Marston's PLC Interim Report 2009
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MarMarston’sston’s PLC Interim Report 2009 REAL REAL REAL ALE QUALITY WELCOME 16439MARSTONS CVR.indd 1 16439 29/05/09 Proof 6 29/05/2009 10:25 MARSTON’SMARSTON’ S PLC Interim Report 2009 www.marstons.co.uk Stock Exchange Code: MARS ABOUT MARSTON’SMARSTON’S Marston’s is a leading independent brewerwer and pub operator. REAL We operate five breweries — Banks’s Brewery in ALE Wolverhampton, Marston’s Brewery in Burton-upon-Burton-upon-Trent,Trent, Jennings Brewery in the Lake District, RinRingwoodgwood BreweryBrewery REAL in the New Forest and Wychwood Brewerywery in Oxfordshire — QUALITY and we are the UK’s leading brewer of premiumpremium cask ales,ales, including Marston’s Pedigree and Jenningsings Cumberland REAL Ale. Our beer portfolio also includes Banks’s,anks’s, Brakspear, Hobgoblin, Mansfield and Ringwood beers.eers. WELCOME We have an estate of over 2,200 pubs and bars situated across England and Wales, comprised of 11,718,718 tenanted or leased pubs and 503 managed pubss includinincludingg Marston’sMarston’s Tavern Table, Two for One and Pitcher & Piano. Contents Highlights 01 Chairman’s Statement 02 Chief Executive’s Review 04 Financial Review 08 Responsibility Statement 10 Group Income Statement (Unaudited) 11 Group Statement of Recognised Income and Expense (Unaudited) 11 Group Cash Flow Statement (Unaudited) 12 Group Balance Sheet (Unaudited) 13 Notes 14 16439MARSTONS CVR.indd 2 16439 29/05/09 Proof 6 29/05/2009 10:25 MARSTON’SMARSTMARSTON’SON ’S PLCC Interim ReportR 2009 01 Highlights REAL ALE HIGHLIGHTS REAL QUALITY REAL WELCOME Underlying Basic Earnings Interim Dividend Underlying Per Share (p) Per Share (p) Operating Profit (£m) 72.6 10.0 10.0 4.80 4.80 71.3 67.2 9.1 4.36 65.4 8.2 8.1 58.3 3.63 3.30 04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 ❱❱ Resilient performance in difficult trading environment ❱ Turnover of £307.5m, 2.8% below last year (2008: £316.4m) ❱ Operating margin of 21.3%, 1.6% below last year (2008: 22.9%) ❱ Underlying operating profit of £65.4m, 9.9% below last year (2008: £72.6m) ❱❱ We remain well positioned to benefit from any sustained up-turn in the trading environment and to exploit opportunities presented by the changing demands of customers, including increased tourism in the UK. Costs remain firmly under control and cash generation strong ❱❱ Continued growth in food sales in Marston’s Inns & Taverns ❱❱ 18% increase in volumes of own brewed ale 16439MARSTONS.indd 01 16439 29/05/09 Proof 6 29/05/2009 12:31 02 MARSTON’ S PLC Interim Report 2009 www.marstons.co.uk Stock Exchange Code: MARS CHAIRMAN’S STATEMENT David Thompson Our performance has been resilient in the first Our focus on pub quality, which has long around 21.7%, in line with our plans and half-year and we have made good progress been at the heart of our strategy for pub reflecting good cost management. Annualised in implementing the operating priorities investment and divestment, is therefore cost increases of approximately £12 million described in the Chief Executive’s Review. critical to longer term success. We also have were substantially offset through improved Although trading conditions are difficult, we a track record demonstrated over many years purchasing and overhead reductions. have benefited from our vertically integrated of providing significant operational support to business model; a substantially freehold our tenanted pub operators to improve their Profit before taxation and exceptional items pub estate with a focus on community pubs; businesses and this has positioned them well was £27.7 million, 20.9% below last year outstanding value for money; fair, sustainable to meet today’s trading challenges. (2008: £35.0 million). Exceptional items agreements with tenants and lessees; and of £12.0 million before taxation relate to a growing brewing business. We have a We also have a leading market position in changes in the fair value of certain interest strong management team with experience of premium ale and strong local franchises rate swaps, which is a non-cash item. Profit operating in testing market conditions. based on the demand for our regional beers. after taxation and exceptional items was We are the UK’s largest brewer of premium £13.2 million (2008: £24.4 million). The smoking ban, the economic environment cask ale and the Marston’s, Jennings, and significant increases in taxation and Banks’s, Ringwood and Wychwood breweries Basic earnings per share before exceptional legislation have accelerated consumer trends are thriving despite the weak performance of items was 8.1 pence, 19.0% below last year and contributed to a marked polarisation the UK beer market. (10.0 pence). Basic earnings per share after in the performance of pubs. There is clear exceptional items was 4.9 pence (2008: evidence that pubs in strong locations with Results 8.9 pence). a clear customer focus continue to prosper, Turnover of £307.5 million was 2.8% below whilst weaker pubs with limited amenities and last year (2008: £316.4 million). Underlying customer offers have experienced declines. operating margin before exceptional items was 1.6% below last year at 21.3% (2008: 22.9%). Adjusting for the timing of Easter, the underlying operating margin would be 16439MARSTONS.indd 02 16439 29/05/09 Proof 6 29/05/2009 12:31 MARSTON’ S PLC Interim Report 2009 03 Chairman’s Statement REAL ALE REAL QUALITY REAL WELCOME Financing Valuation “Although trading Net debt as at 4 April 2009 was £1,296.9 As a consequence of an impairment conditions are difficult, million (2008: £1,269.7 million). review we have reduced book values by £42.2 million. This adjustment is largely we have benefited from We announced on 13 January 2009 that we reflected in the Group Statement of our vertically integrated have extended £295 million of our existing Recognised Income and Expense. £400 million bank facility from August 2010 business model.” to August 2013 providing funding for our Taxation and regulatory matters longer term requirements. Pubs and breweries face significant pressures as a result of the regulatory and Prospects Total capital expenditure was £31.7 million fiscal approach the Government has taken to Marston’s is a profitable and cash generative (2008: £63.3 million) reflecting reduced this important part of the economy. Recent business with high quality assets and investment capital in new site development, and proposed penal increases in taxation are brands, and is well positioned to benefit from although in the 53 weeks since 29 March extremely unwelcome, particularly so in the positive longer term trends in casual dining 2008 we have invested £85.6 million. As current economic climate. This is inconsistent and demand for differentiated offers. We previously announced, capital expenditure with achieving sustainable tax revenues from recognise the challenges that the sector for the full year is expected to be around the industry and fails to reflect the important faces, and our focus will continue to be on £50 million in 2009 compared to £117.2 role that pubs play in sustaining communities. offering good service and exceptional value million in 2008, consistent with our objective for money; promoting a sustainable and to reduce net debt in this financial year and The Business and Enterprise Committee fair basis for our dealings with tenants and progressively thereafter. has requested that the relationship between lessees; the development of an outstanding operators of tenanted and leased pubs range of ale brands; the tight control of costs Proceeds of over £13 million were generated and licensees should be reviewed by the and cash management. As a result, we are from the disposal of 32 smaller pubs and Competition Commission. Marston’s has had well placed to trade through testing times and other properties, achieving book value overall. a consistent approach over many years to exploit the opportunities the market offers. sharing risks and rewards with licensees, Dividend and in setting sustainable, fair rents. We The Board declares an unchanged interim were the first in the industry to introduce dividend of 4.80 pence per share which an independent Rent Panel, and to ensure will be paid on 30 June 2009 to those that all our agreements meet standards of David Thompson shareholders on the register at the close of plain English; we will continue to develop the Chairman business on 5 June 2009. This represents model for the simple reason that our success 22 May 2009 dividend cover, before exceptional items, of depends upon that of our licensees. around 1.7 times for the half-year. The Government intends to introduce a As previously stated, our dividend policy is to mandatory code on alcohol retailing. Whilst maintain a dividend cover of around two times we support legislation that contributes to over the medium term although the level of the responsible retailing of alcohol wherever cover in any one year may vary having regard it is sold, we are concerned about the to the immediate trading environment and effectiveness of the proposals and the cost longer term considerations. implications. 16439MARSTONS.indd 03 16439 29/05/09 Proof 6 29/05/2009 12:31 04 MARSTON’ S PLC Interim Report 2009 www.marstons.co.uk Stock Exchange Code: MARS CHIEF EXECUTIVE’S REVIEW Ralph Findlay “We are well positioned to continue to develop our offers to meet changing consumer demands and the challenges the sector currently faces . we have placed a high priority on improving the average quality of the pub estate in recent years .