Mitchells & Butlers profits slide amid cost headwinds

Toby Carvery’s parent company saw profits tumble by around a quarter last year on the back of significant inflationary pressures.

Mitchells & Butlers operating profits slumped by £26million to £98million in the 53 weeks ending September, as high energy and food costs and a drop in property portfolio valuations hammered its bottom line.

It was further impacted by a near total absence of pandemic-related government support, such as business rates relief and lower VAT for the hospitality sector, which had totalled £53million in the previous year.

Consequently, Mitchells & Butlers shares fell 7.1 per cent to 225.2p by early Thursday afternoon, making them one of the biggest fallers on the FTSE 250 Index.

However, the Birmingham-based business said cost headwinds were subsiding and are now expected to total about £65million this fiscal year, even with the incoming hike in the National Living Wage.

Phil Urban, M&B’s chief executive, added: ‘Whilst we remain mindful of the pressures that the UK consumer is facing, the strength of our sales growth alongside an abating cost environment gives us confidence for the financial year ahead.’

The firm’s like-for-like sales have expanded by 7.2 per cent since October after growing by 9.1 per cent in the previous 12 months, a record outperformance of the broader market.

M&B’s overall revenue climbed by almost £300million to £2.5billion last year, partly due to the lack of Covid-19 restrictions on hospitality venues.

Trading at its Central London outlets benefited from a recovery of inbound tourists and workers commuting to the office more regularly.

In the latter half of the period, comparable turnover increased by 9.7 per cent despite a much cooler and wetter summer than average.

Yet the company, which also runs the All Bar One and Harvester chains, did not declare a dividend, and its net debt remains high at £1.1billion.

Derren Nathan, head of equity research at Hargreaves Lansdown, warned: ‘With a debt pile of over £1billion, it’s no surprise the purse strings haven’t been loosened to allow a dividend.

‘With continuing uncertainty for the immediate outlook, it makes sense to prioritise investment in the business and to leave some room for promotional activity.’

M&B’s results come a week after the Autumn Statement announced many new measures aimed at helping Britain’s struggling hospitality industry.

Chancellor Jeremy Hunt froze alcohol duty and the small business multiplier and extended the 75 per cent business rate relief for hospitality firms to 2025.