Mitchells & Butlers (M&B) has reported a promising start to its new financial year, with like-for-like sales growth of 6.5% in the last ten weeks (9.2% growth against 2019).
The owner of the Toby Carvery, Harvester and All Bar One brands said operating (pre-tax) profit grew to £124 million in the 52 weeks ended Sept. 24.
The company said this equates to growth of 11.1%, excluding the VAT benefit in place last year. In the ten-week period since the end of its financial year on 24 September, it saw an increase in like-for-like food sales of 1.9% and like-for-like drink sales growth of 12.1%, with both in volume growth. Total sales in this period grew by 7.3%. For the 52 weeks to 24 September 2022, the business reported like-for-like sales of 1.1% against 2019, and said that excluding the impact of utilities, “profits broadly recovered to pre covid-19 levels” during the year
The like-for-like growth comprised an increase in like-for-like food sales of 5.2% and a decrease in like-for-like drink sales of 4.1%. It said sales growth in food was driven by premiumisation and other increases in spend per head, with the strongest performances in its premium, food-led brands. However, volumes for both food and drink were in double-digit decline against FY 2019.
The company said: “Total sales across the period were £2,208m reflecting a 1.3% decline on FY2019, driven mainly by temporary covid-related sales reductions and closures in the first part of the year plus site disposals since FY2019. Despite this, adjusted operating profit of £240m reflects a strong return to profitability. Excluding the circa £70m increase in utility costs, profits would have been close to pre covid-19 levels, despite the impact during the year of the Omicron variant and inflationary cost pressures.”
“Over the first half of the year, food sales continued to outperform drink, with food like-for-like sales growth of 6.9%, helped by the reduced rate of VAT. At this point, we started to observe an encouraging trend of recovery in city sites, as people began to return to offices and city centre destinations, albeit trading in some areas of London, such as The City, remained relatively subdued, particularly at the end of the week.”
For the current year, the business said it anticipates an inflationary cost headwind across its circa £1.8bn cost base in the region of 10-12% before mitigation. Inflationary cost headwinds against 2019 totalled circa £220m during 2022, over the three-year period, with energy cost increases contributing circa £70m, after consumption savings.
It said: “The Energy Price Guarantee from the government for businesses for six months from 1 October 2022 was welcome, but energy costs are still expected to increase this year and significant uncertainty remains over the second half. At the current time, we have bought forward 45% of this financial year’s anticipated energy requirement.” During the year, the company completed 170 investment projects including 160 remodels, six conversions, the acquisition of the freehold of three sites that were previously leasehold and opened one new Alex site in Germany. It said it is continuing to see strong performances from its investment projects. The conversion programme includes the trial of Browns in suburbia, stretching the brand beyond its usual high street location. The first trial site opened in August in Beaconsfield and is “performing well”, and a second has just opened in Ruislip.
Phil Urban, chief executive of Mitchells & Butlers, said:
“The trading environment remains highly challenging, with cost inflation continuing to put pressure on margins and we are ever mindful of the pressures that the UK consumer is facing.
“However, we are encouraged by the strength of sales growth at the end of last financial year, which has improved further into the early weeks of this year.”