19th May 2016 07:50
LONDON (Alliance News) - Mitchells & Butlers PLC on Thursday reported growth in profit in the first half of its financial year as its margin improved on the back of lower costs, but revenue slipped and the pub and restaurant chain warned that second-half margin will be hit by the UK National Living Wage.
The operator of Harvester restaurants and O'Neill's Irish pubs said its pretax profit in the 28 weeks ended April 9 grew to GBP83 million from GBP75 million in the first half of the year before, even though revenue slipped marginally to GBP1.10 billion from GBP1.11 billion.
Mitchells & Butlers said the sales environment remains challenging, with food sales down by 2% and drink sales falling by 1.5%. Volume also fell in both food and drink, by 5.1% and 4.8%, respectively.
Profit, however, was helped by a 0.5 percentage point increase in adjusted operating margin to 14.2%, which benefited from non-recurring prior year costs, although Mitchells & Butlers warned that those cost savings will not continue into the second half.
It added that second-half margin will also be hit by the introduction of the National Living Wage, which is expected to generate an incremental cost of around GBP7 million in the second half.
"Following a challenging trading period with subdued sales but margin growth, our sales performance in recent weeks has been more encouraging. We are cognisant of the challenge of future wage cost increases but will continue to execute our plans at pace to build on this performance," the company said in a statement.
Mitchells & Butlers will pay an interim dividend of 2.5 pence.
"Our plan, to reshape the estate and innovate in both existing and new offers for our guests, is now well under way and I have every confidence in its success," Chief Executive Phil Urban said.
Shares in Mitchells & Butlers were trading down 0.7% at 275.30 pence on Thursday morning.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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