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

- Part 2: For the preceding part double click  ID:nRSd9040Xa 

the prior period the net interest on the net defined benefit
asset/liability was presented within underlying items.  This has now been
represented within non-underlying items to better reflect the nature of this
item and to be consistent with the current period presentation. 
 
2    Segment reporting 
 
                                2017     2016   
 Underlying revenue by segment  £m       £m     
 Destination and Premium        438.0    419.0  
 Taverns                        246.7    238.5  
 Leased                         54.6     55.0   
 Brewing                        252.9    193.3  
 Group Services                 -        -      
 Underlying revenue             992.2    905.8  
 Non-underlying items           19.1     31.5   
 Revenue                        1,011.3  937.3  
 
 
                                         2017    2016    
 Underlying operating profit by segment  £m      £m      
 Destination and Premium                 88.9    86.9    
 Taverns                                 57.0    56.6    
 Leased                                  27.1    26.9    
 Brewing                                 25.5    23.2    
 Group Services                          (24.0)  (20.9)  
 Underlying operating profit             174.5   172.7   
 Non-underlying operating items          (4.1)   (8.8)   
 Operating profit                        170.4   163.9   
 Net finance costs                       (70.1)  (83.1)  
 Profit before taxation                  100.3   80.8    
 
 
During the current period the Group changed the structure of its internal
organisation in a manner that caused the composition of its operating segments
to change.  The results for the prior period have been restated to reflect
these changes. 
 
3    NON-Underlying items 
 
                                                                                 2017   2016   
                                                                                 £m     £m     
 Exceptional operating items                                                                   
 Impact of change in rate assumptions used for onerous lease provisions          (1.6)  4.4    
 Reorganisation, relocation and integration costs                                5.5    3.8    
 Non-core estate disposal and reorganisation costs                               -      1.7    
 Profit on sale of surplus land for residential development                      -      (1.5)  
 Tax advisory fees                                                               -      0.5    
                                                                                 3.9    8.9    
 Other adjusting operating items                                                               
 Results in respect of the ongoing management of pubs in the portfolio disposal  0.2    (0.1)  
                                                                                 0.2    (0.1)  
 Non-underlying operating items                                                  4.1    8.8    
                                                                                               
 Exceptional non-operating items                                                               
 Net interest on net defined benefit asset/liability                             0.7    (0.7)  
 Write-off of unamortised finance costs                                          1.4    -      
 Movement in fair value of interest rate swaps                                   (6.4)  8.4    
                                                                                 (4.3)  7.7    
 Total non-underlying items                                                      (0.2)  16.5   
 
 
Impact of change in rate assumptions used for onerous lease provisions 
 
The update of the discount rate assumptions used in the calculation of the
Group's onerous property lease provisions at the current period end resulted
in a decrease of £1.6 million (2016: increase of £4.4 million) in the total
provision. 
 
Reorganisation, relocation and integration costs 
 
During the current period the Group incurred reorganisation and integration
costs of £4.6 million as a result of the acquisition of the beer business of
Charles Wells. 
 
A head office restructuring exercise was also undertaken in the current period
incurring costs of £0.9 million. 
 
During the prior period the redevelopment of the Group's head office building
in Wolverhampton was completed along with a reorganisation of certain head
office functions.  Costs of £0.5 million were incurred in the prior period 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
in the prior period as a result of the acquisition of the trading operations
of Daniel Thwaites PLC's beer division in the period ended 3 October 2015. 
 
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.  A number of the pubs have since been
removed from these arrangements by the purchaser.  During the current period
the Group has entered into new 15 year leases in respect of 22 of the
properties and these have also been removed from the management agreement. 
The Group no longer has strategic control of the pubs still subject to the
management agreement 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: 
 
                     2017    2016    
                     £m      £m      
 Revenue             19.1    31.5    
 Operating expenses  (19.3)  (31.4)  
                     (0.2)   0.1     
 
 
Net interest on net defined benefit asset/liability 
 
The net interest on the net defined benefit asset/liability in respect of the
Group's defined benefit pension plan was a charge of £0.7 million (2016:
credit of £0.7 million). 
 
Write-off of unamortised finance costs 
 
During the current period the Group entered into a new bank facility.  As such
the unamortised finance costs relating to the previous facility have been
written off. 
 
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 gain
of £6.4 million (2016: loss of £8.4 million) is shown as an exceptional item. 
 
Impact of taxation 
 
The current tax credit relating to the above non-underlying items amounts to
£0.9 million (2016: £1.7 million).  The deferred tax charge relating to the
above non-underlying items amounts to £0.9 million (2016: credit of £1.4
million).  In addition, there is a non-underlying deferred tax credit of £nil
(2016: £2.4 million) in relation to the change in corporation tax rate. 
 
During the prior 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 was classified as a
non-underlying item along with the associated advisory fees of £0.5 million. 
 
Prior period non-underlying items 
 
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 the prior period. 
 
During the prior 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. 
 
4    Taxation 
 
                                                                           2017   2016   
 Income statement                                                          £m     £m     
 Current tax                                                                             
 Current period                                                            10.7   13.9   
 Adjustments in respect of prior periods                                   (0.3)  (0.6)  
 Credit in respect of tax on non-underlying items                          (0.9)  (1.7)  
 Non-underlying credit in relation to additional relief for prior periods  -      (3.7)  
                                                                           9.5    7.9    
 Deferred tax                                                                            
 Current period                                                            6.1    4.2    
 Adjustments in respect of prior periods                                   (0.9)  (0.1)  
 Charge/(credit) in respect of tax on non-underlying items                 0.9    (1.4)  
 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)  
                                                                           6.1    (0.1)  
 Taxation charge reported in the income statement                          15.6   7.8    
 
 
5    Ordinary dividends on equity shares 
 
                                                           2017  2016  
 Paid in the period                                        £m    £m    
 Final dividend for 2016 of 4.7p per share (2015: 4.5p)    27.0  25.9  
 Interim dividend for 2017 of 2.7p per share (2016: 2.6p)  17.1  14.9  
                                                           44.1  40.8  
 
 
A final dividend for 2017 of 4.8p per share amounting to £30.4 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 29 January 2018 to those shareholders on the register at close of business
on 15 December 2017. 
 
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. 
 
                                            2017      2016              
                                            Earnings  Per share amount  Earnings  Per share amount  
                                            £m        p                 £m        p                 
 Basic earnings per share                   84.7      14.2              73.0      12.7              
 Diluted earnings per share                 84.7      14.1              73.0      12.6              
                                                                                                    
 Underlying earnings per share figures                                                              
 Basic underlying earnings per share        84.5      14.2              79.9      13.9              
 Diluted underlying earnings per share      84.5      14.0              79.9      13.8              
 
 
                                            2017   2016   
                                            m      m      
 Basic weighted average number of shares    596.9  574.6  
 Dilutive options                           4.8    6.0    
 Diluted weighted average number of shares  601.7  580.6  
 
 
7    Net debt 
 
                                   2017       Cash flow  Non-cash  movements  and deferred  issue costs  2016       
 Analysis of net debt              £m         £m         £m                                              £m         
 Cash and cash equivalents                                                                                          
 Cash at bank and in hand          54.6       (131.0)    -                                               185.6      
                                   54.6       (131.0)    -                                               185.6      
 Financial assets                                                                                                   
 Other cash deposits               120.0      120.0      -                                               -          
                                   120.0      120.0      -                                               -          
 Debt due within one year                                                                                           
 Unsecured bank borrowings         0.7        30.0       (0.1)                                           (29.2)     
 Securitised debt                  (29.5)     28.4       (30.1)                                          (27.8)     
 Finance leases                    (0.2)      0.1        (0.2)                                           (0.1)      
 Other lease related borrowings    0.2        -          -                                               0.2        
 Other borrowings                  (120.0)    -          -                                               (120.0)    
                                   (148.8)    58.5       (30.4)                                          (176.9)    
 Debt due after one year                                                                                            
 Unsecured bank borrowings         (277.7)    (47.0)     1.3                                             (232.0)    
 Securitised debt                  (776.3)    -          29.5                                            (805.8)    
 Finance leases                    (27.6)     -          (7.1)                                           (20.5)     
 Other lease related borrowings    (273.2)    (57.9)     4.4                                             (219.7)    
 Preference shares                 (0.1)      -          -                                               (0.1)      
                                   (1,354.9)  (104.9)    28.1                                            (1,278.1)  
 Net debt                          (1,329.1)  (57.4)     (2.3)                                           (1,269.4)  
 
 
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 held in the relevant bank account is included within other
cash deposits (2016: £120.0 million in cash and cash equivalents).  The amount
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 this amount is considered to
be restricted cash. 
 
Included within cash and cash equivalents is an amount of £0.5 million (2016:
£0.6 million) relating to a letter of credit with Royal Sun Alliance
Insurance, an amount of £1.4 million (2016: £1.5 million) relating to a letter
of credit with Aviva, and an amount of £7.7 million (2016: £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. 
 
                                                                 2017       2016       
 Reconciliation of net cash flow to movement in net debt         £m         £m         
 (Decrease)/increase in cash and cash equivalents in the period  (131.0)    1.2        
 Increase in other cash deposits                                 120.0      -          
 Cash inflow from movement in debt                               (46.4)     (26.9)     
 Change in debt resulting from cash flows                        (57.4)     (25.7)     
 Non-cash movements and deferred issue costs                     (2.3)      1.3        
 Movement in net debt in the period                              (59.7)     (24.4)     
 Net debt at beginning of the period                             (1,269.4)  (1,245.0)  
 Net debt at end of the period                                   (1,329.1)  (1,269.4)  
 
 
                                                                2017       2016       
 Reconciliation of net debt before lease financing to net debt  £m         £m         
 Cash and cash equivalents                                      54.6       185.6      
 Other cash deposits                                            120.0      -          
 Unsecured bank borrowings                                      (277.0)    (261.2)    
 Securitised debt                                               (805.8)    (833.6)    
 Other borrowings                                               (120.0)    (120.0)    
 Preference shares                                              (0.1)      (0.1)      
 Net debt before lease financing                                (1,028.3)  (1,029.3)  
 Finance leases                                                 (27.8)     (20.6)     
 Other lease related borrowings                                 (273.0)    (219.5)    
 Net debt                                                       (1,329.1)  (1,269.4)  
 
 
8    CHARLES WELLS ACQUISITION 
 
On 2 June 2017, the Group acquired Bedford Canning Company Limited, containing
the beer business of Charles Wells.  The business incorporates a portfolio of
well-known brands including Bombardier, Young's and McEwan's.  The acquisition
is consistent with the Group's strategy of focussing on premium beer brands
with local provenance, and provides further opportunities for growth in the
developing free trade market.  Additionally, the acquisition further
strengthens the Group's presence in London and the South East and presents a
platform to expand into Scotland. 
 
The table below summarises the consideration paid, the provisional fair values
of the assets acquired and liabilities assumed and the resulting goodwill. 
 
                                  2017   
                                  £m     
 Brands                           30.0   
 Property, plant and equipment    25.5   
 Trade loans                      0.6    
 Inventories                      8.5    
 Trade and other receivables      27.3   
 Trade and other payables         (2.8)  
 Deferred tax                     (1.4)  
 Goodwill                         2.8    
 Cash consideration               90.5   
 
 
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 30 September 2017, 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
1 October 2016 have been delivered to the Registrar of Companies. 
 
(b)        The Annual Report and Accounts for the 52 weeks ended 30 September
2017 will be posted to shareholders on 18 December 2017.  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
The company news service from the London Stock Exchange

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