Mitchells & Butlers profit drops on higher costs, FX

Pub group Mitchells & Butlers reported a drop in profit for the 28 weeks to 8 April despite a rise in sales as it pointed to increased costs and exchange rate movements.

Profit before tax fell to £75m from £83m in the first half of 2016, despite total revenue nudging up to £1.12bn from £1.1bn. Meanwhile, like-for-like sales were up 1.6% at the half year and 1.9% higher in the first 33 weeks of the year.

Adjusted earnings per share slipped to 15.2p from 15.7p and the company declared an interim dividend of 2.5p, in line with the previous year.

Capital expenditure rose to £93m from £88m, including six new site openings and 172 conversions and remodels. M&B had cash flow of £24m versus £34m the year before and net debt fell to £1.83bn from £1.86bn.

Chief executive Phil Urban said: "During the half year we have generated sustained sales growth, whilst consistently outperforming the market. This comes from the good progress we have made in our three priority areas: building a more balanced business; instilling a more commercial culture; and driving an innovation agenda.

"As previously announced, margins have been adversely impacted by increased costs, most notably from wage inflation, property costs and exchange rate movements. In order to partially mitigate these costs we have been working hard to encourage our guests to trade up and increase spend per head for a more premium experience whilst challenging our General Managers to run their businesses as cost effectively as possible."