Marston’s has this morning reported that total like-for-like sales were up 2.2% across its premium & destination estate for the year to 5 October against the previous year, with growth in the second half year of 4.1%.
The group reported that total revenue across its premium & destination estate increased by 14.1% to £349.2m in the year, which it said reflected the continued strong performance of its new-build pub-restaurants, growth in like-for-like sales and the benefit of the 53rd trading week. Underlying operating profit of £70.3m was up 23.8% (2012: £56.8 million). Average profit per pub increased to £207k, up 11.9%.
Like-for-like food sales across the division were up by 3.9% through a combination of volume growth and increased sales of starters, desserts and coffee which contributed to a 27p increase in spend per head. In Destination pubs, food now accounts for 56% of total sales (2012: 54%) and in Premium pubs and bars food is 25% of sales (2012: 24%). Like-for-like wet sales increased by 0.2%.
The company said it continued to see growth in more premium products, with premium cask ale volumes up 9% and premium lager up 11%. Wine sales increased by 13% and now account for 24% of drinks sales (2012: 22%).
It achieved a 1.5% improvement in operating margin, which it said was through moderate price increases and tight cost control.
Total revenue across its Taverns operation increased by 3.8% to £250.8m, which it said reflected an increased revenue contribution from more pubs operating under the franchise model. Underlying operating profit was £69.5m, a decrease of 5.1%, principally reflecting a significant level of disposals, poor weather in the first half year and a more subdued performance in its tenanted pubs in line with market trends. Average profit per pub is in line with last year.
In its managed and franchised pubs like-for-like sales were in line with last year and operating profits were up 3.7%, which Marston’s said reflected the continued success of pubs operating under the franchise model.
Tenanted like-for-like operating profits were down 7.7% in the period, an improvement on the decline in the first half. The company said this reflected the continued challenges facing small wet-led tenanted pubs in the current market and representing a relatively subdued performance given the better weather in the second half year.
Operating margin was 2.6% below last year at 27.7%, primarily due to the conversion of pubs which were formerly tenanted to franchise models. The group said that these agreements generate increased profit but the operating margin percentage is reduced as a consequence of accounting for sales at full retail value.
Total revenue decreased by 4.6% to £55.6m across it leased division, principally reflecting lower volumes in line with the market. Underlying operating profit of £26m was in line with last year. Average profit per pub increased by 2.1% to £67k, and licensee stability remained high at 92%.
The company said: “As with tenanted pubs, underlying measures of lessee ‘health’, including rent alleviations, improved during the financial year. Operating margin was 2.2% above last year at 46.8%, primarily due to a higher mix of rental income, and lower support costs.”
Total revenue increased by 12% to £127.3m. Underlying operating profit increased by 3.0% to £16.9m.
Overall ale volumes were up 6% on last year, with premium cask ale volumes up 4% and bottled ale volumes up 19%.
The group said: “We have maintained our position as ‘category market leader’, increasing our market share in each of these categories by over 1%. Hobgoblin saw growth of 16%, and is now our largest brand. In the independent free trade, our account base increased by 3% to more than 3,800 customers, and premium ale sales to this sector increased by 6%. In the take home market we continue to perform very strongly with volumes up 18%. Operating margin was down versus last year at 13.3%, reflecting the higher proportion of volume through the off-trade, which commands a lower margin percentage.”
Total company revenue in the year grew 9% to £782.9m, with underlying pre-tax profit up 1% to £88.4m and underlying operating profit up 7% to £168.3m.
Capital expenditure during the year was £150.8m (2012: £129.8m), including the construction of 22 pub-restaurants. It said that the principal reasons for the increase were: an additional £13.6m on new-builds as it plans to accelerate the new-build programme for 2014 and 2015; and £7m in respect of a new bottling line within Brewing which was originally intended to be funded through an operating lease. It expects capital expenditure will be around £140m in 2014, including around £80m for the construction of 25-30 new pub restaurants.
During the year, it generated £46.2m of cash from the sale of 130 pubs and other assets.
At 5 October the group had a £257.5m bank facility to May 2016, and the amount drawn down was £191m. Subsequent to the year end, this facility has been extended to November 2018 on “attractive terms”.
During the period, the group entered into three new lease financing arrangements which have a net value of £108.6m as at 5 October 2013. This financing is a form of sale and leaseback agreement whereby the freehold reverts to the group at the end of the term at nil cost, consistent with its preference for predominantly freehold asset tenure. The agreements range from 35 to 40 years and provide the company with an extended debt maturity profile at attractive rates of interest.
It said: “This facility, together with a long-term securitisation of approximately £1bn and the lease financing arrangements described, provides us with an appropriate level of financing headroom for the medium term. The group has sufficient headroom on both the banking and securitisation covenants and also has flexibility to transfer pubs between the banking and securitisation groups.”
It reported a 3.1% rise in like-for-like sales across its premium and destination division for the year to the 7 weeks to 23 November, with food sales up 4.6% and wet sales up 1%
It said that like-for-like sales across its managed and franchised division climbed 2.1% during the period, while tenanted profits were in line with expectations.
The company said that like-for-like profits in across its leased pubs in the seven weeks were in line with last year.
The group reported that 130 pubs and other assets were sold or exchanged during the year for c£50m. It said it was targeting £60-70 million disposals per annum in 2014 and 2015 from its Taverns estate.
Findlay said: “In 2013 we achieved good growth in turnover and operating profit despite significant challenges. This reflects our unstinting focus on what our customers want: excellent service and value for money in high quality pubs and bars. In 2013 we served 30 million meals, with food now the principal reason for around 80% of customer visits in our Destination pubs.
