Mitchells & Butlers has returned to profitability following the removal of pandemic restrictions, despite a “very difficult” trading environment.
M&B’s operating profit for the year increased from £81 million to £124 million.
The company, which includes the Toby Carvery, Harvester, and All Bar One brands, made an £8 million pre-tax profit for the year ending September 24, compared to a £42 million loss for the same period in the previous year.
The M&B share price increased by 8.45%, or 12.00p, to 154.00p this afternoon, after declining by 35% over the past year.
The group’s comparable sales increased by 6.5% in the 10 weeks following the end of its fiscal year, compared to 9.2% growth in 2019.
Following the removal of Covid-19 limits, revenue more than doubled to £2,200,000,000.
However, M&B stated that it anticipates a 10% to 12% increase in ‘inflationary cost headwind’ throughout its £1.8 billion cost base before any steps to reduce this.
M&B applauded the Government’s energy price guarantee for businesses, which began in October and restricted energy rates for six months.
However, it was said that energy prices were still likely to climb this year and that there remained “substantial uncertainty” over second-half prices.
‘Excluding the approximately £70 million rise in utility costs, profits would have been close to pre-Covid-19 levels, despite the impact of the Omicron version and inflationary cost pressures over the year,’ M&B stated in its results released today.
The company is ‘cautiously optimistic about its prospects in the next months, but it remains cognizant of cost-of-living problems for customers, which are anticipated to linger at least through the remainder of the current fiscal year.
M&B stated that the rebound of sales had been ‘encouraging’ due to the return to office employment, which has bolstered city center sites.
Phil Urban, chief executive officer of Mitchells & Butlers, stated, ‘The trading environment is extremely competitive, with cost inflation continuing to put pressure on margins, and we are constantly cognizant of the challenges faced by the UK consumer.
However, we are encouraged by the robust sales increase at the close of the previous fiscal year, which has continued to improve in the first few weeks of this year.
M&B stated that no dividends were declared or paid during the current period.
Susannah Streeter, a senior investing and markets analyst at Hargreaves Lansdown, stated, ‘Mitchells and Butlers’ results reflect the highly volatile period pubs have been experiencing since the desire to socialize has returned post-pandemic, just as inflation has been eroding margins.
‘Annual revenues increased by 57% as a result of the recovery from Covid’s devastation, but escalating input costs are becoming increasingly burdensome.
‘The company has done a commendable job of increasing sales by 6.5% in the ten weeks since September’s end, demonstrating that pub-goers continue to set aside finances for dining out at its All Bar One, Harvester, and Toby Carvery locations.
‘However, inflationary cost headwinds of 10 to 12 percent are now eroding profit margins.
This is a very difficult time to be a publican, and the suffering will not be temporary. Instead, the organization is planning for the chronic repercussions of the cost-of-living problem to continue into the upcoming year.
The cost of electricity, in particular, is a persistent headache that is predicted to worsen as prices are projected to climb higher and uncertainty persists on the future level of government support.
Russell Pointon, director of the consumer at Edison Group, stated, “Although a respectable set of results, the pub and restaurant business cautioned of economic challenges, with cost inflation and rising energy prices continuing to put pressure on margins.
‘Following the holiday season, it remains to be seen whether consumer demand will continue high, as families across the United Kingdom are compelled to reduce their spending.
The Group will continue to focus on its Ignite initiative to generate cost reductions and improve sales, as well as its capital investment initiative. The versatility of the Group’s product and value proposition positions it well to meet the challenges facing the hospitality industry in the future.’
