Mitchells & Butlers earnings narrow as it spends on improvements and new sites

Mitchells & Butlers posted its half-year results for the 28 weeks to 14 April on Wednesday morning, reporting adjusted like-for-like sales growth of 1.6%, and growth adjusted for the impact of snowy weather earlier in the year of 2.5%.

The FTSE 250 pubco said like-for-like sales growth stood at 5.8% over Easter weekend, which moved into the first half this year.

Its adjusted operating profit for the period slipped to £141m from £149m for the same period last year, and its adjusted earnings per share fell to 13.9p from 15.2p,

On the strategic front, Mitchells & Butlers completed 224 capital projects as part of its six-to-seven year cycle, with the 100th Miller and Carter opened during the period.

It also reported improved customer satisfaction, with its net promoter score up five points, and increased its digital penetration, with 120,000 online bookings made per week in the period, up from 80,000 in the first half of last year.

On a reported basis, the company’s total revenue grew to £1.13bn from £1.123bn year-on-year, while its operating profit slipped to £137m from £145m, and its profit before tax slid to £69m from £75m.

Basic earnings per share were 13.0p, down from 13.7p a year ago.

The company made capital expenditure of £104m during the half, up from £93m, which included four new site openings and 220 conversions and remodels.

Its adjusted free cash flow was a negative £3m, narrowing from a negative flow of £18m 12 months ago.

Net debt stood at £1.72bn at the end of the period, down from £1.83bn, and representing 4.1x adjusted EBITDA compared to 4.3x at the end of the first half last year.

“During the first half we continued to deliver like-for-like sales growth against a period of growth last year,” said chief executive Phil Urban.

“This strong performance comes from the progress we continue to make in our three priority areas: building a more balanced business; instilling a more commercial culture; and driving an innovation agenda.”

Urban said success in the “highly competitive” pub market was dependent on a continuous stream of improvements, with the board focussed on delivering that.

“We have therefore embarked upon a new wave of initiatives which are in their early stages of development, and we believe have the potential to further transform the business.

“As previously announced, margins are being adversely impacted by increased costs, most notably from wage inflation, property costs, energy and food and drink costs,” Urban added.

“In light of this, our operational teams have performed well to deliver flat underlying profitability in the period.”