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Half Year Results 2010

Financial Highlights

  H1 2010
HY 2009
1 After exceptional items and other adjustments, the profit before tax was £72m (h2 2009: £(16m))
* EBITDA, operating profit and profit before tax are all stated before exceptional items and other adjustments
** Adjusted earnings per share is stated as profit after tax before exceptional items and other adjustments, divided by the weighted average number of ordinary shares in issue
*** Basic earnings per share is stated after deducting exceptional items and other adjustments
Revenue 1,037 1,024 1.3%
EBITDA* 225 209 7.7%
Operating Profit* 156 139 12.2%
Profit before tax1* 73 47 55.3%
Adjusted earnings per share** 13.0p 8.4p 54.8%
Basic earnings/ (loss) per share *** 12.8p (1.5)p n/a

Business Highlights

  • Like-for-like sales up 1.8% in the 33 weeks*
  • Food and drink like-for-like sales up 4.3%* and 0.3%* respectively
  • Retail operating profits up 13.7% at £158m**
  • Retail net operating margin up 1.6% points**
  • Net debt reduced by £87m in the first half
  • Pension funding approach agreed: annual payments increased from £24m to £40m

* wks 1-33 to 15 May to include Easter in both periods being compared
** Retail operating profit excludes SCPD, which incurred a loss of £2m, and is stated before exceptional items and other adjustments

Commenting on the results, Adam Fowle, Chief Executive, said:

“The business continues to trade well and we are pleased with the progress made in the first half with improved sales and margins leading to an increase in operating profits and profit before tax of 12.2% and 55.3% respectively. These results underpin our confidence in our strategy of increasing shareholder value by reshaping Mitchells & Butlers around its key food led brands.”

Operational Performance

The Group has maintained good sales growth in the first half, with total revenue up 1.3% to £1,037m. Like-for-like sales were up 1.8% in the 33 weeks to 15 May.

Like-for-like sales Trading to IMS
14 wks to 2 January
Since IMS
19 wks to 15 May
33 wks to 15 May*
Current trading
9 wks to 15 May*
Note: total like-for-like sales include other non food and drink categories
* Includes the Easter trading period
Total 3.3% 0.6% 1.8% 1.9%
Food 5.7% 3.3% 4.3% 4.0%
Drink 2.0% (0.9)% 0.3% 0.5%

Second quarter sales were impacted by the January VAT increase, the adverse weather conditions and by a materially lower level of promotional activity, down by a third compared with last year. Even with this reduced level of promotions, significant market share gains were achieved with like-for-like food and drink sales up 4.3% and 0.3% respectively against the declines in pub industry food sales of 5.2% and in the on-trade drinks market of 4.9% (source: NPD Crest and Nielsen CGA data).

Like-for-like sales were up 1.9% in the most recent nine week period with a continued lower level of promotional spend.

Our overall strategy of driving higher spend per head through enhanced menu quality supported by brand advertising has resulted in continued increases in sales and gross margins. Successful national marketing campaigns such as Toby Carvery’s Great British Roast Debate are a key part of this strategy. This activity, supported by purchasing gains, has improved gross margins in the first half by 0.9% points on a percentage basis and importantly 2.8% on a cash basis.

In addition to this, our efficiency and productivity improvements are progressing well and we now anticipate delivering cost savings of £25m in the year, up £5m on previous expectations. These factors, together with lower energy costs, generated retail operating profits of £158m with operating profit margin up 1.6% points at 15.2%.

This performance supports our confidence in the strategic direction of the business and we now expect to invest an additional £20m to £25m of expansionary capital in the second half resulting in gross capital expenditure of around £160m for the year. This increase will be focused on conversions from the “maintain” group of pubs into our “expand” brands which are achieving high returns on investment. These returns, together with an improved performance on acquisitions, have led to an increase in the cash returns on expansionary capital investment over the last two years from 20% a year ago to over 30%.

We are progressing with the disposal of our non core businesses and will update further when appropriate.

HR and Commercial directors have been appointed and will be starting shortly. We are making good progress on replacing the other executive team positions and we anticipate that this will be finalised by the middle of June.

Balance Sheet

Whilst continuing our capital investment program, Mitchells & Butlers generated operating cash inflows of £168m in the first half including £21m of individual site disposals. This has led to a net debt reduction in the period of £87m to £2.5bn. Drawings on the unsecured medium term facility are currently at £296m.

The Company has agreed with the pension trustees the actuarial assumptions and funding terms to be used in the triennial actuarial review. As a result, the pension deficit, on an actuarial basis, has increased to £400m from £250m in 2007. This will be funded by annual payments of £40m, up from £24m, funding the deficit over a ten year period commencing 1 April 2010. The funding levels will be reviewed again at the next triennial valuation in 2013. The Company also intends to commence consultation on the defined benefit sections of its pension plans in respect of their future.

Social Responsibility

Mitchells & Butlers takes its licensing responsibilities very seriously and currently refuses to serve each month around 120,000 people who are under age or intoxicated. We look to the new government to bring in measures to support the on-trade, which supervises the consumption of alcohol, through creating a level playing field between pubs and supermarkets by tackling irresponsible promotions in the off-trade.


The Company continues to perform well in difficult market conditions and is making good progress in implementing the strategic plan as set out in March. Consequently, we are confident about the future prospects of Mitchells & Butlers.

There will be a presentation for analysts and investors at 9.30am at the JP Morgan Cazenove Auditorium, 20 Moorgate, London, EC2R 6DA. A live webcast of the presentation will be available at www.mbplc.com . The conference will also be accessible by phone by dialling 0845 401 9097 or from outside the UK +44(0) 20 3037 9221, quote “Mitchells & Butlers”, the replay will be available until 01/06/2010 on +44(0) 20 8196 1998 replay access pin 9332560#.

All disclosed documents relating to these Results are available on the Company’s website at www.mbplc.com .

For further information, please contact:

Corporate Affairs:  
Erik Castenskiold 0121 498 6513
James Murgatroyd (Finsbury Group) 0207 251 3801

Notes for editors:

  • Mitchells & Butlers owns and operates around 2,000 high quality pubs in prime locations nationwide. The Group’s predominantly freehold, managed estate is biased towards large pubs in residential locations. With around 3% of the pubs in the UK, Mitchells & Butlers has 10% of industry sales and average weekly sales per pub almost four times greater than that of the average UK pub.
  • Mitchells & Butlers’ leading portfolio of brands and formats includes Harvester, Toby Carvery, Sizzling Pub Co., Crown Carveries, Vintage Inns, Premium Country Dining Group, All Bar One, O’Neill’s, and Nicholson’s.
  • Like-for-like sales growth includes the sales performance against the comparable period in the prior year of all managed pubs that were trading in the two periods being compared.  For the 33 weeks to 10 April 2010, 97% of the estate is included in this measure.

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