Alistair Darby, chief executive at Mitchells & Butlers (M&B) said the economic recovery will be patchy and that he expects highs and lows in trading going forward.
He also said that the group was making tweaks to its Harvester sites located on leisure parks and that the impact of the slowdown was felt across the whole of the country and all of its brands.
The company plans to open 30 pubs in 2014 and a further 50 in 2015.
Speaking after the group’s interim results yesterday, Darby said that the 1% decline in like for-like sale the company had reported in the nine weeks to 21 September was linked to a sharp slowdown in the final three weeks of the period as “consumers were rebuilding finances after summer spending”.
He said: “There is quite a marked spectrum of performance across the country by region. But we’ve seen the slowdown across the country: the impact of the slowdown has been widespread both in terms of georgraphy and across all our brands.”
However, he said that the group were not about to increase its promotional activity to chase increases in like-for-like sales.
Darby said that “lead indicators” such as lower staff turnover and a “four or five point” improvement in Net Promoter Scores across the business would feed through to improved like-for-likes of 1.5 to 2% in the medium term.
He also said that the group was still learning lessons about the performanve of its Harvester brand on leisure parks.
He said: “The vast majority of the sites opened were good ones but we weren’t as operationally geared to open as successfully as we would have liked.”
Darby said the company is now made “appropriate tweaks” to Harvester in these locations “that will make a difference to sales”
Analsyt reaction
Douglas Jack at Numis said: “Full year LFL sales rose 0.4%, behind our previous 1.0% assumption. However, this is fully offset by EBIT margins rising in H2 vs our previous flat assumption. As a result, we are holding our forecasts, which anticipate a step up in expansion and a resumption of dividends in 2014E. Despite under-performing its peers operationally, M&B should still have generated c.9% earnings growth in 2013E, largely through cutting net debt and interest costs.
“We are holding our 2013E and 2014E forecasts, which are both in line with consensus. For 2014E, we assume just 0.5% LFL sales and 25bps margin decline. Given the company’s discount rating and self-help plans, we would accumulate the shares. We believe most of the upside should occur over the medium-term, subject to LFL sales recovering and the £0.6bn pension deficit falling.”
Simon French at Panmure Gordon said: “M&B has announced another disappointing trading update reporting a fall of 1% in LFL sales for the last nine weeks compared to our forecast of a 2.3% rise. Food like-for-like sales declined 0.1% and drink sales declined 2.0%. Although the group was lapping a tough comparative of +3%, we think this performance is significantly behind the performance of sector peers. The stock trades on a CY 2014E adjusted EV/EBITDAR of 8.0x and offers no yield although we anticipate this will be reinstated next year. We reiterate our Sell recommendation and 310p Target Price.”
