It's been just over a year since Alistair Darby moved from chief operating officer at Marston's (MARS) to chief executive officer of Harvester-to-All Bar One owner Mitchells & Butlers (MAB) and his turnaround efforts are starting to capture investors' attention, even though City commentators aren't totally bowled over.


While Mitchells' shares rally today, we'd hardly call a 0.4% rise in like-for-like sales over the past year a reason to get too excited. And there's still no dividend. But this has been a long-term straggler in the leisure sector, so even the smallest progress is understandably going to please the market which explains today's 6.2% jump to 415.3p. And that's partially why we turned positive on the stock in the summer, saying it has lots of self-help measures available to improve the business.


Some analysts are disappointed about a lack of new action points in the results, suggesting that the company will merely continue to tweak the business and hope for the best. Deutsche Bank's Geof Collyer says of the results: 'It’s long on marketing analysis but has no change of action; just a continuation of the business and cultural re-engineering that has been ongoing for 18 months. Whilst this is critical for the longer term operating performance, the shorter term direct profit and loss impacts seem to be struggling to come through in any meaningful way.'


Current trading sees a mere 0.1% rise in like-for-like sales over the past 8 weeks. Collyer reckons its bottom-end food brands and the uninvested wet-led sites are still a drag on the business.


You'll see that the group makes reference to new autumn menus in its Crown Carveries estate that include meals at £3.69 compared to the main carvery price of £4.19. At first glance, that would sound like a proactive move to position the group as the cheapest among its peer group. But it appears to be a reactionary move. Trade news service provider Propel claims that Mitchells saw volumes slump by 20% after putting up meals above the £4 mark at Crown Carveries and is now dropping prices to win back this lost custom. But prices that low won't be good for profit margins.


Long-term bear, Simon French of Panmure Gordon reiterates his 'sell' rating on the stock, saying the stock looks overvalued. He comments: 'The stock trades on a CY 2014E adjusted EV/EBITDAR of 7.9x. M&B is potentially a compelling turnaround story but until earnings downgrades cease and there are genuine signs of an improvement in operating performance we think the shares warrant a discount to the peer group.'


Stockbroker Numis is a 'buyer' of Mitchells but hasn't upgraded its 2014 earnings forecasts. It says 2013' s margin growth was supported by higher pricing, yet management targets more volume and less price growth in 2014. Analyst Douglas Jack adds: 'Despite having arguably one of the best managed pub estates in the sector, M&B shares trade at a 5% EV/EBITDA discount to the peer group reflecting operational under-performance. Over the medium term, we believe there is good scope for the shares to recover through LFL sales picking up, expansion accelerating, dividends resuming and the £0.6bn pension deficit falling.'

Issue Date: 26 Nov 2013