Mitchells & Butlers (M&B), the pub and restaurant operator, has this morning unveiled a 4% increase in like-for-like sales for the first 16 weeks of its financial year to 20 January 2007 compared to the same period last year.
The company said that like-for-like sales on an uninvested basis were ahead 2.4% on the previous year, while overall trading is in line with its expectations.
The group reported that its pubs in residential areas have continued to trade strongly, with like-for-like sales growth of 4.6% over the period.
It said that this performance reflects a slow build up to Christmas, a good festive fortnight and a relatively quiet start to the New Year in its pub restaurants.
M&B said that its local pubs, Sizzling Pub Co and Ember Inns, traded well with high food sales growth, while the 25% of its business, which is on the high street, achieved like-for-like sales growth of 2.7%, with its central London pubs performing particularly well.
The company said that its like-for-like food sales continued to grow strongly at 7.2% ahead of last year.
It also reported that its like-for-like drinks sales were up 2.9%, which the company said reflected significant market share gains in an on-trade market where beer volumes declined by 4.1% in the quarter to December 2006, due to the increasingly aggressive discounting of alcohol by supermarkets.
The group said that retail gross margin was maintained with average prices of food and drink 3% higher than last year, while the effective training and deployment of its retail staff has delivered further gains in productivity.
In Scotland, which represents 5% of the estate, like-for-like sales were 0.4% ahead for the 16 weeks, with food up 5% and drink sales down 2%. M&B said that cumulatively since the introduction of the smoking ban last March, like-for-like sales in Scotland are 1.3% ahead of last year.
Roger Carr, chairman of M&B, said: “We are continuing to build on our experience in Scotland in preparation for the ban in England and Wales later this year, developing the reputation of our pubs for serving good food at attractive prices to ensure we are well placed to attract new customers who do not currently use pubs to eat out. In this context, the strong food sales growth in the first 16 weeks of this year is very encouraging.”
Carr said the company was also making excellent progress in its conversion of the 239 pub-restaurants it acquired from Whitbread last year for £497m.
He said: “We currently have 56 pubs re-opened and operating under our brands and formats with sales uplifts in line with our expectations. We expect to have completed over half of the conversions by the time of our interim results in May. We are confident that we will continue building the average weekly sales of this estate to at least 30% above the level at which we acquired it.
“Before conversion, our focus is on maximising the short term profit
contribution from the pubs. We have removed unprofitable sales promotions which, combined with the greater number of pubs where closure has been notified in preparation for conversion, has had an inevitable impact on sales. As a result, in the first 16 weeks of this year, sales in the 160 pubs still trading pre conversion are running 8.3% below the comparable period last year (pre-acquisition).”
Carr said that actions, such as tightening of costs, were helping to mitigate the impact on profitability of the declining sales trend, and that overall, the acquisition is performing in line with the company’s expectations.
For the group as a whole, total retail sales were 12% ahead of last year.
The company reiterated that is was rigorously evaluating the risks and rewards of converting to a Real Estate Investment Trust (Reit) structure and said that it will report its findings from this evaluation process to shareholders by its interim results.
M&B said the review is focussed on whether it can unlock the tax advantages and any value uplift in the short term, whilst being sure that this would deliver sustainable value longer term.
Carr said: “Given the recent rise in interest rates, it is uncertain whether consumer demand will continue to grow at the current levels. Nevertheless, we are confident of our ability to make further market share gains through our focus on offering value and choice for customers, together with high levels of amenity and service.
“With further improvements in productivity and purchasing, as well
as the opportunity to generate significant sales and profit uplifts from the conversion of the ex-Whitbread sites, the board remains confident in the future growth prospects of the company.”
