Mitchells & Butlers has reported like-for-like sales (lfl) sales growth of 4.1% for the 28 weeks to 13 April 2019.

The operators said it had a strong first half, with market outperformance, and a return to profit growth. Total revenue stood at £1.18bn, while profit before tax increased by £6m, to £75m.

Adjusted operating profit increased by £10m to £151m, while efficiencies achieved in the period boosted its operating margin to 12.7% (H1 2018 12.5%).

Following the end of the financial period lfls continues to grow, by 3.8% in the 33 weeks to 18 May. The business put its sustained lfl growth largely down to the result of its continued focus on initiatives such as its Ignite 2 programme of work which it said had delivered improved trading performances across all of its brands.

An example of one of these initiatives is a focus on staff offering additional items to guests such as side dishes, desserts or an extra drink.

Phil Urban, chief executive, said: “This is a strong set of results, demonstrating that we continue to build momentum in the business, delivering sales growth, sustained market outperformance and a return to operating profit growth all while reducing leverage to below four times.

“This strong performance comes from the progress we continue to make in our three priority areas: building a more balanced business; instilling a more commercial culture; and driving an innovation agenda.”

During the period the business reduced its net debt from £1.72bn in H1 2018, to £1.63bn. It reduced capital expenditure during the period with two new site openings and 206 conversions and remodels, compared with 220 in the comparable period last year.

“Success in this highly competitive market is dependent on a continuous stream of improvements, and that is what we are delivering with many small advances at site level driving significant benefits in aggregate. We will maintain our focus on these initiatives which we believe are transforming the business,” added Urban.

The enhancement of the quality of its estate, through capital investment, has bolstered lfls, with trading performance improving following investment to upgrade amenity levels and to tailor the environment to appeal to the preferences of its guests in each of its brands.

However, M&B added that its underinvested estate of 1,350 sites, which have not received investment in the past year, have also performed well with lfl growth of 2.1% in the first half “demonstrating that capital investment is not the sole driver of improved trading performance”.

Ignite 2

Its strategic priority of ‘building a more balanced business’ has been focused on maximising value creation from its estate of c1,700 largely freehold sites, and on ensuring that each site has the optimal brand fit out and environment. While M&B has increased capital investment over the past three years it said that there was still significant value to be recognised, with more than 250 sites that had not been invested in for more than seven years.

Miller & Carter continues to perform very strongly, it said, with its first site opening in Germany in the second half of the financial year, building on the infrastructure of its Alex brand. “This is an opportunity to test the concept in a new market and, if successful, would provide a further pipeline of growth for the brand,” it said.

The operator has also been working to enhance the accommodation offer under its Innkeepers Lodge brand. By the end of FY2020 it will have refurbished all of its room stock, and will have rooms spanning the top end of the budget sector to premium boutique rooms attached to Premium Country Pubs and Miller & Carters.

When it comes to ‘instilling a more commercial culture’, M&B said it had become more sophisticated in its approach to pricing, enabling it to be more agile in positioning each site within the local market, and a more refined approach to the pricing of products within individual sites. “We know that consumers are willing to pay for quality and that different occasions command varying propensities to trade up a menu, therefore by providing a range of products and add-ons within one menu we can accommodate a variety of guest needs whilst also enabling the guests to flex their experience to suit the occasion,” it said.

While its innovation agenda is focused on enhancing its technological and digital capability, and developing new products and concepts. The business said it had made significant improvements to its communication with guests, including a more seamless booking process which has resulted in an increased conversion of website visits to bookings.

Delivery continues to be a growth area for the business, and M&B now has more than 170 sites live with Deliveroo and Just Eat. “We also have options for guests to pay via their mobile at all sites as well as our order at table facility which is being trialled in O’Neill’s. Our next focus is to create a data platform which will enable us to integrate quickly and smoothly with third party software, allowing us to be more nimble in our response to developments in the market place,” it said.