M&B may restore pay-outs to menu

SHAREHOLDERS in All Bar One-owner Mitchells & Butlers could see their dividend payments restored after the pubs giant yesterday cheered a sharp rise in profits.

• Edinburgh's All Bar One owner M&B profits rise. Picture: David Moir

The group, whose 2,000-strong estate also includes the Harvester and Toby Carvery chains as well as some of Scotland's best-known watering holes, posted a 55 per cent increase in first-half pre-tax profits to 73 million.

The result was ahead of City expectations and was boosted by strong food sales, which gave a lift to the firm's operating margin. M&B is busy reshaping itself into a food-led business following a strategic review. Food sales offer higher margins than drinks.

The group scrapped dividend payments in 2008 to focus on paying down debt but chief executive Adam Fowle yesterday indicated he would re-assess that strategy later in the year.

"If everything is stable and we are continuing to trade well at the end of November, the board would consider the dividend decision in a good light," he said.

M&B – now under the chairmanship of Debenhams boss John Lovering following a boardroom coup in January – said like-for-like sales were up 1.9 per cent in the nine weeks since the end of the first half, marking a rebound on a difficult tough second quarter, when trading was hit by the rise in VAT and wintry weather.

Brokerage KBC Peel Hunt reiterated a "buy" recommendation on the pub and restaurant operator and upgraded its full-year pre-tax profit forecast by 3 per cent to 159m.

Analyst Paul Hickman said: "We believe that Mitchells' commitment to rotate strategy in favour of eating out means faster development than for most pub companies."

The firm, which currently has 100 or so Scottish pubs including Deacon Brodie's Tavern in Edinburgh, Glasgow's famous Horseshoe Bar and the Hawes Inn in South Queensferry, kicked off its strategic review in January after activist shareholder and currency trader Joe Lewis won a battle to shake up M&B's board.

It is looking to dispose of about 300 pubs which are focused on drinks and Fowle said the group hoped to have made good progress in that direction by the end of the summer.

M&B is also looking to cut costs and has increased its savings target in the current year to 25m from 20m.

The group wants to increase dramatically the scale of its restaurant brands, taking the familiar roadside names into smaller town-centre locations.

The number of Harvester sites could double.

Market expectations for full-year profit range between 131m and 181m, according to a poll of 19 analysts.