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Marston’s and Mitchells & Butlers resilient in face of ‘Beast from the East’ but margin worries remain

Last updated: 07:05 16 May 2018 EDT, First published: 03:19 16 May 2018 EDT

pint of beer
Pubs are struggling to pass on rising costs to their customers

First-half sales at UK pub chains Marston’s PLC (LON:MARS) and Mitchells & Butlers PLC (LON:MAB) were resilient in the face of the ‘Beast from the East’ in February and March.

But margin worries at both sent the shares lower on Wednesday. Marston’s lost 7.1% to 104p, while M&B fell 5.6% to 259.8p.

READ: Record Christmas Day for Marston’s

Marston’s posted a sharp rise in revenues to £529.0mln (H1 17: £451.5mln), largely driven by last year’s acquisition of Charles Wells – which added the Bombardier and Young’s brands to the group – as well as a 2.9% rise in like-for-like sales in the Taverns business.

That helped to offset a slide in sales in premium and destination pubs which fell 1.8% year-on-year as a result of the bad weather, during which fewer people ventured out.

READ: M&B blames bad weather for slowdown

Over at rival Mitchells & Butlers, the FTSE 250 group reported like-for-like sales growth of 1.6%. Excluding the impact of the bad weather, like-for-likes jumped 2.5%.

Total revenue edged up to £1.13bn (H1 17: £1.12bn), helped by the inclusion of the long Easter weekend in its results this time around.

Bottom line struggles

Despite the revenue growth, both companies struggled with the bottom line.

Pubs are facing rising wage costs, higher business rates and increased food and drink costs, while intense competition is keeping prices low.

Underlying profits at Marston’s climbed 8% to £36.3mln, thanks to the big top-line boost from new additions, but group operating margins fell 2% during the period.

Pre-tax profits at M&B dipped to £69mln (H1 17: £75mln), with chief executive Phil Urban stating that “increased … discounting” from rivals and rising costs “adversely impacted” margins.

-- Updates for share prices --

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