From the Chief Executive
We delivered a strong financial performance in 2012/13 in a challenging consumer market. Total sales grew by 14.2% to £2,030.0 million. Group underlying profit before tax rose 11.4% to £356.5 million (2011/12: £320.1 million), with underlying basic EPS increasing by 12.0% to 150.45p.
Our strong cash flow from operations of £526.0 million allowed us to increase the dividend by 12.0% and reinvest £343.6 million in the business to open new sites and refurbish our existing estate. Our disciplined approach to deploying capital has enabled us to grow shareholder value year after year. In 2012/13 Group return on capital increased to 14% whilst we maintained our strong balance sheet with net debt of £471.1 million.
Whitbread Hotels & Restaurants delivered a strong performance with total sales up 9.7% and like for likes up 2.8%. Within Hotels & Restaurants, Premier Inn grew total sales by 13.1% and continued to outperform, with total revenue per available room growing by 1.7% compared to a decline of 3.6% for the Midscale and Economy sector and a growth of 0.8% for the total UK hotel market. Restaurants outperformed its competitive benchmark, the Coffer Peach industry tracker, with like for like sales growth of 2.3%. Costa produced another strong performance with total sales up 24.1% and worldwide system sales up 22.6% to £1.0 billion. In the UK its Retail equity business delivered 6.8% like for like sales increase and has now delivered an impressive 44 consecutive quarters of like sales growth.
In April 2011 we established ambitious growth milestones to grow Premier Inn UK rooms to 65,000 rooms and to double Costa’s worldwide system sales to £1.3 billion. We are well on track to achieve these targets and have announced new 2018 milestones, which will grow Premier Inn UK to around 75,000 rooms and double Costa’s system sales to around £2 billion. This organic growth opportunity, together with our clear focus on returns, will create substantial shareholder value.
In the first few weeks of our new financial year, Group trading has been in line with our plan. Premier Inn has maintained its positive momentum. The unseasonably cold weather has held back sales within Restaurants, and benefitted Costa.
Whitbread is a people intensive business. We have 22 million customers a month who are served by our 40,000 team members across 2,500 sites around the UK and hundreds more worldwide. It is our team members who make these experiences special so our customers want to return time and again.
I would like to personally thank our team members for the tremendous work that they do, every day.
Our simple business philosophy is captured by our Whitbread Way model. This model can be seen throughout the Group. It is the foundation of our customer– focused balanced scorecard, which we call our WINcard and is used at every one of our sites.
Innovation is a key theme in our business philosophy. It encompasses a wide range of improvements to the customer experience and to business efficiency, from the development of our digital channels in Premier Inn to continuous improvements to Costa’s food range.
We use a six–monthly employee satisfaction survey called Your Say to measure our people’s engagement. This year 95%, that’s over 36,500 team members, took the time to complete the 28 question survey. They told us that 78% of them are proud to work for the Company and the employee engagement score across the Group was an excellent 77.5%.
Alongside this internal measure, we are also delighted to have received external recognition as a great place to work, ranking tenth in the Sunday Times Best Big Companies to Work For 2013 list and number eight in the Britain’s Top Employers survey run by the CRF Institute.
Our profitable growth means we are creating thousands of jobs each year. In 2012/13 we employed an additional 3,000 people (net) in the UK, many of whom were from the long–term unemployed and under the age of 25. We are proud that the jobs we offer provide very real opportunity to people who want to develop their skills and their careers, not just in the UK but on a global stage.
I am pleased that many of our team members are sharing directly in Whitbread’s success through the Company’s Sharesave scheme. This year saw the highest uptake for seven years with over 3,000 people opening a three or five–year plan. Those who joined the scheme three or five years ago shared in a £2.8 million profit in February.
We are passionate about putting the customer at the heart of everything we do. We believe that great service, constant innovation and a continued investment in our product is the winning formula for building a stronger Customer Heartbeat and growing ever stronger brands which can consistently outperform the competition. We achieved our highest ever sales, guest satisfaction scores and brand preference in the year.
Across Hotels & Restaurants and Costa we have achieved record net promoter scores, with more customers than ever ranking their experience of a Premier Inn, a restaurant or a Costa, nine or ten out of ten. When it comes to brand preference, both Premier Inn and Costa remain the number one brand of choice in their markets, according to the UK’s leading brand survey, YouGov, and both have increased their lead over the competition.
One of the biggest contributing factors to building a stronger Customer Heartbeat, and driving Profitable Growth, is a continued investment in our estate. In Hotels & Restaurants we have invested £103.1 million, a significant amount of which was invested in maintaining and upgrading almost 6,000 rooms, whilst at Costa we have spent £18.2 million on re–imaging 120 stores and maintaining the estate.
In 2012/13 Premier Inn continued to win market share through opening 4,242 net new rooms and 29 net new hotels taking the total estate to 51,671 rooms and 649 hotels. This, combined with our committed pipeline of 10,000 rooms puts us on track to reach our growth milestone of 65,000 rooms by 2016.
We have now extended this milestone to 75,000 rooms by 2018. We anticipate around half of this will come from new catchment areas where Premier Inn is not currently present. London remains an important area of focus. We currently have some 6% of the total London hotel market with 8,000 rooms and envisage reaching 13% by 2018, which equates to 20,000 rooms.
We are building the Premier Inn brand in selected international markets, initially building our own hotels and then moving towards an ‘asset light’ model. We have four hotels in the Middle East and two hotels in India, which are making good progress. We have a committed pipeline of 12 hotels, with plans underway for a further eight in our target market of the Middle East, India and South East Asia.
Costa opened 186 net new stores in the UK during the year, taking the total to 1,578. In addition to growing our store portfolio we also had a highly successful year with the growth of Costa Express which added 1,368 new units, driven by its partnership with Shell which saw the installation of around 700 machines on its forecourts. There are now 2,560 Costa Express machines across the UK.
Costa EMEI and Costa Asia opened 138 new stores including its first stores in France, Cambodia, Thailand and Singapore. China remains an exciting opportunity and we opened 89 net new stores in the year taking the total to 253 in 28 cities, on track to achieve our target of 500 stores by 2016.
We are well on the way towards achieving our growth milestones of 3,500 stores globally, 3,000 Costa Express machines and £1.3 billion of system sales by 2016. We have now extended our Costa growth milestone to around £2 billion of system sales by 2018.
Our Good Together programme runs throughout everything we do. Good Together is our corporate social responsibility programme which incorporates three pillars — Team and Community; Customer Wellbeing and Energy and Environment. All three pillars have achieved some great results in the year including raising over £2.3 million for our chosen charities of Great Ormond Street Hospital Children’s Charity (GOSHCC) and the Costa Foundation; diverting 93% of Hotels & Restaurants waste from landfill; and the introduction of nutritional information on Costa packaging in store and online. We are proud of the efforts we are making in this area and are working hard to achieve our 2017 targets to ensure we are a force for good in all the communities in which we operate.
We are taking our responsible sourcing policy to a new level. We have strengthened our testing and traceability regime for processed meat and have implemented the lessons learned from the horse meat contamination issues prevalent in the industry.