Mitchells & Butlers warns on impact of interest rate rises

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The Independent Online

The pubs operator Mitchells & Butlers warned yesterday that recent rises in interest rates could have put a dampener on consumer spending.

The All Bar One and Harvester pub chains operator also fuelled ongoing speculation it could unlock its property assets by converting into a real estate investment trust.

Roger Carr, the chairman, told shareholders at the annual meeting that the board continued to "rigorously evaluate the risks and rewards of a Reit structure".

Some analysts believe that Mitchells & Butlers, which owns more than 2,000 pubs, could be vulnerable to a bid from the entrepreneur Robert Tchenguiz if it pursued such a move, in effect splitting itself into a property group and pubs operator. Mr Tchenguiz has built up a 15 per cent stake in the group after failing in an attempt to acquire the company last year.

Mr Carr told shareholders that there had been a "relatively quiet start to the new year" in its pub restaurants. "Given the recent rise in interest rates, it is uncertain whether consumer demand will continue to grow at the current levels," Mr Carr said. "Nevertheless, we are confident of our ability to make further market share gains through our focus on offering value for customers."

However, strong trading over the festive period helped boost like-for-like sales by 4 per cent over the 16 weeks to 20 January.

Mr Carr added that like-for-like food sales grew 7 per cent over the quarter. Mitchells & Butlers has been expanding its food offering before the extension of the smoking ban into Wales and England in July and April this year. Food accounts for 35 per cent of revenues but this should expand to 40 per cent over the next two or three years.

In Scotland, where Mitchells has 5 per cent of its estate, like-for-like sales were 0.4 per cent ahead of last year. The company expected a decline after the introduction of the smoking ban.

Nigel Parson, at Evolution Securities, said: "M&B remains the quality play in the sector, and the REIT possibility adds significant potential to the share price."

Shares in the company ended up 1 per cent at 705p, valuing the company at £2.8bn.