Marston’s brewing cautious approach to Brexit ‘uncertainty’

Marston brewery

Pub group Marston’s is to cut back spending, free up cash and reduce debt this year as it prepares for political and economic “uncertainty”.

The company plans to improve its free cash flow by £20-30 million a year, on top of previously announced spending reductions of £30 million, amid business uncertainty over the outcome of Brexit negotiations and headwinds facing the pub industry.

It comes as Marston’s unveiled a 13% rise in revenue for the year to September 29 to £1.14 billion.

Underlying pre-tax profits rose by 4%, but earnings per share were 2% lower due to the integration of Charles Wells Brewing.

The group maintained its dividend at 4.8p per share.

“Macro-economic and political uncertainty is reflected in our capital plans this year,” said chief executive Ralph Findlay.

“However, the outlook for good pubs and brewing remains attractive and Marston’s is well placed to leverage the opportunity this presents with our high quality, well invested estate, leading brands and great people. We expect to make positive progress once again in the current financial year.”

Under the plans, Marston’s anticipates paying smaller contributions to the pension pot, reducing expenditure and refinancing opportunities.

Last month the group acquired 15 former Mitchells & Butlers pubs from investment company Aprirose, enlarging the estate of drinks-led “taverns”.

In addition to these, Marston’s expects to open 10 pubs and five lodges.

But the business has also signalled greater caution on new openings for the current financial year as a result of the challenges facing the wider pub and restaurant industry.

Food price inflation, higher labour costs and business rates have all caused headaches for leisure and hospitality businesses this year.

The fastest-growing division of Marston’s was its brewing arm, which saw a 47% jump in volumes over the previous period thanks to the integration of Charles Wells.

Plans for the current period include investment in a canning line in Burton and a new distribution centre in Thurrock.

Analysts at JP Morgan Cazenove said: “Despite continuing cost headwinds in the pub sector, we expect Marston’s to be able to grow profits in 2019 on the basis of the acquisition of a tranche of pubs from Aprirose, Brewing volume and mix growth and new pub and lodge openings, as well as contribution from pub like-for-like growth.”