Marston’s Remains On Track
Marston’s, a leading UK pub operator and independent brewer, increased total underlying revenue by 2.9% to £1.174 billion in the year ended 28 September 2019, reflecting the positive impact of new openings and pub acquisitions and like-for-like sales growth in pubs, and growth in brewing helped by new distribution contracts.
Underlying EBITDA at £221.9 million was maintained compared to last year’s figure of £222.6 million and operating profit was £178.7 million, down slightly from £182.5 million in 2018). Operating profit per pub was in line with last year and EBITDAR per pub (adjusting for sale and leaseback agreements) increased by 2%.
Group operating margins were 0.8% behind last year and cost challenges remain a significant issue for the sector, particularly people and property costs. In addition, operating margin was impacted by converting pubs to franchise-style agreements and the impact of the acquisition of 15 community pubs in the first half-year.
Underlying profit before tax was £101.0 million – down from £104.0 million in 2018. Non-underlying items before tax were £121 million, of which £112 million were non-cash items, including a non-cash impairment charge from the revaluation of certain properties. On a statutory basis, the loss before tax was £20.0 million compared with £54.3 million profit in 2018.
Ralph Findlay, chief executive of Marston’s.
Marston’s operates an estate of 1,400 pubs, comprising managed, franchised and leased premises. It is the UK’s leading brewer of premium cask and packaged ales, including Marston’s Pedigree, Wainwright, Lancaster Bomber and Hobgoblin. The beer portfolio also includes Banks’s, Jennings, Wychwood, Ringwood, Brakspear and Mansfield beers. Marston’s has added Bombardier, Courage and McEwan’s to its brand portfolio most recently, as well as a range of licensed brands including Young’s, Founders and Estrella Damm.
Market Environment
The eating-out and drinking markets remain in growth overall. Marston’s drinks-led pubs and brewing business achieved good growth in 2019 against very strong comparatives which included the benefits of a World Cup and hot summer in 2018. These strong performances reflect underlying strength in wet-led pubs, which continue to benefit from consumer trends including demand for engagement and experiences, premiumisation, as well as the wide range of consumer choice from Marston’s owned and licensed brands within its extensive beer portfolio.
Consistent with market trends, sales growth in food-led pubs has been more subdued. While there has been good growth at the premium end of the market within Marston’s Revere and Pitcher & Piano pub and bar portfolio, the value segment has been more challenging as a consequence of continued sector over-supply and extensive price discounting. More positively, the last two years have seen some capacity reduction which has manifested itself in the form of some high profile CVAs, reductions in previously aggressive expansion plans and estate rationalisation from some of the larger scale operators. Marston’s Destination pub estate remains well placed to benefit from this reduced supply.
Brewing
Total brewing revenue increased by 3.1% to £389.3 million, principally reflecting volume growth in the core business and the benefits of the new distribution contracts in the year. Underlying operating profit increased by 1.9% to £32.6 million. Underlying operating margin of 8.4% was broadly in line with last year.
During the year Marston’s set out a commitment targeting a £0.2 billion reduction in net debt by 2023.
Ralph Findlay, chief executive of Marston’s, comments: “We are making good progress with our debt reduction plans and are ahead of schedule in meeting the accelerated £70 million of disposal proceeds which we are targeting in the current year. We continue to benefit from Marston’s balanced business model and our Taverns wet-led community pubs and brewing businesses have both once again outperformed the market, building on an outstanding year last year. We are employing a renewed focus on the proposition in our food-led pubs and remain well placed to benefit from reduced supply in this market segment, of which there is beginning to be some evidence.”
He elaborates: “Our principal focus remains to reduce our net debt by £200 million by 2023 – or earlier – and the measures we are taking now will result in a high quality business which is cash generative after dividends and capital expenditure. Trading is on track for the initial weeks of the current year and we are well prepared for the all-important Christmas and New Year period.”
