UPDATE: Mitchells & Butlers Robust But Uncertain On Outlook

22nd Jul 2010 07:36

(adds detail) By Michael Carolan and Kaveri Niththyananthan Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. pub group Mitchells & Butlers PLC (MAB.LN) said Wednesday its financial position is robust but there continues to be uncertainty around discretionary expenditure in the U.K. The company said that effective marketing helped increase sales and profitability this year and formed a "strong platform for future growth." The operator of 2,000 pubs said like-for-like sales from pubs open at least a year grew 1.6% in the 42 weeks to July 17, while total sales rose 2.1% after experiencing a 3.9% boost in food sales. However this marks a slowdown from the first 33 weeks of the year, when like-for-like sales were 1.8% higher, as the World Cup in particular had a negative impact on food sales this month and reduced overall comparable sales by about 2%. The company said retail operating margin continued to improve and third quarter margins were slightly ahead of the same period last year, but gave no further details. Managed pub groups such as J.D. Wetherspoon PLC (JDW.LN) and Mitchells & Butlers have fared much better in the recession than tenanted companies such as Enterprise Inns PLC (ETI.LN) and Punch Taverns PLC (PUB.LN). Regional pub group Greene King PLC (GNK.LN) recently accelerated plans to expand its managed pub division at the expense of its tenanted division. M&B has been aiming to cut the amount it draws from debt to less than GBP300 million a year by the end of 2010 from GBP475 million in 2008, before reinstating its dividend. Drawings on its unsecured medium-term facility currently stand at GBP219 million, excluding GBP88 million of proceeds from the recent disposal of 52 hotels. New Chairman John Lovering unveiled his new strategy for the company in March. He plans to sell up to 15% of the group's estate as he accelerates M&B's move away from traditional drink-led pubs towards those offering a full food service, such as the Harvester and Toby Carvery chains. The company took the first major step in its new strategy last week, selling its 52 hotels for GBP91 million, with budget hotel operator Travelodge taking on the leases in a 25-year deal. M&B said it is making good progress towards the objectives set out in its strategic plan. The company's shares closed Wednesday at 303 pence, up almost 20% on a year ago, as the pub group continues to trade well despite the consumer downturn. Mitchells & Butlers' retail margin grew 1.6 percentage points in the first half to 15.2%. The company is aiming to add 2 to 3 percentage points to its operating margin over the next three years. -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected] (Kaveri Niththyananthan contributed to this story) (END) Dow Jones Newswires July 22, 2010 02:36 ET (06:36 GMT)