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Tough trading causes Mitchells & Butlers shares to go flat

Challenging trading squeezes margins

Shares in the pub group Mitchells & Butlers fell this morning following a statement from the owner revealing its margins were being squeezed in “challenging” trading.

According to the statement, the FTSE 250 company’s business has been difficult recently. This news comes after a strong summer, though its margins for its full financial year is set to be below the prior year due to cost pressures such as riding wages and business rates.

Following this report, spooked investors sent the shares tumbling 5.6pc to 233p, regardless of having being warned previously that margins may be weaker.

M&B reported that like-for-like sales in the 51 weeks to September 16 rose 1.6pc- a significant improvement on the 0.8pc decline in the prior year and ahead of the broader market.

In a statement, chief executive Phil Urban said his company was still “working hard to mitigate the cost headwinds faced by the industry” and thinks that profits will be in line with the board’s expectations.

He also added that the company entered the new financial year with a good sales growth, with greater clarity on pension contributions following a few changes to its scheme.

During the period, the company opened approximately 13 new sites, although disposed of 79 whilst it continues to reshape its estate.

Broker Langton Capital said that it expects profitability to be “under pressure”, and noted JD Wetherspoon’s chairman Tim Martin had said like-for-like sales growth needed to be between 3pc-4pc to stand still in terms of earnings.

“Evidence of a turn in the company’s fortunes may be emerging but the markets are tough and getting tougher and the competition is not standing still,” Langton’s Mark Brumby said.

He also added that the pub company still has “an extremely attractive estate but still has much to do”, highlighting that trading over the autumn and Christmas periods will be “critical in deciding whether M&B has finally turned the corner”.

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