British pub group Mitchells & Butlers warns on costs, shares drop

(Reuters) – Mitchells & Butlers warned of tighter margins in its new financial year as costs rise, driving shares in the British pub operator to two-year lows.

Energy and utility costs have risen to roughly 150 million pounds ($161.6 million) in the year ending September 2022, from 80 million pounds in the 2019 period, and could rise further next year, it said in a statement on Thursday.

Shares in the company, which have nearly halved in value this year, fell nearly 7% to their lowest since Oct. 2020.

British pub groups still recovering from the pandemic are now grappling with the rising costs of everything from labour and ingredients to energy, as well as the threat of lower spending by consumers faced with rising costs of living.

“The trading environment for the hospitality sector remains very challenging, with cost inflation putting increasing pressure on margins, and we are also mindful of the pressures on the UK consumer over the coming months,” Chief Executive Phil Urban said.

Rival J D Wetherspoon, which reports full-year results next week, had earlier forecast losses this year.

Britain has tried to ease the pressure of soaring energy costs, saying it would cap wholesale electricity and gas costs for businesses at less than half the market rate from the coming month until the end of March.

Mitchells & Butlers, which has about 1,700 restaurants and pubs in Britain, welcomed the help on energy costs, but said its bills were still expected to rise, despite steps to cut back use of power, such as installing voltage optimisers.

The owner of the All Bar One and Sizzling Pubs brands added that cost pressures, which were concentrated on energy, wage and food earlier this year, were now felt across the supply chain.

Like-for-like sales were up 1.5% for the fourth quarter ended Sept. 24, against 2019 levels, amid rail strikes and extreme heat.

($1=0.9280 pounds)

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