Marston’s, the brewer and pub operator, has this morning unveiled like-for-like sales slightly ahead of last year, at 0.3%, at its managed houses, with falling drink volumes and machine income offset by strong food growth. Like-for-like drink sales and machine income for the six months to 29 March, 2008, were down 3.1% and 10.3% respectively, following the introduction of smoking bans in England and Wales last year. Conversely, food growth continued to be strong at Marston’s 553-strong managed pub division, with like-for-like food sales ahead at 7.8%. The company said that 65% of sales its managed-house division – which operates the Bluu, Pitcher & Piano, Que Pasa, Tavern Table and Two for One – were now driven by dining. The group said it continued to open new-build managed pubs, with eight opening in the first six months – at Birmingham, Brynmawr, Ipswich, Ludlow, Mansfield, Norwich, Rotherham and Warwick. It intended to open 12 such pubs in the second half, under its food-driven brands. Since 2002 the company had opened about 50 new-build houses, with average ebitda returns exceeding 15%. Underlying operating margin at its managed house arm fell from 16.0% to 15.4%, which the company said reflected increasing food sales as well as higher input costs and energy bills. Marston’s said it expected food-cost inflation over the next year to be about 8%, increasing costs by £1.5m in the second half and by up to £3m in the next financial year. The company said it would also face an increase of £3m – about 35% - to its electricity bill as its current contract was up for renewal in June 2008. Underlying operating profits at the division were up 6.8% to £28.3m on sales up 11.2% to £183.8m, driven by the acquisition of Eldridge Pope in 2007. During the period five managed pubs were sold and 47 pubs were transferred to its leased division. At its tenanted and leased arm, which comprised 1,721 pubs, average ebitda per pub rose 10.1% although like-for-like profit per pub was down 0.6%, reflecting the impact on its licensees of a tougher trading environment. Marstons said it had upped the level of training provided to its lessees, with 1,380 individuals from 1,100 pubs attending training days in the period. Sales dropped from 99.8m to £92.7m at the division, reflecting the sale of 279 bottom-end pubs to aAim Group last year. Underlying operating profit fell 1.8% to £43.3m. underlying operating margin increased by 2.5% to 46.7%. In the first half, it invested £23.7m in its leased pubs arm, including the acquisition of three new pubs and 75 refurbishment projects. At its brewing division, which makes a range of ales under the Jennings, Marston’s and Ringwood brands, sales fell 0.7% to £39.9m, with underlying operating margin falling from 18.4% to 17.5%. It said that against a beer market down about 9%, its own brands were down 2.5%. Growth of Marston’s Pedigree, Jennings Cumberland Ale and Ringwood – its premium ales – was 7.2%. Group ebitda rose 5.6% to £94.6m on sales up 3.6% to £316.4m The group said it had controlled costs well with group margins falling slightly to 22.9%, from 23.4% in the first half last year. In addition to the impact of higher energy, food and brewing raw materials costs, Marston’s said the drop also reflected the changing sales mix from machines and wet sales to food. Ralph Findlay, chief executive, said: “We remain cautious about the outlook for 2008, as consumer confidence remains weak and cost inflation is at higher levels than we have seen for some years. “Nevertheless we expect our relative performance against last year to improve over the summer months as the anniversary of the smoking ban in England on 1 July last year passes, and as a consequence of the impact of flooding last year. We anticipate a slightly greater profit weighting to the second-half, compared to last year as a result of these factors. “Our high quality pub estate continues to benefit from its broad UK geographical spread, its successful casual dining formats and Marston’s vertically integrated business model.”