Smoke ban 'set to slow sales growth', warns M&B

Mitchells & Butlers' (M&B) chief executive Tim Clarke says next year's smoking ban will slow overall sales growth at his 2,000-strong group.

Speaking as M&B unveiled a 10% rise in annual pre-tax profits, Clarke said: "We've been achieving sales growth of 4% to 5% over the past four to five years, but the ban is likely to mean that sales will be a bit slower next year. There'll be a one-up slip, as we lose the hard-core drinkers. But we'll pick up again after that."

About 400 M&B pubs do not have outside trading areas, though many have pavement space. Of the 500 M&B pubs located in town centres, only 25 have garden areas.

Clarke added: "Our experience with Scotland is that classic town pubs, even those with no outside trading space, have been amongst our best performers.

"They've seen a huge number of new customers, drawn in by good food at attractive prices."

Scotland, which represents 4% of the M&B estate, has seen an overall rise of 1.1% in like-for-like sales in the first seven weeks since the end of M&B's financial year on 30 September - with food sales ahead by 7% and drink sales down by 2%.

Said Clarke: "Sales growth has slowed as the autumn has drawn in and we continue to believe that a full winter's trading is required before taking a definitive view on the ban's effect."

M&B has already moved more than 200 of its pub restaurants to non-smoking, with less than 1% reduction of sales growth compared to those that still allow smoking - even though, as M&B points out, customers could have chosen to go to other pubs where smoking is still currently permitted.

Total sales for the year to September were up 5.5% on the previous year and pre-tax profits hit £208m.

EBITDA was up 6.7% to £430m. Same outlet like-for-likes were up 4.1% and average weekly sales per pub rose 6% to £17,500.

Net retail operating margin was 0.3% points ahead of last year, at 18%.

Unsurprisingly, the high street was M&B's toughest trading area, with uninvested units registering 1.8% growth.

Its circuit bars were 1% to 2% down, though in a sector down overall by 10% to 15%, M&B's lesser fall meant it increased its market share.

M&B's 25 central London pubs have performed very strongly, with Nicolsons "an absolute star" according to Clarke.

Overall, M&B's cask sales are about 14% of its total beer volumes. Pricing across the beer portfolio continues to be extremely keen, with M&B's standard lager now 18p cheaper than most of its managed competition and 35p cheaper than tenancies. Same outlet like-for-like drinks sales increased by 3.2% against a background of a declining beer market.

Food is increasingly the reason people visit M&B pubs, said Clarke - and now accounts for 35% of total sales. Average price of a main meal is £6.

"We sell our food more cheaply than our rivals can buy it," he said. Average spend is £15 per head.

Wine sales were also up - by 6% in a market up just 1%.