Marston's warns on energy costs as solid trading continues

The London-listed company said the performance reflected the impact of the reintroduction of trading restrictions in December and January, and the corresponding impact on consumer sentiment in the first half.

It said that total retail sales in its managed and franchise pubs returned to 2019 levels in the period, with drinks sales continuing to outperform food sales.

Like-for-like sales in the last 16 weeks to 23 July were 1% below the 2019 comparator, but in the first 12 weeks of the period sales were “slightly ahead”, the board said.

Over the last four weeks, despite drinks sales continuing to be in growth, food sales weakened primarily due to the recent spell of “very hot” weather.

The pubco described the level of customer demand as “encouraging”, notwithstanding the growing cost-of-living uncertainty for consumers.

Looking ahead, the group said it remained “well-placed” to deliver positive trading with its balanced estate of primarily community pubs, investment in outdoor trading areas and ‘staycation’ custom.

As it previously highlighted, Marston’s electricity contract ended in March.

The board said Russia’s ongoing invasion of Ukraine was continuing to impact energy prices, and as a result its electricity costs were expected to be about £2m higher than it previously guided for the second half.

With energy cost inflation likely to persist in the short term, Marston's said it had decided to fix its electricity rates for the winter, covering the six months from September this year to March 2023, with an incremental cost impact of £3m in the 2023 financial year.

The group's gas price was also fixed until the end of March 2025, with no additional incremental spend anticipated.

Notwithstanding the energy price rises, Marston’s said it was focusing on making “every effort” to mitigate cost inflation over the medium-term through various open opportunities, such as energy efficiency plans and future pricing strategies.

“Since Covid restrictions were lifted, we have been encouraged with the level of sales as we have transitioned to operating on a 'business as usual' basis,” said chief executive officer Andrew Andrea.

“In spite of external economic headwinds, we have not seen any discernible change to customer footfall to date and remain cautiously optimistic that we will continue to see similar levels of customer demand across the summer where we will benefit from our investments in outside space and staycations.

“We continue to focus on our strategic plans and remain on track with our debt reduction strategy.”

Andrea said the company was making “considerable progress” with its transition away from the value food ‘two for one’ brand, which would be complete by the end of September.

“We have completed 45 of these pub conversions to date and, whilst still early days, initial indications are encouraging with positive customer feedback and improving returns.

“We remain confident that the changes we are implementing now will deliver a higher quality business for the group over the medium to longer term.”

At 1041 BST, shares in Marston’s were up 0.81% at 47.38p.

Reporting by Josh White at Sharecast.com.