Mark Brumby, of Langton Capital, gives his view on Mitchells & Butlers’ full-year update:
- M&B is performing more strongly than may have been feared.
• That sounds a bit grudging, but it’s not meant to.
• M&B is a big ship and, if it has been guilty of pushing prices a little too aggressively (see also RTN), then this will not be changed around overnight.
• Margins, with the above in mind, will understandably be lower.
• However, the result is positive and should lift spirits both within and without the company. The group has outperformed the Coffer Peach Tracker by some margin for the first time is quite a while & that is no small feat.
• Regarding average performances for August, we would reiterate that, as the weather was good but the average pub/restaurant raised sales by only 0.6%, some operators must have performed very poorly if Shepherd Neame and now M&B come in above the average.
• M&B’s performance at its converted and invested units has been good,
• As regards its share price, we are now at a point where the group is trading at only around 7.4x current year earnings and it has a 2.8% (and hopefully growing) yield.
• One would hope that the management revolving door (and lack of clarity as to the longer term objectives of shareholders Joe Lewis and Elpida) can be put to one side for the moment – but we have arguably been here before.
• Nonetheless, M&B has an extremely attractive estate and, we would suggest, at less than £3 per share, the risks may be on the upside. The catalyst to unlock value may remain somewhat elusive but, as the group moves from planning to execution, we will be awaiting further news with interes
