Annual Report 2012
In compliance with Listing Rule 9.6.1, Mitchells & Butlers plc has today submitted copies of the following documents to the National Storage Mechanism:
- Company Annual Report and Accounts 2012
- Notice of Annual General Meeting
- Proposed amendments to the Articles of Association pending approval at the 2013 AGM
These documents will shortly be available for inspection at www.hemscott.com/nsm.do
The above documents can also be accessed on the Company's website at: www.mbplc.com
The Company's Annual General Meeting will be held at The International Convention Centre, Broad Street, Birmingham B1 2EA on Thursday 31 January 2013 at 11am.
A condensed set of Mitchells & Butlers plc financial statements, information on important events that have occurred during the year and their impact on the financial statements and responsibility statements were included in the Company's Full Year Results announcement on 27 November 2012. That information, together with the information on Risks and Uncertainties given below, constitutes the requirements of DTR 6.3.5 which is to be communicated via an RIS in unedited full text. This announcement is not a substitute for reading the full Annual report and financial statements. To view the Full Year Results announcement, visit the Company website: www.mbplc.com/investors/
Risks and uncertainties
The principal risks that affect the Company, together with the key mitigating activities in place to manage those risks are set out below. This does not represent a comprehensive list of all of the risks that the Company faces, but focuses on those that are currently considered to be of most concern.
The processes that are used to identify and manage risks are described in the Internal control and risk management statement on pages 30 and 31 of the 2012 Annual report.
DescriptionMarket Risk: Pricing and market changes
DescriptionExternal influences, such as changes in the general economic climate or competitor activity, could have a detrimental effect on customers' spending patterns and therefore the Company's revenue, profitability and consequently the value of its assets
Mitigating activitiesMitchells & Butlers' business is focused on the long-term potential of the eating-out market. The Company owns sites across the UK with a wide spectrum of customer offers targeted at different consumer groups and leisure occasions. This range allows the Company to respond to changes in consumer expenditure either by flexing our offerings or by substituting a different brand at a particular location. This activity is supported by dedicated Pricing and Revenue Management and Asset Planning teams which analyse and evaluate a range of information including that in respect of competitors.
DescriptionMarket Risk: Consumer taste and brand management
DescriptionSocial and demographic changes are driving the long-term growth in eating-out while at the same time leading to a steady decline in the sales of on-trade drinks without food. These changes, together with other developments in consumer taste may reduce the appeal of Mitchells & Butlers' brands to its customers, especially if the Company fails to anticipate and identify these changes and respond to them adequately and promptly.
Mitigating activitiesOn a regular basis, a brand strategy team meets involving marketers, operators and finance as part of a structured programme to continuously improve existing brands and to develop new customer offers. This process is co-ordinated with the capital expenditure programme to ensure that investment is taking place in support of customers' changing needs.
The Company uses an online guest satisfaction survey to collect customer feedback. This feedback together with the results of research studies is monitored and evaluated by a dedicated customer insight team to ensure that the relevance to their customers of the Company's brands is maintained.
DescriptionOperational Risk: Cost of goods price increases
DescriptionIncreases in the price of goods for resale as a result of increases in global demand and uncertainty of supply in producing nations can have a significant impact on the cost base consequently impacting margins.
Mitigating activitiesMitchells & Butlers leverages its scale to drive competitive cost advantage and collaborates with suppliers to increase efficiencies in the supply chain. The fragmented nature of the food supply industry on the world commodity markets gives the Company the opportunity to source products from a number of alternative suppliers in order to drive down cost. The Company continually evolves the composition of menus and retail prices in order to optimise value to the customer as well as profits for the Company.
DescriptionOperational Risk: Property strategy and acquisition targets
DescriptionMitchells & Butlers' strategy is to increase its number of restaurants to drive further scale advantage and provide strong incremental returns. However, it may not be possible to identify and acquire suitable sites on acceptable terms and investments may not perform as anticipated.
Mitigating activitiesThe Company's dedicated Acquisitions and Asset Planning team employs a rigorous project appraisal process in respect of investments, using external advisers where necessary. Post-investment performance of acquired or converted sites investments is monitored in detail.
DescriptionOperational Risk: People planning and development
DescriptionMitchells & Butlers' business has a strong customer focus, and as such it is important that it is able to attract, retain, develop and motivate the best people with the right capabilities throughout the organisation.
Mitigating activitiesRemuneration packages are benchmarked to ensure that they remain competitive and a talent review process is used to provide structured succession planning.
The Company also makes significant investment in training to ensure that its people have the right skills to perform their jobs successfully. Furthermore an employee survey is conducted bi-annually to establish employee satisfaction and engagement and compare it with other companies as well as previous surveys. Where appropriate, changes in working practices are made in response to the findings of these surveys.
DescriptionOperational Risk: Energy price increases
DescriptionMitchells & Butlers is a large commercial user of gas and electricity. There is a risk that costs increase because of global increases in demand and uncertainty of supply in energy producing nations.
Mitigating activitiesThe energy procurement strategy seeks to reduce the risk of cost increases and uncertainty over energy prices by a rolling programme of short and medium-term purchases against forecast requirements.
A dedicated Energy Management team is responsible for optimising energy usage across the organisation by promoting energy efficient working practices via training and educational programmes and by the installation of energy efficient equipment.
DescriptionOperational Risk: Business continuity and crisis management
DescriptionMitchells & Butlers relies on its food and drink supply chain and the key IT systems underlying the business to serve its customers efficiently and effectively. Supply chain interruption, IT system failure or crises such as terrorist activity or the threat of disease pandemic might restrict sales or reduce operational effectiveness.
Mitigating activitiesThe Company has in place crisis and continuity plans that are tested and refreshed regularly.
DescriptionFinance risk: Borrowing covenants
DescriptionThere are risks that borrowing covenants are breached because of circumstances such as:
i) A change in the economic climate leading to reduced cash inflows, or
ii) A material change in the valuation of the property portfolio.
Mitigating activitiesThe Company maintains headroom against these risks. The finance team conducts daily cash forecasting with periodic reviews at the Treasury Committee, the roles of which include ensuring that the Board Treasury Policy is adhered to, monitoring its operation and agreeing appropriate strategies for recommendation to the Board. In addition, regular forecasting and testing of covenant compliance is performed and frequent communication is maintained with the Securitisation Trustee.
DescriptionFinance risk: Pension fund deficit
DescriptionThere is a risk that the pension fund deficit increases because of poor investment performance, lower long-term bond yields or increased life expectancy, leading to unexpected increases in funding requirements by the Company. The triennial actuarial valuation carried out as at 31 March 2010 resulted in a deficit of £400m.
Mitigating activitiesMitchells & Butlers maintains a close dialogue with the Trustees of the pension schemes and three of the 12 Trustees are appointed by the Company. The Company has made significant additional contributions to reduce the funding deficit. The funding levels and contribution requirements will be reviewed again at the next triennial valuation as at March 2013.
DescriptionRegulatory risk: Failure to operate safely and legally
DescriptionA major health and safety failure could lead to illness, injury or loss of life or significant damage to the Company's or a brand's reputation.
Mitigating activitiesMitchells & Butlers maintains a robust programme of health and safety checks both within its restaurants and pubs and throughout the supply chain. The dedicated Safety Assurance team uses a number of technical partners including food technologists, microbiologists and allergy specialists to ensure that our food procedures are safe. Regular independent audits of trading sites are performed to ensure that procedures are followed and that appropriate standards are maintained. Food suppliers are required to meet the British Retail Consortium Global Standard for Food Safety and are subject to regular safety and quality audits. Comprehensive health and safety training programmes are in place.
For further information, please contact:
+44 121 498 4895
James Murgatroyd (RLMFinsbury)
+44 20 7251 3801