Mitchells & Butlers (M&B), the All Bar One and Ember Inns operator, became the latest company to scrap its dividend after deciding to focus on reducing its £2.7 billion debt burden.

The company, which in January made a £391 million hedging loss relating to an aborted £4.5 billion property joint venture with Robert Tchenguiz, also said it had also called time on plans for any type of asset transaction, including conversion to a real estate investment trust, “for the foreseeable future”.

Joe Lewis, the Bahamas-based billionaire who last month bought a 22 per cent stake in M&B from Mr Tchenguiz, has told the company that he is “100 per cent supportive” of the decision to suspend the dividend.

Mr Lewis, who bought the shares at 130p, will forgo almost £9 million in final dividend payments, although with the shares closing at 148p, up 9½p, he is already sitting on a profit of almost £16 million on his £115 million outlay.

Elpida, the investment vehicle of John Magnier and JP McManus, the racing entrepreneurs, which has a 13 per cent holding, is also believed to be sanguine about the need for a dividend cut.

M&B is the latest in a string of companies to scrap or cut the dividend to preserve cash, including Wolseley, Yell, DSG and Punch Taverns. Holidaybreak, which reports results today, is tipped by analysts to cut the final payout.

M&B is not expected to consider restoring shareholder payouts until it has refinanced the £600 million debt facility that expires in December 2010. It has already used its strong cashflows to cut the sum outstanding to £475 million and expects to have reduced the figure to at least £250 million by December 2010.

Tim Clarke, chief executive, said that the cut, which would save £40 million this year and £60 million next year, was “all about proactive debt reduction in uncertain times, not a change in fundamental long-term prospects of the business”.

He said that the company was also seeking to cut its capital expenditure from £193 million to £120 million, although it had put on ice plans to sell non-core assets worth up to £250 million, including its ten-pin bowling and German restaurant businesses, due to falling values.

In the year to September 27, the group reported adjusted pre-tax profits down 13.5 per cent to £179 million from flat revenues of £1.91 billion, although after including exceptional losses of £417 million, mainly in hedging and property impairment losses, it reported a loss of £238 million.

Like-for-like sales during the year rose by 1 per cent, and the group said that like-for-like sales had risen by the same figure in the first eight weeks of the current financial year, as food sales rose by 3.5 per cent and drink sales by 0.5 per cent.

The company said it would continue to offset cost increases with improved purchasing and staff productivity, although Mr Clarke said that the group would need to increase like-for-like sales by 3 per cent this year to match last year’s operating profits. He admitted this was “most unlikely”.

Mr Clarke said the performance was creditable given the trading environment, particularly in London and the South-East, where the financial meltdown was being felt most acutely. He said consumer spending had “materially declined in the last couple of months”, although M&B was winning market share as consumers traded down from more formal restaurants to pubs that served food.

M&B served 110 million meals last year in its 2,000 outlets at an average price of £6.05 and is focusing its promotions on generating trade during weekdays and early evenings.

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