Restaurant and pub owner Mitchells & Butlers (MAB) isn’t paying a half-year dividend in 2018. That news was enough to send the shares tumbling on results day, even though like-for-like sales – up 1.8 per cent during the last year – outperformed wider industry growth of 0.3 per cent. But it doesn’t do well to dwell on spend per head – up 5.6 per cent for food and 3.9 per cent for drink – as price rises and premium brands had much to do with it. Margins contracted by 80 basis points due to a substantial rise in the cost base – something likely to cause further pain in FY2018.
Look at the group’s cash-flow statement and it’s easy to see why dividends are off the table. Last year £31m was spent on shareholder returns, resulting in a free cash outflows of £38m. This year, reducing that total payout to just £12m left the group with a free cash flow of £14m. Considering net debt represents 4.2 times cash profits, it seems prudent to us given the squeeze on profits.
Analysts at Peel Hunt are still forecasting pre-tax profit of £171m for the year ending September 2018, giving EPS of 33p, compared with £183m or 34.8p in FY2017.
| MITCHELLS & BUTLERS (MAB) | ||||
| ORD PRICE: | 239.9p | MARKET VALUE: | £1.01bn | |
| TOUCH: | 239.8-240p | 12-MONTH HIGH: | 280p | LOW: 218p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 385p | NET DEBT: | 108% | |
| Year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 1.90 | 142 | 31.2 | nil |
| 2014 | 1.97 | 123 | 22.6 | nil |
| 2015 | 2.10 | 126 | 25.0 | 5.0 |
| 2016 | 2.09 | 94 | 21.6 | 7.5 |
| 2017 | 2.18 | 77 | 15.1 | 5.0 |
| % change | +5 | -18 | -30 | -33 |
| Ex-div: | 14 Dec | |||
| Payment: | 6 Feb | |||
