ii view: a first-half loss for All Bar One owner Mitchells & Butlers

Shares of this bar and restaurant owner have more than halved in 2020. 

Half-year results to 11 April

• Revenue down 12% to £1.04 billion
• A loss of £121 million, down from a profit of £75 million
• Net debt of £2.2 billion
• No dividend payment
• Offering no financial estimates or guidance

Chief executive Phil Urban said:

"The business was performing very well before the enforced closure in response to Covid-19, building on the strengths of our estate of mainly freehold properties, our diversified and well-loved brands and our team's industry leading operational skills.  These assets, coupled with our early experience of re-opening in Germany, give us a clear plan for re-opening and ensure that we are well placed to continue to bring people and communities together and to keep Mitchells & Butlers at the forefront of the eating and drinking-out market ."

ii round-up:

Pub & restaurant group Mitchells & Butlers (LSE:MAB) has reported a first-half loss of £121 million, down from a profit of £75 million last year as closures under Covid-19 hit business hard. 

Sales fell by 12% as all of its 1,700-plus outlets closed from the 20 March, although are now due to begin reopening in England from the 4 July. 

Mitchells & Butlers’ shares rose by more than 2% in afternoon UK trading, having more than halved year-to-date. Shares of rival Marston’s are down by a similar amount, while Wetherspoons (LSE:JDW) shares have fallen by around a third in 2020.

Its Alex restaurants and bars in Germany re-opened from mid-May and have given it insight into the challenges and opportunities ahead. Sales have grown each week since re-opening. 

Mitchells, which owns brands such as All Bar One, Vintage Inns and Nicholson's, furloughed nearly all of its employees at the start of the pandemic. It donated 11.5 tonnes of food to vulnerable communities which would otherwise have gone to waste.

Basic pay for all employees including directors was reduced to between 60% and 80% of normal pay.

The FTSE 250 constituent came into the crisis not paying a dividend. Group net debt now totals £2.2 billion, including £543 million from new accounting lease changes. 

In June, it negotiated the provision of committed unsecured liquidity facilities totalling £250 million through to 31 December 2021 from its banks. Given adjusted banking terms, it agreed not to pay a dividend before the end of the financial year to September 2021. 

ii view:

Mitchells & Butlers operates just over 1,700 outlets in the UK and Germany. About 80% of the estate is freehold. Its restaurants and pub brands include Harvester, Toby Carvery, All Bar One, Miller & Carter, Premium Country Pubs, Sizzling Pubs, Stonehouse, Vintage Inns, Browns, Castle, Nicholson's, O'Neill's and Ember Inns. In addition, it operates Innkeeper's Collection hotels in the UK. 

For investors, the reopening of its outlets is clearly a favourable development. Positive first-quarter sales prior to the pandemic, plus experience gained in Germany of opening under Covid guidelines, are both favourable. But group net debt and no dividend payment until at least September 2021 counts against it. For now, and given the degree of uncertainty in the outlook, waiting for further evidence of group recovery looks to be most sensible. 

Positives: 

• Before Covid first quarter like-for-like sales up 2.6%
• New financing arrangements agreed

Negatives:

• Net debt of £2.2 billion
• No dividend payment

The average rating of stock market analysts:

Buy