Pub company Mitchells & Butlers says consumer confidence still "fragile"

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May 17 (Reuters) - British pubs, bars and restaurants operator Mitchells & Butlers Plc (LSE: MAB.L - news) reported a 9.6 percent drop in first-half pretax profits on Wednesday, saying that consumer confidence has remained "fragile" throughout this year and last, sending its share price lower.

The group, which operates over 1,800 pubs, bars and restaurants and whose brands include All Bar One, Harvester, Toby Carvery and All Bar One, Nicholson's and O'Neill's, said it was operating in a "challenging and uncertain environment" and there was therefore some caution over predicting future demand.

Rising inflation and muted wage growth following Britain's vote to leave the European Union last June has left consumers feeling the need to rein in spending.

Mitchells & Butlers' share price was down by over 4.5 percent at 262.5 pence at 0803 GMT, the biggest faller in the FTSE 250 Mid-Cap index.

The company said its adjusted operating profit for the first half fell 4.5 percent, mainly due to inflationary cost pressures which the company said it expected would continue to be felt at a similar level in the second half of the year and going into next year.

"Margins have been adversely impacted by increased costs, most notably from wage inflation, property costs and exchange rate movements," Chief Executive Phil Urban said.

"In order to partially mitigate these costs we have been working hard to encourage our guests to trade up and increase spend per head for a more premium experience whilst challenging our general managers to run their businesses as cost effectively as possible."

The company also said that it was continuously monitoring its prices and had carried out some price adjustments, both up and down, after wholesale food price inflation increased in recent months, with a 6 percent rise in March.

Nevertheless, the company said comparable sales in the 28 weeks to April 8 were up 1.6 percent, sharply lower than the 4.7 percent rise reported over the four weeks to Jan. 7, when trading over the festive period was 'particularly strong', although the latest results were affected by a later Easter holiday this year.

Including Easter, like-for-like sales in the year so far, up to May 13, were up 1.9 percent, the company said, noting that although unit sales volumes were down, both food and drink sales were up as it seeks to innovate on products and service.

Revenue for the half-year period rose 2.5 percent to 1.12 billion pounds ($1.45 billion) but pretax profit slipped from 83 million pounds to 75 million pounds. The interim dividend was maintained at 2.5 pence a share. ($1 = 0.7733 pounds) (Reporting by Rahul B in Bengaluru; Editing by Greg Mahlich)