Record revenue and underlying PBT, dividend maintained
· Record revenue and underlying PBT growth achieved
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Underlying |
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Statutory |
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|
|
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Revenue |
£1,140.4m |
+ 15% |
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£1,141.3m |
+ 13% |
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Profit before tax |
£104.0m |
+ 4% |
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£54.3m |
– 46% |
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Earnings per share |
13.9p |
– 2% |
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7.1p |
– 50% |
– Underlying profit growth in all trading segments
– Statutory profit reflects non-cash impact of estate revaluation
· 5th consecutive year of like-for-like pub sales growth
– Like-for-like (LFL) sales growth of 0.6%; wet-led pubs outperformed food-led pubs
– Disciplined approach to operating margins drives profit growth in all segments
– 14 pub-restaurants and seven lodges opened in the year
– Average profit per pub up 2%; up 55% since 2012
· Strong growth in Brewing – own and licensed brands exceed 330 million pints
– Total volume +47%, reflecting benefits of CWBB acquisition and World Cup
– Over 2 million barrels of drinks delivered to one in four of UK pubs
– On track to deliver at least £4 million target synergies from CWBB acquisition
· Operating cash flow +1%, leverage reduced
– Leverage before leasing down 0.2x to 4.6x, strong fixed charge cover of 2.5x
– Additional £40 million bank facility to 2023 improving financial flexibility
· NAV of £1.51 per share supported by estate valuation, pension deficit reduced
– External estate valuation broadly in line with book value of £2.2 billion
– Triennial pension valuation – funding deficit reduced by £10 million to £40 million
· Final dividend maintained at 4.8 pence per share covered 1.9x by earnings
· Clear plans for growth in 2019
– Destination and Premium: 10 new pub-restaurants and bars and five lodges planned
– Taverns: acquisition of 15 pubs from Aprirose
– Brewing: investment in canning line in Burton and new distribution centre in Thurrock
· Focus on cash generation
– Previously announced prudent approach to capital plans for 2019 delivering £30 million net capex reduction
– Target £20-30 million of additional future cash flow opportunities identified through reduction in pension contributions, reduced organic capex and refinancing opportunities
– Target 1.0x reduction in leverage in 3-5 years
Commenting, Ralph Findlay, CEO said:
“Marston's has performed well in a difficult market. Our balanced business model has stood us in good stead, delivering record sales and underlying profits with revenue exceeding £1.1 billion for the first time. Our Taverns wet-led community pubs and market-leading brewing business had an outstanding year, more than offsetting the effects of weather volatility and the World Cup on our food-led pubs.
“Macro-economic and political uncertainty is reflected in our capital plans this year. However, the outlook for good pubs and brewing remains attractive and Marston's is well placed to leverage the opportunity this presents with our high quality, well invested estate, leading brands and great people. We expect to make positive progress once again in the current financial year.”
Forthcoming Events
Please find below the forthcoming reporting dates for the Group, which are also available on the investor calendar on our website – www.marstons.co.uk/investors
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Q1 Trading update and AGM
2019 Interim results
2019 Preliminary Results |
23 January 2019
15 May 2019
27 November 2019 |
GROUP OVERVIEW
This has been an extraordinary year which has been characterised by weather extremes, together with one-off events such as the World Cup. Our balanced business model has stood us in good stead and smoothed trading to achieve revenue and profit growth in each of our trading divisions. Our Taverns and Brewing businesses both had particularly strong performances and clearly benefited from the warm summer weather and England's extended run in the World Cup.
Total underlying revenue increased by 14.9% reflecting the rollover benefits of the acquisition of the Charles Wells Beer Business (“CWBB”) from last year, new distribution contracts in Brewing, the positive impact of new openings and pub acquisitions, together with positive like-for-like sales in our pub business.
As anticipated, Group operating margins were 1.6% behind last year reflecting the dilution impact from the CWBB acquisition which operates at a lower margin than our existing beer business, the impact of distribution contracts in Brewing and the anticipated cost increases in our pub business.
Underlying operating profit was up 4.6% at £182.5 million (2017: £174.5 million).
Underlying profit before tax was up 3.9% to £104.0 million (2017: £100.1 million), principally reflecting the strong performance of Brewing and Taverns. Basic underlying earnings per share for the period of 13.9 pence per share (2017: 14.2 pence per share) were below last year, reflecting the impact of the equity issuance in May 2017.
On a statutory basis, revenue was up 13%, profit before tax was £54.3 million (2017: £100.3 million) and earnings per share were 7.1 pence per share (2017: 14.2 pence per share), principally reflecting the non-cash impact of the estate valuation during the year.
Operating cash flow of £182 million is 1% higher than last year, after adjusting for the CWBB working capital settlement in 2017. The increase principally reflects the higher EBITDA generated during the period.
Net debt at the period end was £1,386 million, incorporating the financing of new site expenditure, the acceleration of pub brand conversions and investment in the new canning line in Burton. Net debt excluding property leases has reduced by £6 million in the period. A minor delay of some disposal activity in the second half year has resulted in this now falling into the first half of 2019 and as such we are increasing our disposals guidance for the current year to £45 million. Excluding property leases with freehold reversion entitlement, the ratio of net debt to underlying EBITDA was 4.6 times at the period end (2017: 4.8 times) which is expected to reduce further over time as the business grows and our long-term debt amortises. In addition, fixed charge cover remains strong at 2.5 times.
Cash Return on Cash Capital Employed (CROCCE) was 10.3% reflecting the performance of the Destination and Premium business as described below. During the year, the external valuation of our property portfolio was completed confirming a value of £2.2 billion, broadly in line with book value. At the period end, net asset value (NAV) per share was £1.51.
The proposed final dividend of 4.8 pence per share provides a total dividend for the year of 7.5 pence per share. Dividend cover is 1.9 times and our dividend policy remains to target progressive increases in the dividend at a cover of around 2 times in the medium term.
Current trading and outlook
Trading has been solid and in line with our expectations for the first seven weeks of the current year, with growth in both pub like-for-like sales and own and licensed beer volumes. As we have highlighted previously, the first quarter trading is heavily weighted to December and the Christmas period. However we are confident our pubs are well prepared to maximise the opportunity which the Christmas and New Year trading period presents. We expect to make progress once again in the
current financial year.
Since the year end we have secured the additional £40 million accordion facility that formed part of our bank refinancing in 2017. This increases the overall facility to £360 million to 2023 and provides us with additional financing flexibility for the medium-term.
The political and economic agenda continues to be dominated by Brexit, contributing to increased uncertainty. However, our business is almost entirely within the UK and the principal risks to us relate to continuity of supply in respect of food and drink from Europe, for which there are alternative sources elsewhere. We are appropriately vigilant but these risks are manageable.
Challenges in the casual dining and restaurant sector over the last year or so have been well documented. We continue to see good opportunities for growth, but given the overall sector background a degree of caution is appropriate. As previously announced, we have reduced our openings programme in 2019 to 10 pubs and bars and five lodges, and together with a corresponding reduction in organic capex, will cut our capital spend by around £30 million this year.
Group strategy
Our Group Strategy is focused on offering customers a great experience through both our pubs and beer. There are two key objectives to achieving our strategy:
· Operating high-quality pubs and lodges offering great places to eat, drink and stay;
· Operating a best in class beer business with a wide range of premium and local brands and great service.