Mitchells & Butlers — what lies ahead?

Mitchells & Butlers has sold 333 wet-led pubs. Morning Advertiser editor The PMA Team looks at what now lies ahead for the managed operator

Mitchells & Butlers chief executive Adam Fowle hosted a conference call for City analysts and investors last Friday — and was clearly delighted to have sold the company's entire wet-led high street segment in a single transaction.

"It's a single deal that has dealt with all the businesses we had in this space," said Fowle.

What has become clear is just how fast earnings at these 333 pubs have been eroding — they've seen a scary 25% drop over the past three years.

Fowle made it clear on Friday that he was fearful for their future prospects given the twin squeeze of "relentless alcohol duty rises" and the decline of late-night youth drinking.

The deal, concluded a couple of months sooner than many expected, completes M&B's mid-summer sale — the Hollywood Bowl chain, a group of Innkeeper's Lodge and 15 franchised pubs have also been sold.

M&B, which has been short of financial firepower in the wake of its equity-destroying hedge debacle, now has around £500m in the war-chest to pursue a plan to add 900 outlets to its six key food-led brands.

The company plans to convert around 160 of its existing sites to growth brands in the coming 18 months. But it's on the look-out for single site acquisitions, retail park opportunities, small packages of suitable pubs and larger deals.

The obvious opportunity for M&B is in persuading Punch Taverns to sell the sites it covets within its managed estate.

There are, in all likelihood, still 400 or so venues that would lend themselves to a conversion to a M&B brand — M&B has already proven that it can easily assimilate 250 pubs in a single go without suffering indigestion.

The arrival of Ian Dyson as the new chief executive at Punch next month, keen to review all aspects of the current strategy, means that the timing could be perfect for a M&B approach.

M&B has set itself a target of five years to add up to 900 new sites to its key brands — by generating £500m of cash so quickly it has given itself extra time to scour the market place for the right opportunities.

It's also stepped away from its previous aversion to leasehold property, which further increases the range of sites that could fill its property hopper.

"We've got full flexibility to examine all the opportunities out there," Fowle said last week.

There's no doubt though that finding 900 top-quality sites within five years remains a considerable challenge — it has, after all, taken JD Wetherspoon 30 years to find 800 sites of the right quality.