Mitchells pauses for breath

Full-year results from pubs and restaurant group Mitchells & Butlers (MAB) have made its shares pause for breath following a substantial re-rating on the back of turnaround hopes. While showing some encouraging signs, the results served as a reminder that new chief executive, Alistair Darby, still has a job on his hands.

Mr Darby, who took up his post in October, is attempting to drive through a change of culture at the pub group aimed at boosting its operational performance. The idea has major attractions as MAB is widely regarded as having some of the best assets and brands in the industry and has proved popular, too, as the share price has now risen almost 50 per cent from its summer lows. An encouraging five percentage point increase in guest satisfaction and retail employee engagement suggests things are already beginning to move in the right direction.

The full-year numbers themselves were less inspiring, though. Like-for-like sales rose 2.1 per cent in the financial year and are flat in the eight weeks since the year-end. Cost-cutting could not completely offset inflationary pressures which meant operating margins slipped 30 basis points to 16 per cent in the retained estate and adjusted EPS rose 6.4 per cent to 30.5p after a one-off £6m tax-related hit in the interest charge. The dividend remains off the menu.

Broker Peel Hunt forecasts 2013 EPS of 34.1p (30.5p in 2012).

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