Mitchells & Butlers shares drop as full-year profits sink

Shares in Mitchells & Butlers dropped on Thursday after the restaurants, pubs and bars group reported a big drop in annual profits on the back of significant cost headwinds and property valuation movements, which outweighed strong sales growth over the year.

The All Bar One and Harvester owner said sales totalled £2.50bn in the 12 months to 30 September, up 13% on last year, helped by a 9.1% increase in like-for-like sales. Even when compared with the fiscal year ending 2019, the last pre-Covid year, LFL sales have improved by 10.5%.

"We are delighted by the continued strength of our trading performance, and resilience in the face of unprecedented cost headwinds," said chief executive Phil Urban.

On a statutory basis, the group swung to a loss before tax of £13m, from a profit of £8m the previous year, impacted both by property portfolio valuation movements and cost headwinds of £175m, though these are expected to fall to around £65m in the current year.

Operating profits were down 21% at £98m, impacted both by both property portfolio valuation movements and the inclusion last year of an additional £52m of non-recurring government support (in the form of reduced VAT and grants).

Since the start of the new financial year, like-for-like sales have increased by 7.2%, with growth said to be "broad-based".

"Cost headwinds presented a significant challenge in FY 2023 but we are seeing clear evidence that these are starting to abate," the company said.

"We now know that the National Living Wage will increase by 9.8%, and be extended to everyone over 21, from April next year, but a reduction in energy prices and slowing food inflation, in particular, mean that anticipated overall cost headwinds for the year ahead are expected to reduce to c.£65m. This should allow us to start to rebuild margins back towards pre-pandemic levels."