Market report: Mitchells & Butlers leaves City sour as it jumps on the dividend wagon

Investors in Mitchells & Butlers were left in need of a stiff drink on Thursday after the pubs chain put its next dividend payment on ice amid falling profits.

Shares in the All Bar One and Toby Carvery owner fell 18.3p, or 7.1%, to 232.5p after it removed the interim dividend.

It has pledged to review the full-year payment once it has made an assessment of trading prospects.

Cost headwinds, including labour and food and drink, have hurt the group with annual profits dropping to £77 million from £94 million in the year to September 30. Its operating margin fell to 14.4%, a drop of 0.8 percentage points.

The firm’s boss, Phil Urban, added that the Budget “could have been better” for the industry, despite a freeze on beer, wines and spirits duty.

He was underwhelmed by an extension to a £1000 discount to pubs on their business rates for boozers with a rateable value under £100,000.

Owing to high London property prices, rates expert Altus Group calculates there are 982 pubs in the capital which will be above that and will therefore not qualify for the aid.

Mitchells & Butlers was accompanied lower by rivals Greene King and Marston’s, which were off 20.1p to 497.9p and 2.2p to 101.8p respectively.

In light of these falls, the performance of City Pub Group in its debut session on AIM was particularly impressive. The company advanced 11p to 181p, having raised £35 million to expand its estate of 34 venues across London and southern England.

Companies trading without the right to their latest dividend payout included National Grid and Vodafone, cutting as much as 7 points off the FTSE 100 Index. The top flight was 19.81 points lower at 7399.21.

The FTSE 250 Index was also lower — off 18.14 points to 19,995.72.

Among second-tier stocks, flow control manufacturer Rotork impressed after holding full-year expectations amid an improving order book. Shares were 6.5p higher at 267p.

Healthcare software firm Servelec jumped more than 20% after it agreed a £224 million takeover offer backed by Montagu Private Equity.

The 313.1p-a-share proposal means that investors who jumped in when the company listed four years ago will have achieved a total return of about 185% on that investment, including dividends.

Shares settled up 52.12p, or 19.94%, at 313.5p.

M&S suit manufacturer Bagir doubled in value after announcing that global textiles firm Shangdong Ruyi has bought a 54% stake in the business for €16.5 million (£14.6 million).

Ruyi plans to accelerate the growth of Bagir’s wholly owned Ethiopian manufacturing site.

Shares, which have not recovered since a profits warning immediately after its stock market listing in 2014, soared 1.5p, or 109.1% to 2.88p.