REG - Mitchells & Butlers - Half Year Results
22/05/2024 07:00
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RNS Number : 3675P Mitchells & Butlers PLC 22 May 2024
MITCHELLS & BUTLERS PLC
LEI no: 213800JHYNDNB1NS2W10
22 May 2024
HALF YEAR RESULTS
(For the 28 weeks ended 13 April 2024)
Highlights
- Strong trading performance with like-for-like sales(a) growth of 7.0%
- Operating profit of £164m up 64% from prior year
- Improved operating margin of 11.7% (HY 2023 7.8%)
- Strong period of cash generation with inflow of £137m before bond
amortisation
- Full year outturn expected to be at the top end of consensus, with momentum
into FY 2025
Reported results
- Total revenue of £1,396m (HY 2023 £1,282m)
- Operating profit of £164m (HY 2023 £99m)
- Profit before tax of £108m (HY 2023 £40m)
- Basic earnings per share of 13.6p (HY 2023 5.4p)
Trading results
- Adjusted operating profit(a) £164m (HY 2023 £100m)
- Adjusted earnings per share(a) of 13.6p (HY 2023 5.5p)
Balance sheet and cash flow
- Cash inflow before bond amortisation of £137m (HY 2023 inflow £10m)
- Net debt(a) reduced to £1,037m (HY 2023 £1,193m), excluding £449m of IFRS
16 lease liabilities (HY 2023 £467m)
Phil Urban, Chief Executive, commented:
"Continued like-for-like sales(a) outperformance against the market(b) coupled
with easing inflationary costs and focus on efficiencies has resulted in very
strong profit recovery for the period.
We remain focused on our Ignite programme of initiatives and our successful
capital investment programme, driving further cost efficiencies and increased
sales. We have confidence that continued focus on effective delivery of our
strategic priorities will generate further value from our enviable estate
portfolio and customer offers, enabling us to build further momentum
throughout the year, with a strong foundation for long term outperformance."
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 CGA Business Tracker.
There will be a presentation held today at 8:30am accessible by phone on 020
3936 2999, access code: 762969 and
at https://www.netroadshow.com/events/login?show=20ca7536&confId=65342
(https://www.netroadshow.com/events/login?show=20ca7536&confId=65342) .
The slides will also be available on the website at www.mbplc.com
(http://www.mbplc.com) The replay will then be available at
https://www.mbplc.com/hy2024/analystspresentation
(https://www.mbplc.com/hy2024/analystspresentation) .
All disclosed documents relating to these results are available on the Group's
website at www.mbplc.com (http://www.mbplc.com)
For further information, please contact:
Tim Jones - Chief Financial Officer +44 (0)121 498 6112
Amy de Marsac - Investor Relations +44 (0)121 498 6514
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, Ember Inns and Ego
Restaurants. 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 (http://www.mbplc.com/imagelibrary) .
CURRENT TRADING AND OUTLOOK
We entered the year having built up strong sales momentum, as we outperformed
the sector, and with the expectation of margin enhancement as clear evidence
emerged that cost inflation was abating. This progress has continued
throughout the first half of the year. Sales growth has remained robust, now
ahead of cost inflation, with every brand across the portfolio in like for
like sales(a) growth. Over the most recent 4 weeks, following Easter in both
this year and last, like-for-like sales(a) have grown by 5.3%.
Cost headwinds are anticipated to total c.£55m this financial year, slightly
less than previously expected, with increases in labour costs due to the
statutory National Living Wage rise mitigated by deflation in our energy costs
and slowing food cost inflation. Coupled with a robust sales performance we
believe this should allow us to continue to rebuild margins.
We remain mindful of uncertainty and pressures on the consumer. However, as
trading continues to be strong, we have confidence that the current year
outturn will be at the top end of consensus expectations, with momentum for
further progress going forward into FY 2025.
BUSINESS REVIEW
Total sales across the period were £1,396m reflecting 8.9% growth on HY 2023.
Like-for-like sales(a) increased by 7.0% with strong performances across all
brands driven by increases in spend per head. Operating profit of £164m was a
marked recovery from last year (HY 2023 £99m).
We made a good start to the year with like-for-like sales(a) growth of 7.2%
over the first seven weeks. Strong trading over the important festive period
led to an acceleration of like-for-like sales(a) growth over the latter half
of the quarter to 8.2%, resulting in overall like-for-like sales(a) growth for
the quarter of 7.7%.
Sales remained resilient through the second quarter with strong performances
on key trading dates and particular resilience in food sales. Across the
quarter, we recorded like-for-like sales(a) growth of 6.1%, comprising drink
sales growth of 5.3% and food sales growth of 6.6%.
We have continued to consistently outperform the market, as represented by the
CGA Business tracker, by over 2% like-for-like sales(a) over the first half.
Overall cost inflation started to abate last year, and this has continued
through the first half. Whilst the recent level of statutory National Living
Wage increases (effective in April each year) has been relatively high at
approximately 10% in both the last two years, other costs have generally
returned to more normalised levels and energy in particular has been in
deflation so far this year. Strong and resilient sales growth through the
first half combined with a clear abatement in overall cost inflation has
driven a marked increase in both profitability and margins.
Across the sector the challenges the industry has faced have had an
unavoidable impact on market supply with a 2.5% net decline in pubs and
restaurants in the year to March 2024 and a c.15.0% net decline since the
start of the Covid-19 pandemic in March 2020 (CGA Outlet Index April 2024).
Independent and tenanted businesses have made up the substantial majority of
the net closures. Given our strong estate and portfolio of brands, we believe
that we are well placed to continue to benefit from these changes in the
competitive landscape.
OUR STRATEGIC PRIORITIES
Our strategic pillars, which have provided the foundation for our ongoing
performance, remain consistent. We focus on maximising the value generated
from our 83% freehold and long leasehold estate, utilising the diversity of
our brand portfolio to grow market share across a broad range of consumer
occasions, demographics and locations. Most immediately, our priority is to
grow the business back to, and beyond, the levels of profit that we were
achieving before Covid-19.
Our Ignite programme of work remains at the core of our long-term value
creation, with a range of initiatives underway focused on driving sales and
delivering cost efficiencies. We have been enhancing our digital capacity to
drive sales, with exciting developments in our marketing allowing us to tailor
communications to an individual's preferences based on past behaviour and to
unlock loyalty programmes designed to drive frequency of visits. In addition
to digital solutions, we continue to run training and skill enhancement
workshops, equipping our managers with the skills to drive the sales of their
businesses. These help to develop a culture of natural upselling within sites
with a focus on attentiveness which will enhance the overall experience for
our guests. The benefit of these initiatives is reflected in sustained
like-for-like sales(a) growth across our brand portfolio as well as continued
market outperformance on guest review scores, which averaged 4.5 out of 5 over
the first half.
Alongside driving sales, we have a range of initiatives focused on enhancing
productivity and efficiency to help mitigate inflationary costs, including
improved labour scheduling, cost mitigating procurement strategies and energy
consumption reduction. Previous investment in enhanced labour scheduling,
which automatically produces rosters to ensure we have the right people on
shift at the right times, has delivered improved efficiencies and importantly
has ensured enough team members are working at peak times to maximise sales
opportunities. We believe there is further benefit to be extracted from
effective use of the system and we continue to have a workstream focused on
helping managers to maximise the potential value.
After the successful roll out of voltage optimisers which delivered c.6%
energy consumption reduction, we are now trialling the use of remote control
of our in-site energy systems with a view to obtaining further consumption
savings. Remote control of heating, for example, provides a significant
opportunity to reduce consumption whilst also relinquishing our managers of
one of their many daily tasks, allowing them to focus on guests. Our energy
initiatives help us to improve efficiency whilst also supporting our
sustainability objectives.
Our capital programme continues to deliver significant value by improving the
competitive position of our pubs and restaurants within their local markets.
Over the first half, we have completed 85 investment projects comprising 78
remodels, 4 conversions and 3 acquisitions. We are continuing to see strong
performances from our investment projects and remain focused on reestablishing
the target 7-year investment cycle which was interrupted by Covid-19.
Many of these initiatives are conceived, managed and delivered through our
Ignite delivery programme. This summer we will be looking to initiate the
fourth generation of this programme with teams from across our business coming
together to challenge the way we work, identify new ideas, work up plans and
present them for approval enabling us to maintain the momentum of improvement
that has been so important to our recent performance.
In June 2023 we completed the acquisition of the remaining 60% stake in 3Sixty
Restaurants Limited, owners of Ego Restaurants, having acquired the initial
40% stake in August 2018. Ego is a collection of Mediterranean-inspired pubs
and restaurants where guests can enjoy freshly cooked food, cocktails, cask
ales and wine from across the continent. The process of integrating Ego is
making good progress, with all sites having now moved onto our systems and
processes. During the first half of FY 2024 we are starting to leverage the
brand internally and have converted 5 of our sites to the Ego offer, with
average sales doubling following conversion. We anticipate conversion of a
further 5-10 sites in FY 2025.
In May 2024 we completed the acquisition of Pesto Restaurants. The brand
delivers an Italian Tapas offer across its ten strong estate which, as with
the Ego acquisition, helps us to further diversify and premiumise our brand
portfolio. The consideration for the business will be determined over two
payments and is partly contingent on its future performance but will be no
more than £15m.
PEOPLE
Our people are fundamental to the delivery of great experiences for our
guests. We are delighted that engagement scores have continued to improve
across all employee groups in the first half of the year, representative of
the commitment of our teams to work together to drive the future success of
the business. Pleasingly, turnover has also continued to improve, reaching
record lows during the first half of FY 2024 having re-established
pre-pandemic levels in FY 2023. The continued progress on our people measures,
despite the challenging recruitment environment, is testament to our success
in attracting the best talent, enhancing performance through our development
programmes and retaining teams through progression opportunities.
Apprenticeships continue to be an integral part of our retention and
succession strategy, with evidence that people who complete apprenticeships
are more likely to stay with us and to be promoted. Having delivered 9,448
apprenticeship starts since 2017, our commitment is unabated, and we are on
track to deliver 1,750 starts this financial year. We are particularly proud
of our culinary apprenticeships which provide a pipeline of talent to a more
challenging area for recruitment, as well as a valuable career opportunity
with above industry level enrolment for 19-24-year-olds. We are delighted
that our apprentice programmes were recognised at the December 2023 National
Apprenticeship awards, winning the award for best large employer.
SUSTAINABILITY
We are committed to reducing the environmental impact of our business and the
Board has challenging targets to drive continued momentum in this area. We
have committed to:
- Net Zero emissions by 2040, including scope 1, 2 and 3
- Zero operational waste to landfill by 2030
- 50% reduction in food waste by 2030
We remain focused on working towards our sustainability goals, with numerous
initiatives underway to support these ambitions. We were delighted to receive
Science Based Target initiative validation for our Net Zero plans in January
2024. We have conducted further trials to better understand available
strategies to remove gas from operations, including at least one trial
electrified kitchen in nearly all of our brands as well as two fully
all-electric sites testing alternatives for heating and hot water. The output
of these trials will inform the speed of transition over the medium term and
enables better understanding of the collaboration needed to overcome
challenges in achieving the removal of gas. We continue to work closely with
our suppliers towards our scope 3 emissions reduction plan, as well as
collaborating with industry groups such as the Zero Carbon Forum.
Our sustainability strategy has a strong focus on the positive impact we have
on people and communities, and we are proud to partner with Social Bite, a
homelessness charity. Of particular importance is the Jobs First programme,
helping people back to independence through long-term employment
opportunities, which to date has employed 18 people from their academy. We see
considerable scope to grow this partnership and enhance our positive social
impact over the coming years.
FINANCIAL REVIEW
On a statutory basis, profit before tax for the half year was £108m (HY 2023
£40m), on sales of £1,396m (HY 2023 £1,282m).
The Group Income Statement discloses adjusted profit and earnings per share
information that excludes separately disclosed items, disclosed by virtue of
their size or nature, to allow a more effective comparison of the Group's
trading performance from one period to the next.
Statutory Adjusted(a)
HY 2024 HY 2023 HY 2024 HY 2023
£m £m £m £m
Revenue 1,396 1,282 1,396 1,282
Operating profit 164 99 164 100
Profit before tax 108 40 108 41
Earnings per share 13.6p 5.4p 13.6p 5.5p
Operating margin 11.7% 7.7% 11.7% 7.8%
At the end of the period, the total estate comprised 1,716 sites in the UK and
Germany of which 1,659 are directly managed.
Revenue
Total revenue of £1,396m (HY 2023 £1,282m) reflects a strong period of
trading driven by sustained like-for-like sales(a) growth across the brand
portfolio.
Like-for-like sales(a) in the first half increased by 7.0%, comprising an
increase in like-for-like food sales(a) of 7.7% and of like-for-like drink
sales(a) of 6.0% driven by strengthening spend per head. Volumes of food and
drink were in marginal decline across the first half following a weaker period
after the festive season.
Like-for-like sales(a):
Wks 1-15 Wks 16-28 Wks 1-28
Q1 Q2 H1
Food 8.7% 6.6% 7.7%
Drink 6.6% 5.3% 6.0%
Total 7.7% 6.1% 7.0%
Over the most recent 4 weeks, following Easter in both this year and last,
like-for-like sales(a) growth was 5.3%.
Separately disclosed items
There were no separately disclosed items recognised in the period. In the
prior period £1m was recognised relating to VAT on gaming machine income for
the period 2005 to 2012.
Operating profit and margins(a)
Adjusted operating profit(a) for the first half was £164m (HY 2023 £100m),
an increase of 64.0%.
Adjusted operating margin of 11.7% was 3.9ppts higher than last year driven by
strong like-for-like sales(a) growth, reduced cost inflation and operating
efficiencies.
We anticipate an aggregate net cost headwind for this year of slightly less
than 3% of our cost base of c.£2.0 billion, including deflation in energy
prices for which we have now secured just over 80% of the current year's
anticipated requirement. We are working very hard to mitigate as much of the
impact of these cost increases as we can, both through driving sales growth
and through identifying and implementing further cost efficiencies, all
executed under our Ignite programme of work.
Interest
Net finance costs of £55m (HY 2023 £58m) for the half year were £3m lower
than the same period last year. The net pensions finance charge was £1m (HY
2023 £1m). The charge for the full year is expected to be £1m.
Earnings per share
Basic and adjusted earnings per share were 13.6p (HY 2023 5.4p and adjusted
earnings per share(a) 5.5p).
The basic weighted average number of shares in the period was 596m and the
total number of shares issued at the balance sheet date was 598m.
Cash flow
HY 2024 HY 2023
£m £m
EBITDA 233 168
Non-cash share-based payment and pension costs and other 5 4
Operating cash flow before movements in working capital and pension 238 172
contributions
Working capital movement 27 27
Pension escrow return 35 -
Pension contributions (1) (7)
Cash flow from operations 299 192
Capital expenditure (81) (98)
Net finance lease principal payments (20) (26)
Interest on lease liabilities (8) (11)
Net interest paid (42) (46)
Purchase of own shares (3) -
Tax (8) -
Other - (1)
Net cash flow before bond amortisation 137 10
Mandatory bond amortisation (61) (57)
Net cash flow 76 (47)
This was a very strong period of cash generation. EBITDA increased sharply as
a result of an improved trading performance to £233m, which converted to net
cash inflow for the period before bond amortisation of £137m (HY 2023 £10m)
helped principally by timing on working capital flows, return of historic
pension contributions from escrow and lower capital expenditure.
After all outgoings, including mandatory bond amortisation of £61m (including
net impact of currency swaps), cash inflow was £76m (HY 2023 outflow £47m).
Capital expenditure
Capital expenditure of £81m (HY 2023 £98m, including £3m intangible assets)
comprises £80m from the purchase of property, plant and equipment and £1m in
relation to the purchase of intangible assets.
HY 2024 HY 2023
£m # £m #
Maintenance and infrastructure ( ) 29 40
Remodels - refurbishment 35 78 45 81
Conversions 5 4 4 3
Acquisitions - freehold 10 2 8 4
Acquisitions - leasehold 2 1 1 2
Total return generating capital expenditure 52 85 58 90
Total capital expenditure 81 98
Maintenance and infrastructure spend included investments towards our
sustainability ambitions, such as solar panels and electrified kitchen
equipment as well as digital and technological improvements. Investment in
these areas continued through the first half, although the cash outflow was
lower than the prior year.
During the period we have made good progress in reducing the average cost of
refurbishment projects across the estate through a renewed focus on cost
re-engineering. Overall, we remain committed to resumption of an average
seven-year refurbishment cycle across our estate, although supply chain
constraints, notably in securing timely planning consent, continue to prove a
challenge.
One of the freehold acquisitions relates to the purchase of a current trading
site previously operated as leasehold.
Pensions
Both the main pensions schemes of the group are now substantially de-risked,
in third party buy-in, with no further contributions being made. During the
year a return of £35m of historic contributions was made to the group from
amounts held in escrow with respect to the Main Plan. A further return of up
to £12m, relating to the Executive Plan, is anticipated in the next financial
year.
One further scheme, remains. This is closed and unfunded and has estimated
liabilities of £23m.
Net debt and facilities
On the back of a strong cash performance, net debt(a) at the period end
reduced to £1,486m, comprised of £1,037m non-lease liabilities and lease
liabilities of £449m (HY 2023 £1,660m comprised of £1,193m non-lease
liabilities and lease liabilities of £467m). This represents a multiple of
3.6 times EBITDA over the last year including lease liabilities (2.5 times
excluding these liabilities).
In addition to the securitisation the Group has a £200 million unsecured
facility, expiring in July 2026. Further details of existing debt arrangements
and an analysis of net debt can be found in Note 10 to the financial
statements and at https://www.mbplc.com/infocentre/debtinformation/
(https://www.mbplc.com/infocentre/debtinformation/) .
Going Concern
After considering forecasts, sensitivities and mitigating actions available to
management and having regard to risks and uncertainties, the Directors have a
reasonable expectation that the Group has adequate resources to continue to
operate within its borrowing facilities and covenants for a period of at least
12 months from the date of signing the financial statements. Accordingly, the
financial statements have been prepared on the going concern basis. Full
details are included in Note 1.
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
25 weeks of the year); and
- The interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).
This responsibility statement was approved by the Board of Directors on 21 May
2024 and is signed on its behalf by:
Tim Jones
Chief Financial Officer
21 May 2024
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.
b - As measured by the CGA Business Tracker.
GROUP CONDENSED INCOME STATEMENT
for the 28 weeks ended 13 April 2024
2024 2023 2023
28 weeks 28 weeks 53 weeks
(Unaudited) (Unaudited) (Audited)
Before separately disclosed items Before separately disclosed items(a) Before separately disclosed items(a)
Total Total Total
Notes £m £m £m £m £m £m
Revenue 3 1,396 1,396 1,282 1,282 2,503 2,503
Operating costs before depreciation, amortisation and movements in the (1,163) (1,163) (1,114) (1,115) (2,145) (2,145)
valuation of the property portfolio
Share in associates results - - 1 1 1 1
Net profit arising on property disposals - - - - - 3
EBITDA(b) before movements in the valuation of the property portfolio 233 233 169 168 359 362
Depreciation, amortisation and movements in the valuation of the property (69) (69) (69) (69) (133) (264)
portfolio
Operating profit 164 164 100 99 226 98
Finance costs 5 (60) (60) (60) (60) (116) (116)
Finance income 5 5 5 2 2 8 8
Net pensions finance charge (1) (1) (1) (1) (3) (3)
5,11
Profit/(loss) before tax 108 108 41 40 115 (13)
Tax (charge)/credit (27) (27) (8) (8) (19) 9
6
Profit/(loss) for the period 81 81 33 32 96 (4)
Earnings/(loss) per ordinary share:
7
Basic 13.6p 13.6p 5.5p 5.4p 16.1p (0.7p)
Diluted 13.5p 13.5p 5.5p 5.4p 16.1p (0.7p)
a. Separately disclosed items are explained and analysed in note 4.
b. Earnings before interest, tax, depreciation, amortisation and movements in the
valuation of the property portfolio.
All results relate to continuing operations.
GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the 28 weeks ended 13 April 2024
2024 2023 2023
28 weeks 28 weeks 53 weeks
Notes £m £m £m
(Unaudited) (Unaudited) (Audited)
Profit/(loss) for the period 81 32 (4)
Items that will not be reclassified subsequently to profit or loss:
Unrealised loss on revaluation of the property portfolio - - (76)
Remeasurement of pension liabilities 11 1 36 42
Tax relating to items not reclassified 6 - (9) 5
1 27 (29)
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 (18) (46) (9)
- Reclassification adjustments for items included in profit or loss 3 29 30
Tax relating to items that may be reclassified 6 4 4 (5)
(11) (13) 15
Other comprehensive (expense)/income after tax (10) 14 (14)
Total comprehensive income/(expense) for the period 71 46 (18)
GROUP CONDENSED BALANCE SHEET
13 April 2024 2024 2023 2023
13 April 8 April 30 September
Notes £m £m £m
ASSETS (Unaudited) (Unaudited) (Audited)
Goodwill and other intangible assets 8 16 15 17
Property, plant and equipment 8 4,114 4,235 4,086
Right-of-use assets 9 316 338 327
Interests in associates - 7 -
Finance lease receivables 11 12 11
Other receivables 11 12 25 47
Deferred tax asset 4 4 4
Derivative financial instruments 12 28 32 33
Total non-current assets 4,501 4,668 4,525
Inventories 27 27 25
Trade and other receivables 92 88 123
Finance lease receivables 1 1 1
Derivative financial instruments 12 2 4 2
Cash and cash equivalents 10 194 180 126
Total current assets 316 300 227
Total assets 4,817 4,968 4,802
LIABILITIES
Pension liabilities 11 (1) (1) (1)
Trade and other payables (489) (457) (491)
Current tax liabilities (2) (1) (2)
Borrowings 10 (140) (156) (144)
Lease liabilities 9 (42) (44) (33)
Derivative financial instruments 12 - (8) -
Total current liabilities (674) (667) (671)
Pension liabilities 11 (22) (23) (21)
Borrowings 10 (1,120) (1,252) (1,186)
Lease liabilities 9 (407) (423) (430)
Derivative financial instruments 12 (21) (36) (7)
Deferred tax liabilities (363) (365) (348)
Provisions (9) (10) (9)
Total non-current liabilities (1,942) (2,109) (2,001)
Total liabilities (2,616) (2,776) (2,672)
Net assets 2,201 2,192 2,130
EQUITY
Called up share capital 51 51 51
Share premium account 357 357 357
Capital redemption reserve 3 3 3
Revaluation reserve 951 1,009 951
Own shares held (5) (5) (5)
Hedging reserve (15) (33) (4)
Translation reserve 14 15 14
Retained earnings 845 795 763
Total equity 2,201 2,192 2,130
GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY
for the 28 weeks ended 13 April 2024
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 24 September 2022 (Audited) 51 357 3 1,009 (5) (20) 15 733 2,143
- - - - - - - 32 32
Profit for the period
Other comprehensive income - - - - - (13) - 27 14
Total comprehensive income - - - - - (13) - 59 46
Credit in respect of share-based payments - - - - - - - 3 3
At 8 April 2023 51 357 3 1,009 (5) (33) 15 795 2,192
(Unaudited)
Loss for the period - - - - - - - (36) (36)
Other comprehensive (expense)/income - - - (58) - 29 (1) 2 (28)
Total comprehensive (expense)/income - - - (58) - 29 (1) (34) (64)
Credit in respect of share-based payments - - - - - - - 2 2
At 30 September 2023 (Audited) 51 357 3 951 (5) (4) 14 763 2,130
Profit for the period - - - - - - - 81 81
Other comprehensive (expense)/income - - - - - (11) - 1 (10)
Total comprehensive (expense)/income - - - - - (11) - 82 71
Purchase of own shares - - - - (3) - - - (3)
Release of own shares - - - - 3 - - (3) -
Credit in respect of share-based payments - - - - - - - 3 3
At 13 April 2024 51 357 3 951 (5) (15) 14 845 2,201
(Unaudited)
GROUP CONDENSED CASH FLOW STATEMENT
for the 28 weeks ended 13 April 2024
2024 2023 2023
28 weeks 28 weeks 53 weeks
Notes £m £m £m
Cash flow from operations (Unaudited) (Unaudited) (Audited)
Operating profit 164 99 98
Add back/(deduct):
Movement in the valuation of the property portfolio - - 131
Net profit arising on property disposals - - (3)
Loss on disposal of fixtures, fittings and equipment - - 2
Depreciation of property, plant and equipment 8 49 49 93
Amortisation of intangibles 2 2 4
Depreciation of right-of-use assets 9 18 18 36
Cost charged in respect of share-based payments 3 3 5
Administrative pension costs 11 2 2 5
Share of associates results - (1) (1)
Settlement of pre existing lease contracts - - 3
Fair value gain on associate - - (5)
Operating cash flow before movements in working capital and pension 238 172 368
contributions
Increase in inventories (2) (4) (2)
Decrease/(increase) in trade and other receivables 50 1 (42)
Increase in trade and other payables 14 30 44
Decrease in provisions - - (1)
Pension contributions 11 (1) (7) (8)
Cash flow from operations 299 192 359
Interest payments (50) (44) (95)
Interest receipts/(payments) on interest rate swap 2 (6) (7)
Interest receipts on cross currency swap 4 3 7
Interest payments on cross currency swap (3) (2) (4)
Other interest paid - lease liabilities (8) (11) (16)
Borrowing facility fees paid - - (2)
Interest received 5 3 9
Tax paid (8) - (3)
Net cash from operating activities 241 135 248
Investing activities
Acquisition of 3Sixty Restaurants Ltd - - (17)
Cash acquired on acquisition of 3Sixty Restaurants Ltd - - 5
Purchases of property, plant and equipment (80) (95) (154)
Purchases of intangible assets (1) (3) (3)
Net proceeds from sale of property, plant and equipment - (1) 3
Finance lease principal repayments received 1 1 1
Net cash used in investing activities (80) (98) (165)
Financing activities
Purchase of own shares (3) - -
Repayment of principal in respect of securitised debt 10 (64) (60) (121)
Principal receipts on currency swap 10 11 11 21
Principal payments on currency swap 10 (8) (8) (16)
Cash payments for the principal portion of lease liabilities (21) (27) (53)
Net cash used in financing activities (85) (84) (169)
Net increase/(decrease) in cash and cash equivalents 10 76 (47) (86)
Cash and cash equivalents at the beginning of the period 10 103 190 190
Foreign exchange movements on cash - (1) (1)
Cash and cash equivalents at the end of the period 10 179 142 103
Cash and cash equivalents are defined in note 10
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. GENERAL INFORMATION
Basis of preparation
Mitchells & Butlers Plc (the Company) is a company domiciled in the UK.
These condensed consolidated interim financial statements (interim financial
statements) as at and for the 28 weeks ended 13 April 2024 comprise the
Company and its subsidiaries (together referred to as the Group). The Group is
primarily involved in the hospitality industry providing guests with memorable
occasions serving food and drink across a range of restaurants, pubs and bars.
This interim financial information has been prepared in accordance with
International Accounting Standard (IAS) 34 Interim Financial Reporting as
adopted within the United Kingdom and should be read in conjunction with the
Group's last annual consolidated financial statements as at 30 September 2023.
They do not include all of the information required for a complete set of
financial statements prepared in accordance with International Financial
Reporting Standards (IFRS). However, selected explanatory notes are included
to explain events and transactions that are significant to an understanding of
the changes in the Group's financial position and performance since the last
annual financial statements.
These interim financial statements were authorised for issue by the Company's
board of Directors on 21 May 2024
The information for the 53 weeks ended 30 September 2023 does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. A
copy of the statutory accounts for that period has been delivered to the
Registrar of Companies and has been prepared in accordance with IFRS as
adopted within the United Kingdom. The auditor's report on those accounts
was not qualified and did not contain statements under section 498(2) or (3)
of the Companies Act 2006.
This interim financial information has not been audited or reviewed by the
auditor under the International Standard on Review Engagements (UK) 2410.
Going concern
The Directors have adopted the going concern basis in preparing these
financial statements after assessing the impact of identified principal risks
and their possible adverse impact on financial performance, specifically
revenue and cashflows throughout the going concern period, being 12 months
from the date of signing of these financial statements.
The Group has two main sources of funding. Namely, a secured debt financing
structure and a £200m unsecured revolving credit facility due to expire in
July 2026.
Within the secured debt financing structure there are two main covenants: the
level of net worth (being the net asset value of the securitisation group) and
FCF to DSCR. As at 13 April 2024 there was substantial headroom on the net
worth covenant. FCF to DSCR represents the multiple of Free Cash Flow (being
EBITDA less tax and required capital maintenance expenditure) generated by
sites within the structure to the cost of debt service (being the repayment of
principal, net interest charges and associated fees). This is tested quarterly
on both a trailing two quarter and a four quarter basis with a minimum level
of 1.1 times.
The unsecured facility includes financial covenants relating to the ratio of
EBITDAR to rent plus interest (at a minimum of 1.25 times) and Net debt to
EBITDA (to be no more than 3.0 times) based on the performance of the
unsecured estate, tested at each Half Year and Full Year date. Unsecured
facilities expire in July 2026, beyond the going concern assessment period.
In the year ahead the main uncertainties are considered to be the maintenance
of growth in sales and the rate of overall cost inflation. Despite recent
reductions in cost inflation (particularly utilities, which have experienced
deflation) the outlook for both of these remains uncertain and will depend on
a number of factors including consumer spending power and confidence, global
political developments and supply chain disruptions and government policy.
1. GENERAL INFORMATION (CONTINUED)
Going concern (continued)
The Directors have reviewed the financing arrangements against a forward
trading forecast in which they have considered the Group's current financial
position. This forecast assumes further growth in sales and that cost
inflation remains moderated at close to current levels. Under this scenario
the Group is able to stay within all committed facility financial covenants,
with good levels of headroom, and maintains sufficient liquidity throughout.
The Directors have also considered a severe but plausible downside scenario
covering adverse movements against the base forward forecast in both sales and
cost inflation in which some, but limited, mitigation activity is taken. In
this downside scenario the Group also retains sufficient liquidity throughout
the period, and no covenants are breached with reasonable headroom maintained
throughout the review period.
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
condensed financial statements, and therefore continue to adopt the going
concern assumption in their preparation.
Accounting policies
The interim financial information has been prepared on a consistent basis
using the accounting policies set out in the Annual Report and Accounts 2023.
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 2023. Judgements and estimates for the interim
period remain unchanged.
2. SEGMENTAL ANALYSIS
The Group trades in one business segment (that of operating pubs, bars 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: 2024 2023 2023
28 weeks 28 weeks 53 weeks
£m £m £m
Food 751 681 1,323
Drink 597 557 1,092
Services 48 43 87
Other - Apprenticeship incentives - 1 1
Total 1,396 1,282 2,503
Revenue from services includes rent receivable from unlicensed properties and
leased operations of £5m (2023 28 weeks £5m, 2023 53 weeks £9m).
Government grants
Apprenticeship incentives
The Group is entitled to claim £1,000 for each apprentice employed, where
they are aged 16 to 18, or under 25 and meet certain other criteria. In
prior periods, as part of its response to the Covid-19 pandemic, the UK
Government introduced a scheme to enable an employer to receive up to an
additional £3,000 per apprentice, where the apprentice commenced employment
between 1 August 2020 and 31 January 2022. The payment is phased with
amounts due in equal instalments at 90 days and 365 days after employment
commenced and is recognised on receipt of cash.
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.
There are no separately disclosed items in the current period. In the prior
period 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 reviews of short leasehold and unlicensed
properties, right-of-use assets and goodwill; VAT refund in relation to gaming
machine income; and costs associated with acquisitions.
2024 2023 2023
28 weeks 28 weeks 53 weeks
Notes £m £m £m
Gaming machine settlement a - (1) (1)
Fair value adjustment to investment in 3Sixty Restaurants Ltd b - - 5
Settlement of pre existing lease contracts on the acquisition of 3Sixty c - - (3)
Restaurants Ltd
Costs associated with the acquisition of 3Sixty Restaurants Ltd d - - (1)
Total separately disclosed items recognised within operating costs - (1) -
Net profit arising on property disposals - - 3
Movement in the valuation of the property portfolio:
- Impairment charge arising from the revaluation of freehold and long e - - (110)
leasehold properties
- Impairment of short leasehold and unlicensed f - - (6)
properties
- Impairment of right-of-use assets g - - (14)
- Impairment of goodwill h - - (1)
Net movement in the valuation of the property portfolio - - (131)
Total separately disclosed items before tax - (1) (128)
Tax relating to the above items - - 28
Total separately disclosed items after tax - (1) (100)
4. SEPARATELY DISCLOSED ITEMS (CONTINUED)
Separately disclosed items are as follows:
a During the prior period £19m was received from HMRC, relating to VAT on
gaming machine income for the period 2005 to 2012, including interest. An
estimate of £20m for the amount receivable was recognised in the 52 weeks
ended 25 September 2021. As a result, the excess of £1m was recognised in
the prior period.
b. During the prior period, the Group acquired the remaining 60% of share capital
of 3Sixty Restaurants Limited, after having a 40% interest since April 2018.
As a result of this acquisition achieved in stages, the Group applied the
principles of IFRS 3 and remeasured the 40% interest to fair value at
acquisition.
c. As a result of the acquisition of 3Sixty Restaurants Limited, a loss was
recognised at acquisition for the settlement of pre-existing lease contracts,
due to the terms of the contracts being below market terms.
d. Relates to integration costs, restructuring costs and legal and professional
fees incurred in the acquisition of 3Sixty Restaurants Limited on 18 June
2023.
e. The impairment arising from the Group's revaluation of its freehold and long
leasehold pub estate comprises an impairment charge, where the carrying values
of the properties exceed their recoverable amount, net of a revaluation
surplus that reverses past impairments.
f. Impairment of short leasehold and unlicensed properties where their carrying
values exceeded their recoverable amounts, net of reversals of past
impairments.
g. Impairment of right-of-use assets where their carrying values exceeded their
recoverable amounts, net of reversals of past impairments.
h. Impairment of goodwill where the carrying value exceeded the recoverable
amount.
5. FINANCE COSTS AND INCOME
2024 2023 2023
28 weeks 28 weeks 53 weeks
£m £m £m
Finance costs
Interest on securitised debt (44) (48) (89)
Interest on other borrowings (7) (3) (11)
Interest on lease liabilities (9) (9) (16)
Total finance costs (60) (60) (116)
Finance income
Interest receivable on cash balances 5 2 8
Net pensions finance charge (note 11) (1) (1) (3)
6. TAXATION
The taxation charge for the 28 weeks ended 13 April 2024 has been calculated
by applying an estimate of the annual effective tax rate before separately
disclosed items of 25.4% (2023 28 weeks, 18.4%). The annual effective rate is
slightly above the UK statutory rate of 25% largely due to profits arising and
taxed in Germany, which has a higher statutory tax rate. The effective rate
has increased significantly since the prior year, due to the increased UK tax
rate of 25% (compared to the blended rate of 22% that applied in FY23) and the
cessation of the enhanced 'super-deduction' for capital expenditure, which
gave a permanent benefit in the prior period.
2024 2023 2023
28 weeks 28 weeks 53 weeks
Tax charge in the income statement £m £m £m
Current tax:
- Corporation tax (8) (2) (5)
Total current tax charge (8) (2) (5)
Deferred tax:
- Origination and reversal of temporary differences (19) (8) 11
- Effect of changes in UK tax rate - 2 3
Total deferred tax (charge)/credit (19) (6) 14
Total tax (charge)/credit in the income statement (27) (8) 9
Further analysed as tax relating to:
Profit before separately disclosed items (27) (8) (19)
Separately disclosed items - - 28
(27) (8) 9
2024 2023 2023
Tax relating to items recognised in other comprehensive 28 weeks 28 weeks 53 weeks
income/(expense) £m £m £m
Deferred tax:
Items that will not be reclassified subsequently to profit or loss:
- Unrealised losses due to revaluations - revaluation reserve - - 18
- Unrealised gains due to revaluations - retained earnings - - (4)
- Remeasurement of pension liabilities - (9) (9)
- (9) 5
Items that may be reclassified subsequently to profit or loss:
- Cash flow hedges 4 4 (5)
Total tax credit/(charge) recognised in other comprehensive income 4 (5) -
The Finance Act 2021 increased the main rate of corporation tax from 19% to
25% from 1 April 2023. The effect of this change was reflected in the closing
deferred tax balances at 30 September 2023 and 8 April 2023.
7. EARNINGS PER SHARE
Basic earnings per share (EPS) has been calculated by dividing the 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 dilutive potential ordinary shares.
Adjusted earnings per ordinary share amounts are presented before separately
disclosed items (see note 4) in order to allow a better understanding of the
adjusted trading performance of the Group.
The profit used for the earnings per share calculations is as follows:
2024 2023 2023
28 weeks 28 weeks 53 weeks
£m £m £m
Profit/(loss) for the period 81 32 (4)
Separately disclosed items net of tax - 1 100
Adjusted profit for the period 81 33 96
The number of shares used for the earnings per share calculations are as
follows:
2024 2023 2023
28 weeks 28 weeks 53 weeks
Million million million
Basic weighted average number of ordinary shares 596 595 595
Effect of dilutive potential ordinary shares:
- Contingently issuable shares 4 1 -
Diluted weighted average number of shares 600 596 595
At 13 April 2024, 4,629,922 (2023 28 weeks 4,868,022, 2023 53 weeks 7,323,559)
share options were outstanding that could potentially dilute basic EPS in the
future but were not included in the calculation of diluted EPS as they are
anti-dilutive for the periods presented.
2024 2023 2023
28 weeks 28 weeks 53 weeks
pence pence Pence
Basic earnings per share
Basic earnings/(loss) per share 13.6 5.4 (0.7)
Separately disclosed items net of tax per share - 0.1 16.8
Adjusted basic earnings per share 13.6 5.5 16.1
Diluted earnings per share
Diluted earnings/(loss) per share 13.5 5.4 (0.7)
Adjusted diluted earnings per share 13.5 5.5 16.1
8. PROPERTY, PLANT AND EQUIPMENT
2024 2023 2023
13 April 8 April 30 September
Net book value £m £m £m
At beginning of period 4,086 4,194 4,194
Additions 80 90 151
Acquired through business combinations - - 29
Disposals (3) - (3)
Net decrease from property revaluation - - (186)
Impairment of short leasehold properties - - (6)
Depreciation provided during the period (49) (49) (93)
At end of period 4,114 4,235 4,086
Revaluation and impairment
The freehold and long leasehold licensed properties were valued at market
value as at 30 September 2023, using information provided by CBRE, independent
Chartered Surveyors. This valuation was based on an assessment of individual
asset fair maintainable operating profit (FMOP) and property multiples. The
Group has performed an assessment for material changes that would impact the
value of its freehold and long leasehold properties at the interim date. The
Group's profit performance is in line with forecast supporting the fair
maintainable operating profit (FMOP) assessed at 30 September 2023 and the
property multiples adopted at 30 September 2023 are supported by the current
property market. As such there is no requirement to perform a revaluation at
the interim date.
Short leasehold properties, unlicensed properties and fixtures, fittings and
equipment are held at cost less depreciation and impairment provisions. During
the current period, in accordance with IAS 36, the Group has performed an
assessment for indicators of impairment of these categories of property, plant
and equipment, together with right-of-use assets (note 9). This review
included an assessment of current year performance against the overall Group
forecast used in the impairment review at 30 September 2023, and long term
growth rates and capital maintenance assumptions both of which are unchanged
from the year end. In addition, our sensitivity analysis at FY23 year end
showed that the impairment charge was relatively insensitive to likely
movements in the discount rate (pre-tax WACC) of 11.00%. As such, there are
not considered to be any indicators of impairment that would require the Group
to perform a further review of impairment.
As a result of the above review, no revaluation or impairment has been
recognised in the period (2023 28 weeks £nil, 2023 53 weeks revaluation
decrease of £186m and short leasehold properties impairment of £6m).
Goodwill and other intangible assets
Goodwill and other intangible assets at 13 April 2024 of £16m (8 April 2023
£15m, 30 September 2023 £17m) comprise goodwill of £2m (8 April 2023
£2m, 30 September 2023 £2m), brands of £5m (8 April 2023 £nil, 30
September 2023 £5m) and computer software of £9m (8 April 2023 £13m, 30
September 2023 £10m).
Capital commitments
The total amount contracted for but not provided in the financial statements
was £25m (8 April 2023 £14m, 30 September 2023 £12m).
9. LEASES
Right-of-use assets
2024 2023 2023
13 April 8 April 30 September
Net book value £m £m £m
At start of period 327 339 339
Acquired through business combinations - - 6
Additions 13 20 36
Impairment - - (14)
Disposals(a) (5) (2) (2)
Depreciation provided during the period (18) (18) (36)
Foreign currency movements (1) (1) (2)
At end of period 316 338 327
a. Disposals mainly relate to leasehold properties where the freehold
has been purchased, and therefore, the right-of-use assets and corresponding
lease liabilities (see note 10) have been disposed. The freehold purchases
are reflected in property, plant and equipment additions (see note 8).
Impairment review of right-of-use assets
As described in note 8, the Group has reviewed its short leasehold properties
and right-of-use assets for indicators of impairment at the interim date, and
determined that there are no indicators that lead the Group to conclude that a
further review of impairment is required.
Lease liabilities
An analysis of lease liabilities recognised are as follows:
13 April 8 April 30 September
2024 2023 2023
£m £m £m
Current liabilities 42 44 33
Non current liabilities 407 423 430
Total lease liabilities 449 467 463
10. BORROWINGS AND NET DEBT
Borrowings
13 April 8 April 30 September
2024 2023 2023
£m £m £m
Current
Securitised debt 127 118 123
Unsecured revolving credit facilities (2) - (2)
Overdraft 15 38 23
Total current 140 156 144
Non-current
Securitised debt 1,120 1,252 1,186
Total borrowings 1,260 1,408 1,330
10. BORROWINGS AND NET DEBT (CONTINUED)
Net debt
13 April 8 April 30 September
2024 2023 2023
£m £m £m
Cash and cash equivalents 194 180 126
Overdraft (15) (38) (23)
Cash and cash equivalents as presented in the cashflow statement(a) 179 142 103
Securitised debt (1,247) (1,370) (1,309)
Unsecured revolving credit facility 2 - 2
Derivatives hedging balance sheet debt(b) 29 35 34
Net debt excluding leases (1,037) (1,193) (1,170)
Lease liabilities (449) (467) (463)
Net debt including leases (1,486) (1,660) (1,633)
a Cash and cash equivalents in the cash flow statement are presented net of an
overdraft within a cash pooling arrangement, relating to various entities
across the group.
b Represents the element of the fair value of currency swaps 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 and form an integral part of the
Group's cash management.
Net debt
Net debt comprises cash and cash equivalents, cash deposits net of borrowings
and discounted lease liabilities. Net debt is presented on a constant currency
basis, due to the inclusion of the fixed exchange rate component of the cross
currency swap. Cash flows on the interest rate and cross currency swaps are
shown within interest paid in the Group cash flow statement.
Securitised debt
On 13 November 2003, the Group refinanced its debt by raising £1,900m through
a securitisation of the majority of its UK pubs and restaurants owned by
Mitchells & Butlers Retail Limited. On 15 September 2006 the Group
completed a further debt ('tap') issue to borrow an additional £655m and
refinance £450m of existing debt at lower cost. The notes are secured on
the majority of the Group's property and future income streams therefrom. All
of the floating rate notes are hedged using interest rate swaps which fix the
interest rate payable.
The overall cash interest rate payable on the loan notes is 6.3% (8 April 2023
6.3%, 30 September 2023 6.3%) after taking account of interest rate hedging
and the cost of the financial guarantee provided by Ambac Assurance UK Limited
(Ambac). Ambac acts as a guarantor of the Group's obligations to repay
interest and principal on the loan notes. In the event that the Group is
unable to pay such amounts the guarantee is limited to the Class A1N, A3N, A4
and Class AB note holders only.
The Class B1 fixed rate notes were fully repaid during the period in
accordance with the amortisation profile of the Loan Notes.
10. BORROWINGS AND NET DEBT (CONTINUED)
Securitised debt (continued)
The securitisation is governed by various covenants, warranties and events of
default, many of which apply to Mitchells & Butlers Retail Limited, the
Group's main operating subsidiary. There are two main financial covenants,
being the level of net assets and free cash flow (FCF) to debt service. FCF to
debt service represents the multiple of cash generated by sites within the
structure to the cost of debt service. This is tested quarterly on both a
trailing two quarter and a four quarter basis. There are additional covenants
regarding the maintenance and disposal of securitised properties and
restrictions on its ability to move cash, by way of dividends for example, to
other Group companies.
At 13 April 2024, Mitchells & Butlers Retail Limited had cash and cash
equivalents of £90m (8 April 2023 £81m, 30 September 2023 £54m). Of this
amount £1m (8 April 2023 £1m, 30 September 2023 £4m), representing disposal
proceeds, was held on deposit in an account over which there are a number of
restrictions. The use of this cash requires the approval of the
securitisation trustee and may only be used for certain specified purposes
such as capital enhancement expenditure and business acquisitions.
The carrying value of the securitised debt in the Group balance sheet is
analysed as follows:
13 April 8 April 30 September
2024 2023 2023
£m £m £m
Principal outstanding at beginning of period 1,308 1,448 1,448
Principal repaid during the period (64) (60) (121)
Net principal receipts on cross currency swap 3 3 5
Exchange on translation of dollar loan notes (5) (24) (24)
Principal outstanding at end of period 1,242 1,367 1,308
Deferred issue costs (2) (2) (2)
Accrued interest 7 5 3
Carrying value at end of period 1,247 1,370 1,309
Liquidity facility
Under the terms of the securitisation, the Group holds a liquidity facility of
£295m provided by two counterparties. The amount drawn at 13 April 2024 is
£nil (8 April 2023 £nil, 30 September 2023 £nil).
Unsecured revolving credit facility
The Group holds an unsecured committed revolving credit facility of £200m,
which expires on 20 July 2026. The amount drawn at 13 April 2024 is £nil, (8
April 2023 is £nil, 30 September 2023 £nil).
10. BORROWINGS AND NET DEBT (CONTINUED)
Movement in net debt excluding leases
2024 2023 2023
28 weeks 28 weeks 53 weeks
£m £m £m
Net increase/(decrease) in cash and cash equivalents 76 (47) (86)
Add back cash flows in respect of other components of net debt:
- Repayment of principal in respect of securitised debt 64 60 121
- Principal receipts on cross currency swap (11) (11) (21)
- Principal payments on cross currency swap 8 8 16
Decrease in net debt arising from cash flows 137 10 30
Movement in capitalised debt issue costs net of accrued interest (4) (4) (1)
Decrease in net debt excluding leases 133 6 29
Opening net debt excluding leases (1,170) (1,198) (1,198)
Foreign exchange movements on cash - (1) (1)
Closing net debt excluding leases (1,037) (1,193) (1,170)
Movement in lease liabilities
2024 2023 2023
28 weeks £m 28 weeks 53 weeks
£m £m
Opening lease liabilities (463) (481) (481)
Acquired through business combinations - - (5)
Additions(a) (13) (19) (35)
Interest charged during the period (9) (9) (16)
Repayment of principal 18 27 53
Payment of interest 12 11 16
Disposals(b) 5 3 4
Foreign currency movements 1 1 1
Closing lease liabilities (449) (467) (463)
a Additions to lease liabilities include new leases and lease extensions or rent
reviews relating to existing leases.
b Disposals mainly relate to leasehold properties where the freehold has been
purchased, and therefore, the right-of-use assets (see note 9) and
corresponding lease liabilities have been disposed.
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 are now closed to future service accrual. The defined
benefit liabilities relate to these funded plans, together with an unfunded
unapproved pension arrangement (the Executive Top-Up Scheme, or MABETUS) in
respect of certain MABEPP members. The assets of the plans are held in
self-administered trust funds separate from the Company's assets.
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
Buy-in policy transactions
During the prior period, the Trustees of the MABPP entered a Bulk Purchase
Agreement (BPA) with Standard Life. The resulting policies were set up to
provide the plan with sufficient funding to cover the majority of known member
benefits of the scheme, leaving c.£27m of uninsured benefits which the
Trustees will meet using the remaining Plan assets.
During the 52 weeks ended 24 September 2022, the Trustees of the MABEPP
entered a Bulk Purchase Agreement (BPA) with Legal and General Assurance
Society Limited. The resulting policy is set up to provide the plan with
sufficient funding to cover all known member benefits of the scheme.
The difference between the buy-in purchase price and the defined benefit
obligations covered by the policies was accounted for in other comprehensive
income. The accounting treatment was based on the following considerations
made by the Company:
· the employer is not relieved of primary responsibility for the
obligations. The 2 separate policies simply cover the benefit payments that
continue to be payable by the schemes;
· the contracts are effectively investments of the schemes; and
· the contracts provide the option to convert each annuity into
individual policies, which would transfer the obligation of each scheme to the
relevant insurer (known as a "buy-out"). Whilst this course of action may be
considered separately for each scheme in future, this is not a requirement and
a separate decision will be required before any buy-out proceeds. The
Trustee has not made a decision to move to buy-out, for either scheme.
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 2022
and updated by the schemes' independent qualified actuaries to 13 April
2024. Schemes' assets are stated at market value at 13 April 2024 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 schemes'
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. The key
assumptions used at the balance sheet date are Discount Rate of 5.1% (8 April
2023 4.8%, 30 September 2023 5.7%); Pensions Increases (RPI max 5%) of 3.0% (8
April 2023 2.9%, 30 September 2023 3.1%); and Inflation (RPI) of 3.2% (8 April
2023 3.2%, 30 September 2023 3.3%). The mortality assumptions remain
unchanged from the last financial year end.
Minimum funding requirements
The results of the 2022 actuarial valuation show a marginal surplus and,
subsequent to this, buy-in transactions for both MABPP and MABEPP were
completed in prior periods. As a result, payments for both schemes were made
into Blocked Accounts with amounts paid recognised as other receivables.
For the MABEPP, payments into the Blocked Account were suspended from December
2022. For the MABPP, payments ended in September 2023. In the current
period the full amount within the MABPP Blocked Account of £35m has been
repaid to the company.
11. PENSIONS (CONTINUED)
A total of £12m in the blocked escrow account in respect of the MABEPP scheme
is recognised in non-current other receivables.
Amounts recognised in respect of pension schemes
The net actuarial surplus in the schemes at the balance sheet date totalled
£127m (8 April 2023 £323m, 30 September 2023 £121m). Under IFRIC 14, an
additional liability is recognised to offset any actuarial surpluses in the
schemes as the Company does not have an unconditional right to a refund of the
surplus. The additional liabilities recognised due to this asset ceiling
totalled £150m (8 April 2023 £347m, 30 September 2023 £143m).
The resulting net pension liability as at 13 April 2024 of £23m (8 April 2023
£24m, 30 September 2023 £22m) relates solely to the MABETUS plan. The total
pension liabilities of £23m is presented as £1m current liabilities (8 April
2023 £1m, 30 September 2023 £1m) and £22m non-current liabilities (8 April
2023 £23m, 30 September 2023 £21m).
Group balance sheet 2024 2023 2023
13 April 8 April 30 September
£m £m £m
Fair value of scheme's assets 1,516 1,787 1,434
Present value of scheme's liabilities (1,389) (1,464) (1,313)
Actuarial surplus in the schemes 127 323 121
Additional liabilities recognised due to asset ceiling/minimum funding (150) (347) (143)
Total pension liabilities(a) (23) (24) (22)
Associated deferred tax asset 6 6 5
12. FINANCIAL INSTRUMENTS
Fair value of derivative financial instruments
The table below sets out the valuation basis of financial instruments held at
fair value by the Group:
13 April 8 April 30 September 2023
2024 2023
£m £m £m
Financial assets:
Currency swaps* 30 35 35
Share options** - 1 -
Financial liabilities:
Interest rate swaps* (21) (44) (7)
9 (8) 28
* Level 2 instruments using inputs, other than quoted prices, that are
observable either directly or indirectly
** Level 3 instruments using inputs that are unobservable.
The fair value of interest rate and currency swaps is the estimated amount
which the Group could expect to pay or receive on termination of the
agreements. These amounts are based on quotations from counterparties which
approximate to their fair market value and take into consideration interest
and exchange rates prevailing at the balance sheet date.
12. FINANCIAL INSTRUMENTS (CONTINUED)
Fair value of financial assets and liabilities
Borrowings have been valued as level 1 financial instruments as the various
tranches of the securitised debt have been valued using period end quoted
offer prices. As the securitised debt is traded on an active market, the
market value represents the fair value of this debt. The current value of
the overdraft represents its fair value. The carrying value and fair value of
borrowings is as follows:
13 April 8 April 30 September
2024 2023 2023
Carrying value Fair value £m Carrying value Fair value £m Carrying value Fair value £m
£m £m £m
Borrowings (note 10) (1,260) (1,114) (1,408) (1,194) (1,330) (1,162)
All other financial assets and liabilities are either short-term in nature or
their book values approximate to fair values.
13. RELATED PARTY TRANSACTIONS
The Group has held a number of property lease agreements with its associate
companies, 3Sixty Restaurants Limited and Fatboy Pub Company Limited. 3Sixty
Restaurants Limited was acquired during the prior period and from 18 April
2023 was treated as a subsidiary under the control of the group. Disclosures
below for 3Sixty Restaurants Limited relate to the period up to 18 April 2023
only.
The Group has entered into the following transactions with the associates:
3Sixty Restaurants Limited Fatboy Pub Company Limited
2024 2023 2023 2024 2023 2023
28 weeks 28 weeks 53 weeks 28 weeks 28 weeks 53 weeks
£000 £000 £000 £000 £000 £000
Rent charged - 640 640 50 50 100
Sales of goods and services - 400 419 9 2 4
- 1,040 1,059 59 52 104
The balance due from Fatboy Pub Company at 13 April 2024 was £5,000 (8 April
2023 £1,000, 30 September 2023 £10,000), net of a provision of £179,000 (8
April 2023 £179,000, 30 September 2023 £179,000).
There have been no other related party transactions during the period or the
previous period requiring disclosure under IAS 24 Related Party Disclosures.
14. POST BALANCE SHEET EVENTS
Acquisition of Pesto Restaurants Ltd
On 14 May 2024 the Group acquired the entire share capital of Pesto
Restaurants Ltd, a group of 10 restaurants based in the UK, for consideration
which will be determined over two payments and partly contingent on future
performance of the business but will be no more than £15m.
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 profit 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 an effective
comparison of the Group's trading performance from one period to the next.
Adjusted profit measures are reconciled to unadjusted IFRS results on the face
of the condensed 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 Group condensed income statement
to calculate net debt to EBITDA.
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 Group condensed income statement
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.
Adjusted earnings per share (EPS) Earnings per share using profit before separately disclosed items. Note 7
Net debt Net debt comprises cash and cash equivalents, cash deposits net of borrowings Note 10
and discounted lease liabilities. Presented on a constant currency basis due
to the inclusion of the fixed exchange rate component of the cross-currency
swap.
Net debt : Adjusted EBITDA The multiple of net debt including lease liabilities, as per the balance sheet Note 10
compared against 52-week EBITDA before separately disclosed items, which is a
widely used leverage measure in the industry.
Group condensed income statement
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.
2024 2023 Year-on-year
28 weeks 28 weeks
Source £m £m %
Reported revenue Condensed income statement 1,395.6 1,281.9 8.9%
Less non like-for-like sales and income (132.0) (100.6) 31.2%
Like-for-like sales 1,263.8 1,181.3 7.0%
Drink sales
2024 2023 Year-on-year
28 weeks 28 weeks
Source £m £m %
Reported drink revenue Note 3 596.9 556.5 7.3%
Less non like-for-like drink sales (48.0) (38.5)
Drink like-for-like sales 548.9 518.0 6.0%
Food sales
2024 2023 Year-on-year
28 weeks 28 weeks
Source £m £m %
Reported food revenue Note 3 750.9 681.1 10.2%
Less non like-for-like food sales (74.2) (52.9)
Food like-for-like sales 676.7 628.2 7.7%
Other sales
2024 2023 Year-on-year
28 weeks 28 weeks
Source £m £m %
Reported other revenue Note 3 47.8 44.3 7.9%
Less non like-for-like other sales (9.8) (9.2)
Other like-for-like sales 38.0 35.1 8.3%
B. Adjusted operating profit
Operating profit before separately disclosed items as set out in the Group
Condensed Income Statement. Separately disclosed items are those which are
separately identified by virtue of their size or nature. Excluding these items
allows a more effective comparison of the Group's trading performance from one
period to the next.
2024 2023 Year-on
28 weeks 28 weeks -year
Source £m £m %
Operating profit Condensed income statement 164 99 65.7%
Separately disclosed items Note 4 - 1
Adjusted operating profit 164 100 64.0%
Reported revenue Condensed income statement 1,396 1,282 8.9%
Adjusted operating margin 11.7% 7.8% 3.9bps
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 nature. Excluding these items allows a more effective comparison of
the Group's trading performance from one period to the next.
2024 2023 Year-on
28 weeks 28 weeks -year
Source £m £m %
Profit for the period Condensed income statement 81 32 153.1%
Add back separately disclosed items Note 4 - 1
Adjusted profit 81 33 145.5%
Basic weighted average number of shares Note 7 596 595
Adjusted earnings per share 13.6p 5.5p 147.3%
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.
2024 2023
28 weeks 28 weeks
Source £m £m
Net debt Note 10 1,486 1,660
Adjusted EBITDA H1 Group condensed income statement 233 169
Adjusted EBITDA prior year H2* 183 183
Adjusted 52-week EBITDA 416 352
3.6 4.7
Net debt : Adjusted EBITDA
*H2 measures are calculated from the income statement as the measure for the
52 weeks ended 30 September 2023, adjusted to remove the 53(rd) week, less the
measure for the 28 weeks ended 8 April 2023
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