Mitchells & Butlers PLC
09 April 2008
9 April 2008
Mitchells & Butlers plc
Half Year Pre-Close Trading Update
- Resilient sales growth: same outlet like-for-like sales up 0.6% in the first
- Significant market share gains: same outlet food sales up 4.8%; drink declines
limited to 1.4%
- Robust operating profits performance with productivity and efficiency gains
offsetting increasing cost pressures
- Strong operational cash inflows
- Strategic review continues with conclusions to be announced by Interim Results
on 20 May
Current Trading - 27 weeks ended 5 April 2008
Mitchells & Butlers reports resilient sales growth and robust operating profits
performance, together with strong operational cash generation for the first 27
weeks. This has been achieved amidst challenging trading conditions for beer
sales but increased eating out demand in pubs following the smoking ban.
Same outlet like-for-like sales were up 0.6% in the first 27 weeks. Food sales
have been buoyant and now account for 38% of sales with same outlet
like-for-like sales growth up 4.8%. The smoking ban has widened the appeal of
the pub, especially to consumers who previously did not eat out in pubs due to
tobacco smoke. The quality and value of our food offers together with our high
standards of amenity have enabled us to gain a disproportionate share of this
growth. As a result, we have further extended our leadership of the on-trade
eating out market, serving over 110 million meals on an annualised basis. In
drinks, we have held same outlet like-for-like drinks sales to a decline of 1.4%
representing a further substantial gain in drinks market share relative to the
fall in on-trade beer market volumes of 9%**. Good growth has been generated in
sales of soft drinks and wine as a result of the food sales uplifts.
Same outlet like-for-like sales in our pubs in residential areas are up 0.8%
with a particularly strong performance from our Pub Restaurant brands, which
have benefited from the successful appeal of the new menus launched in the
autumn. Food sales growth in Locals Pubs has been up 9.3%, although drinks sales
have seen some negative impact from the smoking ban over the winter months.
In the High Street, same outlet like-for-like sales have grown 0.5% with strong
growth in Central London, a good performance from our High Street pubs in the
rest of the UK, but significant pressure on our late night venues.
Current trading in our Scottish estate in the second year of the smoking ban is
showing good growth with same outlet like-for-like sales up 3.5% in the 27 weeks
of this financial year. This increase has been generated by significant food
growth, up 7.1% combined with a positive drink sales performance up 1.8%.
The Acquired Sites' conversion programme has been rapidly implemented and is
nearing completion with 196 sites converted to our brands and formats. Taking
into account conversions to our franchise model and disposals, there remain only
7 sites to be converted. Initial, post-conversion average weekly sales uplifts
are running at 19% above the levels at which the sites were acquired. We will be
continuing to develop the trading performance of these high quality sites in
order to deliver our three year target of 30% sales uplifts by the end of the
2009 financial year.
Our actions to reduce fixed and variable operating costs have been successfully
implemented to offset the increasing cost pressures this year. Staff
productivity gains have been very strong, reflecting service training
initiatives and the benefits of enhanced scheduling systems. Furthermore, the
continuing food volume growth generated by our sales strategy is driving
significant purchasing gains which are mitigating food cost inflation that will
impact particularly in the second half.
As previously stated on 29 January, net pre-exceptional financing costs will be
higher in the first half compared to last year, however operating cash inflows
continue to be strong as a result of the robust operating performance. We have
also continued proactively to manage the asset base, taking advantage of the
continuing strength of the market for quality sites with over £50m of proceeds
raised during the first half on EBITDA multiples of approximately 18 times.
Consequently net debt has reduced from £2.9bn to approximately £2.8bn since the
closure of the hedges and we anticipate further strong cash inflows in the
second half as a result of summer trading and the completion of the Acquired
Sites' conversion programme.
The quality of our estate, the consumer appeal of our formats and the value and
volume sales strategy have led to accelerated market share gains in both food
and drinks. Continuous improvements in productivity, cost flexibility and
further efficiency gains are demonstrating the resilience of the operating model
amidst the challenges of the smoking ban and pressures on discretionary consumer
The outlook for consumer confidence remains weak while the on-trade beer market
is likely to remain depressed with a continuing shift to the off-trade. This
will be exacerbated by the recent budget duty increases. However beer now
represents only 25% of our sales and we remain confident in the growth prospects
of our value for money food offers, continuing strong drinks market share gains
and further productivity improvements. We expect these factors to underpin a
resilient operating performance for the year as a whole.
The strategic review announced in January remains on schedule and we will
announce the conclusions by the time of our Interim Results on 20 May.
* The 27 week period includes the two Easter trading weeks in 2008 and one week
of the comparable Easter period last year. This has resulted in a small
favourable benefit to like-for-like sales arising despite this year's poor
weather over the holiday period.
** Industry data from October 2007 to February 2008
Appendix: Like-for-like sales
27 weeks ended 5 Same outlet like-for-like Uninvested like-for-like
April 2008 sales growth sales growth
Residential 0.8% (1.5)%
High Street 0.5% 0.2%
Total 0.6% (1.1)%
Note: These results include the Acquired Sites
For further information, please contact:
Erik Castenskiold 0121 498 6513
Kathryn Holland 0121 498 4526
James Murgatroyd (Finsbury Group) 0207 251 3801
There will be a conference call for analysts and investors at 9.00am; please
dial +44(0) 20 7162 0025. The replay will be available until 18 April 2008 on
+44(0) 20 7031 4064, passcode 791871.
Notes for editors:
- 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 over three times greater than that of the average UK pub.
- Mitchells & Butlers' leading portfolio of brands and formats includes Ember
Inns, Harvester, Sizzling Pub Co., Toby Carvery, Vintage Inns, All Bar One,
O'Neill's, Nicholson's and Browns. In addition, Mitchells & Butlers operates a
large number of individual city centre and residential pubs.
- The "Acquired Sites" are the pub restaurant sites purchased from Whitbread plc
in July 2006.
- Same outlet like-for-like sales include the sales performance for the
comparable period in the prior year of all managed pubs that were trading for
the two periods being compared. For the 27 weeks to 5 April 92% of the estate
is included in this measure.
- Uninvested like-for-like sales include the sales performance for the
comparable period in the prior year of those managed pubs that have not
received expansionary investment of more than £30,000 in the two periods being
compared. For the 27 weeks to 5 April 80% of the estate is included in this
Citigroup Global Markets Limited ("Citi") which is authorised and regulated in
the United Kingdom by the Financial Services Authority, is acting for Mitchells
& Butlers and no one else in connection with this announcement and will not be
responsible to anyone other than Mitchells & Butlers for providing the
protections afforded to clients of Citi or for providing advice in relation to
the contents of this announcement, or for any other transaction, arrangement or
matters referred to in this announcement.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if any
person is, or becomes, "interested" (directly or indirectly) in 1% or more of
any class of "relevant securities" of Mitchells & Butlers, all "dealings" in any
"relevant securities" of that company (including by means of an option in
respect of, or a derivative referenced to, any such "relevant securities") must
be publicly disclosed by no later than 3.30 pm (London time) on the London
business day following the date of the relevant transaction. This requirement
will continue until the date on which the offer becomes, or is declared,
unconditional as to acceptances, lapses or is otherwise withdrawn or on which
the "offer period" otherwise ends. If two or more persons act together pursuant
to an agreement or understanding, whether formal or informal, to acquire an
"interest" in "relevant securities" of Mitchells & Butlers, they will be deemed
to be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevant
securities" of Mitchells & Butlers by the offeror or Mitchells & Butlers, or by
any of their respective "associates", must be disclosed by no later than 12.00
noon (London time) on the London business day following the date of the relevant
A disclosure table, giving details of the companies in whose "relevant
securities" "dealings" should be disclosed, and the number of such securities in
issue, can be found on the Takeover Panel's website at
"Interests in securities" arise, in summary, when a person has long economic
exposure, whether conditional or absolute, to changes in the price of
securities. In particular, a person will be treated as having an "interest" by
virtue of the ownership or control of securities, or by virtue of any option in
respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the
Panel's website. If you are in any doubt as to whether or not you are required
to disclose a "dealing" under Rule 8, you should consult the Panel.
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