Smoking ban will slow growth at Mitchells & Butlers

By Hamish Champ

- Last updated on GMT

Mitchells & Butlers (M&B) expects sales growth in an English non-smoking environment to be "significantly lower" than its track record of the...

Mitchells & Butlers (M&B) expects sales growth in an English non-smoking environment to be "significantly lower" than its track record of the past four years.

Speaking as the managed pub company announced pre-tax profits up 10 per cent to £208m for the year to September 30 on sales of £1,720m, up 5.5 per cent, M&B's chief executive Tim Clarke said trading across the group's Scottish non-smoking pubs witnessed a one per cent decline in growth.

"This experience was close to what we expected," he said of the Scottish estate - which comprises four per cent of its total portfolio - adding that in the first seven weeks of the current financial year its Scottish like-for-like food sales were up seven per cent, while drink sales fell two per cent.

Clarke said he didn't expect sales in England under a smoking ban to be hit, but he conceded there would be a "significant slowdown of growth" in the first year, compared with the four to five per cent year-on-year growth the group had experienced in the past four years.

"It'll be a blip, followed by an acceleration," he added.

Clarke said that M&B's board was "very open minded" on whether to move the group into a Real Estate Investment Trust (REIT), where a company is split into operating and property owning entities and earnings are paid to shareholders as tax-efficient dividends.

The main sticking point was whether an operating company would be sufficiently incentivised to trade to its full potential under a lease agreement, he argued.

"The value of the asset is currently driven by the trading it achieves and this might shift under a lease arrangement," Clarke said. The group recognised the opportunities "but as yet had come to no firm conclusions" regarding a decision.

M&B had meanwhile "arrested the decline" of beer sales across its estate, growing them by five per cent over the past three years versus an industry fall of nine per cent.

Price rises were in the region of two per cent, Clarke added. Underlying group margin growth of 1.7 per cent constituted a "fabulous performance", given external costs of £24m, which include the impact of the national minimum wage.

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