M&B boss remains confident in strategy despite flat sales

Like-for-like sale in the 28 weeks to 12 April were up 1.1%, with food sales up 0.9% and drink sales up 1.3%. For the 42 weeks to 19 July, total like-for-like sales were up 0.7%, with food sales up 0.8% and drink sales up 0.6%.

Total sales growth in the third quarter was 3.8%, bringing growth in the first 42 weeks to 2.9%.

The company said that over the third quarter like-for-like food volumes continued to increase, although sales remained flat as it held prices and saw a decrease in food spend per head.

It said that this reflected a weak eating and drinking out market in the UK during May and June, exacerbated for restaurants by the impact of the football World Cup. In the last few weeks, the group said it had seen an improvement in demand, particularly for food, from these levels. Operating margins are slightly below last year.

The company acquired 173 outlets from the Orchid Group on 15 June 2014 and the results are included within total sales for the five weeks following this date.

Strategy​

It reiterated that the acquisition is in line with its strategy to focus on long-term growth in the eating-out market and provides significant opportunity for sales and margin growth through both the conversion of selected sites to M&B’s brands, and through cost synergies from the combination of support functions.

The company said that integration is progressing well and it remains confident that the acquisition will be immediately enhancing to adjusted earnings.

Since the date of the half year financial statements (12 April 2014), there have been two significant balance sheet movements, both of which the group has previously announced. Firstly, agreement was reached on the triennial valuation of the group pension schemes as at 31 March 2013, including a funding shortfall of £572m and a revised schedule of contributions. As a result net balance sheet pension liabilities under IAS 19 (revised) have increased by c£200m after tax.

Secondly, net debt at the end of the third quarter has increased following the all cash purchase of Orchid for £266m. The company said that the substantial majority of this consideration was funded using existing cash resources in addition to putting in place unsecured facilities totalling £150 million, provided by existing lenders. The new facilities have a maturity of three and a half years.

Orchid​

In addition to the Orchid deal, the group has opened 20 new sites and converted eight sites so far this financial year.

Alistair Darby, chief executive, said: “Despite the slowdown in the UK eating and drinking out market during May and June, we remain confident in our well established strategy.

"We have continued to achieve growth in food volumes, further improvements in staff turnover and strong Net Promoter Score – all key lead indicators of long term success.

“This is an exciting time for our business as we start the integration of the high quality Orchid estate, which we believe will accelerate our growth and create significant value over the long term. We remain focused on our strategic priorities and are well-placed for future success.”