Pub chain Mitchells & Butlers yesterday announced the loss of £274m and its finance director after an aborted property deal forced it to unwind a disastrous hedge on interest rates.
However, shares in the company rose almost 5% as investors reacted warmly to the news that it is undertaking a strategic review that some hope could lead to its sale.
They were further reassured by Robert Tchenguiz, Mitchells & Butlers' biggest shareholder and its prospective partner in the property deal, increasing his stake in the company.
It also unveiled Christmas sales figures up 0.7%, more positive than many recent announcements from a pub sector that has been hit by the introduction of a smoking ban in England and Wales. The 100 pubs it owned in Scotland saw sales growth of 4.4% over the same 17 week period.
The problems at Mitchells & Butlers, which has 2000 pubs nationwide, stem from the proposed launch of a property joint venture with Tchenguiz in July last year. It had been so certain that the deal would go ahead it entered into a series of derivative deals to protect it from changes in interest rates and inflation.
However, the prolonged credit crunch made funding impossible to achieve and both Mitchells & Butlers and Tchenguiz were forced to unwind their hedges. Mitchells & Butlers had already booked a £155m charge in its 2006/07 financial year and said it would take a further £119m post-tax loss in its current year.
Mitchells & Butlers, which owns the Harvester and O'Neill's chains, yesterday accepted the resignation of finance director Karim Naffah, who will be replaced by his deputy Jeremy Townsend.
Chief executive Tim Clarke's offer to quit was rejected but none of Mitchells & Butlers' seven executive directors will receive a bonus for 2007.
Clarke will lead a strategic review of the company. This will consider "all options for creating value", a spokeswoman said. Items on the table include buying weaker pub chains and options for realising value from its estate.
Mitchells & Butlers shares closed at 401p yesterday, up 19p but less than half the 909p peak they reached in the middle of last year.
Kate Pettem at Landsbanki said: "We do not believe the stock represents the same sort of value as Wetherspoon nor do we believe it is as good quality as Enterprise Inns."
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