Mitchells & Butlers cost outlook improving as H1 profits fall

UK pub group Mitchells & Butlers on Wednesday said its medium-term cost outlook was improving, despite a fall in half-year profits.

Year-on-year sales growth in the most recent six weeks of the year was 8.9% on a like-for-like basis, the company said on Wednesday.

"The trading environment for the hospitality sector remains challenging with inflationary costs putting pressure both on the industry's margins and disposable income of our guests," said chief executive Phil Urban.

Adjusted operating profit fell to £100m for the half year ended to April 8, compared with £120m a year earlier. On a pre-tax basis they declined to £40m from £57m.

"We have been encouraged by the strength of trading throughout the first half of the year with the return to office working continuing, city centres becoming stronger, tourist numbers recovering and guests across the country continuing to enjoy the hospitality sector," the company said.

"There are indications that cost inflation headwinds across the supply chain are starting to abate, although they continue to present a challenge in the near-term. Energy prices have fallen back materially from earlier market highs and early evidence suggests that cost increases in other areas, notably food, will soon start to slow."

Current-year cost guidance remained in line with expectations as the company anticipated an inflationary cost headwind across its £1.8bn cost base at the lower end of the 10-12% range before mitigation.

Reporting by Frank Prenesti for Sharecast.com