The All Bar One owner, Mitchells & Butlers, has lauded recent encouraging sales at the pub and restaurant group but warned that risks from rising food and energy costs lie ahead.
The hospitality chain, which also owns Toby Carvery and Harvester, told shareholders on Wednesday that like-for-like sales had increased by 6.5% since the end of its latest financial year in late September.
M&B said the trading environment remained “very challenging” but its revenues had been boosted by workers returning to offices as Covid fears eased, benefiting its city centre locations.
It posted an £8m pre-tax profit for the year to 24 September, a significant improvement from the £42m loss in the previous year.
The chain said profits would have been near to pre-Covid levels had it not been affected by a £70m increase in utility costs over the year as rocketing gas and electricity prices sent bills soaring.
In its full-year results, M&B said cost inflation was presenting a “significant challenge” to the business and it expected its £1.8bn cost base to increase by between 10% and 12%.
It said the government’s energy price guarantee was “welcome” but that there was “significant uncertainty” of what prices would be in the second half of the year after the support for businesses finishes at the end of March.
Phil Urban, the chief executive of Mitchells & Butlers, said: “We are pleased with the results today. It’s been a difficult two years and we have been waiting for the signs of recovery as people slowly return back to pubs and restaurants.”
He said there were still “a lot of macroeconomic headwinds” the industry faced but the firm was “cautiously optimistic” about the future.
“The two biggest challenges the industry faces is the cost of living crisis and cost inflation on utilities and food costs driven by the war in Ukraine … Those pressures won’t be there forever, and when they do lessen we need to be ready as a business.”
Urban said the rail strikes were “massively unhelpful” but M&B had not seen “a big exodus of Christmas bookings” as feared, and still expected a strong showing at its London establishments as there is no tube strike planned.
Earlier this week, the British Beer and Pub Association said pubs across the country could shut unless they received clarity soon over what will happen to energy costs after the energy price guarantee’s current finish date.
The hospitality industry has experienced a challenging last few years of trading because of the Covid pandemic and other issues, including problems in hiring staff, cost inflation and soaring energy bills.
A recent survey conducted by the industry body UKHospitality found that more than a third of hospitality businesses are at risk of failure in early 2023.