- Strong full year profit recovery
- Net debt reduced by £197 million
- NI change raises costs by £100 million
Pub group Mitchells & Butlers (MAB) served up better than expected full-year sales and profit growth and said the business had made a strong start to the new financial year with like-for-like sales up 4% in the first seven weeks.
Investors cautiously welcomed the results with the shares trading up 6.5p or 2.6% to 251p, reducing year-to-date losses to 1% compared with a 6% gain in the FTSE 250 mid-cap index.
Part of the cautious reaction is related to anticipated cost headwinds in the coming year as increases in employer National Insurance and the National Living Wage take effect from April 2025. The company estimates a cost headwind of around £100 million, equating to 5% of its cost base.
WHAT DID THE COMPANY SAY?
Chief executive Phil Urban commented: ‘We are delighted by the very strong performance during the year. Like-for-like sales continued to outperform the market which, coupled with easing inflationary costs and focus on efficiencies, has resulted in very strong profit recovery.
‘We face increased inflationary cost headwinds in the year ahead. However, we shall remain focused on our established Ignite programme of initiatives and our successful capital investment programme, to drive further cost efficiencies and increased sales.’
STRONG PROFIT RECOVERY
Total sales for the year to 28 September increased 6% to £2.6 billion, driven by 5.3% growth in like-for-like sales, outperforming the underlying market as represented by the CGA Business Tracker index.
Adjusted operating profit jumped by 41% to £312 million reflecting higher sales, lower gas and electricity costs and efficiency gains, offset by roughly a 10% increase in the National Living Wage.
Strong cash generation allowed the group to reduce net debt by £197 million to £989 million excluding lease liabilities, representing a leverage multiple of 2.2 times earnings before interest, tax, depreciation, and amortisation.
In the first seven weeks of the new financial year, like-for-like sales increased by 4% and management remain confident of outperforming the market in the year ahead.
Analyst Greg Johnson at Shore Capital anticipates maintaining his 2025 pre-tax profit estimate of £220 million, equating to around 10% growth.
Johnson believes the company will need to secure around 3% like-for-like sales growth to mitigate higher costs and maintain profitability.
