Marston's profits slide as economy bites

Marston's, the Midlands brewer and pub operator, described its first half trading performance - which saw pre-tax profits down nearly a fifth - as "a resilient one in a difficult market".

Overall operating margins dipped 1.6 percentage points to 21.3 per cent in the 26 weeks to April 4, 2009, representing "a good control on costs", Marston's' chief executive Ralph Findlay said.

Group turnover was down 2.8 per cent at £307.5m, with operating profits down nearly 10 per cent at £65.4m.

Pre-tax profits fell 20.9 per cent to £27.7m. An interim dividend of 4.8p was unchanged.

The group's tenanted pub estate saw sales of £86.3m, down 6.9 per cent on the same period last year, with underlying margins unchanged at 46.7 per cent and underlying operating profit down 6.9 per cent to £40.3m.

Findlay said good pubs were continuing to perform well, "which challenges the argument concerning struggling tenanted outlets", while a like-for-like profits dip of six per cent was largely confined to the 20 per cent of the estate that was on either tenancies at will or were not let on substantive agreements.

Marston's had around 40 pubs across the estate that were closed, with nine to be re-let, he added. The group planned to sell a further 100 pubs out of its tenanted portfolio in the coming year.

Noting the recent findings of the Business & Enterprise Select Committee's report, Findlay said as a brewer his company was keen to see its pubs thrive. "It's in no-one's interest to see our pubs fail," he added, noting that the group "has had a consistent approach over many years to sharing risks and rewards with licensees, and in setting sustainable, fair rents".

The group's managed pub operation saw turnover dip five per cent to £173.7m, while operating profits fell 14 per cent to £24.3m, although Findlay pointed to "continued growth" in food sales, up 1.3 per cent, and highlighted promotional activity which helped boost turnover.

Turnover at Marston's brewing operation rose 19 per cent to £47.5m, boosted by last year's Wychwood Brewery acquisition. However cost increases and lower margin sales to supermarkets meant operating margins fell 2.6 percentage points to 14.9 per cent.

Net debt of £1.3bn was slightly higher than this time last year, but the group expected net debt for the year to be lower for the year as a whole.

Findlay said trading since April 4 had been in line with expectations. "In a tough economy stimulating demand is an important factor and there are signs that our activity in this area is working," he added.