Mitchells & Butlers has developed its business strategy to focus on the growth parts of the eating and drinking-out markets. Our objective is to run businesses that people love to eat & drink in and grow shareholder value. Our strategy to achieve this goal has five key elements:
Focusing on the growth in eating-out
Food sales growth of 8.5% in FY 2012Over the last decade, our strong brands, operational skills and understanding of the UK market have helped us position ourselves to profitably take advantage of the increased demand for eating-out, a market which has grown from £27bn in 2000 to £47bn in 2011. We have reshaped Mitchells & Butlers into a food-led business centred on core concepts with significant growth potential. We are opening new sites where there is a high level of demand for eating out, including 47 new sites in FY 2012. This focus contributed to food sales growth of 8.5% in FY 2012. Food is now our largest selling product having grown by over 40% over the last five years and we estimate that that around three quarters of our turnover is generated from the guests who eat out in our restaurants and pubs.
Developing national brands
Our restaurants have satisfaction levels above 90%Our aim is to own and operate brands that have a significant site distribution throughout the country coupled with very high levels of customer satisfaction. Many of our brands already have good brand recognition and a substantial number of sites. However, we see potential to grow this further. Our restaurants have satisfaction levels above 90% and our experience has shown that new users of our brands are highly likely to return regularly. This makes us confident that we can increase our restaurant numbers, whilst always ensuring that we are making profitable returns on our investment.
Generating high returns on investment
£184k operating profit per site, one of the highest in the industryOur objective is to increase our scale advantages at unit, brand and corporate levels to drive higher site profitability. We operate large pubs with average weekly sales of £23k per week, significantly higher than the average of our major competitors. This leads to strong labour productivity and lower wastage at the outlet level. Brand scale enhances staff training and advertising benefits. Corporate scale enables significant synergies to be gained in menu development and in purchasing where scale buying benefits in food and drink, energy, distribution and capital expenditure can be significant. Each of these factors is a key driver of improved returns and profitability per site, with Mitchells & Butlers' EBIT per outlet of over £180k being one of the highest in the industry. This high site profitability enables expansionary capital to be invested with good returns. For example, EBITDA returns on expansionary capital invested in FY 2011 and FY 2012 were 17%.
Extending the skill base of excellence
1,500 new jobs in FY 2012We are focused on attracting and training people with the skills and motivation to deliver exceptional customer service and to support the operational strategy of the business. At the pub level, a 13-week training programme is conducted with all new staff, as well as specific ongoing coaching to improve bar and kitchen staff service productivity and increase staff product knowledge. To support our food growth strategy, we have created 1,500 new jobs in FY 2012 & launched our apprenticeship scheme.
Our customer facing teams are the core of the organisation and we have initiated a programme which will devolve greater responsibility and accountability to them, helping us to respond even more quickly to changes in the eating and drinking-out markets.
Continuing the sound financial base
Attractive long-term debt financingThe company has in place an attractive long-term debt financing at fixed interest rates that appropriately matches the stable, long-term cash generative nature of the business. The Board is comfortable with a net debt to EBITDA ratio of around 4.5 times, that gives the business ample headroom and opportunity to develop and grow the company in line with its strategic objectives. This long-term debt financing is backed by Mitchells & Butlers' £3.8bn asset base. Moving forwards, we will have a flexible approach to property ownership seeking both freehold and leasehold opportunities as they arise.