M&B cheers year of growth in Scotland

PUB chain Mitchells & Butlers, which owns some of the best-known bars in Edinburgh, said it had seen continued growth in Scotland during the second year of the smoking ban.

The firm, which operates chains including O'Neills, Toby Carvery and All Bar One, said same outlet sales in Scotland have increased by 4.4 per cent in the first 17 weeks of its year. And it said that its English and Welsh pubs had also seen growth in line with Scotland.

But the company also revealed that it had taken a £274 million hit after a bet on interest rates failed – a move which led to its finance director resigning and its chief executive attempting to quit.

In its interim management statement, M&B said trading continues to be "resilient" despite the "very challenging" market.

Like-for-like sales across the group were up 0.7 per cent in the first 17 weeks compared to the same period last year. "This reflects substantial market share gains against the background of the adverse impact of the first winter of trading since the start of the smoking ban in England and Wales," the company said.

The firm enjoyed a "a satisfactory January to date", resulting in like-for-like sales up 0.2 per cent over the last 10 weeks.

The company, which owns and operates around 2000 pubs including a 30-strong local pub estate that includes Deacon Brodie's, the White Hart Inn and the Sheep Heid, Greyfiars Bobby and the Kenilworth said food sales have been strong with like-for-like sales up 4.6 per cent in the 17 weeks.

According to industry data, on-trade beer market volumes declined by nine per cent between October and December, while M&B said its same outlet like-for-like decline has been only 1.1 per cent. "We remain cautious on the outlook for consumer spending and in particular, the near term prospects for the on-trade beer market," M&B said.

"However, the smoking ban has accelerated the shift in the sales mix to food which is having an adverse impact on gross margins."

The resilient trading was overshadowed by the major losses encountered by the firm through the property venture.

Last August it was days away from separating off some pubs in a joint venture with entrepreneur and major shareholder Robert Tchenguiz.

But potential investors pulled out because of the credit crunch, causing the plans to be shelved.

With interest rates now expected to continue to fall, the group has drawn a line under the matter at a cost of £274m post tax.

Krim Naffah, the group's finance director, resigned from his post, while chief executive Tim Clarke also tendered his resignation, although it was rejected by board members.

The company said: "This was declined as the board believes it is in the best interests of the company that he should continue to lead the operational out-performance of the business."

Deputy finance director Jeremy Townsend will succeed Karim Naffah as finance director. All executive directors are to forego their 2007 bonuses as a result of the loss.