Mitchells & Butlers could look to reduce its exposure to retail and leisure park locations in future after admitting they pose the biggest challenges from a profitability point of view.
The pub and restaurant giant has spent this year completing a review focusing on the challenges around sites not currently generating an economic return.
Its analysis has revealed that the “majority” of sites that fall into this category are short leasehold sites in retail and leisure park locations.
“With lower footfall on many of these parks and an uncertain economic outlook, alongside increased cost pressures such as living wage, business rates, apprenticeship levy, sugar tax and food price inflation we believe that a number of sites will now be challenged to achieve a breakeven performance,” it said.
As a result, the firm has extended both the number of sites for which a provision is made and the period recognised. Additionally, it has reduced the discount rate used to calculate the present value of the provision to an estimation of the risk free rate.
The impact of these judgements is a charge of £35m in the year, it said.
Earlier this year Mitchells & Butlers raised £46m from offloading 79 sites. The pub and restaurant chain sold 73 of the properties to property investment company Aprirose, which is now running them under the Milton Pubs and Taverns brand. A further six sites were sold individually.
M&B said none of the 79 sites fitted its long-term estate plan and added that the proceeds from the disposals were “marginally above” the net book value of the properties.
Full-year results published by Mitchells & Butlers this morning revealed like-for-like sales increased 2% to £2.18 billion while operating profit fell 10% to £208m.