Building a sustainable business

  • Award-winningenvironmental team with clear targets for the future
  • Company-ownedwater licence saving 50 million pints of water per annum
  • Rapid car charging points installed in 100 pubs - one million miles sold to date
  • Social agenda focused on wellbeing of guests, employees; community engagement

Current outlook post 2nd lockdown (April 2021)

  • 710 pubs opened on 12 April in England; with a further 66 pubs opened on 26 April
  • 145 pubs subsequently opened in Wales and Scotland on 26 April
  • Indoor trading permitted on 17 May when all of our pubs reopened
  • Well positioned to benefit from strong demand anticipated for UK staycations in H2 2021 with an encouraging level of bookings to date
  • Early indications of strong customer demand: sales in LFL sites running at around 80% of pre-COVID levels; April sales sufficient to deliver break-even Group EBITDA.*
  • Further lifting of restrictions on 21 June; anticipate more normalised trading in final quarter
  • CMBC joint venture synergies on track to significantly exceed initial target
  • Strong platform in place to return to growth and leverage the opportunities which present themselves

*Like-for-like sales are defined as sales compared to the comparable period in 2019 adjusted for timing of Easter weekend for open sites only.

Financial Highlights

Underlying

Total

2021

2020

2021

2020

Total revenue*

£55.1m

£343.3m

£55.1m

£343.3m

Total loss before tax*

£(122.4)m

£(0.8)m

£(105.5)m

£(31.1)m

Net (loss)/profit

£(105.9)m

£7.6m

£199.3m

£(28.0)m

(Loss)/earnings per share

(16.7)p

1.2p

31.5p

(4.4)p

Net cash flow

£110m

£3m

*Results from continuing operations

  • The first half-year was significantly impacted by COVID-19 regulations and nationwide lockdowns, with most of our pubs having been closed for much of the period.
  • The statutory net profit after tax reflects a £291 million gain on the disposal of the Brewing business into the CMBC joint venture, incorporated into the results from discontinued operations.
  • The business has a strong balance sheet position. As at the balance sheet date, the Group had drawn down £164 million of a £280 million bank facility, which is in place to 2024, providing headroom of £116 million.

Commenting, Ralph Findlay, CEO said:

"Despite the challenges of the last year, the actions we have taken have ensured that Marston's has emerged a stronger and more focused business with a substantially strengthened balance sheet, a 40% stake in Carlsberg Marston's Brewing Company and a clear vision for the future. This is my last set of results as Chief Executive Officer and I am confident that the business is in an excellent position to execute its strategy and deliver a return to growth as the country recovers from the pandemic.

Whilst still early days, trading has been encouraging since we were permitted to open our doors for outdoor trading last month and it has been fantastic to have our teams back in the business, doing what they do best, and welcoming customers back into our pubs. Our recent strategic investment in additional outdoor trading areas ahead of reopening has enabled us to capitalise on the clear pent-up consumer demand for the pub. We look forward to all trading restrictions being removed next month which signals a return to some semblance of normality.

I am delighted to hand over the reins of Chief Executive Officer to Andrew Andrea later this year and am confident that both Marston's - and its talented team of people - will be in extremely able hands under his stewardship. He shares the passion I have for this very special business and brings with him invaluable experience and knowledge of both Marston's and the pub sector, having been instrumental in shaping the Group's strategy to date. Marston's has a great opportunity ahead and I look forward to seeing the Group go from strength to strength as it embarks on the next exciting stage of its development."

ENQUIRIES:

Marston's PLC

Tel: 01902 329516

Instinctif Partners

Tel: 020 7457 2010/2005

Ralph Findlay,

Chief Executive Officer

Justine Warren

Andrew Andrea, Chief Financial and

Matthew Smallwood

Corporate Development Officer

GROUP OVERVIEW

Introduction

Whilst the majority of the period under review was severely disrupted by varying levels of restriction caused by COVID-19, the actions we have taken in response to the pandemic and the quality and location of our estate position us well to capture the well-publicisedpent-up demand for consumers to eat, drink and stay in our pubs and lodges. Over 90% of our pubs benefit from outside trading areas and we were delighted to welcome guests back to over 700 of our pubs in England following the initial easing of restrictions on 12 April. With the further easing of restrictions allowing indoor trading on 17 May, all of our pubs are now open in England, Scotland and Wales.

Trading

The first half-year was significantly impacted by COVID-19 regulations and nationwide lockdowns, with most of our pubs having been closed for much of the period.

During this time, the Group also completed the divestment of Marston's Beer Company to form the Carlsberg Marston's Brewing Company ("CMBC"), a new joint venture with Carlsberg UK on 30 October 2020, which will be classified as an associate company for accounting purposes.

Revenue from our continuing pub operations for the period was £55.1 million, down 84% on the same period last year reflecting the disruption referenced above. The Group's pubs were closed for the majority of the period due to various trading restrictions across England, Wales and Scotland. Consequently, total Group revenue for the 26 weeks ending 3 April 2021 was £77.2 million (2020: £510.5 million).

On a continuing operations basis the total underlying operating loss was £77.8 million (2020: £47.1 million profit), which includes £20.6 million of losses being the Group's share of losses from CMBC. The total underlying loss before tax was £122.4 million (2020: £0.8 million). The basic underlying loss per share for the period was 17.0 pence per share (2020: 0.1 pence per share). On a statutory basis, the Group generated a loss before tax of £105.5 million (2020: £31.1 million), and the basic loss per share was 14.6 pence per share (2020: 3.9 pence per share).

Including discontinued operations, the total underlying operating loss was £76.4 million (2020: £57.8

million profit). The total underlying loss before tax was £121.1 million (2020: £9.4 million profit). The

basic underlying loss per share for the period was 16.7 pence per share (2020: 1.2 pence earnings per share). On a statutory basis, as a consequence of the profit on disposal of the Brewing business, the Group generated a profit before tax of £185.6 million (2020: £33.2 million loss), and the basic earnings per share were 31.5 pence per share (2020: 4.4 pence loss per share).

COVID-19 - restrictions, support and actions taken

After the first lockdown in 2020, pubs were permitted to open on 4 July 2020 albeit subject to certain restrictions which materially affected our ability to trade at normal levels of profitability, but which were practical at that time in the context of the wider objective to control the spread of COVID-19.

Our experience of minimal infection rates in the summer of 2020 was consistent with others in the sector. Nevertheless, from the end of September an array of additional restrictions and lockdowns were introduced which meant that pubs have been closed or have only been able to open at minimal levels of trade for the last six months. These restrictions and lockdowns were introduced at different times and with different rules in England, Scotland and Wales, and with a bewildering level of complexity.

In the first half-year we took decisive action in continuing to prioritise cash preservation across the business and applied prudent measures to ensure cash burn was kept to a minimum where possible, as we had done in 2020. We furloughed 93% of our people, and accessed Government support schemes available to us such as grant funding up to the maximum allowed by the State Aid Cap and the 100% business rates relief. The impact of the VAT reduction to 5% for food and non-alcoholic drinks was negligible due to limited trading.

Additional actions included:

  • Reducing all expenditure, including capital items, to essential spend only
  • Securing covenant amendments and waivers in our bank and securitisation facilities
  • Supporting tenants by temporarily waiving rents for the periods when they were unable to trade and assisting with relevant reliefs and grants
  • Maintaining a mental wellbeing programme to support our people

Looking forward, the Government has introduced a reduced rate of VAT at 5% for food and non- alcoholic drinks until 30 September 2021, and then 12.5% until 31 March 2022. The business rates relief has been extended in full to 30 June 2021 and is then reduced to 66% from 1 July 2021 to 31 March 2022 but capped at £2 million.

Acquisition of SA Brain pub operations

During the period we agreed to acquire the pub operations of SA Brain in Wales, with the transaction completing on 5 February 2021. The estate complements Marston's existing portfolio of 106 pubs in Wales and comprises a core estate of 107 SA Brain pubs which we will operate on a long-term basis (99 pubs on a long-term lease and eight freehold sites which Marston's is acquiring), as well as 40 pubs identified for disposal which we have agreed to operate on short-term arrangements. Marston's is also permitted to use the Brain's branding on its existing estate in Wales.

This high-quality pub estate is principally located in South Wales, comprising both wet-led and food- led pubs and employs around 1,300 people. The pubs under long-term agreements operate under a mixture of managed and tenanted operating models and all have a stable five-year revenue and earnings track record.

On a pro-forma basis the historical outlet EBITDA for the retained estate is around £14 million, and we have agreed to pay a rent of £5.5 million per annum (which constitutes a 2.5x rent cover) on the leasehold sites. We will incur an additional £1.5 million per annum of overhead costs as a result of the transaction.

This acquisition has a minimal impact on net cash flow which is consistent with Marston's continued debt reduction strategy. The initial cash outlays comprise two years of advance rental payments (payable in February 2021 and April 2021), and circa £4 million for eight freehold pubs which we are acquiring, payable in July 2021. These outlays will be funded by disposal proceeds during 2021.

It is our intention to convert a significant proportion of the estate to our well-established franchise model to maximise pub profitability, together with purchasing and medium-term overhead synergies. We are targeting a £2-3 million uplift to the pro-forma earnings. In addition, we believe there are additional investment opportunities within the pub estate which will be evaluated in future years.

Cash Flow, Financing and Balance Sheet

Successful completion of the disposal of Marston's Beer Company into the new CMBC joint venture with Carlsberg UK at the end of October further strengthened the Group's balance sheet, enhanced liquidity and enabled us to further reduce the level of debt. As a result, despite the material impact of

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Marston's plc published this content on 19 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 May 2021 06:09:02 UTC.