Marston's full year dividend up despite profit slump

Midlands brewer Marston's has increased its full year dividend to shareholders despite announcing a 13 per cent fall in annual profits.

The group said it would maintain its final dividend of 8.47p per share, making a full year payment of 13.27p a share, up 3.4 per cent on the previous year.

The move will come as some relief to shareholders, who were told today that trading across the group's managed pubs in the last eight weeks was down nearly three per cent.

Profits in the leased and tenanted estate in the same period were "similarly weaker" than this time last year, the group added.

Faced with a downturn in the building sector, Marston's said it would scale back its opening programme of new pubs as developers felt the full force of the economic recession, with four new pubs set to be unveiled in 2009, versus the 16 opened in 2008.

Capital expenditure would consequently fall from £117m in 2008 to below £60m next year, although maintenance spending would be "broadly similar". The brewer will also look to sell between 50 and 75 bottom end pubs in the near future.

Total group turnover in the year to October 4, 2008, rose two per cent to £666.1m following what Marston's described as a "resilient" performance against a background of the smoking ban, rising costs, a weakening economy and poor weather in the second half.

Overall pre-tax profits fell from £98m to £85.1m, with underlying operating profits down one per cent to £161.6m.

As costs rose and the group's sales mix shifted towards food sales, Marston's underlying operating margin fell 0.7 percentage points to 24.3 per cent.

The group's tenanted and leased business, Marston's Pub Company, saw turnover fall more than seven per cent to £186.4m, although it said this took into account the sale of nearly 300 pubs in the year.

Total rents rose 5.2 per cent to an average £26,000 per pub, while like-for-like pub profits fell nearly two per cent.

Marston's said £2m-worth of what it called "rent alleviation and additional discounts" had been implemented during the year, with a similar amount expected to be put in place in 2009.

The group's managed pub division, Inns & Taverns, saw turnover up 5.6 per cent to £388.3m, with operating profits up nearly eight per cent at £67.2m.

Overall like-for-like sales were down 0.6 per cent, with food sales up three points and wet sales down 2.6 per cent.

Food accounted for 36 per cent of total turnover, versus 34 per cent in 2007.

Marston's said higher food inflation had added £3m to its input costs, up six per cent.

The group's brewing operation saw turnover up 8.7 per cent at £91.4m, while operating profits fell around eight per cent to £16.1m.

Cost increases hit operating margins, down 3.1 percentage points to 17.6 per cent.

The group said it would seek to mitigate some future cost increases by reorganising its distribution routes, while a project to tackle central overheads - which saw the combination of marketing, training, credit control and administrative functions of the brewing and leased pub businesses - would save £4m a year after an initial cost of the same amount.