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Preliminary Results for the 53 weeks ended 1 October 2005

30 November 2005

Preliminary Results for the 53 weeks ended 1 October 2005


  • Turnover of £1,662m, up 4.6%*
  • Operating profit of £297m, up 6.6%*
  • Operating cash flow after net capex of £294m, up £10m
  • Profit before tax of £195m, up 10.4%*
  • Earnings per share of 26.0p, up 21.5%*
  • Final dividend 7.55p, up 13.5% on 2004 final

(1) All results are before exceptional items
(2) 2004 comparatives restated for FRS 17
* Growth rate based on a comparable 52 week period

Business highlights

Commenting on the results, Tim Clarke, Chief Executive said:

"We have achieved 4.8% like-for-like sales growth during the year and made significant market share gains, strengthening our position as the UK's leading managed pub operator. We are leading the growth of the rapidly expanding pub eating out market with food sales volumes up 9%.

Our sales performance and gains in productivity and purchasing enabled us to overcome £17m of external cost pressures and increase operating margins. We are very pleased to be reporting a second year of over 20% EPS growth and a new £100m share buy-back."

  • Strong sales growth: same outlet like-for-like sales up 4.8%*
  • Gaining market share: same outlet food volumes up 9%*, drink volumes up 4%*
  • Average weekly sales per managed pub up 8% to £16.4k
  • Continued focus on service, amenity, range and value: average prices flat on last year
  • Operating profit margin 17.9%**, up 0.4 percentage points
  • High returns on expansionary capital: over 20% pre-tax
  • Net cash inflow £10m, after £30m pensions payment and £100m share buy-back
  • Initiating a new £100m share buy-back

* Based on a comparable 52 week period
** Retail only, before exceptional items

Current trading

Commenting on current trading in the 7 weeks to 19 November, Tim Clarke, Chief Executive said:

"Amidst slowing consumer spending, like-for-like sales continue to be resilient, with growth of 3.8%. This is being driven by the out-performance of our food-led brands and drinks market share gains. Our cash generation is enabling us to maintain a strong investment programme with high returns, and announce a further £100 million buy-back programme, while continuing to review value creative opportunities for industry consolidation."

In the first seven weeks of the current year, same outlet like-for-like sales have grown by 3.8%. This growth is lower than the previous strong trend, reflecting the general pressures on consumer spending and in particular the weakness of the on-trade beer market. In absolute terms, this remains a good performance and our market share gains continue to be significant.

7 weeks to 19 November Same Outlet* Uninvested*
Residential like-for-like sales 4.7% 2.4%
High Street like-for-like sales 2.2% 1.5%
Total like-for-like sales 3.8% 2.0%

* For the comparable period

The residential sectors of the market continue to drive our growth with encouraging volume gains, led by food sales in our pub restaurants and residential pubs, with same outlet like-for-likes up 4.7%. The High Street, where same outlet like-for-likes were up 2.2%, remains competitive, particularly in the late night segments. Trading in our central London estate has shown some recovery from the levels recorded after the terrorist attacks.

In the first seven weeks, uninvested like-for-like sales have grown by 2.0% with food and drinks prices broadly unchanged.

Dividend and Share Buy-back

The Board is recommending a final dividend for 2005 of 7.55 pence, making a total dividend for the year of 10.75 pence, up 13.2% on last year. This is consistent with the underlying growth of the business and reflects our commitment to a progressive policy for dividend growth.

In view of the strong trading performance and cash generation of the business, the Board has decided to commence a further share buy-back programme designed to repurchase £100m of the Company's shares during the course of the 2006 financial year. This programme is additional to the £100m buy-back completed during the 2005 financial year. This will preserve sufficient flexibility for the company to participate in industry consolidation if the right opportunities arise, in addition to the organic development of the business. The Board remains committed to the effective deployment of cash resources in the best interests of shareholders.

Regulation: Licensing and Smoking

The new Licensing Act took effect on 24 November and 90% of our 1,831 applications for variation of hours have been granted. We have been concerned to maintain a responsible balance between enhanced commercial opportunities and our obligations to the neighbourhoods in which we trade. On average, these pubs will have an extension of just over an hour in the evening. We will also be taking up new day time opportunities, with our pub restaurants opening one hour earlier on Sunday lunchtimes, their busiest trading session.

On smoking, the Government has recently published its Health Bill, proposing to prohibit smoking in pubs where food is prepared and sold from the summer of 2007. It is unclear whether the legislation will be materially amended from the current food based proposals during its Parliamentary passage, given the severe criticism from the medical authorities and many MPs concerned at the potential health consequences of effectively incentivising pubs to remove food to return to a drinks only, smoking environment.

In the event that the Government proposal does pass in its current form, we intend to continue to move towards food based, non-smoking offers in the great majority of the estate. Regrettably, there is a minority of the estate with a lower food sales mix, where the continued provision of food would need to be reviewed.

Overall we regard the current proposal as a retrograde step, forcing pubs to make invidious choices, which may prove to be only temporary. From a commercial point of view it is sub-optimal but manageable after the initial disruption, because of the wide spread of the food mix in our estate.

Our approach will be to adapt our response to such legislation to suit the different parts of our estate as and when the details become clear. However, because the political process could well default to a full ban sooner or later, it would be preferable to see that position implemented in one clear and decisive step.


Mitchells & Butlers' business is increasingly focused on the long term growth of the informal, value for money, eating and drinking out markets in residential areas where our pubs are capturing a disproportionate share of the growth. Food is now our biggest selling product.

Despite the prospect of subdued consumer spending and an expected increase in regulatory and energy costs in the region of £25m, the Board is confident that our marketing activity, our cost efficiency initiatives and our continuing investment in the estate will secure further growth and cash returns for shareholders in the year ahead.

The Board will continue to use the cash flows generated to deliver value to shareholders, through investment in the business for high returns, pursuit of value creative acquisitions, or return to shareholders by way of dividend and share buy-back.

For further information please contact:

Investor Relations:


  Erik Castenskiold

0121 498 4907



  Simon Ward

0121 498 5795

  James Murgatroyd (Finsbury Group)

020 7251 3801

A presentation for analysts and investors will be held at 9am on 30 November 2005 at the JP Morgan Cazenove Auditorium. A live webcast of the presentation will be available on the Mitchells & Butlers plc website www.mbplc.com .

Notes for editors:

  • Same outlet (invested) like-for-like sales include the sales performance of all managed pubs that were trading for the two periods being compared. 96% of the estate is included in this measure.
  • Uninvested like-for-like sales include the sales performance of those managed pubs that have not received expansionary investment of more than £30,000 in the two periods being compared. 89% of the estate is included in this measure.
  • 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 of over three times the industry average.

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