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Mitchells & Butlers plc - Preliminary Results

(For the year ended 26 September 2009)

Financial Highlights

  FY 2009
FY 2008
1 After exceptional items and other adjustments, the loss before tax was £(10)m (FY 2008: £(238)m)
* 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/(loss) per share is stated after deducting exceptional items and other adjustments after tax of £(92)m, FY 2008 £(301)m
Revenue 1,958 1,908 2.6
EBITDA* 428 477 (10.3)
Operating Profit* 300 343 (12.5)
Profit before tax1* 134 176 (23.9)
Adjusted earnings per share** 23.6p 31.0p (23.9)
Basic earnings/ (loss) per share *** 1.0p (43.7)p n/a
Dividends - 4.55p -

Business Highlights

  • FY 2009 like-for-like sales up 1.6% and total revenue up 2.6%
  • FY 2009 like-for-like food and drink sales up 3.1% and 1.8% respectively
  • Operating profits down 12.5% reflecting £54m of regulatory and inflationary cost pressures*
  • Second half Retail operating profits down 2.4% compared with first half down 16.8%*
  • Strong cash generation: net debt reduced by £135m in the year
  • Current trading improving: like-for-like sales up 3.2% in the eight weeks to 21 November

* Before exceptional items

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

“Mitchells & Butlers has produced a robust operational performance in challenging conditions. The Company has sold 129 million meals in the year and grown average food sales per pub by 9%. The second half trend in net profit margin recovery continues. The first eight weeks of the new financial year have started well and the strength of the Group’s brands, locations, operational skills and cost management mean that we are well positioned for the year ahead.”

FY 2009 Operational Performance

The Group’s sales performance in the year was good with like-for-like sales up 1.6% and total revenue up 2.6% to £1,958m reflecting the strength of the Company’s brands with their high amenity levels and value-for-money pricing.

Like-for-like food and drink sales were up 3.1% and 1.8% respectively, a strong performance given the declines currently experienced in both these markets. In volume terms, this represents an outperformance of the eating-out and the on-trade beer market* by 10% points and 6% points respectively.

Gross margins were 1.5% points lower than last year on an improving trend. Second half margins were 0.9% points down, compared with 2.0% points in the first half, as a result of sales increasing and duty and food inflation reducing. Across both halves, 0.7% points of this decline was caused by the disposal of the high gross margin lodges and the increase in food sales mix which has slightly lower margins than drink.

This financial year has been affected by an abnormal level of cost increases which particularly impacted the first half of the year. £30m of additional regulatory costs related to the National Minimum Wage, holiday pay, business rates and exceptional duty increases with an additional £24m of food and energy cost inflation.

Against these increases, our focus on cost management has resulted in £20m of savings with productivity improvements in staff contribution per hour of 5.2% achieved in the year along with gains from menu development, waste reduction and energy efficiency. As a result of these factors, Retail operating margin** fell by 2.2% to 15.3% with a second half margin of 17.2%, down 1.1% points against the same period last year. This led to Retail operating profits** down 9.6%, with the first half down 16.8% and second half 2.4% lower.

Balance Sheet

The business continues to generate strong operational cash inflows supported by disposals of £72m, leading to a net debt reduction of £135m in the year. Following the closure in the second half of the remaining swaps at a cost of £95m, drawings on the unsecured medium term facility were £383m at the year end, well below the facility limits.

Total capital expenditure in the financial year was £122m and we expect to spend around £140m on the estate on maintenance and expansionary investment this year.

An accounting valuation of our estate has been completed in conjunction with our property valuers, Collier CRE plc who provided a Red Book valuation of a portion of our estate. The revised net book value at 26 September 2009 of £4.5bn*** is 4% lower than the prior year and includes a downward adjustment in the accounting valuation of 2.3% (a total reduction of 9% over the last two years). The current year adjustment reflects primarily the impact of the recession on our late evening businesses, lodges, Hollywood Bowls and a small number of drink focused pubs where food development potential is limited. As a result of the volatility in property markets we intend to carry out a periodic full Red Book valuation of the whole estate.

The pension deficit on the balance sheet has increased to £130m at the year end, primarily due to a reduction in corporate bond yields. The next pension scheme triennial valuation for funding purposes is due in March 2010. Discussions have commenced with the Pension Trustees in respect of the various assumptions to be used in the valuation, some of which could vary significantly from the accounting basis, and we therefore anticipate that the valuation deficit may be higher than £130m. A revised funding plan will be agreed with the Trustees once the valuation process is complete.

Social Responsibility

Mitchells & Butlers recognises the wider concerns caused by anti-social behaviour from excessive alcohol consumption. We also recognise that the pub can play a key role in the supervised retailing of alcohol. At the heart of this is the importance of providing our customers with a friendly, safe, well managed licensed environment. One of the consequences of the controls we have in place is that, each month across all our pubs, we currently refuse to serve alcohol to around 20,000 people on the grounds of being intoxicated and approximately 80,000 people where no proof of age can be produced. In addition, we support local and national responsible drinking initiatives and endorse the strategies of the police and local councils to ensure that the small number of licensees who run irresponsible or unlawful pubs comply with licensing regulations or are dealt with appropriately.

Mitchells & Butlers Board

As part of reducing his business commitments, Drummond Hall will step down as Chairman once an appropriate successor is in place. A process has been initiated to fill this role and we will update the market as appropriate.

Current Trading

In the first 8 weeks of the new financial year trading has strengthened with like-for-like sales growth of 3.2%.

Like-for-like sales Current Trading
8 weeks to 21 November
52 weeks to 26 September
Total 3.2% 1.6%
Food 5.9% 3.1%
Drink 2.0% 1.8%
Residential 4.4% 2.5%
High street Flat (0.2)%

Like-for-like food and drink sales were up 5.9% and 2.0% respectively with a strong performance in residential pub food sales. The High Street segment has been resilient with sales flat on last year. Net margin percentage has improved compared to the same period last year.


Trading in the new financial year has started well, supported by a recent small upturn in consumer confidence. Inflationary cost pressures are currently more stable and less severe than last year with total regulatory and inflationary costs in the full year expected to increase by around £20m inclusive of the benefit of energy costs declining by some £10m. Against this, our efficiency and productivity improvements continue, supported by process and infrastructure developments from which we are aiming to achieve savings of around £20m this year.

Current trading is underpinning the performance in the first half of the financial year however the outlook for the second half is uncertain. It is clear that at a macro level some of the factors that are assisting performance may turn negative in the second half. In particular the outlook for disposable income and consumer confidence could be dampened if VAT and other taxes were to rise. Notwithstanding this, Mitchells & Butlers' strong brands, excellent sites and good operational skills leave the business well positioned.

Retail results exclude the impact of SCPD
* market data from BBPA, AC Nielsen and NPD Crest
** before exceptional items
*** property, plant and equipment

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 10/12/2009 on +44(0) 20 8196 1998 replay access pin 5171284#.

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

The preliminary announcement for the 52 week period ended 26 September 2009 has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The principle accounting policies applied in the preparation of this preliminary announcement are consistent with those described in the 2008 annual report and accounts available within the investors section of the company's Web site: www.mbplc.com

These preliminary statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. They have, however, been extracted from the statutory accounts for the 52 week period ended 26 September 2009 on which an unqualified report has been made by the company's auditors.

The 2008 statutory accounts have been filed with Registrar of Companies. The 2009 statutory accounts will be sent to shareholders in due course and will be filed with Registrar of Companies, following their adoption at the forthcoming annual general meeting.

For further information, please contact:

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 over 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 Ember Inns, Harvester, Sizzling Pub Co., Toby Carvery, Vintage Inns, Crown Carveries, All Bar One, O’Neill’s, Nicholson’s and Browns. In addition, Mitchells & Butlers operates a large number of individual city centre and residential pubs.
  • 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 8 weeks to 21 November 2009 95% of the estate is included in this measure.

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