governance - mitchells & butlersin fy 2019, the company undertook an internal board...

Governance

50ANNUAL REPORT AND ACCOUNTS 2019MITCHELLS & BUTLERS PLC

IN THIS SECTION52 Chairman’s introduction to governance54 Board of Directors58 Directors’ report62 Directors’ responsibilities statement63 Corporate governance statement72 Audit Committee report76 Report on Directors’ remuneration


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CHAIRMAN’S INTRODUCTION TO GOVERNANCE

hisotherroles.Aprocessofidentificationandrecruitmenttookplace,withtheresultthatweweredelightedtoannouncetheappointmentofJaneMoriartyandSusanMurraytotheBoard,on27February2019and8March2019respectively,withSusantakingontheroleofSeniorIndependentDirectoronappointment.ThetwonewappointeesbetweenthembringawealthofexperiencetotheBoardinthefinanceandmarketingsectors,andsignificantlyincreasetheBoard’sdiversity.Myfocuswillcontinuetobeonmaintainingastrongteam,withabroadrangeofprofessionalbackgrounds,experiencefrombothwithinoursectorandinotherindustriesandbusinessandcommunicationskillstodrivefurtherimprovementswherepossible.

Boththe2016Codeandthe2018Codestatethatthereshouldbeaformalandrigorousannualevaluationoftheperformanceoftheboard,itscommittees,thechairandindividualdirectorsandthatthechairshouldconsiderhavingaregularexternallyfacilitatedboardevaluation.InFTSE350companiesthisshouldhappenatleasteverythreeyears.AnexternallyfacilitatedreviewoftheBoard’seffectivenesstookplacein2018andtheresultswerepublishedinthe2018AnnualReport,withthenextexternallyfacilitatedreviewbeingdueforreportinginthe2021AnnualReport.Forthe2019AnnualReport,theevaluationoftheChairman’sperformancewasundertakenbytheSeniorIndependentDirectorindialoguewiththewholeBoard(otherthantheChairman).Also,inFY2019,theCompanyundertookaninternalBoardeffectivenessreviewwhichwasledbytheChairman,withsupportfromtheCompanySecretaryandGeneralCounsel,andtheresultsofthisaregivenonpage71ofthisreport.

Theremainderofthisreportcontainsthenarrativereportingrequiredbythe2016Code,the2018Code,theListingRulesandtheDisclosureGuidanceandTransparencyRules.Ihopethatyoufindthisreporttobeinformativeandhelpfulinrelationtothisimportanttopic.

Wearecommittedtomaintaininganactivedialoguewithallourshareholders,andwecontinuetoofferourinstitutionalinvestorsaccesstokeyseniormanagementandourInvestorRelationsteamviaourInvestorRoadshowprogramme.IwouldliketoencourageshareholderstoattendourAnnualGeneralMeeting,detailsofwhicharesetoutintheseparateNoticeofAGMsentoutwiththisAnnualReport.

WehavebeenpleasedwiththesuccessofourRetailSupportCentreinBirminghamasanAGMvenue,intermsofitssuitability,accessibilitytoshareholdersfromallpartsofthecountryandalsothecostsaving,andwethereforeintendtocontinuetouseitforthismeeting.Ilookforwardtowelcomingyouthereatour2020AGM,whereIhopeyouwilltaketheopportunityofmeetingallourBoardDirectors,butinparticularournewlyappointedDirectors,whowillbemeetingyouforthefirsttime.

Ilookforwardtotheyearahead,confidentintheknowledgethattheCompanyisledbyahighlycompetent,professionalandmotivatedteam.Ialsolookforwardtothesupportofyou,ourshareholders,asourseniormanagementteamcontinuestofocusondrivingfutureprofitgrowthandcreatingadditionalshareholdervalue.

BOB IVELLChairmanMitchells&Butlersplc

Atthe2019yearend,theCompanyhadmorethan46,000employeesandoneofthekeyrolesfortheBoardofDirectorsatMitchells&Butlersistoprovideleadershipforthemandmaintainthehighestpossiblestandardsofcorporategovernance.

Oneofthekeychangesfromlastyear’sreporthasbeenthedetailedconsiderationofthe2018UKCorporateGovernanceCode(the‘2018Code’),publishedinJuly2018.Thisappliestoaccountingperiodsbeginningonorafter1January2019andsotheCompanyisnotrequiredtoreportunderituntilFY2020.Nevertheless,intheinterestsofgoodgovernance,theBoardhasdecidedthatitwillreportunderthe2016UKCorporateGovernanceCode(the‘2016Code’)and,totheextenttowhichitisalreadyable,itwillalsoreportunderthe2018CodeforFY2019,whichisearlierthanrequired,whichhastheadvantageofhighlightinganyareasrequiringattentionbeforecompliancebecomesmandatory.

The2018Codeplacesgreateremphasisonrelationshipsbetweencompanies,shareholdersandstakeholders.ItalsopromotestheimportanceofestablishingacorporateculturethatisalignedwiththeCompanypurposeandbusinessstrategy,promotesintegrityandvaluesdiversity.ThishashadasignificanteffectonthestructureofboththeStrategicreportonpages10to49,whichincludestheGroup’sstrategy,progressandperformancefortheyear,andonthecorporategovernancestatementonpages63to71,whichsetsouttheCompany’scomplianceagainstpublishedgovernancerequirements.

DuringtheyeartheBoardasawholehascontinuedtoworktogethertoimplementtheCompany’sstrategyinacohesiveway.OurbroadrangeofBoardtalentcoversavarietyofprofessionalskillsandourdiversegroupofNon-ExecutiveDirectorscontinuetobringmuchexperienceandchallengetotheBoard.On31December2018,ourformerSeniorIndependentDirector,StewartGilliland,steppeddownfromtheBoardinordertoconcentrateon

Dear fellow shareholderIt gives me great pleasure to update you on our progress in corporate governance over the past year.

FOR THE COMPANY’S LATEST FINANCIAL INFORMATION goto:www.mbplc.com/investors


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BOB IVELL NON-EXECUTIVECHAIRMANR,N,M,C

AppointedtotheBoardinMay2011,Bobhasover40yearsofextensivefoodandbeverageexperiencewithaparticularfocusonfood-led,managedrestaurants,pubsandhotels.HeiscurrentlyNon-ExecutiveChairmanofCarpetrightplc,aNon-ExecutiveDirectorofCharlesWellsLimitedandaUKBoardmemberofUKHospitality.HewaspreviouslySeniorIndependentDirectorofAGARangemasterGroupplcandBritvicplc,andamainBoardDirectorofS&NplcasChairmanandManagingDirectorofitsScottish&Newcastleretaildivision.HehasalsobeenChairmanofRegentInns,ParkResortsandDavidLloydLeisureLimited,andwasManagingDirectorofBeefeaterRestaurants,oneofWhitbread’spubrestaurantbrands,andaDirectorofTheRestaurantGroup.BobisChairoftheNominationCommittee,thePensionsCommittee,theMarketDisclosureCommitteeandtheCorporateResponsibilityCommittee.

PHIL URBANCHIEFEXECUTIVEM,E

PhiljoinedMitchells&ButlersinJanuary2015asChiefOperatingOfficerandbecameChiefExecutiveinSeptember2015.PhilwaspreviouslyManagingDirectoratGrosvenorCasinos,adivisionofRankGroupandChairmanoftheNationalCasinoForum.Priortothat,hewasManagingDirectorforWhitbread’sPubRestaurantdivision,andforScottish&NewcastleRetail’sRestaurantsandAccommodationDivision.PhilhasanMBAandisaqualifiedmanagementaccountant(CIMA).

TIM JONESCHIEFFINANCIALOFFICER M,E

TimwasappointedChiefFinancialOfficerinOctober2010.PriortojoiningtheCompany,heheldthepositionofGroupFinanceDirectorforInterserveplc,asupportservicesgroup.Previously,hewasDirectorofFinancialOperationsatNovarplcandheldseniorfinancialrolesbothintheUKandoverseasinthelogisticscompany,Exelplc.TimisamemberoftheInstituteofCharteredAccountantsinEnglandandWalesandobtainedanMAinEconomicsatCambridgeUniversity.

KEY TO COMMITTEE MEMBERSHIPAAuditCommitteeR RemunerationCommitteeNNominationCommitteeMMarketDisclosureCommitteeE ExecutiveCommitteeC CorporateResponsibilityCommittee


BOARD OF DIRECTORS

KEITH BROWNENON-EXECUTIVEDIRECTOR

AppointedasaNon-ExecutiveDirectorinSeptember2016,KeithisanominatedshareholderrepresentativeofElpidaGroupLimited,asignificantshareholderinMitchells&Butlers.Heisanon-executivedirectorofGroveLimited,theholdingcompanyofBarchesterHealthcareLimited.KeithobtainedaBachelorofCommerceDegreefromUniversityCollegeDublin,qualifiedasacharteredaccountantin1994andsubsequentlygainedanMBAfromUniversityCollegeDublin.AfterjoiningKPMGCorporateFinancein1996,hebecameapartnerinthefirmin2001andHeadofCorporateFinancein2009.HeretiredfromthepartnershiptooperateasanIndependentConsultantin2011.

DAVE COPLININDEPENDENTNON-EXECUTIVEDIRECTOR A,R,N,C

AppointedasanindependentNon-ExecutiveDirectorinFebruary2016,DaveistheCEOandfounderofTheEnvisionersLimitedandwasformerlytheChiefEnvisioningOfficerforMicrosoftLimited,andisanestablishedthoughtleaderontheroleoftechnologyinourpersonalandprofessionallives.Forover25yearshehasworkedacrossarangeofindustriesandcustomermarketplaces,providingstrategicadviceandguidancearoundtheroleandoptimisationoftechnologyinthemodernsocietybothinsideandoutsideoftheworldofwork.Daveisalsoanon-executivedirectorofVianetGroupplc.

EDDIE IRWINNON-EXECUTIVEDIRECTOR A,R,N,C

AppointedasaNon-ExecutiveDirectorinMarch2012,EddieisanominatedshareholderrepresentativeofElpidaGroupLimited,asignificantshareholderinMitchells&Butlers.EddieisFinanceDirectorofCoolmore,aleadingthoroughbredbloodstockbreederwithoperationsinIreland,theUSAandAustraliaandaNon-ExecutiveDirectorofGroveLimited,theholdingcompanyofBarchesterHealthcareLimited.HegraduatedfromUniversityCollegeDublinwithaBachelorofCommerceDegreeandheisaFellowofboththeAssociationofCharteredCertifiedAccountantsandtheInstituteofCharteredSecretariesandAdministrators.


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JOSH LEVYNON-EXECUTIVEDIRECTOR R

AppointedaNon-ExecutiveDirectorinNovember2015,JoshisanominatedshareholderrepresentativeofPiedmontInc.,asignificantshareholderinMitchells&Butlers.JoshisChiefExecutiveofUltimateFinanceGroup,ChairmanofAvenueInsuranceandaDirectorofTavistockGroup.JoshpreviouslyworkedintheInvestmentBankingDivisionofInvestecBankandholdsanMScandaBA(Hons)fromtheUniversityofNottingham.

SUSAN MURRAYSENIORINDEPENDENTDIRECTOR A,R,N,C

AppointedasSeniorIndependentDirectorinMarch2019,SusanhasservedontheboardsofCompassGroupPLC,PernodRicardSA,ImperialBrandsPLCandEIGroupplcandisaformerCouncilMemberoftheAdvertisingStandardsAuthority.Sheiscurrentlyanon-executivedirectorofHaysPlcandGraftonGroupPLCandamemberofthesupervisoryboardofWilliamGrant&SonsHoldingsLimited.Inherexecutivecareer,amongstotherroles,SusanwasDirectorofInternationalMarketingofGrandMetropolitan’sIDVbusiness,WorldwidePresidentandChiefExecutiveofSmirnoff’svodkabusinessandsubsequentlyChiefExecutiveofLittlewoods.

RON ROBSONDEPUTYCHAIRMAN A,N,C

AppointedasDeputyChairmaninJuly2011,RonisaNon-ExecutiveDirectorofTottenhamHotspurLimitedandClydeMunroGroupLimited.HewaspreviouslyChiefFinancialOfficerofTamarCapitalPartnersandGroupFinanceDirectorofKenmore,bothpropertyinvestmentandmanagementgroups.From2005to2008hewasGroupFinanceDirectorofTheBelhavenGroupplc,alistedpubretailing,brewinganddrinkdistributiongroup.PriortothatheheldanumberofseniorfinancerolesincludingGroupFinanceDirectorofalistedshippingandlogisticsgroup,andtrainedasaCharteredAccountantwithArthurAndersen.RonisanominatedshareholderrepresentativeofPiedmontInc.


BOARD OF DIRECTORS CONTINUED

COLIN RUTHERFORDINDEPENDENTNON-EXECUTIVEDIRECTOR A,R,N,M,C

AppointedasanindependentNon-ExecutiveDirectorinApril2013,ColiniscurrentlyChairmanofBrookgateLimited.HeisalsoaNon-ExecutiveDirectorofJamesDonaldson&SonsLimited,NewRiverREITplc,EvofemBiosciencesInc.,MeallmoreLimitedandRenaissanceServicesSAOGamongsthisotheractivities.HewasformerlyExecutiveChairmanofMAMFundsplcandEuroSalesFinanceplcandhasservedasaDirectorofvariousotherpublicandprivatecompaniesintheUKandoverseas.ColinisamemberoftheInstituteofCharteredAccountantsofScotlandandhasdirectlyrelevantcorporatefinanceexperienceinboththeleisureandhospitalityindustries.ColinisChairmanoftheAuditCommittee,andservesonallotherindependentgovernancecommittees.

IMELDA WALSHINDEPENDENTNON-EXECUTIVEDIRECTOR A,R,N,C

AppointedasanindependentNon-ExecutiveDirectorinApril2013,ImeldaisaNon-ExecutiveDirector,andChairoftheRemunerationCommitteesofFirstGroupplcandAstonMartinLagondaGlobalHoldingsplc.ShewasaNon-ExecutiveDirector,andsubsequentlyChairoftheRemunerationCommittee,ofWilliamHillplcfrom2011to2018,Mothercareplcfrom2013to2016,andSainsbury’sBankplcfrom2006to2010.ShehasheldseniorExecutiverolesatJSainsburyplc,whereshewasGroupHRDirectorfromMarch2004toJuly2010,BarclaysBankplcandCoca-Cola&SchweppesBeveragesLimited.ImeldaisChairoftheRemunerationCommittee.

JANE MORIARTYINDEPENDENTNON-EXECUTIVEDIRECTOR A,R,N,C

AppointedasanindependentNon-ExecutiveDirectorinFebruary2019,JaneisaFellowoftheInstituteofCharteredAccountantsinIreland,andcurrentlyadirectorofNGBaileyGroupLimited,QuartoGroupInc.,Martin’sInvestmentsLimitedandNyrstarNV.ShewaspreviouslyasenioradvisorypartnerwithKPMGLLP.


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THE BOARD’S RESPONSIBILITIES IN RESPECT OF THE COMPANY INCLUDE:• Determiningtheoverallbusinessand

commercialstrategy• IdentifyingtheCompany’slong-term

objectives• Reviewingtheannualoperatingbudgetand

financialplansandmonitoringperformanceinrelationtothoseplans

• Determiningthebasisoftheallocationofcapital

• ConsideringallpolicymattersrelatingtotheCompany’sactivitiesincludinganymajorchangeofpolicy

TheBoardhasdecided,totheextenttowhichitisalreadyable,toadopttheprovisionsofthe2018UKCorporateGovernanceCode(the‘2018Code’)earlierthanisrequired.FurtherinformationissetoutintheStrategicReportwhichexaminesthe‘purpose’aspectofthenewrequirements,andintheCorporateGovernanceReportwhichdescribesthechangesinthereportingoftheCompany’sapproachtocultureandpracticesundertakenduringFY2019,inreadinessforwhenfullcomplianceisrequiredinFY2020.

FOR THE COMPANY’S LATEST FINANCIAL INFORMATIONgoto:www.mbplc.com/investors

TheDirectorspresenttheirreportontheaffairsoftheGroupandtheauditedfinancialstatementsforthe52weeksended28September2019.TheBusinessreviewoftheCompanyanditssubsidiariesisgivenonpages12to15which,togetherwiththecorporategovernancestatementandAuditCommitteereport,areincorporatedbyreferenceintothisreportand,accordingly,shouldbereadaspartofthisreport.

DetailsoftheGroup’spolicyonaddressingrisksaregivenonpages40to44and70,anddetailsaboutfinancialinstrumentsareshowninnote4.4tothefinancialstatements.ThesesectionsincludeinformationabouttrendsandfactorslikelytoaffectthefuturedevelopmentandperformanceoftheGroup’sbusinesses.TheCompanyundertakesnoobligationtoupdateforward-lookingstatements.

KeyperformanceindicatorsfortheGroup’sbusinessesaresetoutonpages38and39.

TheCompany’sDirectorspaydueregardtotheneedtofostertheCompany’sbusinessrelationshipswithsuppliers,customersandothers.DetailsoftheCompany’sengagementprocesswithvariousstakeholdersanddifferenttiersofsuppliers,togetherwiththeeffectofthatregardontheprincipaldecisionstakenbytheCompanyduringthefinancialyear,issetoutinthesectiondiscussingtheCompany’sbusinessmodelonpages30and31.

Thisreporthasbeenpreparedundercurrentlegislationandguidanceinforceattheyearenddate.Inaddition,thematerialcontainedonpages10to49reflectstheDirectors’understandingoftherequirementtoprovideaStrategicreport.

Thisreporthasbeenpreparedfor,andonlyfor,themembersoftheCompanyasabody,andnootherpersons.TheCompany,itsDirectors,employees,agentsoradvisersdonotacceptorassumeresponsibilitytoanyotherpersontowhomthisdocumentisshownorintowhosehandsitmaycomeorwhobecomesawareofitandanysuchresponsibilityorliabilityisexpresslydisclaimed.

AREAS OF OPERATIONThroughoutFY2019theGrouphadactivitiesin,andoperatedthrough,pubs,barsandrestaurantsintheUnitedKingdomandGermany.AfulllistoftheCompany’ssubsidiariesandtheircountryofoperationisgivenonpage149oftheAnnualReport.

SHARE CAPITAL AND VOTING RIGHTSTheCompany’sissuedordinarysharecapitalasat28September2019comprisedasingleclassofordinarysharesofwhich428,577,760shareswereinissueandlistedontheLondonStockExchange(29September2018428,310,823shares).TherightsandobligationsattachingtotheordinarysharesoftheCompanyarecontainedwithintheCompany’sArticlesofAssociation.

Oftheissuedsharecapital,noshareswereheldintreasuryandtheCompany’semployeesharetrustsheld2,815,781shares.Detailsofmovementsintheissuedsharecapitalcanbefoundinnote4.7tothefinancialstatementsonpage146.

EachsharecarriestherighttoonevoteatgeneralmeetingsoftheCompany.ThenoticeoftheAnnualGeneralMeetingspecifiesdeadlinesforexercisingvotingrightsinrelationtotheresolutionstobeputtotheAnnualGeneralMeeting.

Allissuedsharesarefullypaidupandcarrynoadditionalobligationsorspecialrights.TherearenorestrictionsontransfersofsharesintheCompany,orontheexerciseofvotingrightsattachedtothem,otherthanthosewhichmayfromtimetotimebeapplicableunderexistinglawsandregulationsandundertheArticlesofAssociation.Inaddition,pursuanttotheListingRulesoftheFinancialConductAuthority,DirectorsandcertainofficersandemployeesoftheGrouprequirethepriorapprovaloftheCompanytodealintheordinarysharesoftheCompany.

ParticipantsintheShareIncentivePlan(‘SIP’)maycompleteaFormofInstructionwhichisusedbyEquinitiSharePlanTrusteesLimited,theSIPTrustee,asthebasisforvotingontheirbehalf.

Duringtheyear,shareswithanominalvalueof£22,801wereallottedunderall-employeeschemesaspermittedunderSection549oftheCompaniesAct2006.Nosecuritieswereissuedinconnectionwitharightsissueduringtheyear.

TheCompanyisnotawareofanyagreementsbetweenshareholdersthatrestrictthetransferofsharesorvotingrightsattachedtotheshares.

InterestsoftheDirectorsandtheirimmediatefamiliesintheissuedsharecapitaloftheCompanyasattheyearendareonpage92intheReportonDirectors’remuneration.

DIVIDENDSNoFinalDividendwillbepaidinrespectoftheyearended28September2019(2018nil).NoInterimDividendwaspaidduringtheyear(2018nil).

INTERESTS IN VOTING RIGHTSAsat28September2019,theCompanywasawareofthesignificantholdingsofvotingrights(3%ormore)initssharesshowninTable1below.

Thefollowingchangestookplacebetween29September2019and19November2019:

StandardLifeAberdeenplcnotifiedtheCompanyon30September2019thatitsholdingwas25,157,186shares(5.87%);on2October2019thatitsholdingwas24,046,406shares(5.61%)andon17October2019thatitsholdingwas23,981,445shares(5.60%).

DIRECTORSDetailsoftheDirectorsasat19November2019andtheirbiographiesareshownonpages54to57andintheNoticeofMeeting.TheDirectorsat28September2019andtheirinterestsinsharesareshownonpage92.

StewartGillilandsteppeddownfromtheBoardon31December2018.JaneMoriartyandSusanMurraywereappointedtotheBoardon27February2019and8March2019respectively.TherewerenochangestotheBoardofDirectorssubsequenttotheyearend,uptothedateofthisreport.

Table 1: Interests in voting rights

Shareholder Ordinary shares% of

share capital*

PiedmontInc. 116,234,517 27.12 DirectholdingElpidaGroupLimited 100,840,659 23.53 DirectholdingStandardLifeAberdeenplc 26,178,807 6.11 IndirectholdingSmoothfieldHoldingLimited 19,021,589 4.44 Directholding

* Basedonthetotalvotingrightsfigureasat28September2019of428,577,760shares.


DIRECTORS’ REPORT

TheCompanyisgovernedbyitsArticlesofAssociationandtheCompaniesAct2006andrelatedlegislationinrelationtotheappointmentandremovalofDirectors.ThepowersoftheCompany’sDirectorsaresetoutintheCompany’sArticlesofAssociation.

InaccordancewiththeCompany’sArticlesofAssociation(whichareinlinewiththebestpracticeguidanceoftheUKCorporateGovernanceCode)alltheDirectorswillretireattheAGMandwillofferthemselvesforelectionorre-electionasappropriate.

MAJOR SHAREHOLDER BOARD REPRESENTATIONTheBoardmaintainsexcellentrelationswithitstwomajorshareholders,whoseinvestmentobjectivesarefullyalignedwiththoseoftheGroupandofothershareholders.ThosetwomajorshareholdersmaintainadialogueviatheirrepresentativesontheBoard,allofwhomarecarefultoensurethatthereisnoconflictbetweenthatroleandtheirdutytotheBoardandothershareholders.ThetwolargestshareholdershavebeenverysupportiveoftheBoard’sstrategy,inparticulartherecentIgniteinitiativesandtheircontinuedinvestmentandpresenceontheBoardaddsvalueasweworktowardscommongoals,andinpursuitoftheCompany’spublishedstrategy.

UnderaDeedofAppointmentbetweenPiedmontInc.andtheCompany,PiedmontInc.hastherighttoappointtwoshareholderDirectorstotheBoardwhilstitowns22%ormoreoftheissuedsharecapitaloftheCompany,andtherighttoappointoneshareholderDirectortotheBoardwhilstitownsmorethan16%oftheCompanybutlessthan22%.IntheeventthatPiedmontInc.ownslessthan16%oftheCompanyanysuchshareholderDirectorswouldberequiredtoresignimmediately.

TheCompany’stwolargestshareholders,PiedmontInc.andElpidaGroupLimited,havenominatedrepresentativesontheBoard.Piedmont’sappointmentrightsareformalisedintheDeedofAppointmentreferredtointhisreportbutthereisnoequivalentagreementinplacebetweentheCompanyandElpida.TheElpidarepresentativeswereappointedwiththeapprovaloftheBoardinMarch2012andSeptember2016.TheBoardhascarefullyconsideredwhetheritwouldbeappropriatetoenterintoaformalagreementwithElpidathatissimilartotheexistingagreementbetweentheCompanyandPiedmont.HavingtakenintoaccounttheFinancialReportingCouncil’sreportofAugust2014‘TowardsClear&ConciseReporting’andtheviewsexpressedpreviouslybycertainoftheinvestorrepresentativebodies,theBoardconsidersthatsuchanagreementwouldbemerelyoneofformratherthansubstanceandnotintheinterestsofshareholdersgenerally.Asaresult,theBoarddoesnotproposecurrentlythattheCompanyshouldenterintosuchanagreementwithElpida,andElpidahasnot,todate,soughtsuchanagreement.

DIRECTORS’ INDEMNITYAspermittedbytheArticlesofAssociation,eachoftheDirectorshasthebenefitofanindemnity,whichisaqualifyingthird-partyindemnityasdefinedbySection234oftheCompaniesAct2006.TheindemnitywasinforcethroughoutthetenureofeachDirectorduringthelastfinancialyear,andiscurrentlyinforce.TheCompanyalsopurchasedandmaintainedthroughoutthefinancialyearDirectors’andOfficers’liabilityinsuranceinrespectofitselfanditsDirectors.NoindemnityisprovidedfortheCompany’sauditor.

ARTICLES OF ASSOCIATIONTheArticlesofAssociationmaybeamendedbyspecialresolutionoftheshareholdersoftheCompany.

CONFLICTS OF INTERESTTheCompany’sArticlesofAssociationpermittheBoardtoconsiderand,ifitseesfit,authorisesituationswhereaDirectorhasaninterestthatconflicts,ormaypossiblyconflict,withtheinterestsoftheCompany(‘SituationalConflicts’).TheBoardhasaformalsysteminplaceforDirectorstodeclareSituationalConflictstobeconsideredforauthorisationbythoseDirectorswhohavenointerestinthematterbeingconsidered.IndecidingwhethertoauthoriseaSituationalConflict,thenon-conflictedDirectorsarerequiredtoactinthewaytheyconsiderwouldbemostlikelytopromotethesuccessoftheCompanyforthebenefitofallshareholders,andtheymayimposelimitsorconditionswhengivingauthorisation,orsubsequently,iftheythinkthisisappropriate.TheBoardbelievesthatthesystemsithasinplaceforreportingandconsideringSituationalConflictscontinuetooperateeffectively.

RELATED PARTY TRANSACTIONSInternalcontrolsareinplacetoensurethatanyrelatedpartytransactionsinvolvingDirectorsortheirconnectedpersonsarecarriedoutonanarm’s-lengthbasisandareproperlyrecorded.

CHANGE OF CONTROL PROVISIONSTherearenosignificantagreementswhichcontainprovisionsentitlingotherpartiestosuchagreementstoexerciseterminationorotherrightsintheeventofachangeofcontroloftheCompany.

TherearenoprovisionsintheDirectors’oremployees’serviceagreementsprovidingforcompensationforlossofofficeoremploymentoccurringbecauseofatakeover.

Table 2: Provisions which apply in the event of a takeover or reconstruction

Share plan Provision in the event of a takeover

2013PerformanceRestrictedSharePlan Awardsvestproratatoperformanceandtimeelapsedandlapsesixmonthslater

2013ShortTermDeferredIncentivePlan Bonussharesmaybereleasedorexchangedforsharesinthenewcontrollingcompany

2013SharesavePlan Optionsmaybeexercisedwithinsixmonthsofachangeofcontrol

ShareIncentivePlan Freesharesmaybereleasedorexchangedforsharesinthenewcontrollingcompany

ThetrusteeoftheCompany’sSIPwillinviteparticipantsonwhosebehalfitholdssharestodirectithowtovoteinrespectofthoseshares,and,ifthereisanofferforthesharesorothertransactionwhichwouldleadtoachangeofcontroloftheCompany,participantsmaydirectittoaccepttheofferoragreetothetransaction.ThetrusteeoftheMitchells&ButlersEmployeeBenefitTrustmay,havingconsultedwiththeCompany,voteorabstainfromvotinginrespectofanysharesitholdsoracceptorrejectanofferrelatingtosharesinanywayitseesfit,anditmaytakealloranyofthefollowingmattersintoaccount:thelong-terminterestsofbeneficiaries,thenon-financialinterestsofbeneficiaries,theinterestsofbeneficiariesintheircapacityasemployeesorformeremployees,theinterestsoffuturebeneficiariesandconsiderationsofalocal,moral,ethical,environmentalorsocialnature.

TherulesofcertainoftheCompany’sshareplansincludeprovisionswhichapplyintheeventofatakeoverorreconstruction,assetoutinTable2below.

EMPLOYMENT POLICIES TheGroupemployedanaverageof45,560peopleinFY2019(FY201844,802).Throughitsdiversitypolicy,theCompanyseekstoensurethateveryemployee,withoutexception,istreatedequallyandfairlyandthatallemployeesareawareoftheirresponsibilities.

Ourpoliciesandproceduresfullysupportourdisabledcolleagues.Wetakeactivemeasurestodosovia:

• arobustreasonableadjustmentpolicy;• disability-specificonlineresources(accessible

viatheGroup’sonlinerecruitmentsystem);and• processestoensurecolleaguesarefully

supported.

TheGroupisresponsivetotheneedsofitsemployees.Assuch,shouldanyemployeeoftheGroupbecomedisabledduringtheirtimewithus,wewillactivelyretrainthatemployeeandmakereasonableadjustmentstotheirenvironmentwherepossible,inordertokeeptheemployeewiththeGroup.ItisthepolicyoftheGroupthattherecruitment,training,careerdevelopmentandpromotionofdisabledpersonsshould,asfaraspossible,beidenticaltothatofotheremployees.


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EMPLOYEE ENGAGEMENT Mitchells&Butlersengageswithitsemployeescontinuouslyandinanumberofwaystosuittheirdifferentworkingpatterns.Thisincludes:

• linemanagerbriefings;• communicationsforumsandroadshowsheld

byfunctionsorbrandsacrosstheCompany;• adedicatedintranetfortheRetailSupport

Team;• ‘Mable’,theMitchells&Butlersonline

learningplatform;• emailnewsalerts;• focusgroups;• weeklybulletins–specificallytargetedatretail

housemanagersandmobileworkers;• employeesocialmediagroups;and• amonthlymagazineposter,FrontlineNews,

fortheretailestate.

DetailsofthefinancialandeconomicfactorsaffectingtheperformanceoftheCompanyaresharedwithallemployeesattheappropriatetimeusingthemethodslistedabove.Inaddition,andinordertoalignmorecloselywiththe2018Code,theBoardhasagreedthatDaveCoplinwillactasalinktotheBoardforthegeneralworkforceinordertostrengthenthe‘employeevoice’attheBoard.Thiswillinvolveattendingemployeeforums,focusgroupsandCompanyawardsandprovidingfeedbackonvaluesandbehaviours,employeedevelopmentandupskillingandensuringthatfeedbackislistenedtoandacteduponwhereappropriate.

WeprovideopportunitiesforemployeestogivetheirfeedbacktotheCompanyinanumberofways,fromteamorshiftmeetingsinrestaurants,barsandpubsandengagementsurveysforallemployeestotheMitchells&ButlersBusinessForum.BusinessForumrepresentativescollectquestionsfromemployeesacrosstheCompanyandputthemtomembersoftheExecutiveCommittee.ThequestionsandanswersarepublishedinFrontlineNewsandonline.

EngagementwithMable(Mitchells&Butlers’onlinelearningplatform)hasgrownsignificantlysincelaunchinJuly2017,withover22,300peopleloggingineachmonthtoparticipateinformallearningandsocialdiscussion.Mableisusedtodeliveron-lineinteractivecourses,90%ofwhicharedesignedinhouse,andutilisesgamification,videosandsociallearninggroups.Mableencouragesengagementandproactive,discretionarylearningwithover1.3millioncoursescompletedsincelaunch.

Mitchells&ButlersiskeentoencouragegreateremployeeinvolvementintheGroup’sperformancethroughshareownership.ItoperatestwoHMRCapprovedall-employeeplans,whicharethe2013SharesavePlanandtheShareIncentivePlan(whichincludesPartnershipshares).TheCompanyalsooperatestwootherplansonaselectivebasis,whicharethe2013PerformanceRestrictedSharePlanandthe2013ShortTermDeferredIncentivePlan.FurtherdetailsontheplansaresetoutintheReportonDirectors’remuneration.

Duringtheyear,theCompanyhasremainedwithinitsheadroomlimitsfortheissueofnewsharesforshareplansassetoutintherulesoftheaboveplans.TheCompanyusesanemployeebenefittrusttoacquiresharesinthemarketwhenappropriatetosatisfyshareawardsinordertomanageheadroomundertheplanrules.Atotalof900,000sharesintheCompanywerepurchasedbytheemployeebenefittrustduringFY2019.

RESPONSIBLE ALCOHOL POLICYMitchells&ButlersoperatestheChallenge21policyinallourbusinessesacrossEnglandandWales(andaChallenge25policyinourScottishbusinesses).Thepolicyrequiresthatanyguestattemptingtobuyalcoholwhoappearsundertheageof21(or25inScotland),mustprovideanacceptableformofproofofageIDtoconfirmthattheyareover18,beforetheycanbeserved.Thispolicyformspartofourregulartrainingforouremployeesontheirresponsibilitiesforservingalcohol.

POLITICAL DONATIONSTheCompanymadenopoliticaldonationsduringtheyearandintendstomaintainitspolicyofnotmakingsuchpayments.Itwill,however,asaprecautionarymeasuretoavoidinadvertentbreachofthelaw,seekshareholderauthorityatits2020AGMtomakelimiteddonationsorincurlimitedpoliticalexpenditure,althoughithasnointentionofusingtheauthority.

FUNDING AND LIQUIDITY RISK InordertoensurethattheGroup’slong-termfundingstrategyisalignedwithitsstrategicobjectives,theTreasuryCommitteeregularlyassessesthematurityprofileoftheGroup’sdebt,alongsidetheprevailingfinancialprojectionsandthreeyearplan.ThisenablesittoensurethatfundinglevelsareappropriatetosupporttheGroup’splans.

ThecurrentfundingarrangementsoftheGroupconsistofthesecuritisednotesissuedbyMitchells&ButlersFinanceplc(andassociatedliquidityfacility)and£150mofunsecuredcommittedbankfacilities.Furtherinformationregardingthesearrangementsisincludedinnote4.2tothefinancialstatementsonpage132.Thetermsofthesecuritisationandthebankfacilitiescontainanumberoffinancialandoperationalcovenants.CompliancewiththesecovenantsismonitoredbyGroupTreasury.

TheGrouppreparesarollingdailycashforecastcoveringasixweekperiodandanannualcashforecastbyperiod.TheseforecastsarereviewedandusedtomanagetheinvestmentandborrowingrequirementsoftheGroup.Acombinationofcashpoolingandzerobalancingagreementsisinplacetoensuretheoptimumliquiditypositionismaintained.CommittedfacilitiesoutsideofthesecuritisationaresizedtoensurethattheGroupcanmeetitsmedium-termanticipatedcashflowrequirements.

GOING CONCERN Thefinancialstatementswhichappearonpages98to155havebeenpreparedonagoingconcernbasis.TheDirectorshavereviewedtheGroup’sobjectives,policiesandprocessesformanagingitscapital;itsfinancialriskmanagementobjectives;itsfinancialinstrumentsandhedgingactivities;anditsexposurestocreditriskandliquidityrisk.TheGroup’sfinancingisbasedonsecuritiseddebtandunsecuredbankfacilitiesand,withinthiscontext,arobustreviewhasbeenundertakenofprojectedperformanceagainstallfinancialcovenants.AsaresultofthisreviewtheDirectorshaveareasonableexpectationthattheGrouphasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.Seesection1ofthefinancialstatementsonpage111fortheCompany’sgoingconcernstatement,andpage45fortheCompany’slong-termviabilitystatement.

ANNUAL GENERAL MEETINGThenoticeconveningtheAnnualGeneralMeetingiscontainedinacircularsenttoshareholderswiththisreportandincludesfulldetailsoftheresolutionsproposed.

AUDITORDeloitteLLPhasexpresseditswillingnesstocontinueinofficeasauditoroftheCompanyanditsreappointmentwillbeputtoshareholdersattheAGM.

EVENTS AFTER THE BALANCE SHEET DATE Therearenopost-balancesheeteventstoreport.

DISCLOSURE OF INFORMATION TO AUDITORHavingmadetherequisiteenquiries,sofarastheDirectorsareaware,specificallythosewhoareaDirectoratthedateofapprovaloftheAnnualReport,thereisnorelevantauditinformation(asdefinedbySection418(3)oftheCompaniesAct2006)ofwhichtheCompany’sauditorisunawareandeachDirectorhastakenallstepsthatoughttohavebeentakentomakethemselvesawareofanyrelevantauditinformationandtoestablishthattheCompany’sauditorisawareofthatinformation.

GREENHOUSE GAS (‘GHG’) EMISSIONS STATEMENT TheGroupgeneratesGHGemissionsthroughoutitsestateofbarsandrestaurantsforheating,cooling,lightingandcateringincludingtherefrigerationandpreparationoffoodanddrink.Therearenewdisclosurerequirementsforfinancialyearsstartingafter1April2019andthesewillbeaddressedintheSustainabilityprogrammebeingundertakenbytheCompany.Thedisclosuresbelowrelatetocurrentdisclosurerequirements.

GHGemissionsper£mturnoverwerereducedby14.9%duringthe2018/19taxyearincomparisonto2017/18inresponsetoourcontinuedapproachtostaffengagementonenergyuseandtoseveralprojectsfocusingonenergyreductionacrossourestate.


DIRECTORS’ REPORT CONTINUED

Assessment parameters

Assessment year 2018/19taxyear.Consolidation approach Financialcontrol.Boundary summary Allpubs,barsandrestaurantseitherownedorunderoperationalcontrolduringthe2018/19taxyear

wereincluded.Scope GeneralclassificationsofgreenhousegasemissionsscopesbasedontheGHGprotocoland

ISO14064-1:2006withinthecontextoftheGroup’soperationsareasfollows:

Scope 1–directgreenhousegasemissionsfromsourcesthatareownedorcontrolledbytheGroup,e.g.fuelcombustionofvaryingtypes,occursduringkitchenactivityandtogenerateheatinganddomestichotwatermostcommonlythroughnaturalgridsuppliedgas,butalsosomeLPG(LiquefiedPetroleumGas)andoil.Realfiresfuelledbylogsorcoalarealsousedtosupplementcustomercomfortandenhanceambience.

Scope 2–GHGemissionsfromthegenerationofpurchasedelectricityusedduringkitchenactivityandforlighting,heatingandcooling.

Scope 3–indirectemissionsasaconsequenceoftheactivitiesoftheGroupbutoccurringfromsourcesnotownedorcontrolledbytheGroup.

ThisassessmentfocusesonScope1and2emissionsonly(scope3isoptionalunderthecurrentregulations).

Consistency with the financial statements Scope1and2emissionsarereportedforthe2018/19and2017/18taxyearstoretainconsistencywithreportingofourcarbonemissionsundertheCarbonReductionCommitments(CRC).

Leasedandfranchisedsitesareexcludedastheyareresponsibleforarrangingandpayingfortheirownenergy.

AlexsitesinGermanyareincluded.EmissionsarebasedonUKaverageemissionsmultipliedbythenumberofAlexsites.

Exclusions Scope 1–Vehiclefleetemissionsareexcludedastheyhavebeencalculatedtoaccountfor<1%oftotalemissionswhichfallsbelowthematerialitythreshold.

Scope 1–Fugitiveemissionswithinrefrigerationandcoolingequipmentarenotincludedasdetailedrecordsarenotyetheld.

Outside of scope–Logsare‘outsideofscope’becausetheScope1impactofthesefuelshasbeendeterminedtobeanet‘0’.However,theCO2evalueoflogshasbeencalculatedtobe<1%andwouldbeexcludedinanycaseasthesefallbelowthematerialitythreshold.

Emission factor data source AllcarbonemissionfactorsusedareconsistentwithdetailsprovidedintherespectiveCarbonReductionCommitmentsubmissions.

Assessment methodology DefraEnvironmentalGuidelines2013.Materiality threshold Allemissiontypesestimatedtocontribute>1%oftotalemissionsareincluded.Intensity threshold EmissionsarestatedintonnesCO2eper£mrevenue.Thisintensityratioputsemissionsintocontext

giventhescaleoftheGroup’sactivitiesandenablescomparisonwithprioryearperformance.Target Emissionsduringthe2017/18taxyearareprovidedforcomparativepurposes.

Itshouldbenotedthatthe2017/18emissionshavebeenre-calculatedwithelectricitytransmissionanddistributionlossesremovedasthesearenowclassedasScope3emissions.

2017/18 2018/19 Change from previous year

Greenhouse gas emissions source (tCO2e) (tCO2e/£m) (tCO2e) (tCO2e/£m) (tCO2e) (tCO2e/£m)% movement in tCO2e/£m

Scope1 90,021 41.2 84,388 38.8 -5,633 -2.4 -5.8%Scope2 149,721 68.5 118,696 54.6 -31,025 -13.9 -20.3%Statutory total (Scope 1 & 2)* 239,742 109.7 203,084 93.4 -36,658 -16.3 -14.9%

* StatutorycarbonreportingdisclosuresrequiredbyCompaniesAct2006.

MODERN SLAVERY ACT 2015InaccordancewiththerequirementsoftheModernSlaveryAct,theBoardhasapprovedandtheCompanyhasaccordinglypublisheditscompliancestatementonitswebsite.Thiscanbeaccessedatwww.mbplc.com

ByorderoftheBoard

GREG McMAHONCompanySecretaryandGeneralCounsel19November2019


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The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

CompanylawrequirestheDirectorstopreparesuchfinancialstatementsforeachfinancialyear.UnderthatlawtheDirectorsarerequiredtopreparetheGroupfinancialstatementsinaccordancewithInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnionandArticle4oftheIASRegulationandhavealsochosentopreparetheparentcompanyfinancialstatementsinaccordancewithFinancialReportingStandard101‘ReducedDisclosureFramework‘.UndercompanylawtheDirectorsmustnotapprovethefinancialstatementsunlesstheyaresatisfiedthattheygiveatrueandfairviewofthestateofaffairsoftheCompanyandoftheprofitorlossoftheCompanyforthatperiod.

Inpreparingtheparentcompanyfinancialstatements,theDirectorsarerequiredto:

• selectsuitableaccountingpoliciesandthenapplythemconsistently;

• makejudgementsandaccountingestimatesthatarereasonableandprudent;

• statewhetherFinancialReportingStandard101ReducedDisclosureFrameworkhasbeenfollowed,subjecttoanymaterialdeparturesdisclosedandexplainedinthefinancialstatements;and

• preparethefinancialstatementsonthegoingconcernbasisunlessitisinappropriatetopresumethattheCompanywillcontinueinbusiness.

InpreparingtheGroupfinancialstatements,InternationalAccountingStandard1requiresthatDirectors:

• properlyselectandapplyaccountingpolicies;• presentinformation,includingaccounting

policies,inamannerthatprovidesrelevant,reliable,comparableandunderstandableinformation;

• provideadditionaldisclosureswhencompliancewiththespecificrequirementsinIFRSsisinsufficienttoenableuserstounderstandtheimpactofparticulartransactions,othereventsandconditionsontheentity’sfinancialpositionandfinancialperformance;and

• makeanassessmentoftheCompany’sabilitytocontinueasagoingconcern.

TheDirectorsareresponsibleforkeepingadequateaccountingrecordsthataresufficienttoshowandexplaintheCompany’stransactionsanddisclosewithreasonableaccuracyatanytimethefinancialpositionoftheCompanyandenablethemtoensurethatthefinancialstatementscomplywiththeCompaniesAct2006.TheyarealsoresponsibleforsafeguardingtheassetsoftheCompanyandhencefortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities.

TheDirectorsareresponsibleforthemaintenanceandintegrityofthecorporateandfinancialinformationincludedontheCompany’swebsite.LegislationintheUnitedKingdomgoverningthepreparationanddisseminationoffinancialstatementsmaydifferfromlegislationinotherjurisdictions.

Weconfirmthattothebestofourknowledge:

• thefinancialstatements,preparedinaccordancewiththerelevantfinancialreportingframework,giveatrueandfairviewoftheassets,liabilities,financialpositionandprofitorlossoftheCompanyandtheundertakingsincludedintheconsolidationtakenasawhole;

• theStrategicreportincludesafairreviewofthedevelopmentandperformanceofthebusinessandthepositionoftheCompanyandtheundertakingsincludedintheconsolidationtakenasawhole,togetherwithadescriptionoftheprincipalrisksanduncertaintiesthattheyface;and

• theAnnualReportandfinancialstatements,takenasawhole,arefair,balancedandunderstandableandprovidetheinformationnecessaryforshareholderstoassesstheCompany’spositionandperformance,businessmodelandstrategy.

ThisresponsibilitystatementwasapprovedbytheBoardofDirectorson19November2019andissignedonitsbehalfby:

TIM JONES ChiefFinancialOfficer19November2019


DIRECTORS’ RESPONSIBILITIES STATEMENT

This corporate governance statement sets out our report to shareholders on the status of our corporate governance arrangements. BOB IVELLChairman

TheBoardisresponsibleforensuringthattheactivitiesoftheMitchells&ButlersGroupanditsvariousbusinessesareconductedincompliancewiththelaw,regulatoryrequirementsandrules,goodpractices,ethicallyandwithappropriateandpropergovernanceandstandards.Thisincludesreviewinginternalcontrols,ensuringthatthereisanappropriatebalanceofskillsandexperiencerepresentedontheBoardandcompliancewiththeapplicableUKCorporateGovernanceCode,whichisissuedbytheFinancialReportingCouncilandwhichisavailableatwww.frc.org.uk,andformaintainingappropriaterelationswithshareholders.

ThelatestfinancialinformationforMitchells&Butlersanditsgroupofcompaniesisincludedinthe2019AnnualReportandAccounts(ofwhichthiscorporategovernancestatementformspart)andwhichisavailableonlineat:www.mbplc.com/investors

ForFY2018,theCompanyreportedagainstthe2016editionoftheUKCorporateGovernanceCode(the‘2016Code’).ArevisedversionwaspublishedinJuly2018(the‘2018Code’),whichbecameeffectiveforaccountingperiodsbeginningonorafter1January2019.Thekeychangesbetweenthe2016and2018versionsare:

1. Enhancedboardengagementwiththeworkforceandwiderstakeholders,includingdescribinghowtheCompanycomplieswithitsobligationstotakeintoaccountstakeholderviewspursuanttos.172CompaniesAct2006;

2.Demonstrationofaclearbusinessstrategyalignedwithahealthycorporatecompanyculture;

3. Ahigh-qualityanddiverseboardcomposition;and

4.Proportionateexecutiveremunerationthatsupportsthelong-termsuccessofthebusiness.

Mitchells&Butlersiscurrentlyrequiredtoreportagainstthe2016Codeanddoesnotneedtoreportagainstthe2018CodeuntilFY2020.Nevertheless,weareawareoftherecommendationsofthe2018Codeand,giventhatitisahighergovernancestandardthanthe

2016Code,totheextentappropriatewewillbereportinginlinewith,orexercisethe‘complyorexplainprinciple’inrelationto,the2018Codeaswellasreportinginaccordancewiththe2016Code.

InviewoftheimportanceattachedbytheBoardtomovingtowardscompliancewiththe2018Code,theBoardestablishedaCorporateResponsibilityCommitteeinJune2019.ThepurposeofthisnewCommitteeistoallowmoreexecutive,leadershipandfunctionalmanagementinvolvement,therebydemonstratingasignificantcommitmenttotheenhancementofgovernanceingeneralandmatterssuchasstakeholderengagementandisthereforeseenasapositivedevelopment.MoredetailsofthisCommitteeanditsmembershiparesetoutonpage69anditsTermsofReferenceareontheCompany’swebsitewww.mbplc.com

PROGRESS TOWARDS ALIGNMENT TO THE 2018 CODE IN FY 2019Inpursuanceofgreateralignmentwiththe2018Code,thefollowingoperationalandadministrativechangesweremade,orexistingprocedureswerereinforced,duringFY2019:

1. Enhanced Board engagement with the workforce and wider stakeholdersThe2018CoderecommendsthattheBoardshouldconsiderwiderstakeholderviews,inparticularimplementingarrangementsforgatheringtheviewsoftheworkforce.The2018Codepermitsadesignatednon-executivedirectortofillthisroleand,accordingly,duringFY2019theBoarddesignatedDaveCoplinforthisrole.Thepurposeofthisappointmentunderthe2018Codeistogatheremployeeviews,ensureemployeeviewsaretakenintoaccountinBoarddiscussionsanddecision-making,andengagewiththeworkforcetoexplainhowexecutiveremunerationalignswithCompanyremunerationpolicy.Workhascommencedonthis,withDaveCoplinbeingintroducedtothoseexecutivemanagerswhocanhelpensurethatmeetingsandsitevisitsareeffective.


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CORPORATE GOVERNANCE STATEMENT

Mitchells&ButlersalreadyhasanEmployeeForumwithelectedrepresentativeswhichmeetswiththeExecutiveDirectorsandmembersoftheExecutiveCommitteeannually.QuestionsfromtheworkforceingeneralaresoughtthroughtheintranettoseekareasofconcernorenquiryandtoenabletheCompanytorespond.ThishasbeenexpandedbyholdingtwoEmployeeForummeetingsayearandtheEmployeeForumagendaincludesanoverviewofhowexecutivepayisalignedwiththeCompany’sstrategicobjectives.DuringFY2019theTermsofReferenceoftheEmployeeForumwereupdatedtoreflectthis.

TheresultsofregularBoardroadshowsareusedtoupdatemanagersonperformanceandthelatestdevelopments,andemployeefeedbackisincludedinBoardpaperswhereappropriateaspartofthedecision-makingprocess.

2. A clear business strategy aligned with a healthy corporate company cultureInJuly2018theFinancialReportingCouncilpublished‘GuidanceontheStrategicReport’,strengtheningthelinkbetweenthepurposeoftheStrategicReportandtheDirectors’dutyundersection172CompaniesAct2006,topromotethesuccessoftheCompany.TherevisedguidanceencouragescompaniestoconsiderthebroadermattersthatmayimpacttheperformanceoftheCompanyoverthelongertermincludingtheinterestsofwiderstakeholders,anditisnowestablishedMitchells&ButlerspracticethatstrategicproposalsputtotheCompany’sBoardmeetingsincludearequirementtoconsidertheDirectors’dutiesundersection172.

Thespecificprovisionsofsection172requiredirectorstoactinthewaytheyconsider,ingoodfaith,wouldbemostlikelytopromotethesuccessofthecompanyforthebenefitofitsmembersasawholeand,indoingso,haveregardtotheinterestsofotherstakeholders.Thespecificrequirementsofsection172arethatBoardsshouldconsider:

• thelikelyconsequencesofdecisionsinthelongterm;

• theinterestsoftheCompany’semployees;• thefosteringofbusinessrelationshipswith

suppliers,customersandothers;• theimpactoftheCompany’soperationsonthe

communityandtheenvironment;• themaintenanceofhighstandardsofbusiness

conduct;and• thefairnessofactionsasbetweenmembers

oftheCompany.

The2018CodenowspecificallyrequiresthattheBoardshouldunderstandtheviewsoftheCompany’skeystakeholders(includingemployees,suppliers,customersandothers)andkeepstakeholderengagementmechanismsunderreviewsotheyremaineffective.The2018CodealsorecommendsthatthereshouldberegularreportingastohowtheBoardhascompliedwiththisengagementapproachinitsdecision-making

processes.The2018CodesetsoutaseriesofaspectstobetakenintoaccountindemonstratingtheBoardhascompliedwithitssection172responsibilities.Thesearelistedbelow,togetherwithCompanyprocedureswhichwereeitheralreadyinplaceornewlyadoptedduringFY2019,toalignMitchells&Butlers’corporatebehaviourwiththespiritandvaluesofthe2018Code:

a. CultureMitchells&ButlersalreadyhasinplaceasetofPRIDEvaluesofPassion,Respect,Innovation,DriveandEngagementwhichunderpinitskeyprioritiesofPeople,Practices,ProfitsandGuests.TheBoardobservesthesePRIDEvaluesindischargingitseverydayresponsibilitiesandconsideringdecisionsandproposalsandencouragesalllevelsoftheorganisationtodoso.

b. StrategyIndemonstratingthattheBoardispromotingthesuccessoftheCompanyandtakingdecisionswithregardtotheirlong-termimpact,theBoardmustensureithas,andregularlyreviews,itsstrategy.Developmentsarisingfromthestrategyreviewarefollowedup,documentedand,onaregularbasis,theBoardreviewswhethertheCompanyisoperatinginlinewiththatstrategyand/orthereneedstobearevisionofthestrategytoreflectexternalandpossiblyinternalchangesinthedynamicsofthebusiness.Boardpapersrefertowhethertheyreflectaproposalthatisalignedto,ordivergesfrom,theagreedstrategy.

PrincipleBandProvisions1and2ofthe2018CoderequiretheBoardto:

• describehowopportunitiesandriskstothefuturesuccessofthebusinesshavebeenconsideredandaddressed,thesustainabilityofthecompany’sbusinessmodelandhowitsgovernancecontributestothedeliveryofitsstrategy;

• establishthecompany’spurpose,valuesandstrategy,ensurethattheseanditsculturearealignedanddescribetheactivitiestheBoardtakestomonitorandimplementthisculture;and

• describethecompany’sapproachtoinvestinginandrewardingitsworkforce.

DetailsofhowtheBoardachievesthisaregivenintheStrategicreportonpages10to49.

c. Training and awarenessThereisaninductionprocessforallDirectorsonappointmentandtheCompanySecretaryisavailabletoallDirectors,whetheroftheCompanyoranyofthesubsidiaries,forconsultationandguidanceonmattersofgovernanceinrelationtoanyaspectsoftheaffairsofanypartoftheGroup.Ascircumstancesornewareasdevelop,whetherintheoperationsofthebusinessorexternally,appropriatetrainingwillbeconsideredtoensurethateachDirectorcanbesurehe/sheisinvolvedindecisionmakingandoversightwiththebenefitofthecorrectamountofknowledgeastowhatisrelevantforconsideration.

TheinductionprocessensuredthatDirectorswereawareof,andunderstood,therequirementsundersection172.Nevertheless,inApril2019,acomprehensiveguidewassenttoallsubsidiaryDirectorstoprovidetrainingbelowBoardlevelinrelationtosection172requirements,focusingonhowsuchconsiderationsshouldbedocumentedinthefuture,toensureaproperunderstandingofwhatneedstobeconsideredandwhatevidenceisrequiredtobepresentedwhenputtingproposalstotheBoard.Ongoingtrainingontheirresponsibilitiesisalsoprovidedtosubsidiarycompanydirectors.

d. InformationBoardpaperproceduresnowcontainspecificreferencestothefactorsreferredtoinsection172CompaniesAct2006,sotheycanbebroughttotheBoard’sattentionwhereappropriate.

e. Policies and processesThebusinesshasanexistingcomprehensivesuiteofpoliciesandprocessesandtheseareupdated,revisedandre-communicatedregularly.

f. Stakeholder engagementEngagementwiththeworkforceisaddressedaboveandengagementwithguestsisdealtwiththroughtheGuestHealthinitiatives.Engagementwithkey,criticalsuppliersisaddressedthroughthesuppliersegmentationtieringprocesswhereweconsultwithsuppliersonaregularbasiswhichvariesfrommonthlyinteractiontoannualreviews,dependingonwherethesupplierappearsontheCompany’stier1totier4ranking(whichisamulti-factorprocessinvolvingcriticality,volume,spendsizeandavailabilityofsubstituteproducts).

3. Board composition and diversitya. Board compositionFollowingthedecisionofStewartGillilandtostepdownfromtheBoardon31December2018,theBoardappointedtwonewindependentNon-ExecutiveDirectors,JaneMoriartyandSusanMurray,whichenhancedboththeindependenceanddiversityoftheBoard.Immediatelyonappointment,SusanMurraybecamethenewSeniorIndependentDirector,apostwhichhadbeentemporarilyvacantfollowingStewartGilliland’sdeparture.

b. Board diversityPrincipleJofthe2018CodestatesthatBoardsareencouragedto‘promotediversityofgender,socialandethnicbackgrounds,cognitiveandpersonalstrengths’throughtheirappointmentsandsuccessionplanning.ThepurposeistoensurethatthereisabalanceofviewsfromdifferentgendersandotherexperiencesandskillsetsaroundtheBoardtablesothatdecision-makingcanbemadewithgoodoversightofallrelevantfactors.


CORPORATE GOVERNANCE STATEMENT CONTINUED

TheCompanyalreadyhadaBoardDiversityPolicyinplace,butduringFY2019itwasalsoagreedthattalentpipelinepresentationstotheBoardshouldincludetheextenttowhichdiversityaspectshavebeentakenintoaccountindevelopmentplans/recruitment,andthatethnicityanddisabilityreportingshouldbeaddressed,totheextentthattheCompanyhasreliabledata.

InpursuanceofamorebalancedBoard,JaneMoriartyandSusanMurraywereappointedinFY2019.Itisfeltthatnotonlywilltheirappointmentcreateamorediversegenderprofile,butthattheirbroaderexperienceoutsidethespecificcharacteristicsofthebusinessoftheCompanyandtheindustrywillstrengthenthebalanceandbreadthoftheBoard’sdecision-making.

GenderPayGapdataisalreadyoverseenbytheRemunerationCommitteeanddetailsaresetoutonpage82oftheAnnualreportonremuneration.

4. Proportionate executive remunerationThisisdealtwithonpages82and94oftheAnnualreportonremuneration.

CORPORATE GOVERNANCETheBoardiscommittedtohighstandardsofcorporategovernance.IamdelightedtobeabletoreportthattheBoardconsidersthattheCompanyhascompliedthroughouttheyearended28September2019withalltheProvisionsandbestpracticeguidanceofthe2016Codeandthe2018CodeexceptthoseinrespectofBoardcompositionandtheconstitutionofBoardCommittees.Thiscorporategovernancestatementaddressesthesmallnumberofareaswhere,forreasonsspecifictoMitchells&Butlers,therearedivergencesfromthe2016Codeand2018Codeasdescribedbelow.

TheAuditCommitteereportandNominationCommitteereportwhicharesetoutonpages72to75andpage68respectivelyoftheAnnualReportalsoformpartofthiscorporategovernancestatementandtheyshouldallbeconsideredtogether.

TheBoardrecognisestheimportanceofgoodcorporategovernanceincreatingasustainable,successfulandprofitablebusinessanddetailsaresetoutinthisstatementoftheCompany’scorporategovernanceproceduresandapplicationoftheprinciplesofthe2016Codeandthe2018Code.Thereare,however,asmallnumberofareaswhere,forreasonsspecificallyrelatedtotheCompany,thedetailedProvisionsofthe2016Codeandthe2018CodewerenotfullycompliedwithinFY2019.Theseareasarekeptunderregularreview.Afundamentalaspectofboththe2016Codeandthe2018Codeisthatineachcaseitcontainsbestpracticerecommendationsinrelationtocorporategovernanceyetacknowledgesthat,inindividualcases,thesewillnotallnecessarilybeappropriateforparticularcompanies.Accordingly,boththe2016Codeandthe2018Codespecificallyrecognisetheconceptof‘ComplyorExplain’inrelationtodivergencesfromit.

COMPLIANCE WITH THE CODE Exceptforthematterswhichareexplainedbelow(inlinewiththe‘ComplyorExplain’concept),theCompanycompliedfullywiththePrinciplesandProvisionsofthe2016Codeandthe2018Codethroughoutthefinancialyearinrespectofwhichthisstatementisprepared(andcontinuestodosoasatthedateofthisstatement).

EXPLANATION FOR NON-COMPLIANCE WITH PARTS OF THE 2016 CODE AND THE 2018 CODEDuringtheyear,thereweresixdivergencesfromfullcompliancewiththe2016Codeandthe2018CodeassetoutbelowbyreferencetospecificparagraphsintherelevantUKCorporateGovernanceCode.Exceptinrelationto2018CodeProvision19,thereissimilarbestpracticeguidanceontheseissuesinbothcodes.

1. Chairman’s tenure (2018 Code Provision 19)BobIvellwasappointedtotheBoardofMitchells&ButlersinMay2011.TheperformanceofBobIvellhasbeensubjecttorigorousreview,includingwithregardtohisindependence.TheDirectorsbelievethatBobIvell’sin-depthknowledgeofthebusinessandindustry,combinedwiththeconsistencyheprovidesthroughcontinuedserviceandhisgoodworkingrelationshipsacrosstheBoardandwithmanagementoftheCompany,remainsinvaluable;andthatitisinthebestinterestsofallshareholdersandotherstakeholders,thattheCompanyasawholecontinuestobenefitfromBob’sexperience.BobIvellcontinuestodemonstratetheattributesofanindependentNon-ExecutiveDirector,includingcontributingtoconstructivechallengeanddebateatmeetingsandtheBoardissatisfiedthatBob’stenurehasnotimpactedhisindependence.Inreachingthisconclusion,Bob’sothercurrentappointmentshavebeentakenintoconsideration.

Inlightofthis,Mitchells&Butlersexpectstoexplainitspositionwithregardto2018CodeProvision19onChairtenure,ratherthantocomplywithit,initsAnnualReport2020,whenreportingagainstthe2018Codecomesintoeffect.

2. Senior Independent Director (2016 Code Provision A.4.1 and 2018 Code Provision 12)FollowingthedepartureofStewartGillilandon31December2018,therewasnonominatedSeniorIndependentDirectorfromthattimeuntiltheappointmentofSusanMurrayassuchon8March2019.ThisaroseduetotheBoardsearchingtorecruitasuitablereplacementforthatroleintheinterveningperiod.TheBoardwasawarethatinthemeantimethisledtoaperiodofnon-compliance,butacceptedthatitwasinevitablewhiletherecruitmentprocesswasunderwayandwouldlastonlyuntilthenewappointmentwasmade.SusanMurraywastheSeniorIndependentDirectorattheyearendof28September2019andremainsso.

3. Composition of the Board (2016 Code Provision B.1.2 and 2018 Code Provision 11)Duringtheyear,2016CodeProvisionB.1.2and2018CodeProvision11,whichrequirethatatleasthalftheboard,excludingthechair,shouldbenon-executivedirectorswhomtheboardconsiderstobeindependent,werenotcompliedwith.Accordingly,thishadconsequentialimplicationsonthecompositionoftheAudit,NominationandRemunerationCommittees.

DuringFY2019,StewartGillilandresignedfromtheBoardon31December2018,andJaneMoriartyandSusanMurraywereappointedtotheBoardon27February2019and8March2019respectively.InaccordancewiththedisclosurerequirementsofProvisionB.2.4ofthe2016CodeandProvision20ofthe2018Code,theCompanyconfirmsthattheservicesofSpencerStuartwereengagedforbothappointments,andthatthereisnootherconnectionbetweenSpencerStuartandtheCompany,oritsBoard,oranyofitsDirectors.

TheBoarddoesnotcomplyfullywiththerequirementforatleasthalfofitsmemberstobeindependent,duetothepresenceoffourshareholderrepresentativesontheBoard,representingourtwolargestshareholders.ThesetwoshareholdersmaintainadialogueviatheirrepresentativesontheBoard,allofwhomarecarefultoensurethatthereisnoconflictbetweenthatroleandtheirdutytotheBoardandothershareholders.

ThetwoshareholdersconcernedhavemadeextremelysignificantinvestmentsintheCompanyandtheBoardconsiderstheirinvestmentobjectivestobefullyalignedwiththoseoftheGroupandofothershareholders.TheBoardmaintainsexcellentrelationswithitsmajorshareholdersandconsiderstheircommitmenttobeasignificantfactorintheongoingstabilityoftheBoard,particularlyasaresultoftheirstrongsupportoftheBoard’slong-termstrategy,includingtherecentIgniteinitiatives.TheircontinuedinvestmentandpresenceontheBoardaddsvalueastheGroupworkstowardscommongoals,andinpursuitoftheCompany’spublishedstrategy.

TheBoardintendstocontinuetoworkcloselywiththerepresentativesofitsmajorshareholderstofurthertheinterestsoftheCompanyandnochangeisproposedtotheshareholderrepresentativeprofileoftheBoardintheimmediatefuture.


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4. Constitution of CommitteesThroughoutFY2019,theCompanyhad(andcontinuestohave)fullyfunctioningNomination,AuditandRemunerationCommitteesasrequiredbythe2016Codeandthe2018Code.

(i) Nomination Committee (2016 Code Provision B.2.1 and 2018 Code Provision 17)TheNominationCommitteewasnotfullycompliantwiththe2016Codeand2018CodeinFY2019,inthatitdidnotcontainamajorityofindependentNon-ExecutiveDirectorsasrequiredby2016CodeProvisionB.2.1and2018CodeProvision17.Thisoccurredforashortperiodonly,whichstartedintheperiodfollowingtheresignationofStewartGillilandandceasedfollowingtheappointmentofadditionalindependentNon-ExecutiveDirectors.Attheyearendof28September2019,theNominationCommitteewasfullycompliantwith2016CodeProvisionB.2.1and2018CodeProvision17.

(ii) Audit Committee (2016 Code Provision C.3.1 and 2018 Code Provision 24); and

(iii) Remuneration Committee (2016 Code Provision D.2.1 and 2018 Code Provision 32)TheAuditandRemunerationCommitteesarenotfullycompliantwiththerelevantProvisionsofthe2016Codeandthe2018Code.2016CodeProvisionsC.3.1andD.2.1and2018CodeProvisions24and32respectivelyspecifythatboththeAuditandRemunerationCommitteesshouldconsistofindependentNon-ExecutiveDirectorsandbothCommitteesincludethepresenceofrepresentativesofmajorshareholders.TheBoardhascarefullyconsideredtheimplicationsofthisandhasconcludedthatitconstitutesavalidexceptionunderthe‘complyorexplain’regimeofthe2016Codeand2018Code,inthatthetwoshareholdersconcernedarecommittedtotheprogressionandgrowthoftheCompany,havemadeasubstantialfinancialcommitmentandarefullysupportiveoftheGroup’sstrategy.TheshareholderrepresentativeshavesignificantcommercialandfinancialexperienceandmakeasubstantialcontributiontotheCommitteesandtheGroupremainsfullycommittedtoworkingwiththemonmattersaffectingtheGroupanditsactivitiesinthefuture.

ThepossibilityofappointingafurtherindependentNon-ExecutiveDirectorremainsamatterfortheNominationCommitteetoreviewandisconsideredregularly.

TheinformationrequiredbyDisclosureGuidanceandTransparencyRule(‘DGTR’)7.1issetoutintheAuditCommitteereportonpages72to75.TheinformationrequiredbyDGTR7.2issetoutinthiscorporategovernancestatement,otherthanthatrequiredunderDGTR7.2.6whichissetoutintheDirectors’reportonpages58to61.

BOARD COMPOSITIONTheBoardstartedtheyearwith11Directorsandendeditwith12.StewartGillilandsteppeddownfromtheBoardon31December2018.JaneMoriartyandSusanMurraywereappointedtotheBoardon27February2019and8March2019respectively.ThetableoppositeliststhecompositionoftheBoardduringtheyear.

THE BOARDTheBoardisresponsibletoallstakeholders,includingitsshareholders,forthestrategicdirection,developmentandcontroloftheGroup.Itapprovesstrategicplansandannualcapitalandrevenuebudgets.ItreviewssignificantinvestmentproposalsandtheperformanceofpastinvestmentsandmaintainsanoverviewandcontroloftheGroup’soperatingandfinancialperformance.ItmonitorstheGroup’soverallsystemofinternalcontrols,governanceandcomplianceandensuresthatthenecessaryfinancial,technicalandhumanresourcesareinplacefortheCompanytomeetitsobjectives.OurwebsiteincludesascheduleofmatterswhichhavebeenreservedforthemainBoard.

DuringFY2019thereweretenscheduledBoardmeetings.TherewerealsofourmeetingsoftheAuditCommittee,fourmeetingsoftheRemunerationCommitteeandtwomeetingsoftheNominationCommittee.ThetablebelowshowsattendancelevelsattheBoardandCommitteemeetingsheldduringtheyear;thenumbersinbracketsconfirmhowmanymeetingseachDirectorwaseligibletoattendduringtheyear.

Exceptasnotedinthetablebelow,fullattendancewasrecordedforallDirectorsinrespectofallBoardandCommitteemeetingsduringFY2019,butwhereDirectorsareunabletoattendameeting(whetheroftheBoardoroneofits

Attendance levels at Board and Committee meetings

BoardAudit

CommitteeRemuneration

CommitteeNomination Committee

Directors who served during the yearBobIvell 10(10) n/a 4(4) 2(2)KeithBrowne 10(10) n/a n/a n/aDaveCoplin 9(10) 4(4) 4(4) 1(2)StewartGilliland1 3(3) 1(1) 2(2) 1(1)EddieIrwin 10(10) 4(4) 4(4) 2(2)TimJones 10(10) n/a n/a n/aJoshLevy 10(10) n/a 4(4) n/aJaneMoriarty2 6(6) 2(2) 2(2) 1(1)SusanMurray3 5(5) 2(2) 2(2) 1(1)RonRobson 9(10) 4(4) n/a 2(2)ColinRutherford 10(10) 4(4) 4(4) 2(2)PhilUrban 10(10) n/a n/a n/aImeldaWalsh 10(10) 4(4) 4(4) 2(2)

1. Resigned31December2018.2. Appointed27February2019.3. Appointed8March2019.DaveCoplinwasunabletoattendtheDecember2018BoardandNominationCommitteemeetingsduetoillness.RonRobsonwasunabletoattendtheJuly2019meetingduetoanunavoidablepriorpersonalcommitment.

Committees),theyareprovidedwithallthepapersandinformationrelatingtothatmeetingandareabletodiscussissuesarisingdirectlywiththeChairmanoftheBoardorChairoftherelevantCommittee.Inaddition,theBoardmembersmeetmoreinformallyapproximatelyfourtimesayearandtheChairmanandtheNon-ExecutiveDirectorsmeetwithouttheExecutiveDirectorstwiceayear.

TherearenineBoardmeetingscurrentlyplannedforFY2020.

TheCompanySecretary’sresponsibilitiesincludeensuringgoodinformationflowstotheBoardandbetweenseniormanagementandtheNon-ExecutiveDirectors.TheCompanySecretaryisresponsible,throughtheChairman,foradvisingtheBoardonallcorporategovernancemattersandforassistingtheDirectorswiththeirprofessionaldevelopment.Thisincludesregularcorporategovernanceandbusinessissuesupdates,aswellastheuseofoperationalsitevisitsandtheprovisionofexternalcourseswhererequired.TheCompanySecretaryfacilitatesacomprehensiveinductionfornewlyappointedDirectors,tailoredtoindividualrequirementsandincludingguidanceontherequirementsof,andDirectors’dutiesinconnectionwith,the2016Code,the2018CodeandtheCompaniesAct2006aswellasotherrelevantlegislation.

AnexternallyfacilitatedBoardevaluationisrequiredeverythreeyearsandthelastonetookplaceinFY2018,withthenextonedueinFY2021.InFY2019,theCompanySecretaryco-ordinatedtheinternalperformanceevaluationoftheBoard,whichwasledbytheChairman,detailsoftheoutputofwhicharesetoutatpage71.TheappointmentandremovaloftheCompanySecretaryisamatterreservedfortheBoard.



DirectorsThefollowingwereDirectorsoftheCompanyduringtheyearended28September2019:

Date appointedDate of

change of role

Directors who served during the yearBobIvell IndependentNon-ExecutiveDirector1 09/05/11 14/07/11

InterimChairman1 14/07/11 26/10/11ExecutiveChairman 26/10/11 12/11/12Non-ExecutiveChairman 12/11/12 –

KeithBrowne2 Non-ExecutiveDirector 22/09/16 –DaveCoplin IndependentNon-ExecutiveDirector 29/02/16 –StewartGilliland3 IndependentNon-ExecutiveDirector 23/05/13 31/12/18

SeniorIndependentDirector 02/02/15 31/12/18EddieIrwin2 Non-ExecutiveDirector 21/03/12 –JoshLevy4 Non-ExecutiveDirector 13/11/15 –TimJones ChiefFinancialOfficer 18/10/10 –JaneMoriarty IndependentNon-ExecutiveDirector 27/02/19 –SusanMurray IndependentNon-ExecutiveDirectorand

SeniorIndependentDirector 08/03/19 –RonRobson4 Non-ExecutiveDirector 22/01/10 –

DeputyChairman 14/07/11 –ColinRutherford IndependentNon-ExecutiveDirector 22/04/13 –PhilUrban ChiefExecutive 27/09/15 –ImeldaWalsh IndependentNon-ExecutiveDirector 22/04/13 –

1. Independentwhileintherolespecified.2. NominatedshareholderrepresentativeofElpidaGroupLimited.3. SteppeddownfromtheBoardon31December2018.4. NominatedshareholderrepresentativeofPiedmontInc.

Atthestartoftheyear,theBoardwasmadeupof10maleandonefemalemembers.DuringtheyearStewartGillilandsteppeddownfromtheBoardon31December2018andJaneMoriartyandSusanMurraywereappointedtotheBoardon27February2019and8March2019respectively.Attheendoftheyear,theBoardwasmadeupofninemaleandthreefemalemembers.

TheExecutiveDirectorshaveservicecontracts,detailsofwhichareontheCompany’swebsitewww.mbplc.com.TheChairmanandeachoftheNon-ExecutiveDirectorshavelettersofappointment.CopiesoftherespectiveservicecontractsorlettersofappointmentofallthemembersoftheBoardareavailableontheCompany’swebsite.Inaddition,theyareavailableforinspectionattheregisteredofficeoftheCompanyduringnormalbusinesshoursandattheplaceoftheAnnualGeneralMeetingfromatleast15minutesbeforeanduntiltheendofthemeeting.

AttheCompany’sforthcomingAnnualGeneralMeetingin2020,theDirectorsappointedduringtheyear(JaneMoriartyandSusanMurray)willberequiredtostandforelectionforthefirsttimeandtheremainingDirectorswillberequiredtostandforannualre-election,inaccordancewiththeCompany’sArticlesofAssociation.Theirbiographicaldetailsasat19November2019aresetoutonpages54to57,includingtheirmaincommitmentsoutsidetheCompany.Inaddition,Provision18ofthe2018Coderequiresthatthepapersaccompanyingtheresolutionstoelectorre-electdirectors,setoutthespecificreasonswhytheindividualdirector’scontributionis,andcontinuestobe,importanttotheCompany’slong-termsustainablesuccessandthisinformationcanbefoundintheaccompanyingNoticeofMeeting.

Provision15ofthe2018Codestatesthatfull-timeexecutivedirectorsshouldnottakeonmorethanonenon-executivedirectorshipinaFTSE100companyorothersignificantappointments.TheExecutiveDirectorsmaybepermittedtoacceptoneexternalNon-ExecutiveDirectorappointmentwiththeBoard’spriorapprovalandaslongasthisisnotlikelytoleadtoconflictsofinterest.DuringFY2019,neitheroftheExecutiveDirectorsheldanysuchexternaldirectorship,nordidtheyholdanyothersignificantappointments,asadirectororotherwise,andthatremainsthecaseasatthedateofthisAnnualReport.

Division of responsibilities between Chairman and Chief ExecutiveInaccordancewithProvisionA.2.1ofthe2016CodeandProvision9ofthe2018Code,therolesofChairmanandChiefExecutiveshouldnotbeexercisedbythesameindividual.

ThedivisionofresponsibilitiesbetweentheChairmanandtheChiefExecutiveisclearlyestablishedasrequiredbyPrincipleA.2ofthe2016CodeandPrincipleGofthe2018CodeandthesearesetoutinwritingandhavebeenagreedbytheBoard.Inparticular,ithasbeenagreedinwritingthattheChairmanshallberesponsibleforrunningtheBoardandshallprovideadviceandassistancetotheChiefExecutive.HealsochairstheNominationCommittee,isamemberoftheRemunerationCommitteeandattends,byinvitation,meetingsoftheAuditCommittee.HealsochairstheMarketDisclosureCommittee,CorporateResponsibilityCommittee,thePropertyCommitteeandthePensionsCommittee.

ItisalsoagreedinwritingthattheChiefExecutivehasresponsibilityforallaspectsoftheGroup’soverallcommercial,operationalandstrategicdevelopment.HechairstheExecutiveCommittee(detailsofwhichappearonpage69)andattendstheNomination,RemunerationandAuditCommitteebyinvitation,notnecessarilyfortheentiretyofsuchmeetingsdependinguponthesubjectmatter.HeisalsoamemberoftheMarketDisclosureCommittee,thePropertyCommitteeandthePensionsCommittee.

AllotherExecutiveDirectors(currentlyjusttheChiefFinancialOfficer)andallothermembersoftheExecutiveCommitteereporttotheChiefExecutive.

ChairmanProvisionA.2.1ofthe2016CodeandProvision9ofthe2018CodeprovidesthattheChairmanshould,onappointment,meettheindependencecriteriasetoutinProvisionB.1.1andProvision10respectively.BobIvellmettheseindependencecriteriaonappointment.

BobIvellwasappointedtotheroleofExecutiveChairmanon26October2011onthedepartureofthethenChiefExecutiveandrevertedtotheroleofNon-ExecutiveChairmanon12November2012.

TheChairmanensuresthatappropriatecommunicationismaintainedwithshareholders.HeensuresthatallDirectorsarefullyinformedofmattersrelevanttotheirroles.

Chief ExecutivePhilUrbanwasappointedChiefExecutiveon27September2015.HehasresponsibilityforimplementingthestrategyagreedbytheBoardandfortheexecutivemanagementoftheGroup.

Senior Independent DirectorTheSeniorIndependentDirector,StewartGilliland,steppeddownfromtheBoardon31December2018inordertoconcentrateonhisotherroles.HewasreplacedbySusanMurray,whobecameSeniorIndependentDirectorimmediatelyuponherappointmenttotheBoardon8March2019.

TheSeniorIndependentDirectorsupportstheChairmaninthedeliveryoftheBoard’sobjectivesandensuresthattheviewsofallmajorshareholdersandstakeholdersareconveyedtotheBoard.SusanMurrayisavailabletoallshareholdersshouldtheyhaveanyconcernsifthenormalchannelsofChairman,ChiefExecutiveorChiefFinancialOfficerhavefailedtoresolvethem,orforwhichsuchcontactisinappropriate.

TheSeniorIndependentDirectoralsomeetswithNon-ExecutiveDirectors,withouttheChairmanpresent,atleastannually,andconductstheannualappraisaloftheChairman’sperformanceandprovidesfeedbacktotheChairmanontheoutputsofthatappraisal.


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Non-Executive Directors TheCompanyhasexperiencedNon-ExecutiveDirectorsonitsBoard.TheBoard’sviewonthetenureofBobIvellasChairmanissetoutonpage65.

RonRobsonandJoshLevywereappointedtotheBoardasrepresentativesofoneoftheCompany’slargestshareholders,PiedmontInc.,andwerethereforenotregardedasindependentinaccordancewiththe2016Codeandthe2018Code.

EddieIrwinandKeithBrownewereappointedtotheBoardasrepresentativesofanotheroftheCompany’slargestshareholders,ElpidaGroupLimited,andwerethereforenotregardedasindependentinaccordancewiththe2016Codeandthe2018Code.

TherearecurrentlyfiveindependentNon-ExecutiveDirectorsontheBoard:ColinRutherford,ImeldaWalsh,DaveCoplin,JaneMoriartyandSusanMurray.

Otherthantheirfees,andreimbursementoftaxableexpenseswhicharedisclosedonpage87,theNon-ExecutiveDirectorsreceivednoremunerationfromtheCompanyduringtheyear.Witheffectfrom1January2020,thebasefeeforNon-ExecutiveDirectorswillremainat£53,000perannum,thefeepaidtoNon-ExecutiveDirectorsforchairingaCommitteeorfortheroleofSeniorIndependentDirectorwillremainat£13,000perannum,andthefeepaidtoDaveCoplinforhisnewroleas‘employeevoice’willremainat£13,000perannum.

WhenNon-ExecutiveDirectorsareconsideredforappointment,theBoardtakesintoaccounttheirotherresponsibilitiesinassessingwhethertheycancommitsufficienttimetotheirprospectivedirectorship.Onaverage,theNon-ExecutiveDirectorsspendtwotothreedayspermonthonCompanybusiness,butthismaybemoredependingonthecircumstancesfromtimetotime.

Board information and trainingAllDirectorsarebriefedbytheuseofcomprehensivepaperscirculatedinadvanceofBoardmeetingsandbypresentationsatthosemeetings,inadditiontoreceivingminutesofpreviousmeetings.TheirunderstandingoftheGroup’sbusinessisenhancedbybusinessspecificpresentationsandoperationalvisitstotheGroup’sbusinesses.Separatestrategymeetingsandmeetingswithseniorexecutivesandrepresentativesofspecificfunctions,brandsorbusinessunitsarealsoheldthroughouttheyear.

ThetrainingneedsofDirectorsareformallyconsideredonanannualbasisandarealsomonitoredthroughouttheyearwithappropriatetrainingbeingprovidedasrequired,includingcorporatesocialresponsibilityandcorporategovernanceaswellastheenvironmentalimpactsoftheCompany’sactivities.

COMMITTEESTheAudit,Remuneration,NominationandCorporateResponsibilityCommitteeshavewrittentermsofreferenceapprovedbytheBoard,whichareavailableontheCompany’swebsite.ThosetermsofreferenceareeachreviewedannuallybytherelevantCommitteetoensuretheyremainappropriate.

Audit CommitteeDetailsoftheAuditCommitteeanditsactivitiesduringtheyearareincludedintheAuditCommitteereportonpages72to75whichisincorporatedbyreferenceintothisstatement.

Remuneration CommitteeDetailsoftheRemunerationCommitteeanditsactivitiesduringtheyearareincludedintheReportonDirectors’remunerationonpages76to97.

Nomination CommitteeTheNominationCommitteeisresponsiblefornominating,fortheapprovaloftheBoard,candidatesforappointmenttotheBoard.ItisalsoresponsibleforsuccessionplanningfortheBoardandtheExecutiveCommitteeandreviewingtheoutputoftheBoardeffectivenessreview.IncompliancewiththedisclosurerequirementsofProvisionB.2.4ofthe2016CodeandProvision23ofthe2018Code,thereisanongoingprocessofreviewofthemake-upoftheBoardandforBoardsuccession,whichiscarriedoutbytheNominationCommitteeandledbytheChairman.TheNominationCommitteeengagesexternalsearchagencieswhenrequiredandensuresthatallcandidatesareidentifiedandassessedagainstpre-determinedcriteria.GenderbalanceisdealtwithbytheNominationCommitteeonaregularbasisandincludesassessmentofgenderbalanceatseniormanagementlevel.

InaccordancewiththedisclosurerequirementinProvision23ofthe2018Code,asatthedateofthisreport,thegenderbalanceforthoseintheseniormanagementteamandtheirdirectreports,wassplitasto51%femaleand49%male.Forthispurpose,theseniormanagementteamcomprisestheExecutiveCommittee.

ThegenderbalanceoftheExecutiveCommittee(whichincludestwoBoardmembers)is80%maleand20%female.FurtherinformationontheExecutiveCommitteeisgivenonpage69.

Duringtheyear,theNominationCommitteeconsideredthecompositionoftheBoardand,followingtheyearend,hasassessedtheoutcomeoftheBoardeffectivenessreviewwhichwascarriedoutduringthefinancialyearnowreportedon.Moredetailsoftheconclusionsofthatreviewareonpage71.TheNominationCommitteeagreestheimportanceofhavingdiversityontheBoard,includingfemalerepresentationandindividualswithdifferentexperiences,skillsetsandexpertise,soastomaintainanappropriatebalancewithintheCompanyandontheBoard.

Diversity and Inclusion Steering Group and Board Diversity PolicyTheCompanyhasaDiversityandInclusionSteeringGroupwhichexaminestheimplementationofdiversitywithintheGroup.

TheBoardhasapprovedaBoardDiversityPolicy.Thekeystatementandobjectivesofthatpolicyareasfollows:

Statement:TheBoardrecognisesthebenefitsofdiversity.Diversityofskills,background,knowledge,internationalandindustryexperience,andgender,amongstmanyotherfactors,willbetakenintoconsiderationwhenseekingtoappointanew

DirectortotheBoard.Notwithstandingtheforegoing,allBoardappointmentswillalwaysbemadeonmerit.

Objectives:• TheBoardshouldensureanappropriatemix

ofskillsandexperiencetoensureanoptimumBoardandefficientstewardship.AllBoardappointmentswillbemadeonmeritwhiletakingintoaccountindividualcompetence,skillsandexpertisemeasuredagainstidentifiedobjectivecriteria(includingconsiderationofdiversity).

• TheBoardshouldensurethatitcomprisesDirectorswhoaresufficientlyexperiencedandindependentofcharacterandjudgement.

• TheNominationCommitteewilldiscussandagreemeasurableobjectivesforachievingdiversityontheBoardwithdueregardbeinggiventotherecommendationssetoutintheDaviesReport,theHampton-AlexanderReview,the2016Codeandthe2018Code.Thesewillbereviewedonanannualbasis.

Progress against the policy:TheBoardcontinuestomonitorprogressagainstthispolicy.IntermsofBoarddiversity,theproportionofwomenontheBoardwas9%asattheyearended29September2018,increasingto25%at28September2019,followingtheresignationofStewartGillilandon31December2018andthesubsequentappointmentofJaneMoriartyandSusanMurrayduringFY2019.Anyfutureappointmentswillalwaysbemadeonmeritandwillcontinuetotakeintoaccountdiversity,notonlyintermsofgender,butalsointermsoftheappropriatemixofskillsandexperience.

DetailsoftheMitchells&ButlersDiversityPolicy,whichappliestodiversityinrelationtoemployeesoftheMitchells&ButlersGroup,canbefoundintheValueCreationStorysectiononpage34.

AdetaileddescriptionofthedutiesoftheNominationCommitteeissetoutwithinitstermsofreferencewhichcanbeviewedatwww.mbplc.com/investors/businessconduct/boardcommittees/

ThefollowingweremembersoftheNominationCommitteeduringtheyear:

Appointment date

Member at 28/09/19

BobIvell(Chair) 11/07/13 YDaveCoplin 29/02/16 YStewartGilliland* 11/07/13 NEddieIrwin 11/07/13 YJaneMoriarty 27/02/19 YSusanMurray 08/03/19 YRonRobson 11/07/13 YColinRutherford 11/07/13 YImeldaWalsh 11/07/13 Y

* SteppeddownfromtheNominationCommitteeon31December2018.

Duringtheyear,theCompanydidnotcomplywith2018CodeProvision17(ortheequivalentProvisionB.2.1ofthe2016Code)astheNominationCommitteedidnotcompriseamajorityofindependentNon-ExecutiveDirectors.



MARKET DISCLOSURE COMMITTEETheEUMarketAbuseRegulation(MAR)whichtookeffectinJuly2016,broughtaboutsubstantialchangesrelatingtoannouncementsofmaterialinformationabouttheCompanyanditsaffairs,andrelatingtodealingsinsharesorothersecuritiesbyDirectorsandotherseniormanagers,includingtightercontrolsonpermitted‘dealings’duringclosedperiodsandthehandlingofinformationrelatingtotheCompany.MARrequirescompaniestokeepalistofpeopleaffectedandthepreviouscomplianceregimeandtimeframewereenhanced.

Asaresult,aformalstandingCommitteeoftheBoardwasestablished,calledtheMarketDisclosureCommittee,whichcomprisestheChairman,theChiefExecutive,theChiefFinancialOfficerandanindependentNon-ExecutiveDirector,currentlyColinRutherford.

CORPORATE RESPONSIBILITY COMMITTEEACorporateResponsibilityCommitteewasestablishedinJune2019anditspurposeistoallowmoreexecutive,leadershipandfunctionalmanagementinvolvementinmattersofcorporateresponsibilityandsustainability.ItsTermsofReferenceareontheCompany’swebsitewww.mbplc.com

TheCorporateResponsibilityCommitteecomprisesBobIvell(Chair),RonRobson,ImeldaWalsh,ColinRutherford,EddieIrwin,SusanMurray,JaneMoriartyandDaveCoplin.ItislikelythattheChiefExecutive,PhilUrban,willbeinvitedtoattendregularly.

FollowingapprovaloftheCommittee’sformation,aworkplanforFY2020wasestablishedwitha‘roadmap’andtargets.Amulti-disciplinarysteeringcommitteehasbeentaskedwithcarryingoutfirstleveloversightoftheplan,withregularreportstotheCorporateResponsibilityCommittee.

EXECUTIVE COMMITTEETheExecutiveCommittee,whichischairedbytheChiefExecutive,consistsoftheExecutiveDirectorsandcertainotherseniorexecutives,namelyGaryJohn(GroupPropertyDirector),SusanMartindale(GroupHRDirector),GregMcMahon(CompanySecretaryandGeneralCounsel),ChrisHopkins(CommercialandMarketingDirector)andSusanChappell,NickCrossley,DavidGallacherandDennisDeare(allDivisionalDirectors).

TheExecutiveCommitteemeetsatleasteverysixweeksandhasday-to-dayresponsibilityfortherunningoftheGroup’sbusiness.ItdevelopstheGroup’sstrategyandannualrevenueandcapitalbudgetsforBoardapproval.ItreviewsandrecommendstotheBoardanysignificantinvestmentproposals.ThisCommitteemonitorsthefinancialandoperationalperformanceoftheGroupandallocatesresourceswithinthebudgetsagreedbytheBoard.Itconsidersemploymentissues,ensurestheGrouphasanappropriatepooloftalentanddevelopsseniormanagementmanpowerplanningandsuccessionplans.Anoteoftheactionsagreedby,andtheprincipaldecisionsof,theExecutiveCommitteearesuppliedtotheBoardforinformationinorderthatBoardmemberscankeepabreastofoperationaldevelopments.

PhilUrbanhasultimateresponsibilityforemploymentrelatedissuesandhealsooverseesmattersrelatingtohumanrightsincludingtheimplementationoftheModernSlaveryActthroughouttheGroup.

GENERAL PURPOSES COMMITTEETheGeneralPurposesCommitteecomprisesanytwoExecutiveDirectorsoranyoneExecutiveDirectortogetherwithaseniorofficerfromanagreedandrestrictedlistofseniorExecutives.ItisalwayschairedbyanExecutiveDirector.Itattendstobusinessofaroutinenatureandtoadministrativematters,theprinciplesofwhichhavebeenagreedpreviouslybytheBoardoranappropriateCommittee.

PROPERTY COMMITTEEThePropertyCommitteereviewspropertytransactionswhichhavebeenreviewedandrecommendedbythePortfolioDevelopmentCommittee,withouttheneedforsubmissionoftransactionstothefullBoard.ThePropertyCommitteeagreestotheoverallstrategicdirectionforthemanagementoftheGroup’spropertyportfolioonaregularbasisandmaydecidethataparticulartransactionshouldbereferredtotheBoardforconsiderationorapproval.ThePropertyCommitteecomprisesBobIvell(CommitteeChair),PhilUrban,TimJones,JoshLevy,KeithBrowne,ColinRutherford,JaneMoriartyandGaryJohn.

PORTFOLIO DEVELOPMENT COMMITTEETheexecutivereviewofpropertytransactionsandcapitalallocationtosignificantpropertymatterssuchassiteremodelandconversionplansandtheCompany’srealestatestrategyiscarriedoutbythePortfolioDevelopmentCommittee.ThisisnotaformalBoardCommitteebutcomprisestheChiefExecutive,theChiefFinancialOfficer,theGroupPropertyDirectorandtheCompanySecretaryandGeneralCounsel.Ithasdelegatedauthoritytoapprovecertaintransactionsuptoagreedfinanciallimitsand,abovethoseauthoritylevels,itmakesrecommendationstotheBoardorthePropertyCommittee.

PENSIONS COMMITTEETheBoardhasestablishedaPensionsCommitteetosuperviseandmanagetheCompany’srelationshipwithitsvariouspensionschemesandtheirtrustees.

ThePensionsCommitteemembersareBobIvell(CommitteeChair),ColinRutherford,ImeldaWalsh,TimJones,PhilUrban,KeithBrowneandJoshLevy.

ThroughoutFY2019,theworkofthePensionsCommitteefocusedprimarilyonthemonitoringoftheperformanceoftheGroup’spensionsarrangements,theassessmentoftheimpactofthedecisionsinrelationtoGuaranteedMinimumPensionsintheLloydsBankingGroupcase,theongoingoversightoftheCompany’sinvolvementintheapplicationtocourtbytheTrusteeoftheMitchells&ButlersPensionPlanforrectificationoftheTrustDeedandRulesofthatplanasreferredtoatnote4.5oftheGroupFinancialStatements,andthefinalisationofthe2019ActuarialValuationsoftheCompany’stwodefinedbenefitpensionschemes,includingtheagreementtothedeficitrecoveryplansforbothschemeswithanunchangedscheduleoffuturecontributions.

TREASURY COMMITTEE ThetreasuryoperationsoftheMitchells&ButlersGroupareoperatedonacentralisedbasisunderthecontroloftheGroupTreasurydepartment.AlthoughnotaformalBoardCommittee,theTreasuryCommittee,whichreportstotheChiefFinancialOfficerbutissubjecttooversightfromtheAuditCommitteeand,ultimately,theBoard,hasday-to-dayresponsibilityfor:

• liquiditymanagement;• investmentofsurpluscash;• funding,cashandbankingarrangements;• interestrateandcurrencyriskmanagement;• guarantees,bonds,indemnitiesandany

financialencumbrancesincludingchargesonassets;and

• relationshipswithbanksandothermarketcounterpartiessuchascreditratingagencies.

TheTreasuryCommitteealsoworkscloselywiththefinancialaccountingdepartmenttoreviewtheimpactofchangesinrelevantaccountingpracticesandtoensurethattreasuryactivitiesaredisclosedappropriatelyintheCompany’saccounts.

TheBoarddelegatesthemonitoringoftreasuryactivityandcompliancetotheTreasuryCommittee.Itisresponsibleformonitoringtheeffectivenessoftreasurypoliciesandmakingproposalsforanychangestopoliciesorinrespectoftheutilisationofnewinstruments.TheapprovaloftheBoard,oradesignatedcommitteethereof,isrequiredforanysuchproposals.

INDEPENDENT ADVICEMembersoftheBoardmaytakeindependentprofessionaladviceinthefurtheranceoftheirdutiesandtheBoardhasagreedaformalprocessforsuchadvicetobemadeavailable.MembersoftheBoardalsohaveaccesstotheadviceandservicesoftheCompanySecretaryandGeneralCounsel,theCompany’slegalandotherprofessionaladvisersanditsexternalauditor.ThetermsofengagementoftheCompany’sexternaladvisersanditsexternalauditorareregularlyreviewedbytheCompanySecretaryandGeneralCounsel.

CODE OF ETHICS TheCompanyhasimplementedbusinessconductguidelinesdescribingthestandardsofbehaviourexpectedfromthoseworkingfortheCompanyintheformofacodeofethics(the‘EthicsCode’).TheEthicsCodewasreviewedandre-communicatedtoallemployeesinFY2019toensureitwaskeptclearlyinfocus.Itsaimistopromotehonestandethicalconductthroughoutourbusiness.TheEthicsCoderequires:

• compliancewithallapplicablerulesandregulationsthatapplytotheCompanyanditsofficersincludingcompliancewiththerequirementsoftheBriberyAct2010;

• theethicalhandlingofactualorapparentconflictsofinterestbetweeninternalandexternal,personalandprofessionalrelationships;and

• thatanyhospitalityfromsuppliersmustbeapprovedinadvancebyappropriateseniormanagement,withapresumptionagainstitsacceptance.


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TheCompanytakesazerotoleranceapproachtobriberyandhasdevelopedanextensiveBriberyPolicywhichisincludedintheEthicsCode.TheEthicsCoderequiresemployeestocomplywiththeBriberyPolicy.

TheCompanyalsooffersanindependentlyadministered,confidentialwhistleblowinghotlineforanyemployeewishingtoreportanyconcernthattheyfeelwouldbeinappropriatetoraisewiththeirlinemanager.Allwhistleblowingallegationsarereportedto,andconsideredby,theExecutiveCommitteeandasummaryreport(withdetailsofanymajorconcerns)issuppliedto,andconsideredby,theAuditCommitteeateachmeeting.

PrincipleEandProvision6ofthe2018CoderequiretheBoardtobeclearhowitsapproachtowhistleblowinghaschangedfromanAuditCommitteeledapproachtoaBoardledapproach.AlthoughtheAuditCommitteecontinuestoreceiveregularreportsonwhistleblowingactivity,eachsetoffullBoardpapersalsoincludesaspartofthereportfromtheCompanySecretarythenumberandassessmentofanywhistleblowingreportsreceivedand,whererelevant,theactionstakeninrespectofreportswhichare,oninvestigation,foundtobesustainable.

TheBoardtakesregularaccountofsocial,environmentalandethicalmattersconcerningtheCompanythroughregularreportstotheBoardandpresentationstotheBoardatitsstrategymeetings.TheCompany’scompliancestatementinrelationtotheModernSlaveryActcanbeviewedontheCompany’swebsitewww.mbplc.com

Directors’trainingincludesenvironmental,socialandgovernance(‘ESG’)mattersandtheCompanySecretaryisresponsibleforensuringthatDirectorsaremadeawareofandreceiveregulartraininginrespectoftheseimportantareas.TheChiefExecutive,PhilUrban,isultimatelyresponsibleforESGmatters.

TheBoardisresponsiblefortheCompany’sinternalriskmanagementsystem,inrespectofwhichmoredetailscanbefoundinthe‘Risksanduncertainties’sectionofthisreport,andinthefollowingsectionofthisstatement.

INTERNAL CONTROL AND RISK MANAGEMENTTheBoardhasoverallresponsibilityfortheGroup’ssystemofinternalcontrolandriskmanagementandforreviewingitseffectiveness.Inordertodischargethatresponsibility,theBoardhasestablishedtheproceduresnecessarytoapplythe2016Codeandthe2018CodefortheyearunderreviewandtothedateofapprovaloftheAnnualReport.SuchproceduresareinlinewiththeFinancialReportingCouncil’s‘GuidanceonRiskManagement,InternalControlandRelatedFinancialandBusinessReporting’andareregularlyreviewedbytheAuditCommittee.

ThekeyfeaturesoftheGroup’sinternalcontrolandriskmanagementsystemsinclude:

• Processes,includingmonitoringbytheBoard,inrespectof:

i. financialperformancewithinacomprehensivefinancialplanning,accountingandreportingframework;

ii. strategicplanachievement; iii. capitalinvestmentandassetmanagement

performance,withdetailedappraisal,authorisationandpost-investmentreviews;and

iv. consumerinsightdataandactionstoassesstheevolutionofbrandsandformatstoensurethattheycontinuetobeappealingandrelevanttotheGroup’sguests.

• Anoverallgovernanceframeworkincluding:

i. clearlydefineddelegationsofauthorityandreportinglines;

ii. acomprehensivesetofpoliciesandproceduresthatemployeesarerequiredtofollow;and

iii. theGroup’sEthicsCode,inrespectofwhichanannualconfirmationofcomplianceissoughtfromallcorporateemployees.

• TheRiskCommittee,asub-committeeoftheExecutiveCommittee,whichassiststheBoard,theAuditCommitteeandtheExecutiveCommitteeinmanagingtheprocessesforidentifying,evaluating,monitoringandmitigatingrisks.TheRiskCommittee,whichcontinuestomeetquarterly,ischairedbytheCompanySecretaryandGeneralCounselandcomprisesExecutiveCommitteemembersandothermembersofseniormanagementfromacross-sectionoffunctions.Itsprimaryresponsibilitiesareto:

i. advisetheExecutiveCommitteeontheCompany’soverallriskappetiteandriskstrategy,takingaccountofthecurrentandprospectiveoperating,legal,macroeconomicandfinancialenvironments;

ii. advisetheExecutiveCommitteeonthecurrentandemergingriskexposuresoftheCompanyinthecontextoftheBoard’soverallriskappetiteandriskstrategy;

iii. promotethemanagementofriskthroughouttheorganisation;

iv. reviewandmonitortheCompany’scapabilityandprocessestoidentifyandmanagerisks;

v. considertheidentifiedkeyrisksfacedbytheCompanyandnewandemergingrisksandconsidertheadequacyofmitigationplansinrespectofsuchrisks;and

vi. wheremitigationplansareinadequate,recommendimprovementactions.

TheGroup’srisksidentifiedbytheprocessesthataremanagedbytheRiskCommitteearedescribedin‘Risksanduncertainties’onpages40to44.MoredetailsoftheworkoftheRiskCommitteeareincludedintheAuditCommitteereportonpages72to75.

• Examinationofbusinessprocessesonariskbasisincludingreportsfromtheinternalauditfunction,knownasGroupAssurance,whichreportsdirectlytotheAuditCommittee.

TheGroupalsohasinplacesystems,includingpoliciesandprocedures,forexercisingcontrolandmanagingriskinrespectoffinancialreportingandthepreparationofconsolidatedaccounts.Thesesystems,policiesandprocedures:

• governthemaintenanceofaccountingrecordsthat,inreasonabledetail,accuratelyandfairlyreflecttransactions;

• requirereportedinformationtobereviewedandreconciled,withmonitoringbytheAuditCommitteeandtheBoard;and

• providereasonableassurancethattransactionsarerecordedasnecessarytopermitthepreparationoffinancialstatementsinaccordancewithInternationalFinancialReportingStandards(‘IFRS’)orUKGenerallyAcceptedAccountingPractice,asappropriate.

Inaccordancewiththe2018Code,duringtheyeartheAuditCommitteecompleted(andreportedtotheBoarditsconclusionsinrespectof)itsannualreviewoftheeffectivenessoftheGroup’sriskmanagementandinternalcontrolsystems,includingfinancial,operationalandcompliancecontrols.Thesystemofinternalcontrolisdesignedtomanage,ratherthaneliminate,theriskoffailuretoachievebusinessobjectivesand,assuch,itcanonlyprovidereasonableandnotabsoluteassuranceagainstmaterialmisstatementorloss.Inthatcontext,intheopinionoftheAuditCommittee,thereviewdidnotindicatethatthesystemwasineffectiveorunsatisfactoryandtotheextentthatweaknessesininternalcontrolswereidentified,theAuditCommitteeconfirmedthatnecessaryremedialactionplanswereinplace.TheAuditCommitteeisnotawareofanychangetothisstatusuptothedateofapprovalofthisAnnualReport.

Withregardtoinsuranceagainstrisk,itisnotpracticabletoinsureagainsteveryrisktothefullestextent.TheGroupregularlyreviewsboththetypeandamountofexternalinsurancethatitbuyswithguidancefromanexternalindependentbroker,bearinginmindtheavailabilityofsuchcover,itscostandthelikelihoodandmagnitudeoftherisksinvolved.



SHAREHOLDER RELATIONSTheBoardrecognisesthatitisaccountabletoshareholdersfortheperformanceandactivitiesoftheCompany.TheCompanyregularlyupdatesthemarketonitsfinancialperformance,atthehalfyearandfullyearresultsinMayandNovemberrespectively,andbywayofotherannouncementsasrequired.ThecontentoftheseupdatesisavailablebywebcastontheCompany’swebsite,togetherwithgeneralinformationabouttheCompanysoastobeavailabletoallshareholders.TheCompanyhasaregularprogrammeofmeetingswithitslargershareholderswhichprovidesanopportunitytodiscuss,onthebasisofpubliclyavailableinformation,theprogressofthebusiness.

Onamoreinformalbasis,theChairman,ChiefExecutiveandtheChiefFinancialOfficerregularlyreporttotheBoardtheviewsoflargershareholdersabouttheCompany,andtheotherNon-ExecutiveDirectorsareavailabletomeetshareholdersonrequestandareofferedtheopportunitytoattendmeetingswithlargershareholders.ThevotingrightsofPiedmontInc.andElpidaGroupLimitedaresetoutintheDirectors’reportonpage58.

TheAGMprovidesausefulinterfacewithshareholders,manyofwhomarealsoguestsinourpubs,barsandrestaurants.AllproxyvotesreceivedinrespectofeachresolutionattheAGMarecountedandthebalanceforandagainst,andanyvoteswithheld,areindicated.AttheJanuary2019AnnualGeneralMeeting,theCompanyhadfiveresolutionswhere20%ormoreofvotescast,werecastagainsttheresolution.Thesewereinrespectofthere-electionofKeithBrowne,EddieIrwin,BobIvell,JoshLevyandRonRobsonandresultedintheCompanyfeaturingintheInvestmentAssociation’spublicregisterofshareholderdissent.TheCompanymadeitclearatthatAGMthatitrecognisedboththescaleofnon-independenceoftheBoardcompositionandthelackofgenderdiversity,andthatitwaswelladvancedintherecruitmentprocessfortwonewindependentNon-ExecutiveDirectors;howevertherecruitmentprocesshadnotbeensufficientlyneartoconclusiontoallowreferencetosuchinthe2018AnnualReportandNoticeofMeeting.

InFebruary2019,weannouncedtheappointmentsofJaneMoriartyandSusanMurray,takingtheBoardtoatotalof12members,fiveofwhomareindependentNon-ExecutiveDirectors(includingthreefemaleindependentNon-ExecutiveDirectors).ThistakesthetotalpercentageofwomenonourBoardfrom9%inFY2018tothecurrentratioof25%.

BOARD EFFECTIVENESS EVALUATION AND CHAIRMAN’S EVALUATION AND APPRAISALDuringtheyear,theBoardalsoconductedaninternallyfacilitatedBoardeffectivenessevaluation,ledbytheChairmanwithsupportfromtheCompanySecretaryandGeneralCounsel.InaccordancewithProvisionB.2.3ofthe2016Code,thisincludedconsiderationandreviewinrespectofanyDirectorwhohadservedformorethansixyears.ThereviewconcludedthattheBoardcontinuestofunctionwellwithagoodblendofexperiencefrombothwithinandoutsidetheCompany’sindustryandagoodmixofskills.AreasforimprovementrelatedtothetimingandlocationsofBoardmeetingssothatmoretimecouldbespentintheGroup’soperationalbusinessesintheUKandGermany,continuedfocusontheoperationaldeliveryandcapitalprogrammesalongsidekeepingforward-lookingindustryandsectordevelopmentsunderreviewaspartoftheongoingstrategicconsiderationofemergingtrendsanddevelopmentsbothwithinandoutsidetheCompany’ssectorandincreasingtheopportunityforBoardmemberstohavecloserengagementwithoperationalmanagement.Thesethemes,whichalsoalignwiththeCompany’sworkonitsdevelopmentoftheapproachtocultureandpurposeinlinewiththerecommendationsofthe2018Code,havebeenagreedtobeimplementedin2020.

TheannualappraisaloftheChairman’sperformancewasconductedbytheSeniorIndependentDirector,SusanMurray,withtherestoftheBoard(withouttheChairmanpresent)andtheconclusionsfedbacktotheChairman.

AnnualreviewsoftheChairman’sperformancewillcontinuetobeconductedasrequiredbythe2018Code.

GOING CONCERNTheDirectors’statementastothestatusoftheCompanyasagoingconcerncanbefoundonpage60.


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Introduction from the Audit Committee Chairman COLIN RUTHERFORDChairmanoftheAuditCommittee

OnbehalfoftheBoard,IpresentthereportoftheAuditCommitteeforthefinancialyearended28September2019.Duringtheperiod,asthepurposeandeffectivenessofexternalandinternalauditprocedurescameunderincreasingpublicscrutiny,theCommitteemaintainedanappropriatelevelofengagementwiththeChiefFinancialOfficerandtheGroupRiskDirector,otherkeyindividualsandtheirteamswhocollectivelyprovideanappreciationandrigorousinsightintohowtheGroupfunctionsandreports.TheCommitteeisalwaysverygratefulforthedetailedinstructiontheseinteractionsprovideandthis,inturn,significantlyassiststowardsthepromotionandefficientexecutionoftheCommittee’soversightrole,ensuringconfidenceinreportingtothewiderBoard.

ENGAGEMENT WITH AUDITORS AND THIRD PARTIESTheCommitteecontinuedtoengageformally,regularlyandatanappropriatelevelofdetailwithourexternalauditors,internalauditors(alsoexternallyresourced)andotherthird-partyadvisersasnecessary.ThishasenabledtheCommitteetomaintainanappropriateunderstandingofhowourauditorsandadvisersinteractandtestourcomprehensiveriskfunctions.TheCommittee’sengagementduringthewholeoftheauditingandadvisoryprocessconveysconfidenceintheircollectivefieldworkconclusions.

ItisalsoimportanttonoteourCommittee’sroleinoverseeingthewell-consideredprovisionofadequateresourcesbytheGroup,ensuringthatanyadditionalnon-auditservicesrequiredduringtheyearwereobtainedwherenecessary,andinparticulardealingwiththeincreasingroleofEUregulation,theFinancialReportingCouncil(FRC)anditsevolvingreportingrequirements.

EFFECTIVENESS OF INTERNAL CONTROLS AND GROUP ASSURANCE AND RISK FUNCTIONTheaboveeffortsprovidedtheCommitteewithaclearanddetailedunderstandingoftheprincipalfinancialandoperationalrisksthroughouttheperiod.TheCommitteecontinuedtofocusonchallengingtheeffectivenessofinternalcontrols,therobustnessofassuranceandriskmanagementprocessesandinassessingtheimportanceof,andactingasrequiredupon,allreportedinformationreceivedfromourexternalandinternalauditorsandthird-partyadvisers.

TheCommitteeremaincommittedtomaintaininganopenandconstructivedialogueonrelevantauditmatterswithallshareholders.Therefore,shouldyouhaveanycommentsorquestionsonanyaspectsofthisreport,orindeedthewiderfinancialstatements,mayIrespectfullyaskyoutopleaseemailmyself,careofAdrianBrannan,GroupRiskDirector,[email protected]

MEMBERSHIP AND REMIT OF THE AUDIT COMMITTEE ThemainpurposeoftheAuditCommitteeistoreviewandmaintainoversightofMitchells&Butlers’corporategovernance,particularlywithrespecttofinancialreporting,internalcontrolandriskmanagement.TheAuditCommittee’sresponsibilitiesalsoinclude:

• reviewingtheprocessesfordetectingfraud,misconductandinternalcontrolweaknesses;

• reviewingtheeffectivenessoftheGroupAssurancefunction;and

• overseeingtherelationshipwiththeexternalandinternalauditors.


AUDIT COMMITTEE REPORT

AtthedateoftheAnnualReport,theAuditCommitteecomprisesfiveindependentNon-ExecutiveDirectors:ColinRutherford(Chair),ImeldaWalsh,DaveCoplin,JaneMoriartyandSusanMurrayandtwofurtherNon-ExecutiveDirectorsnominatedbysubstantialshareholders,RonRobsonandEddieIrwin.InaccordancewithCodeprovisionC.3.1theBoardconsidersthatColinRutherfordhassignificant,recentandrelevantfinancialexperience.BiographiesofallofthemembersoftheAuditCommittee,includingasummaryoftheirrespectiveexperience,appearonpages54to57.

TheAuditCommitteecontinuedtomeetquarterlyduringFY2019.Ineachcase,appropriatepapersweredistributedtotheCommitteemembersandotherinvitedattendees,including,whereandtotheextentappropriate,representativesoftheexternalauditfirmandtheinternalGroupAssurancefunction.

Whenappropriate,theAuditCommitteeaugmentstheskillsandexperienceofitsmemberswithadvicefrominternalandexternalauditprofessionals,forexample,onmatterssuchasdevelopmentsinfinancialreporting.AuditCommitteemeetingsarealsoattended,byinvitation,byothermembersoftheBoardincludingtheChairman,theChiefExecutiveandtheChiefFinancialOfficer,theCompanySecretaryandGeneralCounsel,theGroupRiskDirectorandrepresentativesoftheexternalauditor,DeloitteLLP.TheAuditCommitteealsohastheopportunitytomeetprivatelynotlessthantwiceayear,withoutanymemberofmanagementpresent,inrelationtoauditmatters,withtheexternalauditor.

TheremunerationofthemembersoftheAuditCommitteeissetoutintheReportonDirectors’remunerationonpage87.

SUMMARY TERMS OF REFERENCEAcopyoftheAuditCommittee’stermsofreferenceispubliclyavailablewithintheInvestorsectionoftheCompany’swebsite:www.mbplc.com/pdf/audit_committee_terms.pdf

TheAuditCommittee’stermsofreferencewereapprovedbytheCommitteeandadoptedbytheplcBoardin2013.Thosetermsofreferencespecificallyprovidethattheywillbereviewedannually.TheyhavebeenreviewedandupdatedasappropriateeachyearsinceandnochangeswerefelttobeneededinFY2019.Atthetimeofre-adoptionoftheCompany’sCorporateGovernanceComplianceStatementinJuly2016,asupdatedtoreflectchangesrequiredtogiveeffecttotheintroductionoftheMarketAbuseRegulation(MAR),changestotheCompany’sgovernancearrangementstoreflecttherequirementsofMARwereintroduced.OtherthanthoseMAR-relatedamendments,whichrelatedtoconsequentialchangestoregulatoryreferences(e.g.theUKLA’sDisclosureandTransparencyRulesarenowknownastheDisclosureGuidanceandTransparencyRules),therehavebeennomaterialchangestotheseTermsofReferencesincethelastreviewin2015.

Accordingly,inFY2019nomaterialchangesweremadetothetermsofreferenceoftheAuditCommittee,andtheworkoftheAuditCommitteeiskeptunderreviewwiththeexpectationthatanysuchmatterswhichcometolightareincludedinthereviewscheduledforFY2020.

TheAuditCommitteeisauthorisedbytheBoardtoreviewanyactivitywithinthebusiness.Itisauthorisedtoseekanyinformationitrequiresfrom,andrequiretheattendanceatanyofitsmeetingsof,anyDirectorormemberofmanagement,andallemployeesareexpectedtoco-operatewithanyrequestmadebytheAuditCommittee.

TheAuditCommitteeisauthorisedbytheBoardtoobtain,attheCompany’sexpense,outsidelegalorotherindependentprofessionaladviceandsecuretheattendanceofoutsiderswithrelevantexperienceandexpertise,ifitconsidersthisnecessary.

TheChairoftheAuditCommitteereportstothesubsequentBoardmeetingontheCommittee’sworkandtheBoardreceivesacopyoftheminutesofeachmeeting.

TheroleandresponsibilitiesoftheAuditCommitteeareto:

• reviewtheCompany’spublicstatementsoninternalcontrol,riskmanagementandcorporategovernancecompliance;

• reviewtheCompany’sprocessesfordetectingfraud,misconductandcontrolweaknessesandtoconsidertheCompany’sresponsetoanysuchoccurrence;

• reviewmanagement’sevaluationofanychangeininternalcontrolsoverfinancialreporting;

• reviewwithmanagementandtheauditor,CompanyfinancialstatementsrequiredunderUKlegislationbeforesubmissiontotheBoard;

• establish,reviewandmaintaintheroleandeffectivenessoftheinternalauditfunction,knownasGroupAssurance,whoseobjectiveistoprovideindependentassuranceovertheGroup’ssignificantprocessesandcontrols,includingthoseinrespectoftheGroup’skeyrisks;

• assumedirectresponsibilityfortheappointment,compensation,resignation,dismissalandtheoverseeingoftheauditor,includingreviewoftheexternalaudit,itscostandeffectiveness;

• pre-approvenon-auditworktobecarriedoutbytheexternalauditorandthefeestobepaidforthatworktogetherwiththemonitoringoftheexternalauditor’sindependence;

• overseetheprocessfordealingwithcomplaintsreceivedbytheGroupregardingaccounting,internalaccountingcontrolsorauditingmattersandanyconfidential,anonymoussubmissionbyemployeesofconcernsregardingquestionableaccountingorauditingmatters;and

• adoptandoverseeaspecificCodeofEthicsforallcorporateemployeeswhichisconsistentwiththeCompany’soverallstatementofbusinessethics.

KEY ACTIVITIES OF THE AUDIT COMMITTEEAuditmattersarereviewedatquarterlyAuditCommitteemeetingsthroughouttheyearatwhichdetailedreportsarepresentedforreview.TheAuditCommitteecommissionsreportsfromexternaladvisers,theGroupRiskDirectororCompanymanagement,eitherafterconsiderationoftheCompany’smajorrisksorinresponsetodevelopingissues.Duringtheyear,inordertofulfiltherolesandresponsibilitiesoftheAuditCommittee,thefollowingmatterswereconsidered:

• thesuitabilityoftheGroup’saccountingpoliciesandpractices;

• halfyearandfullyearfinancialresults;• thescopeandcostoftheexternalaudit;• theexternalauditor’shalfyearandfull

yearreports;• reappointmentandevaluationofthe

performanceoftheexternalauditor,includingrecommendationstotheBoard,forapprovalbyshareholders,onthereappointmentoftheCompany’sauditorandontheapprovaloffeesandtermsofengagement;

• non-auditworkcarriedoutbytheauditorandtrendsinthenon-auditfeesinaccordancewiththeCommittee’spolicytoensurethesafeguardingofauditindependence;

• theco-ordinationoftheactivitiesandtheworkprogrammesoftheinternalandexternalauditfunctions;

• thearrangementsinrespectofGroupAssuranceincludingitsresourcing,externalsupport,thescopeoftheannualinternalauditplanforFY2019regardingthelevelofachievementandthescopeoftheannualinternalauditplanforFY2020;

• periodicinternalcontrolandassurancereportsfromGroupAssurance;

• theGroup’sriskmanagementframeworkfortheidentificationandcontrolofmajorrisks,itsriskandassurancemitigationplanandtheannualassessmentofeffectivenessofcontrols;

• compliancewiththeCompany’sCodeofEthics;• corporategovernancedevelopments;• thestatusofmateriallitigationinvolving

theGroup;• plansfortheimplementationofIFRS16;and• reportsonallegationsmadeviatheGroup’s

whistleblowingproceduresandtheeffectivenessoftheseproceduresincludingasummaryofreportsreceivedduringFY2019.


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DISCLOSURE OF SIGNIFICANT ISSUES CONSIDERED TheAuditCommitteehasreviewedthekeyjudgementsappliedinthepreparationoftheconsolidatedfinancialstatements,whicharedescribedintherelevantaccountingpoliciesanddetailednotestothefinancialstatementsonpages98to155.

TheAuditCommittee’sreviewincludedconsiderationofthefollowingkeyaccountingjudgements:

• Property, plant and equipment valuation–theassumptionsusedbymanagementtovaluethelongleaseholdandfreeholdestateincludingestimatedfairmaintainabletradinglevels,brandmultiplesanduseofspotvaluationstoensureaconsistentvaluationmethodologyisinplace.Shortleaseholdbuildings,unlicensedlandandbuildingsandfixtures,fittingsandequipmentareheldatcostlessdepreciationandimpairment.Therevaluationmethodologyisdeterminedbyusingmanagementjudgement,withadvicetakenfromthird-partyvaluers;

• Onerous lease provisions–determinationofwhetheralossisunavoidablerequiresareasofjudgementwhichincludeconsiderationofpotentialfutureinvestmentdecisions,localconditionswhichmaybeimpactingoncurrentperformanceandtheopportunitytosurrenderaleasebacktothelandlord;

• Pension deficit –thepensionliabilityissensitivetotheactuarialassumptionsappliedinmeasuringfuturecashoutflows.TheuseofassumptionssuchasthediscountrateandinflationwhichhaveanimpactonthevaluationofthedefinedbenefitpensionschemehasbeenassessedbytheAuditCommittee.Managementhaveusedjudgementtodeterminetheapplicablerateofinflationtoapplytopensionincreasesincalculatingthedefinedbenefitobligation;

• Covenants –theheadroomonthecovenantswithinthesecuritisedestate,togetherwithanevaluationofthemitigatingoptionsavailabletomanagement(toensurethereisreasonableassurancethatshouldacovenantbeclosetobeingbreached,managementhavefurtheractionsthatcouldbeundertakentopreventsuchabreachoccurring),havebeenreviewedindetailbymanagementandassessedbytheAuditCommittee;and

• Separately disclosed items –judgementisusedtodeterminethoseitemswhichshouldbeseparatelydisclosedtoallowabetterunderstandingoftheadjustedtradingperformanceoftheGroup.Thisjudgementincludesassessmentofwhetheranitemisofsufficientsizeorofanaturethatisnotconsistentwithnormaltradingactivities.

EFFECTIVENESS OF INTERNAL AUDIT TheAuditCommitteeisresponsibleformonitoringandreviewingtheeffectivenessoftheCompany’sinternalauditfunction.TheAuditCommitteemeetsregularlywithmanagementandwiththeGroupRiskDirectorandtheinternalauditor,toreviewtheeffectivenessofinternalcontrolsandriskmanagementandreceivesreportsfromtheGroupRiskDirectoronaquarterlybasis.

TheannualinternalauditplanisapprovedbytheAuditCommitteeandkeptunderreviewonamonthlybasis,bytheGroupRiskDirector,inordertoreflectthechangingbusinessneedsandtoensurenewandemergingrisksareconsidered.TheAuditCommitteeisinformedofanyamendmentsmadetotheauditplanonaquarterlybasis.TheFY2019internalauditplanwasdevelopedthroughareviewofformalriskassessments(inconjunctionwiththeRiskCommitteeandtheGroup’sExecutiveCommittee)togetherwithconsiderationoftheGroup’skeybusinessprocessesandfunctionsthatcouldbesubjecttoaudit.AsimilarapproachhasbeenemployedinrelationtotheFY2020internalauditplan.

TheprincipalobjectivesoftheinternalauditplanforFY2019were,andremainforFY2020:

• toprovideconfidencethatexistingandemergingkeyrisksarebeingmanagedeffectively;

• toconfirmthatcontrolsovercorebusinessfunctionsandprocessesareoperatingasintended(‘coreassurance’);and

• toconfirmthatmajorprojectsandsignificantbusinesschangeprogrammesarebeingadequatelycontrolled.

DuringFY2019,18auditreportswereissuedbytheGroupAssurancefunctionandreviewedbytheBoardortheAuditCommittee.Internalauditrecommendationsarecloselymonitoredthroughtoclosureviaaweb-basedrecommendationtrackingsystem,introducedinFY2013andupdatedinFY2019,whichhassignificantlyimprovedtheoverallmonitoringofinternalauditrecommendationstoensurethesearesuccessfullyimplementedinatimelymanner.AsummaryofthestatusoftheimplementationofinternalauditrecommendationsismademonthlytotheExecutiveCommitteeandquarterlytotheAuditCommittee.

InFY2018,acomprehensivetenderprocesswasundertakenregardingtheco-sourcedGroupAssurancefunction.PwCweresuccessfullyreappointedbaseduponoverallmeritandqualityoftheteam,toprovideGroupAssuranceauditservicestoMitchells&Butlersforafurthertwoyears.

RISK MANAGEMENT FRAMEWORKAsdisclosedinthe‘Riskanduncertainties’sectiononpages40to44theRiskCommitteecontinuestomeetonaquarterlybasistoreviewthekeyrisksfacingthebusiness.MembershipoftheRiskCommittee,whichincludesrepresentationfromeachofthekeybusinessfunctions,isdetailedbelow:

• CompanySecretaryandGeneralCounsel(Chairman)

• ChiefFinancialOfficer• CommercialandMarketingDirector• DivisionalDirector(Operations)• GroupHRDirector• DirectorofBusinessChange&Technology• GroupRiskDirector• HeadofLegal

Keyrisksidentifiedarereviewedandassessedonaquarterlybasisintermsoftheirlikelihoodandimpact,withintheGroup’s‘KeyRiskHeatMap’,inconjunctionwithassociatedriskmitigationplans.Inaddition,theRiskCommitteereviewincludesanassessmentofthematerialrelevanceofemergingrisksandthecontinuedrelevanceofpreviouslyidentifiedrisks.DuringFY2019,RiskCommitteemeetingscontinuedtoincludeacross-functional,detailedreviewoftheGroup’skeyrisks.Thisprocess,whichwasintroducedinFY2016,continuestoprovetobeeffectiveandaddsvaluetothecontinueddevelopmentandprogressionoftheGroup’sapproachtoevaluatingnewandexistingrisks,supportedbyrobustmitigationplans.

ActionsarisingfromRiskCommitteemeetingsarefollowedupbytheGroupRiskDirector.TheAuditCommitteereviewstheRiskCommitteeminutes,inadditiontoundertakingaquarterlyreviewoftheGroup’s‘KeyRiskHeatMap’.

CONFIDENTIAL REPORTING TheGroup’swhistleblowingpolicyenablesstaff,inconfidence,toraiseconcernsaboutpossibleimproprietiesinfinancialandothermattersandtodosowithoutfearofreprisal.DetailsofthepolicyaresetoutintheCompany’sCodeofEthics.TheAuditCommitteereceivesquarterlyreportsonwhistleblowingincidentsandremainssatisfiedthattheproceduresinplacearesatisfactorytoenableindependentinvestigationandfollowupactionofallmattersreported.NomajorissueshavebeenreportedinFY2019(majorissuesbeingdefinedforthispurposeasmattershavingafinancialimpactofgreaterthan£100k).TheBoardalsoreceivesareportonwhistleblowingintheCompanySecretary’sregularreporttoBoardmeetings.


AUDIT COMMITTEE REPORT CONTINUED

EXTERNAL AUDITOR APPOINTMENTDeloitteLLPwasappointedastheauditorin2011,followingaformaltenderprocess.TheAuditCommitteehasconsideredtheguidanceinrelationtorotationincludingtheproposedtransitionruleswhichwillbeconsideredwhenrecommendingtheappointmentoftheauditorinfutureyears.Themostrecentauditpartnerrotationtookplacein2016wherebyJohnCharltonbecametheleadAuditPartner.TheCompanyhascompliedthroughoutthereportingyearwiththeprovisionsofTheStatutoryAuditServicesforLargeCompaniesMarketInvestigation(MandatoryUseofCompetitiveTenderProcessesandAuditCommitteeResponsibilities)Order2014.UnderthetermsofthatOrder,theCommitteehasagreedandhasputplansinplace,tocarryoutacompetitiveaudittenderinearly2020,inrespectofthefinancialyearendingin2021toensurethecontinuedobjectivity,independenceandvalueformoneyofthestatutoryaudit.

TheAuditCommitteeconsidersthattherelationshipwiththeauditorisworkingwellandissatisfiedwithitseffectivenessandhasnotconsidereditnecessarytorequireDeloitteLLPnottore-tenderfortheexternalauditwork.TherearenocontractualobligationsrestrictingtheCompany’schoiceofauditor.

EXTERNAL AUDITOR’S INDEPENDENCETheexternalauditorsshouldnotprovidenon-auditserviceswhereitmightimpairtheirindependenceorobjectivitytodoso.TheAuditCommitteehasestablishedapolicytosafeguardtheindependenceandobjectivityoftheGroup’sauditorassetoutbelow.ThatpolicyhasbeenreviewedinFY2019andacopyofitisappendedtotheAuditCommittee’stermsofreferenceandisavailableontheCompany’swebsite.Pursuanttothatpolicythefollowingserviceshavebeenpre-approvedbytheAuditCommitteeprovidedthatthefeesforsuchservicesdonotexceedinanyyearmorethan70%oftheaverageauditfeepaidtothatauditfirmoverthepastthreeyears:

• auditservices,includingworkrelatedtotheannualGroupfinancialstatements,andstatutoryaccounts;and

• certainspecifiedtaxservices,includingtaxcompliance,taxplanningandtaxadvice.

Acquisitionandvendordue-diligencemayonlybeprovidedifitisspecificallyapprovedbytheCommitteeonacasebycasebasisinadvanceoftheengagementcommencing.Anyotherworkforwhichmanagementwishestoutilisetheexternalauditormustbeapprovedasfollows:

• serviceswithfeeslessthan£50,000maybeapprovedbytheChiefFinancialOfficer;and

• engagementswithfeesover£50,000falltobeapprovedbytheAuditCommitteeoritsChair.

TheAuditCommitteeremainsconfidentthattheobjectivityandindependenceoftheauditorarenotinanywayimpairedbyreasonofthenon-auditserviceswhichtheyprovidetotheGroup.

ThatpolicyalsoincludesanextensivelistofserviceswhichtheauditfirmmaynotprovideormayonlyprovideinverylimitedcircumstanceswheretheCompanyandtheauditfirmagreethattherewouldbenoimpactontheimpartialityoftheauditfirm.Detailsoftheremunerationpaidtotheauditor,andthesplitbetweenauditandnon-auditservices,aresetoutatnote2.3ofthefinancialstatementsonpage118.

EXTERNAL AUDIT ANNUAL ASSESSMENT TheAuditCommitteeassessesannuallythequalification,expertise,resourcesandindependenceoftheGroup’sauditorandtheoveralleffectivenessoftheauditprocess.TheChiefFinancialOfficer,CompanySecretaryandGeneralCounsel,AuditCommitteeChairmanandGroupRiskDirectormeetwiththeauditortodiscusstheaudit,significantrisksandanykeyissuesincludedontheAuditCommittee’sagendaduringtheyear.

FAIR, BALANCED AND UNDERSTANDABLE STATEMENT OneofthekeygovernancerequirementsoftheGroup’sfinancialstatementsisforthereportandaccountstobefair,balancedandunderstandable.Therefore,uponreviewofthefinancialstatements,theAuditCommitteeandtheBoardhaveconfirmedthattheyaresatisfiedwiththeoverallfairness,balanceandclarityoftheAnnualReport,whichisunderpinnedbythefollowing:

• formalminutesoftheyearendworkinggroupcomprisedofrelevantinternalfunctionalrepresentativesandappropriateexternaladvisers;

• clearguidancebeingissuedtoallcontributorstoensureaconsistentapproach;and

• formalreviewprocessesatalllevelstoensuretheAnnualReportisfactuallycorrect.

COLIN RUTHERFORD ChairmanoftheAuditCommittee19November2019

THE GOING CONCERN AND LONG-TERM VIABILITY STATEMENT CAN BE FOUND ON PAGES99and45respectively


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Dear fellow shareholder I am pleased to present the Directors’ remuneration report in respect of the financial year, which ended on 28 September 2019.

IMELDA WALSH ChairoftheRemunerationCommittee

BACKGROUND AND BUSINESS CONTEXT WhenourChiefExecutive,PhilUrban,wasappointedinlate2015heinheritedabusinessthatwasinlike-for-likesalesandprofitdecline,competinginamarketwithexcesssupplyandfacingsignificantcostpressuresofcirca£60mperannum,atatimewhen,asnow,therewasanuncertaineconomicoutlookandfragileconsumerconfidence.

OverthepasttwoyearsIhaveexplainedhowthestrategicprioritiessetbyPhilshortlyafterhisappointment:

• tobuildabalancedbusiness;• instilamorecommercialculture;and• driveaninnovationagenda,

havebeenexecutedsuccessfullythroughtheIgniteprogrammeofinitiatives.Thisisenablingareturntobothsalesandprofitgrowth,consistentoutperformanceofthemarket,guestsatisfactionimprovementacrossallofMitchells&Butlers’brandsandformatsandemployeeengagementatitshighesteverlevel.

TurningspecificallytoperformanceduringFY2019,salesintheyearwere£2,237m,anincreaseof£85monFY2018andalike-for-likesalesaimprovementof3.5%whichcontinuestobeabovethemarket(asmeasuredbytheCofferPeachbusinesstrackerb)andrepresentsnowalmostthreeyearsofconsistentmarketoutperformance.TheMitchells&Butlersportfolioisbroadand,assuch,brandsandoffersperformbetterindifferentcircumstances.Forexample,ourpubsandrestaurantswithgardenstradeverystronglyingoodweather,whereaswarmweathercanbeanegativeforourcarverybusinesses(TobyCarveryandStonehouse).Conversely,incolderweatherourcarverybusinessestradestronglyasdobrandslikeMiller&Carter,andinschoolholidaysHarvesterisafamilyfavourite.Itisthereforeveryencouragingthateverybrandandofferacrosstheportfoliohasdeliveredsalesandprofitgrowthintheyear.

Ourcapitalinvestmentprogrammecontinuestobeanimportantfactorinbuildingabalancedbusinessand248capitalinvestmentprojectswereundertakenduringtheyear,withinvestmentreturnscontinuingtoimproveyear-on-yearinaverycompetitivemarket.Thescaleofourcapitalplanoverrecentyearshasmeantthattheaveragelengthoftimebetweeninvestmentinabusinessisoncoursetoreducefromaroundtwelveyearstobetweensixandsevenyears,animportantfactorinamarketwhereconsumerexpectationscontinuetoincrease.

TechnologyplaysanimportantroleandlastyearIexplainedhowthereputation.complatformallowedourmanagerstoaccesssocialmediafeedbackfromallchannelsinoneplace.Thisplatformhasnowevolvedfurthertoincludefeedbackreceiveddirectlyfromguestsurveysaswellassocialreviews.DuringFY2020itwillalsoenableourmanagerstorespondandtrackanycustomercomplaints.Technologyisalsofacilitatingtheexpansionofourdeliverybusinessandweanticipatethatthiswillcontinuetobeanopportunityforgrowthinthefuture.

Thelinkbetweenhighlevelsofengagement,guestsatisfactionand,ultimately,salesandprofitabilityhasneverbeenstrongeranditisveryencouragingthatemployeeengagementscoreshaveimprovedonceagaintoanalltimehigh.TurnoverofallemployeegroupshasfallenduringFY2019,withretailteammemberturnoverfallingby3pptsto81%followingaslightincreaseinFY2018.ThenumberofemployeesfromtheEuropeanUnionhasremainedstaticdespitetheongoinguncertainty.TheCompanyhasproactivelysoughttokeepourEUcolleaguesuptodatewithregardtotheiroptionsinrelationtoapplyingforSettledStatus.

Theendoffreedomofmovementwillultimatelyhaveanadverseimpactontheavailabilityoftalent,particularlyinkitchenrolesandkeytoaddressingthisshortageisourapprenticeshipprogramme,witharound2,300employeesrecruitedacrossanumberofrolesduringthelasttwelvemonths.Thequalityofourtraininghasbeenrecognisedduringtheyear,winninganumberofawardsincludingoverallwinnerattheCIPDPeopleManagementAwards.


REPORT ON DIRECTORS’ REMUNERATION

FY 2019 Remuneration OutcomesTheannualbonusplanagainhadfourelements:AdjustedOperatingProfita(hereafterreferredtoasOperatingProfit),GuestHealth,EmployeeEngagementandFoodSafety.TheplanmeasuresreflecttheoverallbusinessscorecardaligningallemployeesfromtheExecutiveCommitteethroughtoRetailManagementemployees.

FINANCIAL MEASURES – OPPORTUNITY 70% (OUT OF 100%)Operating Profit (outcome 59.5% out of 70%)InsettingtheOperatingProfittargetrangetheCommitteeconsideredanumberoffactors,including,onceagain,thesignificantcostheadwindsthebusinesscontinuestoface.Forthelastfinancialyeartheseranatcirca£64m,thethirdyearinwhichwehavefacedthislevelofcostinflation.Asbefore,thesewereattributabletolabourandenergy,alongwithfurtherfoodanddrinkinflation.TheCommitteealsotookintoaccounttherangeofinitiativesputinplaceaspartoftheIgniteprogrammeandtowhatextentthesewouldoffsetthecostheadwinds.Morebroadly,theCommitteeconsideredthegeneralandsectoroutlook,especiallygiventherecentincreaseinbusinessfailuresandCVAsacrosstheindustry.Inthiscontext,deliveringprofitgrowthwasconsideredbytheCommitteetobeaverystrongperformance.TargetperformancewasthereforesetslightlyabovetheFY2018outturn(£303m)andconsensus,whichtheCommitteefeltbalancedtheneedforfairbutdemandingtargets.ThelevelrequiredforamaximumawardrequiredasignificantlevelofperformanceaheadofboththeCompany’sbusinessplanandmarketexpectations.

TheOperatingProfitoutcomeof£317mwasjustover103%oftargetandinexcessoftheperformancerequiredforamaximumpayoutforthiselementofthebonusscheme.InlinewithestablishedpracticetheCommitteeundertookathoroughqualityofearningsassessment,tounderstandindetailthedriversofperformance.WhilstthevastmajorityofthegrowthhasbeendriventhroughstrongmanagementactionandimplementationoftheIgniteinitiatives,amodestproportionofthegrowthseeninFY2019wasachievedasaresultoftheutilisationofonerousleaseprovisionsthatwerechargedtoalargeseparatelydisclosediteminFY2017.WiththisinmindtheCommitteehasscaledbackthebonusoutcomebyremovingthebenefitoftheseseparatelydisclosedonerousleaseprovisionsintheincomestatement.

ThisresultsinanOperatingProfitforbonuspurposesof£313.3m(102%oftarget)andapayoutequivalentto59.5%ofsalary(outof70%)forExecutiveDirectors.TheCommitteefeltthatthisapproachtomoderatingthebonusoutcomewasfairandtheresultingpayoutreflectedtheverystrongperformanceandimprovementontheprioryear,withtheCompanyreturningtoOperatingProfitgrowthdespitetheunprecedentedcostchallenges,andthecontinuingoutperformanceversuscompetitorsasmeasuredindependentlybytheCofferPeachbusinesstrackerb.

NON-FINANCIAL MEASURES – 30% (OUT OF 100%)Guest Health (outcome 7.5% out of 15%) ThemeasurementofGuestHealthatMitchells&Butlerscomprisesacombinationofthreeelements,NetPromoterScore(‘NPS’),acombinedsocialmediascoreandguestcomplaints.ThisroundedassessmentensuresthatGuestHealthismeasuredcomprehensivelyanddoesnotrelyonasinglemeasure.

• ThemethodofmeasuringNPSwasamendedslightlyforFY2019.Inprioryearstheoverallscorewascalculatedasanaverageofeachbusiness’sscore.Thismeantasmallerbusinesswithfewerguestscompletingasatisfactionsurveycarriedasmuchweightintheoverallscoreasabiggerbusinesswithmorereviews.ForFY2019thiswaschangedtotreatallscoresasequallyimportant,i.e.largerbusinesseswithmoreguestresponseshaveagreaterbearingontheoverallscore.

ForFY2019theNPStargetwassetat61,requiringanimprovementofaround1pptontheFY2018scoreusingtherevisedcalculationmethodology.Theoverallscorefellshortofthisdemandingtargetat60.3.

• Thetargetforthecombinedsocialmediascore(reputation.com)wassetat4.0,animprovementontheFY2018outturnof3.93.Areputation.comscoreof4.0isanimportantthresholdtoexceedataGrouplevel,asguestsaremorelikelytovisitbusinesseswithratingsof4or5.Makingevenasmallpositivechangetosocialmediascoresrequiresbigimprovements,forexample,a0.1improvementrequiresanadditional100,000reviewscoresof4orabove.

ExcellentprogresswasmadeoverFY2019andtheoverallscorewas4.03,aheadofthetargetsetbytheCommittee.

• Theguestcomplaintsmetricmeasurestheproportionofcomplaintsreceivedforevery1,000mealsserved.Thetargetforthismeasurewassetat0.69.Theoveralloutcomeof0.59representedaverystrongperformanceinthisarea,reflectingthefocusondeliveringgreatguestexperiencesacrossallofourbrands.

Basedoncombinedscoresacrossthethreeguesthealthmetrics,theoveralloutcomeisontargetand,asaresult,apayoutequivalentto7.5%(outof15%),wasawardedtoExecutiveDirectorsunderthiselement.

Employee engagement (outcome 10% out of 10%)Aclearcorrelationhasbeenestablishedbetweenemployeeengagementandguestsatisfaction,which,inturn,hasapositiveimpactonsalesperformance.Twosurveysareheldeachyear.

InJune,employeesareinvitedtoprovidefeedbackthroughacomprehensivesurvey,YourSay,andthisissupplementedbyashorter‘Pulse’surveyinFebruary.Overall,aroundtwo-thirdsofouremployeescontribute,providingvaluableandrobustinsightintoemployeesatisfaction.

TheengagementtargetforFY2019wasonceagainbasedonacombinedscoreacrossbothsurveys,withagreaterweightingplacedonthemorecomprehensiveYourSaysurvey.Theoveralloutcomewasacombinedscoreof81.3whichwasthefirsttimetheoverallscorehasbeenover80andfollowedtheprevioushighesteverscoreof78.9achievedin2018.

Asaresult,amaximumpayoutequivalentto10%(outof10%),wasawardedtoExecutiveDirectorsunderthiselement.

Food safety (outcome 5% out of 5%) Foodsafetywillalwaysbeapriorityforthebusiness,whichiswhyameasurewasintroducedthatisbasedonthenumberofbusinessesthatachieveeithera4or5ratingintheindependentlyoperatedNationalFoodHygieneRatingSystem(‘NFHRS’).ThestretchingtargetsetforFY2019wasfor98%ofbusinesses(ofwhichwehave1,671intheUK)toachieveascoreofeither4or5overtheyearandtheactualresultwasthat98.3%ofbusinessesachievedthislevelofperformanceandretaineditssecondplaceintheleaguetableforlargepubandrestaurantgroups.

Asanadditionalcheck,theCommitteehasalsotakenintoaccountoverallworkplacesafetywhichagainhasbeenstronginallareas.

Thestructureforthiselementissuchthatpayoutisbasedentirelyonachievingthetargetset.Therefore,apayoutequivalentto5%wastriggeredagainstthiselement.

Final bonus outcomeIndeterminingtheoverallfinalbonusoutcome,theCommitteeconsideredthewiderperformanceoftheGroupaspartofitsoverallqualityofearningsassessmentandwassatisfiedthattheoutcomewasconsistentwithourperformanceovertheyear,takingintoaccountthedownwardadjustmenttotheOperatingProfitelementdetailedabove.Therefore,thetotalbonusawardedtoExecutiveDirectorsis82%ofsalaryresultinginbonuspaymentsof£423,156and£353,959toPhilUrbanandTimJonesrespectively.

Inlinewithourpolicy,halfofthebonusawardwillbedeferredintosharesundertheShortTermDeferredIncentivePlan(‘STDIP’),whichwillbereleasedintwoequalamountsafter12and24months.Thesesharesmustberetaineduntiltherelevantshareholdingguidelinehasbeenmet.


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PERFORMANCE RESTRICTED SHARE PLAN (OVERALL VESTING 47.5%)The2017–19PRSPperformanceconditionhadtwoelementswithequalweighting,annualadjustedEarningsperShare(EPS)growthandrelativeTotalShareholderReturn(TSR).TheEPSelementdidnotmeetthethresholdlevelofperformancerequiredandthereforelapses.TSRperformancewas37.8%,abovethemedianoftheGroup(11.8%)butbelowthelevelrequiredformaximumvesting(39.6%)andtherefore95%ofthiselementvests.Overallvestingistherefore47.5%.

Asaresult,PhilUrbanandTimJoneswillreceive189,234and110,776sharesrespectively,plusanydividendaccruedsharesdueonthedateofvestingc.Thevalueoftheseawards,basedontheaverageMitchells&ButlerssharepriceoverthethreemonthstotheendofFY2019,is£634,690inrespectofPhilUrbanand£371,540inrespectofTimJones.

Overthethreeyearperiod(inclusive)progresshasbeenmadeonnominatedKPIsaasfollows

• CumulativeLFLsalesgrowthais6.6%overtheperiod,consistentlyaheadofthemarket.

• ReturnonInvestmentahasincreasedfrom20%to27%.

• NPShasincreasedfrom51to60,andoverallGuestHealthhasalsoimproved.

• Staffturnoverhasreducedfrom86%to81%.

Despiteastrongperformanceinthelastyear(up9.1%)theoverallcompoundEPSagrowthforthethreeyearperiodwas2.2%(FY2016EPS34.9p,FY2019EPS37.2p)againstathresholdof4%.Duringthefirsttwoyearsoftheperformanceperiod,thebusinesswasunabletogeneratesufficientimprovementinsales,orcostefficiencies,tooffsettheincreasedheadwindsbeingexperiencedwhichcumulativelytotalledcirca£180movertheperformanceperiod.

Subsequently,earningsmomentumhasbeenachievedlargelyfromtheIgniteinitiativesstartingtohaveatangibleimpactonperformancebutoverthefirsttwoyearsEPSdeclinedby2.3%creatingagaptothethresholdearningsthatastrongthirdyearperformancewasunabletopullback.Inadditiontooffsettingtheabovecostheadwindsandreturningtoearningsgrowth,goodprogresshasalsobeenmadeinpayingdowndebt,withnetdebtreducingby£276mfrom£1,840mto£1,564mattheendofFY2019.

TheCommitteeisawareoftheincreasedimportanceapplyingtoEnvironmental,SocialandGovernancematterswhendeterminingremunerationoutcomes,wewerethereforepleasedtonotegoodprogresshasalsobeenmadeacrossarangeofsafetymeasuresovertheperformanceperiod.Thenumberofbusinessesthatachieveeithera4or5ratingintheindependentlyoperatedNationalFoodHygieneRatingSystem(‘NFHRS’)increasedfrom96.7to98.3attheendofFY2019.Thenumberofseriousaccidentsinvolvingcustomershasfallenduringtheperiodtoalevelthatequatesto0.6incidentspermillionmealsserved.TherehavebeennoseriousenvironmentalincidentsovertheperiodandduringFY2019areviewofthebusiness’ssustainabilitystrategywasundertaken,andarangeofexternaltargetswasagreedbytheBoard.

ThepeergroupofcompaniesfortheTSRelementoftheplanwastheFTSEAllShareTravelandLeisuregroup.TheCommitteechosethisgroupbecauseitcontainsallofMitchells&Butlers’directlistedhospitalitycompetitorsandalsothosewhoindirectlycompeteforthesameleisurespend.

TSRperformanceismeasuredbyreferencetoperformanceinthethreemonthspriortothestartoftheperformanceperiodcomparedtothatofperformanceinthelastthreemonthsoftheperformanceperiod,relativetothatofthepeergroup.Theimprovingperformanceoverthepasttwelvemonthsinparticularhasunderpinnedasteadyimprovementintheshareprice.Overallthesharepricehasincreasedfrom278patthestartoftheperformanceperiodto385pattheendoftheperiod.

TheCommitteehasnotapplieddiscretiontothevestingoutcomeinrespectofthePRSPandbelievesthattheoutcomeachievedfairlyreflectsthesignificantimprovementinperformance.Inlinewithourremunerationpolicy,ExecutiveDirectorsarerequiredtoholdvestedsharesforafurtherperiodoftwoyears.

Remuneration policy and changes to the UK Corporate Governance CodeOurremunerationpolicywasapprovedatthe2018AGM,with97%ofshareholdersvotinginfavourofthepolicy.OurpolicyisnextdueforapprovalattheJanuary2021AGM,andthereforeareviewprocesswillbeundertakenduringFY2020.TheCommitteearesatisfiedthatthecurrentpolicyisworkingeffectivelyandasintended.NochangestotheremunerationpolicyareproposedforFY2020.MajorshareholdersandtheirrepresentativebodieswillcontinuetobeconsultedwherematerialchangestotheExecutiveDirectors’remunerationpolicyoritsapplicationarebeingconsidered.Fulldetailsofthecurrentremunerationpolicycanbefoundonthembplc.comwebsite.

TheCommitteearecognisantoftheforthcomingchangestotheUKCorporateGovernancecodeandotherreportingregulations.AlthoughMitchells&ButlerswillnotberequiredtoreportagainstthesenewregulationsuntiltheFY2020annualreport,preparationsarewellunderwayfortheirintroductionandinlinewithpreviousyears,whereappropriate,aproactive‘earlyadoption’approachhasbeentaken.

Forexample,overthelastthreeyearswehavereportedonCEOpayratiosandlastyearsetouttheimpactofa50%increaseinsharepriceonLTIPvestingintheillustrationsofremunerationpolicy.LastyearwealsointroducedanewsectiontothereportwhichdemonstratedhowexecutiveremunerationlinkstooverallstrategyandtherelationshipbetweenexecutiveremunerationandthatofotheremployeesacrosstheGroup.ThisyearwehaveexpandedthissectiontoexplaininmoredetailhowourremunerationprinciplesapplythroughtheorganisationandhowouremployeevaluepropositiondifferentiatesMitchells&Butlersinaverycompetitiverecruitmentmarket.

APPROACH FOR 2020Executive Directors’ salary review and pension contributions TheCommitteehascarefullyconsideredthesalariesofbothExecutiveDirectors,andespeciallythatoftheCEOgiventheverystrongperformance,notingthattherehavebeenanumberofnewappointmentsathighersalarylevelsinthesector.TheCommitteewillcontinuetokeepsalariesunderreviewbuthaveconcludedthatwitheffectfrom1January2020,PhilUrban’ssalarywillbeincreasedto£535,500(3%)andTimJones’salarywillbeincreasedto£448,000(3%).Thisisacontinuationofourapproachtoincreasesalariesinlinewiththeworkforce.

TheCommitteeisawareoftheincreasedfocusonpensioncontributionsforExecutiveDirectorsandtheexpectationthatthesewillalign,overtime,withthebroaderworkforce.Thecurrentlevelis20%ofsalarylessthecostofemployers’nationalinsurance(incurredwhenthisispaidasanallowancethroughpayrollasopposedtobeingpaidasacontributionintoapension),whichispassedontotheExecutiveDirector.ThereforethepensionallowancepaidtoExecutiveDirectorscurrentlyis17.6%ofbasesalary.Thecurrentemployeeaveragepensioncontributioniscirca4%.WenotetherecentguidancefromtheInvestmentAssociationinrelationtopensioncontributionsincludedinitsPrinciplesofRemuneration.

TheChiefExecutiveindicatedtotheCommitteehisdesiretoproactivelyaddressthisissueandasafirststep,forFY2020,thecashequivalentpensioncontributionwillbereducedbythesamecashamountastheincreaseinbasepaysetoutabove(3%).ThismeansthatforFY2020thecashequivalentcontributionforbothExecutiveDirectorswillreduceto14.2%,and,therefore,overallfixedpay(salaryandpensionallowance)remainsunchangedversusthepriorfinancialyear.

TheCommitteewillkeepthismatterunderreviewandagreeaspartofourpolicyreviewduring2020,thebestapproachtoaligningExecutiveDirectorpensioncontributionstothebroaderworkforceovertime.

Annual bonus NochangesareproposedtotheannualbonusstructureforFY2020.

OperatingProfit(70%)

• HalfofthebonusopportunitywillbepayableforachievingademandingOperatingProfittarget.

• Thethresholdatwhichbonuswillbegintoaccruewillagainbesetat95%oftargetandfullpaymentwillrequireverystrongperformance,wellinexcessofcurrentmarketconsensus.

• InsettingtargetstheCommitteehasonceagainconsideredthesignificantcostheadwindswhichthebusinessfacesandwhichareexpectedtobecirca£55minFY2020.TheCommitteehasalsotakenintoaccountthefurtherbenefitsexpectedfromtheIgniteprogrammeandtheunderlyingperformanceofthebusiness.

• ItremainstheviewoftheCommitteethatevenmarginalprofitgrowthrepresentsastrongperformanceinthecircumstances.


REPORT ON DIRECTORS’ REMUNERATION CONTINUED

Theremaining30%oftheannualbonusplanwillbeallocatedagainstthebusinessscorecardasfollows:

• 15%forGuestHealth(NPS;combinedsocialmediascoresandguestcomplaints)

• 10%foremployeeengagement• 5%forFoodSafety

Thenon-financialelementsareonlypayableifathresholdlevelofprofitisachieved.ForFY2020thiswillagainbesetat97.5%oftheOperatingProfittarget.

Inlinewithourestablishedpractice,theCommitteewillconsidertheoverallperformanceoftheCompany,notjusttheoutcomeofeachindividualmeasure.

2020–22 PRSPAPRSPawardisduetobemadeinrespectofthe2020–22performanceperiod.TheCommitteehasreviewedtheperformanceconditionandhasconcludedthattheperformancemeasuresshouldremainunchanged,withtwoindependentelements,OperatingCashFlowbeforeadjusteditems,movementsinworkingcapitalandadditionalpensioncontributions(75%weighting,andhereafterreferredtoasOperatingCashFlow)andrelativeTSR(25%weighting).

Assetoutinlastyear’sreport,insettingthetargetrangefor2020–22theCommitteehasagainconsideredthecostheadwindsthatareanticipatedtocontinuethroughtheplancycle.TheCommitteealsotookintoaccountthepotentialbenefitsfromcurrentandfutureIgniteinitiatives.TheOperatingCashFlowtargetrangewillhaveathresholdsetat£1,332mandmaximumat£1,362m.OperatingProfitisthekeyperformancedriverofOperatingCashFlowandthistargetrangerequiresacirca£30mgrowthfromthe2019–21planatboththresholdandmaximum,whichtheCommitteeconsiderstobeastretchingtargetrangeinthecircumstances.Onanearningsequivalentbasis,theadjustedEPStargetrangeis4.5%to7%CAGR,broadlythesameasthe2019–21plan.TheapplicationofIFRS16willchangereportedOperatingProfit,depreciationandamortisationallofwhicharecomponentpartsofourOperatingCashFlowmeasure.Theexactimpactisnotyetknown,howevertheCommitteewillensurethatanyrestatedtargetsforIFRS16areinlinewiththosesetoutabove.

ThecurrentTSRcomparatorgroupcomprisesfivepeercompanies(EiGroup,GreeneKing,Marston’s,TheRestaurantGroupandJDWetherspoon).FollowingthepurchaseofGreeneKingbyCKAandtheproposedpurchaseofEiGroupbyStonegate,therewillonlybethreepeercompaniesinthecomparatorgroup,renderingtheindex-basedapproachusedinprioryearsunsuitable.TheCommitteehasconsideredthealternativeoptionsandconcludedthatforthe2020–22planthemostappropriateapproachistoreverttotheFTSEAllShareTravelandLeisuregroup.ThisgroupisfelttobemorerelevantthanabroadindexsuchastheFTSE250asalloftheconstituentscompeteforthesameleisurespendandwithover30constituents,willnotbeimpactedbyfuturedelistingsinthesamewayasthecurrentpeergrouphasbeen.25%willvestforTSRperformanceequivalenttothemedian

performanceofthecomparatorgroupand100%willvestforperformanceequivalenttotheupperquartileofthegroup.TheTSRelementwillcontinuetobesubjecttoasharepriceunderpinandmayonlybeexercisedwheretheMitchells&Butlerssharepricehasequalledorexceededthesharepriceatthedatetheawardwithinsixmonthsofthevestingdate.

IwouldliketothankmycolleaguesfortheirengagementandcommitmentandtheeffortsofthosewhohavesupportedtheCommitteeinthepastyear.

Ifyouhaveanycommentsorquestionsonanyelementofthisreport,pleaseemailme,careofCraigProvett,DirectorofCompensationandBenefits,[email protected]

IMELDA WALSH ChairoftheRemunerationCommittee19November2019

ThisreporthasbeenpreparedonbehalfoftheBoardandhasbeenapprovedbytheBoard.ThereporthasbeenpreparedinaccordancewiththeCompaniesActdisclosureregulations(theLargeandMedium-sizedCompaniesandGroups(AccountsandReports)(Amendment)Regulations2013)(the‘Regulations’).

a. TheDirectorsuseanumberofalternativeperformancemeasures(APMs)thatareconsideredcriticaltoaidtheunderstandingoftheGroup’sperformance.Keymeasuresareexplainedonpages156to158ofthisreport.

b. TheCofferPeachbusinesstrackeristheUK’sleadingsalestrackerforpubsandrestaurants.

c. Dividendaccruedsharesaredueinrespectofdividendspaidovertheperformanceperiod,totalling7.5p/share.


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FY 2019 SINGLE FIGURE REMUNERATION FOR EXECUTIVE DIRECTORS

Basic salaries

£000

Taxable benefits

£000

Short-term incentives

£000

Pension-related benefits

£000

Long-termincentives

£000Other£000

Total remuneration

£000

PhilUrban 516 16 423 91 635 3 1,684TimJones 432 16 354 76 372 3 1,253Total 948 32 777 167 1,007 6 2,937

ThesinglefiguretablesetsoutpaymentsmadetoExecutiveDirectorsinrespectofFY2019,includingbasesalary,annualbonusearnings,long-termincentives,paymentsmadeinlieuofpensioncontributionsandtaxablebenefitssuchascompanycarandhealthcarecover.MoredetailisprovidedinrelationtotheFY2019annualbonusschemeandlong-termincentiveschemeoutcomesbelowandafullversionofthesinglefiguretableforallDirectorscanbefoundonpage87.

FY 2019 ANNUAL BONUSTheannualbonuswasbasedontwoelements:70%onOperatingProfitand30%onnon-financialscorecardmeasures.

Target ActualBonus outcome

(% of salary)

OperatingProfit 307 313.3* 59.5GuestHealth NPS 61 60.3 SocialMedia 4.03 4.03 7.5 Complaints 0.69 0.59EmployeeEngagement 79.5 81.3 10Safety 98.0 98.3 5

* ReportedAdjustedOperatingProfitwas£317.0m,bonuswasbasedon£313.3m.

Bonuspaymentsequivalentto82%ofbasesalarywillbemadetoExecutiveDirectors(£423,156inrespectofPhilUrbanand£353,959inrespectofTimJones).Halfofthebonusawardwillbedeferredintoshareswhichwillbereleasedintwoequalamountsafter12and24months.

FY 2019 PRSP VESTINGThePRSPawardsgrantedduringFY2017hadaperformanceperiodendingon28September2019.50%oftheawardwasbasedonrelativeTSRperformanceand50%onEPSgrowth.

Target range Actual % vesting

TotalShareholderReturnrelativetopeergroup Mediantoupperquartile 37.8% 95CompoundannualadjustedEPSgrowth 4%to8%CAGR 2.2%p.a. Nil

TSRperformancewas37.8%overtheperiodwhichresultedin95%vestingagainstthiselementandEPSgrowthof2.2%p.a.overtheperiodwasbelowthethresholdandthiselementoftheawarddidnotvest.

Executive Remuneration at a glanceThis section briefly highlights performance and remuneration outcomes for FY 2019, and our approach for FY 2020. More detail can be found in the Annual Report on remuneration on pages 76 to 79. Full details of the remuneration policy can be found on the mbplc.com website.



APPROACH FOR FY 2020

COMPONENTS OF REMUNERATIONTheremunerationpackagefortheExecutiveDirectorscomprisesbothfixedandvariableelementsconsistentwithourremunerationprinciples.

Fixed: Variable:

FIXED COMPONENTSSalaryOn1January2020PhilUrban’ssalarywillincreaseby3%to£535,500andTimJones’willalsoincreaseby3%to£448,000.

PensionThecashequivalentpensioncontributionforbothExecutiveDirectorswillbereducedbyanamountequaltotheincreaseinbasesalary.Asaresultthecashequivalentpensioncontributionwillbe14.2%ofbasesalary

VARIABLE COMPONENTSAnnual bonus

Nochangetopotentialquantum–100%ofsalary.

Employee Food Measures will be: Operating Profit Guest Health Engagement Safety

Halfofanybonuspayablewillbedeferredintheformofsharesandreleasedinequalpartsafter12and24months.

PRSP

Themeasuresforthe2020–22cycleareunchanged,with75%oftheawardbasedonOperatingCashFlowand25%onrelativeTSR.

Atwo-yearholdingperiodappliesforalllong-termincentiveawardsmadefrom2018onwards.

Share ownership guidelinesDirectorsarerequiredtoretainallvestedshares(netoftax)untiltheshareownershipguidelineismet.Thisappliestovesteddeferredbonussharesaswellassharesvestingfromanylong-termincentiveplans.

+ +Salary Annual bonusBenefits and pension PRSP and sharesFixed total Variable total= =

Phil Urban Chief Executive £535,000 +3.0%

Tim Jones Chief Financial Officer £448,000 +3.0%

70% 15% 10% 5%

Business scorecard measures

Threshold Target range Maximum

25% of element vests 100% of this element vests

Measuresand targets

Median Total Shareholder Return Upper quartile

Awards levels(unchanged)

200% salary

140% salaryTim Jones Chief Financial Officer

Phil Urban Chief Executive

200% salary

150% salaryAll other Executive Directors

Phil Urban Chief Executive

£1,332m Operating Cash Flow £1,362m


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ILLUSTRATIONS OF THE APPLICATION OF REMUNERATION POLICYAkeyprincipleoftheGroup’sremunerationpolicyisthatvariableshort-andlong-termrewardshouldbelinkedtothefinancialperformanceoftheGroup.ThechartsbelowshowthecompositionoftheremunerationoftheChiefExecutiveandChiefFinancialOfficeratminimum,on-targetandmaximumlevelsofperformanceinFY2020.Thechartsalsoshowtheimpactofa50%increaseinsharepriceontheLTIPoutcome.

Chief Executive £000

626

1,429

2,231

2,767

Minimum

100% 43.8%

18.7%37.5%

28.0%

24.0%

48.0%

22.6%

19.4%

38.7%

19.3%Fixed pay

On-target Maximum Maximum +50%Share Price Gain

Short-term incentivesLong-term incentivesShare Price Gain

Chief Financial Officer £000

530

1,109

1,605

1,919

Minimum

100% 47.7%

23.9%28.4%

32.9%

28.0%

39.1%

27.5%

23.4%

32.7%

16.4%

Fixed pay

On-target Maximum Maximum +50%Share Price Gain

Short-term incentivesLong-term incentivesShare Price Gain

Theperformancescenariosdemonstratetheproportionofmaximumremunerationwhichwouldbepayableinrespectofeachremunerationelementateachoftheperformancelevels.Indevelopingthesescenarios,thefollowingassumptionshavebeenmade:

MINIMUMOnlythefixedelementsofremunerationarepayable.Thefixedelementconsistsofbasesalary,benefitsandpension.Basesalaryisthesalaryeffectivefrom1January2020.BenefitsarebasedonactualFY2019figuresandincludecompanycar,healthcareandtaxableexpenses.Pensionisthecashallowanceand/orCompanypensioncontributionpayablefrom1January2020.

ON-TARGET Inadditiontotheminimum,thisreflectstheamountpayableforon-targetperformanceundertheshort-andlong-termincentiveplans:

• 50%ofmaximum(50%ofbasesalaryfortheChiefExecutiveandChiefFinancialOfficer)ispayableundertheshort-termincentiveplan;and

• 50%oftheaward(100%ofbasesalaryfortheChiefExecutiveand70%ofbasesalaryfortheChiefFinancialOfficer)ispayableunderthelong-termincentiveplan.

MAXIMUMInadditiontotheminimum,maximumpaymentisachievedunderboththeshort-andlong-termincentiveplanssuchthat:

• 100%ofbasesalaryispayableundertheshort-termincentiveplanfortheChiefExecutiveandChiefFinancialOfficer;and

• 200%ofbasesalaryfortheChiefExecutiveand140%ofbasesalaryfortheChiefFinancialOfficerispayableunderthelong-termincentiveplan.

SHARE PRICE GAINThisshowstheimpacta50%increaseinthesharepricewouldhaveontheLTIPoutcome.

PAY RATIOS AND GENDER PAYThetablebelowsetsouttheCEOpayratioatthemedian,25thand75thpercentiles.

CEO pay ratio

Financial year

P25 (lower

quartile)P50

(median)P75

(upper quartile)

2019 120:1 112:1 106:1

Moredetailinrelationtothepayratiocalculationcanbefoundonpage94.

ThetablebelowprovidesasummaryofGenderPaydatafortheGroup.

2019 %

2018 %

2017 %

MeanPayGap 6.1 7.4 8.1MedianPayGap 3.2 4.7 5.2MeanBonusGap 33.5 38.5 27.6MedianBonusGap 15.4 29.2 20.6

AtaGrouplevelthepaygaphasreducedoverallonbothmeasuresandthemedianpaygapcomparesveryfavourablytothenationalaverageof17.9%.Anumberofinitiativeshaveunderpinnedtheimprovementofourgenderpaygap,includingtheestablishmentofadiversityandinclusionsteeringgroup,areviewofourfamilyfriendlypoliciesandtheimplementationofanewtalentmanagementprocess.FulldetailscanbefoundinourgenderpayreportontheCompanywebsite.

Additional remuneration information



ALIGNMENT OF EXECUTIVE PAY TO STRATEGY ThetablebelowsetsouthowthethreestrategicprioritiesofthebusinessaligntoExecutiveremunerationforExecutiveDirectors:

Strategic priority Link to Executive remuneration

Building a more balanced business Strongcashflowandoperatingperformancesupportsthedeliveryandsustainabilityofthecapitalplanandestateoptimisation.

OperatingCashFlowisthemaincomponentoftheLTIP.

OperatingProfitdeliveryisthemaincomponentoftheannualbonusplan.

Amorebalancedbusinessdeliversbrandsandfoodanddrinkoffersinanenvironmentthatguestswanttoenjoy.

TheGuestHealthelementoftheannualbonusplanprovidesastrongindicatorofthesuccessofeachbusinessandthereisaclearcorrelationbetweenstrongGuestHealthperformanceandsalesperformance.

High-qualityengagedteamsarefundamentaltothesuccessofanybusiness.

TheengagementelementoftheannualbonusplanmeasureshowourteamsfeelaboutworkingforMitchells&Butlersand,inturn,theservicetheyprovidetoguests.

Instilling a more commercial culture Acommercialcultureimprovescontrols,efficiency,purchasingandpricing,drivingbothimprovedcashflowandoperatingperformance.



Commercialdecisionsmustbeguestfocusedandbenefitfromtheinputofcustomerfeedback.

TheGuestHealthquicklydemonstrateswheredecisionsarerightorwrongandExecutivesareincentivisedtoreact.

Developingandevolvingacommercialculturerequireshighlevelsofemployeeengagementandbusinessawarenessthroughoutthebusiness.

Theemployeeengagementelementoftheannualbonusplansupportsandunderpinsthedevelopmentofculture.

Driving an innovation agenda Innovationatsmallandlargescaleisanengineforimprovedsalesand,therefore,cashandprofitgeneration.



Guests’expectationscontinuetoincrease,demandinghigherstandardsofserviceanddigitalcapability.

TheGuestHealthelementoftheannualplanprovidesvaluableactionablefeedbackandincentivisesaction.

Innovationinvolveschangeanddeliveryofchangerequiresstrongemployeeengagement.

Theemployeeengagementelementoftheannualbonusplanincentivisesactiontomaintainandimproveemployeeengagement.

Remuneration context This section of the report sets out the broader context for remuneration and covers a number of areas:

• explaininghowexecutiverewardlinkstoMitchells&Butlers’threestrategicpriorities;

• thelinkbetweenexecutivepayandremunerationacrosstheGroup;

• engagementwithemployeesonpayandhowtheRemunerationCommitteeiskeptupdatedonwiderworkforcepay,incentivespolicyandalignmenttoourvalues;and

• explainingthefactorsthatemployeesvalueinadditiontopayaspartofworkingforMitchells&Butlers–our‘PeoplePromise’.


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MITCHELLS & BUTLERS’ REMUNERATION PRINCIPLES Shareholder alignmentAhighproportionofrewardisdeliveredintheformofequity,ensuringExecutiveshavestrongalignmentwithshareholders.

CompetitiveProvidingrewardthatpromotesthelong-termsuccessofthebusinesswhilstenablingtheattraction,retentionandmotivationofhigh-calibreseniorExecutives.

Performance-linkedAsignificantpartofanExecutive’srewardislinkedtoperformancewithaclearlineofsightbetweenbusinessoutcomesandthedeliveryofshareholdervalue.

StraightforwardTheremunerationstructureissimpletounderstandforparticipantsandshareholdersandisalignedtothestrategicprioritiesofthebusiness.

Thesesameprinciplesapplythroughouttheorganisationandareadaptedasappropriateforspecificemployeegroups.AgoodexampleofthisishowtheseprinciplesapplytoourGeneralManagers.Acompetitivepackageisimportantforthisgroupastheyarefundamentaltotheday-to-daysuccessofthebusinessandthecurrentrecruitmentmarketischallengingwithashortageofhigh-calibremanagers.AswithExecutivesahighproportionofpotentialrewardforthisgroupisbasedonperformanceandtheoverallstructureisstraightforwardtounderstand.Thereisalesserweightingonequity,butallGeneralManagerscanparticipateinanyoftheallemployeeshareschemes,subjecttoqualifyingservice,thereforebuildingtheirownequityinthebusiness.

Equallytheaboveprinciplesareappliedtoourhourlypaidteammembers.Therecruitmentmarketisbecomingevermorechallengingandthismeansthatcompetitivepayisimportanttoattracthigh-calibreteammembers,especiallyinLondonandtheSouthEastandforkitchenteamsacrosstheUK.Althoughbasepayforourhourlypaidteammembersisnotlinkedtoperformancethereisastronglinktoperformancewherethereareopportunitiestoearntipsandservicecharge(100%ofwhichareretainedbytheteamwithnoadministrationcharge),andmorebroadly,thegoodperformanceoftheCompanyallowsformoreinvestmentinpay.Paystructuresforthisgrouparestraightforwardand,aswithotheremployees,hourlypaidteammemberscanparticipateinanyoftheall-employeeshareschemes,subjecttoqualifyingservice.

REMUNERATION BELOW EXECUTIVE DIRECTOR LEVEL ThetablebelowdemonstrateshowthekeyelementsofExecutivepayalignwiththewiderworkforce:

Base pay Bonus Long-term incentives All-employee share plans

Executive Directors Pay broadly around mid-market levels.

Overall, increases (in percentage terms) consistent across all salaried employee groups.

Bonus schemes for all schemes align to the business scorecard.

The majority of bonus opportunity is linked to financial performance.

Measures and targets for long-term incentive plans consistent for all participants.

Allemployeescanparticipateinanyoftheall-employeeshareschemes,subjecttoqualifyingservice,buildingastakeinthebusiness.

Executive CommitteeSenior management

Support CentreRetail managers

Retail team members Pay set in line with market requirements and closely monitored.

Base pay for many employees is ahead of the statutory minimums.

Many employees benefit from tip and service charge, and it is Mitchells & Butlers’ policy to pass 100% of these earnings on to employees.

Ourpayapproachisaimedatprovidingregularandpredictableearningsthroughcompetitivebasepayforourretailteammembers.Thisisvaluedmorehighlythanvariablepayelementsforretailteammembersandisinlinewithour‘competitive’and‘straightforward’remunerationprinciples.

Workforce engagement WhilstnotspecificallyconsultedonExecutiveremuneration,feedbackfromemployeesisgatheredinanumberofwaysthroughtheyearasshownintheillustrationbelow:

Employee survey

Outcomes reviewed by the Remuneration

Committee and taken into account when

setting remuneration policy.

CEO roadshows

The CEO and CFO hold regular roadshows that

allow both support centre colleagues and General Managers an opportunity to discuss

business issues and provide feedback.

Employee forum

Elected representatives have direct access to the

Executive Committee and for Executive

remuneration matters, the Remuneration Committee chair.

Overview of pay and policy decisions

Committee members are updated on employee terms and conditions and made aware of

significant changes to policies and other pay

related matters.

Remuneration Committee

Nominated and Non-Executive

Director

A Non-Executive Director (Dave Coplin) has been appointed to

engage with employees and report back to the Board. Dave Coplin is

a member of the Remuneration

Committee.



TheCommitteeisregularlyupdatedthroughouttheyearonpayandconditionsapplyingtoGroupemployees.WheresignificantchangesareproposedtoemploymentconditionsandpolicieselsewhereintheGroup,thesearehighlightedfortheattentionoftheCommitteeatanearlystage.OverthecourseofFY2019theseupdatesincludedacomprehensiveoverviewofthetermsandconditionsapplicabletothethreemainemployeegroupsacrosstheCompany,hourlypaidretailteammembers,salariedretailmanagementandretailsupportcentreemployees.

TheCommitteetakesintoaccountthebasepayreviewbudgetapplicabletootheremployeeswhenconsideringthepayofExecutiveDirectors.TheCommitteeconsidersabroadrangeofreferencepointswhendeterminingpolicyandpaylevels;theseincludeexternalmarketbenchmarksaswellasinternalreferencepoints.Anysuchreferencepointsaresetinanappropriatecontextandarenotconsideredinisolation.

Asmentionedabove,allemployeesareinvitedtotakepartinourannualYourSayemployeeengagementsurveyandamid-year‘Pulse’survey.Theseprovideallemployeeswithanopportunitytogiveanonymousfeedbackonawiderangeoftopicsofinterestorconcerntothem.TheCommitteereviewstheresultsofboththemainYourSaysurveyandthePulsesurveyandanysignificantconcernsoverremunerationwouldbeconsideredseparatelybytheCommitteeand,ifappropriate,takenintoaccountwhendeterminingtheremunerationpolicyanditsimplementation.

Inaddition,eachyearanemployeeforumisheld,whichgivestheopportunityforemployeestoaskquestionsofseniormanagement,viaelectedrepresentatives.FromFY2020thisforumwillbeheldonabi-annualbasisandwillalsobeattendedbythenominatedNon-ExecutiveDirector.MoredetailsonhowtheCompanyintendstoutiliseboththeemployeeforumandnominatedNon-ExecutiveDirectorinengagingwithemployeesaresetoutonpage60.

Clearlypayisaveryimportantelementbutotherfactorsalsoplayanimportantpartoftheoverallvalueproposition,whichisknowninternallyasour‘PeoplePromise’.ThediagramaboveexplainsinmoredetailourPeoplePromiseandhowMitchells&Butlersisabletodifferentiateouremploymentpropositioninachallengingrecruitmentmarket.

Ourpeoplevalueopportunitiesforprogression,challengewithintheirrole,fairrewardsandasafeworkingenvironment.Inmorerecenttimes,giventhenumberofbusinessclosuresinthehospitalityindustry,thejobsecuritythatworkingforMitchells&Butlersbringshasalsobecomeamoreimportantfactor.

Ourresearchhasalsoshownthat,unlikesomeindustriesandemployers,Mitchells&Butlersoffersanumberofimportantdifferentiatorswhichouremployees’value:

THE MITCHELLS & BUTLERS ‘PEOPLE PROMISE’

• Flexibilityandconvenience:Mitchells&Butlershasalwayspromotedaflexibleapproachtoworkingfromthefrontlinethroughtooursupportcentre.Thisflexibilityhasbeenfurtherenhancedrecentlywiththerolloutofanemployeeappthatallowsfrontlineteamstoviewtheirrotaandswapshiftswithcolleagues.Furtherimprovingflexibilityforallemployeegroupshasbeenidentifiedasakeyopportunityforthefuture.

• Morejobsatisfaction:AspartofourresearchwelearntthatworkingforMitchells&Butlersgaveemployeesastrongsenseoffamilyandthatemployeesputahighvalueontheday-to-dayvarietyofwork.Thiscomesthroughverystronglyinoursurveyresultswithascoreof81.7forjobsatisfactionandlifestyle.

• Agreatatmosphere:Undoubtedlyworkinginhospitality,especiallyatthefrontline,ishardwork.However,wealsoknowthatitcanbegreatfun.OuraimatMitchells&Butlersistomaketheworkingenvironmentasfunandfriendlyaspossiblewhilstensuringthatguestsreceivegreatservice.Goodexamplesofthisincludeour‘legends’recognitionprogrammewhichisapeertopeeropportunityforteamstorecogniseeachotherandthecompetitionsthatmanyofourbrandsrunforourkitchenteamsthatprovideanopportunitytodesigndishesforourmenus.

We expect our people to SERVE WITH PRIDE

(as they have since 1898!)

Like many employers, opportunities for progression,challenge, fair rewards & safety and security

A better lifestyle,because of the flexibility

and convenience

More job satisfaction,because of the sense of community,the feeling of belonging, the shared

purpose, the variety of work andpride in their achievements

A great atmosphere,because it’s both fun

and friendly

All this adds up to ourbig promise – that you’ll

But unlike many employers, also:

In return, we offer:

FUN


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COMMITTEE TERMS OF REFERENCETheCommittee’stermsofreferencewerereviewedandupdatedin2019totakeaccountoftherevisedCorporateGovernanceCode.

TheCommittee’smainresponsibilitiesinclude:

• determiningandmakingrecommendationstotheBoardontheCompany’sexecutiveremunerationpolicyanditscost;

• takingaccountofallfactorsnecessarywhendeterminingthepolicy,theobjectiveofwhichshallbetoensuretheremunerationpolicypromotesthelong-termsuccessoftheCompany;

• determiningtheindividualremunerationpackagesoftheExecutiveDirectorsandotherseniorExecutives(includingalldirectreportstotheCEO,includingtheCompanySecretary),andindiscussionwiththeExecutiveDirectors,theCompanyChairman;

• havingregardtothepayandemploymentconditionsacrosstheCompanywhensettingtheremunerationofindividualsundertheremitoftheCommittee;and

• aligningExecutiveDirectors’interestswiththoseofshareholdersbyprovidingthepotentialtoearnsignificantrewardswheresignificantshareholdervaluehasbeendelivered.

COMMITTEE MEMBERSHIP AND OPERATIONCommitteemembersandtheirrespectiveappointmentdatesaredetailedinthetablebelow.

NameDate of appointment

to the Committee

ImeldaWalsh(Chair)* 11July2013ColinRutherford* 11July2013BobIvell 11July2013EddieIrwin 11July2013DaveCoplin* 29Feb2016JoshLevy 20July2017JaneMoriarty* 27February2019SusanMurray* 8March2019

* IndependentNon-ExecutiveDirectors.

Annual report on remunerationThis section details the remuneration payable to the Executive and Non-Executive Directors (including the Chairman) for the financial year ended 28 September 2019 and sets out how we intend to implement our remuneration policy for the 2020 financial year. This report, along with the Chair’s annual statement, will be subject to a single advisory vote at the AGM on 21 January 2020.

COMMITTEE ACTIVITY DURING THE YEARTheCommitteemetfourtimesduringtheyearandkeyagendaitemsincludedthefollowing:

October 2018

• Annualbonustargets• Long-termincentiveplan

targets• ChiefExecutivepayreview• ExecutiveCommitteepay

review• Appointmentofremuneration

advisersNovember 2018

• Long-termincentiveplanvestingupdate

• 2018bonusapproval• CorporateGovernance

Codeupdate• Committeetermsofreference• GenderPay

April 2019 • CorporateGovernanceCodeupdate

• Reviewofworkforcetermsandconditions

September 2019

• 2019bonusscheme• Long-termincentiveplan

update• Governanceupdate• GenderPayandemployee

engagement• ExecutiveDirectorpay

ADVICE TO THE COMMITTEE TheCommitteereceivedadvicefromPwCLLPduringtheyear.PwCwereappointedfollowingacompetitivetenderprocessduring2018.PwCaresignatoriestotheRemunerationConsultantsGroupCodeofConductandanyadvicereceivedisgovernedbythatCode.TotalfeespayableinrespectofremunerationadvicetotheCommitteeinthereportingyeartotalled£45,9001.AssetoutintheAuditCommitteereport,theexternalaudithasbeenputouttotender.TheRemunerationCommitteehasbeenadvisedthat,shouldPwCbeappointedasauditors,itwillbenecessarytoappointnewremunerationadvisersasPwCwouldwithdrawitsRemunerationCommittee-relatedservicespriortothecommencementofitsroleasauditors.

AdvicewasalsoreceivedfromtheCompany’slegaladvisers,FreshfieldsBruckhausDeringerLLP,ontheoperationoftheCompany’semployeeshareschemesandoncorporategovernancematters.CliffordChanceLLPalsoprovidedadviceinrelationtopensionschemes.

TheCommitteeissatisfiedthattheadvicereceivedfromitsadviserswasobjectiveandindependent.

MembersofmanagementincludingSusanMartindale,theGroupHRDirectorandCraigProvett,theDirectorofCompensationandBenefits,areinvitedtoattendmeetingsonremunerationmatterswhereappropriate.Theyarenotpresentwhenmattersaffectingtheirownremunerationarrangementsaredecided.TheCompanyChairmandoesnotattendBoardorCommitteemeetingswhenhisremunerationisunderreview.PhilUrbanandTimJoneswerepresentatmeetingswheretheCompany’slong-andshort-termincentivearrangementsandshareschemeswerediscussed.However,eachdeclaredaninterestinthemattersunderreview.

1. FeesareshownnetofVAT.20%VATwaspaidontheadvisers’feesshownabove.



STATEMENT OF VOTING AT AGM OurDirectors’RemunerationPolicywasapprovedatthe2018AGMon23January2018.AtthelastAGM(heldon22January2019),theresolutionontheAnnualreportonremunerationwassubjecttoanadvisoryvote.Setoutinthetablebelowaredetailsoftherelevantshareholdervotes:

Votes cast Votes fora % Votes against % Votes withheldb

Annualreportonremuneration 369,411,392 364,302,757 98.62 5,108,635 1.38 1,811,835

a. The‘For’voteincludesthosegivingtheCompanyChairmandiscretion.b. Avotewithheldisnotavoteinlawandisnotcountedinthecalculationofthevotes‘For’or‘Against’theresolution.

Votes‘For’and‘Against’areexpressedasapercentageofvotescast.

PAY OUTCOMESThetablesandrelateddisclosuressetoutonpages87to92onDirectors’remuneration,deferredannualbonusshareawards(‘STDIP’),PRSPshareoptions,ShareIncentivePlanandpensionbenefitshavebeenauditedbyDeloitteLLP.

DIRECTORS’ REMUNERATIONThetablesbelowsetoutthesinglefigureremunerationreceivedbytheExecutiveDirectorsandtheNon-ExecutiveDirectorsduringthereportingyear.Detailsofperformanceundertheannualbonusplanaresetoutonpages88and89.

EXECUTIVE DIRECTORSBasic salaries

£000Taxable benefitsa

£000

Short-termincentives

£000

Pension related benefitsb

£000

Long-termincentivesc

£000Otherd

£000

Totalremuneration

£000

2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

PhilUrbane 516 509 16 16 423 200 91 89 635 – 3 5 1,684 819TimJonese 432 425 16 16 354 167 76 75 372 – 3 5 1,253 688Sub-totalExecutiveDirectors 948 934 32 32 777 367 167 164 1,007 – 6 10 2,937 1,507

NON-EXECUTIVE DIRECTORSFees£000

Taxable benefitsf

£000

Short-termincentives

£000

Pension related benefits

£000

Long-termincentives

£000Other£000

Totalremuneration

£000

2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

BobIvell 284 284 2 3 – – – – – – – – 286 287RonRobson 53 52 1 0 – – – – – – – – 54 52StewartGillilandg 16 62 0.5 1 – – – – – – – – 16.5 63EddieIrwin 53 52 1 0 – – – – – – – – 54 52ColinRutherford 65 62 2 2.5 – – – – – – – – 67 64.5ImeldaWalsh 65 62 1 0 – – – – – – – – 66 62JoshLevy 53 52 1 0 – – – – – – – – 54 52DaveCoplin 57 52 0.5 1 – – – – – – – – 57.5 53KeithBrowne 53 52 1 0 – – – – – – – – 54 52SusanMurrayh 37 – 0 – – – – – – – – – 37 –JaneMoriartyh 30 – 0 – – – – – – – – – 30 –Sub-totalNon-ExecutiveDirectors 766 730 10 7.5 – – – – – – – – 776 737.5TotalExecutiveDirectorsandNon-ExecutiveDirectors 1,714 1,664 42 39.5 777 367 167 164 1,007 – 6 10 3,713 2,244.5

a. Taxablebenefitsfortheyearcomprisedcarallowance,healthcareandtaxableexpenses.b. BasedonthevalueofsupplementspaidinlieuofcontributionstotheCompanyScheme.c. ThevalueofthePRSPvestingisbasedonthethreemonthaveragesharepricetotheyearend(327.9p).Thevalueattributabletosharepriceimprovementis£138,590forPhilUrbanand

£81,129forTimJones.d. IncludestheawardoffreesharesawardedundertheSIP.e. ThebasesalaryforPhilUrbanwas£520,000andforTimJones£435,000.Thefiguressetoutaretheactualsalariesreceivedoverthefinancialyear,whichhad364days.f. TaxablebenefitsforNon-ExecutiveDirectorsincludecashpaymentsmadeoraccountedforbytheCompanyrelatingtothereimbursementofexpenses(andthevalueofpersonaltax

onthoseexpenses).g. StewartGillilandsteppeddownfromtheBoardon31December2018.h. JaneMoriartyandSusanMurraywereappointedtotheBoardon27February2019and8March2019respectively.


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This results in an Operating Profit for bonus purposes of £313.3m (102% of target) and a payout equivalent to 59.5% of salary (out of 70%) for Executive Directors. The Committee felt that this approach to moderating the bonus outcome was fair and the resulting payout reflects the very strong performance and improvement on the prior year, with the Company returning to Operating Profit growth despite the unprecedented cost challenges, and the continuing outperformance versus competitors as measured independently.

NON-FINANCIAL MEASURES – MAXIMUM 30% (OUT OF 100%) Guest Health (outcome 7.5% out of 15%)The measurement of Guest Health at Mitchells & Butlers comprises a combination of three elements: Net Promoter Score (‘NPS’); a combined social media score; and guest complaints. This rounded assessment ensures that Guest Health is measured comprehensively and does not rely on a single measure.

• The method of measuring NPS was amended slightly for FY 2019. In prior years the overall score was calculated as an average of each business’s score. This means a smaller business, with fewer guests completing a satisfaction survey, carried as much weight in the overall score as a bigger business with more reviews. For FY 2019 this was changed to treat all scores as equally important, i.e. larger businesses with more guest responses have a greater bearing on the overall score.

Sales in the year were £2,237m, an increase of £85m on 2018 and a like-for-like sales improvement of 3.5% which continues to be above the market overall (as measured by the Coffer Peach business trackerb) and represents now almost three years of consistent market outperformance.

The Operating Profit outcome of £317m was just over 103% of target and in excess of the performance required for a maximum payout for this element of the bonus scheme. In line with established practice the Committee undertook a thorough quality of earnings assessment, to understand in detail the drivers of performance. Whilst the vast majority of the growth has been driven through strong management action and implementation of the Ignite initiatives, a modest proportion of the growth seen in FY 2019 was achieved as a result of the utilisation of onerous lease provisions that were charged in part through a large separately disclosed item in 2017. With this in mind the Committee has scaled back the bonus outcome by removing the benefit of these separately disclosed onerous leases provisions in the income statement.

b. The Coffer Peach business tracker is the UK’s leading sales tracker for pubs and restaurants.

FINANCIAL MEASURES – MAXIMUM 70% (OUT OF 100%) Operating Profit (outcome 59.5% out of 70%)In setting the Operating Profit target range the Committee considered a number of factors, including, once again, the significant cost headwinds the business continues to face. For the last financial year these ran at circa £64m, the third year in which we have faced this level of cost inflation. As before, these costs were attributable to labour and energy along with further food and drink inflation. The Committee also took into account the range of initiatives put in place as part of the Ignite programme and to what extent these would offset the cost headwinds.

More broadly the Committee considered the general and sector outlook, especially given the recent increase in business failures and CVAs across the industry. In this context, delivering any level of profit growth was considered by the Committee to be a very strong performance. Target performance was therefore set slightly above the 2018 outturn (£303m) and consensus, which the Committee felt balanced the need for fair but demanding targets. The level required for a maximum award required a significant level of performance ahead of both the Company’s business plan and market expectations.

ANNUAL PERFORMANCE BONUS AND STDIP The annual bonus and STDIP operate as set out in our remuneration policy which is available on the Company’s website. Details of the measures and targets applying to the FY 2019 plan are set out below:

Threshold – 95% of Target

(% of salary payable)Target

(% of salary payable)

Maximum – 103% of Target

(% of salary payable)Outcome

(% of salary payable)

Adjusted Operating Profit £291.7m £307m £316.2m £313.3m*(70%) (0%) (35%) (70%) (59.5%)

* Reported Operating Profit was £317.0m, bonus was based on £313.3m.

TargetCalculation of outcome (% of salary payable)

Performance(Score)

Outcome(% of salary payable)

Guest Health (15%) Net Promoter Score (‘NPS’) 61 Each element is scored 1 if better

than target, 0 if on target, and -1 if below target.

• If the sum of these scores is +3 then maximum bonus is paid. (15%)

• If the sum of these scores is +1 or +2 then an on-target payment would be made. (7.5%)

• If the sum of these scores is 0 then threshold bonus is paid. (3.75%)

60.3(-1)

7.5%

Social Media Score 4.0 4.03(+1)

Complaints Ratio 0.69 0.59(+1)

Threshold (% of salary payable)

Target(% of salary payable)

Maximum(% of salary payable)


Employee Engagement 78.5 79.5 80.5 81.5(10%)* (2.5%) (5%) (10%) (10%)

Target(% of salary payable)


Food Safety 98.0% 98.3%(5%) (5%) (5%)

* Payout is on a straight-line basis between points.



ForFY2019theNPStargetwassetat61,requiringanimprovementofaround1pptontheFY2018scoreusingtherevisedcalculationmethodology.Theoverallscorefellshortofthisdemandingtargetat60.3.

• Thetargetforthecombinedsocialmediascore(reputation.com)wassetat4.0,animprovementontheFY2018outturnof3.93.AReputation.comscoreof4.0isanimportantthresholdtoexceedatagrouplevel,asguestsaremorelikelytovisitbusinesseswithratingsof4or5.Makingevenasmallpositivechangetosocialmediascoresrequiresbigimprovements,forexamplea0.1improvementrequiresanadditional100,000reviewscoresof4orabove.

ExcellentprogresswasmadeoverFY2019andtheoverallscorewas4.03,aheadofthetargetsetbytheCommittee.

• Theguestcomplaintsmetricmeasurestheproportionofcomplaintsreceivedforevery1,000mealsserved.Thetargetforthismeasurewassetat0.69.Theoveralloutcomeof0.59representedaverystrongperformanceinthisareareflectingthefocusondeliveringgreatguestexperiencesacrossallofourbrands.

BasedoncombinedscoresacrossthethreeGuestHealthmetrics,theoveralloutcomeisontargetandasaresultapayoutequivalentto7.5%(outof15%)wasawardedtoExecutiveDirectorsunderthiselement.

Employee engagement (outcome 10% out of 10%)Aclearcorrelationhasbeenestablishedbetweenemployeeengagementandguestsatisfaction,whichinturnhasapositiveimpactonsalesperformance.Twosurveysareheldeachyear.

InJune,employeesareinvitedtoprovidefeedbackthroughacomprehensivesurvey,YourSay,andthisissupplementedbyashorter‘Pulse’surveyinFebruary.Overallaroundtwo-thirdsofemployeescontribute,providingvaluableandrobustinsightintoemployeesatisfaction.

TheengagementtargetforFY2019wasonceagainbasedonacombinedscoreacrossbothsurveys,withagreaterweightingplacedonthemorecomprehensiveYourSaysurvey.Theoveralloutcomewasacombinedscoreof81.3whichwasthefirsttimetheoverallscorehadbeenover80andfollowedtheprevioushighesteverscoreof78.9achievedinFY2018.

Asaresult,amaximumpayoutequivalentto10%(outof10%),wasawardedtoExecutiveDirectorsunderthiselement.

Food safety (outcome 5% out of 5%) Foodsafetywillalwaysbeapriorityforthebusiness,whichiswhyameasurewasintroducedthatisbasedonthenumberofbusinessesthatachieveeithera4or5ratingintheindependentlyoperatedNationalFoodHygieneRatingSystem(‘NFHRS’).ThestretchingtargetsetforFY2019wasfor98%ofbusinessestoachieveascoreofeither4or5overtheyearandtheactualresultwasthat98.3%ofourbusinessesachievedthislevelofperformanceandretaineditssecondplaceintheleaguetableforlargepubandrestaurantgroups.

Asanadditionalcheck,theCommitteehasalsotakenintoaccountoverallworkplacesafetywhichagainhasbeenstronginallareas.

Thestructureforthiselementissuchthatpayoutisbasedentirelyonachievingthetargetset.Therefore,apayoutequivalentto5%wastriggeredagainstthiselement.

Final bonus outcomeIndeterminingtheoverallfinalbonusoutcome,theCommitteeconsideredthewiderperformanceoftheGroupaspartofanoverallqualityofearningsassessmentandwassatisfiedthattheoutcomewasconsistentwithourperformanceovertheyear,takingintoaccountthedownwardadjustmenttotheOperatingProfitelementdetailedabove.Therefore,thetotalbonusawardedtoExecutiveDirectorsis82%ofsalaryresultinginbonuspaymentsof£423,156and£353,959toPhilUrbanandTimJonesrespectively.

Inlinewithourpolicy,halfofthebonusawardwillbedeferredintosharesundertheShortTermDeferredIncentivePlan(‘STDIP’),whichwillbereleasedintwoequalamountsafter12and24months.Thesesharesmustberetaineduntiltherelevantshareholdingguidelinehasbeenmet.

LONG-TERM INCENTIVES VESTING DURING THE YEARDuringFY2017shareawardsweremadetoPhilUrbanandTimJones,underthetermsofthePRSPtothevalueof200%and140%oftheirrespectivebasesalaries.Theperformanceconditionhadtwoindependentelements:compoundannualadjustedEPSgrowthandTSRperformanceagainstagroupofsectorpeers,measuredoverthethreeyearperformanceperiodending28September2019.

Table1belowsummarisesperformanceagainsteachelementoftheperformanceconditions.

TheEPSelementdidnotmeetthethresholdlevelofperformancerequiredand,therefore,lapses.TSRperformancewas37.8%,abovethemedianofthegroup(11.8%)butbelowthelevelrequiredformaximumvesting(39.6%)and,therefore,95%ofthiselementvests.Overallvestingistherefore47.5%.

Asaresult,PhilUrbanandTimJoneswillreceive189,234and110,776sharesrespectively,plusanydividend1accruedsharesdueonthedateofvesting.Thevalueoftheseawards,basedontheaverageMitchells&Butlerssharepriceoverthethreemonthstotheendofthe2019financialyear,is£634,690inrespectofPhilUrbanand£371,540inrespectofTimJones.

Overthethreeyearperiod(inclusive),progresshasbeenmadeonnominatedKPIsasfollows:

• CumulativeLFLsalesagrowthis6.6%overtheperiod,consistentlyaheadofthemarket;

• Returnoninvestmenthasincreasedfrom20%to27%;

• NPShasincreasedfrom51to60,andoverallGuestHealthhasalsoimproved;and

• Staffturnoverhasreducedfrom86%to81%.

Despiteastrongperformanceinthelastyear(up9.1%),theoverallcompoundEPSgrowthforthethreeyearperiodwas2.2%(FY2016EPS34.9p,FY2019EPS37.2p)againstathresholdof4%.Duringthefirsttwoyearsoftheperformanceperiod,thebusinesswasunabletogeneratesufficientimprovementinsalesorcostefficienciestooffsettheincreasedheadwindsbeingexperiencedwhichcumulativelytotalledcirca£180movertheperformanceperiod.

Table 12017–19 PRSP – performance conditions

Threshold (25%) to Maximum(100%) range** Actual % vesting

CompoundannualadjustedEarningsPerShare(‘EPS’)growth(50%weighting) 4%to8%CAGR 2.2%p.a. NilTotalShareholderReturnrelativetopeergroup*(50%weighting) Mediantoupperquartile 37.8% 95.1%

* ComprisingtheconstituentsoftheFTSEAllShareTravelandLeisureindex.** Betweenthresholdandmaximum,vestingundereachmeasureisonastraight-linebasis.Belowthresholdtheawardwilllapse.

1. Dividendaccruedsharesaredueinrespectofdividendspaidovertheperformanceperiod,totalling7.5p/share.


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Subsequently,earningsmomentumhasbeenachievedlargelyfromtheIgniteinitiativesstartingtohaveatangibleimpactonperformance,butoverthefirsttwoyearsEPSdeclinedby2.3%creatingagaptothethresholdearningsthatastrongthirdyearperformancewasunabletopullback.

Inadditiontooffsettingtheabovecostheadwindsandreturningtoearningsgrowth,goodprogresshasalsobeenmadeinpayingdowndebt,withnetdebtreducingby£276mfrom£1,840mto£1,564mattheendofFY2019.

TheCommitteeisawareoftheincreasedimportanceapplyingtoEnvironmental,SocialandGovernancematterswhendeterminingremunerationoutcomes;wewerethereforepleasedtonotegoodprogresshasalsobeenmadeacrossarangeofsafetymeasuresovertheperformanceperiod.Thenumberofbusinessesthatachieveeithera4or5ratingintheindependentlyoperatedNationalFoodHygieneRatingSystem(‘NFHRS’)increasedfrom96.7%to98.3%attheendofFY2019.Thenumberofseriousaccidentsinvolvingcustomershasfallenduringtheperiodtoalevelthatequatesto0.6incidentspermillionmealsserved.TherehavebeennoseriousenvironmentalincidentsovertheperiodandduringFY2019areviewofthebusiness’ssustainabilitystrategywasundertaken,andarangeofexternaltargetswasagreedbytheBoard,moredetailsofwhichcanbefoundonpage18.

TSR performance over the period

180

140

100

60 2016 2017 2018 2019

160

120

80

Mitchells & Butlers plc FTSE ALL Share Travel and Leisure Source: Datastream (Thomson Reuters)

Threshold vesting target* Maximum vesting target*

1.OperatingCashFlow(75%oftheaward) £1,332m(25%vests) £1,362m(100%vests)2.TotalShareholderReturn(‘TSR’)relativeto

apeergroupofcomparatorcompanies (25%oftheaward)

25%willvestformatchingthemedianofthegroup 100%willvestforTSRperformancethatexceedsthemedianby8.5%p.a.

* Betweenthresholdandmaximum,vestingundereachmeasureisonastraight-linebasis.Belowthresholdtheawardwilllapse.

OptionsthatvestundertheTSRelementoftheperformanceconditionmayonlybeexercisedwherethesharepricehasequalledorexceededthesharepriceatthedateofgrantonatleastonedaywithinsixmonthsfollowingthevestingdate.Ifthisconditionisnotmet,thenthevestedoptionwilllapse.

ThepeergroupofcompaniesfortheTSRelementoftheplanwastheFTSEAllShareTravelandLeisuregroup.TheCommitteechosethisgroupbecauseitcontainsallofMitchells&Butlersdirectlistedhospitalitycompetitorsandalsothosewhoindirectlycompeteforthesameleisurespend.

TSRperformanceismeasuredbyreferencetoperformanceinthethreemonthspriortothestartoftheperformanceperiodcomparedtothatofperformanceinthelastthreemonthsoftheperformanceperiod,relativetothatofthepeergroup.

Theimprovingperformanceoverthepasttwelvemonthsinparticularhasunderpinnedasteadyimprovementintheshareprice.Overallthesharepricehasincreasedfrom278patthestartoftheperformanceperiodto385pattheendoftheperiod,andthesharepriceatthetimeofwritinghasincreasedfurther.ThegraphbelowshowstheCompany’sTSRperformanceovertheperiod.

TheCommitteehasnotapplieddiscretiontothevestingoutcomeinrespectofthePRSPandbelievesthattheoutcomeachievedfairlyreflectsthesignificantimprovementinperformance.InlinewithourRemunerationPolicy,ExecutiveDirectorsarerequiredtoholdvestedsharesforafurtherperiodoftwoyears.

LONG-TERM INCENTIVE AWARDS MADE DURING FY 2019AnawardwasmadetotheChiefExecutiveandtheChiefFinancialOfficerinNovember2018inaccordancewiththerulesofthePRSPandwithintheapprovedRemunerationPolicy.

Theperformancemeasureswereunchanged,withtwoindependentelements,OperatingCashFlow(75%weighting)andrelativeTSR(25%weighting).

Insettingthetargetrangefor2019–21,theCommitteeconsideredtheongoingcostheadwindsthatthebusinesscontinuestoface,theupwardpressureonfoodanddrinkinflation,alongwiththepotentialbenefitsflowingfromtheIgniteinitiativesoverthecomingyears.

Onanearningsequivalentbasis,theadjustedEPSatargetrangewillbebetween4.5%and7%CAGR.

TheTSRcomparatorgroupforthe2019–21awardcomprisesfivepeercompanies(EiGroup,GreeneKing,Marston’s,TheRestaurantGroupandJDWetherspoon).



TheOperatingCashFlowandTSRconditionsaremeasuredoverthreeyearsfromthestartofthefinancialyearinwhichtheyaregrantedandanysharesthatvestaresubjecttoafurthertwoyearholdingperiod.FulldetailsofawardsmadetoExecutiveDirectorsunderthePRSParesetoutbelow:

Nil Cost Options

awardedduring the

year to 28/09/19

Basisof award

(% of basic annual salary)

Awarddate

Marketprice per

share used to determine the

award(p)*

Actual/planned vesting

date

Latest lapse date

Face value**

£

ExecutiveDirectorsPhilUrban 375,000 200 28/11/18 272 Nov2021 Nov2023 1,021,500TimJones 219,521 140 28/11/18 272 Nov2021 Nov2023 597,975Total 594,521 1,619,475

* MarketpriceistheMMQonthedaypriortotheawardbeingmade.** Facevalueisthemaximumnumberofsharesthatwouldvest(excludinganydividendsharesthatmayaccrue)iftheperformancemeasure(asdescribedabove)ismetinfull,multipliedby

themiddlemarketquotationofaMitchells&Butlersshareonthedaytheawardwasmade(272.4p).

Theaggregateoptionpriceofeachawardis£1.PerformancemeasurementunderthePRSP,whichisnotre-tested,isreviewedandcertifiedbytheCompany’sauditor.

ALL-EMPLOYEE SIPThetablebelowshowstheawardsmadetoDirectorsunderthefreeshareelementoftheSIPduringtheyear.

SIPShares

awarded during

the year to 28/09/19

Award date

Market price per share at award

(p)

Normal vesting

date

Market price per share at normal

vesting date (p)

Lapsed during period

DirectorPhilUrban 1,112 21/06/19 281.5 21/06/22 n/a n/aTimJones 943 21/06/19 281.5 21/06/22 n/a n/aTotal 2,055

Directors’entitlementsunderthePartnershipShareelementoftheSIParesetoutaspartoftheDirectors’intereststableonpage87.

PRSP, STDIP AND OTHER SHARE AWARDSThetablebelowsetsoutdetailsoftheExecutiveDirectors’outstandingawardsunderthePRSP,STDIPandSharesave(SAYE).

Name of Director Scheme

Number of shares at

29 September 2018

Granted during the

period Date of grant

Lapsed during the

period

Exercised during the

period

Number of shares at

28 September 2019

Date from which

exercisable Expiry date

Phil Urban PRSP2016–18ab 381,022 – June2016 381,022 – – Nov2018 Nov2020

PRSP2017–19a 397,970 – Nov2016 – – 397,970 Nov2019 Nov2021

PRSP2018–20c 393,517 – July2018 – – 393,517 Nov2020 Nov2022

PRSP2019–21c – 375,000 Nov2018 – – 375,000 Nov2021 Nov2023STDIP2017 28,639 – Dec2017 – 14,319 14,320 Dec2018d Dec2019STDIP2018 – 36,988 Dec2018 – – 36,988 Dec2019d Dec2020SAYE2015 4,972 – June2015 4,972 – – Oct2018 Mar2019SAYE2018 7,317 – June2018 – – 7,317 Oct2021 Mar2022

Total 1,213,437 411,988 385,994 14,319 1,225,112Tim Jones PRSP

2016–18ab 223,048 – Jun2016 223,048 – – Nov2018 Nov2020PRSP

2017–19a 232,968 – Nov2016 – – 232,968 Nov2019 Nov2021PRSP

2018–20c 230,361 – July2018 – – 230,361 Nov2020 Nov2022PRSP

2019–21c – 219,521 Nov2018 – – 219,521 Nov2021 Nov2023STDIP2017 23,950 – Dec2017 – 11,975 11,975 Dec2018d Dec2019STDIP2018 – 30,932 Dec2018 – – 30,932 Dec2019d Dec2020SAYE2015 2,486 – June2015 2,486 – – Oct2018 Mar2019SAYE2018 7,317 – June2018 – – 7,317 Oct2021 Mar2022

Total 720,130 250,453 225,534 11,975 733,074

a. 50%ofthisPRSPawardissubjecttoaTSRconditionandtheother50%issubjecttoadjustedEPSgrowthtargets.b. The2016–18planlapsedinNovember2018.c. 75%ofthisPRSPawardissubjecttoanOperatingCashFlowtargetandtheremaining25%issubjecttoaTSRcondition.d. Sharesarereleasedintwoequaltranches,12and24monthsaftergrant.Dateshownisfirstreleasedate.


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DIRECTORS’ INTERESTSExecutiveDirectorsareexpectedtoholdMitchells&Butlerssharesinlinewiththeshareholdingguidelinesetoutintheremunerationpolicyreport.

ThisrequirestheChiefExecutivetoaccumulateMitchells&Butlerssharestothevalueofaminimumof200%ofsalary(150%ofsalaryforotherExecutiveDirectors)throughtheretentionofsharesarisingfromshareschemes(onanetoftaxbasis)orthroughmarketpurchases.PhilUrban’sshareholdingat28September2019was76.6%ofhisbasicannualsalary(201848.7%)andTimJones’shareholdingwas78.3%ofhisbasicannualsalary(201857.6%)andasaresulttheshareholdingguidelineisnotmet.

IfdeferredannualbonussharesthatareduetobereleasedinNovember2019andsharesvestingfromthe2017/19PRSP,alsoduetovestinNovember2019,aretakenintoaccountonanetoftaxbasis,theChiefExecutive’sshareholdingwouldbe151%ofbasesalaryandtheChiefFinancialOfficer’s134%ofbasesalary.

ExecutiveDirectors’shareholdingsarecalculatedbasedontheaveragesharepriceoverthefinalthreemonthsofthefinancialyear;forFY2019thiswas327.9p.

TheinterestsoftheDirectorsintheordinarysharesoftheCompanyasat28September2019and29September2018areassetoutbelow:

Wholly owned shares without performance

conditionsa

Shares with performance

conditions

Unvested options/awards without performance

conditionsb

Unvested options/awards with performance conditionsc

Vested but unexercised

optionsTotal

shares/options

2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

Executive DirectorsPhilUrban 121,455 97,024 – – 58,625 40,928 1,166,487 1,172,509 – – 1,346,567 1,310,461TimJones 103,852 95,944 – – 50,224 33,753 682,850 686,377 – – 836,926 816,074Non-Executive DirectorsBobIvell 12,006 12,006 – – – – – – – – 12,006 12,006RonRobson – – – – – – – – – – – –EddieIrwin 31,560 31,560 – – – – – – – – 31,560 31,560ColinRutherford – – – – – – – – – – – –ImeldaWalsh 7,500 7,500 – – – – – – – – 7,500 7,500DaveCoplin 2,042 2,042 – – – – – – – – 2,042 2,042JoshLevy – – – – – – – – – – – –KeithBrowne – – – – – – – – – – – –SusanMurray – – – – – – – – – – – –JaneMoriarty – – – – – – – – – – – –Total 278,415 246,076 – – 108,849 74,681 1,849,337 1,858,886 – – 2,236,601 2,179,643

a. IncludesFreeSharesandPartnershipSharesgrantedundertheSIP.b. OptionsgrantedundertheSharesaveasdetailedinthetableonpage91anddeferredbonusawardsgrantedundertheSTDIP.c. OptionsgrantedunderthePRSPasdetailedinthetableonpage91.

Directors’shareholdings(shareswithoutperformanceconditions)includesharesheldbypersonscloselyassociatedwiththem.

TheaboveshareholdingsarebeneficialinterestsandareinclusiveofDirectors’holdingsundertheShareIncentivePlan(bothFreeShareandPartnershipShareelements).

PhilUrbanandTimJoneseachacquired62sharesunderthePartnershipShareelementoftheShareIncentivePlanbetweentheendofthefinancialyearand19November2019.TherehavebeennochangesintheholdingsofanyotherDirectorssincetheendofthefinancialyear.

NoneoftheDirectorshasabeneficialinterestinthesharesofanysubsidiaryorindebenturestocksoftheCompanyoranysubsidiary.

Themarketpricepershareon28September2019was285pandtherangeduringtheyearto28September2019was238pto385ppershare.

TheExecutiveDirectorsasagroupbeneficiallyown0.05%oftheCompany’sshares.



FEES FOR EXTERNAL DIRECTORSHIPS Noexternalnon-executivedirectorshipswereheldbyeitherExecutiveDirectorduringtheyearto28September2019.

PAYMENT FOR LOSS OF OFFICENopaymentsforlossofofficeweremadeintheyearended28September2019.

PAYMENTS TO PAST DIRECTORSNopaymentsweremadetoanypastDirectorsintheyearended28September2019.

Total shareholder return from September 2009 to September 2019 (rebased to 100)Thisgraphshowsthevalue,by28September2019,of£100investedinMitchells&Butlersplcon26September2009,comparedwiththevalueof£100investedintheFTSE250andtheFTSEAllShareTravelandLeisuregroup(operatedintheLTIPvestingin2019).

350

250

150

50 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

300

200

100

Mitchells & Butlers plc FTSE 250 FTSE ALL Share Travel and Leisure Source: Datastream (Thomson Reuters)

ThegraphbelowillustratestheTSRperformanceoverthepastthreeyears,whichreflectstheperformanceachievedunderthecurrentChiefExecutive.AtthestartofthisperiodtheChiefExecutivehadbeeninpositionforayearandhadcompletedastrategicreviewofthebusiness,identifyingthreestrategicprioritiesandhadcommencedonthefirstwaveofIgniteinitiatives.OverthethreeyearperiodtheperformanceofthebusinesshassteadilyimprovedasfurtherIgniteinitiativeshavebeenimplementedandbenefitshavestartedtoberealised.

180

140

100

60 2016 2017 2018 2019

160

120

80

Mitchells & Butlers plc FTSE 250 FTSE ALL Share Travel and Leisure Source: Datastream (Thomson Reuters)


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CEO EARNINGS HISTORY

Year ended 25/09/10 24/09/11 29/09/12 28/09/13 27/09/14 26/09/15 24/09/16 30/09/17 29/09/18 28/09/19

Phil UrbanSinglefigureremuneration(£000) – – – – – – 613 770 819 1,684Annualbonusoutcome(%ofmax) – – – – – – – 28 39 82LTIPvestingoutcome(%ofmax) – – – – – – – – – 47.5Alistair DarbySinglefigureremuneration(£000) – – – 982a 642 878 – – – –Annualbonusoutcome(%ofmax) – – – 71.0 – – – – – –LTIPvestingoutcome(%ofmax) – – – n/a n/a 19.0 – – – –Bob IvellSinglefigureremuneration(£000) – – 557 69b – – – – – –Annualbonusoutcome(%ofmax) – – n/ac n/ac – – – – – –LTIPvestingoutcome(%ofmax) – – n/ac n/ac – – – – – –Jeremy BloodSinglefigureremuneration(£000) – 397 50 – – – – – – –Annualbonusoutcome(%ofmax) – –d n/ac – – – – – – –LTIPvestingoutcome(%ofmax) – n/ac – – – – – – – –Adam FowleSinglefigureremuneration(£000) 1,315 483e – – – – – – – –Annualbonusoutcome(%ofmax) 87.6 16.0 – – – – – – – –LTIPvestingoutcome(%ofmax) 16.2 24.2 – – – – – – – –

a. AlistairDarbyformallytookupthepositionofCEOon12November2012followingashortperiodofinductionandhandover.ThefigureshownreflectsthedateofhisappointmenttotheBoard(8October2012).

b. Figureshownisuptoandincluding11November2012asBobIvellremainedExecutiveChairmantothisdate.c. TheDirectorwasnotaparticipantintheplan.d. JeremyBloodwasnotaparticipantintheshort-termincentiveplan.AtthediscretionoftheBoardapaymentof£100,000wasmadeinrespectofhiscontributionasInterimChief

Executive.Thispaymentisincludedinthesingleremunerationfigure(£397,000)above.Earningsexcludethefeepayablefortheperiod26September2010to14March2011duringwhichMrBloodservedasaNon-ExecutiveDirector.

e. Earningsdisclosedareto15March2011whenMrFowlesteppeddownasCEO.

CHANGE IN REMUNERATION OF THE CEO

Salary (£) Taxable benefits (£) Bonus (£)

2019 2018 % Change 2019 2018 % Change 2019 2018 % Change

CEO 520,000 510,000 2.0 15,789 15,557 1.5 423,156 200,034 111.5Salariedemployees 34,321 32,383 6.0 895 728 22.9 4,744 2,449 93.7

ThechangeinCEOremunerationiscomparedtothechangeinaverageremunerationofallfull-timesalariedemployees,whichincludesgeneralmanagers,assistantmanagersandkitchenmanagersemployedinourbusinesses.

Salariedemployeeswithpart-yearserviceineitherFY2018orFY2019havebeenexcludedfromthecomparisonfigures.Retailstaffemployeeshavebeenexcludedfromthecomparatorgroupastheyarehourlypaid,largelyparttimeanddonotparticipateinanybonusplans.TheCEOfiguresdonotincludeLTIPawardsorpensionbenefitsthataredisclosedinthesinglefiguretable.

CEO PAY RATIOS ForthelastthreeyearsMitchells&ButlershasdisclosedthepayratiobetweentheCEOandthemedianpayofotheremployees,reflectingemergingbestpractice.TheGovernmenthasnowintroducedlegislationthatwillrequireallquotedcompanieswithmorethan250employeestopublishtheratiooftheirCEO’spay,usingthesinglefigurefortotalCEOremunerationtothatofthemedian,25thand75thpercentiletotalremunerationoffull-timeequivalentemployees.WhilstthislegislationdoesnotrequireMitchells&Butlerstocomplyuntilthe2020AnnualReport,theCommitteefeelsthatitisimportanttocontinuetotakealeadinthisarea,asitprovidesahelpfulopportunitytodemonstratethelinkbetweenCEOpayinthecontextofoverallworkforceremuneration.ThetablebelowsetsouttheCEOpayratioatthemedian,25thand75thpercentilefor2019,comparedto2018.

CEO pay ratio

Financial year Method P25 (lower quartile) P50 (median) P75 (upper quartile)

2019 Option C 120:1 112:1 106:12018 OptionC 61:1 58:1 52:1

Thelowerquartile,medianandupperquartileemployeeswerecalculatedbasedonfull-timeequivalentbasepaydataasat28September2019.ThiscalculationmethodologywasselectedasthedatawasfelttobethemostaccuratewayofidentifyingthebestequivalentsofP25,P50andP75and,therefore,themostaccuratemeasurementofourpayratios.Ofthethreeallowablemethodologiesundertheforthcominglegislation,thismethodisclassedas‘OptionC’.OptionAwasconsideredbutgiventhehighlevelsofteammemberturnover,itwasfeltmoreappropriatetoadopttheapproachsetoutabove.



TheemployeepaydatahasbeenreviewedandtheCommitteeissatisfiedthatitfairlyreflectstherelevantquartilesgiventheverylargeproportionofhourlypaidteammembersemployedbyMitchells&Butlers(circa85%ofthetotalworkforce).Thethreerepresentativeemployeesusedtocalculatethepayratiosarehourlypaidandthebasepayelementswerecalculatedusingafull-timeequivalenthourlyworkingweekof35hours.Hourlypaidemployeesdonotparticipateintheannualbonusplanorlong-termincentiveplanandinmostcasesdonothaveanytaxablebenefits.Employeepaydoesnotincludeearningsfromtipsandservicecharge,fromwhichmanyemployeesbenefit.ItisMitchells&Butlers’policytopassallearningsfromtipsandservicechargestoemployees.

Paydetailsfortheindividualsaresetoutbelow:

CEO (£) P25 (lower quartile) (£) P50 (median) (£) P75 (upper quartile) (£)

Salary 516,044 14,014 14,872 15,575Totalpay 1,680,349 14,014 15,046 15,881

Themedianpayratiosreportedin2016and2017werecompletedusingadifferentmethodologythatcalculatedactualpayandbenefitsoverthefinancialyearforallemployeeswhohadbeenemployedforthefullfinancialyear.Thismethodologyisnotcompliantwiththenewregulations,butoverallthemedianpayratioisbroadlyinlinewithprioryearsat63:1in2017and44:1in2016,ayearinwhichnobonuswaspaidtotheCEO.

TheChiefExecutive’sbasesalaryincreasedby2%from2018comparedtoanoverallincreaseinworkforcepayofaround4%.TheratiobetweenthebasepayoftheChiefExecutiveandthebasepayofemployeesateachquartilehasremainedbroadlystatic.Onatotalpaybasis,theratioofworkforcepaytotheChiefExecutive’stotalpayhasincreased,reflectingthehigherlevelsofvariablepayfromannualandlong-termincentivesthathavebeenpaidtotheChiefExecutiveinrespectofFY2019.Whilstthepayratiohasincreasedbecauseoftheincentivepayments,theCommitteebelievesthattheratioisbroadlyconsistentwiththatofotherorganisationsinhospitalityandretailthathavealsoseenannualandlong-termincentiveplansincreasetotalearningsfortheChiefExecutive.

Asstatedabove,hourly-paidemployeesdonotparticipateintheannualbonusplan,wheresalariedemployeesdoparticipateinanannualbonusplan(circa5,000employees);theyhavealsoseenaveragebonusearningsincreaseinpercentagetermsbyasimilaramountasthatoftheChiefExecutivein2019.Morebroadly,payinthehospitalitysectorislowerthanmanyothersectorsandthiswillbeaninfluencingfactorintheoverallpayratio,despitesignificantincreasesinpayratesoverthelastfewyears.

RELATIVE IMPORTANCE OF SPEND ON PAY £mFiguresshownforwagesandsalariesconsistofallearnings,includingbonus.InFY2019,£3.5m(0.5%)waspaidtoExecutiveandNon-ExecutiveDirectors(2018£2m(0.3%)).

600

400

200

0

700

500

300

100

FY 2019 FY 2018 * From note 2.3 to the consolidated financial statements (excludes share-based payments). ** Business Rates, Corporation Tax, Employer’s NI.

Wages and salaries* Principal taxes** Pension deficit contributions Debt service

5.8%

6.9%

+4.3%

0.0%

656 197 197620 171 160 49 47

Details of service contracts and letters of appointment DetailsoftheservicecontractsofExecutiveDirectorsaresetoutbelow.

Director Contract start date Unexpired termNotice period

from Company Minimum notice

period from DirectorCompensation on change of control

PhilUrbana 27/09/15 Indefinite 12months 6months NoTimJones 18/10/10 Indefinite 12months 6months No

a. PhilUrbanbecameChiefExecutiveandjoinedtheBoardon27September2015.Hiscontinuousservicedatestartedon5January2015,thedateonwhichhejoinedtheCompanyasChiefOperatingOfficer.


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Non-Executive DirectorsNon-ExecutiveDirectors,includingtheCompanyChairman,donothaveservicecontractsbutserveunderlettersofappointmentwhichprovidethattheyareinitiallyappointeduntilthenextAGMwhentheyarerequiredtostandforelection.InlinewiththeCompany’sArticles,allDirectors,includingNon-ExecutiveDirectors,willstandforre-electionatthe2020AGM.Thisisalsoinlinewiththeprovisionsofthe2018UKCorporateGovernanceCode.Non-ExecutiveDirectors’appointmentsareterminablewithoutnoticeandwithnoentitlementtocompensation.Paymentoffeeswillceaseimmediatelyontermination.

RonRobsonandJoshLevywereappointedtotheBoardpursuanttothetermsofthePiedmontDeedofAppointment,informationonwhichissetoutonpage59.

CopiesoftheindividuallettersofappointmentforNon-ExecutiveDirectorsandtheservicecontractsforExecutiveDirectorsareavailableattheRegisteredOfficeoftheCompanyduringnormalbusinesshoursandonourwebsite.Copieswillalsobeavailabletoshareholderstoviewatthe2020AGM.

Annual performance bonusThemaximumbonusopportunitywillremainat100%ofsalaryfortheChiefExecutiveandChiefFinancialOfficerwith70%ofbonustobebasedonOperatingProfitandtheremaining30%onnon-profitelementslinkedtothebusinessscorecard.

Weighting Details

OperatingProfit 70% Bonuswillbegintoaccrueatthresholdwithhalfofthebonuspayableforon-targetperformance.

InsettingtargetstheCommitteehasonceagainconsideredthesignificantcostheadwindsthebusinessfaces,expectedtobecirca£55minFY2020,theeconomicoutlookandconsumerconfidence.Inaddition,theCommitteehasalsotakenintoaccountthefurtherbenefitsexpectedfromtheIgniteprogrammeandtheunderlyingperformanceofthebusiness.

ItremainstheviewoftheCommitteethatevenmarginalprofitgrowthrepresentsastrongperformanceinthecircumstances.

Fullpaymentwillrequireverystrongperformance,wellinexcessofcurrentmarketconsensus.GuestHealth 15% GuestHealthwillcomprisethreemeasures,eachwithanequalweighting:

• NPS–awell-establishedmeasureofGuestHealth,willcontinuetobeassessedinFY2020.• Social media–Themonitoringtoolenablesallsocialmediareviews,includingTripAdvisor,Facebookand

Google,tobecombinedintoasinglereviewscore.• Guest complaints–Therehasbeenanincreasedfocusonimprovingthespeedatwhichguestcomplaintsare

resolved,alongsideacommitmenttoreducingtheoverallnumberofcomplaintsreceived.

CombiningNPSwithanassessmentofsocialmediareviewsandguestcomplaintsprovidesamoreholisticreviewofGuestHealth.Toachieveamaximumpayment,performancewillneedtoexceedtargetonatleasttwoelements,andbeattargetorbetter,forthethirdelement.

EmployeeEngagement 10% Mitchells&Butlershasmeasuredemployeeengagementforanumberofyears,andaclearcorrelationhasbeenestablishedbetweenemployeeengagementandguestsatisfaction,which,inturn,hasapositiveimpactonsales.Forthisreason,theCommitteehasdecidedtocontinuetoincludeemployeeengagementinthebonusscheme.

FoodSafety 5% FoodSafetywillalwaysbeakeypriorityandincludingameasurebasedontheproportionofourbusinessesthatachieveahighNationalFoodHygieneRatingSchemescorereflectsourcontinuedfocusonthesafeoperationofourbusinesses.AnagreedFoodSafetyscoremustbeachievedforthispartofthebonustopayoutand,asanadditionalcheck,overallworkplacesafetywillalsobetakenintoaccountwhendeterminingtheoutcome.

IMPLEMENTATION OF REMUNERATION POLICY IN FY 2020Executive Directors’ salary review and pension contributionsTheCommitteehascarefullyconsideredthesalariesofbothExecutiveDirectors,andespeciallythatoftheChiefExecutivegiventheverystrongperformanceofthebusiness,notingthattherehavebeenanumberofnewappointmentsathighersalarylevelsinthesector.TheCommitteewillcontinuetokeepsalariesunderreviewbuthasconcludedforthenextincrease,duetotakeeffectfrom1January2020,PhilUrban’ssalarywillbeincreasedto£535,500(3%)andTimJones’salarywillbeincreasedto£448,000(3%).Thisisacontinuationofourapproachtoincreasesalariesinlinewiththeworkforce.

TheCommitteeiscognisantoftheincreasedfocusonpensioncontributionsforExecutiveDirectorsandtherequirementforthesecontributionstoalign,overtime,withthebroaderworkforce.Thecurrentlevelis20%ofsalarylessthecostofemployer’snationalinsurance(incurredwhenthisispaidasanallowancethroughpayrollasopposedtobeingpaidasacontributionintoapension),whichispassedontotheExecutive

Director,thereforethepensionallowancepaidtoExecutiveDirectorscurrentlyis17.6%ofbasesalary.Thecurrentemployeeaveragepensioncontributioniscirca4%.WenotetherecentadditionalguidancefromtheInvestmentAssociationinrelationtopensioncontributionsandtherecentpublicationofitsPrinciplesofRemuneration,whichalsocoverInvestmentAssociationmembers’expectationsonotherareasoftheremunerationstructure.

TheChiefExecutiveindicatedtotheCommitteeadesiretoproactivelyaddressthisissueand,therefore,asafirststep,for2020,thecashequivalentpensioncontributionwillbereducedbythesamecashamountastheincreaseinbasepaysetoutabove(3%).Thismeansthatfor2020thecashequivalentcontributionforbothExecutiveDirectorswillreduceto14.2%andoverallfixedpay(salaryandpensionallowance)remainsunchangedversustheprioryear.

TheCommitteewillkeepthismatterunderreviewandwillagree,aspartofourPolicyreviewduring2020,thebestapproachtoaligningExecutiveDirectorpensioncontributionstothebroaderworkforceovertime.



The non-financial elements will only become payable if a certain level of Operating Profit has been achieved. For 2020, this will remain at 97.5% of target, which is ahead of the threshold required for payment under the Operating Profit measure.

The Committee will continue to consider the overall performance of the Company, not just the outcome of each individual measure. All bonus targets are considered to be commercially sensitive and will not be disclosed in advance. However, retrospective disclosure of targets and performance against them will be provided in next year’s Directors’ remuneration report.

The bonus structure for all Managers across Mitchells & Butlers is linked to the above business scorecard.

PERFORMANCE RESTRICTED SHARE PLAN (PRSP) 2020–22A PRSP award is due to be made in respect of the 2020–22 performance period. The Committee has reviewed the performance condition and has concluded that the performance measures should remain unchanged, with two independent elements, Operating Cash Flow (75% weighting) and relative TSR (25% weighting).

As set out in last year’s report, in setting the target range for 2020–22 the Committee has again considered the cost headwinds that are anticipated to continue through the plan cycle. The Committee also took into account the potential benefits from current and future Ignite initiatives. The Operating Cash Flow target range will have a threshold set at £1,332m and maximum at £1,362m. Operating Profit is the key performance driver of Operating Cash Flow and this target range requires growth of circa £30m from the 2019–21 plan at both threshold and maximum, which the Committee considers to be a stretching target range in the circumstances. As a comparison, Operating Profit in the previous three years was flat over the period. On an earnings-equivalent basis, the adjusted EPS target range is 4.5% to 7% CAGR, broadly the same as the 2019–21 plan. The application of IFRS 16 will change reported Operating Profit, depreciation and amortisation, all of which are component parts of our Operating Cash Flow measure. The Committee will ensure that any restated targets for IFRS 16 are no less stretching than those set out above.

The current TSR comparator group comprises five peer companies (EI Group, Greene King, Marston’s, The Restaurant Group and JD Wetherspoon). Following the purchase of Greene King by CKA and the proposed purchase of EI Group by Stonegate there would only be three peer companies in the comparator group, rendering the index-based approach used in prior years unsuitable. The Committee has considered the alternative options and concluded that for the 2020–22 plan the most appropriate approach is to revert to the FTSE All Share Travel and Leisure group. This group is felt to be more relevant than a broad index such as the FTSE 250, as all of the constituents compete for the same leisure spend and with over 30 constituents will not be impacted by future delistings in the same way as the current peer group has been. 25% will vest for TSR performance equivalent to the median performance of the comparator group and 100% will vest for performance equivalent to the upper quartile of the group. The TSR element will continue to be subject to a share price underpin and may only be exercised where the Mitchells & Butlers share price has equalled or exceeded the share price at the date of the award within six months of the vesting date.

A summary of the performance measures and targets are set out in the table below:

Threshold vesting target* Maximum vesting target*

1. Operating Cash Flow (75% of the award) £1,332m (25% vests) £1,362m (100% vests)2. Total Shareholder Return (‘TSR’) relative to

a peer group of comparator companies** (25% of the award)

25% will vest for matching the median of the group 100% will vest for TSR performance that is equivalent to the upper quartile of the comparator group

* Between threshold and maximum, vesting under each measure is on a straight-line basis. Below threshold the award will lapse.** Consisting of the constituents of the FTSE All Share Travel and Leisure group.

NON-EXECUTIVE DIRECTORS’ FEE REVIEW

The Chairman and Non-Executive Director fees were last reviewed in January 2019. No changes are proposed for 2020.

IMELDA WALSH Chair of the Remuneration Committee19 November 2019

a. The Directors use a number of alternative performance measures (APMs) that are considered critical to aid the understanding of the Group’s performance. Key measures are explained on pages 156 to 158 of this report.


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governance - mitchells & butlersin fy 2019, the company undertook an internal board...

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