- Mitchells & Butlers reveals operating profit fell by £26 million to £98 million
- The company faced an almost complete lack of government support related to Covid
- The company’s shares were one of the biggest decliners on the FTSE 250 index.
Tobi Karvy’s parent company saw profits fall by nearly a quarter last year due to significant inflationary pressures.
Mitchell & Butler’s operating profit fell by £26 million to £98 million in the 53 weeks ending in September, as higher energy and food costs and a decline in property portfolio valuations hit its bottom line.
This was further affected by the almost complete absence of pandemic-related government support, such as business rates relief and reduced VAT for the hospitality sector, which totaled £53 million last year.
Profit problems: Toby Carvery owner Mitchells & Butlers revealed annual operating profit has fallen from £26 million to £98 million.
As a result, Mitchells & Butlers shares fell 7.1 per cent to 225.2p by Thursday afternoon, making them one of the biggest fallers on the FTSE 250 index.
However, the Birmingham-based business said cost barriers are easing and now expect turnover to total £65 million this financial year, even with the upcoming rise in the National Living Wage.
Phil Urban, chief executive of M&B, said: ‘While we remain mindful of UK consumer pressures, the strength of our sales growth coupled with the low cost environment gives us confidence for the coming financial year.’
The company’s like-for-like sales rose 7.2 percent from October, a record outperformance of the broader market, following a 9.1 percent rise in the past 12 months.
M&B’s total revenue rose by almost £300 million last year to £2.5 billion, partly due to the easing of Covid-19 restrictions on hospitality venues.
Trading at its central London outlets benefited from an increase in the number of tourists and workers regularly visiting the office.
In the latter half of the period, comparable turnover increased by 9.7 per cent despite a cooler and wetter summer than average.
Yet the company, which also runs the All Bar One and Harvester chains, did not declare a dividend, and its net debt remains as high as £1.1bn.
Darren Nathan, head of equity research at Hargreaves Lansdown, warned: ‘With a debt pile of more than £1 billion, it is no surprise that the purse strings have not been loosened to allow dividends.
‘With continued uncertainty for the immediate outlook, it makes sense to prioritize investment in the business and leave some room for promotional activity.’
M&B’s results come a week after it announced a number of new measures in the Autumn Statement aimed at helping Britain’s struggling hospitality industry.
Chancellor Jeremy Hunt froze alcohol duty and the small business multiplier and extended 75 per cent business rates relief for hospitality firms until 2025.