Pubs group Marston’s PLC (LON:MARS) is expecting to see a pick-up in its destination and premium pubs after a tough year for the food-led side of the business.
The harsh winter weather, hot summer and World Cup added to what was already an oversupplied sector, with a net 4,000 new restaurants estimated to have opened over the past four years.
READ: World Cup and hot summer a doubled-edged sword for Marston’s
Still, Marston’s pushed ahead with its expansion plans and opened 14 new pub-restaurants in the year ended September 30, helping to push destination and premium revenues up 2.9% to £450.7mln (2017: £438mln).
A refusal to match some of the promotions offered by rivals meant margins held relatively firm at 19.8% (2017: 20.3%), allowing profits in that division to edge 0.6% higher to £89.4mln (2017: £88.9mln).
Marston’s chief financial officer Andrew Andrea expects 2019 to be more fruitful for the food-led side of the business though, especially with the pace of expansion in the casual dining industry slowing rapidly.
‘Extraordinary year’
“Last year was probably the most extraordinary year in terms of dynamics affecting the market,” he said in an interview with Proactive Investors.
“The ‘Beast from the East’ was really damaging to food-led restaurants: we had pubs that had to shut, particularly in Scotland and South Wales. In addition to that, the World Cup was really bad for food pubs because people weren’t eating out, they were drinking and watching the football.”
He added: “We expect decent growth out of destination and premium pubs [this year] purely because those environmental factors aren’t reoccurring.”
Andrea does recognise that it will be difficult for Marston’s to repeat the performance of its wet-led pubs this time around though, given the boost to sales from the hot summer and World Cup.
Record group results
Costs remain a key issue for the entire industry and Marston’s is expecting its cost base to rise by around £20mln this year.
It has outlined plans to mitigate much of that, with plans in place to simplify its food menu and pass the extra alcohol costs onto customers.
Overall, group revenue rose 15% to a record £1.14bn, largely reflecting the first full-year contribution from the Charles Wells Beer Business which it bought in 2017.
A strong performance from the wet-led side of the company – Brewing and Taverns – helped underlying pre-tax profits to climb 4% to £104.0mln, also a record for the company.
Shares rose 5% to 103.5p in early deals on Wednesday afternoon.