All Bar One owner warns of hit from weak pound and rising wages as profits slump
The owner of All Bar One and Harvester has seen annual profits drop by a quarter and warned over a hit from the Brexit-hit pound and soaring wage costs.
Mitchells & Butlers, which also owns chains including Toby Carvery and O'Neill's, said profits tumbled to £94 million in the year to September 24 from £126 million the previous year despite a turnaround in trading in recent months.
But the group said the plunging pound would impact the £100 million of purchases it makes in foreign currencies each year, while the introduction of the national living wage has sent its employee costs surging.
Phil Urban, chief executive of Mitchells, cautioned over " external cost headwinds, notably from further wage inflation, the recent business rates review and exchange rate movements".
"We are working hard to mitigate these headwinds wherever possible, both through building on our sales momentum and active management of our cost base," he added.
Mitchells said like-for-like sales fell 0.8% over the year after a "challenging" first half.
It returned to sales growth in the final six months thanks to heatwaves in August and September and sales are up 0.5% in the first eight weeks of the new financial year in spite of a tough comparison from a year earlier when the Rugby World Cup boosted trading.
The group, which employs more than 43,000 staff, has previously warned over the costs of the new minimum wage.
But it said one helpful side-effect of the living wage, which was introduced in April, is the recent slowdown in openings of restaurants.
"Net restaurant openings are now broadly flat year-on-year, which gives us an opportunity to win back market share," said Mitchells.
It is overhauling its pub estate, targeting more upmarket brands.
The group has launched Sizzling Pizza & Carvery and Sizzling Pub & Grill in an attempt to fight back against new competition in the eating out sector.
It said it was "too early to predict" the impact of Brexit, but said it could affect the group by leading to "changes in consumer confidence and behaviour; changes to employment and immigration laws; and changes to input costs".
Mitchells serves around 140 million meals and 430 million drinks each year.
Its brands also include Miller & Carter, Premium Country Pubs, Crown Carveries, Vintage Inns, Browns, Castle, Nicholson's and Ember Inns, as well as Innkeeper's Lodge hotels in the UK and Alex restaurants and bars in Germany.