Marston’s profits up 10%

In its Taverns estate revenue was down 4.6% but average profit per pub increased 20%. The managed and franchised pubs in this division reported like-for-like sales up 2% and operating profits were up 2.9% versus last year.

In the leased estate like-for-like earnings grew 3% and Average profit per pub increased by 4%.

In Brewing, overall ale volumes were up 15% on last year reflecting the benefits of the Thwaites acquisition. Excluding Thwaites, there was a 5% increase in volumes.

Underlying group revenue for the year was up 7% to £845.5m with underlying profit before tax up 10% to £91.5m.

The operating margin was 0.2% below last year, which Marston’s said reflected lower margins in brewing as a result of the contract to supply Thwaites’ pubs.

The company said that around 78% of profits from its pubs is now generated by managed or franchise-style pubs.

Marston’s said the current year had started well, with both pub trading and beer volumes “in line with expectations”.

During the year, Marston’s completed 25 new pub restaurants and continued conversion of Taverns to Franchise – with around 550 now converted. Average profit per pub was up 15% in 2015, up around 40% since 2012.

The company said it had at least 20 new-build pubs, including its first new-build Tavern planned for current year, as well as two Revere bars and five lodges.

Across the group’s Destination business, it has opened over 130 pub-restaurants since 2009. These pubs generate high turnover, with target sales of £25,000 per week and a food sales mix in excess of 60%. The company opened 25 pub-restaurants in 2015, creating 1,250 jobs, and expects to open at least 20 per annum for the foreseeable future, including its first new-build Taverns pub in 2016.

The company believes there is further opportunity to grow both its Premium pub business and accommodation. In 2015, it converted two pubs from the existing estate to its Revere format and opened three lodges adjacent to new-build pub-restaurants. It said that its organic room income has been “consistently strong with sales growth exceeding 50% over the last three years and we anticipate similar trends in the future with growth in leisure and business visitors”. The company expects to continue this expansion with two Premium bars and at least five lodges opening per annum.

The company said that it would continue to make investments in areas less exposed to competitor over-supply.

During the year, the group introduced franchise-style agreements into a further 80 pubs. It said: “This year our most successful franchisees have generated turnover levels similar to those in the Destination estate and the first multiple franchisees have been appointed.”

The company’s franchise model now operates in around 550 pubs and the company said that it remains its intention to convert the remaining pubs in the Taverns estate to this model over the next few years. It is also evaluating the potential for franchise-style agreements in the Destination estate.

Chief executive Ralph Findlay said: “The three year transformation of our pub portfolio towards an optimised estate is now largely complete.  We approach 2016 with our business successfully positioned at the forefront of industry trends with high quality, well-invested pub assets which are fit for the future.  We have great people and a growing portfolio of leading beer brands where our focus on premium and local provenance continues to serve us well. 

“Looking forward, we remain on track to open at least 20 new-build pubs this year and have in place a carefully selected site pipeline in key regional locations for 2016 and beyond.  Whilst new-build, food-led pubs remain our core growth driver, we have evolved our strategy to capitalise upon other opportunities for expansion where we see attractive returns potenti

“At this early stage of the current year trading has begun well and we look forward to building on this momentum over the months ahead to deliver another year of good progress for the Group.” 

The group disposed of 117 pubs and other assets during the year generating proceeds of £70m. It said that its disposal programme is “substantially complete”, although a normal level of estate churn will continue.

The company also gave a break down of its trading sectors, complete with food mix levels.

It currently operates 360 Destination pubs across two principal brands - Marston’s “Two for One”, and “Milestone Rotisserie”. The food sales mix of this business is 58%.

It currently operates 37 Premium pubs and bars. The food sales mix is 28%.

It also operates 859 Taverns pubs, which include franchised pubs, managed pubs, and tenancies. Over the next two to three years it expects that most of its Taverns pubs will be operated under our franchise model. Typically, these are wet-led pubs although food sales represented 17% of sales in 2015.

It currently has 341 Leased pubs and offers accommodation in 44 pubs within the Destination and Premium segment. In total, it has around 800 rooms including three lodges which opened during the financial year.

In 2015, the group continued the rollout of its Pizza Kitchen format which now operates in 40 pubs, and introduced burrito bars. It said that its new “better burger and pizza” concept in Revere is proving “extremely popular” with very encouraging initial trading. It expects to maintain this pace of food development for the foreseeable future.

The company said that across its pubs, premium beers now account for over 55% of beer sold. It now sells 15 million glasses of wine, and coffee sales continue to grow with five million cups of coffee sold last year. In its Revere pubs, cocktails now account for 9% of drinks sales, which the group said demonstrated the importance of offering a premium drinks experience to customers.

The company said that the growth of the UK eating-out market has also seen a shift to premium beers and a preference for quality. In addition, it saw growth in the off-trade, with the strongest growth in the premium bottled ale segment.

The company said: “We have benefited from these trends with our wide portfolio of beers from five breweries, a national distribution network and local approach to our beer brands. Almost 1 in 5 premium bottled ales and around 1 in 5 premium cask ales in the UK are Marston’s brands. Over the last 10 years, our mix of premium ales has increased by 30% to around 70% of sales and the mix of sales to the off-trade has increased by 25% to 55%.

“During the year we introduced 25 new beers into the market including ‘Hobgoblin Gold’, which has achieved annual volumes of around 20,000 barrels since launch, and recent launches of Pedigree New World, Shipyard IPA and the Revisionist craft range have also proved popular.”

In Destination & Premium the 1.8% rise in like-for-like sales was made up of like-for-like food sales up by 1.7%, assisted by “strong growth in sales of starters, desserts and coffee”. Like-for-like room income was up 5.6%. In Destination pubs, food now accounts for 58% of total sales (2014: 57%) and in Premium pubs and bars food is 28% of sales (2014: 27%). Like-for-like wet sales increased by 1.7% and the company said it continued to see growth in more premium products, with own-brewed premium ale volumes up 5% and premium lager up 7%.

In Taverns total revenue decreased by 4.6% to £214.7m, principally reflecting the impact of disposals. Operating profit was up 0.4% to £55.9m and operating margin was 1.3% above last year at 26.0%, primarily reflecting the benefit of the disposal of lower-end pubs.

In the Leased arm total revenue increased by 0.9% to £53.6 m and underlying operating profit of £23.8 million was up 1.3% on last year. Like-for-like earnings grew 3%, including rental income growth of 3%. Average profit per pub increased by 4% to £70,000 and licensee stability remained at over 90%. Operating margin of 44.4% was up 0.1%.

On the National Living Wage, the company said: “Approximately 60% of our people are under the age of 25 and we have previously indicated that the financial impact, compared to our existing plans, will be moderate. Our focus will centre on improving the quality of service to mitigate further the impact of the cost increase.”