May 16, 2018 / 6:30 AM / 2 years ago

Mitchells & Butlers sees no immediate signs of cost pressures abating

(Reuters) - British pub operator Mitchells & Butlers Plc (MAB.L) warned of “unrelenting” cost pressures through the second half of the year and into the next, as it posted an 8 percent decline in first-half pretax profit due to a margin squeeze from higher costs.

Shares of the company, which operates more than 1,750 restaurants and pubs in the UK, were trading down more than 11 percent on Wednesday.

“Margins are being adversely impacted by increased costs, most notably from wage inflation, property costs, energy and food and drink costs,” Chief Executive Phil Urban said, adding that cost pressures were “not going away any time soon”.

Rising inflation and muted wage growth following Britain’s vote to leave the European Union have caused UK consumers to rein in spending.

The company, which operates brands such as Harvester, Toby Carvery and All Bar One, said like-for-like sales for the 28 weeks ended April 14 climbed 1.6 percent but were flat year on year. Adjusted for impact of frigid weather conditions, it rose 2.5 percent, the company said.

Revenue at Mitchell’s and Butler rose to 1.13 billion pounds from 1.12 billion pounds in the first half of the year, while pretax profit slipped to 69 million pounds from 75 million pounds.

Cold weather during the first half also dented sales as fewer people stepped out, the company said, estimating an impact of about 12 million pounds in lost sales.

Rival pub operator Marston’s Plc (MARS.L) on Wednesday also said it was impacted by adverse weather conditions but added that this was offset by strong trading in its brewing and taverns and leased pubs.

Marston’s said it expects revenue and profit growth this year and posted a 20 percent rise in underlying revenue and an 8 percent rise in pretax profit for the 26 weeks ended March 31.

Marston’s is not under the same pressure as M&B as it has “greater strategic latitude to react to external consumer environment,” Liberum analyst Anna Barnfather said in a note.

Marston’s shares were down over 3.5 percent.

Reporting by Sangameswaran S in Bengaluru, Editing by Gopakumar Warrier and Sunil Nair

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