Whitbread PLC Annual report and accounts 2014/15 Interactive PDF User guide This PDF allows you to find information and navigate around this document more easily. Links in this PDF Words and numbers that are underlined are links — clicking on them will take you to further information within the document or to a web page (which opens in a new window) if they are a url (e.g www.whitbread.co.uk). Guide to buttons Back to user guide Search this PDF Print options Preceding page Next page Last visited page Annual Report and Accounts 2014/15 “ Making everyday experiences special” Financial highlights Whitbread has delivered another year of strong growth in revenue, profit and dividend. More on our financial performance p6 Chairman’s statement p8 Chief Executive’s review p42 Finance Director’s review Total revenue Group like for like sales £2,608.1m +13.7% Up 6.5% m m m m Profit before tax Underlying profit1 before tax £463.8m +33.7% £488.1m +18.5% m m m m m m m m Cash generated from operations Net debt £606.4m to £714.2m £391.6m to £583.2m Net assets Group return on capital2 £1,783.0m to £1,977.9m 15.3% to 15.7% Full–year dividend Underlying basic EPS1 82.15p +19.4% 213.67p +19.4% p p p p p p p p 1 Underlying profit excluding amortisation of acquired 2 Return on capital is the return on invested capital intangibles, exceptional items and the impact of the which is calculated by dividing the underlying profit pension finance cost as accounted for under IAS 19. before interest and tax for the year by net assets at Underlying EPS represents the earnings per share the balance sheet date adding back debt, taxation based on the above underlying profit definition and liabilities and the pension deficit. the tax thereon. An interactive PDF of our Report and Accounts is available to download online. www.whitbread.co.uk/investors Overview Whitbread is all about people. As the UK’s Contents Overview leading hospitality company, our success Financial highlights 1 Introduction p1/3 is thanks to 45,000 motivated and engaged 2 Group at a glance team members delivering outstanding service to 25 million customers every month across our hotels, coffee shops and restaurants. We use this Customer Heartbeat schematic to describe our business philosophy. Strategic report Strategic report 4 Whitbread’s Business Model 5 New growth milestones 6 Chairman’s statement 8 Chief Executive’s review 11 Good Together 12 Hotels & Restaurants p4/47 24 Costa 34 Principal risks and uncertainties 38 Key Performance Indicators 42 Finance Director’s review 46 Group HR Director’s report Governance Governance More on Winning Teams on p14 and p26 Governance 48 Corporate governance More on Customer Heartbeat on p17 and p28 50 Board of Directors More on Profitable Growth on p20 and p31 57 Audit Committee report 60 Nomination Committee report More on Good Together on p11, p23 and p33 p48/81 62 Remuneration report 77 Directors’ report Our vision is to grow legendary brands by building a strong Customer Heartbeat and innovating to stay ahead. It’s our Winning Teams that make everyday experiences special for our customers so they come back Consolidated accounts 2014/15 Consolidated accounts 2014/15 time and again, driving Profitable Growth. 84 Directors’ responsibility statement Our Good Together programme makes 85 In dependent auditor’s report 88 Consolidated us a force for good in our communities. financial statements 93 Notes to the consolidated financial statements p83/135 Company accounts 2014/15 Company accounts 2014/15 138 Balance sheet 139 Notes to the accounts Shareholder information 144 Shareholder services 146 Glossary 148 Our charities p1 37/142 Whitbread Annual Report and Accounts 2014/15 1 Overview Group at a glance p1/3 The Group Strategic report Whitbread p4/47 Whitbread has built some of the We have demonstrated our ability to build strong brands through the consistent delivery of operational excellence and UK’s most successful hospitality a great customer experience in people–intensive businesses. brands, including Premier Inn We set our sights on ambitious and fast–paced profitable and Costa. We employ over growth and, in 2011, set out our first milestones which were 45,000 people in the UK and to achieve 65,000 Premier Inn rooms by 2016 and £1.3 billion of system sales in Costa. We are well on track to achieving the serve 25 million customers every 2016 Premier Inn milestone and have already met the Costa month. Our strategy is to grow milestone. We extended these milestones in 2013 and we Governance can now see further growth opportunities. We have therefore our leading brands with a clear announced new milestones to achieve around 85,000 UK focus on returns to deliver rooms and c.£2.5 billion of system sales in Costa in 2020. p48/81 substantial shareholder value. Listed on the London Stock Exchange, Whitbread PLC is a member of the FTSE 100 and the FTSE4Good indices. Our businesses More on p12 Hotels & Restaurants to p23 Consolidated accounts 2014/15 Premier Inn is the UK’s leading hotel business, with almost 700 hotels and more than 59,000 rooms across the UK. We have more rooms in more locations than our competitors, which allows our customers to stay closer to where they want to be. p83/135 We offer our customers a 100% money–back guarantee of a good night’s sleep with a quality room, comfortable surroundings and friendly service. We call it our Good Night Guarantee. Company accounts 2014/15 All Premier Inn UK bedrooms have an ensuite bathroom, TV with Freeview and free Wi–Fi internet access. All our hotels have a bar and restaurant, either inside the building or next to it, offering a wide range of dishes. Whitbread’s unique joint site model means that 382 of these hotels are located alongside our own restaurant brands: Beefeater; Brewers Fayre; Table Table; Whitbread Inns; or Taybarns. A further 190 hotels include one of our Thyme or Kitchen restaurants. p1 37/142 Internationally, we have five hotels in the Middle East and three in India with more in the pipeline. This year we announced that we will open our first hotel in Germany in 2016. Whitbread Group at Annual Report and Accounts 2014/15 a glance 2 Overview p1/3 Premier Inn is the UK’s leading Costa is the UK’s favourite hotel business. coffee shop. Strategic report More on p42 More on p20 and p31 p4/47 Revenue by business Growth Hotels & Restaurants Premier Inn Revenue Rooms m m Up net new rooms Costa Restaurants Revenue m net new restaurants Governance m Up Costa Stores net new stores p48/81 Express machines net new machines More on p24 Costa to p33 Consolidated accounts 2014/15 Costa is the UK’s favourite coffee shop1, with over 1,900 coffee shops in the UK, over 1,100 stores in 29 international markets and over 4,200 Costa Express self–serve units. We have a multichannel strategy, with equity stores, franchise p83/135 stores and stores operated by joint ventures, as well as a wholesale operation. Costa was founded in London by Italian brothers Sergio and Bruno Costa in 1971 and we attribute much of our success Company accounts 2014/15 to the quality of our coffee and our ability to open coffee shops in the most convenient locations. All the coffee we serve in the UK, and most of that served by Costa in the rest of the world, is roasted at our Roastery in Lambeth, London. Costa Express was founded in 2011, after the acquisition of Coffee Nation. Our self–serve units provide customers with the same famous Mocha Italia blend as that enjoyed in our coffee shops and make drinks with fresh milk. Costa Express p1 37/142 gives us access to a range of locations where customers are on the move and want a quality coffee on the go. 1 Independent survey of 5,000 people published in December 2014 by Allegra Strategies. For further details see www.costa.co.uk/terms Whitbread Group at Annual Report and Accounts 2014/15 a glance 3 Overview Whitbread’s Business Model p1/3 The Customer Heartbeat schematic, as shown on page 1, forms the basis of our Business Model, report Strategic which shows how we create value for our teams, customers, shareholders and the communities in which we operate. Creating p4/47 Creating employment employment Strong returns opportunities Strong returns opportunities on capital Building strong leadership on capital Building strong leadership throughout our organisation throughout our organisation Creatin Creatin g W g W in in Active property n Investment in our people: Active property n Investment in our people: in in D D Co management and mmu g apprenticeships and management g apprenticeships and r r m n T ironme T Governance Governance i i a it e career development nv nt e career development v v y Te a E a i i n n m m g g s s P P r r T o Expansion in the UK o p48/81 Expansion in the UK e g fi fi and in selected and in selected a n i t t Making everyday Making everyday international markets international markets m a a CustCCustoomemerr experiences CustCCustoomemerr e experiences b b Winning Teams Profitable Growth Winning Teams Profitable Growth g HHeeartbeaartbeaatt HHeHeartbeatartbeaatt b a special l special l l n l e e n t t i E A force for good A force for good e d e a a G n G e e b W r v l r C l b b o i o o r r e t t w o r w m e r Strong cash flow n a Strong cash flow a t W t m m and balance sheet h m r e and balance sheet h o e e H Product innovation u t H Product innovation e n s n m r and continuous i u r and continuous t o e ty C e t Consolidated accounts 2014/15 s m improvement m improvement u C to to us us C C Winning market share, g Winning market share, g ron ron growing sales and Building a St Convenient and growing sales and Building a St Convenient and driving e­ciencies accessible locations driving e­ciencies accessible locations Brand Brand Market– Market preference preference leading leading and loyalty and loyalty brands brands p83/135 WINcard The key elements of our Business Model have targets attached to them to ensure we consistently focus on creating and delivering value.