By Mark Williamson

THE pubs giant that owns Glasgow’s famed Horseshoe Bar has seen its shares surge six per cent after it returned to profit in the latest year although it said the trading environment remains highly challenging as rampant inflation puts pressure on margins.

Mitchells & Butlers said it made £8 million profit before tax in the 52 weeks to September 24 after losing £42m in the preceding financial year, during which it felt the impact of “substantial closures and restrictions relating to Covid-19”.

The improvement reflects the benefit of the increase in sales which followed the easing of lockdown restrictions from early this year. This encouraged people to return to pubs and to eat out again.

Birmingham-based Mitchells & Butlers describes itself as the leading restaurant and pub company in the UK with around 1,700 outlets, including 84 in Scotland. The group’s brands include All Bar One, O’Neill’s, Toby Carvery and Nicholson’s.

It welcomed signs that spending patterns are still relatively favourable with like-for-like sales increasing by 6.5 per cent in the first ten weeks of the current financial year compared with the preceding period.

“The continued recovery of sales is encouraging, with a general return to office working, city centres becoming stronger and guests across the country becoming ever more confident to return to the hospitality sector,” said the group. “This makes us cautiously optimistic about the future.”

However, chief executive Phil Urban noted: “The trading environment remains highly challenging, with cost inflation continuing to put pressure on margins and we are ever mindful of the pressures that the UK consumer is facing.”

The group said cost inflation headwinds continue to present a significant challenge for the sector as a whole. The impact is most notable in respect of energy, food and wages but is now evident throughout the group’s supply chains.

Mitchells & Butlers is braced for its £1.8 billion cost base to increase by up to 12% in the current year, before taking account of measures it will take to limit the impact. These include “improved labour scheduling, cost mitigating procurement strategies and energy consumption reduction” along with food product substitution.

The group highlighted significant uncertainty about what will happen to energy costs for businesses following the end of the six-month relief scheme introduced by the UK Government in October.

Mitchells & Butlers did not provide details of the impact of the World Cup on sales.

On Tuesday pubs chain Marstons said sales had increased by 50 per cent during England World Cup games and highlighted the fact that Christmas bookings were up on 2019.

The group said drink sales continued to outperform food sales demonstrating the trading resilience of its “predominantly community pub estate”. The group has a 1,468-strong portfolio. It is reckoned that televised World Cup matches provide a boost for ‘wet-led’ pubs but may put people off going to restaurants.

Marstons said it had a relentless focus on managing costs and expected to offset higher levels of inflation to some extent through a combination of cost efficiencies and pricing strategies.

However, it said it was clear that people wanted to continue to visit its pubs as an “affordable socialising” option.

Mitchells & Butlers is confident that the range of outlets it operates and the scale economies it enjoys will help it capitalise on the fact that many pubs and restaurants have closed since the first lockdown was imposed in March 2020.

The group noted that it had restarted its investment programme at the start of the last financial year to help reinforce the competitive position of its pubs and restaurants in their local markets.

The Horseshoe Bar on Glasgow’s Drury Street reopened in February after a three-week refurbishment.

Mitchells & Butlers grew total revenues to £2.2bn in the latest

year, from £1.1bn in the preceding period.

When compared with the 2019 financial year, sales rose by 1.1% on a like-for-like basis in the latest year. Food sales rose by 5.2% but drink sales fell by 4.1% on that basis.

Shares in Mitchells & Butlers closed up 9.2p at 151.2p.