Shares in All Bar One and O’Neill’s pubs operator Mitchells & Butlers (MAB) gained 3% to 243p on Thursday after the company said it had returned to profitability and cash generation after lockdown restrictions were lifted.

In the first eight weeks of the new financial year from 25 September the business has experienced continued like-for-like sales growth of 2.7% and total sales growth of 0.5%.

However, the company sounded a note of caution about the current financial year as it faces employment and utility cost headwinds as well as supply constraints in terms of material procurement and contactor availability.

Chief executive Phil Urban commented: ‘The trading environment remains challenging and cost headwinds continue to put pressure on the sector.

‘However, we have strengthened our balance sheet and returned to profitability and cash generation, allowing us to resume our capital plan and Ignite programme which will deliver sales and efficiency improvements to help combat these challenges.’

STRONG RECOVERY

Demonstrating the strength of recovery since reopening, second half revenues were £846 million compared with £436 million last year and adjusted operating profit was £153 million, up from £9 million.

For the full year to 25 September the company generated revenues of £1.1 billion, down from £1.5 billion as the estate was impacted by lockdowns, while adjusted operating profit was £29 million compared with £99 million in 2020.

After successfully raising £351 million of new equity in February 2021, at 25 September the company had cash on hand of £227 million and unsecured committed facilities of £150 million while net debt had shrunk to £1.27 billion from £1.56 billion.

EXPERT’S VIEW

Investment director at AJ Bell Russ Mould commented: ‘Mitchells & Butlers has long been a laggard in the pubs and restaurant sector, and one can’t help feel it needs to sharpen its focus.

‘The company says it tries to offer something for everyone, whether that’s a sleepy country pub or a livelier atmosphere in a city centre establishment.

‘However, the group has 17 different brands which seems a bit excessive. Perhaps the current environment might force the group to focus harder on what it does best, rather than being something for everyone?’

DISCLAIMER: The author Martin Gamble and Steven Frazer, who edited this story, both own shares in AJ Bell, the owner of Shares

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Issue Date: 25 Nov 2021