Angela Balakrishnan 

Smoking ban fires up profits at pub restaurant firm

All Bar One and Harvester-owner Mitchells and Butler says higher food sales in Scotland have helped boost profits. By Angela Balakrishnan.
  
  

All Bar One by St Paul's Cathedral, London
Photograph: Martin Godwin Photograph: Martin Godwin/Guardian

Scotland's smoking ban appears to have helped the performance of pub restaurant owner, Mitchells and Butlers, where profits have soared on the back of strong food sales.

The British company, which owns the All Bar One and Harvester chains, said today that food sales in its Scottish restaurants jumped by 7.3% in the year ending in September, compared to 4% in the UK. Drinks sales rose by 3.2%.

Profit before tax was £208m compared with £189m a year earlier, a hefty rise of over 10%.

Reviewing the results, Mitchells said that its larger, food-based pubs stood to benefit from the smoking ban in Scotland.

The group has also purchased 239 pub restaurants from Whitbread in July and has already re-opened 25 of these under its brands like Harvester, Vintage Inns and Toby Carvery.

It expects to reopen another 50 by Christmas and a further 100 by Easter.

Analysts at Merrill Lynch said: "While the results are in-line, in our view there remains plenty of longer-term earnings per share upside through the Whitbread conversions and the benefits of a smoking ban on Mitchells & Butlers' increasingly food-driven pub model."

The first seven weeks of the new financial year saw food sales grow by 7% in Scotland, where a smoking ban has been in place since March.

This offset a drop in drink sales of 2%. Overall like-for-like sales were ahead by 1.1%.

Mitchells said its smaller, drinks-focused pubs were likely to suffer from the smoking ban.

"Sales growth has slowed as the autumn has drawn in and we continue to believe that a full winter's trading is required before taking a definitive view on the ban's effect," it said.

However, chief executive Tim Clarke said Mitchells had already banned smoking in more than 200 of its pub restaurants in England and Wales, with an impact of less than 1% on their rate of sales growth.

A full ban on smoking in England and Wales comes into force next year.

Mitchells shares were broadly flat at around 650p, valuing the group at about £2.6bn. The dividend total is being raised by 14% to 12.25p.

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· Email business.editor@guardianunlimited.co.uk

 

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