Mitchells & Butlers profit drops amid cost headwinds, cancels dividend

Pub group Mitchells & Butlers reported a drop in full-year profit on Thursday as it highlighted inflationary cost headwinds and said it will not pay an interim dividend in the current financial year, although revenue rose.

In the 53 weeks to the end of September, pre-tax profit fell to £77m from £94m amid cost headwinds across the industry, which the company said have hit its margins. It said it continues to work hard to mitigate as much of these as possible through its focus on efficiency and profitable sales growth.

Total revenue rose to £2.18bn from £2.09bn the year before, while basic earnings per share fell to 15.1p from 21.6p.

Full-year like-for-like sales were up 1.8%, while sales in the last seven weeks were 2.3% higher.

The company announced an unchanged final dividend of 5p and said there would be no interim dividend in the current financial year pending assessment at year end of capital allocation and prospects.

Chief executive Phil Urban said: "This year, we have continued to make progress on our three priority areas: building a more balanced business; instilling a more commercial culture; and driving an innovation agenda.

"This has resulted in a period of strong operational achievement for Mitchells & Butlers with a sustained return to like-for-like sales growth driving market outperformance. We have also gained agreement with the pensions trustees on future pension contributions which gives clarity to shareholders and pensioners alike."

As well as cost headwinds facing the sector, Mitchells pointed to political uncertainty domestically and surrounding the impact of Brexit.

"There are three main areas on which Brexit may impact our business: changes in consumer confidence; changes in employment and immigration laws; and the impact on input costs. Without clarity on the terms of exit, the impact of the first two remains relatively unknown and we continue to closely follow developments in these areas. Input costs will continue to be impacted by changes in the value of sterling."

Canaccord Genuity said: "Mitchells & Butlers' decision to cut this year's interim dividend is a very cautious move designed to protect its balance sheet, and will likely overshadow otherwise respectable results and a decent start to the year."

CMC Markets analyst David Madden said: "The pulling of the interim dividend did the damage as it sends out a suspect message about their cash flow situation. The stock hit a four-month low today, and if the negative move continues it could fall to 220p."

At 1140 GMT, the shares were down 7.3% to 239.10p.