Simon French at Panmure Gordon looks ahead to the full-year results for Mitchells & Butlers (M&B) next Tuesday (26 November) and says he expects “few surprises”.
French, of Panmure Gordon, reiterated his Sell recommendation and 310p Target Price.
He said: “We expect few surprises in the numbers following the pre-close update with consensus expectations of £181m PBT and no dividend. We anticipate an update on the triennial pension deficit valuation and consequent impact on shareholders’ claims on cash flow.
“We expect current trading to be resilient with c1% like-for-like sales growth but we still believe consensus forecasts for FY 2014E are too high. M&B is potentially a compelling turnaround story but until earnings downgrades cease and there are genuine signs of an improvement in operating performance we think the shares warrant a discount to the peer group. We therefore reiterate our Sell recommendation and 310p Target Price.”
Regarding the group’s performance to date, French said: “M&B announced another disappointing trading update reporting -1.0% like-for-like sales growth for the last nine weeks compared to our forecast of +2.3%.
“Food like-for-like sales declined -0.1% and drink sales declined -2%. Although the group faced a tough comparative of +3%, we think this performance was significantly behind the performance of sector peers. 51-week like-for-like sales increased 0.4%, slightly behind our forecast of 1.0%, whilst total sales growth increased 2.1% (note FY 2012A was a 53-week year). The group commented that margins remained ahead of last year during H2 (H1: +40bps).”
