The pub giant which owns Glasgow’s famous Horseshoe Bar has expressed its confidence of delivering profits at the top end of market expectations, after it said sales increased by nearly 10% in the final quarter and signalled that cost headwinds were “abating”.

Shares in Mitchells & Butlers, which has more than 1,700 pubs with brands such as All Bar One, Harvester, and O’Neill’s, closed up more than 4% after it declared the strong trading it has seen this year continued in the fourth quarter, adding that momentum was being maintained in the new financial year.

In a trading statement covering the 52 weeks ended September 23, M&Bs said its performance in the fourth quarter took like-for-like sales growth to 9.1% for the year to date and total sales growth to 10.5%. Food sales were up 8.6% and drink sales by 9.9% on a like-for-like basis for the year, it added.

M&Bs noted that the financial year in question is a 53-week accounting period which ended on September 30, 2023.

Analysts observed that the company was outperforming the market and attracting consumers to its pubs and restaurants despite the ongoing cost of living crisis and inflationary pressures on overheads such as energy, labour, and food and drink.

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M&Bs told the City that like-for-like sales had been strong in the fourth quarter, “supported by sustained growth in food and drink and reflecting an increasing out-performance against the market”, as measured by the Coffer CGA Business Tracker.

The company meanwhile signalled that cost headwinds were “abating and remain at the bottom end of the range previously identified”.

M&Bs declared: “We remain mindful of the challenging macroeconomic environment and pressures on the consumer however, as trading continues to be strong, we have confidence that the current year out-turn will be at the top end of consensus expectations, with momentum into FY 2024.”

Analyst Greg Johnson at Shore Capital Markets said it now expects to raise its estimate of earnings before interest and tax from £205 million to between £215m and £220m.

He said: “The continued momentum at M&B, along with other UK hospitality peers, is encouraging, and we continue to expect further profit progress in FY24F, driven by LFL growth (3-4%), ongoing investment (supported by the Ego acquisition), cost pressures unwinding (including efficiency from its Ignite programme) and lower interest. Ahead of the update we forecast FY24F EBIT of £240m (earnings per share: 17p), although this may increase if current trends continue.”

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M&Bs said today that it continues to focus investment on its pub estate and in the year to date had completed 142 conversions and remodels, including two which are part of the newly acquired Ego brand. It first invested in Ego Restaurants in 2018 and acquired the 60% it did not previously own in April. M&Bs has also opened four new sites this year.

Russ Mould, investment director at stockbroker AJ Bell, said: “People may be feeling the pinch, but they still need the release of an evening out and All Bar One and Harvester owner Mitchells & Butlers is benefiting as its fourth quarter update demonstrates.

“The appeal of its offering is reflected in its out-performance of the market, suggesting its venues are sufficiently attractive and are in the right locations to pull people in on a regular basis. The company is also able to invest in its estate when smaller and independent rivals may be struggling to do so.

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“An increasing share of the revenue growth the company is reporting should flow through to the bottom line as cost pressures start to abate – making for a very happy cocktail for the business.

“The one negative is it is sitting on a sizeable pile of debt, partly as a legacy of the pandemic, and, with the cost of borrowing having gone up sharply, this is likely to constrain its ability to reward shareholders by returning to the dividend list.”

M&Bs chief executive Phul Urban said: "We are delighted to have continued our strong like-for-like sales performance through the fourth quarter, underpinned by volume growth and reflecting increasing out-performance against the market.

“Going forward we shall remain focused on executing the drivers of this strong performance, our Ignite programme of growth and efficiency initiatives and our capital investment programme which, combined with our diverse portfolio of established brands and enviable estate locations, leaves us well positioned to continue to out-perform the sector and see improved profitability."

Shares in M&Bs closed up 4.3% or 9.2p at 223.8p.