Warmer weather pulled more punters into Mitchells & Butlers’ (MAB) pubs during August and September putting a smile on investors’ faces.
Shares moved 1.9% higher to 270.2p as the sun coming out in the eight weeks to 17 September help the group report sales growth for the first time in more than a year.
Total sales at the group behind brands such as Harvester, Toby Carvery and All Bar One were up 1.8% during that period, according to an update, compared to a 0.8% fall for the year.
Beer, wine and spirits revenues for the two-month period were 3.7% higher than a year earlier, while food sales saw a 0.4% improvement.
Nigel Parson at Canaccord Genuity saw the signs of stronger trading some time ago. ‘The fine summer weather has been helpful but it’s only part of the story, like-for-likes have been recovering for six months.’
The improvement in the shares following the update came despite management warning that margins will be squeezed this year thanks to wage rises dictated by the minimum wage.
The investment in upgrading its pub and restaurants to win new customer in the face of rising competition is also a factor here.
This project is also a factor in revenues expected to miss some analysts’ expectations for the year. Only 244 properties were upgraded during the year, lower than the 250 that were planned.
Management also failed to hit its target of opening new pubs with only seven of the 10 intended open for business.
Mitchells & Butlers has suffered in the past year as it fights to win new custom, especially in its restaurants business. It could take some time before the share price recovers from the 345.1p it traded at on 31 December.
‘M&B has the best freehold estate in the business, in our view, but it looks like investors will be in for the long-haul from a trading perspective,’ Parson says.
