Marston's has what it takes, says Findlay

Midlands brewer Marston's said today it expects its profits for 2008 to be in line with expectations, after benefiting from a lower tax bill.

In a year end trading update, Marston's said overall group turnover for the year to October 4, 2008, was around two per cent up on last year.

Chief executive Ralph Findlay said the group's like-for-likes "reflected trends we talked about in May", when Marston's revealed its interims.

Emphasising the group's "value for money offers in a quality environment", Findlay acknowledged the market in this burgeoning area of the sector was becoming more competitive, but claimed Marston's had the pubs to deliver.

"Consumers are more savvy regarding what's on offer," he said, "and the success of food sales in our pubs has been about visibly demonstrating good value for money."

The group said the second half was particularly tough, with falling consumer confidence, continued inflationary pressures in areas such as food, energy and brewing costs and poor summer weather all contributing to "very testing market conditions".

Marston's leased and tenanted arm saw like-for-like profits down 1.7 per cent, which included a decline of three per cent in the second half of the year.

The group said it had boosted its support for licensees to the tune of £2m "to reflect market conditions". Support included what it calls "rent alleviations", discounts, business building tools and help in cutting costs.

Marston's Inns & Taverns, the brewer's managed operation, saw like-for-like sales down 0.6 per cent, versus strong comparatives in 2007, up 4.6 per cent.

The group said food sales now accounted for 36 per cent of total managed turnover, with its "value for money operating formats continuing to perform well". Average spend on food per head, the number of meals sold and like-for-like food sales all rose against last year, it added.

Managed pub sales would need to be up by three per cent in the coming year to maintain current profit levels, it added.

Marston's Beer Company reported total own-brewed volumes up five per cent, and premium ale volumes up 17.5 per cent including acquisitions of Ringwood and Wychwood breweries. Underlying volumes are believed to be down around the 2.5 per cent mark.

On Marston's recent price hike for its beers, Findlay said the four per cent rise "was actually quite modest", although he admitted raising prices in the current market "was an emotive subject".

"People have to recognise that costs related to brewing beer are rising," he added.

In the coming year Marston's said it expected to nearly halve its capital expenditure on its pubs to below £60m, although maintenance spending would remain at "current levels". The cuts in capex would be in areas such as new pub development.

Marston's expects costs to rise by £12m in 2008/09. Some of this would be mitigated by operating and buying efficiencies, including a £4m reduction thanks to a recent reorganisation of the brewer's head office function.

On the matter of the group's £1.2bn net debt, Findlay said most of it was long term and at fixed rates. Marston's has no refinancing requirements until August 2010, he added, although the group would "keep an eye" on developments in the debt markets.

Findlay said he was cautious about the immediate trading outlook, but was confident the group had "good operational flexibility and the resources to perform better as a whole going forward".

There would be a focus on value for money in the group's managed pubs, he said, while the tenanted and leased estate would be operated "with a view to sustainability and shared risk and reward".

Marston's announces its results for the year to October 4, 2008 on December 5, 2008.