Nobody likes a flat beer but that sums up the market’s reaction to Mitchells & Butlers’ (MAB) better than expected full year results after the shares retreated almost 7% to 226.6p.

Still, even after today’s fall the shares are 56% higher than where they began the year, compared with a 4% fall in the FTSE 250 index driven by a strong rebound in beer and food sales.

RESILIENT PERFORMANCE

For the 53 weeks to 30 September sales increased 13% to £2.5 billion driven by 9% like-for-like sales growth, a record outperformance against the market as measured by the CGA business tracker.

The company, which operates brands including All Bar One and Harvester, has delivered a resilient performance against tough cost headwinds which resulted in adjusted operating profit falling 8% to £221 million.

Excluding government support of £53 million received in 2022 compared with £1 million in 2023 adjusted operating profit grew 17.6% to £33 million.

Chief executive Paul Urban said: ‘We are delighted by the continued strength of our trading performance, and resilience in the face of unprecedented cost headwinds.

‘We have achieved good growth in underlying profit, excluding government support, with like-for-like sales growth across all of our brands, and record outperformance against the market.

‘Whilst we remain mindful of the pressures that the UK consumer is facing, the strength of our sales growth alongside an abating cost environment gives us confidence for the financial year ahead.’

CONTINUED SALES MOMENTUM

Like-for-like sales have continued their strong trend into the new financial year, increasing 7.2% reflecting broad-based growth. The company said it sees ‘clear’ evidence that cost headwinds are abating.

Despite the impact of a 9.8% increase in the national living wage from April 2024, a reduction in energy costs and reduced food inflation mean overall cost headwinds are expected to reduce to around £65 million for the year ahead.

‘This should allow us to start to rebuild margins back towards pre-pandemic levels’, the company said.

WHAT THE EXPERTS ARE SAYING

Greg Johnson, leisure analyst at Shore Capital, said: ‘Mitchells & Butlers has issued results for the 12 months to end September, with profitability nicely ahead of forecast, continued robust trading, cost pressures easing and ongoing deleveraging.

‘We see upside risk to our full year 2024 estimates and inexpensive valuation of circa eight times EBITDA (earnings before interest, tax, depreciation, and amortisation).’

AJ Bell investment director Russ Mould commented: ‘All Bar One owner Mitchells & Butlers swung to a pre-tax loss thanks to cost headwinds.

‘While it says these are abating and sales are growing the company faces some renewed pressure on costs in 2024 thanks to the increase in the national living wage announced in the Autumn Statement.’

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (James Crux) own shares in AJ Bell.

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