Mitchells & Butlers plc’s (LON:MAB) first half profits were dented by an increase in the minimum wage and a weaker post-Brexit pound, sending its share price spiralling lower.
Shares fell 5.33% 260.0p in afternoon trade as the pub and restaurant owner reported pre-tax profit in the 28 weeks ended 8 April of £75mln, down from £83mln the same period a year earlier.
A slump in the pound since the UK voted to leave the European Union last June has pushed up import costs for the company and prompted many consumers to reign in their spending. The introduction of the national living wage has also hiked wage inflation.
“As previously announced, margins have been adversely impacted by increased costs, most notably from wage inflation, property costs and exchange rate movements,” said chief executive Phil Urban.
The company, whose brands include All Bar One, Harvester and Toby Carvery, still improved its sales performance in the first half.
It reported a slight increase in revenue to £1.12bn from £1.09bn and like-for-like sales grew 1.6%, supported by six new site openings and the remodelling of 72 existing sites.
The group said the results were affected by Easter being placed in the second half. In the year-to-date, including Easter, like-for-like sales increased 1.9%.
Volumes of food and drink fell 4.8% and 1.8% respectively, offset by an increase on the average spend per item on food and drink, up 5.9% and 4.2% respectively.
Looking ahead, the company said it was continuing to focus on its three priority areas - building a more balanced business; instilling a more commercial culture; and driving an innovation agenda. Mitchells also warned that cost inflation continues to present a challenge for the group.
“Overall, we are pleased with the turnaround in our sales trajectory and relative performance against the market,” Urban said. “In a challenging cost and consumer environment we will continue to focus on our three priority areas."