M&B beats expectations

Although management admitted last year was "challenging", like-for-like sales rose 0.6 per cent. And this momentum has continued into the current financial year: like-for-like sales are already 2.4 per cent ahead in the first eight weeks of trading. This explains why shares in M&B rose more than 5 per cent on results day.

Rising volumes rather than price hikes boosted M&B's sales performance last year. Bosses were particularly pleased with a 0.9 per cent increase in like-for-like food volumes. This forms the basis of M&B's ongoing strategy. Management says about three-quarters of M&B's turnover comes from guests eating at its establishments, so they reckon long-term growth hinges on securing a larger share of the UK's £78bn dining-out market.

Group sales were boosted by the acquisition of the Orchid Group, which added 173 outlets to M&B's estate back in June. Roughly 15 weeks of Orchid-related trading are included in M&B's full-year sales figures. The deal did drive adjusted operating margins down by 50 basis points. But with Orchid's head office due to close, and other parts of the business due to take on M&B's own brands, management believes the decline will be shortlived. Excluding costs associated with site closures during the year, adjusted operating profits rose 1 per cent at group level.

For now, management is only prepared to say it will consider a return to the dividend list when cash flows permit.

Analysts at Numis have downgraded their profit forecasts for the 2014-15 financial year due to a pension-interest reclassification. They now expect pre-tax profits of £186m, giving EPS of 33.9p, up from £172m and 32.4p, respectively.