Marston's reports drop in FY pre-tax profit

Marston's, the brewer and pub operator, has reported a 3.4% drop in underlying pre-tax profit to £98.0m for the year to 29 September 2007.

The company said that the fall in pre-tax profit was impacted by increased interest costs associated with its share buyback programme, flood repair costs and the poor summer weather.

The group said that approximately 150 of its pubs were affected by the flooding in June and July. Analysts predicted that the flooding could have cost the company up to £11m.

Turnover increased 9.6% to £652.8m, which included contributions from the acquisitions of Eldridge Pope, Ringwood Brewery and Sovereign Inns during the year, while underlying operating profit was up 7.2% to £163.2m.

The company said trading in the eight weeks to 24 November had been in line with expectations, with like-for-like sales in Marston's Inns and Taverns, its managed estate, 2.1% ahead of last year, including like-for-like growth in food sales of 9.1%.

It said that trading across its tenanted and leased estate and brewing operation had been satisfactory since the year end.

The company invested £20m in preparation of the smoking ban, with 90% of its pubs now having outside areas, which it said had contributed to its "robust performance".

Ralph Findlay, chief executive, said: "We remain cautious about consumer confidence, regulatory cost pressures and the short term impact of the smoking ban.​

"We are, however, well positioned to continue to exploit current trends, including the continuing growth in casual dining."

For the year like-for-like sales in Marston's Inns & Taverns climbed of 4.6%, with food sales up 13.3% and wet sales up 0.6%.

Turnover in its managed estate was up 11.2% to £367.8m, while underlying operating profit climbed 5% to £66.7m.

Underlying operating profit in Marston's Pub Company, it tenanted and leased pub division, which comprised 1,772 pubs at 29 September, increased by 13.1% to £90.8m, while turnover was up 12.4% to £200.9m.

As a consequence of the disposal 279 pubs out of the division to aAim in May for £82.5m, average profit per tenanted pub increased 13% to approximately £65,000.

Turnover at the company's brewing business dropped to £84.1m from £86.0m in 2006, reflecting its withdrawal from several low-margin wholesalers, and Admiral Taverns acquisition of the Pyramid Pub Company.

The company invested £146.3m over the 12 months, with £48.5m invested in its tenanted and leased estate, £37.4m in its managed estate, and £46m spent on new pubs and site developments.

During the year the group purchased 28.1 million shares at a total cost of around £120m. It said it expected to complete its commitment to buyback £150m of its shares by the end of 2007.

Earlier this month announced it had increased its securitised debt by £330m following the issue of bonds against a further package of 437 leased pubs.

As part of this process it revalued around 2,000 pubs, which resulted in an after tax gain of £117m, the equivalent to an average increase of around 12% compared to book values.