Roger Carr Roger Carr 4 th December 2003 Chairman
Responsibility statement The directors of Mitchells & Butlers plc accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors of Mitchells & Butlers plc (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information. Cautionary note regarding forward-looking statements This announcement contains certain forward-looking statements as defined under US law (Section 21E of the Securities Exchange Act of 1934). These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "target", "expect", "intend", "believe" or other words of similar meaning. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Factors that could affect the business and the financial results are described in Item 3 Key Information - Risk Factors in the Mitchells & Butlers plc Form 20-F filed with the United States Securities and Exchange Commission on 28 March 2003. 2
Agenda Introduction Roger Carr (Chairman) Financial Results Karim Naffah (Finance Director) Tim Clarke (Chief Executive) Actions and Priorities Questions & Answers 3
Highlights Unlocking Value � Demerger and benefit of focus � Efficient balance sheet restructuring � Prudent use of capital Ongoing Priorities � Stimulation of organic growth � Strengthening of profitability � Maximise cash generation and return on capital � Reward shareholders 4
Karim Naffah Karim Naffah Finance Director 4 th December 2003
Financial Highlights � Turnover £1,513m up 2% � EBITDA £374m flat � Operating profit £275m down 5% � Profit before tax £199m* down 1% � Net Operating Cashflow £241m** up £106m � EPS 18.4p* down 0.1p � Final dividend per share 5.65p *On a proforma basis ** Before interest, tax and dividends 6
Pro forma - Key Assumptions A Reminder � As if separation had occurred on 1 st October 2001 � No adjustments to operating profit � Debt position worked backwards to reflect cashflow � Interest based on separation bank facilities � Taxation reflects increased interest charge � All one-off items relating to separation excluded � Weighted average number of shares 735m (2002: 734m) 7
Pro forma Results FY 03 FY 02 £m £m EBITDA 374 375 - 0.3% Operating Profit 275 289 - 4.8% Interest (76) (86) PBT 199 201 - 1.0% Tax (64) (65) Earnings 135 136 - 0.7% EPS 18.4p 18.5p 8
Operating Performance FY 03 FY 02 £m £m Turnover Pubs & Bars 877 866 + 1.3% Restaurants 619 609 + 1.6% Other 17 6 1513 1481 + 2.2% Operating Profit Pubs & Bars 177 190 - 6.8% Restaurants 96 98 - 2.0% Other 2 1 275 289 - 4.8% 9
Key Operating Statistics � Food sales : up 3% � Food mix 29.5% sales : up 0.5% points � Outlet staff costs : 24% of sales � Retail staff productivity : up +4.5% � Support cost savings of £5m in second half Net retail operating margin 18.2% 10
Margin Movements A year of tw o halves H1 H2 FY Sales Growth + 0.4% + 2.6% + 1.4% Ave. Selling Price* c.+ 2% c.- 2% Flat Movement in % Gross Margins + ve - ve Flat Movement in Net Margins - 1.3% pts - 1.1% pts - 1.2% pts Adjusted for Easter - 0.8% pts - 1.6% pts - 1.2 % pts � Additional regulatory costs equivalent to 1.2% pts of margin � Promotional sales activity skewed towards second half * Food & Drink 11
Retail Sales Grow th 3% FY - 2.4% FY - 0.4% FY + 1.4% 2% H2 1% H2 H1 H2 0% Total H1 -1% H1 -2% Same Outlet* -3% -4% Uninvested* -5% 76% of pubs +18% = 94% of pubs +6% = 100% of pubs NB. Same outlet = uninvested + invested *Adjusted to include Easter in H1 12
Like-for-Like Sales FY 03 H2 03* Same Outlet (i.e. Invested + Uninvested) Residential +0.9% +3.3% High Street - 3.2% - 0.6% Total - 0.4% + 1.8% Uninvested Residential - 1.5% + 0.8% High Street - 5.2% - 3.0% Total - 2.4% - 0.1% * Adjusted to exclude Easter 13
2003 Expansionary Capital Residential Locals Pub Restaurants £22m £32m Drinks Food led led £13m £2m High Street Restaurants City Centre Note: UK only - excludes Hollywood Bowl 14
Performance by Segment Residential Locals Pub Restaurants Inc. ROI 15% Inc. ROI 14% Drinks Food led led Inc. ROI 13% Inc. ROI 11% High Street Restaurants City Centre Note: UK only - Excludes Hollywood Bowl *Cumulative £1bn expansionary investment over the last 10 years 15
Strong Cash Returns 12 months to 30 September 2003 £m £m CROCCE NOPAT EBIT 275 275 Depreciation/Amortisation 99 EBITDA 374 Cash Tax (at 21% of EBIT)* (58) (58) Cash Return 316 217 Average Net Operating Assets 3484 3484 Accumulated Depreciation 225 8% 10% 10% 8% Revaluations (741) (741) Goodwill written off 50 50 Cash Capital Employed 3018 2793 *Unleveraged tax rate (including and benefit of pensions, exceptional costs and demerger related items, estimated rate for 2004 c.26%) 16
Net Cashflow FY 03 FY 02 £m £m EBITDA 374 375 Working capital movement (3) (4) Capital Expenditure (151) (256) Disposal proceeds 48 30 Net Operating Cashflow 268 145 + 123 Additional Pension Contributions (27) (10) Net Operating Cashflow inc. pensions 241 135 + 106 Year end net debt was £1,228m 17
Exceptional items - P & L Memo FY 03 FY 04 £m £m De-merger costs 32 Bid defence costs 10 Syndicated loan to support demerger 8 2 Refinancing fees 4 1 SNR abortive fees 1 55 3 Tax credit* (31) Earnings Impact 24 * Including benefit of group relief from SXC of £75m 18
Securitisation - Headlines � Largest corporate securitisation to date £1.9bn raised � � Cost effective long term fixed rate finance Cash Interest cost : 6% � £24m costs amortised � Enables £500m return to shareholders � 12 for 17 share consolidation � 520m issued shares post consolidation � Funds returned on 8 December � � Appropriate business flexibility 19
Securitisation - Key Terms Flexibility to: � Maintain progressive dividend policy Free cashflow to debt service covenant ≥ 1.3x’s � � Continue to churn the estate Disposals 25% EBITDA + ability to re-set � unlimited with repayment of allocated debt � � Maintain asset quality Minimum maintenance expenditure � 6.4% Turnover (capital + revenue) � Compatible with strategy for long term organic growth 20
Categories of Expenditure FY 03 Revenue Repairs P & L £35m Annual day-to-day repairs � Expensed through Profit & Loss Maintenance Capital Minor maintenance spend � Repairs / maintenance work £78m Refresh spend � Updates existing offer in line with refresh cycle Capital Expansionary Capital Development project � Changes consumer offer £73m � Increases trading area Acquisition Capital � New site * Maintenance Covenant = Revenue Repairs + Maintenance Capital 21
Appropriate financial structure � Net debt (post return of funds) c.£1.8bn � Market cap gearing 150%* � Net debt : EBITDA < 5x’s � Interest cover >2x’s � Dividend cover >2x’s** NB. All ratios based on Mitchells & Butlers plc results for y/e 2003 and net debt of £1.8bn * Based on share price on 4 December 2003 ** Dividend cover based on 9.5 pence per share in 2004 and earnings for y/e 2003 22
Dividend Policy Important Part of Shareholder Returns � 2003 Final: 5.65p � 2004 Interim - 2.85p 9.5p Final - 6.65p Underpinned by strong cash flow � Positive top line growth � Real growth in underlying earnings � Confidence in medium term prospects Progressive policy to deliver real dividend growth 23
Summary � Solid set of results in an eventful year � Optimal financing structure now in place � £500m returned to shareholders � Continued focus on cash control and returns � Emphasis on driving profitable sales growth � Commitment to growth in dividends 24
Tim Clarke Tim Clarke Chief Executive 4 th December 2003
Value Creating Operating Actions � Driving profitable sales growth � Raising productivity and reducing costs � Raising asset productivity through brand and format evolution � Proactive asset management Driving strong cash returns, earnings growth and freehold property appreciation 26
Delivering Customer Value to Enhance Asset Productivity and Returns Sales Generating Grow ing Sales Driving Actions Volumes Returns � Control trials � Range � Enhancing asset � Growing cash productivity � Price gross profits � Mitigating external � Promotions � Mix enhancement costs � Service � Productivity � Defending improvements operating margins � Amenity � Purchasing gains Building volume to extract profit opportunities from outlet and corporate scale 27
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