Mitchells & Butlers has this morning revealed a 1% increase in like-for-like sales for the year but said it would not be paying a dividend, as widely predicted, because it was focused on reducing levels of unsecured debt.
The country's largest managed pub and restaurant operator said it had achieved a 1.1% increase in underlying profit of £477m, up from last year's £472m, off the back of a 0.7% increase in sales to £1.9bn.
Its operating profit remained flat £343m and its profit before tax dropped from £207m to £179, prior to its year end 27 September.
Driving the performance was continued strong food growth, said M&B, with average sales per pub up by 7.2%.
In a statement the group said: “The board is focused on reducing the levels of unsecured medium term debt. It has therefore decided, despite a resilient trading performance and strong cash generation, not to propose a final dividend and will suspend dividend payments until drawing levels on its medium term facility are adequately below £300m.”
The company, led by Tim Clarke, said that the facility would fall to this level in December 2010, having fallen from the current level of £600m to £550m in December 2008 and then again to £400m in December 2009.
The group said that it expected to resume dividend payments “once a comfortable level of headroom had been reached.” It added drawings on the facility were £514m at the year end and have since fallen to £475m at today's date.
It said its net debt had been reduced by £175m to £2.7bn by the end of January 2008. But the company said it would only be spending £120m on capital expenditure, compared with last year's spend of £193m in a bid to reduce its debt levels further.
“The great majority of this spend, other than £18m for converting the recently acquired Whitbread sites, will be focused on maintaining the existing high standards of amenity within the estate,” added M&B.
It also described current trading as “resilient” and said that for the first eight weeks of the financial year up to 22 November that its LFLs were up by 1%.
“The business model and its performance are robust and delivering significant market share gains,” the group added.
“The company is focusing its substantial cash flow generation on reducing debt to an appropriate long term level and securing a resilient operating performance amidst challenging conditions.
“The suspension of dividend payments reflects proactive debt reduction in uncertain markets, not a change in the fundamental long term prospects of the business.”
