Whitbread PLC Annual Report and Annual General Meeting (9350X)

TIDMWTB

RNS Number : 9350X

Whitbread PLC

11 May 2016

Whitbread PLC

Annual Report and Annual General Meeting

11 May 2016

The Company announces that copies of its 2015/16 Annual Report and Accounts, Notice of Annual General Meeting and Form of Proxy, together with letters from the Chairman relating to such documents, have been submitted to the UK Listing Authority National Storage Mechanism and will shortly be available for inspection at www.Hemscott.com/nsm.do.

The Company's Annual General Meeting will be held at Church House Conference Centre, Dean's Yard, Westminster, London SW1P 3NZ on Tuesday 21 June 2016 at 2.00 pm.

The above documents can also be downloaded from the Company's website at www.whitbread.co.uk.

In accordance with the requirements of Rule 4.1 and Rule 6.3.5 of the Disclosure Rules and Transparency Rules of the UK Financial Conduct Authority, the Appendix to this announcement contains a description of the principal risks and uncertainties affecting the Group, a related party disclosure and a responsibility statement, each reproduced in unedited full text from the 2015/16 Annual Report and Accounts.

The Company's Preliminary Results for the financial year to 3 March 2016 were announced on 26 April 2016.

Enquiries:

Catherine Lindsay, Assistant Company Secretary

Tel: [phone]

APPIX

   1.   Principal risks and uncertainties 

Understanding and responding to risks in our operations means we can make informed decisions that enhance our capacity to build value.

Risk management

Risk arises from the operations of, and strategic decisions taken by, every business. It is not something that can be avoided but should be harnessed in pursuit of business objectives.

The Board has ultimate responsibility for risk management throughout the Group and determines the nature and extent of the risks Whitbread is willing to take to achieve its objectives to determine its risk appetite. Risk is managed proactively by the business unit executive committees and the Executive Committee. Certain responsibilities, such as overseeing the systems of risk management and internal control, have been delegated to the Audit Committee, which completes an annual review of the effectiveness of these processes.

The structure and governance of the risk management process at Whitbread is shown on page 47, and during the year, a robust bottom-up assessment of risks was completed.

Both the Hotels & Restaurants and the Costa businesses complete an annual review of the risks to the achievement of their strategic goals, whilst also taking into account the key operational risks, which are updated quarterly. A top- down risk assessment is also completed to capture the Board's views on the principal risks facing Whitbread, considering risk appetite. Actions required to manage these risks are monitored and reviewed on a regular basis.

The principal risks identified, together with a summary of key mitigations, are summarised on pages 48 and 49.

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 48 and 49.

The business planning process reviewed by the Board, as part of the annual strategic planning process, is over a five-year timeline, with the Board acknowledging that there is significantly more certainty over the first three years of the plan in light of fluctuations in the global economy, the entry of new competitors and customer preferences. Therefore the directors have determined a three-year period is an appropriate period over which to provide its viability statement. In making the viability statement, the Board carried out a robust assessment of the principal risks and uncertainties facing the Group, including those that would threaten the business model, future performance, solvency and liquidity. Scenario modelling and sensitivity analysis was applied to forecasted cash flows to model the potential effects should the principal risks actually occur and consideration was given to the availability and likely effectiveness of mitigating actions that could be taken to avoid or reduce the impact or occurrence of the identified risk.

In particular, it should be noted that the Group is currently spending a substantial part of its cash from operations on discretionary growth capital (c.50% on average) which gives 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 to meet its liabilities as they fall due over the three-year assessment period.

Principal risks

 
 Risk                   Key mitigations 
---------------------  -------------------------------------------- 
 Engagement             The success of our businesses relies 
  and retention          upon the passion and commitment 
  Failure to             of our teams and their engagement 
  maintain               is fundamental. We closely monitor 
  staff engagement       our teams' engagement both through 
  and retention          our annual 'Your Say' survey, and 
  in tightening          reporting on team turnover - a key 
  labour market.         component of our WINcard Annual 
                         Incentive Scheme. 
 
                         Team turnover continues to be a 
                         challenge for us as the labour market 
                         tightens with the economic recovery. 
                         We have a number of training and 
                         progression programmes in place 
                         to address this, both at a site 
                         and support centre level. For our 
                         team members we will continue to 
                         review our pay structures to ensure 
                         that their reward reflects their 
                         increasing skills through our pay 
                         for progression programme. 
 
                         At a support centre level we are 
                         implementing a new performance management 
                         framework with a focus on supporting 
                         all employees to reach their potential. 
                         For all senior management positions 
                         we have succession plans in place 
                         and talent gaps are being actively 
                         addressed through recruitment, training 
                         and development. 
---------------------  -------------------------------------------- 
 Health and             The safety of our guests and employees 
  safety                 is of paramount importance and is 
  Death or               monitored closely at every level 
  serious injury         of the business. It is a measure 
  as a result            on the WINcard as a hurdle for incentive 
  of Company             payments and regular updates are 
  negligence.            reported to the Board. 
 
                         Our key health and safety risks 
                         are our construction sites, fire 
                         safety and food hygiene standards. 
                         We monitor these through internal 
                         brand standard checks, compliance 
                         audits, and risk based reviews. 
                         This year, these have resulted in 
                         refreshed fire safety training in 
                         our hotels and updated training 
                         manuals for our international coffee 
                         shops to better address local training 
                         requirements. We also engage with 
                         third-party health and safety assurance 
                         provider NSF, who visit every site 
                         at least annually and support us 
                         in achieving consistent standards 
                         globally. 
---------------------  -------------------------------------------- 
 Innovation             Protecting our brands requires not 
  and brand              only delivering consistently excellent 
  strength               customer experience, but also finding 
  A long-term            new and innovative ways to engage 
  decline in             our customers. We closely monitor 
  the customer           customer perception through market 
  perception             research, focus groups, net guest 
  of our brands          scores and TripAdvisor ratings to 
  would impact           help us focus investment where it 
  our ability            matters most to our customers. 
  to grow and 
  achieve appropriate    As a result of this, we are strengthening 
  levels of              our existing brand proposition including 
  return.                increasing refurbishments of our 
                         estate and improving our customer's 
                         online experience. We are also investing 
                         in a number of new formats including 
                         'hub by Premier Inn', 'Beefeater 
                         Bar + Block', Premier Inn Germany, 
                         Costa Pronto, Costa Fresco and an 
                         expanded Costa loyalty offering. 
---------------------  -------------------------------------------- 
 Pandemic/terrorism     The safety and security of our customers, 
  The risk               staff and suppliers is of critical 
  of a pandemic          importance and therefore ensuring 
  or terrorism           we are ready to respond appropriately 
  on the safety          in the event of a threat materialising 

  and security           is a key priority. We have crisis 
  of our customers,      management procedures in place and 
  staff and              management undertake training and 
  the consequent         simulations to assess our readiness 
  impact on              and response capabilities should 
  trading.               an event arise. We are implementing 
                         specific training for our hotel 
                         team members and embedding training 
                         policies and procedures will remain 
                         a focus for the coming year. 
---------------------  -------------------------------------------- 
 Cyber and              We have a series of IT security 
  data security          controls in place including network/system 
  Inadequate             monitoring and regular penetration 
  systems and            testing to identify vulnerabilities. 
  data security          We continue to invest in new skills 
  reduces the            and capabilities. A security improvement 
  effectiveness          programme is in place improving 
  of our systems         network security, data breach controls, 
  or results             procedures and ensuring accountabilities 
  in a loss              are embedded across Whitbread. 
  of data. 
  This in turn 
  could result 
  in loss of 
  income and/or 
  reputational 
  damage. 
---------------------  -------------------------------------------- 
 IT infrastructure      We are investing heavily in our 
  IT infrastructure      systems infrastructure. This will 
  is unable              increase the capacity, resilience 
  to adequately          and stability of our core systems 
  support our            and digital propositions. We have 
  business               a strong IT leadership team in place 
  growth objectives.     to manage this transformation and 
                         have implemented clear governance 
                         structures to prioritise, coordinate 
                         and deliver it efficiently with 
                         minimal disruption. 
---------------------  -------------------------------------------- 
 Economic               The ability to rapidly respond to 
  climate                changes in the economic environment 
  Changes in             requires a lean and agile cost base. 
  the economic           To this end, we are implementing 
  climate,               a number of efficiency initiatives 
  Brexit, fall           to ensure we leverage technology 
  in GDP,                and maximise synergies across our 
  RevPAR or              Restaurants, Premier Inn and Costa 
  property               brands. These include reviewing 
  inflation              our labour management processes, 
  could impact           and upgrading our systems to ensure 
  returns and            our teams are structured and equipped 
  our growth             to work flexibly and efficiently. 
  plans. 
                         Economic developments are factored 
                         in to our business planning at both 
                         a macro and micro level. Our investment 
                         appraisal process includes modelling 
                         a diverse range of scenarios to 
                         ensure we continue to achieve a 
                         good level of return for all new 
                         openings. Our debt and gearing levels 
                         are monitored closely using our 
                         financial framework to ensure they 
                         are well within our financial covenants 
                         and headroom requirements. 
---------------------  -------------------------------------------- 
 Food safety            Food safety continues to be an area 
  and hygiene            of considerable investment for us, 
  The preparation        both in employee training, and in 
  or storage             enforcing our stringent sourcing 
  of food and/or         policies, traceability and testing 
  supply chain           requirements as we expand our product 
  failure results        offering and continue to grow both 
  in food poisoning      in the UK and internationally. Independent 
  and reputational       food safety audits are completed 
  damage.                at least annually across all our 
                         brands in addition to internal brand 
                         standard checks and audits. This 
                         will remain a key focus and priority 
                         going forward, as we look to increase 
                         the frequency and coverage of outlet 
                         visits. 
---------------------  -------------------------------------------- 
 
   2.   Related party disclosure 

The Group consists of a parent Company, Whitbread PLC, incorporated in the UK and a number of subsidiaries, joint ventures and associate held directly and indirectly by Whitbread PLC, which operate and are incorporated around the world. Note 11 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 31.

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. All significant trading subsidiary undertakings have the same year-end as Whitbread PLC, with the exception of Yueda Costa (Shanghai) Food & Beverage Management Company Limited which has a year-end of 31 December as required by Chinese legislation.

 
 Related party 
-----------------------------------  ------------  ------------  ------------ 
                                      Sales         Amounts       Amounts 
                                       to related    owed          owed 
                                       parties       by related    to related 
                                       GBPm          parties       parties 
                                                     GBPm          GBPm 
-----------------------------------  ------------  ------------  ------------ 
 Joint ventures 
-----------------------------------  ------------  ------------  ------------ 
 2015/16                              3.8           0.9           (0.1) 
-----------------------------------  ------------  ------------  ------------ 
 2014/15                              3.7           1.2           - 
-----------------------------------  ------------  ------------  ------------ 
 Associate 
-----------------------------------  ------------  ------------  ------------ 
 2015/16                              3.3           -             - 
-----------------------------------  ------------  ------------  ------------ 
 2014/15                              3.5           0.3           - 
-----------------------------------  ------------  ------------  ------------ 
 Compensation of key management 
  personnel (including directors): 
-----------------------------------  ------------  ------------  ------------ 
                                                    2015/16       2014/15 
                                                     GBPm          GBPm 
-----------------------------------  ------------  ------------  ------------ 
 Short-term employee benefits                       6.2           7.0 
-----------------------------------  ------------  ------------  ------------ 
 Post employment benefits                           0.2           0.2 
-----------------------------------  ------------  ------------  ------------ 
 Share-based payments                               5.9           5.5 
-----------------------------------  ------------  ------------  ------------ 
                                                    12.3          12.7 
-----------------------------------  ------------  ------------  ------------ 
 

Joint ventures

For details of the Group's investments in joint ventures see Note 16.

Associate

For details of the Group's investment in associate see Note 17.

Terms and conditions of transactions with related parties

Sales to, and purchases from, related parties are made at normal market prices. Outstanding balances at year-end are unsecured and settlement occurs in cash. There have been no guarantees provided, or received, for any related party receivables. For the year ended 3 March 2016, the Group has raised a provision for doubtful debts of nil relating to amounts owed by related parties (2015: 0.1m). 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 76 to 91.

   3.   Directors' responsibility statement 

Statement of directors' responsibilities

The directors are responsible for preparing the Annual Report and Accounts in accordance with applicable UK laws and regulations. UK company law requires the directors to prepare financial statements for each financial year. Under that law, the directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and applicable UK law. Further, they have elected to prepare the Company financial statements in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework' and applicable UK law.

Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period.

In preparing the Group financial statements, the directors are required to:

-- select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, and then apply them consistently;

-- present information, including accounting policies, in a manner which presents relevant, reliable, comparable and understandable information;

-- provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance;

-- state that the Group financial statements comply with IFRS, subject to any material departures disclosed and explained in the financial statements;

-- make judgements and estimates that are reasonable and prudent; and

-- prepare the consolidated financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in its business.

In preparing the Company financial statements, the directors are required to:

-- select suitable accounting policies and apply them consistently;

-- make judgements and estimates that are reasonable and prudent;

-- state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that disclose, with reasonable accuracy at any time, the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006 and, with regard to the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for the system of internal control for safeguarding the assets of the Group and the Company and hence for taking reasonable steps to prevent and detect fraud and other irregularities.

The directors are responsible for preparing the strategic report (including the corporate governance report) and the directors' remuneration report and the directors' report in accordance with the Companies Act 2006 and applicable regulations, including the Listing Rules and the Disclosure and Transparency Rules.

A copy of the financial statements of the Group is posted on the Group's website. The directors are responsible for the maintenance and integrity of the Annual Report included on the website. Information published on the Group's website is accessible in many countries with different legal requirements. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the directors, the names and functions of whom are set out on pages 64 and 65, confirms that, to the best of their knowledge, they have complied with the above requirements in preparing the financial statements in accordance with applicable accounting standards and that the financial statements give a true and fair view of the assets, liabilities, financial position and result of the Group. In addition, each of the directors confirms that the strategic report includes a fair review of the development and performance of the business and the position of the Group and together with a description of the principal risks and uncertainties that it faces.

The directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. Having taken advice from the Audit Committee, the Board considers the Annual Report and Accounts, taken as a whole, to be fair, balanced and understandable and that it provides the information necessary for the shareholders to assess the Group's and Company's performance, business model and strategy.

Signed on behalf of the Board

   Alison Brittain    Nicholas Cadbury 
   Chief Executive   Finance Director 

This information is provided by RNS

The company news service from the London Stock Exchange

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May 11, 2016 06:46 ET (10:46 GMT)