Mitchells & Butlers today published the results of a strategic review of the business, the conclusions of which have been adopted as operating policy immediately. The review takes place after Joe Lewis, the largest shareholder had installed John Lovering as Chairman after the dramatic AGM in January.
M&B owns and operates 2,000 pubs under brands such as Harvester, All-Bar-One and O'Neills. It plans to accelerate its move toward food-led pubs by expanding key brands such as Harvester and Toby Carvery, and withdrawing from "non-core assets", without spelling out what they were. This will improve key operating ratios, especially net operating margins and improve return on capital expenditure.
M&B will move the basis of pay and culture towards one which encourages greater growth in shareholder value, while addressing the pension funding and reducing net debt to around 5x EBITDA. It will also separate the measurement and reporting of the property and operating performance within the business. The intention is to seek a capital return of 11% on freehold values, 15% on property improvements and 25% on brand specific fit out costs.
Their maintenance capital expenditure budget for the current estate has been planned at £120million per annum, of this £70million will be focused on sustaining our core business, while £50million is on higher returning concept development and evolution within their normal maintenance cycle. M&B will report the returns of their property and retail business separately to shareholders as part of their full year results.
M&B plan to grow it's food-led mid-market brands, Harvester from 171 to around 400, Toby Carvery from 133 to around 300, Crown Carveries from 111 to around 300, Sizzling Pub Co from 200 to around 400, Vintage Inns from 237 to around 350 and Premium Country Dining from 61 to around 150. They intend to develop smaller footprint high street variants of Harvester and Toby Carvery, but they principally want to open newly developed "lease viable" versions of the current outlets in leisure parks and other high traffic locations such as retail parks with good car parking.
Implicit in this is an intention to sell off freehold estate assets where they do not fit the new requirements from either a yield, or layout or location point of view. M&B has a large freehold property portfolio which has long been seen as an attractive asset for property investors.
The company's shares have risen more than 30% in the past year as the business has proved resilient in the downturn despite the boardroom problems.
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