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Pub groups hope Easter will be the new Christmas as COVID-19 restrictions tighten

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Job cuts and losses revealed today by Mitchells & Butlers PLC (LON:MAB) and Fuller’s, two of the UK’s largest pub chains, are likely to be echoed in coming months following the new COVID-19 restrictions.


Publicans in England had their worst fears realised with the announcement of tier bands with everywhere except the Isles of Wight and Scilly and Cornwall in the Tier-2 and Tier-3 bands.


London and Liverpool were in Tier-2 but Manchester and the North-east are in the highest risk Tier-3.


Fifty of the largest pub owners in Britain had already written to the government warning that this level of restriction would mean widespread closures of outlets and job losses, but that is now the reality.


Under Tier-2 pubs can open only if serving a ‘substantial meal’ with a closing time of 11 pm and last orders at 10 pm but the mixing of households is not allowed, which has left owners to question whether it is worth opening at all.


In Tier-3, pubs must close with the exception of takeaway drinks.


Matt Hancock, the Health Secretary, said the tiers would be reviewed regularly with a first assessment on December 16 that might see restrictions lowered in some areas ahead of Christmas.


UKHospitality chief executive Kate Nicholls said: “The new tier system will deliver another huge blow to hospitality, with 98% of trade now happening in tier 2 or 3 regions. This will see GBP7.8 billion of trading wiped out compared to last year if the restrictions last all of December.


“These are safe spaces for people to meet, relax and socialise and the sector is desperate to get staff back to work, open their doors and, in the long term, diminish reliance on the public purse and begin driving economic recovery.”


Underlining the weakened state of even some giants in the sector, Mitchells & Butlers’ accounts for the year to September 26 were prepared on a going concern basis, which assumes it has enough funds available to keep going for the current financial year.


Mitchells is seemingly facing an even tougher time in the months ahead but the company put a brave face on the numbers this morning and said it expects to recover its former momentum when things return to normal.


For the other listed groups, today’s announcement will make life uncomfortable but seemingly manageable assuming things do start to pick up from Easter.


Earlier this month, Liberum ranked the listed pub chains (and other leisure businesses) on the theoretical basis of how long they might survive based in a lockdown scenario based on debt headroom and monthly cash outgoings.


City Pub (LON:CPC) was the best positioned with a 63-month window followed by Fuller’s and Young’s on 33 and 30 months respectively.


Marstons had 24 months runway and Wetherspoons 22, but Mitchells & Butlers lagged by some distance at just seven months.


Liberum says it is a simple comparison and does not include the latest numbers on debt and cash burn, but it gives an indication of current financial health.


Shares in the All Bar One and Harvester owner Mitchells fell 2.5% today to 218p, Marstons dropped 3.3% to 66.5p and Fuller’s 2.9% to 680p.

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