Rising costs threatens profits growth at M&B

Mitchells & Butlers (M&B) today admitted it would have to improve sales growth in its pubs from current levels to avoid suffering a fall in profits next year.

The All Bar One and O’Neill’s operator, which has around 2,000 pubs, expects running costs to increase by more than £20m next year, driven by rises in beer duty, staff costs and utility bills.

As a result, the group will need to increase its same outlet like-for-like sales by 3% cent to achieve a similar level of operating profits next year

In the 51 weeks to September 20, same outlet like-for-like sales rose 0.9%. In the last nine weeks of that period the increase was 1.3%

In the last nine weeks, food sales were up 3.6% on a like-for-like basis , while drinks sales increased 0.3%, despite a 9% fall in on-trade beer sales.

M&B said it expects market conditions to remain challenging, amidst weakening consumer spending, and added that it will continue to focus on value-led offers in drink and food.

The company also revealed that it was still in talks with the tax authorities over a possible conversion to a tax efficient real estate investment trust.

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By Daniel Thomas

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