Interim Results
Mitchells & Butlers PLC
19 May 2004
19 May 2004
MITCHELLS & BUTLERS plc
INTERIM RESULTS
(For the 28 weeks ended 10 April 2004)
Financial Highlights
- Turnover up 4% to £823m
- EBITDA* up 3% to £197m
- Operating Profit* up 2% to £140m
- Profit before tax* down 5% to £88m
- Earnings per share* up 16% to 10.0p
- Basic earnings per share of 9.5p (8.4p)
- Interim dividend 2.85p
*Before exceptional items. PBT & EPS: pro forma comparative for 2003
Business Highlights
Commenting on the results, Tim Clarke, Chief Executive said:
'More customers are choosing Mitchells & Butlers' pubs as we continue to enhance
amenity, service and value. We are delivering strong growth in food sales and
capturing drinks market share.'
'Our strategy is generating good like for like sales growth and a solid
operating profit performance. The combination of our trading results and the
refinancing of the business completed in December has delivered strong EPS
growth.'
- Same outlet like for like sales up 5.3%*, uninvested like for like sales up
3.4%*,
- Growth in uninvested like for like gross profits
- Further cost efficiencies from unit and corporate scale
- Solid operating profit growth, despite regulatory cost increases
- Refinancing and £501m return of funds completed: more efficient balance
sheet
*32 weeks to include Easter in both years
Current Trading and Outlook
Overall trading is in line with the Board's expectations for the year.
Sales growth in the eight weeks to 8 May 2004 (which includes the full Easter
period in both years) continues to be strong, particularly in residential areas.
The High Street has also seen further improvement.
8 weeks to 8 May 2004 Same Outlet (invested) Uninvested
Like for Likes Like for Likes
Residential 6.9% 5.1%
High Street 5.1% 3.4%
Total 6.3% 4.6%
We will continue to pursue the optimal balance of volume, price and mix in order
to generate sustainable profit growth. The anniversary of our sales strategy,
together with the hot summer weather in the second half last year, will provide
us with a more challenging sales comparative for the rest of this financial
year. However, the price comparison should be a little easier. Based on the
current levels of sales activity we estimate that average retail prices in the
second half will be down 1% against the second half last year, compared to 3%
down across the first half, leaving percentage gross margins slightly lower than
last year.
We remain focused on tight cost management to offset the increase in external
costs and maximise the profit contribution from our sales activity, so as to
continue to grow earnings and cashflows in the second half.
For further information please contact:
Mitchells & Butlers plc
Kate Holligon - Investor Relations 0121 498 5092
Jeremy Probert - Media 0121 498 5547
Finsbury Group - James Murgatroyd 0207 251 3801
A presentation for analysts and investors will be held at 10am at the Cazenove
Auditorium, 20 Moorgate, EC2. A live webcast of the presentation will be
available on the Mitchells & Butlers plc website www.mbplc.com.
CHIEF EXECUTIVE'S OPERATING REVIEW
The Benefits of Focus
A year on from the demerger, Mitchells & Butlers is performing well. The
benefits of focus and a reborn pub identity are reflected in the enthusiasm with
which our people are executing the strategy.
We are focused on providing our customers with the best overall value experience
competitively available in the market. As a result, food sales growth has
accelerated and drinks market share has been gained. Higher sales volumes are
in turn enabling us to generate cost efficiencies from both our unit and
corporate scale.
These levers are the key to achieving our financial objectives of driving
earnings growth and high returns on assets, sustainable for the longer term.
Generating Profitable Sales Growth
We have been pursuing the optimal combination of price, volume and mix to
maximise profits and actively enhancing the food and drink range to increase
customer choice. Our volume increases of 8%, with a 3% reduction in average
retail prices, have driven same outlet like for like sales growth of 5.3% (32
weeks) and we are continuing to gain market share. Despite the significant
rebasing of prices we are also able to report growth in uninvested like for like
gross profits.
Productivity gains and cost efficiencies
We started this financial year with an increase in the cost base of some £8m in
the first half primarily as a result of the 7% increase in the National Minimum
Wage in October. Our volume led strategy has enabled cost efficiencies which
have offset these increases.
We have re-negotiated some 60% of our food and drink supply contracts by value
achieving a net reduction of 2% overall across our supply terms. We have also
maintained staff contribution per hour to offset the increase in wage rates and
reduction in average prices. In addition, we have achieved central support cost
savings of £5m through actions put in place last year.
Brand and format performance
Same outlet like for like sales were up 6.4% (32 weeks) in the 70% of the estate
in residential areas. This growth is being driven by our five leading
residential brands: Ember Inns, Harvester, Sizzling Pub Co, Toby Carvery and
Vintage Inns, and the strong consumer appeal of their informal food and drink
offers.
In the 30% of the estate in the High Street, the differentiation of brands such
as All Bar One, Goose and O'Neill's and our consumer value proposition is
driving out-performance in tough trading conditions. Same outlet like for like
sales were up 3.1% (32 weeks).
Pro-active Estate Development
We have continued with our programme of raising the quality of the estate.
Our investment has been concentrated in residential areas and is showing good
sales uplifts and returns slightly ahead of the 14% being achieved on the
capital invested in developing our brands and formats over the last 10 years.
For the year as a whole we now anticipate completing 100 to 110 conversions,
reflecting a rigorous approach to evaluation but no change to our overall
assessment of the potential pipeline. We also anticipate opening 11 new pubs
this year, four with adjacent lodges.
Encouraged by the results and interest from individual operators for our
Business Franchise, we have plans to extend this initiative further from the 56
trading at the half year to around 100 over the next 6 months. In return for
access to Mitchells & Butlers support systems, training and food purchasing
scale, we can attract additional entrepreneurial talent and create value through
a share of the trading upside and continued ownership of the property.
Where we see a greater opportunity to add value through disposal we will do so.
We achieved proceeds of £29m in the first half and we currently anticipate
proceeds of around £50m for the year. Overall, we expect net capital
expenditure to be around £100m for the year as a whole.
Strong earnings per share growth and cash returns
As a result of our operating performance and cash generation together with the
successful refinancing of the company completed in December, underlying earnings
per share were up 16%. In addition, the business continues to generate high
returns with a post-tax cash return in excess of 10 %.
OPERATING AND FINANCIAL REVIEW
This Operating and Financial review provides a commentary on the performance of
the Mitchells & Butlers group for the 28 weeks ended 10 April 2004 and compares
it with the equivalent period in 2003.
The commentary refers to the actual results of the Group except where the term
'pro forma' is used. The 'pro forma' results show the performance of the Group
for 2003 as if it had been an independent company since 1 October 2002 operating
under the financing and taxation structure put in place on 15 April 2003, the
date of separation from Six Continents PLC.
Overall Performance
Mitchells & Butlers is one of the UK's leading operators of pubs, bars and pub
restaurants with an estate of 2057 sites as at 10 April 2004. The outlets are
predominantly freehold, mostly in residential areas and have a book value of
£3.5bn. The 1989 managed outlets had average weekly takes of £14,700 in the
period, three times the industry average.
Total sales in the first half were £823m, 4.3% up on last year. Sales growth
continues to be particularly strong in our residential pubs and our High Street
businesses are showing an improvement in a competitive market.
Same outlet (invested)* Uninvested*
Like for Likes Like for Likes
Residential 6.4% 4.4%
High Street 3.1% 1.3%
Total 5.3% 3.4%
*32 weeks to include Easter in both periods
The business invested gross capital expenditure of £77m in the period under
review. 5 new pubs were opened which, together with investment in converting
63 existing pubs to new brands or formats, accounted for £29m of total capital
expenditure. In addition, the evolution and maintenance of the estate continues
in order to keep existing offers up to date and in good condition
Group operating profit before exceptional items was up 2.2% at £140m.
Pubs & Bars
H1 2004
Total sales £485m +4.5%
Operating Profit £92m +1.1%
Same outlet like for like sales +4.7%*
Uninvested like for like sales +2.2%*
*32 weeks to include Easter in both periods
Sales growth has remained strongest in the residential segment led by our two
drink-led brands with distinctive food offers - Ember Inns and Sizzling Pub Co.
Performance in the High Street and in London has also improved. Total sales
growth was diluted by disposals and transfers to Business Franchises.
A total of 54 conversions were completed, predominantly to residential brands
and formats such as Sizzling Pub Co, Ember Inns and the Metropolitan
Professionals format. Overall, as a result of our active franchise development
programme and selective disposals the number of managed pubs and bars reduced by
a net 41 over the half year to 1346.
Operating profit of £92m was up 1.1% on last year.
Restaurants
H1 2004
Total sales £333m +3.7%
Operating Profit £47m +4.4%
Same outlet like for like sales +6.2%*
Uninvested like for like sales +5.0%*
*32 weeks to include Easter in both periods
Sales in the Restaurant Division benefited from menu development and
enhancements to the drinks range. At the same time, we have been further
evolving the pub restaurant brands to provide a distinct bar area, increasing
the opportunity for pre and post meal drinks sales. Vintage Inns, Harvester and
Toby all traded strongly in the period. All Bar One and Browns benefited in the
second quarter from the recovery of the Central London market.
4 new Vintage Inns opened in the period together with 9 pub restaurant
conversions. Following some transfers to Pubs & Bars the total number of
Restaurants has reduced by a net 17 to 643.
Operating profit of £47m was 4.4% up on last year.
Standard Commercial Property Developments (SCPD)
SCPD aims to maximise the value of the Group's surplus properties which are
suitable for development. Turnover of £5m and operating profit of £1m were
generated during the period primarily through the sale of a retail development
in Bournemouth, on the site of a former pub.
Exceptional items
Exceptional operating costs of £2m relate to the securitisation of the Group's
UK pub and pub restaurant business which was completed on 13 November 2003. An
exceptional interest charge of £2m arises from the acceleration of facility fee
amortisation in respect of the syndicated loan facility put in place at the time
of separation and repaid on securitisation.
Refinancing and return of funds
On 13 November 2003, the Group completed a securitisation of the majority of its
UK pubs and restaurant business, raising a total of £1.9bn through the issue of
secured loan notes and providing the Group with long term financing at
attractive rates. The proceeds from the securitisation were used to repay the
Group's outstanding borrowings of £1,243m under its syndicated loan facility,
meet the costs of the refinancing, make special additional contributions to the
pension schemes and return surplus funds of £501m to shareholders by way of
special dividend of 68p per share accompanied by a 12 for 17 consolidation of
the number of shares in issue.
Interest
The net interest charge for the half year was £52m before the exceptional charge
of £2m.
Following the securitisation, the Group has a blended interest rate of
approximately 6.3% including the interest cost on the £1.9 billion loan notes
issued, amortisation of deferred issue costs and interest income earned on the
Group's cash balances.
Taxation
The tax charge of £29m, excluding exceptional items, represents an effective tax
rate of 32.4% which is higher than the UK statutory rate due to non allowable
items, in particular the depreciation of properties.
Earnings per share
Underlying earnings per share, calculated before exceptional items and compared
to the pro forma comparative for the first half last year, was 10.0p, up 16%.
Adjusted earnings per share, which adjusts for exceptional items but reflects
the financing structure pre de-merger for last year, was 10.0p (H1 2003: 10.5p).
Basic earnings per share for the period was 9.5p (H1 2003: 8.4p).
Dividends
The dividend charge for the period of £516m comprises the special dividend of
£501m referred to above and paid on 8 December 2003, plus a proposed interim
dividend of £15m. The latter equates to a dividend per ordinary share of 2.85p
and will be paid on 1 July 2004 to shareholders registered on 28 May 2004.
The Board has announced its intention to pay a final ordinary dividend of 6.65p
per share thereby giving an expected total dividend for the year ending 20
September 2004 of 9.5p per share.
Cash Flow and Net Debt
The Group's operations continued to generate strong cashflow with EBITDA of
£197m before exceptional items, compared to £191m last year. Operating cash
flow after net capital expenditure, but before expenditure relating to
exceptional items, was £155m compared with £152m last year.
Net interest paid was £45m, tax paid was £9m and the final dividend for 2002/03
was £29m. Following the refinancing and return of £501m to shareholders,
accompanying issue costs and additional pension contributions of £40m, the Group
had net debt at 10 April 2004 of £1,667m.
Pensions
On an FRS 17 basis, the Group's pension schemes showed a deficit of £170m after
tax at 30 September 2003. At 31 March 2004, it is estimated that this deficit
had fallen to £141m reflecting the benefit of the additional pension
contributions and improved investment returns, after allowing for an increase in
life expectancy assumptions. As announced at the time of the securitisation,
the Company has agreed to make further additional cash contributions of £10m in
each of the next two years.
Actuarial valuations of the Group's pension schemes as at 31 March 2004 are
currently in progress.
Accounting Policies
Amendment to FRS 5 'Reporting the substance of transactions: Revenue
recognition' and UITF 38 'Accounting for ESOP Trusts' apply for the first time
in these interim financial statements. The adoption of the Amendment to FRS 5
has required the Group to change its accounting policy on revenue recognition to
record turnover net of coupons and staff discounts. Prior period comparatives
have been restated accordingly, with a decrease in the Group's reported turnover
in H1 2003 of £4m (2003 full year £9m) and no impact on reported profits. UITF
38, which requires an entity's own shares held in Employee Share Trusts to be
deducted from shareholders' funds rather than being shown as an asset, has not
required a restatement of prior period comparatives.
IFRS Implementation
Mitchells & Butlers will present its first set of financial statements prepared
under IFRS for the year ended 30 September 2006. This will require a full
profit and loss account, balance sheet and cash flow statement for the year
ended 30 September 2005 for comparative purposes.
A project is underway to ensure that appropriate accounting policies, processes
and procedures are in place to facilitate a smooth transition to IFRS. The
areas where significant differences in accounting policy have been identified to
date include the recognition and measurement of financial instruments,
accounting for pensions, accounting for share-based remuneration and deferred
tax.
PRO FORMA GROUP PROFIT AND LOSS ACCOUNT
for the 28 weeks ended 10 April 2004
The results for the 28 weeks ended 10 April 2004 are the actual results for the
period excluding exceptional items.
2004 2003 2003
28 weeks 28 weeks 52 weeks
restated* restated*
£m £m £m
------- -------- --------
Turnover 823 789 1,504
Costs and overheads, less other income (683) (652) (1,229)
------- -------- --------
Operating profit and profit on ordinary 140 137 275
activities
before interest
Finance charge (52) (44) (76)
------- -------- --------
Profit on ordinary activities before 88 93 199
taxation
Taxation (29) (30) (64)
------- -------- --------
Profit for the financial period 59 63 135
======= ======== ========
Earnings per ordinary share 10.0p 8.6p 18.4p
======== ======== ========
* Restated on the adoption of the Amendment to FRS 5 (see Note 1).
The Mitchells & Butlers group was created on its separation from Six Continents
on 15 April 2003. Significant changes were made to the financing structure of
the Group on separation which resulted in the replacement of inter company
balances owed to Six Continents with external debt. In addition, the Mitchells
& Butlers group no longer benefited from the Six Continents group tax
arrangements that were in place prior to the separation. The pro forma group
profit and loss account therefore presents the Mitchells & Butlers group's
results for the 28 weeks ended 12 April 2003 and the 52 weeks ended 30 September
2003 on the basis that the post separation financing and taxation structure had
been in place since 1 October 2002. Further details on the calculations of the
pro forma finance charge, pro forma tax charge and pro forma earnings per share
for these periods are contained in the Annual Report and Financial Statements
2003. In addition, the pro forma group profit and loss account excludes
exceptional items, as set out in Note 4 to the interim financial statements, for
all periods presented.
The Mitchells & Butlers pro forma group profit and loss account does not
constitute a statutory profit and loss account within the meaning of Section 240
of the Companies Act 1985 and is unaudited. The profit and loss account of the
Mitchells & Butlers group, which has been reviewed by the auditors in accordance
with the guidance contained in Bulletin 1999/4 'Review of interim financial
information' issued by the Auditing Practices Board, is shown on the following
page.
GROUP PROFIT AND LOSS ACCOUNT
for the 28 weeks ended 10 April 2004
2004 2003 2003
28 weeks 28 weeks 52 weeks
restated* restated*
------------------------- ------------------------- -------------------------
Before Before Before
exceptional exceptional exceptional
items Total items Total items Total
£m £m £m £m £m £m
--------- ------ --------- ------ --------- ------
Turnover -
continuing
operations 823 823 789 789 1,504 1,504
(Note 2)
Costs and (683) (685) (652) (652) (1,229) (1,234)
overheads,
less
other income
--------- ------ --------- ------ --------- -------
Operating 140 138 137 137 275 270
profit -
continuing
operations
(Note 3)
Separation - - - (42) - (42)
costs (Note 4)
--------- ------ --------- ------ --------- -------
Profit on 140 138 137 95 275 228
ordinary
activities
before
interest
Net interest (52) (54) (24) (24) (55) (63)
payable (Note
5)
--------- ------ --------- ------ --------- -------
Profit on 88 84 113 71 220 165
ordinary
activities
before
taxation
Tax on profit (29) (28) (36) (9) (71) (40)
on ordinary
activities
(Note 6) --------- ------ --------- ------ --------- -------
Earnings 59 56 77 62 149 125
available
for
shareholders
Dividends on (516) (516) - - (29) (29)
equity
shares
(Note 7)
--------- ------ --------- ------ --------- -------
Retained (457) (460) 77 62 120 96
(loss)/profit
for the
financial
period ========= ====== ========= ====== ========= =======
Earnings per
ordinary
share
(Note 8):
Basic - 9.5p - 8.4p - 17.0p
Diluted - 9.4p - 8.4p - 17.0p
Adjusted 10.0p - 10.5p - 20.3p -
========= ======= ========= ======= ========= ========
Dividend per - 2.85p - - - 5.65p
ordinary
share
========= ======== ========= ======== ========= ========
* Restated on the adoption of the Amendment to FRS 5 (see Note 1).
STATEMENT OF TOTAL RECOGNISED GROUP GAINS AND LOSSES
for the 28 weeks ended 10 April 2004
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
------- ------- -------
Earnings available for shareholders 56 62 125
Exchange differences arising on foreign currency net (2) 6 7
investments
------- ------- -------
Total recognised gains for the period 54 68 132
======= ======= =======
RECONCILIATION OF MOVEMENT IN GROUP SHAREHOLDERS' FUNDS
for the 28 weeks ended 10 April 2004
2004 2003 2003
28weeks 28 weeks 52 weeks
£m £m £m
------- ------- -------
Total recognised gains for the period 54 68 132
Dividends (516) - (29)
Issue of ordinary shares 5 - 4
Purchase of own shares (3) - -
Credit to shareholders' funds in respect of
employee share
schemes 5 - -
Funding with Six Continents group - 184 184
Arising from separation transaction - - (702)
------- ------- -------
Net (decrease)/increase in shareholders' funds (455) 252 (411)
Opening shareholders' funds 2,064 2,475 2,475
------- ------- -------
Closing shareholders' funds 1,609 2,727 2,064
======= ======= =======
GROUP BALANCE SHEET
10 April 2004
2004 2003 2003
10 April 12 April 30 Sept
£m £m £m
------- ------- -------
Intangible assets 11 12 11
Tangible assets 3,514 3,530 3,522
------- ------- -------
Fixed assets 3,525 3,542 3,533
------- ------- -------
Stocks 43 47 43
Debtors
Amounts falling due within one year 70 76 88
Amounts falling due after more than one 137 64 109
year
Investments 139 6 3
Cash at bank and in hand 72 7 4
------- ------- -------
Current assets 461 200 247
Creditors: amounts falling due within one
year
Overdrafts - - (13)
Other borrowings (36) (580) (221)
Other creditors (284) (240) (274)
------- ------- -------
Net current assets/(liabilities) 141 (620) (261)
------- ------- -------
Total assets less current liabilities 3,666 2,922 3,272
Creditors: amounts falling due after more than (1,842) (1) (1,001)
one year
Provisions for liabilities and charges
Deferred taxation (212) (188) (203)
Other provisions (3) (6) (4)
------- ------- -------
Net assets (Note 9) 1,609 2,727 2,064
======= ======= =======
Capital and reserves
Equity share capital 37 - 37
Share premium account 9 - 4
Revaluation reserve 340 - 341
Reserve for own shares (3) - -
Profit and loss account 1,226 - 1,682
Owners' investment - 2,727 -
-------- -------- --------
Equity shareholders' funds 1,609 2,727 2,064
======== ======== ========
GROUP CASH FLOW STATEMENT
for the 28 weeks ended 10 April 2004
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
------- ------- -------
Operating cash flow before separation costs paid 199 213 342
Separation costs paid (1) (27) (36)
------- ------- -------
Net cash inflow from operating activities (Note 198 186 306
10)
------- ------- -------
Interest paid (49) (24) (51)
Issue costs paid in respect of securitised debt (22) - (1)
Facility fees paid - (7) (15)
Interest received 4 1 2
------- ------- -------
Returns on investments and servicing of finance (67) (30) (65)
------- ------- -------
UK corporation tax paid (9) (30) (44)
------- ------- -------
Purchase of tangible fixed assets (77) (80) (151)
Sale of tangible fixed assets 29 19 48
------- ------- -------
Capital expenditure and financial investment (48) (61) (103)
------- ------- -------
Final dividend for 2002/03 (29) - -
Special interim dividend for 2003/04 (501) - -
------- ------- -------
Equity dividends paid (530) - -
------- ------- -------
Net cash (outflow)/inflow before management of (456) 65 94
liquid
resources and financing
------- ------- -------
Movement in short-term deposits (136) (4) (1)
Issue of ordinary share capital 5 - 4
Purchase of own shares (3) - -
Proceeds from issue of securitised debt 1,900 - -
Repayments of principal in respect of securitised (11) - -
debt
Borrowings drawn down under syndicated loan 25 - 1,350
facility
Borrowings repaid in respect of syndicated loan (1,243) - (132)
facility
Repayment of amounts due to Six Continents group - (254) (831)
Net funding flows with Six Continents group - 184 193
Cash payment to former Six Continents PLC - - (702)
shareholders
------- ------- -------
Management of liquid resources and financing 537 (74) (119)
------- ------- -------
Movement in cash and overdrafts (Note 12) 81 (9) (25)
======= ======= =======
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
The interim financial statements, which are unaudited, comply with relevant
accounting standards under UK GAAP and should be read in conjunction with
the Annual Report and Financial Statements 2003. They have been prepared
using the accounting policies set out in that report on a consistent basis
with that applied in 2003, with the following exceptions:
a Turnover - following the publication of the Amendment to FRS 5
'Reporting the substance of transactions: Revenue recognition', the
Group has changed its accounting policy to record turnover net of
coupons and staff discounts. Prior period comparatives have been
restated accordingly. The effect has been to decrease the Group's
reported turnover by £8m (2003 28 weeks, £4m; 52 weeks, £9m) with no
impact on reported profits.
b Own shares - UITF 38 'Accounting for ESOP Trusts', which applies for
the first time in these interim financial statements, requires an
entity's own shares held in Employee Share Trusts to be deducted from
shareholders' funds rather than being shown as an asset. In addition,
as a consequence of UITF 38, the accrual made for the cost of share
awards under UITF 17 'Employee Share Schemes' is credited to
shareholders' funds. The implementation of UITF 38 has not resulted in
a restatement of prior period comparatives.
As explained in Note 13, the Group has issued secured loan notes and
entered into a number of related interest rate and currency swap agreements
during the period. Under the provisions of FRS 4 'Capital instruments',
such debt instruments are stated initially at the amount of the proceeds,
net of issue costs. Finance costs, which are the difference between the
net proceeds and the total amount of payments to be made in respect of the
instruments, are allocated to periods over the term of the debt at a
constant rate on the carrying amount. The carrying amount is increased by
the finance cost in respect of the reporting period and reduced by payments
made in respect of the debt in that period. Amounts payable and receivable
in respect of derivative financial instruments that hedge the related
interest rate exposures are treated as part of the finance cost.
The interim financial statements do not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985.
The financial information for the year ended 30 September 2003 has been
extracted from the Group's published financial statements for that year
which contain an unqualified audit report and which have been filed with
the Registrar of Companies.
The periods ended 10 April 2004 and 12 April 2003 are regarded as distinct
financial periods for accounting purposes; income and costs are recognised
in the profit and loss account as they arise; tax is charged on the basis
of the expected effective tax rate for the full year.
The results of overseas operations have been translated into sterling at
weighted average rates of exchange for the period of £1 = €1.46 (2003 28
weeks, £1=€1.53; 52 weeks, £1=€1.48) and euro denominated assets and
liabilities have been translated into sterling at the rate of exchange at
the balance sheet date of £1 = €1.51 (2003 12 April, £1=€1.45; 30 Sept, £1=
€1.44).
2 TURNOVER
2004 2003 2003
28 weeks 28 weeks 52 weeks
restated* restated*
£m £m £m
------- -------- --------
Pubs & Bars 485 464 873
Restaurants 333 321 614
------- -------- --------
Retail 818 785 1,487
SCPD 5 4 17
------- -------- --------
Turnover 823 789 1,504
======= ======== ========
* Restated on the adoption of the Amendment to FRS 5 (see Note 1).
3 OPERATING PROFIT
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
-------- -------- --------
Pubs & Bars 92 91 177
Restaurants 47 45 96
-------- -------- --------
Retail 139 136 273
SCPD 1 1 2
-------- -------- --------
Operating profit before operating 140 137 275
exceptional items
Operating exceptional items (2) - (5)
-------- -------- --------
Operating profit 138 137 270
======== ======== ========
Due to the nature of the operating exceptional items (see Note 4), it is not
possible to provide a meaningful allocation of the costs to the operating
segments.
4 EXCEPTIONAL ITEMS
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
------- ------- -------
Operating exceptional items
Securitisation costs (note a) 2 - 4
Abortive acquisition costs (note b) - - 1
------- ------- -------
2 - 5
Non-operating exceptional items
Separation costs (note c) - 42 42
------- ------- -------
2 42 47
Exceptional interest charge (note d) 2 - 8
------- ------- -------
Total exceptional items before tax 4 42 55
Tax credits on above items (1) (5) (9)
Exceptional tax credit (note e) - (22) (22)
------- ------- -------
Total exceptional items after taxation 3 15 24
======= ======= =======
a Securitisation costs relate to operating expenses incurred in relation
to the securitisation of the Group's UK pubs and restaurants business.
b Abortive acquisition costs were incurred in respect of the Scottish &
Newcastle retail business.
c Separation costs related to the costs of separating the Group's
operations from the hotels and soft drinks businesses of Six Continents
PLC. The cost includes external advisers' fees, bid defence costs and
various other costs directly related to the separation.
d The exceptional interest charge arises from the acceleration of facility
fee amortisation in respect of the Group's borrowing facilities which
were repaid on securitisation.
e The exceptional tax credit arose in respect of group relief received
from the Six Continents group.
All exceptional items relate to continuing operations and are excluded from
the calculation of adjusted earnings per ordinary share (see Note 8).
5 NET INTEREST PAYABLE
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
------- ------- -------
Securitised debt 47 - -
Bank overdrafts and loans 11 1 41
Six Continents group - 24 24
------- ------- -------
Interest payable 58 25 65
Interest receivable (4) (1) (2)
------- ------- -------
54 24 63
======= ======= =======
Interest payable includes an exceptional charge of £2m (2003 28 weeks,
£nil; 52 weeks, £8m) relating to the acceleration of facility fee
amortisation following the early repayment of the related borrowings on
securitisation (see Note 13).
6 TAX ON PROFIT ON ORDINARY ACTIVITIES
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
-------- -------- --------
UK corporation tax 19 19 36
Deferred tax 9 (10) 4
-------- -------- --------
28 9 40
======== ======== ========
Further analysed as tax relating to:
Profit before exceptional items 29 36 71
Exceptional items (Note 4) (1) (27) (31)
-------- -------- --------
28 9 40
======== ======== ========
Tax has been calculated using an estimated effective rate of 32.4% (2003 28
weeks, 32.3%; 52 weeks, 32.3%) on profit on ordinary activities before
taxation and exceptional items.
7 DIVIDENDS
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
------- ------- -------
Special interim dividend for 2003/ 501 - -
04
(68p per 5p ordinary share)
Normal interim dividend for 2003/ 15 - -
04
(2.85p per 7 1/12p ordinary share)
Final dividend for 2002/03 - - 29
(5.65p per 7 1/12p ordinary share)
------- ------- -------
516 - 29
======= ======= =======
A special interim dividend for the year ended 30 September 2004 of 68p per
5p ordinary share was paid to shareholders on 8 December 2003 at a total
cost of £501m. In connection with the special dividend, a share
consolidation was approved by shareholders at an Extraordinary General
Meeting held on 1 December 2003 and then implemented on 2 December 2003.
The share consolidation resulted in the issue of 12 new ordinary shares of 7
1/12p each for every 17 existing ordinary shares of 5p each.
8 EARNINGS PER SHARE
Basic earnings per share have been calculated by dividing the earnings
available for shareholders of £56m (2003 28 weeks, £62m; 52 weeks, £125m),
by 591m (2003 28 weeks, 734m; 52 weeks, 735m), being the weighted average
number of ordinary shares, excluding investment in own shares, in issue
during the period.
Diluted earnings per share are calculated by adjusting basic earnings per
ordinary share to reflect the notional exercise of the weighted average
number of dilutive ordinary share options outstanding under the Group's
share option schemes. The resulting weighted average number of ordinary
shares is 595m (2003 28 weeks, 734m; 52 weeks, 736m).
As explained in Note 7, in December 2003 the Company combined the payment of
a special dividend of 68p per 5p ordinary share with a consolidation of its
share capital. These transactions were designed to have the same overall
commercial effect, in terms of net assets, earnings and number of shares, as
a buy back of shares at fair value. Accordingly, earnings per share for
prior periods have not been restated.
Adjusted earnings per ordinary share are calculated as follows:
2004 2003 2003
28 weeks 28 weeks 52 weeks
pence per pence per pence per
ordinary ordinary ordinary
share share share
--------- -------- --------
Basic earnings 9.5 8.4 17.0
Exceptional items and tax thereon 0.5 2.1 3.3
(Note 4)
--------- -------- --------
Adjusted earnings 10.0 10.5 20.3
========= ======== ========
Adjusted earnings per ordinary share are disclosed in order to show
performance undistorted by abnormal items. However, due to the significant
changes made to the financing structure of the Group on separation from Six
Continents on 15 April 2003, adjusted earnings per share above does not
give a true indication of the underlying performance of the Group for the
prior year. Proforma earnings per share, which adjusts for the changes in
the financing structure in the comparative periods, is therefore presented
at the foot of the pro forma group profit and loss account.
9 NET ASSETS
2004 2003 2003
10 April 12 April 30 Sept
£m £m £m
------- ------- -------
Pubs & Bars 2,117 2,107 2,141
Restaurants 1,288 1,346 1,314
------- ------- -------
Retail 3,405 3,453 3,455
SCPD 21 20 25
------- ------- -------
Net operating assets 3,426 3,473 3,480
Net debt (1,667) (568) (1,228)
Other net non-operating (150) (178) (188)
liabilities
------- ------- -------
Net assets 1,609 2,727 2,064
======= ======= =======
10 NET CASH INFLOW FROM OPERATING ACTIVITIES
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
------- ------- -------
Operating profit before operating 140 137 275
exceptional items
Depreciation and amortisation 57 54 99
------- ------- -------
Earnings before interest, taxation, 197 191 374
depreciation,
amortisation and exceptional items
Working capital movement 44 22 (3)
Additional pension contributions (40) - (27)
Other non-cash items 2 - -
------- ------- -------
Operating cash flow before expenditure 203 213 344
relating
to exceptional items
Operating exceptional expenditure (4) - (2)
Separation costs paid (1) (27) (36)
------- ------- -------
Net cash inflow from operating activities 198 186 306
======= ======= =======
11 NET CASH FLOW
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
------- ------- -------
Operating cash flow before expenditure 203 213 344
relating
to exceptional items * (Note 10)
Net capital expenditure (48) (61) (103)
------- ------- -------
Operating cash flow after net capital 155 152 241
expenditure
Net interest paid (45) (23) (49)
Tax paid (9) (30) (44)
Normal dividends paid (29) - -
Issue of ordinary share capital 5 - 4
Purchase of own shares (3) - -
Special dividends paid (501) - -
Operating exceptional expenditure (4) - (2)
Separation costs paid (1) (27) (36)
Issue costs paid in respect of securitised (22) - (1)
debt
Facility fees paid - (7) (15)
------- ------- -------
Net cash flow (454) 65 98
======= ======= =======
* Includes £40m (2003 28 weeks, £nil; 52 weeks, £27m) of additional pension
contributions.
12 NET DEBT
2004 2003 2003
28 weeks 28 weeks 52 weeks
£m £m £m
------- ------- -------
Movement in cash and overdrafts 81 (9) (25)
Management of liquid resources and financing (537) 74 119
activities
Issue of ordinary share capital 5 - 4
Purchase of own shares (3) - -
------- ------- -------
Net cash flow (Note 11) (454) 65 98
Issue costs paid in respect of securitised 22 - -
debt
Net funding flows with Six Continents - 184 193
group
Cash payment to former Six Continents PLC - - (702)
shareholders
------- ------- -------
(Increase)/decrease in net debt arising from (432) 249 (411)
cash
flows
Non-cash movement in net debt (7) - -
------- ------- -------
(Increase)/decrease in net debt (439) 249 (411)
Opening net debt (1,228) (817) (817)
------- ------- -------
Closing net debt (1,667) (568) (1,228)
======= ======= =======
Comprising:
Cash at bank and in hand 72 7 4
Overdrafts - - (13)
-------- -------- --------
Cash and overdrafts 72 7 (9)
Current asset investments 139 6 3
Securitised debt (Note 13) (1,874) - -
Syndicated loan facility - - (1,218)
Other loan notes and finance leases (4) (4) (4)
Amounts due to Six Continents group - (577) -
-------- -------- --------
(1,667) (568) (1,228)
======== ======== ========
13 SECURITISED DEBT
On 13 November 2003, a group company, Mitchells & Butlers Finance plc,
issued £1,900m of secured loan notes in connection with the securitisation
of the majority of the Group's UK pubs and restaurants business. The
funds raised were mainly used to repay existing bank borrowings of £1,243m
and return cash to shareholders by way of a special dividend (see Note
7).
The loan notes consist of six tranches with principal terms as follows:
Tranche £m Interest Principal repayment period Expected WAL
A1 200 Floating By instalments 2011 to 2028 7 years
A2 550 5.574% By instalments 2003 to 2028 13 years
A3 250 Floating By instalments 2011 to 2028 7 years
B1 350 5.965% By instalments 2003 to 2023 11 years
B2 350 6.013% By instalments 2015 to 2028 21 years
C 200 6.469% By instalments 2029 to 2030 26 years
------
1,900
======
The expected WAL (weighted average life) is based on the amortisation profile of
the individual note tranches and assumes refinancing of the A1 and A3 notes on
the margin step-up dates below.
The notes are secured on substantially all of the Group's property and future
income streams therefrom.
Interest on the Class A1 notes is payable at three month LIBOR plus a margin of
0.45%, stepping up to LIBOR plus 0.90% in December 2010. These notes are fully
hedged using interest rate swaps which fix the interest rate payable.
The Class A3 notes were issued in principal amount of $418.75m, with interest
payable at three month US Dollar LIBOR plus a margin of 0.45%, stepping up to US
Dollar LIBOR plus 0.90% in December 2010. These notes are fully hedged using
currency swaps and interest rate swaps, whereby all principal and interest
liabilities are swapped into sterling providing an initial principal of £250m
and fixed interest payable.
The overall cash interest rate payable on the loan notes is 6% after taking
account of interest rate hedging and monoline insurance costs.
The securitisation is governed by various conditions, including covenants
relating to the maintenance and disposal of the securitised properties.
The carrying value of the loan notes in the Group balance sheet at 10 April 2004
is analysed as follows:
£m
Gross proceeds received on 13 November 2003 1,900
Principal repaid (11)
-------
Principal outstanding at 10 April 2004 1,889
Deferred issue costs (23)
Accrued interest 8
-------
Carrying value at 10 April 2004 1,874
=======
14 PENSIONS
The Group continues to account for pensions under SSAP 24 'Accounting for
pension costs'. FRS 17 'Retirement benefits' requires additional
disclosures in the notes to the accounts including the surplus or deficit
measured on a market value basis. At 30 September 2003, the FRS 17
deficit in the Group's pension schemes was £243m (£170m after tax). At 31
March 2004, it is estimated that the FRS 17 deficit had reduced to £201m
(£141m after tax) reflecting the benefit of additional contributions of
£40m paid during the period and improved investment returns, after
allowing for an increase in life expectancy assumptions.
15 CONTINGENT LIABILITIES
The Company has given indemnities in respect of the disposal of certain
companies previously within the Six Continents group. It is the view of
the Directors that, other than to the extent that liabilities have been
provided for in these financial statements, such indemnities are not
expected to result in financial loss to the Group.
16 AUDITORS' REVIEW
The auditors, Ernst & Young LLP, have reported to the directors on their
review of these financial statements in accordance with the guidance
contained in Bulletin 1999/4 'Review of interim financial information'
issued by the Auditing Practices Board. Their unqualified report will be
included in the Interim Report & Accounts 2004 which will be sent to
shareholders.
______________________________________
Responsibility statement
The directors of Mitchells & Butlers plc accept responsibility for the
information contained in this announcement. To the best of the knowledge
and belief of the Directors of Mitchells & Butlers plc (who have taken all
reasonable care to ensure that such is the case), the information
contained in this announcement is in accordance with the facts and does
not omit anything likely to affect the import of such information.
Cautionary note regarding forward-looking statements
This announcement contains certain forward-looking statements as defined
under US law (Section 21E of the Securities Exchange Act of 1934). These
forward-looking statements can be identified by the fact that they do not
relate to historical or current facts. Forward-looking statements often
use words such as 'target', 'expect', 'intend', 'believe' or other words
of similar meaning. By their nature, forward-looking statements are
inherently predictive, speculative and involve risk and uncertainty.
There are a number of factors that could cause actual results and
developments to differ materially from those expressed in or implied by
such forward-looking statements. Factors that could affect the business
and the financial results are described in Item 3 Key Information - Risk
Factors in the Mitchells & Butlers plc Form 20-F for the financial year
ended 30 September 2003 filed with the United States Securities and
Exchange Commission.
-ends-
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 31st May 2024
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