the Top
Employers Institute and as one of
the ‘Best Big Companies to work for’,
ranking eighth in the prestigious
annual Sunday Times listing of best
companies. We are very proud of
these achievements as not only do they
strengthen our promise to our Winning
Teams, but they help us attract and
retain our employees and showcase
our values to our customers.
Whitbread Annual Report and Accounts 2016/17 24
Strategic reportStrategic report Examples of our
employer brand
propositions
Premier Inn
Premier Inn is a place
made by you with
opportunities to grow, develop
and achieve your dreams too.
A place where you
belong, where your
future will unfold
Costa
Passionate about making
people smile and determined
to impact the world around
you. Together we’ll craft
your talent with the perfect
blend of opportunity
and inspiration
Shaping your future and ours.
Connected and always on the pulse,
your passion for interaction will give
our guests a new kind of hotel
experience.
hub by Premier Inn
Shaping your future and
ours. Connected and always
on the pulse, your passion
for interaction will give
our guests a new kind
of hotel experience
Listening to our Winning Teams
We understand that giving our people
a voice is critical to ensuring that
we are giving them the support they
need and desire. Our 2016 ‘Your Say’
survey which used a tested measure
of ‘engagement and enablement’
was completed by over 39,000 people,
which is 83% of eligible employees.
In Costa we have seen a small decrease
in engagement from last year, which we
believe is due to organisational changes
and a tougher trading environment.
To drive higher levels of engagement
over the next 12 months, we will be
focusing on our communications
strategy to ensure we build our teams’
understanding of our five year plan
and the progress achieved against
this. In addition, we will be focusing
on our store managers’ capability
through a store manager development
programme. Overall Whitbread
maintained its engagement score
of 78% which, despite positioning
us favourably against external
comparisons, did not quite meet
our 79% target and highlights further
opportunities to improve. The results
still pay fantastic testament to
our commitment to improve overall
working conditions and create
Winning Teams, but we recognise
that there is more to do.
Following feedback from our 2016
survey, we know that we need to
focus on enablement across our
support centre. As a result we have
built robust action plans to improve
working environments, technology
and explore more collaborative ways
of working both within the support
centre and across our brands.
81%
of team members said
that they feel enabled and
are in the right roles for
their skill set
8th
in the Sunday Times
‘Best Big Companies to work for’
78%
of our employees feel
engaged, are proud to say
they work for Whitbread and
are motivated to go above
and beyond
Whitbread Annual Report and Accounts 2016/17 25
Strategic report Operating review continued
Winning Teams
continued
Retaining our Winning Teams
We recognise and understand the
importance of retaining our teams
and team retention has replaced team
turnover as a key performance indicator
for 2017/18. We are delighted to say
our efforts to challenge ourselves to
outperform relative to our industry in
improving retention have continued.
We have continued to build on the
positive momentum from last year and
introduced further initiatives to engage,
motivate and retain our teams. We are
proud that each of our brands operates
robust and tailored ‘Pay for Progression’
schemes that give team members
the chance to develop their skills and
progress through fair and transparent
pay rates. We strongly believe that
such initiatives are encouraging team
members to stay and develop their
careers with Whitbread and, as a result,
we have seen increases in the number
of our employees who have more than
12 months’ service.
It is important however, that we remain
proactive in our approach in order
to maintain our momentum.
Developing our Winning Teams
We know that our teams are more
engaged when they have access to
career opportunities and they feel more
enabled when they are given the chance
to learn and develop. At Whitbread
we are committed to developing our
employees and actively seek to create
opportunities to strengthen our teams.
Over the last year we have launched
exciting development programmes
across the Group.
In Costa, a number of training and
development programmes were
developed with the aim of enhancing
line manager capability across the
globe. We continued to develop and
roll out ‘Talent Camp’ which focused
on enhancing support centre line
managers’ understanding of recruitment
and developing potential. Over 100
of Costa’s line managers successfully
completed ‘Talent Camp’.
Costa also focused on maintaining
essential coffee and core skills training
to ensure we continue to meet our
customers’ expectations and remain
the UK’s favourite coffee shop chain.
In Premier Inn we have launched a new,
cross-functional senior management
leadership programme targeted at
strengthening our pipeline to senior
leadership roles. This programme is
enabling us to attract, retain and
develop exceptional talent across
our commercial functions.
In Premier Inn operations we have
updated a suite of leadership
development programmes and have
continued to build a coaching culture
through up-skilling multi-site managers
and providing one to one coaching and
peer to peer learning.
In our Restaurants, we are continuing
core development activity by giving
teams the opportunity to progress
their careers using an online skills
matrix and through our ‘Progressing
Into’ management development
programmes.
We have also focused on skill-based
training for kitchen managers and
chefs at one of our three food and
beverage academies.
Training and development snapshots
E-Learning courses
completed
Classroom based
training courses
delivered
Total course
completions
Over 763,000
Nearly 9,000
Over 772,000
Rewarding and recognising our
Winning Teams
Rewarding and recognising our Winning
Teams continued to be a key focus
throughout 2016/17. In addition to
running central incentives, we have
worked hard to implement specific
initiatives that are tailored to suit and
engage our different brands and teams
to create relevant and meaningful total
reward packages.
Throughout Premier Inn & Restaurants
continued emphasis was placed on
encouraging our managers to recognise
their teams through our ‘My Rewards’
platform and local recognition. To
support this, over £1 million was
uploaded to the ‘My Rewards’ platform
to be awarded to our Premier Inn &
Restaurants team members. During
2016/17, over 70% of team members
registered on the platform received an
award. However, we need to work even
harder to ensure that a greater number
of our team members are recognised,
as the local recognition of our Winning
Teams is at the heart of our
engagement strategy.
Across Premier Inn we also continued
to celebrate teams who achieved
an ‘All Green’ WINcard by rewarding
an additional week’s salary when all
key performance indicators are met.
In Restaurants we have built on the
momentum of last year’s ‘Kitchens
of Excellence’ event and continued
to provide kitchen teams with a
dedicated scorecard to help them
achieve excellence in their sites. The
number of kitchens meeting this
standard improved significantly this
year and these were rewarded on a
quarterly basis through ‘My Rewards’.
The very best kitchen teams were also
selected to compete to represent their
brand at the highly regarded ‘Kitchens
of Excellence’ final.
In Costa, the existing team member
reward platform was broadened to
create an employee benefits portal
Whitbread Annual Report and Accounts 2016/17 26
Strategic reportStrategic report to provide access to information
on all employee benefits. UK based
employees can now benefit from
discounted gym membership
across a number of the UK’s leading
gym companies.
Costa celebrated its 11th ‘Barista of
the Year’ competition culminating in
a two-day global final, which was an
opportunity to celebrate and recognise
the pride, passion and personality
of those at the very heart of our
business, as individuals competed
to be crowned the global Costa
‘Champion of Champions’.
Work placements and apprenticeships
for our Winning Teams
Whitbread created WISE (Whitbread
Investing in Skills & Employment)
in 2012 to create employment
opportunities and support people’s
entry into employment and onto
apprenticeships, by connecting with
the education system.
WISE is a structured and quality assured
programme with bold targets that
educates, engages and employs people
who are often from difficult backgrounds,
supporting them into the world of
work through:
1. Work experience placements and
school visits for 11-18 year olds.
2. Employment placements – for
people of all ages who are not in
education, employment or training.
3. Apprenticeships and functional
skills – for team members who
want to gain nationally recognised
qualifications.
Whitbread’s commitment to
apprenticeships was recognised
through being ‘Highly Commended’
at the 2016 National Apprenticeship
Awards.
The achievements of our WISE
programme have helped create
accessible local community work
routes through community partnerships
that support young people. 17% of
WISE apprentices have progressed
to management and we are proud to
say that 25% of our hotel managers
were previous apprentices. We are
I love the job I do and winning
this competition has really
made me strive to do
better and teach others.”
Giorgio Ventisei
Costa Barista of the Year 2016
2016
Barista of the Year
Barista of the Year is integral to
Costa: coffee is at the heart of our
business and baristas are at the
heart of our operations – inspiring
our customers to love great coffee
every day of the year.
The search for our 11th Costa Barista
of the Year began in June through
a series of store heats all around the
world. After months of heats that
grew in difficulty at each stage, nine
finalists were crowned business unit
champions and invited to our annual
final – designed to crown the very
best barista in the Costa world.
Giorgio Ventisei claimed our revered
trophy and was crowned ‘Champion
of Champions 2016’.
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
committed to the ongoing support and
development of our WISE programme
to improve the well-being, self-esteem,
confidence and employability of
people not previously in education,
employment or training.
During 2016/17 across Whitbread WISE
successfully achieved:
Over 800
Apprentices in learning
Over 400
Work placements
Almost 300
Work experiences
Building on the success of WISE in
Premier Inn, during 2016/17, Costa
launched its own WISE programme.
Since launch over 200 adult work
placements have been completed
with each graduate receiving
a Level 1 Introduction into Hospitality
qualification, credible work experience
with Costa, a reference and interview
experience. To demonstrate the
impact of this programme, almost
100 graduates of the scheme were
recruited into the business during the
year representing a 46% conversion
into employment.
2016/17 was a great year for the
WISE team in Costa and they are
proud to have attracted almost 200
apprentice’s nationally with many
more in the pipeline to graduate.
The apprenticeship provides a credible
alternative to education as well as an
attractive career with Costa.
In addition to the suite of apprenticeships
offered in Premier Inn, work has been
completed for Costa to launch its
advanced level apprenticeship next
year. This has been designed to nurture
all the necessary skills to become an
assistant manager. Plans are also in
place to introduce the higher level
apprenticeship, geared at developing
the skills required to grow into a Costa
store manager.
Whitbread Annual Report and Accounts 2016/17
27
Operating review continued
Winning Teams
continued
Diversity and inclusion in our
Winning Teams
Across all of Whitbread we promote,
respect and value differences to create
an inclusive environment. There are
no barriers to entry and no limits to
ambition. Our ability to grow as an
organisation depends on our ability
to attract, develop and retain diverse
teams as we believe that a diverse
organisation encourages better
innovation and decision making. As
an equal opportunities employer, not
only do we value, grow and celebrate
people who have diverse perspectives
whatever their age, gender, sexuality,
ethnicity, disability or religious belief,
we believe it gives us greater
connectivity with our customers
and a commercial advantage.
Across Whitbread, promoting diversity,
respect and inclusion is a local, line
management accountability as well as
a corporate activity. Over 2016/17 we
have been successful not only through
Group-led activity but also through
local initiatives and through employees’
personal passion.
Flexible working
We have explored ways to increase
flexible working to allow roles to be
accessible to a broader range of
employees. In Costa, part-time working
was integrated into the role of the area
manager to suit flexible working needs.
Gender balance
Focus has continued on the promotion
of gender balance, particularly at
senior levels and in functions where
there has been a gender imbalance.
Efforts have been made to ensure we
provide gender balanced shortlists in
recruitment and that our succession
pools include a strong mix, ensuring we
provide quality stretching opportunities
for individuals to grow their careers.
Learning difficulties and disabilities
In early 2017 we opened the Premier Inn
training centre within Derwen College
for young people with learning
difficulties and disabilities. The training
centre is fitted out to the specifications
of a Premier Inn hotel and allows
students to develop their skills in
housekeeping and reception. The
training centre aims to build students’
confidence and self-esteem, providing
opportunity to gain work experience
and move into paid employment with
Premier Inn.
The WISE programme
Paige Flynn left school anxious about her future, with low self esteem and
confidence; fast forward to today and Paige stars in the Government’s ‘Get in,
Go far’ apprenticeship campaign with the ambition to one day run her own
hotel. The WISE programme enabled Paige to experience Premier Inn before
enrolling on our Advanced Apprenticeship in Hospitality Management,
earning while learning at work. Paige valued the structured programme,
support system of regular reviews and feedback about her performance at
Leeds Premier Inn. Paige demonstrates the opportunities to develop and
progress within Whitbread and she is also now a great ambassador for the
Government’s ‘Get in, Go far’ apprenticeship campaign, helping others to
understand how integral apprenticeships are to business and personal growth.
GLOW
Momentum of the GLOW (Gay &
Lesbian Out at Whitbread) network
has been further leveraged through
internal social channels to boost
team engagement and enhance
community activity. We are proud to
have celebrated a member of our Costa
leadership team being recognised in the
OUTstanding & Financial Times Leading
LGBT+ Ally Executives list. In further
support of the LGBT community, we
invited world-class barista Mason
Salisbury to train UK Costa baristas to
make Rainbow Flat Whites in selected
stores. The Rainbow Flat Whites were
a huge success and were served in four
cities over the summer aligned with
Pride events.
Ethnicity
We have focused on improving the
level of data capture on ethnicity within
our recruitment processes in order to
strengthen insight on our workforce
demographics. We need to place
further focus on ethnic diversity in
order to ensure that we are a truly
diverse and inclusive organisation.
Over the course of the next 12 months
and beyond, we will continue our
commitment to create and develop
a diverse and inclusive working
environment where everyone has the
opportunity to reach their full potential.
We want to create an inclusive culture
where everyone feels that they can
bring their whole self to work, as the
energy and desire of our teams play
a key role in our future success.
Graduate schemes
We have continued to operate our
award winning graduate schemes,
across both operations and support
centre, attracting over 2,000
applications to our schemes that
commence in autumn 2017.
Our operational graduate schemes
are designed for commercially focused
graduates, offering exposure to various
roles and operational areas. Not only
have these schemes helped develop our
internal talent pipeline, but the training
on offer equips our graduates with
a deep understanding of how our
businesses work from the ground up.
These schemes have also provided our
graduates with the skills and attributes
needed to successfully lead a Winning
Team within one of our Costa stores
or Premier Inn hotels.
Our functional programmes cover
HR, finance, IS, marketing, property
and procurement. The experience
has helped our graduates to develop
their skills, build a network of contacts
and gain exposure in a range of areas
Whitbread Annual Report and Accounts 2016/17 28
Strategic reportStrategic report and roles, across all of our brands.
Our graduates have acquired
function-specific experience, technical
training and support for the professional
qualifications they wish to work towards.
Our international Winning Teams
Our Costa International markets have
continued to focus on acting upon
feedback from our employees through
our annual ‘Your Say’ survey, specifically
paying attention to growing capability
and creating attractive reward packages
for team members.
In Costa Poland, focus is centred on
developing internal talent pipelines,
introducing efficiency driven pay,
benefits for baristas and development
of leadership skills.
Costa has continued to invest in
building international experience
through moving talent and has created
a dedicated business development
team located in South East Asia.
Significant focus has also been placed
on working with our partners on
social initiatives that are important
for our customers as well as building
capability within barista and store
manager populations.
2,000
Our graduate schemes across both
operations and support centre,
attracted over 2,000 applications
to our schemes commencing
in autumn 2017
Costa China continued to grow
capability within stores and over
500 store employees graduated from
‘Learning Journey’ programmes. These
employees now form the internal talent
pipeline for future leadership roles
within our store teams. Costa China
also invested in advanced level coffee
knowledge training for the ‘Hot
House’ team members to build their
knowledge, skills and confidence
around coffee. The new and exciting
‘Hot House’ store format enabled
formulisation and trial of a new
incentive scheme that allows store
team members to share in extra profit
that the store generates.
Following the successful opening of
our first Premier Inn site in Germany, our
team is still new but growing. Increasing
occupancy and sales have allowed us to
increase the number of team members
and we have proactively sought to
recruit a diverse workforce through
supporting the organisation ‘Joblinge’
which helps to bring young refugees in
to the workplace. Since September, we
have offered internships and permanent
employment through this partnership.
We are focused on ensuring our teams
are happy and engaged and we are
proud to have already achieved positive
feedback in our annual ‘Your Say’
engagement and enablement survey.
500
Costa China grew capability
within stores and over 500
store employees graduated
from ‘Learning Journey’
programmes
A successful year
2016/17 has been a successful year
with continued focus on creating an
environment where our Winning
Teams can flourish. There is still further
opportunity and we have strong plans
in place to continue this momentum
through 2017/18 and beyond.
92bpm
98bpm
Whitbread Annual Report and Accounts 2016/17 29
Strategic report Strategic report
“When we get
together to shop,
we want to escape
to a central city
location. We
need a cost
effective solution
that we can rely
on to be clean and
ensure us a good
night’s sleep.”
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Shaping your future and ours.
Connected and always on the pulse,
your passion for interaction will give
our guests a new kind of hotel
experience.
Whitbread Annual Report and Accounts 2016/17 30
Whitbread Annual Report and Accounts 2016/17 30
Shaping your future and ours.
Connected and always on the pulse,
your passion for interaction will give
our guests a new kind of hotel
experience.
hub by Premier Inn is
our exciting new hotel
brand specially designed
to fit perfectly into
cosmopolitan city
centres and appeal to
savvy travellers looking
for great value, stylish
design and the latest
technology from a hotel
at the heart of the action.
With four hotels in London, one in
Edinburgh and a further 11 in the pipeline
hub takes the stress out of travel. Guests
can book, check-in online and personalise
their room before arrival all via the ‘hub
app’, leaving them free to relax and unwind
or hit the shops...
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5
Total ‘hub by
Premier Inn’ hotels
11
Hotels in the
pipeline
83% 4.5/5 89%
Occupancy
TripAdvisor score
Guests rate
hub excellent or
very good
Bringing customers brands they love...
when only
retail therapy
will do
Whitbread Annual Report and Accounts 2016/17
31
Operating review continued
Customer Heartbeat
Our approach
Our 50,000 team members provide outstanding experiences to our
millions of customers. We make sure we listen to what our customers
want and use this insight to enhance our customer propositions
to build satisfaction and loyalty.
• We offer customers the greatest choice of locations
• We invest in our sites to maintain their quality
• We design our coffee shops, restaurants and hotels to create
a warm and welcoming experience for our customers
• We innovate to meet customer needs and expectations
• We offer customers a great choice of high quality food
and drink
• We use digital technology to enhance the customer experience
Premier Inn & Restaurants
Another award winning year
In the past year our leading brands,
Premier Inn and Costa, have cemented
their positions as the UK’s favourite
hotel chain and coffee shop chain
respectively. For the seventh year in
a row Costa was voted the Nation’s
Favourite Coffee Shop Brand by Allegra.
Premier Inn was named the UK’s
Top Rated Hotel Chain for a second
consecutive year in the Which? Hotel
Chain Survey, and for the first time,
picked up the award for Travel Brand
of the Year in the 2016 Which? Awards.
These accolades are especially
significant as they are voted for by
Which? members and the general
public and Premier Inn was recognised
for providing a ‘first class experience’
at ‘very competitive prices’.
2 years
voted UK’s top rated hotel chain
by Which?
63%
of customers in our restaurants
score us nine or ten out of ten
5.5 million
customers
9
out of ten Premier Inn guests say they
will definitely consider staying again
90%
of all hotels received a TripAdvisor
Certificate of Excellence
Costa
23 million
customers
7 years
voted the Nation’s Favourite
Coffee Shop Brand
87%
of customers say they are likely
to revisit
50%
net recommend
56%
drink quality scores
Premier Inn also featured heavily
in the TripAdvisor Travellers’ Choice
Awards and the Premier Inn London
Bank took the No. 1 slot for Best
Family Hotel in the UK. 621 hotels
received a TripAdvisor Certificate
of Excellence Award.
Our individual brand guest satisfaction
surveys provide us with a valuable tool
to find out what is important to our
customers and how we can improve
upon their experience. These surveys
show that our teams are already doing
a great job serving our customers,
with nine out of ten Premier Inn guests
saying they will definitely consider
staying again and 87% of Costa
customers saying they are likely to
revisit but, of course, we recognise
there is always more we can do to
deliver even better experiences for our
customers, as evidenced by the targets
that we set ourselves.
We use YouGov Brand Index and
Brand Preference trackers to monitor
our progress against competitors
and you can see on the next page
how Premier Inn and Costa continue
to hold the leading position in their
respective markets.
Whitbread Annual Report and Accounts 2016/17 32
Strategic reportStrategic report The only brand to deliver on quality and value
YouGov® BrandIndex
UK’s favourite coffee shop* – 7th year in a row
Brand Preference: Costa is the UK’s favourite
35
30
25
20
15
10
5
e
r
o
c
s
y
t
i
l
a
u
Q
0
-2
Hilton
Marriott
Holiday Inn
Holiday Inn Express
Ibis
AirBnb
Travelodge
31%
22%
11%
37%
13%
11%
Costa
Starbucks
Nero
2
6
10
14
18
22
26
30
34
38
’08
’09
’10
’11
’12
’13
’14
’15
’16
’17
Value score
Premier Inn is the only brand to deliver on both
quality and value, securing wider market appeal*
*
Note: Scores are net (i.e. positive % minus negative %). YouGov
BrandIndex 52-week rolling average 28th February 2017
Source: 2008 – 2014; YouGov Q. If there were a Costa Coffee,
Starbucks and Caffé Nero next door to each other, which one would
be your FIRST choice to visit? 2015–2017; TNS One Costa Tracker,
Market Monitor, 2,000 Nat Rep respondents per quarter
* Source: Allegra Project Cafe 2017
With over 3,500 Costa stores around
the world and 762 Premier Inns in the
UK alone, we are able to be everywhere
our customers need and want us to be.
To ensure our products and services
meet customers increasingly high
expectations, we invest significantly
in maintaining the quality of our stores,
hotels and restaurants.
In 2016/17 we refurbished 4,450
Premier Inn rooms, whilst in our
Restaurants business we converted
three Table Table sites to Beefeater,
and all our Taybarns sites to Brewers
Fayre. In Costa we have been rolling
out a re-imaging programme with 169
stores getting a new look in the year.
Our Drive Thru stores are proving
very popular with customers and we
opened 16 sites in the year and now
have 52 around the UK. Following
a successful 13 store trial, the Costa
Pronto format will be rolled out more
widely in 2017/18. Costa Pronto stores
are specially designed to meet the
increasing demand for ‘on the go’
coffee, with specially designed counters
to enable our baristas to improve
the speed of service and avoid lengthy
customer queues.
China is an important market for Costa,
where we currently have over 400
stores. We are trialling an innovative
new store format in five Shanghai
stores, involving a completely new store
design and food and drink offer. The
stylish new interior gives more focus
to the counter and food display, which
includes freshly made sandwiches,
and the use of natural woods and soft
fabrics and lighting help to create a
warm, welcoming environment. The
new food range includes freshly made
sandwiches and premium desserts
whilst Costa’s coffee credentials are
brought to the fore with new brewing
methods such as single origin hand
pouring coffee and Old Paradise Street
blends. Initial customer feedback has
been promising with over 80% saying
they would be likely to return and we
plan to roll the design out to more
stores in the year ahead.
As shown on TV
2016/17 has been an exciting year for
Premier Inn and Costa as they both
launched brand new TV advertising
campaigns. Costa’s biggest ever
campaign went live in October during
the first X Factor Live show and
celebrated the promise of ‘never a dull
cup’, showcasing Costa’s reputation
for delivering quality handcrafted
barista-made coffee. 170 baristas got
the opportunity to take part in the
humorous advert as members of an
enthusiastic audience watching a highly
unorthodox motivational speaker.
September 2016 saw the launch of
Premier Inn’s bold new multi-channel
advertising campaign, ‘A Great Place
to Start’, with the first in a series of
four TV commercials. The campaign
featured different storylines showing
how Premier Inn provided a great start
to the day for their guests, whether
that’s a family celebrating Great Aunt
Mabel’s birthday or a group of ladies
getting ready for a night out.
Great
Aunt Mabel
Premier Inn’s new
TV advertising campaign
Whitbread Annual Report and Accounts 2016/17 33
Strategic report
Operating review continued
Customer Heartbeat
continued
Innovating our coffee
Since being founded by brothers
Bruno and Sergio Costa in 1971, Costa
has been at the forefront of Britain’s
growing love affair with coffee, and
we are on a mission to inspire the
world to love great coffee. Britain
is now undoubtedly a nation of
coffee lovers, but at Costa we believe
there is much more to do to bring
new premium coffee experiences
to customers. As part of Costa’s
commitment to create exciting coffee
experiences for customers, our ‘never
a dull cup’ campaign promoted the
delights of a Cortado and Flat White
and was supported by nationwide
coffee masterclasses.
In October, we opened a new
concept store in Wandsworth in
London, promising to deliver new
coffee and food experiences in a
stylish environment. The concept
store responds to evolving appetite
for fresh ways to enjoy coffee and a
flavoursome new range of coffee beans
and brews is on offer including three
slow drip, single origin blends from
Sumatra, Kenya and Colombia, all 100%
Arabica beans. Also available is a cold
brew coffee, which is steeped for 20
hours and served over ice to create
a delicious and refreshing drink. An
enhanced food menu is also available
at the Wandsworth store featuring
delicious additions such as avocado
on toast, macarons and an antipasti
sharing plate.
Innovating our food offer in Costa
Increasing customer demand for
an enhanced food offer with greater
choice of lighter, fresher and healthier
options is driving our food development.
We are doing this through a mix of
reformulating existing products and
the introduction of new items including
healthy wraps and salads, as well as a
trial of Costa’s ‘It’s All Good’ range in
selected stores.
Costa celebrated a taste of summer
in its new cold drinks range, with the
launch of SuperDay Smoothies, made
from 100% real fresh fruit that the
1 of your
5 a day
Costa launched its new
Super Day Smoothie last summer
customer selects from the chiller
cabinet, which is then lovingly blended
and prepared in front of them by their
barista. They come in three refreshing
flavours from a mix of pineapple, melon,
passionfruit, apple, kiwi, strawberries
and grapes and contain one of your
‘five a day’.
Our stores in White City London and
Milton Keynes are exploring how to
deliver an enhanced food offer to
customers displaying products in a new
counter display with some products
prepared fresh on site. Costa Poland
is also addressing consumer trends for
healthy fresh food with the opening
of its new concept store at the Chopin
Airport in Warsaw. The store has a
number of dishes suitable for vegetarians
and vegans and serves a wide range
of savoury food including freshly made
baguettes, French pastries and cookies
that are all baked in the store.
NO.24
100%
100%
Arabica beans: single
Arabica beans: single
origin blends from Sumatra,
origin blends from Sumatra,
Kenya and Colombia
Kenya and Colombia
Whitbread Annual Report and Accounts 2016/17 34
Strategic reportStrategic report Innovating in Premier Inn
& Restaurants
‘hub by Premier Inn’ is a new generation
of smartly designed hotels, perfect for
people who want to be in the heart of
the city at an affordable price. With
five hub hotels now open across London
and Edinburgh, technology features
heavily throughout the hotels’ cleverly
crafted compact rooms. To celebrate
the opening of the Brick Lane hub in
June and to showcase its connectivity
credentials, the launch event featured
rapper, Tinchy Stryder, who challenged
himself to create a track using inspiration
from the digital surroundings of the
hotel and the vibrant areas of Brick
Lane, all produced from his hotel room.
In March 2016, Whitbread launched
its first ever Bar + Block steakhouse
restaurant in the centre of Birmingham,
followed by two more openings in
London’s Kings Cross and Whiteley
shopping centre in Fareham. Like
Beefeater, Bar + Block has quality
steak at its core and offers a distinctive
‘Butcher’s Block’ which offers a range
of rotating unique special cuts, all
hand cut to order. An informal all-day
dining destination, Bar + Block has
been specifically designed to thrive in
high street and city centre locations
alongside a Premier Inn. The stylish and
contemporary interiors make a feature
of the large open kitchen and central
bar, serving innovative cocktails and
a specially curated wine list.
For our Beefeater guests we have
introduced some exciting new dishes
and drinks that complement the stylish
new interiors with great dishes like
Smokehouse style Duo of Beef, our
Craft Guild of Chefs award winning
Crispy Tabasco Chicken Burger and
a new range of premium milkshakes
and cocktails. In Brewers Fayre we have
launched new menu categories and
dishes in partnership with beverage
brands, such as the Jack Daniel’s
category which offers a special
Jack Daniel’s burger, ribs and Beef &
Doom Bar pie. A new range of cask ales
is also proving popular with customers.
We are encouraging new guests to
experience our restaurants with
promotional partnerships and new
communication channels.
To address consumer trends for
healthier, fresher food as well as
supporting Government goals to
improve the nation’s health we have
developed a nutrition strategy, focused
on four key pillars. These are to provide
customers with greater choice of
healthier, lighter dishes; to ensure
transparency of nutritional information
to enable customers to make an
Butcher’s
Block
Steak is the hero at our new
all-day dining restaurant
brand Bar + Block
informed choice; to reformulate those
dishes that are high in saturated fats,
salt and added sugar; and to ensure that
our advertising, especially to children,
is responsible and that we are promoting
healthier dishes. Examples of this
strategy in action include greater choice
of healthier foods in our spring 2017
menus, better access to nutritional
information and enhanced children’s
menus with more healthy dishes to
choose from and reformulation of top
selling favourites, such as spaghetti
bolognese, with reduced levels of salt
and sugar. We are committed to doing
more to improve the nutritional content
of our menus and playing our role in
improving the nation’s health.
5 hubs
a new generation of smartly
designed hotels, perfect for people
who want to be in the heart of the
city at an affordable price
Whitbread Annual Report and Accounts 2016/17 35
Strategic report Operating review continued
Customer Heartbeat
continued
Record direct distribution through premierinn.com
Volume of reservations by channel
Indirect channels
Premier Inn
other
Premier Inn
digital*
8%
15%
77%
9%
11%
80%
7%
7%
86%
6%
6%
88%
2013/14
2014/15
2015/16
2016/17
*
Including reservations from GDS and agents of 7%
Delighting customers with
digital services
Our products and services are
increasingly delivered digitally. Whether
that is searching for the hotel closest
to where you need to be, booking a
hotel room from your mobile phone or
pre-ordering your cup of coffee so it is
ready to collect. Customers have high
expectations of how digital technology
will make their day to day lives easier
and at Whitbread we are investing
significantly in building core expertise
in our in-house digital teams to ensure
we continually delight customers with
innovative new products and services.
At Premier Inn over 80% of all bookings
are made online at premierinn.com
and in 2016/17 we made some exciting
new developments to our digital and
mobile offer including the launch of
a new mobile site. The new site has
been designed to make the customer
search and booking journey as easy
and enjoyable as possible to boost
conversion rates. In the year, we also
launched a new German website
www.premierinn.de on a platform that
is scalable to support our international
expansion and we relaunched the
Beefeater website in line with the
new Beefeater brand proposition.
New German
website
We launched a new German website
www.premierinn.de on a platform
that is scalable to support our
international expansion
36 Whitbread Annual Report and Accounts 2016/17
Whitbread Annual Report and Accounts 2016/17 36
Strategic reportStrategic report Building customer love
through loyalty
Our customers enjoy added value
through being a member of our
brand loyalty programmes. Costa
Coffee Club now has over five million
active members and enjoyed significant
increase in usage in the year, driven
primarily by a new data-driven retention
programme. Over 20% of registered
Costa Coffee Club customers now
transact using the Costa Coffee Club
app and over the year the digital team
has made a number of improvements,
including simplification of the registration
process, which has led to a 15% increase
year on year in people actively using the
app. The team is also working on lots
of new and exciting features to deliver
an even more engaging app experience
to Costa Coffee Club holders in the
year ahead.
Across our restaurant brands loyalty
programmes we now have 1.9 million
card holders, up 12% in the year. Loyalty
card members spend around 7 – 11%
more with us than non-card holders and
41% of active members have redeemed
their vouchers over the course of the
year, enjoying the benefits that
membership provides.
For Premier Inn corporate customers
who want to book directly, we have
developed our Business Booker tool.
It has its own website, where customers
can manage their account and enjoy
added value services, including
preferential commercial terms and
smart reporting. Current corporate sales
customers have been moved onto this
platform and it will be made widely
available to the UK SME market in 2017.
40%
of sales involve a Costa
Coffee Club card
The Costa digital team has been
working on an exciting new app feature
that allows customers to pre–order their
coffee and come to collect it in store.
When a customer arrives in store their
coffee is ready and waiting for them on
the Costa Collect counter with no need
to queue. Costa Pay & Collect has been
trialled in ten London stores and has
received positive customer feedback
along with key learnings that we will use
to enhance the app and create a great
in-store experience for customers and
baristas. The new enhanced service will
be piloted in 2017/18 with plans to roll
out more widely across the estate
towards the end of the year.
Across our brands we continue
to grow our social media presence
and enjoy high levels of engagement
in the content that we post. Costa
has 1.5 million Facebook fans and
c.224,000 Twitter followers and 211,000
Instagram followers, whilst Premier Inn
has 202,000 likes on Facebook up 21%
in the year and 68,000 Twitter fans. Our
Restaurants brands are also increasing
their social media channels with over
680,000 fans across its Facebook,
Twitter and Instagram channels.
Social media presence
1.5 million
Costa Facebook fans
202,000
Premier Inn likes on Facebook
up 21% in the year
224,000
Costa Twitter followers
68,000
Premier Inn Twitter followers
Whitbread Annual Report and Accounts 2016/17 37
Strategic report Strategic report
Bringing customers brands they love...
when they
want to enjoy
a family meal
together
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Restaurants
located next to
Premier Inns
Members in
loyalty schemes
Fans across our
restaurants’ social
media channels
New Bar + Block
restaurants open
With over 400
restaurants up and
down the UK our
Brewers Fayre, Beefeater
and Table Table brands
are a popular choice
for families.
With almost all of our restaurants located
next door to a Premier Inn, families can
make the most of the famous Premier Inn
breakfast as children under 16 get to eat
for free! For lunch and dinner we offer
a great children’s menu, with a wide range
of delicious and healthy options for children
to enjoy along with fun-filled activity packs
to keep them entertained whilst the variety
of great food and drink to choose from on
our main menus means we can keep the
parents happy too!
Whitbread Annual Report and Accounts 2016/17 38
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“We rarely have
dinner out as a
family. It’s hectic
and everyone has
different tastes.
I need somewhere
that makes
everyone happy,
so that I can sit
back and enjoy
it too.”
Whitbread Annual Report and Accounts 2016/17 39
Operating review continued
Profitable Growth
Profitable Growth
Our approach
• We invest in high returning, profitable sites
• We innovate with new formats to provide further growth
opportunities
• We are growing in selected international markets
• Our Premier Inn & Restaurants joint site model provides efficiency
and creates incremental returns
• Costa uses a number of ownership models, including equity stores,
franchise and joint venture
Premier Inn & Restaurants
9.0%
Premier Inn grew total sales
by 9.0% and like for like sales
by 2.3%
80.2%
Total occupancy remained
high as we finished the year
at 80.2%
£468.0m
Underlying operating profit
was up 7.4% to £468.0 million
7.2%
Number of rooms available
increased by 7.2%, with 3,816 new
UK rooms opened in the year
8
Restaurants grew total sales
by 1.2% and opened eight
net new sites
Costa
£158m
Underlying operating profit was
up 5.3% to £158.0 million
255
net new stores worldwide
10.7%
Total sales growth of 10.7%
2.0%
UK like for like sales growth
of 2.0%
1,585
net new Costa Express machines
installed (248 internationally)
During 2016/17 Premier Inn and
Costa delivered organic expansion
combined with like for like sales
growth resulting in a Group total
sales increase of 8.2% to £3.1 billion.
Group underlying profit before tax
which rose by 6.2% to £565.2
million and profit for the year
increased 7.4% to £415.9 million.
Whitbread is highly cash
generative with cash generated
from operations of £860.1 million
which supports our dividend and
capital investment programme.
Our total cash capital investment
for 2016/17 was £609.8 million as
we maintained our market leading
position through re-investment
in our estate and by delivering
organic growth. Our continual
focus on returns and disciplined
financial management enabled us
to deliver a good return on capital
of 15.2% (2015/16: 15.3%).
Operational review and progress on
strategic priorities
In April 2016, we outlined our three
strategic priorities to deliver long-term
sustainable growth and shareholder
value. Since then, we have made
positive progress across all three areas.
1. Grow and innovate in our core UK
businesses;
2. Focus on our strengths to grow
internationally; and
3. Build capability and infrastructure
to support long-term growth.
Details on our progress are provided
on the following pages.
Whitbread Annual Report and Accounts 2016/17 40
Strategic reportStrategic report Strategic Priority
1 Grow and
innovate in
our core UK
businesses
The UK is our largest market and we
will continue to invest in our people,
our brands and our systems to capture
the significant growth opportunities
available in both coffee and branded
budget hotels.
In the UK hotel market, the independent
sector which accounts for c.50% of the
market is in decline, while the budget
branded sector is benefitting from
continued growth, reflecting customers’
desire for quality and value for money.
The coffee sector has a high growth
forecast benefitting from a global
consumer lifestyle trend, demand for
quality coffee and habitual purchase
behaviours.
Premier Inn UK
As the UK’s number one hotel company
our business model is clearly well placed
to capture the shift to value brands with
our compelling proposition, loyal guests,
direct distribution model and focus on
operational excellence. Our network
strength gives customers the greatest
choice of locations and we offer the
best value for money which results in
our high occupancy across the estate,
and 94% of our guest bookings direct
with Premier Inn. Our market leading
occupancy and direct distribution
means our growth continues to be at
high returns with our committed UK
pipeline expected to achieve similar
returns to the c.13% achieved today.
Network strength
Premier Inn is the leading hotel brand in
the UK with 68,081 UK hotel rooms and
some 9,000 rooms opened during the
last two years. Our committed hotel
room pipeline is strong and stands at
c.14,500 rooms, and we are well on
track to achieve our 2020 milestone
of c.85,000 UK rooms, with line of sight
to 100,000 rooms.
In 2016/17, we opened 25 net new hotels
taking our total number of hotels in the
UK to 762, over 200 more than our
nearest competitor. During this period
Premier Inn UK has grown total sales by
8.9% and total rooms available by 9.3%,
whilst retaining high occupancy. Our
unrivalled network coverage means
we bring our customers closer to their
destination, a key consideration for
both leisure and business guests.
Quality and value for money
We focus on delivering a consistent,
quality product across our network
through our systematic refurbishment
programme and, by the end of the year,
over 80% of our estate were our most
recent designs, c.14% more than two
years ago. We prioritise high occupancy
and value for money to build long-term
customer loyalty and this approach
has resulted in Premier Inn growing its
occupancy to 80.2% and enabled us
to achieve consistently high scores for
both quality and value from YouGov.
Automated Trading Engine
In June this year we launched our
new Automatic Trading Engine (ATE)
to build on our value for money
credentials, as well as optimising
our rate, occupancy and new hotel
maturity going forward.
We are very much in the 12-18 month
‘test and learn’ phase. However, we
expect ATE to drive our total sales
growth as we focus on further
occupancy growth, optimising rate
to match the demand and accelerating
the maturity of our new rooms.
Direct distribution
Our focus on providing our guests
with the best digital booking platform
has been vital to our success. We have
grown our direct digital distribution
from 77% in 2013/14 to 88% in 2016/17,
driving incremental revenue and
reducing our reliance on third party
distribution. Not only does direct
distribution provide our lowest cost
booking channel, it also enables a direct
relationship with our customers, helping
to build loyalty over time. Our total
direct distribution now stands at
a record 94%.
The London Opportunity
Our share of the London hotel market
remains relatively low at c.8% providing
a substantial growth opportunity.
Over the last three years we have
increased our rooms available by 49.4%,
compared with 12.5% for the Midscale
and Economy market, and grown
accommodation sales by 43.7%
compared with 21.4% respectively as
we continue to win market share. Our
London sites mature rapidly with new
hotels reaching occupancy of c.80% in
their first year whilst at the same time
maintaining the total London estate’s
occupancy at over 85%.
Our compact city centre hotel concept
‘hub by Premier Inn’ has been a great
success giving us access to profitable
city centre locations with high property
costs, delivering a good return on
capital, whilst offering customers
great value, high quality rooms in
great locations.
89%
of guests rate hub an “excellent”
or “very good” experience
Whitbread Annual Report and Accounts 2016/17
41
Strategic report Operating review continued
Profitable Growth
continued
We now have four hub hotels open in
London and one in Edinburgh, with a
committed pipeline of 11 hotels over the
next three years. Customer feedback
on the proposition has been excellent,
with 4.5/5 TripAdvisor score across all
sites and 89% of guests rating hub an
“excellent” or “very good” experience.
Furthermore, occupancy has been
c.85% for our hub sites in London,
which are expected to deliver returns
in line with our existing Premier Inn
estate at maturity.
UK Regions
Over the last three years we have
increased our rooms available by 22.0%
and grown accommodation sales by
38.3%, compared with growth in the
Midscale and Economy sector of 6.7%
and 30.5% respectively, as we continue
to win market share.
Our new hotels continue to perform
well, maturing fast and becoming
profitable with occupancy of c.75%
in the first year, reaching full maturity
in 3-4 years. We continued to achieve
high occupancy in the total regional
estate of c.80%.
Further growth with good returns
Our UK committed pipeline has grown
to 14,500 rooms, of which c.5,900 are in
London and c.8,600 are in the regions.
Moreover, our extension programme
has been driving incremental like for like
sales growth and good returns and
constitutes c.20% of our committed
pipeline outside of London.
Food and beverage offering for
Premier Inn customers
Our joint site restaurants continue
to play an important role in serving
Premier Inn guests and delivering higher
RevPAR and returns. Restaurants grew
total sales by 1.2%, with a marginal
reduction in like for like sales of 0.3%,
albeit we continued to perform ahead
of our competitor set. We continue to
focus on our guests and our teams, with
high customer satisfaction scores and
a significant reduction in team turnover,
achieved with the help of investment
initiatives such as our new labour
scheduling tool.
We continue to make good progress
in rejuvenating our restaurant brands,
converting a further 53 restaurants
to our modern ‘Orange Cow’ Beefeater
concept and are on track to complete
the remaining conversions in the
first half of 2017/18. Our new
contemporary city centre restaurant
format, Bar + Block, is trading well
and receiving very high customer
satisfaction scores. We now have one
open in London, one in Birmingham
and one in Fareham, with five planned
to open during 2017/18.
Costa
In Costa we offer the largest network
of coffee shops in the UK and, with our
strong brand, we are in a great position
to capitalise on future market growth
opportunities, growing from 2,218 stores
today to over 3,000 stores in the
medium-term.
Costa has been named as the UK’s
favourite coffee shop chain for the
seventh year in a row, underpinned by
our relentless focus on quality coffee
and on achieving high customer
satisfaction scores.
Costa – Investing for future growth
UK
A giant step forward
Innovate coffee and food, invest in store proposition,
amplify the brand and improve digital capability
China
Unlock potential
Focus on major cities, step change brand awareness
and develop a compelling proposition
Rest of
world
Deeper, more profitable
Scale successful franchise model by focusing
on quality markets, with the right partners
Express
Double up
Continue to innovate and differentiate offer
to stay ahead of competition
Purpose
Inspiring the world to love great coffee
Vision
The world’s most loved coffee brand
Whitbread Annual Report and Accounts 2016/17 42
Strategic reportStrategic report the platform for further Pay & Collect
trials towards the end of this year and
a wider roll-out thereafter.
To increase our engagement with our
c.5.2 million active Costa Coffee Club
members we are enhancing our app
to enable a better customer experience
and more targeted offers, as well
as gaining a much richer source of
customer data, habits and insight.
The new-look app will be released
in the first half of 2017/18.
Pipeline weighted towards high
performing channels
Future growth will also be underpinned
through diversification of our channels
and formats as we recognise that
customer requirements differ by
location. For example, our Pronto
format is optimised to sell our hand-
crafted coffee quickly in high footfall
locations, such as travel hubs at peak
times, taking advantage of the volume
opportunity presented. Drive Thrus are
also delivering very high sales volumes
and returns and, together with travel
channels, are our fastest growing
category and will become a greater
proportion of our estate going forward.
High sales
volumes
Drive Thrus are delivering
very high sales volumes
and returns
UK Retail
Costa UK Retail continues its track
record of delivery, with UK retail system
sales growing by 10.5%, 169 net new
stores and like for like sales in UK equity
stores increasing by 2.0%.
Investing to drive like for like growth
The market and competitive landscape
continue to evolve with more food-led
operators now offering coffee and,
while convenience and coffee quality
remain the top decision criteria,
customers are becoming more
demanding in the way their priorities
are met.
At Costa we are focused on meeting
this challenge and serving the best
quality coffee and fresher food via
more tailored store designs, with a
complementary digital experience.
During the year we invested in new
MerryChef ovens and microwaves
across the estate, which will facilitate
the roll-out of new hot food ranges
during 2017/18, starting with the launch
of our new better breakfast offering
during the first half. We also recently
extended our coffee range through new
initiatives in the Cortado family and will
build on this innovation with the launch
of cold brew and new single origin
blends during this year.
Investing in the brand and
digital capability
We continue to invest in our digital
capability and our new till system will be
installed during 2017/18, enabling faster
service and new functionality to provide
3,000
We now see a future growth
potential of over 3,000 UK stores
Whitbread Annual Report and Accounts 2016/17 43
Whitbread Annual Report and Accounts 2016/17 43
Strategic report Operating review continued
Profitable Growth
Profitable Growth
continued
continued
Strategic Priority
2 Focus on
our strengths
to grow
internationally
Premier Inn Germany
Our first German hotel opened in
Frankfurt in February 2016 and the
feedback has been excellent, with
the hotel constantly ranked between
first and third on TripAdvisor out of
c.270 hotels in Frankfurt. We have a
committed pipeline of five more hotels
and will have opened six to eight by
2020 with a capital commitment of
£60-100 million per annum over the
next few years. The aim is to accelerate
our roll-out and we continue to look
for further opportunities to grow
more quickly.
Premier Inn International
Our six hotels in the Middle East
continue to perform well in a
challenging market and we will maintain
our profitable joint venture here with
two further hotels in the pipeline. Our
withdrawal from India and South East
Asia is on plan with a view to exiting the
market over the next twelve months.
Costa EMEI
Internationally we continue to build on
our strengths and look to broaden our
footprint in quality markets that have
the opportunity for scale. In Poland we
have 131 stores, achieving strong single
digit like for like sales growth, driven
using successful initiatives including
fresher food, innovative drink ranges
and new store formats. We reached
profitability in 2016/17 and see potential
to significantly increase the number
of stores in this market. We also have
259 Costa Express machines in Poland,
which are performing well.
We continue to see strong growth in
our profitable franchise business with
a total of 731 stores across 23 countries.
Our franchise business has grown
rapidly over a number of years through
our successful business model of great
partnerships, efficient logistics and
a focus on localisation and customer
demographics. Going forward we will
select target markets with the highest
potential for us to grow profitably
and win market share.
In France we have decided to pursue a
franchise only strategy resulting in the
recent closure of our five equity stores.
Costa Asia
China is a large market with a
burgeoning middle class and the
propensity to drink coffee is on
the rise. This presents an exciting
opportunity for Costa to become
the clear number two in the market.
We have built a solid foundation from
which to grow, but will take a more
strategic approach as we narrow our
focus across ten top tier cities to build
scale and a brand presence. We will
also exit or turnaround poor performing
stores to improve the overall profitability
of our estate. We will enhance our
brand awareness through digital media,
build our coffee credentials and create
the meeting place of choice for our
target customer through improved
store formats.
During the year we opened 63 gross
new stores and exited 37 stores in
China. In addition, we have introduced
five new-look concept stores with an
improved customer proposition and,
although early days, results have been
promising, and we aim to add additional
new concept stores over the course
of 2017/18. The success of these stores
so far gives us greater confidence
in our ability to build scale successfully
in this growing market and look for
opportunities to accelerate our strategy.
Whitbread Annual Report and Accounts 2016/17 44
Strategic reportStrategic report In November we announced c.£150
million of cost efficiencies over five
years to help offset investment and
cost pressures facing our sector, such
as National Living Wage and business
rates. Through this we will become
a leaner and more agile business,
sustaining good margins as we grow.
During the year we have made good
progress against these initiatives with
the renegotiation and consolidation
of key supplier contracts and the
implementation of new labour
management tools across Costa
and Restaurants, to facilitate better
scheduling and communications
with team members. We have also
completed the in-sourcing of our digital
teams and will shortly commence the
roll-out of new tills across Costa.
As part of our plan to build a better
infrastructure, in March we opened
our new state of the art Roastery
to drive innovation and efficiency,
facilitating Costa’s global growth for
the next 20 years. This £38 million
investment will increase roasting
capacity from 11,000 tonnes to 45,000
tonnes a year and use fully automated
systems to achieve increased
productivity and sustainability.
Costa Express
Costa Express is an exciting global
growth engine for Costa and we see
potential to double the size of this
part of the business. This year we
installed 1,585 net new machines
bringing our total to 6,801, including
740 internationally. As well as renewing
our key UK customer contract, we
also embarked on our entry into
a number of new markets with
plans to roll out in 2017/18.
We are upgrading our machines with
new management systems, which will
enhance our scalability and allow us
to monitor and control the machines
and their content remotely. This will
be important to the success of our
international roll-out.
We are upgrading the customer screens
to bring the best quality experience and
benefit our partners by enabling options
such as site specific advertising.
6,801
This year we installed 1,585
net new machines bringing our total
to 6,801, including international
Strategic Priority
3 Build
capability and
infrastructure
to support
long-term
growth
During the year we continued to
strengthen our capabilities to support
long-term growth. In the senior
executive team this included the
promotion of Simon Jones to Managing
Director of Premier Inn & Restaurants,
and the appointment of Dominic Paul
to Managing Director of Costa.
Mark Anderson, Managing Director of
Property and Premier Inn International,
has been promoted to the Executive
Committee reflecting the importance
of his new role. We have created a new
Group Transformation Director role to
support our journey to become a more
efficient company and we recently
announced that we have hired Nigel
Jones to take up this role later this year.
With our focus on our winning teams
we were also proud to be voted eighth
in the Sunday Times ‘Best Big
Companies to work for’.
£38m
invested in our state of the
art Roastery to achieve a 25%
increase in productivity
Whitbread Annual Report and Accounts 2016/17 45
Strategic report Strategic report
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
“My job can take
me all over the
UK and given the
choice, I’ll always
stay in a Premier
Inn because you
know the room will
be clean, the bed
will be comfortable
and they put on a
great breakfast.”
Whitbread Annual Report and Accounts 2016/17 46
Whitbread Annual Report and Accounts 2016/17 46
Premier Inn holds a
place in the nation’s
heart as the UK’s
favourite hotel chain,
and it’s easy to
understand why.
With a network of over 750 hotels
around the country there is always a
Premier Inn close by to where you need
or want to be and our brilliant team
members will always welcome you
with a smile and make sure you’re well
looked after. Ensuring our guests get
a good night’s sleep is our number one
priority and our famous Premier Inn
breakfast will set you up for the day
ahead, whether you’re off to work or
off on hols...
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
1.9bn 762 c.14,500 80.2% 94%
Number of UK
Premier Inns
Committed pipeline
(rooms)
Total occupancy
Bookings direct
with Premier Inn
Total Premier Inn &
Restaurants sales in
2016/17 (up 6.6%)
Bringing customers brands they love...
when they
need to be
ready for action
Whitbread Annual Report and Accounts 2016/17 47
Force for Good
Working together to
make a better future
Highlights
Team and community
Over
£2.8m
raised for Great Ormond Street
Hospital Charity
Over
800
apprentices in learning
£1.8m
raised for the Costa Foundation
12,000
community hours volunteered
by Costa team members
Customer wellbeing
15%
less added sugar in our
Costa Ice range
100%
of our whole shell eggs
will be cage free by 2020
659
restaurants – the largest chain in the
UK to serve MSC certified fish
100%
of Costa coffee is Rainforest
Alliance certified
Energy and environment
15,000
new LED lights installed across
100 Premier Inn sites
3,300
tonnes of CO2e per annum saved
through energy efficiency
projects installed in 2016/17
2,000
Costa stores participating in a
nationwide cup recycling scheme
800
Costa stores nationwide recycling
coffee grounds
Chris Vaughan
General Counsel
At Whitbread, we are building a long
term sustainable business. How we
do things is just as important as what
we do. People are at the heart of our
business, whether it be the way we look
after our colleagues, how we protect
the environment or how we support the
communities in which we operate. We
have a responsibility to act as a Force
for Good for all our stakeholders, and
we take this responsibility seriously.
We break our sustainability programme
into three pillars:
• Team and community;
• Customer wellbeing; and
• Energy and environment.
Each pillar has its own individual goals
and targets set.
Whitbread is a great place to work,
and we are committed to ensuring
that our 50,000 employees have the
opportunities they need to succeed
in whatever they do. We have over
800 apprentices in learning. Our WISE
programme focuses on getting young
people into training, whether or not
they are in education, training or
employment, and we invest significant
sums each year in our various schemes.
Further information is provided
in our operating review found on
pages 24 to 29.
Whitbread Annual Report and Accounts 2016/17 48
Strategic reportStrategic report With 28 million customers welcomed
every month, we must ensure that
they are buying products and services
they can trust and that we provide a
great choice of food and drink, which
includes healthier options. Animal
welfare is important to us, which is why
we recently committed to achieving
cage free status on all whole shell eggs
by 2020 and all ingredient eggs by
2025. We also announced a target in
Costa to reduce added sugar in drinks
by 25% by 2020. But we know there
is more to do.
During the year, our teams have
continued to passionately support
charitable and local causes. To date
we have raised over £8 million for
Great Ormond Street Hospital Charity
and over £11 million for the Costa
Foundation. This includes over
£250,000 raised from the annual
Three Peaks Challenge and I was
delighted to take part in the 2016
event myself.
Our innovative work to build sustainable
buildings continues and, as a result,
we won the prestigious Asda
Environmental Leadership Award at
the BITC Responsible Business Awards.
This year we also participated in the
Dow Jones Sustainability Index
for the first time, scoring best in
class in Governance, Philanthropy
and Eco-efficiency. We have been
identified in their Sustainability
Yearbook as leaders in our sector.
Chris Vaughan
General Counsel
24 April 2017
Our pillars
1 Team and
community
Great Ormond Street Hospital Charity
During 2016/17, the partnership
between Premier Inn & Restaurants
and Great Ormond Street Hospital
Charity has continued to achieve
outstanding results. Through building
on the momentum of the last four years,
we have raised over £2.8 million for
the charity in 2016/17.
Premier Inn & Restaurants had
committed to raising £7.5 million in
five years towards a new Premier Inn
Clinical Building. We were delighted
in November 2016 to announce that
the fundraising total had been achieved
one year earlier than anticipated. The
fundraising targets set have been
embraced by our team members,
customers and suppliers across
the country.
Costa Foundation
During the year, the Costa Foundation
has completed 11 new school projects.
It has also funded projects to expand
six established Costa Foundation
schools in Guatemala and Uganda.
The total amount raised in 2016/17
was £1.8 million.
The Costa Foundation has been
active since 2007. During the last
ten years, 72 different school
projects have been completed in nine
coffee-producing countries around
the world and provided over 30,000
places for children to access a safe
and quality education.
72
school projects completed
in nine countries
The Costa Foundation has inspired
thousands of Costa employees to make
a difference through their daily work.
2016 saw the tenth Costa Foundation
Three Peaks Challenge fundraising
event. Since 2007 hundreds of the
wider Costa team have risen to the
gruelling challenge of climbing the
highest mountains in Scotland, Wales
and England in one continuous journey
to raise money for the Foundation.
We also ran our first collaborative
partnership with Allegra’s Project
Waterfall as part of the UK Coffee
Week. Costa raised over £81,000, which
was used to support water projects
delivered by the Costa Foundation
on behalf of Project Waterfall. This
included new water harvesting tanks
supporting the increased growth
in student enrolment at ten Costa
Foundation high schools in Uganda.
Costa community programme
The Costa community programme has
gone from strength to strength with the
aim of empowering our team members
to make an active contribution to
their local communities. In 2016 over
12,000 hours were volunteered by team
members across Costa to good causes
where they live and work.
£2.8m
We have raised £2.8 million
for Great Ormond Street
Hospital Charity in 2016/17
Whitbread Annual Report and Accounts 2016/17 49
Strategic report Force for Good continued
Team and
community
continued
This year we established a partnership
with the Police Community Clubs of
Great Britain to run our first Costa
Reading Week, whereby hundreds of
our store teams donated educational
books on environmental issues to local
schools. Book club events were hosted
in store to encourage parents and
carers to spend one to one time reading
with their children.
Costa also supported Keep Britain
Tidy’s (KBT) ‘Clean for the Queen’
Campaign, Britain’s largest ever litter
pick event, as part of our commitment
to work towards tackling the issue of
litter. This was the second year that
Costa has acted as a principal retail
sponsor for KBT’s national anti-litter
campaigns. Over 600 of our stores
took part in the event.
In recognition of the hard work and
commitment that our teams have
delivered to their communities, the
Costa Community Programme received
Gold in the “Corporate Engagement
Awards” and a Highly Commended
in the “Corporate Comms Awards.”
We continue to work on enabling our
teams to make an active contribution
to their communities across Whitbread.
Our pillars
2 Customer
wellbeing
We have continued to recognise
the ongoing concern that childhood
obesity presents to our society. We are
committed to working in partnership
with the UK Government and industry
partners to ensure progress continues
on this important issue.
We are actively working to reformulate
dishes where possible, review our
portion sizes and provide choice and
transparency. We have a strategy in
place to do this, but recognise there
is more to do.
With over 600 restaurants and over
2,200 coffee shops in the UK, we
believe that our scale enables us
to make a significant and positive
contribution in driving change through
our work on:
• the reformulation of the food and
drink that we serve;
• introducing credible healthier
choices; and
• providing clear, meaningful and
easily accessible information for
our customers.
We have already taken action and
during the year have continued to
make good progress.
To date, the majority of dishes on our
restaurants’ children’s menus provide
children with one of their five a day
requirement and we offer more fruit
options in desserts. A review was
undertaken of the drinks offered to
children and this has led to the removal
of all added sugar drinks. Our children’s
food and drink offering has been
positively received by the Soil
Association in its ‘Out to Lunch’ survey
where Beefeater and Brewers Fayre
were recognised for improvements to
the quality and nutrition of the food
offered. We continue to work with the
Soil Association so that we can build
on this achievement.
Our reformulation programme to
reduce salt, sugar and saturated fat
without compromising the quality
and taste of our food has progressed
well during the year and we have made
significant reductions in the amount
of sugar in our starters, desserts and
sauce accompaniments.
Sugar reduction has also been a key
priority for Costa and we are committed
to reducing added sugar across our
beverage range by 25% by 2020.
Significant reductions have been made
in many of our drinks range. These
include 15% less added sugar in our
Costa Ice and 41% in a medio Chai Latte.
Our Costa food range also includes
products which are less than 250 kcals
per portion including healthier options
such as fruit pots and whole and dried
fruit. In addition, we have been working
to a target of reducing salt in our
sandwiches by 5% by the end of 2017.
Responsible sourcing
We have published our first modern
slavery report this year. The full
report can be found at www.whitbread.
co.uk/corporate-responsibility and
provides details of our modern slavery
risk assessment and due diligence
strategy, which we are implementing
across our global supply chain.
With a vast and varied supply chain,
we understood the first step to tackling
these issues was to understand where
our most significant risks lie. Working
in partnership with leading UK human
trafficking charity, Stop The Traffik,
we undertook a heat mapping exercise
to identify which suppliers and which
parts of our global supply chain are
most at risk of modern slavery taking
place. The process we followed involved
50 Whitbread Annual Report and Accounts 2016/17
Whitbread Annual Report and Accounts 2016/17 50
Strategic reportStrategic report an analysis of supplier tiers down to
commodity level, based on a risk rating
at source and chain geographies. We
are now working through the results to
develop a response for each supplier
identified as a higher risk, following the
Ethical Trading Initiative’s human rights
due diligence framework.
Product
We have made good progress towards
ensuring the products that we buy are
sustainable. In relation to our critical
commodities:
Coffee – 100% of our coffee is
Rainforest Alliance certified;
Fish – All of the fish that we now
buy directly is sustainably sourced.
This year, we are very proud to have
achieved the Chain of Custody Marine
Stewardship Council (MSC) certification.
This makes us the largest restaurant
chain in the UK to serve MSC certified
fish, demonstrating to our customers
that the fish they are served has
been caught in a sustainable and
responsible way.
Eggs – In September 2016, we
announced our commitment to go cage
free on whole shell eggs across Costa
and Premier Inn & Restaurants by 2020
and ingredient eggs by 2025. We are
already taking significant steps in
meeting that target.
We also have plans and targets in
place in relation to cotton, meat, palm
oil and timber.
Our pillars
3 Energy and
environment
Targets
This year we are pleased to have
achieved our 2020 carbon reduction
target. We will be working to reset our
environmental targets early in 2017/18,
continuing our commitment to reduce
our environmental impact.
UK electricity generation has become
more efficient in 2016/17, reducing
emissions per kWh generated. This
improvement and our continued
investment in efficiency has enabled
us to reduce our emissions beyond
our 15% 2020 target.
During the year we continued
our programme of annual capital
investment to reduce our energy
consumption.
We opened a further hub by Premier
Inn site in 2016/17 as part of our strategy
for sustainable development in urban
environments. These developments
have incorporated the environmental
initiatives and lessons from the success
of our first hub by Premier Inn site
in 2015, which achieved a BREEAM
Outstanding rating, and we will continue
this work as we accelerate the roll out
of the format in 2017/18.
Investing in efficiency and
renewable energy
We have continued to invest in
renewable energy generation in our new
Premier Inns. We now have solar photo
249kW
A 249kW solar PV system
will provide power for
the Roastery
voltaic generation capacity on over
90 hotels. In addition as of April 2017,
all of the electricity we buy for our
UK operations will be 100% renewable.
On 13 March 2017, Costa opened its
new £38 million Roastery in Basildon.
As well as quadrupling Costa’s roasting
capacity and being one of the largest
roasteries in Europe, it is also one of
the world’s most sustainable. On-site
renewable energy generation reduces
the building’s carbon footprint, with
the roof hosting a 249kW solar PV
system, which will provide power
for the Roastery. In tandem with
the rainwater harvesting system,
this will also generate hot water for
the building. Already achieving a
BREEAM Outstanding (to latest
standards) during its design stage
assessment, the Roastery was
shortlisted for the 2017 BREEAM
Awards and is aiming to receive a
further ‘Outstanding’ certification
at the final stage assessment.
Recycling and resource management
We are committed to minimising
our environmental footprint from bean
to cup, and in February 2017 Costa
launched a nationwide recycling
scheme across over 2,000 stores in
order to recover and guarantee the
recycling of its iconic takeaway cups.
In addition to this, Costa is funding
research with the University of Sheffield
to further understand the barriers to
cup recycling. We are also supporting
consumer-facing campaigns to raise
awareness of cup recyclability.
Moving from recycling cups to coffee
grounds, Costa has also partnered
with award-winning clean technology
company bio-bean to recycle coffee
grounds into low carbon fuel sources.
Over 800 stores nationwide are now
recycling an estimated 3,000 tonnes
of coffee grounds a year.
Awards
During the year, we won the
Environmental Leadership Award from
Business in the Community. The award
recognises the pioneering sustainability
efforts of both Premier Inn and Costa
for tackling climate change and saving
energy through two trail-blazing
environmental projects – the Costa
Eco-Pod in Telford and the hub by
Premier Inn, St. Martin’s Lane hotel. Both
projects demonstrate that sustainable
buildings and efficient new space are at
the core of our environmental strategy.
Whitbread Annual Report and Accounts 2016/17
51
Strategic report Strategic report
Bringing customers brands they love...
when they
need to break
up the journey
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
6,061 740
9
250
Number of UK Costa
Express machines
Number of
international Costa
Express machines
Number of
countries with
Costa Express
Number of drink
combinations available
from a machine
With over 6,000 Costa
Express machines in
garages and motorway
service stations up and
down the UK’s roads,
motorists never have to
drive too far before they
get to the next stop to
pick up a cup of quality
coffee on the go.
Made with fresh milk and Costa’s Mocha
Italia blend, a cup of coffee from a
Costa Express machine is the next best
thing to a hand-crafted barista made
coffee. It’s the perfect pick me up if
you’ve got a long drive ahead or just
want to break up the journey.
Whitbread Annual Report and Accounts 2016/17 52
Whitbread Annual Report and Accounts 2016/17 52
“When I have
to make a long
journey and need a
good quality coffee
to look forward
to when I stop.”
Whitbread Annual Report and Accounts 2016/17 53
Strategic report Group Finance Director’s review
A good financial
performance
Whitbread has continued its good financial
performance, with total revenue up 8.2%
to £3,106.0 million driven by strong organic
growth combined with good like for like sales
growth of 1.6%, albeit below our stretching
internal target. Underlying profit before tax
was up 6.2% to £565.2 million, with cash
generated from operations of £860.1 million
and underlying basic earnings per share up
6.0%. Profit before tax was £515.4 million
(2015/16: £487.7 million).
Nicholas Cadbury
Group Finance Director
Revenue
Premier Inn & Restaurants
Costa
Less: inter-segment
Revenue
2016/17
52 weeks to
2 March 2017
£m
2015/16
53 weeks to
3 March 2016
£m
Change
53 week
comparative
%
Change
52 week
comparative
%
Like for like
growth
%
1,907.9
1,201.7
(3.6)
3,106.0
1,822.0
1,103.2
(3.4)
2,921.8
4.7
8.9
6.3
6.6
10.7
8.2
1.5
2.0
1.6
Revenue
Premier Inn & Restaurants’ revenue rose
to £1,907.9 million, up 6.6%. Within this,
Premier Inn achieved total sales growth
of 9.0% to £1,349.1 million and grew
its market share through new hotel
openings and good like for like sales
growth in the UK. Premier Inn’s new UK
hotels contributed 6.4% to sales growth,
and like for like sales grew 2.3%. Like for
like sales growth was driven by the good
performance of hotels in catchments
where we did not add capacity and by
our strong returning hotel extension
programme. Our hotel extensions as
previously indicated, together with new
hotels diluted our like for like RevPAR
by c.2.0%, resulting in a decline of 0.6%.
In 2017/18 we expect new hotels to
contribute around 5-6% to total sales
growth and extensions to contribute
net c.1.0% to like for like sales growth.
Restaurants’ total sales grew by 1.2%
with like for like sales down 0.3%. Eight
net new restaurants were opened during
the year.
Costa’s revenue grew by 10.7% to
£1,201.7 million. Costa’s UK sales grew to
£1,054.0 million, up 10.0%, with equity
like for like sales increasing by 2.0% and
184 net new coffee shops opened during
the year. International sales grew to
£147.7 million, up 16.3% (7.1% in constant
currency) with 71 net new stores. Costa
Express delivered a strong performance
with 1,585 net coffee machines installed
taking the total to 6,801, of which 740
are overseas. In 2017/18, we expect
our Costa initiatives to drive positive
like for like sales growth, with the
investments we are making in the first
half delivering benefits in the second
half. We do, however, expect the
consumer environment to be tougher
than last year.
Whitbread Annual Report and Accounts 2016/17
54
Strategic reportStrategic report Profit
Premier Inn & Restaurants – UK, Ireland and Germany
Premier Inn International
Premier Inn & Restaurants
Costa – UK
Costa – International
Costa
Profit from operations
Central costs
Underlying operating profit
Net finance costs
Underlying profit before tax
Non-underlying operating costs
Non-underlying finance costs
Profit before tax
Underlying taxation
Non-underlying tax items
Profit for the year
2016/17
52 weeks to
2 March 2017
£m
2015/16
53 weeks to
3 March 2016
£m
Change
53 week
comparative
%
Change
52 week
comparative
%
7.0
23.9
7.4
4.4
5.3
6.8
(7.0)
6.8
(22.5)
6.2
471.5
(3.5)
468.0
154.3
3.7
158.0
626.0
(33.6)
592.4
(27.2)
565.2
(39.7)
(10.1)
515.4
(119.1)
19.6
415.9
451.5
(4.6)
446.9
151.0
2.5
153.5
600.4
(31.6)
568.8
(22.5)
546.3
(40.7)
(17.9)
487.7
(116.1)
15.7
387.3
4.4
23.9
4.7
2.2
2.9
4.3
(6.3)
4.1
(20.9)
3.5
5.7
7.4
Profit before tax was £515.4 million, up
5.7%, and after taxation, statutory profit
for the year was £415.9 million, up 7.4%
on last year.
Premier Inn & Restaurants’ profits grew
to £468.0 million up 7.4%, with UK
profits of £471.5 million, up 7.0%. Within
this, rent costs increased by 15.8% to
£139.8 million, reflecting the high level
of leasehold openings across the last
two years. Our depreciation and
amortisation charge increased by 19.3%
to £144.3 million as we continued to
invest in enhancing our hotels and
restaurants and upgrading our systems.
In line with previous guidance, margins
held steady at 24.5% compared to
2015/16, benefitting from like for like
sales growth and our cost efficiency
programme that offset inflation, and
our increased investments.
International hotel losses reduced to
£3.5 million (2015/16: loss of £4.6 million).
In July last year we announced that
Premier Inn will focus its international
strategy on continuing to grow its
businesses in Germany and the Middle
East and will commence a phased
withdrawal from its operations in India
and South East Asia. The associated
costs of withdrawal are detailed in the
non-underlying items section.
Costa’s profits increased 5.3% to
£158.0 million, with good growth in our
UK retail business and continued strong
growth from Costa Express. Costa’s
margins were down 0.8% pts year on
year on a 53 week basis, to 13.1%, due to
the National Living Wage, investments in
refurbishments and IT and increased
investment in brand marketing. This was
slightly better than previous guidance
due to investment re-phased into
2017/18.
Costa International made a profit of
£3.7 million (2015/16: £2.5 million), with
a good performance in our international
franchise business and in Poland.
Looking forward, our sectors continue
to face a number of cost headwinds
from the National Living Wage, business
rates, commodity price inflation and
foreign exchange rates. We are incurring
additional rent from the sale and
leaseback transactions we successfully
completed last year and are planning to
carry out this year. We are also investing
in line with our strategy of improving
our customer proposition and building
digital and IT capabilities and
infrastructures that will enable the
delivery of long-term sustainable
growth. Over time these costs will be
partially offset as we benefit from: the
cost efficiency programme announced
in November 2016, which plans to
deliver c.£150 million of savings over five
years; the investments we are making;
our dynamic pricing model; and through
the scale benefits of our organic growth.
In 2017/18 we expect margins in Costa
to reduce by around 1.2% pts which is
in line with previous guidance, including
the re-phasing of investments from
2016/17. In Premier Inn & Restaurants
we expect margins to reduce between
0% to 0.2% pts, again in line with
previous guidance.
Non-underlying items
Non-underlying items, including tax
related adjustments, amounted to
a charge of £30.2 million (2015/16:
£42.9 million).
This includes a £30.0 million charge in
respect of Premier Inn International’s
withdrawal from India and South East
Asia, comprising impairment of assets,
the costs of exiting contracts, and the
closure of regional offices. Also included
in non-underlying items are one-off
restructuring costs of £36.1 million
relating to reorganisation costs in the
UK as part of our cost efficiency
programme and a charge in respect
of the strategic review and resulting
restructuring of Costa’s international
operations in France and China. The
restructuring in China is on-going and
there are expected to be further closure
costs in the next financial year. In
addition an impairment charge of
£7.5 million was recognised relating
principally to underperforming stores.
These charges are partially offset by:
a net gain of £19.3 million on the disposal
of property, plant and equipment and
property reversions, a significant part
of which relate to our strategy to carry
out moderate sale and leaseback
transactions; a net gain of £11.8 million
on the disposal of our investment in
associate (a hotel in Edinburgh); and
a £5.3 million refund on the settlement
of a historic VAT claim.
Non-underlying items also include
amortisation of acquired intangible
assets (£2.5 million) and the IAS 19
pension finance charge (£9.4 million).
Full details are set out in note 6 to the
financial statements. Our policy on
underlying performance measures that
defines what items may be classified as
non-underlying is set out in note 2.
Whitbread Annual Report and Accounts 2016/17
55
Strategic report Group Finance Director’s review continued
Earnings per share
Underlying basic
Underlying diluted
Statutory basic
Statutory diluted
2016/17
52 weeks to
2 March 2017
pence
2015/16
53 weeks to
3 March 2016
pence
Change %
53 week
comparative
Change %
52 week
comparative
246.48
245.95
231.39
230.89
238.65
236.82
215.66
214.00
3.3%
3.9%
7.3%
7.9%
6.0%
6.5%
Net finance costs
The underlying net finance cost for
the year was higher than last year at
£27.2 million (2015/16: £22.5 million)
due to an increase in average net debt,
as a result of our continued capital
investments detailed below. In 2017/18
we expect underlying interest to
increase to around £32 million as
a result of the incremental cost of the
recent US private placement loan notes.
The effective interest rate on average
borrowings decreased from 4.7%
to 3.8%.
Total net finance costs, including
non-underlying finance costs, were
£37.3 million (2015/16: £40.4 million)
including the IAS19 pension finance
charge of £9.4 million (2015/16:
£17.2 million).
Taxation
Underlying tax for the year amounted
to £119.1 million at an effective tax rate of
21.1% (2015/16: 21.3%). The statutory tax
expense for the year was £99.5 million
(2015/16: £100.4 million).
Further details are set out in note 9
to the financial statements.
Earnings per share
Underlying basic earnings per share
for the year were 246.48 pence, up
6.0% on last year, and underlying diluted
earnings per share for the year were
245.95 pence, up 6.5% on last year.
Full details are set out in note 10 to
the financial statements.
Dividend
The Group’s dividend policy is to
grow the dividend broadly in line with
earnings across the cycle.
The recommended final dividend is
65.90 pence, an increase on last year
of 6.5%, making the total dividend for
the year 95.80 pence, a growth of 6.0%.
With the final dividend, we will offer our
shareholders the option to participate
in a dividend reinvestment plan. Further
details are set out in note 11 to the
financial statements.
in London. Our freehold pipeline is
now c.34% of the total pipeline
compared to 52% at the end of 2015/16.
Expansionary cash expenditure includes
£69.6 million acquisition of freehold
properties, which includes £28.3 million
on expansion in Germany, and £268.0
million on freehold and leasehold hotel
and hotel extension construction.
Non-expansionary product improvement
and maintenance cash capital
expenditure in Premier Inn & Restaurants
was £147.9 million (2015/16: £167.1
million). This was a decrease on the
previous year due to the successful
roll-out of lower cost full room
refurbishments, reactive maintenance
efficiencies and savings, as we annualised
the roll-out of air-conditioning units and
new beds across the estate last year.
Costa’s cash capital expenditure was
£124.3 million (2015/16: £102.6 million)
with the increase from last year
principally due to the construction of our
new Roastery and a higher number of
Costa Express machines. Expansionary
cash capital was £65.8 million as we
opened 255 net new coffee shops and
installed 1,585 net new Costa Express
machines. Costa’s non-expansionary
product improvement and maintenance
expenditure was £58.5 million (2015/16:
£47.7 million), with the increase driven
by investment in the new Roastery to
create more capacity for future growth.
Cash flow and net debt
Cash generated from operations was
strong at £860.1 million, an increase of
10.0% on last year.
Cash capital expenditure in total was
£609.8 million (2015/16: £724.9 million),
with further details set out below whilst,
on an accruals basis the Group’s capital
expenditure was £615.8 million (2015/16:
£751.8 million). Capital expenditure
is split between expansionary (which
includes the acquisition and development
of properties) and product improvement
and maintenance.
Premier Inn & Restaurants’ cash capital
expenditure was £485.5 million (2015/16:
£622.3 million), with expansionary
expenditure of £337.6 million (2015/16:
£455.2 million) as we opened 4,763
gross new rooms and continued to
invest in our hotel room pipeline
including freehold property purchases.
We maintained our gross UK pipeline
at c.14,500 rooms, including c.5,900
The principal movements in net debt are as follows:
Cash generated from operations
Product improvement and maintenance capital1
Operating cash flow after maintenance capital
Interest
Tax
Pensions
Dividends
Other
Cash flow before expansionary capital
Expansionary capital1
Proceeds from sale & leaseback
Proceeds from cash disposals
Net cashflow
Net debt brought forward
Net debt carried forward
2016/17
£m
2015/16
£m
860.1
(206.4)
653.7
(34.6)
(86.8)
(90.3)
(167.1)
(58.7)
216.2
(403.4)
186.2
20.8
19.8
(909.8)
(890.0)
782.2
(214.8)
567.4
(25.0)
(85.1)
(84.3)
(155.1)
(34.2)
183.7
(510.1)
–
(0.2)
(326.6)
(583.2)
(909.8)
1Total cash capital expenditure
609.8
724.9
Whitbread Annual Report and Accounts 2016/17
56
Strategic reportStrategic report In addition to capital expenditure, our
future leasehold commitments increased
by £242.0m to £3,138.7 million with
Premier Inn & Restaurants at £2,681.3
million (2015/16: £2,567.6 million) and
Costa at £430.9 million (2015/16:
£282.0 million).
Net proceeds of £186.2 million were
received from the successful sale and
leaseback of our hub hotel in Kings
Cross, our hub hotel in Tothill Street,
Westminster, and our Premier Inn hotel
in West Smithfield, Farringdon. Proceeds
from cash disposals of £20.8 million
include £14.1 million for the disposal
of our investment in associate.
In 2017/18, we expect our gross cash
capital expenditure to be between
£650 million and £700 million and
around £500-600 million net of the
proceeds of around £100-150 million
from sale and leaseback transactions.
Premier Inn & Restaurants’ spend is
expected to be c.£500-550 million, with
around 4,200 room openings. Premier
Inn & Restaurants’ non-expansionary
product improvement and maintenance
investment will be maintained, as we
continue to improve our customer
experience and competitive edge and
continue to improve our digital and
systems capabilities. Costa cash capital
expenditure is expected to be a similar
level to 2016/17 at around £140 million,
with around 60% being expansionary
capital, which will include larger stores
such as Drive Thrus, and the remainder
comprising refurbishments, systems,
product improvement and innovation.
Costa is planning to open a similar level
of coffee shops and to install c.1,250
Costa Express machines.
Pension payments totalled £90.3 million,
in line with the schedule of contributions
agreed at the last triennial review in
March 2014.
Dividend payments amounted to £167.1
million (2015/16: £155.1 million), with the
6.0% increase in the full year dividend of
95.80 pence consistent with the Group’s
basic underlying earnings per share
growth of 6.0%.
Corporation tax paid in the year was
£86.8 million (2015/16: £85.1 million).
Other cash items of £58.7 million
(2015/16: £34.2 million) include
payments of £22.3 million principally
relating to last year’s provision for
onerous leases on historically disposed
businesses, £7.1 million for the acquisition
of our interest in Healthy Retail Ltd,
(trading as ‘Pure’), and foreign exchange
movements on net debt.
We maintained our adjusted net debt
to EBITDAR ratio (see financial status
and funding) with net debt as at
2 March 2017 of £890.0 million (2015/16:
£909.8 million).
Return on capital
Return on capital is a prime focus for
Whitbread. In the year, the Group’s
return on capital of 15.2% (2015/16:
15.3%) continued to deliver a good
premium to our cost of capital. Costa
continued to deliver excellent returns
at 45.4% but were down 4.5% pts
on last year, after increasing for six
consecutive years, principally due
to the higher capital spend on the new
Roastery. Premier Inn & Restaurants’
returns were up 0.1% pt at 13.0%
(2015/16 year end: 12.9%). Excluding
the investment in freehold developments
under construction totalling more than
£200 million, returns in Premier Inn &
Restaurants would have been 1.6% pts
higher at 14.6%.
Pension
As at 2 March 2017, there was an IAS19
pension deficit of £425.1 million (2015/16:
£288.1 million). The main movements
during the year were the reduction in
the discount rate from 3.70% to 2.60%,
driven by the ongoing volatility in
corporate bond yields, partly offset by
the payment of the cash contribution
of £90.3 million.
The recovery plan schedule of Company
contributions is £80 million per annum
for 2017 to 2021 and £2.6 million in 2022.
The payments will be accelerated by up
to £5 million per year where increases
in ordinary dividends exceed RPI. The
Company also makes payments of
c.£9-10 million per year into the pension
fund through the Scottish Partnership
arrangements.
Financial status and funding
Whitbread aims to maintain its financial
position and capital structure consistent
with retaining its investment grade debt
status. To this end, we work within a
financial framework aimed at keeping
net debt to EBITDAR (pension and lease
adjusted) not greater than 3.5 times.
The net debt to EBITDAR for 2016/17
was 3.2 times, providing us with
comfortable headroom.
Our majority freehold hotel estate
also provides us with significant capital
flexibility, with the pace of freehold
acquisition and construction and hotel
extensions within our control. Freehold
hotel properties, compared to leasehold,
also reduce profit volatility and provide
Whitbread with a flexible source of
capital funding through sale and
leaseback transactions.
The Group has sufficient facilities to
finance our short and medium-term
requirements with total committed
facilities of c.£1.9 billion, compared
to net debt as at 2 March 2017 of
£890.0 million. Committed debt facilities
include US Private Placement loans
of £258 million (at the hedged rate),
a £450 million bond with a coupon of
3.375% which matures in October 2025
and a syndicated bank revolving credit
facility (“RCF”) of £950 million. During
the year the maturity of the RCF facility
was extended to September 2021,
with the option of a further one year
extension potentially taking the facility
to September 2022.
On 1 March 2017, the Group successfully
secured a further £200 million US
Private Placement loan notes in pounds
sterling. These loan notes were issued in
two series with a ten year maturity fixed
at c.2.6%. The proceeds will be drawn
during the year, in May and August.
Nicholas Cadbury
Group Finance Director
24 April 2017
Whitbread Annual Report and Accounts 2016/17
57
Strategic report Principal risks and uncertainties
Understanding and
responding to risks
Understanding and responding to risks
in our operations means we can make
informed decisions that enhance our
capacity to build value.
Risk management
Risk arises from the operations of,
and strategic decisions taken by, every
business. It is not something that can
be avoided but should be harnessed
in pursuit of business objectives.
The Board has ultimate responsibility
for risk management throughout the
Group and determines the nature and
extent of the risks Whitbread is willing
to take to achieve its objectives to
determine its risk appetite. Risk is
managed proactively by the Executive
Committee. Certain responsibilities,
such as overseeing the systems of risk
management and internal control, have
been delegated to the Audit Committee,
which completes an annual review of the
effectiveness of these processes.
The structure and governance of the risk
management process at Whitbread is
shown on page 59 and, during the year,
a robust bottom–up assessment of risks
was completed.
Both the Premier Inn & Restaurants
and the Costa businesses complete
an annual review of the risks to the
achievement of their strategic goals,
whilst also taking into account the key
operational risks, which are updated
regularly. A top–down risk assessment
is also completed to capture the Board’s
views on the principal risks facing
Whitbread, considering risk appetite.
Actions required to manage these
risks are monitored and reviewed
on a regular basis. The principal risks
identified, together with a summary
of key mitigations, are summarised
on pages 60 and 61.
Risks and uncertainties
The Directors have reconsidered the
principal risks and uncertainties of
the Group and added two new risks
reflecting the risks around the
extensive programme of change we
have embarked upon and business
interruption risks for services managed
by third parties. The risk of a wider
macro-economic effect as a result of
the UK leaving the EU, including foreign
exchange and interest rate fluctuations,
is addressed by the Group’s existing
economic climate risk. Going forward,
we will closely monitor and evaluate any
potential areas of risk.
Viability statement
The Corporate Governance Code
requires that the directors have
considered the viability of the Group
over an appropriate period of time
selected by them, in this case a
three–year period. In making this
assessment, the directors took into
account the current financial and
operational positions of the Group
and the potential impact of the risks
and uncertainties as outlined on pages
60 and 61.
The business planning process reviewed
by the Board, as part of the annual
strategic planning process, is over
a five–year timeline, with the Board
acknowledging that there is significantly
more certainty over the first three years
of the plan in light of fluctuations in
the global economy, the entry of new
competitors and customer preferences.
Therefore the directors have determined
a three–year period is an appropriate
period over which to provide its viability
statement. In making the viability
statement, the Board carried out a
robust assessment of the principal risks
and uncertainties facing the Group,
including those that would threaten
the business model, future performance,
solvency and liquidity. Scenario
modelling and sensitivity analysis was
applied to forecasted cash flows to
model the potential effects should
the principal risks actually occur
and consideration was given to the
availability and likely effectiveness of
mitigating actions that could be taken
to avoid or reduce the impact or
occurrence of the identified risk.
In particular, it should be noted that the
Group is currently spending a substantial
part of its cash from operations on
discretionary growth capital (c.30%
on average) which allows the Group
considerable flexibility to manage cash
flows and would provide significant
mitigation if required.
Based upon this assessment, the
directors confirm that they have
reasonable expectation that the Group
will be able to continue in operation
and to meet its liabilities as they fall due
over the three–year assessment period.
Whitbread Annual Report and Accounts 2016/17
58
Strategic reportStrategic report Group risk framework
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Accountable for strategic risk
management, including the assessment
of risk appetite, 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
Executive Committee
Review, challenge and
approval of Group risks
Internal Audit
Coordination and analysis
Group
Functions
Costa
Premier Inn &
Restaurants
Accountable for risk management in the respective business
and risk submissions to the Executive Committee
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Whitbread Annual Report and Accounts 2016/17
59
Strategic report
Principal risks and uncertainties continued
Principal Risks
Risks
Key mitigations
Change
Cyber and data security
Cyber and data security remains
a key risk as it could reduce the
effectiveness of our systems or
result in a loss of data. This in
turn could result in loss of income
and/or reputational damage.
We have a series of IT security controls in place, including up-to-date
antivirus software across the estate, network/system monitoring and
regular penetration testing to identify vulnerabilities. A continuous
security improvement programme is in place improving security and
data controls. Specifically, during the year we have strengthened our
perimeter protection with improved firewall and denial of service
protection and have moved significant systems to new, more secure,
data centres.
IT Infrastructure
IT infrastructure is unable to
adequately support our business
growth objectives. Although
improvements have been made
in our infrastructure.
A strong IT leadership team is in place together, with Group governance
structures, to help prioritise, coordinate and deliver our business plans
and the IT investment in an efficient way so as to minimise disruption.
We are also significantly increasing our investment in the upgrade of our
systems infrastructure, increasing the capacity, resilience and stability
of our core systems and our digital proposition.
Innovation and brand strength
A long–term decline in the
customer perception of our
brands would impact our ability
to grow and achieve appropriate
levels of return.
To ensure we maintain and improve the strength of our brands, we
continually complete market research and monitor opinion with focus
groups and net guest scores to ensure we maintain the right levels of
investment and innovation in our customer offerings. We are also
increasing the rate and level of investment in the refurbishments of our
Premier Inn and Costa stores to help improve our net promoter scores.
Change
Our ability to execute the
unprecedented volume of
change is recognised as
a new risk this year.
We have embarked on an extensive programme of change to replace
our legacy systems and infrastructure, upgrade our digital capability
and improve our customer propositions, enabling Whitbread to deliver
its growth plans over the coming years. To help ensure the successful
delivery of these change projects, we have significantly enhanced our
internal project delivery expertise and capability and put in place a robust
assurance management framework coupled with regular reporting to
the Executive Committee for all major projects.
New
Economic Climate
Uncertain/volatile economic
climate results in GDP decline fall
in RevPAR and inflation impacting
growth plans.
There is a rigorous business planning process in place which considers
many scenarios with responses to these. We also have strong site
selection teams with well-established processes in place based on market
and economic fundamentals, both at a macro and micro level. These
are supported by sensitivity analysis and a robust investment appraisal
process to help deliver good levels of return. We have also embarked on
an efficiency programme that aims to deliver £150 million of savings over
five years.
Engagement and retention
Failure to maintain staff
engagement and retention in
a tightening labour market.
The success of our businesses would not be possible without the passion
and commitment of our teams. Team engagement is fundamental. We
monitor this closely through our annual engagement survey ‘Your Say’,
the results of which are reviewed by the Executive Committee and the
Board, with trends analysed and appropriate actions reviewed and
agreed. Team turnover is also a key component of our WINcard and
Annual Incentive Scheme.
Whitbread Annual Report and Accounts 2016/17
60
Strategic reportStrategic report Key to change in the risk level
Higher
Level
Lower New New risk
Risks
Key mitigations
Change
Pandemic/terrorism
The risk of a pandemic or
terrorism on the safety and
security of our customers, staff
and the consequent impact
on trading.
The safety and security of our customers, employees and suppliers is
of utmost importance. Failure to prevent or respond to a major safety
or security incident could adversely impact our operations and financial
performance. We invest site level training to help identify hostile
reconnaissance activities and to ensure we have an appropriate response
should such events take place. The executive team also hold regular crisis
management exercises to ensure we are prepared for such events.
Talent and succession
Insufficient leadership capability
and succession in place to deliver
growth ambitions.
Talent and succession planning takes place regularly to ensure top talent
is identified and succession plans exist for key roles. Talent gaps are
addressed through recruitment, training and development to grow our
management capability. The Group offers key employees appropriate
levels of reward and recognition in order to retain them.
Food safety and hygiene
The preparation or storage
of food and/or supply chain
failure results in food poisoning
and reputational damage.
The health and wellbeing of our customers is fundamental to our
business. We have stringent food safety and sourcing policies with
traceability and testing requirements in place in respect of meat and
other products. Independent food safety audits are also completed
regularly at our hotels, restaurants and coffee shops and the results are
closely monitored. We also invest considerable resources in employee
training in the storage, handling and preparation of food.
Health and safety
Health and safety risk, death
or serious injury as a result of
Company negligence.
The safety of our guests and employees is of paramount importance.
NSF, an independent company, carries out health and safety audits on
every site and we have a programme of fire safety training for our
employees. Health and safety is a measure on the WINcard and acts
as a gateway for incentive payments. Regular health and safety updates
are provided to the Executive Committee and the Board.
Third party arrangements
Business interruption as a result
of the withdrawal of services/
support or reputational damage
as result of supplier practices is
recognised as a new risk this year.
Whitbread has a number of key supplier relationships that help ensure
the efficient delivery of our multi-site and support centre operations. The
failure or withdrawal of services from one or more of these suppliers may
result in some business interruption. To ensure against this, we continually
review our suppliers and business continuity arrangements. We expect
our suppliers’ practices to be in line with our values and standards.
Suppliers are thoroughly vetted before we enter into any arrangements
to ensure they are reputable and then monitored though our supplier
management arrangements.
New
The strategic report on pages 4 to 61 was approved by the Board and signed on its behalf by Chris Vaughan, General
Counsel on 24 April 2017.
Whitbread Annual Report and Accounts 2016/17
61
Strategic report
Corporate governance
I am pleased to present the Board’s annual report
on corporate governance, which confirms that the
Company has fully complied with the UK Corporate
Governance Code throughout the year.
Richard Baker
Chairman
The Board is committed
to ensuring that corporate
governance is an integral part
of our organisation. It is key
to how we interact with our
investors, employees, suppliers
and other stakeholders.
UK Corporate Governance Code
The Board has reviewed the Company’s
performance against the UK Corporate
Governance Code (the Code) and has
concluded that the Company complied
with the Code throughout the 2016/17
financial year. A copy of the Code is
available from www.frc.org.uk. As part
of our annual corporate governance
review, the Board also considered the
new provisions contained within the
2016 Corporate Governance Code,
which applies to the Company with
effect from the 2017/18 financial year.
I am pleased to confirm that we already
comply with these new provisions.
Board membership
The Board welcomed David Atkins and
Deanna Oppenheimer as independent
non-executive directors during the year.
Since the end of the financial year, we
have also welcomed Adam Crozier as
an independent non-executive director.
Each of these individuals brings skills
and experience to aid the Board’s
discussions. Further details of the
appointment of the new non-executive
directors is provided in the Nomination
Committee report on pages 75 to 77.
As announced during the year, Wendy
Becker retired from her position as a
non-executive director of the Board in
December 2016 following her nine year
tenure. I would like to thank Wendy for
her contribution and commitment to the
Board and we wish her well for the
future. Also, as previously announced
Stephen Williams will retire from the
Board following the conclusion of the
Company’s 2017 AGM. We are grateful
to Stephen for remaining on the Board
to ensure an orderly transition of the
leadership of the Remuneration
Committee.
Shareholder engagement
The 2016/17 financial year has been
one of significant engagement with
our shareholders. We held a Capital
Market Day in November 2016,
which was attended by our major
shareholders, at which executives
presented details of our strategy.
We have twice consulted investors
in connection with the Company’s
remuneration policy and further details
of these consultations are provided in
the remuneration report on pages 78
to 98. I would like to thank all those
investors that have taken the time to
engage with us, whether by responding
to the consultations, attending the
Capital Market Day or meeting with
Company representatives throughout
the year. Your input is much appreciated.
I also very much enjoyed meeting a
number of our shareholders at our AGM
last year and I look forward to doing so
again at this year’s AGM on Wednesday
21 June 2017.
Richard Baker
Chairman
24 April 2017
Whitbread Annual Report and Accounts 2016/17
62
GovernanceGovernance
Leadership and the Board of Directors
The Board of Directors
There are 11 members of the
Board including the Chairman,
Chief Executive and Senior
Independent Director. The
composition of the Board is
shown in the chart to the right.
Biographical details of each of
the directors can be found on
pages 64 and 65.
We believe that it is vital for
the Board to include 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 to the right.
Composition of the board
Chairman
Executive directors
Independent non-executive directors
Board experience
Number of directors
1
3
7
Age of the board
46-55
56-65
66-75
1
2
Retail sector
Travel and
hospitality sector
Marketing
Legal
Financial
International
Commercial property
8
Technology and digital
Human resources
7
6
6
3
6
11
5
7
8
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.
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, together with information
on the roles of the Senior Independent
Director, the executive directors and
the non-executive directors.
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 appropriate 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
• Optimising the performance of
the Company.
• Day–to–day operation of the business.
• 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 and motivating a large
workforce of 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 annual evaluation of the
Chairman on behalf of the other directors.
The Senior Independent Director can
be contacted directly or through the
General Counsel.
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 2016/17
63
Governance Board of Directors
A strong
leadership
team
Richard Baker
Chairman
Alison Brittain
Chief Executive
Date of appointment to the Board:
September 2009
Date of appointment as Chairman:
September 2014
Age: 54
Experience:
Richard previously served as Chairman of Virgin
Active Group, Chief Executive of Alliance Boots
Group plc and Chief Operating Officer of Asda
Group plc.
External appointments:
• Aimia Inc. (Adviser)
• DFS Furniture plc (Chairman)
• British Retail Consortium (Chairman)
• Advent International Plc (Operating Partner)
• Lawn Tennis Association
(Non–executive director)
• AELTC Grounds plc (Non–executive director)
Committee membership:
• Nomination Committee (Chairman)
• Remuneration Committee
Date of appointment to the Board:
September 2015
Age: 52
Experience:
Alison joined Whitbread from Lloyds Banking
Group, where she was Group Director of the
Retail Division, with responsibility for the Lloyds,
Halifax and Bank of Scotland retail branch
networks, remote and intermediary channels
and products, along with the Retail Business
Banking and the wealth businesses. Prior to
joining Lloyds Bank, Alison was Executive Director
for Retail Distribution and Board Director at
Santander UK PLC. She previously held senior
roles at Barclays Bank.
External appointments:
• Marks and Spencer Group plc
(Non–executive director)
• Prince’s Trust Council (Trustee)
Nicholas Cadbury
Group Finance Director
Louise Smalley
Group HR Director
Sir Ian Cheshire
Senior Independent Director
Date of appointment to the Board:
November 2012
Age: 51
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
to 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.
External appointments:
• Land Securities Group PLC
(Non–executive director)
Date of appointment to the Board:
November 2012
Age: 49
Experience:
Louise joined Whitbread in 1995 and has held
the position of Group HR 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:
• DS Smith Plc (Non–executive director)
Date of appointment to the Board:
February 2011
Age: 57
Experience:
Sir Ian was Group Chief Executive of Kingfisher
plc until the end of January 2015, and was also
a former Chair of the British Retail Consortium.
External appointments:
• Debenhams plc (Chairman)
• Government lead non–executive director
• Business in the Community (Trustee Director)
• Menhaden Capital PLC (Chairman)
• Cambridge Programme for Sustainability
Leadership (Chairman of Advisory Board)
• The Prince of Wales Charitable
Foundation (Trustee)
• Maisons du Monde (Non-executive
President)
• Barclays UK (Chairman-designate)
Committee membership:
• Nomination Committee
• Remuneration Committee
Whitbread Annual Report and Accounts 2016/17
64
GovernanceGovernance David Atkins
Independent non-executive director
Adam Crozier
Independent non-executive director
Chris Kennedy
Independent non–executive director
Date of appointment to the Board:
January 2017
Age: 51
Experience:
David is Chief Executive of Hammerson plc,
former Chairman of the European Public Real
Estate Association (EPRA) and past president
of Revo (formerly BCSC).
External appointments:
• Hammerson plc (Chief Executive)
• Revo (Member of the advisory panel)
• European Public Real Estate Association
(Executive board member)
• British Council of Shopping Centres
(President)
• British Property Federation
(Committee Member)
• Reading Real Estate Foundation
(Director and Trustee)
Committee membership:
• Audit Committee
• Nomination Committee
Date of appointment to the Board:
April 2017
Age: 53
Experience:
Adam is Chief Executive of ITV plc, which he
joined in 2010. Prior to that, Adam was former
Joint Chief Executive of Saatchi & Saatchi, Chief
Executive of the Football Association and then
Royal Mail Group.
External appointments:
• ITV plc (Chief Executive)
• Creative Diversity Network Ltd (Director)
Committee membership:
• Nomination Committee
• Remuneration Committee
Date of appointment to the Board:
March 2016
Age: 53
Experience:
Chris is Chief Financial Officer of ARM Holdings
plc, which he joined in September 2015. He will
step down from that position on 30 April 2017.
Prior to that, Chris was Group Finance Director
of easyJet plc for five years, having previously
spent 17 years in a variety of senior roles at EMI.
External appointments:
• ARM Holdings plc (Chief Financial Officer)
• The EMI Group Archive Trust (Trustee)
Committee membership:
• Audit Committee (Chairman)
• Nomination Committee
Deanna Oppenheimer
Independent non–executive director
Stephen Williams
Independent non–executive director
Susan Taylor Martin
Independent non-executive director
Date of appointment to the Board:
January 2017
Age: 59
Experience:
Deanna spent over 25 years in a number of senior
roles in banking at both Barclays Bank PLC and
Washington Mutal Inc.
External appointments:
• CameoWorks (Founder and Chief Executive)
• WorldPay Group PLC (Non-executive
director)
• Tesco PLC (Senior Independent Director)
• AXA SA (Non-executive director)
• Joshua Green Corp. (Non-executive director)
• University of Puget Sound (Trustee)
Committee membership:
• Nomination Committee
• Remuneration Committee (Chair)
Date of appointment to the Board:
April 2008
Age: 69
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.
External appointments:
• Croda International Plc (Non–executive
director)
• Eversheds LLP (Non–executive director)
• Spencer Stuart LLP (Senior Adviser)
• Moorfields Eye Hospital NHS Trust
(Vice Chairman of the Trust Board)
• De La Warr Pavilion Trust (Chairman)
• Amicus Curiae Limited (Director)
• Leverhulme Trust (Board member)
Committee membership:
• Nomination Committee
• Remuneration Committee
Date of appointment to the Board:
January 2012
Age: 53
Experience:
Susan has held a number of roles at Thomson
Reuters, including President, Thomson Reuters
Media, President of Global Investment Focus
Accounts and 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)
Thomson Reuters Foundation (Trustee)
Committee membership:
Audit Committee
Nomination Committee
Whitbread Annual Report and Accounts 2016/17
65
Governance Senior management
These executives, together with the
Whitbread PLC executive directors
(whose biographies can be found on
pages 64 and 65) form the Executive Committee.
The Executive Committee meets on
a monthly basis and is chaired by Alison
Brittain. It has authority to manage the
day-to-day operations of the Group’s
businesses, with the exception of those
matters reserved for the Board, within
the financial limits set by the Board.
The Committee’s responsibilities include:
• formulation of strategy for
recommendation to the Board;
• management of performance in
accordance with strategy and
budgets;
• talent and succession;
• risk management;
• capital investment decisions (where
Board approval is not required);
• cost efficiency, procurement and
organisational design; and
• reputation and stakeholder
management.
As explained on page 7 the Company
undertook a management restructure
during the year. Mark Anderson and
Simon Jones joined the Executive
Committee in September 2016. Mark
has been with the Company for ten
years, has led the property function
since 2008 and is now Managing
Director of Property and Premier Inn
International. Simon Jones joined
Whitbread in 2011, and has led on key
initiatives such as network planning,
pricing and marketing. Simon is
Managing Director of Premier Inn
& Restaurants.
Dominic Paul joined Whitbread in June
2016 as Managing Director, Costa Coffee
and Chris Vaughan has been General
Counsel since joining the Company
in 2015.
Mark Anderson
Managing Director, Property and
Premier Inn International
Simon Jones
Managing Director, Premier Inn
& Restaurants
Dominic Paul
Managing Director, Costa Coffee
Chris Vaughan
General Counsel
Whitbread Annual Report and Accounts 2016/17
66
GovernanceGovernance Corporate governance continued
Board activities during
the year
updated and is circulated as part of
the General Counsel’s report before
each meeting.
In advance of each Board meeting,
a set of Board papers, including monthly
financial and trading report, is circulated
so that directors have sufficient time to
review them and arrive at the meeting
fully prepared.
The Board has a rolling forward agenda
which sets matters to be considered
throughout the year ahead. Two
strategy days are held each year. In
2016/17, one considered the long–term
strategy and the other considered
the five-year strategy. Following
these sessions, the Board agreed the
significant topics to be discussed at its
meetings during the year. The rolling
agenda is then updated to ensure that
there is a structured approach to the
consideration of topics and that
recurring issues are 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
The agenda for each Board meeting is
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 progress on
action points, reports from the Chief
Executive, the Group Finance Director,
the Managing Directors of Premier Inn
& Restaurants and Costa together with
General Counsel’s report. The General
Counsel keeps minutes of the meetings
and produces a list of agreed actions
for each meeting.
At the meetings during the year, the
Board discharged its responsibilities and
considered a range of matters as shown
in the table at the bottom of this page.
Board processes and topics to be
discussed are continually reviewed to
ensure that the correct focus is given
to the key issues highlighted at the
strategy days.
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. Those 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 the limit set out in the matters
reserved to the Board;
• approval of interim dividends and
recommendation of final dividends; and
• establishment of Board committees.
The schedule of matters reserved
was reviewed at the February 2017
Board meeting and again in April 2017,
and is available on our website
(www.whitbread.co.uk).
Board agenda 2016/17
Standing agenda items
• Chief Executive's report
• Health and safety report (quarterly)
• Group Finance Director's report
• General Counsel’s report
Q1
• Acquisition of 49% of Healthy Retail Limited (Pure)
• Approval of year-end documentation and final
dividend
• Corporate responsibility activity
• Information technology update
• Long-term strategy
Q2
• Information technology update
• Leadership and talent
• Pensions update
• Sale and leaseback of properties
• Premier Inn withdrawal from India and
South East Asia
Q3
• Appointment of David Atkins to the Board
• Appointment of Deanna Oppenheimer to the Board
• Capital Market Day
• 2016/17 Interim results and approval of interim dividend
• Risk management
• Strategy day and five-year plan
Q4
• 2017/18 budget
• Appointment of Adam Crozier to the Board
• Costa China update
• Premier Inn Germany update
• Talent and succession planning
• Update on Premier Inn withdrawal from India
and South East Asia
• Risk management
• Corporate governance review
Whitbread Annual Report and Accounts 2016/17
67
Governance Corporate governance continued
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 the
directors is set out below.
Members of the executive team
attended Board and committee
meetings as appropriate.
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
and generating claims over and above
those covered by insurance. These
are reviewed periodically.
Board meetings and attendance
Number of scheduled meetings
Richard Baker
Alison Brittain
Nicholas Cadbury
Christopher Rogers2
Louise Smalley
David Atkins5
Wendy Becker4
Sir Ian Cheshire
Chris Kennedy1
Simon Melliss3
Deanna Oppenheimer5
Susan Taylor Martin
Stephen Williams
Board
10
10/10
10/10
10/10
2/2
10/10
2/2
8/8
10/10
9/10
5/5
2/2
10/10
10/10
Audit
Committee
Nomination
Committee
Remuneration
Committee
4
–
–
–
–
–
–
4/4
–
3/4
3/3
–
4/4
–
3
3/3
–
–
–
–
–
3/3
3/3
3/3
2/2
–
3/3
3/3
7
7/7
–
–
–
–
–
5/5
7/7
–
–
2/2
–
7/7
1 Chris Kennedy missed one Board meeting and one Audit Committee meeting, both of which were held
in the same week, due to a commitment made prior to his appointment as a director.
2 Christopher Rogers stepped down from the Board on 19 April 2016.
3 Simon Melliss stepped down from the Board on 30 September 2016.
4 Wendy Becker stepped down from the Board on 31 December 2016.
5 David Atkins and Deanna Oppenheimer were appointed as directors on 1 January 2017.
Board Performance evaluation
An evaluation of the Board, its
committees, individual directors and
the Chairman is carried out each year.
An externally facilitated Board
evaluation was carried out in 2015/16.
The next externally facilitated
Board evaluation will be conducted
during the financial year ending
28 February 2019.
Board and Committee Review Cycle
Year 1
(Year ended 2015/16)
Externally facilitated review
Year 2
(Year ended 2016/17)
Internal review
Year 3
(Year ended 2017/18)
Internal review
Board and Committee
It is believed that the Board and its
committees have the appropriate
balance of skills, experience, diversity,
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, and also
considered the Chairman to be
independent on appointment.
During the year, there has been
a number of changes to the Board.
David Atkins and Deanna Oppenheimer
were appointed as non-executive
directors of the Company on 1 January
2017, with Adam Crozier being
appointed as a non-executive director
since the year-end, on 1 April 2017.
Following the completion of her nine
year term as a non-executive director,
Wendy Becker resigned from the
Board on 31 December 2016. Finally, as
previously announced, Stephen Williams
will step down from the Board following
the completion of the 2017 AGM on
21 June 2017.
Details of the appointment procedures
can be found in the report of the
Nomination Committee on pages 75
to 77.
The 2015/16 evaluation identified
opportunities for improvement in the
following areas:
• further clarity on the international
strategies of both Premier Inn and
Costa;
• more structured and regular focus on
risk management and risk appetite;
and
• greater discussion on certain aspects
of talent management and succession
planning, at middle management level
as well as at Board level.
The issues identified in 2015/16 in
relation to strategy did not re-emerge,
suggesting that the actions taken to
address those points were effective.
Whitbread Annual Report and Accounts 2016/17
68
GovernanceGovernance Commitment
During the year all directors including
the non-executive directors, committed
significant time to the Company in
accordance with the requirements
specified in their service contracts and
letters of appointment. On behalf of the
Board, the Nomination Committee has
reviewed the extent of other interests of
the non-executive directors. The Board
is satisfied the Chairman and each of
the non-executive directors commit
sufficient time to their duties and fulfil
their obligations to the Company. During
the year, particular consideration was
given by the Board to the appointment
of Sir Ian Cheshire to the Board of
Barclays Bank PLC and it was agreed
that Sir Ian continued to commit
significant and appropriate time to his
role as the Senior Independent director
of the Company.
No executive director has taken on more
than one non–executive directorship
in a FTSE 100 company.
Induction process
On appointment, all directors receive a
full and formal induction that is tailored
to their specific needs. David Atkins and
Deanna Oppenheimer joined the Board
on 1 January 2017 as non-executive
directors. As part of their induction each
non- executive director met with the
Chief Executive, Group Finance Director
and the members of the Executive
Committee. We ensure that each
new member of the Board has the
opportunity to visit Premier Inn &
Restaurant together with Costa sites.
Training and development
Directors attend external training events
to update their skills and knowledge.
Training was undertaken by Board
members during the year on a range
of issues including:
• anti-bribery;
• data protection;
• cyber security; and
• travel security.
Investor relations and market updates
were also presented to the Board
together with regular updates from
each of the brands are made to the
Board. In addition, Slaughter and May,
provided directors with training on the
new Market Abuse Regulation. ‘Deep
dive’ sessions were also held on certain
issues, such as Costa China. Some Board
meetings were held at Premier Inn hotels
and restaurants in order to give the
Board the opportunity to gain a deeper
understanding of the business.
All directors have access to independent
professional advice at the Company’s
expense. Directors serving on the Board
and committees confirmed that they
were satisfied that they received
sufficient resources to enable them to
undertake their duties effectively. Each
director has access to the General
Counsel for advice on governance.
The General Counsel prepares a
monthly report that includes updates on
secretariat and legal matters, along with
governance, compliance and insurance.
This report is presented and discussed
at each Board meeting.
Conflicts of interest
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
in January each year when all directors
confirm 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.
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.
2016/17 Internal Evaluation
In 2016/17, the Board conducted the
annual evaluation of its performance,
and that of its three main committees,
by using an online evaluation tool.
Each director completed a questionnaire
and the General Counsel collated
and presented the responses of the
evaluation for consideration by
the Board.
The outcome of the evaluation was
such that the directors considered that
the Board is operating effectively
and has been able to develop clear
objectives of its future strategy.
Identified areas
Although no significant concerns
were raised, some opportunities
for improvement were identified.
These included:
• to provide opportunities for the
non-executive directors to spend
more time in the business, outside
of the formal Board meeting cycle;
• to increase the level of Board
awareness of customer perceptions
and developments in the markets
in which we operate, whilst ensuring
that the Company’s performance
is adequately monitored against its
peers; and
• to further increase focus on key risks
and mitigation plans.
Whilst progress has been made
on risk management, the latest
evaluation shows that further action
is required to address this point.
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
meets with the non–executive
directors, without the Chairman
present, to discuss the performance
of the Chairman. The Senior
Independent Director also speaks
with the executive directors to gain
their views before discussing the
results with the Chairman.
Whitbread Annual Report and Accounts 2016/17
69
Governance Corporate governance continued
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 through
the Chairman.
In addition to the regular contact
with shareholders, during the year, we
undertook two shareholder consultations
in respect of the proposed new
remuneration policy and proposed
changes to LTIP targets. The opportunity
to discuss the new policy with a number
of our shareholders was appreciated
and the feedback provided was
constructive and helpful. Further details
of the new remuneration policy can be
found in the remuneration report on
pages 78 to 98.
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 model and performance over
the past financial year and plans for
future growth.
• The AGM, where all shareholders can
vote on the resolutions proposed and
to put questions to the Board and
executive team.
• Presentations of full–year and interim
results to analysts and shareholders,
that are also available on the
Company’s website.
Interaction with institutional
shareholders
• The Chief Executive, Group Finance
Director and Director of Investor
Relations hold meetings with
institutional investors following the
full–year and interim results.
• The Chairman meets with institutional
shareholders on request.
• The Board receives updates on
the views of major shareholders from
the Company’s brokers.
• Consultations were held with our
major shareholders on changes to the
Company’s remuneration policy and
to LTIP targets.
Interaction with private shareholders
• Live webcast presentations of the
full–year and interim results.
Capital Market Day
We hosted a Capital Market Day
in November 2016 to address
the longer term outlook for the
business. The Chief Executive,
Group Finance Director and
senior executives across the
Group presented to both
institutional shareholders and
analysts, followed by a question
and answer session. A live
webcast, together with the
presentation materials, continues
to be accessible on the Company’s
website – www.whitbread.co.uk
• Electronic communications with
shareholders including use of the
online share portal.
The Annual General Meeting
The AGM provides all shareholders with
the opportunity to communicate directly
with the Board which encourages their
participation at the meeting.
understandable and provides the
information necessary for shareholders
to assess the Company’s position and
performance, business model and
strategy. Further detail on how this
conclusion was reached can be found
in the report of the Audit Committee
on page 74.
Statements by the auditor in respect
of its reporting responsibilities
Statements by the auditor about its
reporting responsibilities can be found in
the auditor’s report on pages 104 to 108.
Going concern
The directors’ going concern statement
can be found in the directors’ report
on page 102.
Viability statement
The viability statement can be found
on page 58.
Business model and strategy
Information on the Group’s business
model and the strategy for delivering
the objectives of the Company can be
found on pages 4 to 61.
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 regularly
and updated in line with best practice.
They are available in full on the
Company’s website.
A detailed report from the Chairman of
the Remuneration Committee is set out
on pages 75 to 78. Reports for the Audit
and Nomination Committees can be
found on pages 73 to 77.
In accordance with the Code, the Notice
of AGM and related papers are sent to
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 at this year’s AGM 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 99 to 102.
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
Whitbread Annual Report and Accounts 2016/17
70
GovernanceGovernance 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 principal risks.
This process was in place throughout the 2016/17 financial year and up to the date of this report. The process is reviewed
by the Board and accords with the internal control guidance for directors in the Code. A report of the principal risks,
together with the viability statement, can be found on pages 58 to 61.
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 business and
operational risks, 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 the Director of Internal Audit
and this is reviewed regularly by
the Premier Inn & Restaurants and
Costa executive committees.
• All major capital and revenue
projects, together with significant
change programmes, include the
consideration of the risks involved
and an appropriate action plan.
Controls
• The Company reviews and confirms
its level of compliance with the
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 are
regularly reviewed and updated.
• The Whitbread Code of Conduct,
setting out required levels of ethics
and behaviour, is communicated to
employees and training is provided
with a whistleblowing system made
available.
• The Code of Conduct makes reference
to specific policies and procedures
which have to be followed.
• Employees are required to undertake
tailored training on risk areas including
IS security, data protection and
anti-bribery.
• 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 Audit Committee approves
the 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 internal
and external audits.
• Internal audits are carried out
under the control of the Director
of Internal Audit. The reports are
reviewed by the Audit Committee
and, on a monthly basis, by the
Executive Committee to ensure
that the actions required to address
issues identified are implemented.
• The Director of Internal Audit
reports annually to the Audit
Committee on the effectiveness of
operational and financial controls
across the Group.
• Deloitte LLP, the Company’s
external auditor, reviews and
reports on the significant issues
identified in its 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 the internal
audit team.
• Post completion reviews of major
projects and investments are
carried out and reported on to
the Board.
Whitbread Annual Report and Accounts 2016/17
71
Governance Audit Committee report
As Chairman of the Audit Committee, I am
pleased to present the Audit Committee
report for the year ended 2 March 2017.
The report provides an overview of the
work that the Audit Committee has
undertaken during the year and the issues
that have been considered.
Chris Kennedy
Chairman, Audit Committee
Membership of the Audit Committee and meeting attendance
Name of director
Chris Kennedy1 (Chairman)
David Atkins
Wendy Becker2
Susan Taylor Martin
Simon Melliss2
Meetings attended and
eligible to attend
3/4
–
4/4
4/4
3/3
1 Chris Kennedy missed one Committee meeting due to a commitment made prior to his
appointment as a director.
2 Simon Melliss and Wendy Becker stepped down from the Committee on 30 September 2016
and 31 December 2016 respectively.
During the year, we have
welcomed David Atkins as a
member of the Audit Committee.
David is currently Chief Executive
of Hammerson plc and his
appointment ensures that the
Audit Committee continues to
have the competencies relevant
to the industry in which the
Company operates.
As part of his Committee induction,
David Atkins attended meetings with
the Chairman of the Audit Committee,
Group Finance Director, the General
Counsel and the Managing Directors of
Premier Inn & Restaurants and Costa.
The Committee meets at least four times
a year and will hold additional meetings
as and when required. Meetings are
attended by members of the Committee
and, by invitation, the Chairman of the
Board, the Chief Executive, the Group
Finance Director, the Director of Internal
Audit, the Group Financial Controller,
the General Counsel and other relevant
people from the business when
appropriate. The external auditor,
Deloitte LLP is also invited to meetings.
Composition of the Committee
All members of the Committee are
independent non-executive directors
as required by the Committee’s terms of
reference and have been selected to be
members of the Committee based on
their individual financial and commercial
experience. In accordance with the UK
Corporate Governance Code (the Code),
the Board considers that I have recent
and relevant financial experience
through my current role as Chief
Financial Officer of ARM Holdings plc.
I will step down from this position on
30 April 2017. As part of the annual
review of the Company’s compliance
with the Code, the skills and experience
of the Committee have been evaluated.
Further in accordance with the 2016
Corporate Governance Code (applying
to the Company with effect from its 2017
Whitbread Annual Report and Accounts 2016/17
72
GovernanceGovernance financial year), the Board has agreed
that the Committee as a whole has the
competencies relevant to the sector in
which the Company operates.
Responsibilities of the Committee
The Board has delegated specific
responsibilities to the Committee in
accordance with the Code. The key
responsibilities of the Audit Committee
are to:
• monitor and review the integrity of the
Group’s financial results and the
financial reporting process;
• monitor the statutory audit of the
annual and consolidated accounts;
• monitor the effectiveness of the
Group’s internal controls and risk
management systems;
• review and monitor the independence
of the statutory auditor, in particular,
the provision of additional services;
• approve the internal audit plan and
monitor and review the effectiveness
of the Group’s internal audit function;
and
• have primary responsibility for the
recommendations to the Board in
relation to the external auditor.
Further details on the Committee’s
responsibilities are in the Committee’s
terms of reference on the Group’s
website: www.whitbread.co.uk.
Main activities during the year
In 2016/17, the Audit Committee’s
work included internal controls, risk
management, internal audit, external
audit and financial reporting.
The specific details of the matters
discussed included:
• the quality and integrity 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
Group’s performance, business
model and strategy;
• the regulatory announcements
of the results;
• a going concern assessment;
• a long-term view of the Group’s going
concern basis;
• a review of the ‘Speaking Out’ reports
submitted in accordance with the
Group’s whistleblowing policy;
• a review of the Committee’s
effectiveness and terms of reference;
and
• a review of the Group Finance systems
upgrade programme.
To aid its review, the Committee
considers reports from the Group
Finance Director, the Group Tax Director,
the Director of Internal Audit, the
General Counsel and also reports from
Deloitte LLP as the external auditor on
the outcomes of their half-year review
and annual audit. The Committee looks
for constructive challenge from Deloitte
as external auditor.
The key areas of judgement and
estimation considered by the
Committee, in relation to the 2016/17
accounts were:
Defined benefit pension
The Committee reviewed, considered
and exercised judgement on the
assumptions used to calculate the
pension scheme assets and liabilities
under IAS 19, to satisfy itself that
appropriate consideration and balance
had been given to all macroeconomic
factors. The principal assumptions used
and the sensitivities around them were
considered and the consistency in
approach from 2015/16 to 2016/17 was
assessed, concluding with the same
estimates as reached by management.
Impairment
A full asset impairment review is
undertaken every year and the
Committee is provided with information
on how the impairment values have
been derived. Areas of judgement
around the calculation of the discount
rate used, the growth rates applied,
the sensitivities of the judgements and
the impairments booked are discussed
and challenged. The impairment values
presented by management were noted
and agreed by the Committee.
Non-underlying items
Consideration was given to the
appropriateness of disclosure for
all of the items classified as
non-underlying. This included the
nature of the items and whether they
met the criteria as defined by the
accounting policy. In addition, the
Committee was provided with details
around the restructuring provisions
created within non-underlying and in
particular around the exit of the hotel
operations in South East Asia. Regular
updates have been provided in relation
to the progress of the exit and the level
of provisioning has been challenged
accordingly to ensure that it is sufficient
to meet the potential obligations.
Taxation
The method of calculating the
Group’s tax expense and liability
and the provisioning for potential
tax liabilities were considered.
Assumptions are made around
the assets which qualify for capital
allowances (determined ultimately via
the aid of a third–party expert), the level
of disallowable expenses, provisions for
uncertain exposures or recoveries, the
extent of rolled over gains, indexation
thereon and the tax base into which
they have been rolled. All have an
impact on both deferred and current
tax. These were reviewed and challenged
with the judgements being noted and
agreed. The Committee also reviewed
the judgements exercised on tax
provisioning as part of its annual
review of key provisions.
Whitbread Annual Report and Accounts 2016/17
73
Governance Audit Committee report continued
Fair, balanced and understandable
In order to confirm to the Board
that the Annual Report and Accounts,
taken as a whole is fair, balanced
and understandable, there has been
a thorough verification and approval
process using the Committee’s
knowledge of the Group, 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
Executive Committee and me, as the
Audit Committee Chairman;
• a final draft is reviewed by the Audit
Committee prior to consideration
by a committee of the Board; and
• formal approval of the Annual Report
and Accounts is given by a committee
of the Board.
Based upon this review, the Committee
determined that the Annual Report is
fair, balanced and understandable.
Internal control and risk management
The Audit Committee monitors the
systems of risk management and
internal control. In addition, the
Committee completes an annual review
of the effectiveness of these systems in
March, assessing the risk management
framework and policy, management’s
risk assessment and review process,
and the monitoring and reporting of risk.
This review is completed in conjunction
with an internal control effectiveness
review from Internal Audit and Group
Finance, and considers all material
controls, including financial, operational
and compliance controls. The system
and processes were considered to be
robust and no significant weaknesses
were noted. A robust assessment of the
principal risks facing the Company was
carried out, considering risk appetite,
and each risk was assessed and the level
of assurance required was determined.
Further details of the principal risks
identified and agreed by the Company
can be found on pages 60 and 61.
‘Speaking Out’ facility
In accordance with the Code, the
Committee has continued to review
the Company’s whistleblowing function,
known as ‘Speaking Out’. The system
is operated by two external third-party
providers, Hospitality Action in the UK
and Navex Global internationally, and
allows employees to report anonymously
and in confidence. During the year the
Committee reviewed the re-launch of
the policy, processes and reporting
structure for ‘Speaking Out’, and agreed
that appropriate arrangements are in
place for proportionate and independent
investigations. The Committee receives
regular reports from the General Counsel
on the operation of this function.
Internal audit
The Audit Committee monitors
and reviews the scope, extent and
effectiveness of the Company’s internal
audit function. Regular presentations
and updates were given to the
Committee by the Director of Internal
Audit and private discussions were held
with the Director of Internal Audit as
and when necessary.
External auditor
On behalf of the Board, the Committee
overseas the relationship with the
external auditor. Deloitte was reappointed
as auditor of the Company at the
2016 AGM following a tender process
undertaken in 2015. The effectiveness
of the external audit process is
dependent on appropriate audit risk
identification at the start of the audit
cycle. We received from Deloitte a
detailed audit plan, identifying their
assessment of these key risks.
These risks were reviewed and they,
together with the work done by the
auditor, were challenged to test
management’s assumptions and
estimates around these areas, as well
as other areas reported upon. The
effectiveness of the audit process was
assessed in addressing these matters
through the reporting we received
from Deloitte at both the half–year
and year–end. In addition, feedback
was sought from management on the
effectiveness of the audit process and
targeted and tailored questionnaires
were completed. The points raised
were taken into account in this year’s
year-end process. As part of our
review process, the Committee will be
assessing the work of the year-end audit
once finalised and formal discussions
of the effectiveness review will take
place at the Audit Committee meeting
in July 2017.
Audit tender
Deloitte was appointed as the Group’s
auditor in 2015. The Committee confirms
compliance with the provisions of the
Statutory Audit Services for Large
Companies Market Investigation
(Mandatory Use of Competitive
Tender Processes and Audit Committee
Responsibilities) Order 2014, as published
by the UK Competition and Markets
Authority. The Group intends to put
the external audit out to tender every
10 years in the future.
Auditor independence
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.
Deloitte are engaged to provide
independent assurance over the
systems transformation programme
governance and deep dive reviews in
to the high risk stages of the project, as
permitted by the policy on non-audit
services. This was approved by the
Audit Committee. Independence is
maintained as they are not designing
the system or its controls but reviewing
and reporting to assist the wider
programme governance required
for a successful go-live.
Following a review of the services
provided by our external auditor,
Deloitte LLP, and taking into
consideration the ratio of non-audit
to audit fees of 0.25, we can confirm
that it continues to be independent.
Chris Kennedy
Chairman, Audit Committee
24 April 2017
Whitbread Annual Report and Accounts 2016/17
74
GovernanceGovernance
Nomination Committee report
I am pleased to present the Nomination
Committee report that provides an overview
of the work that has been undertaken by
the Committee during the year.
Richard Baker
Chairman,
Nomination Committee
Membership of the Nomination Committee and meeting attendance
Name of director
Richard Baker (Chairman)
David Atkins1
Wendy Becker2
Sir Ian Cheshire
Simon Melliss2
Deanna Oppenheimer1
Stephen Williams
Meetings attended and
eligible to attend
3/3
–
3/3
3/3
2/2
–
3/3
1 David Atkins and Deanna Oppenheimer joined the Committee on 1 January 2017.
2 Simon Melliss and Wendy Becker stepped down from the Committee on 30 September 2016
and 31 December 2016 respectively.
Succession planning is key
to a successful Board and the
Committee was pleased to
recommend the appointments of
David Atkins, Deanna Oppenheimer
and Adam Crozier to the Board.
David and Deanna joined the Board
on 1 January 2017. Adam Crozier
joined the Board on 1 April 2017.
The Committee meets at least twice
a year and will hold additional meetings
as and when required. Meetings are
attended by members of the Committee
and, by invitation, the Chief Executive,
the Group Finance Director, the Group
HR Director and the General Counsel.
Composition of the Committee
All members of the Committee are
non-executive directors. During the year,
the membership of the Committee was
reviewed and all non-executive directors
have now joined the Committee.
Role of the Committee
The role of the Nomination Committee
is to review the Board composition
and identify and nominate directors
who could add value to the Board’s
performance. The Committee is also
responsible for succession planning,
evaluating the directors on an annual
basis and striving for a balance of skills,
knowledge, independence, experience
and diverse representation.
Whitbread Annual Report and Accounts 2016/17
75
Governance Nomination Committee report continued
Responsibilities of the Committee
The Committee has specific
responsibilities on behalf of the Board
and these are detailed below:
the Board before appointment and
any changes to the Chairman’s
commitments should be reported
to the Board as they arise; and
• to regularly review the structure,
size, and composition of the Board
to include the balance of skills,
knowledge, independence, experience
and diversity and to make
recommendations to the Board
in respect of any changes;
• to consider succession planning for
the Board and to determine the skills
and experience required for future
Board appointments;
• to identify and nominate, for the
approval of the Board, candidates
to fill Board vacancies as and when
they arise;
• to evaluate the balance of skills,
knowledge, experience and
diversity required prior to making
an appointment to the Board and on
the basis of this evaluation to prepare
a role description outlining the
capabilities required for a particular
appointment;
• review the results of the annual
Board evaluation that relate to the
composition of the Board.
The full terms of reference are
available on the Company’s website:
www.whitbread.co.uk.
Main activities during the year
In 2016/17, the Committee’s main
activities have included:
• the appointment and on boarding of
three new independent non–executive
directors;
• a review of the Board size, structure
and composition, with a view to
ensuring the continued ability of the
organisation to compete effectively
in the marketplace;
• a review of the talent and succession
planning for the Board, taking into
account the challenges and
opportunities facing the business;
• the re–election of directors at the AGM;
• to keep the leadership needs of the
and
• the terms of reference and
effectiveness.
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 February.
Board appointments and diversity
Appointments to the Board are based
on merit against objective criteria.
Diversity and equality have always
been core values at Whitbread. The
Board believes that diversity is of
utmost importance, ensuring the
effectiveness of the Board and the
Company and its continued success.
Whitbread appoints members of the
Board on the basis of performance
and the ability to continually contribute
to the Board, on the grounds of the
knowledge, skills and experience
required. We are committed to an
active policy of equal opportunities
and embraced diversity at all levels.
The appointment of new directors
The Committee annually evaluates
the balance of skills, experience,
independence and knowledge on
the Board, preparing a description
of the role and capabilities required
for a particular appointment and
consider a matrix of skills and
competencies of the Board.
Company under review, both executive
and non-executive with a view to
ensuring the continued ability of the
Company to effectively compete;
• keep up to date and fully informed
about strategic issues and commercial
changes affecting the Company and
the market in which it operates;
• to ensure that on appointment to the
Board, non-executive directors receive
a formal letter of appointment setting
out the time commitment in respect
of the role;
• to annually review the time required
from non-executive directors and to
ensure that a performance evaluation
is undertaken to determine if
non-executive directors are spending
sufficient time to fulfil their duties;
• for the appointment of a Chairman,
to prepare a job description including
the time commitment expected. A
proposed Chairman’s other significant
commitments should be disclosed to
Length of tenure of directors as at 2 March 2017
David Atkins
Richard Baker
Alison Brittain
Nicholas Cadbury
Sir Ian Cheshire
Adam Crozier
Chris Kennedy
Deanna Oppenheimer
Louise Smalley
Susan Taylor Martin
Stephen Williams
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Whitbread Annual Report and Accounts 2016/17
76
GovernanceGovernance The Committee followed the same
process for the appointment of Adam
Crozier as a non-executive director,
joining the Board on 1 April 2017. Adam
has a strong background in business
transformations, brands, communication
and marketing. His expertise will be of
great value to the Board as we continue to
expand the Premier Inn and Costa brands.
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. As part of my individual
performance review of each
non-executive director, I reviewed their
contribution and time commitment
to the Company. All directors are
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.
As mentioned, Stephen Williams will
be stepping down from the Board in
June 2017 after serving nine years as
a non-executive director.
Richard Baker
Chairman, Nomination Committee
24 April 2017
We use external search consultants
to engage and identify a number of
candidates, ensuring equal representation,
aligned with the role and capabilities
required for the appointment. Selected
candidates meet with the Committee
and further interviews take place before
an appointment is made.
Board changes during the year
Following a review of the composition
of the Board, it was determined that the
Committee should appoint three new
non-executive directors. Zygos was
appointed by the Board as the adviser
to the Committee in the search for
external candidates. Zygos has no
other connections to the Company.
When appointing new directors, the
Committee reviewed a matrix of Board
skills and considered which skills
were required, taking into account the
strategic development of the Company.
Following this, a detailed specification
was prepared for each non-executive
role and a preliminary list of candidates
was prepared for consideration.
Following the interview and assessment
process, Deanna Oppenheimer and
David Atkins were appointed as
non–executive directors, joining the
Board on 1 January 2017. Deanna has
a strong background in mass consumer
retail and her experience of having
worked with a broad range of leading
edge digital businesses will add
significant value to the Whitbread
Board. Deanna also replaced Stephen
Williams as Chair of the Remuneration
Committee from 1 March 2017.
As the CEO of a major UK business with
interests across a number of European
markets, David also has significant
experience in the European retail
property sector that will provide the
Whitbread Board with invaluable
insights as we continue to expand
both in the UK and overseas.
Whitbread Annual Report and Accounts 2016/17
77
Governance
Remuneration report
I am delighted to have joined the Whitbread
Board at the beginning of 2017, and to have
succeeded Stephen Williams as Chair of the
Remuneration Committee on 1 March 2017.
2016/17 was a busy year for the Committee.
Deanna Oppenheimer
Chair, Remuneration Committee
Introduction
The remuneration policy, which was
approved by shareholders in 2014, is
reaching the end of its three-year life.
Coupled with Alison Brittain announcing
the three strategic priorities for the
Group this time last year, the time was
right for a detailed review of Whitbread’s
remuneration policy.
I would like to thank Stephen for his
work chairing the Committee over the
last three years and for the support he
has provided to me as I take on the role.
Stephen has kindly agreed to remain
on the Board and the Remuneration
Committee until the AGM and both
he and I will be available to answer
shareholders’ questions on remuneration
at the meeting. This will provide us with
a six-month period during which we will
both be members of the Committee.
I fully support the outcome of the policy
review and, while much of the work on
the new policy took place before I joined
Whitbread, I attended the Committee
meetings since January at which the
feedback from our shareholders was
carefully considered and the updated
policy agreed. Having completed our
consultation with our major investors,
we will be putting the updated policy
to shareholders for approval at the AGM
in June 2017.
The new policy is an evolution of the
existing policy and we have only made
changes where we believe they are
essential in the context of the strategic
priorities of the business. Our philosophy
is to align remuneration directly with the
Company’s strategy and its business
plans. Importantly, there will be no
changes to maximum award levels or
holding periods, and both malus and
clawback clauses will continue to apply
to both incentive schemes.
Our philosophy
The updated remuneration policy
reflects our philosophy that executives
should be paid fairly, that they should
be incentivised to achieve outstanding
results, rewarded for doing so and that
targets should be stretching enough so
as to avoid large payouts for mediocre
performance. The Committee is very
aware of the significant attention on
executive remuneration and of our
responsibilities to all Whitbread’s
stakeholders. We are also aware of the
need for Whitbread to be competitive
in the employment market, so that
the Company is able to attract and
retain high-calibre executives with
appropriate experience.
I believe that we have the right balance
and this is demonstrated by the fact
that rewards under the Annual Incentive
Scheme this year are slightly less than
50% of maximum, when Whitbread
has once again achieved a good
performance, with underlying profit
before tax increasing by 6.2% to
£565.2 million.
Shareholder engagement
The Committee has consulted with
Whitbread’s major investors, along with
Glass Lewis, ISS and the Investment
Association, twice this year. The first
consultation was in relation to the
revised structure of the Company’s
remuneration policy and the second
was in connection with changes to the
LTIP performance conditions. These
consultations have been very helpful
to us as we have formulated both policy
and targets for the future and I would
like to thank all those who responded
to the consultations for their time
and input. Following feedback, as
mentioned above, we have decided to
improve the disclosure in relation to the
targets, particularly in relation to the
Annual Incentive Plan. We have also
taken the opportunity to extend the
circumstances in which clawback and
Whitbread Annual Report and Accounts 2016/17
78
GovernanceGovernance malus conditions would apply to include
a situation where material damage is
done to the Company’s reputation.
More details on these consultations
can be found in the sections below.
Greater transparency
As I mentioned above, during the
recent consultations, a number of our
shareholders stressed the importance
of good disclosure and transparency.
As a result of the feedback we received,
we have decided that wherever possible,
we will disclose the incentivised targets.
Last year, for the first time, we
retrospectively disclosed our profit
target and committed to disclose the
2015/16 target in this report. This
disclosure can be found on page 88.
As a result of the shareholder feedback,
we have given some thought to how
we can improve the transparency of
our targets still further and have now
decided to disclose our 2016/17 profit
target in addition to 2015/16 target.
This can also be found on page 88.
We have also included a new table
in the section of the report on key
performance indicators on pages 16 to
19, which brings greater clarity to the
targets set for incentivised measures.
Updated policy
During the past year, the Committee’s
activities have been dominated by
a detailed review of Whitbread’s
remuneration policy. The review started
at the beginning of 2016 and, shortly
afterwards, Alison Brittain set out her
three strategic priorities for the Group:
• to grow and innovate in the UK;
• to focus on Whitbread’s strengths
to grow internationally; and
• to build the capability and platform
to support future growth.
(See pages 8 to 13 for more information
on Whitbread’s strategy.)
The Committee set out to propose
a policy, which is designed to align
remuneration structures directly with
strategy, while retaining the key
measures which shareholders have
indicated are most critical to them.
With this in mind, the Committee
agreed certain changes to the incentive
schemes in order to align them more
closely to the longer-term strategy,
taking account of the business context
in which we are operating, and to
simplify their operation.
In particular, we identified that the
Annual Incentive Scheme was weighted
too heavily towards in-year profit and
that the LTIP performance measures
were overly complex. During the latter
part of 2016, Stephen Williams wrote
to our 20 largest shareholders as well
as a number of proxy advisers in order
to get their views on the proposed
changes to the remuneration policy.
Respondents were generally pleased
with the simplification of the LTIP
and accepted the rationale for the
re-alignment of the Annual Incentive
Scheme to include greater focus
on the longer-term strategy.
The changes that we propose
to the existing scheme structures
are as follows:
Annual Incentive Scheme
The Annual Incentive Scheme will
be rebalanced, such that executives
are focused as much on driving the
longer-term strategic aims as they are
on in-year profit. This is particularly
important for Whitbread as the
Company invests significant capital into
maintaining the strength of its brands.
It is proposed that 50% of the annual
Annual Incentive Scheme – performance targets1
Objective
Target
Annual profit growth
Underlying profit before tax
Individual strategic
objectives:
UK growth
Growth in Premier Inn rooms, Costa stores,
Costa Express machines and Group like for like
sales
International growth
Growth in German hotel pipeline and Costa China
Cost efficiency
Achieve the in-year efficiency plan
WINcard measures
Team retention
Customer heartbeat
Proportion of
maximum opportunity
50%
25%
25%
1 The individual strategic objectives shown in the table are those of Alison Brittain. The objectives set for
the other executive directors can be found on page 97. The annual profit growth target and the WINcard
measures are consistent for all three executive directors.
incentive be payable based on in-year
profit, with the remaining 50% split
equally between:
• financially orientated, objective
and measurable individual strategic
objectives, linked to Whitbread’s
measurable long-term goals; and
• objectively determined WINcard
measures, to include team retention
and customer measures, which are all
critical leading indicators of the future
financial performance of the Group.
We received a number of questions
during the consultation with shareholders
about the kind of strategic measures
which we will adopt for the executive
directors. Shareholders were keen to
make sure that the targets were clear
and tangible and closely linked to the
delivery of profit in the business. The
Remuneration Committee agrees that
the targets must be tangible, stretching
and objectively measurable and aligned
with the three-point strategy for the
Group referred to earlier. A table
showing these changes is set out
below, using Alison Brittain’s strategic
objectives as an example. Information
on the strategic objectives for all of
the executive directors is provided on
page 97.
We do not propose to make any
changes to the quantum of awards
and clawback and malus clauses will
continue to apply. We propose that
50% of all short-term incentives will be
deferred in shares, which are released
after a three-year period (the deferral
amount currently varies depending on
the measure, and in recent years has
been around the 50% mark).
Long Term Incentive Plan
We plan to simplify the scheme by
removing the matrix relationship
between the two LTIP measures and
moving to two equally weighted and
independently measured components
of EPS and ROCE. Again, we do not
propose that there be any increase
in the maximum level of award.
The awards will still be subject to a
two-year post-vesting holding period
and clawback and malus clauses will
continue to apply.
Whitbread is investing substantial
sums of capital in its business to provide
strong future growth. ROCE remains
a critical measure of performance for
shareholders, and no changes to the
ROCE ranges, which will remain at 13%
to 18%, are proposed.
Whitbread Annual Report and Accounts 2016/17
79
Governance Remuneration report continued
In relation to the EPS measure, the
current range in the policy is RPI + 4%
at threshold to RPI + 10% at maximum
payout. As articulated earlier in the
Annual Report, Whitbread has
benefitted from a period of sustained
growth in the last five years. While the
Group plans to continue growing for
the long term, as outlined in detail to
shareholders at the Capital Market Day
in November 2016, current investment
is required to deliver long-term growth
and the Committee has reflected those
financial plans in setting the LTIP targets.
In addition, as we move into a period
of more economic uncertainty, the
Committee believes that having RPI as
part of the calculation will introduce
undue volatility into the measure and
could result in extreme upside or
downside impact on payouts, which
bear no correlation to the underlying
performance of the business. For these
reasons, we believe now is the right time
to move away from using RPI as part
of the EPS measure. Having carefully
considered the business plans of the
Group and current consensus estimates,
we propose to leave the range at 4% to
10% EPS growth. For more information
on the background to this proposal,
please see the Chairman’s statement on
page 5, the strategy section on pages 8
to 13 and the Group Finance Director’s
review on page 55.
Set out below is a table which summarises
the proposed new structure of the LTIP
performance conditions:
LTIP Measure
Target Range
EPS growth
4% to 10% CAGR
Return on
Capital
Employed
13% to 18%
Entitlement
(% of max)
50%
50%
We have also removed the ability to
provide an additional joining award of
up to 200% of salary on recruitment
and limited any awards to those needed
to compensate a joiner for the loss of
awards from the previous employer.
Other remuneration
No changes have been made to the
policy approved in 2014 in relation
to the base salary, pension or benefits
of executive directors.
This report
The policy report, which follows
this statement, sets out details of
the remuneration structure, which
shareholders will be asked to approve
at the 2017 AGM. The annual report on
remuneration explains what directors
were paid in 2016/17, including the
awards under the incentive schemes,
and also gives some detail on how
our policy will be implemented in
2017/18 in the event that it is approved
by shareholders.
I look forward to working with my
colleagues on the Board and the
Remuneration Committee and to
meeting shareholders at the AGM
in June.
Deanna Oppenheimer
Chair, Remuneration Committee
24 April 2017
The statements 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 Deanna Oppenheimer on 24 April 2017.
Linkage between strategy and incentives
Winning
Teams
Customer
Heartbeat
Profitable
Growth
Everyday
Efficiency
Measure
• Team retention
• Health and safety (gateway)
Measure
• Premier Inn brand health
• Restaurants net
recommend
• Costa net recommend
• Health and safety (gateway)
Scheme
• Annual Incentive Scheme
Scheme
• Annual Incentive Scheme
Measure
• Underlying basic EPS
• Return on capital
• Underlying profit before tax
• Brand expansion
• Like for like sales
Scheme
• LTIP
• Annual Incentive Scheme
Measure
• Delivery of in-year
efficiency plan
Scheme
• Annual Incentive Scheme
Whitbread Annual Report and Accounts 2016/17
80
GovernanceGovernance
Remuneration policy report
Introduction
This report outlines the Company’s remuneration policy,
which shareholders will be asked to approve at the 2017
AGM. Subject to shareholder approval, the policy will be
effective from the date of the 2017 AGM and is intended
to apply for three years.
For executives, our approach continues
to be designed so as 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.
Future policy table
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.
Element
Purpose and link to strategy Operation
Maximum potential value
Performance metrics
Base
salary
• Base salaries are set to
be sufficient to attract
and retain the calibre
of executive talent
needed to support the
long–term interests of
the business.
Salaries are reviewed annually
taking account of:
• the salary review across the
Group;
• trading circumstances;
• personal performance,
including 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, healthcare/personal
insurances.
• In exceptional
circumstances, such as the
relocation of a director, or
for a new hire, additional
benefits may be provided
in the form of a relocation
allowance and benefits
including tax equalisation,
re-imbursement of
expenses for temporary
accommodation, travel and
legal financial assistance.
• Annual salary increases would
• None
normally be in line with the 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, it will do so in
accordance with policies applying
across the Group and the resulting
salary will not exceed the
competitive market range.
• In 2016/17 the benefits received by
the executive directors amounted
to between 2.8% and 5.4% 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.
• None
Whitbread Annual Report and Accounts 2016/17
81
Governance Remuneration policy report continued
Element
Purpose and link to strategy Operation
Maximum potential value
Performance metrics
• 167% of base salary (up to 50%
of maximum paid in cash and
up to 50% of maximum paid in
deferred shares).
Annual
Incentive
Scheme
• To provide a direct link
• Targets for measures set at
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.
the beginning of the
financial year.
• Cash awards paid following
the end of the financial year.
• Deferred shares awarded
following the end of the
financial year and, under
normal circumstances,
released three years after
the date of award.
• Malus provisions apply to
unvested deferred shares
and clawback provisions
apply to cash awards
in the event of a material
misstatement of results.
• Awards are payable based on three
weighted areas covering underlying
profit performance, individual
strategic objectives and performance
against selected team and customer
related measures from the WINcard
(the Group’s balanced scorecard).
Performance measures under each
area are determined annually and the
Committee retains the discretion to
adjust the weighting of the areas
annually based on prevailing business
needs. However, the underlying profit
performance will represent no less
than 50% of total award at any time.
Other measures will be objective
and, when possible, externally
benchmarked leading indicators
of future financial performance.
Normally around 25% of the maximum
incentive is paid for threshold
performance, with around 50% paid
for on target performance and the
full incentive payment being paid
for delivering stretch performance.
These vesting levels may vary from
year to year.
• For 2017/18, the weighting of
the annual incentive award will be
based on 50% underlying profit
performance, 25% on individual
strategic objectives and 25%
Customer Heartbeat/Winning Teams
measures from the WINcard.
• Vesting is based on equally weighted
and independently measured 3-year
EPS and ROCE performance. For
threshold performance, 20% of the
award will vest; for maximum
performance, 100% of the award will
vest. The Committee retains the
discretion to introduce additional
measures or adjust the weighting of
performance measures in the future
based on prevailing business needs.
Any material changes will be discussed
with shareholders in advance.
Long Term
Incentive
Plan
• 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 and motivate
executives over the
performance period
of the awards and
beyond.
Sharesave
Scheme
• To encourage
long-term
shareholding in
the Company
• Awards made annually
• Annual awards to a maximum
in shares.
of 200% of base salary.
• Awards vest after three
years subject to
performance conditions.
• Two–year holding period
post-vesting.
• Dividend equivalents may
be provided on vested
shares during a holding
period.
• Subject to clawback and
malus provisions.
• Annual invitation to all
employees, including the
executive directors
• Consistent with prevailing HMRC
limits, currently savings limited to
£500 per month.
• None
• Option price calculated by
reference to the market
price discounted by 20%
on the invitation date.
• Options granted over
a three and/or five-year
period.
Pension
• Pension benefits
• Executive directors are
• 27.5% of base salary (up to 25% for
• None
new joiners).
are provided in order
to offer a market
competitive
remuneration package
that is sufficient to
attract and retain
executive talent.
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.
Whitbread Annual Report and Accounts 2016/17
82
GovernanceGovernance Illustration of application of remuneration policy
The graphs below show how the remuneration policy will be applied in 2017/18, with details of expected remuneration levels
for each director for below threshold performance, for on–target performance and for maximum performance.
Executive directors – potential value of 2017/18 package
Alison Brittain
Nicholas Cadbury
Below
threshold
£1,010,313
On target
£1,900,672
Maximum
£3,486,927
Below
threshold
£689,693
80%
20%
80%
20%
On target
£1,232,274
43% 11% 11%
18%
18%
45%
11%
7%
19%
19%
Maximum
£2,044,599
23%
6%
32%
19%
19%
27%
7%
21%
22%
22%
£m
0
0.5
10
15
20
25
£m
0
0.5
10
15
20
25
Louise Smalley
Below
threshold
£456,722
On target
£818,776
Maximum
£1,370,081
Fixed elements
Salary
Pension
79%
21%
Variable elements
LTIP
Deferred shares
Cash incentive payment
44%
11%
7%
19%
19%
26% 7%
22%
22%
22%
£m
0
0.5
10
15
20
25
On–target performance assumes on–target profit, a good
performance on individual strategic objectives, green WINcard
scores and threshold vesting under the LTIP. Maximum
performance assumes maximum profit, stretch performance
on individual strategic objectives, excel WINcard scores and
maximum LTIP vesting. In both cases, for simplicity, no share
price growth is assumed. Taxable benefits are not included.
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 the three
performance areas 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 three–year deferral 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, with clawback
provisions applying to cash awards.
There are three types of measure used
to determine the level of awards under
the scheme. There is a profit measure,
a number of WINcard measures (or
other stakeholder measures as may be
deemed appropriate by the Committee)
and some personal strategic objectives.
The strategic individual objectives will
be quantitative measures linked to
individual responsibilities in the context
of our strategic objectives, and will be
reviewed in advance by the Committee.
Targets are set taking into account the
business plan, and the link between
targets and the Group’s strategy can
be seen on page 80.
Whitbread Annual Report and Accounts 2016/17
83
Governance Remuneration policy report continued
Long Term Incentive Plan
For the LTIP, the performance conditions
will be structured as follows:
• 50% of maximum awards are
dependent on EPS growth over the
three–year performance period;
• 50% of maximum awards are
dependent on ROCE performance
achieved in the final year of the
performance period;
• awards will be subject to clawback
and malus provisions, applying in
circumstances such as a material
misstatement of results; 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 targets for
awards to be made in future years will
be determined by the Remuneration
Committee at the time each award is
made taking account of available
information at that time, including
internal budget forecasts, external
expectations and market practice,
and the need to ensure that targets
remain motivational.
Changes to the remuneration policy
in 2016/17
With the exception of the changes to
the Annual Incentive Scheme and the
LTIP, which are outlined on pages 79 and
80 and will form part of the policy to be
put to shareholders for approval at the
AGM in June, no significant changes
to the remuneration policy have been
made during the year. Other minor
changes have been made in order to
provide greater clarity and to improve
the operation of the policy.
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
(www.whitbread.co.uk/global/
download-centre/corporate-
governance.html), are as follows:
Alison Brittain
Nicholas Cadbury
Louise Smalley
21 May 2015
3 September 2012
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.
The Committee reserves the right to
make any other payments in connection
with a director’s cessation of office or
employment where the payments are
made in good faith in discharge of
an existing legal obligation (or by
way of damages for breach of such an
obligation) or by way of settlement of
any claim arising in connection with
the cessation of a director’s office or
employment. Any such payments may
include but are not limited to paying any
fees for outplacement assistance and/or
the director’s legal and/or professional
advice fees in connection with his
cessation of office or employment.
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 86
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, or in circumstances in
which the reputation of the Company
is materially damaged, the malus
provisions may be applied, in which
case, 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 86 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 or in circumstances in
which the reputation of the Company is
materially damaged, the clawback and/
or malus provisions may be applied.
Whitbread Annual Report and Accounts 2016/17
84
GovernanceGovernance Approach to remuneration
on recruitment
Our approach to recruitment is that
remuneration should be set in line with
the policy table on pages 81 and 82.
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 experience and expertise,
internal salaries, market levels 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 a higher than normal rate of
annualised increase, with any such
increase aligned to internal policies. 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 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 normally set appropriate
performance conditions and vesting
would generally be over a similar
timeframe to awards forfeited. 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.
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
consulted with employees 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.
Benefits
Approximately 1,000 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 2,600 employees are
entitled to participate in the Group’s
private healthcare scheme, with 1,100 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 6,250 employees are
eligible to receive an annual incentive
payment linked to the achievement of
profit and WINcard targets. 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%.
Approximately 200 employees,
including the executive directors, are
given individual strategic objectives
in addition to the profit and WINcard
targets mentioned above.
Long Term Incentive Plan
Approximately 50 executives, including
the executive directors, participate in
the LTIP. This scheme is not available
to the wider employee population,
although the Sharesave scheme
provides employees with a form
of long-term incentive.
Whitbread Annual Report and Accounts 2016/17
85
Governance Remuneration policy report continued
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 from
the Company vary depending on the job
grade of the individual, with employees
at the entry level able to choose a 5%
contribution level, of which 2% is paid by
the employee and 3% by the Company.
Contribution level choices rise with
seniority. Approximately 45 executives
receive between 15% and 20% of basic
salary from the Company, which can be
allocated to pension or taken as cash.
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
executive directors is that there is an
upper limit for Company contributions
of 27.5% of salary. In 2013, the upper limit
for new joiners was reduced to 25%. This
contribution can be allocated to pension,
or taken as cash.
Consideration of shareholder views
We contacted our twenty largest
investors, as well as Glass Lewis, ISS and
the Investment Association, in October
2016 to consult on proposed changes
to our remuneration policy. A further
consultation was carried out in February
2017 in relation to the proposed LTIP
targets for the 2017 awards.
The responses received to both
consultations were broadly positive and
supportive and, as a result, no changes
were made to the original proposals
although, as a result of shareholders
feedback, we have improved our
disclosure of targets.
Legacy matters
The Committee reserves the right to
make any remuneration payments and/
or payments for loss of office (including
exercising any discretions available to
it in connection with such payments)
notwithstanding that they are not in line
with the policy set out above where the
terms of the payment were agreed (i)
before 17 June 2014 (the date the
Company’s first shareholder-approved
directors’ remuneration policy came
into effect); (ii) before the policy set
out above came into effect, provided
that the terms of the payment were
consistent with the shareholder-
approved directors’ remuneration policy
in force at the time they were agreed;
or (iii) at a time when the relevant
individual was not a director of the
Company and, in the opinion of the
Committee, the payment was not
in consideration for the individual
becoming a director of the Company.
For these purposes ‘payments’ includes
the Committee satisfying awards of
variable remuneration and, in relation to
an award over shares, the terms of the
payment are “agreed” at the time the
award is granted.
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 12 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 page 85.
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,
individual strategic objectives and 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 all
reasonable expenses, and the Company
may settle any tax incurred, 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. Non-executive directors have
letters of appointment setting out their
duties and the time commitment
expected of them. Appointments are
for an initial term of three years after
which they are reviewed and their
appointment can be terminated by
either party on three-months’ written
notice. Non-executive directors have
no entitlement to compensation on
termination. All directors submit
themselves for re-election annually.
The letters of appointment are available
for shareholders to view at the
Company’s registered office.
Whitbread Annual Report and Accounts 2016/17
86
GovernanceGovernance Annual report on remuneration
Remuneration Committee – membership
Name of director
Deanna Oppenheimer1 (Chair)
Richard Baker
Wendy Becker2
Sir Ian Cheshire
Stephen Williams
1 Deanna Oppenheimer joined the Committee on 1 January 2017.
2 Wendy Becker stepped down from the Committee on 31 December 2016.
Meetings attended and
eligible to attend
2/2
7/7
5/5
7/7
7/7
Key duties
Full terms of reference are available on the Company’s website and a summary of the key duties is set out below.
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 incentive payments,
share awards and other benefits) of the Chairman and each executive director.
• Monitor the structure and level of remuneration of Executive Committee members.
• Approve the design of, and determine the targets for, incentive schemes.
• Approve awards to be made to executive directors and other senior executives under incentive schemes.
• 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.
Remuneration Committee – advisers
Internal advisers
Chris Vaughan – General Counsel
Ruth Hutchison – Group Reward Director
External advisers
Willis Towers Watson, one of the founding members of the Remuneration Consultants Code of Conduct, was appointed
remuneration consultant by the Committee following a rigorous tender process and adheres to this code in its dealings with
the Committee. Separate parts of Willis Towers Watson provide investment advice and actuarial services in relation to the
pension fund and insurance broking services to the Group. Fees paid to Willis Towers Watson in respect of advice received
by the Committee amounted to £149,000. These fees were charged on a time and material basis.
The Committee is satisfied that the advice received is independent and objective.
Remuneration Committee agenda – 2016/17
• Approval of Annual Incentive Scheme and targets for
2016/17.
• Approval of awards of cash and deferred shares to executive
directors under the Annual Incentive Scheme.
• Executive directors’ salary review.
• Approval of 2016 LTIP awards.
• Confirmation of the performance conditions for the 2016
LTIP awards. Confirmation of the vesting percentages for the
LTIP award made in 2013 and vesting in 2016.
• Approval of the 2016 remuneration report.
• Approval of updated terms of reference.
• Review of remuneration policy.
• Shareholder consultations on revised policy and
LTIP targets.
Whitbread Annual Report and Accounts 2016/17
87
Governance Annual report on remuneration continued
Single total figure of remuneration (audited information) – executive directors
Basic salary
Benefits
Annual Incentive
Scheme
LTIP
Pension
Total
Director
Alison Brittain
Nicholas Cadbury
Christopher Rogers
Louise Smalley
2016/17
£’000
2015/16
£’000
2016/17
£’000
2015/16
£’000
2016/17
£’000
2015/16
£’000
2016/17
£’000
2015/161
£’000
2016/17
£’000
2015/16
£’000
2016/17
£’000
2015/16
£’000
792
532
73
355
329
490
538
344
22
22
3
19
10
21
22
19
638
422
126
279
214
320
384
224
859
394
–
257
–
774
937
617
198
117
18
78
82
112
130
80
2,509
1,487
2202
988
6352
1,717
2,011
1,284
The values of the vesting LTIP awards for 2015/16 have been restated to reflect the actual prices at the date of exercise. These prices are disclosed on page 92.
1
2 Fees for part of the year
Details of each of the elements included in the table above are as follows:
Base salary
Annual salary increases across the Group are effective from 1 May each year. The base salary numbers shown in the table
therefore include two months’ pay based on the director’s salary from 1 May 2015 and ten months’ pay based on the director’s
salary from 1 May 2016. Christopher Rogers’ basic salary is shown up to his leaving date. Alison Brittain’s basic salary for 2015/16
was from the date of her appointment in September 2015.
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 2017 and deferred
shares to be issued in April 2017. The awards were calculated as described below.
Awards based on profit measure
The profit target for 2016/17 was £562.5 million and the result was £565.2 million, which was 100.5% of target. The profit range
was between 95% of target at threshold and 110% of target at maximum.
Director
Alison Brittain
2015/16
Nicholas Cadbury
2015/16
Christopher Rogers1
2015/16
Louise Smalley
2015/16
% of salary
in cash
% of salary in
deferred shares
Total %
of salary
21.5
17.1
21.5
17.1
16.3
19.0
21.5
17.1
40.0
32.5
40.0
32.5
31.0
35.8
40.0
32.5
61.5
49.7
61.5
49.7
47.3
54.8
61.5
49.7
1 Christopher Rogers had a 2016/17 profit target made up of a mixture of Group and Costa profit (20% Group, 80% Costa), which resulted in a lower payout than
that for the other executive directors. The Costa target was £161.7 million.
The profit target for the 2015/16 financial year was £563.2 million and the result was £557.1 million, which was 98.9% of target.
The profit range was between 95% of target at threshold and 110% of target at maximum. The profit target for 2015/16 excluded
the cost of Premier Inn Germany, which was in its first year of start up. The result was also adjusted for a change in the asset life
of freehold property, which was not considered when the target was initially set. The profit target for Christopher Rogers was
a mixture of Group and Costa profit (40% Group, 60% Costa). The Costa target was £154.3 million.
Awards based on WINcard and leadership succession measures
The WINcard targets in 2016/17 were appropriate to the director’s role and consisted of Group targets, some of which were
a combination of the Costa and Premier Inn & Restaurants measures.
Whitbread Annual Report and Accounts 2016/17
88
GovernanceGovernance The WINcard incentive results are as shown in the table below:
WINcard measure
Winning Teams
Team turnover
Health and safety1
Customer Heartbeat
Guest recommend
Profitable Growth
Premier Inn total occupancy
Brand expansion2
Like for like sales growth
Costa total system sales growth
Force for Good
Electricity consumption
Total
Total 2016/17
% of salary3
4.00
n/a
4.50
1.50
0.00
0.00
0.75
3.00
13.75
1
The health and safety measure acted 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.
2 The executive directors had a more stretching target of 4,250 rooms for Premier Inn rooms growth, which was not adjusted when the decision to smooth the
phasing of room openings was taken and communicated at the Capital Market Day. As a result the brand expansion measure was red for the purpose of
incentive payments to the executive directors, but is amber in the key performance indicators on page 18.
3 These results are those for the current executive directors. Christopher Rogers had targets relating to Costa. He received five green scores, which were worth
a total of 17.5% of salary, two amber scores, which were worth a total of 3% of salary, and one red score.
More information on the actual targets and outcomes for these measures can be found on pages 16 to 19.
Each executive was also entitled to earn a maximum of 5% of salary based on the achievement of personal leadership
succession targets. The results achieved were such that Alison Brittain will receive 5% of salary and each of the other executive
directors will receive 3% of salary based on these measures.
As a result, the awards to be made based on WINcard and leadership succession measures are as follows:
Director
Alison Brittain
2015/16
Nicholas Cadbury
2015/16
Christopher Rogers
2015/16
Louise Smalley
2015/16
Total awards
The split between cash and deferred shares is as follows:
Director
Alison Brittain
2015/16
Nicholas Cadbury
2015/16
Christopher Rogers
2015/16
Louise Smalley
2015/16
% of salary
in cash
% of salary in
deferred shares
Total %
of salary
15.0
12.0
13.4
12.0
18.8
12.8
13.4
12.0
3.8
3.0
3.4
3.0
4.7
3.2
3.4
3.0
Cash award
£’000
Cash value
of deferred
shares award
£’000
290
96
188
144
62
172
124
101
348
117
234
176
64
211
155
123
18.8
15.0
16.8
15.0
23.5
16.0
16.8
15.0
Total
£’000
638
214
422
320
126
384
279
224
Whitbread Annual Report and Accounts 2016/17
89
Governance Annual report on remuneration continued
The deferred shares will, under normal circumstances, vest on 1 March 2020, 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 with clawback provisions applying to the cash awards. The share price
used to calculate the awards was the average closing price of a Whitbread share for the five business days preceding
1 March 2017 (i.e. 3,822.2 pence).
The number of deferred shares awarded to each director will be as follows:
Director
Alison Brittain
Nicholas Cadbury
Christopher Rogers
Louise Smalley
Number of deferred
shares awarded
2017
Number of deferred
shares awarded
2016
9,104
6,128
1,659
4,051
3,074
4,600
5,533
3,227
Long Term Incentive Plan
The amounts shown in the table on page 88 refer to the value of the LTIP awards made in 2014 and vesting in 2017.
The value given for the LTIP awards is based on the average market value over the last quarter of the financial year
(3,844.4 pence), as the awards will not vest until after the date of this report.
The LTIP awards made to executives in 2014 were subject to EPS and ROCE measures on a matrix basis as shown below:
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
Threshold
ROCE 2016/17
Sliding scale
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%
Maximum
18%
0%
25%
50%
75%
100%
17%
0%
24%
50%
71%
96%
<4%
4%
6%
8%
10%
The actual EPS growth achieved was RPI plus 9.4% with the 2016/17 ROCE, which is calculated using an average of the previous
13 months’ net assets, being 15.3%. As a result, 76.5% of the shares awarded under the 2014 LTIP will vest. The awards vesting to
the executive directors, each of which are subject to a one-year holding period (except for the award vesting to Alison Brittain,
which is subject to a two-year holding period) are as follows:
Director
Alison Brittain
Nicholas Cadbury
Louise Smalley
Number of
shares vested 2017
Number of
shares vested 2016
22,334
10,255
6,688
–
22,106
14,416
Single total figure of remuneration (audited information) – Chairman and non–executive directors
Director
Richard Baker
David Atkins1
Wendy Becker1
Sir Ian Cheshire
Chris Kennedy1
Simon Melliss1
Deanna Oppenheimer1
Susan Taylor Martin
Stephen Williams
1 Fees for part year.
Base fee
Senior Independent
Director fee
Fee as Chairman
of a Board Committee
Fee as a member
of a Board Committee
Total
2016/17
£’000
2015/16
£’000
2016/17
£’000
2015/16
£’000
2016/17
£’000
2015/16
£’000
2016/17
£’000
2015/16
£’000
2016/17
£’000
2015/16
£’000
350
9
48
57
57
33
9
57
57
350
–
55
55
–
55
–
55
55
–
–
–
15
–
–
–
–
–
–
–
–
10
–
–
–
–
–
–
–
–
–
8
12
–
–
20
–
–
–
–
–
15
–
–
15
–
1
8
5
–
–
1
5
–
–
–
10
5
–
–
–
5
–
350
10
56
77
65
45
10
62
77
350
–
65
70
–
70
–
60
70
Whitbread Annual Report and Accounts 2016/17
90
GovernanceGovernance
Pension
The percentage of salary or pension allowance received by the executive directors in pension contributions is shown in the
table below.
Director
Alison Brittain
Nicholas Cadbury
Christopher Rogers
Louise Smalley
% of salary
25.0
25.0
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. Christopher Rogers and Alison Brittain elected to receive a cash payment,
while Nicholas Cadbury 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. The percentage of salary or pension
allowance received by Nicholas Cadbury and Louise Smalley will rise to 27.5% on 1 December 2017 and 1 November 2017
respectively. This is as a result of grandfathered terms.
Statement of directors’ shareholding and share interests (audited information)
The Committee believes that the shareholding requirements for executives 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 Alison Brittain, who was appointed in September 2015, have already met the
requirement. Alison has invested in excess of £1 million in the Company’s shares from her own resources. Her first share scheme
award is partially vested in April 2017, but is subject to a two-year holding period.
During 2014/15, shareholding requirements were 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.
The table below shows the holdings of directors as at 2 March 2017:
Counting towards requirement
Performance versus requirement
Additional awards
Number of
ordinary
shares
Value based on
purchase price
£’000
Value based on
market price
£’000
Shareholding
requirement
% of salary
% of salary
based on
purchase
price
% of salary
based on
market price
Awards subject
to performance
conditions1
Awards not
subject to
performance
conditions2
Chairman
Richard Baker
Executive directors
Alison Brittain
Nicholas Cadbury
Christopher Rogers*
Louise Smalley
Non–executive directors
David Atkins
Wendy Becker*
Sir Ian Cheshire
Chris Kennedy
Simon Melliss*
Deanna Oppenheimer
Susan Taylor Martin
Stephen Williams
15,802
381
607
20,900
24,410
51,028
41,236
1,425
6,100
2,245
1,500
3,000
1,6003
1,490
11,340
1,029
1,006
2,383
1,531
56
65
107
61
41
66
50
182
803
938
1,962
1,585
55
235
86
58
115
62
57
436
100
200
125
125
125
100
100
100
100
100
100
100
100
109
129
186
442
429
99
114
188
108
73
115
87
319
174
101
174
364
444
96
411
151
101
202
108
100
765
–
–
98,950
40,876
52,689
28,016
3,074
20,792
32,295
8,802
*As at date of leaving
1
2
Includes outstanding LTIP awards for which performance has not yet been tested.
Includes unvested/unexercised deferred shares under the Annual Incentive Scheme and unexercised LTIP awards for which the performance targets have
already been met.
3 Deanna Oppenheimer actually holds 3,200 ADRs in Whitbread PLC, each of which represent 0.5 of a Whitbread ordinary share.
Whitbread Annual Report and Accounts 2016/17
91
Governance Annual report on remuneration continued
There has been no change to the interests in the tables shown on page 91 between the end of the financial year and the date
of this report. The column showing awards not subject to performance conditions does not include the deferred shares issued
under the incentive scheme in 2017.
Please see tables below and on the following pages for details of LTIP awards, deferred shares and Sharesave options.
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
Alison Brittain2
Nicholas Cadbury
Christopher Rogers3
Louise Smalley
4 March
2016 Awarded
Lapsed Exercised
29,196
29,196
–
–
– 40,558
40,558
–
–
–
16,153
16,153
–
–
–
–
–
–
–
11,333
11,333
58,392
22,743
13,406
11,317
–
47,466
24,953
15,040
12,696
52,689
14,832
8,743
7,940
–
31,515
–
–
–
–
1,637
–
–
–
1,637
701
–
–
701
416
–
–
–
416
–
–
–
–
22,106
–
–
–
22,106
–
–
–
–
14,416
–
–
–
14,416
2 March
20171
29,196
29,196
40,558
98,950
–
13,406
11,317
16,153
40,876
24,254
15,040
12,696
51,990
–
8,743
7,940
11,333
28,016
Conditional
award
granted
Performance
period
concludes
01/03/15
01/03/15
01/03/16
02/03/17
01/03/18
28/02/19
Market
price at
award
pence
5255.0
5255.0
4043.0
Date
vested
award
exercised
Price at
exercise
pence
Monetary
value of
exercised award
£’000
–
–
–
–
–
–
01/03/13
01/03/14
01/03/15
01/03/16
01/03/13
01/03/14
01/03/15
01/03/13
01/03/14
01/03/15
01/03/16
03/03/16
02/03/17
01/03/18
28/02/19
2554.0 01/07/16
–
4487.0
–
5255.0
–
4043.0
3501.0
–
–
–
03/03/16
02/03/17
01/03/18
2554.0
4487.0
5255.0
–
–
–
–
–
–
03/03/16
02/03/17
01/03/18
28/02/19
2554.0 26/05/16
–
4487.0
–
5255.0
–
4043.0
4279.0
–
–
–
–
–
–
–
774
–
–
–
774
–
–
–
–
617
–
–
–
617
Or date of leaving.
1
2 Alison Brittain received two LTIP awards on joining the Company, each to the value of 175% of salary. The performance conditions for the first of these awards
are aligned to the awards made to other executives in 2014 and the second of the awards have performance conditions aligned to the awards made to other
executives in 2015. Although the awards were actually made on 11 December 2015, under the rules of the LTIP, the technical date of both awards is 1 March 2015
and the market price at award shown in the table above is therefore the price on 1 March 2015. The price used to calculate the awards was the average Whitbread
share price for the five business days immediately preceding Alison’s first day of employment, which was 4645.2 pence.
3 Christopher Rogers stepped down from the Board on 19 April 2016 and left the Company on 1 July 2016. He exercised his 2013 LTIP award over 24,254 shares on
3 May 2016 at a price of 3865.0 pence per share. His 2014 and 2015 LTIP awards lapsed when he left the Company. He now has no LTIP awards outstanding.
LTIP performance conditions – past awards
Performance metrics
2013 award
2014 award
2015 award
2016 award
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 and is calculated using an average of the previous
13 months’ net assets.
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 2016/17 of 13% to 18.0%. ROCE also acts as a hurdle and is calculated using an average of the previous
13 months’ net assets.
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 2017/18 of 13% to 18.0%. ROCE also acts as a hurdle and is calculated using an average of the previous
13 months’ net assets.
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 2018/19 of 13% to 18.0%. ROCE also acts as a hurdle and is calculated using an average of the previous
13 months’ net assets.
LTIP performance conditions – future awards
Details of the performance conditions for the awards to be made in 2017 can be found on page 98.
Whitbread Annual Report and Accounts 2016/17
92
GovernanceGovernance
Annual Incentive Scheme (‘the Scheme’) (audited information)
At 2 March 2017 the directors held the following deferred shares under the Plan:
Name
Alison Brittain
Nicholas Cadbury
Christopher Rogers
Louise Smalley
Year of
award
2016
2017
2013
2014
2015
2016
2017
2013
2014
2015
2016
2014
2015
2016
2017
Date
award
exercised
–
–
Market
price at
vesting
pence
Monetary
value of
vested
award
£’000
–
–
Balance at
4 March
2016 Awarded
Lapsed Exercised
Balance at
2 March
20171
Release
date
Market
price at
award
pence
3,074
–
3,074
3,672
8,246
7,946
4,600
–
24,464
14,963
9,028
8,304
5,533
37,828
5,377
5,575
3,227
–
14,179
–
9,104
9,104
–
–
–
–
6,128
6,128
–
–
–
–
–
–
–
–
4,051
4,051
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,672
–
–
–
–
3,074
–
–
9,104
– 12,178
–
8,246
7,946
4,600
6,128
3,672 26,920
– 14,963
9,028
–
8,304
–
–
5,533
– 37,828
0
5,575
3,227
4,051
5,377 12,853
5,377
–
–
–
01/03/20
01/03/20
4043.0
3841.0
03/03/162
01/03/17
01/03/18
01/03/19
01/03/20
03/03/162
01/03/17
01/03/18
01/03/19
01/03/17
01/03/18
01/03/19
01/03/20
2554.0
4487.0
5255.0
4043.0
3841.0
2554.0
4487.0
5255.0
4043.0
4487.0
5255.0
4043.0
3841.0
01/07/16
–
–
–
–
3,501.0
–
–
–
–
–
–
–
–
–
–
–
–
01/03/17
–
–
–
3,814.0
–
–
–
–
–
–
129
–
–
–
–
129
–
–
–
–
–
205
–
–
–
205
1 Or at date of leaving.
2 Under the rules of the Scheme awards cannot vest during a close or prohibited period. The normal release dates for the 2013 awards would have been 1 March
2016. However, as this date was during a prohibited period, the 2013 awards actually released on 3 March 2016.
The awards are not subject to performance conditions and will vest in full on the release date subject to the director remaining an employee of Whitbread at that
date. If the director ceases to be an employee of Whitbread prior to the release date by reason of redundancy, retirement, death, injury, ill health, disability or
some other reason considered to be appropriate by the Remuneration Committee the awards will be released in full. If the director ceases to be an employee of
Whitbread for any other reason the proportion of award which vests depends upon the year in which the award was made and the date the director ceases to be
an employee. If the director leaves within the first year after an award is made none of the award vests, between the first and second anniversary 25% vests and
between the second and third anniversary 50% vests.
Whitbread Annual Report and Accounts 2016/17
93
Governance
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 3 March 2016 the directors held the following share options under the Scheme, with the latest exercise
date being July 2021. Savings–related share options have a six–month exercise period.
Director
Alison Brittain
Nicholas Cadbury
Louise Smalley
Number
of shares
Date of grant
Exercise price
pence
Exercise date Last exercise date
775
775
327
256
583
256
232
488
02/12/2015
3866.4
01/02/2021
31/07/2021
(775 at 03/03/2016)
29/11/2013
02/12/2014
(583 at 03/03/2016)
02/12/2014
02/02/2015
(958 at 03/03/2016)
2746.4
3507.2
01/02/2017
01/02/2018
31/07/2017
31/07/2018
3507.2
3866.4
01/02/2018
01/02/2019
31/07/2018
31/07/2019
Options exercised (audited information)
The following options were exercised by executive directors under the savings–related share option scheme during the year.
Director
Louise Smalley
Number
of shares
Exercise price
pence
Exercise date
470
1913.6
08/08/20161
Market
price on
exercise
pence
3962.0
Monetary
value of
gain
(£’000)
10
1 Although the exercise is shown as being 8 August 2016, Louise gave instructions to exercise to the administrator prior to the deadline of 31 July 2016, but the
process is such that the actual exercises are carried out once every two weeks.
Total shareholder return
800
700
600
500
400
300
200
100
0
26 February
2009
4 March
2010
3 March
2011
1 March
2012
28 February
2013
27 February
2014
26 February
2015
3 March
2016
2 March
2017
Whitbread plc
FTSE 100 Index
The corresponding chart looks at the value over eight 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 has been selected by the Committee as an
appropriate comparator group due to Whitbread’s position within the FTSE 100.
Source: Thomson Reuters Datastream
Whitbread Annual Report and Accounts 2016/17
94
GovernanceGovernance Remuneration Committee discretion
During the year, it was announced that Christopher Rogers would step down from the Board on 19 April 2016 and leave the
Company on 1 July 2016. The Committee exercised its discretion, in accordance with the approved policy, to apply partial ‘good
leaver’ terms to Christopher. A disclosure under Section 403(2B) of the Companies Act 2006 was made on the Company’s
website and the details are as follows:
All payments are in line with the Company’s stated remuneration policy for a good leaver (published in the Annual Report for
2013/14) and approved by the shareholders at the 2014 AGM.
Salary and benefits
Christopher will continue to receive normal salary and benefits, as provided under his service agreement, up to and
including 1 July 2016.
Share awards for past and future performance
Directors Incentive Scheme: Christopher ’s deferred shares will vest on their ordinary vesting date, being three years from the date
of grant. He was granted 9,028 deferred shares in 2014 and 8,304 in 2015. These deferred shares were awarded as a result of
performance under incentive schemes in prior years. He also will be entitled to a cash and deferred share award, subject to
performance, for the 2015/16 financial year, to be agreed by the Remuneration Committee in April 2016, and for the part of the
2016/17 financial year for which he is employed, which will be agreed by the Remuneration Committee in 2017. Any new deferred
shares awarded in 2016 or 2017 will not vest until 2019 or 2020 respectively.
LTIP: Unvested awards granted in 2014 and 2015 will lapse. The Remuneration Committee will determine in April 2016
the level at which the LTIP grant made to Christopher in 2013 (24,953 shares) will vest. No further grants will be made to
Christopher under the LTIP.
Payments to past directors (audited information)
With the exception of regular pension payments and dividends on Whitbread shares and the exercise of share awards as
permitted under the rules of the Annual Incentive Scheme, the LTIP and the Savings-related Share Option Scheme, no other
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) decreased by 6.1% in the
year, compared with an increase of 5.3% for the Group’s employees as a whole.
The following table shows the Chief Executive’s pay over the last eight years, with details of the percentage of maximum paid
out under the Annual Incentive Scheme and the LTIP vesting percentage for each year.
Year
2016/17
2015/16
2014/15
2013/141
2012/13
2011/12
2010/11
2009/10
Chief Executive
Alison Brittain
Alison Brittain
Andy Harrison
Combined
Andy Harrison
Andy Harrison
Andy Harrison
Andy Harrison
Andy Harrison
Alan Parker
Combined
Alan Parker
Single total
figure of
remuneration
£’000
% of
maximum
incentive
achieved
% of LTIP
award vesting
2,509
634
2,423
3,057
4,554
6,374
3,432
1,444
534
2,509
3,043
2,634
49.8
38.8
38.8
38.8
86.8
82.6
74.9
45.6
94.4
94.4
94.4
100.0
76.5
n/a
97.2
97.2
100.0
100.0
89.8
n/a
n/a
82.4
82.4
75.9
Fees from external directorships
The executive directors are entitled to retain fees from external directorships. Christopher Rogers is a non–executive director
of Travis Perkins Plc and retained a fee of £8,541 up to the date he stepped down from the Whitbread Board in respect of
that directorship. Louise Smalley is a non–executive director of DS Smith Plc and retained a fee of £55,233. Alison Brittain
is a non–executive director of Marks and Spencer Plc and retained a fee of £70,000. Nicholas Cadbury was appointed as
a non-executive director of Land Securities Group PLC on 1 January 2017 and retained a fee of £11,667.
Whitbread Annual Report and Accounts 2016/17
95
Governance Annual report on remuneration continued
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.
£m
800
700
600
500
400
300
200
100
0
+7.6%
2015/16
2016/17
+7.4%
+7.7%
Profit
after tax
Dividends
Employee
costs
Implementation of remuneration policy in 2016/17
Base salary
800
The executive directors will each receive a salary increase of 2%, which is in the same range as the general increase being given
to employees across the Group.
700
600
The base salaries of the executive directors with effect from 1 May 2017 will be as follows:
500
400
Director
300
Alison Brittain
200
Nicholas Cadbury
100
Louise Smalley
Base salary at
1 May 2017
£’000
Base salary at
1 May 2016
£’000
811
551
362
795
540
357
0
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
As explained earlier in the report, some changes have been made to the way in which the Annual Incentive Scheme will operate
in 2017/18. The overall quantum of awards available to the executive directors has not changed and remains at 167% of salary
at the maximum.
To be eligible to receive incentive payments there are ‘gateway’ requirements relating to both performance and leadership
behaviour. Any incentive payments will be at the discretion of the Remuneration Committee in the event that either profit
performance is below 90% of target or the health and safety score is red on the WINcard. The expectation is that our leaders’
actions reflect Whitbread’s values and code of conduct, including our approach to health and safety. Keeping our team and
customers safe is not an incentive lever but a core responsibility that earns the right to earn further incentivised rewards.
In 2017/18, half of the total incentive available will be based on performance against a Group underlying profit before tax target.
As explained on page 18, this profit target is commercially sensitive and, for that reason, is not disclosed in advance. The
Committee intends to disclose the target retrospectively in the 2017/18 report.
Whitbread Annual Report and Accounts 2016/17
96
GovernanceGovernance Profit performance (% of salary)
Threshold
Total 21%
10.5% 10.5%
On-target
Stretch
(maximum)
Total 42%
21%
21%
42%
42%
Total 84%
Cash
Deferred shares
Each executive director will be able to earn up to an additional 25% of the maximum based on WINcard measures. One
measure will be operational team retention and the other will be a combination of Customer Heartbeat measures, made up
of Premier Inn brand health, Costa net recommend and Restaurants net recommend. Only half of the maximum available in
respect of these measures will be available for a ‘green’ WINcard score, with 75% of maximum payout available for achieving
a stretch target beyond green and maximum payout requiring a new ‘excel’ level, to be achieved.
Each executive director also has three personal strategic objectives. They will be eligible to receive up to 25% of the maximum
incentive opportunity based on the delivery of these objectives. Each objective will carry an equal weighting within that and
achievement of the approved objective outcomes have been aligned to a payment level that would be recognised as stretch
performance. The objectives are quantifiable and linked to the business plan and future financial performance. The table below
shows a summary of the personal strategic objectives for each of the executive directors, together with details on which of the
three strategic priorities (see pages 8 to 13) each objective is linked to:
100
20
40
60
80
0
Alison Brittain
Objective 1: Growth in Premier Inn rooms, Costa stores and Costa Express machines and like for like sales growth.
Objective 2: Growth in German hotel pipeline and progress in Costa China.
Objective 3: Achieve the in-year efficiency plan.
Nicholas Cadbury
Objective 1: Successful launch of new financial controls framework system.
Objective 2: Delivery of improvements to Whitbread’s IT infrastructure.
Objective 3: Achieve the in-year efficiency plan.
Louise Smalley
Objective 1: Effective workforce planning for greater macro uncertainty.
Objective 2: Delivery of HR technology transformation.
Objective 3: Achieve the in-year efficiency plan.
Strategic
Priority
1
2
3
3
3
3
1
3
3
Cash awards will be made in May 2018, with deferred equity issued in April 2018 and due to vest on 1 March 2021, with no
further performance conditions applying.
Whitbread Annual Report and Accounts 2016/17
97
Governance Annual report on remuneration continued
Long Term Incentive Plan
The awards to be made in 2017 will be based on 200% of base salary for Alison Brittain and 125% of base salary for the
other executive directors, calculated by reference to the average of the closing price of a Whitbread share for the five
business days preceding 1 March 2017 (i.e. 3,822.2 pence). They will vest in April 2020, subject to the director’s continued
employment within the Group and satisfaction of the performance conditions. The awards will be subject to a two–year
holding period post vesting.
The 2017 awards to the executive directors will be made following the AGM in June 2017.
In the event that the updated policy is approved, the awards will be subject to two independently operating performance
conditions. 50% of each award will be dependent on the Group ROCE in 2019/20, with the threshold being 13% and maximum
payout at 18%, with a sliding scale operating in between.
A further 50% of each award will be linked to an EPS growth target operating on a sliding scale between 4% per annum at
threshold to 10% per annum at maximum.
The number of shares awarded under the LTIP to each director will be as follows:
Director
Alison Brittain
Nicholas Cadbury
Louise Smalley
Number of
shares awarded
41,599
17,659
11,675
Value of
award
£’000
1,590
675
446
Non–executive directors fees
The base annual fee for non–executive directors is £57,000. The fees for the chairmanship of the Audit Committee and the
Remuneration Committee are £20,000. The fee for the Senior Independent Director is £15,000 and the fees for membership
of the Audit and Remuneration Committees are £5,000.
Statement of shareholder voting
At the Annual General Meeting in 2016 the advisory resolution to approve the annual report on remuneration was passed.
In total 121,702,536 votes were cast on the resolution, with 116,075,272 (95.38%) in favour and 5,627,264 (4.62%) against.
There were 1,893,034 votes withheld.
Whitbread Annual Report and Accounts 2016/17
98
GovernanceGovernance Directors’ report
The directors present their
Report and Accounts for
the year ended 2 March 2017
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
Group underlying
profit before tax
Group profit
before tax
Interim dividend
paid on
16 December 2016
Recommended
final dividend
Total dividend for
the year
£565.2m
£515.4m
29.90p per share
65.90p per share
95.80p per share
Details on the Group’s dividend policy
can be found on page 56 in the Group
Finance Director’s review.
Subject to approval at the AGM, the final
dividend will be payable on 30 June
2017 to the shareholders on the register
at the close of business on 26 May 2017.
Board of Directors
The directors at the date of this Report
are listed on pages 64 and 65. There
have been a number of director changes
throughout the year. Wendy Becker
stepped down from the Board on
31 December 2016. David Atkins and
Deanna Oppenheimer were appointed
to the Board on 1 January 2017. Stephen
Williams served throughout the year, but
it was announced that he will step down
from the Board at the AGM on 21 June
2017. Adam Crozier was appointed to
the Board on 1 April 2017.
Chris Vaughan
General Counsel
Details of the directors’ service contracts
are given in the remuneration report on
page 84. None of the non–executive
directors have a service contract.
Details of directors’ training are given in
the corporate governance report on
page 69.
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.
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 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.
Directors automatically stop being
directors if:
1. they give the Company a written
notice of resignation (at the date such
notice expires);
2. they give the Company a written
notice in which they offer to resign
and the other directors decide to
accept the offer;
3. 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;
4. they are or have been suffering from
mental or physical ill health and the
directors pass a resolution removing
the director from office;
5. 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;
6. a bankruptcy order is made against
them or they make any arrangement
or composition with their creditors
generally;
7. they are prohibited from being a
director under any applicable
legislation; or
8. they cease to be a director under any
applicable legislation or are removed
from office under the Company’s
Articles of Association.
Whitbread Annual Report and Accounts 2016/17
99
Governance Directors’ report continued
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 78 to 98.
Share capital
Details of the issued share capital can
be found in Note 25 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 sharews 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 155 pence per B
share and 159 pence per C share
respectively, but are not entitled to any
further right of participation in the
profits of the Company. They are also
entitled to payment of 155 pence per B
share and 159 pence per C share
respectively on a return of capital on
winding–up (excluding any intra–group
reorganisation on a solvent basis).
Except in limited circumstances, the
holders of the B shares and C shares are
not entitled in their capacity as holders
of such shares, to receive notice of any
general meeting of the Company nor
to attend, speak or vote at any such
general meeting.
Both B and C shares represent
significantly less than 0.01% of the
total share capital.
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 2017 AGM.
The Company did not purchase any
of its own shares during the year.
12.1 million shares are held as treasury
shares (3 March 2016: 12.6 million).
During the course of the year, the
Company transferred 495,300 shares
from treasury to the Employee Share
Ownership Trust for the future
satisfaction of awards under the
Company’s share 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.
Whitbread Annual Report and Accounts 2016/17
100
GovernanceGovernance 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 section on pages 24
to 29.
Mandatory Green House Gas 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 in CO2e 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 includes 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 CO2e from owned
vehicles which include company
cars but excludes logistics as
this is an outsourced operation.
Refrigerant gas, F-Gas, losses are
captured for UK operations only
due to reporting capabilities.
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 man,
offices in Australasia and the Far East
have been excluded. All other sites
throughout the world are included.
Where possible we have reported billed
or AMR data which now 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 www.whitbread.co.uk.
Source of emissions
Gas
LPG
Fuel oil
F-gas
Business travel
Electricity
Gross emissions
Turnover (£ millions)
Tonnes carbon per £1 million turnover
Scope 1
Scope 2
2015/16
54,105
3,246
203
4,109
3,510
2,100
275,123
2,922
95
2016/17
55,680
3,285
193
2,749
3,871
2,003
266,074
3,110
86
Change %
2.9
1.2
(4.9)
(33.1)
10.3
(4.6)
(3.3)
6.4
(9.5)
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 Inc.
9,422,457
5.15
MFS Investment
Management
Longview
Partners
Aberdeen Asset
Management
9,330,908
5.11
9,240,506
5.04
9,155,869
4.99
Employment policies
Whitbread has a range of employment
policies covering such issues as diversity,
employee wellbeing 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 or for any
other reason. 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.
Whitbread Annual Report and Accounts 2016/17
101
Governance
Directors’ report continued
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, bond and private
placement loan notes agreements,
details of which can be found in Note 19
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 22 and
Note 23 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
Deloitte LLP has expressed its
willingness to continue in office as
auditor of the Company and a resolution
proposing its reappointment will be put
to shareholders at the 2017 AGM. After
proper consideration, the Audit
Committee is satisfied that Deloitte 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 Deloitte LLP, and
has concluded that certain services will
not be carried out by Deloitte 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 4 to 61. 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
Group Finance Director’s review on
pages 54 to 57. In addition there are
further details in the financial statements
on the Group’s financial risk management,
objectives and policies (Note 22) and on
financial instruments (Note 23).
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 foreseeable
working capital requirements. The
directors have concluded that the going
concern basis remains appropriate.
The viability statement can be found
on page 58.
Annual General Meeting
The AGM will be held at 2pm on 21 June
2017 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
have elected to receive documents
electronically. At the 2017 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 24 April 2017
and signed.
Chris Vaughan
General Counsel and Company
Secretary
Registered Office:
Whitbread Court
Houghton Hall Business Park
Porz Avenue
Dunstable
Bedfordshire
LU5 5XE
Registered company number: 04120344
Whitbread Annual Report and Accounts 2016/17
102
GovernanceGovernance Directors’ responsibility statement
The directors are responsible for
preparing the Annual Report and
Accounts in accordance with applicable
UK laws and regulations. UK company
law requires the directors to prepare
financial statements for each financial
year. Under that law, the directors
have prepared the Group financial
statements in accordance with
International Financial Reporting
Standards (IFRS) as adopted by the
European Union (EU) and applicable
UK law. Further, they have elected
to prepare the Company financial
statements in accordance with
Financial Reporting Standard 101
'Reduced Disclosure Framework'
and applicable UK law.
Under company law, the directors
must not approve the financial
statements unless they are satisfied that
they give a true and fair view of the state
of affairs of the Group and Company
and of the profit or loss of the Group for
that period.
In preparing the Group 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;
• present information, including
accounting policies, in a manner which
presents relevant, reliable, comparable
and understandable information;
• provide additional disclosures
when compliance with the specific
requirements in IFRS 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;
• state that the Group financial
statements comply with IFRS,
subject to any material departures
disclosed and explained in the
financial statements;
• make judgements and estimates
that are reasonable and prudent; and
• prepare the consolidated financial
statements on a going concern basis
unless it is inappropriate to presume
that the Group will continue in
its business.
In preparing the Company financial
statements, the directors are required to:
• select suitable accounting policies
and apply them consistently;
• make judgements and estimates
that are reasonable and prudent;
• state whether applicable UK
accounting standards have been
followed, subject to any material
departures disclosed and explained
in the financial statements; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping
adequate accounting records that
disclose, with reasonable accuracy
at any time, the financial position
of the Company and the Group and
enable them to ensure that the financial
statements comply with the Companies
Act 2006 and, with regard to the
Group financial statements, Article 4
of the IAS Regulation. They are also
responsible for the system of internal
control for safeguarding the assets of
the Group and the Company and hence
for taking reasonable steps to prevent
and detect fraud and other irregularities.
The directors are responsible for
preparing the strategic report (including
the corporate governance report)
and the directors' remuneration report
and the directors' report in accordance
with the Companies Act 2006 and
applicable regulations, including the
Listing Rules and the Disclosure and
Transparency Rules.
A copy of the financial statements
of the Group is posted on the Group’s
website. The directors are responsible
for the maintenance and integrity
of the Annual Report included on
the website. Information published
on the Group’s website is accessible
in many countries with different
legal requirements. Legislation in
the UK governing the preparation
and dissemination of financial
statements may differ from legislation
in other jurisdictions.
Each of the directors, the names and
functions of whom are set out on
pages 64 and 65, confirms that, to
the best of their knowledge, they have
complied with the above requirements
in preparing the financial statements in
accordance with applicable accounting
standards and that the financial
statements give a true and fair view of
the assets, liabilities, financial position
and result of the Group. In addition,
each of the directors confirms that the
strategic report includes a fair review
of the development and performance
of the business and the position of the
Group and 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 Annual Report and
Accounts, taken as a whole, to be fair,
balanced and understandable and that
it provides the information necessary for
the shareholders to assess the Group's
and Company's performance,
business model and strategy.
Signed on behalf of the Board
Alison Brittain
Chief Executive
Nicholas Cadbury
Group Finance Director
Whitbread Annual Report and Accounts 2016/17
103
Governance Independent auditor’s report to the members
of Whitbread PLC
Opinion on financial statements
of Whitbread plc
In our opinion:
• the financial statements give a true
and fair view of the state of the Group’s
and of the parent Company’s affairs
as at 2 March 2017 and of the Group’s
profit for the year then ended;
• the Group financial statements have
been properly prepared in accordance
with International Financial Reporting
Standards (IFRS) as adopted by
the European Union;
• the parent Company financial
statements have been properly
prepared in accordance with United
Kingdom Generally Accepted
Accounting Practice involving FRS 101
‘Reduced Disclosure Framework’;
• the financial statements have been
prepared in accordance with the
requirements of the Companies
Act 2006 and, as regards the Group
financial statements, Article 4 of
the IAS Regulation.
The financial statements that we
have audited comprise:
• the Consolidated income statement;
• the Consolidated statement
of comprehensive income;
• the Consolidated and parent
Company statements of changes
in equity;
• the Consolidated and parent
Company balance sheets;
• the Consolidated cash flow
statement; and
• the related notes 1 to 30 of the
Consolidated financial statements and
notes 1 to 10 of the parent Company
financial statements, including
the Accounting Policies.
The financial reporting framework that
has been applied in their preparation is
applicable law and IFRS as adopted by
the European Union and, as regards the
Parent Company financial statements,
as applied in accordance with the
provisions of the Companies Act 2006.
Going concern and the directors’
assessment of the principal risks
that would threaten the solvency
or liquidity of the Group
As required by the Listing Rules we
have reviewed the directors’ statement
regarding the appropriateness of the
going concern basis of accounting
contained within the directors’ report on
page 102 and the directors’ statement
on the longer-term viability of the Group
contained within the strategic report
on page 58.
Summary of our audit approach
Key risks
The key risks that we identified in the current year were:
Materiality
Scoping
Significant
changes in
our approach
• revenue recognition;
• valuation of the defined benefit obligation; and
• classification and presentation of
non-underlying items.
Within this report, any new risks are identified with
and any risks which are the same as the prior year
are identified with
.
The materiality that we used in the current year
was £26.0m which was determined on the basis
of 5% of profit before tax.
We focused our Group audit scope primarily on
all significant trading entities at both Premier Inn
& Restaurants and Costa, and the Group head office.
These locations represent the principal business units
and account for 99% of the Group’s revenue, 101% of
the Group’s profit before tax and 97% of the Group’s
net assets.
In the current year, we have included a risk surrounding
the classification and presentation of non-underlying
items due to an increased number of adjusting items
and the judgement and complexity in accounting for
the restructuring, sale and leaseback transactions
and the costs incurred in exiting the Premier Inn
operations in South East Asia and India.
The risk of management override of controls has
been removed in the current period as this had a
lower effect on the allocation of resources in the
second year of our audit.
We are required to state whether we
have anything material to add or draw
attention to in relation to:
• the directors' confirmation on page 58
that they have carried out a robust
assessment of the principal risks
facing the Group, including those
that would threaten its business
model, future performance, solvency
or liquidity;
• the disclosures on pages 58 to 61 that
describe those risks and explain how
they are being managed or mitigated;
• the directors’ statement within the
directors’ report on page 102 about
whether they considered it appropriate
to adopt the going concern basis
of accounting in preparing them and
their identification of any material
uncertainties to the Group’s ability
to continue to do so over a period
of at least twelve months from the
date of approval of the financial
statements; and
• the directors’ explanation on page 58
as to how they have assessed the
prospects of the Group, over what
period they have done so and why
they consider that period to be
appropriate, and their statement as
to whether they have a reasonable
expectation that the Group will be
able to continue in operation and
meet its liabilities as they fall due
over the period of their assessment,
including any related disclosures
drawing attention to any necessary
qualifications or assumptions.
We confirm that we have nothing
material to add or draw attention
to in respect of these matters.
We agreed with the directors’
adoption of the going concern basis
of accounting and we did not identify
any such material uncertainties.
However, because not all future
events or conditions can be predicted,
this statement is not a guarantee
as to the Group’s ability to continue
as a going concern.
Whitbread Annual Report and Accounts 2016/17
104
GovernanceGovernance The risk of management override
of controls has been removed in the
current period as this had a lower
effect on the allocation of resource
in the second year of our audit.
Independence
We are required to comply with the
Financial Reporting Council’s Ethical
Standards for Auditors and confirm
that we are independent of the Group
and we have fulfilled our other ethical
responsibilities in accordance with
those standards.
Our assessment of risks
of material misstatement
The assessed risks of material
misstatement described below are those
that had the greatest effect on our audit
strategy, the allocation of resources in
the audit and directing the efforts of the
engagement team.
We confirm that we are independent
of the Group and we have fulfilled
our other ethical responsibilities in
accordance with those standards. We
also confirm we have not provided any
of the prohibited non-audit services
referred to in those standards.
In the current year, we have included
a risk surrounding the presentation
and classification of non-underlying
items due to the judgement and
complexity in accounting for certain
of these items.
Revenue recognition
Risk – Revenue
recognition
How the scope
of our audit
responded to
the risk
As described in the Accounting policies and Revenue disclosures in notes 2 and 3 to the
financial statements, the Group generates revenues from three revenue streams, totalling
£3,106.0m in the current year (2015/16: £2,921.8m). The main revenue streams comprise a high
volume of low level transactions from accommodation (sale of services), restaurant and food
and beverage sales (sale of goods).
There are manual adjustments made to revenue, outside of core transactional processes, for
example in respect of reclassifications, other income streams, loyalty schemes and franchise
income, which represent the key areas of focus for the audit due to their significance and
certain estimates required in accounting for these items, e.g. redemption rates within loyalty
schemes and deferred revenues for franchisees.
We have performed the following procedures to address this audit risk:
• profiled the manual journal entries posted to revenue, assessed the impact of these on revenue
and tested a sample of these journal entries by verifying to supporting documentation to confirm
the entry was valid and appropriate;
• for loyalty schemes, tested the redemption rate calculation, agreed the number of loyalty points
outstanding to third party evidence and re-performed the liability calculation; and
• for franchise income, recalculated the deferred revenue with reference to agreements
with franchisees.
We also performed the following procedures to test the revenue balance:
• controls testing: tested the controls over revenue including those in the IT systems that
support the recording of revenue;
• analytical reviews: performed substantive analytical procedures on the major revenue
streams with reference to store and hotel and restaurant data; and
• tests of detail: utilised analytical software to perform substantive tests of detail for a sample of the
revenue balance by reconciling source data for each sample to the general ledger and cash receipts.
Key observations
Following our audit procedures we found that revenue had been recorded appropriately.
Valuation of the defined benefit obligation
Risk description
As described in the Audit Committee report on page 73, the Accounting Policies (note 2) and
the Retirement Benefits note (note 29), the Group has a defined benefit pension scheme, which
is closed to new members and to future accrual. At 2 March 2017, the Group recorded a net retirement
obligation of £425.1m (2016: £288.1m), including £2,808.2m of liabilities (2016: £2,220.4m) and
£2,383.1m of assets (2016: £1,932.3m).
The pension valuation is dependent on market conditions and key assumptions made, in particular
relating to investment markets, discount rate, inflation expectations and life expectancy assumptions.
The setting of these assumptions is complex and requires the exercise of significant management
judgement with the support of third party actuaries. As such, it continues to represent a key audit risk.
Whitbread Annual Report and Accounts 2016/17
105
Governance Independent auditor’s report to the members
of Whitbread PLC continued
Valuation of the defined benefit obligation
How the scope
of our audit
responded to
the risk
To address this audit risk, we have performed the following procedures:
• Actuarial assumptions: engaged our internal pension specialists to review the key assumptions
used, and considered the methodology utilised to derive these assumptions. Futhermore,
we have benchmarked these assumptions against external market data to assess their
appropriateness in calculating the scheme assets and liabilities; and
• Reviewed the disclosures in the financial statements, considering the IAS 19 report prepared
by the actuary.
Key observations
From the work completed, we are satisfied that the methodology and assumptions applied
in relation to determining the pension valuation are appropriate.
Classification and presentation of non-underlying items
Risk description
As described in the Audit Committee report on page 73 and the Accounting Policies (note 2), the
recognition and presentation of income and costs within adjusted performance measures (‘APMs’)
(to derive ‘Underlying profit before tax’) under IFRS, is judgemental, with IFRS only requiring the
separate presentation of material items. Judgement is exercised by management in determining the
classification of items as non-underlying. In addition, the accounting for certain of these items is more
complex this year. As such, it has been recognised as a key area of audit focus.
In the current year, adjustments totalling £49.8m (2015/16: £58.6m) have been made to statutory
profit before tax to derive underlying profit before tax of £565.2m (2015/16: £546.3m). The definition
of underlying is described in the Accounting Policies (Note 2) and the reconciliation between
statutory profit before tax and underlying profit before tax is included in note 6 to the financial
statements.
The most significant items classified as non-underlying in 2016/17 are:
• Premier Inn India and South East Asia business exit of £30.0m;
• UK Restructuring costs of £21.6m;
• Costa international restructuring of £14.5m;
• Impairment of property, plant and equipment (net of reversals) of £7.5m; and
• Property, plant and equipment disposals and property reversions resulting in a gain of £19.3m.
How the scope
of our audit
responded to
the risk
We have performed the following procedures to address this audit risk:
• Classification as non-underlying: evaluated the appropriateness of the inclusion of items,
both individually and in aggregate, within non-underlying profits, including assessing the
consistency of items included year on year and compliance with the accounting policies.
In addition, we also assessed one-off items identified through the course of the audit,
but which had been recognised within underlying profit before tax; and
• For each of the items identified above: obtained and assessed management’s accounting papers
and considered the judgements and assumptions used in these. For each of these, agreed on a
sample basis to supporting evidence where possible, recalculated the provisions in place where
relevant and understood and challenged the key assumptions applied by management through
benchmarking, re-calculation and agreement to third party support (e.g. discount rate used
within the impairment model); and
• For the disclosures, reviewed the consistency of the presentation of non-underlying
measures throughout the Annual Report and the information included in note 6 to the
financial statements.
Key observations
From the work performed, we are satisfied that the items recognised within non-underlying
have been appropriately accounted for and that their presentation is in line with the definition
included within the accounting policies and consistent with prior year.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Whitbread Annual Report and Accounts 2016/17
106
GovernanceGovernance Our application of materiality
We define materiality as the magnitude
of misstatement in the financial
statements that makes it probable
that the economic decisions of a
reasonably knowledgeable person
would be changed or influenced.
We use materiality both in planning
the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement,
we determined materiality for the
financial statements as a whole
as follows:
Group
materiality
£26.0m
(2016: £25.0m)
Basis for
determining
materiality
Rationale
for the
benchmark
applied
5% of profit before
tax of £515.4m
(2016: £487.7m) was
used to determine
our materiality in the
current year. This is
consistent with the
prior year.
In determining
our final materiality
based on our
professional
judgement, we have
considered profit
before tax to be the
most appropriate
measure for business
performance. The
materiality applied
also represents
5% of profit before
tax, less than 1%
of revenue and 1%
of equity.
95%
5%
PBT
Group Materiality
We agreed with the Audit Committee
that we would report to the Committee
all audit differences in excess of £1.3m
(2016: £0.5m), as well as differences
below that threshold that, in our view,
warranted reporting on qualitative
grounds. We also report to the Audit
Committee on disclosure matters that
we identified when assessing the overall
presentation of the financial statements.
An overview of the scope of our audit
Our Group audit was scoped by
obtaining an understanding of the
Group and its environment, including
Group-wide controls and assessing
the risks of material misstatement
at the Group level.
Based on that assessment, we focused
our Group audit scope primarily on the
audit work at four components: Premier
Inn & Restaurants UK, Costa UK, Costa
Poland and Costa Shanghai. These were
subject to a full audit where the extent of
our testing was based on our assessment
of the risks of material misstatement
and of the materiality of the Group’s
operations at those locations. These
locations represent the principal business
units and together account for 99% of
the Group’s revenue, 101% of the Group’s
profit before tax and 97% of the Group’s
net assets. They were also selected
to provide an appropriate basis for
undertaking audit work to address
the risk of material misstatement
identified above.
At the parent entity level we also tested
the consolidation process and carried
out analytical procedures to confirm
our conclusion that there were no
significant risks of material misstatement
of the aggregated financial information
of the remaining components not
subject to audit or audit of specified
account balances.
The Group audit team followed a
programme of planned visits that has
been designed so that a senior member
of the audit team visits each of the
locations where the Group audit scope
was focused at least once every two
years and the most significant of them
at least once a year. In the current
year, we performed testing in the UK
for Premier Inn UK, Costa UK and the
Group audit and visited Costa Poland.
In years where we do not visit a
significant component, we will include
the component audit team in our team
briefing, discuss their risk assessment,
attend their closing meeting and review
documentation of the findings from
their work.
Profit
before
tax
£m
Net
assets
£m
Revenue
£m
3,076.6
522.3 2,441.0
29.4
(6.9)
83.8
3,106.0
515.4 2,524.8
Full scope
audit
Analytical
procedures
Total
Group materiality £26m
Component
materiality range
£13m to £21m
Audit Committee
reporting threshold
£1.3m
Whitbread Annual Report and Accounts 2016/17
107
Governance Independent auditor’s report to the members
of Whitbread PLC continued
Opinion on other matters prescribed
by the Companies Act 2006
In our opinion, based on the work
undertaken in the course of the audit:
• the part of the directors’ remuneration
report to be audited has been properly
prepared in accordance with the
Companies Act 2006;
• the information given in the strategic
report and the directors’ report for the
financial year for which the financial
statements are prepared is consistent
with the financial statements; and
• the strategic report and the directors’
report have been prepared in
accordance with applicable
legal requirements.
In the light of the knowledge and
understanding of the Group and its
environment obtained in the course of
the audit, we have not identified any
material misstatements in the strategic
report and the directors’ report.
Matters on which we are required
to report by exception
Adequacy of explanations received
and accounting records
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
• we have not received all the
information and explanations we
require for our audit; or
• adequate accounting records have not
been kept by the parent Company, or
returns adequate for our audit have
not been received from branches not
visited by us; or
• the parent Company financial
statements are not in agreement with
the accounting records and returns.
We have nothing to report in respect
of these matters.
Directors’ remuneration
Under the Companies Act 2006 we
are also required to report if in our
opinion certain disclosures of directors’
remuneration have not been made or
the part of the directors’ remuneration
report to be audited is not in agreement
with the accounting records and returns.
We have nothing to report arising from
these matters.
Corporate Governance Statement
Under the Listing Rules we are
also required to review part of the
Corporate Governance Statement
relating to the company’s compliance
with certain provisions of the UK
Corporate Governance Code.
We have nothing to report arising from
our review.
Our duty to read other information
in the Annual Report
Under International Standards on
Auditing (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 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
• 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.
We confirm that we have not identified
any such inconsistencies or misleading
statements.
Respective responsibilities of directors
and auditor
As explained more fully in the directors’
responsibilities statement, the directors
are responsible for the preparation of
the 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 financial
statements in accordance with applicable
law and International Standards on
Auditing (UK and Ireland). We also
comply with International Standard
on Quality Control 1 (UK and Ireland).
Our audit methodology and tools aim
to ensure that our quality control
procedures are effective, understood
and applied. Our quality controls
and systems include our dedicated
professional standards review team
and independent partner reviews.
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.
Scope of the audit of the
financial statements
An audit involves obtaining evidence
about the amounts and disclosures
in the financial statements sufficient
to give reasonable assurance that
the financial statements are free from
material misstatement, whether caused
by fraud or error. This includes an
assessment of: whether the accounting
policies are appropriate to the Group’s
and the parent Company’s circumstances
and have been consistently applied and
adequately disclosed; the reasonableness
of significant accounting estimates
made by the directors; and the overall
presentation of the financial statements.
In addition, we read all the financial and
non-financial information in the annual
report to identify material inconsistencies
with the audited 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.
Nicola Mitchell FCA
(Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants
and Statutory Auditor
London
24 April 2017
Whitbread Annual Report and Accounts 2016/17
108
GovernanceGovernance Consolidated accounts 2016/17
110 Consolidated income statement
111
112
113
114
115 Notes to the consolidated financial statements
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated balance sheet
Consolidated cash flow statement
Whitbread Annual Report and Accounts 2016/17 109
Consolidated accounts 2016/17
Consolidated income statement
Year ended 2 March 2017
Revenue
Operating costs
Operating profit before joint ventures and associate
Share of profit from joint ventures
Share of profit from associate
Operating profit
Finance costs
Finance revenue
Profit before tax
Analysed as:
Underlying profit before tax
Non-underlying items
Profit before tax
Tax expense
Analysed as:
Underlying tax expense
Non-underlying tax credit
Tax expense
Profit for the year
Attributable to:
Parent shareholders
Non-controlling interest
Earnings per share
(Note 10)
Earnings per share
Basic
Diluted
Underlying earnings per share
Basic
Diluted
Notes
3, 4
5
15
8
8
4
4
6
4
9
6
9
52 weeks to
2 March
2017
£m
3,106.0
(2,557.2)
53 weeks to
3 March
2016
£m
2,921.8
(2,397.9)
548.8
523.9
3.2
0.7
552.7
(37.6)
0.3
515.4
565.2
(49.8)
515.4
(99.5)
(119.1)
19.6
(99.5)
415.9
421.6
(5.7)
415.9
3.3
0.9
528.1
(41.2)
0.8
487.7
546.3
(58.6)
487.7
(100.4)
(116.1)
15.7
(100.4)
387.3
391.2
(3.9)
387.3
52 weeks to
2 March
2017
pence
53 weeks to
3 March
2016
pence
231.39
230.89
215.66
214.00
246.48
245.95
238.65
236.82
Whitbread Annual Report and Accounts 2016/17
110
Consolidated accountsConsolidated accounts 2016/17
Consolidated statement of comprehensive income
Year ended 2 March 2017
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 (loss)/gain on cash flow hedges
Current tax 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
Notes
52 weeks to
2 March
2017
£m
53 weeks to
3 March
2016
£m
415.9
387.3
29
9
9
9
23
9
9
9
(214.8)
15.6
26.7
(3.1)
(175.6)
(0.2)
0.5
(0.6)
(0.1)
(0.4)
22.9
(153.1)
262.8
268.4
(5.6)
262.8
201.6
14.7
(55.4)
(0.7)
160.2
6.5
(0.9)
(0.4)
(0.1)
5.1
7.1
172.4
559.7
563.5
(3.8)
559.7
Whitbread Annual Report and Accounts 2016/17
111
Consolidated accounts 2016/17
Consolidated statement of changes in equity
Year ended 2 March 2017
Share
capital
(Note 25)
£m
Share
premium
(Note 26)
£m
Capital
redemption
reserve
(Note 26)
£m
Retained
earnings
(Note 26)
£m
Currency
translation
reserve
(Note 26)
£m
Other
reserves
(Note 26)
£m
Non-
controlling
interest
£m
Total
£m
Total
equity
£m
At 26 February 2015
149.8
59.2
12.3 3,833.0
(1.4) (2,080.9) 1,972.0
5.9 1,977.9
Profit for the year
Other comprehensive income
Total comprehensive income
Ordinary shares issued
Loss on ESOT shares issued
Accrued share-based payments
Tax rate change on historical revaluation
Equity dividends
At 3 March 2016
Profit for the year
Other comprehensive loss
Total comprehensive income
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
–
–
–
0.2
–
–
–
–
–
–
–
3.4
–
–
–
–
–
–
–
–
–
–
–
–
391.2
158.8
550.0
–
(6.7)
17.3
1.3
(155.1)
–
7.0
7.0
–
–
–
–
–
–
6.5
6.5
–
6.7
–
–
–
391.2
172.3
563.5
3.6
–
17.3
1.3
(155.1)
(3.9)
0.1
387.3
172.4
(3.8)
559.7
–
–
–
–
–
3.6
–
17.3
1.3
(155.1)
150.0
62.6
12.3 4,239.8
5.6 (2,067.7) 2,402.6
2.1 2,404.7
–
–
–
0.2
–
–
–
–
–
–
–
–
5.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
421.6
(175.8)
245.8
–
(6.4)
17.7
0.4
0.7
(167.1)
–
22.8
22.8
–
(0.2)
421.6
(153.2)
(5.7)
0.1
415.9
(153.1)
(0.2)
268.4
(5.6)
262.8
–
–
–
–
–
–
–
6.4
–
–
–
–
5.6
–
17.7
0.4
0.7
(167.1)
–
–
–
–
–
–
5.6
–
17.7
0.4
0.7
(167.1)
At 2 March 2017
150.2
68.0
12.3 4,330.9
28.4 (2,061.5) 2,528.3
(3.5) 2,524.8
Whitbread Annual Report and Accounts 2016/17
112
Consolidated accountsConsolidated accounts 2016/17
Consolidated balance sheet
At 2 March 2017
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investment in joint ventures
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
Borrowings
Provisions
Derivative financial instruments
Current tax liabilities
Trade and other payables
Non-current liabilities
Borrowings
Provisions
Derivative financial instruments
Deferred 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
Alison Brittain
Chief Executive
24 April 2017
Nicholas Cadbury
Finance Director
Notes
2 March
2017
£m
3 March
2016
£m
12
13
15
23
17
16
23
17
18
13, 15
275.7
3,972.4
53.0
43.3
6.8
4,351.2
48.2
12.3
163.6
63.0
287.1
50.5
258.1
3,831.0
39.5
21.6
7.7
4,157.9
44.8
3.2
140.0
57.1
245.1
2.3
4
4,688.8
4,405.3
19
21
23
9
24
19
21
23
9
29
24
4
4
25
26
26
26
26
26
157.4
36.3
2.3
45.9
596.9
838.8
795.6
12.3
8.3
62.0
425.1
21.9
94.0
14.7
4.4
41.2
538.2
692.5
872.9
22.7
9.6
94.7
288.1
20.1
1,325.2
2,164.0
2,524.8
1,308.1
2,000.6
2,404.7
150.2
68.0
12.3
4,330.9
28.4
(2,061.5)
150.0
62.6
12.3
4,239.8
5.6
(2,067.7)
2,528.3
2,402.6
(3.5)
2.1
2,524.8
2,404.7
Whitbread Annual Report and Accounts 2016/17
113
Consolidated accounts 2016/17
Consolidated cash flow statement
Year ended 2 March 2017
Profit for the year
Adjustments for:
Tax expense
Net finance cost
Share of profit from joint ventures
Share of profit from associate
Net (gain)/loss on disposal of property, plant and equipment and property reversions
Net gain on disposal of investment in associate
Depreciation and amortisation
Impairment of property, plant and equipment, intangible assets and investments
Restructuring provisions created
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
Cash generated from operations
Payments against provisions
Pension payments
Interest paid
Interest received
Corporation taxes paid
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Investment in intangible assets
Proceeds/(costs) from disposal of property, plant and equipment
Proceeds from disposal of investment in associate
Business combinations, net of cash acquired
Capital contributions and loans to joint ventures
Dividends from associate
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Increase in short-term borrowings
Proceeds from long-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
Closing cash and cash equivalents
52 weeks to
2 March
2017
£m
53 weeks to
3 March
2016
£m
415.9
387.3
99.5
37.3
(3.2)
(0.7)
(16.3)
(11.8)
220.1
30.0
28.0
17.7
8.6
825.1
(3.1)
(7.1)
45.2
860.1
(22.3)
(90.3)
(34.9)
0.3
(86.8)
626.1
(571.2)
(38.6)
192.9
14.1
–
(7.7)
0.4
(410.1)
5.6
17.6
–
(67.4)
(0.6)
(167.1)
(211.9)
4.1
57.1
1.8
63.0
100.4
40.4
(3.3)
(0.9)
20.9
–
197.6
5.4
–
17.3
5.6
770.7
(7.6)
(15.2)
34.3
782.2
(15.1)
(84.3)
(25.6)
0.6
(85.1)
572.7
(680.3)
(35.4)
(0.2)
–
(9.2)
(3.0)
0.8
(727.3)
3.6
20.8
445.2
(101.9)
(3.6)
(155.1)
209.0
54.4
2.1
0.6
57.1
Notes
9
8
15
6
6
12, 13
14, 15
21
28
21
29
4
4
20
20
20
20
11
20
20
20
18
Whitbread Annual Report and Accounts 2016/17
114
Consolidated accountsConsolidated accounts 2016/17
Notes to the consolidated financial statements
At 2 March 2017
1 Authorisation of consolidated financial statements
The consolidated financial statements of Whitbread PLC for the year ended 2 March 2017 were authorised for issue by the
Board of Directors on 24 April 2017. 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 address of the registered office
is given on page 172.
The significant activities of the Group are described in Note 4, Segment information, and in the strategic report on pages
4 to 61.
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 (IFRS) as adopted for use in the European Union and as applied in accordance
with the provisions of the Companies Act 2006.
The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments
that are measured at fair values at the end of each reporting period and the defined benefit pension scheme, as explained
in the accounting policies below.
The consolidated financial statements have been prepared on a going concern basis. Further detail is contained in the
viability statement included in the strategic report on page 58.
The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest hundred
thousand except when otherwise indicated. The financial year represents the 52 weeks to 2 March 2017 (prior financial year:
53 weeks to 3 March 2016).
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 3 March 2016, except for the
adoption of the new standards and interpretations that are applicable for the year ended 2 March 2017. The significant
accounting policies adopted are set out below.
The Group has adopted the following standards and interpretations which have been assessed as having no financial impact
or disclosure requirements at this time:
• The IASB’s annual improvement process, 2012–2014;
• IAS 1 Disclosure Initiative – Amendments to IAS 1;
• IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38;
• IAS 16 and IAS 41 Bearer Plants – Amendments to IAS 16 and IAS 41;
• IAS 27 Equity Method in Separate Financial Statements – Amendments to IAS 27;
• IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception – Amendments to IFRS 10, IFRS 12
and IAS 28; and
• IFRS 11 Accounting for Acquisitions of Interests in Joint Operations – Amendments to IFRS 11.
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 associate incorporated using the equity method of
accounting. These are adjusted, where appropriate, to conform to Group accounting policies. The financial statements of
significant trading subsidiaries are prepared for the same reporting year as the parent Company except for Yueda Costa
(Shanghai) Food & Beverage Management Company Limited which has a year-end of 31 December as per Chinese legislation.
A subsidiary is an entity controlled by the Group. Control is the power to direct the relevant activities of the subsidiary
which significantly affect the subsidiary’s return, so as to have rights to the variable return from its activities.
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 2016/17
115
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
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 indefinite life;
• reacquired franchise rights are amortised over the life of the acquired franchise agreement;
• IT software and technology is amortised over periods of three to six years;
• acquired customer relationships are 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
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 assets 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 residual values are reviewed annually.
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 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 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.
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 consolidated income statement within 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.
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 an 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 estimated future cash flows 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.
Whitbread Annual Report and Accounts 2016/17
116
Consolidated accountsConsolidated accounts 2016/17
2 Accounting policies continued
For the purposes of impairment testing, all centrally held assets are allocated in line with IAS 36 to CGUs based on
management’s view of the consumption of the asset. Any resulting impairment is recorded against the centrally held asset.
Goodwill and intangible assets
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
recoverable amount.
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 that 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
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. 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 the cost to sell, and are not depreciated
or amortised.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated on the basis of first in, first out
and net realisable value is the estimated selling price less any costs to sell.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is
probable that an outflow of resources will be required to settle the obligation and 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.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is
considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be received under it.
Warranties
Provisions for the expected costs of warranty obligations arising on the acquisition or disposal of a business are
recognised at the date of the relevant transaction, at the directors’ best estimate of the expenditure required to settle
the Group’s obligation.
Restructuring costs
A restructuring provision is recognised when the Group has developed a detailed formal plan and has raised a valid
expectation, in those affected, that it will carry out the restructuring by starting to implement the plan or announcing its
main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures
arising from the restructuring which are those amounts that are both necessarily entailed by the restructuring and not
associated with the ongoing activities of the entity.
Whitbread Annual Report and Accounts 2016/17
117
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
2 Accounting policies continued
Non-underlying items and use of underlying performance measures
We use a range of measures to monitor the financial performance of the Group. These measures include both statutory
measures in accordance with IFRS and alternative performance measures (APMs) which are consistent with the way that
the business performance is measured internally.
The term underlying profit is not defined under IFRS and may not be comparable with similarly titled profit measures
reported by other companies. It is not intended to be a substitute for, or superior to, statutory measurements of profit.
Underlying measures of profitability are non-IFRS because they exclude amounts that are included in, or include amounts
that are excluded from, the most directly comparable measure calculated and presented in accordance with IFRS.
We report underlying measures because we believe they provide both management and investors with useful additional
information about the financial performance of the Group’s businesses.
Underlying measures of profitability represent the equivalent IFRS measures adjusted for specific items that we consider
hinder comparison of the financial performance of the Group’s businesses either from one period to another or with other
similar businesses.
The face of the income statement presents underlying profit before tax and reconciles this to profit before tax.
Underlying earnings per share is calculated using underlying profit after tax attributable to parent shareholders.
The adjustments made to reported profit in the consolidated income statement, in order to derive our underlying results,
may include:
• Profit or loss on disposal of property, plant and equipment, property reversions and onerous leases. On occasion
we may dispose of properties, either as part of a sale and leaseback transaction or because the property is no longer
required in our ongoing business. In addition, the Group may recognise liabilities in respect of lease obligations on
properties which have been previously disposed of but where the lease obligations have reverted to the Group under
privity. Profits or losses on these items may be significant and are not reflective of the Group’s ongoing trading results;
• Profit or loss on the sale of a business or investment. These disposals are not part of the Group’s ongoing trading
business and are therefore excluded;
• Significant one-off restructuring costs, resulting from a strategic review of the Group’s businesses or operations,
the inclusion of which would distort the year on year comparability of the Group’s trading results;
• Impairment of assets as the result of restructuring or closure of a business and impairment of sites which are
underperforming or are to be closed, the inclusion of which would distort the year-on-year comparability of the Group’s
trading results;
• Amortisation of intangible assets recognised as part of a business combination or other transaction outside of the
ordinary course of business;
• Finance charge/credit for defined benefit pension scheme. These costs are non-cash and do not relate to the Group’s
ongoing activities as the scheme is closed to future accrual;
• Finance costs resulting from the unwinding of discounts on provisions created in respect of non-underlying items; and
• Significant and one-off tax settlements in respect of prior years including the related interest and the impact of changes
in the statutory tax rate, the inclusion of which would distort year on year comparability, as well as the tax impact of the
non-underlying items identified above.
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.
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.
Whitbread Annual Report and Accounts 2016/17
118
Consolidated accountsConsolidated accounts 2016/17
2 Accounting policies continued
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.
The Group operate some customer loyalty programmes. Where award credits are granted as part of a sale transaction,
a portion of revenue equal to the fair value of the award 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;
Rendering of services
Revenue from room sales and other guest services is recognised when rooms are occupied and as services are provided; and
Franchise fees
Revenue from fees received in connection with the franchise of the Group’s brand names is recognised when earned.
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.
Finance revenue
Interest income is recognised as the interest accrues, using the effective interest method.
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 the defined benefit pension scheme, 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 reclassified 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.
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 these equity-
settled transactions 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.
Whitbread Annual Report and Accounts 2016/17
119
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
2 Accounting policies continued
Cash-settled transactions
The cost is fair-valued at grant date and expensed over the period until the vesting date, with 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
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual
rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them
to be joint ventures.
Associates are all entities over which the Group has significant influence but not control, generally accompanying
a shareholding of between 20% and 50% of the voting rights.
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.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market, do not qualify as trading assets and have not been designated as either fair value through profit and loss or
available-for-sale. Such assets are carried at amortised cost using the effective interest method if the time value of money
is significant. Gains and losses are recognised in the income statement when the loans and receivables are derecognised
or impaired, as well as through the amortisation process.
Trade receivables are recognised and carried at original invoice amount less any uncollectable amounts. An estimate for
doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank, 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.
Whitbread Annual Report and Accounts 2016/17 120
Consolidated accountsConsolidated accounts 2016/17
2 Accounting policies continued
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. 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. 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 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.
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.
Gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting, are recognised
immediately in the income statement.
Borrowings
Borrowings are initially recognised at the 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
The preparation of financial statements requires management to make judgements, estimates and assumptions that
affect the amounts reported as assets and liabilities at the balance sheet date and the amounts reported as revenues and
expenses during the year. However, the nature of estimation means that the actual outcomes could differ from those
estimates. In the process of applying the Group’s accounting policies, management has made the following judgements
and estimates which have the most significant effect on the amounts recognised in the financial statements:
Key accounting judgements
Residual values and asset lives
The residual value is the net realisable value of an asset at the end of its useful economic life. The Group has taken an
assessment of the residual values that are appropriate for the business and reviews this assessment annually. Note 13
provides details of the value of fixed assets capitalised.
Intangible asset capitalisation – IT software and technology assets
The amount capitalised includes the total cost of any external products or services as well as any internal costs directly
attributable to the development of the assets. Management judgement is involved in determining whether projects
meet the criteria for capitalisation. Note 12 provides details of the value of IT software capitalised.
Non-underlying items
During the year certain items are identified and separately disclosed as non-underlying. Judgement is applied as to
whether the item meets the necessary criteria as per the accounting policy disclosed earlier in this note. Note 6 provides
information on all of the items disclosed as non-underlying in the current year financial statements.
Areas of estimation uncertainty
Impairment
An impairment test of tangible and intangible assets is undertaken each year using both an EBITDA multiple and
a discounted cash flow approach. Note 14 describes the assumptions used together with an analysis of the sensitivity
to changes in key assumptions.
Whitbread Annual Report and Accounts 2016/17
121
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
2 Accounting policies continued
Asset lives
Asset lives are based upon management’s estimation at the point of capitalisation. Periodically these are reviewed to ensure
that the estimated lives of the assets remain appropriate and if not the assets are re-lifed prospectively. Notes 12 and 13
provide details on the depreciation and amortisation booked.
Defined benefit pension
Defined benefit pension plans are accounted for in accordance with actuarial advice using the projected unit credit method.
Note 29 describes the assumptions used together with an analysis of the sensitivity to changes in key assumptions.
Restructuring provisions
Restructuring costs are provided for using the best information available to management at the balance sheet date.
This includes estimates of future costs and judgements on the likely outcome/timing of restructuring activities. Note 21
provides details of the value of the provisions carried.
Taxation
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 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.
Assumptions are also made around the assets which qualify for capital allowances and the level of disallowable expenses
and these affect the income tax calculation. Provisions may be made for uncertain exposures or recoveries, which can have
an impact on both deferred and current tax.
A deferred tax asset shall be recognised for the carry forward of unused tax losses, pension deficits and unused tax credits
to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused
tax credits can be utilised.
Details 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:
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments was issued in July 2014 and is a replacement of IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 covers the classification, measurement and derecognition of financial assets and financial liabilities,
together with a new hedge accounting model and a new expected credit loss model for calculating impairment. The new
standard becomes effective for annual periods beginning on or after 1 January 2018, subject to EU adoption. The Group
has undertaken an initial impact assessment which indicates that the adoption of IFRS 9 will not have a material impact
on its consolidated results and financial position.
IFRS 15 Revenue from Contracts with Customers
The IASB issued IFRS 15 Revenue from Contracts with Customers in May 2014. The new standard provides a single, five-step
revenue recognition model, applicable to all sales contracts, which is based upon the principle that revenue is recognised
when control of goods or services is transferred to the customer. It replaces all existing revenue recognition guidance under
current IFRS and becomes effective for annual periods beginning on or after 1 January 2018, subject to EU adoption. The
Group has undertaken an initial impact assessment which indicates that the adoption of IFRS 15 will not have a material
impact on its consolidated result and financial position, but is likely to result in additional disclosure requirements.
IFRS 16 Leases
The IASB issued IFRS 16 Leases in January 2016. The new standard provides a single lessee accounting model, requiring
lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has
a low value. It replaces the existing leasing Standard, IAS 17 Leases, and related Interpretations and becomes effective for
annual periods beginning on or after 1 January 2019, subject to EU adoption. The Group has determined that the application
of IFRS 16 will have a material impact on its consolidated financial result and financial position. This includes recognition
of interest and amortisation expense in place of fixed rental expense in the income statement and the recognition of right
of use assets and lease liabilities for its operating lease portfolio on the balance sheet. There is no net cash flow impact
on application of IFRS 16. The Group is currently undertaking a detailed assessment to determine the full impact of IFRS 16
on its consolidated results and financial position.
Whitbread Annual Report and Accounts 2016/17
122
Consolidated accountsConsolidated accounts 2016/17
2 Accounting policies continued
IAS 7 Disclosure Initiative – Amendment to IAS 7
The IASB issued the amendment in January 2016. The improvements to disclosure relate to the statement of cash flows
and require companies to provide information about changes in their financing liabilities. This amendment is a response to
requests from investors for information that helps them better understand changes in a company’s debt. The amendment
will help investors to evaluate changes in liabilities arising from financing activities, including changes from cash flows
and non-cash changes (such as foreign exchange gains or losses) and becomes effective for annual periods beginning
on or after 1 January 2017, subject to EU adoption. The Group has determined that the impact of IAS 7 will be limited
to disclosure and will have no impact on its consolidated result and financial position.
Whilst the following standards and interpretations are relevant to the Group, they have been assessed as having minimal
or no financial impact or additional disclosure requirements at this time1:
• IFRS 4 Applying IFRS 9 with IFRS 4 Insurance contracts – Amendments to IFRS 4;
• IFRS 14 Regulatory Deferral Accounts;
• IAS 40 Amendments to IAS 40: Transfers of Investment Property;
• IAS 12 Recognition of Deferred Tax Assets for Unrealised Loss;
• IFRS 2 Amendments to IFRS 2;
• IFRIC 22 Foreign Currency Translations and Advance Consideration; and
• The IASB’s annual improvement process, 2014–2016.
1 As the consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union, the adoption date is as per the EU,
not the IASB.
3 Revenue
An analysis of the Group’s revenue is as follows:
Sale of goods
Rendering of services
Franchise fees
Revenue
4 Segment information
2016/17
£m
1,717.2
1,349.1
39.7
2015/16
£m
1,626.8
1,260.0
35.0
3,106.0
2,921.8
For management purposes, the Group is organised into two strategic business units (Premier Inn & Restaurants and Costa)
based upon their different products and services:
• Premier Inn & 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 Premier Inn & 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 Premier Inn & Restaurants segment and is eliminated on consolidation.
Transactions were entered into on an arm’s length basis in a manner similar to transactions with third parties.
The following tables present revenue and profit information and certain asset and liability information regarding business
operating segments for the years ended 2 March 2017 and 3 March 2016.
Whitbread Annual Report and Accounts 2016/17
123
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
4 Segment information continued
Year ended 2 March 2017
Revenue
Revenue from external customers
Inter-segment revenue
Total revenue (Note 3)
Underlying operating profit
Underlying net finance cost
Underlying profit before tax
Non-underlying items (Note 6):
Net gain/(loss) on disposal of property, plant and equipment
and property reversions
PI International business exit
Costa international restructuring
UK restructuring
Settlement of historic VAT claim
Net gain on disposal of investment in associate
Amortisation of acquired intangibles
Impairment (net of reversals)
IAS 19 income statement charge for pension finance cost
Unwinding of discount on provisions
Total non-underlying items
Profit before tax
Tax expense (Note 9)
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 joint ventures (Note 15)
Share of profit from associate
Investment in joint ventures
Total property rent (Note 5)
Capital expenditure:
Property, plant and equipment – cash basis
Property, plant and equipment – accruals basis (Note 13)
Intangible assets (Note 12)
Depreciation – underlying
Amortisation – underlying
Premier Inn &
Restaurants
£m
Unallocated
and
elimination
£m
Costa
£m
Total
operations
£m
1,907.9
–
1,907.9
468.0
–
468.0
1,198.1
3.6
1,201.7
158.0
–
158.0
26.0
(30.0)
–
(15.6)
–
11.8
–
(2.9)
–
–
(10.7)
(5.9)
–
(14.5)
(5.9)
5.3
–
(2.5)
(4.6)
–
(0.2)
(28.3)
457.3
129.7
–
(3.6)
(3.6)
(33.6)
(27.2)
(60.8)
(0.8)
–
–
(0.1)
–
–
–
–
(9.4)
(0.5)
(10.8)
(71.6)
3,106.0
–
3,106.0
592.4
(27.2)
565.2
19.3
(30.0)
(14.5)
(21.6)
5.3
11.8
(2.5)
(7.5)
(9.4)
(0.7)
(49.8)
515.4
(99.5)
415.9
4,020.2
–
4,020.2
(427.8)
–
(427.8)
511.4
–
511.4
–
157.2
157.2
4,531.6
157.2
4,688.8
(163.3)
–
–
(1,572.9)
(591.1)
(1,572.9)
(163.3)
(1,572.9)
(2,164.0)
3,592.4
348.1
(1,415.7)
2,524.8
2.5
0.7
41.0
139.8
459.7
455.7
25.8
0.7
–
12.0
121.4
111.5
121.5
12.8
(131.0)
(13.3)
(71.5)
(1.8)
–
–
–
–
–
–
–
–
–
3.2
0.7
53.0
261.2
571.2
577.2
38.6
(202.5)
(15.1)
Whitbread Annual Report and Accounts 2016/17 124
Consolidated accountsConsolidated accounts 2016/17
4 Segment information continued
Year ended 3 March 2016
Revenue
Revenue from external customers
Inter-segment revenue
Total revenue (Note 3)
Underlying operating profit
Underlying net finance cost
Underlying profit before tax
Non-underlying items (Note 6):
Net loss on disposal of property, plant and equipment
and property reversions
Intangible assets accelerated amortisation
Amortisation of acquired intangibles
Impairment (net of reversals)
IAS 19 income statement charge for pension finance cost
Unwinding of discount on provisions
Total non-underlying items
Profit before tax
Tax expense (Note 9)
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 joint ventures (Note 15)
Share of profit from associate
Investment in joint ventures
Total property rent (Note 5)
Capital expenditure:
Property, plant and equipment – cash basis
Property, plant and equipment – accruals basis (Note 13)
Intangible assets (Note 12)
Depreciation – underlying
Amortisation – underlying
Revenues from external customers are split geographically as follows:
United Kingdom1
Non-United Kingdom
Premier Inn &
Restaurants
£m
1,822.0
–
1,822.0
446.9
–
446.9
(0.4)
(7.2)
–
0.3
–
–
(7.3)
439.6
Costa
£m
1,099.8
3.4
1,103.2
153.5
–
153.5
(5.5)
(0.9)
(4.3)
(5.7)
–
–
(16.4)
137.1
Unallocated
and
elimination
£m
Total
operations
£m
–
(3.4)
(3.4)
(31.6)
(22.5)
(54.1)
(15.0)
(2.0)
–
–
(17.2)
(0.7)
(34.9)
(89.0)
2,921.8
–
2,921.8
568.8
(22.5)
546.3
(20.9)
(10.1)
(4.3)
(5.4)
(17.2)
(0.7)
(58.6)
487.7
(100.4)
387.3
3,842.2
–
3,842.2
(366.4)
–
(366.4)
444.4
–
444.4
–
118.7
118.7
4,286.6
118.7
4,405.3
(136.8)
–
–
(1,497.4)
(503.2)
(1,497.4)
(136.8)
(1,497.4)
(2,000.6)
3,475.8
307.6
(1,378.7)
2,404.7
3.3
0.9
36.3
123.4
581.0
604.6
32.2
–
–
3.2
111.2
99.3
102.6
3.2
–
–
–
0.1
–
–
–
3.3
0.9
39.5
234.7
680.3
707.2
35.4
(112.0)
(9.0)
(59.4)
(2.7)
–
(0.1)
(171.4)
(11.8)
2016/17
£m
2,985.0
121.0
3,106.0
2015/16
£m
2,822.4
99.4
2,921.8
1 United Kingdom (UK) revenue is revenue where the source of the supply is the UK. This includes Costa franchise income invoiced from the UK.
Whitbread Annual Report and Accounts 2016/17
125
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
4 Segment information continued
Non-current assets1 are split geographically as follows:
United Kingdom
Non-United Kingdom
1 Non-current assets exclude derivative financial instruments.
5 Operating costs
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
Non-underlying items (Note 6)1
2017
£m
4,123.4
184.5
4,307.9
2016
£m
3,973.1
163.2
4,136.3
2016/17
£m
375.6
793.3
262.7
17.6
202.5
717.6
(0.5)
151.2
37.2
2015/16
£m
368.2
737.1
235.9
16.1
171.4
694.4
0.3
138.1
36.4
2,557.2
2,397.9
1 Non-underlying items excludes amortisation of acquired intangibles of £2.5m (2015/16: £4.3m). These amounts are included in amortisation of
intangible assets.
Analysis of operating lease payments:
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 Group’s auditor during the period consisted of:
Audit of the Group’s financial statements
Audit of the Group’s subsidiaries
Total audit fees
Audit related assurance
Other
Total non-audit fees
Included in other operating charges
2016/17
£m
243.5
1.9
245.4
15.8
261.2
3.5
(2.0)
262.7
2015/16
£m
219.0
(0.4)
218.6
16.1
234.7
3.4
(2.2)
235.9
2016/17
£m
2015/16
£m
0.5
0.3
0.8
0.1
0.1
0.2
1.0
0.5
0.3
0.8
0.1
–
0.1
0.9
Whitbread Annual Report and Accounts 2016/17 126
Consolidated accountsConsolidated accounts 2016/17
6 Non-underlying items
As set out in the policy in Note 2, we use a range of measures to monitor the financial performance of the Group. These
measures include both statutory measures in accordance with IFRS and APMs which are consistent with the way that
the business performance is measured internally. We report underlying measures because we believe they provide both
management and investors with useful additional information about the financial performance of the Group’s businesses.
Underlying measures of profitability represent the equivalent IFRS measures adjusted for specific items that we consider
hinder the comparison of the financial performance of the Group’s businesses either from one period to another or with
other similar businesses.
Previously this note was reported as exceptional items and non-underlying adjustments. The definition and policy has been
simplified in 2016/17 to refer to non-underlying items only. There has been no change in definition or metric and therefore
presentation is reflected in the comparative disclosure without any restatement of values.
Non-underlying items were as follows:
Operating costs:
Net gain/(loss) on disposal of property, plant and equipment and property reversions1
PI International business exit2
Costa international restructuring3
UK restructuring4
Settlement of historic VAT claim5
Net gain on disposal of investment in associate6
Intangible assets accelerated amortisation7
Amortisation of acquired intangibles (Note 12)
Impairment of property, plant and equipment (net of reversals)8
Non-underlying operating costs
Net finance costs:
IAS 19 pension finance cost (Note 29)
Unwinding of discount on provisions9
Non-underlying net finance costs
Non-underlying items before tax
Tax adjustments included in reported profit after tax, but excluded in arriving at underlying profit after tax:
Tax on non-underlying items
Non-underlying tax items – tax base cost
Deferred tax relating to UK tax rate change10
Non-underlying tax credit
2016/17
£m
2015/16
£m
19.3
(30.0)
(14.5)
(21.6)
5.3
11.8
–
(2.5)
(7.5)
(39.7)
(9.4)
(0.7)
(10.1)
(20.9)
–
–
–
–
–
(10.1)
(4.3)
(5.4)
(40.7)
(17.2)
(0.7)
(17.9)
(49.8)
(58.6)
12.3
2.1
5.2
19.6
2.8
(0.1)
13.0
15.7
1 During the year, the Group made a net gain on asset disposals of £26.0m through three sale and leaseback transactions. The balance relates to changes
in onerous contract provisions in the UK of £2.4m, Poland release of £(0.4)m and Singapore of £2.9m and minor disposals in the year of £1.8m.
2 On 13 July 2016, the Group announced its intention to exit hotel operations in South East Asia. This has resulted in the recognition of impairment losses
on assets of £11.0m, investment in joint ventures of £0.9m and goodwill of £3.0m as well as the recognition of a restructuring provision of £15.1m for costs
of exiting management agreements and closure of regional offices.
3 During the year, Costa has undertaken a strategic review of its international operations. This has led to the decision to exit its French equity business and to
restructure its Chinese operations. In France this has resulted in the recognition of impairment losses of £1.5m, store closure costs of £0.8m and restructuring
costs of £6.8m (including a restructuring provision of £6.6m for redundancy and lease exit costs). In China the review has led to impairment losses of £3.2m,
store closure costs of £1.6m and onerous lease provisions of £0.6m. The restructure is ongoing and there are expected to be further closure costs in the next
financial year. The share attributable to the parent shareholders is £2.7m.
4 During the year, the Group undertook significant operational reorganisation of support centre operations. This restructuring has resulted in costs of £12.4m,
including staff redundancy and consultation costs, asset impairments of £2.9m as well as the recognition of a restructuring provision of £6.3m covering staff
redundancy and consultation costs.
5 During the year, the Group received a refund on settlement of a historic VAT claim.
6 During the year, the Group disposed of its investment in Morrison Street Hotel Limited resulting in a net gain of £11.8m.
7 Following a review of IT software and technology assets during the prior year, additional amortisation of £10.1m was recognised in the income statement
in respect of systems for which there was no future economic benefit.
8 Net impairment losses arising on sites which are to be closed or are underperforming. Further details are provided in Note 14.
9 The finance cost arising from the unwinding of the discount rate within provisions is included in non-underlying finance costs, reflecting the non-underlying
nature of the provisions created.
10 Impact of the reduction in the main rate of UK corporation tax to 19% from 1 April 2017 and to 17% from 1 April 2020.
Whitbread Annual Report and Accounts 2016/17
127
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
7 Employee benefits expense
Wages and salaries
Social security costs
Pension costs
2016/17
£m
733.2
51.0
9.1
793.3
2015/16
£m
682.1
46.5
8.5
737.1
Included in wages and salaries is a share-based payments expense of £17.7m (2015/16: £17.3m), 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:
Premier Inn & Restaurants
Costa
Unallocated
Total operations
Excluded from the above are employees of joint ventures and associate undertakings.
Directors’ remuneration is disclosed below:
Directors’ remuneration
Aggregate contributions to the defined contribution pension scheme
Aggregate gains on the exercise of share options
Number of directors accruing benefits under defined contribution schemes
2016/17
Number
27,201
14,768
75
42,044
2016/17
£m
3.0
–
3.8
2016/17
Number
2
2015/16
Number
27,115
13,990
70
41,175
2015/16
£m
3.6
0.1
10.1
2015/16
Number
2
Whitbread Annual Report and Accounts 2016/17
128
Consolidated accountsConsolidated accounts 2016/17
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 (Note 23)
Finance revenue
Bank interest receivable
Other interest receivable
Impact of ineffective portion of cash flow and fair value hedges (Note 23)
Underlying net finance costs
Non-underlying net finance costs
IAS 19 pension finance cost (Note 29)
Unwinding of discount on provisions (Note 21)
Total net finance costs
Total finance costs
Total finance revenue
Total net finance costs
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 17% (2015/16: 18%)
Tax reported in the consolidated income statement
Consolidated statement of comprehensive income
Current tax:
Cash flow hedges
Pensions
Deferred tax:
Cash flow hedges
Pensions
Change in UK tax rate to 17% (2015/16: 18%) – pensions
Change in UK tax rate to 17% (2015/16: 18%) – cash flow hedges
Tax reported in other comprehensive income
2016/17
£m
2015/16
£m
(5.3)
(31.0)
8.9
(0.1)
(27.5)
0.1
0.2
–
0.3
(5.3)
(28.0)
10.0
–
(23.3)
0.4
0.2
0.2
0.8
(27.2)
(22.5)
(9.4)
(0.7)
(10.1)
(37.3)
(37.6)
0.3
(37.3)
(17.2)
(0.7)
(17.9)
(40.4)
(41.2)
0.8
(40.4)
2016/17
£m
2015/16
£m
111.6
(1.7)
109.9
(6.0)
0.8
(5.2)
(10.4)
99.5
116.1
(8.0)
108.1
(2.9)
8.2
(13.0)
(7.7)
100.4
2016/17
£m
2015/16
£m
(0.5)
(15.6)
0.6
(26.7)
3.1
0.1
(39.0)
0.9
(14.7)
0.4
55.4
0.7
0.1
42.8
Whitbread Annual Report and Accounts 2016/17 129
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
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 2 March 2017 and 3 March 2016 respectively
is as follows:
Profit before tax as reported in the consolidated income statement
Tax at current UK tax rate of 20% (2015/16: 20.08%)
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 years
Adjustments to deferred tax expense in respect of previous years
Impact of deferred tax being at a different rate from current tax rate
Impact of change in tax rate on deferred tax balance
Tax expense reported in the consolidated income statement
Current tax liability
The corporation tax balance is a liability of £45.9m (2016: liability of £41.2m).
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
2016/17
2015/16
Tax on
underlying
profit
£m
565.2
113.0
4.3
(0.5)
3.1
(2.1)
1.8
(0.5)
–
119.1
Tax on
profit
£m
515.4
103.1
8.3
(0.5)
(4.9)
(1.6)
0.8
(0.5)
(5.2)
99.5
Tax on
underlying
profit
£m
546.3
109.7
3.5
(0.9)
4.0
(8.0)
7.8
–
–
116.1
Tax on
profit
£m
487.7
98.0
5.1
(0.9)
11.0
(8.0)
8.2
–
(13.0)
100.4
Consolidated
balance sheet
Consolidated
income statement
2017
£m
44.0
68.1
112.1
(53.1)
3.0
(50.1)
2016
£m
2016/17
£m
2015/16
£m
48.7
73.3
122.0
(28.7)
1.4
(27.3)
(4.7)
(4.5)
(0.7)
(0.5)
(3.3)
(8.0)
(2.2)
5.8
(10.4)
(7.7)
62.0
94.7
Total deferred tax liabilities relating to disposals during the year were £nil (2016: £nil).
The Group has incurred overseas tax losses which, subject to any local restrictions, can be carried forward and offset against
future taxable profits in the companies in which they arose. The Group carries out an annual assessment of the recoverability
of these losses and does not think it is appropriate at this stage to recognise any deferred tax asset. If the Group were to
recognise these deferred tax assets in their entirety, profits would increase by £16.5m (2016: £10.7m), of which, the share
attributable to the parent shareholders is £13.9m (2016: £8.9m).
At 2 March 2017, there was no recognised deferred tax liability (2016: £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 £1.8m (2016: £2.0m).
Factors affecting the tax charge for future years
The Finance (No 2) Act 2015 reduced the main rate of UK corporation tax to 19% from 1 April 2017 and to 18% from 1 April
2020. The effect of these rates was included in the financial statements in 2015/16. The Finance Act 2016 further reduced the
main rate of UK corporation tax to 17% with effect from 1 April 2020. The effect of the new rate is a reduction of the deferred
tax liability by a net of £2.7m comprising a credit of £5.2m to the income statement, a charge of £3.2m to the statement of
consolidated income and a reserves movement of £0.7m. The rate changes will also impact the amount of the future cash tax
payments to be made by the Group.
Whitbread Annual Report and Accounts 2016/17 130
Consolidated accountsConsolidated accounts 2016/17
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 (2016: 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
2016/17
million
182.2
0.4
182.6
2015/16
million
181.4
1.4
182.8
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 195.4m, less 12.1m treasury shares held by Whitbread PLC and 1.0m held by the ESOT (2016: 195.2m, less
12.6m treasury shares held by Whitbread PLC and 0.9m held by the ESOT).
The profits used for the earnings per share calculations are as follows:
Profit for the year attributable to parent shareholders
Non-underlying items – gross
Non-underlying items – taxation
Non-underlying items – non-controlling interest
Underlying profit for the year attributable to parent shareholders
Basic on profit for the year
Non-underlying items – gross
Non-underlying items – taxation
Non-underlying items – non-controlling interest
Basic on underlying profit for the year
Diluted on profit for the year
Diluted on underlying profit for the year
2016/17
£m
421.6
49.8
(19.6)
(2.7)
449.1
2016/17
pence
231.39
27.33
(10.76)
(1.48)
246.48
230.89
245.95
2015/16
£m
391.2
58.6
(15.7)
(1.2)
432.9
2015/16
pence
215.66
32.30
(8.65)
(0.66)
238.65
214.00
236.82
Whitbread Annual Report and Accounts 2016/17
131
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
11 Dividends paid and proposed
Final dividend, proposed and paid, relating to the prior year
Interim dividend proposed, and paid, for the current 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:
Final equity dividend for the current year
2016/17
2015/16
pence
per share
61.85
29.90
0.80
0.80
pence
per share
56.95
28.50
0.80
0.80
£m
112.6
54.5
167.1
–
–
–
167.1
£m
103.4
51.7
155.1
–
–
–
155.1
65.90
120.1
61.85
112.4
A final dividend of 65.90p per share (2016: 61.85p) amounting to a dividend of £120.1m (2016: £112.4m) was recommended by the
directors at their meeting on 24 April 2017. A dividend reinvestment plan (DRIP) alternative will be offered. These consolidated
financial statements do not reflect this dividend payable.
Whitbread Annual Report and Accounts 2016/17
132
Consolidated accountsConsolidated accounts 2016/17
12 Intangible assets
Cost
At 26 February 2015
Additions
Businesses acquired
Assets written off
Foreign currency adjustment
At 3 March 2016
Additions
Assets written off
Foreign currency adjustment
At 2 March 2017
Amortisation and impairment
At 26 February 2015
Amortisation during the year
Amortisation on assets written off
At 3 March 2016
Amortisation during the year
Amortisation on assets written off
Impairment (Note 14)
Foreign currency adjustment
At 2 March 2017
Net book value at 2 March 2017
Net book value at 3 March 2016
Goodwill
£m
Brand
£m
Customer
IT software
relationships
£m
and technology
£m
179.4
–
0.6
–
–
180.0
–
–
0.1
180.1
–
–
–
–
–
–
(3.0)
–
(3.0)
177.1
180.0
5.1
–
–
(5.1)
–
–
–
–
–
–
(5.1)
–
5.1
–
–
–
–
–
–
–
–
5.9
–
–
–
–
5.9
–
–
–
5.9
(1.8)
(0.4)
–
(2.2)
(0.3)
–
–
–
(2.5)
3.4
3.7
85.5
34.0
–
(2.7)
0.2
117.0
38.6
(29.9)
0.3
126.0
(35.3)
(22.0)
2.7
(54.6)
(14.5)
29.9
(0.8)
(0.1)
(40.1)
85.9
62.4
Other
£m
17.2
1.4
–
–
–
18.6
–
–
0.1
18.7
(2.8)
(3.8)
–
(6.6)
(2.8)
–
–
–
(9.4)
9.3
12.0
Total
£m
293.1
35.4
0.6
(7.8)
0.2
321.5
38.6
(29.9)
0.5
330.7
(45.0)
(26.2)
7.8
(63.4)
(17.6)
29.9
(3.8)
(0.1)
(55.0)
275.7
258.1
Included in the amortisation for the year is amortisation relating to acquired intangibles amounting to £2.5m (2015/16: £4.3m)
and accelerated amortisation of IT software and technology assets of £nil (2015/16: £10.1m).
The carrying amount of goodwill allocated by segment is presented below:
Premier Inn & Restaurants
Costa
Total
2017
£m
110.4
66.7
177.1
2016
£m
113.4
66.6
180.0
The carrying amount of goodwill at 2 March 2017 comprised £110.4m for Premier Inn & Restaurants and £66.7m for Costa.
The Premier Inn & 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 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 assets have been assessed as having finite lives and are amortised under the straight-line
method over periods ranging from three to six years from the date the asset became fully operational.
Other intangibles comprise Costa overseas trading licences and territory fees, reacquired franchise rights, Costa Express
operating rights agreements and development costs.
The trading licences, which have a carrying value of £1.6m (2016: £1.6m), are deemed to have indefinite lives as there is
no foreseeable limit to the period over which they are expected to contribute to the Group’s net cash inflow. The operating
rights agreements are being amortised over ten years and have a carrying value of £0.2m (2016: £0.2m). Development costs
have a carrying value of £1.9m (2016: £2.6m) and are being amortised over six years. The reacquired franchise right arose
from the acquisition of Life Coffee Cafes Limited in 2014/15 and is being amortised over five years and has a carrying value of
£5.2m (2016: £7.2m). The balance of £0.4m (2016: £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 £8.2m (2016: £10.9m).
Whitbread Annual Report and Accounts 2016/17
133
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
13 Property, plant and equipment
Cost
At 26 February 2015
Additions
Businesses acquired
Interest capitalised
Reclassified
Assets written off
Foreign currency adjustment
Disposals
At 3 March 2016
Additions
Interest capitalised
Reclassified
Assets written off
Foreign currency adjustment
Movements to held for sale in the year
Disposals
At 2 March 2017
Depreciation and impairment
At 26 February 2015
Depreciation charge for the year
Impairment (Note 14)
Reclassified
Depreciation on assets written off
Foreign currency adjustment
Disposals
At 3 March 2016
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 2 March 2017
Net book value at 2 March 2017
Net book value at 3 March 2016
Land and
buildings
£m
Plant and
equipment
£m
Total
£m
2,691.1
439.9
8.9
10.0
0.2
(6.0)
4.0
(1.1)
1,261.4
267.3
0.3
–
(0.2)
(71.1)
2.2
(4.2)
3,952.5
707.2
9.2
10.0
–
(77.1)
6.2
(5.3)
3,147.0
1,455.7
4,602.7
277.7
8.9
(1.1)
(7.0)
15.5
(64.7)
(179.3)
299.5
–
1.1
(158.4)
7.6
(8.0)
(11.1)
577.2
8.9
–
(165.4)
23.1
(72.7)
(190.4)
3,197.0
1,586.4
4,783.4
(170.4)
(19.2)
0.5
0.8
6.0
(0.1)
0.7
(181.7)
(28.5)
(13.0)
7.0
(1.2)
18.4
0.7
(198.3)
(503.7)
(152.2)
(5.9)
(0.8)
71.1
(1.2)
2.7
(590.0)
(174.0)
(12.3)
158.4
(5.0)
6.5
3.7
(612.7)
(674.1)
(171.4)
(5.4)
–
77.1
(1.3)
3.4
(771.7)
(202.5)
(25.3)
165.4
(6.2)
24.9
4.4
(811.0)
2,998.7
973.7
3,972.4
2,965.3
865.7
3,831.0
Included above are assets under construction of £337.2m (2016: £511.4m).
There is a charge in favour of the pension scheme over properties with a market value of £408.0m (2016: £408.0m).
See Note 29 for further information.
Whitbread Annual Report and Accounts 2016/17 134
Consolidated accountsConsolidated accounts 2016/17
13 Property, plant and equipment continued
Capital expenditure commitments
Capital expenditure commitments for property, plant and equipment
for which no provision has been made
2017
£m
2016
£m
156.4
142.4
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 Premier Inn & Restaurants strategic business unit as part of its
pipeline. These developments are dependent 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 £670.0m over the next five years
(2016: £500.0m).
Capitalised interest
Interest capitalised during the year amounted to £8.9m, using an average rate of 3.6% (2015/16: £10.0m, using an average
rate of 3.9%).
Assets held for sale
During the year, seven property assets with a combined net book value of £5.7m (2015/16: £nil) were transferred to assets
held for sale. Eight sites with a net book value of £6.0m (2016: one site with a net book value of £0.3m) continued to be
classified as held for sale at the year-end. No sites were sold during the year (2016: two) and an impairment loss of £nil
(2016: £nil) was recognised in the year. In addition, as a result of the decision to exit hotel operations in India and South East
Asia, assets with a net book value of £42.1m have been transferred to asset held for sale at the year-end.
14 Impairment
During the year, impairment losses of £31.9m (2015/16: £7.7m) and impairment reversals of £2.8m (2015/16: £2.3m)
were recognised.
Impairment losses
Premier Inn & Restaurants
Costa
Total impairment losses
Impairment reversals
Premier Inn & Restaurants
Costa
Total impairment reversals
Total net impairment charge
2016/17
Intangible
assets
£m
2015/16
Intangible
assets
£m
2016/17
Property,
plant and
equipment
£m
2015/16
Property,
plant and
equipment
£m
3.8
–
3.8
–
–
–
3.8
–
–
–
–
–
–
–
18.6
9.5
28.1
(2.6)
(0.2)
(2.8)
25.3
1.7
6.0
7.7
(2.0)
(0.3)
(2.3)
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.
Where indicators of impairment are identified an impairment assessment is undertaken.
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 7.0% in the
UK (2015/16: 8.1%), 7.1% in France (2015/16: 8.1%), 7.2% in China (2015/16: 8.4%), 6.5% in Singapore (2015/16: 7.5%) and 7.5%
in Poland (2015/16: 8.8%). 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 long-term growth rates for the relevant country, ranging from 2.0%
to 3.5% with the UK, the most significant country, being 2.0% (2015/16: 2.0%).
The events and circumstances that led to the impairment charge of £28.1m are set out below:
Premier Inn & Restaurants
As a result of the decision to exit hotel operations in India and South East Asia, impairment losses of £10.2m have been
recorded to bring asset values in line with realisable values.
As part of the UK operational restructure seven restaurant sites were converted to Brewers Fayre leading to an impairment
of £2.9m. In addition, seven restaurant sites were transferred to assets held for sale resulting in an impairment of £3.9m.
The remaining £1.6m impairment arose on sites which are to be closed or are underperforming.
Whitbread Annual Report and Accounts 2016/17
135
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
14 Impairment continued
Costa
The Costa international restructuring has resulted in impairment losses of £1.5m in France and £3.2m in China. The remaining
impairment charge includes £2.8m in the UK, £0.9m in Singapore and £1.1m in Poland, where stores are to be closed or are
underperforming.
Impairment reversals
Following an improvement in trading performance and an increase in amounts of estimated future cash flows of previously
impaired sites, reversals of £2.8m have been recognised, £2.6m in Premier Inn & Restaurants and £0.2m 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
Premier Inn &
Restaurants
£m
4.1
4.0
Costa
£m
–
–
Total
£m
4.1
4.0
Goodwill
Goodwill acquired through business combinations is allocated to groups of CGUs at strategic business unit level, being the
level at which management monitor goodwill.
The recoverable amount is the higher of fair value less costs 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 (2015/16: 2.0%). The pre-tax discount rate applied to cash flow projections is 7.0% (2015/16: 8.1%).
The resultant impairment review required £3.0m impairment of goodwill allocated to the Premier Inn & Restaurants CGU
(2015/16: £nil) as a result of the decision to exit hotel operations in India and South East Asia. No impairment was required
for goodwill allocated to the Costa CGU (2015/16: £nil).
Intangible assets
The decision to exit hotel operations in India and South East Asia resulted in an impairment of intangible assets of £0.8m
(2015/16: £nil).
Whitbread Annual Report and Accounts 2016/17 136
Consolidated accountsConsolidated accounts 2016/17
15 Investment in joint ventures
% equity interest
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
PT. Tasland Indonesia
Premier Inn Kier Limited
Costa Beijing Limited
Coffee shops
China
WHRI Holding
Company Limited
Premier Inn Hotels
Limited
Hotels
Indonesia
Property
England
Healthy Retail Limited
Whitbread Group PLC
Convenience food
England
2017
49.0
50.0
50.0
50.0
49.0
During the year, the Group acquired a 49% interest in Healthy Retail Limited for total consideration of £7.1m.
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
Premium paid on acquisition (cost in excess of share of net assets at acquisition)
Impairment losses
Transferred to assets held for sale
Aggregate carrying amount of the Group’s interest in joint ventures
Share of joint ventures’ revenue and expenses
Revenue
Operating costs
Finance costs
Operating profit before tax and net profit
2017
£m
12.9
73.0
85.9
(11.9)
(27.2)
(39.1)
3.6
50.4
5.9
(0.9)
(2.4)
53.0
2016/17
£m
38.7
(34.6)
(0.9)
3.2
2016
49.0
50.0
50.0
50.0
–
2016
£m
12.3
56.5
68.8
(8.5)
(24.8)
(33.3)
2.6
38.1
1.4
–
–
39.5
2015/16
£m
30.6
(26.5)
(0.8)
3.3
At 2 March 2017, the Group’s share of the capital commitments of its joint ventures amounted to £9.9m (2016: £2.5m).
Whitbread Annual Report and Accounts 2016/17
137
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
16 Inventories
Raw materials and consumables (at cost)
Finished goods (at cost)
Total inventories at lower of cost and net realisable value
17 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 2 March 2017 was £1.6m (2016: £5.8m).
The ageing analysis of trade receivables is as follows:
Neither past due nor impaired
Past due but not impaired:
Less than 30 days
Between 30 and 60 days
Greater than 60 days
2017
£m
12.8
35.4
48.2
2017
£m
92.6
44.8
33.0
2016
£m
10.0
34.8
44.8
2016
£m
92.7
39.0
16.0
170.4
147.7
163.6
6.8
170.4
140.0
7.7
147.7
2017
£m
81.2
9.6
0.5
1.3
92.6
2016
£m
83.6
7.9
0.8
0.4
92.7
Whitbread Annual Report and Accounts 2016/17
138
Consolidated accountsConsolidated accounts 2016/17
18 Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
2017
£m
62.9
0.1
63.0
2016
£m
57.0
0.1
57.1
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 £63.0m (2016: £57.1m).
For the purposes of the consolidated cash flow statement, cash and cash equivalents comprise the amounts as
disclosed above.
19 Financial liabilities
Short-term borrowings
Other loans
Revolving credit facility (£950m)
Private placement loan notes
Senior unsecured bonds
Maturity
On demand
2017
2021
2017 to 2022
2025
Current
Non-current
2017
£m
109.6
109.6
15.2
–
32.6
–
157.4
2016
£m
92.0
92.0
2.0
–
–
–
94.0
2017
£m
–
–
–
66.9
284.6
444.1
795.6
2016
£m
–
–
–
146.6
282.6
443.7
872.9
Short-term borrowings
Short-term borrowings are typically overnight borrowings, repayable on demand. Interest rates are variable and linked
to LIBOR.
Revolving credit facility (£950m)
The committed revolving credit facility (RCF) terms give a total available committed credit of £950m which runs until
September 2020 with options over two one-year extensions, subject to agreement by the banking partners, that will
potentially extend the maturity to September 2022. In November 2016, the first extension option was activated, extending
the loan maturity date to September 2021. Loans have variable interest rates linked to LIBOR. The facility is multi-currency.
Whitbread Annual Report and Accounts 2016/17 139
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
19 Financial liabilities continued
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
£25.0m
13 August 2017
13 August 2020
13 August 2020
26 January 2019
26 January 2019
26 January 2022
6 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 23.
On 1 March 2017 the Group entered into agreements securing funding of £200.0m from new private placement loan notes
which will be drawn down in two tranches of £100.0m on 16 May 2017 and 16 August 2017. The funds have a maturity of
16 August 2027 and a coupon of between 2.54% and 2.63%.
Senior unsecured bonds
The Group issued £450.0m 2025 bonds with a coupon of 3.375% on 28 May 2015.
An analysis of the interest rate profile and the maturity of the borrowings, together with related interest rate swaps, is as follows:
Year ended 2 March 2017
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
Year ended 3 March 2016
Fixed rate
Fixed to floating rate swaps
Floating to fixed interest rate swaps
Floating rate
Fixed to floating rate swaps
Floating to fixed interest rate swaps
Within
1 year
£m
32.6
–
–
32.6
124.8
–
–
124.8
157.4
Within
1 year
£m
–
–
50.0
50.0
94.0
–
(50.0)
44.0
94.0
1 to 2
years
£m
94.8
–
–
94.8
–
–
–
–
94.8
1 to 2
years
£m
28.1
–
–
28.1
–
–
–
–
2 to 5
years
£m
189.8
(50.1)
50.0
189.7
66.9
50.1
(50.0)
67.0
256.7
2 to 5
years
£m
163.9
(50.1)
50.0
163.8
146.6
50.1
(50.0)
146.7
Over
5 years
£m
444.1
–
–
444.1
–
–
–
–
444.1
Over
5 years
£m
534.3
–
–
534.3
–
–
–
–
28.1
310.5
534.3
Total
£m
761.3
(50.1)
50.0
761.2
191.7
50.1
(50.0)
191.8
953.0
Total
£m
726.3
(50.1)
100.0
776.2
240.6
50.1
(100.0)
190.7
966.9
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 (2016: £50.0m) with maturities beyond the life of the current RCF (2021), 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 2 March 2017, the Group had available £880.0m (2016: £800.0m) of undrawn committed borrowing facilities in respect
of revolving credit facilities on which all conditions precedent had been met.
Whitbread Annual Report and Accounts 2016/17 140
Consolidated accountsConsolidated accounts 2016/17
20 Movements in cash and net debt
Year ended 2 March 2017
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 3 March 2016
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
3 March 2016
£m
Cost of
borrowings
£m
Cash flow
£m
Foreign
exchange
£m
Fair value
adjustments
to loans
£m
Amortisation
of premiums
and discounts
£m
57.0
0.1
–
57.1
(92.0)
(2.0)
(872.9)
(874.9)
(909.8)
26 February
2015
£m
1.9
0.2
–
2.1
(71.2)
(1.9)
(512.2)
(514.1)
(583.2)
–
–
0.6
0.6
4.1
(17.6)
1.8
–
–
–
–
–
67.4
53.9
(28.1)
(26.3)
(6.5)
(6.5)
(1.9)
(1.9)
Cost of
borrowings
£m
Cash flow
£m
Foreign
exchange
£m
Fair value
adjustments
to loans
£m
Amortisation
of premiums
and
discounts
£m
–
–
54.4
(20.8)
0.6
–
–
–
–
–
3.6
3.6
(343.3)
(309.7)
(14.1)
(13.5)
(5.1)
(5.1)
(1.9)
(1.9)
2 March
2017
£m
62.9
0.1
–
63.0
(109.6)
(47.8)
(795.6)
(843.4)
(890.0)
3 March
2016
£m
57.0
0.1
–
57.1
(92.0)
(2.0)
(872.9)
(874.9)
(909.8)
Net debt includes US$ denominated loan notes of US$325.0m (2016: US$325.0m) retranslated to £267.8m (2016: £233.8m).
These notes have been hedged using cross-currency swaps. At maturity, £208.3m (2016: £208.3m) will be repaid taking into
account the cross-currency swaps. If the impact of these hedges is taken into account, reported net debt would be £830.5m
(2016: £884.3m).
Whitbread Annual Report and Accounts 2016/17
141
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
21 Provisions
At 26 February 2015
Created
Unwinding of discount rate
Utilised
Business acquired
At 3 March 2016
Created
Unwinding of discount rate
Utilised
Foreign currency adjustment
At 2 March 2017
Analysed as:
Current
Non-current
At 2 March 2017
Analysed as:
Current
Non-current
At 3 March 2016
Restructuring
£m
Onerous
contracts
£m
–
–
–
–
–
–
28.0
–
(5.0)
(0.1)
22.9
22.9
–
22.9
–
–
–
27.2
16.9
0.7
(15.0)
0.4
30.2
4.6
0.7
(17.3)
0.3
18.5
6.2
12.3
18.5
14.7
15.5
30.2
Other
£m
7.3
–
–
(0.1)
–
7.2
–
–
–
–
7.2
7.2
–
7.2
–
7.2
7.2
Total
£m
34.5
16.9
0.7
(15.1)
0.4
37.4
32.6
0.7
(22.3)
0.2
48.6
36.3
12.3
48.6
14.7
22.7
37.4
Restructuring
Restructuring provisions have been recognised as a result of the Group’s decision to exit certain markets and restructure
its operations.
On 13 July 2016, the Group announced its intention to exit hotel operations in South East Asia. This resulted in the recognition
of a restructuring provision of £15.1m for costs of exiting management agreements and closure of regional offices.
The Group has also recognised restructuring provisions of £12.9m resulting from decisions to exit the Costa equity market
in France and the reorganisation of support centre operations. The restructuring provisions are expected to be used within
one year.
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% (2016: 3.74%) based on an approximation for the
time value of money.
The amount and timing of the cash outflows are subject to variation. 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 18 years.
Other
Other provisions relate to warranties given on the disposal of businesses. These are expected to be used within one year.
Whitbread Annual Report and Accounts 2016/17 142
Consolidated accountsConsolidated accounts 2016/17
22 Financial risk management objectives and policies
The Group’s principal financial instruments, other than derivatives, comprise bank loans, private placement loans, senior
unsecured bonds, 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 debt obligations.
Interest rate swaps are used where necessary to maintain a mix of fixed and floating rate borrowings to manage this risk, in
line with the Group treasury policy. Although the private placement loan notes are US dollar denominated, cross-currency
swaps mean that the interest rate risk is effectively sterling only. At the year-end, £761.2m (90.3%) of Group debt was fixed
for an average of 6.29 years at an average interest rate of 4.0% (2016: £776.2m (88.9%) for 7.29 years at 4.1%).
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 2 March 2017 and 3 March 2016
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 £0.8m (2015/16: £1.0m), and equity by approximately £7.3m (2016: £13.1m).
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 2 March 2017 and 3 March 2016
based on contractual undiscounted payments, including interest:
2 March 2017
Interest-bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Accrued financial liabilities
Provisions in respect of financial liabilities
3 March 2016
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
109.6
–
–
–
–
109.6
7.6
–
230.2
–
7.8
245.6
On
demand
£m
Less than
3 months
£m
92.0
–
–
–
–
92.0
1.0
–
204.7
–
3.7
209.4
3 to 12
months
£m
66.2
2.3
–
233.1
28.3
329.9
3 to 12
months
£m
28.0
2.6
–
218.2
11.2
260.0
1 to 5
years
£m
More than
5 years
£m
382.0
9.2
21.9
–
10.3
423.4
513.2
–
–
–
5.2
518.4
1 to 5
years
£m
More than
5 years
£m
413.1
2.7
20.1
–
10.7
446.6
621.4
2.0
–
–
7.7
631.1
Total
£m
1,078.6
11.5
252.1
233.1
51.6
1,626.9
Total
£m
1,155.5
7.3
224.8
218.2
33.3
1,639.1
Whitbread Annual Report and Accounts 2016/17 143
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
22 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 good 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 17.
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.
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 54 to 57 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 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 sale and
leaseback transactions to provide further funding for growth.
The Group’s financing is subject to financial covenants. These covenants relate to measurement of EBITDA against
consolidated net finance charges (interest cover) and total net debt (leverage ratio, on a not-adjusted-for 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.
23 Financial instruments
Fair values
As in the prior year, the carrying value of financial assets and liabilities disclosed in Notes 17, 18, 19, 20, 21 and 24 are
considered to be reasonable approximations of their fair values.
The fair value of derivative instruments is calculated by discounting all future cash flows by the market yield curve at the
balance sheet date using level 2 techniques.
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; and
Level 3
Techniques which use inputs, which have a significant effect on the recorded fair value, that are not based on observable
market data.
Whitbread Annual Report and Accounts 2016/17 144
Consolidated accountsConsolidated accounts 2016/17
23 Financial instruments continued
Financial assets
Derivative financial instruments – level 2
Financial liabilities
Derivative financial instruments – level 2
2017
£m
55.6
10.6
2016
£m
24.8
14.0
During the year ended 2 March 2017, there were no transfers between fair value measurement levels. Derivative financial
instruments include £43.3m assets (2016: £21.6m) and £8.3m liabilities (2016: £9.6m) due after one year.
Derivative financial instruments
Hedges
Cash flow hedges
At 2 March 2017, the Group has interest rate swaps in place to swap a notional amount of £50.0m (2016: £100.0m) whereby
it receives a variable interest rate based on LIBOR on the notional amount and pays fixed rates of between 5.145% and
5.190% (2016: 5.145% and 5.372%). These swaps have maturities beyond the current life of the revolving credit facility (2021)
and are in place to hedge against the core level of debt the Group will hold. 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% (2016: 3.92% and 4.86%) on a notional amount of US$250.0m
(2016: US$250.0m) and pays an average of 4.72% on a notional sterling balance of £158.2m (2016: 4.72% on £158.2m).
The cash flow hedges were assessed to be highly effective at 2 March 2017 and a net unrealised gain of £0.2m (2015/16: net
unrealised loss of £6.5m) has been recorded in other comprehensive income. The ineffectiveness recorded within finance
costs in the income statement for 2016/17 was nil (2015/16, a debit of £1.0k).
Fair value hedges
At 2 March 2017, the Group has cross-currency swaps in place whereby it receives a fixed interest rate of 5.23% (2016: 5.23%)
on a notional amount of US$75.0m (2016: US$75.0m) and pays a spread of between 1.715% and 1.755% (2016: 1.715% and
1.755%) over 6m GBP LIBOR on a notional sterling balance of £50.1m (2016: £50.1m).
The fair value hedges were also assessed to be highly effective at 2 March 2017. An increase in the fair value of the interest
rate swap of £6.5m (2016: an increase of £5.4m) offset by a loss in the fair value of the hedged items of £6.6m (2016: loss
of £5.2m) led to a debit of £0.1m recorded within finance costs in the income statement (2016: a credit of £0.2m in finance
revenue in the income statement).
Cash flow and fair value hedges are expected to impact on the income statement in line with the liquidity risk table shown
in Note 22.
24 Trade and other payables
Trade payables
Other taxes and social security
Deferred income
Accruals
Other payables
Analysed as:
Current
Non-current
2017
£m
162.1
40.0
93.6
233.1
90.0
618.8
596.9
21.9
618.8
2016
£m
144.4
44.6
70.7
218.1
80.5
558.3
538.2
20.1
558.3
Whitbread Annual Report and Accounts 2016/17 145
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
25 Share capital
Ordinary share capital
Allotted, called up and fully paid ordinary shares of 76.80p each (2016: 76.80p each)
At 26 February 2015
Issued
At 3 March 2016
Issued
At 2 March 2017
million
195.0
0.2
195.2
0.2
195.4
£m
149.8
0.2
150.0
0.2
150.2
At the 2016 Annual General Meeting, the Company was authorised to purchase up to 18.3m of its own shares on the open market.
During the year, no ordinary shares were acquired (2015/16: nil). No shares were cancelled in the year (2015/16: nil). During the
year, options over 0.2m ordinary shares, fully paid, were exercised by employees under the terms of various share option
schemes (2015/16: 0.2m).
Preference share capital
Allotted, called up and fully paid shares of 1p each (2016: 1p each)
At 26 February 2015, 3 March 2016 and 2 March 2017
B shares
C shares
million
2.0
£m
–
million
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 155p 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 159p per share.
Other than shares issued in the normal course of business as part of the share-based payments schemes, 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.
26 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 was treated as a bonus issue, with the nominal value of the shares being charged against the share
premium account.
Capital redemption reserve
A capital redemption reserve was created on the cancellation of the Group’s B and C preference shares (Note 25) 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.
Other reserves
The movement in other reserves during the year is set out in the table below:
At 26 February 2015
Other comprehensive income – net gain on cash flow hedges
Loss on ESOT shares issued
At 3 March 2016
Other comprehensive loss – net loss on cash flow hedges
Loss on ESOT shares issued
At 2 March 2017
Treasury
reserve
£m
204.5
–
(6.7)
Merger
reserve
£m
1,855.0
–
–
Hedging
reserve
£m
21.4
(6.5)
–
Total other
reserves
£m
2,080.9
(6.5)
(6.7)
197.8
1,855.0
14.9
2,067.7
–
(6.4)
–
–
0.2
–
0.2
(6.4)
191.4
1,855.0
15.1
2,061.5
Whitbread Annual Report and Accounts 2016/17 146
Consolidated accountsConsolidated accounts 2016/17
26 Reserves continued
Treasury reserve
This reserve relates to shares held by an independently managed employee share ownership trust (ESOT) and treasury
shares held by Whitbread PLC. The shares held by the ESOT were purchased in order to satisfy outstanding employee share
options and potential awards under the Long-Term Incentive Plan (LTIP) and other incentive schemes.
The movement in treasury shares during the year is set out in the table below:
At 26 February 2015
Transferred
Exercised during the year
At 3 March 2016
Transferred
Exercised during the year
At 2 March 2017
Treasury shares held by
Whitbread PLC
ESOT shares held
million
£m
million
13.3
(0.7)
–
12.6
(0.5)
–
12.1
194.7
(10.3)
–
184.4
(7.2)
–
177.2
0.6
0.7
(0.4)
0.9
0.5
(0.4)
1.0
£m
9.8
10.3
(6.7)
13.4
7.2
(6.4)
14.2
The treasury shares reduce the amount of reserves available for distribution to shareholders by £191.4m (2016: £197.8m).
Merger reserve
The merger reserve arose as a consequence of the merger in 2000/01 of Whitbread Group PLC and Whitbread PLC.
Hedging reserve
This hedging reserve records movements for effective cash flow hedges measured at fair value.
27 Commitments and contingencies
Operating lease commitments
The Group leases various buildings which are used within the Premier Inn & 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 or 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
2017
£m
247.0
850.8
742.0
1,298.9
3,138.7
2016
£m
214.5
724.6
675.4
1,282.2
2,896.7
Future minimum rentals payable under non-cancellable operating leases disclosed above includes £13.7m in relation
to privity contracts (2015/16: £40.5m). Future lease costs in respect of these privity contracts are included within the
onerous contracts provision (Note 21). 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 11.7 years
(2016: 12.3 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 2 March 2017 are £25.8m (2016: £49.5m) of which £14.5m (2016: £36.6m)
relates to privity contracts.
Contingent liabilities
There are no contingent liabilities to be disclosed in the year ended 2 March 2017 (2016: £nil).
Whitbread Annual Report and Accounts 2016/17
147
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
28 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) and return on capital employed (ROCE) performance
targets over a three-year period (the vesting period). Details of the performance targets for the LTIP awards can be seen
in the remuneration report on pages 78 to 98. 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
2017
Awards
2016
Awards
685,426
284,129
(257,797)
(88,115)
817,642
223,730
(302,577)
(53,369)
623,643
685,426
26,855
9,963
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
2017
Awards
2016
Awards
412,520
92,415
(217,637)
(13,301)
415,264
158,573
(129,252)
(32,065)
273,997
412,520
1,602
–
Whitbread Annual Report and Accounts 2016/17 148
Consolidated accountsConsolidated accounts 2016/17
28 Share-based payment plans continued
Employee sharesave scheme
The employee sharesave scheme is open to all employees and provides for a purchase price equal to the market price on the
day preceding the date of invitation, with 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:
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
2017
2016
Options
£ per share
Options
£ per share
WAEP
WAEP
1,293,149
669,441
(235,267)
(401,792)
1,325,531
77,410
32.49
29.46
22.42
35.39
31.87
25.07
1,224,544
465,854
(208,513)
(188,736)
1,293,149
89,110
27.30
38.66
17.01
31.26
32.49
18.80
Outstanding options to purchase ordinary shares of 76.80p between 2016 and 2021 are exercisable at prices between
£13.39 and £38.66 per share (2016: between 2015 and 2020 at prices between £13.39 and £38.66).
The weighted average contractual life of the share options outstanding as at 2 March 2017 is between two and three years.
The weighted average share price at the date of exercise for options exercised during the year was £39.09 (2016: £43.25).
The following table lists the inputs to the model used for the years ended 2 March 2017 and 3 March 2016:
Grant
date
Number of
shares
granted
Fair
value
%
Fair
Exercise
value
£
price
£
Price at
grant
date
£
Expected
term
Years
Expected
dividend
yield
%
Expected
volatility
%
LTIP awards
26/04/2016
29/04/2015
Deferred equity
awards
26/04/2016
28/04/2015
SAYE – 3 years 02/12/2016
02/12/2015
284,129
223,730
92,415
158,573
558,278
388,343
SAYE – 5 years 02/12/2016
02/12/2015
111,163
77,511
94.2 10,623,009
94.2 11,001,341
94.2
94.2
20.3
20.5
22.9
22.7
3,455,210
7,916,916
3,864,568
3,739,296
868,061
826,437
–
–
–
–
29.46
38.66
29.46
38.66
39.69
52.20
39.69
53.00
34.10
46.97
34.10
46.97
3.00
3.00
3.00
3.00
3.25
3.25
5.25
5.25
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
n/a
n/a
n/a
n/a
25.0
20.0
25.0
20.0
Risk-free
rate
%
n/a
n/a
n/a
n/a
0.23
0.86
0.59
1.35
Vesting
conditions
Non-market1,2,3
Non-market1,2,3
Service3
Service3
Service3
Service3
Service3
Service3
1 Return on capital employed.
2 Earnings per share.
3 Employment service.
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.
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.
Employee share ownership trust (ESOT)
The Company funds an ESOT to enable it to acquire and hold shares for the LTIP. The ESOT held 1.0m shares at 2 March 2017
(2016: 0.9m). All dividends on the shares in the ESOT are waived by the Trustee.
Whitbread Annual Report and Accounts 2016/17 149
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
28 Share-based payment plans continued
Total charged to the income statement for all schemes
Long Term Incentive Plan
Deferred equity
Employee sharesave scheme
Equity-settled
29 Retirement benefits
2016/17
£m
2015/16
£m
7.1
5.7
4.9
17.7
17.7
7.4
6.4
3.5
17.3
17.3
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 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 £8.6m (2015/16: £8.1m).
At the year-end, 30,344 employees (2016: 29,307) were active members of the scheme, which also had 11,772 deferred
members (2016: 6,181).
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. The Whitbread Group
Pension Fund is set up under UK trust law, registered with Her Majesty’s Revenue and Customs and regulated by the
Pensions Regulator. The Whitbread Group Pension Fund is governed by a corporate trustee which operates the scheme
in accordance with the requirements of UK pensions legislation.
At the year-end the scheme had no active members (2016: nil), 21,942 deferred pensioners (2016: 22,792) and 16,581
pensions in payment (2016: 16,647).
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 pension cost
relating to the defined benefit section of the Whitbread Group Pension Fund is assessed in accordance with actuarial advice
from, and calculations provided by, Lane Clark & Peacock, 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.
Under the governing documentation of the Whitbread Group Pension Fund, any future surplus in the Fund would be
returnable to Whitbread PLC by a reduction in future contributions. As such, there are no adjustments required in respect
of IFRIC 14 ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’.
The weighted average duration of the defined benefit plan obligation at the end of the reporting period is 18.0 years
(2016: 16.5 years).
Whitbread Annual Report and Accounts 2016/17 150
Consolidated accountsConsolidated accounts 2016/17
29 Retirement benefits continued
Funding
Expected contributions to be made in the next reporting period total £92.6m (2016: £82.1m). In 2016/17, contributions were
£88.1m with £78.2m from the employer, £9.1m from Moorgate Scottish Limited Partnership (SLP) and £0.8m of benefits settled
by the Group in relation to an unfunded scheme (2015/16: £82.0m, with £73.0m from the employer, £8.9m from Moorgate SLP
and £0.1m of benefits settled by the Group in relation to an unfunded scheme). In addition, Whitbread paid £2.2m (2015/16:
£2.3m) of investment manager expenses.
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 2014. A deficit recovery plan and some protection whilst the
scheme remains in deficit, have been agreed with the Trustee. The Group made payments of £75.0m in 2016/17 and will
make the following payments to the Fund: £80.0m in 2017/18; £80.0m in 2018/19; £80.0m in 2019/20; £80.0m in 2020/21;
£80.0m in 2021/22 and £2.6m in 2022/23. 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 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 eight 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 (2016: £150.0m).
Under IAS 19, the investment held by the Pension Scheme in Moorgate SLP, a consolidated entity, does not represent a plan
asset for the purposes of the consolidated financial statements. Accordingly, the pension deficit position in these consolidated
financial statements does not reflect the £190.2m (2016: £165.8m) 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 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
Principal impact on assets
and obligation reconciliations
Return on plan assets
Market volatility
Inflationary risk
Accounting
assumptions
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.
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
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 2016/17
151
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
29 Retirement benefits continued
The principal assumptions used by the independent qualified actuaries in updating the most recent valuation carried out as
at 31 March 2014 of the UK scheme to 2 March 2017 for IAS 19 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
2 March
At
3 March
2017
%
3.10
2.10
3.10
2.60
3.20
2016
%
2.80
2.00
2.80
3.70
2.90
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 21.3 years (2016: 21.3 years) if they are
male and for a further 24.5 years (2016: 24.4 years) if they are female. For a member who retires in 2036 at age 65, the
assumptions are that they will live on average for a further 22.8 years (2016: 22.8 years) after retirement if they are male
and for a further 26.0 years (2016: 25.9 years) after retirement if they are female.
The amounts recognised in the income statement in respect of the defined benefit scheme are as follows:
Net interest on net defined benefit liability
Administrative expenses
Total expense recognised in the income statement (gross of deferred tax)
Amounts recognised in operating profit for service costs or curtailment are £nil (2015/16: £nil).
The amounts taken to the consolidated statement of comprehensive income are as follows:
Actuarial losses/(gains)
Return on plan assets (greater)/less 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
2016/17
£m
9.4
3.1
12.5
2015/16
£m
17.2
3.0
20.2
2016/17
£m
601.7
(386.9)
214.8
2015/16
£m
(203.9)
2.3
(201.6)
2017
£m
2016
£m
(2,808.2)
2,383.1
(2,220.4)
1,932.3
(425.1)
(288.1)
During the year, the accounting deficit increased from £288.1m at 3 March 2016 to £425.1m at 2 March 2017. The principal
reasons for this deterioration were a decrease in the discount rate and an increase in expected future inflation.
Changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligation
Interest cost
Re-measurement due to:
Changes in financial assumptions
Experience adjustments
Benefits paid
Benefits settled by the Group in relation to an unfunded pension scheme1
Closing defined benefit obligation
2017
£m
2,220.4
80.4
612.9
(11.2)
(93.5)
(0.8)
2016
£m
2,447.8
79.5
(154.8)
(49.1)
(102.9)
(0.1)
2,808.2
2,220.4
Whitbread Annual Report and Accounts 2016/17
152
Consolidated accountsConsolidated accounts 2016/17
29 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/(lower) than discount rate2
Contributions from employer1
Additional contributions from Moorgate SLP1
Investment manager expenses paid by the employer1
Benefits paid
Administrative expenses
Closing fair value of scheme assets
The major categories of plan assets are as follows:
Equities
Government bonds
Corporate bonds
Property
Other3
Quoted and
pooled
£m
865.1
872.7
184.0
149.5
64.3
2,135.6
2017
Unquoted
£m
124.7
–
34.7
88.1
–
247.5
2017
£m
1,932.3
71.0
386.9
78.2
9.1
2.2
(93.5)
(3.1)
2,383.1
2016
Unquoted
£m
75.2
–
33.5
61.8
–
2016
£m
1,894.0
62.3
(2.3)
73.0
8.9
2.3
(102.9)
(3.0)
1,932.3
Total
£m
879.6
686.3
162.7
187.7
16.0
Total
£m
989.8
872.7
218.7
237.6
64.3
Quoted and
pooled
£m
804.4
686.3
129.2
125.9
16.0
2,383.1
1,761.8
170.5
1,932.3
1 The total of these four items equals the cash paid by the Group as per the consolidated cash flow statement.
2
3 Other primarily relates to assets held in respect of cash and net current assets.
Includes cost of managing fund assets.
The assumptions in relation to discount rate, mortality and inflation 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
2017
£m
2016
£m
125.0
(134.0)
(97.0)
94.0
88.0
(94.0)
(69.0)
66.0
(95.0)
(75.0)
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
assumptions did not change.
Whitbread Annual Report and Accounts 2016/17
153
Consolidated accounts 2016/17
Notes to the consolidated financial statements continued
At 2 March 2017
30 Related party disclosure
The Group consists of a parent Company, Whitbread PLC, incorporated in the UK and a number of subsidiaries, joint ventures
and associate held directly and indirectly by Whitbread PLC, which operate and are incorporated around the world. Note 10
to the Company’s separate financial statements lists details of the interests in subsidiaries and related undertakings.
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 29.
Shares in Whitbread Group PLC are held directly by Whitbread PLC. Shares in the other subsidiaries are held directly
and indirectly by Whitbread Group PLC.
Related party transactions
Sales to a related party
Amounts owed by related party
Amounts owed to related party
2016/17
2015/16
Joint ventures
£m
Joint ventures
£m
2016/17
Associate
£m
2015/16
Associate
£m
5.2
1.7
–
3.8
0.9
(0.1)
–
–
–
3.3
–
–
Joint ventures
For details of the Group’s investments in joint ventures see Note 15.
Associate
The Group held an investment in Morrison Street Hotel Limited which was disposed of during the year. For details of the
disposal see Note 6.
Compensation of key management personnel (including directors):
Short-term employee benefits
Post employment benefits
Share-based payments
2016/17
£m
6.4
–
4.0
10.4
2015/16
£m
6.2
0.2
5.9
12.3
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. No provision for doubtful debts relating to amounts owed by related parties has been made (2016: £nil).
An assessment is undertaken, each financial year, through examining the financial position of the related parties and
the market in which the related parties operate.
Transactions with other related parties
Details of transactions with directors are detailed in the remuneration report on pages 78 to 98.
Whitbread Annual Report and Accounts 2016/17 154
Consolidated accountsConsolidated accounts 2016/17
Company accounts 2016/17
156 Company balance sheet
157 Company statement of changes in equity
158 Notes to the Company financial statements
Whitbread Annual Report and Accounts 2016/17
155
Company accounts 2016/17
Company balance sheet
At 2 March 2017
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 liabilities
Net assets
Capital and reserves
Share capital
Share premium
Capital redemption reserve
Retained earnings1
Treasury reserve
Shareholders’ funds
Notes
2 March
3 March
2017
£m
2016
£m
4
5
6
7
8
8
8
8
8
2,374.1
2,374.1
2,356.4
2,356.4
2.7
1.5
(425.5)
(422.8)
(252.1)
(250.6)
1,951.3
2,105.8
150.2
68.0
12.3
1,912.2
(191.4)
1,951.3
150.0
62.6
12.3
2,078.7
(197.8)
2,105.8
1 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 loss generated in the year for ordinary shareholders, and included in the financial statements of the parent Company, amounted
to £10.7m (2015/16: loss of £5.9m).
Alison Brittain
Chief Executive
Nicholas Cadbury
Finance Director
24 April 2017
Whitbread Annual Report and Accounts 2016/17 156
Company accountsCompany accounts 2016/17
Company statement of changes in equity
Year ended 2 March 2017
At 26 February 2015
Loss for the year
Total comprehensive loss
Ordinary shares issued
Accrued share-based payments
ESOT adjustment
Loss on ESOT shares issued
Equity dividends
At 3 March 2016
Loss for the year
Total comprehensive loss
Ordinary shares issued
Accrued share-based payments
Loss on ESOT shares issued
Equity dividends
At 2 March 2017
Share
capital
(Note 8)
£m
149.8
–
–
0.2
–
–
–
–
Share
premium
(Note 9)
£m
Capital
redemption
reserve
(Note 9)
£m
Retained
earnings
(Note 9)
£m
Treasury
reserve
(Note 9)
£m
Total
£m
59.2
12.3
2,169.6
(194.7)
2,196.2
–
–
3.4
–
–
–
–
–
–
–
–
–
–
–
(5.9)
(5.9)
–
100.3
(23.5)
(6.7)
(155.1)
–
–
–
–
(9.8)
6.7
–
(5.9)
(5.9)
3.6
100.3
(33.3)
–
(155.1)
150.0
62.6
12.3
2,078.7
(197.8)
2,105.8
–
–
0.2
–
–
–
–
–
5.4
–
–
–
–
–
–
–
–
–
(10.7)
(10.7)
–
17.7
(6.4)
(167.1)
–
–
–
–
6.4
–
(10.7)
(10.7)
5.6
17.7
–
(167.1)
150.2
68.0
12.3
1,912.2
(191.4)
1,951.3
Whitbread Annual Report and Accounts 2016/17
157
Company accounts 2016/17Company accounts 2016/17
Notes to the Company financial statements
At 2 March 2017
1 Basis of accounting
The financial statements of Whitbread PLC for the year ended 2 March 2017 were authorised for issue by the Board of
Directors on 24 April 2017. The financial year represents the 52 weeks to 2 March 2017 (prior financial year: 53 weeks
to 3 March 2016).
The financial statements are prepared under the historical cost convention and in accordance with applicable UK Accounting
Standards. The Company meets the definition of a qualifying entity under FRS 100 ‘Application of Financial Reporting
Requirements’ as issued by the Financial Reporting Council (FRC). Accordingly, in the year ended 3 March 2016, the
Company underwent transition from reporting under UK GAAP to FRS 101 ‘Reduced Disclosure Framework’. The financial
statements are therefore prepared in accordance with FRS 101.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in
relation to share-based payments, non-current assets held for sale, financial instruments, capital management, presentation
of comparative information in respect of certain assets, presentation of a cash flow statement, standards not yet effective,
impairment of assets and related party transactions.
Where required, equivalent disclosures are given in 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 Dividends paid and proposed
Final dividend, proposed and paid, relating to the prior year
Interim dividend proposed, and paid, for the current 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:
Final equity dividend for the current year
2016/17
2015/16
Pence
per share
61.85
29.90
0.80
0.80
Pence
per share
56.95
28.50
0.80
0.80
£m
112.6
54.5
167.1
–
–
–
167.1
£m
103.4
51.7
155.1
–
–
–
155.1
65.90
120.1
61.85
112.4
A final dividend of 65.90p per share (2016: 61.85p) amounting to a dividend of £120.1m (2016: £112.4m) was recommended
by the directors at their meeting on 24 April 2017. A dividend reinvestment plan (DRIP) alternative will be offered.
These financial statements do not reflect this dividend payable.
Whitbread Annual Report and Accounts 2016/17 158
Company accountsCompany accounts 2016/17
4 Investment in subsidiary undertakings
Investments at cost
At 3 March 2016
Contributions to subsidiaries in respect of share-based payments
At 2 March 2017
Significant trading subsidiary undertakings
Principal activity
Whitbread Group PLC
Hotels & Restaurants
Premier Inn Hotels Limited
Hotels
Costa Limited
Operators of coffee shops and roasters
and wholesalers of coffee beans
2017
£m
2,356.4
17.7
2,374.1
2016
£m
2,256.1
100.3
2,356.4
Country of
incorporation
Country of
principal
operations
% of
equity and
votes held
England
England
England
England
England
England
100.0
100.0
100.0
Yueda Costa (Shanghai)
Food & Beverage Management
Company Limited
Coffeeheaven International Limited
Costa Express Limited
Operators of coffee shops
China
China
51.0
Operators of coffee shops
in Eastern Europe
Operators of customer-facing espresso-
based self-serve coffee bars
England
Poland
100.0
England
England
100.0
Whitbread Group PLC, in which the Company has an investment, 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 Whitbread Group PLC. The partnerships
were set up in 2009/10 as part of a transaction with Whitbread Pension Trustees. Further details can be found in Note 29
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. A full list of subsidiaries and related undertakings is provided
in Note 10.
5 Debtors
Amounts falling due within one year
Corporation tax receivable
6 Creditors
Amounts falling due within one year
Amounts owed to subsidiary undertakings
Unclaimed dividends
2017
£m
2.7
2.7
2016
£m
1.5
1.5
2017
£m
420.0
5.5
425.5
2016
£m
246.5
5.6
252.1
Whitbread Annual Report and Accounts 2016/17 159
Company accounts 2016/17Company accounts 2016/17
Notes to the Company financial statements continued
At 2 March 2017
7 Share capital
Ordinary share capital
Allotted, called up and fully paid ordinary shares of 76.80p each (2016: 76.80p each)
At 26 February 2015
Issued
At 3 March 2016
Issued
At 2 March 2017
million
195.0
0.2
195.2
0.2
195.4
£m
149.8
0.2
150.0
0.2
150.2
At the 2016 Annual General Meeting, the Company was authorised to purchase up to 18.3m of its own shares on the open
market.
During the year, no ordinary shares were acquired (2015/16: nil). No shares were cancelled in the year (2015/16: nil). During
the year, options over 0.2m ordinary shares, fully paid, were exercised by employees under the terms of various share option
schemes (2015/16: 0.2m).
Preference share capital
Allotted, called up and fully paid shares of 1p each (2016: 1p each)
At 26 February 2015, 3 March 2016 and 2 March 2017
B Shares
C Shares
million
2.0
£m
–
million
1.9
£m
–
At 2 March 2017 there were outstanding options for employees to purchase up to 1.3m (2016: 1.3m) ordinary shares of 76.80p
each between 2016 and 2021 at prices between £13.39 and £38.66 per share (2016: between 2015 and 2020 at prices
between £13.39 and £38.66 per share).
8 Reserves
Share premium
The share premium reserve is the premium paid on the Company’s 76.80p ordinary shares.
Capital redemption reserve
A capital redemption reserve was created on the cancellation of the Company’s B and C preference shares and also includes
the nominal value of cancelled ordinary shares.
Retained earnings
Included in retained earnings are distributable reserves of £1,794.1m.
Treasury reserve
This reserve relates to shares held by an independently managed employee share ownership trust (ESOT) and treasury
shares held by Whitbread PLC. The shares held by the ESOT were purchased in order to satisfy outstanding employee share
options and potential awards under the Long Term Incentive Plan (LTIP) and other incentive schemes.
The movement in treasury shares during the year is set out in the table below:
At 3 March 2016
Transferred
Exercised in the year
At 2 March 2017
Treasury shares held
by Whitbread PLC
ESOT shares held
million
12.6
(0.5)
–
12.1
£m
million
184.4
(7.2)
–
177.2
0.9
0.5
(0.4)
1.0
£m
13.4
7.2
(6.4)
14.2
Whitbread Annual Report and Accounts 2016/17 160
Company accountsCompany accounts 2016/17
9 Contingent liabilities
Whitbread PLC is a member of the 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 £24.5m (2016: £27.2m).
10 Related parties
The Company has taken advantage of the exemption under paragraph 8(k) of Financial Reporting Standard 101 not to
disclose transactions with other Group companies.
Details of related undertakings are shown below:
Active related undertakings
Name of related undertaking
Country of incorporation
Class of shares held
Boutique Premier Inn Soi 11 Ltd
Brickwoods Limited
Coffeeheaven Holdings Limited
Coffeeheaven International Limited
Costa Beijing Limited
Costa Catering Management
(Shanghai) Co., Ltd
Costa China Holdings Limited
Costa Coffee India Private Limited
Costa Coffee Polska S.A.
Costa Express Canada Limited
Costa Express Holdings Limited
Costa Express Limited
Costa France S.A.S
Costa International Limited
Costa Limited
Thailand2
England1
England1
England1
England1
China3
England1
India4
Poland5
Canada6
England7
England7
France8
England1
England1
Costa M.E.N.A Trading DMCC
Costa Singapore Private Limited
Duttons Brewery Limited
United Arab
Emirates9
Singapore10
England1
Ordinary THB 100.00
Ordinary £0.25
Ordinary £0.01
Ordinary £0.01
Ordinary £1.00
Ordinary HKD 1.00
Ordinary £1.00
Ordinary INR 10.00
Ordinary PLN 10.00
Ordinary CAD 1.00
Deferred Ordinary £0.01
Ordinary – A £0.01
Ordinary – B £0.01
Ordinary £0.10
Ordinary EUR 1.00
Ordinary £1.00
Ordinary £1.00
Deferred USD 0.01
Ordinary AED 1,000
Ordinary SGD 1.00
Ordinary £1.00
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
2.9
72.1
25.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
100.0
100.0
Whitbread Annual Report and Accounts 2016/17
161
Company accounts 2016/17Company accounts 2016/17
Notes to the Company financial statements continued
At 2 March 2017
10 Related parties continued
Active related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
Elm Hotel Holdings Limited
Farringdon Scottish Partnership
Hualian Costa (Beijing) Food & Beverage
Management Company Limited
Life Coffee Cafes Limited
England1
Scotland11
China12
England1
Ordinary £0.10
n/a
Ordinary USD 1.00
Ordinary £1.00
Mid-Tier Singapore Private Limited
Singapore13
Ordinary SGD 1.00
Milton (SC) 2 Limited
Milton (SC) Limited
Milton 1 Limited
Scotland14
Scotland14
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Moorgate Scottish Limited Partnership
Scotland14
n/a
Orchard Incorporations (13S) Ltd
Scotland15
A Ordinary £1.00
PI Hotels & Restaurants Ireland Limited
Ireland16
Premier Inn (Jersey) Limited
Premier Inn (UK) Limited
Premier Inn Glasgow Limited
Premier Inn GmbH
Premier Inn Hotels Limited
Premier Inn Hotels LLC
Premier Inn Hotels Qatar LLC
Premier Inn India Private Limited
Premier Inn International
Development Limited
Premier Inn Kier Limited
Jersey17
England1
England1
Germany35
England1
United Arab
Emirates18
Qatar19
India21
England1
England22
B Ordinary £1.00
Ordinary EUR 1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary EUR 25,000
Ordinary £1.00
Ordinary AED 1,000
Ordinary QAR 100.00
Ordinary INR 10.00
Ordinary £1.00
A Ordinary £1.00
B Ordinary £1.00
Premier Inn Manchester Airport Limited
England1
Ordinary £1.00
Premier Inn Manchester Trafford Limited
England1
A Ordinary £1.00
Premier Inn Ochre Limited
Premier Inn Pattaya Limited
Premier Inn Westminster Limited
Premier Travel Inn India Limited
PT. Tasland Indonesia
PT. Whitbread Indonesia
PTI Middle East Limited
SIA Coffee Nation
Silk Street Hotels Limited
England1
Thailand23
England1
England1
Indonesia24
Indonesia25
United Arab
Emirates26
Latvia27
England1
Ordinary £1.00
Ordinary THB 10.00
Ordinary £1.00
Ordinary £1.00
Ordinary IDR 500,000
Ordinary USD 1.00
Ordinary AED 1,000
Ordinary LVL 1.00
Deferred £1.00
Ordinary USD 0.01
St Andrews Homes Limited
England1
Ordinary £1.00
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
–
100.0
100.0
n/a
n/a
n/a
–
–
–
–
–
–
n/a
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
n/a
40.0
–
n/a
40.0
60.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
49.0
49.0
49.0
100.0
100.0
100.0
100.0
–
–
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.9
0.1
100.0
100.0
Whitbread Annual Report and Accounts 2016/17 162
Company accountsCompany accounts 2016/17
10 Related parties continued
Active related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
Swift Hotels Limited
England1
Preference £5.00
T. F. Ashe & Nephew Limited
England1
Ordinary £1.00
Deferred £1.00
Ordinary £0.01
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
–
–
–
–
100.0
100.0
0.1
99.9
100.0
100.0
100.0
–
n/a
The Costa Foundation
England1
n/a
n/a
n/a
Whitbread Asia Pacific Private Limited
Singapore10
Ordinary SGD 1.00
Whitbread (Condor) Holdings Ltd
Whitbread East Pennines Limited
Whitbread Group PLC
England1
England1
England1
Ordinary £0.0001
Ordinary £1.00
Ordinary £0.25
A Ordinary £0.25
Whitbread Holdings Germany GmbH
Germany35
Ordinary EUR 25,000
Whitbread Hotel Company Limited
Whitbread Properties Limited
England1
England1
Whitbread West Pennines Limited
England1
WHRI Development DMCC
United Arab
Emirates28
Ordinary £0.10
5% Non-Cumulative
Preference £0.50
7% Non-Cumulative
Preference £0.25
Ordinary £0.175
Ordinary £1.00
Ordinary AED 1,000
WHRI Holding Company Limited
England1
Ordinary £1.00
Yueda Costa (Shanghai) Food & Beverage
Management Company Limited
China29
Ordinary CNY 1.00
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
–
50.0
50.0
–
–
–
–
–
–
–
–
–
100.0
100.0
99.0
99.0
100.0
24.9
100.0
100.0
16.4
58.7
100.0
100.0
100.0
100.0
100.0
100.0
51.0
51.0
Whitbread Annual Report and Accounts 2016/17 163
Company accounts 2016/17Company accounts 2016/17
Notes to the Company financial statements continued
Notes to the Company financial statements continued
At 2 March 2017
At 2 March 2017
10 Related parties continued
Dormant related undertakings
Name of related undertaking
Country of incorporation
Class of shares held
Advisebegin Limited
England1
Alastair Campbell & Company Limited
Scotland30
Archibald Campbell Hope & King Limited Scotland11
Autumn Days Limited
Belgrave Hotel Limited
Belstead Brook Manor Hotel Limited
Brewers Fayre Limited
Britannia Inns Limited
Broughton Park Hotel Limited
C.H.I Hungary Kft
Carpenters of Widnes Limited
England1
England1
England1
England1
England1
England1
Hungary31
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary HUF 1.00
Ordinary £0.01
Deferred Ordinary £1.00
Cherwell Inns Limited
England1
A Ordinary Non-Voting £1.00
Chiswell Overseas Limited
Chiswell Properties Limited
Churchgate Manor Hotel Limited
Coffee Nation Employee Benefit
Trustee Limited
Coffee Nation UK Limited
Condor Overseas Holdings Two
Limited – UK tax resident. Dissolved
on 8 March 2017
England1
England1
England1
England1
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
British Virgin Islands20 Deferred Consideration £1.00
Ordinary B £1.00
Preference B £1.00
Ordinary £1.00
Ordinary DKK 1,000
Ordinary EUR 25,000
Costa Card ELMI Limited
Costa Denmark ApS
Costa Express GmbH
England1
Denmark33
Germany36
Costa Hong Kong Limited
Hong Kong34
Ordinary HKD 1.00
Country Club Hotels Limited
Cromwell Hotel (Stevenage)
Cymric Hotel Company Limited
Danesk Limited
David Williams (Builth) Limited
Dealend Limited
Delamont Freres Limited
Delauney Freres Limited
Dome Restaurants Limited
Dragon Inns and Restaurants Limited
Dukes Head 1988 Limited
England1
England1
England1
Scotland11
England1
England1
England1
England1
England1
England1
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
B Ordinary £1.00
W Ordinary £1.00
E. Lacon & Co., Limited
England1
Ordinary £1.00
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
66.7
33.3
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
33.2
33.6
33.2
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.0
99.0
100.0
100.0
100.0
100.0
100.0
100.0
99.0
100.0
100.0
99.0
99.0
50.0
50.0
99.0
Whitbread Annual Report and Accounts 2016/17 164
Company accountsCompany accounts 2016/17
10 Related parties continued
Dormant related undertakings
Name of related undertaking
Country of incorporation
Class of shares held
E.B. Holdings Limited
Evan Evans Bevan Limited
Finite Hotel Systems Limited
England1
England1
England1
Ordinary £1.00
Ordinary £1.00
A Ordinary £1.00
B Ordinary £1.00
Fleet Wines & Spirits Limited
England1
Ordinary £1.00
Forest of Arden Golf and Country
Club Limited
Gable Care Limited
Goodhews (Castle)
England1
England1
England1
Goodhews (Holdings) Limited
England1
Goodhews (Inns)
Goodhews (Restaurants)
Goodhews B. & S. Limited
Goodhews Enterprises
Goodhews Limited
Gough Brothers Limited
Grosvenor Leisure Limited
Hammock Limited
Hart & Co., (Boats) Limited
England1
England1
England1
England1
England1
England1
England1
England1
England1
Harveys Leisure Promotions Limited
England1
Hunter & Oliver Limited
J. Burton (Warwick) Limited
J.J. Norman and Ellery Limited
James Bell and Company Limited
Jestbread Limited
Kingsmill Hotel Company Limited
Lambtons Ale Limited
Latewise Limited
Lawnpark Limited
Leisure and Retail Resources Limited
England1
England1
England1
England1
England1
Scotland30
England1
England1
England1
England1
Ordinary £1.00
Ordinary £1.00
A Ordinary £1.00
Ordinary £1.00
A Ordinary £1.00
B Ordinary £1.00
C Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Deferred Ordinary £0.20
Ordinary £0.20
Ordinary £1.00
Ordinary £1.00
1% Non-Cumulative
Preference £1.00
Ordinary £1.00
1% Non-Cumulative
Preference £0.01
A Ordinary £1.00
B Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Deferred Ordinary £0.25
Ordinary £0.01
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
49.0
42.2
42.2
15.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
97.6
2.4
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.0
1.0
–
70.0
30.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
96.2
3.8
100.0
100.0
100.0
100.0
100.0
100.0
53.4
53.4
100.0
100.0
99.6
99.6
Whitbread Annual Report and Accounts 2016/17 165
Company accounts 2016/17Company accounts 2016/17
Notes to the Company financial statements continued
At 2 March 2017
10 Related parties continued
Dormant related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
Lloyds Avenue Catering Limited
England1
3% Non-Cumulative
Preference £1.00
London International Hotel Limited
England1
Lorimer & Clark, Limited
Scotland30
Mackeson & Company Limited
Mackies Wine Company Limited
Maredrove Limited
Marine Hotel Porthcawl Limited
Marlow Catering Limited
Meon Valley Golf and Country
Club Limited
Milton 2 Limited
Morans of Bristol Limited
Morris’s Wine Stores Limited
England1
England1
England1
England1
England1
England1
England1
England1
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
5.6% Non-Cumulative
Preference £1.00
New Clapton Stadium Company Limited
England1
Ordinary £0.05
Norseman Lager Limited
P I Hotels Limited
P I Hotels York Limited
England1
England1
England1
Pacific Caledonian Properties Limited
Scotland11
Percheron Properties Limited
Peter Dominic Limited
Piquant Caterers Limited
Pizzaland Limited
Premier Inn Belfast Limited
Premier Inn Bournemouth Limited
Premier Inn Castleford Limited
Premier Inn Chippenham Limited
Premier Inn Doncaster Limited
Premier Inn Gateshead Limited
Premier Inn Hull Limited
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
Premier Inn Investments GmbH
(formerly Costa Coffee Germany GmbH) Germany32
Premier Inn Limited
England1
Premier Inn Manchester Holdings Limited England1
Premier Inn Manchester Limited
Premier Inn Northampton Limited
Premier Inn Portsmouth Limited
Premier Inn Sheffield Limited
England1
England1
England1
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary EUR 25,000
Ordinary £1.00
Ordinary £1.00
A Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
5.4
100.0
94.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Whitbread Annual Report and Accounts 2016/17 166
Company accountsCompany accounts 2016/17
10 Related parties continued
Dormant related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
Premier Inn Trentham Gardens Limited
England1
Premier Inn Troon Limited
Premier Restaurant Holdings Limited
Priory Leisure Limited
PSU2 kft
R. C. Gough & Co. Limited
Raybain (Northern) Limited
Raybain (Wine Bars) Limited
Respotel Limited
Rhymney Breweries Limited
S & S Property Limited
S. H. Ward & Company Limited
Salford Automatics Limited
Scorechance 1 Limited
Scorechance 12 Limited
Scorechance 17 Limited
Scorechance 25 Limited
Scorechance 8 Limited
Sheffield Automatics Limited
Shewell Limited
Silk Street Hotel Liverpool Limited
Small & Co. (Engineering) Limited
Small & Co. Limited
Spring Soft Drinks Limited
Sprowston Manor Hotel Limited
Square October 1 Limited
Square October 2 Limited
Square October 3 Limited
St Andrews Homes (1995) Limited
St Martins Care Homes
Investments Limited
Stoneshell Limited
Stripe Travel Inn Limited
Strong and Co. of Romsey Limited
Summerfields Care Limited
Sun Taverns Limited
Sweetings (Chop House) Limited
Swift (Lurchrise) Limited
England1
Ireland16
England1
Hungary31
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
Ordinary £1.00
Ordinary £0.10
Ordinary EUR 1.27
Ordinary £1.00
Ordinary HUF 1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £0.25
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
7% Cumulative
Preference £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.0
99.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
0.7
99.3
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Whitbread Annual Report and Accounts 2016/17 167
Company accounts 2016/17Company accounts 2016/17
Notes to the Company financial statements continued
Notes to the Company financial statements continued
At 2 March 2017
At 2 March 2017
10 Related parties continued
Dormant related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
Swift Hotels (1995) Limited
Swift Hotels (Management) Limited
Swift Inns and Restaurants Limited
Swift Profit Sharing Scheme
Trustees Limited
Swift Quest Limited
Swingbridge Hotel Limited
Tewkesbury Park Golf and
Country Club Ltd
The Barcave Group Limited
The Dominic Group Limited
The Four Seasons Hotel
Investments Limited
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
The Four Seasons Hotel
Investments Management Limited
The Four Seasons Hotel Limited
The Oyster Spa Company Limited
The Portsmouth and Brighton United
Breweries, Limited
Thomas Wethered & Sons Limited
England1
England1
England1
England1
England1
Threlfalls (Liverpool & Birkenhead) Limited England1
Threlfalls (Salford) Limited
Trentrise Limited
Uncle Sam’s Limited
Virlat Limited
W. M. Darley, Limited
England1
England1
England1
England1
England1
W. R. Wines Limited
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
7% Cumulative
Preference £1.00
Ordinary £1.00
Ordinary £1.00
8% Cumulative Preference
A £1.00
8% Cumulative Preference
B £1.00
Ordinary £1.00
Preferred Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £0.25
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Preference £1.00
Preferred Ordinary £0.01
Deferred £1.00
Ordinary £0.01
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.0
90.9
9.1
99.0
100.0
33.0
100.0
100.0
100.0
28.1
30.2
8.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.8
49.8
0.4
99.0
1.0
Wentworth Guarantee Company
(BVI) Limited – UK tax resident.
Dissolved on 8 March 2017
British Virgin Islands20 Ordinary £1.00
Wentworth Guarantee Company Limited England1
n/a
–
100.0
100.0
n/a
n/a
n/a
Wentworth No. 1 Limited – UK tax resident.
Dissolved on 8 March 2017
British Virgin Islands20 Ordinary £1.00
–
100.0
100.0
Whitbread Annual Report and Accounts 2016/17 168
Company accountsCompany accounts 2016/17
10 Related parties continued
Dormant related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
British Virgin Islands20 Ordinary £1.00
British Virgin Islands20 Ordinary £1.00
British Virgin Islands20 Ordinary £1.00
Wentworth No. 2 Limited – UK tax resident.
Dissolved on 8 March 2017
Wentworth No. 3 Limited – UK tax resident.
Dissolved on 8 March 2017
Wentworth No. 4 Limited – UK tax resident.
Dissolved on 8 March 2017
West Country Breweries Limited
Wheeler Gate Limited
Whitbread (G.C.) Limited
Whitbread Company Two Limited
Whitbread Developments Limited
Whitbread Devon Limited
Whitbread Directors 1 Limited
Whitbread Directors 2 Limited
Whitbread Dunstable Limited
Whitbread Enterprise Centre Limited
Whitbread Finance PLC
Whitbread Fremlins Limited
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
Whitbread Golf and Country Club Limited England1
Whitbread Healthcare Trustees Limited
England1
Whitbread Hotel (Bournemouth) Limited England1
Whitbread Hotels (Management) Limited England1
Whitbread International Limited
England1
Whitbread International Trading Limited
England1
Whitbread Investment Company Limited England1
Whitbread Investment Company
Securities Limited
Whitbread London Limited
Whitbread Nominees Limited
Whitbread Pension Trustee
Directors Company Limited
Whitbread Pension Trustees
Whitbread Pub and Bars Limited
Whitbread Pub Partnership Limited
Whitbread Pub Restaurants
Business Limited
England1
England1
England1
England1
England1
England1
England1
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
99.0
99.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
45.0
55.0
100.0
100.0
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
99.0
99.0
100.0
100.0
99.0
99.0
100.0
100.0
n/a
n/a
n/a
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £0.05
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
5% Non-Cumulative
Preference £1.00
A Ordinary £1.00
Ordinary £1.00
Ordinary £0.05
Deferred £1.00
USD 0.01
Ordinary £1.00
Ordinary £1.00
Ordinary £0.25
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
n/a
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Whitbread Golf Club Limited
England1
Ordinary £1.00
Whitbread Guarantee Company
Two Limited
England1
n/a
n/a
n/a
n/a
England1
Ordinary £1.00
Whitbread Annual Report and Accounts 2016/17 169
Company accounts 2016/17Company accounts 2016/17
Notes to the Company financial statements continued
At 2 March 2017
10 Related parties continued
Dormant related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
Whitbread Quest Trustee Limited
England1
Whitbread Restaurants (Australia) Limited England1
Whitbread Restaurants Limited
Whitbread Scotland Limited
Whitbread Secretaries Limited
Whitbread Share Ownership
Trustees Limited
Whitbread Spa Company Limited
England1
Scotland11
England1
England1
England1
Whitbread Sunderland (1995) Limited
England1
Whitbread Sunderland 2 Limited
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £0.56
Ordinary £1.00
Ordinary £1.00
Ordinary £0.05
4% Preference £0.05
n/a
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
5.6% Non-Cumulative
Preference £1.00
Whitbread Sunderland Limited
England1
Ordinary £5.00
Whitbread Trafalgar Properties Limited
England1
Whitbread UK Limited
Whitbread Wales Limited
Whitbread Wessex Limited
White Cross Films Limited
Wiggin Tree Limited
Willhouse Limited
England1
England1
England1
England1
England1
England1
Preference £5.00
A Ordinary £1.00
B Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Deferred £1.00
Q Ordinary £1.00
W Ordinary £1.00
William Overy Crane Hire Limited
England1
Ordinary £1.00
% of class of
shares held
by the Group
(if different
from the
parent
Company)
% of class of
shares held
by the parent
Company
% of nominal
value (where
applicable)
–
–
–
–
–
–
–
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
50.0
n/a
n/a
n/a
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
57.0
100.0
100.0
100.0
100.0
100.0
43.0
50.0
50.0
50.0
50.0
100.0
100.0
99.0
99.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
25.0
25.0
100.0
100.0
Whitbread Annual Report and Accounts 2016/17 170
Company accountsCompany accounts 2016/17
10 Related parties continued
Dormant related undertakings continued
The registered office of the above compaines is as follows:
170/67 21st Floor Ocean Tower 1, Sukhumvit 16 (Sammitr), Ratchadapisek Road, Klongtoey Sub-district, Klongtoey District, Bangkok Metropolis, Thailand
1 Whitbread Court, Houghton Hall Business Park, Porz Avenue Dunstable, Bedfordshire, LU5 5XE
2
3 Room 3002, ICP, No 1318 North Sichuan Road, Hongkou District, Shanghai, 200080, China
4 Unit No. 216, Second Floor at Squareone, C-2 District Centre, Saket, New Delhi, 110017, India
5 Chłodna 52, 00-872, Warsaw, Poland
6 C/o Accu-Search Inc, 215, 10205-101 Street, Edmonton AB T5J 2Y9, Canada
7 Knaves Beach, Loudwater, High Wycombe, Buckinghamshire, HP10 9QR
8 41, Rue Saint Augustin, 75002, Paris, France
9 Unit No. Almas-33-A, Almas Tower, Plot No. LT-2, Jumeirah Lakes Towers, Dubai, United Arab Emirates
10 38 Beach Road, #29-11 South Beach Tower, Singapore 189767, Singapore
11 4th Floor 115 George Street, Edinburgh, EH2 4JN, Scotland
12 Room 520 and 524, 5th Floor, East Tower, Sichuan Building, 1 Fu Wai Avenue, Xicheng District, Beijing, China
13 1 Coleman Street, #05-06A The Adelphi, 179803, Singapore
14 4th Floor, Saltire Court, 20 Castle Terrance, Edinburgh, EH1 2EN, Scotland
15 Caledonian Exchange, 19A Canning Street, Edinburgh, EH3 8HE, Scotland
16 TMF Group (Ireland) Ltd, 3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1, Ireland
17 TMF Channel Islands Ltd, 28-30 The Parade, St Helier, Jersey JE1 1EQ
18 Ground Floor, Premier Inn Dubai Investment Park, PO Box 35118, Dubai, United Arab Emirates
19 3rd Floor, Tornado Towers, PO Box 34040, Doha, Qata
20 TMF (BVI) Ltd, TMF Place, PO Box 964, Road Town, Tortola, VG1110, British Virgin Islands
21 Room No. 314, Hotel Premier Inn, District Centre, Shalimar Bagh, Outer Ring Road, Haiderpur Red Light, New Delhi, 110088, India
22 Gowling WLG (UK) LLP, 4 More London Riverside, London, SE1 2AU
23 No 236/26, Moo 10, Soi 15 Pattaya Sai 2 Road, Tambol Nongpure, Amphur Banglamung, Chonburi Province 20260, Thailand
24 Jalan Raya Juanda No.73, RT 18, RW05, Semanbung Village, Gedangan Sub District, Sidoarjo Regency, East Java Province, Indonesia
25 Gandaria 8 Office Tower, 19th Floor Unit A1, Jalan Sultan Iskandarmuda, Kebayoran Lama, 12240, Indonesia
26 TMF Services B.V., Nassima Tower, Office 1401, Sheikh Zayed Road, PO Box 213975, Dubai, United Arab Emirates
27 Ieriķu iela 3, Riga, LV-1084, Latvia
28 Almas 6C, Almas Tower, Jumeirah Lake Towers, Dubai, United Arab Emirates
29 Science and Technology Center Building, Room B1, Block F, No 666 East Beijing Road, Shanghai 200080, China
30 The Royal Scot Hotel, 111 Glasgow Road, Edinburgh, EH12 8NF, Scotland
31 Ugocsa utca 4. B. ep., 1226-Budapest, Hungary
32 Eschenheimer Anlage 1, 60316 Frankfurt am main, Germany
33 c/o TMF Denmark A/S, Bredgade 6, 1, 1260 Copenhagen, Copenhagen, Denmark
34 36/F., Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong
35 Messehurm, Freidrich-Ebert-Anlage 49, 60308, Frankfurt, Germany
36 Ecos office centre eschborn, HS Buro und Service GmbH, Mergenthaleralle 10–12, 65760, Eschborn, Germany
Whitbread Annual Report and Accounts 2016/17
171
Company accounts 2016/17Company accounts 2016/17
Shareholder services
Dividend Reinvestment Plan
To reinvest your dividend you will
need to sign up for the Dividend
Reinvestment Plan (the ’DRIP’). The
terms and conditions of the DRIP
and a shareholder dividend form are
available at www.whitbread-shares.com
or can be requested from Capita
Asset Services. For enquiries
regarding the DRIP, please telephone
+44 (0)371 664 0381.
Dividend payments by BACS
We can pay your dividends directly to
your bank or building society account
using 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)344 855 2327.
Dividend history
2016/17
2015/16
2014/15
2013/14
2012/13
95.80p
90.35p
82.15p
68.80p
57.40p
Dividend diary 2017/18
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
DRIP election date
Payment of interim dividend
Financial reporting calendar
Dates subject to confirmation
Half–year end
Announcement of half-year results
End of financial year
Capital gains tax
For further information on:
25 May 2017
26 May 2017
5 June 2017
30 June 2017
9 November 2017
10 November 2017
20 November 2017
15 December 2017
31 August 2017
24 October 2017
1 March 2018
• 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
Contact details
Registrars
Capita Asset Services
Whitbread Share Register
The Register
34 Beckenham Road
Kent BR3 4TU
The website address is
www.capitaassetservices.com.
For enquiries regarding your
shareholding, please telephone
+44 (0)344 855 2327. 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 email;
• buy and sell shares via the Capita
Share Dealing Service1;
• view your holding and get an
indicative valuation; and
• change your personal details.
You will need to have your investor
code to hand. This can be found on
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
For Capita Share Dealing Services you
can telephone +44 (0)371 664 0445.
Calls are charged at the standard
geographic rate and will vary by
provider. Calls from outside the
United Kingdom will be charged
at the applicable international rate.
Capita are open from 9:00 to 17:30,
Monday to Friday excluding public
holidays in England and Wales.
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
Chris Vaughan
Whitbread Annual Report and Accounts 2016/17
172
Shareholder informationShareholder information
Analysis of ordinary shares at 2 March 2017
Band
1-100
101-500
501-1,000
1,001-5,000
5,001-10,000
10,001-50,000
50,001-100,000
100,001-500,000
500,001-1,000,000
1,000,001-5,000,000
5,000,001+
Total
Number of
holders
23,394
13,936
2,879
1,787
187
295
97
145
30
29
5
% of
holders
54.67
32.57
6.73
4.18
0.44
0.69
0.23
0.34
0.07
0.07
0.01
Number
of shares
852,666
3,302,431
2,019,218
3,371,685
1,327,934
6,891,701
6,857,027
32,024,124
21,733,130
58,832,474
58,272,608
% of share
capital
0.44
1.69
1.03
1.72
0.68
3.53
3.51
16.38
11.12
30.10
29.80
42,784
100.00
195,484,998
100.00
Share price history
2016/17
2015/16
2014/15
2013/14
2012/13
1637p
High
Low
2392p
2692p
4356p
3391p
3649p
3846p
4397p
5440p
5285p
Annual General Meeting 2017
The 2017 AGM will be held at 2pm on
Wednesday 21 June 2017 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.
How can I find the current
share prices?
You can 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’s registrars,
Capital Asset Services, on the
shareholder helpline +44 (0)344 855
2327. They will be able to assist you in
arranging a replacement.
Am I entitled to shareholder benefits?
Shareholders with a holding of 64
shares or more are eligible to receive
a shareholder benefits card. Those
shareholders who registered to receive
offers in 2016 should automatically
have received the card with the Annual
Report mailing. Shareholders who
wish to register for a card can do so
by contacting Capita, whose contact
details are shown on page 172.
Whitbread Annual Report and Accounts 2016/17
173
Shareholder informationShareholder information
Shareholder services continued
• 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/
firms/financial-services-register and
contact the firm using the details on
the register;
• report the matter to the FCA either
by calling 0800 111 6768 or visit
scamsmart.fca.org.uk;
• 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
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
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 can register
online: www.mpsonline.org.uk
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. There operations are
commonly known as ‘boiler rooms’.
These ‘brokers’ can be very persistent
and extremely persuasive. The Financial
Conduct Authority (FCA) has found
that the average amount lost by
investors is around £20,000, with
around £200m lost in the UK each year.
Even seasoned investors have been
caught out, with the biggest individual
loss recorded by the police being
£6 million.
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:
Whitbread Annual Report and Accounts 2016/17
174
Shareholder informationShareholder information
Glossary
Automated trading engine (ATE)
The system which we deploy to vary
our prices according to demand levels
and room availability within certain
prescribed limits.
Enablement score
Having the correct and adequate
amount of tools and resources to
perform your job to the best of
your abilities.
Average Room Rate (ARR)
Hotel accommodation income
divided by the number of rooms
occupied by guests.
Compound Annual Growth Rate
(CAGR)
The year on year growth rate of an
annualised gain over a specified
number of years.
Detractors
Customers that score zero to six
when completing a survey with ten
score choices.
Direct bookings
Booking made direct to the Premier Inn
website, Premier Inn call centre or hotel
front desks.
Direct digital
Bookings made direct to the Premier
Inn website.
Directors’ forum
A group of Whitbread’s senior leaders.
Earnings per share (EPS)
Profit attributable to the parent
shareholders divided by the basic
weighted average number of ordinary
shares in issue during the year after
deducting treasury shares and shares
held by an independently managed
share ownership trust (‘ESOT’).
EBITDA†
Earnings before interest, tax,
depreciation and amortisation,
excluding income from Joint Ventures
and Associates.
EBITDAR†
Earnings before interest, tax,
depreciation, amortisation and rent,
excluding income from Joint Ventures
and Associates.
Engagement score
The engagement score is calculated by
adding together the positive responses
to the ‘Your Say’ questions regarding
pride in the organisation, advocacy,
recommending the Company as a
place of work and intention to stay
and motivation. These scores are
then averaged to produce an overall
engagement score.
Equity stores
Costa stores leased or owned by
Whitbread, as opposed to those leased
or operated under franchise agreements.
IFRS
International Financial Reporting
Standards.
Joint sites
A site which has both a Premier Inn
and Whitbread-owned pub restaurant
in one location.
Like for like
Total sites, outlets or machines
excluding those acquired or disposed
of and opened or closed during the
current year and the previous year.
This can be applied to alternative
performance measures such as
revPAR, ARR and occupancy.
Like for like sales†
Period over period change in total sales,
less sales generated by businesses
acquired or disposed of and outlets
opened or closed during the current
year and the previous year.
This is stated pre-IFRIC 13 for
Premier Inn – UK and Ireland, Costa
and Restaurants – UK calculated on
the 52 weeks to 2 March 2017 vs the 52
weeks to 25 February 2016.
Net debt†
Total company borrowings after
deducting cash and cash equivalents.
Net Recommend
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 subtracting
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/margins
Operating profit expressed as
a percentage of total revenue.
Operating profit
Profit before interest and tax.
OTAs
Online travel agents such as
Booking.com
Promotors
Customers that score nine to ten
when completing a survey with
ten score choices.
RevPAR
Revenue per available room is 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.
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Whitbread Annual Report and Accounts 2016/17
175
Shareholder information
Glossary continued
RevPAR premium
Incremental revenue per available room
over and above that achieved by direct
competitors and/or the market
Return on Capital/Returns†
Dividing the underlying operating profit
for the year by net assets at the balance
sheet date, adding back debt, taxation
liabilities and the pension deficit.
System sales
Retail sales from Costa outlets
irrespective of whether it is an equity
or a franchise store.
Team retention
The number of permanent new starters
that we retain for the first 90 days/
3 months.
Team turnover
The level of outgoing and incoming
permanent employees within our
business over a 12 month period.
Underlying basic EPS†
Underlying profit attributable to
the parent shareholders divided by
the basic weighted average number
of ordinary shares. See Note 10 to
the consolidated accounts.
Underlying net finance cost†
Finance costs net of finance revenue
excluding non-underlying finance
costs or revenue. See Note 8 to the
consolidated accounts.
Underlying operating profit†
Underlying profit before underlying
net finance costs. See Note 4 to the
consolidated accounts.
Underlying profit†
Profit excluding non-underlying items.
See Note 6 to the consolidated
accounts.
Underlying profit before tax†
Underlying profit before underlying tax.
See Note 5 to the consolidated accounts.
Underlying tax†
Tax expense excluding non-underlying
tax items. See Note 9 to the
consolidated accounts.
† The performance of the Group is monitored
internally using a variety of statutory and
alternative performance measures (APMs).
APMs are not defined within IFRS and are
used to assess the underlying operational
performance of the Group and as such these
measures should be considered alongside
IFRS’s measures.
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Whitbread Annual Report and Accounts 2016/17
176
Shareholder information
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LU5 5XE
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