annual report  
and accounts
 201 4
wwwmbplccom mitchells  butlers plc annual report and accounts 2014 mitchells  butlers plc is  
a member of the ftse 250  
and runs some of the uk’s  
bestloved restaurant and pub 
brands including all bar one 
harvester toby carvery 
browns vintage inns and 
sizzling pubs our vision is to 
run businesses that guests love 
to eat and drink in and as a 
result grow shareholder value
our strategy to achieve this 
vision has five key elements
• • focus•the•business•on•the•most • attractive•market•spaces•within • eating•and•drinking•out
• • develop•superior•brand • propositions•with•high•levels • • of•consumer•relevance
• • recruit•retain•and•develop • engaged•people•who•deliver • excellent•service•for•our•guests
• • generate•high•returns•on • investment•through•scale • advantage
• • maintain•a•sound•financial•base contents
strategic report
2	 2014	highlights
3	 chairman’s	statement
4	 mitchells		butlers	at	a	glance
6	 chief	executive’s	statement
	 8	 our	market
	 10	 our	business	model
	 12	 our	strategy
	 14	 our	strategy	in	action
	 18	 risks	and	uncertainties
	 22	 key	performance	indicators
	 24	 business 	 review
26	 corporate	social	responsibility
31	 financial	review
go online wwwmbplccom
what you’ll find
 • about us and our brands
 • news from around the business
 • corporate social responsibility
 • investor relations
 • careers with us
chief	executive’s	
statement	 	
page	6
corporate	social	responsibility		
page	26
governance
35	 chairman’s	introduction	to	governance
36	 board	of	directors
38	 directors’	report
42	 	 directors’	 responsibilities	 statement
43	 corporate	governance	statement
48	 audit	committee	report
50	 report	on	directors’	remuneration
financial statements
68	 	 independent	auditor’s	report	to	the		
members	of	mitchells		butlers	plc
70	 group	income	statement
71	 	 group	statement	of	comprehensive	income
72	 group	balance	sheet
73	 	 group	statement	of	changes	in	equity
74	 group	cash	flow	statement
75	 notes	to	the	financial	statements
104	 	 five	year	review		
income	statement	information
105	 	 company	balance	sheet
106	 	 notes	to	the	company	financial	statements
shareholder information
112	 shareholder 	 information
112	 glossary
mitchells  butlers plc annual report and accounts 2014 1
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 number of managed sites
fy 2011
0
400
800
1200
1600
2000
1775
fy 2012 fy 2013 fy 2014
fy 2014
fy 2011
0
5
10
15
20
25
232
fy 2012 fy 2013 fy 2014
fy 2014
fy 2011
0
20
40
60
80
100
51
fy 2012 fy 2013 fy 2014
fy 2014
average weekly sales per pub 
£k
food sales 
as  of total sales
1536
1576 1589
1775 222
228 229
232
48
50
51 51
revenue
£1970m 40
adjusted operating profit
£313m 10
adjusted earnings per share
326p 12
  excludes the pubs acquired from the orchid group in june 2014
  adjusted figures refer to results before exceptional items as noted  
in the group income statement
mitchells  butlers plc annual report and accounts 2014 2
2014 highlights
financial highlights
operational highlights  “the market in which we 
operate remains challenging 
and competitive but we  
feel wellplaced to continue  
to grow given the solid 
foundations of our business”
bob ivell
chairman
this year has seen us continue to  
deliver earnings growth while remaining 
on track with our priorities we have taken 
steps to drive longterm growth in the 
business by focusing on increasing food 
volumes improving our infrastructure and 
allocating our capital in the most effective 
manner we also completed the exciting 
acquisition of 173 pubs from the orchid 
group which gives us a great opportunity 
to grow further in the forthcoming years 
the market in which we operate remains 
challenging and competitive but we feel 
wellplaced to continue to grow given  
the solid foundations of our business
the last year has been full of activity for 
mitchells  butlers i am delighted that  
we were successful in completing the 
acquisition of 173 sites from the orchid  
group the opportunity to purchase this 
largely freehold managed estate presented 
the type of acquisition unlikely to arise  
again in the near future and is fully in line  
with our clear strategy of growing our share  
of the uk eatingout market we are able  
to create value by converting the sites to  
our existing brands and formats reducing 
central overheads and realising purchasing 
synergies we welcome the orchid team  
into our business
in may we successfully concluded 
negotiations with the pension trustees 
regarding the triennial valuation of our 
schemes negotiations had been progressing 
since before the last valuation in march  
2013 and we reached a settlement whereby 
company contributions increase at a 
manageable level to reduce the deficit over  
the agreed recovery period i am delighted 
that we reached a positive agreement for  
both the company and the trustees
i would like to praise and thank our people 
now at more than 43000 for their ongoing 
hard work in driving this business forward  
we aim to delight every guest that eats  
and drinks with us which we simply cannot 
achieve without the support and hard work  
of our people
we continue to operate in a challenging 
market it is clearly very encouraging to see 
the economic recovery taking place however 
consumers have undoubtedly retained their 
focus on value and quality which developed 
during the recession we therefore need to 
continue to perform at the top of our game  
to make every guest visit worthwhile 
reflecting on the last year we have achieved  
a great deal and generated further value for 
our shareholders this has been achieved 
while continuing to set solid foundations  
for our longterm success
bob ivell
chairman
173
largely freehold managed sites 
acquired from the orchid group  
in june 2014
43000 
employees delighting our guests  
on a daily basis
mitchells  butlers plc annual report and accounts 2014 3
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112
chairman’s statement we love building innovative brands and 
formats and run some of the country’s 
bestknown restaurants and pubs  
so whether you’re in the mood for an 
unlimited hearty breakfast with your 
family close to home or a pint and some 
tapas in a buzzing city centre restaurant 
we’ve a business to suit every occasion
harvester
a welcoming place for families to spend  
time together have fun and share the 
pleasure of good honest food enjoy our 
£499 unlimited breakfast free unlimited 
salad and fresh tasty grilled meat and fish
number of sites
213
castle
if you like your pint served with real 
personality pull up a chair in one of our 
eclectic urban pubs serving the best 
draught beer and great pub food each  
is decidedly individual with a character  
to suit its community and an independence 
that attracts regulars as diverse and 
discerning as the beers on tap
number of sites
110
ember inns
relaxed and welcoming suburban pubs  
where conversation flows we serve the  
best cask ales and classic pub food with  
a twist in stylish environments
number of sites
130
heartland
a collection of the uk’s friendliest pubs  
and carveries what unites these pubs is 
unbeatable value for money generosity  
and bighearted service
 
number of sites
440
toby carvery
the home of the roast every day your local 
toby carvery lays on a familysized feast  
of tender slowcooked meats eight lots  
of veg including crispy ruffled roasties and 
all the trimmings you’ll find lots more on 
offer such as tasty specials allyoucaneat 
breakfasts and even comfy accommodation 
at some of our restaurants
number of sites
158
nicholson’s
if you share our passion for real ale hearty 
food and a friendly welcome you’ll feel 
right at home at these traditional city  
and town centre pubs enjoy the timeless 
atmosphere that’s been loved by groups  
of friends colleagues and shoppers since 
our first pub opened in 1873
number of sites
80
mitchells  butlers plc annual report and accounts 2014 4
mitchells  butlers at a glance revenue by region fy 2014
 of sales excludes orchid pubs
total london
south east ex london
west midlands
north west
yorkshirehumberside
east of england
south west
east midlands
scotland
wales
north east
24
15
14
9
8
7
7
5
4
4
3
1
1
8
7
2
3
10
5
11
4
6
9
2
3
4
5
6
7
8
9
10
11
all bar one
at all bar one we’ve been running stylish 
city bars in central locations since 1994 
whether you want to catch up over 
cocktails share a bottle of wellchosen wine 
or enjoy an excellent meal out you’ll find 
something and somewhere to suit you
number of sites
50
browns
since the first browns opened in 1973 it’s 
been providing delicious food and drink in 
beautiful surroundings with superb service 
many are in unique landmark buildings  
so you can enjoy classic seasonal food  
and signature cocktails in everything from  
a stunning mayfair exgentlemen’s club  
to bristol’s beautiful old city museum 
number of sites
27
miller  carter
you will not experience a better steak than 
that at miller  carter we put everything 
into pursuing the perfect steak from the 
field to the butcher’s block to the grill  
so only the finest most flavoursome cuts 
make it to your plate
number of sites
35
country pubs
we are proud to manage over 300 of the 
best country pubs in the uk all offering 
modern pub food and outstanding drinks 
served with care and character by our teams 
number of sites
315
alex
if you’re out in a german city centre these 
classic bars and brasseries are the perfect 
places to stop for a beer and a bite to eat 
soak up the sun in the outside eating  
area and try the classic meals salads and 
healthy snacks that have made alex one  
of germany’s leading brands
number of sites
41
orchid
in june 2014 we acquired 173 pubs  
from the orchid group these high quality 
welllocated largely freehold pubs expand 
our share of the growing uk branded pubs 
and restaurants market we will convert  
96 of these businesses to our brands and 
formats over the next two years
number of sites
173
mitchells  butlers plc annual report and accounts 2014 5
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 our market opportunities
special
  browns
  miller  carter
family
  harvester
everyday social
  ember inns
heartland
  crown carveries
  oaktree pubs
upmarket social
  all bar one
  castle
  vintage inns
  premium country pubs
  toby carvery
  sizzling pubs
  o’neill’s
  nicholson’s
  alex
we operate a wide range of brands and 
formats which offer food and drink across 
a broad spectrum of price points and 
occasions from a casual meeting with 
friends to special occasion dining we have 
identified five market spaces accounting 
for around half of the £78bn eating and 
drinkingout market on which to focus
1
2
3
4
5
everyday social
special
upmarket social
heartland
3
2
1
5
4
family
 “since i joined mitchells  butlers 
in october 2012 we have been 
committed to the fundamentals 
of our business plan i remain 
confident that this is the right 
plan and will deliver sustainable 
profit growth and future 
shareholder value”
alistair darby
chief	 executive
we are the uk’s largest operator of 
managed restaurants and pubs with  
a high quality freehold estate and a 
portfolio of strong brands our strategy is 
to focus on the longterm growth of food 
within the £78bn eating and drinkingout 
market with around threequarters of our 
turnover coming from guests eating in our 
pubs and restaurants
during the year we took a significant step to 
grow our business by acquiring 173 pubs from 
the orchid group this acquisition enables  
us to create value through the conversion  
of the majority of these pubs into our own 
brands and formats a reduction in its central 
overheads and the realisation of purchasing 
synergies across the whole estate 
75
around threequarters of our sales 
come from guests eating in our pubs 
and restaurants
in a challenging year we continued to  
position the business for future growth  
whilst delivering increased earnings per share 
of 12 we have delivered sales growth 
underpinned by volumes rather than price 
invested further capital in both expansion  
into new sites and enhancement of amenity 
and continued to upgrade our key systems 
together with the quality of our estate and  
our people we have confidence going into  
the year ahead
in this review i will update you on our market 
and our wellestablished business model and 
strategy as well as our progress against the key 
measures we use to monitor our performance
mitchells  butlers plc annual report and accounts 2014 6
chief executive’s statement our vision
what we want to be famous for
our mission
what we set out to achieve
values
how the business behaves
our market
where we operate
— page 8
business model
how the business delivers value
— page 10
guests love to eat and drink with us
consistently deliver great service to our guests to drive repeat visits and 
recommendation while delivering great financial results and shareholder returns
our business model is designed to maximise 
revenue and profit from our operations we 
believe that by adopting industryleading 
practices recruiting training and retaining  
the best people and by focusing on excellent 
customer service we will deliver longterm 
growth in profits and shareholder value
we recognise that we operate in a dynamic 
market with everchanging circumstances 
our market is in aggregate a mature one 
with growth expected broadly to track gdp 
and consumer expenditure however there 
are dynamics within this market on which 
we can capitalise namely the
 • growth in branded outlets
 • continued growth in eating out
 • consumers’ continued focus on value
 • consumers’ demand for eating out at any 
time of day 
 • passion
 • respect
 • innovation
 • drive
 • engagement
our strategy
how we will achieve our mission
— page 12
our strategic priorities remain unchanged to
 • focus the business on the most attractive 
market spaces within eating and drinkingout
 • develop superior brand propositions with 
high levels of consumer relevance
 • recruit retain and develop engaged people 
who deliver excellent service for our guests
 • generate high returns on investment 
through scale advantage
 • maintain a sound financial base
kpis
how we monitor our success
— page 22
we measure our performance and progress 
against our strategy through five key 
performance indicators including two 
nonfinancial kpis relating to our ability to 
retain our employees and to the extent that 
our guests would recommend our businesses 
to their friends and family these kpis are 
reviewed at every executive committee 
meeting and are central to our understanding 
of our performance
risks
how we manage our markets  
and operating environment
— page 18
this section highlights the principal risks that 
affect the company together with the key 
mitigating activities in place to manage those 
risks key risks identified are reviewed and 
assessed by the risk committee in terms
of their likelihood and impact in conjunction 
with associated risk mitigation plans
through our research we have identified  
five market spaces in which our businesses 
operate we tailor our approach on the  
basis of the different dynamics of each  
of these spaces
 • special
 • family
 • everyday social
 • heartland 
 • upmarket social
mitchells  butlers plc annual report and accounts 2014 7
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 uk annual turnover 
£bn
2010
0
5
10
15
20
25
30
branded pubs and restaurants
source allegra project restaurant 2013
unbranded pubs and restaurants
2011 2012 2015 2014 2013
98
271
106
262
112
254
119
248
126
242
133
237
uk consumer average spend 
 of income
1997 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
eating out drinking in drinking out
source ons and company estimates
0
2
4
6
8
10
we are operating in a dynamic market  
that is evolving constantly we are 
continually reviewing the positioning  
and development of our brands and how 
we allocate capital between them this 
approach has underpinned our growth  
in food and will ensure that our pubs  
bars and restaurants remain relevant  
and competitive in the years to come  
during the year the uk economy has grown 
led by london and the south east growth in 
the year ahead is forecast to be more evenly 
distributed across the uk returning to areas 
that have been the most depressed since  
the economic downturn in 2007  consumer 
confidence has started to increase and overall 
spending is up as a result however during the 
year earnings growth has remained below 
inflation causing consumers to remain highly 
value conscious the careful spending 
behaviour developed during the recession  
is now the norm
despite being the largest uk operator of 
managed pubs and restaurants we have  
only around a 3 share of this market and  
so there are significant opportunities for  
us to grow further 
the market in which we operate is in 
aggregate a mature one with growth 
expected broadly to track gdp and consumer 
expenditure however there are a number  
of dynamics on which we can capitalise 
growth in branded outlets
the pub and restaurant market 
continues to see growth in branded 
outlets at the expense of independent 
outlets coming out of the recession 
consumers increasingly look for the 
reliability and value that a brand  
can offer
food remains the route to growth
food remains the principal opportunity 
for longterm sustainable growth  
the ongoing structural decline in the 
drinkingout market is offset by growth 
in fooddriven occasions out of the 
home we benefit from being focused 
on eatingout we are wellplaced to 
take advantage of this longterm trend 
having a large number of excellent sites 
with a focus on customer service 
quality and value
mitchells  butlers plc annual report and accounts 2014 8
our market 85 67 66
i will continue to be 
more careful with 
my money even 
when the economic 
downturn is over
of respondents
source future foundation uk responses
i carefully budget 
my finances 
each month
of respondents
i shop around 
extensively to get 
the best deals
of respondents
source npd crest
2013 industry sales growth by meal time

breakfast lunch dinner
0
1
2
3
4
5
44
03
01
our brands and formats
through our research we have identified  
five market spaces in which our businesses 
operate upmarket social special family 
everyday social and heartland
market conditions in each of these spaces  
as well as an understanding of how our brands 
and concepts sit within these dictate how  
we operate and how we allocate our capital 
spend we have developed two broad 
approaches to these market spaces attractive 
expansionary investment and cash generation
attractive investment opportunities
the family special and upmarket social 
segments currently present attractive 
opportunities for investment with the market 
trends being towards branded food special
occasion dining and speciality drinks offerings 
these are the segments towards which we 
allocate the majority of our expansionary 
capital including that relating to the 
conversion of orchid sites
four of our brands are being prioritised for 
further expansion all bar one harvester 
miller  carter and toby carvery these offer 
opportunities for growth because they meet 
the following key criteria
 • established in attractive market segments
 • capable of generating strong returns  
on expansionary capital
 • compelling brand propositions and
 • good availability of sites 
 
we will grow other brands in these market 
spaces through opportunistic acquisitions  
if they are able to meet the criteria set out above
cash generation opportunities
the heartland and everyday social  
segments are characterised by the need to 
offer great value and service to our guests  
in community pubs in these segments our 
businesses generate significant profit and 
cash but within market spaces that are not 
expected to grow as significantly as the  
other three 
these businesses continue to be valuable to  
us and have enduring appeal for their guests 
as a result we look to grow them through 
consistently offering great prices quality  
and service as well as investing the necessary 
capital to ensure that our pubs continue  
to satisfy our guests’ needs 
value for money
consumers continue to seek value  
for money despite a rebound in 
confidence and spending as a 
largescale operator we are able  
to use our buying power to deliver 
quality experiences at affordable 
prices and so win market share
time of day
consumers are increasingly happy  
to eat out at any time of the day  
we believe that there is significant 
opportunity to benefit from allday 
trading in particular through 
breakfast an occasion for which we 
have experienced rising demand 
within both our city centre and 
suburban brands
mitchells  butlers plc annual report and accounts 2014 9
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 our guests
each of the 135 
million meals and 
435 million drinks we 
serve each year is 
aimed at delighting 
our guests
suppliers
we work with our 
suppliers to deliver 
the best products 
at the best value 
to our guests  
our practices
our practices refer to the way in which we 
approach all of our key activities  
our profits
through delivery of the above priorities we will grow 
the same outlet likeforlike sales in our existing estate 
safety
our approach to 
safety is our first and 
most important priority 
in operating our 
businesses  
recruit
recruit the right 
people at all levels 
of the organisation   
technology
our practices rely 
on us staying relevant 
in our approach to 
technology  
retain
retain our people 
by helping them build 
a career that works 
for them  
induct 
and train
induct and train our 
new people to see them 
through what can be a 
steep and pressurised 
learning curve  
our people
our 43000 people are vital to the successful 
running of our businesses our approach 
to our people is therefore to 
our business model represents how  
we aim to generate revenue and profit 
from our operations we believe that by 
recruiting training and retaining the best 
people by focusing on excellent customer 
service and by adopting industryleading 
practices we will deliver longterm growth 
in profits and shareholder value
mitchells  butlers plc annual report and accounts 2014 10
our business model our practices refer to the way in which  
we approach all of our key activities 
including compliance with legislation  
how we conduct ourselves in interacting 
with our various stakeholders and how 
we utilise equipment and technology 
consistent and faultless adoption of these 
practices gives the foundation for us  
to be able to operate outstanding pubs  
and restaurants for our guests to enjoy
we employ more than 43000 people 
who are each vital to the successful 
running of our business in a market 
typified by fierce competition and guests 
with high standards our people are the 
key differentiating factor and help us  
to gain competitive advantage our 
approach to people is therefore to
our aim is to delight our guests through 
each and every one of the 135 million 
meals and 435 million drinks we serve 
per year
through delivery of the above priorities 
we will grow the same outlet likeforlike 
sales in our existing estate
our first and most important priority in 
carrying out these practices is safety we set 
ourselves the highest standards to ensure that 
our businesses are safe for our people to work 
in and our guests to eat and drink in these 
principles are paramount in everything we  
do and are reflected in performance measures 
at all levels within the organisation
we work with suppliers to deliver the best 
products at the best value to our guests our 
approach to supply chain management is to 
utilise our scale through volume suppliers 
 • recruit the right people at all levels of the 
organisation we recruit our people to  
be great at hospitality – with a focus on 
personality rather than experience we 
look to recruit people who will adopt our 
values of passion respect innovation 
drive and engagement and who wish  
to progress within the organisation
 • induct and train our new people to support  
them through what can be a steep and 
pressurised learning curve this involves 
strict compliance training to ensure our  
high standards are adhered to but also 
welcoming them into a supportive 
environment so that they feel prepared when 
they are serving guests for the first time 
first and foremost we must welcome  
our guests into a clean safe and friendly 
environment these therefore represent  
key outputs from our focus on our practices 
and our people 
we then need to offer brand propositions  
that meet our wideranging and evolving 
guests’ needs 
these offerings vary from an outstanding 
range of cask ales in nicholson’s and ember 
inns value breakfasts within a number of our 
we aim to drive further shareholder value  
by investing our capital in focused areas  
to complement our guests’ priorities while 
generating attractive returns we have a strategic 
approach to investment which principally 
focuses on four key brands due to a combination 
of market attractiveness and availability of 
locations we also remain open to opportunistic 
expansion where available subject to it 
delivering sufficiently attractive returns
where appropriate but also work in 
partnership with smaller specialist suppliers 
such as local farmers when it benefits  
the product and gives the best quality  
and value to our guests
our practices rely on us staying relevant  
in our approach to systems and technology  
this includes appropriate back of house 
systems payment systems to deal as efficiently 
as possible with any guest administration  
and technology to support management 
information and decisionmaking
where possible we look to promote to 
general manager and beyond from within 
the organisation offering a compelling 
reason to join our fantastic business and
 • retain our people by helping them build  
a career that works for them we can use  
our scale to offer flexibility in the workplace 
as well as a fantastic and varied career path  
we encourage our people to make the most  
of working for our brands but also to 
develop and build a career with us we  
offer nationwide opportunities across a 
range of formats and functions including 
front of house back of house and in our 
retail support centre
brands family roast dinners at the likes of  
toby carvery and country pubs to special 
occasion dining at miller  carter or browns 
we have dedicated employees focused  
on making all of these propositions available  
at great value for our guests
through this focus we aim for our guests  
to leave us having had a pleasurable and  
memorable experience and one that they  
will highly recommend to friends and family  
to broaden our guest base further 
we focus on maintaining robust financial  
practices including carefully managing the 
longterm financial stability of the business  
with the overriding aim of increasing 
shareholder value through both increasing 
earnings and the ongoing reduction in debt
mitchells  butlers plc annual report and accounts 2014 11
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112
our practices
our people
our guests
our profits in this section we outline our established 
strategic priorities update on the progress 
we have made in their execution during  
the year as well as our plans for fy 2015 
and link them back to both the key risks 
and performance indicators that we 
monitor to run the business
our strategy
focus the business  
on the most attractive 
market spaces within  
eating and drinkingout
 • the acquisition of orchid is in line with our objective of increasing our share of the  
uk eating and drinking out market
 • our expansionary capital expenditure was directed towards our strategically identified 
market spaces we acquired an additional 23 sites throughout the year all within these 
spaces 10 in upmarket social 7 in special 6 in family we also converted 8 businesses 
to our brands and formats
develop superior  
brand propositions  
with high levels of  
consumer relevance
1
2
fy 2014 progress
recruit retain and  
develop engaged people 
who deliver excellent  
service for our guests
3
4
maintain a sound  
financial base
5
 • we have continued to evolve each of our brand propositions by focusing on delivering 
exceptional guest experiences particularly within harvester castle nicholson’s  
and ember inns and further enhancing the sport offering within heartland
 • we opened all bar one sites within transport hubs including our first airport site
 • we have continued the rollout of our new epos systems project at pace now reaching 
more than 1300 outlets and enabling our teams to focus on providing great guest 
experiences these systems include various technology upgrades including tills  
payment and handheld order devices and kitchen management systems
 • our ‘good to great’ principles continue to live throughout the business driving  
teams’ engagement
 • we have revised our process of retail team recruitment with the aim of making best  
use of our scale and diversity to attract exceptional people
 • our induction programme for new employees has been extended to reduce the  
number of our people who leave within the first three months of joining
 • we have committed to taking on an additional 1000 apprentices over the next two years
 • we have completed the immediately earningsaccretive acquisition of 173 pubs from  
the orchid group
 • we have accelerated our remodel programme which sees capital invested in refurbishing 
and maintaining amenity we remodelled 174 businesses in fy 2014 compared to 97  
in fy 2013 this programme has delivered ebitda roi in excess of 30
 • we successfully renegotiated the terms of our contributions to the pensions deficit  
following the triennial valuation in march 2013
 • we have longterm debt financing secured on our large predominantly freehold asset base
 • at the year end our freehold property was revalued and we conducted an impairment 
review on other assets taken together this resulted in an increase in value of £26m
 • net debt increased to 45x ebitda fy 2013 42x due to the use of cash in  
the acquisition of 173 pubs from the orchid group
generate high returns  
on investment through  
scale advantage 
mitchells  butlers plc annual report and accounts 2014 12
our strategy  • we begin the conversion of a significant number of  
the orchid outlets into our own brands and formats
 • we have an ongoing expansion programme which is primarily 
focused on the special upmarket social and family segments
 • failure to anticipate pricing  
and market changes
 • failure to anticipate changes  
in consumer taste
see kpis  
b c d
fy 2015 priorities key risks link  
to kpi
 • we will continue to build on our market research to enhance  
the offering to our guests in terms of menu development and 
product ranges
 • we will complete the new epos systems rollout including  
the acquired orchid businesses
 • we are reallocating some of our maintenance capital 
expenditure towards the heartland estate to maintain  
the level of amenity for our guests
 • failure to anticipate pricing  
and market changes
 • failure to anticipate changes  
in consumer taste
see kpis  
b c
 • our focus remains on improving retail staff turnover and in 
particular on reducing the number of employees who leave 
within the first three months of joining we will achieve this  
by continuing our work on developing the recruitment and 
induction programme as well as living ‘good to great’ to 
ensure our teams remain engaged and set up to deliver 
exceptional guest service
 • having welcomed them in fy 2014 we will continue to work 
with our people from the orchid business to share our ways  
of working and learn from their experiences
 • failure to attract retain develop  
and motivate the best people with  
the right capabilities
see kpis  
a b c
 • we will continue our focus on improving the efficiency  
of our investments
 • we will convert around 50 of the orchid sites into our own 
brands and formats along with integrating around 70 sites into 
our heartland estate
 • the pace of our remodel programme will continue to increase 
to get the business to a point where every site receives  
regular investment
 • cost of goods price increases  
including energy
 • failure to attract high quality teams  
to operate newly opened restaurants 
and pubs
see kpis  
d e
 • we will continue to prioritise longterm financial stability  
for the group
 • the pension fund deficit may  
increase leading to increases  
in funding requirements
 • failure to meet our borrowing 
covenants
see kpi 
e
see our strategy in action  
on page 14
mitchells  butlers plc annual report and accounts 2014 13
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 this is what  
happens when 
we get our  
strategy right
pippa williams philippacake 
millerandcarter	is my new 
favourite restaurant amazing first 
visit steakhouse yummy
811pm – 23 september 2014
mitchells  butlers plc annual report and accounts 2014 14
our strategy in action louise cage cagelouised2500 
harvesteruk	derby pride park 
never fails staff are fab service is 
fab and food just amazing
1222pm – 30 september 2014
mitchells  butlers plc annual report and accounts 2014 15
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 jamesy jstutelybrown1 
just had a lovely tobycarvery –  
great food and lovely friendly staff
546pm – 21 september 2014
mitchells  butlers plc annual report and accounts 2014 16
our strategy in action
continued dominic bright inanemusing 
first time in yourallbarone in 
york and can honestly say i’ve 
never been to a bar i liked more 
the menu and the staff are  
just perfect
859pm – 31 july 2014
mitchells  butlers plc annual report and accounts 2014 17
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 identify 
risk
report risk 
assessments to 
risk committee 
and audit 
committee
review net risk 
post mitigation
agree risk 
mitigation plans 
of gross risk
assess 
likelihood 
and impact
1st line of defence
   executive committee
   leadership groupmanagement
   internal controls and processes
   internal policies and procedures
   training
2nd line of defence
   financial authority limits
   risk management processes
   risk committee
   health and safety
   technology 
   legal 
3rd line of defence
   group assurance
   external audit
   retail control 
our key risks and how we manage them
risk and control processes – ‘three lines of defence’
senior management audit committee
risk
management 
this section highlights the principal  
risks and uncertainties that affect  
the company together with the key 
mitigating activities in place to manage 
those risks this does not represent a 
comprehensive list of all of the risks that 
the company faces but focuses on those 
that are currently considered to be most 
relevant at the current time
the risk committee met on three occasions in 
fy 2014 and continues to meet on a quarterly 
basis to review the key risks facing the business 
key risks identified are reviewed and assessed 
by the risk committee in terms of their 
likelihood and impact within the group’s  
‘key risk heat map’ in conjunction with 
associated risk mitigation plans 
the processes that are used to identify and 
manage risks are described in the internal 
control and risk management statement  
on pages 46 and 47 
mitchells  butlers plc annual report and accounts 2014 18
risk and uncertainties risk risk description mitigating activities
market risks
consumer taste and  
brand management
pricing and market changes
social and demographic changes  
are driving the longterm growth  
in eatingout while at the same time  
leading to a steady decline in the  
sales of ontrade drinks without food  
these changes together with other 
developments in consumer taste may 
reduce the appeal of mitchells  butlers’ 
brands to its guests especially if the 
company fails to anticipate and identify 
these changes and respond to them 
adequately and promptly
external influences such as changes  
in the general economic climate or 
competitor activity could have a 
detrimental effect on consumers’ 
spending patterns and therefore the 
company’s revenue profitability and 
consequently the value of its assets
in fy 2013 the company conducted  
a major piece of consumer research 
interviewing 8000 consumers about 
14000 leisure occasions this research 
examined macroeconomic trends 
consumer dynamics competitor and 
internal brand positioning and the 
company’s strengths and weaknesses 
the business continues to implement the 
outputs from this project to refine further 
its brand positioning and ensure the 
portfolio’s continued relevance for 
guests this is discussed in detail in the 
business review on pages 24 and 25
the company uses an online guest 
satisfaction survey to collect guest 
feedback this feedback together  
with the results of research studies is 
monitored and evaluated by a dedicated 
guest insight team to ensure that the 
relevance to guests of the company’s 
brands is maintained
net promoter score as defined on page 
22 is the key measure of success in this 
area and this has improved from 59 in 
fy 2013 to 63 in fy 2014
mitchells  butlers is focused on the 
longterm potential of the eatingout 
market the company owns sites across 
the uk with a wide spectrum of offers 
targeted at different consumer groups 
and leisure occasions this range allows 
the company to respond to changes in 
consumer expenditure either by flexing 
our offerings or by substituting a different 
brand at a particular location this activity 
is supported by dedicated sales and 
margin managers and asset planning 
teams which analyse and evaluate a range 
of information including that in respect  
of competitors
mitchells  butlers plc annual report and accounts 2014 19
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 risk risk description mitigating activities
operational risks
cost of goods price increases 
including energy price 
increases
people planning and 
development
increases in the price of goods for resale 
and utilities costs as a result of increases 
in global demand and uncertainty of 
supply in producing nations can have  
a significant impact on the cost base 
consequently impacting margins
mitchells  butlers has a strong guest 
focus and as such it is important that  
it is able to attract retain develop and 
motivate the best people with the right 
capabilities throughout the organisation
mitchells  butlers leverages its scale  
to drive competitive cost advantage and 
collaborates with suppliers to increase 
efficiencies in the supply chain the 
fragmented nature of the food supply 
industry on the world commodity markets 
gives the company the opportunity  
to source products from a number of 
alternative suppliers in order to drive down 
cost the company continually evolves  
the composition of menus and retail prices 
in order to optimise value to the guest as 
well as profits for the company
the energy procurement strategy seeks 
to reduce the risk of cost increases and 
uncertainty over energy prices by a rolling 
programme of short and mediumterm 
purchases against forecast requirements 
a dedicated energy management team  
is responsible for optimising energy  
usage across the organisation by 
promoting energy efficient working 
practices via training and educational 
programmes and by the installation  
of energy efficient equipment
the company makes significant 
investment in training to ensure that its 
people have the right skills to perform 
their jobs successfully furthermore an 
employee survey is conducted annually  
to establish employee satisfaction and 
engagement and this is compared with 
other companies as well as previous 
surveys where appropriate changes in 
working practices are made in response  
to the findings of these surveys 
remuneration packages are benchmarked 
to ensure that they remain competitive and 
a talent review process is used to provide 
structured succession planning 
staff turnover is the key measure of  
success in this area and in fy 2014 the 
company has maintained the low rate  
of 78 as seen in fy 2013
business continuity and  
crisis management
mitchells  butlers relies on its food and 
drink supply chain and the key it systems 
underlying the business to serve its guests 
efficiently and effectively supply chain 
interruption it system failure or crises 
such as terrorist activity or the threat of 
disease pandemic might restrict sales  
or reduce operational effectiveness
the company has in place crisis  
and continuity plans that are tested  
and refreshed regularly
in september 2014 the company’s third 
party backup facility for retail support 
centre employees was successfully tested 
to ensure critical business systems are able 
to function in the event of a disaster 
mitchells  butlers plc annual report and accounts 2014 20
risk and uncertainties
continued risk risk description mitigating activities
finance risks
borrowing covenants
regulatory risks
failure to operate safely  
and legally 
pension fund deficit
there are risks that borrowing covenants 
are breached because of circumstances 
such as
i  a change in the economic climate 
leading to reduced cash inflows or
ii  a material change in the valuation  
of the property portfolio
the material value of the pension fund 
deficit remains a risk 
the company maintains headroom 
against these risks the finance team 
conducts daily cash forecasting with 
periodic reviews at the treasury 
committee the roles of which include 
ensuring that the board treasury policy  
is adhered to monitoring its operation 
and agreeing appropriate strategies  
for recommendation to the board in 
addition regular forecasting and testing 
of covenant compliance is performed and 
frequent communication is maintained 
with the securitisation trustee
the company has made significant 
additional contributions to reduce the 
funding deficit in may 2014 the 
company reached agreement on the 
triennial valuation of the group pension 
schemes as at 31 march 2013 at an 
increased funding shortfall of £572m 
march 2010 valuation £400m
a major health and safety failure could 
lead to illness injury or loss of life or 
significant damage to the company’s  
or a brand’s reputation
mitchells  butlers maintains a robust 
programme of health and safety checks 
both within its restaurants and pubs  
and throughout the supply chain the 
dedicated safety assurance team uses  
a number of technical partners including 
food technologists microbiologists and 
allergen specialists to ensure that our food 
procedures are safe regular independent 
audits of trading sites are performed  
to ensure that procedures are followed  
and that appropriate standards are 
maintained food suppliers are required 
to meet the british retail consortium 
global standard for food safety and  
are subject to regular safety and quality 
audits comprehensive health and safety 
training programmes are in place
mitchells  butlers plc annual report and accounts 2014 21
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 we measure our performance and 
progress against our strategy through  
five key performance indicators this  
year we have included two nonfinancial 
kpis relating to our ability to retain our 
employees and to the extent that our 
guests would recommend our businesses 
to their friends and family 
these kpis are reviewed at every executive 
committee meeting and are central to our 
understanding of our performance our 
performance in the year was as follows
kpi kpi definitions 2014 performance
a  staff turnover 
see strategy point 3
b  net promoter 
score 
see strategy points  
1 2 3
the number of leavers in our retail 
businesses expressed as a percentage 
of average retail employees this 
measure excludes site management as 
well as employees who leave and rejoin 
the business within the same year
the net promoter score for a pub is 
defined as the percentage of responses 
where we score 9 or 10 out of 10 ‘brand 
promoters’ less the percentage of 
responses where we score 0 to 6 out of 
10 ‘brand detractors’ to the statement 
“i am likely to recommend this pub  
to a friend andor relative” responses 
scoring 7 or 8 ‘passives’ are ignored  
in the calculation
maintained the historical low of 78 
seen in fy 2013
increased by 4ppts to 63
c  same outlet  
likeforlike  
sales growth 
see strategy points  
1 2 3
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
as a measure of overall profitability and shareholder value creation eps growth forms a key part of the group’s remuneration policies  
for directors and other employees full details of the various schemes in operation are shown in the report on directors’ remuneration
likeforlike sales grew by 06 in 
fy 2014
d  incremental  
return on 
expansionary  
capital 
see strategy points 1 4
expansionary capital includes 
investments made in new sites and 
investment in existing assets that 
increases the trading area or materially 
changes the guest offer incremental 
return is the growth in annual site 
ebitda expressed as a percentage  
of expansionary capital
fallen slightly to 16 fy 2013 17  
due to a greater proportion of recent 
freehold investments
e  eps growth 
see strategy points 4 5
adjusted earnings per share for the  
year compared to last year as reported 
in the financial statements expressed  
as a percentage
adjusted earnings per share increased  
by 12 to 326 pence
mitchells  butlers plc annual report and accounts 2014 22
key performance indicators a staff turnover

fy 2011
78
fy 2012 fy 2013 fy 2014
fy 2014
fy 2011
63
fy 2012 fy 2013 fy 2014
fy 2014
fy 2011
0
05
10
15
20
25
30
06
fy 2012 fy 2013 fy 2014
fy 2014
b net promoter score 

d incremental return 
on expansionary capital

fy 2011
0
5
10
15
20
25
16
fy 2012 fy 2013 fy 2014
fy 2014
fy 2011
326p
fy 2012 fy 2013 fy 2014
fy 2014
e eps growth
pence
c same outlet likeforlike 
sales growth 

0
20
40
60
80
100
0
20
40
60
80
100
0
5
10
15
20
25
30
35
85
82
78 78
47
55
59
63
21
17 17
16
na na
322
326
26
21
04
06
fouryear trend
note adjusted earnings per share was  
affected by the adoption of ias 19 revised  
on 29 september 2013 and has been applied 
retrospectively to fy 2013 in accordance with  
the transition provisions fy 2011 and fy 2012  
are therefore not comparable
mitchells  butlers plc annual report and accounts 2014 23
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 we continue to operate  
and measure our business 
performance across four 
priority areas our people  
our practices our guests  
and our profits
our performance
we continue to operate and measure our 
business performance across four priority 
areas our people our practices our guests 
and our profits 
our people
our key measure of success with regards  
to our people is retail staff turnover which 
remained in line with the prior year at 78 
whilst we have succeeded in maintaining this 
at its record low we will continue to focus on it
our approach to people is founded on our 
‘good to great’ philosophy which adapts  
our ways of working to engage with our teams 
empower them to make their own decisions 
and ultimately to drive stronger performance 
this is now live in the majority of the estate 
and at its best is delivering exceptional results
in the last year we have also reviewed the  
way we recruit our team members we  
have introduced collective recruitment days 
across multiple brands and concentrated 
geographical regions this approach allows  
us to demonstrate the scale of our business  
and the career opportunities available to 
potential future employees
we are proud of our investment in young 
people which currently sees more than  
1500 people on a vocational or apprenticeship 
programme we have pledged to take on  
a further 1000 apprentices over the next  
two years 
we are delighted to have announced two 
highquality and experienced external 
appointments to the executive team catriona 
kempston has assumed responsibility for 
marketing and phil urban joins us in january 
as chief operating officer
our practices
our practices refer to the safe and efficient 
way that we run our operations we continue 
to make safety a top priority and challenge  
all of our businesses to achieve the maximum 
national food hygiene rating scheme score  
of 5 we have made further progress towards 
achieving this goal in the last year
the project to replace all of the epos systems 
in our pubs and restaurants has continued  
to be rolled out at pace they are now live in 
more than 1300 sites with the project due  
to be completed in fy 2015 these systems 
enable greater efficiency within our operations 
by speeding up order taking and bill payment 
improving business controls and allowing our 
retail teams to spend more time with our 
guests further detail is included within the  
financial review
we have made a significant change to the way in 
which our operations teams make decisions with 
the provision of dashboard analysis on tablets  
for all general managers and area managers  
this analysis allows prioritisation of decisions 
based on realtime data and is an important step 
forward in the daytoday management of the 
operations of our businesses 
1500
currently we have more than  
1500 people on a vocational  
or apprenticeship programme
mitchells  butlers plc annual report and accounts 2014 24
business review our guests
our key measure for understanding how  
we are seen by our guests is net promoter 
score
a
 which measures how likely our guests 
are to recommend us to friends and family  
in fy 2014 our net promoter score increased  
by 4 ppts to 63
our focus on guests is evident in the 
development of our food volume growth 
throughout fy 2014 following several  
years of spend per head increases we have 
concentrated on driving our food sales through 
volume rather than price growth we aim to 
deliver consistently great value to our guests 
and to build trust in our brands we remain 
committed to driving this volume growth by 
offering ongoing value through our menus 
rather than by shortterm promotional activity 
our focus on brands and value to meet our 
guests’ needs can be demonstrated with  
a number of examples
 • we offer consistently great value through 
toby carvery a carvery meal during the 
week for £599 and unlimited breakfast  
for £399
 • we are innovating to drive the harvester 
brand by making significant changes to 
food and drink menus the breakfast offer 
branding and design and
 • we have evolved all bar one’s food and drink 
offer with a clear focus on its target market  
of professionals and shown that it can be 
successful in a greater diversity of locations
our remodel programme is aimed at enhancing 
our existing businesses to ensure that they 
surpass our guests’ high standards we have 
actively increased the pace and level of 
expenditure on remodels 174 businesses 
were remodelled in fy 2014 compared  
with 97 in the prior year generating returns  
in excess of 30 
our profits
in fy 2014 we increased our adjusted earnings 
per share by 12 to 326 pence based on 
higher sales and the contribution from orchid 
as described further in the financial review 
our operating margins fell by 50 basis points 
reflecting some shortterm impact of the 
integration of orchid the increased closure 
costs from the accelerated remodel programme 
and the growth in sales derived primarily from 
volume rather than price 
outlook
since i joined mitchells  butlers in  
october 2012 we have been committed  
to the fundamentals of our business plan  
i remain confident that this is the right plan  
and will deliver sustainable profit growth  
and future shareholder value 
the actions we have taken are gathering 
momentum we have seen staff turnover 
improve net promoter score increase a 
turnaround in food volume performance 
increased levels of remodel and expansionary 
capex and substantial investment in our 
systems we are excited about integrating  
the orchid estate into our leading portfolio of 
brands and we have a fantastic team of more 
than 43000 people to support our progress 
whilst we continue to operate in a challenging 
and competitive market we are making real 
progress and we have confidence in our  
future success
alistair darby
chief	 executive
63
our net promoter score in the  
year increased by 4 percentage  
points to 63
174
we remodelled 174 businesses  
in the year compared with 97  
in the prior year
a  net promoter score is defined as the percentage of 
responses where we score 9 or 10 out of 10 ‘brand 
promoters’ less the percentage of responses where  
we scored 0 to 6 ‘brand detractors’ to the statement  
“i am likely to recommend this pub to a friend andor 
relative” responses scoring 7 or 8 ‘passives’ are 
ignored in the calculation
mitchells  butlers plc annual report and accounts 2014 25
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 750
the number of new jobs we have created
£60k
we raised over £60000 in support of the 
prince’s trust million makers initiative
90
tonnes of salt removed from our menus
2914
food waste recycling has generated 
enough electricity to power 2914  
uk households
1000
we are creating 1000 apprenticeships 
over the next two years 
mitchells  butlers plc annual report and accounts 2014 26
corporate social responsibility our guests trust  
us to serve good 
food that represents 
good value for 
money which is 
safely prepared  
and cooked
we continue to build our reputation as  
a socially responsible retailer through 
focusing on four key areas which most 
impact our business practices
 • our guests
 • our people
 • our communities 
 • the environment
more information can be found in our social 
responsibility review 2014 which can be 
found at wwwmbplccomresponsibility
good food
our guests trust us to serve good food that 
represents good value for money which is 
safely prepared and cooked they also trust  
us to source food that is both sustainable and 
ethical with due regard for high standards  
of both workers’ and animal welfare
what’s in our food
nutrition
we continue to look for the most effective  
way to present nutritional information to our 
guests across our portfolio of brands by using 
our guest insight to understand better our 
guests preferences and priorities we can 
develop our nutritional messaging to ensure  
it remains effective we believe our focus 
should be on communicating ingredients 
healthy cooking techniques the freshness  
of our food and providing healthier options  
to enable our guests to make an informed 
choice when eating with us
harvester toby carvery and crown carveries 
publish nutritional information online for their 
core menu items 
in all bar one ember inns and a number of our 
heartland pubs meals that contain 700 calories 
or less are highlighted on the main menus in 
harvester we print calorific values on all our 
menus including the young guests menu 
chefs in any of our businesses will happily 
respond to a guest’s request to swap to a 
healthier option for example a side salad  
in place of potatoes and wherever possible 
serve dressings and sauces separately
the development of our young guest menus 
continues to be a focus for the business and 
our company nutritionist has joined the 
scottish government working group on 
developing guidance for caterers on healthy 
options for children’s menus
allergens
we are compliant with the new eu legislation 
which will come into effect in december 2014 
concerning the availability of information 
about 14 common food allergens 
salt
we pledged to deliver a number of initiatives 
to help and support our guests to consume 
less salt as part of our commitment to the 
public health responsibility deal
in the last 12 months we have continued  
to work with our suppliers to reduce the salt 
content of the products we use we reduced the 
salt content of over 25 products that contributed 
the most salt to our supply chain in line with 
responsibility deal salt pledge targets and as  
a result during fy 2014 we removed over 90 
tonnes of salt from our menus based on annual 
volumes this includes over 63 tonnes removed 
from our popular beef and onion gravy served  
in toby and crown carveries we delivered this 
salt reduction initiative without compromising  
on food safety taste or quality through working 
closely with our suppliers and providing sensory 
training to our development chefs
we are continuing our ongoing trials of a 
mineral salt blend which contains less sodium 
than standard salt and therefore could help 
reduce the amount of salt our guests consume 
in the trial businesses the mineral salt is being 
used in the kitchen during the cooking process 
and also replaces standard table salt
trans fats
we do not use hydrogenated vegetable fats  
in our food this policy has been in place since 
january 2013 the level of trans fats in our 
frying oils is limited to a maximum of 2 but 
typically the level is less than 1 trans fatty acids 
in fresh cooking oil this year we implemented 
a policy of best practice oil management which 
includes clear processes to heat the oil to the 
correct temperature change the oil regularly 
and to not turn the fryers on until in use – 
minimising any increase in trans fats caused  
by heating and reheating the oil 
food sourcing
we work closely with a network of trusted 
suppliers to source the best quality ingredients 
for our menus when buying our food we 
ensure our high food safety standards are met 
we are sourcing quality products and we are 
taking into account provenance and price 
all our food suppliers are required to comply 
with the british retail consortium’s technical 
standard which requires their staff to be 
properly trained and supervised and for the 
supplier to meet high standards of food safety
we are proactively working with our suppliers 
to improve the quality and range of products 
available within the mitchells  butlers’  
supply chain
mitchells  butlers plc annual report and accounts 2014 27
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 we have completed the first year of working 
with a group of farmers located in the national 
parks to rear lamb we are featuring selected 
cuts on our browns and castle pubs menus 
offering our guests british lamb that is fully 
traceable and of excellent quality
we are part of an integrated supply chain  
team that includes morrisons and mcdonald’s 
to take beef steaks from black and white bull 
calves produced from dairy herds which 
would otherwise be destroyed on farms 
these animals are reared to strict protocols 
and we work with a rearing company and 
processor to utilise the steak meat produced 
we continue to strengthen our relationships 
with uk growers working direct where 
possible to remove the wholesaler’s margin 
and delivering fresher seasonal products  
to our kitchens for example we use british 
strawberries when in season and all our  
fresh potatoes in toby and crown carveries 
are british we have also begun a trial to grow 
our own potato crop through a direct supply 
contract at brechin in scotland 
our cattle scheme continues to develop and 
we are now working with 21 farmers rearing 
around 1400 calves under our direct contract 
agreements the first animals will be ready in 
spring 2015 giving us a supply of around 20 
animals every week all fully traceable from 
farm to fork 
this scheme has enabled us to work with a 
high calibre of experienced farmers to ensure 
we are rearing livestock to excellent standards 
this includes paul and charlotte parfitt who 
have won a national trust fine farm produce 
award 2014 for their beef production 
we take responsible sourcing extremely 
seriously and recognise concerns about the 
sustainable sourcing of fish we are committed 
to working with our supplier base to ensure well 
managed and sustainable fishing practices are 
in place for example we source line caught 
cod for our menus in a number of our brands 
we have an annual spend cost value of over 
£19m on beef and poultry products that are 
covered by red tractor accreditation the uk’s 
largest food assurance scheme these products 
are endorsed on our menus using the red 
tractor logo for example we use british 
chicken in harvester all our beef in toby 
carvery and harvester is of british and irish 
origin and we use 100 british beef in miller  
 carter
we won two awards at the british turkey 
awards 2014 – food service operator of the 
year and best food service these awards 
demonstrate the hard work commitment and 
support that mitchells  butlers and toby 
carvery have given to british farming and  
in particular the british turkey industry
food safety
we have made a commitment to increase  
the number of our businesses that achieve a  
4 or 5 star food hygiene rating we take a zero 
tolerance approach to any of our businesses 
that achieve a score of 3 or below we continue 
to strive for a score of 5 in each business and 
conduct independently commissioned audits  
in all of our businesses at least twice per year 
we have rigorous checks and policies in place 
to ensure we do things right and we consult 
regularly with government and local authorities 
to ensure we maintain the highest standards  
in food safety we are currently investing 
significantly in upgrading our safety training 
including food safety fire safety and health 
and safety training in addition we have 
increased the internal supportive resource 
available to our operations teams 
serving alcohol responsibly
as a responsible operator we are determined 
to build promote and maintain a culture of 
responsible retailing across the company
our alcohol and social responsibility policy 
promotes good practice in the responsible 
retailing of alcohol through our employee 
training safe operational practices and 
responsible pricing and promotions 
challenge 21 is a fundamental part of our 
employee training programme and includes 
regular refresher training to help ensure  
that our retail teams are fully aware of their 
licensing responsibilities and not serving 
alcohol to anyone underage
we do not operate any 24 hour licences
as part of our commitment to promote a 
responsible approach to retailing alcohol we 
support and work in partnership with a number 
of organisations including drinkaware trust 
pubwatch best bar none the biiab london 
security council and association of licensed 
and multiple retailers almr
we encourage our brands to promote 
responsible drinking messages where 
appropriate to our guests through our 
websites social media pages and inhouse 
promotional materials 
mitchells  butlers plc annual report and accounts 2014 28
corporate social responsibility
continued through pickaperk our people can also  
apply for our salary sacrifice schemes 
childcare vouchers and cycle to work scheme 
in addition our people have access to a wide 
range of company benefits such as sharesave 
free shares pension for eligibleentitled 
workers and dental plans
we launched our ‘recognising you’ scheme 
where line managers across mitchells  butlers 
can officially recognise our people when they 
achieve key milestones from one year to  
45 years personalised ‘thank you’ cards  
to recognise hundreds of employees who 
demonstrate living our values and also award 
preloaded gift cards 
this year our ‘dine with us’ employee  
discount scheme launched onto a digital 
platform improving access for our people  
to enjoy a 20 discount when dining in one  
of our restaurants or pubs
retaining top talent
retail team member turnover is at a  
historical low 
mitchells  butlers achieved top 100 
graduate employer status in 2014 for  
the second year running
we achieved a highly commended 
accreditation at the west midlands national 
apprenticeship awards for the quality of our 
vocational programme and our commitment  
to developing our people through nationally 
recognised apprenticeship qualifications 
listening to our people 
every year we circulate our employee 
engagement survey ‘your say’ to understand 
better what is important to our employees  
in july 2014 72 27 869 of our people 
responded to the survey we were delighted 
that engagement levels for our retail employee 
and general manager groups beat benchmark 
results and that our central retail support team 
engagement scores continue to trend upwards 
yearonyear 
diversity 
mitchells  butlers is committed to providing 
equal opportunities for all of our employees 
our diversity policy ensures that every 
employee without exception is treated 
equally and fairly and that all employees  
are aware of their responsibilities 
the policy confirms that there will be no  
direct or indirect discrimination in respect of 
age disability religious belief gender sexual 
orientation race colour marital status political 
belief and nationality or any other category 
defined by law in all aspects of employment 
including recruitment promotion and 
opportunities for training pay and benefits
the table below provides a breakdown of the 
gender of directors and employees at the end 
of the financial year
men women
company directors 8 1
other senior managers 46 19
all employees 21018 21927
our communities
by supporting our people and businesses 
across a spectrum of charitable activities  
and fundraising we continue to build strong 
relationships with our guests and neighbours 
and give back to the communities in which  
we operate
the good cause fund
this fund provides help for our pubs and 
restaurants to boost their local fundraising  
last financial year we donated over £9500  
to a number of deserving charities and groups 
employee donations programme
this fund provides donations for individual 
mitchells  butlers employees and retired 
employees to support a personal charity 
event or challenge of their choice in fy 2014 
we made donations of around £19500 to a 
large number of local and national causes 
including macmillan cancer support 
parkinson’s uk and action for children 
working with us
with over 100 years’ experience in the 
hospitality industry we can offer our employees 
and future employees a huge range of career 
opportunities through our people strategy  
we are striving to attract develop and retain  
the best talent everything we do as a business  
is built on the enthusiasm and professionalism  
of our people
attracting the best talent
last year we created c750 new jobs by 
opening new retail sites across the uk 
nurturing and developing our people
a new induction has been launched to give 
new team members the best start possible 
when joining the company
we have expanded our accredited coach  
and coaching ambassador network and  
given every general manager every 
functional manager and many assistant 
managers and kitchen managers the 
opportunity to learn coaching foundations
we currently have over 1500 learners on  
a vocational or apprenticeship programme  
for which we achieved a highly commended 
award at the national apprenticeship awards 
this year we have pledged to take on a further 
1000 over the next two years additionally 
we are working in partnership with believe  
in young people offering over 200 work 
experience places for 1418 year olds who 
wish to explore a career in hospitality with  
a natural lead into our apprenticeship scheme
rewarding and recognising our people
more and more of our people are taking 
advantage of our benefits platform pickaperk 
which offers exclusive discounts with an 
extensive range of retailers through instant 
vouchers cashback or reloadable cards  
since its launch in february 2013 our people 
have purchased discounted goods to the  
value of £13m
mitchells  butlers plc annual report and accounts 2014 29
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 supporting the prince’s trust 
in our final year of support for the prince’s trust 
we made a company donation of £15000 as 
part of our support for the youth charity a team  
of enthusiastic employees took part in the prince’s 
trust million makers fundraising initiative  
where teams compete to raise as much money  
as possible by setting up minienterprises the 
mitchells  butlers team team pride raised over 
£60000 in a variety of innovative ways over  
80 teams across the country competed to raise 
the most money for the prince’s trust with 
mitchells  butlers ranking fourth in the national 
competition and being named ‘top fundraiser’  
in the west midlands
marie curie cancer care
once again all our businesses worked together 
to support the marie curie great daffodil 
appeal all of our restaurants and pubs sold 
daffodil pins during march 2014 and raised  
a total of £15743 for the charity the money 
raised will help marie curie to provide over 
787 hours of nursing care to patients and  
their families 
our businesses giving back
in june crown carveries offered armed forces 
personnel and veterans a free carvery meal or 
breakfast for the sixth year running to mark 
armed forces day the brand donated a total 
of 2806 meals 
our restaurants and pubs supported the royal 
british legion poppy appeal in november 2013 
selling thousands of poppies to raise funds for 
thousands of serving and exservice people 
as part of a hugely successful st patrick’s 
week of events in o’neill’s each pub chose a 
local charity to support and raise funds for in 
addition to this the o’neill’s brand teams also 
helped to do their bit by completing various 
challenges in total the 45 pubs as well as the 
brand teams managed to raise over £40000 
for good causes
environmental awareness
our aim is to manage our energy waste and 
water consumption effectively to minimise our 
environmental footprint and reduce costs to 
the business
energy and greenhouse gas emissions
our proactive management of energy 
consumption procurement and carbon 
emissions continues to deliver significant 
benefits to our business against a backdrop  
of increasing food sales volume during the 
last year our electricity gas and water costs 
have reduced by 42 through a combination 
of behavioural change programmes and 
investment in making our buildings and 
equipment more energy efficient this has 
resulted in a 22 reduction in our greenhouse 
gas emissions per £m turnover during the 
201314 tax year
a full disclosure of our greenhouse gas 
emissions can be found on page 41
back of house lighting 
we have successfully replaced almost 26000 
fluorescent light fittings across the estate with 
new energyefficient fluorescent fittings this 
has helped us to make considerable savings  
on energy consumption as well as improving 
lighting levels for our people
heat recovery from cellars 
we have fitted heat recovery units in  
cellars wherever possible this has not  
only allowed the recovery of heat but also 
reduced maintenance costs by allowing  
other equipment in the cellars to operate  
in cooler conditions 
free air cellar cooling 
free air cellar cooling units have been fitted 
across the estate this system draws in cool air 
from outside when ambient air temperatures 
drop below 8˚c and turns off the traditional  
cellar cooling system saving energy
kitchen extraction automated controls 
automated controls have been fitted at 
compatible businesses to ensure that the 
extract and air supply fans run at the lowest 
speed at all times to minimise energy usage
water consumption
we are working with manufacturers and our 
suppliers to reduce the amount of water we 
use most recently we have fitted motion 
detection controls in urinals which reduce 
water wastage by managing the number of 
flushes and hippo bags which reduce the 
volume of water used for each toilet flush
waste management
we continue to drive successfully our waste 
disposal strategy focused on reducing 
reusing and effectively recycling the waste 
generated by our restaurants and pubs  
we recycle the equivalent of 900 tonnes of 
cardboard 850 tonnes of glass 100 tonnes  
of plastic and 100 tonnes of aluminium every 
month the food waste produced in our 
businesses has been used to generate green 
electricity this has helped produce enough 
electricity to power 2914 uk households  
with electricity for a month as well as saving 
over 462000kg of co
2
 every month our 
combined recycling initiatives divert over 
90000 tonnes from landfill every year 
we realise that recycling and diverting waste 
from landfill are just the first steps towards 
minimising and ultimately removing waste 
from our estate therefore we have recently 
begun to trial new and innovative technologies 
to reduce the waste we produce and to 
actively derive value and revenue from  
the resources in our waste 
mitchells  butlers plc annual report and accounts 2014 30
corporate social responsibility
continued on a statutory basis profit before tax for the 
period was £123m 2013 £142m on sales of 
£1970m 2013 £1895m
the group income statement discloses 
adjusted profit and earnings per share 
information that excludes exceptional items to 
allow a better understanding of the underlying 
trading of the group adjusted earnings  
per share increased by 12 in fy 2014  
to 326 pence
at the end of the financial year the total  
estate comprised 1775 managed businesses 
and 57 franchised businesses in the uk  
and germany
changes in accounting policies
ias 19 revised was adopted on 29 september 
2013 and has been applied retrospectively 
in addition following recent best practice 
guidance from the financial reporting council 
frc the net pensions finance charge is  
now recognised within underlying profit 
having previously been classified as an other 
adjustment alongside identified exceptional 
items as a result additional finance charges  
of £11m in fy 2013 and £10m in fy 2014  
have now been included as interest within 
adjusted profit 
revenue
the group’s total revenues increased by  
40 to £1970m as a result of both growth  
in likeforlike sales and the contribution of 
new pubs and restaurants including 15 weeks 
of trading from the 173 outlets acquired  
from orchid 
total likeforlike sales increased by 06  
with growth from both food and drink sales 
food sales growth was driven by volume 
growth of 09 partially offset by a small 
reduction in average spend per head drink 
sales growth by contrast resulted from 
average spend growth of 16 and volume 
declines of 11
likeforlike  
sales growth
week 
128
fy 2014
week 
2952
fy 2014
week 
152
fy 2014
total 11 01 06
food 09 05 07
drink 13 04 05
operating margins
adjusted operating margins across the  
year declined by 05 ppts whilst orchid 
contributed operating profit of £6m to the 
group for its 15 weeks of trading it was slightly 
dilutive to margin in the period with the head 
office yet to be closed and businesses yet to  
be converted to our own brands and formats 
these conversions begin in the first quarter  
of fy 2015 with the head office also to close 
during fy 2015
operating margins have also been impacted  
in the year both by increased closure costs 
relating to the accelerated remodel 
programme in order to reposition the estate 
and the fact that volume as opposed to spend 
per head has been the driver of food sales 
growth in the year adjusted operating profit 
was £313m for the year 10 higher than  
fy 2013
£313m
adjusted operating profit was  
10 higher than last year at £313m
 “the group’s total revenues 
increased by 40 to £1970m 
as a result of both growth  
in likeforlike sales and the 
contribution of new pubs  
and restaurants”
tim jones
finance	 director
mitchells  butlers plc annual report and accounts 2014 31
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112
financial review 326p
adjusted earnings per share were 
12 higher than last year at 326p
interest
net finance costs of £141m were £2m  
higher than the prior year the factors behind 
this net increase were stepup margins 
applied to four floating rate securitised notes 
from september 2013 additional interest 
incurred on a £147m liquidity facility drawn 
down under the terms of the securitisation 
and the cost of new facilities put in place  
to finance the acquisition of orchid 
as stated above the net pensions finance 
charge of £10m fy 2013 £11m is now 
included within adjusted profits the charge 
for fy 2015 is anticipated to be £16m
taxation
the tax charge of £30m in the year represents 
an effective rate of 244 fy 2013 99  
the increase in the effective rate is principally 
due to a oneoff £18m credit to deferred tax 
included in fy 2013 reflecting the reduction  
in the main rate of corporation tax to 20  
from april 2015 
exceptional items
exceptional items comprise two items  
a £37m charge relating to the net movement  
in the property portfolio fy 2013 £29m  
and a £12m charge for acquisition and 
integration costs relating to the orchid 
transaction fy 2013 £nil
earnings per share
adjusted earnings per share were 326p 12 
higher than last year after the exceptional 
items described above basic earnings per 
share were 226p fy 2013 312p
 
cash flow and net debt
the cash flow statement below excludes 
£147m drawn from a liquidity facility under  
the terms of the securitisation and £25m 
transferred to cash from other cash deposits 
the funds drawn from the liquidity facility are 
charged under the securitisation and are not 
available for use in the wider group further 
detail is provided in note 18
fy 2014
£m
fy 2013
£m
ebitda before 
exceptional items 422 420
working capital movement
noncash items 18 9
pension deficit 
contributions 49 40
cash flow from 
operations before 
exceptional items 391 371
maintenance and 
infrastructure capex 120 100
interest 135 126
tax and other 34 32
free cash flow before 
exceptional items 102 113
expansionary capex 42 28
orchid acquisition 258 0
disposals 4 1
operating exceptional 5 2
net cash flow 199 84
mandatory bond 
amortisation 58 55
net cash flow after 
bond amortisation 257 29
the business generated £422m of ebitda in 
the year pension deficit contributions of £49m 
reflected the newly agreed annual contribution 
of £45m previously £40m with the incremental 
amount backdated to the triennial valuation 
date of march 2013 after maintenance capital 
interest and tax £102m of free cash was 
generated by the business
internal rent
a regime of internal rents is in place to enable greater internal transparency around the 
performance of freehold and leasehold properties and external transparency concerning  
the performance of the operating and property functions the operating performance is 
monitored on a regular basis through a system of profit reviews through all levels of the group 
estate management is primarily monitored through the portfolio development committee
operating property total before exceptional
£m vs ly  £m vs ly  £m vs ly 
revenue 1970 40 – – 1970 40
ebitdar 475 13 – – 475 13
external rent 53 82 – – 53 82
internal rent 201 47 201 47 0 –
ebitda 221 31 201 47 422 05
ebitda  112 08 ppts – – 214 08 ppts
mitchells  butlers plc annual report and accounts 2014 32
financial review
continued £162m
total capital expenditure was £162m
the acquisition of orchid for initial consideration 
of £266m resulted in a net cash outflow in the 
year of £258m after adjusting for acquired cash 
and working capital and deferred consideration
fy 2014
£m
initial consideration 266
working capital and completion 
adjustments 5
total cash consideration 271
deferred consideration 2
cash and cash equivalents acquired 11
acquisition net cash outflow 258
in the 15 weeks postacquisition trading 
included in this year orchid contributed sales 
of £41m and operating profit of £6m
net debt was £1958m representing 45  
times annualised ebitda fy 2013 42 times 
ebitda the yearonyear increase being  
a result of the orchid acquisition net debt 
within the securitisation was £1986m and net 
cash held outside the securitisation was £28m
capital expenditure
total capital expenditure was £162m 
comprising £94m fy 2013 £88m spent on 
maintaining and enhancing the high level of 
amenity in the group’s restaurants and pubs 
£26m on infrastructure projects fy 2013 
£12m and £42m on new site openings  
fy 2013 £28m
expenditure on maintenance and infrastructure 
projects included the ongoing replacement and 
upgrade of pub and restaurant epos systems 
the new system is now live in more than 1300 
sites and the rollout is due to be completed 
during fy 2015 the systems implementation 
and benefit varies according to our different 
brands and formats in addition to tills full table 
service restaurants receive new payment 
devices handheld terminals for taking orders 
and kitchen management systems pubs 
focused on ordering at the bar receive tills and 
payment devices only this gives a range of 
financial and nonfinancial benefits including 
productivity savings improved controls in terms 
of daily cash processes and improvements in 
the management and analysis of data including 
promotional activity productivity benefits are 
to be realised through a combination of reduced 
levels of employment cost and reinvestment 
into service to provide an enhanced guest 
experience the new systems are estimated  
to drive productivity benefits worth in excess  
of 20 hours per pub per week at our full table 
service brands and around seven hours per 
pub per week in barservice brands
the blended ebitda return on expansionary 
capital invested since fy 2011 was 16  
fy 2013 17 given the varying nature of 
freehold acquisitions leasehold acquisitions  
and conversions the business reviews returns  
by category
investment
a
fy 2014
no of 
sites
fy 
20112014
ebitda 
roi
freehold 
acquisitions £27m 8 13
leasehold 
acquisitions £15m 15 18
conversions £3m 8 16
total £45m 31 16
property
a red book valuation of the freehold and  
long leasehold estate has been completed in 
conjunction with the independent property 
valuers cbre in addition the group has 
conducted an impairment review on short 
leasehold and unlicensed properties the 
overall portfolio value has increased by £26m 
reflecting a £36m exceptional charge in the 
income statement and a £62m increase in  
the revaluation reserve there is a further £1m 
exceptional charge to the income statement in 
relation to the impairment of lease premiums
pensions
in may 2014 the company reached agreement 
on the triennial valuation of the group pension 
schemes as at 31 march 2013 at an increased 
funding shortfall of £572m march 2010 
valuation £400m the discounted value of 
the minimum funding requirement agreed as 
part of the revised schedule of contributions  
is recognised in the balance sheet leading to 
an increased pensions liability before tax  
of £425m fy 2013 £248m
dividends
the board remains mindful of the attraction of 
the resumption of dividend payments and will 
continue to monitor anticipated net cash flow 
generation before taking a decision on timing 
and quantum
as an element of the recent pensions 
valuation referred to above the group has  
agreed that normal dividends will only be 
resumed provided they can initially be funded 
out of cash flow after bond amortisation
tim jones
finance	 director
a  spend relating to new and converted sites completed  
in the current year
1300 
project to upgrade pub systems  
now completed in 1300 pubs
mitchells  butlers plc annual report and accounts 2014 33
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112 governance
35	 chairman’s	introduction	to	governance
36	 board	of	directors
38	 directors’	report
42	 directors’	responsibilities	statement
43	 corporate	governance	statement
48	 audit	committee	report
50	 report	on	directors’	remuneration
mitchells  butlers plc  annual report and accounts 2014 34 dear fellow shareholder
it gives me great pleasure to take this opportunity to update you     on our progress in corporate governance over the past year   one of the key roles for the board of directors at mitchells  butlers     is to provide leadership for more than 43000 employees and maintain     the highest possible standards of corporate governance the board   continues to monitor developments in corporate governance and   reporting regulations the new strategic report on pages 2 to 33   includes the group’s strategy progress and performance for the year   in the last year we have benefited from the continued stability of our   board alistair darby has now been successfully leading the business   for two years and the additional nonexecutive directors appointed   over those two years have brought much experience diversity     and challenge to the board while bringing us further into line with   governance requirements my focus continues to be on maintaining     a strong team with a broad range of professional backgrounds and     skills to drive further improvements where possible
my aim is to support our senior management in delivering the     group’s strategy by ensuring the board’s continued effectiveness     in furtherance of this aim last year we committed to a review of     our effectiveness as a board i conducted the board performance   evaluation this year with assistance from the company secretary     a fuller description of the process is set out on page 47 of the     corporate governance statement together with the focus areas     for next year as a result of this review the board has committed to   address these areas thoroughly in the months ahead in line with the   best practice recommendations of the uk corporate governance   code we will carry out a further externally facilitated review of the   board’s effectiveness in fy 2015 and that of course will be reported   on in the 2015 annual report
the remainder of this report contains the narrative reporting required   by the uk corporate governance code the listing rules and the   disclosure and transparency rules i hope that you find this report     to be informative and helpful in relation to this important topic   we are committed to maintaining an active dialogue with all our   shareholders i would like to encourage our shareholders to attend our   annual general meeting details of which are set out in the separate   notice of agm sent out with this annual report it will provide an   excellent opportunity to meet the executive and nonexecutive board   directors and to visit our retail support centre in birmingham
i look forward to the year ahead confident in the knowledge that the   company is led by a highly competent professional and motivated   team i also look forward to the support of you our shareholders as     our senior management team continue to focus on our four key priority   areas our people our practices our guests and our profits to drive   future profit growth and create additional shareholder value
bob ivell
chairman
 “one of the key roles for  
the board of directors at 
mitchells  butlers is to provide 
leadership for more than 
43000 employees and maintain 
the highest possible standards 
of corporate governance”
bob ivell
chairman
mitchells  butlers plc  annual report and accounts 2014 35
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112
chairman’s introduction to governance 1 bob ivell
4 stewart gilliland
7 ron robson
2 alistair darby
5 eddie irwin
8 colin rutherford
3 tim jones
6 douglas mcmahon
9 imelda walsh
mitchells  butlers plc  annual report and accounts 2014 36
board of directors 1 bob ivell aged 62
nonexecutive	chairman
bc
appointed as interim nonexecutive chairman in july 2011 bob became   executive chairman in october 2011 and reverted to nonexecutive   chairman in november 2012 following the appointment of alistair darby   he has over 30 years of extensive food and beverage experience with     a particular focus on foodled managed restaurants pubs and hotels     he is currently nonexecutive chairman of carpetright plc and senior   independent director of britvic plc and of aga rangemaster group plc   he was previously a main board director of sn plc as chairman and   managing director of its scottish  newcastle retail division he has also   been chairman of regent inns chairman of park resorts and of next   generation clubs and was managing director of beefeater restaurants   one of whitbread’s pub restaurant brands and a director of the   restaurant group bob is chair of the nomination committee
2 alistair darby aged 48
chief	executive
d
alistair was appointed chief executive in october 2012 he has more   than 25 years’ experience working in some of the uk’s best known   brands in the pub drinks and consumer sectors including roles with   mars confectionery wolverhampton and dudley breweries and   united distillers he joined marston’s plc in 1997 where he held senior   operational and strategic roles becoming a board member in 2003 and   chief operating officer in 2011 alistair is a director of cask marque   an independent nonprofit making organisation set up to improve the   quality of cask ale in pubs by way of an accreditation scheme   3 tim jones aged 51
finance	director
d
tim was appointed finance director in october 2010 prior to joining   the company he held the position of group finance director for   interserve plc a support services group previously he was director     of financial operations at novar plc and held senior financial roles     both in the uk and overseas in the logistics company exel plc tim     is a member of the institute of chartered accountants in england and   wales and obtained an ma in economics at cambridge university     he is a nonexecutive director and chairman of the audit committee   at poundland group plc
4 stewart gilliland aged 57
independent	nonexecutive	director
abc
appointed as an independent nonexecutive director in may 2013   stewart was chief executive officer of muller dairy uk limited     until 2010 and prior to that held senior management positions in     inbev sa interbrew uk limited and whitbread plc he is currently a   nonexecutive director of booker group plc sutton and east surrey   water co tulip group limited nature’s way foods limited cc   group plc and vianet plc
5 eddie irwin aged 55
nonexecutive	director
abc
appointed as a nonexecutive director in march 2012 eddie is a   nominee of elpida limited a significant shareholder in mitchells    butlers eddie is finance director of coolmore a leading thoroughbred   bloodstock breeder with operations in ireland the usa and australia   and a nonexecutive director of grove ltd the holding company of   barchester healthcare limited he is a fellow of both the association     of chartered certified accountants and the institute of chartered   secretaries and administrators
6 douglas mcmahon aged 49
nonexecutive	director
appointed a nonexecutive director in october 2010 douglas is senior   managing director of tavistock group and is a nominated shareholder   representative of piedmont inc he has 28 years of marketing experience   previously serving as chairman and ceo of publicis new york general   manager of j walter thompson new york and chief marketing officer   at consumer news and business channel cnbc
7 ron robson aged 51
deputy	chairman
abc
appointed as deputy chairman in july 2011 ron is a managing   director of tavistock group and is a nominated shareholder   representative of piedmont inc ron is a nonexecutive director of   tottenham hotspur limited he was previously chief financial officer   of tamar capital partners and group finance director of kenmore   both property investment and management groups from 2005 to   2008 he was group finance director of the belhaven group plc     a listed pub retailing brewing and drink distribution group prior     to that he held a number of senior finance roles including group   finance director of a listed shipping and logistics group and trained     as a chartered accountant with arthur andersen
8 colin rutherford aged 55
independent	nonexecutive	director
abc
appointed as an independent nonexecutive director in april 2013   colin is currently chairman of brookgate limited and teachers media   plc he was formerly executive chairman of mam funds plc and euro   sales finance plc amongst various other public and private companies   in the uk and overseas colin is a member of the institute of chartered   accountants of scotland and has directly relevant corporate finance   experience in both the leisure and hospitality industries colin is     chair of the audit committee
9 imelda walsh aged 50
independent	nonexecutive	director
abc
appointed as an independent nonexecutive director in april 2013   imelda is a nonexecutive director and chair of the remuneration   committee of william hill plc mothercare plc and firstgroup plc     she was a nonexecutive director and chair of the remuneration   committee of sainsbury’s bank plc from 2006 to 2010 she has     held senior executive roles at j sainsbury plc where she was group     hr director from march 2004 to july 2010 barclays bank plc and   cocacola  schweppes beverages limited she is also a trustee     of charity projects limited comic relief imelda is chair of the   remuneration  committee
key
a  member of the audit committee
b  member of the remuneration committee
c  member of the nomination committee
d  member of the executive committee
mitchells  butlers plc  annual report and accounts 2014 37
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 the directors present their report and the audited financial statements   for the year ended 27 september 2014 the business review of the   company and its subsidiaries is given on pages 24 and 25 which   together with the corporate governance statement and audit   committee report are incorporated by reference into this report and   accordingly should be read as part of this report
details of the group’s policy on addressing risks are given on pages 18     to 21 and 46 and 47 and details about financial instruments are shown in   note 19 to the financial statements these sections include information   about trends and factors likely to affect the future development and   performance of the group’s businesses the company undertakes     no obligation to update forwardlooking statements   key performance indicators for the group’s businesses are set out on   page 22   this report has been prepared under current legislation and guidance   in force at the year end date in addition the material contained on   pages 2 to 33 reflect the directors’ understanding of the requirement     to provide a strategic report
this report has been prepared for and only for the members of the   company as a body and no other persons the company its directors   employees agents or advisers do not accept or assume responsibility to   any other person to whom this document is shown or into whose hands   it may come or who becomes aware of it and any such responsibility     or liability is expressly disclaimed
areas of operation
throughout fy 2014 the group had activities in and operated through   pubs bars and restaurants in the united kingdom and germany
share capital
the company’s issued ordinary share capital as at 27 september 2014   comprised a single class of ordinary shares of which 411637 885 shares   were in issue and listed on the london stock exchange 28 september   2013 411011098 shares the rights and obligations attaching to the   ordinary shares of the company are contained within the company’s   articles of association of the issued share capital no shares were held   in treasury and the company’s employee share trusts held 2105687   shares details of movements in the issued share capital can be found     in note  22  to  the  financial  statements  on  page  100  each  share  carries  the   right to one vote at general meetings of the company the notice of the   annual general meeting specifies deadlines for exercising voting rights   in relation to the resolutions to be put to the annual general meeting   all issued shares are fully paid up and carry no additional obligations     or special rights there are no restrictions on transfers of shares in the   company or on the exercise of voting rights attached to them other than   those which may from time to time be applicable under existing laws and   regulations and under the articles of association in addition pursuant     the board’s responsibilities in respect of the  
company include
  • determining the overall business and commercial strategy
  • identifying the company’s longterm objectives
  • reviewing the annual operating budget and financial plans     and performance in relation to those plans
  • determining the basis of allocation of capital
  • considering all policy matters relating to the company’s     activities including any major change of policy
   for the company’s latest financial information go to wwwmbplccom
investors
to the listing rules of the financial conduct authority directors and   certain officers and employees of the group require the approval of     the company to deal in the ordinary shares of the company
participants in the share incentive plan ‘sip’ may complete a form     of instruction which is used by the sip trustee as the basis for voting     on their behalf
  during the year shares with a nominal value of £53538 were     allotted under allemployee schemes as permitted under section     549 companies act 2006 no securities were issued in connection     with a rights issue during the year   the company is not aware of any agreements between shareholders     that restrict the transfer of shares or voting rights attached to the shares
interests of the directors and their immediate families in the issued   share capital of the company as at the year end are on page 63 of     the report on directors’ remuneration
dividends
no final dividend will be paid in respect of the year ended     27 september 2014 2013 nil no interim dividend was paid     during the year 2013 nil
interests in voting rights
as at the date of this report the company was aware of the following   significant holdings of voting rights 3 or more in its shares
shareholder
ordinary 
shares
 of 
share capital
piedmont inc 109970613 2668 direct  holding
elpida group limited 93196131 2261 direct  holding
smoothfield holding limited 16757 723 407 direct  holding
     using the total voting rights figure announced to the london stock exchange     for 31 october 2014 of 412220086 shares
directors
details of the directors as at 24 november 2014 and their biographies   are shown on pages 36 and 37  the directors at 27 september 2014   and their interests in shares are shown on page 63 there were no   changes to the board of directors during the year nor have there     been any such changes subsequent to the year end up to the date     of this report   the company is governed by its articles of association and the   companies act 2006 and related legislation in relation to the   appointment and removal of directors the powers of the company’s   directors are set out in the company’s articles of association   in accordance with the company’s articles of association which     are in line with best practice guidance of the uk corporate governance   code the directors will retire at the agm and offer themselves     for  reelection
under a deed of appointment between piedmont inc and the   company piedmont inc has the right to appoint two shareholder   directors to the board whilst it owns 22 or more of the issued share   capital of the company and the right to appoint one shareholder   director to the board whilst it owns more than 16 of the company     but less than 22 in the event that piedmont inc owns less than     16 of the company any such shareholder directors would be     required to resign immediately   mitchells  butlers plc  annual report and accounts 2014 38
directors’ report directors’ indemnity
as permitted by the articles of association each of the directors has   the benefit of an indemnity which is a qualifying thirdparty indemnity   as defined by section 234 of the companies act 2006 the indemnity   was in force throughout the tenure of each director during the last   financial year and is currently in force the company also purchased   and maintained throughout the financial year directors’ and officers’   liability insurance in respect of itself and its directors no indemnity     is provided for the company’s auditor   articles of association
the articles of association may be amended by special resolution of   the shareholders of the company
conflicts of interest
the company’s articles of association permit the board to consider   and if it sees fit authorise situations where a director has an interest   that conflicts or may possibly conflict with the interests of the   company ‘situational conflicts’ the board has a formal system in   place for directors to declare situational conflicts to be considered     for authorisation by those directors who have no interest in the matter   being considered in deciding whether to authorise a situational   conflict the nonconflicted directors are required to act in the way   they consider would be most likely to promote the success of the   company for the benefit of all shareholders and they may impose     limits or conditions when giving authorisation or subsequently     if they think this is appropriate the board believes that the systems     it has in place for reporting and considering situational conflicts   continue to operate effectively
related party transactions
internal controls are in place to ensure that any related party   transactions involving directors or their connected persons are     carried out on an arm’slength basis and are properly recorded
change of control provisions
there are no significant agreements which contain provisions entitling   other parties to such agreements to exercise termination or other     rights in the event of a change of control of the company   there are no provisions in the directors’ or employees’ service   agreements providing for compensation for loss of office or   employment occurring because of a takeover   the trustee of the mitchells  butlers share incentive plan will invite   participants on whose behalf it holds shares to direct it how to vote in   respect of those shares and if there is an offer for the shares or other   transaction which would lead to a change of control of the company   participants may direct it to accept the offer or agree to the transaction   the trustee of the mitchells  butlers employee benefit trust may   having consulted with the company vote or abstain from voting in   respect of any shares it holds or accept or reject an offer relating to   shares in any way it sees fit and it may take all or any of the following   matters into account the longterm interests of beneficiaries the   nonfinancial interests of beneficiaries the interests of beneficiaries     in their capacity as employees or former employees the interests     of future beneficiaries and considerations of a local moral ethical   environmental or social nature
the rules of certain of the company’s share plans include provisions   which apply in the event of a takeover or reconstruction as set     out opposite
provisions which apply in the event of a takeover  
or reconstruction
share plan provision in the event of a takeover
performance  restricted  share plan and 2013   performance  restricted  share plan
awards vest pro rata to performance and   time elapsed and lapse six months later
short term deferred   incentive plan and 2013   short term deferred   incentive plan
bonus shares may be released or   exchanged for shares in the new   controlling company
executive share option plan options may be exercised within six   months of a change of control
sharesave plan and 2013   sharesave plan
options may be exercised within six   months of a change of control
share incentive plan and   2013 share incentive plan
free shares may be released or   exchanged for shares in the new   controlling company
employment policies
the group employed an average of 41514 people in fy 2014 fy 2013   41325 through its diversity policy the company seeks to ensure that   every employee without exception is treated equally and fairly and     that all employees are aware of their responsibilities   our policies and procedures fully support our disabled colleagues     we take active measures to do so via
  • a robust reasonable adjustment policy
  • disabilityspecific online resources accessible via the group’s     online recruitment system and
  • processes to ensure colleagues are fully supported
the group is responsive to the needs of its employees as such should   any employee of the group become disabled during their time with it     we will actively retrain and make reasonable adjustments to their   environment where possible to keep the employee with the group
a more detailed account can be found in the separately published     social responsibility review 2014 at wwwmbplccomresponsibility
employee engagement
mitchells  butlers engages with its employees continuously and in a   number of ways to suit their different working patterns this includes
  • line manager briefings
  • communications forums and roadshows held by functions     or brands across the company
  • a dedicated intranet for the retail support team
  • a dedicated portal ‘ourhub’ for retail employees
  • email news alerts
  • focus groups
  • weekly bulletins – specifically targeted at retail general managers   and mobile workers
  • employee social media groups
  • an annual conference and awards for our operators and
  • a monthly magazine poster frontline news for the retail estate
details of the financial and economic factors affecting the performance   of the company are shared with all employees at the appropriate time   using the methods listed above   mitchells  butlers plc  annual report and accounts 2014 39
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 we provide opportunities for employees to give their feedback to the   company in a number of ways from team or shift meetings in restaurants   and pubs and pulse surveys for all employees to the mitchells  butlers   annual  business  forum  business  forum  representatives  collect  questions  from employees across the company and put them to members of the   executive committee the questions and answers are published in   frontline news and online
what’s the big idea is a companywide initiative where employees     are encouraged to submit their ideas for improving the business   environmentally financially or otherwise via our dedicated     employee  website
our retail teams complete compulsory bespoke safety training via   elearning at level 2 and classroom based level 3 for food safety fire   safety and health and safety mitchells  butlers operates the challenge   21 policy in all our businesses across england and wales the policy   requires that any guest attempting to buy alcohol who appears under   the age of 21 must provide an acceptable form of proof of age id     to confirm that they are over 18 before they can be served this     policy forms part of our regular training for our employees on their   responsibilities for serving alcohol we also have a visual training library   which houses short training videos to share best practice tips health     and safety guidance kitchen operational advice and cooking skills
mitchells  butlers is keen to encourage greater employee involvement   in the group’s performance through share ownership it operates four   hmrc approved allemployee plans which are the sharesave plan     the 2013 sharesave plan the share incentive plan and the 2013 share   incentive plan which include partnership shares the company also   operates five other plans on a selective basis which are the performance   restricted share plan the 2013 performance restricted share plan the   short term deferred incentive plan the 2013 short term deferred   incentive plan and the executive share option plan further details     on the plans are set out in the report on directors’ remuneration   during the year the company has remained within its headroom limits for   the issue of new shares for share plans as set out in the rules of the above   plans the company uses an employee benefit trust to acquire shares in   the market when appropriate to satisfy share awards in order to manage   headroom under the plan rules a total of 500000 shares in the company   were purchased by the employee benefit trust during fy 2014
political donations
the company made no political donations during the year and intends   to maintain its policy of not making such payments it will however as     a precautionary measure to avoid inadvertent breach of the law seek   shareholder authority at its 2015 agm to make limited donations or   incur limited political expenditure although it has no intention of     using the authority
funding and liquidity risk
in order to ensure that the group’s longterm funding strategy is aligned   with its strategic objectives the treasury committee regularly assesses   the maturity profile of the group’s debt alongside the prevailing   financial projections and threeyear plan this enables it to ensure     that funding levels are appropriate to support the group’s plans
the current funding arrangements of the group consist of the securitised   notes issued by mitchells  butlers finance plc and associated liquidity   facility and £150m of unsecured committed bank facilities further   information regarding these arrangements is included in note 18 to the   financial statements on page 94 the terms of the securitisation contain     a number of financial and operational covenants compliance with these   covenants is monitored by group treasury
the group prepares a rolling daily cash forecast covering a sixweek   period and an annual cash forecast by period these forecasts are   reviewed on a daily basis and used to manage the investment and   borrowing requirements of the group a combination of cash pooling   and zero balancing agreements are in place to ensure the optimum   liquidity position is maintained committed facilities outside of the   securitisation are sized to ensure that the group can meet its medium
term anticipated cash flow requirements
going concern
the financial statements which appear on pages 67 to 111 have been   prepared on a going concern basis the directors have reviewed the   group’s objectives policies and processes for managing its capital     its financial risk management objectives its financial instruments and   hedging activities and its exposures to credit risk and liquidity risk the   group’s financing is based on securitised debt and within this context   a robust review has been undertaken of projected performance against   the securitisation covenants as a result of this review the directors   have a reasonable expectation that the group has adequate resources   to continue in operational existence for the foreseeable future see note   1 to the financial statements on page 75
annual general meeting
the notice convening the annual general meeting is contained in a   circular sent to shareholders with this report and includes full details     of the resolutions proposed
auditor
deloitte llp has expressed its willingness to continue in office as auditor of   the company and its reappointment will be put to shareholders at the agm
postbalance sheet events
there are no postbalance sheet events to report
disclosure of information to auditor
having made the requisite enquiries so far as the directors are aware   there is no relevant audit information as defined by section 4183 of   the companies act 2006 of which the company’s auditor is unaware   and each director has taken all steps that ought to have been taken     to make themselves aware of any relevant audit information and to   establish that the company’s auditor is aware of that information
mitchells  butlers plc  annual report and accounts 2014 40
directors’ report
continued greenhouse gas ‘ghg’ emissions statement
the group generates ghg emissions throughout its estate of bars and restaurants for heating cooling lighting and catering including the   refrigeration of drinks and food   ghg emissions per £m turnover were reduced by 22 during the 201314 tax year in comparison to 201213 this reduction has been achieved   through continual evolution of our behavioural change programmes including training of energy ambassadors who are now active across most     of our estate and ongoing investment in increasing the energy efficiency of our buildings and equipment
assessment parameters
assessment year 201314 tax year
consolidation  approach financial control
boundary summary all bars and restaurants either owned or under operational control during the 201314 tax year were included
scope general classifications of greenhouse gas emissions scopes based on the ghg protocol and iso1406412006   within the context of the group’s operations are as follows
scope 1 – direct greenhouse gas emissions from sources that are owned or controlled by the company     eg fuel combustion of varying types occurs during kitchen activity and to generate heating and domestic hot   water most commonly through natural grid supplied gas but also some lpg liquefied petroleum gas and oil   real fires fuelled by logs or coal are also used to supplement customer comfort and enhance ambience   scope 2 – ghg emissions from the generation of purchased electricity used during kitchen activity and     for lighting heating and cooling
scope 3 – indirect emissions as a consequence of the activities of the company but occurring from sources   not owned or controlled by the company
this assessment focuses on scope 1 and 2 emissions only scope 3 is optional under the current regulations   consistency with the     financial  statements
scope 1 and 2 emissions are reported for the 201314 tax year and the 201213 tax year to retain     consistency with reporting of our carbon emissions under the carbon reduction commitment ‘crc’     energy efficiency scheme
scope 1 and 2 emissions from sites with ‘landlord supplies’ are not included in the crc submission     we currently have 18 sites that use a landlord’s gas supply and 15 that use a landlord’s electricity supply   orchid sites are excluded as their acquisition was completed after the end of the 201314 tax year   franchise sites are excluded as they are responsible for arranging and paying for their own energy
alex sites in germany are included emissions are based on uk average emissions multiplied by the number of   alex sites   exclusions scope 1 – vehicle fleet emissions are excluded as they have been calculated to account for  1 total emissions   which falls below the materiality threshold
scope 1 – fugitive emissions within refrigeration and cooling equipment are not included as detailed records   are not yet held
outside of scope – logs are ‘outside of scope’ because the scope 1 impact of these fuels has been   determined to be a net ‘0’ however the co
2
e value of logs has been calculated to be  1 and would be   excluded in any case as it falls below the materiality threshold   emission factor data source defra conversion factors have been used where appropriate carbon emission conversion factors that relate to   the calendar year within which the greatest portion of the data falls have been applied as such 2013 factors   have been applied for the 201314 tax year and 2012 factors have been applied for the 201213 tax year  assessment  methodology defra environmental guidelines 2013
materiality threshold all emission types estimated to contribute  1 of total emissions are included   intensity  threshold emissions are stated in tonnes co
2
e per £m revenue this intensity ratio puts emissions into context given     the scale of the group’s activities and enables comparison with prior year performance
target emissions during the 201213 tax year are provided for comparative purposes
greenhouse gas  
emission source
201213 201314 change from previous year
tco
2
e tco
2
e£m tco
2
e tco
2
e£m tco
2
e tco
2
e£m 
scope 1 93701 515 89893 482 3808 33 641
scope 2 203128 1116 207591 1113 4463 03 027
statutory total scope 1 and 2 296829 1631 297484 1595 655 36 221
  statutory carbon reporting disclosures required by the companies act 2006
by order of the board
greg mcmahon
company	secretary	and	general	counsel
24 november 2014
mitchells  butlers plc  annual report and accounts 2014 41
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 the directors are responsible for preparing the annual report and the   financial statements in accordance with applicable law and regulations
company law requires the directors to prepare financial statements     for each financial year under that law the directors are required to   prepare the group financial statements in accordance with international   financial reporting standards ifrss as adopted by the european   union and article 4 of the ias regulation and have elected to prepare   the parent company financial statements in accordance with united   kingdom generally accepted accounting practice united kingdom   accounting standards and applicable law under company law the   directors must not approve the accounts unless they are satisfied that   they give a true and fair view of the state of affairs of the company     and of the profit or loss of the company for that period   in preparing the parent company financial statements the directors     are required to
  • select suitable accounting policies and then apply them consistently
  • make judgments and accounting estimates that are reasonable     and prudent
  • state whether applicable uk accounting standards have been   followed  subject  to  any  material  departures  disclosed  and  explained  in the financial statements and
  • prepare the financial statements on the going concern basis unless     it is inappropriate to presume that the company will continue     in  business
in preparing the group financial statements international accounting   standard 1 requires that directors
  • properly select and apply accounting policies
  • present information including accounting policies in a     manner that provides relevant reliable comparable and   understandable  information    • provide additional disclosures when compliance with the     specific requirements in ifrss are insufficient to enable users     to understand the impact of particular transactions other     events and conditions on the entity’s financial position and     financial performance and
  • make an assessment of the company’s ability to continue     as a going concern
the directors are responsible for keeping adequate accounting     records that are sufficient to show and explain the company’s   transactions and disclose with reasonable accuracy at any time     the financial position of the company and enable them to ensure     that the financial statements comply with the companies act 2006   they are also responsible for safeguarding the assets of the     company and hence for taking reasonable steps for the prevention     and detection of fraud and other irregularities
the directors are responsible for the maintenance and integrity of     the corporate and financial information included on the company’s   website legislation in the united kingdom governing the preparation   and dissemination of financial statements may differ from legislation     in other jurisdictions
responsibility statement
the directors confirm that to the best of their knowledge
  • the financial statements prepared in accordance with the relevant   financial reporting framework 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
  • the strategic report includes a fair review of the development and   performance of the business and the position of the company and   the undertakings included in the consolidation taken as a whole   together with a description of the principal risks and uncertainties   that they face and
  • the annual report and financial statements taken as a whole are   fair balanced and understandable and provide the information   necessary for shareholders to assess the company’s performance   business model and strategy
signed by
tim jones
finance	director
24 november 2014
mitchells  butlers plc  annual report and accounts 2014 42
directors’ responsibilities statement the board recognises the importance of good corporate governance     in creating a sustainable successful and profitable business and details   are set out in this statement of the company’s corporate governance   procedures and application of the principles of the code there are   however a small number of areas where for reasons specifically related   to the company the detailed provisions of the code were not fully   complied  with  these  areas  are  kept  under  regular  review  a  fundamental  aspect of the code is that it contains best practice recommendations in   relation to corporate governance yet acknowledges that in individual   cases these will not necessarily be appropriate for particular companies   accordingly the code specifically recognises the concept of ‘comply     or explain’ in relation to divergences from the code   compliance with the code 
except for the matters which are explained below in line with the   ‘comply or explain’ concept the company complied fully with the   principles and provisions of the code throughout the financial year     in respect of which this statement is prepared and continues to     do so as at the date of this statement
explanation for noncompliance with parts of the code
during the year there were seven divergences from full compliance   with the code as set out below by reference to specific paragraphs     in the code
a41	senior	independent	director	and	a42	and	b63 		
chairman’s	performance	evaluation
the role of senior independent director remained vacant and   accordingly the company did not comply with provision a41 of     the code as confirmed by the board effectiveness review carried out   during the year the board is operating effectively as reported on page   47  nonetheless the nomination committee is still considering the   most appropriate candidate to be identified as senior independent   director in the meantime all directors will continue to be available     to shareholders via the company secretary to address questions     as a result the chairman’s evaluation see page 47 was conducted     by the independent nonexecutive directors acting jointly
b1	including	b12	composition	of	the	board	and	b21	c31 		
and	d21	constitution	of	committees
the board was not constituted in full compliance with the code as it     had three independent nonexecutive directors out of a total of six   nonexecutive directors not including the chairman for this purpose   and two executive directors accordingly provision b12 which   requires that at least half of the board be made up of independent   nonexecutive directors excluding the chairman was not complied   with this also had consequential implications on the composition     of the standing board committees   three independent nonexecutive directors were appointed     during fy 2013 meaning that the board moved significantly further   towards compliance with the provisions of the code relating to     board composition while the board does not comply fully with     the requirement for at least half of its members to be independent     it recognises and values the presence of representatives of its major   shareholders on the board and welcomes the interest shown     by them in the company as a whole the board will continue to     work closely with the representatives of its major shareholders     to further the interests of the company
the possibility of appointing a further independent nonexecutive   director remains a matter for the nomination committee to review     and is considered regularly
corporate governance statement
the board is responsible for ensuring that the activities of     the mitchells  butlers group and its various businesses are   conducted in compliance with the law regulatory requirements   and rules good practices ethically and with appropriate and   proper governance and standards this includes reviewing   internal controls ensuring that there is an appropriate balance     of skills and experience represented on the board and compliance   with the 2012 uk corporate governance code the ‘code’   which is issued by the financial reporting council and which is   available at wwwfrcorguk and maintaining appropriate relations   with shareholders
a new edition of the code was published in september 2014     and applies to reporting periods beginning on or after 1 october   2014 as our 2014 reporting period began before this date     we are continuing to report against the 2012 edition of the code   although the board has adopted some of the new provisions     in the revised code earlier than required
   the latest financial information for mitchells  butlers and its group of     companies is included in the 2014 annual report and accounts of which this   corporate governance statement forms part and which are available online at   wwwmbplccominvestors
this corporate governance statement sets out our report to   shareholders on the status of our corporate governance arrangements   
the board is committed to high standards of corporate   governance i am delighted to be able to report that the board   considers that the company has complied throughout the year   ended 27 september 2014 with all the provisions and best   practice guidance of the code except those in respect of the   senior independent director board composition and constitution   of the board committees this corporate governance statement   addresses the small number of areas where for reasons specific   to mitchells  butlers there are divergences from the code as   described  below  the audit committee report and nomination committee report     which are set out on pages 48 to 50 and 45 and 46 respectively of   the annual report also form part of this corporate governance   statement and they should all be considered together
bob ivell
chairman
mitchells  butlers plc  annual report and accounts 2014 43
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112
corporate governance statement following the appointment of the three new independent non
executive directors to the board in april and may 2013 throughout     fy 2014 the company had and continues to have fully functioning   nomination audit and remuneration committees as required by     the code the committees are not fully compliant with the relevant   provisions of paragraphs b21 c31 and d21 of the code in that     they include the presence of representatives of major shareholders   nevertheless the board values the contribution of those shareholder   representatives on those committees does not consider this to be an   impediment to good governance and looks forward to working with   them on matters affecting the group and its activities in the future
the information required by disclosure and transparency rule ‘dtr’   7 1 is set out in the audit committee report on pages 48 to 50 the   information required by dtr 7 2 is set out in this corporate governance   statement other than that required under dtr 7 26 which is set out     in the directors’ report on pages 38 to 41   board composition
during the year the board comprised nine directors a table listing     the composition of the board during the year is in the table opposite   the board
the board is responsible to all stakeholders including its shareholders   for the strategic direction development and control of the group     it approves strategic plans and annual capital and revenue budgets     it reviews significant investment proposals and the performance of     past investments and maintains an overview and control of the group’s   operating and financial performance it monitors the group’s overall   system of internal controls governance and compliance and ensures   that the necessary financial technical and human resources are in     place for the company to meet its objectives   during fy 2014 there were 14 scheduled board meetings there     were also five meetings of the audit committee four meetings of     the remuneration committee and two meetings of the nomination   committee the table opposite shows attendance levels at the board     and committee meetings held during the year the numbers in brackets   confirm how many meetings each director was eligible to attend     during the year
where a director was unable to attend a meeting whether of the   board or one of its committees they were provided with all the papers   and information relating to that meeting and were able to discuss issues   arising direct with the chairman of the board or chair of the relevant   committee in addition the board members meet more informally   approximately four times a year and the chairman and the non
executive directors meet without the executive directors twice a year   there are 11 board meetings currently planned for fy 2015   the company secretary’s responsibilities include ensuring good   information flows to the board and between senior management     and the nonexecutive directors the company secretary is   responsible through the chairman for advising the board on all   corporate governance matters and for assisting the directors with their   professional development this includes regular corporate governance   and business issues updates as well as the use of operational site visits   and the provision of external courses where required the company   secretary facilitates a comprehensive induction for newly appointed   directors tailored to individual requirements and including guidance   on the requirements of and directors’ duties in connection with the   code and the companies act 2006 as well as other relevant legislation    in fy 2014 the company secretary also coordinated the internally   facilitated performance evaluation of the board the appointment and   removal of the company secretary is a matter reserved for the board
attendance levels at board and committee meetings
board
audit
committee
remuneration
committee
nomination
committee
current directors who served during the year
bob ivell 14  14 – 4 4 2 2
alistair darby 14  14 – – –
stewart gilliland
1
12 14 3 5 3 4 1 2
eddie irwin 12 14 5 5 4 4 2 2
tim jones 14  14 – – –
douglas mcmahon
2
8 14 – – –
ron  robson 13 14 5 5 4 4 2 2
colin rutherford 13 14 5 5 4 4 2 2
imelda walsh 14  14 5 5 4 4 2 2
1    mr gilliland had preexisting commitments prior to his appointment to the board     and the audit committee
2    mr mcmahon was prevented from attending some board meetings due to travel   difficulties or clashes with other business commitments but in each case provided     his comments on the matters to be considered by the board to the chairman another   director mr robson who is also nominated to the board by piedmont inc or the   company  secretary
directors
the following were directors of the company during the year ended   27 september 2014
 
date
appointed
date of
change of role
current directors who served during the year
bob ivell independent  non
executive director
1
090511 140711
interim  chairman
1
140711 261011
executive chairman 261011 121112
nonexecutive  chairman 121112 –
alistair darby chief executive 081012 –
stewart gilliland independent  nonexecutive  director 230513 –
eddie irwin
2
nonexecutive  director 210312 –
tim jones finance director 181010 –
douglas mcmahon
3
nonexecutive  director 151010 –
ron  robson
3
nonexecutive  director 220110 –
deputy chairman 140711 –
colin rutherford independent  nonexecutive  director 220413 –
imelda walsh independent  nonexecutive  director 220413 –
1  independent while in the role specified
2  nominated shareholder representative of elpida limited
3  nominated shareholder representative of piedmont inc
throughout the year and as at the date of this statement the board   was made up of eight male and one female members   the executive directors have service contracts which are summarised     on page 57  the chairman and each of the nonexecutive directors have   letters of appointment copies of the respective service contracts or letters   of appointment of all the board are on the company’s website in addition   they are available for inspection at the registered office of the company   during normal business hours and at the place of the annual general   meeting from at least 15 minutes before and until the end of the meeting
all the company’s directors are required to stand for annual reelection   in accordance with the company’s articles of association their   biographical details as at 24 november 2014 are set out on page 37    including their main commitments outside the company further   information is set out opposite
mitchells  butlers plc  annual report and accounts 2014 44
corporate governance statement
continued eddie irwin has been appointed to the board as a representative of the   company’s second largest shareholder elpida limited and is therefore   not regarded as independent in accordance with the code   there are currently three independent nonexecutive directors     on the board stewart gilliland colin rutherford and imelda walsh
other than their fees and reimbursement of taxable expenses which   are disclosed on page 60 the nonexecutive directors received no   remuneration from the company during the year   when nonexecutive directors are considered for appointment the   board takes into account their other responsibilities in assessing whether   they can commit sufficient time to their prospective directorship
board information and training
all directors are briefed by the use of comprehensive papers circulated   in advance of board meetings and by presentations at the meetings in   addition to receiving minutes of previous meetings their understanding   of the group’s business is enhanced by business specific presentations   and operational visits to the group’s businesses separate strategy   meetings and meetings with senior executives are also held throughout   the year the training needs of directors are formally considered on     an annual basis and are also monitored throughout the year with   appropriate training being provided as required
committees
each board committee has written terms of reference approved     by the board which are available on the company’s website
audit committee
details of the audit committee and its activities during the year     are included in the audit committee report on pages 48 to 50 which     is incorporated by reference into this statement
remuneration committee
details of the remuneration committee and its activities during     the year are included in the report on directors’ remuneration     on pages 50 to 66
nomination committee
the nomination committee is responsible for nominating for the   approval of the board candidates for appointment to the board it     is also responsible for succession planning and reviewing the output     of the board effectiveness review during the year the nomination   committee considered the composition of the board and assessed     the outcome of the board’s effectiveness review the nomination   committee agrees the importance of having diversity on the board   including female representation and different experiences skill sets   and expertise so as to maintain an appropriate balance within the   company and on the board
a detailed description of the duties of the nomination committee     is set out within its terms of reference which can be viewed at     wwwmbplccominvestorsbusinessconductboardcommittees  the following were members of the nomination committee during     the year
appointment
date
member at
 270914
bob ivell chair 110713 y
stewart gilliland 110713 y
eddie irwin 110713 y
ron  robson 110713 y
colin rutherford 110713 y
imelda walsh 110713 y
the executive directors may be permitted to accept one external   nonexecutive director appointment with the board’s prior approval   and as long as this is not likely to lead to conflicts of interest
division of responsibilities between chairman and chief executive
in accordance with provision a21 of the code the roles of chairman   and chief executive should not be exercised by the same individual   the division of responsibilities between the chairman and chief   executive are clearly established and set out in writing and agreed by   the board in particular it has been agreed in writing that the chairman   shall be responsible for running the board and shall provide advice     and assistance to the chief executive he also chairs the nomination   committee is a member of the remuneration committee and attends   by invitation meetings of the audit committee it is also agreed in   writing that the chief executive has responsibility for all aspects of the   group’s overall commercial operational and strategic development     he chairs the executive committee details of which appear on page   46 and attends the nomination remuneration and audit committee   by invitation not necessarily for the entirety of such meetings   depending upon the subject matter all other executive directors   currently just the finance director and all other members of the   executive committee report to the chief executive
chairman
the chairman should on appointment meet the independence     criteria set out in provision b11 of the code bob ivell met these   independence  criteria  on  appointment
bob ivell was appointed to the role of executive chairman on   26 october 2011 on the departure of the then chief executive and   reverted to the role of nonexecutive chairman on 12 november 2012   following the completion of an induction period by alistair darby who   was appointed chief executive on 8 october 2012 the chairman   ensures that appropriate communication is maintained with   shareholders he ensures that all directors are fully informed     of matters relevant to their roles   chief executive
alistair darby was appointed as chief executive on 8 october 2012   with a formal handover of responsibilities from mr ivell who had     been acting chief executive since october 2011 taking place on   12 november 2012 following completion of his induction period
as indicated above the chief executive has responsibility for   implementing the strategy agreed by the board and for the     executive management of the group
senior independent director
the board has not currently identified any of its members as the     senior independent director although this is a matter which the   nomination committee is keeping under review
nonexecutive directors 
the company has experienced nonexecutive directors on its board   bob ivell was considered to be independent upon his appointment on   9 may 2011 in that he was free from any business or other relationship   with the company which could materially influence his judgement and   he continues to represent a strong source of advice and independent   challenge since his appointment as chairman on 14 july 2011 as set   out in the code the independence test is no longer applicable to his   current  position  ron robson and douglas mcmahon have been appointed to the board   as representatives of the company’s largest shareholder piedmont inc   and are therefore not regarded as independent in accordance with     the code   mitchells  butlers plc  annual report and accounts 2014 45
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 during the year the company did not comply with provision     b21 of the code because as explained earlier in this statement     the nomination committee was not comprised of a majority of   independent nonexecutive directors the committee is not fully   compliant in that it includes the presence of representatives of major   shareholders nevertheless for the reasons already stated the board   does not consider this to be an impediment to good governance     and looks forward to continuing to work constructively with the   representatives nominated by its major shareholders in relation to all   the matters and issues to be addressed by the nomination committee   and the board in connection with the company in the future
executive committee
the executive committee which is chaired by the chief executive   consists of the executive directors and certain other senior executives   namely catriona kempston marketing director gary john group   property director susan martindale group hr director and     greg mcmahon company secretary and general counsel
the executive committee meets at least every four weeks and has   daytoday responsibility for the running of the group’s business     it develops the group’s strategy and annual revenue and capital   budgets for board approval it reviews and recommends to the board   any significant investment proposals this committee monitors the   financial and operational performance of the group and allocates   resources within the budgets agreed by the board it considers   employment issues ensures the group has an appropriate pool of   talent and develops senior management manpower planning and   succession plans the minutes of meetings of the executive committee   are supplied to the board for information in order that board members     can keep abreast of operational developments
general purposes committee
the general purposes committee comprises any two executive   directors or any one executive director together with a senior officer   from an agreed and restricted list of senior executives it is always chaired   by an executive director it attends to business of a routine nature and to   the administration of matters the principles of which have been agreed   previously by the board or an appropriate committee
treasury committee
although not a formal board committee the treasury operations of the   mitchells  butlers group are operated on a centralised basis under the   control of the group treasury department the treasury committee   which reports to the finance director but is subject to oversight from   the audit committee and ultimately the board has daytoday   responsibility for
  • liquidity management     • investment of surplus cash     • funding cash and banking arrangements     • interest rate and currency risk management     • guarantees bonds indemnities and any financial encumbrances   including charges on assets and     • relationships with banks and other market counterparties     such as credit rating agencies   the treasury committee also works closely with the financial   accounting department to review the impact of changes in relevant   accounting practices and to ensure that treasury activities are     disclosed appropriately in the company’s accounts
the board delegates the monitoring of treasury activity and compliance   to the treasury committee it is responsible for monitoring the   effectiveness of treasury policies and making proposals for any     changes to policies or in respect of the utilisation of new instruments   the approval of the board or a designated committee thereof     is required for any such proposals
independent advice
members of the board may take independent professional advice     in the furtherance of their duties and the board has agreed a formal   process for such advice to be made available members of the board   also have access to the advice and services of the company secretary   and general counsel the company’s legal and other professional   advisers and its external auditor the terms of engagement of the   company’s external advisers and its external auditor are regularly   reviewed by the company secretary and general counsel
code of ethics
the company has implemented business conduct guidelines   describing the standards of behaviour expected from those working     for the company in the form a code of ethics the ‘ethics code’ its   aim is to promote honest and ethical conduct throughout our business   and it applies to all corporate employees the ethics code requires
  • compliance with all applicable rules and regulations that apply     to the company and its officers including the bribery act 2010
  • the ethical handling of actual or apparent conflicts of interest   between internal and external personal and professional   relationships and
  • that any hospitality from suppliers must be approved in advance     by appropriate senior management with a presumption against     its  acceptance
the company takes a zero tolerance approach to bribery and has   developed an extensive bribery policy the ethics code requires   employees to comply with the bribery policy
the company also offers an independently administered confidential   whistleblowing hotline for any employee wishing to report any concern   that they feel would be inappropriate to raise with their line manager   all whistleblowing allegations are reported to and considered by the   executive committee and a summary report with details of any major   concerns is supplied to and considered by the audit committee at   each meeting
the board takes regular account of social environmental and ethical   matters concerning the company through regular reports to the board   and presentations to the board at its strategy meetings the company   secretary is responsible for ensuring that directors are made aware     of and receive training in respect of such matters the board is also   responsible for the company’s internal risk management system     in respect of which more details can be found in the ‘risks and   uncertainties’ section of this report and in the following section     of this statement
internal control and risk management
the board has overall responsibility for the group’s system of internal   control and risk management and for reviewing its effectiveness in order   to discharge that responsibility the board has established the procedures   necessary to apply the code for the year under review and to the date of   approval of the annual report such procedures are regularly reviewed   by the audit committee
the key features of the group’s internal control and risk management   systems  include
  • processes including monitoring by the board in respect of     i    financial performance within a comprehensive financial planning   accounting and reporting framework
  ii    strategic plan achievement
  iii    capital investment and asset management performance with   detailed appraisal authorisation and postinvestment reviews   and
  iv    consumer insight data and actions to assess the evolution of   brands and formats to ensure that they continue to be appealing   and relevant to the group’s guests
mitchells  butlers plc  annual report and accounts 2014 46
corporate governance statement
continued with regard to insurance against risk it is not practicable to insure against   every risk to the fullest extent the group regularly reviews both the type   and amount of external insurance that it buys with guidance from an   external independent broker bearing in mind the availability of such   cover its cost and the likelihood and magnitude of the risks involved
shareholder relations
the board recognises that it is accountable to shareholders for the   performance and activities of the company the company regularly   updates the market on its financial performance at the half year and     full year results in may and november respectively and by way of     other announcements as required the content of these updates is   available by webcast on the company’s website together with general   information about the company so as to be available to all shareholders   the company has a regular programme of meetings with its larger   shareholders which provides an opportunity to discuss on the basis of   publicly available information the progress of the business on a more   informal basis the chairman chief executive and the finance director   regularly report to the board the views of larger shareholders about the   company and the other nonexecutive directors are available to meet   shareholders on request and are offered the opportunity to attend   meetings with larger shareholders
the agm provides a useful interface with shareholders many of whom   are also guests all proxy votes received in respect of each resolution at   the agm are counted and the balance for and against and any votes   withheld are indicated   board effectiveness evaluation and chairman’s evaluation  
and appraisal
in line with the code the board carried out an internally facilitated   effectiveness evaluation in 2014   the internal evaluation process involved the completion of a tailored   questionnaire by all board members and deloitte llp as auditor     the principal actions arising for attention related to board diversity   improvements to succession planning improved effectiveness in setting   priorities and bringing more subject specialist presentations to the board   to widen the board’s understanding of the group’s core business and   strategic direction the board received the findings of the evaluation     in  july 2014 and the directors confirmed that the board is fulfilling its   responsibilities appropriately the evaluation also concluded that the   board and its committees were effective and that each continuing   director made a constructive and valuable contribution to the board     and the running of the company
a full externally facilitated board evaluation exercise is to be conducted     in 2015
as indicated earlier in this statement the company has not as yet   nominated a senior independent director accordingly the annual   appraisal of the chairman’s performance was conducted by the   independent nonexecutive directors without the chairman present   with the conclusions fed back to the chairman by that group the   principal conclusions of that review were that mr ivell’s performance   remains highly constructive and that the level of mr ivell’s involvement   was of benefit to the company noting that the relationship between     the chairman and ceo is critical annual reviews of the chairman’s   performance will continue to be conducted as required by the code
going concern
the directors’ statement as to the status of the company as a going   concern can be found on page 40
  • an overall governance framework including
  i    clearly defined delegations of authority and reporting lines     ii    a comprehensive set of policies and procedures that employees   are required to follow and
  iii    the group’s ethics code in respect of which an annual confirmation   of compliance is sought from all corporate employees
  • the risk committee a subcommittee of the executive committee   which assists  the  board  audit  committee  and  executive  committee   in managing the processes for identifying evaluating monitoring   and mitigating risks the risk committee which met three times   during fy 2014 is chaired by the company secretary and general   counsel and comprises executive committee members and other   members of senior management from a crosssection of functions   its primary responsibilities are to
  i    advise the executive committee on the company’s overall     risk appetite and risk strategy taking account of the current     and prospective operating legal macroeconomic and     financial  environments
  ii    advise the executive committee on the current and emerging   risk exposures of the company in the context of the overall     risk appetite and risk strategy
  iii    promote the management of risk throughout the organisation
  iv    review and monitor the company’s capability and processes     to identify and manage risks
  v    consider the identified key risks faced by the company and     new and emerging risks and consider the adequacy of mitigation   plans in respect of such risks and
  vi    where mitigation plans are inadequate recommend   improvement actions
the group risks identified by the processes that are managed by the risk   committee are described in ‘risks and uncertainties’ on pages 18 to 21
  • examination of business processes on a risk basis including reports   from the internal audit function known as group assurance which   reports directly to the audit committee
the group also has in place systems including policies and procedures   for exercising control and managing risk in respect of financial reporting   and the preparation of consolidated accounts these systems policies   and procedures
  • govern the maintenance of accounting records that     in reasonable detail accurately and fairly reflect transactions
  • require reported information to be reviewed and reconciled     with monitoring by the audit committee and board and
  • provide reasonable assurance that transactions are recorded as   necessary to permit the preparation of financial statements in   accordance with international financial reporting standards ‘ifrs’   or uk generally accepted accounting practice as appropriate
in accordance with the code during the year the audit committee   completed and reported to the board its conclusions in respect of its   annual review of the effectiveness of the group’s risk management and   internal control systems including financial operational and compliance   controls the system of internal control is designed to manage rather   than eliminate the risk of failure to achieve business objectives and as   such it can only provide reasonable and not absolute assurance against   material misstatement or loss in that context in the opinion of the audit   committee the review did not indicate that the system was ineffective or   unsatisfactory and to the extent that weaknesses in internal controls were   identified the audit committee confirmed that necessary remedial   action plans were in place the audit committee is not aware of any   change to this status up to the date of approval of this annual report
mitchells  butlers plc  annual report and accounts 2014 47
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 membership and remit of the audit committee
the main purpose of the audit committee is to review and maintain   oversight of mitchells  butlers corporate governance particularly with   respect to financial reporting internal control and risk management   the audit committee’s responsibilities also include
  • reviewing the processes for detecting fraud misconduct and   internal control weaknesses
  • reviewing the effectiveness of the group assurance function and
  • overseeing the relationship with the auditor   at the date of the 2014 annual report the audit committee comprises   three independent nonexecutive directors colin rutherford chair   imelda walsh and stewart gilliland and two further nonexecutive   directors nominated by substantial shareholders ron robson and eddie   irwin in accordance with code provision c3 1 the board considers that   colin rutherford has significant recent and relevant financial experience   biographies of all of the members of the audit committee including a   summary of their experience appear on page 37    following the appointment of three independent nonexecutive   directors in april and may 2013 committee members were appointed   with effect from 11 july 2013 and revised terms of reference established   in order to move further in line with code requirements the audit   committee met five times during fy 2014   when appropriate the audit committee augments the skills and   experiences of its members with advice from internal and external audit   professionals for example on matters such as developments in financial   reporting audit committee meetings are also attended by invitation     by members of the board the director of group assurance  risk   management and representatives of the auditor deloitte llp  the audit   committee also meets privately not less than twice a year without any   member of management present with the director of group assurance    risk management in relation to internal audit matters and with the auditor   the remuneration of the members of the audit committee is set out     in the report on directors’ remuneration on page 60
summary terms of reference
a copy of the audit committee’s terms of reference is publicly     available within the investor section of the company’s website   wwwmbplccompdfauditcommitteetermspdf
the audit committee is authorised by the board to review any activity   within the business it is authorised to seek any information it requires   from and require the attendance at any of its meetings of any director or   member of management and all employees are expected to cooperate   with any request made by the audit committee   the audit committee is authorised by the board to obtain at the   company’s expense outside legal or other independent professional   advice and secure the attendance of outsiders with relevant experience   and expertise if it considers this necessary the chair of the audit   committee reports to the subsequent board meeting on the committee’s   work and the board receives a copy of the minutes of each meeting   the role and responsibilities of the audit committee are to
  • review the company’s public statements on internal control     risk management and corporate governance compliance
  • review the company’s processes for detecting fraud misconduct   and control weaknesses and to consider the company’s response     to any such occurrence
  • review management’s evaluation of any change in internal controls   over financial reporting
  • review with management and the auditor company financial statements   required under uk legislation before submission to the board
  • establish review and maintain the role and effectiveness of the internal   audit function known as group assurance whose objective is to   provide independent assurance over the group’s significant processes   and controls including those in respect of the group’s key risks
 
introduction from the audit committee chair  
i am delighted to present on behalf of the board our audit   committee report for the financial year ended 27 september 2014   since my appointment i have been committed to gaining a     broad understanding of the group its operations and challenges   and have spent valuable time with key individuals across the   organisation who have collectively provided an appreciation     and rigorous insight into how the group functions   a key area of the audit committee’s work is to engage formally   regularly and in detail with our auditor thirdparty advisers and   the internal director of group assurance  risk management   this enables  us  to  gain  an  indepth  understanding  and  confidence   in how our auditor and thirdparty advisers interact with the   internal group assurance  risk management function to give   comprehensive coverage of the overall external and internal     audit  process  it is important to note our group commitment to the provision     of sufficient resources in ensuring any additional assurance is   provided where considered appropriate and necessary in   support of the overall process   the role of the audit committee is now more important than ever   in reviewing the effectiveness of the group’s internal controls the   group assurance  risk management processes and assessing   and acting upon any and all information received from our auditor   thirdparty advisers and our internal audit function
colin rutherford
chairman	of	the	audit	committee
mitchells  butlers plc  annual report and accounts 2014 48
audit committee report   • assume direct responsibility for the appointment compensation   resignation dismissal and the overseeing of the auditor including   review of the external audit its cost and effectiveness
  • preapprove nonaudit work to be carried out by the auditor     and the fees to be paid for that work together with the monitoring     of the external auditor’s independence
  • oversee the process for dealing with complaints received by     the group regarding accounting internal accounting controls or   auditing matters and any confidential anonymous submission by   employees of concerns regarding questionable accounting or   auditing matters and
  • adopt and oversee a specific code of ethics for all corporate   employees which is consistent with the company’s overall   statement of business ethics
key activities of the audit committee
audit matters are reviewed at quarterly audit committee meetings   throughout the year at which detailed reports are presented for review   the audit committee commissions reports from external advisers     the director of group assurance  risk management or company   management either after consideration of the company’s major risks     or in response to developing issues during the year the audit   committee considered the following matters
  • the suitability of the group’s accounting policies and practices     • half year and full year financial results
  • the scope and cost of the external audit
  • the auditor’s half year and full year reports     • reappointment and evaluation of the performance of the auditor   including recommendations to the board for approval by   shareholders on the reappointment of the company’s     auditor and approval of fees and terms of engagement
  • nonaudit work carried out by the auditor and trends in the   nonaudit fees in accordance with the committee’s policy     to ensure the safeguard of audit independence     • the coordination of the internal and external audit functions
  • the arrangements in respect of group assurance including its   resourcing external support the scope of the annual internal     audit plan for fy 2014 regarding the level of achievement and     the scope of the internal audit plan for fy 2015
  • periodic internal control and assurance reports from     group assurance
  • the group’s risk management framework for the identification     and control of major risks its risk and assurance mitigation plan     and the annual assessment of control effectiveness
  • compliance with the company’s code of ethics
  • corporate  governance  developments
  • the status of material litigation involving the group and
  • reports on allegations made via the group’s whistleblowing   procedures and the effectiveness of these procedures including     a summary of reports received during fy 2014
disclosure of significant issues considered 
the audit committee has reviewed the key judgements applied in the   preparation of the consolidated financial statements which are described   in the relevant accounting policies and detailed notes to the financial   statements on pages 75 to 103 the audit committee’s review included   consideration of the following key accounting judgements
  • orchid acquisition accounting – key judgement areas and their   impact on the financial statements
  • property plant and equipment valuation – applying a consistent   valuation  methodology    • pension deficit – valuation of the defined benefit pension scheme     • taxation – tax accounting remains an area of focus in particular   accounting for deferred tax on the property estate
effectiveness of internal audit 
the audit committee is responsible for monitoring and reviewing     the effectiveness of the company’s internal audit function the audit   committee meets regularly with management and with the director of   group assurance  risk management and the auditor to review the   effectiveness of internal controls and risk management and receives   reports from the director of group assurance  risk management     on a quarterly basis   the annual internal audit plan is approved by the audit committee     and kept under review on a monthly basis by the director of group   assurance  risk management in order to reflect the changing   business needs and to ensure new and emerging risks are considered   the audit committee is informed of any amendments made to the   audit plan on a quarterly basis the fy 2014 internal audit plan was   developed through a review of formal risk assessments in conjunction   with the risk committee and the group’s executive committee   together with consideration of the group’s key business processes     and functions that could be subject to audit a similar approach has   been employed in relation to the fy 2015 internal audit plan
the principal objectives of the internal audit plan for fy 2014 were     and remain for fy 2015
  • to provide confidence that existing and emerging key risks are being   managed  effectively
  • to confirm that controls over core business functions and processes   are operating as intended ‘core assurance’ and
  • to confirm that major projects and significant business change   programmes are being adequately controlled
during fy 2014 21 audit reports were issued by the group assurance   function and reviewed by the board or the audit committee internal   audit recommendations are closely monitored through to closure via     a webbased recommendation tracking system introduced in fy     2013 which has improved the overall monitoring of internal audit   recommendations to ensure these are successfully implemented in     a timely manner a summary of the status of the implementation of   internal audit recommendations is made monthly to the executive   committee and quarterly to the audit committee
risk management framework
as disclosed in the ‘risk and uncertainties’ section on pages 18 to 21     the risk committee continues to meet on a regular basis to review the   key risks facing the business the risk committee met on three occasions   in fy 2014 membership of the risk committee which includes   representation from each of the key business functions is detailed below
  • company secretary and general counsel chairman
  • group finance director
  • group hr and operations director
  • director of business change  technology
  • director of group assurance  risk management
key risks identified are reviewed and assessed on a quarterly basis in   terms of their likelihood and impact within the group’s ‘key risk heat   map’ in conjunction with associated risk mitigation plans in addition     the risk committee’s review includes an assessment of the material   relevance of emerging risks and the continued relevance of previously   identified risks actions arising from risk committee meetings are   followed up by the director of group assurance  risk management   the audit committee reviews the risk committee minutes in addition     to a review of the group’s ‘key risk heat map’ quarterly   confidential reporting 
the group’s whistleblowing policy enables staff in confidence to raise   concerns about possible improprieties in financial and other matters   and to do so without fear of reprisal details of the policy are set out     in the company’s code of ethics the audit committee receives   quarterly reports on whistleblowing incidents and remains satisfied     that the procedures in place are satisfactory to enable independent   investigation and followup action of all matters reported no major   issues have been reported in fy 2014 major issues being defined for   this purpose as matters having a financial impact greater than £100k   mitchells  butlers plc  annual report and accounts 2014 49
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 external auditor appointment
deloitte llp was appointed as the auditor in 2011 following a     formal tender process the audit committee has considered the new   guidance in relation to rotation including the proposed transition rules   which will be considered when recommending the appointment of     the auditor in future years the audit committee considers that the   relationship with the auditor is working well and is satisfied with its   effectiveness and has not considered it necessary to require deloitte   llp to retender for the external audit work there are no contractual   obligations restricting the company’s choice of auditor following its   appointment as auditor deloitte llp was replaced in respect of the   provision of internal audit services by pricewaterhousecoopers llp 
external auditor’s independence
the external auditor should not provide nonaudit services where     it might impair their independence or objectivity to do so the audit   committee has established a policy to safeguard the independence   and objectivity of the group’s auditor as follows
  the following services have been preapproved by the audit   committee provided that the fee for the individual project is less than   50 of the audit fee and in total for the year is less than the audit fee
  • auditrelated services including work related to the annual group   financial statements subsidiary audits and statutory accounts and
  • certain specified  tax  services  including  tax  compliance  tax  planning   and tax advice
acquisition and vendor duediligence may only be provided if it is   specifically approved  by  the  committee  on  a  casebycase  basis  in  advance   of the engagement commencing any other work for which management   wishes to utilise the external auditor must be approved as follows
  • services with fees less than £50000 may be approved by the     finance director and
  • engagements with fees over £50000 may be approved     by the audit committee or its chair
the audit committee remains confident that the objectivity and   independence of the auditor are not in any way impaired by reason     of the nonaudit services which they provide to the group   external audit annual assessment 
the audit committee assesses annually the qualification expertise   resources and independence of the group’s auditor and the overall   effectiveness of the audit process the finance director company   secretary and general counsel audit committee chairman and   director of group assurance  risk management meet with the   auditor to discuss the audit and any key issues included on the     audit committee’s agenda during the year
fair balanced and understandable statement 
one of the key governance requirements of a group’s financial   statements is for the report and accounts to be fair balanced and   understandable therefore upon review of the financial statements   the audit committee and the board are satisfied with the overall   fairness balance and clarity of the annual report which is   underpinned by the following
  • formal minutes of the year end working group
  • clear guidance issued to all contributors to ensure a consistent   approach  and    • formal review processes at all levels to ensure the annual report     is factually correct
approved by the board
colin rutherford 
chairman	of	the	audit	committee
24 november 2014
statement from the committee chair
dear shareholder
i am pleased to present the directors’ remuneration report in respect   of the financial year which ended on 27 september 2014
financial year 2014
over the past year we have continued to make progress in providing   a strong platform for future growth in particular we have focused on   improving sales through sustainable volume growth accelerating   our remodel programme where we are seeing good financial returns   increasing investment in training and rolling out new it systems that   help our general managers run their businesses more effectively   the acquisition of 173 pubs from orchid was completed during the   year and our plans to successfully integrate this estate are on track   and will further enhance our growth prospects the improvement   we have seen in food and drink volumes has not yet translated into     a sustained improvement in cash sales which also reflects the   competitive market place and ongoing consumer caution
in relation to the fy 2014 bonus scheme the committee believes     that bonus should only be earned for achievement against stretching   targets despite a number of yearonyear improvements the   threshold eps performance required to trigger a payment in the     2014 incentive plan has not been met and therefore no annual bonus   awards have been made to the chief executive or finance director   during the  year  an  award  was  made  under  the  terms  of  the  performance   restricted share plan ‘prsp’ in respect of the 2014 to 2016   performance period and full details are set out on pages 61 and 62
in july 2013 the remuneration committee was reestablished and     in my statement last year i confirmed that the committee would be   undertaking a review of our remuneration policy in addition we     also took the opportunity to conduct a review of advisers to the   committee and in march 2014 appointed new bridge street ‘nbs’   as our advisers over the past six months the committee has   focused primarily on the review of policy and the changes we     are proposing are summarised overleaf
mitchells  butlers plc  annual report and accounts 2014 50
report on directors’ remuneration audit committee report
continued approach for 2015
our review of remuneration policy has considered all aspects of   remuneration and how each best supports the future success of   mitchells  butlers
  • base pay should reflect personal contribution experience and   competence as well as market conditions increases will normally     be in line with those applicable to the wider workforce     • the overall potential maximum earnings opportunity from both     the annual and longterm incentive arrangements and the current   incentive opportunity for our directors will remain as current   although some changes to the structure of each plan are proposed
  • the current annual bonus plans ‘stdip’ individual limit is 200     of base salary the stdip may comprise any combination of cash   deferred shares and matching shares save that no more than 100   of any bonus is paid in cash the policy will be amended to remove   the ability to use the matching shares and also to reduce the   maximum earnings limit from 200 to 150 of base salary the   remaining 50 will be transferred to the longterm incentive plan   ‘prsp’ resulting in a maximum limit of 250 of salary which will   require an amendment to the plan rules and therefore approval     at the 2015 agm the aggregate maximum limits will remain     at 400 of salary
  • notwithstanding a maximum combined limit of 400 of salary     the current normal annual bonus and longterm incentive plan   maximum levels will continue to be 100 and 200 of base salary   respectively and it is intended that the new 250 prsp maximum   would only be used in exceptional circumstances and should the   committee wish to extend the ‘normal’ maximum award limit to this   level on a permanent basis leading investors would be consulted     in summary there is no change in the aggregate incentive quantum   or to the current ‘normal’ incentive limits for our current directors
  • the committee has also considered the performance measures used   in the annual plan and for 2015 it is proposed that 75 of the bonus   opportunity will be measured against the achievement of profit   before tax ‘pbt’ targets the remaining 25 will be measured   against the achievement of our key guest satisfaction measure     net promoter score ‘nps’ the committee believes that pbt is     a good measure of operational performance and that the delivery     of outstanding guest service as measured by nps is a key lead   indicator of future sales performance there will be no payout     on the nps element if profit is below a predetermined threshold     for fy 2015 this being 95 of target pbt
  • the prsp performance condition will continue to have two   elements relative total shareholder return ‘tsr’ and adjusted   earnings per share ‘eps’ with each accounting for 50 of the   award the committee has given careful consideration to the   structure of the group of companies on which the tsr measure is   based and for the 2015 to 2017 award to be made in november   2014 the comparator group will comprise companies in the ftse     all share travel and leisure index the committee believes this   wider group is more robust than the current comparator group of   only nine companies and that performance against this group of   over 30 companies reflects performance relative to companies     who compete for the same leisure spend     • in line with best practice and the latest changes to the uk corporate   governance code the rules of our incentive plans both annual     and longterm will be amended to include clawback and malus   clauses our remuneration policy also outlines under what   circumstances the committee may use discretion in relation     to both incentive plans and when such discretions will be subject     to consultation with major shareholders
  • the shareholding guidelines for executive directors have also   been reviewed and the chief executive will now be expected     to own shares with a value equal to at least 150 of base salary   the shareholding requirement for the finance director remains     at 100 of salary     • the committee has also considered the base pay of the   executive directors and has determined that a 15 increase     in base salary should apply in 2015 this increase is less than     that which has been applied to the wider workforce     • the chairman’s fee has not increased since bob ivell was   appointed in 2011 the committee has reviewed mr ivell’s fee   and decided that it should increase by £10000 to £285000 pa   with effect from 1 january 2015     • the base fees applicable to nonexecutive directors have     not increased since january 2011 and following a review     they will increase by £2000 to £52000 pa with effect from     1 january 2015
the format of this year’s report reflects the requirements of the new   regulations governing the disclosure and approval of directors’   remuneration the policy report will for the first time be put   forward for a binding vote and the annual report on remuneration   will be subject to an advisory vote at the agm on 29 january 2015     a separate resolution approving the amendment to the prsp   individual limit will also be subject to a vote
the committee is committed to maintaining an open and   constructive dialogue with our shareholders on remuneration   matters we consulted shareholders and advisory bodies on the   proposed changes to remuneration set out above and they were   broadly supportive of our proposals and in particular the removal     of the matching shares element of the annual plan and increase in   the shareholding guideline for the chief executive if you have any   comments or questions on any element of the report please email   me care of craig provett director of compensation  benefits     at remcombplccom
imelda walsh
chair	of	the	remuneration	committee
24 november 2014
mitchells  butlers plc  annual report and accounts 2014 51
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112
report on directors’ remuneration policy table
the table below summarises each element of the remuneration policy applicable to executive directors   purpose and  
link to strategy operation opportunity performance metrics
recovery or  
withholding
base salary
provides a sound basis   on which to attract   and retain executives   of  appropriate    calibre to deliver the   strategic  objectives    of the group
to reflect the market   value of the role   personal  contribution  experience  and  competence
salaries are normally subject to     annual review   salary levels may be influenced by
  •  role experience or performance
  • group profitability and prevailing   market conditions and
  •  periodic external benchmarking of   similar roles at comparable companies   by size and sector
any increase is normally effective from   1 january
payable in cash fourweekly throughout   the year pensionable
normally set broadly around midmarket   levels with increases in line with that     of the company’s uk workforce   percentage increases beyond those   granted to the wider workforce may be   awarded in certain circumstances such as   when there is a change in the individual’s   role or responsibility or where there has   been a fundamental change in the scale     or nature of the company
in addition a higher increase may     be made where an individual had     been appointed to a new role at below   market salary while gaining experience   subsequent demonstration of strong   performance may result in a salary   increase that is higher than for the     wider workforce   there may also be circumstances where   the committee agrees to pay above   midmarket levels to secure or retain     an individual who is considered in the   judgement of the committee to possess   significant and relevant experience which   is required to enable the delivery of the   company’s  strategy
salaries  effective  from  1  january  2015  are
chief executive – £543500
finance director – £426500
executive directors’ performance is a factor   considered when determining salaries   performance is reviewed in line with the   established performance review process     in place across the group
no recovery     or withholding   applies
this report has been prepared on behalf of the board and has     been approved by the board the report has been prepared in   accordance with the companies act disclosure regulations the     large and mediumsized companies and groups accounts and   reports amendment regulations 2013 ‘the regulations’
policy	report
this section of the report sets out the company’s remuneration policy   and subject to approval will take effect from 29 january 2015 the date   of the agm
the committee is constituted in accordance with the recommendations   of the uk corporate governance code the ‘code’ the full terms     of reference of the committee are available on our website     wwwmbplccominvestorsbusinessconductboardcommittees    and on request the committee’s responsibilities include
  • making recommendations to the board on the company’s   remuneration policy for executive directors and senior executives   giving full consideration to the code and setting the remuneration   for executive directors and the chairman including pension rights   and compensation payments     • taking account of all factors necessary when determining the policy   the objective of which shall be to ensure remuneration policy   promotes the longterm success of the company without paying   more than is necessary and
  • aligning executive directors’ interests with those of shareholders     by providing the potential to earn significant rewards where   significant shareholder value has been delivered   the committee is mindful of a broad range of stakeholders in the     business and accordingly takes account of a range of factors when setting   remuneration policy including market conditions pay and benefits in   relevant comparator organisations terms and conditions of employment   across the group the company’s risk appetite and shareholder feedback   the committee considers a broad range of internal and external   information in determining policy this includes a review of external   benchmarking information when reviewing executive directors’ base     pay and as required on appointment of a new executive director or other   executive committee member while market data is provided to the   committee by its independently appointed advisers such data provides   the context for setting pay levels and the committee does not consider     it in isolation
  the remuneration policy for executive directors set out over the   following pages supports the business needs of the company ensuring     it promotes the longterm success of the business whilst enabling the   company to attract retain and motivate senior executives of a high   calibre the committee is satisfied that the remuneration policy supports   the company’s business strategy of growing longterm shareholder value   and appropriately balances fixed and variable remuneration with a high   proportion of reward delivered in the form of equity this ensures that   executives have strong alignment with shareholders through the   company’s share price
for clarity of reporting references to the sharesave plan ‘sharesave’   share incentive plan ‘sip’ performance restricted share plan ‘prsp’   and short term deferred incentive plan ‘stdip’ refer both to share   awards under these original schemes and following the expiry of these   schemes for grant purposes subsequent awards under their respective   replacement schemes on substantially the same terms both the original   schemes and their replacements in 2013 were approved by shareholders     mitchells  butlers plc  annual report and accounts 2014 52
report on directors’ remuneration
continued purpose and  
link to strategy operation opportunity performance metrics
recovery or  
withholding
annual performance bonus cash and shares
provides a direct     link between the   achievement of annual   business  performance  targets  and  reward
deferred bonus   awarded in shares   provides a retention   element and additional   alignment of interests   to shareholders
bonus payment level is determined by the   committee by reference to performance   against the targets set by the committee   prior to the commencement of the   performance year the cash element of     the bonus is normally payable in december   following the end of the financial year   up to half of any bonus award is payable     in cash at least half of any bonus award     is deferred as shares under the terms of     the stdip below   key terms of the stdip are
  • deferred bonus share awards are   normally released in two equal amounts   12 and 24 months after deferral
  • at the discretion of the committee   dividends paid between grant and   vesting may accrue on vested shares   nonpensionable
currently the normal maximum payment   is 100 of base salary
at the discretion of the committee     the maximum earnings potential may     be increased in line with the plan rules     up to 150 of base salary
at least 75 of bonus will be based on   financial measures this may be a single   measure or a mix of metrics as determined   by the committee
no more than 25 will be based on   nonfinancial measures or personal     business  objectives  payment of nonfinancial measures may be   subject to a financial performance threshold
up to 50 of bonus may be earned for   achieving a demanding target with full   payout for achieving a second more   demanding  target
the nature of the performance measures   and the targets are reviewed in advance     of each new award   the committee has the discretion to vary   the mix of measures or to introduce new   measures to reflect business need   as the bonus is subject to performance   conditions any deferred bonus is not   subject to further conditions
the committee may alter the bonus   outcome if it considers that the payout is   inconsistent with the company’s overall   performance taking account of any factors     it considers relevant this will help ensure   that payouts reflect overall company   performance during the period the   committee will consult with leading   investors  before  any  exercise  of  its  discretion  to increase the bonus outcome
clawback and   malus will apply   to the cash bonus   and deferred   shares where   there has been     a misstatement     of the accounts   or other data     or a serious   misdemeanour    or serious   misconduct by   the  participant  has occurred   prior to payment   or vesting or   within two years   of payment or   vesting of shares
performance restricted share plan ‘prsp’
to incentivise     delivery of sustained   growth through   superior  longterm  performance    provide an element     of retention and   increase alignment   with shareholders
discretionary annual award of nominal     cost  options  vested options are exercisable immediately   following confirmation of performance
at the discretion of the committee vested   options attract dividend accrued shares   between award and vesting
under the rules of the prsp  conditional   share awards may also be granted     although there is currently no plan     to grant such awards
nonpensionable
the normal maximum annual award     of nominal cost options is 200 of     base salary
subject to approval of the revised prsp   at the january 2015 agm the maximum   award may be increased in line with the   plan rules to 250 of base salary any   increase to the normal maximum award   of 200 of base salary other than in   exceptional circumstances such as   recruitment would also be subject to   prior consultation with leading investors   performance condition is measured     over three financial years
the current performance condition     includes eps growth and total shareholder   return tsr relative to a peer group of   comparator  companies
for each element 25 of the award will vest   for threshold performance 100 of the   award will vest for maximum performance   straight line vesting applies between   threshold and maximum
the committee has the flexibility to vary     the mix of measures or to introduce new   measures the committee will consult     with leading investors before implementing   any change   the committee may alter the vesting   outcome if it considers that the level of   vesting is inconsistent with the company’s   overall performance taking account of     any factors it considers relevant this will   help ensure that vesting reflects overall     company performance during the period   the committee will consult with leading   investors  before  any  exercise  of  its  discretion  to increase the vesting outcome
clawback and   malus applies on   the same basis as   the annual  bonus
allemployee share plans
to underpin the   employee  engagement  strategy and   encourage  employees  to have a financial   stake in the future of   the company
all eligible employees including the   executive directors can participate in     the hm revenue  customs ‘hmrc’   approved sharesave and sip 
sharesave all eligible employees can save   over a three or five year maturity period   proceeds from the savings contract may be   used to acquire shares in the company at     an option price fixed at the date of invitation   sip all eligible employees are invited to   participate a free share award is made   annually free shares are typically held in   trust for at least three years in addition   eligible employees may purchase from their   gross pay partnership shares partnership 
shares are held in trust and can be released   at any time income tax and national   insurance contributions are normally   payable on the value of shares released   within five years of purchase   the committee has discretion under the     sip rules to operate matching shares  and   dividend shares elements although there   is currently no plan to do so   sharesave maximum savings up to   hmrc limits currently £500 per month   over a three or five year maturity period
sip maximum free share award up to   hmrc limit currently £3600 per tax   year partnership shares up to hmrc   limit currently with an initial value of     up to £1800 per tax year
sharesave no performance metrics apply
sip no performance metrics apply
sharesave  
no recovery     or withholding   applies
sip no recovery   or withholding   applies
mitchells  butlers plc  annual report and accounts 2014 53
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 purpose and  
link to strategy operation opportunity performance metrics
recovery or  
withholding
pension or cash allowance
to provide a   marketaligned  retirement  benefit
payment into a company pension personal   individual pension andor a cash allowance   in lieu of company pension contributions   once statutory limits fixed protection     and annual allowance are reached     or a combination of both
see pages 60 and 61 for further detail     on pension where the annual allowance     or fixed protection apply   the company contribution is a maximum   of 20 of base salary
no performance metrics apply no recovery     or withholding   applies
other benefits
to provide   marketaligned  benefits
benefits include but are not limited to   private healthcare life assurance annual   health check employee assistance   programme use of a company vehicle     or cash equivalent and discounts on food   and associated drinks purchased in our   businesses private healthcare is provided   for the executive spouse or partner and   dependent  children
discount vouchers are provided on     the same basis to all employees and     can be redeemed in any of our managed   businesses provided the purchase is     a personal not a business expense
relocation or the temporary provision of   accommodation may be offered where the   company requires a director to relocate   expatriate allowances may be offered   where required travel and if relevant   related expenses such as accommodation   may be reimbursed on a gross of tax basis
executive directors may become eligible   for any new benefits introduced to a wider   set of other group employees
in line with market practice the value     of benefits may vary from year to year   depending on the cost to the company   from thirdparty suppliers   no performance metrics apply no recovery     or withholding   applies  other  than  if relocation costs   were  provided    a proportion of   any  relocation  costs may be   recovered  where  a director leaves   the  employment  of the group   within two years   of  appointment  or date of   relocation
shareholding policy
to align the interests     of the executive   directors with   shareholders and   promote a longterm   approach to risk   management
the chief executive is required to hold   mitchells  butlers’ shares to the value of     a minimum of 150 of base salary other   executive directors are required to hold   mitchells  butlers’ shares to the value     of a minimum of 100 of base salary   except for those sold to cover the   acquisition cost together with the   associated income tax and national   insurance  contributions  executive  directors will normally be required to     retain shares arising from share schemes   until the minimum level of ownership   required has been achieved
it is expected that the guideline will   normally be achieved within five years     of appointment to the board in the case     of the current chief executive the 50 of   salary increase to his guideline from 100   of salary prior to the approval of this policy   is expected to be achieved within five years   of the effective date of this new policy   only shares owned outright by the   executive director or a connected person   are included shares or share options which   are subject to a performance condition are   not included deferred shares and options   which are vested but unexercised are also   not  included
the value of the shareholding will be the   number of shares owned multiplied by the   average share price over the previous three   months up to the date of valuation
na na na
mitchells  butlers plc  annual report and accounts 2014 54
report on directors’ remuneration
continued notes to the policy table 
table 1 summarises the reasons behind the selection of the performance metrics and sets out the categories of employee other than executive   directors who are eligible to participate in each scheme table 2 compares the remuneration and benefits received by executive directors with   that received by other group employees
table 1
element notes
annual performance 
bonus 
the main emphasis of the annual plan is to reward management for the achievement of financial targets such as profit growth which is a key indicator     of the company’s performance   nonfinancial measures are intended to measure whether management are delivering against key lead performance indicators   targets are determined annually by the committee
all salaried employees participate in a bonus scheme save for certain operational and operational support roles where some or all of the annual bonus   relates directly to the performance of the business or area for which the participant is responsible a common annual bonus target applies across all   participating  employees
retail staff do not participate in any bonus scheme
prsp around 60 senior employees including executive directors and members of the executive committee participate in the prsp  no longterm incentive     plans apply for any other employees
measures for executive directors include
  • eps growth which is a measure of overall profitability of the business for investors over the long term and therefore is a fundamental element of     aligning shareholders’ interests with those of executives
  • relative tsr performance which provides a measure of longterm success of the company relative to an appropriate group of peer comparators   from 2015 onwards eps will be the only measure for participants below executive committee level   table 2
remuneration and benefits
provision of company  
car or cash alternative
a company car or cash alternative is provided only where it is determined that there is a commercial requirement or business need to do so
private healthcare the majority of employees entitled to receive private healthcare do so on an employee only basis private healthcare is not provided to assistant   management appointed on or after 30 september 2012 or to retail staff
health check a company funded health check is available on request to senior and middle management retail support employees other salaried employees have   access to online health and wellbeing support through the company’s employee assistance programme ’eap’   employee assistance 
programme 
the eap is available to all salaried employees and provides employees with confidential health and wellbeing help and support the eap is not available     to retail staff
pension the company contribution to the dc choice pension plan is between 45 and 15 of base salary assistant management and retail staff employees     who are not eligible for the dc choice pension receive a company contribution of either 1x the member contribution up to 3 of qualifying earnings   assistant management scheme or the statutory minimum automatic enrolment scheme
life assurance assistant management and retail staff employees who are not eligible to join the dc choice pension plan do not have life assurance
relocation relocation may be made available to retail support centre employees where the company requires an employee to relocate for business purposes   relocation is not normally provided to retail management or retail staff
discount vouchers the discount voucher scheme is approved by hmrc as the amount payable by the employee after application of the discount exceeds the cost of     goods the scheme is not considered to be a benefit in kind for tax purposes
other benefits other benefits such as childcare vouchers bike to work and private dental cover are not listed above as a taxable benefit to the executive directors     where an executive director participates he does so at his own cost as the benefit is administered by but not funded by the company nicwise     a national insurance efficient way for a member to make contributions to the pension plan is provided at no cost to the employee or company     the range of benefits offered to executive directors is offered to all senior management employees of the group
shareholding policy the shareholding policy is only in place for executive directors
  as defined by legislation
legacy arrangements
for the avoidance of doubt in approving the policy report authority is given to the company to honour any commitments entered into with   current or former directors before the current legislation on remuneration policies came into force or before an individual became a director such   as the payment outstanding on incentive awards even where it is not consistent with the policy prevailing at the time such commitment is fulfilled
incentive plan discretions
the committee will operate the incentive plans described in the policy table according to their respective rules the policy set out above and in   accordance with the listing rules applicable legislation and hmrc guidance where relevant the committee consistent with market practice retains   discretion over a number of areas relating to the operation and administration of these plans these include but are not limited to the following
  • who participates in the plans
  • the timing of grant of award andor payment
  • the size of an award andor a payment subject to policy limits
  • the choice of and adjustment of performance measures and targets for each incentive plan in accordance with the policy set out above     and the rules of each plan
  • discretion relating to the measurement of performance in the event of a change of control or reconstruction
  • determination of a good leaver in addition to any specified categories for incentive plan purposes based on the rules of each plan and     the appropriate treatment under the plan rules and
  • adjustments required in certain circumstances eg rights issues corporate restructuring on a change of control and special dividends
any use of the above discretions would where relevant be explained in the annual report on remuneration and may as appropriate     be the subject of consultation with the company’s major shareholders
mitchells  butlers plc  annual report and accounts 2014 55
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 chief executive
£000
finance director
£000
minimum
657
 100 548 287
 226
 226
 238
 475
ontarget
1201
maximum
2288
0
500
1000
1500
2000
2500
minimum
519
 100 589 336
 242
 169
 277
 387
ontarget
881
maximum
1542
0
500
1000
1500
2000
2500
fixed pay shortterm incentives longterm incentives fixed pay shortterm incentives longterm incentives
chairman and nonexecutive director fees
the table below summarises each element of the remuneration policy applicable to nonexecutive directors
purpose and  
link to strategy operation opportunity
performance  
metrics
recovery or  
withholding
fees
to attract and retain   nonexecutive directors   of appropriate calibre     and experience
payable in cash fourweekly throughout the year
fees are normally reviewed annually with any increase usually taking effect   from 1 january each year
the chairman’s fee is reviewed annually by the committee without the   chairman present
remuneration policy for the nonexecutive directors is determined by     the company chairman and executive directors by reference to companies     of similar size and sector as well as time commitment and responsibilities   nonexecutive directors receive a base fee and an additional fee for chairing     a committee details are set out on page 60
travel accommodation and other related expenses incurred in carrying out     the role will be paid by the company including if relevant any gross up for tax
where a non
executive director   undertakes additional   responsibilities  other  than the chairing of a   committee  additional  fees may be set     eg for a senior   independent director
no performance     metrics apply
no recovery or   withholding applies
nonexecutive directors do not participate in the company’s bonus arrangements share schemes benefit schemes other than the allemployee   discount voucher scheme or pension plans
illustrations of application of remuneration policy
a key principle of the group’s remuneration policy is that variable short and longterm reward should be linked to the financial performance     of the group the charts below show the composition of each executive director’s remuneration at minimum ontarget and maximum   performance for fy 2015
the performance scenarios demonstrate the proportion of maximum remuneration which would be payable in respect of each remuneration   element at each of the performance levels in developing these scenarios the following assumptions have been made
minimum
only the fixed elements of remuneration are payable the fixed element consists of base salary benefits and pension base salary is the salary   effective at 1 january 2015 benefits are as detailed in the directors’ remuneration table on page 60 pension is the cash allowance andor   company pension contribution payable in respect of base salary     ontarget
in addition to the minimum this reflects the amount payable for ontarget performance under the short and longterm incentive plans being
  • 50 of base salary is payable under the shortterm incentive plan and     • 25 of the award 50 of base salary for the ceo and 35 of base salary for the finance director vests under the longterm incentive plan
maximum
in addition to the minimum maximum payment is achieved under both the short and longterm incentive plans such that     • 100 of base salary is payable under the shortterm incentive plan and     • 200 of base salary for the ceo and 140 for the finance director vests under the longterm incentive plan
mitchells  butlers plc  annual report and accounts 2014 56
report on directors’ remuneration
continued a breakdown of the elements included in the application of remuneration policy to the remuneration charts is shown in the table below
fixed £000 shortterm plan £000 longterm plan £000
base pay benefits pension total fixed ontarget maximum ontarget maximum
chief executive 5435 180 955 6570 2718 5435 2718 10870
finance director 4265 170 750 5185 2133 4265 1493 597 1
note the value received under the shortterm plan is the gross value of awards before 50 is deferred into shares the values received under the shortterm plan and longterm   incentive plan do not take into account dividend accrued shares that are payable on the vesting of awards nor any changes in share price
service contracts
executive directors’ contracts
the table below summarises key elements of the service contracts applicable to executive directors
notice period   • executive directors are employed under service contracts that may be terminated by the company at any time on one year’s notice
  • any payment made in lieu of notice would comprise base salary only
a
 and may be payable in instalments in line with the established salary payment dates until     the expiry of the notice period or if earlier the date on which alternative employment or other engagement is secured with the same or higher base salary if   employment is secured at a lower rate of base salary subsequent instalments of the payment in lieu of notice shall be reduced by the value of alternative income
  • service contracts contain a provision enabling the company to put the executive director on garden leave after notice to terminate the service contract has been   given by either party during this period the executive will be entitled to base salary only
a
  termination   • if an executive director’s employment with the group ends during the financial year normally any entitlement to bonus for that year is forfeited however     if the individual leaves by reason of illhealth injury disability retirement redundancy death or sale of his employing business or company or if the committee     so decides in any other case at the committee’s discretion the executive director may receive a bonus prorated to time employed in the year or to such later     date as the committee may decide the committee may decide at its discretion to pay the bonus all in cash
  • if an executive director ceases employment following the end of the financial year but before payment of the bonus in respect of that year there is no entitlement   to a bonus but the committee may at its discretion pay a bonus for that year any such bonus at the committee’s discretion may be all in cash     • if an executive director ceases employment prior to the release of bonus award shares under the stdip for the same specified good leaver reasons as set out   above the committee at its discretion may release the bonus award shares and associated dividend accrued shares at the date of termination otherwise     the shares will be released on the normal release date if the director leaves for any other reason his entitlement to bonus award shares and associated dividend   accrued shares is forfeited unless the committee decides otherwise
  • if an executive director dies before an award under the prsp has vested vesting of the award and associated dividend accrued shares will occur as soon as   practicable based on performance and on a time prorated basis
  • if the executive director ceases employment for the same defined good leaver reasons as are specified above the award and associated dividend accrued   shares will vest following the end of the normal performance period and on a time prorated basis if employment ceases for any other reason the award will   normally lapse unless the committee decides otherwise except that if employment ceases by reason of gross misconduct the award and associated dividend   accrued shares must lapse
  • the committee has no discretion in relation to shares or options held under the allemployee share plans sip and sharesave on termination these will vest   become exercisable or lapse in accordance with the legislation governing tax favoured plans
a    this arrangement applies to alistair darby any payments in lieu of notice in respect of tim jones whose appointment and service contract predates 27 june 2012 the relevant date   for the purposes of the regulations and does not fall within the current policy will comprise base salary and contractual benefits only
in the event that the company terminates an executive director’s service contract other than in accordance with the terms of his contract the   committee will act in the best interests of the company and ensure there is no reward for failure when determining what compensation if any     is to be paid to the departing executive director the committee will give full consideration to the circumstances of the termination the executive   director’s performance the terms of the service contract relating to notice and payments in lieu of notice and the obligation of that executive director   to mitigate any loss which he may suffer as a result   although the company would seek to minimise termination costs the committee may in appropriate circumstances provide other elements in a   leaving director’s termination package including without limitation compensation for the waiver of statutory rights in exchange for the director   executing a settlement agreement payment of the leaving director’s legal fees in connection with his termination arrangements and payment of   outplacement fees in addition the committee may determine that the director should continue to be engaged by the company on consultancy     or other terms following cessation of his directorship
details of the service contracts of executive directors who served during fy 2014 are set out below
director contract start date unexpired term
notice period
from company
minimum notice  
period from director
compensation on  
change of control
alistair darby 081012 indefinite 12 months 6 months no
tim jones 181010
a
indefinite 12 months 6 months no
a  tim jones’ service contact predates the current regulations
executive directors may accept one external nonexecutive appointment with the company’s prior approval as long as this is not likely to lead to conflicts   of interest fees received may be retained by the executive director no such nonexecutive appointments have applied in the year to 27 september   2014 on 30 october 2014 tim jones was appointed as an independent nonexecutive director and chairman of the audit and risk committee of   poundland group plc
mitchells  butlers plc  annual report and accounts 2014 57
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 nonexecutive directors
nonexecutive directors including the company chairman do     not have service contracts but serve under letters of appointment   which provide that they are initially appointed until the next agm     when they are required to stand for election in line with the     company’s articles all directors including nonexecutive directors   will stand for reelection at the 2015 agm this is also in line with     the recommendations set out in paragraph b7 1 of the code     nonexecutive directors’ appointments are terminable without     notice and with no entitlement to compensation payment of fees will   cease immediately on termination the dates of appointment of the     nonexecutive directors to the committee are set out on page 59
douglas mcmahon and ron robson were appointed to the board   pursuant to the terms of the piedmont deed of appointment information   on which is set out on page 38   copies of both the individual letters of appointment for nonexecutive   directors and the service contracts for executive directors are   available at the registered office of the company during normal   business hours and on our website copies will also be available     to shareholders to view at the 2015 agm
recruitment of executive directors
where it is necessary to appoint a replacement or additional executive   director the committee will set a base salary appropriate to the   experience and responsibilities of the new appointee and in line     with our policy set out on page 52
the maximum level of variable pay is 400 of base salary 150 in   relation to annual cash bonusstdip and 250 in relation to the prsp   depending on the timing and responsibilities of the appointment it     may be necessary to set different annual bonusstdip performance   measures and targets as applicable to other executive directors
benefits including pension company vehicle or cash allowance   healthcare life assurance health check and where applicable   relocation assistance would be consistent with the principles     of the policy as set out on page 54
for an internal appointment his or her existing pension arrangements   may continue  to  operate  which  may  include  participation  as  an  employee   deferred member in the defined benefit plan which is closed to future   accrual and any existing awards would continue over their original   vesting period and remain subject to their terms as at the date of grant
in the event that a buyout award is necessary to secure the services     of an executive director then the structure of the award will mirror     as far as is possible the arrangements in place at the incoming   executive director’s previous employer and may include cash     andor an award of shares any share awards made outside of the   company’s existing plans may have no or different performance   conditions or a shorter vesting period compared to the company’s   existing plans shareholders will be informed of any buyout   arrangements at the time of the executive director’s appointment   recruitment of nonexecutive directors
chairman 
the committee will recommend to the board a fee appropriate to the   experience and responsibilities of the new appointee
other nonexecutive directors
the fee will be set in line with the fee structure for nonexecutive   directors in place at the date of appointment
consideration of employment conditions elsewhere in the group
the committee is regularly updated throughout the year on pay and   conditions applying to group employees where significant changes   are proposed to employment conditions elsewhere in the group these   are highlighted for the attention of the committee at an early stage     the committee is informed of the base pay review budget applicable     to other employees and is cognisant of changes to the national   minimum wage when considering the pay of executive directors
employees are not specifically consulted on executive remuneration   all employees are however invited to take part in our annual your say   employee engagement survey in which they have an opportunity to   provide anonymous feedback on a wide range of topics of interest or   concern to them the results of the survey are reviewed by the board   any significant concerns over remuneration would be considered   separately by the committee in meeting and if appropriate taken     into account when determining the remuneration policy
consideration of shareholder views
following the review of our remuneration policy in 2014 major   shareholders and investor groups were consulted on the changes     to policy the consultation took the form of a detailed letter from the   committee chair outlining the proposed changes shareholders and   their representative bodies will continue to be consulted where material   changes to the executive directors’ remuneration policy are being   considered we remain committed to shareholder dialogue and take     an active interest in voting outcomes we consult extensively with     our major shareholders when setting our remuneration policy if there   are any particular shareholders opposed to our policy we would   endeavour to meet with them as appropriate to understand any     issues they may have
mitchells  butlers plc  annual report and accounts 2014 58
report on directors’ remuneration
continued annual	report
this section details the remuneration of the executive and     nonexecutive directors including the chairman for the financial     year ended 27 september 2014 the report will be subject to     an advisory vote at the agm on 29 january 2015
committee membership and operation
committee members were appointed on 11 july 2013 from that     date imelda walsh was appointed as committee chair committee   members are listed below
name
date of 
appointment name
date of 
appointment
imelda walsh chair 11 july 2013 bob ivell 11 july 2013
colin rutherford 11 july 2013 ron  robson 11 july 2013
stewart gilliland 11 july 2013 eddie irwin 11 july 2013
  independent nonexecutive directors
committee activity during the year
the committee met four times during the year and agenda items   included the following
november 2013
  • approval of 2013 bonus payments
  • release of the second tranche of the 2011 deferred bonus awards
  • review of executive directors’ salaries
  • update on directors’ shareholdings
  • review of directors’ expenses
  • review of advisers to the committee   march 2014
  • incentive arrangements for 2015 – first proposals
  • appointment of advisers to the committee
  • consideration of employment terms and conditions across the group     • review of directors’ remuneration reporting requirements
june 2014
  • executive  remuneration  trends
  • incentive arrangements for 2015 – updatedfinal proposals     • ltip arrangements for 2015 award
september 2014
  • 2014 directors’ remuneration report drafting
  • 2015 incentive scheme targets
  • chairman’s fee review
advice to the committee 
during the year a review of advisers was undertaken and new bridge   street ‘nbs’ a trading name of aon plc were appointed as advisers     to the committee in march 2014 since appointment nbs has   provided the committee with external advice on a wide range of issues   including short and longterm incentive plans salary benchmarking     for senior employees and general remuneration advice prior to the   appointment of nbs pricewaterhousecoopers ‘pwc’ provided   advice to the committee total fees payable in respect of remuneration   advice in the reporting year totalled £104963
1
 £94863 nbs and   £10100 pwc in addition during fy 2014 pwc undertook work in the   areas of internal audit project assurance and vat pwc also provides   pensions audit advice to the group’s pension scheme trustees   1  fees are shown net of vat 20 vat was paid on the advisers’ fees shown above
advice was also received from the company’s legal advisers   freshfields bruckhaus deringer llp  on the operation of the     company’s employee share schemes pension schemes and     on corporate governance matters   the committee is satisfied that the advice received from its advisers   was objective and independent   the committee determines the policy and individual remuneration   package for each executive director and the company chairman     in addition the committee makes recommendations to the board     on any new longterm incentive plans but such plans are approved     by the board as a whole and where necessary by shareholders     members of management including susan martindale the group     hr director and craig provett the director of compensation    benefits are invited to attend meetings on remuneration matters     where appropriate they are not present when matters affecting their   own remuneration arrangements are decided the company chairman   does not attend board or committee meetings when his remuneration   is under review alistair darby and tim jones were present at meetings   where the company’s share schemes long and shortterm incentive   arrangements and pension plan were discussed however each   declared an interest in the matters under review and did not participate   in the discussion
statement of voting at general meeting 
the committee is pleased that last year the remuneration report   received a 9987 shareholder vote in favour as set out below
votes 
cast
votes 
for
a

votes
against 
votes
withheld
b
349560691 349102726 9987 457965 013 2867296
a  the ‘for’ vote includes those giving the company chairman discretion
b    a vote withheld is not a vote in law and is not counted in the calculation of the votes   ‘for’ or ‘against’ the resolution
votes ‘for’ and ‘against’ are expressed as a percentage of votes cast   pay outcomes
the tables and related disclosures set out on pages 60 to 63 on   directors’ remuneration stdip  share options share incentive plan     and pension benefits have been audited by deloitte llp 
directors’ remuneration
the tables set out the single figure remuneration received by the   executive directors and the nonexecutive directors during the   reporting year details of performance under the annual bonus plan     are set out on page 61
mitchells  butlers plc  annual report and accounts 2014 59
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 executive directors
basic salaries
£000
taxable benefits
a
£000
shortterm 
incentives
b
£000
pension related 
benefits
c
£000
longterm 
incentives
£000
total 
remuneration
£000
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
alistair darby 531 513 18 14 – 365 93 90 – – 642 982
tim jones 417 408 17 17 – 290 75 76 – – 509 791
doug evans
d
– 87 – 5 – – – 17 – – – 109
sub total executive directors   948 1008 35 36 – 655 168 183  – – 1151   1882  nonexecutive directors
fees 
£000
taxable benefits
h
£000
shortterm 
incentives
b
£000
pension related 
benefits
c
£000
longterm 
incentives
£000
total 
remuneration
£000
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
bob ivell
e
274 319 6 5 – – – – – – 280 324
ron  robson 50 188 32 7 – – – – – – 82 195
stewart gilliland
f
50 18 1 1 – – – – – – 51 19
eddie irwin 50 50 – – – – – – – – 50 50
douglas e mcmahon 50 50 1 1 – – – – – – 51 51
colin rutherford
g
60 24 2 – – – – – – – 62 24
imelda walsh
g
60 24 1 1 – – – – – – 61 25
sub total nonexecutive   directors  594  673 43 15 – – – – – – 637 688
total executive directors and   nonexecutive  directors  1542 1681 78 51 – 655 168 183  – – 1788 2570
a    taxable benefits for the year comprised car allowance healthcare taxable expenses and the award of free shares under the allemployee sip as set out on page 62     the 2013 figure has been restated to include awards made under the sip £2997 in respect of tim jones
b    the shortterm incentives are granted in the form of an annual bonus 50 is paid in cash and the remainder is deferred into shares and is subject to the rules of the stdip      the deferred remuneration is not subject to a performance condition see page 53
c      includes supplements paid in lieu of contributions to the company scheme £93380 alistair darby and £59937 tim jones
d    doug evans left the employment of the group on 31 january 2013
e    bob ivell stepped down as executive chairman and resumed the role of nonexecutive chairman from 12 november 2012
f    stewart gilliland was appointed to the board on 23 may 2013
g    colin rutherford and imelda walsh were appointed to the board on 22 april 2013
h    for 2014 taxable benefits for nonexecutive directors include cash payments made or accounted for by the company relating to the reimbursement of expenses     where applicable these amounts are inclusive of tax and national insurance restated for 2013
executive directors’ salaries
salaries were reviewed on 1 january 2014 from this date alistair darby’s salary was increased from £525000 to £535500 2 and tim jones’   salary was increased from £412000 to £420250 2
there were no payments made to former directors during the year and no payments were or are due to be made in respect of loss of office   nonexecutive directors’ fee level and structure
during the reporting year the fee structure applicable to the nonexecutive directors was as follows   dates
basic fee 
£
committee 
chair fee
£
from 11 july 2013 to date 50000 10000
  not applicable to nomination committee no additional fee is paid for committee membership
chairman 
the fee paid to the chairman remained at £275000 per annum terminable by either party at any time without notice and without compensation   directors’ pension benefits
pension or cash allowance
tim jones participated in the defined contribution section of the mitchells  butlers executive pension plan the ‘plan’ until 5 april 2014     under the plan executive directors’ contributions of up to 5 of salary are matched on a four times basis by the company from 6 april 2014     mr jones became a noncontributory member of the plan and received a cash allowance equivalent to the net cost to the company of a 20     of base salary contribution   as an alternative to the company’s contribution to the plan any member who has i aggregate pension savings at or above the lifetime   allowance threshold £15m in tax year 201314 and £125m in tax year 201415 or ii who has fixed protection or iii whose combined   employee and company contributions to the plan would otherwise be in excess of the annual allowance £50000 in tax year 201314     and £40000 in tax year 201415 may elect to receive a cash allowance equivalent to the net cost to the company of the contribution which   would otherwise have been made to the plan
mitchells  butlers plc  annual report and accounts 2014 60
report on directors’ remuneration
continued the plan provides for a normal pension age of 60 and in the event of death there is life assurance cover of up to six times plan pay the plan     also provides for full and partial incapacity benefit where the member is unable to continue in employment due to ill health active members     of the plan have the option to pay additional voluntary contributions
alistair darby is not a member of the plan mr darby receives a cash allowance equivalent to the net cost to the company of a 20 of base     salary  contribution
company contribution £ cash allowance £
2014 2013 2014 2013
directors
alistair darby – – 93380 90245
tim jones 15187 29620 59937 45647
annual performance bonus and stdip
the annual bonus and stdip operate as set out in the policy section of this report details of the 2014 stdip are set out below
annual bonus performance measure performance  of base salary payable
adjusted earnings per share eps target 36 1p 50
maximum 110 of target 397p 100
  bonus is payable on a straight line basis between target and maximum
the group delivered eps of 326p being 97 of target performance resulting in no bonus being payable in respect of fy 2014
a bonus share award was made during the reporting year under the terms of the stdip in respect of fy 2013 performance details of which     are set out in the table below
shares awarded during  
the year to 270914 basis of award vesting date
face value 
£
executive directors
alistair darby 44436 50 of 2013     annual bonus
50 of the award will vest to participants 12 months     after grant and 50 24 months after grant
182276
tim jones 35292 144768
total 79728 327044 
  face value based on a share price of 4102p this being the average of the middle market quotation of a mitchells  butlers share over the three days prior to the award
  deferred bonus subject only to continued employment
longterm incentives vesting during the year
no longterm incentives were granted that were able to vest during the year being reported on or shortly after the end of the year the next   longterm incentive award capable of vesting will be the award made in february 2013 in respect of the fy 2013 to fy 2015 performance period   which may vest in november 2015 subject to performance and continued employment   longterm incentive awards made in fy 2014 
an award was made in accordance with the rules of the performance restricted share plan ‘prsp’ and as set out in the policy section of this report
the independent elements of the performance measure for the november 2013 award each of which accounts for 50 of the award are   summarised below
threshold vesting target maximum vesting target
1     compound annual adjusted earnings per   share ‘eps’ growth measured before   exceptional items and other adjustments
25 will vest if the compound annual eps   growth is 8
100 will vest if compound annual eps growth is   at least 16
2    total shareholder return tsr relative to a   peer group of comparator companies
25 will vest for tsr performance equivalent to   the median of the comparator group
100 will vest for tsr performance equivalent   to the median of the comparator group x 135
the eps and tsr conditions are measured over three years from the start of the financial year in which they are granted ie three years from     29 september 2013 ending 25 september 2016
the tsr element of the award is also subject to a share price underpin and may only be exercised where the mitchells  butlers share price has   equalled or exceeded the share price at the date of award within six months of the vesting date if this condition is not met then the vested tsr   element of the option will lapse
  between threshold and maximum vesting under each measure is on a straight line basis below threshold the award will lapse
  enterprise inns punch taverns fuller smith  turner greene king marston’s whitbread j d wetherspoon spirit pub company and the restaurant group
mitchells  butlers plc  annual report and accounts 2014 61
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 eps and tsr targets were set by the committee having taken advice from pwc its independently appointed adviser at the time of the award   performance measurement under the prsp  which is not retested is reviewed and certified by the company’s auditor   around 60 senior employees participate in the prsp the award level varies by job category ranging from 50 of base salary for the majority     up to 200 for the ceo details of awards made to executive directors under the prsp are set out below
 options 
awarded
 during the
 year to 
270914
basis 
of award 
 of basic
 annual
 salary
award 
date
market 
price per
 share at
 award
date p
actual
planned 
vesting
 date
latest 
lapse
 date
face 
value 
£
executive directors
alistair darby 262434 200 281113 4001 251116 251118 1049998
tim jones 144162 140 281113 4001 251116 251118 576792
total 406596 1626790
    face value is the maximum number of shares that would vest if the performance measure as described above is met in full multiplied by the middle market quotation of     a mitchells  butlers share on the business day immediately preceding the award      the aggregate option price of each award is £1   allemployee sharesave and sip
an award was made under each of the hmrcapproved allemployee share plans in line with the policy set out on page 53
a grant under the sharesave scheme and a free share award under the sip was made in june 2014   the tables below show directors’ share options under the sharesave and shares under the sip 
sharesave
 ordinary shares under option
date of 
grant
opening
 balance
 290913
shares 
awarded
during 
the year 
290913 
to 270914
vested 
during 
period
exercised
 during 
period
lapsed
 during 
period
closing
 balance at
 270914
option 
price 
p
market 
share price
 on date of 
exercise
earliest
 exercise
 date
last 
expiry
 date
director
alistair darby 260614 – 5487 – – – 5487 3280 – 011017 310318
tim jones 200612 4945 – – – – 4945 1820 – 011015 310316
260614 – 2743 – – – 2743 3280 – 011017 310318
total 4945 8230 – – – 13175 – – – –
sip 
as at 27 september 2014 the executive directors had the following entitlements under the free share element of the allemployee sip 
shares 
held at 
280913
shares 
awarded
during 
the year 
290913 
to 270914
award
 date
market
price per
share
 at award
 p
normal 
vesting
 date
market 
price per 
share at 
normal 
vesting  
date p
shares 
held at 
270914 
director
alistair darby – 923 260614 3897 260617 – 923
tim jones 1204 – 200612 2493 200615 – 1204
800 – 280613 3746 280616 – 800
– 813 260614 3897 260617 – 813
total 2004 1736 – – – – 3740
directors’ entitlements under the partnership share element of the sip are set out as part of the directors’ interests table on page 63
mitchells  butlers plc  annual report and accounts 2014 62
report on directors’ remuneration
continued prsp stdip and other share awards
the table below sets out details of the executive directors’ outstanding awards under the prsp  stdip and saye
name of director scheme
number of 
shares at  
28 september 
2013
granted during 
the period date of grant
lapsed 
during the 
period
exercised 
during the 
period
number of 
shares at  
27 september 
2014
date from which 
exercisable expiry date
alistair darby prsp 201315
a
307210 – feb 2013 – – 307210 nov 2015 nov 2017
prsp 201416
a
– 262434 nov 2013 – – 262434 nov 2016 nov 2018
stdip 2013 – 44436 dec 2013 – – 44436  dec 2014
b
dec 2015
saye 2014 – 5487 jun 2014 – – 5487 oct 2017 mar 2018
total 307210 312357 – – 619567
tim jones prsp 201315
a
169846 – feb 2013 – – 169846 nov 2015 nov 2017
prsp 201416
a
– 144162 nov 2013 – – 144162 nov 2016 nov 2018
stdip 2013 – 35292 dec 2013 – – 35292  dec 2014
b
dec 2015
saye 2012 4945 – jun 2012 – – 4945 oct 2015 mar 2016
saye 2014 – 2743 jun 2014 – – 2743 oct 2017 mar 2018   total 174791 182197 – – 356988
a    50 of the prsp awards are subject to a tsr condition and the other 50 subject to adjusted eps growth targets adjusted eps is affected by the adoption of ias 19 employee   benefits and related changes in reporting the remuneration committee will consider in due course the impact of these changes for eps measurement in any event the 8 to 16   growth targets will remain unchanged which will ensure that targets are no less stretching than the original ones
b  shares released in two equal tranches 12 and 24 months after grant date shown is the first release date   directors’ interests
executive directors are expected to hold mitchells  butlers’ shares in line with the shareholding guidelines set out in the remuneration policy report
based on the valuation methodology as set out in the shareholding policy alistair darby’s shareholding was 0638 2013 0597 times his basic   annual salary and tim jones’ shareholding was 0234 2013 0089 times his basic annual salary   the interests of the directors in the ordinary shares of the company as at 27 september 2014 and at 28 september 2013 or date of appointment     if later were as set out below
wholly owned  
shares without 
performance conditions
a
shares with
performance conditions
unvested options 
awards without  
performance conditions
b
unvested options 
awards with  
performance conditions
c
vested but  
unexercised options
total 
sharesoptions
27092014 28092013 27092014 28092013 27092014 28092013 27092014 28092013 27092014 28092013 27092014 28092013
executive 
directors 
alistair darby 85588 77 423 – – 49923 – 569644 307210 – – 705155 384633
tim jones 24667 9048  – – 42980 11466 314008 169846  – – 381655 190360
former director
doug evans – 912
d
– – – 8241
d
– – – – – 9153
d
nonexecutive 
directors             bob ivell 12006 – – – – – – – – – 12006 –
ron  robson – – – – – – – – – – – –
stewart gilliland – – – – – – – – – – – –
eddie irwin 10000 10000 – – – – – – – – 10000 10000
douglas e   mcmahon – – – – – – – – – – – –
colin rutherford – – – – – – – – – – – –
imelda walsh 7500 – – – – – – – – – 7500 –
total 139761 97383 –  – 92903 19707 883652 477 056  – – 1  1 16316 594146
a  includes free shares and partnership shares granted under the sip 
b  options granted under the sharesave as detailed in the table on page 62 and deferred bonus awards granted under the stdip 
c  options granted under the prsp as detailed in the table on page 62
d  at 31 january 2013 the date on which mr evans left the employment of the group
no share options were exercised in the year by either alistair darby or tim jones
directors’ shareholdings shares without performance conditions include shares held by connected persons
the above shareholdings are beneficial interests and are inclusive of directors’ holdings under the share incentive plan both free share     and partnership share elements
mitchells  butlers plc  annual report and accounts 2014 63
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 total shareholder return from 25 september 2009 to 27 september 2014 rebased to 100
mitchells  butlers plc ftse 250 source datastream
2009 2014 2013 2012 2011 2010
40
60
80
100
120
140
160
180
200
220
ceo fiveyear earnings history
year ended 250910 240911 290912 280913 270914
alistair darby
single figure remuneration £000 – – – 982
a
642
annual bonus outcome  of max – – – 710 –
ltip vesting outcome  of max – – – na na
b
bob ivell
single figure remuneration £000 – – 557 69
c
–
annual bonus outcome  of max – – na
d
na
d
–
ltip vesting outcome  of max – – na
d
na
d
–
jeremy blood
single figure remuneration £000 – 397 50 – –
annual bonus outcome  of max – –
e
na
d
– –
ltip vesting outcome  of max – na
d
– – –
adam fowle
single figure remuneration £000 1315 483
f
– – –
annual bonus outcome  of max 876 160 – – –
ltip vesting outcome  of max 162 242 – – –
a      alistair darby formally took up the position of ceo on 12 november 2012 following a short period of induction and handover the figure shown reflects the date of his appointment     to the board 8 october 2012
b  no longterm incentive plan is due to vest in respect of the year ended 27 september 2014
c  figure shown is up to and including 11 november 2012 as bob ivell remained executive chairman to this date
d  the director was not a participant in the plan
e    jeremy blood was not a participant in the shortterm incentive plan at the discretion of the board a payment of £100000 was made in respect of his contribution as interim chief   executive this payment is included in the single remuneration figure £397000 above earnings exclude the fee payable for the period 26 september 2010 to 14 march 2011 during   which mr blood served as a nonexecutive director
f  earnings disclosed are to 15 march 2011 when mr fowle stepped down as ceo
under the partnership share element of the share incentive plan alistair darby and tim jones acquired 76 shares and 64 shares of the     company respectively between the end of the financial year and 24 november 2014   none of the directors has a beneficial interest in the shares of any subsidiary or in debenture stocks of the company or any subsidiary
the market price per share on 27 september 2014 was 367 3 pence and the range during the year to 27 september 2014 was 367 3 pence to     4913 pence per share
the executive directors as a group beneficially own 003 of the company’s shares
tsr performance graph
the company’s tsr performance for the last five financial years is shown below against the ftse 250 index the ftse 250 index has been   chosen to show tsr performance as the company is a member of the ftse 250
mitchells  butlers plc  annual report and accounts 2014 64
report on directors’ remuneration
continued relative importance of spend on pay
£m
fy 2014 fy 2013  from note 6 accounts excludes sharebased payments
 business rates corporation tax employer’s ni
0
200
400
600
wages and salaries principal taxes pension deficit contributions debt service dividend and share buy back
505 46
483
150 42
144
49 225
40
188 33 182
0 0
figures shown for wages and salaries are all earnings including bonus in fy 2014 £154m 03 was paid to executive and nonexecutive   directors 2013 £234m 05   implementation of remuneration policy in financial year 2015 
executive directors’ salary review
salaries are next due to be reviewed with effect from 1 january 2015 from this date alistair darby’s salary will be increased to £543500 15   and tim jones’ salary will be increased to £426500 15
annual performance bonus
the committee has reviewed the performance measures and the following changes will take effect for fy 2015
  • the company profit measure in the annual plan will be pbt the committee considers that pbt better reflects the operational performance     of the business over a single year than the previous measure of adjusted earnings per share     • a maximum of 75 of base salary will be payable for performance against company pbt     • up to 25 of base salary will be paid for the achievement against our guest satisfaction measure net promoter score nps nps is a lead   measure of future performance and is one of the key performance indicators that underpins the business strategy     • there will be no payout on the nps element if profit is below a predetermined threshold for 201415 being 95 of target pbt  combined payments     at ontarget and maximum remain as current with a total of 50 of base salary being paid if ontarget performance is achieved across both measures   and 100 of salary for maximum achievement   pbt and nps targets are deemed to be commercially sensitive and will not be disclosed in advance however retrospective disclosure of targets   and performance against them will be provided in next year’s remuneration report   change in remuneration of the ceo
salary £ taxable benefits £ bonus £
2014 2013  change 2014 2013  change 2014 2013  change
ceo 531334 582534 879 14483 14445 026 0 364580 100
salaried  employees  30474 30419 018 771 710 859 1922 3364 429
the fy 2013 ceo figures shown are the combined earnings of bob ivell whilst executive chairman and alistair darby from the date he was   appointed to the board the ceo figures do not include ltip awards or pension benefits as disclosed in the single figure table
the change in ceo remuneration is compared to the change in average remuneration of all full time salaried employees which includes general   managers assistant managers and kitchen managers employed in our businesses excluding orchid salaried employees with part year service     in either fy 2013 or fy 2014 have been excluded from the comparison figures retail staff employees have been excluded from the comparator   group as they are hourly paid largely part time and do not participate in any bonus plans
mitchells  butlers plc  annual report and accounts 2014 65
strategic report 2–33 governance  34–66 financial statements 67–111 shareholder information 112 long term incentive plans
an award is due to be made in november 2014 in respect of the fy 2015 to fy 2017 performance period the committee has reviewed the   performance condition applicable to the prsp  and felt that tsr should be measured against a comparator group consisting of the 33 companies   that constitute the ftse all share travel  leisure group previously tsr was measured against nine other restaurants and bars companies but   the committee felt there were too few comparators for a robust comparison particularly in the event of any delistings during the performance   period there are no other changes to the performance condition from that which was in place for the 2013 awards
the table below summarises the revised performance condition for the performance period 20152017
performance measures
each accounting for 50 of the award threshold vesting target maximum vesting target
1     compound annual adjusted earnings per share ‘eps’ growth   measured before exceptional items and other adjustments
25 will vest if the compound annual   eps growth is 8 per annum
100 will vest if compound annual eps   growth is at least 16 per annum
2    total shareholder return tsr relative to a peer group of   comparator companies comprising the ftse all share travel      leisure group
25 will vest for tsr performance   equivalent to the median of the   comparator  group  100 will vest for tsr performance   equivalent to the upper quartile of the   comparator  group
    between threshold and maximum vesting under each measure is on a straight line basis below threshold the award will lapse
the tsr element of the award is also subject to a share price underpin and may only be exercised where the mitchells  butlers’ share price has   equalled or exceeded the share price at the date of award within six months of the vesting date if this condition is not met then the vested tsr   element of the option will lapse
nonexecutive directors’ fee review
the fee applicable to the chairman has been reviewed and with effect from 1 january 2015 the fee payable to bob ivell will increase to £285000   the fee payable to mr ivell has not increased since his appointment in july 2011   nonexecutive directors’ fees have been reviewed and with effect from 1 january 2015 the base fee for nonexecutive directors will increase     to £52000 nonexecutive directors’ base fees were last increased in january 2011 the fees applicable to committee chairs are unchanged     the table below sets out the revised fee structure
basic fee 
£
committee 
chair fee
£
52000 10000
    not applicable to nomination committee no additional fee is paid for committee membership
approved by the board
imelda walsh
chair	of	the	remuneration	committee
24 november 2014
mitchells  butlers plc  annual report and accounts 2014 66
report on directors’ remuneration
continued financial statements
68	 	 independent	auditor’s	report	to	the		
members	of	mitchells		butlers	plc
70	 group	income	statement
71	 	 group	statement	of	comprehensive	income
72	 group	balance	sheet
73	 	 group	statement	of	changes	in	equity
74	 group	cash	flow	statement
75	 notes	to	the	financial	statements
104	 	 five	year	review		
income	statement	information
105	 	 company	balance	sheet
106	 	 notes	to	the	company	financial	statements
mitchells  butlers plc  annual report and accounts 2014 67
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 opinion on financial statements of mitchells  butlers plc
in our opinion
  • the financial statements give a true and fair view of the state of     the group’s and of the company’s affairs as at 27 september 2014   and of the group’s and the company’s profit for the 52 week period   then ended
  • the group financial statements have been properly prepared in   accordance with international financial reporting standards ifrss   as adopted by the european union
  • the company financial statements have been properly prepared in   accordance with united kingdom generally accepted accounting   practice and
  • the financial statements have been prepared in accordance with the   requirements of the companies act 2006 and as regards the group   financial statements article 4 of the ias regulation
the financial statements comprise of the group income statement the   group statement of comprehensive income the group and company   balance sheets the group cash flow statement the group statement     of changes in equity and the related notes 1 to 30 on the group   financial statements and the related notes 1 to 10 on the company   financial statements the financial reporting framework that has     been applied in the preparation of the group financial statements     is applicable law and ifrss as adopted by the european union the   financial reporting framework that has been applied in the preparation   of the company financial statements is applicable law and united   kingdom accounting standards united kingdom generally accepted   accounting  practice
going concern
as required by the listing rules we have reviewed the directors’   statement contained on page 40 that the group is a going concern     we confirm that
  • we have concluded that the directors’ use of the going concern   basis of accounting in the preparation of the financial statements     is appropriate and
  • we have not identified any material uncertainties that may     cast significant doubt on the group’s ability to continue as     a going concern
however because not all future events or conditions can be predicted   this statement is not a guarantee as to the group’s ability to continue as   a going concern
our assessment of risks of material misstatement
the assessed risks of material misstatement described below are those   that had the greatest effect on our audit strategy the allocation of   resources in the audit and directing the efforts of the engagement   team with the exception of the risk in respect of the orchid acquisition   accounting the risks are consistent with the audit we performed     in respect of the 52 week period ended 28 september 2013
risk how the scope of our audit responded to the risk
valuation of pub estate
there are a number of key   assumptions and estimates   used in the valuation of the   pub estate the market value is   determined using factors such   as estimated fair maintainable   trading levels and comparable   market transactions an   estimated multiple is derived   for each of the group’s brands   which is then applied to the fair   maintainable trade in specific   circumstances where this   approach does not fairly   represent  the  underlying    value of the property a spot   valuation is applied
we worked with our property valuation specialists     and management’s external advisers to challenge the   methodology as described in note 14 to the financial   statements and underlying assumptions to the pub   estate valuation this included     • assessing the appropriateness of any changes     to assumptions since the prior period and
  • discussing the valuation process with   management’s external advisers and obtaining   evidence where required including benchmarking   valuations to comparable market transactions   where data was available and obtaining evidence   for a sample of spot valuations
additionally we     • compared the estimated fair maintainable     trading levels to historical trading results and   investigated  variances
  • tested the integrity of the data used in the   valuations by agreeing a sample to source data
  • assessed the competence independence and   integrity of management’s external advisers and
  • reviewed post period end trading to verify that it   supported the valuations as at 27 september 2014
orchid acquisition accounting
the  acquisition  accounting  required the exercise of   judgement to determine the   appropriate fair values of the   assets and liabilities acquired     in this transaction in particular   there were key assumptions   used in determining the fair   value of the acquired pub   estate including the estimated   fair maintainable trading levels   and the multipliers applied to   each site
we worked with our property valuation specialists     to challenge the methodology used by the external   valuers to determine the fair value applied to the   orchid pub estate including consideration of the   consistency of the approach with the valuation   methodology of the remainder of the estate we have   considered the competence independence and   integrity of the external valuer we were assisted by   our tax specialists in assessing the associated deferred   tax we also assessed the appropriateness and   completeness of the remaining fair value adjustments   by obtaining evidence for judgemental balances such   as accruals and provisions   tax provisions
the value of the tax provisions   recorded in respect of a   number of uncertain tax   positions require judgements   in respect of the likely outcome   of negotiations with and   enquiries from tax authorities   we utilised our tax specialists to appraise the likely   outcome of technical tax treatments and review   correspondence with the revenue authorities to     assess the reasonableness of the provisions made
accounting for defined benefit schemes
the actuarial assumptions   used in the measurement     of the group’s net pension   liability are inherently   judgemental such as the   discount rate and inflation
we tested the actuarial assumptions used to calculate   the net pension deficit using our actuarial specialists     to perform an assessment of the key assumptions as   described in note 8 to the financial statements with   reference to comparable market data and obtained   evidence for the additional liability recognised in     respect of the minimum funding requirement   the audit committee’s consideration of these risks is set out on     page 49
our audit procedures relating to these matters were designed in the   context of our audit of the financial statements as a whole and not to   express an opinion on individual accounts or disclosures our opinion   on the financial statements is not modified with respect to any of the   risks described above and we do not express an opinion on these   individual matters
our application of materiality
we define materiality as the magnitude of misstatement in the financial   statements that makes it probable that the economic decisions of a   reasonably knowledgeable person would be changed or influenced   we use materiality both in planning the scope of our audit work and     in evaluating the results of our work
we determined materiality for the group to be £9m which is   approximately 5 of profit before tax and exceptional items being   acquisition costs movements in the valuation of the property portfolio   and impairment 2013 £9m determined on the same basis these   items are excluded due to their volatility and this is consistent with     the group’s internal and external reporting to facilitate a better   understanding of the underlying trading performance
mitchells  butlers plc  annual report and accounts 2014 68
independent auditor’s report to the members  
of mitchells  butlers plc we agreed with the audit committee that we would report to the   committee all audit differences in excess of £180000 2013 £180000   as well as differences below that threshold that in our view warranted   reporting on qualitative grounds we also report to the audit   committee on disclosure matters that we identified when assessing     the overall presentation of the financial statements   an overview of the scope of our audit
our group audit was scoped by obtaining an understanding of     the group and its environment including groupwide controls and   assessing the risks of material misstatement at the group level based   on that assessment we performed a full scope audit in respect of     the uk retail operating business the uk property business and the   german business 2013 we performed a full scope audit in respect     of the uk retail operating business and uk property business these   three businesses account for 100 of the group’s total assets revenue   and operating profit 2013 two businesses accounting for 100 of total   assets 97 revenue 95 operating profit our audit work of these   businesses was executed at levels of materiality applicable to each   individual entity which were lower than group materiality at the     parent entity level we also tested the consolidation process
the group audit team includes the german component audit team in   our audit team briefing discusses their risk assessment and reviews   documentation of the findings from their work a senior member of     the group audit team also performed a site visit to germany   opinion on other matters prescribed by the companies act 2006
in our opinion
  • the part of the report on directors’ remuneration to be audited     has been properly prepared in accordance with the companies     act 2006 and
  • the information given in the strategic report and business review   and the directors’ report for the financial period for which the   financial statements are prepared is consistent with the financial   statements
matters on which we are required to report by exception
adequacy of explanations received and accounting records
under the companies act 2006 we are required to report to you if     in our opinion
  • we have not received all the information and explanations we   require for our audit or
  • adequate accounting records have not been kept by the company   or returns adequate for our audit have not been received from   branches not visited by us or
  • the company financial statements are not in agreement with     the accounting records and returns
we have nothing to report in respect of these matters
directors’ remuneration
under the companies act 2006 we are also required to report if in     our opinion certain disclosures of directors’ remuneration have not   been made or the part of the report on directors’ remuneration to be   audited is not in agreement with the accounting records and returns   we have nothing to report arising from these matters
corporate governance statement
under the listing rules we are also required to review the part     of the corporate governance statement relating to the company’s   compliance with ten provisions of the uk corporate governance code   we have nothing to report arising from our review
our duty to read other information in the annual report
under international standards on auditing uk and ireland we     are required to report to you if in our opinion information in the     annual report is
  • materially inconsistent with the information in the audited financial   statements or
  • apparently materially incorrect based on or materially inconsistent   with our knowledge of the group acquired in the course of   performing our audit or
  • otherwise  misleading
in particular we are required to consider whether we have identified any   inconsistencies between our knowledge acquired during the audit and the   directors’ statement that they consider the annual report is fair balanced   and understandable and whether the annual report appropriately   discloses those matters that we communicated to the audit committee   which we consider should have been disclosed we confirm that we have   not identified any such inconsistencies or misleading statements
respective responsibilities of directors and auditor
as explained more fully in the directors’ responsibilities statement     the directors are responsible for the preparation of the financial   statements and for being satisfied that they give a true and fair view   our responsibility is to audit and express an opinion on the financial   statements in accordance with applicable law and international   standards on auditing uk and ireland those standards require us     to comply with the auditing practices board’s ethical standards for   auditors we also comply with international standard on quality   control 1 uk and ireland our audit methodology and tools aim to   ensure that our quality control procedures are effective understood   and applied our quality controls and systems include our dedicated   professional standards review team and independent partner reviews
this report is made solely to the company’s members as a body     in accordance with chapter 3 of part 16 of the companies act 2006   our audit work has been undertaken so that we might state to the   company’s members those matters we are required to state to them     in an auditor’s report and for no other purpose to the fullest extent   permitted by law we do not accept or assume responsibility to anyone   other than the company and the company’s members as a body for   our audit work for this report or for the opinions we have formed
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and disclosures   in the financial statements sufficient to give reasonable assurance that the   financial statements are free from material misstatement whether caused   by fraud or error this includes an assessment of whether the accounting   policies are appropriate to the group’s and the company’s circumstances   and have been consistently applied and adequately disclosed the   reasonableness of significant accounting estimates made by the   directors and the overall presentation of the financial statements   in addition we read all the financial and nonfinancial information in     the annual report to identify material inconsistencies with the audited   financial statements and to identify any information that is apparently   materially incorrect based on or materially inconsistent with the   knowledge acquired by us in the course of performing the audit     if we become aware of any apparent material misstatements or   inconsistencies we consider the implications for our report
stephen griggs 
senior	statutory	auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london united kingdom
24 november 2014
mitchells  butlers plc  annual report and accounts 2014 69
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 2014 
52 weeks
2013 
52 weeks restated
notes
before 
exceptional 
items 
£m
exceptional 
items
a
 £m
total
 £m
before 
exceptional 
items
£m
exceptional 
items
a
 
£m
total
 £m
revenue 3 1970 – 1970 1895  –  1895  operating costs before depreciation   amortisation and movements in the   valuation of the property portfolio 4 9 1548 12 1560 1475 – 1475
ebitda
b
422 12 410 420  – 420  depreciation amortisation and movements   in the valuation of the property portfolio 4 9 109 37 146 110 29 139
operating profitloss 3 313 49 264 310  29 281  finance costs 10 132 – 132 130 – 130
finance  revenue 10 1 – 1 2  –  2  net pensions finance charge 8 10 10 – 10 11 –  11
profitloss before tax 172 49 123 171  29 142  tax expensecredit 9 11 38 8 30 39 25  14
profit for the period 134 41 93 132  4 128  earnings per ordinary share
  – basic 12 326p 226p 322p 312p
  – diluted 12 324p 225p 320p 310p
  restated for the impact of ias 19 revised and presentation of pensions finance charge see note 8
a  exceptional items are explained in note 1 and analysed in note 9
b  earnings before interest tax depreciation amortisation and movements in the valuation of the property portfolio
the notes on pages 75 to 103 form an integral part of these financial statements
all results relate to continuing operations
mitchells  butlers plc  annual report and accounts 2014 70
group income statement
for the 52 weeks ended 27 september 2014 notes
2014
52 weeks
 £m
2013 
52 weeks
restated
 £m
profit for the period 93 128  items that will not be reclassified subsequently to profit or loss
unrealised gain on revaluation of the property portfolio 14 62 60  remeasurement of pension liability 8 214 –  tax relating to items not reclassified 11 33 16  119 76  items that may be reclassified subsequently to profit or loss
exchange differences on translation of foreign operations 1 1  cash flow hedges
  – lossesgains arising during the period 19 59 53    – reclassification adjustments for losses included in profit or loss 19 48 47  tax relating to items that may be reclassified 11 2 30
10 71  other comprehensive lossincome after tax 129   147  total comprehensive lossincome for the period 36 275    restated for the impact of ias 19 revised see note 8
the notes on pages 75 to 103 form an integral part of these financial statements
mitchells  butlers plc  annual report and accounts 2014 71
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112
group statement of comprehensive income
for the 52 weeks ended 27 september 2014 notes
2014 
£m
2013 
£m
assets
goodwill and other intangible assets 13 18 5  property plant and equipment 14 4242 3895  lease premiums 1 2  deferred tax asset 20 149 105  derivative financial instruments 19 5 5  total noncurrent assets 4415 4012  inventories 15 27 24  trade and other receivables 16 60 72  other cash deposits 26 – 25  cash and cash equivalents 26 255 340  total current assets 342 461  total assets 4757 4473  liabilities
pension liabilities 8 45 40
trade and other payables 17 300 263
current tax liabilities 21 17
borrowings 18 208 57
derivative financial instruments 19 45 46
total current liabilities 619 423
pension liabilities 8 380 208
other  payables 17 – 12
borrowings 18 2012 2075
derivative financial instruments 19 196 182
deferred tax liabilities 20 353 345
longterm  provisions 21 12 9
total noncurrent liabilities 2953 2831
total liabilities 3572 3254
net assets 1185 1219  equity
called up share capital 22 24 35 35  share premium account 24 24 23  capital redemption reserve 24 3 3  revaluation  reserve 24 918 869  own shares held 24 4 4
hedging  reserve 24 196 187
translation reserve 24 11 12  retained earnings 394 468  total equity 1185 1219  the notes on pages 75 to 103 form an integral part of these financial statements
signed on behalf of the board on 24 november 2014
alistair darby
tim jones
mitchells  butlers plc  annual report and accounts 2014 72
group balance sheet
27 september 2014 called
 up share
 capital
 £m
share
 premium
 account
 £m
capital
 redemption
 reserve 
£m
revaluation
 reserve
 £m
own
 shares
 held 
£m
hedging
 reserve
 £m
translation
 reserve
 £m
retained
 earnings
 £m
total
 equity 
£m
at 29 september 2012 35  21  3  793  3 257 11  340  943  profit for the period –  –  –  –  –  –  –  128  128  other  comprehensive  incomeexpense –  –  –  76  –  70  1  –  147  total comprehensive incomeexpense –  –  –  76  –  70  1  128  275  share capital issued –  2  –  –  –  –  –  –  2  purchase of own shares –  –  –  –  5 –  –  –  5
release of own shares –  –  –  –  4  –  –  2 2  credit in respect of sharebased payments –  –  –  –  –  –  –  2  2  at 28 september 2013 35  23  3  869  4 187 12  468  1219  profit for the period –  –  –  –  –  –  –  93  93  other  comprehensive  incomeexpense –  –  –  50  –  9 1 169 129
total comprehensive incomeexpense –  –  –  50  –  9 1 76 36
share capital issued –  1  –  –  –  –  –  –  1  purchase of own shares –  –  –  –  2 –  –  –  2
release of own shares –  –  –  –  2  –  –  1 1  credit in respect of sharebased payments –  –  –  –  –  –  –  2  2  disposal of properties –  –  –  1 –  –  –  1  –  at 27 september 2014 35 24 3 918 4 196 11 394 1185
  restated for the impact of ias 19 revised see note 8
mitchells  butlers plc  annual report and accounts 2014 73
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112
group statement of changes in equity
for the 52 weeks ended 27 september 2014 notes
2014 
52 weeks 
£m
2013 
52 weeks 
£m
cash flow from operations 25 391 371  cash flow from operating exceptional items 5 2
interest paid 137 128
interest  received 2 2  tax paid 34 31
net cash from operating activities 217 212  investing activities
acquisition of orchid pubs  dining limited and midco 1 limited 29 269 –  cash acquired on acquisition of orchid pubs  dining limited and midco 1 limited 29 11 –  purchases of property plant and equipment 156 126
purchases of intangible assets 6 1
payment of lease premium – 1
proceeds from sale of property plant and equipment 4 1  transfers from other cash deposits 25 –  net cash used in investing activities 391 127
financing activities
issue of ordinary share capital 1 2  purchase of own shares 2 5
proceeds on release of own shares 1 2  repayment of principal in respect of securitised debt 18 58 55
drawings under liquidity facility 18 147 –  net cash fromused in financing activities 89 56
net decreaseincrease in cash and cash equivalents 85 29  cash and cash equivalents at the beginning of the period 340 311  cash and cash equivalents at the end of the period 26 255 340  cash and cash equivalents are defined in note 1
the notes on pages 75 to 103 form an integral part of these financial statements
mitchells  butlers plc  annual report and accounts 2014 74
group cash flow statement
for the 52 weeks ended 27 september 2014 1 accounting policies
general information
mitchells  butlers plc is a company incorporated in the united   kingdom under the companies act   the consolidated financial statements are presented in pounds sterling   rounded to the nearest million being the functional currency of     the primary economic environment in which the parent and most   subsidiaries  operate  basis of preparation
mitchells  butlers plc along with its subsidiaries together ‘the   group’ is required to prepare its consolidated financial statements     in accordance with international financial reporting standards ifrss     as adopted by the european union and in accordance with the   companies act 2006
the group’s accounting reference date is 30 september the group   draws up its financial statements to the saturday directly before or   following the accounting reference date as permitted by section 390   3 of the companies act 2006 both the periods ended 27 september   2014 and 28 september 2013 include 52 trading weeks
the financial statements have been prepared on the historical cost   basis as modified by the revaluation of properties pension obligations   and financial instruments
the group’s accounting policies have been applied consistently
recent accounting developments
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 financial statements for the first time
ias	19	employee	benefits	revised
ias 19 revised was adopted on 29 september 2013 and has been   applied retrospectively in accordance with the transition provisions
the new standard replaces the interest charge on defined benefit   obligations and the expected return on plan assets with a single net   interest cost that is calculated by applying the discount rate to the net   pension deficit at the beginning of the period inclusive of any minimum   funding requirement in addition the administration costs of the   pension scheme previously charged against the expected return     on plan assets are now charged within operating costs
in addition to the changes noted above following recent guidance from   the financial reporting council frc the pensions finance charge is   now recognised within underlying profit
the impact of ias 19 revised has been to reduce profit before tax     by £8m for the 52 weeks ended 28 september 2013
further details of the restatement are shown in note 8 basic and   diluted earnings per share have been impacted and restated   accordingly in note 12
ifrs	13	fair	value	measurement
ifrs 13 has been applied prospectively from the period beginning     29 september 2013 the standard provides a definition of fair value   sets out a framework for measuring fair value and requires disclosure   about fair value measurements fair value is defined as the price that   would be received to sell an asset or paid to transfer a liability in an   orderly transaction between market participants at the measurement   date the additional disclosures resulting from the introduction of ifrs   13 are provided in note 19
new	and	revised	standards	on	consolidation	joint	arrangements	
associates	and	disclosure
in may 2011 a package of five standards on consolidation joint   arrangements associates and disclosures was issued comprising ifrs   10 consolidated financial statements ifrs 11 joint arrangements   ifrs 12 disclosure of interests in other entities ias 27 as revised in   2011 separate financial statements and ias 28 as revised in 2011   investments in associates and joint ventures
the group has adopted all of the above listed standards and revisions   in the current period as there are no joint arrangements or associates   within the group and all subsidiaries are under 100 ownership there   has been no impact on the consolidated financial statements   ifrs	7	amended	disclosures	–	offsetting	financial	assets	and	
financial	liabilities
the group has applied the amendments to ifrs 7 for the first time     in the current period the amendments to ifrs 7 require entities to   disclose information about rights of offset and related arrangements for   financial instruments under an enforceable master netting agreement   or similar agreement the additional disclosures resulting from the   amendments to ifrs 7 are provided in note 19
amendments	to	ias	1	presentation	of	financial	statements	as	part	
of	the	annual	improvements	to	ifrss	20092011	cycle	issues	in	
may	2012
the annual improvements to ifrss 20092011 have made a number of   amendments to ifrss the amendments that are relevant to the group   are the amendments to ias 1 regarding when a balance sheet as at the   beginning of the preceding third balance sheet period and the related   notes are required to be presented the amendments specify that a   third balance sheet is required when an entity applies an accounting   policy retrospectively or makes a retrospective restatement or   reclassification of items in its financial statements and the retrospective   application restatement or reclassification has a material effect on the   information in the third balance sheet the amendments specify that   related notes are not required to accompany the third balance sheet   there is no impact from this amendment on the financial statements     for the 52 weeks ended 27 september 2014 as the application of     ias 19 revised has had no impact on the balance sheet see note 8
the iasb and ifric have issued the following standards and   interpretations which could impact the group with an effective     date after the date of these financial statements they have not     been adopted early by the group and are not expected to have     any material impact
ifrs 15 revenue from contracts with customers – specifies how and   when revenue is recognised using a principles based fivestep model   this will be effective for the group in 201718 if adopted by the   european union
ifrs 9 financial instruments – simplifies the classification recognition   and measurement requirements for financial assets financial liabilities   and some contracts to buy or sell nonfinancial items this will be   effective for the group in 201819 if adopted by the european union
ifrs 10 and 12 and ias 27 amendments investment entities ias 36   amendments recoverable amount disclosures for nonfinancial   assets ias  39  amendments  novation  of  derivatives  and  continuation   of hedge accounting
mitchells  butlers plc  annual report and accounts 2014 75
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112
notes to the financial statements
for the 52 weeks ended 27 september 2014 1 accounting policies continued
the directors do not expect that the adoption of the standards listed   above will have a material impact on the financial statements of the   group in future periods beyond this it is not practicable to provide     a reasonable estimate of the effect of these standards until a detailed   review has been completed
basis of consolidation
the consolidated financial statements incorporate the financial   statements of mitchells  butlers plc ‘the company’ and entities   controlled by the company its subsidiaries the financial statements   of the subsidiaries are prepared for the same financial reporting period   as the company with the exception of orchid pubs  dining limited   and midco 1 limited which have an accounting reference date of     30 september and are only for a period of 39 weeks where necessary   adjustments are made to the financial statements of subsidiaries     to bring their accounting policies into line with those used by the   group intercompany transactions balances and unrealised gains     and losses on transactions between group companies are eliminated     on  consolidation
the results of subsidiaries acquired during the period are included     in the consolidated income statement from the date of acquisition
going concern
the group’s business activities together with the factors likely to affect   its future development performance and position are set out in the   company overview strategic report and business review on pages 2 to   33 the financial position of the group its cash flows liquidity position   and borrowing facilities are also described within the review
in addition note 19 to the financial statements includes the group’s   objectives policies and processes for managing its capital its financial   risk management objectives details of its financial instruments and   hedging activities and its exposures to credit risk and liquidity risk     as highlighted in note 18 to the financial statements the group’s   financing is based upon securitised debt   the directors have at the time of approving the financial statements     a reasonable expectation that the company and the group have   adequate resources to continue in operational existence for the   foreseeable future thus they continue to adopt the going concern   basis of accounting in preparing the financial statements
business combinations
acquisitions of subsidiaries and businesses are accounted for using the   acquisition method the consideration for each acquisition is measured   at the aggregate of the fair values of assets given and liabilities incurred   or assumed by the group in exchange for control of the acquiree   acquisitionrelated costs are recognised in the income statement     as  incurred  at the acquisition date the identifiable assets acquired and the     liabilities assumed are recognised at their fair value at the acquisition   date except that
  • deferred tax assets or liabilities and liabilities or assets related to   employee benefit arrangements are recognised and measured     in accordance with ias 12 income taxes and ias 19 employee   benefits revised respectively and
  • assets or disposal groups that are classified as held for sale in   accordance with ifrs 5 noncurrent assets held for sale and   discontinued operations are measured in accordance with     that  standard
intangible assets acquired in a business combination and recognised   separately from goodwill are initially recognised at their fair value at     the acquisition date
goodwill is measured as the excess of the sum of the consideration   transferred the amount of any noncontrolling interests in the acquiree   and the fair value of the acquirer’s previously held equity interest in     the acquiree over the net of the identifiable assets acquired and the   liabilities assumed at the acquisition date if after reassessment the     net of the identifiable assets acquired and liabilities assumed at the   acquisition date exceeds the sum of the consideration transferred     the amount of any noncontrolling interests in the acquiree and the     fair value of the acquirer’s previously held interest in the acquiree     the excess is recognised immediately in the income statement as     a bargain purchase
when the consideration transferred by the group in a business   combination includes assets or liabilities resulting from a contingent   consideration arrangement the contingent consideration is measured   at its acquisition date fair value and included as part of the contingent   consideration transferred in a business combination changes in fair   value of the contingent consideration that qualify as measurement   period adjustments are adjusted retrospectively with corresponding   adjustments against goodwill measurement period adjustments are   adjustments that arise from additional information obtained during     the ‘measurement period’ which cannot exceed one year from the   acquisition date about facts and circumstances that existed at the   acquisition  date
the subsequent accounting for changes in the fair value of contingent   consideration that do not qualify as measurement period adjustments   depends on how the contingent consideration is classified contingent   consideration that is classified as equity is not remeasured at   subsequent reporting dates and its subsequent settlement is accounted   for within equity contingent consideration that is classified as an asset   or a liability is remeasured at subsequent reporting dates in accordance   with ias 39 or ias 37 provisions contingent liabilities and contingent   assets as appropriate with the corresponding gain or loss being   recognised in the income statement
when a business combination is achieved in stages the group’s   previouslyheld interests in the acquired entity is remeasured to its   acquisition date fair value and the resulting gain or loss if any is   recognised in the income statement amounts arising from interests     in the acquiree prior to the acquisition date that have previously been   recognised in other comprehensive income are reclassified to profit     or loss where such treatment would be appropriate if that interest     were disposed of
if the initial accounting for a business combination is incomplete by     the end of the reporting period in which the combination occurs     the group reports provisional amounts for the items for which the   accounting is incomplete those provisional amounts are adjusted   during the measurement period or additional assets or liabilities     are recognised to reflect new information obtained about facts and   circumstances that existed as of the acquisition date that if known   would have affected the amounts recognised as of that date   intangible assets
goodwill
goodwill arising in respect of acquisitions being the excess of the   purchase consideration over the fair value attributed to the separately   identifiable assets liabilities and contingent liabilities acquired is stated   at cost less any impairment in value   mitchells  butlers plc  annual report and accounts 2014 76
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued goodwill is not amortised but is reviewed for impairment annually     or more frequently if events or changes in circumstances indicate that   the carrying value may be impaired for the purpose of impairment   testing goodwill is allocated to each of the group’s cashgenerating   units expected to benefit from the synergies of the combination     the impairment review requires management to undertake certain   judgements including estimating the recoverable value of the business   to which the goodwill relates based on either the fair value less costs     to sell or the value in use in order to reach a conclusion as to whether   the goodwill is recoverable value in use estimates are based on   management’s projection of the cash flows that the business will   generate after applying a suitable discount rate fair value less costs     to sell is based on management’s assessment of the net proceeds     which could be generated through disposing of the business to which   the goodwill relates if the recoverable amount of the cashgenerating   unit is less than the carrying amount of the unit the impairment loss is   allocated first to reduce the carrying amount of any goodwill allocated   to the unit and then to the other assets of the unit prorata on the basis   of the carrying amount of each asset in the unit an impairment loss     is recognised immediately in the income statement and is not   subsequently  reversed  on disposal of a subsidiary the attributable amount of goodwill is   included in the determination of the profit or loss on disposal
computer	software
computer software and associated development costs which are     not an integral part of a related item of hardware are capitalised as an   intangible asset and amortised on a straight line basis over their useful   life the period of amortisation ranges between three and seven years   with the majority being five years
property plant and equipment
the group revalues the majority of its freehold and long leasehold   licensed properties to fair value for accounting purposes short   leasehold properties unlicensed properties fixtures and fittings are   held at deemed cost less depreciation and impairment provisions   noncurrent assets held for sale are held at their carrying value or their   fair value less costs to sell where this is lower the revaluation includes   significant accounting judgements in respect of valuation multiples   which are determined via third party inspection of 20 of the sites such   that all sites are individually valued approximately every five years and   assumptions made  in  determining  fair  maintainable  trade  the  directors   believe that their estimates which are based on the current state of the   uk property market are appropriate surpluses which arise from the   revaluation exercise are included within other comprehensive income   in the revaluation reserve unless they are reversing a revaluation   adjustment 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 income   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 a separate   valuation exercise was undertaken for the acquired orchid sites as     part of the fair value accounting exercise
depreciation is charged to the income statement on a straight line     basis over the estimated useful lives of items of property plant and   equipment freehold land is not depreciated freehold and long   leasehold properties are depreciated so that the difference between   their carrying value and estimated residual value is written off over 50   years from the date of acquisition the residual value of freehold and   long leasehold properties is reviewed at least annually leasehold   properties are depreciated over the unexpired term of the lease where   this is less than 50 years the cost less residual value at the balance   sheet date of plant machinery fixtures and fittings and equipment     is spread by equal instalments over the estimated life of the relevant   assets namely
information technology equipment 37 years
fixtures and fittings 320 years
expected useful lives and residual values are reviewed each year     and adjusted if appropriate
profits and losses on disposal of property plant and equipment are   calculated as the difference between the net sales proceeds and the   carrying amount of the asset at the date of disposal   the carrying values of property plant and equipment which are     not revalued to fair market value are reviewed on an outlet basis     for impairment if events or changes in circumstances indicate that     the carrying amount may not be recoverable an impairment loss     is recognised whenever the carrying amount of an outlet exceeds     its recoverable amount the recoverable amount is the higher of     an outlet’s fair value less costs to sell and value in use in determining     the value in use of an outlet the group is required to make various   judgements regarding the outlet’s projected cash flows and the   appropriate discount rate to apply to these these judgements include   estimating the future growth rate and profitability of the outlet
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 as income immediately an impairment   reversal is only recognised where there is a change in the estimates     used to determine recoverable amounts not where it results from the   passage of time
operating leases
leases in which substantially all the risks and rewards of ownership     are retained by the lessor are classified as operating leases payments   made under operating leases and subleases are charged to the income   statement on a straight line basis over the period of the lease lease   incentives are recognised as a liability and a subsequent reduction     in the rental expense over the lease term on a straight line basis
premiums paid on acquiring a new lease are spread on a straight line   basis over the lease term such premiums are classified in the balance   sheet as current or noncurrent prepayments with the current portion   being the element which relates to the following period
the group’s policy is to account for land held under both long     and short leasehold contracts as operating leases since it has     no expectation that title will pass on expiry of the lease contracts
the group is party to a small number of leases on properties which are   no longer trading profitably whilst every effort is made to sublet these   properties it is not always possible where a lease is onerous to the   group a provision is established based on the directors’ best estimate   of the present value of the cash flows up until the point it is judged the   lease will no longer be onerous
inventories
inventories are stated at the lower of cost and net realisable value     cost is calculated using the weighted average method work in   progress is in respect of property development activities and includes   the direct costs of the developments and associated professional fees
financial instruments
financial assets and financial liabilities are recognised in the group’s   balance sheet when the group becomes a party to the contractual   provisions of the instrument
mitchells  butlers plc  annual report and accounts 2014 77
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 1 accounting policies continued
financial	assets
all financial assets are recognised and derecognised on a trade date   where the purchase or sale of a financial asset is under a contract   whose terms require delivery of the financial asset within the timeframe   established by the market concerned and are initially measured at fair   value plus transaction costs except for those financial assets classified   as at fair value through profit or loss which are initially measured at     fair  value  financial assets are classified into the following specified categories   financial assets ‘at fair value through profit or loss’ fvtpl derivative   instruments in designated hedge accounting relationships ‘heldto
maturity’ investments ‘availableforsale’ afs financial assets and   ‘loans and receivables’ the classification depends on the nature     and purpose of the financial assets and is determined at the time     of initial recognition
impairment	of	financial	assets
financial assets other than those at fvtpl are assessed for indicators   of impairment at each balance sheet date financial assets are impaired   where there is objective evidence that as a result of one or more events   that occurred after the initial recognition of the financial asset the   estimated future cash flows of the investment have been affected   for listed and unlisted equity investments classified as afs a significant   or prolonged decline in the fair value of the security below its cost is   considered to be objective evidence of impairment   for all other financial assets including redeemable notes classified as   afs and finance lease receivables objective evidence of impairment   could  include
  • significant financial difficulty of the issuer or counterparty or
  • default or delinquency in interest or principal payments or
  • it becoming probable that the borrower will enter bankruptcy     or financial reorganisation
for certain categories of financial assets such as trade receivables   assets that are assessed not to be impaired individually are in addition   assessed for impairment on a collective basis objective evidence of   impairment for a portfolio of receivables could include the group’s     past experience of collecting payments an increase in the number of   delayed payments in the portfolio past the agreed credit period as well   as observable changes in national or local economic conditions that   correlate with default on receivables
for financial assets carried at amortised cost the amount of the   impairment is the difference between the asset’s carrying amount     and the present value of estimated future cash flows discounted     at the financial asset’s original effective interest rate
the carrying amount of the financial asset is reduced by the     impairment loss directly for all financial assets with the exception     of trade receivables where the carrying amount is reduced through     the use of an allowance account when a trade receivable is     considered uncollectable it is written off against the allowance   account subsequent recoveries of amounts previously written off     are credited against the allowance account changes in the carrying   amount of the allowance account are recognised in profit or loss
when an afs financial asset is considered to be impaired cumulative   gains or losses previously recognised in other comprehensive income   are reclassified to profit or loss in the period
with the exception of afs equity instruments if in a subsequent   period the amount of the impairment loss decreases and the decrease   can be related objectively to an event occurring after the impairment   was recognised the previously recognised impairment loss is reversed   through profit or loss to the extent that the carrying amount of the   investment at the date the impairment is reversed does not exceed   what the amortised cost would have been had the impairment not     been  recognised  in respect of afs equity securities impairment losses previously   recognised in profit or loss are not reversed through profit or loss     any increase in fair value subsequent to an impairment loss is   recognised in other comprehensive income
derecognition	of	financial	assets	and	liabilities
the group derecognises a financial asset only when the contractual   rights to the cash flows from the asset expire or when it transfers the   financial asset and substantially all the risks and rewards of ownership   of the asset to another entity if the group neither transfers nor retains   substantially all the risks and rewards of ownership and continues to   control the transferred asset the group recognises its retained interest   in the asset and an associated liability for amounts it may have to pay     if the group retains substantially all the risks and rewards of ownership   of a transferred financial asset the group continues to recognise the   financial asset and also recognises a collateralised borrowing for the   proceeds  received
trade	and	other	receivables
trade and other receivables are recognised and carried at original     cost less an allowance for any uncollectable amounts
cash	and	cash	equivalents
cash and cash equivalents comprise cash at bank and in hand and   other shortterm highly liquid deposits with an original maturity at   acquisition of three months or less cash held on deposit with an   original maturity at acquisition of more than three months is disclosed   as other cash deposits for the purposes of the cash flow statement   cash and cash equivalents are net of bank overdrafts that are repayable   on demand
trade	and	other	payables
trade and other payables are recognised at original cost
borrowings
borrowings which include the group’s secured loan notes are stated   initially at fair value normally the amount of the proceeds net of issue   costs thereafter they are stated at amortised cost using an effective   interest basis 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 over the term of the debt using the   effective interest method
effective	interest	method
the effective interest method is a method of calculating the amortised   cost of a debt instrument and of allocating interest income over the   relevant period the effective interest rate is the rate that exactly   discounts estimated future cash receipts including all fees and points   paid or received that form an integral part of the effective interest     rate transaction costs and other premiums or discounts through the   expected life of the debt instrument or where appropriate a shorter   period to the net carrying amount on initial recognition income is   recognised on an effective interest basis for debt instruments other   than those financial assets classified as at fvtpl   mitchells  butlers plc  annual report and accounts 2014 78
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued derivative	financial	instruments	and	hedge	accounting
the group uses interest rate and currency swap contracts to hedge     its exposure to changes in interest rates and exchange rates these   contracts are designated as cash flow hedges and hedge accounting     is applied where the necessary criteria under ias 39 financial   instruments recognition and measurement are met derivative   financial instruments are not used for trading or speculative purposes
derivative financial instruments are initially measured at fair value     on the contract date and are remeasured to fair value at subsequent   reporting dates fair value is calculated as the present value of the   estimated future cash flows
changes in the fair value of derivative instruments that are designated   and effective as hedges of highly probable future cash flows are   recognised in equity the cumulative gain or loss is transferred from   equity and recognised in the income statement at the same time as     the hedged transaction affects profit or loss the ineffective part of     any gain or loss is recognised in the income statement immediately
movements in the fair value of derivative instruments which do     not qualify for hedge accounting are recognised in the income   statement  immediately
hedge accounting is discontinued when the hedging instrument   expires or is sold terminated or no longer qualifies for hedge   accounting at that point the cumulative gain or loss in equity remains   in equity and is recognised in accordance with the above policy when   the transaction affects profit or loss if the hedged transaction is no   longer expected to occur the cumulative gain or loss recognised     in equity is recognised in the income statement immediately
equity	instruments
an equity instrument is any contract that evidences a residual     interest in the assets of an entity after deducting all liabilities equity   instruments issued by the company are recorded at the fair value     of the proceeds received net of direct issue costs
foreign currencies
transactions in foreign currencies are recorded at the exchange rates   ruling on the dates of the transactions monetary assets and liabilities   denominated in foreign currencies are translated into the functional   currency at the relevant rates of exchange ruling at the balance sheet date   foreign exchange differences arising on translation are recognised in the   income statement nonmonetary assets and liabilities are measured at   cost using the exchange rate on the date of the initial transaction
on consolidation the assets and liabilities of the group’s overseas   operations are translated into sterling at the relevant rates of exchange   ruling at the balance sheet date the results of overseas operations     are translated into sterling at average rates of exchange for the period   exchange differences arising from the translation of the results and the   retranslation of opening net assets denominated in foreign currencies   are taken directly to the group’s translation reserve when an overseas   operation is sold such exchange differences are recognised in the   income statement as part of the gain or loss on sale
revenue
revenue is the fair value of goods and services sold to third parties as   part of the group’s trading activities after deducting salesbased taxes   coupons and staff discounts
the majority of revenue comprises food and beverages sold in the   group’s businesses this revenue is recognised at the point of sale to   the customer revenue arising from the sale of development property     is recognised on legal completion of the sale   operating profit
operating profit is stated after charging operating exceptional costs     but before investment income and finance costs
supplier incentives and rebates are recognised within operating costs   as they are earned the accrued value at the reporting date is included   in other receivables
tax
the income tax expense represents both the income tax payable   based on profits for the period and deferred tax and is calculated     using tax rates enacted or substantively enacted at the balance sheet   date taxable profit differs from net profit as reported in the income   statement because it excludes items of income or expense which are   not taxable income tax is recognised in the income statement except   when it relates to items charged or credited directly to equity in which   case the income tax is also charged or credited to equity
deferred tax is recognised on all temporary differences between     the carrying amounts of assets and liabilities for financial reporting   purposes and the amount of their tax bases deferred tax is not   recognised in respect of temporary differences associated with   investments in subsidiaries where the timing of the reversal of the   temporary difference can be controlled and it is probable that the   temporary difference will not reverse in the foreseeable future the   amount of deferred tax provided is based on the expected manner of   realisation or settlement of the carrying amount of assets and liabilities   deferred tax assets are recognised only to the extent that it is probable   that future taxable profits will be available against which the asset can   be utilised
assessing the outcome of uncertain tax positions requires judgements   to be made in relation to the likely outcome of negotiations with and   enquiries from tax authorities and in some cases an assessment of the   likely outcome of other case law
adjusted profit
in addition to presenting information on an ifrs basis the group also   presents adjusted profit and earnings per share information that excludes   exceptional items including the impact of related tax this adjusted   information is disclosed to allow a better understanding of the underlying   trading performance of the group and is consistent with the group’s   internal management reporting exceptional items are those which are   separately identified by virtue of their size or incidence and include   movements in the valuation of the property portfolio as a result of the   annual revaluation exercise impairment review of shortleasehold and   unlicensed properties and restructuring costs see note 9   pension obligations
the group has both defined benefit and defined contribution     pension  arrangements
the total pension liability recognised in the balance sheet in respect     of the group’s defined benefit arrangements is the greater of the   minimum funding requirements calculated as the present value of     the agreed schedule of contributions and the actuarial calculated   liability the actuarial liability is the present value of the defined     benefit obligation less the fair value of the scheme assets the cost     of providing benefits is determined using the projected unit credit   method as determined annually by qualified actuaries this is based     on a number of financial assumptions and estimates the determination   of which may be significant to the balance sheet valuation in the event   that this reflects a greater deficit than that suggested by the schedule     of minimum contributions these are set out and discussed in note 8   and include judgements in relation to longterm interest rates inflation   investment returns and longevity of current and future pensioners   mitchells  butlers plc  annual report and accounts 2014 79
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 1 accounting policies continued
there is no current service cost as all defined benefit schemes are   closed to future accrual the net pension finance charge calculated     by applying the discount rate to the pension deficit or surplus at the   beginning of the period is shown within finance income or expense   the administration costs of the scheme are recognised within     operating costs in the income statement
remeasurement comprising actuarial gains and losses the effect     of minimum funding requirements and the return on scheme assets     are recognised immediately in the balance sheet with a charge or credit   to the statement of comprehensive income in the period in which     they  occur  curtailments and settlements relating to the group’s defined benefit   plan are recognised in the income statement in the period in which the   curtailment or settlement occurs
for the defined contribution arrangements the charge against profit     is equal to the amount of contributions payable for that period
sharebased compensation
the group operates a number of equitysettled sharebased   compensation plans whereby subject to meeting any relevant   conditions employees are awarded shares or rights over shares     the cost of such awards is measured at fair value excluding the effect   of non marketbased vesting conditions on the date of grant the   expense is recognised on a straight line basis over the vesting period   and is adjusted for the estimated effect of non marketbased vesting   conditions and forfeitures on the number of shares that will eventually   vest due to employees leaving the employment of the group fair   values are calculated using either the blackscholes binomial or monte   carlo simulation models depending on the conditions attached to the   particular share scheme
saye share options granted to employees are treated as cancelled   when employees cease to contribute to the scheme this results in     an accelerated recognition of the expense that would have arisen     over the remainder of the original vesting period
own shares
the cost of own shares held in employee share trusts and in treasury   are deducted from shareholders’ equity until the shares are cancelled   reissued or disposed where such shares are subsequently sold or   reissued the fair value of any consideration received is also included     in shareholders’ equity
provisions
provisions are recognised when the group has a present legal or   constructive obligation as a result of past events it is more likely than   not that an outflow of resources will be required to settle the obligation   and the amount can be reliably estimated provisions are measured   using the directors’ best estimate of the expenditure required to settle   the obligation at the balance sheet date and are discounted to present   value where the effect is material
dividends
dividends proposed by the board but unpaid at the period end are not   recognised in the financial statements until they have been approved   by shareholders at the annual general meeting interim dividends are   recognised when paid no dividends were proposed or paid in either   the current or the prior period
exchange rates
the results of overseas operations have been translated into sterling     at the weighted average euro rate of exchange for the period of     £1  € 122 2013 £1  € 119 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  € 128    2013 £1  € 119 and £1  162 2013 £1  161 respectively
2 critical accounting judgements and estimates
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 the   group’s critical accounting judgements and estimates are in respect     of property plant and equipment asset impairments exceptional     items and other adjustments pensions and taxation details of these   judgements and estimates are described in the relevant accounting   policy and detailed notes to the financial statements as set out below
  • property plant and equipment – assumptions are made in the   valuation of properties in relation to fair maintainable trading levels   the use of an appropriate multiple and the property market   assumptions are also made regarding assets’ useful lives and   residual value in relation to plant and equipment see accounting   policy on property plant and equipment and note 14
  • asset impairments – assumptions are made in relation to the value in   use calculation including projected cash flows future growth rates   and the appropriate discount rate to apply to these see accounting   policies on property plant and equipment and goodwill
  • exceptional items – determination of items which are separately   identified by virtue of their size or incidence so as to allow a better   understanding of the underlying trading performance of the     group see accounting policy on adjusted profit and note 9
  • taxation – assessing the outcome of uncertain tax positions requires   judgements to be made in relation to the likely outcome of   negotiations with and enquiries from tax authorities and in some   cases an assessment of the likely outcome of other case law     see accounting policy on tax and notes 11 17 and 20     • pensions – actuarial assumptions in respect of the defined benefit   pension scheme liability include judgements in relation to the   discount rate and the longevity of current and future pensioners   see accounting policy on pension obligations and note 8 and
  • acquisition accounting – assumptions are made in relation to the fair   valuation of property plant and equipment intangible assets and   current assets and liabilities at the acquisition date in relation to   property plant and equipment these assumptions include the   assessment of fair maintainable trading levels and property multiples   mitchells  butlers plc  annual report and accounts 2014 80
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued 3 segmental analysis
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 codm uses profit before interest and   exceptional items operating profit preexceptionals as the key measure of the segment results group assets are reviewed as part of this process   but are not presented on a segment basis
the retail operating business operates all of the group’s retail operating units and generates all of its external revenue the property business   holds the group’s freehold and long leasehold property portfolio and derives all of its income from the internal rent levied against the group’s   retail operating units the internal rent charge is eliminated at the total group level
retail operating business property business total
2014 
52 weeks
 £m
2013 
52 weeks
restated
 £m
2014 
52 weeks
 £m
2013 
52 weeks
 £m
2014 
52 weeks
 £m
2013 
52 weeks
restated
 £m
revenue
a
1970 1895  – –  1970 1895  ebitda preexceptionals 221 228  201
b
 192
b
422 420  operating profit preexceptionals 127 131  186 179  313 310  exceptional items note 9 49 29
operating profit   264 281  net finance costs 141 139
profit before tax 123 142  tax expense 30 14
profit for the period 93 128    restated for the impact of ias 19 revised see note 8   a  revenue includes other income of £7m 2013 £7m in respect of franchise operations
b  the ebitda preexceptionals of the property business relates entirely to rental income received from the retail operating business
geographical segments
substantially all of the group’s business is conducted in the united kingdom in presenting information by geographical segment segment   revenue and noncurrent assets are based on the geographical location of customers and assets
uk germany total
2014 
52 weeks
 £m
2013
 52 weeks
 £m
2014 
52 weeks
 £m
2013 
52 weeks
 £m
2014
 52 weeks
 £m
2013
52 weeks 
£m
revenue – sales to third parties 1906 1837  64 58  1970 1895  segment noncurrent assets
a
4254 3895  7 7  4261 3902  a  includes balances relating to intangibles property plant and equipment and noncurrent lease premiums
4 operating costs
2014 
52 weeks
 £m
2013
52 weeks
 restated
£m
raw materials and consumables recognised as an expense 542 530  changes in inventory of finished goods and work in progress 1 2  employee costs note 6 550 525  hire of plant and machinery 21 18  property operating lease costs 53 49  other costs 395 351  operating costs before depreciation amortisation and movements in the valuation of the property portfolio 1560 1475  depreciation of property plant and equipment note 14 108 109  amortisation of intangible assets note 13 1 1  net movement in the valuation of the property portfolio note 9 37  29   depreciation amortisation and movements in the valuation of the property portfolio   146 139
total operating costs 1706 1614
  restated for the impact of ias 19 revised see note 8
mitchells  butlers plc  annual report and accounts 2014 81
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 5 auditor’s remuneration
2014
52 weeks
 £m
2013 
52 weeks
 £m
fees payable to the group’s auditor for the
  – audit of the consolidated group financial statements 01 01    – audit of the company’s subsidiaries financial statements 03 02  total audit fees 04 03  other fees to auditors
  – other services 02 01  total nonaudit fees 02 01  auditor’s remuneration of £03m 2013 £03m was paid in the uk and £01m 2013 £01m was paid in germany
6 employees and directors
2014
52 weeks
 £m
2013
 52 weeks 
£m
wages and salaries 505 483  sharebased payments note 7 2 2  total wages and salaries 507 485  social security costs 36 35  pensions note 8 7 5  total employee costs 550 525  the average number of employees including parttime employees was 40561 retail and 953 support 2013 40459 retail and 866 support
information regarding key management personnel is included in note 30 detailed information regarding directors’ emoluments pensions   longterm incentive scheme entitlements and their interests in share options is given in the report on directors’ remuneration on pages 50 to 66
7 sharebased payments
the net charge recognised for sharebased payments in the period was £2m 2013 £2m
the group had five share schemes 2013 six all of which are equitysettled in operation during the period
the vesting of all awards or options is generally dependent upon participants remaining in the employment of a participating company during     the vesting period
details of schemes in operation during the period are shown below
sharesave plan
the sharesave plan is an hmrc approved savings scheme whereby the proceeds from a savings contract of either three or five years duration   may be used to purchase shares under option providing the employee remains in employment until the contract matures options are typically   granted in june or july of each year at a discount of up to 20 of the market value of the shares at the date of invitation there are no performance   conditions the scheme is open to all uk employees provided that they have at least 12 months’ service at the date of invitation the vesting   period is 39 months or 63 months and options may be exercised up to six months after the vesting date
share incentive plan
the share incentive plan is an hmrc approved savings scheme open to all uk employees with at least 12 months’ service at the date of invitation   the plan awards free shares to participating employees up to a maximum award of £3600 per employee per year with individual value being   prorated on salary there are no performance conditions other than remaining in employment for two years from the date of award hence there   is a vesting period of two years from the award date shares are generally held in the share incentive plan trust for at least three years and are   capable of being released to participants at any time thereafter
short term deferred incentive plan
under the short term deferred incentive plan the annual bonuses of the executive directors and other eligible employees may be deferred into   mitchells  butlers plc shares at the discretion of the remuneration committee at least 50 of the annual bonus for the executive directors and   any excess over 75 of base salary earned in the year for the other eligible employees will normally be deferred and released in equal tranches     12 and 24 months after deferral participants may receive dividend accrued shares on vesting equal to the value of the ordinary dividends that   would have been paid on the vested shares during the performance period if a participant leaves the employment of the group before the   ‘release dates’ then in certain circumstances they may lose entitlement to bonus shares and dividend accrued shares
all deferrals of bonuses into shares to date have been entirely at the discretion of the remuneration committee
mitchells  butlers plc  annual report and accounts 2014 82
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued performance restricted share plan
the performance restricted share plan prsp allows executive directors and other eligible employees to receive nominal cost options subject     to the satisfaction of performance conditions set by the remuneration committee which are normally measured over a three year period   vesting is conditional upon the achievement of a total shareholder return tsr performance condition and an adjusted earnings per share   growth performance condition
in respect of the tsr performance condition monte carlo simulations incorporate the market condition in the measurement of the fair value   based on an index of competitors participants will be entitled to receive dividend accrued shares on vesting equal to the value of the ordinary   dividends that would have been paid on the vested shares during the performance period
executive share option plan
the grant of options under the executive share option plan was discontinued following shareholder approval of changes to executive director   remuneration in 2006
the vesting period for these options is three years from grant followed by a seven year exercise period the latest possible exercise date for any     of these options outstanding at 27 september 2014 is 24 may 2015
the group has used separate option pricing models and assumptions for each plan the following tables set out weighted average information   about how the fair value of each option grant was calculated
2014
performance 
restricted share plan sharesave plan
valuation  model monte carlo and binomial blackscholes
weighted average share price 4175p 3980p 
exercise price
a
– 3280p 
expected dividend yield
b
– –
riskfree interest rate 187 170
volatility
c
34 283
expected life years
d
30 412 
2013
performance 
restricted share plan sharesave plan
valuation  model monte carlo and binomial blackscholes
weighted average share price 3497p 3709p  exercise price
a
–  3090p  expected dividend yield
b
– –
riskfree interest rate 097 103
volatility
c
34 314
expected life years
d
260 394
a    the exercise price for the performance restricted share plan is £1 per participating employee
b    the expected dividend yield for the sharesave plan has used historical dividend information for details on the group’s current dividend policy refer to the financial review on     page 33 the expected dividend yield for the performance restricted share plan options is zero as participants are entitled to dividend accrued shares to the value of ordinary   dividends paid during the vesting period
c    the expected volatility is determined by calculating the historical volatility of the company’s share price commensurate with the expected term of the options and share awards
d    the expected life of the options represents the average length of time between grant date and exercise date
the fair value of awards under the short term deferred incentive plan and the share incentive plan are equal to the share price on the date of   award as there is no price to be paid and employees are entitled to dividend accrued shares the assumptions set out above are therefore not   relevant to these schemes
mitchells  butlers plc  annual report and accounts 2014 83
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 7 sharebased payments continued
movements in the awards and options outstanding under these schemes for the periods ended 27 september 2014 and 28 september 2013 are   as follows
short term
 deferred
 incentive plan
performance 
restricted 
share plan
share
 incentive 
plan
number of 
shares
 thousands
number of
 shares
 thousands
number of
 shares
 thousands
outstanding at 29 september 2012 25  2265  1553  granted –  1598  265  exercised 18 563 177
forfeited –  1533 69
expired –  8 –  outstanding at 28 september 2013 7  1759  1572  granted 80  1336  261  exercised 7 94 208
forfeited –  252 72
expired –  –  –  outstanding at 27 september 2014 80 2749 1553 
options exercisable
at 27 september 2014 – 105 781
at 28 september 2013 –  199 739
fair value of options granted during the period pence
a
at 27 september 2014 4093 2263 3980 
at 28 september 2013 –  2139  3709  weighted average remaining contract life years
at 27 september 2014 07 35 –
b
at 28 september 2013 02  38  –
b
a  fair value is based on the date of grant
b  sip shares are capable of remaining within the sip trust indefinitely while participants continue to be employed by the group
executive share option plan sharesave plan
number of
 shares 
thousands
weighted
 average
 option price 
pence
number of 
shares 
thousands
weighted 
average
 option price
 pence
outstanding at 29 september 2012 1510  2853  4099  2148  granted –  –  759  3090  exercised 694 2613  903  1965  forfeited –  –  409
a
2088  expired 84 3261  108  3365  outstanding at 28 september 2013 732  3033  3438  2373  granted –  –  1348  3280  exercised 386 2830  440  2538  forfeited –  –  322
a
2533  expired –  –  53  2502  outstanding at 27 september 2014 346 3261 3971 2648 
options exercisable
at 27 september 2014 346 3261 – –
at 28 september 2013 732  3033  –  –
fair value of options granted during the period pence
b
at 27 september 2014 – 1341
at 28 september 2013 – 1246
range of prices pence of options outstanding
at 27 september 2014 3261 1820 – 3280
at 28 september 2013 2522 – 326 1 1820 – 3090
a  the number of forfeited shares in the period includes 168442 2013 219464 cancellations
b  weighted average fair value based on the date of grant has been shown for the sharesave plan
the weighted average share price during the period was 4225p 2013 3553p
mitchells  butlers plc  annual report and accounts 2014 84
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued summarised information about options outstanding at 27 september 2014 under the share option schemes is as follows
options outstanding options exercisable
range of exercise prices pence
number of
 shares 
outstanding 
thousands
weighted 
average 
remaining 
contract life 
 years
weighted 
average 
option price 
 pence
number of
shares
 exercisable 
thousands
weighted 
average
 remaining 
contract life
 years
weighted 
average 
option price 
pence
performance restricted share plan
negligible
a
2749 35 –
a
  105 02 –
a  executive share option plan
3261 346 07 3261 346 07 3261
sharesave plan
1960 370 05 1960 – – –
2570 138 15 2570 – – –
2530 523 11 2530 – – –
1820 966 19 1820 – – –
3090 630 29 3090 – – –
3280 1344 41 3280 – – –
3971 26 2648 – – –
a  the exercise price relating to the performance restricted share plan is £1 per participating employee per exercise
8 pensions
background
retirement and death benefits are provided for eligible employees in the united kingdom principally by the mitchells  butlers pension plan   mabpp and the mitchells  butlers executive pension plan mabepp these plans are funded hmrc approved occupational pension   schemes with defined contribution and defined benefit sections the defined benefit section of the plans is now closed to future service accrual   the defined benefit liability relates to these funded plans together with an unfunded unapproved pension arrangement the executive topup   scheme or mabetus in respect of certain mabepp members the assets of the plans are held in selfadministered trust funds separate from   the company’s assets
in addition mitchells  butlers plc also provides a workplace pension plan in line with the workplace pensions reform regulations     this automatically enrols all eligible workers into a qualifying workplace pension plan
restatement in relation to ias 19 revised
ias 19 revised was adopted on 29 september 2013 and has been applied retrospectively in accordance with the transition provisions
the new standard replaces the interest charge on defined benefit obligations and the expected return on plan assets with a single net interest     cost that is calculated by applying the discount rate to the net pension deficit at the beginning of the period inclusive of any minimum funding   requirement in addition the administration costs of the pension scheme previously charged against the expected return on plan assets are     now charged within operating costs
in addition to the changes noted above following recent guidance from the financial reporting council frc the pensions finance charge     is now recognised within underlying profit
the group has restated the comparative amounts in the income statement and statement of comprehensive income for the 52 weeks ended     28 september 2013 there is no impact on the balance sheet or cash flow statement from the changes introduced by ias 19 revised
mitchells  butlers plc  annual report and accounts 2014 85
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 8 pensions continued
the tables below provide a summary of the amounts previously reported the adjustments made and the restated amounts in relation to     ias 19 revised
52 weeks ended 28 september 2013
group income statement
previously 
reported
£m
impact of  
ias 19 revised
 £m
restated 
£m
operating profit 283  2 281  finance costs
finance costs and revenue 128 –  128
net pensions finance charge 5 6 11
profit before tax 150  8 142  tax expense 15 1  14
profit for the period 135  7 128  group statement of comprehensive income
profit for the period 135  7 128  remeasurement of pension liability 8 8  –  other items of comprehensive income 161  –  161  tax relating to items of other comprehensive income 13 1 14
other comprehensive income after tax 140  7  147  total comprehensive income 275  –  275  group balance sheet
pension liabilities 248 –  248
associated deferred tax asset 50 –  50
measurement of scheme assets and liabilities
actuarial	valuation
the actuarial valuations used for ias 19 revised purposes are based on the results of the latest full actuarial valuation carried out at     31 march 2013 and updated by the schemes’ independent qualified actuaries to 27 september 2014 scheme assets are stated at market     value at 27 september 2014 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 scheme liabilities are discounted using market yields at the end of the period on high quality corporate bonds
the principal financial and mortality assumptions used at the balance sheet date have been updated to reflect changes in market conditions     in the period and more up to date mortality assumptions in line with those used in the 2013 actuarial valuation as agreed on 21 may 2014
2014 2013
pensions increases 31 33
discount rate 38 44
inflation  rate 32 34
2014 2013
main plan 
years
executive plan 
years
main plan
 years
executive plan 
years
male member aged 65 current life expectancy 217 259 203 246
male member aged 45 life expectancy at 65 243 276 230 264
female member aged 65 current life expectancy 241 271 231 260
female member aged 45 life expectancy at 65 269 291 258 280
minimum	funding	requirements
the results of the 2013 actuarial valuation showed a funding deficit of £572m using a more prudent basis to discount the scheme liabilities than is   required by ias 19 revised and on 21 may 2014 the company formally agreed a new 10 year recovery plan with the trustees to close the funding   deficit in respect of its pension scheme liabilities the group has agreed to increase contributions from £40m to £45m per annum for three years   effective from 1 april 2013 from 1 april 2016 contributions then increase each year by the rate of rpi subject to a minimum increase of 0 and     a maximum increase of 5 for the following seven years the group has also agreed to make a further minimum underwritten payment of £40m   on terms to be agreed with the trustees by 30 september 2015 under ifric 14 an additional liability is recognised such that the overall pension   liability at the period end reflects the schedule of contributions in relation to a minimum funding requirement should this be higher than the   actuarial deficit
sensitivity	to	changes	in	discount	rate
the discount rate applied to the pension schemes’ liabilities is a significant driver of the net balance sheet valuation of the schemes and is subject   to a high degree of judgement and complexity it is estimated that a 01 increase or decrease in the discount rate used would in isolation reduce   or increase the actuarial deficit by approximately £39m 2013 £34m a similar increase or decrease in the discount rate used would in isolation   reduce or increase the total pension liability by approximately £2m 2013 £1m with no material impact on the income statement charge   mitchells  butlers plc  annual report and accounts 2014 86
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued 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
group income statement
2014 
52 weeks
£m
2013
 52 weeks
restated 
£m
operating profit
employer contributions defined contribution plans 7 5
administrative costs defined benefit plans 2 2
charge to operating profit 9 7
finance costs
net pensions finance charge on actuarial deficit 4 3
additional pensions finance charge due to minimum funding 6 8
net finance charge in respect of pensions 10 11
total charge 19 18
  restated for the impact of ias 19 revised
group statement of comprehensive income
2014 
52 weeks
£m
2013
 52 weeks
restated 
£m
return on scheme assets and effects of changes in assumptions 119 65
movement in pension liability recognised due to minimum funding   95 65  remeasurement of pension liability 214 –
  restated for the impact of ias 19 revised
group balance sheet
2014 
£m
2013
£m
fair value of scheme assets 1865 1732  present value of scheme liabilities 2058 1849
actuarial deficit in the schemes 193 117
additional liability recognised due to minimum funding 232 131
total pension liability 425 248
associated deferred tax asset 85 50  the movement in the fair value of the scheme assets in the period is as follows
scheme assets
2014 
£m
2013
 £m
fair value of scheme assets at beginning of period 1732 1610  interest income 76 69  remeasurement  gain
  – return on scheme assets excluding amounts included in net finance charge 80 78  employer  contributions 49 41  benefits paid 70 64
administration  costs 2 2
at end of period 1865 1732  changes in the present value of defined benefit obligations are as follows
defined benefit obligation
2014
 £m
2013
 £m
present value of defined benefit obligation at beginning of period 1849 1698
interest cost 80 72
benefits paid 70 64  remeasurement  losses
  – effect of changes in demographic assumptions 45 122
  – effect of changes in financial assumptions 154 21
at end of period
a
2058 1849
a    the defined benefit obligation comprises £24m 2013 £22m relating to the mabetus unfunded plan and £2034m 2013 £1827m relating to the funded plans
mitchells  butlers plc  annual report and accounts 2014 87
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 8 pensions continued
the major categories and fair values of scheme assets of the mabpp and mabepp schemes at the end of the reporting period are as follows
2014 
£m
2013
£m
cash and equivalents 11 11  equity instruments 588 545  debt instruments
  – bonds 1215 1120    – emerging market debt 45 45    – absolute return bond funds 194 188    – gilt repurchase transactions 189 190
property 1 5  gold 2 3  forward foreign exchange contracts 2 5  fair value of assets 1865 1732  the actual investment return achieved on the scheme assets over the period was 95 2013 92 which represented a gain of £154m 2013 £145m
virtually all equity instruments bonds emerging market debt and gold have quoted prices in active markets absolute return bonds funds gilt   repurchase transactions and forward foreign exchange contracts are classified as level 2 instruments and property is classified as a level 3 instrument   in the 52 weeks ended 27 september 2014 the group paid £6m 2013 £5m in respect of the defined contribution arrangements with an   additional £1m 2013 £nil outstanding as at the period end
at 27 september 2014 the mabpp owed £2m 2013 £1m to the group in respect of expenses paid on its behalf this amount is included     in other receivables in note 16
9 exceptional items
notes
2014
 52 weeks
 £m
2013 
52 weeks
restated 
£m
operating exceptional items
movement in the valuation of the property portfolio
  – impairment arising from the revaluation 25 12
  – other impairment a 11 17
  – impairment of lease premium 1 –  net movement in the valuation of the property portfolio   37 29
other exceptional items
  – acquisition of orchid pubs  dining limited and midco 1 limited b 12 –  total exceptional items before tax 49 29
tax credit relating to above items 8 7  tax credit in respect of change in tax legislation note 11 c – 18  total tax credit 8 25  total exceptional items after tax 41 4
  restated for the impact of ias 19 revised and presentation of pension finance charge
a  impairment of short leasehold and unlicensed properties where their carrying values exceed their recoverable amount
b  relates to integration costs and legal and professional fees incurred in the acquisition of orchid pubs  dining limited and midco 1 limited on 15 june 2014
c    the prior year deferred tax credit relates to the enactment of legislation on 17 july 2013 which lowered the uk standard rate of corporation tax from 23 to 20 with effect from     1 april 2015
10 finance costs and revenue
2014
 52 weeks
 £m
2013 
52 weeks
restated 
£m
finance costs
securitised and other debt – loans and receivables 132 130
finance revenue
interest receivable – cash 1 2  net pensions finance charge note 8 10 11
  restated for the impact of ias 19 revised see note 8
mitchells  butlers plc  annual report and accounts 2014 88
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued 11 taxation
2014
 52 weeks
 £m
2013 
52 weeks
restated 
£m
tax charged in the income statement
current tax
  – uk corporation tax 29 34    – amounts underover provided in previous years 9 14  total current tax charge 38 20  deferred tax
  – origination and reversal of temporary differences 1 1
  – adjustments in respect of previous years 7 11
  – change in tax rate – 18  total deferred tax credit note 20 8 6
total tax charged in the income statement 30 14
  restated for the impact of ias 19 revised see note 8
2014
 52 weeks
 £m
2013 
52 weeks
restated 
£m
tax relating to items recognised in other comprehensive income
deferred tax
items that will not be reclassified subsequently to profit or loss
  – unrealised gains due to revaluations – revaluation reserve 12 16    – unrealised gains due to revaluations – retained earnings 2 11    – remeasurement of pension liability 43 11
33 16  items that may be reclassified subsequently to profit or loss
  – cash flow hedges
    – lossesgains arising during the period 12 11
    – reclassification adjustments for losses included in profit or loss 10 19
2 30
total tax creditcharge recognised in other comprehensive income 35 14
  restated for the impact of ias 19 revised see note 8
reconciliation of the total tax charge
the tax charge in the income statement for the period is higher 2013 lower than the standard rate of corporation tax in the uk the differences   are reconciled below
2014
 52 weeks
 £m
2013 
52 weeks
restated 
£m
profit before tax 123 142  accounting profit multiplied by the uk standard rate of corporation tax of 220 2013 235 27 33  expenses  not  deductible  3 3  income not taxable   2 1
adjustments in respect of previous years 2 3
tax credit in respect of change in tax rate – 18
total tax charge reported in the income statement 30 14    restated for the impact of ias 19 revised see note 8
factors which may affect future tax charges
the finance act 2013 was enacted on 17 july 2013 and reduced the main rate of corporation tax from 23 to 20 from 1 april 2015 the effect     of this change has been reflected on the deferred tax balance shown in note 20
mitchells  butlers plc  annual report and accounts 2014 89
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 12 earnings per share
basic earnings per share eps has been calculated by dividing the profit or loss 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 exceptional items see note 9 in order to allow a better understanding     of the underlying trading performance of the group
profit 
£m
basic eps
 pence per 
ordinary
 share
diluted eps 
pence per 
ordinary 
share
52 weeks ended 27 september 2014
profiteps 93 226p 225p
exceptional items net of tax 41 100p 99p
adjusted  profiteps  134 326p 324p
52 weeks ended 28 september 2013 restated
profiteps 128  312p 310p  exceptional items net of tax 4  10p 10p  adjusted  profiteps  132  322p 320p    restated for the impact of ias 19 revised and presentation of pensions finance charge see below and note 8
the weighted average number of ordinary shares used in the calculations above are as follows
2014
 52 weeks
 m
2013 
52 weeks
m
for basic eps calculations 411 410
effect of dilutive potential ordinary shares
  – contingently issuable shares 1 –    – other share options 1 2
for diluted eps calculations 413 412  at 27 september 2014 816685 2013 521591 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 antidilutive for the periods presented
impact of change in accounting policy
ias 19 revised was adopted on 29 september 2013 and has been applied retrospectively as described in note 1 the results for the 52 weeks   ended 28 september 2013 have been restated to reflect these changes the impact of this restatement on the amounts reported for earnings     per share is as follows
profit 
£m
basic eps
 pence per 
ordinary
 share
diluted eps 
pence per 
ordinary 
share
52 weeks ended 28 september 2013
profiteps previously reported 135  329p 327p
impact of ias 19 revised 7 17p 16p
profiteps  restated 128  312p 311p
  adjusted profiteps previously reported 143  349p 347p
impact of ias 19 revised 2 05p 05p
change in presentation of pensions finance charge net of tax 9 22p 22p
adjusted  profiteps  restated 132  322p 320p
mitchells  butlers plc  annual report and accounts 2014 90
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued 13 goodwill and other intangible assets
goodwill 
£m
computer
 software 
£m
total 
£m
cost
at 29 september 2012 7  4  11  additions –  1  1  disposals
a
–  1 1
at 28 september 2013 7  4  11  additions –  6  6  acquired through business combinations note 29 9  –  9  disposals
a
–  2 2
at 27 september 2014 16 8 24 
accumulated amortisation and impairment
at 29 september 2012 5  1  6  provided during the period –  1  1  disposals
a
–  1 1
at 28 september 2013 5  1  6  provided during the period –  1  1  disposals
a
–  1 1
at 27 september 2014 5 1 6 
net book value
at 27 september 2014 11 7 18 
at 28 september 2013 2  3  5  at 29 september 2012 2  3  5  a  includes assets which are fully depreciated and have been removed from the fixed asset register
there are no intangible assets with indefinite useful lives all amortisation charges have been expensed through operating costs
the period of amortisation for computer software ranges between three and seven years with the majority being five years
goodwill has been tested for impairment on a sitebysite basis using forecast cash flows discounted by applying a pretax discount rate of 8   2013 10 for the purposes of the calculation of the recoverable amount the cash flow projections beyond the two year period include 2     2013 2 growth per annum
given the proximity of the orchid acquisition to the period end associated goodwill recognised during the period is excluded from the current   period impairment testing and will be tested for the first time during the 52 week period ended 26 september 2015
mitchells  butlers plc  annual report and accounts 2014 91
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 14 property plant and equipment
land and 
buildings
 £m
fixtures
 fittings and
 equipment
 £m
total
 £m
cost or valuation
at 29 september 2012 3468  953  4421  exchange  differences 1  1  2  additions 45  81  126  disposals
a
18 58 76
revaluation
b
39  8 31  at 28 september 2013 3535  969  4504  exchange  differences 1 1 2
acquired through business combinations note 29 270  9  279  additions 67  90  157  disposals
a
39 107 146
revaluation
b
27  1 26  at 27 september 2014 3859 959 4818 
depreciation
at 29 september 2012 124  449  573  exchange  differences 1  1  2  provided during the period 22  87  109  disposals
a
18 57 75
at 28 september 2013 129  480  609  exchange  differences 1 1 2
provided during the period 18  90  108  disposals
a
34 105 139
at 27 september 2014 112 464 576 
net book value
at 27 september 2014 3747 495 4242 
at 28 september 2013 3406  489  3895  at 29 september 2012 3344  504  3848  a  includes assets which are fully depreciated and have been removed from the fixed asset register
b    the impact of the property revaluation is a net book value increase of £37m 2013 increase of £48m comprising an impairment of £25m 2013 £12m net of a revaluation reserve   credit of £62m 2013 £60m shown in the group statement of comprehensive income in addition a review of the short leasehold and unlicensed property estate has resulted in     an impairment of £11m 2013 £17m see note 9
certain assets with a net book value of £39m 2013 £37m owned by the group are subject to a fixed charge in respect of liabilities held by     the mitchells  butlers executive topup scheme mabetus
cost at 27 september 2014 includes £4m of assets in the course of construction
revaluationimpairment
a policy of valuing the majority of the group’s freehold and long leasehold licensed properties for accounting purposes was adopted on     29 september 2007  short leasehold properties unlicensed properties and fixtures fittings and equipment are held at cost less depreciation     and impairment   the freehold and long leasehold properties have been valued at market value as at 27 september 2014 using information provided by cbre   independent chartered surveyors the valuation was carried out in accordance with the provisions of rics appraisal and valuation standards   ‘the red book’ assuming each asset is sold as part of the continuing enterprise in occupation individually as a fully operational trading entity   the market value has been determined having regard to factors such as current and future projected income levels taking account of location   quality of the pub restaurant and recent market transactions in the sector changes in these assumptions such as the valuation basis applied in   comparable market transactions or the income level generated by a pub could materially impact the valuation of the freehold and long leasehold   properties it is estimated that a £1 change in the ebitda of the freehold and long leasehold properties would generate approximately an £8   movement in their valuation
mitchells  butlers plc  annual report and accounts 2014 92
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued these valuations have been incorporated into the financial statements and the resulting revaluation adjustments have been taken to the   revaluation reserve or income statement as appropriate the impact of the revaluationsimpairments described above is as follows
2014
 52 weeks
£m
2013 
52 weeks
£m
income statement
revaluation loss charged as an impairment 75 63
reversal of past impairments 50 51  total impairment arising from the revaluation 25 12
impairment of short leasehold and unlicensed properties   11 17
36 29
revaluation reserve
unrealised revaluation surplus 169 160  reversal of past revaluation surplus 107 100
62 60  net increase in property plant and equipment 26 31  the valuation techniques are consistent with the principles in ifrs 13 and use significant unobservable inputs such that the fair value   measurement of each property within the portfolio has been classified as level 3 in the fair value hierarchy   the carrying values of property plant and equipment which are not revalued to fair market value are reviewed on an outlet basis for impairment     if events or changes in circumstances indicate that their carrying amount may not be recoverable
the key inputs to valuation on property and equipment are as follows   ebitda multiple range net book value
b
at 27 september 
2014
£m low high
a
number 
of pubs
freehold  properties 70 120 1247 3420  long leasehold properties 50 100 100 304  total revalued properties 50 120 1347 3724  short leasehold properties 174  orchid properties acquired
c
279  unallocated assets
d
65  total property plant and equipment 4242  a    in specific circumstances the value of property derived purely from an income approach misrepresents the underlying property value in these cases a spot value has been applied     to the property rather than a value derived from a multiple applied to the ebitda
b    the carrying value of freehold and long leasehold properties based on their historical cost or deemed cost at transition to ifrs is £2727m and £208m respectively 2013 £2458m   and £201m
c    a separate valuation exercise was undertaken for the acquired orchid sites as part of the fair value accounting exercise see note 29
d    unallocated assets primarily includes freehold properties excluded from revaluation due to recent investment and unlicensed properties
included within property plant and equipment are assets with a net book value of £3597m 2013 £3569m which are pledged as security for     the securitisation debt and over which there are certain restrictions on title
in addition to the above premiums paid on acquiring a new lease are classified separately in the balance sheet at 27 september 2014 an amount   of £1m 2013 £2m was included in the balance sheet
15 inventories
2014
£m
2013
 £m
work in progress
a
3 3  goods held for resale 24 21  total inventories 27 24  a  work in progress is in respect of property developments
mitchells  butlers plc  annual report and accounts 2014 93
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 16 trade and other receivables
2014
£m
2013
 £m
trade receivables 3 2  other  receivables 21 21  prepayments 27 36  other financial assets
a
9 13  total trade and other receivables 60 72  a  other financial assets relate to cash collateral provided by the swap counterparty see note 19
all amounts fall due within one year
trade and other receivables are noninterest bearing and are classified as loans and receivables and are therefore held at amortised cost     trade and other receivables past due and not impaired are immaterial and therefore no further analysis is presented the directors consider     that the carrying amount of trade and other receivables approximately equates to their face value
credit risk is considered in note 19
17 trade and other payables
2014
£m
2013
 £m
current
trade  payables 100 84
other taxation and social security 69 55
accrued  charges 96 84
other  payables 26 27
other financial liabilities
a
9 13
total trade and other payables 300 263
noncurrent
other  payables
b
– 12  a    other financial liabilities relate to cash collateral provided by the swap counterparty see note 19
b    at 28 september 2013 noncurrent other payables comprise an amount held in respect of the group’s gaming machine vat claim a decision was released during 2010 in respect of rank   plc’s gaming claim and this ruling fell in the taxpayer’s favour as a result the group was able to further pursue its own gaming claim which was submitted in april 2006 hmrc agreed to   make a repayment of the existing claim subject to the group providing a guarantee to hmrc that in the event that the existing decision is overturned in a higher court the amount will be   repayable in full the rank case was appealed by hmrc to the european court of justice ecj in 2011 however no final decision was reached on gaming and the case was referred back   to the uk upper tribunal the case progressed through the uk courts and was heard in the court of appeal in may 2013 the decision in this case was released on 30 october 2013 and   found in favour of hmrc rank has subsequently requested to appeal to the supreme court which has now been refused by the court of appeal it is expected that rank will now appeal   directly to the supreme court during the period ended 27 september 2014 the group has repaid an amount of £12m plus interest to hmrc
current trade and other payables are noninterest bearing
18 borrowings
2014
£m
2013
 £m
current
securitised debt
ab
61 57
liquidity facility   147 –  total current 208 57
noncurrent 
securitised debt
ab
2012 2075
total borrowings 2220 2132
a  further details of the assets pledged as security against the securitised debt are given on page 92
b  stated net of deferred issue costs
2014
£m
2013
 £m
analysis by year of repayment
due within one year or on demand 208 57
due between one and two years 73 69
due between two and five years 242 223
due after five years 1697 1783
total borrowings 2220 2132
mitchells  butlers plc  annual report and accounts 2014 94
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued securitised debt
on 13 november 2003 the group refinanced its debt by raising £1900m through a securitisation of the majority of its uk pubs and restaurants   owned by mitchells  butlers retail limited ‘mab retail’ on 15 september 2006 the group completed a further debt ‘tap’ issue to borrow     an additional £655m and refinance £450m of existing debt at lower cost
the loan notes consisted of 10 tranches as follows
principal outstanding
tranche
initial principal 
borrowed
 £m interest
principal 
repayment period
all by instalments
effective
interest rate 

27 september
2014
£m
28 september
2013
£m
expected 
wal
a
a1n 200  floating 2011 to 2028 621
b
  170 178  8 years
a2 550  fixed – 557 2003 to 2028 601  309 324  8 years
a3n 250  floating 2011 to 2028 629
b
  212
c
223
c
8 years
a4 170  floating 2016 to 2028 597
b
  170 170  9 years
ab 325  floating 2020 to 2032 574
b
  325 325  14 years
b1 350  fixed – 597 2003 to 2023 612  175 199  5 years
b2 350  fixed – 601 2015 to 2028 612  350 350  10 years
c1 200  fixed – 647 2029 to 2030 656  200 200  15 years
c2 50  floating 2033 to 2034 647
b  50 50  19 years
d1 110  floating 2034 to 2036 668
b
  110 110  21 years
2555  2071 2129  a  expected weighted average life wal assumes no early redemption in respect of any loan notes
b  after the effect of interest rate swaps
c  a3n notes are us notes which are shown as translated to sterling at the hedged swap rate values at the period end spot rate are £219m 2013 £231m
the notes are secured on the majority of the group’s property and future income streams therefrom all of the floating rate notes are hedged   using interest rate swaps which fix the interest rate payable
interest and margin is payable on the floating rate notes as follows
tranche interest margin
a1n 3 month libor 045
a3n 3 month us libor 045
a4 3 month libor 058
ab 3 month libor 060
c2 3 month libor 188
d1 3 month libor 213
the overall cash interest rate payable on the loan notes is 61 2013 61 after taking account of interest rate hedging and the cost of the   provision of a financial guarantee provided by ambac in respect of the class a and ab notes
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 these include 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 at 27 september 2014 mitchells  butlers retail limited   had cash and cash equivalents of £78m 2013 £99m which were governed by the covenants associated with the securitisation of this amount   £36m 2013 £43m representing disposal proceeds was held on deposit in an account over which there are a number of restrictions the use     of this cash requires the approval of the securitisation trustee and may only be used for certain specified purposes such as capital enhancement   expenditure and business acquisitions
the carrying value of the securitised debt in the group balance sheet is analysed as follows
 
2014
£m
2013
 £m
principal outstanding at beginning of period 2137 2192  principal repaid during the period 58 55
exchange on translation of dollar loan notes 1 –  principal outstanding at end of period 2078 2137  deferred issue costs 9 9
accrued interest 4 4  carrying value at end of period 2073 2132  liquidity facility
under the terms of the securitisation the group holds a liquidity facility of £295m provided by two counterparties as a result of the decrease     in credit rating of one of the counterparties the group has been obliged to draw that counterparty’s portion of the facility during the period     the amount drawn at 27 september 2014 is £147m 28 september 2013 £nil these funds are charged under the terms of the securitisation     and are not available for use in the wider group
the facility which is not available for any other purpose is sized to cover 18 months debt service
mitchells  butlers plc  annual report and accounts 2014 95
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 18 borrowings continued
unsecured revolving credit facilities
during the period the group entered into two revolving credit facilities of £75m each available for general corporate purposes the amount   drawn at 27 september 2014 is £nil 2013 £nil both facilities expire on 31 december 2017 
19 financial instruments
financial risk management
financial risk is managed by the group’s treasury function the group’s treasury function is governed by a board treasury policy statement   which details the key objectives and policies for the group’s treasury management the treasury committee ensures that the treasury policy is   adhered to monitors its operation and agrees appropriate strategies for recommendation to the board the treasury policy statement is reviewed   annually with recommendations for change made to the board as appropriate the group treasury function is operated as a cost centre and is   the only area of the business permitted to transact treasury deals it must also be consulted on other related matters such as the provision of   guarantees or the financial implications of contract terms
an explanation of the group’s financial instrument risk management objectives and strategies is set out below
the main financial risks which impact the group result from funding and liquidity risk credit risk capital risk and market risk principally as a result   of changes in interest and currency rates derivative financial instruments principally interest rate and foreign currency swaps are used to manage   market risk derivative financial instruments are not used for trading or speculative purposes
funding and liquidity risk
in order to ensure that the group’s longterm funding strategy is aligned with its strategic objectives the treasury committee regularly assesses   the maturity profile of the group’s debt alongside the prevailing financial projections this enables it to ensure that funding levels are appropriate   to support the group’s plans
the current funding arrangements of the group consist of the securitised notes issued by mitchells  butlers finance plc and associated liquidity   facility along with two unsecured revolving credit facilities of £75m each the terms of the securitisation and the revolving credit facilities contain   various financial covenants compliance with these covenants is monitored by group treasury
the group prepares a rolling daily cash forecast covering a six week period and an annual cash forecast by period these forecasts are reviewed   on a daily basis and are used to manage the investment and borrowing requirements of the group a combination of cash pooling and zero   balancing agreements are in place to ensure the optimum liquidity position is maintained the group maintains sufficient cash balances or   committed facilities outside the securitisation to ensure that it can meet its mediumterm anticipated cash flow requirements
the maturity table below details the contractual undiscounted cash flows both principal and interest for the group’s financial liabilities     after taking into account the effect of interest rate swaps trade and other payables note 17 are shortterm and excluded from the table
within
 1 year 
£m
12 years
 £m
23 years 
£m
34 years 
£m
45 years
 £m
more than 
5 years
 £m
total
 £m
27 september 2014
a
fixed rate
securitised debt
b
186 188 193 194 193 2472 3426
floating rate
liquidity facility 147 – – – – – 147
28 september 2013
a
fixed rate
securitised debt
b
186 186 188 193 194 2665 3612
a  assumes no early redemption in respect of any loan notes
b  includes the impact of the cash flow hedges
credit risk
the group treasury function enters into contracts with third parties in respect of derivative financial instruments for risk management purposes   and the investment of surplus funds these activities expose the group to credit risk against the counterparties to mitigate this exposure group   treasury operates policies that restrict the investment of surplus funds and the entering into of derivative transactions to counterparties that have     a minimum credit rating of ‘a’ longterm and ‘a1’‘p1’‘f1’ shortterm counterparties may also be required to post collateral with the group   where their credit rating falls below a predetermined level an amount of £9m 2013 £13m of collateral was posted by a swap counterparty within   the securitisation as at 27 september 2014 the amount that can be invested or transacted at various ratings levels is restricted under the policy   to minimise credit risk exposure against individual counterparties investments and derivative transactions are entered into with a range of   counterparties the group treasury function reviews credit ratings as published by moody’s standard  poor’s and fitch ratings current   exposure levels and the maximum permitted exposure at given credit ratings for each counterparty on a daily basis any exceptions are     required to be formally reported to the treasury committee on a fourweekly basis
included in other receivables are amounts due from certain group suppliers included in trade and other payables at the period end are amounts   due to some of these suppliers this reduces the group’s credit exposure
mitchells  butlers plc  annual report and accounts 2014 96
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued the group’s credit exposure at the balance sheet date was
2014
£m
2013
 £m
cash and cash equivalents 255 340
other cash deposits – 25
trade receivables 3 2
other  receivables 21 21
derivatives
a
5 5
a  as disclosed in notes 16 and 17 the group has £9m 2013 £13m of cash collateral which is not included in this balance
capital management
the group’s capital base is comprised of its net debt analysed in note 26 plus total equity disclosed on the face of the group balance sheet     the objective is to maintain a capital base which is sufficiently strong to support the ongoing development of the business as a going concern   including the amenity and cash flow generation of the pub estate by keeping debt see also ‘funding and liquidity risk’ above and headroom against   its debt facilities at an appropriate level the group ensures that it maintains a strong credit position whilst maximising value for shareholders and   adhering to its covenants and other restrictions associated with its debt see note 18 in managing its capital structure from time to time the group   may realise value from noncore assets buy back or issue new shares initiate and vary its dividend payments and seek to vary or accelerate debt   repayments the group’s policy is to ensure that the maturity of its debt profile supports its strategic objectives the board considers the latest   covenant compliance headroom projections and projected balance sheet positions periodically throughout the year based on the advice of the   treasury committee which meets on a fourweekly basis the treasury committee is chaired by the group treasurer and monitors treasury   performance and compliance with boardapproved policies the group finance director is also a member of the committee
total capital at the balance sheet date is as follows
2014
£m
2013
 £m
net debt note 26 1958 1759
total equity 1185 1219
total  capital 3143 2978
market risk
the group is exposed to the risk that the fair value of future cash flows of its financial instruments will fluctuate because of changes in market   prices market risk comprises foreign currency and interest rate risk
foreign currency risk
the group faces currency risk in two main areas
at issuance of the class a3n floating rate notes the group entered into a cross currency interest rate swap to manage the foreign currency exposure   resulting from both the us principal and initial interest elements of the notes the a3n notes form part of the securitised debt see note 18
further to the stepup on the a3n notes on 15 december 2010 the group has additional foreign currency exposure as a result of the increase     in us finance costs a movement of 10 in the us exchange rate would have £nil 2013 £nil impact on the reported group profit and £5m   2013 £5m impact on the reported group net assets
the group has no significant profit and loss exposure as a result of retranslating monetary assets and liabilities at different exchange rates as the group   is predominantly uk based and acquires the majority of its supplies in sterling it has no significant direct currency exposure from its operations
interest rate risk
the group has a mixture of fixed and floating interest rate debt instruments and manages the variability in cash flows resulting from changes     in interest rates by using derivative financial instruments where the necessary criteria are met the group minimises the volatility in its financial   statements through the adoption of the hedge accounting provisions permitted under ias 39 the interest rate exposure resulting from the   group’s  £21bn  securitisation  is  largely  fixed either as  a  result  of  the  notes  themselves  being issued  at  fixed interest rates  or  through  a  combination  of floating rate notes against which effective interest rate swaps are held which are eligible for hedge accounting   the group’s sensitivity to a 100 basis point movement in interest rates is detailed below
 
2014
£m
2013
 £m
interest income
a
2 4  interest  expense
b
2 –  profit impact – 4  derivative financial instruments fair values
c
104 110  total equity 104 114  a  represents interest income earned on cash and cash equivalents these are defined in note 26
b    the element of interest expense which is not matched by payments and receipts under cash flow hedges which would otherwise offset the interest rate exposure of the group
c  the impact on total equity from movements in the fair value of cash flow hedges
mitchells  butlers plc  annual report and accounts 2014 97
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 19 financial instruments continued
derivative financial instruments
cash	flow	hedges
changes in cash flow hedge fair values are recognised in the hedging reserve in equity to the extent that the hedges are effective the cash flow   hedges detailed below have been assessed as being highly effective during the period and are expected to remain highly effective over the   remaining contract lives
during the period a loss of £59m 2013 gain of £53m on cash flow hedges was recognised in equity a loss of £48m 2013 £47m was recycled   from equity and included in the group income statement for the period
cash	flow	hedges	–	securitised	borrowings
at 27 september 2014 the group held 10 2013 10 interest rate swap contracts with a nominal value of £1037m 2013 £1056m designated     as a hedge of the cash flow interest rate risk of £1037m 2013 £1056m of the group’s floating rate borrowings comprising the a1n a3n a4     ab c2 and d1 loan notes
the cash flows on these contracts occur quarterly receiving a floating rate of interest based on libor and paying a fixed rate of 48749     2013 48805 the contract maturity dates match those of the hedged item the 10 interest rate swaps are held on the balance sheet at fair   market value which is a liability of £241m 2013 £228m
at 27 september 2014 the group held one 2013 one cross currency interest rate swap contract with a nominal value of £212m 2013 £223m   designated as a hedge of the cash flow interest rate and currency risk of the group’s a3n floating rate 355m 2013 373m borrowings the cross   currency interest rate swap is held on the balance sheet at a fair value asset of £5m 2013 £5m
the cash flows on this contract occur quarterly receiving a floating rate of interest based on us libor and paying a floating rate of interest     at libor in sterling
the cash flows arising from interest rate swap positions on the same counterparty may be settled as a net position the cross currency interest     rate swap is held under a separate agreement and cash movements for this instrument are settled individually
the fair values of the derivative financial instruments were measured at 27 september 2014 and may be subject to material movements in the   period subsequent to the balance sheet date the fair values of the derivative financial instruments are reflected on the balance sheet as follows
derivative financial instruments – fair value
noncurrent
 assets
 £m
current
 assets 
£m
current
 liabilities
 £m
noncurrent 
liabilities 
£m
total 
£m
cash flow hedges
  – interest rate swaps – – 45 196 241
  – cross currency swap 5 – – – 5 
27 september 2014 5 – 45 196 236
28 september 2013 5  –  46 182 223
the fair value and carrying value of financial assets and liabilities by category is as follows
2014 2013
book
 value 
£m
fair 
value 
£m
book 
value
 £m
fair
 value
 £m
financial assets
  – cash 255 255 365  365    – derivative instruments in designated hedge accounting relationships 5 5 5  5    – loans and receivables 24 24 23  23  financial liabilities
  – amortised cost 2220 2294 2132 2073
  – derivative instruments in designated hedge accounting relationships 241 241 228 228
  – other 195 195 166 166
2372 2298 2133 2074
the various tranches of the securitised debt have been valued using period end quoted offer prices as the securitised debt is traded on an active   market the market value represents the fair value of this debt the fair value of interest rate and currency swaps is the estimated amount which   the group could expect to pay or receive on termination of the agreements these amounts are based on quotations from counterparties which   approximate to their fair market value and take into consideration interest and exchange rates prevailing at the balance sheet date other financial   assets and liabilities are either shortterm in nature or their book values approximate to fair values
  fair value of financial instruments
the fair value of the group’s derivative financial instruments is calculated by discounting the expected future cash flows of each instrument     at an appropriate discount rate to a ‘mark to market’ position and then adjusting this to reflect any nonperformance risk associated with the   counterparties to the instrument
mitchells  butlers plc  annual report and accounts 2014 98
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued ifrs 13 financial instruments requires the group’s derivative financial instruments to be disclosed at fair value and categorised in three levels   according to the inputs used in the calculation of their fair value
    • level 1 instruments use quoted prices as the input to fair value calculations
  • level 2 instruments use inputs other than quoted prices that are observable either directly or indirectly
  • level 3 instruments use inputs that are unobservable
the table below sets out the valuation basis of financial instruments held at fair value by the group at 27 september 2014
level 1
£m
level 2
£m
level 3
£m
total
£m
financial assets
currency swaps – 5 – 5 
financial liabilities
interest rate swaps – 241 – 241
– 236 – 236
20 deferred tax
the deferred tax included in the group balance sheet and group income statement is as follows
2014
£m
2013
 £m
deferred tax liability
accelerated capital allowances 44 46  rolled over and held over gains 137 139  unrealised gains on revaluations 165 153  depreciated nonqualifying assets 7 7  total deferred tax liability 353 345  deferred tax asset
retirement benefit obligations note 8 85 50  sharebased payments 3 2  derivative financial instruments 48 46  nontrade tax losses 13 7  total deferred tax asset 149 105  2014
£m
2013
restated
 £m
deferred tax in the income statement
accelerated capital allowances 2 6  retirement benefit obligations 8 2
rolled over and held over gains 2 11  depreciated nonqualifying assets – 1  unrealised gainslosses on revaluations 6 8
short  term  temporary  differences – 1
nontrade tax losses 6 1
total deferred tax credit in the income statement note 11 8 6    restated for the impact of ias 19 revised see note 8
unrecognised tax losses and tax allowances
at the balance sheet date the group had unused losses of £70m 2013 £9m and unused tax allowances of £47m 2013 £nil available for offset   against future profits the increase in unused losses and tax allowances in the period relates to the acquisition of orchid pubs  dining limited   and midco 1 limited
a deferred tax asset has not been recognised on tax losses with a value of £13m 2013 £1m and tax allowances with a value of £9m 2013 £nil   because it is not certain that future taxable profits will be available against which the group can utilise these benefits these tax losses and tax   credits can be carried forward indefinitely
mitchells  butlers plc  annual report and accounts 2014 99
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 21 provisions
property 
leases 
£m
at 29 september 2012 9  released in the period 2
provided in the period 5  utilised in the period 3
at 28 september 2013 9  released in the period 1
provided in the period 7  utilised in the period 3
at 27 september 2014 12 
onerous property provisions represent the expected unavoidable losses on onerous and vacant property leases and comprise the lower of the     net rent payable or the operating loss after rental costs the provision is calculated on a site by site basis with an estimated period of future losses   ranging from three to five years other contractual dilapidations costs are also recorded as provisions as appropriate over a period of five years     prior to lease expiry
22 called up share capital
2014 2013
number 
of shares £m
number
 of shares £m
allotted called up and fully paid
ordinary shares of 8
13
24p each
at start of period 411011098 35 409923805 35
share capital issued 626787 – 1087293 –  at end of period 411637885 35 411011098 35
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
no dividends have been declared or paid in the period 2013 £nil
details of options granted under the group’s share schemes are contained in note 7 
23 employee share trusts
the company has established two employee share trusts
share incentive plan sip trust
the sip trust was established in 2003 to purchase shares on behalf of employees participating in the company’s share incentive plan under this   scheme eligible employees are awarded free shares which are normally held in trust for a holding period of at least three years after five years   the shares may be transferred to or sold by the employee free of income tax and national insurance contributions the sip trust buys the shares     in the market or subscribes for newly issued shares with funds provided by the company during the holding period dividends are paid directly     to the participating employees at 27 september 2014 the trustees equiniti share plan trustees limited held 1571331 2013 1592802 shares   in the company of these shares 441070 2013 376215 shares are unconditionally available to employees 340256 2013 362927 shares have   been conditionally awarded to employees 771894 2013 832704 shares have been awarded to employees but are still required to be held within   the sip trust and the remaining 18111 2013 20956 shares are unallocated
employee benefit trust ebt
the ebt was established in 2003 in order to satisfy the exercise or vesting of existing and future share options and awards under the executive   share option plan performance restricted share plan short term deferred incentive plan and the sharesave plan the ebt purchases shares     in the market or subscribes for newly issued shares using funds provided by the company based on expectations of future requirements   dividends are waived by the ebt at 27 september 2014 the trustees sanne fiduciary services limited were holding 534356 2013 521295   shares in the company
24 equity reserves
the group’s main operating subsidiary mitchells  butlers retail limited had retained earnings under uk gaap of £234m at 27 september 2014   2013 £227m its ability to distribute these reserves by way of dividends is restricted by the securitisation covenants see note 18
share premium account
the share premium account represents amounts received in excess of the nominal value of shares on issue of new shares
capital redemption reserve
the capital redemption reserve movement arose on the repurchase and cancellation by the company of ordinary shares during prior periods
mitchells  butlers plc  annual report and accounts 2014 100
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued revaluation reserve
the revaluation reserve represents the unrealised gain generated on revaluation of the property estate with effect from 29 september 2007      it comprises the excess of the fair value of the estate over deemed cost net of related deferred taxation
own shares held
own shares held by the group represent the shares in the company held by the employee share trusts
during the period the employee share trusts acquired 500000 2013 1250000 and subscribed for 189859 2013 181578 shares at a cost     of £2m 2013 £5m and released 698269 2013 1448937 shares to employees on the exercise of options and other share awards for a total   consideration of £1m 2013 £2m the 2105687 shares held by the trusts at 27 september 2014 had a market value of £8m 28 september 2013   2114097 shares held had a market value of £9m further details regarding the employee share trusts are given in note 23
hedging reserve
the hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to   hedged future cash flows
translation reserve
the translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries
25 cash flow from operations
2014
52 weeks
 £m
2013 
52 weeks
restated
 £m
operating profit 264 281
add back operating exceptional items note 9 49 29
operating profit before exceptional items 313 310  add back
depreciation of property plant and equipment note 4 108 109  amortisation of intangibles note 4 1 1  cost charged in respect of sharebased payments note 6 2 2  administrative pension costs note 8 2 2  operating cash flow before exceptional items movements in working capital  
and additional pension contributions 426 424  movements in working capital and pension contributions
increasedecrease in inventories 1 2  decreaseincrease in trade and other receivables 15 10
decrease in trade and other payables 3 5
increase in provisions 3 –
additional pension contributions note 8 49 40
cash flow from operations 391 371    restated for the impact of ias 19 revised see note 8
26 analysis of net debt
2014
£m
2013
 £m
cash and cash equivalents see below 255 340  other cash deposits see below – 25  securitised debt note 18 2073 2132
liquidity facility note 18 147 –  derivatives hedging balance sheet debt
a
 note 18 7 8  1958 1759
a    represents the element of the fair value of currency swaps hedging the balance sheet value of the group’s us denominated loan notes see note 18 this amount is disclosed   separately to remove the impact of exchange movements which are included in the securitised debt amount
cash and cash equivalents
cash and cash equivalents comprise cash at bank and in hand including overnight deposits of £255m 2013 £268m and cash deposits with     an original maturity of three months or less of £nil 2013 £72m
other cash deposits
other cash deposits at 27 september 2014 comprise £nil 2013 £25m of cash at bank with an original maturity of three months or more
mitchells  butlers plc  annual report and accounts 2014 101
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 27 movement in net debt
2014 
52 weeks
 £m
2013 
52 weeks
 £m
net decreaseincrease in cash and cash equivalents note 26 85 29  add back cash flows in respect of other components of net debt
transfers from other cash deposits 25 –  repayment of principal in respect of securitised debt 58 55  drawings under liquidity facility 147 –  increasedecrease in net debt arising from cash flows 199 84  movement in capitalised debt issue costs net of accrued interest – 2
increasedecrease in net debt 199  82   opening net debt 1759 1841
closing net debt 1958 1759
28 financial commitments
leases
the vast majority of the group’s leases are industry standard uk pub or commercial property leases which provide for periodic rent reviews     to open market value and enjoy statutory rights to renewal on expiry they generally do not contain conditions relating to rent escalation     rights to purchase concessions residual values or other material provisions of an unusual nature
where sublet arrangements are in place future minimum lease payments and receipts are presented gross
operating lease commitments – group as lessee
total future minimum lease rental payments under noncancellable operating leases are as follows
2014
 £m
2013 
£m
due within one year 47 42
between one and five years 174 158
after five years 452 424
673 624
operating lease receivables – group as lessor
total future minimum lease rental receipts under noncancellable operating leases are as follows
2014 
£m
2013 
£m
due within one year 7 6
between one and five years 22 20
after five years 47 49
76 75
lease income recognised in the year was as follows
2014
52 weeks
 £m
2013 
52 weeks 
£m
standard lease income 9 8
capital commitments
2014
 £m
2013
 £m
contracts placed for expenditure on property plant and equipment not provided for in the financial statements 24 18
29 acquisitions
on 15 june 2014 the group acquired all of the issued share capital in orchid pubs  dining limited and midco 1 limited orchid pubs  dining   limited operates pubs and restaurants in the uk and midco 1 limited operates as a property leasing company the acquisition of these companies   supports the group’s strategy of expanding its foodled operations
at the period end none of the acquired sites had been converted into one of the group’s existing brand formats however a phased conversion   programme will commence during the new financial period
mitchells  butlers plc  annual report and accounts 2014 102
notes to the financial statements
for the 52 weeks ended 27 september 2014 continued the amounts recognised in respect of identifiable assets and liabilities relating to the acquisition were as follows
 £m
land and buildings 270 
fixtures fittings and equipment 9 
inventory 2 
cash and cash equivalents 11 
trade and other receivables 5 
trade and other payables 26
deferred tax liability 9
net identifiable assets 262 
goodwill 9 
total cash consideration 271 
net cash outflow arising on acquisition
cash  consideration 271 
less deferred consideration 2
less cash and cash equivalents acquired 11
258 
goodwill of £9m has arisen on the acquisition of orchid pubs  dining limited and midco 1 limited primarily through the benefits that will     be gained from combining their sites with the group’s existing portfolio of brands and related sites
the trade and other receivables acquired have a fair value of £5m and a gross contractual value of £5m   acquisition costs relating to integration and legal and professional fees amounted to £12m and have been charged to the income statement   during the period see note 9
orchid pubs  dining limited and midco 1 limited have contributed £41m revenue and £6m to the group’s operating profit preexceptionals     for the period between acquisition date and the balance sheet date   30 related party disclosures
transactions between the company and its subsidiaries which are related parties have been eliminated on consolidation   mitchells  butlers plc is the beneficial owner of all of the equity share capital either itself or through subsidiary undertakings of the following   principal operating companies
name of subsidiary country of incorporation country of operation nature of business
mitchells  butlers retail limited england and wales united kingdom leisure retailing
mitchells  butlers retail no 2 limited england and wales united kingdom leisure retailing
mitchells  butlers property limited england and wales united kingdom property  management
mitchells  butlers leisure retail limited england and wales united kingdom service company
mitchells  butlers finance plc england and wales united kingdom finance company
mitchells  butlers germany gmbh
a
germany germany leisure retailing
orchid pubs  dining limited england and wales united kingdom leisure retailing
midco 1 limited england and wales united kingdom property leasing company
standard commercial property developments limited england and wales united kingdom property  development
a  shares held directly by mitchells  butlers plc
  a full list of subsidiary undertakings will be annexed to the next annual return of mitchells  butlers plc to be filed with the registrar of companies
compensation of key management personnel of the group
2014
£m
2013 
£m
shortterm employee benefits 2 2
termination payments – –
sharebased payments – –
pension benefits – –
2 2
only employees of the mitchells  butlers group who are members of the board of directors or the executive committee of mitchells  butlers plc are   deemed to be key management personnel it is the board who have responsibility for planning directing and controlling the activities of the group
movements in share options held by the employees of mitchells  butlers plc are summarised in note 4 of the company accounts
mitchells  butlers plc  annual report and accounts 2014 103
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 2014
52 weeks
 £m
2013
52 weeks
restated 
£m
2012
53 weeks
 
£m
2011
 52 weeks
 £m
2010
 52 weeks 
£m
revenue 1970 1895  1889  1796  1980  operating profit before exceptional items 313 310  304  294  322  operating exceptional items 49 29 72 19 289
total operating profit 264 281  232  275  33  finance costs 132 130 140 141 153
finance  revenue 1 2  2  3  –  net pensions finance charge 10 11 11 5 7
profitloss before taxation 123 142  83  132  127
taxation  chargecredit 30 14 13 7 43  profitloss for the period 93 128  70  125  84
earningsloss per share
basic 226p 312p 17 1p 307p 206p
diluted 225p 310p 170p 305p 206p
adjusted basic 326p 322p 305p 280p 297p
dividends paid and proposed
a
normal dividends £m – –  –  –  –  normal dividends per share – –  –  –  –    restated for the impact of ias 19 revised and presentation of pension finance charge see note 8   a  dividend information represents interim and final dividends for each period presented
adjusted earnings per share is stated after removing the impact of exceptional items and other adjustments as explained in note 1 less tax thereon
mitchells  butlers plc  annual report and accounts 2014 104
five year review 
income statement information notes
2014
 £m
2013
 £m
fixed assets
investments 5 1717 1719  1717 1719  current assets
debtors amounts falling due within one year 6 532 225  other cash deposits – 97  cash and cash equivalents 7 151  539 473  creditors amounts falling due within one year 7 1336 1328
net current liabilities 797 855
net assets before net pension liabilities 920 864  net pension liabilities 2 340 198
net assets 580 666  capital and reserves
called up share capital 8 9 35 35  share premium account 9 24 23  capital redemption reserve 9 3 3  profit and loss account 9 518 605  shareholders’ funds 580 666  signed on behalf of the board on 24 november 2014
alistair darby
tim jones
the accounting policies and the notes on pages 106 to 111 form an integral part of these financial statements
mitchells  butlers plc  annual report and accounts 2014 105
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112
company balance sheet
27 september 2014  registered number 04551498 1 accounting policies
basis of accounting
the financial statements have been prepared under the historical     cost convention the financial statements comply with applicable   accounting standards in the united kingdom
the company has not presented its own profit and loss account     as permitted by section 408 of the companies act 2006
no statement of recognised gains and losses is provided as the only   additional loss is the actuarial movement which is disclosed in note 9
the company’s accounting policies have been applied on a consistent   basis with no changes to policies during the period
fixed asset investments
the company’s investments in group undertakings are held at cost     less provision for impairment except for those amounts designated     as being in a fair value hedge   current taxation
the tax currently payable is based on taxable profit for the period   taxable profit differs from net profit as reported in the profit and     loss account because it excludes items of income or expense that are   taxable or deductible in other periods and it further excludes items     that are never taxable or deductible the company’s liability for current   tax is calculated using tax rates that have been enacted or substantively   enacted at the balance sheet date
deferred taxation
deferred tax assets and liabilities are recognised subject to certain   exceptions in respect of all material timing differences between the   recognition of gains and losses in the financial statements and for     tax purposes   deferred tax assets are recognised to the extent that it is regarded     as more likely than not that they will be recovered
deferred tax is calculated on a nondiscounted basis at the tax rates   that are expected to apply in the periods in which timing differences   reverse based on tax rates and laws enacted or substantively enacted   at the balance sheet date
pension obligations
the company has both defined benefit and defined contribution   pension  arrangements
the actuarial liability recognised in the balance sheet in respect of     the company’s defined benefit arrangements is the present value of   the defined benefit obligation less the fair value of the scheme assets   shown net of deferred tax the cost of providing benefits is determined   using the projected unit credit method as determined annually by   qualified independent actuaries   following guidance from the financial reporting review panel     the total liability recognised in the balance sheet in respect of the   company’s defined benefit arrangements is the greater of the minimum   funding requirements calculated as the present value of the agreed   schedule of contributions and the actuarial calculated liability
there is no current service cost as all defined benefit schemes are   closed to future accrual the interest cost and the expected return     on assets are shown as a net amount within finance income or     expense actuarial gains and losses are recognised immediately     in equity curtailments and settlements relating to the company’s   defined benefit plan are recognised in the period in which the   curtailment or settlement occurs
for the company’s defined contribution arrangements the charge   against profit is equal to the amount of contributions payable
sharebased compensation
the company operates a number of equitysettled sharebased   compensation plans whereby subject to meeting any relevant   conditions employees are awarded shares or rights over shares     the cost of such awards is measured at fair value excluding the effect   of non marketbased vesting conditions on the date of grant the   expense is generally recognised over the vesting period and is adjusted   for the estimated effect on the number of shares that will eventually   vest of non marketbased vesting conditions and forfeitures due to   employees leaving the employment of the company fair values are   calculated using either the blackscholes binomial or monte carlo   simulation models depending on the conditions attached to the   particular share scheme
foreign currencies
transactions in foreign currencies are recorded at the exchange rates   ruling on the dates of the transactions monetary assets and liabilities   denominated in foreign currencies are translated into sterling at the   relevant rates of exchange ruling at the balance sheet date
in accordance with frs 26 the company applies fair value accounting   in order to hedge part of its euro loan with mitchells  butlers germany   gmbh against part of its investment in mitchells  butlers germany   gmbh foreign exchange differences arising on translation on both     of these items using the period end rate are taken to the profit and     loss account the remainder of the investment in mitchells  butlers   germany gmbh is held at cost as described above
profit and loss account
the company recorded a profit after tax of £94m 2013 £77m     less dividends of £nil 2013 £nil
auditor’s remuneration for audit services to the company was £22000   2013 £22000 this is borne by another group company as are any   other  costs  relating  to  nonaudit  services  see  note  5  to  the  consolidated  financial  statements
cash flow statement
the company has taken advantage of the exemption under frs 1     cash flow statements and not produced a cash flow statement
related party transactions
the company has taken advantage of the exemption under frs 8   related party disclosures and not disclosed details of transactions     with wholly owned subsidiaries
2 pensions
the net pension liability of £340m 2013 £198m is shown net of     a deferred tax asset of £85m 2013 £50m   the company is the sponsoring employer of the group’s pension plans   information concerning the pension scheme arrangements operated     by the company and associated current and future contributions     is contained within note 8 on pages 85 to 88 to the consolidated   financial  statements
the company accounts for pensions under frs 17 retirement   benefits prior to the introduction of ias 19 revised disclosure   requirements under frs 17 were equivalent to those under ias 19   employee benefits however following group adoption of ias 19   revised on 29 september 2013 differences in the accounting and   disclosure requirements between frs 17 and ias 19 revised now   arise the impact of this change is described in note 1 to the group   consolidated financial statements on page 75 make reference to     note 8 of the group consolidated financial statements on pages 85     to 88 where appropriate
mitchells  butlers plc  annual report and accounts 2014 106
notes to the company financial statements measurement of scheme assets and liabilities 
minimum	funding	requirements
the results of the 2013 actuarial valuation showed a funding deficit of £572m using a more prudent basis to discount the scheme liabilities than     is required by frs 17 and on 21 may 2014 the company formally agreed a new 10 year recovery plan with the trustees to close the funding     deficit in respect of its pension scheme liabilities the group has agreed to increase contributions from £40m to £45m per annum for three years   effective from 1 april 2013 from 1 april 2016 contributions then increase each year by the rate of rpi capped between 0 and 5 for the   following seven years the group has also agreed to make a further minimum underwritten payment of £40m on terms to be agreed with the   trustees by 30 september 2015 an additional liability is recognised such that the overall pension liability at the period end reflects the schedule   of contributions in relation to a minimum funding requirement should this be higher than the actuarial deficit
actuarial	valuation
the actuarial valuations used for ias 19 revised purposes are based on the results of the latest full actuarial valuation carried out at     31 march 2013 and updated by the schemes’ independent qualified actuaries to 27 september 2014 scheme assets are stated at market     value at 27 september 2014 and the liabilities of the schemes have been assessed as at the same date using the projected unit method     frs 17 requires that the scheme liabilities are discounted using market yields at the end of the period on high quality corporate bonds
the principal financial and mortality assumptions used at the balance sheet date have been updated to reflect changes in market conditions     in the period and more up to date mortality assumptions in line with those used in the 2013 actuarial valuation as agreed on 21 may 2014     these assumptions and a sensitivity analysis are disclosed in note 8 to the group consolidated financial statements on page 86
the longterm rates of return on assets at 27 september 2014 shown below form the basis of the calculation of the expected return on pension   scheme assets for the 2015 financial year the 2013 rates shown are used in calculating the 2014 expected return
to develop the expected longterm rate of return on assets assumptions the group considered the current level of expected returns on riskfree   investments primarily government bonds the historical level of the risk premium associated with the other asset classes in which the portfolio     is invested and the expectations for future returns of each asset class the expected return for each asset class is weighted based on the asset   allocation to develop the expected longterm rate of return on assets assumption for the portfolio resulting in a weighted average assumption     of 47 2013 42 the actual investment return achieved on the scheme assets over the period was 95 2013 92 which represented a     gain of £154m 2013 £145m
the combined assets of the mabpp and mabepp  their expected rates of return and the value of the pension scheme assets and liabilities at the   balance sheet date can be summarised as follows
2014 2013
longterm 
rates of return 
expected

value 
£m
longterm 
rates of return 
expected

value 
£m
equities 70 588 74  545  bonds 31 1215 36  1120  other 48 62 50  67  fair value of assets 1865 1732  present value of scheme liabilities 2058 1849
actuarial deficit in the schemes 193 117
additional liability recognised due to minimum funding requirements 232 131
total pension liability   425 248
associated deferred tax asset 85 50  net pension liability 340 198  the following amounts relating to the defined benefit and defined contribution arrangements have been recognised in the company’s financial   statements in the period
profit and loss account
2014 
52 weeks
 £m
2013 
52 weeks
 £m
interest  received
expected return on pension scheme assets 81 67  interest on pension scheme liabilities 80 72
net interest in respect of pensions 1 5
profit and loss account reserves
2014 
52 weeks
 £m
2013 
52 weeks
 £m
actual return less expected return on pension scheme assets 73 78  changes in assumptions underlying the present value of the scheme liabilities 199 143
actuarial loss recognised 126 65
movement in pension liability recognised due to minimum funding requirements 101 57  total movement in pension liability recognised reserves 227 8
mitchells  butlers plc  annual report and accounts 2014 107
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 2 pensions continued
the movement in the fair value of the schemes’ assets in the period is as follows
scheme assets
2014
£m
2013
£m
fair value of scheme assets at beginning of period 1732 1610  expected return on plan assets 81 67  employer  contributions 49 41  benefits paid 70 64
actuarial gain recognised 73 78  at end of period 1865 1732  changes in the present value of defined benefit obligations are as follows
scheme liabilities
2014
£m
2013
£m
present value of defined benefit obligation at beginning of period 1849 1698
interest cost on benefit obligations 80 72
benefits paid 70 64  actuarial loss recognised 199 143
at end of period
a
2058 1849
a    the defined benefit obligation comprises £24m 2013 £22m relating to the mabetus unfunded plan and £2034m 2013 £1827m relating to the funded plans
3 employees and directors
2014 
52 weeks
2013 
52 weeks
average number of employees including parttime employees 2 2
employees of mitchells  butlers plc consist of executive directors
4 sharebased payments
the charge recognised for sharebased payments in the period is £nil 2013 £nil which comprises share option schemes and share awards     to the employees of the company
details of employee share schemes and options granted over the shares of the company are included under note 7 of the consolidated     financial  statements
movements in the awards and options outstanding under these schemes in respect of the employees of the company for the periods ended     27 september 2014 and 28 september 2013 are as follows
short term
 deferred 
incentive plan
performance
 restricted
 share plan
share 
incentive 
plan
number of 
shares 
thousands
number of 
shares
 thousands
number of
 shares
 thousands
outstanding at 29 september 2012 13  813  2  granted –  477  1  exercised 7 201 –  forfeited –  –  1
expired –  612 –  outstanding at 28 september 2013 6  477  2  granted 80  407  2  exercised 6 –  –  forfeited –  –  –  expired –  –  –  outstanding at 27 september 2014 80 884 4 
fair value of options granted during the period pence
a
at 27 september 2014 4093 2263 3980 
at 28 september 2013 –  2139  3709  weighted average remaining contract life years
at 27 september 2014 07 36 –
b
at 28 september 2013 02  42  –
b
a  fair value is calculated on the date of grant
b  sip shares are capable of remaining within the sip trust indefinitely while participants continue to be employed by the group
mitchells  butlers plc  annual report and accounts 2014 108
notes to the company financial statements
continued sharesave plan
number of 
shares 
thousands
weighted 
average 
option price
 pence
options outstanding at 29 september 2012 13  1820  granted –  –  exercised –  –  forfeited 8 1820  expired –  –  options outstanding at 28 september 2013 5  1820  granted 8  3280  exercised –  –  forfeited –  –  expired –  –  options outstanding at 27 september 2014 13 2732 
options exercisable
at 27 september 2014 – – 
at 28 september 2013 –  –  fair value of options granted during the period pence
a
at 27 september 2014 123 
at 28 september 2013 –
range of prices pence of options outstanding
at 27 september 2014 1820 – 3280 
at 28 september 2013 1820  a  fair value is calculated on date of grant
the weighted average share price during the period was 4225p 2013 3553p
summarised information about options over the company’s shares outstanding at 27 september 2014 under the share option schemes in respect   of the employees of the mitchells  butlers group is shown on page 85
5 fixed asset investments
shares in
subsidiary
undertakings 
£m
cost
at 29 september 2012 1748  exchange  differences  1   at 28 september 2013 1749  exchange  differences   2
at 27 september 2014 1747 
provision
at 29 september 2012 30  provided during period –  at 28 september 2013 30  provided during period –  at 27 september 2014 30 
net book value
at 27 september 2014 1717 
at 28 september 2013 1719  at 29 september 2012 1718  mitchells  butlers plc is the beneficial owner of all of the equity share capital of companies within the group either itself or through subsidiary   undertakings see note 30 of the consolidated financial statements   a full list of subsidiary undertakings will be annexed to the next annual return of mitchells  butlers plc to be filed with the registrar of companies
mitchells  butlers plc  annual report and accounts 2014 109
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 6 debtors
2014
 £m
2013 
£m
amounts owed by subsidiary undertakings 532 224  prepayments – 1  532 225  all amounts fall due within one year
7 creditors amounts falling due within one year
2014
 £m
2013 
£m
bank overdraft 28 26  amounts owed to subsidiary undertakings 1306 1300  other creditors 2 2  1336 1328  8 called up share capital
details of the amount and nominal value of allotted called up and fully paid share capital are contained in note 22 to the consolidated     financial  statements
9 capital and reserves
profit and loss account reserve
share 
capital 
£m
share 
premium 
£m
capital 
redemption
 reserve 
£m
own shares
 £m
other 
£m
total 
£m
at 29 september 2012 35 21 3 3 550  547  share capital issued –  2  –  –  –  –  purchase of own shares –  –  –  5 –  5
credit in respect of employee share schemes –  –  –  –  2  2  release of own shares –  –  –  4  2 2  actuarial loss on pension schemes –  –  –  –  65 65
movement in pension liability due to minimum funding   requirements –  –  –  –  57  57  deferred tax relating to actuarial loss –  –  –  –  7  7  deferred tax relating to movement in pension liability     due to minimum funding requirements –  –  –  –  17 17
profit after taxation –  – – – 77  77
at 28 september 2013   35  23  3  4 609  605  share capital issued –  1  –  – – –
purchase of own shares –  –  –  2 –  2
release of own shares –  –  –  2  1 1  credit in respect of employee share schemes –  –  –  –  2  2  actuarial loss on pension schemes –  –  –  –  126 126
movement in pension liability due to minimum funding   requirements –  –  –  –  101 101
deferred tax relating to actuarial loss –  –  –  –  25  25  deferred tax relating to movement in pension liability     due to minimum funding requirements –  –  –  –  20  20  profit after taxation –  – – – 94  94  at 27 september 2014 35 24 3 4 522 518 
the profit and loss account reserve is wholly distributable after the deduction for own shares
mitchells  butlers plc  annual report and accounts 2014 110
notes to the company financial statements
continued 10 deferred tax asset
£m
at 29 september 2012 63  charged to profit and loss account   3
charged to profit and loss account reserves   10
at 28 september 2013 50  charged to profit and loss account 10
credited to profit and loss account reserves 45  at 27 september 2014 85 
analysed as tax timing differences related to
2014
 £m
2013 
£m
pensions 85 50
the pension liability is shown net of the associated deferred tax asset see note 2
further information on the changes to tax legislation are provided in note 11 to the consolidated financial statements
mitchells  butlers plc  annual report and accounts 2014 111
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112 contacts
registered office
27 fleet street
birmingham b3 1jp
telephone 44 0121 498 4000
fax 44 0121 233 2246
registrar
equiniti
aspect house
spencer  road
lancing
west sussex bn99 6da
from the uk
telephone 0871 384 2065   fax 0871 384 2100
from nonuk jurisdictions
telephone 44 0121 415 7088
fax 44 01903 833 113
for those with hearing loss a textphone is available on     0871 384 2255 for uk callers with compatible equipment
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key dates
these dates are indicative only and may be subject to change for the current status visit 
the financial calendar on our website at wwwmbplccominvestors
annual general meeting 29 january 2015
announcement of halfyear results may 2015
preclose trading update september  2015
2015 final results announcement november 2015
awt average weekly take
the average sales per site per week calculated as total sales excluding   vat divided by the average number of sites trading during the period   divided by the number of weeks in the period
bond amortisation
the paying off of debt with a fixed repayment schedule in regular   instalments over a period of time
cash flow from operations
net cash flow resulting directly from regular operations
ebit
earnings before interest and tax
ebitda
earnings before interest tax depreciation and amortisation
ebitdar
earnings before interest tax depreciation amortisation and rent
epos
electronic point of sale
fsa
food standards agency
ias
international  accounting  standards
internal rent
a notional rent charge made against freehold properties to align   internal  performance  measurement  across  freehold  and  leasehold  sites
likeforlike sales growth
likeforlike sales growth includes the sales performance against the   comparable period in the prior year of all uk managed pubs bars     and restaurants that were trading in the two periods being compared
operating profit
earnings before interest and tax
red book valuation
a valuation conducted in compliance with the valuation standards     of the royal institution of chartered surveyors
securitisation
a means of raising finance secured on a particular group of assets     and the associated cash flows derived from those assets
mitchells  butlers plc  annual report and accounts 2014 112
shareholder 
information
glossary mitchells  butlers’ comprehensive 
website gives you fast direct access to  
a wide range of company information
our brands
all of our popular brands have their own 
websites helping our customers to find  
the information they need straight away 
latest food and drink menus news and  
offers email newsletters and details of  
new openings are all available
alex
wwwalexgastrode
all bar one
wwwallbaronecouk
browns
wwwbrownsrestaurantscouk
castle
wwwmbplccomfindapub
crown carveries
wwwcrowncarveriescouk
ember inns
wwwemberinnscouk
harvester
wwwharvestercouk
innkeeper’s lodge
wwwinnkeeperslodgecouk
miller  carter
wwwmillerandcartercouk
nicholson’s
wwwnicholsonspubscouk
o’neill’s
wwwoneillscouk
oak tree pubs
wwwmbplccomfindapub
premium country pubs
wwwmbplccomfindapub
sizzling pubs
wwwsizzlingpubscouk
toby carvery
wwwtobycarverycouk
vintage inns
wwwvintageinncouk
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to find out more go to wwwmbplccom
strategic report 2–33 governance 34–66 financial statements 67–111 shareholder information 112
mitchells  butlers online
design and production gather
printed by cpi colour
the paper used in this report is  
derived from sustainable sources mitchells  butlers plc
27 fleet street
birmingham b3 1jp
tel 44 0121 498 4000
fax 44 0121 233 2246
wwwmbplccom
wwwmbplccom mitchells  butlers plc annual report and accounts 2014


Summary:
 our market opportunities
special
  browns
  miller  carter
family
  harvester
everyday social
  ember inns
heartland
  crown carveries
  oaktree pubs
upmarket social
  all bar one
  castle
  vintage inns
  premium country pubs
  toby carvery
  sizzling pubs
  o’neill’s
  nicholson’s
  alex
we operate a wide range of brands and 
formats which offer food and drink across 
a broad spectrum of price points and 
occasions from a casual meeting with 
friends to special occasion dining we have 
identified five market spaces accounting 
for around half of the £78bn eating and 
drinkingout market on which to focus
1
2
3
4
5
everyday social
special
upmarket social
heartland
3
2
1
5
4
family
 “since i joined mitchells  butlers 
in october 2012 we have been 
committed to the fundamentals 
of our business plan i remain 
confident that this is the right 
plan and will deliver sustainable 
profit growth and future 
shareholder value”
alistair darby
chief	 executive
we are the uk’s largest operator of 
managed restaurants and pubs with  
a high quality freehold estate and a 
portfolio of strong brands our strategy is 
to focus on the longterm growth of food 
within the £78bn eating and drinkingout 
market with around threequarters of our 
turnover coming from guests eating in our 
pubs and restaurants
during the year we took a significant step to 
grow our business by acquiring 173 pubs from 
the orchid group this acquisition enables  
us to create value through the conversion  
of the majority of these pubs into our own 
brands and formats a reduction in its central 
overheads and the realisation of purchasing 
synergies across the whole estate 
75
around threequarters of our sales 
come from guests eating in our pubs 
and restaurants
in a challenging year we continued to  
position the business for future growth  
whilst delivering increased earnings per share 
of 12 we have delivered sales growth 
underpinned by volumes rather than price 
invested further capital in both expansion  
into new sites and enhancement of amenity 
and continued to upgrade our key systems 
together with the quality of our estate and  
our people we have confidence going into  
the year ahead
in this review i will update you on our market 
and our wellestablished business model and 
strategy as well as our progress against the key 
measures we use to monitor our performance
mitchells  butlers plc annual report and accounts 2014 6
chief executive’s statement our vision
what we want to be famous for
our mission
what we set out to achieve
values
how the business behaves
our market
where we operate
— page 8
business model
how the business delivers value
— page 10
guests love to eat and drink with us
consistently deliver great service to our guests to drive repeat visits and 
recommendation while delivering great financial results and shareholder returns
our business model is designed to maximise 
revenue and profit from our operations we 
believe that by adopting industryleading 
practices recruiting training and retaining  
the best people and by focusing on excellent 
customer service we will deliver longterm 
growth in profits and shareholder value
we recognise that we operate in a dynamic 
market with everchanging circumstances 
our market is in aggregate a mature one 
with growth expected broadly to track gdp 
and consumer expenditure however there 
are dynamics within this market on which 
we can capitalise namely the
 • growth in branded outlets
 • continued growth in eating out
 • consumers’ continued focus on value
 • consumers’ demand for eating out at any 
time of day 
 • passion
 • respect
 • innovation
 • drive
 • engagement
our strategy
how we will achieve our mission
— page 12
our strategic priorities remain unchanged to
 • focus the business on the most attractive 
market spaces within eating and drinkingout
 • develop superior brand propositions with 
high levels of consumer relevance
 • recruit retain and develop engaged people 
who deliver excellent service for our guests
 • generate high returns on investment 
through scale advantage
 • maintain a sound financial base
kpis
how we monitor our success
— page 22
we measure our performance and progress 
against our strategy through five key 
performance indicators including two 
nonfinancial kpis relating to our ability to 
retain our employees and to the extent that 
our guests would recommend our businesses 
to their friends and family these kpis are 
reviewed at every executive committee 
meeting and are central to our understanding 
of our performance
risks
how we manage our markets  
and operating environment
— page 18
this section highlights the principal risks that 
affect the company together with the key 
mitigating activities in place to manage those 
risks key risks identified are reviewed and 
assessed by the risk committee in terms
of their likelihood and impact in conjunction 
with associated risk mitigation plans
through our research we have identified  
five market spaces in which our businesses 
operate we tailor our approach on the  
basis of the different dynamics of each  
of these spaces
 • special
 • family
 • everyday social
 • heartland 
 • upmarket social
mitchells  butlers plc annual report and accounts 2014 7
strategic report 2–33 governance  34–66 financial statements  67–111 shareholder  information  112