F INANCIAL STATEMENTS - mbplc.com

1 In this section89 Independent auditor s report to the members of Mitchells & Butlers plc96 Group income statement97 Group statement of comprehensive income98 Group balance sheet99 Group statement of changes in equity100 Group cash flow statementNotes to the financial statements101 Section 1 Basis of preparation104 Section 2 Results for the year 104 Segmental analysis 105 Separately disclosed forms 106 Revenue and operating costs 108 Taxation 110 Earnings per share111 Section 3 Operating assets and liabilities 111 Property, plant and equipment 115 Working capital 115 Provisions 116 Goodwill and other intangible assets118 Section 4 Capital structure and financing costs 118 Net debt 118 Borrowings 120 Finance costs and revenue 120 Financial instruments 126 Pensions 129 Share-based payments 131 Equity133 Section 5 Other notes 133 Related party transactions 133 Subsidiaries 134 Five year review135 Mitchells & Butlers plc Company financial statements137 Notes to the Mitchells & Butlers plc Company financial STATEMENTS FINANCIAL STATEMENTS88 | Mitchells & Butlers plc | Annual report and accounts 2017 Report on the audit of the financial statementsOpinionIn our opinion.

2 The financial STATEMENTS give a true and fair view of the state of the Group s and of the Company s affairs as at 30 September 2017 and of the Group s profit for the 53 weeks then ended; the Group financial STATEMENTS have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; the Company financial STATEMENTS have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice including Financial Reporting Standard 101 Reduced Disclosure Framework; and the financial STATEMENTS have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial STATEMENTS , Article 4 of the IAS have audited the financial STATEMENTS of Mitchells & Butlers plc (the Company ) and its subsidiaries (the Group ) which comprise: the Group income statement; the Group statement of comprehensive income; the Group and Company balance sheets; the Group and Company STATEMENTS of changes in equity; the Group cash flow statement; the related notes 1 to 5 of Group financial STATEMENTS .

3 And the related notes 1 to 10 of the Company financial financial reporting framework that has been applied in the preparation of the Group financial STATEMENTS is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Company financial STATEMENTS is applicable law and United Kingdom Accounting Standards, including FRS 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor s responsibilities for the audit of the financial STATEMENTS section of our report.

4 We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial STATEMENTS in the UK, including the FRC s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC s Ethical Standard were not provided to the Group or the believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our of our audit approachKey audit mattersThe key audit matters that we identified in the current year were: Valuation of the pub estate; and Onerous lease provisions.

5 With the exception of extending the Onerous lease provisions key audit matter to include the fact that the charge for the year is included as a separately disclosed item, there have been no changes in the key audit matters included in our audit report since 2016. This is consistent with the fact that the operations of the Group are largely unchanged from the previous year. MaterialityThe materiality that we used in the current year was which is approximately 5% of profit before tax before separately disclosed items. ScopingA full scope audit has been performed in respect of the UK business, consistent with changes in our approachIn 2016, we adopted an audit approach which tested the operating effectiveness of controls relating to revenue and food and drink expenditure.

6 In 2017, we have tested the operating effectiveness of controls relating to revenue, food and drink expenditure and, in addition, property, plant and auditor s report to the members of Mitchells & Butlers plcAnnual report and accounts 2017 | Mitchells & Butlers plc | 89In tnhisec hoF ncNcnFcACiFLh StSehcAAcnFcTEFINANCIAL STATEMENTS 88 TO 139 OTHER INFORMATION 140 TO 144 Independent auditor s report to the members of Mitchells & Butlers plc continuedConclusions relating to principal risks, going concern and viability statement We have reviewed the Directors statement regarding the appropriateness of the going concern basis of accounting contained within Section 1 to the financial STATEMENTS and the Directors statement on the longer-term viability of the Group contained within the Strategic report on page are required to state whether we have anything material to add or draw attention to in relation to: the disclosures on pages 36 to 40 that describe the principal risks and explain how they are being managed or mitigated.

7 The Directors confirmation on page 37 that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; the Directors statement in Section 1 to the financial STATEMENTS about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the Group and the Company s ability to continue to do so over a period of at least 12 months from the date of approval of the financial STATEMENTS ; the Directors explanation on page 40 as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

8 Or whether the Directors STATEMENTS relating to going concern and the prospects of the Company required in accordance with Listing Rule (3) are materially inconsistent with our knowledge obtained in the confirm that we have nothing material to add or draw attention to in respect of these agreed with the Directors adoption of the going concern basis of accounting and we did not identify any such material uncertainties. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group s ability to continue as a going audit mattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial STATEMENTS of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.

9 These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement matters were addressed in the context of our audit of the financial STATEMENTS as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these | Mitchells & Butlers plc | Annual report and accounts 2017 Key audit matter descriptionHow the scope of our audit responded to the key audit matterKey observationsValuation of the pub estateAs set out in section the value of the estate is 4,429m (2016 4,423m).Freehold and long leaseholdThe accounting policy adopted and judgements used are described in section to the financial is considered to be a key audit matter due to the judgements inherent within the valuation exercise and the range of acceptable judgements.

10 The total net book value of revalued properties as at 30 September 2017 is 4,230m (2016 4,217m). The revaluation exercise performed in the year has resulted in a net increase of 23m versus carrying value (2016 136m), which includes an impairment charge of 51m (2016 80m) recognised in the income statement. The Group s accounting policy sets out that the market value is determined using factors such as estimated fair maintainable trading levels and estimated multiples which are derived for each of the Group s trading brands. 20% of the freehold and long leasehold estate has been inspected by the Group s external valuers, with the result of the inspection informing the brand standard multiples which are then extrapolated across the remainder of the estate.