Mitchells & Butlers has put 75 sites up for sale on the basis that they will generate greater value for shareholders if sold than they would if retained as managed businesses.
The move comes as the pub and restaurant giant attempts to expose its business to more “premium market spaces”, where it expects to see the strongest growth going forward.
Although the sites it is looking to offload represent a small percentage of its 1,800-strong portfolio, their sale is strategically important to the company’s efforts to improve the quality of its estate.
M&B has not disclosed the sites it is aiming to divest, but said that 75 had been “identified” following a full review of its estate. The exercise means it now has a plan for each of its properties. “Going forward, we will continue to look at acquisitions and disposals as part of our normal course of business,” it stated.
The growth of its Miller & Carter brand this year is evidence of its appetite for growing the premium parts of its business. It remains on track to grow Miller & Carter to 100 sites by 2018. “This is a proven and successful steakhouse format that generates strong like-for-like sales, and also delivers good returns when we open in new locations. We have grown the brand in the last year from 36 to 52 sites,” it revealed.
A small number of the new openings have come through acquisition, but the majority have been existing site conversions delivering EBITDA returns of more than 40%. Its portfolio gives it a “strong pipeline” of future conversion opportunities to grow the brand, it said.
Separately, M&B has evolved its pizza and carvery businesses, which included the launch of the Stonehouse brand earlier this year. Stonehouse is a reinvention of its Crown Carveries brand, involving modernisation of the amenity while enhancing the menu to broaden its appeal. It currently has 36 sites under the new brand, all of which offer strong value format but with a more premium offer than prior to conversion.
“As with Miller & Carter, these are largely existing site conversions, and are generating returns of around 25%. We will aim to grow Stonehouse to around 80 sites by 2018. Our estate’s amenity level has improved through our remodel programme, which encompasses all our brands and allows us to develop the guest proposition whilst maintaining and enhancing the estate through capital investment.”
M&B said the remodel programme even extends to brands such as Harvester, which has faced increased competition in recent years. “We have evolved our ‘Feel Good Dining’ remodel solution, which sees us spend around £400,000 of CAPEX per site, and is delivering a return of around 25% in the 32 sites in which it has so far been implemented. We have a pipeline of Harvester sites to continue the roll-out of this format. In total, we completed 252 remodels and conversions in FY 2016, moving us towards a six-year investment cycle for all our sites. We will continue to increase this to around 300 remodels and conversions in FY 2017, which we expect to be broadly the rate in future years.”
Full-year results published by Mitchells & Butlers this morning revealed that annual sales at the group fell 1% to £2.08 billion, while pre-tax profits slipped from £126m to £94m.