Annual Report 2019
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 2019
- Notice of the 2020 Annual General Meeting
These documents will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM
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 Mitchells & Butlers plc, Retail Support Centre, 27 Fleet Street, Birmingham, B3 1JP on Tuesday 21 January 2020 at 2.00pm.
A condensed set of Mitchells & Butlers plc financial statements and information on important events that have occurred during the year and their impact on the financial statements was included in the Company's Full Year Results announcement on 20 November 2019. That information, together with the information on Risks and Uncertainties given below and the directors' responsibilities statement 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
This section highlights the top 12 principal risks and uncertainties that affect the Company, together with the key mitigating activities in place to manage those risks. 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 most relevant.
The processes that are used to identify and manage risks are described in the internal control and risk management statement on page 70 of the Annual Report.
A. DECLINING SALES PERFORMANCE
There is a risk that declining sales, concerns around consumer confidence, increased personal debt levels, squeezes on disposable income and rising inflation individually, together or in combination, may adversely affect our market share and profitability, reducing headroom against securitisation tests.
Consumer and market insight
If Mitchells & Butlers fails to manage and develop its existing (and new) brands in line with consumer needs and market trends due to failure to obtain or use sufficient insight in a timely manner, this may lead to a decline in revenues and profits.
Pricing and market changes
If price changes are not intelligently applied due to a lack of appreciation of market sensitivities and elasticities, this may result in decreased revenue and profit.
B. COST OF GOODS – PRICE INCREASES
The cost of goods increases due to changes in demand, food legislation, exchange rates and/or production costs and uncertainty of supply, leading to decreased profits.
The cost of drinks goods increases due to changes in demand, legislation, exchange rates and production costs, leading to decreased profits.
Goods not for resale
Increases in the cost of goods not for resale and utilities costs 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.
Given that circa 30% of food spend is sourced from EU countries, the overall risk and impact of additional costs is higher. In addition, there is an increasing risk of sourcing certain products given the expected delays at ports following the exit by the UK from the EU. On exit by the UK from the EU, the cost of goods may be impacted by changes in terms of trade and therefore tariffs, additional border controls and fluctuations in the value of sterling.
Overall, cost increases are mitigated as Mitchells & 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 in the world commodity markets gives the Company the opportunity to source products from a number of alternative suppliers in order to drive down cost. Consideration has been given to potential areas such as supply chain risk (e.g. customs controls on imports), labour risk and economic disruption. Key mitigating activities for food and drink are detailed below:
Risk is increasing mainly due to the devaluation of the pound following the EU referendum, changes in Government policy (raising the risk of punitive duty changes) and the introduction of the Sugar Tax in 2018. Brexit risks have been considered in detail during FY 2019 and mitigating plans continue to be reviewed and developed.
Buying ahead to mitigate the increasing risk of a lack of availability of products upon the exit by the UK from the EU.
|2. Operational Risks
A. PEOPLE PLANNING AND DEVELOPMENT
Mitchells & Butlers has a strong guest focus and so it is important that it is able to attract, retain, develop and motivate the best people with the right capabilities throughout the organisation. There is a risk that, without the right people, our customer service levels would be affected.
There are a large number of EU workers within the Group, particularly in London and the South East. Therefore, the overall risk is increasing as the UK approaches its possible exit from the EU. Any restriction on the free movement of labour would have a material impact on both the cost of labour and access to talent.
B. BUSINESS CONTINUITY AND CRISIS MANAGEMENT
Mitchells & Butlers relies on its food and drink supply chain and the key IT systems underlying the business to serve its guests 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.
C. INFORMATION SECURITY AND DISASTER RECOVERY
There is a risk that inadequate disaster recovery plans and information security processes are in place to mitigate against a system outage, or failure to ensure appropriate back-up facilities (covering key business systems and the recovery of critical data) and loss of sensitive data.
Increasing risk of cyber-attacks.
Risk of non-compliance with GDPR.
F. PENSION FUND DEFICIT
The material value of the pension fund deficit remains a risk.
G. FAILURE TO OPERATE SAFELY AND LEGALLY
A 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.
H. FOOD SUPPLY CHAIN SAFETY
Malicious or accidental contamination in the supply chain could lead to food goods for resale being unfit for human consumption or being dangerous to consume. This could lead to restrictions in supply which in turn causes an increase in cost of goods and reduced sales due to consumer fears and physical harm to customers/employees.
Allergens are becoming an increased risk within the industry, however, this is a well managed risk within the Group.
I. HEALTH AND LIFESTYLE CONCERNS
Failure to respond to changing consumer expectations in relation to health and lifestyle choices and our responsibility to facilitate those.
There is an increasing level of focus from media and Government on health and obesity issues, predominantly impacting the UK. This heightened consumer awareness has increased consumer awareness of the health implications of their eating and drinking choices and it is important that we evolve our offers to facilitate consumers to make informed decisions. Failure to meet these expectations could have both a financial and reputational impact on the business.
J. ENVIRONMENT AND SUSTAINABILITY
Climate change, biodiversity depletion and environmental pollution present a risk to our ability to source products, with food being particularly at risk.
The impact of extreme and longer-term shifts in weather patterns, natural resource depletion and other effects of climate change could impact the business both financially and reputationally. It could disrupt our supply chain and the ability to source products due to reduced availability. Regulatory action to manage climate change could result in the introduction of additional taxes or restrictions being imposed. The business also has a responsibility to continually aim to reduce its usage of natural resources and its negative impact on the climate.
Directors' responsibilities statement
The Annual Report contains the following statement regarding responsibility for the financial statements in compliance with DTR 4.1.12. This statement relates solely to the Annual Report and financial statements and is not connected to the extracted information set out in the Full Year Results announcement.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
- the Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
- the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
The directors of Mitchells & Butlers plc are listed in the Annual Report and on the Mitchells & Butlers plc website, www.mbplc.com/investors/
For further information, please contact:
Amy de Marsac
0121 498 6514
James Murgatroyd (Finsbury)
020 7251 3801