Mitchells & Butlers to exit wet-led pubs

It could be open season on many of Mitchells & Butlers' (M&B) wet-led pub businesses after the managed operator announced plans to focus its energy and resources on food-led retail brands such as Toby Carvery and Harvester.

M&B said it envisaged a "rapid" exit from running drinks-led pubs following a 55-day strategic review - the third in as many years - led by chairman John Lovering and which outlines a focus on six food-led retail brands.

A spokesman said M&B was not planning to sell off chains such as Nicolson's, All Bar One or O'Neill's, but the group would be open to realistic offers.

The group had already signalled it wanted to sell 300 of its 450-odd unbranded sites - a move which could net it up to £500m - as it homes in on core food-led businesses.

Its focus on food-led sites will heighten interest in its branded wet-offerings, and although M&B has said it doesn't wish to sell Nicolson's, rival operators will be taken a renewed look at such operations.

As well as upping its food-led pub business Lovering said key areas to address in the coming months were: improving returns on capital investment; boosting operating ratios, especially net operating margins; splitting out the measurement and reporting of the property and operating performance within the business, and addressing the pension funding and reducing net debt to around five times EBITDA.

The move to food-led offers was "fully endorsed. The strategy of reducing our exposure to drinks-led pubs has been sound but we believe that it could be progressed faster subject to increasing shareholder value", he added.

Lovering said M&B would open more mid-market food-led brands, aiming to open sites in retail parks and shopping centres "with good parking". The number of Harvester, Toby Carvery and Sizzling Pub Co outlets could more than double in number, to 400, 300 and 400 sites respectively, with significant increases in the number of Crown Carveries, Premium Country Dining and Vintage Inns venues.

M&B should get away from what he called "estate optimisation" and towards "brand optimisation", suggesting there were some retail brands that were too small and needed to be sold, although no mention was made of which outlets might be up for grabs.

Lovering also hinted at what many in the industry have seen as a flaw in M&B's strategy, namely over-spending on its pubs.

"We have been spending about £50,000 per pub, per year, to stay in business and sustain our competitive position. We will find ways to better engineer our spend through more back of house standardisation and less focus on the best, rather than the necessary, where it does not reduce consumer value," he said.

Lovering, appointed chairman after a bitter battle between the previous M&B board and activist shareholders earlier this year, also aimed a subtle swipe at high executive remuneration packages, noting that another key plank of M&B's strategy going forward was to "move the basis of pay and culture towards one which encourages greater growth in shareholder value".

"The senior management compensation schemes have been such that pension entitlements have been more significant than the rewards available from creating shareholder value," he added.

Commenting on the strategy review Lovering welcomed what he called the "cohesion and effectiveness of the new board which has quickly concluded on a highly attractive growth plan for the business".

"We are already implementing the plans with targets being cascaded through the business. I am very encouraged by the enthusiasm and commitment of the management and staff and believe that we have all the right ingredients for success."