Whitbread pension deficit drops by £127m

Whitbread’s defined benefit pension deficit has dropped by £127m over the last six months to £162m on an IAS19 accounting basis.

Publishing its half year results today, 23 October, Whitbread said the deficit reduction was attributed to deficit contributions of £46m, a change in financial assumptions of £44m and return on plan assets greater than the discount rate of £43m.

As a result of the triennial review, undertaken on 31 March 2017, Whitbread has agreed with the trustees to pay £85m each year from 2019 to 2022, with a final contribution of £57m in 2023. It has also said that contributions will be increased at a rate in line with dividend growth, when dividends increase by more than 5 per cent; this will continue until the next triennial valuation.

Furthermore, additional contributions to the pension fund of around £10m per year will continue to be made through the Scottish Partnership arrangements.

In its report, it was revealed that the company’s DB pension liabilities fell from £288.6m on 1 March 2018 to £161.5m on 30 August 2018.

Whitbread has also claimed that they will use some of the net cash proceeds from the sale of Costa Limited to Coca-Cola to reduce the pension fund deficit and “discussions with pension trustees and other relevant stakeholders are being conducted and an update on the amount and method to return proceeds will be provided in due course.”

On 10 October 2018, Whitbread held a meeting at which 99.3 per cent of shareholders voted in favour of selling Costa to Coca-Cola. The sale is now “conditional on Coca-Cola obtaining two anti-trust regulatory approvals in the EU and China”, which is expected to happen in the first half of 2019.

Whitbread chief executive officer, Alison Brittain commented: "The highlight of the first half was the announcement of our agreement for the sale of Costa to The Coca-Cola Company for £3.9bn, which received the overwhelming approval of our shareholders in October.

“We intend to return a significant majority of the net cash proceeds to shareholders, although the exact amount, timing and method will be determined following discussions with stakeholders, including our shareholders, pension fund and debt providers.”

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