M&B warns cost base will be hit by national living wage requirements

BIRMINGHAM pubco M&B has warned shareholders the introduction of the new national living wage could seriously impact performance from 2016 onwards.

In a trading update, the group said that as a business employing more than 42,000 people, the announcement by George Osborne in his emergency Budget was likely to have repercussions for its cost base.

“We are assessing a wide range of options to mitigate the impact whilst continuing to focus on retaining and attracting the best people to work in our pubs, bars and restaurants,” it said.  

The group also said that it had seen further growth, with sales up 5% for its third quarter. The performance brings total growth for the first 43 weeks of the year to 8.2%.

M&B, which has just seen its HQ building sold for the second time in 15 months – the latest in a £69.5m deal, said strong food sales were helping to offset weaker drinks sales at its various outlets.

In a trading update, the company said that as previously reported, operating margins were below last year, largely due to the integration of the Orchid business and sales growth being driven by food volumes.
 
In the 32 weeks to May 9, like for like sales were up 1.4%, with food up 2.5% and drinks up just 0.3%. In the 11 weeks from then to July 25, total sales rose 0.8%, with up food sales matching those of the first period but drinks sales down 1%.

For the 43-week period as a whole, total sales were up 1.3%, with food sales maintaining the 2.5% growth but drinks down 0.1%.  

The acquisition of 173 sites with its Orchid takeover in June last year continues to have a bearing on group performance as the integration process goes on.

So far this financial year, the group has opened 11 new sites and converted 43 sites, including 32 conversions of Orchid sites to core M&B brands including Toby Carvery, Miller & Carter, Harvester and Ember Inns.

Alistair Darby, M&B chief executive, said: “This year we have continued to successfully grow our food volumes and our like-for-like sales ahead of a subdued market, in addition to integrating and converting the Orchid business as planned.  These initial conversions are trading well and in line with our expectations.”