Mitchells & Butlers (MAB.L): Well,
all my optimism that M&B was on a path back to institutional status has evaporated.
Alongside a dreary trading update, the CEO, Alistair Darby, has pulled his last
pint. He is being replaced by Phil Urban, who joined as COO in January and has
worked previously with the Chairman. It seems that Darby was not dynamic enough
for the group’s major shareholders, with significant sales growth proving
elusive. I thought he was actually making a decent fist of a sprawling business
hampered by a large pension deficit and a very lumpy shareholder register.
In this pre-close update (for the 50 weeks to 12th September)
LFL sales were up 1.0%, with food up 2.1% and drink down 0.3%, with a sharp
deceleration (probably worse than the industry average) having been seen in the
last seven (damp and cool) weeks. Their bottom line is that “results for the
year to 26th September [will] show growth [but will] be at the
bottom end..…of current market expectations”. Current FY2015 consensus is for
eps of 34.8p, so perhaps we should shoot low for 33p, just above last year’s
32.4p. At the depressed share price of 317p, that is a PE of just 9.7x.
However, hopes of an imminent return to the dividend list have probably been
dashed. I had been looking to a nominal interim for FY2016, but that too looks
less likely. The mood in the M&B boardroom won’t have been lightened by the
hot breath of Greene King who are poised to overtake them in terms of size post
the Spirit deal. Reading the runes at this company is made more difficult by
the near 27% held by a Joe Lewis vehicle whilst the Magnier/MacManus vehicle
Elpida has just gone up through the 23% barrier.
So I am retreating to saying that the stock is not at present worth the
agro for income hunters. However, we all know the risk is that the major
shareholders somehow brew up a value creating deal, but that has been the case
for many years. Being the outsider at someone else’s corporate party is never
easy. (Neil
Cumming, 29th September 2015)
These comments are not a personal
recommendation to deal. Any investments can fall as well as rise in value, so
you could get back less than you invest. I may have a financial interest in
some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk Twitter: @DividendPower
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