Marston’s accelerates plans to tackle £200m debt

By Stuart Stone contact

- Last updated on GMT

Capital idea: finance reallocation will help Marston’s reduce debt at a ‘greater pace’ according to Ralph Findlay
Capital idea: finance reallocation will help Marston’s reduce debt at a ‘greater pace’ according to Ralph Findlay
Against a backdrop of ‘modest growth’, pub operator and brewer Marston’s has outlined plans to wipe out £200m in net debt quicker than initially planned.

In a trading update for the 42 weeks to 20 July 2019, the operator of approximately 1,500 pubs explained it intended to defer £70m of new-build investment planned for the next three years and reallocate between £20m and £30m of said funds into organic capital plans.

Marston’s expects this capital reallocation to generate between £40m and £50m in extra cash flow over the next three years and allow it to address £200m in net debt at an increased pace. 

Initially, the company had set out plans to reduce net debt by £200m by 2020-2023 by reducing capital expenditure, £120m of disposals and by reducing interest and pension costs in its January trading update. 

Small sales increase 

News of the planned capital reallocation follows a 42-week trading period in which the UK distributor of Estrella Damm and Shipyard saw increased sales across both its pub and beer businesses.

Like-for-like managed and franchised pub sales increased by 0.5%, sales in destination and premium sites crept up by 0.1% versus the previous year with trading in Marston’s taverns increasing by 1.1%.

What’s more, beer volumes for the same 42-week period remained flat year on year.

Despite a modest increase in overall trading, sales over the last 16 weeks were significantly down year on year due to stand-out figures from last year as a result of the 2018 World Cup in Russia coinciding with the summer heatwave.

Greater pace 

“We have achieved modest growth during the 42 weeks to date continuing the long-term positive like-for-like sales trend despite May and June being hampered by relatively poor weather,” Marston’s chief executive officer Ralph Findlay explained. 

“We have a high-quality, balanced pub estate and a highly disciplined approach to preserving margin, together with a leading beer business that continues to perform well, leveraging our outstanding brand portfolio and increasing our market share.

“Having made good progress with our cash generation and debt reduction plans, we have subsequently decided to accelerate our efforts in this context and defer our remaining new-build plans and reallocate £20m to £30m of the £70m new-build capex over the next three years to drive higher returns from our existing estate. 

“We believe that this focus will further enhance our returns from our existing pub business and reduce our debt at an even greater pace.”

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