Whitbread PLC Annual Report and Annual General Meeting (6185O)

TIDMWTB

RNS Number : 6185O

Whitbread PLC

18 May 2018

Whitbread PLC

Annual Report and Annual General Meeting

18 May 2018

The Company announces that copies of its 2017/18 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.morningstar.co.uk/uk/nsm.

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

The Company's Annual General Meeting will be held at Church House Conference Centre, Dean's Yard, Westminster, London SW1P 3NZ on Wednesday 27 June 2018 at 2.00 pm.

In accordance with the requirements of Rule 6.3.5 of the Disclosure Rules and Transparency Guidance 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 2017/18 Annual Report and Accounts.

The Company's Preliminary Results for the financial year to 1 March 2018 were announced on 25 April 2018.

Enquiries:

Laura Taylor, 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 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 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, 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, which could impact the business model, future performance, solvency and liquidity, including the proposed demerger of Costa which is expect 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 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.

 
Risks                                     Key mitigations 
========================================  ================================================= 
Cyber and data security                   We have a series of IT security controls 
 Cyber and data security remains           in place, including up-to-date antivirus 
 a key risk as it could reduce             software across the estate, network/system 
 the effectiveness of our systems          monitoring and regular penetration testing 
 or result in a loss of data.              to identify vulnerabilities. A continuous 
 This in turn could result in              security improvement programme is in place 
 loss of income and/or reputational        improving security and data controls. 
 damage.                                   Specifically, during the year we have 
                                           enhanced network security and we are in 
                                           the process of implementing a framework 
                                           of industry-recognised security standards. 
----------------------------------------  ------------------------------------------------- 
Innovation and brand strength             To ensure we maintain and improve the 
 A long-term decline in the customer       strength of our brands, we continually 
 perception of our brands would            complete market research and monitor opinion 
 impact our ability to grow and            with focus groups and net guest scores 
 achieve appropriate levels of             to ensure we maintain the right levels 
 return.                                   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. 
----------------------------------------  ------------------------------------------------- 
Change                                    We embarked on an extensive programme 
 Our ability to execute the significant    of change to replace our legacy finance, 
 volume of change, including the           POS, CRM and HR systems, whilst also delivering 
 proposed demerger of Costa.               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. 
----------------------------------------  ------------------------------------------------- 
Economic Climate                          There is a rigorous business planning 
 Uncertain/volatile political              process in place which considers many 
 and economic climate results              scenarios with appropriate responses. 
 in a decline in GDP, consumer             We also have strong site selection teams 
 and business spending, a fall             with well-established processes in place 
 in RevPAR and inflation pressure          based on market and economic fundamentals, 
 impacting growth plans.                   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 
                                           GBP250 million of savings over five years. 
----------------------------------------  ------------------------------------------------- 
Retention and wage inflation              The success of our businesses would not 
 Failure to maintain staff engagement      be possible without the passion and commitment 
 and retention in a tightening             of our teams. Team engagement is fundamental. 
 labour market.                            We monitor this closely through our annual 
                                           engagement survey Your Say, the results 
                                           of which are reviewed by the Executive 

                                           Committee and the Board, with trends analysed 
                                           and appropriate actions reviewed and agreed. 
                                           We are also upgrading our HR systems to 
                                           provide greater insight. Team retention 
                                           is a key component of our WINcard and 
                                           Annual Incentive Scheme. 
----------------------------------------  ------------------------------------------------- 
Pandemic/terrorism                        The safety and security of our customers, 
 The risk of a pandemic or terrorism       employees and suppliers is of utmost importance. 
 on the safety and security of             Failure to prevent or respond to a major 
 our customers or staff and the            safety or security incident could adversely 
 consequent impact on trading.             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. 
----------------------------------------  ------------------------------------------------- 
Food safety and hygiene                   The health and wellbeing of our customers 
 The preparation or storage of             is fundamental to our business. We have 
 food and/or supply chain failure          stringent food safety and sourcing policies 
 results in food poisoning and             with traceability and testing requirements 
 reputational damage.                      in place in respect of meat and other 
                                           products. Independent food safety audits 
                                           are also completed regularly at our hotels, 
                                           restaurants and coffee shops and the results 
                                           are closely monitored. We also invest 
                                           considerable resources in employee training 
                                           in the storage, handling and preparation 
                                           of food. 
----------------------------------------  ------------------------------------------------- 
Health and safety                         The safety of our guests and employees 
 Health and safety risk, death             is of paramount importance. NSF, an independent 
 or serious injury as a result             company, carries out health and safety 
 of company negligence.                    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 Committee and the Board. 
----------------------------------------  ------------------------------------------------- 
Third party arrangements                  Whitbread has several key supplier relationships 
 Business interruption as a result         that help ensure the efficient delivery 
 of the withdrawal of services/provision   of our multi-site and support centre operations. 
 of services below acceptable              The failure or withdrawal of services 
 standards/support or reputational         from one or more of these suppliers may 
 damage as result of unethical             result in some business interruption. 
 supplier practices.                       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. 
----------------------------------------  ------------------------------------------------- 
 
   2.   Related Party Disclosure 

The Group consists of a parent company, Whitbread PLC, incorporated in the UK and a number of subsidiaries and joint ventures and 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                  2017/18           2016/17 
                                              Joint ventures    Joint Ventures 
                                              GBPm              GBPm 
------------------------------------------  ----------------  ---------------- 
 
 Sales to a related party                    5.1               5.2 
------------------------------------------  ----------------  ---------------- 
 Amounts owed by related party               1.9               1.7 
------------------------------------------  ----------------  ---------------- 
 Amounts owed to related party               -                 - 
------------------------------------------  ----------------  ---------------- 
 
 Compensation of key management personnel 
  (including directors): 
------------------------------------------  ----------------  ---------------- 
                                             2017/18           2016/17 
                                              GBPm              GBPm 
------------------------------------------  ----------------  ---------------- 
 Short-term employee benefits                7.3               6.4 
------------------------------------------  ----------------  ---------------- 
 Post employment benefits                    -                 - 
------------------------------------------  ----------------  ---------------- 
 Share-based payments                        0.6               4.0 
------------------------------------------  ----------------  ---------------- 
                                             7.9               10.4 
------------------------------------------  ----------------  ---------------- 
 

Joint ventures

For details of the Group's investments in joint ventures see Note 15.

Terms and conditions of transactions with related parties

Sales to, and purchases from, related parties are made at normal market prices. Outstanding balances at year-end are unsecured and settlement occurs in cash. There have been no guarantees provided, or received, for any related party receivables. No provision for doubtful debts relating to amounts owed by related parties has been made (2016: GBPnil). 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.

   3.   Directors' responsibility statement 

The directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulations.

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 (EU) 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 Group 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 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; 

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

-- 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 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 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;

-- 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 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                          Nicholas Cadbury 
   Chief Executive                         Group Finance Director 

This information is provided by RNS

The company news service from the London Stock Exchange

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May 18, 2018 09:58 ET (13:58 GMT)