MITCHELLS & BUTLERS PLC

23 May 2013

HALF YEAR RESULTS

(For the 28 weeks ended 13 April 2013)

Strong earnings growth with further operational and strategic progress

Statutory results

Financial highlights

Operational highlights

Strategic progress

Board composition

Alistair Darby, Chief Executive, commented:

"These results demonstrate the progress we are making through our business change programme. We are growing sales and profit in a tough market by building on the firm foundations of our excellent estate, strong brands, dedicated people and substantial scale.

Having now delivered our restructuring cost savings in full, we have identified specific market segments where we can grow successfully and we have outlined clear operational priorities. By focusing on these areas, I believe that we will provide great experiences for our guests and sustainable returns for our shareholders."

Definitions

a - Like-for-like sales growth includes the sales performance against the comparable period in the prior year of all UK managed pubs that were trading in the two periods being compared. For the 28 weeks to 13 April 2013, 95% of the UK managed estate is included in this measure.

b - Adjusted items are quoted before exceptional items and other adjustments as noted in the Group Income Statement.

c - Net cash flow is detailed within the Financial Review.

d - Adjusted EBITDA for the 52 weeks to 13 April 2013.

There will be a presentation for analysts and investors at 9.30am at Nomura International plc, 1 Angel Lane, London, EC4R 3AB. A live webcast of the presentation will be available at www.mbplc.com. The conference will also be accessible by phone: + 44 20 3059 8125 and quote "Mitchells & Butlers". The replay will be available until 30/05/2013 on + 44 121 260 4861,replay access pin 4407008.

For further information, please contact:

Notes for editors:

BUSINESS REVIEW

We are the UK's largest operator of managed restaurants and pubs, with a leading portfolio of well-recognised brands and a high quality freehold estate. We focus on long-term growth in the eating-out market. Despite the economic downturn we have delivered a 45% increase in food sales since 2007 and around three-quarters of our turnover is now generated from the guests who eat in our restaurants and pubs.

We are a strong and resilient business:

These strengths represent a solid foundation on which to build. Against this background, we are continuing to implement our business change programme so that we are completely focused on our people, our practices, our guests and our profits. We believe that if we develop, retain and recruit exceptional people to operate scale brands and formats in which our guests love to eat and drink, then we will achieve market leadership and deliver sustainable growth in shareholder value.

The market, brand positioning and expansion opportunities

We operate a wide range of scale brands and formats which offer food and drink across a broad spectrum of price points and occasions, from a casual meeting with friends to special occasion dining.

We have completed a significant piece of consumer research, with the objective of updating our understanding of current and future consumer trends, opportunities, and brand growth potential. As part of this research, we interviewed 8,000 consumers about 14,000 leisure occasions they had recently experienced, met industry commentators to discuss future trends in eating and drinking out, examined our own brand positioning and that of our competition and conducted a review of macro-economic indicators and forecasts.

We believe that there are areas of substantial opportunity to grow through increasing share in our highly fragmented market, worth £75bn in the UK^a. We have identified five 'market spaces' in which to focus, covering around half of the total market size.

Of these sectors, Upmarket Social, Special and Family currently benefit from the most attractive consumer trends. We will invest in these areas and expand our brands where possible. In the Everyday Social space, we will optimise and invest in our brands to grow like-for-like sales and profits. In the Heartland space, we will protect our highly cash generative formats by competing on the basis of giving the greatest value to consumers that have been most exposed to the economic downturn. We call this our 'five-star' approach to the market.

We will maintain our high degree of focus on capital returns rather than targeting specific numbers of new openings each year. However, after a lower level of expansionary capex this year of around £30m, we expect to return to a spend of between £50m and £80m pa in the medium term, largely in the Upmarket Social, Special and Family spaces.

Note

a - Source: NPD Crest and CGA.

Business change programme

In FY 2012, we began a transformation programme aimed at placing customer service at the heart of our organisation by removing unnecessary bureaucracy. The first stage in this change programme was to restructure our central functions and modernise our core IT infrastructure. This was completed last year, delivering an annualised cost saving of £10m.

The second stage is a transformation of our operations and culture - balanced between our desire to progress change across the business and the need to safeguard the delivery of our profit targets. As this transformation gathers pace, its success will be reflected in our financial performance.

To deliver this transformation, we must make progress across our four operational priorities: our people, our practices, our guests and our profits. Performance against these priorities is measured at all levels across the organisation and we will report progress on a regular basis.

Our people: The most sustainable competitive advantage we can generate is through our 40,000 people, serving our guests with enthusiasm, professionalism and a personal touch throughout the business. The ways of working trials have been incorporated into our 'Good to Great' programme. This long-term programme is central to our plans to enable and empower general management and their teams to deliver great guest service. We are currently working on various projects to reduce staff turnover as we believe that restaurants and pubs with lower staff turnover give better service to guests and as a result are more popular places to eat and drink. We have redesigned our guest service and food capability training and we have launched a new talent planning framework to develop our future leaders. We are forming links with schools and colleges across the country to highlight hospitality as a career path and employ over 1,500 apprentices across the Group who are completing a work-based, nationally recognised qualification.

Our practices: Practices refer to the professional, safe and efficient way that we run our operations. Through the right people doing the right things at the right time, we aspire to be market leaders in operational practices. We remain focused on improving our already high scores in the FSA's Food Hygiene Ratings ('Scores on the Doors') and continue to prioritise cost effective purchasing and efficient labour scheduling. We are piloting new IT systems in our restaurants and pubs to ensure we take full advantage of the IT infrastructure investment made last year to improve our speed and quality of guest service.

Our guests: We continue to invest in guest service and amenity across our pubs, bars and restaurants. Based on over 700,000 pieces of guest feedback each year, we have identified the 'trust builders' and 'loyalty builders' for all of our brands. These are the key factors which increase the chance of guests re-visiting our restaurants and, in addition, recommending them to their friends. Individual restaurants and pubs are able to track their progress against these measures, allowing them to take action where necessary to improve guest service. We continue to monitor 'net promoter score'^a, a widely used industry measure of guest satisfaction, and have made further progress in the first half, increasing our score from 55% in FY 2012 to 59% at the end of this reporting period.

Our profits: If we deliver improvements against all of the operational priorities described above, we expect our operational achievements to be reflected in our financial results. Rising guest satisfaction will support our like for like sales, which we will benchmark against comparable operators of pubs and restaurants. Our margins already compare very favourably to our peer group when normalised for allocation of central costs, estate profile and food mix. Our ambition is to protect our margins and seek incremental opportunities to expand them further in the medium term.

In summary, by focusing on our people, our practices, our guests and our profits, we will continue to transform the business and create real and sustainable shareholder value.

Board composition

During the first half, we were delighted to welcome Imelda Walsh and Colin Rutherford to the Board as independent Non-Executive Directors. Today we welcome Stewart Gilliland as an independent Non-Executive. All three bring a wealth of experience to the Board and their appointments demonstrate our commitment to bring our governance structures more in line with best practice guidance.

Outlook

Like-for-like sales have increased 1.0% in the five weeks since the half year end. For some time to come, we expect consumer confidence and discretionary income growth to remain subdued. Consumers in lower income deciles are likely to continue to be more stretched than more affluent groups and London and the South East are likely to remain the main geographic drivers of economic growth. We are confident in our ability to grow further in the future as a result of our broad brand portfolio, high quality assets and the transformation of our operations and culture, as set out today.

Notes

a - We ask our guests how likely they are to recommend our restaurants and pubs us to their friends, families and colleagues, scored out of 10. Each year we obtain over 700,000 responses. Net promoter score is defined as the percentage of responses where we score 9 or 10 out of 10 ('brand promoters') less the percentage of responses where we score 0 to 6 out of 10 ('brand detractors'). Responses scoring 7 or 8 ('passives') are ignored in the calculation.

FINANCIAL REVIEW

In the first half, Mitchells & Butlers delivered a strong financial performance, growing adjusted EPS by 17% whilst increasing cash flow, reducing debt and continuing to invest prudently in new growth opportunities.

At the end of the first half, the business comprised 1,582 managed businesses in the UK and Germany and 61 franchised businesses.

Revenue

Revenue increased 2.3% to £991m as a result of modest growth in like-for-like sales together with the contribution from new restaurants and pubs. Revenue growth was driven principally by food sales which comprise 51% of total sales and were up 4.5% in the period, whilst drink sales were marginally higher than last year.

Like-for-like sales were up 0.3%, with strong trading across special occasions such as Christmas, Valentine's Day and Easter but weaker trading in January and March as a result of extended periods of cold and snowy weather. In both drink and food, volumes have been lower year-on-year with positive movements in spend and price.

Since the end of the first half, like-for-like sales have increased 1.0%. In the first 33 weeks (to 18 May 2013), like-for-like sales growth was 0.4%.

Operating profit

Adjusted operating profit of £145m was 5.1% higher than last year. During the period the business continued to invest in improving levels of service and amenity, spending £4m more than last year on a like-for-like basis on outlet level labour and repairs. Offsetting this investment was the remaining £4m of cost savings announced a year ago from restructuring the central support functions and IT systems, which have now been delivered in full.

Overall, operating margins were 40 basis points higher than H1 2012 at 14.6% with the benefits from the restructuring, menu management and lower new site opening costs offsetting the impact of alcohol duty increases from 2012 and higher costs from increases to the national minimum wage, food inflation and higher business rates.

The Company's financial performance is subject to seasonal trends between the first and second half of the financial year. The first half, covering 28 weeks largely across autumn and winter, usually includes lower levels of average weekly take as a result of seasonal weather conditions. Consequently, the adjusted operating profit margin is usually lower in the first half year than in the year as a whole.

The Company welcomes the Government's decision in the 2013 Budget to reduce alcohol duty by 1p and remove the duty escalator. The reduction was immediately passed on in full and was a welcome recognition from Government that pubs provide a safe and welcoming place to drink and play an important role in employment creation.

Internal rent

A regime of internal rents is in place to enable greater internal transparency around the performance of freehold and leasehold properties and external transparency concerning the performance of the operating and property functions. The operating performance is monitored on a regular basis through a system of profit reviews at all levels of the Group. Estate management is primarily monitored through the Portfolio Development Committee. Further details are given in note 2.

Interest

The interest charge for the first half consists of three main elements: a finance cost of £71m relating to interest paid on the Company's securitised debt; finance income of £1m relating to the cash deposit balances; and the net finance charge from pensions under IAS 19 of £3m.

The IAS 19 net finance charge represents the difference between the expected return on a pension scheme's assets and an interest cost on its liabilities. IAS 19 (revised): Employee Benefits (as issued by the IASB in 2011, effective from periods beginning 1 January 2013) requires the net finance charge to be calculated by calculating the scheme's assets and liabilities and applying a corporate bond discount rate to the net position, thus limiting the expected returns on scheme assets to the rate that an entity applies to its liabilities. As the estimated return on assets for the Group's schemes is currently similar to the discount rate used to calculate the interest cost, it is estimated that the new rules will not have a material impact on the charge in forthcoming years.

Taxation

The estimated annual effective tax rate is 23.5%. This excludes £2.5m of non-recurring prior year tax credits in the first half which reduced the pre-exceptional tax expense to £15m.

Exceptional items and other adjustments

The net finance charge for pensions referred to above, together with the associated tax credit, was the only exceptional item or other adjustment in the first half to be excluded from adjusted profit measures.

Earnings per share

Adjusted earnings per share were 14.6p, 17% higher than last year. Basic earnings per share were 14.1p (H1 2012: 8.8p). Further details are provided in note 6.

Cash flow and net debt

EBITDA of £205m was generated by the business in the first half, up £7m against last year. Working capital inflows and non-cash items of £21m were largely generated by the timing of supplier payments. Pension deficit contributions of £20m were made, in line with the deficit recovery plan agreed with the Trustees following the 2010 triennial review of the schemes. Cash flow from operations was £206m, £20m higher than last year.

During a period of focus on returns and market dynamics, expansionary capital investment reduced to £11m in the period. In the medium term this is expected to return to its previous level in the range of £50m to £80m. There were £1m of payments relating to exceptional restructuring costs charged in the prior year. Net cash flow generation was £70m in the first half. In addition, there were £27m of mandatory bond amortisation payments.

Net debt was reduced to 4.3 times the rolling 52 week adjusted EBITDA (4.5 times at the last year end). Net debt within the securitisation was £2.0bn and cash held outside the securitisation was £0.2bn.

Capital expenditure

Total capital investment in the first half was £59m, £31m lower than the first half of last year. Of this amount, £44m was spent on maintaining and enhancing the high level of amenity in the Company's restaurants and pubs, £4m on infrastructure projects, mainly in improving energy efficiency, and £11m was spent on new site openings and conversion projects.

EBITDA returns on capital expenditure made since the start of the current programme of expansion have remained stable at 17%. Given the varying nature of freehold acquisitions, leasehold retail and leisure park sites and conversion projects, the business reviews returns by category:

Pensions

The IAS 19 pension deficit has increased to £100m. The value of assets increased from £1,610m as at the last year end to £1,807m following Company contributions and positive investment performance. However, liabilities increased from £1,698m to £1,907m, primarily as a result of lower yields on AA-rated corporate bonds and higher inflation rate assumptions.

The Company is now in the early stages of discussions with the Trustee of the pension schemes regarding the triennial actuarial valuation which is dated as at 31 March 2013. Despite strong asset returns there will be additional upward pressure on the funding deficit from the further fall in real gilt yields in the first quarter of 2013.

Dividends

As indicated in the Full Year Results of November 2012, the Company is mindful of the attraction of the resumption of dividend payments and will continue to monitor forecast cash flow generation before taking a decision on timing and quantum.

Risk factors and uncertainties

The risks and uncertainties that affect the company remain unchanged and are set out on pages 18-20 of the 2012 Annual report and accounts which is available on the Mitchells & Butlers web site at www.mbplc.com. In summary, these are:

Responsibility statement

The Directors confirm that to the best of their knowledge this condensed set of financial information, which has been prepared in accordance with IAS 34, gives a true and fair view of assets, liabilities, financial position and profit or loss of the Company, and the undertakings included in the consolidation taken as a whole, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

This responsibility statement was approved by the Board of Directors on 22 May 2013 and is signed on its behalf by Tim Jones, Finance Director.

GROUP CONDENSED INCOME STATEMENT

for the 28 weeks ended 13 April 2013

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME

for the 28 weeks ended 13 April 2013

GROUP CONDENSED BALANCE SHEET

13 April 2013

GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY

for the 28 weeks ended 13 April 2013

GROUP CONDENSED CASH FLOW STATEMENT

for the 28 weeks ended 13 April 2013

NOTES TO THE INTERIM FINANCIAL INFORMATION