30th Nov 2023 10:41
(Alliance News) - Mitchells & Butlers PLC on Thursday failed to impress shareholders, with its annual results going down like a "flat beer".
"All Bar One-owner Mitchells & Butlers' results got the kind of reception reserved for a flat beer as the company swung to a pretax loss thanks to cost headwinds. While it says these are abating and sales are growing, the company faces some renewed pressure on costs in 2024 thanks to the increase in the national living wage announced in the Autumn Statement," said AJ Bell's Russ Mould.
The Birmingham, England-based company operates restaurants and pubs under brands that include Harvester, Toby Carvery, All Bar One, Nicholson's and O'Neill's.
Shares in Mitchells & Butlers were down 6.4% to 227.00 pence each in London on Thursday morning. However, over the last 12 months the stock is up 63%.
Mitchells & Butlers reported total revenue of GBP2.50 billion in the 53 weeks that ended September 30, up 13% from GBP2.21 billion the year earlier.
It swung to a pretax loss of GBP13 million from a profit of GBP8 million a year ago.
Mitchells & Butlers said profitability was hurt by a decline in its property portfolio valuation, as well as buy significant cost headwinds during the financial year. Operating costs were 17% higher at GBP2.15 billion from GBP1.84 billion.
"Cost headwinds presented a significant challenge in FY 2023, but we are seeing clear evidence that these are starting to abate," Mitchells & Butlers said.
However, Jeremy Hunt's autumn statement may present some challenges, with the national living wage expected to increase by 9.8%. This will come into play in April next year.
"Guidance on the same headwinds this year implies they'll more than half to GBP65 million. But getting back to profit growth isn't assured. Sales growth so far this year has slowed a couple of percentage points as landlords head into the crucial festive season. And there are signs that consumers are cutting back on eating out in order to save for Christmas," said Derren Nathan, head of equity research at Hargreaves Lansdown.
"With a debt pile of over GBP1 billion, it's no surprise the purse strings haven't been loosened to allow a dividend. With continuing uncertainty for the immediate outlook, it makes sense to prioritise investment in the business, and to leave some room for promotional activity."
Mitchells declared no dividend for financial 2023. It hasn't paid a dividend for the past six years, last paying one for financial 2017.
Peel Hunt's Douglas Jack was more positive about Michells & Butlers outlook, though.
The broker upgraded its forecasts for financial 2024 pretax profit by 4% to GBP155 million from GBP149 million, encouraged by "strong ongoing" sales at Mitchells.
In the eight weeks since the end of its financial year, like-for-like sales have risen 7.8% on-year, Mitchells said.
By Sophie Rose, Alliance News senior reporter
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