Mitchells & Butlers plc (LON:MAB)’s first half revenue of £1.2bn reflects a 1.0% increase in like-for-like (LFL) sales compared to pre-pandemic levels. Sales benefited from the reduced rate of VAT on food and non-alcoholic drinks, which has now ended. An increase of 6.9% in LFL food sales was accompanied by a similar sized fall in drinks.
Underlying operating profit of £120 was up from a loss of £124m last year. Inflationary pressures from wages, food and energy continue to present a “major challenge” to the sector and are expected to impact margins in the short to medium term.
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The shares fell 1.0% following the announcement.
Mitchells & Butlers' Earnings
Matt Britzman, Equity Analyst at Hargreaves Lansdown
“First half results are very much a tale of two quarters, the year started with yet another setback for the pub sector with Omicron restrictions and fears keeping the pints from flowing. There’s at least some positive news coming over the second quarter with sales returning to growth territory, a trend that’s seen continuing over the last few weeks too despite VAT on food and non-alcoholic drinks returning to its 20% level.
The worrying signs are two-fold, volumes remain 10-15% down with sales being propped up by strong performance from food and customers opting for more premium offerings. With VAT levels back up and a cost-of-living crisis that we arguably haven’t seen the worst of yet, whether it’s sustainable for consumers to keep spending more on eating out remains to be seen. Then there’s the issue of 11.5% higher costs expected this year relative to 2019 levels, with no immediate end in sight the impact on margins is expected to extend into the medium term.”
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