Mitchells & Butlers plc Final Results for year ended 25 September 2010. Full details have now been published for the year ended 25 September 2010.

Business Highlights

  • Operating profit1 up 7.3% to £322m
  • Profit before tax1 up 26.1% to £169m
  • Net cash inflow of £303m in the year
  • Retained Estate2 like-for-like sales up 2.8% in the year
  • Retained Estate like-for-like food and drink sales up 4.7% and 1.4% respectively 
  • Retained Estate operating profit of £285m up 14% with margin up 1.9% points to 17.0%
  • Like-for-like sales in the Retained Estate up 3.7% in first 8 weeks of new financial year
  • Like-for-like food sales in the Retained Estate up 6.9% in first 8 weeks

Financial Highlights

 FY 2010
FY 2009

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

"We have delivered a very good set of results in challenging economic conditions with earnings per share up 26%. Excellent progress has been made against our strategic goal to turn Mitchells & Butlers into a food-led business by concentrating our industry leading brands on the informal eating-out market. This strategy continues to prove effective with 7% like-for-like food sales growth in the first eight weeks driven by customers trading up the menu. The Company now has a strong balance sheet which, coupled with our brands and resilient trading platform, underpins our confidence in the future."

Operational Performance

In FY 2010 total sales were up 1.1% to £1,980m. Total company food sales increased by 4.5% whilst drink sales were down 0.7%, held back as a result of the disposal of drinks-led pubs during the year. Operating profits increased by 7.3% to £322m which, with a lower interest charge from reduced debt levels, resulted in profit before tax of £169m and adjusted earnings per share of 29.7p. The movement between the adjusted earnings per share and basic loss per share of 20.6p is due to exceptional items of £205m, mainly relating to a reduction in property valuation.

Retained Estate

The successful disposal of the non-core assets enables the business to focus on the Retained Estate of nearly 1,600 sites which are well positioned within the attractive informal eating out market. Food is now 47% of sales and we estimate that around two thirds of total sales relate to a food occasion. Like-for-like sales were as follows:

 Retained Estate
Retained Estate
Retained Estate
Retained Estate

Food like-for-like sales were up 4.7% with drink sales up 1.4%. Food volumes increased by 2.3% in the year. In addition, average food spend per head rose by 2.3% (excluding VAT) reflecting same dish prices in line with last year together with increasing spend from enhancing menu quality, selling additional courses and seeing a greater proportion of higher priced items being chosen. These improvements have been underpinned by our national advertising campaigns for Harvester, Toby and Sizzling Pub Co. which have been successfully attracting new customers into our sites. This sales result reflects an outperformance of the overall eating-out market by 7.2% points with the market declining by 2.5% across the whole financial year however returning to positive growth in the second half.*

In the most recent 8 weeks to 20 November like-for-like sales were up 3.7% continuing the underlying rate of growth experienced over the last 6 months.

The gross margin percentage was up 1.2% points driven largely by improvements in food gross margins from menu management, purchasing gains and reduced wastage. Further efficiencies in labour and overhead reductions were supported by energy cost deflation to offset increasing regulatory expenses and other inflationary costs. As a result, EBITDA in the Retained Estate was £391m with operating profits of £285m and operating margins up 1.9% points at 17.0%.

* Market source: NPD Crest

Capital Expenditure and Disposals

Capital expenditure was £138m in the year, including £28m on acquisitions and expansionary capital. The EBITDA return on expansionary capital spent over the last two years was over 30%. The purchase of 22 Ha Ha Bar & Grill sites for £19.5m was completed after the year end and these will be converted mainly into All Bar One and Browns.

Disposals raising £130m were completed during the financial year. Excluding the major disposals of Lodges and Bowls, the Company sold or exchanged contracts on 49 individual pubs at an EBITDA multiple of over 15 times. After the year end, 333 drinks-led non-core pubs were disposed to Stonegate Pub Company Limited for a net consideration of £363m. Including this transaction, around £500m of major disposals have been achieved since the strategy review in March.

Balance Sheet

The business continues to generate strong cash flow supported by disposals, leading to a net debt reduction of nearly £300m to £2.3bn. Drawings on the unsecured medium term facility were £258m at the year end, well below the current facility limit of £425m. Current net debt is now £2.0bn following receipt of cash proceeds from the Stonegate disposal which will be used to pay down the unsecured facility.

A Red Book valuation of our estate has been completed, in conjunction with our property valuers, lowering the overall property value by £235m, reflected by an exceptional charge to the income statement of £304m and a balance sheet revaluation credit of £69m. Excluding the 333 non-core pubs, the Retained Estate was decreased in value by 4%, primarily as a result of reduced valuation multiples on our larger, high profitability sites where there are no comparable multiples in the market. The valuation reflects a prudent position at this point in the economic cycle bearing in mind the growth in profitability during the year.

In March we highlighted that a regime of internal rents would be initiated to provide greater transparency both externally around the performance of the operating and property functions, and internally through the clear application of our differentiated hurdle rates for invested capital. As a result from the start of FY 2011, the business will charge an internal rent on each freehold and long leasehold site. The total internal rent charge will be about £190m representing around 40% of the aggregate pub level EBITDA of the freehold and long leasehold assets. There is no intention of legally separating the business into a property company and an operating company. Rent will rise each year to reflect the average of RPI and the relevant retail rent increases, in addition to any further capital invested. The methodology will be reviewed periodically to ensure it continues to reflect market conditions.


As indicated in May, the Board is committed to a resumption of dividend payments. The Board will closely monitor the level of operating cash flow generation and capital investment opportunities for the business during 2011 before taking a decision on the timing and quantum of the resumption of dividend payments.


The outlook for consumer spending remains uncertain in light of government spending cuts and the VAT increase in January. However, the strength of Mitchells & Butlers' brands, the effectiveness of its marketing platform, its operational capabilities and strong capex returns underpin the Board's confidence in the Company's prospects.

There will be a presentation for analysts and investors at 9.30am at the Merrill Lynch Financial Centre, 100 Newgate St, London EC1A 1H. A live webcast of the presentation will be available at


  • Mitchells & Butlers' leading portfolio of brands and formats includes Harvester, Toby Carvery, Vintage Inns, Premium Country Dining Group, Crown Carveries, Sizzling Pub Co., Browns, Miller & Carter, Metro Professionals, All Bar One, Nicholson's, O'Neill's and Ember Inns. Further details are available on
  • 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 20 November 2010, 96% of the estate is included in this measure.

The Final Results announcement for the 52 week period ended 25 September 2010 has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The principal accounting policies applied in the preparation of this Final Results announcement are consistent with those described in the 2009 annual report and accounts available within the investors section of the Company's Web site:

Final Results 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 25 September 2010 on which an unqualified report which did not contain an emphasis of matter reference or a statement under section 498 (2) or (3) of Companies Act 2006 has been made by the Company's auditors.

The 2009 statutory accounts have been filed with Registrar of Companies. The 2010 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.