Mitchells & Butlers sees profits fall following end of lower hospitality VAT rate
Harvester and Nicholson’s pub owner Mitchells & Butlers sees profits fall as costs rise and the reduced VAT rate for the hospitality sector expires
- Mitchells & Butlers said interim pre-tax profit fell by £17m to £40m
- Profits were under pressure from staff salaries and higher food and energy costs
- Absence of pandemic restrictions increased company revenue by 11%
Mitchells & Butlers has reported weaker half-year earnings due to additional inflationary pressures and the end of a temporary lower VAT rate on hospitality businesses.
The hospitality group, which owns All Bar One and Nicholson’s pubs, along with restaurants Harvester and Toby Carvery, said pre-tax profits fell by £17m to £40m in the 28 weeks to April 8, despite a healthy period of consumer spending.
Revenues were under pressure from higher staff salaries and the war in Ukraine, which drove up food and energy bills significantly, as well as the lack of financial support from the government.
Drink to that: Mitchells & Butlers, owner of Nicholson’s and Toby Carvery, said pre-tax profit fell by £17m to £40m for the 28 weeks to April 8
During the same period last year, the Birmingham-based company received a £43 million increase in a 5 per cent VAT rate on sales of food and non-alcoholic drinks, on top of business rate exemptions and subsidies from local authorities.
But trade was affected as the government encouraged the British to work from home to stop the spread of the Omicron variety, including during the usually busy Christmas period.
The absence of such Covid-related restrictions in the most recent first half saw an uptick in commuters and foreign tourists, particularly in the company’s booze-led pubs in central London.
Sales growth was held back by successive strikes by workers from ASLEF and the Rail, Maritime and Transport Union, which led to the massive cancellation of train services.
But sales rose 11 per cent to £1.3 billion, while like-for-like sales grew 8.5 per cent, even in a tougher consumer environment.
M&B chief executive Phil Urban said: “The business environment for the hospitality industry remains challenging with inflationary costs weighing on both industry margins and the disposable income of our guests.”
But the group noted that cost headwinds are showing signs of abating, with energy prices falling back from their highs and “early signs” that food price increases are starting to slow.
For the current fiscal year, it now forecasts inflation to be at the lower end of the previously estimated range of 10 to 12 percent.
Trade also continued to grow strongly, with like-for-like sales rising 8.9 percent over the past six weeks, helped by a strong Easter weekend.
Mitchells & Butlers Stocks were 3.75 percent higher at 202.4 p on Wednesday morning and are up 49 percent over the past six months.
Victoria Scholar, head of investment at Interactive Investor, said: “After the stock came under pressure from the mini-budget chaos between April 2021 and October 2022, the stock bounced back from its lows.
“As the headwinds from the pandemic era shift to the rearview mirror and hopes grow that inflation will ease this year, Mitchells & Butlers is recovering.”