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

Marston'sAnnouncement

24/11/2016 07:05

- Part 2: For the preceding part double click  ID:nRSX9962Pa 

   (20.9)  (18.6)  
 Underlying operating profit             172.7   165.4   
 Non-underlying operating items          (8.8)   (51.6)  
 Operating profit                        163.9   113.8   
 Net finance costs                       (83.1)  (82.5)  
 Profit before taxation                  80.8    31.3    
                                                           
 
 
3    NON-Underlying items 
 
                                                                                 2016   2015  
                                                                                 £m     £m    
 Exceptional operating items                                                                  
 Non-core estate disposal and reorganisation costs                               1.7    2.5   
 Impact of change in rate assumptions used for onerous lease provisions          4.4    4.9   
 Relocation, reorganisation and integration costs                                3.8    2.6   
 Impairment of freehold and leasehold properties                                 -      39.0  
 Profit on sale of surplus land for residential development                      (1.5)  -     
 Tax advisory fees                                                               0.5    -     
                                                                                 8.9    49.0  
 Other adjusting operating items                                                              
 Results in respect of the ongoing management of pubs in the portfolio disposal  (0.1)  2.6   
                                                                                 (0.1)  2.6   
 Non-underlying operating items                                                  8.8    51.6  
                                                                                              
 Exceptional non-operating items                                                              
 Movement in fair value of interest rate swaps                                   8.4    8.6   
                                                                                 8.4    8.6   
 Total non-underlying items                                                      17.2   60.2  
 
 
Non-core estate disposal and reorganisation costs 
 
During the period ended 5 October 2013 the Group commenced a restructuring of
its pub estate and operating segments.  Costs in respect of this restructuring
were incurred in both the current and prior period. 
 
Impact of change in rate assumptions used for onerous lease provisions 
 
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 £4.4 million (2015: £4.9 million) in the
total provision. 
 
Relocation, reorganisation and integration costs 
 
During the current and prior period a redevelopment of the Group's head office
building in Wolverhampton was undertaken along with a reorganisation of
certain head office functions.  Costs of £0.5 million (2015: £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 £3.3 million
(2015: £1.0 million) as a result of the acquisition of the trading operations
of Daniel Thwaites PLC's beer division in the prior period. 
 
Profit on sale of surplus land for residential development 
 
During the current period the Group sold a parcel of surplus land for
residential development for £9.5 million realising a profit of £1.5 million on
disposal. 
 
Portfolio disposal of pubs 
 
During the period ended 4 October 2014 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 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: 
 
                     2016    2015    
                     £m      £m      
 Revenue             31.5    33.1    
 Operating expenses  (31.4)  (35.7)  
                     0.1     (2.6)   
 
 
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 £8.4 million (2015: £8.6 million) is shown as an exceptional item. 
 
Impact of taxation 
 
The current tax credit relating to the above non-underlying items amounts to
£1.7 million (2015: £1.9 million).  The deferred tax credit relating to the
above non-underlying items amounts to £1.6 million (2015: £7.8 million).  In
addition, there is a non-underlying deferred tax credit of £2.4 million (2015:
£nil) in relation to the change in corporation tax rate. 
 
During the current period the Group agreed the tax treatment of certain items
with HM Revenue & Customs.  The tax credit of £4.1 million in respect of the
additional tax relief claimed for previous periods has been classified as a
non-underlying item along with the associated advisory fees of £0.5 million. 
 
Prior period non-underlying items 
 
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 were recognised in the revaluation reserve
or income statement as appropriate.  The amount recognised in the income
statement comprised: 
 
                                                            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    
 
 
4    Taxation 
 
                                                                           2016   2015   
 Income statement                                                          £m     £m     
 Current tax:                                                                            
 Current period                                                            14.1   14.2   
 Adjustments in respect of prior periods                                   (0.6)  0.1    
 Credit in respect of tax on non-underlying items                          (1.7)  (1.9)  
 Non-underlying credit in relation to additional relief for prior periods  (3.7)  -      
                                                                           8.1    12.4   
 Deferred tax:                                                                           
 Current period                                                            4.2    3.5    
 Adjustments in respect of prior periods                                   (0.1)  (0.1)  
 Credit in respect of tax on non-underlying items                          (1.6)  (7.8)  
 Non-underlying credit in relation to the change in tax rate               (2.4)  -      
 Non-underlying credit in relation to additional relief for prior periods  (0.4)  -      
                                                                           (0.3)  (4.4)  
 Taxation charge reported in the income statement                          7.8    8.0    
 
 
5    Ordinary dividends on equity shares 
 
                                                           2016  2015  
 Paid in the period                                        £m    £m    
 Final dividend for 2015 of 4.5p per share (2014: 4.3p)    25.9  24.6  
 Interim dividend for 2016 of 2.6p per share (2015: 2.5p)  14.9  14.3  
                                                           40.8  38.9  
 
 
A final dividend for 2016 of 4.7p per share amounting to £27.0 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 30 January 2017 to those shareholders on the register at close of business
on 16 December 2016. 
 
6    Earnings per ordinary share 
 
Basic earnings per share are calculated by dividing the profit 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. 
 
                                            2016      2015               
                                            Earnings  Per share  amount  Earnings  Per share  amount  
                                            £m        p                  £m        p                  
 Basic earnings per share                   73.0      12.7               23.3      4.1                
 Diluted earnings per share                 73.0      12.6               23.3      4.0                
                                                                                                      
 Underlying earnings per share figures                                                                
 Basic underlying earnings per share        80.4      14.0               73.8      12.9               
 Diluted underlying earnings per share      80.4      13.8               73.8      12.8               
 
 
                                            2016   2015   
                                            m      m      
 Basic weighted average number of shares    574.6  572.2  
 Dilutive options                           6.0    6.1    
 Diluted weighted average number of shares  580.6  578.3  
 
 
7    Net debt 
 
                                   2016       Cash flow  Non-cash  movements  and deferred  issue costs  2015       
 Analysis of net debt              £m         £m         £m                                              £m         
 Cash and cash equivalents                                                                                          
 Cash at bank and in hand          185.6      (7.5)      -                                               193.1      
 Bank overdrafts                   -          8.7        -                                               (8.7)      
                                   185.6      1.2        -                                               184.4      
 Debt due within one year                                                                                           
 Unsecured bank borrowings         (29.2)     -          (30.1)                                          0.9        
 Securitised debt                  (27.8)     26.7       (28.3)                                          (26.2)     
 Finance leases                    (0.1)      0.1        (0.1)                                           (0.1)      
 Other lease related borrowings    0.2        -          0.1                                             0.1        
 Other borrowings                  (120.0)    -          -                                               (120.0)    
                                   (176.9)    26.8       (58.4)                                          (145.3)    
 Debt due after one year                                                                                            
 Unsecured bank borrowings         (232.0)    (13.0)     29.2                                            (248.2)    
 Securitised debt                  (805.8)    -          27.8                                            (833.6)    
 Finance leases                    (20.5)     -          0.1                                             (20.6)     
 Other lease related borrowings    (219.7)    (40.7)     2.6                                             (181.6)    
 Preference shares                 (0.1)      -          -                                               (0.1)      
                                   (1,278.1)  (53.7)     59.7                                            (1,284.1)  
 Net debt                          (1,269.4)  (25.7)     1.3                                             (1,245.0)  
 
 
Other borrowings represent amounts drawn down under the securitisation's
liquidity facility.  During the period ended 4 October 2014 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 (2015: £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 £0.6 million (2015:
£1.6 million) relating to a letter of credit with Royal Sun Alliance
Insurance, an amount of £1.5 million (2015: £1.0 million) relating to a letter
of credit with Aviva, and an amount of £7.8 million (2015: £7.8 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. 
 
                                                                2016       2015       
 Reconciliation of net cash flow to movement in net debt        £m         £m         
 Increase in cash and cash equivalents in the period            1.2        11.1       
 Cash inflow from movement in debt                              (26.9)     (59.5)     
 Change in debt resulting from cash flows                       (25.7)     (48.4)     
 Non-cash movements and deferred issue costs                    1.3        1.6        
 Movement in net debt in the period                             (24.4)     (46.8)     
 Net debt at beginning of the period                            (1,245.0)  (1,198.2)  
 Net debt at end of the period                                  (1,269.4)  (1,245.0)  
                                                                                      
                                                                2016       2015       
 Reconciliation of net debt before lease financing to net debt  £m         £m         
 Cash and cash equivalents                                      185.6      193.1      
 Unsecured bank borrowings (including bank overdrafts)          (261.2)    (256.0)    
 Securitised debt                                               (833.6)    (859.8)    
 Other borrowings                                               (120.0)    (120.0)    
 Preference shares                                              (0.1)      (0.1)      
 Net debt before lease financing                                (1,029.3)  (1,042.8)  
 Finance leases                                                 (20.6)     (20.7)     
 Other lease related borrowings                                 (219.5)    (181.5)    
 Net debt                                                       (1,269.4)  (1,245.0)  
 
 
Notes: 
 
(a)           The financial information contained in this preliminary
announcement does not constitute the Group's statutory accounts within the
meaning of Section 434 of the Companies Act 2006. The financial information
has been extracted from the audited statutory accounts of the Group for the 52
weeks ended 1 October 2016, which will be filed with the Registrar of
Companies in due course.  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.  The statutory accounts for the 52 weeks ended
3 October 2015 have been delivered to the Registrar of Companies. 
 
(b)           The Annual Report and Accounts for the 52 weeks ended 1 October
2016 will be posted to shareholders on 16 December 2016.  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 Group Secretary, Marston's PLC, Marston's
House, Brewery Road, Wolverhampton, WV1 4JT. 
 
This information is provided by RNS
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