Marston’s, the brewer and pub operator, has this morning reported a 0.3% rise in underlying profits across its tenanted and leased division for the 26 weeks to 2 April.
The group said this reflected the stable performance of pubs on long-term traditional agreements, and the profit uplift being achieved from pubs converted to its innovative Retail Agreement - its quasi-franchise agreement. Average income per pub across its tenanted and leased arm rose by 1.5% during the period.
Total revenue across it 1660-strong tenanted and leased estate increased by 4.5% to £85m, which it said was also due to the rollout of its Retail Agreements.
The company said performance remained stable in its 1,000-strong traditional estate, with revenue up 0.2%, and operating profit up 0.8% on last year. In the remaining 600 pubs, profits were down 3%, which the company said was a significant improvement on the trend last year.
Marston’s said the rollout of the Retail Agreement had contributed a further £0.7m of profit growth this year, offset by a profit decline in the pubs yet to be converted.
The group said it was its intention to convert approximately 600 pubs in its tenanted estate to the new Retail Agreement by the end of 2013.
It has converted 227 pubs to date, and said the performance to date of these sites “has been encouraging, with post conversion profits up a further £0.7 million compared to last year”.
The company intends to convert at least 100 additional pubs by the end of this financial year, and the remaining pubs by the end of 2013. The average expenditure per conversion is around £50k per pub with a minimum target return on incremental capital expenditure of 20%.
The company reported a 2.4% increase in like-for-like sales across its managed arm driven by a 4.7% increase in food sales and like-for-like wet sales up 1.5%.
Its 486-strong managed estate saw total revenue increase by 3.6% to £181.7 million during the 26 weeks, helped by the contribution of new-build pub-restaurants; growth in like-for-like sales; and the impact of the disposal of town centre leasehold sites during 2010 and 2011 to date.
Overall ale volumes were up 4% on last year, with premium ale volumes up 6%. Total revenue across its beer arm decreased by 2.5% to £50.3m, which it said reflected the timing of Easter and lower standard lager volumes in the independent free trade. Underlying operating profit in its beer division increased by 1.4% to £7.3m.
Group revenue for the period increased by 2.8% to £317.9m, while underlying pre-tax profit increased by 5% to £29.2m.
The group said it had seen further improvement in trading in the six weeks since 2 April, with like-for-like sales in its managed pubs up 3.2% in the 32 weeks to 14 May, driven by a 5% increase in food sales and a 2.7% rise in wet sales.
Like-for-like sales for the managed division in the nine weeks to 14 May, which includes Mother's Day and Easter in both years, increased by 5%.
It said that tenanted and leased like-for-like profits over the same period were estimated to be up by 0.4%, with own-brewed volumes 4% ahead of last year.
Chief executive Fndlay said: "The performance of the group in the first half year has been encouraging, despite challenging market conditions and the severe weather in December, and this has continued with good trading over the Easter period. Our focused and disciplined strategy, offering consumers value for money in well-invested pubs, together with sector-leading shares in the growth segments of the beer market, places us in a strong position for the future."
The group completed eight new-build pubs in the year to date with performance ahead of target. It said that its new-build sites continue to generate a high EBITDA return on capital increasing to 18.6%.
Capital expenditure for the first half year increased to £49.1m in 2011 (2010: £38.7m), as the company continued to invest in its new-build pub development programme. As a result, it expects capital expenditure to be around £100m for the year as a whole (2010: £83.5m).
The company said it raised around £6m from the disposal of 10 pubs and other properties during the 26 weeks.
