REG - Marston's Plc - Preliminary Results <Origin Href="QuoteRef">MARS.L</Origin> - Part 2

Marston'sAnnouncement

26/11/2015 07:11

- Part 2: For the preceding part double click  ID:nRSZ9916Ga 

associated leasehold impairments    -     29.5    
 Credit in respect of defined benefit pension plan                               -     (10.8)  
                                                                                 49.0  105.1   
 Other adjusting operating items                                                               
 Results in respect of the ongoing management of pubs in the portfolio disposal  2.6   1.9     
                                                                                 2.6   1.9     
 Non-underlying operating items                                                  51.6  107.0   
                                                                                               
 Exceptional non-operating items                                                               
 Interest on Rank refunds                                                        -     (0.2)   
 Buyback of securitised debt and associated costs                                -     27.2    
 Movement in fair value of interest rate swaps                                   8.6   8.2     
                                                                                 8.6   35.2    
 Total non-underlying items                                                      60.2  142.2   
 
 
Non-core estate disposal and reorganisation costs 
 
During the period ended 5 October 2013 the Group restructured both its pub
estate and its operating segments.  Costs in respect of this restructuring
were incurred in both the current and prior period.  The prior period
exceptional charge of £50.6 million included an amount of £29.6 million in
respect of the impairment of non-core properties. 
 
Impairment of freehold and leasehold properties 
 
At 1 February 2015 the Group's freehold and leasehold properties were revalued
by independent chartered surveyors on an open market value basis. The
resulting revaluation adjustments have been recognised in the revaluation
reserve or income statement as appropriate.  The amount recognised in the
income statement comprises: 
 
                                                            2015    
                                                            £m      
 Impairment of other intangible assets                      0.1     
 Reversal of impairment of other intangible assets          (0.2)   
 Impairment of property, plant and equipment                60.1    
 Reversal of impairment of property, plant and equipment    (26.3)  
 Impairment of assets held for sale                         5.0     
 Reversal of impairment of assets held for sale             (0.1)   
 Valuation fees                                             0.4     
                                                            39.0    
 
 
Impact of change in rate assumptions used for onerous lease provisions 
 
Due to significant movements in gilt yields and inflation rates in the current
period, the update of the discount and inflation rate assumptions used in the
calculation of the Group's onerous property lease provisions at the current
period end resulted in an increase of £4.9 million in the total provision. 
 
Relocation, reorganisation and integration costs 
 
During the current period redevelopment of the Group's head office building in
Wolverhampton commenced along with a reorganisation of certain head office
functions.  Costs of £1.6 million were incurred in respect of temporarily
relocating to alternative premises nearby during the period of redevelopment
and in undertaking the reorganisation. 
 
The Group also incurred reorganisation and integration costs of £1.0 million
as a result of the acquisition of the trading operations of Daniel Thwaites
PLC's beer division. 
 
Portfolio disposal of pubs 
 
During the prior period the Group disposed of a portfolio of 202 pubs and
subsequently entered into a four year lease and five year management agreement
in respect thereof.  The loss on disposal was £35.8 million and revaluation
surpluses of £37.5 million were transferred from the revaluation reserve to
retained earnings upon disposal, giving a net impact of £1.7 million. 
 
The Group no longer has strategic control of these pubs and they do not form
part of its core activities.  As such the results in respect of the ongoing
operation and management of these pubs post disposal have been classified as a
non-underlying item, comprised as follows: 
 
                     2015    2014    
                     £m      £m      
 Revenue             33.1    27.7    
 Operating expenses  (35.7)  (29.6)  
                     (2.6)   (1.9)   
 
 
Movement in fair value of interest rate swaps 
 
The Group's interest rate swaps are revalued to fair value at each balance
sheet date.  The movement in fair value of interest rate swaps which are not
designated as part of a hedging relationship, and the ineffective portion of
the movement in fair value of interest rate swaps which are accounted for as
hedging instruments are both recognised in the income statement.  The net loss
of £8.6 million (2014: £8.2 million) is shown as an exceptional item. 
 
Impact of taxation 
 
The current tax credit relating to the above non-underlying items amounts to
£1.9 million (2014: £13.0 million).  The deferred tax credit relating to the
above non-underlying items amounts to £7.8 million (2014: £11.8 million). 
 
Prior period non-underlying items 
 
A review of the Group's property leases in the prior period indicated that an
additional provision of £28.0 million was required for leases which were
considered to be onerous, along with an associated impairment of leasehold
properties of £1.5 million.  This was primarily due to the reversion of a
number of leases to the Group in the prior period and a deterioration in
market conditions. 
 
During the prior period the Marston's PLC Pension and Life Assurance Scheme
was closed to future accrual.  The net credit of £10.8 million comprised the
negative past service cost of £11.2 million less associated costs of £0.4
million. 
 
In previous periods the Group received refunds totalling £5.9 million from HM
Revenue & Customs (HMRC).  This followed Tribunal/Court of Appeal hearings
involving The Rank Group Plc ('Rank'), which concluded that there had been a
breach of fiscal neutrality in the treatment of gaming machine income as
liable to UK VAT.  HMRC issued protective assessments to recover the
repayments pending the result of further Court hearings.  On 30 October 2013
the Court of Appeal found in favour of HMRC and the Group subsequently repaid
the refunds of £5.9 million plus interest of £0.3 million thereon.  In the
period ended 5 October 2013 the Group had recognised a provision for the £5.9
million repayment and interest of £0.5 million.  As such there was a reduction
in the interest accrual of £0.2 million in the prior period. 
 
During the prior period the Group repurchased all of its securitised AB1 notes
at par.  The notes, with a nominal value of £80.0 million, were immediately
cancelled and the associated floating-to-fixed interest rate swap held in
respect of this tranche of securitised debt was terminated.  This swap had
been designated as a cash flow hedge of the forecast floating rate interest
payments arising in respect of the AB1 notes.  As these forecast transactions
were no longer expected to occur the cumulative hedging loss of £24.7 million
was recognised in the income statement. 
 
4.  Taxation 
 
                                                            2015   2014    
 Income statement                                           £m     £m      
 Current tax                                                               
 Current period                                             14.2   14.4    
 Adjustments in respect of prior periods                    0.1    (0.9)   
 Credit in respect of tax on non-underlying items           (1.9)  (13.0)  
                                                            12.4   0.5     
 Deferred tax                                                              
 Current period                                             3.5    2.8     
 Adjustments in respect of prior periods                    (0.1)  -       
 Credit in respect of tax on non-underlying items           (7.8)  (11.8)  
                                                            (4.4)  (9.0)   
 Taxation charge/(credit) reported in the income statement  8.0    (8.5)   
 
 
5.  Ordinary dividends on equity shares 
 
                                                           2015  2014  
 Paid in the period                                        £m    £m    
 Final dividend for 2014 of 4.3p per share (2013: 4.1p)    24.6  23.4  
 Interim dividend for 2015 of 2.5p per share (2014: 2.4p)  14.3  13.7  
                                                           38.9  37.1  
 
 
A final dividend for 2015 of 4.5p per share amounting to £25.8 million has
been proposed for approval at the Annual General Meeting, but has not been
reflected in the financial statements. 
 
Subject to approval at the Annual General Meeting, this dividend will be paid
on 1 February 2016 to those shareholders on the register at close of business
on 18 December 2015. 
 
6.  Earnings per ordinary share 
 
Basic earnings per share are calculated by dividing the profit/(loss)
attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the period, excluding treasury shares and those held on
trust for employee share schemes. 
 
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares.  These represent share options granted to employees where the exercise
price is less than the weighted average market price of the Company's shares
during the period. 
 
Underlying earnings per share figures are presented to exclude the effect of
exceptional and other adjusting items.  The Directors consider that the
supplementary figures are a useful indicator of performance. 
 
                                            2015      2014               
                                            Earnings  Per share  amount  Earnings  Per share  amount  
                                            £m        p                  £m        p                  
 Basic earnings/(loss) per share            23.3      4.1                (50.7)    (8.9)              
 Diluted earnings/(loss) per share*         23.3      4.0                (50.7)    (8.9)              
                                                                                                      
 Underlying earnings per share figures                                                                
 Basic underlying earnings per share        73.8      12.9               66.7      11.7               
 Diluted underlying earnings per share      73.8      12.8               66.7      11.6               
 
 
* The 2014 diluted loss per share is the same as the basic loss per share as
the inclusion of the dilutive potential ordinary shares would reduce the loss
per share and as such is not dilutive in accordance with IAS 33 'Earnings per
Share'. 
 
                                            2015   2014   
                                            m      m      
 Basic weighted average number of shares    572.2  571.0  
 Dilutive options                           6.1    5.0    
 Diluted weighted average number of shares  578.3  576.0  
 
 
7.  Net debt 
 
                                   2015       Cash flow  Non-cash  movements  and deferred  issue costs  2014       
 Analysis of net debt              £m         £m         £m                                              £m         
 Cash and cash equivalents                                                                                          
 Cash at bank and in hand          193.1      12.2       -                                               180.9      
 Bank overdrafts                   (8.7)      (1.1)      -                                               (7.6)      
                                   184.4      11.1       -                                               173.3      
 Debt due within one year                                                                                           
 Unsecured bank borrowings         0.9        -          0.1                                             0.8        
 Securitised debt                  (26.2)     25.4       (26.8)                                          (24.8)     
 Finance leases                    (0.1)      0.1        (0.1)                                           (0.1)      
 Other lease related borrowings    0.1        -          -                                               0.1        
 Other borrowings                  (120.0)    -          -                                               (120.0)    
                                   (145.3)    25.5       (26.8)                                          (144.0)    
 Debt due after one year                                                                                            
 Unsecured bank borrowings         (248.2)    (38.0)     (0.7)                                           (209.5)    
 Securitised debt                  (833.6)    -          26.2                                            (859.8)    
 Finance leases                    (20.6)     -          0.1                                             (20.7)     
 Other lease related borrowings    (181.6)    (47.0)     2.8                                             (137.4)    
 Preference shares                 (0.1)      -          -                                               (0.1)      
                                   (1,284.1)  (85.0)     28.4                                            (1,227.5)  
 Net debt                          (1,245.0)  (48.4)     1.6                                             (1,198.2)  
 
 
Unsecured bank borrowings due within one year represent unamortised issue
costs expected to be charged to the income statement within 12 months of the
balance sheet date.  Unsecured bank borrowings due after one year represent
amounts drawn down under the Group's revolving credit facilities, net of
unamortised issue costs expected to be charged to the income statement after
12 months from the balance sheet date. 
 
Other lease related borrowings represent amounts due under sale and leaseback
arrangements that do not fall within the scope of IAS 17 'Leases'. 
 
Other borrowings represent amounts drawn down under the securitisation's
liquidity facility.  During the prior period the facility's provider, the
Royal Bank of Scotland Group plc, had its short-term credit rating downgraded
below the minimum prescribed in the facility agreement and as such the Group
exercised its entitlement to draw the full amount of the facility and hold it
in a designated bank account.  The corresponding balance of £120.0 million
(2014: £120.0 million) held in this bank account is included within cash and
cash equivalents.  The amounts drawn down can only be used for the purpose of
meeting the securitisation's debt service obligations should there ever be
insufficient funds available from operations to meet such payments.  As such
these amounts are considered to be restricted cash. 
 
Included within cash and cash equivalents is an amount of £1.6 million (2014:
£1.4 million) relating to a letter of credit with Royal Sun Alliance
Insurance, an amount of £1.0 million (2014: £1.0 million) relating to a letter
of credit with Aviva, and an amount of £7.8 million (2014: £8.2 million)
relating to collateral held in the form of cash deposits. These amounts are
also considered to be restricted cash. 
 
In addition, any other cash held in connection with the securitised business
is governed by certain restrictions under the covenants associated with the
securitisation. 
 
                                                          2015       2014       
 Reconciliation of net cash flow to movement in net debt  £m         £m         
 Increase in cash and cash equivalents in the period      11.1       79.2       
 Cash inflow from movement in debt                        (59.5)     (90.4)     
 Change in debt resulting from cash flows                 (48.4)     (11.2)     
 Non-cash movements and deferred issue costs              1.6        4.0        
 Movement in net debt in the period                       (46.8)     (7.2)      
 Net debt at beginning of the period                      (1,198.2)  (1,191.0)  
 Net debt at end of the period                            (1,245.0)  (1,198.2)  
 
 
                                                                2015       2014       
 Reconciliation of net debt before lease financing to net debt  £m         £m         
 Cash and cash equivalents                                      193.1      180.9      
 Unsecured bank borrowings (including bank overdrafts)          (256.0)    (216.3)    
 Securitised debt                                               (859.8)    (884.6)    
 Other borrowings                                               (120.0)    (120.0)    
 Preference shares                                              (0.1)      (0.1)      
 Net debt before lease financing                                (1,042.8)  (1,040.1)  
 Finance leases                                                 (20.7)     (20.8)     
 Other lease related borrowings                                 (181.5)    (137.3)    
 Net debt                                                       (1,245.0)  (1,198.2)  
 
 
8.  Thwaites Acquisition 
 
On 17 April 2015, the Group acquired the trading operations of Daniel Thwaites
PLC's beer division, including the two leading beer brands Wainwright and
Lancaster Bomber.  The acquisition is consistent with the Group's strategy to
focus on popular premium ale brands, and provides further opportunities for
growth in the developing free trade market. 
 
The table below summarises the consideration paid, the provisional fair values
of the assets acquired and liabilities assumed and the resulting goodwill. 
 
                                  2015   
                                  £m     
 Brands                           12.8   
 Property, plant and equipment    6.1    
 Trade loans                      3.0    
 Inventories                      2.9    
 Trade and other receivables      1.1    
 Trade and other payables         (0.4)  
 Goodwill                         3.3    
 Cash consideration               28.8   
 
 
Notes: 
 
(a)           The contents of this preliminary announcement, which constitute
summary financial statements as defined in Section 428 of the Companies Act
2006, have been extracted from the audited statutory accounts of the Group for
the 52 weeks ended 3 October 2015, which will be filed with the Registrar of
Companies in due course.  The statutory accounts for the 52 weeks ended 4
October 2014 have been delivered to the Registrar of Companies.  The
independent auditors' report on these accounts is unqualified and does not
contain any statements under section 498 (2) or (3) of the Companies Act
2006. 
 
(b)           The Annual Report and Accounts for the 52 weeks ended 3 October
2015 will be posted to shareholders on 18 December 2015.  The Annual Report
and Accounts can be downloaded from the Marston's PLC website:
www.marstons.co.uk.  Alternatively, copies will be obtainable from Instinctif
Partners (020 7457 2020) or from The Company Secretary, Marston's PLC,
Coniston House, Chapel Ash, Wolverhampton, WV3 0BF. 
 
This information is provided by RNS
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