News of forecast-beating profits for the last financial year sent shares in pub and restaurant operator Mitchells and Butlers soaring on Friday.
At 280p per share, the Mitchells and Butlers share price was last 9.4% higher in end-of-week trading.
The business – which operates the All Bar One, O’Neills and Ember Inns brands – said revenues rose to 3.9% in the 12 months to 27 September, to £2.7 billion.
On a like-for-like basis, turnover was up 4.3% over the period. This was roughly 3% ahead of the broader market.
Earnings per share increased 19%, to 29.7p
Strength In Depth
Mitchells said that it enjoyed “strong performances through the brand portfolio,” which pushed adjusted operating profit 5.8% higher from financial 2024 to £330 million.
The publican saw cost headwinds of £100 million, in line with guidance. This was due chiefly to “increased labour costs (including increased national insurance contributions which impacted the second half),” it said.
Despite this, Mitchells’ adjusted operating profit margin rose 20 basis points from year on year to 12%. This reflected progress under its Ignite cost efficiency programme and a hiking in food and drink prices.
Net debt dropped to £843 million as of September, down from £989 million the year before.
Capital expenditure increased by £27 million year on year, to £181 million, driven by site refurbishment measures.
Net asset values improved to 476p per share from 433p in financial 2024.
Confident Outlook
Celebrating what he described as “another year of strong performance,” chief executive Phil Urban said “like-for-like sales continued to outperform the market across all segments, reinforcing the strength of our strategy and market positioning.”
He added that “combined with disciplined operational execution, this delivered robust profit growth mitigating sector-wide cost headwinds.”
Looking ahead, Urban said that “[while] we anticipate increased cost pressures across the sector… we remain confident in our ability to manage these challenges through our established Ignite improvement programme and disciplined capital investment strategy.”
Mitchells said it anticipates cost headwinds of roughly £130 million in financial 2026, “driven by annualisation of labour cost increases, plus further increases in the statutory thresholds, and increased levels of food cost inflation.”
The company said it has made a “strong” start to the current fiscal year, with like-for-like sales up 3.8% in the first eight weeks.
This is up from 3.2% in the final quarter of last year.
Earnings Drop Expected
Analyst Adam Vettese of eToro said that Mitchells “has set the pace ahead of their busiest time of year with results, showing revenue up as well as profit numbers comfortably beating expectations.”
He added that the company remains “one of the sector’s better performers, with double-digit earnings growth forecast and a resilient business model, but investors should remain vigilant to macroeconomic risks and cost inflation in the coming year.”
City analysts expect Mitchells’ earnings per share (EPS) to dip 1% during financial 2026. An 8% recovery is predicted for the following year.
Ten brokers have ratings on the FTSE 250 stock. Seven view the business as a ‘strong buy’ or ‘buy.’ Three have slapped a ‘hold’ rating on Mitchells shares.
Based on current forecasts, the company trades on a forward price-to-earnings (P/E) ratio of 8.7 times.