Dividend decision goes down badly with M&B investors

PUBS group Mitchells & Butlers jolted the stock market yesterday by again passing the dividend and also refusing to promise a 2011 shareholder payout.

Shares in the group, whose pubs include Edinburgh's Sheep Heid Inn and Glasgow's Horseshoe Bar, slumped nearly 5 per cent at one point as the disappointing news on the divi overshadowed full-year pre-tax profits up 26 per cent to 169 million.

M&B - whose chains include O'Neill's, All Bar One and Toby Carvery - said it would delay a decision on any future payment until seeing how future trading went and considering other uses for its capital.

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The divi was frozen in 2008 in order to pay down debt. M&B, which has 90 pubs in Scotland out of a British stable of 1,600, sold more than 300 outlets in the past year, reducing its debt by nearly 300m to 2.3 billion.

Adam Fowle, chief executive, said: "We are not committing now to a dividend at the end of 2011. We are going to look at the way the business runs through the year, and we're also going to observe the opportunities that arise for the business."

M&B's shares had risen 17 per cent in the past three months partly on the back of increasingly strong trading figures and hopes of a dividend resumption. They closed off 2.6 per cent last night at 344.6p.

Alistair Macdonald, leisure analyst at broker Execution Noble, said: "Following the recent speculation around the reinstatement of the dividend, the market is sure to be disappointed by management's decision to resist the temptation here."

On current trading, M&B said sales at pubs and pub/restaurants open for more than a year were up 3.7 per cent. This was an acceleration on the 2.8 per cent seen in the year to 25 September, and was boosted by a near-7-per cent rise in food sales. The hundreds of pubs sold last year generated revenue mainly from drinks. Food now accounts for nearly two-thirds of revenues.