British pub operator Mitchells & Butlers, which is partly owned by Irish financiers JP McManus and John Magnier, has warned of “unrelenting” cost pressures through the second half of the year and into the next.
That warning came after it posted an 8% decline in first-half pre-tax profit due to a margin squeeze from higher costs.
Shares in the company — which operates more than 1,750 restaurants and pubs in the UK, through chains such as O’Neill’s, Harvester, and All Bar One — fell by up to 11%.
“Margins are being adversely impacted by increased costs, most notably from wage inflation, property costs, energy, and food and drink costs,” chief executive Phil Urban said, adding that cost pressures were “not going away any time soon”.
Rising inflation and muted wage growth following Britain’s vote to leave the EU have caused UK consumers to rein in spending.
The company said like-for-like sales for the 28 weeks to the middle of April climbed 1.6% but were flat year-on-year.
Adjusted for impact of frigid weather conditions, it rose 2.5%, the company said.
Revenue at Mitchell’s & Butlers rose to £1.13bn from £1.12bn in the first half of the year, while pre-tax profit slipped to £69m from £75m.
Cold weather during the first half also dented sales as fewer people stepped out, the company said, estimating an impact of about £12m in lost sales.
Rival pub operator Marston’s also said it was impacted by adverse weather conditions but added that this was offset by strong trading in its brewing and taverns and leased pubs.
Marston’s said it expects revenue and profit growth this year and posted a 20% rise in underlying revenue and an 8% rise in pre-tax profit for the six months to the end of March.
The Wolverhampton-based brewer is not under the same pressure as M&B as it has “greater strategic latitude to react to external consumer environment,” Liberum analyst Anna Barnfather said in a note.
Despite the company’s positivity, Marston’s share price plummeted by nearly 9% on the back its first half results.