Mitchells & Butlers PLC Annual Report 2017 (3848Z)
14 December 2017 - 11:00PM
UK Regulatory
TIDMMAB
RNS Number : 3848Z
Mitchells & Butlers PLC
14 December 2017
14 December 2017
Mitchells & Butlers plc
LEI no. 213800JHYNDNB1NS2W10
Annual Report 2017
In compliance with Listing Rule 9.6.1, Mitchells & Butlers
plc has today submitted copies of the following documents to the
National Storage Mechanism:
1. Company Annual Report and
Accounts 2017
2. Notice of the 2018 Annual
General Meeting
These documents will shortly be available for inspection at
http://www.morningstar.co.uk/uk/NSM
The above documents can also be accessed on the Company's
website at: www.mbplc.com
The Company's Annual General Meeting will be held at Mitchells
& Butlers plc, Retail Support Centre, 27 Fleet Street,
Birmingham, B3 1JP on Tuesday 23 January 2018 at 2.00pm.
A condensed set of Mitchells & Butlers plc financial
statements, information on important events that have occurred
during the year and their impact on the financial statements and
responsibility statements were included in the Company's Full Year
Results announcement on 23 November 2017. That information,
together with the information on Risks and Uncertainties given
below, constitutes the requirements of DGTR 6.3.5 which is to be
communicated via an RIS in unedited full text. This announcement is
not a substitute for reading the full Annual Report and financial
statements. To view the Full Year Results announcement, visit the
Company website: www.mbplc.com/investors/
Risks and uncertainties
This section highlights the top ten principal risks and
uncertainties that affect the Company, together with the key
mitigating activities in place to manage those risks. This does not
represent a comprehensive list of all of the risks that the Company
faces, but focuses on those that are currently considered to be
most relevant.
The processes that are used to identify and manage risks are
described in the internal control and risk management statement on
pages 60 and 61 of the 2017 Annual Report.
Risk category and description Controls/mitigating activities
--------------------------------- -------------------------------------------
1. Market risks
--------------------------------- -------------------------------------------
Declining sales performance Right team and structure
in place. Brand alignment
This risk falls into ensures the right research
three main categories: gets done and is acted
on.
Sales: There is a risk
that declining sales, Daily, weekly and periodic
concerns around consumer sales reporting, monitoring
confidence, increased and scrutiny activity is
personal debt levels, in place.
squeezes on disposable
income and rising inflation Our Eat Drink Share panel
together may adversely provides robust, quick
affect our market share and cost effective research.
and profitability, reducing This is our own panel of
headroom against securitisation 27,000 M&B guests whom
tests. we can use for research
purposes for quick and
Consumer and market cost effective insights.
insight: If M&B fails
to manage and develop Primary research in partnership
its existing (and new) with brand/category teams.
brands in line with
consumer needs and market Working with suppliers
trends due to failure to tap into their research.
to obtain or use sufficient
insight in a timely Each brand has its own
manner, this may lead pricing strategy.
to a decline in revenues
and profits. Price promotions are in
line with the agreed strategy.
Pricing and market changes:
If price changes are Sales training for Management.
not intelligently applied
due to a lack of appreciation Consumer/insight led innovation
of market sensitivities process and development
and elasticities, this for new brands.
may result in decreased
revenue and profit. Reduce customer complaints
by improving the local
management of social media
responses (e.g. TripAdvisor).
Increased digital marketing
activity.
Online guest satisfaction
survey to collect guest
feedback. This feedback
together with the results
of research studies is
monitored and evaluated
by a dedicated guest insight
team to ensure that the
relevance to guests of
the Company's brands is
maintained.
--------------------------------- -------------------------------------------
Cost of goods price Overall, price increases
increases are mitigated as Mitchells
& Butlers leverages its
Food: The price of goods scale to drive competitive
increases due to increases cost advantage and collaborates
in demand and uncertainty with suppliers to increase
of supply, leading to efficiencies in the supply
decreased profits. chain. The fragmented nature
of the food supply industry
Drinks: The price of on the world commodity
drinks goods increases markets gives the Company
due to changes in demand, the opportunity to source
legislation, exchange products from a number
rates and production of alternative suppliers
costs, leading to decreased in order to drive down
profits. cost. Key mitigating activities
for food and drink are
Goods not for resale: detailed below:
Increases in the price
of goods not for resale Food:
and utilities costs A Food Procurement Strategy
as a result of increases is in place.
in global demand and
uncertainty of supply Full reviews have been
in producing nations carried out on key categories
can have a significant to ensure optimum value
impact on the cost base, is achieved in each category.
consequently impacting
margins. A full range review was
completed in 2017 ensuring
the correct number of products/suppliers.
Regular reporting of current
and projected inflation.
Good relationships with
key suppliers.
Drinks:
Each drinks category has
a clearly defined strategic
sourcing plan to ensure
Company scale is leveraged,
supply base is rationalised
and consumer needs are
met.
Good relationships with
key suppliers.
Supplier collaboration
programmes are in place.
Plans in development to
mitigate Sugar Tax.
Risk is increasing mainly
due to the devaluation
of the pound following
Brexit, changes in Government
policy (raising risk of
punitive duty changes)
and the introduction of
the Sugar Tax in 2018.
--------------------------------- -------------------------------------------
2. Operational Risks
--------------------------------- -------------------------------------------
People planning and The Company makes significant
development investment in training
to ensure that its people
Mitchells & Butlers have the right skills to
has a strong guest focus, perform their jobs successfully.
and as such it is important
that it is able to attract, Furthermore, an employee
retain, develop and survey is conducted annually
motivate the best people to establish employee satisfaction
with the right capabilities and engagement and this
throughout the organisation. is compared with other
There is a risk that companies, as well as previous
without the right people surveys. Where appropriate,
our customer service changes in working practices
levels would be affected. are made in response to
the findings of these surveys.
Remuneration packages are
benchmarked to ensure that
they remain competitive
and a talent review process
is used to provide structured
succession planning.
--------------------------------- -------------------------------------------
Business continuity The Company has in place
and crisis crisis and continuity plans
management that are tested and refreshed
regularly. The Company's
Mitchells & Butlers third-party back-up facility,
relies on its food and for Retail Support Centre
drink supply chain and employees, has been successfully
the key IT systems underlying tested to ensure critical
the business to serve business systems are able
its guests efficiently to function in the event
and effectively. Supply of a disaster.
chain interruption,
IT system failure or In addition, during FY
crises such as terrorist 2017, departmental Business
activity or the threat Continuity Plans have been
of disease pandemic revised, updated and reviewed
might restrict sales by the Risk Committee.
or reduce operational
effectiveness.
--------------------------------- -------------------------------------------
Information security In FY 2017 a further review
and of information security,
disaster recovery disaster recovery and IT
resilience was performed
There is a risk that in order to highlight any
inadequate disaster gaps and address any challenges
recovery plans and information that had been presented
security processes are in exploring the viability
in place to mitigate of a disaster recovery
against a system outage, test for our business critical
or failure to ensure applications. During the
appropriate back-up year a number of improvements
facilities (covering have been made, including:
key business systems
and the recovery of Further development of
critical data) and loss the information security
of sensitive data. steering group.
Group Assurance follow-up
review of information security
controls.
Review and implementation
of appropriate cyber security
governance policy and procedures.
Ongoing security awareness
initiatives have been and
continue to be undertaken.
Penetration testing.
--------------------------------- -------------------------------------------
Wage cost inflation A detailed review of the
risks associated with successfully
There is a risk that implementing the National
increased costs associated Living Wage has been completed.
with the introduction This review has been undertaken
of the National Living at a strategic level and
Wage may adversely impact seeks to ensure that appropriate
upon overall operational mitigating actions are
costs. in place, some of which
are in relation to how
the Group carefully manages
productivity and efficiency
across the estate. Implementation
of the National Living
Wage will continue to remain
an area of focus in FY
2018. We have successfully
implemented a new Time
and Attendance system to
improve the management
controls and reporting
of staff hours.
--------------------------------- -------------------------------------------
Borrowing covenants The Company maintains headroom
against these risks. The
There are risks that finance team conducts daily
borrowing covenants cash forecasting with periodic
are breached because reviews at the Treasury
of circumstances such Committee, the roles of
as: which include ensuring
i. A change in the that the Board Treasury
economic climate Policy is adhered to, monitoring
leading to reduced its operation and agreeing
cash inflows; or appropriate strategies
ii. A material change for recommendation to the
in the valuation Board.
of the property
portfolio. In addition, regular forecasting
and testing of covenant
compliance is performed
and frequent communication
is maintained with the
Securitisation Trustee.
--------------------------------- -------------------------------------------
Pension fund deficit The Company has made significant
additional contributions
The material value of to reduce the funding deficit.
the pension fund deficit In July 2017, the Company
remains a risk. reached agreement on the
triennial valuation of
the Group pension schemes
as at 31 March 2016, with
a funding shortfall of
GBP451m (March 2013 valuation
GBP572m shortfall).
The Company will continue
to pay cash contributions
(of GBP46m p.a. indexed)
to 2023, with an additional
payment of GBP13m into
escrow in 2024 should such
further funding be required
at that time.
--------------------------------- -------------------------------------------
Failure to operate safely Mitchells & Butlers maintains
and a robust programme of health
legally and safety checks both
within its restaurants
A major health and safety and pubs and throughout
failure could lead to the supply chain.
illness, injury or loss
of life or significant The dedicated Safety Assurance
damage to the Company's team uses a number of technical
or a brand's reputation. partners including food
technologists, microbiologists
and allergen specialists
to ensure that our food
procedures are safe.
Regular independent audits
of trading sites are performed
to ensure that procedures
are followed and that appropriate
standards are maintained.
Food suppliers are required
to meet the British Retail
Consortium Global Standard
for Food Safety and are
subject to regular safety
and quality audits.
Comprehensive health and
safety training programmes
are in place.
--------------------------------- -------------------------------------------
Food supply chain safety M&B has a Safety Assurance
team and uses a number
Malicious or accidental of technical partners including
contamination in the food technologists, food
supply chain could lead safety experts, a microbiologist,
to food goods for resale allergy consultants, trading
being unfit for human standards specialists,
consumption or being nutritionists etc.
dangerous to consume. M&B uses a robust system
This could lead to restrictions of detailed product specifications.
in supply which in turn
causes an increase in All food products are risk
cost of goods and reduced rated using standard industry
sales due to consumer definitions and assessment
fears and physical harm of the way the products
to customers/employees. are used in M&B kitchens.
Suppliers are then risk
rated according to their
products.
Each food supplier is audited
at least once per annum
in respect of safety and
additionally in response
to a serious food safety
complaint or incident.
--------------------------------- -------------------------------------------
For further information, please contact:
Investor Relations
Amy De Marsac
0121 498 6514
Media:
James Murgatroyd (Finsbury)
020 7251 3801
This information is provided by RNS
The company news service from the London Stock Exchange
END
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