Marston's reports strong full-year results

Revenues grew 5.5% to £719.7m. Managed like-for-like sales increased 2.2%, with underlying operating margins up 0.2%, while operating profits in the tenanted and franchised business increased 3.2%. It announced a 9.8% rise in underlying earnings per share to 12.3p.

In its managed estate, like-for-like food sales grew 3.4%, with wet sales up 0.9%.

Marston’s said its new build programme is generating an average return on capital of c.18% since 2009, representing an investment multiple of less than six time EBITDA. "This high return on capital has generated significant equity value, contributing to the 56% valuation uplift for new-build pub-restaurants."

Over 80 new builds have been built in the past six years, including 25 in 2012, and the firm is "on track" to build another 20-25 in 2013, including its first in Scotland. "We expect to continue investment at a similar level over the next few years."

Marston’s said that thanks to its ‘f-plan’ - targeting food, families, females and forty/fifty-somethings - has helped increase food sales from 28% of sales in 2005 to 44% in 2012. Plans going forward including adding full table service in its destination food pubs.

Marston’s had c.500 pubs operating under its franchise Retail Agreement at the year end. The firm said post-conversion profitability on the franchise estate is 23%, and 13% by volume.

In the franchised and tenanted estate, total revenue increased by 9% to £200.5m, reflecting the increased contribution from Retail Agreements. Underlying operating profit was £81.8m. Average profit per pub increased by 4.1% to £50,000.

In the traditional estate, performance was "stable" with operating profit "in line with last year". "Rent increased by 2% and operating margins in these pubs were similar to last year."

"In the remaining 600 pubs the conversion of pubs to Retail Agreement has contributed to a significant improvement in performance. Profit from this group of pubs increased by 23% with significant improvement in the converted pubs, offset by a decline in those pubs yet to be converted."

Operating margin was 2.3% below last year at 40.8%, primarily due to franchise agreements. "These agreements generate increased profit but the operating margin percentage is reduced as a consequence of accounting for sales at full retail value." Capital investment in the period was £32m including around £12m in Retail Agreement pubs.

In the brewing arm, total revenue increased by 6.8% to £113.7m. Underlying operating profit increased by 0.6% to £16.4m. Overall ale volumes were up 2% compared to last year, with premium cask ale volumes up 3% and bottled ale volumes up 18%. "We have maintained our market-leading position, increasing our market share in each of these categories by over 1%."

"In the independent free trade our account base increased by 3% to more than 3,800 customers, and premium ale sales to this sector increased by 3%. In the take home market we continue to perform very strongly with volumes up 14%. Operating margin was down versus last year at 14.4%, reflecting the higher proportion of volume through the off-trade, which commands a lower margin."

In the eight weeks to 24 November, managed like-for-likes are up 2% (food +3.4%, drinks +0.9%). Tenanted and franchise profits are estimated to be up 3% and own-brewed volumes are "in line with expectations".

Marston’s said Thompson is to retire after 35 years service and will remain in his role until a successor is appointed.

Ralph Findlay, chief executive, said: "These results demonstrate resilience despite the weak economy and very poor weather during the summer. All areas of the business achieved increased revenue and profit in the year, demonstrating the continuing appeal of good pubs and beers.

"The economy is likely to remain weak for the foreseeable future, but we have a clear, proven strategy which is appropriate for current market conditions, and which is achieving growth."