Pub shares lose their fizz on inflation fears
MITCHELLS & Butlers tumbled as Canaccord Genuity cut its ‘Buy’ rating on the stock.
The stockbroker has moved the restaurant and pub chain to a ‘Hold’ amid fears it looks vulnerable to increasing competition and rising costs in the sector. Experts say the UK eating out and drinking sector is facing the worst cost pressures in a decade. A weaker pound means food costs are going up, the National Living Wage has increased costs and business rates are rising.
And with official figures yesterday putting inflation at 1.8pc, consumers feeling the pinch may be about to rein in how often they go out.
Canaccord is concerned by Mitchells’ ambitious expansion plans – the firm expects to complete 300 remodels and conversions over the full year. Last month the chain warned there could be pressure on margins because of rising costs. Yesterday, shares slipped 2.2pc, or 5.7p, to 250.6p.
It wasn’t the only pub group feeling the pinch on the day. Greene King fell 0.7pc, or 4.5p, to 653p, while JD Wetherspoon lost 1pc, or 9p, to 932.5p.
The FTSE 100 finished down 0.14pc, or 10.36 points, to 7268.56.
Tui was the greatest riser of the day, up 5.3pc, or 61p, to 1218p as it confirmed its dividend.
Banks also featured among the top flight. HSBC leapt 1.3pc, or 9.1p, to 697.2p, after it appointed Ian Stuart as its new chief executive. RBS, meanwhile, climbed for a second day as it was estimated that job cuts at the firm could save the bank £800m a year. Shares leapt 2.7pc, or 6.4p, to 241p. Virgin
Money got a boost from an ‘outperform’ rating from RBC.
Analysts said it was a unique bank with a low-risk profile, which could outperform rivals.
The broker has a target price of 415p on the stock. It said it was a trusted brand with an established branch network. Shares gained 4.9pc, or 16p, to 345p.
Online car retailer Pendragon tumbled as it revealed pre-tax profit dropped 7.6pc to £74m in 2016. Used vehicle sales grew 64pc over the past five years.
Pendragon expects double-digit revenue growth this year and said revenues from used cars should double over five years.
The group saw 22.7m visits to its websites last year – an increase of 14.4pc – and said initiatives such as Sell Your Car, where drivers can sell their car to the group even if they’re not buying through it, were helping the online retail sector evolve. Aftersales revenues also climbed 4.1pc. Shares dipped 3.6pc, or 1.25p, to 34p. Altitude Group plunged as it warned that, while results for the year would be ahead of expectations, it was down to tight cost controls. The firm said it had made savings of around £1.8m a year after restructuring.
Altitude has started work on Click 2 Ship websites for resellers of promotional products. Some 22,000 sites were made in the final three months of the year. Despite the upbeat outlook, shares plunged 17.3pc, or 15.5p, to 74p.
Gaming and lottery firm Veltyco soared as it said full-year results would exceed expectations. Net revenues for the year have more than doubled to £4.8m while earnings have almost tripled to £1.7m.
The business, which runs poker and binary trading websites, will report its results in April. Shares surged 18.3pc, or 6.5p, to 42p.
Xeros Technology has developed a new cleaning solution for firefighters’ gear – a product to clean personal protective equipment and extend the life of the garments.
It will be available to more than 58,000 fire stations across the US and could be used in other industries such as mining or the military. Shares were 19pc, or 4.55p down at 245p.