27th Sep 2007 07:03
Mitchells & Butlers PLC27 September 2007 27 September 2007 Mitchells & Butlers plc Pre Close Trading Update Mitchells & Butlers announces a strong trading performance in the 22 weeks to 15September 2007 with earnings for the year before exceptional items expected tobe at the upper end of the Board's expectations. Same outlet like-for-like sales in the 18 weeks to 15 September 2007 (the periodsince that covered at the Interim Results) increased by 2.6%. This represents aresilient performance during a period of poor weather, the introduction of thesmoking ban in England and strong comparatives in July to September last year.Significant drinks market share gains have been made against an on-trade marketwhere beer volumes fell by almost 7% in the four months to the end of August. For the 50 weeks to 15 September 2007, same outlet like-for-like sales increasedby 3.2%, with drinks sales up 2.5% and food sales up 5.3%. Residential sameoutlet like-for-like sales for the 50 weeks increased by 3.4%, with Local pubsperforming very strongly, particularly in food, but the pressure on mid marketconsumers continuing to lead to some slowing in Pub Restaurants. On the HighStreet, the successful evolution of our formats and the buoyancy of trading incentral London led to increasing like-for-like sales growth of 3.1% in the 50weeks with a further improvement in the last 18 weeks. Total Retail sales forthe 50 weeks were 9.1% ahead and average weekly sales per managed pub were up 6%to £18.5k. In the 11 weeks since the introduction of the smoking ban, same outletlike-for-like sales for our English pubs excluding those previously converted tonon-smoking, increased by 2.2%, with drinks sales up 0.9% and food sales up5.8%. This result is in line with our expectations of the initial impact fromthe ban before the onset of winter. We are encouraged by trading in Scotland up3.9% in the last 18 weeks and in the longer term we continue to believe theoverall impact of the ban will be beneficial to our business. Our operational strategy, emphasising quality, value and innovation, has beenkey to this resilient trading performance. Average retail price rises over theyear of less than 2% for food and drink remained below inflation, reinforcingour value position in a market characterised by substantial real priceincreases. Our focus remains on generating profitable volume growth and we aremaking further revenue investment in the value of our menus to strengthen ourcompetitive position. Customer service standards have continued to be enhancedby our staff training programmes, evidenced by increased mystery guest scores. Sales increases have been efficiently converted into profits growth. This hasbeen achieved through further improvements in employee productivity, purchasinggains and effective cost controls, which have overcome £8m of externalregulatory cost increases. As a result, Retail net operating margins are broadlyin line with last year despite £14m of closure and pre-opening costs arisingfrom the conversion of the Acquired Sites. The integration of the Acquired Sites has progressed well. 163 of the sites havenow been converted to Mitchells & Butlers' formats, with the remainingconversions expected to be completed during the first half of next year. Todate, average weekly sales uplifts on the converted sites are runningapproximately 20% above the levels at which the sites were acquired. This isdespite the substantial impact of the poor summer weather, particularly on thecountry pub restaurants in destination locations. The performance is on track todeliver in the year 2008/9 uplifts of 30% in average weekly sales as anticipatedat the time of acquisition. With further post-conversion sales build-ups and asignificant focus on enhancing staff productivity, the Acquired Sites areexpected to deliver strong profits uplifts in the year ahead. In addition to the Retail profits, an operating profit of approximately £7m isexpected from SCPD for the current year, of which the majority relates to thesale of a long term development property in Burton-on-Trent completed in August. Value release from freehold property estate The Board continues to believe that substantial value can be released toshareholders through the creation by Mitchells & Butlers of a dedicated propertycompany structure and discussions are continuing to implement a transaction onacceptable financing terms once the debt markets have stabilised. The current post tax mark-to-market deficit on the hedges taken out inconnection with the planned R20 transaction remains at approximately £140m and,although not a cash cost, any accounting loss related to the debt hedgingarrangements at the year-end date will be accounted for as an exceptional item. Outlook Despite the uncertain outlook for consumer spending, Mitchells & Butlers iscompetitively well placed to make further market share gains in the year ahead.Margin reinvestment in the quality and value of our food offers is beingactively pursued to generate further volume increases. This will help tomitigate the estimated £12m of additional regulatory costs next year, resultingprimarily from increases in the National Minimum Wage and holiday pay, as wellas the significant upward pressures on food costs and the impact of the smokingban. With the benefits from the conversion of the Acquired Sites starting to bemore fully reflected next year and the prospects for further market share gains,we anticipate a resilient performance amidst more challenging market conditions. Mitchells & Butlers will announce its Preliminary Results for the year ended 29September 2007 on 29 November 2007. For further information, please contact: Investor Relations: 0121 498 6513Erik Castenskiold Media Kathryn Holland 0121 498 4526James Murgatroyd (Finsbury Group) 020 7251 3801 There will be a conference call for analysts and investors at 8.30am; pleasedial 020 7162 0025. The replay will be available until 8 October 2007 on 0207031 4064, passcode 767475. APPENDIX: Same outlet like-for-like sales* 18 weeks** to 50 weeks to 15 September 2007 15 September 2007Residential 2.1% 3.4%High Street 3.5% 3.1%Total 2.6% 3.2% Uninvested like-for-like sales* 18 weeks** to 50 weeks to 15 September 2007 15 September 2007Residential 0.6% 1.7%High Street 2.7% 2.4%Total 1.4% 1.9% * Excludes the Acquired Sites** Last reported like-for-like sales included 32 weeks to ensure comparabilityof Easter trading. Notes for editors: - Mitchells & Butlers owns and operates around 2,000 high quality pubs in prime locations nationwide. The Group's predominantly freehold, managed estate is biased towards large pubs in residential locations. With around 3% of the pubs in the UK, Mitchells & Butlers has 10% of industry sales, and average weekly sales per pub of over three times the industry average.- The "Acquired Sites" are the 239 pub restaurant sites acquired from Whitbread plc in August 2006.- Same outlet like-for-like sales include the sales performance for the comparable period in the prior year of all managed pubs that were trading for the two periods being compared. 84% of the estate is included in this measure.- Uninvested like-for-like sales include the sales performance for the comparable period in the prior year of those managed pubs that have not received the expansionary investment of more than £30,000 in the two periods being compared. 75% of the estate is included in this measure. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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