Mitchells & Butlers plc

Right. Good morning, ladies and gentlemen. Bang on 8.30, so we'll start. Welcome to the interim results presentation for Mitchells and Butlers. Our first half is a tale of two quarters, with quarter one being very strong, culminating with a great festive period, followed by quarter two that was impacted by poor year-on-year weather and to a lesser extent by the macroeconomic backdrop. That's why we're delighted with our first half year results, as despite quarter two, softer growth in quarter two, and despite the impact of incremental employers' national insurance and the very high cost of stake, we managed to bring profit in just slightly ahead of expectations and slightly ahead of last year. To us, that demonstrates the power of our Ignite program and the work done on cost mitigation. And as we believe the macro issues are temporary, we are maintaining our focus on the midterm, where debt service costs significantly reduce, where the business is going to be very well placed. I'm delighted to say that we're joined today by Emma Harris, our new CFO. But Tim will deliver his final City of French presentation this morning. But both he and Emma will be available to meet with you after the presentation. So I'll now hand over to Tim, who'll take you through the financial results, and I will turn to add colour to the things we're working on.

Morning. So, as Phil said, I'd like to take through the summary of the financial results for the 32nd and final time. LAUGHTER We feel we had a really good first half of the year, as you can see here on this slide. Sales remained strong, certainly well ahead of the markets, such that despite very stiff cost headwinds that we talked about previously, we were able to maintain our operating profits at 181 million. And EPS, which continues to benefit from a reduction of debt, lower interest charges, was up 3.6%. So that's a strong performance in this market. It starts with sales. I've set out here a flow of the sales on a monthly basis over the last 12 months. Now, clearly, individual months can be quite impacted by calendar events, so you shouldn't read too much into the individuals. But overall, across the first half, we had a like-for-like sales increase of 3.3%, with volumes marginally down and driven mainly by food. Now, within that, we had a very strong start to the year, very strong festivities, as was previously reported. The Q1 life's up 4.5%. Since then, the pace across Q2 is slightly slower, 1.8%. Phil's going to talk a little bit about that. Certainly adverse weather was a key factor within that. But also, you know, it's harder to discern, but possible indications of some sort of response to macroeconomic pressures. We look at how that affected our EBIT. You can see here the various drivers and elements that contribute to our performance. We are increasing capex justified by very strong returns in excess of 30%. Current year projects are dilutive, of course, for us for this year as a result of closure and pre-opening costs. But naturally, they lay the ground for profit growth next year. So we're continuing with that plan and indeed scaling up that plan. We're also driving value from light to light trading and from our Ignite deficiencies. And they all came together to balance what were very high half year disproportionately weighted to the first half. And, you know, we talk a lot about costs at these sessions because it's been very important challenge for us. But I've set out here what we consider to be the pre-mitigation cost headwinds that we face as a business. Now, this year we had talked about 130 million premiums. We think it will be slightly lower than that, largely as a result of reductions in business rates and also red meat not being quite as extreme as we feared it was at the beginning of the year. We've also now closed out our entry purchasing this year, so we've taken that risk off the table. So a slightly lower cost headwind this year than we've previously flagged. That's going to be weighted 60% towards the first half, so we're, if you like, we're through the worst of it. That's a result, principally, of national insurance contributions for employers, which we've now annualised on at the increased rate. So that's no longer a headwind for us. If I look forward to next year, we would anticipate the challenge becoming slightly more benign, slightly lower, with the cost inflation of £95 million, representing about 4% of our cost base. Probably one area of risk in that is energy. We've brought forward 15% of next year's energy as I stand here today, so there's scope for a little bit of volatility in that. That's why you've got a slightly blurry bar for energy there. Cash flow was very strong. We have a typical seasonality whereby working capital is an inflow in the first half due to our payments profile. A lot of that will reverse in the second half, as it did last year. But beyond that, items of note, CapEx increased to £117 million as we're now back on our seven-year remodel cycle that we've talked to you about. justified by strong returns and indeed also including the purchase of a number of new sites. So we bought five new sites within the first half and indeed a couple since the balance sheet date as well. So we'd expect full year capex to be slightly higher than we guided before up to about 230 million with I suspect more new sites, single site acquisitions taking place. We've also paid the final consideration of our pesto business of 11 million. And lastly, tax pay. For the past couple of years, our tax pay has been depressed or alleviated, if you like, by the fact that we've built up a number of losses during COVID. We've sort of used all those losses up, if you like, through the course of this year. So we'll start to see our cash tax paid slightly higher. But overall, a really strong cash performance and indeed 30 million in excess of what we need to pay down amortisation in the first half. You can see the value of that cash flow on our balance sheet, reducing our gearing net debt now just under £750 million, about 1.6 times even dark, excluding leases, alongside a transformation of our pension position to now what is a de-risked asset of about £100 million. We haven't but we do have a further increase in net assets to now £4.91 per share. So a very strong balance sheet. And as we've said before consistently, over time the board will continue to keep the balance sheet and the capital allocation strategy under review, particularly with respect to break costs and new issue costs. So pulling that together and summarising it, we think it's a strong trading performance in the first half, doing very well to maintain operating profit despite stiff cost headwinds progress has also been made across all of our scorecard cash debt returns staff scores and guest scores and we see a positive outlook looking forward um we expect to continue to outperform sector we do see cost headwinds beginning to beginning to moderate now as i said before this is the the last time you'll hear from me so we thought we'd sort of use the opportunity to reflect on where we are today and how we got to where we are today. There have been a number of challenges in this sector over the last 15 years, and none of you here need reminding of those, so I won't go through them. But I feel we have met all of those challenges head on, and we now face the future in great shape as a business. We have a really strong financial position. We've navigated net debt down from over six times EBITDA to under two times. We've transformed the pension position deficit to 100 million assets. And looking forward, we will see value from that deep gearing. It's a number of capital allocation options and flexibility will open up for the group. We have a fantastic portfolio of well-invested sites. We have a large and stable of brands and formats that we can use to maximise the trading from each of those sites. I think we have a business and management team that's now established a clear track record of continuous improvement and delivery. So we don't know what the future is going to hold, but we do believe that MB faces it with confidence and is set up very well for success. With that, I'd like to hand you back to you.

Thanks, Kevin.