Adoption of IFRS
Mitchells & Butlers PLC
07 December 2005
MITCHELLS & BUTLERS PLC
Adoption of International Financial Reporting Standards
Mitchells & Butlers plc ('the Group') today releases its financial results for the 53
weeks to 1 October 2005 as prepared under International Financial Reporting Standards
('IFRS').
Preliminary results for the 53 weeks to 1 October 2005 under UK GAAP were released on 30
November 2005 and are available on the Group's website www.mbplc.com/IFRS.
The key headlines from the restated accounts for the 53 weeks to 1 October 2005 are:
- Profit before tax and exceptional items of £193m, £2m lower than under UK GAAP.
- Effective tax rate before exceptional items of 31%, one percentage point lower than
under UK GAAP.
- Profit after tax and before exceptional items of £133m, same as under UK GAAP.
- EPS before exceptional items of 26.0p, same as under UK GAAP.
- Profit after tax and exceptional items of £130m, £3m lower than under UK GAAP.
- Net assets at 1 October 2005 of £1,183m, £234m lower than under UK GAAP.
The above changes to the Group's reported financial information from the adoption of
IFRS are consistent with previous guidance given and mainly result from:
- Profit before tax - increased charge for the cost of share-based payments.
- Tax charge - benefit of a lower permanent difference in respect of depreciation.
- Net assets - recognition of additional deferred tax liabilities relating to the
revaluation of properties and gains previously rolled over into replacement
assets.
The adoption of IFRS will have no impact on the underlying operations, cash flows or
debt covenants of the Group. However, the new regime may lead to some increased
volatility in reported numbers, particularly net assets.
For further information contact:
Erik Castenskiold, Head of Investor 0121 498 4907
Relations
MITCHELLS & BUTLERS PLC
Adoption of International Financial Reporting Standards ('IFRS')
CONTENTS
1 Introduction
2 Summary of impacts
3 Basis of preparation
4 IFRS 1 first-time adoption choices
5 Description of IFRS adjustments
6 Restated IFRS consolidated financial statements:
- Group income statement for the 53 weeks ended 1 October 2005
- Group statement of recognised income and expense for the 53 weeks ended 1
October 2005
- Group balance sheets at 1 October 2005 and 26 September 2004 (IFRS transition
date)
- Group cash flow statement for the 53 weeks ended 1 October 2005
- Selected notes to the financial statements
7 Independent Auditors' Report
8 Appendices:
I Reconciliation of profit and recognised income and expense for the 53 weeks
ended 1
October 2005
II Reconciliation of net assets at 26 September 2004 (IFRS transition date)
III Reconciliation of net assets at 1 October 2005
1 Introduction
Mitchells & Butlers plc ('the Group') has historically prepared its consolidated
financial statements under UK Generally Accepted Accounting Principles ('UK GAAP').
With effect from 2 October 2005, the Group is required to prepare its financial
statements in accordance with International Financial Reporting Standards ('IFRS').
The Group's first Annual Report under IFRS will be for the 52 weeks to 30 September
2006, with the first published IFRS results being the Interim Report and Accounts
for the 28 weeks to 15 April 2006. The Group is required to publish one year of
comparative information, which results in a date of transition to IFRS of 26
September 2004.
This document describes the main differences between UK GAAP and IFRS that impact
the Group and provides IFRS consolidated financial statements for the 53 weeks
ended 1 October 2005, as well as the IFRS opening balance sheet at 26 September
2004, together with reconciliations to previously reported figures under UK GAAP.
IFRS consolidated financial statements for the 28 weeks ended 9 April 2005,
together with reconciliations to previously reported figures under UK GAAP, can be
found within the investors section of the Group's website at www.mbplc.com/IFRS.
The adoption of IFRS will have no impact on the underlying operations, cash flows
or debt covenants of the Group. However, the new regime may lead to some increased
volatility in reported numbers, particularly net assets.
2 Summary of impacts
For the 53 weeks ended 1 October 2005, the key headlines from the IFRS results
compared to those under UK GAAP are as follows:
- Profit before tax and exceptional items of £193m, £2m lower than under UK
GAAP.
- Effective tax rate before exceptional items of 31%, one percentage point
lower than under UK GAAP.
- Profit after tax and before exceptional items of £133m, same as under UK
GAAP.
- EPS before exceptional items of 26.0p, same as under UK GAAP.
- Profit after tax and exceptional items of £130m, £3m lower than under UK
GAAP.
- Net assets at 1 October 2005 of £1,183m, £234m lower than under UK GAAP.
The following table summarises the specific areas of IFRS that have impacted the
Group results:
Profit Profit Profit
before tax after tax after tax
and and before and
exceptional exceptional exceptional Net assets
Items items Items
2005 2005 2005 2005 2004
------- ------- ------- ------- -------
£m £m £m £m £m
Under UK GAAP 195 133 133 1,417 1,423
Share-based payments (2) (2) (2) - -
Leases - - - (3) (3)
Reversal of dividend - - - 37 34
accrual
Holiday pay accrual - - - (6) (6)
Pensions - - - (3) (3)
Property, plant and - - - (24) (24)
equipment
Derivatives - - - (35) (10)
Tax - 2 (1) (200) (231)
------- ------- ------- ------- -------
Under IFRS 193 133 130 1,183 1,180
======= ======= ======= ======= =======
In addition, there have been balance sheet reclassifications in respect of cash and cash equivalents,
lease premiums, computer software and assets held for sale.
3 Basis of preparation
The financial information presented in this document has been prepared on the basis of current
interpretations of all IFRSs and International Financial Reporting Interpretation Committee ('IFRIC')
interpretations published as at the date of this announcement. These are subject to ongoing amendment by
the International Accounting Standards Board ('IASB') and subsequent endorsement by the European
Commission. In addition, the Group may need to review accounting treatments as a result of emerging
industry consensus on the practical application of IFRS and further technical opinion. It is possible,
therefore, that the financial information presented in this document could be modified by the time the
Group publishes its first complete set of IFRS financial statements for the 52 weeks ending 30 September
2006.
In preparing the financial information, the Group has assumed that the European Commission will endorse
the amendment to IAS 19, 'Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures'.
In November 2005, the European Commission endorsed an amended version of IAS 39, 'Financial Instruments:
Recognition and Measurement' rather than the full version as previously published by the IASB. As the
Group is unaffected by the amendments, its adoption of IAS 39 complies with both versions.
The accounting policies under which the financial information presented within this document has been
prepared can be found within the investors section of the Group's website at www.mbplc.com/IFRS.
The financial information contained in this document does not constitute statutory accounts as defined in
section 240 of the Companies Act 1985. The auditors have issued unqualified opinions on the Group's UK
GAAP financial statements for the periods ended 25 September 2004 and 1 October 2005. The UK GAAP
financial statements for the year ended 25 September 2004 have been delivered to the Registrar of
Companies. The UK GAAP financial statements for the year ended 1 October 2005 will be delivered to the
Registrar of Companies in due course.
4 IFRS 1 first-time adoption choices
IFRS 1, 'First-time Adoption of International Financial Reporting Standards' sets out the rules that the
Group must follow when it adopts IFRS for the first time. Under this standard, the Group is required to
establish its IFRS accounting policies as at 2 October 2005 and, in general, apply these retrospectively
to determine the IFRS opening balance sheet at its date of transition, 26 September 2004.
IFRS 1 provides a number of optional exceptions to this general principle. Set out below is a description
of the significant first time adoption choices made by the Group.
Business combinations (IFRS 3)
The Group has elected to apply IFRS 3 'Business Combinations' prospectively from the date of transition
to IFRS rather than to restate previous business combinations.
Valuation of properties (IAS 16)
Under IAS 16 'Property, Plant and Equipment' an entity must adopt either a cost or valuation model for
valuing its property, plant and equipment. Consistent with its approach under UK GAAP the Group has
decided to continue with a cost model and has elected to take the exemption available under IFRS 1 to use
the previous revaluations of its properties as deemed cost at the transition date.
Share-based payments (IFRS 2)
The Group has elected to apply IFRS 2 'Share-based Payment' only to those equity settled awards that were
granted after 7 November 2002 but not vested at 1 January 2005.
Pensions (IAS 19)
The Group has elected to recognise all cumulative actuarial gains and losses in relation to its defined
benefit pension arrangements at the date of transition. Actuarial gains and losses arising after the
transition date are recognised in full in the period in which they occur in a statement of recognised
income and expense in accordance with the Amendment to IAS 19. These accounting treatments mirror those
of FRS 17 'Retirement Benefits' which the Group adopted for 2004/05 under UK GAAP.
Financial instruments (IAS 32 / 39)
The Group had appropriate hedging documentation in place at the date of transition to IFRS and has
therefore opted to restate its results for the 53 weeks ended 1 October 2005 under IAS 32 and IAS 39.
5 Description of IFRS adjustments
The following commentary describes the differences between IFRS and UK GAAP that have a material impact
on the income or net assets of the Group. The adjustments that result from these differences are set out
in the Appendices which contain detailed reconciliations of previously reported results under UK GAAP to
restated results under IFRS.
Share-based payments (IFRS 2)
IFRS 2 requires all share options and employee share awards to be expensed in the profit and loss account
with the expense measured at fair value at date of grant and generally charged over the vesting period of
the scheme. Under UK GAAP, SAYE schemes were exempt from a charge and the expense recognised in respect
of other schemes was based on the intrinsic value at date of grant and charged over the performance
period of the scheme.
The Group has used a combination of Black Scholes, Binomial and Monte Carlo simulation models to
calculate fair values depending on the conditions attached to the particular share scheme.
The additional pre tax charge arising from the adoption of IFRS 2 is £2m for the 53 weeks ended 1 October
2005.
Pensions (IAS 19)
The Group will account for pensions under IFRS in the same way as that already applied under UK GAAP (FRS
17). In particular, and assuming European Commission endorsement of the Amendment to IAS 19, actuarial
gains and losses are recognised in full in the statement of recognised income and expense. There is,
however, a small difference in the valuation of pension scheme assets which are valued at bid price under
IFRS rather than mid-market price under UK GAAP.
The impact of this difference is to increase the pension deficit recorded under IAS 19 by £3m at both 1
October 2005 and 26 September 2004 with no material effect on the income statement for the 53 weeks ended
1 October 2005.
Under IFRS, the pension deficit is shown on the balance sheet gross of deferred tax. This is a change in
presentation from UK GAAP which required the liability to be shown net of the related deferred tax
asset.
Dividends (IAS 10)
Under IAS 10 'Events after the Balance Sheet Date', dividends declared after the balance sheet date are
not recognised as a liability.
The effect of this change is to increase net assets by £37m at 1 October 2005 and £34m at 26 September
2004.
Holiday pay accrual (IAS 19)
As a result of the specific guidance in IAS 19, the Group has recognised an additional accrual for
holiday pay.
The impact is to reduce net assets by £6m at both 1 October 2005 and 26 September 2004 with no material
effect on the income statement for the 53 weeks to 1 October 2005.
Property, plant and equipment (IAS 16)
Under IFRS, the Group will cease to capitalise certain low value short lived assets.
The effect is to reduce net assets by £24m at both 1 October 2005 and 26 September 2004 with no material
effect on the income statement for the 53 weeks to 1 October 2005.
Financial instruments (IAS 39 and IAS 21)
IAS 39 'Financial Instruments: Recognition and Measurement' requires all derivative financial instruments
to be included on the balance sheet at fair value and contains provisions that restrict the use of hedge
accounting. If hedge accounting cannot be applied, any changes in fair value are reported in the profit
and loss account. There are no equivalent provisions in UK GAAP.
The Group uses interest rate and currency swaps to fix the interest rate payable on the floating rate
tranches of its secured loan notes. These derivatives have qualified for cash flow hedge accounting since
IFRS transition so that changes in fair value are recognised in equity in a 'hedging reserve' until such
point as the transactions which are being hedged are reflected in the profit and loss account. As these
hedging relationships are highly effective, cash flow hedge accounting has avoided earnings volatility in
the 53 weeks to 1 October 2005 and is expected to do so going forward. However, the value of the Group's
net assets at each reporting date is impacted by the fair value of the derivatives recorded in the
hedging reserve. As a consequence, the Group's net assets have been reduced by £35m and £10m at 1 October
2005 and 26 September 2004, respectively.
Under IAS 21 'The Effects of Changes in Foreign Exchange Rates' the Group's US dollar denominated secured
loan notes are translated at period end exchange rates with exchange differences passing through the
profit and loss account. However, as the Group has been able to apply hedge accounting, there is an equal
and opposite transfer from the hedging reserve that removes the earnings volatility that would otherwise
result. Under UK GAAP, the US dollar denominated secured loan notes were translated at the contracted
exchange rates implicit in the underlying hedging arrangements.
Leases (IAS 17)
The Group holds a number of properties under operating leases. In accordance with IAS 17 'Leases', lease
premium payments made on entering into the leases, previously included in fixed assets under UK GAAP,
have been reclassified as non current prepayments and amortised over the life of the lease. Amounts
reclassified at 1 October 2005 and 26 September 2004 were £17m and £18m respectively. In the income
statement for the 53 weeks ended 1 October 2005, depreciation of £1m has been reclassified as lease
amortisation with no overall impact on reported profits. In addition, the revaluation previously
attributed to the amount included in fixed assets has been reversed. This has reduced net assets by £3m
at both 1 October 2005 and 26 September 2004.
IAS 17 requires that the buildings element of leases on land and buildings is considered separately for
the purpose of determining whether the lease is a finance or operating lease. IAS 17 also requires lease
incentives to be spread over the full lease term rather than the period to the first rent review. In
response to these requirements, the Group has undertaken a review of its leased property portfolio and
concluded that no adjustments are required on transition to IFRS.
Computer software (IAS 38)
Computer software, which is not an integral part of a related item of hardware, is required under IFRS to
be treated as an intangible asset. Under UK GAAP, all such software was included in tangible fixed
assets.
The amounts reclassified to intangible assets are £16m at 1 October 2005 and £19m at 26 September 2004.
In the income statement for the 53 weeks ended 1 October 2005, depreciation of £5m has been reclassified
as intangibles amortisation with no overall impact on reported profits.
Assets held for sale (IFRS 5)
IFRS 5 requires that where the value of an asset will be recovered through a sale transaction rather than
continuing use the asset is classified as held for sale. Assets held for sale are valued at the lower of
book value and fair value less costs to sell and are no longer depreciated. Under UK GAAP there was no
held for sale classification.
IFRS 5 has been adopted prospectively from 26 September 2004 resulting in a balance sheet
reclassification of £9m at 1 October 2005. There is no effect on the income statement for the 53 weeks to
1 October 2005.
Deferred tax (IAS 12)
IAS 12 'Income Taxes' requires deferred tax to be provided on temporary differences between the tax base
and carrying value of assets and liabilities rather than just taxable timing differences under UK GAAP.
As a result, the Group's opening IFRS balance sheet at 26 September 2004 includes an additional deferred
tax liability of £242m relating to the revaluation of properties and gains previously rolled over into
replacement assets. The equivalent additional liability was £223m at 1 October 2005.
In addition, the tax effects of the other IFRS adjustments have resulted in a reduction in the overall
deferred tax liability of £11m at 26 September 2004 and £23m at 1 October 2005.
For the 53 weeks ended 1 October 2005, the effective tax rate before exceptional items is 31% under IAS
12 compared with 32% under UK GAAP. The reduction in the effective tax rate is as a result of a lower
permanent difference in respect of depreciation.
Goodwill (IFRS 3)
In accordance with IFRS 3 'Business Combinations', goodwill is not amortised but instead tested for
impairment on transition to IFRS and annually thereafter, or more frequently if circumstances indicate
that impairment may have occurred. As a consequence, the Group's goodwill balance of £10m was tested for
impairment at 26 September 2004 and 1 October 2005 and no impairment adjustment was required.
Under UK GAAP, the Group's goodwill was amortised over a 20 year period. The impact of not amortising
goodwill was not material for the 53 weeks ended 1 October 2005.
Exceptional items (IAS 1)
IAS 1 'Presentation of Financial Statements' does not contain an equivalent classification for the FRS 3
non-operating exceptional items that were shown below operating profit under UK GAAP. Such items, which
do not relate to the underlying business performance of the Group and include profits and losses on the
disposal of properties, will now be reported in operating profit, but shown as operating exceptional
items. The Group will continue to highlight exceptional items by way of a columnar presentation on the
face of the Group income statement. Exceptional items are those items which are separately identified by
virtue of their size or incidence to allow a full understanding of the underlying performance of the
Group.
Earnings per share (IAS 33)
Whilst the denominator for basic EPS purposes is calculated in the same way as under UK GAAP, the
denominator for diluted EPS purposes is different under IFRS due to the treatment of contingently
issuable shares and the effects of IFRS 2.
For the 53 weeks ended 1 October 2005, under IFRS, the basic and diluted EPS denominators are 511m shares
and 518m shares respectively. Under UK GAAP, the equivalent figures were 511m and 520m shares
respectively.
Cash flow statements (IAS 7)
IAS 7 'Cash flow statements' changes the definition of cash used for the preparation of the cash flow
statement. Under IFRS, cash and cash equivalents include cash at bank and other short term deposits and
investments with an original maturity at acquisition of up to three months. Under UK GAAP, cash was
restricted to deposits and investments repayable on demand.
In addition, IAS 7 only allows three classifications of cash flow; operating, investing and financing.
Interest and tax cash flows, previously disclosed under separate headings under UK GAAP, are shown with
operating activities under IAS 7.
Under IFRS, the Group will define net debt to include the proportion of the fair value of the currency
swaps hedging the balance sheet value of the Group's dollar denominated loan notes. This will ensure that
net debt under IFRS is reported on a consistent basis with UK GAAP.
Other reclassifications
In accordance with IAS 21, cumulative foreign exchange movements on the translation of foreign
subsidiaries are disclosed separately in a 'translation reserve' within shareholders' equity. The amount
reclassified out of retained earnings is £6m at both 1 October 2005 and 26 September 2004.
As noted above, the carrying values of previously revalued assets have been treated as deemed cost on
transition to IFRS, in accordance with the provisions of IFRS 1. Accordingly, the Group's revaluation
reserve (£335m at 1 October 2005 and £339m at 26 September 2004) has been reclassified to retained
earnings, although it should be noted that this does not represent an increase in the Group's
distributable reserves.
6 Restated IFRS consolidated financial statements
GROUP INCOME STATEMENT
For the 53 weeks ended 1 October 2005
Before Exceptional Total
exceptional items
items
£m £m £m
--------- --------- ---------
Revenue (Note 1) 1,662 - 1,662
Net operating costs (1,367) (4) (1,371)
Profit on disposal of fixed assets - 1 1
--------- --------- ---------
Operating profit (Note 1) 295 (3) 292
Finance income 14 - 14
Finance expense (116) - (116)
--------- --------- ---------
Profit before tax 193 (3) 190
Tax (60) - (60)
--------- --------- ---------
Profit for the year 133 (3) 130
========= ========= =========
Earnings per ordinary share
Basic 26.0p - 25.4p
Diluted 25.7p - 25.1p
========= ========= =========
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the 53 weeks ended 1 October 2005
£m
----------
Cash flow hedges (25)
Actuarial loss on pension schemes (7)
Tax on items taken directly to equity 34
----------
Net income recognised directly in equity 2
Profit for the period 130
----------
Total recognised income and expense for the period 132
==========
GROUP BALANCE SHEETS
2005 2004
1 October 26 Sept
£m £m
--------- ----------
ASSETS
Goodwill and other intangible assets 26 29
Property, plant and equipment 3,447 3,445
Non current prepayments 16 17
--------- ----------
Total non current assets 3,489 3,491
--------- ----------
Inventories 39 43
Trade and other receivables 77 83
Short-term investments 1 20
Cash and cash equivalents 199 205
--------- ----------
Total current assets 316 351
--------- ----------
Non current assets held for sale 9 -
--------- ----------
Total assets 3,814 3,842
--------- ----------
LIABILITIES
Short-term borrowings (39) (35)
Trade and other payables (220) (204)
Current tax payable (60) (59)
--------- ----------
Total current liabilities (319) (298)
--------- ----------
Borrowings (1,773) (1,804)
Derivatives (48) (28)
Pension liabilities (151) (176)
Deferred tax liabilities (336) (354)
Provisions (4) (2)
--------- ----------
Total non current liabilities (2,312) (2,364)
--------- ----------
Total liabilities (2,631) (2,662)
--------- ----------
Net assets 1,183 1,180
========= ==========
EQUITY
Called up share capital 35 37
Share premium account 14 12
Capital redemption reserve 2 -
Own shares held (12) (11)
Hedging reserve (24) (7)
Translation reserve 6 6
Retained earnings 1,162 1,143
--------- ----------
Total equity 1,183 1,180
========= ==========
GROUP CASH FLOW STATEMENT
For the 53 weeks ended 1 October 2005
£m
----------
Cash flow from operations (Note 2) 400
Net interest paid (102)
Tax paid (43)
----------
Net cash from operating activities 255
----------
Investing activities
Decrease in short-term deposits and investments 19
Purchases of intangibles (2)
Purchases of property, plant and equipment (165)
Proceeds from sale of property, plant and equipment 57
----------
Net cash used in investing activities (91)
----------
Financing activities
Issue of ordinary share capital 2
Purchase of own shares (101)
Proceeds on release of own shares held 14
Repayment of principal in respect of securitised debt (35)
Dividends paid (50)
----------
Net cash used in financing activities (170)
----------
Net decrease in cash and cash equivalents (6)
Cash and cash equivalents at the beginning of the period 205
----------
Cash and cash equivalents at the end of the period 199
==========
SELECTED NOTES TO THE FINANCIAL STATEMENTS
1 Segmental analysis
Under IAS 14 'Segmental Reporting' the Group will continue to report its results under the same primary
reporting segments as under UK GAAP.
Revenue Operating
profit
before
exceptional
items*
£m £m
--------- ---------
Pubs & Bars 957 179
Restaurants 697 115
--------- ---------
Retail 1,654 294
SCPD 8 1
--------- ---------
1,662 295
========= =========
* Exceptional items comprise licensing costs of £4m and a profit on disposal of fixed assets
of £1m.
2 Cash flow from operations
£m
----------
Operating profit before exceptional items 295
Adjustments for:
Depreciation of property, plant and equipment 110
Amortisation of intangibles 5
Amortisation of non current prepayments 1
Cost charged in respect of share remuneration 6
Defined benefit pension cost less normal cash contributions 1
----------
Operating cash flow before exceptional items, movements in working capital and 418
additional pension contributions
Movements in working capital:
Decrease in inventories 4
Increase in trade and other receivables (2)
Increase in trade and other creditors 12
Movement in provisions 2
----------
Cash flow from operations before exceptional items and additional pension 434
contributions
Cash outflow relating to exceptional items (4)
Additional pension contributions (30)
----------
Cash flow from operations 400
==========
3 Analysis of net debt
2005 2004
£m £m
--------- ---------
Cash and cash equivalents 199 205
Short-term investments 1 20
Securitised debt (1,808) (1,835)
Derivatives hedging balance sheet debt* (13) (18)
Finance leases (2) (2)
Other loans (2) (2)
--------- ---------
(1,625) (1,632)
========= =========
* See commentary on page 6 under 'Cash flow statements (IAS 7)'.
4 Movement in net debt
£m
--------
Net decrease in cash and cash equivalents (6)
Add back cash flows in respect of other components of net debt:
Decrease in short-term deposits and investments (19)
Repayment of principal in respect of securitised debt 35
--------
Reduction in net debt arising from cash flows 10
Other non-cash movements (3)
--------
Decrease in net debt 7
Opening net debt (1,632)
--------
Closing net debt (1,625)
========
5 Change in equity
£m
--------
Total equity at 26 September 2004 1,180
Profit for the period 130
Net income recognised directly in equity 2
Dividends paid to shareholders (50)
Issue of ordinary shares 2
Purchase of own shares (101)
Proceeds on release of own shares held 14
Credit in respect of employee share schemes 6
--------
Total equity at 1 October 2005 1,183
========
7 Independent Auditors' Report to Mitchells & Butlers plc on the preliminary
IFRS Financial Statements for the 53 weeks ended 1 October 2005
We have audited the accompanying preliminary International Financial Reporting
Standards ('IFRS') financial statements of the Group for the 53 weeks ended 1
October 2005. These comprise the opening IFRS Group balance sheet as at 26
September 2004, the Group income statement, Group statement of recognised
income and expense and Group cash flow statement for the 53 weeks ended 1
October 2005 and the Group balance sheet as at 1 October 2005, together with
the related accounting policies as set out on pages 2 to 6.
This report is made solely to the Group in accordance with our engagement
letter dated 21 November 2005. Our audit work has been undertaken so that we
might state to the Company those matters we are required to state to them in an
auditors' report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility or liability to anyone other
than the Group for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
These preliminary IFRS financial statements are the responsibility of the
Company's directors and have been prepared as part of the Company's conversion
to IFRS. They have been prepared in accordance with the basis set out in Notes
3, 4 and 5 which describes how IFRS have been applied under IFRS 1, including
the assumptions management has made about the standards and interpretations
expected to be effective, and the policies expected to be adopted, when
management prepares its first complete set of IFRS financial statements as at
30 September 2006.
Our responsibility is to express an independent opinion on the preliminary IFRS
financial statements based on our audit. We read the other information
accompanying the preliminary IFRS financial statements and consider whether it
is consistent with the preliminary IFRS financial statements. This other
information comprises the description of significant changes in accounting
policies on pages 2 to 6. We consider the implications or our report if we
become aware of any apparent misstatements or material inconsistencies with the
preliminary opening balance sheet. Our responsibilities do not extend to any
other information.
Basis of audit opinion
We conduct our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
preliminary IFRS financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the preliminary IFRS financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
preliminary IFRS financial statements. We believe that our audit provides a
reasonable basis for our opinion.
Emphasis of matter
Without qualifying our opinion, we draw attention to the fact that 'basis of
preparation' explains why there is a possibility that the preliminary IFRS
financial statements may require adjustment before constituting the final IFRS
financial statements. Moreover, we draw attention to the fact that, under IFRSs
only a complete set of financial statements with comparative financial
information and explanatory notes can provide a fair presentation of the
Company's financial position, results of operations and cash flows in
accordance with IFRSs.
Opinion
In our opinion, the preliminary IFRS financial statements for the 53 weeks
ended 1 October 2005 have been prepared, in all material respects, in
accordance with the basis set out in Notes 3, 4 and 5 which describes how IFRS
have been applied under IFRS 1, including the assumptions management has made
about the standards and interpretations expected to be effective, and the
policies expected to be adopted, when management prepares its first complete
set of IFRS financial statements as at 30 September 2006.
Ernst & Young LLP
London
6 December 2005
Mitchells & Butlers plc Appendix I
Group Income Statement Share
For the 53 weeks based Deferred Total
ended 1 October 2005
payment Derivatives tax IFRS IFRS
UK GAAP IFRS 2 IAS 39 IAS 12 Reclass adjs Income
------- ------- ------- ------- ------- ------- -------
£m £m £m £m £m £m £m
Revenue 1,662 0 1,662
Net (1,369) (2) (2) (1,371)
operating
costs
Profit on 0 1 1 1
disposal of ------- ------- ------- ------- ------- ------- -------
fixed
assets
Operating 293 (2) 0 0 1 (1) 292
profit
Profit on 1 (1) (1) 0
disposal of
fixed
assets
Finance 11 3 3 14
income
Finance (116) 0 0 (116)
expense
Net finance 3 (3) (3) 0
income in ------- ------- ------- ------- ------- ------- -------
respect of
pensions
Profit 192 (2) 0 0 0 (2) 190
before
tax
Tax (59) 1 (2) (1) (60)
------- ------- ------- ------- ------- ------- -------
Profit for 133 (1) 0 (2) 0 (3) 130
the ------- ------- ------- ------- ------- ------- -------
period
Note: the above table includes exceptional items
Group Statement Of Recognised Income And Expense
For the 53 weeks ended 1 October 2005
Cash flow 0 (25) (25) (25)
hedges
Actuarial (7) 0 (7)
gain on
pensions
Tax on items 2 4 8 20 32 34
taken ------- ------- ------- ------- ------- ------- -------
directly to
equity
Net income (5) 4 (17) 20 0 7 2
recognised
directly in
equity
Profit for 133 (1) 0 (2) 0 (3) 130
the
period
------- ------- ------- ------- ------- ------- -------
Total 128 3 (17) 18 0 4 132
recognised ------- ------- ------- ------- ------- ------- -------
income and
expense for
the period
Mitchells & Butlers plc Appendix II
Group Balance Sheet
26 September 2004 (IFRS Computer Holiday
transition date) PP&E software Leases pay Pensions
UK GAAP IAS 16 IAS 38 IAS 17 IAS 19 IAS 19
------- ------ ------- ------ ------ -------
£m £m £m £m £m £m
ASSETS
Goodwill and other 10 19
intangible assets
Property, plant and 3,509 (24) (19) (21)
equipment
Non current 0 17
prepayments
------- ------ ------- ------ ------ -------
Total non current 3,519 (24) 0 (4) 0 0
assets ------- ------ ------- ------ ------ -------
Inventories 43
Trade and other 82 1
receivables
Short term 144
investments
Cash and cash 81
equivalents
------- ------ ------- ------ ------ -------
Total current 350 0 0 1 0 0
assets ------- ------ ------- ------ ------ -------
------- ------ ------- ------ ------ -------
Total assets 3,869 (24) 0 (3) 0 0
------- ------ ------- ------ ------ -------
LIABILITIES
Short term (35)
borrowings
Trade and other (232) (6)
payables
Current tax (59)
payable ------- ------ ------- ------ ------ -------
Total current (326) 0 0 0 (6) 0
liabilities ------- ------ ------- ------ ------ -------
Borrowings (1,822)
Derivatives 0
Pension (114) (3)
liabilities
Deferred tax (182) 3 2 1
liabilities
Provisions (2)
------- ------ ------- ------ ------ -------
Total non current (2,120) 3 0 0 2 (2)
liabilities ------- ------ ------- ------ ------ -------
------- ------ ------- ------ ------ -------
Total (2,446) 3 0 0 (4) (2)
liabilities ------- ------ ------- ------ ------ -------
------- ------ ------- ------ ------ -------
NET ASSETS 1,423 (21) 0 (3) (4) (2)
------- ------ ------- ------ ------ -------
EQUITY
Called up share 37
capital
Share premium 12
account
Capital redemption 0
reserve
Own shares held (11)
Hedging reserve 0
Translation 0
reserve
Revaluation 339 (3)
reserve
Retained 1,046 (21) (4) (2)
earnings
------- ------ ------- ------ ------ -------
Total equity 1,423 (21) 0 (3) (4) (2)
------- ------ ------- ------ ------ -------
Mitchells & Butlers plc Appendix II
Group Balance Sheet Share
26 September Derivatives Dividend based Deferred Total IFRS
2004 & borrowings accrual payment tax Other IFRS Balance
IAS 21/39 IAS 10 IFRS 2 IAS 12 reclass adjs Sheet
------- ------- ------- ------- ------ ----- ------
£m £m £m £m £m £m £m
ASSETS
Goodwill and 19 29
other intangible
assets
Property, plant (64) 3,445
and equipment
Non current 17 17
prepayments
------- ------- ------- ------- ------ ----- ------
Total non current 0 0 0 0 0 (28) 3,491
assets ------- ------- ------- ------- ------ ----- ------
Inventories 0 43
Trade and other 1 83
receivables
Short term (124) (124) 20
investments
Cash and cash 124 124 205
equivalents
------- ------- ------- ------- ------ ----- ------
Total current 0 0 0 0 0 1 351
assets ------- ------- ------- ------- ------ ----- ------
------- ------- ------- ------- ------ ----- ------
Total assets 0 0 0 0 0 (27) 3,842
------- ------- ------- ------- ------ ----- ------
LIABILITIES
Short term 0 (35)
borrowings
Trade and other 34 28 (204)
payables
Current tax 0 (59)
payable ------- ------- ------- ------- ------ ----- ------
Total current 0 34 0 0 0 28 (298)
liabilities ------- ------- ------- ------- ------ ----- ------
Borrowings 18 18 (1,804)
Derivatives (28) (28) (28)
Pension (59) (62) (176)
liabilities
Deferred tax 3 2 (242) 59 (172) (354)
liabilities
Provisions 0 (2)
------- ------- ------- ------- ------ ----- ------
Total non current (7) 0 2 (242) 0 (244) (2,364)
liabilities ------- ------- ------- ------- ------ ----- ------
------- ------- ------- ------- ------ ----- ------
Total (7) 34 2 (242) 0 (216) (2,662)
liabilities ------- ------- ------- ------- ------ ----- ------
------- ------- ------- ------- ------ ----- ------
NET ASSETS (7) 34 2 (242) 0 (243) 1,180
------- ------- ------- ------- ------ ----- ------
EQUITY
Called up share 0 37
capital
Share premium 0 12
account
Capital 0 0
redemption
reserve
Own shares 0 (11)
held
Hedging (7) (7) (7)
reserve
Translation 6 6 6
reserve
Revaluation (336) (339) 0
reserve
Retained 34 2 (242) 330 97 1,143
earnings
------- ------- ------- ------- ------ ----- ------
Total equity (7) 34 2 (242) 0 (243) 1,180
------- ------- ------- ------- ------ ----- ------
Mitchells & Butlers plc Appendix III
Group Balance Sheet Assets
1 October 2005 held for Computer Holiday
PP&E sale software Leases pay Pensions
UK GAAP IAS 16 IFRS 5 IAS 38 IAS 17 IAS 19 IAS 19
------ ------ ------ ------- ------ ------ -------
£m £m £m £m £m £m £m
ASSETS
Goodwill and 10 16
other intangible
assets
Property, plant 3,516 (24) (9) (16) (20)
and equipment
Non current 0 16
prepayments ------ ------ ------ ------- ------ ------ -------
Total non 3,526 (24) (9) 0 (4) 0 0
current ------ ------ ------ ------- ------ ------ -------
assets
Inventories 39
Trade and other 76 1
receivables
Short term 71
investments
Cash and cash 129
equivalents ------ ------ ------ ------- ------ ------ -------
Total current 315 0 0 0 1 0 0
assets ------ ------ ------ ------- ------ ------ -------
Non current 0 9
assets held for
sale
------ ------ ------ ------- ------ ------ -------
Total 3,841 (24) 0 0 (3) 0 0
assets ------ ------ ------ ------- ------ ------ -------
LIABILITIES
Short term (39)
borrowings
Trade and other (251) (6)
payables
Current tax (60)
payable ------ ------ ------ ------- ------ ------ -------
Total current (350) 0 0 0 0 (6) 0
liabilities ------ ------ ------ ------- ------ ------ -------
Borrowings (1,786)
Derivatives 0
Pension (99) (3)
liabilities
Deferred tax (185) 3 (1) 2 1
liabilities
Provisions (4)
------ ------ ------ ------- ------ ------ -------
Total non current (2,074) 3 (1) 0 0 2 (2)
liabilities ------ ------ ------ ------- ------ ------ -------
------ ------ ------ ------- ------ ------ -------
Total (2,424) 3 (1) 0 0 (4) (2)
liabilities ------ ------ ------ ------- ------ ------ -------
------ ------ ------ ------- ------ ------ -------
NET ASSETS 1,417 (21) (1) 0 (3) (4) (2)
------ ------ ------ ------- ------ ------ -------
EQUITY
Called up share 35
capital
Share premium 14
account
Capital 2
redemption
reserve
Own shares (12)
held
Hedging 0
reserve
Translation 0
reserve
Revaluation 335 (3)
reserve
Retained 1,043 (21) (1) (4) (2)
earnings
------ ------ ------ ------- ------ ------ -------
Total 1,417 (21) (1) 0 (3) (4) (2)
equity ------ ------ ------ ------- ------ ------ -------
Mitchells & Butlers plc Appendix III
Group Balance Sheet Share
1 October 2005 Derivatives Dividend based Deferred Total IFRS
& borrowings accrual payment tax Other IFRS Balance
IAS 21/39 IAS 10 IFRS 2 IAS 12 reclass adjs Sheet
-------- ------- ------- ------- ------ ------ ------
£m £m £m £m £m £m £m
ASSETS
Goodwill and 16 26
other intangible
assets
Property, plant (69) 3,447
and equipment
Non current 16 16
prepayments -------- ------- ------- ------- ------ ------ ------
Total non 0 0 0 0 0 (37) 3,489
current -------- ------- ------- ------- ------ ------ ------
assets
Inventories 0 39
Trade and other 1 77
receivables
Short term (70) (70) 1
investments
Cash and cash 70 70 199
equivalents -------- ------- ------- ------- ------ ------ ------
Total current 0 0 0 0 0 1 316
assets -------- ------- ------- ------- ------ ------ ------
Non current 9 9
assets held for
sale
-------- ------- ------- ------- ------ ------ ------
Total 0 0 0 0 0 (27) 3,814
assets -------- ------- ------- ------- ------ ------ ------
LIABILITIES
Short term 0 (39)
borrowings
Trade and other 37 31 (220)
payables
Current tax 0 (60)
payable -------- ------- ------- ------- ------ ------ ------
Total current 0 37 0 0 0 31 (319)
liabilities -------- ------- ------- ------- ------ ------ ------
Borrowings 13 13 (1,773)
Derivatives (48) (48) (48)
Pension (49) (52) (151)
liabilities
Deferred tax 11 7 (223) 49 (151) (336)
liabilities
Provisions 0 (4)
-------- ------- ------- ------- ------ ------ ------
Total non current (24) 0 7 (223) 0 (238) (2,312)
liabilities -------- ------- ------- ------- ------ ------ ------
-------- ------- ------- ------- ------ ------ ------
Total (24) 37 7 (223) 0 (207) (2,631)
liabilities -------- ------- ------- ------- ------ ------ ------
-------- ------- ------- ------- ------ ------ ------
NET ASSETS (24) 37 7 (223) 0 (234) 1,183
-------- ------- ------- ------- ------ ------ ------
EQUITY
Called up share 0 35
capital
Share premium 0 14
account
Capital 0 2
redemption
reserve
Own shares 0 (12)
held
Hedging (24) (24) (24)
reserve
Translation 6 6 6
reserve
Revaluation (332) (335) 0
reserve
Retained 37 7 (223) 326 119 1,162
earnings
-------- ------- ------- ------- ------ ------ ------
Total (24) 37 7 (223) 0 (234) 1,183
equity -------- ------- ------- ------- ------ ------ ------
This information is provided by RNS
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