Mitchells & Butlers MAB Final Results

  Mitchells & Butlers (MAB) - Final Results

RNS Number : 0513S
Mitchells & Butlers PLC
27 November 2012

                           MITCHELLS & BUTLERS PLC

27 November 2012

                              FULL YEAR RESULTS

                  (For the 53 weeks ended 29 September 2012)


                       Positioning for long term growth

Statutory results

- EBITDA: £395m (FY 2011: £387m)
- Basic earnings per share, after property revaluation: 17.1p (FY 2011: 30.7p)

Financial performance

- Total revenue of £1,889m, up 3.3%^a
- Like-for-like sales growth of 2.1%^b, led by food sales
- Recovery in net operating margin in the second half
- Adjusted operating profit of £304m^c, up 1.0%^a after inflationary costs and
  investment into service and amenity
- Adjusted earnings per share of 30.5p^c, up 6.4%^a
- Net cash flow of £32m^d after expansionary capital of £55m
- Net debt of £1.8bn representing 4.5 times EBITDA^e
- Like-for-like sales broadly flat in the first 8 weeks of FY 2013

Operational performance

- Business transformation programme underway to improve focus on the guest in
  all areas
- Central support functions and infrastructure reorganised with £6m saving
  delivered in FY 2012
- Increased investment in training and service; new training academy opened
- Guest satisfaction and retail employee engagement both improved 5 percentage
- Building on enhanced technology platform to further improve the customer
  experience with more targeted marketing
- Award-winning brands and infrastructure projects: Harvester and Toby Carvery
  top Technomic satisfaction poll; Retail Systems Award for Best Use of
  Technology; Alex wins Consumer Focus award in Germany; M&B awarded Carbon
  Trust Standard for the second time.

Property Estate

- £37m reduction in property valuation, a 1% decrease excluding acquisitions
  and conversions
- 47 new site openings and 10 conversions in the period with expansionary
  capex of £55m
- EBITDA returns of 17% achieved on expansionary capex invested over the last
  two years

Bob Ivell, Non-executive Chairman, commented:

"This year we have initiated a significant cultural change programme focused
on streamlining internal processes and placing the guest at the heart of
everything we do. We have restructured the way we support our operations
teams, reduced our central costs and increased the accountability of our
senior executives for their brands. I am extremely pleased that we have
delivered a resilient financial performance, during a period of such cultural
and organisational change.

Since becoming Chairman my foremost priority has been to recruit the right
person to lead the business as Chief Executive. Having appointed Alistair, my
focus will now shift to enhancing the balance, skills and compliance of the
Board through the selection of appropriately qualified independent
Non-Executive Directors."

Alistair Darby, Chief Executive, commented:

"I am delighted to be leading a company with great people and popular branded
pubs, bars and restaurants. M&B is well positioned to take maximum advantage
of our evolving industry and we have the right strategy in place. I look
forward to continuing the business transformation to deliver long term
earnings growth and shareholder returns."


a - Growth rates are quoted on a 52 week vs 52 week basis to exclude the
benefit of an extra trading week in FY 2012.

b - Like-for-like sales growth is measured over the 52 weeks to 22 September
2012 and includes the sales performance against the comparable period in the
prior year of all UK managed pubs that were trading in the two periods being
compared. For the 52 weeks to 22 September 2012, 93% of the UK managed estate
is included in this measure.

c - Adjusted items are quoted before exceptional items and other adjustments
as noted in the Group Income Statement.

d - Net cash flow is detailed within the Financial Review

e - Adjusted EBITDA for the 52 weeks to 22 September 2012.

There will be a presentation for analysts and investors at 9.30am at Nomura
International plc, 1 Angel Lane, London, EC4R 3AB. A live webcast of the
presentation will be available at The conference will also be
accessible by phone: + 44 20 3059 8125 and quote "Mitchells & Butlers". The
replay will be available until 11th December 2012on + 44 121 260 4861 replay
access pin 6565693.

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

For further information, please contact:

Tim Jones - Finance Director                           +44 (0)121 498 6514
Stephen Hopson - Head of Investor Relations +44 (0)121 498 4895
James Murgatroyd (RLM Finsbury)                   +44 (0)207 251 3801

Notes for editors:

- Mitchells & Butlers is the UK's largest operator of managed restaurants and
  pubs. Its portfolio of brands and formats includes Harvester, Toby Carvery,
  Vintage Inns, Premium Country Dining Group, Crown Carveries, Village Pub &
  Kitchen, Sizzling Pubs, All Bar One, Browns, Miller & Carter, Metro
  Professionals, Alex, Nicholson's, O'Neill's and Ember Inns. Further details
  are available at and supporting photography can be downloaded
- Mitchells & Butlers serves around 130 million meals and 420 million drinks
  each year and is one of the largest operators within the UK's £70 billion
  eating and drinking out market.

                               BUSINESS REVIEW

Mitchells & Butlers is the UK's largest operator of managed restaurants and
pubs, with a leading portfolio of well-recognised brands and a high quality
freehold estate. We focus on long-term growth in the eating-out market.
Having repositioned the business to deliver a 40% increase in food sales over
the last five years, around three-quarters of our turnover is generated from
the guests who eat out in our restaurants and pubs.

This year, we have delivered a resilient operating performance in challenging
economic conditions whilst initiating a major change programme to put guest
service at the heart of our business.

Operating performance

FY 2012 was a 53 week reporting period. To provide a more appropriate
comparison to the prior year, results have been restated on a 52 week basis to
exclude the last week of the year. Unless otherwise stated, all figures in
this Business Review are given on a 52 week basis. A comparative Income
Statement is presented below:

                          FY 2012 £m FY 2012 £m FY 2011 £m   Variance
                          (53 weeks) (52 weeks) (52 weeks) (52 weeks)
Revenue                        1,889      1,855      1,796       3.3%
Adjusted EBITDA                  415        407        404       0.7%
Adjusted operating profit        304        297        294       1.0%
Adjusted PBT                     166        162        156       3.8%
Adjusted EPS                   30.5p      29.8p      28.0p       6.4%

"Adjusted" figures refer to results before exceptional items and other
adjustments as noted in the Group Income Statement.

Total revenue growth of 3.3% was driven by like-for-like sales growth of
2.1%. Food sales continue to drive overall sales growth demonstrating the
success of our focus on the eating-out market. The brands in the middle to
upper end of our spectrum of spend per head have driven this revenue growth.

Like-for-like  FY 2011   FY 2012  FY 2013
sales growth  Week 1-52 Week 1-52 Week 1-8
Total           2.6%      2.1%     -0.1%
Food            4.8%      2.9%      1.5%
Drink           1.0%      1.4%     -1.9%

Like-for-like sales in the first week of the new financial year were down as a
result of unseasonably warm weather last year; since then, sales have
increased by around 1%.

Adjusted operating profit was 1.0% higher than last year at £297m with
operating margins slightly lower than last year at 16.0%.

Business change programme

We have initiated a major business transformation programme which is
fundamentally changing the way we work to improve the focus on our guests, our
people, our practices and our profits. This year, we have taken some
important steps towards achieving our vision: 'People love to eat and drink
with us'.

Organisational structure: At the half year we reported that we had simplified
our central support functions to increase the focus on our guests; to clarify
accountabilities and responsibilities; and to improve the pace of decision
making through reduced bureaucracy. We appointed Brand Operations Directors
with increased accountability for the performance of their brands; Marketing
and HR now sit within their teams. We removed around 90 roles from our
support functions and we have launched a performance dashboard to align
objectives throughout the organisation.

Supporting outstanding customer service: The core of the change programme is
our firmly held belief that we need to place customer service at the heart of
our organisation. We have already made good progress on this journey which we
will build on over the next few years. We have opened a new Training Academy
at our Retail Support Centre; established a Talent Development team to ensure
we develop the right people across the business; and increased investment in
outlet level service, sales and kitchen training. As a result of this
investment, staff engagement has improved 5 percentage points among our retail
teams; guest satisfaction scores have improved 5 percentage points; and 8%
more of our guests than last year would recommend us to their friends and
families as a great place to eat and drink.

We are delighted that our brands and support teams are being recognised
externally for their achievements. This year, Harvester and Toby Carvery
topped a Technomic poll measuring guest satisfaction; Alex collected a
national Consumer Focus award in Germany; Vintage Inns won a National
Springboard award for excellence; and Harvester, All Bar One, Sizzling Pubs
and Premium Country Dining all collected awards for their food development.

Ways of working: To deliver outstanding service we need to enable our
restaurant and pub managers to become leaders and coaches rather than
implementers and administrators. Our ways of working trials are aimed at
giving our people the skills and motivation to deliver outstanding customer
service. These trials have now progressed from nine businesses to over 300.
This stage is the final element of the trial and, subject to successful
completion, full roll-out will begin in 2013.

Innovation: We will use our improved technology infrastructure to deliver
better guest experiences and offer more targeted marketing at a lower annual
cost. In the past year, we have rolled out free wi-fi across all of our
managed businesses in the UK and are currently launching gift cards for all of
our brands. Online bookings have increased to 1.5m from 700k in FY 2011 and
visitors to our websites are up by one third. We were the first national
retailer to launch a voucher in Apple's Passbook app and we continue to
innovate in social media with more targeted offers to our guests.

Further developments will follow using this platform in the future, both in
increasing the efficiency of our central support functions and in further
enhancing guest experiences. During the year, the successful launch of our
new IT infrastructure was recognised by a Retail Systems Award for Best Use of
Technology in the sector.

Brand roll-out

This year, we have continued the roll-out of our brands across both freehold
and leasehold sites. We have opened 47 new sites, primarily Harvester, Miller
& Carter, Browns and Toby Carvery, creating 1,500 new jobs. We have also
converted 10 sites, largely completing the current conversion programme. 38
of the new openings were leasehold, of which 32 were located on leisure or
retail parks. Overall EBITDA returns on expansionary capital invested over
the past two years were 17%.

We are focused on increasing the level of returns on expansionary capital
investment whilst continuing to grow the estate. We have developed rigorous
site criteria and 'target town' models for leisure and retail parks, using the
lessons we have learned from our initial expansion into this area.


We expect the economic environment to remain challenging. Further
inflationary and regulatory cost pressures will impact the business in the new
financial year, with ongoing alcohol duty increases, further food price
inflation and other cost increases, coupled with continued tightness in
consumer incomes. We will maintain our focused and disciplined investment in
service and amenity in our estate. Overall, we believe our strong brands and
assets together with our business transformation programme leave the Company
well positioned to grow further in the year ahead.

                               FINANCIAL REVIEW

FY 2012 was a 53 week period. A restated 52 week summary Income Statement is
detailed in the Business Review. With the exception of the section describing
the performance of the Retained Estate, all figures in this Financial Review
are stated on a 53 week basis. To provide a meaningful comparison, all
year-on-year growth rates are on a 52 week basis.

Total revenues of £1,889m were up 3.3%, driven by like-for-like growth as well
as openings of new restaurants and pubs. Adjusted operating profit of £304m
was up 1.0% with operating margins declining slightly as a result of increased
investment into outlet level service and amenity as well as inflationary and
regulatory cost pressures.

After net interest costs of £138m and increased costs of exceptional items and
other adjustments (detailed below), profits before tax declined to £83m (2011:
£132m), due primarily to movements in the valuation of the property portfolio.

The pre-exceptional tax charge of £41m is an effective rate of 25% of profit
before tax, a decrease from 27% in FY 2011, primarily as a result of the
reduction in the standard rate of UK corporation tax.

Basic earnings per share reduced to 17.1p (2011: 30.7p).

At the end of the year, the business comprised 1,576 managed businesses in the
UK and Germany and 62 leased or franchised businesses.

Retained Estate

In the previous financial year, the Group disposed of 333 non-core pubs for
£373m which had contributed £34m of sales and £6m of operating profit in FY

Excluding this, the Retained Estate delivered revenue growth of 5.3% and
adjusted operating profit growth of 3.1% on a 52 week basis.

                          FY 2012 £m FY 2011 £m   % growth
                          (52 weeks) (52 weeks) (52 weeks)
Revenue                        1,855      1,762       5.3%
Adjusted operating profit        297        288       3.1%
Adjusted operating margin      16.0%      16.3%      -0.3%

Total sales growth of 5.3% was driven by food sales growth of 8.5%, with drink
sales growth of 3.7%. Food sales have now increased to 50% of total sales as
the business continues to focus on the long term growth in this market.

Excluding the impact of new site openings, like-for-like sales growth of 2.1%
was driven by growth in like-for-like food sales of 2.9%, with like-for-like
drink sales up 1.4%. Drink volumes continue to decline, partly as a result of
increases in alcohol duty which have led to higher drink prices across the
industry. Food main meal volumes were also slightly lower than last year.
Guests continue to prioritise special occasions, with sales and volumes
significantly up on many of the key events throughout the year.

Over the 52 weeks, operating costs were higher than last year due to
inflationary and regulatory increases in alcohol duty, the national minimum
wage, the Carbon Reduction Charge, business rates, rent, energy and food
costs, as well as investment into customer facing areas. Outlet employment
costs as a percentage of sales have increased by 0.5 percentage points to
25.3% as a result of the impact of new site openings, the Company's continued
move towards food sales, which require a higher degree of service, and as a
result of increased investment in enhancing the guest experience, staff
development and training.

A number of measures have partially offset these cost pressures.
Simplification of central support functions and infrastructure during the year
resulted in an annualised saving of £10m, of which £6m impacted FY 2012, and
there has been a reduction in performance-related payments.

As a result, the Retained Estate delivered adjusted operating profit of £297m
on a 52 week basis, 3.1% higher than last year. The adjusted operating margin
was 16.0%, down 0.3ppts over the full year, representing a recovery from the
first half deficit of 0.7ppts.

Internal rent

A regime of internal rents is in place to enable greater internal transparency
around the performance of freehold and leasehold properties and external
transparency concerning the performance of the operating and property
functions. The operating performance is monitored on a regular basis through
a system of profit reviews through all levels of the Company. Estate
management is primarily monitored through the Portfolio Development
Committee. Further details are given in note 2 of the accounts.

53 weeks      Operating Property Total
                     £m       £m    £m
Turnover           1889           1889
EBITDAR             467            467
External Rent       -52            -52
Internal Rent      -195      195     -
EBITDA              220      195   415
EBITDA %          11.6%          22.0%

Exceptional items and other adjustments

Total exceptional items and other adjustments reduced profit before tax by
£83m and consisted of a £11m net pensions finance charge; a £47m charge
relating to the revaluation of the property portfolio and short leasehold
impairment review; a £5m impairment of the goodwill relating to the
acquisition of Ha Ha Bar & Grill Ltd.; a £6m charge for professional fees and
other costs relating to the approach from Piedmont Inc in September 2011 and
£14m of costs relating to the internal restructuring and IT reorganisation
which is generating £10m of annualised savings.

Cash flow

                                                   FY 2012 £m FY 2011 £m
                                                   (53 weeks) (52 weeks)
EBITDA before exceptional items                           415        404
Working capital movement/non-cash items                   -28        -28
Pension deficit contributions                             -40        -40
Cash flow from operations before exceptional items        347        336
Maintenance & infrastructure capex                       -92        -90
Interest                                                 -129       -134
Tax                                                       -25        -20
Share capital                                               -          2
Free Cash Flow before exceptional items                   101         94
Expansionary capex                                        -55        -82
Disposals                                                   3        424
Operating exceptionals                                    -17          -
Net cash flow                                              32        436

EBITDA of £415m was generated by the business over the 53 weeks. There was a
working capital outflow of £28m, largely as a result of additional payments
made in the 53^rd week. Pension deficit contributions of £40m were made, in
line with the deficit recovery plan agreed with the Trustees following the
2010 triennial review of the schemes.

Cash flow from operations before exceptional items was £347m. This was
reduced by £92m of maintenance capital, £129m of net interest and £25m of cash
tax to produce £101m of free cash flow before exceptional items, slightly
higher than last year. Expansionary capital was lower than last year at £55m,
a small number of disposals generated £3m of cash, and there were £17m of cash
operating exceptional items, resulting in £32m of net cash generation in the

Net debt was reduced to £1.8bn, representing 4.5 times the 52 week EBITDA (FY
2011: 4.7 times Retained Estate EBITDA). Net debt within the securitisation
was £2.0bn and cash held outside the securitisation was £0.2bn.

Capital expenditure

Total capital expenditure in the year was £147m, with £83m spent maintaining
and enhancing the high level of amenity in the Group's restaurants and pubs,
£9m on infrastructure projects, mainly in energy efficiency and IT, and £55m
on new site openings.

EBITDA returns on expansionary capital invested over the last two years were
17%. Within this, returns on single site leasehold acquisitions remained high
at 25% and this area will remain the focus of our expansion going forward.
Returns on freehold acquisitions were 13%, on packaged lease acquisitions were
14% and on the residual conversion programme were 16%.

£5m of the infrastructure capital was in the area of energy efficiency
projects, generating ROIs of over 50%. The business was awarded the Carbon
Trust Standard for the second time this year, making Mitchells & Butlers one
of fewer than one hundred companies globally to have achieved this.


The Board is mindful of the attraction of the resumption of dividend payments
and will continue to monitor net cash flow generation, particularly in the
light of the forthcoming triennial pensions valuation as at March 2013, before
taking a decision on timing and quantum.

Balance sheet

A Red Book valuation of the freehold and long leasehold estate has been
completed in conjunction with the property valuers CBRE. In addition the
business has conducted an impairment review on short leasehold and unlicensed
properties. The overall decrease of £37m is reflected as a £47m charge in the
income statement and a £10m increase in the revaluation reserve.

The pre-tax pensions deficit, as measured under IAS19, increased to £88m in
the year, primarily as a result of a reduction in AA-rated corporate bond
yields to 4.3% (FY 2011: 5.2%) increasing the present value of scheme
liabilities to £1,698m (FY 2011: £1,509m). Assets increased to £1,610m (FY
2011: £1,472m) through strong investment performance and £40m of additional
Group contributions. This deficit is sensitive to a number of key assumptions
as shown in the table below:

Assumption     Movement Impact on IAS 19 deficit
Discount rate   +0.1%            -£32m
Inflation rate  +0.1%            +£30m

The next triennial actuarial valuation of the schemes is due as at March
2013. The 2010 review resulted in an agreed valuation deficit of £400m.
Given the current low levels of real gilt yields, the deficit is expected to
have increased since that date.

Directors'statement on the annual report

The responsibility statement below has been prepared in connection with the
Group's full Annual Report for the 53 weeks ended 29 September 2012. Certain
parts thereof are not included within this announcement.

Responsibility statement

We confirm to the best of our knowledge:

- The financial statements, prepared in accordance with IFRSs as adopted by
the European Union, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group and the undertakings
included in the consolidation taken as a whole; and

- The Business Review, Financial Review and Risks and Uncertainties sections,
which are incorporated into the directors' report, include a fair review of
the development and performance of the business and the position of the
company and the undertakings included in the consolidation taken as a whole
together with a description of the principal risks and uncertainties they

This responsibility statement was approved by the Board of Directors on 26
November 2012 and is signed on its behalf by Tim Jones, Finance Director.

Group income statement
For the 53 weeks ended 29 September 2012

   2012      2011
 53 weeks  52 weeks

                      Before                               Before
                 exceptional    Exceptional           exceptional    Exceptional
                       items      items and                 items      items and
                   and other          other             and other          other
                 adjustments  adjustments^a    Total  adjustments  adjustments^a    Total
                          £m             £m       £m           £m             £m       £m
Revenue               1,889             -   1,889       1,796             -  1,796
Operating costs
amortisation and
movements in the
valuation of the
portfolio            (1,474)           (20)  (1,494)      (1,392)           (13)  (1,405)
arising on
disposals                 -             -       -           -            (4)      (4)
EBITDA^b                415           (20)     395         404           (17)    387
movements in the
valuation of the
portfolio and
impairment of
goodwill               (111)           (52)    (163)        (110)            (2)    (112)
Operating               304           (72)      232         294           (19)    275
Finance costs          (140)             -    (140)        (141)             -    (141)
Finance revenue           2             -       2           3             -      3
Net finance
charge from
pensions                  -           (11)     (11)           -            (5)      (5)
before tax              166           (83)      83         156           (24)    132
Tax                     (41)            28     (13)         (42)            35      (7)
Profit for the
period                  125           (55)      70         114            11    125
Earnings per
ordinary share
     Basic             30.5p                   17.1p        28.0p                   30.7p
     Diluted           30.2p                   17.0p        27.7p                   30.5p

a. Exceptional items and other adjustments (refer to note 3).
b. Earnings before interest, tax, depreciation, amortisation and movements in
   the valuation of the property portfolio.

All results relate to continuing operations.

Group statement of comprehensive income

For the 53 weeks ended 29 September 2012

                                                                2012      2011
                                                            53 weeks  52 weeks
                                                                  £m        £m
Profit for the period                                            70      125
Other comprehensive (expense)/income:
Unrealised gain on revaluation of the property portfolio         10       73
Actuarial (losses)/gains on defined benefit pension schemes     (81)       84
Exchange differences on translation of foreign operations        (1)        -
Cash flow hedges:
- Losses arising during the period                             (103)     (118)
- Reclassification adjustments for losses included in
profit or loss                                                   54       37
Other comprehensive (expense)/income                           (121)       76
Tax credit/(charge) relating to items of other                   49       (9)
comprehensive (expense)/income
Other comprehensive (expense)/income after tax                  (72)       67
Total comprehensive (expense)/income for the period              (2)      192

Group balance sheet
29 September 2012

                                        2012     2011
                                          £m       £m
Goodwill and other intangible assets      5      10
Property, plant and equipment         3,848   3,848
Lease premiums                            1       6
Deferred tax asset                      107      83
Derivative financial instruments          4      18
Total non-current assets              3,965   3,965
Inventories                              26      25
Trade and other receivables              56      70
Other cash deposits                      25      50
Cash and cash equivalents               311     306
Total current assets                    418     451
Total assets                         4,383   4,416
Current tax liabilities                 (28)     (17)
Trade and other payables               (265)    (298)
Borrowings                              (53)     (49)
Derivative financial instruments        (45)     (44)
Total current liabilities              (391)    (408)
Pension liabilities                     (88)     (37)
Other payables                          (12)     (12)
Borrowings                           (2,133)  (2,197)
Derivative financial instruments       (280)    (235)
Deferred tax liabilities               (382)    (429)
Long-term provisions                     (9)      (6)
Total non-current liabilities        (2,904)  (2,916)
Total liabilities                    (3,295)  (3,324)
Net assets                            1,088   1,092
Called up share capital                  35      35
Share premium account                    21      21
Capital redemption reserve                3       3
Revaluation reserve                     793     768
Own shares held                          (3)      (5)
Hedging reserve                        (257)    (214)
Translation reserve                      11      12
Retained earnings                       485     472
Total equity                          1,088   1,092

Group statement of changes in equity
For the 53 weeks ended 29 September 2012

                  Called    Share     Capital                  Own
                      up  premium  redemption  Revaluation  shares  Hedging  Translation  Retained   Total
                 capital  account     reserve      reserve    held  reserve      reserve  earnings  equity
                      £m       £m          £m           £m      £m       £m           £m        £m      £m
At 25 September
2010                35      20          3         747     (8)    (149)          12     234    894
Profit for the
period               -       -          -           -      -       -           -     125    125
income/(expense)     -       -          -          89      -     (65)           -      43     67
income/(expense)     -       -          -          89      -     (65)           -     168    192
Share capital
issued               -       1          -           -      -       -           -       -      1
Release of own
shares               -       -          -           -      3       -           -      (2)      1
Credit in
respect of
payments             -       -          -           -      -       -           -       6      6
reserve realised
on disposal of
properties           -       -          -         (68)      -       -           -      68      -
Tax on
payments             -       -          -           -      -       -           -      (2)     (2)
At 24 September
2011                35      21          3         768     (5)    (214)          12     472  1,092
Profit for the
period               -       -          -           -      -       -           -      70     70
income/(expense)     -       -          -           25      -     (43)          (1)      (53)    (72)
income/(expense)     -       -          -           25      -     (43)          (1)      17     (2)
Purchase of own
shares               -                   -           -     (1)       -           -       -     (1)
Release of own
shares               -       -          -           -      3       -           -       (2)      1
Credit in
respect of
payments             -       -          -           -      -       -           -       (1)     (1)
Tax on
payments             -       -          -           -      -       -           -       (1)     (1)
At 29 September
2012                 35      21          3          793     (3)    (257)          11     485  1,088

Group cash flow statement
For the 53 weeks ended 29 September 2012

                                                                2012      2011
                                                            53 weeks  52 weeks
                                                                  £m        £m
Cash flow from operations                                       347      336
Cash flow from operating exceptional items                      (17)        -
Interest paid                                                  (131)     (137)
Interest received                                                 2        3
Tax paid                                                        (25)      (20)
Net cash from operating activities                              176      182
Investing activities
Acquisition of Ha Ha Bar & Grill Limited                          -      (20)
Acquisition of Intertain (Dining) Limited                         -       (4)
Purchases of property, plant and equipment                     (147)     (144)
Purchases of intangibles (computer software)                      -       (4)
Proceeds from sale of property, plant and equipment               3       28
Proceeds from disposal of assets held for sale                    -      396
Transfers from/(to) other cash deposits                          25      (50)
Net cash (used in) / from investing activities                 (119)      202
Financing activities
Issue of ordinary share capital                                   -        1
Purchase of own shares                                           (1)        -
Proceeds on release of own shares                                 1        1
Repayment of principal in respect of securitised debt           (52)      (49)
Repayment of principal in respect of other borrowings             -     (259)
Net cash used in financing activities                           (52)     (306)
Net increase in cash and cash equivalents                         5       78
Cash and cash equivalents at the beginning of the financial     306      228
Cash and cash equivalents at the end of the financial           311      306

Notes to the preliminary financial statements

For the 53 weeks ended 29 September 2012

1. General information

Mitchells & Butlers plc is a company incorporated in the United Kingdom under
the Companies Act.

Mitchells & Butlers plc, along with its subsidiaries, (together 'the Group')
is required to prepare its consolidated financial statements in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the
European Union and in accordance with the Companies Act 2006. The information
contained within this release is based on the Group's consolidated financial

The preliminary financial statements include the results of Mitchells &
Butlers plc and all its subsidiaries for the 53 week period ended 29 September
2012. The comparative period is for the 52 week period ended 24 September
2011. The respective balance sheets have been drawn up as at 29 September 2012
and 24 September 2011.

The preliminary financial statements have been prepared on the historical cost
basis, except for the revaluation of properties and financial instruments.

Exchange rates

The results of overseas operations have been translated into sterling at the
weighted average euro rate of exchange for the financial period of £1 = €1.23
(2011 £1 = €1.15), where this is a reasonable approximation to the rate at the
dates of the transactions. Euro and US denominated assets and liabilities
have been translated at the relevant rate of exchange at the balance sheet
date of £1 = €1.26 (2011 £1 = €1.15) and £1 = $1.61 (2011 £1 = $1.55)

Going concern

The Group's forecasts and projections take account of anticipated trading
performance and show that the Group should be able to operate within the level
of its current borrowing facilities.

The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. Thus they
continue to adopt the going concern basis of accounting in preparing the
financial statements.

2. Segmental analysis

IFRS 8 Operating Segments requires operating segments to be based on the
Group's internal reporting to its Chief Operating Decision Maker (CODM). The
CODM is regarded as the Chief Executive together with other Board members. The
CODM uses profit before interest and exceptional items (operating profit
pre-exceptionals) as the key measure of the segment results. Group assets are
reviewed as part of this process but are not presented on a segment basis.

The retail operating business operates all of the Group's retail operating
units and generates all of its external revenue. The property business holds
the Group's freehold and long leasehold property portfolio and derives all of
its income from the internal rent levied against the Group's retail operating
units. The internal rent charge is eliminated at the total Group level.

                              Retail Operating       Property
                                  Business           Business       Total
                                 2012     2011      2012  2011    2012    2011

                             53 weeks 52 weeks        53    52      53      52
                                                   weeks weeks   weeks   weeks
                                   £m       £m        £m    £m      £m      £m
Retained business
Revenue                        1,889   1,762        -    -  1,889  1,762
EBITDA pre-exceptionals          220     208   195 ^c 190^c    415    398
Operating profit
pre-exceptionals                 123     110      181  178    304    288
Other operations^a
Revenue                                                             -     34
EBITDA pre-exceptionals                                             -      6
Operating profit
pre-exceptionals                                                    -      6
Total business
Revenue^b                                                       1,889  1,796
EBITDA pre-exceptionals                                           415    404
Operating profit
pre-exceptionals                                                  304    294

Exceptional items and other adjustments^d  (72)   (19)
Operating profit                           232  275
Net finance costs                         (149)  (143)
Profit before tax                           83   132
Tax expense                                (13)   (7)
Profit for the financial period             70   125

a. Other operations for the 52 weeks ended 24 September 2011 primarily related
   to the pre-disposal trading in relation to sites sold to Stonegate in
   November 2010. No analysis is provided for these sites in relation to
   Operating/Property business as this information was not reviewed by the
b. Revenue includes other income of £nil (2011 £6m) in respect of transitional
   services arrangements and £7m (2011 £13m) in relation to franchise
c. The EBITDA pre-exceptionals of the property business relates entirely to
   rental income received from the retail operating business.
d. Refer to note 3.


3. Exceptional items and other adjustments

                                                                2012      2011
                                                            53 weeks  52 weeks
                                                      Notes       £m        £m
Operating exceptional items
Exceptional pension charge                              a         -      (13)
Bid defence                                             b        (6)        -
Business reorganisation                                 c        (7)        -
IT systems reorganisation                               c        (7)        -
Net loss arising on other exceptional items                     (20)      (13)
Net (loss)/profit arising on property disposals                   -       (4)
Movement in the valuation of the property portfolio:
- (Impairment)/reversal arising from the revaluation    d       (35)        8
- Other impairment                                      d       (12)      (10)
- Impairment of goodwill                                e        (5)        -
Net movement in the valuation of the property                   (52)       (2)
Total operating exceptional items                               (72)      (19)
Other adjustments
Net pensions finance charge (note 10)                   f       (11)       (5)
Total exceptional items and other adjustments before            (83)      (24)
Tax credit relating to above items                               18       25
Exceptional tax charge in respect of prior years        g        (1)       (2)
Tax credit in respect of change in tax legislation      h        11       12
Total tax credit                                                 28       35
Total exceptional items and other adjustments                   (55)       11
(charge)/credit after tax

a. Relates to a curtailment charge in respect of the closure of the defined
   benefit pension plans to future accrual which occurred during the prior
b. Relates to legal and professional fees incurred in the defence of a
   possible offer made by Piedmont Inc. in September 2011 to purchase all of
   the remaining Company shares. The possible offer was withdrawn on 13
   October 2011.
c. This relates to the costs of a reorganisation announced by the Company on
   22 November 2011. Costs are primarily redundancy and severance payments,
   fees in relation to professional advisors and one-off costs connected with
   the transfer of the IT data centre.
d. Movements in the valuation of the property portfolio includes £35m of
   impairment (2011 £8m credit) arising from the Group's revaluation of its
   pub estate, £12m (2011 £10m) of impairment of short leasehold and
   unlicensed properties where their carrying values exceed their recoverable
e. Goodwill impairment following testing of the value in relation to Ha Ha Bar
   & Grill Limited.
f. The net pensions finance charge is a non-cash adjustment which is excluded
   from adjusted profit.
g. The current year charge is an adjustment in respect of prior year disposals
   and prior year derivative planning. The 2011 charge is an adjustment in
   respect of prior year disposals.
h. A deferred tax credit has been recognised in the current period following
   the enactment of legislation on 17 July 2012 which lowered the UK standard
   rate of corporation tax from 25% to 23% with effect from 1 April 2013. The
   prior year deferred tax credit relates to the enactment of legislation on
   19 July 2011 which lowered the UK standard rate of corporation tax from 27%
   to 25% with effect from 1 April 2012.

4. Finance costs and revenue

                                                         2012      2011
                                                     53 weeks  52 weeks
                                                           £m        £m
Finance costs
Securitised and other debt - loans and receivables^a    (140)     (141)
Finance revenue
Interest receivable - cash                                 2        3
Net finance charge in respect of pensions                (11)       (5)

a. Includes £6m (FY 2011: nil) in relation to accrued backdated interest on
   outstanding tax items.

5. Taxation

                                        2012      2011
                                    53 weeks  52 weeks
                                          £m        £m
Tax charged in the income statement
Current tax:

- UK corporation tax                              28  32
- Amounts under/(over) provided in previous years  8  (3)

Total current tax 36  29
Deferred tax:

- Origination and reversal of temporary differences  (5)  (13)
- Adjustments in respect of prior years              (7)    3
- Change in tax rate                                (11)  (12)

Total deferred tax                        (23)  (22)
Total tax charged in the income statement  13    7

                                                                2012      2011
                                                            53 weeks  52 weeks
                                                                  £m        £m
Tax relating to items recognised in equity
Unrealised gains due to revaluations - revaluation reserve       15       17
Unrealised gains/(losses) due to revaluations - retained         12      (16)
Actuarial gains/(losses) on pension schemes                      16      (25)
Cash flow hedges:
- Losses arising during the period                              24       30
- Reclassification adjustments for losses included in
profit or loss                                                  (18)      (15)
Tax credit/(charge) on items of other comprehensive              49       (9)
Tax on share-based payments recognised directly in equity        (1)       (2)
Total tax credit/(charge) on items recognised in equity          48      (11)

6. Earnings per share

Basic earnings per share (EPS) has been calculated by dividing the profit or
loss for the financial period by the weighted average number of ordinary
shares in issue during the period, excluding own shares held in treasury and
by employee share trusts.

For diluted earnings per share, the weighted average number of ordinary shares
is adjusted to assume conversion of all dilutive potential ordinary shares.

Adjusted earnings per ordinary share amounts are presented before exceptional
items and other adjustments and the net pensions finance charge (see note 3)
in order to allow a better understanding of the underlying trading performance
of the Group.

                                                              Basic    Diluted
                                                                EPS        EPS
                                                          pence per  pence per
                                                  Profit   ordinary   ordinary
                                                      £m      share      share
53 weeks ended 29 September 2012:
Profit/EPS                                           70      17.1p     17.0p
Exceptional items and other adjustments, net of      46      11.2p     11.1p
Net pensions finance charge, net of tax               9       2.2p      2.1p
Adjusted profit/EPS                                 125      30.5p     30.2p
52 weeks ended 24 September 2011:
Profit/EPS                                          125      30.7p      30.5p
Exceptional items and other adjustments, net of     (15)     (3.7)p     (3.7)p
Net pensions finance charge, net of tax               4       1.0p       0.9p
Adjusted profit/EPS                                 114      28.0p    27.7p

The weighted average number of ordinary shares used in the calculations above
are as follows:

                                                  2012      2011
                                              53 weeks  52 weeks
                                                     m         m
For basic EPS calculations                         409      407
Effect of dilutive potential ordinary shares:
- Contingently issuable shares                   2        2
- Other share options                            1        2
For diluted EPS calculations                       412      411

7. Cash flow from operations

                                                                2012      2011
                                                            53 weeks  52 weeks
                                                                  £m        £m
Operating profit                                                 232      275
Add back: operating exceptional items                             72       19
Operating profit before exceptional items                       304      294
Add back:
Depreciation of property, plant and equipment                   111      108
Amortisation of intangibles (computer software)                   -        2
Cost charged in respect of share-based payments                   -        6
Defined benefit pension cost less regular cash                    -       (1)
Operating cash flow before exceptional items, movements in
working capital and additional pension contributions            415      409
Movements in working capital and pension contributions:
Increase in inventories                                          (1)        -
(Increase)/decrease in trade and other receivables               (9)        3
Decrease in trade and other payables                            (21)      (36)
Increase in provisions                                            3        -
Additional pension contributions                                (40)      (40)
Cash flow from operations                                       347      336

8. Analysis of net debt

                                            2012     2011
                                              £m       £m
Cash and cash equivalents (see below)       311     306
Other cash deposits (see below)              25      50
Securitised debt (see below)             (2,186)  (2,246)
Derivatives hedging balance sheet debt^a      9      20
                                         (1,841)  (1,870)

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

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, including
overnight deposits, of £286m (2011 £259m) and cash deposits with an original
maturity of three months or less of £25m (2011 £47m).

Other cash deposits

Other cash deposits at 29 September 2012 comprise £25m (2011 £50m) of cash at
bank with an original maturity of three months or more.

9. Movement in net debt

                                                                2012      2011
                                                            53 weeks  52 weeks
                                                                  £m        £m
Net increase in cash and cash equivalents                         5       78
Add back cash flows in respect of other components of net
Transfers (from)/to other cash deposits                         (25)       50
Repayment of principal in respect of securitised debt            52       49
Repayment of principal in respect of other borrowings             -      259
Decrease in net debt arising from cash flows                     32      436
Movement in capitalised debt issue costs net of accrued          (3)       (4)
Decrease in net debt                                            29      432
Opening net debt                                             (1,870)   (2,302)
Closing net debt                                             (1,841)   (1,870)

10. Pensions

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

Group income statement           2012                                     2011
                             53 weeks                                 52 weeks
                                   £m                                       £m
Operating profit:
- Current service cost             -                                      (4)
(defined benefit plans)
- Current service cost            (5)                                      (4)
(defined contribution plans)
Total current service cost        (5)                                      (8)
Exceptional pension charge         -                                     (13)
Charge to operating profit        (5)                                     (21)
Finance income:                       The story has been truncated,
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