It also announced the acquisition of the 10-strong north-west and Midlands Italian small plates business Pesto Restaurants.
Mitchells & Butlers (M&B), which operates brands including All Bar One, Nicholson’s and Sizzling Pubs, said the highlights of its half-year (HY) results – for the 28 weeks ended 13 April 2024 – lfl sales growth of 7%, operating profit of £164m (up 64% from prior year), improved operating margin of 11.7% (HY 2023: 7.8%), strong period of cash generation with inflow of £137m before bond amortisation and full-year outturn expected to be at the top end of consensus with momentum into its 2025 financial year.
During the period, M&B recorded total revenue of £1.4bn (HY 2023: £1.28bn) and profit before tax of £108m (HY 2023: £40m).
M&B chief executive Phil Urban said: “Continued like-for-like sales outperformance against the market, coupled with easing inflationary costs and focus on efficiencies has resulted in very strong profit recovery for the period.
“We remain focused on our Ignite programme of initiatives and our successful capital investment programme, driving further cost efficiencies and increased sales.
Enviable estate
“We have confidence that continued focus on effective delivery of our strategic priorities will generate further value from our enviable estate portfolio and customer offers, enabling us to build further momentum throughout the year, with a strong foundation for long-term outperformance.”
On the acquisition of Pesto, founders Neil and Sara Gatt will continue to manage the business for an 18-month period to help M&B identify and convert sites to the Pesto brand.
The consideration for the business will be determined over two payments and is partly contingent on its future performance but will be no more than £15m.
Urban said: “I’m delighted to welcome the Pesto team to M&B. It’s a business with a distinctive USP that we’ve long admired and will help us to further diversify and premiumise our brand portfolio.”
Neil Gatt added: “After 18 years, Sara and I are delighted to see our business become part of the M&B portfolio of brands.
“For Pesto to fulfil its true potential as an innovative and unique brand, it was always necessary for us to team up with a partner that had a substantial property portfolio within which to grow the brand and there is no better partner than M&B to do that.”
Outperformed the sector
On its H1 results, M&B continued: “We entered the year having built up strong sales momentum, as we outperformed the sector, and with the expectation of margin enhancement as clear evidence emerged that cost inflation was abating.
“This progress has continued throughout the first half of the year. Sales growth has remained robust, now ahead of cost inflation, with every brand across the portfolio in lfl sales growth.
“Over the most recent four weeks, following Easter in both this year and last, lfl sales have grown by 5.3%.
“Cost headwinds are anticipated to total c£55m this financial year, slightly less than previously expected, with increases in labour costs due to the statutory national living wage rise mitigated by deflation in our energy costs and slowing food cost inflation. Coupled with a robust sales performance we believe this should allow us to continue to rebuild margins.
“We remain mindful of uncertainty and pressures on the consumer. However, as trading continues to be strong, we have confidence that the current year outturn will be at the top end of consensus expectations, with momentum for further progress going forward into FY 2025.”
