Fall in property values added to Mitchells and Butlers £127m loss

A £304 MILLION sterling reduction in the value of its properties contributed to a £127 million loss at Mitchells and Butlers, the British pub chain part-owned by Irish businessmen John Magnier and JP McManus, in its last financial year.

Mitchells and Butlers said yesterday that pre-tax profits in its business grew 26 per cent in the 12 months to September 25th – its last full financial year – to £169 million sterling.

Sales rose by just over 1 per cent in the period to £1.98 billion from €1.96 billion. Operating profit grew 7 per cent to £322 million. Its finance costs came to £153 million.

Mr Magnier and Mr McManus own 17.6 per cent of the group through a vehicle called Elpida. The group’s biggest shareholder is the Joe Lewis-controlled Piedmont, which has a 23 per cent stake. Earlier this year, both shareholders supported a move to sack the group’s then chairman, John Laffin.

The group’s accounts show that write-offs last year came to £431 million. Of this, £304 million was attributable to a writedown in the value of the pubs and properties that the company owns around Britain. Those write-offs left it with a pre-tax loss of £127 million.

The group’s brands include All Bar One, Vintage Inns, Sizzling Pub Co and Toby Carvery. Mitchells and Butlers sold 333 pubs during the year for £363 million, as they were not central to its business.

The group raised £130 million net from disposals, and this, along with cash flows of more than £450 million, helped it to cut its net debt to £2.3 billion by the financial year’s end.

Earnings per share were up 26 per cent at 29.7p. Including the writedowns and other exceptionals, the company lost 20.6p per share during the financial year.

Mitchells and Butlers chairman John Lovering changed strategies during the year to concentrate on pubs that are more focused on food such as the Harverster and Toby Carvery chains. The businesses that it retained showed growth in sales of both food and drink.

Cashflow in its “retained estate” – that is the pubs it continues to operate – was £391 million while operating profits were £285 million.

Overall revenues were up 2.8 per cent. Food sales were up 4.7 per cent while drinks turnover rose 1.4 per cent. In the eight weeks to November 20th, the group’s sales were up 3.7 per cent.