TIDMMAB
RNS Number : 0576Z
Mitchells & Butlers PLC
19 May 2021
MITCHELLS & BUTLERS PLC
LEI no: 213800JHYNDNB1NS2W10
19 May 2021
HALF YEAR RESULTS
(For the 28 weeks ended 10 April 2021)
Highlights
- Strengthened balance sheet through successful GBP351m equity
raise and refinanced debt arrangements
- Confident of emerging in a position of strength as restrictions
are eased
- Almost all sites now open, trading indoors and outdoors
Reported results
- Total revenue of GBP219m (HY 2020 GBP1,039m)
- Operating loss of GBP132m (HY 2020 loss GBP51m)
- Loss before tax of GBP200m (HY 2020 loss GBP121m)
- Basic loss per share of (33.0)p (HY 2020 (22.6)p as restated)
Trading results
- First half again dominated by Covid-19, with only 14 weeks
of restricted trading permitted
- Like-for-like sales(a) restricted to a decline of 30.1%
against pre Covid-19 levels
- Adjusted operating (loss)/profit(a) GBP(124)m (HY 2020 GBP108m)
- Adjusted (loss)/earnings per share(a) (31.8)p (HY 2020 6.5p
as restated )
Balance sheet and cash flow
- Unsecured committed financing facilities of GBP150m to February
2024
- Extended covenant waivers and then amendments in place for
the securitisation until January 2023
- Cash outflow of GBP(16)m (HY 2020 inflow GBP58m), including
gross equity proceeds of GBP351m
- Net debt of GBP2,014m (HY 2020 GBP2,158m), including GBP542m
of IFRS 16 lease liabilities (HY 2020 GBP543m)
Phil Urban, Chief Executive, commented:
"M&B was a high performing business coming into the
pandemic. With the support of our main stakeholders, we are now
well placed to emerge in a strong competitive position and look
forward to the removal of remaining trading restrictions in June
such that the business is able to return again to full and
sustainable profitability.
With our great estate, well diversified portfolio of brands and
proven management team, we look forward to welcoming back our
guests for great experiences in Covid-19 secure environments and
focusing the business once again on continually enhancing our
customer proposition while driving efficiencies through the Ignite
programme."
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.
There will be a conference call held today at 9:15am accessible
by phone on 0203 936 2999, access code: 327499 and
www.incommuk.com/customers/online access code: 327499. The slides
will also be available on the website at www.mbplc.com . The replay
will be available until 2 June 2021 on 0203 936 3001, access code:
686064.
All disclosed documents relating to these results are available
on the Group's website at www.mbplc.com
For further information, please contact:
Tim Jones - Chief Financial Officer +44(0)121 498 6112
Gabby Shilvock - 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 and Ember Inns. In addition, it
operates Innkeeper's Collection hotels in the UK and Alex
restaurants and bars in Germany. Further details are available at
www.mbplc.com and supporting photography can be downloaded at
www.mbplc.com/imagelibrary .
CURRENT TRADING AND OUTLOOK
We successfully launched our Open Offer on 22 February, raising
GBP351m. The equity raise, plus the associated package of
refinanced terms for our secured and unsecured debt, provides a
strong platform of financial stability as we continue to manage our
way through the remaining uncertainty presented by the Covid-19
pandemic.
At the balance sheet date the Group had cash balances on hand of
GBP141m, with undrawn unsecured facilities of GBP150m.
Subsequently, we have had five weeks of limited outdoor trading
from 12 April. We started this period with 16% of our estate open,
building to 44% as restrictions eased in Scotland and Wales, and
based on the strong levels of bookings and demand we have seen open
sites generating a level of outdoor sales that were 37% down on
their total sales (outdoor plus indoor) pre Covid-19. As
restrictions have eased further, we have this week re-opened almost
all of our estate, now permitted to trade both indoors and
outdoors.
Whilst uncertainty and challenges still remain, we are
encouraged by the successful roll out of the Covid-19 vaccination
programme and the fall in infection rates and are confident, given
the demand that we have seen so far since re-openings, that we will
see strong consumer confidence in our brands supporting a rebound
to profitability and cash generation once restrictions are fully
eased. Until that time, we continue to believe it is not meaningful
to provide any forward guidance.
BUSINESS REVIEW
The first half of the financial year continued to be dominated
by the effects of Covid-19 with increased trading restrictions,
including the introduction of regional tiers, resulting in reduced
guest visits in the lead up to the second 4-week lockdown in
England on 5 November.
Trading recommenced on 2 December, but with even tighter
restrictions within the regional tiers, including tier 3 areas
remaining closed. Throughout December, with the introduction of
tier 4 as the new variant was discovered, restrictions became
progressively tighter still resulting in further site closures and
significantly reduced sales activity over the important festive
trading season followed by closure of the estate for the third time
from 30 December, ahead of the imposition of the wider national
lockdown on 4 January.
Total sales in the first half of the year were GBP219m, a
decline of 78.9% reflecting these restrictions on trade.
As a result, the Group's liquidity position deteriorated
significantly over the first quarter. On 15 February we announced
our intention to undertake an Open Offer to raise additional
equity. In parallel with this process, we reached agreement with
our relationship banks for a new GBP150m 3-year unsecured facility
and extended the temporary waivers and amendments in place over the
securitisation to avoid technical breaches that would have been
incurred due to forced closure, both of which were conditional on
completion of the Open Offer. The formation of Odyzean was also
announced, representing the combined shareholding of Piedmont,
Elpida and Smoothfield, showing their support for the Company
through this critical period by fully supporting the proposed Open
Offer.
The Open Offer was launched on 22 February, with the results
published on 11 March confirming gross proceeds of GBP351m to
provide funding for short-term working capital needs, reduce the
level of unsecured debt and strengthen the balance sheet. As we
emerge from restrictions, this will also enable us to restart our
estate investment strategy and maintain our strong competitive
position, while continuing our focus on long-term deleveraging.
Throughout closure periods we have kept operating costs to a
minimum, have reduced discretionary capital expenditure and over
99% of employees have been on furlough. We have continued to work
hard to keep all our team members connected and informed through
our support portal, launched last financial year, and social media
platforms. The welfare and mental health of our team has continued
to be a primary concern and we are encouraged by the way our teams
have pulled together in this difficult time.
Mitchells & Butlers has continued to play a role in the UK
Hospitality forums that helped devise the Hospitality Sector
Protocols Document and have lobbied the Government directly to
support the sector during closure. We welcomed the Government's
extended support through a reduced VAT rate on certain supplies and
the business rates holiday, in addition to the security of
employment provided by the furlough scheme enabling us to continue
to protect the vast majority of our employees.
The Government's announcement on 22 February provided a roadmap
for the easing of restrictions and we have successfully traded an
average of 535 sites from outdoor areas since 12 April. Performance
has been varied and heavily influenced by the weather, with outdoor
sales in open sites being on average 37% down on full pre Covid-19
levels (outdoor and indoor). Encouragingly our average guest review
scores since reopening were 4.4 out of 5, despite the restricted
trading conditions. The CGA Consumer Pulse survey has shown 44% of
adults visited hospitality venues in the first week of trading, 9%
points higher than reopening after England's first national
lockdown. This indicates that consumer demand for hospitality
remains strong and provided us with optimism ahead of our reopening
for indoor trading on 17 May, with almost all of our estate now
open.
Covid-19 secure procedures including directional and spacing
signage, sanitising stations, disposable menus and table spacing
have previously been adopted by our teams, whilst still providing a
hospitable feel and great experiences for our guests. We have the
experience and confidence to support these measures going forward,
alongside the application of test and trace guidance. Over this
period consumer trends such as home delivery have been accelerated
and digital technology that we were already implementing has been
increasingly important. Order at table, now successfully rolled out
across the majority of our estate, has been particularly popular
with our pub brands where we have seen sales mix build to over
60%.
The unprecedented challenges the industry has faced have had a
damaging impact on market supply with a 7% decline in licensed
premises, according to the May AlixPartners CGA Market Recovery
Monitor. We believe that the platform of financial stability
provided through the equity raise will leave us well placed to
benefit from these changes in the competitive landscape.
OUR STRATEGIC PRIORITIES
Despite the impacts of Covid-19, the fundamental strengths of
our business remain. We have an 82% freehold estate, with
recognised and diversified brands across consumer demographics and
geographical locations, and an experienced and proven management
team with the focus to build on the momentum previously gained
before the pandemic. In the short to medium term, our priority will
be on successfully trading the business in the current challenging
environment, ensuring the safety of our team members and guests,
and on growing the business back to, and beyond, the levels of
trade that we were enjoying before Covid-19.
Our Ignite programme of work remains at the core of our
long-term value creation plans and we had refreshed the initiatives
and opportunities available to us in early 2020. Our immediate
focus will be on the successful rebuilding of trade following the
extended periods of closure and w e will be prioritising
initiatives that support this, such as sales driving actions and
the resumption of capital investment in our estate to maintain
competitiveness. We remain confident in our ability to deliver long
term and sustained efficiencies and business improvements through
the existing Ignite programme and will be working to refine and
roll out new measures.
Principal risks and uncertainties
Since the financial year end, there have been no material
changes to the principal risks previously disclosed (detailed in
the Annual Report and Accounts 2020 page 32). However, in
experiencing enforced Government closures, which have impacted the
business due to Covid-19, we have identified a new risk in relation
to 'Mandated Closures'. This new risk has been added to the Group's
risk register, given the rare risk that the business could again be
severely impacted by an enforced Government closure (or imposed
severe trading restrictions), of part or all of the estate. The
frequency and nature of these risks are unpredictable and the
impact could be substantial for the Group, as evidenced during the
Covid-19 pandemic. We continue to monitor and assess all key risks
and uncertainties facing the business, in addition to any new and
emerging risks.
The Group has prepared for Brexit and does not expect material
supply shortages or cost increases. However, having been closed
since the date Brexit became effective, the full impact will become
more apparent as we begin to reopen for trade.
FINANCIAL REVIEW
On a statutory basis, loss before tax for the half year was
GBP200m (HY 2020 loss GBP121m), on sales of GBP219m (HY 2020
GBP1,039m).
The Group Income Statement discloses adjusted profit and
earnings per share information that excludes separately disclosed
items to allow a better understanding of the trading of the Group.
Separately disclosed items are those which are separately
identified by virtue of their size or incidence.
Statutory Adjusted (a)
HY 2021 HY 2020 HY 2021 HY 2020
GBPm GBPm GBPm GBPm
Revenue 219 1,039 219 1,039
Operating (loss)/profit (132) (51) (124) 108
(Loss)/profit before
tax (200) (121) (192) 38
(Loss)/Earnings per share
(1) (33.0)p (22.6)p (31.8)p 6.5p
Operating margin (60.3)% (4.9)% (56.6)% 10.4%
(1) (Loss)/earnings per share for the comparative periods have
been restated to reflect the bonus element of the Open Offer share
issue completed on 12 March 2021.
At the end of the period, the total estate comprised 1,735 sites
in the UK and Germany of which 1,649 are directly managed.
Revenue
Total revenue of GBP219m (HY 2020 GBP1,039m) was 78.9% lower
than last year due to restrictions on trading.
During the first 14 weeks of the period some level of restricted
trading was possible for parts of the estate. During this period l
ike-for-like sales (a) (for those sites open) were 30.1 below prior
year levels with food sales (a) down by 20.7% and drink sales (a)
down by 40.3%.
At the end of December, the estate entered a mandated closure
for the third time, with the full national lockdown subsequently
enforced from 4 January. No further sales were therefore
recorded.
Separately disclosed items
Separately disclosed items are identified due to their nature or
materiality to help the reader form a better view of overall and
adjusted trading.
A charge of GBP5m was recognised in relation to stock write offs
as a result of Covid-19 mandated closure and a GBP3m past service
cost in relation to guaranteed minimum pensions (GMPs) equalisation
for the defined benefit pension schemes.
Operating profit and margins (a)
The significant impact of Covid-19 closures and restrictions
resulted in an adjusted operating loss (a) of GBP124m (HY 2020
adjusted profit GBP108m). Throughout the closure periods operating
costs have been kept to a minimum and over 99% of employees have
been on furlough, amounting to GBP175m of Government support for
employees through furlough grants during the period. Support to the
Group itself has continued in the form of a holiday from business
rates, which is worth GBP51m across the half year, and a reduction
in the rate of VAT to 5% on non-alcoholic sales.
Statutory operating margin of (60.3)% was 55.4ppts lower than
last year, impacted by the significant closures and other trading
restrictions. Adjusted operating margin (a) for the half year was
67.0ppts lower than last year at (56.6)%.
Interest
Net finance costs of GBP67m for the half year were GBP1m lower
than last year. The net pensions finance charge was GBP1m (HY 2020
GBP2m). The charge for the full year is expected to be GBP3m.
The Group notes the requirement to transition the basis of
future rates of interest on securitised bonds, the liquidity
facility and swaps away from LIBOR ahead of the cessation of
publication of that index. This transition is being reviewed with a
view to seeking agreement with relevant stakeholders by the end of
the year.
Earnings per share
Basic loss per share, after the separately disclosed items
described above, were (33.0)p (HY 2020 (22.6)p), adjusted
(loss)/earnings per share (a) were (31.8)p (HY 2020 6.5p).
(Loss)/earnings per share for comparative periods have been
restated to reflect the bonus element of the Open Offer share issue
(see note 8).
The basic weighted average number of shares in the period was
500m and the total number of shares issued at the balance sheet
date was 596m, following the equity raise and subsequent issue of
an additional 167m shares.
Cash flow
HY 2021 HY 2020
GBPm GBPm
EBITDA before movements in the valuation
of the property portfolio (57) 182
Non-cash share-based payment and pension
costs and other 6 2
Operating cash flow before adjusted items,
movements in working capital and additional
pension contributions (51) 184
Working capital movement (85) (34)
Pension deficit contributions (13) (25)
-------- --------
Cash flow from operations (149) 125
Capital expenditure (16) (82)
Net finance lease principal payments (18) (12)
Interest on lease liabilities (9) (6)
Net interest paid (53) (55)
Tax 1 (16)
Issue of shares 342 2
Other (2) (3)
Drawings under liquidity facility 49 -
(Repayment) of term loan (100) -
(Repayment)/drawdown of revolving credit
facilities (10) 150
Net cash flow before bond amortisation 35 103
Mandatory bond amortisation (51) (45)
-------- --------
Net cash flow before dividends (16) 58
The business generated a loss of GBP57m of EBITDA before
movements in the valuation of the property portfolio.
The working capital movement reflects significant periods of
closure with continued supplier, landlord and HMRC commitments due.
GBP28m of the movement is due to an increase in the Coronavirus Job
Retention Scheme receivable.
Share issue proceeds reflect the equity raise of GBP351m less
GBP9m transaction fees.
Capital expenditure
Capital expenditure of GBP16m (HY 2020 GBP82m) comprises GBP15m
from the purchase of property, plant and equipment and GBP1m in
relation to the purchase of intangible assets. Capital expenditure
was significantly below historic levels as part of the cash
management strategy in response to Covid-19. Of the GBP15m spend,
GBP7m relates to essential maintenance and infrastructure, with the
balance being the completion of committed acquisitions and
outstanding remodels.
As all sites have continued to be impacted by restrictions and
closures, we do not believe it will be possible to calculate a
current and meaningful return on previous investment.
Pensions
The Group continues to make pension deficit payments as agreed
as part of the triennial pensions valuation with the schemes'
Trustees at 31 March 2019, which showed an actuarial deficit of
GBP293m. It was agreed that t he deficit would continue to be
funded by cash contributions of GBP49m per annum indexed with RPI
from 2016 to 2023.
During the last financial year, the Group agreed with the
Trustees that the contributions into the Mitchells & Butlers
Pension Plan and the Mitchells & Butlers Executive Pension Plan
would be suspended in respect of the monthly contributions for the
six months to September 2020 and those contributions have been
added onto the end of the agreed recovery plan so that those
contributions will be payable in 2023. During the current period an
additional agreement was reached with the trustee to delay monthly
contributions from January to March 2021, inclusive, with these now
being paid, albeit after the interim date.
In 2024 an additional payment of GBP13m will be made into
escrow, should such further funding be required at that time.
The court hearing in relation to the rate of inflation to be
applied to pensions increases for certain sections of the
membership in excess of the guaranteed minimum pensions is expected
to start during Summer 2021.
Net debt and facilities
Following the adoption of IFRS16 in the prior period, leases are
now included in net debt. Net debt at the period end was GBP1,472m,
excluding lease liabilities of GBP542m (HY 2020 GBP1,615m excluding
lease liabilities of GBP543m).
On 14 February, the Group reached agreement with its three
relationship banks for a new GBP150 million 3-year unsecured
facility. In addition, extended waivers and then amendments until
January 2023 were agreed within the Group securitisation to provide
flexibility and stability to manage the secured financing
structure. Without these extensions certain breaches would have
resulted due to the ongoing impact of Covid-19 and the measures
taken to stem the spread of the virus. Both the unsecured and
secured financing agreements were conditional on completion of the
Open Offer. In addition, on completion of the Open Offer the full
GBP100m of the CLBILS term loans was repaid. The details of these
arrangements and an analysis of net debt can be found in note 11 to
the financial statements.
In securing these valuable amendments the Group has agreed not
to pay an external dividend, undertake any share buy-backs or
repurchase bond debt until January 2023 at the earliest.
Further details can be found at
https://www.mbplc.com/infocentre/debtinformation/ .
Director's responsibility statement
We confirm that to the best of our knowledge:
- The condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting'
as required by DTR 4.2.4R and to the best of their knowledge
gives a true and fair view of the information required
by DTR 4.2.4R;
- The interim management report includes a fair review of
the information required by DTR 4.2.7R (indication of important
events during the first 28 weeks and description of principal
risks and uncertainties for the remaining 24 weeks of the
year); and
- 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 18 May 2021 and is signed on its behalf by:
Tim Jones
Chief Financial Officer
18 May 2021
Definitions
a - The Directors use a number of alternative performance
measures (APMs) that are considered critical to aid the
understanding of the Group's performance. Key measures are
explained later in this announcement.
GROUP CONDENSED INCOME STATEMENT
for the 28 weeks ended 10 April 2021
2021 2020 2020
28 weeks 28 weeks 52 weeks
(Unaudited) (Unaudited) (Audited)
-------------------------------- -------------------------- ----------------------------
Before Before Before
separately separately separately
disclosed disclosed disclosed
items(a) Total items(a) Total items(a) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------- --------- ----------- --------- ----------- -----------
Revenue 3 219 219 1,039 1,039 1,475 1,475
Operating costs
before
depreciation,
amortisation
and movements
in the valuation
of the property
portfolio (268) (276) (846) (857) (1,221) (1,219)
Share in
associates
results - - - - (1) (1)
EBITDA (b)
before movements
in the valuation
of the property
portfolio (49) (57) 193 182 253 255
Depreciation,
amortisation
and movements
in the valuation
of the property
portfolio (75) (75) (85) (233) (154) (247)
----------------- --------- ----------- --------- ----------- -----------
Operating
(loss)/profit (124) (132) 108 (51) 99 8
Finance costs 6 (67) (67) (69) (69) (128) (128)
Finance income 6 - - 1 1 1 1
Net pensions
finance charge 6,12 (1) (1) (2) (2) (4) (4)
----------------- --------- ----------- --------- ----------- -----------
(Loss)/profit
before tax (192) (200) 38 (121) (32) (123)
Tax
credit/(charge) 7 33 35 (7) 14 5 11
----------------- --------- ----------- --------- ----------- -----------
(Loss)/profit
for the period (159) (165) 31 (107) (27) (112)
================= ========= =========== ========= =========== ===========
(Loss)/earnings
per ordinary
share
(restated)(c)
: 8
Basic (31.8)p (33.0)p 6.5p (22.6)p (5.7)p (23.6)p
Diluted (31.8)p (33.0)p 6.5p (22.6)p (5.7)p (23.6)p
a Separately disclosed items are explained and analysed in note
4.
b Earnings/(loss) before interest, tax, depreciation, amortisation
and movements in the valuation of the property portfolio.
c (Loss)/earnings per share for the comparative periods have
been restated to reflect the bonus element of the Open Offer
share issue completed on 12 March 2021.
All results relate to continuing operations.
GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME/(EXPENSE)
for the 28 weeks ended 10 April 2021
2021 2020 2020
28 weeks 28 weeks 52 weeks
Notes GBPm GBPm GBPm
------------ ------------ ----------
(Unaudited) (Unaudited) (Audited)
Loss for the period (165) (107) (112)
Items that will not be reclassified
subsequently to profit or loss:
Unrealised loss on revaluation of
the property portfolio 9 - (392) (148)
Remeasurement of pension liabilities 12 8 5 3
Tax (charge)/credit relating to items
not reclassified 7 (1) 42 1
------------ ------------ ----------
7 (345) (144)
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation (1) - -
of foreign operations
Cash flow hedges:
- Gains/(losses) arising during the
period 31 (13) (43)
- Reclassification adjustments for
items included in profit or loss 35 21 48
Tax (charge)/credit relating to items
that may be reclassified 7 (13) 4 5
------------ ------------ ----------
52 12 10
Other comprehensive income/(expense)
after tax 59 (333) (134)
Total comprehensive expense for the
period (106) (440) (246)
============ ============ ==========
GROUP CONDENSED BALANCE SHEET
10 April 2021 2021 2020 2020
10 April 11 April 26 September
Notes GBPm GBPm GBPm
--------------- --------------- -------------
ASSETS (Unaudited) (Unaudited) (Audited)
Goodwill and other intangible
assets 9 14 15 14
Property, plant and equipment 9 4,263 4,029 4,305
Right-of-use assets 10 405 435 402
Interests in associates 4 5 4
Finance lease receivables 14 17 15
Deferred tax asset 107 77 85
Derivative financial instruments 13 29 50 45
--------------- --------------- -------------
Total non-current assets 4,836 4,628 4,870
--------------- --------------- -------------
Inventories 14 20 22
Trade and other receivables 66 62 41
Current tax assets - 4 1
Finance lease receivables 2 1 2
Cash and cash equivalents 11 144 191 173
Derivative financial instruments 13 - 1 -
Total current assets 226 279 239
--------------- --------------- -------------
Total assets 5,062 4,907 5,109
--------------- --------------- -------------
LIABILITIES
Pension liabilities 12 (64) (51) (51)
Trade and other payables (243) (293) (314)
Current tax liabilities (1) - -
Borrowings 11 (168) (251) (238)
Lease liabilities 10 (69) (52) (58)
Derivative financial instruments 13 (38) (37) (40)
Total current liabilities (583) (684) (701)
--------------- --------------- -------------
Pension liabilities 12 (114) (137) (142)
Borrowings 11 (1,477) (1,605) (1,542)
Lease liabilities 10 (473) (491) (483)
Derivative financial instruments 13 (192) (257) (257)
Deferred tax liabilities (302) (248) (302)
Provisions (7) (3) (5)
Total non-current liabilities (2,565) (2,741) (2,731)
--------------- --------------- -------------
Total liabilities (3,148) (3,425) (3,432)
--------------- --------------- -------------
Net assets 1,914 1,482 1,677
=============== =============== =============
EQUITY
Called up share capital 14 51 37 37
Share premium account 356 28 28
Capital redemption reserve 3 3 3
Revaluation reserve 1,117 918 1,117
Own shares held (4) (4) (3)
Hedging reserve (187) (238) (240)
Translation reserve 13 14 14
Retained earnings 565 724 721
--------------- --------------- -------------
Total equity 1,914 1,482 1,677
=============== =============== =============
GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY
for the 28 weeks ended 10 April 2021
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 29 September
2019 (Audited) 37 26 3 1,267 (4) (250) 14 830 1,923
Loss for the
period - - - - - - - (107) (107)
Other
comprehensive
(expense)/income - - - (349) - 12 - 4 (333)
------- ------- ---------- ----------------- ------ ------- ----------- -------- ------
Total
comprehensive
(expense)/income - - - (349) - 12 - (103) (440)
Share capital
issued - 2 - - - - - - 2
Purchase of
own shares - - - - (3) - - - (3)
Release of own
shares - - - - 3 - - (3) -
Credit in respect
of share-based
payments - - - - - - - 1 1
Tax charge on
share-based
payments - - - - - - - (1) (1)
At 11 April
2020 (Unaudited) 37 28 3 918 (4) (238) 14 724 1,482
Loss for the
period - - - - - - - (5) (5)
Other
comprehensive
income/(expense) - - - 199 - (2) - 2 199
------- ------- ---------- ----------------- ------ ------- ----------- -------- ------
Total
comprehensive
income/(expense) - - - 199 - (2) - (3) 194
Purchase of
own shares - - - - 1 - - - 1
Credit in respect
of share-based
payments - - - - - - - 1 1
Tax charge on
share-based
payments - - - - - - - (1) (1)
At 26 September
2020 (Audited) 37 28 3 1,117 (3) (240) 14 721 1,677
Loss for the
period - - - - - - - (165) (165)
Other
comprehensive
income/(expense) - - - - - 53 (1) 7 59
------- ------- ---------- ----------------- ------ ------- ----------- -------- ------
Total
comprehensive
income/(expense) - - - - - 53 (1) (158) (106)
Share capital
issued 14 328 - - - - - - 342
Purchase of
own shares - - - - (1) - - - (1)
Credit in respect
of share-based
payments - - - - - - - 1 1
Tax credit on
share-based
payments - - - - - - - 1 1
At 10 April
2021
(Unaudited) 51 356 3 1,117 (4) (187) 13 565 1,914
======= ======= ========== ================= ====== ======= =========== ======== ======
GROUP CONDENSED CASH FLOW STATEMENT
for the 28 weeks ended 10 April 2021
2021 2020 2020
28 weeks 28 weeks 52 weeks
Notes GBPm GBPm GBPm
----------------- ------------ ----------
(Unaudited) (Unaudited) (Audited)
Cash flow from operations
Operating (loss)/profit (132) (51) 8
Add back/(deduct):
Movement in the valuation of the property
portfolio - 148 93
Net profit arising on property disposals - - -
Depreciation of property, plant and
equipment 9 53 61 110
Amortisation of intangibles 2 2 3
Depreciation of right-of-use assets 10 20 22 41
Cost charged in respect of share-based
payments 1 1 2
Administrative pension costs 12 2 1 2
Past service cost in relation to the
defined benefit pension obligation 12 3 - -
Share of associates results - - 1
Operating cash flow before movements
in working capital and additional
pension contributions (51) 184 260
Decrease in inventories 8 6 4
(Increase)/decrease in trade and other
receivables (25) (10) 9
(Decrease)/increase in trade and other
payables (68) (30) 6
Decrease in provisions - - 1
Additional pension contributions 12 (13) (25) (25)
Cash flow (used in)/from operations (149) 125 255
Interest paid (53) (55) (109)
Other interest paid - lease liabilities (9) (6) (8)
Borrowing facility fees paid (1) - (1)
Interest received - - 1
Tax received/(paid) 1 (16) (11)
Net cash (used in)/from operating
activities (211) 48 127
----------------- ------------ ----------
Investing activities
Purchases of property, plant and equipment (15) (79) (104)
Purchases of intangible assets (1) (3) (4)
Proceeds from sale of property, plant
and equipment - - 2
Finance lease principal repayments
received 1 - 2
----------------- ------------ ----------
Net cash used in investing activities (15) (82) (104)
----------------- ------------ ----------
Financing activities
Issue of ordinary share capital 14 342 2 2
Purchase of own shares (1) (3) (3)
Repayment of principal in respect
of securitised debt 11 (51) (45) (95)
Drawings under liquidity facility 11 49 - 9
(Repayment)/drawdown of term loan 11 (100) - 100
(Repayment)/drawdown of unsecured
revolving credit facilities 11 (10) 150 10
Cash payments for the principal portion
of lease liabilities (19) (12) (22)
----------------- ------------ ----------
Net cash from financing activities 210 92 1
----------------- ------------ ----------
Net (decrease)/increase in cash and
cash equivalents 11 (16) 58 24
Cash and cash equivalents at the beginning
of the period 11 158 133 133
Foreign exchange movements on cash (1) - 1
Cash and cash equivalents at the end
of the period 141 191 158
================= ============ ==========
Cash and cash equivalents are defined in note 11.
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. GENERAL INFORMATION
Basis of preparation
This interim financial information has been prepared in accordance
with International Accounting Standard (IAS) 34 Interim Financial
Reporting as adopted by the European Union.
The information for the 52 weeks ended 26 September 2020 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 International Financial Reporting
Standards as adopted by the European Union (IFRS). 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,
but did include a section highlighting a material uncertainty
that may cast significant doubt on the Group and Company's ability
to continue as a going concern. This interim financial information
should be read in conjunction with the Annual Report and Accounts
2020.
It is normal practice for the Company to request its auditor to
complete a review of interim financial information. However, as
a result of the Covid-19 pandemic and the UK national lockdown
which commenced on 5 January 2021, all of the Group's pubs and
restaurants remain closed at the interim date. As such, the interim
financial information has not been reviewed by the Company's auditor
pursuant to the Auditing Practices Board guidance on review of
'Interim Financial Information'.
Going concern
The persistence of continuing trading restrictions as a result
of the Covid-19 pandemic cast a degree of uncertainty as to the
future financial performance and cash flows of the Group. These
have been considered by the Directors in assessing the ability
of the Group to continue as a going concern.
During the first half of the year, on 22 February 2021, the Group
launched an Open Offer to shareholders. This has now been completed,
involving the issue of 167 million new shares at a price of 210p,
resulting in an inflow of GBP351m of additional funds, gross of
transaction costs, on 12 March 2021. This has significantly enhanced
the financial position of the Group. Further, and contingent on
this equity raise, the Group secured new debt arrangements by
agreement with its main stakeholders which are now in force. In
summary:
-- The establishment of a new GBP150m 3 year unsecured revolving
credit facility to replace the GBP150m of unsecured facilities
due to expire in December 2021. CLBILS term loans of GBP100m,
also due to expire in December 2021, have now been repaid and
cancelled.
-- Agreement to a number of waivers and amendments with Ambac
Assurance UK Ltd, as controlling creditor, and HSBC Trustee (CI),
as trustee, to the Group's secured debt financing structure.
In order to secure such amendments and waivers, the Group gave
certain undertakings, including not to pay an external dividend
until certain conditions are satisfied (which is unlikely before
January 2023) and to provide funding into the securitisation in
line with drawings on the Liquidity Facility.
Full details can be found in the prospectus issued with the Open
Offer which is available on the Group's website.
After an extended period of closure the Group's sites re-opened
fully for trade, on 17 May 2021, albeit with some continuing restrictions.
In the year ahead the main uncertainty is considered to be the
strength of recovery of sales which will depend on a number of
factors including consumer demand and, particularly, the extent
and duration of future mandated restrictions on trade.
The Directors have reviewed revised financing arrangements against
a severe but plausible downside scenario forecast. This forecast
assumes the full re-opening of the estate on 17 May 2021 in line
with the current Government roadmap. This is then followed by
an extended build back of activity, but with sales remaining materially
below pre Covid-19 levels for the remainder of the financial year,
and marginally below throughout FY22. Specifically, given the
extent of the previous shutdown and following progress in vaccination
roll-out this downside scenario assumes that there is not another
wave of pandemic infection leading to a further period of forced
closure or the re-imposition of material restrictions, and that
future operating margins remain consistent with pre Covid-19 levels.
Under this scenario the Group is able to stay within revised committed
facility financial covenants and maintains sufficient liquidity.
1. GENERAL INFORMATION (CONTINUED)
Going concern (continued)
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 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 2020.
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 2020. Judgements and estimates for
the interim period remain largely unchanged.
2. SEGMENTAL ANALYSIS
The Group trades in one business segment (that of operating pubs
and restaurants). The Group's brands meet the aggregation criteria
set out in paragraph 12 of IFRS 8 Operating Segments and as such
the Group reports the business as one reportable segment.
3. REVENUE
Revenue is analysed as follows: 2021 2020 2020
28 weeks 28 weeks 52 weeks
GBPm GBPm GBPm
--------- --------- ---------
Food 128 535 782
Drink 77 467 645
Services 14 37 48
--------- --------- ---------
Total 219 1,039 1,475
========= ========= =========
The Group has benefitted from a reduction in the rate of VAT
from 20% to 5% on non-alcoholic sales which was introduced by the
UK Government on 15 July 2020 and will continue until 30 September
2021. Following this a rate of 12.5% will apply for the subsequent
six months until 31 March 2022.
Revenue from services includes rent receivable from unlicensed
properties and leased operations of GBP3m (2020 28 weeks GBP4m,
2020 52 weeks GBP7m).
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.
4. SEPARATELY DISCLOSED ITEMS (CONTINUED)
Separately disclosed items include movements in the valuation of
the property portfolio as a result of the revaluation exercise of
property, plant and equipment, impairment review of tenant's
fixtures and fittings, impairment review of short leasehold and
unlicensed properties, impairment review of right-of-use assets,
revaluation of assets held for sale, past service cost in relation
to the defined benefit pension obligation, VAT refund in relation
to gaming duty and costs directly associated with the government
enforced closure of pubs as a result of the Covid-19 pandemic.
2021 2020 2020
28 weeks 28 weeks 52 weeks
Notes GBPm GBPm GBPm
--------- --------- ---------
Costs directly associated with the Covid-19
pandemic and enforced closure of pubs a (5) (11) (11)
Gaming machine settlement b - - 13
Past service cost in relation to the c (3) - -
defined benefit pension obligation
Total separately disclosed items recognised
within operating costs (8) (11) 2
Movement in the valuation of the property
portfolio:
--------- --------- ---------
- Impairment arising from the revaluation
of freehold and long leasehold properties d - (127) (43)
- Impairment of freehold and long leasehold
tenant's fixtures and fittings e - (3) (10)
- Impairment of short leasehold and unlicensed
properties f - (2) (7)
- Impairment of right-of-use assets g - (16) (33)
Net movement in the valuation of the
property portfolio - (148) (93)
Total separately disclosed items before
tax (8) (159) (91)
--------- --------- ---------
Tax credit relating to the above items 2 31 16
Tax charge relating to change in tax
rate h - (10) (10)
Total separately disclosed items after
tax (6) (138) (85)
========= ========= =========
a Costs directly associated with the Covid-19 pandemic primarily
relate to the disposal of stock items at site and within distribution
depots that are beyond usable dates as a result of the Government
enforced closure of pubs during periods of local and national
lockdown. These costs are not considered to be part of normal
trading activity.
b The income of GBP13m recognised in the prior period relates
to a long-standing claim with HMRC, relating to VAT on gaming
machines. HMRC first paid the Group GBP13m in May 2010 but
following an appeal by HMRC, the Group repaid this in 2014.
During the 52 weeks ended 26 September 2020, HMRC agreed to
settle this amount with the Group. The amount recognised is
the settlement value including estimated interest.
c On 20 November 2020, the High Court ruled that pension schemes
will need to revisit individual transfer payments since 17
May 1990 to check if any additional value is due as a result
of guaranteed minimum pensions (GMPs) equalisition. This latest
judgement follows on from the ruling regarding GMPs on 26
October 2018 and requires that schemes make a top-up payment
to any member who exercised their statutory right to transfer
benefits to an alternative scheme. The top-up payment should
be the shortfall between the original transfer payments and
what would have been paid if benefits had been equalised at
the time, with interest in line with bank base rate plus 1%
each year. The past service cost recognised in the current
period is an estimate of the impact to the Group's schemes
as a result of this ruling.
4. SEPARATELY DISCLOSED ITEMS (CONTINUED)
d Impairment arising from the Group's revaluation of its freehold
and long leasehold pub estate where the carrying values of
the properties exceed their recoverable amount (see note 9).
e Impairment of freehold and long leasehold tenant's fixtures
and fittings where their carrying values exceed their recoverable
amount (see note 9).
f The impairment of short leasehold and unlicensed properties
comprises an impairment charge, where the carrying values
of the properties exceed their recoverable amount (see note
9).
g Impairment of right-of-use assets where their carrying values
exceed their recoverable amount (see note 10).
h A deferred tax charge of GBP10m was recognised in the prior
period following the substantive enactment of legislation
on 17 March 2020 which increased the UK standard rate of corporation
tax from 17% to 19% from 1 April 2020.
5. GOVERNMENT GRANTS
Coronavirus Job Retention Scheme (CJRS)
Under this scheme, HMRC reimburses up to 80% of the wages of
certain employees who have been
furloughed. The scheme is designed to compensate for staff
costs, so amounts received are recognised in the income statement
over the same period as the costs to which they relate. In the
income statement, operating costs are shown net of grant income
received. The scheme commenced on 20 March 2020 and will continue
until 30 September 2021.
Business rates
Businesses in the retail, hospitality and leisure sectors in
England were granted 100% business rates relief for the 2020/2021
rates year, covering the period from 1 April 2020 to 31 March 2021.
An additional 3 months of 100% business rates relief has been
granted to cover 1 April 2021 to 30 June 2021. Following this, it
has been announced that business rates will be discounted by
two-thirds from 1 July 2021 until 31 March 2022. However, this
extended relief is capped at GBP2m for the Group.
Eat Out to Help Out
During August 2020, HMRC offered a 50% discount off food and
non-alcoholic drinks, capped to GBP10 per
person, when dining out between Monday and Wednesday. The Group
participated in this scheme. In the income statement, food and
drink revenue includes amounts received from HMRC in respect of the
scheme.
The impact of grants received on the income statement is as
follows:
Government grant scheme Income statement line 2021 2020 2020
impact
28 weeks 28 weeks 52 weeks
GBPm GBPm GBPm
--------- --------- ---------
Eat Out to Help Out Revenue - - 30
Operating costs before
Coronavirus Job Retention separately disclosed
Scheme items 175 - 165
Total Government grants
received 175 - 195
========= ========= =========
In addition to the grants received above, during the prior
period, the UK Government announced 100% rate relief for all pubs
and restaurants for the business rates year 2020/2021, covering the
period from 1 April 2020 to 31 March 2021. During the current
period, the UK Government announced an additional 3 months of 100%
business rates relief to cover 1 April 2021 to 30 June 2021. The
impact in the current period is an estimated saving of GBP51m (2020
28 weeks GBP3m, 2020 52 weeks GBP47m).
Although this has not been quantified, the Group has benefitted
from a reduction in the rate of VAT from 20% to 5% on non-alcoholic
sales which was introduced by the UK Government on 15 July 2020
and will continue until 30 September 2021. Following this a rate
of 12.5% will apply for the subsequent six months until 31 March
2022.
6. FINANCE COSTS AND FINANCE INCOME
2021 2020 2020
28 weeks 28 weeks 52 weeks
GBPm GBPm GBPm
--------- --------- ---------
Finance costs
Interest on securitised debt (54) (57) (105)
Interest on other borrowings (4) (2) (6)
Interest on lease liabilities (9) (10) (17)
Total finance costs (67) (69) (128)
========= ========= =========
Finance income
Interest receivable - cash - 1 1
Net pensions finance charge (note 12) (1) (2) (4)
========= ========= =========
7. TAXATION
The taxation charge for the 28 weeks ended 10 April 2021 has
been calculated by applying an estimate of the annual effective tax
rate before separately disclosed items of 17.5% (2020 28 weeks,
19.3%). The annual effective tax rate for the current period is
lower than the statutory rate of 19.0% due to adjustments in
respect of prior periods.
2021 2020 2020
28 weeks 28 weeks 52 weeks
Tax credit in the income statement GBPm GBPm GBPm
--------- --------- ---------
Current tax:
- UK corporation tax - - -
- Amounts over provided in prior periods - - 2
--------- --------- ---------
Total current tax credit - - 2
--------- --------- ---------
Deferred tax:
- Origination and reversal of temporary differences 38 24 21
- Effect of changes in UK tax rate - (10) (10)
- Adjustments in respect of prior periods (3) - (2)
Total deferred tax credit 35 14 9
--------- --------- ---------
Total tax credit in the income statement 35 14 11
========= ========= =========
Further analysed as tax relating to:
Profit before separately disclosed items 33 (7) 5
Separately disclosed items 2 21 6
--------- --------- ---------
35 14 11
========= ========= =========
7. TAXATION (CONTINUED)
2021 2020 2020
Tax relating to items recognised in 28 weeks 28 weeks 52 weeks
other comprehensive
income/(expense) GBPm GBPm GBPm
--------- --------- ---------
Deferred tax:
Items that will not be reclassified
subsequently to profit or loss:
* Unrealised gains/(losses) due to revaluations -
revaluation reserve - 43 (2)
* Unrealised (losses)/gains due to revaluations -
retained earnings - (1) 1
* Rolled over and held over gains - retained earnings - (7) (6)
* Remeasurement of pension liabilities (1) 7 8
(1) 42 1
--------- --------- ---------
Items that may be reclassified subsequently
to profit or loss:
* Cash flow hedges (13) 4 5
Total tax (charge)/credit recognised
in other comprehensive income (14) 46 6
========= ========= =========
The tax credit in the interim financial statements is wholly
attributable to deferred tax as the full year results are expected
to be an overall allowable tax loss and no corporation tax is
expected to be payable for the 52 weeks ended 25 September 2021.
The Finance Act 2016 reduced the main rate of corporation tax
from 19% to 17% from 1 April 2020.
The Finance Act 2020 maintained the main rate of corporation
tax rate at 19% from 1 April 2020, overriding the Finance Act
2016. The effect of this change has been reflected in the closing
deferred tax balances at 11 April 2020 and 26 September 2020.
On 3 March 2021 the Government announced that the main rate
of corporation tax would increase to 25% with effect from 1
April 2023. This tax rate increase had not been substantively
enacted at the interim balance sheet date and therefore has
not been reflected in the interim financial statements. If the
increase had been enacted at the interim date, the deferred
tax asset would increase by GBP95m and the deferred tax liability
would increase by GBP24m.
8. (LOSS)/EARNINGS PER SHARE
Basic (loss)/earnings per share (EPS) has been calculated by dividing
the (loss)/profit for the financial period by the weighted average
number of ordinary shares in issue during the period, excluding
own shares held by employee share trusts.
For diluted earnings per share, the weighted average number of
ordinary shares is adjusted to assume conversion of all potentially
dilutive ordinary shares.
Adjusted (loss)/earnings per ordinary share amounts are presented
before adjusted items (see note 4) in order to allow a better
understanding of the adjusted trading performance of the Group.
Basic and diluted (loss)/earnings per share figures for the comparative
periods have been restated for the bonus factor of 1.109 to reflect
the bonus element of the Open Offer share issue (see note 14),
in accordance with IAS 33 Earnings per Share. Amounts as originally
stated at 26 September 2020 were
(26.2)p basic loss per share and (6.3)p basic adjusted loss per
share. Amounts originally stated at 10 April 2020 were (25.0)p
basic loss per share and 7.2p basic adjusted earnings per share.
The number of shares used for the (loss)/earnings per share
calculations are as follows:
2021 2020 2020
28 weeks 28 weeks 52 weeks
(restated) (restated)
million million million
Basic weighted average number of
ordinary shares 500 474 474
Effect of dilutive potential ordinary
shares:
- - -
* Contingently issuable shares
- - -
* Other share options
Diluted weighted average number of
shares 500 474 474
--------- ----------- -----------
At 10 April 2021, 3,144,778 (2020 28 weeks 2,814,978, 2020 52
weeks 2,797,479) share options were outstanding that could
potentially dilute basic EPS in the future but were not included in
the calculation of diluted EPS are they are anti-dilutive for the
periods presented.
The (losses)/profits used for the (loss)/earnings per share
calculations are as follows:
2021 2020 2020
28 weeks 28 weeks 52 weeks
GBPm GBPm GBPm
--------- --------- ---------
Loss for the period (165) (107) (112)
Separately disclosed items net of
tax 6 138 85
--------- --------- ---------
Adjusted (loss)/profit for the period (159) 31 (27)
========= ========= =========
2021 2020 2020
28 weeks 28 weeks 52 weeks
(restated) (restated)
pence pence pence
--------- ----------- -------------
Basic earnings/(loss) per share
Basic loss per share (33.0) (22.6) (23.6)
Separately disclosed items net of
tax per share 1.2 29.1 17.9
--------- ----------- -------------
Adjusted basic (loss)/earnings per
share (31.8) 6.5 (5.7)
========= =========== =============
Diluted earnings/(loss) per share
Diluted loss per share (33.0) (22.6) (23.6)
Adjusted diluted (loss)/earnings
per share (31.8) 6.5 (5.7)
========= =========== =============
9. PROPERTY, PLANT AND EQUIPMENT
2021 2020 2020
10 April 11 April 26 September
GBPm GBPm GBPm
--------- --------------- -------------------
At beginning of period 4,305 4,528 4,528
Additions 13 88 97
Decrease as a result of the revaluation
and impairment review - (524) (208)
Disposals (2) (2) (2)
Depreciation provided during the
period (53) (61) (110)
At end of period 4,263 4,029 4,305
========= =============== ===================
Revaluation and impairment
At 10 April 2021, all of the Group's pubs and restaurants
remained closed under the latest national lockdown. Due to the
extended period of closure since the prior reporting date of 26
September 2020, this is considered to be a potential indicator of
impairment of the Group's property, plant and equipment. As such,
the revaluation and impairment approaches have been considered as
follows.
Revaluation of freehold and long leasehold properties
Critical accounting judgements
The revaluation methodology is determined using management
judgement, with advice from third-party valuers (CBRE) involving
the application of a valuation multiple to the level of fair
maintainable trade ('FMT') of each site.
At the prior period reporting date of 26 September 2020,
judgement was applied to determine the most appropriate measure of
site level FMT. Given numerous trading restrictions impacting all
sites as well as a significant period of mandated closure, FMT was
determined by reference to the trading performance up to March
2020, the point of the first full lockdown following the emergence
of Covid-19, in conjunction with the previous two years of trading
performance.
At the interim date of 10 April 2021, given further periods of
enforced closure which have persisted throughout the majority of
the first half of the financial year, the March 2020 trading
performance is still considered to be the most appropriate measure
of site level FMT.
In the prior period, CBRE reduced the property multiples for
certain brands to take into account the expected market impact of
Covid-19. Multiples have been reviewed at the interim date in
conjunction with CBRE and are still considered to be
appropriate.
In addition, after application of a valuation multiple to
provide a site valuation, an income shortfall deduction was made to
reduce the resulting property valuations by the difference between
the FMT and the value of the Covid-19 impacted site annual forecast
for FY21. This methodology continues to be applied at the interim
date. A revised annual profit forecast for H2 FY21 and H1 FY22 has
been applied, generating a movement in the income shortfall
deduction which is offset by depreciation charged in H1 FY21. The
net result is therefore an immaterial movement against net book
value.
Given both the FMT and property multiples used at the prior
reporting date remain constant at the interim date, and the
movement in the income shortfall deduction is offset by
depreciation charged in H1 FY21, management have concluded that a
full estate valuation is not required at the interim date.
9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Impairment review
The fair value of tenant's fixtures and fittings are removed
from the valuation of freehold and long leasehold properties and
are subsequently reviewed for impairment by comparing the
recoverable amount to their carrying values. The recoverable amount
is the higher of fair value less costs to sell or value in use. Any
resulting impairment relates to sites with poor trading
performance, where the output of the calculation is insufficient to
justify their current net book value.
Short leasehold and unlicensed properties (comprising land and
buildings and fixtures, fittings and equipment) which are not
revalued to fair market value, are reviewed for impairment by
comparing the site recoverable amount to their carrying values. The
recoverable amount is the higher of fair value less costs to sell
or value in use. Any resulting impairment relates to sites with
poor trading performance, where the output of the calculation is
insufficient to justify their current net book value.
Value in use calculations use forecast trading performance cash
flows, which are discounted by applying a pre-tax discount rate of
8.8% (2020 28 weeks 8.1%, 52 weeks 9.9%) and a long term growth
rate of 1.0% (2020 28 weeks 0.0%, 52 weeks 0.0%). At the interim
date, the value in use calculations include an estimate of the
impact of the expected remaining closure period and subsequent
build up in trade post re-opening, as a direct result of the
Covid-19 pandemic.
Critical accounting judgements
Judgement is required when assessing whether a short leasehold
property or tenant's fixtures and fittings should be impaired as
this requires management to determine the most reliable source for
the basis of future income.
In the current and prior periods, judgement has been applied to
determine the most appropriate forecast to use as a result of the
impact of Covid-19 on site profitability. Management apply
judgement when allocating overhead costs to site cash flows, with
an overhead allocation being made only for those costs that can be
directly attributable to a site on a consistent basis. Site level
forecasts, including the allocation of directly attributable
overhead costs, have been used that formed the basis of the overall
Group forecast for both FY 2021 and FY 2022, that was in place at
the interim balance sheet date.
Following a review of the interim impairment output, management
have concluded that no additional impairment is required at the
balance sheet date.
The impact of the revaluation and impairment review in prior
periods is as follows:
2021 2020 2020
28 weeks 28 weeks 52 weeks
GBPm GBPm GBPm
---------- --------- ---------
Group income statement
Revaluation deficit charged as an
impairment - (153) (93)
Reversal of past revaluation deficits - 26 50
----------- --------- ---------
Total impairment arising from the
revaluation - (127) (43)
Impairment of short leasehold and
unlicensed properties - (2) (7)
Impairment of freehold and long leasehold
tenant's fixtures and fittings - (3) (10)
Total impairment of short leasehold,
unlicensed properties and tenant's
fixtures and fittings - (5) (17)
- (132) (60)
----------- --------- ---------
Revaluation reserve
Unrealised revaluation surplus - 29 77
Reversal of past revaluation surplus - (421) (225)
----------- --------- ---------
- (392) (148)
-----------
Net decrease in property, plant and
equipment - (524) (208)
=========== ========= =========
Goodwill and other intangible assets
Goodwill and other intangible assets at 10 April 2021 comprise
goodwill of GBP2m (11 April 2020 GBP2m, 26 September 2020 GBP2m)
and computer software of GBP12m (11 April 2020 GBP13m, 26 September
2020 GBP12m).
9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Capital commitments
The total amount contracted for but not provided in the
financial statements was GBP6m (11 April 2020 GBP9m, 26 September
2020 GBP9m).
10. LEASES
Right-of-use assets
2021 2020 2020
10 April 11 April 26 September
GBPm GBPm GBPm
--------- --------- -------------
At start of period 402 - -
Transition to IFRS 16 - 466 466
Additions 24 7 10
Decrease as result of the impairment
review - (16) (33)
Disposals - - (1)
Depreciation provided during the
period (20) (22) (41)
Foreign currency movements (1) - 1
At end of period 405 435 402
========= ========= =============
Impairment of right-of-use assets
Right-of-use assets are reviewed for impairment by comparing
site recoverable amounts to their carrying values. Any resulting
impairment relates to sites with poor forecast trading performance,
where their estimated recoverable amount is insufficient to justify
their current net book value. For practical reasons the impairment
review of right-of-use assets is performed simultaneously with the
impairment review of short leasehold assets classified within
property, plant and equipment, as an individual site is a single
cash generating unit. Recoverable amount is the higher of fair
value less costs to sell or value in use.
The methodology and critical accounting judgements used for this
impairment review are explained in note 9. Following a review of
the interim impairment output, management have concluded that no
additional impairment is required at the balance sheet date.
Lease liabilities
An analysis of lease liabilities recognised are as follows:
10 April 11 April 26 September
2021 2020 2020
GBPm GBPm GBPm
Current liabilities 69 52 58
Non current liabilities 473 491 483
--------- --------- -------------
Total lease laibilities 542 543 541
========= ========= =============
11. BORROWINGS AND NET DEBT
Borrowings
10 April 11 April 26 September
2021 2020 2020
GBPm GBPm GBPm
Current
Securitised debt 107 101 104
Term loan - - 100
Liquidity facility 58 - 9
Unsecured revolving credit facilities - 150 10
Overdraft 3 - 15
--------- --------- -------------
Total current 168 251 238
Non-current
Securitised debt 1,477 1,605 1,542
Total borrowings 1,645 1,856 1,780
========= ========= =============
Net debt
2021 2020 2020
10 April 11 April 26 September
GBPm GBPm GBPm
------------ --------------- -------------
Cash and cash equivalents 144 191 173
Overdraft (3) - (15)
------------ --------------- -------------
Cash and cash equivalents as presented
in the cashflow statement(a) 141 191 158
Securitised debt (1,584) (1,706) (1,646)
Term loan - - (100)
Unsecured revolving credit facility - (150) (10)
Liquidity facility (58) - (9)
Derivatives hedging balance sheet
debt(b) 29 50 44
Net debt excluding leases (1,472) (1,615) (1,563)
Lease liabilities (542) (543) (541)
------------ --------------- -------------
Net debt including leases (2,014) (2,158) (2,104)
============ =============== =============
a Cash and cash equivalents in the cash flow statement are presented
net of an overdraft within a cash pooling arrangement, to which
the Group has a legal right of offset.
b Represents the proportion of the fair value of the currency
swap that is hedging the balance sheet value of the Group's
US dollar denominated A3N loan notes. This amount is disclosed
separately to remove the impact of exchange rate movements
which are included in the securitised debt amount.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
other short-term highly liquid deposits with an original maturity
at acquisition of three months or less. Cash held on deposit with
an original maturity at acquisition of more than three months is
disclosed as other cash deposits. In the cash flow statement, cash
and cash equivalents are shown net of bank overdrafts that are
repayable on demand and form an integral part of the Group's cash
management.
11. BORROWINGS AND NET DEBT (CONTINUED)
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
GBP1,900m 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 GBP655m and refinance GBP450m 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%
(11 April 2020 6.3%, 26 September 2020 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 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.
These include 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.
During the prior period, and as a result of the Covid-19
pandemic, material trading restrictions were imposed on the Group
and the sector, including mandated closure for over three months.
Mitigating action was swiftly taken and this included agreeing
revised arrangements in the secured financing structure with the
consent of the controlling creditor of the securitisation and the
securitisation trustee. As a result a series of amendments and
waivers to the securitisation covenants were obtained, as detailed
in the Annual Report and Accounts 2020. During the current period a
series of further amendements and waivers to the securitisation
covenants were obtained as follows:
-- a further waiver of, and amendment to, the 30 day suspension
of business provision, where the suspension has arisen because of
the ongoing enforced closure during the Covid-19 pandemic;
-- a waiver of the two quarter look-back debt service coverage
ratio test up until April 2022 and a waiver of the four quarter
look-back debt service coverage ratio test up until July 2022, with
both tests then performed at revised lower levels until full
reinstatement in January 2023;
-- a waiver to facilitate drawings of up to GBP110m in total
under the Liquidity Facility providing the Group with additional
facilities in order to meet payments of principal and interest,
provided such drawings are repaid in full at the end of December
2021.
At 10 April 2021, Mitchells & Butlers Retail Limited had
cash and cash equivalents of GBP36m (11 April 2020 GBP47m, 26
September 2020 GBP63m). Of this amount GBP1m (11 April 2020 GBP1m,
26 September 2020 GBP1m), 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.
11. BORROWINGS AND NET DEBT (CONTINUED)
The carrying value of the securitised debt in the Group balance
sheet is analysed as follows:
2021 2020 2020
10 April 11 April 26 September
GBPm GBPm GBPm
--------- --------- -------------
Principal outstanding at beginning of
period 1,647 1,753 1,753
Principal repaid during the period (51) (45) (95)
Exchange on translation of dollar loan
notes (15) (5) (11)
--------- --------- -------------
Principal outstanding at end of period 1,581 1,703 1,647
Deferred issue costs (3) (4) (4)
Accrued interest 6 7 3
--------- --------- -------------
Carrying value at end of period 1,584 1,706 1,646
========= ========= =============
Liquidity facility
Under the terms of the securitisation, the Group holds a
liquidity facility of GBP295m provided by two counterparties.
During the prior period, as a result of the Covid-19 pandemic,
the Group obtained a waiver to facilitate drawings of up to GBP100m
in total under the liquidity facility, providing the Group with
additional facilities in order to meet payments of principal and
interest, provided such drawings were repaid in full by 15 March
2021. This waiver has been extended during the current period, such
that full repayment was not required by 15 March 2021 and further
drawings can be made on15 June 2021 (subject to no more than
GBP110m outstanding at any time), with all drawings now required to
be repaid in full by 15 December 2021.
The amount drawn at 10 April 2021 is GBP58m (11 April 2020
GBPnil, 26 September 2020 GBP9m).
Unsecured revolving credit facilities
At the start of the period the Group held unsecured committed
revolving credit facilities totalling GBP150m (comprising three
GBP50m bilateral facilities) and an uncommitted overdraft facility
of GBP5m, available for general corporate purposes. The full
GBP150m of unsecured committed facilities were repaid and cancelled
on 12 March 2021 and replaced with a single unsecured committed
revolving credit facility of GBP150m. The new committed facility
expires on 14 February 2024. The amount drawn at 10 April 2021 is
GBPnil (11 April 2020 GBP150m, 26 September 2020 GBP10m).
Term loan backed by the Coronavirus Large Business Interruption
Loan Scheme
In June 2020, the group entered into two new facilities of
GBP50m each, backed by the UK Government Coronavirus Large Business
Interruption Loan Scheme. During the period these facilities were
repaid and cancelled. The amount drawn at 10 April 2021 is GBPnil.
(11 April 2020 GBPnil, 26 September 2020 GBP100m.)
11. BORROWINGS AND NET DEBT (CONTINUED)
Movement in net debt excluding leases
2021 2020 2020
28 weeks 28 weeks 52 weeks
GBPm GBPm GBPm
-------- -------- --------
Net (decrease)/increase in cash and
cash equivalents (16) 58 24
Add back cash flows in respect of other
components of net debt:
* Repayment of principal in respect of securitised debt 51 45 95
* Repayment/(drawdown) of term loan 100 - (100)
* Repayment/(drawdown) on unsecured revolving credit
facilities 10 (150) (10)
* Drawdown of liquidity facility (49) - (9)
Decrease/(increase) in net debt arising
from cash flows 96 (47) -
Movement in capitalised debt issue
costs net of accrued interest (4) (4) -
-------- -------- --------
Decrease/(increase) in net debt excluding
leases 92 (51) -
Opening net debt excluding leases (1,563) (1,564) (1,564)
Foreign exchange movements on cash (1) - 1
Closing net debt excluding leases (1,472) (1,615) (1,563)
======== ======== ========
Movement in lease liabilities
2020 2020
2021 28 weeks 52 weeks
28 weeks GBPm GBPm
GBPm
---------- ---------- ----------
Opening lease liabilities (541) - -
Transition to IFRS 16 - (545) (545)
Additions (22) (6) (10)
Interest charged during the period (9) (10) (17)
Repayment of principal and interest 28 18 30
Disposals - - 2
Foreign currency movements 2 - (1)
---------- ---------- ----------
Closing lease liabilities (542) (543) (541)
========== ========== ==========
12. PENSIONS
Retirement and death benefits are provided for eligible
employees in the United Kingdom, principally by the Mitchells &
Butlers Pension Plan (MABPP) and the Mitchells & Butlers
Executive Pension Plan (MABEPP). These plans are funded, HMRC
approved, occupational pension schemes with defined contribution
and defined benefit sections. The defined benefit section of the
plans is now closed to future service accrual.
In addition, Mitchells & Butlers plc also provides a
workplace pension plan in line with the Workplace Pensions Reform
Regulations. This automatically enrols all eligible workers into a
Qualifying Workplace Pension Plan.
12. PENSIONS (CONTINUED)
Measurement of scheme assets and liabilities
Actuarial valuation
The actuarial valuations used for IAS 19 (revised) purposes are
based on the results of the latest full actuarial valuation carried
out at 31 March 2019 and updated by the schemes' independent
qualified actuaries to 10 April 2021. Schemes' assets are stated at
market value at 10 April 2021 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 and are as follows:
2021 2020 2020
10 April 11 April 26 September
Discount rate 2.0% 1.9% 1.6%
Pensions increases - RPI max 5% 3.1% 2.6% 2.8%
Inflation - RPI 3.2% 2.6% 2.9%
The mortality assumptions were reviewed following the 2019
actuarial valuation. A summary of the average life expectancies
assumed are as follows:
2021 2020 2020
10 April 11 April 26 September
Implied life expectancies from
age 65:
- MABPP male currently 45 22.7 years 22.7 years 22.7 years
- MABEPP male currently 45 24.5 years 24.5 years 24.5 years
- MABPP female currently 45 25.3 years 25.3 years 25.3 years
- MABEPP female currently 45 26.3 years 26.3 years 26.3 years
========== ========== ============
Minimum funding requirements
The results of the 2019 actuarial valuation showed a funding
deficit of GBP293m, using a more prudent basis to discount the
schemes' liabilities than is required by IAS 19 (revised). As a
result of the 2019 actuarial valuation, the Company subsequently
agreed recovery plans for both the Executive and Main schemes in
order to close the funding deficit in respect of its pension
liabilities. The recovery plans show an unchanged level of cash
contributions with no extension to the agreed payment term (GBP45m
per annum indexed with RPI from 1 April 2016 subject to a minimum
increase of 0% and maximum of 5%, until 31 March 2023). In the
prior period, given the Covid-19 outbreak, the Company agreed with
the Trustee that contributions would be suspended for the months of
April to September 2020, with these being added onto the end of the
agreed recovery plan so that these contributions will be paid in
the second half of FY2023. Subsequent to the national lockdown
which commenced on 5 January 2021, the Company has agreed a further
deferral of contributions covering January to March 2021 with these
contributions to be paid by 22 April 2021.
Under IFRIC 14, an additional liability is recognised, such that
the overall pension liabilities at the period end reflect the
schedule of contributions in relation to a minimum funding
requirement, should this be higher than the actuarial deficit.
12. PENSIONS (CONTINUED)
Amounts recognised in respect of pension schemes
The following amounts relating to the Group's defined benefit
and defined contribution arrangements have been recognised in the
Group income statement and Group statement of comprehensive
income:
Group income statement 2021 2020 2020
28 weeks 28 weeks 52 weeks
GBPm GBPm GBPm
--------- --------- ---------
Operating profit
Employer contributions (defined contribution
plans) (6) (6) (13)
Administrative costs (defined benefit
plans) (2) (1) (2)
--------- --------- ---------
Charge to operating profit before adjusted
items (8) (7) (15)
Past service cost (see note 4) (3) - -
--------- --------- ---------
Charge to operating profit (11) (7) (15)
Finance costs
Net pensions finance income on actuarial
surplus 3 3 5
Additional pensions finance charge due
to minimum funding (4) (5) (9)
--------- --------- ---------
Net pensions finance charge (1) (2) (4)
Total charge (12) (9) (19)
========= ========= =========
Group statement of comprehensive income 2021 2020 2020
28 weeks 28 weeks 52 weeks
GBPm GBPm GBPm
--------- --------- ---------
Return on scheme assets and effects of
changes in assumptions 27 58 (22)
Movement in pension liabilities due to
minimum funding (19) (53) 25
--------- --------- ---------
Remeasurement of pension liabilities 8 5 3
========= ========= =========
Group balance sheet 2021 2020 2020
10 April 11 April 26 September
GBPm GBPm GBPm
-------- -------- ------------
Fair value of scheme assets 2,651 2,649 2,736
Present value of scheme liabilities (2,311) (2,269) (2,434)
-------- -------- ------------
Actuarial surplus in the schemes 340 380 302
Additional liability recognised due
to minimum funding (518) (568) (495)
-------- -------- ------------
Total pension liabilities(a) (178) (188) (193)
======== ======== ============
Associated deferred tax asset 34 36 36
======== ======== ============
a. The total pension liabilities of GBP178m (11 April 2020
GBP188m, 26 September 2020 GBP193m) is presented as a GBP64m
current liabilities (11 April 2020 GBP51m, 26 September 2020
GBP51m) and a GBP114m non-current liabilities (11 April 2020
GBP137m, 26 September 2020 GBP142m).
12. PENSIONS (CONTINUED)
Movements in total pension liabilities are analysed as follows:
2021 2020 2020
10 April 11 April 26 September
GBPm GBPm GBPm
----------- ---------- -------------
At beginning of period (193) (215) (215)
Past service cost (see note 4) (3) - -
Administration costs (2) (1) (2)
Net pensions finance charge (1) (2) 5
Employer contributions 13 25 25
Remeasurement of pension liabilities 8 5 (6)
At end of period (178) (188) (193)
=========== ========== =============
13. FINANCIAL INSTRUMENTS
The fair value of the Group's derivative financial instruments
is calculated by discounting the expected future cash flows of each
instrument at an appropriate discount rate to a 'mark to market'
position and then adjusting this to reflect any non-performance
risk associated with the counterparties to the instrument.
IFRS 13 Financial Instruments requires the Group's derivative
financial instruments to be disclosed at fair value and categorised
in three levels according to the inputs used in the calculation of
their fair value:
- Level 1 instruments use quoted prices as the input to fair value calculations;
- Level 2 instruments use inputs, other than quoted prices, that
are observable either directly or indirectly;
- Level 3 instruments use inputs that are unobservable.
The table below sets out the valuation basis of financial
instruments held at fair value by the Group:
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
----- ----- ----- ------
At 10 April 2021
Financial assets
Currency swaps - 28 - 28
Share options - - 1 1
Financial liabilities
Interest rate swaps - (230) - (230)
-- (202) 1 (201)
===== ===== ===== ======
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
----- ----- ----- ------
At 11 April 2020
Financial assets
Currency swaps - 50 - 50
Share options - - 1 1
Financial liabilities
Interest rate swaps - (294) - (294)
----- ----- ----- ------
-- (244) 1 (243)
===== ===== ===== ======
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
----- ----- ----- ------
At 26 September 2020
Financial assets
Currency swaps - 44 - 44
Share options - - 1 1
Financial liabilities
Interest rate swaps - (297) - (297)
----- ----- ----- ------
- (253) 1 (252)
===== ===== ===== ======
13. FINANCIAL INSTRUMENTS (CONTINUED)
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. Other financial assets
and liabilities are either short-term in nature or their book
values approximate to fair values.
14. OPEN OFFER SHARE ISSUE AND SHARE CAPITAL
On 12 March 2021, the Group completed a fully underwritten Open
Offer share issue to existing shareholders on the basis of 7 shares
for every 18 fully paid ordinary shares held.
As a result, a total of 166,937,606 ordinary shares with an
aggregate nominal value of GBP14m were issued for cash
consideration of GBP351m. Transaction costs of GBP9m were incurred
which were directly attributable to the issuance of the new shares,
resulting in GBP328m being recognised in share premium and net cash
proceeds of GBP342m.
Earnings per share figures for the comparative period have been
restated to reflect the bonus element of the Open Offer as shown in
note 8.
Called up share capital Number of GBPm
shares
------------ -----
Allotted, called up and fully paid
Ordinary shares of 8(13/) (24) p each
At 26 September 2020 429,201,117 37
Issued on exercise of employee share options 135,763 -
Open Offer issued 166,937,606 14
At 10 April 2021 596,274,486 51
15. RELATED PARTY TRANSACTIONS
During the period, the Group has held a number of property lease
agreements with its associate companies, 3Sixty Restaurants Limited
and Fatboy Pub Company Limited.
The Group has entered into the following transactions with the
associates:
3Sixty Restaurants Limited Fatboy Pub Company Limited
2021 2020 2020 2021 2020 2020
28 weeks 28 weeks 52 weeks 28 weeks 28 weeks 52 weeks
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------- ---------- ---------- ---------- ---------- ----------
Rent charged 336 325 719 - 50 50
Sales of goods and
services 85 341 521 2 2 4
Loans - - - - - 4
---------- ---------- ---------- ---------- ---------- ----------
421 666 1,240 2 52 58
========== ========== ========== ========== ========== ==========
The balance due from 3Sixty Restaurants Limited at 10 April 2021
was GBP535,000 (11 April 2020 GBP112,000, 26 September 2020
GBP385,000).
The balance due from Fatboy Pub Company at 10 April 2021 was
GBP11,000 (11 April 2020 GBP185,000, 26 September 2020 GBP11,000),
net of a provision of GBP179,000 (11 April 2020 GBPnil, 26
September 2020 GBP179,000).
There have been no other related party transactions during the
period or the previous period requiring disclosure under IAS 24
Related Party Disclosures.
Alternative Performance Measures
The performance of the Group is assessed using a number of
Alternative Performance Measures (APMs).
The Group's results are presented both before and after
separately disclosed items. Adjusted profitability measures are
presented excluding separately disclosed items as we believe this
provides both management and investors with useful additional
information about the Group's performance and supports a more
effective comparison of the Group's trading performance from one
period to the next. Adjusted profitability measures are reconciled
to unadjusted IFRS results on the face of the 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 Group condensed
and amortisation. income statement
------------------------- -------------------------------------------- ------------------
Adjusted EBITDA Annualised EBITDA on a 52 week basis Group condensed
before separately disclosed items income statement
is used to calculate net debt to EBITDA.
------------------------- -------------------------------------------- ------------------
EBITDA before EBITDA before separately disclosed Group condensed
adjusted items items. income statement
------------------------- -------------------------------------------- ------------------
Operating (loss)/profit (Loss)/earnings before interest and Group condensed
tax. income statement
------------------------- -------------------------------------------- ------------------
Adjusted operating Operating (loss)/profit before separately Group condensed
(loss)/profit disclosed items. income statement
------------------------- -------------------------------------------- ------------------
Like-for-like Like-for-like sales growth reflects Group condensed
sales growth the sales performance against the 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 (loss)/earnings (Loss)/earnings per share using profit Note 8
per share (EPS) before separately disclosed items.
------------------------- -------------------------------------------- ------------------
Net debt : Adjusted The multiple of net debt including Note 11
EBITDA lease liabilities, as per the balance
sheet compared against 52 week EBITDA Group condensed
before separately disclosed items income statement
which is a widely used leverage measure
in the industry.
------------------------- -------------------------------------------- ------------------
Return on capital Return generating capital includes
investments made in new sites and
investment in existing assets that
materially changes the guest offer.
Return on investment is measured by
incremental site EBITDA following
investment expressed as a percentage
of return generating capital. Return
on investment is measured for four
years following investment. Measurement
commences three periods following
the opening of the site.
------------------------- -------------------------------------------- ------------------
A. Like-for-like sales
The sales this year compared to the sales in the previous year
of all UK managed sites that were trading in the two periods being
compared, expressed as a percentage. This widely used industry
measure provides better insight into the trading performance than
total revenue which is impacted by acquisitions and disposals. As
like-for-like sales can only be measured when sites are trading the
measure ceases in week 14 the last week of trade before the
enforced closure of the estate in response to Covid-19.
2021 2020 Year-on
14 weeks 14 weeks -year
Source GBPm GBPm %
------------------- --------- --------- --------
Condensed
Reported revenue income statement 219 1,039 (78.9)%
Less non like-for-like
sales and income subsequent
to closure (67) (822) (91.8)%
--------- --------- --------
Like-for-like sales 152 217 (30.1)%
Drink and food sales growth HY 2021
2021 2020 Year-on
14 weeks 14 weeks -year
Source GBPm GBPm %
-------- --------- --------- --------
Drink like-for-like sales 57 95 (40.3)%
Food like-for-like sales 92 116 (20.7)%
Other like-for-like sales 3 6
--------- --------- --------
Total like-for-like sales 152 217 (30.1)%
B. Adjusted operating (loss)/profit
Operating (loss)/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 incidence (see note 4). Excluding these items allows a
better understanding of the trading of the Group.
2021 2020 Year-on
28 weeks 28 weeks -year
Source GBPm GBPm %
------------------- --------- --------- -----------
Condensed
Operating loss income statement (132) (51) (158.8)%
Separately disclosed items Note 4 8 159
Adjusted operating (loss)/profit (124) 108 (214.8)%
Condensed
Reported revenue 28 weeks income statement 219 1,039 (78.9)%
--------- --------- -----------
Adjusted operating margin (56.6%) 10.4% (67.0)ppts
========= ========= ===========
C. Adjusted (loss)/earnings per share
(Loss)/earnings per share using (loss)/profit before separately
disclosed items. Separately disclosed items are those which are
separately identified by virtue of their size or incidence.
Excluding these items allows a better understanding of the trading
of the Group.
2021 2020 Year-on
28 weeks 28 weeks -year
Source GBPm GBPm %
------------------- --------- --------- ---------
Condensed
Loss for the period income statement (165) (107) (54.2)%
Add back separately disclosed Condensed
items income statement 6 138
Adjusted (loss)/profit (159) 31 (612.9)%
Basic weighted average
number of shares Note 8 500 474 5.5%
Adjusted (loss)/earnings
per share (31.8)p 6.5p (589.2)%
========= ========= =========
D. Net Debt: Adjusted EBITDA
The multiple of net debt as per the balance sheet compared
against 52 week EBITDA before separately disclosed items which is a
widely used leverage measure in the industry. From FY 2020 leases
are included in net debt following adoption of IFRS16. Adjusted
EBITDA is used for this measure to prevent distortions in
performance resulting from separately disclosed items.
Due to the Covid-19 closure period we do not have a
representative 52 week EBITDA measure to calculate this metric and
therefore it has not been used in these condensed financial
statements.
E. Return on capital
Return generating capital includes investments made in new sites
and investment in existing assets that materially changes the guest
offer. Return on investment is measured by incremental site EBITDA
following investment expressed as a percentage of return generating
capital.
Due to the enforced closure of sites in response to Covid-19
outbreak we are currently unable to accurately measure return on
capital as all sites are impacted.
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