Pub group Mitchells & Butlers (MAB.L) warned of "cost headwinds" in its latest set of full-year results on Thursday, as it hailed a return to profitability following the end of COVID-19 lockdowns.
Its full-year 2021 results like-for-like sales declined by 9.6%. However, it has seen a like-for-like sales growth of 2.7% in the last eight weeks since the end of its financial year with total sales in growth of 0.5%.
M&B owns popular high street food and drink establishments such as All Bar One, Toby Carvery and Harvester which were hit particularly hard by lockdowns.
Investors cheered the news with the FTSE 250 company's stock gaining as much as 6% in early trade.
The group also said it had strengthened its balance sheet through a successful £351m ($468m) equity raise and refinanced debt arrangements.
As part of new funding arrangements put in place in February the group has agreed not to pay a dividend until at least January 2023.
“Despite the inevitable challenges faced by our business over the past year we are now well positioned to regain the momentum previously built as we come out of the pandemic," said CEO Phil Urban.
"The trading environment remains challenging and cost headwinds continue to put pressure on the sector."
The group singled out employment and utilities costs as concerns going into next year.
Prior to the COVID-19 pandemic the business faced inflationary cost headwinds in the region of £60m to £65m per year. In the short-term, cost pressures are expected to be higher than average due principally to recent escalations in energy costs, it said.
"Ultimately investors will need to remain patient. The group’s agreed not to return any cash until at least January 2023, which should mean the balance sheet continues to improve even if capital expenditure rises," said Matt Britzman, equity analyst at Hargreaves Lansdown.
"But there’s a long road ahead, and progress needs to continue over what could be a tough winter period.”
The results come following M&B's launch of a partnership with Uber Eats which will allow customers to order food from around 1,000 of its venues on the app.
It will be one of the biggest pub partnerships on the platform, which has seen operator numbers soar since the pandemic hit last year.