Shares in pub-owner Mitchells & Butlers were soaring over four per cent on the FTSE 250 after the group said that it announced a rise in profit of 55 per cent and said it was "confident" of its future prospects.
The group said that its revenue in the half year to 10 April increased 1.3 per cent from the same period the previous year to over one billion pounds. Pre-tax profit was also reported as increasing 55.3 per cent to £73 million.
In the 33 weeks to 15 May Mitchells & Butlers said it like for like sales had increased 1.8 per cent, with food like for like sales climbing 4.3 per cent and drink like for sales rising 0.3 per cent.
Net debt at the group was reported as falling £87 million in the half, while the company said that it had agreed a new pension funding approach, raising annual payments from £24 million to £40 million.
The group said that its sales in the second quarter had been hit by the rise in VAT, poor weather at the beginning of the year and fewer promotions. Despite this the group said it made significant market share gains in the period.
Mitchells & Butlers said its efficiency savings programme was progressing well, with £25 million cost savings expected this year, up 25 per cent from previous expectations.
In the second half the group said it would be investing an additional £20 million to £25 million in expanding its business, taking gross capital expenditure to an estimated £160 million for the full year.
In a statement the company said, "The Company continues to perform well in difficult market conditions and is making good progress in implementing the strategic plan as set out in March. Consequently, we are confident about the future prospects of Mitchells & Butlers."
Adam Fowle, Chief Executive of Mitchells & Butlers, said, "The business continues to trade well and we are pleased with the progress made in the first half with improved sales and margins leading to an increase in operating profits and profit before tax of 12.2% and 55.3% respectively. These results underpin our confidence in our strategy of increasing shareholder value by reshaping Mitchells & Butlers around its key food led brands."
By 15:40 shares in Mitchells & Butlers were up 4.85 per cent to 318.10 pence per share.
Hugh-Guy Lorriman - who rates the shares a 'sell' - offered this comment:
"Mitchells & Butlers has announced interims this morning (period 28 weeks to 10 April 2010). PBT is £73m and eps 13p, both up respectively 55% on last year. This is largely driven by interest cost. Revenues are up 1%, EBITDA is up 8% and Operating profit +12%."
"We understand from presentations in the last few months that rising LFLs year to date have been driven principally by price or 'menu engineering' and we prefer to remain cautious on the sustainability of this considering the volatility of a predominantly walk-in trade."
"We remain long term sellers of M&B based on what we perceive to be a high risk situation at the level of ownership, management and balance sheet." he said, giving a target price of 230p.