Marston's first half profits under pressure

Marston's, the Midlands brewer, has reported sliding wet and machine income sales across its managed pub estate for the first 24 weeks of the current financial year and remains "cautious" about trading prospects for the rest of 2008.

In a trading statement in which it said pre-tax profits for the period were likely to be hit by costs relating to its share buyback programme, Marston's said its wet sales had fallen 3.1 per cent in the six months to March 15, while machine income slumped 10.3 per cent.

Chief executive Ralph Findlay said he believed the group had performed "reasonably well in a tough market", and given the strong comparatives.

"The decline in wet and machine income is not a surprise, but our food sales growth shows that people are still going out to eat," he said.

Findlay said trading across the group's tenanted and leased pubs was "generally more challenging", with a number of well-publicised factors "and less flexibility" affecting the sector.

Marston's managed pub division, representing just over a fifth of the brewer's retail operations, saw like-for-like sales up 0.3 per cent, versus a seven per cent rise in the same period in 2007, while food sales rose 7.8 per cent, against a 13.9 per cent increase last year.

The group has coincidentally announced today plans to transfer 47 managed pubs into leased businesses.

Marston's 1,900-strong tenanted and leased division saw like-for-like profit "slightly below last year in the period with the growth in rental income offset by volumes and machine income in line with market trends".

Overall beer volumes "remain below last year", Marston's said, although it claimed to have increased market share with a "continued good performance in the premium ale segment".

Marston's said its overall pre-tax profits in the first half of its financial year are expected to be hit by the effects of the brewer's £150m share buyback programme.

The group said it expected overall turnover for the 26 weeks to March 29, 2008 to by up "by around four per cent" on last year.

This rise reflects the acquisitions of Sovereign Inns, Eldridge Pope and Ringwood Brewery in 2007.

But while the group's operating profits are expected to be "in line" with last year, pre-tax profits "will reflect the higher interest costs associated with the £150m share buyback programme in 2007".

The company said costs have been 'well controlled' despite inflationary pressures and its operating margins are likely to be hit by sales mix changes.

Marston's announces its interim results on May 23, 2008.