Chief Executive's review
Whitbread achieved good sales and profit growth in the year. We have strengthened our market leading brands by adding a record number of Premier Inns and Costa stores, whilst significantly improving our restaurant performance.
Decisive action has been taken to improve our operating efficiency with margins maintained. Our relentless customer focus and drive to offer both value for money and quality, together with our robust financial position, mean that Whitbread is well placed for these tougher times.
Over the past five years we have transformed Whitbread into a focused hotel and restaurant business. Through continued investment, we have developed and built a modern, well-maintained estate, with leading brands in value for money sectors. 2008/09 was a year of strong progress for the Group, with out performance across our markets, albeit against an increasingly challenging economic backdrop.
Group revenue grew year on year by 9.7% to £1,334.6 million, driven by the growth in the number of hotels, restaurants and coffee shops and an increase in like for like sales, of 4.9%. At Premier Inn, sales rose 14.0%, with like for like sales up 6.0%, sales at our restaurants rose 3.2%, with like for like sales up 4.6%, and Costa sales increased by 22.0%, with like for like sales up 2.0%.
Group like for like sales were strong in the first half followed by a softening as we entered the more difficult market in the autumn. In the last quarter overall Group like for like sales were negative, predominantly as a result of lower occupancy in Premier Inn.
Group profit before tax and exceptional items on a continuing operations basis increased by 9.3% to £229.9 million (2007/08: £210.3 million), with earnings per share (diluted) increasing by 18.0% to 93.0p.
At the year end, net debt stood at £623.1 million compared to £425.8 million at this time last year. This increase reflected continued capital investment in the business together with the previously announced £50 million payment into the pension fund. The Group's total facilities currently stand at £1.16 billion in place until December 2010 when it reduces to £930 million until December 2011.
At the start of the 2008/09 financial year, we undertook an operational review to create a more streamlined and efficient organisation. We combined the management of our hotels and restaurants, transferred our food logistics to Kuehne + Nagel and outsourced some back office support functions. This efficiency programme is on track to deliver cost savings of £25 million by the end of 2010/11. We have already achieved £7 million of savings in 2008/09, a further c£13 million is to be delivered in 2009/10, with the balance in 2010/11. The action we have taken has enabled the Group to maintain operating margins.
The Board recommends a final dividend payment of 26.90p per share, making a total dividend for the year of 36.55p per share. The final dividend will be paid on 10 July 2009 to shareholders on the register at the close of business on 8 May 2009.
Just one minute to check in! Premier Inn's self check in kiosks allow guests to get to their rooms more quickly.
Investing in the growth and quality of our estate
For the fifth year running we opened more hotel rooms in the UK than any other operator. We exceeded our stated targets and, including our new hotel in Dubai, delivered a total of 4,553 new rooms in Premier Inn. More than one new hotel was opened on average every week (55 hotels) and the total portfolio at the year end stood at 573 hotels comprising a total of 40,559 rooms.
We invested in increasing our branded restaurant portfolio, opening 13 new restaurants. This included six new Table Table restaurants. We also opened six further outlets of our newest innovation in freshly prepared food, Taybarns.
We continue to invest in the estate, ensuring our hotels and restaurants are maintained to a consistently high standard. In the year we upgraded over 7,000 Premier Inn rooms and refurbished a total of 48 restaurants, 42 of which were Brewers Fayres.
Costa continued to grow rapidly. A net total of 186 stores were opened in the UK, bringing its total UK stores to 881. In its international markets, Costa grew by a net 110 stores. These included 23 new joint venture stores and 87 new international franchise stores, bringing the total number of overseas stores to 407 in 24 countries.
Our Costa advertising campaign shows that not all coffee is the same.
Well positioned for tougher times
This is the first full year that Whitbread has operated as a focused hotel and restaurant business, with leading brands in each of our markets. This position, together with the scale and quality of our estate, our ongoing judicious investment in the business and commitment to providing value for money, means that Whitbread is well positioned for the challenging year ahead.
Premier Inn is the clear leader in the budget hotel sector. The cornerstones of its competitive advantage are a combination of product quality and value for money, both of which drive higher customer satisfaction and loyalty. Our continued focus on driving each of these, will underpin our continued success.
We are transforming the perception of the budget hotel sector, providing quality customer service at great value prices. Since our hotel estate was re-branded to Premier Inn we have created a distinct, leading budget brand and increased brand awareness through focused marketing towards families, leisure customers and business travellers. We have increased revpar and value for money scores have increased to 81%. Guest recommend scores have also increased to 87%.
Premier Inn is now the UK's favourite budget hotel brand for business travellers and we plan to improve on this leading position with a strong focus on sales, winning business from 3 and 4 star operators and by offering further new benefits such as our 20 food and beverage package.
Value for money is at the heart of our joint site model, where guests can experience both great value hotel stays and meals at affordable prices. This model continues to drive superior returns. Each of our restaurant brands has distinctive value for money propositions, such as the two main meals for £9 at Brewers Fayre. We continue to drive sales through these everyday attractive prices and introduce new menus across Beefeater, Table Table and Brewers Fayre. Meanwhile, at Taybarns it costs from as little as £5.95 for a three course meal and we will continue to learn from the initial roll-out of seven sites in order to plan the next phase at the appropriate time.
At Costa, our unique proposition is the quality of our handmade coffee served in a welcoming environment. Indeed, we have demonstrated, with independent market research, that 7 out of 10 coffee lovers prefer Costa Coffee's cappuccino. We will continue to amplify this message with an aggressive marketing campaign during the year. At the same time we will further improve the food offers at our Costa outlets, for example adding lunchtime meal offers, such as the popular panini plus cappuccino for £4.95.
We remain committed to opportunities and growth in the longer term, although we will reduce the pace of our organic expansion in 2009. We now plan for capital expenditure in 2009/10 to be c£170 million.
Our target for Premier Inn during 2009/10 is to deliver around 2,000 new rooms in the UK and overseas. We have a strong pipeline of secured sites and will continue to develop a land bank. Internationally, our first hotel opened in Dubai during 2008 and we will build on this position, intending to open a further two hotels in the Emirates plus one in India.
We plan to open around 100 new Costa outlets in the UK in 2009/10. We will capitalise on our strong Costa brand by focusing on new locations, as well as areas where we can replace existing operators, such as in supermarkets, hospitals and leisure facilities. Costa will also continue to strengthen its position across international markets, adding 100 net new stores in the year ahead.
Current trading and Outlook
Premier Inn has been impacted by the increasingly harsh economic environment but continues to outperform the market. Against tough comparatives, its performance since the start of the financial year has softened further whilst remaining within the range of market expectations. Both Costa and Restaurants have traded positively in line with the second half of the last financial year.
We have invested in maintaining a high quality estate. We have built leading brands providing the quality and value for money that today's customers are looking for. Early action has been taken to increase efficiencies and reduce costs, and we will continue to do so. Our balance sheet remains robust and is underpinned both by a strong freehold asset base and our aim to run our current operations at cash flow neutrality. This will put us in a good position to take advantage of any attractive opportunities that may arise from the tougher operating environment and lower asset prices.
We believe that Whitbread is well placed to maintain and build upon our strong competitive position in the year ahead.
