F INANCIAL STATEMENTS - mbplc.com€¦ · Report on the audit of the financial statements Opinion In our opinion: • the financial statements give a true and fair view of the state

In this section89 Independentauditor’sreporttothemembers

ofMitchells&Butlersplc96 Groupincomestatement97 Groupstatementofcomprehensiveincome98 Groupbalancesheet99 Groupstatementofchangesinequity100 Groupcashflowstatement

Notestothefinancialstatements101 Section1–Basisofpreparation104 Section2–Resultsfortheyear

104 2.1Segmentalanalysis105 2.2Separatelydisclosedforms106 2.3Revenueandoperatingcosts108 2.4Taxation110 2.5Earningspershare

111 Section3–Operatingassetsandliabilities111 3.1Property,plantandequipment115 3.2Workingcapital115 3.3Provisions116 3.4Goodwillandotherintangibleassets

118 Section4–Capitalstructureandfinancingcosts 118 4.1Netdebt 118 4.2Borrowings 120 4.3Financecostsandrevenue 120 4.4Financialinstruments 126 4.5Pensions 129 4.6Share-basedpayments 131 4.7Equity133 Section5–Othernotes 133 5.1Relatedpartytransactions 133 5.2Subsidiaries 134 5.3Fiveyearreview

135 Mitchells&ButlersplcCompanyfinancialstatements137 NotestotheMitchells&ButlersplcCompanyfinancialstatements

FINANCIAL STATEMENTS

88 | Mitchells & Butlers plc | Annual report and accounts 2017

Report on the audit of the financial statementsOpinionInouropinion:

•thefinancialstatementsgiveatrueandfairviewofthestateoftheGroup’sandoftheCompany’saffairsasat30September2017andoftheGroup’sprofitforthe53weeksthenended;

•theGroupfinancialstatementshavebeenproperlypreparedinaccordancewithInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnion;

•theCompanyfinancialstatementshavebeenproperlypreparedinaccordancewithUnitedKingdomGenerallyAcceptedAccountingPracticeincludingFinancialReportingStandard101‘ReducedDisclosureFramework;and

•thefinancialstatementshavebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006and,asregardstheGroupfinancialstatements,Article4oftheIASRegulation.

WehaveauditedthefinancialstatementsofMitchells&Butlersplc(the‘Company’)anditssubsidiaries(the‘Group’)whichcomprise:

•theGroupincomestatement;

•theGroupstatementofcomprehensiveincome;

•theGroupandCompanybalancesheets;

•theGroupandCompanystatementsofchangesinequity;

•theGroupcashflowstatement;

•therelatednotes1to5ofGroupfinancialstatements;and

•therelatednotes1to10oftheCompanyfinancialstatements.

ThefinancialreportingframeworkthathasbeenappliedinthepreparationoftheGroupfinancialstatementsisapplicablelawandIFRSsasadoptedbytheEuropeanUnion.ThefinancialreportingframeworkthathasbeenappliedinthepreparationoftheCompanyfinancialstatementsisapplicablelawandUnitedKingdomAccountingStandards,includingFRS101‘ReducedDisclosureFramework’(UnitedKingdomGenerallyAcceptedAccountingPractice).

Basis for opinionWeconductedourauditinaccordancewithInternationalStandardsonAuditing(UK)(ISAs(UK))andapplicablelaw.Ourresponsibilitiesunderthosestandardsarefurtherdescribedintheauditor’sresponsibilitiesfortheauditofthefinancialstatementssectionofourreport.

WeareindependentoftheGroupandtheCompanyinaccordancewiththeethicalrequirementsthatarerelevanttoourauditofthefinancialstatementsintheUK,includingtheFRC’sEthicalStandardasappliedtolistedentities,andwehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeserequirements.Weconfirmthatthenon-auditservicesprohibitedbytheFRC’sEthicalStandardwerenotprovidedtotheGrouportheCompany.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.

Summary of our audit approach

Key audit matters Thekeyauditmattersthatweidentifiedinthecurrentyearwere:

•Valuationofthepubestate;and

•Onerousleaseprovisions.

WiththeexceptionofextendingtheOnerousleaseprovisionskeyauditmattertoincludethefactthatthechargefortheyearisincludedasaseparatelydiscloseditem,therehavebeennochangesinthekeyauditmattersincludedinourauditreportsince2016.ThisisconsistentwiththefactthattheoperationsoftheGrouparelargelyunchangedfromthepreviousyear.

Materiality Thematerialitythatweusedinthecurrentyearwas£8.8mwhichisapproximately5%ofprofitbeforetaxbeforeseparatelydiscloseditems.

Scoping AfullscopeaudithasbeenperformedinrespectoftheUKbusiness,consistentwith2016.

Significant changes in our approach In2016,weadoptedanauditapproachwhichtestedtheoperatingeffectivenessofcontrolsrelatingtorevenueandfoodanddrinkexpenditure.In2017,wehavetestedtheoperatingeffectivenessofcontrolsrelatingtorevenue,foodanddrinkexpenditureand,inaddition,property,plantandequipment.

Independent auditor’s report to the members of Mitchells & Butlers plc

Annual report and accounts 2017 | Mitchells & Butlers plc | 89

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Independent auditor’s report to the members of Mitchells & Butlers plc continued

Conclusions relating to principal risks, going concern and viability statement WehavereviewedtheDirectors’statementregardingtheappropriatenessofthegoingconcernbasisofaccountingcontainedwithinSection1tothefinancialstatementsandtheDirectors’statementonthelonger-termviabilityoftheGroupcontainedwithintheStrategicreportonpage40.

Wearerequiredtostatewhetherwehaveanythingmaterialtoaddordrawattentiontoinrelationto:

•thedisclosuresonpages36to40thatdescribetheprincipalrisksandexplainhowtheyarebeingmanagedormitigated;

•theDirectors’confirmationonpage37thattheyhavecarriedoutarobustassessmentoftheprincipalrisksfacingtheGroup,includingthosethatwouldthreatenitsbusinessmodel,futureperformance,solvencyorliquidity;

•theDirectors’statementinSection1tothefinancialstatementsaboutwhethertheyconsidereditappropriatetoadoptthegoingconcernbasisofaccountinginpreparingthemandtheiridentificationofanymaterialuncertaintiestotheGroupandtheCompany’sabilitytocontinuetodosooveraperiodofatleast12monthsfromthedateofapprovalofthefinancialstatements;

•theDirectors’explanationonpage40astohowtheyhaveassessedtheprospectsoftheGroup,overwhatperiodtheyhavedonesoandwhytheyconsiderthatperiodtobeappropriate,andtheirstatementastowhethertheyhaveareasonableexpectationthattheGroupwillbeabletocontinueinoperationandmeetitsliabilitiesastheyfalldueovertheperiodoftheirassessment,includinganyrelateddisclosuresdrawingattentiontoanynecessaryqualificationsorassumptions;or

•whethertheDirectors’statementsrelatingtogoingconcernandtheprospectsoftheCompanyrequiredinaccordancewithListingRule9.8.6R(3)aremateriallyinconsistentwithourknowledgeobtainedintheaudit.

Weconfirmthatwehavenothingmaterialtoaddordrawattentiontoinrespectofthesematters.

WeagreedwiththeDirectors’adoptionofthegoingconcernbasisofaccountingandwedidnotidentifyanysuchmaterialuncertainties.However,becausenotallfutureeventsorconditionscanbepredicted,thisstatementisnotaguaranteeastotheGroup’sabilitytocontinueasagoingconcern.

Key audit mattersKeyauditmattersarethosemattersthat,inourprofessionaljudgement,wereofmostsignificanceinourauditofthefinancialstatementsofthecurrentperiodandincludethemostsignificantassessedrisksofmaterialmisstatement(whetherornotduetofraud)thatweidentified.Thesemattersincludedthosewhichhadthegreatesteffecton:theoverallauditstrategy,theallocationofresourcesintheaudit;anddirectingtheeffortsoftheengagementteam.

Thesematterswereaddressedinthecontextofourauditofthefinancialstatementsasawhole,andinformingouropinionthereon,andwedonotprovideaseparateopiniononthesematters.


Key audit matter description How the scope of our audit responded to the key audit matter Key observations

Valuation of the pub estateAssetoutinsection3.1thevalueoftheestateis£4,429m(2016£4,423m).

Freehold and long leaseholdTheaccountingpolicyadoptedandjudgementsusedaredescribedinsection3.1tothefinancialstatements.

Thisisconsideredtobeakeyauditmatterduetothejudgementsinherentwithinthevaluationexerciseandtherangeofacceptablejudgements.Thetotalnetbookvalueofrevaluedpropertiesasat30September2017is£4,230m(2016£4,217m).Therevaluationexerciseperformedintheyearhasresultedinanetincreaseof£23mversuscarryingvalue(2016£136m),whichincludesanimpairmentchargeof£51m(2016£80m)recognisedintheincomestatement.TheGroup’saccountingpolicysetsoutthatthemarketvalueisdeterminedusingfactorssuchasestimatedfairmaintainabletradinglevelsandestimatedmultipleswhicharederivedforeachoftheGroup’stradingbrands.20%ofthefreeholdandlongleaseholdestatehasbeeninspectedbytheGroup’sexternalvaluers,withtheresultoftheinspectioninformingthebrandstandardmultipleswhicharethenextrapolatedacrosstheremainderoftheestate.

Inspecificcircumstanceswherethisapproachdoesnotfairlyrepresenttheunderlyingvalueoftheproperty,forexampleifasiteislossmaking,aspotvaluationisapplied.

Wheresiteshavebeenimpactedbyexpansionarycapitalinvestmentinthepreceding12months,thevaluationofthosepropertiesisheldatthe24September2016valuationpluscapitalexpenditurelessdepreciationin2017.Sitesthathavebeenopenformorethanthreeperiods(2016sixperiods)arereviewedforimpairment.

Short leaseholdTheaccountingpolicyadoptedandjudgementsusedaredescribedinsection3.1tothefinancialstatements.

Thetotalvalueofshortleaseholdpropertiesasat30September2017is£170m(2016£177m).Judgementsinrelationtoexpectedtradinglevels,whetherthesitehasthepotentialtobeturnedaroundanddiscountratesareappliedwhencalculatingshortleaseholdpropertyimpairments.TheGrouprecordedanimpairmentchargeof£17m(2016£8m)intheyear.

Weworkedwithourpropertyvaluationspecialistsandmanagement’sexternaladvisorstochallengethemethodologyandunderlyingassumptionsusedinthefreeholdandlongleaseholdpubestatevaluation.Thisincluded:

•discussingandchallengingtheappropriatenessofthevaluationmethodologyadoptedwithmanagement’sexternaladvisors;

•benchmarkingvaluationstotransactionactivityinthelicensedretailpropertymarket,inordertoconfirmwhetherthemultiplesbeingproposedwereappropriate;

•confirmingthatthesitesinspectedbytheGroup’svaluerwererepresentativeofthepubestateasawhole,intermsofbrandandgeography,todeterminethattheapplicationofthemultiplederivedfromthevaluationoftheinspectedpropertiestotherestofthepubestatewasappropriate;

•confirmingthatthefairmaintainabletradinglevelsusedintherevaluationexercisewereconsistentwiththeGroup’spolicyandchallengingtheuseofhistoricaltradingresultsratherthanforecastsinthedeterminationoffairmaintainabletrade;

•reviewingthefutureprojectedincomeusedintheimpairmentreviewsforthesiteswhichhavehadexpansionarycapitalinvestmentinthepreceding12months;

•obtainingevidencetosupportthevaluationofasampleofpropertiestowhichaspotvaluationhasbeenapplied,forexample,throughcomparisontosalesproceedsachievedforsimilarrecentsalestransactions.Inaddition,weperformedaretrospectivereviewofprioryearsiteswhichwerespotvalued;

•testingtheintegrityofthedatausedinthevaluationsbyagreeingasampletosourcedata;

•usinganalyticaltoolstotesttheintegrityoftherevaluationmodel;and

•assessingthecompetence,independenceandintegrityofmanagement’sexternaladvisers.

Additionallywe:

•assessedthedesignandimplementationandtestedtheoperatingeffectivenessofcontrolsinrelationtothevaluationofthefreeholdandlongleaseholdestate.

Weareinagreementwiththemethodologychosenandtheassumptionsadoptedtorevaluethepubestateandconcludethereappearstobenobiasinthevaluation.Themultiplesadoptedacrosstheestatearewithinareasonablerange.Weconcurthatthevaluationsaresuitableforinclusioninthefinancialstatements.


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Key audit matter description How the scope of our audit responded to the key audit matter Key observations

Valuation of the pub estate continuedFocus areasGiventheamountscapitalisedandtheriskassociatedacrossthefreehold,longleaseholdandshortleaseholdsiteswehavefocusedourproceduresontheassessmentmadebymanagementof:

•theappropriatenessofthefairmaintainabletradinglevelsandbrandmultipleassumptionsappliedtothefreeholdandlongleaseholdestateonasitebysitebasis;

•thevaluationoffreeholdandlongleaseholdsitesimpactedbyexpansionarycapital,challengingtheneedforanyimpairmentofproperty,plantandequipmentrequiredatanindividualoutletlevel;and

•therequirementforanyimpairmentinrespectoftheproperty,plantandequipmentheldintheshortleaseholdestateatanindividualoutletlevel.

Inaddition,duetothelevelofsubjectivejudgementsinvolvedinrespectofmultipleandfairmaintainabletradeassumptionswhichareinherentlyuncertain,wehaveidentifiedapotentialriskoffraudinthiskeyauditmatter.

Wechallengedtheassumptionsusedbymanagementwithintheimpairmentreviewsperformedfortheshortleaseholdestateandfreeholdandlongleaseholdsitesimpactedbyexpansionarycapital.Thisincluded:

•obtainingevidencetosupportmanagement’sassertionthatshortleaseholdpropertiescanbesuccessfullyturnedaroundwherepropertieshavenotbeenimpairedduetomanagement’sexpectationthattheperformanceofthepropertieswillimprove.Thisincludedobtainingevidencetosupportmanagement’sturnaroundplansandperformanceofaretrospectivereviewconsideringthesuccessofhistoricturnaroundplans;

•obtainingevidencetosupportmanagement’sexpectedperformanceofsitespostinvestmentofexpansionarycapitalandaretrospectivereviewofprioryearsiteswhereexpansionarycapitalwasincurred;

•testingtheintegrityoftheinformationusedwithinthemodelbyagreeinginputsbacktosourcedataincludinghistoricalresultsandleaseterms;and

•assessingtheappropriatenessofthediscountratethroughrecalculationandperformingsensitivityanalysis.

Additionally,weassessedthedesignandimplementationandtestedtheoperatingeffectivenessofcontrolsinrelationtotheshortleaseholdimpairmentreview.

Onerous lease provisionsAssetoutinsection3.3,propertyprovisionsare£42.4m(2016£9.3m)ofwhich£41.9m(2016£8.8m)relatestoonerousleaseprovisions.Theaccountingpolicyforprovisionsissetoutinsection3.3.£35m(2016£nil)ofthepropertyprovisionsprovidedintheperiodhavebeenincludedasaseparatelydiscloseditemintheincomestatement.

Loss-makingshortleaseholdpropertiesarereviewedbymanagementtodeterminewhetheranonerousleaseprovisionisrequired.Judgementsinrelationtoexpectedtradinglevels,theappropriateleasetermoverwhichtoprovide,thepotentialopportunitytoexittheleasesearlyandtheappropriatediscountratetouseareappliedwhenassessingthelevelofonerousleaseprovisionrequired.Thereforewehaveidentifiedapotentialriskoffraudinthiskeyauditmatter.

Focus areasGiventhesizeoftheleaseholdestatethereisariskthatwhereasiteisunderperformingthecashflowsmaynotbeadequatetocoverfutureleaseobligations,resultingintherequirementforanonerousleaseprovisionfortheunavoidablecashflow.Wefocusedonthecompletenessoftheonerousleaseprovisionbothintermsofthesiteswhereaprovisionhasnotbeenrecognisedonthebasisthatmanagementhaveaturnaroundplaninplaceoropportunitytoexitandwherethereisaprovision,thejudgementsusedinarrivingattheleveloftheprovisionforeachsite.

Inadditionandinachangetoprioryearswefocusedonthepresentationofpartofthechargeintheyearasaseparatelydiscloseditem.

•Weassessedtheappropriatenessoftheclassificationofthe£35mofpropertyprovisionsprovidedintheperiodasaseparatelydisclosediteminaccordancewithIAS1PresentationofFinancialStatements;

•Wecheckedthatallleaseholdsiteswereconsideredinmanagement’sprocesstoidentifysiteswhichwerepotentiallysubjecttoonerousleases;

•Whereonerousleaseprovisionshavenotbeenrecognised,despitehistoricalresultsindicatingthataprovisionmayberequired,weobtainedevidencetosupportmanagement’sassertionthatpropertiescanbesuccessfullyturnedaround.Thisincludedassessingthesuccessofpreviousactionsundertakenbymanagementtoturnaroundsimilarsites;

•Wetestedasampleofloss-makingshortleaseholdandunlicensedpropertiestocreateanexpectationoftheappropriatelevelofonerousleaseprovisionforeachpropertywithinoursampleandcomparedourexpectationwiththelevelofonerousleaseprovisionforeachproperty;

•Wetestedtheintegrityoftheinformationusedwithintheonerousleaseprovisioncalculationbyagreeinginputsbacktosourcedataincludinghistoricalresults,andrentalcommitments;and

•Weassessedtheappropriatenessoftherisk-freediscountrateusedthroughcomparisontoappropriateexternalbenchmarks.

Additionally,weassessedthedesignandimplementationandtestedtheoperatingeffectivenessofcontrolsinrelationtothecalculationoftheonerousleaseprovision.

Weagreethatthelevelofonerousleaseprovisionisappropriateandthattheclassificationofthe£35mofpropertyprovisionsprovidedintheperiodasseparatelydisclosedisreasonableinaccordancewithIAS1PresentationofFinancialStatements.

Inarrivingat£41.9mofonerousleaseprovisions,managementhavehadtomakeanumberofjudgementsregardingtheperformanceofthesitesandtheperiodtoexit.Inconsideringthejudgementsmade,weconsiderthattheprovisioniswithinareasonablerange.



Our application of materialityWedefinematerialityasthemagnitudeofmisstatementinthefinancialstatementsthatmakesitprobablethattheeconomicdecisionsofareasonablyknowledgeablepersonwouldbechangedorinfluenced.Weusematerialitybothinplanningthescopeofourauditworkandinevaluatingtheresultsofourwork.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group materiality £8.8m(2016£8.7m)

Basis for determining materiality Approximately5%(20165%)ofprofitbeforetaxadjustedfornetprofitarisingonpropertydisposals,movementsinthevaluationofthepropertyportfolioandshortleaseholdimpairmentandtheseparatelydisclosedonerousleaseprovisioncharge(2016profitbeforetaxaftertheonerousleaseprovisionchargebutbeforeseparatelydiscloseditems).

Rationale for the benchmark applied ProfitbeforetaxbeforeseparatelydiscloseditemsisakeymeasureusedbytheGroupinreportingitsresultstoallowabetterunderstandingoftheadjustedtradingoftheGroupandisalsoakeymeasureconsideredbyanalysts.

Group materiality £8.8m

Component materiality range £0.27m to £8.7m

Audit Committee reporting threshold £0.438m

PBT before separately disclosed items£183m

WeagreedwiththeAuditCommitteethatwewouldreporttotheCommitteeallauditdifferencesinexcessof£437,500(2016£435,000),aswellasdifferencesbelowthatthresholdthat,inourview,warrantedreportingonqualitativegrounds.WealsoreporttotheAuditCommitteeondisclosuremattersthatweidentifiedwhenassessingtheoverallpresentationofthefinancialstatements.

An overview of the scope of our auditOurGroupauditwasscopedbyobtaininganunderstandingoftheGroupanditsenvironment,includingGroup-widecontrols,andassessingtherisksofmaterialmisstatementattheGrouplevel.Basedonthatassessment,weperformedafullscopeauditinrespectoftheUKretailoperatingbusinessandtheUKpropertybusinesstogetheraccountingfor99%(201699%)oftheGroup’stotalassets,97%(201697%)ofrevenueand98%(201698%)ofoperatingprofit.ThisauditworkwasperformeddirectlybytheGroupauditengagementteam,whoalsotestedtheconsolidationprocess.GiventherelativesizeoftheGermanbusiness(‘ALEX’)weconsidertheUKbusinessprovidessufficientauditassuranceovertheGroupbalances.Thisapproachisconsistentwith2016.

Inrespondingtotheassessedrisksofmaterialmisstatement,theauditengagementteamsoughttoplacerelianceontheoperatingeffectivenessoftheGroup’scontrolsinrelationtorevenue,foodanddrinkexpenditureandproperty,plantandequipment.

OurauditworkontheUKbusinesswasexecutedatlevelsofmaterialityapplicabletoeachindividualentitywhichwerelowerthanGroupmaterialityandrangedfrom£0.27mto£8.7m(2016£0.25mto£8.68m).


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Other informationTheDirectorsareresponsiblefortheotherinformation.TheotherinformationcomprisestheinformationincludedintheAnnualReport,otherthanthefinancialstatementsandourauditor’sreportthereon.

Ouropiniononthefinancialstatementsdoesnotcovertheotherinformationand,excepttotheextentotherwiseexplicitlystatedinourreport,wedonotexpressanyformofassuranceconclusionthereon.

Inconnectionwithourauditofthefinancialstatements,ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththefinancialstatementsorourknowledgeobtainedintheauditorotherwiseappearstobemateriallymisstated.

Ifweidentifysuchmaterialinconsistenciesorapparentmaterialmisstatements,wearerequiredtodeterminewhetherthereisamaterialmisstatementinthefinancialstatementsoramaterialmisstatementoftheotherinformation.If,basedontheworkwehaveperformed,weconcludethatthereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.

Inthiscontext,mattersthatwearespecificallyrequiredtoreporttoyouasuncorrectedmaterialmisstatementsoftheotherinformationincludewhereweconcludethat:

•Fair, balanced and understandable–thestatementgivenbytheDirectorsthattheyconsidertheAnnualReportandfinancialstatementstakenasawholeisfair,balancedandunderstandableandprovidestheinformationnecessaryforshareholderstoassesstheGroup’sperformance,businessmodelandstrategy,ismateriallyinconsistentwithourknowledgeobtainedintheaudit;or

•Audit Committee reporting–thesectiondescribingtheworkoftheAuditCommitteedoesnotappropriatelyaddressmatterscommunicatedbyustotheAuditCommittee;or

•Directors’ statement of compliance with the UK Corporate Governance Code–thepartsoftheDirectors’statementrequiredundertheListingRulesrelatingtotheCompany’scompliancewiththeUKCorporateGovernanceCodecontainingprovisionsspecifiedforreviewbytheauditorinaccordancewithListingRule9.8.10R(2)donotproperlydiscloseadeparturefromarelevantprovisionoftheUKCorporateGovernanceCode.

We have nothing to report in respect of these matters.

Responsibilities of DirectorsAsexplainedmorefullyintheDirectors’responsibilitiesstatement,theDirectorsareresponsibleforthepreparationofthefinancialstatementsandforbeingsatisfiedthattheygiveatrueandfairview,andforsuchinternalcontrolastheDirectorsdetermineisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Inpreparingthefinancialstatements,theDirectorsareresponsibleforassessingtheGroup’sandtheCompany’sabilitytocontinueasagoingconcern,disclosingasapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlesstheDirectorseitherintendtoliquidatetheGrouportheCompanyortoceaseoperations,orhavenorealisticalternativebuttodoso.

Auditor’s responsibilities for the audit of the financial statementsOurobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesouropinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAs(UK)willalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.

AfurtherdescriptionofourresponsibilitiesfortheauditofthefinancialstatementsislocatedontheFinancialReportingCouncil’swebsiteat:www.frc.org.uk/auditorsresponsibilities.Thisdescriptionformspartofourauditor’sreport.

Use of our reportThisreportismadesolelytotheCompany’smembers,asabody,inaccordancewithChapter3ofPart16oftheCompaniesAct2006.OurauditworkhasbeenundertakensothatwemightstatetotheCompany’smembersthosematterswearerequiredtostatetotheminanauditor’sreportandfornootherpurpose.Tothefullestextentpermittedbylaw,wedonotacceptorassumeresponsibilitytoanyoneotherthantheCompanyandtheCompany’smembersasabody,forourauditwork,forthisreport,orfortheopinionswehaveformed.


Report on other legal and regulatory requirementsOpinions on other matters prescribed by the Companies Act 2006InouropinionthepartoftheDirectors’remunerationreporttobeauditedhasbeenproperlypreparedinaccordancewiththeCompaniesAct2006.

Inouropinion,basedontheworkundertakeninthecourseoftheaudit:

•theinformationgivenintheStrategicreportandtheDirectors’reportforthefinancialyearforwhichthefinancialstatementsarepreparedisconsistentwiththefinancialstatements;and

•theStrategicreportandtheDirectors’reporthavebeenpreparedinaccordancewithapplicablelegalrequirements.

InthelightoftheknowledgeandunderstandingoftheGroupandortheCompanyandtheirenvironmentobtainedinthecourseoftheaudit,wehavenotidentifiedanymaterialmisstatementsintheStrategicreportortheDirectors’report.

Matters on which we are required to report by exceptionAdequacy of explanations received and accounting recordsUndertheCompaniesAct2006wearerequiredtoreporttoyouif,inouropinion:

•wehavenotreceivedalltheinformationandexplanationswerequireforouraudit;or

•adequateaccountingrecordshavenotbeenkeptbytheCompany,orreturnsadequateforouraudithavenotbeenreceivedfrombranchesnotvisitedbyus;or

•theCompanyfinancialstatementsarenotinagreementwiththeaccountingrecordsandreturns.


Directors’ remunerationUndertheCompaniesAct2006wearealsorequiredtoreportifinouropinioncertaindisclosuresofDirectors’remunerationhavenotbeenmadeorthepartoftheDirectors’remunerationreporttobeauditedisnotinagreementwiththeaccountingrecordsandreturns.


Other mattersAuditor tenureFollowingtherecommendationoftheAuditCommittee,wewereappointedbytheBoardon10February2011toauditthefinancialstatementsfortheyearending24September2011andsubsequentfinancialperiods.Theperiodoftotaluninterruptedengagementincludingpreviousrenewalsandreappointmentsofthefirmissevenyears,coveringtheyearsending24September2011to30September2017.

Consistency of the audit report with the additional report to the Audit CommitteeOurauditopinionisconsistentwiththeadditionalreporttotheAuditCommitteewearerequiredtoprovideinaccordancewithISAs(UK).

John Charlton FCA (Senior statutory auditor)forandonbehalfofDeloitteLLPCharteredAccountantsandStatutoryAuditorLondon,UnitedKingdom

22November2017


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Group income statement Forthe53weeksended30September2017

201753 weeks

201652 weeks

Notes

Before separately disclosed

items £m

Separately disclosed

itemsa

£mTotal

£m

Before separately disclosed

items£m

Separately disclosed

itemsa

£mTotal

£m

Revenue 2.1,2.3 2,180 – 2,180 2,086 – 2,086Operatingcostsbeforedepreciation,amortisationandmovementsinthevaluationofthepropertyportfolio 2.2,2.3 (1,751) (35) (1,786) (1,655) – (1,655)Netprofitarisingonpropertydisposals 2.2,2.3 – 1 1 – 1 1EBITDAb 429 (34) 395 431 1 432Depreciation,amortisationandmovementsinthevaluationofthepropertyportfolio 2.2,2.3 (115) (72) (187) (113) (88) (201)Operating profit/(loss) 2.1 314 (106) 208 318 (87) 231Financecosts 4.3 (125) – (125) (126) – (126)Financerevenue 4.3 1 – 1 1 – 1Netpensionsfinancecharge 4.3,4.5 (7) – (7) (12) – (12)Profit/(loss) before tax 183 (106) 77 181 (87) 94

Tax(expense)/credit 2.2,2.4 (37) 23 (14) (37) 32 (5)

Profit/(loss) for the period 146 (83) 63 144 (55) 89Earnings per ordinary share –Basic 2.5 34.9p 15.1p 34.9p 21.6p –Diluted 2.5 34.8p 15.0p 34.9p 21.6p

a. Separatelydiscloseditemsareexplainedandanalysedinnote2.2.b. Earningsbeforeinterest,tax,depreciation,amortisationandmovementsinthevaluationofthepropertyportfolio.

Thenotesonpages101to134formanintegralpartofthesefinancialstatements.

Allresultsrelatetocontinuingoperations.


Group statement of comprehensive income Forthe53weeksended30September2017

Notes

201753 weeks

£m

201652 weeks

£m

Profit for the period 63 89Items that will not be reclassified subsequently to profit or loss:Unrealisedgainonrevaluationofthepropertyportfolio 3.1 74 216Remeasurementofpensionliability 4.5 8 (22)Taxrelatingtoitemsnotreclassified 2.4 (13) (21)

69 173Items that may be reclassified subsequently to profit or loss:Exchangedifferencesontranslationofforeignoperations 1 3Cashflowhedges: –Gains/(losses)arisingduringtheperiod 4.4 60 (116) –Reclassificationadjustmentsforitemsincludedinprofitorloss 4.4 53 8Taxrelatingtoitemsthatmaybereclassified 2.4 (19) 10

95 (95)Other comprehensive income after tax 164 78Total comprehensive income for the period 227 167



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Group balance sheet 30September2017

Notes2017

£m2016

£m

AssetsGoodwillandotherintangibleassets 3.4 10 9Property,plantandequipment 3.1 4,429 4,423Leasepremiums 1 2Deferredtaxasset 2.4 110 143Derivativefinancialinstruments 4.4 41 52Total non-current assets 4,591 4,629Inventories 3.2 24 25Tradeandotherreceivables 3.2 53 32Othercashdeposits 4.1 120 120Cashandcashequivalents 4.1 147 158Derivativefinancialinstruments 4.4 2 1Assetsheldforsale 3.1 1 –Total current assets 347 336Total assets 4,938 4,965LiabilitiesPensionliabilities 4.5 (47) (46)Tradeandotherpayables 3.2 (297) (293)Currenttaxliabilities (3) (12)Borrowings 4.2 (235) (253)Derivativefinancialinstruments 4.4 (43) (44)Total current liabilities (625) (648)Pensionliabilities 4.5 (245) (291)Borrowings 4.2 (1,827) (1,920)Derivativefinancialinstruments 4.4 (249) (360)Deferredtaxliabilities 2.4 (324) (329)Provisions 3.3 (42) (9)Total non-current liabilities (2,687) (2,909)Total liabilities (3,312) (3,557)Net assets 1,626 1,408

EquityCalledupsharecapital 4.7 36 35Sharepremiumaccount 4.7 26 27Capitalredemptionreserve 4.7 3 3Revaluationreserve 4.7 1,202 1,142Ownsharesheld 4.7 (1) (1)Hedgingreserve 4.7 (244) (338)Translationreserve 4.7 14 13Retainedearnings 590 527Total equity 1,626 1,408


ThefinancialstatementswereapprovedbytheBoardandauthorisedforissueon22November2017.

Theyweresignedonitsbehalfby:

Tim JonesFinance Director


Calledup share

capital£m

Sharepremiumaccount

£m

Capitalredemption

reserve£m

Revaluationreserve

£m

Ownshares

held£m

Hedgingreserve

£m

Translationreserve

£m

Retainedearnings

£m

Totalequity

£m

At 26 September 2015 35 26 3 938 (1) (240) 10 500 1,271Profitfortheperiod – – – – – – – 89 89Othercomprehensiveincome/(expense) – – – 204 – (98) 3 (31) 78Total comprehensive income/(expense) – – – 204 – (98) 3 58 167Sharecapitalissued – 1 – – – – – – 1Purchaseofownshares – – – – (1) – – – (1)Releaseofownshares – – – – 1 – – (1) –Creditinrespectofshare-basedpayments – – – – – – – 2 2Dividendspaid – – – – – – – (31) (31)Taxonshare-basedpaymentstakendirectlytoequity – – – – – – – (1) (1)At 24 September 2016 35 27 3 1,142 (1) (338) 13 527 1,408Profitfortheperiod – – – – – – – 63 63Othercomprehensiveincome – – – 61 – 94 1 8 164Total comprehensive income – – – 61 – 94 1 71 227Creditinrespectofshare-basedpayments – – – – – – – 2 2Dividendspaid – – – – – – – (12) (12)Revaluationreserverealisedondisposalofproperties – – – (1) – – – 1 –Scripdividendrelatedshareissue 1 (1) – – – – – – –Taxonshare-basedpaymentstakendirectlytoequity – – – – – – – 1 1At 30 September 2017 36 26 3 1,202 (1) (244) 14 590 1,626

Group statement of changes in equity Forthe53weeksended30September2017


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Group cash flow statement Forthe53weeksended30September2017

Notes

201753 weeks

£m

201652 weeks

£m

Cash flow from operationsOperatingprofit 208 231Addback:adjusteditems 2.2 106 87Operatingprofitbeforeadjusteditems 314 318Addback:Depreciationofproperty,plantandequipment 2.3 113 111Amortisationofintangibles 2.3 2 2Costchargedinrespectofshare-basedpayments 4.6 2 2Administrativepensioncosts 4.5 2 2Operating cash flow before adjusted items, movements in working capital and additional pension contributions 433 435Decrease/(increase)ininventories 1 (1)Increaseintradeandotherreceivables (20) (4)Increase/(decrease)intradeandotherpayables 7 (5)Decreaseinprovisions (2) (1)Additionalpensioncontributions 4.5 (46) (49)Cash flow from operations before adjusted items 373 375Interestpaid (122) (126)Interestreceived 1 1Taxpaid (26) (28)Net cash from operating activities 226 222Investing activitiesPurchasesofproperty,plantandequipment (166) (166)Purchasesofintangibleassets (3) (1)Proceedsfromsaleofproperty,plantandequipment 46 5Net cash used in investing activities (123) (162)Financing activitiesIssueofordinarysharecapital – 1Purchaseofownshares – (1)Dividendspaid(netofscripdividend) 4.7 (12) (31)Repaymentofprincipalinrespectofsecuritiseddebt 4.2 (77) (67)Netmovementonunsecuredrevolvingcreditfacilities 4.1 (25) 31Net cash used in financing activities (114) (67)Net decrease in cash and cash equivalents (11) (7)Cashandcashequivalentsatthebeginningoftheperiod 158 163Foreignexchangemovementsoncash – 2Cash and cash equivalents at the end of the period 4.1 147 158



General informationMitchells&Butlersplc(theCompany)isapubliclimitedcompanylimitedbysharesandisregisteredinEnglandandWales.TheCompany’ssharesarelistedontheLondonStockExchange.TheaddressoftheCompany’sregisteredofficeisshownonpage143.

TheprincipalactivitiesoftheCompanyanditssubsidiaries(theGroup)andthenatureoftheGroup’soperationsaresetoutinnote2.1andintheStrategicreportonpages1to43.

Mitchells&Butlersplc,alongwithitssubsidiaries(together‘theGroup’),isrequiredtoprepareitsconsolidatedfinancialstatementsinaccordancewithInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnionandinaccordancewiththeCompaniesAct2006.

TheGroup’saccountingreferencedateis30September.TheGroupdrawsupitsfinancialstatementstotheSaturdaydirectlybeforeorfollowingtheaccountingreferencedate,aspermittedbysection390(3)oftheCompaniesAct2006.Theperiodended30September2017includes53tradingweeksandtheperiodended24September2016includes52tradingweeks.

Thefinancialstatementshavebeenpreparedonthehistoricalcostbasisasmodifiedbytherevaluationofproperties,pensionobligationsandfinancialinstruments.

TheGroup’saccountingpolicieshavebeenappliedconsistently.

Basis of consolidationTheconsolidatedfinancialstatementsincorporatethefinancialstatementsofMitchells&Butlersplc(‘theCompany’)andentitiescontrolledbytheCompany(itssubsidiaries).ThefinancialstatementsofthesubsidiariesarepreparedforthesamefinancialreportingperiodastheCompany.Intercompanytransactions,balancesandunrealisedgainsandlossesontransactionsbetweenGroupcompaniesareeliminatedonconsolidation.

Theresultsofsubsidiariesacquiredduringtheperiodareincludedintheconsolidatedincomestatementfromthedateofacquisition.

Going concernTheGroup’sbusinessactivities,togetherwiththefactorslikelytoaffectitsfuturedevelopment,performanceandpositionaresetoutintheStrategicreportandBusinessreviewonpages1to43.ThefinancialpositionoftheGroup,itscashflows,liquiditypositionandborrowingfacilitiesarealsodescribedwithintheBusinessreview.

Inaddition,note4.4tothefinancialstatementsincludestheGroup’sobjectives,policiesandprocessesformanagingitscapital;itsfinancialriskmanagementobjectives;detailsofitsfinancialinstrumentsandhedgingactivities;anditsexposurestocreditriskandliquidityrisk.Ashighlightedinnote4.2tothefinancialstatements,theGroup’sfinancingisbaseduponsecuritiseddebt.

TheDirectorshave,atthetimeofapprovingthefinancialstatements,areasonableexpectationthattheCompanyandtheGrouphaveadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.Thustheycontinuetoadoptthegoingconcernbasisofaccountinginpreparingthefinancialstatements.

Foreign currenciesTransactionsinforeigncurrenciesarerecordedattheexchangeratesrulingonthedatesofthetransactions.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedintothefunctionalcurrencyattherelevantratesofexchangerulingatthebalancesheetdate.Foreignexchangedifferencesarisingontranslationarerecognisedintheincomestatement.Non-monetaryassetsandliabilitiesaremeasuredatcostusingtheexchangerateonthedateoftheinitialtransaction.

Theconsolidatedfinancialstatementsarepresentedinpoundssterling(roundedtothenearestmillion),beingthefunctionalcurrencyoftheprimaryeconomicenvironmentinwhichtheparentandmostsubsidiariesoperate.Onconsolidation,theassetsandliabilitiesoftheGroup’soverseasoperationsaretranslatedintosterlingattherelevantratesofexchangerulingatthebalancesheetdate.Theresultsofoverseasoperationsaretranslatedintosterlingataverageratesofexchangefortheperiod.ExchangedifferencesarisingfromthetranslationoftheresultsandtheretranslationofopeningnetassetsdenominatedinforeigncurrenciesaretakendirectlytotheGroup’stranslationreserve.Whenanoverseasoperationissold,suchexchangedifferencesarerecognisedintheincomestatementaspartofthegainorlossonsale.

Theresultsofoverseasoperationshavebeentranslatedintosterlingattheweightedaverageeurorateofexchangefortheperiodof£1=€1.16(2016£1=€1.28),wherethisisareasonableapproximationtotherateatthedatesofthetransactions.EuroandUSdollardenominatedassetsandliabilitieshavebeentranslatedattherelevantrateofexchangeatthebalancesheetdateof£1=€1.13(2016£1=€1.16)and£1=$1.34(2016£1=$1.30)respectively.

Notes to the financial statements Section1–Basisofpreparation


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Notes to the financial statements Section1–Basisofpreparationcontinued

Recent accounting developmentsTheInternationalAccountingStandardsBoard(IASB)andInternationalFinancialReportingInterpretationsCommittee(IFRIC)haveissuedthefollowingstandardsandinterpretationswhichhavebeenadoptedbytheGroupinthesefinancialstatementsforthefirsttime:

Accounting standard Requirement Impact on financial statements

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

Theamendmentsclarifythattheexemptionfrompreparingconsolidatedfinancialstatementsisavailabletoaparententitythatisasubsidiaryofaninvestmententity,eveniftheinvestmententitymeasuresallitssubsidiariesatfairvalueinaccordancewithIFRS10.

AstheCompanyisnotaninvestmententityanddoesnothaveanyholdingcompany,subsidiary,associateorjointventurethatqualifiesasaninvestmententity,theadoptionoftheamendmentshashadnoimpactontheGroup’sfinancialstatements.

Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations

TheGrouphasadoptedtheamendmentsforthefirsttimeinthecurrentperiod.TheamendmentsprovideguidanceonhowtoaccountfortheacquisitionofajointoperationthatconstitutesabusinessasdefinedinIFRS3BusinessCombinations.Specifically,theamendmentsstatethattherelevantprinciplesofaccountingforbusinesscombinationsinIFRS3andotherstandardsshouldbeapplied.Thesamerequirementsshouldbeappliedtotheformationofajointoperationifandonlyifanexistingbusinessiscontributedtothejointoperationbyoneofthepartiesthatparticipateinthejointoperation.

AjointoperatorisalsorequiredtodisclosetherelevantinformationrequiredbyIFRS3andotherstandardsforbusinesscombinations.

TheadoptionoftheseamendmentshashadnoimpactontheGroup’sconsolidatedfinancialstatements.

Amendments to IAS 1 TheGrouphasadoptedtheamendmentstoIAS1DisclosureInitiativeforthefirsttimeinthecurrentperiod.TheamendmentsclarifythatanentityneednotprovideaspecificdisclosurerequiredbyanIFRSiftheinformationresultingfromthatdisclosureisnotmaterial,andgiveguidanceontheaggregationanddisaggregationofinformationfordisclosurepurposes.However,theamendmentsreiteratethatanentityshouldconsiderprovidingadditionaldisclosureswhencompliancewiththespecificrequirementsinIFRSisinsufficienttoenableusersoffinancialstatementstounderstandtheimpactofparticulartransactions,eventsandconditionsontheentity’sfinancialpositionandperformance.

Inaddition,theamendmentsclarifythatanentity’sshareoftheothercomprehensiveincomeofassociatesandjointventuresaccountedforusingtheequitymethodshouldbepresentedseparatelyfromthosearisingfromtheGroup,andshouldbeseparatedintotheshareofitemsthat,inaccordancewithotherIFRSs:(i)willnotbereclassifiedsubsequentlytoprofitorloss;and(ii)willbereclassifiedsubsequentlytoprofitorlosswhenspecificconditionsaremet.

Theamendmentsalsoaddressthestructureofthefinancialstatementsbyprovidingexamplesofthesystematicorderingorgroupingofthenotes.

TheadoptionoftheseamendmentshasnotresultedinanyimpactonthefinancialperformanceorpositionoftheGroup.

Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation

TheGrouphasadoptedtheamendmentsforthefirsttimeinthecurrentperiod.Theamendmentsprohibitentitiesfromusingarevenue-baseddepreciationmethodforitemsofproperty,plantandequipment.TheamendmentstoIAS38introducearebuttablepresumptionthatrevenueisnotanappropriatebasisforamortisationofanintangibleasset.Thispresumptioncanonlyberebuttedinthefollowingtwolimitedcircumstances:

(a) Whentheintangibleassetisexpressedasameasureofrevenue;or

(b) Whenitcanbedemonstratedthatrevenueandconsumptionoftheeconomicbenefitsoftheintangibleassetarehighlycorrelated.

AstheGroupalreadyusesthestraight-linemethodfordepreciationandamortisationforitsproperty,plantandequipmentandintangibleassets,theadoptionoftheseamendmentshashadnoimpactontheGroup’sconsolidatedfinancialstatements.

Amendments to IAS 27 Equity Method in Separate Financial Statements

TheGrouphasadoptedtheamendmentsforthefirsttimeinthecurrentperiod.Theamendmentsfocusonseparatefinancialstatementsandallowtheuseoftheequitymethodinsuchstatements.Specifically,theamendmentsallowanentitytoaccountforinvestmentsinsubsidiaries,associatesandjointventuresinitsseparatefinancialstatements:

• atcost;

• inaccordancewithIFRS9;or

• usingtheequitymethodasdescribedinIAS28InvestmentsinAssociatesandJointVentures.

Thesameaccountingmustbeappliedtoeachcategoryofinvestments.

Theamendmentsalsoclarifythatwhenaparententityceasestobeaninvestmententity,orbecomesaninvestmententity,itshouldaccountforthechangefromthedatewhenthechangeinstatusoccurs.

TheadoptionoftheamendmentshashadnoimpactontheCompany’sseparatefinancialstatementsastheCompanyaccountsforinvestmentsinsubsidiariesandassociatesatcostandisnotaninvestmententity.


Accounting standard Requirement Impact on financial statements

Annual Improvements to IFRSs: 2012 to 2014 Cycle

TheamendmentstoIFRS5Non-currentAssetsHeldforSaleintroducespecificguidanceforwhenanentityreclassifiesanasset(ordisposalgroup)fromheldforsaletoheldfordistributiontoowners(orviceversa).TheamendmentsclarifythatsuchachangeshouldbeconsideredasacontinuationoftheoriginalplanofdisposalandhencerequirementssetoutinIFRS5regardingthechangeofsaleplandonotapply.Theamendmentsalsoclarifytheguidanceforwhenheldfordistributionaccountingisdiscontinued.

TheamendmentstoIFRS7FinancialInstruments:Disclosuresprovideadditionalguidancetoclarifywhetheraservicingcontractiscontinuinginvolvementinatransferredassetforthepurposeofthedisclosuresrequiredinrelationtotransferredassets.

TheadoptionoftheseamendmentshashadnoimpactontheGroup’sconsolidatedfinancialstatements.

TheamendmentstoIAS19EmployeeBenefitsclarifythattherateusedtodiscountpost-employmentbenefitobligationsshouldbedeterminedbyreferencetomarketyieldsonhigh-qualitycorporatebonds.Theassessmentofthedepthofamarketforhigh-qualitycorporatebondsshouldbeatthecurrencylevel(i.e.thesamecurrencyasthebenefitsaretobepaid).Forcurrenciesforwhichthereisnodeepmarketinsuchhigh-qualitycorporatebonds,themarketyieldsattheendofthereportingperiodongovernmentbondsdenominatedinthatcurrencyshouldbeusedinstead.

TheGroupusesadiscountratethatisdeterminedwithreferencetomarketyieldsonhigh-qualitycorporatebondstodiscountthedefinedbenefitobligations.Furtherdetailsareprovidedinnote4.5.

TheIASBandIFRIChaveissuedthefollowingstandardsandinterpretationswhichcouldimpacttheGroup,withaneffectivedateforfinancialperiodsbeginningonorafterthedatesdisclosedbelow:

Accounting standard Effective date

IAS 7 (amendments) Disclosure Initiative 1January2017(subjecttoEUendorsement)

IAS 12 (amendments) Recognition of Deferred Tax Assets for Unrealised Losses

1January2017(subjecttoEUendorsement)

IFRS 15 Revenue from Contracts with Customers 1January2018

IFRS 9 Financial Instruments 1January2018

IFRS 2 (amendments) Classification and Measurement of Share-based Payment Transactions

1January2018(subjecttoEUendorsement)

TheDirectorsdonotexpectthattheadoptionofthestandardslistedabovewillhaveamaterialimpactonthefinancialstatementsoftheGroupinfutureperiods.Beyondthis,itisnotpracticabletoprovideareasonableestimateoftheeffectofthesestandardsuntiladetailedreviewhasbeencompleted.

Accounting standard Effective date

IFRS 16 Leases 1January2019(subjecttoEUendorsement)

ThestandardreplacesIAS17Leasesandrequireslesseestorecogniseassetsandliabilitiesforallleasesunlesstheleasetermis12monthsorlessortheunderlyingassetisoflowvalue.

Theabovestandardreflectsasignificantchangeintheaccountingandreportingofleasesforlesseesasitprovidesasinglelesseeaccountingmodel,andassuch,requireslesseestorecogniseassetsandliabilitiesforallleasesunlesstheunderlyingassethasalowvalueortheleasetermis12monthsorless.AccountingrequirementsforlessorsissubstantiallyunchangedfromIAS17.Asshowninnote2.3,theGrouphasleasecommitmentsof£693mat30September2017acrossmorethan300leasesofvaryingremaininglengthandage.TheimpactofthestandardontheGroupiscurrentlybeingassessedanditisnotyetpracticabletoquantifytheeffectofIFRS16ontheseconsolidatedfinancialstatements.Thereisnoimpactoncashflow.

Critical accounting judgements and estimatesThepreparationoftheconsolidatedfinancialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsintheapplicationofaccountingpoliciesthataffectreportedamountsofassets,liabilities,incomeandexpense.

Estimatesandjudgementsareperiodicallyevaluatedandarebasedonhistoricalexperienceandotherfactorsincludingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.Actualresultsmaydifferfromtheseestimates.DetailsoftheGroup’scriticalaccountingjudgementsandestimatesaredescribedwithintherelevantaccountingpolicysectionineachofthenotestothefinancialstatements.

Criticaljudgementsaredescribedineachsectionlistedbelow:

•Note2.2Separatelydiscloseditems

•Note3.1Property,plantandequipment

•Note3.3Provisions

•Note4.5Pensions

Criticalestimatesaredescribedin:

•Note3.1Property,plantandequipment


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Notes to the financial statements Section2–Resultsfortheyear

2.1 Segmental analysis

Accounting policiesOperating segmentsIFRS8OperatingSegmentsrequiresoperatingsegmentstobebasedontheGroup’sinternalreportingtoitsChiefOperatingDecisionMaker(CODM).TheCODMisregardedastheChiefExecutivetogetherwithotherBoardmembers.TheCODMusesEBITDAandprofitbeforeinterestandadjusteditems(operatingprofitpre-adjustments)asthekeymeasuresofthesegmentresults.Groupassetsarereviewedaspartofthisprocessbutarenotpresentedonasegmentbasis.

TheretailoperatingbusinessoperatesalloftheGroup’sretailoperatingunitsandgeneratesallofitsexternalrevenue.ThepropertybusinessholdstheGroup’sfreeholdandlongleaseholdpropertyportfolioandderivesallofitsincomefromtheinternalrentleviedagainsttheGroup’sretailoperatingunits.Atamacrolevel,rentissetonamarket-basedmeasurewiththisbeingreviewedonafiveyearlybasis.TheinternalrentchargeiseliminatedatthetotalGrouplevel.

Segmental informationRetail operating business Property business Total

201753 weeks

£m

201652 weeks

£m

201753 weeks

£m

201652 weeks

£m

201753 weeks

£m

201652 weeks

£m

Revenue 2,180 2,086 – – 2,180 2,086EBITDApre-adjustments 213 217 216a 214a 429 431Operatingprofitpre-adjustments 111 117 203 201 314 318Separatelydiscloseditems(note2.2) (106) (87)Operatingprofit 208 231Netfinancecosts (131) (137)Profit before tax 77 94Taxexpense (14) (5)Profit for the period 63 89

a. TheEBITDApre-adjustmentsofthepropertybusinessrelatesentirelytorentalincomereceivedfromtheretailoperatingbusiness.

Geographical segmentsSubstantiallyalloftheGroup’sbusinessisconductedintheUnitedKingdom.Inpresentinginformationbygeographicalsegment,segmentrevenueandnon-currentassetsarebasedonthegeographicallocationofcustomersandassets.

UK Germany Total

201753 weeks

£m

201652 weeks

£m

201753 weeks

£m

201652 weeks

£m

201753 weeks

£m

201652 weeks

£m

Revenue–salestothirdparties 2,100 2,018 80 68 2,180 2,086Segmentnon-currentassetsa 4,430 4,423 10 11 4,440 4,434

a. Includesbalancesrelatingtointangibles,property,plantandequipmentandnon-currentleasepremiums.


2.2 Separately disclosed items

Accounting policyInadditiontopresentinginformationonanIFRSbasis,theGroupalsopresentsadjustedprofitandearningspershareinformationthatexcludesseparatelydiscloseditemsandtheimpactofanyassociatedtax.ThisadjustedinformationisdisclosedtoallowabetterunderstandingoftheadjustedtradingperformanceoftheGroupandisconsistentwiththeGroup’sinternalmanagementreporting.

Separatelydiscloseditemsarethosewhichareseparatelyidentifiedbyvirtueoftheirsizeorincidenceandincludemovementsinthevaluationofthepropertyportfolioasaresultoftheannualrevaluationexercise,impairmentreviewofshortleaseholdandunlicensedproperties,movementsintheonerousleaseprovision,restructuringcostsandeffectsofcorporationtaxratechange.

Critical accounting judgements JudgementisusedtodeterminethoseitemswhichshouldbeseparatelydisclosedtoallowabetterunderstandingoftheadjustedtradingperformanceoftheGroup.Thisjudgementincludesassessmentofwhetheranitemisofsufficientsizeorofanaturethatisnotconsistentwithnormaltradingactivities.

Separatelydiscloseditemsareidentifiedasfollows:

• Profit/(loss)arisingonpropertydisposals–propertydisposalsaredisclosedseparatelyastheyarenotconsideredtobepartofadjustedtradeperformanceandthereisvolatilityinthesizeoftheprofit/(loss)ineachaccountingperiod.

• Movementinthevaluationofthepropertyportfolio–thisisdisclosedseparately,duetothesizeofthemovementinpropertyvaluationeachperiod.ThismovementisalsonotconsideredtobepartoftheadjustedtradeperformanceoftheGroup.

• Onerousleaseprovision–thisprovisioniscalculatedonasitebysitebasis,withthemajorityoftheadditionsforthecurrentperiodbeingdisclosedseparately.Thisincreaseistheresultofafullreviewofestatestrategy.Inaddition,thediscountrateappliedincalculatingtheprovisionhasbeenchangedinthecurrentperiod.Duetothesizeoftheresultingincreaseintheprovision,thishasbeendisclosedseparately.

•Taxratechange–thechangeintaxrateisnotpartofnormaltradeandduetothesizeinanygivenperiod,thisisdisclosedseparately.

Theitemsidentifiedinthecurrentperiodareasfollows:

Notes

201753 weeks

£m

201652 weeks

£m

Adjusted itemsNetprofitarisingonpropertydisposals 1 1Movementinthevaluationofthepropertyportfolio(seenote3.1): –Impairmentarisingfromtherevaluation a (51) (80) –Impairmentofshortleaseholdandunlicensedproperties b (17) (8) –Impairmentofassetsheldforsale c (4) –Netmovementinthevaluationofthepropertyportfolio (72) (88)Otheradjusteditems:Onerousleaseprovisionadditions d (35) –Total adjusted items before tax (106) (87)Taxcreditrelatingtoaboveitems 23 18Taxcreditinrespectofchangeintaxlegislation(note2.4) e – 14Total adjusted items after tax (83) (55)

a. ImpairmentarisingfromtheGroup’srevaluationofitspubestatewheretheircarryingvaluesexceedtheirrecoverableamount.Seenote3.1forfurtherdetails.b. Impairmentofshortleaseholdandunlicensedpropertieswheretheircarryingvaluesexceedtheirrecoverableamount.Seenote3.1forfurtherdetails.c. Impairmentrecognisedonreclassificationofproperty,plantandequipmenttoassetsheldforsale.d. Duringtheperiod,areviewofestatestrategyinrelationtomanagedleaseholdsiteshasbeencompleted,withspecificfocusonthechallengesaroundloss-makingsitesandthoselocated

onretailandleisureparks.Thelossesarenowconsideredunavoidablefortheremainingcommittedleaseterm.Inaddition,thediscountrateappliedinthecalculationhasbeenupdated.Asaresult,theonerousleaseprovisionhasbeenincreasedsignificantlywiththemajorityofthisincreaserecognisedasaseparatelydiscloseditem.Seenote3.3forfurtherdetails.

e. TheprioryeardeferredtaxcreditrelatestotheenactmentoftheFinance(No.2)Act2015on18November2015whichreducedthemainrateofcorporationtaxfrom20%to19%from1April2017.Inaddition,theFinanceAct2016wassubstantivelyenactedon15September2016andreducedthemainrateofcorporationtaxto17%from1April2020.


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Notes to the financial statements Section2–Resultsfortheyearcontinued

2.3 Revenue and operating costs

Accounting policiesRevenue recognitionRevenueisthefairvalueofgoodsandservicessoldtothirdpartiesaspartoftheGroup’stradingactivities,afterdeductingsales-basedtaxes,couponsanddiscounts.

ThemajorityofrevenuecomprisesfoodandbeveragessoldintheGroup’sbusinesses.Thisrevenueisrecognisedatthepointofsaletothecustomer.

Operating profitOperatingprofitisstatedafterchargingadjusteditemsbutbeforeinvestmentincomeandfinancecosts.

Supplier incentivesSupplierincentivesandrebatesarerecognisedwithinoperatingcostsastheyareearned.Theaccruedvalueatthereportingdateisincludedinotherreceivables.

Operating leases – Group as lesseeLeasesinwhichsubstantiallyalltherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Paymentsmadeunderoperatingleasesandsub-leasesarechargedtotheincomestatementonastraight-linebasisovertheperiodofthelease.Leaseincentivesarerecognisedasaliabilityandasubsequentreductionintherentalexpenseovertheleasetermonastraight-linebasis.

Premiumspaidonacquiringanewleasearespreadonastraight-linebasisovertheleaseterm.Suchpremiumsareclassifiedinthebalancesheetascurrentornon-currentprepayments,withthecurrentportionbeingtheelementwhichrelatestothefollowingperiod.

TheGroup’spolicyistoaccountforlandheldunderbothlongandshortleaseholdcontractsasoperatingleases,sinceithasnoexpectationthattitlewillpassonexpiryoftheleasecontracts.

Operating leases – Group as lessorRentalincomefromoperatingleasesisrecognisedonastraight-linebasisoverthetermofthelease.

Revenueisanalysedasfollows:

201753 weeks

£m

201652 weeks

£m

Goods 2,169 2,075Services 11 11

2,180 2,086

Revenuefromservicesincludesrentreceivablefromunlicensedpropertiesandleasedoperations.

Operatingcostsareanalysedasfollows:

201753 weeks

£m

201652 weeks

£m

Rawmaterialsandconsumablesrecognisedasanexpense 573 552Changesininventoryoffinishedgoodsandworkinprogress 1 (1)Employeecosts 682 626Hireofplantandmachinery 24 22Propertyoperatingleasecosts 62 58Othercosts 409 398Operatingcostsbeforedepreciation,amortisationandmovementsinthevaluationofthepropertyportfolio 1,751 1,655Depreciationofproperty,plantandequipment(note3.1) 113 111Amortisationofintangibleassets(note3.4) 2 2Netmovementinthevaluationofthepropertyportfolio(note3.1) 72 88Depreciation,amortisationandmovementsinthevaluationofthepropertyportfolio 187 201Otheradjusteditems(note2.2) 35 –Netprofitarisingonpropertydisposals (1) (1)Total operating costs 1,972 1,855


Employee costs2017

53 weeks£m

201652 weeks

£m

Wagesandsalaries 625 577Share-basedpayments(note4.6) 2 2Totalwagesandsalaries 627 579Socialsecuritycosts 48 40Pensions(note4.5) 7 7Totalemployeecosts 682 626

Theaveragenumberofemployeesincludingpart-timeemployeeswas44,893retailemployees(201643,495)and998supportemployees(2016980).

Informationregardingkeymanagementpersonnelisincludedinnote5.1.DetailedinformationregardingDirectors’emoluments,pensions,long-termincentiveschemeentitlementsandtheirinterestsinshareoptionsisgivenintheReportonDirectors’remunerationonpages66to87.

Operating leasesOperating lease commitments – Group as lesseeThevastmajorityoftheGroup’sleasesareindustrystandardUKpuborcommercialpropertyleaseswhichprovideforperiodicrentreviewstoopenmarketvalueandenjoystatutoryrightstorenewalonexpiry.Generallytheydonotcontainconditionsrelatingtorentescalation,rightstopurchase,concessions,residualvaluesorothermaterialprovisionsofanunusualnature.

Totalfutureminimumleaserentalpaymentsundernon-cancellableoperatingleasesareasfollows:

2017£m

2016£m

Duewithinoneyear 54 52Betweenoneandfiveyears 199 194Afterfiveyears 440 448

693 694

Operating lease receivables – Group as lessorTheGroupleasesasmallproportionofitsunlicensedpropertiestotenants.Themajorityofleaseagreementshavetermsof50yearsorlessandareclassifiedasoperatingleases.Wheresubletarrangementsareinplace,futureminimumleasepaymentsandreceiptsarepresentedgross.

Totalfutureminimumleaserentalreceiptsundernon-cancellableoperatingleasesareasfollows:

2017£m

2016£m

Duewithinoneyear 8 8Betweenoneandfiveyears 27 26Afterfiveyears 45 45

80 79

Leaseincomerecognisedintheyearwasasfollows:

201753 weeks

£m

201652 weeks

£m

Standardleaseincome 10 10

Auditor remuneration2017

53 weeks£m

201652 weeks

£m

FeespayabletotheGroup’sauditorforthe: –auditoftheconsolidatedGroupfinancialstatements 0.1 0.1 –auditoftheCompany’ssubsidiariesfinancialstatements 0.3 0.3Totalauditfees 0.4 0.4Otherfeestoauditor: –auditrelatedassuranceservices 0.1 0.1Totalnon-auditfees 0.1 0.1

Auditor’sremunerationof£0.3m(2016£0.3m)waspaidintheUKand£0.1m(2016£0.1m)waspaidinGermany.


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2.4 Taxation

Accounting policiesTheincometaxexpenserepresentsboththeincometaxpayable,basedonprofitsfortheperiod,anddeferredtaxandiscalculatedusingtaxratesenactedorsubstantivelyenactedatthebalancesheetdate.Taxableprofitdiffersfromnetprofitasreportedintheincomestatementbecauseitexcludesitemsofincomeorexpensewhicharenottaxable.Incometaxisrecognisedintheincomestatementexceptwhenitrelatestoitemsthatarechargedorcreditedinothercomprehensiveincomeordirectlyinequity,inwhichcasetheincometaxisalsochargedorcreditedinothercomprehensiveincomeordirectlyinequity.

Deferredtaxisrecognisedonalltemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountoftheirtaxbases.Deferredtaxisnotrecognisedinrespectoftemporarydifferencesassociatedwithinvestmentsinsubsidiaries,wherethetimingofthereversalofthetemporarydifferencecanbecontrolledanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.Theamountofdeferredtaxprovidedisbasedontheexpectedmannerofrealisationorsettlementofthecarryingamountofassetsandliabilities.

Taxation – income statement2017

53 weeks£m

201652 weeks

£m

Currenttax: –UKcorporationtax (20) (28) –Amountsoverprovidedinpriorperiods 3 3Totalcurrenttaxcharge (17) (25)Deferredtax: –Originationandreversaloftemporarydifferences 7 9 –Adjustmentsinrespectofpriorperiods (4) (3) –Changeintaxrate – 14Totaldeferredtaxcredit 3 20Totaltaxchargedintheincomestatement (14) (5)Furtheranalysedastaxrelatingto:Profitbeforeadjusteditems (37) (37)Adjusteditems 23 32

(14) (5)

Thetaxchargeintheincomestatementfortheperiodislower(2016lower)thanthestandardrateofcorporationtaxintheUK.Thedifferencesarereconciledbelow:

201753 weeks

£m

201652 weeks

£m

Profitbeforetax 77 94TaxationchargeattheUKstandardrateofcorporationtaxof19.5%(201620.0%) (15) (19)Expensesnotdeductible (4) (2)Incomenottaxable 9 2Adjustmentsinrespectofpriorperiods (1) –Effectofdifferenttaxratesofsubsidiariesoperatinginotherjurisdictions (1) –TaxcreditinrespectofchangeinUKtaxrate – 14Effectofdifferentratesfordeferredtaxandcorporationtax (2) –Totaltaxchargeintheincomestatement (14) (5)

Taxationforotherjurisdictionsiscalculatedattheratesprevailinginthosejurisdictions.


201753 weeks

£m

201652 weeks

£m

Deferred tax in the income statement:Acceleratedcapitalallowances 5 7Retirementbenefitobligations (6) (4)Rolledoverandheldovergains 4 10Depreciatednon-qualifyingassets 1 2Unrealisedgainsonrevaluations 7 13Taxlosses–UK (6) (7)Taxlosses–overseas (2) (1)Totaldeferredtaxcreditintheincomestatement 3 20

Taxation – other comprehensive income2017

53 weeks£m

201652 weeks

£m

Deferredtax:Itemsthatwillnotbereclassifiedsubsequentlytoprofitorloss: –Unrealisedgainsduetorevaluations–revaluationreserve (13) (12) –Unrealisedgainsduetorevaluations–retainedearnings 1 (11) –Rolledoverandheldovergains–retainedearnings – 11 –Remeasurementofpensionliability (1) (9)

(13) (21)Itemsthatmaybereclassifiedsubsequentlytoprofitorloss: –Cashflowhedges: –(Gains)/lossesarisingduringtheperiod (10) 11 –Reclassificationadjustmentsforitemsincludedinprofitorloss (9) (1)

(19) 10Totaltaxchargerecognisedinothercomprehensiveincome (32) (11)

Tax relating to items recognised directly in equity2017

53 weeks£m

201652 weeks

£m

Deferredtax: –Taxcredit/(charge)relatedtoshare-basedpayments 1 (1)

Taxation – balance sheet Thedeferredtaxassetsandliabilitiesrecognisedinthebalancesheetareshownbelow:

2017£m

2016£m

Deferred tax liability:Acceleratedcapitalallowances (32) (37)Rolledoverandheldovergains (112) (116)Unrealisedgainsonrevaluations (176) (171)Depreciatednon-qualifyingassets (4) (5)Totaldeferredtaxliability (324) (329)Deferred tax asset:Retirementbenefitobligations(note4.5) 50 57Derivativefinancialinstruments 50 69Taxlosses–UK 8 14Taxlosses–overseas – 2Share-basedpaymentsa 2 1Totaldeferredtaxasset 110 143Total (214) (186)

a. Taxonshare-basedpaymentsisrecogniseddirectlyinequityinthestatementofchangesinequity.


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2.4 Taxation continuedUnrecognised tax allowancesAtthebalancesheetdatetheGrouphadunusedtaxallowancesof£80minrespectofunclaimedcapitalallowances(2016£66m)availableforoffsetagainstfutureprofits.

Adeferredtaxassethasnotbeenrecognisedontaxallowanceswithavalueof£14m(2016£11m)becauseitisnotcertainthatfuturetaxableprofitswillbeavailableinthecompanywherethesetaxallowancesaroseagainstwhichtheGroupcanutilisethesebenefits.Thesetaxcreditscanbecarriedforwardindefinitely.

Factors which may affect future tax chargesTheFinance(No.2)Act2015wasenactedon18November2015andreducedthemainrateofcorporationtaxfrom20%to19%from1April2017.TheFinanceAct2016wassubstantivelyenactedon15September2016andreducedthemainrateofcorporationtaxto17%from1April2020.Theeffectofthesechangeshasbeenreflectedintheclosingdeferredtaxbalancesat24September2016and30September2017.

2.5 Earnings per shareBasicearningspershare(EPS)hasbeencalculatedbydividingtheprofitorlossfortheperiodbytheweightedaveragenumberofordinarysharesinissueduringtheperiod,excludingownsharesheldbyemployeesharetrusts.

Fordilutedearningspershare,theweightedaveragenumberofordinarysharesisadjustedtoassumeconversionofalldilutivepotentialordinaryshares.

Adjustedearningsperordinaryshareamountsarepresentedbeforeadjusteditems(seenote2.2)inordertoallowabetterunderstandingoftheadjustedtradingperformanceoftheGroup.

Profit£m

BasicEPS

pence perordinary

share

DilutedEPS

pence perordinary

share

53 weeks ended 30 September 2017:Profit/EPS 63 15.1p 15.0pAdjusteditems,netoftax 83 19.8p 19.8pAdjustedprofit/EPS 146 34.9p 34.8p

52 weeks ended 24 September 2016:Profit/EPS 89 21.6p 21.6pAdjusteditems,netoftax 55 13.3p 13.3pAdjustedprofit/EPS 144 34.9p 34.9p

Theweightedaveragenumberofordinarysharesusedinthecalculationsaboveareasfollows:

201753 weeks

m

201652 weeks

m

ForbasicEPScalculations 418 413Effectofdilutivepotentialordinaryshares: –Contingentlyissuableshares 1 –FordilutedEPScalculations 419 413

At30September2017,3,124,559(20162,697,038)othershareoptionswereoutstandingthatcouldpotentiallydilutebasicEPSinthefuturebutwerenotincludedinthecalculationofdilutedEPSastheyareanti-dilutivefortheperiodspresented.


Notes to the financial statements Section3–Operatingassetsandliabilities

3.1 Property, plant and equipment

Accounting policiesProperty, plant and equipmentThemajorityoftheGroup’sfreeholdandlongleaseholdlicensedlandandbuildingsarerevaluedannuallyandarethereforeheldatfairvaluelessdepreciation.

Shortleaseholdbuildings(leaseswithanunexpiredleasetermoflessthan50years),unlicensedlandandbuildingsandfixtures,fittingsandequipmentareheldatcostlessdepreciationandimpairment.

Alllandandbuildingsaredisclosedasasingleclassofassetwithintheproperty,plantandequipmenttable,aswedonotconsidertheshortleaseholdandunlicensedbuildingstobematerialforseparatedisclosure.

Non-currentassetsheldforsaleareheldattheircarryingvalueortheirfairvaluelesscoststosellwherethisislower.

DepreciationDepreciationischargedtotheincomestatementonastraight-linebasistowriteoffthecostlessresidualvalueovertheestimatedusefullifeofanassetandcommenceswhenanassetisreadyforitsintendeduse.Expectedusefullivesandresidualvaluesarereviewedeachyearandadjustedifappropriate.

Freeholdlandisnotdepreciated.

Freeholdandlongleaseholdbuildingsaredepreciatedsothatthedifferencebetweentheircarryingvalueandestimatedresidualvalueiswrittenoffover50yearsfromthedateofacquisition.Theresidualvalueoffreeholdandlongleaseholdbuildingsisreassessedeachyearandisestimatedtobeequaltothefairvaluedeterminedintheannualvaluationandthereforenodepreciationchargeisrecognised.

Shortleaseholdbuildings,andassociatedfixtures,fittingsandequipment,aredepreciatedovertheshorteroftheestimatedusefullifeandtheunexpiredtermofthelease.

Fixtures,fittingsandequipmenthavethefollowingestimatedusefullives:

Informationtechnologyequipment 3to7years

Fixturesandfittings 3to20years

Atthepointoftransfertonon-currentassetsheldforsale,depreciationceases.Shouldanassetbesubsequentlyreclassifiedtoproperty,plantandequipment,thedepreciationchargeiscalculatedtoreflectthecumulativechargehadtheassetnotbeenreclassified.

DisposalsProfitsandlossesondisposalofproperty,plantandequipmentarecalculatedasthedifferencebetweenthenetsalesproceedsandthecarryingamountoftheassetatthedateofdisposal.

RevaluationTherevaluationutilisesvaluationmultiples,whicharedeterminedviathird-partyinspectionof20%ofthesitessuchthatallsitesareindividuallyvaluedapproximatelyeveryfiveyears;andestimatesoffairmaintainabletrade(FMT);andestimatedresalevalueoftenant’sfixturesandfittings.Propertiesarevaluedasfullyoperationalentities,toincludefixturesandfittingsbutexcludingstockandpersonalgoodwill.Thevalueoftenant’sfixturesandfittingsisthenremovedfromthisvaluationviareferencetoitsassociatedresalevalue.Wheresiteshavebeenimpactedbyexpansionarycapitalinvestmentinthepreceding12months,theprioryearFMTisconsideredtorepresentthemostappropriatemaintainableprofitofthesiteasthecurrentyeartradingperformanceincludesaperiodofclosure.

Valuationmultiplesderivedviathird-partyinspectionsdeterminebrandstandardmultipleswhicharethenusedtovaluetheremainderofthenon-inspectedestateviaanextrapolationexercise,withtheoutputofthisexercisereviewedatahighlevelbytheDirectorsandthethird-partyvaluer.

Surpluseswhicharisefromtherevaluationexerciseareincludedwithinothercomprehensiveincome(intherevaluationreserve)unlesstheyarereversingarevaluationadjustmentwhichhasbeenrecognisedintheincomestatementpreviously;inwhichcaseanamountequaltoamaximumofthatrecognisedintheincomestatementpreviouslyisrecognisedinincome.Wheretherevaluationexercisegivesrisetoadeficit,thisisreflecteddirectlywithintheincomestatement,unlessitisreversingapreviousrevaluationsurplusagainstthesameasset;inwhichcaseanamountequaltothemaximumoftherevaluationsurplusisrecognisedwithinothercomprehensiveincome(intherevaluationreserve).

ImpairmentShortleaseholdandunlicensedpropertiesarereviewedonanoutletbasisforimpairmentifeventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedwheneverthecarryingamountofanoutletexceedsitsrecoverableamount.Therecoverableamountisthehigherofanoutlet’sfairvaluelesscoststosellandvalueinuse.Anychangesinoutletearnings,orcashflows,thediscountrateappliedtothosecashflows,ortheestimateofsalesproceedscouldgiverisetoanadditionalimpairmentloss.

Whereanimpairmentlosssubsequentlyreverses,thecarryingamountoftheassetisincreasedtotherevisedestimateofitsrecoverableamount,butonlysothattheincreasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognisedfortheassetinpriorperiods.Areversalofanimpairmentlossisrecognisedasincomeimmediately.Animpairmentreversalisonlyrecognisedwherethereisachangeintheestimatesusedtodeterminerecoverableamounts,notwhereitresultsfromthepassageoftime.


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Notes to the financial statements Section3–Operatingassetsandliabilitiescontinued

3.1 Property, plant and equipment continued

Critical accounting judgementsTherevaluationmethodologyisdeterminedusingmanagementjudgement,withadvicefromthird-partyvaluers.TheapplicationofavaluationmultipletothefairmaintainabletradeofeachsiteisconsideredthemostappropriatemethodfortheGrouptodeterminethefairvalueoflicensedlandandbuildings.Wherethevalueoflandandbuildingsderivedpurelyfromamultipleappliedtothefairmaintainabletrademisrepresentstheunderlyingassetvalue,duetolowlevelsofincomeorlocationcharacteristics,aspotvaluationisapplied.

Managementalsousejudgementtodeterminethemostappropriatemethodofreviewingshortleaseholdandunlicensedpropertiesforimpairment.Whenareviewforimpairmentisconducted,therecoverableamountisdeterminedbasedonvalueinusecalculationsbyapplyinggrowthratestodeterminefuturecashflowsanddiscountingatanappropriaterate.

Critical accounting estimatesTheapplicationofthevaluationmethodologyrequirestwocriticalaccountingestimates;theestimationofvaluationmultiples,whicharedeterminedviathird-partyinspections;andanestimateoffairmaintainabletrade,includingreferencetohistoricandfutureprojectedincomelevels.AsensitivityanalysisofchangesinvaluationmultiplesandFMT,inrelationtothepropertiestowhichtheseestimatesapply,isprovidedonpage113.Thecarryingvalueofpropertiestowhichtheseestimatesapplyis£4,230m(2016£4,217m).

Property, plant and equipmentProperty,plantandequipmentcanbeanalysedasfollows:

Land and buildings

£m

Fixtures, fittings and equipment

£mTotal

£m

Cost or valuationAt26September2015(restated*) 3,762 1,073 4,835Exchangedifferences 3 3 6Additions(restated*) 39 128 167Disposalsa(restated*) (3) (92) (95)Revaluation/(impairment) 133 (5) 128At24September2016(restated*) 3,934 1,107 5,041Additions 43 120 163Disposalsa (7) (73) (80)Transferstoassetsheldforsale (30) (25) (55)Revaluation/(impairment) 13 (11) 2At 30 September 2017 3,953 1,118 5,071

DepreciationAt26September2015(restated*) 69 524 593Exchangedifferences 2 2 4Providedduringtheperiod(restated*) 7 104 111Disposalsa(restated*) (1) (89) (90)At24September2016 77 541 618Providedduringtheperiod 6 107 113Disposalsa (5) (72) (77)Transferstoassetsheldforsale – (12) (12)At 30 September 2017 78 564 642

Net book valueAt 30 September 2017 3,875 554 4,429 At24September2016(restated*) 3,857 566 4,423At26September2015(restated*) 3,693 549 4,242

* Anamountof£48m(costof£88mlessdepreciationof£40m)asat24September2016and£45m(costof£81mlessdepreciationof£36m)asat26September2015,hasbeenreclassifiedtofixtures,fittingsandequipmentfromlandandbuildings.Thisreclassificationhasnoimpactonthetotalvalueofproperty,plantandequipment.

a. Includesassetswhicharefullydepreciatedandhavebeenremovedfromthefixedassetregister.


Certainassetswithanetbookvalueof£44m(2016£43m)ownedbytheGrouparesubjecttoafixedchargeinrespectofliabilitiesheldbytheMitchells&ButlersExecutiveTop-UpScheme(MABETUS).

Costat30September2017includes£10m(2016£11m)ofassetsinthecourseofconstruction.

Revaluation of freehold and long leasehold propertiesThefreeholdandlongleaseholdpropertieshavebeenvaluedatmarketvalue,asat30September2017usinginformationprovidedbyCBRE,independentcharteredsurveyors.ThevaluationwascarriedoutinaccordancewiththeprovisionsofRICSAppraisalandValuationStandards(‘TheRedBook’)assumingeachassetissoldaspartofthecontinuingenterpriseinoccupationindividuallyasafullyoperationaltradingentity.Themarketvaluehasbeendeterminedhavingregardtofactorssuchascurrentandfutureprojectedincomelevels,takingaccountoflocation,qualityofthepubrestaurantandrecentmarkettransactionsinthesector.

Sensitivity analysisChangesineithertheFMTorthemultiplecouldmateriallyimpactthevaluationofthefreeholdandlongleaseholdproperties.Itisestimatedthat,giventhemultipliereffect,a2.5%changeintheEBITDAofthefreeholdorlongleaseholdpropertieswouldgenerateanapproximate£70mmovementintheirvaluation.Itisestimatedthata0.1changeinthemultiplewouldgenerateanapproximate£31mmovementinvaluation.

Impairment review of short leasehold and unlicensed propertiesShortleaseholdandunlicensedproperties(comprisinglandandbuildingsandfixtures,fittingsandequipment)whicharenotrevaluedtofairmarketvalue,arereviewedforimpairmentbycomparingsitevalueinusecalculationstotheircarryingvalues.Thevalueinusecalculationusesforecasttradingperformancecashflows,whicharediscountedbyapplyingapre-taxdiscountrateof7%(20167%).Anyresultingimpairmentrelatestositeswithpoortradingperformance,wheretheoutputofthevalueinusecalculationisinsufficienttojustifytheircurrentnetbookvalue.

Currentyearvaluationshavebeenincorporatedintothefinancialstatementsandtheresultingrevaluationadjustmentshavebeentakentotherevaluationreserveorincomestatementasappropriate.Theimpactoftherevaluations/impairmentsdescribedaboveisasfollows:

201753 weeks

£m

201652 weeks

£m

Income statementRevaluationlosschargedasanimpairment (109) (144)Reversalofpastimpairments 58 64Totalimpairmentarisingfromtherevaluation (51) (80)Impairmentofshortleaseholdandunlicensedproperties (17) (8)Impairmentofassetsheldforsale (4) –

(72) (88)Revaluation reserveUnrealisedrevaluationsurplus 210 329Reversalofpastrevaluationsurplus (136) (113)

74 216Net increase in property, plant and equipment 2 128

ThevaluationtechniquesareconsistentwiththeprinciplesinIFRS13andusesignificantunobservableinputssuchthatthefairvaluemeasurementofeachpropertywithintheportfoliohasbeenclassifiedasLevel3inthefairvaluehierarchy.

Thekeyinputstovaluationonproperty,plantandequipmentareasfollows:

30 September 2017Number of pubs

Land and buildings

£m


£m

Net book valuea

£m

Freeholdproperties 1,339 3,512 426 3,938 Longleaseholdproperties 95 256 36 292 Totalrevaluedproperties 1,434 3,768 462 4,230 Shortleaseholdproperties 86 84 170 Unlicensedproperties 14 2 16 Othernon-pubassets 1 2 3 Assetsunderconstruction 6 4 10 Totalproperty,plantandequipment 3,875 554 4,429


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3.1 Property, plant and equipment continued

24 September 2016Number of pubs

Land and buildings

£m


£m

Net book valuea

£m

Freeholdproperties 1,411 3,490 437 3,927Longleaseholdproperties 98 256 34 290Totalrevaluedproperties 1,509 3,746 471 4,217Shortleaseholdproperties 91 86 177Unlicensedproperties 13 2 15Othernon-pubassets 1 2 3Assetsunderconstruction 6 5 11Totalproperty,plantandequipment 3,857 566 4,423

a. Thecarryingvalueoffreeholdandlongleaseholdpropertiesbasedontheirhistoricalcost(ordeemedcostattransitiontoIFRS)is£2,625mand£188mrespectively(2016£2,683mand£191m).

Thetablesbelowshow,byclassofasset,thenumberofpropertiesthathavebeenvaluedwithineachFMTandmultiplebanding:

Valuation multiple applied to FMT

30 September 2017Over 12

times10 to 12

times8 to 10

times6 to 8 times

Under 6 times Total

NumberofpubsineachFMTincomebanding:<£200kpa 46 11 153 190 12 412£200kto£360kpa – 11 315 141 13 480>£360kpa 2 52 406 59 23 542

48 74 874 390 48 1,434

Valuation multiple applied to FMT

24 September 2016Over 12

times10 to 12

times8 to 10

times6 to 8 times

Under 6 times Total

NumberofpubsineachFMTincomebanding:<£200kpa 47 12 195 231 9 494£200kto£360kpa 2 13 358 131 3 507>£360kpa 1 55 397 54 1 508

50 80 950 416 13 1,509

Year-on-yearmovementsinvaluationmultiplesaretheresultofchangesinpropertymarketconditions.Theaverageweightedmultipleis8.5(20168.6).

Includedwithinproperty,plantandequipmentareassetswithanetbookvalueof£3,808m(2016£3,780m),whicharepledgedassecurityforthesecuritisationdebtandoverwhichtherearecertainrestrictionsontitle.

Inadditiontotheabove,premiumspaidonacquiringanewleaseareclassifiedseparatelyinthebalancesheet.At30September2017anamountof£1m(2016£2m)wasincludedinthebalancesheet.

Assets held for sale2017

£m2016

£m

Properties 1 –

InaccordancewithIFRS5,propertiescategorisedasheldforsaleareheldatthelowerofbookvalueandfairvaluelesscoststosell.

Duringtheperiod,£43mofpropertieswereclassifiedasheldforsale.Animpairmentof£4mwasrecognisedpriortoreclassification.

Subsequently,£42mofpropertieshavebeensold,leaving£1mremainingasheldforsaleatthebalancesheetdate.

Capital commitments2017

£m2016

£m

Contractsplacedforexpenditureonproperty,plantandequipmentnotprovidedforinthefinancialstatements 23 23


3.2 Working capitalInventories

Accounting policyInventoriesarestatedatthelowerofcostandnetrealisablevalue.Costiscalculatedusingtheweightedaveragemethod.Workinprogressisinrespectofpropertydevelopmentactivitiesandincludesthedirectcostsofthedevelopmentsandassociatedprofessionalfees.

Inventoriescanbeanalysedasfollows:

2017£m

2016£m

Workinprogress – 1Goodsheldforresale 24 24Totalinventories 24 25

Trade and other receivables

Accounting policyTradeandotherreceivablesarerecognisedandcarriedatoriginalcostlessanallowanceforanyuncollectableamounts.

Tradeandotherreceivablescanbeanalysedasfollows:

2017£m

2016£m

Tradereceivables 5 4Otherreceivables 15 14Prepayments 33 14Totaltradeandotherreceivables 53 32

Allamountsfallduewithinoneyear.

Tradeandotherreceivablesarenon-interestbearingandareclassifiedasloansandreceivablesandarethereforeheldatamortisedcost.Tradeandotherreceivablespastdueandnotimpairedareimmaterialandthereforenofurtheranalysisispresented.TheDirectorsconsiderthatthecarryingamountoftradeandotherreceivablesapproximatelyequatestotheirfairvalue.

Creditriskisconsideredinnote4.4.

Trade and other payables

Accounting policyTradeandotherpayablesarerecognisedatoriginalcost.

Tradeandotherpayablescanbeanalysedasfollows:

2017£m

2016£m

Tradepayables 80 96Othertaxationandsocialsecurity 70 73Accruedcharges 102 94Otherpayables 45 30Totaltradeandotherpayables 297 293

Currenttradeandotherpayablesarenon-interestbearing.TheDirectorsconsiderthatthecarryingamountoftradeandotherpayablesapproximatelyequatestotheirfairvalue.

3.3 Provisions

Accounting policyProvisionsarerecognisedwhentheGrouphasapresentlegalorconstructiveobligationasaresultofpastevents;itismorelikelythannotthatanoutflowofresourceswillberequiredtosettletheobligation;andtheamountcanbereliablyestimated.ProvisionsaremeasuredusingtheDirectors’bestestimateoftheexpenditurerequiredtosettletheobligationatthebalancesheetdateandarediscountedtopresentvaluewheretheeffectismaterial.

Onerouspropertyprovisionsrepresenttheexpectedunavoidablelossesononerousandvacantpropertyleasesandcomprisethelowerofthenetrentpayableortheoperatinglossafterrentalcosts.Theprovisioniscalculatedonasitebysitebasiswithaprovisionbeingmadefortheremainingleaseterm,wherealeaseisconsideredtobeonerous.Othercontractualdilapidationscostsarealsorecordedasprovisionsasappropriate.

Critical accounting judgementsDeterminationofwhetheralossisunavoidablerequiresareasofjudgementsuchasconsiderationofpotentialfutureinvestmentdecisions,localconditionswhichmaybeimpactingoncurrentperformanceandtheopportunitytosurrenderaleasebacktothelandlord.


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3.3 Provisions continued

Critical accounting estimatesInrelationtoonerouspropertyprovisions,estimatesarerequiredindeterminingthefutureEBITDAperformanceofeachsiteandthepotentialtoexitleasesearlierthantheexpirydate.Asensitivityanalysisofchangesintheseestimatesisprovidedbelow.Thevalueofprovisionstowhichtheseestimatesapplyis£42m(2016£9m).

ProvisionsTheprovisionforunavoidablelossesononerouspropertyleaseshasbeensetuptocoverrentalpaymentsofvacantorloss-makingproperties.Paymentsareexpectedtocontinueonthesepropertiesforperiodsof1to19years.

Provisionscanbeanalysedasfollows:

Property leases

£m

At26September2015 10Releasedintheperiod (2)Providedintheperiod 5Unwindingofdiscount –Utilisedintheperiod (4)At24September2016 9Releasedintheperioda (1)Providedintheperiodb 36Unwindingofdiscount 1Utilisedintheperiod (3)At 30 September 2017 42

a. Releasesintheperiodprimarilyrelatetopropertydisposals.Thishasbeenrecognisedwithinadjustedprofittoreflectwherethechargeforthesepropertieswasoriginallyrecognised.b.Duringtheperiod,afullreviewofestatestrategyinrelationtomanagedleaseholdpropertieshasbeencompleted,withspecificfocusonthechallengesaroundloss-makingsitesandthose

locatedonretailandleisureparks.Withlowerfootfallonmanyoftheseparksandthecontinueduncertaineconomicoutlook,alongsideincreasedcostpressuressuchaslivingwage,businessratesreview,apprenticeshiplevy,sugartaxandfoodpriceinflation,anumberofshortleaseholdsitesarenowchallengedwhenstrivingtoachieveabreak-evenprofitperformance.Asaresult,thelossesarenowconsideredunavoidablefortheremainingcommittedleasetermformanagedproperties.Inaddition,thediscountrateappliedinthecalculationhasbeenupdated.Asaresultofthesechanges,a£35mincreaseintheprovisionwhichhasbeenincludedasaseparatelydiscloseditem(seenote2.2).

Theremainingincreaseof£1misrecognisedwithinadjustedprofit,asthisrepresentsunavoidablelossesonunlicensedproperties.Thereisnochangeinapproachforthesesitesfromthepriorperiod.

Sensitivity analysisChangesintheEBITDAperformanceofeachsitecouldimpactonthevalueoftheprovision.Itisestimatedthat,a10%declineintheEBITDAperformanceofthesitesincludedintheprovisionwouldgenerateanadditionalprovisionof£2m.

Itisalsoestimatedthat,shouldallleaseswithmorethantenyearsremainingonthecommittedleasetermbeexitedtwoyearsaheadofexpiry,theprovisionwouldreduceby£3m.

3.4 Goodwill and other intangible assets

Accounting policiesBusiness combinations and goodwillAcquisitionsofsubsidiariesandbusinessesareaccountedforusingtheacquisitionmethod.TheconsiderationforeachacquisitionismeasuredattheaggregateofthefairvaluesofassetsgivenandliabilitiesincurredorassumedbytheGroupinexchangeforcontroloftheacquiree.Acquisition-relatedcostsarerecognisedintheincomestatementasincurred.

Attheacquisitiondate,theidentifiableassetsacquiredandtheliabilitiesassumedarerecognisedattheirfairvalueattheacquisitiondate,exceptthat:

• deferredtaxassetsorliabilitiesandliabilitiesorassetsrelatedtoemployeebenefitarrangementsarerecognisedandmeasuredinaccordancewithIAS12IncomeTaxesandIAS19EmployeeBenefits(revised)respectively;and

•assets(ordisposalgroups)thatareclassifiedasheldforsaleinaccordancewithIFRS5Non-CurrentAssetsHeldforSaleandDiscontinuedOperationsaremeasuredinaccordancewiththatstandard.

Intangibleassetsacquiredinabusinesscombinationandrecognisedseparatelyfromgoodwillareinitiallyrecognisedattheirfairvalueattheacquisitiondate.

Goodwillismeasuredastheexcessofthesumoftheconsiderationtransferred,theamountofanynon-controllinginterestsintheacquiree,andthefairvalueoftheacquirer’spreviouslyheldequityinterestintheacquireeoverthenetoftheidentifiableassetsacquiredandtheliabilitiesassumedattheacquisitiondate.If,afterreassessment,thenetoftheidentifiableassetsacquiredandliabilitiesassumedattheacquisitiondateexceedsthesumoftheconsiderationtransferred,theamountofanynon-controllinginterestsintheacquireeandthefairvalueoftheacquirer’spreviouslyheldinterestintheacquiree,theexcessisrecognisedimmediatelyintheincomestatementasabargainpurchase.

WhentheconsiderationtransferredbytheGroupinabusinesscombinationincludesassetsorliabilitiesresultingfromacontingentconsiderationarrangement,thecontingentconsiderationismeasuredatitsacquisitiondatefairvalueandincludedaspartofthecontingentconsideration


transferredinabusinesscombination.Changesinfairvalueofthecontingentconsiderationthatqualifyasmeasurementperiodadjustmentsareadjustedretrospectively,withcorrespondingadjustmentsagainstgoodwill.Measurementperiodadjustmentsareadjustmentsthatarisefromadditionalinformationobtainedduringthe‘measurementperiod’(whichcannotexceedoneyearfromtheacquisitiondate)aboutfactsandcircumstancesthatexistedattheacquisitiondate.

Thesubsequentaccountingforchangesinthefairvalueofcontingentconsiderationthatdonotqualifyasmeasurementperiodadjustmentsdependsonhowthecontingentconsiderationisclassified.Contingentconsiderationthatisclassifiedasequityisnotre-measuredatsubsequentreportingdatesanditssubsequentsettlementisaccountedforwithinequity.Contingentconsiderationthatisclassifiedasanassetoraliabilityisre-measuredatsubsequentreportingdates,atfairvalue,withthecorrespondinggainorlossbeingrecognisedintheincomestatement.

Whenabusinesscombinationisachievedinstages,theGroup’spreviously-heldinterestsintheacquiredentityisre-measuredtoitsacquisitiondatefairvalueandtheresultinggainorloss,ifany,isrecognisedintheincomestatement.Amountsarisingfrominterestsintheacquireepriortotheacquisitiondatethathavepreviouslybeenrecognisedinothercomprehensiveincomearereclassifiedtoprofitorloss,wheresuchtreatmentwouldbeappropriateifthatinterestweredisposedof.

Iftheinitialaccountingforabusinesscombinationisincompletebytheendofthereportingperiodinwhichthecombinationoccurs,theGroupreportsprovisionalamountsfortheitemsforwhichtheaccountingisincomplete.Thoseprovisionalamountsareadjustedduringthemeasurementperiod,oradditionalassetsorliabilitiesarerecognised,toreflectnewinformationobtainedaboutfactsandcircumstancesthatexistedasoftheacquisitiondatethat,ifknown,wouldhaveaffectedtheamountsrecognisedasofthatdate.

Goodwillisnotamortised,butisreviewedforimpairmentannuallyormorefrequentlyifeventsorchangesincircumstancesindicatethatthecarryingvaluemaybeimpaired.Forthepurposeofimpairmenttesting,goodwillisallocatedtoeachoftheGroup’scash-generatingunitsexpectedtobenefitfromthesynergiesofthecombination.Theimpairmentreviewrequiresmanagementtoconsidertherecoverablevalueofthebusinesstowhichthegoodwillrelates,basedoneitherthefairvaluelesscoststosellorthevalueinuse.Valueinusecalculationsrequiremanagementtoconsiderthenetpresentvalueoffuturecashflowsgeneratedbythebusinesstowhichthegoodwillrelates.Fairvaluelesscoststosellisbasedonmanagement’sestimateofthenetproceedswhichcouldbegeneratedthroughdisposingofthatbusiness.Iftherecoverableamountofthecash-generatingunitislessthanthecarryingamountoftheunit,theimpairmentlossisallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtotheunitandthentotheotherassetsoftheunitpro-rataonthebasisofthecarryingamountofeachassetintheunit.Animpairmentlossisrecognisedimmediatelyintheincomestatementandisnotsubsequentlyreversed.

Ondisposalofasubsidiary,theattributableamountofgoodwillisincludedinthedeterminationoftheprofitorlossondisposal.

Computer softwareComputersoftwareandassociateddevelopmentcosts,whicharenotanintegralpartofarelateditemofhardware,arecapitalisedasanintangibleassetandamortisedonastraight-linebasisovertheirusefullife.Theperiodofamortisationrangesbetweenthreeandsevenyearswiththemajoritybeingfiveyears.

Intangible assetsIntangibleassetscanbeanalysedasfollows:

Goodwill£m

Computer software

£mTotal

£m

CostAt26September2015 7 10 17Additions – 1 1At24September2016 7 11 18Additions – 3 3At 30 September 2017 7 14 21

Accumulated amortisation and impairmentAt26September2015 5 2 7Providedduringtheperiod – 2 2At24September2016 5 4 9Providedduringtheperiod – 2 2At 30 September 2017 5 6 11

Net book valueAt 30 September 2017 2 8 10 At24September2016 2 7 9At26September2015 2 8 10

Therearenointangibleassetswithindefiniteusefullives.Allamortisationchargeshavebeenexpensedthroughoperatingcosts.

Goodwillhasbeentestedforimpairmentonasite-by-sitebasisusingforecastcashflows,discountedbyapplyingapre-taxdiscountrateof7%(20167%).Forthepurposesofthecalculationoftherecoverableamount,thecashflowprojectionsbeyondthetwoyearperiodinclude2%(20162%)growthperannum.


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Notes to the financial statements Section4–Capitalstructureandfinancingcosts

4.1 Net debt

Accounting policyCash and cash equivalentsCashandcashequivalentscomprisecashatbankandinhandandothershort-termhighlyliquiddepositswithanoriginalmaturityatacquisitionofthreemonthsorless.Cashheldondepositwithanoriginalmaturityatacquisitionofmorethanthreemonthsisdisclosedasothercashdeposits.Inthecashflowstatement,cashandcashequivalentsareshownnetofbankoverdraftsthatarerepayableondemand.

Net debt2017

£m2016

£m

Cashandbankbalances 147 158Cashandcashequivalents 147 158Othercashdeposits 120 120Securitiseddebt(note4.2) (1,909) (1,995)Liquidityfacility(note4.2) (147) (147)Revolvingcreditfacilities(note4.2) (6) (31)Derivativeshedgingbalancesheetdebta(note4.2) 45 55

(1,750) (1,840)

a. RepresentstheelementofthefairvalueofcurrencyswapshedgingthebalancesheetvalueoftheGroup’sUS$denominatedA3Nloannotes.Thisamountisdisclosedseparatelytoremovetheimpactofexchangemovementswhichareincludedinthesecuritiseddebtamount.

Movement in net debt2017

53 weeks£m

201652 weeks

£m

Net decrease in cash and cash equivalents (11) (7)Addbackcashflowsinrespectofothercomponentsofnetdebt:Repaymentofprincipalinrespectofsecuritiseddebt 77 67Netmovementonunsecuredrevolvingfacilities 25 (31)Decrease in net debt arising from cash flows 91 29Movementincapitaliseddebtissuecostsnetofaccruedinterest (1) (1)Decrease in net debt 90 28Openingnetdebt (1,840) (1,870)Foreignexchangemovementsoncash – 2Closing net debt (1,750) (1,840)

4.2 Borrowings

Accounting policy Borrowings,whichincludetheGroup’ssecuredloannotes,arestatedinitiallyatfairvalue(normallytheamountoftheproceeds)netofissuecosts.Thereaftertheyarestatedatamortisedcostusinganeffectiveinterestbasis.Financecosts,whicharethedifferencebetweenthenetproceedsandthetotalamountofpaymentstobemadeinrespectoftheinstruments,areallocatedoverthetermofthedebtusingtheeffectiveinterestmethod.Borrowingcostsarenotattributedtotheacquisitionorconstructionofassetsandthereforenocostsarecapitalisedwithinproperty,plantandequipment.

Borrowingscanbeanalysedasfollows:

2017£m

2016£m

CurrentSecuritiseddebta,b 82 75Liquidityfacility 147 147Unsecuredrevolvingcreditfacilities 6 31Totalcurrent 235 253Non-current Securitiseddebta,b 1,827 1,920Totalborrowings 2,062 2,173

a. Furtherdetailsoftheassetspledgedassecurityagainstthesecuritiseddebtaregivenonpage113.b. Statednetofdeferredissuecosts.


2017£m

2016£m

Analysis by year of repaymentDuewithinoneyearorondemand 235 253Duebetweenoneandtwoyears 130 137Duebetweentwoandfiveyears 307 285Dueafterfiveyears 1,390 1,498Totalborrowings 2,062 2,173

Securitised debtOn13November2003,theGrouprefinanceditsdebtbyraising£1,900mthroughasecuritisationofthemajorityofitsUKpubsandrestaurantsownedbyMitchells&ButlersRetailLimited(‘MABRetail’).On15September2006theGroupcompletedafurtherdebt(‘tap’)issuetoborrowanadditional£655mandrefinance£450mofexistingdebtatlowercost.

Theloannotesconsistof10tranchesasfollows:

Principal outstanding

Tranche

Initial principal

borrowed£m Interest

Principalrepayment

period(all by instalments)

Effectiveinterest

rate%

30 September2017

£m

24 September2016

£mExpected

WALa

A1N 200 Floating 2011to2028 6.21b 142 152 6yearsA2 550 Fixed-5.57% 2003to2028 6.01 258 276 6yearsA3N 250 Floating 2011to2028 6.29b 177c 189c 6yearsA4 170 Floating 2016to2028 5.97b 159 168 6yearsAB 325 Floating 2020to2032 5.74b 325 325 11yearsB1 350 Fixed-5.97% 2003to2023 6.12 119 135 3yearsB2 350 Fixed-6.01% 2015to2028 6.12 327 339 7yearsC1 200 Fixed-6.47% 2029to2030 6.56 200 200 12yearsC2 50 Floating 2033to2034 6.47b 50 50 16yearsD1 110 Floating 2034to2036 6.68b 110 110 18years

2,555 1,867 1,944

a. Expectedweightedaveragelife(WAL)assumesnoearlyredemptioninrespectofanyloannotes.b. Aftertheeffectofinterestrateswaps.c. A3NnotesareUS$noteswhichareshownastranslatedtosterlingatthehedgedswaprate.Valuesattheperiodendspotrateare£222m(2016£244m).Thereforetheexchange

differenceontheA3Nnotesis£45m(2016£55m).

ThenotesaresecuredonthemajorityoftheGroup’spropertyandfutureincomestreamstherefrom.Allofthefloatingratenotesarehedgedusinginterestrateswapswhichfixtheinterestratepayable.

Interestandmarginispayableonthefloatingratenotesasfollows:

Tranche Interest Margin

A1N 3monthLIBOR 0.45%A3N 3monthUS$LIBOR 0.45%A4 3monthLIBOR 0.58%AB 3monthLIBOR 0.60%C2 3monthLIBOR 1.88%D1 3monthLIBOR 2.13%

Theoverallcashinterestratepayableontheloannotesis6.1%(20166.1%)aftertakingaccountofinterestratehedgingandthecostoftheprovisionofafinancialguaranteeprovidedbyAmbacinrespectoftheClassAandABnotes.

Thesecuritisationisgovernedbyvariouscovenants,warrantiesandeventsofdefault,manyofwhichapplytoMitchells&ButlersRetailLimited,theGroup’smainoperatingsubsidiary.Theseincludecovenantsregardingthemaintenanceanddisposalofsecuritisedpropertiesandrestrictionsonitsabilitytomovecash,bywayofdividendsforexample,tootherGroupcompanies.At30September2017,Mitchells&ButlersRetailLimitedhadcashandcashequivalentsof£97m(2016£103m).Ofthisamount£1m(2016£36m),representingdisposalproceeds,washeldondepositinanaccountoverwhichthereareanumberofrestrictions.Theuseofthiscashrequirestheapprovalofthesecuritisationtrusteeandmayonlybeusedforcertainspecifiedpurposessuchascapitalenhancementexpenditureandbusinessacquisitions.


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Notes to the financial statements Section4–Capitalstructureandfinancingcostscontinued

4.2 Borrowings continuedThecarryingvalueofthesecuritiseddebtintheGroupbalancesheetisanalysedasfollows:

2017£m

2016£m

Principaloutstandingatbeginningofperiod 1,998 2,031Principalrepaidduringtheperiod (77) (67)Exchangeontranslationofdollarloannotes (10) 34Principaloutstandingatendofperiod 1,911 1,998Deferredissuecosts (6) (7)Accruedinterest 4 4Carryingvalueatendofperiod 1,909 1,995

Liquidity facilityUnderthetermsofthesecuritisation,theGroupholdsaliquidityfacilityof£295mprovidedbytwocounterparties.Asaresultofthedecreaseincreditratingofoneofthecounterparties,theGroupwasobligedtodrawthatcounterparty’sportionofthefacilityduringthe52weeksended27September2014.Theamountdrawnat30September2017is£147m(24September2016£147m).ThesefundsarechargedunderthetermsofthesecuritisationandarenotavailableforuseinthewiderGroup.

Thefacility,whichisnotavailableforanyotherpurpose,issizedtocover18monthsdebtservice.

Unsecured revolving credit facilitiesTheGroupholdsthreeunsecuredcommittedrevolvingcreditfacilitiesof£50meach,anduncommittedrevolvingcreditfacilitiesof£15m,availableforgeneralcorporatepurposes.Theamountdrawnat30September2017is£6m(2016£31m).Allcommittedfacilitiesexpireon31December2020.

4.3 Finance costs and revenue2017

53 weeks£m

201652 weeks

£m

Finance costsInterestonsecuritiseddebt (120) (121)Interestonotherborrowings (4) (5)Unwindingofdiscountonprovisions (1) –Totalfinancecosts (125) (126)Finance revenueInterestreceivable–cash 1 1Net pensions finance charge (note 4.5) (7) (12)

4.4 Financial instruments

Accounting policiesFinancialassetsandfinancialliabilitiesarerecognisedintheGroup’sbalancesheetwhentheGroupbecomesapartytothecontractualprovisionsoftheinstrument.

Financial assetsAllfinancialassetsarerecognisedorderecognisedonatradedatewherethepurchaseorsaleofafinancialassetisunderacontractwhosetermsrequiredeliveryofthefinancialassetwithinthetimeframeestablishedbythemarketconcerned.Financialassetsareinitiallymeasuredatfairvalue,plustransactioncosts,exceptforthosefinancialassetsclassifiedasatfairvaluethroughprofitorloss,whichareinitiallymeasuredatfairvalue.

Financialassetsareclassifiedintothefollowingspecifiedcategories:financialassets‘atfairvaluethroughprofitorloss’(FVTPL);derivativeinstrumentsindesignatedhedgeaccountingrelationships;‘held-to-maturity’investments;‘available-for-sale’(AFS)financialassets;and‘loansandreceivables’.Theclassificationdependsonthenatureandpurposeofthefinancialassetsandisdeterminedatthetimeofinitialrecognition.

Impairment of financial assetsFinancialassets,otherthanthoseatFVTPL,areassessedforindicatorsofimpairmentateachbalancesheetdate.Financialassetsareimpairedwherethereisobjectiveevidencethat,asaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionofthefinancialasset,theestimatedfuturecashflowsoftheinstrumenthavebeenaffected.

ForlistedandunlistedequityinvestmentsclassifiedasAFS,asignificantorprolongeddeclineinthefairvalueofthesecuritybelowitscostisconsideredtobeobjectiveevidenceofimpairment.

Forallotherfinancialassets,includingredeemablenotesclassifiedasAFS,objectiveevidenceofimpairmentcouldinclude:

•significantfinancialdifficultyoftheissuerorcounterparty;or

•defaultordelinquencyininterestorprincipalpayments;or

• itbecomingprobablethattheborrowerwillenterbankruptcyorfinancialreorganisation.


Forcertaincategoriesoffinancialassets,suchastradereceivables,assetsthatareassessednottobeimpairedindividuallyare,inaddition,assessedforimpairmentonacollectivebasis.ObjectiveevidenceofimpairmentforaportfolioofreceivablescouldincludetheGroup’spastexperienceofcollectingpayments,anincreaseinthenumberofdelayedpaymentsintheportfoliopasttheagreedcreditperiod,aswellasobservablechangesinnationalorlocaleconomicconditionsthatcorrelatewithdefaultonreceivables.

Forfinancialassetscarriedatamortisedcost,theamountoftheimpairmentisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows,discountedatthefinancialasset’soriginaleffectiveinterestrate.

Thecarryingamountofthefinancialassetisreducedbytheimpairmentlossdirectlyforallfinancialassetswiththeexceptionoftradereceivables,wherethecarryingamountisreducedthroughtheuseofanallowanceaccount.Whenatradereceivableisconsidereduncollectable,itiswrittenoffagainsttheallowanceaccount.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainsttheallowanceaccount.Changesinthecarryingamountoftheallowanceaccountarerecognisedinprofitorloss.

WhenanAFSfinancialassetisconsideredtobeimpaired,cumulativegainsorlossespreviouslyrecognisedinothercomprehensiveincomearereclassifiedtoprofitorlossintheperiod.

WiththeexceptionofAFSequityinstruments,if,inasubsequentperiod,theamountoftheimpairmentlossdecreasesandthedecreasecanberelatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognised,thepreviouslyrecognisedimpairmentlossisreversedthroughprofitorlosstotheextentthatthecarryingamountoftheinvestmentatthedatetheimpairmentisreverseddoesnotexceedwhattheamortisedcostwouldhavebeenhadtheimpairmentnotbeenrecognised.

InrespectofAFSequitysecurities,impairmentlossespreviouslyrecognisedinprofitorlossarenotreversedthroughprofitorloss.Anyincreaseinfairvaluesubsequenttoanimpairmentlossisrecognisedinothercomprehensiveincome.

Financial liabilitiesFinancialliabilitiesareclassifiedaseither‘borrowingsatamortisedcost’or‘otherfinancialliabilities’.

Theborrowingsaccountingpolicyisprovidedinnote4.2.Otherfinancialliabilitiesareinitiallymeasuredatfairvalue,netoftransactioncosts.

Derecognition of financial assets and liabilitiesTheGroupderecognisesafinancialassetonlywhenthecontractualrightstothecashflowsfromtheassetexpire,orwhenittransfersthefinancialassetandsubstantiallyalltherisksandrewardsofownershipoftheassettoanotherentity.IftheGroupdoesnotretainsubstantiallyalltherisksandrewardsofownershipbutcontinuestocontrolatransferredasset,theGrouprecognisesitsretainedinterestintheassetandanassociatedliabilityforamountsitmayhavetopay.IftheGroupretainssubstantiallyalltherisksandrewardsofownershipofatransferredfinancialasset,theGroupcontinuestorecognisethefinancialassetandalsorecognisesacollateralisedborrowingfortheproceedsreceived.

TheGroupderecognisesfinancialliabilitieswhen,andonlywhen,theGroup’sobligationsaredischarged,cancelledorexpired.Thedifferencebetweenthecarryingamountofthefinancialliabilitydischargedandtheconsiderationpaidandpayableisrecognisedinprofitorloss.

Effective interest methodTheeffectiveinterestmethodisamethodofcalculatingtheamortisedcostofadebtinstrumentandofallocatinginterestincomeovertherelevantperiod.Theeffectiveinterestrateistheratethatexactlydiscountsestimatedfuturecashreceipts(includingallfeesandpointspaidorreceivedthatformanintegralpartoftheeffectiveinterestrate,transactioncostsandotherpremiumsordiscounts)throughtheexpectedlifeofthedebtinstrument,orwhereappropriate,ashorterperiod,tothenetcarryingamountoninitialrecognition.IncomeisrecognisedonaneffectiveinterestbasisfordebtinstrumentsotherthanthosefinancialassetsclassifiedasatFVTPL.

Derivative financial instruments and hedge accountingTheGroupusesinterestrateandcurrencyswapcontractstohedgeitsexposuretochangesininterestratesandexchangerates.ThesecontractsaredesignatedascashflowhedgesandhedgeaccountingisappliedwherethenecessarycriteriaunderIAS39FinancialInstruments:RecognitionandMeasurementaremet.Derivativefinancialinstrumentsarenotusedfortradingorspeculativepurposes.

Derivativefinancialinstrumentsareinitiallymeasuredatfairvalueonthecontractdate,andarere-measuredtofairvalueatsubsequentreportingdates.Fairvalueiscalculatedasthepresentvalueoftheestimatedfuturecashflowsataratethatreflectsthecreditriskofvariouscounterparties.

Changesinthefairvalueofderivativeinstrumentsthataredesignatedandeffectiveashedgesofhighlyprobablefuturecashflowsarerecognisedinequity.Thecumulativegainorlossistransferredfromequityandrecognisedintheincomestatementatthesametimeasthehedgedtransactionaffectsprofitorloss.Theineffectivepartofanygainorlossisrecognisedintheincomestatementimmediately.

Movementsinthefairvalueofderivativeinstrumentswhichdonotqualifyforhedgeaccountingarerecognisedintheincomestatementimmediately.

Hedgeaccountingisdiscontinuedwhenthehedginginstrumentexpiresorissold,terminated,ornolongerqualifiesforhedgeaccounting.Atthatpoint,thecumulativegainorlossinequityremainsinequityandisrecognisedinaccordancewiththeabovepolicywhenthetransactionaffectsprofitorloss.Ifthehedgedtransactionisnolongerexpectedtooccur,thecumulativegainorlossrecognisedinequityisrecognisedintheincomestatementimmediately.

Equity instrumentsAnequityinstrumentisanycontractthatevidencesaresidualinterestintheassetsofanentityafterdeductingallliabilities.EquityinstrumentsissuedbytheCompanyarerecordedatthefairvalueoftheproceedsreceived,netofdirectissuecosts.


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4.4 Financial instruments continuedFinancial risk managementFinancialriskismanagedbytheGroup’sTreasuryfunction.TheGroup’sTreasuryfunctionisgovernedbyaBoardApprovedTreasuryPolicyStatementwhichdetailsthekeyobjectivesandpoliciesfortheGroup’streasurymanagement.TheTreasuryCommitteeensuresthattheTreasuryPolicyisadheredto,monitorsitsoperationandagreesappropriatestrategiesforrecommendationtotheBoard.TheTreasuryPolicyStatementisreviewedannually,withrecommendationsforchangemadetotheBoard,asappropriate.TheGroupTreasuryfunctionisoperatedasacostcentreandistheonlyareaofthebusinesspermittedtotransacttreasurydeals.Itmustalsobeconsultedonotherrelatedmatterssuchastheprovisionofguaranteesorthefinancialimplicationsofcontractterms.

AnexplanationoftheGroup’sfinancialinstrumentriskmanagementobjectivesandstrategiesissetoutbelow.

ThemainfinancialriskswhichimpacttheGroupresultfromfundingandliquidityrisk,creditrisk,capitalriskandmarketrisk,principallyasaresultofchangesininterestandcurrencyrates.Derivativefinancialinstruments,principallyinterestrateandforeigncurrencyswaps,areusedtomanagemarketrisk.Derivativefinancialinstrumentsarenotusedfortradingorspeculativepurposes.

Funding and liquidity riskInordertoensurethattheGroup’slong-termfundingstrategyisalignedwithitsstrategicobjectives,theTreasuryCommitteeregularlyassessesthematurityprofileoftheGroup’sdebt,alongsidetheprevailingfinancialprojections.ThisenablesittoensurethatfundinglevelsareappropriatetosupporttheGroup’splans.

ThecurrentfundingarrangementsoftheGroupconsistofthesecuritisednotesissuedbyMitchells&ButlersFinanceplc(andassociatedliquidityfacility)alongwiththreecommittedunsecuredrevolvingcreditfacilitiesof£50meach.Thetermsofthesecuritisationandtherevolvingcreditfacilitiescontainvariousfinancialcovenants.CompliancewiththesecovenantsismonitoredbyGroupTreasury.TheGroupalsohasuncommittedrevolvingcreditfacilitiesof£15m.

TheGrouppreparesarollingdailycashforecastcoveringasixweekperiodandanannualcashforecastbyperiod.TheseforecastsarereviewedonadailybasisandareusedtomanagetheinvestmentandborrowingrequirementsoftheGroup.Acombinationofcashpoolingandzerobalancingagreementsareinplacetoensuretheoptimumliquiditypositionismaintained.TheGroupmaintainssufficientcashbalancesorcommittedfacilitiesoutsidethesecuritisationtoensurethatitcanmeetitsmedium-termanticipatedcashflowrequirements.

Thematuritytablebelowdetailsthecontractualundiscountedcashflows(bothprincipalandinterest)fortheGroup’sfinancialliabilities,aftertakingintoaccounttheeffectofinterestrateswaps.

Within1 year

£m

1 to 2years

£m

2 to 3 years

£m

3 to 4years

£m

4 to 5years

£m

More than 5 years

£mTotal

£m

30 September 2017a

Fixedrate:Securitiseddebtb (194) (193) (197) (199) (199) (1,879) (2,861)Floatingrate:Liquidityfacility (147) – – – – – (147)Unsecuredrevolvingcreditfacilities (6) – – – – – (6)Tradeandotherpayables (297) – – – – – (297)

24 September 2016a

Fixedrate:Securitiseddebtb (194) (194) (193) (197) (199) (2,078) (3,055)Floatingrate:Liquidityfacility (147) – – – – – (147)Unsecuredrevolvingcreditfacilities (31) – – – – – (31)Tradeandotherpayables (293) – – – – – (293)

a. Assumesnoearlyredemptioninrespectofanyloannotes.b. Includestheimpactofthecashflowhedges.

Credit riskTheGroupTreasuryfunctionentersintocontractswiththirdpartiesinrespectofderivativefinancialinstrumentsforriskmanagementpurposesandtheinvestmentofsurplusfunds.TheseactivitiesexposetheGrouptocreditriskagainstthecounterparties.Tomitigatethisexposure,GroupTreasuryoperatespoliciesthatrestricttheinvestmentofsurplusfundsandtheenteringintoofderivativetransactionstocounterpartiesthathaveaminimumcreditratingof‘A’(long-term)and‘A1’/‘P1’/‘F1’(short-term).CounterpartiesmayalsoberequiredtopostcollateralwiththeGroup,wheretheircreditratingfallsbelowapredeterminedlevel.Theamountthatcanbeinvestedortransactedatvariousratingslevelsisrestrictedunderthepolicy.Tominimisecreditriskexposureagainstindividualcounterparties,investmentsandderivativetransactionsareenteredintowitharangeofcounterparties.TheGroupTreasuryfunctionreviewscreditratings,aspublishedbyMoody’s,Standard&Poor’sandFitchRatings,currentexposurelevelsandthemaximumpermittedexposureatgivencreditratings,foreachcounterpartyonadailybasis.AnyexceptionsarerequiredtobeformallyreportedtotheTreasuryCommitteeonafour-weeklybasis.


IncludedinotherreceivablesareamountsduefromcertainGroupsuppliers.Includedintradeandotherpayablesattheperiodendareamountsduetosomeofthesesuppliers.ThisreducestheGroup’screditexposure.

TheGroup’screditexposureatthebalancesheetdatewas:

2017£m

2016£m

Cashandcashequivalents 147 158Othercashdeposits 120 120Tradereceivables 5 4Otherreceivables 15 14Derivatives 43 53

Capital managementTheGroup’scapitalbaseiscomprisedofitsnetdebt(analysedinnote4.1)plustotalequity(disclosedonthefaceoftheGroupbalancesheet).Theobjectiveistomaintainacapitalbasewhichissufficientlystrongtosupporttheongoingdevelopmentofthebusinessasagoingconcern,includingtheamenity,andcashflowgenerationofthepubestate.Bykeepingdebt(seealso‘Fundingandliquidityrisk’above)andheadroomagainstitsdebtfacilitiesatanappropriatelevel,theGroupensuresthatitmaintainsastrongcreditposition,whilstmaximisingvalueforshareholdersandadheringtoitscovenantsandotherrestrictionsassociatedwithitsdebt(seenote4.2).Inmanagingitscapitalstructure,fromtimetotimetheGroupmayrealisevaluefromnon-coreassets,buybackorissuenewshares,initiateandvaryitsdividendpaymentsandseektovaryoracceleratedebtrepayments.TheGroup’spolicyistoensurethatthematurityofitsdebtprofilesupportsitsstrategicobjectives.TheBoardconsidersthelatestcovenantcompliance,headroomprojectionsandprojectedbalancesheetpositionsperiodicallythroughouttheyear,basedontheadviceoftheTreasuryCommitteewhichmeetsonafour-weeklybasis.TheTreasuryCommitteeischairedbytheGroupTreasurerandmonitorsTreasuryperformanceandcompliancewithBoard-approvedpolicies.TheGroupFinanceDirectorisalsoamemberoftheCommittee.

Totalcapitalatthebalancesheetdateisasfollows:

2017£m

2016£m

Netdebt(note4.1) 1,750 1,840Totalequity 1,626 1,408Totalcapital 3,376 3,248

Market riskTheGroupisexposedtotheriskthatthefairvalueoffuturecashflowsofitsfinancialinstrumentswillfluctuatebecauseofchangesinmarketprices.Marketriskcomprisesforeigncurrencyandinterestraterisk.

Foreign currency riskTheGroupfacescurrencyriskintwomainareas:

AtissuanceoftheClassA3Nfloatingratenotes,theGroupenteredintoacrosscurrencyinterestrateswaptomanagetheforeigncurrencyexposureresultingfromboththeUS$principalandinitialinterestelementsofthenotes.TheA3Nnotesformpartofthesecuritiseddebt(seenote4.2).

Furthertothestep-upontheA3Nnoteson15December2010,theGrouphasadditionalforeigncurrencyexposureasaresultoftheincreaseinUS$financecosts.Amovementof10%intheUS$exchangeratewouldhave£nil(2016£nil)impactonthereportedGroupprofitand£22m(2016£25m)impactonthereportedGroupnetassets.

TheGrouphasnosignificantprofitandlossexposureasaresultofretranslatingmonetaryassetsandliabilitiesatdifferentexchangerates.AstheGroupispredominantlyUKbasedandacquiresthemajorityofitssuppliesinsterling,ithasnosignificantdirectcurrencyexposurefromitsoperations.

Interest rate riskTheGrouphasamixtureoffixedandfloatinginterestratedebtinstrumentsandmanagesthevariabilityincashflowsresultingfromchangesininterestratesbyusingderivativefinancialinstruments.Wherethenecessarycriteriaaremet,theGroupminimisesthevolatilityinitsfinancialstatementsthroughtheadoptionofthehedgeaccountingprovisionspermittedunderIAS39.TheinterestrateexposureresultingfromtheGroup’s£1.9bnsecuritisationislargelyfixed,eitherasaresultofthenotesthemselvesbeingissuedatfixedinterestrates,orthroughacombinationoffloatingratenotesagainstwhicheffectiveinterestrateswapsareheld,whichareeligibleforhedgeaccounting.

ThesensitivityanalysisbelowhasbeencalculatedbasedontheGroup’sexposuretointerestratesforbothderivativeandnon-derivativeinstrumentsasatthebalancesheetdate.Forfloatingrateliabilities,whicharenothedgedbyderivativeinstruments,theanalysishasbeenpreparedassumingthattheliabilityoutstandingatthebalancesheetdatewasoutstandingforthewholeperiod.Forinterestincometheanalysisassumesthatcashandcashequivalentsandothercashdepositsthatwereheldininterestbearingaccountsatthebalancesheetdatewereheldforthewholeperiod.A100basispointmovementisusedwhenreportinginterestrateriskinternallytokeymanagementpersonnelandrepresentsmanagement’sassessmentofthereasonablypossiblechangeininterestrates.


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4.4 Financial instruments continued2017

£m2016

£m

Interestincomea 2 2Interestexpenseb (2) (2)Profitimpact – –Derivativefinancialinstruments(fairvalues)c 86 98Totalequity 86 98

a. Representsinterestincomeearnedoncashandcashequivalentsandothercashdeposits(thesearedefinedinnote4.1).b. TheelementofinterestexpensewhichisnotmatchedbypaymentsandreceiptsundercashflowhedgeswhichwouldotherwiseoffsettheinterestrateexposureoftheGroup.c. Theimpactontotalequityfrommovementsinthefairvalueofcashflowhedges.

Derivative financial instrumentsCash flow hedgesChangesincashflowhedgefairvaluesarerecognisedinthehedgingreserveinequitytotheextentthatthehedgesareeffective.Thecashflowhedgesdetailedbelowhavebeenassessedasbeinghighlyeffectiveduringtheperiodandareexpectedtoremainhighlyeffectiveovertheremainingcontractlives.

Duringtheperiodagainof£60m(2016lossof£116m)oncashflowhedgeswasrecognisedinequity.Alossof£53m(2016lossof£8m)wasrecycledfromequityandincludedintheGroupincomestatementfortheperiod.

Cash flow hedges – securitised borrowingsAt30September2017,theGroupheld10(201610)interestrateswapcontractswithanominalvalueof£963m(2016£994m),designatedasahedgeofthecashflowinterestrateriskof£963m(2016£994m)oftheGroup’sfloatingrateborrowings,comprisingtheA1N,A3N,A4,AB,C2andD1loannotes.

Thecashflowsonthesecontractsoccurquarterly,receivingafloatingrateofinterestbasedonLIBORandpayingafixedrateof4.8558%(20164.8625%).Thecontractmaturitydatesmatchthoseofthehedgeditem.The10interestrateswapsareheldonthebalancesheetatfairmarketvalue,whichisaliabilityof£292m(2016£404m).

At30September2017theGroupheldone(2016one)crosscurrencyinterestrateswapcontract,withanominalvalueof£177m(2016£189m),designatedasahedgeofthecashflowinterestrateandcurrencyriskoftheGroup’sA3Nfloatingrate$297m(2016$317m)borrowings.Thecrosscurrencyinterestrateswapisheldonthebalancesheetatafairvalueassetof£43m(2016£53m).

Thecashflowsonthiscontractoccurquarterly,receivingafloatingrateofinterestbasedonUS$LIBORandpayingafloatingrateofinterestatLIBORinsterling.

Thecashflowsarisingfrominterestrateswappositionsonthesamecounterpartymaybesettledasanetposition.Thecrosscurrencyinterestrateswapisheldunderaseparateagreementandcashmovementsforthisinstrumentaresettledindividually.

Thefairvaluesofthederivativefinancialinstrumentsweremeasuredat30September2017andmaybesubjecttomaterialmovementsintheperiodsubsequenttothebalancesheetdate.Thefairvaluesofthederivativefinancialinstrumentsarereflectedonthebalancesheetasfollows:

Derivative financial instruments – fair value

Non-currentassets

£m

Currentassets

£m

Currentliabilities

£m

Non-currentliabilities

£mTotal

£m

Cash flow hedges: –Interestrateswaps – – (43) (249) (292) –Crosscurrencyswap 41 2 – – 4330 September 2017 41 2 (43) (249) (249)24September2016 52 1 (44) (360) (351)


Thefairvalueandcarryingvalueoffinancialassetsandliabilitiesbycategoryisasfollows:

2017 2016

Bookvalue

£m

Fairvalue

£m

Bookvalue

£m

Fairvalue

£m

Financial assets: –Cashandcashequivalents 147 147 158 158 –Othercashdeposits 120 120 120 120 –Derivativeinstrumentsindesignatedhedgeaccountingrelationships 43 43 53 53 –Loansandreceivables 20 20 18 18Financial liabilities: –Borrowingsatamortisedcost (2,062) (2,076) (2,173) (2,167) –Derivativeinstrumentsindesignatedhedgeaccountingrelationships (292) (292) (404) (404) –Other (297) (297) (293) (293)

(2,321) (2,335) (2,521) (2,515)

Thevarioustranchesofthesecuritiseddebthavebeenvaluedusingperiodendquotedofferprices.Asthesecuritiseddebtistradedonanactivemarket,themarketvaluerepresentsthefairvalueofthisdebt.ThefairvalueofinterestrateandcurrencyswapsistheestimatedamountwhichtheGroupcouldexpecttopayorreceiveonterminationoftheagreements.Theseamountsarebasedonquotationsfromcounterpartieswhichapproximatetotheirfairmarketvalueandtakeintoconsiderationinterestandexchangeratesprevailingatthebalancesheetdate.Otherfinancialassetsandliabilitiesareeithershort-terminnatureortheirbookvaluesapproximatetofairvalues.

Fair value of financial instrumentsThefairvalueoftheGroup’sderivativefinancialinstrumentsiscalculatedbydiscountingtheexpectedfuturecashflowsofeachinstrumentatanappropriatediscountratetoa‘marktomarket’positionandthenadjustingthistoreflectanynon-performanceriskassociatedwiththecounterpartiestotheinstrument.

IFRS13FinancialInstrumentsrequirestheGroup’sderivativefinancialinstrumentstobedisclosedatfairvalueandcategorisedinthreelevelsaccordingtotheinputsusedinthecalculationoftheirfairvalue:

•Level1instrumentsusequotedpricesastheinputtofairvaluecalculations;

•Level2instrumentsuseinputs,otherthanquotedprices,thatareobservableeitherdirectlyorindirectly;

•Level3instrumentsuseinputsthatareunobservable.

ThetablebelowsetsoutthevaluationbasisoffinancialinstrumentsheldatfairvaluebytheGroup:

Fair value at 30 September 2017Level 1

£mLevel 2

£mLevel 3

£mTotal

£m

Financial assets:Currencyswaps – 43 – 43 Financial liabilities:Interestrateswaps – (292) – (292)

– (249) – (249)

Fair value at 24 September 2016Level 1

£mLevel 2

£mLevel 3

£mTotal

£m

Financial assets:Currencyswaps – 53 – 53Financial liabilities:Interestrateswaps – (404) – (404)

– (351) – (351)


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4.5 Pensions

Accounting policyRetirementanddeathbenefitsareprovidedforeligibleemployeesintheUnitedKingdomprincipallybytheMitchells&ButlersPensionPlan(MABPP)andtheMitchells&ButlersExecutivePensionPlan(MABEPP).Theseplansarefunded,HMRCapproved,occupationalpensionschemeswithdefinedcontributionanddefinedbenefitsections.Thedefinedbenefitsectionoftheplansisnowclosedtofutureserviceaccrual.Thedefinedbenefitliabilityrelatestothesefundedplans,togetherwithanunfundedunapprovedpensionarrangement(theExecutiveTop-UpScheme,orMABETUS)inrespectofcertainMABEPPmembers.Theassetsoftheplansareheldinself-administeredtrustfundsseparatefromtheCompany’sassets.

Inaddition,Mitchells&ButlersplcalsoprovidesaworkplacepensionplaninlinewiththeWorkplacePensionsReformRegulations.ThisautomaticallyenrolsalleligibleworkersintoaQualifyingWorkplacePensionPlan.

ThetotalpensionliabilityrecognisedinthebalancesheetinrespectoftheGroup’sdefinedbenefitarrangementsisthegreateroftheminimumfundingrequirements,calculatedasthepresentvalueoftheagreedscheduleofcontributions,andtheactuarialcalculatedliability.Theactuarialliabilityisthepresentvalueofthedefinedbenefitobligation,lessthefairvalueoftheschemeassets.Thecostofprovidingbenefitsisdeterminedusingtheprojectedunitcreditmethodasdeterminedannuallybyqualifiedactuaries.Thisisbasedonanumberoffinancialassumptionsandestimates,thedeterminationofwhichmaybesignificanttothebalancesheetvaluationintheeventthatthisreflectsagreaterdeficitthanthatsuggestedbythescheduleofminimumcontributions.

Thereisnocurrentservicecostasalldefinedbenefitschemesareclosedtofutureaccrual.Thenetpensionfinancecharge,calculatedbyapplyingthediscountratetothepensiondeficitorsurplusatthebeginningoftheperiod,isshownwithinfinanceincomeorexpense.Theadministrationcostsoftheschemearerecognisedwithinoperatingcostsintheincomestatement.

Re-measurementcomprisingactuarialgainsandlosses,theeffectofminimumfundingrequirements,andthereturnonschemeassetsarerecognisedimmediatelyinthebalancesheetwithachargeorcredittothestatementofcomprehensiveincomeintheperiodinwhichtheyoccur.

CurtailmentsandsettlementsrelatingtotheGroup’sdefinedbenefitplanarerecognisedintheincomestatementintheperiodinwhichthecurtailmentorsettlementoccurs.

Forthedefinedcontributionarrangements,thechargeagainstprofitisequaltotheamountofcontributionspayableforthatperiod.

Critical accounting judgements Thecalculationofthedefinedbenefitliabilityrequiresmanagementjudgementtoselectanappropriatehigh-qualitycorporatebondtodeterminethediscountrate.

Measurement of scheme assets and liabilitiesActuarial valuationTheactuarialvaluationsusedforIAS19(revised)purposesarebasedontheresultsofthelatestfullactuarialvaluationcarriedoutat31March2016andupdatedbytheschemes’independentqualifiedactuariesto30September2017.Schemeassetsarestatedatmarketvalueat30September2017andtheliabilitiesoftheschemeshavebeenassessedasatthesamedateusingtheprojectedunitmethod.IAS19(revised)requiresthattheschemeliabilitiesarediscountedusingmarketyieldsattheendoftheperiodonhigh-qualitycorporatebonds.

Theprincipalfinancialassumptionsusedatthebalancesheetdatehavebeenupdatedtoreflectchangesinmarketconditionsintheperiodandareasfollows:

2017 2016

Pensionsincreases 3.1% 2.9%Discountrate 2.7% 2.2%Inflationrate 3.2% 3.0%

Themortalityassumptionswerereviewedfollowingthe2016actuarialvaluation.Asummaryoftheaveragelifeexpectanciesassumedisasfollows:

2017 2016

Main planyears

Executive plan

yearsMain plan

years

Executive plan

years

Malememberaged65(currentlifeexpectancy) 21.2 23.8 21.7 25.9Malememberaged45(lifeexpectancyat65) 22.9 25.5 24.3 27.6Femalememberaged65(currentlifeexpectancy) 23.6 25.9 24.1 27.1Femalememberaged45(lifeexpectancyat65) 25.4 27.8 26.9 29.1


Minimum funding requirementsTheresultsofthe2016actuarialvaluationshowedafundingdeficitof£451m,usingamoreprudentbasistodiscounttheschemeliabilitiesthanisrequiredbyIAS19(revised).TheCompanyhassubsequentlyagreedrecoveryplansforboththeExecutiveandMainschemesinordertoclosethefundingdeficitinrespectofitspensionliabilities.AgreementwasreachedwiththeTrusteesinrelationtotheExecutiveplanon30June2017andtheMainplanon25July2017.Intheinterveningperiod,theGroupcontinuedtomakecontributionsinlinewiththepreviousagreements.Thenewrecoveryplansshowanunchangedlevelofcashcontributionswithnoextensiontotheagreedpaymentterm(£45mperannumindexedwithRPIfrom1April2016subjecttoaminimumincreaseof0%andmaximumof5%,until31March2023).UnderIFRIC14,anadditionalliabilityisrecognised,suchthattheoverallpensionliabilityattheperiodendreflectsthescheduleofcontributionsinrelationtoaminimumfundingrequirement,shouldthisbehigherthantheactuarialdeficit.

Theemployercontributionsexpectedtobepaidduringthefinancialperiodending29September2018amountto£47m.

In2024,anadditionalpaymentof£13mwillbemadeintoescrow,shouldsuchfurtherfundingberequiredatthattime.Thisisacontingentliabilityandisnotreflectedinthepensionsliabilityasitisnotcommitted.

Sensitivity to changes in actuarial assumptionsThesensitivitiesregardingprincipalactuarialassumptions,assessedinisolation,thathavebeenusedtomeasuretheschemeliabilitiesaresetoutbelow:

Increase or (decrease) in actuarial deficit

Increase or (decrease) in total pension liability

2017£m

2016£m

2017£m

2016£m

0.1%increaseindiscountrate (41) (52) (1) (2)0.1%pointsincreaseininflationrate 36 49 1 2Additionalone-yearincreasetolifeexpectancy 77 89 (1) 1

Thesensitivityanalysispresentedabovemaynotberepresentativeoftheactualchangeinthedefinedbenefitobligationasitisunlikelythatthechangesinassumptionswouldoccurinisolationofoneanotherassomeoftheassumptionsmaybecorrelated.Inpresentingtheabovesensitivityanalysis,thepresentvalueofthedefinedbenefitobligationhasbeencalculatedusingtheprojectedunitcreditmethodattheendofthereportingperiod,whichisthesameasthatappliedincalculatingthedefinedbenefitobligationliabilityrecognisedinthestatementoffinancialposition.

Therewasnochangeinthemethodsandassumptionsusedinpreparingthesensitivityanalysisfrompriorperiods.

Amounts recognised in respect of defined benefit schemesThefollowingamountsrelatingtotheGroup’sdefinedbenefitanddefinedcontributionarrangementshavebeenrecognisedintheGroupincomestatementandGroupstatementofcomprehensiveincome:

Group income statement2017

53 weeks£m

201652 weeks

£m

Operatingprofit:Employercontributions(definedcontributionplans) (7) (7)Administrativecosts(definedbenefitplans) (2) (2)Chargetooperatingprofit (9) (9)Financecosts:Netpensionsfinancechargeonactuarialdeficit (4) (3)Additionalpensionsfinancechargeduetominimumfunding (3) (9)Netfinancechargeinrespectofpensions (7) (12)Totalcharge (16) (21)

Group statement of comprehensive income2017

53 weeks£m

201652 weeks

£m

Returnonschemeassetsandeffectsofchangesinassumptions 337 (148)Movementinpensionliabilityrecognisedduetominimumfunding (329) 126Remeasurementofpensionliability 8 (22)


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4.5 Pensions continuedGroup balance sheet

2017£m

2016£m

Fairvalueofschemeassets 2,390 2,381Presentvalueofschemeliabilities (2,219) (2,587)Actuarialsurplus/(deficit)intheschemes 171 (206)Additionalliabilityrecognisedduetominimumfunding (463) (131)Totalpensionliabilitya (292) (337)Associateddeferredtaxasset 50 57

a. Thetotalpensionliabilityof£292m(2016£337m)isrepresentedbya£47mcurrentliability(2016£46m)anda£245mnon-currentliability(2016£291m).

Themovementinthefairvalueoftheschemes’assetsintheperiodisasfollows:

Scheme assets

2017£m

2016£m

Fairvalueofschemeassetsatbeginningofperiod 2,381 2,010Interestincome 53 71Remeasurementgain: –Returnonschemeassets(excludingamountsincludedinnetfinancecharge) 3 355Employercontributions 46 49Benefitspaid (91) (102)Administrationcosts (2) (2)Atendofperiod 2,390 2,381

Changesinthepresentvalueofdefinedbenefitobligationsareasfollows:

Defined benefit obligation

2017£m

2016£m

Presentvalueofdefinedbenefitobligationatbeginningofperiod (2,587) (2,112)Interestcost (57) (74)Benefitspaid 91 102Remeasurementlosses: –Effectofchangesindemographicassumptions 139 – –Effectofchangesinfinancialassumptions 164 (577) –Effectofexperienceadjustments 31 74Atendofperioda (2,219) (2,587)

a. Thedefinedbenefitobligationcomprises£34m(2016£39m)relatingtotheMABETUSunfundedplanand£2,185m(2016£2,548m)relatingtothefundedplans.

Theweightedaveragedurationofthedefinedbenefitobligationis20years(201621years).

ThemajorcategoriesandfairvaluesofschemeassetsoftheMABPPandMABEPPschemesattheendofthereportingperiodareasfollows:

2017£m

2016£m

Cashandequivalents 18 15Equityinstruments 730 633Debtinstruments: –Bonds 1,512 1,600 –Realestatedebt 90 96 –Infrastructuredebt 73 50 –Absolutereturnbondfunds 200 198 –Giltrepurchasetransactions (245) (202)Gold 4 5Forwardforeignexchangecontracts 8 (14)Fairvalueofassets 2,390 2,381

Theactualinvestmentreturnachievedontheschemeassetsovertheperiodwas2.2%(201622.0%),whichrepresentedagainof£56m(2016£427m).


Virtuallyallequityinstruments,bondsandgoldhavequotedpricesinactivemarketsandareclassifiedasLevel1instruments.Absolutereturnbondfunds,giltrepurchasetransactionsandforwardforeignexchangecontractsareclassifiedasLevel2instruments.Realestatedebtandinfrastructuredebtareclassifiedaslevel3instruments.

Inthe53weeksended30September2017theGrouppaid£7m(2016£6m)inrespectofthedefinedcontributionarrangements,withanadditional£1m(2016£1m)outstandingasattheperiodend.

At30September2017theMABPPowed£2m(2016£1m)totheGroupinrespectofexpensespaidonitsbehalf.Thisamountisincludedinotherreceivablesinnote3.2.

4.6 Share-based payments

Accounting policyTheGroupoperatesanumberofequity-settledshare-basedcompensationplans,whereby,subjecttomeetinganyrelevantconditions,employeesareawardedsharesorrightsovershares.Thecostofsuchawardsismeasuredatfairvalue,excludingtheeffectofnonmarket-basedvestingconditions,onthedateofgrant.Theexpenseisrecognisedonastraight-linebasisoverthevestingperiodandisadjustedfortheestimatedeffectofnonmarket-basedvestingconditionsandforfeitures,onthenumberofsharesthatwilleventuallyvestduetoemployeesleavingtheemploymentoftheGroup.FairvaluesarecalculatedusingeithertheBlack-Scholes,BinomialorMonteCarlosimulationmodelsdependingontheconditionsattachedtotheparticularsharescheme.

SAYEshareoptionsgrantedtoemployeesaretreatedascancelledwhenemployeesceasetocontributetothescheme.Thisresultsinanacceleratedrecognitionoftheexpensethatwouldhavearisenovertheremainderoftheoriginalvestingperiod.

Schemes in operation Thenetchargerecognisedforshare-basedpaymentsintheperiodwas£2m(2016£2m).

TheGrouphadfourequity-settledshareschemes(2016four)inoperationduringtheperiod;thePerformanceRestrictedSharePlan(PRSP);SharesavePlan;ShareIncentivePlan(SIP)andShortTermDeferredIncentivePlan(STDIP).TherewerenooutstandingawardsfortheSTDIPplanatthestartoftheperiodandnograntsinthecurrentperiod,thereforenodisclosuresarepresentedbelowforthisscheme.

Thevestingofallawardsoroptionsisgenerallydependentuponparticipantsremainingintheemploymentofaparticipatingcompanyduringthevestingperiod.FurtherdetailsoneachschemeareprovidedintheReportonDirectors’remunerationonpages66to87.

Thefollowingtablessetoutweightedaverageinformationabouthowthefairvalueofeachoptiongrantwascalculated:

2017 2016

Performance RestrictedShare Plan

SharesavePlan

Performance RestrictedShare Plan

SharesavePlan

Valuationmodel Monte Carlo and Binomial Black-Scholes

MonteCarloandBinomial Black-Scholes

Weightedaverageshareprice 246.1p 231.0p 239.5p 282.7pExercisepricea – 221.0p – 264.0pExpecteddividendyieldb – 2.94% – 2.32%Risk-freeinterestrate 0.34% 0.31% 0.11% 0.69%Volatilityc 32.0% 29.43% 32.8% 28.3%Expectedlife(years)d 3.5 4.10 2.92 3.99Weightedaveragefairvalueofgrantsduringtheperiod 182.4 42.8 159.3 57.8

a. TheexercisepriceforthePerformanceRestrictedSharePlanis£1perparticipatingemployee.b. TheexpecteddividendyieldfortheSharesavePlanhasusedhistoricaldividendinformation.FordetailsontheGroup’scurrentdividendpolicyrefertotheFinancialreviewonpage43.

TheexpecteddividendyieldforthePerformanceRestrictedSharePlanoptionsiszeroasparticipantsareentitledtoDividendAccruedSharestothevalueofordinarydividendspaidorpayableduringthevestingperiod.

c. TheexpectedvolatilityisdeterminedbycalculatingthehistoricalvolatilityoftheCompany’ssharepricecommensuratewiththeexpectedtermoftheoptionsandshareawards.d. Theexpectedlifeoftheoptionsrepresentstheaveragelengthoftimebetweengrantdateandexercisedate.

ThefairvalueofawardsundertheShortTermDeferredIncentivePlanandtheShareIncentivePlanareequaltothesharepriceonthedateofawardasthereisnopricetobepaidandemployeesareentitledtoDividendAccruedSharestothevalueofordinarydividendspaidorpayableduringthevestingperiod.Theassumptionssetoutabovearethereforenotrelevanttotheseschemes.ThefairvalueofoptionsgrantedundertheShareIncentivePlanduringtheperiodwas231.0p(2016282.7p).


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4.6 Share-based payments continuedThetablesbelowsummarisethemovementsinoutstandingoptionsduringtheperiod.

Number of sharesWeighted average

exercise price

2017m

2016m

2017p

2016p

Sharesave planOutstandingatthebeginningoftheperiod 3.6 3.9 297.0 299.2Granted 1.8 1.6 221.0 264.0Exercised (0.1) (0.8) 249.0 191.7Forfeited (0.8) (1.0) 296.8 337.7Expired (0.4) (0.1) 302.6 279.7Outstandingattheendoftheperiod 4.1 3.6 264.1 297.0Exercisableattheendoftheperiod 0.5 – 291.1 –

TheoutstandingoptionsfortheSAYEschemehadanexercisepriceofbetween182.0pand362.0p(2016between182.0pand362.0p)andtheweightedaverageremainingcontractlifewas3.0years(20162.9years).Thenumberofforfeitedsharesintheperiodincludes615,998(2016811,828)cancellations.

SAYEoptionswereexercisedonarangeofdates.Theaveragesharepricethroughtheperiodwas251.1(2016286.9p).

Number of shares

2017m

2016m

Share Incentive PlanOutstandingatthebeginningoftheperiod 1.5 1.5Granted 0.5 0.3Exercised (0.2) (0.2)Forfeited (0.1) (0.1)Outstandingattheendoftheperiod 1.7 1.5Exercisableattheendoftheperiod 0.8 0.8

OptionsundertheShareIncentivePlanarecapableofremainingwithintheSIPtrustindefinitelywhileparticipantscontinuetobeemployed.

Number of shares

2017m

2016m

Performance Restricted Share PlanOutstandingatthebeginningoftheperiod 4.1 3.5Granted 2.1 2.0Exercised – (0.2)Forfeited (0.1) (0.1)Expired (0.9) (1.1)Outstandingattheendoftheperiod 5.2 4.1Exercisableattheendoftheperiod – –

TheexercisepriceforthePerformanceRestrictedSharePlanis£1perparticipatingemployee,thereforetheweightedaverageexercisepricefortheseoptionsis£nil(2016£nil).

Optionsoutstandingat30September2017hadanexercisepriceof£nilandaweightedaverageremainingcontractuallifeof3.3years(20163.4years).


4.7 Equity

Accounting policiesOwn sharesThecostofownsharesheldinemployeesharetrustsandintreasuryaredeductedfromshareholders’equityuntilthesharesarecancelled,reissuedordisposed.Wheresuchsharesaresubsequentlysoldorreissued,thefairvalueofanyconsiderationreceivedisalsoincludedinshareholders’equity.

DividendsDividendsproposedbytheBoardbutunpaidattheperiodendarenotrecognisedinthefinancialstatementsuntiltheyhavebeenapprovedbyshareholdersattheAnnualGeneralMeeting.Interimdividendsarerecognisedwhenpaid.

Scripdividendsarefullypaidupfromthesharepremiumaccount.Theyareaccountedforasanincreaseinsharecapitalforthenominalvalueofthesharesissued,andaresultingreductioninsharepremium.

Called up share capital

2017Number of shares £m

2016Number of shares £m

Allotted, called up and fully paidOrdinarysharesof813/24peachAtstartofperiod 413,624,294 35 412,520,626 35Sharecapitalissueda 8,924,310 1 1,103,668 –At end of period 422,548,604 36 413,624,294 35

a. UnderthetermsoftheCompany’sscripdividendscheme,shareholderswereabletoelecttoreceiveordinarysharesinplaceofthefinaldividendof5.0pperordinaryshareinrelationtothe52weeksended24September2016andtheinterimdividendof2.5pinrelationtothecurrentperiod.Thisresultedintheissueof7,252,656and1,253,640newfullypaidordinarysharesrespectively(2016nilandnil).InadditiontheCompanyissued418,014(20161,103,668)sharesduringtheyearunderthesavingsrelatedshareoptionschemesforaconsiderationof£nil(2016£nil).

Alloftheordinarysharesrankequallywithrespecttovotingrightsandrightstoreceiveordinaryandspecialdividends.Therearenorestrictionsontherightstotransfershares.

DetailsofoptionsgrantedundertheGroup’sshareschemes,arecontainedinnote4.6.

Dividends2017 2016

Total dividend

£m

Settled via scrip

£m

Pence per ordinary

share

Total dividend

£m

Settled via scrip

£m

Pence per ordinary

share

Declared and paid in the periodInterimdividend–53weeksended30September2017 11 3 2.5 – – –Finaldividend–52weeksended24September2016 21 17 5.0 – – –Interimdividend–52weeksended24September2016 – – – 10 – 2.5Finaldividend–52weeksended26September2015 – – – 21 – 5.0

32 20 31 –

Thefinaldividendof5.0pperordinarysharedeclaredinrelationtothe52weeksended24September2016(20155.0p)wasapprovedattheAnnualGeneralMeetingon28January2017andwaspaidtoshareholderson7February2017.ShareholderswereabletoelecttoreceiveordinarysharescreditedasfullypaidinsteadofthecashdividendunderthetermsoftheCompany’sscripdividendscheme.Ofthe£21mfinaldividend,£17mwasintheformoftheissueofordinarysharestoshareholdersoptingintothescripalternative.Themarketvaluepershareatthedateofpaymentwas227.3ppershare,resultingintheissueof7millionnewshares,fullypaidupfromthesharepremiumaccount.Aninterimdividendof2.5pperordinaryshare(20162.5p)wasdeclaredintheperiodandpaidon3July2017.Ofthe£11minterimdividend,£3mwasintheformoftheissueofordinarysharestoshareholdersoptingintothescripalternative.Themarketvaluepershareatthedateofpaymentwas243.2ppershare,resultingintheissueof1millionnewshares,fullypaidupfromthesharepremiumaccount.Thenominalvalueofthe8millionsharesissuedinrelationtothefinalandinterimscripdividendsis£1m.

TheDirectorsproposeafinaldividendof5.0ppershareforapprovalattheAnnualGeneralMeeting,whichequatesto£21mbasedonthenumberofordinarysharesinissueat30September2017.Thedividendwillbepaidon6February2018toshareholdersontheregisteratcloseofbusinesson15December2017.


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4.7 Equity continuedShare premium accountThesharepremiumaccountrepresentsamountsreceivedinexcessofthenominalvalueofsharesonissueofnewshares.Sharepremiumof£nilhasbeenrecognisedonsharesissuedintheperiod(2016£1m).

Capital redemption reserveThecapitalredemptionreservemovementaroseontherepurchaseandcancellationbytheCompanyofordinarysharesduringpriorperiods.

Revaluation reserveTherevaluationreserverepresentstheunrealisedgaingeneratedonrevaluationofthepropertyestatewitheffectfrom29September2007.Itcomprisestheexcessofthefairvalueoftheestateoverdeemedcost,netofrelateddeferredtaxation.

Own shares heldOwnsharesheldbytheGrouprepresentthesharesintheCompanyheldbytheemployeesharetrusts.

Duringtheperiod,theemployeesharetrustsacquirednoshares(2016270,000)andsubscribedfor353,025(2016268,287)sharesatacostof£nil(2016£1m)andreleased188,586(2016477,286)sharestoemployeesontheexerciseofoptionsandothershareawardsforatotalconsiderationof£nil(2016£nil).The1,748,942sharesheldbythetrustsat30September2017hadamarketvalueof£5m(24September20161,584,503sharesheldhadamarketvalueof£4m).

TheCompanyhasestablishedtwoemployeesharetrusts:

Share Incentive Plan (SIP) TrustTheSIPTrustwasestablishedin2003topurchasesharesonbehalfofemployeesparticipatingintheCompany’sShareIncentivePlan.Underthisscheme,eligibleemployeesareawardedfreeshareswhicharenormallyheldintrustforaholdingperiodofatleastthreeyears.AfterfiveyearsthesharesmaybetransferredtoorsoldbytheemployeefreeofincometaxandNationalInsurancecontributions.TheSIPTrustbuysthesharesinthemarketorsubscribesfornewlyissuedshareswithfundsprovidedbytheCompany.Duringtheholdingperiod,dividendsarepaiddirectlytotheparticipatingemployees.At30September2017,thetrustees,EquinitiSharePlanTrusteesLimited,held1,698,880(20161,530,395)sharesintheCompany.Oftheseshares,553,839(2016474,453)sharesareunconditionallyavailabletoemployees,272,341(2016345,674)shareshavebeenconditionallyawardedtoemployees,842,954(2016689,702)shareshavebeenawardedtoemployeesbutarestillrequiredtobeheldwithintheSIPTrustandtheremaining29,746(201620,566)sharesareunallocated.

Employee Benefit Trust (EBT)TheEBTwasestablishedin2003inordertosatisfytheexerciseorvestingofexistingandfutureshareoptionsandawardsundertheExecutiveShareOptionPlan,PerformanceRestrictedSharePlan,ShortTermDeferredIncentivePlanandtheSharesavePlan.TheEBTpurchasessharesinthemarketorsubscribesfornewlyissuedshares,usingfundsprovidedbytheCompany,basedonexpectationsoffuturerequirements.DividendsarewaivedbytheEBT.At30September2017,thetrustees,SanneFiduciaryServicesLimited,wereholding50,062(201654,108)sharesintheCompany.

Hedging reserveThehedgingreservecomprisestheeffectiveportionofthecumulativenetchangeinthefairvalueofcashflowhedginginstrumentsrelatedtohedgedfuturecashflows.

Translation reserveThetranslationreserveisusedtorecordexchangedifferencesarisingfromthetranslationofthefinancialstatementsofforeignsubsidiaries.

Retained earningsTheGroup’smainoperatingsubsidiary,Mitchells&ButlersRetailLimited,hadretainedearningsunderFRS101of£2,157mat30September2017(2016£2,091m).Itsabilitytodistributethesereservesbywayofdividendsisrestrictedbythesecuritisationcovenants(seenote4.2).


Notes to the financial statements Section5–Othernotes

5.1 Related party transactionsKey management personnelEmployeesoftheMitchells&ButlersGroupwhoaremembersoftheBoardofDirectorsortheExecutiveCommitteeofMitchells&Butlersplcaredeemedtobekeymanagementpersonnel.ItistheBoardwhohaveresponsibilityforplanning,directingandcontrollingtheactivitiesoftheGroup.

CompensationofkeymanagementpersonneloftheGroup:

201753 weeks

£m

201652 weeks

£m

Short-termemployeebenefits 2 3

MovementsinshareoptionsheldbytheemployeesofMitchells&ButlersplcaresummarisedintheReportonDirectors’remunerationonpages66to87.

5.2 SubsidiariesTransactionsbetweentheCompanyanditssubsidiaries,whicharerelatedparties,havebeeneliminatedonconsolidation.

Mitchells&Butlersplcisthebeneficialownerofalloftheequitysharecapital,eitheritselforthroughsubsidiaryundertakings,ofthefollowingcompanies:

Name of subsidiary Country of incorporation Country of operation Nature of business

Principal operating subsidiariesMitchells&ButlersRetailLimited EnglandandWales UnitedKingdom LeisureretailingMitchells&ButlersRetail(No.2)Limited EnglandandWales UnitedKingdom LeisureretailingHaHaBar&GrillLimited EnglandandWales UnitedKingdom LeisureretailingOrchidPubs&DiningLimited EnglandandWales UnitedKingdom LeisureretailingALEXGaststättenGesellschaftmbH&CoKG Germany Germany LeisureretailingMidco1Limited EnglandandWales UnitedKingdom PropertyleasingcompanyMitchells&Butlers(Property)Limited EnglandandWales UnitedKingdom PropertymanagementMitchells&ButlersLeisureRetailLimited EnglandandWales UnitedKingdom ServicecompanyMitchells&ButlersGermanyGmbHa Germany Germany ServicecompanyMitchells&ButlersFinanceplc EnglandandWales UnitedKingdom FinancecompanyStandardCommercialPropertyDevelopmentsLimited EnglandandWales UnitedKingdom PropertydevelopmentOther subsidiariesMitchells&ButlersHoldings(No.2)Limiteda EnglandandWales UnitedKingdom HoldingcompanyMitchells&ButlersHoldingsLimited EnglandandWales UnitedKingdom HoldingcompanyMitchells&ButlersLeisureHoldingsLimited EnglandandWales UnitedKingdom HoldingcompanyMitchells&ButlersRetailHoldingsLimited EnglandandWales UnitedKingdom HoldingcompanyOldKentuckyRestaurantsLimited EnglandandWales UnitedKingdom TrademarkownershipBedeRetailInvestmentsLimited EnglandandWales UnitedKingdom Non–tradingLastbrewLimited EnglandandWales UnitedKingdom Non–tradingMitchells&Butlers(IP)Limited EnglandandWales UnitedKingdom Non–tradingMitchells&ButlersAcquisitionCompany EnglandandWales UnitedKingdom Non–tradingMitchells&ButlersRetailPropertyLimiteda EnglandandWales UnitedKingdom Non–tradingMitchellsandButlersHealthcareTrusteeLimited EnglandandWales UnitedKingdom HealthcaretrusteeStandardCommercialPropertyInvestmentsLimited EnglandandWales UnitedKingdom Non–tradingStandardCommercialPropertySecuritiesLimited EnglandandWales UnitedKingdom PropertydevelopmentTempleCircusDevelopmentsLimited EnglandandWales UnitedKingdom PropertydevelopmentALEXGaststättenImmobiliengesellschaftmbH Germany Germany PropertymanagementALLBARONEGaststättenBetriebsgesellschaftmbH Germany Germany LeisureretailingALEXAlsterpavillonImmobilienGmbH&CoKG Germany Germany PropertymanagementALEXAlsterpavillonManagementGmbH Germany Germany ManagementcompanyALEXGaststättenManagementGmbH Germany Germany ManagementcompanyPLAN-BARGastronomieEinrichtungsGmbH Germany Germany Non–tradingBrownsRestaurant(Brighton)Limited EnglandandWales UnitedKingdom Dormant


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Notes to the financial statements Section5–Othernotescontinued

Name of subsidiary Country of incorporation Country of operation Nature of business

BrownsRestaurant(Bristol)Limited EnglandandWales UnitedKingdom DormantBrownsRestaurant(Cambridge)Limited EnglandandWales UnitedKingdom DormantBrownsRestaurant(London)Limited EnglandandWales UnitedKingdom DormantBrownsRestaurant(Oxford)Limited EnglandandWales UnitedKingdom DormantBrownsRestaurantsLimited EnglandandWales UnitedKingdom DormantCrownhillEstates(Derriford)Limited EnglandandWales UnitedKingdom DormantEastLondonPubs&RestaurantsLimited EnglandandWales UnitedKingdom DormantMitchells&ButlersLeaseCompanyLimited EnglandandWales UnitedKingdom DormantIntertain(Dining)Limited EnglandandWales UnitedKingdom Dormant

a. ShareshelddirectlybyMitchells&Butlersplc.

TheregisteredofficeforcompaniesoperatingintheUnitedKingdomis27FleetStreet,Birmingham,B31JP.

TheregisteredofficeforcompaniesoperatinginGermanyisAdolfstrasse16,65185Wiesbaden.

5.3 Five year review2017

53 weeks£m

201652 weeks

£m

201552 weeks

£m

201452 weeks

£m

201352 weeks

£m

Revenue 2,180 2,086 2,101 1,970 1,895Operating profit before adjusted items 314 318 328 313 310Adjusteditems (106) (87) (58) (49) (29)Operating profit 208 231 270 264 281Financecosts (125) (126) (130) (132) (130)Financerevenue 1 1 1 1 2Netpensionsfinancecharge (7) (12) (15) (10) (11)Profit before taxation 77 94 126 123 142Taxexpense (14) (5) (23) (30) (14)Profit for the period 63 89 103 93 128Earnings per shareBasic 15.1p 21.6p 25.0p 22.6p 31.2pDiluted 15.0p 21.6p 24.9p 22.5p 31.0pAdjusted(Basic)a 34.9p 34.9p 35.7p 32.6p 32.2p

a. Adjustedearningspershareisstatedafterremovingtheimpactofadjusteditemsasexplainedinnote2.2.

5.2 Subsidiaries continued


Notes2017

£m

2016(restated*)

£m

Non-current assetsInvestmentsinsubsidiaries 5 1,474 1,225Deferredtaxasset 9 56 66

1,530 1,291Current assetsTradeandotherreceivables 6 828 1,034Cashandcashequivalents 1 –

829 1,034Current liabilitiesPensionliabilities 4 (47) (46)Borrowings 8 – (6)Tradeandotherpayables 7 (447) (480)

(494) (532)Non-current liabilitiesPensionliabilities 4 (245) (291)Net assets 1,620 1,502

EquityCalledupsharecapital 10 36 35Sharepremiumaccount 26 27Capitalredemptionreserve 3 3Ownsharesheld (1) (1)Retainedearnings 1,556 1,438Total equity 1,620 1,502

* Investmentinsubsidiariesandretainedearningshavebeenrestatedtoreflectanimpairmentof£495moftheCompany’sinvestmentinMitchells&ButlersHoldings(No.2)Limited.Seenote1.

Pensionliabilitieshavealsobeenreclassifiedtoreflectcurrentandnon-currentliabilities.

TheCompanyreportedprofitforthe53weeksended30September2017of£121m(52weeksended24September2016£918m).

SignedonbehalfoftheBoardon22November2017

Tim JonesFinance Director

Theaccountingpoliciesandthenotesonpages137to139formanintegralpartofthesefinancialstatements.

RegisteredNumber:04551498

Mitchells & Butlers plc Company financial statementsCompany balance sheet 30September2017


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Mitchells & Butlers plc Company financial statementsCompany statement of changes in equity Forthe53weeksended30September2017

Sharecapital

£m

Sharepremium

£m

Capitalredemption

reserve£m

Ownshares

held£m

Retainedearnings

£m

Totalequity

£m

At26September2015 35 26 3 (1) 581 644Profitaftertaxation(restated*) – – – – 918 918Remeasurementofpensionliability – – – – (22) (22)Deferredtaxonremeasurementofpensionliability – – – – (9) (9)Totalcomprehensiveincome(restated*) – – – – 887 887Sharecapitalissued – 1 – – – 1Purchaseofownshares – – – (1) – (1)Releaseofownshares – – – 1 (1) –Creditinrespectofemployeeshareschemes – – – – 2 2Dividendspaid – – – – (31) (31)At24September2016(restated*) 35 27 3 (1) 1,438 1,502Profitaftertaxation – – – – 121 121Remeasurementofpensionliability – – – – 8 8Deferredtaxonremeasurementofpensionliability – – – – (1) (1)Totalcomprehensiveincome – – – – 128 128Sharecapitalissued – – – – – –Purchaseofownshares – – – – – –Releaseofownshares – – – – – –Creditinrespectofemployeeshareschemes – – – – 2 2Dividendspaid – – – – (12) (12)Scripdividendrelatedshareissue 1 (1) – – – –At 30 September 2017 36 26 3 (1) 1,556 1,620

* Profitaftertaxationforthe52weeksended24September2016hasbeenrestatedfrom£1,413mto£918m,reflectinganimpairmentof£495moftheCompany’sinvestment inMitchells&ButlersHoldings(No.2)Limited.Seenote1.

Theretainedearningsaccountiswhollydistributableafterthedeductionforownshares.


1. Basis of preparationBasis of accountingThesefinancialstatementswerepreparedinaccordancewithFinancialReportingStandard101‘ReducedDisclosureFramework’asissuedbytheFRC.

AspermittedbyFRS101,theCompanyhastakenadvantageofthedisclosureexemptionsavailableunderthatstandardinrelationtoshare-basedpayments,financialinstruments,presentationofacashflowstatement,standardsnotyeteffective,impairmentofassetsandrelatedpartytransactions.

Whererequired,equivalentdisclosuresaregivenintheconsolidatedfinancialstatements.

Thefinancialstatementshavebeenpreparedunderthehistoricalcostconvention.TheCompany’saccountingpolicieshavebeenappliedonaconsistentbasistothosesetoutintherelevantnotestotheconsolidatedfinancialstatements.Therehavebeennochangestopoliciesduringtheperiod.ThecriticaljudgementsandestimatesoftheCompanyareconsideredalongsidethoseoftheGroup.ThekeycriticaljudgementsoftheCompanyarerelatedtotheselectionofthediscountrateforthedefinedbenefitpensionliabilitydescribedinnote4.5oftheconsolidatedfinancialstatementsandtheselectionofdiscountrateintheinvestmentimpairmentreviewinnote5.ThekeycriticalestimatefortheCompanyistheestimateoffuturecashflowsintheinvestmentimpairmentreviewdescribedinnote5.

Foreign currenciesTransactionsinforeigncurrenciesarerecordedattheexchangeratesrulingonthedatesofthetransactions.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedintosterlingattherelevantratesofexchangerulingatthebalancesheetdate.

InaccordancewithIAS39,theCompanyhasappliedfairvalueaccountinginordertohedgepartofitseuroloanwithMitchells&ButlersGermanyGmbHagainstpartofitsinvestmentinMitchells&ButlersGermanyGmbH.On20September2017,Mitchells&ButlersGermanyhaspaidadividendtotheCompanywhichhassettledtheeuroloan.Uptothesettlementdate,foreignexchangedifferencesarisingontranslationonboththeinvestmentandeuroloanweretakentotheprofitandlossaccount.At20September2017,thehedgehasbeende-designatedandthepartoftheinvestmentthathadbeenusedtohedgetheloanwastranslatedattheexchangerateonthatdate.Nofurtherhedgeaccountingwillberequired.

RestatementFollowingpublicationoftheMitchells&ButlersplcAnnualreportandaccounts2016,theFinancialReportingCouncil(FRC)wrotetotheCompanytodeterminewhetheranappropriateimpairmentreviewhadbeenperformedovertheCompany’sinvestmentsandintercompanyreceivablesbalances,followingtherestructuringactivityduringtheperiod.Asaresultofthisrequest,theCompanyhasperformedamoredetailedimpairmentreviewinrespectofthepriorperiodandhasdeterminedthattherewasanerrorinthepreviouscalculation.ThishasresultedintherequirementfortheCompanytoimpairitsinvestmentinMitchells&ButlersHoldings(No.2)Limitedby£495m.The2016profitandlossaccount,balancesheetandstatementofchangesinequityhavebeenrestatedtoreflectthis.Detailsoftherestatementareshowninnote5.Thisadjustmentdoesnotaffecttheconsolidatedfinancialstatements.

2. Profit and loss accountProfit and loss accountTheCompanyhasnotpresenteditsownprofitandlossaccount,aspermittedbySection408oftheCompaniesAct2006.

TheCompanyrecordedaprofitaftertaxof£121m(2016£918m(restatedasdescribedinnote1)),lessdividendsof£12m(2016£31m).

Audit remunerationAuditors’remunerationforauditservicestotheCompanywas£22,000(2016£22,000).ThisisbornebyanotherGroupcompany,asareanyothercostsrelatingtonon-auditservices(seenote2.3totheconsolidatedfinancialstatements).

3. Employees and Directors2017

53 weeks2016

52 weeks

Averagenumberofemployees,includingpart-timeemployees 2 2

EmployeesofMitchells&ButlersplcconsistofExecutiveDirectorswhoareconsideredtobethekeymanagementpersonneloftheCompany.

Detailsofemployeebenefitsandpost-employmentbenefits,includingshare-basedpaymentsareincludedwithintheDirectors’RemunerationReportonpages66to87.Thechargerecognisedforshare-basedpaymentsintheperiodis£nil(2016£nil).

4. Pensions

Accounting policyTheaccountingpolicyforpensionsisdisclosedintheconsolidatedfinancialstatementsinnote4.5.

Pension liabilityAt30September2017theCompany’spensionliabilitywas£292m(2016£337m).Ofthisamount,£47m(2016£46m)isacurrentliabilityand£245m(2016£291m)isanon-currentliability.

TheCompanyisthesponsoringemployeroftheGroup’spensionplans.InformationconcerningthepensionschemearrangementsoperatedbytheCompanyandassociatedcurrentandfuturecontributionsiscontainedwithinnote4.5totheconsolidatedfinancialstatementsonpages126to129.

Thepensionamountsanddisclosuresincludedinnote4.5totheconsolidatedfinancialstatementsareequivalenttothoseapplicablefortheCompany.

Notes to the Mitchells & Butlers plc Company financial statements


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Notes to the Mitchells & Butlers plc Company financial statements continued

5. Investments in subsidiaries

Accounting policyTheCompany’sinvestmentsinGroupundertakingsareheldatcostlessprovisionforimpairment,exceptforthoseamountsdesignatedasbeinginafairvaluehedge.

Sharesinsubsidiary

undertakings£m

CostAt26September2015 1,746Exchangedifferences 4Additionsa 1,354At24September2016 3,104Exchangedifferences 1Additionsb 248At 30 September 2017 3,353

ProvisionAt26September2015 30ImpairmentofinvestmentinMitchells&ButlersHoldings(No.2)Limited(restated*) 495ImpairmentofinvestmentinMitchells&ButlersRetailPropertyLimiteda 1,354At24September2016(restated*) 1,879Impairment –At 30 September 2017 1,879

Net book valueAt 30 September 2017 1,474

At24September2016(restated*) 1,225

At26September2015 1,716

* Restatedtoreflectanimpairmentof£495mintheCompany’sinvestmentinMitchells&ButlersHoldings(No.2)Limited.Seenote1.a. Duringthepriorperiod,theCompanyacquiredallofthesharecapitalofMitchells&ButlersRetailPropertyLimitedbywayofadividendinspecieof£1,354mfromMitchells&Butlers

Holdings(No.2)Limited.Subsequently,Mitchells&ButlersRetailPropertyLimitedmadeadistributionof£501mtotransferanintercompanyloanreceivablefromMitchells&ButlersHoldings(No.2)LimitedtotheCompany.Afurtherdividendof£853mwasalsoreceivedbytheCompanyfromMitchells&ButlersRetailPropertyLimited.Followingthesedistributions,thenetassetsofMitchells&ButlersRetailPropertyLimitedwerereducedby£1,354mandtheCompany’sinvestmentinMitchells&ButlersRetailPropertyLimitedwasfullyimpaired.

b. Additionsintheperiodof£248mrelatetoacapitalcontribution,intheformofaloanwaiver,providedtoasubsidiarycompanywithintheMitchells&ButlersplcGroup.Theintercompanyloanwastestedforimpairmentpriortotheloanwaiver,withnoimpairmentrequired.

Mitchells&ButlersplcisthebeneficialownerofalloftheequitysharecapitalofcompanieswithintheGroup,eitheritselforthroughsubsidiaryundertakings(seenote5.2oftheconsolidatedfinancialstatements).

Investmentshavebeentestedforimpairmentusingforecastcashflows,discountedbyapplyingapre-taxdiscountrateof7.5%(20168.3%).Forthepurposesofthecalculationoftherecoverableamount,thecashflowprojectionsinclude0.0%(20161.0%)ofgrowthperannum.

Sensitivity analysisChangesinforecastcashflowsordiscountratecouldmateriallyimpacttherecoverabilityoftheinvestments.Itisestimatedthat:a1%increaseinthediscountratewouldgenerateanimpairmentof£286m;a10%reductioninfuturecashflowswouldgenerateanimpairmentof£115m;ora1%reductioningrowthratewouldgenerateanimpairmentof£326m.

6. Trade and other receivables2017

£m2016

£m

Amountsowedbysubsidiaryundertakings 828 1,034

Allamountsfallduewithinoneyear.Thereductioninamountsowedbysubsidiaryundertakingsismainlyasaresultoftheloanwaiverprovidedtoasubsidiarycompanyduringtheperiod(seenote5).


7. Trade and other payables2017

£m2016

£m

Bankoverdraft 28 28Amountsowedtosubsidiaryundertakingsa 416 450Othercreditors 3 2

447 480

a. Amountsowedtosubsidiaryundertakingsarerepayableondemand.Interestisnotchargedonallbalances.Whereinterestischarged,itischargedatmarketrate,basedonwhatcanbeachievedoncorporatedeposits.

8. BorrowingsAccounting policy Theaccountingpolicyforborrowingsisdisclosedintheconsolidatedfinancialstatementsinnote4.2.

Borrowingscanbeanalysedasfollows:

2017£m

2016£m

CurrentUnsecuredrevolvingcreditfacility – 6Totalborrowings – 6

Unsecured revolving credit facilityTheCompanyholdsuncommittedcreditfacilitiesof£15m.Theamountdrawnat30September2017is£nil(2016£6m).

9. Taxation

Accounting policyTheaccountingpolicyfortaxationisdisclosedintheconsolidatedfinancialstatementsinnote2.4.

Deferred tax assetMovementsinthedeferredtaxassetcanbeanalysedasfollows:

£m

At26September2015 70Chargedtoincomestatement–pensions (4)Creditedtoincomestatement–taxlosses 9Chargedtoothercomprehensiveincome–pensions (9)At24September2016 66Chargedtoincomestatement–pensions (6)Chargedtoincomestatement–taxlosses (3)Chargedtoothercomprehensiveincome–pensions (1)At 30 September 2017 56

Analysedastaxtimingdifferencesrelatedto:

2017£m

2016£m

Pensions 50 57Taxlossesa 6 9

56 66

a. Taxlossesarisingin2008whicharenowrecoverablebyoffsetagainstotherincome.

Furtherinformationonthechangestotaxlegislationareprovidedinnote2.4totheconsolidatedfinancialstatements.

10. EquityCalled up share capitalDetailsoftheamountandnominalvalueofallotted,calledupandfullypaidsharecapitalarecontainedinnote4.7totheconsolidatedfinancialstatements.

DividendsDetailsofthedividendsdeclaredandpaidbytheCompanyarecontainedinnote4.7totheconsolidatedfinancialstatements.


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Documents

F INANCIAL STATEMENTS - mbplc.com€¦ · Report on the audit of the financial statements Opinion In our opinion: • the financial statements give a true and fair view of the state