Marston’s optimism about the euro Summer as profits rise

Pub chain Marston’s has had a strong first half of its financial year thanks to food and drink sales and is looking ahead to the great summer months full of sports, including the euro.

Marston’s operates 1,395 pubs in the UK and this morning announced an increase in both sales and profits for the 26 weeks to March 30. Underlying turnover rose from £407m to £428.1m, while profits rose from £43m to £52.7m. This performance exceeded market expectations.

Recent sunny weather has provided a significant boost to pub sales as customers flock to beer gardens across the country. This positive turn is particularly welcomed by the hospitality sector, which is grappling with a challenging cost of living crisis.

The increase in like-for-like sales, which grew by 7.3% over the period, contributed significantly to Marston’s success. In addition, pubs saw a 22% increase in operating profits. The company also reported a reduction in debt and effective cost management, positioning itself favorably for the second half of the year. With major events such as the European Championships and the Olympic Games on the horizon, Marston’s expects to attract millions of Brits to its locations.

Despite the positive trends, Marston’s reported a pre-tax statutory loss of £43.5 million, compared to £38.1 million in the same period last year. This was attributed to two non-cash items: a £25.8 million increase in interest rate swap liabilities and a £16 million charge related to the impairment of CMBC’s beer brand and an onerous contract provision.

Chief Executive Justin Platt commented: “Marston’s delivered a positive first half, delivering strong like-for-like sales growth of 7.3 per cent, outperforming the market and delivering an impressive 22 per cent increase in pub operating profit . We have kept costs under control and have made further progress in reducing debt.”

Platt expressed optimism about the second half of the year, highlighting the potential of Marston’s improved pub gardens and popular food menus to attract guests at major sporting events. “Looking back on my first few months at Marston’s, I am very excited about the potential that awaits us. The UK pub market offers significant value creation opportunities for those who can engage and deliver to their guests. With our high-quality real estate and guest-obsessed team, we are well placed to capitalize and deliver consistent, reliable cash flows that will drive value for our shareholders.”

Looking ahead, Marston’s aims to build on the positive trading momentum, taking advantage of the seasonality of trading, with the majority of sales, profits and cash flow typically generated in the second half of the year. The company plans to increase efficiency and is targeting at least £8 million in cost savings, mainly through lower energy and labor costs.

Marston’s also addressed the recent job losses, stating that it had initiated an operational program to streamline the business and improve efficiency. The one-off workforce-related costs, which amounted to £0.5 million in the current period and £2.9 million for the 26 weeks ending September 30, 2023, are expected to be short-lived and one-off. As of March 30, 2024, £3.4 million had been incurred as part of reorganization, restructuring and relocation costs.

With a promising outlook for the summer and strategic plans to increase efficiency, Marston’s is well positioned to benefit from the expected increase in pub visitors during major sporting events.