In its latest trading update Marston’s has said it is to halt all pub restaurant new-build projects over the next three years, proposing to defer £70 million of the new-build investment planned for the next three years and reallocate £20-30 million of funds into its organic capital plans, which are they say, generating significantly higher returns. The company, which has created an estate of over 200 new-build pub restaurants over the last years, building between 20 and 25 a year, had planned six or seven a year for the next three years.
Now the planned £70m investment has been put on ice – a smaller sum of £20m to £30m will be switched to organic capital projects where the company is getting better returns.
The company said it has achieved sales growth in both its pub and beer businesses in the 42 week period to date, despite weaker sales in the last 16 weeks reflecting strong trading in the same period last year, which included the World Cup and an unusually hot summer.
Like-for-like managed and franchised pub sales increased by 0.5% in the 42 week period. In Destination and Premium, like-for-like sales for the 42 week period were 0.1% ahead of last year and in Taverns, like-for-like sales for the 42 week period were 1.1% ahead of last year. We continue to remain disciplined in terms of pricing, discounting and promotion, with operating margin in line with our expectations.
Debt Reduction Plans and Reallocation of Capital Expenditure
The company has also announced it is to reduce its net debt by £200 million in the period 2020-2023 through reduced capital expenditure, £120 million of disposals and a reduction in interest and pension costs
Commenting, Ralph Findlay, Chief Executive Officer, said:
“We have achieved modest growth during the 42 weeks to date continuing the long term positive LFL sales trend despite May and June being hampered by relatively poor weather. We have a high-quality, balanced pub estate and a highly disciplined approach to preserving margin, together with a leading beer business which 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 £20-30 million of the £70 million 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.”