Marston's: Turnover up but trading still tough

National brewer and operator Marston's has reported a 2% increase in group turnover for the 43 weeks to 26 July despite the tough trading climate.

But the company warned trading remains challenging due to the smoking ban, weakening consumer confidence and higher costs.

Food sales have increased but drinks and gaming machine revenues are on a downward slide.

Like-for-like profit at Marston's Pub Company, its tenanted and leased division, was down 1.2% with growth in rental income off-set by weak drink volumes and machine income.

The cost of tenant support has risen to £2m this year. "We believe that our consistent policy of achieving a sustainable rent for each pub is contributing to our resilient performance," a statement said.

The division will now be headed up by Alistair Darby who has exchanged his role as Beer Company managing director with Stephen Oliver.

Like-for-like sales at managed houses were down 0.6% on last year but the last 13 weeks have seen sales 0.5% ahead of last year.

At Marston's Beer Company, volumes of its own brands are down on last year but market share has been increased through the acquisition of Refresh in April.

Marston's will reduce its capital expenditure investment from £115m this year to £65m in 2009 with fewer pub openings in new housing developments anticipated. This is due to reduced investment by house builders.

It will continue to monitor the situation over possible conversion to tax-efficient Real Estate Investment Trust (Reit) status.

"Although the market is difficult, and we do not expect any improvement in the economy in the short term, we are still seeing growth in eating out in Marston's pubs despite the squeeze on discretionary expenditure and weaker confidence," said chief executive Ralph Findlay.

"We are also experiencing volume growth in the excellent range of Marston's premium ales.

"Cost inflation remains a significant challenge, but we are controlling our costs well and are taking appropriate actions to offset some of the increases in the costs of brewing raw materials, food supplies and utilities.

"We are relatively well positioned as a result of sustained investment in our food offers, the improvements in our range of beers and premium brands, and our freehold pub estate."