MITCHELLS & BUTLERS PLC

LEI no: 213800JHYNDNB1NS2W10

 

2 July 2020

 

HALF YEAR RESULTS

 

(For the 28 weeks ended 11 April 2020)

 

Highlights

-
Experience of German business provides clear path for re-opening
-
Well positioned to benefit from recovery on re-opening

 

Reported results

-

Trading results

-
First half trading includes nearly four weeks of enforced closure due to Covid-19
-
-
Adjusted operating profita £108m (HY 2019 £151m)
-
Adjusted earnings per sharea 7.2p (HY 2019 16.1p)

 

Balance sheet and cash flow

-
Unsecured committed financing facilities extended by £100m to total £250m to 31 December 2021
-
Capital investment of £82m (HY 2019 £90m), including 2 new site openings and 166 conversions and remodels (HY 2019 208)
-
Cash flow of £58m (HY 2019 £23m)
-
Full property valuation and impairment review undertaken resulting in an overall decrease in book value of £524m
-
Net debt of £2.2bn including £543m of lease liabilities following adoption of IFRS 16

 

 

Phil Urban, Chief Executive, commented:

 

"The business was performing very well before the enforced closure in response to Covid-19, building on the strengths of our estate of mainly freehold properties, our diversified and well-loved brands and our team's industry leading operational skills.  These assets, coupled with our early experience of re-opening in Germany, give us a clear plan for re-opening and ensure that we are well placed to continue to bring people and communities together and to keep Mitchells & Butlers at the forefront of the eating and drinking-out market."

  

 

 

 

Definitions

 

a - The Directors use a number of alternative performance measures (APMs) that are considered critical to aid the understanding of the Group's performance.  APMs are explained later in this announcement.

 

b - As measured by the Coffer Peach business tracker. 

 

There will be a conference call held today at 8:30am accessible by phone on 0203 936 2999, access code: 471216, slides will be available on the website at www.mbplc.com.  The replay will be available until 16 July 2020 on 0203 936 3001, access code: 174438.

 

All disclosed documents relating to these results are available on the Group's website at www.mbplc.com 

 

For further information, please contact:

 

Tim Jones - Chief Financial Officer
+44(0)121 498 6552
Amy de Marsac - Investor Relations
+44(0) 7712 538660
James Murgatroyd (Finsbury)
+44(0)20 7251 3801

 

Note for editors:

Mitchells & Butlers is a leading operator of managed restaurants and pubs. Its portfolio of brands and formats includes Harvester, Toby Carvery, All Bar One, Miller & Carter, Premium Country Pubs, Sizzling Pubs, Stonehouse, Vintage Inns, Browns, Castle, Nicholson's, O'Neill's and Ember Inns. In addition, it operates Innkeeper's Collection hotels in the UK and Alex restaurants and bars in Germany. Further details are available at www.mbplc.com and supporting photography can be downloaded at www.mbplc.com/imagelibrary.

 

 

CURRENT TRADING AND OUTLOOK

 

On 12 June we announced that we had extended our unsecured financing facilities by £100m to total £250m, and that temporary terms have been agreed with bondholders to avoid technical breaches which would have occurred due to forced closure.  These arrangements provide stability and flexibility for the group to navigate these uncertain times and provide sufficient liquidity to survive a delay in re-opening beyond our current expectation of early July.

 

We continue to be focused on emerging from the Covid-19 induced crisis in a position of strength with the intention of continuing to build the business and outperforming the industry.

 

At this time the business remains closed under government guidance to limit the spread of Covid-19.  Uncertainty remains over a number of important variables, including the re-opening profile of our sites, the social distancing measures which will need to be in place and the strength of consumer demand.  As such we do not feel it is currently meaningful to give forward guidance.

 

These financial statements have been prepared under the going concern basis, the specific considerations in reaching this assessment can be found in note 1 to the financial statements. 

 

BUSINESS REVIEW

 

The first half of the financial year has been dominated by the enforced closure of the estate in response to the Covid-19 outbreak. 

 

On 16 March the government advised the public to not attend busy places, including pubs and restaurants, in order to limit the spread of the virus.  This led to a sharp and immediate reduction of like-for-like sales.  Then, on 20 March, the government announced a directive to close all pubs and restaurants with immediate effect as measures to slow the spread of the virus increased.  The first half therefore includes four weeks of either mandated closure or government guidance not to visit pubs and restaurants.

 

Before Covid-19 we had enjoyed a strong start to the year.  Like-for-like salesa growth of 2.6% in the first quarter had been followed by a period of softer sales due to the stormy weather, but we remained c.1% ahead of the marketb and continued to see the beneficial impact of our Ignite programme of work.  Stronger margins, better labour control and tighter cost management had resulted in operating profit growth and we had just started to refresh the range of Ignite initiatives, such that we were confident of a strong finish to the year.

 

We closed all our businesses immediately on the evening that lockdown was announced to protect our team and our guests.  Established communication channels were set in motion to ensure that we could keep the whole team updated during what was a period of confusion and concern for everyone.  In keeping with our values, we maintained an honest and open style to all communication and carefully considered our options in the light of the developing situation, including emerging details on government support.

 

We swiftly set up a closedown team to instigate a structured approach to closing the businesses and to minimise losses.  Stock loss was an immediate issue and so as to reduce the impact, perishable items were sold directly from sites or donated through our established relationship with the charity Fareshare.  In total we were able to donate 11.5 tonnes of food, equivalent to 27,500 meals, to vulnerable communities which would otherwise have gone to waste. Cash floats, including those in amusement machines were banked, full stock counts were taken, and each business was physically secured for a prolonged period of closure.

 

The rapid closure presented significant challenges in terms of managing and mitigating the profit and cash flow impact of lost revenue.  A number of measures were taken from the outset of the crisis to protect the business including putting over 99% of our employees on furlough with basic pay for all employees including the Board reduced to between 60% to 80% of normal pay, depending on seniority.  We quickly reduced operating costs to the minimum required to keep the estate secure, safe and in good condition and maintained strong control of working capital.  All discretionary capital expenditure was halted, including our development programme, and all temporary contracts have been cancelled. 

 

Throughout the closure period our central communications team have worked hard to keep team members connected and informed, including the launch of a new support portal which can be accessed from mobile devices, and which includes regularly updated FAQs, our Employee Assistance Programme, wellbeing resources and volunteering opportunities.  Social media platforms have also been used to create inclusive groups across all of our team members, from sites and the head office, to share positive and engaging content and ideas. The welfare and mental health of our team has been a primary concern, particularly for those colleagues who have isolated alone, and we have been encouraged in the way the business has pulled together at this difficult time.

 

We have had a skeleton team working throughout lockdown, including a field-based team that have maintained the businesses, responding to break-ins and emergency call outs. A structured cadence of meetings throughout the week has helped to keep everyone informed, as Covid-19 policy and the industry response has developed. Mitchells & Butlers has played a full role in the UK Hospitality led forums that have helped to devise the Hospitality Sector Protocols Document that the government issued for the sector, and we continue to lobby government directly to ensure that we, and the sector, get the support we need to protect jobs once we re-open and then re-build.

 

We are working to an early July date for English sites to re-open, with Wales and Scotland following over the next two weeks and have developed a detailed re-opening plan for the business.  Each site will have clear directional and spacing signage to explain and help maintain social distancing; sanitising stations; disposable menus; table spacing; capacity management where possible through our online booking engines; a cashless-first approach (and in some businesses cashless-only); and new brand specific Covid-19 safe service cycles such as vegetables being served in Toby Carvery, as opposed to the usual self-serve model. We have also worked hard to ensure that our team can both be and feel safe at work, including new protocols for deliveries, and where appropriate for take-away food collection.  Key to these measures is the government guidance on the necessary distance between people, clearly a 1-metre distance will allow for significantly higher capacity and will impact the extent of adaptations to service cycles required.

 

Our German business, Alex, re-opened through mid to late May, affording us valuable insight into the challenges and opportunities ahead, and we are encouraged that sales levels have grown each week since re-opening.  City centre sites have been the slowest to recover, but conversely some suburban businesses have generated days of year on year growth.  From the 1st July, VAT on food in Germany will drop from 19% to 7% for a year, and on all other categories, from 19% to 16%, through the rest of the calendar year.  We are therefore confident that the business will recover quickly, as the impact of Covid-19 subsides.

 

OUR STRATEGIC PRIORITIES

 

The fundamental strengths of our business remain. We have a well-known and diversified brand portfolio, an 83% freehold estate in strong locations, an experienced and proven management team and, going forward, we intend to continue to build on the momentum previously gained.  In the short to medium term, our focus will be on successfully re-opening the business in the current challenging environment, ensuring the safety of our team members and guests, and on growing the business back to, and beyond, the levels of trade that we were enjoying before the pandemic. 

 

Our Ignite programme of work remains at the core of our long-term growth plans and we had recently refreshed the initiatives and opportunities available to us.  Our immediate focus will be on the successful rebuilding of trade following this period of closure and we will be prioritising the shorter-term initiatives that have a quick impact on the business, such as sales driving initiatives.  We remain confident of our ability to deliver long term and sustained efficiencies and business improvements through the existing Ignite programme and will be working to refine and roll out the new initiatives once the business is trading well again.

 

 

Principal risks and uncertainties - Covid-19

 

We continually monitor and assess the principal risks and uncertainties of the business and operating environment.  Given the way in which Covid-19 has rapidly altered the environment in which we trade we note the new risks and uncertainties we now face in addition to the previously identified risks detailed on pages 40 to 44 in our FY 19 Annual Report:

 

Social distancing measures

Risk: We support the need for social distancing measures to reduce the spread of Covid-19.  While social distancing measures are in place the capacity of our businesses will be reduced, impacting the offer to our guests and the financial model of our operations.  Given the unknown nature of the virus the duration of distancing measures is uncertain.  

 

Controls / mitigating activity:  We will apply a risk assessment to each of our businesses and only re-open those which we believe can operate under the new guidelines.  For the pubs and restaurants which we can re-open we will adapt the format and practices of our sites to ensure that the distancing guidelines provided by the government can be adhered to, protecting both team members and guests.  We will take measures to protect the financial health of the business whilst operating at reduced capacity and continue to closely manage the cash position of the group.  We will continuously review the latest guidelines and continue to adapt our business operations in response in an agile manner.

 

Consumer behaviour

Risk: As pubs and restaurants re-open, 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 our experience.  Equally some consumers may not heed the measures put in place to restrict the spread of the virus, potentially putting our team members and other guests at risk.    

 

Controls / mitigating activity:  Our priority is to protect our team members and guests, providing an eating out experience which can be enjoyed.  We have very strong health and safety practices already in place in our businesses, which we will enhance and evolve to tackle the challenges we now face.  We will be transparent with guests as to these measures such that they can trust in us.

 

 

FINANCIAL REVIEW

 

On a statutory basis, loss before tax for the half year was £(121)m (HY 2019 profit of £75m), on sales of £1,039m (HY 2019 £1,186m). 

 

The Group Income Statement discloses adjusted profit and earnings per share information that exclude separately disclosed items to allow a better understanding of the trading of the Group.  Separately disclosed items are those which are separately identified by virtue of their size or incidence.

 

 
 
 
 
 
 
Statutory
 
HY 2020
HY 2019
HY 2020
HY 2019
 
£m
£m
£m
£m
Revenue
1,039
1,186
1,039
1,186
Operating (loss)/profit
(51)
140
108
151
(Loss)/profit before tax
(121)
75
38
86
(Loss)/Earnings per share
(25.0)p
14.3p
7.2p
16.1p
Operating margin
(4.9)%
11.8%
10.4%
12.7%

 

At the end of the period, the total estate comprised 1,745 sites in the UK and Germany of which 1,674 are directly managed.

 

Changes in accounting policies

 

These are the first set of accounts the Group has published since the adoption of IFRS 16 (Leases).  As a result of adopting the modified retrospective (asset equals liability) method, prior year comparatives have not been restated.  A full impairment review of the right-of-use assets has been completed on transition to the new standard with the resulting impairment, net of any reversal of onerous lease provisioning, presented as an adjustment to opening reserves. Further details are included in note 13 to the financial statements.

 

The main impact of the adoption of this new standard on our financial statements, which should accrue evenly across the year, is as follows. On the balance sheet, recognition of a right of use asset of £466m and a lease liability of £543m.  On the full year income statement; an uplift in EBITDA of c.£50m (through lower rental costs) and a reduction in pre-tax profits (after increased depreciation and interest charges) of c.£8m, reducing basic earnings per share by 1.5p. 

 

Revenue

 

Total revenue of £1,039m was 12.4% lower than last year due to the government directive to close all sites on 20 March in response to the Covid-19 outbreak.  

 

As at week 24, the last full week of trading before closure to 14 March, like-for-like salesa grew by 0.9% with food salesa up by 1.3% and drink salesa up by 0.3%.  The Group had a strong first quarter to week 14, with a particularly strong festive season. The second quarter from weeks 15 to 24 was truncated by enforced closure of all sites on 20 March 2020 and includes the negative impact of the storms and resulting flooding throughout the UK in February followed by a sharp decline in sales due to early restrictions put in place in response to the Covid-19 pandemic. 

 

Like-for-like salesa growth:
Weeks 1 - 14
Weeks 15-24
Weeks 1 - 24
 
FY 2020
FY2020
FY 2020
 
 
 
 
Food
3.0%
(1.3%)
1.3%
Drink
1.8%
(2.1%)
0.3%
 
 
 
 
Total
2.6%
(1.7%)
0.9%

Separately disclosed items

 

Separately disclosed items are identified due to their nature or materiality to help the reader form a better view of overall and adjusted trading.  

 

A charge of £11m was recognised for costs directly associated with the Covid-19 pandemic, which relate primarily to the disposal or donation of short dated food and drink stock items as a result of the government enforced closure of pubs.  

 

A £148m charge is recognised relating to valuation and impairment of properties, comprising a £130m charge relating to downward valuation movements on freehold and long leasehold sites, a £2m impairment charge on short leasehold and unlicensed properties and a £16m charge for impairment of right-of-use assets.  The majority of these movements are a direct result of Covid-19 and the perceived trading environment present at the reporting date. With all pubs closed at the half year, assumptions reflect the impact of no sales during temporary closure and multiples have also been reduced to reflect uncertainty and an absence of observable comparable transactions at that time.

 

 

Adjusted operating profita of £108m was 28.5% lower than last year.  The period included a little over three weeks of enforced closure of all sites. After the completion of closedown activity, across the estate and central functions, over 99% of the Group's employees were subsequently furloughed under the Coronavirus Job Retention Scheme and all non-essential costs eliminated.

 

Statutory operating margin of (4.9)% was 16.7ppts lower than last year, materially impacted by the closure period and valuation and impairment reviews.  Adjusted operating margina for the half was 2.3ppts lower than last year at 10.4%. 

 

Interest

 

Net finance costs of £68m for the half year were £7m higher than last year reflecting an additional £10m recognised in respect of interest on lease liabilities due to IFRS16 adoption.

 

The net pensions finance charge was £2m (HY 2019 £4m), the charge for the full year is expected to be £3m.

 

Earnings per share

 

Basic (loss)/earnings per share, after the separately disclosed items described above, were (25.0)p (HY 2019 14.3p).  Adjusted earnings per sharea were 7.2p, 55.3% lower than last year.  The weighted average number of shares in the period was 428m and the total number of shares issued at the balance sheet date was 429m.

 

Cash flow

 

 
HY 2020
HY 2019
 
£m
£m
193
217
Non-cash share-based payment and pension costs
2
4
Operating cash flow before adjusted items, movements in working capital and additional pension contributions
195
221
Working capital movement
(34)
32
Pension deficit contributions
(25)
(24)
Cash flow from operations before adjusted items
136
229
Cash flow from adjusted items
(11)
(1)
Capital expenditure
(82)
(90)
Interest
(61)
(55)
Tax
(16)
(17)
Disposal proceeds
-
1
Other
(1)
(1)
Principal portion of lease liability
(12)
-
Revolving credit facility
150
-
Net cash flow before bond amortisation
103
66
Mandatory bond amortisation
(45)
(43)
Net cash flow before dividends
58
23
 
 
 
 
 
 

The business generated £193m of EBITDA before separately disclosed itemsa

 

Working capital movement is summarised as; an increase in trade receivables of £10m, the majority of which relates to Coronavirus Job Retention Scheme monies due, offset in part by the absence of business rates prepayment, following the announcement of government Covid-19 support for businesses; a decrease in trade and other payables of £30m, primarily a reduction in accruals and VAT liability following the loss of sales in the last three weeks of the period and; a decrease in inventories of £6m which is the direct result of Covid-19 and the enforced closure of pubs and restaurants.

 

Capital expenditure of £82m relates to investment projects undertaken before the capital programme was suspended in light of the Covid-19 business closure.   

 

Following the adoption of IFRS16, leases are now included in net debt resulting in a corresponding presentational increase in book gearing of approximately 70 bps.  Book debt at the half year was £2,158m, including lease liabilities of £543m.

 

Capital expenditure

 

Capital expenditure of £82m comprises £79m from the purchase of property, plant and equipment and £3m in relation to the purchase of intangible assets. 

 

The investment programme was suspended in March as part of the cash management strategy in response to Covid-19, with only essential spend being undertaken after that event. 

 

Given the closure, into the second half of the financial year, we do not believe it will be possible to calculate a current and meaningful return on investment as all sites are impacted by closure. This will be particularly so for those that have not been trading for a full year.

 

 

 

 

 

 

 
HY 2020
HY 2019
 
£m
#
£m
#
26
 
30
 
 
 
 
 
 
Remodels - refurbishment
41
138
43
182
Remodels - expansionary
2
5
4
11
Conversions
10
23
8
13
Acquisitions - freehold
2
1
-
-
Acquisitions - leasehold
1
1
5
2
Total return generating capital expenditure
56
168
60
208
 
 
 
 
 
Total capital expenditure
82
 
90
 

 

Property

 

The mandatory closure of pubs and restaurants due to the Covid-19 pandemic is considered to be an indicator of impairment of property, plant and equipment.  As a result, a directors' revaluation has been completed of the freehold and long leasehold properties at the half year, although it has not been possible to physically visit sites. In addition, an impairment review has been performed for the short leasehold properties and right-of-use assets.  Further details of the assumptions applied are detailed in note 8.

 

The overall property portfolio valuation has decreased by £524m, reflecting a £132m separately disclosed net impairment charge in the income statement and a £392m net decrease in the revaluation reserve. We believe that this represents a reasonable valuation, based on perceived market conditions at the balance sheet date but note the high degree of uncertainty at that time, shortly following enforced shutdown of all sites in the hospitality sector, coupled with an absence of observed comparable transactions. 

 

Pensions

 

The Group continues to make pension deficit payments as agreed as part of the triennial pensions valuation with the schemes' Trustee at 31 March 2019, which showed an actuarial deficit of £293m.  It was agreed that the deficit would continue to be funded by cash contributions of £49m per annum indexed to 2023.  However, the Group has agreed with the Trustee that the contributions into the Mitchells & Butlers Pension Plan and the Mitchells & Butlers Executive Pension Plan would be suspended in respect of the monthly contributions in respect of April, May and June 2020 and those contributions have been added onto the end of the agreed recovery plan so that those contributions will be payable in 2023.  In 2024 an additional payment of £13m will be made into escrow, should such further funding be required at that time.

 

In light of the Covid-19 outbreak it has been mutually agreed by the Trustee and the Group that the trial of the Trustee's application to court concerning the power to determine the rate of inflation to be applied to pension increases for certain sections of the membership in excess of guaranteed minimum pensions, be adjourned until mid-2021.

 

Net debt and facilities

 

Debt within the Group securitisation arrangements is subject to quarterly testing on both a rolling half and full year basis. Following consideration of the impact of the Covid-19 pandemic and the enforced closure of all the Group's businesses from 20 March 2020 it was concluded that, in a highly uncertain environment, the Group was at risk of being in breach of a number of covenants within these debt arrangements through the second half and into next year. As such, alternative and revised arrangements have subsequently been agreed both with the controlling creditor and with trustee of the securitisation and the Group's main unsecured banks. These arrangements, which include extension to the existing term of unsecured facilities, the provision of an additional £100m of unsecured liquidity and waivers for anticipated covenant defaults, are summarised in note 15 on post balance sheet events and note 1 on going concern.

 

Further details can be found at https://www.mbplc.com/infocentre/debtinformation/.

 

 

Going Concern

 

The outbreak of Covid-19 during the first half of the year casts a high degree of uncertainty as to the future financial performance and cash flows of the group. The implications of this, and particularly the enforced shutdown of all the Group's sites from 20 March 2020, have been considered by the directors in assessing the ability of the Group to continue as a going concern. Further detail is provided in note 1 to the financial statements.

 

Both before and after the enforced shutdown urgent action was taken to protect access to liquidity, by drawing in full unsecured facilities of £150m, and to protect the business through limiting cash outflows, including: cancelling all discretionary capital expenditure, furloughing of over 99% of the workforce, where possible reaching agreement with suppliers and other creditors on extended payment terms, and the elimination of all non-essential operating expenses.

 

Subsequently agreement was reached with the Group's main creditors on a number of new arrangements which provide a platform of additional liquidity and improved financial flexibility for the Group in order to meet the challenge presented by Covid-19.  These included extension of the term of existing unsecured facilities and the raising of an additional £100m of unsecured facilities to the same date, to give a total of £250m committed unsecured facilities available to the group until 31st December 2021.

 

In addition, within the securitisation, a number of concessions have been agreed including waiver against default on financial covenant breaches, up to July 2021 for the six month look-back test and to September 2021 for the twelve month look-back test, and the ability to access further liquidity for debt service costs of up to £100m through drawing the liquidity facility within the securitisation.

 

At the date of approval of these interim results the Group has cash on hand of £100m and undrawn committed facilities totalling £150m.  When closed and under full furlough arrangements, the four week EBITDA loss (including rent) totals £15m with a cash outflow before debt service costs over the four week period of £30m to £35m after payment of legacy supplier balances.  The two main uncertainties in the year ahead are considered to be the duration of the enforced shutdown and the subsequent strength of recovery as sites re-open. To that end revised financial arrangements, outlined above, have been assessed against a base case, in which the majority of sites re-open in July 2020 (being the current expectation), and a severe but plausible downside case where no sites open before October 2020.  In both cases sales are assumed to take nine months to build back up to prior year levels.

 

After due consideration of these factors the directors believe that they have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the 12 months from the date of approval of these financial statements, and therefore continue to adopt the going concern in their preparation.

 

Director's responsibility statement

 

We confirm that to the best of our knowledge:

-
The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as required by DTR 4.2.4R and to the best of their knowledge gives a true and fair view of the information required by DTR 4.2.4R;
-
The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 28 weeks and description of principal risks and uncertainties for the remaining 24 weeks of the year); and
-

 

This responsibility statement was approved by the Board of Directors on 1 July 2020 and is signed on its behalf by:

Tim Jones

Chief Financial Officer

1 July 2020

 

Definitions

 

a - The Directors use a number of alternative performance measures (APMs) that are considered critical to aid the understanding of the Group's performance. Key measures are explained later in this announcement.

 

 

GROUP CONDENSED INCOME STATEMENT                                              

for the 28 weeks ended 11 April 2020

 
 
2020
 
2019
 
2019
 
 
 
 
 
 
 
 
 
 
 
 
Notes
             £m
 
£m
 
£m
 
£m
 
£m
 
£m
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
3
1,039 
 
1,039 
 
1,186 
 
1,186
 
2,237 
 
2,237 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating costs before depreciation, amortisation and movements in the valuation of the property portfolio and right-of-use assets
 
(846)
 
(857)
 
(969)
 
(988)
 
(1,801)
 
(1,820)
Net profit arising on property disposals
 
 
 
 
 
 
1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
193 
 
182 
 
217 
 
199 
 
436 
 
418 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation, amortisation and movements in the valuation of the property portfolio and right-of-use assets
 
(85)
 
(233)
 
(66)
 
(59)
 
(119)
 
(121)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
 
108 
 
(51) 
 
151 
 
140 
 
317 
 
297
 
 
 
 
 
 
 
 
 
 
 
 
 
Finance costs
5
(69)
 
(69)
 
(62)
 
(62)
 
(114)
 
(114)
 
 
 
 
 
 
 
 
 
 
 
 
 
Finance revenue
5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net pensions finance charge
(2)
 
(2)
 
(4)
 
(4)
 
(7)
 
(7)
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit/(loss) before tax
 
38    
 
(121) 
 
86 
 
75 
 
197 
 
177 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax (charge)/credit
(7) 
 
14  
 
(17)
 
(14)
 
(38)
 
(34)
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit/(loss) for the period
 
31 
 
(107) 
 
69 
 
61 
 
159 
 
143 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings/(loss) per ordinary share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
7.2p
 
(25.0)p
 
16.1p
 
14.3p
 
37.2p
 
33.5p
 
 
Diluted
7.2p
 
(24.8)p
 
16.0p
 
14.2p
 
37.1p
 
33.3p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
a
Separately disclosed items are explained and analysed in note 4.
 
b
Earnings/(loss) before interest, tax, depreciation, amortisation and movements in the valuation of the property portfolio and right-of-use assets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

All results relate to continuing operations.

 

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME

for the 28 weeks ended 11 April 2020

 

 
 
2020
 
2019
 
2019
 
 
28 weeks
 
28 weeks
 
52 weeks
 
Notes
£m
 
£m
 
£m
 
 
(Unaudited)
 
(Unaudited)
 
(Audited)
 
 
 
 
 
 
 
(Loss)/profit for the period
 
(107) 
 
61 
 
143 
 
 
 
 
 
 
 
Items that will not be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealised (loss)/gain on revaluation of the property portfolio
8
(392) 
 
 
84 
 
 
 
 
 
 
 
Remeasurement of pension liabilities
11
 
17 
 
15 
 
 
 
 
 
 
 
Tax credit/(charge) relating to items not reclassified
6
42 
 
(3)
 
(18)
 
 
 
 
 
 
 
 
 
(345) 
 
14 
 
81 
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
Exchange differences on translation of foreign operations
 
 
(1)
 
 
 
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
 
- Losses arising during the period
 
(13)
 
(28)
 
(81)
- Reclassification adjustments for items included in profit or loss
 
21 
 
18 
 
23 
 
 
 
 
 
 
 
Tax credit relating to items that may be reclassified
6
 
 
10 
 
 
 
 
 
 
 
 
 
12
 
(9)
 
(48)
 
 
 
 
 
 
 
Other comprehensive (expense)/income after tax
 
(333)
 
 
33 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total comprehensive (expense)/income for the period
 
(440) 
 
66 
 
176 

 

 

 

  GROUP CONDENSED BALANCE SHEET

11 April 2020
 
2020
 
2019
 
2019
 
 
11 April
 
13 April
 
28 September
 
Notes
£m
 
£m
 
£m
ASSETS
 
(Unaudited)
 
(Unaudited)
 
(Audited)
Goodwill and other intangible assets
8
                 15 
 
12 
 
14 
Property, plant and equipment
8
4,029 
 
4,448 
 
4,528 
 
 
 
13
435 
 
 
Interests in associates
 
 
 
 
17 
 
 
 
77 
 
61 
 
66 
Derivative financial instruments
12
50 
 
41 
 
53 
 
 
 
 
 
 
 
Total non-current assets
 
4,628 
 
4,568 
 
4,667 
 
 
 
 
 
 
 
Inventories
 
20 
 
28 
 
26 
 
63 
 
56 
 
63 
Current tax asset
 
 
 
Other cash deposits
9
 
120 
 
Cash and cash equivalents
9
191 
 
145 
 
133 
Derivative financial instruments
12
 
 
Assets held for sale
 
 
13 
 
 
 
 
 
 
 
 
Total current assets
 
279 
 
366 
 
225 
 
 
 
 
 
 
 
Total assets
 
4,907 
 
4,934 
 
4,892 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
Pension liabilities
11
(51)
 
(49)
 
(50)
 
(293)
 
(344)
 
(327)
Current tax liabilities
 
 
(7)
 
(12)
Borrowings
 
(251)
 
(237)
 
(95)
13
(52)
 
 
Derivative financial instruments
12
(37)
 
(36)
 
(36)
 
 
 
 
 
 
 
Total current liabilities
 
(684)
 
(673)
 
(520)
 
 
 
 
 
 
 
Pension liabilities
11
(137)
 
(183)
 
(165)
Borrowings
 
(1,605)
 
(1,699)
 
(1,657)
13
(491)
 
 
Derivative financial instruments
12
(257)
 
(217)
 
(266)
Deferred tax liabilities
 
(248)
 
(283)
 
(301)
 
(3)
 
(42)
 
(36)
 
 
 
 
 
 
 
Total non-current liabilities
 
(2,741)
 
(2,424)
 
(2,425)
 
 
 
 
 
 
 
Total liabilities
 
(3,425)
 
(3,097)
 
(2,945)
 
 
 
 
 
 
 
Net assets
 
1,482 
 
1,837 
 
1,947 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
 
 
Called up share capital
 
37 
 
37 
 
37 
Share premium account
 
28 
 
26 
 
26 
Capital redemption reserve
 
 
 
Revaluation reserve
 
918 
 
1,197 
 
1,267 
Own shares held
 
(4)
 
(1)
 
(4)
Hedging reserve
 
(238)
 
(210)
 
(250)
Translation reserve
 
14 
 
13 
 
14 
 
724 
 
772 
 
854 
 
 
 
 
 
 
 
Total equity
 
1,482 
 
1,837 
 
1,947 
 
 
 
 
 
 
 
a
During the period, the Group has adopted IFRS 16 which requires lease liabilities and corresponding right-of-use assets to be recognised on the balance sheet. The Group has adopted IFRS 16 using the modified retrospective approach. As a result, prior year comparatives have not been restated. See note 13 for details of transitional impact.
 
 
 
 
 
 
 
 
 
 
 

GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY

for the 28 weeks ended 11 April 2020

 

 
Called 
 
Share 
 
Capital 
 
 
 
Own 
 
 
 
 
 
 
 
 
 
up share
 
premium 
 
redemption
 
Revaluation
 
shares 
 
Hedging
 
Translation
 
Retained
 
Total 
 
capital 
 
account 
 
reserve 
 
reserve 
 
held 
 
reserve 
 
reserve 
 
earnings
 
equity
 
£m 
 
£m 
 
£m 
 
£m 
 
£m 
 
£m 
 
£m 
 
£m 
 
£m 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At 29 September 2018  (Audited)
37
 
26
 
3
 
1,197
 
(1)
 
(202)
 
14
 
695
 
1,769 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit for the period
 
 
 
 
 
 
-
 
61
 
61 
Other comprehensive (expense)/income
 
 
 
 
 
(8)
 
(1)
 
14
 
Total comprehensive (expense)/income
 
 
 
 
 
(8)
 
(1)
 
75
 
66 
Credit in respect of share-based payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At 13 April 2019 (Unaudited)
37 
 
26 
 
 
1,197
 
(1)
 
(210)
 
13 
 
772 
 
1,837 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit for the period
 
 
 
 
 
 
 
82 
 
82 
Other comprehensive income/(expense)
 
 
 
70
 
 
(40)
 
 
(3)
 
28 
Total comprehensive income/(expense)
 
 
 
70
 
 
(40)
 
 
79 
 
110 
Purchase of own shares
 
 
 
 
(3)
 
 
 
 
(3)
Credit in respect of share-based payments
 
 
 
 
 
 
 
 
Tax on share-based payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At 28 September 2019  (Audited)
37
 
26
 
3
 
1,267
 
(4)
 
(250)
 
14
 
854
 
1,947 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(24) 
 
(24) 
At 29 September 2019 
37
 
26
 
3
 
1,267
 
(4)
 
(250)
 
14
 
830
 
1,923
 
 
 
 
 
 
 
(107) 
 
(107) 
Other comprehensive (expense)/income
 
 
 
(349)
 
 
12 
 
-
 
 
(333) 
Total comprehensive (expense)/income
 
 
 
(349)
 
 
12 
 
-
 
(103) 
 
(440) 
Share capital issued
 
 
 
 
 
 
 
 
Purchase of own shares
 
 
 
 
(3)
 
 
 
 
(3)
Release of own shares
 
 
 
 
 
 
 
(3)
 
Credit in respect of share-based payments
 
 
 
 
 
 
 
 
Tax on share-based payments
 
 
 
 
 
 
 
(1) 
 
(1) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
37 
 
28
 
3
 
918
 
(4)
 
(238)
 
14
 
724
 
1,482 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

GROUP CONDENSED CASH FLOW STATEMENT

for the 28 weeks ended 11 April 2020

 
 
2020
 
2019
 
2019
 
 
28 weeks
 
28 weeks
 
52 weeks
 
Notes
£m
 
£m
 
£m
 
 
(Unaudited)
 
(Unaudited)
 
(Audited)
Cash flow from operations
 
 
 
 
 
 
Operating (loss)/profit
 
(51)
 
140 
 
297 
Add back: adjusted items
4
159 
 
11 
 
20 
 
 
 
 
 
 
 
Operating profit before adjusted items
 
108 
 
151 
 
317 
 
 
 
 
 
 
 
Add back:
 
 
 
 
 
 
Depreciation of property, plant and equipment
8
61 
 
64 
 
116 
Amortisation of intangibles
 
 
 
Depreciation of right-of-use assets
13
22 
 
 
Cost charged in respect of share-based payments
 
 
 
Administrative pension costs
11
 
 
 
 
 
 
 
 
 
Operating cash flow before adjusted items, movements in working capital and additional pension contributions
 
195 
 
220 
 
442 
 
 
 
 
 
 
 
Decrease/(increase) in inventories
 
 
(2)
 
Increase in trade and other receivables
 
(10)
 
 
(9)
(Decrease)/increase in trade and other payables
 
(30)
 
36 
 
25 
Decrease in provisions
 
 
 (1)
 
(7)
Additional pension contributions
11
(25)
 
(24)
 
(49)
 
 
 
 
 
 
 
Cash flow from operations before adjusted items
 
136 
 
229 
 
402 
 
 
 
 
 
 
 
Cash flow from adjusted items
 
(11)
 
(1)
 
Interest paid
 
(55)
 
(57)
 
(113)
Interest received
 
 
 
Cash payments for the interest portion of lease liabilities
 
(6)
 
 
Tax paid
 
(16)
 
(17)
 
(25)
 
 
 
 
 
 
 
Net cash from operating activities
 
48 
 
155 
 
266 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
Purchases of property, plant and equipment
 
(79)
 
(88)
 
(147)
Purchases of intangible assets
 
(3)
 
(2)
 
(5)
Proceeds from sale of property, plant and equipment
 
 
 
14 
Transfers from other cash deposits
 
 
 
120 
 
 
 
 
 
 
 
Net cash used in investing activities
 
(82)
 
(89)
 
(18)
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
Issue of ordinary share capital
 
 
 
-
Purchase of own shares
 
(3)
 
 
(3)
Repayment of principal in respect of securitised debt
10
(45)
 
(43)
 
(87)
Repayment of liquidity facility
 
 
 
(147)
Cash payments for the principal portion of lease liabilities
 
(12)
 
 
-
Drawdown of unsecured revolving credit facilities
10
150
 
 
-
 
 
 
 
 
 
 
Net cash from/(used in) financing activities
 
92 
 
(43)
 
(237)
 
 
 
 
 
 
 
Net increase in cash and cash equivalents
58 
 
23
 
 
 
 
 
 
 
 
Cash and cash equivalents at the beginning of the period
 
133 
 
122 
 
122 
 
 
 
 
 
 
 
Cash and cash equivalents at the end of the period
 
191 
 
145 
 
133 

 

Cash and cash equivalents are defined in note 9.

 NOTES TO THE INTERIM FINANCIAL INFORMATION

 

1.       GENERAL INFORMATION
 
Basis of preparation
This interim financial information has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the European Union.
 
 
Going concern
 
Accounting policies

Critical accounting judgements and key sources of estimation uncertainty

The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions in the application of accounting policies that affect reported amounts of assets, liabilities, income and expense.

 

Estimates and judgements are periodically reviewed and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Details of the Group's critical accounting judgements and estimates are described within the relevant accounting policies set out in the Annual Report and Accounts 2019.

 

Judgements and estimates for the interim period remain largely unchanged.  However, there have been changes to the estimates used in the valuation of property, plant and equipment as described in note 8. Judgement around provisions are also no longer relevant as onerous lease provisioning is no longer a requirement post IFRS 16.

 

 

2.       SEGMENTAL ANALYSIS
 
The Group trades in one business segment (that of operating pubs and restaurants). The Group's brands meet the aggregation criteria set out in paragraph 12 of IFRS 8 Operating Segments and as such the Group reports the business as one reportable segment.
 
 
 
 

3.       REVENUE

 

Revenue is analysed as follows:
 
2020
 
2019
 
2019
 
 
28 weeks
 
28 weeks
 
52 weeks
 
 
£m
 
£m
 
£m
Food
 
535 
 
610
 
1,137
Drink
 
467 
 
537
 
1,025
Services
 
37 
 
39
 
75
Total
 
1,039 
 
1,186
 

 

Revenue from services includes rent receivable from unlicensed properties and leased operations of £4m (2019 28 weeks £5m, 2019 52 weeks £10m).

 

4.       SEPARATELY DISCLOSED ITEMS

 

In addition to presenting information on an IFRS basis, the Group also presents adjusted profit and earnings per share information that excludes separately disclosed items and the impact of any associated tax. Adjusted profitability measures are presented excluding separately disclosed items as we believe this provides both management and investors with useful additional information about the Group's performance and supports a more effective comparison of the Group's trading performance from one period to the next.  Adjusted profit and earnings per share information is used by management to monitor business performance against both shorter-term budgets and forecasts but also against the Group's longer-term strategic plans.

 

Judgement is used to determine those items which should be separately disclosed. This judgement includes assessment of whether an item is of sufficient size or of a nature that is not consistent with normal trading activities.

 

Separately disclosed items include movements in the valuation of the property portfolio as a result of the revaluation exercise of property, plant and equipment, impairment review of short leasehold and unlicensed properties, impairment review of right-of-use assets, revaluation of assets held for sale, past service cost in relation to the defined benefit pension obligation and costs directly associated with the government enforced closure of pubs as a result of the Covid-19 pandemic.

 

In addition to those items presented as separately disclosed items in the Annual Report and Accounts 2019, the impairment review of right-of-use assets is classified as separately disclosed due to its potential volatility, which can be partly driven by movements in discount rate. Costs directly associated with the closure of pubs as a result of the Covid-19 virus are considered to be separately disclosed due to their size and one-off nature.

 

4.       SEPARATELY DISCLOSED ITEMS (CONTINUED)

 

 
 
2020
 
2019
 
2019
 
 
28 weeks
 
28 weeks
 
52 weeks
 
Notes
£m
 
£m
 
£m
Adjusted items
 
 
 
 
 
 
Costs directly associated with the Covid-19 pandemic and enforced closure of pubs
a
(11)
 
-
 
-
Past service cost in relation to the defined benefit pension obligation
b
-  
 
(19)
 
(19)
Total adjusted items recognised within operating costs
 
(11)
 
(19)
 
 
 
 
 
 
 
 
Net profit arising on property disposals
c
 
 
 
 
 
 
 
 
 
Movement in the valuation of the property portfolio:
 
 
 
 
 
 
- Impairment arising from the revaluation
d
(127)
 
 
(4)
- Revaluation of assets held for sale
e
 
 
- Impairment of freehold and long leasehold tenant's fixtures and fittings                                                    
f
(3)
 
-
 
-
- Impairment of short leasehold and unlicensed                                                     properties
g
(2)
 
 
(5)
- Impairment of right-of-use assets
h
(16)
 
 
 
 
 
 
 
 
 
Net movement in the valuation of the property portfolio
 
(148)
 
 
(2)
 
 
 
 
 
 
 
Total adjusted items before tax
 
(159)
 
(11)
 
(20)
 
 
 
 
 
 
 
Tax credit relating to the above items
 
31 
 
 
Tax charge relating to change in tax rate
i
(10) 
 
 
 
 
 
 
 
 
 
Total adjusted items after tax
 
(138)
 
            (8)
 
(16)

 

 

a
Costs directly associated with the Covid-19 pandemic primarily relate to the disposal of stock items at site and within distribution depots that are beyond usable dates as a result of the government enforced closure of pubs. These costs are not considered to be part of normal trading activity.
b
On 26 October 2018 the High Court provided a ruling regarding guaranteed minimum pensions (GMPs) equalisation. The court ruled that pensions provided to members who had contracted-out of their scheme must be recalculated to ensure payments reflect the equalisation of state pension ages in the 1990s. The ruling provided pension trustees with a range of acceptable methods for calculating the GMP equalisation. The court also ruled that trustees are obliged to make arrears payments to members and simple interest on the arrears should be paid at 1% above the base rate. The estimated increase in pension liabilities required to equalise for GMPs is £19m. This was disclosed separately in the prior period, as it is not considered part of the adjusted trade performance of the Group.
c
Profit or loss arising on property disposals is disclosed separately as it is not considered to be part of adjusted trading performance and there is volatility in the size of the profit/(loss) in each accounting period.
d
Impairment arising from the Group's revaluation of its freehold and long leasehold pub estate where the carrying values of the properties exceed their recoverable amount (see note 8).
g
The impairment of short leasehold and unlicensed properties comprises an impairment charge, where the carrying values of the properties exceed their recoverable amount, net of an impairment reversal where carrying values have been increased to recoverable amounts (see note 8).
h
Impairment of right-of-use assets where their carrying values exceed their recoverable amount (see note 13).
i
A deferred tax charge of £10m has been recognised in the current period following the substantive enactment of legislation on 17 March 2020 which increased the UK standard rate of corporation tax from 17% to 19% from 1 April 2020.
 
 
5.      FINANCE COSTS AND FINANCE REVENUE
 
 
 
 
 
 
 
2020
 
2019
 
2019
 
 
28 weeks
 
28 weeks
 
52 weeks
 
 
£m
 
£m
 
£m
 
Finance costs
 
 
 
 
 
 
Interest on securitised debt
(57)
 
(59)
 
(109)
 
Interest on other borrowings
(2)
 
(3)
 
(4)
 
Interest on lease liabilities
(10)
 
 
 
Unwinding of discount on provisions
 
 
(1)
 
Total finance costs
(69)
 
(62)
 
(114)
 
 
 
 
 
 
 
 
Finance revenue
 
 
 
 
 
 
Interest receivable
 
 
 
 
 
 
 
 
 
Net pensions finance charge (note 11)
(2)
 
(4)
 
(7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

6.       TAXATION

 

The taxation charge for the 28 weeks ended 11 April 2020 has been calculated by applying an estimate of the annual effective tax rate before adjusted items of 19.3% (2019 28 weeks, 19.9%).

 

 
2020
 
2019
 
2019
 
28 weeks
 
28 weeks
 
52 weeks
Tax credit/(charge) in the income statement
£m
 
£m
 
£m
 
 
 
 
 
 
Current tax:
 
 
 
 
 
- UK corporation tax
 
(15)
 
(31)
- Amounts over provided in prior periods
 
 
 
 
 
 
 
 
Total current tax charge
-
 
(15)
 
(28)
 
 
 
 
 
 
Deferred tax:
 
 
 
 
 
- Origination and reversal of temporary differences
24 
 
1
 
(5)
- Changes in tax rate
(10)
 
 
- Adjustments in respect of prior periods
 
 
(1)
 
 
 
 
 
 
Total deferred tax credit/(charge)
14 
 
1
 
(6)
 
 
 
 
 
 
Total tax credit/(charge) in the income statement
14
 
(14)
 
(34)
 
 
 
 
 
 
Further analysed as tax relating to:
 
 
 
 
 
Profit before adjusted items
(7)
 
(17)
 
(38)
Adjusted items
21 
 
 
 
 
 
 
 
 
 
14
 
(14)
 
(34)

 

 

 

6.       TAXATION (CONTINUED)

 

 
2020
 
2019
 
2019
Tax relating to items recognised in other comprehensive
28 weeks
 
28 weeks
 
52 weeks
income
£m
 
£m
 
£m
 
 
 
 
 
 
Deferred tax:
 
 
 
 
 
Items that will not be reclassified subsequently to profit or loss:
 
 
 
 
 
- Unrealised losses/(gains) due to revaluations - revaluation reserve
43 
 
 
(14)
- Unrealised gains due to revaluations - retained earnings
(1)
 
 
(1)
- Rolled over and held over gains - retained earnings
(7)
 
 
- Remeasurement of pension liabilities
7
 
(3)
 
(3)
 
 
 
 
 
 
 
42
 
(3)
 
(18)
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
- Cash flow hedges:
 
 
 
 
 
- Losses arising during the period
 
 
14
- Reclassification adjustments for items included in profit or loss
 
(3)
 
(4)
 
 
 
 
 
 
 
 
2
 
10
 
 
 
 
 
 
Total tax credit/(charge) recognised in other comprehensive income
46
 
(1)
 
(8)

 

 

7.    EARNINGS/(LOSS) PER SHARE
 
Basic earnings/(loss) per share (EPS) has been calculated by dividing the (loss)/profit for the financial period by the weighted average number of ordinary shares in issue during the period, excluding own shares held by employee share trusts.
 
For diluted earnings per share, the weighted average number of ordinary shares is adjusted to assume conversion of all potentially dilutive ordinary shares.
 
Adjusted (loss)/earnings per ordinary share amounts are presented before adjusted items (see note 4) in order to allow a better understanding of the adjusted trading performance of the Group.
 
 
 
 
 
 
 
 
2020
 
2019
 
2019
 
 
28 weeks
 
28 weeks
 
52 weeks
 
Basic earnings per share:
 
 
 
 
 
 
Total (loss)/profit for the period (£m)
(107) 
 
61
 
143
 
Weighted average number of ordinary shares for the purposes of basic earnings per share (millions)
428 
 
428
 
427
 
 
 
 
 
 
 
 
Basic (loss)/earnings per share (pence)
(25.0)p
 
14.3p
 
33.5p
 
 
 
 
 
 
 
 
Total (loss)/profit for the period (£m)
(107) 
 
61
 
143
 
Effect of adjusted items on (loss)/earnings for the period (£m)
 138 
 
8
 
16
 
Earnings excluding adjusted items (£m)
31 
 
69
 
159
 
 
 
 
 
 
 
 
Adjusted basic earnings per share (pence)
7.2p
 
16.1p
 
37.2p
 
 
 
 
 
2020
 
2019
 
2019
 
 
28 weeks
 
28 weeks
 
52 weeks
 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
Weighted average ordinary shares for the purposes of basic earnings per share (millions)
428
 
428
 
427
 
 
 
 
 
 
 
 
Effect of dilutive potential ordinary shares:
 
 
 
 
 
 
-     Contingently issuable shares (millions)
 
 
 
-     Other share options (millions)
 
 
 
Number of shares for the purpose of diluted earnings per share (millions)
431 
 
430 
 
429 
 
 
 
 
 
 
 
 
Diluted (loss)/earnings per share (pence)
(24.8)p
 
14.2p
 
33.3p
 
Adjusted diluted earnings per share (pence)
7.2p
 
16.0p
 
37.1p
 
 
 
 
2020
 
2019
 
2019
 
 
11 April
 
13 April
 
28 September
 
 
£m
 
£m
 
£m
 
 
 
 
 
 
 
 
At beginning of period
4,528  
 
4,426  
 
4,426 
 
 
 
 
 
 
 
 
Additions
88  
 
93  
 
151  
 
(Decrease)/increase as a result of the revaluation and impairment review
(524) 
 
 
82 
 
Disposals
(2)  
 
(1) 
 
(2)
 
Depreciation provided during the period
(61) 
 
(64) 
 
(116)
 
Transfers to assets held for sale
 
(13) 
 
(13)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At end of period
4,029  
 
4,448  
 
4,528 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

8.     PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

 

 

 

 

9.     ANALYSIS OF NET DEBT
 
2020
 
2019
 
2019
 
11 April
 
13 April
 
28 September
 
£m
 
£m
 
£m
 
 
 
 
 
 
Cash and bank balances
            191 
 
145 
 
133 
Cash and cash equivalents
191 
 
145 
 
133 
 
 
 
 
 
 
Other cash deposits
 
120 
 
 
 
 
 
 
 
(1,706)
 
(1,789)
 
(1,752)
Liquidity facility
 
(147)
 
 
 
 
 
 
 
Revolving credit facility
(150) 
 
 
 
 
 
 
 
 
50 
 
44 
 
55 
 
 
 
 
 
 
Net debt excluding leases
(1,615)
 
(1,627)
 
(1,564)
 
 
 
 
 
 
Current lease liabilities
(52)
 
 
Non-current lease liabilities
(491)
 
 
 
 
 
 
 
 
Total lease liabilities
(543)
 
 
 
 
 
 
 
 
Net debt including leases
(2,158)
 
(1,627)
 
(1,564)

 

a
Represents the proportion of the fair value of the currency swap that is hedging the balance sheet value of the Group's US dollar denominated A3N loan notes. This amount is disclosed separately to remove the impact of exchange rate movements which are included in the securitised debt amount.

 

Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other short-term highly liquid deposits with an original maturity at acquisition of three months or less. Cash held on deposit with an original maturity at acquisition of more than three months is disclosed as other cash deposits. In the cash flow statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand.
 
Securitised debt
 
 
2020
 
2019
 
2019
 
 
11 April
 
13 April
 
28 September
 
 
£m
 
£m
 
£m
 
 
 
 
 
 
 
 
Principal outstanding at beginning of period
1,753 
 
1,832 
 
1,832 
 
Principal repaid during the period
(45)
 
(43)
 
(87)
 
Exchange on translation of dollar loan notes
(5)
 
(3)
 
 
 
 
 
 
 
 
 
Principal outstanding at end of period
1,703 
 
1,786 
 
1,753 
 
 
 
 
 
 
 
 
Deferred issue costs
(4)
 
(5)
 
(4)
 
Accrued interest
 
 
 
 
 
 
 
 
 
 
Carrying value at end of period
1,706 
 
1,789 
 
1,752 
 
 
 
 
 
 
 
 
 

 

Liquidity facility

Under the terms of the securitisation, the Group holds a liquidity facility of £295m provided by two counterparties.  As a result of the decrease in credit rating of one of the counterparties, the Group was obliged to draw that counterparty's portion of the facility during the 52 weeks ended 27 September 2014.  During the prior period the Group novated part of the facility to a higher rated counterparty and repaid the amount drawn. The amount drawn at 11 April 2020 is £nil (13 April 2019 £147m, 28 September 2019 £nil).

 

Unsecured revolving credit facilities

The Group holds three unsecured committed revolving credit facilities of £50m each and uncommitted revolving credit facilities of £5m, available for general corporate purposes. The amount drawn at 11 April 2020 is £150m (13 April 2019 £nil, 28 September 2019 £nil).  All committed facilities expire on 31 December 2020.

 

 

10.      MOVEMENT IN NET DEBT
 
 
2020
 
2019
 
2019
 
28 weeks
 
28 weeks
 
52 weeks
 
£m
 
£m
 
£m
Net increase in cash and cash equivalents
58 
 
23
 
11  
 
 
 
 
 
 
Add back cash flows in respect of other components of net debt:
 
 
 
 
 
-     Transfers from other cash deposits
 
 
(120) 
-     Repayment of principal in respect of securitised debt
45 
 
43 
 
87  
-     Repayment of liquidity facility
 
 
147  
-     Drawdown of unsecured revolving facilities
(150) 
 
 
-  
 
 
 
 
 
 
(Increase)/decrease in net debt arising from cash flows
(47) 
 
66 
 
125  
 
 
 
 
 
 
Movement in capitalised debt issue costs net of accrued interest
(4)  
 
(5)
 
(1)
 
 
 
 
 
 
(Increase)/decrease in net debt excluding leases
(51) 
 
61 
 
124 
 
 
 
 
 
 
 
 
 
 
 
 
Opening net debt excluding leases
(1,564)
 
(1,688)
 
(1,688)
 
 
 
 
 
 
Closing net debt excluding leases
(1,615)
 
(1,627)
 
(1,564)
 
 
 
 
 
 
 

 

11.        PENSIONS

 

Retirement and death benefits are provided for eligible employees in the United Kingdom, principally by the Mitchells & Butlers Pension Plan (MABPP) and the Mitchells & Butlers Executive Pension Plan (MABEPP).  These plans are funded, HMRC approved, occupational pension schemes with defined contribution and defined benefit sections.  The defined benefit section of the plans is now closed to future service accrual.

 

In addition, Mitchells & Butlers plc also provides a workplace pension plan in line with the Workplace Pensions Reform Regulations.  This automatically enrols all eligible workers into a Qualifying Workplace Pension Plan.

 

Measurement of scheme assets and liabilities

 

Actuarial valuation

The actuarial valuations used for IAS 19 (revised) purposes are based on the results of the latest full actuarial valuation carried out at 31 March 2019 and updated by the schemes' independent qualified actuaries to 11 April 2020.  Scheme assets are stated at market value at 11 April 2020 and the liabilities of the schemes have been assessed as at the same date using the projected unit method.  IAS 19 (revised) requires that the scheme liabilities are discounted using market yields at the end of the period on high quality corporate bonds.

 

The principal financial assumptions used at the balance sheet date have been updated to reflect changes in market conditions in the period and are as follows:

 

 
2020
 
2019
 
2019
 
11 April
 
13 April
 
28 September
 
 
 
 
 
 
Discount rate
1.9%
 
2.6%
 
1.8%
Pensions increases - RPI max 5%
2.6%
 
3.1%
 
3.0%
Inflation - RPI
2.6%
 
3.3%
 
3.1%
 
 
 
 
 
 

 

 

The mortality assumptions were reviewed following the 2019 actuarial valuation. A summary of the average life expectancies assumed are as follows:

 

 
2020
 
2019
 
2019
 
11 April
 
13 April
 
28 September
 
 
 
 
 
 
Implied life expectancies from age 65:
 
 
 
 
 
-    MABPP male currently 45
22.7 years
 
23.0 years
 
22.7 years
-    MABEPP male currently 45
24.5 years
 
25.6 years
 
24.5 years
-    MABPP female currently 45
25.3 years
 
25.5 years
 
25.3 years
-    MABEPP female currently 45
26.3 years
 
27.9 years
 
26.3 years
 
 
 
 
 
 

 

Minimum funding requirements

The results of the 2019 actuarial valuation showed a funding deficit of £293m, using a more prudent basis to discount the scheme liabilities than is required by IAS 19 (revised). As a result of the 2019 actuarial valuation, the Company subsequently agreed recovery plans for both the Executive and Main schemes in order to close the funding deficit in respect of its pension liabilities.  The recovery plans show an unchanged level of cash contributions with no extension to the agreed payment term (£45m per annum indexed with RPI from 1 April 2016 subject to a minimum increase of 0% and maximum of 5%, until 31 March 2023). However, given the Covid-19 outbreak, the Company has agreed with the Trustee that contributions would be suspended for the months of April, May and June 2020, with these being added onto the end of the agreed recovery plan so that these contributions will be paid in 2023. Under IFRIC 14, an additional liability is recognised, such that the overall pension liabilities at the period end reflect the schedule of contributions in relation to a minimum funding requirement, should this be higher than the actuarial deficit.

 

 

11.     PENSIONS (CONTINUED)

 

Amounts recognised in respect of pension schemes

 

The following amounts relating to the Group's defined benefit and defined contribution arrangements have been recognised in the Group income statement and Group statement of comprehensive income:

 

Group income statement
2020
 
2019
 
2019
 
28 weeks
 
 
 
£m
 
£m
 
£m
Operating profit
 
 
 
 
 
Employer contributions (defined contribution plans)
(6)
 
(5)
 
(12)
Administrative costs (defined benefit plans)
(1)
 
(1)
 
(3)
Charge to operating profit before adjusted items
(7)
 
(6)
 
(15)
Past service cost (see note 4)
 
(19)
 
(19)
Charge to operating profit
(7)
 
(25)
 
(34)
 
 
 
 
 
 
Finance costs
 
 
 
 
 
Net pensions finance income on actuarial surplus
 
 
10 
Additional pensions finance charge due to minimum funding
(5)
 
(9)
 
(17)
Net pensions finance charge
(2)
 
(4)
 
(7)
 
 
 
 
 
 
 
 
 
 
 
 
Total charge
(9)
 
(29)
 
(41)

 

 

 

Group statement of comprehensive income
2020
 
2019
 
2019
 
28 weeks
 
 
 
£m
 
£m
 
£m
 
 
 
 
 
 
Return on scheme assets and effects of changes in assumptions
58 
 
(92)
 
(77)
Movement in pension liabilities due to minimum funding
(53)
 
109 
 
92 
 
 
 
 
 
 
Remeasurement of pension liabilities
5  
 
17 
 
15 

 

 

Group balance sheet
2020
 
2019
 
2019
 
11 April
 
13 April
 
28 September
 
£m
 
£m
 
£m
 
 
 
 
 
 
Fair value of scheme assets
2,649 
 
2,477 
 
2,739 
Present value of scheme liabilities
(2,269)
 
(2,224)
 
(2,443)
 
 
 
 
 
 
Actuarial surplus in the schemes
380 
 
253 
 
296 
Additional liability recognised due to minimum funding
(568)
 
(485)
 
(511)
 
 
 
 
 
 
(188)
 
(232)
 
(215)
 
 
 
 
 
 
Associated deferred tax asset
36 
 
40 
 
36 

 

 

a.   The total pension liabilities of £188m (13 April 2019 £232m, 28 September 2019 £215m) is presented as a £51m current liabilities (13 April 2019 £49m, 28 September 2019 £50m) and a £137m non-current liabilities (13 April 2019 £183m, 28 September 2019 £165m).

 

11.   PENSIONS (CONTINUED)

 
 
2020
 
2019
 
2019
 
11 April
 
13 April
 
28 September
 
£m
 
£m
 
£m
 
 
 
 
 
 
At beginning of period
(215)
 
(249)
 
(249)
Past service cost
 
(19)
 
(19)
Administration costs
(1)
 
(1)
 
(3)
Net pensions finance charge
(2)
 
(4)
 
(7)
Employer contributions
25 
 
24 
 
49 
Remeasurement of pension liabilities
 
17 
 
15 
 
 
 
 
 
 
At end of period
(188)
 
(232)
 
(215)
 
 
 
 
 
 
 

 

12.   FINANCIAL INSTRUMENTS
 
 
 
 
 
 
 

 

 

15. POST BALANCE SHEET EVENT

 

Securitised debt

On 11 June 2020 certain amendments and waivers were agreed with Ambac Assurance UK Ltd (as controlling creditor of the secured financing structure) and HSBC (C.I) Trustee (as Trustee of the secured financing structure), to mitigate against the impacts of the Covid-19 pandemic. Under the terms of the agreement, the financial covenant test in respect of the debt service coverage ratio has been waived until July 2021 (in respect of the six month look-back test) and until September 2021 (in respect of the twelve month look-back test). Further key points are: a) the securitised Liquidity Facility can be used to fund debt service costs in June 2020 and September 2020 (up to a maximum amount of £100m), with all amounts having to be repaid by March 2021; b) the requirement to spend a minimum amount of capital maintenance expenditure is waived for periods of closure due to Covid-19. The Group is also committed to provide funding into the securitised financing structure, of up to £100m in line with drawings under the securitised Liquidity Facility.

 

Liquidity facility

On 15 June 2020 the facility was drawn in an amount of £47m to fund debt service costs of the securitisation Issuer, in line with the waivers obtained on 11 June 2020.

 

Securitised funding

On 16 June 2020 the Group subscribed for additional equity in Mitchells & Butlers Retail Limited in the amount of £47m, in line with the commitments made on 11 June 2020 to provide additional funding to the securitsation structure.

 

Unsecured credit facilities

As at 11 April 2020 the Group held three unsecured committed revolving credit facilities of £50m each (expiring on 31 December 2020) and unsecured uncommitted revolving credit facilities of £5m, available for general corporate purposes. The amount drawn at 11 April 2020 is £150m (13 April 2019 £nil, 28 September 2019 £nil).

 

On 11 June 2020 the Group entered into the following facilities: a) extension of maturity date under the three existing unsecured committed revolving credit facilities of £50m each to 31 December 2021 and; b) two new unsecured committed term loan facilities of £50m each with a maturity date of 31 December 2021, structured under the Government backed Coronavirus Large Business Interruption Loan Scheme.

 

On 17 June 2020 the two term loans were fully drawn for £100m, with £101m of the existing revolving credit facility drawings being repaid on the same date.

 

Alternative Performance Measures

 

 

The performance of the Group is assessed using a number of Alternative Performance Measures (APMs).

 

The Group's results are presented both before and after separately disclosed items. Adjusted profitability measures are presented excluding separately disclosed items as we believe this provides both management and investors with useful additional information about the Group's performance and supports a more effective comparison of the Group's trading performance from one period to the next. Adjusted profitability measures are reconciled to unadjusted IFRS results on the face of the income statement with details of separately disclosed items provided in note 4.

 

The Group's results are also described using other measures that are not defined under IFRS and are therefore considered to be APMs. These APMs are used by management to monitor business performance against both shorter term budgets and forecasts but also against the Group's longer-term strategic plans.

 

APMs used to explain and monitor Group performance include:

 

APM
Definition
Source
EBITDA
Earnings before interest, tax, depreciation and amortisation.
Group condensed income statement
Adjusted EBITDA
Annualised EBITDA on a 52 week basis before separately disclosed items is used to calculate net debt to EBITDA.
Group condensed income statement
EBITDA before adjusted items
EBITDA before separately disclosed items.
Group condensed income statement
Operating profit
Earnings before interest and tax.
Group condensed income statement
Adjusted operating profit
Operating profit before separately disclosed items.
Group condensed income statement
Like-for-like sales growth
Like-for-like sales growth reflects the sales performance against the comparable period in the prior year of UK managed pubs, bars and restaurants that were trading in the two periods being compared, unless marketed for disposal.
Group condensed income statement
Adjusted earnings per share (EPS)
Earnings per share using profit before separately disclosed items.
Note 7
The multiple of net debt including lease liabilities, as per the balance sheet compared against 52 week EBITDA before separately disclosed items which is a widely used leverage measure in the industry.
Free cash flow
Calculated as net movement in cash and cash equivalents before the movement on unsecured revolving credit facilities. This measure is no longer used as an APM, see explanation below.
Condensed cash flow statement
Return on capital
 

 

  

 

A. Like-for-like sales

 

The sales this year compared to the sales in the previous year of all UK managed sites that were trading in the two periods being compared, expressed as a percentage. This widely used industry measure provides better insight into the trading performance than total revenue which is impacted by acquisitions and disposals.  As like-for-like sales can only be measured when sites are trading the measure ceases in week 24 the last full week of trade before the closure of the estate in response to COVID-19.

 

 
 
 
2020
 
2019
 
Year-on
 
 
 
24 weeks
 
24 weeks
 
-year
 
Source
 
£m
 
£m
 
%
 
 
 
 
 
 
 
 
Reported revenue
Condensed income statement
 
1,039
 
1,186
 
(12.4%)
Less non like-for-like sales and income subsequent to closure
 
 
(114)
 
(269)
 
(57.6%)
Like-for-like sales
 
 
925
 
917
 
0.9%
 
 
 
 
 
 
 

Drink and food sales growth HY 2020

 
 
 
2020
 
2019
 
Year-on
 
 
 
24 weeks
 
24 weeks
 
-year
 
Source
 
£m
 
£m
 
%
 
 
 
 
 
 
 
 
Drink like-for-like sales
 
 
420.3
 
419.0
 
0.3%
Food like-for-like sales
 
 
481.7
 
475.4
 
1.3%
Other like-for-like sales
 
 
23.4
 
22.4
 
 
Total like-for-like sales
 
 
925.4
 
916.8
 
0.9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

B. Adjusted Operating Profit

 

Operating profit before separately disclosed items as set out in the Group Income Statement. Separately disclosed items are those which are separately identified by virtue of their size or incidence (see note 4). Excluding these items allows a better understanding of the trading of the Group.

 

 
 
 
2020
 
2019
 
Year-on
 
 
 
28 weeks
 
28 weeks
 
-year
 
Source
 
£m
 
£m
 
%
 
 
 
 
 
 
 
 
Operating (loss)/profit
Condensed income statement
 
(51)
 
140
 
(136%)
Separately disclosed items
Note 4
 
159
 
11
 
-
Adjusted operating (loss)/profit
 
 
108
 
151
 
(28%)
Reported revenue 28 weeks
Condensed income statement
 
1,039
 
1,186
 
(12%)
Adjusted operating margin
 
 
10.4%
 
12.7%
 
(2.3ppts)

 

C. Adjusted Earnings per Share

 

Earnings per share using profit before separately disclosed items. Separately disclosed items are those which are separately identified by virtue of their size or incidence. Excluding these items allows a better understanding of the trading of the Group.

 
 
 
2020
 
2019
 
Year-on
 
 
 
28 weeks
 
28 weeks
 
-year
 
Source
 
£m
 
£m
 
%
 
 
 
 
 
 
 
 
(Loss)/profit for the period
Condensed income statement
 
(107)
 
61
 
(275%)
Add back separately disclosed items
Condensed income statement
 
138
 
8
 
 
Adjusted (loss)/profit
 
 
31
 
69
 
(55%)
Weighted average number of shares
Note 7
 
428
 
428
 
-
Adjusted earnings per share
 
 
7.2p
 
16.1p
 
(55%)

 D. Net Debt: Adjusted EBITDA

 

The multiple of net debt as per the balance sheet compared against 52 week EBITDA before separately disclosed items which is a widely used leverage measure in the industry.  From FY 2020 leases are included in net debt following adoption of IFRS16.  Adjusted EBITDA is used for this measure to prevent distortions in performance resulting from separately disclosed items.

 

Due to the closure period we do not have a representative 52 week EBITDA measure to calculate this metric and therefore it has not been used in these financial statements. 

 

 

E. Free Cash Flow

 

Free cash flow excludes the cash movement on unsecured revolving credit facilities and was previously presented to allow understanding of the cash movements excluding short term debt.  This measure was no longer used in the FY 2019 financial statements, with the reconciliation provided for the prior year purposes only and continues not to be used an alternative performance measure. 

 

 

 

F. Return on capital

 

Return generating capital includes investments made in new sites and investment in existing assets that materially changes the guest offer. Return on investment is measured by incremental site EBITDA following investment expressed as a percentage of return generating capital. 

 

Due to the enforced closure of sites in response to Covid-19 outbreak we are no longer able to accurately measure return on capital as all sites are impacted.