M&B reports small rise in full-year sales

The group’s total revenues of £1.89bn were 2.2% higher than FY 2012, driven by food sales growth of 3.3%, with drink sales growth of 1.0%. It said that food sales now account for more than half of total sales, reflecting the business’s strategy to generate long term growth from this market.

Adjusted operating profit rose 5.1% to £312m, with adjusted earnings per share up 17.1% to 34.9p. Meanwhile, like-for-like sales in the first eight weeks of its current financial year grew 0.1%.

Food and drink​

Like-for-like sales growth of 0.4% included like-for-like food sales growth of 0.8% and a like-for-like drink sales decline of 0.2%. It said that like-for-like sales were driven by increases in price and spend, with volumes lower in both categories.

Food sales growth was weighted towards the first half of the year, with a number of the year’s key calendar events, on which trading continues to be strong, falling into the first half.

The second half of the year saw stronger drink sales growth, which the company said reflected the impact of good weather seen throughout the summer and fewer specific special occasions.

M&B said it grew operating margin by 0.5 percentage points to 16.5% and had made “good progress across all priority areas: people, practices, guests and profits”. Staff turnover was down four ppts and net promoter score was up four ppts.

Capex​

Total capital expenditure was £128m, comprising £88m (FY 2012: £83m) spent on “maintaining and enhancing the high level of amenity” in the group’s restaurants and pubs, £12m on infrastructure projects (FY 2012: £9m), and £28m on new site openings (FY 2012: £55m).

Infrastructure projects include a significant IT project led by Zonal which will see all restaurant and pub till systems upgraded and the introduction of kitchen management systems in its food led businesses by the spring of 2015. The project is now in full roll out across the estate at an expected cost of £33m, of which approximately two thirds will be capital.

There was a 17% EBITDA returns achieved on expansionary capex invested since FY 2011. The company said 16 new sites opened across the year in the “upmarket social, family and special market spaces”.

M&B’s property value grew by £31m as a result of its annual revaluation and impairment review. The company said it had a pipeline of new sites building for FY 2014 and beyond.

Transformation​

Alistair Darby, chief executive, said: “We have worked hard this year to deliver our transformation plan and position Mitchells & Butlers for future growth. We are proud that, through the measures we have taken, we have been able to grow sales and build our margins in a challenging and competitive consumer environment, leading to EPS growth of 17%.

“I am confident that our continued emphasis on developing our people, focusing on our brands and delivering great service for our guests will result in a better business and produce sustainable value for shareholders in the future.”

He added: "The transformation programme is designed to deliver the key building blocks of sustainable growth. Informed by guest insight, we will make further progress next year through investment into service, training and development, systems improvements and improved capital allocation. In particular, a variety of projects will start to benefit the business. In our Retail Support Centre, these include investment into new central systems in payroll and finance.

"In our restaurants and pubs, we are in the early stages of a project to replace our till, payment, table management and kitchen management systems. The new systems will enable the delivery of significantly improved guest service, measured both in quality and speed, and allow improvements in menus and promotional activity to manage our gross margins better.

Progress​

"The new systems are being rolled out at pace across the business, with 125 sites live at the year end and 320 sites by the end of November.

"We are cautious about the strength of the economic recovery over the next year and expect ongoing variation by geography and consumer group. Like‐for‐like sales were up 0.1% in the first 8 weeks of the new financial year. We are pleased with the progress we are making on our transformation programme and, as a result, we are well placed to deliver sustainable profit growth and shareholder value in the future."