Marston’s has reported like-for-like sales growth of 3% across its managed and franchised pubs in the six months to 2 April.
Underlying group revenue for the period was up 11.5% to £428.7m, with underlying profit before tax up 11.8% to £33.1m.
The group said that average profit per pub was up 13% in 2016, and had increased 44% since 2012
The company opened seven pubs and three lodges in the period, including its first new-build Tavern under the franchise model. Marston’s will open 20 new pubs this financial year, including two Revere bars and five new lodges
In the Destination & Premium arm total revenue was up 9.4% to £204.8m, with total like-for-like sales up 3% on last year. Like-for-like food sales up by 2.2%, which the group said was assisted by strong growth in sales of starters, desserts and coffee. In Destination pubs, food now accounts for 59% of total sales (2015: 58%) and in Premium pubs and bars food is 29% of sales (2015: 28%). Like-for-like room income was up 11.8% and wet like-for-like sales grew 3.5%, including own-brewed premium ale volumes up 7% and premium lager up 15%. Underlying operating profit for Destination & Premium of £34.8m was up 10.1% .
In Taverns, total revenue increased by 2.6% to £107.1m, which the group said principally reflected the continued conversion of pubs to its franchise model. Like-for-like sales were up 3.0% and operating margins up 0.1% versus last year. Operating profit was up 0.4&%.
In the Leased division total revenue decreased by 3.6% to £24.2m and underlying operating profit of £12.7m was up 2.4% on last year. Marston’s performance of the core estate was strong with rental income growth of 2%. Operating margin of 52.5% was up 3.1%.
In brewing, total revenue increased by 36.6% to £92.6m, primarily reflecting the benefits of the Thwaites acquisition. Underlying operating profit increased by 16.3% to £10m.
Overall ale volumes were up 22% on last year. Premium cask ale volumes were up 22% and bottled ale volumes up 10%. Hobgoblin continues to grow with sales up 15% on last year, supported by the introduction of Hobgoblin Gold.
Operating margin was down versus last year at 10.8% which reflects the impact of the pub supply arrangement with Thwaites which generates a positive profit contribution, albeit at a low margin percentage.
Capital expenditure was £72.9 m in the first half year (2015: £70.9 million) including £33.6m on new pubs. The group said it expects that capital expenditure will be around £140m this financial year, including around £70m for the construction of at least 20 pub-restaurants, two Revere bars and five lodges.
Proceeds of £27.1m of cash have been received from the sale of 34 pubs and other assets.
Chief executive Ralph Findlay said: “We are encouraged by our first half performance and are on track to meet our expectations for the year. In pubs, we have driven our growth by the organic development of pub-restaurants and franchise-style pubs, and more recently through investment in lodges and premium bars, widening our appeal. In Brewing, we had an excellent first half year and achieved good growth through our industry-leading brands and service.”
On the current outlook, the group said: “After the first few weeks of the second half year, performance remains in line with expectations. Despite more challenging comparatives in the second half year, we remain confident of achieving our targets for the full financial year and are on track to complete the new-build and lodge expansion plans outlined below. We are pleased to declare an interim dividend of 2.6 pence per share representing a 4.0% increase on 2015.
“There are two pieces of Government legislation that come into effect in the second half year. The planned introduction of the Pubs Code in the second half-year will impact the tenanted and leased pub sector. Marston’s Leased pubs generate approximately 15% of our total pub profits, and we are therefore not materially exposed to potential adverse consequences of the legislation. The Living Wage was introduced on 1st April and will increase staff costs in pubs. We had anticipated that staff costs would increase over time, and that the Minimum Wage and Living Wage would converge, so the impact over and above our existing forecasts was relatively modest. We have no plans to review other staff benefits as a consequence of the introduction of the Living Wage.
