Marston’s has this morning reported its preliminary results for the 52 weeks to 1 October 2016, with like-for-like sales up 2.3% across its Destination and Premium division, up 2.7% in Taverns, whilst Leased average profit per pub increased 3%.
Average profit per pub up 8% in 2016, up around 50% since 2012.
Underlying revenue increased by 7.1% to £905.8m reflecting “like-for-like growth in our pubs, the positive impact of new openings, growth in our beer brands and the acquisition of Thwaites’ beer business”.
Underlying operating profit of £172.7m was up 4.4% with profit growth in each of its trading segments. Underlying profit before tax was up 7.1% to £98m “principally reflecting the contribution from new pub-restaurants and a strong performance from Brewing”. Net debt at the period end was £1.269bn.
Destination and Premium: Total revenue increased 8% to £440.8m in the year “reflecting the continued strong performance of our new-build pub-restaurants and growth in like-for-like sales”. Underlying operating profit of £90.2m was up 7.9%. Average profit per pub increased to £223k, up 2%.
Like-for-like food sales were up by 1.7%, assisted by strong growth in sales of starters, desserts and coffee. In addition, like-for-like room income was up 15.8%. In Destination pubs, food now accounts for 58% of total sales (2015: 57%) and in Premium pubs and bars food is 29% of sales (2015: 28%). Like-for-like wet sales increased by 2.3%.
Taverns: Total revenue increased by 2.9% to £221m, with strong franchised growth offsetting the impact of disposals. The company said the quality of the remaining pub estate had improved significantly with average profit per pub up 10% to £67k.
In its managed and franchised pubs like-for-like sales were up 2.7% and operating profits were up 5.7% versus last year, reflecting the “continued success of pubs operating under the franchise model”. Operating margins were in line with last year.
Operating profit was up 0.2% to £56mdespite the impact of disposals, reflecting the “strong performance of franchised pubs within our estate”. Operating margin was 0.7% below last year at 25.3%, primarily reflecting the impact of conversion of pubs to the franchise model.
Leased: Total revenue decreased by 5.4% to £50.7m, reflecting disposals and transfers, and underlying operating profit of £24.2m was up 1.7% on last year. The company said the performance of its core leased estate was strong with like-for-like earnings growth of 2%, including rental income growth of 2%. Average profit per pub increased by 3% to £72k and licensee stability remained stable at over 90%. Operating margin of 47.7% was up 3.3%.
Brewing: Volumes were up 13% during the year, with the company increasing its market share to 27% of the premium bottled ale and 20% of premium cask ale markets. Thwaites’ beer business fully integrated and achieving targets.
Total revenue increased by 14.3% to £193.3m, reflecting the benefits of the Thwaites’ acquisition. Underlying operating profit increased by 12.1% to £23.2m.
Overall ale volumes were up 13% with premium cask ale volumes up 6% and premium bottled ale volumes up 5%. Hobgoblin, the group’s largest brand, continued to grow with sales up 13% on last year.
General: Approximately 80% of profits from its pubs are now generated by managed or franchise-style pubs.
22 new pubs and bars completed this year, creating around 1,000 jobs. Six lodges opened, taking estate to over 950 rooms.
Capital expenditure was £143.7m in 2016 (2015: £142.3m), including £65m on the construction of 22 pubs and bars and 6 lodges. The company expects that capital expenditure will be around £140m in 2017, including around £70m for the construction of at least 20 new pub-restaurants, three Revere bars and five lodges.
During the year, the group generated £45.9m of cash from the disposal of assets including £30.9m of leasing transactions.
The company said it had made an “encouraging start to new financial year”.
Its target is to open at least 20 new-build pub-restaurants in the coming year, including three Revere bars and 5-10 lodges, weighted towards the second half.
The company said that its Revere business acts as an “innovation-hotbed” where its trials new food styles and concepts that can then be extended to the broader pub estate. Pizza is a good example and in 2016 it continued the rollout of Pizza Kitchen, offering fresh-made pizza with “theatre”, which now operates in 70 pubs. Similarly, it introduced “smoke-house food” and “better-burger” concepts in to its Generous George pubs following successful trials in the Revere business.
The company said: “We are also well placed to benefit from current trends in beer, wines, spirits and non-alcoholic drinks. Growth in premium drinks continues, with strong consumer interest in new brands and styles, particularly in craft beer, spirits and non-alcoholic drinks. Premium beers account for over 70% of beer sold, we sell 16 million glasses of wine and five million cups of coffee a year, with soft drinks accounting for 15% of total drinks volume. In our Revere bars, cocktails account for 12% of drinks sales reflecting the premium nature of the experience, and we have enhanced our cocktail offer in both our Destination and Taverns pubs to capitalise on this growing area of the market.”
It expects to open at least three bars per annum through its Revere division in future, with openings in Hammersmith, Harrogate and Sheffield planned in 2017.
The company said that the results of its 2016 engagement survey had been “extremely encouraging” with an employee engagement score of 76%, which is 9% above the UK average and 2% above the UK High Performers.
Chief executive Ralph Findlay said: “We have delivered another year of good growth across the business, with the outstanding performance of our beer company particularly encouraging. Trading has been solid in the first few weeks of the new financial year and we have seen no discernible change to the trends experienced in 2016. The majority of our major product cost lines are contracted for 2017 and well into 2018. We have a high quality pub and beer business which is displaying positive momentum and is consistently outperforming the market. We believe that, despite some continuing market headwinds, our expansion plans for new pub-restaurants, lodges and Revere bars will further enhance our ability to deliver attractive returns.
