M&B reports H1 lfl sales up 8.5%: Mitchells & Butlers (M&B), the All Bar One, Toby Carvery and Harvester operator, has reported like-for-like sales growth of 8.5% for the 28 weeks ended 8 April 2023 versus HY 2022, built on volume growth in both food and drink. Like-for-like sales in the first half comprised an increase in like-for-like food sales of 5.8% and of like-for-like drink sales of 12.8%. It said that costs remain a challenge but that the medium-term cost outlook “is now improving”. For the six weeks since the period end, including the benefit of the Easter weekend in both years and all at full rates of VAT, the business delivered like-for-like sales growth of 8.9%. Total sales across the period were £1.282bn, which the company said reflected 10.6% growth on HY 2022, supported by increases in both volume and spend per head. Operating profit of £99m (HY 2022 £121m) was generated, with adjusted operating profit of £100m. Prior year figures include £53m of government support initiatives, including £43m benefit from the temporary reduction in the rate of VAT on food and non-alcoholic drink sales. On a statutory basis, pre-tax profit for the half year was £40m (HY 2022 £57m). The business said it made a strong start to the year with like-for-like sales growth of 6.5% over the first ten weeks, primarily driven by drink sales growth. It said that as expected, growth significantly increased in the final five weeks of the first quarter due principally to last year being impacted by the emergence of the omicron variant which resulted in a downturn in activity across much of the festive season. Like-for-like sales for the quarter were up 10.4% against FY 2022. M&B said: “Sales remained resilient through the second quarter with strong performances on key trading dates and from our drink-led, city centre pubs, especially in London, that are benefitting from a further return of office working and tourists visiting. Across the quarter, we recorded like-for-like sales growth of 6.4%, comprising drink sales growth of 9.9% and food sales growth of 5.2%. Against FY 2019, like-for-sales grew 9.7% over the first half, with growth driven by spend-per-head as volumes remain below pre-covid levels. Comparing our sales performance versus the wider market, we are currently outperforming the Coffer Peach tracker by between 2-3% on like-for-like sales each month.” The business said it has been encouraged by the strength of trading throughout the first half of the year with the return to office working continuing, city centres becoming stronger, tourist numbers recovering and guests across the country continuing to enjoy the hospitality sector. It said this has continued since the period end with trading over the past six weeks, including the benefit of the Easter weekend in both years and all at full rates of VAT, delivering like-for-like sales growth of 8.9%. The company said: “This gives us optimism for the future, although we continue to remain mindful of the cost-of-living challenge facing our guests. There are indications that cost inflation headwinds across the supply chain are starting to abate, although they continue to present a challenge in the near-term. Energy prices have fallen back materially from earlier market highs and early evidence suggests that cost increases in other areas, notably food, will soon start to slow. Our cost guidance for the current year remains in line with that previously announced as we anticipate an inflationary cost headwind across our circa £1.8bn cost base at the lower end of the 10-12% range before mitigation. We continue to work hard to mitigate as many of these pressures as we can through both driving sales growth and identifying and implementing cost efficiencies. This should allow margins to start to rebuild towards pre-covid levels.” Over the first half, M&B completed 90 investment projects comprising 81 remodels, three conversions and six acquisitions. It said it was continuing to see “strong performances from our investment projects”. Its conversion programme includes the trial of Browns in suburbia, stretching the brand beyond its usual high street location. The first trial site opened in August 2022 and the second opened in December 2022, with both sites “performing strongly”. Arrowsmiths, its new competitive socialising darts concept, is now established within two O’Neill’s sites, Solihull and Watford, and providing a “strong return from secondary space”. Phil Urban, chief executive of M&B, said: “We are pleased to report a strong first half performance delivering continued like-for-like sales growth and outperformance against the market. The trading environment for the hospitality sector remains challenging with inflationary costs putting pressure both on the industry’s margins and disposable income of our guests. However, we are encouraged by the resilience of trade to date, including the most recent six weeks at 8.9% like-for-like sales growth, and also by early signs of the medium-term cost outlook improving. We remain focused on our Ignite programme of initiatives and our successful capital investment programme, driving cost efficiencies and increased sales. Combined with our diverse portfolio of established brands, value proposition, enviable estate locations and talented people, we believe we are well positioned to continue to outperform the sector.”