Marston's PLC Preliminary Results -3-
November 27 2014 - 2:00AM
UK Regulatory
Like-for-like wet sales increased by 2.0%, outperforming the UK
on-trade drinks market. We continue to see growth in more premium
products, with premium cask ale volumes up 8% and premium lager up
16%.
We achieved a 0.1% improvement in underlying operating margin
through moderate price increases and tight cost control.
Taverns
Total underlying revenue decreased by 10.2% to GBP225.1 million,
principally reflecting the impact of the significant disposal
activity described above, and consequently underlying operating
profit was GBP55.7 million. The quality of the remaining pub estate
has improved significantly with average profit per pub up 4%.
In our managed and franchised pubs like-for-like sales were up
2.1% on last year and operating profits were up 5.7%, reflecting
the continued success of pubs operating under the franchise
model.
Operating margin was 3.0% below last year at 24.7%, primarily
due to the conversion of pubs from tenanted to franchised models.
These agreements generate increased profit but the operating margin
percentage is reduced as a consequence of accounting for sales at
full retail value.
Leased
Total underlying revenue decreased by 4.5% to GBP53.1 million,
principally reflecting significant disposals and the non-recurrence
of the 53(rd) trading week. Underlying operating profit of GBP23.5
million was down on last year. The performance of the core estate
was strong with like-for-like earnings growth of 3%. Average profit
per pub increased by 2% to GBP68,000, and licensee stability
remained at over 90%.
As with tenanted pubs, underlying measures of lessee 'health',
including rent alleviations, improved during the financial year.
Underlying operating margin of 44.3% was down 2.5%.
Brewing
Total underlying revenue increased by 4.1% to GBP132.5 million.
Underlying operating profit increased by 3.0% to GBP17.4
million.
Overall ale volumes were in line with last year, with premium
ale volumes up 4% and bottled ale volumes up 6%. Hobgoblin, our
largest brand, continues to grow with sales up 4% on last year. We
have maintained our position as 'category market leader' in both
the premium bottled ale and premium cask ale markets.
In the independent free trade, our account base increased to
more than 4,150 customers, and premium ale sales to this sector
increased by 14%. In the take home market we continue to perform
very strongly with volumes up 4%.
Underlying operating margin was slightly down versus last year
at 13.1%.
Capital expenditure and disposals
Capital expenditure was GBP142.6 million in 2014 (2013: GBP150.8
million), including the construction of 27 pub-restaurants. We
expect that capital expenditure will be around GBP150 million in
2015, including around GBP80 million for the construction of at
least 25 pub- restaurants.
During the year we generated GBP143.6 million of cash from the
sale of 388 pubs and other assets.
Financing
At 4 October 2014 the Group had a GBP257.5 million bank facility
to November 2018, and the amount drawn down at 4 October 2014 was
GBP212 million. This facility, together with a long-term
securitisation of approximately GBP0.9 billion and the lease
financing arrangements described below provides us with an
appropriate level of financing headroom for the medium term. The
Group has sufficient headroom on both the banking and
securitisation covenants and also has flexibility to transfer pubs
between the banking and securitisation groups.
The Group has entered into a number of lease financing
arrangements which have a total value of GBP158.1 million as at 4
October 2014. This financing is a form of sale and leaseback
agreement whereby the freehold reverts to the Group at the end of
the term at nil cost, consistent with our preference for
predominantly freehold asset tenure. The agreements range from 35
to 40 years and provide the Group with an extended debt maturity
profile at attractive rates of interest. Unlike a traditional sale
and leaseback, the associated liability is recognised as debt on
the balance sheet due to the reversion of the freehold.
Net debt before lease financing of GBP1,040 million at 4 October
2014 is a decrease of GBP42 million compared to GBP1,082 million at
5 October 2013 partially reflecting the repurchase of the AB1 notes
in the securitisation. Operating cashflow of GBP127.8 million was
below last year principally due to the impact of the disposal
activity in the year and an adverse movement in working capital in
the period, which is principally in relation to creditors.
For the period ended 4 October 2014 the ratio of net debt before
lease financing to underlying EBITDA was 5.4 times (2013: 5.3
times). It remains our intention to reduce this ratio to below 5.0
times, principally through EBITDA growth generated from our
new-build investment programme.
Pensions
Our final salary pension scheme at the year end showed a surplus
of GBP7.8 million before tax (2013: GBP5.1 million deficit). This
position reflects the consistent manner in which the Group has
proactively managed its deficit over the last five years, and the
closure of the final salary scheme to future accrual from 30
September 2014. The triennial valuation of the scheme was due on 30
September 2014 and we expect to report on this at our 2015 Interim
Results.
Taxation
The underlying rate of taxation of 19.6% in 2014 is below the
standard rate of corporation tax of 22% due to a combination of:
prior year adjustments, the benefit of indexation allowance in
deferred tax on property and the lower deferred tax rate of
20%.
The underlying tax rate has decreased by 1.1% from 20.7% in
2013.
Non-underlying items
There is a net non-underlying charge of GBP117.4 million after
tax of which circa GBP100 million is non-cash. The net charge
includes a loss on disposal of GBP35.8 million in respect of the
portfolio sale of 202 pubs together with a GBP1.9 million loss in
respect of the ongoing management of these pubs. GBP37.5 million of
revaluation surpluses from the portfolio sale were transferred from
the revaluation reserve to retained earnings upon disposal. In
addition there is a charge of GBP50.6 million relating to non-core
estate disposal and reorganisation costs from the restructuring of
our operations across the Group, a charge of GBP29.5 million
relating to the recognition of onerous lease provisions and
associated leasehold impairments, a charge of GBP27.2 million
relating to the buyback of securitised debt and a loss of GBP8.2
million in respect of the mark-to-market movement in the fair value
of certain interest rate swaps. These charges are offset by a
credit of GBP10.8 million in respect of the closure of the defined
benefit pension plan, a GBP0.2 million reduction in the interest
accrued in respect of the Rank case and a credit of GBP24.8 million
relating to the tax on non-underlying items.
As a consequence, there is a statutory loss for the year of
GBP50.7 million, and loss of 8.9 pence per share.
GROUP INCOME STATEMENT
For the 52 weeks ended 4 October 2014
2013
2014 (Restated)
Non- Non-
Underlying underlying Underlying underlying
items items Total items items Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----- ----------- ------------ --------- ----------- ------------ ---------
Revenue 787.6 27.7 815.3 782.9 .- 782.9
Operating expenses* (631.5) (134.7) (766.2) (614.7) (21.6) (636.3)
--------------------------------- ----------- ------------ --------- ----------- ------------ ---------
Operating profit 156.1 (107.0) 49.1 168.2 (21.6) 146.6
--------------------------------- ----------- ------------ --------- ----------- ------------ ---------
Finance costs (73.4) (27.0) (100.4) (83.8) (0.5) (84.3)
Finance income 0.3 .- 0.3 1.7 .- 1.7
Movement in fair
value of interest
rate swaps .- (8.2) (8.2) .- 3.5 3.5
--------------------------------- ----------- ------------ --------- ----------- ------------ ---------
Net finance costs (73.1) (35.2) (108.3) (82.1) 3.0 (79.1)
---------
Profit/(loss) before
taxation 83.0 (142.2) (59.2) 86.1 (18.6) 67.5
Taxation (16.3) 24.8 8.5 (17.8) 7.2 (10.6)
--------------------------------- ----------- ------------ --------- ----------- ------------ ---------
Profit/(loss) for
the period attributable
to equity shareholders 66.7 (117.4) (50.7) 68.3 (11.4) 56.9
--------------------------------- ----------- ------------ --------- ----------- ------------ ---------
(Loss)/earnings per
share:
Basic (loss)/earnings
per share (8.9)p 10.0p
Basic underlying
earnings per share 11.7p 12.0p
Diluted (loss)/earnings
per share (8.9)p 9.9p
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