2 0 1 4 Annual Report and Accounts www.mbplc.com Mitchells & Butlers plc Annual Report and Accounts 2014 Mitchells & Butlers plc is Our strategy to achieve this a member of the FTSE 250 vision has five key elements: and runs some of the UK’s •• Focus•the•business•on•the•most• best-loved restaurant and pub attractive•market•spaces•within• brands including All Bar One, eating•and•drinking•out Harvester, Toby Carvery, •• Develop•superior•brand• Browns, Vintage Inns and propositions•with•high•levels•• Sizzling Pubs. Our vision is to of•consumer•relevance run businesses that guests love •• Recruit,•retain•and•develop• to eat and drink in, and as a engaged•people•who•deliver• result grow shareholder value. excellent•service•for•our•guests •• Generate•high•returns•on• investment•through•scale• advantage •• Maintain•a•sound•financial•base Strategic report 2–33 Contents Strategic report 2 2014 Highlights 3 Chairman’s statement 4 Mitchells & Butlers at a glance Chief Executive’s statement Page 6 Governance Governance 35 Chairman’s introduction to Governance 36 Board of Directors 34–66 38 Directors’ report 6 Chief Executive’s statement 42 Directors’ responsibilities statement 8 Our market 43 Corporate governance statement 10 Our business model 48 Audit Committee report 12 Our strategy 50 Report on Directors’ remuneration 14 Our strategy in action 18 Risks and uncertainties 22 Key performance indicators Financial statements 24 Business review 68 Independent auditor’s report to the 26 Corporate social responsibility members of Mitchells & Butlers plc 31 Financial review 70 Group income statement 71 Group statement of comprehensive income 72 Group balance sheet 73 Group statement of changes in equity 74 Group cash flow statement 75 Notes to the financial statements Financial statements 104 Five year review Income statement information 105 Company balance sheet 106 Notes to the Company financial statements 67–111 Shareholder information 112 Shareholder information 112 Glossary Corporate social responsibility Page 26 Shareholder information Shareholder Go online: www.mbplc.com 112 What you’ll find: • About us and our brands • News from around the business • Corporate social responsibility • Investor relations • Careers with us Mitchells & Butlers plc Annual Report and Accounts 2014 1 2014 Highlights Operational highlights Number of managed sites Average weekly sales per pub* Food sales £k as % of total sales 1,775 FY 2014 23.2 FY 2014 51% FY 2014 2000 25 100 23.2 1,775 22.2 22.8 22.9 1600 1,536 1,576 1,589 20 80 1200 15 60 48 50 51 51 800 10 40 400 5 20 0 0 0 FY 2011 FY 2012 FY 2013 FY 2014 FY 2011 FY 2012 FY 2013 FY 2014 FY 2011 FY 2012 FY 2013 FY 2014 Financial highlights Revenue Adjusted earnings per share** £1,970m +4.0% 32.6p +1.2% Adjusted operating profit** * Excludes the pubs acquired from the Orchid Group in June 2014. ** Adjusted figures refer to results before exceptional items as noted £313m +1.0% in the Group Income Statement. 2 Mitchells & Butlers plc Annual Report and Accounts 2014 Strategic report Chairman’s statement 2–33 “The market in which we operate remains challenging and competitive, but we feel well-placed to continue to grow given the solid foundations of our business.” Governance 34–66 Bob Ivell Chairman This year has seen us continue to In May we successfully concluded deliver earnings growth while remaining negotiations with the Pension Trustees on track with our priorities. We have taken regarding the triennial valuation of our 43,000 steps to drive long-term growth in the schemes. Negotiations had been progressing business by focusing on increasing food since before the last valuation in March employees delighting our guests volumes, improving our infrastructure and 2013, and we reached a settlement whereby on a daily basis allocating our capital in the most effective company contributions increase at a manner. We also completed the exciting manageable level to reduce the deficit over acquisition of 173 pubs from the Orchid the agreed recovery period. I am delighted Financial Group, which gives us a great opportunity that we reached a positive agreement for 173 to grow further in the forthcoming years. both the Company and the Trustees. statements 67–111 The market in which we operate remains largely freehold, managed sites challenging and competitive, but we feel I would like to praise and thank our people, acquired from the Orchid Group well-placed to continue to grow given now at more than 43,000, for their ongoing in June 2014 the solid foundations of our business. hard work in driving this business forward. We aim to delight every guest that eats The last year has been full of activity for and drinks with us, which we simply cannot Mitchells & Butlers. I am delighted that achieve without the support and hard work we were successful in completing the of our people. acquisition of 173 sites from the Orchid Group. The opportunity to purchase this We continue to operate in a challenging largely freehold, managed estate presented market. It is clearly very encouraging to see the type of acquisition unlikely to arise the economic recovery taking place, however again in the near future, and is fully in line consumers have undoubtedly retained their with our clear strategy of growing our share focus on value and quality which developed of the UK eating-out market. We are able during the recession. We therefore need to to create value by converting the sites to continue to perform at the top of our game our existing brands and formats, reducing to make every guest visit worthwhile. Shareholder central overheads and realising purchasing synergies. We welcome the Orchid team Reflecting on the last year, we have achieved into our business. a great deal and generated further value for information 112 our shareholders. This has been achieved while continuing to set solid foundations for our long-term success. Bob Ivell Chairman Mitchells & Butlers plc Annual Report and Accounts 2014 3 Mitchells & Butlers at a glance 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 mood for an unlimited hearty breakfast with your family close to home, or a pint and some tapas in a buzzing city centre restaurant, we’ve a business to suit every occasion. Harvester Ember Inns Toby Carvery A welcoming place for families to spend Relaxed and welcoming suburban pubs, The home of the roast! Every day, your local time together, have fun and share the where conversation flows. We serve the Toby Carvery lays on a family-sized feast pleasure of good, honest food. Enjoy our best cask ales and classic pub food with of tender, slow-cooked meats, eight lots £4.99 unlimited breakfast, free, unlimited a twist in stylish environments. of veg including crispy, ruffled roasties and salad and fresh, tasty grilled meat and fish. all the trimmings. You’ll find lots more on offer, such as tasty specials, all-you-can-eat breakfasts and even comfy accommodation at some of our restaurants. Number of sites Number of sites Number of sites 213 130 158 Castle Heartland Nicholson’s If you like your pint served with real A collection of the UK’s friendliest pubs If you share our passion for real ale, hearty personality, pull up a chair in one of our and carveries. What unites these pubs is food and a friendly welcome, you’ll feel eclectic urban pubs serving the best unbeatable value for money, generosity right at home at these traditional city draught beer and great pub food. Each and big-hearted service. and town centre pubs. Enjoy the timeless is decidedly individual, with a character atmosphere that’s been loved by groups to suit its community and an independence of friends, colleagues and shoppers since that attracts regulars as diverse and our first pub opened in 1873. discerning as the beers on tap. Number of sites Number of sites Number of sites 110 440 80 4 Mitchells & Butlers plc Annual Report and Accounts 2014 Strategic report 2–33 Revenue by region (FY 2014) % of sales (excludes Orchid pubs) 1 Total London 24 2 South East (ex. London) 15 3 West Midlands 14 4 North West 9 9 5 Yorkshire/Humberside 8 11 6 East of England 7 5 Governance 34–66 7 South West 7 4 8 8 East Midlands 5 3 6 9 Scotland 4 10 1 10 Wales 4 2 7 11 North East 3 Financial All Bar One Miller & Carter Alex At All Bar One, we’ve been running stylish You will not experience a better steak than If you’re out in a German city centre, these statements 67–111 city bars in central locations since 1994. that at Miller & Carter. We put everything classic bars and brasseries are the perfect Whether you want to catch up over into pursuing the perfect steak, from the places to stop for a beer and a bite to eat. cocktails, share a bottle of well-chosen wine field to the butcher’s block to the grill, Soak up the sun in the outside eating or enjoy an excellent meal out, you’ll find so only the finest, most flavoursome cuts area and try the classic meals, salads and something, and somewhere, to suit you. make it to your plate. healthy snacks that have made Alex one of Germany’s leading brands. Number of sites Number of sites Number of sites 50 35 41 Shareholder information 112 Browns Country Pubs Orchid Since the first Browns opened in 1973, it’s We are proud to manage over 300 of the In June 2014, we acquired 173 pubs been providing delicious food and drink in best country pubs in the UK, all offering from the Orchid Group.