- Better than expected first half
- Full-year outlook upgraded
- Inflation cost headwinds for 2026
Shares in pub operator Mitchells & Butlers (MAB) jumped more than 4% after the group served up another strong first half performance ahead of market expectations and raised its full-year operating profit guidance to the top end of consensus forecasts.
The stock have been on a tear since the beginning of April, rallying by around 35%, taking year-to-date gains to 16%, easily outperforming the mid-cap FTSE 250 index return of 1%.
Chief executive Phil Urban commented: ‘The strength of our first-half performance is driven by a continued focus on maximising the guest appeal of our diverse portfolio of brands to drive sales, supported by efficiency initiatives delivered through our Ignite programme of work.
‘We are delighted with the like-for-like sales performance which continues to outperform against the market.’
RESILIENT PERFORMANCE
Like-for-like sales increased 4.3% over the 18 weeks to 12 April, while total sales were up 4.2% to £1.45 billion. Operating profit jumped 10.4% to £181 million, reflecting an expansion of margin on sales to 12.4% from 11.7% in the prior year as well as operating efficiencies.
Trading over the last 10 weeks including the Easter and Mother’s Day saw an acceleration in like-for-like sales growth to 6%. Over the first half the business continued to outperform the market, as represented by the CGA Business tracker index, by more than 3%.
Looking forward to 2026, the company noted cost headwinds as increased labour costs annualise and recent indications of ‘high’ increases in food costs, most notably meat.
Consequently, the company anticipates cost headwinds will rise from £100 million in 2025 to £130 million, representing just under 6% of the cost base, before mitigation.
EARNINGS UPGRADE
Given the strong first half, Shore Capital’s Greg Johnson said he was likely to nudge up his 2025 operating profit forecast by £5 million to £322 million in line with the top end of the consensus range.
Looking out to 2026, Johnson believes higher cost inflation will likely be mitigated by a larger profit base and lower interest costs resulting in an unchanged pre-tax profit estimate.
