REG - Marston's Plc - RESULTS FOR THE 26 WEEKS ENDED 30 MARCH 2024
14/05/2024 07:00
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RNS Number : 2436O Marston's PLC 14 May 2024
14 May 2024
MARSTON'S PLC
("Marston's" or "the Group")
RESULTS FOR THE 26 WEEKS ENDED 30 MARCH 2024
STRONG LIKE-FOR-LIKE SALES GROWTH, +7.3%, AHEAD OF THE MARKET, DRIVING GOOD
GROWTH IN PUB OPERATING PROFIT, +22%, AND ENABLING CONTINUED REDUCTION OF
DEBT; ENCOURAGING OUTLOOK FOR H2
Marston's, a leading UK operator of 1,395 pubs, today announces its Interim
Results for the 26 weeks ended 30 March 2024 ("H1" or "the period").
Underlying Statutory
2024 2023 2024 2023
Total revenue £428.1m £407.0m £428.1m £407.0m
Pub operating profit £52.7m £43.1m £51.8m £43.1m
Net finance costs £(52.9)m £(48.9)m £(78.7)m £(83.4)m
Income/(loss) from associates £(0.6)m £2.2m £(16.6)m £2.2m
Profit/(loss) before Tax £(0.8)m £(3.6)m £(43.5)m £(38.1)m
Net profit/(loss) £(0.6)m £(2.9)m £(36.6)m £(28.8)m
Earnings/(loss) per share (0.1)p (0.5)p (5.8)p (4.5)p
Net cash inflow - - £30.5m £11.5m
NAV per share - - £0.95 £0.98
Underlying pub operating margin 12.3% 10.6% - -
Strong financial performance
· Revenue up 5.2% to £428.1 million (H1 FY2023: £407.0 million), with
good momentum across food and drink sales and like-for-like sales up 7.3%,
outperforming the broader market(1)
· 22% increase in underlying pub operating profit to £52.7 million (H1
FY2023: £43.1 million)
· Underlying pub operating margin of 12.3% (H1 FY2023: 10.6%), with
good progress on cost efficiency programme, despite inflationary environment
· Underlying share of CMBC's profit/(loss): £(0.6) million (H1 FY2023:
£2.2 million), reflecting CMBC's accelerated investment in brands; the CMBC
H1 FY2024 dividend received was £13.8 million (H1 FY2023: £10.6 million)
· Statutory loss before tax of £(43.5) million (H1 FY2023: £(38.1)
million) is primarily a result of two non-cash items: the increase in
liabilities from interest rate swaps of £25.8 million, together with a
one-off charge of £16.0 million in respect of CMBC's ale brand impairment and
onerous contract provision
Focus on cash generation, debt reduction and extension of bank funding
· Operating cash inflow of £90.9 million (H1 FY2023: £69.9 million),
with net cash inflow following interest, capex and disposals of £30.5 million
(H1 FY2023: £11.5 million)
· Continued progress with debt reduction strategy: net debt excluding
IFRS 16 lease liabilities reduced by £24.5 million during H1 FY2024 to
£1,160.9 million (FY2023: £1,185.4 million); debt reduction remains a key
focus
· Successfully secured amendment, extension and increase of banking
facilities totalling £340 million
Ongoing operational improvement
· Well-positioned to continue to capitalise on consumer lifestyle
changes with a predominantly freehold pub estate and community focus with
limited city centre exposure
· Continued improvement in our Reputation score, up to 787, from 766 at
FY2023, as we continue to work to improve quality and consistency across our
pubs(2)
· Operational efficiency initiatives progressing well, reflected in
positive margin growth
Current trading and outlook
· Encouraging start to H2 with like-for-like sales in the last six
weeks +4.0% vs. last year, excluding the impact of the additional May bank
holiday last year like-for-like sales were +5.3%
· Continued progress on cost efficiency programme and targeting margin
improvement of at least 200bps over the medium-term, with significant progress
already made
· As with prior years, the business will be impacted by the seasonality
of trade which typically sees the majority of revenue, profit and cashflow
generated in H2
Commenting, Justin Platt, CEO said:
"A positive H1, Marston's has delivered strong like-for-like sales growth of
+7.3% outperforming the market and achieving an impressive 22% uplift in pub
operating profit. We have managed costs well and made further progress to
reduce debt. This performance is testament to the dedication and hard work of
our talented team, who constantly strive to delight our pub-loving guests."
"The outlook for H2 is encouraging. With a number of 'must not miss' major
sporting events, our massively upgraded pub gardens and much-loved food menus,
we expect our pubs to be very popular this summer."
"Reflecting on my first few months with Marston's, I am very excited by the
potential that lies ahead. The UK Pub Market offers significant value-driving
opportunities for those who can engage and deliver for their guests. With our
high-quality estate and guest obsessed team we are well placed to capitalise
and to deliver consistent, reliable cashflows that will drive value for our
shareholders."
Analyst Presentation
Marston's PLC will be hosting an analyst presentation on 14 May 2024.
Attendance is by invitation only. A recording of the presentation will be
available on the Marston's PLC website at
https://www.marstonspubs.co.uk/investors/results-presentations/
(https://www.marstonspubs.co.uk/investors/results-presentations/) following
the event.
Notes
1. Month-on-month outperformance of Peach Tracker in H1 FY2024.
2. Reputation Experience Management, March 2024.
The Group uses a number of alternative performance measures (APMs) to enable
management and users of the financial statements to better understand elements
of financial performance in the period. APMs are explained and reconciled in
note 17 of the financial statements.
ENQUIRIES:
Marston's PLC Tel: 01902 329516
Justin Platt, CEO
Hayleigh Lupino, CFO
Instinctif Partners (Media Enquiries) Tel: 020 7457 2010/2005
Justine Warren
Matthew Smallwood
Joe Quinlan
NOTES TO EDITORS
Marston's is a leading pub operator with an estate of 1,395 pubs nationally,
comprising managed, partnership ('franchised') and tenanted and leased pubs.
Marston's employs around 10,000 people. It also holds a 40% holding in
Carlsberg Marston's Brewing Company.
H1 2024 PERFORMANCE OVERVIEW
Performance in the first half of 2024 has been positive. Whilst the
macroeconomic environment remains challenging, our focus on community pubs,
with minimal exposure to the more volatile demand in city centre
establishments, continues to deliver successful results. The Group benefits
from an estate that is balanced across formats and locations, with
well-invested pubs, and is set for sustainable like-for-like growth and
shareholder value creation over the medium to long term.
We remain focused on our strategic priorities of driving enhanced guest
satisfaction and team engagement. The Group continued to improve the quality
and experience we provide across our sites which delivered positive progress
on our guest satisfaction measures, with improvement in our Reputation score,
up to 787, from 766 at FY2023. We were also extremely proud to win Best Large
Pub Company Employer 2024, a testament to our ongoing effort to support and
motivate our team.
Trading
Revenue increased by 5.2% to £428.1 million (H1 FY2023: £407.0 million).
Retail sales in the Group's managed and partnership pubs rose by 5.7% to
£396.6 million (H1 FY2023: £375.3 million) and total outlet sales increased
by 5.8% to £411.0 million (H1 FY2023: £388.3 million). Like-for-like sales
for the period were up 7.3%, reflecting strong trading over the festive
period, with positive momentum in both drink sales and food sales highlighting
the ongoing appeal of our business.
Underlying operating profit, excluding income from associates, was up 22% to
£52.7 million (H1 FY2023: £43.1 million) and the underlying pub operating
margin of 12.3% was 1.7% ahead of the prior year (H1 FY2023: 10.6%). The
success of initiatives to manage price increases, product mix and drive
enhanced efficiencies have enabled us to deliver margin growth, despite
persistent inflationary pressures.
Underlying operating profit, including income from associates, was £52.1
million (H1 FY2023: £45.3 million), an increase of 15%. Underlying profit
before tax was a loss of £(0.8) million (H1 FY2023: loss of £(3.6)
million). Underlying profitability continues to reflect the seasonality of
trade, which typically sees the majority of profit generated in H2. The
statutory loss before tax of £(43.5) million (H1 FY2023: £(38.1) million) is
primarily a result of two non-cash items, these are the increase in
liabilities from interest rate swaps of £25.8 million, together with a
one-off charge of £16.0 million in respect of CMBC's ale brand impairment and
onerous contract provision.
Net assets and property disposals
Net assets were £601.5 million (H1 FY2023: £620.1 million) with net asset
value per share of £0.95 (H1 FY2023: £0.98).
In FY2024 we expect to dispose of £50 million of non-core and unlicensed
properties. Disposal proceeds of £9.6 million have been realised in H1,
which, overall, achieved net book value. Since the end of H1, c.£16 million
of additional disposals have either sold or exchanged.
Carlsberg Marston's Brewing Company (CMBC)
Underlying income from associates was a loss of £(0.6) million (H1 FY2023:
£2.2 million), which is the Group's share of the loss after tax generated by
CMBC. The H1 result reflects CMBC's accelerated investment in 1664 following
the brand rights acquisition and further investment in Carlsberg.
The H1 dividend received was £13.8 million (H1 FY2023: £10.6 million).
Board
Justin Platt joined the Group as Chief Executive Officer on 10 January 2024.
Justin has over 30 years' experience in hospitality and consumer-facing
businesses, having spent the last 12 years at Merlin Entertainments; most
recently as Chief Strategy Officer and prior to that in a variety of
operational leadership roles. Justin's combination of operational and
strategic experience in multi-site leisure businesses equips him well to lead
Marston's through the next phase of its development.
Effective from the 23 January 2024, Rachel Osborne joined the Board as an
independent Non-executive Director and Chair of the Audit Committee. Rachel
also joined the Nomination and Remuneration Committees, at the same time.
As previously announced, William Rucker is due to step down as Director and
Chair of the Board, with effect from 8 July 2024. A search for a successor is
currently in progress.
Dividend
The Board confirms that given its priority to reduce the overall level of
borrowing and the continued macroeconomic uncertainty, no dividends will be
paid in respect of financial year 2024. The Board is cognisant of the
importance of dividends to shareholders and intends to keep potential future
dividends under review.
Outlook
The positive trading momentum which characterised H1 has continued, with
like-for-like sales in our managed and partnership ('franchised') pubs +4.0%
in the six weeks since the period end. Excluding the impact of the additional
May bank holiday last year, like-for-like sales were +5.3%. We have
continued to invest in further enhancing our estate, including our pub gardens
and, with major sporting events scheduled for H2, we are well positioned to
capitalise on these key trading opportunities. Similar to prior years, the
business will be affected by the seasonality of trade which typically sees the
majority of revenue, profit and cashflow generated in the second half of the
year.
As previously guided, the Group continues to drive efficiencies and remains
confident of delivering at least £8 million of cost efficiencies in-year.
This will be principally achieved from reduced energy and labour costs, as
well as improving margins through simplification. With our predominantly
freehold estate, our fixed energy costs and a significant proportion of our
food and drink costs secured for FY2024, this provides us with a high degree
of confidence going into H2.
Regarding interest costs, our borrowings are largely long-dated and
asset-backed. 93% of our borrowings are hedged and therefore not at risk of
changes in interest rate movements that may occur during the year. The
refinancing will incur one-off transaction costs of c.£4 million.
We reiterate our previous commitment to reduce net debt excluding IFRS 16
lease liabilities to below £1 billion by 2026.
H1 2024 BUSINESS UPDATE
Market dynamics
Amid macroeconomic challenges, pub spending remains resilient, and is
projected to grow steadily at around 3% CAGR from 2023 to 2028.(1) The
post-pandemic shift towards remote work has redirected leisure activities away
from city centres, benefiting community-centric pubs. Marston's is
strategically positioned to benefit from this growing market opportunity.
Pubs remain integral to British culture, offering unique social experiences.
Social engagement has surged post-pandemic, aligning with consumer preferences
for experiences over possessions and pub visits are a primary means of
fulfilling these fundamental aspects of connection. Pubs are expected to
sustain popularity across diverse demographics, but success relies on
tailoring offerings to local areas to foster lasting loyalty. Those catering
to more rural locations, with higher disposable incomes, and those in areas
where spending power is likely to recover fastest from cost-of-living
pressures, will have a competitive edge in this respect.
Strong fundamentals
Marston's has strong business fundamentals on which to build, including: a
predominantly community-based estate; freehold ownership; a balanced
management model between managed, partnership ('franchised') and traditional
tenanted and leased; along with positive cash generation.
We are a pub company with a core estate of c.90% community-based pubs.
Operating in the mainstream market, with a pub for every occasion, our
approach means we are well-hedged against changes in consumer trends. We
target the sweet spot of consumers with higher disposable incomes, looking to
spend more time in lower tempo social environments.
We have predominantly freehold ownership of our pubs, with a related asset
value of £2.1 billion. This not only allows greater operational flexibility,
but it also provides more stability in terms of fixed costs, as the vast
majority of our estate is not subject to rent increases, or renegotiation.
Marston's operates a diversified ownership model, with 55% of our pubs being
partnerships run by entrepreneurs operating under an agreement that drives
their business forward. The remainder of our pubs are either managed (30%) or
tenanted and leased (15%). This approach allows us the flexibility to match
the right model with the right location and licensee, ensuring sustained
success.
We have a clear, cash generative operating model, that will support our
ongoing debt reduction plans.
Operational delivery
Operationally, we remain focused on driving guest satisfaction in a great
environment served by engaged and motivated teams, and we continue to be a
business driven by our data and insights.
We aim to delight our guests so they visit our pubs time and time again and we
remain focused on our goal of achieving a Reputation score of 800+ for all of
our pubs. Over the last six months, our operational delivery has been strong,
with a further 101 pubs moving into the 800+ category, demonstrating our
ongoing commitment to improving our service and guest satisfaction in a
consistent manner.
We truly believe that people are an integral part of pubs, and we want
Marston's to be a great place to work for our c.10,000 employees - happy,
engaged teams deliver great guest experiences. To achieve this, we set
ourselves a target of achieving a 'Your Voice' engagement score of 8 or more,
and in 2023 achieved an average employee engagement score of 8.2, with
participation rates of 84%.
ESG and sustainability
Our ESG agenda is structured around four core pillars where we believe we can
make the biggest impact: Planet, People, Product and Policy.
Highlights for the year so far include:
· The installation of Solar PV panels at our Pub Support Centre
and, so far, at six of our pubs to increase the mix of renewable energy and
reduce costs. Over H1 FY2024, this has contributed 23,056KWh of solar power
and saved 5,188kg of CO2
· Increasing the roll out of EV chargers within our estate with 437
EV chargers across over 190 of our pubs and five ultra-fast charging hubs. Our
charging network has been responsible for c.65+ million miles travelled by
electric vehicles, saving 12.5 million kg of CO2 - the equivalent of the
average annual total mileage for 7,575 individuals
· Progress on our target to reduce food waste by saving over
15,000+ meals from waste in partnership with Too Good to Go, and supporting
charities like the Trussell Trust to help eradicate food poverty
· Industry recognition of our People-powered approach winning Best
Large Pub Company Employer 2024 in the Publican Awards and Best Workplace
Mental Health Strategy 2024 at Hospitality's Mental Health Heroes 2024, by
Burnt Chef
Marston's future value drivers
Marston's is well-positioned to capitalise on the opportunity ahead of it:
· We have strong business fundamentals on which to build, and a focus
on delivering operational excellence and commitment to a sustainable future;
· With our focus on community-based pubs, we operate in a structurally
growing area of the market(1), and are well-placed to take advantage of
changing dynamics with a focus on volume and revenue per guest;
· Our predominantly freehold estate provides operational flexibility
and certainty over fixed costs;
· We are focused on driving cost efficiency improvements and margin
expansion;
· We have an industry leading reputation and continue to focus on
improving key operational metrics; and
· Our positive cash generation and streamlined debt profile, reducing
debt to £1 billion, will further reinforce our financial stability.
Notes
1. Broader market growth of c. 3% CAGR between 2023-2028, Mintel UK
Pub Visiting Report, Dec 2023
PERFORMANCE AND FINANCIAL REVIEW
Revenue
Revenue increased by 5.2% to £428.1 million (H1 FY2023: £407.0 million) and
like-for-like sales for the period were up 7.3%, with strong momentum from
drink and food sales.
Retail sales in the Group's 1,186 managed and partnership pubs increased by
5.7% to £396.6 million (H1 2023: £375.3 million) and total outlet sales
increased by 5.8% to £411.0 million (H1 2023: £388.3 million).
Within our pub business we operated 209 pubs under the traditional tenanted
and leased model generating revenues of £17.1 million (H1 2023: £18.7
million).
Accommodation sales were consistently strong at £14.9 million (H1 2023:
£15.0 million).
Profit
Underlying operating profit, excluding income from associates, increased by
22% to £52.7 million (H1 2023: £43.1 million) with an underlying pub
operating margin of 12.3% (H1 2023: 10.6%). The significant increases reflect
the positive impact of our cost efficiency programme and strong like-for-like
sales. Underlying operating profit, including income from associates was
£52.1 million, (H1 2023: £45.3 million), which reflects the £(0.6)m share
of CMBC's loss for the period.
Underlying EBITDA, excluding income from associates, increased by 15% to
£75.5 million (H1 2023: £65.9 million).
Underlying profit before tax was a loss of £(0.8) million (H1 2023: loss of
£(3.6) million). Profit before tax was a loss of £(43.5) million (H1 2023: a
loss of £(38.1) million).
Non-underlying items
The difference between underlying loss before tax and statutory loss before
tax is a net non-underlying charge of £42.7 million, which includes a £25.8
million net loss in respect of interest rate swap movements, £12.5 million
share of CMBC's brand impairment (in respect of some of CMBC's ale brands),
£3.5 million share of a CMBC onerous contract provision (in respect of one
specific contract), £0.5 million of reorganisation, restructuring and
relocation costs (being the continuation of the £2.9 million restructuring
programme previously disclosed as non-underlying in 2023) and £0.4 million of
additional costs from the change of CEO.
Interest
Our borrowings are largely long-dated and asset-backed. The securitisation is
in place until 2035 which provides financing security and high visibility of
future cash flows; this is of particular importance in an environment where
interest rates have increased to curb inflation. The securitisation is fully
hedged until 2035. Other lease related borrowings are index linked, capped and
collared at 1% and 4%, providing protection against high inflation. Of our
£300 million bank facilities, £120 million is hedged. Overall, we are 93%
hedged, providing protection against unknown changes in interest rate
movements that may occur during the year.
Share of associate - Carlsberg Marston's Brewing Company (CMBC)
Included in our Group income statement is underlying loss from associates of
£(0.6) million (H1 2023: £2.2 million). The H1 underlying share of associate
reflects CMBC's accelerated investment in 1664 following the brand rights
acquisition and further investment in Carlsberg and is not expected to be
reflective of full year performance. The majority of profit is typically
generated during H2.
Loss from associates of £(16.6) million (H1 2023: £2.2 million), which is
the Group's share of the statutory loss after tax generated by CMBC, includes
two non-underlying items: £12.5 million share of CMBC's brand impairment (in
respect of some of CMBC's ale brands) and £3.5 million share of a CMBC
onerous contract provision (in respect of one specific contract). These items
are one-off in nature and are not expected to recur.
The Group also benefits from dividends received from CMBC, as shown in our
Group cash flow statement. Dividends from associates of £13.8 million were
received (H1 2023: £10.6 million). Dividends in respect of CMBC's calendar
financial year are paid in September in year (for January - June) and March
the following year (for July - December). The dividends are generated from
CMBC's operating cash flows, adjusted for working capital and other movements.
Taxation
The estimated underlying tax rate is 25% (H1 2023: 19.4%). This is in line
with the statutory rate of corporation tax of 25% for the year. The overall
tax rate is 15.9% for the period and the key driver for this overall rate
reduction is the post-tax share of loss from associates.
Earnings per share
Underlying earnings per share were a loss of (0.1) pence per share (H1 2023:
(0.5) pence loss per share). Earnings per share were a loss of (5.8) pence per
share (H1 2023: (4.5) pence loss per share).
Net assets
Net assets were £601.5 million (2023: £640.1 million, H1 2023: £620.1
million) with net asset value per share of £0.95 (H1 2023: £0.98). The
decrease from FY2023 is primarily due to the increase in liabilities from
interest rate swaps together with a reduction in carrying value of the CMBC
investment driven by the CMBC ale brand impairment.
Capital expenditure and property disposals
Capital expenditure was £21.7 million in the period (H1 2023: £40.9
million), with a focus on deploying capital as efficiently as possible and
maximising returns. We expect that capital expenditure will not exceed £50
million in FY2024.
In FY2024 we expect to dispose of £50 million of non-core and unlicensed
properties. Proceeds of £9.6 million have been realised in relation to these
disposals in H1, which, overall, achieved net book value. Since the end of H1,
c.£16 million of additional disposals have either sold or exchanged.
Debt and financing
The Group remained focused on cash management during the year to date. We
continued to prioritise cash preservation whilst maintaining an appropriate
level of pub investment.
The Group generated an operating cash inflow of £90.9 million in the half
year, significantly ahead of last year (H1 2023: £69.9 million). Net interest
costs including bank fees were £48.3 million (H1 2023: £40.9 million),
capital expenditure was £21.7 million (H1 2023: £40.9 million) and disposals
proceeds received were £9.6 million (H1 2023: £23.4 million), resulting in a
net cash inflow for the period of £30.5 million (H1 2023: £11.5 million).
Net debt, excluding IFRS 16 lease liabilities, was £1,160.9 million, a
reduction of £24.5 million from last financial year (2023: £1,185.4
million). Total net debt of £1,536.5 million (2023: £1,565.8 million)
includes IFRS 16 lease liabilities of £375.6 million (2023: £380.4 million).
We have successfully secured an amendment and extension to our banking
facility, which was due to expire in January 2025. The revised £340 million
of funding comprises £300 million of bank facilities, maturing in July 2026,
and an additional £40 million bank facility with a maturity of up to July
2026, drawings of which must be used to repay the existing £40 million
private placement that matures in January 2025. There are one-off transaction
costs of c.£4 million and the costs of the facilities are variable: to be
determined by the level of leverage or drawings from time to time alongside
changes in the SONIA rate. £120 million of the facilities remains hedged.
The Group continues to have a range of financing providing an appropriate
level of flexibility and liquidity. As at the end of H1 FY2024:
· £300 million bank facility - at the period end £232.0 million was
drawn providing headroom of £68.0 million and non-securitised cash balances
of £11.1 million
· £40 million private placement in place until January 2025
· Seasonal overdraft of £5-£20 million, depending on dates - which
was not used at the period end
· Long-term securitisation debt of approximately £581.1 million - at
the period close the £120 million securitisation liquidity facility was not
utilised
· Long-term other lease related borrowings of £338.2 million
· £375.6 million of IFRS 16 lease liabilities
The securitisation is fully hedged to 2035. Other lease related borrowings are
index-linked capped and collared at 1% and 4%. There are £120 million of
swaps against the bank facilities: £60 million is fixed at 3.73% until 2031
and £60 million is fixed at 3.45% until 2029.
In summary, we have adequate cash headroom in our bank facilities to provide
operational liquidity. Importantly, c.93% of our medium to long-term financing
is hedged thereby minimising exposure to movement in interest rates.
Pensions
The balance on our final salary scheme was a £11.4 million surplus at 30
March 2024 (£12.9 million surplus at 30 September 2023). The change can
primarily be attributed to the increase in the benefit obligation resulting
from a reduction in the discount rate, partially offset by corresponding
increases in the invested asset values and the value of insured pensioners
during the period. The net annual deficit contribution of c.£6 million is
expected to cease at the end of FY2024.
Dividend
The Board confirms that given its priority to reduce the overall level of
borrowing and the continued macroeconomic uncertainty, no dividends will be
paid in respect of financial year 2024. The Board is cognisant of the
importance of dividends to shareholders and intends to keep potential future
dividends under review.
Going Concern
As part of the reporting process, we are formally required to assess the
extent to which our forecasts and therefore our financing requirements may or
may not affect our going concern assumption in preparing the accounts. In
performing this assessment we have considered the Group's financial position
and exposure to principal risks, including the cost-of-living crisis and
inflationary pressure. The Group's forecasts assume moderate sales price
increases, operational costs rising broadly in line with inflation, unless
those costs are known, or fixed, in which case the known cost has been used,
and increased borrowing costs in the short term, reducing to flat towards the
end of the period. The assessment takes into account the newly revised banking
facilities, which include a more accommodating interest cover covenant. The
conclusion of this assessment was that the Directors are satisfied that the
Group has adequate liquidity and is not forecast to breach any covenants
within its banking group, private placement or securitisation in its base case
forecast.
The Group has analysed a downside scenario, in which a lower level of sales
are achieved compared to the base case with similar cost assumptions to that
of the base case and variable costs flexing with the reduced volume. The
result of this downside scenario is that the Group would still have sufficient
liquidity to settle liabilities as they fall due and headroom within its
financial covenants throughout the going concern review period.
The Group has also performed a reverse stress test case, which analyses to
what extent sales would need to decrease in order to breach financial
covenants, with similar cost assumptions to that of the base case and variable
costs flexing with the reduced volume. This reverse stress test shows that the
Group could withstand a reduction in sales of over 10% from those assessed in
the base case throughout the going concern period. The Directors consider this
scenario to be remote as, other than when the business was closed during the
pandemic, it has never experienced sales declines to this level. Additionally,
the Group could take management actions within its control to partially
mitigate the financial impact.
Accordingly, the financial statements have been prepared on the going concern
basis with no material uncertainty. Full details are included in Note 1.
Investment in CMBC
The balance sheet carrying value of Marston's investment in CMBC has decreased
during the period, due to the share of CMBC's loss after tax, included in the
Group's income statement, and the dividend received, included in the Group's
cash flow statement.
Consistent with last year, we will perform an annual formal impairment
assessment as at year end.
Key estimates and significant judgements
Under International Financial Reporting Standards (IFRS) as adopted within the
UK and in accordance with the requirements of the Companies Act 2006, the
Group is required to make estimates and assumptions that affect the
application of policies and reported amounts. Estimates and judgements are
continually evaluated and are based on historical experience and other factors
including expectations of future events that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates. The
Group's key assumptions and significant judgements are:
· Non-underlying items - determination of items to be classified as
non-underlying
· Property, plant, and equipment - valuation of effective freehold land
and buildings
· Retirement benefits - actuarial assumptions in respect of the defined
benefit pension plan, which include discount rates, rates of increase in
pensions, inflation rates and life expectancies
· Financial instruments - valuation of derivative financial
instruments
· CMBC - recoverable amount of the investment in associate estimated on
a value in use basis
Notes
Prior period was a 26-week period to 1 April 2023. The Group uses a number of
alternative performance measures (APMs) to enable management and users of the
financial statements to better understand elements of financial performance in
the period. APMs are explained and reconciled in Note 17 of the financial
statements.
Responsibility Statement of the Directors in respect of the Interim Results
The Directors confirm that these condensed consolidated interim financial
statements have been prepared in accordance with IAS 34 'Interim Financial
Reporting' and that the interim management report includes a fair review of
the information required by DTR 4.2.7R and DTR 4.2.8R of the United Kingdom
Financial Conduct Authority, namely:
· an indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
· material related party transactions in the first six months of the
financial year and any material changes in the related party transactions
described in the last Annual Report and Accounts.
The Directors of Marston's PLC are listed in the Marston's PLC Annual Report
and Accounts for 30 September 2023. A list of current Directors is
maintained on the Marston's PLC website: www.marstonspubs.co.uk
(http://www.marstonspubs.co.uk) .
By order of the Board:
Justin Platt
Hayleigh Lupino
Chief Executive Officer Chief
Financial Officer
14 May 2024 14 May
2024
GROUP INCOME STATEMENT (UNAUDITED)
For the 26 weeks ended 30 March 2024
26 weeks to 30 March 2024 26 weeks to 1 April 2023 52 weeks to
30 September
2023
Note Non- Non- Total
Underlying(1) underlying(1) Total Underlying(1) underlying(1) Total £m
£m £m £m £m £m £m
Revenue 3 428.1 - 428.1 407.0 - 407.0 872.3
Net operating expenses 4 (375.4) (0.9) (376.3) (363.9) - (363.9) (782.1)
(Loss)/income from associates 4 (0.6) (16.0) (16.6) 2.2 - 2.2 9.9
Operating profit/(loss) 52.1 (16.9) 35.2 45.3 - 45.3 100.1
Finance costs 5 (53.5) - (53.5) (49.5) - (49.5) (100.4)
Finance income 5 0.6 - 0.6 0.6 - 0.6 1.2
Interest rate swap movements 4, 5 - (25.8) (25.8) - (34.5) (34.5) (21.6)
Net finance costs 4, 5 (52.9) (25.8) (78.7) (48.9) (34.5) (83.4) (120.8)
Loss before taxation (0.8) (42.7) (43.5) (3.6) (34.5) (38.1) (20.7)
Taxation 4, 6 0.2 6.7 6.9 0.7 8.6 9.3 11.4
Loss for the period attributable to equity shareholders (0.6) (36.0) (36.6) (2.9) (25.9) (28.8) (9.3)
7 (5.8) (4.5) (1.5)
(Loss)/earnings per share:
Basic
loss per share
Basic underlying(1) (loss)/earnings per share 7 (0.1) (0.5) 5.1
Diluted 7 (5.8) (4.5) (1.5)
loss per share
Diluted underlying(1) (loss)/earnings per share 7 (0.1) (0.5) 5.1
GROUP STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the 26 weeks ended 30 March 2024
26 weeks to 26 weeks to 52 weeks to
30 March 1 April 30 September
2024 2023 2023
£m £m £m
Loss for the period (36.6) (28.8) (9.3)
Items of other comprehensive income that may subsequently be reclassified to
profit or loss
Losses arising on cash flow hedges (2.6) (7.3) (3.0)
Transfers to the income statement on cash flow hedges 4.0 6.6 11.4
Other comprehensive income of associates 0.2 0.4 0.8
Tax on items that may subsequently be reclassified to profit or loss (0.4) 0.1 (2.1)
1.2 (0.2) 7.1
Items of other comprehensive income that will not be reclassified to profit or
loss
Remeasurement of retirement benefits (4.9) 0.7 (9.2)
Unrealised surplus on revaluation of properties - - 95.6
Reversal of past revaluation surplus - - (93.9)
Tax on items that will not be reclassified to profit or loss 0.4 (0.2) (0.2)
(4.5) 0.5 (7.7)
Other comprehensive (expense)/income for the period (3.3) 0.3 (0.6)
Total comprehensive expense for the period attributable to equity shareholders (39.9) (28.5) (9.9)
(1) Alternative performance measures (APMs) are reconciled to the interim
financial information in note 17.
GROUP CASH FLOW STATEMENT (UNAUDITED)
For the 26 weeks ended 30 March 2024
26 weeks to 26 weeks to 52 weeks to
30 March 1 April 30 September
2024 2023 2023
Note £m £m £m
Operating activities
Loss for the period (36.6) (28.8) (9.3)
Taxation (6.9) (9.3) (11.4)
Net finance costs 78.7 83.4 120.8
Depreciation and amortisation 22.8 22.8 45.5
Working capital movement 6.0 2.9 (29.0)
Non-cash movements 17.1 (8.8) 12.3
(Decrease)/increase in provisions and other non-current liabilities (0.4) 0.5 (0.8)
Difference between defined benefit pension contributions paid and amounts (3.7) (3.8) (7.6)
charged
Dividends from associates 13.8 10.6 21.6
Income tax received/(paid) 0.1 0.4 (0.9)
Net cash inflow from operating activities 90.9 69.9 141.2
Investing activities
Interest received 0.8 1.2 1.8
Sale of property, plant and equipment and assets held for sale 9.6 23.4 51.3
Purchase of property, plant and equipment and intangible assets (21.7) (40.9) (65.3)
Finance lease capital repayments received 1.1 1.3 2.5
Net transfer to other cash deposits 9 (0.1) (0.1) (0.1)
Net cash outflow from investing activities (10.3) (15.1) (9.8)
Financing activities
Interest paid (50.2) (43.3) (93.1)
Arrangement costs of bank facilities - (0.1) (4.0)
Repayment of securitised debt (20.4) (19.3) (39.4)
Advance of bank borrowings 3.0 2.0 14.0
Net repayment of capital element of lease liabilities (4.3) (2.4) (5.1)
Repayment of other borrowings (10.0) - (5.0)
Net cash outflow from financing activities (81.9) (63.1) (132.6)
Net decrease in cash and cash equivalents 9 (1.3) (8.3) (1.2)
GROUP BALANCE SHEET (UNAUDITED)
As at 30 March 2024
30 March 1 April 30 September
2024 2023 2023
Note £m £m £m
Non-current assets
Intangible assets 30.7 34.7 32.9
Property, plant and equipment 8 2,053.4 2,118.5 2,064.8
Interests in associates 220.7 252.4 250.9
Other non-current assets 15.2 16.4 15.0
Deferred tax assets 7.7 1.2 0.9
Retirement benefit surplus 11.4 19.3 12.9
Derivative financial instruments 10 0.8 0.7 2.7
2,339.9 2,443.2 2,380.1
Current assets
Derivative financial instruments 10 - - 1.1
Inventories 14.7 15.5 14.9
Trade and other receivables 29.6 28.3 26.9
Current tax assets 0.4 - 0.4
Other cash deposits 9 3.2 3.1 3.1
Cash and cash equivalents 9 25.2 19.4 26.5
73.1 66.3 72.9
Assets held for sale 1.4 1.7 1.4
74.5 68.0 74.3
Current liabilities
Borrowings* 9 (329.3) (69.4) (65.9)
Derivative financial instruments 10 (1.4) (1.7) -
Trade and other payables (177.9) (212.9) (170.4)
Current tax liabilities - (1.4) -
Provisions for other liabilities and charges (1.0) (1.6) (1.4)
(509.6) (287.0) (237.7)
Non-current liabilities
Borrowings* 9 (1,235.6) (1,539.6) (1,529.5)
Derivative financial instruments 10 (57.4) (54.6) (37.4)
Other non-current liabilities (7.7) (6.7) (7.1)
Provisions for other liabilities and charges (2.6) (3.2) (2.6)
(1,303.3) (1,604.1) (1,576.6)
Net assets 601.5 620.1 640.1
Shareholders' equity
Equity share capital 48.7 48.7 48.7
Share premium account 334.0 334.0 334.0
Revaluation reserve 409.7 415.7 412.1
Capital redemption reserve 6.8 6.8 6.8
Hedging reserve (43.4) (51.3) (44.4)
Own shares (110.5) (110.8) (110.6)
Retained earnings (43.8) (23.0) (6.5)
Total equity 601.5 620.1 640.1
* Subsequent to the current period end of 30 March 2024, the Group
successfully secured an amendment and extension of its bank facilities to the
end of July 2026. There was a period of less than 12 months outstanding on
the previous bank facilities as at the balance sheet date resulting in a
temporary reclassification of the bank borrowings from non-current to current
liabilities.
GROUP STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
For the 26 weeks ended 30 March 2024
Equity Share Revaluation Capital Retained
share premium reserve redemption Hedging Own earnings Total
capital account reserve reserve shares equity
£m £m £m £m £m £m £m £m
At 1 October 2023 48.7 334.0 412.1 6.8 (44.4) (110.6) (6.5) 640.1
Loss for the period - - - - - - (36.6) (36.6)
Remeasurement of retirement benefits - - - - - - (4.9) (4.9)
Tax on remeasurement of retirement benefits - - - - - - 0.4 0.4
Losses on cash flow hedges - - - - (2.6) - - (2.6)
Transfers to the income statement on cash flow hedges - - - - 4.0 - - 4.0
Tax on hedging reserve movements - - - - (0.4) - - (0.4)
Other comprehensive income of associates - - - - - - 0.2 0.2
Total comprehensive income/(expense) - - - - 1.0 - (40.9) (39.9)
Share-based payments - - - - - - 1.3 1.3
Sale of own shares - - - - - 0.1 (0.1) -
Transfer disposals to retained earnings - - (2.7) - - - 2.7 -
Transfer tax to retained earnings - - 0.3 - - - (0.3) -
Total transactions with owners - - (2.4) - - 0.1 3.6 1.3
At 30 March 2024 48.7 334.0 409.7 6.8 (43.4) (110.5) (43.8) 601.5
For the 26 weeks ended 1 April 2023
Equity Share Revaluation Capital Retained
share premium reserve redemption Hedging Own earnings Total
capital account reserve reserve shares equity
£m £m £m £m £m £m £m £m
At 2 October 2022 48.7 334.0 417.1 6.8 (50.7) (110.9) 3.1 648.1
Loss for the period - - - - - - (28.8) (28.8)
Remeasurement of retirement benefits - - - - - - 0.7 0.7
Tax on remeasurement of retirement benefits - - - - - - (0.2) (0.2)
Losses on cash flow hedges - - - - (7.3) - - (7.3)
Transfers to the income statement on cash flow hedges - - - - 6.6 - - 6.6
Tax on hedging reserve movements - - - - 0.1 - - 0.1
Other comprehensive income of associates - - - - - - 0.4 0.4
Total comprehensive expense - - - - (0.6) - (27.9) (28.5)
Share-based payments - - - - - - 0.4 0.4
Sale of own shares - - - - - 0.1 (0.1) -
Transfer disposals to retained earnings - - (1.5) - - - 1.5 -
Transfer tax to retained earnings - - 0.1 - - - (0.1) -
Changes in equity of associates - - - - - - 0.1 0.1
Total transactions with owners - - (1.4) - - 0.1 1.8 0.5
At 1 April 2023 48.7 334.0 415.7 6.8 (51.3) (110.8) (23.0) 620.1
NOTES
1 BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION
Marston's PLC (the 'Company') is a company domiciled in the UK. The
consolidated interim financial information for the 26 weeks ended 30 March
2024 incorporates the financial statements of Marston's PLC and all of its
subsidiary undertakings (the 'Group'). The Group is primarily an operator of
pubs and bars across the UK.
This interim financial information has been prepared in accordance with IAS 34
'Interim Financial Reporting' in conformity with the requirements of the
Companies Act 2006. The same accounting policies, presentation and methods
of computation are followed in the interim financial information as applied in
the Group's audited financial statements for the 52 weeks ended 30 September
2023 with the exception of new standards and interpretations that were only
applicable from the beginning of the current financial year. The audited
financial statements for the 52 weeks ended 30 September 2023 contain details
of the new standards and interpretations now applicable to the Group. The
adoption of these standards and interpretations has had no material impact on
the interim financial information.
The financial information for the 52 weeks ended 30 September 2023 is
extracted from the audited accounts for that period, which have been delivered
to the Registrar of Companies. The Auditor's report was unqualified and did
not contain a statement under section 498 (2) or (3) of the Companies Act
2006. However, the Auditor's report contained an emphasis of matter relating
to a material uncertainty that may cast significant doubt on the Group's and
Company's ability to continue as a going concern.
The interim financial information does not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006. The interim
financial information for the 26 weeks ended 30 March 2024 and the
comparatives to 1 April 2023 are unaudited.
The Group does not consider that any standards or interpretations issued by
the International Accounting Standards Board, but not yet applicable, will
have a significant impact on the financial statements for the 52 weeks ending
28 September 2024.
Going concern
Subsequent to the current period end of 30 March 2024, the Group successfully
secured an amendment and extension of its bank facility, which was due to
expire in January 2025. The revised £340.0 million of funding comprises
£300.0 million of bank facilities, maturing in July 2026, and an additional
£40.0 million bank facility with a maturity of up to July 2026, drawings of
which must be used to repay the existing £40.0 million private placement debt
facility that matures in January 2025. £232.0 million of the previous
£300.0 million bank facility was drawn at 30 March 2024. The Group's
sources of funding also include its securitised debt.
There are two covenants associated with the Group's securitised debt. The
FCF DSCR is a measure of free cash flow to debt service for the group headed
by Marston's Pubs Parent Limited and the Net Worth is derived from the net
assets of that group of companies.
There are three covenants associated with the amended Group's bank and private
placement borrowings for the non-securitised group of companies - Debt Cover,
Interest Cover and Liquidity. The Debt Cover covenant is a measure of net
borrowings to EBITDA, the Interest Cover covenant is a measure of EBITDA to
finance charges and the Liquidity covenant is a measure of headroom on the
Group's bank and private placement borrowing.
The Directors have performed an assessment of going concern over the period of
12 months from the date of signing these interim financial statements, to
assess the adequacy of the Group's financial resources. In performing their
assessment, the Directors considered the Group's financial position and
exposure to principal risks, including the cost-of-living crisis and
inflationary pressure. The Group's forecasts assume moderate sales price
increases, operational costs rising broadly in line with inflation, unless
those costs are known, or fixed, in which case the known cost has been used,
and increased borrowing costs in the short term, reducing to flat towards the
end of the period. The assessment takes into account the newly revised
banking facilities, which include a more accommodating Interest Cover
covenant.
The conclusion of this assessment was that the Directors are satisfied that
the Group has adequate liquidity, is not forecast to breach any revised
covenants within its banking group, private placement or securitisation in its
base case forecast, and has sufficient resources to continue in operational
existence for a period of at least 12 months from the date of approval of
these interim financial statements.
The Group has analysed a downside scenario, in which a lower level of sales
are achieved compared to the base case forecast with similar cost assumptions
to that of the base case forecast and variable costs flexing with the reduced
volume. The result of this downside scenario is that the Group would still
have sufficient liquidity to settle liabilities as they fall due and headroom
within its revised financial covenants throughout the going concern review
period.
The Group has also performed a reverse stress test case, which analyses to
what extent sales would need to decrease in order to breach revised financial
covenants, with similar cost assumptions to that of the base case forecast and
variable costs flexing with the reduced volume. This reverse stress test shows
that the Group could withstand a reduction in sales of over 10% from those
assessed in the base case throughout the going concern period. The Directors
consider this scenario to be remote as, other than when the business was
closed during the pandemic, the Group has never experienced sales declines to
this level. Additionally, the Group could take management actions within the
Directors' control to partially mitigate the financial impact.
Accordingly, the financial statements have been prepared on the going concern
basis.
2 SEGMENT REPORTING
The Group is considered to have one operating segment under IFRS 8 'Operating
Segments' and no disclosures are presented. This is in line with the
reporting to the chief operating decision maker and the operational structure
of the business. The measure of profit or loss reviewed by the chief
operating decision maker is underlying(1) profit/loss before tax.
3 REVENUE
30 March 1 April
2024 2023
Revenue £m £m
Outlet sales 411.0 388.3
Wholesale sales 13.1 14.0
Revenue from contracts with customers 424.1 402.3
Rental income 4.0 4.7
Total revenue 428.1 407.0
4 NON-underlying(1) items
In order to illustrate the underlying(1) trading performance of the Group,
presentation has been made of performance measures excluding those items which
it is considered would distort the comparability of the Group's results.
Non-underlying(1) items are presented separately on the face of the income
statement and are defined as those items of income and expense which, because
of the materiality, nature and/or expected infrequency of the events giving
rise to them, merit separate presentation to enable users of the financial
statements to better understand elements of financial performance in the
period, so as to facilitate comparison with future and prior periods. As
management of the freehold and leasehold property estate is an essential and
significant area of the business, the threshold for classification of property
related items as non-underlying(1) is higher than other items.
30 March 1 April
2024 2023
£m £m
Non-underlying(1) operating items
Reorganisation, restructuring and relocation costs 0.5 -
Duplication costs 0.4 -
Non-underlying(1) loss from associates 16.0 -
16.9 -
Non-underlying(1) non-operating items
Interest rate swap movements 25.8 34.5
25.8 34.5
Total non-underlying(1) items 42.7 34.5
Reorganisation, restructuring and relocation costs
During the prior period the Group commenced the implementation of an
operational programme to simplify the business and drive efficiencies. The
programme was initiated towards the end of the prior financial year resulting
in costs being incurred in both the prior financial year and current period.
The costs identified are one-off headcount related costs and this element of
the programme is expected to be short term in nature and non-recurring. The
cost of implementing this programme in the current period was £0.5 million
(£2.9 million of costs were incurred in the 26 weeks ended 30 September
2023). Cumulatively, as at 30 March 2024 a cash cost of £3.4 million has
been incurred, which is considered material to the Group. The
reorganisation, restructuring and relocation costs have been recorded within
non-underlying(1) items in the income statement based on their materiality,
nature and expected infrequency.
Duplication costs
On 17 November 2023 Andrew Andrea stepped down from his role as CEO of the
Group and, following an external process, Justin Platt was appointed as CEO
from 10 January 2024. During the current period duplicated costs were
incurred as a result of the change in CEO which were unusual and one-off for
Marston's. The duplicated costs have been recorded within non-underlying(1)
items in the income statement based on their nature and expected infrequency.
Non-underlying(1) loss from associates
The Group's associate, Carlsberg Marston's Limited, recognised an impairment
of £12.5 million during the current period in relation to some of the ale
brands that it holds. The ale category has been severely impacted by the
COVID-19 pandemic, secular trends, and the cost-of-living crisis, resulting in
long-term expectations specifically for the ale brands being updated. There
is no current expectation that further brand impairments will be made. The
brand impairment of £12.5 million is material in the context of the
underlying(1) loss from associates of £0.6 million. The resulting brand
impairment has been recorded within non-underlying(1) items in the income
statement based on its materiality, nature and expected infrequency.
Carlsberg Marston's Limited also recognised an onerous contract provision of
£3.5 million during the current period in relation to a specific porterage
contract that it holds. The significant cost inflation experienced from the
cost-of-living crisis, alongside the increases in distribution costs over and
above what was reasonably anticipated has led to an acute and short-term
(rather than business-as-usual) environment of cost inflation which has
required an onerous provision to be recorded for this specific contract. The
onerous contract provision of £3.5 million is material in the context of the
underlying(1) loss from associates of £0.6 million. The resulting onerous
contract provision has been recorded within non-underlying(1) items in the
income statement based on its materiality, nature and expected infrequency.
4 NON-underlying(1) items (CONTINUED)
Interest rate swap movements
The Group's interest rate swaps are revalued to fair value at each balance
sheet date. For interest rate swaps which were designated as part of a hedging
relationship a loss of £2.6 million (2023: £7.3 million) has been recognised
in the hedging reserve in respect of the effective portion of the fair value
movement and a credit of £0.2 million (2023: charge of £1.7 million) has
been reclassified from the hedging reserve to underlying(1) finance costs in
the income statement in respect of the cash received (2023: paid) in the
period. A gain of £nil (2023: £0.3 million) in respect of the ineffective
portion of the fair value movement has been recognised within
non-underlying(1) items in the income statement. An amount representing the
cash paid of £0.6 million (2023: £0.7 million) has subsequently been
transferred from non-underlying(1) items to underlying(1) finance costs to
ensure that underlying(1) finance costs reflect the resulting fixed rate paid
on the associated debt. As such there is an overall gain of £0.6 million
(2023: £1.0 million) recognised within non-underlying(1) items in the income
statement based on its materiality and nature. In addition, £4.2 million
(2023: £4.9 million) of the balance remaining in the hedging reserve in
respect of discontinued cash flow hedges has been reclassified as a charge to
the income statement within non-underlying(1) items based on its materiality
and nature.
For interest rate swaps which were not designated as part of a hedging
relationship a loss of £16.7 million (2023: £30.8 million) in respect of the
fair value movement has been recognised within non-underlying(1) items in the
income statement. An amount representing the cash received of £5.5 million
(2023: cash paid of £0.2 million) has subsequently been transferred from
non-underlying(1) items to underlying(1) finance costs to ensure that
underlying(1) finance costs reflect the resulting fixed rate paid on the
associated debt. As such there is an overall loss of £22.2 million (2023:
£30.6 million) recognised within non-underlying(1) items in the income
statement based on its materiality and nature, which is equal to the change in
the carrying value of the interest rate swaps in the period.
Impact of taxation
The current tax credit relating to the above non-underlying(1) items amounts
to £0.1 million (2023: £nil). The deferred tax credit relating to the
above non-underlying(1) items amounts to £6.6 million (2023: £8.6
million).
5 FINANCE COSTS AND INCOME
30 March 1 April
2024 2023
£m £m
Finance costs
Bank borrowings 13.6 10.3
Securitised debt 16.9 16.5
Lease liabilities 9.6 9.7
Other lease related borrowings 11.4 11.0
Other interest payable and similar charges 2.0 2.0
Total finance costs 53.5 49.5
Finance income
Finance lease and other interest receivable (0.6) (0.6)
Total finance income (0.6) (0.6)
Interest rate swap movements
Hedge ineffectiveness on cash flow hedges (net of cash paid) (0.6) (1.0)
Change in carrying value of interest rate swaps 22.2 30.6
Transfer of hedging reserve balance in respect of discontinued hedges 4.2 4.9
25.8 34.5
Net finance costs 78.7 83.4
6 TAXATION
The underlying taxation credit for the 26 weeks ended 30 March 2024 has been
calculated by applying an estimate of the underlying effective tax rate for
the 52 weeks ending 28 September 2024 of 25.0% (26 weeks ended 1 April 2023:
19.4%).
30 March 1 April
2024 2023
£m £m
Current tax (0.1) -
Deferred tax (6.8) (9.3)
(6.9) (9.3)
The taxation credit includes a current tax credit of £0.1 million (2023:
£nil) and a deferred tax credit of £6.6 million (2023: £8.6 million)
relating to the tax on non-underlying(1) items.
7 EARNINGS PER ORDINARY SHARE
Basic loss per share is calculated by dividing the loss attributable to equity
shareholders by the weighted average number of ordinary shares in issue during
the period, excluding treasury shares and those held on trust for employee
share schemes. Underlying(1) loss per share figures are presented to exclude
the effect of non-underlying(1) items.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. These represent share options granted to employees where the
exercise price is less than the weighted average market price of the Company's
shares during the period.
In the current and prior period in accordance with IAS 33 'Earnings per Share'
the potential ordinary shares were not dilutive as their inclusion would
reduce the loss per share for continuing operations.
30 March 2024 1 April 2023
Earnings Per share Earnings Per share
amount amount
£m p £m p
Basic loss per share (36.6) (5.8) (28.8) (4.5)
Diluted loss per share (36.6) (5.8) (28.8) (4.5)
Underlying(1) loss per share figures
Basic underlying(1) loss per share (0.6) (0.1) (2.9) (0.5)
Diluted underlying(1) loss per share (0.6) (0.1) (2.9) (0.5)
30 March 1 April
2024 2023
m m
Basic weighted average number of shares 633.5 633.3
Dilutive potential ordinary shares - -
Diluted weighted average number of shares 633.5 633.3
8 PROPERTY, PLANT AND EQUIPMENT
£m
Net book amount at 1 October 2023 2,064.8
Additions 23.5
Net transfers to assets held for sale and disposals (14.8)
Depreciation, revaluation and other movements (20.1)
Net book amount at 30 March 2024 2,053.4
£m
Net book amount at 2 October 2022 2,111.0
Additions 41.1
Net transfers to assets held for sale and disposals (13.2)
Depreciation, revaluation and other movements (20.4)
Net book amount at 1 April 2023 2,118.5
9 NET DEBT
30 March 30 September
2024 2023
Analysis of net debt £m £m
Cash and cash equivalents
Cash at bank and in hand 25.2 26.5
25.2 26.5
Financial assets
Other cash deposits 3.2 3.1
3.2 3.1
Debt due within one year
Bank borrowings* (229.9) 2.6
Securitised debt (42.3) (41.1)
Lease liabilities (17.6) (17.8)
Other lease related borrowings 0.5 0.4
Other borrowings* (40.0) (10.0)
(329.3) (65.9)
Debt due after one year
Bank borrowings* - (228.2)
Securitised debt (538.8) (560.2)
Lease liabilities (358.0) (362.6)
Other lease related borrowings (338.7) (338.4)
Other borrowings* - (40.0)
Preference shares (0.1) (0.1)
(1,235.6) (1,529.5)
Net debt (1,536.5) (1,565.8)
* Subsequent to the current period end of 30 March 2024, the Group
successfully secured an amendment and extension of its bank facilities to the
end of July 2026. There was a period of less than 12 months outstanding on
the previous bank facilities as at the balance sheet date resulting in a
temporary reclassification of the bank borrowings from non-current to current
liabilities.
30 March 30 September
2024 2023
£m £m
Net debt excluding lease liabilities (1,160.9) (1,185.4)
Lease liabilities (375.6) (380.4)
Net debt (1,536.5) (1,565.8)
Other cash deposits comprises deposits securing letters of credit for
reinsurance contracts. Included within cash and cash equivalents is an
amount of £5.7 million (at 30 September 2023: £5.6 million), which relates
to collateral held in the form of cash deposits. These amounts are
considered to be restricted cash. In addition, any cash held in connection
with the securitised business is governed by certain restrictions under the
covenants associated with the securitisation.
30 March 1 April
2024 2023
Reconciliation of net cash flow to movement in net debt £m £m
Decrease in cash and cash equivalents in the period (1.3) (8.3)
Increase in other cash deposits 0.1 0.1
Cash outflow from movement in debt 31.7 19.7
Net cash inflow 30.5 11.5
Non-cash movements and deferred issue costs (1.2) (4.0)
Movement in net debt in the period 29.3 7.5
Net debt at beginning of the period (1,565.8) (1,594.0)
Net debt at end of the period (1,536.5) (1,586.5)
10 FINANCIAL INSTRUMENTS
The only financial instruments which the Group holds at fair value are
derivative financial instruments, which are classified as at fair value
through profit or loss or derivatives used for hedging.
Fair value hierarchy
IFRS 13 'Fair Value Measurement' requires fair value measurements to be
recognised using a fair value hierarchy that reflects the significance of the
inputs used in the measurements, according to the following levels:
Level 1 - unadjusted quoted prices in active markets for identical assets or
liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3 - inputs for the asset or liability that are not based on observable
market data.
The tables below show the levels in the fair value hierarchy within which fair
value measurements have been categorised:
30 March 2024 30 September 2023
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets as per the balance sheet £m £m £m £m £m £m £m £m
Derivative financial instruments - 0.8 - 0.8 - 3.8 - 3.8
30 March 2024 30 September 2023
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Liabilities as per the balance sheet £m £m £m £m £m £m £m £m
Derivative financial instruments - 58.8 - 58.8 - 37.4 - 37.4
There were no transfers between Levels 1, 2 and 3 fair value measurements
during the current or prior period. The Level 2 fair values of derivative
financial instruments have been obtained using a market approach and reflect
the estimated amount the Group would expect to pay or receive on termination
of the instruments, adjusted for the Group's own credit risk. The Group
utilises valuations from counterparties who use a variety of assumptions based
on market conditions existing at each balance sheet date. The fair values
are highly sensitive to the inputs to the valuations, such as discount rates,
analysis of credit risk and yield curves.
The fair values of all the Group's other financial instruments are equal to
their book values, with the exception of borrowings. The carrying amount
less impairment provision of finance lease receivables, trade receivables and
other receivables, and the carrying amount of other cash deposits, cash and
cash equivalents, trade payables and other payables, are assumed to
approximate their fair values. The carrying amount (excluding unamortised
issue costs) and the fair value of the Group's borrowings are as follows:
Carrying amount Fair value
30 March 30 September 30 March 30 September
2024 2023 2024 2023
£m £m £m £m
Bank borrowings 232.0 229.0 232.0 229.0
Securitised debt 583.4 603.8 506.3 520.8
Lease liabilities 375.6 380.4 375.6 380.4
Other lease related borrowings 361.7 361.7 361.7 361.7
Other borrowings 40.0 50.0 40.0 50.0
Preference shares 0.1 0.1 0.1 0.1
1,592.8 1,625.0 1,515.7 1,542.0
11 SIGNIFICANT EVENTS AND TRANSACTIONS
Detail regarding significant events and transactions that have taken place
since 30 September 2023 is provided outside of the interim financial
statements in the Performance and Financial Review.
12 RELATED PARTY TRANSACTIONS
Details of related party transactions with the Group's associate, Carlsberg
Marston's Limited, are as follows:
Transaction amount Balance outstanding
30 March 1 April 30 March 30 September
2024 2023 2024 2023
£m £m £m £m
Purchase of goods (85.1) (86.9) (27.6) (29.4)
Dividends from associates 13.8 10.6 - -
Receipt of cash on behalf of associates - (1.2) - -
13 CAPITAL COMMITMENTS
Capital expenditure authorised and committed at the period end but not
provided for in this interim financial information was £1.5 million (at 30
September 2023: £1.0 million).
14 SEASONALITY OF INTERIM OPERATIONS
The Group's financial results and cash flows have historically been subject to
seasonal trends between the first and second half of the financial year.
Traditionally, the second half of the financial year sees higher revenue and
profitability, as a result of better weather conditions.
There is no assurance that this trend will continue in the future.
15 EVENTS AFTER THE BALANCE SHEET DATE
Subsequent to the current period end of 30 March 2024, the Group successfully
secured an amendment and extension of its bank facility, which was due to
expire in January 2025. The revised £340.0 million of funding comprises
£300.0 million of bank facilities, maturing in July 2026, and an additional
£40.0 million bank facility with a maturity of up to July 2026, drawings of
which must be used to repay the existing £40.0 million private placement debt
facility that matures in January 2025.
An interim dividend has not been proposed for the current period. No interim
dividend was paid for the prior period.
16 PRINCIPAL RISKS AND UNCERTAINTIES
The Group set out on pages 43 to 50 of its 2023 Annual Report and Accounts the
principal risks and uncertainties that could impact its performance. These
risks and uncertainties were as follows:
Economic and political
The UK, as well as many countries, is at risk of a recession, exacerbated by
high energy costs and global demand for commodities, which could be in short
supply. A recession could increase unemployment and further lower consumer
confidence. There is a risk that inflation remains high, and interest rates
continue to increase and remain high for a long time.
Market and operational / guest sentiment
As economic factors make it more expensive to go to the pub, guests become
more sensitive to experience not meeting expectation. Consistently
maintaining high standards becomes more critical to ensuring the Group's
guests return.
Failure to attract, train and retain the best people can impact the Group's
pubs' performance. Recruitment remains competitive within a tight labour
market and wage inflation.
Disruption to key suppliers, particularly those closely involved with the
Group's day-to-day activities, or a shortage of commodities could
significantly impact the Group's operations. There is an increased risk that
the Group's own prices become uncompetitive, thereby restricting the
opportunity to pass on future cost increases.
These factors could mean that the Group's pubs fail to attract guests due to
poor service or quality, or do not keep up with changing preferences.
Liquidity
As consumers reduce spend in response to higher prices, it is uncertain how
this might impact the Group's pubs. In similar circumstances in the past,
pubs have remained attractive and affordable however, this might not always be
the case.
Financial covenants, pension fund surplus, and accounting controls
A breach of the covenants with the Group's lenders could occur due to
incorrect reporting of financial results.
The pension surplus might also decrease if investment yields fall.
Unauthorised transactions could be a major risk along with accounting controls
either failing or being overridden.
ESG
Without a clear strategy on ESG the Group could find in the future that it's
forced to make changes to comply with stakeholder expectation or government
legislation.
The reputation of the Group could be damaged if its stance on ESG is not
clearly communicated, or if it cannot demonstrate what actions have been taken
or targets set. The perception of the Group could be tainted for guests,
employees, lenders and investors without a clearly communicated position on
ESG issues, backed up by actions and progress against targets.
During the Group's transition to Net Zero, higher energy prices might make it
more difficult to source renewable energy at a commercial price. This
increases the risk that the transition is delayed or becomes more costly.
Health & safety, food safety
Breaches of health and safety regulations could attract media attention and
potentially high penalties. Public concern over allergens remains high.
There is a risk that information is collected incorrectly from the Group's
suppliers and/or misinterpreted for the Group's menu items. There is the risk
that a team member mis-advises a guest or serves the wrong meal.
Increased regulation could increase the complexity of the information to be
provided to the public and thereby increase the Group's cost of compliance.
Information technology
Threats to IT are both external and internal and could result in a network
outage, denial of service or loss, theft or corruption of data. The risk
extends to the companies that the Group shares data with for processing or
storage on the Group's behalf.
Pandemic
Future restrictions on trade, as a result of regulations imposed to reduce
infection rates, and public confidence in mixing socially in public places.
17 ALTERNATIVE PERFORMANCE MEASURES (APMs)
In addition to statutory financial measures, these interim results include
financial measures that are not defined or recognised under IFRS, all of which
the Group considers to be alternative performance measures (APMs). APMs
should not be regarded as a complete picture of the Group's financial
performance, which the Group presents within its total results.
Definitions of APMs, along with the reconciliation of the APMs used to the
Group's strategy, remain unchanged from the 2023 Annual Report and Accounts,
commencing on page 154 of that report.
Free cash flow (FCF) - including reconciliation to net cash flow (NCF)
26 weeks to 30 March 26 weeks to 52 weeks to
2024 1 April 30 September
Interim financial information reference 2023 2023
£m £m £m
Net cash inflow from operating activities Cash flow statement 90.9 69.9 141.2
Interest received Cash flow statement 0.8 1.2 1.8
Interest paid Cash flow statement (50.2) (43.3) (93.1)
Arrangement costs of bank facilities Cash flow statement - (0.1) (4.0)
Free cash flow 41.5 27.7 45.9
Finance lease capital repayments received Cash flow statement 1.1 1.3 2.5
42.6 29.0 48.4
Purchase of property, plant and equipment and intangible assets Cash flow statement (21.7) (40.9) (65.3)
Sale of property, plant and equipment and assets held for sale Cash flow statement 9.6 23.4 51.3
Net cash flow 30.5 11.5 34.4
Like-for-like (LFL) sales
26 weeks to 30 March 26 weeks to LFL
2024 1 April
Interim financial information reference 2023
£m £m %
LFL retail sales 376.5 350.9 7.3
Non-LFL retail sales 20.1 24.4
Retail sales 396.6 375.3
Non-EPOS outlet sales 14.4 13.0
Outlet sales Note 3 411.0 388.3
6 weeks to 6 weeks to LFL
11 May 13 May
2024 2023
£m £m %
LFL retail sales 95.3 91.6 4.0
Non-LFL retail sales 5.3 6.4
Retail sales 100.6 98.0
Net asset value (NAV) per share
Interim financial information reference 30 March 1 April 30 September
2024 2023 2023
Net assets (£m) Balance sheet 601.5 620.1 640.1
Number of shares outstanding (m) 633.5 633.3 633.5
NAV per share (£) 0.95 0.98 1.01
Net cash flow (NCF)
26 weeks to 30 March 2024 26 weeks to 52 weeks to 30 September 2023
1 April
Interim financial information reference 2023
£m £m £m
Decrease in cash and cash equivalents in the period Note 9 (1.3) (8.3) (1.2)
Increase in other cash deposits Note 9 0.1 0.1 0.1
Cash outflow from movement in debt Note 9 31.7 19.7 35.5
Net cash flow 30.5 11.5 34.4
17 ALTERNATIVE PERFORMANCE MEASURES (APMs)
Net debt excluding lease liabilities
26 weeks to 26 weeks to 52 weeks to
30 March 1 April 30 September
Interim financial information reference 2024 2023 2023
£m £m £m
Decrease in cash and cash equivalents in the period Note 9 (1.3) (8.3) (1.2)
Increase in other cash deposits Note 9 0.1 0.1 0.1
Cash outflow from movement in debt excluding lease liabilities 27.4 17.3 30.4
Net cash inflow excluding lease liabilities 26.2 9.1 29.3
Non-cash movements and deferred issue costs (1.7) 3.0 1.5
Movement in net debt excluding lease liabilities in the period 24.5 12.1 30.8
Net debt excluding lease liabilities at beginning of the period (1,185.4) (1,216.2) (1,216.2)
Net debt excluding lease liabilities at end of the period Note 9 (1,160.9) (1,204.1) (1,185.4)
Underlying earnings before interest, tax, depreciation, and amortisation
(Underlying EBITDA)
26 weeks to 30 March 26 weeks to 52 weeks to
2024 1 April 30 September
Interim financial information reference 2023 2023
£m £m £m
Operating profit Income statement 35.2 45.3 100.1
Non-underlying operating items Note 4 16.9 - 34.6
Depreciation and amortisation Cash flow statement 22.8 22.8 45.5
Underlying EBITDA including loss/(income) from associates 74.9 68.1 180.2
Underlying loss/(income) from associates Income statement 0.6 (2.2) (9.9)
Underlying EBITDA excluding loss/(income) from associates 75.5 65.9 170.3
Underlying operating margin
26 weeks to 30 March 26 weeks to 52 weeks to
2024 1 April 30 September
Interim financial information reference 2023 2023
£m £m £m
Operating profit Income statement 35.2 45.3 100.1
Underlying loss/(income) from associates Income statement 0.6 (2.2) (9.9)
Non-underlying operating items Note 4 16.9 - 34.6
Underlying operating profit excluding loss/(income) from associates ('pub 52.7 43.1 124.8
operating profit')
Revenue Income statement 428.1 407.0 872.3
Underlying operating margin 12.3% 10.6% 14.3%
18 INTERIM RESULTS
The interim results were approved by the Board on 14 May 2024.
19 COPIES
Copies of these results are available on the Marston's PLC website
(www.marstonspubs.co.uk (http://www.marstonspubs.co.uk) ) and on request from
the General Counsel & Company Secretary, Marston's PLC, St Johns House, St
Johns Square, Wolverhampton, WV2 4BH.
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