governance - mitchells & butlers chairman’s introduction to governance 46 board of ......

In this section45 Chairman’sintroductiontoGovernance46 BoardofDirectors48 Directors’report54 Directors’responsibilitiesstatement55 Corporategovernancestatement62 AuditCommitteereport66 ReportonDirectors’remuneration

GOVERNANCE

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

Bob IvellNon-Executive Chairman

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

OneofthekeyrolesfortheBoardofDirectorsatMitchells&Butlersistoprovideleadershipforaround46,000employeesandmaintainthehighestpossiblestandardsofcorporategovernance.TheBoardcontinuestomonitordevelopmentsincorporategovernanceandreportingregulations.TheStrategicreportonpages1to43includestheGroup’sstrategy,progressandperformancefortheyear.

TherehavebeennoBoardchangesduringtheyearandtheBoardasawholehascontinuedtoworktogethertoimplementtheCompany’sstrategyinacohesiveway.OurbroadrangeofBoardtalentcoversavarietyofprofessionalskillsandourdiversegroupofNon-ExecutiveDirectorscontinuetobringmuchexperienceandchallengetotheBoard.Myfocuscontinuestobeonmaintainingastrongteam,withabroadrangeofprofessionalbackgroundsandskillstodrivefurtherimprovementswherepossible.

For2017wecarriedoutaninternalreviewoftheBoard’seffectiveness,andtheresultsofthiscanbefoundonpage61.

TheremainderofthisreportcontainsthenarrativereportingrequiredbytheUKCorporateGovernanceCode,theListingRulesandtheDisclosureGuidanceandTransparencyRules.Ihopethatyoufindthisreporttobeinformativeandhelpfulinrelationtothisimportanttopic.

Wearecommittedtomaintaininganactivedialoguewithallourshareholders,andwecontinuetoofferourinstitutionalinvestorsaccesstokeyseniormanagementandourInvestorRelationsteamviaourInvestorRoadshowprogramme.IwouldliketoencourageshareholderstoattendourAnnualGeneralMeeting,detailsofwhicharesetoutintheseparateNoticeofAGMsentoutwiththisAnnualReport.TheuseofourRetailSupportCentreinBirminghamasavenueforourAGMhasprovedtobeasuccess(aswellasacostsaving)andsoweintendtousethesamefacilityforthe2018AGMandwelookforwardtowelcomingyou,whereIhopeyouwilltaketheopportunityofmeetingourExecutiveandNon-ExecutiveBoardDirectors.

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

Bob Ivell Chairman

For the Company’s latest financial informationgoto:www.mbplc.com/investors

One of the key roles for the Board of Directors at Mitchells & Butlers is to provide leadership for around 46,000 employees and maintain the highest possible standards of corporate governance.

Chairman’s introduction to Governance

Annual report and accounts 2017 | Mitchells & Butlers plc | 45

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Bob IvellNon-Executive Chairman Aged65AppointedtotheBoardinMay2011,Bobhasover30yearsofextensivefoodandbeverageexperiencewithaparticularfocusonfood-led,managedrestaurants,pubsandhotels.HeiscurrentlyNon-ExecutiveChairmanofCarpetrightplc,aNon-ExecutiveDirectorofCharlesWellsLimitedandPresidentofTheAssociationofLicensedMultipleRetailers.HewaspreviouslySeniorIndependentDirectorofAGARangemasterGroupplcandBritvicplc,andamainBoardDirectorofS&NplcasChairmanandManagingDirectorofitsScottish&Newcastleretaildivision.HehasalsobeenChairmanofRegentInns,ParkResortsandDavidLloydLeisureLimited,andwasManagingDirectorofBeefeaterRestaurants,oneofWhitbread’spubrestaurantbrands,andaDirectorofTheRestaurantGroup.BobisChairoftheNominationCommitteeandoftheMarketDisclosureCommittee.

Ron RobsonDeputy Chairman Aged54AppointedasDeputyChairmaninJuly2011,RonisaManagingDirectorofTavistockGroup,ChiefExecutiveofUltimateFinanceGroup,ChairmanofAvenueInsurancePartnersandaNon-ExecutiveDirectorofTottenhamHotspurLimited.HewaspreviouslyChiefFinancialOfficerofTamarCapitalPartnersandGroupFinanceDirectorofKenmore,bothpropertyinvestmentandmanagementgroups.From2005to2008hewasGroupFinanceDirectorofTheBelhavenGroupplc,alistedpubretailing,brewinganddrinkdistributiongroup.PriortothatheheldanumberofseniorfinancerolesincludingGroupFinanceDirectorofalistedshippingandlogisticsgroup,andtrainedasaCharteredAccountantwithArthurAndersen.RonisanominatedshareholderrepresentativeofPiedmontInc.

Colin RutherfordIndependent Non-Executive Director Aged58AppointedasanindependentNon-ExecutiveDirectorinApril2013,ColiniscurrentlyChairmanofBrookgateLimitedandTeachersMediaplc.HeisalsoaNon-ExecutiveDirectorofEvofemBiosciencesInc.andRenaissanceServicesSAOGamongsthisotheractivities.HewasformerlyExecutiveChairmanofMAMFundsplcandEuroSalesFinanceplcandhasservedasaDirectorofvariousotherpublicandprivatecompaniesintheUKandoverseas.ColinisamemberoftheInstituteofCharteredAccountantsofScotlandandhasdirectlyrelevantcorporatefinanceexperienceinboththeleisureandhospitalityindustries.ColinisChairmanoftheAuditCommittee,andservesonallotherindependentgovernancecommittees.

Imelda WalshIndependent Non-Executive Director Aged53AppointedasanindependentNon-ExecutiveDirectorinApril2013,ImeldaisaNon-ExecutiveDirector,andChairoftheRemunerationCommitteesofWilliamHillplcandFirstGroupplc.ShewasaNon-ExecutiveDirector,andChairoftheRemunerationCommittee,ofMothercareplcfrom2013to2016andofSainsbury’sBankplcfrom2006to2010.ShehasheldseniorExecutiverolesatJSainsburyplc,whereshewasGroupHRDirectorfromMarch2004toJuly2010,BarclaysBankplcandCoca-Cola&SchweppesBeveragesLimited.ImeldaisChairoftheRemunerationCommittee.

Phil UrbanChief Executive Aged54PhiljoinedMitchells&ButlersinJanuary2015asChiefOperatingOfficerandbecameChiefExecutiveinSeptember2015.PhilwaspreviouslyManagingDirectoratGrosvenorCasinos,adivisionofRankGroupandChairmanoftheNationalCasinoForum.Priortothat,hewasManagingDirectorforWhitbread’sPubRestaurantdivision,andforScottish&NewcastleRetail’sRestaurantsandAccommodationDivision.PhilhasanMBAandisaqualifiedmanagementaccountant(CIMA).

Tim JonesFinance Director Aged54TimwasappointedFinanceDirectorinOctober2010.PriortojoiningtheCompany,heheldthepositionofGroupFinanceDirectorforInterserveplc,asupportservicesgroup.Previously,hewasDirectorofFinancialOperationsatNovarplcandheldseniorfinancialrolesbothintheUKandoverseasinthelogisticscompany,Exelplc.TimisamemberoftheInstituteofCharteredAccountantsinEnglandandWalesandobtainedanMAinEconomicsatCambridgeUniversity.

Board of DirectorsKnowledgeandexperience


Keith BrowneNon-Executive Director Aged48AppointedasaNon-ExecutiveDirectorinSeptember2016,KeithisarepresentativeofElpidaGroupLimited,asignificantshareholderinMitchells&Butlers.KeithobtainedaBachelorofCommerceDegreefromUniversityCollegeDublin,qualifiedasacharteredaccountantin1994andsubsequentlygainedanMBAfromUniversityCollegeDublin.AfterjoiningKPMGCorporateFinancein1996,hebecameapartnerinthefirmin2001andHeadofCorporateFinancein2009.HeretiredfromthepartnershiptooperateasanIndependentConsultantin2011.

Dave CoplinIndependent Non-Executive Director Aged47AppointedasanindependentNon-ExecutiveDirectorinFebruary2016,DaveistheCEOandfounderofTheEnvisionersLimitedandwasformerlytheChiefEnvisioningOfficerforMicrosoftLimited,andisanestablishedthoughtleaderontheroleoftechnologyinourpersonalandprofessionallives.Forover25yearshehasworkedacrossarangeofindustriesandcustomermarketplaces,providingstrategicadviceandguidancearoundtheroleandoptimisationoftechnologyinthemodernsocietybothinsideandoutsideoftheworldofwork.

Stewart GillilandSenior Independent Director Aged60AppointedasanindependentNon-ExecutiveDirectorinMay2013andasSeniorIndependentDirectorinFebruary2015.StewartwasChiefExecutiveOfficerofMullerDairy(UK)Limiteduntil2010andpriortothatheldseniormanagementpositionsinInBevSA,InterbrewUKLimitedandWhitbreadplc.HeiscurrentlyChairmanofBookerGroupPlcandCuriousDrinksLimitedandaNon-ExecutiveDirectorofC&CGroupplcandNature’sWayFoodsLimited.

Eddie IrwinNon-Executive Director Aged58AppointedasaNon-ExecutiveDirectorinMarch2012,EddieisanomineeofElpidaGroupLimited,asignificantshareholderinMitchells&Butlers.EddieisFinanceDirectorofCoolmore,aleadingthoroughbredbloodstockbreederwithoperationsinIreland,theUSAandAustraliaandaNon-ExecutiveDirectorofGroveLtd,theholdingcompanyofBarchesterHealthcareLimited.HegraduatedfromUniversityCollegeDublin,withaBachelorofCommerceDegreeandheisaFellowofboththeAssociationofCharteredCertifiedAccountantsandtheInstituteofCharteredSecretariesandAdministrators.

Josh LevyNon-Executive Director Aged27AppointedaNon-ExecutiveDirectorinNovember2015,JoshisanominatedshareholderrepresentativeofPiedmontInc.,asignificantshareholderinMitchells&Butlers.JoshisanInvestmentAnalystatTavistockGrouphavingpreviouslyworkedintheInvestmentBankingDivisionofInvestecBank.JoshholdsanMScandaBA(Hons)fromtheUniversityofNottingham.


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Share capitalTheCompany’sissuedordinarysharecapitalasat30September2017comprisedasingleclassofordinarysharesofwhich422,548,604shareswereinissueandlistedontheLondonStockExchange(24September2016413,624,294shares).TherightsandobligationsattachingtotheordinarysharesoftheCompanyarecontainedwithintheCompany’sArticlesofAssociation.Oftheissuedsharecapital,noshareswereheldintreasuryandtheCompany’semployeesharetrustsheld1,748,942shares.Detailsofmovementsintheissuedsharecapitalcanbefoundinnote4.7tothefinancialstatementsonpage131.EachsharecarriestherighttoonevoteatgeneralmeetingsoftheCompany.ThenoticeoftheAnnualGeneralMeetingspecifiesdeadlinesforexercisingvotingrightsinrelationtotheresolutionstobeputtotheAnnualGeneralMeeting.

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

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

Duringtheyear,shareswithanominalvalueof£35,705wereallottedunderall-employeeschemesaspermittedunderSection549oftheCompaniesAct2006,andshareswithanominalvalueof£726,579wereallottedpursuanttotheScripDividendScheme.Nosecuritieswereissuedinconnectionwitharightsissueduringtheyear.

TheCompanyisnotawareofanyagreementsbetweenshareholdersthatrestrictthetransferofsharesorvotingrightsattachedtotheshares.

InterestsoftheDirectorsandtheirimmediatefamiliesintheissuedsharecapitaloftheCompanyasattheyearendareonpage83intheReportonDirectors’remuneration.

DividendTheBoardrecommendsafinaldividendforthe53weeksended30September2017of5ppersharetobepaidon6February2018toshareholdersontheregisteratcloseofbusinesson15December2017.Thismakesatotaldividendfortheyearof7.5ppershare(FY20167.5ppershare).AssetoutintheNoticeoftheAnnualGeneralMeetingsenttoshareholderswiththisAnnualReport,theCompanywillseekauthorityfromitsshareholdersatthatmeetingtoofferascripdividendalternativetoacashdividend.MoredetailsofthatscripdividendalternativearesetoutintheexplanatorynoteswhichaccompanythatNotice.

Shareholderswhoholdsharecertificate(s)willneedtocompleteaScripDividendMandateForm,whichcanbefoundonourwebsitewww.mbplc.comorbycontactingEquinition03713842065.ThecompletedScripDividendMandateformshouldbereturnedtotheregistrarsnolaterthan5pmon16January2018.

ShareholderswhoholdtheirsharesinCRESTandwhowishtoelectfortheScripDividendshouldcompleteanelectionthroughCRESTnolaterthan5pmon16January2018.Pleaserefertotheelectionsprocessdocumentavailableatwww.shareview.co.uk/info/reinvest

ShareholderswhodonotholdtheirsharesinCRESTandwhohavealreadysubmittedaScripDividendMandateformdonotneedtosubmitanewmandateform.TheexistingMandateformwillcontinueinforceforthoseshareholderswhodonotholdsharesinCRESTunlessanduntilnoticeofcancellationisreceivedbytheCompany’sregistrarsnotlessthan15workingdaysbeforethedateonwhichthedividendistobepaid.

The Board’s responsibilities in respect of the Company include:•Determiningtheoverallbusinessandcommercialstrategy

•IdentifyingtheCompany’slong-termobjectives

• Reviewingtheannualoperatingbudgetandfinancialplansandmonitoringperformanceinrelationtothoseplans

•Determiningthebasisoftheallocationofcapital

• ConsideringallpolicymattersrelatingtotheCompany’sactivitiesincludinganymajorchangeofpolicy

For the Company’s latest financial informationgoto:www.mbplc.com/investors

TheDirectorspresenttheirreportandtheauditedfinancialstatementsforthe53weeksended30September2017.TheBusinessreviewoftheCompanyanditssubsidiariesisgivenonpages14to17which,togetherwiththeCorporategovernancestatementandAuditCommitteereport,areincorporatedbyreferenceintothisreportand,accordingly,shouldbereadaspartofthisreport.

DetailsoftheGroup’spolicyonaddressingrisksaregivenonpages36to40and60and61,anddetailsaboutfinancialinstrumentsareshowninnote4.4tothefinancialstatements.ThesesectionsincludeinformationabouttrendsandfactorslikelytoaffectthefuturedevelopmentandperformanceoftheGroup’sbusinesses.TheCompanyundertakesnoobligationtoupdateforward-lookingstatements.

KeyperformanceindicatorsfortheGroup’sbusinessesaresetoutonpages28and29.

Thisreporthasbeenpreparedundercurrentlegislationandguidanceinforceattheyearenddate.Inaddition,thematerialcontainedonpages1to43reflectstheDirectors’understandingoftherequirementtoprovideaStrategicreport.

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

Areas of operationThroughoutFY2017theGrouphadactivitiesin,andoperatedthrough,pubs,barsandrestaurantsintheUnitedKingdomandGermany.

Directors’ report


Piedmont.HavingtakenintoaccounttheFinancialReportingCouncil’sreportofAugust2014‘TowardsClear&ConciseReporting’andtheviewsexpressedpreviouslybycertainoftheinvestorrepresentativebodies,theBoardconsidersthatsuchanagreementwouldbemerelyoneofformratherthansubstanceandnotintheinterestsofshareholdersgenerally.Asaresult,theBoarddoesnotproposecurrentlythattheCompanyshouldenterintosuchanagreementwithElpida,andElpidahasnottodatesoughtsuchanagreement.TheBoardconsidersthattheCompanyisactinginaccordancewithgoodgovernanceprinciplesinworkingwithoursignificantlong-termshareholderstowardsourcommongoalsandtheachievementoftheCompany’sstrategy,withcontinuedstabilityatBoardlevel.

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.

Interests in voting rightsAsatthedateofthisreport,theCompanywasawareofthefollowingsignificantholdingsofvotingrights(3%ormore)initsshares:

ShareholderOrdinary

shares% of

share capital*

PiedmontInc. 113,026,256 26.74 DirectholdingElpidaGroupLimited 98,969,081 23.42 DirectholdingStandardLifeAberdeenplc 60,288,713 14.26 IndirectholdingSmoothfieldHoldingLimited 18,668,553 4.42 Directholding

* UsingthetotalvotingrightsfigureannouncedtotheLondonStockExchangefor31October2017of422,639,413shares.

DirectorsDetailsoftheDirectorsasat22November2017andtheirbiographiesareshownonpages46and47.TheDirectorsat30September2017andtheirinterestsinsharesareshownonpage83.TherewerenochangestotheBoardofDirectorsduringtheyearnorsubsequenttotheyearend,uptothedateofthisreport.

TheCompanyisgovernedbyitsArticlesofAssociationandtheCompaniesAct2006andrelatedlegislationinrelationtotheappointmentandremovalofDirectors.ThepowersoftheCompany’sDirectorsaresetoutintheCompany’sArticlesofAssociation.

InaccordancewiththeCompany’sArticlesofAssociation(whichareinlinewithbestpracticeguidanceoftheUKCorporateGovernanceCode),alltheDirectorswillretireattheAGMandwillofferthemselvesforre-election.

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

TheCompany’stwolargestshareholders,PiedmontInc.andElpidaGroupLimited,havenominatedrepresentativesontheBoard.Piedmont’sappointmentrightsareformalisedintheDeedofAppointmentreferredtointhisreportbutthereisnoequivalentagreementinplacebetweentheCompanyandElpida.TheElpidarepresentativeswereappointedwiththeapprovaloftheBoardinMarch2012andSeptember2016.TheBoardhascarefullyconsideredwhetheritwouldbeappropriatetoenterintoaformalagreementwithElpidathatissimilartotheexistingagreementbetweentheCompanyand


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TheGroupisresponsivetotheneedsofitsemployees.Assuch,shouldanyemployeeoftheGroupbecomedisabledduringtheirtimewithus,wewillactivelyretrainthatemployeeandmakereasonableadjustmentstotheirenvironmentwherepossible,inordertokeeptheemployeewiththeGroup.

Employee engagement Mitchells&Butlersengageswithitsemployeescontinuouslyandinanumberofwaystosuittheirdifferentworkingpatterns.Thisincludes:

• linemanagerbriefings;

•communicationsforumsandroadshowsheldbyfunctionsorbrandsacrosstheCompany;

•adedicatedintranetfortheRetailSupportTeam;

• ‘Mable’,theM&Bonlinelearningsystem;

•emailnewsalerts;

•focusgroups;

•weeklybulletins–specificallytargetedatretailhousemanagersandmobileworkers;

•employeesocialmediagroups;and

•amonthlymagazineposter,FrontlineNews,fortheretailestate.

DetailsofthefinancialandeconomicfactorsaffectingtheperformanceoftheCompanyaresharedwithallemployeesattheappropriatetimeusingthemethodslistedabove.

WeprovideopportunitiesforemployeestogivetheirfeedbacktotheCompanyinanumberofways,fromteamorshiftmeetingsinrestaurantsandpubsandengagementsurveysforallemployeestotheMitchells&ButlersannualBusinessForum.BusinessForumrepresentativescollectquestionsfromemployeesacrosstheCompanyandputthemtomembersoftheExecutiveCommittee.ThequestionsandanswersarepublishedinFrontlineNewsandonline.

SinceMablewaslaunchedinJuly2017,theSTARprogramme,auniversaltrainingneedsanalysisandlearningresourceforallretailroles,hasnowbeenusedbyover8,800newteammembersasanintegralpartofthebusinessesinductionprocess.STARissupportedbycoachingmaterialthathasbeenproducedforeverytechnicaltaskassociatedwithajobinhospitality,thevisualtraininglibraryenablesourteamstoaccessuptodateandrelevantinformationfromanyhandheldordesktopdevice,andaprogressreportenableseverymemberoftheorganisationtounderstandtheskillsandprogressofourpeople.TheintroductionofMable,thebusiness’ssociallearningplatform,hasenabledthebusinesstodirectkeytrainingmessagescontainedwithinSTARquicklyandefficientlytothefrontline.

Mitchells&ButlersoperatestheChallenge21policyinallourbusinessesacrossEnglandandWales(andaChallenge25policyinourScottishbusinesses).Thepolicyrequiresthatanyguestattemptingtobuyalcoholwhoappearsundertheageof21,mustprovideanacceptableformofproofofageIDtoconfirmthattheyareover18,beforetheycanbeserved.Thispolicyformspartofourregulartrainingforouremployeesontheirresponsibilitiesforservingalcohol.

Change of control provisionsTherearenosignificantagreementswhichcontainprovisionsentitlingotherpartiestosuchagreementstoexerciseterminationorotherrightsintheeventofachangeofcontroloftheCompany.

TherearenoprovisionsintheDirectors’oremployees’serviceagreementsprovidingforcompensationforlossofofficeoremploymentoccurringbecauseofatakeover.

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

TherulesofcertainoftheCompany’sshareplansincludeprovisionswhichapplyintheeventofatakeoverorreconstruction,assetoutbelow.

Provisions which apply in the event of a takeover or reconstructionShare plan Provision in the event of a takeover

2013PerformanceRestrictedSharePlan

Awardsvestproratatoperformanceandtimeelapsedandlapsesixmonthslater

2013ShortTermDeferredIncentivePlan

Bonussharesmaybereleasedorexchangedforsharesinthenewcontrollingcompany

2013SharesavePlan Optionsmaybeexercisedwithinsixmonthsofachangeofcontrol

ShareIncentivePlan Freesharesmaybereleasedorexchangedforsharesinthenewcontrollingcompany

Employment policies TheGroupemployedanaverageof45,891peopleinFY2017(FY201644,475).Throughitsdiversitypolicy,theCompanyseekstoensurethateveryemployee,withoutexception,istreatedequallyandfairlyandthatallemployeesareawareoftheirresponsibilities.

Ourpoliciesandproceduresfullysupportourdisabledcolleagues.Wetakeactivemeasurestodosovia:

•arobustreasonableadjustmentpolicy;

•disability-specificonlineresources(accessibleviatheGroup’sonlinerecruitmentsystem);and

•processestoensurecolleaguesarefullysupported.

Directors’ report continued


Going concern Thefinancialstatementswhichappearonpages88to139havebeenpreparedonagoingconcernbasis.TheDirectorshavereviewedtheGroup’sobjectives,policiesandprocessesformanagingitscapital;itsfinancialriskmanagementobjectives;itsfinancialinstrumentsandhedgingactivities;anditsexposurestocreditriskandliquidityrisk.TheGroup’sfinancingisbasedonsecuritiseddebtandunsecuredbankfacilitiesand,withinthiscontext,arobustreviewhasbeenundertakenofprojectedperformanceagainstallfinancialcovenants.AsaresultofthisreviewtheDirectorshaveareasonableexpectationthattheGrouphasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.Seesection1ofthefinancialstatementsonpage101fortheCompany’sgoingconcernstatement,andpage40fortheCompany’slong-termviabilitystatement.

Annual General MeetingThenoticeconveningtheAnnualGeneralMeetingiscontainedinacircularsenttoshareholderswiththisreportandincludesfulldetailsoftheresolutionsproposed.

AuditorDeloitteLLPhasexpresseditswillingnesstocontinueinofficeasauditoroftheCompanyanditsreappointmentwillbeputtoshareholdersattheAGM.

Post-balance sheet eventsTherearenopost-balancesheeteventstoreport.

Disclosure of information to auditorHavingmadetherequisiteenquiries,sofarastheDirectorsareaware,thereisnorelevantauditinformation(asdefinedbySection418(3)oftheCompaniesAct2006)ofwhichtheCompany’sauditorisunawareandeachDirectorhastakenallstepsthatoughttohavebeentakentomakethemselvesawareofanyrelevantauditinformationandtoestablishthattheCompany’sauditorisawareofthatinformation.

Greenhouse gas (‘GHG’) emissions statement TheGroupgeneratesGHGemissionsthroughoutitsestateofbarsandrestaurantsforheating,cooling,lightingandcateringincludingtherefrigerationandpreparationoffoodanddrink.

GHGemissionsper£mturnoverwerereducedby8.1%duringthe2016/17taxyearincomparisonto2015/16inresponsetoarangeofbehaviouralchangeactivities.Thisreductionhasbeenachieveddespiteincreasingsalesalthoughitshouldbenotedthatconversionfactorshavealsoreduced,particularlyforgridsuppliedelectricityduetoareductionincoalgenerationwhichhasbeenbalancedbyanincreaseincleanergasandrenewablesgeneration.

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

Duringtheyear,theCompanyhasremainedwithinitsheadroomlimitsfortheissueofnewsharesforshareplansassetoutintherulesoftheaboveplans.TheCompanyusesanemployeebenefittrusttoacquiresharesinthemarketwhenappropriatetosatisfyshareawardsinordertomanageheadroomundertheplanrules.NosharesintheCompanywerepurchasedbytheemployeebenefittrustduringFY2017.

Political donationsTheCompanymadenopoliticaldonationsduringtheyearandintendstomaintainitspolicyofnotmakingsuchpayments.Itwill,however,asaprecautionarymeasuretoavoidinadvertentbreachofthelaw,seekshareholderauthorityatits2018AGMtomakelimiteddonationsorincurlimitedpoliticalexpenditure,althoughithasnointentionofusingtheauthority.

Funding and liquidity risk InordertoensurethattheGroup’slong-termfundingstrategyisalignedwithitsstrategicobjectives,theTreasuryCommitteeregularlyassessesthematurityprofileoftheGroup’sdebt,alongsidetheprevailingfinancialprojectionsandthreeyearplan.ThisenablesittoensurethatfundinglevelsareappropriatetosupporttheGroup’splans.

ThecurrentfundingarrangementsoftheGroupconsistofthesecuritisednotesissuedbyMitchells&ButlersFinanceplc(andassociatedliquidityfacility)and£150mofunsecuredcommittedbankfacilities.Furtherinformationregardingthesearrangementsisincludedinnote4.2tothefinancialstatementsonpage118.Thetermsofthesecuritisationandthebankfacilitiescontainanumberoffinancialandoperationalcovenants.CompliancewiththesecovenantsismonitoredbyGroupTreasury.

TheGrouppreparesarollingdailycashforecastcoveringasix-weekperiodandanannualcashforecastbyperiod.TheseforecastsarereviewedandusedtomanagetheinvestmentandborrowingrequirementsoftheGroup.Acombinationofcashpoolingandzerobalancingagreementsisinplacetoensuretheoptimumliquiditypositionismaintained.CommittedfacilitiesoutsideofthesecuritisationaresizedtoensurethattheGroupcanmeetitsmedium-termanticipatedcashflowrequirements.


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Assessment parameters

Assessment year 2016/17TaxYear

Consolidation approach Financialcontrol

Boundary summary Allbarsandrestaurantseitherownedorunderoperationalcontrolduringthe2016/17taxyearwereincluded.

Scope GeneralclassificationsofgreenhousegasemissionsscopesbasedontheGHGprotocolandISO14064-1:2006withinthecontextoftheGroup’soperationsareasfollows:

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

Scope 2 –GHGemissionsfromthegenerationofpurchasedelectricityusedduringkitchenactivityandforlighting,heatingandcooling.

Scope 3 –indirectemissionsasaconsequenceoftheactivitiesoftheGroup,butoccurringfromsourcesnotownedorcontrolledbytheGroup.

Thisassessmentfocusesonscope1and2emissionsonly(scope3isoptionalunderthecurrentregulations).

Consistency with the financial statements Scope1and2emissionsarereportedforthe2016/17and2015/16taxyearstoretainconsistencywithreportingofourcarbonemissionsundertheCarbonReductionCommitment(‘CRC’)EnergyEfficiencyScheme.

Scope1and2emissionsfromsiteswith‘landlordsupplies’arenotincludedintheCRCsubmission.

Franchisesitesareexcludedastheyareresponsibleforarrangingandpayingfortheirownenergy.

AlexsitesinGermanyareincluded.EmissionsarebasedonUKaverageemissionsmultipliedbythenumberofAlexsites.

Exclusions Scope 1–Vehiclefleetemissionsareexcludedastheyhavebeencalculatedtoaccountfor<1%totalemissionswhichfallsbelowthematerialitythreshold.

Scope 1–Fugitiveemissionswithinrefrigerationandcoolingequipmentarenotincludedasdetailedrecordsarenotyetheld.

Outside of scope–Logsare‘outsideofscope’becausethescope1impactofthesefuelshasbeendeterminedtobeanet‘0’.However,theCO2evalueoflogshasbeencalculatedtobe<1%andwouldbeexcludedinanycaseasthisfallsbelowthematerialitythreshold.

Emission factor data source AllcarbonemissionfactorsusedaretakenfromtheGovernmentemissionconversionfactorsforgreenhousegascompanyreportingpublishedbyBEIS(formerlyDEFRA).

The2016versionofthefactorshasbeenappliedtothe2016/2017consumptiondatasetandthe2015versionhasbeenappliedtothe2015/2016consumptiondataset.

Assessment methodology DefraEnvironmentalGuidelines2013.

Materiality threshold Allemissiontypesestimatedtocontribute>1%oftotalemissionsareincluded.

Intensity threshold EmissionsarestatedintonnesCO2eper£mrevenue.ThisintensityratioputsemissionsintocontextgiventhescaleoftheGroup’sactivitiesandenablescomparisonwithprioryearperformance.

Target Emissionsduringthe2015/16taxyearareprovidedforcomparativepurposes.

Itshouldbenotedthatthe2015/16emissionshavebeenre-calculatedwithelectricitytransmissionanddistributionlossesremovedasthesearenowclassedasScope3emissions.

Directors’ report continued


Greenhouse gas emissions source

2015/16 2016/17 Change from previous year

(tCO2e) (tCO2e/£m) (tCO2e) (tCO2e/£m) (tCO2e) (tCO2e/£m)% movement in tCO2e/£m

Scope1 96,014 46.0 95,993 45.4 (21) (0.6) (1.3%)Scope2 183,183 87.8 163,960 77.6 (19,223) (10.2) (11.6%)Statutory total (Scope 1 & 2)* 279,197 133.8 259,953 123.0 (19,244) (10.8) (8.1%)

* StatutorycarbonreportingdisclosuresrequiredbytheCompaniesAct2006.

Modern Slavery Act 2015InaccordancewiththerequirementsoftheModernSlaveryAct,theBoardhasapprovedandtheCompanyhasaccordinglypublisheditscompliancestatementonitswebsite.Thiscanbeaccessedatwww.mbplc.com

ByorderoftheBoard

Greg McMahonCompany Secretary and General Counsel22November2017


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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,includingaccountingpolicies,inamannerthatprovidesrelevant,reliable,comparableandunderstandableinformation;

•provideadditionaldisclosureswhencompliancewiththespecificrequirementsinIFRSsareinsufficienttoenableuserstounderstandtheimpactofparticulartransactions,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.

ThisresponsibilitystatementwasapprovedbytheBoardofDirectorson22November2017andissignedonitsbehalfby:

Tim Jones Finance Director 22November2017

Directors’ responsibilities statement


TheBoardiscommittedtohighstandardsofcorporategovernance.IamdelightedtobeabletoreportthattheBoardconsidersthattheCompanyhascompliedthroughouttheyearended30September2017withalltheprovisionsandbestpracticeguidanceoftheCodeexceptthoseinrespectofBoardcompositionandtheconstitutionofBoardCommittees.Thiscorporategovernancestatementaddressesthesmallnumberofareaswhere,forreasonsspecifictoMitchells&Butlers,therearedivergencesfromtheCodeasdescribedbelow.

TheAuditCommitteereportandNominationCommitteereportwhicharesetoutonpages62to65andpage58respectivelyoftheAnnualReportalsoformpartofthiscorporategovernancestatementandtheyshouldallbeconsideredtogether.

TheBoardrecognisestheimportanceofgoodcorporategovernanceincreatingasustainable,successfulandprofitablebusinessanddetailsaresetoutinthisstatementoftheCompany’scorporategovernanceproceduresandapplicationoftheprinciplesoftheCode.Thereare,however,asmallnumberofareaswhere,forreasonsspecificallyrelatedtotheCompany,thedetailedprovisionsoftheCodewerenotfullycompliedwithinFY2017.Theseareasarekeptunderregularreview.AfundamentalaspectoftheCodeisthatitcontainsbestpracticerecommendationsinrelationtocorporategovernanceyetacknowledgesthat,inindividualcases,thesewillnotallnecessarilybeappropriateforparticularcompanies.Accordingly,theCodespecificallyrecognisestheconceptof‘ComplyorExplain’inrelationtodivergencesfromtheCode.

Compliance with the Code Exceptforthematterswhichareexplainedbelow(inlinewiththe‘ComplyorExplain’concept),theCompanycompliedfullywiththeprinciplesandprovisionsoftheCodethroughoutthefinancialyearinrespectofwhichthisstatementisprepared(andcontinuestodosoasatthedateofthisstatement).

Explanation for non-compliance with parts of the CodeDuringtheyear,therewerethreedivergencesfromfullcompliancewiththeCodeassetoutbelowbyreferencetospecificparagraphsintheCode:

B.1.2 (Composition of the Board), C.3.1 and D.2.1 Constitution of CommitteesDuringtheyear,CodeProvisionB.1.2,whichrequiresthatatleasthalfoftheBoardbemadeupofindependentNon-ExecutiveDirectors(excludingtheChairman),wasnotcompliedwith.Accordingly,thishadconsequentialimplicationsonthecompositionoftheAuditandRemunerationCommittees.TherewerenochangesinBoardcompositionduringFY2017.

WhiletheBoarddoesnotcomplyfullywiththerequirementforatleasthalfofitsmemberstobeindependent,itrecognisesandvaluesthepresenceofrepresentativesofitsmajorshareholdersontheBoardandwelcomestheinterestshownbythemintheCompanyasawhole.TheBoardwillcontinuetoworkcloselywiththerepresentativesofitsmajorshareholderstofurthertheinterestsoftheCompany.

ThepossibilityofappointingafurtherindependentNon-ExecutiveDirectorremainsamatterfortheNominationCommitteetoreviewandisconsideredregularly.ThroughoutFY2017,theCompanyhad(andcontinuestohave)fullyfunctioningNomination,AuditandRemunerationCommitteesasrequiredbytheCode.TheAuditandRemunerationCommitteesarenotfullycompliantwiththerelevantprovisionsofparagraphsC.3.1andD.2.1oftheCodeinthattheyincludethepresenceofrepresentativesofmajorshareholders.Nevertheless,theBoardvaluesthecontributionofthoseshareholderrepresentativesonthoseCommittees,doesnotconsiderthistobeanimpedimenttogoodgovernanceandlooksforwardtocontinuingtoworkwiththemonmattersaffectingtheGroupanditsactivitiesinthefuture.

Corporate governance statementThis corporate governance statement sets out our report to shareholders on the status of our corporate governance arrangements.TheBoardisresponsibleforensuringthattheactivitiesoftheMitchells&ButlersGroupanditsvariousbusinessesareconductedincompliancewiththelaw,regulatoryrequirementsandrules,goodpractices,ethicallyandwithappropriateandpropergovernanceandstandards.Thisincludesreviewinginternalcontrols,ensuringthatthereisanappropriatebalanceofskillsandexperiencerepresentedontheBoardandcompliancewiththeUKCorporateGovernanceCode(the‘Code’),whichisissuedbytheFinancialReportingCouncilandwhichisavailableatwww.frc.org.uk,andformaintainingappropriaterelationswithshareholders.

In2016,theCompanyreportedagainstthe2014versionoftheCode.InSeptember2015,theFRCpublishedaconsultationonrevisionstoEthicalandAuditingStandards,theUKCorporateGovernanceCodeandrelatedGuidanceonAuditCommitteesand,asaresultofthisconsultation,theFRCissuedanupdatedUKCorporateGovernanceCodeandassociatedGuidanceonAuditCommittees.

TheCompanyisthereforereportingagainstthe2016editionoftheCodewhichcameintoeffectforaccountingperiodsbeginningonorafter17June2016.Keychangesbetweenthe2014and2016Codesrelatetoarequirementforcompetenceofauditcommitteesrelevanttothesectorinwhichthecompanyoperates,adeletionoftherequirementforFTSE350companiestoputtheexternalauditcontractouttotenderatleasteverytenyears,andarequirementfortheAuditCommitteereporttoincludeadvancenoticeofanyexternalauditretenderingplans.Duringtheyear,theAuditCommitteerevieweditsTermsofReference(includingthesectiondealingwiththeGroupPolicyfortheProvisionofNon-AuditServicesbytheExternalAuditor),andfurtherdetailsareincludedintheAuditCommitteereportonpage62.

The latest financial information for Mitchells & Butlers and its group of companies is included in the 2017 Annual Report and Accounts (of which this corporate governance statement forms part) and which are available online at:www.mbplc.com/investors

Corporate governance statement

Bob IvellChairman


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TheinformationrequiredbyDisclosureGuidanceandTransparencyRule(‘DGTR’)7.1issetoutintheAuditCommitteereportonpages62to65.TheinformationrequiredbyDGTR7.2issetoutinthiscorporategovernancestatement,otherthanthatrequiredunderDGTR7.2.6whichissetoutintheDirectors’reportonpages48to53.

Board compositionTheBoardstartedandendedtheyearwithelevenDirectorsandthetableoppositeliststhecompositionoftheBoardduringtheyear.

The BoardTheBoardisresponsibletoallstakeholders,includingitsshareholders,forthestrategicdirection,developmentandcontroloftheGroup.Itapprovesstrategicplansandannualcapitalandrevenuebudgets.ItreviewssignificantinvestmentproposalsandtheperformanceofpastinvestmentsandmaintainsanoverviewandcontroloftheGroup’soperatingandfinancialperformance.ItmonitorstheGroup’soverallsystemofinternalcontrols,governanceandcomplianceandensuresthatthenecessaryfinancial,technicalandhumanresourcesareinplacefortheCompanytomeetitsobjectives.OurwebsiteincludesascheduleofmatterswhichhavebeenreservedforthemainBoard.

DuringFY2016thereweretenscheduledBoardmeetings.TherewerealsofourmeetingsoftheAuditCommittee,fivemeetingsoftheRemunerationCommitteeandonemeetingoftheNominationCommittee.ThetableshowsattendancelevelsattheBoardandCommitteemeetingsheldduringtheyear;thenumbersinbracketsconfirmhowmanymeetingseachDirectorwaseligibletoattendduringtheyear.

WhereaDirectorwasunabletoattendameeting(whetheroftheBoardoroneofitsCommittees),theywereprovidedwithallthepapersandinformationrelatingtothatmeetingandwereabletodiscussissuesarisingdirectlywiththeChairmanoftheBoardorChairoftherelevantCommittee.Inaddition,theBoardmembersmeetmoreinformallyapproximatelyfourtimesayearandtheChairmanandtheNon-ExecutiveDirectorsmeetwithouttheExecutiveDirectorstwiceayear.

TherearetenBoardmeetingscurrentlyplannedforFY2018.

TheCompanySecretary’sresponsibilitiesincludeensuringgoodinformationflowstotheBoardandbetweenseniormanagementandtheNon-ExecutiveDirectors.TheCompanySecretaryisresponsible,throughtheChairman,foradvisingtheBoardonallcorporategovernancemattersandforassistingtheDirectorswiththeirprofessionaldevelopment.Thisincludesregularcorporategovernanceandbusinessissuesupdates,aswellastheuseofoperationalsitevisitsandtheprovisionofexternalcourseswhererequired.TheCompanySecretaryfacilitatesacomprehensiveinductionfornewlyappointedDirectors,tailoredtoindividualrequirementsandincludingguidanceontherequirementsof,andDirectors’dutiesinconnectionwith,theCodeandtheCompaniesAct2006aswellasotherrelevantlegislation.InFY2017,theCompanySecretaryalsoco-ordinatedaninternalperformanceevaluationoftheBoard.TheappointmentandremovaloftheCompanySecretaryisamatterreservedfortheBoard.

Attendance levels at Board and Committee meetings

BoardAudit

CommitteeRemuneration

CommitteeNomination Committee

Directors who served during the yearBobIvell 10(10) n/a 5(5) 1(1)KeithBrowne 10(10) n/a n/a n/aDaveCoplin 10(10) 3(4) 4(5) 1(1)StewartGilliland 9(10) 4(4) 4(5) 1(1)EddieIrwin 9(10) 3(4) 3(5) 1(1)TimJones 10(10) n/a n/a n/aJoshLevy 10(10) n/a 1(1) n/aRonRobson 10(10) 4(4) 4(4) 1(1)ColinRutherford 10(10) 4(4) 5(5) 1(1)PhilUrban 10(10) n/a n/a n/aImeldaWalsh 10(10) 4(4) 5(5) 1(1)

WhereaDirectorwaspreventedfromattendingameetingduetotraveldifficultiesorclasheswithotherbusinesscommitments,ineachcasetheDirectorconcernedprovidedcommentsonthematterstobeconsideredtotheChairman,anotherDirectorortheCompanySecretary.

DirectorsThefollowingwereDirectorsoftheCompanyduringtheyearended30September2017:

Date

appointedDate of

change of role

Directors who served during the yearBobIvell IndependentNon-

ExecutiveDirector1 09/05/11 14/07/11InterimChairman1 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 –StewartGilliland IndependentNon-

ExecutiveDirector 23/05/13 –SeniorIndependentDirector 02/02/15 –

EddieIrwin2 Non-ExecutiveDirector 21/03/12 –JoshLevy3 Non-ExecutiveDirector 13/11/15 –TimJones FinanceDirector 18/10/10 –RonRobson3 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. NominatedshareholderrepresentativeofPiedmontInc.

Corporate governance statement continued


Atthestartandendoftheyear,theBoardwasmadeupoftenmaleandonefemalemembers.TherewerenochangestotheBoardduringtheyear.

TheExecutiveDirectorshaveservicecontractswhicharesummarisedonpages76and77.TheChairmanandeachoftheNon-ExecutiveDirectorshavelettersofappointment.CopiesoftherespectiveservicecontractsorlettersofappointmentofallthemembersoftheBoardareavailableontheCompany’swebsite.Inaddition,theyareavailableforinspectionattheregisteredofficeoftheCompanyduringnormalbusinesshoursandattheplaceoftheAnnualGeneralMeetingfromatleast15minutesbeforeanduntiltheendofthemeeting.

AlltheCompany’sDirectorsarerequiredtostandforannualre-electionattheCompany’sAnnualGeneralMeetinginaccordancewiththeCompany’sArticlesofAssociation.Theirbiographicaldetailsasat22November2017aresetoutonpages46and47,includingtheirmaincommitmentsoutsidetheCompany.

TheExecutiveDirectorsmaybepermittedtoacceptoneexternalNon-ExecutiveDirectorappointmentwiththeBoard’spriorapprovalandaslongasthisisnotlikelytoleadtoconflictsofinterest.

Division of responsibilities between Chairman and Chief ExecutiveInaccordancewithprovisionA.2.1oftheCode,therolesofChairmanandChiefExecutiveshouldnotbeexercisedbythesameindividual.

ThedivisionofresponsibilitiesbetweentheChairmanandtheChiefExecutiveareclearlyestablishedandsetoutinwritingandagreedbytheBoard.Inparticular,ithasbeenagreedinwritingthattheChairmanshallberesponsibleforrunningtheBoardandshallprovideadviceandassistancetotheChiefExecutive.HealsochairstheNominationCommittee,isamemberoftheRemunerationCommitteeandattends,byinvitation,meetingsoftheAuditCommittee.HealsochairstheMarketDisclosureCommittee,thePropertyCommitteeandthePensionsCommittee.

ItisalsoagreedinwritingthattheChiefExecutivehasresponsibilityforallaspectsoftheGroup’soverallcommercial,operationalandstrategicdevelopment.HechairstheExecutiveCommittee(detailsofwhichappearonpage59)andattendstheNomination,RemunerationandAuditCommitteebyinvitation,notnecessarilyfortheentiretyofsuchmeetingsdependinguponthesubjectmatter.HeisalsoamemberoftheMarketDisclosureCommittee,thePropertyCommitteeandthePensionsCommittee.

AllotherExecutiveDirectors(currentlyjusttheFinanceDirector)andallothermembersoftheExecutiveCommitteereporttotheChiefExecutive.

ChairmanTheUKCorporateGovernanceCodeprovidesthattheChairmanshould,onappointment,meettheindependencecriteriasetoutinprovisionB.1.1ofthatCode.BobIvellmettheseindependencecriteriaonappointment.

BobIvellwasappointedtotheroleofExecutiveChairmanon26October2011onthedepartureofthethenChiefExecutiveandrevertedtotheroleofNon-ExecutiveChairmanon12November2012.

TheChairmanensuresthatappropriatecommunicationismaintainedwithshareholders.HeensuresthatallDirectorsarefullyinformedofmattersrelevanttotheirroles.

Chief ExecutivePhilUrbanwasappointedChiefExecutiveon27September2015.HehasresponsibilityforimplementingthestrategyagreedbytheBoardandfortheexecutivemanagementoftheGroup.

Senior Independent DirectorStewartGillilandwasappointedtotheroleofSeniorIndependentDirectoron2February2015.

TheSeniorIndependentDirectorsupportstheChairmaninthedeliveryoftheBoard’sobjectivesandensuresthattheviewsofallmajorshareholdersandstakeholdersareconveyedtotheBoard.StewartGillilandisavailabletoallshareholdersshouldtheyhaveanyconcernsifthenormalchannelsofChairman,ChiefExecutiveorFinanceDirectorhavefailedtoresolvethem,orforwhichsuchcontactisinappropriate.

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

Non-Executive Directors TheCompanyhasexperiencedNon-ExecutiveDirectorsonitsBoard.BobIvellwasconsideredtobeindependentuponhisappointmenton9May2011inthathewasfreefromanybusinessorotherrelationshipwiththeCompanywhichcouldmateriallyinfluencehisjudgementandhecontinuestorepresentastrongsourceofadviceandindependentchallenge.SincehisappointmentasChairmanon14July2011theindependencetest,assetoutintheCode,isnolongerapplicabletohiscurrentposition.

RonRobsonandJoshLevywereappointedtotheBoardasrepresentativesofoneoftheCompany’slargestshareholders,PiedmontInc.,andwerethereforenotregardedasindependentinaccordancewiththeCode.

EddieIrwinandKeithBrownewereappointedtotheBoardasrepresentativesofanotheroftheCompany’slargestshareholders,ElpidaGroupLimitedandwerethereforenotregardedasindependentinaccordancewiththeCode.

TherearecurrentlyfourindependentNon-ExecutiveDirectorsontheBoard:StewartGilliland,ColinRutherford,ImeldaWalshandDaveCoplin.

Otherthantheirfees,andreimbursementoftaxableexpenseswhicharedisclosedonpage80,theNon-ExecutiveDirectorsreceivednoremunerationfromtheCompanyduringtheyear.

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


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

ThetrainingneedsofDirectorsareformallyconsideredonanannualbasisandarealsomonitoredthroughouttheyearwithappropriatetrainingbeingprovidedasrequired,includingcorporatesocialresponsibilityandcorporategovernanceaswellastheenvironmentalimpactsoftheCompany’sactivities.

CommitteesEachBoardCommitteehaswrittentermsofreferenceapprovedbytheBoard,whichareavailableontheCompany’swebsite.ThosetermsofreferenceareeachreviewedannuallybytherelevantCommitteetoensuretheyremainappropriate.

Audit CommitteeDetailsoftheAuditCommitteeanditsactivitiesduringtheyearareincludedintheAuditCommitteereportonpages62to65whichisincorporatedbyreferenceintothisstatement.

Remuneration CommitteeDetailsoftheRemunerationCommitteeanditsactivitiesduringtheyearareincludedintheReportonDirectors’remunerationonpages66to87.

Nomination CommitteeTheNominationCommitteeisresponsiblefornominating,fortheapprovaloftheBoard,candidatesforappointmenttotheBoard.ItisalsoresponsibleforsuccessionplanningfortheBoardandtheExecutiveCommitteeandreviewingtheoutputoftheBoardeffectivenessreview.

Duringtheyear,theNominationCommitteeconsideredthecompositionoftheBoardandcommissionedtheinternally-facilitatedBoardeffectivenessreview.

TheNominationCommitteeagreestheimportanceofhavingdiversityontheBoard,includingfemalerepresentationandindividualswithdifferentexperiences,skillsetsandexpertise,soastomaintainanappropriatebalancewithintheCompanyandontheBoard.

Board Diversity PolicyTheBoardhasapprovedaBoardDiversityPolicy.Thekeystatementandobjectivesofthatpolicyareasfollows:

Statement:TheBoardrecognisesthebenefitsofdiversity.Diversityofskills,background,knowledge,internationalandindustryexperience,andgender,amongstmanyotherfactors,willbetakenintoconsiderationwhenseekingtoappointanewDirectortotheBoard.Notwithstandingtheforegoing,allBoardappointmentswillalwaysbemadeonmerit.

Objectives:•TheBoardshouldensureanappropriatemixofskillsandexperience

toensureanoptimumBoardandefficientstewardship.AllBoardappointmentswillbemadeonmeritwhiletakingintoaccountindividualcompetence,skillsandexpertisemeasuredagainstidentifiedobjectivecriteria(includingconsiderationofdiversity).

•TheBoardshouldensurethatitcomprisesDirectorswhoaresufficientlyexperiencedandindependentofcharacterandjudgement.

•TheNominationCommitteewilldiscussandagreemeasurableobjectivesforachievingdiversityontheBoardwithdueregardbeinggiventotherecommendationssetoutintheDaviesReport,theHampton-AlexanderReviewandtheUKCorporateGovernanceCode2016.Thesewillbereviewedonanannualbasis.

Progress against the policy:TheBoardcontinuestomonitorprogressagainstthispolicy.IntermsofBoarddiversity,theproportionofwomenontheBoardwas9%asattheyearended30September2017.Anyfutureappointmentswillalwaysbemadeonmeritandwillcontinuetotakeintoaccountdiversity,notonlyintermsofgender,butalsointermsoftheappropriatemixofskillsandexperience.

DetailsoftheMitchells&ButlersDiversityPolicy,whichappliestodiversityinrelationtoemployeesoftheMitchells&ButlersGroup,canbefoundinthecorporatesocialresponsibilitysectiononpages30to35.

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

ThefollowingweremembersoftheNominationCommitteeduringtheyear:

Appointment date

Member at 30/09/17

BobIvell(Chair) 11/07/13 YDaveCoplin 29/02/16 YStewartGilliland 11/07/13 YEddieIrwin 11/07/13 YRonRobson 11/07/13 YColinRutherford 11/07/13 YImeldaWalsh 11/07/13 Y

Duringtheyear,theCompanycompliedwithprovisionB.2.1oftheCodeastheNominationCommitteecomprisedamajorityofindependentNon-ExecutiveDirectors.



Market Disclosure CommitteeTheEUMarketAbuseRegulation(MAR)whichtookeffectinJuly2016,broughtaboutsubstantialchangesrelatingtoannouncementsofmaterialinformationabouttheCompanyanditsaffairs,andrelatingtodealingsinsharesorothersecuritiesbyDirectorsandotherseniormanagers,includingtightercontrolsonpermitted‘dealings’duringclosedperiodsandthehandlingofinformationrelatingtotheCompany.MARrequirescompaniestokeepalistofpeopleaffectedandthepreviouscomplianceregimeandtimeframewereenhanced.

Asaresult,aformalstandingCommitteeoftheBoardwasestablished,calledtheMarketDisclosureCommittee,whichiscomprisedoftheChairman,theChiefExecutive,theFinanceDirectorandanindependentNon-ExecutiveDirector,currentlyColinRutherford.

Executive CommitteeTheExecutiveCommittee,whichischairedbytheChiefExecutive,consistsoftheExecutiveDirectorsandcertainotherseniorexecutives,namelyGaryJohn(GroupPropertyDirector),SusanMartindale(GroupHRDirector),GregMcMahon(CompanySecretaryandGeneralCounsel),ChrisHopkins(CommercialandMarketingDirector)andSusanChappell,NickCrossley,DennisDeareandRobPitcher(allDivisionalDirectors).

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

PhilUrbanhasultimateresponsibilityforemploymentrelatedissuesandhealsooverseesmattersrelatingtohumanrightsincludingtheimplementationoftheModernSlaveryActthroughouttheGroup.

General Purposes CommitteeTheGeneralPurposesCommitteecomprisesanytwoExecutiveDirectorsoranyoneExecutiveDirectortogetherwithaseniorofficerfromanagreedandrestrictedlistofseniorExecutives.ItisalwayschairedbyanExecutiveDirector.Itattendstobusinessofaroutinenatureandtotheadministrationofmatters,theprinciplesofwhichhavebeenagreedpreviouslybytheBoardoranappropriateCommittee.

Property CommitteeThePropertyCommitteereviewspropertytransactionswhichhavebeenreviewedandrecommendedbythePortfolioDevelopmentCommittee,withouttheneedforsubmissionoftransactionstothefullBoard.ThePropertyCommitteeagreestotheoverallstrategicdirectionforthemanagementoftheGroup’spropertyportfolioonahalf-yearlybasisandmaydecidethataparticulartransactionshouldbereferredtotheBoardforconsiderationorapproval.ThePropertyCommitteecomprisesBobIvell(CommitteeChair),PhilUrban,TimJones,JoshLevy,KeithBrowne,ColinRutherford,StewartGillilandandGaryJohn.

Portfolio Development CommitteeTheexecutivereviewofpropertytransactionsandcapitalallocationtosignificantpropertymatterssuchassiteremodelandconversionplansandtheCompany’srealestatestrategyiscarriedoutbythePortfolioDevelopmentCommittee.ThisisnotaformalBoardCommitteebutiscomprisedoftheChiefExecutive,theFinanceDirector,theGroupPropertyDirectorandtheCompanySecretaryandGeneralCounsel.Ithasdelegatedauthoritytoapprovecertaintransactionsuptoagreedfinanciallimitsand,abovethoseauthoritylevels,itmakesrecommendationstotheBoardorthePropertyCommittee.

Pensions CommitteeTheBoardhasestablishedaPensionsCommitteetosuperviseandmanagetheCompany’srelationshipwithitsvariouspensionschemesandtheirtrustees.

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

ThroughoutFY2017theworkofthePensionsCommitteefocusedprimarilyonthenegotiationswiththeTrusteeoftheGroup’stwoprincipaldefinedbenefitpensionschemes,theMitchells&ButlersPensionPlanandtheMitchells&ButlersExecutivePensionPlan,toagreethetriennialvaluationsofthoseschemesasat31March2016.ThesuccessfulconclusionofthosetriennialvaluationswasannouncedbytheCompanyinitsThirdQuarterTradingUpdateon27July2017.Thosevaluationsshowedanagreeddeficitof£451m(whichwasareductionfromthedeficitof£572masdisclosedbythe2013triennialvaluations)whichwillbefundedbyanunchangedlevelofcashcontribution(of£46mp.a.,indexed)to2023.

ThediscussionsandnegotiationsbetweentheTrusteeoftheGroup’stwodefinedbenefitplansandthePensionsCommitteewereledonthePensionCommittee’sbehalfbyColinRutherford,oneoftheCompany’sindependentNon-ExecutiveDirectors.Thisprocesswascomplicatedandnecessarilyhighlydetailed.ToreflecttheverysignificantamountoftimeandeffortwhichMrRutherfordcommittedtothisprocessduringFY2017,theBoardapprovedaone-offadditionalfeeforMrRutherfordof£75,000.TheBoarddoesnotexpectthattherewillbeanyfurtherfeeofthisnatureinFY2018.

Treasury Committee ThetreasuryoperationsoftheMitchells&ButlersGroupareoperatedonacentralisedbasisunderthecontroloftheGroupTreasurydepartment.AlthoughnotaformalBoardCommittee,theTreasuryCommittee,whichreportstotheFinanceDirectorbutissubjecttooversightfromtheAuditCommitteeand,ultimately,theBoard,hasday-to-dayresponsibilityfor:

• liquiditymanagement;

• investmentofsurpluscash;

•funding,cashandbankingarrangements;

• interestrateandcurrencyriskmanagement;

•guarantees,bonds,indemnitiesandanyfinancialencumbrancesincludingchargesonassets;and

•relationshipswithBanksandothermarketcounterpartiessuchascreditratingagencies.


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TheTreasuryCommitteealsoworkscloselywiththefinancialaccountingdepartmenttoreviewtheimpactofchangesinrelevantaccountingpracticesandtoensurethattreasuryactivitiesaredisclosedappropriatelyintheCompany’saccounts.

TheBoarddelegatesthemonitoringoftreasuryactivityandcompliancetotheTreasuryCommittee.Itisresponsibleformonitoringtheeffectivenessoftreasurypoliciesandmakingproposalsforanychangestopoliciesorinrespectoftheutilisationofnewinstruments.TheapprovaloftheBoard,oradesignatedcommitteethereof,isrequiredforanysuchproposals.

Independent adviceMembersoftheBoardmaytakeindependentprofessionaladviceinthefurtheranceoftheirdutiesandtheBoardhasagreedaformalprocessforsuchadvicetobemadeavailable.MembersoftheBoardalsohaveaccesstotheadviceandservicesoftheCompanySecretaryandGeneralCounsel,theCompany’slegalandotherprofessionaladvisersanditsexternalauditor.ThetermsofengagementoftheCompany’sexternaladvisersanditsexternalauditorareregularlyreviewedbytheCompanySecretaryandGeneralCounsel.

Code of Ethics TheCompanyhasimplementedbusinessconductguidelinesdescribingthestandardsofbehaviourexpectedfromthoseworkingfortheCompanyintheformofacodeofethics(the‘EthicsCode’).TheEthicsCodewasreviewedandre-communicatedtoallemployeesinFY2017toensureitwaskeptclearlyinfocus.Itsaimistopromotehonestandethicalconductthroughoutourbusiness.TheEthicsCoderequires:

•compliancewithallapplicablerulesandregulationsthatapplytotheCompanyanditsofficersincludingcompliancewiththerequirementsoftheBriberyAct2010;

•theethicalhandlingofactualorapparentconflictsofinterestbetweeninternalandexternal,personalandprofessionalrelationships;and

•thatanyhospitalityfromsuppliersmustbeapprovedinadvancebyappropriateseniormanagement,withapresumptionagainstitsacceptance.

TheCompanytakesazerotoleranceapproachtobriberyandhasdevelopedanextensiveBriberyPolicywhichisincludedintheEthicsCode.TheEthicsCoderequiresemployeestocomplywiththeBriberyPolicy.

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

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 management TheBoardhasoverallresponsibilityfortheGroup’ssystemofinternalcontrolandriskmanagementandforreviewingitseffectiveness.Inordertodischargethatresponsibility,theBoardhasestablishedtheproceduresnecessarytoapplytheCodefortheyearunderreviewandtothedateofapprovaloftheAnnualReport.SuchproceduresareregularlyreviewedbytheAuditCommittee.

ThekeyfeaturesoftheGroup’sinternalcontrolandriskmanagementsystemsinclude:

•Processes,includingmonitoringbytheBoard,inrespectof:

i. financialperformancewithinacomprehensivefinancialplanning,accountingandreportingframework;

ii. strategicplanachievement;iii. capitalinvestmentandassetmanagementperformance,with

detailedappraisal,authorisationandpost-investmentreviews;andiv. consumerinsightdataandactionstoassesstheevolutionof

brandsandformatstoensurethattheycontinuetobeappealingandrelevanttotheGroup’sguests.

•Anoverallgovernanceframeworkincluding:

i. clearlydefineddelegationsofauthorityandreportinglines;ii. acomprehensivesetofpoliciesandproceduresthatemployees

arerequiredtofollow;andiii. theGroup’sEthicsCode,inrespectofwhichanannual

confirmationofcomplianceissoughtfromallcorporateemployees.

•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’scapabilityandprocesses

toidentifyandmanagerisks;v. considertheidentifiedkeyrisksfacedbytheCompanyand

newandemergingrisksandconsidertheadequacyofmitigationplansinrespectofsuchrisks;and

vi. wheremitigationplansareinadequate,recommendimprovementactions.



TheGroup’srisksidentifiedbytheprocessesthataremanagedbytheRiskCommitteearedescribedin‘Risksanduncertainties’onpages36to40.MoredetailsoftheworkoftheRiskCommitteeareincludedintheAuditCommitteereportonpages62to65.

•Examinationofbusinessprocessesonariskbasisincludingreportsfromtheinternalauditfunction,knownasGroupAssurance,whichreportsdirectlytotheAuditCommittee.

TheGroupalsohasinplacesystems,includingpoliciesandprocedures,forexercisingcontrolandmanagingriskinrespectoffinancialreportingandthepreparationofconsolidatedaccounts.Thesesystems,policiesandprocedures:

•governthemaintenanceofaccountingrecordsthat,inreasonabledetail,accuratelyandfairlyreflecttransactions;

•requirereportedinformationtobereviewedandreconciled,withmonitoringbytheAuditCommitteeandtheBoard;and

•providereasonableassurancethattransactionsarerecordedasnecessarytopermitthepreparationoffinancialstatementsinaccordancewithInternationalFinancialReportingStandards(‘IFRS’)orUKGenerallyAcceptedAccountingPractice,asappropriate.

InaccordancewiththeCode,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,ChiefExecutiveandtheFinanceDirectorregularlyreporttotheBoardtheviewsoflargershareholdersabouttheCompany,andtheotherNon-ExecutiveDirectorsareavailabletomeetshareholdersonrequestandareofferedtheopportunitytoattendmeetingswithlargershareholders.

TheAGMprovidesausefulinterfacewithshareholders,manyofwhomarealsoguestsinourpubs,barsandrestaurants.AllproxyvotesreceivedinrespectofeachresolutionattheAGMarecountedandthebalanceforandagainst,andanyvoteswithheld,areindicated.

Board effectiveness evaluation and Chairman’s evaluation and appraisalDuringFY2017,theNominationCommitteecommissionedaninternalself-evaluationreviewinwhichtheBoardcontinuedtoreviewtheeffectivenessofindividualDirectors.TheconclusionsofthatreviewhavebeenreportedontotheBoardandappropriateactionsrelatingtoadjustmentsandimprovementstothewayinwhichtheDirectors,theBoardanditsCommitteesinteracthavebeenagreedupon.Noneoftheseconstitutesignificantchangestothepre-existingoperationalpracticesoftheBoardoritsCommitteesbut,rather,fallwithintheambitofcontinuousreviewandevolution.

Insummary,theprincipaloutputsofthatreviewwerethat:

•TheBoardshouldcontinuetokeepunderclosereviewtheevolutionof,andemergingtrendsacross,theleisureandhospitalityindustry,whichitwasnotedisstilldevelopingrapidly,aswellasmonitoringcurrentoperations;

•Therewasacontinuedneedforuptodatesuccessionplanswithparticularreferencetodiversity;and

•TheBoardshouldhavetheopportunitytospendtimeintheGroup’sbusinessestoensurecontinuedfamiliaritywiththedeliveryoftheGroup’sgoodsandservicesandtheoperationalenvironment.

AllofthesemattershavebeenbuiltintotheBoard’stimetableforFY2018.

TheSeniorIndependentDirector,StewartGilliland,hasledtheprocessfortheannualappraisaloftheChairman’sperformancewiththeindependentNon-ExecutiveDirectors(withouttheChairmanpresent)andtheconclusionswerefedbacktotheChairman.

AnnualreviewsoftheChairman’sperformancewillcontinuetobeconductedasrequiredbytheCode.Further,theBoardEffectivenessReviewincludedanassessmentoftheChairmanandhisfulfilmentofhisrole.

Going concernTheDirectors’statementastothestatusoftheCompanyasagoingconcerncanbefoundonpage51.


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Membership and remit of the Audit Committee ThemainpurposeoftheAuditCommitteeistoreviewandmaintainoversightofMitchells&Butlers’corporategovernance,particularlywithrespecttofinancialreporting,internalcontrolandriskmanagement.TheAuditCommittee’sresponsibilitiesalsoinclude:

•reviewingtheprocessesfordetectingfraud,misconductandinternalcontrolweaknesses;

•reviewingtheeffectivenessoftheGroupAssurancefunction;and

•overseeingtherelationshipwiththeexternalandinternalauditors.

Atthedateofthe2017AnnualReport,theAuditCommitteecomprisesfourindependentNon-ExecutiveDirectors:ColinRutherford(Chair),ImeldaWalsh,StewartGillilandandDaveCoplin,andtwofurtherNon-ExecutiveDirectorsnominatedbysubstantialshareholders,RonRobsonandEddieIrwin.InaccordancewithCodeprovisionC.3.1theBoardconsidersthatColinRutherfordhassignificant,recentandrelevantfinancialexperience.BiographiesofallofthemembersoftheAuditCommittee,includingasummaryoftheirrespectiveexperience,appearonpages46and47.

FollowingtheappointmentofthreeIndependentNon-ExecutiveDirectorsinAprilandMay2013,Committeememberswereappointedwitheffectfrom11July2013,andrevisedtermsofreferencewereestablished,inordertocomplywithCoderequirements.Thosetermsofreferencearereviewedannually.

TheAuditCommitteecontinuedtomeetquarterlyduringFY2017.Ineachcase,appropriatepapersweredistributedtotheCommitteemembersandotherinvitedattendees,including,whereandtotheextentappropriate,representativesoftheexternalauditfirmandtheinternalGroupAssurancefunction.

Whenappropriate,theAuditCommitteeaugmentstheskillsandexperienceofitsmemberswithadvicefrominternalandexternalauditprofessionals,forexample,onmatterssuchasdevelopmentsinfinancialreporting.AuditCommitteemeetingsarealsoattended,byinvitation,byothermembersoftheBoardincludingtheChiefExecutiveandtheFinanceDirector,theCompanySecretaryandGeneralCounsel,theGroupRiskDirectorandrepresentativesoftheexternalauditor,DeloitteLLP.TheAuditCommitteealsomeetsprivatelynotlessthantwiceayear,withoutanymemberofmanagementpresent,inrelationtoauditmatters,withtheexternalauditor.

TheremunerationofthemembersoftheAuditCommitteeissetoutintheReportonDirectors’remunerationonpage80.

Introduction from the Audit Committee ChairmanI am delighted to present, on behalf of the Board, the report of its Audit Committee for the financial year ended 30 September 2017.OverthepreviousyearwecontinuedtohavethebenefitofspendingvaluabletimewithourGroupRiskDirectorandthosekeyindividualsthroughouttheGroup,whocollectivelyprovideanappreciationandrigorousinsightintohowourGroupfunctionsandreports.TheseinteractionsareextremelyvaluableandtheCommitteearegratefulfortheinstructiontheyprovide.TheseactivitiesalsosignificantlyassisttowardsthepromotionandefficientexecutionoftheCommittee’soversightrole.

Engagement with auditors and third partiesTheCommitteecontinuedtoengageformally,regularlyandatanappropriatelevelofdetailwithourexternalauditors,internalauditors(alsoexternallyresourced),andotherthird-partyadvisersasnecessary.ThishasenabledtheCommitteetomaintainanappropriateunderstandingofhowourauditorsandthird-partyadvisersinteractwithourassuranceandriskfunction.Inturnthisenabledtheseessentialauthoritiestoprovidecomprehensivecoverageofauditprocessandthird-partyassuranceandrisk,andthishelpedaugmentourCommittee’sconfidenceintheirrespectiveandcollectivefieldworkconclusions.

ItisalsoimportanttonoteourCommittee’sroleinoverseeingthewell-consideredprovisionofadequateresourcesbytheGroup,towardsensuringthatanyadditionalnon-auditservicesrequiredovertheyearwereobtainedwherenecessary,andindealingwiththeincreasingroleoftheFRCanditsincumbentreportingdemands.

Effectiveness of internal controls and Group assurance and risk functionTheaboveeffortsprovidedtheCommitteewithaclearanddetailedunderstandingoftheprincipaloperationsatalllevelsovertheyear.TheCommitteecontinuedtofocusonchallengingtheeffectivenessoftheGroup’sinternalcontrols,therobustnessofGroupAssuranceandRiskManagementprocessesandinassessingtheimportanceof,andactingasrequiredupon,allreportedinformationreceivedfromourauditorsandthird-partyadvisers.

Weremaincommittedtomaintaininganopenandconstructivedialoguewithourshareholdersonauditmatters.Therefore,ifyouhaveanycommentsorquestionsonanyelementofthereport,pleaseemailme,careofAdrianBrannan,GroupRiskDirector,[email protected]

Audit Committee report

Colin RutherfordChairman of the Audit Committee


Summary terms of referenceAcopyoftheAuditCommittee’stermsofreferenceispubliclyavailablewithintheInvestorsectionoftheCompany’swebsite:www.mbplc.com/pdf/audit_committee_terms.pdf

TheAuditCommittee’stermsofreferencewereapprovedbytheCommitteeandadoptedbytheplcBoardin2013.Thosetermsofreferencespecificallyprovidethattheywillbereviewedannually.TheyhavebeenreviewedeachyearsinceandnochangeswerefelttobeneededinFY2017.Atthetimeofre-adoptionoftheCompany’sCorporateGovernanceComplianceStatementinJuly2016,asupdatedtoreflectchangesrequiredtogiveeffecttotheintroductionoftheMarketAbuseRegulation(MAR),anychangestotheCompany’sgovernancearrangementstoreflecttherequirementsofMARwereintroduced.OtherthanthoseMARrelatedamendments,whichrelatedtoconsequentialchangestoregulatoryreferences(e.g.theUKLA’sDisclosureandTransparencyRulesarenowknownastheDisclosureGuidanceandTransparencyRules),therehavebeennomaterialchangestotheseTermsofReferencesincethelastreviewin2015.Accordingly,inFY2017nochangesweremadetothetermsofreferenceoftheAuditCommittee,andtheworkoftheAuditCommitteeiskeptunderreviewwiththeexpectationthatanysuchmatterswhichcometolightareincludedinthereviewscheduledforFY2018.

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-auditworktobecarriedoutbytheauditorandthefeestobepaidforthatworktogetherwiththemonitoringoftheexternalauditor’sindependence;

•overseetheprocessfordealingwithcomplaintsreceivedbytheGroupregardingaccounting,internalaccountingcontrolsorauditingmattersandanyconfidential,anonymoussubmissionbyemployeesofconcernsregardingquestionableaccountingorauditingmatters;and

•adoptandoverseeaspecificCodeofEthicsforallcorporateemployeeswhichisconsistentwiththeCompany’soverallstatementofbusinessethics.

Key activities of the Audit CommitteeAuditmattersarereviewedatquarterlyAuditCommitteemeetingsthroughouttheyearatwhichdetailedreportsarepresentedforreview.TheAuditCommitteecommissionsreportsfromexternaladvisers,theGroupRiskDirectororCompanymanagement,eitherafterconsiderationoftheCompany’smajorrisksorinresponsetodevelopingissues.Duringtheyear,inordertofulfiltherolesandresponsibilitiesoftheAuditCommittee,thefollowingmatterswereconsidered:

•thesuitabilityoftheGroup’saccountingpoliciesandpractices;

•halfyearandfullyearfinancialresults;

•thescopeandcostoftheexternalaudit;

•theauditor’shalfyearandfullyearreports;

•reappointmentandevaluationoftheperformanceoftheauditor,includingrecommendationstotheBoard,forapprovalbyshareholders,onthereappointmentoftheCompany’sauditorandontheapprovaloffeesandtermsofengagement;

•non-auditworkcarriedoutbytheauditorandtrendsinthenon-auditfeesinaccordancewiththeCommittee’spolicytoensurethesafeguardingofauditindependence;

•theco-ordinationoftheactivitiesandtheworkprogrammesoftheinternalandexternalauditfunctions;

•thearrangementsinrespectofGroupAssuranceincludingitsresourcing,externalsupport,thescopeoftheannualinternalauditplanforFY2017regardingthelevelofachievementandthescopeoftheannualinternalauditplanforFY2018;

•periodicinternalcontrolandassurancereportsfromGroupAssurance;

•theGroup’sriskmanagementframeworkfortheidentificationandcontrolofmajorrisks,itsriskandassurancemitigationplanandtheannualassessmentofeffectivenessofcontrols;

•compliancewiththeCompany’sCodeofEthics;

•corporategovernancedevelopments;

•thestatusofmateriallitigationinvolvingtheGroup;and

•reportsonallegationsmadeviatheGroup’swhistleblowingproceduresandtheeffectivenessoftheseproceduresincludingasummaryofreportsreceivedduringFY2017.


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DuringFY2017,15auditreportswereissuedbytheGroupAssurancefunctionandreviewedbytheBoardortheAuditCommittee.Internalauditrecommendationsarecloselymonitoredthroughtoclosureviaaweb-basedrecommendationtrackingsystem,introducedinFY2013andupdatedinFY2017,whichhassignificantlyimprovedtheoverallmonitoringofinternalauditrecommendationstoensurethesearesuccessfullyimplementedinatimelymanner.AsummaryofthestatusoftheimplementationofinternalauditrecommendationsismademonthlytotheExecutiveCommitteeandquarterlytotheAuditCommittee.

Risk management frameworkAsdisclosedinthe‘Riskanduncertainties’sectiononpages36to40theRiskCommitteecontinuestomeetonaquarterlybasistoreviewthekeyrisksfacingthebusiness.MembershipoftheRiskCommittee,whichincludesrepresentationfromeachofthekeybusinessfunctions,isdetailedbelow:

•CompanySecretaryandGeneralCounsel(Chairman)

•GroupFinanceDirector

•CommercialandMarketingDirector

•DivisionalDirector(Operations)

•GroupHRDirector

•DirectorofBusinessChange&Technology

•GroupRiskDirector

•SeniorLegalCounsel

Keyrisksidentifiedarereviewedandassessedonaquarterlybasisintermsoftheirlikelihoodandimpact,withintheGroup’s‘KeyRiskHeatMap’,inconjunctionwithassociatedriskmitigationplans.Inaddition,theRiskCommitteereviewincludesanassessmentofthematerialrelevanceofemergingrisksandthecontinuedrelevanceofpreviouslyidentifiedrisks.DuringFY2017,RiskCommitteemeetingscontinuedtoincludeacross-functional,detailedreviewoftheGroup’skeyrisks.Thisprocess,whichwasintroducedinFY2016,continuestoprovetobeeffectiveandaddsvaluetothecontinueddevelopmentandprogressionoftheGroup’sapproachtoevaluatingnewandexistingrisks,supportedbyrobustmitigationplans.

ActionsarisingfromRiskCommitteemeetingsarefollowedupbytheGroupRiskDirector.TheAuditCommitteereviewstheRiskCommitteeminutes,inadditiontoundertakingaquarterlyreviewoftheGroup’s‘KeyRiskHeatMap’.

Confidential reporting TheGroup’swhistleblowingpolicyenablesstaff,inconfidence,toraiseconcernsaboutpossibleimproprietiesinfinancialandothermattersandtodosowithoutfearofreprisal.DetailsofthepolicyaresetoutintheCompany’sCodeofEthics.TheAuditCommitteereceivesquarterlyreportsonwhistleblowingincidentsandremainssatisfiedthattheproceduresinplacearesatisfactorytoenableindependentinvestigationandfollowupactionofallmattersreported.NomajorissueshavebeenreportedinFY2017(majorissuesbeingdefinedforthispurposeasmattershavingafinancialimpactofgreaterthan£100k).

Disclosure of significant issues considered TheAuditCommitteehasreviewedthekeyjudgementsappliedinthepreparationoftheconsolidatedfinancialstatements,whicharedescribedintherelevantaccountingpoliciesanddetailednotestothefinancialstatementsonpages88to139.

TheAuditCommittee’sreviewincludedconsiderationofthefollowingkeyaccountingjudgements:

•Property,PlantandEquipmentValuation–theassumptionsusedbymanagementtovaluethelongleaseholdandfreeholdestateincludingestimatedfairmaintainabletradinglevels,brandmultiplesanduseofspotvaluationstoensureaconsistentvaluationmethodologyisinplace.Anumberofkeyjudgementsarealsoappliedincalculatingshortleaseholdimpairmentsuchastradinglevelsandtheuseofanappropriatediscountrate;

•Valuationofonerousleaseprovisions–ascurrentlycalculatedtheonerousleaseprovision(includingthekeymattersconsidered,e.g.leaseterm,rentalcommitments,operatingperformanceandturnaroundplans)hasincreasedinFY2017,resultinginaseparatelydisclosedcharge;and

•Pensiondeficit–thepensionliabilityissensitivetotheactuarialassumptionsappliedinmeasuringfuturecashoutflows.TheuseofassumptionssuchasthediscountrateandinflationwhichhaveanimpactonthevaluationofthedefinedbenefitpensionschemewasassessedbytheAuditCommittee.

Effectiveness of internal audit TheAuditCommitteeisresponsibleformonitoringandreviewingtheeffectivenessoftheCompany’sinternalauditfunction.TheAuditCommitteemeetsregularlywithmanagementandwiththeGroupRiskDirectorandtheauditor,toreviewtheeffectivenessofinternalcontrolsandriskmanagementandreceivesreportsfromtheGroupRiskDirectoronaquarterlybasis.

TheannualinternalauditplanisapprovedbytheAuditCommitteeandkeptunderreviewonamonthlybasis,bytheGroupRiskDirector,inordertoreflectthechangingbusinessneedsandtoensurenewandemergingrisksareconsidered.TheAuditCommitteeisinformedofanyamendmentsmadetotheauditplanonaquarterlybasis.TheFY2017internalauditplanwasdevelopedthroughareviewofformalriskassessments(inconjunctionwiththeRiskCommitteeandtheGroup’sExecutiveCommittee)togetherwithconsiderationoftheGroup’skeybusinessprocessesandfunctionsthatcouldbesubjecttoaudit.AsimilarapproachhasbeenemployedinrelationtotheFY2018internalauditplan.

TheprincipalobjectivesoftheinternalauditplanforFY2017were,andremainforFY2018:

•toprovideconfidencethatexistingandemergingkeyrisksarebeingmanagedeffectively;

•toconfirmthatcontrolsovercorebusinessfunctionsandprocessesareoperatingasintended(‘coreassurance’);and

•toconfirmthatmajorprojectsandsignificantbusinesschangeprogrammesarebeingadequatelycontrolled.

Audit Committee report continued


External auditor appointmentDeloitteLLPwasappointedastheauditorin2011,followingaformaltenderprocess.TheAuditCommitteehasconsideredtherecentguidanceinrelationtorotationincludingtheproposedtransitionruleswhichwillbeconsideredwhenrecommendingtheappointmentoftheauditorinfutureyears.TheCompanyhascompliedthroughoutthereportingyearwiththeprovisionsofTheStatutoryAuditServicesforLargeCompaniesMarketInvestigation(MandatoryUseofCompetitiveTenderProcessesandAuditCommitteeResponsibilities)Order2014.UnderthetermsofthatOrder,theCommitteeexpectstocarryoutacompetitiveaudittenderbynolaterthan2020inrespectofthefinancialyearendingin2021toensurethecontinuedobjectivity,independenceandvalueformoneyofthestatutoryaudit.Itmaychoosetodosoatanearliertime.

TheAuditCommitteeconsidersthattherelationshipwiththeauditorisworkingwellandissatisfiedwithitseffectivenessandhasnotconsidereditnecessarytorequireDeloitteLLPtore-tenderfortheexternalauditwork.TherearenocontractualobligationsrestrictingtheCompany’schoiceofauditor.Followingitsappointmentasauditor,DeloitteLLPwasreplacedinrespectoftheprovisionofinternalauditservicesbyPricewaterhouseCoopersLLP.

External auditor’s independenceTheexternalauditorsshouldnotprovidenon-auditserviceswhereitmightimpairtheirindependenceorobjectivitytodoso.TheAuditCommitteehasestablishedapolicytosafeguardtheindependenceandobjectivityoftheGroup’sauditorassetoutinbelow.ThatpolicyhasbeenreviewedinFY2017andacopyofitisappendedtotheAuditCommittee’stermsofreferenceandisavailableontheCompany’swebsite.Pursuanttothatpolicythefollowingserviceshavebeenpre-approvedbytheAuditCommitteeprovidedthatthefeesforsuchservicesdonotexceedinanyyearmorethan70%oftheaverageauditfeepaidtothatauditfirmoverthepastthreeyears:

•auditservices,includingworkrelatedtotheannualGroupfinancialstatements,andstatutoryaccounts;and

•certainspecifiedtaxservices,includingtaxcompliance,taxplanningandtaxadvice.

Acquisitionandvendordue-diligencemayonlybeprovidedifitisspecificallyapprovedbytheCommitteeonacasebycasebasisinadvanceoftheengagementcommencing.Anyotherworkforwhichmanagementwishestoutilisetheexternalauditormustbeapprovedasfollows:

•serviceswithfeeslessthan£50,000maybeapprovedbytheFinanceDirector;and

•engagementswithfeesover£50,000maybeapprovedbytheAuditCommitteeoritsChair.

TheAuditCommitteeremainsconfidentthattheobjectivityandindependenceoftheauditorarenotinanywayimpairedbyreasonofthenon-auditserviceswhichtheyprovidetotheGroup.

ThatpolicyalsoincludesanextensivelistofserviceswhichtheauditfirmmaynotprovideormayonlyprovideinverylimitedcircumstanceswheretheCompanyandtheauditfirmagreethattherewouldbenoimpactontheimpartialityoftheauditfirm.Detailsoftheremunerationpaidtotheauditor,andthesplitbetweenauditandnon-auditservices,aresetoutatnote2.3ofthefinancialstatementsonpage107.

External audit annual assessment TheAuditCommitteeassessesannuallythequalification,expertise,resourcesandindependenceoftheGroup’sauditorandtheoveralleffectivenessoftheauditprocess.TheFinanceDirector,CompanySecretaryandGeneralCounsel,AuditCommitteeChairmanandGroupRiskDirectormeetwiththeauditortodiscusstheaudit,significantrisksandanykeyissuesincludedontheAuditCommittee’sagendaduringtheyear.

Fair, balanced and understandable statement OneofthekeygovernancerequirementsoftheGroup’sfinancialstatementsisforthereportandaccountstobefair,balancedandunderstandable.Therefore,uponreviewofthefinancialstatements,theAuditCommitteeandtheBoardhaveconfirmedthattheyaresatisfiedwiththeoverallfairness,balanceandclarityoftheAnnualReport,whichisunderpinnedbythefollowing:

•formalminutesoftheyearendworkinggroupcomprisedofrelevantinternalfunctionalrepresentativesandappropriateexternaladvisers;

•clearguidancebeingissuedtoallcontributorstoensureaconsistentapproach;and

•formalreviewprocessesatalllevelstoensuretheAnnualReportisfactuallycorrect.

Colin Rutherford Chairman of the Audit Committee22November2017

The Going Concern and Long-Term Viability Statementcanbefoundonpages101and40respectively.


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Background and business context Totalsalesoverthefinancialyeargrewby£94m,withlike-for-likesalesgrowthof1.8%,consistentlyaheadofthemarket.Thisstrongsalesperformanceisaresultofourcontinuedfocusonourthreepriorityareas:buildingamorebalancedbusiness;instillingamorecommercialculture;anddrivinganinnovationagenda.

Over250capitalinvestmentprojectshavebeenundertakenduringtheyear,whichhavebeenfocusedonthepremiumisationoftheestateandtheimprovementofamenity.TherapidexpansionoftheMiller&Carterbrandtoover80locations,primarilythroughtheconversionofexistingsites,isagoodexample.TheremodelprogrammeinHarvesterhasprioritisedhigherlevelsofamenity,demonstratingthatafreshandcontemporarydesignimprovesinvestmentreturns.TheCompanyhasreducedtheredevelopmentcyclefrom11to12yearsforeachbusinessto6to7years,animportantfactorinafastmovingconsumerenvironment.Aswehavereviewedtheestate79businesseswereidentifiedasnotofferinglong-termgrowthpotential,andtheseweresoldduringtheyear.

Thefournewoperatingdivisionsintroducedin2016haveimprovedourguestfocusandacrossallbusinessesNetPromoterScorehasincreasedandcustomercomplaintshavereduced.Theuseofsocialmediabyourgueststoprovidefeedbackisbecomingevermoreprevalentandthereforemanagingon-linereputationisimportant.OurManagersnowhaveaccesstoanonlinefeedbackconsolidationtoolthatallowsthemtocommunicatedirectlyandrapidlywithourguests.

Progresshasbeenmadeinimprovingoperationaleffectivenessthroughtheintroductionofatimeandattendancesystem,andthenextstageofrolloutwillenableteammemberstoswapshiftsandtoshareresourceacrossbusinesses.Thesecondsystemthathasbeenupgradedisourstockmanagementsystemwhichimprovesstockcontrolandhalvesthetimetakentocompletestockcounts.Furtherenhancementstobothofthesesystemsareplanned,andweanticipatethatfurtherbenefitswillbeseeninFY2018.

Ourguestsalsoexpecttechnologytoevolveandenhancetheirexperienceswithus,andduringtheyearamobileorderattablefacilityhasbeendevelopedandtrialled.TheexpectationthatfoodcanbedeliveredtoguestsathomecontinuestoincreaseandduringtheyearthenumberofsitesofferingDeliveroohasincreasedtoaround60andtrialswithJustEathavealsobeensuccessful,withdeliveryandclickandcollectnowavailablefrommanyHarvesterandTobyCarverybusinesses.

Ourpeoplearefundamentaltothedeliveryofgreatguestexperiencesandwherewehaveconsistentlyhighemployeeengagement,salesgrowthisstrongest.Itispleasingthereforethatouremployeeengagementscoreshaveimprovedby2pptsandthatretailteammemberturnoverhasreducedby4.1pptsovertheyear.Thisreductioninteamturnoveralsodeliversasignificantsavingwhenthecostofrecruitment,trainingandinductionistakenintoaccount.Providingapipelineoffuturetalentisalsovitallyimportantandovertheyearafurther1,300apprenticeshavejoinedourvariousprogrammes,andournewon-linelearningplatformprovidesmoreflexibilityforemployeestolearnanddevelopinawaythatsuitsthemandtheirlifestyle.

Despitethegoodprogressmadeacrossanumberofareas,themacroenvironmentinwhichthebusinessoperateshasbeenchallenging,withunprecedentedcostheadwindsimpactingtheindustryasawhole.Theactionstakenovertheyearhaveenabledasustainedreturntosalesgrowthandmadeitpossibletomitigateasignificantproportionofthepreviouslyidentifiedcostheadwinds,neverthelessthecumulativeimpactofthesecostshasresultedinadjustedOperatingProfitfallingby1.3%to£314m.

Remuneration Policy ReviewThecurrentremunerationpolicyforDirectorswasapprovedbyshareholdersinJanuary2015andthereforeisdueforrenewalattheforthcomingAGM.TheCommitteehasundertakenathoroughreviewoftheexistingDirectors’remunerationpolicy,takingfullaccountofthestrategicprioritiesofMitchells&Butlers,andthelatestdevelopmentsintheexternalpayenvironment.TheCommitteehasconcludedthatthecurrentstructure,comprisingabasesalary,benefits,pension,annualbonusandlong-termincentiveawardsdeliveredinshares,andthelevelofquantum,remainsfitforpurpose.However,theCommitteehasdeterminedthatsomeamendmentstothepolicyareappropriatetoensure,primarily,that:(i)ourincentivearrangementscontinuetosupportthelong-termsuccessoftheCompanythroughaperiodofmarketuncertainty;(ii)thepolicyissufficientlyflexibletoremainapplicableoverthenextpolicyperiod;and(iii)thealignmentbetweenExecutiveDirectorsandshareholdersisfurtherstrengthened.

Thekeychangesaresetoutbelow:

Increased flexibility in selection of bonus measures.Weareproposingtoallowgreaterflexibilityintheselectionofannualbonusmeasures,toenableustorespondbettertoevolvingprioritiesoverthepolicyperiod.Thecurrentpolicystatesthatatleast75%willbebasedonfinancialmetricswiththebalancebasedonnon-financialorpersonalbusinessmetrics.Undertheproposednewpolicyatleast50%willbebasedonfinancialobjectivesgivingmorescopetoincludestrategicmeasuresifappropriate.However,for2018,70%willbebasedonfinancialobjectives–seefurtherdetailbelow.

Introduction of a long-term incentive plan post-vesting holding period.Apost-vestingholdingperiodwillbeintroducedforfuturelong-termincentiveawardsrequiringtheExecutiveDirectorstoholdtheafter-taxvalueofsharesuntilatleastfiveyearsfromgrant.Thisisintendedtostrengthenalignmentbetweenexecutivesandshareholdersandtoreflectbestpracticeinthisarea.

More stringent share ownership guidelines.TheCommitteebelievesthattheachievementandmaintenanceofasignificantlevelofshareownershipplaysanimportantroleinaligningtheinterestsofDirectorsandshareholders.Theguidelinewillbeincreasedto200%ofsalaryfortheCEOand150%forallotherDirectors(upfrom150%fortheCEOand100%forotherdirectors).Directorswillcontinuetoberequiredtoretainallvestedshares(netoftax)untiltheshareownershipguidelineismet.Thiswillapplytovesteddeferredbonussharesaswellassharesvestingfromanylong-termincentiveplans.

2017 remuneration The2017annualbonusplanhadtwoelements,AdjustedOperatingProfit(OperatingProfit1)andGuestService.OperatingProfitof£314m,

Report on Directors’ remuneration

I am pleased to present the Directors’ remuneration report in respect of the financial year, which ended on 30 September 2017.

Imelda WalshChair of the Remuneration Committee


wasabovethethresholdlevelof£310mrequiredforbonusunderthiselementtobeginaccruingand,asaresult,3%ofsalary(outof75%ofsalary)underthiselementwasearned.

TheprimarymeasureofGuestServicewasNetPromoterScore(‘NPS’),whichisusedasasurveytomeasureguestsatisfaction.GoodprogresshasbeenmadeandanNPSscoreof59%wasachieved,wellabovethemaximumof53%requiredtotriggerafullpay-outunderthiselementandasaresult25%ofsalaryunderthiselementwasearned.Inaddition,asIoutlinedinmystatementlastyear,theCommitteeintendedtoreviewperformanceagainstotherguestmetrics,suchasTripAdvisorandguestcomplaints,andIampleasedtoconfirmthatgoodprogresshasalsobeenmadeintheseareas.Forexample,theaverageTripAdvisorscoreincreasedfrom3.5to3.7andthenumberofcomplaintsreceivedalsofellbyover7%.DuringtheyeartheCompanyhasalsorevieweditsapproachtothemeasurementofguestsatisfaction,recognisingthatguestsareincreasinglychoosingtoprovidefeedbackviaotherchannelsandinparticularsocialmedia.Tothisendanewsocialmediamonitoringtoolhasbeenintroducedwhichenablesallsocialmediareviews,includingTripAdvisor,FacebookandGoogle,tobecombinedintoasinglereviewscore,andnowover80%ofreviewsarerespondedtobythemanagementteaminthebusiness,increasingtheirdirectengagementwiththeirguests.

ThisresultedinfullbonusesbeingearnedunderthiselementwhichreflectednotonlythestrongactualNPSoutcomebutalsothegoodprogressinguestserviceoverallmadeduring2017.

TheCommitteereviewedtheresultsagainsttheOperatingProfitmeasureandguestserviceandnotedtheconsiderableimpactofthecostheadwindsexperiencedbytheCompanyinFY2017anddecidedthatawardingabonusof28%ofsalaryreflectedoverallperformanceintheperiod.

The2015-2017PerformanceRestrictedSharePlan(‘PRSP’)performanceconditionalsohadtwoelements,growthinadjustedearningspershare(‘EPS1’)andtotalshareholderreturn(‘TSR’),witheachelementweightedequally.OvertheperformanceperiodEPSgrowthwas2.3p.a.,belowthethresholdlevelofperformancerequiredforvesting(8%p.a.).TSRperformancewasalsobelowthemedianthresholdrequiredforvesting.Asaresult,theawardsunderbothelementslapsed.

Approach for FY 2018Salary NosalaryincreasewillapplyforanyExecutiveDirector.PhilUrban’ssalarywillremainat£510,000andTimJones’at£426,500.PhilUrban’ssalaryhasnotincreasedsincehisappointmentinSeptember2015andTimJones’salarywaslastincreasedinJanuary2015.

Annual BonusFor2018,70%ofbonuswillbebasedonOperatingProfit.Theremaining30%willbebasedonnon-profitelementslinkedtothebusinessscorecard(15%GuestHealth,10%EmployeeEngagementand5%Safety),whichappliestoallmanagersacrossMitchells&Butlers.

OperatingProfit(70%)

•HalfofthebonusopportunitywillbepayableforachievingademandingOperatingProfittarget.Thethresholdatwhichbonuswillbegintoaccruehasbeensetat95%oftargetandfullpaymentforthiselementwouldrequireverystrongperformance,wellinexcessofcurrentmarketconsensus.

Non-ProfitElements(30%)

•Theremaining30%oftheannualbonusplanwillbeallocatedagainstthebusinessscorecardasfollows:

− 15%forGuestHealth− 10%forEmployeeEngagement− 5%forSafety

•Thenon-profitelementswillonlybepayableifathresholdleveloffinancialperformanceisachieved.For2018thiswillbesetat97.5%oftheOperatingProfittarget,whichishigherthanthethresholdrequiredforpaymentundertheOperatingProfitelement.

•Since2015theleadingmeasureofGuestHealthhasbeenNPSandin2017anewsocialmediamonitoringtoolwasintroducedenablingallsocialmediareviews,includingTripAdvisor,FacebookandGoogle,tobecombinedintoasinglereviewscore.

• Inaddition,therehasbeenanincreasedfocusonimprovingthespeedatwhichguestcomplaintsareresolved,alongsideacommitmenttoreducingtheoverallnumberofcomplaintsreceived.

•Withthisinmind,for2018theGuestHealthmeasurewillcompriseacombinationofallthreeelements,NPS,acombinedsocialmediareviewscoreandguestcomplaints.Eachelementwillhaveequalweightingandtoachieveamaximumpaymentperformancewillneedtoexceedtargetonatleasttwoelementsandbeattargetorbetterforthethirdelement.Thisroundedassessmentensuresthatguestserviceimprovementsarereviewedcomprehensivelyandarenotsolelybasedononemetric.

•Mitchells&Butlershasmeasuredemployeeengagementforanumberofyears,andaclearcorrelationhasbeenestablishedbetweenemployeeengagementandguestsatisfaction,whichinturnhasapositiveimpactonsales.Forthisreason,theCommitteefeltthatemployeeengagementshouldformpartofthebonusscheme.

•FoodsafetywillalwaysbeakeypriorityandincludingameasurebasedontheproportionofourbusinessesthatachieveahighNationalFoodHygieneRatingreflectsourcontinuedfocusonthesafeoperationofourbusinesses.Asanadditionalcheck,overallworkplacesafetyperformancewillalsobetakenintoaccountwhendeterminingthebonussafetyoutcome.

•Morebroadly,theCommitteewillcontinuetoconsidertheoverallperformanceoftheCompany,notjusttheoutcomeofeachindividualmeasure.

Long-term incentivesThemarketisevermorechallenginganduncertain,andtheCommitteewantstotakeaccountofthefurtherworktheCEOisundertakingindefiningplansthatwillfurtherimprovesalesandincreaseefficiencies,inlinewithourthreestrategicpriorities.Therefore,theCommitteedidnotconsideritappropriatetodeterminemeasuresoragreetargetsforalong-termincentiveplanatthistime.ThiswillbeamatterthattheCommitteeconsidersoverthenextfewmonthsanddoesnotexpecttomakeanawarduntilafterthe2018AGM.Wewillconsultwithmajorshareholderspriortomakinganyaward.Theperformanceconditionswillbedisclosedinfullatthetimeofgrant.

Ifyouhaveanycommentsorquestionsonanyelementofthereport,pleaseemailme,careofCraigProvett,DirectorofCompensation&Benefits,[email protected]

Imelda WalshChair of the Remuneration Committee22November2017

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

1. Adjustedearningspershareandadjustedoperatingprofitfiguresincludedinthisreportarequotedbeforeseparatelydiscloseditemsassetoutinnote2.2tothefinancialstatements.


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FY 2017 annual bonusTheannualbonuswasbasedontwoelements:75%onOperatingProfitand25%onGuestServiceasmeasuredbyourNPS.

Target Actual Result

Bonus Outcome (% of salary)

OperatingProfit £326m £314m 96.2%oftarget 3NPS 52% 59% Maximum 25

Bonuspaymentsequivalentto28%ofbasesalaryareduetobepaidtoExecutiveDirectors(£145,456inrespectofPhilUrbanand£121,717inrespectofTimJones).

FY 2017 PRSP vestingThePRSPawardsgrantedinNovember2014hadaperformanceperiodendingon30September2017.50%oftheawardwasbasedonrelativeTSRperformanceand50%onEPSgrowth.

Target Actual % vesting

TotalShareholderReturnrelativetopeergroup

Mediantoupperquartile Belowmedian Nil

CompoundannualadjustedEPSgrowth 8%to16%CAGR 2.3%p.a. Nil

TSRperformancewasbelowmedianandEPSgrowthof2.3%p.a.overtheperiodwasbelowthethreshold,thereforenopartoftheawardvested.

FY 2017 single figure remuneration for Executive Directors (53 week Financial Year)

Basic salaries £000

Taxable benefits £000

Short-term incentives

£000

Pension related benefits

£000

Long-term incentives

£000

Total remuneration

£000

2017 2017 2017 2017 2017 2017

PhilUrban 518 15 146 91 – 770TimJones 434 16 122 76 – 648Total 952 31 268 167 – 1,418

Approach for FY 2018Salary NosalaryincreasewillapplyforanyExecutiveDirector.PhilUrban’ssalarywillremainat£510,000andTimJones’at£426,500.

Benefits and pension Nochangeproposed.Apensioncontribution(orcashequivalent)of20%ofsalarywillcontinuetoapply.

Annual bonus Nochangetopotentialquantum–100%ofsalary.

MeasureswillbeOperatingProfit(70%),GuestHealth(15%),EmployeeEngagement(10%)andSafety(5%).

Halfofanybonuspayablewillbedeferredinsharesandreleasedinequalpartsafter12and24months.

PRSP Awardlevelsremainunchangedat200%ofbasesalaryfortheChiefExecutiveand140%ofbasesalaryfortheFinanceDirector.

Themeasuresandtargetsfortheawardstobemadeforthe2018-20cyclearestillbeingdeterminedbytheCommittee.Theperformanceconditionswillbedisclosedinfullatthetimeofgrant.

Atwo-yearholdingperiodwillbeintroducedforallfuturelong-termincentiveawards,tostrengthenalignmentbetweenExecutivesandshareholders.

Share ownership guidelines Theguidelinewillbeincreasedto200%ofsalaryfortheCEOand150%forallotherExecutiveDirectors(upfrom150%fortheCEOand100%forotherExecutiveDirectors).

Directorswillberequiredtoretainallvestedshares(netoftax)untiltheshareownershipguidelineismet.Thiswillapplytovesteddeferredbonussharesaswellassharesvestingfromanylong-termincentiveplans.

AT A GLANCEThis section briefly summarises the principles that underpin our remuneration policy, highlights performance and remuneration outcomes for FY 2017, and our approach for FY 2018. More detail can be found in the annual report on remuneration on pages 78 to 87.

Remuneration principles Shareholder alignmentAhighproportionofrewardisdeliveredintheformofequity,ensuringExecutiveshavestrongalignmentwithshareholders.

CompetitiveProvidingcompetitiverewardthatpromotesthelong-termsuccessofthebusinesswhilstenablingtheattraction,retentionandmotivationofhighcalibreseniorExecutives.

Performance-linkedAsignificantpartofanExecutive’srewardislinkedtotheperformanceofthebusinesswithaclearlineofsightbetweenbusinessperformanceanddeliveryofshareholdervalue.

StraightforwardTheremunerationstructureissimpletounderstandforparticipantsandshareholdersandisalignedtothestrategicprioritiesofthebusiness.

Report on Directors’ remuneration continued


POLICY REPORTThis section of the report sets out the Company’s Directors’ remuneration policy that will be put forward for approval in a binding vote of shareholders at the 2018 AGM on 23 January 2018. The policy will take formal effect from that date, subject to shareholder approval. It is intended that the policy will formally apply for the three years beginning on the date of approval.

Key considerations when determining the Directors’ remuneration policyTheprimaryobjectiveoftheDirectors’remunerationpolicyistopromotethelong-termsuccessofthebusinesswhilstensuringthattheCompanydoesnotpaymorethanisnecessary.Inseekingtoachievethisobjective,theCommitteeismindfuloftheviewsofabroadrangeofstakeholdersinthebusinessandaccordinglytakesaccountofanumberoffactorswhensettingremunerationpolicyincludingmarketconditions,payandbenefitsinrelevantcomparatororganisations,termsandconditionsofemploymentacrosstheGroup,theCompany’sriskappetite,theexpectationsofinstitutionalinvestorsandfeedbackfromshareholdersandotherstakeholders.

Shareholder viewsTheBoardremainscommittedtoshareholderdialogueandtheRemunerationCommitteewillconsultextensivelywithmajorshareholderswhenconsideringanysignificantchangestoourremunerationarrangements.TheCommitteealsoconsidersshareholderfeedbackreceivedinrelationtotheDirectors’RemunerationReporteachyearfollowingtheAGM.This,togetherwithanyadditionalfeedbackreceivedfromshareholdersandotherstakeholdersfromtimetotime,isthenconsideredaspartoftheCommittee’sannualreviewofremunerationpolicyanditsimplementation.TheCommitteealsoactivelymonitorsdevelopmentsintheexpectationsofinstitutionalinvestorsandtheirrepresentativebodies.

Employment conditionsTheCommitteeisregularlyupdatedthroughouttheyearonpayandconditionsapplyingtoGroupemployees.WheresignificantchangesareproposedtoemploymentconditionselsewhereintheGroup,thesearehighlightedfortheattentionoftheCommitteeatanearlystage.TheCommitteeisinformedofthebasepayreviewbudgetapplicabletootheremployeesandiscognisantofchangestotheNationalLivingWageandtheNationalMinimumWagewhenconsideringthepayofExecutiveDirectors.

EmployeesarenotspecificallyconsultedonExecutiveremuneration.Allemployeesare,however,invitedtotakepartinourannualYourSayemployeeengagementsurveyinwhichtheyhaveanopportunitytoprovideanonymousfeedbackonawiderangeoftopicsofinterestorconcerntothem.TheresultsofthesurveyarereviewedbytheBoard;anysignificantconcernsoverremunerationwouldbeconsideredseparatelybytheCommitteeand,ifappropriate,takenintoaccountwhendeterminingtheremunerationpolicy.Inaddition,eachyearanemployeeforumisheld,whichgivestheopportunityforemployeestoaskquestionsofseniormanagement,viaelectedrepresentatives.TheRemunerationCommitteeChairwillattendtheforumonanannualbasistoanswerquestionsraisedbyemployeerepresentativesconcerningExecutivepay.

TheCommitteeconsidersabroadrangeofreferencepointswhendeterminingpolicyandpaylevels;theseincludeexternalmarketbenchmarksaswellasinternalreferencepoints.Anysuchreferencepointsaresetinanappropriatecontextandarenotconsideredinisolation.

TheremunerationpolicyforExecutiveDirectors,whichissetoutoverthefollowingpagessupportsthebusinessneedsoftheCompany,ensuringitpromoteslong-termsuccesswhilstenablingittoattract,retainandmotivateseniorExecutivesofahighcalibre.TheCommitteeissatisfiedthattheremunerationpolicysupportstheCompany’sstrategyofgrowinglong-termshareholdervalueandappropriatelybalancesfixedandvariableremuneration.Withahighproportionofrewarddeliveredintheformofequity,thisensuresthatExecutiveshaveastrongalignmentwithshareholdersthroughtheCompany’sshareprice.

Changes to the previous Directors’ remuneration policyTheCommitteehasundertakenathoroughreviewoftheexistingDirectors’remunerationpolicy,takingfullaccountofthestrategicobjectivesofMitchells&Butlersandthelatestdevelopmentsintheexternalpayenvironment.TheCommitteehasconcludedthatthecurrentstructure,comprisingabasesalary,benefits,pension,annualbonusandlong-termincentiveawardsdeliveredinshares,andtheoveralllevelofquantum,remains,largely,fitforpurpose.However,theCommitteehasdeterminedthatsomeimportantamendmentstothepolicyareappropriatetoensure,primarily,that:(i)ourincentivearrangementscontinuetosupportthelong-termsuccessoftheCompanythroughaperiodofmarketuncertainty;(ii)thepolicyissufficientlyflexibletoremainapplicableoverthenextpolicyperiod;and(iii)thealignmentbetweenExecutiveDirectorsandshareholdersisfurtherstrengthened.

Thekeychangesaresetoutbelow:

• Increased flexibility in selection of bonus measures.Weareproposingtoallowgreaterflexibilityintheselectionofannualbonusmeasures,toenableustobetterrespondtoevolvingprioritiesoverthepolicyperiod.Thecurrentpolicystatesthatatleast75%willbebasedonfinancialmetricswiththebalancebasedonnon-financialorpersonalbusinessmetrics.Itisproposedthatthenewpolicyrequiresthatatleast50%isbasedonfinancialobjectivesgivingusmorescopetoincludestrategicmeasuresifappropriate.Atthepresenttime,theCommitteeintendsthat70%ofthebonusopportunitywillbebasedonfinancialmetrics.

• Introduction of a long-term incentive plan post-vesting holding period.Apost-vestingholdingperiodwillbeintroducedforfuturelong-termincentiveawardsrequiringtheExecutiveDirectorstoholdtheafter-taxvalueofsharesuntilatleastfiveyearsfromgrant.ThisisintendedtostrengthenalignmentbetweenExecutivesandshareholdersandtoreflectbestpracticeinthisarea.

•More stringent share ownership guidelines. TheCommitteebelievesthattheachievementandmaintenanceofasignificantlevelofshareownershipplaysanimportantroleinaligningtheinterestsofDirectorsandshareholders.Theguidelinewillbeincreasedto200%ofsalaryfortheCEOand150%forallotherDirectors(upfrom150%fortheCEOand100%forotherDirectors).Directorswillcontinuetoberequiredtoretainallvestedshares(netoftax)untiltheshareownershipguidelineismet.However,thiswillnowalsoapplytovesteddeferredbonusshares.


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Policy tableThetablebelowsummariseseachelementoftheremunerationpolicyapplicabletoExecutiveDirectors.

Purpose and link to strategy Operation Opportunity Performance metrics Recovery or withholding

Base salary

ProvidesasoundbasisonwhichtoattractandretainExecutivesofappropriatecalibretodeliverthestrategicobjectivesoftheGroup.

Toreflectthemarketvalueoftherole,personalcontribution,experienceandcompetence.

Salariesarenormallysubjecttoannualreview,typicallyeffectivefrom1January.

Salarylevelsmaybeinfluencedby:

• role,experienceorperformance;

• Groupprofitabilityandprevailingmarketconditions;and

• periodicexternalbenchmarkingofsimilarrolesatcomparablecompaniesbysizeandsector.

Payablefour-weeklythroughouttheyear.

Pensionable.

Thegeneralpolicyistosetsalariesbroadlyaroundmid-marketlevelswithincreases(inpercentageterms)typicallyinlinewiththatoftheCompany’sUKworkforce.

Percentageincreasesbeyondthosegrantedtothewiderworkforcemaybeawardedincertaincircumstancessuchaswhenthereisachangeintheindividual’sroleorresponsibilityorwheretherehasbeenafundamentalchangeinthescaleornatureoftheCompany.

Inaddition,ahigherincreasemaybemadewhereanindividualhadbeenappointedtoanewroleatbelowmarketsalarywhilegainingexperience.Subsequentdemonstrationofstrongperformancemayresultinasalaryincreasethatishigherthanforthewiderworkforce.

TheremayalsobecircumstanceswheretheCommitteeagreestopayabovemid-marketlevelstosecureorretainanindividualwhoisconsidered,inthejudgementoftheCommittee,topossesssignificantandrelevantexperiencewhichisrequiredtoenablethedeliveryoftheCompany’sstrategy.

ExecutiveDirectors’performanceisafactorconsideredwhendeterminingsalaries.

PerformanceisreviewedinlinewiththeestablishedperformancereviewprocessinplaceacrosstheGroup.

Norecoveryorwithholdingprovisionsapply.




Annual Performance Bonus (cash and shares)

Providesadirectlinkbetweenannualperformanceandreward.IncentivisestheachievementofkeymeasureslinkedtoCompanystrategy.

Deferredbonus,awardedinshares,providesaretentionelementandadditionalalignmentofintereststoshareholders.

TheCommitteedeterminesbonuspaymentlevelaftertheyear-endbyreferencetoperformancetargetspreviouslysetbytheCommittee.

ThecashelementofthebonusisnormallypayableinDecemberfollowingtheendofthefinancialyear.

Uptohalfofanybonusawardispayableincash.AtleasthalfofanybonusawardisdeferredassharesunderthetermsoftheShortTermDeferredIncentivePlan(‘STDIP’)below.

KeytermsoftheSTDIPare:

• Deferredbonusshareawardsarenormallyreleasedintwoequalamounts12and24monthsafterdeferralsubjecttocontinuedemployment(orgoodleaverstatus).

• AtthediscretionoftheCommitteedividendspaidbetweengrantandvestingmayaccrueonvestedshares.

• Shares,whichvest,afterthesettlementofincometaxandnationalinsurancemustberetaineduntiltherelevantshareholdingguidelinehasbeenmet.

Non-pensionable.

Currentlythenormalmaximumpaymentis100%ofsalary.

AtthediscretionoftheCommittee,themaximumearningspotentialmaybeincreasedinlinewiththeplanrulesupto150%ofsalary.

Themajorityofthebonusoutcomewillbebasedonfinancialmeasures.ThismaybeasinglemeasureoramixofmetricsasdeterminedbytheCommittee.

Theremaindermaybebasedonnon-financialmeasuresorpersonalbusinessobjectives.

ThebonusmeasuresarereviewedannuallyandtheCommitteehasthediscretiontovarythemixofmeasuresortointroducenewmeasurestakingintoaccountthestrategicfocusoftheCompany.

Nobonusispayableunderthefinancialelement(s)unlessademandingthresholdlevelofperformanceisachieved.

Asthebonusissubjecttoperformanceconditions,anydeferredbonusisnotsubjecttofurtherperformanceconditionsbutremainssubjecttorecoveryandwithholdingprovisions.

TheCommitteemayalterthebonusoutcomeifitconsidersthatthepayoutisinconsistentwiththeCompany’soverallperformancetakingaccountofanyfactorsitconsidersrelevant.ThiswillhelpensurethatpayoutsreflectoverallCompanyperformanceduringtheperiod.TheCommitteewillconsultwithleadinginvestorsifappropriatebeforeanyexerciseofitsdiscretiontoincreasethebonusoutcome.

Recoveryandwithholdingprovisionsapplywheretherehasbeenamisstatementoftheaccounts,orotherdata,oraseriousmisdemeanourorseriousmisconductbytheparticipanthasoccurredpriortopaymentorvestingorwithintwoyearsofpaymentorvestingofshares.


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Long Term Incentive Plan (Performance Restricted Share Plan, ‘PRSP’)

ToaligntheinterestsofseniorExecutiveswithsustainedlong-termvaluecreation.

IncentivisesparticipantstogrowthebusinessforthelongterminlinewiththeCompany’sstrategy.

Toprovideanelementofretentionthroughandbeyondtheperformanceperiod.

Discretionaryawardsmaybemadeeachyear,normallytakingtheformofnilornominalcostoptions.

Awardsnormallyhaveathreeyearperformanceandvestingperiod.

AtthediscretionoftheCommitteevestedoptionsmayattractDividendAccruedSharesbetweenawardandtheendofthevestingorholdingperiod.

Atwoyearpost-vestingholdingperiodapplieswhichrequiresawardstoberetainedforaperiodoftwoyearsfromtheendofthevestingperiod,exceptforsharessoldtopayincometaxandnationalinsuranceuponexercise/vesting.

Shares,whichvest,afterthesettlementofincometaxandnationalinsurance,mustberetaineduntiltherelevantshareholdingguidelinehasbeenmet.

UndertherulesofthePRSP,conditionalshareawardsmayalsobegrantedalthoughthereiscurrentlynoplantograntsuchawards.

Non-pensionable.

Currentlythenormalmaximumannualawardisupto200%ofsalary.

ThePRSPrulesincludeanannualawardlimitof250%ofsalary.Anyincreasetothenormalmaximumof200%ofsalary,otherthaninexceptionalcircumstancessuchasrecruitment,wouldbesubjecttopriorconsultationwithleadinginvestors,ifappropriate.

Performanceisnormallymeasuredovernolessthanthreefinancialyears.

AwardswillbesubjecttotheachievementofstretchingtargetsdesignedtoincentiviseperformanceinsupportoftheGroup’sstrategyandbusinessobjectives.

TheCommitteehastheflexibilitytovarythemixofmeasuresortointroducenewmeasuresforeachaward,takingintoaccountbusinessprioritiesatthetimeofgrant.

ForTSRandfinancialmeasures,upto25%ofthatelementmayvestforthresholdperformance.

TheCommitteemayalterthevestingoutcomeifitconsidersthatthelevelofvestingisinconsistentwiththeCompany’soverallperformancetakingaccountofanyfactorsitconsidersrelevant.ThiswillhelpensurethatvestingreflectsoverallCompanyperformanceduringtheperiod.TheCommitteewouldseektoconsultwithleadinginvestorsifappropriate,beforeanyexerciseofitsdiscretiontoincreasethevestingoutcome.

Recoveryandwithholdingprovisionsapplywheretherehasbeenamisstatementoftheaccounts,orotherdata,oraseriousmisdemeanourorseriousmisconductbytheparticipanthasoccurredpriortopaymentorvestingorwithintwoyearsofvestingofshares.

Pension (or cash allowance)

Toprovideamarket-alignedretirementbenefit.

ContributiontowardsaCompanyorpersonalpensionschemeand/oracashallowanceinlieuofCompanypensioncontributions,oracombinationofboth.

TheCompanycontributionisupto20%ofbasesalary.

Noperformancemetricsapply. Norecoveryorwithholdingprovisionsapply.




Other benefits

Toprovidecompetitiveandmarket-alignedbenefitstoassistinretainingandattractingExecutives.

Benefitsnormallyinclude(butarenotlimitedto)privatehealthcare,lifeassurance,annualhealthcheck,employeeassistanceprogramme,useofaCompanyvehicleorcashequivalent,anddiscountsonfoodandassociateddrinkspurchasedinourbusinesses.PrivatehealthcareisprovidedfortheExecutive,spouseorpartneranddependentchildren.

Discountvouchersareprovidedonthesamebasistoallemployeesandcanberedeemedinanyofourmanagedbusinessesprovidedthepurchaseisapersonal,notabusiness,expense.

ExecutiveDirectorsmayparticipateinanyoftheCompany’sall-employeeshareschemes(e.g.SharesaveandSIP)onthesamebasisasallotheremployeesandinlinewithprevailingHMRClimits.

RelocationorthetemporaryprovisionofaccommodationmaybeofferedwheretheCompanyrequiresaDirectortorelocate.

Expatriateallowancesmaybeofferedwhererequired.Traveland,ifrelevant,relatedexpensessuchasaccommodationmaybereimbursedonagrossoftaxbasis.

ExecutiveDirectorsmaybecomeeligibleforanynewbenefitsintroducedtoawidersetofotherGroupemployees.

Inlinewithmarketpractice,thevalueofbenefitsmayvaryfromyeartoyeardependingonthecosttotheCompanyfromthird-partysuppliers.

Noperformancemetricsapply. Norecoveryorwithholdingprovisionsapplyotherthanifrelocationcostswereprovided.AproportionofanyrelocationcostsmayberecoveredwhereaDirectorleavestheemploymentoftheGroupwithintwoyearsofappointmentordateofrelocation.

Shareholding policy

ToaligntheinterestsoftheExecutiveDirectorswithshareholdersandpromotealong-termapproachtoriskmanagement.

TheChiefExecutiveisexpectedtoholdandmaintainMitchells&Butlers’sharestothevalueofaminimumof200%ofbasesalary.

OtherExecutiveDirectorsareexpectedtoholdandmaintainMitchells&Butlers’sharestothevalueofaminimumof150%ofbasesalary.

ExceptforthosesoldtocovertheacquisitioncosttogetherwiththeassociatedincometaxandNationalInsurancecontributions,ExecutiveDirectorswillberequiredtoretainsharesarisingfromshareschemesuntiltheminimumlevelofownershiprequiredhasbeenachieved.

OnlysharesownedoutrightbytheExecutiveDirectororaconnectedpersonareincluded.Sharesorshareoptionswhicharesubjecttoaperformanceconditionarenotincluded.Deferredsharesandoptionswhicharevestedbutunexercised,arealsonotincluded.

n/a n/a n/a


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Notes to the policy table Selection of performance measures and targetsThechoiceofperformancemetricsapplicabletotheannualbonusschemereflecttheCommittee’sbeliefthatanyincentivecompensationshouldbeappropriatelychallengingandtiedtoboththedeliveryofkeyfinancialtargetsandindividualand/orstrategicperformancemeasuresintendedtoensurethatExecutiveDirectorsareincentivisedtodeliveracrossarangeofobjectivesforwhichtheyareaccountable.TheCommitteehasretainedsomeflexibilityonthespecificmeasureswhichwillbeusedtoensurethatanymeasuresarefullyalignedwiththestrategicimperativesprevailingatthetimetheyareset.

ThechoiceoftheperformanceconditionsapplicabletothePRSPawardswillbealignedwiththeCompany’sobjectiveofdeliveringsuperiorlevelsoflong-termvaluetoshareholders.TheCommitteehasretainedflexibilityonthemeasures,whichwillbeusedforfutureawardcyclestoensurethatthemeasuresarefullyalignedwiththestrategyprevailingatthetimetheawardsaregranted.Notwithstandingthis,theCommitteewould,ifappropriate,seektoconsultwithmajorshareholdersinadvanceofanymaterialchangetothechoiceorweightingofthePRSPperformancemeasures.

TheCommitteewillreviewthecalibrationoftargetsapplicabletotheannualbonusandthePRSPannuallytoensuretheyremainappropriateandsufficientlychallenging,takingintoaccounttheCompany’sstrategicobjectivesandtheinterestsofshareholders.

Differences in remuneration policy between Executive Directors and other employeesTheoverallapproachtorewardforemployeesacrosstheworkforceisakeyreferencepointwhensettingtheremunerationoftheExecutiveDirectors.WhenreviewingthesalariesoftheExecutiveDirectors,theCommitteepayscloseattentiontopayandemploymentconditionsacrossthewiderworkforceandinnormalcircumstancestheincreaseforExecutiveDirectorswillbenohigherthantheaverageincreaseforthegeneralworkforce.

ThekeydifferencebetweentheremunerationofExecutiveDirectorsandthatofourotheremployeesisthat,overall,atseniorlevels,remunerationisincreasinglylongterm,and‘atrisk’withanemphasisonperformance-relatedpaylinkedtobusinessperformanceandshare-basedremuneration.ThisensuresthatremunerationatseniorlevelswillincreaseordecreaseinlinewithbusinessperformanceandprovidesalignmentbetweentheinterestsofExecutiveDirectorsandshareholders.Inparticular,long-termincentivesareprovidedonlytothemostseniorExecutives,astheyarereservedforthoseconsideredtohavethegreatestpotentialtoinfluenceoveralllevelsofperformance.

TheCompanyoperatesHMRC-approvedall-employeeshareplans(SharesaveandSIP)enablingallouremployeestobecomeshareholdersintheCompany.

Legacy arrangementsFortheavoidanceofdoubt,theCommitteemayapprovepaymentstosatisfycommitmentsagreedpriortotheapprovalofthisremunerationpolicy,forexample,thoseoutstandingandunvestedincentiveawardswhichhavebeendisclosedtoshareholdersinpreviousremunerationreports.TheCommitteemayalsoapprovepaymentsoutsideofthisremunerationpolicyinordertosatisfylegacyarrangementsmadetoanemployeepriorto(andnotincontemplationof)promotiontotheBoardofDirectors.

Allhistoricawardsthatweregrantedbutremainoutstanding,remaineligibletovestbasedontheiroriginalawardterms.

Incentive plan discretionsTheCommitteewilloperatetheincentiveplansdescribedinthepolicytableaccordingtotheirrespectiverules,thepolicysetoutaboveandinaccordancewiththeListingRules,applicablelegislationandHMRCguidancewhererelevant.TheCommittee,consistentwithmarketpractice,retainsdiscretionoveranumberofareasrelatingtotheoperationandadministrationoftheseplans.Theseinclude(butarenotlimitedto)thefollowing:

•whoparticipatesintheplans;

•thetimingofgrantofawardand/orpayment;

•thesizeofawardand/orpayment,subjecttopolicylimits;

•thechoiceof(andadjustmentof)performancemeasuresandtargetsforeachincentiveplaninaccordancewiththepolicysetoutaboveandtherulesofeachplan;

•discretionrelatingtothemeasurementofperformanceintheeventofachangeofcontrolorreconstruction;

•determinationofagoodleaver(inadditiontoanyspecifiedcategories)forincentiveplanpurposesbasedontherulesofeachplanandtheappropriatetreatmentundertheplanrules;and

•adjustmentsrequiredincertaincircumstances(e.g.rightsissues,corporaterestructuring,onachangeofcontrolandspecialdividends).

Anyuseoftheabovediscretionswould,whererelevant,beexplainedintheannualreportonDirectors’remunerationandmay,asappropriate,bethesubjectofconsultationwiththeCompany’smajorshareholders.



Chairman and Non-Executive Director feesPurpose and link to strategy Operation Opportunity Performance metrics Recovery or withholding

Fees

ToattractandretainNon-ExecutiveDirectorsofappropriatecalibreandexperience.

Payableincash,four-weeklythroughouttheyear.

Feesarenormallyreviewedannuallywithanyincreaseusuallytakingeffectfrom1Januaryeachyear.

TheChairman’sfeeisreviewedannuallybytheCommittee(withouttheChairmanpresent).

FeelevelsfortheNon-ExecutiveDirectorsaredeterminedbytheCompanyChairmanandExecutiveDirectorsbyreferencetocompaniesofsimilarsizeandsectoraswellastimecommitmentandresponsibilities.

Non-ExecutiveDirectorsreceiveanadditionalfeeforchairingacommittee.

WhereaNon-ExecutiveDirectorundertakesadditionalresponsibilities,otherthanthechairingofacommittee,additionalfeesmaybeset.

Travel,accommodationandotherrelatedexpensesincurredincarryingouttherolewillbepaidbytheCompanyincluding,ifrelevant,anygross-upfortax.

Currentfeelevelsareshownintheannualreportonremuneration.Feelevelsmaybeincreased,takingintoaccountfactorssuchasthetimecommitmentoftheroleandmarketlevelsincompaniesofcomparablesizeandcomplexity.

Inexceptionalcircumstances,ifthereisatemporaryyetmaterialincreaseinthetimecommitmentsforNon-ExecutiveDirectors,theBoardmaypayextrafeestorecognisetheadditionalworkload.

Noperformancemetricsapply. Norecoveryorwithholdingapplies.

Non-ExecutiveDirectorsdonotparticipateintheCompany’sbonusarrangements,shareschemes,benefitschemes(otherthantheall-employeediscountvoucherscheme)orpensionplans.

Illustrations of application of remuneration policyAkeyprincipleoftheGroup’sremunerationpolicyisthatvariableshort-andlong-termrewardshouldbelinkedtothefinancialperformanceoftheGroup.ThechartsbelowshowthecompositionoftheremunerationoftheCEOandFinanceDirectoratminimum,on-targetandmaximumlevelsofperformanceinFY2018.

Chief Executive £000 Finance Director £000

2,500

2,000

1,500

1,000

500

0 Minimum

Fixed pay

100.0% 54.6%

22.7%

22.7%

28.6%

23.8%

47.6%

On-target Maximum

Short-term incentives Long-term incentives

614

1,124

2,1442,500

2,000

1,500

1,000

500

0 Minimum

Fixed pay

100.0% 58.8%

24.2%17.0%

33.6%

27.7%

38.7%

On-target Maximum

Short-term incentives Long-term incentives

518

880

1,541


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Theperformancescenariosdemonstratetheproportionofmaximumremunerationwhichwouldbepayableinrespectofeachremunerationelementateachoftheperformancelevels.Indevelopingthesescenariosthefollowingassumptionshavebeenmade:

MinimumOnlythefixedelementsofremunerationarepayable.Thefixedelementconsistsofbasesalary,benefitsandpension.Basesalaryisthesalaryeffectivefrom1January2018.BenefitsarebasedonactualFY2017figuresandincludecompanycar,healthcareandtaxableexpenses.Pensionisthecashallowanceand/orCompanypensioncontributionpayableinrespectofbasesalaryfrom1January2018.

On-target Inadditiontotheminimum,thisreflectstheamountpayableforon-targetperformanceundertheshort-andlong-termincentiveplans:

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

•25%oftheaward(50%ofbasesalaryfortheChiefExecutiveand35%ofbasesalaryfortheFinanceDirector)ispayableunderthelong-termincentiveplan.

MaximumInadditiontotheminimum,maximumpaymentisachievedunderboththeshort-andlong-termincentiveplanssuchthat:

•100%ofbasesalaryispayableundertheshort-termincentiveplanfortheChiefExecutiveandFinanceDirector;and

•200%ofbasesalaryfortheChiefExecutiveand140%ofbasesalaryfortheFinanceDirectorispayableunderthelong-termincentiveplan.

Abreakdownoftheelementsincludedintheillustrationsofapplicationofremunerationpolicyisshowninthetablebelow:

Fixed (£000) Short-term plan (£000) Long-term plan (£000)

Base pay Benefits Pension Total fixed On-target Maximum On-target Maximum

ChiefExecutive 510 15 89 614 255 510 255 1,020FinanceDirector 426.5 16 75 517.5 213.3 426.5 149.3 597.1

Note:Thevaluereceivedundertheshort-termplanisthegrossvalueofawardsbefore50%isdeferredintoshares.Thevaluesreceivedundertheshort-termplanandlong-termincentiveplandonottakeintoaccountdividendaccruedsharesthatarepayableonthevestingofawardsnoranychangesinshareprice.

Service contractsExecutive Directors’ contractsThetablebelowsummariseskeyelementsoftheservicecontractsapplicabletoExecutiveDirectors:

Notice period • ExecutiveDirectorsareemployedunderservicecontractsthatmaybeterminatedatanytimeonuptooneyear’snoticefromtheCompanyandonaminimumofsixmonths’noticefromtheExecutiveDirector.

• Anypaymentmadeinlieuofnoticewouldcomprisebasesalaryonlyaandmaybepayableininstalmentsinlinewiththeestablishedsalarypaymentdatesuntiltheexpiryofthenoticeperiodor,ifearlier,maybethedateonwhichalternativeemploymentorotherengagementissecuredwiththesameorhigherbasesalary.Ifemploymentissecuredatalowerrateofbasesalary,subsequentinstalmentsofthepaymentinlieuofnoticemaybereducedbythevalueofalternativeincome.

• ServicecontractscontainaprovisionenablingtheCompanytoputtheExecutiveDirectorongardenleaveafternoticetoterminatetheservicecontracthasbeengivenbyeitherparty.Duringthisperiod,theExecutivewillbeentitledtobasesalaryonly.

• Thereisnoenhancedprovisiononachangeofcontrol.

Termination • IfanExecutiveDirector’semploymentwiththeGroupendsduringthefinancialyear,normallyanyentitlementtobonusforthatyearisforfeited.However,iftheindividualleavesbyreasonofill-health,injury,disability,retirement,redundancy,deathorsaleoftheemployingbusinessorcompanyoriftheCommitteesodecidesinanyothercase,attheCommittee’sdiscretiontheExecutiveDirectormayreceiveabonuspro-ratedtotimeemployedintheyearortosuchlaterdateastheCommitteemaydecide.Insuchcircumstances,theCommitteemaydecide,atitsdiscretion,topayallthebonusincash.

• IfanExecutiveDirectorceasesemploymentfollowingtheendofthefinancialyearbutbeforepaymentofthebonusinrespectofthatyear,thereisnoentitlementtoabonusbuttheCommitteemay,atitsdiscretion,payabonusforthatyear.Anysuchbonus,attheCommittee’sdiscretion,maybeallincash.

• IfanExecutiveDirectorceasesemploymentpriortothereleaseofBonusAwardSharesundertheSTDIPforthesamespecifiedgoodleaverreasonsassetoutabove,theCommittee,atitsdiscretion,mayreleasetheBonusAwardShares(andassociatedDividendAccruedShares)atthedateoftermination.Otherwise,theshareswillbereleasedonthenormalreleasedate.IftheDirectorleavesforanyotherreason,hisentitlementtoBonusAwardShares(andassociatedDividendAccruedShares)isforfeited,unlesstheCommitteedecidesotherwise.

• IfanExecutiveDirectordiesbeforeanAwardunderthePRSPhasvested,vestingoftheaward(andassociatedDividendAccruedShares)willoccurassoonaspracticablebasedonperformanceandonatimepro-ratedbasis.

• IftheExecutiveDirectorceasesemploymentforthesamedefinedgoodleaverreasonsasarespecifiedabove,thePRSPAward(andassociatedDividendAccruedShares)willvestfollowingtheendofthenormalperformanceperiodandonatimepro-ratedbasis.Ifemploymentceasesforanyotherreason,theAwardwillnormallylapse,unlesstheCommitteedecidesotherwise(exceptthatifemploymentceasesbyreasonofgrossmisconductthePRSPAward(andassociatedDividendAccruedShares)mustlapse).

• TheCommitteehasnodiscretioninrelationtosharesoroptionsheldundertheall-employeeshareplans(SIPandSharesave);onterminationthesewillvest,becomeexercisableorlapseinaccordancewiththelegislation.

a. ThisarrangementappliestoPhilUrbanandanyfutureExecutiveDirectorappointments.AnypaymentsinlieuofnoticeinrespectofTimJones,whoisemployedonalegacycontract,willcomprisebasesalaryandcontractualbenefitsonly.



IntheeventthattheCompanyterminatesanExecutiveDirector’sservicecontractotherthaninaccordancewiththetermsofhiscontract,theCommitteewillactinthebestinterestsoftheCompany,andensurethereisnorewardforfailure.Whendeterminingwhatcompensation,ifany,istobepaidtothedepartingExecutiveDirector,theCommitteewillgivefullconsiderationtothecircumstancesofthetermination,theExecutiveDirector’sperformance,thetermsoftheservicecontractrelatingtonoticeandpaymentsinlieuofnotice,andtheobligationofthatExecutiveDirectortomitigateanylosswhichmaybesufferedasaresult.

AlthoughtheCompanywouldseektominimiseterminationcosts,theCommitteemayinappropriatecircumstancesprovideotherelementsinaleavingDirector’sterminationpackage,including(withoutlimitation):compensationforthewaiverofstatutoryrightsinexchangefortheDirectorexecutingasettlementagreement;paymentoftheleavingDirector’slegalfeesinconnectionwithhisterminationarrangements;andpaymentofoutplacementfees.Inaddition,theCommitteemaydeterminethattheDirectorshouldcontinuetobeengagedbytheCompanyonconsultancyorothertermsfollowingcessationofhisdirectorship.

External directorshipsExecutiveDirectorsmayacceptoneexternalNon-ExecutiveappointmentwiththeCompany’spriorapproval,aslongasthisisnotlikelytoleadtoconflictsofinterest.

Non-Executive DirectorsNon-ExecutiveDirectors,includingtheCompanyChairman,donothaveservicecontractsbutserveunderlettersofappointment.Non-ExecutiveDirectors’appointmentsareterminablewithoutnoticeandwithnoentitlementtocompensation.Paymentoffeeswillceaseimmediatelyontermination.

RonRobsonandJoshLevywereappointedtotheBoardpursuanttothetermsofthePiedmontDeedofAppointment,informationonwhichissetoutonpage49.

CopiesofboththeindividuallettersofappointmentforNon-ExecutiveDirectorsandtheservicecontractsforExecutiveDirectorsareavailableattheRegisteredOfficeoftheCompanyduringnormalbusinesshoursandonourwebsite.Copieswillalsobeavailableforshareholderstoviewatthe2018AGM.

Recruitment of Executive DirectorsWhereitisnecessarytoappointareplacementoradditionalExecutiveDirector,theCommitteewillsetabasesalaryappropriatetothecalibre,experienceandresponsibilitiesofthenewappointeeandinlinewithourpolicysetoutonpage70.

Themaximumlevelofvariablepayis400%ofbasesalary(150%inrelationtoannualcashbonus/STDIPand250%inrelationtothePRSP).

Dependingonthetimingandresponsibilitiesoftheappointment,itmaybenecessarytosetdifferentannualbonus/STDIPperformancemeasuresandtargetsthanthoseapplicabletootherExecutiveDirectors.

Benefits(includingpension,Companyvehicleorcashallowance,healthcare,lifeassurance,healthcheckand,whereapplicable,relocationassistance)wouldbeconsistentwiththeprinciplesofthepolicyassetoutonpages72and73.

Foraninternalappointment,hisorherexistingpensionarrangementsmaycontinuetooperate(whichmayincludeparticipationasanemployeedeferredmemberinthedefinedbenefitplan,whichisclosedtofutureaccrual)andanyvariablepayelementawardedinrespectofthepriorrolewouldbeallowedtopayoutaccordingtoitsterms,adjustedasrelevanttotakeintoaccounttheappointment.Inaddition,anyotherpreviouslyawardedentitlementswouldcontinue,andbedisclosedinthenextannualreportonDirectors’remuneration.

Inadditiontotheabove,theCommitteemayofferadditionalcashand/orshare-basedelementsinorderto‘buy-out’remunerationrelinquishedonleavingaformeremployer.Intheeventthatsuchabuy-outisnecessarytosecuretheservicesofanExecutiveDirectorthenthestructureofanyawardorpaymentwillmirror,asfarasispossible,thearrangementsinplaceattheincomingExecutiveDirector’spreviousemployer.Anyshareawardsmadeinthisregardmayhavenoperformanceconditions,ordifferentperformanceconditions,orashortervestingperiodcomparedtotheCompany’sexistingplans,asappropriate.Shareholderswillbeinformedofanybuy-outarrangementsatthetimeoftheExecutiveDirector’sappointment.

Recruitment of Non-Executive DirectorsNon-ExecutiveDirectors’feesaresetbytheChairmanandExecutiveDirectors;andtheChairman’sfeeissetbytheRemunerationCommittee.

Chairman TheCommitteewillrecommendtotheBoardafeeappropriatetothecalibre,experienceandresponsibilitiesofthenewappointee.

Other Non-Executive DirectorsThefeewillbesetinlinewiththefeestructureforNon-ExecutiveDirectorsinplaceatthedateofappointment.


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ANNUAL REPORT ON REMUNERATIONThis section details the remuneration payable to the Executive and Non-Executive Directors (including the Chairman) for the financial year ended 30 September 2017, and sets out how we intend to implement our remuneration policy for the 2018 financial year. This report, along with the Chair’s annual statement, will be subject to a single advisory vote at the AGM on 23 January 2018.

Committee terms of referenceTheCommittee’stermsofreferencewerelastreviewedin2016andareavailableonourwebsite.

TheCommittee’smainresponsibilitiesinclude:

•determiningandmakingrecommendationstotheBoardontheCompany’sexecutiveremunerationpolicyanditscost;

•takingaccountofallfactorsnecessarywhendeterminingthepolicy,theobjectiveofwhichshallbetoensureremunerationpolicypromotesthelong-termsuccessoftheCompany;

•determiningtheindividualremunerationpackagesoftheExecutiveDirectorsandotherseniorExecutives,andtheCompanyChairman;

•havingregardtothepayandemploymentconditionsacrosstheCompanywhensettingtheremunerationofindividualsundertheremitoftheCommittee;and

•aligningExecutiveDirectors’interestswiththoseofshareholdersbyprovidingthepotentialtoearnsignificantrewardswheresignificantshareholdervaluehasbeendelivered.

Committee membership and operationCommitteemembersandtheirrespectiveappointmentdatesaredetailedinthetablebelow.

Name Date of appointment to the Committee Name Date of appointment to the Committee

ImeldaWalsh(Chair)* 11July2013 BobIvell 11July2013ColinRutherford* 11July2013 EddieIrwin 11July2013StewartGilliland* 11July2013 JoshLevy 20July2017DaveCoplin* 29Feb2016

* IndependentNon-ExecutiveDirectors.

RonRobsonwasamemberoftheCommitteefrom11July2013andsteppeddownon20July2017.

Committee activity during the yearTheCommitteemetfivetimesduringtheyearandkeyagendaitemsincludedthefollowing:

October 2016•2017Bonusarrangements

•2017–2019PRSPawards

November 2016•2017Bonustargets

•2016Bonusoutcome

•CEOpayratio

•ReviewofDirectors’expenses

•ExecutiveDirectorandExecutiveCommitteesalaryreview

•NationalLivingWageoutlook

June 2017•Updateongovernancedevelopments

•ReviewofDirectors’remunerationpolicy

July 2017•Remunerationpolicyreview

September 2017•Remunerationpolicyreview

•LTIParrangements



Advice to the Committee Duringtheyear,theCommitteecontinuedtoreceiveadvicefromNewBridgeStreet(‘NBS’),atradingnameofAonPlc.NBSwasappointedfollowingacompetitivetenderin2014.NBSisasignatorytotheRemunerationConsultantsGroupCodeofConductandanyadvicereceivedisgovernedbythatCode.TotalfeespayableinrespectofremunerationadvicetotheCommitteeinthereportingyeartotalled£54,7801.AonPlcprovidedadviceonapotentialinsuranceproduct,butnofeeshavebeenpaidinrespectofsuchadviceinFY2017.

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

TheCommitteeissatisfiedthattheadvicereceivedfromitsadviserswasobjectiveandindependent.

MembersofmanagementincludingSusanMartindale,theGroupHRDirectorandCraigProvett,theDirectorofCompensation&Benefits,areinvitedtoattendmeetingsonremunerationmatterswhereappropriate.Theyarenotpresentwhenmattersaffectingtheirownremunerationarrangementsaredecided.TheCompanyChairmandoesnotattendBoardorCommitteemeetingswhenhisremunerationisunderreview.PhilUrbanandTimJoneswerepresentatmeetingswheretheCompany’slongandshort-termincentivearrangementsandshareschemeswerediscussed.However,eachdeclaredaninterestinthemattersunderreview.1. FeesareshownnetofVAT.20%VATwaspaidontheadvisers’feesshownabove.

Statement of voting at AGM AtthelastAGM(heldon24January2017),theresolutionontheAnnualReportonRemunerationreceivedthefollowingvotesfromshareholders:

Votes cast Votes fora % Votes against % Votes withheldb

Annualreportonremuneration 357,469,741 357,130,786 99.91 338,955 0.09 4,987,454

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

Votes‘For’and‘Against’areexpressedasapercentageofvotescast.

Pay outcomesThetablesandrelateddisclosuressetoutonpages79to83onDirectors’remuneration,deferredannualbonusshareawards(‘STDIP’),PRSPshareoptions,ShareIncentivePlanandpensionbenefitshavebeenauditedbyDeloitteLLP.

Directors’ remunerationThetablessetoutthesinglefigureremunerationreceivedbytheExecutiveDirectorsandtheNon-ExecutiveDirectorsduringthereportingyear.Figuresshownfor2017areona53weekbasis.Detailsofperformanceundertheannualbonusplanaresetoutonpages80and81.

Executive Directors

Basic salaries £000

Taxable benefitsa £000


£000

Pension related benefitsb

£000


£000Loss of office

£000

Total remuneration

£000

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

PhilUrbanc 518 509 15 15 146 – 91 89 – – – – 770 613TimJonesc 434 425 16 15 122 – 76 75 – – – – 648 515Sub-totalExecutiveDirectors 952 934 31 30 268 – 167 164 – – – – 1,418 1,128


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Non-Executive Directors

Fees £000

Taxable benefitsd £000


£000

Pension related benefitsb

£000


£000Loss of office

£000

Total remuneration

£000

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

BobIvell 290 284 4 6 – – – – – – – – 294 290RonRobson 53 52 0 1 – – – – – – – – 53 53StewartGilliland 63 62 1 1 – – – – – – – – 64 63EddieIrwin 53 52 0 – – – – – – – – – 53 52ColinRutherford 138e 62 1 1 – – – – – – – – 139 63ImeldaWalsh 63 62 0 – – – – – – – – – 63 62JoshLevyf 53 45 1 – – – – – – – – – 54 45DaveCopling 53 30 1 – – – – – – – – – 54 30KeithBrowneh 53 0 0 – – – – – – – – – 53 0DouglasMcMahoni – 7 – – – – – – – – – – – 7Sub-totalNon-ExecutiveDirectors 819 656 8 9 – – – – – – – – 827 665TotalExecutiveDirectorsandNon-ExecutiveDirectors 1,771 1,590 39 39 268 – 167 164 – – – – 2,245 1,793

Note:All2017figuresareshownona53weekbasisa. Taxablebenefitsfortheyearcomprisedcarallowance,healthcare,taxableexpensesandtheawardoffreesharesundertheall-employeeSIPtoTimJonesassetoutonpage82.b. BasedonthevalueofsupplementspaidinlieuofcontributionstotheCompanyScheme.c. ThebasesalaryforPhilUrbanis£510,000andforTimJones£426,500.Thefiguressetoutaretheactualsalariesreceivedoverthefinancialyear,whichhad371days.d. TaxablebenefitsforNon-ExecutiveDirectorsincludecashpaymentsmadeoraccountedforbytheCompanyrelatingtothereimbursementofexpenses(andthevalueofpersonaltax

onthoseexpenses).e. ThisamountincludestheadditionalfeeapprovedbytheBoardandpaidinrespectoftheworkcarriedoutbyMrRutherfordinleadingtheCompany’sdiscussionswiththetrusteeof

theCompany’stwodefinedbenefitschemeswhichresultedintheagreementofthe2016triennialvaluationsofthoseschemesasdescribedmorefullyonpage43oftheAnnualReport.f. JoshLevyjoinedtheBoardon13November2015.g. DaveCoplinjoinedtheBoardon29February2016.h. KeithBrownejoinedtheBoardon22September2016.i. DouglasMcMahonsteppeddownfromtheBoardon13November2015.

Annual performance bonus and STDIP TheannualbonusandSTDIPoperateassetoutinthepolicysectionofthisreport.Detailsofthemeasuresandtargetsapplyingtothe2017planaresetoutbelow:

Performance measures*Threshold – 95% of Target

(% of salary payable)99% of Target

(% of salary payable)Target

(% of salary payable)Maximum – 105% of Target

(% of salary payable)

AdjustedOperatingProfit(£)–75%

£310m(0%)

£323m(10%)

£326m(30%)

£342m(75%)

Threshold(% of salary payable)

Target (% of salary payable)

Maximum (% of salary payable)

GuestService:(NPSaverage%scoreovertheyear)–25%

51(6.25%)

52(12.5%)

53(25%)

* Payoutisonastraight-linebasisbetweenpoints.

Operating profitIndeterminingtheOperatingProfittargetrangetheCommitteetookintoconsiderationarangeoffactors,suchasthegeneraleconomicandmarketoutlook,anassessmentofthesignificantfuturecostheadwindsfacingthebusinessandinternalplans.Thesecostheadwindsincludedincreasestonationallivingwage,anincreaseinbusinessrates,theimpactofthedepreciationofsterlingfollowingtheresultofthereferendumontheUK’smembershipoftheEuropeanUniononfoodanddrinkcosts,thein-yearcostofthecapitalplanandtheplannedmitigatingactions.Targetwassetbroadlyinlinewiththe2016out-turnandmarketconsensus,withanawardtowardsthemaximumlevelrequiringsignificantoutperformanceoverandabovetheCompany’sbusinessplan.

TheGroupdeliveredOperatingProfitof£314mwhichwasabovethethresholdlevelofperformancerequiredforbonustobeginaccruingunderthiselementandhasresultedinapay-outof3%ofbasesalary.TheOperatingProfitoutcomereflectedstrongsalesperformanceovertheyearwithtotalsalesincreasingby£94mto£2,180m.Like-for-likesalesgrowthof1.8%consistentlyoutperformedthemarketwithnoticeableimprovementsacrossalmostourentirebrandportfolio.Theactionstakenundereachofourstrategicprioritieshavenotonlyseenareturntosustainedsalesgrowthbuthavealsoenabledasignificantproportionofthecostheadwindstobemitigated,andasaresultthefallinOperatingProfitwaslimitedto£10mintheyear(ona52weekbasis),acredibleperformanceinthecircumstances.

Guest HealthNPSwastheleadmeasureofGuestHealthin2017withprogressagainstotherguestmetricssuchasTripAdvisorandcomplaintsalsotakenintoconsiderationtoensurearoundedandmorecomprehensiveassessment.



TheNPStargetsweresetatthestartofthefinancialyearandwerebasedonanewsurveythatincludedamorerobustmethodofcollectingdataandthereforeresultvalidity.Theoldsurveyrequiredteammemberstoencouragegueststoleavefeedbackattheendoftheirvisit.Thenewsurveysolicitsfeedbackfromguestsinseveralways,forexampleviae-mailafterbookingonlineorthroughoneofourbrandapps.Thismeansthatsurveysaremorelikelytobecompletedawayfromthebusinessandafteraperiodoftimehaselapsed,whichcanimpacthowthesurveyisanswered.Italsomeansthatsignificantlymoresurveysarecompleted;eachweekc.25,000guestsareinvitedtoleavefeedback.

Atthepointthetargetswereset,thenewsurveyhadbeeninplaceforarelativelyshortperiodandthereforehistoricdatawaslimited.The51to53targetrangesetbytheCommitteewasstretchingbasedonthishistoricdataandinsightsfromthedataprovider.Theactualachievementfortheyearwasascoreof59andthereforesignificantlyaheadofthemaximumtargetset.Withthebenefitnowofayear’sworthofdata,theCommitteelookedcarefullyattheoriginaltargetsandthesignificantdegreeofoutperformanceachieved.Therefore,theCommitteeviewedasparticularlyimportantamorecomprehensivereviewofGuestHealthmeasureswhilstacknowledgingasubstantialyear-on-yearimprovementinNPShasbeendelivered.

TheprogressmadeinoverallGuestHealthisdemonstratedbyanimprovementinTripAdvisorscoresfrom3.5in2016to3.7bytheendof2017(anda37pointincreaseinTripAdvisorresponserates,anincreaseofover70,000responses),anda7%reductioninthenumberofcomplaintsreceived.

DuringtheyeartheCompanyhasalsorevieweditsapproachtothemeasurementofguestsatisfaction,recognisingthatGuestsareincreasinglychoosingtoprovidefeedbackviaotherchannelsandinparticularsocialmedia.Tothisend,anewsocialmediamonitoringtoolhasbeenintroducedwhichenablesallsocialmediareviews,includingTripAdvisor,FacebookandGoogle,tobecombinedintoasinglereviewscore,andnowover80%ofreviewsarerespondedtodirectlybypubandrestaurantmanagementteams.

TheCommitteebelievesthebonusoutcomeundertheGuestHealthelementreflectstheNPSoutcome,whenconsideredalongsidethegoodprogressmadeinothermeasuresofGuestHealth.

Asaresult,bonuspaymentsequivalentto28%ofbasesalaryareduetobepaidtoExecutiveDirectors(£145,546inrespectofPhilUrbanand£121,717inrespectofTimJones).

Inlinewithourpolicy,halfofthebonusawardwillbedeferredintosharesundertheSTDIP,whichwillbereleasedintwoequalamountsafter12and24months,andsharesmustberetaineduntiltherelevantshareholdingguidelinehasbeenmet.

Long-term incentives vesting during the yearDuringFY2015awardsweremadetoTimJonesandtheformerCEO,AlistairDarby,underthetermsofthePRSPtothevalueof140%and200%oftheirrespectivebasesalaries.Theperformanceconditionhadtwoindependentelements;compoundannualadjustedEPSgrowthandTSRperformanceagainstagroupofsectorpeers,measuredoverthethreeyearperformanceperiodending30September2017.

Thetablebelowsummarisesperformanceagainsteachelementoftheperformancecondition.

2015-2017 PRSP – performance conditions Target** Actual % vesting

TotalShareholderReturnrelativetopeergroup* Mediantoupperquartile Belowmedian NilCompoundannualadjustedEarningsPerShare(‘EPS’)growth 8%to16%CAGR 2.3%p.a. Nil

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

AsTSRperformancefellbelowthemedianperformanceofthecomparatorgroupandEPSfellbelowthethresholdlevelofgrowthrequired,theFY2015planawardswilllapseinfull.

Long-term incentive awards made in FY 2017AnawardwasmadetotheChiefExecutiveandFinanceDirectorinNovember2016inaccordancewiththerulesofthePRSPandwithintheapprovedDirectors’remunerationpolicy.

Theindependentelementsoftheperformancemeasureforthisaward,eachofwhichaccountsfor50%oftheaward,aresummarisedbelow:

Threshold vesting target* Maximum vesting target

1. CompoundannualadjustedEarningsPerShare(‘EPS’)growth(measuredbeforeseparatelydiscloseditemsandotheradjustments).

25%willvestifthecompoundannualEPSgrowthis4%.

100%willvestifcompoundannualEPSgrowthisatleast8%.

2. TotalShareholderReturn(‘TSR’)relativetoapeergroupofcomparatorcompanies.**

25%willvestforTSRperformanceequivalenttothemedianofthecomparatorgroup.

100%willvestforTSRperformanceequivalenttotheupperquartileofthecomparatorgroup.

* Betweenthresholdandmaximum,vestingundereachmeasureisonastraight-linebasis.Belowthresholdtheawardwilllapse.**ComprisestheconstituentsoftheFTSEAllShareTravel&Leisuregroup.

TheEPSandTSRconditionsaremeasuredoverthreeyearsfromthestartofthefinancialyearinwhichtheyaregranted,i.e.thethreefinancialyearsfrom25September2016,endinginSeptember2019.

Assetoutinlastyear’sreport,theEPStargetrangehasathresholdlevelofperformancesetat4%growthp.a.andmaximumsetat8%growthp.a.TheCommitteebelievedthatthistargetrangewasdemandinginthecontextoftheearningsforecastatthetimeoftheaward,giventhesignificantcostchallengesthebusinessfaced.

TheTSRelementoftheawardisalsosubjecttoasharepriceunderpinandawardsmayonlybeexercisedwheretheMitchells&Butlerssharepricehasequalledorexceededthesharepriceatthedateofawardwithinsixmonthsofthevestingdate.Ifthisconditionisnotmet,thentheTSR-relatedawardswilllapse.


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PerformancemeasurementunderthePRSP,whichisnotre-tested,isreviewedandcertifiedbytheCompany’sauditor.

DetailsofawardsmadetoExecutiveDirectorsunderthePRSParesetoutbelow.

Options awarded

during theyear to

30/09/17

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*

£

Executive DirectorsPhilUrban 397,970 200 24/11/16 256.3 Nov19 Nov21 979,404TimJones 232,968 140 24/11/16 256.3 Nov19 Nov21 573,334Total 630,938

* Facevalueisthemaximumnumberofsharesthatwouldvest(excludinganydividendsharesthatmayaccrue)iftheperformancemeasure(asdescribedabove)ismetinfull,multipliedbythemiddlemarketquotationofaMitchells&Butlersshareonthedaytheawardwasmade(246.1p).

Theaggregateoptionpriceofeachawardis£1.

All-employee SIP and SharesaveThetablebelowshowstheawardsmadetoDirectorsunderthefreeshareelementoftheSIPduringtheyear.NoawardsweremadetoDirectorsundertheSharesaveplanduringFY2017.

SIPShares

awarded during

the year 25/09/16 to

30/09/17Award

date

Market price per share at award

(p)

Normal vesting

date

Market price per share at normal

vesting date (p)

Lapsed during period

DirectorPhilUrban 1,551 21/6/17 232 21/6/20 n/a n/aTimJones 1,322 21/6/17 232 21/6/20 n/a n/aTotal 2,873

Directors’entitlementsunderthePartnershipShareelementoftheSIParesetoutaspartoftheDirectors’interests’tableonpage83.

PRSP, STDIP and other share awardsThetablebelowsetsoutdetailsoftheExecutiveDirectors’outstandingawardsunderthePRSP,STDIPandSharesave(SAYE).

Name of Directorc Scheme

Number of shares at

24 September 2016

Granted during the

period Date of grant

Lapsed during the

period

Exercised during the

period

Number of shares at

30 September 2017

Date from which

exercisable Expiry date

Phil Urban

PRSP2015-17ac 61,738b – Jan2015 – – 61,738 Nov2017 Nov2019

PRSP2016-18a 381,022 – Jun2016 – – 381,022 Nov2018 Nov2020

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

SAYE2015 4,972 Jun2015 – – 4,972 Oct2018 Mar2019Total 447,732 397,970 845,702

Tim Jones PRSP2014-16a 144,162 – Nov2013 144,162 – – Nov2016 Nov2018

PRSP2015-17ac 161,856 – Nov2014 – – 161,856 Nov2017 Nov2019

PRSP2016-18a 223,048 – Jun2016 – – 223,048 Nov2018 Nov2020

PRSP2017-19a – 232,968 Nov2016 – – 232,968 Nov2019 Nov2021

SAYE2014 2,743 – Jun2014 – 2,743 – Oct2017 Mar2018SAYE2015 2,486 – Jun2015 – – 2,486 Oct2018 Mar2019

Total 534,295 232,968 144,162 2,743 620,358

a. 50%ofthePRSPawardissubjecttoaTSRconditionandtheother50%issubjecttoadjustedEPSgrowthtargets.b. SharesawardedtoPhilUrbanonjoiningtheCompanyasChiefOperatingOfficerinJanuary2015.c. The2015-17planwilllapseinNovember2017.



Update on forecast performance of other PRSP awards2016-2018 PRSP BasedoncurrentearningsforecastsandTSRperformancetotheendofFY2017,theCommitteedoesnotanticipatethattherewillbeanyvestingattheendofthe2018financialyear.

2017-2019 PRSPWithtwoperformanceyearsremaining,thepositioncouldchangebutspecificallyinrelationtotheEPSmeasure,thesignificantadditionalcostchallengesandamoredetailedassessmentofthetimingandimpactofinvestment,resultinaforecastlevelofvestingbelowthethresholdlevel.

Directors’ interestsExecutiveDirectorsareexpectedtoholdMitchells&ButlerssharesinlinewiththeshareholdingguidelinesetoutintheRemunerationPolicyreport.

TheproposedremunerationpolicyhasashareownershipguidelinethatrequirestheChiefExecutivetoaccumulateMitchells&Butlerssharestothevalueofaminimumof200%ofsalary(150%ofsalaryforotherExecutiveDirectors)throughtheretentionofsharesarisingfromshareschemes(onanetoftaxbasis)orthroughmarketpurchases.PhilUrban’sshareholdingat30September2017was24.9%ofhisbasicannualsalaryandTimJones’sshareholdingwas45.2%ofhisbasicannualsalary.

TheinterestsoftheDirectorsintheordinarysharesoftheCompanyasat30September2017andat24September2016areassetoutbelow:

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

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Executive Directors PhilUrban 53,042 31,306 – – 4,972 4,972 840,730 442,760 – – 898,744 479,038TimJones 80,461 76,518 – – 2,486 5,229 617,872 529,066 – – 700,819 610,813Non-Executive DirectorsBobIvell 12,006 12,006 – – – – – – – – 12,006 12,006RonRobson – – – – – – – – – – – –StewartGilliland 11,000 11,000 – – – – – – – – 11,000 11,000EddieIrwin 30,974 30,000 – – – – – – – – 30,974 30,000ColinRutherford – – – – – – – – – – – –ImeldaWalsh 7,500 7,500 – – – – – – – – 7,500 7,500DaveCoplin 2,000 – – – – – – – – – 2,000 –JoshLevy – – – – – – – – – – – –KeithBrowne – – – – – – – – – – – –Total 196,983 168,330 – – 7,458 10,201 1,458,602 971,826 – – 1,663,043 1,150,357

a. IncludesFreeSharesandPartnershipSharesgrantedundertheSIP.b. OptionsgrantedundertheSharesaveasdetailedinthetableonpage82anddeferredbonusawardsgrantedundertheSTDIP.c. OptionsgrantedunderthePRSPasdetailedinthetableonpage82.

Directors’shareholdings(shareswithoutperformanceconditions)includesharesheldbypersonscloselyassociated.

TheaboveshareholdingsarebeneficialinterestsandareinclusiveofDirectors’holdingsundertheShareIncentivePlan(bothFreeShareandPartnershipShareelements).

TimJonesacquired110sharesunderthePartnershipShareelementoftheShareIncentivePlanbetweentheendofthefinancialyearand22November2017.TherehavebeennochangesintheholdingsofanyotherDirectorssincetheendofthefinancialyear.

NoneoftheDirectorshasabeneficialinterestinthesharesofanysubsidiaryorindebenturestocksoftheCompanyoranysubsidiary.

Themarketpricepershareon30September2017was252.0pandtherangeduringtheyearto30September2017was221.0pto287.8ppershare.

TheExecutiveDirectorsasagroupbeneficiallyown0.03%oftheCompany’sshares.


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Fees for external directorships NoexternalNon-ExecutivedirectorshipswereheldbyeitherExecutiveDirectorduringtheyearto30September2017.

Payment for loss of officeNopaymentsforlossofofficeweremadeintheyearending30September2017.

Payments to past DirectorsNopaymentsweremadetoanypastDirectorsintheyearending30September2017.

TSR performance graphTheCompany’sTSRperformanceforthelasteightfinancialyearsisshownbelowagainsttheFTSE250indexandtheFTSEAllShareTravel&Leisureindex.TheFTSE250indexhasbeenchosentoshowTSRperformanceastheCompanyisamemberoftheFTSE250.TheFTSEAllShareTravel&LeisureindexisshownasthisistheTSRcomparatorgroupusedforthelong-termincentiveplan.

Total shareholder return from September 2009 to September 2017 (rebasedto100)

300

250

200

150

100

50

0 2009

Mitchells & Butlers plc

2010 2011 2012 2013 2014 2015 2016 2017

FTSE 250 FTSE All Share Travel & Leisure Source: Datastream (Thomson Reuters)

Thisgraphshowsthevalue,by30September2017,of£100investedinMitchells&Butlersplcon26September2009,comparedwiththevalueof£100investedintheFTSE250andFTSEAllShareTravel&LeisureIndicesonthesamedate.



CEO earnings historyYear 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

Phil UrbanSinglefigureremuneration(£000) – – – – – – 613 770Annualbonusoutcome(%ofmax) – – – – – – – 28LTIPvestingoutcome(%ofmax) – – – – – – – –Alistair Darby –Singlefigureremuneration(£000) – – – 982a 642 878 – –Annualbonusoutcome(%ofmax) – – – 71.0 – – – –LTIPvestingoutcome(%ofmax) – – – n/a n/a 19.0 – –Bob Ivell –Singlefigureremuneration(£000) – – 557 69b – – – –Annualbonusoutcome(%ofmax) – – n/ac n/ac – – – –LTIPvestingoutcome(%ofmax) – – n/ac n/ac – – – –Jeremy Blood –Singlefigureremuneration(£000) – 397 50 – – – – –Annualbonusoutcome(%ofmax) – –d n/ac – – – – –LTIPvestingoutcome(%ofmax) – n/ac – – – – – –Adam Fowle –Singlefigureremuneration(£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 (£)

2017 2016 % Change 2017 2016 % Change 2017 2016 % Change

CEO 510,000 510,000 0 15,134 15,098 0.2 145,546 – –Salariedemployees 31,572 31,763 -0.6 704 725 -2.9 2,739 2,525 8.5

ThechangeinCEOremunerationiscomparedtothechangeinaverageremunerationofallfulltimesalariedemployees,whichincludeshousemanagers,assistantmanagersandkitchenmanagersemployedinourbusinesses.

Salariedemployeeswithpart-yearserviceineitherFY2016orFY2017havebeenexcludedfromthecomparisonfigures.Retailstaffemployeeshavebeenexcludedfromthecomparatorgroupastheyarehourlypaid,largelyparttimeanddonotparticipateinanybonusplans.TheCEOfiguresdonotincludeLTIPawardsorpensionbenefitsthataredisclosedinthesinglefiguretable.

CEO pay ratios LastyeartheCommitteedecidedtoincludethepayratiobetweentheCEOandthemedianpayofotheremployees,reflectingemergingbestpractice.SincethentheGovernmenthasrespondedtoitsconsultationoncorporategovernanceandwillseektointroducesecondarylegislationthatwillrequirequotedcompaniestopublishtheratiooftheirCEO’spaytothatoftheworkforce.TheCommitteeawaitstheGovernment’sprecisemethodofcalculation.

However,givenourdecisiontopublisharatiolastyearandusingthesameapproach,basedontheCEOsinglefiguresetoutonpage79,theratioofpaytothemedianofallotheremployeesis1:63(20161:44).TheincreaseintheratiobetweenthepayoftheCEOandotheremployeeslargelyreflectstheannualbonuspayabletotheCEOin2017;in2016nobonuswaspaid.

Althoughwagesandsalarieshaveincreasedforallemployeegroups,overallearningshavefallen,asaresultoffewerhoursbeingworkedonaverageeachweek,astheCompanyimprovesschedulingefficiencyacrossallsites.Inassessingourpayratioversuslikelyratiosfromindustrypeers,webelievethatwearetowardsthelowerendoftherangebutnotethatannualandlong-termincentivepaymentshavevariedconsiderablyamongstthisgroup.Inourcase,theCEOsinglefigurecomprisesfixedpayandbonusonlygiventhatnolong-termincentivevestedinrespectofperformanceendinginFY2017.Wealsorecognisethatratioswillbeinfluencedbylevelsofemployeepay,andinthehospitalitysector,despitesignificantincreasesoverthepastyear,employeepaywillbelowerthaninmanyothersectorsoftheeconomy.


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Employeepayincludesbasesalary,incentivepayments,employer’spensioncontributionsandbenefits.Employeeswithpart-yearservicehavebeenexcludedfromthecomparisonfigures.Employeepaydoesnotincludeearningsfromtipsandservicecharge,fromwhichmanyemployeesbenefit.ItisMitchellsandButlerspolicytopassallearningsfromtipsandservicechargeontoemployeesinfull.

InadditiontotheelementsofpayincludedintheabovepayratiocalculationtheCompanyalsoinvestsinemployeesinotherways.Ouremployeesarefundamentaltothedeliveryofgreatguestexperiencesandthereforeatrulyengagedworkforceisimportant.Foroveradecade,MitchellsandButlershassoughttheviewsofemployeesthoughourannual‘YourSay’employeeengagementsurvey.Whatthissurveyconsistentlytellsusisthatwhilstpayisaveryimportantelementoftheoverallemployeeproposition,thereareotherfactorsthatarealsoimportanttoouremployees.TheopportunitytolearnanddevelopisoneoftheseandtheCompanyhasinvestedheavilyinthisareainthepastyear.Over1,250employeesarenowundertakinganapprenticeshipwithus,overanumberofprogrammes,fromguestservicetoculinaryskillsthroughtomanagement.Underpinningallofourlearninganddevelopmentactivityisthenewlearningsystemintroducedduringtheyear,whichprovidesaninnovativeandinteractivewayforemployeestolearnanddevelop,bothonjobandon-line,inawaythatisconvenientandflexible.

Anotherimportantfactorisemployeerecognition,whichcantakemanyforms,andtheCompanysupportsemployeesinanumberofways,suchasourrecognitionprogrammewhichallowsmanagerstorewardgreatperformanceinthemomentandalsoservicemilestones,fromoneyearofserviceupwards.Inaddition,allemployeescanbenefitfromagenerousemployeediscountandbecomeshareholdersthroughourShareIncentivePlans.

Relative importance of spend on pay £m

700

500

400

300

200

100

600

0 Wages and salaries*

FY 2017

577625

1551674946

190198

3112

Principal taxes** Pension deficit contributions Debt service Cash Dividend and Share Buy Back

FY 2016 * From note 2.3, Accounts, excludes share-based payments. ** Business Rates, Corporation Tax, Employer’s NI.

+8.3%

+7.7%

-6.1%

+4.2%

-61.3%

Figuresshownforwagesandsalariesconsistofallearnings,includingbonus.InFY2017,£2m(0.3%)waspaidtoExecutiveandNon-ExecutiveDirectors(2016£2.1m(0.36%)).

TheincreaseinwagesandsalariesisprimarilyaresultofNMWandNLW.

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.

Non-Executive DirectorsNon-ExecutiveDirectors,includingtheCompanyChairman,donothaveservicecontractsbutserveunderlettersofappointmentwhichprovidethattheyareinitiallyappointeduntilthenextAGMwhentheyarerequiredtostandforelection.InlinewiththeCompany’sArticles,allDirectors,includingNon-ExecutiveDirectors,willstandforre-electionatthe2018AGM.ThisisalsoinlinewiththerecommendationssetoutinparagraphB.7.1oftheCode.Non-ExecutiveDirectors’appointmentsareterminablewithoutnoticeandwithnoentitlementtocompensation.Paymentoffeeswillceaseimmediatelyontermination.

RonRobsonandJoshLevywereappointedtotheBoardpursuanttothetermsofthePiedmontDeedofAppointment,informationonwhichissetoutonpage49.

CopiesofboththeindividuallettersofappointmentforNon-ExecutiveDirectors,andtheservicecontractsforExecutiveDirectorsareavailableattheRegisteredOfficeoftheCompanyduringnormalbusinesshoursandonourwebsite.Copieswillalsobeavailabletoshareholderstoviewatthe2018AGM.



Implementation of Remuneration Policy in FY 2018 Executive Directors’ salary reviewNosalaryincreasewillapplyforanyExecutiveDirector.PhilUrban’ssalarywillremainat£510,000andTimJones’at£426,500.PhilUrban’ssalaryhasnotincreasedsincehisappointmentinSeptember2015andTimJones’salarywaslastincreasedinJanuary2015.

Annual performance bonusThemaximumbonusopportunitywillbe100%ofsalaryfortheChiefExecutiveandFinanceDirectorwith70%ofbonustobebasedonOperatingProfitandtheremaining30%onnon-profitelementslinkedtothebusinessscorecard.

Weighting Details

OperatingProfit 70% Bonuswillbegintoaccrueatthresholdwithhalfofthebonuspayableforon-targetperformance,reflectingthedemandingnatureofthetargetssetbytheCommittee.Fullpaymentwouldrequireverystrongperformance,wellinexcessofcurrentmarketconsensus.

GuestHealth 15% GuestHealthwillcomprisethreemeasures,eachwithanequalweighting:

•NPS–awell-establishedmeasureofGuestHealth,willcontinuetobeassessedinFY2018.

•Social media–Thesocialmediamonitoringtool,introducedin2017enablesallsocialmediareviews,includingTripAdvisor,FacebookandGoogle,tobecombinedintoasinglereviewscore.

•Guest complaints–Therehasbeenanincreasedfocusonimprovingthespeedatwhichguestcomplaintsareresolved,alongsideacommitmenttoreducingtheoverallnumberofcomplaintsreceived.Therefore,anassessmentofguestcomplaintswillbeincludedinassessingGuestHealth.

CombiningNPSwithanassessmentofsocialmediareviewsandguestcomplaintsprovidesamoreholisticreviewofGuestHealth.Toachieveamaximumpayment,performancewillneedtoexceedtargetonatleasttwoelements,andbeattargetorbetter,forthethirdelement.

Employeeengagement 10% Mitchells&Butlershasmeasuredemployeeengagementforanumberofyears,andaclearcorrelationhasbeenestablishedbetweenemployeeengagementandguestsatisfaction,whichinturnhasapositiveimpactonsales.Forthisreason,theCommitteehasdecidedtoincludeemployeeengagementinthebonusscheme.

Safety 5% FoodsafetywillalwaysbeakeypriorityandincludingameasurebasedontheproportionofourbusinessesthatachieveahighNationalFoodHygieneRatingreflectsourcontinuedfocusonthesafeoperationofourbusinesses.Anagreedfoodsafetyscoremustbeachievedforthispartofthebonustopayoutand,asanadditionalcheck,overallworkplacesafetywillalsobetakenintoaccountwhendeterminingtheoutcome.

Thenon-profitelementswillonlybecomepayableifacertainlevelofOperatingProfithasbeenachieved.For2018,thishasbeenincreasedto97.5%oftargetwhichisaheadofthethresholdrequiredforpaymentundertheOperatingProfitmeasure.

Morebroadly,theCommitteewillcontinuetoconsidertheoverallperformanceoftheCompany,notjusttheoutcomeofeachindividualmeasure.Allbonustargetsareconsideredtobecommerciallysensitiveandwillnotbedisclosedinadvance.However,retrospectivedisclosureoftargetsandperformanceagainstthemwillbeprovidedinnextyear’sDirectors’remunerationreport.

ThebonusstructureforallManagersacrossMitchells&Butlersislinkedtotheabovebusinessscorecard.

Performance Restricted Share Plan (PRSP)PRSPawardswithafacevalueof200%and140%ofbasesalarywillbemadetotheChiefExecutiveandFinanceDirectorrespectively.Themeasuresandtargetsfortheawardtobemadeforthe2018-20cyclearestillbeingdeterminedassetoutintheChair’sstatementatthebeginningofthisreport.Measuresandtargetswillbesubjecttoconsultationwithmajorshareholdersandwillbedisclosedinfullatthetimeofgrant.

Reflectinggoodpracticeinthisarea,atwo-yearpost-vestingholdingperiodwillbeintroducedforthePRSPawardstobemadein2018andforallfuturelong-termincentiveawards,therebystrengtheningalignmentbetweenexecutivesandshareholders.

Share ownership guideline Theguidelinehasbeenincreasedto200%ofsalaryfortheChiefExecutiveand150%ofsalaryfortheFinanceDirector.Consistentwiththepreviouspolicy,Directorswillberequiredtoretainallvestedshares(netoftax)untiltheshareownershipguidelineismet.

Non-Executive Directors’ fee reviewTherewillbenochangetotheChairmanandNon-ExecutiveDirectorfeelevelsin2018.

Imelda WalshChair of the Remuneration Committee22November2017


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