Mitchells & Butlers upbeat on recent trading, warns on energy costs

Mitchells & Butlers said in a trading update on Thursday that like-for-like sales improved in its fourth quarter, despite the ongoing impact of extreme heat as well as further rail strikes, both of which disrupted trade.

The pub operator said sales over the August bank holiday were "encouraging", with like-for-like growth over the three-day weekend of over 6%, before returning to levels consistent with the quarter as a whole.

Growth was still being driven by food sales, with the strongest performances in its premium, food-led brands.

For the year as a whole, M&B said total sales declined 1.3% compared to the pre-Covid 2019 period, mainly due to temporary pandemic-related closures in the first part of the year and site disposals since 2019.

Inflationary cost pressures presented "an increasing challenge" through the second half, the board said, initially concentrated in the areas of energy, wages and food costs, but now evident throughout most of the supply chain.

The recent announcements of domestic and business energy price caps were "welcomed" by the company, both due to the impact on guest disposable income, and the reduction of cost downside to the business from potential further adverse market price increases.

However, it said it expected its total energy and utility costs to have increased to £150m for the 2022 financial year, up from £80m last year, and even with the cap in place it anticipated a further increase on that for 2023.

That was despite several initiatives underway to reduce its ongoing energy usage, including greater focus and review at a site level on energy efficiency, combined with investment initiatives such as the installation of voltage optimisers.

M&G said it had brought forward aboit 20% of its requirements for the next financial year.

The group said it currently had cash balances of £160m, in addition to undrawn committed unsecured facilities of £150m.

"The trading environment for the hospitality sector remains very challenging, with cost inflation putting increasing pressure on margins, and we are also mindful of the pressures on the UK consumer over the coming months," said chief executive officer Phil Urban.

"We remain focused on the delivery of our Ignite programme of initiatives, driving sales and delivering cost efficiencies.

"This will, combined with our diverse portfolio of well-known brands and strong estate locations, put us in a stronger competitive position to face the challenges ahead."

Reporting by Josh White at Sharecast.com.