Mitchells & Butlers (M&B) will inevitably be touted as a potential target for M&A, but chief executive Phil Urban doesn’t see a takeover happening, he has told MCA.

“We have felt we have been undervalued for a number of years. The irony is it took the Greene King deal to get focus on the sector, but sure enough our share price has corrected itself,” he said.

While the significant M&A activity this summer has shone a spotlight on the sector, Urban said CK Asset Holding’s acqusition of Greene King, in particular, could in fact be viewed as “absolute vindication of why our investors invested in us in the first place”.

“We are almost the last man standing in the public arena, so inevitable we get looked at. We will just carry on running the business as we are and if that happened then we’ll cross that bridge – but I don’t think it will,” he added.

M&B reported a strong set of financial results yesterday for the full year to 28 September 2019 with total sales up by 3.9%, like-for-likes up 3.5%, and profit before tax up 36.2% to £177m.

Urban said it was hard to pinpoint particular brand’s contributions to the growth as like-for-like growth was seen across all of its brands – “for the first time in many years”, but he said Miller & Carter and Nicholson’s still “lead the way” in terms of performance.

Urban said the business believed there were still opportunities to grow the Miller & Carter estate, and that it was on the lookout for sites to acquire across the UK.

Ignite continues to burn bright

The pub, bar and restaurant operator has put much of its improved sales performance down to the impact of its Ignite programme, which is currently in the second phase, with the focus for Ignite Three to be developed during the coming year.

“There is no silver bullet for turning a business like M&B around – you have to work on numerous fronts. At any one time we will have around 45 workstreams underway,” he said.

He said one of the advantages for the business is that while it currently has some momentum and good results, if it looks at how it has landed some of its initiatives, they haven’t landed well everywhere. “We still have work to do to […] so there is more to come, and that’s before we top up with Ignite Three,” he explained.

Delivery and new concepts fall under one of its three priority areas, which is to ‘drive an innovation agenda’. Delivery is now available from 273 of its 1,748 sites, through Deliveroo and Just Eat, and is something that the business is keen to develop further, he said.

While the detail of Ignite Three is still be developed, Urban said it will feature two specific workstreams around delivery, which have kicked off early. The first will focus on improving the operation of delivery at the sites where it is already offered – “we have got a lot of work to really lift the bar and raise the standards in terms of delivering our own product through Deliveroo and Just Eat. Think there is quite a lot of upside for us in that area,” he said.

The second stream will assess delivery from an opportunity perspective; taking a look at the M&B estate, seeing where there are quiet periods of trade within the site, and where there is a demand for delivery and developing delivery-only brands that can operate from the spare capacity in those kitchens.

“We are at the starting blocks on that,” he said. M&B is currently trialling three virtual brands from one of its London pub’s kitchens – one of which is Chicken Society – a format it looked to develop in in bricks and mortar several years ago. “It is a great offer and had really strong customer appeal – so that is one of the brands that we are delivering through that pub,” he explained.

“One of the big standout successes is Toby Carvery, which when we started on delivery is not one that I had initially jumped to; it took me by surprise. But when you think about it it’s quite easy for us to service,” he added.

New concepts

Urban said its new premium all-day dining concept, launched at The George in Harpenden earlier this year, was performing well, and that he believed “Christmas would be the making of that site”.

He said in terms of innovation and new concept development, if it could land on the next Miller & Carter then fantastic, but it’s about testing ideas that it can then roll out to its other brands.

The concept at The George, which features an open kitchen, has been very much designed as an all-day proposition, as a way to differentiate it, and he said it may well be rolled out further if successful.

“We have a number of other sites which we could roll it out into, but we take the view that we are in a fortuitous position that if we find ourselves with a site where we know it hasn’t got the optimal brand we have two or three options to put into it, so we just need to make the call which one we go with,” he said.

However, he said that even if the offering at The George remained at that site only it would still have been a good exercise and some of the principles around fresh ingredients are being input back into some of its other premium country pubs.

On his future outlook, Urban said certainty was the most important thing that a new government could provide. He said was confident in what M&B was doing and the momentum it had, despite the tough trading environment.

“All we can do is keep pushing on the range of initiatives we have got and I think that’s where our confidence comes from,” he said. “We have been working on this for three years; we can see the green shoots that have come through our numbers and we have still got a lot to go at. Whatever comes our way in terms of the macro environment we have still got a lot of things we can do that helps our position.”