In a half year report to 11 April, pubs group Mitchells & Butlers (MAB) said it had traded strongly before lockdown and is well positioned to benefit from reopening, pushing the shares up 5% to 201p.
STRONG TRADING BEFORE LOCKDOWN
Prior to closure like-for-like sales were 0.9% higher having been 2.6% ahead in the first quarter followed by softer trading due to stormy weather. The business also achieved higher margins due to good labour control and cost management.
First half trading included almost four weeks of enforced closure of all sites which resulted in revenues falling 12% to £1 billion and adjusted operating profit 29% lower at £108 million. All non-essential costs were eliminated and 99% of staff were furloughed.
The company extended its unsecured financing facilities by £100 million to £250 million and agreed with bond holders to temporarily waive covenant tests.
Mitchells & Butlers took a £148 million charge relating to an impairment of properties directly as a result of Covid-19.
A SIGN OF THINGS TO COME
The company’s German business Alex reopened in mid to late May with encouraging sales growth helped by a reduction in VAT on food to 7% from 19%. Some of the suburban sites have since experienced days of year-on-year growth but the city centre sites have been slower to recover.
While management is reluctant to provide forward guidance due to uncertainty over the re-opening profile of UK sites and strength of consumer demand, the experience in Germany suggests recovery will be swift. In addition the UK chancellor is mulling over reducing VAT to help jump-start the economy.
Chief executive Phil Urban commented, ‘our early experience of re-opening in Germany, give us a clear plan for re-opening and ensure that we are well placed to continue to bring people and communities together and to keep Mitchells & Butlers at the forefront of the eating and drinking-out market.’
