Mitchells & Butlers shares dive 7% as soaring costs wipe out profits

Shares in restaurants and pubs giant Mitchells & Butlers (LSE: MAB) tumbled 7% this morning after the company swung to a £13m pre-tax loss, despite a 13% jump in revenues.

The FTSE 250 listed firm blamed “significant cost headwinds” as operating costs soared 17% to £2.15bn, wiping out profits that were £8m a year ago. However, total sales rose 13% to £2.50bn, while like-for-like sales gained strongly across all brands in the 53 weeks to September 30.

Chief Executive Phil Urban said “we are delighted by the continued strength of our trading performance, and resilience in the face of unprecedented cost headwinds.” But property valuations and spiking costs turned last year’s £8m profit into a £13m loss.

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In a brighter update, Mitchells & Butlers said like-for-like sales have risen 7.8% in the eight weeks since its financial year-end. It also hopes easing cost pressures, with lower energy prices and slowing food inflation, will allow it to rebuild margins.

Despite today’s 7% drop, Mitchells & Butlers shares remain up 57% year-to-date and 61% higher than a year ago.