ALISON BRITTAIN, CHIEF EXECUTIVE
This is a significant year in Whitbread’s history as we celebrate our 275th anniversary.
I am delighted to be leading this great British company at this historic time and, with such a long and successful history, it is right that we take a long-term view of our business in order to safeguard the Company’s future for many more years to come.
Whitbread has had another year of strong growth and continued investment with total Group sales increasing 8.2% to £3.1 billion and underlying basic earnings per share increasing by 6.0%, demonstrating the strength of our core brands. Total basic earnings per share increased by 7.3%.
In 2016/17 we made good progress in delivering on our three strategic priorities: to grow and innovate in our core UK businesses; to focus on our strengths to grow internationally; and to build the capability and infrastructure to support long-term growth.
Premier Inn’s strong sales growth benefitted from the 3,816 gross new UK rooms we opened this year and the accelerated maturity of the c.9,000 rooms we have opened over the last two years. We delivered high customer satisfaction by leading the market on quality and value, achieved occupancy of over 80% with record levels of direct bookings at 94%, all of which supported our strong return on capital. Costa opened 255 net new stores worldwide and we continue to roll out our successful and fast growing Costa travel formats. Costa Express had a great year installing over 1,500 machines of which 248 were in international markets. We are innovating to drive our sales growth and are pleased with the investment we are making to introduce ‘finer’ coffee concepts, leveraging our new stateof the art Roastery and delivering fresher food that our customers will enjoy later this year.
Internationally, in Germany we grew our hotel pipeline to five hotels and our Frankfurt hotel received great guest feedback. We continue to have success with our profitable joint venture in the Middle East while our phased withdrawal from South East Asia is on plan. China remains an exciting platform of growth for Costa and we have a clear plan to enhance our business. We have launched five new concept stores, the results of which give us further confidence that we can capitalise on this market opportunity and grow to significant scale.
During the year we continued to strengthen our capabilities to support our long-term growth, including developing the senior team with a number of new hires and promotions. In November we announced a £150 million cost efficiency programme to help offset investment and sector cost pressures. We have made good progress this year in areas such as procurement, supplier consolidation and labour scheduling, which has helped maintain margins.
In the year ahead we will continue to focus on organic growth and investing in our customer proposition. This, together with our efficiency programme and disciplined capital management gives us confidence in delivering another year of good progress, in line with overall expectations. Whilst we are only seven weeks into our new financial year Premier Inn has had a good start to the year and Costa has also seen positive like for like sales growth, although we remain cautious and expect a tougher consumer environment than last year.
In the longer term we remain confident that, with our significant structural growth opportunities, the power of our brands and the investments we are making, we will continue to deliver strong returns and sustainable long-term growth for our shareholders.
Group underlying profit before tax rose 6.2% to ￡565.2 million and underlying basic earnings per share increased 6.0% to 246.48 pence. Profit for the year was up 7.4% to ￡415.9 million and total basic earnings per share were up 7.3% to 231.39 pence. Premier Inn & Restaurants’ underlying operating profit was up 7.4% to £468.0 million.
Premier Inn grew total sales by 9.0% and the number of rooms available by 9.3%, as we opened 3,816 gross new UK rooms during the year, whilst achieving high total occupancy of 80.2%. Like for like sales grew by 2.3%, benefitting from good RevPAR growth of c.1.4% in catchments where we did not add capacity and from our hotel extension programme which, as expected, diluted our like for like RevPAR by c.2%, but overall grew our like for like sales by c.1%.
Restaurants’ total sales increased 1.2% benefitting from the eight net new sites opened during the year and like for like sales declined by 0.3%, slightly ahead of our competitor set.
Costa’s underlying operating profit was up 5.3% to ￡158.0 million, with total sales growth of 10.7%. This was driven by UK like for like sales growth of 2.0%, 255 net new stores worldwide and an acceleration in our roll-out of Costa Express machines, with 1,585 net new installations. Margins were down 0.8% pts, slightly ahead of our previous guidance due to the phasing of investments into 2017/18.
As we align our business towards our three strategic priorities we incurred a net non-underlying charge of £49.8 million (2015/16: £58.6 million), predominately relating to the estimated cost of Premier Inn International’s withdrawal from India and South East Asia and re-organisation costs associated with our cost efficiency programme.
The executive team
As Richard Baker mentioned in his statement, there has been some significant change to the executive team over the last couple of years and I am grateful to Nicholas Cadbury and Louise Smalley for the stability they have provided, which has enabled our leadership team to be refreshed so seamlessly.
I reported this time last year that Dominic Paul would be joining the team as Managing Director, Costa Coffee. Dominic joined us in June 2016, before which he was responsible for the success of Royal Caribbean outside the US. Dominic has hit the ground running, injecting energy and putting his personal stamp on our strategy for Costa.
In order to structure ourselves to meet our strategic objectives I took the decision to remove the Whitbread Hotels & Restaurants divisional infrastructure, with the aim of bringing the leadership team closer to the customer and enabling a leaner, more agile business, with faster decision-making. This led to a number of changes to my executive team.
Simon Jones was promoted to Managing Director of both Premier Inn & Restaurants and joined the Executive Committee. Simon joined Whitbread in 2011 and, since then, has been pivotal to the Premier Inn story, leading on key initiatives such as network planning, pricing and marketing.
Another internal promotion was Mark Anderson, who has been with the business for ten years and has led our property function since 2008. Mark now reports directly to me, which I believe appropriately reflects the importance of property to our business and the significant potential for value creation in this area. Mark also became Managing Director, Premier Inn International.
At Whitbread we believe that it is not just what you achieve, but how you achieve it. We aim to deliver great financial results for our shareholders, have a positive impact on communities, create fantastic career opportunities for our employees and great experiences for our customers, in a safe and welcoming environment.
We intend to ensure that everyone who plays a part in delivering the products and services that our customers love is treated with respect and paid appropriately for their work. This applies not only to our 50,000 team members, but also to the many people working across the world who contribute to Whitbread’s success.
I want to take this opportunity to thank everyone who makes Whitbread the company it is for their effort and commitment throughout the year and I am confident that we will work together to deliver on our strategic objectives in the years ahead and that we will do so in a way that will make us all proud.