REG - Mitchells & Butlers - Full Year Results
27/11/2024 07:00
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RNS Number : 7645N Mitchells & Butlers PLC 27 November 2024
MITCHELLS & BUTLERS PLC
LEI no: 213800JHYNDNB1NS2W10
27 November 2024
FULL YEAR RESULTS
(For the 52 weeks ended 28 September 2024)
Highlights
- Strong trading performance with like-for-like sales(a) growth of 5.3%
- Operating profit of £312m up 41.2% from prior year on a 52-week basis
- Strengthened operating margin of 12.0% (FY 2023 9.0%)
- Strong period of cash generation driving a £197m reduction in net debt
including leases
Reported results (FY 2023 53 weeks)
- Total revenue of £2,610m (FY 2023 £2,503m)
- Operating profit of £300m (FY 2023 £98m)
- Profit/(loss) before tax of £199m (FY 2023 £(13)m)
- Basic earnings/(loss) per share of 25.0p (FY 2023 (0.7)p)
Trading results (FY 2023 on an adjusted 52-week basis for ease of comparison)
- Adjusted operating profit(a) £312m (FY 2023 £221m)
- Adjusted earnings per share(a) of 26.4p (FY 2023 15.6p)
Balance sheet and cash flow
- Cash inflow before bond amortisation of £185m (FY 2023 £30m)
- Net debt(a) reduced to £989m (FY 2023 £1,170m), excluding £447m of IFRS 16
lease liabilities (FY 2023 £463m)
- Pension schemes substantially de-risked with net surplus funding of £139m now
recognised
Operational highlights
- Strong performances across all market segments
- Nearly 200 investment projects completed in the year yielding strong returns
- Record breaking team metrics demonstrating depth of engagement and talent
Current trading
- Strong start to FY 2025, like-for-like sales(a) of 4.0% in the first seven
weeks
Phil Urban, Chief Executive, commented:
"We are delighted by the very strong performance during the year.
Like-for-like sales(a) continued to outperform the market(b) which, coupled
with easing inflationary costs and focus on efficiencies, has resulted in very
strong profit recovery.
We face increased inflationary cost headwinds in the year ahead. However, we
shall remain focused on our established Ignite programme of initiatives and
our successful capital investment programme, to drive further cost
efficiencies and increased sales. Coupled with our market-leading estate and
customer offers, we are confident that this will enable us to further grow
market share and secure continued long-term outperformance."
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.
b - As measured by the CGA Business Tracker.
There will be a presentation held today at 8:30am accessible by phone on 020
3936 2999, access code: 778658 and at
https://www.netroadshow.com/events/login?show=61f6fdbc&confId=71552
(https://www.netroadshow.com/events/login?show=61f6fdbc&confId=71552) .
The slides will also be available on the website at www.mbplc.com
(http://www.mbplc.com) .The replay will then be available at
https://www.mbplc.com/fy2024/analystspresentation
(https://www.mbplc.com/fy2024/analystspresentation) .
All disclosed documents relating to these results are available on the Group's
website at www.mbplc.com (http://www.mbplc.com)
For further information, please contact:
Tim Jones - Chief Financial Officer +44 (0)121 498 6112
Amy de Marsac - Investor Relations +44 (0)121 498 6514
James Murgatroyd (FGS Global) +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, Ember Inns, Ego
Restaurants and Pesto. 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 (http://www.mbplc.com/imagelibrary) .
CURRENT TRADING AND OUTLOOK
Sales growth remained strong over FY 2024, with consistent market
outperformance. As we move into FY 2025 we expect more normalised levels of
sales growth as the inflationary environment eases. The current underlying
run rate of like-for-like sales(a) growth, as measured across the first 7
weeks of the new financial year, is 4.0%.
Cost headwinds are now anticipated to total c.£100m this financial year, an
increase of just over 5% on our current cost base. Against a benign backdrop
of general inflation (including food and drink inputs) by far the most
significant increase is now expected to be in relation to labour costs due
both to increases in the statutory National Living Wage and in the recently
announced increase in employer national insurance contributions, both of which
take effect from April 2025. We anticipate that energy costs this year, of
which just over one half have been bought forward, will broadly stabilise
overall with no further deflation, as has been seen in FY 2024.
Notwithstanding future cost increases we feel that the business is in very
good shape. Our balance sheet continues to strengthen, with reduced debt and a
substantially de-risked pension surplus, and we expect to out-perform the
market driving further profit growth in the year ahead.
BUSINESS
REVIEW
Persistent inflation over the past two years has put pressure on the
hospitality sector as while the worst of the pandemic-related disruptions have
eased, rising costs in food supply chains, energy, and labour which followed
have impacted margins. Looking forward costs in general are abating, with the
notable exception of wages, which continue to rise sharply based on increases
both in the statutory National Living Wage and the level of employer national
insurance contributions. The resulting widespread and unavoidable increase in
prices has made eating out a more considered choice for many households and
the culmination of these pressures has been net closures of 1% in the year to
June 2024(c). Despite these pressures, Lumina reported sales growth in the
pubs, bars and restaurants market of 1.5% in 2024, with managed groups
outperforming and delivering growth of 2.9%. With positive indications of
increasing disposable income in recent months as inflationary pressures on
households ease(d) sales growth for the sector is expected to remain resilient
in the year ahead with forecast growth for managed pubs, bars and restaurants
of 2.6%, driven by price and spend per head with volumes anticipated to be in
low single digit decline.
Against this backdrop total sales across the period were £2,610m reflecting
6.1% growth on FY 2023, on a 52-week basis. Like-for-like sales(a) increased
by 5.3% with strong performances through the brand portfolio and continued
out-performance against the market as a whole. Operating profit, after
separately disclosed items, of £300m reflects a notable recovery from last
year (FY 2023 £98m) built on this strong sales performance coupled with
falling cost inflation. Adjusted operating profit(a) of £312m represents a
£91m increase in profitability from last year, on a 52-week basis.
We made a very good start to the year with like-for-like sales(a) growth of
7.2% over the first seven weeks. Strong trading over the important festive
period then led to an acceleration of like-for-like sales(a) growth over the
latter half of the quarter to 8.2%, resulting in overall like-for-like
sales(a) growth for the quarter of 7.7%.
Sales remained strong through the second quarter particularly on key trading
dates. Across the quarter, we recorded like-for-like sales(a) growth of
6.1%, comprising drink sales growth of 5.3% and food sales growth of 6.6%,
benefitting from the movement of Easter forward from the third quarter in the
prior year.
Over the third quarter like-for-like sales(a) grew by 3.4%, adversely impacted
by the movement of Easter, the easing of the inflationary environment and a
period of generally wet weather. In the fourth quarter sales grew by 3.4%
having been negatively impacted by riots in city centres during August, as
well as an unseasonably cool and wet summer.
Throughout the year we have consistently outperformed the market, as
represented by the CGA Business tracker, by c.2ppts.
Overall cost inflation abated through the financial year. Whilst the recent
level of statutory National Living Wage increases (effective in April each
year) has been relatively high at approximately 10%, other costs have
generally returned to more normalised levels and gas and electricity costs in
particular have been in deflation. Strong and resilient sales growth combined
with effective cost efficiency initiatives and abatement in overall cost
inflation has driven a marked increase in profitability.
OUR STRATEGIC PRIORITIES
Our strategic pillars, which provide the foundation for our performance,
remain consistent;
- Build a more balanced business
- Instil a commercial culture
- Drive an innovation agenda
We focus on maximising the value generated from our 83% freehold and long
leasehold estate, utilising the diversity of our brand portfolio to grow
market share across a broad range of consumer occasions, demographics and
locations.
Our Ignite programme of work remains at the core of our long-term value
creation, with a range of initiatives underway focused on driving sales and
delivering cost efficiencies. During the year we have successfully deployed
'My Account' across multiple brands, providing guests with a single platform
to manage their bookings, orders, and offers. This has led to a notable rise
in customer engagement, particularly among younger guests, and positions 'My
Account' as a key platform for future interactions as customer behaviours
evolve. In addition to digital solutions, we remain focused on delivering
excellent guest experiences and equipping our managers with the skills to
drive the sales of their businesses. A specific focus during the year has been
enhancing dish availability, a key consideration in guest experience, using
technology to more accurately forecast sales which inform orders and provide
guidance to kitchen teams on the optimal volume of food to prepare to satisfy
demand. The benefit of these initiatives is reflected in sustained
like-for-like sales(a) growth across our brand portfolio as well as continued
market outperformance on guest review scores, which averaged 4.5 out of 5.
Alongside driving sales, we have a range of initiatives focused on enhancing
productivity and efficiency to help mitigate inflationary costs. Driving a
reduction in our energy consumption remains a priority, both to improve
efficiency and to support our sustainability objectives. During the year we
achieved a further 2% reduction in overall energy usage, aided by investment
voltage optimisers and solar panel roll-out. After a successful trial we are
also now rolling out the use of remote control in-site energy monitoring
systems. Remote control of heating, for example, provides a significant
opportunity to reduce consumption whilst also relinquishing our managers of
one of their many daily tasks, allowing them to focus on guests.
During the year we held a number of events, gathering different cohorts from
various levels across the organisation, to generate fresh ideas for the next
wave of Ignite initiatives to launch in FY 2025. These sessions successfully
identified numerous new opportunity areas, as well as additional value to be
realised through improving the effectiveness of existing work streams.
Our capital programme continues to deliver value through improving the
competitive position of our pubs and restaurants within their local markets.
Over the last year, we have completed 195 investment projects comprising 178
remodels, 11 conversions and 6 acquisitions. We are continuing to see strong
performances from our investment projects, with remodel returns for projects
completed in the year of 37%, and remain focused on re-establishing the target
7-year investment cycle which was interrupted by Covid-19.
In June 2023 we completed the acquisition of the remaining 60% stake in 3Sixty
Restaurants Limited, owners of Ego Restaurants, having acquired the initial
40% stake in August 2018. Ego is a collection of Mediterranean-inspired pubs
and restaurants where guests can enjoy freshly cooked food, cocktails, cask
ales and wine from across the continent. The process of integrating Ego is
making good progress, with all sites having now moved onto our systems and
processes. During the first half of FY 2024 we are starting to leverage the
brand internally and have converted 5 of our existing sites to the Ego offer,
with average sales doubling following conversion. We anticipate conversion of
a further 5-10 sites in FY 2025.
In May 2024 we completed the acquisition of Pesto Restaurants. Pesto delivers
an Italian tapas offer across its ten strong estate which is designed to
create informal social and interactive experiences based on sharing with
friends and family. Pesto compliments the Mediterranean theme of Ego and
together they provide further diversification of the estate with a low meat
offer which appeals to the health-conscious guest. The consideration payable
for the business is partly contingent on its performance over the first year
of trading under our ownership, but is not expected to be more than £15m.
PEOPLE
Our people are fundamental to the delivery of great experiences for our
guests. As such we are delighted with the progress made across our people
measures during the year, which reflects our continuous focus on engagement,
recruitment and retention. Engagement scores have continued to improve across
all employee groups with record scores in our most recent employee survey.
Turnover has also continued to improve, reaching record lows of 64% (FY 2023
81%), meaning that we are retaining our talent, building more experienced
teams, and reducing the cost associated with the induction and training
process. In addition, our internal succession rates have increased with 61% of
General Manager positions filled internally (FY 2023 53%), reflecting our
commitment to team member progression and development.
Apprenticeships continue to be an integral part of our retention and
succession strategy, with evidence that people who complete apprenticeships
are more likely to stay with us and to be promoted. We remain committed to
delivering high quality apprenticeship opportunities both to new starters and
existing employees and welcomed over 1,600 new joiners to the programme this
financial year. We are particularly proud of our culinary apprenticeships,
which continue to receive excellent feedback from learners, providing a
pipeline of talent to a more challenging area for recruitment, as well as a
valuable career opportunity with above industry level enrolment for
19-24-year-olds. We are delighted that our apprentice programmes were
recognised at the December 2023 National Apprenticeship awards, winning the
award for Best Large Employer.
SUSTAINABILITY
We are committed to reducing the environmental impact of our business and the
Board has challenging targets to drive continued momentum in this area. We
have committed to:
- Net Zero emissions by 2040, including scope 1, 2 and 3
Progress: During the year we reduced our emissions by 14% from our 2019
baseline year, a year-on-year improvement of 3 ppts. Scope 1 & 2 emissions
reduced from the baseline by 18% (FY 2023 13%) driven primarily by the energy
consumption reduction initiatives, and the systematic removal of gas from the
estate. In the year we have made good progress in our efforts to reduce gas as
an energy source with 60 electrified kitchens, and five sites where gas has
been fully removed, and replaced by air source heat pumps as an alternative
for heating. We have plans to considerably expand this programme in FY 2025.
Scope 3 emissions reduced by 14% with significant progress made in the
reduction of emissions associated to the products we buy, including food, as
well as transport emissions in our supply chain.
- Zero operational waste to landfill by 2030
Progress: We now divert over 98% of waste from landfill and are confident of
achieving our target ahead of 2030. In addition, we have maintained recycling
rates at 59% with enhanced segregation and a focus on engagement and behaviour
change in sites.
- 50% reduction in food waste by 2030
Progress: We have successfully reduced our food waste by 23% from our 2019
baseline, with progress both in sites and in the supply chain. We are focused
on operational practices to reduce waste, and have effective partnerships in
place with Fareshare and Too Good To Go to redistribute unavoidable surplus
food.
Our sustainability strategy also has a strong focus on the positive impact we
have on people and communities, and we are proud to partner with Social Bite,
a homelessness charity. Of particular importance is the Jobs First programme,
helping people back to independence through long-term employment
opportunities, which to date has employed 26 people from their academy. This
year we funded the establishment of a new role within Social Bite, focused
solely on placing people impacted by homelessness into Mitchells and Butlers
roles and supporting them for the first year of employment. We see
considerable scope to grow this partnership and enhance our positive social
impact over the coming years.
FINANCIAL REVIEW
On a statutory basis, profit/(loss) before tax for the financial year was
£199m (FY 2023 £(13)m), on sales of £2,610m (FY 2023 £2,503m).
The Group Income Statement discloses adjusted profit and earnings per share
information that excludes separately disclosed items, determined by virtue of
their size or nature, to allow a more effective comparison of the Group's
trading performance from one period to the next.
Last year, FY 2023, was a 53-week reporting period therefore 52-week results
are additionally disclosed for year-on-year comparison purposes.
Statutory (FY 2023 53 week) Adjusted(a) (FY 2023 52 week)
FY 2024 FY 2023 FY 2024 FY 2023
£m £m £m £m
Revenue 2,610 2,503 2,610 2,459
Operating profit 300 98 312 221
Profit before tax 199 (13) 211 112
Earnings per share 25.0p (0.7p) 26.4p 15.6p
Operating margin 11.5% 3.9% 12.0% 9.0%
At the end of the period, the total estate comprised 1,726 sites in the UK and
Germany of which 1,654 are directly managed.
Revenue
Total revenue of £2,610m (FY 2023 £2,503m) reflects a strong period of
trading driven by sustained like-for-like sales(a) growth.
Like-for-like sales(a) in the first half increased by 7.0%, comprising an
increase in like-for-like food sales(a) of 7.7% and of like-for-like drink
sales(a) of 6.0% driven by strengthening spend per head. Over the second
half like-for-like sales growth was impacted, as expected, by the easing
inflationary environment as well as an unseasonably wet and cool summer and
riots in some city centres during August. Volumes of food and drink were in
decline of c.1.5% across the year.
The current underlying rate of growth of like-for-like sales(a), as measured
over the first 7 weeks of the new financial period, is 4.0%. The subsequent
week was adversely impacted by comparison against Black Friday promotional
activity last year, a timing difference that reverses a week later, resulting
in growth over the first 8 weeks being 2.7%.
Like-for-like sales(a):
Weeks 1-15 Weeks 16-28 Weeks 29-42 Weeks 43-52 Weeks 1-52
Q1 Q2 Q3 Q4 YTD
Food 8.7% 6.6% 2.6% 2.6% 5.3%
Drink 6.6% 5.3% 4.0% 3.4% 4.9%
Total 7.7% 6.1% 3.4% 3.4% 5.3%
Total sales grew by 4.3% against last financial year and by 6.1% on a 52-week
basis.
Separately disclosed items
Separately disclosed items are identified due to their nature or materiality
to help the reader form a view of overall and adjusted trading.
Within the context of the overall valuation of the group's freehold and long
leasehold land and buildings (as set out in Note 6 to the consolidated
financial statements), a £14m reduction in value is recognised relating to
valuation and impairment of properties, comprising a £4m increase in value
arising from the revaluation of freehold and long leasehold sites, a £17m
impairment of right-of-use assets and a £1m impairment of computer software.
The £4m tax credit relates to these impairments.
Other separately disclosed items include a net profit arising on property
disposals of £2m. Refer to Note 3 to the consolidated financial statements
for comparative information.
Operating profit and margins(a)
Adjusted operating profit(a) was £312m (FY 2023 £221m), an increase of 41.2%
on a 52-week basis. Adjusted operating margin of 12.0% was 3.0ppts higher
than last year driven by strong like-for-like sales(a) growth, reduced cost
inflation and operating efficiencies. Statutory operating profit was £300m
(FY 2023 £98m) with statutory operating profit margin of 11.5% (FY 2023
3.9%).
The aggregate net cost headwind for the financial year was slightly less than
3% of our cost base of c.£2.0 billion, after some offset from deflation in
energy prices. Looking forward, cost headwinds are now anticipated to
increase to c.£100m for FY 2025, representing just over 5% on the cost base.
Against a generally benign backdrop of general inflation (including food and
drink inputs) by far the most significant increase is now expected in relation
to labour costs due both to increases in the statutory National Living Wage
and in the recently announced increase in employer national insurance
contributions, both of which take place from April 2025. We anticipate that
energy costs, of which just over one half have been bought forward, will
broadly stabilise overall with no further deflation
Interest
Net finance costs of £99m (FY 2023 £108m) for the financial year were £9m
lower than the same period last year. The net pensions finance charge was £2m
(FY 2023 £3m). This is anticipated to be a credit of £7m this year, FY 2025,
following recognition of the net surplus funding position across the schemes.
Earnings per share
Basic earnings (losses) per share, after the separately disclosed items
described above, were 25.0p (FY 2023 earnings (0.7)p), with adjusted earnings
per share(a) of 26.4p (FY 2023 15.6p on 52-week basis).
The basic weighted average number of shares in the period was 595m and the
total number of shares issued at the balance sheet date was 598m.
Cash flow
FY 2024 FY 2023
£m £m
EBITDA before movements in the valuation of the property portfolio 444 362
Non-cash share-based payment and pension costs and other 10 6
Operating cash flow before movements in working capital and additional pension 454 368
contributions
Working capital movement 15 (1)
Pension escrow return 35 -
Pension deficit contributions (1) (8)
Cash flow from operations 503 359
Capital expenditure (154) (157)
Acquisition of Pesto Restaurants Limited (2) -
Acquisition of 3Sixty Restaurants Limited - (17)
Cash acquired on acquisition of 3Sixty Restaurants Limited - 5
Net finance lease principal payments (40) (52)
Interest on lease liabilities (17) (16)
Net interest paid (82) (90)
Tax (18) (3)
Purchase of own shares (7) -
Other 2 1
Net cash flow before bond amortisation 185 30
Mandatory bond amortisation (123) (116)
Net cash flow 62 (86)
This was a very strong period of cash generation. EBITDA, before movements in
the valuation of the property portfolio increased sharply as a result of an
improved trading performance to £444m, which converted to net cash inflow for
the period before bond amortisation of £185m (FY 2023 £30m) helped by a
number of non-recurring items in the form of the return of historic pensions
contributions from escrow, use of tax losses and timing on working capital
flows.
After all outgoings, including mandatory bond amortisation of £123m
(including net impact of currency swaps), cash inflow was £62m (FY 2023
outflow £86m).
Capital expenditure
Capital expenditure of £154m (FY 2023 £157m, including £3m intangible
assets) comprises £152m from the purchase of property, plant and equipment
and £2m in relation to the purchase of intangible assets.
FY 2024 FY 2023
£m # £m #
Maintenance and infrastructure ( ) 58 67
Remodels - refurbishment 69 170 65 127
Remodels - expansionary 2 8 4 7
Conversions 10 11 11 11
Acquisitions - freehold 12 4 9 4
Acquisitions - leasehold 3 2 1 2
Total return generating capital expenditure 96 195 90 151
Total capital expenditure 154 157
Maintenance and infrastructure spend included investment of £9m towards our
sustainability ambitions, such as solar panels and electrified kitchen
equipment, as well as £4m towards digital and technological improvements.
Maintenance and infrastructure spend was slightly lower than prior year due to
reduced spend on IT infrastructure and hardware.
During the period we have made good progress on increasing the number of
completed investment projects, and we remain committed to resumption of an
average seven-year refurbishment cycle across our estate, although supply
chain constraints, notably in securing timely planning consent, continue to
prove a challenge.
Four freehold sites were acquired in the year comprising new sites in York,
Nunthorpe and Fitzrovia and the acquisition of the freehold of a site
previously operated as leasehold in Edinburgh. Both of the leasehold
acquisitions relate to new Alex sites in Germany.
Pensions
Both the main pensions schemes of the group are now substantially de-risked.
The Main Plan completed a full scheme buy-in last year, and the Executive Plan
most recently completed a full scheme buy-out late this year. No further
employer contributions are therefore being made to either scheme. In the year
a return of £35m of historic contributions was made to the group from amounts
held in escrow with respect to the Main Plan. A further return of £12m,
relating to the monies left in the Executive Plan escrow account, has been
received after the balance sheet date.
One further scheme, remains. This is closed and unfunded and has estimated
liabilities of £25m.
Over the course of the year agreement was reached to use any surplus arising
in the Main Plan to pay for employer contributions in the defined contribution
section of that Plan. As this is a change in the Trustee's agreed use of the
surplus compared to prior years the full value of the surplus of £164m is now
recognised in this year's accounts as an economic benefit to the company.
Net debt and facilities
On the back of a strong cash performance, net debt(a) at the period end
reduced to £1,436m, comprised of £989m non-lease liabilities and lease
liabilities of £447m (FY 2023 £1,633m comprised of £1,170m non-lease
liabilities and lease liabilities of £463m). This represents a multiple of
3.2 times EBITDA over the last year including lease liabilities (2.2 times
excluding these liabilities).
Further details of existing debt arrangements and an analysis of net debt can
be found in Note 9 to the consolidated financial statements and at
https://www.mbplc.com/infocentre/debtinformation/
(https://www.mbplc.com/infocentre/debtinformation/) .
Going Concern
After considering forecasts, sensitivities and mitigating actions available to
management and having regard to risks and uncertainties, the Directors have a
reasonable expectation that the Group has adequate resources to continue to
operate within its borrowing facilities and covenants for a period of at least
12 months from the date of signing the financial statements. Accordingly, the
financial statements have been prepared on the going concern basis. Full
details are included in Note 1 to the consolidated financial statements.
Director's responsibility statement
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company and
the undertakings included in the consolidation taken as a whole; and
- the strategic report includes a fair review of the development and
performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
This responsibility statement was approved by the Board of Directors on 26
November 2024 and is signed on its behalf by:
Tim Jones
Chief Financial Officer
26 November 2024
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.
b - As measured by the CGA Business Tracker.
c- CGA Hospitality Market Monitor, August 2024
d - Asda Income Tracker
Group income statement
For the 52 weeks ended 28 September 2024
2024 2023
52 weeks 53 weeks
Before Before
separately disclosed Separately disclosed separately disclosed Separately disclosed
items items(a) Total items items(a) Total
Notes £m £m £m £m £m £m
Revenue 2 2,610 - 2,610 2,503 - 2,503
Operating costs before depreciation, amortisation and movements in the (2,168) - (2,168) (2,145) - (2,145)
valuation of the property portfolio
Share in associates' results 1 1
- - - -
Net profit arising on property disposals 3 - 2 - 3
2 3
EBITDA(b) before movements in the valuation of the property portfolio 442 2 444 359 3 362
Depreciation, amortisation and movements in the valuation of the property 3 (130) (14) (144) (133) (131) (264)
portfolio
Operating profit/(loss) 312 (12) 300 226 (128) 98
Finance costs 10 (109) - (109) (116) - (116)
Finance income 10 10 - 10 8 - 8
Net pensions finance charge 10, 11 (2) - (2) (3) - (3)
Profit/(loss) before tax 211 (12) 199 115 (128) (13)
Tax (charge)/credit 4 (54) 4 (50) (19) 28 9
Profit/(loss) for the period (8) (100) (4)
157 149 96
Earnings/(loss) per ordinary share
Basic 5 26.4p 25.0p 16.1p (0.7p)
Diluted 5 26.2p 24.8p 16.1p (0.7p)
a. Separately disclosed items are explained and analysed in note 3.
b. Earnings before interest, tax, depreciation, amortisation and movements in the
valuation of the property portfolio. 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.
All results relate to continuing operations.
Group statement of comprehensive income
For the 52 weeks ended 28 September 2024
2024 2023
52 weeks 53 weeks
Notes £m £m
Profit/(Loss) for the period 149 (4)
Items that will not be reclassified subsequently to profit or loss:
Unrealised gain/(loss) on revaluation of the property portfolio 6 254 (76)
Remeasurement of pension liability 11 166 42
Tax relating to items not reclassified 4 (116) 5
304 (29)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations - (1)
Cash flow hedges:
- (Losses) arising during the period (34) (9)
- Reclassification adjustments for items included in profit or loss 11 30
Tax relating to items that may be reclassified 4 6 (5)
(17) 15
Other comprehensive income/(expense) after tax 287 (14)
Total comprehensive income/(expense) for the period 436 (18)
Group balance sheet
28 September 2024 2024 2023
Notes £m £m
Assets
Goodwill and other intangible assets 20 17
Property, plant and equipment 6, 8 4,419 4,086
Right-of-use assets 7, 8 307 327
Finance lease receivables 11 11
Other receivables 11 - 47
Pension surplus 164 -
Deferred tax asset 3 4
Derivative financial instruments 19 33
Total non-current assets
4,943 4,525
Inventories 27 25
Trade and other receivables 98 123
Finance lease receivables 1 1
Derivative financial instruments - 2
Cash and cash equivalents 9 176 126
Total current assets 302 277
Total assets 5,245 4,802
Liabilities
Pension liabilities 11 (1) (1)
Trade and other payables (482) (491)
Current tax liabilities (1) (2)
Borrowings 9 (143) (144)
Lease liabilities 7 (33) (33)
Derivative financial instruments (2) -
Total current liabilities (671)
(662)
Pension liabilities 11 (24) (21)
Other payables 13 (8) -
Borrowings 9 (1,041) (1,186)
Lease liabilities 7 (414) (430)
Derivative financial instruments (27) (7)
Deferred tax liabilities (491) (348)
Provisions (12) (9)
Total non-current liabilities (2,017) (2,001)
Total liabilities (2,679) (2,672)
Net assets 2,566 2,130
Equity
Called up share capital 12 51 51
Share premium account 12 357 357
Capital redemption reserve 3 3
Revaluation reserve 1,143 951
Own shares held (9) (5)
Hedging reserve (21) (4)
Translation reserve 14 14
Retained earnings 1,028 763
Total equity 2,566 2,130
Group statement of changes in equity
For the 52 weeks ended 28 September 2024
Called Share Capital Own
up share 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 24 September 2022 51 357 3 1,009 (5) (20) 15 733 2,143
Loss for the period - - - - - - - (4) (4)
Other comprehensive (expense)/income - - - (58) - 16 (1) 29 (14)
Total comprehensive (expense)/income - - - (58) - 16 (1) 25 (18)
Credit in respect of share-based payments - - - - - - - 5 5
At 30 September 2023 51 357 3 951 (5) (4) 14 763 2,130
Profit for the period - - - - - - - 149 149
Other comprehensive income/(expense) - - - 192 - (17) - 112 287
Total comprehensive income/(expense) - - - 192 - (17) - 261 436
Purchase of shares - - - - (7) - - - (7)
Release of shares - - - - 3 - - (3) -
Credit in respect of share-based payments - - - - - - - 6 6
Tax on share based payment - - - - - - - 1 1
At 28 September 2024 51 357 3 1,143 (9) (21) 14 1,028
2,566
a.
Group cash flow statement
For the 52 weeks ended 28 September 2024 2024 2023
52 weeks 53 weeks
Notes £m £m
Cash flow from operations
Operating profit 300 98
Add back/(deduct):
Movement in the valuation of the property portfolio 3 14 131
Net profit arising on property disposals 3 (2) (3)
Loss on disposal of fixtures, fittings and equipment - 2
Depreciation of property, plant and equipment 6 92 93
Amortisation of intangibles 4 4
Depreciation of right-of-use assets 7 34 36
Cost charged in respect of share-based payments 7 5
Administrative pension costs 11 5 5
Share of associates results - (1)
Settlement of pre existing lease contracts 13 - 3
Fair value gain on associate 13 - (5)
Operating cash flow before movements in working capital 454 368
and additional pension contributions
Increase in inventories (1) (2)
Decrease/(Increase) in trade and other receivables 44 (42)
Increase in trade and other payables 8 44
Decrease in provisions (1) (1)
Additional pension contributions 11 (1) (8)
Cash flow from operations 503 359
Interest payments(a) (96) (95)
Interest receipts/(payments) on interest rate swaps(a) 3 (7)
Interest receipts on cross currency swap(a) 7 7
Interest payments on cross currency swap(a) (5) (4)
Other interest paid - lease liabilities 9 (17) (16)
Borrowing facility fees paid - (2)
Interest received 9 9
Tax paid (18) (3)
Net cash from operating activities 386 248
Investing activities
Acquisition of 3Sixty Restaurants Limited 13 - (12)
Acquisition of Pesto Restaurants Ltd 13 (2) -
Purchases of property, plant and equipment (152) (154)
Purchases of intangible assets (2) (3)
Proceeds from sale of property, plant and equipment 1 3
Finance lease principal repayments received 1 1
Net cash used in investing activities (154) (165)
Financing activities
Purchase of own shares (7) -
Repayment of principal in respect of securitised debt(b) 9 (128) (121)
Principal receipts on currency swap(b) 9 21 21
Principal payments on currency swap(b) 9 (16) (16)
Cash payments for the principal portion of lease liabilities 9 (41) (53)
Repayment of other borrowings (1) -
Short term financing of employee advances 2 -
Net cash used in financing activities (170) (169)
Net increase/(decrease) in cash and cash equivalents 62 (86)
Cash and cash equivalents at the beginning of the period 9 103 190
Foreign exchange movements (1) (1)
Cash and cash equivalents at the end of the period 9 164 103
a. Interest paid is split to show gross payments on the interest rate
and cross currency swaps.
b. Principal repayments on securitised debt are split to show
repayments relating to the cross currency swap.
Notes to the consolidated financial statements
1. Preparation of preliminary consolidated financial statements
General information
Mitchells & Butlers plc, along with its subsidiaries, (together 'the
Group') is required to prepare its consolidated financial statements in
accordance with UK-adopted International Financial Reporting Standards (IFRSs)
as and in accordance with the Companies Act 2006. While the financial
information included in this release is based on the Group's consolidated
financial statements and has been prepared in accordance with the recognition
and measurement criteria of UK-adopted International Financial Reporting
Standards (IFRSs), this announcement does not itself contain sufficient
information to comply with IFRSs.
The preliminary financial statements include the results of Mitchells &
Butlers plc and all its subsidiaries for the 52 week period ended 28 September
2024. The comparative period is for the 53 week period ended 30 September
2023. The respective balance sheets have been drawn up as at 28 September 2024
and 30 September 2023.
The consolidated financial statements have been prepared on the historical
cost basis as modified by the revaluation of freehold and long leasehold
properties, pension obligations and financial instruments.
The Group's accounting policies have been applied consistently.
Going concern
The Directors have adopted the going concern basis in preparing these
financial statements after assessing the impact of identified principal risks
and their possible adverse impact on financial performance, specifically
revenue and cash flows throughout the going concern period, being 12 months
from the date of signing of these financial statements.
The Group's primary source of borrowings is through nine tranches of fully
amortising loan notes with a gross debt value of just under £1.2bn as at the
end of the year. These are secured against the majority of the Group's
property and future income streams. The principal repayment period varies by
class of note with maturity dates ranging from 2028 to 2036. Within this
financing structure there are two main covenants: the level of net worth
(being the net asset value of the securitisation group) and, FCF to DSCR. As
at 28(th) September 2024 there was substantial headroom on the net worth
covenant. FCF to DSCR represents the multiple of Free Cash Flow (being EBITDA
less tax and required capital maintenance expenditure) generated by sites
within the structure to the cost of debt service (being the repayment of
principal, net interest charges and associated fees). This is tested quarterly
on both a trailing two quarter and a four quarter basis.
The Group also has a committed unsecured credit facility of £200m, with a
negative pledge in favour of participating banks and an expiry date in July
2026. At the balance sheet date there were no drawings under this
facility. This facility has two main financial covenants, based on the
performance of the unsecured estate: the ratio of EBITDAR to rent plus
interest (at a minimum of 1.25 times) and Net Debt to EBITDA (to be no more
than 3.0 times), both tested on a half-yearly basis (for the prior four
quarters).
In the year ahead the main uncertainties facing the Group are considered to be
the maintenance of sales growth in the face of pressure on consumer spending
power, and the rate of cost inflation. The outlook for these is uncertain and
will depend on a number of factors including consumer confidence, global
political developments, supply chain disruptions and government policies.
The Directors have reviewed the financing arrangements against a base case
forward trading forecast in which they have considered the Group's current
financial position. This forecast assumes mid single digit growth in sales
across the year. Cost inflation is assumed to remain at broadly similar levels
to the previous financial year with the marked exception of energy costs,
which are assumed to be stable with no further deflation from recent historic
peaks, and labour costs, which include provision for increased levels of
employers national insurance contributions from April 2025. As a result, an
overall net increase of approximately five percent across the cost base of the
business of approximately £2bn is expected. Under this base case the Group is
able to stay within securitisation and committed facility financial covenants
and maintains sufficient liquidity.
1. Preparation of preliminary consolidated financial statements (continued)
Going concern (continued)
The Directors have also considered a severe but plausible downside scenario
covering adverse movements against the base forward forecast in both sales and
cost inflation in which some mitigation activity is taken including lower
capital expenditure on site remodel activity and a flex down of labour and
site costs in line with reduced sales. In this scenario sales are assumed to
remain marginally in growth but at three percent below the base case forecast.
Unmitigated cost inflation is also higher in the areas of food and energy. In
this downside scenario the Group is again able to stay within securitisation
and committed facility financial covenants, whilst maintaining sufficient
liquidity.
Furthermore, the Directors have considered a reverse stress test analysis, to
review the headroom below which trading could fall beyond the downside
scenario before the earlier of financial covenants becoming breached, or
available liquidity becoming insufficient. This analysis indicates that on
consistent cost assumptions, sales would be able to fall by approximately five
percent beyond the downside case throughout the assessment period before
financial covenants were breached, when tested at Q4 FY25 being the last full
testing period within the 12 month going concern assessment period. In this
scenario the Group would still have sufficient available liquidity.
After due consideration of these factors, the directors therefore believe that
it remains appropriate to prepare the financial statements on a going concern
basis.
Foreign currencies
The results of overseas operations have been translated into sterling at the
weighted average euro rate of exchange for the period of £1 = €1.15 (2023
£1 = €1.16), where this is a reasonable approximation to the rate at the
dates of the transactions. Euro and US dollar denominated assets and
liabilities have been translated at the relevant rate of exchange at the
balance sheet date of £1 = €1.20 (2023 £1 = €1.15) and £1 = $1.34 (2023
£1 = $1.22) respectively.
New and amended IFRS Standards that are effective for the current period
The International Accounting Standards Board (IASB) and International
Financial Reporting Interpretations Committee (IFRIC) have issued the
following standards and interpretations which have been adopted by the Group
in these consolidated financial statements for the first time with no material
impact.
Accounting standard Effective date
Amendments to IAS 1 January 2023
1 and IFRS Practice Statement 2 (Disclosure of Accounting Policies)
Amendments to 1 January 2023
IAS 8 (Definition of Accounting Estimates)
Amendments to IAS 12 (Deferred Tax related to Assets and Liabilities arising 1 January 2023
from a Single Transaction)
IFRS 17 Insurance Contracts 1 January 2023
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 evaluated 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.
1. Preparation of preliminary consolidated financial statements (continued)
Critical accounting judgements and key sources of estimation uncertainty
(continued)
Judgements and estimates for the period remain largely unchanged from the
prior period, with the additional area of judgement around the recognition of
pension surplus (see note 11).
Significant accounting estimates:
The significant accounting estimate with a significant risk of a material
change to the carrying value of assets and liabilities within the next year in
terms of IAS 1 Presentation of Financial Statements, is:
· Fair value of freehold and long leasehold properties - see note 6
Other areas of judgement are described in each section listed below:
· Determination of items that are separately disclosed - see note 3
· Impairment review of short leasehold properties and right-of-use
assets - see note 8
· Recognition of pension surplus - see note 11
Other sources of estimation uncertainty are described in:
· Impairment review of short leasehold properties and right-of-use
assets - see note 8
2. Segmental analysis
Operating segments
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
Group trades in one business segment (that of operating pubs and restaurants)
and the Group's brands meet the aggregation criteria set out in Paragraph 12
of IFRS 8. Economic indicators assessed in determining that the aggregated
operating segments share similar economic characteristics include: expected
future financial performance; operating and competitive risks; and return on
invested capital. As such, the Group reports the business as one reportable
business segment.
The CODM uses EBITDA and operating profit before interest and separately
disclosed items as the key measures of the Group's results on an aggregated
basis.
Geographical segments
Substantially all of the Group's business is conducted in the United
Kingdom. In presenting information by geographical segment, segment revenue
and non-current assets are based on the geographical location of customers and
assets.
Geographical segments
UK Germany Total
2024 2023 2024 2023 2024 2023
52 weeks 53 weeks 52 weeks 53 weeks 52 weeks 53 weeks
£m £m £m £m £m £m
Revenue - sales to third parties 2,493 2,387 117 116 2,610 2,503
Segment non-current assets(a) 4,706 4,442 51 46 4,757 4,488
a. Includes balances relating to intangibles, property, plant and equipment,
right-of-use assets, finance lease receivables and non-current other
receivables.
3. Separately disclosed items
The items identified in the current period are as follows:
2024 2023
52 weeks 53 weeks
Notes £m £m
Separately disclosed items
Gaming machine settlement a - (1)
Fair value adjustment to investment in 3Sixty Restaurants Limited b - 5
Settlement of pre-existing lease contracts on acquisition of 3Sixty c - (3)
Restaurants Limited
Costs associated with the acquisition of 3Sixty Restaurants Limited d - (1)
Total separately disclosed items recognised within operating costs - -
Net profit arising on property disposals 2 3
Movement in the valuation of the property portfolio:
- Impairment credit/(charge) arising from the revaluation of freehold and long e 4 (110)
leasehold properties
- Net impairment of short leasehold and unlicensed properties f - (6)
- Net impairment of right-of-use assets g (17) (14)
- Net impairment of computer software h (1) -
- Net impairment of goodwill i - (1)
Net movement in the valuation of the property portfolio (14) (131)
Total separately disclosed items before tax (12) (128)
Tax credit relating to above items 4 28
Total separately disclosed items after tax (8) (100)
a. During prior periods £19m was received from HMRC, relating to VAT on gaming
machine income for the period 2005 to 2012, including interest. An estimate of
£20m for the amount receivable was recognised in the 52 weeks ended 25
September 2021 as a separately disclosed item. As a result, the shortfall of
£1m was recognised in the prior period.
b. During the prior period, on 18 June 2023 the Group acquired the remaining 60%
of share capital of 3Sixty Restaurants Limited, after having a 40% interest
since April 2018. As a result of this acquisition achieved in stages, the
Group has applied the principles of IFRS 3 and remeasured the 40% interest to
fair value at acquisition (see note 13 for further details).
c. As a result of the acquisition of 3Sixty Restaurants Limited in the prior
period, a loss was recognised at acquisition for the settlement of
pre-existing lease contracts, due to the terms of the contracts being below
market terms (see note 13 for further details).
d. Relates to integration costs, restructuring costs and legal and professional
fees incurred in the prior period acquisition of 3Sixty Restaurants Limited.
e. The impairment arising from the Group's revaluation of its freehold and long
leasehold pub estate comprises an impairment charge, where the carrying values
of the properties exceed their recoverable amount, net of a revaluation
surplus that reverses past impairments. See note 6 for further details.
f. Impairment of short leasehold and unlicensed properties where their carrying
values exceed their recoverable amounts, net of reversals of past impairments.
See note 8 for further details.
g. Impairment of right-of-use assets where their carrying values exceed their
recoverable amounts, net of reversals of past impairments. See note 8 for
further details.
h. Impairment of computer software where the carrying value exceeds the
recoverable amount. See note 8 for further details.
i. Impairment of goodwill where the carrying value exceeds the recoverable
amount. See note 8 for further details.
4. Taxation
Taxation - Group income statement
2024 2023
52 weeks 53 weeks
£m £m
Current tax:
- Corporation tax (16) (5)
Total current tax charge (16) (5)
Deferred tax:
- Origination and reversal of temporary differences (33) 11
- Effect of changes in UK tax rate - 3
- Amounts under-provided in prior periods (1) -
Total deferred tax (charge)/credit (34) 14
Total tax (charge)/credit in the Group income statement (50) 9
Further analysed as tax relating to:
Profit before separately disclosed items (54) (19)
Separately disclosed items 4 28
Total tax (charge)/credit in the Group income statement (50) 9
The standard rate of corporation tax applied to the reported profit/(loss) is
25.0% (2023 22.0%).
The tax charge (2023 credit) in the Group income statement for the period is
in line with (2023 higher than) the standard rate of corporation tax in the
UK. The differences are reconciled below:
2024 2023
52 weeks 53 weeks
£m £m
Profit/ (Loss) before tax 199 (13)
Taxation (charge)/credit at the UK standard rate of corporation tax of 25.0% (50) 3
(2023 22.0%)
Expenses not deductible (3) (1)
Permanent benefits 4 5
Tax credit in respect of change in UK tax rate - 3
Effect of different tax rates of subsidiaries in other jurisdictions - (1)
Adjustments in respect of prior periods (1) -
Total tax (charge)/credit in the Group income statement (50) 9
4. Taxation (continued)
Taxation for other jurisdictions is calculated at the rates prevailing in
those jurisdictions.
2024 2023
52 weeks 53 weeks
£m £m
Deferred tax in the Group income statement:
Accelerated capital allowances (14) (14)
Unrealised losses on revaluations - 28
Tax losses - UK (15) -
Tax losses - Interest Restriction (7) -
Retirement benefit obligations 1 -
Share based payments 1 -
Total deferred tax (charge)/credit in the Group income statement (34) 14
Taxation - other comprehensive income
2024 2023
52 weeks 53 weeks
£m £m
Deferred tax:
Items that will not be reclassified subsequently to profit or loss:
- Unrealised (gains)/losses due to revaluations - revaluation reserve (74) 18
- Unrealised gains due to revaluations - retained earnings - (4)
- Remeasurement of pension liability (42) (9)
(116) 5
Items that may be reclassified subsequently to profit or loss:
- Cash flow hedges 6 (5)
Total tax charge recognised in other comprehensive income (110) -
2024 2023
52 weeks 53 weeks
£m £m
Tax relating to items recognised directly in equity
Deferred tax:
- Tax credit related to share-based payments 1 -
Factors which may affect future tax charges
The Group is within the scope of the OECD Pillar Two (Global Minimum Tax)
model rules. The legislation has been substantively enacted in the UK and
Germany, being the jurisdictions in which the Group operates. The rules will
be effective for the Group from the accounting period commencing 29 September
2024. Initial assessments indicate that Pillar Two income taxes will not be
material to the Group, with the effective tax rate in the UK and Germany both
exceeding the 15% global minimum tax rate by some margin. The Group will
continue to work on evaluating the final impact of both the calculations and
the reporting requirements through FY 2025.
For the year to 28 September 2024, the Group has applied the IAS 12 mandatory
exception to recognising and disclosing information about deferred tax assets
and liabilities related to Pillar Two income taxes.
5. Earnings/(loss) per share
Basic earnings per share (EPS) has been calculated by dividing the profit for
the 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 dilutive potential ordinary shares.
Adjusted earnings per ordinary share amounts are presented before separately
disclosed items (see note 3) in order to allow an understanding of the
adjusted trading performance of the Group.
The profits used for the earnings per share calculations are as follows:
2024 2023
52 weeks 53 weeks
£m £m
Profit/(Loss) for the period 149 (4)
Separately disclosed items, net of tax 8 100
Adjusted profit for the period(a) 157 96
a. Adjusted profit and adjusted EPS are alternative performance measures
(APMs) and are considered critical to aid understanding of the Group's
performance. These measures are explained later in this announcement.
The number of shares used for the earnings per share calculations are as
follows:
2024 2023
52 weeks 53 weeks
million million
Basic weighted average number of ordinary shares 595 595
Effect of dilutive potential ordinary shares:
- Contingently issuable shares 5 -
Diluted weighted average number of shares 600 595
2024 2023
52 weeks 53 weeks
pence pence
Basic earnings/(loss) per share
Basic earnings/(loss) per share 25.0p (0.7p)
Separately disclosed items net of tax per share 1.4p 16.8p
Adjusted basic earnings per share(a) 26.4p 16.1p
Diluted earnings/(loss) per share
Diluted earnings/(loss) per share 24.8 p (0.7) p
Adjusted diluted earnings per share(a) 26.2 p 16.1 p
a. Adjusted profit and adjusted EPS are alternative performance
measures (APMs) and are considered critical to aid understanding of the
Group's performance. These measures are explained later in this announcement.
At 28 September 2024, 1,486,595 (2023 7,323,559) other share options were
outstanding that could potentially dilute basic EPS in the future but were not
included in the calculation of diluted EPS as they are anti-dilutive for the
periods presented.
6. Property, plant and equipment
Accounting policies
Property, plant and equipment
The majority of the Group's freehold and long leasehold licensed land and
buildings, and the associated landlord's fixtures, fittings and equipment
(i.e. fixed fittings) are revalued annually and are therefore held at fair
value less depreciation. Tenant's fixtures and fittings (i.e. loose
fixtures) within freehold and long leasehold properties, are held at cost less
depreciation and impairment.
Short leasehold buildings (leases with an unexpired lease term of less than 50
years), unlicensed land and buildings and associated fixtures, fittings and
equipment are held at cost less depreciation and impairment.
Revaluation
The revaluation, performed at 28 September 2024, is determined via annual
third-party inspection of 20% of the sites with the aim that all sites are
individually valued approximately every five years. The valuation utilises
estimates of fair maintainable trade (FMT) and valuation multiples. The
revaluation determined by the annual inspection was carried out in accordance
with the RICS Valuation - Global Standards 2022 which incorporate the
International Valuation Standards and the RICS Valuation - Professional
Standards UK (the 'Red Book') assuming each asset is sold as a fully
operational trading entity.
Properties are valued as fully operational entities, to include fixtures and
fittings but excluding stock, personal goodwill and estimated fair value of
tenant's fixtures and fittings.
The 80% of the freehold and long leasehold estate which is not subject to a
third-party valuation in the period is instead revalued internally by
management. The Group's external valuer provides advice to management in
relation to their internal valuation. This valuation is performed using
estimates of FMT, together with the same valuation multiples as those applied
by the external valuer. Sites impacted by expansionary capital investment in
the preceding twelve months are reviewed for impairment only, based on
estimated annualised post investment FMT against the carrying value of the
asset. Where the value of land and buildings derived purely from a multiple
applied to the FMT misrepresents the underlying asset value, a spot valuation
is applied.
Surpluses which arise from the revaluation exercise are included within other
comprehensive income (in the revaluation reserve) unless they are reversing a
revaluation deficit which has been recognised in the income statement
previously; in which case an amount equal to a maximum of that recognised in
the income statement previously is recognised in the income statement. Where
the revaluation exercise gives rise to a deficit, this is reflected directly
within the income statement, unless it is reversing a previous revaluation
surplus against the same asset; in which case an amount equal to the maximum
of the revaluation surplus is recognised within other comprehensive income (in
the revaluation reserve).
Impairment
Short leaseholds, unlicensed properties and fixtures and fittings are reviewed
on an outlet basis for impairment if events or changes in circumstances
indicate that the carrying amount may not be recoverable. Further details of
the impairment policy are provided in the impairment note 8.
6. Property, plant and equipment (continued)
Property, plant and equipment can be analysed as follows:
2024 2023
£m £m
At beginning of period 4,086 4,194
Acquired through business combinations (note 13) 7 29
Additions 163 151
Disposals (2) (3)
Net increase/(decrease) from property revaluation 258 (186)
Net impairment of short leasehold properties - (6)
Depreciation provided during the period (92) (93)
Exchange differences (1) -
At end of period 4,419 4,086
Revaluation and impairment recognised
Current period valuations have been incorporated into the consolidated
financial statements and the resulting revaluation adjustments have been taken
to the revaluation reserve or Group income statement as appropriate.
The impact of the revaluations/impairments described above is as follows:
2024 2023
53 weeks 53 weeks
£m £m
Group income statement
Revaluation deficit charged as an impairment (120) (162)
Reversal of past revaluation deficits 124 52
Total impairment reversal/(charge) arising from the revaluation 4 (110)
Impairment of short leasehold and unlicensed properties (note 8) (7) (11)
Reversal of past impairments of short leasehold and unlicensed properties 7 5
(note 8)
Net impairment of short leaseholds and unlicensed properties - (6)
Total impairment reversal/(charge) recognised in the income statement 4 (116)
Group statement of other comprehensive income
Unrealised revaluation surplus 356 162
Reversal of past revaluation surplus (102) (238)
Total movement recognised in other comprehensive income 254 (76)
Net increase/(decrease) in property, plant and equipment 258 (192)
Accounting judgements
Revaluation of freehold and long leasehold properties
The revaluation methodology is determined, with advice from CBRE, independent
chartered surveyors and incorporates management judgement where appropriate.
The application of a valuation multiple to the fair maintainable trade of each
site is considered the most appropriate method for the Group to determine the
fair value of freehold and long leasehold licensed land and buildings.
6. Property, plant and equipment (continued)
Accounting judgements (continued)
In the current and prior period, judgement has been applied to establish the
basis of FMT that a willing third-party buyer would assume. The estimation
of FMT is derived from the individual profit and loss accounts of pubs and
restaurants and is inclusive of the centrally recorded trading margins earned
by the Group but exclusive of certain head office costs. This represents the
Group's best view of the value that would be attributed by other reasonably
efficient operators. In the current period FMT reflects the reported site
performance. In the prior period the prevailing reported profits were
negatively impacted by high and sustained cost inflation, notably in food and
energy price increases driven by the Ukraine conflict. However the
inflationary pressures were not expected to fully impact on site valuations
and as such, FMT was determined to include an adjustment to reported profit
margins.
Where sites have been impacted by expansionary capital investment in the
preceding twelve months, the FMT has been determined by estimating annualised
post-investment operating profit with reference to post-investment forecasts.
For the purposes of the valuation, and in order to group together properties
of a similar nature, groupings by brand are applied for which standard
multiples have been established through third-party inspections of 20% of the
freehold and long leasehold licensed property estate. Judgements are applied
in assessing multiples on the basis of market evidence of transaction prices
and nature of the overall offer within the local market, with specific
consideration given to geographical location, ancillary revenue such as
accommodation sales from bedrooms and lease terms for long leasehold sites.
Revaluation of freehold and long leasehold properties (continued)
Further judgement is required when a spot valuation is applied where the
property value derived purely from a multiple applied to the fair maintainable
trade misrepresents the underlying asset value with consideration given to the
level of trade and location characteristics.
Significant accounting estimates
Revaluation of freehold and long leasehold properties
The application of the valuation methodology requires two significant
estimates; the estimation of valuation multiples, which are determined via
third-party inspections; and an estimate of FMT.
In the prior period adjustments were made to pub and restaurant trading
margins to reflect the margin impacts of cost inflation which were expected to
persist into the level of FMT used by third-party, reasonably efficient
operators in arriving at a transaction price. The impact of inflation across
drink and food, labour, energy and other pub operating costs compared to pre
Covid was assessed and adjusted individually. In aggregate approximately
2.5% of the total margin reduction reported in the prior period against pre
Covid trade was expected to recover in the short to medium term and was
included in estimated FMT. In the current period, costs have stabilised such
that the Group's external valuer now considers that the current level of
reported site profitability is representative of the FMT that a third-party,
reasonably efficient operator would include in arriving at a transaction
price.
The estimation of valuation multiples is derived from the valuers knowledge of
market evidence of transaction prices for similar properties. In the current
period the multiples adopted are mostly in line with the prior period other
than a slight easing for some parts of the premium end of the market.
There is considered to be a significant risk that an adjustment to either of
these assumptions could lead to a material change in the property valuation
within the next year.
The carrying value of properties to which these estimates apply is £4,260m
(2023 £3,933m).
Sensitivity analysis
Changes in the FMT, or the multiple could materially impact the valuation of
the freehold and long leasehold properties, and as such they are both
considered to be significant estimates in the current period.
6. Property, plant and equipment (continued)
Significant accounting estimates (continued)
FMT
In the current period, FMT has increased by 6% over the prior period's
adjusted FMT, excluding the sites with investment in the current period which
are only assessed for impairment. Given trading has now normalised following
the disruption caused by the Covid pandemic in 2020, and there is a more
stable inflationary environment, a return to pre Covid FMT movements is
considered to be within range of reasonably possible outcomes. Over the
three years reported prior to Covid the average movement in the FMT of the
revalued estate was 1%. Assuming multiples remain stable, it is estimated
that a 1% reduction in the FMT would generate an approximate £37m reduction
in the valuation. A 1% increase in the FMT is estimated to generate an
approximate £36m increase in the valuation. The sensitivity does not apply
to sites with spot valuations as these valuations are independent of reported
operating profits. Any change to the spot valuations would not be material.
Multiples
Valuation multiples are determined at an individual brand level. Over the
last three financial periods, the weighted average brand multiple has moved by
an average of 0.1, which is considered to be within the range of reasonably
possible outcomes for future movements in multiples. It is estimated that a
0.1 reduction in the multiple would generate an approximate £42m reduction in
the valuation. A 0.1 increase to the multiple is estimated to generate an
approximate £41m increase in the valuation.
Impairment review
Short leasehold and unlicensed properties (comprising land, buildings,
fixtures, fittings and equipment) which are not revalued to fair market value,
are reviewed for impairment as described in the impairment note 8. A net
impairment of £nil (2023 £6m) has been recognised against short leasehold
and unlicensed properties in the period.
7. Leases
Right-of-use assets
Right-of-use assets can be analysed as follows:
2024 2023
£m £m
At beginning of period 327 339
Acquired through business combinations (note 13) 7 6
Additions 30 36
Disposals (5) (2)
Impairment (17) (14)
Depreciation provided during the period (34) (36)
Foreign currency movements (1) (2)
At end of period 307 327
Impairment review of right-of-use assets
Right-of-use assets are reviewed for impairment by comparing site recoverable
amounts to their carrying values. Impairment is considered at a
cash-generating unit level. A net impairment of £17m (2023 £14m) has been
recognised against right-of-use assets in the period. Details of the
impairment review at a cash-generating unit level are disclosed in note 8.
Lease liabilities
2024 2023
Analysed as: £m £m
Current lease liabilities - principal amounts due within twelve months 33 33
Non-current lease liabilities - principal amounts due after twelve months 414 430
447 463
8. Impairment
Accounting policies
Impairment - Property, plant and equipment, right-of-use assets, computer
software and goodwill
Impairment reviews are considered at a cash-generating unit level, with this
being an individual outlet.
The carrying value of assets for an individual outlet, comprise the property,
plant and equipment value, the associated right-of-use asset and any
attributable goodwill, together with an allocation of central asset values
(property, plant and equipment, right-of-use asset and computer software). At
each balance sheet date, the Group assesses whether there is any indication
that the carrying value of assets for individual outlets may be impaired. If
any such impairment indicator exists then an impairment loss is recognised
whenever the carrying value of the outlet exceeds its recoverable amount,
which is determined as the higher of the value in use, or fair value less
costs to sell for each outlet. Any resulting impairment relates to sites
with poor trading performance, where the output of the value in use
calculations are insufficient to justify their current net book value.
Changes in outlet earnings or cash flows, the discount rate applied to those
cash flows, or the estimate of fair value less costs of disposal could give
rise to an additional impairment loss.
Where an impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable amount, but only
so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the
asset in prior periods. A reversal of an impairment loss is recognised in
the income statement. An impairment reversal is only recognised where there
is a change in circumstances or favourable events since the last impairment
test impacting estimates used to determine recoverable amounts, not where it
results from the passage of time.
Accounting judgements
Impairment review of cash-generating units - property, plant and equipment,
right-of-use assets, computer software and goodwill
For the individual outlet level impairment review, judgement has been applied
to determine the most appropriate site level profit and cash flow forecasts
based on the Group forecast for FY 2025 to FY 2027 that was in place at the
balance sheet date.
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. Judgement is applied
in the allocation of corporate level assets to individual cash generating
units, based on relative profitability.
Other sources of estimation uncertainty
Impairment review of cash-generating units - property, plant and equipment,
right-of-use assets, computer software and goodwill
The impairment review requires two key sources of estimation uncertainty in
calculating the value in use: the estimation of forecast cash flows for each
site and the selection of an appropriate discount rate. The discount rate is
applied consistently to each cash-generating unit.
The carrying value of assets to which these estimates apply is £442m (2023
£452m).
Impairment review of cash-generating units, comprising property, plant and
equipment, right-of-use assets, computer software and goodwill
Recoverable amount is determined as the higher of the value in use, or fair
value less costs to sell for each outlet.
8. Impairment (continued)
Value in use calculations use forecast trading performance pre-tax cash flows,
for years 1 to 3. These include steady increases to revenue and costs. In
the short to medium term, over the three year forecast period, no allowances
have been made for any potential impact activity related to climate change,
other than continued maintenance and infrastructure spend on existing
sustainability projects, as the impacts of this on future cash flows or
capital expenditure cannot yet be reasonably estimated or allocated to
cash-generating units.
The forecast cash flows are discounted by applying a pre-tax discount rate of
11.00% (2023 11.00%) and a long-term growth rate of 2.0% from year 4 (2023
2.0%). The long-term growth rate is applied to the net cash flows and is based
on up-to-date economic data points.
In summary, the carrying value of the cash-generating units and impairment
charges and reversals recognised against those cash-generating units is as
follows.
Carrying value Impairment charges Impairment reversals Net impairment
Note 2024 2024 2024 2024
£m £m £m £m
Short leasehold properties 6 122 (7) 7 -
Right-of-use assets 7 307 (29) 12 (17)
Software 6 (1) - (1)
Goodwill 7 - - -
442 (37) 19 (18)
Carrying value Impairment charges Impairment reversals Net impairment
Note 2023 2023 2023 2023
£m £m £m £m
Short leasehold properties 6 113 (11) 5 (6)
Right-of-use assets 7 327 (27) 13 (14)
Software 10 - - -
Goodwill 2 (1) - (1)
452 (39) 18 (21)
Sensitivity analysis
Changes in forecast cash flows or the discount rate could impact the
impairment charge recognised against the cash-generating units, and corporate
level assets.
Forecast cash flows
The forecast pre-tax cash flows used in the value in use calculations are site
level forecasts determined from the Group forecast for FY 2025 to FY 2027 that
was in place at the balance sheet date. For short leasehold sites and
freehold/long leasehold sites with ROU or goodwill assets, should future cash
flows decline by 1%, this would result in an increase of £2m to the net
impairment charge recognised.
Discount rate
The pre-tax discount rate applied to the forecast cash flows is derived from
the Group's post-tax weighted average cost of capital (WACC). The assumptions
used in the calculation of the Group's WACC are benchmarked to externally
available data. A single discount rate is applied to all cash-generating
units. Over recent periods, the discount rate used in impairment reviews has
moved by c.1.0%. For short leasehold sites and freehold/long leasehold sites
with ROU or goodwill assets, an increase of 1.0% in the discount rate would
result in an increase of £7m to the net impairment charge recognised.
9. Borrowings and net debt
Borrowings can be analysed as follows:
2024 2023
£m £m
Current
Securitised debt(a) 130 123
Unsecured revolving credit facilities(b) (1) (2)
Overdrafts(c) 12 23
Other borrowings(d) 2 -
Total current 143 144
Non-current
Securitised debt(a) 1,041 1,186
Total borrowings 1,184 1,330
a. Stated net of deferred issue costs.
b. At 28 September 2024 the amount of £1m (2023 £2m) represents unamortised
issue costs.
c. The overdraft is within a cash pooling arrangement. In the cash flow
statement, cash and cash equivalents are presented net of this overdraft.
d. Short term financing of employee advances.
2024 2023
£m £m
Analysis by year of repayment
Due within one year or on demand 143 144
Due between one and two years 157 164
Due between two and five years 458 435
Due after five years 426 587
Total borrowings 1,184 1,330
Securitisation
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. There are two main financial covenants,
being the level of net assets and free cash flow (FCF) to debt service. FCF to
debt service represents the multiple of cash generated by sites within the
structure to the cost of debt service. This is tested quarterly on both a
trailing two quarter and a four quarter basis. There are additional 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. Further details of the covenants are provided in the
going concern review in note 1.
Unsecured revolving credit facilities
The Group holds a single unsecured committed revolving credit facility of
£200m, which expires on 20 July 2026. The amount drawn at 28 September 2024
is £nil (2023 £nil).
There are covenants on the unsecured revolving credit facilities relating to
the ratio of EBITDAR to rent plus interest and net debt to EBITDA based on the
performance of the unsecured estate. Further details of the covenants are
provided in the going concern review in note 1.
9. Borrowings and net debt (continued)
2024 2023
Net debt £m £m
Cash and cash equivalents 176 126
Overdraft (12) (23)
Cash and cash equivalents as presented in the cash flow statement(a) 164 103
Securitised debt (1,171) (1,309)
Unsecured revolving credit facility 1 2
Derivatives hedging securitised debt(b) 19 34
Short term financing of employee advances (c) (2) -
(989) (1,170)
Net debt excluding leases
Lease liabilities (447) (463)
Net debt including leases (1,436) (1,633)
a. Cash and cash equivalents, in the cash flow statement, are presented net of an
overdraft within a cash pooling arrangement relating to various entities
across the Group.
b. Represents the element of the fair value of currency swaps hedging the balance
sheet value of the Group's US$ denominated A3N loan notes. This amount is
disclosed separately to remove the impact of exchange movements which are
included in the securitised debt amount. Derivatives hedging debt restates the
US$ debt at $1.675: £1.
c. Advances to employees is a borrowing from Wagestream.
2024 2023
52 weeks 53 weeks
Movement in net debt excluding leases £m £m
Net decrease in cash and cash equivalents 62 (86)
Add back cash flows in respect of other components of net debt:
Principal repayments on securitised debt 128 121
Principal receipts on cross currency swap (21) (21)
Principal payments on cross currency swap 16 16
Short term financing of employee advances (2) -
Decrease in net debt arising from cash flows 183 30
Movement in capitalised debt issue costs net of accrued interest (1) (1)
Decrease in net debt excluding leases 182 29
Opening net debt excluding leases (1,170) (1,198)
Foreign exchange movements on cash (1)
(1)
Closing net debt excluding leases (989) (1,170)
9. Borrowings and net debt (continued)
Movement in lease liabilities:
2024 2023
52 weeks 53 weeks
£m £m
Opening lease liabilities (463) (481)
Acquired through business combinations (note 13) (5) (5)
Additions(a) (28) (35)
Interest charged during the period (17) (16)
Repayment of principal 41 53
Payment of interest 17 16
Disposals 7 4
Foreign currency movements 1 1
Closing lease liabilities (447) (463)
a. Additions to lease liabilities include new leases and lease
extensions or rent reviews relating to existing leases.
10. Finance costs and income
2024 2023
52 weeks 53 weeks
£m £m
Finance costs
Interest on securitised debt (79) (89)
Interest on other borrowings (13) (11)
Interest on lease liabilities (17) (16)
Total finance costs (109) (116)
Finance income
Interest receivable - cash 10 8
Net pensions finance charge (note 11) (2) (3)
11. Pensions
Measurement of scheme assets and liabilities
MABEPP - buy-out
The Trustees of MABEPP bought-out the liabilities of the plan with Legal and
General Assurance Society Limited on 20 September 2024, through converting the
overall bulk annuity policy (held by the Trustees as an investment since 2021)
into individual policies in members' own names. As part of this process, a
separate decision was made in August 2024 by the Company to convert the buy-in
policy into a buy-out, which was independent of, and not related to, the
initial decision in December 2021 to purchase a buy-in policy.
As a result of the decision to buy-out, which relieves the Company of primary
responsibility for the obligation, this event has been treated as a settlement
of an equal and opposite amount on both the assets and liabilities, such that
the net impact is a zero cost. Since the buy-out was close to the Company's
year-end, the settlement calculation has been calculated using the year-end
assumptions (the key assumptions of which are set out below).
The intention is for MABEPP to be wound-up over the course of the next twelve
months.
A £3m cash surplus remaining in MABEPP at the year end has been recognised as
it will transfer to MABPP on the wind up of the scheme and recovered from
future DC scheme contributions in line with the MABPP surplus.
11. Pensions (continued)
Measurement of scheme assets and liabilities (continued)
MABPP - buy-in policy transaction
During the prior period the Trustees of the MABPP entered a Bulk Purchase
Agreement ('BPA') with Standard Life. The resulting policy was set up to
provide the plan with sufficient funding to cover all known member benefits of
the scheme. As in the prior period the following considerations remain
applicable:
· the employer is not relieved of primary responsibility for the
obligation. The policy simply covers the benefit payments that continue to be
payable by the scheme;
· the contract is effectively an investment of the scheme;
· the contract provides the option to convert the annuity into
individual policies, which would transfer the obligation to the insurer (known
as a "buy-out"). Whilst this course of action may be considered in future,
this is not a requirement and a separate decision will be required before any
buy-out proceeds. The Company had not made a decision, and has still not made
a decision, to move to buy-out; and
· the Trustee and insurer continue to progress a data cleanse
project. An adjustment has been made to the assets held by the MABPP to
allow for £6m additional premium, which is the current best estimate of the
true-up premium payable to the insurer once the data cleanse project is
completed. This is based on the current status of the data cleanse project,
and may be updated in future as this progresses to allow for any further
changes, including the potential impact of the recent Virgin Media legal case.
MABPP - recognition of actuarial surplus
Over the course of 2024, the Trustees of MABPP resolved that any surplus
arising in MABPP can be used to pay for the employer contributions to the
defined contribution section of MABPP. In connection with this, before the
buy-out of MABEPP occurred in September 2024, the defined contribution members
within MABEPP were moved across to MABPP, along with the remaining surplus
funds from the MABEPP (with the exeption of £3m which remains in MABEPP and
which will transfer to MABPP on the wind up of the scheme), to enable future
employer contributions for them to be met out of the surplus in the MABPP.
Since this is a change in the Trustee's agreed use of the MABPP surplus
compared to previous years, the accounting surplus is being recognised in full
in this year's accounts, with the full value of the surplus of £164m
(including the £3m remaining within MABEPP until the wind up of the scheme)
expected to be an economic benefit to the Company. This economic benefit has
been determined over the future lifetime of the DC section of the plan, in
particular on the basis that this section remains open to new members in its
current form, and therefore will continue to remain active for the foreseeable
future. In prior periods no actuarial surplus has been recognised as the
Company did not have an unconditional right to recover any surplus from the
pension plans.
Actuarial valuation
The actuarial valuations used for IAS 19 (revised) purposes are based on the
results of the latest full actuarial valuation carried out as at 31 March
2022, which completed in December 2022, and updated by the schemes'
independent qualified actuaries to 28 September 2024. Schemes' assets are
stated at market value at 28 September 2024 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 have been updated to reflect changes in
market conditions in the period and are as follows. Whilst the Executive
Plan bought out all it's liabilities with Legal & General during the
period, the assumptions applicable to the Executive Plan have been used in the
settlement calculation given it's proximity to the year end date.
Main plan Executive plan Main plan Executive plan
2024 2024 2023 2023
Discount rate 5.1% 5.1% 5.7% 5.7%
Pensions increases - RPI max 5% 3.0% 3.0% 3.1% 3.1%
Inflation rate - RPI 3.2% 3.2% 3.3% 3.3%
11. Pensions (continued)
Measurement of scheme assets and liabilities (continued)
The discount rate is based on a yield curve for AA corporate rated bonds which
are consistent with the currency and estimated term of retirement benefit
liabilities.
To determine the RPI assumption the gilt implied inflation yield curve has
been used, reflecting the duration of the Plan's cash flows, and adjusting for
an assumed inflation risk premium.
Minimum funding requirements
The results of the 2022 actuarial valuation, which was completed in December
2022, show a marginal surplus. As a result of the 2022 actuarial valuation,
the Company subsequently agreed a revised schedule of contributions for both
the MABPP and MABEPP schemes.
For the MABEPP, the agreement confirms that from December 2022, payments into
the "Blocked Account" that commenced after completion of the buy-in
transaction in 2021 have been suspended.
For the MABPP, contributions since December 2022 were made into a "Blocked
Account". As the scheme is in surplus, in the current period the Trustee
agreed to return in full the balance of £36m in the blocked account to the
Company, which the Company had recognised within non-current receivable in the
prior period.
As a result, the remaining Blocked Account for MABEPP is recognised within
current other receivables as recovery of this amount is expected. The amount
recognised as at 28 September 2024 is £12m (2023 £47m; £12m in respect of
the MABEPP blocked account and £35m in respect of the MABPP blocked account,
since repaid - both shown within non-current other receivables).
As a result of the above changes, the resulting net pension asset as at 28
September 2024 is £139m, which represents £164m surplus in relation to
MABEPP and MABPP, with a liability of £25m relating to MABETUS.
Amounts recognised in respect of defined benefit 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.
2024 2023
52 weeks 53 weeks
Group income statement £m £m
Operating profit:
Employer contributions (defined contribution plans) (19) (17)
Administrative costs (defined benefit plans) (5) (5)
Charge to operating profit (24) (22)
Finance costs:
Net pensions finance income on actuarial surplus 6 14
Additional pensions finance charge due to asset ceiling/minimum funding (8) (17)
Net finance charge in respect of pensions (2) (3)
Total charge (26) (25)
2024 2023
52 weeks 53 weeks
Group statement of comprehensive income £m £m
Return on scheme assets and effects of changes in assumptions 16 (153)
Movement in pension liabilities recognised due to asset ceiling/minimum 150 195
funding
Remeasurement of pension liabilities 166 42
11. Pensions (continued)
Amounts recognised in respect of defined benefit schemes (continued)
2024 2023
Group balance sheet £m £m
Fair value of schemes' assets 1,238 1,434
Present value of schemes' liabilities (1,099) (1,313)
Actuarial surplus in the schemes 139 121
Additional liabilities recognised due to asset ceiling/minimum funding - (143)
Total pension asset/(liabilities)(a) 139 (22)
Associated deferred tax (liability)/asset (35) 5
a. The total net pension asset of £139m (2023 £22m liability) is
presented as a pension asset of £164m, made up of a net asset from the two
funded plans, and liabilities of £25m (2023 £22m) presented as a £1m
current liability (2023 £1m) and a £24m non-current liability (2023 £21m).
The movement in the actuarial surplus in the period is as follows:
2024 2023
£m £m
Actuarial surplus at beginning of period 121 257
Interest income 7 14
Return on scheme assets and effects of changes in assumptions 15 (153)
Additional employer contributions 1 8
Administration costs (5) (5)
At end of period 139 121
12. Share capital and share premium
2024 2023
Called up share capital Number of shares £m Number of shares £m
Allotted, called up and fully paid
Ordinary shares of 8(13/)(24)p each
At start of period 597,726,859 51 597,383,363 51
Share capital issued(a) 330,812 - 343,496 -
At end of period 598,057,671 51 597,726,859 51
a. During the period, the Company issued 330,812 (2023 343,496) shares
at nominal value under share option schemes, for consideration of £28,257
(2023 £29,340).
All of the ordinary shares rank equally with respect to voting rights and
rights to receive Ordinary and Special Dividends. There are no restrictions on
the rights to transfer shares.
Dividends
There were no dividends declared or paid during the current or prior period.
Share premium account
The share premium account represents amounts received in excess of the nominal
value of shares on issue of new shares. Share premium of £nil (2023 £nil)
has been recognised on shares issued in the period.
13. Acquisitions
On 14 May 2024, the Group acquired the entire share capital of Pesto
Restaurants Ltd, a group of 10 restaurants based in the UK, for consideration
which will be determined over two payments and partly contingent on future
performance of the business. The consideration will be no more than £15m
and has been assessed at £12m for the purposes of calculation of goodwill
under IFRS 3.
The amounts recognised in respect of identifiable assets and liabilities
relating to the acquisition were as follows.
Fair value on acquisition
£m
Land and buildings 7
Right-of-use assets 7
Brand intangible 2
Cash and cash equivalents 2
Trade and other payables (3)
Lease liabilities (5)
Borrowings (1)
Deferred tax liability (2)
Net identifiable assets of Pesto Restaurants Ltd 7
Goodwill 5
Fair value of assets and liabilities 12
Consideration:
Initial cash consideration 4
Contingent consideration 8
Total consideration 12
Initial cash consideration 4
Less: cash and cash equivalents acquired (2)
Net cash outflow on acquisition 2
Goodwill of £5m has arisen on the acquisition of Pesto Restaurants Ltd
primarily through the benefits that will be gained from cost synergies that
will be obtained on joining the Group and future conversions of other Group
outlets.
The brand intangible has been fair valued by reference to an estimated royalty
income based on forecast cash flows for Pesto Restaurants Ltd over the
expected useful life of 20 years.
Contingent consideration of £8m is shown as a non-current liability within
other payables. Contingent consideration is payable to the previous owners
of Pesto Restaurants Ltd, at a level dependent on the financial performance of
that business over the 12 months ending 27 September 2025, and not to exceed
£15m. It has been measured at its fair value at the acquisition date based
on trading forecast and discounted at a risk-free rate.
Contingent consideration is measured in line with the Group's accounting
policy for business combinations. It will be re-measured at subsequent
reporting dates, as a non-measurement period adjustment, with the
corresponding gain or loss being recognised in the income statement.
Pesto Restaurants Ltd has contributed £8m to revenue and £1m to the Group's
operating profit for the period between acquisition date and the balance sheet
date. If Pesto Restaurants Limited had been included as a subsidiary since
the start of the financial period, it would have contributed £20m revenue and
£2m to the Group's operating profit.
13. Acquisitions (continued)
In the prior year the Group completed the acquisition of 3Sixty Restaurants
Limited. In August 2018, the Group acquired 40% of the share capital of
3Sixty Restaurants Limited for £4m, together with a put and call option that
would enable the Group to purchase the remaining 60% share capital at a future
date. On 18 April 2023, the Group exercised the call option, resulting in
the acquisition of the remaining 60% of share capital of 3Sixty Restaurants
Limited, for £17m, with the purchase completing on 18 June 2023. The date
of the option exercise, 18 April 2023, was considered to be the date at which
control passed to the Group, and therefore consolidation took place from that
date.
14. Financial statements
The preliminary statement of results was approved by the Board of Directors on
26 November 2024. It does not constitute the Group's statutory consolidated
financial statements for the 52 weeks ended 28 September 2024 or for the 53
weeks ended 30 September 2023. The financial information is derived from the
statutory consolidated financial statements of the Group for the 52 weeks
ended 28 September 2024.
Statutory accounts for 2023 have been delivered to the Registrar of Companies
and those for 2024 will be delivered following the Company's Annual General
Meeting.
The financial information for the 53 weeks ended 30 September 2023 is derived
from the statutory accounts for that year which have been delivered to the
Registrar of Companies. The auditors reported on those accounts: their report
was unqualified and did not contain a statement under s498(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.
The statutory financial statements for the 52 weeks ended 28 September 2024
will be filed with the Registrar of Companies following the 2023 Annual
General Meeting. The report of the auditor was unqualified and did not contain
a statement under s498(2) or (3) of the Companies Act 2006. Further detail is
provided with the Outlook assessment and notes to this preliminary statement
of results.
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 profit 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 an effective
comparison of the Group's trading performance from one period to the next.
Adjusted profit measures are reconciled to unadjusted IFRS results on the face
of the income statement with details of separately disclosed items provided in
Note 3.
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.
FY 2023 was a 53-week period, in order to aid comparability, we have provided
a 52-week result. The 52-week result is derived by removing the 53(rd) week of
the financial year. FY 2024 was a 52-week year.
APMs used to explain and monitor Group performance include:
APM Definition Source
EBITDA Earnings before interest, tax, depreciation and amortisation, before movements Group income statement
in the valuation of the property portfolio.
Adjusted EBITDA EBITDA before separately disclosed items is used to calculate net debt to Group income statement
EBITDA.
52-week Adjusted EBITDA EBITDA on a 52-week basis, adjusted to remove the 53(rd) week of the period, APM D
before separately disclosed items is used to calculate net debt to EBITDA.
Operating profit Earnings before interest and tax. Group income statement
Adjusted operating profit Operating profit before separately disclosed items. Group income statement
52-week adjusted operating profit Operating profit before separately disclosed items adjusted to remove the APM B
53(rd) week of the period.
52-week revenue Revenue adjusted to remove the 53(rd) week of the year. APM B
Like-for-like sales growth Like-for-like sales growth reflects the sales performance against the APM A
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.
52-week like-for-like sales growth Like-for-like sales growth reflects the sales performance against the APM A
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 to remove 53(rd) week of the period.
Adjusted earnings per share (EPS) Earnings per share using profit before separately disclosed items. Note 5
52- week adjusted earnings per share (EPS) Earnings per share using profit before separately disclosed items adjusted for APM C
53(rd) week of period.
Net debt Net debt comprises cash and cash equivalents, cash deposits net of borrowings Note 9
and discounted lease liabilities. Presented on a constant currency basis due
to the inclusion of the fixed exchange rate component of the cross currency
swap.
Net debt : Adjusted EBITDA The multiple of net debt including lease liabilities, as per the balance sheet APM D
compared against 52-week EBITDA before separately disclosed items, which is a
widely used leverage measure in the industry.
Net debt : Adjusted 52-week EBITDA The multiple of net debt including lease liabilities, as per the balance sheet APM D
compared against 52-week EBITDA before separately disclosed items, which is a
widely used leverage measure in the industry. Adjusted for 53(rd) week of the
period.
FY 2023 52-week reconciliation A 53-week accounting period occurs every five years. FY 2023 was a 53-week APM E
period and therefore presentation of a 52-week basis provides useful
comparability to previous financial years
Return on capital Return generating capital includes investments made in new sites and APM F
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. Incremental EBITDA
reflects the increase in profit following investment, with the pre-investment
profit being measured as the average annual profit prior to investment. 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. Like-for-like sales is provided on a 52-week
basis.
2024 2023 Year-on-year
Source £m £m %
Reported revenue Income statement 2,610.0 2,503.0 4.3%
Adjust for 53(rd) week APM E - (44.0) -
Less 52-week non like-for-like sales and income (254.1) (221.2) (14.9%)
52-week like-for-like sales 2355.9 2,237.8 5.3%
Drink sales
2024 2023 Year-on-year
Source £m £m %
Reported drink revenue 1132.0 1,092.0 3.7%
Adjust for 53(rd) week - (20.0) -
Less 52-week non like-for-like drink sales (95.0) (83.7) (13.5%)
52-week drink like-for-like sales 1037.0 988.3 4.9%
Food sales
2024 2023 Year-on-year
Source £m £m %
Reported food revenue 1385.0 1,323.0 4.7%
Adjust for 53(rd) week - (23.0) -
Less 52-week non like-for-like food sales (141.7) (119.6) (18.5%)
52-week food like-for-like sales 1243.3 1,180.4 5.3%
Other sales
2024 2023 Year-on-year
Source £m £m %
Reported other revenue 93.0 87.8 5.9%
Adjust for 53(rd) week - (1.5) -
Less non like-for-like other sales (17.4) (17.2) 1.2%
52 week other like-for-like sales 75.6 69.1 9.4%
B. Adjusted operating profit
Operating profit before separately disclosed items as set out in the Group
Income Statement. Separately disclosed items are those which are separately
identified by virtue of their size or nature. Excluding these items allows a
more effective comparison of the Group's trading performance from one period
to the next.
2024 2023 Year-on
-year
Source £m £m %
Operating profit Income statement 300 98 206.1%
Separately disclosed items Income statement 12 128 90.6%
Adjusted operating profit Income statement 312 226 38.1%
Adjusted operating profit 53(rd) week APM E - (5) -
52-week adjusted operating profit 312 221 41.2%
Reported revenue Income statement 2,610 2,503 4.3%
Revenue 53(rd) week APM E - (44) -
52-week revenue 2,610 2,459 6.1%
52-week adjusted operating margin 12.0% 9.0% 3.0ppts
C. Adjusted earnings per share
Earnings per share using profit before separately disclosed items. Separately
disclosed items are those which are separately identified by virtue of their
size or nature. Excluding these items allows a more effective comparison of
the Group's trading performance from one period to the next.
2024 2023 Year-on
-year
Source £m £m %
Profit/(loss) for the period Income statement 149 (4) 3825.0%
Add back separately disclosed items Income statement 8 100 (92.0%)
Adjusted profit 157 96 63.5%
Adjusted profit 53(rd) week - (3)
52-week adjusted profit 157 93 68.8%
Basic weighted average number of shares Note 5 595 595 -%
Adjusted earnings per share 26.4p 16.1p -
52-week adjusted earnings per share 26.4p 15.6p 69.2%
D. Net Debt: 52-week 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 52-week EBITDA is used for this measure
to prevent distortions in performance resulting from separately disclosed
items.
2024 2023 Year-on
-year
Source £m £m %
Net Debt including leases Note 9 1436 1,633 (12.1%)
EBITDA Income statement 444 362 22.1%
Add back separately disclosed items Income statement (2) (3) (166.7%)
EBITDA 53(rd) week APM E - (7) -
Adjusted 52-week EBITDA 442 352 26.1%
Net debt : Adjusted 52-week EBITDA 3.2 4.6
E. FY 2023 52-week reconciliation
A 53-week accounting period occurs every five years. FY 2023 was a 53-week
period and therefore presentation of a 52-week basis provides useful
comparability to previous financial years.
2023 2023 2023
Source 52 weeks Week 53 53 weeks
Revenue Income statement £2,459m £44m £2,503m
Adjusted EBITDA Income statement £352m £7m £359m
Adjusted operating profit Income statement £221m £5m £226m
Adjusted PBT Income statement £112m £3m £115m
Adjusted profit for the period Income statement £93m £3m £96m
Adjusted EPS Income statement 15.6p 0.5p 16.1p
F. 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 of return
commences three periods following the opening of the site.
Return on expansionary capital
2023 2024 2024 2024
FY20-23 FY21-23 FY24 Total
Source £m £m £m £m
Maintenance and infrastructure 158 120 58 178
Remodel - refurbishment 188 134 69 203
Non-expansionary capital 346 254 127 381
Remodel expansionary 9 6 2 8
Conversions and acquisitions* 25 27 16 43
Expansionary capital for return calculation 34 33 18 51
Expansionary capital open < 3 periods pre year end 40 1 6 7
Freehold purchases 23 3 26
Total capital 52-week Cash flow 420 311 154 465
Adjusted 52-week EBITDA Income statement 1,146 893 444 1,337
Non-incremental EBITDA 1,140 866 441 1,327
Incremental EBITDA 6.2 7.0 2.7 9.7
Return on expansionary capital 19% 21% 15% 19.1%
*Conversion and acquisition capital is net of capex incurred for projects
which have been open for less than 3 periods pre year end
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