Mitchells & Butlers sales fattened by food volumes but margins undercooked

Pub group Mitchells & Butlers, operator of such chains as Harvester, All Bar One, Nicholson's and O'Neill's, served up stronger sales since its September year-end but at the expense of margins.

The UK's largest pub and restaurant operator delivered more than 200,000 meals on Christmas day and reported like-for-like (LFL) sales growth of 4.8% in the two weeks of Christmas and New Year.

Total sales in the first 17 weeks of its new financial year have increased by 9.1%, with LFL growth of 1.7%, which betters the 0.6% LFL growth last year but is weaker than the 2.0% seen in the same festive trading update a year ago.

LFL food growth of 2.8% in the period was the key growth driver, thanks to higher food volumes, though the FTSE 250 group explained that margins continue to be weaker than last year due to "a number of factors", including the integration of June's Orchid acquistion and a "careful approach" management has adopted to pricing what remains a demanding consumer environment.

"As we now move into the more difficult winter trading period we continue our focus on growing our business through increased volumes, upgrading infrastructure and further improving staff turnover and net promoter scores," said chief executive Alistair Darby.

"The Orchid integration plan is on track and we are encouraged by the early trading performance of the converted sites."

Mitchells has acquired 4 sites and converted 15 in the financial year to date, including the first six conversions of Orchid sites to its existing brands and formats.

The investment into a new electronic point-of-sale (EPOS) system is on track, with more than 1,400 pubs now using the system and the project due to complete this financial year.