REG - Marston's Plc - Annual Financial Report
21/12/2022 14:45
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RNS Number : 5178K Marston's PLC 21 December 2022
Marston's PLC (the "Company")
Annual Report and Accounts and Notice of Annual General Meeting 2023
In compliance with Listing Rule 9.6.1R, the Company announces that the
following documents have today been submitted to Financial Conduct Authority's
Electronic Submission Service and may shortly be viewed on the National
Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.ord.uk/#/nsm/nationalstoragemechanism)
· 2022 Annual Report and Accounts;
· Notice of Annual General Meeting to be held at 10am on
24 January 2023 ("AGM Notice");
· Proxy forms for the 2023 Annual General Meeting;
· Rules of the Marston's PLC Sharesave Scheme, proposed for approval;
and
· Rules of the Marston's PLC Long Term Incentive Plan, proposed for
approval.
As required by DTR 6.3.5R(3), the Company confirms that the 2022 Annual Report
and Accounts and AGM Notice are now available to view or download from the
Marston's PLC website: www.marstonspubs.co.uk/investors/
(http://www.marstonspubs.co.uk/investors/) . The 2022 Annual Report and
Accounts have been prepared using the single electronic reporting format
specified in the TD ESEF Regulation.
A condensed set of the Company's financial statements and information on
important events that have occurred during the financial year and their impact
on the financial statements were included in the Company's preliminary results
announcement on 6 December 2022. That information together with the
information set out below, which is extracted from the 2022 Annual Report and
Accounts, constitute the requirements of DTR 6.3.5 which is to be communicated
via an RIS in unedited full text. This announcement is not a substitute for
reading the full 2022 Annual Report and Accounts. Page and note references
in the text below refer to page numbers in the 2022 Annual Report and
Accounts. To view the preliminary announcement, slides of the results
presentation and audio webcast please visit
www.marstonspubs.co.uk/investors/results-presentations/
(http://www.marstonspubs.co.uk/investors/results-presentations/) .
For further information, please contact:
Bethan Raybould
General Counsel & Company Secretary
01902 329163
Additional information
Our Principal Risks and Uncertainties
The following principal risks are recognised by the Board as those that could
impact upon the operation of the business and the achievement of its strategic
objectives.
This is not intended to be a complete assessment of all risks as the Group
risks change over time.
Risk Description Potential impact Mitigation
1. MARKET AND OPERATIONAL During the current cost of living crisis, including high inflation and • Reduction in the number of sales or lost opportunities to increase our • Continual assessment of guest preferences; market and consumer insight
consumer price sensitivity, there is an increased risk that our prices become value proposition data
uncompetitive. Inflationary pressure on costs might be difficult to pass on,
resulting in reduced margin. • Reduction in guest satisfaction levels and repeat visits to our pubs • Continual analysis of sales performance data of single sites and by pub
format
• Increased costs as a result of seeking alternative suppliers
• Pricing strategy built upon careful analysis, in sufficient detail, of
Marston's revenue is dependent upon being able to offer, and attract, our guests' sensitivities
guests to an enjoyable experience of high quality food and drink at the right
price. It is reliant upon attracting existing guests back and winning new • Marketing, including digital marketing campaigns
guests. To achieve this we compete for high calibre people to operate our pubs
and focus heavily upon their training and management. We carefully choose our • Tracking guest feedback on Reputation.com and targeting our sites with
suppliers and the food and drink offered to our guests. Uninterrupted improvement
operations are dependent on the continual supply of goods and services, often
from single sources. The operational performance of our suppliers is • Cost control, including menu margin analysis
materially significant to our total profit.
• Investment, location and design of our pubs
• Continual awareness of our people offer compared to our competitors
Failure to attract or retain the best people can impact our pubs' performance. through participation in appropriate networks
Recruitment is more competitive due to a tightening labour market and wage
inflation. Disruption to key suppliers, particularly those closely involved • Improved training, induction and development programmes
with our day-to-day activities or shortage of commodities could significantly
impact our operations. Disruption to food supplies from the EU due to • Tracking the engagement of our employees and identifying action points
administration, or customs checks, could impact upon our offering to guests if for teams
we were unable to find substitutions. These factors could mean over time that
our pubs fail to attract guests, or do not reflect changing preferences, or • Continual assessment of suppliers' resilience and capacity
offer poor service or quality.
• Contingency planning with suppliers: identifying how products or services
can be substituted
Movement - Increased
Competition to recruit and retain the best people increased during this
financial year. Since reopening after the lockdown in 2021, there have been
short-term supply chain problems, although any disruption has been alleviated
without significantly impacting our guests.
Linked opportunity
Build the reputation of Marston's as an affordable, high quality experience
particularly when consumers are likely to change buying behaviour whilst the
cost of living increases.
Risk Description Potential impact Mitigation
2. PANDEMIC COVID-19 demonstrated how a global pandemic can impact our industry and public • Ability of our teams to operate safely • Remaining alert to Government advice
life. One would anticipate that at some point in the future another pandemic
will occur. The severity of a future pandemic upon human health and the • Reduction to the numbers of guests, and shorter stays at our hotels • Auditing our readiness to implement a response effectively
duration of measures taken to reduce the infection rate are uncertain.
• Increased operating costs • Adaption of our pubs to facilitate social distancing when required
• Training available for our pub teams
There is a risk that a variant of COVID-19 or another form of pandemic causes
infection rates to increase, leading to future restrictions on the public and • Building contingency plans for future lockdowns
trading regulations imposed on pubs and lodges.
• Consulting with our employees during an outbreak on safety concerns and
operational issues
• Simplified menus, streamlined guest offering to concentrate upon offering
the highest guest satisfaction at the right margin
• Regular scrutiny of asset values
Movement - No change in risk
Pandemic remains a risk to our business. Future variants of COVID-19 are
possible, while vaccination rates remain lower in many countries. Future
Government restrictions on trading could be announced in response to the NHS
once again coming under pressure.
Linked opportunity
Our pubs were sorely missed during the lockdowns, demonstrating their
importance for social interaction and leisure. Pubs benefit from the increase
in spend within the locality of the home, as people spend more time at home
and are less likely to holiday abroad. The reopening of a pub is a chance to
reinvigorate its offering and to stand out to guests.
Risk Description Potential impact Mitigation
3. LIQUIDITY Our financial strategy is to reduce our debt below £1 billion. The UK economy The liquidity of the business could come under strain as a result of economic • Seek further covenant amendments to avoid an expected covenant breach at
is likely to go into recession as a result of high inflation, rising interest pressure on the pub sector, particularly if rising prices cannot be passed on 31 December 2022
rates, rising costs in energy and a fall in consumer confidence. to consumers.
• Seek to increase the banking facility through an amend and extend
agreement
Consumers will reduce spending as the economy goes into recession and as • Reduce debt
prices rise. The cost of living crisis created uncertainty regarding consumer
behaviour. While in previous recessions pubs have remained attractive and • Conserve liquid funds by reducing costs
affordable, this might not always be the case.
• Maintain strong relationships with financial backers
• Lobby Government on the importance of the pub trade to the UK economy
• Plan for resilience within our financial model to cover an economic
downturn
Movement - No change in risk
COVID-19 is no longer the immediate threat that it has been in the last few
years. The economy in the UK is weakening, and consumer confidence is falling.
The Group can mitigate the impact of this by reducing costs, keeping its
offering to guests attractive and affordable.
Linked opportunity
The movement in the economy can stimulate a change in the marketplace as
higher-priced or less attractive operators are forced out and creates
opportunities to stand out to our guests.
Risk Description Potential impact Mitigation
4. HEALTH AND SAFETY, FOOD SAFETY The safety of our guests, our people and the public is fundamental to our • Financial penalties • Embedded health, safety and hygiene management systems
activities. We seek to attain the highest levels of safety across our estate.
Lapses of safety damage the trust and reputation of the business. • Significant damage to reputation • Dedicated safety advisers for our pubs seeking continuous improvement
• Increased business complexity impacting upon our guests' experience • Regular independent expert safety audits
The provision of accurate and reliable information on food, to our guests, is • Training of team members including e-learning modules on specific risks,
paramount. Our guests trust in our high standards of food hygiene, food such as allergens, for completion by all front and back of house team members
preparation and quality.
• Escalation of potential safety threats to senior operational management
• Maintaining excellent levels of compliance through policies, training and
Breaches of health and safety regulations and food standards attract media monitoring
attention and high penalties.
• Working with our supply chain to maintain accurate records identifying the
constituent food ingredients and allergens of our meals
Public concern over allergens still remains high. There is a risk that • Due diligence on accepting new suppliers, monitoring and tracking all
information is collected incorrectly from our suppliers and/or misinterpreted suppliers
for our menu items. There is also a risk if a team member mis-advises a guest
on ingredients or serves the wrong meal. Increased regulation directly • Rigorous investigation of complaints
affecting Marston's or our suppliers could increase the complexity of the
information to be provided and the cost of compliance. • Tracking legislative changes and adapting operations
• Food information system facilitating the collection of detailed
information on food constituents, providing a clear audit trail and removing,
where possible, the chance of manual error
• Smaller menus than previously, allowing a greater focus upon quality
Movement - Decreased
The continued development of our food information system has given us the
ability to collect and provide more detail to our guests. The risk remains
significant because of the wide variety of food items we source, and levels of
food intolerance amongst the public. When our systems or practices are found
to be at fault, we confront any failing honestly, in order to learn and build
better safeguards for the future.
Linked opportunity
In a competitive marketplace there is an opportunity to build a reputation for
absolute commitment to guest care and building long-term trust.
Risk Description Potential impact Mitigation
5. FINANCIAL The Group's financial system handles many transactions accurately and • Reputation damage and additional financial operating restrictions imposed • Covenant waiver permission sought from bondholders/ financial lenders
securely. Accurate reporting is key to running the business effectively, and by lenders
COVENANTS, in compliance with our financial covenants.
• Regular detailed management accounts, budgets and forecasts
• Loss of investor confidence
PENSION FUND
• Detailed financial data collected from our sites
DEFICIT, AND Breach of the covenants with our lenders. • Financial auditing of our sites based on data analysis
ACCOUNTING • Constant monitoring of financial ratios
CONTROLS Incorrect reporting of financial results. • Internal and external audits
• Segregation of duties
The pension deficit might increase if investment yields fall. • Access controls within our systems
• Levels of authority
Unauthorised transactions, failure of accounting controls or overridden. • Commitment to reduce debt
• Management of the pension's investment portfolio to spread risk
Greater responsibility to report on control effectiveness as a result of the • Controls improvement programme underway to meet future regulation
Government's white paper on 'Restoring Trust in Audit and Corporate anticipated from the Government's white paper on 'Restoring Trust in Audit and
Governance'. Corporate Governance'.
Movement - No change in risk
There are strong controls mitigating this risk to a low level. The impact on
our covenants is reduced by clear communications to, and engagement with, our
lenders which explains the financial impact of the lockdowns in recent years
and the trading conditions.
Linked opportunity
To further strengthen our relationships with our bondholders, communicating
information on the business and the impact of decline in consumer confidence
upon our sector.
Risk Description Potential impact Mitigation
6. POLITICAL Changes to Government policy impact upon the cost base for operating pubs, • It may be harder to secure long-term agreements with our suppliers while • To constantly review the positioning of our guest offer at the right price
either positively or negatively. At the same time, economic factors such as prices rise and shortages of some commodities or products exist point, to maintain or grow margin whilst remaining competitive
AND ECONOMIC the current period of inflation and high demand for certain commodities and
products, also impacts our operating costs and those of our supply chain. • Continue to lobby Government on matters that are likely to restrict trade
Legislative changes also impact business, particularly in recent times the or increase costs
move to decarbonise the economy. It remains uncertain how successful the
Government and the Bank of England can be in curbing inflation pressure in the • Continually assess our supply contracts and renegotiate terms when they
year ahead and what the impact will be on consumer confidence. fall due
• Where feasible, work with our key suppliers to hold sufficient stocks in
the UK to cover short-term disruption
There is a risk that inflation continues to rise, leading to higher interest
rates, increased unemployment, and low consumer confidence. The UK as well as • Consider alternative sources of supply if our suppliers have trouble
many other countries is at a risk of a deep recession, exacerbated by high importing goods
energy costs and shortages of commodities.
• Financial forecasts stress tested based on reduced revenue as a result of
an erosion in consumer confidence
Movement - Increased
Inflation impacts the cost base for our business as well as our suppliers and
our partners. At the same time our guests have less money to spend, which
makes a recession more likely in the UK.
Linked opportunity
Pubs normally remain very competitive when prices are rising in the economy.
They are perceived as an affordable treat offering an experience which can be
flexed to suit demand, for instance offering greater value for money over
quality or the range of choice. Our ability to track and react quickly to
changes in preference could offer a competitive advantage. Our scale of
operations and long-term stable relationships with suppliers could also help
us control costs better than competitors.
Risk Description Potential impact Mitigation
7. INFORMATION TECHNOLOGY Our business activity is reliant upon our IT network to communicate, operate • Reduction in the effectiveness of operations, business interruption and • Anti-virus and firewall protection
effectively, serve our guests, process transactions and report on results. The loss of profit
continuous operation of our business is dependent upon the uninterrupted
• Access control, password protection and IT policy adherence
running of our computer network, site links and the internet. The cyber threat • Regulatory fines as a result of the loss of data
has increased in recent years targeting vulnerable businesses with data theft,
• Network and device controls and monitoring
data encryption, denial of service and fraud. • Reputational damage due to a loss of data
• Penetration testing and remediation
Marston's handles the personal contact details of many of its guests who opt
to use the Wi-Fi or sign up to receive mails. In addition, the Group retains • Cyber defence testing
the employment data for a large number of people.
• Backup procedures
• Data recovery plans and rehearsals
Threats to IT are both external and internal and could result in a network
outage, loss, theft or corruption of data or denial of service. The risk • Raising employee awareness regarding IT security
extends to the companies that we share data with for processing or storage on
our behalf. • Data security policies, processes and training
• Data breach incident response plan and scenario training
Movement - No change in risk
Global cyber risk has evolved in recent years, particularly the exploitation
of vulnerable companies that may have less defence but exist within supply
chains sensitive to disruption. Cyber criminality has, in recent years, sought
to take advantage of stretched supply chains and the increase in homeworking
to exploit gaps in corporates' cyber defences.
Linked opportunity
Our digital engagement with guests is greatly valued by them, whether it's to
book a table or a room, receive offers by email or order a meal. Keeping our
guests' confidence allows us to take advantage of these tools and have the
confidence to innovate new ways to engage and market our business digitally.
Our internal controls are continually enhanced by digital tools including, in
recent years, our analysis and reporting of sales data, team planning,
recruitment, concessions and food information.
Statement of Directors' responsibilities in respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and the Group
and parent Company financial statements in accordance with applicable law and
regulations. Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that law they have
elected to prepare the Group financial statements in accordance with
UK-adopted international accounting standards and applicable law and have
elected to prepare the parent Company financial statements in accordance with
UK accounting standards and applicable law (UK Generally Accepted Accounting
Practice), including FRS 102 The Financial Reporting Standard applicable in
the UK and Republic of Ireland.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and parent Company and of the Group's profit or loss for
that period. In preparing each of the Group and parent Company financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable, relevant,
reliable and prudent;
· for the Group financial statements, state whether they have been
prepared in accordance with UK-adopted international accounting standards;
· for the parent Company financial statements, state whether
applicable UK accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
· assess the Group and parent Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern;
and
· use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease operations, or
have no realistic alternative but to do so. The Directors are responsible for
keeping adequate accounting records that are sufficient to show and explain
the parent Company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006. They are
responsible for such internal controls as they determine is necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general responsibility
for taking such steps as are reasonably open to them to safeguard the assets
of the Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and
the undertakings included in the consolidation taken as a whole; and
· the Strategic Report/Directors' Report includes a fair review of
the development and performance of the business and the position of the issuer
and the undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face.
· We consider the Annual Report and Accounts, taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Group's position and performance, business model
and strategy.
Disclosure of information to Auditor
The Directors who held office at the date of approval of this Directors'
Report confirm that, so far as they are each aware, there is no relevant audit
information of which the Company's Auditor is unaware; and each Director has
taken all the steps that they ought to have taken as a Director to make
themselves aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.
ANDREW
ANDREA
HAYLEIGH LUPINO
CHIEF EXECUTIVE
OFFICER
CHIEF FINANCIAL OFFICER
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