Capital expenditure at Mitchells & Butlers reached £171m this year following the group’s push to carry out dozens of conversion projects across its estate.
The pub and restaurant chain, which comprises 1,750 properties, spent £2m more than it did the previous year as it converted 232 sites and opened seven more in the 12 months to 29 September 2018.
M&B has been focusing on improving the quality of the estate through premiumisation and amenity upgrades. It remains on course to deliver a 6-7 year cycle of investment, from the 11-12 year cycle of previous years.
In order to maximise the profit uplift following investment within the financial year, it completed more projects in the first half than in previous years. The in-year benefit from this, coupled with savings made in costs relating to closure, was £3m.
Conversions remained focused on the expansion of Miller & Carter, which now consists of 105 sites and continues to perform strongly both in terms of sales growth and returns.
Remodel projects provide a refreshed environment for sites which remain within the same brand, giving the opportunity to impress existing guests and attract new guests.
Bosses also passed comment on the state of the market as M&B unveiled operating profits of £303m on sales of £2.15 billion.
They noted that the number of restaurants in the UK increased by 11% over the past five years, outstripping demand growth and resulting in pressure on sales per site across the sector. But in the year to September 2018, the number of restaurants in operation in the UK fell by 1%, reflecting the competitive pressure in what they described as a “highly fragmented” sector.
From a demand perspective there have been several economic factors impacting consumer confidence including Brexit, political uncertainty and limited growth in real wages. Despite this, turnover in the eating out market as a whole continues to grow, with forecast growth of 1.5% in 2018 indicating that leisure spend is currently being protected to some extent by consumers.
“Market trends suggest that consumers are eating out less frequently but spending more when they do, supporting our strategy of premiumisation and focus on providing opportunities for guests to ‘trade up’ menus,” the company stated.
It said that the impact of Brexit remains “uncertain”, noting: “Aside from macro-economic consequences, the specific areas of material impact for our business are increases in costs and reduction of availability of goods, and implications of restrictions on the free movement of labour. On exit of the EU, cost of goods would be impacted by changes in terms of trade and therefore tariffs, additional border controls and fluctuations in the value of sterling.”