Mitchells & Butlers PLC (MAB)

[daveh]

Why does this company exist? Improved profitability they mentioned in the trading statement. What they meant was a modest reduction in the trading losses. Does anyone here hold them? If so why?

Dod

Yes I hold. They exist to sell food and alcohol and employ people. They are a holdover from a purchase of Scottish and Newcastle many years ago, that became Six Continents, that split into IHG and MAB. The former has done very well (I'm showing a gain of 522%) and the latter not so well (a gain of 31%). Why do I hang on to it: cos its not worth very much ( a few hundred quid) and I get 20% off my total bill upto 10x a year for upto 10 people in their restaurants. So we are going out for lunch at work on Monday and I'm predicting a saving on the bill of at least £60. One year I used the vouchers for our Xmas meal and got over £300 off the bill which was more than the shares were worth at the time. Not that it was just a benefit to me, but also my colleagues.

[simoan]

Why does this company exist? Improved profitability they mentioned in the trading statement. What they meant was a modest reduction in the trading losses. Does anyone here hold them? If so why?

Dod

Whilst its' a bargepole share for me, it does trade at a significant discount to book value. Some value investors quite like these type of situations. I agree with your sentiment though and have no idea why anyone would want to invest in the UK hospitality sector.

[Dod101]

Why does this company exist? Improved profitability they mentioned in the trading statement. What they meant was a modest reduction in the trading losses. Does anyone here hold them? If so why?

Dod

Yes I hold. They exist to sell food and alcohol and employ people. They are a holdover from a purchase of Scottish and Newcastle many years ago, that became Six Continents, that split into IHG and MAB. The former has done very well (I'm showing a gain of 522%) and the latter not so well (a gain of 31%). Why do I hang on to it: cos its not worth very much ( a few hundred quid) and I get 20% off my total bill upto 10x a year for upto 10 people in their restaurants. So we are going out for lunch at work on Monday and I'm predicting a saving on the bill of at least £60. One year I used the vouchers for our Xmas meal and got over £300 off the bill which was more than the shares were worth at the time. Not that it was just a benefit to me, but also my colleagues.

You have a very particular reason to hold it but it is surely at the mercy of its lenders and seems to be making very little progress in actually achieving anything very much.

Dod

[Dod101]

Why does this company exist? Improved profitability they mentioned in the trading statement. What they meant was a modest reduction in the trading losses. Does anyone here hold them? If so why?

Dod

Whilst its' a bargepole share for me, it does trade at a significant discount to book value. Some value investors quite like these type of situations. I agree with your sentiment though and have no idea why anyone would want to invest in the UK hospitality sector.

It also of course depends on what ‘book value’ means. Hey would surely be doing their shareholders a favour by selling their assets at book value (that is if anyone would buy them at that price)

Dod

[csearle]

Moderator Message:
The discussion continues here. - Chris

[Hallucigenia]

it is surely at the mercy of its lenders and seems to be making very little progress in actually achieving anything very much.

Dod

It's not heavily geared - in fact there's some scope for private equity to saddle it with a whole heap more of debt. Think of it primarily as a property company, with a 30% LTV mortgage. You're paying ~220p for ~680p of assets, or ~480p net of the mortgages.

Yes, as a general rule, the fact that pub valuations tend to rely on the fiction that is Fair Maintainable Trade, but that's more of a problem for tenanted pubs, with >96% direct managed the MAB valuations should be closer to reality. I don't hold, but a private equity bid towards £3 doesn't sound implausible, even if it would be harder to finance now than 18 months ago.

Anyway, this isn't the place for that debate. In terms of news, I don't know what the City was expecting but I thought the results were OK in the circumstances. It has been a brutal environment for costs - remember businesses don't have the Ofgem cap so were paying 2-3x more for energy than consumers were, minimum wage has been soaring and so on. And hospitality as a whole has seen the top line up only 5% or so, a significant reduction in real terms. So to keep the top line flat-ish in real terms is a result. That's not to say losing money is a good thing - clearly not, although I rather like that they didn't try to fiddle things to avoid the £8m loss as they could have done when you're dealing with a business turning over £2.5bn - but I think they've done OK in the circumstances.

[Bouleversee]

Why does this company exist? Improved profitability they mentioned in the trading statement. What they meant was a modest reduction in the trading losses. Does anyone here hold them? If so why?

Dod

Yes I hold. They exist to sell food and alcohol and employ people. They are a holdover from a purchase of Scottish and Newcastle many years ago, that became Six Continents, that split into IHG and MAB. The former has done very well (I'm showing a gain of 522%) and the latter not so well (a gain of 31%). Why do I hang on to it: cos its not worth very much ( a few hundred quid) and I get 20% off my total bill upto 10x a year for upto 10 people in their restaurants. So we are going out for lunch at work on Monday and I'm predicting a saving on the bill of at least £60. One year I used the vouchers for our Xmas meal and got over £300 off the bill which was more than the shares were worth at the time. Not that it was just a benefit to me, but also my colleagues.

Thanks for reminding me of the history. I,too, still hold IHG and am pleased it's doing OK at present.

[daveh]

Trading statement from yesterday:
https://www.investegate.co.uk/announcem ... te/7992440

First Quarter Trading Update

Trading statement covering the 15 weeks ended 13 January 2024.


Sales

Strong trading performance over the festive season has resulted in increased like-for-like sales growth in the year to date of 7.7%, with total sales growth of 9.7%.

Outlook

Sales have remained strong throughout the first quarter and, notwithstanding a 9.8% increase in the National Living Wage next April, overall cost pressures are now abating. We remain mindful of uncertainties ahead but, based on the strong performance of the business so far this year we now believe that the full year outturn will be towards the top end of current consensus expectations.