The glass was half-full for pubs group Mitchells & Butlers PLC (LON:MAB) in the third quarter of its financial year.
Trading since the half-year point was passed has been strong, with like-for-like (LFL) year-on-year sales growth of 2.6% over the 10 weeks to 22 July.
Year-to-date, sales were 3.1% higher than in 2016, while LFL sales were up 2.0%, with food sales up 1.4% and drink sales 2.7% higher.
READ: Mitchells & Butlers shares fall as first half profits drop on rising inflation
Pensions deal agreed
The company also had good news on the pension front – at least in terms of removing some uncertainty.
M&B has now reached agreement on the 2016 triennial pensions valuation with the scheme trustees. The agreed deficit of £451mln as at 31 March 2016 (2013: £572mln) will be funded by an unchanged level of cash contributions of £46mln a year (adjusted for inflation) to 2023.
In 2024 an additional payment of £13mln will be made into escrow, should such further funding be required at that time.
"Sales performance since the half year has been encouraging, with strengthening like-for-likes helped by the sunny weather and continued outperformance to the market,” said M&B’s chief executive, Phil Urban.
“The cost headwinds we face remain challenging; however, we are working hard to mitigate these where we can and we are confident that continued focus on the three strategic priority areas we have identified will help us to deliver a performance for the full year in line with the board's expectations and will generate long term sustainable shareholder value," he added.
Liberum Capital Markets described it as a “solid trading update” but it remains concerned that the company will have to spend heavily on sprucing up the estate to maintain sales growth, and it might not have the spare cash to do so.
The broker Shore opted for “robust” in its description of the update, as it acknowledged it was a challenging period for food-led outlets, which form the bulk of M&B’s estate.
In an echo of Liberum’s concerns, it said: “Overall, a very encouraging statement with further comfort around numbers; however, we remain to be convinced that the capex-aided sales improvement will lead to improved cash flow.”
Shore rates the shares a ‘hold’.
Mark Brumby of Langton Capital said “working harder and longer for less money seems to be the order of the day - at least in the short term”.
“Nonetheless, the group comments that its LfL momentum is gathering pace but, mindful that JDW [JD Wetherspoon] recently said that it might need 3% to 4% LfL growth in order to stand still in terms of profits, there may yet be some way to go.
“Evidence of a turn in the company’s fortunes may be emerging but the markets are tough and getting tougher and the competition is not standing still,” Brumby believes.