- Improved like-for-like sales growth in final quarter
- Volumes still below pre-pandemic levels
- Energy costs squeeze margins
Pubs group Mitchells & Butlers (MAB) said fourth quarter like-for-like sales in the 10 weeks to 26 September were 1.5% ahead of the same period in 2019 despite disruption from the heat wave and rail strikes.
For the year like-for-like sales were up 1.1%, but down 0.9% excluding VAT while total sales dropped 1.3% as significant price increases since the pandemic translated into lower volumes.
Shares in Mitchells & Butlers, which owns brands including All Bar On, Harvester and Miller and Carter, dropped 9% to 123.4p after it highlighted increasingly ‘challenging’ cost pressures.
The squeeze on consumer spending from higher interest rates and raging inflation is a toxic mix for the hospitality sector.
MARGIN PRESSURES
Utility and energy costs are anticipated to be around £150 million in 2022 and increase by a further £50 million in 2023 despite mitigating energy saving actions, the company said. This represents an 88% increase compared to pre-pandemic costs.
CEO Phil Urban commented: ‘The trading environment for the hospitality sector remains very challenging, with cost inflation putting increasing pressure on margins, and we are also mindful of the pressures on the UK consumer over the coming months.
‘We remain focused on the delivery of our Ignite programme of initiatives, driving sales and delivering cost efficiencies. This will, combined with our diverse portfolio of well-known brands and strong estate locations, put us in a stronger competitive position to face the challenges ahead.’
EXPERT VIEW
Greg Johnson at Shore Capital said the revenue performance in the fourth quarter was broadly consistent with his expectations, but energy costs may put further downward pressure on estimates.
Johnson commented: ‘For FY23F, we were forecasting PBT improving to £147 million, although energy costs would likely take this to below £100 million, with the macro-outlook likely to put further pressure on volumes. We will update our estimates accordingly.’
On a more positive note, Johnson highlighted the improved balance sheet with net debt falling by around £300 million since the pandemic, and pointed out the group retains ‘significant’ freehold backing.
