Wednesday 18 July 2018

Irish-backed UK pub chain in Brexit and cost warning

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John Mulligan

John Mulligan

Brexit and rising costs have created "unprecedented headwinds" for UK pub chain owner Mitchells & Butlers, in which Irish horseracing magnates JP McManus and John Magnier have a combined 23.1pc stake.

Shares in the FTSE-250 company slid as much as 10pc yesterday as it released full-year results that showed its pre-tax profits slumped 18pc to £77m (€86.5m).

Its shares were also hit after it said it's scrapping its next interim dividend "pending assessment at year end of capital allocation and prospects".

Chief executive Phil Urban warned that increased costs have impacted the business, whose pubs trade under names such as All-Bar-One and Harvester.

"Cost headwinds across the industry have adversely affected margins but we continue to work hard to mitigate as much of these as possible through our focus on efficiency and profitable sales growth," he said.

Rising costs are a theme across the UK pub sector, with increased wages, levies and other charges hitting operators.

Brexit-hit sterling has also elevated some input costs.

Mitchells & Butlers said there are three main areas on which Brexit might impact its business: weaker consumer confidence; changes in employment and immigration laws; and the impact on input costs.

UK pubs could be hit by tighter immigration laws that might be introduced once Brexit happens in 2019.

"Without clarity on the terms of exit, the impact of the first two remains relatively unknown and we continue to closely follow developments in these areas.

"Input costs will continue to be impacted by changes in the value of sterling," the group said.

It added: "While the fall in the value of the currency since the EU referendum has been profit dilutive we do have a strong track record of partially mitigating input costs inflation through procurement initiatives."

The pub group said it mitigated £26m (€29.2m) of input cost inflation by leveraging its scale through its central procurement processes.

Mitchells & Butlers operates a total of about 1,750 pubs in the UK.

Its revenue in the 12 months to the end of September rose 4.5pc to £2.18bn (€2.45m), and by 1.8pc on a like-for-like basis.

Irish Independent

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