Half Year Results

MITCHELLS & BUTLERS PLC

LEI no: 213800JHYNDNB1NS2W10

22 May 2025

HALF YEAR RESULTS

(For the 28 weeks ended 12 April 2025)

Highlights

Reported results

Trading results

Balance sheet and cash flow

Phil Urban, Chief Executive, commented:

"The strength of our first half performance is driven by continued focus on maximising the guest appeal of our diverse portfolio of brands to drive sales, supported by efficiency initiatives delivered through our Ignite programme of work. We are delighted with the like-for-like salesa performance which continues to outperform against the marketb. 

As we enter the second half of the year, with increased employer national insurance contributions, we remain focused on the effective delivery of our Ignite programme of initiatives and our capital investment programme, driving further cost efficiencies and increased sales. Notwithstanding a likely increase in cost headwinds next year, we have confidence that relentless focus on delivery of our strategic priorities will generate further value from our well invested and strategically located estate portfolio and compelling customer offers."

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 3807 9124, access code: 699179 and at https://www.netroadshow.com/events/login?show=2c5d75e9&confId=81719

The slides will also be available on the website at www.mbplc.com The replay will then be available at https://www.mbplc.com/hy2025/analystspresentation.

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

For further information, please contact:

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.

CURRENT TRADING AND OUTLOOK

We traded strongly through the first half of the year with like-for-like salesa growth of 4.3% built on strong performances, ahead of the marketb, through the brand portfolio and supported by broadly flat volumes. Combined with disciplined cost control and further Ignite efficiencies this delivered over 10 per cent growth in operating profit to £181m (HY 2024 £164m). 

Over the most recent 10 weeks, to include both Easter and Mother's Day in each year, like-for-like salesa have grown by 6.0%. Looking forward we expect the market to remain robust and believe we are well placed to continue to outperform.

Our guidance on cost headwinds for the current financial year remains unchanged, with an anticipated increase of c.£100m before mitigation, representing c.5% of our cost base, driven primarily by labour costs including increases to both the statutory National Living Wage and employer national insurance contributions which will impact from the second half. Looking forward to FY26, we will have annualisation of labour cost increases, plus further increases in statutory thresholds which we would expect to exceed the general level of inflation. These, combined with recent indications of high increases in food costs, notably meat, lead us to anticipate a higher level of overall inflation next year, probably approaching £130m, representing slightly less than 6% of our cost base before mitigation.

Notwithstanding future cost increases we believe that the business remains in good shape, supported by a balance sheet that continues to strengthen, with reduced debt and a substantially de-risked pension surplus. We expect to deliver profits at the top end of consensus for the current year.

BUSINESS REVIEW

Total sales across the period were £1,454m reflecting 4.2% growth on HY 2024. Like-for-like salesa increased by 4.3% with strong performances through the brand portfolio. Operating profit of £181m reflected 10.4% growth on last half-year (HY 2024 £164m) and a 0.7ppt increase in operating margin to 12.4%.

We made a good start to the year with like-for-like salesa growth of 4.0% over the first seven weeks. Performance over the important three-week festive period was particularly strong with like-for-like salesa growth of 10.4%. Across the first quarter as a whole, like-for-like salesa remained well ahead of the marketa, growing by 3.9% despite the notable adverse, albeit temporary, impact of very cold and stormy weather over the last couple of weeks of the quarter.

Sales remained resilient through the second quarter aided by good weather in late March, and with a particularly strong performance on Mother's Day. Across the quarter, we recorded like-for-like salesa growth of 4.7%, comprising drink sales growth of 5.1% and food sales growth of 3.6%.

We have continued to consistently outperform the marketb, as represented by the CGA Business tracker, by over 3% over the first half. Across the market segments reported on by CGA Business tracker, Pubs and Pub Restaurants have seen the highest sales growth over the first half, benefitting from the warm weather in March and April. The Restaurant segment of the market has delivered broadly flat sales across the period, which we have consistently outperformed. Bars across the market have reported sales decline over the first half, with the late-night market being particularly challenged. This is the segment that we have least exposure to, but again we have outperformed significantly, with our offers appealing across a range of occasions with less exposure to late-night trade. 

Overall current year cost inflation remains in line with previous guidance at £100m, driven primarily by increased labour costs and with a stabilisation of energy costs in particular. Strong and resilient sales growth combined with effective delivery of our Ignite and capital programmes has driven an increase in both profitability and margins.

Supply across the sector largely stabilised by the end of 2024. However, as the industry faces a new wave of cost headwinds there is renewed likelihood of supply contraction. In the three months to March 2025 there was an average of 20 net closures a week with food-led sites being particularly impacted (CGA AlixPartners Hospitality Market Monitor April 2025).

OUR STRATEGIC PRIORITIES

Our strategy, based on three key pillars, has provided the foundation for our ongoing performance. We focus on maximising the value generated from our 82% freehold and long leasehold estate, utilising the diversity of our brand portfolio to grow market share with appeal across a broad range of consumer occasions, demographics and locations. Our range of brands is a particular strength during times of uncertainty, with familiar brands to suit a wide range of occasions, offering guests the opportunity to adapt their eating out choices to meet their needs.

Our Ignite programme of work remains a key focus for the business and is at the core of our long-term value creation. We currently have around 40 initiatives underway across a range of areas, all focused on driving sales and delivering cost efficiencies. Our initiatives focus on enhancing guest experience in a variety of ways and continue to reap rewards, reflected in sustained like-for-like salesa growth as well as continued market outperformance on guest review scores, which averaged 4.6 out of 5 over the first half. We now have a new workstream focused on our drinks offer, from optimum font positioning, to perfect serve to cellar practices. In recent years, we have focused on the food element of our offers, and we believe there is significant opportunity in developing our drinks offers to the same high standard.

Enhancing productivity and efficiency to help mitigate inflationary costs remains an important focus and we have a number of initiatives in place designed to improve efficiency including our labour scheduling system and auto-order technology. Employee engagement and low turnover are important elements supporting team efficiency. Therefore, to enhance our employee experience, we have launched an employee app providing a single portal to access benefits and pay slips. The app also provides a direct route of communication from the brand designed to enhance engagement behind incentives and 'calls to action' which will increase productivity over time.

Following the successful trial of the use of remote control in-site energy systems which have delivered energy consumption savings we have begun the roll out of this technology across our estate. 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. Our energy initiatives help us to improve efficiency whilst also supporting our sustainability objectives.

Our capital programme continues to deliver significant value through improving the competitive position of our pubs and restaurants within their local markets. Enhancing the effectiveness of delivery of the programme has also been an area of Ignite focus, ensuring optimisation of closure and re-opening timing, streamlining of costs and rigorous analysis of post-investment performance. Over the first half, we completed 95 investment projects comprising 87 remodels, 5 conversions and 3 acquisitions. We are generating strong returns, currently in excess of 35% on remodels, justifying an increasing allocation of capital to this area as we look to re-establish an average 7 year investment cycle.

PEOPLE

Our people are fundamental to the delivery of great experiences for our guests. We are delighted that engagement scores have continued to improve across all employee groups in the first half of the year, representative of the commitment of our teams to work together to drive the future success of the business. Pleasingly, turnover has also continued to improve, reaching record lows during the first half of FY 2025. The continued progress on our people measures, despite the challenging recruitment environment, is testament to our success in attracting the best talent, enhancing performance through our development programmes and retaining teams through progression opportunities.

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

- Zero operational waste to landfill by 2030

- 50% reduction in food waste by 2030

We remain focused on working towards our sustainability goals, with numerous initiatives underway to support these ambitions and we were delighted to again receive the award for the Most Sustainable Pub Company at this year's Publican Awards. During the first half we have continued to invest in sustainability capital, we now have 180 sites with solar panels, and significant further opportunity to grow our production of renewable energy. We have electrified 74 kitchens, reducing our reliance on gas for cooking, and have fully removed gas in 5 sites taking the learnings from these projects forward to expand the removal of gas in the coming years. In addition, we are investing in technology which allows us to remotely control high energy consumption equipment across the estate, opening up the opportunity for energy consumption savings without requiring intervention from our teams. Our teams are vital to the delivery of progress in other areas, for example our ambition to increase recycling rates is dependent on our teams effectively segregating waste. We provide support for these types of initiatives through our dedicated network of sustainability ambassadors, as well as centrally developed online training. We know that our people are passionate about improving the environmental impact of our business and are pleased to deliver continued progress in this area further enhancing our employer proposition.

FINANCIAL REVIEW

On a statutory basis, profit before tax for the half year was £134m (HY 2024 £108m), on sales of £1,454m (HY 2024 £1,396m). 

The Group Income Statement discloses adjusted profit and earnings per share information that excludes separately disclosed items, disclosed 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.

At the end of the period, the total estate comprised 1,723 sites in the UK and Germany of which 1,653 are directly managed.

Revenue

Total revenue of £1,454m (HY 2024 £1,396m) reflects a strong period of trading with sustained like-for-like salesa growth across the brand portfolio.

Like-for-like salesa in the first half increased by 4.3%, comprising an increase in like-for-like food salesa of 3.8% and of like-for-like drink salesa of 4.3% driven by strengthening spend per head.  Volumes of both food and drink were broadly flat across the first half.

Like-for-like salesa:

Over the most recent 10 weeks, to include both Easter and Mother's Day in each year, like-for-like salesa have grown by 6.0%.

Separately disclosed items

There were no separately disclosed items recognised in the period.

Operating profit and marginsa

Adjusted operating profita for the first half was £181m (HY 2024 £164m), an increase of 10.4% on the first half of the previous year.

Adjusted operating margin of 12.4%, 0.7ppts higher than last year driven by strong like-for-like salesa growth and operating efficiencies.

We continue to expect cost headwinds for this year of £100m before mitigation, representing c.5% of our cost base, driven primarily by labour costs including increases to the statutory National Living Wage and an increase in employer national insurance contributuions which will impact from the second half. Looking forward to FY26 we will have annualisation of labour cost increases, plus further increases in statutory thresholds which we would expect to exceed the general level of inflation. These, combined with recent indications of high increases in food costs, notably meat, lead us to anticipate a higher level of overall inflation probably approaching £130m, representing slightly less than 6% of our cost base before mitigation.

Interest

Net finance costs of £50m (HY 2024 £55m) for the half year were £5m lower than the same period last year. The net pensions finance income of £3m (HY 2024 charge £1m) reflects the surplus funding position now recognised on the balance sheet.

Earnings per share

Basic and adjusted earnings per share were 16.8p (HY 2024 13.6p basic and adjusted earnings per sharea).

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 599m.

Cash flow

This was a strong period of cash generation, built on EBITDA increased as a result of an improved trading performance to £252m, a pension escrow return of £12m which was received during the period (HY 2024 £35m) and the use of tax losses incurred over the pandemic to temporarily reduce cash tax paid. Capital expenditure increased to £92m (HY 2025 £81m) with reduced impact of external delays allowing us to extend the number of completed projects, with an increasing allocation of capital to this area being justified by strong returns.

After all outgoings, including mandatory bond amortisation of £64m (including net impact of currency swaps), cash inflow was £67m (HY 2024 £76m).

Capital expenditure

Capital expenditure of £92m (HY 2024 £81m) comprises £89m from the purchase of property, plant and equipment and £3m in relation to the purchase of intangible assets.

Maintenance and infrastructure spend included investments towards our sustainability ambitions, such as further installations of solar panels and control sensors, and electrification of kitchens. Investment in these areas was slightly higher than the prior period.

Project numbers have increased in the period as we remain committed to resumption of an average seven-year refurbishment cycle across our estate, justified by the strong returns we are generating in this area of over 35% on remodels.

Pensions

In the prior period the Trustees of the Mitchells & Butlers Executive Pension Plan (MABEPP) completed a full scheme buy-out of the liabilities of the plan. Subsequent to that, and in the current period, the scheme has been wound up with all escrow monies repaid and a surplus cash balance of £3m transferring to the Mitchells & Butlers Pension Plan (MABPP).

Over the course of 2024, the Trustees of MABPP resolved that any surplus arising in that plan can be used to pay for the employer contributions to the defined contribution section of MABPP. During the period, the MABPP surplus has funded the settlement of £6m of the Company's employer contributions, AVC's in respect of prior year bonus payments and death in service benefits.

One further scheme remains. This is closed and unfunded and has estimated liabilities of £21m.

Net debt and facilities

On the back of a strong cash performance, net debta at the period end reduced to £1,298m, comprised of £860m non-lease liabilities and lease liabilities of £438m (HY 2024 £1,486m comprised of £1,037m non-lease liabilities and lease liabilities of £449m). This represents a multiple of 2.8 times EBITDA over the last year including lease liabilities (1.9 times excluding these liabilities).

In addition to the securitisation the Group has a £200 million committed unsecured facility, expiring in July 2026. Further details of existing debt arrangements and an analysis of net debt can be found in Note 10 to the financial statements and at 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.

Director's responsibility statement

We confirm that to the best of our knowledge:

This responsibility statement was approved by the Board of Directors on 21 May 2025 and is signed on its behalf by:

Tim Jones

Chief Financial Officer

21 May 2025

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. 

GROUP CONDENSED INCOME STATEMENT

for the 28 weeks ended 12 April 2025

All results relate to continuing operations.

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME

for the 28 weeks ended 12 April 2025

GROUP CONDENSED BALANCE SHEET

GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY

for the 28 weeks ended 12 April 2025

GROUP CONDENSED CASH FLOW STATEMENT

for the 28 weeks ended 12 April 2025