Mitchells & Butlers, the country's biggest managed pub operator, set its face firmly in the direction of getting its like-for-likes back on track this morning in its first financial statement since becoming an independent company.
Announcing interim results for the 28 weeks to April 12, the company's chief executive, Tim Clarke, said the focus in the immediate future would be the development of the group through "organic endeavour", refinancing the business through securitisation and returning £400m to shareholders.
Work is ongoing to finalise the securitisation of M&B's UK pub and restaurants business, Clarke said, and more details should be available by the time of the next trading update in September, with completion in the autumn. The company aimed to raise sufficient proceeds from the securitisation to return to shareholders at least £400m.
In an interview with Martin Information early this morning, Clarke said the company would continue to push forward through organic growth, driving volume with aggressive "value-for-money" price promotions right across its pub and restaurant estate.
Earlier Clarke appeared to rule out a bid for Scottish & Newcastle Retail, which has been put up for sale by its parent company, telling investors M&B would depart from its present growth strategy only if the alternative was compelling and could be delivered with certainty.
Speaking to Martin Information this morning Clarke forecast that promotions will mean prices to M&B consumers would be down 1% to 2% by the end of the year. "We are detecting much more consumer price sensitivity. We will be going for the volume premium rather than the price premium."
He said the decline in like-for-like sales in the estate had slowed and he company's aim was to stabilise that decline during the course of the year. Like for like sales in the 12 weeks to 12 April were down 3.7%, adjusted for Easter, and down 3.1% in the eight weeks to 10 May, against a decline of 4.5% in the eight weeks to the end of November.
The strongest performance is being generated by M&B's branded local pubs and pub restaurants, Clarke said, with the relative buoyancy of the economy in the Midlands and the North, which account for almost 60% of Mitchells & Butlers' business, reinforcing those trends. There have been "modest" signs of recovery in central London after the end of the Iraq war. However, in the High Street, while downward pricing pressures had stabilised recently, the impact of overcapacity remained "significant".
Responding to the fact that JD Wetherspoon was still seeing positive like-for-likes, Clarke said: "There's a reason for that. Their margins are 10%, ours are 18%".
The new M&B promotion package would embrace both food and drink offerings, such as the reintroduction of Early Bird offers at Harvester. Clarke said the company was sensitive to the issues of cut-price drinks and M&B's reductions would not be on the scale of some of its High Street rivals.
The longer term aim was to better exploit the scale of the business, particularly in purchasing. "Scale in marketing and purchasing can help us drive considerable organic growth," Clarke said. The market would see the emergence of "some real powerhouse" managed house operators.
Clarke said it was the success of brands and trading formats, such as Ember Inns and its metro locals in London, that is driving business at M&B. "Many are on the face of it remain unbranded, still the Red Lion or Dog & Duck, but carry a badge of endorsement. Nonetheless there is an awful lot of science behind them," he said.
For the future, there would not be a raft of new concepts, he said. "The vast majority of what we do is evolution of existing offers," Clarke said. "We are currently working on the segmentation of Vintage Inns."
M&B planned 135 pub and restaurant conversions to brands and badges this year and still had a reservoir of 350 existing sites for development over the next two to three years.
Turnover for the period was up 0.9% to £793m, and net operating cash flow rose £80m to £152m, but operating profit was down 6.2% to £137m after higher depreciation costs. Drink sales were down 1.0% but food sales showed growth of 2.7%. Uninvested like for like sales in the 32 weeks to 10 May (which includes Easter in both years) were down 3.7%.
In the Pubs and Bars division, sales rose 0.2% to £466m, though uninvested like for like sales were down 4.3%. Operating profit fell 9.9% to £91m because of the effects of regulation, High Street competition and weak London trading. In the Restaurant division total turnover grew by 0.6% to £323m but uninvested like for like sales adjusted for Easter fell by 2.8%, with London again weak. Operating profit was flat at £45m, largely because of the timing of Easter.
Announcing interim results for the 28 weeks to April 12, the company's chief executive, Tim Clarke, said the focus in the immediate future would be the development of the group through "organic endeavour", refinancing the business through securitisation and returning £400m to shareholders.
Work is ongoing to finalise the securitisation of M&B's UK pub and restaurants business, Clarke said, and more details should be available by the time of the next trading update in September, with completion in the autumn. The company aimed to raise sufficient proceeds from the securitisation to return to shareholders at least £400m.
In an interview with Martin Information early this morning, Clarke said the company would continue to push forward through organic growth, driving volume with aggressive "value-for-money" price promotions right across its pub and restaurant estate.
Earlier Clarke appeared to rule out a bid for Scottish & Newcastle Retail, which has been put up for sale by its parent company, telling investors M&B would depart from its present growth strategy only if the alternative was compelling and could be delivered with certainty.
Speaking to Martin Information this morning Clarke forecast that promotions will mean prices to M&B consumers would be down 1% to 2% by the end of the year. "We are detecting much more consumer price sensitivity. We will be going for the volume premium rather than the price premium."
He said the decline in like-for-like sales in the estate had slowed and he company's aim was to stabilise that decline during the course of the year. Like for like sales in the 12 weeks to 12 April were down 3.7%, adjusted for Easter, and down 3.1% in the eight weeks to 10 May, against a decline of 4.5% in the eight weeks to the end of November.
The strongest performance is being generated by M&B's branded local pubs and pub restaurants, Clarke said, with the relative buoyancy of the economy in the Midlands and the North, which account for almost 60% of Mitchells & Butlers' business, reinforcing those trends. There have been "modest" signs of recovery in central London after the end of the Iraq war. However, in the High Street, while downward pricing pressures had stabilised recently, the impact of overcapacity remained "significant".
Responding to the fact that JD Wetherspoon was still seeing positive like-for-likes, Clarke said: "There's a reason for that. Their margins are 10%, ours are 18%".
The new M&B promotion package would embrace both food and drink offerings, such as the reintroduction of Early Bird offers at Harvester. Clarke said the company was sensitive to the issues of cut-price drinks and M&B's reductions would not be on the scale of some of its High Street rivals.
The longer term aim was to better exploit the scale of the business, particularly in purchasing. "Scale in marketing and purchasing can help us drive considerable organic growth," Clarke said. The market would see the emergence of "some real powerhouse" managed house operators.
Clarke said it was the success of brands and trading formats, such as Ember Inns and its metro locals in London, that is driving business at M&B. "Many are on the face of it remain unbranded, still the Red Lion or Dog & Duck, but carry a badge of endorsement. Nonetheless there is an awful lot of science behind them," he said.
For the future, there would not be a raft of new concepts, he said. "The vast majority of what we do is evolution of existing offers," Clarke said. "We are currently working on the segmentation of Vintage Inns."
M&B planned 135 pub and restaurant conversions to brands and badges this year and still had a reservoir of 350 existing sites for development over the next two to three years.
Turnover for the period was up 0.9% to £793m, and net operating cash flow rose £80m to £152m, but operating profit was down 6.2% to £137m after higher depreciation costs. Drink sales were down 1.0% but food sales showed growth of 2.7%. Uninvested like for like sales in the 32 weeks to 10 May (which includes Easter in both years) were down 3.7%.
In the Pubs and Bars division, sales rose 0.2% to £466m, though uninvested like for like sales were down 4.3%. Operating profit fell 9.9% to £91m because of the effects of regulation, High Street competition and weak London trading. In the Restaurant division total turnover grew by 0.6% to £323m but uninvested like for like sales adjusted for Easter fell by 2.8%, with London again weak. Operating profit was flat at £45m, largely because of the timing of Easter.
