Mitchells & Butlers plc Annual report and accounts 2021

In compliance with Listing Rule 9.6.1R, Mitchells & Butlers plc has today submitted copies of the following documents to the National Storage Mechanism:

Company Annual Report and Accounts 2021 (the Annual Report)
Notice of the 2022 Annual General Meeting

These documents will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism and can also be accessed on the Company's website at: www.mbplc.com/investors/annualreport

The Company's Annual General Meeting will be held at Mitchells & Butlers plc, Retail Support Centre, 27 Fleet Street, Birmingham, B3 1JP on Tuesday 25 January 2022 at 9.00am. The Notice of the 2022 Annual General Meeting and the Annual Report are expected to be despatched to shareholders on 23 December 2021.

A condensed set of Mitchells & Butlers plc's 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 25 November 2021. That information, together with the information on Risks and Uncertainties given below and the directors' responsibilities statement below, constitutes the satisfaction of the requirements of DTR 6.3.5R in respect of information 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, please visit the Company website: www.mbplc.com/investors/

Risks and Uncertainties

This section highlights the top 13 principal risks and uncertainties that affect the Company as set out in the Annual Report, 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. These risks and uncertainties reflect the position as set out at the time of finalisation of the Annual Report on 24 November 2021. Circumstances, particularly in relation to the impact of Covid–19 on the business of the Company, may differ as at the date of this announcement.

The processes that are used to identify and manage risks are described in the internal control and risk management statement on pages 73 and 74 of the Annual Report.

Risk category and description	Controls/mitigating activities
Risk category and description 1. Borrowing covenants There are risks that borrowing covenants are breached because of circumstances such as: i. The continuation of disruption due to the Covid-19 pandemic; ii. A change in the economic climate leading to reduced cash net inflows; or iii. A material change in the valuation of the property portfolio. Risk Stable Following the equity raise in March 2021, covenant waivers remain in place, which has meant the overall risk is reduced. However, this needs to be balanced against potential for further lockdowns/restrictions, so on balance, is assessed as 'Stable'.	Controls/mitigating activities
Risk category and description 2. Declining sales performance This risk falls into the below main categories: Sales: 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. Consumer behaviour as a result of Covid-19: With the reopening of pubs and restaurants, consumers may have a different mindset to eating out, with health and safety at the forefront of priorities. Guests may want greater insight into practices, and food supply chain information to feel confident in their eating out experience. Risk Increasing Overall risk is increasing due to the potential decline in sales following the Covid-19 pandemic.	Controls/mitigating activities
Risk category and description 3. 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 guest service levels would be affected. Prior to Covid-19, the external pipeline for high potential talent, particularly in senior roles, and digital, was tightening due to the rise in opportunity in a growing and competitive marketplace. Post-Covid-19, external recruitment activity over the previous year is challenging due to quality candidates being reluctant to move in the current climate. A further potential risk is the image of hospitality, given the recent pandemic impact. Retention is high amongst our director and 'head of' populations which may lead to a perceived lack of progression routes and hence unwanted loss of good talent at lower levels. Regarding retail labour, overall, there is a continued risk of a lack of quality of internal/ external pipeline for key roles resulting in open vacancies or poor-quality appointments, leading to poor performance, reduced quality of service and loss of sales. There is a previous lack of consistent skills training affecting guest satisfaction and employee engagement and retention. Despite Covid-19 and the high level of redundancies in the UK, this still remains a risk mainly driven by the declining number of non-UK applicants following the UK's departure from the EU and the restrictions which some non-UK employees have faced in moving to the UK to work as a result of the pandemic control measures such as travel restrictions and border controls. Kitchen Manager attraction and attrition continues to be the role with the highest concern, particularly given the declining non-UK applicants, decrease in internal progression and increase in turnover which is influencing the overall risk rating. Wage pressure (over 25s) remains an issue, as competition for labour increases. Risk increasing There has been a loss of EU workers within the Group, particularly in London and the South East. Therefore, the overall risk is increasing following the UK's departure from the EU. Restrictions on the movement of labour have had a material impact on both the cost of labour and access to talent.	Controls/mitigating activities
Risk category and description 4. 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 a further disease pandemic might restrict sales or reduce operational effectiveness. Risk Stable Staff have the resources and ability to work remotely rather than rely on access to the Retail Support Centre.	Controls/mitigating activities
Risk category and description 5. Information and cyber security 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. Given the increase in the level and frequency of global cyber attacks, the likelihood of occurrence is therefore increasing, although current IT controls and monitoring tools are robust. Risk of non-compliance with data protection laws is an increasing risk for the business to ensure full compliance remains up to date. Risk Increasing The increased activity, information security and reliance on IT systems continues to be a key focus to ensure critical IT systems are kept secure and tested frequently and any vulnerabilities identified are closed out efficiently.	Controls/mitigating activities – The work carried out by the Group’s cross-functional Information Security Steering Group. – Group Assurance IT controls reviews. – Implementation and revision of appropriate cyber security governance policies and procedures. – Ongoing security awareness initiatives continue to be undertaken. – A regular cycle of penetration testing. – Increased focus on protecting the business against potential cyber attacks has resulted in the implementation of additional controls to mitigate against such risks. – The effective implementation of a business-wide data protection compliance programme, including training of all relevant employees and contractors. – Systems, processes and controls have been reviewed and updated to ensure compliance with data protection laws.
Risk category and description 6. Wage cost inflation There is a risk that increased costs associated with further increases to the National Living Wage may adversely impact upon overall operational costs. It is unclear at this stage how Covid-19 may affect overall wage costs as we head into FY 2022. Therefore, this review will continue as part of our review of all emerging risks facing the business. Risk Increasing Due to further increases set by Government, wage costs could continue to increase.	Controls/mitigating activities
Risk category and description 7. Pension fund deficit The material value of the pension fund deficit remains a risk. Risk Stable The Company has made significant additional contributions to reduce the funding deficit.	Controls/mitigating activities
Risk category and description 8. 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. Risk Stable Allergen related incidents and near misses have stabilised. There is evidence in the last quarter of FY 2021 that allergen incidents are levelling out.	Controls/mitigating activities
Risk category and description 9. Cost of goods – price increases Food: The cost of food for resale increases due to changes in demand, food legislation, exchange rates and/or production costs and uncertainty of supply, leading to decreased profits. Drinks: The cost of drinks for resale 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. Supply: Given the national shortage of drivers and labour, which is putting additional pressure on suppliers, overall costs are likely to increase. Brexit: Although the tariff risk of a hard Brexit is now removed, we are experiencing Brexit related cost pressures from our food suppliers relating to import administration costs and workforce shortages. These Brexit related cost pressures, combined with a volatile global food market, present higher food inflation levels than pre-Covid, which we have forecasted for FY 2022. Risk Increasing The overall risk of price increases is increasing.	Controls/mitigating activities 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: Food: Drinks: Brexit: Brexit risks have remained a key focus and have been subject to continued regular review and development by management during FY 2021. Brexit risks and the mitigating action plans are embedded within each of the key risks, which are regularly reviewed by both 'risk owners' and the Risk Committee. A number of key measures have been taken to mitigate both the known and emerging risks that Brexit may present to the business. For example, we have secured agreements with our key suppliers which include: Covid-19 During the Covid-19 pandemic, suppliers have continued to remain very supportive, and no material further supply chain associated risks have materialised.
Risk category and description 10. 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 cause an increase in cost of goods for resale and reduced sales due to consumer fears and physical harm to guests/employees. Risk Stable The key risks facing the food supply chain safety are regarded as stable.	Controls/mitigating activities
Risk category and description 11. Health and lifestyle concerns Failure to respond to changing consumer expectations in relation to health and lifestyle choices and our responsibility to facilitate those. Risk Increasing There is an increasing level of focus from media and Government on health and obesity issues. This heightened consumer awareness has increased consumer awareness of the health implications of their eating and drinking choices, and it is important that we continue to 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. Therefore, this risk is increasing.	Controls/mitigating activities
Risk category and description 12. 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. Risk Increasing 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. These factors 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. Therefore, this risk continues to increase.	Controls/mitigating activities
Risk category and description 13. Enforced Government closure/trading restrictions There is a risk that the business could be impacted by an enforced Government closure or imposed severe trading restrictions, of part or the whole of the estate, for example, regional/national/global pandemic, chemical/terrorist activity etc. A global pandemic may have a negative impact on the Group's operating and financial performance and liquidity. An outbreak of a global virus may cause severe disruptions in the global economy which could adversely affect the Group's business or operations, as well as the business or operations of third parties with whom the Group conducts business. Risk Stable The frequency and nature of these risks arising are unpredictable, as evidenced during the Covid-19 pandemic. However, given that Government trading restrictions have been lifted, the associated risks to the business have stabilised.	Controls/mitigating activities

Directors' responsibilities statement

The Annual Report contains the following statement regarding responsibility for the financial statements in compliance with DTR 4.1.12R. 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:

Investor Relations:
Amy de Marsac
0121 498 6514

Media:
James Murgatroyd (Finsbury)
020 7251 3801

Mitchells & Butlers plc Annual report and accounts 2021

Related Documents

Risks and Uncertainties

Directors' responsibilities statement