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Investing.com -- Mitchells & Butlers ’ (LON:MAB) shares jumped more than 9% on Friday after the pub and restaurant operator reported full-year profits slightly ahead of market expectations and said trading remained resilient, while outlining cost headwinds of about £130 million for the current fiscal year.
The operator of Harvester, Toby Carvery, Miller & Carter and All Bar One, posted adjusted operating profit of £330 million for the 52 weeks ended Sept. 27, up 5.8% from £312 million a year earlier and roughly 1% above consensus. Adjusted profit before tax rose 17% to £246 million, about 4% ahead of expectations.
Revenue increased 4% year on year to £2.71 billion from £2.61 billion. Like-for-like sales advanced 4.3% for the year, outperforming the broader market tracked by the CGA Business Tracker by roughly 3 percentage points.
The company reported like-for-like sales growth of 10.4% over a three-week festive period, moderating to 3.2% in the fourth quarter. Sales in the first eight weeks of fiscal 2026 rose 3.8%, versus 3.1% in the previous quarter.
Chief executive Phil Urban said the company remains positioned to manage rising pressures. “Our market-leading estate and diversified guest propositions provide a strong foundation for resilience and growth,” he said.
The group’s estate totalled 1,718 sites at period end, of which 1,631 were directly managed, with 83% held as freehold and long leasehold properties.
Mitchells & Butlers forecast cost increases of approximately £130 million in fiscal 2026, representing nearly 6% of its cost base before mitigation.
The company attributed the rise to the annualization of labor cost increases, further statutory threshold changes and elevated food costs, particularly red meat.
The assessment includes preliminary impacts from the Chancellor’s Autumn Budget “pending clarification of further detail.” The guidance exceeds the £100 million of cost inflation absorbed in the prior year.
Jefferies said the company, which reduced net debt excluding leases by £146 million to £843 million, is positioned to benefit as leverage falls, now at 1.8 times on that basis.
The brokerage noted that near-term changes to capital allocation are unlikely but may evolve following the appointment of a new chief financial officer.
Jefferies described Mitchells & Butlers as “well-placed to gain market share in a cost-pressured sector,” citing scale, its largely freehold estate and a diverse portfolio.
The Birmingham-based group expanded capital expenditure to £181 million from £154 million, completing 216 investment projects comprising 199 remodels, 13 conversions and four acquisitions, delivering approximately 35% returns on remodels.
Capital expenditure is expected to increase to about £210 million in fiscal 2026 as the company continues re-establishing a seven-year investment cycle.
Adjusted operating margin improved to 12.2% from 12%. Basic earnings per share rose to 29.7 pence from 25 pence, while adjusted earnings per share grew to 30.9 pence from 26.4 pence.
Net debt including lease liabilities declined to £1.28 billion from £1.44 billion, representing leverage of 2.7 times EBITDA.
The board said it does not consider resetting the capital allocation strategy efficient in the near term, noting break costs and debt issue expenses.
Management said shareholder returns will be evaluated alongside investment opportunities as the securitization matures.
According to industry data, licensed outlet numbers declined 0.5% in the year to June 2025, with leased businesses down 3.3%. Lumina Intelligence expects the UK eating-out market to grow 2.4% in 2026.