Mitchells & Butlers (LON: MAB) axes 1,300 jobs, posts loss of £123 million in FY20

Summary

• Mitchells & Butlers has made approximately 1,300 workers redundant in the FY20
• The company has reported a net loss of £123 million for FY20 on the back of lower revenues due to the pandemic
• Its share price plunged more than 4 per cent in the morning deals after the earnings release

Mitchells & Butlers Plc (LON:MAB) on Thursday reported a net loss of £123 million for the FY20 as the full-year revenue declined sharply on the back of coronavirus-led business disruption. The Birmingham-headquartered pub-to-restaurant operator had posted a net profit of £177 million for the FY19. For the reporting period, Mitchells & Butlers recognised a total revenue to the tune of £1,475 million, down 34.1 per cent as against a total revenue of £2,237 million earned in FY19. 

Job cuts

Following the after-effects of Covid-19, Mitchells & Butlers was required to make nearly 1,300 job cuts by the end of FY20 due to reduced levels of activity and shutting of stores. 

The employees have been benefited from the Job Support Scheme launched by the UK government, which had helped the company in saving many jobs providing an interim assurance in the initial days of the pandemic. But the business was not able to sustain the existing number of jobs due to the uncertainty around the pandemic. 

With the challenging business environment and restricted operations, most enterprises within the hospitality sector have suffered unforeseen losses. The hospitality industry has been touted as one of the few sectors that remain largely unaffected from low-scale financial setbacks but the global health emergency has gripped who’s who of the industry be it an age-old fast food joint or an adequately-established brewery.

Mitchells & Butlers shares

Shares of Mitchells & Butlers slipped more than 4 per cent in the mid-morning trades as the results were announced before the markets opened. The stock of Mitchells & Butlers plunged about more than 4.03 per cent to an intraday bottom of GBX 214.50 at around 11:15 am (GMT) from the share price level of GBX 223.50.

Mitchells & Butlers share price (26 November)

(Source: EODHD/Others, Thomson Reuters) 

November has been one of the best periods for the Mitchells & Butlers shares as share price has advanced more than 40 per cent so far. According to the data available with the London Stock Exchange, the stock of Mitchells & Butlers soared as much as 42.5 per cent to GBX 223.50 (25 November) from a market price of GBX 156.80 a piece as on 30 October. 

Key financials & Covid-19 responses in nutshell

• Mitchells & Butlers has managed to earn an operating profit of £8 million in the FY20 as against an operating profit of £297 million in FY19.
• The financial results for the FY20 includes a period of enforced business closure effective from 20 March to 4 July.
• The business had a total liquidity of £225 million as on 25 November, including a cash balance of £125 million along with undrawn, unsecured facilities equivalent to £100 million.
• It furloughed more than 99 per cent of its staff.
• The company tried to sell all the possible stock with a short shelf life at a cost price.
• As a part of the cost reduction plan, it halted all the discretionary capital expenditure and reduced operating costs to a minimum required.

Sluggish outlook

The devastating challenges due to the eruption of Covid-19 pandemic have affected almost every business at large. With the uncertainty of events, Mitchells & Butlers has declined to provide detailed guidance on the financial performance and reinstated to “recover quickly” after the removal of operative restrictions.

The company has prepared the financial results on a going concern basis, however, it said that there is material uncertainty against the valuation of the property portfolio and the going concern principle. 

Its board of directors have a reasonable expectation that the group has adequate resources that are required for the operational existence of the enterprise in the near future. The directors have contemplated that the company can operate for a period of at least 12 months from the date of signing the last financial statements within its existing borrowing facilities and covenants. 

According to the company, the duration and depth of trading restrictions on the hospitality sector due to Covid-19 pandemic is the primary determinant of the financial performance of the company. Therefore, the future is going to remain challenging and highly uncertain at least for a few quarters. 

CEO’s take

Mitchells & Butlers is optimistic to regain the previously built momentum and achieve a sustained performance with the presence of a balanced portfolio of brands after the erasure of present operation restrictions due to the worldwide medical emergency, said CEO Phil Urban.