Tuesday 24 November 2015 2:00 pm

All Bar One and Harvester owner Mitchells & Butlers reinstates dividends despite “modest sales”

FTSE 250-listed pub group Mitchells & Butlers is resuming dividend payments after a seven year break.

The figures

Revenue at the group, which owns All Bar One, Browns and Harvester brands, was up 6.6 per cent in the full year ending 26 September, to £2.1bn, and pre-tax profits were just up on last year's £123m, at £126m.

However, like-for-likes softened over the last quarter, despite a strong start to the year. The company blamed "poor summer weather, such that beer gardens did not see the benefit of any sustained period of sunshine."

The group also pointed to an “increasingly competitive" market, which dragged total sales for the first eight weeks of the year down 1.3 per cent and like-for-likes down by 1.6 pe cent.

Operating margins fell slightly, to 15.6 per cent from 15.9 per cent last year. The company put this down to the integration of the Orchid pub group, which it bought last summer for £266m.

Why it's interesting

Mitchells & Butler hasn't paid its shareholders a dividend since 2008, when it paid 4.55p as an interim payout. The fact that company has started again, at 5p a share, is a boost for investors.

However, analysts at Numis weren't too convinced, and said the dividend only "softens the disappointment" of what Mitchells & Butlers admitted was "modest sales growth."

Investors didn't know what to think, shares rose initially this morning, up to 356.9p, but have since fallen sharply to around 347.6p, down 0.11 per cent, after lows of 341.9p.

What Mitchells & Butlers said

Phil Urban, chief executive, said: "In the last year we have increased our earnings by 9.5 per cent, and I am delighted to announce the resumption of the dividend," adding:

Since joining Mitchells & Butlers in January I have seen first-hand the potential within the business. The market remains highly competitive but I have identified our key priorities to realise that potential.

We will build a more balanced business; instil a more commercial culture; and increase the pace of execution and innovation. We are confident that with this approach we will drive sustained profit growth and enhanced shareholder returns.