2016 + Annual Report & Accounts Mitchells & Butlers plc Annual Report and Accounts 2016 Financial highlights Revenue (£m) Strategic report 2 Chairman’s statement 4 Mitchells & Butlers at a glance 2,086m 6 Chief Executive’s statement 2016: 2,086 8 Our markets 10 Our business model 2015: 2,101 12 Our strategy 2014: 1,970 14 Our strategy in action 2013: 1,895 18 Key performance indicators 2012**: 1,855 20 Risks and uncertainties 25 Business review 1,600 1,700 1,800 1,900 2,000 2,100 2,200 28 Corporate social responsibility 32 Financial review Adjusted operating profit* (£m) Governance 318m 37 Chairman’s introduction to Governance 38 Board of Directors 2016: 318 40 Directors’ report 2015: 328 46 Directors’ responsibilities statement 2014: 313 47 Corporate governance statement 54 Audit Committee report 2013: 310 58 Report on Directors’ remuneration 2012**: 297 250 270 290 310 330 Financial statements 83 Independent auditor’s report to the members of Adjusted earnings per share* (pence) Mitchells & Butlers plc 90 Group income statement 91 Group statement of comprehensive income 34.9p 92 Group balance sheet 2016: 34.9 93 Group statement of changes in equity 2015: 35.7 94 Group cash flow statement 95 Notes to the financial statements 2014: 32.6 129 Five year review 2013: 32.2 130 Mitchells & Butlers plc Company financial statements 2012**: 29.8 132 Notes to the Mitchells & Butlers plc Company financial statements 26 28 30 32 34 36 Shareholder information * Adjusted figures refer to results before separately disclosed items as detailed in note 2.2 of the accounts. 139 Shareholder information ** FY 2012 was a 53 week year, figures are therefore restated on a 52 week basis. 139 Glossary Strategic report 2 to Welcome 35 Governance 36 to + 81 Mitchells & Butlers is a leading operator of statements Financial managed restaurants and pubs. Our strong portfolio of brands and formats includes 82 to Harvester, Toby Carvery, All Bar One, 138 Miller & Carter, Premium Country Pubs, Sizzling Pubs, Crown Carveries, information Shareholder Stonehouse, Vintage Inns, Browns, Castle, Nicholson’s, O’Neill’s and Ember Inns. In addition we operate 139 Innkeeper’s Lodge hotels in the UK and Alex restaurants and bars in Germany. We are focused on the delivery of our three strategic priorities: To build a more balanced business To instil a more commercial culture To drive an innovation agenda Mitchells & Butlers plc1 Annual report and accounts 2016 Chairman’s statement Progress against our priorities + I am delighted that we returned to like-for-like sales growth in the last quarter of the year and that this momentum has continued into the early weeks of 2017. Mitchells2 & Butlers plc Annual report and accounts 2016 Operational highlights Strategic report In my statement last year I welcomed Phil Urban as Number of managed sites (at year end) our new Chief Executive, at a time when we faced a highly competitive market with a great deal of new 2 restaurants having opened. Phil and the team have to 1,768 35 worked at pace to identify a clear set of priorities, and 2016: 1,768 have already made good progress against these. 2015: 1,779 We had a challenging first half of the year, but saw sales recover in the second half. Overall, our adjusted earnings per 2014: 1,775 share fell by 2.2%, impacted by a lower level of sales, cost 2013: 1,589 Governance headwinds including the introduction of the National Living 2012: 1,576 Wage, and the cost of accelerating our capital investment 1,500 1,550 1,600 1,650 1,700 1,750 1,800 programme to deliver our long-term strategy. 36 to I am delighted that we returned to like-for-like sales growth Average weekly sales per pub (£k) 81 in the last quarter of the year and that this momentum has continued into the early weeks of 2017. We have also consistently outperformed the market in this period, 22.7k giving us a real opportunity to win back market share. 2016: 22.7 We resumed the payment of a dividend last year. This year the 2015: 22.6 statements Financial Directors are recommending the payment of a final dividend of 5p per share, making a total of 7.5p for the year. 2014: 23.2 There has been a number of Board changes during the year. 2013: 22.9 In November, Piedmont Inc. nominated Josh Levy as one of 2012: 22.8 82 its two representative Non-Executive Directors, replacing 22.0 22.2 22.4 22.6 22.8 23.0 23.2 to Douglas McMahon. In February we appointed Dave Coplin 138 to the Board as an independent Non-Executive Director; he is Food sales as a % of total sales currently Chief Envisioning Officer at Microsoft Limited and an established thought leader on the role of technology in personal and professional lives. His deep understanding of the information Shareholder technology environment will be invaluable to us in ensuring our 51% continued progress in digital marketing and the development 2016: 51 of our brands online. In September, we appointed Keith 2015: 51 Browne to the Board as a Non-Executive Director. He joins 2014: 51 us as a representative of Elpida Group Limited, a significant shareholder of the Company, and has considerable corporate 2013: 51 139 finance and real estate experience which will be of great 2012: 50 assistance to the Board. Overall, I remain pleased with the 45 46 47 48 49 50 51 composition of the Board and the way we interact to lead the business to greater success. The good progress we are making would not be possible without the dedication of our 44,000 employees. On behalf of the Board I would like to thank them all for the passion and hard work they deliver to our business. We continue to operate in a challenging market with an increasing number of external cost headwinds. There is therefore no room for complacency, we must continue to perform at the top of our game to make every guest visit worthwhile, and thereby grow market share and shareholder value. I feel confident that we will continue to make progress in the year ahead. Bob Ivell Chairman Mitchells & Butlers plc3 Annual report and accounts 2016 Mitchells & Butlers at a glance A brand for every occasion + We love building innovative brands and formats and run some of the country’s best-known restaurants and pubs. So whether you’re in the Alex – 43 sites All Bar One – 51 sites mood for the perfect steak If you’re out in a German city centre, these From cocktails to a well-chosen bottle of wine classic bars are the perfect places to stop for or an excellent meal, you’ll find something to close to home, or a pint of a beer and a bite to eat. suit you in our stylish city bars. real ale and some hearty food in a buzzing town centre pub, we’ve a business to suit every occasion. Ember Inns – 148 sites Harvester – 229 sites Relaxed and welcoming suburban pubs. A welcoming place for families to spend time We serve the best cask ales and classic pub together, have fun and share the pleasure of food with a twist in stylish environments. good, honest food. Premium Country – 128 sites Stonehouse – 36 sites Our traditional pubs have been stylishly Alongside our traditional carvery, we serve refurbished to make them the perfect place up handmade pizza with fresh dough; plus to find a cosy corner and take time out. burgers and pub classics at a great price. Mitchells4 & Butlers plc Annual report and accounts 2016 Revenue by 4% egion Scotland Strategic report (% of sales) N3o%rth East N9o%rth West 2 Y8or%kshire and Humberside to 35 5% 14% East Midlands West Midlands E8as%t of England W4%ales Governance L2on3do%n S7ou%th West S1o5uth% East of England 36 (excluding London) to 81 Financial statements Financial Browns – 25 sites Castle – 114 sites Crown Carveries – 76 sites 82 to Since the first Browns opened in 1973, it’s been If you like a place with real personality, pull up a We serve a traditional roast dinner with a great 138 providing delicious food and drink and superb chair in one of our urban pubs serving the best choice of tender, slow-cooked joints every day service in beautiful surroundings. draught beer and great food. of the week. Shareholder information Shareholder 139 High Street – 127 sites Miller & Carter – 52 sites Nicholson’s – 80 sites Our High Street pubs are the perfect place for We put everything into pursuing the perfect You’ll feel right at home at these traditional city decent food and quality beer – and at prices steak at Miller & Carter so only the finest cuts and town centre pubs that have been loved that put other pubs to shame. make it to your plate. since our first pub opened in 1873. Suburban – 291 sites Toby Carvery – 173 sites Vintage Inns – 195 sites A collection of the friendliest pubs. What unites We lay on a feast of tender, slow-cooked meats, We manage some of the best country pubs these pubs is unbeatable value for money, eight lots of veg including crispy, ruffled roasties in the UK, all offering modern pub food and generosity, and big-hearted service. and all the trimmings. outstanding drinks. Mitchells & Butlers plc5 Annual report and accounts 2016 Chief Executive’s statement Constantly striving for profitable sales + Our brands and concepts are well established in their respective markets and I have been very impressed by the team of people we have here.