TIDMMAB
RNS Number : 7638P
Mitchells & Butlers PLC
22 November 2016
MITCHELLS & BUTLERS PLC
22 November 2016
FULL YEAR RESULTS
(For the 52 weeks ended 24 September 2016)
- Return to like-for-like sales
growth
- Acceleration of estate investment
- Good progress on all three
strategic priorities
Financial performance
- Full year like-for-like sales down 0.8%(a)
with improving trend through the year. Recent
eight weeks up 0.5%
- Adjusted operating profit of GBP318m(b) (FY
2015 GBP328m)
- Adjusted earnings per share of 34.9p(b) (FY
2015 35.7p)
- Final dividend of 5.0p
Reported results
- Total revenue of GBP2,086m (FY 2015 GBP2,101m)
- Operating profit of GBP231m (FY 2015 GBP270m)
- Profit before tax: GBP94m (FY 2015 GBP126m)
- Basic earnings per share: 21.6p (FY 2015 25.0p)
Balance sheet and cash flow
- Capital expenditure GBP167m (FY 2015 GBP162m),
including 8 new site openings and 252 conversions
and remodels
- Free cash flow before adjusted items of GBP60m(c)
(FY 2015: GBP95m)
- Net debt of GBP1.84bn representing 4.3 times
adjusted EBITDA(b) (FY 2015 4.3 times)
Phil Urban, Chief Executive, commented:
"During the year we have made good progress in our three
priority areas: building a more balanced business; instilling a
more commercial culture; and driving an innovation agenda. This
focus is starting to have a positive effect on our sales, with
improved performance against a subdued market in recent months
through continuation of the momentum we saw start in the second
half of last year. Sales growth in the first eight weeks was
impacted by the Rugby World Cup in the prior year, but I'm
encouraged by the underlying momentum which has seen recent weeks
return to the levels seen in the summer.
In the next year, as previously announced, we face external cost
headwinds, notably from further wage inflation, the recent business
rates review and exchange rate movements. We are working hard to
mitigate these headwinds wherever possible, both through building
on our sales momentum and active management of our cost base."
Definitions
a - 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. Like-for-like sales are
measured against relevant accounting weeks in the prior year.
b - Adjusted earnings are quoted before adjusted items as set
out in the Group Income Statement and detailed in note 3 of the
accounts.
c - Free cash flow before adjusted items excludes GBP31m
dividend payment (FY 2015 GBPnil); GBP67m mandatory bond
amortisation (FY 2015 GBP61m); GBP31m drawn from an unsecured
revolving facility (FY 2015 GBPnil) and, in the prior year, GBP120m
transferred from cash to other cash deposits and GBP6m of operating
adjusted items.
There will be a presentation today for analysts and investors at
8.30am at the London Stock Exchange, 10 Paternoster Square, London,
EC4M 7LS. A live webcast of the presentation will be available at
www.mbplc.com. The conference will also be accessible by phone: 020
3059 8125 and quote "Mitchells & Butlers". The replay will be
available until 29 November 2016 on 0121 260 4861 replay access pin
4486867#.
All disclosed documents relating to these results are available
on the Group's website at www.mbplc.com
For further information, please contact:
+44(0)121 498
Tim Jones - Finance Director 6112
+44(0)121 498
James Cooper - Investor Relations 4525
+44(0)20 7251
James Murgatroyd (Finsbury) 3801
Notes to editors:
- Mitchells & Butlers is a leading operator
of managed restaurants and pubs. Its strong
portfolio of brands and formats includes Harvester,
Toby Carvery, All Bar One, Miller & Carter,
Premium Country Pubs, Sizzling Pubs, Crown
Carveries, Stonehouse, Vintage Inns, Browns,
Castle, Nicholson's, O'Neill's and Ember Inns.
In addition, it operates Innkeeper's Lodge
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
.
BUSINESS REVIEW
Over the last year we have continued to focus on our three
strategic priorities:
- To build a more balanced business
- To instil a more commercial culture
- To drive an innovation agenda
We have started to see early positive results emerging from our
work on these priorities. Sales were challenging in the first half
of the year, falling by 1.6% on a like-for-like basis. However, in
the second half our like-for-like sales grew by 0.2%, improving the
full year outturn to 0.8% down. This was in part driven by an
increased level of capital investment in our estate but also an
improvement in the performance of our sites that have not seen
recent investment.
This build in sales momentum has continued from the second half
to recent trading after the year end as we have moved from lagging
the market, to outperforming consistently(1) .
Our adjusted earnings per share fell by 2.2% to 34.9p,
reflecting the lower total sales but also a weaker margin in the
second half of the year. The National Living Wage was introduced
from April 2016, and saw a 7.5% increase in the minimum rate of pay
for those aged 25 and over, in addition to the National Minimum
Wage which increased by 3.1% in October 2015. The acceleration of
investment in our businesses also affected profits, as we incurred
a greater number of closure weeks and pre-opening costs. This is an
unavoidable short-term impact of improving amenity levels in our
businesses but is the right thing to do to enhance our long-term
prospects.
OUR PRIORITIES
Building a more balanced business
Our estate comprises more than 1,800 sites, of which more than
80% are freehold or long-leasehold. This provides the opportunity
for long-term value generation; our priority is therefore to ensure
the estate is set up to extract this value.
Over the coming years, we are committed to improving the quality
of the estate: by exposing it to more premium market spaces and by
improving the overall level of amenity. The premium market is where
we would expect to see the strongest growth, and these spaces offer
a form of long-term mitigation towards cost inflation. We are
therefore converting several of our businesses towards more premium
concepts (both existing and new) as well as making selective site
acquisitions and disposals where appropriate.
To this end, within the year we have carried out a full estate
review, which gives us a plan for each of our sites. We have
recently identified around 75 sites for sale in order to generate
greater value for shareholders than if retained as managed
businesses. Going forward, we will continue to look at acquisitions
and disposals as part of our normal course of business.
It remains our intention to grow Miller & Carter to 100
sites by 2018 and we are well on track to achieve this. This is a
proven and successful steakhouse format that generates strong
like-for-like sales, and also delivers good returns when we open in
new locations. We have grown the brand in the last year from 36 to
52 sites. A small number of these have been acquisitions, with the
majority being existing site conversions delivering EBITDA returns
of more than 40%. Our portfolio gives us a strong pipeline of
future conversion opportunities to continue successfully growing
the brand.
We have also evolved our Pizza & Carvery businesses and
established the new Stonehouse brand in summer 2016. This is a
reinvention of our Crown Carveries brand, involving modernisation
of the amenity whilst enhancing the menu to broaden its appeal. At
the end of FY 2016 we had 36 sites under the new brand. This
remains a strong value format, but with a more premium offer than
prior to conversion. As with Miller & Carter, these are largely
existing site conversions, and are generating returns of around
25%. We will aim to grow Stonehouse to around 80 sites by 2018.
Our estate's amenity level has improved through our remodel
programme, which encompasses all our brands and allows us to
develop the guest proposition whilst maintaining and enhancing the
estate through capital investment. An example of this is Harvester,
which has faced increased competition in recent years. We have
evolved our 'Feel Good Dining' remodel solution, which sees us
spend around GBP400,000 of capex per site, and is delivering a
return of around 25% in the 32 sites in which it has so far been
implemented. We have a pipeline of Harvester sites to continue the
rollout of this format.
In total, we completed 252 remodels and conversions in FY 2016
(FY 2015: 167), moving us towards a six-year investment cycle for
all our sites. We will continue to increase this to around 300
remodels and conversions in FY 2017, which we expect to be broadly
the rate in future years.
Instilling a more commercial culture
Across our retail teams and our support centre we employ more
than 43,000 people. Engagement of this team is critical to
achieving growth in profitable sales. Given the challenges we face
as a business and an industry, it is critical we execute well and
at pace.
To facilitate this, we underwent an organisational restructure
this year, creating four operating divisions, each containing
similar brands and customer types. The four Divisional Directors
leading these each now sit on the Executive Committee.
Organisationally, we have also identified a number of clear
workstreams aligned to our three priorities. These changes enable
us to make much quicker decisions, with our workstream teams
empowered to be decisive, work their way through barriers, and
deliver effectively.
We have focused our work in this area across a wide range of
activities. There has been a significant drive towards resolving
our guests' complaints more quickly. A year ago it was taking an
unacceptable average of 11 days to resolve a guest complaint. We
quickly reduced this to our target of just over 2 days, and
successfully maintained this level. This will continue to be an
important area for our teams.
Much of our work in this area has been around creating a more
sales-focused culture, and we will continue to have an ongoing
number of initiatives to achieve this. Examples from the last year
include dedicated sales training provided to all the operational
teams, an incentive scheme in the second half of the year which
awarded cash bonuses for improving sales trends, and the
establishment of a London-based sales team to fill secondary space
and increase levels of corporate bookings.
Grow through innovation and technology
Innovation and technology are critical areas for us as a
business, in terms of efficiency, attracting and interacting with
guests and remaining competitive in our markets.
A key area of focus is to build on our existing technology,
given the systems investment we have made in recent years. We have
developed our online bookings system to increase the availability
of short-term bookings and to integrate with third party booking
providers to extend our reach. Our bookings have grown, such that
more than half our restaurant bookings are now made online. We are
looking at various other ways to improve efficiency and the guest
experience, including enhanced wifi provision in our sites and the
trialling of alternative payment technology.
We have also developed our digital strategy across key guest
interaction areas: acquisition, experience, customer relationship
management, loyalty, and social media. The relentless nature of
digital development is such that we must continually enhance our
skills in this area. In the last year we developed five new brand
apps, which have collectively had more than 400,000 downloads, and
achieve a significantly higher booking conversion rate than through
traditional email communication. We are looking to build on this
through the addition of loyalty incentives into forthcoming apps
for Browns and Miller & Carter. We have increased our social
media presence, consolidated 10m guests' details on our central
database, our gift card sales have increased by more than 40% and
we have carried out several successful campaigns with
affiliates.
Food delivery is becoming increasingly important to the
industry, and we have carried out an initial successful trial with
Deliveroo across 25 All Bar One and Browns sites. Given the early
success, we are working to roll this out further across our brands,
in different locations and with different third party providers. We
believe that this model can apply to around a quarter of the
estate, and that it provides a good opportunity to generate
incremental sales.
We have increased our use of TripAdvisor as a guest interaction
tool by providing all our house managers with accounts and
encouraging its usage. We will look to develop this further in the
year ahead, but have already seen the number of reviews
significantly increase, as well as our average rating rise by more
than 8%. Early results from our increased usage of TripAdvisor
suggest that better scores correlate with higher like-for-like
sales, increased bookings and a reduction in the average number of
complaints.
Finally, we have stated that we will look to carry out new
concept and product development, to maintain the appeal of our
existing brands and innovate in new markets. As noted previously,
we have launched the new Stonehouse brand, a successful innovation
to evolve and transform the Crown Carveries brand. We are also on
the point of launching a casual dining rotisserie-style concept
aimed at the millennials market under the brand of 'Chicken
Society'. This provides us with an opportunity to test a new
concept which may be later rolled out to further sites. We expect
to take the learnings from this and to develop a pipeline of
further new concepts this financial year.
EXTERNAL ENVIRONMENT
Market supply
In recent years the eating-out market has seen a significant
increase in the supply of restaurants. In the year to June 2015
there were over 1,700 net restaurant openings - broadly the
equivalent of our own business in terms of outlet numbers. This
provided us with many new local competitors and impacted our
mid-market brands in particular, as a number of these openings were
close to our own high-quality trading locations.
However, since the summer of 2015 the rate of openings has
slowed considerably, most likely as a result of the cost headwinds
the sector faces, notably the announcement of the introduction of
the National Living Wage in July 2015. Net restaurant openings are
now broadly flat year-on-year, which gives us an opportunity to win
back market share. It therefore remains imperative that we focus on
our priorities to maintain our competitive position through our
range of brands and formats, our high quality locations, and the
delivery of our offers to guests.
EU referendum
We believe it is too early to predict with any certainty what
the impact of Brexit on the economy might be, particularly without
clarity on exit terms. However there are broadly three areas in
which Brexit may affect us in the medium to long term: changes in
consumer confidence and behaviour; changes to employment and
immigration laws; and changes to input costs. The first two of the
three are largely unknown at present, and therefore our approach is
to stay close to developments whilst continuing to support all our
43,000 employees.
Input costs will be impacted by the value of sterling, which has
fallen significantly since the EU referendum. We have a small
number of sites trading in Germany, but otherwise our international
trade is defined by our supply chain. The net effect of a weaker
sterling is therefore profit dilutive due to the food and drink
which is purchased in foreign currency, although this is partially
mitigated in the next financial year by existing contracts.
CURRENT TRADING AND OUTLOOK
In the first eight weeks of the current year like-for-like sales
have increased by 0.5%, continuing the momentum that we started to
build in the second half of last year.
Although we are working hard to take mitigating action where
possible, we expect to see downward pressure on margins in this
financial year, as our sector incurs the additional cost headwinds
including the first full year of the National Living Wage,
indications of two potential increases in the National Minimum
Wage, the impact of exchange rate movements on foreign currency
denominated purchases, and the recent business rates review.
Despite these challenges, we remain encouraged by the progress
we have seen so far, in particular the strengthening of our
performance against the market. We will continue focusing on our
three priorities, and believe that by doing so we can continue to
generate long-term shareholder value.
NOTES:
1. Coffer Peach Business Tracker
FINANCIAL REVIEW
On a statutory basis, profit before tax for the period was
GBP94m (FY 2015 GBP126m), on sales of GBP2,086m (FY 2015
GBP2,101m).
The Group Income Statement discloses adjusted profit and
earnings per share information that excludes separately disclosed
items to allow a better understanding of the underlying trading of
the Group. Separately disclosed items are described below and
detailed in note 3 of the accounts. Adjusted earnings per share
fell by 2.2% in 2016 to 34.9 pence.
At the end of the financial year, the total estate comprised
1,768 managed businesses and 57 franchised businesses, in the UK
and Germany.
The forthcoming year, to 30 September 2017, will be a 53 week
accounting year to maintain alignment of accounting and calendar
dates.
Accounting policies
There have been no changes in accounting policies in the
period.
Revenue
The Group's total revenues fell by 0.7% to GBP2,086m, largely as
a result of a fall in like-for-like sales, with a small number of
acquisitions and disposals in the year.
Like-for-like sales growth Week 1 Week 29 Week 1
/ (decline): - 28 - 52 - 52
FY 2016 FY 2016 FY 2016
-------- -------- --------
Total (1.6%) 0.2% (0.8%)
Food (2.0%) (0.8%) (1.4%)
Drink (1.5%) 1.3% (0.1%)
Total like-for-like sales fell by 0.8%, recovering from a fall
of 1.6% in the first half. Across the year, like-for-like food
volumes fell by 5.7%, with food spend per head up 4.6%. The
increase in food spend per head was driven partially by the
changing balance of the estate, for example from Harvester sites
being converted to Miller & Carter, which trades at a higher
price point, as well as selective price increases. Drink sales
reflected average spend per head growth of 4.1% offset by
like-for-like volume decline of 4.0%.
Operating margins
Adjusted operating margins for the year were 15.2%, 0.4ppts
below 2015. Margins in the first half were 0.5ppts higher than last
year, having benefited from non-recurring savings on prior year
costs such as the Orchid head office closure and IT projects.
In the second half, as anticipated, margins were below the prior
year, by 1.3ppts. The introduction of the National Living Wage, in
addition to National Minimum Wage increases earlier in the year,
drove an increase in employment costs, which ended the year 5.2%
higher than in 2015. Margin was also impacted by the cost of
accelerating the level of investment in remodels and conversions in
line with our priority of building a more balance estate, with a
greater number of closure weeks and pre-opening costs incurred.
These factors were partially mitigated by food and drink sales
being driven by increased spend per head, and by continued benign
cost conditions in energy and food and drink input markets.
Adjusted operating profit for the year was GBP318m, 3.0% lower
than 2015.
Looking forward to FY 2017, we see continued cost pressure
facing the business as further increases in the National Living
Wage and National Minimum Wage are compounded, in particular
by:
- the impact of the weakness in sterling on our
cGBP100m of foreign currency denominated purchases;
and
- the introduction of a new regime of business
rates (effective from April 2017) which is
likely to see an annual increase across our
estate of GBP18m over 5 years (of which around
GBP5m will impact in FY 2017).
We have a large number of activities underway to mitigate the
cost headwinds as far as possible, both through cost savings and
growing sales as detailed elsewhere in this report. However, we
expect the net impact to put downward pressure on operating
margins.
Separately disclosed items
Separately disclosed items comprise:
- an GBP80m charge relating to downward valuation
movements on selected sites in the property
portfolio resulting from the revaluation (FY
2015 GBP54m). Overall the property portfolio
valuation increased by GBP128m to GBP4.4bn;
- an GBP8m charge for impairment of short leaseholds
and unlicensed properties (FY 2015 GBP11m)
- a GBP1m net profit from the disposal of properties
(FY 2015 GBP7m); and
- deferred tax credits relating to property
revaluations and the future reduction in the
standard UK corporation tax rate, as detailed
below.
Interest
Net finance costs of GBP137m were GBP7m lower than the prior
year. The net pensions finance charge of GBP12m was GBP3m lower
than in 2015, and there was a reduction in the annual interest
charge on reduced net borrowings.
For FY17 we expect the pensions finance charge to reduce to
GBP7m.
Taxation
The tax charge of GBP5m in the year represents an effective rate
on total profits of 5.3% (FY 2015 18.3%). This is mainly due to
recognition of a deferred tax credit arising from the reduction in
the standard rate of UK corporation tax to 17% from April 2020 (as
enacted in the Finance Act 2016).
The effective tax rate on adjusted earnings was 20.4%.
Earnings per share
Adjusted earnings per share were 34.9p, 2.2% lower than last
year. After the adjusted items described above, basic earnings per
share were 21.6p (FY 2015 25.0p).
Cash flow and net debt
The cash flow statement below excludes GBP67m of mandatory bond
amortisation (FY 2015 GBP61m), GBP31m drawn from unsecured
revolving credit facilities (FY 2015 GBPnil) and, in the prior
year, GBP120m transferred from cash to other cash deposits.
FY 2016 FY 2015
GBPm GBPm
EBITDA before adjusted items 431 439
Working capital movement /
non-cash items (7) 48
Pension deficit contributions (49) (86)
-------- --------
Cash flow from operations
before adjusted items 375 401
Maintenance and infrastructure
capex (115) (116)
Expansionary capex (52) (46)
Net interest (125) (127)
Tax (28) (25)
Disposals and other 5 8
-------- --------
Free Cash Flow before adjusted
items 60 95
Dividend (31) -
Operating adjusted items - (6)
-------- --------
Net cash flow 29 89
The business generated GBP431m of EBITDA in the year. Pension
deficit contributions of GBP49m were lower than the prior year,
which included a one-off contribution of GBP40m agreed as part of
the last triennial valuation. After capital expenditure, interest
and tax, GBP60m of free cash before exceptional items was generated
by the business (FY 2015 GBP95m).
Net debt was GBP1,840m, representing 4.3 times adjusted EBITDA
(FY 2015 4.3 times). Net debt within the securitisation was
GBP1,834m and net borrowings held outside the securitisation were
GBP6m.
Capital expenditure
Total maintenance and infrastructure capex was GBP115m (FY 2015
GBP116m).
Expansionary capex of GBP52m was GBP6m higher than last year,
driven by additional spend on conversions and major remodels in
line with our strategic priorities, and a reduction in acquisition
capex due to fewer new openings.
Total remodel activity increased to cover 175 sites (FY 2015
116) at an investment cost of GBP47m (FY 2015 GBP34m). Within this,
certain large scale remodel projects, where the brand name or guest
offer is materially altered by the nature and level of investment,
are now included within expansionary capex.
The number of conversions has also increased from 51 to 77,
including 12 Miller & Carter sites and 36 sites under our new
Stonehouse concept.
FY 2016 FY 2015
GBPm # GBPm #
-------------------------------- ----- ---- ----- ----
Maintenance and infrastructure
(excluding remodels) 81 82
Remodels - maintenance 34 137 34 116
Remodels - expansionary 13 38 - -
Conversions 31 77 23 51
----- ---- ----- ----
Sub-total 78 252 57 167
Acquisitions - freehold 1 2 10 4
Acquisitions - leasehold 7 6 13 10
Total capital expenditure 167 162
The annual incremental EBITDA return on expansionary capital
invested cumulatively since FY 2013 improved to 20% (FY 2015
18%).
Property
A red book valuation of the freehold and long leasehold estate
has been completed in conjunction with the independent property
valuer, CBRE. In addition, the Group has conducted an impairment
review on short leasehold and unlicensed properties. The overall
portfolio value has increased by GBP128m (FY 2015 decrease of
GBP40m) reflecting an GBP88m separately disclosed charge in the
income statement and a GBP216m increase in the revaluation
reserve.
Pensions
The Company continues to make pensions deficit payments based on
the schedule of contributions agreed as part of the triennial
valuations at 31 March 2013, based on an assessed funding shortfall
at that time of GBP572m. The discounted value of the minimum
funding requirement agreed as part of the revised schedule of
contributions is recognised in the balance sheet at GBP337m (FY
2015 GBP350m) before tax.
Negotiations are ongoing between the Company and the Trustees of
the pension schemes regarding the latest valuation, which is to be
prepared as at 31 March 2016.
Dividends
The Board has approved a final dividend of 5.0 pence per share
(full year 7.5 pence per share) to shareholders on the register as
at 2 December 2016, to be paid on 7 February 2017.
The Board intends to make a scrip dividend alternative available
to shareholders, subject to the relevant approvals at the AGM.
Shareholders who wish to join the Scrip Dividend Scheme should
complete a Scrip Dividend Mandate form and return it to the
registrars no later than 17 January 2017.
Responsibility statement
We confirm to the best of our knowledge:
- The financial statements, prepared in accordance
with the relevant financial reporting framework,
give a true and fair view of the assets,
liabilities, financial position and profit
or loss of the company and the undertakings
included in the consolidation taken as a
whole;
- The strategic report includes a fair review
of the development and performance of the
business and the position of the company
and the undertakings included in the consolidation
taken as a whole, together with a description
of the principal risks and uncertainties
they face; and
- The annual report and financial statements,
taken as a whole, are fair, balanced and
understandable and provide the information
necessary for shareholders to assess the
company's position, performance, business
model and strategy.
This responsibility statement was approved by the Board of
Directors on 21 November 2016 and is signed on its behalf by Tim
Jones, Finance Director.
Group income statement
For the 52 weeks ended 24 September 2016
2016 2015
52 weeks 52 weeks
--------- ---------
Before Before
separately Separately separately Separately
disclosed disclosed disclosed disclosed
items items(a) Total items items(a) Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------------------ -------- ----------- ------------------ --------
Revenue 2,086 - 2,086 2,101 - 2,101
Operating costs
before
depreciation,
amortisation
and movements
in the valuation
of the property
portfolio (1,655) - (1,655) (1,662) - (1,662)
Net profit arising
on property
disposals - 1 1 - 7 7
EBITDA(b) 431 1 432 439 7 446
Depreciation,
amortisation
and movements
in the valuation
of the property
portfolio (113) (88) (201) (111) (65) (176)
----------------- ------------------ -------- ----------- ------------------ --------
Operating
profit/(loss) 318 (87) 231 328 (58) 270
Finance costs (126) - (126) (130) - (130)
Finance revenue 1 - 1 1 - 1
Net pensions
finance charge (12) - (12) (15) - (15)
----------------- ------------------ -------- ----------- ------------------ --------
Profit/(loss)
before tax 181 (87) 94 184 (58) 126
Tax
(expense)/credit (37) 32 (5) (37) 14 (23)
----------------- ------------------ -------- ----------- ------------------ --------
Profit/(loss)
for the period 144 (55) 89 147 (44) 103
================= ================== ======== =========== ================== ========
Earnings per
ordinary share
Basic 34.9p 21.6p 35.7p 25.0p
Diluted 34.8p 21.5p 35.5p 24.9p
================= ======== =========== ========
a. Separately disclosed items are explained and analysed
in note 3.
b. Earnings before interest, tax, depreciation, amortisation
and movements in the valuation of the property
portfolio.
All results relate to continuing operations.
Group statement of comprehensive income
For the 52 weeks ended 24 September 2016
2016 2015
52 weeks 52 weeks
GBPm GBPm
------------- ---------
Profit for the period 89 103
Items that will not be reclassified
subsequently to profit or loss:
Unrealised gain on revaluation
of the property portfolio 216 25
Remeasurement of pension liability (22) 6
Tax relating to items not reclassified (21) (9)
173 22
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations 3 (1)
Cash flow hedges:
- Losses arising during the period (116) (86)
- Reclassification adjustments
for items included in profit
or loss 8 31
Tax relating to items that may
be reclassified 10 11
(95) (45)
Other comprehensive income/(loss)
after tax 78 (23)
------------- ---------
Total comprehensive income for
the period 167 80
============= =========
Group balance sheet
24 September 2016
2016 2015
GBPm GBPm
------------------- --------
Assets
Goodwill and other intangible
assets 9 10
Property, plant and equipment 4,423 4,242
Lease premiums 2 2
Deferred tax asset 143 156
Derivative financial instruments 52 19
Total non-current assets 4,629 4,429
Inventories 25 24
Trade and other receivables 32 46
Other cash deposits 120 120
Cash and cash equivalents 158 163
Derivative financial instruments 1 -
------------------- --------
Total current assets 336 353
Total assets 4,965 4,782
------------------- --------
Liabilities
Pension liabilities (46) (46)
Trade and other payables (293) (317)
Current tax liabilities (12) (15)
Borrowings (253) (214)
Derivative financial instruments (44) (43)
Total current liabilities (648) (635)
Pension liabilities (291) (304)
Borrowings (1,920) (1,960)
Derivative financial instruments (360) (253)
Deferred tax liabilities (329) (349)
Provisions (9) (10)
------------------- --------
Total non-current liabilities (2,909) (2,876)
Total liabilities (3,557) (3,511)
Net assets 1,408 1,271
=================== ========
Equity
Called up share capital 35 35
Share premium account 27 26
Capital redemption reserve 3 3
Revaluation reserve 1,142 938
Own shares held (1) (1)
Hedging reserve (338) (240)
Translation reserve 13 10
Retained earnings 527 500
Total equity 1,408 1,271
=================== ========
Group statement of changes in equity
For the 52 weeks ended 24 September 2016
Called Share Capital Own
up premium redemption Revaluation shares Hedging Translation Retained Total
share
capital account reserve reserve held reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- ---------- ----------- ------ ------- ----------- -------- ------
At 27 September
2014 35 24 3 918 (4) (196) 11 394 1,185
Profit for
the period - - - - - - - 103 103
Other
comprehensive
income/(expense) - - - 20 - (44) (1) 2 (23)
Total
comprehensive
income/(expense) - - - 20 - (44) (1) 105 80
Share capital
issued - 2 - - - - - - 2
Release of
own shares - - - - 3 - - (1) 2
Credit in
respect of
share-based
payments - - - - - - - 2 2
At 26 September
2015 35 26 3 938 (1) (240) 10 500 1,271
Profit for
the period - - - - - - - 89 89
Other
comprehensive
income/(expense) - - - 204 - (98) 3 (31) 78
------- ------- ---------- ----------- ------ ------- ----------- -------- ------
Total
comprehensive
income/(expense) - - - 204 - (98) 3 58 167
Share capital
issued - 1 - - - - - - 1
Purchase of
own shares - - - - (1) - - - (1)
Release of
own shares - - - - 1 - - (1) -
Credit in
respect of
share-based
payments - - - - - - - 2 2
Dividends
paid - - - - - - - (31) (31)
Tax on share
based payments
taken directly
to equity - - - - - - - (1) (1)
At 24 September
2016 35 27 3 1,142 (1) (338) 13 527 1,408
======= ======= ========== =========== ====== ======= =========== ======== ======
Group cash flow statement
For the 52 weeks ended 24 September 2016
2016 2015
52 weeks 52 weeks
GBPm GBPm
--------------- ---------------
Cash flow from operations
Operating profit 231 270
Add back: adjusted items 87 58
--------------- ---------------
Operating profit before adjusted
items 318 328
Add back:
Depreciation of property, plant
and equipment 111 109
Amortisation of intangibles 2 2
Cost charged in respect of share-based
payments 2 2
Administrative pension costs 2 2
--------------- ---------------
Operating cash flow before adjusted
items, movements in working capital
and additional pension contributions 435 443
(Increase)/decrease in inventories (1) 3
(Increase)/decrease in trade and
other receivables (4) 22
(Decrease)/increase in trade and
other payables (5) 21
Decrease in provisions (1) (2)
Additional pension contributions (49) (86)
--------------- ---------------
Cash flow from operations before
adjusted items 375 401
Cash flow from adjusted items - (6)
Interest paid (126) (129)
Interest received 1 2
Tax paid (28) (25)
Net cash from operating activities 222 243
Investing activities
Acquisition of Orchid Pubs & Dining
Limited and Midco 1 Limited - (1)
Purchases of property, plant and
equipment (166) (157)
Purchases of intangible assets (1) (3)
Payment of lease premium - (2)
Proceeds from sale of property,
plant and equipment 5 6
Transfers to other cash deposits - (120)
Net cash used in investing activities (162) (277)
Financing activities
Issue of ordinary share capital 1 2
Purchase of own shares (1) -
Proceeds on release of own shares - 1
Dividends paid (31) -
Repayment of principal in respect
of securitised debt (67) (61)
Net movement on unsecured revolving 31 -
credit facilities
Net cash used in financing activities (67) (58)
Net decrease in cash and cash equivalents (7) (92)
Cash and cash equivalents at the
beginning of the period 163 255
Foreign exchange movements on cash 2 -
Cash and cash equivalents at the
end of the period 158 163
=============== ===============
Notes to the financial statements
1. Preparation of preliminary financial statements
Basis of preparation
Mitchells & Butlers plc, along with its subsidiaries,
(together 'the Group') is required to prepare its consolidated
financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union and in
accordance with the Companies Act 2006. While the financial
information included in this release is based on the Group's
consolidated financial statements and has been prepared in
accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRSs), this
announcement does not itself contain sufficient information to
comply with IFRSs.
The preliminary financial statements include the results of
Mitchells & Butlers plc and all its subsidiaries for the 52
week period ended 24 September 2016. The comparative period is for
the 52 week period ended 26 September 2015. The respective balance
sheets have been drawn up as at 24 September 2016 and 26 September
2015.
The preliminary financial statements have been prepared on the
historical cost basis as modified by the revaluation of properties,
pension obligations and financial instruments.
Going concern
The Group's forecasts and projections take account of
anticipated trading performance and show that the Group should be
able to operate within the level of its current borrowing
facilities.
The Directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future. Thus they continue to adopt the going
concern basis of accounting in preparing the financial
statements.
Foreign currencies
The results of overseas operations have been translated into
sterling at the weighted average euro rate of exchange for the
period of GBP1 = EUR1.28 (2015 GBP1 = EUR1.37), where this is a
reasonable approximation to the rate at the dates of the
transactions. Euro and US dollar denominated assets and liabilities
have been translated at the relevant rate of exchange at the
balance sheet date of GBP1 = EUR1.16 (2015 GBP1 = EUR1.36) and GBP1
= $1.30 (2015 GBP1 = $1.52) respectively.
2. Segmental analysis
IFRS 8 Operating Segments requires operating segments to be
based on the Group's internal reporting to its Chief Operating
Decision Maker (CODM). The CODM is regarded as the Chief Executive
together with other Board members. The CODM uses EBITDA and profit
before interest and adjusted items (operating profit
pre-adjustments) as the key measures of the segment results. Group
assets are reviewed as part of this process but are not presented
on a segment basis.
The retail operating business operates all of the Group's retail
operating units and generates all of its external revenue. The
property business holds the Group's freehold and long leasehold
property portfolio and derives all of its income from the internal
rent levied against the Group's retail operating units. At a macro
level, rent is set on a market based measure with this being
reviewed on a five yearly basis. At a micro level, the property
business charges rent to the retail operating business based on the
performance of the individual outlets. The internal rent charge is
eliminated at the total Group level.
Segmental information
Retail operating Property
business business Total
------------------------ ------------------------ -----------------------
2016 2015 2016 2015 2016 2015
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
GBPm GBPm GBPm GBPm GBPm GBPm
--------- --------- ------------- --------- ----------- ---------
Revenue 2,086(a) 2,101(a) - - 2,086 2,101
EBITDA pre-adjustments 218 219 214(b) 220(b) 431 439
Operating profit
pre-adjustments 117 121 201 207 318 328
Separately disclosed items (note 3) (87) (58)
----------- ---------
Operating profit 231 270
Net finance costs (137) (144)
----------- ---------
Profit before tax 94 126
Tax expense (5) (23)
----------- ---------
Profit for the period 89 103
=========== =========
Revenue includes other income of GBP6m (2015 GBP6m)
a. in respect of MAB Leased operations and GBPnil
(2015 GBP6m) in respect of sales of development
properties.
b. The EBITDA pre-adjustments of the property business
relates entirely to rental income received from
the retail operating business.
3. Separately disclosed items
The items identified in the current period are as follows:
2016 2015
52 weeks 52 weeks
Notes GBPm GBPm
--------- ---------
Adjusted items
Net profit arising on property
disposals a 1 7
Movement in the valuation of the
property portfolio:
- Impairment arising from the
revaluation (80) (54)
- Other impairment b (8) (11)
Net movement in the valuation
of the property portfolio (88) (65)
Total adjusted items before tax (87) (58)
--------- ---------
Tax credit relating to above items 18 14
Tax credit in respect of change c 14 -
in tax legislation
Total adjusted items after tax (55) (44)
========= =========
a. The 2015 profit includes the release of a GBP5m
accrual for costs in relation to the disposal
of properties in prior periods.
b. Impairment of short leasehold and unlicensed properties
where their carrying values exceed their recoverable
amount.
c. The Finance (No.2) Act 2015 was enacted on 18
November 2015 and reduced the main rate of corporation
tax from 20% to 19% from 1 April 2017. The Finance
Act 2016 was substantively enacted on 15 September
2016 and reduced the main rate of corporation
tax to 17% from 1 April 2020. The effect of these
changes has been reflected in the closing deferred
tax balance at 24 September 2016.
4. Finance costs and revenue
2016 2015
52 weeks 52 weeks
GBPm GBPm
--------- ---------
Finance costs
Interest on securitised and other debt (126) (130)
========= =========
Finance revenue
Interest receivable - cash 1 1
========= =========
Net pensions finance charge (note 9) (12) (15)
========= =========
5. Taxation
Taxation - income statement
2016 2015
52 weeks 52 weeks
GBPm GBPm
--------- ---------
Current tax:
* UK corporation tax (28) (21)
* Amounts over provided in prior periods 3 3
----- -----
Total current tax charge (25) (18)
----- -----
Deferred tax:
* Origination and reversal of temporary differences 9 (6)
- Adjustments in respect of prior periods
- overseas tax losses - 4
- Adjustments in respect of prior periods
- other (3) (3)
- Change in tax rate 14 -
---- ----
Total deferred tax credit/(charge) 20 (5)
-------------- -----
Total tax charged in the income statement (5) (23)
============== =====
Further analysed as tax relating to:
Profit before adjusted items (37) (37)
Adjusted items 32 14
----- -----
(5) (23)
===== =====
6. Earnings per share
Basic earnings per share (EPS) has been calculated by dividing
the profit or loss for the 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 adjusted items (see note 3) in order to allow a better
understanding of the underlying trading performance of the
Group.
Basic Diluted
EPS EPS
pence pence
per per
Profit ordinary ordinary
GBPm share share
------- --------- ---------
52 weeks ended 24 September
2016:
Profit/EPS 89 21.6p 21.5p
Adjusted items, net of tax 55 13.3p 13.3p
------- --------- ---------
Adjusted profit/EPS 144 34.9p 34.8p
=========
52 weeks ended 26 September
2015:
Profit/EPS 103 25.0p 24.9p
Adjusted items, net of tax 44 10.7p 10.6p
Adjusted profit/EPS 147 35.7p 35.5p
======= ========= =========
6. Earnings per share (continued)
The weighted average number of ordinary shares used in the
calculations above are as follows:
2016 2015
52 weeks 52 weeks
m m
--------- ---------
For basic EPS calculations 413 412
Effect of dilutive potential ordinary
shares:
* Contingently issuable shares - 1
* Other share options - 1
For diluted EPS calculations 413 414
========= =========
At 24 September 2016, 2,697,038 (2015 379,182) other 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.
7. Property, plant and equipment
Property, plant and equipment
2016 2015
24 September 26 September
GBPm GBPm
------------- -------------
At beginning of period 4,242 4,237
Additions 167 158
Revaluation 128 (40)
Disposals (5) (5)
Depreciation provided during the
period (111) (109)
Exchange differences 2 1
At end of period 4,423 4,242
============= =============
Revaluation/impairment
The freehold and long leasehold properties have been valued at
market value, as at 24 September 2016 using information provided by
CBRE, independent chartered surveyors. The valuation was carried
out in accordance with the provisions of RICS Appraisal and
Valuation Standards ('The Red Book') assuming each asset is sold as
part of the continuing enterprise in occupation individually as a
fully operational trading entity. The market value has been
determined having regard to factors such as current and future
projected income levels, taking account of location, quality of the
pub restaurant and recent market transactions in the sector.
The carrying values of property, plant and equipment which are
not re-valued to fair market value have been reviewed for
impairment using forecast cash flows, discounted by applying a
pre-tax discount rate of 7% (2015 7%). This impairment relates to
outlets with poor trading performance, that are unlikely to
generate sufficient cash in the future to justify their current net
book value.
7. Property, plant and equipment (continued)
Revaluation/impairment (continued)
Sensitivity analysis
Changes in either the FMT or the multiple could materially
impact the valuation of the freehold and long leasehold properties.
It is estimated that a 2.5% change in the EBITDA of the freehold or
long leasehold properties would generate an approximate GBP70m
movement in their valuation. It is estimated that a 0.1 change in
the multiple would generate an approximate GBP32m movement in
valuation.
It is estimated that a 1% increase in the discount rate applied
during the impairment review, would increase the impairment of
property, plant and equipment, which are not re-valued, by
approximately GBP250,000.
Current year valuations have been incorporated into the
financial statements and the resulting revaluation adjustments have
been taken to the revaluation reserve or income statement as
appropriate. The impact of the revaluations/impairments described
above is as follows:
2016 2015
52 weeks 52 weeks
GBPm GBPm
---------------- ---------
Income statement
Revaluation loss charged as an impairment (144) (90)
Reversal of past impairments 64 36
---------------- ---------
Total impairment arising from the revaluation (80) (54)
Impairment of short leasehold and unlicensed
properties (8) (11)
---------------- ---------
(88) (65)
---------------- ---------
Revaluation reserve
Unrealised revaluation surplus 329 141
Reversal of past revaluation surplus (113) (116)
---------------- ---------
216 25
Net increase/(decrease) in property,
plant and equipment 128 (40)
================ =========
8. Net debt
2016 2015
GBPm GBPm
Net debt
------------- --------
Cash and cash equivalents 158 163
Other cash deposits 120 120
Securitised debt (1,995) (2,027)
Liquidity facility (147) (147)
Revolving credit facilities (31) -
Derivatives hedging balance sheet debt(a) 55 21
(1,840) (1,870)
============= ========
a. Represents the element of the fair value of currency
swaps hedging the balance sheet value of the Group's
US$ denominated A3N loan notes. This amount is
disclosed separately to remove the impact of exchange
movements which are included in the securitised
debt amount.
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.
8. Net debt (continued)
2016 2015
52 weeks 52 weeks
Movement in net debt GBPm GBPm
------------------- ---------
Net decrease in cash and cash equivalents (7) (92)
Add back cash flows in respect of
other components of net debt:
Transfers to other cash deposits - 120
Repayment of principal in respect
of securitised debt 67 61
Net movement on unsecured revolving (31) -
facilities
Decrease in net debt arising from
cash flows 29 89
Movement in capitalised debt issue
costs net of accrued interest (1) (1)
Decrease in net debt 28 88
Opening net debt (1,870) (1,958)
Foreign exchange movements on cash 2 -
Closing net debt (1,840) (1,870)
=================== =========
9. Pensions
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:
2016 2015
52 weeks 52 weeks
Group income statement GBPm GBPm
--------- ---------
Operating profit:
Employer contributions (defined contribution
plans) (7) (7)
Administrative costs (defined benefit
plans) (2) (2)
--------- ---------
Charge to operating profit (9) (9)
Finance costs:
Net pensions finance charge on actuarial
deficit (3) (6)
Additional pensions finance charge due
to minimum funding (9) (9)
--------- ---------
Net finance charge in respect of pensions (12) (15)
Total charge (21) (24)
========= =========
2016 2015
52 weeks 52 weeks
Group statement of comprehensive income GBPm GBPm
--------- ---------
Return on scheme assets and effects
of changes in assumptions (148) 13
Movement in pension liability recognised
due to minimum funding 126 (7)
--------- ---------
Remeasurement of pension liability (22) 6
========= =========
9. Pensions (continued)
2016 2015
Group balance sheet GBPm GBPm
------- --------
Fair value of scheme assets 2,381 2,010
Present value of scheme liabilities (2,587) (2,112)
------- --------
Actuarial deficit in the schemes (206) (102)
Additional liability recognised due
to minimum funding (131) (248)
------- --------
Total pension liability(a) (337) (350)
======= ========
Associated deferred tax asset 57 70
======= ========
a. The total pension liability of GBP337m (2015 GBP350m) is
represented by a GBP46m current liability (2015 GBP46m) and a
GBP291m non-current liability (2015 GBP304m).
The movement in the fair value of the schemes' assets in the
period is as follows:
Scheme assets
----------------
2016 2015
GBPm GBPm
------- -------
Fair value of scheme assets at beginning
of period 2,010 1,865
Interest income 71 71
Remeasurement gain:
- Return on scheme assets (excluding
amounts included in net finance charge) 355 63
Employer contributions 49 86
Benefits paid (102) (73)
Administration costs (2) (2)
At end of period 2,381 2,010
======= =======
Changes in the present value of defined benefit obligations are
as follows:
Defined benefit
obligation
--------------------------------
2016 2015
GBPm GBPm
-------------- ----------------
Present value of defined benefit obligation
at beginning of period (2,112) (2,058)
Interest cost (74) (77)
Benefits paid 102 73
Remeasurement losses:
- Effect of changes in demographic
assumptions - (12)
- Effect of changes in financial assumptions (577) (38)
- Effect of experience adjustments 74 -
-------------- ----------------
At end of period(a) (2,587) (2,112)
============== ================
a. The defined benefit obligation comprises GBP39m
(2015 GBP25m) relating to the MABETUS unfunded
plan and GBP2,548m (2015 GBP2,087m) relating to
the funded plans.
10. Dividends
2016 2015
GBPm GBPm
----- -----
Declared and paid in the period
Final dividend for 52 weeks ended 26 21 -
September 2015 of 5.0p per share
Interim dividend for 52 weeks ended 10 -
24 September 2016 of 2.5p per share
----- -----
31 -
===== =====
The Directors propose a final dividend of 5.0p per share,
amounting to GBP21m, for approval at the Annual General Meeting.
The dividend will be paid on 7 February 2017 to shareholders on the
register at close of business on 2 December 2016.
11. Financial Statements
The preliminary statement of results was approved by the Board
of Directors on 21 November 2016. It does not constitute the
Group's statutory financial statements for the 52 weeks ended 24
September 2016 or for the 52 weeks ended 26 September 2015. The
financial information is derived from the statutory financial
statements of the Group for the 52 weeks ended 24 September
2016.
Statutory accounts for 2015 have been delivered to the Registrar
of Companies and those for 2016 will be delivered following the
Company's Annual General Meeting. The Company's auditor reported on
those accounts; their reports were unqualified; did not draw
attention to any matters by way of emphasis without qualifying
their report and did not contain statements under S498(2) or (3) of
the Companies Act 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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November 22, 2016 02:01 ET (07:01 GMT)
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