Sector: Travel & Leisure

A bit of froth has returned to the depressed pub sector of late, following strong results from ‘pubcos’ Mitchells & Butlers (MAB) and Greene King (GNK).

Although MAB is still having problems with its major shareholders – heavyweight investor Joe Lewis in particular, whose boardroom representative has been axed after acting in a way that could ‘potentially undermine’ the board – recent results outstripped City expectations.

On sales up 2.6 per cent to £1.96 billion in the year to September, the owner of the All Bar One, O’Neill’s and other bar chains produced a £134 million profit before tax, 24 per cent down year-on-year, though 8 per cent ahead of consensus forecasts.

While MAB has withdrawn from the dividend list, FTSE 250 peer GNK held dividends at 5.9p per share at the interim stage. Half-year results to October were more in line with analysts’ figures, showing 2.8 per cent growth in pre-tax profits to £62.4 million, on sales up 4.3 per cent to £464.5 million. The Suffolk-based brewer, which cut debt levels by £211.5 million to £1.35 billion, also flagged up strong trading across its businesses since the period end, with like-for-like beer sales outperforming the market despite slowing.

Over at MAB, where net debts were down £135 million to £2.3 billion, CEO Adam Fowle was in high spirits, pointing out that like-for-like sales were 3.2 per cent ahead in the new financial year as a result of ‘a recent small upturn in consumer confidence’.

However, he cautioned that the external outlook for the second half is uncertain and was already thinking of the next government Budget: ‘The outlook for disposable income and consumer confidence could be dampened if VAT and other taxes were to rise.’