Mitchells & Butlers posts 26 per cent profits rise

High profile TV ad campaigns for a number of its pub brands have helped managed pub operator Mitchells & Butlers (M&B) post a 26 per cent rise in annual profits.

But despite what chief executive Adam Fowle described as a "very good set of results" the group disappointed the City by not reinstating its dividend payments to shareholders.

Analysts had mooted the possibility of a payout, but the group merely said it would monitor its operating cash levels and capital investment opportunities next year before making a decision on resuming dividends.

M&B shares were down nearly five per cent at 337p as the City digested the dividend news.

Reporting its results for the year to September 25, 2010, M&B said like-for-like food sales rose nearly five per cent and similar drink sales grew 1.4 per cent.

With around 1,900 pubs before the recent disposals, M&B's total turnover nearly reached £2bn, with operating profits up 7.3 per cent at £322m and pre-tax profits up 26.1 per cent to £169m.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 4.9 per cent, with earnings per share up 25.8 per cent at 29.7p. After an exceptional charge following an estate revaluation M&B posted a pre-tax loss of £127m.

Across what M&B called its 'retained estate' - taking into account recent disposals including the 333 mainly wet-led pubs to private equity vehicle TDR Capital - average food spend per head rose 2.3 per cent, partly due to more courses being sold and higher priced items being chosen by customers.

"These improvements have been underpinned by our national advertising campaigns for Harvester, Toby and Sizzling Pub Co., which have been successfully attracting new customers into our sites," the group said.

Total food sales rose 4.5 per cent, while total drinks sales dipped 0.7 per cent, fuelled, the company said, by disposals.

M&B said its net debt had fallen to £2.3bn, boosted by funds from disposals, while its pub estate has been revalued downwards by £235m. Its retained estate had decreased in value by four per cent, it added.

The group's trading momentum had been carried over into the first two months of the current financial year, the group noted, with like-for-like sales up 3.7 per cent, including a near seven per cent hike in food sales.

Fowle said: "Excellent progress has been made against our strategic goal to turn Mitchells & Butlers into a food-led business by concentrating our industry leading brands on the informal eating-out market.

"This strategy continues to prove effective with seven per cent like-for-like food sales growth in the first eight weeks driven by customers trading up the menu. The company now has a strong balance sheet which, coupled with our brands and resilient trading platform, underpins our confidence in the future."