Pub Companies Take The Biggest Hit As UK Stocks Tumble

The FTSE tumbled on the back of the UK government’s announcement of new Covid-19 restrictions for England. After the announcement, the benchmark FTSE 100 index fell by 0.55% to 6,355, with midcaps taking it even harder, the FTSE 250 dropping to 19,340, a fall of 1.17%.

Pubs Under Pressure

Unsurprisingly, stocks in the pub and hospitality industry were hit the hardest.

Mitchells & Butler (MAB), owners of Toby Carvery, All Bar One and Harvester saw its share price fall to 216p, a drop of 3.36%. Earlier, it had announced that it intended to axe 1,300 staff as a result of the pandemic restrictions.

The company fell £123 million into the red during the last year and is currently spending between £35 million to £40 million every month.

It currently has only £225 million cash left on the books. The company currently spends £50 million a quarter servicing a £2.1 billion net debt, including property leases.

Fuller, Smith & Turner saw their share price fall to 684p, a drop of 2.3%.

This came on the back of half-yearly results that saw a swing to interim losses as a result of the pandemic. The company reported a pre-tax loss of £23 million, compared to a profit of £14.2million a year earlier.

Revenue dropped dramatically from £167 million to £45.6 million, as pubs were shut entirely for 14 weeks in the six months up to the end of September. The company revealed it had shed 20% of its workforce since the start of the new financial year.

Vaccine Rally

Earlier in the week pub stocks had staged a robust comeback, on the news that AstraZeneca had developed an easy to administer vaccine.

While the new tier restrictions and the subsequent market correction may represent a reality check, the outlook for pubs and hospitality should be improving in the second quarter of 2021, as vaccine programmes are progressively rolled out.

If previous pandemics are any indication as to consumer behaviour, then when the Covid-19 pandemic recedes the appetite for socialising and travel is likely to see an immediate spike.

In Wuhan, where the current crisis began, clubs and pubs have been packed with relieved revellers.