Brewer and pub operator Marston's has reported a 4.6% jump in underlying end of year profits to £73.5m fuelled by a strong performance in its managed division.
The compamy's focus on its "F Plan" — food, families, females and forty/fifty somethings — has paid off with food now accounting for 40% of sales with over 24m meals sold in its managed outlets — 5% up on last year at an average spend of £6 a head.
Like-for-like sales at its managed pubs, Marston's Inns and Taverns, grew 1.7% with underlying operating margins up 1% and average profit per pub up 10%.
It has now added 15 new build pubs to the estate and is on track to complete a further 20 in 2011 and then 25 the year after.
New managed sites saw a weekly average turnover of £25,000 per week — well above its target of £20,000 — with food making up around 60% of sales.
"Profitability is also ahead of target producing an estimated annual return on capital of around 17%, representing an effective acquisition multiple of below 6x EBITDA," said chief executive Ralph Findlay.
Tenanted
At its tenanted division, operating profit was down 3.7% with trends improving throughout the year. It now has 104 pubs on its new Retail Agreement and is on track to roll out a further 200 agreements in 2011.
Its Retail Agreement is a quasi-franchise that pays licensees 20% to 28% of net takings, with Marston's in charge of EPoS, stock-taking, retail offer and costs, except staff.
Findlay said the results from the 104 pubs that had adopted the Retail Agreement had been "encouraging", with operating profit from these pubs up £1m on last year.
Capital investment in the 104 pubs totalled £6m with a further £10m set aside for the 200 sites set for conversion to the agreement in 2011. A further 300 sites are set for conversion by 2013.
"The targeted profit improvement from all 600 pubs is around £6 million per year from 2013, representing a return on incremental capital expenditure of 20%," said Findlay.
From 2 October 2011, those pubs operating under Retail Agreements will convert to the managed division, Marston's Inns and Taverns. By 2013 Marston's Inns and Taverns will operate around 1,100 pubs. Marston's Pub Company will operate around 1,000 pubs under long term lease agreements.
This will be accompanied by several management changes (Marston's: Andrew leaves, Darby steps up).
Premium ale volumes are up by 3% with turnover and profit growth in a UK beer market down by around 7%.
For the eight weeks to 27 November managed like-for-like sales were up 3.0%, including like-for-like food sales up 5.8% and like-for-like wet sales up 1.7%. Tenanted and leased like-for-like profits are estimated to be down 1.5%.
"We have adapted well to market conditions and trends. We are benefiting from our focused, differentiated strategy as demonstrated by our robust results in 2010 and a strong start to the new financial year," said chief executive Ralph Findlay.
"Our plans are affordable, deliverable, and target sustainable growth and strong returns in the future.''
Key figures:
• Group revenue up 0.9% to £650.7 million (2009: £645.1 million)
• Underlying profit before tax of £73.5 million up 4.6% (2009: £70.3 million)
• Marston's Inns and Taverns like-for-like sales up 1.7% with underlying operating margins up 1% and average profit per pub up 10%
• Marston's Pub Company operating profit down 3.7% with trends improving through the year
• Marston's Beer Company revenue up 4.5% and operating profit up 1.3%
• Net debt down by £17.1 million to £1,082.2 million