Mitchells & Butlers fizzes higher on Liberum upgrade

On Thursday, M&B said like-for-like sales grew 4.1% in the first half, while total revenue rose to £1.19bn from £1.13bn in H1 2018 and pre-tax profit pushed up to £75m from £69m.

The broker said M&B has reached a “tipping point”, with sustained like-for-like outperformance now translating to profit growth.

“Importantly, its approach is multifaceted, driven by a large number of initiatives driving both sales up and costs down across all parts of its estate. Tellingly, LFL sales growth has accelerated across both the invested and uninvested estates which implies to us that it is sustainable and reflective of a more ingrained commercial culture.

“This has driven improved returns and cash generation which in turn is reducing leverage and de-risking the overall investment proposition.”

Liberum said it was lifting its pre-tax profit/earnings per share forecasts by 4.6% in FY19E and 9.2% in FY20E.

The broker added that the shares are inexpensive, trading on CY19E EV/EBITDA of 6.6x and price-to-earnings of 7.2x.

“While we still do not expect re-instatement of a dividend soon, we do expect £80-£100m annual debt to equity value transfer to help drive the share price.”

At 1300 BST, the shares were up 2.8% at 271.50p.