Pubs group nervy over second half

O'Neill's and All Bar One owner Mitchells & Butlers has cheered recent signs of improved consumer confidence, but warned of "uncertain" prospects ahead.

The group said trading in the first eight weeks of its financial year had been helped by a "small upturn" in sentiment as like-for-like sales grew by 3.2%.

While this is twice as fast as the 1.6% sales growth seen in the 12 months to September 26, M&B said the group faced headwinds in the second half of its financial year.

The firm cautioned: "In particular the outlook for disposable income and consumer confidence could be dampened if VAT and other taxes were to rise."

M&B owns 2,000 pubs and restaurants under brands such as Toby Carvery, Harvester, Vintage Inns and Sizzling Pub Co.

The firm posted a 24% fall in pre-tax profits to £134 million for the year to September 26 - when it was hit by rising wage, alcohol duty and energy costs, as well as the onset of recession. But M&B said it was outperforming both the eating-out and drinking markets.

Cost pressures are so far "more stable and less severe" than the previous year, with energy bills around £10 million lower. The group also hopes to make £20 million in cost savings during the year.

The company - which has focused efforts on boosting its food offering following the introduction of the smoking ban more than two years ago - said like-for-like food sales were 5.9% higher so far in the new financial year, compared with 2% growth in drinks sales.

Shares in M&B rose more than 2% as profits came in ahead of consensus forecasts, but some City experts still voiced concerns over the firm's prospects this year.

Seymour Pierce analyst Hugh-Guy Lorriman said: "We are not changing our conservative numbers for the year considering our cautious outlook on 2010 and the timing of M&B's financial year. So far M&B has been poor at converting like-for-like sales growth into profit growth - this year will be vital to proving they can do so, but risks, in our view, are high."