Phil Urban will not mind if there are a few sore heads struggling to make sense of this column this morning. The Mitchells & Butlers chief executive has long hoped that this will prove a big weekend for his 1,640-odd pubs.
Sales for the hospitality industry typically lack a little fizz in the first few weeks of the year as many of us try to regain control of our finances — and our waistlines — after the ravages of Christmas.
“Normally at the end of January, there is a bit of a ‘Wahey, thank God we’re paid [moment], so we’re hoping for that again,” said Urban last week, noting that Friday was the day millions of Brits received their first pay cheque of the year.
The Birmingham-based group’s landlord-in-chief will also be cheered that time has now been called on the plan B restrictions brought in to combat the Omicron variant.
Mitchells & Butlers is particularly well-placed to benefit from the end of work-from-home guidance. About 82 per cent of the UK population live within five miles of one of its watering holes. All Bar One, that well- known purveyor of the post-work tipple, is one of its best-known chains.
However, the group has more than a dozen other brands, including Miller & Carter steakhouses, Browns restaurants and Irish bar chain O’Neill’s. Meanwhile, the 300-plus Harvester and Toby Carvery restaurants help widen the appeal of the 124-year-old company to those with tighter budgets.
A trading update last week indicated that sales were down by 1.5 per cent over the 15 weeks to January 8 this year. But dig into the numbers and they show that revenues were up 2.7 per cent in the eight weeks before the latest round of Covid restrictions.
Analysts at the investment bank Jefferies argue that the group should gain market share during the current re-opening due to its well-maintained estate.
The balance sheet is also healthy, with a cash balance of £235 million and undrawn credit of £150 million. We also like the management’s action to shore up the pension fund, and the fact the group owns 80 per cent of its freeholds.
Some investors may be more wary of getting involved in a company where a tight group of shareholders run the show. Tottenham Hotspur owner Joe Lewis and racing moguls John Magnier and JP McManus own 55 per cent of the shares.
And while rising national insurance, inflation and higher energy costs will squeeze consumer spending this year, an outpouring of abstinence looks unlikely.
A strong labour market should keep Mitchells and Butlers’ taps flowing nicely. Buy.
