M&B hails 'excellent' progress on food sales
Mitchells & Butlers (M&B) has hailed its "excellent" progress in transforming the business into a food-led operation with like-for-like food sales up 4.7% in the year to 25 September and up 6.9% in the most recent eight weeks.
M&B's strategy of focusing on six key brands — Harvester, Toby Carvery, Crown Carveries, Sizzling Pub Co, Premium Country Dining Group and Vintage Inns — saw revenue rise 1.1% to £1,980m for the year with EBITDA up 4.9% to £449m.
Operating profit (before exceptionals) was up 7.3% to £322m with profit before tax (before exceptionals) up 26.1% to £169m.
Its disposal of non-core assets, most notably 333 pubs to Stonegate Pub Company, has allowed M&B to grow food to 47% of sales across its retained estate of 1,600 pubs. It estimates that around two-thirds of all sales now relate to eating out.
In its retained estate, like-for-like food and drink sales were up 4.7% and 1.4% respectively.
Food volumes increased by 2.3% in the year with average food spend per head up by 2.3% (excluding VAT) reflecting enhanced menu quality, selling additional courses and a greater proportion of higher priced items being chosen.
In the most recent 8 weeks to 20 November like-for-like sales were up 3.7% with food sales up 6.9%.
Property value
M&B spent £138m in capital expenditure during the year, including £28m on acquisitions — most notably the purchase of 22 Ha Ha Bar & Grill sites for £19.5m, which will be converted to All Bar One and Browns. A total of £28m was spent on acquisitions.
The group has reduced overall net debt by nearly £300m to £2.3bn. Drawings on its unsecured medium term facility were £258m at the year end — well below the current facility limit of £425m.
Current net debt is now £2.0bn following the receipt of cash proceeds from the Stonegate disposal, which will be used to pay down the unsecured facility.
The value of M&B's property has dropped by £235m. The retained estate decreased in value by 4%, primarily as a "result of reduced valuation multiples on our larger, high profitability sites where there are no comparable multiples in the market".
It added: "The valuation reflects a prudent position at this point in the economic cycle bearing in mind the growth in profitability during the year."
Internal rent
M&B is to charge an internal rent on each of its freeholds and long leasehold sites from the start of this financial year but has no intention of legally separating the company into a property company and operating company.
The total internal rent charge is around £190m —a round 40% of the aggregate pub level EBITDA. Rents will rise each year to reflect the average RPI and the relevant retail rent increases.
"The outlook for consumer spending remains uncertain in light of government spending cuts and the VAT increase in January," said chief executive Adam Fowle.
"However, the strength of Mitchells & Butlers' brands, the effectiveness of its marketing platform, its operational capabilities and strong capex returns underpin the Board's confidence in the Company's prospects."
Key figures
• Revenue up 1.1% to £1,980m
• EBITDA up 4.9% to £449m
• Operating profit (before exceptionals) up 7.3% to £322m
• Profit before tax (before exceptionals) up 26.1% to £169m
• Net cash inflow of £303m in the year
• Retained Estate like-for-like sales up 2.8% in the year
• Retained Estate like-for-like food and drink sales up 4.7% and 1.4% respectively
• Retained Estate operating profit of £285m up 14% with margin up 1.9% points to 17.0%
• Like-for-like sales in the Retained Estate up 3.7% in first 8 weeks of new financial year
• Like-for-like food sales in the Retained Estate up 6.9% in first 8 weeks
