Mitchells & Butlers swings to profit but warns over cost headwinds

Pub group Mitchells & Butlers said on Wednesday that it swung to a first-half profit as sales continued to recover, but warned over cost headwinds.

For the 28 weeks to 9 April, the company made a pre-tax profit of £57m compared to a loss of £200m in the same period a year ago, with revenues rising to £1.16bn from £219m. Basic earnings per share came in at 7.7p versus a 33p loss in the first half of 2021.

The group said it was encouraged by the continued recovery in sales since its last update, with like-for-like sales growth in the second quarter of 3.8%, taking overall LFL sales growth for the first half to 1.0% despite the adverse impact of Omicron over the festive period.

Chief executive Phil Urban said: "We are encouraged by the improvement in sales trajectory through the first half of the year, having made progress in each of our markets, with our food-led businesses continuing to lead the way.

"The trading environment remains difficult. Cost headwinds present a significant challenge to the industry, particularly those costs related to utilities, wages and food. In light of this, our teams have refocused their efforts on driving further efficiency and productivity gains through our Ignite programme. In parallel, we are pushing forward with our capital investment plan which we are pleased to see delivering strong sales uplifts."

M&B said that cost headwinds, based on FY 2019 and on a cost base of £1.8bn, are expected to be in the region of 11.5% for the current year, equivalent to 3.7% on an annualised basis across the three-year period.

Next year, current assumptions indicate an increase of around 6% on a year-on-year basis "but high volatility in energy markets could have a material impact", it said.