M&B, TGI Friday, Travelodge, incomes, employment rights & other:

PREMIUM EMAIL – PLEASE DO NOT FORWARD:

A DAY IN THE LIFE:

Well, we’re creeping towards the end of what has felt like a long month.

And, though there will have been five weekends in November 2025 and therefore fewer working days than would normally be expected, it has been mentally draining.

Particularly as the Budget, now thankfully in the rearview mirror, was written in full public view, scrapped and re-written more than once in the run up to last Wednesday.

And this put a lid on consumer spending, corporate investment, hiring, Christmas planning and the rest such that, when transport secretary Heidi Alexander told Laura Kuenssberg last Sunday that budget leaks and uncertainty had not damaged the real economy, there will have been many a cornflake spat out across the UK’s breakfast tables.

The most charitable response would be ‘you should get out more’ but, as we can only play the ball we are bowled by the politicians, it’s time to put all of those Christmas preps into action.

Have a great weekend. Good luck to Hull – no points from the last six – and let’s move on to the news.

MITCHELLS & BUTLERS – FULL YEAR NUMBERS:

M&B has this morning reported full year numbers and our comments thereon are set out below:

Headline figures:

• MAB reports ‘strong trading ahead of the market with like-for-like sales growth of 4.3%.

• It says that total revenue is £2.71bn vs £2.61bn in the prior year.

• Operating profit is £322m (FY24: £300m) and PBT is £238m against £199m in FY24.

• On an adjusted basis, operating profit is £330m is up 5.8% from prior year and adjusted PBT is £246m against £211m last year.

• The group reports that it has seen an increased adjusted operating margin of 12.2% (FY 2024 12.0%) and says that strong cash flows have reduced net debt (excluding leases) by £146m.

• NAV is up to 476p from 433p at the end of FY24.

• Re current trading, the group says it has made a ‘solid start to FY 2026’ with like-for-like sales growth of 3.8% in the first eight weeks

Current trading:

• In financial Q4-2025, M&B reports LFL ‘sales growth of 3.2% reflected robust performances in mid-market pub and pub restaurants balanced against slightly weaker sales in London within the M25 and in more premium businesses.’

• M&B reports that ‘over the most recent 8 weeks like-for-like sales have strengthened from the final quarter of FY 2024, growing by 3.8% despite uncertainty ahead of the Chancellor’s Autumn Budget.’

• It says ‘looking forward, Lumina Intelligence forecasts the UK eating out market to grow by 2.4% in 2026 (UK Eating Out Market Report, 2025), against which we expect to maintain our outperformance.’

• The company says that ‘during FY 2026 we anticipate cost headwinds of c.£130m, representing slightly less than 6% of our cost base before mitigation, driven by annualisation of labour cost increases, plus further increases in the statutory thresholds, and increased levels of food cost inflation.’

• It says ‘this includes our preliminary assessment of the impact of the Chancellor’s recent Autumn Budget, pending clarification of further detail.’

• The company says ‘we believe that our strong market position, together with the success of our Ignite improvement programme, should enable us to continue to outperform the sector and leave us well positioned to mitigate these increases.’

• The balance sheet issues, M&B says ‘we remain focused on strengthening our balance sheet, which will enhance the resilience of the group and deliver further value to shareholders, principally through a transfer to equity.’

• It says ‘the Board do not feel that it will be efficient, particularly with regard to break costs and new debt issue costs, to consider a reset of the capital allocation strategy of the Group within the near term.’

• However, ‘over time, and as the securitisation matures, the Board will however continue to monitor the position and shareholder returns will be considered alongside investment opportunities.’

Company comment:

• CEO Phil Urban says ‘we are pleased to report another year of strong performance. Like-for-like sales continued to outperform the market across all segments, reinforcing the strength of our strategy and market positioning.’

• Mr Urban says ‘combined with disciplined operational execution, this delivered robust profit growth mitigating sector-wide cost headwinds.’

• He says ‘as we look to the year ahead, we anticipate increased cost pressures across the sector. However, we remain confident in our ability to manage these challenges through our established Ignite improvement programme and disciplined capital investment strategy.’

• The CEO concludes that ‘our market-leading estate and diversified guest propositions provide a strong foundation for resilience and growth, enabling us to capture incremental market share and deliver continued long-term outperformance.’

Langton Comment:

• Whilst Christmas last year seems like a long time ago, it’s in FY25’s numbers and M&B had a good one.

• H1 weather was not helpful but Q3 was glorious and Q4 wasn’t bad. There was no football this year.

• This made for challenging comps in summer 2025 but the World Cup will be an effective tailwind in FY26.

• A glance at the share price shows that the good trading news during M&B’s Q3 was absorbed into the share price but the market has since been a little more reticent.

• The company points to ‘slightly less than 6% cost inflation’ in FY26. This is well ahead of general inflation and will be driven predominantly by the cost of labour.

• Hospitality companies are major employers and wages can be impacted both by NLW changes and by the changes both in the rate and the starting point for employers’ NIC. Companies will be left to either reduce costs, raise prices or accept lower margins.

• Overall, however, hospitality as a whole should grow in excess of GDP and we would expect M&B to be one of the winners in the hospitality sector.

• M&B remains a focused, well-run company that benefits from substantial asset backing. Its share register is somewhat abnormal and observers may from time-to-time express concern as to how value will come out.

PUBS & RESTAURANTS:

Disposable incomes:

With growth estimates down and the tax take rising, many consumer will face a ‘truly dismal’ increase in their disposable income over the next few years reports the Institute for Fiscal Studies. It says that consumers may find themselves around 0.5% better off per annum in real terms. The OBR estimates real growth in the economy of an average of 1.5% over the next five years. The IFS number implies that two thirds of that growth will be taken in taxes by the government…

• In terms of consumption in absolute terms, of course, much of the government take will be pushed back into the economy by recipients of higher transfer payments such as pensioners, families with more than two children and a number of other groups.

• Nonetheless, IFS director Helen Miller says the growth is poor when ‘compared to the more than 2% per year we achieved across every parliament from the mid-1980s to mid-2000s.’ Both Tory and Labour governments featured over the sample years taken above but the financial crisis, Brexit and Covid seem to have had a lasting impact since – and also, the IFS suggests, into the future.

• The Independent reports that a new study this month from the highly respected US think tank, the National Bureau of Economic Research, found that the economic damage since the 2016 Leave vote had resulted in the UK’s GDP being between 6 per cent and 8 per cent smaller than it could have been. That amounts to a loss of around £175bn per annum.

• The Independent also points to new analysis by the House of Commons library, which estimates that Brexit is costing the Treasury up to £90bn a year in lost tax revenue, which is not inconsistent with the £175bn total economy number mentioned above, and that the average Briton has seen a hit to GDP per head between £2,700 and £3,700.

Costs:

Whilst relatively high inflation in the UK is likely to remain a feature over the medium term per the OBR, this has abated somewhat. Nevertheless, work by the Boston Consulting Group illustrates that beef prices have risen by 27.4% over the past year…

• Value-for-money chain JD Wetherspoon earlier this year took steak and mixed grills from the menu across a number of its pubs in order to reduce loss-making menu items. On the flip-side, as regards cheaper sources of protein, pig & chicken company Cranswick has recently pointed to high and rising demand.

• Broker Berenberg reports on the company, saying that it is ‘benefiting from significant tailwinds to top-line growth that we expect to persist across the near term.’ Specifically, it says that ‘revenue growth is benefiting from consumers switching out of higher-priced proteins and into pork and poultry.’ With the outlook for disposable incomes said to be ‘truly dismal’, see above, there is no reason to think that this trend will not persist for the foreseeable future.

Employment rights:

Business groups have welcomed the decision to introduce a six-month qualifying period for unfair dismissal in the Employment Rights Bill. The six business groups involved in discussions say that ‘businesses will be relieved that the Government has agreed to a key amendment to the Employment Rights Bill which can pave the way to its initial acceptance.’ They say they ‘have always been clear that making the Employment Rights Bill work would take business, trade unions and government working together to find a landing zone for these major policy changes….’

• The business groups say that the ‘agreement keeps a qualifying period that is simple, meaningful, and understood within existing legislation. It is crucial for businesses confidence to hire and to support employment, at the same time as protecting workers.’ They add that the ‘change addresses the key problem that must be sorted in primary legislation. It shows that dialogue works and is a model for how to consider the important questions that need answering in regulations before new rules come into force.’

• The business groups go on to say that they ‘will still have concerns about many of the powers contained in this Bill. This includes guaranteed hours contracts, seasonal and temporary workers and thresholds for industrial action.’ They add that they ‘remain committed to working with government and unions to dealing with this in the necessary secondary legislation to implement the Bill. We must ensure that it supports opportunity for workers while avoiding damage to economic growth.’

• UKH chair Kate Nicholls has said that ‘this is a pragmatic change that addresses one of hospitality businesses key concerns.’ She says ‘we made clear representations to the Government that a six-month qualifying period would be much more practical for businesses and maintain job opportunities for young people, and I’m glad they have acted on those concerns.’

• Ms Nicholls adds ‘the Employment Rights Bill will still bring substantial changes and extra cost to hospitality businesses. In light of the increases to wages, business rates and other costs coming in April, it would be sensible for the Government to delay the introduction of statutory sick pay from day one by six months.’ She concludes ‘this would give businesses much-needed breathing room and avoid further damage to employment opportunities.’

Other news:

UKH says that ‘the Scottish Government has a clear opportunity to support the vital Scottish hospitality sector, by using Barnett consequentials arising from the UK Budget to expand existing business rates relief to include all Scottish hospitality businesses…’

• It adds that ‘hospitality businesses in Scotland face being left even more disadvantaged compared to their English competitors, unless action is taken’ and says it is ‘calling for the Scottish Government to fundamentally reform the broken business rates system, through the introduction of a permanently reduced business rates poundage for hospitality and leisure at 30 pence in the pound. This would be funded by rebalancing the burden to reflect the rise of the online economy.’

• UKH Scotland director Leon Thompson says ‘this Budget underlines the potential gap opening up between Scotland and England on business rates.’ He says ‘with the Scottish Government receiving Barnett consequentials, the Scottish Government needs to use these funds to expand existing business rates relief for all Scottish hospitality businesses.’

• Mr Thompson adds ‘to not use these funds for this purpose would once again deepen the competitive disadvantage our sector experiences, compared to our English counterparts’ and says ‘Scotland needs action to fix its broken business rates system to support and protect our high streets through a permanently lower multiplier. Delay will only deepen the disadvantage and put more pressure on jobs and investment.’

COMPANY NEWS:

Sky News reports that TGI Fridays’ UK chain is up for sale again, within a month of changing hands. It says the ‘fate of TGI’s 49 British restaurants and 2,000-strong workforce is again uncertain after Interpath was hired to canvas appetite from potential investors…’

• Sky reports that ‘Interpath has begun contacting potential investors in the last few days about a potential deal.’ It reminds us that the above move ‘comes just a few weeks after TGI Fridays in the UK was acquired by Sugarloaf TGIF Management, a company run by the chain’s former chief executive, Ray Blanchette.’ It says that the reason for the rapid decision to market the business was unclear ‘although the commencement of an investment process at the start of the festive trading period will raise questions among prospective bidders.’

• Phil Broad, president, TGI Fridays International Franchising, told Sky News in a statement that ‘the directors of TGI Fridays UK can confirm they are working closely with independent advisors to explore all available options for securing the long-term future of TGI Fridays in the UK.’ It adds ‘since assuming control last month, our priority has been to protect jobs, support our employees, and continue to deliver the welcoming, celebratory experience guests expect from TGI Fridays.’ The statement adds that the ‘discussions are progressing constructively, and we will provide further updates when appropriate.’

Three-strong Irish pub chain Nancy Spain’s is seeking to raise money on Crowdcube off a pre-new money valuation of £8m. The company has current sales of £3.8m…

• The company says ‘we enjoy high-margin wet sales driven by the craic of our live-music. We also offer corporate event bookings for those craving something different, authentic and memorable. Our growth strategy is simple: building from our initial roots in London & now Manchester, we then aim to expand the proven Nancy Spain’s experience to other major cities in the UK.’

Lucky Cup has become the third Chinese coffee shop chain to exceed 10,000 outlets. Luckin Coffee has 30,000 units and Cotti has around 15,000.

HOLIDAYS & LEISURE TRAVEL:

Travelodge has warned that a ‘barrage of rising costs’ will significantly impact its operations and could reduce demand. it says that the rise in the national minimum wage will cost it around £11 million by 2026. Business rates bills will rise and tourist taxes, which may be introduced by a number of councils, could depress demand…

• CEO Jo Boydell says ‘into 2026, we expect further cost pressures from the 2026 increase in the national living wage, the Employment Rights Bill, the business rates revaluation due in April 2026 and the introduction of new visitor levies, though the impact remains difficult to quantify at this stage.’ Ms Boydell says ‘we remain focused on strong cost control and technology-driven efficiencies to help mitigate these pressures as far as possible.’

• The company adds that ‘the potential impact of the visitor levies is unclear as there is little consistency currently, with no centralised framework in existence, meaning that decision to charge a visitor levy and the associated rate is set locally with a lack of transparency.’ It says ‘the Government’s plan to empower English mayors to implement a nightly tourism tax on accommodation providers will also further increase costs, although there is not yet clarity on how this will be implemented.’

Heathrow airport has suggested that it faces business rates bill increase of as much as £145 million by 2030. Other airports could face similar percentage cost increases. Karen Dee, chief executive of Airports UK, says this ‘could still force some to review billions of pounds of transformational investments across the UK and potentially puts thousands of jobs at risk in the longer-term….’

• She adds it ‘will obviously have a knock-on effect for the businesses that depend on airport connectivity in all areas of England, negatively impacting local economies that depend on the supply chains, tourists and connections their airports provide. It’s a short-sighted move that passengers will feel in their pockets, with both hard-working families and business flyers experiencing price rises and more limited choices.’

APD will rise in line with inflation. Business Travel Association CEO Clive Wratten says that the rises ‘risk undermining growth at the very moment the UK economy needs it most.’ Re corporate travel in general, he says ‘mayors being given the power to introduce an overnight visitor levy has been positioned as a tool for local investment, but this will directly increase the cost of travelling for work in the very regions the government is seeking to level up.’

OTHER LEISURE:

The FT has suggested that gambling tax increases proposed in Wednesday’s budget could spur a spike in corporate activity.

Another day of volatility in share prices for gaming stocks and their service providers. Late afternoon saw Rank 8% down after a 10% rise on Wednesday. Evoke was down 4% after an 18% drop the day before. Entain was little-changed after a 3% rise on Tuesday and Playtech managed a second day’s major rise, up 10% after a rise of 6% on Tuesday.

FINANCE & MARKETS:

Markets are now pricing in a c90% chance for an interest rate cut when the Bank of England next reports its MPC’s findings on 18 December. Should this happen, it may go some way to mitigating the cost increases coming business’s way as a result of the Budget and announcements on the National Living Wage….

• The above betting implies that concerns about a slowing economy outweigh short term concerns that inflation will stay high. The OBR, which is independent of both the Government and the Bank of England, has said of its latest comments that ‘higher and more persistent inflation in this forecast reflects stronger momentum in services price inflation and higher wage settlement expectations for 2025 and 2026 outweighing a more persistent negative output gap.’ Some may consider that a wordy way of avoiding saying ‘stagflation’.

City AM reports ‘several top economists’ as warning that the UK remains in a weak fiscal position after Wednesday’s Budget….

• Michael Saunders at Oxford Economics says ‘the Budget still leaves the UK with a relatively weak fiscal position, with the public debt to GDP well above levels of 20 years ago, low potential growth and ageing population.’ He adds that ‘the UK is still not securely on a sustainable fiscal path.’

Sterling down at $1.3228 and €1.1425. Oil higher at $63.54. UK 10 year gilt yield up 3 basis points at 4.45%. World markets mostly better yesterday and London set to open around 15 points better as at 6.30am.

RETAIL WITH NICK BUBB:

Nick is taking a short break.