M&B takes a hit on 24% profits slump and cautious outlook

Published on Thursday 26 November 2009 20:54

PUBS group Mitchells & Butlers' full-year profits have tumbled 24 per cent to £134 million as it revealed yesterday that it has been hit by a damaging cocktail of rising staff costs, alcohol duties and consumers reining in spending.

Chief executive Adam Fowle also said the looming 1 January restoration of VAT to 17.5 per cent after a year at 15 per cent was also likely to be a negative factor.

Fowle – whose group's main brands include O'Neill's, All Bar One and Toby Carvery – said: "Current trading is underpinning the performance in the first half of the financial year.

"However, the outlook for the second half is uncertain. The outlook for disposable income and consumer confidence could be dampened if VAT and other taxes were to rise."

Fowle said M&B's performance was robust in challenging conditions, highlighting strong food sales at the company's 2,000 pubs and restaurants.

M&B, which runs Glasgow's Horseshoe Bar and Deacon Brodie's Tavern in Edinburgh, sold 129 million meals during the year to 26 September, and average food sales per pub grew 9 per cent. Like-for-like sales rose 1.6 per cent, a figure improving to 3.2 per cent in the first eight weeks of M&B's new financial year.

Food-related sales, including drinks bought with food, now account for about two-thirds of the group's overall sales.

Seymour Pierce analyst Hugh-Guy Lorriman said: "So far, M&B has been poor at converting like-for-like sales growth into profit growth – this year will be vital to proving they can do so, but risks, in our view, are high."

M&B's shares closed down 3.5p at 253.4p.