Pub groups see shares drop after tough first half
Mitchells & Butlers and Marston’s reveal a sales chill from the extreme weather and pressure on profits.
Shares in Mitchells & Butlers and Marston’s have tumbled after the pub groups revealed the impact of a tough first half following the Beast from the East and woes from rising costs.
All Bar One owner Mitchells saw shares slump 7% as it revealed an 8% fall in half-year pre-tax profits to £69 million after soaring costs took their toll.
It said profit margins were knocked by higher staff costs from the national living wage together with rising business rates, energy tariffs and food and drink costs.
Increased competition has also led to discounting in the market, which put further pressure on margins, it added.
This came on top of the impact of the extreme weather in late February and beginning of March, which cost it around £12 million in lost sales.
Like-for-like sales rose by 1.6% in the 28 weeks to April 14, but would have been 2.5% higher with the impact of the snow disruption stripped out, according to Mitchells.
Two For One and Pitcher & Piano rival Marston’s likewise saw sales knocked by the cold snap, with its drive-to pubs suffering in particular as customers stayed at home.
Its so-called destination and premium pubs saw sales fall 1.8% as a result, although sales at its taverns rose 2.9%, leaving like-for-like sales flat across managed and franchised bars.
Shares in Marston’s fell 5% as it also swung into the red with interim pre-tax losses of £13.4 million against profits of £36.7 million a year earlier after booking writedowns.
On an underlying basis, pre-tax profits rose 8% to £36.3 million.
Listed pub group Greene King also saw shares come under pressure – down more than 1% – after the mixed results from its rivals.
Both Marston’s and Mitchells were more cheery about the outlook, although this failed to convince investors.
Marston’s said it expects to deliver growth in revenues and underlying profits over the full year, while Mitchells said sales had been strong since the half-year, leaving them up 1.4% on a like-for-like basis overall in the 32 weeks to May 12.
Mitchells said: “In this uncertain environment and in the face of unrelenting cost headwinds, our focus remains on delivering our strategy with the aim of returning the company to profitable growth.”
Chris Wickham, an analyst at Equity Development, said: “While both pub groups appear confident about the full-year outlook, it’s clearly still tough out there, so I wouldn’t be surprised to see more consolidation across the sector over the coming 12 months.”