Pub chains cheer hike in profits

Chief executive Ralph Findlay expects expansion to continue
Chief executive Ralph Findlay expects expansion to continue
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Two of the UK’s biggest pub chains have reported higher profits as improving consumer confidence continues to boost the food and drink market.

Mitchells & Butlers, which owns brands including Harvester, All Bar One, and O’Neill’s, said it made good progress in the six months to 11 April as its operating profits lifted 4.1 per cent to £153 million.

Brewer and rival chain Marston’s, which has an estate of more than 1,600 pubs featuring a mix of managed, franchised and leased outlets, grew its underlying pre-tax profits by 2 per cent to £29.6m in the six months to 4 April.

The improvement came despite the impact of disposals made over recent years as it offloads smaller pubs in favour of new-build “family-friendly” restaurants, including a growing number north of the Border.

Mitchells & Butlers cautioned that the eating and drinking out market – worth an estimated £78 billion – remains challenging despite an improving jobs market and return to real wage growth.

The company, which serves around 135 million meals and 435 million drinks each year, told investors: “Our market will benefit from this positive consumer environment.

“However, after a period of austerity, and with many consumers continuing to carry a significant amount of personal debt, we recognise that many people remain cautious and highly selective in purchasing decisions. We believe that this caution explains a slight slowdown in the recent rate of market growth.”

Revenues at Mitchells rose 9.5 per cent to £1.1bn as a result of 1.4 per cent growth in like-for-like sales and the contribution of new pubs and restaurants, such as the 173 outlets acquired from Orchid.

It said food sales growth was primarily driven by volume growth of 2.9 per cent, with a small increase in average spend per head.

Drink sales growth, by contrast, resulted from higher average spend growth of 2.7 per cent partially offset by volume declines of 2.2 per cent.

Stockbroker Shore Capital, which has a “hold” recommendation on M&B’s shares, said it “continued to see better value elsewhere”.

Analyst Greg Johnson said: “We continue to be concerned over margin declines especially if like-for-like sales momentum is unable to build.”

Martson’s, which also brews ales such as Pedigree and Hobgoblin, said it expected to open some 25 family-friendly pub-restaurants, including three lodges, in the current year. It pointed to a good pipeline of sites, allowing it to achieve its future openings target.

Chief executive Ralph Findlay said: “Two years ago, we set out our plan to reposition our pub estate, focusing on high-quality pubs with opportunity for further growth. As we approach the end of the transition period, these results demonstrate our plan is working.

“Profits have increased in each of our trading segments, excluding the impact of disposals, and we remain on track to complete 25 new-builds this year with excellent visibility on our site pipeline in 2015 and 2016.

“We are also seeing good opportunities to expand our premium estate, Pitcher & Piano and Revere, and invest further in pubs with accommodation.”

The group lifted its interim dividend by 4 per cent to 2.5p.