Double Digit Growth in Revenue, Profit and Dividend

DOUBLE DIGIT GROWTH IN REVENUE, PROFIT AND DIVIDEND

Whitbread PLC results for the financial year to 27 February 2014

Financial Highlights

Total revenue up 13.0% to £2,294.3 million (2012/13: £2,030.0 million) Group like for like sales1 up 4.2% Underlying profit2 before tax up 16.5% to £411.8 million (2012/13: £353.4 million3) Underlying basic EPS2 up 20.1% to 179.02p (2012/13: 149.10p3) Full year dividend up 19.9% to 68.80p (2012/13: 57.40p) Whitbread Hotels and Restaurants profits4 up 11.2% to £348.1 million, Costa profits4 up 21.9% to £109.8 million Premier Inn total sales up 13.4% and like for like sales1 up 5.0% Costa total sales up 20.1% and like for like sales1 up 5.7% Group return on capital5 up 1.4% pts to 15.3% Strong cash flow from operations6 of £601.3 million funded capital investment of £306.2 million and 19.9% dividend growth Year end net debt down by £79.5 million to £391.6 million

Statutory Highlights

Profit after tax and exceptional items up 10.7% to £323.4 million (2012/13: £292.1 million3) Total basic EPS up 10.4% to 182.98p (2012/13: 165.71p3)

On track for 2016 and 2018 growth milestones

Premier Inn now has 55,035 UK7 rooms, up 6.5% in the year with a committed pipeline of c.11,500 rooms Costa system sales increased by 19.4% to £1.2 billion Around 3,000 net new UK jobs created in 2013/14

Anthony Habgood, Chairman, said:

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

Andy Harrison, Chief Executive, said:

"Whitbread has delivered another year of strong double digit growth, with total sales up 13.0%, underlying pre tax profits up 16.5% and EPS up 20.1%. This, combined with our good cash flow, has led the Board to recommend a full year dividend increase of 19.9%. This extends our track record of double digit growth, with sales growing by 11.4% over the last five years and EPS and dividends per share growing by 14.7% and 13.5% respectively. This success is built on our two strong brands Premier Inn, the UK‟s favourite hotel chain and Costa, the UK‟s favourite coffee shop and our 43,000 team members who work so hard to deliver a consistently good customer experience.

We continue to invest in improving our customer propositions and international expansion. This includes the rollout of our “best ever bed” in Premier Inn, the launch of “hub by Premier Inn” and rejuvenating our restaurant brands. In Costa we are focussed on international growth in China and France and our rebranding in Poland, together with the continuing growth of Costa Express.

We had a strong finish to last year, with all our brands performing well, boosted by good Christmas and New Year campaigns and helpful weather comparatives. The first two months of the new financial year have started positively, with good trading again helped by relatively soft comparatives which will become tougher as we move into the second half of this year.

We remain on track to deliver our 2016 and 2018 growth milestones for both Premier Inn and Costa which, combined with our clear focus on returns, will create substantial shareholder value.”

For further information contact:

Whitbread Nicholas Cadbury, Group Finance Director + 44 (0) 20 7806 5491 Anna Glover, Director of Communications +44 (0) 1582 844 244 Joanne Russell, Director of Investor Relations +44 (0) 1582 888 633

Tulchan David Allchurch/Will Smith + 44 (0) 20 7353 4200

1 Like for like sales stated pre-IFRIC 13 adjustment for Premier Inn – UK and Ireland, Costa and Restaurants - UK

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

3 Restated for the impact of IAS 19 (revised 2011), see note 3 of the financial statements

4 Underlying operating profit before exceptional items

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

6 Cash flow from operations Cash generated from operations in the financial statements excluding the pension payments

7 Premier Inn UK includes one hotel in Ireland with 155 rooms

8 Allegra Strategies Project Cafe 2013 report, published December 2013

Favourite coffee shop, based on a sample of 4,650 consumers from an independent coffee shop visitor panel

9 YouGov - Hotel BrandIndex Hotel BrandIndex index measure when compared against our direct competitors, based on data for 2013/14 using a 52 week rolling average

10 STR Global – UK Midscale and Economy sector

Further information

For photographs and videos, please visit the corporate media library: www.whitbreadimages.co.uk

A presentation for analysts will be held at Nomura, 1 Angel Lane, Upper Thames Street, London, EC4R 3AB. The presentation is at 9.30 am and a live webcast of the presentation will be available on the investors' section of the website at: http://www.whitbread.co.uk/investors

CHIEF EXECUTIVE’S REVIEW

Whitbread is a people intensive business with 43,000 employees serving some 22 million customers every month, through 2,800 UK outlets. Last year we sold 15 million Premier Inn rooms, 47 million restaurant meals and 400 million cups of Costa coffee. Employee training and motivation are key factors for our success and prime contributors to providing outstanding service to our guests and in turn driving like for like sales growth. We are committed to providing development and career opportunities for our teams through industry leading training programmes and apprenticeship schemes, with over 20,000 team members undergoing training in the past year and 557 people achieving an apprenticeship. Our fast-paced growth has enabled us to create around 3,000 net new UK jobs in the year.

We are building strong brands by putting customers at the heart of everything we do and we are proud to own the UK‟s No. 1 coffee shop brand8 and No.1 hotel brand9. Once again, we have achieved record customer scores for all our brands in the UK. Great customer service needs to be backed up with great products and we have invested over £300 million in the year opening, maintaining and upgrading our hotels, restaurants and coffee shops to ensure they remain the best in the market.

In 2013/14 Whitbread delivered another strong financial performance, with double digit organic growth in revenue, profit and dividends together with good cash flow. Network expansion, combined with good like for like sales growth of 4.2%, increased Group total sales by 13.0% to £2,294.3 million. Group underlying profit before tax rose 16.5% to £411.8 million (2012/13: £353.4 million), with underlying basic EPS increasing by 20.1% to 179.02p.

The Group‟s cash generation remains good, with cash flow from operations up 14.3% to £601.3 million. Group return on capital increased by 1.4% pts to 15.3% and we maintained our strong balance sheet, ending the year with net debt of £391.6 million (£471.1 million as at 28 February 2013).

The Board recommends a final dividend payment of 47.00p per share, making a total dividend for the year of 68.80p per share, an increase of 19.9%. The final dividend will be paid on 4 July 2014 to shareholders on the register at the close of business on 30 May 2014.

Whitbread Hotels and Restaurants

During 2013/14 our Hotels and Restaurants business delivered a good performance with revenue increasing by 9.8% to £1,494.0 million and like for like sales growing by 3.7%. Underlying operating profit4 rose by 11.2% to £348.1 million and return on capital increased by 0.9% pts to 13.3%.

Premier Inn grew total sales by 13.4% to £967.9 million with the opening of 3,955 rooms worldwide and like for like sales growth of 5.0%. Restaurants grew total sales by 3.9% to £526.1 million, with like for like sales growth of 1.6% and the opening of eight new restaurants.

Premier Inn

Premier Inn is the UK‟s leading hotel chain and continues to win market share through organic growth. In 2013/14 we opened 23 net new hotels taking our total number of hotels to 672, which is 172 more than our nearest competitor. Our network of hotels already offers customers the widest choice of locations and the delivery of our growth milestones will increase this choice as we grow to c.750 locations in 2016 and c.830 locations in 2018.

We are investing in our brands to further reinforce our competitive position and we spent around £80 million this year on refurbishment and maintenance of our Premier Inn estate. This is part of a systematic refurbishment programme across the estate, with a light refurbishment every three and nine years and a more comprehensive refurbishment every six and twelve years. In 2014/15 we plan to increase the number of rooms we refurbish in the year from 5,433 in 2013/14 to c.12,700 and we will also roll out a further 20,000 new beds, up from 10,000 last year. In addition we will upgrade the wi-fi capability in our hotels and install air conditioning in a further c.2,500 rooms which is in c.55% of the estate.

Our focus on delivering great customer satisfaction through the quality and consistency of our product and service, together with the best choice of locations and excellent value for money have resulted in 70% of guests in our „Guest Recommend Survey‟ rating their stay 9 or 10 out of 10. Furthermore Premier Inn continues to come top in the YouGov „best value for money‟ survey.

We aim to deliver an efficient pricing model through dynamic pricing for each individual hotel to drive higher occupancy and great value for money. We are continually developing our dynamic pricing systems to support our goal of achieving just over 80% occupancy.

We continued to win market share in both London and the UK regions, increasing our total room stock by 6.5% while delivering total revpar growth of 5.4% and occupancy growth of 1.7% pts to 78.1%. Total revpar for the Midscale and Economy sector10 grew by 8.3% against weak comparatives, and it grew by 5.1% for the total UK hotel market.

Over the last four years we have substantially upgraded our online capability, growing our online reservations as a proportion of total bookings from 67% to 85%. Our website, premierinn.com, is our customers‟ preferred booking channel, representing 85% of transactions with 77% of bookings direct to premierinn.com. We are investing in our technology and have recently launched a new mobile website for Premier Inn as well as a new iPhone app to improve customer conversion.

In April 2013 we announced a new growth milestone of c.75,000 UK rooms by 2018. Last year we opened 3,364 net UK rooms taking the total to 55,035 which, combined with our

4 committed pipeline of c.11,500, will take us towards our 2016 milestone of c.65,000 rooms. This will put us on track to achieve our 2018 milestone of c.75,000 rooms.

The London hotel market is a key focus. We plan to grow our total number of London rooms from 8,729 to c.20,000 by 2018 and have made good progress towards this goal, with a committed pipeline in London of c.5,500 rooms. In 2014/15 we plan to open around 4,500 new UK rooms and expect around a third of these to be in London.

In late autumn we will open our first “hub by Premier Inn” hotel in St Martin‟s Lane, London. Our committed “hub by Premier Inn” pipeline has grown to nine hotels and 1,700 rooms of which c.1,400 are in central London.

Premier Inn International

Our strategy is to build Premier Inn in selected international markets with a small number of owned hotels and then through an „asset light‟ model. During 2013/14 Premier Inn International continued to make progress with like for like occupancy up 10.9% pts to 77.5% and like for like revpar up 20.0%. Our five hotels in the Middle East showed good profit growth whilst our three hotels in India faced a challenging market. Investment in developing Premier Inn overseas and building our infrastructure, including establishing our development team in South East Asia, contributed to a total loss of £6.0 million. Our committed pipeline has grown to 22 hotels of which 18 are „asset light‟ management contracts. We also signed 16 memoranda of understanding in our target territories of the Middle East, India and South East Asia.

Restaurants

Restaurants delivered a much better second half performance, which increased sales growth for the full year to 3.9% and like for like sales growth to 1.6%, outperforming the Coffer Peach industry benchmark outside the M25. Contribution margin was flat as a result of the stronger second half performance. This was aided by very favourable weather comparatives and less promotional discounting.

We are rejuvenating our Brewers Fayre and Beefeater brands. This includes investing in our food development, revitalising our menu offer, improving our branding and signage and delivering a more consistent guest experience. We have updated 33 of our Brewers Fayre restaurants and we plan to complete the rest of the estate in 2014/15, at an average investment of around £50,000 per restaurant. In Beefeater we have converted eight restaurants to our new format, with a further 20 conversions planned in 2014/15 at an average investment of around £200,000 per restaurant. The goal in our Restaurants business is to “serve up great memories” for the 47 million guests who visit us each year and it is pleasing to see our guest scores improve by 3.2% pts to 66.1%.

Costa

Costa produced another excellent performance during the year with underlying operating profit up 21.9% to £109.8 million and return on capital growing by 5.8% pts to 40.5%. Total sales increased by 20.1% driven by good like for like growth and a strong store opening programme. Total worldwide system sales grew by 19.4% to £1.2 billion and are on track to deliver our 2018 milestone which is to reach around £2.0 billion of system sales.

UK Retail

Costa is the UK‟s favourite coffee shop and has delivered another outstanding performance, with total UK retail sales growing by 16.5% and like for like sales in UK equity stores up 5.7%, mainly as a result of a 5.0% growth in transactions per store.

Our strong organic growth is continuing and we extended our lead in the UK with an additional 177 net new stores in the year, taking the total to 1,755. We expect our number of UK stores to increase to over 2,200 by 2018. The YouGov coffee shop brand preference survey shows Costa‟s brand preference score strengthening again, ahead of its competition, and rising by a further 5% pts since last year.

Investment in our people, our products and our stores are the keys to our success. Product innovation underpins our like for like growth. Our successful Christmas campaign along with the introduction of a new breakfast range and hot chocolate drinks helped to drive a strong performance in the year. Some 2,000 baristas have completed our Maestro training course and our team engagement score is 82.4%. Investment in our stores is also a key element of our strategy with some 139 equity stores refurbished in 2013/14.

Costa Enterprises

Costa Enterprises had a very successful year growing system sales by 22.0% and adding 955 net new Costa Express machines, giving a total of 3,515 units at the year end. We are testing our new generation Costa Express machine which will help us to enter new market segments, including universities and hospitals, as well as spearheading our international expansion. During the year we also saw strong growth in our corporate partnerships and made progress with “Costa at Home” following its successful launch in 2012.

Costa EMEI

Costa EMEI had a mixed performance with total system sales growing by 10.6% and like for like system sales by 1.4%. Our franchise business performed well with a strong performance in the Middle East and Ireland. In our equity business in Poland, the market was challenging and we are implementing a recovery plan. We have closed 15 unprofitable stores, continued the re-branding of our Coffeeheaven stores to Costa and concentrated on product development. In France we now have two franchise stores and four recently opened equity stores. Although it is early days we are pleased with the performance of our trial stores and have a pipeline for a further five stores which we expect to open during 2014/15.

Costa Asia

China remains an exciting opportunity where we operate two joint ventures. During the year we opened 73 net new stores taking our total number of stores to 326 in 30 cities. We made good progress on the profitability of our like for like estate in China. This gives us the confidence to continue to invest in new store openings and to build the critical infrastructure, management capabilities and resources to construct a profitable platform for the future. Outside of China we have 16 franchise stores in South East Asia.

Good Together

During the year we committed to raise £7.5 million for Great Ormond Street Hospital Children‟s Charity by 2019 to fund the building of the new Premier Inn Clinical Building at the hospital. We have already raised over £2.2 million towards this target. The Costa Foundation has raised over £1.5 million during the year and opened eight new school projects in coffee growing communities in six countries.

Whitbread created around 3,000 net new UK jobs during the year, with nearly 700 apprentices in learning and 557 new apprenticeships awarded in 2013/14.

Significant progress has been made in implementing our Sustainable Supply Policies which put real vigour behind our responsible sourcing activities. We have overhauled our beef and processed meat supply chain and increased our ability to track, audit and quality control our food supply chain.

We are reviewing our carbon emission and water usage targets, having exceeded them. The new carbon emission target will be based on the new mandatory reporting regime. Our reduction in waste to landfill continues on track.

Current trading

We had a strong finish to last year, with all our brands performing well, boosted by good Christmas and New Year campaigns and helpful weather comparatives. The first two months of the new financial year have started positively, with good trading again helped by relatively soft comparatives, which will become tougher as we move into the second half of this year.

Whitbread Hotels and Restaurants

2013/14 2012/13 % £m £m Change

Premier Inn revenue 967.9 853.8 13.4 Restaurants revenue 526.1 506.3 3.9 Total revenue 1,494.0 1,360.1 9.8 Premier Inn like for like sales %* 5.0 3.1 Premier Inn rooms UK (no.) 55,035 51,671 6.5 Premier Inn like for like revpar growth % ** 4.3 1.7 Premier Inn occupancy (total) %** 78.1 76.4 Restaurants like for like sales %* 1.6 2.3 Restaurants like for like covers growth % (0.1) 3.0 Underlying profit 348.1 313.1 11.2 Operating profit, post exceptional 332.2 328.7 1.1 WHR Return on capital % 13.3 12.4 * UK & Ireland only and pre-IFRIC 13 ** UK & Ireland only

Costa

2013/14 2012/13 % £m £m Change System sales * 1,199.2 1,004.7 19.4 Revenue 807.7 672.4 20.1 Like for like sales % (UK)* 5.7 6.8 UK stores (no.) 1,755 1,578 11.2 International stores (no.) 1,106 949 16.5 Underlying profit 109.8 90.1 21.9 Operating profit, post exceptional 93.3 81.4 14.6 Return on capital % 40.5 34.7 *System sales and like for like sales excludes inter-segment and pre-IFRIC 13.

FINANCE DIRECTOR’S REVIEW

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

Revenue

2013/14 2012/13 Change Revenue by business segment (£m) Hotels and Restaurants 1,494.0 1,360.1 9.8% Costa 807.7 672.4 20.1% Less: inter-segment (2.8) (2.5) Revenue before exceptional 2,298.9 2,030.0 13.2% Exceptional Revenue (4.6) - Revenue 2,294.3 2,030.0 13.0%

Whitbread Hotels and Restaurants

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

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

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

Costa

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

Profit

Underlying profit by business segment 2013/14 2012/13* Change (£m) Hotels & Restaurants – UK & Ireland 354.1 319.2 10.9% Hotels & Restaurants – International (6.0) (6.1) 1.6% Totals Hotels & Restaurants 348.1 313.1 11.2%

Costa 109.8 90.1 21.9%

Profit from Operations 457.9 403.2 13.6%

Central costs (27.2) (26.2) (3.8)% Underlying operating profit 430.7 377.0 14.2%

Interest (18.9) (23.6) 19.9% Underlying profit before tax 411.8 353.4 16.5%

* restated for the impact of IAS 19 (revised 2011)

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

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

As we continue to invest in our customer offering we will increase our refurbishment programme in 2014/15 to approximately 12,700 rooms (5,433 in 2013/14) carrying out both a light and full programme and installing some 2,500 air conditioning units. In addition we will upgrade our customer wi-fi offering and increase our revenue investment in technology and process improvements as we evolve our systems to support future growth. These revenue investments will amount to approximately £10 million in 2014/15.

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

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

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

Interest

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

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

Exceptional items

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

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

Taxation

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

Earnings per share

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

Dividend

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

Net debt and free cash

The principal movements in net debt are as follows: £m 2013/14 2012/13 Cash flow from operations before pension 601.3 526.0 Capital expenditure (306.2) (343.6) Overseas investment (1.6) (4.8) Disposal proceeds 1.0 51.0 Interest (19.1) (26.2) Tax (81.4) (46.7) Pensions (71.2) (45.7) Dividends (62.4) (77.8) Other 19.1 1.0 Net cash flow 79.5 33.2 Net debt brought forward (471.1) (504.3) Net debt carried forward (391.6) (471.1)

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

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

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

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

Capital expenditure

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

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

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

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

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

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

Pension

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

Financial status and funding

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

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

Return on capital

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