Marston's trading robustly as it keeps eye on costs

Pub operator Marston's said in a trading update on Tuesday that total like-for-like sales for the financial year just ended were down 1% on the pre-pandemic 2019 comparator.

The London-listed firm said that reflected the impact of trading restrictions in December and January as a result of the omicron variant of Covid-19, and the corresponding impact on consumer sentiment in the first half.

Total retail sales in its managed and franchise pubs were up 2% over 2019, as drink sales continued to outperform food sales in the 52 weeks ended 1 October, reinforcing the “steadfast trading resilience” of its predominantly community pub estate.

Like-for-like sales were “encouraging”, and continued to improve in the 10 weeks from 24 July to 1 October, being 3% up on 2019 and 4% up on 2021.

Growth continued to be primarily driven by drink sales, with food sales in the period weaker due to the hot weather.

The company said the level of customer demand remains encouraging, notwithstanding continued uncertainty around the cost of living.

It said it was confident that its pub strategy was beginning to deliver positive momentum, evidenced by that good trading performance.

As previously highlighted, the group said its gas price was fixed until the end of March 2025, with no additional incremental spend expected.

Electricity costs in the last 10 weeks of the 2022 financial year were higher than originally expected, however, due to the volatile market for energy over recent months.

The group said its electricity was hedged for the first half of the 2023 financial period, covering the six months from October to March.

Marston’s said the recent announcement from the government over the energy price cap was “helpful”, further protecting its first-half energy spend.

Looking at the second half, the board said it awaited the review of the price cap, although it was currently “comfortable” with the guidance provided on energy costs for its financial year as a whole.

Net borrowings, excluding IFRS 16 commitments, as at 1 October totalled £1.22bn - £16m below last year and £30m lower than the first half.

During the year, the £50m deferred duty and VAT paid was offset by a contingent consideration of £28m from CMBC and a payment by CMBC of £19.4m, reflecting a one-off working capital movement recognised in CMBC's first half results.

Marston’s said its borrowing was largely long-dated and asset-backed, with 86% of its borrowings hedged and thus not at risk of any changes in interest rate movements that could occur during the year.

At year-end, the group had £65m of headroom against its £280m bank facility, and £10m of cash.

“This is a good performance, with the trading momentum we experienced in the summer continuing,” said chief executive officer Andrew Andrea.

“Marston's has a long-term capital structure which is well suited to the current market environment and we remain committed to our debt reduction strategy with which we continue to make progress.

“We are managing cost inflation well with food, drink and energy costs covered for the immediate future.”

Andrea said that while the company was “not complacent” and could not predict the future, it was “clear” that customers were continuing to visit its predominantly community pubs.

“The level of customer demand we are experiencing is encouraging which underpins our confidence that our strategy is working and we are making positive progress in that regard.

“Looking forward, we are primed to maximise the trading opportunities provided by the forthcoming World Cup and first restriction-free Christmas in three years.

“Marston's is in good shape and well positioned to navigate the future.”

At 0917 BST, shares in Marston’s were up 3.62% at 37.2p.

Reporting by Josh White at Sharecast.com.