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Mitchells slides as social distancing dents capacity and sales

Published: 09:01 24 Sep 2020 BST

Mitchells & Butlers - Mitchells slides as social distancing dents capacity and sales

Mitchells & Butlers PLC (LON:MAB) shares were on the slide on Thursday after the owner of Harvester and All Bar One said social distancing measures enforced as part of coronavirus quarantine measures had dented its capacity and affected its sales.

In a trading update for the 51 weeks to September 19, the FTSE 250 pub group reported that like-for-like (LFL) sales had fallen 3.1% over the period, while total sales in the year to date have fallen 35.4% due to the closure period during lockdown.

READ: Mitchells & Butlers pushed into losses by coronavirus property hit

Mitchell’s said that following the reopening of most of its estate on July 4, when most UK coronavirus restrictions were eased, it had continued to outperform the market partly due to the breadth of its estate and its regional exposure, however, the sharp sales decline had resulted from social distancing measures and consumer caution around visiting its pubs.

It added that the government’s ‘Eat Out to Help Out’ discounting scheme in August, as well as the temporary VAT reduction on certain products, had helped it return to LFL sales growth of 1.4% during the month, however, trading into September had settled below this level with LFL sales in the month down 6.4%.

Looking ahead, the company said it currently has cash balanced of around £100mln and unsecured lending facilities of £140mln, while it said a resumption of its paused investment programme will be considered through a continuous review of its performance and cash flow.

"After a difficult period of closure, we have been delighted to welcome back our guests with the vast majority of our sites open and trading again under [coronavirus]-secure procedures.  I am particularly impressed by the way in which our teams have made this possible by responding to the challenge of our new operating environment with energy and enthusiasm”, chief executive Phil Urban said in a statement.

While the CEO said the future was “challenging and uncertain”, particularly with new UK restrictions unveiled earlier this week, he added that the firm was “well placed to meet that challenge and to keep Mitchells & Butlers at the forefront of the eating and drinking-out market”.

In a note, analysts at Peel Hunt retained their ‘buy’ rating and 500p target price on the stock, saying that they expected trading to be profitable above a 40% decline in LFL sales due to the VAT reduction and other government support measures, adding that the publican was “likely to emerge relatively strongly” from the pandemic.

Investors seemed less convinced as the shares fell 3.7% to 131p in early deals.

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