Annual Report and Accounts 2017/18
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Delivering on
our strategy...
Annual Report & Accounts 2017/18
...to bring
customers
brands
they love
Our vision
We will grow brands that customers love by building a
strong Customer Heartbeat and innovating to stay ahead.
Our Winning Teams delight customers so they come back
time and again which, along with our focus on Everyday
Efficiency, drives Profitable Growth. We are passionate
about being a Force for Good in our communities, helping
everyone to live and work well.
In this document
Overview
01 Financial highlights
02 Business overview
Strategic report
04 Chairman’s statement
06 Chief Executive’s review
08 Business Model
10 Key performance indicators
12 Group HR Director’s review
14 Force for Good
20 Winning Teams
28 Customer Heartbeat
36 Profitable Growth
44 Group Finance Director’s review
52 Principal risks and uncertainties
Governance
56 Corporate governance
58 Board of Directors
66 Audit Committee report
70 Nomination Committee report
72 Remuneration report
88 Directors’ report
Consolidated accounts 2017/18
92 Directors’ responsibility statement
93 Independent auditor’s report
101 Consolidated financial statements
107 Notes to the consolidated
financial statements
Company accounts 2017/18
147 Company accounts
150 Notes to the Company
financial statements
Shareholder information
164 Shareholder services
167 Glossary
An interactive pdf of our
Annual Report and Accounts
is available to download online
www.whitbread.co.uk/investors
Overview
What’s inside?
Financial highlights
O
v
e
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See our Business
Model
pg 8
Our
customers
Our
shareholders
Our
business
Read about our
sustainability
programme,
Force for Good
pg 14
Performance measures
A range of measures are used to
monitor the financial performance
of the Group. These measures include
both 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, which are consistent with the
way that the business performance
is measured internally. APMs are not
defined within IFRS and therefore may
not be directly comparable with
similarly titled measures reported by
other companies. APMs should be
considered in addition to, and are not
intended to be a substitute for, or
superior to, IFRS measures.
Revenue
£3,295m
+6.1%
2017/18
2016/17
2015/16
2014/15
Underlying profit before tax†
£591m
+4.5%
£3,295m
2017/18
£3,106m
£2,922m
£2,608m
2016/17
2015/16
2014/15
£591m
£565m
£546m
£488m
Statutory profit before tax
£548m
+6.4%
Underlying operating profit†
£622m
+5.0%
2017/18
2016/17
2015/16
2014/15
£548m
2017/18
£515m
£488m
£464m
2016/17
2015/16
2014/15
£622m
£592m
£569m
£504m
Group return on capital†
15.4%
+20 bps
Dividend per share
101.15p
+5.6%
2017/18
2016/17
2015/16
2014/15
15.4%
2017/18
15.2%
15.3%
2016/17
2015/16
15.7%
2014/15
101.15p
95.80p
90.35p
82.15p
Discretionary free cash flow†
From £532m
to £585m
Capital expenditure
From £610m
to £555m
Statutory basic EPS
Underlying basic EPS†
240p
+3.6%
2017/18
2016/17
2015/16
2014/15
260p
+5.6%
240p
2017/18
231p
2016/17
216p
205p
2015/16
2014/15
260p
246p
239p
214p
†
Definitions of all APMs are included in the glossary on page 167.
Whitbread Annual Report and Accounts 2017/18 01
Customer Heartbeat Overview
Business overview
How our business works
O
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Whitbread 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.
We measure our progress
through our balanced scorecard
(or Whitbread In Numbers –
WINcard) for Winning Teams,
Profitable Growth, Customer
Heartbeat, Force for Good and
Everyday Efficiency.
Force for Good
Everyday Efficiency
We serve our customers in the UK and beyond through our two businesses:
Premier Inn
Premier Inn is the UK’s leading
hotel business. Our unique joint site
model means that more than half
of our hotels are located alongside
our own restaurant brands.
Costa
Costa is the UK’s favourite coffee
shop. We have a multi-channel
strategy, with equity stores,
franchise stores and stores
operated by joint ventures, as
well as a wholesale operation.
785
UK hotels
72,466
rooms across the UK
2,422
coffee shops in the UK
1,399
stores in 31 international
markets
Whitbread Annual Report and Accounts 2017/18 02
We are focused on three strategic priorities:
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
long-term growth
37 for more information
38 for more information
40 for more information
O
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We work hard to deliver great customer
service and create real job opportunities
Our focus on delivering high standards for
our customers through strong employee
engagement is at the heart of our strategy.
We create job opportunities for people from
varied and diverse backgrounds and help
our people to reach their potential through
training and coaching in a supportive and
inclusive environment.
20 for more information
We are committed to doing business
responsibly and sustainably
Our Force for Good programme has three
pillars: Opportunity; Community; and Responsibility.
We are delivering tangible improvements in
each of these areas against our existing targets,
whilst also setting ambitious new targets.
14 for more information
Supported by a strong risk
management and governance
framework and a disciplined
approach to capital management
Maintaining high standards in 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 2017/18 03
Chairman’s statement
Premier Inn and Costa are
both fantastic brands, with
market-leading positions
in the UK and long-term
structural opportunities
to grow internationally.
Adam Crozier
Chairman
Stepping up the pace
of progress
After a year in which Whitbread has
celebrated its 275th anniversary I was
delighted to be asked to Chair the Whitbread
Board as we enter the next phase of the
Company’s development.
6.4%
growth in our statutory profit
before tax to £548 million
+5.6%
growth in full-year dividend
to 101.15p
£4.6m
donated to our chosen charities,
Great Ormond Street Hospital
Charity and the Costa Foundation
£100m+
savings delivered to date from
our efficiency programme
I joined the Board in April last year and
this has given me the opportunity to get
a good understanding of our Company,
the businesses we operate, our 50,000+
dedicated team members and the
increasing expectations of our millions
of loyal customers. Whitbread has
a strong management team led by
Alison Brittain, with a clear plan to create
shareholder value. Over the past year,
we have performed well financially and
operationally, together with making
good progress with our strategic plans.
Premier Inn and Costa are both fantastic
brands, with market-leading positions
in the UK and long-term structural
opportunities to grow internationally.
Over the next two years, the focus of the
Board will be to ensure both businesses
are structured in the best manner to
deliver on the exciting opportunities
available to them.
Financial performance and dividend
Whitbread has continued to perform
well despite shorter-term challenges in
our industry. During the year Whitbread
grew revenues by 6.1% to £3.3 billion and
operating profit by 6.7% to £590 million.
In addition, £877 million of operating
cash flow was generated and, through
disciplined management of capital, return
on capital increased to 15.4%, whilst also
maintaining a strong balance sheet.
As a result of the good financial
performance, the Board recommends a
final dividend of 69.75 pence per share,
making a total dividend of 101.15 pence
per share, an increase of 5.6%. The final
Whitbread Annual Report and Accounts 2017/18 04
Strategic reportStrategic report The Board
Richard Baker, my predecessor as
Chairman, stepped down from the
Board on 28 February 2018. Richard
joined the Board as a non-executive
director in September 2009, before
becoming Chairman five years later in
September 2014. I would like to thank
Richard both for his fantastic service to
Whitbread and for his support to me
personally as I have taken on the role
of Chairman. I wish him success and
happiness in the future.
Also stepping down from the Board
during the year were Stephen Williams
on 21 June 2017, who Richard thanked
for his contribution in his statement this
time last year, and Sir Ian Cheshire on
21 September 2017. Sir Ian joined the
Whitbread Board in February 2011 and,
during a period of more than six years,
served both as Chairman of the
Remuneration Committee and more
recently as Senior Independent Director.
I would like to thank Sir Ian for his
service to the Company and wish him
well for the future.
With these recent changes to the
Board, we have plans in place to further
strengthen the Board as we prepare for
the demerger of Costa, with a further
update in due course.
I am very much looking forward to my
first year as Whitbread Chairman, as
we look to step up the pace of progress
against our strategic priorities and
structure our businesses in the best
way to ensure they can thrive and
continue to deliver value for all of our
stakeholders. I hope to meet some
of you at our AGM on Wednesday
27 June 2018.
Adam Crozier
Chairman
24 April 2018
dividend will be paid on 4 July 2018
to shareholders on the register at the
close of business on 25 May 2018.
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 in
the Group Finance Director’s review on
page 47.
Strategic progress
Both Premier Inn and Costa are clear
leaders in their respective markets
and both have significant structural
growth opportunities in the UK and
internationally. We have clear plans to
capitalise on these opportunities and
Alison and the team have achieved a
tremendous amount over the past two
years. We have also been working hard
over the past two years to ensure we
have the right skills and capabilities to
deliver these plans, with a particular
focus on technology, property,
procurement and supply chain.
Particular highlights of our strategic
progress include:
• the announcement of an agreed
acquisition of 19 hotels in Germany,
which will accelerate Premier Inn’s
network in Germany to more than
30 hotels by 2021;
• the buy-out of Costa’s joint venture
partner in South China, which provides
Whitbread with full control of Costa’s
Chinese operations outside of Beijing;
and
• delivering over £100 million of savings
from our efficiency programme so far,
which has helped offset the significant
inflationary pressure experienced
recently in our industry.
The pace of strategic delivery over the
past year has been strong, and the plans
in place will ensure both businesses can
continue to create value for all of our
stakeholders over the long term.
Update on Whitbread’s structure
The Board has conducted regular and
rigorous reviews of its strategy and
structure for a number of years. For
some time, the Board has been of the
view that at the right time Premier Inn
and Costa should be independent
companies. A separation will provide
enhanced focus for each business and
give shareholders an investment in two
high quality businesses. We have made
significant progress with our strategy
over the last two years and are now
committed to a demerger of Costa,
which will enable long-term value to be
optimised for our shareholders. We will
ensure that prior to separation each
business is sufficiently developed and
well-positioned to take advantage
of the structural growth opportunities
available to them in the UK and
internationally. Announcing our intention
now provides clarity on our strategic
direction to our shareholders, team
members and other stakeholders.
The management team have
continued to deliver strong strategic
and operational performance, whilst
building momentum in growth,
innovation, international expansion
and development of technology and
infrastructure. The team will now also be
focused on ensuring the demerger of
Costa is conducted as fast as practical
and appropriate to optimise value for
Whitbread’s shareholders. The Board
fundamentally believes this is the best
course of action to optimise value for
shareholders over the longer term and
will ensure both Premier Inn and Costa
are positioned well to thrive as
independent companies. This is
discussed further on page 41.
Force for Good
As you will see on page 14, our wide-
reaching sustainability programme was
re-launched during the year as Force for
Good. Although a number of activities
fall under the Force for Good banner,
they are very much integrated within our
everyday business activities, whether
that’s apprenticeships, charitable
fundraising, energy efficiency or cup
recycling for example.
In January 2018, the new Premier Inn
Clinical Building at Great Ormond
Street Hospital was formally opened
by HRH the Duchess of Cambridge.
This was made possible by the teams
in our hotels and restaurants raising
£7.5 million to fund the facility. We are
now extending our partnership with
Great Ormond Street Hospital Charity
and are targeting to raise a further
£10 million to build a new facility for
children with sight and hearing
impairments.
Another recent highlight has been
the launch of an innovative and
industry-leading recycling initiative in
Costa. By 2020, Costa is committed
to recycling at least 500 million coffee
cups a year, representing one-fifth
of the 2.5 billion cups consumed in
the UK each year. This will ensure
we recycle as many cups as we use,
becoming ‘cup neutral’, and will be
achieved through a broad spectrum
of measures, including Costa paying
for waste collectors to collect coffee
cups and ensure they are delivered to
appropriate recycling facilities.
Whitbread Annual Report and Accounts 2017/18 05
Strategic report Chief Executive’s review
Alison Brittain
Chief Executive
This year we have
accelerated momentum
in the delivery of our
strategic priorities, both
in the UK and internationally.
This progress will leave both
businesses well-placed
to deliver long-term
sustainable growth.
Good progress on
our strategic objectives
6.1%
increase in revenue to
£3,295 million
5,720 Premier Inn rooms by 2021. In
China, we completed the buy-out of one
of our two joint venture partners. This
acquisition provides Costa with full
control of stores outside Beijing and
allows us to increase our ambition to
target 1,200 stores by 2022. These
acquisitions provide solid foundations
from which both businesses can grow
international operations of increasing
significance in the years ahead.
Efficiency
In addition to growing our business at
a good return on capital, we have also
worked hard to generate meaningful
savings from our efficiency programme,
which have offset the material structural
inflation that is impacting the hospitality
sector. Our strong execution to date
has delivered savings of £105 million,
which gives us confidence that we can
increase our target from £150 million
to £250 million, with £100 million to
be delivered over the next two years.
These additional efficiencies will help
to offset a substantial proportion of
anticipated inflationary pressures
in the next few years.
We are committed to the attractive
longer-term structural opportunities for
growth in the hotel and coffee markets,
both in the UK and internationally.
We are therefore continuing to invest
throughout our businesses to ensure
we retain brand leadership in the UK,
build the foundations for long-term
international growth and deliver the
modern and efficient processes and
technology which the businesses need
to thrive in the future.
Whitbread has produced another strong
financial performance this year, with
revenue growth of 6.1% to £3,295 million.
Disciplined cost management has
enabled us to grow underlying profit
before tax by 4.5% to £591 million, with
statutory profit before tax up 6.4% to
£548 million. We have accelerated
delivery momentum in all three of our
strategic priorities during the year.
UK growth
In the UK, we have increased revenues,
profits, cash flow, dividends and return
on capital, notwithstanding challenging
market conditions. This growth has been
underpinned by disciplined investment
in new capacity for both Premier Inn and
Costa and a relentless focus on improving
the overall experience for our millions
of customers. With ongoing growth in
coffee consumption and our increasing
ability to win market share from the
independent hotel sector, we are
confident of further growth at a good
return on capital in the years ahead.
International progress
Internationally, we announced two
strategically significant transactions for
Premier Inn in Germany and Costa in
China. In our first acquisition in Germany,
we have agreed to acquire 19 hotels,
comprising 3,100 rooms. In addition to
our organic pipeline, this will ensure we
have at least 31 hotels, comprising
Whitbread Annual Report and Accounts 2017/18 06
4.5%
growth in our underlying
operating profit† before tax
to £591 million
15.4%
return on capital,
up 20 bps
£585m
discretionary free cash flow†,
up from £532 million
†
Definitions of all APMs are included in the
glossary on page 167.
Strategic reportStrategic report Outlook
Given recent economic and industry
data, we do remain cautious on the
consumer environment, especially on
the high street, which we expect to
remain challenging in the near term. The
combination of our commitment to the
investment programme and the current
UK consumer environment naturally
means our near-term profit growth may
be lower than in previous years. However,
I am confident that this strategy will
deliver long-term sustainable growth in
earnings and dividends, combined with
good return on capital for years to come.
Increased dividend
In addition to delivering our ambitious
longer-term growth plan, we remain
committed to disciplined allocation of
capital, maintaining a strong balance
sheet and generating excellent cash
flow. As a result, the Board is increasing
the full-year dividend in line with earnings
growth to 101.15 pence per share.
Long-term ambition
Whitbread has achieved a significant
amount in the past two years to improve
capabilities and ensure a strong platform
is in place to deliver sustainable growth
over the medium term in the UK and
internationally. Progress has been made
whilst maintaining a strong balance
sheet, growing revenue and earnings
and maintaining a strong return
on capital.
In the UK, Premier Inn has a secure
pipeline to 85,000 rooms and a clear
opportunity to grow beyond 100,000
rooms. Despite significant capacity
growth, Premier Inn remains the hotel
group with the highest value for money
scores. Costa has made good progress
in building a pipeline of innovation
for new drinks, new food ranges,
improvements in digital technology and
investment in store standards. These
improvements enable Costa to continue
to be the UK’s favourite coffee shop
and grow to 3,000 UK stores over the
longer term.
Internationally, Premier Inn’s expansion
into Germany has accelerated and a
strong foundation has been established
to enable longer-term growth and
replicate the success of Premier Inn
in the UK. Costa in China is now in a
stronger position to deliver its plans
following the buyout of its joint venture
in South China, combined with its
existing successful partnership with
BHG in North China.
Investing in Whitbread’s capabilities
to achieve these ambitious plans has
continued, but more remains to be done.
Supply chain development, procurement
efficiency and technology advancements
are now possible following the
improvements in the team over the past
two years. The property strategy has
been refined, with an increase in sale
and leaseback transactions, whilst
remaining majority freehold in the
Premier Inn estate. These improvements
enable the two businesses to deliver
long term, sustainable growth in
earnings, combined with strong return
on capital.
Group structure
Given the progress Whitbread is making,
we are confident that both Premier Inn
and Costa will soon be businesses of
sufficient strength, scale and capability
to enable them to thrive as independent
companies. The Board, therefore,
believes that it is in the best long-term
interests of Whitbread’s many
stakeholders to separate Premier Inn
and Costa, via a demerger of Costa.
We have carefully considered the
optimal timing and concluded that
it will be pursued as fast as practical
and appropriate to optimise value
for Whitbread’s shareholders and
is expected to be completed within
24 months. This will allow both
Premier Inn and Costa to maintain
momentum, complete critical and
complex transformation and
infrastructure objectives, and drive
international expansion.
The management team and I are
excited that the strategy we are
executing will give us the opportunity
to create two high-quality independent
businesses that will create long-term
value for our stakeholders.
At the point of separation, both
businesses will be able to take advantage
of the structural growth opportunities
available to them in the UK and
internationally. Costa will become a listed
entity in its own right and the clear
market leader in the out-of-home coffee
market in the UK. Costa will also be well
positioned to build further on its strong
international foundations with growth
expected in China and Costa Express.
Whitbread will remain the owner and
operator of the UK’s most successful
hotel business. A key priority will be
continuing the development of Premier
Inn by creating a business of scale in
Germany to replicate the success we
have in the UK.
A Force for Good
Our Force for Good programme was
launched in July 2017 and builds on our
success to date. It is a forward-looking
sustainability programme with an
ambitious vision to ‘enable everyone to
live and work well’. Further information
on the programme has been integrated
throughout the strategic report and
is introduced in more detail by
Chris Vaughan on pages 14 to 15.
I am always very proud of, and humbled
by, the amazing efforts of our teams to
raise money for Whitbread’s chosen
charities of Great Ormond Street Hospital
Charity and the Costa Foundation, and
this past year has been particularly special
and memorable. During the year I had the
pleasure of seeing first hand the impacts
that the Costa Foundation is having in
several coffee-growing communities. The
Foundation is now helping to educate
more than 30,000 children in ten countries
and the teams on the ground are doing
truly inspirational work to improve the
lives of children and their families.
Following the successful opening of the
Premier Inn Clinical Building, we have
committed to continue to partner with
the charity and have set a goal of raising
a further £10 million over the next few
years, to support the development of
a sight and sound hospital at Great
Ormond Street.
Our Winning Teams
I reported last year a number of
important changes to my executive
team and I was pleased this year to
complete the team with the appointment
of Nigel Jones in the role of Group
Transformation Director. This is a critical
role for Whitbread as we continue to
transform our operations and create a
more efficient and productive business
to support our future growth.
This has been a year of significant
structural change and much progress has
been made as we deliver on our strategy
to grow and innovate in our core UK
businesses, focus on our strengths to
grow internationally and build the
infrastructure and capability to support
our future growth. Our continuing
success is a result of, and a tribute to,
the passion and commitment of our
winning teams. We have over 50,000
team members giving outstanding
service to some 29 million customers a
month across 2,500 sites around the UK
and hundreds more worldwide. I would
like to take this opportunity to personally
thank them for the tremendous work that
they do every day and their invaluable
contribution to our business.
Alison Brittain
Chief Executive
24 April 2018
Whitbread Annual Report and Accounts 2017/18 07
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 assets and resources
Our brand strength and our 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
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
Financial strength
Disciplined capital management
and good returns.
Read more on p48
Brand strength
Premier Inn is the UK’s leading
hotel business and Costa is the
UK’s favourite coffee shop.
Read more on p29
Winning Teams
Our 50,000+ team members make
everyday experiences special for
our customers.
Read more on p20
Property portfolio
Competitively advantaged access
to the best sites and flexibility.
Read more on p40
Network strength
With 785 UK Premier Inns, 3,821
Costa stores and 8,237 Costa
Express machines worldwide,
we are always close to our customers.
Read more on p37
Our business performance
is underpinned by:
Strong risk
management
and governance
Whitbread Annual Report and Accounts 2017/18 08
+
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
B
u
il
d
t
h
e capability and p l a t f o r m f
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
G
Our
shareholders
5.6%
increase in dividend
o
u
r
r
o
c
w
o
r
a
e
n
d
U
i
K
n
n
b
o
u
v
a
t
e
i
n
s
i
n
e
s
s
e
s
Profitable
Growth
Our
business
5.6%
Underlying basic
EPS† growth
o r g ro wth
Our
communities
£4.6m
donated to our
chosen charities
Our
people
78%
employee engagement
Our values
• Genuine
• Confident
• Committed
†
Definitions of all APMs are included in the
glossary on page 167.
+
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 p14
Whitbread Annual Report and Accounts 2017/18 09
Strategic report
Key performance indicators
Whitbread’s plan is to deliver long-term
growth in earnings and dividends, combined
with a strong return on capital.
This will be achieved through disciplined
execution of our three strategic priorities:
01 Grow and innovate in our
core UK businesses
02 Focus on our strengths to
grow internationally
03 Build capability to support
long-term growth
Whilst we work to deliver on our
long-term ambitions we must also
deliver results for our shareholders in
the short term. To do this we focus on
retaining a strong Customer Heartbeat,
which means supporting our Winning
Teams as they provide an excellent
experience for our customers.
There are a number of measures that
we review on a regular basis, both to
make sure we are on track to meet our
strategic objectives, but also to check
that we are meeting the needs of key
stakeholders in the shorter term.
Information on our key performance
indicators can be found on this
page and details of a wide range of
other strategic measures can be seen
on page 11.
Team engagement, like for like sales,
Premier Inn occupancy and electricity
consumption are still measured but, as
they are no longer incentivised WINcard
measures are not included as key
performance indicators.
Brand performance
We have a robust way of
measuring how our customers
rate our performance in terms of
recommendations and preference
over other brands.
Underlying EPS†
Underlying EPS is an important
measure of the effective delivery of
profitable growth for our shareholders.
Operational team
retention
Team retention is important because,
if team members stay with us longer,
we can provide a better service to our
customers and reduce the cost of
recruitment and training. This
measures the proportion of employed
team members retained over a three
month period taken throughout the
financial year.
+0.8%pt
2017/18
2016/17
88.8%
88.0%
Premier Inn
Restaurants
Costa
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.
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
32.7
31.1
51.6% pts
46.0% pts
49.3% pts
49.6% pts
Brand expansion
Growing, both in the UK and
overseas, is integral to our strategic
priorities and it is important that we
measure our progress.
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
3,816
4,565
289
255
1,436
1,585
+5.6%
2017/18
2016/17
260p
246p
Group return on capital†
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.
+20 bps
+4.5%
2017/18
2016/17
£591m
£565m
Premier Inn UK rooms opened (gross)
Costa net stores opened
Costa Express net machines installed
2017/18
2016/17
15.4%
15.2%
†
Definitions of all APMs are included in the glossary on page 167.
Whitbread Annual Report and Accounts 2017/18
10
Strategic reportStrategic report In March 2017,
Costa’s state of the
art new sustainable
roastery was
opened in Basildon,
quadrupling Costa’s
roasting capability
and supporting its
long-term growth.
01
Grow and innovate in the
core UK markets for
Premier Inn and Costa
02
03
Focus on the strengths developed
by Whitbread in the UK to grow
internationally, in particular in
Premier Inn in Germany, Costa in
China, and Costa Express in
multiple countries
Build and enhance the necessary
capabilities and infrastructure to
support long-term growth and
efficiency
Premier Inn
Premier Inn
(Germany)
Network
• 4,385 net rooms opened
• 4,600 rooms added to pipeline
• over 85% rooms in latest format
Network
• 1st acquisition (19 hotels)
• 5,500 rooms in pipeline
• 3 hotels opening in 2018/19
Performance
• 79.3% occupancy
• 97% booking directly
• 4.2 avg. TripAdvisor score
Performance
• 62% occupancy
• 100% booking directly
• 4.6 avg. TripAdvisor score
Costa
Costa
(International)
Stores
• 243 stores opened, 39 closed
• c.40% sales with Costa Club
• c.40% food capture rate
Stores
• 198 stores opened, 113 closed
• joint venture buy out in
South China
• 16 Chinese stores in latest format
Express
• 1,187 new machines
• 805 partners
Express
• 249 net new machines
• 6 countries
Winning Teams
• 89% team retention
• 3,000 apprenticeships
Property
• 14,500 rooms in pipeline
• £56m sale and leaseback proceeds
• 152 Costa global store churn
Digital
• over 85% Premier Inn direct
digital booking
• 1.3m active Costa App users
• 30 Costa Express machines
trialling loyalty
Efficiency
• £105m cumulative savings
• £145m committed further savings
Force for Good
• £4.6m charitable contributions
• almost 14m coffee cups recovered
Whitbread Annual Report and Accounts 2017/18
11
Strategic report Group HR Director’s review
Our customers continue
to report that positive
engagement with our teams
is critical to the quality of their
experience with us, on every
visit. Therefore retaining
and offering our people the
opportunities to grow and
develop their careers, remains
core to our strategy.
Louise Smalley
Group HR Director
Delivering exceptional
service every day
As outlined in previous years we care hugely
about ensuring our 50,000+ team members
remain motivated and engaged to deliver
exceptional service every day for our guests.
2,500+
new jobs created
800+
apprentices in learning
78%
team engagement
3,000+
apprenticeships started since
WISE began
2017/18 has been another strong
year for Whitbread, due to the
daily efforts of our 50,000+
team members.
We have continued to invest in
developing our team members at all
levels. Our YourSay survey results
demonstrate that we have maintained
high engagement levels across our
teams. We need to ensure local
managers are consistently working to
make Whitbread an even better place
to work. We remain focused on the
improvements to our core people
strategies as follows:
• engaging our Winning Teams –
continued, consistent listening with
more two-way dialogue;
• fair and transparent reward strategies
to motivate all team members;
• creating a ‘no limits to ambition’
environment – building diverse teams;
and
• enabling our people through new
technology and great places to work.
Engaging our Winning Teams in
two-way dialogue
We have long known that listening
to our team members who are closest
to our customers will drive our business
success. 83% of our people took part in
our annual YourSay survey this year. We
have continued to improve the depth and
range of consultation mechanisms at all
levels of the Company, for example
Whitbread Annual Report and Accounts 2017/18
12
Strategic reportStrategic report through our Restaurants Forum which
has been operating nationally to improve
communication between our field
operations teams and support centre.
Costa and Premier Inn continued to
engage teams through regular
conferences, regional meetings and
leadership engagement. Our Workplace
Forum for those team members based at
our Whitbread Court support centre has
discussed ways to improve the working
environment and has proven to be an
effective two-way conversation on how
to prioritise investment and improve
ways of working.
Over 2018/19 we will be extending and
connecting this work further to establish
formal consultation forums in all brands
so that employees’ opinions on strategy
and transformation plans can be heard
in more detail by leadership and by
the Board.
Fair and transparent reward strategies
to motivate all team members
Since the introduction of our ‘Pay for
Progression’ strategy in 2015 – which
links team member pay to skills
development – team members
perception of fair and transparent pay
has continued to rise. On the question
“I believe I am paid fairly for the work
I do” we continue to outperform the
high performing norm of benchmark
companies. Investment here has
contributed to retention and a better
guest experience as a result.
In April 2018 we changed our pensions
scheme, giving our employees more
choice and flexibility in the way they
save for retirement. We engaged our
teams in consultation about proposed
regulatory changes, using an online
forum to reach the largest possible
audience. We had the biggest response
we have ever had to any pensions
consultation with extremely balanced
and thoughtful contributions.
Creating a diverse ‘no limits
to ambition’ environment
In 2017/18 we have continued to
make progress against our ambition
to become the ‘most inclusive
hospitality business’.
A major focus this year has been in
analysing and understanding our gender
pay gap. Our analysis has demonstrated
that we have a mean gender pay gap
of 12.65%, with our senior leadership
remaining 70% male. If we achieved
a 50:50 representation of men and
women across all grades, our gender
pay gap would reduce to 0.39%. This, of
course, means that we need to do more
to ensure that men and women are
equally balanced in our senior
leadership team. We have set gender
targets for each area of the business
and, over the year ahead, we will
continue to address any barriers to
progression with a particular focus
on recruitment and succession.
We continue to prioritise broader
representation across our business.
We have conducted extensive research
into the changing nature of the labour
market in the UK. This has identified
how we can improve our engagement
with populations not currently well
represented including women not
currently in work and those over 55 years
old. We have conducted fieldwork in
a number of locations and the initial
findings demonstrate the scale of the
opportunity and some actions for us to
implement, for example making applying
for a job at Whitbread easier, and better
communicating our flexible shift patterns.
Enabling our people through new
technology and great places to work
We monitor not only engagement of our
teams, but also enablement – the extent
to which our employees feel that their
working conditions allow them to
flourish and that there are no major
barriers to them doing their job well.
This feedback has allowed us to target
investment more effectively, having
heard a degree of frustration with our
systems and support centre environment.
We are underway with a programme
to implement a new HR Information
System – Workday – with tools that will
be available to all team members. This
will benefit team members and line
managers through simpler processes
and better access and governance of
personal information. This represents
a major financial investment in HR
technology over four years which we
believe will radically transform our
team’s experience.
We have commenced with an extensive
programme of works at Whitbread
Court, our support centre, to implement
a modern working environment,
encouraging a more flexible workspace
for our teams so that they can work
more collaboratively.
Overall, we are confident that these
investments in our teams will contribute
to healthy and sustainable businesses
for the future.
Louise Smalley
Group HR Director
24 April 2018
Board Directors
Male 4
Female 4
Senior leaders
Male 36
Female 11
Whitbread Leadership
Forum
Male 143
Female 71
All Whitbread
employees
Male 19,036
Female 33,680
Whitbread Annual Report and Accounts 2017/18
13
Strategic report Force for Good
Chris Vaughan
General Counsel
Enabling people to live
and work well
Whitbread has always developed and
changed with the times, but our core
values of investing in people and being
a Force for Good in our communities
remain as true today as they were in 1742.
We have committed to reduce
our carbon emissions intensity by
50%
by 2025
100%
procured renewable energy
supplying owned sites since
August 2017
We have a responsibility to
act as a Force for Good for all our
stakeholders and we take this
seriously, which is why I am really
pleased to have the responsibility
for sustainability at Whitbread.
Sustainability is core to what we do and
is integral to our business strategy and
long-term commercial success, so it
makes sense to reflect this in the way
we report. This year we will not be
publishing a separate sustainability
report, we are integrating our
sustainability reporting into our Annual
Report and Accounts. Look out for our
Force for Good updates and case
studies signposted by our logos shown
on page 15.
We established our corporate social
responsibility programme, Good
Together, in 2009 and we’ve made a lot
of progress. While it was agreed that the
programme structure largely worked
across our brands, we decided to review
whether it focused on the right trends
and whether we could set more
ambitious targets.
To ensure the new programme was the
best fit for our brands, we completed
two related pieces of work during 2017:
• a materiality assessment that analysed
the views of internal and external
stakeholders about which sustainability
areas, linked to the UN Sustainable
Development Goals, are the most
important to Whitbread and why; and
• a review of the current and future
consumer-related sustainability
trends that are likely to impact our
brands now and over the next five
to ten years.
The overall and consistent theme
emerging from the work is that if we
were going to build a sustainability
programme around anything, and set
a higher level of ambition, it should be
around the broad theme of ‘people’.
People are at the heart of our business
and our success is anchored in our
teams. But this is more than simply
running great training and development;
it is about providing healthier products
that our customers can trust and the
role we play in our communities and
across our entire supply chain.
Whitbread Annual Report and Accounts 2017/18
14
Strategic reportStrategic report We launched our new programme,
Force for Good, in July 2017. Force for
Good is about helping everyone – our
customers, team members and suppliers
– to live and work well.
We have identified three key pillars:
Opportunity, Community and
Responsibility. Each of these pillars
has its own commitments and
stretching targets; from raising a huge
£30 million for our charity partners by
2021, to becoming the most inclusive
hospitality brand.
We are pleased to have made real
progress since launching our new
approach in July. Information on how
we are progressing against our targets
can be found in the table on pages 16
and 17.
Force for Good focuses on improving
the issues that are most material for our
brands, team members, society and the
environment. We recognise emerging
issues around single-use plastics,
takeaway cups and health and nutrition.
We are committed to finding new and
innovative ways to be a Force for Good
in these areas. For example, we are
continuing to take the lead in recycling
plastic waste through our cup recycling
commitment, the removal of plastic
straws in Costa and by offering to refill
water bottles for free in over 300
Whitbread sites.
We will continue to communicate our
performance in an open and honest way
and report on our performance through
our Annual Report and Accounts and
third-party assessments such as the
Dow Jones Sustainability Index. Our
Force for Good data has been assured
by an independent third-party company
and the full statement can be found on
our website: www.whitbread.co.uk.
This year has been an excellent year
for our new programme and I am
particularly proud of the achievements
highlighted in the Force for Good table;
including our ground breaking cup
recycling programme, our work on
sugar reduction and the WISE
apprenticeship programme.
I am excited about how Force for Good
will continue to make a real difference
to our teams, customers and suppliers,
enabling them to live and work well.
Read on to find out how we have
continued to make progress on our
commitments and set more ambitious
targets for the coming year.
Chris Vaughan
General Counsel
24 April 2018
Enabling people to live and work well
Opportunity
Community
Responsibility
A team where everyone can reach their
potential – no barriers to entry and no
limits to ambition
Making a meaningful contribution
to the customers and communities
we serve
• Our ground-breaking WISE
(Whitbread Investing in Skills
& Employment) programme has
enabled apprentices to gain over
1,200 industry qualifications this year.
• Whitbread is a member of the
30% Club with the aim to improve
gender diversity in our senior
leadership teams.
• We have raised over £4.6 million this
year for our charity partners Great
Ormond Street Hospital and the
Costa Foundation.
• This year we have committed
to the out-of-home Code of Practice
to reduce sugar by 20% by 2020,
to do this we have been working
hard to make changes to recipes,
review portion sizes and introduce
healthier options.
Always operating in a way that respects
people and planet
• This year we have published our
commitment to reduce our carbon
emissions intensity by 50% by 2025.
• This year, we have recovered almost
14 million cups for recycling, but we
want to continue to take a lead on
coffee cup recycling. We have
committed to recycle the same
volume of takeaway cups that our
customers use every year – we intend
to recycle 500 million cups per year
by 2020, by paying a supplement of
£70 to waste collectors for every tonne
of cups collected, which will increase
their value by 150%.
Whitbread Annual Report and Accounts 2017/18
15
Strategic report Force for Good continued
As the UK’s largest hospitality business, we have a
responsibility and an opportunity to drive change
within the industry. We have made great progress
against our ambitious targets.
Focus area
2020 target
Force for
Good pillar
Progress against
2020 targets
Target
status
Update on progress and
plans for the future
Teams and
communities
• 5,000 apprenticeships
• 7,500 work experience placements
(started since 2014/15)
• 6,500 employment placements
(started since 2014/15)
3,199
4,082
3,736
• £10 million raised for Great Ormond
Street Hospital Charity
£11.5 million
• £15 million raised for 100 Costa
Foundation School projects
£13.8 million
We are pleased to have raised almost £14 million for the Costa Foundation to date and
we are on track to exceed our targets. We have completed 78 school projects so far.
Customer
wellbeing
• Whitbread’s critical commodities
100% accredited against robust
standards
• Added sugar in all Costa drinks
reduced by 25% (against 2014/15
baseline)
• Added sugar in Costa Ice range
reduced by 30% (against 2014/15
baseline)
On track
15% per portion
16% per portion
• Salt in Costa sandwich range reduced
by 5% (against 2014/15 baseline)
14% per portion
Environment
• Reduced carbon by 15% relative to
sales turnover (against 2014/15
baseline)
• Reduced water use by 20% relative
to sales turnover (against a
2014/15 baseline)
• Increased direct operations recycling
rate to 80% across hotels, restaurants
and coffee shops
20.91%*
3.4%
67%
* Applies to UK and international business.
Whitbread Annual Report and Accounts 2017/18
16
The Whitbread Apprenticeship Programme continues to be on track to meet our
We have a strong presence in offering opportunities for all. We are working with
our resourcing teams to transition the way we can offer work experience and work
placements to students from our website to increase opportunities.
We are continuing to work with our local communities to highlight career
opportunities and engage future talent through work placements and have
reviewed our partnerships and reporting system over the last year to continue
improvement.
We are delighted to have hit our 2020 target early. We have now announced a new
target to raise a further £10 million to go towards a much-needed sight and sound
centre at Great Ormond Street Hospital.
We have been working hard to meet our 2020 target to source our cotton, coffee,
meat, fish, sugar, soy, timber and palm oil to sustainable standards. For example, all
our coffee is all Rainforest Alliance Certified.
We have been working hard on our Costa range to look at healthier choices,
reformulation and portion size review. We have now achieved an overall reduction
for Costa drinks of 15% per portion, and 33% per 100g. For hot drinks, we have seen
a 23% reduction.
We are now at the halfway point with our Costa Ice range and are on target for
a 16% reduction per portion.
We are extremely pleased that we have exceeded the 5% reduction target for
Costa sandwiches with 14% reduction per portion. We continue to make excellent
progress to the Public Health England 2017 Salt Guidelines with all Costa categories
meeting the category average.
In 2016/17 we exceeded our carbon reduction target. We have now set a new
science-based carbon target. This is a target which aligns Whitbread to the global
Paris Climate Change agreement made at COP 21 in 2015.
We continue to install water efficient appliances across our estate. However, due to
some changes, such as the growth of larger floor space in Costa Drive Thru’s, we
have been tracking behind our target. To tackle this, we are working with external
partners to review how we can protect water resources in our operation.
We are continuing to recycle many of our waste streams across our estate, including
coffee cups and coffee grounds and intend to extend our backhaul waste solution to
include additional waste streams to help us reach our recycling target.
Strategic reportStrategic report Focus area
2020 target
Force for
Progress against
Good pillar
2020 targets
Target
status
Update on progress and
plans for the future
The Whitbread Apprenticeship Programme continues to be on track to meet our
target and is now live across all our brands.
Awards
Key
On track or ahead of target.
Not currently on track, but plan
in place to achieve target.
At risk of missing target.
We have a strong presence in offering opportunities for all. We are working with
our resourcing teams to transition the way we can offer work experience and work
placements to students from our website to increase opportunities.
We are continuing to work with our local communities to highlight career
opportunities and engage future talent through work placements and have
reviewed our partnerships and reporting system over the last year to continue
improvement.
We are delighted to have hit our 2020 target early. We have now announced a new
target to raise a further £10 million to go towards a much-needed sight and sound
centre at Great Ormond Street Hospital.
• £15 million raised for 100 Costa
Foundation School projects
£13.8 million
We are pleased to have raised almost £14 million for the Costa Foundation to date and
we are on track to exceed our targets. We have completed 78 school projects so far.
We have been working hard to meet our 2020 target to source our cotton, coffee,
meat, fish, sugar, soy, timber and palm oil to sustainable standards. For example, all
our coffee is all Rainforest Alliance Certified.
We have been working hard on our Costa range to look at healthier choices,
reformulation and portion size review. We have now achieved an overall reduction
for Costa drinks of 15% per portion, and 33% per 100g. For hot drinks, we have seen
a 23% reduction.
We are now at the halfway point with our Costa Ice range and are on target for
a 16% reduction per portion.
We are extremely pleased that we have exceeded the 5% reduction target for
Costa sandwiches with 14% reduction per portion. We continue to make excellent
progress to the Public Health England 2017 Salt Guidelines with all Costa categories
meeting the category average.
In 2016/17 we exceeded our carbon reduction target. We have now set a new
science-based carbon target. This is a target which aligns Whitbread to the global
Paris Climate Change agreement made at COP 21 in 2015.
We continue to install water efficient appliances across our estate. However, due to
some changes, such as the growth of larger floor space in Costa Drive Thru’s, we
have been tracking behind our target. To tackle this, we are working with external
partners to review how we can protect water resources in our operation.
We are continuing to recycle many of our waste streams across our estate, including
coffee cups and coffee grounds and intend to extend our backhaul waste solution to
include additional waste streams to help us reach our recycling target.
Evening Standard Corporate
Citizen of the Year
We are tremendously proud that the
Costa Community Programme and
achievements of our teams has been
recognised with Costa being awarded
the Evening Standard Corporate Citizen
of the Year for 2017.
MSC Newcomer of the Year
All our wild caught fish is sustainably
sourced and certified to the Marine
Stewardship Council (MSC) standard.
In the 2017 MSC Awards, we were
delighted to win ‘Newcomer of the Year’.
2018 Sustainability Yearbook
For the second year running, Whitbread
was named amongst the world’s most
sustainable companies in RobecoSAM’s
2018 Sustainability Yearbook.
Whitbread Annual Report and Accounts 2017/18
17
Teams and
communities
• 5,000 apprenticeships
(started since 2014/15)
• 7,500 work experience placements
(started since 2014/15)
• 6,500 employment placements
(started since 2014/15)
3,199
4,082
3,736
• £10 million raised for Great Ormond
Street Hospital Charity
£11.5 million
Customer
wellbeing
• Whitbread’s critical commodities
100% accredited against robust
standards
• Added sugar in all Costa drinks
reduced by 25% (against 2014/15
baseline)
• Added sugar in Costa Ice range
reduced by 30% (against 2014/15
baseline)
On track
15% per portion
16% per portion
• Salt in Costa sandwich range reduced
by 5% (against 2014/15 baseline)
14% per portion
Environment
• Reduced carbon by 15% relative to
sales turnover (against 2014/15
20.91%*
baseline)
• Reduced water use by 20% relative
to sales turnover (against a
2014/15 baseline)
• Increased direct operations recycling
rate to 80% across hotels, restaurants
and coffee shops
3.4%
67%
Strategic report Working hard
to give you the best
night’s sleep
72,000+
rooms the length and
breadth of the UK
relax...
and recharge
Whitbread Annual Report and Accounts 2017/18
18
Strategic reportStrategic report S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
97%
of all guests book with us directly
The UK’s No. 1 hotel
brand goes from
strength to strength
With over 70,000 rooms the length and
breadth of the UK, Premier Inn’s position as
the No. 1 hotel brand goes from strength to
strength. Substantial investment in opening
new hotels, refurbishing existing hotels and
innovating the brand proposition ensures
that guests can always enjoy a high quality
product at great value for money, wherever
they choose to stay.
Recent innovations in Premier Inn’s digital
offer have led to an enhanced online and
booking experience for guests, with over
95% of all guests choosing to book with
us directly, driving guest satisfaction,
preference and loyalty. For our business
account customers our new booking tool
gives them access to a dedicated online
portal with information tailored to their
needs, making it even easier and more
cost-effective to book with Premier Inn.
Whitbread Annual Report and Accounts 2017/18
19
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 an industry-leading apprenticeship programme to
grow talented leaders and we provide exciting international
career prospects.
Costa
16,000+
employees
74%
engagement score
Premier Inn
34,000+
employees
80%
engagement score
Force for Good
We have set a target to raise
£30m
for our chosen charity
partners by 2021
Read more pg 24
We employ over 50,000 team
members across all our brands.
It’s the continued dedication of our
Winning Teams that makes every
day experiences special for our
customers. Ensuring our teams
are engaged and supported is
important to us.
Listening to our Winning Teams
Listening to our people continues
to be a vital activity at the heart
of our strategy. Our annual engagement
survey YourSay, carried out by
Korn Ferry Hay Group, provides our
teams with an opportunity to tell us
whether Whitbread is a great place
to work. In 2017, 83% of our people
took part in YourSay – over 40,000
team members.
Overall, Whitbread’s engagement score
is 78%. Our Winning Teams continue to
have high levels of engagement in all
brands – 80% (Premier Inn), and 74%
(Costa). In Costa China, our team
had outstanding engagement and
enablement results at 94% and 96%
respectively. We also track enablement –
a measure of whether our teams feel
equipped and supported to do their
job – which is at 81%.
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.
A number of areas across our brands
have made significant progress year on
year, for example our exciting restaurant
brand Bar+Block has increased team
engagement by 9% and our Premier Inn
housekeeping teams are some of the
most highly enabled teams across
hospitality worldwide. Nevertheless in
all areas we have robust action plans to
address any opportunities or issues
raised by our teams.
Whitbread Annual Report and Accounts 2017/18 20
Strategic reportStrategic report We also combined our Premier Inn
and restaurants UK learning and
development teams, bringing greater
value and mutual learning across our
joint sites. Our three food and beverage
skills academies continue to deliver skills
training for our restaurant kitchen teams
and our skills academies now include
training for our Premier Inn team
members. This has led to a large
increase in learning delivery and,
over the course of 2017/18, over
6,500 team members across Premier
Inn and our restaurants have attended
a development workshop at one of our
skills academies.
Internationally, in our Costa Poland
business, we are delighted that our
internal talent development programme
‘Carrier Path’ has successfully supported
internal progression and, across the year
a significant proportion of management
positions have been filled by internal
Our 2017 YourSay survey results
are encouraging and tell us:
84% 87% 89% 88%
feel like a valued
member of
their team
of team members
have received the
correct training to
do their job well
are treated
fairly and with
respect by their
line manager
say that their
team works
together to
deliver for
customers
Premier Inn Clinical Building
Work began on the Premier Inn Clinical
Building at Great Ormond Street Hospital
(GOSH) in 2014 and the new facility
opened its doors to its first patients in
November 2017. We were delighted to
announce the Premier Inn Clinical
Building was officially opened in January
2018 by HRH The Duchess of Cambridge.
Thanks to the tremendous generosity
of our team members, customers and
suppliers, the Premier Inn Clinical
Building, which sits within The Mittal
Children’s Medical Centre provides 141
new beds (97 inpatient, nine ICU and 35
day-cases), for children being treated at
GOSH. It has seen children move out of
old facilities and into brand new, modern
wards with en-suite bedrooms where
parents can stay comfortably with their
child overnight.
The Premier Inn Clinical Building will make
an incredible difference to the amazing and
dedicated teams of medical and nursing
staff, helping them to provide care for
thousands more seriously ill children, in
world class facilities.
We are delighted to announce that our
partnership with GOSH will continue to
grow as we work towards our next big
project – raising £10 million to build another
ground-breaking new facility for children
with sight and hearing impairments.
£7.5m
Our teams have hit our target
to raise £7.5 million towards the
Premier Inn Clinical Building
We have a strong track record in
enabling our teams to deliver a great
experience for our customers, but we
recognise that there is still more to do.
We are planning significant investment
across our sites and in the support
centre to address the feedback, with
particular focus on the following areas:
• personal development for our teams
to learn and develop their careers;
• continuing to modernise our working
environments; and
• improving our technology to enable
our teams to perform at their best.
Retaining our Winning Teams
We understand and appreciate the
importance of retaining our teams and
in 2017/18 we have shifted our focus
and measurement to the underlying
drivers of team retention, including pay
progression and ongoing development.
We are delighted that in all our brands
we have seen positives in a challenging
year with an improved retention rate
versus the prior year.
Positive momentum from last year
continues into 2017/18 and we are
pleased that our Pay for Progression
proposition continues to ensure our
team members across all our brands are
fairly rewarded for the transferable skills
they attain. We are being proactive in
developing initiatives to support our
managers in improving the retention of
their teams through quality recognition
and learning and development
opportunities.
Developing our Winning Teams
Our team members deliver the brand
standards and service every day for
our customers, therefore ensuring our
people have the opportunity and
support to reach their full potential and
the means to develop their careers is
critical to our success. In Costa UK over
1,000 store managers have attended
targeted leadership training across
the year. In addition to this, we have
continued to focus on line manager
capability and almost 50 leaders have
attended our Leadership Development
workshop, ‘LEAD’. We have continued to
run skills workshops and in Costa China
a number of team members have
attended a two-day advanced coffee
training programme.
Whitbread Annual Report and Accounts 2017/18
21
Strategic report Operating review continued
Winning Teams
continued
team members. Furthermore, our
Premier Inn Germany team have
launched specific coaching sessions
designed to train and develop our internal
talent for future management positions;
these coaching sessions are designed to
strengthen our pipeline of future hotel
managers. We also continue to support
‘Joblinge,’ an organisation that assists
the employment of young people.
This year, we have continued to run our
highly successful graduate schemes
both operationally and functionally; and
we welcomed over 40 graduates onto
our schemes in September 2017. Our
operational scheme within Premier Inn is
worth highlighting. The scheme provides
hands-on operational experience and
develops graduates through a detailed
training programme designed to give
them the skills required to lead a winning
team. Our functional schemes have also
continued within HR, Finance and IT, all
of which provide a strong internal talent
pipeline. The schemes include regular
rotations, relevant training and
guarantees development. The
opportunity to gain detailed knowledge
of the business and learn a specific
function or specialism is highly valued.
Rewarding and recognising our
Winning Teams
Personalised recognition is fundamental
to our engagement strategy and we
continue to look for ways to celebrate
and recognise our teams. Throughout
2017/18 over £400,000 was paid to
team members via the ‘MyRewards’
platform as part of local recognition
awards in Premier Inn and our
restaurants. ‘MyRewards’ enables our
managers to reward teams ‘in the
moment’ when it is most relevant and
valued. Similarly, in Costa over £1 million
is uploaded annually to our ‘Feelgood’
portal to award Baristas and Barista
Maestros for great customer service and
sales performance.
We have built on last year’s momentum
and Premier Inn and our restaurants
have invested significantly into
‘MyRewards’ to support fun and
engaging team member incentives;
driving focus and energy in areas
important to our customers. Across our
restaurants, one key focus has been on
our Kitchens of Excellence programme
which awards every single team
member when their team collectively
achieves their core kitchen performance
indicators. Furthermore, across Premier
Inn and Costa, we continue to celebrate
those teams that achieve an ‘all green
WINcard,’ having met every target set
on the WINcard across the year.
Creating a ‘no limits to ambition’
environment
We have continued to make
progress against our Force for Good
commitment to become the ‘most
inclusive hospitality business’.
We’re passionate about creating an
environment where everyone can reach
their potential, with no barriers to entry
and no limits to ambition. We recognise
that diverse teams bring significant
business benefits and we must cultivate
the environment for diversity of thought
to flourish.
Gender representation continues to
be a key focus of our diversity and
inclusion strategy. This year we have
introduced challenging internal targets
for gender representation in our senior
roles and formally joined the 30%
Club, aiming for a minimum of 30%
representation at our most senior
Barista of the Year
We have again, for the 12th year,
celebrated our annual Barista of the
Year competition. Barista of the Year is
integral to Costa and sees baristas from
all over the world take to the stage to
demonstrate their pride, passion and
personalities whilst competing to secure
the ultimate title – Champion of
Champions. The competition commences
in June with store, area and regional
heats and culminates in January with a
two-day final, the second day of which is
held in London in front of a live audience
and streamed to colleagues around the
world. Following this amazing two-day
final, we were extremely proud to
announce that our Barista of the Year
2017/18 Champion of Champions is
Kinga Sobczynska from the UK.
“I’m still in shock that
I have won Barista of
the Year. The whole
journey has been
amazing and it was
such an honour to
even make the final
and meet other
Costa Baristas.”
Kinga Sobczynska
Barista of the Year 2017/18
Whitbread Annual Report and Accounts 2017/18
22
Strategic reportStrategic report Derwen College and Premier Inn
This year marked the one-year
anniversary of Premier Inn’s fantastic
new training centre at Derwen College,
Shropshire. Derwen College is a specialist
residential education centre for young
people with learning difficulties and
disabilities. It equips young people aged
16-25 with the skills they need to be
independent and prepares them for
the workplace.
To make the training as effective as
possible, we converted a space in the
college into a fully functioning Premier
Inn training centre. The training centre
consists of a reception area, three
en-suite bedrooms and a linen room
creating a real-life work setting for
students to gain industry standard
training in hospitality. Students are given
work experience opportunities in local
Premier Inn sites during their time at the
college, which hopefully go on to
become permanent positions in our
hotels across the country.
We are continuing to build on the success
of our partnership with Derwen College
and we are extremely proud that 102
students have directly benefitted from
working in the Premier Inn training centre
since its opening. Six students are now in
full time positions and 36 students have
had external placements with Premier Inn
since 2013.
levels in all functional areas. This
year we reached over 30% female
representation in our top 200 roles
overall, although we recognise that we
have much further to go and we will
continue to work hard to ensure men
and women are equally balanced
in all our senior leadership teams. To
support this we are also collaborating
with the 30% Club external mentoring
programme for our female future
leaders and we continue to invest
in our ‘WOW’ group – Women of
Whitbread, which now has chapters all
over the country aiming to tackle the
barriers to career progression at team
level across all functions and brands in
our business. As we introduce further
advances to our technology we are able
to encourage agile working across the
group to support all of our diversity and
inclusion initiatives.
We also continue to encourage the
activities of ‘GLOW’ – Gay & Lesbian
Out at Whitbread, to raise awareness
amongst all employees of the
importance of inclusion and share
tangible actions to improve. As members
of Stonewall, we continue to seek
guidance and support from them to
ensure that we create an environment
where LGBTQ team members can truly
be themselves at work.
WISE
Whitbread launched ‘WISE’ – Whitbread
Investing in Skills and Employment,
in 2012. WISE is a key part of our
Force for Good strategy and is a
structured and quality assured
programme that provides opportunities
and supports people into the world
of work. WISE addresses attraction,
retention and progression challenges
through providing structured work
experience, two or four-week work
placements and a suite of intermediate
and higher-level apprenticeships. Due
to the success of our operationally-
focused apprenticeship programmes,
in November 2017 WISE launched
Level 3 and 4 Business Administration
Apprenticeships.
We are delighted that, over the year,
Whitbread has had over 800 apprentices
in learning with an ambitious target
of 1,500 apprentices within two years.
A key focus for our apprenticeship
programme is to improve employee
retention, a business-critical challenge
and one that is at the heart of our
Winning Teams strategy. Whitbread’s
apprenticeship programme also strives
to fill management positions internally
and to inspire more people to choose
a career in hospitality. We are proud of
the fact that a significant proportion
of our operations managers either are,
or have been, an apprentice. This is
fantastic testament to the quality
of our apprenticeship programme
and demonstrates the value of our
apprenticeships in developing
our talented people and providing
attractive career opportunities.
During 2017/18 Whitbread has
transitioned 12 apprenticeship
programmes to the new industry
‘standards’ and is currently setting
up new processes to deliver
the new End Point Assessment
requirements.
Whitbread Annual Report and Accounts 2017/18
23
Strategic report Operating review continued
Winning Teams
continued
“Each apprenticeship
has taught me
different skills and
leadership abilities,
helping me to become
the first person to
complete all levels,
and to win the
Samuel Whitbread
Apprentice Award.”
Charlotte Maloney
Whitbread apprentice
Charlotte Maloney
Charlotte Maloney joined Whitbread
six years ago as a team member in
Premier Inn. Charlotte saw opportunities
to reach her potential with us and build
a career while working, instead of going
to university.
Charlotte started her intermediate
apprenticeship as a team member and
worked her way through to advanced
apprenticeships as a team leader before
starting on her higher hospitality
management apprenticeship in 2016.
Charlotte gained the knowledge, skills
and confidence to set her career up for
success and gained promotions following
each apprenticeship programme.
In 2017 Charlotte completed her higher
apprenticeship and was appointed into
her first operations manager role in
Manchester. The apprenticeship
programmes have supported Charlotte
to be a more confident person
stretching her knowledge and giving
her time and space to learn and
develop into a more rounded person,
manager and future leader.
Audrey Gillespie, Regional Operations
Director, Costa in Scotland, said “I’m
extremely proud to be involved with our
Modern Apprenticeship Programme. It
offers all of our team the opportunity
to achieve qualifications while gaining
valuable on job experience. Over the last
few years we’ve had the pleasure
of seeing many of our team progress
through the various apprenticeship
levels while, at the same time, advancing
their careers. This combination of
advancing skill and education in parallel
has seen many progress to supervisory
and managerial roles. This secures our
leadership pipeline for our future growth
with a strong base in our workforce in
terms of their engagement and
capability ensuring an eager and
enabled team moving forward.”
Our charitable partners
Whitbread team members have a long
history for supporting and giving to
charity. As a business we recognise that
some of our team members want to
support other charities and good
causes, as well as supporting our
corporate charity partners. The Raise &
Match charity scheme was put into place
to support team members who want to
fundraise in their own time for causes
they are personally passionate about,
and through this scheme our team
members have raised £120,000 with the
Company matching £50,000, making
a total benefit of £170,000. The Give &
Match (Payroll Giving) Scheme supports
our team members in donating to
charities of their choice on a regular
basis by double matching the team
member’s first donation and paying
all the administration charges for
processing the donation. Through
this scheme our team members have
donated a total of £273,500 with
Whitbread matching £13,500, making a
total benefit to the charities of £287,000
and the business also paying £13,000
in administration.
Great Ormond Street Hospital Charity
Thanks to the pride, passion and
support of our team members, along
with the kindness and generosity of our
customers and suppliers, we are proud
that we have the ability to change lives
here in the UK and around the world
through our successful partnerships
with Great Ormond Street Hospital
Charity (GOSH) and our very own
Costa Foundation.
Whitbread Annual Report and Accounts 2017/18 24
Strategic reportStrategic report When we established our partnership
with GOSH in 2012, we wanted to make
a significant impact to the hospital
through fundraising. We are extremely
proud to be the largest corporate
fundraiser for GOSH and thanks to the
combined efforts of our customers,
teams and suppliers, we are delighted to
have raised over £2.6 million in 2017/18,
totalling more than £11 million to date.
Costa Foundation
We are tremendously proud of the
work that the Costa Foundation has
achieved over the past ten years,
building and funding school projects
in coffee-growing communities around
the world. The Foundation’s strategic
mission is to improve the life chances of
girls and boys by providing them with
the opportunity for a safe, quality
education. Foundation schools deliver
both academic and extra curricular
programmes that enhance health,
gender equality and environmental
awareness. This year we have raised
more than £1.96 million and six new
school projects have been completed.
Costa Community Programme
The work we do has an impact beyond
our doors. Our Costa Community
Programme continues to make a positive
difference in the local communities near
our stores. In 2017 over 1,300 of our store
teams completed more than 2,400
different community projects and have
volunteered over 16,000 hours of
community support.
This year was our third year of supporting
The Great British Spring Clean with over
400 stores helping to collect ten tonnes
of rubbish. 2017 was also the second year
of our Costa Reading Week which saw
over 500 stores participate in hosting
reading activities in their stores,
encouraging parents, carers and teachers
to spend one-on-one time reading
with their children. During this week,
our Costa store teams donated around
30,000 books and other resources to
their local schools.
40,000hrs
of community work since the
beginning of our Costa
Community Programme
in 2014
2017 saw the 11th year of the Costa
Foundation Three Peaks Challenge
event. This fantastic event raised a huge
£92,000 by 23 teams and over 180
participants. This year also marked our
first mass participant event – ‘The
Twilight Walk’. More than 800 members
of our store teams and the wider Costa
community across the UK took part in
walking 10km across 20 locations, all in
aid of the Costa Foundation.
Doing business, the right way
Continuing our partnership with Stop
the Traffik (one of the UK’s leading
modern slavery and human trafficking
non-governmental organisations), we
developed a training programme for
team members working across our hotel
sites. The training was delivered through
a series of working groups, supported
by an e-learning module and focused on
raising awareness of human trafficking
and modern slavery, empowering our
teams to identify potential indicators of
human trafficking abuse in our sites and
provide them with the tools to report it
quickly and effectively.
Within 30 days of joining, every team
member must undertake an e-learning
module on Whitbread’s Code of
Conduct, and then refresh their
knowledge on an annual basis. The code
covers a number of topics, including
Whitbread’s vision and values, and the
speaking out process and phoneline. It
also covers areas of compliance, such as
gifts and hospitality, inside information,
and bribery and corruption. There is a
separate anti-bribery e-learning module,
which is mandatory for all team
members to complete, and covers
Whitbread’s policy on bribery and the
Bribery Act.
“We are proud to
support many children
and communities in
our work in coffee
growing communities
around the world,
communities that are
often overlooked.”
Piers Blake
Costa Foundation Director
Jerusalen de Minaro
Primary School, Peru
Under the Modern Slavery Act we are
proud to publicly report our progress
in tackling the risk of modern slavery
across our business and supply chain.
Our second Modern Slavery Report
has been published in line with our
Annual Report and can be found at
www.whitbread.co.uk/modernslavery.
Whitbread Annual Report and Accounts 2017/18
25
Strategic report Working hard
to delight and innovate
8
stores in the
new design
Whitbread Annual Report and Accounts 2017/18 26
Strategic reportStrategic report Voted the Nation’s Favourite
Coffee Shop Brand
8 years
in a row
Costa innovates with
new store design
Always looking to stay ahead of hospitality
trends and delight customers with new
products and experiences, Costa is
refreshing the environment and design of its
stores to make them even more welcoming
and appealing. Eye-catching features of the
new store design include a lighting display
made of Costa cups and bespoke wall art
that add a bright, contemporary feel where
customers can relax and chat in colourful
comfy armchairs or find a quiet spot to
work. Coffee is absolutely at the heart of the
experience with coffee imagery decorating
the walls and a state-of-the-art ‘Brew Bar’
serving the latest coffee innovations of Nitro
Cold Brew and Pour Over filter coffee.
Whitbread Annual Report and Accounts 2017/18
27
Strategic report
Operating review continued
Customer Heartbeat
Our approach
Our 50,000+ team members continue to 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 experience and build brand 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 and nutritionally
balanced food and drink
• We use digital technology to enhance the customer experience
Costa
23.5m
customers per month
8yrs in a row
voted Nation’s Favourite
Coffee Shop Brand
87%
of customers say they are
likely to revisit
Premier Inn
5.5m
customers per month
3yrs in a row
voted UK’s top-rated hotel
chain by Which?
Force for Good
Making a meaningful
contribution to the customers
and communities we serve
Another award-winning year
Over the year our leading brands,
Premier Inn and Costa, have continued
to cement their positions as the UK’s
favourite hotel chain and coffee shop
chain respectively. For the eighth 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 third
consecutive year in the Which? Hotel
Chain Survey, and was awarded the
Which? Recommended Provider for
a third year in a row. Premier Inn also
picked up the award for Best UK
Economy Hotel brand at the British
Travel Awards 2017.
Premier Inn also featured heavily in the
TripAdvisor Travellers’ Choice Awards
and over 600 of our hotels secured
Certificates of Excellence, many for the
fifth consecutive year.
49%
net recommend score
56%
drink quality scores
14m
takeaway cups recovered
for recycling
9/10
Premier Inn guests say they will
definitely consider staying again
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 consider staying again and 87%
of Costa customers saying they are likely
to revisit a store.
Whitbread Annual Report and Accounts 2017/18
28
Strategic reportStrategic report The only hotel brand to deliver on quality
and value
YouGov® BrandIndex
UK’s favourite coffee shop* – 8th year in a row
Brand Preference: Costa is the UK’s favourite
e
r
o
c
s
y
t
i
l
a
u
Q
40
35
30
25
20
15
10
5
0
-5
Hilton
Marriott
Holiday Inn
Holiday Inn Express
Ibis
AirBnb
Travelodge
31%
22%
11%
0
36%
13%
11%
Costa
Starbucks
Caffè Nero
0
5
10
15
20
25
30
35
40
’08
’09
’10
’11
’12
’13
’14
’15
’16
’17
’18
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 moving average as at 22 February 2018
All years based on 12-month averages to the end of the financial year.
* Source: 2008 – 2014; YouGov Q. If there were a Costa Coffee, Starbucks
and Caffè Nero next door to each other, which one would be your FIRST
choice to visit? 2015–2018; TNS One Costa Tracker, Market Monitor,
2,000 Nat Rep respondents per quarter
We use YouGov BrandIndex and Brand
Preference trackers to monitor our
progress against competitors and you
can see on the above how Premier Inn
and Costa continue to hold the leading
position in their respective markets.
A Great Place to Start
Premier Inn has continued to develop
and evolve its successful ‘Great Place
to Start’ multi-channel advertising
campaign, with the launch of three new
TV advertisements. The campaign
features different storylines – reflecting
how and why guests choose Premier Inn
to start their day, whether that’s two
colleagues off to deliver some knockout
pitches in the world of printer sales or
the ‘Pedal Squad’ starting out on their
cycling adventure.
The ’Bridesmaid’s Tale’ is the latest
in Premier Inn’s new series of TV
advertisements. When a bridesmaid
and groomsman lock eyes across the
Premier Inn breakfast buffet, the film
morphs into an all-singing, all-dancing
dream sequence.
Whitbread Annual Report and Accounts 2017/18 29
Strategic report
Operating review continued
Customer Heartbeat
continued
British summer weather. Costa had a
record-breaking Christmas with strong
year on year growth and saw Costa
Express feature Christmas drinks for
the first time ever.
Costa continues to expand its food
range ensuring those customers
looking for a gluten-free and vegan
option are catered for. This year Costa
has expanded its salad range and
introduced new hot foods – including
the ever-popular mac and cheese. Those
looking for gluten-free products have
been enjoying new wraps and salads,
whilst our vegan Christmas mince pie
went on to be one of the biggest selling
impulse purchases this Christmas.
Future proofing our stores
Building on the success of our
Wandsworth concept store, Costa
rolled out eight new ‘stores of the
future’ this year – delivering light and
airy spaces for customers to enjoy an
enhanced selection of fresh food and
coffee. The store layout also includes
a newly designed bar to increase the
store team’s productivity. The coffee
machines have been moved to the front
of the bar to allow customers to learn
and engage more with our teams whilst
their handcrafted coffee is being made.
The pace of refurbishment will
significantly increase this year.
Innovating at Costa
Costa remains at the forefront of
Britain’s growing love affair with coffee
and this year introduced Costa Cold
Brew; a smooth, refreshing drink made
from a carefully selected single-origin
Colombian blend designed for a rich
and balanced flavour profile. Brewed
in-store for 20 hours to bring out the
coffee’s natural sweetness, this delicious,
hand-crafted coffee experience has
excited coffee lovers looking to try
something new.
As the nation’s palates mature and
customers seek milk alternatives for
their coffee, Costa introduced a
coconut-based milk alternative across its
stores nationwide. The dairy alternative
showcases the perfect partnership of
Costa’s Mocha-Italia blend and the light,
fresh taste of coconut.
The past year saw Costa launch its
biggest and boldest summer selection
yet. With the return of cool favourites
as well as fresh new additions, there
was something on offer for everyone
throughout the predictably unpredictable
20hrs
to bring out the natural sweetness
in our Cold Brew coffee
Best-seller
this Christmas was the
vegan mince pie
Whitbread Annual Report and Accounts 2017/18 30
Strategic reportStrategic report Innovating in Premier Inn and
our restaurants
‘hub by Premier Inn’ continues to grow,
with four new hotels opened this year,
in King’s Cross, Westminster Abbey
and Goodge Street in London, as
well as Rose Street in Edinburgh. These
compact, city centre hotels continue to
delight guests, providing contemporary
room design and excellent connectivity
at good value for money. With an
ambitious target of over 3,000 rooms
by 2020, we continue to host guests in
the heart of cities up and down the
country at an affordable price.
In October 2017 Whitbread launched
its brand new pub restaurant concept,
Cookhouse & Pub, in Oldbury, West
Midlands. The new pub restaurant aims
to reinvent the pub dining experience,
delivering “quality food and service in
an informal, all-day casual restaurant
with the relaxed vibe and affordability
of a pub.” With an additional five sites
now open, Cookhouse & Pub received
a Midas award for menu innovation
in a new pub restaurant concept and
has received positive guest and team
feedback. The new concept is a strong
addition to Whitbread’s restaurant
portfolio and is expected to continue
to drive strong covers growth alongside
Beefeater, Bar+Block, Brewers Fayre,
Table Table and Whitbread Inns.
Premier Inn continues to lead the way
digitally, providing our customers with
technology that allows them to search,
book and pay online with ease, via a
website or mobile app.
Following significant investment in our
in-house digital teams, this year Premier
Inn launched Business Booker, an online
portal designed to save time and money
for businesses. The platform simplifies
the process of booking and includes
Business Flex rates, offering faster
booking, spending caps, employee
allowances, and downloadable reports.
Leading the way in nutrition
Across all its brands, Whitbread continues
to demonstrate leadership in providing
its customers with ‘credible choice’ and a
nutrition programme aimed at supporting
government goals to improve the nation’s
health by offering healthier, fresher food
and drink options.
As part of our nutrition strategy, this year
saw Whitbread lead an out-of-home
industry group to develop a Code of
Practice, in which a number of leading
restaurant and coffee shop companies
have committed to cut sugar in their food
and drink by 20% by 2020. The Code also
commits to driving responsible behaviour
within the industry on reformulation, new
product development and customer
communications.
The ambition is to encourage the
out-of-home sector to join the alliance
in their support for the Government’s
Obesity Plan and Public Health
England’s sugar reduction programme.
To ensure progress against these
commitments, the group will be advised
by independent expert organisation,
the British Nutrition Foundation.
Sugar reduction
Increasing customer demand for an
enhanced food offer with greater choice
and healthier options is driving our good
development. We are doing this through a
mix of reformulating existing products and
introducing new products and healthier
versions of a few of our favourites.
16%
reduction of sugar per portion
in our Brewers Fayre core desserts
14%
sugar reduction in Costa’s hot
chocolate, coffees with sugar-free syrup,
Frostino and cooler ranges
7.8%
sugar reduction in Costa’s chocolate
tiffin has resulted in nearly three tonnes
of total sugar removed from this
product since July 2017
Whitbread Annual Report and Accounts 2017/18
31
Strategic report Operating review continued
Customer Heartbeat
continued
A digital revolution
During the year our in-house digital
teams launched a range of new and
exciting digital services to ensure our
customers get the best possible
experience at Costa.
A massive piece of work was undertaken
to migrate all of our loyalty customers to
a brand new digital platform, giving us a
stable platform to build and innovate
upon. In October 2017 Costa Digital took
a huge step forward by launching a new
look app with an exciting modern feel,
improved navigation and an infinitely
more accurate store locator. The new
app has been positively received by our
customers, driving an increased level of
customer satisfaction and allowing us to
grow our user base to around 1.3 million.
This strong momentum continued with
the launch of two exciting new pilots
later in the year:
• Costa Collect – The ability for our
customers to pre-order and pay for
a coffee via the mobile app. This is
being piloted in 16 busy London stores
before adding enhanced features and
rolling out to more stores later in the
year. A great offering to give our
customers a new way to grab their
favourite coffee; and
• Express Loyalty – as an industry first,
customers can now collect Coffee
Club loyalty points on purchases at
our Costa Express machines, currently
being trialled across 21 sites and 30
machines. An exciting new way for our
Express customers to enjoy the
benefits of the Costa Coffee Club.
1.3m
users of the app
Delivering quality
Customers know they can rely on us to
deliver quality and value. But they also
trust us to make sure the products they
enjoy are sourced responsibly and with
integrity and that we take our
responsibility to both people and planet
seriously. From coffee cups to cotton,
we’ll find opportunities to make a
positive impact for the environment
across our whole supply chain and we’ll
make sure that our suppliers and the
people who work with us are always
treated fairly and with respect.
At Whitbread we are committed to
playing our part to tackle the very
serious issue of plastic waste and coffee
cup recycling and being a Force for
Good in this area. This year Costa has
been a driver for change setting up the
first nationwide in-store recycling
scheme (recycling almost 14 million
takeaway cups) and committing to
becoming the first ever coffee chain in
the UK to recycling the same volume of
Social media presence
Across the brands we continue to grow
our social media presence and enjoy
high levels of engagement in the
content we post.
1.7m
Costa Facebook likes
260,000
Premier Inn Facebook likes
237,000
Costa Twitter followers
76,000
Premier Inn Twitter followers
Whitbread Annual Report and Accounts 2017/18
32
Strategic reportStrategic report Sustainable cotton
Working in partnership with Cotton
Connect, we have mapped our cotton
supply chain down to the farms in
Pakistan where it is grown. This has
allowed us to have fully traceable and
sustainable cotton in our supply chain
in the past year.
1,600
farmers enrolled via Cotton Connect
in 2017/18
cups it puts onto the market – 500
million a year by 2020. We have made it
commercially and financially attractive
for waste collectors to put in place the
infrastructure and processes to collect,
sort and transport coffee cups to
recycling plants, meaning fewer cups
will end up in landfill.
Costa has played an active role in the
Government’s Environment Audit
Committee inquiry, providing both
written and oral evidence and continues
to work closely with the Government
to help increase recycling rates.
This year we also launched two new
multi-purpose cups, fit for purpose in
our Costa Express machines and offer
25p for customers using a reusable cup
in store.
As we look beyond just coffee cups, this
year we also committed to replacing all
plastic straws across all Whitbread
brands with plastic alternatives and were
the first UK business to sign up to Refill
– offering over 3,000 sites across the UK
where consumers can refill their water
bottles for free.
Sourcing with integrity
We are committed to sourcing our
products responsibly and ethically and
we work closely with our suppliers to
that end. Respecting human rights
across our supply chain is a key priority
for us and we have made good progress
this year in measuring, monitoring and
remediating our suppliers’ performance
against the standards set out in our
responsible sourcing policy.
We have now begun to implement
human rights audits in our supply chain
programme to ensure people in our
supply chain are treated fairly and with
respect. 243 of our critical suppliers
have now been on-boarded to our
ethical audit programme and over 80
independent ethical audits have now
been completed as part of our wider
Responsible Sourcing programme.
MSC Fish
All the wild-caught fish we serve is
sourced to the Marine Stewardship
Council (MSC) standard. We are the
largest hotel and restaurant chain
in the UK to be awarded the MSC
Chain of Custody standard and were
delighted to win MSC’s ‘Newcomer
of the Year’ award this year in
recognition of our achievement.
3,000
places across the country for
people to refill their water bottles
Whitbread Annual Report and Accounts 2017/18
33
Strategic report Working hard
to create new opportunities
1
2
0
2
0
0
7
5
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y
n
a
m
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e
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,
i
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Whitbread Annual Report and Accounts 2017/18 34
Strategic reportStrategic report
31
Premier Inn hotels in
Germany by 2021
5th
Frankfurt Premier Inn
5th in the TripAdvisor
Travellers Choice Awards
Top 25 ‘Bargain’ hotels in
Germany
Expanding our reach
in Germany
This year we have made significant and exciting
steps in our ambitious growth plans for the
Premier Inn brand in Germany, where we already
have one hotel welcoming guests in Frankfurt.
In addition to our organic pipeline of 11 hotels
we have agreed to purchase a hotel portfolio of
19 hotels, 13 of which are open and trading, with
the remaining six hotels expected to open within
the next two years. All of the hotels, which we
expect to rebrand to Premier Inn in around two
years’ time, are in prime locations in key German
cities. They are of high quality providing the perfect
platform on which to establish our brand as a major
player in this attractive and important market as we
develop an international business of scale.
Whitbread Annual Report and Accounts 2017/18
35
Strategic report Operating review continued
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 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
£498m
underlying operating profit†
was up 6.5%
6.4%
number of rooms available
increased by 6.4%, with 4,385 net
new UK rooms opened in the year
5.2%
Premier Inn grew total sales by
5.2% and UK hotel like for like
sales† by 2.2%
79%
total occupancy remained high
Costa
£159m
underlying operating profit†
was up 0.5%
289
net new stores worldwide
7.5%
total sales growth
1.2%
UK like for like sales† growth
Force for Good
Operating with integrity and
transparency underpins the
way we work.
†
Definitions of all APMs are included in
the glossary on page 167.
Whitbread has produced another
strong financial performance with
Group revenues up 6.1% to £3.3 billion.
Underlying profits before tax increased
by 4.5% to £591 million, with statutory
profit before tax increasing 6.4% to
£548 million. This performance has
been built on the strength of
Whitbread’s two UK market-leading
businesses which have continued to
grow this year, with 4,385 rooms added
to the Premier Inn UK network, 204
Costa UK stores and 1,187 UK Express
machines added. Premier Inn increased
underlying operating profits by 6.5% to
£498 million and Costa increased 0.5%
to £159 million. A full analysis of financial
performance can be found in the Group
Finance Director’s Review on pages
44 to 49.
Whitbread has a clear plan to deliver
long-term growth in earnings and
dividends, combined with a strong
return on capital. This is achieved
through disciplined execution in three
key areas:
01 Grow and innovate
in our core UK businesses
02 Focus on our strengths
to grow internationally
03 Build capacity and
infrastructure to support
long-term growth
The Board has for some time been fully
aligned to the view that separating
Premier Inn and Costa at the right time
would enhance focus and enable value
to be optimised for shareholders over
the longer-term. Given the significant
strategic progress that has been made
and the momentum in the remainder
of the plan, the Board is confident that
both Premier Inn and Costa will soon be
businesses of sufficient strength, scale
and capability to enable them to thrive
as independent companies. The Board,
therefore, believes that it is in the best
long-term interests of Whitbread’s many
stakeholders to separate Premier Inn
and Costa, via a demerger of Costa.
Announcing the demerger of Costa will
provide clarity to shareholders, team
Whitbread Annual Report and Accounts 2017/18 36
Strategic reportStrategic report
members and other stakeholders on
Whitbread’s strategic direction.
The Board has carefully considered the
optimal timing of the demerger of Costa
and concluded it will be pursued as fast
as practical and appropriate to optimise
value for Whitbread’s shareholders and
is expected to be completed within 24
months. This timeframe will allow both
Premier Inn and Costa to maintain
momentum, complete critical and
complex transformation and
infrastructure objectives, and drive
international expansion, putting each
business in a strong position to create
further value as separate entities.
Superior capacity
growth over last
3 years (rooms)
Balanced pipeline
of new capacity
Committed
pipeline of 14,500
rooms to 2020
Premier Inn 13,842
Travelodge 3,454
Holiday Inn Express 1,392
Ibis 562
New catchments 40%
Low capacity
catchments 30%
High capacity
catchments 30%
Attractive unit
economics
1-3 year
maturity duration
>13%
ROC at maturity
Strategic priority
Premier Inn UK estate metrics
01 Grow and
innovate in
our core
UK businesses
Premier Inn UK
• Good revenue growth of 5.2% to
over £2 billion from market leading
occupancy and room growth
• Underlying operating profit increased
to almost £500 million through
disciplined cost action
• Continued strong occupancy
throughout the UK whilst adding
significant new capacity
• Industry leading rate of customers
booking directly at 97%
• Accelerating the competitive
advantage as the UK’s best value
hotel for business and leisure
Over the past three years Premier Inn
has added more than 13,700 new rooms
in the UK, 2.5 times more than the
combined total added by Travelodge,
Holiday Inn Express and Ibis. Against
this material addition of new capacity,
Premier Inn has held occupancy at
industry leading levels, increased the
proportion of customers booking
directly to 97%, improved guest
feedback scores and increased return
on capital to 13.4%.
Premier Inn’s committed pipeline of new
freehold and leasehold hotels currently
stands at over 14,700 rooms. Combined
with the current estate of c.72,500,
Premier Inn expects to have c.85,000
# hotels
# rooms
Direct booking
Occupancy
Average room rate†
Revenue per available room†
Total accommodation† and food & beverage†
(F&B) revenue growth
Like for like† accommodation sales growth
Return on capital
Committed pipeline (rooms)
2017/18
785
72,466
97%
79%
£62.87
£49.85
5.4%
2.2%
13.4%
14,750
2016/17
762
68,081
96%
80%
£62.02
£49.77
4.6%
2.5%
13.0%
14,500
Change
3.0%
6.4%
1ppt
(1)ppt
1.4%
0.2%
80bps
(30)bps
40bps
rooms by 2020 with line of sight beyond
that to 100,000. Premier Inn’s network
planning and property expertise have
been paramount in delivering high
quality new capacity at good returns.
The skills and data available to Premier
Inn enable the ongoing delivery of new
capacity in attractive locations, without
diluting return on capital once the
hotel matures. Of the committed new
room pipeline:
• 40% will be opened in catchments
with no existing Premier Inn supply;
• 30% will be opened in catchments
with limited Premier Inn supply; and
• 30% will be opened in catchments
with higher Premier Inn supply but
also higher demand such as London
and city centres.
Over the previous three years, Premier
Inn has opened almost 4,000 London
rooms with total accommodation
sales growth for 2017/18 of 9.1% whilst
maintaining an excellent occupancy level
of 83%. In the regions, over 9,700 rooms
(including 2,900 from extensions to
existing properties) have been opened
in the previous three years with total
accommodation sales growth in 2017/18
of 6.6% and occupancy at 79%. This
significant network growth has been
delivered whilst maintaining a good
return on capital. Combined with a
food and beverage offer integral to the
Premier Inn experience, total Premier Inn
revenue (including F&B) grew 5.4% in
2017/18 to just over £2 billion.
A consistent and high-quality
experience is vital to the overall
Premier Inn customer offer. Many of
Premier Inn’s customers visit multiple
hotels every year and value a consistent
experience across the network of
785 hotels. Therefore, the ongoing
refurbishment of rooms is critical to
ensure consistency. To balance the
demands of customers for consistent
high quality and the capital required to
deliver this, Premier Inn has developed
a more efficient model to refurbish
rooms. This has resulted in faster
refurbishment, which minimises
disruption and lowers the refurbishment
cost by more than 30%. This has
enabled Premier Inn to have 87% of
its 72,466 rooms in the latest formats.
Core to Premier Inn’s success has been
its investment in digital capabilities. This
began with re-platforming Premier Inn’s
core trading website, introducing a yield
Whitbread Annual Report and Accounts 2017/18
37
Strategic report
Operating review continued
Profitable Growth
continued
management system, investing in
enhanced digital marketing capabilities
and introducing a business-focused
booking tool which took over 500,000
bookings in the year. As a result, the
number of visits to Premier Inn’s website
has increased to seven million visits per
month, whilst consistently retaining over
85% of total bookings directly through
Premier Inn’s digital channels.
Costa UK
• Strong UK revenue growth of 7.3%
delivered through disciplined delivery
of new outlets
• Consistently strong growth of Costa
Express with UK total sales increasing
18% to £210 million
• Underlying UK operating profit of
£151 million as cost pressures and a
challenging consumer environment
are mitigated by the investment in
new capacity and efficiency savings
• Good progress in rebalancing UK
store network to convenience-based
channels & locations
• Food range enhancement gaining
traction with over 1ppt increase in
food capture rate
• New point-of-sale till rollout
substantially complete in all UK stores
Costa is part-way through a multi-year
transformation programme designed
to improve the customer experience
through innovation in the coffee and
food offer, investing in the stores and
broadening the channels in which Costa
operates. During the year, despite the
well-publicised level of external
challenges from decreased footfall in
traditional shopping locations and
increased levels of inflation, Costa has
made significant progress in its
transformation.
Fundamental to Costa’s ongoing
success in the UK is ensuring it can
serve coffee to customers when and
where they want it. Traditionally, this
was primarily in high street and
shopping centre locations. With
increased adoption of coffee, consumers
are demanding a more convenient
purchase. Costa has been fulfilling this
demand with the majority of new
capacity being added to retail parks,
drive-thrus, transport locations and
Costa Express machines. Costa’s
Costa metrics
# high street stores
# shopping centres & retail park stores
# drive thru stores
# concessions & transport & office stores
# franchise stores
# Costa Express machines
UK equity stores like for like sales growth
UK Express like for like sales growth
Total UK like for like sales growth
Return on capital
2017/18
2016/17
Change
455
409
81
427
1,050
7,248
(0.4)%
7.2%
1.2%
46.0%
441
383
54
402
938
6,061
2.0%
n.m.
n.m.
45.4%
3.2%
6.8%
50.0%
6.2%
11.9%
19.6%
(240)bps
n.m.
n.m.
60bps
economic model of high return on
capital and short, flexible lease
structures ensures that Costa can
continue to tailor the store portfolio
toward these high-growth areas.
With changing consumer preference for
convenience and shorter-term pressures
on consumer confidence, many of
Costa’s stores in traditional shopping
locations are experiencing declining like
for like sales. In these destinations Costa
can limit the impact of declining footfall
through enhancing the overall customer
offer and increasing average transaction
values. Costa expects this trend to
continue in the medium term. However,
with a total return on capital in excess of
45%, less than 2% of the Costa estate
(just 29 stores) makes a cash loss. With
short leases Costa has flexibility to churn
these sites to better locations or
negotiate lower rent.
Costa has made significant progress in
delivering new and innovative food and
coffee ranges, with a good uplift in the
savoury food capture rate following the
launch of a new breakfast offering in
May. This uplift was sustained with an
improved salad range available in stores
from June and a new hot lunch range
launched in September. The overall food
capture rate for the Costa UK equity
business increased by 1ppt to 42.6%.
The Costa point-of-sale terminal
upgrade programme is now also
substantially complete and has allowed
us to trial mobile order & collect in 16
London stores. The new terminals will
enhance the customer experience
through faster transaction times and
greater menu flexibility, enable new
initiatives to enhance store efficiency,
and improve customers’ digital
experience including the trial of mobile
order & collect. In addition, Costa will
also begin to trial the use of targeted
offers to the five million active Costa
Club loyalty programme members.
Costa is also trialling the connection
of the loyalty programme to Express
machines, which has the potential
to increase the number of Express
customers visiting stores to
redeem points.
Strategic priority
02 Focus on
our strengths
to grow
internationally
Premier Inn Germany | Significant
acquisition of 19 hotels agreed to
accelerate network growth
The German hotel market is 35% larger
than the UK and similar to the UK ten
years ago and it is experiencing a
structural shift from independent hotels
to branded hotels. The branded budget
hotel sector is the fastest beneficiary of
this shift, but still only represents a 6%
market share, compared to 24% in the
UK. With only moderate growth
expected from other brands, Premier
Inn’s strong quality and value credentials
provide a long-term opportunity to
establish a major hotel brand and
develop a successful business of scale in
this attractive market.
Given the scale and attractive nature
of the opportunity in Germany,
Whitbread accelerated the development
of an organic new hotel pipeline and
announced a significant agreed
acquisition of a portfolio of hotels.
Together, the organic pipeline and
acquisition will deliver 31 hotels,
comprising 5,720 rooms across 15 key
cities, by 2021.
Whitbread Annual Report and Accounts 2017/18 38
Strategic reportStrategic report Work to improve the proposition in
China has continued alongside the
ownership changes, to ensure store level
economics support the strong growth
planned. Following trials last year, with
new store formats, products and
enhanced team training, the
performance has been pleasing. In line
with the strategy to focus on core cities,
39 stores were closed in the year. The
experience gained from Costa’s trials
provides confidence in the customer
offer and the opportunity to extend the
store network to more than 1,200 stores
by 2022, with significant opportunity
beyond this over the longer term.
Other international activity
Whitbread has now completed the exit
of all non-core international operations
for both Premier Inn and Costa. This
activity has included the closure of the
equity-owned Costa business in France
and the disposal and exit of all 11 hotels
and management agreements in India,
Thailand, Singapore and Indonesia.
These exits have been completed
slightly ahead of previous financial
guidance and now enable the teams
to focus international efforts on
developing Premier Inn in Germany
and Costa in China.
Costa Poland performed well with
stores and Express machines in like
for like sales growth. There are now
approximately 140 Costa stores across
22 cities and nearly 300 Express
machines. During the year, new products
were successfully launched including
bacon baguettes and cold brew coffee.
Costa Express continued its international
expansion with a further 200 machines
in Europe, the Middle East and Malaysia.
The entry into Malaysia has been
received well following a tailored launch
with iced coffees, and over 150 machines
installed to date. There are now around
1,000 machines in six countries and,
although the business in Canada will be
exited, there are a further three
countries in trial.
Premier Inn in the Middle East continues
to perform well against tough market
conditions, with good occupancy levels
and strong customer feedback. Premier
Inn has a productive partnership with
Emirates, with a hotel recently opened in
Doha, comprising 219 rooms, and plans
for one further 389-room hotel in Dubai,
due to open in 2018/19. Costa in the
Middle East has also experienced tough
market conditions, resulting in a decline
in sales during the year.
German hotel pipeline
Open and trading
Committed pipeline
Total
Organic
To be acquired
Total
Hotels
Rooms
Hotels
Rooms
Hotels
Rooms
1
11
12
210
2,400
2,610
13
6
19
2,140
970
3,110
14
17
31
2,350
3,370
5,720
This acquisition represents an important
step in accelerating Whitbread’s existing
international strategy and in replicating
Premier Inn UK’s success and network
scale in this key strategic market.
Whitbread will continue to explore
options to further accelerate growth
in Germany, through a mix of freehold
property developments, leasehold
sites and acquisitions of small existing
hotel portfolios.
The transaction and consideration are
conditional upon obtaining consent
from landlords to rebrand the hotels and
upon the termination of the franchise
agreements with the current franchisor.
This could take up to two years for the
13 trading hotels. The hotels being
acquired will continue trading under
their current brand, in advance of being
refurbished in to the Premier Inn brand.
The acquisition is expected to deliver
returns in excess of Whitbread’s cost of
capital and be earnings enhancing the
year after completion.
The pipeline of new capacity in Germany
is now a mix of hotels to be acquired and
the accelerated organic pipeline of new
leasehold and freehold sites.
Costa China | Completed buy-out of
South China joint venture partner
On 10 October 2017 Whitbread
announced the buy-out of the 49%
share in the South China joint venture
held by Yueda for RMB 310 million
(£35 million). The South China operation
comprises approximately 250 stores.
The partnership with Yueda was
essential in the first phase of Costa’s
development in China, but full control
enables a greater level of focus on
improving the overall proposition and
reshaping the store network to have
broader and deeper representation in
key cities. Costa’s strong joint venture
partnership with BHG in North China
will continue unaffected.
Whitbread Annual Report and Accounts 2017/18 39
Strategic report Operating review continued
Profitable Growth
continued
Strategic priority
03 Build
capability to
support long
term growth
Whitbread is focused on securing
the cost efficiencies needed to offset
structural cost pressures in the hotel and
coffee markets. Whitbread’s property
expertise underpins the consistent
quality and competitive advantage
enjoyed by both Premier Inn and
Costa over rivals, whilst Whitbread’s
technology skills have undergone a
step-change as work is conducted to
replace legacy systems and become an
increasingly technologically-enabled
and effective business.
Winning Teams
The breadth and scale of Whitbread
facilitates superior attraction and
retention of talented people. As
Whitbread entered a new phase of
growth, a different mix of skills has
been required. The executive team
was completed in September with
the appointment of a new Group
Transformation Director, responsible
for improving Whitbread’s supply
chain, procurement and IT shared
service capability.
A lean central Group team provides
governance and strategic oversight and
Whitbread’s shared services facilitate
transformation and efficiency
programmes across the IT, procurement
and supply chain functions. For the next
two years this structure will provide the
Premier Inn and Costa management
teams a significant amount of freedom
to focus on delivering growth and
innovation in Whitbread’s UK and
international markets.
Science-based carbon target
In 2017/18 we set a new science-based
carbon target for Whitbread. We have
committed to reduce our carbon
emissions intensity by 50% by 2025
and 88% by 2050 (against a 2016/17
baseline). This target aligns Whitbread
to the global Paris Climate Change
agreement made at COP 21 in 2015. This
commitment ensures we are continuing
to set high targets to ensure we remain
dedicated to tackling climate change as
we grow.
50%
reduction
in our carbon emissions intensity
by 2025
combination of procurement benefits
and shared services. During the year,
more than £65 million of savings
were achieved through structural
reorganisation, store and site efficiency,
procurement and supply chain savings
and process re-engineering. The next
phase of activity will involve further
shared procurement and evolving the
supply chains for both Premier Inn and
Costa. Whitbread’s progress so far and
confidence in the next phase of activity,
has enabled an increase in ambition
from £150 million of savings to
£250 million, with £100 million to be
delivered over the next two years.
This will help to offset a substantial
proportion of the inflationary pressures
over the coming years.
Improving technology capabilities
Over the last two and a half years,
Whitbread has undergone a significant
investment programme to improve the
core infrastructure, internal support
systems and customer facing systems in
both Premier Inn and Costa. This
programme has been delivered by a
newly created shared support team,
ensuring Whitbread has the scale and
capabilities to deliver. So far, the
Group-wide technology team has:
• substantially completed the upgrade
of all Costa point-of-sale terminals;
Everyday Efficiency
In 2016 Whitbread began a five-year
programme to generate £150 million
of efficiency savings and mitigate
inflationary cost pressures. This
programme has already delivered
£105 million of savings from a
• upgraded Costa’s loyalty data
management system;
• re-platformed Premier Inn’s core
trading website;
• implemented a yield management
system for Premier Inn;
• delivered new mobile applications for
both Costa and Premier Inn;
• replaced Premier Inn’s core finance
systems; and
• installed workforce planning systems
for both Costa and Premier Inn’s F&B
operations.
Further essential work still needs to be
done, and for the next 24 months the
focus remains on the complex process
of replacing legacy systems with
sustainable platforms that meet
customer demands and enable
operational efficiencies and innovation.
This vital work includes:
• leveraging the expertise in the shared
digital team to extend the Costa
mobile order & collect trial and further
enhance the offering to its five million
loyal customers;
• replacing Costa’s legacy finance
systems to allow greater efficiency
and insight, utilising knowledge gained
from Premier Inn’s recent successful
finance transformation;
• replacing legacy HR systems across
Premier Inn and Costa, supporting
team retention and efficiencies; and
• in Premier Inn, replacing its hotel
booking system by 2020.
Property expertise
Premier Inn’s success in the UK has
been delivered through its unique
asset-backed, owner-managed model.
The balanced property ownership
model provides Premier Inn significant
competitive advantages, including:
• superior market access with flexibility
to acquire freehold sites without
additional external finance and
favourable leasehold access;
• a proven model of value creation
through capture of development profit
and the ability to extend and refurbish
hotels;
• low-cost funding, with corporate debt
costs lower than leasehold finance and
the ability to recycle capital through
selective sale and leaseback
transactions; and
• ensuring a strong and flexible
operating model with lower financial
gearing, avoidance of rent escalation
and underpins Whitbread’s credit
rating, covenant strength and pension.
Whitbread Annual Report and Accounts 2017/18 40
Strategic reportStrategic report Update on Group structure |
Creating two high-quality
independent companies
The Board regularly reviews the
strategic direction of Whitbread and
the structure of the Group. These
reviews are designed to protect and
enhance the long-term value of the
businesses within Whitbread for its
shareholders and to ensure that the
businesses continue to effectively and
responsibly serve their customers
and communities. This approach has
delivered considerable long-term
returns for shareholders, created
substantial employment and career
opportunities for Whitbread’s team
members, and played a part in the
daily lives of millions of consumers
throughout the UK and internationally.
The Board has for some time been of
the view that separating Premier Inn
and Costa at the right time would
enhance focus and enable value to be
optimised for shareholders over the
longer term. Given the significant
strategic progress that has been
made and the momentum in the
remainder of the plan, the Board is
confident that both Premier Inn and
Costa will soon be businesses of
sufficient strength, scale and
capability to enable them to thrive as
independent companies. The Board,
therefore, believes that it is in the best
long-term interests of Whitbread’s
many stakeholders to separate
Premier Inn and Costa, via a demerger
of Costa. Announcing the demerger
of Costa will provide clarity to
shareholders, team members and
other stakeholders on Whitbread’s
strategic direction.
The Board has carefully considered
the optimal timing of the demerger
of Costa and concluded it will be
pursued as fast as practical and
appropriate to optimise value for
Whitbread’s shareholders and is
expected to be completed within
24 months. This timeframe will allow
both Premier Inn and Costa to
maintain momentum, complete
critical and complex transformation
and infrastructure objectives, and
drive international expansion, putting
each business in a strong position
to create further value as separate
entities. These objectives include:
• completing the complex and critical
IT and business system upgrades
and improvement programmes,
which are delivered by Whitbread
shared resources;
• delivering the recently upgraded
efficiency programme, which will
offset a significant proportion of
the current high level of industry
inflation and minimising disruption
to trading and product innovation
activities, particularly in the UK;
• further develop the international
strategies in both Premier Inn and
Costa, to build the foundations for
long-term profitable growth; and
• appropriately managing the
Whitbread pension fund deficit
and funding facilities and ensuring
both Whitbread and Costa have
appropriate governance structures
in place to thrive as separate
entities.
Regular updates on progress will be
given as part of Whitbread’s standard
financial reporting cycle.
Reducing our
environmental Impact
By encouraging simple but effective
behaviours to reduce the energy and
resources we use we can reduce our
environmental footprint while also
driving business efficiencies. By
investing in new technologies and ways
of working, we are able to test and
demonstrate higher sustainability
standards, whilst setting challenging
targets to build further momentum.
The Roastery
On 13 March 2017, Costa opened its new
state-of-the-art 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 manufacturing
buildings. We are proud that our roastery
is the first industrial process site to be
built to BREEAM* Outstanding standard.
* BREEAM is an assessment based on
sustainability metrics and indices that
cover a range of environmental issues
from energy and water use, health,
pollution, transport, materials, waste,
ecology and management processes
throughout the design, procurement,
construction and operation of the building.
It aims to reduce the negative effects of
construction and development on the
environment. Outstanding is the highest
achievement awarded through BREEAM.
Costa’s success in the UK and
internationally has also been a
consequence of Whitbread’s successful
property strategy. Whitbread’s
asset-backed model, combined with
prudent leverage and strong operating
businesses, ensures Whitbread has
a superior covenant in negotiating
for leased sites for Costa stores.
As a result, Costa is supported with
a material competitive advantage
through enhanced access to sites at
attractive rates.
Whitbread is also actively managing its
property portfolio and has completed
four sale and leaseback transactions
over the last two years with total cash
proceeds to date of £242 million.
Sale and leaseback transactions are
appropriate for properties which have
fulfilled their development potential and
can secure attractive rental yields. The
level of sale and leaseback transactions
will continue to be reviewed subject to
disposal opportunities in the UK and
investment opportunities in the UK
and Germany. In line with Premier
Inn’s strategy of operating F&B outlets
which complement the Premier Inn
proposition, seven standalone
restaurants have also been sold, with
16 remaining.
Whitbread Annual Report and Accounts 2017/18
41
Strategic report Working hard
to grow internationally
449
stores in China
1,200
stores by 2022
Whitbread Annual Report and Accounts 2017/18 42
Strategic reportStrategic report No. 2
coffee shop brand in China
Focus on our strengths
to grow internationally
China presents an exciting opportunity for the Costa
brand and our decision this year to buy-out the 49%
share of our joint venture partner in South China
marks a significant step towards our goal to establish
Costa as the undisputed No. 2 coffee shop brand in
this large and fast-growing market. With over 400
stores today we are working hard to improve Costa’s
brand proposition to ensure it meets the demands
of China’s highly aspirational consumers and our trial
of a new store concept with innovative store design,
new coffee and food products and enhanced
employee training is proving very popular with
customers. The success of the customer offer
coupled with our newly acquired strategic and
funding flexibility provides the opportunity to grow
our network to around 1,200 stores by 2022, with
significant scope beyond this over the longer term.
Whitbread Annual Report and Accounts 2017/18 43
Strategic report Group Finance Director’s review
Ongoing disciplined
allocation of capital
and focus on executing
Whitbread’s plans will
deliver sustainable growth
in earnings and dividends
and a strong return
on capital.
Nicholas Cadbury
Group Finance Director
Good financial
performance in line
with expectations
Profit growth | Good sales growth and disciplined cost control
underpins profit growth
Revenue
Profit from operations
Central costs
Underlying operating profit
Underlying net finance costs
Underlying profit before tax
Non-underlying items
Profit before tax
Tax
Net profit
2017/18
£3,295m
£657m
£(35)m
£622m
£(31)m
£591m
£(43)m
£548m
£(112)m
£436m
2016/17
Change
£3,106m
£626m
£(34)m
£592m
£(27)m
£565m
£(50)m
£515m
£(99)m
£416m
6.1%
5.0%
4.5%
5.0%
(15.4)%
4.5%
15.1%
6.4%
(12.6)%
4.9%
• Strong revenue growth of 6.1% and
market share gains in both Premier Inn
and Costa
• Disciplined cost management enabling
underlying profit growth of 4.5% to
£591 million, and statutory profit before
tax growth of 6.4% to £548 million
• Premier Inn underlying operating profit
grew to £498 million, Costa increased
to £159 million
• Good discretionary free cash flow
conversion of 94%, delivering
£585 million to reinvest
• Strong balance sheet with net debt
reduced to £833 million
• Return on capital increased 20bps
to 15.4%, despite scale of recent
investment
Whitbread has again delivered good
results, with underlying profit before tax
up 4.5% to £591 million and underlying
basic earnings per share up 5.6% to
260.16p, driven by a combination of
revenue growth of 6.1% to £3,295 million
and disciplined cost control. Statutory
profit before tax increased 6.4% to
£548 million and total basic earnings per
share grew 3.6% to 239.74p. Both Premier
Inn and Costa have increased market
share, with underlying operating profit up
6.5% to £498 million in Premier Inn and
0.5% to £159 million in Costa. Good
discretionary free cash flow conversion
of 94% delivered £585 million to re-invest
and, despite the scale of re-investment,
the Group return on capital increased by
twenty basis points to 15.4%.
Whitbread Annual Report and Accounts 2017/18 44
Strategic reportStrategic report Premier Inn
• Good revenue growth of 5.2% to
over £2 billion from market leading
occupancy and room growth
• Underlying operating and statutory
profits increased to almost
£500 million through disciplined
cost action
• Consistent and disciplined investment
in fast-maturing new rooms with good
return on capital
• Strong 40bps increase in return on
capital to 13.4%, reflecting good profit
growth
Premier Inn (including food & beverage
revenue) performed well during the
year, with revenue increasing 5.2% to
£2,007 million (2016/17: £1,908 million)
and underlying operating profit growing
6.5% to £498 million (2016/17: £468
million). This growth in profits led to an
increase in return on capital to 13.4%
(2016/17: 13.0%), despite further capital
investment in Premier Inn of £410 million.
In the UK & Germany, Premier Inn
(including F&B) increased revenue
by 5.4% to £2,004 million (2016/17:
£1,902 million) and grew underlying
operating profit at a faster rate of 5.7%
to £498 million (2016/17: £472 million).
Accommodation revenue growth of
7.1% was a mix of good like for like sales
growth and the benefit of new hotels
opened in the last 12 months. Like for
like accommodation sales growth of
2.2% (2016/17: 2.5%) was the result of
an increase in the average rate charged
per room of 1.4% to £62.87 (2016/17:
£62.02) and the benefit of hotel
extensions, offset by a modest reduction
in occupancy to 79.3% (2016/17: 80.2%).
Like for like RevPAR was up 0.3% with
RevPAR in catchments with no Premier
Inn capacity growth up c.1.7%, comparable
with the midscale and economy market
RevPAR growth of 2.0%.
In London, Premier Inn grew well with
total accommodation sales up 9.1%, with
12.5% growth coming from additional
room capacity. With high occupancy
and the additional capacity added, like
for like RevPAR declined by (1.3)% and
like for like sales by (0.9)%, compared
to the midscale and economy market
where RevPAR increased 0.9%.
Outside London, Premier Inn’s total
accommodation sales growth was again
strong, increasing 6.6%, with like for like
RevPAR increasing 0.9% and like for like
sales growth of 3.0%, supported by
c.800 extension rooms opened over the
last 12 months. The midscale and economy
market RevPAR increased 2.3%.
Premier Inn financial highlights
Revenue
UK & Germany (inc. F&B)
International
Underlying operating profit
UK & Germany (inc. F&B)
International
2017/18
2016/17
Change
£2,007m £1,908m
£1,902m
£2,004m
£6m
£3m
£498m
£498m
£0m
£468m
£472m
£(4)m
5.2%
5.4%
n.m.
6.5%
5.7%
n.m.
8.8%
Statutory profit before tax
£498m
£457m
Other metrics
UK accommodation total sales growth
UK F&B total sales growth
Premier Inn (inc. F&B) total sales growth
UK accommodation like for like sales growth
UK F&B like for like sales growth
Q4 UK accommodation like for like sales growth
Q4 F&B like for like sales growth
7.1%
2.5%
5.2%
2.2%
0.4%
0.3%
(1.1)%
6.9%
0.7%
4.7%
2.5%
0.3%
2.9%
0.6%
20bps
180bps
50bps
(30)bps
10bps
(260)bps
(170)bps
Return on capital
13.4%
13.0%
40bps
In the second half of the year, the pace
of like for like accommodation sales
growth slowed, in line with a general
softening across the midscale and
economy hotel market, particularly in
London. Comparatives were particularly
challenging following strong growth in
H2 2016/17 due to a weak pound,
compounded by an increase in the rate
of market supply growth in H2. However,
with total accommodation sales growth
in the second half of this year at 7.0% for
London and 5.2% outside London,
Premier Inn continued to gain market
share through adding capacity in the
right locations, and at a strong return
on capital.
During the year, the hospitality industry
experienced significant inflationary
pressures arising from the increase in
business rates and a higher National
Living Wage. In total, this led to a cost
increase of c.£55 million, impacting
underlying operating profit margin by
280 basis points. However, this inflation
was substantially offset by the efficiency
programme, which benefitted from
some acceleration in savings. Increased
sales and new capacity contributed
90 basis points, more than offsetting
the additional investments in IT and
refurbishment. This resulted in an
increase in overall underlying operating
margin from 24.5% in 2016/17 to 24.8%
in 2017/18.
The food and beverage offer comprising
Whitbread’s restaurant brands and
integrated Premier Inn restaurants is
integral to the overall Premier Inn
experience. F&B revenue grew 2.5%,
with like for like sales growth of 0.4%
(2016/17: 0.3%). Like for like growth was
a result of all Beefeater restaurants now
being refurbished to the latest ‘orange
cow’ format; enhancements to menus
across Thyme, Beefeater and Brewers
Fayre restaurants; and increased focus
on value in all F&B formats, driving an
increase in covers.
During the year, the exit of all hotels in
India, Thailand, Singapore and Indonesia
was completed. As a result of these
exits, underlying operating losses from
Premier Inn International reduced to nil
(2016/17: £(4) million).
After non-underlying items of £(0.9)
million, statutory profit before tax
increased 8.8% to £498 million (2016/17:
£457 million). Non-underlying items in
Premier Inn consisted of a net cost
of £6 million relating to the disposal
of properties and property-related
provisions, over £1 million of UK
restructuring costs, offset by a gain
of more than £6 million recognised
following the exit of operations in India
and South East Asia. Further details on
non-underlying items can be found in
Note 6 to the financial statements.
Whitbread Annual Report and Accounts 2017/18 45
Strategic report Group Finance Director’s review continued
Costa financial highlights
Revenue
UK Stores
UK Express
Total UK
International
Underlying operating profit
Total UK
International
2017/18
2016/17
Change
£1,292m
£921m
£210m
£1,131m
£161m
£1,202m
£876m
£178m
£1,054m
£148m
£159m
£151m
£8m
£158m
£154m
£4m
7.5%
5.2%
18.0%
7.3%
8.5%
0.5%
(2.3)%
n.m.
Statutory profit before tax
£123m
£130m
(5.5)%
Other metrics
UK equity like for like sales growth
UK Express like for like sales growth
UK total like for like sales growth
Q4 UK equity stores like for like sales
Q4 UK Express like for like sales growth
Q4 UK like for like sales growth
(0.4)%
7.2%
1.2%
(1.8)%
5.5%
(0.3)%
2.0%
n.m.
n.m.
(240)bps
n.m.
n.m.
(0.8)%
n.m.
n.m.
(100)bps
n.m.
n.m.
Return on capital
46.0%
45.4%
60bps
Costa
• Strong revenue growth of 7.5%
delivered through disciplined delivery
of new outlets
• Positive like for like sales growth in
Costa Express offsetting the lower
high street footfall
• Consistently strong growth of Costa
Express with UK total sales increasing
18% to £210 million
• Steady underlying operating profit of
£159 million with cost pressures
mitigated through efficiencies, and
continuing investment for the future,
in a strong coffee market
• Costa International profits increased
to £8 million driven by European
equity and franchise operations
• Statutory profit before tax down 5.5%
to £123 million
• Excellent return on capital of 46.0%
Costa revenue increased at a strong rate
of 7.5% to £1,292 million (2016/17:
£1,202 million). Recent significant
increases in industry cost structures
were offset by efficiency savings, whilst
investment continued in the UK
customer proposition, IT infrastructure,
and in establishing international growth
platforms. Against this backdrop,
underlying operating profit grew
by 0.5% to £159 million (2016/17:
£158 million). Fundamentally strong
unit economics in both the Costa UK
stores and Costa Express businesses
resulted in an excellent return on capital
of 46.0% (2016/17: 45.4%).
In the UK, Costa increased revenue
by 7.3% to £1,131 million (2016/17:
£1,054 million). This strong sales growth
was principally driven by the addition of
204 net new stores, and the continued
strong performance of Costa Express,
which grew revenues by 18% to
£210 million (2016/17: £178 million). Like
for like sales in the UK grew by 1.2%,
benefitting from a strong performance
in Express. Like for like sales in UK
equity stores, whilst declining by (0.4)%,
performed better than footfall trends
in traditional shopping locations. This
relative outperformance was primarily a
result of increased spend per transaction
supported by the ongoing improvements
in the food offer and the introduction of
new drinks.
Costa UK underlying operating profit
declined by (2.3)% to £151 million
(2016/17: £154 million); in line with
previous margin guidance which
signposted both external cost pressures
and a meaningful period of investment
in technology platforms, digital
propositions and product innovation,
culminating in an incremental
c.£10 million invested in the year. A mix
of significant increases in labour costs,
business rates and the foreign exchange
impact on coffee imports was fully
offset by efficiency savings.
Costa’s international contribution to
underlying operating profit increased
to £8 million (2016/17: £4 million). This
followed a good performance in Poland
and European franchise markets and
the exit from our loss-making equity
business in France. This was partially
offset by a more challenging
environment in the Middle East and
increased investment in Costa’s business
in China following the buy-out of its
Southern China joint venture partner at
the beginning of the second half of the
year. In China, an incremental investment
of £5 million in operating cost is
anticipated in FY19 on new stores,
marketing, product innovation and
digital capabilities. With the success of
Express in the UK, and the opportunity
ahead of us internationally, a similar
incremental investment in the
international Express business is also
anticipated as new international markets
are established.
After non-underlying items of
£(36) million, Costa’s statutory profit
before tax decreased (5.5)% to
£123 million (2016/17: £130 million).
Non-underlying items in Costa consisted
of impairment charges and property
provisions of £17 million in relation to
underperforming stores, an impairment
charge of £9 million for IT projects,
and £6 million of costs principally
related to the restructuring of Costa’s
international businesses in China, France,
Singapore and Canada (see Note 6 to
the financial statements).
Whitbread Annual Report and Accounts 2017/18 46
Strategic reportStrategic report Net finance costs
The underlying net finance cost for the
year was £4 million higher than last year
at £31 million (2016/17: £27 million)
following the successful £200 million
US private placement and lower interest
capitalised on construction projects.
Total net finance costs were £41 million
(2016/17: £37 million) including the
non-underlying IAS19 pension finance
charge of £10 million (2016/17:
£9 million).
Taxation
Underlying tax for the year amounted
to £117 million at an effective tax rate of
19.8% (2016/17: 21.1%). The decrease in
effective tax rate is predominantly due
to a reduction in the statutory rate of UK
corporation tax from 20% to 19%. The
statutory tax expense for the year was
£112 million (2016/17: £99 million).
Dividend
The Group’s dividend policy is to grow
the dividend broadly in line with
earnings across the cycle. A final
dividend of 69.75 pence per share
(2016/17: 65.90p), an increase on last year
of 5.8%, amounting to £127 million, was
declared by the Board on 24 April 2018.
Full details are set out in Note 8 to the
financial statements. The dividend will
be paid on 4 July 2018 to all shareholders
on the register at the close of business
on 25 May 2018. Shareholders will again
be offered the option to participate in
a dividend re-investment plan.
Cash generation
Cash generation remained strong
in the year with cash generated from
operations increasing to £877 million
(2016/17: £860 million) whilst converting
94% of underlying operating profit
into discretionary free cash. This
discretionary free cash flow was used to
fund Whitbread’s pension contributions
of £101 million, dividend payments of
£178 million and expansionary capital
expenditure of £396 million.
Capital investment
Capital expenditure during the year was
£555 million (2016/17: £610 million). The
year-on-year reduction was principally
due to the timing of new hotels and
hotel refurbishments.
Investments in new and extended
hotels mature over a 1-3 year period
and deliver return on capital above 13%.
Maintenance capital expenditure in
Premier Inn is essential to ensure
consistent, high quality rooms across
the estate which is a key driver of repeat
direct business. In the last two years,
£530 million has been invested in
expanding the UK network with a
further £100 million spent on the
Earnings per share
Statutory basic earnings per share
Statutory diluted earnings per share
2017/18
239.74p
239.08p
2016/17
Change
231.39p
230.89p
Underlying basic earnings per share
Underlying diluted earnings per share
260.16p
259.44p
246.48p
245.95p
Full details are set out in Note 10 to the financial statements.
Cash generation | Consistent & strong to fund investments
Underlying operating profit
Depreciation and amortisation
Other non-cash items
Change in working capital
Cash generated from operations
Maintenance capital expenditure
Interest
Tax
Discretionary free cash flow
Pensions
Dividends
Expansionary capital expenditure
Proceeds from sale & leaseback transactions
Proceeds from disposal of business
Other
Net cash flow
Opening net debt
Closing net debt
2017/18
£622m
£230m
£13m
£12m
£877m
£(159)m
£(34)m
£(99)m
£585m
£(101)m
£(178)m
£(396)m
£75m
£57m
£15m
£57m
£890m
£833m
3.6%
3.5%
5.6%
5.5%
2016/17
£592m
£218m
£15m
£35m
£860m
£(206)m
£(35)m
£(87)m
£532m
£(90)m
£(167)m
£(404)m
£193m
£14m
£(58)m
£20m
£910m
£890m
Capital investment | Compelling opportunities to invest at high return on capital
Maintenance and product improvement
Premier Inn
Costa
Growth
New/extended UK hotels
Premier Inn Germany & International
New Costa stores
South China JV buy-out
Express machines
Total
organic pipeline in Germany. Capital
expenditure for Premier Inn Germany
does not reflect any amounts for the
recently announced agreement to
acquire a portfolio of hotels, which will
be accounted for on completion of the
transaction. In the unlikely event the
transaction does not proceed, a break
fee would become payable which would
be accounted for at that time.
The pace of investment in new Costa
stores and Costa Express machines
continued in the year, with a further
£47 million of capital on new stores and
2017/18
2016/17
Last 2 years
£118m
£41m
£227m
£65m
£47m
£35m
£22m
£555m
£148m
£58m
£303m
£35m
£41m
–
£25m
£610m
£266m
£99m
£530m
£100m
£88m
£35m
£47m
£1,165m
£22 million on new Express machines.
New Costa stores take 1-3 years to reach
maturity and deliver return on capital of
30-40%.
Capital expenditure for 2018/19 is
expected to be in the region of
£600 million to £700 million with a
relatively higher allocation to Costa as
the pace of UK store refurbishment
accelerates and we continue to grow
Costa Express unit numbers.
Whitbread Annual Report and Accounts 2017/18 47
Strategic report Group Finance Director’s review continued
Capital discipline | Asset-backed balance sheet provides flexibility
2017/18
H1 2017/18
2016/17
Net debt
Pension (net of tax)
Capitalised leases
Adjusted net debt
Freehold/leasehold mix
Adjusted net debt: EBITDAR
Net debt: EBITDA
Fixed charge cover
£833m
£264m
£852m
£335m
£2,227m £2,128m
£3,324m £3,315m £3,325m
£890m
£377m
£2,058m
64:36%
2.9x
1.0x
2.9x
64:36%
3.0x
1.0x
3.0x
64:36%
3.2x
1.1x
3.0x
Return on capital | Consistently delivering above cost of capital
Premier Inn
Costa
Whitbread
2017/18
2016/17
13.4%
46.0%
15.4%
13.0%
45.4%
15.2%
Change
40bps
60bps
20bps
Impact on the Group of capital invested for future openings
(110)bps
(170)bps
60bps
Capital discipline
In recent years, Whitbread has held
its ratio of lease-adjusted net debt to
EBITDAR at between 3.0 and a
maximum of 3.5. This level ensures that
Whitbread retains its strong financial
position and has access to a broad
source of funds at attractive rates, in
order to take advantage of freehold
property and acquisition opportunities
as they arise, including the recently
agreed acquisition in Germany. This level
of leverage also ensures that Whitbread
retains a strong covenant for further
leasehold expansion and that the
pension Trustee is comfortable with
Whitbread’s ability to adapt to periods
of volatility or economic slowdown.
Whitbread’s scale, balance of business
activities and asset-backed leverage
provides robust financial capacity and
minimises the overall weighted cost of
capital, providing significant value to
shareholders whilst preserving through-
cycle stability. Sufficient headroom in
debt funding facilities are also in place
to finance short and medium-term
requirements with total committed
facilities of approximately £1.8 billion,
compared to net debt as at 1 March 2018
of £833 million. Committed debt
facilities include US Private Placement
loans of £432 million (at the hedged
rate), a £450 million bond and a
syndicated bank revolving credit facility
(“RCF”) of £950 million which has been
extended to September 2022.
Pension
As at 1 March 2018 there was an IAS19
pension deficit of £289 million, which
compares to £425 million at 2 March
2017. The reduction in deficit of
£136 million was primarily due to deficit
contributions of £101 million and a
change in mortality rate assumptions
following the triennial review.
Following the triennial review
undertaken at 31 March 2017, a recovery
schedule of cash contributions has
been agreed at £85 million per annum
for 2018/19 to 2021/22, with a final
contribution of £57 million in 2022/23.
Until the next valuation, to the extent
that ordinary dividends increase by
more than 5% per year, contributions will
be accelerated at a rate in line with
dividend growth, less 5%. Additional
contributions to the pension fund of
c.£10 million per year will continue to be
made through the Scottish Partnership
arrangements.
Return on capital
There is currently £292 million of capital
invested for future openings. This has an
impact on Whitbread’s reported return
on capital of (110)bps.
2018/19 outlook
Whitbread has significant structural
growth opportunities in the UK and
internationally with confidence in its
plans. Investment in the businesses
will continue in order to maintain their
competitive advantage and to capitalise
on these structural opportunities.
However, given recent economic and
industry data, along with inflationary
pressures in the consumer sector, there
is a degree of caution in the current
environment especially on the high
street. It is expected that Whitbread’s
ongoing Group-wide efficiency
programme can continue to offset a
significant proportion of this inflation.
The combination of our commitment
to the investment programme and the
current UK consumer environment
naturally means our near-term
profit growth may be lower than in
previous years.
In 2018/19 Premier Inn is expected to
open 4,000-4,500 rooms in the UK and
Germany, including at least three hotels
in Germany. Costa plans to deliver
230-250 net new stores globally,
including the closure of around 60-80
stores in the UK and China as part of its
ongoing network optimisation
programme. In addition, overall growth
will be supported by over 1,300 new
Costa Express machines. In order to
achieve Costa’s growth ambitions in
China and Express, approximately
£5 million of incremental operating
expense is planned in each business.
Ongoing disciplined allocation of capital
and focus on executing Whitbread’s
plans will deliver sustainable growth in
earnings and dividends and a strong
return on capital.
Whitbread Annual Report and Accounts 2017/18 48
Strategic reportStrategic report Other information
Going concern
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.
Risks and uncertainties
The directors have reconsidered the
principal risks and uncertainties of
the Group and these remain largely
unchanged from those reported in the
Annual Report and Accounts 2017. 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.
The risks relating to change have been
updated to reflect the potential impact
of the proposed demerger of Costa.
Going forward any potential areas of risk
will be closely monitored and evaluated.
American Depositary Receipts
Whitbread has established a sponsored
Level I American Depositary Receipt
(ADR) programme for which Deutsche
Bank perform the role of depositary
bank. The Level I ADR programme
trades on the U.S. over-the-counter
(OTC) markets under the symbol
WTBDY (it is not listed on a U.S.
stock exchange).
Nicholas Cadbury
Group Finance Director
24 April 2018
Whitbread Annual Report and Accounts 2017/18 49
Strategic report Working hard
to improve our
customers’ experience
Whitbread Annual Report and Accounts 2017/18 50
Strategic reportStrategic report Building the capability
and platform to support
future growth
To deliver our ambitious growth plans and
to meet the needs and expectations of our
customers we are working hard to build our
capabilities and infrastructure in areas such
as supply chain, procurement, property,
digital and technology.
Our in-house digital teams are making important
inroads in modernising our legacy systems and
providing market-leading innovative tools such
as Premier Inn’s automated trading engine and
Business Booker tool along with improvements
to the customer’s booking journey through
enhancements to the premierinn.com website.
Meanwhile, this year has also seen the launch
of Costa’s new loyalty system which will be a
key enabler of future improvements to Costa
customers’ digital and overall brand experience,
providing a better mobile app that features
new products, promotions and Click and
Collect functionality.
1.3m
users of the Costa Loyalty app
Whitbread Annual Report and Accounts 2017/18
51
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 actively
managed and 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 by the Board to the
Audit Committee, which completes an
annual review of the effectiveness of
these processes.
Both the Premier Inn 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 and its risk appetite
for each. 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, can be found on pages
54 and 55.
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 54 and 55.
The business planning process reviewed
by the Board, as part of the annual
strategic planning process, considers
both three and five-year timelines, with
the Board acknowledging that there is
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,
which could impact the business model,
future performance, solvency and
liquidity, including the proposed
demerger of Costa which is expected to
complete within the viability assessment
period. Scenario modelling and
sensitivity analysis was applied to
forecasted cash flows, including a
downturn in like for like growth rates
as well as the potential impacts should
the principal risks, outlined on pages
54 to 55 actually occur. Consideration
was also 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 2017/18
52
Strategic reportStrategic report Group risk framework
l
n
o
i
t
a
a
c
s
e
d
n
a
g
n
i
t
r
o
p
e
r
t
n
e
m
e
g
a
n
a
m
k
s
i
R
Board
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
Accountable for risk management in the respective business
and risk submissions to the Executive Committee
i
s
n
o
i
t
a
c
n
u
m
m
o
c
d
n
a
t
h
g
i
s
r
e
v
o
,
y
g
e
t
a
r
t
s
,
e
c
n
a
n
r
e
v
o
G
Whitbread Annual Report and Accounts 2017/18 53
Strategic report
Principal risks and uncertainties continued
Strategic priorities
01
Grow and innovate
in our core UK businesses
02
Focus on our strengths to
grow internationally
03
Build capacity and infrastructure
to support long-term growth
Principal Risks
Strategic
priorities
Risk
Movement
vs prior year
Risk
appetite
Key mitigations
Higher
Level
Lower
03
01|02
01|02|03
Cyber and Data Security
Cyber and data security
remains a key risk as it
reduces the effectiveness
of our systems or results
in a loss of data. This in
turn could result in loss
of income and/or
reputational damage.
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.
Change
Our ability to execute the
significant volume of
change, including the
proposed demerger
of Costa.
01|02
01
Economic climate
Uncertain/volatile political
and economic climate
results in a decline in GDP,
consumer and business
spending, a fall in RevPAR
and inflation pressure
impacting growth plans.
Retention
and wage inflation
Failure to maintain staff
engagement and
retention in a tightening
labour market.
Low
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 enhanced network security and
we are in the process of implementing a framework of
industry-recognised security standards.
Medium 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 monitor the
rate and level of investment in the refurbishment of our
Premier Inn hotels and Costa stores along with our net
promoter scores.
High
N/A
Low
We have embarked on an extensive programme of
change to replace our legacy finance, POS, CRM and HR
systems, whilst also delivering an ongoing efficiency
programme and upgrading our digital capability and
customer propositions enabling Whitbread to deliver its
growth plans over the coming years. To help ensure the
successful delivery of these change projects, including
the proposed demerger of Costa, 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.
There is a rigorous business planning process in place
which considers many scenarios with appropriate
responses. 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 and we are making good progress with our
efficiency programme that aims to deliver £250 million
of savings over five years.
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 YourSay, the results
of which are reviewed by the Executive Committee and
the Board, with trends analysed and appropriate actions
reviewed and agreed. We are also upgrading our HR
systems to provide greater insight. Team retention is a key
component of our WINcard and Annual Incentive Scheme.
Whitbread Annual Report and Accounts 2017/18 54
Strategic reportStrategic report
The strategic report on pages 4 to 55 was approved by the Board and signed on its behalf by
Chris Vaughan, General Counsel on 24 April 2018.
Strategic
priorities
Risk
Movement
vs prior year
Risk
appetite
Key mitigations
01|02
Pandemic/Terrorism
The risk of a pandemic or
terrorism on the safety
and security of our
customers or staff and
the consequent impact
on trading.
01|02|03
Food safety and hygiene
The preparation or
storage of food and/or
supply chain failure
results in food poisoning
and reputational damage.
01|02|03
Health and safety
Health and safety risk,
death or serious injury as
a result of company
negligence.
02|03
Third party
arrangements
Business interruption as a
result of the withdrawal of
services/provision of
services below acceptable
standards/support or
reputational damage as
result of unethical
supplier practices.
N/A
Low
Low
Low
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 in 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.
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 completed
regularly at our hotels, restaurants and coffee shops and
the results are closely monitored. We invest considerable
resources in employee training in the proper storage,
handling and preparation of food.
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. In
addition, C.S. Todd & Associates Ltd, independent fire
safety consultants, have been working with us on the fire
safety of our hotels. Health and safety is a measure on
the WINcard and acts as a hurdle for incentive payments.
Regular health and safety updates are provided to the
Executive Committees and the Board.
Whitbread has several 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 safeguard 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.
Whitbread Annual Report and Accounts 2017/18 55
Strategic report Corporate governance
Our robust governance framework plays
a crucial role in ensuring that Whitbread’s
culture and values are set from the top.
This included reviewing our compliance
with the Code with respect to business
and corporate practices, reviewing the
matters reserved to the Board, and
reviewing the terms of reference for
each of the Board committees.
With the exception of a couple of
provisions, which are explained later on
in this report, we were fully compliant
with the Code.
We are aware that the Financial
Reporting Council (the FRC) is currently
reviewing the Code, with plans to
publish a revised code later this year.
At the time of writing we await further
details of the changes, but we do not
foresee any significant difficulties in
complying with the changes anticipated.
Company values
During the year we relaunched our Code
of Conduct, which focuses on our vision
and values, the behaviours we expect
from our employees, and conduct we
expect from the Company as a whole.
We are proud to have created a positive
culture where our employees trust,
respect and look out for each other, and
are proud to work for Whitbread.
We encourage our employees to speak
out if they have concerns or see
anything which does not meet the
standards set out in our Code of
Conduct, and we have an effective
process in place which enables them to
do so, details of which can be found in
the Audit Committee report on pages
66 to 69.
Board evaluation
The Board and it’s main committees
participated in an internal evaluation
during the year. Following last year’s
evaluation, the Board increased its focus
on the areas identified for improvement.
The results from the 2017/18 evaluation
are provided on page 63. There was a
broad consensus from the Board that
progress has been made on the areas
identified in last year’s evaluation,
although there is still more to do.
Adam Crozier
Chairman
I was delighted to be appointed
Chairman of such a well-respected
and long standing British company
earlier this year. Whitbread has
always been committed to
ensuring that corporate
governance is integral to the
organisation and I intend to ensure
that this continues.
A robust governance framework is
key to how we interact with all of our
stakeholders, from investors to
employees, and is essential to support
management in delivering the
Company’s strategy. It plays a crucial
role in ensuring that Whitbread’s culture
and values are set from the top.
UK Corporate Governance Code
The Board has reviewed the Company’s
performance against the UK Corporate
Governance Code 2016 (the Code),
which was applicable for the first time
this year. A copy of the Code is available
from: www.frc.org.uk.
In order to measure our compliance,
we undertook a thorough review of our
corporate governance arrangements.
Stakeholder engagement
In its recent consultation, the FRC
is keen to ensure board engagement
with all company’s stakeholders.
This is something the Board already
considers as highly beneficial in helping
us build a greater understanding of
our stakeholders’ views and concerns.
We regularly engage with and receive
updates from all our key stakeholders,
including shareholders, employees, the
media, the Government, key suppliers
and non-governmental organisations.
As part of the Board agenda the
directors also receive updates or details
of any significant changes and events
relating to these groups.
We are specifically looking this year
at how the Board can engage directly
with the Whitbread workforce, and I
look forward to providing an update
on our work in this area in the 2019
Annual Report and Accounts.
Shareholders play a significant role in
supporting Whitbread and shaping our
corporate governance. The Board is
committed to ensuring there is
continued sufficient and effective
communication and engagement
between the Company and our
shareholders.
I would like to thank all those investors
that have taken the time to engage with
us throughout the year, whether by
contacting us with concerns or opinions,
attending the UKSA meeting or meeting
with Company representatives. Your
input is much appreciated. I also very
much enjoyed meeting a number of our
shareholders at my first Annual General
Meeting (AGM) last year and I look
forward to doing so again at this year’s
AGM as Chairman on Wednesday 27
June 2018.
Adam Crozier
Chairman
24 April 2018
Whitbread Annual Report and Accounts 2017/18 56
GovernanceGovernance
Compliance with the Code
In September 2017, Sir Ian Cheshire
stepped down as Senior Independent
Director and was succeeded in that role
by Adam Crozier. At around the same
time, Richard Baker indicated that he
might wish to step down as Chairman
and we started the process to identify a
suitable successor to Richard. Following
Sir Ian’s departure, the Nomination
Committee considered that two new
non-executive directors would need to
be appointed, but only once the
Chairman’s succession was clear.
In January 2018 we announced that
Adam Crozier would succeed Richard
Baker as Chairman with effect from
1 March 2018 and we immediately began
the process of searching for two new
non-executive directors.
This corporate governance report sets
out how the Company has complied
with the Code in 2017/18. With the
exception of two provisions, resulting
from the factors outlined above, the
Company complied with the Code
throughout the year.
The first provision with which we did not
fully comply was A.4.1, which relates to
the appointment of a Senior
Independent Director. When Adam
Crozier became Chairman on 1 March
2018, which was the penultimate day of
the financial year, he stood down as
Senior Independent Director. We chose
not to appoint another director to the
position on a temporary basis, electing
instead to wait until the search for new
independent non-executive directors
had been completed. The search for a
new Senior Independent Director is
ongoing and this means that, until this
search has been completed, there is a
short period of non-compliance across
the end of 2017/18 and the start of
2018/19.
The second area of non-compliance was
provision D.2.1 which is in relation to the
membership of the Remuneration
Committee and states that at least three
members of the Committee, excluding
the Chairman, should be independent
non-executive directors. As outlined
above, we expect at least one of the new
non-executive directors to be appointed
to the Remuneration Committee, at
which point we will be compliant.
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
Chief Executive
• 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
• Optimising the performance of the
Company
• Day-to-day operation of the
business
• 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
• 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
Executive directors
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.
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 2017/18
57
Governance Board of Directors
A strong
leadership
team
The Board of Directors
There are eight members of the Board
including the Chairman and Chief
Executive. There are four independent
non-executive directors on the Board
and three executive directors.
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 below.
Board experience
Number of directors
6
5
4
1
7
7
2
4
4
4
3
Retail sector
Travel and hospitality sector
Marketing
Legal
Financial
International
Commercial property
Technology and digital
Human resources
Corporate social responsibility
Media
Key
N
R
A
Chair of the committee
Nomination Committee
Remuneration Committee
Audit Committee
RN
Adam Crozier
Chairman
Date of appointment to the Board:
April 2017
Date of appointment as Chairman:
March 2018
Age: 54
Experience:
Adam was Chief Executive of ITV plc from
2010-2017. 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:
• Vue International (Non-executive Chairman)
• Stage Entertainment BV (Non-executive
Chairman)
Alison Brittain
Chief Executive
Date of appointment to the Board:
September 2015
Age: 53
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
Date of appointment to the Board:
November 2012
Age: 52
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.
Date of appointment to the Board:
November 2012
Age: 50
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:
• Land Securities Group PLC
(Non-executive director)
External appointments:
• DS Smith Plc (Non-executive director)
Whitbread Annual Report and Accounts 2017/18 58
GovernanceGovernance Composition of the Board
Chairman 1
Executive directors 3
Independent non-executive directors 4
Tenure
0-3 years 5
3-6 years 2
6+ years 1
Gender
Male 4
Female 4
NA
R
NA
David Atkins
Independent non-executive director
Chris Kennedy
Independent non-executive director
Date of appointment to the Board:
January 2017
Age: 52
Experience:
David is Chief Executive of Hammerson plc,
former Chairman and Executive Board member
of the European Public Real Estate Association
(EPRA) and past President and committee
member of Revo (formerly BCSC).
External appointments:
• Hammerson plc (Chief Executive)
• Revo (Member of the advisory panel)
• British Property Federation
(Committee Member)
Date of appointment to the Board:
March 2016
Age: 54
Experience:
Chris is Chief Financial Officer of Micro Focus
International plc, which he joined in January 2018.
Prior to that, Chris was Chief Financial Officer of
ARM Holdings plc for over two years, Group
Finance Director of easyJet plc for five years,
having previously spent 17 years in a variety of
senior roles at EMI.
External appointments:
• Micro Focus International plc
(Chief Financial Officer)
• Reading Real Estate Foundation (Director
and Trustee)
• The EMI Group Archive Trust (Trustee)
• Great Ormond Street Hospital Trust (Trustee)
RN
NA
Deanna Oppenheimer
Independent non-executive director
Susan Taylor Martin
Independent non-executive director
Date of appointment to the Board:
January 2017
Age: 60
Experience:
Deanna spent over 25 years in a number of senior
roles in banking at both Barclays Bank PLC and
Washington Mutual Inc., where she ran retail
banking across leading national branch
franchises in the UK and US. Since 2012, through
her family’s hospitality business, she invests in
boutique hotels in western US.
Date of appointment to the Board:
January 2012
Age: 54
Experience:
Susan has held a number of roles at Thomson
Reuters, including President,of 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:
• Hargreaves Lansdown plc
(Non-Executive Chair)
• CameoWorks (Founder)
• Tesco PLC (Senior Independent Director)
• AXA SA (Non-executive director)
External appointments:
• Thomson Reuters (President, Legal)
• Thomson Reuters Foundation (Trustee)
Whitbread Annual Report and Accounts 2017/18 59
Governance 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;
Alison Brittain
Chief Executive
Mark Anderson
Managing Director, Property and
Premier Inn International
• capital investment decisions (where
Board approval is not required);
Nicholas Cadbury
Group Finance Director
Nigel Jones
Group Operations and
Transformation Director
• cost efficiency, procurement and
organisational design;
• reputation and stakeholder
management; and
• culture, values and sustainability.
Nigel Jones joined the Executive
Committee in August 2017, when he
joined the Company as Group
Operations and Transformation Director.
Nigel is responsible for managing
Whitbread’s supply chain and leading
the overall Whitbread transformation
plan. He has recently taken on
responsibility for our IT transformation.
Mark Anderson has been with the
Company for ten years and has led the
property function since 2008. He is
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 and
Restaurants UK.
Dominic Paul joined Whitbread in June
2016 as Managing Director of Costa
Coffee and Chris Vaughan has been
General Counsel since joining the
Company at the end of 2015.
Biographical details for Alison Brittain,
Nicholas Cadbury and Louise Smalley
can be found on page 58.
Simon Jones
Managing Director, Premier Inn
and Restaurants UK
Dominic Paul
Managing Director, Costa Coffee
Louise Smalley
Group HR Director
Chris Vaughan
General Counsel
Whitbread Annual Report and Accounts 2017/18 60
GovernanceGovernance Corporate governance
Board activities during
the year
In advance of each Board meeting,
a set of Board papers, including monthly
financial and trading reports, is
circulated so that directors have
sufficient time to review them and
arrive at the meeting fully prepared.
The Board has a rolling forward agenda
which sets matters to be considered
throughout the year ahead. Two
strategy days are held each year.
Following these sessions, the Board
agree 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 updated and is
circulated as part of the General
Counsel’s report before each meeting.
The agenda for each Board meeting is
agreed with the Chairman and the Chief
Executive 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 Group HR Director, the
Managing Directors of Premier Inn and
Restaurants and Costa together with the
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
executive directors present after
Board meetings.
The Senior Independent Director meets
annually with all non-executive directors
to discuss the performance of the
Chairman.
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 in January 2018
and is available on the Company’s
website: www.whitbread.co.uk.
Board agenda 2017/18
Standing agenda items
• Chief Executive's report
• Health and safety report (quarterly)
• HR Director’s Report
• Group Finance Director's report
• General Counsel’s report
• Approval of capital projects
Q1
• Approval of year-end documentation and final dividend
• Information technology update
• Risk Management overview – cyber security
• Talent, culture and succession
• Acquisition of Yueda joint venture (Costa China)
• Approval of international hotel disposals
• Strategy day (including Group structure)
Q2
• Everyday Efficiency
• Sustainability update
• Germany expansion plan
• Premier Inn UK
• Costa UK
Q3
Q4
• 2017/18 Interim results and approval of interim dividend
• Risk appetite
• Pure update
• Review of cladding (Health and Safety)
• Cyber security
• Restaurants growth plan
• Strategy day (including Group structure) at Basildon
• Corporate governance review
• Appointment of Adam Crozier as Chairman
• Pensions update
• Group Transformation update
• Costa Express strategy
• Premier Inn UK
• Costa UK
Roastery
• China visit
Whitbread Annual Report and Accounts 2017/18
61
Governance Corporate governance continued
Board meetings and attendance
The Board generally holds regular
scheduled meetings during the year
and on an ad hoc basis as and when
required. 11 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
David Atkins1
Richard Baker2
Alison Brittain
Nicholas Cadbury
Sir Ian Cheshire3
Adam Crozier4
Chris Kennedy
Susan Taylor Martin1
Deanna Oppenheimer
Louise Smalley
Stephen Williams5
Board
11
10/11
9/10
11/11
11/11
6/6
8/9
11/11
10/11
11/11
11/11
4/4
Audit
Committee
Nomination
Committee
Remuneration
Committee
4
4/4
–
–
–
–
-
4/4
4/4
–
–
–
5
5/5
3/3
–
–
1/2
1/1
5/5
5/5
5/5
–
2/2
6
–
6/6
–
–
4/4
5/5
–
–
6/6
–
3/3
1 David Atkins and Susan Taylor Martin each missed one meeting due to pre-arranged meetings elsewhere.
2 Richard Baker stepped down from the Board on 28 February 2018. The one meeting he missed was to
discuss his own succession.
3 Sir Ian Cheshire stepped down from the Board on 21 September 2017.
4 Adam Crozier was appointed to the Board on 1 April 2017. The one meeting he missed was to discuss his
appointment as Chairman.
5 Steve Williams stepped down from the Board on 21 June 2017.
Board and committees
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. 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 have been a
number of changes to the Board.
Sir Ian Cheshire stepped down from
his role as Senior Independent Director
and resigned from the Board on 21
September 2017. Adam Crozier, who
joined the Board on 1 April 2017, became
the new Senior Independent Director
on the same day.
Following the completion of his
nine-year term, four of those as
Chairman of the Board, Richard Baker
announced his retirement on 4 January
2018, and resigned from the Board on
28 February 2018. Adam Crozier, who
was serving as the Senior Independent
Director, was appointed as Chairman
of the Board the following day.
The search for a new Senior
Independent Director is still ongoing at
the time of publication and there will be
an announcement once an appointment
has been made.
Details of the appointment procedures
can be found in the report of the
Nomination Committee on pages
70 to 71.
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.
No executive director has taken on more
than one non-executive directorship in a
FTSE 100 company.
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:
• Governance;
• GDPR;
• Market Abuse Regulation; and
• CSR.
Investor relations and market updates
were presented to the Board, together
with regular updates from each of the
brands.
‘Deep dive’ sessions were also held on
certain issues to improve knowledge,
including:
• Costa China;
• Costa Express;
• Premier Inn Germany;
• Transformation programme;
• Technology;
• Health and Safety; and
• Talent and Succession.
One of the Board strategy days was held
at the Basildon Roastery in order to give
the Board the opportunity to gain a
deeper understanding of the site and
how it runs.
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.
Induction process
On appointment, all directors receive a
full and formal induction that is tailored
to their specific needs. Adam Crozier
joined the Board on 1 April 2017 as a
non-executive director. As part of his
induction, Adam 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 and
Costa sites.
Whitbread Annual Report and Accounts 2017/18 62
GovernanceGovernance
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
(Financial year 2015/16)
Externally facilitated review
Year 2
(Financial year 2016/17)
Internal review
Year 3
(Financial year 2017/18)
Internal review
2017/18 internal evaluation
In 2017/18, 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, the directors
considered that the opportunities
identified for improvement in
the 2016/17 evaluation were still
relevant areas of focus for the
forthcoming year. The table on
the right shows the process that
has been made against these areas
and further work that is planned
for the coming year.
An additional area for improvement
in 2018/19 will be a greater focus on
discussion and management of
succession planning at middle
management and board level.
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.
Areas identified for
improvement in
2016/17 internal
evaluation
To provide opportunities
for the non-executive
directors to spend more
time in the business,
outside of the formal
board meeting cycle.
Progress made in
2017/18
Further work to be
undertaken during
2018/19
The Board has agreed
to retain its focus on
giving directors
opportunities to spend
time in the business.
During the year, progress
has been made in this
area with members of the
Board visiting China and
Germany. The 2017/18
board evaluation also
highlighted this as
an opportunity for
further work.
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.
During the year, progress
has been made in this
area, with improvements
to the KPI pack and
monthly reports, and with
the periodic deep dives
into the businesses also
containing material on
customers and
competitors.
We will continue to
identify opportunities to
enhance board papers
together with KPI packs
and monthly reports.
To further increase
focus on key risks and
mitigation plans.
The Board will continue
to build on the progress
made last year, with
further discussion on
principal risks and risk
appetite.
During the year, work
has been undertaken to
focus on this area with
one-to-one meetings
held with the Board and
Executive Committee to
understand their risk
appetite. The findings
from these meetings
were presented back to
the Board.
Whitbread Annual Report and Accounts 2017/18 63
Governance Corporate governance continued
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 authorises all
directors’ current external directorships.
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.
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 and Accounts,
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 Chief Executive and Group
Finance Director also meet with
investors on request.
• The Board receives updates on the
views of major shareholders from the
Company’s brokers.
Interaction with private shareholders
• Live webcast presentations of the
full-year and interim results.
• 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.
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 page 89.
Statement of the directors in respect
of the Annual Report and Accounts
As required by the Code, the directors
confirm their responsibility for preparing
the Annual Report and Accounts and
consider that the Annual Report, taken
as a whole, is fair, balanced and
understandable and provides the
information necessary for shareholders
to assess the Company’s 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
pages 66 to 69.
Going concern
The directors’ going concern statement
can be found in the Directors’ Report
on page 91.
Viability statement
The viability statement can be found
on page 52.
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 8 to 9.
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 72 to 87. Reports for the Audit
and Nomination Committees can be
found on pages 66 to 71.
Whitbread Annual Report and Accounts 2017/18 64
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 2017/18 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 52 to 55.
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 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.
An externally hosted whistleblowing
system is also available.
Assurance
• The Audit Committee approves
the audit programme which ensures
that the significant areas of risk
identified are monitored and
reviewed.
• The programme and the results of
the audits are regularly assessed
during the year.
• The Code of Conduct makes reference
to specific policies and procedures
which have to be followed.
• The Audit Committee reviews the
major findings from both internal
and external audits.
• Employees are required to undertake
• Internal audits are carried out
tailored training on risk areas
including IS security, data protection,
anti-bribery and anti-trust law.
• 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.
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 2017/18 65
Governance Audit Committee report
The Committee continued to focus its work on the
Group’s financial reporting, financial control and risk
management and compliance processes.
Committee evaluation
As part of the annual board evaluation,
all Audit Committee members together
with the Company Secretary completed
a committee evaluation. The results of
the evaluation concluded that the
Committee continued to operate
effectively, with an appropriate structure
and level of experience.
Role and 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 half-year and full-year
financial results and the financial
reporting process;
• monitor the statutory audit of the
annual and consolidated accounts;
• review the Group’s internal controls
and risk management systems;
• review and monitor the independence
of the external auditor, in particular,
the provision of additional services;
• 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.
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 Head
of Internal Audit, the Group
Financial Controller and other
relevant people from the business
when appropriate. The external
auditor, Deloitte LLP is also invited
to meetings.
Composition of the Committee
In accordance with the UK Corporate
Governance Code (the Code), the Board
has confirmed that all members of the
Committee are independent non-
executive directors and have been
appointed to the Committee based
on their individual financial and
commercial experience. The Board
has also confirmed that I, as Chairman
of the Committee, have recent and
relevant financial experience through
my current appointment as Chief
Financial Officer of Micro Focus
International plc and my previous
appointments as Chief Financial Officer
of ARM Holdings plc and Group Finance
Director of easyjet plc.
As part of the Company’s annual
compliance with the Code, an evaluation
was undertaken of the skills and
experience of the Committee. In
accordance with the Code, the Board
has agreed that the Committee as a
whole has the competencies relevant
to the sector in which the Company
operates. Through the external
appointments that David Atkins and
Susan Taylor Martin hold, they bring
a depth of financial and commercial
experience that add to the strengths
of the Committee.
Whitbread Annual Report and Accounts 2017/18 66
Chris Kennedy
Chairman, Audit Committee
Membership of the Audit Committee
and meeting attendance
Name of director
David Atkins
Chris Kennedy (Chairman)
Susan Taylor Martin
Meetings
attended
and eligible
to attend
4/4
4/4
4/4
Further details on the Committee’s
responsibilities are in the Committee’s
terms of reference on the Company’s
website: www.whitbread.co.uk.
GovernanceGovernance Main activities of the
Audit Committee:
In 2017/18, the Audit Committee’s
work covered internal controls, risk
management, internal audit, external
audit and financial reporting. The
details of the matters discussed at
Committee meetings are shown on
the right.
Through the year, the Committee has
also covered the following matters at
each meeting:
• the quality and integrity of
accounting policies and practices;
• review of the implementation of the
new Premier Inn financial systems,
together with the subsequent
control environment; and
• review of the Speaking Out reports
submitted in accordance with the
Group’s whistleblowing procedures.
March
• Review of the 2016/17 Annual report and Accounts
• Accounting judgement methodology
• Deloitte – 2016/17 external audit update, together with the approval of
the Deloitte terms of engagement
• Internal audit – approval of plan and fraud update
• Review of risk management process and risk management framework
• Review of the Committee’s effectiveness and terms of reference
April
• Approval of 2016/17 year-end financial statements (including the strategic
report/governance, consolidated accounts, whether the report is fair,
balanced and understandable, and provides the information necessary for
shareholders to assess the Group’s performance, Business Model and
strategy key judgements and estimates, going concern and viability
statement together with the letter of representation)
• 2016/17 external audit report
• The regulatory announcements of the results
• A longer-term view of the Group’s going concern basis
• Internal audit annual report and terms of reference
July
• Financial control framework – risks and controls
• External audit effectiveness in respect of the 2016/17 Annual Report
and Accounts
• Treasury control policy
October
• Review of the half-year statement and report (including the appropriate
accounting judgements)
• External audit – review and approval of the 2017/18 audit plan, presentation
of the half-year audit report, together with the letter of representation
• Internal audit review
• Implementation of IFRS 16 (leasing update)
• Review of the progress made in respect of the implementation of the new
EU data protection legislation – General Data Protection Regulation
Whitbread Annual Report and Accounts 2017/18 67
Governance Audit Committee report continued
To aid its review, the Committee
considers reports from the Group
Financial Controller, the Group Tax
Director, the Director of Internal Audit
and also reports from the external
auditor on the outcomes of its half-year
review and annual audit. The Committee
looks for constructive challenge from
Deloitte as external auditor.
The key areas of judgement and
estimates considered by the Committee,
in relation to the 2017/18 accounts and
disclosed in Note 2 of the consolidated
financial statements, were:
Non-underlying items
Consideration was given to the
appropriateness of disclosure for each
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.
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 2016/17 to 2017/18 was
assessed, concluding with the same
estimates as reached by management.
Residual value and asset lives
The Committee considered the Group
accounting policy in relation to asset
lives and residual values in the context of
the property, plant and equipment and
intangible assets held by the Group, and
the annual depreciation and impairment
charge. The Committee concurred with
management that the Group accounting
policy remains appropriate.
Intangible asset capitalisation
Given the level of capital expenditure
on IT assets, the Committee reviewed
the Group accounting policy on the
capitalisation of intangible assets
and concurred with management’s
conclusion that the policy remains
appropriate.
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.
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 Company, as
outlined below:
• the Annual Report and Accounts is
drafted by the appropriate senior
management with overall coordination
by the Secretariat team to ensure
consistency;
• comprehensive reviews of the drafts
of the Annual Report and Accounts
are undertaken by management, the
Executive Committee and 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.
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 by the Board, 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 54
and 55.
‘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. The
Committee receives regular reports
from the General Counsel on the
operation of this function, and are
satisfied that there are appropriate
arrangements in place for proportionate
and independent investigations.
Whitbread Annual Report and Accounts 2017/18 68
GovernanceGovernance 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 of up to £250,000. 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 than
£250,000. A tender process would
be held where appropriate.
Deloitte are engaged to provide
independent assurance over the
systems transformation governance
and project assurance, 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 0.3, we can confirm
that it continues to be independent.
Chris Kennedy
Chairman, Audit Committee
24 April 2018
Internal audit
The internal audit function provides
independent assurance through
reviewing the risk management
processes and internal controls
established by management.
The Audit Committee monitors and
reviews the scope, extent and
effectiveness of Whitbread’s internal
audit function. Regular presentations
and updates are given to the Committee
by the Director of Internal Audit and
private discussions are held with the
Director of Internal Audit as and when
necessary. The Committee has approved
the Group Internal Audit Terms of
Reference which sets out the role,
accountability, authority, independence,
and objectivity of the internal audit
function. The Committee considers
matters raised through audit reports
and the adequacy of management’s
response to them, included the time
taken to resolve any such matters. The
main focus areas for internal audit
during the year including cyber security,
project assurance covering major
system implementations and
international operations.
The scope of activity of internal audit is
monitored and reviewed at each
Committee meeting. An annual plan was
agreed by the Committee in March 2018
which covers the activities to May 2019.
The Internal Audit plan is determined
based on the Group’s key risk areas, as
well as areas of change within the
business, recurring themes from
previous audit results and the views of
management. Risk areas scheduled for
future audits include newly established
financial controls in Premier Inn, systems
and processes to support the
accelerated growth plan for Costa
Express, and operational processes in
Costa China. The in-house IT Internal
Audit team provides assurance over
Whitbread’s Information Systems, and
delivers integrated IT audits, as well as
coordinating assurance reviews to
de-risk Whitbread’s ongoing major
change projects.
External auditor
On behalf of the Board, the Committee
oversees the relationship with the
external auditor. Deloitte was appointed
as the auditor of the Company in 2015
and the current audit partner is Nicola
Mitchell who has held this role since the
audit engagement began. Deloitte was
reappointed as auditor of the Company
at the 2017 Annual General Meeting.
Auditor effectiveness
The effectiveness of the external audit
process is dependent on appropriate
audit risk identification at the start of the
audit cycle. We receive from 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 the Committee, the Board
and management on the effectiveness
of the audit process and targeted and
tailored questionnaires were completed.
An assessment of the effectiveness
of Deloitte in respect of the previous
financial year was undertaken in
July 2017. Overall, it was noted
that the audit was effective and that
improvements had been made on the
prior financial year, however, there
remained opportunities to drive
increased efficiency.
As part of our review process for this
financial year the Committee will be
assessing the work of the year-end audit
once finalised and an effectiveness
review for this financial year, will be
undertaken and reported to the July
2018 Audit Committee meeting.
The Committee confirms that the
Company has complied with regard to
the requirement of the provisions of the
Statutory Audit Services for Large
Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014. The Group
intends to put the external audit out to
tender every ten years in the future,
which would expect to be in 2025.
Whitbread Annual Report and Accounts 2017/18 69
Governance
Nomination Committee report
The Nomination Committee has
overseen a year of change with further
work ahead in the next year.
This is my first Nomination
Committee report as Chairman of
the Committee and, on reflection, it
has been a very busy year for the
Committee. As stated in last year’s
Annual Report and Accounts,
Stephen Williams resigned as a
director of the Company following
the conclusion of the 2017 Annual
General Meeting. Following the
resignation of Sir Ian Cheshire on
21 September 2017, the Committee
nominated myself to be appointed
as Senior Independent Director.
It was announced in January 2018
that following nine years’ service as
non-executive director with four of
those years as Chairman of the
Company, Richard Baker was to
resign as from the Board with effect
from 28 February 2018. As part of this
announcement and following a thorough
process lead by Chris Kennedy as an
independent non-executive director,
with support from Louise Smalley as
Group HR Director, the Company
announced that I would be appointed
as Chairman with effect from 1 March
2018. Further details on the process
that the Committee followed for the
appointment of the new Chairman is
provided on page 71.
As highlighted in the corporate
governance report on page 57, the
Company is actively engaged in the
recruitment of two new non-executive
directors of the Board. As part of this
process, the Committee is also engaged
in an ongoing search for a new Senior
Independent Director. We anticipate
reporting on all changes to the Board as
part of next year’s Committee report.
The Committee meets at least twice
a year and during this year, several
additional meetings were held to
support the search and appointment
of the new Chairman. Meetings are
attended by members of the Committee
and, by invitation, the Chief Executive,
the Group Finance Director and the
Group HR Director.
Adam Crozier
Chairman,
Nomination Committee
Membership of the Nomination
Committee and meeting
attendance
Name of director
David Atkins
Richard Baker1
(resigned 28 February 2018)
Sir Ian Cheshire2
(resigned 21 September 2017)
Adam Crozier1 (Chairman)
Chris Kennedy
Deanna Oppenheimer
Susan Taylor Martin
Stephen Williams
(resigned 21 June 2017)
Meetings
attended
and eligible
to attend
5/5
3/3
1/2
1/1
5/5
5/5
5/5
2/2
1 Richard Baker and Adam Crozier were
ineligible to attend the Nomination Committee
meetings that discussed Chairman and Senior
Independent Director succession.
2 Sir Ian Cheshire was unable to attend a
Nomination Committee meeting due to a prior
business commitment.
Composition of the Committee
All members of the Committee are
non-executive directors. This is the first
year that all non-executive directors
have been members of the Committee.
The expansion of the Committee has
further added to experience of the
Committee in respect of all matters that
it considers on behalf of the Board.
Role of the Committee
The role of the Nomination Committee
is to review the Board composition and
to plan for its refreshment as applicable.
The Committee is also responsible for
evaluating the directors on an annual
basis and striving for a balance of skills,
knowledge, independence, experience
and diverse representation to allow for
it to operate effectively.
Responsibilities of the Committee
The Committee has specific
responsibilities on behalf of the Board
and these are detailed below:
• 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;
• to keep the leadership needs of the
Company under review, both for
executive and non-executive directors
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;
Whitbread Annual Report and Accounts 2017/18 70
GovernanceGovernance The Chairman’s succession
process – led by Chris Kennedy
In January 2018, we announced that
Richard Baker was to retire as Chairman
of the Company after nine years’
service. The Nomination Committee led
by myself with the support of Louise
Smalley, the Group HR Director,
undertook a thorough process to
appoint a new Chairman and we were
delighted to announce in January 2018,
that Adam Crozier, who was Senior
Independent Director of the Company,
was to be appointed as the Chairman.
We have outlined the process that we
followed for the appointment of the
Chairman below.
Role requirements
The Committee prepared a detailed
specification for the role of Chairman,
specifying the skills, knowledge,
experience and attributes required.
Process
The Committee directed the selection
process, under the leadership of Chris
Kennedy, independent non-executive
director. The Zygos Partnership (Zygos),
an external search consultant, was
engaged to facilitate the search and
selection process.
Search
The Committee considered potential
candidates identified by Zygos. It
examined a list of candidates in
consultation with Zygos, assessing each
candidate against the role specification.
The Committee then identified
candidates to be invited to interviews.
Recruitment
Following the interviews, the Committee
discussed the shortlisted and agreed
that Adam Crozier should be proposed
to the Board for appointment as
Chairman. The Board approved his
appointment, which was announced on
4 January 2018 and took effect on
1 March 2018.
Length of tenure of directors as at 1 March 2018
David Atkins
Alison Brittain
Nicholas Cadbury
Adam Crozier
Chris Kennedy
Deanna Oppenheimer
Louise Smalley
Susan Taylor Martin
2011
2012
2013
2014
2015
2016
2017
2018
• 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 the Board before
appointment and any changes to the
Chairman’s commitments should be
reported to the Board as they arise;
and
policies and practices that support equal
opportunities and broad-based diversity
which will inform our future hiring. We
have participated for the last two years
in the Hampton Alexander review of
women in senior roles which examines
the gender balance on our board, the
Executive Committee and across our
direct reports to the Executive
Committee members.
• 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 2017/18, the Committee’s main
activities have included:
• the appointment of the Company’s
new Chairman;
• the appointment of the Company’s
new Senior Independent Director;
• board succession planning;
• the re-election of directors at the 2017
Annual General Meeting; and
• a review of the Committee’s
effectiveness and its terms of
reference.
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 was reviewed
in February 2018.
Board appointments and diversity
Diversity and equality have always been
core values at Whitbread. The Board
believes that diversity in many forms
is critical to the effectiveness of the
Board and the Company and its
continued success. As highlighted earlier
in this report, the Company is actively
engaged in the recruitment of two new
non-executive directors of the Board
and we remain actively committed to
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. A matrix of the skills and
competencies of the current Board is
mapped against the skills and
competencies the Committee believes
will be required in the future.
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.
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 Annual General Meeting (AGM).
Richard Baker completed the individual
performance review of each non-
executive director before he stepped
down as Chairman in respect of 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.
Adam Crozier
Chairman, Nomination Committee
24 April 2018
Whitbread Annual Report and Accounts 2017/18
71
Governance
Remuneration report
We believe that remuneration should be aligned directly
with the strategy and plans of the business and that
executives should be paid fairly, incentivised to achieve
outstanding results and rewarded for doing so.
All targets should be appropriately stretching.
This time last year we submitted an
updated remuneration policy to
shareholders for approval at our AGM in
June and I was delighted that the policy
received overwhelming support, with
over 98% of votes cast in favour of the
resolution. I would like to thank
shareholders for their support at the
AGM and also thank those investors and
stakeholders who engaged with us as
we developed the policy.
The policy was developed with the
aim of aligning remuneration with
Whitbread’s strategy and business
plans and was designed to underpin the
Company’s long-term profitability and
improving our stakeholder return.
During 2017/18 the Committee’s focus
has been on ensuring that the policy
was effectively implemented and that
it is working to support Whitbread’s
strategy.
I would like to welcome Adam Crozier
and David Atkins to the Committee and
look forward to working with them.
Rewards linked to performance
The Committee remains aware of
Whitbread’s responsibility to all of its
stakeholders and is cognisant of the
continued, and increasing, focus on
executive remuneration. These factors
must be balanced with the need to
attract and retain high-calibre executives
with appropriate experience.
This balance is best demonstrated by
comparing our annual performance to
rewards under the Annual Incentive
Scheme. The last year has seen a
challenging trading environment as well
as an uncertain political and economic
climate. Against this backdrop
Whitbread has still been able to deliver
good results, with underlying profit
before tax up by 4.5% and return on
capital up by 20 basis points to 15.4%.
This performance, together with some
very positive progress against the
Group’s three strategic priorities, has led
to incentive payments to the executive
directors being between 61.7% and
64.1% of maximum. More information
on rewards under the Annual Incentive
Scheme can be found on pages 79 to 81.
The Committee believes that the
executives have received fair and
proportionate rewards for a good level
of performance in the year and a good
level of progress towards Whitbread’s
longer-term strategic aims. This is one
example of how the new policy is
working effectively.
During the year, the Committee has
considered the awards due to vest
under the 2015 and 2016 LTIP in the
light of a strategic decision taken by the
Board to undertake sale and leaseback
transactions. The awards made under
the Long Term Incentive Plan in 2015
have vested at 38.3% of maximum
and are subject to a two-year holding
period. Further details can be found
on page 82.
Transparent reporting
The transparency of our reporting
remained a priority for our shareholders
last year and I am very keen to ensure
that we report transparently on the
operation of Whitbread’s remuneration
policy and to demonstrate that
payments and awards made to
executives are fair and reasonable. To
this end, we made some enhancements
to last year’s report and have again
looked to improve our disclosure this
year. In particular, we have included a
new ‘At a glance’ section, which can be
found on pages 71 and 75.
Corporate governance
There has been a lot of activity in terms
of changes and proposed changes to
UK governance requirements and
some of these changes are linked to
remuneration. Whitbread has recently
published its gender pay gap and
further details on this can be found
on page 13.
Whitbread Annual Report and Accounts 2017/18
72
Deanna Oppenheimer
Chair, Remuneration Committee
Underlying profit before tax†
£591m
+4.5%
2017/18
2016/17
2015/16
Group return on capital†
2014/15
15.4%
+20bps
2017/18
2016/17
2015/16
Underlying basic EPS†
2014/15
260p
+5.6%
2017/18
2016/17
£591m
£565m
£546m
£488m
15.4%
15.2%
15.3%
15.7%
260p
246p
2015/16
239p
Definitions of all APMs are included in the
glossary on page 167.
214p
2014/15
†
GovernanceGovernance The FRC has recently conducted a
consultation on the UK Corporate
Governance Code. At the time of
writing, the results of the consultation
are not known. Based on the original
proposals, there are some areas relating
to remuneration, both in terms of the
remit of remuneration committees
and to disclosure. Once the revised
corporate governance code has been
published, we will take steps to ensure
that we comply with it and I anticipate
that this will be one of the areas of
focus for the Committee during the
year ahead.
The year ahead
Further to the announcement about the
future restructuring of the Group, the
Committee believes that the current
approved remuneration policy, and in
particular the Long Term Incentive Plan,
will no longer be appropriate. Given the
complexity of managing the demerger,
it will be necessary to put in place a
long-term incentive arrangement which
will retain and incentivise executives to
execute the strategy effectively, and to
protect and create shareholder value
over this critical period.
We will be consulting with our major
shareholders over the next few weeks
on proposals for a new long-term
incentive plan, and we will be asking
shareholders to approve a revised
Directors’ Remuneration Policy as soon
as practically possible. In the event that
the revised Policy is approved by
shareholders the 2018 LTIP awards,
which will be made under the current
policy, will be substituted with awards
under the new arrangements.
I very much welcome engagement with
Whitbread’s investors and look forward
to meeting shareholders at the AGM
in June.
Deanna Oppenheimer
Chair, Remuneration Committee
24 April 2018
The statement above, the summary of the remuneration policy 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 2018.
2017/18 remuneration linkage to strategy
Winning Teams
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
B
u
il
d
t
h
e capability and p l a t f o r m f
G
o
u
r
o
r
c
w
o
r
a
e
n
d
U
i
K
n
n
b
o
u
v
a
t
e
i
n
s
i
n
e
s
s
e
s
o r g ro wth
Profitable
Growth
Key
AIS: Annual Incentive
Scheme
ISO: Individual strategic
objective
IW:
Incentivised
WINcard measure
Profit measure
P:
LTIP: Long-term
Incentive Plan
Whitbread Annual Report and Accounts 2017/18
73
Grow and innovate in our core UK businessesFocus on our strengths to grow internationallyBuild the capability and platform for growthWinning TeamsCustomer HeartbeatProfitable Growth• Premier Inn room growth (AIS-ISO)• Costa store growth (AIS-ISO)• Costa Express machine installations (AIS-ISO)• Effective workforce planning (AIS-ISO)• Increase German hotel pipeline (AIS-ISO)• Establish growth platform for Costa China (AIS-ISO)• Delivery of cost savings (AIS-ISO)• Implementation of more efficient processes and systems (AIS-ISO)• Operational team retention (AIS-IW)• YourSay results (AIS-ISO)• Premier Inn brand health (AIS-IW)• Costa net recommend (AIS-IW)• Restaurants net recommend (AIS-IW)• Group profit (AIS – P)• Like for like sales growth (AIS-ISO)• EPS growth (LTIP)• Return on capital (LTIP)Governance
Remuneration at a glance
Business performance
Financial measures
Underlying profit
before tax†
Underlying
basic EPS†
Return on
capital
4.5%
to £591 million
5.6%
to 260p
15.4%
up by 20bps
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
1 March
2018
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
Team and customer measures
Operational
team retention
Premier Inn
Brand health
Restaurants
net recommend
Costa
net recommend
Operational team retention measures the proportion of employed team members retained over a three-month period
taken throughout the financial year. The customer measures for Premier Inn, Costa and Restaurants are all on a net
basis, with negative scores subtracted from positive scores. For Premier Inn this is based on the YouGov BrandIndex
and for Costa and Restaurants this is based on our customer surveys. The health and safety measure is based on the
proportion of sites passing independent audits.
Health and
safety
In most cases the colours
represent the following:
A green WINcard score
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.
†
Definitions of all APMs are included in the glossary on page 167.
Whitbread Annual Report and Accounts 2017/18
74
GovernanceGovernance
Performance outcomes
Annual Incentive Scheme
% of maximum for Chief Executive
Long Term Incentive Plan
% of awards vesting
2017/18
2016/17
2015/16
2014/15
64.1%
49.8%
38.8%
86.8%
2017/18
2016/17
2015/16
2014/15
38.3%
76.5%
97.0%
100.0%
Remuneration outcomes
Alison Brittain
Chief Executive
Total remuneration
£’000
2017/18
2016/17
2015/161
634
1 Remuneration for part of the year
Nicholas Cadbury
Group Finance Director
Total remuneration
£’000
2017/18
2016/17
2015/16
2014/15
1,437
1,487
1,717
2,135
Louise Smalley
Group HR Director
Total remuneration
£’000
2017/18
2016/17
2015/16
2014/15
957
988
1,284
1,493
Share ownership
2,336
2,509
Shares
20,900
Vested, but unexercised,
share awards
22,8892
Meeting requirement?3
✓
Vested, but unexercised,
share awards
18,4552
Meeting requirement?3
✓
Vested, but unexercised,
share awards
12,4292
Meeting requirement?3
✓
% of salary
127
Share ownership
Shares
29,100
% of salary
215
Share ownership
Shares
41,236
% of salary
420
2 These awards do not count towards meeting the shareholding requirement.
3 Details of shareholding requirements can be found on page 83.
Whitbread Annual Report and Accounts 2017/18
75
Governance Remuneration policy
Introduction
The Company’s remuneration policy was approved at
the 2017 AGM and was implemented over the 2017/18
financial year. We will be reviewing this policy over
the coming weeks in light of our recently announced
plans to restructure the Group, and will be consulting
shareholders on a revised policy.
For executives, our approach
is designed to:
• align with the business strategy and
the achievement of planned business
goals;
• support the creation of sustainable
long-term shareholder value;
• provide an appropriate balance
between remuneration elements that
attract, retain and motivate the
highest calibre of executive talent; and
• encourage a high-performance
culture by ensuring performance-
related remuneration constitutes a
substantial proportion of the
remuneration package and by linking
maximum payout opportunity to
outstanding results.
The policy table below is an extract
from the approved remuneration
policy and provides 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. The full remuneration policy is
available on the Company’s website:
www.whitbread.co.uk.
Policy table
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 and
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 2017/18 the benefits received by
the executive directors amounted
to between 2.7% and 5.2% 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 2017/18
76
GovernanceGovernance 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 2018/19, 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.
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
• Vesting is based on equally weighted
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.
and independently measured
three-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.
• 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
• None
(up to 25% for 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 2017/18
77
Governance Annual report on remuneration
Remuneration Committee – membership
Name of director
Deanna Oppenheimer (Chair)
David Atkins1
Richard Baker2
Adam Crozier1
Sir Ian Cheshire2
Stephen Williams2
Meetings attended and
eligible to attend
6/6
0/0
6/6
5/5
4/4
3/3
1 Adam Crozier and David Atkins joined the Committee on 1 April 2017 and 1 March 2018 respectively.
2 Stephen Williams, Sir Ian Cheshire and Richard Baker stepped down from the Committee on 21 June 2017, 21 September 2017 and 28 February 2018 respectively.
Key duties
Full terms of reference are available on the Company’s website (www.whitbread.co.uk) and a summary of the key duties is set
out below.
Remuneration Committee – responsibilities
• 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 and Secretary to the Committee
Ruth Hutchison – Group Reward Director
External advisers
PwC, one of the founding members of the Remuneration Consultants Code of Conduct, was appointed remuneration
consultant by the Committee with effect from September 2017 following a rigorous tender process and adheres to this
code in its dealings with the Committee. PwC also provides international tax advice to the Group. Fees paid to PwC in respect
of advice received by the Committee amounted to £79,700. These fees were charged on a time and material basis. Prior to the
appointment of PwC, Willis Towers Watson, also a founding member of the Remuneration Consultants Code of Conduct, acted
as remuneration consultant to the Committee. A separate part of Willis Towers Watson provided 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 £84,390. These fees were charged on a time and
material basis.
The Committee is satisfied that the advice received is independent and objective. The Committee is comfortable that the PwC
engagement partner and team that provides remuneration advice to the Committee do not have connections with the
Company that may impair their independence.
Remuneration Committee agenda – 2017/18
• Approval of Annual Incentive Scheme and targets for
2017/18.
• Approval of awards of cash and deferred shares to executive
directors under the Annual Incentive Scheme.
• Executive directors’ salary review.
• Approval of 2017 LTIP awards.
• Confirmation of the performance conditions for the 2017
LTIP awards. Confirmation of the vesting percentages for the
LTIP award made in 2014 and vesting in 2017.
• Approval of the 2017 remuneration report.
• Remuneration policy review.
• Committee effectiveness evaluation.
• Appointment of PwC as new adviser.
• Assessment of vesting calculations for 2015 and 2016 LTIPs.
• Review of the terms of reference.
Whitbread Annual Report and Accounts 2017/18
78
GovernanceGovernance Single total figure of remuneration (audited information) – executive directors
Basic salary
Benefits
Annual Incentive
Scheme
LTIP
Pension
Total
Director
Alison Brittain
Nicholas Cadbury
Louise Smalley
2017/18
£’000
2016/17
£’000
2017/18
£’000
2016/17
£’000
2017/18
£’000
2016/17
£’000
2017/18
£’000
2016/17
£’000
2017/18
£’000
2016/17
£’000
2017/18
£’000
2016/17
£’000
808
549
363
792
532
355
22
22
19
22
22
19
869
578
375
638
422
279
435
168
118
859
394
257
202
120
82
198
117
78
2,336
1,437
957
2,509
1,487
988
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 2016 and ten months’ pay based on the director’s
salary from 1 May 2017.
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 2018 and deferred
shares to be issued in April 2018. The awards were calculated as described below.
Awards based on profit measure (50% of total award)
Threshold
Target
£591m (99.43% of target)
£564.3m
£594.0m
Max
£653.4m
Director
Alison Brittain
2016/17
Nicholas Cadbury
2016/17
Louise Smalley
2016/17
Total %
of salary1
39.60
61.50
39.60
61.50
39.60
61.50
1
The year-on-year change is largely driven by a change in the Annual Incentive Scheme structure, as approved by shareholders at the 2017 AGM, with a reduction in
the maximum percentage of salary linked to profit performance.
Awards based on WINcard (25% of total award)
The incentivised WINcard targets for 2017/18, together with the results, are shown below. Only half of the maximum reward was
payable based on a green result, with higher rewards available for stretch or excel performance above target.
WINcard measure
Operational team retention
Total Winning Teams
Premier Inn brand health (YouGov BrandIndex)
Restaurants total guest net promoter score
Costa Listen & Learn
Total Customer Heartbeat
Total 2017/18
Green
Target
Result Performance
88.45%
88.75%
Stretch
32.1
47.0
50.3
32.7
51.6
49.3
Stretch
Excel
Maximum
opportunity
% of salary
Outcome
% of salary
20.50
20.50
6.83
6.83
6.83
20.50
41.00
15.00
15.00
5.00
6.83
1.67
13.50
28.50
More information on how these measures are calculated can be found on page 74. As a result, the awards to be made based on
WINcard measures are as follows:
Director
Alison Brittain
2016/17
Nicholas Cadbury
2016/17
Louise Smalley
2016/17
Total %
of salary
28.50
18.80
28.50
16.80
28.50
16.80
Whitbread Annual Report and Accounts 2017/18
79
Governance Annual report on remuneration continued
Awards based on individual strategic objectives (25% of total award)
Last year we explained that each of the executive directors would have individual strategic objectives and that 25% of the
maximum incentive opportunity would be linked to performance against these objectives. A summary of each of the executive
directors’ performance, together with the incentive outcomes is shown in the table below.
✓ indicates that the objective was achieved, ✓ indicates that it was partially achieved and ✗ shows that the objective was
not achieved.
Objectives
Achievement
Outcome
Alison Brittain
Continue to grow and innovate the core UK businesses,
within agreed financial framework:
Increase Premier Inn gross UK rooms and like for like sales
Increase Costa net stores and like for like sales
Develop stretch Costa Express plan, with sustainable economic model for
expansion and increase number of machines
Create international growth platform with progress in Premier Inn Germany
and Costa China:
Increase German hotel pipeline
Develop investable and scalable growth platform for Costa in China, with return to
positive like for like sales
Achieve in-year efficiency plan. Improve core infrastructure to allow for future
customer proposition development:
Deliver in-year cost savings
Launch new finance system with no significant disruption and most financial
control issues resolved by year end
4,565 additional rooms and like for like sales
increase of 2.2%
289 additional stores worldwide and like for
like sales increase of 1.2%
Plan approved by Board, 1,436 new machines
installed
25 hotels added to the pipeline via organic
growth and acquisition
Plan for China approved by the Board, buyout
of JV partner and like for like sales positive
Delivered more than £65 million cost savings
in year
System delivered successfully. Smooth half
year with no material audit issues
✓
✓
✓
✓
✓
✓
✓
Overall performance against individual strategic objectives (maximum opportunity: 42.00%):
39.00%
Nicholas Cadbury
Delivering budgeted cost saving across Whitbread and successful negotiation
of the pension review:
Deliver in-year cost savings
Appropriate negotiation of the triennial pension valuation
Launch of new finance system in Premier Inn. Improved efficiency, controls and
financial insight:
No significant business disruption and successful, efficient and accurate reporting
of half and full-year results
Project delivered on budget
Finance resources aligned to target operating model
Procurement savings tracking to plan
Deliver the IT infrastructure improvements across the Group
to enable greater productivity, efficiency and security:
New till applications rolled out on time and budget
Data warehouse migrated with no business disruption
Develop clear implementation plan for replacement of Premier Inn reservation
system
No significant trading time lost or reputational damage from cyber security issues
Delivered more than £65 million cost savings
in year
Company contribution schedule agreed with
limited additional funding required in the
short term
System delivered successfully. Smooth
half and full-year with no material audit issues
Delivered on time and on budget
Achieved alignment of finance resources
to operating model
Significantly improved visibility of procurement
and authorisation controls
Deadline missed, with project extended into
Q1 2018/19
Completed all planned moves with no
interruption
Clear plan in place and delivery on track
Achieved – no significant issues and cyber
security actions completed as planned
✓
✓
✓
✓
✓
✓
✗
✓
✓
✓
Overall performance against individual strategic objectives (maximum opportunity: 42.00%):
36.75%
Whitbread Annual Report and Accounts 2017/18 80
GovernanceGovernance Objectives
Achievement
Outcome
Louise Smalley
Successful completion of next phase of the transition to an efficient and high
performing organisation:
In-year overhead cost efficiencies
Improved YourSay scores on key questions relating to
senior management
Succession cover for senior roles to progress in line with plans
Effective workforce planning for greater macro-uncertainty:
2016 Business Plan translated to robust outlet workforce plans
for the UK to determine labour demand
Supply scenarios modelled and mitigating actions developed
Pay for Progression investments informed by supply and demand
linked to benchmarking for critical roles
Delivery of HR technology transformation:
Robust business case from phase 1 project evaluation
Obtain approval for phase 2, carry out functionality benchmarking
and determine key metrics
International application for equity markets in Poland, Germany
and China in order to capture the key global HR KPIs
Efficiencies delivered on plan, with an increase
in the number of shared HR services
Scores stable at Group level and improved in
Premier Inn
Achieved – succession cover stable post
re-organisation
Robust outlet workforce plans for UK included
in September 2017 business plans
Scenarios established for inactive populations,
weakest regional supply and key skill deficits
Team retention improved in all brands and Pay
for Progression investment maintained
Business case approved in May 2017
Phase 2 approved and completed in
March 2018. Benchmarking undertaken.
Metrics defined
Phased international deployment agreed
✓
✓
✓
✓
✓
✓
✓
✓
✓
Overall performance against individual strategic objectives (maximum opportunity: 42.00%):
35.00%
Total awards
The split between cash and deferred shares is as follows:
Director
Alison Brittain
2016/17
Nicholas Cadbury
2016/17
Louise Smalley
2016/17
% of salary based
on profit
% of salary based
on WINcard
39.61
39.61
39.61
28.50
28.50
28.50
% of salary based
on individual
objectives
39.00
Total %
of salary
107.11
36.75
104.86
35.00
103.11
Cash award
£’000
Cash value
of deferred
shares award
£’000
434
290
289
188
188
124
434
348
289
234
188
155
Total
£’000
869
638
578
422
375
279
The deferred shares will, under normal circumstances, vest on 1 March 2021, 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 2018 (i.e. 3,911.4 pence).
The number of deferred shares awarded to each director will be as follows:
Director
Alison Brittain
Nicholas Cadbury
Louise Smalley
Number of deferred
shares awarded
2018
Number of deferred
shares awarded
2017
11,102
7,383
4,799
9,104
6,128
4,051
Whitbread Annual Report and Accounts 2017/18
81
Governance Annual report on remuneration continued
Long Term Incentive Plan
The amounts shown in the table on page 79 refer to the value of the LTIP awards made in 2015 and vesting in 2018.
The value given for the LTIP awards is based on the average market value over the last quarter of the financial year
(3,886.6 pence), as the awards will not vest until after the date of this report.
The LTIP awards made to executives in 2015 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 2017/18
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%
74%
100%
17%
0%
24%
50%
71%
96%
<4%
4%
6%
8%
10%
The EPS growth achieved was RPI plus 5.45% with the 2017/18 ROCE, which is calculated using an average of the previous
13 months’ net assets, being 16.13%.
During the 2015 and 2016 LTIP performance periods, a strategic decision was taken by the Board to undertake certain sale
and leaseback transactions in order to manage the balance sheet effectively to generate the best returns for shareholders.
On-going rental expense from all sale and leaseback transactions is reflected in reported EPS numbers. For consistency the
decision was taken to include profit from these transactions alongside the rental expense when determining underlying
earnings for the EPS and ROCE performance conditions. The Committee felt it was appropriate for these amounts to be
treated in a consistent way in determining the incentive outcome. This approach will be taken in respect of these material sale
and leaseback transactions for both the 2015 and 2016 LTIPs.
As a result of performance, 38.3% of the shares awarded under the 2015 LTIP will vest. The awards vesting to the executive
directors each of which are subject to a two-year holding period are as follows:
Director
Alison Brittain
Nicholas Cadbury
Louise Smalley
Number of
shares vested 2018
Number of
shares vested 2017
11,182
4,334
3,041
22,334
10,255
6,688
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
Louise Smalley
% of salary
25.0
27.5
27.5
Executives receive either a pension contribution or a monthly amount in cash in lieu of the pension contribution. Alison Brittain
received a cash payment, while Nicholas Cadbury and Louise Smalley each elected to receive a cash payment (less an
amount equal to the employer’s national insurance contribution). The percentage of salary received by Nicholas Cadbury
and Louise Smalley rose from 25.0% to 27.5% on 1 December 2017 and 1 November 2017 respectively. This was as a result of
grandfathered terms.
Single total figure of remuneration (audited information) – Chairman and non-executive directors
Director
Richard Baker
Adam Crozier
David Atkins
Sir Ian Cheshire
Chris Kennedy
Deanna Oppenheimer
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
2017/18
£’000
2016/17
£’000
2017/18
£’000
2016/17
£’000
2017/18
£’000
2016/17
£’000
2017/18
£’000
2016/17
£’000
2017/18
£’000
2016/17
£’000
350
52
57
33
57
57
57
18
350
–
9
57
57
9
57
57
–
6
–
9
–
–
–
–
–
–
–
15
–
–
–
–
–
–
–
–
20
20
–
–
–
–
–
–
8
–
–
20
–
5
5
3
–
–
5
1
–
–
1
5
–
1
5
–
350
631
62
451
77
77
62
191
350
–
101
77
65
101
62
77
Whitbread Annual Report and Accounts 2017/18 82
GovernanceGovernance
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 are in compliance with the requirement. Alison Brittain, who was appointed in September 2015,
and is currently required to build towards a 200% holding, invested in excess of £1 million in the Company’s shares from her
own resources. Alison’s first share scheme award 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 1 March 2018:
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
Adam Crozier3
Richard Baker*
Executive directors
Alison Brittain
Nicholas Cadbury
Louise Smalley
Non-executive directors
David Atkins
Sir Ian Cheshire*
Chris Kennedy
Deanna Oppenheimer4
Susan Taylor Martin
Stephen Williams*
1,000
16,188
20,900
29,100
41,236
1,425
2,282
1,500
1,600
1,490
11,340
41
N/A
1,029
1,182
1,531
56
N/A
61
66
50
N/A
39
N/A
812
1,131
1,603
55
N/A
58
62
58
N/A
100
N/A
200
125
125
100
N/A
100
100
100
N/A
10
N/A
127
215
420
94
N/A
102
110
83
N/A
10
N/A
100
205
440
92
N/A
97
104
97
N/A
–
–
111,353
45,129
30,948
35,067
29,183
19,707
* As at date of leaving
1
2 Includes unvested/unexercised deferred shares under the Annual Incentive Scheme and unexercised LTIP awards for which the performance targets have
Includes outstanding LTIP awards for which performance has not yet been tested.
already been met.
3 Adam Crozier was appointed Chairman on the last day of the financial year and the performance versus requirement shown in the table is based on his new
fee as Chairman.
4 Deanna Oppenheimer actually holds 6,400 ADRs in Whitbread PLC, each of which represent 0.25 of a Whitbread ordinary share.
There has been no change to the interests in the tables shown on this page between the end of the financial year and the date
of this report. 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 on the following pages for details of LTIP awards, deferred shares and Sharesave options.
Options exercised (audited information)
The following options were exercised by executive directors under the Company’s share schemes during the year.
Director
Nicholas Cadbury
Scheme
SAYE
Number
of shares
Exercise price
pence
Exercise date
327
2746.4
30/05/2017
Market
price on
exercise
pence
4229.0
Monetary
value of
gain
(£’000)
5
Awards granted
Details of awards made under the Annual Incentive Scheme in relation to the 2016/17 incentive year and awards made under
the Long Term Incentive Plan in 2017 were disclosed in the 2016/17 Annual Report.
Whitbread Annual Report and Accounts 2017/18 83
Governance Annual report on remuneration continued
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) increased by 17.0% in the
year, compared with an increase of 5.9% for the Group’s employees as a whole.
The following table shows the Chief Executive’s pay over the last nine years, with details of the percentage of maximum paid
out under the Annual Incentive Scheme and the LTIP vesting percentage for each year.
Year
2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
2010/11
2009/10
Chief Executive
Alison Brittain
Alison Brittain
Alison Brittain
Andy Harrison
Combined CEO remuneration for 2015/16
Andy Harrison
Andy Harrison
Andy Harrison
Andy Harrison
Andy Harrison
Alan Parker
Combined CEO remuneration for 2010/11
Alan Parker
Single total
figure of remuneration
£’000
% of maximum
incentive achieved
% of LTIP
award vesting
2,336
2,509
634
2,423
3,057
4,554
6,374
3,432
1,444
534
2,509
3,043
2,634
64.1
49.8
38.8
38.8
38.8
86.8
82.6
74.9
45.6
94.4
94.4
94.4
100.0
38.3
76.5
n/a
97.2
97.2
100.0
100.0
89.8
n/a
n/a
82.4
82.4
75.9
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 1,100 employees across the Group are entitled to a company car or cash in lieu of a company car. 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 2,700 employees are entitled to participate in the Group’s private healthcare scheme, with 1,150 of these,
including the executive directors, entitled to family cover.
All employees receive discounts on Company products, but the directors have waived their right to this benefit.
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.
Annual Incentive Scheme
Approximately 6,400 employees are eligible to receive an annual incentive payment linked to the achievement of profit and
WINcard targets. The maximum opportunity is dependent on the role. 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 senior leaders, 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 2017/18 84
GovernanceGovernance
Pension
Like all employees, the executive directors are entitled to participate in the Company’s pension scheme. The scheme is a
defined contribution scheme. Employees below the executive level are able to choose a contribution rate of between 5%
and 10% and have this matched by the Company. 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.
Fees from external directorships
The executive directors are entitled to retain fees from external directorships. Louise Smalley is a non-executive director of
DS Smith Plc and retained a fee of £56,735. Alison Brittain is a non-executive director of Marks and Spencer Plc and retained
a fee of £70,000. Nicholas Cadbury is a non-executive director of Land Securities Group PLC and retained a fee of £78,333.
Relative importance of spend on pay
The graph below compares the change in total expenditure on employee pay during the year to the change in dividend payments.
2016/17
2017/18
£m
1,000
900
800
700
600
500
400
300
200
100
0
+6.3%
Dividends
+5.6%
+[7.7]%
Employee
costs
Implementation of remuneration policy in 2018/19
Base salary
The executive directors will each receive a salary increase of 4.0%, which is within the same range as the increase being given to
employees across the Group.
The base salaries of the executive directors with effect from 1 May 2018 will be as follows:
Director
Alison Brittain
Nicholas Cadbury
Louise Smalley
Base salary at
1 May 2018
£’000
Base salary at
1 May 2017
£’000
843
573
379
811
551
362
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.
Whitbread Annual Report and Accounts 2017/18 85
Governance Governance
Annual report on remuneration continued
Annual incentive scheme
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 achieve incentivised rewards.
Profit and WINcard performance (% of salary)
In 2018/19, half of the total incentive available will be based on performance against a Group underlying profit before tax target.
This profit target is considered by the Board to be commercially sensitive and, for that reason, is not disclosed in advance.
The Committee intends to disclose the target retrospectively in the 2018/19 report.
Each executive will be able to earn an additional 25% of the maximum based on WINcard measures. One measure will be
operational team retention and the others will be 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 an ‘excel’ level, to be achieved.
Profit and WINcard performance (% of salary)
Threshold
On-target
Maximum
Total 31%
21%
10%
42%
20%
Total 62%
% of salary linked to
profit performance
% of salary linked to
WINcard measures
84%
41%
Total 125%
Individual strategic objectives
Each executive director also has three individual strategic objectives. They will be eligible to receive up to 25% of the maximum
incentive opportunity based on the delivery of these objectives. Achievement of the approved objective outcomes has 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 individual strategic objectives for
each of the executive directors, together with details on which of the three strategic priorities (see pages 10 to 11) each objective
is linked to:
Alison Brittain
Growth in UK estate and Premier Inn occupancy and delivery of key UK innovations.
Increase German hotel pipeline, updated growth plan for Costa China and international progress for Costa Express.
Develop detailed road map to deliver cost savings plan and deliver in-year cost savings. Deliver major infrastructure
projects.
Nicholas Cadbury
Develop a new financial operating model and improved reporting for property.
Achievement of in-year international growth targets.
Deliver in-year cost savings and support transformation plan.
Louise Smalley
Deploy the new HR System to plan, budget and key governance parameters in the UK and Germany.
Establish a representative and sustainable employee forum structure across the Group, initially in the UK.
Increased succession cover for priority roles/pools critical to long-term growth and brand proposition development.
Strategic
Priority
1
2
3
1/3
2
3
1/2
1
2/3
Cash awards will be made in May 2019, with deferred equity issued in April 2019 and due to vest on 1 March 2022, with no
further performance conditions applying.
Whitbread Annual Report and Accounts 2017/18 86
Governance Long Term Incentive Plan
The awards to be made in 2018 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 2018 (i.e. 3,911.4 pence). They will vest in April 2021, 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 2018 awards to the executive directors will be made in April 2018 and, in line with the 2017 grant, will be subject to two
independently operating performance conditions: 50% will be dependent on the Group ROCE in 2020/21, with the threshold
being 13% and maximum payout at 18%, with a sliding scale operating in between. A further 50% will be dependent on an EPS
growth target operating on a sliding scale between 4% per annum at threshold and 10% per annum at maximum.
The Committee is mindful that it is crucial that the executive team is awarded fairly for its significant contribution to the
ongoing success of the Company and that this key talent is retained within the business. During the year the Committee
considered the LTIP grant levels for the Group Finance Director and Group HR Director, which have remained unchanged at
125% of salary for a number of years. The maximum LTIP grant under our policy, approved by shareholders in 2017, is 200% of
salary. The current LTIP grant level is significantly behind market levels, which therefore reduces the competitiveness of the
package for these two roles. It is the Committee’s intention to review future LTIP award levels for these two roles.
As set out in the Remuneration Committee Chair’s letter, further to the recent announcement, the Committee will be consulting
with major shareholders on proposals for a new long term incentive plan and revised Policy which will support the future
strategy of the business and successful execution of the demerger. To this end, in the event that the revised Policy is approved
by shareholders, the Committee will substitute awards under the new arrangements for the 2018 LTIP awards.
The number of shares awarded under the LTIP to each director will be as follows:
Director
Alison Brittain
Nicholas Cadbury
Louise Smalley
LTIP performance conditions – past awards
Performance metrics
Number of
shares awarded
41,463
17,602
11,637
Value of
award
£’000
1,622
689
455
2014 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 2016/17 of 13% to 18%. ROCE also acts as a hurdle and is calculated using an average of the previous 13 months’ net assets.
2015 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 2017/18 of 13% to 18%. ROCE also acts as a hurdle and is calculated using an average of the previous 13 months’ net assets.
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 2018/19 of 13% to 18%. ROCE also acts as a hurdle and is calculated using an average of the previous 13 months’ net assets.
2017 award Subject to two independently operating performance conditions. 50% of each award is dependent on Group ROCE in 2019/20, with
the threshold being 13% and the maximum payout at 18%, with a sliding scale operating in between. The other 50% of each award will
be linked to an EPS growth target on a sliding scale between 4% per annum at threshold and 10% per annum at maximum.
Chairman’s fee
Adam Crozier was appointed Chairman on 1 March 2018 and his fee with effect from that date is £400,000. The Chairman’s fee
will be reviewed annually.
Non-executive directors fees
The base annual fee for non-executive directors is £60,000, which was increased from £57,000 on 1 March 2018, having
previously been reviewed in March 2016. The fees for the chairmanship of the Audit Committee and the Remuneration
Committee are unchanged at £20,000. The fee for the Senior Independent Director remains at £15,000 and the fees for
membership of the Audit and Remuneration Committees are unchanged at £5,000. Non-executive director fees will be
reviewed annually in the future.
Statement of shareholder voting
At the Annual General Meeting in 2017, the resolution to approve the updated directors’ remuneration policy and the advisory
resolution to approve the annual report on remuneration were both passed.
The voting results were as follows:
Resolution
Updated remuneration policy
Annual report on remuneration
For
Against
Total
129,489,202 (98.4%)
131,146,484 (99.7%)
2,057,323 (1.6%)
370,395 (0.3%)
131,546,525
131,516,879
Withheld
63,482
93,782
Whitbread Annual Report and Accounts 2017/18
87
Governance Directors’ report
The directors present their
Report and Accounts for
the year ended 1 March 2018
• sickness – full salary for a maximum of
12 months in any three-year period or
for a maximum of nine consecutive
months; and
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;
• non-compete – for six months after
leaving.
The dates of the executive directors’
service contracts are as follows:
Alison Brittain
21 May 2015
Nicholas Cadbury
3 September 2012
Louise Smalley
25 October 2010
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 (the 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;
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.
Directors’ indemnity
A qualifying third-party indemnity
provision was in force for the benefit of
the directors during the financial year.
In addition, a qualifying pension scheme
indemnity provision was in force for the
benefit of Whitbread Pension Trustees
during the financial year.
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
page 83.
Whitbread Annual Report and Accounts 2017/18 88
Chris Vaughan
General Counsel
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.
The Board
Board of Directors
The directors at the date of this report
are listed on pages 58 and 59. There
have been a number of director
changes throughout the year, which
are shown on page 62 of the corporate
governance report.
Details of directors’ training are given in
the corporate governance report on
page 62.
Directors’ service contracts
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 – details of the
termination policy are set out in our
remuneration policy, which can be
found on the Company’s website
(www.whitbread.co.uk);
GovernanceGovernance Shares
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 shares will no longer give
that shareholder any right to vote at a
shareholders’ meeting.
Both B and C shares represent
significantly less than 0.01% of the total
share capital.
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.
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 2018 AGM. The
Company did not purchase any of its
own shares during the year. 12.1 million
shares are held as treasury shares
(2 March 2017: 12.1 million).
Employee share schemes
Whitbread does not have any employee
share schemes with shares which have
rights with regard to the control of the
Company that are not exercisable
directly by the employees.
Major interests
As at the end of the financial year,
the Company had received formal
notification, under the Disclosure and
Transparency Rules, of the following
material holdings in its shares (the
percentages shown are the
percentages at the time of the
disclosure and have not been
re-calculated based on the issued
share capital at the year-end):
Number of
shares
% of issued
share
capital
BlackRock Inc.
9,821,688
5.35
MFS Investment
Management
Longview
Partners
Aberdeen Asset
Management
Sachem
Head Capital
Management LP
9,330,908
5.11
9,240,506
5.04
9,155,869
4.99
6,200,000
3.40
Since the year end, the Company
received four further notifications
from BlackRock Inc. The latest
notification was received on 3 April
2018 where the Company was
informed BlackRock Inc. had
increased its holding to 10,127,653
shares representing 5.51% of the total
voting rights. The Company also
received a notification from Elliott
Capital Advisers L.P on 13 April 2018
where the Company was informed
they had increased their holding to
9,727,854 shares representing 5.30%
of the total voting rights. No other
changes to the above have been
disclosed to the Company in
accordance with Rule 5 of the
Disclosure and Transparency
Rules between the end of the
financial year and 24 April 2018.
Whitbread Annual Report and Accounts 2017/18 89
Governance Directors’ report continued
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 business owned
vehicles which includes company cars
and food logistics vehicles as we own
the lease arrangements. CO2e from
company cars is calculated using the
manufacturers stated performance
multiplied by an uplift stated in the
DEFRA standards methodology paper.
Scope 2 relates to the indirect emissions
associated with the generation of the
electricity consumed in our sites.
The increases in emissions between
2016/17 and 2017/18 are caused by
estate growth and increased reporting
scope. New availability of data has
allowed for the inclusion of F Gas
emissions from Costa China, Poland
and Singapore in 2017/18, which was
previously excluded.
When defining the scope of our data
we do not report on operations under
Joint Venture agreements, or are fully
franchised, where we do not have
operational control such as 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. For those operations
which are currently beyond our
reporting capabilities, 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.
Additional disclosures
Other information that is relevant to the
Directors’ report can be found in the
following sections of the Annual Report:
Information required
Section
Conflicts of interest
Corporate
governance
report
Financial
statements,
Note 22
Strategic report
N/A
Financial risk
management
objectives and policies
Future developments
Research and
development
Existence of branches N/A
Disclosures required pursuant to Listing
Rule 9.8.4R can be found in the
following sections:
Listing
Rule
Information
required
Section
9.8.4R
(1)
9.8.4R
(2) (5-14)
9.8.4R
(4)
Fixed assets
Note 13
Statement of
capitalised
interest
Not applicable Not applicable
Long term
incentive
schemes
Remuneration
report
Additional information
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 adopted
the following environmental report
methodology.
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 as well as
DEFRA and International Energy
Standards GHG Conversion Factors
for Company Reporting.
Source of emissions
2016/17
2017/18
Change %
Gas
LPG
Fuel Oil
F-gas
Business Travel
Electricity
Gross Emissions
Turnover (£ millions)
Tonnes carbon per £1 million turnover
Scope 1
Scope 2
55,681
3,285
193
2,749
12,848
200,295
266,074
3,109.60
85.57
65,052
3,155
230
9,088
19,837
177,090
274,452
3,295.10
83.29104
16.83%
-3.96%
19.06%
230.59%
54.40%
-11.59%
3.15%
5.97%
-2.66%
Environment policies
Whitbread businesses depend upon
the environment to operate hotels,
restaurants and coffee shops through
the energy we use and the services and
products we provide to our customers.
Our main environmental impacts are
from the use of natural resources, water
consumption and generation of residual
waste and from GHG emissions
associated with energy and fuel use.
Whitbreads strategic drive is provided
by the corporate responsibility Force
for Good programme which includes
energy, water and waste reduction
activities. We are committed to
minimising our impact on the
environment, preventing pollution
and promoting good environmental
practices. Further details can be found
on pages 14 and 17.
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, YourSay, is
conducted annually to provide insight
into the views of employees.
Our employees are actively encouraged
to take part in our Sharesave scheme,
which is available to all employees and
offers an option price discounted
by 20%.
Whitbread Annual Report and Accounts 2017/18 90
GovernanceGovernance
Annual General Meeting
The AGM will be held at 2.00pm
on 27 June 2018 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 2018 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 2018
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
Results and dividends
Group underlying profit
before tax
Group profit before tax
Interim dividend paid
on 15 December 2017
Recommended final
dividend
Total dividend for
the year
£591m
£548m
31.40p per
share
69.75p per
share
101.15p per
share
Details on the Group’s dividend
policy can be found on page 47 in
the Group Finance Director’s review.
Subject to approval at the AGM,
the final dividend will be payable on
4 July 2018 to the shareholders on
the register at the close of business
on 25 May 2018.
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 20 to 25.
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.
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 2018 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 55. 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 44 to 49.
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 52.
Whitbread Annual Report and Accounts 2017/18
91
Governance • the strategic report includes a fair
review of the development and
performance of the business and
the position of the Company and
the undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties
that they face; and
• the Annual Report and Accounts,
taken as a whole, are fair, balanced
and understandable and provide
the information necessary for
shareholders to assess the Company’s
position and performance, business
model and strategy.
This responsibility statement was
approved by the Board of Directors
on 24 April 2018 and is signed on its
behalf by:
Alison Brittain
Chief Executive
Nicholas Cadbury
Group Finance Director
Directors’ responsibility statement
The directors are responsible for
preparing the Annual Report and
Accounts in accordance with applicable
law and regulations.
• present information, including
accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;
Company law requires the directors to
prepare financial statements for each
financial year. Under that law the
directors are required to prepare the
Group financial statements in
accordance with International Financial
Reporting Standards (IFRS) as adopted
by the European Union and Article 4 of
the IAS Regulation and have elected to
prepare the parent company financial
statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards and applicable law), including
FRS 101 Reduced Disclosure Framework.
Under company law the directors must
not approve the accounts unless they
are satisfied that they give a true and
fair view of the state of affairs of the
Company and of the profit or loss of
the Company for that period.
In preparing the parent company
financial statements, the directors are
required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and accounting
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.
In preparing the Group financial
statements, International Accounting
Standard 1 requires that directors:
• properly select and apply accounting
policies;
• provide additional disclosures when
compliance with the specific
requirements in IFRS are insufficient
to enable users to understand the
impact of particular transactions,
other events and conditions on the
entity’s financial position and financial
performance; and
• make an assessment of the Group’s
ability to continue as a going concern.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the
Company’s transactions and disclose
with reasonable accuracy at any time
the financial position of the Company
and enable them to ensure that the
financial statements comply with the
Companies Act 2006. They are also
responsible for safeguarding the assets
of the Company and hence for taking
reasonable steps for the prevention and
detection of fraud and other
irregularities.
The directors are responsible for the
maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the United Kingdom
governing the preparation and
dissemination of financial statements
may differ from legislation in other
jurisdictions.
Responsibility statement
We confirm that to the best of our
knowledge:
• the financial statements, prepared in
accordance with the relevant financial
reporting framework, give a true and
fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken
as a whole;
Whitbread Annual Report and Accounts 2017/18 92
GovernanceGovernance 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 1 March 2018 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 (IFRSs) as adopted by the
European Union;
• the parent company financial
statements have been properly
prepared in accordance with United
Kingdom Generally Accepted
Accounting Practice including
Financial Reporting Standard 101
“Reduced Disclosure Framework; and
• 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.
We have audited the financial
statements of Whitbread PLC (the
‘parent company’) and its subsidiaries
(the ‘Group’) which 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;
• the statement of accounting policies;
and
• the related notes 1 to 30.
The financial reporting framework that
has been applied in the preparation
of the group financial statements is
applicable law and IFRSs as adopted
by the European Union. The financial
reporting framework that has been
applied in the preparation of the parent
company financial statements is
applicable law and United Kingdom
Accounting Standards, including FRS 101
“Reduced Disclosure Framework”
(United Kingdom Generally Accepted
Accounting Practice).
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current
year were:
Materiality
Scoping
Significant
changes in
our approach
• valuation of the pension obligation;
• presentation of non-underlying items; and
• implementation of new finance systems.
Within this report, any new key audit matters are
identified with and any key audit matters which are
the same as the prior year identified with
.
The materiality that we used for the group financial
statements was £27.3m 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 and
Costa, and the Group head office. The locations
represent the principal business units and account
for 99% of the Group’s revenue, 99% of the Group’s
profit before tax and 99% of the Group’s net assets.
Our approach is consistent with the previous year
with the exception of the key audit matter relating
to manual adjustments to revenue which has been
removed in the current period as this had a lower
effect on the allocation of resources following the
implementation of the new financial system in Premier
Inn during the year.
Given the current implementation of, and ongoing
investment in new finance systems, we have included
a key audit matter surrounding the implementation
of new finance systems, due to the complexity and
allocation of resources to this matter during the year.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law.
Our responsibilities under those
standards are further described in the
auditor’s responsibilities for the audit
of the financial statements section of
our report.
We are independent of the group and
the parent company in accordance with
the ethical requirements that are
relevant to our audit of the financial
statements in the UK, including the
FRC’s Ethical Standard as applied to
listed public interest entities, and we
have fulfilled our other ethical
responsibilities in accordance with
these requirements. We confirm
that the non-audit services prohibited
by the FRC’s Ethical Standard were
not provided to the group or the
parent company.
We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for
our opinion.
Whitbread Annual Report and Accounts 2017/18 93
Governance Independent auditor’s report to the members
of Whitbread PLC continued
Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the directors’ statement on page 91 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 and company’s ability to continue to do
so over a period of at least twelve months from the date of approval of the financial statements.
We are required to state whether we have anything material to add or draw attention to in
relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement is
materially inconsistent with our knowledge obtained in the audit.
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether they were consistent
with the knowledge we obtained in the course of the audit, including the knowledge obtained in
the evaluation of the directors’ assessment of the group’s and the company’s ability to continue
as a going concern, we are required to state whether we have anything material to add or draw
attention to in relation to:
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
• the disclosures on pages 52-55 that describe the principal risks and explain how they are being
managed or mitigated;
• the directors’ confirmation on page 52 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; or
• the directors’ explanation on page 52 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 are also required to report whether the directors’ statement relating to the prospects
of the group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge
obtained in the audit.
Whitbread Annual Report and Accounts 2017/18 94
GovernanceGovernance
Key audit matters
Key audit matters are those matters
that, in our professional judgement,
were of most significance in our audit of
the financial statements of the current
period and include the most significant
assessed risks of material misstatement
(whether or not due to fraud) that we
identified. These matters included those
which had the greatest effect on: the
overall audit strategy, the allocation of
resources in the audit; and directing the
efforts of the engagement team.
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.
Valuation of the pension obligation
Key audit matter
description
As described in the Audit Committee report on page 68, 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. On page 114 the defined benefit plan is disclosed as a
key source of estimation uncertainty.
How the scope
of our audit
responded to the
key audit matter
As at 1 March 2018, the Group recorded a net retirement benefit obligation of £288.6m (2017:
£425.1m), comprising liabilities of £2,683.9m (2017: £2,808.2m) and scheme assets of £2,395.3m
(2017: £2,383.1m). The principal reasons for the decrease in the obligation were changes in the
mortality assumptions and contributions from the employer.
The pension valuation is dependent on market conditions and key assumptions made, in particular
relating to the 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. The defined benefit obligation is highly sensitive to changes in
the assumptions. As such, it continues to represent a key audit matter.
To address this key audit matter, we have performed the following procedures:
• obtained the pension report prepared by a qualified actuary which is engaged by the Group
to value the scheme’s defined benefit pension position under IAS 19 “Employee benefits” and
assessed the competence and objectivity of that actuary;
• engaged our internal actuarial specialists to assess the appropriateness of the assumptions used
to account for the defined benefit scheme. This included comparison of key data with market
benchmarks and challenge of the methodology used by the scheme actuary;
• considered whether each of the key assumptions was reasonable in isolation and collectively in
determining the pension liability at the balance sheet date; and
• reviewed the sensitivity analysis performed by management on the key assumptions determined
by the Directors.
Key observations
From the work completed, we are satisfied that the methodology and assumptions applied in
relation to determining the valuation of the defined benefit obligation are appropriate.
Whitbread Annual Report and Accounts 2017/18 95
Governance Independent auditor’s report to the members
of Whitbread PLC continued
Presentation of non-underlying items
Key audit matter
description
How the scope
of our audit
responded to the
key audit matter
As described in the Audit Committee report on page 68 and the Accounting Policies (note 2), the
presentation of income and costs as non-underlying items in the Income Statement (to derive
“Underlying profit before tax”) is judgmental and not a requirement of IFRS. Judgement is exercised
by management in determining the classification of items as non-underlying and there is potential for
manipulation of the underlying profit before tax measure.
In the current year, adjustments totaling £42.3m (2017: £49.8m) have been made to statutory profit
before tax to derive underlying profit before tax of £590.7m (2017: £565.2m). The definition of non-
underlying items 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 are as follows:
• Disposal of property, plant and equipment (“PPE”) and property provisions – net charge of
£16.3m which includes gains on disposal of assets of £20.3m, impairment of PPE (net of
reversals) of £22.0m and property provisions £15.2m;
• IAS 19 pension finance costs of £10.0m;
• IT asset impairment of £9.1m; and
• UK and international restructuring costs of £7.2m.
We have performed the following procedures to address this key audit matter:
• challenged and understood management’s rationale for including certain items outside profit
before tax, including assessing the consistency of adjustments with the prior year and
compliance with the Group’s accounting policy.
• assessed the completeness of items separately identified as non-underlying through an
examination of costs and income recorded during the year to determine whether items had been
omitted from the non-underlying category; and
• assessed the disclosure of the accounting policy for non-underlying items, description of the
items classified as non-underlying and the reconciliation between statutory profit before tax and
underlying profit before tax. This was performed in the context of recent regulatory guidance,
ensuring the purpose of using alternative performance measures was set out and that they were
clearly defined, consistent over time and included appropriate reconciliations to statutory
financial information.
Key observations
From the work performed, we are satisfied that the items included within non-underlying have
been appropriately presented in line with the definition included within the accounting policies and
are consistent with the prior year.
Whitbread Annual Report and Accounts 2017/18 96
GovernanceGovernance Implementation of new finance systems
Key audit matter
description
As noted within the Strategic Report, over the last two and a half years, Whitbread has undergone
a significant investment programme to improve the core infrastructure, internal and customer
facing support systems. As part of this programme, the core finance system is being replaced as
part of the transformation of business processes and controls. The finance system was replaced
in Premier Inn during 2017/18 and is due to be implemented in Costa during 2018/19. IT systems
and controls are critical in a high volume, low value transactional business.
The level and complexity of change in the year, and continued change expected in 2018/19 has
resulted in, and will continue to require, a significant amount of audit effort to gain assurance over
the Group’s IT and control environment and financial reporting systems. Due to the transition
of the finance system within Premier Inn taking place part way through the year, testing has been
performed in respect of both the legacy and new systems, increasing the level of audit effort
required.
How the scope of
our audit
responded to the
key audit matter
We have performed the following procedures, together with our IT specialists, to address this key
audit matter:
• assessed the Group’s transformation programme and the planned enhancements to the IT
environment and business processes, with a particular focus on the replacement of core finance
systems;
• assessed and tested the programme governance and management’s change management process
for each key area of change;
• tested the migration of data between the legacy and new system;
• understood and tested the changes to business processes and relevant controls implemented
as part of the new finance system during the year;
• assessed the design and implementation of the Group’s controls over the information systems
that are important to financial reporting in both the legacy and new finance systems; and
• tested operating effectiveness of internal controls within business cycles (for example, revenue and
expenditure) where controls reliance has been sought in both the legacy and new finance systems.
Key observations
We found management’s procedures to implement the new finance system in Premier Inn to be
appropriate.
Whitbread Annual Report and Accounts 2017/18 97
Governance Independent auditor’s report to the members
of Whitbread PLC continued
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:
We agreed with the Audit Committee
that we would report to the Committee
all audit differences in excess of £1.3m
(2017: £1.3m) for the Group , 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.
Group financial statements
Parent company financial
statements
Materiality
£27.3m (2017: £26.0m)
£10.9m (2017: £1.3m)
Basis for
determining
materiality
5% of profit before tax of
£548.4m (2017: £515.4m) was
used to determine our
materiality in the current year.
Materiality was determined on
the basis of the Parent
Company’s net assets. This was
then capped at 40% of Group
materiality. This materiality
equates to 4.6% of net assets.
Rationale
for the
benchmark
applied
Profit before tax is a key metric
for the users of the financial
statements and based on our
professional judgement, we
considered this to be the most
appropriate measure for
business performance. The use
of profit before tax is
consistent with the prior year.
In the prior year materiality for
the Parent Company was
based on profit before tax. The
entity is non-trading and
contains an investment in all of
the group’s trading
components and as a result,
we have determined materiality
on the basis of net assets for
the current year.
£548.3m
Group materiality £27.3m
Component
materiality range
£10.9m to £23.2m
Audit Committee
reporting threshold
£1.3m
PBT
Group materiality
Whitbread Annual Report and Accounts 2017/18 98
GovernanceGovernance 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 the two primary
components: Premier Inn UK and Costa
UK. In the prior year, full scope audits
for Costa Poland and Costa Shanghai
were also completed for the purposes
of the Group audit. Given the relative
size of these components and our
understanding of the Group, it has
not been necessary to perform these
procedures in the current year. 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% (2017: 99%) of the
Group’s revenue, 99% (2017: 101%)
of the Group’s profit before tax and 99%
(2017: 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. Our work
was executed at levels of materiality
applicable to each individual entity
which were lower than Group materiality
and, excluding the Parent Company
disclosed previously, ranged from
£17.7m to £23.2m (2017: £13m to £21m).
Full scope
audit
Analytical
procedures
Total
Revenue
£m
3,283.8
(2017:
3,076.6)
11.3
(2017:
29.4)
3,295.1
(2017:
3,106.0)
Profit
before
tax
£m
530.2
(2017:
522.3)
18.2
(2017:
(6.9))
548.4
(2017:
515.4)
Net
assets
£m
2,761.9
(2017:
2,441.0)
40.6
(2017:
83.8)
2,802.5
(2017:
2,524.8)
aggregated financial information
of the remaining components not
subject to audit or audit of specified
account balances.
The Group audit team followed a
collaborative approach with the
component teams. We held planning
briefings, attended by the component
auditors from each of the locations
discussed above, at which we discussed
developments in the Group relevant to
our audit, including risk assessment and
audit procedures to respond to the risks
identified. The Group audit team were
included in the component closing
meetings and reviewed the findings
of their work.
Other information
We have nothing to report in respect
of the following matters:
• The directors are responsible for
the other information. The other
information comprises the information
included in the annual report, other
than the financial statements and
our auditor’s report thereon.
• Our opinion on the financial
statements does not cover the other
information and, except to the extent
otherwise explicitly stated in our
report, we do not express any form
of assurance conclusion thereon.
• In connection with our audit of the
financial statements, our responsibility
is to read the other information and, in
doing so, consider whether the other
information is materially inconsistent
with the financial statements or our
knowledge obtained in the audit or
otherwise appears to be materially
misstated.
• If we identify such material
inconsistencies or apparent material
misstatements, we are required
to determine whether there is a
material misstatement in the financial
statements or a material misstatement
of the other information. If, based on
the work we have performed, we
conclude that there is a material
misstatement of this other information,
we are required to report that fact.
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
• In this context, matters that we
are specifically required to report
to you as uncorrected material
misstatements of the other
information include where we
conclude that:
– Fair, balanced and understandable
– the statement given by the
directors that they consider the
annual report and financial
statements taken as a whole is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the
group’s position and performance,
business model and strategy, is
materially inconsistent with our
knowledge obtained in the audit; or
– Audit committee reporting – the
section describing the work
of the audit committee does not
appropriately address matters
communicated by us to the audit
committee; or
– Directors’ statement of compliance
with the UK Corporate Governance
Code – the parts of the directors’
statement required under the Listing
Rules relating to the company’s
compliance with the UK Corporate
Governance Code containing
provisions specified for review by
the auditor in accordance with
Listing Rule 9.8.10R(2) do not
properly disclose a departure from
a relevant provision of the UK
Corporate Governance Code.
Responsibilities of directors
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, and for such internal control as
the directors determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud
or error.
In preparing the financial statements,
the directors are responsible for
assessing the group’s and the parent
company’s ability to continue as a
going concern, disclosing as applicable,
matters related to going concern and
using the going concern basis of
accounting unless the directors either
intend to liquidate the group or the
parent company or to cease operations,
or have no realistic alternative but to
do so.
Whitbread Annual Report and Accounts 2017/18 99
Governance Governance
Independent auditor’s report to the members
of Whitbread PLC continued
Auditor’s responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that an
audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or
error and are considered material if,
individually or in the aggregate, they
could reasonably be expected to
influence the economic decisions of
users taken on the basis of these
financial statements.
A further description of our
responsibilities for the audit of the
financial statements is located on the
Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditor’s report.
Use of our report
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.
In our opinion, based on the work
undertaken in the course of the audit:
• 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.
Other matters
Auditor tenure
Following the recommendation of the
audit committee, we were appointed by
the Directors on 16 June 2015 to audit
the financial statements for the year
ending 3 March 2016 and subsequent
financial periods. The period of total
uninterrupted engagement including
previous renewals and reappointments
of the firm is 3 years, covering the years
ending 3 March 2016 to 1 March 2018.
Consistency of the audit report with
the additional report to the audit
committee
Our audit opinion is consistent with the
additional report to the audit committee
we are required to provide in
accordance with ISAs (UK).
Nicola Mitchell FCA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, UK
24 April 2018
In the light of the knowledge and
understanding of the group and of the
parent company and their environment
obtained in the course of the audit, we
have not identified any material
misstatements in the strategic report or
the directors’ report.
Matters on which we are required to
report by exception
We have nothing to report in respect
of these matters.
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.
Report on other legal and regulatory
requirements
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion the part of the directors’
remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
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.
Whitbread Annual Report and Accounts 2017/18 100
Governance Consolidated accounts 2017/18
102 Consolidated income statement
103 Consolidated statement of comprehensive income
104 Consolidated statement of changes in equity
105 Consolidated balance sheet
106 Consolidated cash flow statement
107 Notes to the consolidated financial statements
Whitbread Annual Report and Accounts 2017/18
101
Consolidated accounts 2017/18
Consolidated income statement
Year ended 1 March 2018
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
1 March
2018
£m
3,295.1
(2,707.3)
52 weeks to
2 March
2017
£m
3,106.0
(2,557.2)
587.8
548.8
2.0
–
589.8
(42.2)
0.8
548.4
590.7
(42.3)
548.4
(112.0)
(116.7)
4.7
(112.0)
436.4
438.0
(1.6)
436.4
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
52 weeks to
1 March
2018
pence
52 weeks to
2 March
2017
pence
239.74
239.08
231.39
230.89
260.16
259.44
246.48
245.95
Whitbread Annual Report and Accounts 2017/18 102
Consolidated accountsConsolidated accounts 2017/18
Consolidated statement of comprehensive income
Year ended 1 March 2018
Profit for the year
Items that will not be reclassified to the income statement:
Re-measurement gain/(loss) on defined benefit pension scheme
Current tax on pensions
Deferred tax on pensions
Deferred tax: change in rate of corporation tax on pensions
Items that may be reclassified subsequently to the income statement:
Net gain/(loss) 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 income/(loss) 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
1 March
2018
£m
52 weeks to
2 March
2017
£m
436.4
415.9
29
9
9
9
23
9
9
9
48.9
17.2
(25.8)
–
40.3
2.4
0.4
(0.8)
–
2.0
0.6
42.9
479.3
480.9
(1.6)
479.3
(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
Whitbread Annual Report and Accounts 2017/18 103
Consolidated accounts 2017/18
Consolidated statement of changes in equity
Year ended 1 March 2018
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 3 March 2016
150.0
62.6
12.3 4,239.8
5.6 (2,067.7) 2,402.6
2.1 2,404.7
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
–
–
–
–
–
–
–
–
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
Profit for the year
Other comprehensive income
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
Acquisition of non-controlling interest1
Equity dividends
–
–
–
0.2
–
–
–
–
–
–
–
–
–
5.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
438.0
39.9
477.9
–
(2.0)
4.3
1.4
(0.1)
(40.1)
(177.6)
–
0.6
0.6
–
–
–
–
–
–
–
–
2.4
438.0
42.9
(1.6)
–
436.4
42.9
2.4
480.9
(1.6)
479.3
–
2.0
–
–
–
–
–
5.4
–
4.3
1.4
(0.1)
(40.1)
(177.6)
–
–
–
–
–
5.1
–
5.4
–
4.3
1.4
(0.1)
(35.0)
(177.6)
At 1 March 2018
150.4
73.2
12.3 4,594.7
29.0 (2,057.1) 2,802.5
– 2,802.5
1 During the year the Group acquired the 49% non-controlling interest in Yueda Costa (Shanghai) Food & Beverage Management Company Limited for £35.0m.
Whitbread Annual Report and Accounts 2017/18 104
Consolidated accountsConsolidated accounts 2017/18
Consolidated balance sheet
At 1 March 2018
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 2018
Nicholas Cadbury
Finance Director
Notes
1 March
2018
£m
2 March
2017
£m
12
13
15
23
17
16
23
17
18
13
4
19
21
23
9
24
19
21
23
9
29
24
4
4
25
26
26
26
26
26
300.7
4,176.0
50.4
9.2
5.8
4,542.1
48.8
12.5
191.1
90.6
343.0
7.3
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
4,892.4
4,688.8
108.9
26.7
2.6
44.8
668.2
851.2
814.5
21.4
5.3
82.4
288.6
26.5
157.4
36.3
2.3
45.9
596.9
838.8
795.6
12.3
8.3
62.0
425.1
21.9
1,238.7
2,089.9
2,802.5
1,325.2
2,164.0
2,524.8
150.4
73.2
12.3
4,594.7
29.0
(2,057.1)
150.2
68.0
12.3
4,330.9
28.4
(2,061.5)
2,802.5
2,528.3
–
(3.5)
2,802.5
2,524.8
Whitbread Annual Report and Accounts 2017/18 105
Consolidated accounts 2017/18
Consolidated cash flow statement
Year ended 1 March 2018
Profit for the year
Adjustments for:
Tax expense
Net finance cost
Share of profit from joint ventures
Share of profit from associate
Non-underlying operating costs
Net cash outflow from non-underlying operating costs
Underlying depreciation and amortisation
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 from disposal of property, plant and equipment
Proceeds from disposal of investment in associate
Proceeds from disposal of business
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
(Decrease)/increase in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Renegotiation costs of long-term borrowings
Acquisition of non-controlling interest
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
1 March
2018
£m
52 weeks to
2 March
2017
£m
436.4
415.9
112.0
41.4
(2.0)
–
32.3
(1.7)
229.9
4.3
12.9
865.5
(0.6)
(50.6)
62.8
877.1
(22.5)
(100.8)
(34.3)
0.8
(99.3)
621.0
(467.0)
(52.8)
74.9
–
56.6
(0.3)
–
(388.6)
5.4
(109.6)
200.0
(87.0)
(1.3)
(35.0)
(177.6)
(205.1)
27.3
63.0
0.3
90.6
99.5
37.3
(3.2)
(0.7)
39.7
(7.3)
217.6
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
Notes
9
8
15
6
12, 13
28
21
29
4
4
20
20
20
20
11
20
20
20
18
Whitbread Annual Report and Accounts 2017/18 106
Consolidated accountsConsolidated accounts 2017/18
Notes to the consolidated financial statements
At 1 March 2018
1 Authorisation of consolidated financial statements
The consolidated financial statements of Whitbread PLC for the year ended 1 March 2018 were authorised for issue by
the Board of Directors on 24 April 2018. Whitbread PLC is a public company limited by shares incorporated in the United
Kingdom under the Companies Act and is registered 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 165.
The significant activities of the Group are described in Note 4, Segment information, and in the strategic report on pages
4 to 55.
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 52.
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 1 March 2018 (prior financial year:
52 weeks to 2 March 2017).
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 2 March 2017, except for the adoption
of the new standards and interpretations that are applicable for the year ended 1 March 2018. The significant accounting
policies adopted are set out below.
The Group has adopted the following standards, interpretations and amendments which have been assessed as having no
financial impact or disclosure requirements at this time:
• Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses;
• Amendment to IAS 7 Disclosure Initiative; and
• Amendments to IFRS 12 Disclosure of Interests in Other Entities included in the Annual Improvements to IFRS Standards
2014-2016 Cycle.
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 Costa Coffee
(Shanghai) Co. Ltd 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 2017/18 107
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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 ten 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 2017/18 108
Consolidated accountsConsolidated accounts 2017/18
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 2017/18 109
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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 provisions 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;
• 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;
• acquisition costs incurred as part of a business combination or other strategic asset acquisitions;
• 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
• 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.
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 2017/18
110
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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 operates 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 2017/18
111
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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
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 2017/18
112
Consolidated accountsConsolidated accounts 2017/18
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.
Key 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. Although these amounts are based on management’s best estimates, events or actions may mean that
actual results ultimately differ from those estimates, and these differences may be material. These judgements and estimates
and the underlying assumptions are reviewed regularly.
Key accounting judgements
The following are the key judgements, apart from those involving estimations (dealt with separately below) that
management have made in the process of applying the Group’s accounting policies and which have the most significant
effect on the amounts recognised in the financial statements.
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. This assessment covers the
nature of the item, cause of occurrence and the scale of impact of that item on reported performance. Reversals of previous
exceptional items are assessed based on the same criteria. Note 6 provides information on all of the items disclosed as
non-underlying in the current year financial statements.
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, which has become more critical as the Group’s investment in system improvement and
development projects has increased. Note 12 provides details of the value of IT software and technology assets capitalised.
Key areas of estimation uncertainty
The following are the key areas of estimation uncertainty that may have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year.
Whitbread Annual Report and Accounts 2017/18
113
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
2 Accounting policies continued
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.
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. 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. Significant changes to the
estimate of residual values or asset lives would impact the depreciation charge in future periods. Notes 12 and 13 provide
details on the depreciation and amortisation booked.
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
Whitbread will adopt IFRS 9 on 2 March 2018 and anticipates applying the standard prospectively with no retrospective
adjustments required. The new standard 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 of financial assets.
The Group has completed an impact assessment and determined that the adoption of IFRS 9 will not have a material
impact on its consolidated result and financial position.
IFRS 15 Revenue from Contracts with Customers
Whitbread will adopt IFRS 15 on 2 March 2018 and anticipates applying the cumulative catch-up (‘modified’) transition
method. 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. The Group has completed an impact assessment
and determined that the adoption of IFRS 15 will not have a material impact on its consolidated result and financial position,
but will result in additional disclosures regarding the disaggregation of revenue.
IFRS 16 Leases
Whitbread will adopt IFRS 16 on 1 March 2019 and anticipates applying the cumulative catch-up (‘modified’) transition
method. 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. 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
result and financial position.
Whitbread Annual Report and Accounts 2017/18
114
Consolidated accountsConsolidated accounts 2017/18
2 Accounting policies continued
Whilst the following standards, interpretations and amendments are relevant to the Group, they have been assessed
as having minimal or no financial impact or additional disclosure requirements at this time1:
IFRS Standards and Interpretations
• IFRS 14 Regulatory Deferral Accounts;
• IFRS 17 Insurance Contracts;
• IFRIC 22 Foreign Currency Translations and Advance Consideration; and
• IFRIC 23 Uncertainty over Income Tax Treatments;
Amendments
• Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures;
• Amendments to IAS 40: Transfers of Investment Property;
• Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions;
• Amendments to IFRS 9: Prepayment Features with Negative Compensation;
• Amendments to IAS 19: Plan amendment, curtailment or settlement;
• Annual Improvements to IFRS Standards 2014-2016 Cycle; and
• Annual Improvements to IFRS Standards 2015-2017 Cycle.
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
2017/18
£m
1,813.2
1,439.5
42.4
2017/18
£m
1,717.2
1,349.1
39.7
3,295.1
3,106.0
For management purposes, the Group is organised into two strategic business units; Premier Inn (previously Premier Inn &
Restaurants) and Costa, based upon their different products and services:
• Premier Inn provides 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 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 following tables 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 segment and is eliminated on consolidation. Transactions were
entered into on an arm’s length basis in a manner similar to transactions with third parties.
The following tables present revenue and profit information and certain asset and liability information regarding business
operating segments for the years ended 1 March 2018 and 2 March 2017.
Whitbread Annual Report and Accounts 2017/18
115
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
4 Segment information continued
Year ended 1 March 2018
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):
Disposal of property, plant and equipment
and property provisions
PI International business exit
Costa international restructuring
UK restructuring
Historic indirect tax disputes
IT asset impairment
Acquisition costs
Amortisation of acquired intangibles
IAS 19 pension finance cost
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)
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
£m
Costa
£m
Unallocated
and
elimination
£m
Total
operations
£m
2,007.4
–
1,287.7
4.0
2,007.4
1,291.7
498.4
–
498.4
158.8
–
158.8
(5.9)
6.7
–
(1.7)
–
–
–
–
–
(0.9)
(16.5)
–
(6.1)
0.6
(2.8)
(9.1)
–
(2.3)
–
(36.2)
497.5
122.6
–
(4.0)
(4.0)
(35.1)
(31.4)
(66.5)
6.1
–
–
–
–
–
(1.3)
–
(10.0)
(5.2)
(71.7)
3,295.1
–
3,295.1
622.1
(31.4)
590.7
(16.3)
6.7
(6.1)
(1.1)
(2.8)
(9.1)
(1.3)
(2.3)
(10.0)
(42.3)
548.4
(112.0)
436.4
4,218.3
–
4,218.3
(489.2)
–
524.3
–
524.3
–
149.8
4,742.6
149.8
149.8
4,892.4
(179.1)
–
–
(1,421.6)
(668.3)
(1,421.6)
(489.2)
(179.1)
(1,421.6)
(2,089.9)
3,729.1
345.2
(1,271.8)
2,802.5
2.7
39.0
(0.7)
11.4
156.4
125.7
370.4
381.1
39.9
(133.2)
(17.2)
96.6
90.5
12.9
(75.5)
(4.0)
–
–
–
–
–
–
–
–
2.0
50.4
282.1
467.0
471.6
52.8
(208.7)
(21.2)
Whitbread Annual Report and Accounts 2017/18
116
Consolidated accountsConsolidated accounts 2017/18
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):
Disposal of property, plant and equipment
and property provisions
PI International business exit
Costa international restructuring
UK restructuring
Historic indirect tax disputes
Net gain on disposal of investment in associate
Amortisation of acquired intangibles
IAS 19 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
£m
Costa
£m
Unallocated
and
elimination
£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
23.1
(30.0)
–
(15.6)
–
11.8
–
–
–
(10.7)
(10.5)
–
(14.5)
(5.9)
5.3
–
(2.5)
–
(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
11.8
(30.0)
(14.5)
(21.6)
5.3
11.8
(2.5)
(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 2017/18
117
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
4 Segment information continued
Revenues from external customers are split geographically as follows:
United Kingdom1
Non United Kingdom
2017/18
£m
3,169.6
125.5
3,295.1
2016/17
£m
2,985.0
121.0
3,106.0
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.
Non-current assets2 are split geographically as follows:
United Kingdom
Non United Kingdom
2 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
2018
£m
4,340.6
192.3
4,532.9
2017
£m
4,123.4
184.5
4,307.9
2017/18
£m
385.1
837.9
284.4
23.5
208.7
778.2
0.2
159.3
30.0
2016/17
£m
375.6
793.3
262.7
17.6
202.5
717.6
(0.5)
151.2
37.2
2,707.3
2,557.2
1 Non-underlying items excludes amortisation of acquired intangibles of £2.3m (2016/17: £2.5m). 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:
2017/18
£m
264.7
2.5
267.2
14.9
282.1
3.7
(1.4)
284.4
2016/17
£m
243.5
1.9
245.4
15.8
261.2
3.5
(2.0)
262.7
2017/18
£m
2016/17
£m
Audit of the Group’s financial statements
Audit of the Group’s subsidiaries
Total audit fees
Audit related assurance
Other non-audit fees
Total non-audit fees
Included in other operating charges
0.7
0.3
1.0
0.1
0.2
0.3
1.3
Whitbread Annual Report and Accounts 2017/18
0.5
0.3
0.8
0.1
0.1
0.2
1.0
118
Consolidated accountsConsolidated accounts 2017/18
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.
Non-underlying items were as follows:
Operating costs:
Disposal of property, plant and equipment and property provisions1
PI International business exit2
Costa international restructuring3
UK restructuring4
Historic indirect tax disputes5
IT asset impairment6
Acquisition costs7
Net gain on disposal of investment in associate8
Amortisation of acquired intangibles (Note 12)
Non-underlying operating costs
Net finance costs:
IAS 19 pension finance cost (Note 29)
Unwinding of discount on provisions
Non-underlying net finance costs
2017/18
£m
2016/17
£m
(16.3)
6.7
(6.1)
(1.1)
(2.8)
(9.1)
(1.3)
–
(2.3)
(32.3)
(10.0)
–
(10.0)
11.8
(30.0)
(14.5)
(21.6)
5.3
–
–
11.8
(2.5)
(39.7)
(9.4)
(0.7)
(10.1)
Non-underlying items before tax
(42.3)
(49.8)
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 change9
Non-underlying tax credit
3.8
0.9
–
4.7
12.3
2.1
5.2
19.6
1 During the year, the Group made a net gain on asset disposals of £20.3m from disposal and development profit on sale and leaseback transactions, disposal of
sites previously held for sale and other minor disposals. This was offset by impairment losses of hotel sites transferred to assets held for sale of £14.1m, impairment
losses on trading sites of £7.9m and provision for other property costs of £15.2m. The balance relates to changes in onerous contract provisions in the UK of
£3.7m, Poland of £2.7m and release of other provisions of £7.0m.
2 On 13 July 2016, the Group announced its intention to exit hotel operations in South East Asia. In the prior year the Group recognised impairment losses of £14.9m
and a provision of £15.1m for costs of exiting management agreements and closure of regional offices. During the current year the Group disposed of its
businesses in Thailand, India and Indonesia, acheiving net sales proceeds in excess of those assumed in the initial impairment calculation resulting in a net credit of
£6.7m in the year.
3 During the year Costa has continued the strategic review of its international operations. Further to the decisions taken last year to exit its French equity business
and to restructure its Chinese operations, decisions have been made to exit its Singapore equity business and its Express business in Canada. This has resulted in
the recognition of store closure and exit costs of £4.4m, offset by a release of onerous lease provisions of £2.2m. In France impairment losses of £1.5m, store
closure costs of £0.8m and restructuring costs of £6.8m were recognised in the prior year. With the exit from France nearing completion, the exit costs have been
reviewed resulting in a release of £1.5m in the current year. Continuing our reorganisation in China, we have recognised impairment losses of £3.6m (2016/17:
£3.2m), store closure costs of £0.8m (2016/17: £1.6m) and onerous lease provisions of £1.0m (2016/17: £0.6m). The share attributable to the parent shareholders is
£5.1m (2016/17: £2.7m).
4 During the prior year, the Group undertook significant operational reorganisation of support centre operations. This restructuring 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. The charge relating to this in the year was £1.1m.
5 During the year, the Group recognised a provision in respect of additional indirect tax potentially payable outside the UK. In the prior year, the Group received a
refund on settlement of a historic VAT claim.
6 During the year, the Group recognised an impairment charge of £4.4m and provided for costs of £4.7m following a review of IT assets.
7 As announced on 28 February 2018, the Group has entered into an agreement to acquire the share capital of Foremost Hospitality Group GmbH. During the year,
the Group has incurred professional fees in relation to the transaction of £1.3m.
8 During the prior year the Group disposed of its investment in Morrison Street Hotel Limited resulting in a net gain of £11.8m.
9 Prior year impact of the reduction in the main rate of UK corporation tax to 17% from 1 April 2020.
Whitbread Annual Report and Accounts 2017/18
119
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
7 Employee benefits expense
Wages and salaries
Social security costs
Pension costs
2017/18
£m
778.6
50.8
8.5
837.9
2016/17
£m
733.2
51.0
9.1
793.3
Included in wages and salaries is a share-based payments expense of £4.3m (2016/17: £17.7m), 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 was as follows:
Premier Inn
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
2017/18
Number
34,173
18,412
120
52,705
2016/17
Number
34,317
18,162
101
52,580
2017/18
£m
2016/17
£m
2.9
–
0.5
3.0
–
3.8
2017/18
Number
2
2016/17
Number
2
Whitbread Annual Report and Accounts 2017/18 120
Consolidated accountsConsolidated accounts 2017/18
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
Underlying net finance costs
Non-underlying net finance costs
IAS 19 pension finance cost (Note 29)
Unwinding of discount on provisions
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% (2016/17: 17%)
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% (2016/17: 17%) – pensions
Change in UK tax rate to 17% (2016/17: 17%) – cash flow hedges
Tax reported in other comprehensive income
2017/18
£m
2016/17
£m
(3.8)
(32.7)
4.8
(0.5)
(32.2)
0.5
0.3
0.8
(5.3)
(31.0)
8.9
(0.1)
(27.5)
0.1
0.2
0.3
(31.4)
(27.2)
(10.0)
–
(10.0)
(41.4)
(42.2)
0.8
(41.4)
(9.4)
(0.7)
(10.1)
(37.3)
(37.6)
0.3
(37.3)
2017/18
£m
2016/17
£m
116.9
(0.2)
116.7
(6.1)
1.4
–
(4.7)
112.0
111.6
(1.7)
109.9
(6.0)
0.8
(5.2)
(10.4)
99.5
2017/18
£m
2016/17
£m
(0.4)
(17.2)
0.8
25.8
–
–
9.0
(0.5)
(15.6)
0.6
(26.7)
3.1
0.1
(39.0)
Whitbread Annual Report and Accounts 2017/18
121
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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 1 March 2018 and 2 March 2017 respectively
is as follows:
Profit before tax as reported in the consolidated income statement
Tax at current UK tax rate of 19.08% (2016/17: 20%)
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 £44.8m (2017: liability of £45.9m).
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
2017/18
2016/17
Tax on
underlying
profit
£m
590.7
112.7
3.6
(0.4)
1.4
(4.1)
3.5
–
–
116.7
Tax on
profit
£m
548.4
104.6
12.4
(0.4)
(5.8)
(0.2)
1.4
–
–
112.0
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
Consolidated
balance sheet
Consolidated
income statement
2018
£m
2017
£m
2017/18
£m
2016/17
£m
45.3
64.3
109.6
(28.1)
0.9
(27.2)
44.0
68.1
112.1
(53.1)
3.0
(50.1)
82.4
62.0
1.4
(3.8)
(0.7)
(1.6)
(4.7)
(4.5)
(0.7)
(0.5)
(4.7)
(10.4)
Total deferred tax liabilities relating to disposals during the year were £nil (2017: £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 £17.6m (2017: £16.5m), of which, the share
attributable to the parent shareholders is £17.6m (2017: £13.9m).
At 1 March 2018, there was no recognised deferred tax liability (2017: £nil) for taxes that would be payable on any unremitted
earnings, as all such amounts are permanently reinvested or, where they are not, there are no corporation tax consequences
of such companies paying dividends to parent companies.
Tax relief on total interest capitalised amounts to £0.9m (2017: £1.8m).
Factors affecting the tax charge for future years
The Finance Act 2016 reduced the main rate of UK corporation tax to 17% with effect from 1 April 2020. The effect of the new
rate was included in the financial statements in 2016/17. The rate change will also impact the amount of the future cash tax
payments to be made by the Group.
Whitbread Annual Report and Accounts 2017/18
122
Consolidated accountsConsolidated accounts 2017/18
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 (2017: 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
2017/18
million
182.7
0.5
183.2
2016/17
million
182.2
0.4
182.6
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 195.6m, less 12.1m treasury shares held by Whitbread PLC and 0.8m held by the ESOT (2017: 195.4m,
less 12.1m treasury shares held by Whitbread PLC and 1.0m 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
2017/18
£m
438.0
42.3
(4.7)
(0.3)
475.3
2017/18
pence
239.74
23.15
(2.57)
(0.16)
260.16
239.08
259.44
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
Whitbread Annual Report and Accounts 2017/18
123
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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
2017/18
2016/17
pence
per share
65.90
31.40
0.50
0.60
pence
per share
61.85
29.90
0.80
0.80
£m
120.3
57.3
177.6
–
–
–
177.6
£m
112.6
54.5
167.1
–
–
–
167.1
69.75
127.4
65.90
120.1
A final dividend of 69.75p per share (2017: 65.90p) amounting to a dividend of £127.4m (2017: £120.1m) was recommended by the
directors at their meeting on 24 April 2018. A dividend reinvestment plan (DRIP) alternative will be offered. The proposed final
dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these
consolidated financial statements.
Whitbread Annual Report and Accounts 2017/18 124
Consolidated accountsConsolidated accounts 2017/18
12 Intangible assets
Cost
At 3 March 2016
Additions
Assets written off
Foreign currency adjustment
At 2 March 2017
Additions
Assets written off
Reclassified
Foreign currency adjustment
At 1 March 2018
Amortisation and impairment
At 3 March 2016
Amortisation during the year
Amortisation on assets written off
Impairment (Note 14)
Foreign currency adjustment
At 2 March 2017
Amortisation during the year
Amortisation on assets written off
Reclassified
Impairment (Note 14)
Foreign currency adjustment
At 1 March 2018
Net book value at 1 March 2018
Net book value at 2 March 2017
Goodwill
£m
Customer
IT software
relationships
£m
and technology
£m
Other
£m
Total
£m
180.0
–
–
0.1
180.1
–
–
–
–
5.9
–
–
–
5.9
–
–
–
–
180.1
5.9
–
–
–
(3.0)
–
(3.0)
–
–
–
–
–
(3.0)
177.1
177.1
(2.2)
(0.3)
–
–
–
(2.5)
(0.4)
–
–
–
–
(2.9)
3.0
3.4
117.0
38.6
(29.9)
0.3
126.0
52.7
(10.7)
1.3
–
169.3
(54.6)
(14.5)
29.9
(0.8)
(0.1)
(40.1)
(20.6)
10.7
(0.3)
(4.4)
0.1
(54.6)
114.7
85.9
18.6
–
–
0.1
18.7
0.1
–
(1.3)
–
17.5
(6.6)
(2.8)
–
–
–
(9.4)
(2.5)
–
0.3
–
–
(11.6)
5.9
9.3
321.5
38.6
(29.9)
0.5
330.7
52.8
(10.7)
–
–
372.8
(63.4)
(17.6)
29.9
(3.8)
(0.1)
(55.0)
(23.5)
10.7
–
(4.4)
0.1
(72.1)
300.7
275.7
Included in the amortisation for the year is amortisation relating to acquired intangibles amounting to £2.3m (2016/17: £2.5m).
The carrying amount of goodwill allocated by segment is presented below:
Premier Inn
Costa
Total
2018
£m
110.4
66.7
177.1
2017
£m
110.4
66.7
177.1
The carrying amount of goodwill at 1 March 2018 comprised £110.4m for Premier Inn and £66.7m for Costa. The Premier Inn
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 ten 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.
Whitbread Annual Report and Accounts 2017/18
125
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
12 Intangible assets continued
The trading licences, which have a carrying value of £1.7m (2017: £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 (2017: £0.2m). Development costs
have a carrying value of £0.6m (2017: £1.9m) 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
£3.1m (2017: £5.2m). The balance of £0.3m (2017: £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 £5.5m (2017: £8.2m).
13 Property, plant and equipment
Cost
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
Additions
Interest capitalised
Reclassified
Assets written off
Foreign currency adjustment
Movements to held for sale in the year
Disposals
At 1 March 2018
Depreciation and impairment
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
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 1 March 2018
Net book value at 1 March 2018
Net book value at 2 March 2017
Land and
buildings
£m
Plant and
equipment
£m
Total
£m
3,147.0
277.7
8.9
(1.1)
(7.0)
15.5
(64.7)
(179.3)
1,455.7
299.5
–
1.1
(158.4)
7.6
(8.0)
(11.1)
4,602.7
577.2
8.9
–
(165.4)
23.1
(72.7)
(190.4)
3,197.0
1,586.4
4,783.4
210.3
4.8
5.7
(8.3)
3.4
(27.8)
(30.2)
261.3
–
(5.7)
(113.1)
0.4
(1.7)
(6.9)
471.6
4.8
–
(121.4)
3.8
(29.5)
(37.1)
3,354.9
1,720.7
5,075.6
(181.7)
(28.5)
(13.0)
7.0
(1.2)
18.4
0.7
(590.0)
(174.0)
(12.3)
158.4
(5.0)
6.5
3.7
(771.7)
(202.5)
(25.3)
165.4
(6.2)
24.9
4.4
(198.3)
(612.7)
(811.0)
(28.0)
(12.0)
8.3
(0.5)
19.1
1.2
(180.7)
(14.0)
113.1
–
1.3
3.6
(208.7)
(26.0)
121.4
(0.5)
20.4
4.8
(210.2)
(689.4)
(899.6)
3,144.7
1,031.3
4,176.0
2,998.7
973.7
3,972.4
Included above are assets under construction of £356.4m (2017: £337.2m).
There is a charge in favour of the pension scheme over properties with a market value of £408.0m (2017: £408.0m).
See Note 29 for further information.
Whitbread Annual Report and Accounts 2017/18 126
Consolidated accountsConsolidated accounts 2017/18
13 Property, plant and equipment continued
Capital expenditure commitments
Capital expenditure commitments for property, plant and equipment
for which no provision has been made
2018
£m
2017
£m
130.9
156.4
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 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 £573.7m over the next five years (2017: £670.0m).
Capitalised interest
Interest capitalised during the year amounted to £4.8m, using an average rate of 3.6% (2016/17: £8.9m, using an average rate
of 3.6%).
Assets held for sale
During the year, seven property assets with a combined net book value of £9.1m (2016/17: seven sites with a net book value
of £5.7m) were transferred to assets held for sale and one property asset with a net book value of £0.3m was transferred
back to fixed assets. During the year, eight sites with a combined net book value of £7.5m were sold (2017: no sites). Six sites
with a net book value of £7.3m (2017: eight sites with a net book value of £6.0m) continued to be classified as held for sale at
the year-end. No impairment loss (2017: £nil) was recognised in the year.
14 Impairment
During the year, impairment losses of £33.5m (2016/17: £31.9m) and impairment reversals of £3.1m (2016/17: £2.8m)
were recognised.
Impairment losses
Premier Inn
Costa
Total impairment losses
Impairment reversals
Premier Inn
Costa
Total impairment reversals
Total net impairment charge
2017/18
Intangible
assets
£m
2016/17
Intangible
assets
£m
2017/18
Property,
plant and
equipment
£m
2016/17
Property,
plant and
equipment
£m
–
4.4
4.4
–
–
–
3.8
–
3.8
–
–
–
4.4
3.8
14.7
14.4
29.1
(2.7)
(0.4)
(3.1)
26.0
18.6
9.5
28.1
(2.6)
(0.2)
(2.8)
25.3
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 (2016/17: 7.0%), 7.2% in China (2016/17: 7.2%) and 7.5% in Poland (2016/17: 7.5%). 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%
(2016/17: 2.0%).
The events and circumstances that led to the impairment charge of £29.1m are set out below:
Premier Inn
During the year, seven hotel sites were transferred to assets held for sale resulting in an impairment of £14.1m. The remaining
£0.6m impairment arose on sites which are to be closed or are underperforming.
Whitbread Annual Report and Accounts 2017/18
127
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
14 Impairment continued
Costa
The Costa international restructuring has resulted in impairment losses of £0.4m in Canada and £3.6m in China. The remaining
impairment charge includes £7.6m in the UK and £2.4m 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 £3.1m have been recognised, £2.7m in Premier Inn and £0.4m 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 a reasonably possible
change in 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
£m
0.5
0.9
Costa
£m
–
–
Total
£m
0.5
0.9
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 (2016/17: 2.0%). The pre-tax discount rate applied to cash flow projections is 7.0% (2016/17: 7.0%).
No impairment was required for goodwill in either Premier Inn or Costa CGUs (2016/17: £3.0m in Premier Inn as a result
of the decision to exit hotel operations in India and South East Asia).
Intangible assets
A review of IT assets resulted in an impairment of intangible assets of £4.4m (2016/17: £0.8m charge as a result of the
decision to exit hotel operations in India and South East Asia).
Whitbread Annual Report and Accounts 2017/18
128
Consolidated accountsConsolidated accounts 2017/18
15 Investment in joint ventures
Principal joint ventures
Investment held by
Principal activity
Country of incorporation
Premier Inn Hotels LLC
PTI Middle East Limited
Hotels
United Arab Emirates
Hualian Costa (Beijing) Food
& Beverage Management
Company Limited
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
% equity interest
2018
49.0
50.0
–
50.0
49.0
2017
49.0
50.0
50.0
50.0
49.0
During the year, the Group disposed of its 50% holding in PT. Tasland Indonesia as part of the exit from its hotel operations
in international markets.
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
Tax
Net profit
2018
£m
12.9
73.2
86.1
(13.7)
(30.1)
(43.8)
3.6
45.9
4.5
–
–
50.4
2017/18
£m
40.9
(37.9)
(0.9)
2.1
0.1
2.0
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
–
3.2
At 1 March 2018, the Group’s share of the capital commitments of its joint ventures amounted to £4.5m (2017: £9.9m).
Whitbread Annual Report and Accounts 2017/18 129
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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
Trade and other receivables are non-interest bearing and are generally on 30-day terms.
The provision for impairment of receivables at 1 March 2018 was £3.4m (2017: £1.6m).
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
2018
£m
7.8
41.0
48.8
2018
£m
105.7
65.4
25.8
196.9
191.1
5.8
196.9
2018
£m
89.8
12.0
3.0
0.9
105.7
2017
£m
12.8
35.4
48.2
2017
£m
92.6
44.8
33.0
170.4
163.6
6.8
170.4
2017
£m
81.2
9.6
0.5
1.3
92.6
Whitbread Annual Report and Accounts 2017/18 130
Consolidated accountsConsolidated accounts 2017/18
18 Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
2018
£m
29.2
61.4
90.6
2017
£m
62.9
0.1
63.0
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 £90.6m (2017: £63.0m).
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
2018
2022
2018 to 2027
2025
Current
Non-current
2018
£m
–
–
24.4
–
84.5
–
2017
£m
109.6
109.6
15.2
–
32.6
–
108.9
157.4
2018
£m
–
–
–
–
369.8
444.7
814.5
2017
£m
–
–
–
66.9
284.6
444.1
795.6
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 2022. Loans have variable interest rates linked to LIBOR. The facility is multi-currency.
Whitbread Annual Report and Accounts 2017/18
131
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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 B loan notes
Series C loan notes
Series A loan notes
Series B loan notes
Series C loan notes
Series D loan notes
Series A loan notes
Series B loan notes
Year issued
Principal value
Maturity
Coupon
2010
2010
2011
2011
2011
2011
2017
2017
US$75.0m
£25.0m
US$60.0m
US$56.5m
US$93.5m
£25.0m
£100.0m
£100.0m
13 August 2020
13 August 2020
26 January 2019
26 January 2019
26 January 2022
6 September 2021
16 August 2027
16 August 2027
5.23%
5.19%
3.92%
4.12%
4.86%
4.89%
2.54%
2.63%
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.
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 1 March 2018
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 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
Within
1 year
£m
84.5
–
–
84.5
24.4
–
–
24.4
108.9
Within
1 year
£m
32.6
–
–
32.6
124.8
–
–
124.8
157.4
1 to 2
years
£m
–
–
–
–
–
–
–
–
–
1 to 2
years
£m
94.8
–
–
94.8
–
–
–
–
94.8
2 to 5
years
£m
169.8
(50.1)
50.0
169.7
–
50.1
(50.0)
0.1
Over
5 years
£m
644.7
–
–
644.7
–
–
–
–
Total
£m
899.0
(50.1)
50.0
898.9
24.4
50.1
(50.0)
24.5
169.8
644.7
923.4
2 to 5
years
£m
189.8
(50.1)
50.0
189.7
66.9
50.1
(50.0)
67.0
256.7
Over
5 years
£m
444.1
–
–
444.1
–
–
–
–
444.1
Total
£m
761.3
(50.1)
50.0
761.2
191.7
50.1
(50.0)
191.8
953.0
The maturity analysis is grouped by when the debt is contracted to mature rather than by repricing dates, as allowed under IFRS.
The carrying amount of the Group’s borrowings is denominated in sterling and US dollars.
At 1 March 2018, the Group had available £950.0m (2017: £880.0m) of undrawn committed borrowing facilities in respect
of revolving credit facilities on which all conditions precedent had been met.
Whitbread Annual Report and Accounts 2017/18
132
Consolidated accountsConsolidated accounts 2017/18
20 Movements in cash and net debt
Year ended 1 March 2018
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 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
2 March 2017
£m
Cost of
borrowings
£m
Cash flow
£m
Foreign
exchange
£m
Fair value
adjustments
to loans
£m
Amortisation
of premiums
and discounts
£m
62.9
0.1
–
63.0
(109.6)
(47.8)
(795.6)
(843.4)
(890.0)
–
–
27.3
109.6
0.3
–
–
–
–
–
1.3
1.3
(113.0)
23.9
25.0
25.3
8.3
8.3
(1.6)
(1.6)
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)
–
–
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)
1 March
2018
£m
29.2
61.4
–
90.6
–
(108.9)
(814.5)
(923.4)
(832.8)
2 March
2017
£m
62.9
0.1
–
63.0
(109.6)
(47.8)
(795.6)
(843.4)
(890.0)
Net debt includes US$ denominated loan notes of US$285.0m (2017: US$325.0m) retranslated to £208.2m (2017: £267.8m).
These notes have been hedged using cross-currency swaps. At maturity, £181.6m (2017: £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 £806.0m
(2017: £830.5m).
Whitbread Annual Report and Accounts 2017/18
133
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
21 Provisions
At 3 March 2016
Created
Unwinding of discount rate
Utilised
Foreign currency adjustment
At 2 March 2017
Created
Unwinding of discount rate
Utilised
Foreign currency adjustment
At 1 March 2018
Analysed as:
Current
Non-current
At 1 March 2018
Analysed as:
Current
Non-current
At 2 March 2017
Restructuring
£m
Onerous
contracts
£m
–
28.0
–
(5.0)
(0.1)
22.9
2.7
–
(15.7)
(0.1)
9.8
6.2
3.6
9.8
22.9
–
22.9
30.2
4.6
0.7
(17.3)
0.3
18.5
11.1
0.3
(6.0)
(0.2)
23.7
16.2
7.5
23.7
6.2
12.3
18.5
Other
£m
7.2
–
–
–
–
7.2
8.2
–
(0.8)
–
14.6
4.3
10.3
14.6
7.2
–
7.2
Total
£m
37.4
32.6
0.7
(22.3)
0.2
48.6
22.0
0.3
(22.5)
(0.3)
48.1
26.7
21.4
48.1
36.3
12.3
48.6
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 £4.0m resulting from decisions to exit the Costa equity market
in Singapore and the Costa Express business in Canada (2016/17: £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% (2017: 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 property related costs and warranties given on the disposal of businesses. During the year the
Group released the provision in relation to the warranty on disposal of businesses and provided for one-off property related
costs. These are expected to be used within one to two years.
Whitbread Annual Report and Accounts 2017/18 134
Consolidated accountsConsolidated accounts 2017/18
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, £898.9m (97.3%) of Group debt was fixed
for an average of 6.92 years at an average interest rate of 3.5% (2017: £761.2m (90.3%) for 6.29 years at 4.0%).
In accordance with IFRS 7, the Group has undertaken sensitivity analysis on its financial instruments which are affected by
changes in interest rates. This analysis has been prepared on the basis of a constant amount of net debt, a constant ratio
of fixed to floating interest rates, and on the basis of the hedging instruments in place at 1 March 2018 and 2 March 2017
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 £0.2m (2016/17: £0.8m), and equity by approximately £4.1m (2017: £7.3m).
Liquidity risk
In its funding strategy, the Group’s objective is to maintain a balance between the continuity of funding and flexibility
through the use of overdrafts and bank loans. This strategy includes monitoring the maturity of financial liabilities to
avoid the risk of a shortage of funds.
Excess cash used in managing liquidity is placed on interest-bearing deposit 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 1 March 2018 and 2 March 2017 based on
contractual undiscounted payments, including interest:
1 March 2018
Interest-bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Accrued financial liabilities
Provisions in respect of financial liabilities
2 March 2017
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
–
–
–
–
–
–
12.1
–
226.5
–
4.1
242.7
On
demand
£m
Less than
3 months
£m
109.6
–
–
–
–
109.6
7.6
–
230.2
–
7.8
245.6
3 to 12
months
£m
126.8
2.2
–
299.0
18.3
446.3
3 to 12
months
£m
66.2
2.3
–
233.1
28.3
329.9
1 to 5
years
£m
More than
5 years
£m
246.8
7.0
26.5
–
9.5
289.8
723.5
–
–
–
3.2
726.7
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
Total
£m
1,109.2
9.2
253.0
299.0
35.1
1,705.5
Total
£m
1,078.6
11.5
252.1
233.1
51.6
1,626.9
Whitbread Annual Report and Accounts 2017/18
135
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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 44 to 49 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 2017/18 136
Consolidated accountsConsolidated accounts 2017/18
23 Financial instruments continued
Financial assets
Derivative financial instruments – level 2
Financial liabilities
Derivative financial instruments – level 2
2018
£m
21.7
7.9
2017
£m
55.6
10.6
During the year ended 1 March 2018, there were no transfers between fair value measurement levels. Derivative financial
instruments include £9.2m assets (2017: £43.3m) and £5.3m liabilities (2017: £8.3m) due after one year.
Derivative financial instruments
Hedges
Cash flow hedges
At 1 March 2018, the Group has interest rate swaps in place to swap a notional amount of £50.0m (2017: £50.0m) 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% (2017: 5.145% and 5.190%). 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% (2017: 3.92% and 4.86%) on a notional amount of US$210.0m (2017: US$250.0m) and pays an average
of 4.72% on a notional sterling balance of £131.4m (2017: 4.72% on £158.2m).
The cash flow hedges were assessed to be highly effective at 1 March 2018 and a net unrealised gain of £2.4m (2016/17: net
unrealised loss of £0.2m) has been recorded in other comprehensive income. The ineffectiveness recorded within finance
costs in the income statement for 2017/18 was nil (2016/17: nil).
Fair value hedges
At 1 March 2018, the Group has cross-currency swaps in place whereby it receives a fixed interest rate of 5.23% (2017: 5.23%)
on a notional amount of US$75.0m (2017: US$75.0m) and pays a spread of between 1.715% and 1.755% (2017: 1.715% and
1.755%) over 6m GBP LIBOR on a notional sterling balance of £50.1m (2017: £50.1m).
The fair value hedges were also assessed to be highly effective at 1 March 2018. A decrease in the fair value of the interest
rate swap of £8.8m (2017: an increase of £6.5m) offset by a gain in the fair value of the hedged items of £8.3m (2017: loss
of £6.6m) led to a debit of £0.5m recorded within finance costs in the income statement (2017: a debit of £0.1m in finance
costs 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
2018
£m
150.1
37.7
105.0
299.0
102.9
694.7
668.2
26.5
694.7
2017
£m
162.1
40.0
93.6
233.1
90.0
618.8
596.9
21.9
618.8
Trade payables typically have maturities up to 60 days depending on the nature of the purchase transaction and the
agreed terms
Whitbread Annual Report and Accounts 2017/18
137
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
25 Share capital
Ordinary share capital
Allotted, called up and fully paid ordinary shares of 76.80p each (2017: 76.80p each)
At 3 March 2016
Issued
At 2 March 2017
Issued
At 1 March 2018
million
195.2
0.2
195.4
£m
150.0
0.2
150.2
0.2
0.2
195.6
150.4
At the 2017 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 (2016/17: nil). No shares were cancelled in the year (2016/17: nil). During the
year, options over 0.2m ordinary shares, fully paid, were exercised by employees under the terms of various share option
schemes (2016/17: 0.2m).
Preference share capital
Allotted, called up and fully paid shares of 1p each (2017: 1p each)
At 3 March 2016, 2 March 2017 and 1 March 2018
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 3 March 2016
Other comprehensive income – net loss on cash flow hedges
Loss on ESOT shares issued
At 2 March 2017
Other comprehensive loss – net gain on cash flow hedges
Loss on ESOT shares issued
At 1 March 2018
Treasury
reserve
£m
197.8
–
(6.4)
Merger
reserve
£m
1,855.0
–
–
Hedging
reserve
£m
14.9
0.2
–
Total other
reserves
£m
2,067.7
0.2
(6.4)
191.4
1,855.0
15.1
2,061.5
–
(2.0)
–
–
(2.4)
–
(2.4)
(2.0)
189.4
1,855.0
12.7
2,057.1
Whitbread Annual Report and Accounts 2017/18
138
Consolidated accountsConsolidated accounts 2017/18
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 3 March 2016
Transferred
Exercised during the year
At 2 March 2017
Exercised during the year
At 1 March 2018
Treasury shares held by
Whitbread PLC
ESOT shares held
million
£m
million
12.6
(0.5)
–
12.1
–
184.4
(7.2)
–
177.2
–
12.1
177.2
0.9
0.5
(0.4)
1.0
(0.2)
0.8
£m
13.4
7.2
(6.4)
14.2
(2.0)
12.2
The treasury shares reduce the amount of reserves available for distribution to shareholders by £189.4m (2017: £191.4m).
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 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
2018
£m
269.2
953.4
856.4
1,500.6
3,579.6
2017
£m
247.0
850.8
742.0
1,298.9
3,138.7
Future minimum rentals payable under non-cancellable operating leases disclosed above includes £10.4m in relation
to privity contracts (2016/17: £13.7m). 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 13.4 years
(2017: 11.7 years).
Group companies have sublet space in certain properties. The future minimum sublease payments expected to be received
under non-cancellable sublease agreements as at 1 March 2018 are £27.7m (2017: £25.8m) of which £12.1m (2017: £14.5m)
relates to privity contracts.
Contingent liabilities
There are no contingent liabilities to be disclosed in the year ended 1 March 2018 (2017: £nil).
Whitbread Annual Report and Accounts 2017/18 139
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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 72 to 87. 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
2018
Awards
2017
Awards
623,643
245,343
(13,332)
(68,548)
685,426
284,129
(257,797)
(88,115)
787,106
623,643
123,487
26,855
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
2018
Awards
2017
Awards
273,997
92,404
(82,190)
(9,134)
412,520
92,415
(217,637)
(13,301)
275,077
273,997
10,801
1,602
Whitbread Annual Report and Accounts 2017/18 140
Consolidated accountsConsolidated accounts 2017/18
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
2018
2017
Options
£ per share
Options
£ per share
WAEP
WAEP
1,325,531
519,074
(186,546)
(325,421)
31.87
29.42
29.63
30.58
1,293,149
669,441
(235,267)
(401,792)
1,332,638
31.13
1,325,531
81,054
33.44
77,410
32.49
29.46
22.42
35.39
31.87
25.07
Outstanding options to purchase ordinary shares of 76.80p between 2017 and 2022 are exercisable at prices between
£19.14 and £38.66 per share (2017: between 2016 and 2021 at prices between £13.39 and £38.66).
The weighted average contractual life of the share options outstanding as at 1 March 2018 is between two and three years.
The weighted average share price at the date of exercise for options exercised during the year was £38.03 (2017: £39.09).
The following table lists the inputs to the model used for the years ended 1 March 2018 and 2 March 2017:
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
26.04.2017
26.04.2016
245,343
284,129
94.2
8,925,588
94.2 10,623,009
Deferred equity
awards
26.04.2017
26.04.2016
SAYE – 3 years 01.12.2017
02.12.2016
SAYE – 5 years 01.12.2017
02.12.2016
92,404
92,415
455,624
558,278
63,450
111,163
94.2
94.2
22.6
20.3
24.9
22.9
3,361,661
3,455,210
3,658,560
3,864,568
561,340
868,061
–
–
–
–
29.42
29.46
29.42
29.46
38.62
39.69
38.62
39.69
35.53
34.10
35.53
34.10
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
25.0
25.0
25.0
Risk-free
rate
%
n/a
n/a
n/a
n/a
0.58
0.23
0.80
0.59
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 0.8m shares at 1 March 2018
(2017: 1.0m). All dividends on the shares in the ESOT are waived by the Trustee.
Whitbread Annual Report and Accounts 2017/18
141
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
28 Share-based payment plans continued
Total charged/(credited) to the income statement for all schemes
Long Term Incentive Plan
Deferred equity
Employee sharesave scheme
Equity-settled
29 Retirement benefits
2017/18
£m
2016/17
£m
(2.6)
3.1
3.8
4.3
4.3
7.1
5.7
4.9
17.7
17.7
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 £9.1m (2016/17: £8.6m).
At the year-end, 32,209 employees (2017: 30,344) were active members of the scheme, which also had 19,827 deferred
members (2017: 11,772).
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 (2017: nil), 21,328 deferred pensioners (2017: 21,942) and 16,433 pensions
in payment (2017: 16,581).
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
(2017: 18.0 years)
Whitbread Annual Report and Accounts 2017/18 142
Consolidated accountsConsolidated accounts 2017/18
29 Retirement benefits continued
Funding
Expected contributions to be made in the next reporting period total £103.3m (2017: £92.6m). In 2017/18, contributions were
£98.3m with £88.2m from the employer, £9.4m from Moorgate Scottish Limited Partnership (SLP) and £0.7m of benefits
settled by the Group in relation to an unfunded scheme (2016/17: £88.1m, with £78.2m from the employer, £9.1m from Moorgate
SLP and £0.8m of benefits settled by the Group in relation to an unfunded scheme). In addition, Whitbread paid £2.5m
(2016/17: £2.2m) 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 2017 by Willis Towers Watson using the projected unit credit
method. The valuation showed a deficit of assets relative to technical provisions of £450.0m (31 March 2014: deficit of £564.0m).
A deficit recovery plan and some protection whilst the scheme remains in deficit have been agreed with the Trustee. The Group
made payments of £85.0m in 2017/18 and will make the following payments to the Fund: £85.0m in 2018/19; £85.0m in 2019/20;
£85.0m in 2020/21; £85.0m in 2021/22 and £57.0m 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 at a rate aligned with increases in ordinary dividends. If ordinary dividends increase
by more than 5% a year, contributions will be accelerated at a rate in line with dividend growth minus 5%.
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 (2017: £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 (2017: £190.2m) 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 of 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 2017/18 143
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
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 2017 of the UK scheme to 1 March 2018 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
1 March
2018
%
3.00
2.10
3.00
2.60
3.10
At
2 March
2017
%
3.10
2.10
3.10
2.60
3.20
The mortality assumptions are based on standard mortality tables which allow for future mortality improvements.
The assumptions are that a member currently aged 65 will live on average for a further 20.8 years (2017: 21.3 years) if they
are male and for a further 23.3 years (2017: 24.5 years) if they are female. For a member who retires in 2038 at age 65, the
assumptions are that they will live on average for a further 22.0 years (2017: 22.8 years) after retirement if they are male
and for a further 24.5 years (2017: 26.0 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 (2016/17: £nil).
The amounts taken to the consolidated statement of comprehensive income are as follows:
Actuarial (gains)/losses
Return on plan assets less/(greater) than discount rate
Re-measurement effects recognised in other comprehensive income
The amounts recognised in the balance sheet are as follows:
Present value of defined benefit obligation
Fair value of scheme assets
Liability recognised in the balance sheet
2017/18
£m
10.0
3.2
13.2
2016/17
£m
9.4
3.1
12.5
2017/18
£m
(85.8)
36.9
(48.9)
2016/17
£m
601.7
(386.9)
214.8
2018
£m
2017
£m
(2,683.9)
2,395.3
(2,808.2)
2,383.1
(288.6)
(425.1)
During the year, the accounting deficit decreased from £425.1m at 2 March 2017 to £288.6m at 1 March 2018.The principal
reasons for this improvement were the change to mortality assumptions and company contributions.
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
Changes in demographic assumptions
Experience adjustments
Benefits paid
Benefits settled by the Group in relation to an unfunded pension scheme1
Closing defined benefit obligation
1 The total of these four items equals the cash paid by the Group as per the consolidated cash flow statement.
2018
£m
2017
£m
2,808.2
71.6
2,220.4
80.4
(38.3)
(99.3)
51.8
(109.4)
(0.7)
612.9
–
(11.2)
(93.5)
(0.8)
2,683.9
2,808.2
Whitbread Annual Report and Accounts 2017/18 144
Consolidated accountsConsolidated accounts 2017/18
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 (lower)/greater 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:
2018
£m
2,383.1
61.6
(36.9)
88.2
9.4
2.5
(109.4)
(3.2)
2017
£m
1,932.3
71.0
386.9
78.2
9.1
2.2
(93.5)
(3.1)
2,395.3
2,383.1
Equities
Government bonds
Corporate bonds
Property
Other3
Quoted and
pooled
£m
727.8
966.1
232.4
160.1
102.3
2018
Unquoted
£m
89.3
–
17.8
93.8
5.7
Total
£m
817.1
966.1
250.2
253.9
108.0
Quoted and
pooled
£m
865.1
872.7
184.0
149.5
64.3
2,188.7
206.6
2,395.3
2,135.6
2017
Unquoted
£m
124.7
–
34.7
88.1
–
247.5
Total
£m
989.8
872.7
218.7
237.6
64.3
2,383.1
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
2018
£m
2017
£m
116.0
(124.0)
(90.0)
87.0
125.0
(134.0)
(97.0)
94.0
(91.0)
(95.0)
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 2017/18 145
Consolidated accounts 2017/18
Notes to the consolidated financial statements continued
At 1 March 2018
30 Related party disclosure
The Group consists of a parent company, Whitbread PLC, incorporated in the UK and a number of subsidiaries and joint
ventures 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
Joint ventures
For details of the Group’s investments in joint ventures see Note 15.
Compensation of key management personnel (including directors):
Short-term employee benefits
Post employment benefits
Share-based payments
2017/18
2016/17
Joint ventures
£m
Joint ventures
£m
5.1
1.9
–
5.2
1.7
–
2017/18
£m
7.3
–
0.6
7.9
2016/17
£m
6.4
–
4.0
10.4
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 (2017: £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 72 to 87.
Whitbread Annual Report and Accounts 2017/18 146
Consolidated accountsConsolidated accounts 2017/18
Company accounts 2017/18
148 Company balance sheet
149 Company statement of changes in equity
150 Notes to the Company financial statements
Whitbread Annual Report and Accounts 2017/18
147
Company accounts 2017/18
Company balance sheet
At 1 March 2018
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
1 March
2018
£m
2 March
2017
£m
4
5
6
7
8
8
8
8
2,378.4
2,378.4
2,374.1
2,374.1
4.2
2.7
(16.9)
(12.7)
(425.5)
(422.8)
2,365.7
1,951.3
150.4
73.2
12.3
2,319.2
(189.4)
2,365.7
150.2
68.0
12.3
1,912.2
(191.4)
1,951.3
1 The income statement of the parent company is omitted from the company’s accounts by virtue of the exemption granted by Section 408 of the Companies Act
2006. The profit generated in the year for ordinary shareholders, and included in the financial statements of the parent company, amounted to £582.3m
(2016/17: loss of £10.7m).
Alison Brittain
Chief Executive
24 April 2018
Nicholas Cadbury
Finance Director
Whitbread Annual Report and Accounts 2017/18 148
Company accountsCompany accounts 2017/18
Company statement of changes in equity
Year ended 1 March 2018
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
Profit for the year
Total comprehensive income
Ordinary shares issued
Accrued share-based payments
Loss on ESOT shares issued
Equity dividends
Share
capital
(Note 7)
£m
150.0
–
–
0.2
–
–
–
Share
premium
(Note 8)
£m
Capital
redemption
reserve
(Note 8)
£m
Retained
earnings
(Note 8)
£m
Treasury
reserve
(Note 8)
£m
Total
£m
62.6
12.3
2,078.7
(197.8)
2,105.8
–
–
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
–
–
0.2
–
–
–
–
–
5.2
–
–
–
–
–
–
–
–
–
582.3
582.3
–
4.3
(2.0)
(177.6)
–
–
–
–
2.0
–
582.3
582.3
5.4
4.3
–
(177.6)
At 1 March 2018
150.4
73.2
12.3
2,319.2
(189.4)
2,365.7
Whitbread Annual Report and Accounts 2017/18 149
Company accounts 2017/18
Notes to the Company financial statements
At 1 March 2018
1 Basis of accounting
The financial statements of Whitbread PLC for the year ended 1 March 2018 were authorised for issue by the Board of
Directors on 24 April 2018. The financial year represents the 52 weeks to 1 March 2018 (prior financial year: 52 weeks
to 2 March 2017).
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, the financial statements are prepared in
accordance with FRS 101 ‘Reduced Disclosure Framework’.
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
2017/18
2016/17
pence
per share
65.90
31.40
0.50
0.60
pence
per share
61.85
29.90
0.80
0.80
£m
120.3
57.3
177.6
–
–
–
177.6
£m
112.6
54.5
167.1
–
–
–
167.1
69.75
127.4
65.90
120.1
A final dividend of 69.75 per share (2017: 65.90p) amounting to a dividend of £127.4m (2017: £120.1m) was recommended by
the directors at their meeting on 24 April 2018. A dividend reinvestment plan (DRIP) alternative will be offered. The proposed
final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability
in these financial statements.
Whitbread Annual Report and Accounts 2017/18 150
Company accountsCompany accounts 2017/18
4 Investment in subsidiary undertakings
Investments at cost
At 2 March 2017
Contributions to subsidiaries in respect of share-based payments
At 1 March 2018
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
Costa Coffee (Shanghai) Co. Ltd
Operators of coffee shops
Coffeeheaven International Limited
Operators of coffee shops
in Eastern Europe
2018
£m
2017
£m
2,374.1
4.3
2,356.4
17.7
2,378.4
2,374.1
Country of
incorporation
Country of
principal
operations
% of
equity and
votes held
England
England
England
England
England
England
China
China
England
Poland
100.0
100.0
100.0
100.0
100.0
Costa Express Limited
Operators of customer-facing espresso-
based self-serve coffee bars
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
2018
£m
4.2
4.2
2018
£m
11.2
5.7
16.9
2017
£m
2.7
2.7
2017
£m
420.0
5.5
425.5
Whitbread Annual Report and Accounts 2017/18
151
Company accounts 2017/18
Notes to the Company financial statements continued
At 1 March 2018
7 Share capital
Ordinary share capital
Allotted, called up and fully paid ordinary shares of 76.80p each (2017: 76.80p each)
At 3 March 2016
Issued
At 2 March 2017
Issued
At 1 March 2018
million
195.2
0.2
195.4
0.2
195.6
£m
150.0
0.2
150.2
0.2
150.4
At the 2017 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 (2017: nil). No shares were cancelled in the year (2017: nil). During the year,
options over 0.2m ordinary shares, fully paid, were exercised by employees under the terms of various share option schemes
(2017: 0.2m).
Preference share capital
Allotted, called up and fully paid shares of 1p each (2017: 1p each)
At 3 March 2016, 2 March 2017 and 1 March 2018
B Shares
C Shares
million
2.0
£m
–
million
1.9
£m
–
At 1 March 2018 there were outstanding options for employees to purchase up to 1.3m (2017: 1.3m) ordinary shares of
76.80 pence each between 2017 and 2022 at prices between £19.14 and £38.66 per share (2017: between 2016 and
2021 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 £2,196.7m (2017: £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:
Treasury shares held
by Whitbread PLC
ESOT shares held
At 2 March 2017
Exercised in the year
At 1 March 2018
£m
million
million
12.1
–
177.2
–
12.1
177.2
1.0
(0.2)
0.8
£m
14.2
(2.0)
12.2
Whitbread Annual Report and Accounts 2017/18
152
Company accountsCompany accounts 2017/18
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 £24.2m (2017: £24.5m).
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
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 Coffee (Shanghai) Co. Ltd (formerly
Yueda Costa (Shanghai) Food & Beverage
Management Company Limited)
Costa Express Canada Limited
Costa Express GmbH
Costa Express Holdings Limited
Costa Express Limited
Costa Express Malaysia Sdn Bhd.
Costa France S.A.S
Costa International Limited
Costa Limited
Costa M.E.N.A Trading DMCC
Costa Singapore Private Limited
Duttons Brewery Limited
Elm Hotel Holdings Limited
Farringdon Scottish Partnership
England1
England1
England1
England1
China2
England1
India3
Poland4
China 23
Canada5
Germany28
England6
England6
Malaysia7
France8
England1
England1
United Arab
Emirates9
Singapore10
England1
England1
Scotland11
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 CNY 1.00
Ordinary CAD 1.00
Ordinary EUR 25,000
Deferred Ordinary £0.01
Ordinary – A £0.01
Ordinary – B £0.01
Ordinary £0.10
Ordinary RMG 1.00
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
Ordinary £0.10
n/a
% 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
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
100.0
100.0
100.0
100.0
n/a
n/a
n/a
Whitbread Annual Report and Accounts 2017/18
153
Company accounts 2017/18
Notes to the Company financial statements continued
At 1 March 2018
10 Related parties continued
Active related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
Hualian Costa (Beijing) Food & Beverage
Management Company Limited
Life Coffee Cafes Limited
Milton (SC) 2 Limited
Milton (SC) Limited
Milton 1 Limited
China12
England1
Scotland11
Scotland11
England1
Ordinary USD 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)
–
–
–
–
–
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Moorgate Scottish Limited Partnership
Scotland11
n/a
n/a
n/a
n/a
PI Hotels & Restaurants Ireland Limited
Ireland13
Ordinary EUR 1.00
Premier Inn (Jersey) Limited
Premier Inn (UK) Limited
Premier Inn Glasgow Limited
Jersey14
England1
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Premier Inn GmbH
Germany15
Ordinary EUR 25,000
Premier Inn Hamburg Nordkanalstrasse
GmbH
Premier Inn München Frankfurter Ring
GmbH
Germany15
Ordinary EUR 25,000
Germany15
Ordinary EUR 25,000
Premier Inn Dortmund Königswall GmbH Germany15
Ordinary EUR 25,000
Premier Inn Berlin Tiergarten GmbH
Germany15
Ordinary EUR 25,000
Premier Inn Hotels Limited
Premier Inn Hotels LLC
England1
United Arab
Emirates16
Ordinary £1.00
Ordinary AED 1,000
Premier Inn Hotels Qatar LLC
Qatar17
Ordinary QAR 100.00
Premier Inn International
Development Limited
Premier Inn Investments GmbH
Premier Inn Kier Limited
England1
Germany26
England18
Ordinary £1.00
Ordinary EUR 25,000
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 Westminster Limited
Premier Travel Inn India Limited
PT. Whitbread Indonesia
PTI Middle East Limited
SIA Coffee Nation
Silk Street Hotels Limited
St Andrews Homes Limited
Swift Hotels Limited
England1
England1
England1
Indonesia19
United Arab
Emirates20
Latvia21
England1
England1
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary USD 1.00
Ordinary AED 1,000
Ordinary LVL 1.00
Deferred £1.00
Ordinary USD 0.01
Ordinary £1.00
Preference £5.00
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
100.0
100.0
49.0
49.0
49.0
49.0
100.0
100.0
100.0
100.0
–
–
100.0
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
99.9
0.1
100.0
100.0
100.0
100.0
0.1
99.9
Whitbread Annual Report and Accounts 2017/18 154
Company accountsCompany accounts 2017/18
10 Related parties continued
Active related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
T. F. Ashe & Nephew Limited
England1
Deferred £1.00
Ordinary £0.01
% of class of
shares held
by the parent
company
–
–
% of class of
shares held
by the Group
(if different
from the
parent
company)
% of nominal
value (where
applicable)
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
Germany15
Ordinary EUR 25,000
Whitbread Hotel Company Limited
Whitbread Properties Limited
England1
England1
Whitbread West Pennines Limited
England1
WHRI Development DMCC
United Arab
Emirates22
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
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
–
91.7
8.3
–
–
–
–
–
–
–
–
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
Whitbread Annual Report and Accounts 2017/18
155
Company accounts 2017/18
Notes to the Company financial statements continued
At 1 March 2018
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
Scotland24
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
Hungary25
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
Costa Card ELMI Limited
England1
England1
England1
England6
England6
England1
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Costa Denmark ApS
Denmark27
Ordinary DKK 1,000
Costa Hong Kong Limited
Hong Kong29
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
E. Lacon & Co., Limited
E.B. Holdings Limited
Evan Evans Bevan Limited
England1
England1
England1
Scotland11
England1
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
B Ordinary £1.00
W 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
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
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
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
Whitbread Annual Report and Accounts 2017/18 156
Company accountsCompany accounts 2017/18
10 Related parties continued
Dormant related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
Finite Hotel Systems Limited
England1
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
Scotland24
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
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 2017/18
157
Company accounts 2017/18
Notes to the Company financial statements continued
At 1 March 2018
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
Lorimer & Clark, Limited
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
Scotland24
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
Premier Inn Limited
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
England1
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
Premier Inn Trentham Gardens Limited
England1
Premier Inn Troon Limited
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 £1.00
Ordinary £1.00
A Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £1.00
Ordinary £0.10
% 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
100.0
100.0
Whitbread Annual Report and Accounts 2017/18 158
Company accountsCompany accounts 2017/18
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 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
Swift Hotels (1995) Limited
Swift Hotels (Management) Limited
Ireland13
England1
Hungary25
Ordinary EUR 1.27
Ordinary £1.00
Ordinary HUF 1.00
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
England1
England1
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
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
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
100.0
100.0
100.0
100.0
Whitbread Annual Report and Accounts 2017/18 159
Company accounts 2017/18
Notes to the Company financial statements continued
At 1 March 2018
10 Related parties continued
Dormant related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
Swift Inns and Restaurants Limited
England1
Ordinary £1.00
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
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
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
% 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
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
n/a
Wentworth Guarantee Company Limited England1
n/a
n/a
n/a
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
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 £0.05
–
–
–
–
–
–
–
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 2017/18 160
Company accountsCompany accounts 2017/18
10 Related parties continued
Dormant related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
Whitbread Directors 2 Limited
Whitbread Dunstable Limited
Whitbread Enterprise Centre Limited
Whitbread Finance PLC
Whitbread Fremlins Limited
England1
England1
England1
England1
England1
Whitbread Golf and Country Club Limited England1
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
Whitbread Golf Club 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
45.0
55.0
100.0
100.0
Whitbread Guarantee Company
Two Limited
England1
n/a
n/a
n/a
n/a
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
Whitbread Quest Trustee Limited
England1
England1
England1
England1
England1
England1
England1
England1
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
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
Ordinary £1.00
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
–
–
–
–
–
–
–
–
–
–
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
n/a
n/a
n/a
–
–
–
–
–
–
–
–
–
–
–
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
50.0
50.0
n/a
n/a
n/a
–
–
100.0
100.0
100.0
100.0
Whitbread Annual Report and Accounts 2017/18
161
Company accounts 2017/18
Notes to the Company financial statements continued
At 1 March 2018
10 Related parties continued
Dormant related undertakings continued
Name of related undertaking
Country of incorporation
Class of shares held
Whitbread Sunderland 2 Limited
England1
Ordinary £1.00
Whitbread Sunderland Limited
England1
Ordinary £5.00
5.6% Non-Cumulative
Preference £1.00
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
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
100.0
100.0
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 2017/18 162
Company accountsCompany accounts 2017/18
10 Related parties continued
The registered office of the above companies is as follows:
1 Whitbread Court, Houghton Hall Business Park, Porz Avenue Dunstable, Bedfordshire, LU5 5XE
2 Room 3002, ICP, No 1318 North Sichuan Road, Hongkou District, Shanghai, 200080, China
3 Unit No. 216, Second Floor at Square One, C-2 District Centre, Saket, New Delhi,110017, India
4 Chłodna 52, 00-872, Warsaw, Poland
5 C/o Accu-Search Inc, 215, 10205-101 Street, Edmonton AB T5J 2Y9, Canada
6 Knaves Beach, Loudwater, High Wycombe, Buckinghamshire, HP10 9QR
7 TMF Administrative Services Malaysia Sdn. Bhd., 10th Floor, Menara Hap Seng, No.1 & 3 Jalan P. Ramlee 50250 Kuala Lumpur, Malaysia
8 52 rue de la Victorie 75009, 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, Saltire Court, 20 Castle Terrance, Edinburgh, EH1 2EN, Scotland
12 Room 520 and 524, 5th Floor, East Tower, Sichuan Building, 1 Fu Wai Avenue, Xicheng District, Beijing, China
13 TMF Group (Ireland) Ltd, 3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1, Ireland
14 TMF Channel Islands Ltd, 28-30 The Parade, St Helier, Jersey JE1 1EQ
15 Messeturm, Friedrich-Ebert-Anlage 49, 60308, Frankfurt, Germany
16 Ground Floor, Premier Inn Dubai Investment Park, PO Box 35118, Dubai, United Arab Emirates
17 3rd Floor, Tornado Towers, PO Box 34040, Doha, Qatar
18 Tempsford Hall, Sandy, Bedfordshire SG19 2BD
19 Gandaria 8 Office Tower, 19th Floor Unit A1, Jalan Sultan Iskandarmuda, Kebayoran Lama, 12240, Indonesia
20 TMF Services B.V., Nassima Tower, Office 1401, Sheikh Zayed Road, PO Box 213975, Dubai, United Arab Emirates
21 Ieriķu iela 3, Riga, LV-1084, Latvia
22 Almas 6C, Almas Tower, Jumeirah Lake Towers, Dubai, United Arab Emirates
23 Science and Technology Center Building, Room B1, Block F, No 666 East Beijing Road, Shanghai, 200080, China
24 The Royal Scot Hotel, 111 Glasgow Road, Edinburgh, EH12 8NF, Scotland
25 Ugocsa utca 4. B. ep., 1226-Budapest, Hungary
26 Eschenheimer Anlage 1, 60316 Frankfurt am main, Germany
27 c/o TMF Denmark A/S, Bredgade 6, 1, 1260 Copenhagen, Copenhagen, Denmark
28 Ecos office centre eschborn, HS Buro und Service GmbH, Mergenthaleralle 10-12, 65760 Eschborn, Germany
29 36/F., Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong
Whitbread Annual Report and Accounts 2017/18 163
Company accounts 2017/18
Shareholder services
Useful contacts
Registrars
Link Asset Services
Whitbread Share Register
The Register
34 Beckenham Road
Kent
BR3 4TU
The website address is
www.linkassetservices.com
For enquiries regarding your
shareholding please telephone
+44 (0)344 855 2327.
Alternatively you can email:
whitbread@linkgroup.co.uk
Registered office
Whitbread PLC
Whitbread Court
Houghton Hall Business Park
Porz Avenue
Dunstable
Bedfordshire
LU5 5XE
General Counsel and
Company Secretary
Chris Vaughan
Managing your shareholding
You can 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 Link 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 Link
promptly of any change of address.
Analysis of ordinary shares at 1 March 2018
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
22,491
13,317
2,776
1,758
211
280
92
134
28
32
5
% of
holders
54.70
32.38
6.75
4.27
0.51
0.68
0.22
0.33
0.07
0.08
0.01
Number
of shares
817,864
3,148,345
1,958,118
3,361,654
1,487,057
6,336,260
6,346,355
28,880,874
20,869,364
70,580,154
51,891,186
% of share
capital
0.42
1.61
1.00
1.72
0.76
3.24
3.24
14.76
10.67
36.07
26.51
41,124
100.00
195,677,231
100.00
Financial reporting calendar
Dates subject to confirmation
Half-year end
Announcement of half-year results
End of financial year
Share dealing service1
For Link 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. Link are open between 8.00am
– 4.30pm, 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 advisor. 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.
Private shareholder
Private shareholders are shareholders
who hold their shares in their own
name on the Company’s Register
of Members. They have full voting
rights and have the right to stipulate
their communication preferences and
bank account preferences on their
own holding.
30 August 2018
23 October 2018
28 February 2019
Nominee shareholder
Nominee shareholders are underlying
beneficial shareholders who hold their
shares through a nominee company.
The name of the nominee company will
appear on the Company’s Register of
Members. It will depend on the terms
and conditions of the nominee provider
as to whether underlying shareholders
receive copies of the AGM documents
and any other company documents that
are mailed. Dividend options may also
be restricted by the nominee. If
underlying shareholders wish to receive
Company mailings then they have the
right to request to be put on the
beneficial holders’ information rights
register, which can be arranged via their
nominee provider.
Annual General Meeting 2018
The 2018 AGM will be held at 2.00pm
on 27 June 2018 at Church House
Conference Centre, Dean’s Yard,
Westminster, London SW1P 3NZ.
Whitbread Annual Report and Accounts 2017/18 164
Shareholder information 101.15p
95.80p
90.35p
82.15p
68.80p
24 May 2018
25 May 2018
11 June 2018
4 July 2018
8 November 2018
9 November 2018
23 November 2018
14 December 2018
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 Link
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 the Bankers’ Automated Clearing
Service (BACS). This means that your
dividend will be in your account on the
same day we make the payment. Your
tax voucher will be posted to your home
address. If you would like to use this
method please ring the registrars on
+44 (0)344 855 2327.
4,307p
4,356p
3,512p
3,391p
3,649p
3,846p
4,397p
5,440p
5,285p
Dividend history
2017/18
2016/17
2015/16
2014/15
2013/14
Dividend diary 2018/19
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
Share price history
2017/18
2016/17
2015/16
2014/15
2013/14
2,392p
High
Low
Capital gains tax
For further information on:
• the market value of shares in the Company as at 31 March 1982;
• the reduction of Capital on 10 May 2001; and
• the special dividend and share consolidation in May 2005,
or if you require any further information on capital gains tax allocations, please refer
to the investors’ section of the Company’s website: www.whitbread.co.uk.
Whitbread Annual Report and Accounts 2017/18
165
Shareholder information
Shareholder services continued
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, Link 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 2017 should automatically have
received the card with the Annual
Report and Accounts mailing.
Shareholders who wish to register
for a card can do so by contacting Link,
whose contact details are shown on
page 164.
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
Shareholder warning
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, and a 2006 survey by the
Financial Conduct Authority (FCA)
reported that the average amount lost
by investors is around £20,000, with
around £200 million lost in the UK
each year.
It is not just the novice investor that has
been duped in this way; many of the
victims had been successfully investing
for several years. Shareholders are
advised to be wary of unsolicited
advice, offers to buy shares at a
discount or offers of free company
reports. If you receive any unsolicited
investment advice:
• make sure you get the correct name
of the person or organisation;
• check that they are properly
authorised by the FCA before getting
involved by visiting www.fca.org.uk
and contact the firm using the details
on the register;
• report the matter to the FCA either
by calling 0800 111 6768 or visit
www.fca.org.uk/scams;
• if the calls persist, hang up; and
• REMEMBER if it sounds too good
to be true it probably is!
If you deal with an unauthorised firm,
you will not be eligible to receive
payment under the Financial Services
Compensation Scheme (FSCS) if things
go wrong. The FCA can be contacted
by completing an online form at
www.fca.org.uk/scams or you can
call the FCA Consumer Helpline on
0800 111 6768 or Action Fraud 0300 123
2040 (www.actionfraud.police.uk).
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/consumers.
Whitbread Annual Report and Accounts 2017/18 166
Shareholder information Glossary
Accommodation sales
Premier Inn accommodation revenue
excluding non-room income such as
food and beverage.
Average room rate (ARR)†
Hotel revenue divided by the number
of rooms occupied by guests.
Closest IFRS measure: No direct
equivalent
Reconciliation: N/A
Capitalised leases
The treatment of leases as an asset for
the purposes of calculating Whitbread’s
leverage ratio. Calculated as multiplying
the annual property rent cost by 8x in
line with external credit rating agency
assessments of the lodging industry.
Detractors
Customers that score zero to six when
completing a survey with ten score
choices.
Direct bookings
Bookings made direct to the Premier Inn
website, Premier Inn app, Premier Inn
customer contact centre or hotel
front desks.
Direct digital
Based on stayed bookings made direct
to the Premier Inn website and Premier
Inn app based on stayed bookings in
the financial year.
Directors’ forum
A group of Whitbread’s senior leaders.
Discretionary free cash flow†
Cash generated from operations after
payments for interest, tax and
maintenance capital1.
Closest IFRS measure: Cash generated
from operations
Reconciliation: FD’s report, page 47
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†
Underlying earnings before interest, tax,
depreciation and amortisation,
excluding income from Joint Ventures
and Associates.
Closest IFRS measure: No direct
equivalent
Reconciliation: Refer below
EBITDAR†
Underlying earnings before interest, tax,
depreciation, amortisation and rent,
excluding income from Joint Ventures
and Associates.
Closest IFRS measure: No direct
equivalent
Reconciliation: Refer below
Engagement score
The engagement score is calculated by
adding together the positive responses
to the YourSay 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.
Fixed charge cover†
Ratio of underlying operating profit
before total property rent compared
to interest plus total property rent.2
Closest IFRS measure: No direct
equivalent
Reconciliation: Refer below
Food and beverage (F&B) sales
Food and beverage revenue from all
Whitbread owned pub restaurants
and integrated hotel restaurants.
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 sales†
Period over period change in revenue
for outlets open for at least one year.3
Closest IFRS measure: No direct
equivalent
Reconciliation: N/A
Net debt†
Total company borrowings after
deducting cash and cash equivalents.
Closest IFRS measure: Borrowings
less cash and cash equivalents
Reconciliation: Note 20
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
Promoters
Customers that score nine to ten
when completing a survey with ten
score choices.
Profit from operations
Profit before central costs, interest
and tax
RevPAR†
Revenue per available room is also
known as ‘yield’. This hotel measure
is achieved by multiplying the ARR
by Occupancy.
Closest IFRS measure: No direct
equivalent
Reconciliation: N/A
Return on Capital†
Underlying operating profit for the year
divided by net assets at the balance
sheet date, adding back debt, taxation
liabilities, the pension deficit and
derivative financial assets and liabilities.
Closest IFRS measure: No direct
equivalent
Reconciliation: Refer below
Team retention
The number of permanent new
starters that we retain for the first
90 days/3 months.
Underlying basic EPS†
Underlying profit attributable to the
parent shareholders divided by the
basic weighted average number of
ordinary shares.
Closest IFRS measure: Basic EPS
Reconciliation: Note 10
Underlying net finance cost†
Finance costs net of finance revenue
excluding non-underlying finance costs
or revenue.
Closest IFRS measure: Net finance costs
Reconciliation: Note 8
Underlying operating profit†
Operating profit before non-underlying
operating costs.
Closest IFRS measure: Operating profit
Reconciliation: Note 4
Whitbread Annual Report and Accounts 2017/18
167
Shareholder information
Glossary continued
Underlying profit before tax†
Profit before tax before
non-underlying items.
Closest IFRS measure: Profit before tax
Reconciliation: Note 4
Underlying tax†
Tax expense excluding non-underlying
tax items.
Closest IFRS measure: Tax Expense
Reconciliation: Note 9
WINcard
Whitbread In Numbers – balanced
scorecard to measure progress against
key performance targets.
YourSay
Whitbread’s annual employee opinion
survey to provide insight into the views
of employees.
Reconciliations of APMs
EBITDA and EBITDAR
Underlying operating profit
Depreciation
Amortisation
EBITDA
Total property rent
EBITDAR
Return on Capital
Net assets
Net debt
Current tax liabilities
Deferred tax liabilities
Pension deficit
Derivative financial assets
Derivative financial liabilities
Net assets for return on capital
Underlying operating profit
Return on capital
Fixed charge cover
Underlying operating profit
Total property rent
Underlying operating profit before rent
Underlying interest
Total property rent
Underlying interest plus rent
Fixed charge cover
Underlying operating profit
Operating profit
Non-underlying operating costs
Underlying operating profit
1 New measure used to demonstrate the conversion
of underlying operating profit into cash before
considering discretionary cash flows.
2 New measure to demonstrate the Group’s ability
to meet its fixed operating costs.
3 Redefined to reflect wider industry practice.
Comparatives have been presented using the
revised definition.
† Alternative 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.
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 relevant for
comparison of the financial performance of
the Group’s businesses either from one period
to another or with other similar businesses.
APMs are not defined by IFRS and therefore may
not be directly comparable with similarly titled
measures reported by other companies. APMs
should be considered in addition to, and are not
intended to be a substitute for, or superior to,
IFRS measures.
Notes
2017/18
2016/17
4
4
4
5
4
20
9
9
29
23
23
4
4
5
8
5
Income Statement
6
4
622.1
208.7
21.2
852.0
282.1
592.4
202.5
15.1
810.0
261.2
1,134.1
1,071.2
2,802.5
832.8
44.8
82.4
288.6
(21.7)
7.9
4,037.3
622.1
15.4%
622.1
282.1
904.2
31.4
282.1
313.5
2.9
589.8
32.3
622.1
2,524.8
890.0
45.9
62.0
425.1
(55.6)
10.6
3,902.8
592.4
15.2%
592.4
261.2
853.6
27.2
261.2
288.4
3.0
552.7
39.7
592.4
Whitbread Annual Report and Accounts 2017/18
168
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Whitbread Court
Houghton Hall Business Park
Porz Avenue
Dunstable
Bedfordshire
LU5 5XE
www.whitbread.co.uk/investors