Shares in restaurant group Mitchells & Butlers (MAB) fell another 7 per cent following these disappointing half-year results, which showed like-for-like sales growth of just 1.6 per cent in the first half. Management pinned the blame on recent adverse weather – specifically the ‘Beast from the East’ snow storm – but everyone's jumping on that particular bandwagon. Cost-push inflation, including increased pay commitments, is the real bugbear, borne out by an 80 basis point reduction in the adjusted operating margin. This led to an 8 per cent crunch at the bottom line, although analysts at Peel Hunt are sticking by full-year forecasts (for now). The broker expects pre-tax profits of £179m for the year ending September 2018, giving EPS of 33.3p, compared with £183m and 34.8p in FY2017.
To counter the cost squeeze, Mitchells is expanding the proportion of its estate serving the 'premium' end of the market – widely considered to be the most resilient part of the pub and restaurant sector. With margins as thin as they are, a move up the value chain probably makes sense, particularly if cash flows are constricted. Lest we forget, the group's net debt is equivalent to 4.1 times cash profits.
| MITCHELLS & BUTLERS (MAB) | ||||
| ORD PRICE: | 259p | MARKET VALUE: | £1.11bn | |
| TOUCH: | 259-260p | 12-MONTH HIGH: | 287p | LOW: 220p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 398p | NET DEBT: | 101% | |
| Half-year to 14 Apr | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 1.12 | 75.0 | 13.7 | nil |
| 2018 | 1.13 | 69.0 | 13.0 | nil |
| % change | +1 | -8 | -5 | - |
| Ex-div: | na | |||
| Payment: | na |
