GEOFF PERCIVAL: Profits slide for UK pubs group

Shares in the British pub group in which Irish financiers John Magnier and JP McManus hold a 23% stake fell by as much as 12% on the back of falling profits and a decision not to award shareholders an interim dividend next year, writes Geoff Percival.

Mitchells and Butlers — which runs such chains as O’Neill’s, Harvester and All Bar One — reported a 2.6% rise in total revenue, for the 12 months to the end of September, to £2.18bn (€2.44bn). Like-for-like sales were up by 1.8%, compared to a 0.8% drop the previous year.

However, adjusted pre-tax profits were down 0.6%, for the year, at £183m and adjusted operating profits fell 3.1% to £314m, mainly due to inflationary cost pressures.

Adjusted earnings per share fell by 1.4% to 34.9p. Net debt declined by around £100m to £1.75bn, but remained more than four times earnings levels.

The company said it would not be paying an interim dividend in its current financial year, but will make an assessment on the full-year based on trading levels. A dividend of 7.5p per share, for the year just ended, will be paid in February.

Mitchells and Butlers said like-for-like sales for the first seven weeks of its current financial year were up 2.3%, adding that it is well positioned to deliver long-term shareholder value.

Like other operators in the sector, Mitchells & Butlers has been battling increased costs, most notably from wage inflation, property costs and exchange rate movements. Earlier this month, rival pub group JD Wetherspoon warned about the impact of higher input costs, as sterling took a hit after the Brexit vote.

The move to cancel the interim dividend raised concerns about the company’s cash-flow and growth prospects, Liberum analysts said.

However, Morgan Stanley analysts said the decision to pay the final dividend [for last year] suggested that there were no immediate issues.


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