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Marston's PLC 
Annual Report and Accounts 2014

 
 
 
 
 
Introduction

WELCOME  
TO MARSTON’S

Welcome to Marston’s. We offer something for 
everyone; a welcoming environment, great food, beer 
and real value for money. We are proud of our pubs and 
we want our customers simply to think of them as “the 
best place around here” whatever the business model, 
format or brand.

Our strategy is for Marston’s to grow and increase returns through 
the continued and sustainable development of great pubs and bars 
and through a unique portfolio of premium beers and local ales.

For more information: 
Our Operating Strategy on page 8

Our business model combines the best people, pubs and beer brands 
with our innovation, training, heritage and culture to create the best 
places for socialising, relaxing, celebrating and refreshment and to 
create the best premium ale business in the UK. 

For more information: 
Our Business Model on page 6

This year we have made good progress in transforming the quality 
of our pub estate through the continuation of our new-build 
development plans and the disposal of weaker pubs. Our Brewing 
business is benefiting from our category leadership in premium ale 
and new product development.

For more information: 
Our Strategy in Action on page 10

Strategic ReportHighlights of 2014  1Chairman’s Statement  2Chief Executive’s Statement 3Market Overview  4 – 5Our Business Model  6 – 7Our Operating Strategy  8 – 9Our Strategy in Action  10 – 12Risk Management Framework 13Principal Risks and Uncertainties  14 – 15Our People 16Marston’s Community 17Performance and Financial Review 18 – 19GovernanceCorporate Governance Report  20 – 27Board of Directors  22 – 23Audit Committee Report  28 – 29Nomination Committee Report 30Directors’ Remuneration Report  31 – 43Other Statutory Information  44 – 46Statement of Directors’ Responsibilities  47Financial StatementsFive Year Record  48 Independent Auditors’ Report  49 – 51Group Accounts  52 – 55Notes to Group Accounts  56 – 89Independent Auditors’ Report  90 – 91Company Balance Sheet  92Notes to Company Accounts  93 – 98Other InformationInformation for Shareholders  99 – 100Glossary and Picture Reference IBCHighlights of 2014

Underlying* revenue

£787.6m

Underlying* operating profit †

£156.1m

Product highlights

800

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2011

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2014

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Over  
30 million

meals served

2010

2011

2012

2013

2014

Underlying* profit before tax †

£83.0m

Underlying* earnings per share †

11.7p

100
90
80
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2011

2012

2013

2014

67  
million

pints of beer
served in  
our pubs 

Over  
1 million

pints of Piledriver 
sold since its launch
in February 2014

20

pizza ovens installed

*  The underlying results reflect the performance of the Group before exceptional and other adjusting items. The Directors 

consider that these figures provide a useful indication of the underlying performance of the Group.

†  Figures restated for 2010 – 2013. See note 35 on page 89 for further details.

Marston's PLC   Annual Report and Accounts 2014

1

Chairman’s Statement

GOOD PROGRESS IN 
STRATEGIC OBJECTIVES

I am pleased to report a satisfactory outcome 
to the year. 
Performance summary
The performance of our pubs and beer brands has been robust, and we have 
made good progress implementing our key strategic initiatives. Although the 
underlying numbers for profit before taxation and earnings per share are 
lower than last year, this is a consequence of planned disposals and the fact 
that 2013 contained a 53rd trading week: the core business achieved good 
growth from building new pub-restaurants.

Strategy
Our strategy benefits from being clear and is capable of being achieved 
through organic development. We consider acquisition opportunities carefully 
but we already have a sound plan: we are building 20-30 new pub restaurants 
each year, achieving high returns, and selling pubs which are no longer able to 
offer customers what they want. Since 2009, we have built over 100 new 
pub-restaurants – creating 5,000 jobs in the process – and sold around 600 
smaller wet-led pubs. The business is changing and becoming more 
responsive to our customers’ needs.

Our ability to develop new ideas and implement them effectively is important 
to our future growth. Marston’s has a reputation for breaking new ground: the 
new-build programme demonstrates our appetite for transforming our pub 
estate; the franchise agreements we launched in 2009 have transformed our 
community pubs; and fastcask ™ continues to contribute to the success of 
Marston’s Beer Company. This year we have formed a ‘youth board’ – in 
conjunction with The Sun newspaper – to design ‘The Pub of the Future’. We 
are optimistic that this forum will generate good ideas.

Market
The market remains tough, although most economic indicators are showing 
steady signs of improvement. That has not yet fed through to customers’ 
pockets and so value for money remains vitally important for many pubs in 
our estate. Nevertheless, we are seeing good opportunities for developing 
more premium offers, as the success of our Revere pubs, Pitcher & Piano bars 
and many of our leased pubs demonstrate. Our broad market positioning  
is a strength.

We have also been able to take advantage of low interest rates to secure 
long-term finance for our new-build programme at attractive rates. Our ability 
to raise sensible finance is helped by our freehold ownership of a substantial 
percentage of the pubs in our estate and that is something that I believe is 
important to our shareholders, and to us operationally. Some of our future 
growth may, of necessity, be in leasehold sites but we will not compromise 
our strong balance sheet.

Board changes
I am delighted to welcome Carolyn Bradley and Catherine Glickman to the 
Board and I am confident they will help us as we respond to a fast changing 
market. Roz Cuschieri will be standing down from the Board after the Annual 
General Meeting after eight years and I thank her for her contribution to our 
development in that time.

Dividend
In summary, our performance has been good relative to our peer group, we are 
well positioned for future growth and we are making sound progress against our 
strategic objectives. We are confident in our prospects and, as a consequence, are 
pleased to recommend an increase of 4.9% in the final dividend to 4.3 pence per 
share, representing a full year dividend of 6.7 pence per share (an increase of 5% 
on 2013).

Finally, and most importantly, I thank our people for their commitment and 
enthusiasm for Marston’s, which is much in evidence in our pubs, our breweries 
and support operations.

Roger Devlin
Chairman

2

Marston's PLC   Annual Report and Accounts 2014

Chief Executive’s Statement

SOLID PROGRESS  
CONTINUED DIVIDEND GROWTH

These results demonstrate that our strategy is delivering 
value, achieved through investment in new-builds 
generating superior returns, the development of 
franchise-style pubs and, planned disposals.
The transformation of our pub estate is well underway and on plan and we are 
pleased to report solid progress including growth in our retained pub 
business and in Brewing.

Underlying operating profit was £156.1 million (2013: £168.2 million) including 
the impact of disposals referred to above and the non-recurrence of the 53rd 
trading week. Allowing for these, underlying operating profit increased in 
each of our core business segments. 

Underlying profit before tax was £83.0 million (2013: £86.1 million) with lower 
interest charges from debt repayments partially offsetting the impact of 
disposals. Basic underlying earnings per share for the period were 11.7 pence 
per share (2013: 12.0 pence per share). 

In looking at the performance for the Group as a whole, our year-on-year 
comparisons reflect significant disposal activity, in particular the portfolio 
disposal of 202 pubs in November 2013 (which generated annual revenue of 
£29.6 million and operating profit of £10.8 million) and the fact that 2013 
included a 53rd trading week. 

Our plans to invest in pub-restaurants nationally and sell smaller wet-led pubs are 
on track. We met our targets for the 2014 financial year, opening 27 new-build 
pub-restaurants including our 100th new-build pub in Dumfries, Scotland. We 
continue to see good opportunities for future investment at attractive returns.

Net debt at the period end was £1,198 million. Net debt includes £1,043 million 
of long-term structured finance with a stable repayment profile and no 
exposure to increases in interest rates. Excluding property leases with freehold 
reversion entitlement, the ratio of net debt to underlying EBITDA was 5.4 times 
at the period end. Net debt to EBITDA is expected to reduce over time as this 
long-term debt amortises, and it remains our intention to target a ratio of 
around 5 times in the medium term. We have significant flexibility in our 
financing options, including the selective use of sale and leaseback where 
appropriate, without compromising our preference for an estate of which 
more than 90% is freehold.

We also sold 388 smaller wet-led pubs and other assets, realising proceeds of  
£144 million for reinvestment. As at the year end, the Group’s estate comprised 
1,689 pubs against 2,050 in 2013.

The continuing successful implementation of our strategy is demonstrated by our 
financial performance: we are seeing good growth in our Destination and 
Premium estate, increased exposure to the dining market and, growth in our 
retained Taverns and Leased estates reflected in a 19% increase in average profit 
per pub over the last two years.

Additionally, around 75% of profits from our pubs are now generated by 
managed or franchise-style pubs in which we have direct control over the retail 
offer. This will continue to increase as we implement our strategy, ensuring that 
we are better able to deliver consistency of service and standards, and to offer 
outstanding value to our customers in more pubs.

Our performance in pubs was underpinned by an excellent year in Brewing, 
where our focus on premium and regional beers reflects strong consumer 
interest in this segment of the market. 

In spite of our disposal activity and a 53rd trading week in 2013, total 
underlying revenue increased by 0.6% compared to 2013 reflecting the 
contribution from new pub-restaurants, solid like-for-like sales growth in our 
pubs and growth in Brewing. Operating margin was 1.7% below last year as a 
consequence of the conversion of formerly tenanted pubs to franchise-style 
agreements, which generate higher profits but at a lower percentage 
operating margin.

Cash return on cash capital employed remains strong at 10.5%. This is slightly 
behind last year reflecting the short-term effect of the portfolio disposal in 
November 2013. We remain focused on improving returns and are confident 
that the implementation of our strategy will increase returns over time.

The proposed final dividend of 4.3 pence per share provides a total dividend 
for the year of 6.7 pence per share, and represents a 5% increase on 2013. 
Dividend cover was 1.7 times (2013: 1.9 times) reflecting the portfolio disposal. 
Our dividend policy remains to target consistent progressive increases in 
dividend at a cover of around 2 times over the medium term.

Current trading 
The year has started well, with like-for-like sales growth in Destination and 
Premium pubs of 2.1% for the 7 weeks to 22 November including food sales 
growth of 2.1% and drinks sales growth of 2.0%. Operating margins are up on 
last year. In Taverns, like-for-like sales have grown by 2.0% and in Leased, 
profits are up on last year. In Brewing, trading is ahead of last year with another 
strong Halloween performance by Hobgoblin.

Ralph Findlay 
Chief Executive Officer

Marston's PLC   Annual Report and Accounts 2014

3

Market Overview

OPERATING IN  
THREE ATTRACTIVE 
MARKETS

We operate in the eating-out and drinking-out markets 
through our pubs and the UK on-trade and off-trade; and we 
export to 59 countries worldwide. We are constantly 
reviewing and researching the markets in which we operate 
and seeking feedback from our customers to better 
understand their needs. This informs our innovation and 
development initiatives that improve our standards, service 
and range to gain market share.
Like-for-like (LFL) sales growing ahead of market
Marston’s vs Peach Pubs (outside M25) – 2 Year Trand

Like-for-like (LFL) sales growing ahead of market
3%
Marston’s vs Peach Pubs (outside M25) – 2 Year Trand

2%
3%

1%
2%

0%
1%

-1%
0%

-2% Oct 2012
-1%

Jan 2013

Apr 2013

Jul 2013

Oct 2013

Jan 2014

Apr 2014

Jul 2014

-2% Oct 2012

Jan 2013

Apr 2013

Jul 2013

Oct 2013

Premiumisation driving beer market – and Marston’s
Premium ale 2014 vs 2010

Premiumisation driving beer market – and Marston’s
Premium ale 2014 vs 2010
10

Dest & Prem vs Peach Food Led
Taverns vs Peach Wet Led
Apr 2014

Jul 2014

Jan 2014

Dest & Prem vs Peach Food Led
Taverns vs Peach Wet Led

+10%

+10%

+8%

+8%

+6%

+6%

8
10

6
8

4
6

2
4

0
2

0

XXX

+1%
XXX
7%

Premium ale
+1%
share of total
7%
beer market
Premium ale
share of total
beer market

4

Marston's PLC   Annual Report and Accounts 2014

Marston’s vs. PCA*

Marston’s vs. PBA**

Marston’s vs. PCA*

Marston’s vs. PBA**

+71%

Marston’s premium 
ale mix of total Marston’s ale 
+71%

**PCA – Premium Cask Ale
Marston’s premium 
**PBA – Premium Bottled Ale
ale mix of total Marston’s ale 

**PCA – Premium Cask Ale
**PBA – Premium Bottled Ale

UK pub market

We operate pubs and bars under different 
business models – managed, franchised, 
tenanted and leased – in one business 
division. This maximises our operating 
flexibility and ensures that we are better 
placed to apply our consumer insights 
throughout the business. We invest in 
new-build pub-restaurants which meet 
increasing demand for informal dining, 
and align our community pubs to the 
changing needs of today’s pub 
customers. 

Eating out

Our pubs offer a variety of eating-out 
options and experiences from snacking 
and grazing to Sunday roasts. We aim to 
offer great value and high levels of 
service in a traditional pub 
environment. Our research and 
development teams 
monitor trends 
and behaviours to 
ensure that our 
food offers remain 
attractive to 
customers.

Brewing 

We have a permanent range 
of 22 cask beers and brew 
over 40 guest ales every 
year on a seasonal basis. 
Over 1 in 5 bottles of ale 
sold in the UK are Marston’s 
beers and our premium 
cask and bottled ales 
continue to outperform the 
market.

Trends
The importance of the pub to the UK consumer 
remains very strong and there is increased demand 
for pub-restaurants offering value and quality, and 
community pubs being the place for socialising, 
drinking and eating. Pubs have increased their 
share of the eating-out market and the UK 
drinking-out market is showing signs of recovery 
particularly in premium drinks consumption. 
However, there continues to be polarisation 
between the success of well invested pubs in 
good locations with a clear offer and the weaker 
performance of under-invested pubs in poor 
locations, and this has been exacerbated by 
increased political and economic pressures in 
recent years. This has resulted in the reduction of 
the population of pubs in the UK in total, but the 
pubs that remain are of significantly higher quality.

Impact
Whilst pubs continue to close, those that offer a 
compelling reason to visit will survive and succeed. 
These include pubs that offer a more family-
friendly or female-friendly environment or the 
right combination of quality and value food and 
drink offer. Those that are not able to compete 
effectively tend to be the smaller wet-led pubs 
which lack the position or scale to be viable 
businesses for Marston’s; they have also suffered 
most from the Government’s taxation and 
legislative changes in recent years. Marston’s has 
long argued that fair, sustainable rents and a 
partnership approach are vital for the success of 
tenanted and leased pubs.

Trends
The UK eating-out market has grown by 2.8% in 
the last year – the strongest since the start of the 
recession. Although consumer confidence has 
started to return, and with it customers’ disposable 
income, eating-out habits have changed. 
Consumers are more discerning in their desire for 
great service, high quality food and drink and 
value for money. The influence of the US in dishes, 
flavours and the desire to customise one’s own 
meal remains, as well as a more casual approach to 
eating out. 
One of the biggest challenges facing pubs in the 
future is how to attract the younger customer 
group (the Millennials) who have grown up eating 
and drinking in a wide range of outlets. They eat 
and drink out more often, yet their spend per visit 
is lower than the average pub customer.

Impact
Being thrifty and seeking value deals is now the 
norm and customers have greater choice in a 
more diverse and competitive leisure landscape. In 
spite of an eye on the budget, when customers go 
out they like to treat themselves with the 
occasional indulgence and whilst the frequency of 
visits has fallen the average spend per visit is up. 
A change in consumer eating habits is leading to a 
shift in traditional mealtimes and a rise in grazing 
and snacking throughout the day.
Customers are seeking more from their leisure 
activities, including when eating out, and they 
want to understand the story behind their 
experience, whether it’s the dish’s provenance or 
the influence of the Company’s heritage on the 
whole experience.

Response
Our success is built on providing pubs that 
people want: new-build pubs that match the 
needs of our customers in a particular location; 
a range of operating formats that allow us 
maximum flexibility in determining the service 
style and product range; a rolling refurbishment 
programme ensures that our estate remains 
attractive. In addition all of our tenanted and 
leased pub agreements comply with the Pub 
Industry Framework Code of Practice and we 
are currently reviewing the latest Government 
response to the consultation paper. Our 
franchise agreements enable us to take greater 
control of the retail offer and standards allowing 
the franchisee to focus on sales and share in the 
profits generated. Those pubs that are no 
longer viable are sold and the proceeds 
re-invested in improving the quality of our 
estate. 
To understand the habits of the younger 
generation we recently launched the Pub of the 
Future Board.

Response
We seek to understand our customers’ needs 
through focus groups, customer experience 
surveys and research. This has led us to develop 
programmes designed to improve the customer 
experience such as ‘Know your Customer’ and 
‘Best in Glass’ training. In addition, our food and 
drink innovation focuses not only on the product 
but also service style, promotions and 
merchandising. ‘Masters of Cask’ aims to drive 
awareness of Marston’s 180 years of brewing 
experience, our Master Brewers and the 
ingredients and processes that go into creating 
our cask ales. 
The Garden Grill Company menu meets the 
growing demand for BBQ and smoked foods and 
pizza ovens have been introduced into more of 
our pub-restaurants to broaden the appeal. For 
that occasional treat, we have launched an ice 
cream parlour serving Beechdean Dairy ice cream 
and introduced more indulgent dessert ranges. 

For more information: 
Visit us at www.marstons.co.uk

Impact
The current switch to off-trade is expected to 
continue apace. Cask continues to recruit new 
drinkers from other beer categories and brand and 
category innovation is attracting more shoppers to 
the PBA category. Seen as experiential and locally 
produced, Marston’s is in a strong position to 
exploit these trends.

Response
Our five breweries and six brand families enable 
Marston’s to react and develop the portfolio 
around these growth categories. PBA and cask 
and craft beers place Marston’s at the heart of 
nationally available local beers. Our own brands 
and more collaborative beers with Status Quo 
(Piledriver), American brewer Shipyard of Maine 
USA and ‘Help for Heroes’ have been successful 
in responding to the trend.

Trends
The total beer market in the UK, which has been 
consistently declining in total volume, returned to 
growth in 2014 driven by a year of strong sales 
growth in the off-trade for home consumption. 
Whilst a modest growth indicator is unlikely to 
represent a change in the trend for total beer sales 
there are certain categories of beer where sales are 
increasing; specifically premium lager and 
premium ale. Drinking at home remains a value 
equation for consumers based on quality as well 
as price.
The value of the Premium Bottled Ale (PBA) market 
in the off-trade now stands at £460 million. This is 
forecast to increase to £1 billion by 2020. The 
volume of beer consumed in pubs has remained 
under pressure, however the market for cask ale 
remains resilient.

Marston's PLC   Annual Report and Accounts 2014

5

Our Business Model

HOW WE DELIVER VALUE 
TO OUR SHAREHOLDERS

We create shareholder value through delivering sustainable and profitable growth 
of our business. We aim to do this by being the best place for socialising, relaxing, 
celebrating and refreshment together with being the UK’s leading ale brewer.

OUR BUSINESS MODEL

OUR GOALS

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O U R GOALS

O U R RECIPE

To be th

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Heritage

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ACHIEVING OUR  
STRATEGIC OBJECTIVES

• Sustainable growth
•
Increased RoC
• Reduced leverage

BEST PLACE FOR SOCIALISING, 
RELAXING, CELEBRATING & 
REFRESHMENT

• High quality estate
• Operating a range of formats
•  Offering value, excellent service and good food and drink

For more information:
Operational review on PXX

XX

The achievement of our goals is underpinned by the Marston’s 
way of doing business – we call it Marston’s-ness. Taking the 
best ingredients and applying our own recipe is something 
that makes us different. We think and act differently rather than 
follow others.

OUR RECIPE
• having curiosity about our markets and customers and

what drives them

• having passion for a business with a great heritage
•

finding new and better ideas to build on the traditional
strengths of our long-established business

• being as careful with our shareholders’ assets and money

as with our own
recognising our responsibilities – to customers, colleagues, 
communities, the environment and Government
acting with ‘Fairness, Integrity and Transparency’ in all we do
taking pride in doing things properly

Marston's PLC   Annual Report and Accounts 2014

•

•
•

6

THE UK’S LEADING 
ALE BREWER

• Leadership in the premium ale market

 
 
   
 
 
 
 
 
 
 
New-builds completed
2014
2013
2012

27

22

25

CROCCE
New-builds completed
2014
2014
2013
2013
2012
2012

10.5%
27
10.5%
10.6%
25

22

22

22
22

27
27

22
22

26.0m

£85.6m

£48.6m

£48.6m

£85.6m
£85.6m

£48.6m
£48.6m

£85.6m
£85.6m

£48.6m
£48.6m

£48.6m
£48.6m

£92.4m
£92.4m
31.7m

OUR KPIS

22
22
£85.6m
25
10.5%
25
£92.4m
27
27
10.5%
10.6%
25
25
27
27

25
25
11.7p
10.5%
10.5%
12.0p
10.5%
10.5%
12.2p
10.6%
10.6%
10.5%
10.5%
£92.4m
10.5%
10.5%
10.6%
10.6%
10.5%
10.5%
79%
10.5%
10.5%
81%
10.6%
10.6%
77%
11.7p
£92.4m
£92.4m
12.0p
12.2p

£85.6m
£85.6m
29.2m
£92.4m
79%
11.7p
11.7p
£92.4m
81%
12.0p
12.0p
77%
12.2p
12.2p
11.7p
11.7p
27
12.0p
12.0p
12.2p
12.2p
11.7p
25
11.7p
1.6%
12.0p
79%
79%
12.0p
–
12.2p
81%
31.7m
81%
12.2p
77%
29.2m
77%
79%
79%

New-builds completed
New-builds completed
Free Cash Flow
2014
2014
2014
CROCCE
2013
New-builds completed
New-builds completed
2013
2013
2012
2014
2012
2012
2014
2014
2013
New-builds completed
2013
2013
2012
New-builds completed
2012
2012
2014
2014
2013
Earnings per ordinary share1
2013
CROCCE
2012
CROCCE
2012
2014
Free Cash Flow
2014
2014
2013
2013
CROCCE
2014
CROCCE
2013
2012
2012
2013
2012
2014
2014
2012
CROCCE
2013
2013
CROCCE
Employee engagement
2012
2012
2014
2014
2014
Free Cash Flow
2013
Free Cash Flow
2013
2013
2012
Earnings per ordinary share1
2014
2014
2012
2012
2013
Free Cash Flow
Free Cash Flow
2013
2014
2012
2012
2013
2014
2014
2012
Free Cash Flow
2013
2013
Free Cash Flow
No. of main meals served
2012
2012
2014
2014
2014
Employee engagement
2013
Earnings per ordinary share1
Earnings per ordinary share1
2013
2013
2012
2014
2014
2014
2012
2012
2013
2013
Earnings per ordinary share1
Earnings per ordinary share1
2013
New-builds completed
2012
2012
2012
2014
2014
2014
LFLs vs. market
Earnings per ordinary share1
2013
2013
2013
Earnings per ordinary share1
Employee engagement
2012
2014
0.9%
2012
Employee engagement
2014
2012
2014
2013
No. of main meals served
2013
2014
2014
2013
2012
2012
2013
Employee engagement
2014
Employee engagement
2013
2012
2012
2013
2012
2014
2014
26.0m
2012
Employee engagement
2013
Market share of premium cask ale
2013
CROCCE
Employee engagement
2012
2012
2014
2014
2014
2014
No. of main meals served
2013
No. of main meals served
2013
2013
LFLs vs. market
2013
2012
2012
2012
2014
2014
2012
2014
2013
No. of main meals served
No. of main meals served
2013
Market share of premium bottle ale
2013
2012
2012
2012
2014
2014
2014
No. of main meals served
2013
2013
Free Cash Flow
2013
No. of main meals served
26.0m
2012
2012
26.0m
2012
2014
LFLs vs. market
£48.6m
2014
LFLs vs. market
Market share of premium cask ale
2014
2013
2013
2014
2013
2014
2014
2012
2012
2013
LFLs vs. market
2012
LFLs vs. market
2013
2013
2012
2012
2012
2014
2014
LFLs vs. market
2013
2013
Market share of premium bottle ale
LFLs vs. market
Earnings per ordinary share1
2012
2012
2014
Market share of premium cask ale
Market share of premium cask ale
2014
2014
2013
2014
2013
2014
2014
2013
2012
2013
2012
2013
Market share of premium cask ale
Market share of premium cask ale
2013
2012
2012
2012
2012
2014
2014
Market share of premium cask ale
Market share of premium bottle ale
2013
2013
Market share of premium bottle ale
Market share of premium cask ale
Employee engagement
2012
2012
2014
2014
2014
2014
2014
2013
2013
Market share of premium bottle ale
Market share of premium bottle ale
2013
2013
2013
2012
20.7%
2012
20.7%
2012
2014
2014
2012
2012
Market share of premium bottle ale
1.   Before exceptional and other adjusting items and restated. 
2013
2013
Market share of premium bottle ale
See note 35 on page 89 for further details.
20.7%
2012
2012
20.7%
2014
2014
2013
2013
No. of main meals served
2012
2012
2014
2013

17.9%
17.9%
18.0%
18.0%
79%
17.9%
23.1%
23.1%
17.9%
81%
18.0%
21.4%
21.4%
18.0%
77%
23.1%
23.1%

21.4%
29.2m
29.2m
20.7%
29.2m
£85.6m
29.2m
16.4%

1.6%
–
31.7m
31.7m
23.1%
31.7m
31.7m

1.6%
11.7p
23.1%
1.6%
–
12.0p
17.9%
17.9%
–
12.2p
18.0%
18.0%

77%
77%
79%
10.5%
79%
81%
17.9%
10.5%
81%
77%
18.0%
10.6%
31.7m
31.7m
77%

£92.4m
1.6%
1.6%
17.9%
–
–
18.0%

16.4%
16.4%
20.7%

16.4%
21.4%
21.4%
16.4%

21.4%
21.4%

1.6%
1.6%
–
–

23.1%
23.1%

20.7%
20.7%

26.0m
26.0m

0.9%
0.9%

29.2m
29.2m

26.0m
26.0m

16.4%
16.4%

0.9%
0.9%

21.4%

16.4%

31.7m

0.9%
0.9%

0.9%

81%
81%

LFLs vs. market

0.9%

Market share of premium cask ale

Market share of premium bottle ale

29.2m

26.0m

1.6%

–

16.4%

17.9%

18.0%

21.4%

23.1%

20.7%

2012

2014

2013

2012

2014

2013

2012

2014

2013

2012

CROCCE
Return on capital is a key driver of shareholder 
value and reflects progress made on 
investments, disposals, and the profitability of 
our core estate.

Employee engagement
Our customers expect excellent service across 
our business. We believe that if our employees 
are engaged with us, as their employer, and our 
strategic objectives, this will manifest itself in the 
form of great service, both externally and 
internally, thereby improving sales and profits.

No. of main meals served
Since the inception of the ‘F-Plan’ in 2005 we 
recognised the shift towards food as a key driver 
of growth. The number of main meals served is 
the key volume indicator of growth in food and 
provides the foundation from which increased 
spend per head can be achieved, through selling 
additional products such as starters, desserts 
and coffee.

RIGHTHAND FIGURES 4 NUDGES

Earnings per ordinary share
EPS is a widely used profitability and valuation 
measure.

RIGHTHAND FIGURES 4 NUDGES

Free Cash Flow
Free Cash Flow is a measure of cash generated 
and available to reinvest in the business; to return 
to shareholders in the form of dividends; and to 
repay debt.

RIGHTHAND FIGURES 4 NUDGES
RIGHTHAND FIGURES 4 NUDGES

RIGHTHAND FIGURES 4 NUDGES
RIGHTHAND FIGURES 4 NUDGES

RIGHTHAND FIGURES 4 NUDGES
RIGHTHAND FIGURES 4 NUDGES

New-builds completed
The new-build programme is the key driver of 
profit and returns growth within our business.  
We plan to open at least 25 sites per annum in 
future, spending around £80 million per year.

LFLs vs market (Destination and Premium)
One of our goals is to be the “best place around 
here”. This is most appropriately measured by 
comparing our like-for-like sales performance 
relative to the market (based on the Coffer Peach 
Business Tracker). Historical comparatives prior to 
2013 are not available due to the changes in our 
operating segmentation

RIGHTHAND FIGURES 4 NUDGES

Market share of premium ale
We are currently the market leaders in premium 
cask and premium bottled ale and seek to 
maintain this status. In order to measure our 
relative performance to our competitors, market 
share information is the most relevant indicator.

Marston's PLC   Annual Report and Accounts 2014

7

Our Operating Strategy

HOW WE DELIVER 
OUR GOALS

DESTINATION 
AND PREMIUM 
STRATEGY

Marston’s operates around 1,700 pubs and bars 
across the UK under different business models 
– managed, franchised, tenanted and leased – in
one business division. Our pub segments are 
Destination and Premium, Taverns and Leased. In 
our other division we run five breweries.

Destination and Premium
Destination pubs are larger, food-led managed pubs and 
include our new-build pub-restaurants. We aim to offer 
great value and high levels of service in a traditional pub 
environment – ideal for day-to-day convenience, special 
treats and celebrations. Our Premium pubs and bars 
include Pitcher & Piano and Revere pubs in premium 
locations. We have 700 rooms in around 40 of our 
Destination and Premium pubs.

Taverns
Our community pub estate includes franchised, managed 
and tenanted pubs. Great community pubs are about 
socialising, entertainment, good value food and drink and 
licensees who know their customers.

Leased
Some of the best pubs in our estate are operated by 
highly skilled lessees who run these pubs independently 
with exceptional service and high quality offers. 

Brewing
Our five breweries, of differing scale, located from the 
North to the South of England protect our heritage, 
support innovation and enable us to brew high quality, 
distinctive beers with true authenticity and provenance. 
We are market leaders in premium cask and bottled ale. 
Our national drive brands of Pedigree and Hobgoblin 
feature in the top 20 bottled beer brands.

For more information: 
Our Strategy in Action pages 10 – 12

8

Marston's PLC   Annual Report and Accounts 2014

TAVERNS 
STRATEGY

LEASED 
STRATEGY

BREWING 
STRATEGY

Estate development
 – High quality, nationally located pub estate, 

Objectives
 – Increase the estate to around 500 sites in 

Progress
 – Completion of over 100 new-builds in the 

directly operated by Marston’s

the next five years

last seven years

 – Broad range of trading formats and brands

Consumer focus
 – Value for money, great service
 – ‘F-Plan’: Food, Families, Females, Forty/Fifty 

somethings

 – Develop Two for One and Milestone 
Rotisserie drive brands to around 200 
outlets each in the next five years

 – Continued development of the ‘F-Plan’
 – Continue to improve service standards 
through investment in our pubs and  
our people

 – Food mix accounts for 53% of sales
 – Like-for-like sales and margin growth in 

the last three years

Future plans
 – Target 25-30 new openings nationwide 
per annum over the next few years

 – Maintain value offers
 – Expansion of premium pubs offer

Evolution of franchise
 – Low barriers to entry
 – Simple model
 – Efficient operation 

Consumer focus
 – Making community pubs the heart of the 

local community

 – Offer great drink, great food and great 

entertainment for all customers

Objectives
 – Convert all pubs to managed or franchised 

Progress
 – Around 535 sites operating under 

within five years

franchise agreement

 – Target licensee stability rate of 90%
 – Growth in profits
 – Dispose of smaller wet-led pubs 

 – Franchised pubs profit growth over past 

three years

 – 342 pubs disposed of in 2014

Future plans
 – Target around 200 franchise conversions 

over the next two years

 – Development of food offers more 
appropriate for community pubs

 – Target 200 individual pub disposals over 

next year

Stable estate
 – Recruit high quality entrepreneurs to 

maintain stable estate

 – Flexible agreements

Objectives
 – Target licensee stability rate of 90%
 – Growth through stable relationships

Future plans
 – Continued development of agreements to 
maximise Marston’s and lessee profitability
 – Investment in estate to drive profit growth

Consumer focus
 – Leverage Marston’s pub knowledge into 

Progress
 – Lessees offered full flexibility on rates and 

Leased estate

 – Access to Marston’s buying power to offer 

consumers great value

beer pricing

 – Retention rate over 90%
 – Stable profits 

Strong presence in local markets
 – National independent free trade operation
 – Operate out of five breweries in  

Burton upon Trent, Wolverhampton, 
Witney, Ringwood and Cockermouth

Premium focus
 – Focus on premium cask and bottled  
ale and development of craft beer

 – Expansion of take home and export teams

Objectives
 – Become category leader for premium cask 

Future plans
 – Expand independent free trade customer 

and bottled ale

base

 – Leverage value from local breweries

 – Maintain segment market leader status 

and grow market share

 – Exploit future growth opportunities in 

export markets

Progress
 – Expansion of independent free trade 

operation serving over 3,500 customers
 – Segment market leader in premium cask 

and bottled ale

 – £7 million investment in new bottling line 

to support future growth

Marston's PLC   Annual Report and Accounts 2014

9

Our Strategy In Action

Marston’s strategy is based upon a clear returns-led 
focus. Our Group strategic objectives remain 
sustainable growth, reduced leverage over time and 
maximising return on capital. The potential for 
acquisitions is regularly assessed and reviewed 
against the consistently strong returns achieved 
through organic investment in the Group’s 
programme of new-build pub-restaurants. 

#1 OPERATING A HIGH 
QUALITY PUB ESTATE

Building new pub-restaurants
Since 2009 we have opened over 100 pub-restaurants offering family dining at 
reasonable prices. These pubs generate high turnover, typically averaging 
£27,000 per week with a food sales mix in excess of 50%. Good site selection 
has generated consistent returns on investment, extended our trading 
geography to include southern England and Scotland and created significant 
value for shareholders. We opened 27 pub-restaurants in 2014, creating 1,500 
jobs and expect to open at least 25 in both 2015 and 2016, with sites also 
being acquired for longer-term development. The trading style of our 
new-build pub-restaurants is described in more detail within the ‘Destination’ 
section that follows on the next page.

Innovation and investment in community pubs
We pioneered franchise-style agreements in 2009 to improve customer 
experiences and enhance earnings in our community pubs. In 2014, the 
success of pub franchising was demonstrated through the award of the British 
Franchise Association’s ‘Young Franchisee of the Year’ to a Marston’s licensee. 
Franchise-style agreements now operate in 535 Taverns pubs with our aim 
being to convert most of the remainder by 2016.

Franchise-style agreements differ significantly from traditional tenanted and 
leased models. The pub operating model is directed by Marston’s, the 
agreements do not include rent of payments for beer and, risks to the licensee 
are reduced. In our view, therefore, it is unlikely that the introduction of 
‘market rent only’ options as recently proposed by Parliament will have a 
material impact on pubs in our Taverns estate.

Disposal of smaller wet-led pubs
We disposed of 388 pubs and other assets during the year generating 
proceeds of £144 million, and anticipate generating a further c£70 million of 
proceeds in 2015, mainly from disposals in Taverns.

10

Marston's PLC   Annual Report and Accounts 2014

Strategy in Action - Case Study

THEATRE OF FOOD

Pizza Kitchen’s introduced into our Two for One pub restaurants. 
Pizzas are cooked from scratch, fresh to order and ‘front and centre’ 
within the pub, not behind closed doors.
The Garden Grill Company menu, ordered, prepared and served from 
the outside kitchen and bar area offers BBQ style food that consumers 
can customise from the choices available.
We have also launched an authentic ice cream parlour that offers 
consumers an ‘at bar’ ice cream experience.

For more information: 
Visit us at www.marstons.co.uk

Strategy in Action - Case Study

INNOVATION AND INVESTMENT 
IN COMMUNITY PUBS

The Best in Glass perfect serve training programme ensures drinks 
are delivered to the desired high quality standard each time they are 
ordered in any of our pubs.
Masters of Cask showcases Marston’s brewing expertise, talking 
about our Master Brewers and the ingredients and processes that go 
into creating our cask ales.

Technology
In a number of our community pubs we have invested in technology 
to improve the customer experience. This includes interactive 
touchscreen TVs that display our own Pub TV, digital advertising at till 
points and at bars and booths that allow customers to play their own 
music in and an interactive juke box that links to customers mobiles.

For more information: 
Visit us at www.marstons.co.uk

Strategy in Action - Case Study

#2 OPERATING A RANGE 
OF PUB BRANDS, 
FORMATS AND FLEXIBLE 
BUSINESS MODELS

#3 OFFERING VALUE FOR 
MONEY, GOOD FOOD AND 
DRINK, AND EXCELLENT 
SERVICE

Destination
Our Destination pubs offer family dining at reasonable prices, with excellent 
service in a relaxed pub environment. We operate two principal brands – 
Marston’s Two for One, and Milestone Rotisserie. The food sales mix of this 
business is 57%.

Premium pubs and bars
Our Pitcher & Piano bars and Revere pubs offer premium food and drink in 
attractive town centre and suburban locations. The food sales mix is 27%. We 
converted three pubs to Revere in 2014, and expect three conversions in 2015, 
with the acquisition of new sites targeted for 2016.

Taverns
Our community pubs include franchised pubs, managed pubs, and tenancies. 
Over the next 2-3 years we expect that most of our Taverns pubs will be 
operated under our franchise model. Typically, these are ‘wet-led’ pubs 
although food sales are growing and represented 24% of sales in 2014.

Leased pubs
These distinctive pubs benefit from a greater degree of independence and 
committed licensees. The leased model, with longer-term assignable 
agreements, attracts skilled entrepreneurs who build value through developing 
their own businesses. We contribute through our expertise in attracting the 
right lessee, dealing in a fair manner, and providing business support. 

Marston’s Inns
We offer high quality accommodation in 44 pubs within the Destination and 
Premium segment. In total, we have around 700 rooms including those in four 
lodges operated directly by us, with three new lodges planned to be built in 2015. 

Strategy in Action - Case Study

YOUNG 
FRANCHISEE 
OF THE 
YEAR

Aaron Stewart, franchisee 
at the Fairways, Sheffield 
and the Rufford, Mansfield 
won the bfa’s HSBC Young 
Franchisee of the Year 
Award 2014.

Value
Our customers want great experiences at affordable prices. Good pubs offer 
outstanding value and customers are using pubs on more occasions, 
including breakfast and ‘coffee shop’ visits. In addition, the proportion of the 
total eating-out market represented by pub-restaurants is increasing and we 
expect this trend to continue to provide opportunities for growth.

Good food
Our pubs offer a broad appeal to families, females, mature customers, and, 
increasingly, ‘Millennials’. In 2014 the introduction of ‘build your own’ burgers 
and burritos proved popular with customers; pizza kitchens, ice-cream 
parlours and garden grills added theatre and broadened our menu offers and, 
interest in healthy menu options increased.

This year, in our managed and franchised pubs we served over 30 million meals, 
67 million pints of beer, 3 million bottles of wine and 5 million cups of coffee. 

A great drinks range
In 2014 we introduced 25 new Marston’s beers. These included the Revisionist 
Craft Beer range, Shipyard IPA, ‘collaboration’ beers with Status Quo and Elbow, 
and Pedigree New World Ale. We improved our wine offer through a new supply 
agreement with Rothschild Wines and signed new spirit contracts in the period.

Our aim is to build on great experiences and to remain at the forefront of 
innovation in pub retailing. In 2014 we created a ‘youth board’ in partnership with 
The Sun newspaper to help create ‘The Pub of The Future’. We look forward to 
developing the ideas which arise from this forum over the coming year. 

Excellent service 
The foundations for great service are our people; training and development 
continues to be important in maintaining our high quality service and 
standards. 

We are proud of our investment in training and development. In 2014 we created 
400 apprenticeships and delivered around 20,000 training days. Our ‘keyholder’ 
training programme offers our pub employees a clear career development path, 
and our Brewing business offers comprehensive training to our sales, customer 
service and brewing teams.

This investment produces results. Our employee satisfaction score of 79%  
is very high compared to other retailers and, in our pubs, our customer 
satisfaction scores continue to improve and we are outperforming  
our competitors. 

In October 2014 we won the ‘Best Pubs & Bars Employer’ (large group 
category) award in the Caterer.com’s Best Employers in Hospitality Awards 
2014, based on employee votes. In our Brewing business our Customer Service 
team were awarded a Customer Service Excellence award, as well as Emma 
Gilleland receiving the industry accolade of All Parliamentary Beer Group 
‘Brewer of the Year’. We were also delighted to receive the Publican’s Morning 
Advertiser ‘Best National Cask Ale Supplier’ award. 

For more information: 
Visit us at www.marstons.co.uk

Further customer service enhancements are expected following the 
introduction of a new EPOS system in 2015.

Marston's PLC   Annual Report and Accounts 2014

11

Our Strategy In Action continued

#4 LEADERSHIP IN THE 
BEER MARKET 

Many beer drinkers have become bored by conventional ‘big beer brands’ and 
the market has fragmented with more interest in provenance, choice and 
taste. Growing demand for premium beers reflects this trend and the 
increasing importance of it when eating out in pubs.

We have benefited from these trends with our wide portfolio of beers from 
our five breweries, a national distribution network and ‘local’ approach to our 
beer brands. This strategy is successful: one in five premium bottled ales and 
one in six premium cask ales in the UK are Marston’s brands. Over the last five 
years volume has grown by 30% in premium bottled ale and by 9% in 
premium cask ale.

In 2014 we were awarded Tesco 2014 ‘Category Supplier of the Year’ ahead of 
larger, multinational suppliers in other grocery categories. As category leaders, 
we work hard with our customers to improve the overall performance of the 
category and through both the Cask Ale Report and the Premium Bottled Ale 
Report provide valuable insight into current and future trends.

Our marketing activity reflects the inherent character of our brands: This year 
Marston’s Pedigree renewed its sponsorship as ‘The Official Beer of England 
Cricket’; by contrast, Hobgoblin is widely renowned as the ‘Unofficial Beer of 
Halloween’. Regionally, we support local brands through sponsorships of 
events including the New Forest Show, the Henley Regatta and the Keswick 
Jazz Festival.

Our reputation as a leading brewer, packager and distributor resulted in us 
securing brewing contracts for both Tetley and Thwaites beers. Furthermore, 
following the £7 million investment in the bottling line at Marston’s Brewery in 
Burton upon Trent, we contract bottle and distribute for a significant number 
of other brewers nationwide.

12

Marston's PLC   Annual Report and Accounts 2014

Strategy in Action - Case Study

BRAND EXTENSION AND 
COLLABORATIONS

Pedigree New World Pale Ale - A contemporary English beer crafted 
from heritage.
Piledriver – Rockin’ All Over The World! Inspired by the re-release of 
the album Piledriver, Status Quo collaborated with Wychwood 
Brewery to brew a rockin’ hop bomb of a beer!
Hobgoblin Gold was launched in June 2014. Carrying the Hobgoblin’s 
moniker, this golden beer appeals to both existing Hobgoblin 
consumers and to those buying into the brand values, but desiring 
lighter refreshment.

For more information: 
Visit us at www.marstons.co.uk

Strategy in Action - Case Study

AWARD WINNERS

Marston’s were awarded the winners of the Best Pubs & Bars 
Employer (large group category) in the Caterer.com’s Best Employers 
in Hospitality Awards 2014. The award recognises the Company as a 
leading hospitality employer.
Emma Gilleland received the industry accolade of the All 
Parliamentary Beer Group ‘Brewer of the Year’.
Marston’s has won ‘Best National Cask Ale Supplier’ in the 2014 
Publican’s Choice awards. 

For more information: 
Visit us at www.marstons.co.uk

Risk Management Framework

Marston’s has adopted a formal process of risk identification, assessment and mitigation. The key risks to 
the business are evaluated and prioritised by senior management and the Corporate Risk Director. These 
reviews cover strategic, financial, operational and compliance risks; the results are documented in the 
corporate risk register. The Board reviews the risks annually. The Corporate Risk Director also chairs a 
number of committees with a responsibility for risk, including corporate social responsibility, compliance 
and business continuity.

BOARD

AUDIT COMMITTEE

COMPLIANCE TESTING

CORPORATE RISK DIRECTOR

INTERNAL AUDITING

Risks & controls subject to internal auditing and compliance testing

ENTERPRISE WIDE RISK MANAGEMENT 
(Regular risk assessments, corporate risk register, risk ownership,  
mitigating controls identified and reviewed)

BUSINESS CONTINUITY 
COMMITTEE

COMPLIANCE COMMITTEE

CORPORATE SOCIAL 
RESPONSIBILITY COMMITTEE

BUSINESS CONTINUITY SYSTEMS 
(Maintenance of crisis plans, business impact 
analysis, scenario testing, emergency 
messaging) 

SITE SECURITY 
(Risk assessment, system  
evaluation, new technology)

GROUP H&S MANAGEMENT SYSTEMS
(Group auditing, policies, incident reporting, 
escalation of risks, remedial actions, accident 
investigation)

RISK TRANSFER
(Insurance policies /insurance captive company/self-insurance levels/claims)

Controls mitigating the key risks are identified. Management are 
responsible for monitoring and reporting on the effectiveness of the 
controls. This process helps to ensure that risk management is 
continually embedded in the operations of the business.

Day-to-day responsibility for operational risks, at the level of the pub 
or brewery, rests with the pub managers and Head Brewers. The 
controls operated at each site are part of wider management systems 
designed to reduce internal risks, including food hygiene, health and 
safety, business continuity and security. The Corporate Risk Director is 
responsible for examining whether this risk management framework 
is effective, and is keeping pace with changes in business operations, 
regulations and other external factors. 

The Corporate Risk Director manages internal auditing and 
compliance testing. The internal audit strategy takes into account the 
key business risks and provides assurance to the Audit Committee on 
the effectiveness of the management systems mitigating them to an 
acceptable level. The results of audits and compliance tests are 
reported to the Audit Committee and the executive members of the 
Board.

Marston's PLC   Annual Report and Accounts 2014

13

Principal Risks and Uncertainties

The following risks are, in the opinion of the Board, the principal risks which affect Marston’s both 
financially and reputationally. It is not intended to be a complete analysis of all risks and may change 
over time.

External Risks

Economic

Factor

We rely upon the 
spending capacity of our 
customers. The basic cost 
of living could rise at a 
faster rate than income.

Movement

Regulatory

Risk

Impact

Linked Objectives

Mitigation

Economic uncertainty.

A fall in consumer 
confidence could impact 
on our sales, and our 
investment plans. 

•  Maximise return on 

investment.

•  Sustainable growth.
Investment in new 
• 
pub-restaurants.

•  Reduction in leverage.

•  Value-for-money proposition.
•  Customer choice, flexible pricing options 
and a range of pub brands and formats.

•  Competitive offering.
•  High standards of service and quality.
• 

‘F-Plan’: eating out often remains resilient to 
difficult economic conditions.

The economic climate has improved this year and there is less uncertainty in the short term. 
Unemployment is falling, however overall the cost of living relative to wages has increased and there is the 
possibility of an interest rate increase next year.

Factor

Risk

Impact

Linked Objectives

Mitigation

Marston’s operates across 
heavily regulated areas – 
alcohol licensing, food 
hygiene, alcohol 
production, transport, 
property development 
and property 
management.

Movement

Investment plans

Changes in regulation 
impacting on the cost of 
business, or obstructing 
growth.

Increased regulation 
affecting Marston’s 
directly, our tenants or our 
suppliers could impact on 
profit by increasing the 
cost of compliance. 

•  Maximise return on 

•  Maintain excellent levels of compliance 

investment.

through training and monitoring.

•  Sustainable growth.
•  Growth of our 

•  Robust health and safety management 

systems.

franchised pub estate.

•  Compliance Committee monitors 

compliance and responds to changes in 
regulation.

•  Active consultation with Government, trade 

bodies and the BBPA.

The Government have announced their intention to bring in a Statutory Code and an Independent 
Adjudicator to regulate the relationship between pub companies and their tenants. In mitigation of this 
risk Marston’s already operates a Code of Practice, and handles its lease and tenancy agreements in a fair 
and transparent manner. 

Additionally, Parliament has recently voted to introduce a market rent only option for tenanted and leased 
pubs which, if implemented, would have the effect of providing licensees with free-of-tie agreements.  
In recent years, Marston’s has taken steps which minimise the impact of this proposed change, including 
the introduction of franchise-style agreements in 535 pubs and the disposal of weaker pubs as described 
in the Strategic Report. We will continue to keep this under review pending clarification of the details of 
the legislation.

Factor

Risk

Impact

Linked Objectives

Mitigation

Increased competition for 
development sites for new 
pub-restaurants.

Investment plans do not 
meet expectations.

Movement

Reduced return on 
investment. Investment in 
new pub-restaurants is 
slowed.

•  Maximise return on 

• 

investment.
Investment in new 
pub-restaurants.

• 

In-house property team with many years of 
experience delivering projects.
•  Tracking of new site availability.
•  Well managed pipeline of sites into the 

•  Reduction in leverage.

future. 

Competition for new-build sites has been strong and this is likely to continue, however no shortage of 
opportunities is envisaged. 

Marston’s has a strong pipeline of sites in development and, in recent years, has expanded its new-build 
pub-restaurant programme into Scotland. 

14

Marston's PLC   Annual Report and Accounts 2014

Internal Risks

Operational  Information Technology

Factor

Risk

Impact

Linked Objectives

Mitigation

Marston’s has a heavy 
reliance upon IT networks 
to operate efficiently, 
process transactions and 
report on results.

Network outage. Loss, 
theft or corruption of data. 
Denial of service. 

Reduction in the 
effectiveness of 
operations, business 
interruption and loss of 
profit. Regulatory fine as a 
result of the loss of data.

•  Sustainable growth.
•  High standard of 

service and quality of 
products.

•  Strong reputation.
•  Legal compliance.
•  Corporate 

responsibility.

•  Anti-virus and firewall protection.
•  Access control, password protection and IT 

policy adherence.

•  Network controls and monitoring.
•  Penetration testing and remediation.
•  Backup procedures.
•  Data recovery plans and rehearsals.

Movement

Global cyber risk threats have increased in the last year. Theft of personal data is on the increase. There is 
an increased expectation that businesses must manage cyber risk as a key business risk and not just an IT 
related risk. Future EU legislation could impose much higher penalties for the loss of personal data.

Marston’s has conducted penetration testing on its network for many years now. The programme of 
testing has recently been expanded to cover the wider cyber risk now prevalent.

People  Our Staff and Licensees

Factor

Risk

Impact

Linked Objectives

Mitigation

Increased demand for 
high calibre people. 
Marston’s operates in a 
very competitive 
environment; as a result its 
strategic objectives have a 
heavy reliance upon the 
quality of its managers.

Movement

Failure to attract or retain 
the best people.

Financial targets and 
strategic objectives are 
not met.

•  Sustainable growth.
•  High standard of 

service and quality of 
products.

•  Training and induction programmes.
•  Staff appraisals and development 

programmes.

•  Staff engagement surveys, and delivery on 

•  Strong reputation.

action points.

•  Flexible agreements with our tenants and 

franchisees.

The sustained growth in our business has allowed for improvements in training programmes, and given 
more opportunity for staff to progress. 

Visible action on points raised in staff engagement surveys, such as the proposed redevelopment of our 
head office, has helped keep our annual staff satisfaction score well in the top quartile.

Financial  Financial Covenants and Accounting Controls

Factor

Risk

Impact

Linked Objectives

Mitigation

The company’s financial 
system has to handle a 
large number of 
transactions securely. 
Accurate reporting of 
financial results is key to 
running the business 
effectively, and critically 
important for compliance 
with financial covenants.

Movement

Incorrect reporting of 
financial results. 
Unauthorised 
transactions. Breach of 
financial covenants with 
our lenders.

Loss of investor 
confidence and 
reputational damage. 
Potential loss as a result of 
fraud. Breach of covenants, 
resulting in additional 
financial operating 
restrictions.

•  Sustainable growth.
•  Strong reputation.
• 
•  Compliance with 

Investor confidence.

covenants.

•  Business financed at 

rates that allow profit to 
grow.

•  Sophisticated accounting systems.
•  Detailed management accounts, budgets 

and forecasts.

Internal audit programme.

•  Constant monitoring of financial ratios.
• 
•  Annual external audit.
•  Extensive segregation of duties.
•  Access controls over the financial systems 
accurately aligned with responsibilities.
•  Levels of authority appropriately authorised.

There are strong controls mitigating this risk to a low level. There has been no change in the risk  
since last year.

Marston's PLC   Annual Report and Accounts 2014

15

Our People

CREATING A POSITIVE IMPACT

At Marston’s we recognise that we have a responsibility to develop and train our staff, to 
meet their aspirations and develop their careers. By doing so we also aim to support the 
continuing success of the business. Full details of how we develop our staff are given in 
our Corporate Responsibility Report at www.marstons.co.uk/responsibility

DEPUTY GOING 
PLACES
Read Tom’s story on his career 
path to Deputy and more on 
opportunities and training for 
young people at  
www.marstons.co.uk

At Head Office we also offer a range of professional qualifications including 
accounting (CIMA), surveying (RICS), marketing (CIM) and personnel (CIPD). We 
sponsor degree and diploma programmes including Brewing Diplomas, 
Master Brewing qualifications, HGV and logistics.

The Marston’s Pub Career Path is our key development tool for pub employees 
to gain and enhance the skills required for their jobs. It provides a job specific 
induction programme, as well as e-learning modules covering licensing, food 
safety, health and safety, fire awareness and first aid.

Professional development programmes are also run each year accredited by 
the Chartered Management Institute. This year 39 of our staff completed CMI 
qualifications and we run a coaching and mentoring qualification to provide 
in-house support for career development.

Our responsibility for safety
Full details of our health and safety systems are given in our online Corporate 
Responsibility Report. An explanation is given on how we record and monitor 
incidents across the whole of our pub estate, production and distribution 
areas. By understanding the causes of accidents we can work to reduce 
incident rates in the future.

An extensive system of auditing is deployed in our pubs, breweries, depots 
and offices in order to identify emerging safety risks. The system can escalate 
outstanding actions and thereby seeks continual improvement. We have 
three health and safety managers to assist with the auditing, monitor legal 
compliance, develop safe working practices and provide training.

Each year the Company’s record on health and safety is reported to the Board. 
Following improvements in staff training and better staff engagement, the 
accident rate in our production and distribution areas has fallen by 27%.

Our People Corporate Social Responsibility

Safety in our Taverns
We have now operated our Ready to Let scheme for franchisees, tenants 
and lessees for two years. Ready to Let ensures that our pubs are legally 
compliant upon the commencement of a new agreement and that living 
areas provide suitable accommodation. The scheme covers all of the 
essential safety features of the pub, including the fire risk assessment, 
electrical fixed wiring testing and, the inspection of any gas and electricity 
appliances. The scheme also ensures that any remedial actions identified 
are completed; any physical defects are repaired and, any faulty or broken 
components are repaired or replaced as necessary.

Read more on opportunities and training for 
young people and all employees at:
www.marstons.co.uk/responsibility

Courses completed this year by our  
pub staff have included:
•

over 30,000 online e-learning courses giving our pub staff key 
entry knowledge, fire marshal and management training;
318 Keyholder Development courses by our front of house team 
which develop supervisors and assistant managers;
178 Chef Development courses which provide and support the 
development of our kitchen teams into Line Chefs, Second Chefs 
and Head Chefs; and 
257 manager development courses.

•

•

•

Gender Diversity 

l

s
e
e
y
o
p
m
e
f

o
r
e
b
m
u
N

40

10

30

9
2

7

12,921

6,778

6,143

Directors

Senior
managers

Total
employees

Number of employees as at 4 October 2014

Career development
We offer a wide range of structured career development programmes 
enabling employees to develop their skills, experiences and further their 
progress within the business.

Marston’s actively encourages staff to develop with opportunities to acquire a 
varied experience across our pubs, distribution centres, breweries and offices. 
Staff are given the opportunity to progress throughout the business, as 
evidenced by the career path of many of our senior managers and Directors.

For details of the Marston’s graduate schemes, see:
www.marstons.co.uk/responsibility

16

Marston's PLC   Annual Report and Accounts 2014

 
 
Marston’s Community

We are proud that our pubs and breweries are an integral part of their communities. For many the 
relationship has been longstanding; our oldest brewery in Burton was founded in 1834, and our brewery 
in Wolverhampton in 1875. 

PUB IS THE HUB
This year Marston’s contributed £10,000 to the Community Services 
Fund set up by Pub is The Hub to help pubs in small, often rural 
communities, adapt and survive changing economic pressures. The 
charity helps pubs offer additional services to their communities such 
as shops, play areas, postal services and libraries.

www.marstons.co.uk

At Marston’s we recognise that the relationship with our community is an 
essential ingredient for the appreciation of the distinctiveness of our beer 
brands and an essential foundation for our pubs.

Our attention is focussed on compliance with the new Food Information for 
Consumers Regulation which comes into effect in December 2014, and 
requires all food businesses to provide allergen information to customers.

Our aim is for our breweries to remain the pride of their communities and we 
are determined that it stays that way. Marston’s has a reputation for investing 
in its smaller regional breweries in Ringwood, Witney and Cockermouth, and 
the Company is renowned for respecting the provenance and history of its 
local beers. At Marston’s we understand the value of these regional brands 
within their local communities, for whom they were often originally created 
and we are able to adapt our offering to suit local tastes and preferences.

In 2014 we invested in a system to provide more information on nutrition, diet 
and allergens. Our most frequent requests for information are from customers 
who are coeliac or intolerant to gluten and wheat. For these customers we 
increased the number of dishes we offer and launched specially printed 
menus identifying these dishes. We acknowledge the contribution of our 
suppliers who have, this year, excelled in their provision of information that 
enables us to pass on detailed allergen information to consumers.

Marston’s is continually renewing and improving its pub estate. This includes  
a number of disposals in the last year. Whilst the Company would prefer to see 
disposals continuing to operate as pubs this is not always economically 
sensible. The proceeds from these disposals help to fund the building of new 
pubs, designed to meet the requirements of customers today and those of 
growing new communities.

Charitable support
We encourage our pubs to actively support local fund raising and other 
voluntary activities arranged by our customers and staff. Our pubs assist  
by helping with collections, sponsored activities, the use of our rooms  
and publicity.

As in previous years the Marston’s Inns and Taverns Charitable Trust has 
matched funds raised by our pub staff. In 2014 the contribution from the  
Trust totalled £15,000. Marston’s also operates an employee charity,  
supported by contributions from the Company, which in 2014 donated 
£18,000 to various causes.

Healthy eating
Marston’s is meeting its targets set as part of the Department of Health’s 
Responsibility Deal. Progress on our targets is published on the website  
www.responsibilitydeal.dh.gov.uk.

This year we have worked on reducing salt in many of our menu items, 
achieving a 50% reduction in our puddings, 34% in our bread and rolls, and 
10% in our pre-prepared meals. This year we served our customers over 
200,000 low calorie meals.

More information on how we are making progress towards our targets under 
the Responsibility Deal is given in our online Corporate Responsibility Report.  

Alcohol responsibility
Marston’s continues to meet its obligations under licensing regulations. Our 
staff are trained to vigorously operate Challenge 21 and 25 in our pubs. In  
2014 our staff recorded in excess of 400,000 challenges to customers to prove 
their age.

Our online Corporate Responsibility Report features more information on how:
•
•

our beers are marketed responsibly;
our bottled beers are labelled with unit content and UK Health 
Department limit guidelines;

• we provide in kind support for Drinkaware, an industry backed Trust which 

aims to influence consumer behaviour to drink responsibly; and
• we use test purchasing in our pubs to ensure compliance to the law.

Suppliers – ethical sourcing
Our purchasing systems aim to achieve single sourcing of supply wherever 
possible. This gives us a better understanding of our supply chain. All our staff 
involved in purchasing have confirmed their acceptance of our ethical 
purchasing policy which states our commitment to trade in a transparent, 
confidential and fair manner, taking particular care to ensure that all products 
come from ethical sources.

Understanding the origin of food ingredients is particularly important to our 
business. We only use food suppliers who have been accredited by the British 
Retail Consortium or, where we have the opportunity if required, to carry out 
site audits of the suppliers’ production centres and facilities. Together with our 
suppliers we seek food stocks and natural raw materials from sustainable 
sources.

Marston's PLC   Annual Report and Accounts 2014

17

Performance and Financial Review

SOLID TRADING 
PERFORMANCE

Underlying revenue

 Underlying operating profit

 Margin

2014
(52wks)
£m

376.9
225.1
53.1
132.5
 – 

787.6

2013
(53wks)
£m

349.2
250.8
55.6
127.3
– 

2014
(52wks)
£m

76.0
55.7
23.5
 17.4
 (16.5)

2013
(53wks)
£m

70.3
69.5
26.0
 16.9
 (14.5)

782.9

 156.1

 168.2

2014
(52wks)
%

20.2
24.7
44.3
 13.1
 (2.1)

 19.8

2013
(53wks)
%

20.1
27.7
46.8
 13.3
(1.9)

 21.5

Leased
Total revenue decreased by 4.5% to £53.1 million, principally reflecting 
significant disposals and the non-recurrence of the 53rd trading week. 
Underlying operating profit of £23.5 million was down on last year. The 
performance of the core estate was strong with like-for-like earnings growth 
of 3%. Average profit per pub increased by 2% to £68,000, and licensee 
stability remained at over 90%.

As with tenanted pubs, underlying measures of lessee ‘health’, including rent 
alleviations, improved during the financial year. Underlying operating margin 
of 44.3% was down 2.5%. 

Brewing
Total underlying revenue increased by 4.1% to £132.5 million. Underlying 
operating profit increased by 3.0% to £17.4 million.

Overall ale volumes were in line with last year, with premium cask ale volumes 
up 4% and bottled ale volumes up 6%. Hobgoblin, our largest brand 
continues to grow with sales up 4% on last year. We have maintained our 
position as ‘category market leader’ in both the premium bottled ale and 
premium cask ale markets.

In the independent free trade, our account base increased to more than 4,150 
customers, and premium ale sales to this sector increased by 14%. In the take 
home market we continue to perform very strongly with volumes up 4%. 

Underlying operating margin was slightly down versus last year at 13.1%.

Destination and Premium
Taverns
Leased
Brewing
Group Services

Group

Destination and Premium
Total underlying revenue increased by 7.9% to £376.9 million reflecting the 
continued strong performance of our new-build pub-restaurants, growth in 
like-for-like sales and the non-recurrence of a 53rd trading week. Underlying 
operating profit of £76.0 million was up 8.1% (2013: £70.3 million). Average 
profit per pub increased to £213,000, up 3%.

Total like-for-like sales were 3.1% above last year, with like-for-like food sales up 
by 3.3%, assisted by strong growth in sales of starters, desserts and coffee. We 
achieved double digit growth in both our room income and machine income. 
In Destination pubs, food now accounts for 57% of total sales (2013: 56%) and 
in Premium pubs and bars food is 27% of sales (2013: 25%).

Like-for-like wet sales increased by 2.0%, outperforming the UK on-trade 
drinks market. We continue to see growth in more premium products, with 
premium cask ale volumes up 8% and premium lager up 16%. 

We achieved a 0.1% improvement in operating margin through moderate 
price increases and tight cost control. 

Taverns
Total underlying revenue decreased by 10.2% to £225.1 million principally 
reflecting the impact of the significant disposal activity described above and, 
consequently, underlying operating profit was £55.7 million. The quality of the 
remaining pub estate has improved significantly with average profit per pub 
up 4%.

In our managed and franchised pubs like-for-like sales were up 2.1% on last 
year and operating profits were up 5.7%, reflecting the continued success of 
pubs operating under the franchise model. 

Operating margin was 3.0% below last year at 24.7%, primarily due to the 
conversion of pubs from tenanted to franchised models. These agreements 
generate increased profit but the operating margin percentage is reduced as a 
consequence of accounting for sales at full retail value.

18

Marston's PLC   Annual Report and Accounts 2014

Capital expenditure and disposals
Capital expenditure was £142.6 million in 2014 (2013: £150.8 million), including 
the construction of 27 pub-restaurants. We expect that capital expenditure 
will be around £150 million in 2015, including around £80 million for the 
construction of at least 25 new pub-restaurants. 

During the year we generated £143.6 million of cash from the sale of 388 pubs 
and other assets.

Financing
At 4 October 2014 the group had a £257.5 million bank facility to November 
2018, and the amount drawn down at 4 October 2014 was £212million. This 
facility, together with a long-term securitisation of approximately £0.9 billion 
and the lease financing arrangements described below provides us with an 
appropriate level of financing headroom for the medium term. The Group 
has sufficient headroom on both the banking and securitisation covenants 
and also has flexibility to transfer pubs between the banking and 
securitisation groups. 

The Group has entered a number of lease financing arrangements which have 
a total value of £158.1 million as at 4 October 2014. This financing is a form of 
sale and leaseback agreement whereby the freehold reverts to the Group at 
the end of the term at nil cost, consistent with our preference for 
predominantly freehold asset tenure. The agreements range from 35 to 40 
years and provide the Group with an extended debt maturity profile at 
attractive rates of interest. Unlike a traditional sale and leaseback, the 
associated liability is recognised as debt on the balance sheet due to the 
reversion of the freehold.

Net debt before lease financing of £1,040 million at 4 October 2014 is a 
decrease of £42 million compared to £1,082 million at 5 October 2013 partially 
reflecting the repurchase of the AB1 notes in the securitisation. Operating 
cashflow of £127.8 million was below last year principally due to the impact of 
the disposal activity in the year and an adverse movement in working capital 
in the period, which is principally in relation to creditors.

For the period ended 4 October 2014 the ratio of net debt before lease 
financing to underlying EBITDA was 5.4 times (2013: 5.3 times). It remains our 
intention to reduce this ratio to below 5.0 times, principally through EBITDA 
growth generated from our new-build investment programme.

Pensions 
Our final salary pension scheme at the year end showed a surplus of  
£7.8 million before tax (2013: £5.1 million deficit). This position reflects the 
consistent manner in which the Group has protectively managed its deficit 
over the last five years, and the closure of the final salary scheme to future 

accrual from 30 September 2014. The triennial valuation of the scheme  
was due on 30 September 2014 and we expect to report on this at our  
2015 Interim Results.

Taxation
The underlying rate of taxation of 19.6% in 2014 is below the standard rate of 
corporation tax of 22% due to a combination of: prior year adjustments, the 
benefit of indexation allowance in deferred tax on property and the lower 
deferred tax rate of 20%. 

The underlying tax rate has decreased by 1.1% from 20.7% in 2013. 

Non-underlying items 
There is a net non-underlying charge of £117.4 million after tax of which 
circa £100 million is non-cash. The net charge includes a loss on disposal of 
£35.8 million in respect of the portfolio sale of 202 pubs together with a  
£1.9 million loss in respect of the ongoing management of these pubs.  
£37.5 million of revaluation surpluses from the portfolio sale were transferred 
from the revaluation reserve to retained earnings upon disposal. In addition 
there is a charge of £50.6 million relating to non-core estate disposal and 
reorganisation costs from the restructuring of our operations across the 
Group, a charge of £29.5 million relating to the recognition of onerous lease 
provisions and associated leasehold impairments, a charge of £27.2 million 
relating to the buyback of the securitised debt and a loss of £8.2 million in 
respect of the mark-to-market movement in the fair value of certain interest 
rate swaps. These charges are offset by a credit of £10.8 million in respect of 
the closure of the defined benefit pension plan, a £0.2 million reduction in the 
interest accrued in respect of the Rank case and a credit of £24.8 million 
relating to the tax on non-underlying items.

As a consequence, there is statutory loss for the year of £50.7 million and loss 
per share of 8.9 pence per share.

Strategic Report Approval

The Strategic Report, outlined on 
pages 1 to 19, incorporates 2014 
Highlights, Chairman’s Statement, 
Chief Executive’s Statement, Market 
Overview, Our Business Model, Our 
Operating Strategy, Our Strategy in 
Action, Marston’s Risk Management 
Framework, Principal Risks and 
Uncertainties, Our People, 
Marston’s Community and 
Performance and Financial Review.

By order of the Board

Ralph Findlay
Chief Executive Officer
27 November 2014

Marston's PLC   Annual Report and Accounts 2014

19

Corporate Governance Report

Chairman’s Introduction

Dear Shareholder
I am pleased to present the Board’s annual report on corporate governance. Marston’s is committed to maintaining high standards of corporate governance, 
which we regard as essential to support the sustainable growth of our business and to protect shareholder value. This review, together with the reports of the 
Nomination, Audit and Remuneration Committees, provides an overview of our corporate governance practices and summarises our activities in this area 
during the year.

Succession
There have been a number of changes to the Board during the year, reflecting the work of the Nomination Committee in ensuring the appropriate mix of skills 
and experience. Lord Hodgson retired from the Board in January 2014 and Neil Goulden was appointed Senior Independent Director and Chairman of the 
Remuneration Committee. Whilst Neil remains a member of the Audit Committee, Nick Backhouse replaced him as the Chairman of that committee.

In September Rosalind Cuschieri announced her intention to retire from the Board following the 2015 AGM and, on behalf of the Board, I would like to thank Roz 
for her valued contribution during the last eight years. During the year, we also announced the appointments of Carolyn Bradley and Catherine Glickman to the 
Board. Their appointments will enhance the breadth of experience amongst our Board members. Carolyn joined the Board with effect from 1 October 2014 and 
Catherine commences her appointment on 1 December 2014. Further details on the Board’s composition are given at page 25.

Remuneration
The Remuneration Committee has continued to focus on ensuring there is a direct link between rewards and performance. The Committee has also reviewed 
emerging best practice to ensure that disclosures meet the new regulations in a clear and concise manner.

Audit
As part of the Board’s commitment to ensuring fresh and appropriate challenge in managing risks and internal control assurances the Audit Committee 
conducted a tender of the internal audit outsource provision.

Statement of compliance
The Board considers it has fully complied with the main principles of the September 2012 UK Corporate Governance Code (the “Code”) during the reporting year 
under review. The Code is available on the Financial Reporting Council’s website (www.frc.org.uk).

Roger Devlin
Chairman
27 November 2014

20

Marston's PLC   Annual Report and Accounts 2014

Leadership and the Board of Directors 

Role of the Board
The Board is collectively responsible to shareholders for the long-term success of the Company. The Board has met nine times this year, allowing it to effectively 
monitor the Company’s progress against its strategic aims and within the risk management framework. A schedule of matters specifically reserved for the 
Board’s decision is in place and includes matters relating to: strategy, major capital expenditure, acquisitions and disposals, capital structure and financial results, 
internal controls, governance and risk management, committee membership and terms of reference. The schedule was reviewed at the September 2014 Board 
meeting and is available on our website.

Roles and responsibilities
There is a clear division of responsibility between the roles of the Chairman and the Chief Executive Officer (CEO) which are set out in writing and agreed by the Board. 

Chairman

Chief Executive Officer

Roger Devlin is responsible for:
•  Ensuring each Non-executive Director makes an effective contribution to the 

Ralph Findlay is responsible for: 
•  The performance of the Company in line with the strategies and objectives 

Board through debate and discussion with the Executive Directors.

established by the Board and under powers delegated by the Board.

•  The effective operation, leadership and governance of the Board.
•  Ensuring effectiveness of the Board.
•  Setting the agenda, style and tone of Board discussions with a particular focus 

on strategic matters. 

•  Ensuring the Board is supplied with information relevant to its strategic role.
•  Leading the Executive Directors and senior management in dealing with the 

operational requirements of the business. 

•  Providing clear and visible leadership in business conduct.

•  Ensuring through the Company Secretary that the Directors receive accurate, 

timely and clear information.

Senior Independent Director
Neil Goulden acts as a ‘sounding board’ for the Chairman and as an intermediary for the other Directors. He is available to shareholders if they have concerns which the 
normal channels have failed to resolve or for which such contact would be inappropriate. He also leads the Non-executive Directors in their annual assessment of the 
Chairman’s performance. 

Company Secretary
Anne-Marie Brennan is responsible for, under the direction of the Chairman, ensuring effective information channels within the Board and its Committees, and 
between senior management and Non-executive Directors, as well as facilitating induction activities for Directors and assisting with their development as required.

Non-executive Directors
The Chairman, who was independent on appointment, meets with the Non-executive Directors at least annually without the Executive Directors being present.

The Non-executive Directors are encouraged to constructively challenge proposals on strategy, contributing to the development of the strategy in the long 
term. The Chairman is responsible for setting the correct environment and atmosphere to allow this to take place, particularly through his experienced 
chairmanship of meetings and control of agendas.

Marston's PLC   Annual Report and Accounts 2014

21

Board of Directors

Roger Devlin
Chairman

Ralph Findlay
Chief Executive Officer

Andrew Andrea
Chief Financial Officer

Carolyn Bradley
Non-executive Director

Rosalind Cuschieri
Non-executive Director

Robin Rowland
Non-executive Director

Name

Roger Devlin

Position

Chairman
Chair of Nomination Committee

Length of  
service on Board  
(as at 4/10/2014)

1 year and 1 month

Ralph Findlay

Chief Executive Officer

18 years

Andrew Andrea

Chief Financial Officer

5 years and 6 months

Carolyn Bradley

Non-executive Director

Appointed 1 October 2014

Rosalind Cuschieri 
A R R

Non-executive Director

8 years

Robin Rowland
A

R

Non-executive Director

4 years and 1 month

Peter Dalzell

Managing Director of  
Marston’s Inns and Taverns

2 years

Neil Goulden
A
R

Senior Independent Director
Chair of Remuneration Committee

6 years and 6 months

Nick Backhouse
A

Non-executive Director
Chair of Audit Committee

2 years and 8 months

✓

–

–

✓

✓

✓

–

✓

✓

Catherine Glickman

Non-executive Director

Appointment to commence 
on 1 December 2014

✓

Anne-Marie Brennan

Company Secretary

22

Marston's PLC   Annual Report and Accounts 2014

Independent

Public  
company 
experience

Operational 
experience

Retail

experience

Finance

experience

Government/

regulatory

experience

Curriculum Vitae

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

✓

✓

–

–

–

–

✓

✓

–

–

✓

–

✓

–

–

–

✓

–

–

Chairman of Gamesys, SIS and Porthaven Nursing Homes

Independent Non-executive Director of the Football Association

Previously a Non-executive Director of National Express and RPS Group

Appointed to the Board as Finance Director in 1996 becoming CEO in 2001

• Qualified Chartered Accountant and Treasurer

Previous roles held at Geest Plc and Bass Plc

Chair of Council and Pro Chancellor at Keele University

Joined the Company in 2002

• Qualified Chartered Accountant

Previous roles held at Guinness Brewing Worldwide and Bass Brewers Limited

Former UK Marketing Director at Tesco

Previously a Trustee of the DrinkAware Trust

Chief Executive of Genius Foods Limited

Former Commercial Director of Warburtons Limited

Previously responsible for off-trade marketing at Scottish & Newcastle Plc

Executive Chairman of YO! Sushi Limited

• Non-executive Director at Caffè Nero Group Limited and 'Tortilla'

Previous roles held at Restaurant Group Plc and Scottish & Newcastle Plc

Joined the Company in 1995 following roles as a licensee and pub company operator

Previously Operations Director for Marston’s Inns and Taverns

Chairman of MIT Charitable Trust

Chairman of The Responsible Gambling Trust and Access Sport

Chairman of Affinity Sutton (Housing) Group

• Member of The Low Pay Commission

Previous roles at Gala Coral Group, Compass Group Plc and Chef & Brewer

Senior Independent Director of Guardian Media Group plc

Fellow of the Institute of Chartered Accountants

Previous senior management positions in the pub, leisure and financial sectors

• Group HR Director of Genus Plc

Former Group HR Director at Tesco

• Member of the Institute of Personnel and Development

Appointed Company Secretary in 2004

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

Name

Roger Devlin

Position

Chairman

Chair of Nomination Committee

Length of 

service on Board 

(as at 4/10/2014)

1 year and 1 month

Ralph Findlay

Chief Executive Officer

18 years

Andrew Andrea

Chief Financial Officer

5 years and 6 months

Carolyn Bradley

Non-executive Director

Appointed 1 October 2014

Rosalind Cuschieri

Non-executive Director

8 years

A R R

Robin Rowland

A

R

Non-executive Director

4 years and 1 month

Peter Dalzell

Managing Director of 

Marston’s Inns and Taverns

2 years

Neil Goulden

A

R

Senior Independent Director

6 years and 6 months

Chair of Remuneration Committee

Nick Backhouse

A

Non-executive Director

Chair of Audit Committee

2 years and 8 months

Catherine Glickman

Non-executive Director

Appointment to commence 

on 1 December 2014

Anne-Marie Brennan

Company Secretary

✓

–

–

✓

✓

✓

–

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

✓

✓

✓

✓

✓

✓

✓

Peter Dalzell
Managing Director 
Marston’s Inns  
and Taverns

Neil Goulden
Senior Independent 
Director

Nick Backhouse
Non-executive Director

Catherine Glickman
Non-executive Director

Anne-Marie Brennan
Company Secretary

A   Audit Committee

  Nomination Committee
R   Remuneration Committee

Independent

Public

company

experience

Operational

experience

Retail  
experience

Finance  
experience

Government/
regulatory 
experience

Curriculum Vitae

✓

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

✓

✓

–

–

–

–

✓

✓

–

–

✓

–

✓

–

–

–

✓

–

–

•  Chairman of Gamesys, SIS and Porthaven Nursing Homes
•
•

Independent Non-executive Director of the Football Association
Previously a Non-executive Director of National Express and RPS Group

Appointed to the Board as Finance Director in 1996 becoming CEO in 2001

•
• Qualified Chartered Accountant and Treasurer
Previous roles held at Geest Plc and Bass Plc
•
Chair of Council and Pro Chancellor at Keele University
•

• 
Joined the Company in 2002
• Qualified Chartered Accountant
•

Previous roles held at Guinness Brewing Worldwide and Bass Brewers Limited

•
•

•
•
•

Former UK Marketing Director at Tesco
Previously a Trustee of the DrinkAware Trust

Chief Executive of Genius Foods Limited
Former Commercial Director of Warburtons Limited
Previously responsible for off-trade marketing at Scottish & Newcastle Plc

Executive Chairman of YO! Sushi Limited

•
• Non-executive Director at Caffè Nero Group Limited and 'Tortilla'
•

Previous roles held at Restaurant Group Plc and Scottish & Newcastle Plc

•
•
•

Joined the Company in 1995 following roles as a licensee and pub company operator
Previously Operations Director for Marston’s Inns and Taverns
Chairman of MIT Charitable Trust

Chairman of The Responsible Gambling Trust and Access Sport
Chairman of Affinity Sutton (Housing) Group

•
•
• Member of The Low Pay Commission
•

Previous roles at Gala Coral Group, Compass Group Plc and Chef & Brewer

• 
•
•

Senior Independent Director of Guardian Media Group plc
Fellow of the Institute of Chartered Accountants
Previous senior management positions in the pub, leisure and financial sectors

• Group HR Director of Genus Plc
•
• Member of the Institute of Personnel and Development

Former Group HR Director at Tesco

•

Appointed Company Secretary in 2004

Marston's PLC   Annual Report and Accounts 2014

23

Corporate Governance Report continued

Board agenda and activities during the year
The Board has a forward agenda of scheduled matters for consideration to ensure sufficient time is devoted to key business matters at the appropriate time. The 
agenda itself is reviewed on a regular basis and the agenda for each meeting, agreed between the Chairman and the CEO, is sufficiently flexible to 
accommodate the addition of any specific matters as required.

Board papers are circulated in advance of each Board or Committee meeting to ensure that Directors have sufficient time to review them before the meeting. 
Standing items and regular reports cover the Company’s financial position, risk management and regulatory compliance. Updates on activities across each 
operating division and performance against targets are reported to the Board in a monthly summary of key business operations.

Other items considered during the year include:

Customer Focus and 
Business Operations

Strategy

Retail systems investment

Annual strategy day

Major food and drink 
supplier proposals

Annual plan 

Leadership and  
People Development

People, culture and 
succession – presentation

People, culture and 
succession – strategic 
action plan

Beer company – take home 
business

Property update and lodge 
development

Board succession

Health and safety review

Retail marketing

Financing proposals

Corporate and social 
responsibility

Annual insurance renewal

Review of new product 
development

Governance

Shareholder Focus

Board evaluation report

Terms of reference for all 
committees

Review of results 
announcements

Dividend proposals

Fair, balanced and 
understandable review of 
Annual Report and Accounts

Going concern review

Group risks and risk 
management

AGM preparation

Assessment of key business 
and financial controls

Shareholder feedback

Regulatory and statutory 
compliance

Pensions update and 
Pension Scheme accounts

Capital structure, dividend 
policy 

In addition to regular strategic discussions, the Board holds an annual strategy day offsite. This enables the Board to conduct an in-depth review of strategy and 
its implementation. This year the Board also considered the opportunities for food and pub community development, property management and increased 
branding. Presentations are received from a number of senior managers enabling Non-executive Directors to challenge, discuss and debate with presenters.

Board and Committee meeting attendance
We operate Committees of the Board to deal with specific issues under the Code, each with its own terms of reference which are regularly reviewed and 
updated. Reports from each Committee can be found on pages 28 to 43. The table below shows each Director’s attendance throughout the year:

Board

Nomination

Audit

Remuneration

9/9
9/9
–
9/9
9/9
9/9
9/9
9/9
4/4
9/9

–
4/4
–
4/4
–
4/4
4/4
4/4
–
4/4

–
3/3
–
3/3
–
–
–
3/3
1/1
–

–
–
–
3/3
–
–
–
3/3
1/1
3/3

Name

Andrew Andrea
Nick Backhouse
Carolyn Bradley1
Rosalind Cuschieri
Peter Dalzell
Roger Devlin
Ralph Findlay
Neil Goulden
Lord Hodgson2
Robin Rowland

1 Carolyn Bradley was appointed to the Board on 1 October 2014.
2 Lord Hodgson retired from the Board on 21 January 2014. 

24

Marston's PLC   Annual Report and Accounts 2014

Effectiveness 

Board composition
At the date of this report, our Board comprised nine Directors. In addition to the Chairman, Roger Devlin, there are five Non-executive Directors and three 
Executive Directors. As highlighted in last year’s Board evaluation, the Committee undertook a review of the Board’s long-term succession planning and 
recruitment process. Once the Board’s needs were identified, the external agency Warren Partners were engaged to assist in the search for suitable new 
Non-executive Directors. The Chairman then worked with Warren Partners to identify a shortlist of suitable candidates for the Nomination Committee’s 
consideration. Carolyn Bradley was appointed as a Non-executive Director on 1 October 2014. Carolyn’s extensive marketing experience and knowledge of the 
retail consumer facing industry complements the skills, experience and knowledge already present on the Board.

The Board also appointed Catherine Glickman as a Non-executive Director. Catherine brings HR experience from a retail background to the Board and her 
appointment takes effect from 1 December 2014 at which time she will also join the Remuneration Committee.

Lord Hodgson retired from the Board in January 2014 and Rosalind Cuschieri has announced her intention to retire from the Board following the 2015 AGM.
We consider all of our Non-executive Directors to be independent and the following chart portrays the balance of the Board as at the date of this report.
Composition of the Board

Chairman: 1
Executive Directors: 3
Independent Non-executive Directors: 5

Male: 7
Female: 2

Commitment
Significant commitments of the Directors held outside of Marston’s are disclosed prior to appointment and on an ongoing basis where there are any changes. 
Actual and potential conflicts of interest are regularly reviewed. The Articles of Association allow the Board to authorise potential conflicts of interest and to 
impose any limits or conditions it sees fit. All of our Directors are required to allocate sufficient time to the Company to discharge their responsibilities effectively 
and this is reviewed as part of the annual evaluation process.

Evaluation
The Code recommends that an evaluation of the effectiveness of the Board and its Committees is conducted annually and that this process is externally 
facilitated at least every third year. This year the evaluation process was carried out internally, having been externally facilitated last year (2012/13).

The evaluation involved a questionnaire designed to review Board constitution and conduct, development of the Board agenda and succession planning. The 
review of the Committees focused on their performance throughout the year, whether the agendas covered their remit and the effectiveness of their 
communications with the full Board.

The Chairman prepared a report for the Board on its effectiveness and that of its Committees. The report identified a number of specific action points: topics 
were identified for future presentations; it was agreed to strengthen the process of providing updates on the output from previously received presentations and 
proposals; and it was agreed to increase the number of site visits.

The Board is of the opinion, supported by the Nomination Committee, that each Director continues to make an effective and valuable contribution and 
demonstrates commitment to his or her role.

Marston's PLC   Annual Report and Accounts 2014

25

Corporate Governance Report continued

Training and development
It is the Chairman’s responsibility for ensuring that Directors continually update their skills, knowledge and familiarity with the Company. The Chairman has 
conducted development reviews with each Director as part of the Board evaluation exercise and no specific training needs were identified. The Company 
provides the resources to meet development requirements for individual Directors as and when required and it will continue to review development initiatives 
for Directors.

All Directors receive a tailored induction programme on joining the Board. Carolyn Bradley’s induction programme included scheduled meetings with key 
personnel, a number of pub site visits, a brewery tour and a comprehensive company information pack. The information pack covers all relevant statutory and 
regulatory guidance notes.

During the year the Board visited a number of managed pubs and the brewery at Burton; meeting with local management to further its understanding of 
operational matters. The meeting held at Burton provided the opportunity for a tour of the new bottling line. Meetings were also held at advisers’ offices, 
including those of the Company’s new financial PR advisers, providing an opportunity for Board members to meet with advisers. The remaining Board meetings 
were held at the Head Office in Wolverhampton. Individually, the Non-executive Directors also spent time with senior managers visiting managed and tenanted 
pubs and our regional breweries. There are regular opportunities for the Directors to meet with senior management at Head Office, in the pubs and breweries to 
maintain and deepen their understanding of our business.

The Company Secretary advises the Board, through the Chairman, on all governance matters. All Directors have access to her advice and services. If necessary, 
Directors may seek independent professional advice at the Company’s expense in the performance of their duties.

Election and re-election
Shareholders will consider the election of Carolyn Bradley and Catherine Glickman at the AGM and they will be subject to annual re-election thereafter. All other 
Directors offer themselves for re-election at each AGM. Details of each Director serving on the Board at the date of this Report are set out on pages 22 to 23 and, 
with the exception of Rosalind Cuschieri, shall be set out to shareholders in the papers accompanying the election and re-election resolutions for the AGM.

Diversity Policy
The way we manage our pubs, breweries and brands reflects the preferences of many different consumer and customer types; it is therefore vital that our 
management of the business has appropriate regard for diversity when making decisions.

The Board, through the CEO, takes overall responsibility for diversity and equality below Board level. We have a code of behaviour which is communicated 
throughout Marston’s: to behave with Fairness, Integrity, and Transparency. We have a Whistleblowing Policy intended to ensure that concerns can be raised 
without adverse effect on the reportee’s career and development at Marston’s. Further details of Marston’s approach to diversity and succession planning can be 
found on the website www.marstons.co.uk/responsibility/caringforouremployees

Accountability and internal control

Fair, balanced and understandable assessment
In accordance with the Code’s requirement that the Board should consider whether the Annual Report and Accounts, taken as a whole, is fair, balanced and 
understandable comprehensive reviews are undertaken at regular intervals throughout the year-end process by senior management. The preparation of this 
document is coordinated by the Company Secretariat team with significant input from the Finance team and Group-wide support from other contributing 
personnel. The Board receive drafts of the Annual Report and Accounts to allow sufficient time to review and provide an opportunity for challenge and discussion, 
ahead of approving the final documents. In addition, the external Auditor reviews the consistency between the narrative reporting and financial disclosures.

Internal controls
The Board is responsible for the Company’s systems of internal control and risk management and reviewing their effectiveness. The Executive Directors are 
responsible for its implementation. The systems are designed to manage rather than eliminate risk. By their nature, such systems provide only a reasonable and 
not absolute defence against material errors, losses, fraud or breaches of the law.

Control environment
The key features of the internal control system are:
•

A clearly defined management structure operating within a framework of policies and procedures covering authority levels, responsibilities and 
accountabilities.

•  A detailed formal budgeting process for all Group activities, with the annual Group budget and projections for future years being formally approved by the Board.
•
•
•
•

Established procedures for planning, approving and monitoring capital expenditure and major projects.
Board approval is needed for all major investment, divestment and strategic plans and programmes.
At each meeting the Board reviews financial and non-financial progress towards the Company’s goals.
An internal audit function that scrutinises internal controls and conducts audits on controls associated with key risks of the business, and which recommends 
improvements.

For more information on control of risks see: 
Marston's Risk Management Framework on page 13

26

Marston's PLC   Annual Report and Accounts 2014

Compliance
In 2013 Marston’s set up a Compliance Committee chaired by the Corporate Risk Director, in order to monitor all areas of legal compliance across the Company. 
The Committee is responsible for maintaining a register of legislation appertaining to Marston’s activities, and seeking confirmation of compliance from 
management on a regular basis. Breaches in compliance will be reported by the Committee to the Board; in addition the Committee will report its operations 
biannually to the Board. The Committee meets quarterly, and includes representatives from across the business, in order to consider any emerging areas of 
legislation or challenges to existing compliance. 

Remuneration

Information on the Remuneration Committee, its membership and activities is given in the Directors’ Remuneration Report on pages 31 to 43. The report 
includes the current Directors’ Remuneration Policy as approved by shareholders at the 2014 AGM. The Report also comprises the Annual Report on 
Remuneration and this is subject to an advisory vote at the 2015 AGM.

Shareholder relations

Engagement with our shareholders is essential to ensure a greater understanding of, and confidence in, the medium and longer-term strategy of the Company 
and in the Board’s ability to oversee its implementation.

An investor relations programme is in place between the Executive Directors and institutional shareholders, fund managers and analysts. The CEO and CFO 
meet with Private Client Fund Managers in a number of locations on a quarterly basis. Matters such as strategy, performance, management and governance are 
discussed within the constraints of information already made publicly available.

The Board considers it important to understand the views of shareholders and issues which concern them. At least twice each year, it receives written feedback 
from analysts and institutional shareholders on their meetings with Executive Directors. During the year the Chairman and Senior Independent Director met 
with some of the Company’s major institutional investors.

The Company Secretary oversees communication with private individual shareholders on behalf of the Board. The Annual Report and Accounts is the principal 
means of communication and the Company’s website is an important method of communication for the majority of its shareholders providing comprehensive 
share price information, results presentations, financial calendars and announcements.

The AGM provides all shareholders with the opportunity to communicate directly with the Board of Directors. Recent trading performance and developments 
in the business are presented prior to the formal business of the meeting. Shareholders are invited to ask questions during the meeting, which is followed by 
an opportunity to meet with the Directors and senior managers of the business on an informal basis. The senior management team are available for 
shareholders to speak to before and after the meeting. All of our Directors attend and the Chairman of the Board and each Committee will be available to 
answer shareholder questions during the formal business of the meeting. We intend to call a poll for all resolutions to be considered at the 2015 AGM. This 
follows best practice guidelines and allows all shareholders, present in person, by proxy or unable to attend, to vote on all resolutions in proportion to their 
shareholding. The Company will release the results of voting, including proxy votes on each resolution, on its website on the next business day at  
www.marstons.co.uk/investors and announce them through an RNS. Details of the 2015 AGM are set out in the separate Notice of Meeting.

Marston's PLC   Annual Report and Accounts 2014

27

Audit Committee

Audit Committee Report

Dear Shareholder
Following my appointment as Chairman of the Audit Committee with effect from 21 January 2014, I am pleased to present the Audit Committee Report for the 
year ended 4 October 2014. Neil Goulden remains a member of the Audit Committee but has stepped down as Chairman to focus on his roles as Chairman of 
the Remuneration Committee and Senior Independent Director, following Lord Hodgson’s retirement. Both Neil and I are considered by the Board to meet the 
requirements of the Code as having recent and relevant financial experience. Robin Rowland has also become a member of the Committee with effect from 17 
September 2014.

Each member of the Committee, all independent Non-executive Directors, contributes their own financial and business experience to effectively assess the 
external and internal audits of the Company and the internal control and risk management systems. The Committee members challenge and debate the 
reports, statements and findings presented to them.

Membership 

Nick Backhouse 
Rosalind Cuschieri
Neil Goulden
Lord Hodgson (until 21 January 2014)
Robin Rowland (from 17 September 2014)

Responsibilities 

•  Reviewing the integrity of the Company’s financial statements including the 

Interim Results and the Annual Report and Accounts.

•  Reviewing the effectiveness of the internal controls and risk management 

system.

•  Reviewing the Company’s systems for detecting fraud, preventing bribery 

and allowing employees to raise concerns in a safe and confidential manner.

•  Reviewing the effectiveness of the internal audit function.
•  Overseeing the relationship with the external Auditors, specifically reviewing 
and approving their fees, the terms of engagement and their objectivity and 
independence on an annual basis.

Attendees

Terms of reference

The Corporate Risk Director and external Auditors attend each meeting. 
Other individuals, such as the CEO and CFO are usually invited to attend all 
or part of the Committee’s meetings. 

Full terms of reference of the Committee can be found in the Investors 
section of the Company’s website.

During the year the Committee has conducted a formal retendering of the Internal Audit co-source which has been undertaken by Deloitte since 2005. 
A number of audit firms were invited to tender for this work including two mid-tier firms. In assessing the tender proposals and presentations received, the 
Committee considered the ability of each firm to deliver an effective, efficient service, their audit methodology, relevant experience, knowledge of key audit 
issues and the benefit of a fresh approach. The Committee concluded that Grant Thornton should be appointed to deliver the internal audit plan with the first 
assignments to be undertaken in January 2015. 

Following the tender of the external audit last year, PwC continue to provide an effective audit service and the Committee recommends to shareholders their 
re-appointment. The audit partner is next due to rotate after the 2017 reporting period and the Company will conduct a full tender of the external audit at that 
time. Further details are provided in the report that follows.

Nick Backhouse
Chairman of the Audit Committee

28

Marston's PLC   Annual Report and Accounts 2014

Auditors
In assessing the work of the external Auditors, the Committee was satisfied with the scope of their work and their effectiveness, and recommended their 
re-appointment to the Board. The Committee has satisfied itself that the independence and objectivity of the external Auditors, and the safeguards to protect it,  
remain strong:
•

The external Auditors conduct an annual review of their independence identifying all services provided to the Group and assessing whether the content and 
scale of such work is a threat to their independence. 
The Committee accepts that some non-audit work is most appropriately undertaken by the external Auditors. The Committee’s terms of reference set out 
what is permissible. Where such work is expected to be in excess of a specified amount, the Chairman of the Audit Committee must approve the work. 
Below that amount, the CFO has authority to approve such work once he is satisfied that the Auditors are the most appropriate providers. The Group has 
used other accounting firms for some non-audit work. In each case, consideration was given to the need for value for money, experience and objectivity 
required in the particular circumstances.
The audit partner is changed at least once every five years and a new partner was appointed during the 2012/13 financial reporting period. The audit partner 
is next due to rotate after the 2016/17 financial year. The Committee has recommended to the Board that a formal tender be conducted in 2016/17 and, 
given the length of their tenure, PwC will not be invited to tender at that time. 

•

•

Fees paid to the external Auditors are disclosed in Note 3 of the Financial Statements on page 63.

Activities
During the year the Committee met three times to consider and review the risks to the Group, the internal control and risk management systems, to assess the 
annual internal audit plan and to review the internal audit tender proposals and presentations received. The Corporate Risk Director provided ongoing 
assurance to the Committee with regular updates on the scope and findings of internal audit. The Committee also considered the Annual Report and Accounts 
and Interim Results. In order to provide the Committee with the opportunity to review and challenge the integrity of the Company’s financial reports, the 
external Auditors attended each meeting. The external Auditors also presented their audit strategy, findings and conclusions in respect of the Annual Report 
and Accounts or Interim Results. At least once a year, the external Auditors meet the Committee without any Executive Director present to provide an 
opportunity for open dialogue and feedback.

In addition the Committee reviewed a number of standing items including the Whistleblowing Policy and arrangements thereunder, matters arising from 
internal audits and compliance and legal developments.

Significant financial judgements
In recommending the Interim Results and Annual Report and Accounts to the Board for approval, the Committee reviewed in particular the accounting for and 
disclosure of the following key matters:

• Non-underlying items. The Committee considered management's assessment of each item disclosed as non-underlying, including, the appropriateness and 
consistency of disclosure and accounting treatment. The Committee was satisfied that the items warranted separate disclosure by virtue of their nature, size 
or infrequency and concurred with management's classification and treatment. The Committee also considered the quality of earnings in assessing the 
completeness of non-underlying items.

• Onerous property lease provisions. The Company had undertaken a review of property leases during the year and identified the need for a provision to 

reflect changed conditions in both the market and individual circumstances as well as some lease reversions. Noting the judgements made, the Committee 
was satisfied that these provisions represented management's best estimate of the onerous element of future lease payments and, as such, was satisfied that 
the overall provision was acceptable.
Valuation of the estate. The Committee considered the internal valuation process undertaken by management and noted that this had not identified any 
areas of significant difference between book and fair value of the core estate at the reporting date. Impairments made during the year relating to the 
disposal group were based on management's best estimate of the achievable market price. The Committee considered the approach taken to be reasonable 
and consistent with market conditions and the treatment in prior years.
Tax provisions. The Company has a number of outstanding tax positions where recognition in the financial statements is judgemental given the uncertainty 
of settlement. The Committee noted that the potential benefit in respect of the majority of positions has not been recognised. The Committee was satisfied 
with the rationale behind this treatment.

•

•

Marston's PLC   Annual Report and Accounts 2014

29

Nomination Committee

Nomination Committee Report

Dear Shareholder
During the year we have refreshed the composition of our Board and Committees. In September we announced the retirement of Roz Cuschieri, who will step 
down from the Board following the 2015 AGM and the appointment of two new Non-executive Directors. Carolyn Bradley joined the Board on 1 October 2014 
and Catherine Glickman will be appointed on 1 December 2014. Both Carolyn's and Catherine’s appointments enhance and widen the Board’s skillset with their 
respective experience in retail marketing and HR.

Both the Audit and Remuneration Committees have been refreshed with the appointment of a new Chairman and by Robin Rowland joining the Audit 
Committee and Catherine Glickman joining the Remuneration Committee. Over the next year the Nomination Committee will continue to review the long-term 
succession plans for the Board and key roles across the business.

Membership 

Roger Devlin (Chairman)
Ralph Findlay
Rosalind Cuschieri
Neil Goulden
Nick Backhouse 
Robin Rowland 

Responsibilities 

•  Ensure the Board and its Committees have the right balance of skills, 

knowledge and experience.

•  To plan for the orderly succession of Directors to the Board and other senior 

managers.

•  To identify and nominate suitable candidates for Executive and Non-

executive Director vacancies having regard to, amongst other factors, the 
benefits of diversity, including gender diversity.

Attendees

Terms of reference

Other Executive Directors, senior management and external advisers may be 
invited to attend meetings.

Full terms of reference of the Committee can be found in the Investors section 
of the Company’s website.

Activities
The Nomination Committee met three times during the year specifically to consider the requirement for additional experience on the Board and the subsequent 
recruitment and appointment of two additional Non-executive Directors. The Committee was initially supported by KORNFERRY Whitehead Mann and 
subsequently by Warren Partners during the recruitment and appointment process. Neither KORNFERRY Whitehead Mann nor Warren Partners have any other 
connection to the Company.

The Committee also considered the membership of the Board and each of its Committees. The Committee continues to actively review the long-term 
succession planning process for Non-executive Directors to ensure the structure, size and composition of the Board and its Committees continues to be 
effective, thus ensuring appropriate levels of corporate governance and best practice and support for the Company as it pursues its strategy.

Diversity Policy
Succession planning at Board level is informed by guidance provided by the Financial Reporting Council (FRC) and the Department for Business, Innovation & 
Skills (BIS) on both Board Effectiveness and Gender Diversity, and the process of recruitment to the Board recognises the benefits of diversity. When recruiting, 
we require the search agency to have signed up to their industry’s Voluntary Code of Conduct addressing gender diversity. We have not set a specific target for 
numbers of female Directors and we will continue to make appointments on the basis of merit. However, we recognise the benefits that greater diversity can 
bring and take into account such factors when considering any particular appointment. Currently, two of Marston’s nine Board members are female rising to 
three on 1 December when Catherine Glickman joins the Board.

The effectiveness of the Committee was considered as part of the wider Board evaluation process. The Board concluded that it is satisfied that the Committee 
continues to perform its duties in accordance with its terms of reference. 

Finally, the Committee considered the effectiveness and commitment of each Director standing for election or re-election at the 2015 AGM and, having 
concluded that their performance continues to be effective, recommends the election or re-election of each Director to the shareholders.

Roger Devlin
Chairman of the Nomination Committee

30

Marston's PLC   Annual Report and Accounts 2014

Directors’ Remuneration Report

Remuneration Committee Chairman – Annual Statement

Dear Shareholder
On behalf of the Board, I am pleased to present the Remuneration Report for the year ended 4 October 2014, which sets out the remuneration policy for the 
Directors of Marston’s and the amounts earned in respect of the year ended 4 October 2014. 

Shareholder engagement
In my first report as Chairman of the Remuneration Committee I am pleased to report on the strong level of support and engagement from shareholders. This is 
evidenced by the voting outcomes at the 2014 Annual General Meeting. The resolutions seeking approval of the new 2014 Long Term Incentive Plan (LTIP), the 
Directors’ Remuneration Policy and Implementation Report were supported by over 97% of the votes cast. Before introducing the new LTIP we consulted 
extensively with our major shareholders and will continue to do so as the Remuneration Policy is reviewed and developed in future years.

2013/14 key decisions and incentive pay-outs
The Remuneration Committee remains committed to a responsible approach to executive pay, particularly given the continuing challenges of the economic 
environment. Key decisions on executive pay, including increases to salary and bonus payments, are calculated after consideration of similar decisions affecting 
all employees, consistent with the Company’s ethos of operating with ‘Fairness, Integrity and Transparency’. 

Base salary increases awarded to the Executive Directors in 2014 were 2.6%, in line with average salary increases across the Group.

The Remuneration Committee retains discretion to adjust performance metrics impacting on bonus or LTIP awards where there is a material consequence of 
strategic decisions. In considering bonus awards for the 2014 financial year the Committee took into account the portfolio disposal of 202 pubs in November 
2013. Whilst the immediate financial impact of this disposal was to reduce profit and earnings in 2014, it will improve the quality of our pub estate and earnings 
in the longer term. Having adjusted for the 2013 reported profit before taxation for the impact of the 53rd week and the portfolio disposal, Marston’s underlying 
earnings increased by 11% during the year and the Executive Directors will receive 25% of their maximum annual bonus entitlements. As disclosed on page 33, a 
formulaic application of the performance metrics applying to the annual bonus would have resulted in bonus awards of 40% of salary but, taking into account 
the economic environment, the Committee exercised restraint and awarded bonuses of 25% of salary.

In addition, as a result of EPS growth from 2011 to 2013, the 2011 LTIP award vested at 44.2% during the year. Further details are included on page 34. The 
Committee retains discretion to reduce or withhold awards but not to increase them (subject to noting the potential for adjustments to performance metrics as 
described above). In exercising that discretion, the Committee has regard to the financial performance of the business in the financial year in which the award 
vests. The fact that the awards usually vest in June means that the Committee takes into account a further nine months of performance in determining whether 
an award will vest and the Committee believes that this provides additional assurance that the award is appropriate.

2014/15
The performance metrics for variable pay are unchanged. In relation to bonus payments it is a combination of underlying profit before taxation and return on 
capital employed; and for the LTIP it is a combination of CROCCE, FCF and relative TSR. Further details are included on pages 33 and 34.

Last year the Company adopted a malus provision into the 2014 LTIP rules and the deferred bonus plan. The Committee is aware of the changes in the 2014 
edition of the UK Corporate Governance Code and, specifically with reference to clawback provisions for variable pay, is reviewing the adjustments required. We 
will take note of emerging practice before a decision is made and reported to you next year.

We recognise the expectations of our shareholders on executive pay and our history should demonstrate clearly that the Remuneration Committee approaches 
such issues with caution and sensitivity. 

Neil Goulden
Chairman of the Remuneration Committee

Notes
This Report has been prepared on behalf of the Board and has been approved by the Board. The Report complies with the Large and Medium Sized Companies and Groups (Accounts and 
Reports) (Amendment) Regulations 2013, the 2012 UK Corporate Governance Code (the Code) and the Financial Conduct Authority Listing Rules. 

To reflect the requirements of the revised remuneration reporting regulations this Report is presented in two sections: 
•
•

The Annual Report on Remuneration provides details on the amounts earned in respect of the period and how the policy will be operated for the period ended 3 October 2015; and
The Directors’ Remuneration Policy sets out the current remuneration policy as approved by shareholders at the 2014 Annual General Meeting.

Marston's PLC   Annual Report and Accounts 2014

31

Directors’ Remuneration Report continued

Annual Report on Remuneration

Remuneration principles
To align the remuneration of the Executive Directors with the Group’s strategic objectives and the interests of shareholders, our strategic priorities are 
reflected in our remuneration principles:

Key focus

Remuneration principles

Sustainable growth

•  Ensure that remuneration arrangements support sustainable growth and the long-term objectives of the Company.

Shareholder interests

•  Substantial part of the incentive package for Executive Directors is delivered in the Company’s shares to ensure interests are 

aligned with shareholders.

•  Minimum shareholding expectations for Executive Directors and senior management.
•  Bonuses earned in excess of 40% of the maximum opportunity are payable in shares in the Company, which will be deferred 

for a period of three years.

Employee engagement

•  Ensure Director and senior management salaries are set with reference to the wider workforce. 
•  Offer an HMRC approved SAYE scheme to all eligible employees.

The policy is designed to ensure that Executive Directors are provided with sufficient remuneration to motivate each individual, together with appropriate 
incentives that are aligned to strategy and encourage enhanced performance. The Committee undertakes an annual review of market practices and 
commentary and remuneration levels of Directors in similar roles in companies of comparable sizes and complexity. In addition, they review the levels of 
remuneration for other employees and the pay increases awarded throughout the Group; the aim being to reward all employees fairly according to their role, 
performance, the economic environment and the financial performance of the Group.

The following parts of the Remuneration Report are subject to audit, other than the elements explaining the application of the Remuneration Policy for 2014/15.

Single total figure of remuneration (Executive Directors)
The table below reports the total remuneration receivable in respect of qualifying services by each Executive Director during the year. Details of the figures in 
the table are provided overleaf.

Period ended 4 October 2014

Andrew Andrea
Peter Dalzell
Ralph Findlay

Period ended 5 October 2013

Andrew Andrea
Peter Dalzell
Ralph Findlay

Total salary and 
fees
£

317,000
282,000
508,000

Total salary  
and fees
£

309,000
275,000
495,000

Taxable
 benefits
£

14,438
14,438
17,138

Taxable
 benefits
£

14,630
14,419
17,330

Annual  
bonus 
£

Long term 
incentives
£

Pension related 
benefits
£

Total
£

79,250
70,500
127,000

Annual  
bonus 
£

–
–
–

204,770
142,668
324,680

Long term 
incentives
restated1
£

185,629
32,207
301,232

63,425
323,916
127,045

678,883
833,522
1,103,863

Pension related 
benefits
£

61,800
300,553
123,750

Total
£

571,059
622,179
937,312

1  In the Directors’ Remuneration Report for the period ended 5 October 2013, the long term incentives figures for the period ended 5 October 2013 assumed that the LTIP awards 
granted in June 2011 would lapse. The awards vested in June 2014 at 44.2% and in the above table for the period ended 5 October 2013 the long term incentives figures have been 
updated to reflect that vesting. The value has been calculated by multiplying the number of shares in respect of which the award vested by £1.429 (being the market value of a 
share on 24 June 2014, the date of vesting). In the case of Andrew Andrea, the long term incentives figure for the period ended 5 October 2013 also includes £1,005 in respect of an 
SAYE option granted in that period, as disclosed in the Directors’ Remuneration Report for the period ended 5 October 2013. 

Figures in the single figure table are derived from the following:

Total salary and fees

The amount of salary/fees received in the period. 

Taxable benefits

The taxable value of benefits received in the period. These are car allowance, private medical insurance and life assurance.

Annual bonus

The annual bonus earned in the period ended 4 October 2014. A description of Group performance against which the bonus pay-out 
was determined is provided on page 33. No Executive Director has elected to defer any of the bonus earned into shares.

32

Marston's PLC   Annual Report and Accounts 2014

Long term incentives

The value of LTIP awards that vest in respect of the financial period and the value of SAYE options granted in the financial period.
LTIP: The 2011 LTIP award vested at 44.2% during the year. In the single total figure of remuneration table for the period ended 
5 October 2013, the relevant value is calculated as disclosed in the footnote to that table. The original estimate disclosed in the Directors’ 
Remuneration Report for the period ended 5 October 2013 was that 0% of the 2011 LTIP would vest. As awards vest nine months after the 
end of the financial year and then only subject to the Committee being satisfied that the underlying performance of the award supports the 
formulaic output of the award, the best estimate at that time was that the awards would lapse. In June 2014 the Committee were satisfied 
that financial performance supported the vesting of the awards based on EPS performance over the previous three years, at 44.2%.
LTIP: The 2012 LTIP award will vest in June 2015. For the purposes of the single total figure of remuneration table for the period ended 
4 October 2014, it has been estimated that the 2012 LTIP will vest at 36%, and the value included in the table has been calculated by 
multiplying the number of shares in respect of which the 2012 LTIP is estimated to vest by the average market value of a share over the last 
quarter of the period ended 4 October 2014. 
SAYE: For the year ended 4 October 2014 the long term incentive value includes the value of SAYE options granted based on the fair value of 
the options at grant.

Pension related benefits

The pension figure represents the cash value of pension contributions received by the Executive Directors. This includes the Company’s 
contributions to the defined contribution pension scheme and any salary supplement in lieu of a Company pension contribution and for 
individuals in the Company’s defined benefit pension scheme, it also includes the additional value achieved in the period calculated using 
the HMRC method (using a multiplier of 20). Further details of pension benefits are set out on page 35.

Individual elements of remuneration (Executive Directors)
Base salary
Base salaries for individual Executive Directors are reviewed annually by the Remuneration Committee and are set with reference to individual performance, 
experience and responsibilities within the Group as well as with reference to similar roles in comparable companies. For 2013/14, Ralph Findlay, Andrew Andrea 
and Peter Dalzell received a 2.6% salary increase, which was in line with the average salary increases across the Group.

For 2014/15, the average salary increase for Executive Directors is 2.5%, which is in line with the average salary increases across the Group. The base salaries for 
2013/14 and 2014/15 are as set out below:

Name

Andrew Andrea
Peter Dalzell
Ralph Findlay

2014/15  
base salary

2013/14 
base salary

£325,000
£289,000
£521,000

£317,000
£282,000
£508,000

Increase

2.5%
2.5%
2.6%

Annual bonus
With the exception of our pub managers and field-based sales teams, all bonus arrangements within the Group have the same structure and pay-out 
mechanism, though the maximum potential award, expressed as a percentage of salary, varies between different employee groups. Payments are calculated 
based upon achieving or exceeding pre-set targets for both Group profit and return on capital. 

2013/14
For 2013/14, Executive Directors could earn a bonus equivalent to 50% of base salary for hitting on-target performance and this increases on a linear basis for 
performance above the set targets up to a maximum of 100% of base salary. For Executive Directors, the bonus agreement includes two additional conditions:

•
•

Any bonus earned in excess of 40% of the maximum opportunity is payable in shares in the Company, which will be deferred for a period of three years; and 
A malus provision is operated which gives the Remuneration Committee the discretion to reduce/lapse unvested deferred shares if an act or omission of the 
participant contributes to a material misstatement of the Group’s financial statements or results in material loss or reputational damage for the Company.

The Directors consider that the future Group profit and return on capital targets are matters which are commercially sensitive; they provide our competitors with 
insight into our business plans and expectations and should therefore remain confidential to the Company. However, the following table sets out the bonus 
pay-out to the Executive Directors for 2013/14 and Marston’s target and actual Group profit and return on capital performance for the year.

2013/14

£85.0m

£83.0m

Group profit target* 

Group profit actual*

* before non-underlying items

Target return  
on capital

10.6%

Actual return  
on capital

10.5%

Executive Director  
bonus as a percentage  
of salary

25%

Excluding the impact of disposals and the 53rd trading week, the underlying profit before tax for 2012/13 was £75 million. The 2013/14 profit therefore represents 
an 11% increase on the previous year – the threshold level at which a bonus will vest. On a straight-line vesting a bonus level of 40% would be payable. Taking 
into account the continuing challenges of the economic environment the Remuneration Committee considers it appropriate to exercise restraint and have 
therefore approved an award of 25%.

2014/15
No changes are proposed in respect of the annual bonus scheme for 2014/15 with awards based on Group profit (two thirds) and return on capital (one third). 
The Remuneration Committee will continue to disclose how the bonus pay-out delivered relates to performance against the targets on a retrospective basis.

Marston's PLC   Annual Report and Accounts 2014

33

Directors’ Remuneration Report continued

Long Term Incentive Plan
Awards vesting in respect of the financial period
LTIP awards granted in 2012 were subject to the achievement of an EPS growth performance condition over a three year period. Awards vest on a sliding scale 
with 35% becoming exercisable if annual EPS growth exceeds RPI by 3%. For 100% of an award to vest EPS growth must exceed RPI by 9% per annum.

The extent to which the LTIP awards granted in June 2012 will vest will not be determined by the Remuneration Committee until June 2015, therefore an 
estimate of the level of vesting has been made. During the year the Remuneration Committee noted that the historical EPS figure will be restated to reflect the 
new pension accounting standard. The Committee also discussed the impact of the portfolio and other strategic disposal activity on the remaining awards 
made under the 2004 LTIP scheme. Given the short term effect on earnings it was agreed that the 2012 and 2013 LTIP awards should be measured against an 
adjusted EPS figure. It is estimated that the 2012 LTIP will vest at 36%. The awards will only vest if the prevailing performance of the Company at the time of 
vesting supports it. This decision is at the discretion of the Committee.

Awards granted during 2013/14
In respect of the year ended 4 October 2014 the following awards were granted under the 2014 LTIP:

Andrew Andrea
Peter Dalzell
Ralph Findlay

Type of award

Percentage of 
salary

Number of
shares1

Face value at 
grant

LTIP
LTIP
LTIP

125%
125%
125%

275,748
245,302
441,892

396,250
352,499
634,999

% of award 
vesting at 
threshold

25%
25%
25%

Performance period

Financial years  
2013/14 to 2015/16 
inclusive

1  The awards granted in respect of the year ended 4 October 2014 were granted as Approved Performance Share Plan (“APSP”) awards, with each award comprising of the following 
three elements: (i) a tax advantaged option with an exercise price of £1.437 per share over shares with a total value at the date of grant of £30,000, (ii) a “Linked Award” which is, 
principally, a funding award in the form of a nil-cost option to acquire such number of shares whose value at exercise equals £30,000; and (iii) an LTIP award in the form of a nil cost 
option over shares to the value of the remainder of the APSP award. The number of shares referred to in the table above is the aggregate of the number of shares subject to the tax 
advantaged option and the LTIP award, each person was also granted a “Linked Award” over a maximum of 20,876 shares. 

The performance metrics for these LTIP awards are as follows:

CROCCE

FCF

Relative TSR 

% linked  
to award

40%

40%

20%

Threshold vesting  
at 25% of the  
maximum award

Vesting 
at 50% of the 
maximum award

Maximum vesting 
at 100% of the 
maximum award

Base +0.25%

Base +0.5%

Base +1.0%

Base +7.5%  
average growth 

Base +15%  
average growth 

Base +30%  
average growth 

Median

Upper quintile 

Base

10.8%

£300m

–

Each award, other than the APSP element, is also subject to a further underpinning performance condition and will only vest if, at the discretion of the 
Committee, the prevailing financial performance of the Company at the time of vesting supports it. 

There will be straight-line vesting between the points and no reward below threshold performance. The base amounts will be set at a level that is considered 
stretching but without encouraging undue risk.

• CROCCE: Cash Return On Cash Capital Employed. The use of CROCCE (as opposed to an EBIT return on book value) removes potential distortions from 

•

subjective decisions on depreciation policy and asset revaluation. CROCCE will be based on the budget target for 2015. Threshold vesting for this measure 
would only be earned if this target is exceeded by 0.25% over the three year period. 
FCF: Free Cash Flow. This reflects the operating cash flow of the business after tax and interest which is available to return to shareholders as dividends; to 
reinvest to increase returns; or to pay down debt. It is more closely aligned to operating performance than a simple leverage ratio. FCF in 2015 will be set as a 
three year cumulative amount based on the budget for 2015, 2016 and 2017 projections. Awards will only be earned if FCF exceeds that cumulative level at 
the end of three years by at least 7.5%.

• Relative TSR: Total Shareholder Return compared against the FTSE 250 (excluding investment trusts). The Remuneration Committee believe that a wider 

comparator group is a more robust and realistic way of measuring how shareholders value the Company and, furthermore, have set the maximum reward at 
upper quintile performance recognising our commitment to ensuring there are demanding performance targets. In addition, the Remuneration Committee 
will require that the element of the award associated with TSR performance will only be earned if underlying financial performance supports it.

The weightings for each measure have been set to balance what the Remuneration Committee consider to be the direction of focus for management in its day 
to day direction of the business with its ultimate responsibility to shareholders. In order to maintain transparency the Remuneration Committee will disclose 
how the Company has performed against each of the performance metrics following the end of the performance period.

2014/15 Awards
It is intended to make awards under the LTIP in 2014/15 based on the same performance metrics. Base numbers will be finalised and disclosed next year. 

34

Marston's PLC   Annual Report and Accounts 2014

Total pension entitlements 
Defined benefit schemes
The defined benefit scheme was closed to new entrants from 29 September 1997. The scheme closed to future accrual on 30 September 2014. Ralph Findlay 
became a deferred member of the Marston’s Scheme on 5 April 2012 and takes a salary supplement of 25% of base salary in lieu of future pension provision. 

The details of pensions accrued in the defined benefit scheme are shown in the table below:

Peter Dalzell
Ralph Findlay

Accrued pension 
at 30.09.14 
£

79,693
108,655

Accrued pension
at 30.09.13 
£

61,828
105,793

Normal 
retirement 
age

65
60

Early retirement can be taken from age 55 provided the Group gives its consent. The accrued pension will then be reduced to take account of its early payment.

On death before retirement, if still employed by Marston's, a spouse’s pension is payable equal to one-third of the member’s pension for Peter Dalzell and 50% 
for Ralph Findlay plus a lump sum equal to the Director’s contributions (including those made via salary sacrifice). On death after retirement the spouse’s pension 
payable is 60% of the member’s pre-commutation pension, for both Peter Dalzell and Ralph Findlay.

Defined contribution scheme
The Group makes contributions into the Group Personal Pension Plan (“GPPP”) on behalf of Andrew Andrea. A rate of 20% of base salary (paid partly as a GPPP 
contribution and partly as a taxable cash supplement) is payable in return for a minimum personal contribution of 7.5%. For the year ended 4 October 2014, the 
Group contribution for Andrew Andrea was £63,425, being £16,170 pension contribution and a salary supplement of £47,255.

In 2013/14 Ralph Findlay received a taxable cash supplement of 25% of basic salary in lieu of pension contributions.

Single total figure of remuneration (Chairman and Non-executive Directors)
The table below reports the total remuneration receivable in respect of qualifying services by the Chairman and each Non-executive Director during the year:

Period ended 4 October 2014

Roger Devlin
Nick Backhouse
Carolyn Bradley1
Rosalind Cuschieri
Neil Goulden
Lord Hodgson2
Robin Rowland

1 Carolyn Bradley was appointed as a Non-executive Director on 1 October 2014.
2 Lord Hodgson stepped down from the Board on 21 January 2014. 

Period ended 5 October 2013

Roger Devlin1
Nick Backhouse
Rosalind Cuschieri
Neil Goulden
Lord Hodgson
Robin Rowland

Total salary 
and fees
£

180,000
48,500
715
44,500
53,166
18,167
44,500

Total salary  
and fees
£

15,000
44,500
44,500
50,500
54,500
44,500

Total
£

180,000
48,500
715
44,500
53,166
18,167
44,500

Total
£

15,000
44,500
44,500
50,500
54,500
44,500

1 Roger Devlin was appointed as Chairman on 1 September 2013.
2  For the period ended 5 October 2013, David Thompson's total single figure of remuneration was £314,439, comprising fees of £137,083, taxable benefits of £117,665 and pension 
related benefits of £58,691. David Thompson stepped down as Chairman on 31 August 2013.

Fees
The remuneration policy for Non-executive Directors, other than the Chairman, is determined by the Board and is reviewed every two years. Fees were reviewed 
in 2013/2014 and reflect the responsibilities and duties placed upon Non-executive Directors whilst also having regard to market practice. The Non-executive 
Directors do not participate in any of the Group’s share incentive plans nor do they receive any benefits or pension contributions.

Chairman

Fee

Non-executive Directors

Basic fee

Additional fee for
– Chairmanship of the Remuneration Committee
– Chairmanship of the Audit Committee 
– Senior Independent Non-executive Director

2013/14

2014/15 

£180,000

£180,000

2013/14

2014/15 

£44,500

£46,500

£5,000
£6,000
£5,000

£7,500
£7,500
£5,000

Marston's PLC   Annual Report and Accounts 2014

35

Directors’ Remuneration Report continued

Payments to past Directors
There were no payments made to past Directors during the period in respect of services provided to the Company as a Director.

Payments for loss of office
There were no payments for loss of office made during the year.

Statement of Directors’ shareholdings and share interests
Executive Directors are expected to build up and maintain a shareholding in the Company equal to at least one times’ salary. As at 4 October 2014, Andrew 
Andrea held 69%, Peter Dalzell held 29% and Ralph Findlay held in excess of 100% of base salary (based on the cost of acquisition).

Director 

Andrew Andrea

Peter Dalzell

Ralph Findlay

Nick Backhouse
Carolyn Bradley
Rosalind Cuschieri
Roger Devlin
Neil Goulden
Lord Hodgson1
Robin Rowland

Type

Shares
Nil cost options
SAYE options

Shares
Nil cost options
SAYE options

Shares
Nil cost options
SAYE options

Shares
Shares
Shares
Shares
Shares
Shares
Shares

Exercised 
during 
the year

N/A
129,198
0

N/A
22,538
0

N/A
210,799
N/A

Owned 
outright

185,125
N/A
N/A

75,207
N/A
N/A

973,001
N/A
N/A

25,000
0
88,126
150,000
268,000
–
52,083

Unvested

Subject to 
performance 
conditions

Not subject to 
performance 
conditions

N/A
801,485
N/A

N/A
653,359
N/A

N/A
1,283,482
N/A

Total as at 
4 October 
2014

185,125
801,485
19,726

75,207
653,359
27,740

N/A
N/A
19,726

N/A
N/A
27,740

N/A
973,001
N/A 1,283,482
27,740

27,740

25,000
0
88,126
150,000
268,000
–
52,083

1 Lord Hodgson stepped down from the Board on 21 January 2014 and held 80,972 ordinary shares at that date. 

The following sections of the Remuneration Report are not subject to audit.

Performance graph and table
This graph shows the value, at 4 October 2014, of £100 invested in the Company on 6 October 2008 compared to the value of £100 invested in the FTSE All Share 
Index. The FTSE All Share Index has been selected as a comparator because the Company is a member of that index.

300

250

200

150

100

50

0

Marston’s Net TSR

FTSE All Share Net TSR

240

200

160

120

80

40

0

T O   B E   U P D A T E D

Oct 08

Oct 09

Oct 10

Oct 11

Oct 12

Oct 13

Oct 14

Sep 09

Sep 10

Sep 11

Sep 12

36

Marston's PLC   Annual Report and Accounts 2014

Marston’s Net TSR

FTSE All Share Net TSR

Enterprise Inns Net TSR

Green King Net TSR

Whitbread Net Return IND

Mitchells & Butler Net TSR

Punch Taverns Net TSR

Chief Executive Officer remuneration for previous six years

2013/14
2012/13
2011/12
2010/11
2009/10
2008/09

Total remuneration

Annual bonus
(% of maximum opportunity)

LTIP (% of maximum  
number of shares) 

£1,103,863
£937,3121
£815,690
£974,784
£826,677
£640,190

25.0%
0.0%
40.0%
46.0%
40.0%
0.0%

36.0%
44.2%1
0.0%
0.0%
0.0%
0.0%

1  In the Directors’ Remuneration Report for the period ended 5 October 2013, the table showing the Chief Executive Officer Remuneration for the previous five years assumed that the LTIP 
awards granted in June 2011 would lapse. As noted on page 34, those LTIP awards vested in June 2014 at 44.2% and in the table above the total remuneration figure and vesting 
percentage for 2012/13 has been updated accordingly. 

Percentage change in Chief Executive Officer remuneration
The table below sets out in relation to salary, taxable benefits and annual bonus the percentage increase in remuneration for Ralph Findlay versus the prior year 
compared to the wider workforce. For these purposes, this includes head office and supply chain employees but excludes pub based staff as the majority of 
these employees have their remuneration rate set by statute rather than the market.

Salary
Taxable benefits
Annual bonus1

CEO

2.63%
(1.1%)
–

Wider 
workforce

2.7%
(0.89%)
–

1  With the exception of a small number of sales employees within the wider workforce, no bonuses were payable last year based on Group performance. Therefore the percentage 
change in bonus compared to the prior year is not a meaningful comparison. 

Relative importance of spend on pay
The following table sets out the percentage change in dividends and the overall expenditure on pay (as a whole across the organisation).

Dividends payable in respect of the period
Overall expenditure on pay (excluding non-underlying items)

2014

2013

% Change

£38.3m
£170.2m

£36.5m
£162.1m

4.9%
5.0%

Statement of voting at last AGM
The Company remains committed to on-going shareholder dialogue and takes an active interest in voting outcomes. The following table sets out actual voting 
in respect of the resolutions relating to Directors’ remuneration matters at the Company’s Annual General Meeting on 21 January 2014:

Resolution

Approve the Annual Report on Remuneration
Approve the Directors’ Remuneration Policy
Approve the new Long Term Incentive Plan

Committee membership and advisers

Votes for

% of vote

Votes against

% of vote

Votes withheld

97,393,542
94,611,659
96,477,659

99.78%
97.64%
97.36%

215,742
2,588,801
2,612,992

0.22%
2.66%
2.64%

2,616,794
3,025,426
1,135,427

The Remuneration Committee met three times during the period and comprises Neil Goulden (Chairman), Rosalind Cuschieri and Robin Rowland, all of 
whom are regarded by the Company as independent Non-executive Directors. Lord Hodgson was Chairman of the Committee until he retired from the 
Board following the AGM on 21 January 2014.

Setting the framework and policy for Executive Directors’ remuneration;

Consideration by the Directors of matters relating to Directors’ remuneration
The Remuneration Committee is responsible for:
•
• Determining the remuneration packages for the Executive Directors and Chairman;
• Monitoring the level and structure of remuneration for senior management and approving bonus payments; and
•  Noting any major changes in employee benefit structures throughout the Group and ensuring that Executive Director remuneration practice is consistent with any 

such changes.

Advisers
During the period the Committee received advice from a number of sources to ensure its decision making was informed and took account of pay and 
conditions in the Group as a whole and wider market conditions. These sources comprise:
• Deloitte LLP (Deloitte). Appointed by the Committee in 2003, Deloitte is retained to provide independent advice to the Committee as required and has 

confirmed it remains independent. During the period, Deloitte has also provided advice on various tax issues and internal audit services to the Company. 
Deloitte is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the code of conduct in relation to executive 
remuneration consulting in the UK. Deloitte’s fees for providing advice to the Remuneration Committee amounted to £15,100 (2013: £6,950).
Ralph Findlay, Chief Executive Officer, provided advice in respect of the remuneration of the other Executive Directors but was not in attendance when his 
own remuneration was discussed.
Anne-Marie Brennan, Company Secretary, provides general advice and support on governance and best practice, as secretary to the Committee.

•

•

Marston's PLC   Annual Report and Accounts 2014

37

Directors’ Remuneration Report continued

Directors’ Remuneration Policy 

This part of the report sets out the Company’s Directors’ remuneration policy which was approved by shareholders at the 2014 AGM. The policy came into effect 
on 5 October 2014. The policy is determined by the Company’s Remuneration Committee (“the Committee”). The policy is due to be reviewed by shareholders 
at the 2017 AGM.

Base Salary

Purpose and link  
to strategy

Operation

Opportunity

Core element of fixed remuneration, reflecting the size and scope of the role.
Purpose is to recruit and retain Directors of the calibre required for the business.

Reviewed annually and usually fixed for 12 months commencing 1 October. 
Whilst Executive Directors are contractually entitled to an annual review of their salary, there is no entitlement to an increase as a 
result of this review.
Salary levels are determined by the Committee taking into account a range of factors including:
•
•
•
•

role, experience and performance;
alignment with workforce;
prevailing market conditions; and
external benchmarks for similar roles at comparable companies.

Salary increases are reviewed in the context of salary increases across the wider Group. The Committee considers any increase 
which is out of line with these very carefully and such increases may be awarded where there is a reason to do so taking into 
account relevant factors. These circumstances may include but are not limited to:
•
•
•

increase in scope and responsibility;
promotional increase to Executive Director; or
a salary falling significantly below market positioning.

Performance metrics

Not applicable, although the individual’s contribution and overall performance is one of the considerations in determining the 
level of any salary increase.

Benefits

Purpose and link  
to strategy

Operation

Ensures the overall package is competitive.
Purpose is to recruit and retain Directors of the calibre required for the business.
Participation in the Save As You Earn scheme (SAYE) creates staff alignment with the Group and promotes a sense of ownership.

Executive Directors receive benefits in line with market practice which include a car allowance, private medical insurance and life 
assurance.
The SAYE is an HMRC approved monthly savings scheme facilitating the purchase of shares at a discount.
Other benefits may be provided based on the role and individual circumstances. These may include, for example, relocation and 
travel allowances.

Opportunity

Set at a level which the Committee considers appropriate against the market and provides a sufficient level of benefit based on 
individual circumstances.
SAYE contribution as permitted in accordance with the relevant tax legislation.

Performance metrics

Not applicable.

38

Marston's PLC   Annual Report and Accounts 2014

Annual bonus and deferred bonus plan

Purpose and link  
to strategy

Operation

Rewards performance against annual targets which support the strategic direction of the Company.
Compulsory deferral into shares aligns Executive Directors with shareholder interests and provides a retention element.

Targets are set annually and any pay-out is determined by the Committee after the period end, based on performance against 
those targets. The Committee has discretion to vary the bonus pay-out should any formulaic output not reflect the Committee’s 
assessment of overall business performance.
Any bonus earned in excess of 40% of the maximum award is usually payable in shares in the Company which will be deferred for 
a period of three years. Executive Directors can opt to defer a greater proportion if they wish. Deferral of any bonus earned is 
subject to a de minimis limit of £5,000.
A claw-back (malus) provision gives the Committee the right to cancel unvested shares if an act or omission of the participant 
contributes to a material misstatement of the Group’s financial statements or results in material loss or reputational damage  
for the Company.
As with all Company bonuses, they remain discretionary and can be adjusted or removed at the Company’s discretion. In the case 
of Executive Directors this discretion lies with the Committee.

Opportunity

Maximum bonus opportunity is 100% of base salary.

Performance metrics

Financial targets are set each year reflecting the business priorities that underpin Group strategy and align to financial key 
performance indicators which may include Group profit and return on capital measures.
At least 50% of the award will be based on Group profit.
Payments range between 0% and 100% of base salary with 50% of the maximum entitlement for each measure payable for 
on-target performance. 
For achievement of the maximum performance level (the highest level of performance that results in any additional payment) 
100% of the maximum opportunity will vest.
There is usually straight-line vesting between the threshold and target performance levels and between target and maximum 
performance levels.
The Committee has the discretion to vary the vesting schedules by reducing the percentage that vests at each performance level 
but not by increasing the percentage that vests.

Long term incentive plan (LTIP)

Purpose and link  
to strategy

Operation

Incentivises Executive Directors to deliver against the Company’s strategy over the longer term.
Long term performance targets and share-based remuneration support the creation of sustainable shareholder value.

The Committee makes long term incentive awards under the 2014 LTIP which was approved by shareholders at the 2014 AGM.
Under the 2014 LTIP, awards of conditional shares, restricted stock or nil cost options (or similar cash equivalent) can be made with 
vesting dependent on the achievement of performance conditions, normally over a three year performance period.
Awards may vest early on a change of control (or other relevant event) subject to satisfaction of the performance conditions and 
pro-rating for time, although the Committee has discretion to increase the extent of vesting having due regard to performance 
over the period to vesting. 
As described on page 43, LTIP awards may also vest early in “good leaver” circumstances.
Under the new LTIP the Committee has the right to reduce any LTIP awards which have not yet vested (i.e. a malus provision) if an 
act or omission contributes to a material misstatement of the Group’s financial statements or results in material loss or reputational 
damage for the Company.
The Committee may at its discretion structure awards as Approved Performance Share Plan (APSP) awards. APSP awards enable 
the participant and company to benefit from HMRC approved option tax treatment in respect of part of the award, without 
increasing the pre-tax value delivered to participants. APSP awards may be structured either as an approved option for the part of 
the award up to the HMRC limit (currently £30,000) with an unapproved option for the balance and a “linked award” to fund the 
exercise price of the approved option, or as an approved option and an LTIP award, with the vesting of the LTIP award scaled back 
to take account of any gain made on exercise of the approved option. 

Opportunity

The normal maximum award size will be 125% of base salary in respect of any financial year.
In exceptional circumstances the Committee reserves the right to award up to 200% of base salary in respect of any financial year.
These limits do not include the value of shares subject to any approved option granted as part of an APSP award.

Marston's PLC   Annual Report and Accounts 2014

39

Directors’ Remuneration Report continued

Long term incentive plan (LTIP) continued

Performance metrics

The vesting of LTIP awards is subject to the satisfaction of performance targets set by the Committee. 

The performance measures are reviewed regularly to ensure they remain relevant but will be based on financial measures and/or 
share price growth related measures, including (but not exclusively):

•

•

•

free cash flow;

return on capital employed; and

relative total shareholder return.

The relevant metrics and the respective weightings may vary each year based upon Company strategic priorities.

For 2015, the performance measures and weightings will be:

•

•

•

40% free cash flow;

40% cash return on cash capital employed; and

20% relative total shareholder return.

For the achievement of threshold performance no more than 25% of each respective element of the award will vest.

For the achievement of maximum performance 100% of each respective element will vest.

There will be straight-line vesting between threshold and maximum performance.

The Committee will regularly review the performance conditions and targets to ensure they are aligned to Marston’s strategy 
and remain challenging and reflective of commercial expectations.

The Committee has the discretion to vary the vesting schedules by reducing the percentage that vests at each performance 
level but not by increasing the percentage that vests.

Retirement benefits

Purpose and link  
to strategy

Operation

Opportunity

To recruit and retain Directors of the calibre required for the business.
Provides market competitive post-employment (or cash equivalent) benefits.

Executive Directors are eligible to participate in the defined contribution pension scheme (or such other pension plan as may be 
deemed appropriate) and, if a member before closure of the scheme, the defined benefit scheme.
The defined benefit scheme was closed to new entrants from 29 September 1997. Executive Directors who are members of the 
closed scheme can continue to receive benefits in accordance with the terms of this scheme. 
In appropriate circumstances, Executive Directors may take a salary supplement instead of contributions into a pension plan.

Ralph Findlay, who was previously a member of the defined benefit scheme has opted to no longer accrue future benefits and 
instead receives 25% of base salary as a salary supplement in lieu of pension contributions. 
All the other Executive Directors (including any new appointments) may receive contributions of up to 20% of base salary under 
the defined contribution pension scheme, an equivalent cash allowance or a combination of the two (up to 20% of base salary). 
Active members of the defined benefit pension scheme continued to accrue benefits under this scheme until 30 September 2014.

Performance metrics

Not applicable.

Non-executive Director fees

Purpose and link  
to strategy

Operation

Opportunity

Sole element of Non-executive Director remuneration set at a level that reflects market conditions and is sufficient to attract 
individuals with appropriate knowledge and experience.

Fees are reviewed every two years and amended to reflect market positioning and any change in responsibilities.
The Committee recommends the remuneration of the Chairman to the Board. Fees paid to Non-executive Directors are 
determined and approved by the Board as a whole.
The Non-executive Directors do not participate in the annual bonus plan, any of the Group’s share incentive plans nor do they 
receive any benefits or pension contributions.

Fees are based on the level of fees paid to Non-executive Directors serving on Boards of similar-sized UK-listed companies and the 
time commitment and contribution expected for the role.
Non-executive Directors receive a basic fee and an additional fee for further duties (for example chairmanship of a committee or 
senior independent director responsibilities).

Performance metrics

Not applicable.

40

Marston's PLC   Annual Report and Accounts 2014

The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office notwithstanding that they are not in line 
with the Policy set out above where the terms of the payment were agreed: 

(i)  before the Policy came into effect; or 
(ii)  at a time when the relevant individual was not a Director of the Company and, in the opinion of the Remuneration Committee, the payment was not in 

consideration for the individual becoming a Director of the Company.

For these purposes the term payments includes the Remuneration Committee satisfying awards of variable remuneration and, in relation to an award over 
shares, the terms of the payment are agreed at the time the award is granted. For the avoidance of doubt, the Remuneration Committee’s discretion includes 
discretion to determine, in accordance with the rules of the current LTIP, the extent to which awards under that plan may vest in the event of a change of control 
or in a ‘good leaver’ circumstance.

The Committee may make minor changes to this Policy, which do not have a material advantage to Directors, to aid in its operation or implementation taking 
into account the interests of shareholders but without the need to seek shareholder approval.

Explanation of performance metrics chosen
Performance measures are selected that are aligned to the Company’s strategy. Stretching performance targets are set each year for the annual bonus and long 
term incentive awards. In setting these stretching performance targets the Committee will take into account a number of different reference points which may 
include the Company’s business plans and strategy and the market environment. Where relative total shareholder return is used there will be no payment for 
performance below median (compared to the comparator group).

The annual bonus performance targets reflect key financial objectives of the Company and reward for delivery against these. 

The LTIP performance targets reflect the Company’s strategic objectives and therefore the financial and strategic decisions which ultimately determine the success 
of the Company. The LTIP performance measures are based on financial measures and/or share price growth related measures, including (but not exclusively):
•
•

Cash Return On Cash Capital Employed – this is a key driver of shareholder value and reflects Marston’s investment/disposal plans and the balance sheet. 
Free Cash Flow – this reflects the operating cash flow of the business after tax and interest which is available to return to shareholders as dividends; to 
reinvest to increase returns; or to pay down debt. 
Relative Total Shareholder Return – aligns management’s objectives with those of shareholders and is a broad measure of the extent to which Company 
strategy is considered appropriate by the market as well as the extent to which it is being well implemented. 

•

The Remuneration Committee retains the discretion to adjust the performance targets and measures where it considers it appropriate to do so (for example, to 
reflect changes in the structure of the business and to assess performance on a fair and consistent basis from year to year).

Illustration of application of Remuneration Policy
The charts below show the relative split of remuneration between fixed pay (base salary, benefits and pension) and variable pay (annual bonus, deferred bonus 
plan (DBP) and LTIP) for each Executive Director on the basis of minimum remuneration, remuneration receivable for performance in line with the Company’s 
expectations and maximum remuneration (not allowing for any share price appreciation).

Ralph Findlay

Andrew Andrea

Peter Dalzell

■ LTIP
■ Annual bonus
■ Fixed pay

£1,092
15%

24%

£668

£1,841

35%

28%

100%

61%

36%

)
s
0
0
0
£
(

n
o
i
t
a
r
e
n
u
m
e
R

l

a
t
o
T

£2000

£1600

£1200

£800

£400

£0

)
s
0
0
0
£
(

n
o
i
t
a
r
e
n
u
m
e
R

l

a
t
o
T

£2000

£1600

£1200

£800

£400

£0

■ LTIP
■ Annual bonus
■ Fixed pay

£1,136

36%

28%

36%

£669
15%
24%

61%

£404

100%

)
s
0
0
0
£
(

n
o
i
t
a
r
e
n
u
m
e
R

l

a
t
o
T

£2000

£1600

£1200

£800

£400

£0

■ LTIP
■ Annual bonus
■ Fixed pay

£1,011

36%

28%

36%

£596
15%
24%

61%

£361

100%

Minimum In line with
expectations

Maximum

Minimum In line with
expectations

Maximum

Minimum In line with
expectations

Maximum

Marston's PLC   Annual Report and Accounts 2014

41

 
 
 
 
 
 
Directors’ Remuneration Report continued

In illustrating the potential reward the following assumptions have been made:

Minimum performance

Performance in line with 
expectations

Maximum performance

Fixed pay

Annual bonus and DBP

LTIP

Fixed elements of remuneration are 
base salary, benefits and pension.

Base salary is the latest known 
salary (i.e. the salary effective from 
1 October 2014) and the value for 
benefits has been assumed to be 
equivalent to that included in the 
single figure calculation on  
page 32.

No bonus.

No LTIP vesting.

50% of salary delivered for achieving 
target performance.

100% of salary awarded for 
delivering at or above the highest 
performance in respect of the 
annual bonus measures.

25% of maximum award vesting 
(i.e. 31.25% of salary) for achieving 
threshold performance across all 
performance measures.

100% of award vesting (125% of 
salary) delivered for achieving 
the most stretching level of 
performance measures attached to 
the LTIP awards.

Awards under the LTIP and deferred shares vesting under the DBP are included at face value with no share price movement included.

Differences in policy from the wider employee population
The Company aims to provide a remuneration package that is market competitive, complies with any statutory requirements and is applied fairly and equitably 
across the wider employee population. Where remuneration is not determined by statutory regulation, the Company operates the same core principles as it 
does for Executive Directors namely:
• We remunerate people in a manner that allows for stability of the business and the opportunity for sustainable long-term growth.
• We seek to remunerate fairly and consistently for each role with due regard to the marketplace, internal consistency and the Company’s ability to pay.

With the exception of our pub managers and field-based sales teams, all bonus arrangements within the Group normally have the same structure and pay-out 
mechanism as those for Executive Directors.

Participation in the DBP and LTIP is extended to the senior management team at the discretion of the Board and, in line with the policy for Executive Directors, 
share ownership is encouraged and LTIP participants are expected to build and maintain a minimum level of shareholding. We also encourage long term 
employee engagement through the offer of SAYE to all employees of the Group who meet a minimum service requirement.

Recruitment Remuneration Policy
When hiring a new Executive Director, the Committee will typically seek to use the Policy detailed in the table above to determine the Executive Director’s 
ongoing remuneration package. To facilitate the hiring of candidates of the appropriate calibre required to implement the Group’s strategy, the Committee also 
retains the discretion to include any other remuneration component or award which is outside the Policy. In determining appropriate remuneration, the 
Committee will take into consideration all relevant factors (including the quantum and nature of remuneration) to ensure the arrangements are in the best 
interests of Marston’s and its shareholders.

The Committee may make an award to buy out incentive arrangements forfeited on leaving a previous employer. In doing so the Committee will take account 
of relevant factors including the form of award, any performance conditions attached to these awards and the time over which they would have vested. The 
Committee would seek to incorporate buy-out awards in line with the Company’s remuneration framework as far as is practical. The Committee may consider 
other components for structuring the buy-out, including cash or shares awards, restricted stock awards and share options where there is a commercial rationale 
for doing so. 

Appropriate costs and support will be covered if the recruitment requires relocation of the individual. 

All recruitment awards will normally be liable to forfeiture or clawback on early departure. For Executive Directors, early departure is defined as being within the 
first two years of employment. 

The maximum level of variable remuneration which may be granted (excluding buy-out arrangements) is three times salary. The Committee will ensure that 
such awards are linked to the achievement of appropriate and challenging performance measures and will be forfeited if performance or continued 
employment conditions are not met.

Service contracts and policy on payment for loss of office
Executive Directors’ contracts are on a rolling 12 month basis and are subject to 12 months’ notice when terminated by the Company and six months’ notice 
when terminated by the Director. The Committee may, in exceptional circumstances, in order to attract and retain suitable executives, offer service contracts 
with up to an initial 24 month notice period which then reduce to 12 months at the end of this initial period. 

The current Non-executive Directors, including the Chairman, do not have a service contract and their appointments, whilst for a term of three years, may be 
terminated without compensation at any time. All Non-executive Directors have letters of appointment and their appointment and subsequent re-appointment 
is subject to annual approval by shareholders.

42

Marston's PLC   Annual Report and Accounts 2014

The principles on which the determination of payments of loss of office will be approached are summarised below:

Provision

Treatment upon loss of office

Payment in lieu  
of notice

Payments to Executive Directors upon termination of their contracts will be equal to base salary plus the value of core benefits 
for the duration of the notional notice period. Benefits may also include, but are not limited to, outplacement and legal fees. 

They will also be entitled to pension contributions for the duration of the notional notice period or the requisition cash 
allowance equivalent.

Annual bonus

This will be at the discretion of the Committee on an individual basis and the decision whether or not to award a bonus in full or 
in part will be dependent upon a number of factors including the circumstances of their departure and their contribution to the 
business during the bonus period in question. Any bonus amounts paid (as estimated by the Committee) will typically be pro-
rated for time in service to termination and will, subject to performance, be paid at the usual time.

Deferred bonus

Any deferred award under the deferred bonus plan will be determined based on the leaver provisions contained within the 
deferred bonus plan rules.

For participants leaving before the first anniversary of the date of grant deferred awards will lapse unless the participant is 
considered a ‘good leaver’. For a good leaver the deferred award will vest in full. ‘Good leavers’ are participants who leave as a 
result of redundancy, death, ill-health, injury or disability, the sale of his employer out of the Group or any other reason at the 
discretion of the Committee.

For a participant leaving after the first anniversary of the date of grant the award will vest in full unless employment is terminated 
for reasons of misconduct (in which case the award will lapse).

2014 LTIP

Any award under the 2014 LTIP would be determined based on the leaver provisions contained within the 2014 LTIP plan rules.

For ‘good leavers’ LTIP awards will usually vest at the ordinary vesting point, be subject to performance conditions and pro-rated 
for time. ‘Good leavers’ are participants who leave as a result of death, ill-health, injury or disability, the sale of his employer out 
of the Group or any other reason at the discretion of the Committee. In other circumstances LTIP awards will lapse upon the 
cessation of employment.

The Committee retains the discretion to accelerate vesting and to waive pro-rating for time.

Change of control

Upon a change of control incentive awards will usually vest and be subject to performance conditions and pro-rated for time. 

The Committee retains the discretion to waive pro-rating for time.

Mitigation

Ralph Findlay’s service contract is formed under a model which was approved by the Committee in 2001 and there is no reduction 
in payments for mitigation or for early payment as the Remuneration Committee has taken the view that as a long-standing 
employee of the Group, full compensation would be merited in the event of unilateral termination of his employment by the Group. 

Andrew Andrea and Peter Dalzell’s service contracts were formed under a new model approved in 2009 and provide that, 
subject to formal notice being given by either party, any payment during the notice period will be reduced by any amount 
earned in that period from alternative employment as a result of being released to work for another employer prior to the 
conclusion of their notice period.

Statement of consideration of employment conditions elsewhere in the Company
Salary, benefits and performance related rewards provided to employees are taken into account when setting policy for Executive Directors’ remuneration. 
Although employees are not actively consulted on Directors’ remuneration the Company has regular contact with union bodies on matters of pay and 
remuneration for employees covered by collective bargaining or consultation arrangements. 

In October of each year a paper is submitted to the Remuneration Committee by the Group Human Resources Director summarising the outcome of any annual 
reviews made to the wider workforce (including head office and supply chain employees but excluding pub based staff as the majority of these employees have 
their remuneration rate set by statute rather than the market). This paper is taken into account when setting Executive Directors’ remuneration effective from 
the start of October for the following 12 months. In addition, and where relevant, a similar paper is submitted in October covering the decisions taken by the 
Executive Committee relating to bonus payments for employees within the wider workforce. This is taken into consideration by the Remuneration Committee 
when approving bonus awards for Executive Directors.

Statement of consideration of shareholder views
The Committee is committed to open and transparent dialogue with shareholders and welcomes feedback on Executive and Non-executive Directors’ remuneration. 

Prior to the 2014 LTIP being formally put to shareholders, the Committee held an open dialogue with major shareholders and institutional investor bodies 
setting out the proposals and the detailed thinking and planning behind them.

This report was approved by the Board and signed on its behalf by

Neil Goulden
Chairman of the Remuneration Committee
27 November 2014

Marston's PLC   Annual Report and Accounts 2014

43

Other Statutory Information

This section contains additional information which the Directors are required by law and regulation to include within the Annual Report and Accounts. This 
section along with the information from the Chairman’s Statement on page 2 to the Statement of Directors’ Responsibilities on page 47 constitutes the 
Directors’ Report in accordance with the Companies Act 2006.

Strategic report
The Company is required by the Companies Act to include a Strategic Report in this document. The information that fulfils the requirements of the Strategic 
Report can be found on pages 1 to 19, which are incorporated in this report by reference. 

Corporate governance statement
The corporate governance statement as required by the Disclosure and Transparency Rules 7.2.1 is set out on pages 20 to 30 and is incorporated into this report 
by reference.

Research and development
In-house research and development is undertaken alongside work with the British Beer and Pub Association (BBPA) and Brewing Research International.

Capital structure
Details of the Company’s issued share capital and of the movements during the year are shown in note 27 to the financial statements on page 85. The Company 
has one class of ordinary shares and one class of preference shares. On a poll vote, ordinary and preference shareholders have one vote for every 25 pence of 
nominal value of ordinary and preference share capital held in relation to all circumstances at general meetings of the Company. The issued nominal value of the 
ordinary shares and preference shares is 100% of the total issued nominal value of all share capital.

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of 
Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company’s shares that may result in restrictions on 
the transfer of securities or on voting rights.

Details of employee share schemes are set out in note 26 to the financial statements on pages 84 to 85. Where shares are held on behalf of the Company’s share 
schemes, the trustees have waived their right to vote and to dividends. 

No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.

Under the Articles of Association, the Directors have authority to allot ordinary shares subject to the aggregate set at the 2014 Annual General Meeting (AGM). 
The Company was also given authority at its 2014 AGM to make market purchases of ordinary shares up to a maximum number of 57,243,227 shares. Similar 
authority will again be sought from shareholders at the 2015 AGM.

With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the UK Corporate Governance Code, the 
Companies Act 2006 and related legislation. The Articles may be amended by special resolution of the shareholders. The powers of the Directors are further 
described in the Corporate Governance Report on pages 20 to 30.

Change of control
There are a number of agreements that take effect after, or terminate upon, a change of control of the Company, such as commercial contracts, bank loan 
agreements, property lease arrangements and employee share plans. None of these are considered to be significant in terms of their likely impact on the 
business as a whole. Furthermore, the Directors are not aware of any agreements between the Company and its Directors or employees that provide for 
compensation for loss of office or employment that occurs because of a takeover bid.

Major interest in Company’s shares
Notifications of the following voting interests in the Company’s ordinary share capital had been received by the Company (in accordance with Chapter 5 of the 
FCA’s Disclosure and Transparency Rules and section 793 Companies Act 2006) as at 4 October 2014 and 24 November 2014:

As at 
4 October 
2014

35,143,010
31,083,908
24,196,892
23,520,301
21,963,860
20,663,725

% of 
voting rights

6.13%
5.42%
4.22%
4.10%
3.83%
3.61%

As at 
24 November 
2014

35,863,321
31,083,908
23,523,362
26,447,673
23,447,505
17,620,012

% of 
voting rights

6.26%
5.42%
4.10%
4.61%
4.09%
3.07%

Ordinary shares of 7.375p each

Shareholder

Brewin Dolphin 
The Capital Group Companies, Inc
Dimensional Fund Advisers
Royal London Asset Management
Rathbone Investment Management
Henderson Global Investors Ltd

44

Marston's PLC   Annual Report and Accounts 2014

The Company also discloses the following information, obtained from the Register of Members, for the preference shares:

Preference shares

Shareholder

Fiske Nominees Ltd 
Mrs HM Medlock 
George Mary Allison Ltd 
Mr PF and Dr K Knowles
Mr GAL Southall and Mr N Aston
Mrs H Michels 
Mr R Somerville

Number

34,048
10,407
5,500
4,356
2,855
2,750
2,750

Percentage of  
voting rights

45.39%
13.87%
7.33%
5.80%
3.80%
3.66%
3.66%

Dividends on ordinary shares
An interim dividend of 2.4 pence per ordinary share was paid on 8 July 2014. The Directors recommend a final dividend of 4.3 pence per ordinary share to be 
paid on 2 February 2015 to shareholders on the register on 19 December 2014. This would bring the total dividend for 2013/14 to 6.7 pence per ordinary share 
(2013: 6.4 pence per ordinary share). The payment of the final dividend is subject to shareholder approval at the AGM. 

Preference shares
The preference shares carry the right to a fixed cumulative preferential dividend at the rate of 6% per annum payable in June and December (£5,250 per annum). 
Further details are given in note 17 on page 73.

Directors
Biographies of the Directors currently serving on the Board are set out on pages 22 and 23.

Changes to the Board during the year are set out in the Corporate Governance Report on page 25. Details of Directors’ service contracts are set out in the 
Directors’ Remuneration Report on pages 42 and 43. 

In accordance with the requirements of the UK Corporate Governance Code all Directors, with the exception of Rosalind Cuschieri, will offer themselves for 
election or re-election at the AGM on 27 January 2015. Rosalind Cuschieri has confirmed that she will retire from the Board following the 2015 AGM and so will 
not stand for re-election.

Insurance and indemnities
The Company maintains Directors’ and Officers’ Liability Insurance in respect of legal action that might be brought against its Directors and Officers. In 
accordance with the Company’s Articles of Association and to the extent permitted by law, the Company has indemnified each of its Directors and other Officers 
of the Group against certain liabilities that may be incurred as a result of their position within the Group. These indemnities were in place for the whole of the 
period ended 4 October 2014 and as at the date of the report. There are no indemnities in place for the benefit of the Auditors.

Employee information
The average number of employees within the Group is shown in note 5 to the financial statements on page 65.

Apart from ensuring that an individual has the ability to carry out a particular role, we do not discriminate in any way. We endeavour to retain employees if they 
become disabled, making reasonable adjustments to their role and, if necessary, look for redeployment opportunities within the Group. We also ensure that 
training, career development and promotion opportunities are available to all employees irrespective of gender, race, age or disability.

The Company is committed to employee involvement and keeps employees informed of the performance and strategy of the Group through presentations of 
the interim and annual results by senior management. In addition , there are a range of internal newsletters, booklets and briefings to keep employees abreast of 
developments. Employees views are sought through regular engagement surveys across the Group and action plans are put in place to respond to issues 
arising. Employees are encouraged to participate in the Company SAYE share scheme.

Environmental policy and mandatory greenhouse gas emissions reporting
Marston’s places social responsibility at the heart of its business. The Board recognises that responsible behaviour is key to building sustainable growth and 
reputational value. Our responsible approach defines our corporate behaviour, the perception of our brands and the appreciation for the quality of our products 
and standard of service.

Marston’s Corporate Social Responsibility Committee is chaired by our Corporate Risk Director. The Committee reports to the main Board on how the activities of 
the Company have met its ethical agenda. The Committee is responsible for overseeing progress on CSR issues, external reporting of our CSR agenda, and 
responding to new ethical challenges and regulatory changes. 

Each year Marston’s publishes a Corporate Responsibility Report providing information on the many aspects of our corporate ethics, available at  
www.marstons.co.uk/responsibility.

Marston's PLC   Annual Report and Accounts 2014

45

Other Statutory Information continued

Environmental Impacts
Marston’s publishes detailed information on energy consumption, water usage and waste in its Corporate Responsibility Report. In recent years we have 
achieved considerable reductions in energy usage by replacing all the lighting in the public areas of our managed and franchised pubs with LED lighting. Water 
usage has been significantly reduced by installing water management systems in our managed pubs, and we are now rolling the same systems out across our 
franchised estate. We continue to aim to increase the percentage of waste being recycled (2014: 80.2% / 2013: 79.1%) and have signed up to WRAP’s Food and 
Hospitality Agreement to increase the amount of food recycling to 70% by the end of 2015. Currently 319 of our managed pubs recycle food waste (2013: 290).

In 2014 we made real time reporting of our energy consumption available for our pub managers and their area managers to track energy consumption by pub 
against targets. The system provides a continually refreshed dashboard on energy consumption compared to the expected level, by hour, day and week.

Fuel Types

Electricity and Gas
Petrol and diesel
Refrigerants – breweries
Refrigerants – pubs

Greenhouse Gas Emissions Intensity Ratio:

CO2e tonnes per £100,000 of turnover
– excluding pub refrigerant fugitive emissions, and LPG emissions (see note below)

2014

2013

CO2e tonnes

CO2e tonnes

121,533
8,259
50

101,809
7,399
118
4,161 (see note 3)

2014

17.36

16.54

2013

2012

See notes below

14.82

12.77

Note:
1. We reported on all the measured emissions sources required under the Companies Act 2006 (Strategic Report and Director’s Reports) Regulations 2013.
2. Data collected is in respect of the year ended 31 March 2014, the period for which our carbon emissions are reported under the Carbon Reduction 

Commitment Energy Efficiency Scheme. The conversion factors used are those published by Defra for 2013.
3. Refrigerant fugitive emissions and LPG emissions across our pub estate were not measured in 2013 and 2012.
4. The figures disclosed above for 2014 have been reviewed by BDO LLP.

This year electricity and gas consumption emissions have increased due to greater food sales, additional new-build pub-restaurants, and the conversion of 
tenanted pubs to franchised. Marston’s estate maintenance team constantly work to reduce energy and emissions in the pub estate. This year their projects have 
included installing LED lighting in all front of house areas, ambient air to cool our cellars rather than air conditioning, voltage optimisation, heating control 
systems and heat recovery systems.

Political donations
Our policy is not to make any donations for political purposes in the UK or to donate to EU political parties or incur EU political expenditure.

Financial instruments
The disclosures required in relation to the use of financial instruments by the Company together with details of our treasury policy and management are set out 
in note 20 to the financial statements on pages 76 to 79.

Auditors
PricewaterhouseCoopers LLP have indicated their willingness to continue as Auditors and their reappointment has been approved by the Audit Committee. 
Resolutions to reappoint them and to authorise the Directors to determine their remuneration will be proposed at the 2015 AGM.

Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. 
The financial position of the Group is described on pages 18 to 19. In addition, note 20 to the financial statements on pages 76 to 79 includes the Group’s 
objectives, policies and processes for managing its exposures to interest rate risk, foreign currency risk, counterparty risk, credit risk and liquidity risk. Details of 
the Group’s financial instruments and hedging activities are also provided in note 20.

The Board has a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable 
future. Accordingly, the financial statements set out on pages 48 to 89 and 92 to 98 have been prepared on the going concern basis.

Annual General Meeting
The AGM of the Company will be held at Wolverhampton Racecourse, Dunstall Park, Wolverhampton, WV6 0PE at 12 noon on 27 January 2015. The notice 
convening the meeting, together with details of the special business to be considered and explanatory notes for each resolution, is distributed separately to 
shareholders. It is also available at www.marstons.co.uk, where a copy can be viewed and downloaded. 

By order of the Board

Anne-Marie Brennan
Company Secretary
27 November 2014

46

Marston's PLC   Annual Report and Accounts 2014

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report, the Directors’ 
Remuneration Report and the financial statements in accordance with 
applicable law and regulations.

Each of the Directors, whose names and functions are listed on page 22 to 23 
confirm that, to the best of their knowledge:

•

•

the Group financial statements, which have been prepared in accordance 
with IFRS as adopted by the EU, give a true and fair view of the assets, 
liabilities, financial position and loss of the Group; and
the Strategic Report together with the Other Statutory Information 
includes a fair review of the development and performance of the 
business and the position of the Group, together with a description of the 
principal risks and uncertainties that it faces.

In accordance with Section 418, Directors’ reports shall include a statement, in the 
case of each Director in office at the date the Directors’ Report is approved, that:

(a)  so far as the Director is aware, there is no relevant audit information of 

which the Company’s Auditors are unaware; and

(b)  he/she has taken all the steps that he ought to have taken as a Director 
in order to make him/herself aware of any relevant audit information 
and to establish that the Company’s Auditors are aware of that 
information.

Ralph Findlay 
Chief Executive Officer 

Andrew Andrea
Chief Financial Officer

27 November 2014

Company law requires the Directors to prepare financial statements for each 
financial year. Under that law the Directors have prepared the Group financial 
statements in accordance with International Financial Reporting Standards 
(IFRS) as adopted by the European Union, and the Parent Company financial 
statements in accordance with United Kingdom Generally Accepted 
Accounting Practice (United Kingdom Accounting Standards and applicable 
law). Under company law the Directors must not approve the financial 
statements unless they are satisfied that they give a true and fair view of the 
state of affairs of the Group and the Company and of the profit or loss of the 
Group for that period. In preparing these financial statements, the Directors 
are required to:

•
select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and 

•

•

prudent;
state whether IFRS as adopted by the European Union and applicable UK 
Accounting Standards have been followed, subject to any material 
departures disclosed and explained in the Group and Parent Company 
financial statements respectively;
prepare the financial statements on the going concern basis unless it is 
inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that 
are sufficient to show and explain the Company’s transactions and disclose 
with reasonable accuracy at any time the financial position of the Company 
and the Group and enable them to ensure that the financial statements and 
the Directors’ Remuneration Report comply with the Companies Act 2006 
and, as regards the Group financial statements, Article 4 of the IAS Regulation. 
They are also responsible for safeguarding the assets of the Company and the 
Group and hence for taking reasonable steps for the prevention and detection 
of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the 
Company’s website. Legislation in the United Kingdom governing the 
preparation and dissemination of financial statements may differ from 
legislation in other jurisdictions.

The Directors consider that the Annual Report and Accounts, taken as a whole, 
is fair, balanced and understandable and provides the information necessary 
for shareholders to assess a the Group's performance, business model and 
strategy. 

Marston's PLC   Annual Report and Accounts 2014

47

Five Year Record

Underlying revenue

Underlying profit before taxation
Non-underlying items

Profit/(loss) before taxation
Taxation*

Profit/(loss) after taxation

Net assets

Earnings/(loss) per ordinary share
Non-underlying items

Underlying earnings per ordinary share

Dividend per ordinary share

2010 
(Restated)
(52 weeks)
£m 

650.7

70.9 
(21.0)

49.9 
(4.3)

45.6 

2011 
(Restated)
(52 weeks)
£m 

682.2 

75.9 
0.4 

76.3 
(10.8)

65.5 

2012 
(Restated)
(52 weeks)
£m 

719.7

86.7
(223.3)

(136.6)
25.5

(111.1)

2013 
(Restated)
(53 weeks)
£m 

782.9

86.1
(18.6)

67.5
(10.6)

56.9

2014 
(52 weeks)
£m 

787.6

83.0
(142.2)

(59.2)
8.5

(50.7)

780.5 

817.6 

762.0

841.9

759.0

8.0p
1.7p

9.7p

5.8p

11.5p
(0.9)p

10.6p

(19.5)p
31.7p

12.2p

10.0p
2.0p

12.0p

(8.9)p
20.6p

11.7p

5.8p

6.1p

6.4p

6.7p

*  Taxation includes the tax impact on non-underlying items together with non-underlying credits of £3.1 million in 2013, £2.1 million in 2012, £5.0 million in 2011 and £2.1 million in 2010 in respect 

of the change in corporation tax rate.

48

Marston's PLC   Annual Report and Accounts 2014

Independent Auditors’ Report to the members of Marston’s PLC

Report on the Group financial statements
Our opinion
In our opinion, Marston’s PLC’s Group financial statements (the ‘financial statements’):

•
•
•

give a true and fair view of the state of the Group’s affairs as at 4 October 2014 and of its loss and cash flows for the period then ended;
have been properly prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.

What we have audited
The financial statements comprise:

•
•
•
•
•

the Group Balance Sheet as at 4 October 2014;
the Group Income Statement and Group Statement of Comprehensive Income for the period then ended;
the Group Cash Flow Statement for the period then ended;
the Group Statement of Changes in Equity for the period then ended; and
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report and Accounts (the ‘Annual Report’), rather than in the notes to the financial 
statements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRS as adopted by the European Union.

Our audit approach
Overview

Materiality

Audit scope

Areas of focus

Overall Group materiality: £4.2 million which represents 5% of profit before tax and non-underlying items.

The Group audit is performed on a consolidated basis and the level of work performed over each financial statement line item is 
determined based on the size and nature of the transactions and balances within that line item. 

Valuation of the estate

•
• Disclosure of items as ‘non-underlying’

• Accounting for uncertain tax positions
•

Provisioning for onerous property leases

The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where 
the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future 
events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether 
there is evidence of bias by the Directors that may represent a risk of material misstatement due to fraud. 

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as ‘areas of focus’ 
in the table below together with an explanation of how we tailored our audit to address these specific areas. This is not a complete list of all risks identified by 
our audit. 

Area of focus

How our audit addressed the area of focus

Valuation of the estate (notes 1, 12 and 15)
We focused on the Directors’ annual assessment of the carrying value of land and 
buildings because properties are a significant item on the balance sheet and there 
are complex and subjective assumptions used in the valuations, including the 
future expected performance of pubs and multiples applied.

We obtained the Directors’ valuation and impairment analysis and discussed with 
the Group’s estates team. We also took into account the impact of changes in 
macroeconomic conditions, pub performance and recent market transactions 
and their associated multiples.
We verified management’s assumptions on future earnings and multiples using 
recent market transactions data and considered the impact of movements in key 
assumptions.
Where material adjustments to valuations of specific assets occurred we agreed 
the revaluation adopted by management to external market information or third 
party evidence supporting the value.

Marston's PLC   Annual Report and Accounts 2014

49

Independent Auditors’ Report to the members of Marston’s PLC continued

Area of focus

How our audit addressed the area of focus

Disclosure of items as ‘non-underlying’ (notes 1 and 4)
The financial statements include certain items which are disclosed as ‘non-
underlying’, such as non-core estate disposal and reorganisation costs, the loss on 
the portfolio disposal of pubs and the results from the ongoing management of 
these pubs, recognition of onerous lease provisions and associated leasehold 
impairments, costs relating to the buy-back of securitised debt, movements in the 
fair value of interest rate swaps and the credit in respect of closing the defined 
benefit pension plan to future accrual. Management have included these items as 
non-underlying using the criteria explained in their accounting policy which is 
disclosed in note 1 to the financial statements. 
We focused on this area because non-underlying items are not defined by IFRS as 
adopted by the European Union and it therefore requires judgement by the 
Directors to identify such items. Consistency in identifying and disclosing items as 
non-underlying is important to maintain comparability of the results with previous 
years.

We assessed the appropriateness of the Group’s accounting policy and whether 
those items disclosed as non-underlying were consistent with the accounting 
policy and the approach taken in previous accounting periods. We also 
considered an appropriate threshold to apply to non-underlying items based on 
the financial statement line items that were affected. For example, property items 
are considered by management to have a higher threshold for disclosure as non-
underlying and we considered whether this was appropriate in the circumstances. 
We assessed whether other non-recurring items should have been classified as 
non-underlying and discussed this with the Directors and the Audit Committee to 
check whether items meeting the criteria in the Group’s accounting policy had 
been identified and whether the treatment was consistent year on year.
Specifically in relation to the revenue and costs in respect of the ongoing 
management of the portfolio of 202 pubs disposed of in the period, we tested 
that the trade relating to the pubs disposed of, and only the pubs disposed of, was 
disclosed as non-underlying.

Accounting for uncertain tax positions (note 1)
The Group has a number of outstanding corporate and indirect tax positions 
where recognition in the financial statements is judgemental given the 
uncertainty of settlement.
These uncertainties arise because these matters have not yet been resolved with 
HM Revenue & Customs and the Directors have had to make material judgements 
about the recognition or non-recognition of the benefits associated with the tax 
positions.

Provisioning for onerous property leases (notes 4 and 24)
We focused in particular on the provisions for onerous property leases as they 
represented an area of significant judgement, such as the timing and rate of future 
sub-let agreements that may be possible for each property and the expected 
level of dilapidations that would be payable at the end of the lease. 

We examined correspondence with HM Revenue & Customs and any legal 
challenges relevant to the individual circumstances of each case. We assessed the 
position taken by the Directors in respect of these uncertainties. We evaluated the 
appropriateness of the recognition or non-recognition of the benefits or liabilities 
associated with these tax positions, and the treatment of any related interest.

We tested the underlying calculations of the required provision and agreed key 
inputs to contractual terms for a sample of properties. 
We also compared key assumptions used such as discount rate and inflation rate 
to market information and discussed key judgements with management, 
considering alternative positions where appropriate and undertaking sensitivity 
analysis to model the impact on the provision where a range of appropriate 
outcomes existed, for example in relation to discount rates and sub-let 
assumptions.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into 
account the operational structure of the Group, the accounting processes and controls, and the industry in which the Group operates. 

The Group is structured along four business lines being Destination and Premium, Taverns, Leased and Brewing, together with Group Services. The Group 
financial statements are a consolidation of subsidiaries and special purpose entities, principally comprising the Group’s operating businesses, property 
companies, securitisation vehicles, holding companies and an insurance company.

In establishing the overall approach to the Group audit we considered the consolidated trial balance for the Group as a whole and designed our audit testing for each 
financial statement line item based on the size and nature of the transactions and balances that aggregated to form that line item, and our assessment of the risk of 
material misstatement. We used our professional judgement to determine the nature and extent of testing required over each line item in the financial statements. 

Materiality
The scope of our audit is influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative 
considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of 
misstatements, both individually and on the financial statements as a whole. 

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall group materiality

£4.2 million (2013: £4.5 million).

How we determined it

5% of profit before tax and non-underlying items.

Rationale for benchmark applied We believe that underlying profit before tax provides us with a consistent year on year basis for determining materiality by 

eliminating the non-recurring disproportionate impact of those items disclosed as ‘non-underlying’.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.2 million (2013: £0.2 million) as well as 
misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Going concern
Under the Listing Rules we are required to review the Directors’ statement, set out on page 46, in relation to going concern. We have nothing to report having 
performed our review.

As noted in the Directors’ statement, the Directors have concluded that it is appropriate to prepare the financial statements using the going concern basis of accounting. 
The going concern basis presumes that the Group has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the 
date the financial statements were signed. As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate.

However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s ability to continue as a going concern.

50

Marston's PLC   Annual Report and Accounts 2014

Other required reporting
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial statements are prepared is 
consistent with the financial statements.

ISAs (UK & Ireland) reporting

Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:

• 

•

• 

Information in the Annual Report is:
 – materially inconsistent with the information in the audited financial statements; or
 – apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group

We have no exceptions to report arising 
from this responsibility.

acquired in the course of performing our audit; or

 – is otherwise misleading.

The statement given by the Directors on page 47, in accordance with provision C.1.1 of the UK Corporate 
Governance Code (‘the Code’), that they consider the Annual Report taken as a whole to be fair, balanced and 
understandable and provides the information necessary for members to assess the Group’s performance, 
business model and strategy is materially inconsistent with our knowledge of the Group acquired in the course 
of performing our audit.

We have no exceptions to report arising 
from this responsibility.

The section of the Annual Report on pages 28 to 29, as required by provision C.3.8 of the Code, describing the work of
the Audit Committee does not appropriately address matters communicated by us to the Audit Committee.

We have no exceptions to report arising 
from this responsibility.

Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our 
audit. We have no exceptions to report arising from this responsibility. 

Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are not made. 
We have no exceptions to report arising from this responsibility. 

Corporate governance statement
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the Parent Company’s compliance with nine 
provisions of the UK Corporate Governance Code. We have nothing to report having performed our review. 

Responsibilities for the financial statements and the audit
Our responsibilities and those of the Directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 47, the Directors are responsible for the preparation of the financial 
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in 
accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the 
Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other 
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial 
statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: 

• whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; 
•
•

the reasonableness of significant accounting estimates made by the Directors; and 
the overall presentation of the financial statements. 

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the 
disclosures in the financial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to 
provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a 
combination of both. 

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to 
identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the 
audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Other matter
We have reported separately on the Parent Company financial statements of Marston’s PLC for the 52 week period ended 4 October 2014 and on the information 
in the Directors’ Remuneration Report that is described as being audited. 

Mark Smith (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham

27 November 2014

Marston's PLC   Annual Report and Accounts 2014

51

Group Income Statement
For the 52 weeks ended 4 October 2014

Revenue
Operating expenses*

Operating profit

Finance costs
Finance income
Movement in fair value of interest rate swaps

Net finance costs

Profit/(loss) before taxation
Taxation

Profit/(loss) for the period attributable to 
equity shareholders

(Loss)/earnings per share:
Basic (loss)/earnings per share
Basic underlying earnings per share 
Diluted (loss)/earnings per share
Diluted underlying earnings per share

Note

2, 3, 4

3

2, 4

6

6

4, 6

4, 6

4, 7

9

9

9

9

2014

Non- 
underlying 
 items 
 £m 

27.7
(134.7)

(107.0)

(27.0)
–
(8.2)

(35.2)

(142.2)
24.8

Underlying 
items  
£m 

787.6
(631.5)

156.1

(73.4)
0.3
–

(73.1)

83.0
(16.3)

Total 
 £m 

815.3
(766.2)

49.1

(100.4)
0.3
(8.2)

(108.3)

(59.2)
8.5

Underlying 
  items  
£m 

782.9
(614.7)

168.2

(83.8)
1.7
–

(82.1)

86.1
(17.8)

2013 
(Restated)

Non- 
underlying 
 items 
 £m 

–
(21.6)

(21.6)

(0.5)
–
3.5

3.0

(18.6)
7.2

Total  
 £m   

782.9
(636.3)

146.6

(84.3)
1.7
3.5

(79.1)

67.5
(10.6)

66.7

(117.4)

(50.7)

68.3

(11.4)

56.9

Group Statement of Comprehensive Income
For the 52 weeks ended 4 October 2014

(Loss)/profit for the period

Items of other comprehensive income that may subsequently be reclassified to profit or loss
(Losses)/gains arising on cash flow hedges
Transfers to the income statement on cash flow hedges
Tax on items that may subsequently be reclassified to profit or loss

Items of other comprehensive income that will not be reclassified to profit or loss
Remeasurement of retirement benefits
Unrealised surplus on revaluation of properties
Reversal of past revaluation surplus
Tax on items that will not be reclassified to profit or loss

Other comprehensive income for the period

Total comprehensive (expense)/income for the period

(8.9)p
11.7p
(8.9)p
11.6p

10.0p
12.0p
9.9p
11.9p

2013 
(Restated)
£m 

56.9

24.9
24.7
(15.0)

34.6

5.9
2.1
–
14.1

22.1

56.7

2014 
£m 

(50.7)

(36.4)
39.0
(0.5)

2.1

(12.5)
16.4
(3.4)
0.8

1.3

3.4

(47.3)

113.6

*  During the current 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. Further 
detail is provided in note 4 to the financial statements. 

52

Marston's PLC   Annual Report and Accounts 2014

Group Cash Flow Statement
For the 52 weeks ended 4 October 2014

Operating activities
Underlying operating profit 
Depreciation and amortisation

Underlying EBITDA
Non-underlying operating items

EBITDA
Working capital movement
Non-cash movements
Increase/(decrease) in provisions and other non-current liabilities
Difference between defined benefit pension contributions paid and amounts credited/charged
Income tax paid

Net cash inflow from operating activities

Investing activities
Interest received
Sale of property, plant and equipment and assets held for sale
Purchase of property, plant and equipment and intangible assets
Movement in other non-current assets

Net cash inflow/(outflow) from investing activities

Financing activities
Equity dividends paid
Interest paid
Arrangement costs of bank facilities
Arrangement costs of other lease related borrowings
Swap termination costs
Proceeds of ordinary share capital issued
Proceeds from sale of own shares
Repayment of securitised debt
Advance of bank loans
Capital element of finance leases repaid
Advance of other lease related borrowings
Advance of other borrowings

Net cash outflow from financing activities

Net increase in cash and cash equivalents

2014 
£m 

156.1
36.3

192.4
(107.0)

85.4
(23.7)
78.1
22.8
(26.0)
(8.8)

127.8

0.5
143.6
(142.6)
1.3

2.8

(37.1)
(74.6)
(1.9)
(3.9)
(25.0)
0.2
0.5
(104.0)
21.0
(0.1)
53.5
120.0

(51.4)

79.2

2013 
(Restated)
£m 

168.2
35.8

204.0
(20.3)

183.7
11.2
2.4
(4.7)
(15.1)
(8.1)

169.4

0.5
44.7
(150.8)
1.5

(104.1)

(35.3)
(78.3)
(0.1)
(7.0)
–
1.1
–
(22.7)
16.0
(0.3)
94.6
–

(32.0)

33.3

Note

29

29

8

30

Marston's PLC   Annual Report and Accounts 2014

53

Group Balance Sheet
As at 4 October 2014

ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Retirement benefit surplus
Other non-current assets

Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents*

Assets held for sale

LIABILITIES
Current liabilities
Borrowings*
Derivative financial instruments
Trade and other payables
Current tax liabilities

Non-current liabilities
Borrowings
Derivative financial instruments
Retirement benefit obligations
Deferred tax liabilities
Other non-current liabilities
Provisions for other liabilities and charges

Net assets

Shareholders’ equity
Equity share capital
Share premium account
Revaluation reserve
Capital redemption reserve
Hedging reserve
Own shares
Retained earnings

Total equity

 4 October 
 2014 
£m 

 5 October 
 2013 
£m 

Note

10

11

12

22

25

13

14

16

18

30

15

17

18

21

17

18

25

22

23

24

27

28

28

224.2
25.1
1,990.0
49.1
7.8
11.5

2,307.7

23.0
72.9
–
173.3

269.2

224.2
24.1
2,063.6
47.3
–
12.8

2,372.0

21.5
69.0
6.8
94.1

191.4

38.3

59.9

(144.0)
(19.5)
(157.0)
(14.2)

(334.7)

(1,227.5)
(120.7)

–

(131.3)
(2.9)
(39.1)

(1,521.5)

759.0

44.4
334.0
545.9
6.8
(92.9)
(126.8)
47.6

759.0

(22.7)
(6.8)
(174.3)
(25.9)

(229.7)

(1,262.4)
(134.6)
(5.1)
(135.5)
(0.5)
(13.6)

(1,551.7)

841.9

44.4
333.8
575.3
6.8
(95.0)
(130.9)
107.5

841.9

The financial statements on pages 52 to 89 were approved by the Board on 27 November 2014 and signed on its behalf by: 

Ralph Findlay 
Chief Executive Officer
27 November 2014

*  During the current period the provider of the securitisation’s liquidity facility, 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 amount drawn down of £120.0 
million is included within cash and cash equivalents and the corresponding liability is included within borrowings. 

54

Marston's PLC   Annual Report and Accounts 2014

Group Statement of Changes in Equity
For the 52 weeks ended 4 October 2014

At 6 October 2013

Loss for the period
Remeasurement of retirement benefits
Tax on remeasurement of retirement benefits
Losses on cash flow hedges
Transfers to the income statement on  

cash flow hedges

Tax on hedging reserve movements
Property revaluation
Property impairment
Deferred tax on properties

Total comprehensive income/(expense)

Share-based payments
Tax on share-based payments
Issue of shares
Sale of own shares
Disposal of properties
Tax on disposal of properties
Transfer to retained earnings
Dividends paid

Total transactions with owners

Equity 
share 
capital 
£m 

44.4

Share 
premium 
 account 
£m 

333.8

Revaluation
reserve 
£m 

Capital
redemption
reserve
£m 

575.3

6.8

–
–
–
–

–
–  
–  
–  
–  

–  

–  
–  
–  
–
–
–
–
–

–

–  
–  
–  
–  

–  
–  
–  
–  
–  

–  

–  
–  
0.2
–  
–  
–  
–  
–  

0.2

–  
–  
–  
–  

–  
–  
16.4
(3.4)
(2.0)

11.0

–  
–  
–  
–  
(44.6)
4.7
(0.5)
–  

(40.4)

–  
–  
–  
–  

–  
–  
–  
–  
–  

–  

–  
–  
–  
–  
–  
–  
–  
–  

–  

Hedging 
 reserve 
£m 

(95.0)

–  
–  
–  
(36.4)

39.0
(0.5)
–  
–  
–  

2.1

–  
–  
–  
–  
–  
–  
–  
–  

–  

Own 
 shares 
£m 

(130.9)

–  
–  
–  
–  

–  
–  
–  
–  
–  

–  

–  
–  
–  
4.1
–  
–  
–  
–  

4.1

At 4 October 2014

44.4

334.0

545.9

6.8

(92.9)

(126.8)

At 30 September 2012

Profit for the period
Remeasurement of retirement benefits
Tax on remeasurement of retirement benefits
Gains on cash flow hedges
Transfers to the income statement on 

cash flow hedges

Tax on hedging reserve movements
Property revaluation
Deferred tax on properties

Total comprehensive income

Share-based payments
Tax on share-based payments
Issue of shares
Disposal of properties
Transfer to retained earnings
Dividends paid

Total transactions with owners

Equity 
share 
capital 
£m 

44.3 

Share 
premium 
 account 
£m 

332.8

Revaluation
 reserve 
£m 

560.4

Capital 
redemption 
reserve 
£m 

6.8

Hedging 
 reserve 
£m 

(129.6)

Own 
 shares 
£m 

(130.9)

–  
–  
–  
–  

–  
–  
–  
–  

–  

–  
–  
0.1
–  
–  
–  

0.1

–  
–  
–  
–  

–  
–  
–  
–  

–  

–  
–  
1.0
–  
–  
–  

1.0

–  
–  
–  
–  

–  
–  
2.1
15.6

17.7

–  
–  
–  
(2.1)
(0.7)
–  

(2.8)

–  
–  
–  
–  

–  
–  
–  
–  

–  

–  
–  
–  
–  
–  
–  

–  

–  
–  
–  
24.9

24.7
(15.0)
–  
–  

34.6

–  
–  
–  
–  
–  
–  

–  

–  
–  
–  
–  

–  
–  
–  
–  

–  

–  
–  
–  
–  
–  
–  

–  

Retained 
earnings 
£m 

107.5

(50.7)
(12.5)
2.8
–  

–  
–  
–  
–  
–  

(60.4)

0.7
0.1
–  
(3.6)
44.6
(4.7)
0.5
(37.1)

0.5

47.6

Retained 
earnings 
(Restated)
£m 

78.2

56.9
5.9
(1.5)
–  

–  
–  
–  
–  

61.3

0.2
0.3
–  
2.1
0.7
(35.3)

(32.0)

Total 
equity 
£m 

841.9

(50.7)
(12.5)
2.8
(36.4)

39.0
(0.5)
16.4
(3.4)
(2.0)

(47.3)

0.7
0.1
0.2
0.5
–  
–  
–  
(37.1)

(35.6)

759.0

Total 
equity 
(Restated)
£m 

762.0

56.9
5.9
(1.5)
24.9

24.7
(15.0)
2.1
15.6

113.6

0.2
0.3
1.1
–  
–  
(35.3)

(33.7)

At 5 October 2013

44.4

333.8

575.3

6.8

(95.0)

(130.9)

107.5

841.9

Further detail in respect of the Group’s equity is provided in notes 27 and 28 to the financial statements.

Marston's PLC   Annual Report and Accounts 2014

55

Notes
For the 52 weeks ended 4 October 2014

1  Accounting policies

Basis of preparation
These consolidated financial statements for the 52 weeks ended 4 October 2014 (2013: 53 weeks ended 5 October 2013) have been prepared in accordance with 
IFRS and International Financial Reporting Interpretations Committee (IFRIC) and Standing Interpretations Committee (SIC) interpretations adopted by the 
European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared 
under the historical cost convention as modified by the revaluation of certain items, principally land and buildings, derivative financial instruments, retirement 
benefits and share-based payments.

New standards and interpretations
The International Accounting Standards Board (IASB) and IFRIC have issued the following new or revised standards and interpretations with an effective date for 
financial periods beginning on or after the dates disclosed below. These standards and interpretations have not yet been adopted by the Group.

IFRS 9

Financial Instruments 

New accounting standard

IFRS 10 

Consolidated Financial Statements  

New accounting standard

IFRS 11 

Joint Arrangements 

New accounting standard

IFRS 12 

Disclosure of Interests in Other Entities  

IFRS 14

New accounting standard

Regulatory Deferral Accounts 
New accounting standard

IFRS 15

Revenue from Contracts with Customers 

New accounting standard

IAS 16

Property, Plant and Equipment 

Amendments regarding the clarification of acceptable methods of depreciation and amortisation 
Amendments bringing bearer plants into the scope of IAS 16

IAS 19

Employee Benefits 

Amended to clarify the requirements that relate to how contributions from employees or third parties that are linked to 
service should be attributed to periods of service

IAS 27

Consolidated and Separate Financial Statements 

Reissued as IAS 27 Separate Financial Statements (as amended in 2011)

IAS 28

Investments in Associates 

Reissued as IAS 28 Investments in Associates and Joint Ventures (as amended in 2011)

IAS 32

Financial Instruments: Presentation 

Amendments relating to the offsetting of assets and liabilities

IAS 36

Impairment of Assets 

Amendments arising from Recoverable Amount Disclosures for Non-Financial Assets

IAS 38

Intangible Assets 

Amendments regarding the clarification of acceptable methods of depreciation and amortisation

IAS 39

Financial Instruments: Recognition and Measurement 

Amendments for novations of derivatives

IAS 41

Agriculture 

Amendments bringing bearer plants into the scope of IAS 16 

IFRIC 21

Levies

1 January 2018

1 January 2013*

1 January 2013*

1 January 2013*

1 January 2016

1 January 2017

1 January 2016 
1 January 2016

1 July 2014

1 January 2013*

1 January 2013*

1 January 2014

1 January 2014

1 January 2016

1 January 2014

1 January 2016

1 January 2014

*  As the EU has endorsed these standards for financial periods beginning on or after 1 January 2014, they have not been adopted by the Group in these 

financial statements.

The IASB have also issued a number of minor amendments to standards as part of their Annual Improvements to IFRS.

The Directors are considering the impact of the adoption of the above new standards and amendments on the Group.

Basis of consolidation
The consolidated financial statements incorporate the audited financial statements of Marston’s PLC and all of its subsidiary undertakings. The results of new 
subsidiary undertakings are included in the Group accounts from the date on which control transferred to the Group or, in the case of disposals, up to the 
effective date of disposal. Transactions between Group companies are eliminated on consolidation.

56

Marston's PLC   Annual Report and Accounts 2014

1  Accounting policies continued

The Group has applied the purchase method in accounting for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the 
consideration paid and deferred. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the 
acquisition date. Acquisition costs are expensed as incurred. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net 
assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group’s share of the identifiable net assets of the subsidiary 
acquired, the difference is recognised immediately in the income statement.

The consolidated financial statements also incorporate the results of Marston’s Issuer PLC, a company set up with the sole purpose of issuing debt secured on 
assets owned by the Group. The Directors of Marston’s PLC consider this company meets the definition of a special purpose entity under SIC 12 ‘Consolidation 
– Special Purpose Entities’ and hence for the purpose of the consolidated financial statements it has been treated as a subsidiary undertaking. 

Revenue and other operating income
Revenue represents the value of goods (principally drink and food) and services (principally accommodation, gaming machines and third party brewing and 
packaging) supplied to customers, and rent receivable from licensed properties. Revenue from drink, food, accommodation, brewing and packaging is 
recognised at the point at which the goods or services are provided. Gaming machine income is recognised as earned. Rental income is recognised in the 
period to which it relates. Revenue is recorded net of discounts, intra group transactions, VAT and excise duty relating to the brewing and packaging of certain 
products. Other operating income mainly comprises rent receivable from unlicensed properties, which is recognised in the period to which it relates.

Operating segments
For segment reporting purposes the Group is considered to have five distinguishable operating segments, being Destination and Premium, Taverns, Leased, 
Brewing and Group Services. This mirrors the Group’s internal reporting structure, and reflects the different distribution channels, customer profiles and nature 
of products and services provided within each segment. An element of Group Services’ costs is allocated to each of the trading segments. 

The operating segments set out in note 2 are consistent with the internal reporting provided to the chief operating decision maker. For the purposes of IFRS 8 
the chief operating decision maker has been identified as the Executive Directors. 

Acquired businesses are treated as separate reporting segments, where material, until they have been fully integrated with the Group’s operating segments.

Non-underlying items
In order to illustrate the underlying trading performance of the Group, presentation has been made of performance measures excluding those items which it is 
considered would distort the comparability of the Group’s results. These non-underlying items comprise exceptional items and other adjusting items. 

Exceptional items are defined as those items that, by virtue of their nature, size or expected frequency, warrant separate additional disclosure in the financial 
statements in order to fully understand the underlying performance of the Group. As management of the freehold and leasehold property estate is an essential 
and significant area of the business, the threshold for classification of property related items as exceptional is higher than other items.

Other adjusting items comprise the revenue and costs in respect of the ongoing management of the portfolio of 202 pubs disposed of in the period. Following 
their disposal these pubs no longer form part of the Group’s core activities and the Group does not have the ability to make strategic decisions in respect of 
them. As such it is considered appropriate to exclude the results of these pubs from the Group’s underlying results.

Intangible assets
Intangible assets are carried at cost less accumulated amortisation and any impairment losses. Intangible assets arising on acquisition of subsidiaries are 
recognised separately from goodwill if the fair value of these assets can be identified separately and measured reliably.

Amortisation is calculated on a straight-line basis over the estimated useful life of the intangible asset. Where the useful life of the asset is considered to be 
indefinite no annual amortisation is provided but the asset is subject to annual impairment reviews. Impairment reviews are carried out more frequently if 
events or changes in circumstances indicate that the carrying value of an asset may be impaired.

The useful lives of the Group’s intangible assets are:

Acquired brands  
Lease premiums 
Computer software 
Development costs 

Indefinite
Life of the lease
5 to 15 years
10 years

Any impairment of carrying value is charged to the income statement.

Research and development expenditure
All expenditure on the research phase of an internal project is expensed as incurred.

Development costs are recognised as an intangible asset when the following conditions are met:

It is technically feasible to complete the intangible asset so that it will be available for use;

•
• Management intends to complete the asset and use or sell it;
•
•
•
•

There is an ability to use or sell the asset;
It can be demonstrated how the asset will generate probable future economic benefits;
Adequate technical, financial and other resources to complete the development and to use or sell the asset are available; and
The expenditure attributable to the asset during its development can be reliably measured.

Marston's PLC   Annual Report and Accounts 2014

57

Notes continued 
For the 52 weeks ended 4 October 2014

1  Accounting policies continued

Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously recognised as an 
expense are not recognised as an asset in a subsequent period.

Goodwill
Goodwill arising on acquisitions is capitalised and represents the excess of the fair value of the consideration given over the fair value of the identifiable net 
assets and liabilities acquired. Goodwill is not amortised but instead is reviewed for impairment on an annual basis, or more frequently if events or changes in 
circumstances indicate that the carrying value may be impaired. Any impairment is recognised immediately in the income statement.

For the purposes of impairment testing, goodwill is allocated to cash generating units that are consistent with the Group’s operating segments.

Property, plant and equipment
•

Freehold and leasehold properties are initially stated at cost and subsequently at valuation. Plant and machinery and fixtures, fittings, tools and equipment 
are stated at cost.

Freehold and long leasehold buildings are depreciated to residual value over 50 years.
Short leasehold properties are depreciated over the life of the lease.
Plant and machinery and fixtures, fittings, tools and equipment are depreciated over periods ranging from 3 to 15 years.

• Depreciation is charged to the income statement on a straight-line basis to provide for the cost of the assets less residual value over their useful lives.
•
•
•
• Own labour and interest costs directly attributable to capital projects are capitalised.
•

Land is not depreciated.

Residual values and useful lives are reviewed and adjusted if appropriate at each balance sheet date.

Properties are revalued by qualified valuers on a sufficiently regular basis using open market value so that the carrying value of an asset does not differ 
significantly from its fair value at the balance sheet date. Substantially all of the Group’s properties have been externally valued in accordance with the Royal 
Institution of Chartered Surveyors’ Red Book. These valuations are performed directly by reference to observable prices in an active market or recent market 
transactions on arm’s length terms. Internal valuations are performed on the same basis.

The estate is reviewed for indication of impairment at each reporting date, using a process focusing on areas of risk and business performance throughout the 
portfolio to identify any exposure. 

Impairment losses are charged to the revaluation reserve to the extent that a previous gain has been recorded, and thereafter to the income statement. 
Surpluses on revaluation are recognised in the revaluation reserve, except to the extent that they reverse previously charged impairment losses, in which case 
the reversal is recorded in the income statement.

Disposals of property, plant and equipment
Profit/loss on disposal of property, plant and equipment represents net sale proceeds less the carrying value of the assets. Any element of the revaluation 
reserve relating to the property disposed of is transferred to retained earnings at the date of sale.

Impairment
If there are indications of impairment or reversal of impairment, an assessment is made of the recoverable amount. An impairment loss is recognised where the 
recoverable amount is lower than the carrying value of assets, including goodwill. The recoverable amount is the higher of value in use and fair market value less 
costs to sell. 

Where there is an indication that any previously recognised impairment losses no longer exist or have decreased, a reversal of the loss is made if there has been 
a change in the estimates used to determine the recoverable amounts since the last impairment loss was recognised. The carrying amount of the asset is 
increased to its recoverable amount only up to the carrying amount that would have resulted, net of depreciation or amortisation, had no impairment loss been 
recognised for the asset in prior periods. The reversal is recognised in the income statement unless the asset is carried at revalued amount. The reversal of an 
impairment loss on a revalued asset is recognised in other comprehensive income and increases the revaluation surplus for that asset. However, to the extent 
that an impairment loss on the same revalued asset was previously recognised in the income statement, the reversal of that impairment loss is recognised in the 
income statement. The depreciation charge is adjusted in future periods to allocate the asset’s revised carrying value, less any residual value, on a systematic 
basis over its remaining useful life. There is no reversal of impairment losses relating to goodwill.

Acquired brands are reviewed for impairment on a portfolio basis.

Leases
Leases are classified as finance leases if the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are 
classified as operating leases.

The cost of assets held under finance leases is included within property, plant and equipment and depreciation is charged in accordance with the accounting 
policy for each class of asset concerned. The corresponding capital obligations under these leases are shown as liabilities. The finance charge element of rentals 
is charged to the income statement and classified within finance costs as incurred.

Rental costs under operating leases, including lease incentives, are charged to the income statement on a straight-line basis over the term of the lease. Similarly, 
income receivable under operating leases is credited to the income statement on a straight-line basis over the term of the lease.

58

Marston's PLC   Annual Report and Accounts 2014

1  Accounting policies continued

Obligations arising from sale and leaseback arrangements with repurchase options that do not fall within the scope of IAS 17 ‘Leases’ are classified as other lease 
related borrowings and accounted for in accordance with IAS 39 ‘Financial Instruments: Recognition and Measurement’.

Inventories
Inventories are stated at the lower of cost and net realisable value. Raw materials are valued on a ‘first in, first out’ basis, with the exception of hops which are 
valued at average cost. Finished goods and work in progress include direct materials, labour and a proportion of attributable overheads.

Assets held for sale
Assets, typically properties and related fixtures and fittings, are categorised as held for sale when the value of the asset will be recovered through a sale 
transaction rather than continuing use. This condition is met when the sale is highly probable, the asset is available for immediate sale in its present condition 
and is being actively marketed. In addition, the Group must be committed to the sale and completion should be expected to occur within one year from the 
date of classification. Assets held for sale are valued at the lower of carrying value and fair value less costs to sell, and are no longer depreciated.

Financial instruments
The Group classifies its financial assets in one of the following two categories: at fair value through profit or loss and loans and receivables. The Group classifies 
its financial liabilities in one of the following two categories: at fair value through profit or loss and other financial liabilities. The classification depends on the 
purpose for which the financial instruments were acquired. Management determines the classification of the Group’s financial instruments at initial recognition.

Financial instruments at fair value through profit or loss
Derivatives are categorised as financial instruments at fair value through profit or loss unless they are designated as part of a hedge relationship. The Group 
holds no other financial instruments at fair value through profit or loss. 

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group’s loans and 
receivables comprise trade receivables, other receivables, trade loans and cash and cash equivalents in the balance sheet. Loans and receivables are carried at 
amortised cost using the effective interest method.

Other financial liabilities
Non-derivative financial liabilities are classified as other financial liabilities. The Group’s other financial liabilities comprise borrowings, trade payables and other 
payables. Other financial liabilities are carried at amortised cost using the effective interest method.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has 
transferred substantially all risks and rewards of ownership. 

The Group assesses whether there is objective evidence that a financial asset is impaired at each balance sheet date.

It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken.

Derivative financial instruments
The only derivative financial instruments that the Group enters into are interest rate swaps. The purpose of these transactions is to manage the interest rate risk 
arising from the Group’s operations and its sources of finance.

Derivatives are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured at their fair value at each 
balance sheet date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive 
income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within exceptional finance income or costs. 

Gains or losses arising from changes in the fair value of derivatives which are not designated as part of a hedging relationship are presented in the income 
statement within exceptional finance income or costs in the period in which they arise.

The fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months and 
as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. The fair values of derivatives which are not designated as 
part of a hedging relationship are classified as current assets or liabilities. Accrued interest is recognised separately in current assets or liabilities as appropriate.

At the inception of a hedging transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk 
management objectives and strategy for undertaking the hedging transaction. The Group also documents its assessment, both at hedge inception and on an 
ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of 
hedged items.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity 
at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is 
no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within exceptional 
finance income or costs.

Marston's PLC   Annual Report and Accounts 2014

59

Notes continued 
For the 52 weeks ended 4 October 2014

1  Accounting policies continued

Amounts that have been recognised in other comprehensive income in respect of cash flow hedges are reclassified from equity to profit and loss as a 
reclassification adjustment in the same period or periods during which the hedged forecast cash flow affects profit or loss.

Trade receivables and other receivables
Trade receivables and other receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. A 
provision for impairment of trade receivables and other receivables is established when there is objective evidence that the Group will not be able to collect all 
amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or 
financial reorganisation and default or delinquency in payments are considered indicators that the trade or other receivable is impaired. The amount of the 
provision is the difference between the asset’s carrying amount and the estimated future cash flows. The carrying amount of the asset is reduced through the 
use of an allowance account, and the amount of the loss is recognised in the income statement within other net operating charges. When a trade or other 
receivable is uncollectable, it is written off against the allowance account for trade or other receivables. Subsequent recoveries of amounts previously written off 
are credited against other net operating charges in the income statement.

Trade loans
In common with other major brewers, the Group makes trade loans to publicans who purchase the Group’s beer. These trade loans are classified as other 
non-current assets in the balance sheet and are recognised initially at fair value and subsequently at amortised cost less provision for impairment. Significant 
trade loans are secured against the property of the loan recipient.

Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits on call with banks. Bank overdrafts are shown within borrowings in current liabilities. For the 
purpose of the cash flow statement, cash and cash equivalents are as defined above, net of outstanding bank overdrafts.

Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between 
the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective 
interest method.

Preference shares are classified as liabilities. The dividends on these preference shares are recognised in the income statement as finance costs.

Borrowing costs are recognised as an expense in the period in which they are incurred, except for gross interest costs incurred on the financing of major 
projects, which are capitalised until the time that the projects are available for use.

Trade payables and other payables
Trade payables and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Employee benefits
Pension costs for the Group’s defined benefit pension plan are determined by the Projected Unit Credit Method, with actuarial calculations being carried out at 
each period end date. Costs are recognised in the income statement within both operating expenses and net finance costs. The current service cost, past 
service cost and gains or losses arising from settlements are included within operating expenses. The net interest on the net defined benefit asset/liability and 
the administrative expenses paid from plan assets are included in net finance costs.

Actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions are recognised in full in the period in which they occur in the 
statement of comprehensive income. The return on plan assets, excluding amounts included in the net interest on the net defined benefit asset/liability, is also 
recognised in other comprehensive income.

The asset/liability recognised in the balance sheet for the defined benefit pension plan is the present value of the defined benefit obligation less the fair value of 
plan assets. Where the fair value of plan assets exceeds the present value of the defined benefit obligation, the Group recognises an asset at the lower of the fair 
value of plan assets less the present value of the defined benefit obligation, and the present value of any economic benefits available in the form of refunds 
from the plan or reductions in future contributions to the plan.

Pension costs for the Group’s defined contribution pension plans are charged to the income statement in the period in which they arise. 

Post-retirement medical benefits are accounted for in an identical way to the Group’s defined benefit pension plan.

Key management personnel
Key management personnel are those who have authority and responsibility for planning, directing and controlling the activities of the Group. In the case of 
Marston’s PLC, the Directors of the Group are considered to be the only key management personnel.

Current and deferred tax
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date and is measured at the amount 
expected to be paid to or recovered from the tax authorities.

Deferred tax is provided in full, using the liability method, on all differences that have originated but not reversed by the balance sheet date, and which give rise 
to an obligation to pay more or less tax in the future. Differences are defined as the differences between the carrying value of assets and liabilities and their 
tax base.

60

Marston's PLC   Annual Report and Accounts 2014

1  Accounting policies continued

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the assets can be utilised. 

Deferred tax is calculated using tax rates that are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Provisions
Provisions are recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an 
outflow of economic benefits will be required to settle the obligation. 

When valuations of leasehold properties (based on future estimated income streams) give rise to a deficit as a result of onerous lease conditions they are 
recognised as provisions. These provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax 
rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The key assumptions used in the discounted 
cash flow calculation are the discount rate, inflation rate and market rents and vacant periods of the properties.

Other contractual property costs are also recorded as provisions as appropriate.

Share-based payments
The fair value of share-based remuneration at the date of grant is calculated using the Black-Scholes option-pricing model and charged to the income statement 
on a straight-line basis over the vesting period of the award. The charge to the income statement takes account of the estimated number of shares that will vest. 

Non-vesting conditions are taken into account when determining the fair value of the Group’s share-based payments, and all cancellations of share-based 
payments, whether by the Group or by employees, are accounted for in an identical manner with any costs unrecognised at the date of cancellation being 
immediately accelerated. 

Own shares
Own shares comprise treasury shares, shares held within a Long Term Incentive Plan (LTIP) and shares held within an Executive Share Option Plan (ESOP), which 
are used for the granting of shares to applicable employees.

Own shares are recognised at cost as a deduction from shareholders’ equity. Subsequent consideration received for the sale of such shares is also recognised in 
equity, with any difference between the sale proceeds and the original cost being taken to equity. No income or expense is recognised in the performance 
statements on own share transactions.

Dividends
Dividends proposed by the Board but unpaid at the period end are recognised in the financial statements when they have been approved by the shareholders. 
Interim dividends are recognised when paid.

Transactions and balance sheet items in a foreign currency
Transactions in a foreign currency are translated to sterling using the exchange rate at the date of the transaction. Monetary receivables and payables are 
remeasured at closing day rates at each balance sheet date. Exchange gains or losses that arise from such remeasurement and on settlement of the transaction 
are recognised in the income statement. Translation differences for non-monetary assets valued at fair value through profit or loss are reported as part of the fair 
value gain or loss. Gains or losses on disposal of non-monetary assets are recognised in the income statement.

Key assumptions and significant judgements
IFRS requires the Group to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are 
continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under 
the circumstances. Actual results may differ from these estimates. The Group’s key assumptions and significant judgements are in respect of property, plant and 
equipment, taxation, impairment, retirement benefits, financial instruments, property lease provisions, share-based payments and non-underlying items. Details 
of these assumptions and judgements are set out in the relevant accounting policy and detailed note to the financial statements as set out below:

Property, plant and equipment
•
•

Valuation of properties (see accounting policy).
Assets’ useful lives and residual values (see accounting policy).

Taxation
•

Assumptions in respect of the resolution of outstanding corporate and indirect tax matters with HM Revenue & Customs (see accounting policies for current 
and deferred tax and provisions).

Impairment
•

Assumptions made in the value in use calculation, in particular the pre-tax discount rate applied to cash flow projections and the growth rate used to 
extrapolate projected cash flows beyond one year budgets (notes 10 and 11).

Retirement benefits
•

Actuarial assumptions in respect of the defined benefit pension plan, which include discount rates, rates of increase in pensionable salaries, rates of increase 
in pensions, inflation rates and life expectancies (note 25).

Marston's PLC   Annual Report and Accounts 2014

61

Notes continued 
For the 52 weeks ended 4 October 2014

1  Accounting policies continued

Financial instruments
•

Valuation of financial instruments that are not traded in an active market (note 20).

Property lease provisions
•

Assumptions made in the discounted cash flow calculation, in particular the market rents, vacant periods, inflation rate and discount rate (see accounting 
policy).

Share-based payments
•

Inputs to the Black-Scholes option-pricing model, which include dividend yield, expected volatilities and risk free interest rates (note 26).

Non-underlying items
• Determination of items to be classed as non-underlying (see accounting policy).

2  Segment reporting

For segment reporting purposes the Group is considered to have five distinguishable operating segments as follows:

Segment

Revenue

Destination and Premium 
Taverns
Leased
Brewing
Group Services

Food and drink sales, accommodation and gaming machine income
Food and drink sales, rent from licensed properties, accommodation and gaming machine income
Drink sales, rent from licensed properties and gaming machine income
Drink sales and third party brewing and packaging
N/A

Transfer prices between operating segments are on an arm’s length basis.

Underlying revenue by segment

Destination and Premium
Taverns
Leased
Brewing
Group Services

Underlying revenue
Non-underlying items

Revenue

Underlying operating profit by segment

Destination and Premium
Taverns
Leased
Brewing
Group Services

Underlying operating profit
Non-underlying operating items

Operating profit
Net finance costs

(Loss)/profit before taxation

Other segment information

Destination and Premium
Taverns
Leased
Brewing
Group Services

Total

* Excludes amounts relating to retirement benefits, financial instruments and deferred tax assets.

62

Marston's PLC   Annual Report and Accounts 2014

2014 
£m 

376.9
225.1
53.1
132.5
–

787.6
27.7

815.3

2014 
£m 

76.0
55.7
23.5
17.4
(16.5)

156.1
(107.0)

49.1
(108.3)

(59.2)

2013 
£m 

349.2
250.8
55.6
127.3
–

782.9
–

782.9

2013 
(Restated)
£m 

70.3
69.5
26.0
16.9
(14.5)

168.2
(21.6)

146.6
(79.1)

67.5

 Additions to  
 non-current assets*

 Depreciation and 
 amortisation

2014 
£m 

104.2
19.6
5.8
10.3
6.0

145.9

2013 
£m 

121.3
23.6
5.7
15.4
7.5

173.5

2014 
£m 

15.4
8.2
1.9
7.5
3.3

36.3

2013 
£m 

14.6
9.5
2.0
8.4
2.6

37.1

2  Segment reporting continued

Geographical areas
Revenue generated outside the United Kingdom during the period was £3.4 million (2013: £3.5 million).

3  Revenue and operating expenses

Revenue

Goods
Services

Revenue from services includes rents receivable from licensed properties of £21.9 million (2013: £24.3 million).

Operating expenses

Change in stocks of finished goods and work in progress
Own work capitalised
Other operating income
Raw materials, consumables and excise duties
Depreciation of property, plant and equipment
Amortisation of intangible assets
Employee costs
Hire of plant and machinery
Other operating lease rentals
Income from other non-current assets
Impairment of freehold and leasehold properties
Other net operating charges

The amounts included in the line items above which have been classed as non-underlying are as follows:

Other operating income
Raw materials, consumables and excise duties
Depreciation of property, plant and equipment
Employee costs
Other operating lease rentals
Impairment of freehold and leasehold properties
Other net operating charges

PricewaterhouseCoopers LLP fees:

Fees payable to the Company’s Auditors for the audit of the Company’s annual accounts

Fees payable to the Company’s Auditors for other services to the Group:
The audit of the Company’s subsidiaries
Audit related assurance services

2014 
£m 

753.9
61.4

815.3

2014 
£m 

(1.5)
(4.7)
(7.3)
279.6
35.1
1.2
160.9
0.9
20.0
(0.2)
31.1
251.1

766.2

2014 
£m 

(0.2)
9.1
–
(9.3)
8.8
31.1
95.2

134.7

2014 
£m 

0.1

0.1
0.1

0.3

2013 
£m 

722.3
60.6

782.9

2013 
(Restated)
£m 

0.6
(3.9)
(8.7)
268.9
36.1
1.0
166.7
0.8
11.2
(0.3)
(2.5)
166.4

636.3

2013 
£m 

–
–
1.3
4.6
–
–
15.7

21.6

2013 
£m 

0.1

0.1
0.1

0.3

Marston's PLC   Annual Report and Accounts 2014

63

Notes continued 
For the 52 weeks ended 4 October 2014

4  Non-underlying items

Exceptional operating items
Non-core estate disposal and reorganisation costs
Write-off of cellar equipment 
Recognition of provision for repayment of Rank refunds received
Loss on portfolio disposal of pubs
Recognition of onerous lease provisions and associated leasehold impairments
Credit in respect of defined benefit pension plan

Other adjusting operating items
Results in respect of the ongoing management of pubs in the portfolio disposal

Non-underlying operating items

Exceptional non-operating items
Interest on Rank refunds
Buyback of securitised debt and associated costs
Movement in fair value of interest rate swaps

Total non-underlying items

2014 
£m 

50.6
–
–
35.8
29.5
(10.8)

105.1

1.9

1.9

107.0

(0.2)
27.2
8.2

35.2

142.2

2013 
£m 

10.8
4.9
5.9
–
–
–

21.6

–

–

21.6

0.5
– 
(3.5)

(3.0)

18.6

Non-core estate disposal and reorganisation costs
During the prior period 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 exceptional charge of £50.6 million (2013: £10.8 million) includes an amount of £29.6 million (2013: £nil) in respect of the impairment 
of non-core properties. 

Portfolio disposal of pubs 
During the current 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 shown as a non-underlying item, which is comprised as follows:

2014 
£m 

Revenue
Operating expenses

27.7
(29.6)

(1.9)

Recognition of onerous lease provisions and associated leasehold impairments
A review of the Group’s property leases in the current period identified that an additional provision of £28.0 million was required for leases which are considered 
to be onerous, along with an associated impairment of leasehold properties of £1.5 million. This is primarily due to the reversion of a number of leases to the 
Group in the period and a deterioration in market conditions.

Defined benefit pension plan
During the current period the Marston’s PLC Pension and Life Assurance Scheme was closed to future accrual. The net credit of £10.8 million is comprised of the 
negative past service cost of £11.2 million less associated costs of £0.4 million.

Rank refunds
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 has now repaid the refunds of £5.9 million plus interest of £0.3 million thereon. In the prior period 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 
current period.

Buyback of securitised debt and associated costs
During the current 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 are no longer 
expected to occur the cumulative hedging loss of £24.7 million has been recognised in the income statement. 

64

Marston's PLC   Annual Report and Accounts 2014

4  Non-underlying items continued

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 hedge 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 £8.2 million (2013: gain of £3.5 million) is shown as an exceptional item. 

Impact of taxation
The current tax credit relating to the above non-underlying items amounts to £13.0 million (2013: £1.8 million). The deferred tax credit relating to the above 
non-underlying items amounts to £11.8 million (2013: £2.3 million). In addition, there is a non-underlying deferred tax credit of £nil (2013: £3.1 million) in relation 
to the change in corporation tax rate (note 7).

Prior period non-underlying items
As part of a review of its fixed asset register the Group identified various items of cellar equipment which it assessed were no longer in use by the business and 
which would not have been utilised in the prior period. These assets were subsequently written off with the charge and depreciation for the period shown as an 
exceptional item.

5  Employees

Employee costs

Wages and salaries
Social security costs
Pension costs
Share-based payments
Termination costs

A net non-underlying credit of £9.3 million (2013: charge of £4.6 million) is included in employee costs.

Average monthly number of employees

Bar staff
Management, administration and production

2014 
£m 

154.9
11.2
(6.5)
0.7
0.6

160.9

2014 
Number 

10,688
2,166

2013 
(Restated)
£m 

148.1
10.9
4.5
0.2
3.0

166.7

2013 
Number 

10,611
2,117

Key management personnel
Directors’ emoluments are set out in the Directors’ Remuneration Report on pages 31 to 43. The total cost to the Group of the Directors’ remuneration for the 
period was £2.6 million (2013: £2.1 million), including employers’ national insurance, pension costs and share-based payments.

Marston's PLC   Annual Report and Accounts 2014

65

Notes continued 
For the 52 weeks ended 4 October 2014

6  Finance costs and income

Finance costs

Unsecured bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Net finance cost in respect of retirement benefits
Other interest payable

Exceptional finance costs
Interest on Rank refunds
Buyback of securitised debt and associated costs

Total finance costs

Finance income
Deposit and other interest receivable

Total finance income

Movement in fair value of interest rate swaps
Gain on movement in fair value of interest rate swaps
Loss on movement in fair value of interest rate swaps

Net finance costs

2014 
£m 

12.1
50.8
1.0
7.5
0.5
1.5

73.4

(0.2)
27.2

27.0

100.4

(0.3)

(0.3)

(6.8)
15.0

8.2

108.3

2013 
(Restated)
£m

14.1
61.8
0.8
3.4
1.5
2.2

83.8

0.5
– 

0.5

84.3

(1.7)

(1.7)

(10.4)
6.9

(3.5)

79.1

In the prior period deposit and other interest receivable included £1.5 million of interest in relation to income of £1.7 million from a VAT claim, which was 
included in other operating income.

7  Taxation

Income statement

Current tax
Current period
Credit in respect of tax on non-underlying items
Adjustments in respect of prior periods

Deferred tax
Current period
Adjustments in respect of prior periods
Credit in respect of tax on non-underlying items
Non-underlying credit in relation to the change in tax rate

Taxation (credit)/charge reported in the income statement

Statement of comprehensive income

Remeasurement of retirement benefits
Impairment and revaluation of properties
Hedging reserve movements
Deferred tax credit in respect of the change in tax rate

Taxation (credit)/charge reported in the statement of comprehensive income

66

Marston's PLC   Annual Report and Accounts 2014

2014 
£m 

14.4
(13.0)
(0.9)

0.5

2.8
–
(11.8)
–

(9.0)

(8.5)

2014 
£m 

(2.8)
2.0
0.5
–

(0.3)

2013 
(Restated)
£m 

13.1
(1.8)
(0.5)

10.8

5.3
(0.1)
(2.3)
(3.1)

(0.2)

10.6

2013 
(Restated)
£m 

1.4
(1.7)
11.4
(10.2)

0.9

7  Taxation continued

Recognised directly in equity

Tax on share-based payments

Taxation credit recognised directly in equity

2014 
£m 

(0.1)

(0.1)

2013 
£m 

(0.3)

(0.3)

The actual tax rate for the period is higher (2013: lower) than the standard rate of corporation tax of 22% (2013: 23.5%). The differences are explained below:

Tax reconciliation

(Loss)/profit before tax

(Loss)/profit before tax multiplied by the corporation tax rate of 22% (2013: 23.5%)
Effect of:
Adjustments in respect of prior periods
Net deferred tax charge/(credit) in respect of land and buildings
Costs not deductible for tax purposes
Other amounts upon which tax relief is available
Impact of difference between deferred and current tax rates
Impact of change in tax rate

Current period taxation (credit)/charge

2014
£m 

(59.2)

(13.0)

(0.9)
4.5
0.2
(0.6)
1.3
–

(8.5)

2013
(Restated)
£m 

67.5

15.8

(0.6)
(1.9)
0.6
(0.2)
–
(3.1)

10.6

The March 2012 Budget announced that there would be a reduction in the standard rate of corporation tax from 24% to 22% phased in over two years at 1% per 
annum from April 2013. The change from 24% to 23% with effect from 1 April 2013 was enacted in the Finance Act 2012 in July 2012. As such the Group’s profits 
for the prior period were taxed at an effective rate of 23.5%. 

The December 2012 Autumn Statement announced that the standard rate of corporation tax would now change from 23% to 21% with effect from 1 April 2014. 
The March 2013 Budget then announced that the standard rate of corporation tax would change from 21% to 20% with effect from 1 April 2015. These changes 
were both enacted in the Finance Act 2013 in July 2013. As such a non-underlying deferred tax credit of £3.1 million was recognised in the prior period and the 
Group’s losses for the current period have been taxed at an effective rate of 22%.

8  Ordinary dividends on equity shares

Paid in the period

Final dividend for 2013 of 4.1p per share (2012: 3.9p)
Interim dividend for 2014 of 2.4p per share (2013: 2.3p)

2014 
£m 

23.4
13.7

37.1

2013 
£m 

22.2
13.1

35.3

A final dividend for 2014 of 4.3p per share amounting to £24.6 million has been proposed for approval at the Annual General Meeting, but has not been reflected 
in the financial statements.

This dividend will be paid on 2 February 2015 to those shareholders on the register at close of business on 19 December 2014.

9  Earnings per ordinary share

Basic earnings per share are calculated by dividing the (loss)/profit attributable to equity shareholders by the weighted average number of ordinary shares in 
issue during the period, excluding treasury shares and those held in the Executive Share Option Plan and the Long Term Incentive Plan.

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.

Marston's PLC   Annual Report and Accounts 2014

67

Notes continued 
For the 52 weeks ended 4 October 2014

9  Earnings per ordinary share continued

Basic (loss)/earnings per share
Diluted (loss)/earnings per share*

Underlying earnings per share figures
Basic underlying earnings per share 
Diluted underlying earnings per share

2014

Earnings 
£m 

(50.7)
(50.7)

Per share 
 amount 
p 

(8.9)
(8.9)

 2013 
(Restated) 

Earnings 
£m 

56.9
56.9

Per share 
 amount 
p 

10.0
9.9

66.7
66.7

11.7
11.6

68.3
68.3

12.0
11.9

*  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’.

Basic weighted average number of shares
Dilutive options

Diluted weighted average number of shares

10  Goodwill

Cost

At 6 October 2013 and 4 October 2014

Aggregate impairment

At 6 October 2013 and 4 October 2014

Net book amount at 5 October 2013

Net book amount at 4 October 2014

Cost

At 30 September 2012 and 5 October 2013

Aggregate impairment

At 30 September 2012 and 5 October 2013

Net book amount at 29 September 2012

Net book amount at 5 October 2013

2014 
m 

571.0
5.0

576.0

2013 
m 

569.4
5.1

574.5

£m 

225.3 

1.1 

224.2 

224.2 

£m 

225.3 

1.1 

224.2 

224.2 

Impairment testing of goodwill
Goodwill has been allocated across the operating segments, and the value of the recoverable amounts allocated to those segments has been estimated and 
compared to the carrying amounts. Recoverable amounts are determined based on the higher of value in use and fair value less costs to sell. 

The carrying amount of goodwill has been allocated £87.5 million (2013: £87.5 million) to Destination and Premium, £86.6 million (2013: £86.6 million) to Taverns, 
£26.5 million (2013: £26.5 million) to Leased and £23.6 million (2013: £23.6 million) to Brewing. Goodwill has been allocated to operating segments based on the 
extent to which the benefits of acquisitions flow to that segment.

The key assumptions used in determining value in use are the pre-tax discount rate applied to the cash flow projections of 7.5% (2013: 7.5%) and the growth rate 
used to extrapolate the projected cash flows beyond the one year budgets of 2.0% (2013: 2.0%) in line with an expected long-term growth rate which is below 
the long-term average growth rate for the industry. Risk factors are considered to be similar in each of the Group’s operating segments.

Other commercial assumptions relate to market growth, market share and net selling prices. These assumptions are based on historic trends adjusted for management 
estimates of future prospects. These estimates take account of economic forecasts, marketing plans, political factors and assessments of competitors’ strategy.

The above impairment tests demonstrated that the Group had substantial levels of headroom and as such no impairment of goodwill was required in the 
current or prior period.

68

Marston's PLC   Annual Report and Accounts 2014

11  Other intangible assets

Cost
At 6 October 2013
Additions
Net transfers to assets held for sale and disposals

At 4 October 2014

Amortisation
At 6 October 2013
Charge for the period
Net transfers to assets held for sale and disposals

At 4 October 2014

Net book amount at 5 October 2013

Net book amount at 4 October 2014

Acquired 
brands 
£m 

Lease 
premiums 
£m 

Computer 
software 
£m 

Development
costs 
£m 

19.3
–
–

19.3

–
–
–

–

19.3

19.3

2.0
–
(0.3)

1.7

1.4
0.1
(0.3)

1.2

0.6

0.5

8.8
2.4
(1.9)

9.3

4.7
1.1
(1.7)

4.1

4.1

5.2

0.1
–
–

0.1

–
–
–

–

0.1

0.1

Total 
£m 

30.2
2.4
(2.2)

30.4

6.1
1.2
(2.0)

5.3

24.1

25.1

Acquired brands are initially recognised at their fair value on acquisition. Given the anticipated level of investment in acquired brands, and there being no legal 
or regulatory limits to their useful lives, they are regarded as having indefinite useful lives and no annual amortisation is provided.

Lease premiums classified as intangible assets are those acquired with new subsidiaries. 

Cost
At 30 September 2012
Additions
Net transfers to assets held for sale and disposals

At 5 October 2013

Amortisation
At 30 September 2012
Charge for the period
Net transfers to assets held for sale and disposals

At 5 October 2013

Net book amount at 29 September 2012

Net book amount at 5 October 2013

The carrying value of acquired brands is split as follows:

Wychwood
Jennings
Ringwood

Acquired brands relate to Brewing.

Acquired 
 brands 
£m 

Lease 
 premiums 
£m 

Computer 
 software 
£m 

Development
costs 
£m 

19.3 
–
–

19.3

–
–
–

–

19.3

19.3

2.0
–
–

2.0

1.4
–
–

1.4

0.6

0.6

7.3
1.7
(0.2)

8.8

3.8
1.0
(0.1)

4.7

3.5

4.1

0.1
–
–

0.1

–
–
–

–

0.1

0.1

2014 
£m 

13.6
2.8
2.9

19.3

Total 
£m 

28.7
1.7
(0.2)

30.2

5.2
1.0
(0.1)

6.1

23.5

24.1

2013 
£m 

13.6
2.8
2.9

19.3

Impairment testing of acquired brands
The carrying values of acquired brands are subject to annual impairment reviews on a value in use basis. The recoverable amount of each brand is calculated based 
on anticipated future income generated by that brand. The key assumptions used in the impairment testing of brands are a pre-tax discount rate of 7.5% (2013: 7.5%) 
and a long-term growth rate used to extrapolate cash flows beyond the cash flow projection period of one year of 2.0% (2013: 2.0%) in line with an expected 
long-term growth rate which is below the long-term average growth rate for the industry. These assumptions are based on historic trends adjusted for management 
estimates of future prospects, and take account of economic forecasts, marketing plans, political factors and assessments of competitors’ strategy. 

The above impairment tests demonstrated that the Group had sufficient levels of headroom and as such no impairment of acquired brands was required in the 
current or prior period.

Marston's PLC   Annual Report and Accounts 2014

69

Notes continued 
For the 52 weeks ended 4 October 2014

12  Property, plant and equipment

Cost or valuation
At 6 October 2013
Additions
Net transfers to assets held for sale and disposals
Revaluation

At 4 October 2014

Depreciation
At 6 October 2013
Charge for the period
Net transfers to assets held for sale and disposals
Revaluation/impairment

At 4 October 2014

Net book amount at 5 October 2013

Net book amount at 4 October 2014

Cost or valuation
At 30 September 2012
Additions
Net transfers to assets held for sale and disposals
Revaluation

At 5 October 2013

Depreciation
At 30 September 2012
Charge for the period
Net transfers to assets held for sale and disposals
Revaluation

At 5 October 2013

Net book amount at 29 September 2012

Net book amount at 5 October 2013

The net book amount of land and buildings is split as follows:

Freehold properties
Leasehold properties over 50 years unexpired
Leasehold properties under 50 years unexpired

70

Marston's PLC   Annual Report and Accounts 2014

Land and 
 buildings 
£m 

Plant and 
machinery 
£m 

1,889.6
107.5
(176.4)
6.2

1,826.9

1.9
2.0
–
(0.2)

3.7

1,887.7

1,823.2

49.4
6.8
(2.5)
–

53.7

22.7
4.1
(2.5)
–

24.3

26.7

29.4

Land and 
 buildings 
£m 

Plant and 
machinery 
£m 

1,819.4
125.4
(59.5)
4.3

1,889.6

0.3
1.9
–
(0.3)

1.9

1,819.1

1,887.7

42.0
11.6
(4.2)
–

49.4

23.4
3.3
(4.0)
–

22.7

18.6

26.7

Fixtures, 
 fittings, 
 tools and 
 equipment 
£m 

310.5
29.2
(46.4)
–

Total 
£m 

2,249.5
143.5
(225.3)
6.2

293.3

2,173.9

161.3
29.0
(35.2)
0.8

155.9

149.2

137.4

Fixtures, 
 fittings, 
 tools and 
 equipment 
£m 

352.3
34.8
(76.6)
–

185.9
35.1
(37.7)
0.6

183.9

2,063.6

1,990.0

Total 
£m 

2,213.7
171.8
(140.3)
4.3

310.5

2,249.5

194.4
30.9
(64.0)
–

161.3

157.9

149.2

2014 
£m 

1,578.3
215.5
29.4

1,823.2

218.1
36.1
(68.0)
(0.3)

185.9

1,995.6

2,063.6

2013 
£m 

1,652.0
211.4
24.3

1,887.7

12  Property, plant and equipment continued

Cost or valuation of land and buildings comprises:

Valuation
At cost

2014 
£m 

1,647.2
179.7

1,826.9

2013 
£m 

1,770.2
119.4

1,889.6

If the freehold and leasehold properties had not been revalued, the historical cost net book amount would be £1,325.9 million (2013: £1,372.5 million).

Cost at 4 October 2014 includes £25.8 million (2013: £29.5 million) of assets in the course of construction. 

Interest costs of £1.5 million (2013: £0.9 million) were capitalised in respect of the financing of major projects.

The net loss on disposal of property, plant and equipment, intangible assets and assets held for sale was £46.5 million (2013: £5.0 million). A profit on disposal of 
£8.1 million (2013: £2.8 million) is included within the Group’s underlying results.

Capital expenditure authorised and committed at the period end but not provided for in the financial statements was £9.0 million (2013: £10.5 million).

The net book amount of land and buildings held under finance leases at 4 October 2014 was £21.8 million (2013: £21.4 million). The net book amount of land and 
buildings held as part of sale and leaseback arrangements that do not fall within the scope of IAS 17 ‘Leases’ was £161.2 million (2013: £112.0 million).

Revaluation/impairment
During the current and prior period various properties were reviewed for impairment and/or material changes in value. These valuation adjustments were 
recognised in the revaluation reserve or the income statement as appropriate.

The impact of the revaluations/impairments described above is as follows:

Income statement:
Revaluation loss charged as an impairment
Reversal of past impairments

Revaluation reserve:
Unrealised revaluation surplus
Reversal of past revaluation surplus

Net increase in shareholders’ equity/property, plant and equipment

2014 
£m 

(7.4)
–

(7.4)

16.4
(3.4)

13.0

5.6

2013 
£m 

–
2.5

2.5

2.1
–

2.1

4.6

Fair value of land and buildings
IFRS 13 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in the measurements, 
according to the following levels:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 
Level 3 – inputs for the asset or liability that are not based on observable market data.

The table below shows the level in the fair value hierarchy into which the fair value measurements of land and buildings have been categorised:

Recurring fair value measurements

Level 1 
£m 

Level 2 
£m 

Level 3 
£m 

Total 
£m 

Level 1 
£m 

Level 2 
£m 

2014

2013

Land and buildings:
Specialised brewery properties
Other land and buildings

– 
–

–

– 
1,799.5

1,799.5

23.7
– 

23.7

23.7
1,799.5

1,823.2

–
– 

– 

– 
1,864.0 

1,864.0 

Level 3 
£m 

23.7 
– 

23.7 

Total 
£m 

23.7 
1,864.0 

1,887.7 

There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior period.

Marston's PLC   Annual Report and Accounts 2014

71

Notes continued 
For the 52 weeks ended 4 October 2014

12  Property, plant and equipment continued

The Level 2 fair values of land and buildings have been obtained using a market approach, primarily using earnings multiples derived from prices in observed 
transactions involving comparable businesses.

The Level 3 fair values of the specialised brewery properties have been obtained using a cost approach. These breweries represent properties that are rarely, if ever, 
sold in the market, except by way of a sale of the business of which they are part, due to the uniqueness arising from their specialised nature, design and 
configuration. As such the valuation of these properties has been performed using the depreciated replacement cost approach, which values the properties at the 
current cost of replacing them with their modern equivalents less deductions for physical deterioration and all relevant forms of obsolescence and optimisation.

The significant unobservable inputs to the Level 3 fair value measurements are:

Current cost of modern equivalent asset
Amount of adjustment for physical deterioration/obsolescence

Sensitivity of fair value to unobservable inputs

The higher the cost the higher the fair value
The higher the adjustment the lower the fair value

Level 3 recurring fair value measurements

At beginning of the period
Additions
Depreciation charge for the period

At end of the period

2014 
£m 

23.7
0.3
(0.3)

23.7

2013 
£m 

23.4
0.6
(0.3)

23.7

The Group’s properties are revalued by external independent qualified valuers at least once in each rolling three year period. The last external valuation of the 
Group’s freehold and leasehold properties was performed as at 1 July 2012. The Group has an internal team of qualified valuers and at each reporting date the  
estate is reviewed for any indication of significant changes in value. Where this is the case internal valuations are performed on a basis consistent with those 
performed externally.

13  Other non-current assets

Trade loans

At beginning of the period
Additions
Disposals, repayments and impairments

At end of the period

Other non-current assets are shown net of a provision of £1.7 million (2013: £1.5 million).

14  Inventories

Raw materials and consumables
Work in progress
Finished goods

15  Assets held for sale

Properties

2014 
£m 

12.8
2.3
(3.6)

11.5

2014 
£m 

5.6
0.7
16.7

23.0

2014 
£m 

38.3

2013 
£m 

14.3 
2.1
(3.6)

12.8

2013 
£m 

5.6
0.6
15.3

21.5

2013 
£m 

59.9

In accordance with IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’, properties categorised as held for sale have been written down to 
their fair value less costs to sell. This is a non-recurring fair value measurement falling within Level 2 of the fair value hierarchy. These Level 2 fair values have been 
obtained using a market approach, and are derived from sales prices in recent transactions involving comparable properties.

During the current and prior period, all properties classed as held for sale were reviewed for impairment. This review identified an impairment of £23.7 million 
(2013: £nil) which has been taken to the income statement. 

72

Marston's PLC   Annual Report and Accounts 2014

16  Trade and other receivables

Trade receivables
Prepayments and accrued income
Other receivables

2014 
£m 

32.6
24.7
15.6

72.9

2013 
£m 

28.6
25.7
14.7

69.0

Trade receivables are shown net of a provision of £0.8 million (2013: £0.7 million). Other receivables are shown net of a provision of £3.7 million (2013: £4.3 million). 

The ageing analysis of trade receivables is as follows:

Neither past due nor impaired
Less than 30 days
31 to 60 days
Greater than 60 days

2014 
£m 

25.5
3.1
1.0
3.0

32.6

2013 
£m 

22.5
2.4
0.7
3.0

28.6

Included within other receivables is an amount of £6.3 million (2013: £6.2 million), net of provision, which relates to amounts due from tenants of licensed 
properties. A significant proportion of this balance is greater than 60 days old.

All of the Group’s trade receivables are denominated in pounds sterling.

Included within trade receivables are balances which are past due at the balance sheet date but have not been provided for, as these are considered to be 
recoverable. These balances relate to established customers for whom there is no recent history of default. Trade receivables that are less than three months past 
due are not generally considered impaired unless there is objective evidence that the Group will not be able to collect all amounts due according to the original 
terms of the receivables. 

At 4 October 2014 the value of collateral held in the form of cash deposits was £8.2 million (2013: £8.5 million). 

17  Borrowings

Current

Unsecured bank borrowings
Securitised debt 
Finance leases
Other leased related borrowings
Other borrowings

Non-current

Unsecured bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Preference shares

2014 
£m 

(0.8)
24.8
0.1
(0.1)
120.0

144.0

2014 
£m 

209.5
859.8
20.7
137.4
0.1

2013 
£m 

(0.8)
23.4
0.1
–
–

22.7

2013 
£m 

189.6
964.2
20.8
87.7
0.1

1,227.5

1,262.4

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.

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 current 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 (2013: £nil) held in this 
bank account is included within cash and cash equivalents. 

The Group has 75,000 (2013: 75,000) preference shares of £1 each in issue at the balance sheet date. The preference shares carry the right to a fixed cumulative 
preferential dividend at the rate of 6% per annum (they are also entitled to a non-cumulative dividend of 1% per annum provided that dividends of not less than 
£24,000 have been paid on the ordinary shares in that year). They participate in the event of a winding-up and on a return of capital and carry the right to attend 
and vote at general meetings of the Company, carrying four votes per share.

Marston's PLC   Annual Report and Accounts 2014

73

Notes continued 
For the 52 weeks ended 4 October 2014

17  Borrowings continued

All of the Group’s borrowings are denominated in pounds sterling. There were no instances of default, including covenant terms, in either the current or prior period.

Maturity of borrowings
The maturity profile of the carrying amount of the Group’s borrowings at the period end was as follows:

Due:

Within one year
In more than one year but less than two years
In more than two years but less than five years
In more than five years

2014

Gross 
borrowings 
£m 

Unamortised 
 issue costs 
£m 

Net 
borrowings 
£m 

Gross 
borrowings 
£m 

145.5
26.8
302.5
917.8

1,392.6

(1.5)
(1.5)
(3.5)
(14.6)

(21.1)

144.0
25.3
299.0
903.2

24.1
25.5
276.5
976.1

1,371.5

1,302.2

2013

Unamortised 
 issue costs 
£m 

(1.4)
(1.4)
(2.5)
(11.8)

(17.1)

Net 
borrowings 
£m 

22.7
24.1
274.0
964.3

1,285.1

Fair value of borrowings
The carrying amount and the fair value of the Group’s borrowings are as follows:

Unsecured bank borrowings
Securitised debt 
Finance leases
Other lease related borrowings
Other borrowings
Preference shares

Carrying amount

Fair value

2014 
£m 

212.0
891.6
20.8
148.1
120.0
0.1

2013 
£m 

191.0
995.6
20.9
94.6
–
0.1

2014 
£m 

212.0
923.7
20.8
148.1
120.0
0.1

2013 
£m 

191.0
971.5
20.9
94.6
–
0.1

1,392.6

1,302.2

1,424.7

1,278.1

The fair value of the Group’s securitised debt is based on quoted market prices and is within Level 1 of the fair value hierarchy. The fair values of the Group’s 
other borrowings approximate to their carrying amounts and are within Level 2 of the fair value hierarchy.

18  Derivative financial instruments

Interest rate swaps

Current assets
Current liabilities
Non-current liabilities

Details of the Group’s interest rate swaps are provided in note 20.

2014
£m 

.–
(19.5)
(120.7)

(140.2)

2013
£m 

6.8
(6.8)
(134.6)

(134.6)

74

Marston's PLC   Annual Report and Accounts 2014

19  Securitised debt

On 9 August 2005 £805.0 million of secured loan notes were issued in connection with the securitisation of 1,592 of the Group’s pubs held in Marston’s Pubs 
Limited. On 22 November 2007, a further £330.0 million of secured loan notes (tranches A4 and AB1) were issued in connection with the securitisation of an 
additional 437 of the Group’s pubs, also held in Marston’s Pubs Limited. The loan notes are secured over the properties and their future income streams and were 
issued by Marston’s Issuer PLC, a special purpose entity. On 15 January 2014 all of the AB1 notes were repurchased by the Group at par and immediately cancelled. 

During the period ended 4 October 2014, 173 (2013: 104) of the securitised pubs were sold to third parties, 197 pubs (2013: 5) were sold to another member  
of the Group and 6 pubs (2013: nil) were acquired from other members of the Group. The carrying amount of the securitised pubs at 4 October 2014 was  
£1,260.5 million (2013: £1,409.8 million).

The securitisation is governed by various covenants, warranties and events of default, many of which apply to Marston’s Pubs Limited. These include covenants 
regarding the maintenance and disposal of securitised properties and restrictions on the ability to move cash to other companies within the Group.

The tranches of securitised debt have the following principal terms:

Tranche

A1
A2
A3
A4
AB1
B

The interest payable on each tranche is as follows: 

Tranche

A1
A2
A3
A4
AB1
B

2014
£m 

115.1 
214.0 
200.0 
207.5 

–

155.0 

891.6 

2013 
£m 

131.6 
214.0 
200.0 
215.0 
80.0 
155.0 

995.6 

Interest

Principal repayment
period – by instalments

Expected
average life

Expected
maturity date

Floating
Fixed/floating
Fixed/floating
Floating
Floating
Fixed/floating

2014 to 2020
2020 to 2027
2027 to 2032
2014 to 2031
N/A
2032 to 2035

6 years
13 years
18 years
17 years
N/A
21 years

2020 
2027 
2032 
2031 
N/A 
2035 

Before step up

After step up

Step up date

3 month LIBOR + 0.55%
5.1576%
5.1774%

3 month LIBOR + 1.375%
3 month LIBOR + 1.32%
3 month LIBOR + 1.45%
3 month LIBOR + 0.65% 3 month LIBOR + 1.625%
3 month LIBOR + 3.125%
3 month LIBOR + 1.25%
3 month LIBOR + 2.55%
5.6410%

July 2012
July 2019
April 2027
October 2012
October 2012
July 2019

All floating rate notes are hedged in full by the Group using interest rate swaps whereby all interest payments are swapped to fixed interest payable. Upon 
buyback of the AB1 notes the associated floating-to-fixed interest rate swap held in respect of this tranche of debt was terminated. 

At 4 October 2014 Marston’s Pubs Limited held cash of £38.1 million (2013: £76.6 million), which was governed by certain restrictions under the covenants 
associated with the securitisation. In addition Marston’s Issuer PLC held cash of £120.2 million (2013: £nil) principally in respect of the amounts drawn under the 
liquidity facility. 

Marston's PLC   Annual Report and Accounts 2014

75

Notes continued 
For the 52 weeks ended 4 October 2014

20  Financial instruments

Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:

At 4 October 2014

Assets as per the balance sheet
Derivative financial instruments
Trade receivables (before provision)
Other receivables (before provision)
Trade loans (before provision)
Cash and cash equivalents

At 4 October 2014

Liabilities as per the balance sheet
Derivative financial instruments
Borrowings
Trade payables
Other payables

At 5 October 2013

Assets as per the balance sheet
Derivative financial instruments
Trade receivables (before provision)
Other receivables (before provision)
Trade loans (before provision)
Cash and cash equivalents

At 5 October 2013

Liabilities as per the balance sheet
Derivative financial instruments
Borrowings
Trade payables
Other payables

76

Marston's PLC   Annual Report and Accounts 2014

Assets at 
fair value 
through 
profit or 
loss 
£m 

–
–
–
–
–

–

Liabilities 
  at fair 
 value 
through 
 profit or 
 loss 
£m 

19.5
–
–
–

Loans and 
receivables 
£m 

–
33.4
19.3
13.2
173.3

Total 
£m 

–
33.4
19.3
13.2
173.3

239.2

239.2

Other 
financial 
 liabilities 
£m 

–
1,371.5
67.4
15.7

Total 
£m 

140.2
1,371.5
67.4
15.7

19.5

1,454.6

1,594.8

Assets at 
fair value 
through 
profit or 
loss 
£m 

6.8
–
–
–
–

6.8

Liabilities 
  at fair 
 value 
through 
 profit or 
 loss 
£m 

6.8
–
–
–

6.8

Loans and 
receivables 
£m 

–
29.3
19.0
14.3
94.1

Total 
£m 

6.8
29.3
19.0
14.3
94.1

156.7

163.5

Other 
financial 
 liabilities 
£m 

–
1,285.1
71.0
25.0

Total 
£m 

141.4
1,285.1
71.0
25.0

1,381.1

1,522.5

Derivatives 
 used for 
  hedging
£m 

120.7
–
–
–

120.7

Derivatives 
 used for 
  hedging 
£m 

134.6
–
–
–

134.6

20  Financial instruments continued

Fair values of financial instruments
The only financial instruments which the Group holds at fair value are derivative financial instruments, which are classified as at fair value through profit or loss or 
derivatives used for hedging.

IFRS 13 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in the measurements, 
according to the following levels:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 
Level 3 – inputs for the asset or liability that are not based on observable market data.

The table below shows the level in the fair value hierarchy into which fair value measurements have been categorised:

Assets as per the balance sheet

Derivative financial instruments

Liabilities as per the balance sheet

Derivative financial instruments

Level 1 
£m 

–

Level 1 
£m 

–

2014

2014

Level 2 
£m 

–

Level 2 
£m 

140.2 

Level 3 
£m 

–

Level 3 
£m 

–

Total 
£m 

–

Total 
£m 

140.2 

Level 1 
£m 

–

Level 1 
£m 

–

2013

2013

Level 2 
£m 

6.8 

Level 2 
£m 

141.4 

Level 3 
£m 

–

Level 3 
£m 

–

Total 
£m 

6.8 

Total 
£m 

141.4 

There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior period.

The Level 2 fair values of derivative financial instruments have been obtained using a market approach and reflect the estimated amount the Group would 
expect to pay or receive on termination of the instruments. The Group obtains such valuations from counterparties who use a variety of assumptions based on 
market conditions existing at each balance sheet date.

The fair values of all non-derivative financial instruments are equal to their book values, with the exception of borrowings (note 17). The carrying value less 
impairment provision of trade receivables, other receivables and trade loans, and the carrying value of trade payables and other payables, are assumed to 
approximate their fair values.

Offsetting financial assets and financial liabilities
The following financial assets are subject to offsetting:

At 4 October 2014

Cash and cash equivalents

At 5 October 2013

Cash and cash equivalents

Gross 
 amount of 
recognised 
 financial 
liabilities set 
 off in the 
balance sheet
£m 

Net 
amount of 
financial 
 assets 
presented in 
the balance 
sheet 
£m 

Gross 
 amount of 
recognised 
 financial 
 asset 
£m 

180.9 

(7.6)

173.3

Gross 
 amount of 
recognised 
 financial 
liabilities set 
 off in the 
balance sheet 
£m 

Net 
amount of 
financial 
 assets 
presented in 
the balance 
sheet 
£m 

Gross 
 amount of 
recognised 
 financial 
 asset 
£m 

109.7

(15.6)

94.1

The Group has a netting arrangement in respect of certain of its bank accounts held with the same counterparty. This arrangement allows for the net settlement 
of the balances on these bank accounts.

Marston's PLC   Annual Report and Accounts 2014

77

Notes continued 
For the 52 weeks ended 4 October 2014

20  Financial instruments continued

Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk and foreign currency risk), counterparty risk, credit risk and 
liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse 
effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board. Group Treasury identifies, evaluates 
and hedges financial risks. The Board provides principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, credit 
risk, investment of excess liquidity and use of derivative and non-derivative financial instruments. 

Interest rate risk:
The Group’s income and operating cash flows are substantially independent of changes in market interest rates, and as such the Group’s interest rate risk arises 
from its long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the 
Group to fair value interest rate risk.

The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing 
positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on the income statement of a defined interest rate shift. 
The scenarios are run only for liabilities that represent the major interest-bearing positions.

The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting 
borrowings from floating rates to fixed rates. Generally, the Group raises long-term borrowings at floating rates and swaps them into fixed rates that are lower 
than those available if the Group borrowed at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified 
intervals, the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional amounts.

If interest rates had been 0.5% higher/lower during the period ended 4 October 2014, with all other variables held constant, post-tax (loss)/profit for the period 
would have been £0.4 million (2013: £0.3 million) lower/higher as a result of higher/lower interest expense.

Interest rate swaps designated as part of a hedging arrangement
The Group uses interest rate swaps to fix the interest rate payable on the floating rate tranches of its securitised debt (note 19). The notional principal amounts 
of these interest rate swap contracts at 4 October 2014 totalled £322.6 million (2013: £426.6 million). These interest rate swaps, including borrowing margins, 
fix interest at 6.2% and 6.8%. The movement in fair value recognised in other comprehensive income in the period was a loss of £22.1 million (2013: gain of 
£44.0 million). The movement in fair value recognised in the income statement in the period was a loss of £4.5 million (2013: £nil).

During the current period the Group repurchased all of its securitised AB1 notes at par. The notes were immediately cancelled and the associated floating-to-
fixed interest rate swap held in respect of this tranche of securitised debt was terminated. At the prior period end this swap was designated as a cash flow hedge 
of the forecast floating rate interest payments arising in respect of the AB1 notes. As these forecast transactions are no longer expected to occur the cumulative 
hedging loss of £24.7 million that had been reported in equity has been transferred to the income statement. 

Interest rate swaps not designated as part of a hedging arrangement
On 1 October 2007 the Group entered into two interest rate swaps of £70.0 million each to fix the interest rate payable on the Group’s unsecured bank 
borrowings. These interest rate swaps fixed interest at 5.5% and 5.6% and terminated on 1 October 2014. The movement in fair value recognised in the income 
statement in the period was a gain of £6.8 million (2013: £6.9 million). 

On 22 March 2012 the Group entered into four new fixed-to-floating interest rate swaps of £35.0 million each. In total, these swaps were equal and opposite to 
the above two floating-to-fixed interest rate swaps of £70.0 million each. The total fair value of the four new swaps at inception was £15.1 million. The movement 
in fair value recognised in the income statement in the period was a loss of £6.8 million (2013: £6.9 million). 

On the same date the Group entered into two forward starting interest rate swaps of £60.0 million each to fix the interest rate payable on the Group’s unsecured 
bank borrowings. These interest rate swaps originally fixed interest at 4.1% and were due to terminate on 30 April 2020. In the current period the termination 
date of the swaps was extended to 28 April 2023 and the terms were amended to fix interest at 3.0% until 28 April 2016 and 4.5% thereafter. In total, the fair value 
of the two swaps at inception was £(18.9) million. At 5 October 2013 these swaps were designated as part of a hedging relationship; however this designation 
was revoked at the start of the current period. The movement in fair value recognised in other comprehensive income in the period was a gain of £nil (2013: £5.6 
million). The movement in fair value recognised in the income statement in the period was a loss of £3.7 million (2013: gain of £3.1 million). 

On 20 May 2009 the Group entered into a forward starting interest rate swap of £20.0 million. This interest rate swap commenced on 9 August 2010, fixed interest at 
3.3% and terminated on 8 August 2013. The movement in fair value recognised in the income statement in the period was a gain of £nil (2013: £0.4 million). 

78

Marston's PLC   Annual Report and Accounts 2014

20  Financial instruments continued

The interest rate risk profile, after taking account of derivative financial instruments, is as follows:

Borrowings

260.9 

1,131.7 

1,392.6 

Floating
rate 
financial 
liabilities 
£m 

2014

Fixed 
 rate 
financial 
liabilities 
£m 

Total 
£m 

Floating 
rate 
  financial
 liabilities 
£m 

186.5 

2013

Fixed 
 rate 
financial 
 liabilities 
£m 

1,115.7 

Total 
£m 

1,302.2

The weighted average interest rate of the fixed rate financial borrowings was 5.4% (2013: 5.8%) and the weighted average period for which the rate is fixed was 
15 years (2013: 16 years).

Foreign currency risk:
The Group buys and sells goods denominated in non-sterling currencies, principally US dollars and euros. As a result, movements in exchange rates can affect 
the value of the Group’s income and expenditure. The Group’s exposure in this area is not considered to be significant.

Counterparty risk:
The Group’s counterparty risk in respect of its cash and cash equivalents is mitigated by the use of various banking institutions for its deposits. 

There is no significant concentration of counterparty risk in respect of the Group’s pension assets, as these are held with a range of institutions. 

Credit risk:
Credit risk is managed on a Group basis. Credit risk arises from credit exposure to customers, including outstanding receivables and committed transactions. If 
customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, an assessment is made of the credit quality of the 
customer, taking into account its financial position, past experience and other factors. Individual credit limits are set based on internal or external ratings in 
accordance with limits set by the Board. The utilisation of and adherence to credit limits is regularly monitored. 

A provision for impairment of trade receivables, other receivables and trade loans has been estimated by management and is based on prior experience and 
known factors at the balance sheet date after taking into account collateral held in the form of cash deposits and fixtures and fittings. Receivables are written off 
against the provision for impairment when management considers that the debt is no longer recoverable. 

The Group has no significant concentration of credit risk in respect of its customers. The maximum exposure to credit risk at the reporting date is the carrying 
value of each class of receivable.

Liquidity risk:
The Group applies a prudent liquidity risk management policy, which involves maintaining sufficient cash, ensuring the availability of funding through an 
adequate amount of committed credit facilities and having the ability to close out market positions. Due to the dynamic nature of the underlying business, 
Group Treasury maintains the availability of committed credit lines to ensure that the Group has flexibility in funding.

Management monitors rolling forecasts of the Group’s liquidity reserve (comprising undrawn borrowing facilities and cash and cash equivalents) on the basis of 
expected cash flow. In addition, the Group’s liquidity management policy involves maintaining debt financing plans, projecting cash flows and considering the 
level of liquid assets necessary to meet these, and monitoring balance sheet liquidity ratios against internal and external regulatory requirements. The Group’s 
borrowing covenants are subject to regular review.

The table below analyses the Group’s financial liabilities and non-settled derivative financial instruments into relevant maturity groupings based on the 
remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. 

At 4 October 2014

Borrowings
Derivative financial instruments
Trade payables
Other payables

At 5 October 2013

Borrowings
Derivative financial instruments
Trade payables
Other payables

Less than  
1 year 
£m 

Between 1 
and 2 years 
£m 

Between 2 
 and 5 years 
£m 

198.2
14.6
67.4
15.7

295.9

82.6
12.2
–
–

94.8

70.8
29.2
71.0
25.0

196.0

73.5
19.7
–
–

93.2

Less than  
1 year 
£m 

Between 1 
 and 2 years 
£m 

Between 2 
 and 5 years 
£m 

495.9

1,646.7

2,533.3

Over 
 5 years 
£m 

1,534.1
112.6
–
–

Total 
£m 

2,282.5
167.7
67.4
15.7

Over 
 5 years 
£m 

1,352.6
74.3
–
–

Total 
£m 

1,910.6
157.2
71.0
25.0

467.6
28.3
–
–

413.7
34.0
–
–

447.7

1,426.9

2,163.8

Marston's PLC   Annual Report and Accounts 2014

79

Notes continued 
For the 52 weeks ended 4 October 2014

21  Trade and other payables

Trade payables
Other taxes and social security
Accruals and deferred income
Other payables

Other payables include £nil (2013: £10.3 million) payable in respect of a supplier credit arrangement.

22  Deferred tax

2014 
£m 

67.4
22.9
51.0
15.7

157.0

2013 
£m 

71.0
32.4
45.9
25.0

174.3

Net deferred tax liability
Deferred tax is calculated on temporary differences between tax bases of assets and liabilities and their carrying amounts under the liability method using a tax 
rate of 20% (2013: 20%). The movement on the deferred tax accounts is shown below:

At beginning of the period
Credited to the income statement
Charged/(credited) to equity:
Impairment and revaluation of properties
Hedging reserve
Retirement benefits
Share-based payments

At end of the period

2014 
£m 

88.2
(9.0)

2.0
0.5
0.5
–

82.2

2013 
(Restated)
£m 

87.6
(0.2)

(15.6)
15.0
1.5
(0.1)

88.2

The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12) during the period are 
shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net. 

Deferred tax liabilities

At 6 October 2013
Charged/(credited) to the income statement
Charged to equity

At 4 October 2014

Deferred tax assets

At 6 October 2013
Charged/(credited) to the income statement
Charged to equity

At 4 October 2014

Net deferred tax liability
At 5 October 2013

At 4 October 2014

Pensions 
£m 

–
1.1
0.5

1.6

Accelerated 
 capital 
 allowances 
£m 

Revaluation 
 of properties 
£m 

Rolled over 
 capital 
 gains 
£m 

31.1
(1.3)
–

29.8

98.5
(4.9)
2.0

95.6

Pensions 
£m 

Tax losses 
£m 

(1.0)
1.0
–

–

(20.7)
(3.4)
–

(24.1)

0.7
0.6
–

1.3

Hedging 
 reserve 
£m 

(23.8)
–
0.5

(23.3)

Other 
£m 

5.2
(2.2)
–

3.0

Other 
£m 

(1.8)
0.1
–

(1.7)

Total 
£m 

135.5
(6.7)
2.5

131.3

Total 
£m 

(47.3)
(2.3)
0.5

(49.1)

88.2

82.2

80

Marston's PLC   Annual Report and Accounts 2014

22  Deferred tax continued

Deferred tax liabilities

At 30 September 2012
Credited to the income statement
Credited to equity

At 5 October 2013

Deferred tax assets

At 30 September 2012
Charged to the income statement
Charged/(credited) to equity

At 5 October 2013

Net deferred tax liability
At 29 September 2012

At 5 October 2013

Accelerated 
 capital 
 allowances 
£m 

Revaluation 
 of properties 
£m 

Rolled over 
 capital 
 gains 
£m 

35.3
(4.2)
–

31.1

Pensions 
(Restated)
£m 

(5.6) 
3.1
1.5

(1.0)

114.1
–
(15.6)

98.5

Tax losses 
£m 

(23.5)
2.8
–

(20.7)

2.0
(1.3)
–

0.7

Hedging 
 reserve 
£m 

(38.8)
–
15.0

(23.8)

Other 
£m 

7.6
(2.4)
–

5.2

Other 
£m 

(3.5)
1.8
(0.1)

(1.8)

Total 
£m 

159.0
(7.9)
(15.6)

135.5

Total 
(Restated)
£m 

(71.4)
7.7
16.4

(47.3)

87.6

88.2

Deferred tax assets have been recognised in respect of all tax losses and other temporary differences where it is probable that these assets will be recovered.

23  Other non-current liabilities

Other liabilities

24  Provisions for other liabilities and charges

Property leases

At beginning of the period
Released in the period
Provided in the period
Unwinding of discount
Utilised in the period

At end of the period

2014 
£m 

2.9

2014 
£m 

13.6 
–
28.0
0.7
(3.2)

39.1

2013 
£m 

0.5

2013 
£m 

17.7 
(1.9)
0.9
0.7
(3.8)

13.6

When valuations of leasehold properties (based on future estimated income streams) give rise to a deficit as a result of onerous lease conditions they are 
recognised as liabilities in provisions. Other contractual property costs are also recorded as provisions as appropriate.

Payments are expected to continue on these properties for periods of 1 to 78 years (2013: 1 to 56 years). 

In the current period the net provision made of £28.0 million has been classified as a non-underlying item (note 4).

25  Retirement benefits

During the period the Group contributed to a funded defined benefit pension plan and a number of defined contribution plans.

Defined contribution plans
Pension costs for defined contribution plans are as follows:

Defined contribution plans

2014 
£m 

4.3

2013 
£m 

3.8

Marston's PLC   Annual Report and Accounts 2014

81

Notes continued 
For the 52 weeks ended 4 October 2014

25  Retirement benefits continued

Defined benefit plan
The Marston’s PLC Pension and Life Assurance Scheme is a final salary pension plan which provides benefits to members in the form of a guaranteed level of 
pension payable for life. The plan closed to future accrual on 30 September 2014 and the link to future salary increases was also removed. 

The plan operates under the UK regulatory framework and is governed by a board of Trustees composed of plan participants and representatives of the Group. 
The Trustees make investment decisions and set the required contribution rates based on independent actuarial advice. 

The key risks to which the plan exposes the Group are as follows: 

•
•
•
•

Volatility of plan assets 
Changes in bond yields
Inflation risk
Changes in life expectancy

The movements in the fair value of plan assets and the present value of the defined benefit obligation during the period were:

At beginning of the period
Current service cost
Interest income/(expense)
Remeasurements:
Return on plan assets (excluding interest income)
Effect of changes in demographic assumptions
Effect of changes in financial assumptions
Past service cost
Cashflows:
Employer contributions
Employee contributions
Administrative expenses paid from plan assets 
Benefits paid

At end of the period

Fair value  
of plan assets

Present value  
of defined  
benefit obligation

Net surplus/ 
(deficit)

2014 
£m 

427.8
–
18.6

14.0
–
–
–

15.2
0.1
(0.6)
(21.5)

453.6

2013 
(Restated)
£m 

390.4
–
17.1

22.1
–
–
–

15.8
0.1
(0.7)
(17.0)

427.8

2014 
£m 

(432.9)
(2.1)
(18.5)

–
(0.4)
(26.2)
12.9

–
(0.1)
–
21.5

2013 
(Restated)
£m 

(414.9)
(2.1)
(17.9)

–
–
(16.3)
1.4

–
(0.1)
–
17.0

(445.8)

(432.9)

2014 
£m 

(5.1)
(2.1)
0.1

14.0
(0.4)
(26.2)
12.9

15.2
–
(0.6)
–

7.8

2013 
(Restated)
£m 

(24.5)
(2.1)
(0.8)

22.1
–
(16.3)
1.4

15.8
–
(0.7)
–

(5.1)

Pension costs recognised in the income statement
A credit of £10.8 million (2013: charge of £0.7 million) comprising the current service cost and the past service cost is included within employee costs (note 5) and 
a charge of £0.5 million (2013: £1.5 million) comprising the net interest on the net defined benefit asset/liability and the administrative expenses paid from plan 
assets is included within finance costs and income (note 6).

A negative past service cost of £11.2 million (2013: £nil) was recognised in the current period due to the closure of the plan to future accrual at 30 September 
2014 and the cutting of the link to future salary increases with effect from this date. The net credit of £10.8 million comprising this negative past service cost less 
the associated costs of £0.4 million has been classed as a non-underlying item (note 4).

An updated actuarial valuation of the plan was performed by Mercer as at 4 October 2014 for the purposes of IAS 19. The principal assumptions made by the 
actuaries were:

2014 

2013

Discount rate
Rate of increase in pensionable salaries
Rate of increase in pensions – 5% LPI
Rate of increase in pensions – 2.5% LPI
Inflation assumption (RPI)
Inflation assumption (CPI)
Employed deferred revaluation
Life expectancy for active and deferred members from age 65 (years)
  Male
  Female
Life expectancy for current pensioners from age 65 (years)
  Male
  Female

4.0%
3.6%
3.0%
2.1%
3.1%
2.1%
2.1%

23.6
26.0

21.8
24.1

4.4%
3.7%
3.1%
2.1%
3.2%
2.2%
N/A 

23.5
25.9

21.7
23.9

Mortality assumptions are based on standard tables adjusted for plan experience and with an allowance for future improvement in life expectancy.

82

Marston's PLC   Annual Report and Accounts 2014

25  Retirement benefits continued

The sensitivity of the defined benefit obligation to changes in the principal actuarial assumptions is:

Discount rate
Inflation assumption
Life expectancy

Change in assumption

Increase in assumption

Decrease in assumption

0.25%
0.25%
One year

Decrease by 4.3%
Increase by 2.4%
Increase by 2.7%

Increase by 4.6%
Decrease by 2.0%
Decrease by 2.7%

The above sensitivity analyses have been determined by changing one assumption while holding all other assumptions constant. This is unlikely to be the case 
in practice as changes in some of the assumptions could be correlated. When calculating the above sensitivities the same method has been applied as when 
calculating the net defined benefit asset/liability in the balance sheet i.e. the present value of the defined benefit obligation calculated using the Projected Unit 
Credit Method. 

Plan assets are comprised as follows:

Equities/Properties
Bonds/Gilts
Cash/Other
Buy-in policy (matching annuities)

2014 
£m 

197.2
203.6
4.8
48.0

453.6

2013 
£m 

190.1
187.5
3.4
46.8

427.8

The actual return on plan assets was a gain of £32.6 million (2013: £39.2 million).

A proportion of the defined benefit obligation has been secured by a buy-in policy and as such this proportion of liabilities is matched by annuities.

The Trustees of the plan hold a range of assets and are aiming to better align the cash flows from these to those of the plan. They are also currently working with 
the Group to de-risk their portfolio further. 

The Group is aiming to eliminate the plan’s funding deficit by 2017. During the current period the contribution rate was 22.3% and lump sums of £1.1 million per 
month were paid into the plan. Following the closure of the plan to future accrual the only contributions to the plan will comprise lump sum contributions. The 
next triennial valuation will be performed as at 30 September 2014.

The current agreed employer contributions expected to be paid during the financial period ending 3 October 2015 amount to £13.8 million, subject to 
discussions as part of the triennial valuation. 

The weighted average duration of the defined benefit obligation is 18 years.

Post-retirement medical benefits
A gain of £0.1 million (2013: £0.1 million) in respect of the remeasurement of post-retirement medical benefits has been included in the statement of 
comprehensive income.

Marston's PLC   Annual Report and Accounts 2014

83

Notes continued 
For the 52 weeks ended 4 October 2014

26  Share-based payments

During the period there were two classes of equity-settled employee share incentive plans outstanding:

(a)  Save As You Earn (SAYE). Under this scheme employees enter into a savings contract for a period of three to seven years and options are granted on 

commencement of the contract, exercisable using the amount saved under the contract at the time it terminates. Options under the scheme are granted at 
a discount of 20% to the market price of the shares at the time of the invitation and are not subject to performance conditions. Exercise of options is subject 
to continued employment.

(b)  Long Term Incentive Plan (LTIP). Under this scheme nil cost options are granted that will only vest provided the participant satisfies the minimum 

shareholding requirement and performance conditions relating to earnings per share, return on capital, free cash flow and relative total shareholder return, 
as set out in the Directors’ Remuneration Report on page 34, are met. 

In 2010, HM Revenue & Customs (HMRC) approved an Approved Performance Share Plan (APSP) to enable participants in the LTIP to benefit from UK tax 
efficiencies. As such, awards made in 2010 and subsequent years comprise an HMRC approved option (in respect of the first £30,000 worth of an award) and 
an unapproved LTIP award for amounts in excess of this HMRC limit. A further share award (a linked award) is also provided to enable participants to fund the 
exercise of the approved option. This linked award is satisfied by way of shares from the Company’s Employee Benefit Trust but these additional shares are 
not generally delivered to the participant. Under these rules the LTIP options are still issued at nil cost to the employee. 

The tables below summarise the outstanding share options.

Number of shares

 Weighted average  
exercise price

SAYE:

Outstanding at beginning of the period
Granted
Exercised
Expired

Outstanding at end of the period

Exercisable at end of the period
Range of exercise prices 

Weighted average remaining contractual life (years)

LTIP:

Outstanding at beginning of the period
Granted
Exercised
Expired

Outstanding at end of the period

Exercisable at end of the period
Exercise price

2014 
m 

5.1
2.6
(0.8)
(0.4)

6.5

2013 
m

6.2
0.9
(1.4)
(0.6)

5.1

0.2
76.1p
 to 265.5p

2.8

0.2
76.1p
 to 265.5p

2.8

Number of shares

2014 
m 

4.2
1.8
(0.6)
(0.8)

4.6

–
–

2013 
m

5.1
1.3
–
(2.2)

4.2

–
–

2014 
p 

90.2
121.0
85.9
99.7

102.1

128.3

2013 
p

83.8
122.8
81.1
97.1

90.2

90.0

 Weighted average  
exercise price

2014 
p 

2013 
p

–
–
–
–

–

–
–
–
–

–

LTIP options are exercisable no later than the tenth anniversary of the date of grant.

At the start of the prior period there were 0.1 million options outstanding in respect of the Group’s Executive Share Option Plan (ESOP). These options had an 
exercise price of 108.4p and were all exercised in the prior period.

The fair values of the SAYE and LTIP rights are calculated at the date of grant using the Black-Scholes option-pricing model. The significant inputs into the model 
for all schemes unless otherwise stated were:

2014 

2013 

Dividend yield %
Expected volatility %
Risk free interest rate %
Expected life of rights
  SAYE
  LTIP

84

Marston's PLC   Annual Report and Accounts 2014

4.5
20.1 to 28.2
1.3 to 2.1

3 to 5 years 
3 years 

4.8 
20.6 to 42.4 
0.7 to 1.2 

3 to 5 years 
3 years 

26  Share-based payments continued

The expected volatility is based on historical volatility over the expected life of the rights. 

The weighted average fair value of options granted during the period in relation to the SAYE was 16.2p (2013: 16.5p). The fair value of options granted during the 
period in relation to the LTIP was 123.3p (2013: 127.1p).

The weighted average share price for options exercised over the period was 146.3p (2013: 154.1p). The total charge for the period relating to employee 
share-based payment plans was £0.7 million (2013: £0.2 million), all of which related to equity-settled share-based payment transactions. After tax, the total 
charge was £0.6 million (2013: £0.1 million).

27  Equity share capital

Allotted, called up and fully paid

Ordinary shares of 7.375p each:
At beginning of the period
Allotted under share option schemes

At end of the period

2014

2013

Number 
m 

602.6
0.2

602.8

Value 
£m 

44.4
–

44.4

Number 
m 

601.1
1.5

602.6

Value 
£m 

44.3
0.1

44.4

A total of 0.2 million (2013: 1.5 million) ordinary shares were issued during the period ended 4 October 2014 pursuant to the exercise of ESOP and SAYE share 
options. The aggregate consideration in respect of these exercises was £0.2 million (2013: £1.1 million).

At 4 October 2014 there were 6.5 million (2013: 5.1 million) SAYE options outstanding at prices from 76.1p to 265.5p per share exercisable between 2014 and 2020. 
Details of the Group’s LTIP are included in the Directors’ Remuneration Report on page 34.

28  Other components of equity

The capital redemption reserve of £6.8 million (2013: £6.8 million) arose on share buybacks.

Own shares represent the carrying value of the investment in own shares held by the Group’s ESOP and LTIP and in treasury shares as set out in the table below. 
ESOP and LTIP shares are held pursuant to the Company’s executive share option schemes. The trustee of the ESOP is Banks’s Brewery Insurance Limited, a 
wholly-owned subsidiary of Marston’s PLC. The trustee of the LTIP is Computershare Trustees (C.I.) Limited.

ESOP
LTIP
Treasury shares

2014

2013

Number 
m 

0.1
1.1
29.6

30.8

Value 
£m 

0.1
2.6
124.1

126.8

 Number 
m 

0.1 
1.7 
30.2 

32.0 

Value 
£m  

0.1 
4.1 
126.7 

130.9 

The market value of own shares held is £44.0 million (2013: £46.4 million). Shares held by the LTIP represent 0.2% (2013: 0.3%) of issued share capital. Treasury 
shares held represent 4.9% (2013: 5.0%) of issued share capital. 

Dividends on own shares have been waived.

Capital management
The Group considers its capital to comprise total equity (as disclosed on the face of the Group balance sheet) and net debt (note 30). In managing its capital the 
primary objective is to ensure that the Group is able to continue to operate as a going concern and to maximise return to shareholders through a combination 
of capital growth and distributions. The Group seeks to maintain a ratio of debt to equity that both balances risks and returns at an acceptable level and retains 
sufficient funds to comply with lending covenants, achieve working capital targets and meet investment requirements. The Board reviews the Group’s dividend 
policy and funding requirements at least once a year.

29  Working capital and non-cash movements

Working capital movement

(Increase)/decrease in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables

2014 
£m 

(1.5)
(3.9)
(18.3)

(23.7)

2013 
£m 

0.7
(6.9)
17.4

11.2

Marston's PLC   Annual Report and Accounts 2014

85

Notes continued 
For the 52 weeks ended 4 October 2014

29  Working capital and non-cash movements continued

Non-cash movements

Income from other non-current assets
Movements in respect of property, plant and equipment, assets held for sale and intangible assets
Share-based payments

2014 
£m 

(0.2)
77.6
0.7

78.1

Further details of movements in respect of property, plant and equipment, assets held for sale and intangible assets are given in notes 11, 12 and 15.

30  Net debt

Analysis of net debt

Cash and cash equivalents
Cash at bank and in hand

Debt due within one year
Unsecured bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Other borrowings

Debt due after one year
Unsecured bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Preference shares

Net debt

2014 
£m 

Cash flow 
£m 

Non-cash 
 movements 
 and deferred 
 issue costs 
£m 

173.3

173.3

0.8
(24.8)
(0.1)
0.1
(120.0)

(144.0)

(209.5)
(859.8)
(20.7)
(137.4)
(0.1)

(1,227.5)

(1,198.2)

79.2

79.2

–
24.0
0.1
–
(120.0)

(95.9)

(21.0)
80.0
–
(53.5)
–

5.5

(11.2)

–

–

–
(25.4)
(0.1)
0.1
–

(25.4)

1.1
24.4
0.1
3.8
–

29.4

4.0

2013 
£m 

(0.3)
2.5
0.2

2.4

2013 
£m 

94.1

94.1

0.8
(23.4)
(0.1)
–
–

(22.7)

(189.6)
(964.2)
(20.8)
(87.7)
(0.1)

(1,262.4)

(1,191.0)

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 facility, 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 current 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 (2013: £nil) 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 at bank and in hand is an amount of £1.4 million (2013: £2.6 million) relating to a letter of credit with Royal Sun Alliance Insurance, an 
amount of £1.0 million (2013: £0.5 million) relating to a letter of credit with Aviva, and an amount of £8.2 million (2013: £8.5 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 (note 19).

Net debt does not include other financial liabilities such as trade and other payables.

86

Marston's PLC   Annual Report and Accounts 2014

30  Net debt continued

Reconciliation of net cash flow to movement in net debt

Increase in cash and cash equivalents in the period
Cash inflow from movement in debt

Change in debt resulting from cash flows
Non-cash movements and deferred issue costs

Movement in net debt in the period
Net debt at beginning of the period

Net debt at end of the period

Reconciliation of net debt before lease financing to net debt

Cash and cash equivalents
Unsecured bank borrowings
Securitised debt
Other borrowings
Preference shares

Net debt before lease financing
Finance leases
Other lease related borrowings

Net debt

31  Operating leases

2014 
£m 

79.2
(90.4)

(11.2)
4.0

(7.2)
(1,191.0)

(1,198.2)

2014 
£m 

173.3
(208.7)
(884.6)
(120.0)
(0.1)

(1,040.1)
(20.8)
(137.3)

(1,198.2)

2013 
£m 

33.3
(87.6)

(54.3)
(15.6)

(69.9)
(1,121.1)

(1,191.0)

2013 
£m 

94.1
(188.8)
(987.6)
–
(0.1)

(1,082.4)
(20.9)
(87.7)

(1,191.0)

The Group as lessee
The Group leases various properties and equipment under non-cancellable operating leases. The leases have various terms, escalation clauses and renewal 
rights. Future minimum lease rentals payable under non-cancellable operating leases are as follows:

 2014

 2013

Due:

Within one year
In more than one year but less than five years
In more than five years

Land and 
buildings 
£m 

25.0
73.2
189.3

287.5

Other
£m

0.4
0.4
–

0.8

Land and
buildings
£m

11.5
43.4
156.1

211.0

Other
£m

0.4
0.3
–

0.7

The Group as lessor
The Group leases a proportion of its licensed estate and other non-licensed properties to tenants. The majority of lease agreements have terms of between 
3 and 21 years and are classified as operating leases. Future minimum lease rentals receivable under non-cancellable operating leases are as follows:

Due:

Within one year
In more than one year but less than five years
In more than five years

 2014

 2013

Land and 
buildings 
£m 

24.5
74.2
107.1

205.8

Other 
£m 

–
–
–

–

Land and 
buildings 
£m 

27.3
79.5
132.1

238.9

Other 
£m 

–
–
–

–

Marston's PLC   Annual Report and Accounts 2014

87

Notes continued
For the 52 weeks ended 4 October 2014

32  Finance leases

The Group leases various properties under finance leases. The leases have various terms, escalation clauses and renewal rights. Future minimum lease payments 
under finance leases are as follows:

Due:

Within one year
In more than one year but less than five years
In more than five years

Future finance charges

Present value of finance lease obligations

The present value of finance lease obligations is as follows:

Due:

Within one year
In more than one year but less than five years
In more than five years

Present value of finance lease obligations

33  Principal subsidiary undertakings

2014 
£m 

1.2
4.9
40.2

46.3
(25.5)

20.8

2014 
£m 

0.1
0.5
20.2

20.8

2013 
£m 

1.2
4.9
41.4

47.5
(26.6)

20.9

2013 
£m 

0.1
0.5
20.3

20.9

Details of the Group’s principal subsidiary undertakings are provided in note 4 to the Company financial statements.

34  Contingent liabilities and financial commitments

On 9 August 2005 the Group entered into a Tax Deed of Covenant, which was amended on 22 November 2007, the primary objective of which was to ensure 
that the Group did not trigger a de-grouping liability comprising Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT). This would arise in the event of 
Marston’s Pubs Limited being sold outside the Group, within six years of the relevant asset transfer date for CGT purposes, and within three years of the relevant 
asset transfer date for SDLT purposes. Due to the passage of time and changes in the statutory rate of corporation tax, the total potential de-grouping liability 
now stands at £8.4 million (2013: £8.4 million), of which £7.9 million (2013: £7.8 million) relates to CGT and £0.5 million (2013: £0.6 million) relates to SDLT.

The Group has issued a letter of credit in favour of Royal Sun Alliance Insurance totalling £1.4 million (2013: £2.6 million) and a letter of credit in favour of Aviva 
totalling £1.0 million (2013: £0.5 million) to secure reinsurance contracts. The letters of credit are secured on fixed deposits for the same amount.

The Group has also entered into a Deed of Guarantee with the Trustees of the Marston’s PLC Pension and Life Assurance Scheme (‘the Scheme’) whereby it 
guarantees to the Trustees the ongoing obligations of the Group to contribute to the Scheme, and the obligations of the Group to contribute to the Scheme in 
the event of a debt becoming due under section 75 of the Pensions Act 1995 on the occurrence of either a Group company entering liquidation or the Scheme 
winding up.

88

Marston's PLC   Annual Report and Accounts 2014

35  Change in accounting policy

Adoption of IAS 19 ‘Employee Benefits’ (revised 2011)
The Group has retrospectively adopted IAS 19 ‘Employee Benefits’ (revised 2011) in the current period. The revised standard requires the Group to recognise a 
single net interest component in respect of its defined benefit pension plan, calculated by applying the discount rate to the net defined benefit asset/liability. In 
addition to this, the interest on the service cost is now required to be included as part of the service cost itself rather than forming part of the interest cost. 
The impact of the retrospective application of this new standard on the Group income statement, Group statement of comprehensive income, Group cash flow 
statement and earnings per share for the 53 weeks ended 5 October 2013 is set out below. There was no impact on the Group balance sheet.

Impact on the Group income statement

Revenue
Operating expenses

Operating profit

 Finance costs
 Finance income
 Movement in fair value of interest rate swaps

Net finance costs

Profit before taxation
Taxation

Profit for the period attributable to equity shareholders

Impact on the Group statement of comprehensive income

Profit for the period

Items of other comprehensive income that may subsequently be reclassified to profit or loss
Gains arising on cash flow hedges
Transfers to the income statement on cash flow hedges
Tax on items that may subsequently be reclassified to profit or loss

Items of other comprehensive income that will not be reclassified to profit or loss
Remeasurement of retirement benefits
Unrealised surplus on revaluation of properties
Tax on items that will not be reclassified to profit or loss

Other comprehensive income for the period

Total comprehensive income for the period

Impact on the Group cash flow statement

Operating activities
Underlying operating profit
Depreciation and amortisation

Underlying EBITDA
Non-underlying operating items

EBITDA
Working capital movement
Non-cash movements
Decrease in provisions and other non-current liabilities
Difference between defined benefit pension contributions paid and amounts charged
Income tax paid

Net cash inflow from operating activities

Impact on earnings per share

Basic earnings per share
Basic underlying earnings per share 
Diluted earnings per share
Diluted underlying earnings per share

As originally 
 stated 
£m 

782.9 
(636.2)

146.7 

(82.8)
2.4 
3.5 

(76.9)

69.8 
(11.2)

58.6 

As originally 
 stated 
£m 

58.6 

24.9 
24.7 
(15.0)

34.6 

3.6 
2.1 
14.7 

20.4 

55.0 

113.6 

Adjustment 
£m 

– 
(0.1)

(0.1)

(1.5)
(0.7)
–

(2.2)

(2.3)
0.6 

(1.7)

Adjustment 
£m 

(1.7)

–
–
–

–

2.3 
–
(0.6)

1.7 

1.7 

–

As originally 
 stated 
£m 

Adjustment 
£m 

168.3 
35.8 

204.1 
(20.3)

183.8 
11.2 
2.4 
(4.7)
(15.2)
(8.1)

169.4 

(0.1)
– 

(0.1)
–

(0.1)
– 
– 
–
0.1 
– 

– 

As originally 
 stated 
p 

Adjustment 
p 

10.3 
12.3 
10.2 
12.2 

(0.3)
(0.3)
(0.3)
(0.3)

Restated 
 amount 
£m 

782.9 
(636.3)

146.6 

(84.3)
1.7 
3.5 

(79.1)

67.5 
(10.6)

56.9 

Restated 
 amount 
£m 

56.9 

24.9 
24.7 
(15.0)

34.6 

5.9 
2.1 
14.1 

22.1 

56.7 

113.6 

Restated 
 amount 
£m 

168.2 
35.8 

204.0 
(20.3)

183.7 
11.2 
2.4 
(4.7)
(15.1)
(8.1)

169.4 

Restated 
 amount 
p 

10.0 
12.0 
9.9 
11.9 

Marston's PLC   Annual Report and Accounts 2014

89

Independent Auditors’ Report to the members of Marston’s PLC

Report on the Parent Company financial statements
Our opinion
In our opinion, Marston’s PLC’s Parent Company financial statements (the “financial statements”):

•
•
•

give a true and fair view of the state of the Parent Company’s affairs as at 4 October 2014;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.

What we have audited
The financial statements comprise:

•
•

the Company balance sheet as at 4 October 2014; and
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report and Accounts (the “Annual Report”), rather than in the notes to the financial 
statements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and United Kingdom Accounting 
Standards (United Kingdom Generally Accepted Accounting Practice).

Other required reporting
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial statements are prepared is 
consistent with the financial statements.

ISAs (UK & Ireland) reporting
Under International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”) we are required to report to you if, in our opinion, information in the Annual 
Report is:

• materially inconsistent with the information in the audited financial statements; or
•
•

apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or
otherwise misleading.

We have no exceptions to report arising from this responsibility.

Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or
•

adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not 
visited by us; or
the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns.

•

We have no exceptions to report arising from this responsibility.

Directors’ remuneration
Directors’ remuneration report - Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are not made. 
We have no exceptions to report arising from this responsibility. 

90

Marston's PLC   Annual Report and Accounts 2014

Responsibilities for the financial statements and the audit
Our responsibilities and those of the Directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 47, the Directors are responsible for the preparation of the financial 
statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards 
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the 
Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other 
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial 
statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This 
includes an assessment of: 

• whether the accounting policies are appropriate to the Parent Company’s circumstances and have been consistently applied and adequately disclosed; 
•
•

the reasonableness of significant accounting estimates made by the Directors; and 
the overall presentation of the financial statements. 

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the 
disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to 
draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. 

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements 
and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of 
performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Other matter
We have reported separately on the Group financial statements of Marston’s PLC for the 52 week period ended 4 October 2014.

Mark Smith (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham

27 November 2014

Marston's PLC   Annual Report and Accounts 2014

91

Company Balance Sheet
As at 4 October 2014

Fixed assets
Tangible assets
Investments

Current assets
Assets held for sale
Debtors
Amounts falling due within one year
  Amounts falling due after more than one year
Cash at bank

Creditors Amounts falling due within one year

Net current assets

Total assets less current liabilities

Creditors Amounts falling due after more than one year
Provisions for liabilities and charges

Net assets

Capital and reserves
Equity share capital
Share premium account
Revaluation reserve
Capital redemption reserve
Own shares
Profit and loss account

Total shareholders’ funds

The financial statements on pages 92 to 98 were approved by the Board on 27 November 2014 and signed on its behalf by:

Ralph Findlay 
Chief Executive Officer
27 November 2014

4 October 
 2014 
£m 

5 October 
 2013 
£m 

Note

3 

4 

5 

6 

6 

7 

7 

8 

11 

12 

12 

12 

12 

12 

13 

307.3
260.9

568.2

13.5

543.4
685.6
18.7

314.5
260.9

575.4

5.7

787.5
629.1
28.3

1,261.2

1,450.6

(734.3)

526.9

(971.5)

479.1

1,095.1

1,054.5

(127.7)
(12.0)

955.4

44.4
334.0
59.8
6.8
(126.8)
637.2

955.4

(126.7)
(8.4)

919.4

44.4
333.8
52.8
6.8
(130.9)
612.5

919.4

92

Marston's PLC   Annual Report and Accounts 2014

Notes 
For the 52 weeks ended 4 October 2014

1  Accounting policies

Basis of preparation
The Company financial statements are prepared on the going concern basis, under the historical cost convention, as modified by the revaluation of certain freehold 
and leasehold properties and derivative financial instruments, and in accordance with the Companies Act 2006 and applicable UK accounting standards. 

As permitted by section 408(3) of the Companies Act 2006, no profit and loss account has been presented for the Company. As permitted by section 408(2) of 
the Companies Act 2006, information about the Company’s employee numbers and costs has not been presented.

Revenue and other operating income
Revenue represents rent receivable from licensed properties, which is recognised in the period to which it relates. Other operating income comprises mainly 
rent receivable from unlicensed properties.

Current and deferred tax
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date and is measured at the amount 
expected to be paid to or recovered from the tax authorities.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed by the balance sheet date that give rise to an obligation to 
pay more or less tax in the future. Timing differences are differences between the Company’s taxable profits and profits as stated in the financial statements. 
Deferred tax assets and liabilities are not discounted and assets are only recognised where recoverability is probable.

Deferred tax has been calculated at the tax rates expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or 
substantively enacted at the balance sheet date.

Freehold and leasehold properties are stated at valuation or at cost. Fixtures, fittings, plant and equipment are stated at cost.

Fixed assets
•
• Depreciation is charged to the profit and loss account on a straight-line basis to provide for the cost of the assets less residual value over their useful lives.
•
•
•
• Own labour and interest costs directly attributable to capital projects are capitalised.
•

Freehold and long leasehold buildings are depreciated to residual value over 50 years.
Short leasehold properties are depreciated over the life of the lease.
Fixtures, fittings, plant and equipment are depreciated over periods ranging from 3 to 15 years.

Land is not depreciated.

Properties are revalued by qualified valuers at least once in each rolling three year period, on an existing use basis. Substantially all of the Company’s properties 
have been externally valued in accordance with the Royal Institution of Chartered Surveyors’ Red Book. These valuations are performed directly by reference to 
observable prices in an active market or recent market transactions on arm’s length terms. Internal valuations are performed on the same basis.

When a valuation is below current carrying value, the asset concerned is reviewed for impairment. Impairment losses are charged to the revaluation reserve to 
the extent that a previous gain has been recorded, and thereafter to the profit and loss account. Surpluses on revaluation are recognised in the revaluation 
reserve, except to the extent they reverse previously charged impairment losses, in which case the reversal is recorded in the profit and loss account.

Assets held for sale
Assets, typically properties, are categorised as held for sale when the value of the asset will be recovered through a sale transaction rather than continuing use. 
This condition is met when the sale is highly probable, the asset is available for immediate sale in its present condition and is being actively marketed. In 
addition, the Company must be committed to the sale and completion should be expected to occur within one year from the date of classification. Assets held 
for sale are valued at the lower of carrying value and fair value less costs to sell, and are no longer depreciated.

Disposals of fixed assets
Profit/loss on disposal of fixed assets represents net sale proceeds less carrying value of the assets. Any element of the revaluation reserve relating to the fixed 
assets disposed of is transferred to the profit and loss reserve at the date of sale.

Leases
Rental costs under operating leases are charged to the profit and loss account over the term of the lease. The cost of assets held under finance leases is included 
within tangible fixed assets and depreciation is provided in accordance with the policy for the class of asset concerned. The corresponding obligations under 
those leases are shown as creditors. The finance charge element of rentals is charged to the profit and loss account as incurred.

Lease premiums received are recognised on a straight-line basis over the life of the lease.

Obligations arising from sale and leaseback arrangements with repurchase options that do not fall within the scope of SSAP 21 ‘Accounting for leases and hire purchase 
contracts’ are classified as other lease related borrowings and accounted for in accordance with FRS 26 ‘Financial Instruments: Recognition and Measurement’.

Investments in subsidiaries
Investments in subsidiaries are stated at cost, less any provision for diminution in value. 

Provisions
Provisions are recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event and it is probable that 
an outflow of economic benefits will be required to settle the obligation. 

Marston's PLC   Annual Report and Accounts 2014

93

Notes continued 
For the 52 weeks ended 4 October 2014

1  Accounting policies continued

Dividends
Dividends proposed by the Board but unpaid at the period end are recognised in the financial statements when they have been approved by the shareholders. 
Interim dividends are recognised when paid.

Preference shares
Preference shares are treated as borrowings, and dividends payable on those preference shares are charged as interest in the profit and loss account.

Group undertakings
There is an intra group funding agreement in place between the Company and certain other members of the Marston’s Group. This agreement stipulates that all 
balances outstanding on any intercompany loan account between these companies which exceed £1 are interest bearing at a prescribed rate.

In the current and prior period it was agreed that no interest would be charged on any balances due to/from certain Group companies during the period of 
their restructuring.

There is a 12.5% subordinated loan due to the Company from Marston’s Pubs Limited. No interest is payable on any other amounts owed by/to Group 
companies who are not party to the intra group funding agreement.

All amounts owed by/to Group undertakings are unsecured and, with the exception of the subordinated loan, repayable on demand.

Derivative financial instruments
The Company uses derivative financial instruments to hedge the Group’s exposure to fluctuations in interest rates. Derivative financial instruments are 
initially recognised in the balance sheet at fair value and are subsequently remeasured to their fair value at each balance sheet date. The Company has not 
designated any derivative financial instruments as hedging instruments and as such any gains or losses on remeasurement are recognised in the profit and 
loss account immediately.

2  Auditors’ remuneration

Fees payable to the Company’s Auditors for the audit of the Company’s annual accounts are disclosed in note 3 to the Group financial statements. Fees paid to 
the Company’s Auditors for non-audit services to the Company itself are not required to be disclosed as the Group financial statements disclose such fees on a 
consolidated basis.

3  Tangible fixed assets

Cost or valuation
At 6 October 2013
Additions
Net transfers to assets held for sale and disposals
Revaluation
Net transfers from Group undertakings

At 4 October 2014

Depreciation
At 6 October 2013
Charge for the period
Net transfers to assets held for sale and disposals
Revaluation

At 4 October 2014

Net book value at 5 October 2013

Net book value at 4 October 2014

94

Marston's PLC   Annual Report and Accounts 2014

Land and 
buildings 
£m 

300.2
7.1
(101.8)
10.4
77.0

292.9

1.1
1.2
–
(0.1)

2.2

299.1

290.7

Fixtures, 
fittings, 
plant and 
equipment 
£m 

22.2
3.3
(6.5)
–
6.4

25.4

6.8
2.1
(0.1)
–

8.8

15.4

16.6

Total 
£m 

322.4
10.4
(108.3)
10.4
83.4

318.3

7.9
3.3
(0.1)
(0.1)

11.0

314.5

307.3

3  Tangible fixed assets continued

The net book value of land and buildings is split as follows:

Freehold properties
Leasehold properties over 50 years unexpired
Leasehold properties under 50 years unexpired

Cost or valuation of land and buildings comprises:

Valuation
At cost

2014 
£m 

202.0
75.2
13.5

290.7

2014 
£m 

254.5
38.4

292.9

2013 
£m 

207.3
78.1
13.7

299.1

2013 
£m 

264.1
36.1

300.2

If the land and buildings had not been revalued, the historical cost net book value would be £242.8 million (2013: £246.5 million).

Cost at 4 October 2014 includes £2.5 million (2013: £6.3 million) of assets in the course of construction. 

Capital expenditure authorised and committed at the period end but not provided for in the financial statements was £0.5 million (2013: £0.5 million).

The net book value of land and buildings held under finance leases at 4 October 2014 was £21.8 million (2013: £21.4 million). The net book value of land and 
buildings held as part of sale and leaseback arrangements that do not fall within the scope of SSAP 21 ‘Accounting for leases and hire purchase contracts’ was 
£113.9 million (2013: £112.0 million).

Revaluation/impairment
During the current and prior period various properties were reviewed for impairment and/or material changes in value. These valuation adjustments were 
recognised in the revaluation reserve or the profit and loss account as appropriate. 

The impact of the revaluations/impairments described above is as follows:

Profit and loss account:
Revaluation loss charged as an impairment
Reversal of past impairments

Revaluation reserve:
Unrealised revaluation surplus
Reversal of past revaluation surplus

Net increase in shareholders’ funds/fixed assets

4  Fixed asset investments

Cost

At 6 October 2013 and 4 October 2014

Impairments

At 6 October 2013 and 4 October 2014

Net book value at 5 October 2013

Net book value at 4 October 2014

2014 
£m 

(0.9)
–

(0.9)

11.7
(0.3)

11.4

10.5

2013 
£m 

–
1.6

1.6

1.0
–

1.0

2.6

Subsidiary 
undertakings 
£m 

312.0

51.1

260.9

260.9 

Marston's PLC   Annual Report and Accounts 2014

95

Notes continued 
For the 52 weeks ended 4 October 2014

4  Fixed asset investments continued

The principal subsidiary undertakings are:

Marston’s Trading Limited
Marston’s Property Developments Limited 
Marston’s Pubs Limited
Marston’s Estates Limited
Marston’s Operating Limited
Banks’s Brewery Insurance Limited

Country of incorporation

Nature of business

% held

Class of share

England
England
England
England
England
Guernsey

Pub retailer and brewer
Property developer
Pub retailer
Property management
Pub retailer and brewer
Insurance

100
100
100
100
100
100

Ordinary £5 shares
Ordinary £1 shares
Ordinary £1 shares
Ordinary 25p shares
Ordinary £1 shares
Ordinary £1 shares

Details of the principal operating subsidiaries by type of business are set out above. All of these are held directly by Marston’s PLC with the exception of 
Marston’s Operating Limited, which is a wholly-owned subsidiary of Marston’s Estates Limited, and Marston’s Pubs Limited, which is a wholly-owned subsidiary 
of Marston’s Pubs Parent Limited, an intermediate holding company. A complete list of subsidiary undertakings is available at the Group’s registered office and 
will be filed with the next Annual Return. All subsidiaries have been included in the consolidated financial statements.

The Group financial statements also include the consolidation of Marston’s Issuer PLC, which the Directors consider to be a special purpose entity. The ultimate 
parent undertaking of Marston’s Issuer PLC is Wilmington Trust SP Services (London) Limited, which holds the shares of the company’s parent company under a 
charitable trust. Marston’s Issuer PLC was set up with the sole purpose of issuing debt secured on the assets of Marston’s Pubs Limited.

5  Assets held for sale

Properties

2014 
£m 

13.5

2013 
£m 

5.7

During the current and prior period, all properties classed as held for sale were reviewed for impairment. This review identified an impairment of £1.3 million 
(2013: £nil) which has been taken to the profit and loss account. 

6  Debtors

Amounts falling due within one year

Amounts owed by Group undertakings
Interest owed by Group undertakings
Derivative financial instruments
Prepayments and accrued income
Other debtors

Amounts falling due after more than one year

12.5% subordinated loan owed by Group undertakings

7  Creditors

Amounts falling due within one year

Amounts owed to Group undertakings
Interest owed to Group undertakings
Finance leases
Other lease related borrowings
Corporation tax
Accruals and deferred income
Derivative financial instruments
Other creditors

Other creditors include £nil (2013: £10.3 million) payable in respect of a supplier credit arrangement.

96

Marston's PLC   Annual Report and Accounts 2014

2014 
£m 

522.2
–
19.5
–
1.7

543.4

2014 
£m 

685.6

2014 
£m 

686.0
–
0.1
(0.1)
25.0
2.6
19.5
1.2

734.3

2013 
£m 

733.7
30.2
22.6
0.1
0.9

787.5

2013 
£m 

629.1

2013 
£m 

876.2
43.7
0.1
–
17.0
1.6
22.6
10.3

971.5

7  Creditors continued

Amounts falling due after more than one year

Finance leases
Other lease related borrowings
Preference shares
Accruals and deferred income
Other creditors

2014 
£m 

20.7
87.7
0.1
16.8
2.4

2013 
£m 

20.8
87.7
0.1
18.1
–

127.7

126.7

The preference shares carry a right to a fixed preferential dividend. They participate in the event of a winding-up and carry the right to attend and vote at 
general meetings of the Company.

Liabilities disclosed under creditors falling due after more than one year which are due for repayment after more than five years from the balance sheet date 
total £108.2 million (2013: £108.3 million).

8  Provisions for liabilities and charges

At 6 October 2013
Provided in the period
Unwinding of discount
Utilised in the period
Credited to the profit and loss account

At 4 October 2014

Deferred 
tax 
£m 

Property 
leases 
£m 

5.7
–
–
–
(0.2)

5.5

2.7
4.4
0.1
(0.7)
–

6.5

Total 
£m 

8.4
4.4
0.1
(0.7)
(0.2)

12.0

When valuations of leasehold properties (based on future estimated discounted income streams) give rise to a deficit as a result of onerous lease conditions they 
are recognised as liabilities in provisions. Payments are expected to continue on these properties for periods of 1 to 30 years (2013: 1 to 31 years). 

Deferred tax
The amount provided in respect of deferred tax is as follows:

Excess of capital allowances over accumulated depreciation

9  Operating lease commitments

At 4 October 2014 the Company had annual commitments under non-cancellable operating leases as follows: 

2014 
£m 

5.5

2013 
£m 

5.7 

Leases which expire:

Within one year
Later than one year and less than five years
After five years

10  Finance lease obligations

Obligations under finance leases are as follows: 

Due:

Within one year
Later than one year and less than five years
After five years

Future finance charges

Present value of finance lease obligations

Land and 
buildings 
£m 

–
13.0
4.1

17.1

2014

2013

Other 
£m 

Land and 
buildings 
£m 

–
–
–

–

0.1
0.5
4.2

4.8

2014 
£m 

1.2
4.9
40.2

46.3
(25.5)

20.8

Other 
£m 

–
–
–

–

2013 
£m 

1.2
4.9
41.4

47.5
(26.6)

20.9

Marston's PLC   Annual Report and Accounts 2014

97

Notes continued 
For the 52 weeks ended 4 October 2014

11  Share capital

Allotted, called up and fully paid

Ordinary shares of 7.375p each:
At beginning of the period
Allotted under share option schemes

At end of the period

Further information on share capital is provided in note 27 to the Group financial statements.

Number 
m 

602.6
0.2

602.8

12  Reserves

At 6 October 2013
Issue of shares
Sale of own shares
Property revaluation 
Property impairment
Disposal of properties
Transfer to profit and loss account
Profit for the financial period
Dividends paid

At 4 October 2014

Share 
premium 
account 
£m 

Revaluation 
reserve 
£m 

Capital 
redemption 
reserve 
£m 

333.8
0.2
–
–
–
–
–
–
–

334.0

52.8
–
–
11.7
(0.3)
(4.1)
(0.3)
–
–

59.8

The capital redemption reserve arose on share buybacks.

Details of own shares are provided in note 28 to the Group financial statements.

13  Reconciliation of movement in shareholders’ funds

Profit for the financial period
Dividends paid
Issue of shares
Sale of own shares
Revaluation of properties

Net addition to shareholders’ funds
Opening shareholders’ funds

Closing shareholders’ funds

14  Contingent liabilities

2014

2013

Value 
£m 

44.4
–

44.4

Own 
shares 
£m 

(130.9)
–
4.1
–
–
–
–
–
–

Number 
m 

601.1
1.5

602.6

Profit 
and loss 
account 
£m 

612.5
–
(3.6)
–
–
4.1
0.3
61.0
(37.1)

6.8
–
–
–
–
–
–
–
–

6.8

(126.8)

637.2

2014 
£m 

61.0
(37.1)
0.2
0.5
11.4

36.0
919.4

955.4

Value 
£m 

44.3
0.1

44.4

Total 
£m 

875.0
0.2
0.5
11.7
(0.3)
–
–
61.0
(37.1)

911.0

2013 
£m 

62.4
(35.3)
1.1
–
1.0

29.2
890.2

919.4

The Company has entered into a Deed of Guarantee with Marston’s Trading Limited (‘Trading’) and the Trustees of the Marston’s PLC Pension and Life Assurance 
Scheme (‘the Scheme’) whereby it guarantees to the Trustees the ongoing obligations of Trading to contribute to the Scheme and the obligations of Trading to 
contribute to the Scheme in the event of a debt becoming due under section 75 of the Pensions Act 1995 on the occurrence of either Trading entering 
liquidation or the Scheme winding up.

98

Marston's PLC   Annual Report and Accounts 2014

Information for Shareholders

Annual General Meeting
The Company’s AGM will be held on 27 January 2015 at 12 noon at Wolverhampton Racecourse, Holiday Inn Garden Court, Dunstall Park, Wolverhampton, WV6 0PE.

Financial calendar

Ex-dividend date for final dividend
Record date for final dividend
AGM and Interim Management Statement
Final dividend payment date
Half-year results
Ex-dividend date for interim dividend
Interim dividend payment date

18 December 2014
19 December 2014
27 January 2015
2 February 2015
May 2015
May 2015
July 2015

These dates are indicative only and may be subject to change.

The Marston’s PLC website
Shareholders are encouraged to visit our website www.marstons.co.uk for further information about the Company. The dedicated Investors section on the 
website contains information specifically for shareholders including share price information, historical dividend amounts and payment dates together with this 
year’s (and prior years’) Annual Report and Accounts.

Registrars
The Company’s shareholder register is maintained by our Registrar Equiniti. If you have any queries relating to your Marston’s PLC shareholding you should 
contact Equiniti directly by one of the methods below:

www.shareview.co.uk – from here you will be able to securely email Equiniti with your query.

Online: 
Telephone:  0871 384 2274*
Text phone: 0871 384 2255*
By post: 

Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA

Dividend payments
By completing a bank mandate form dividends can be paid directly into your bank or building society account. Those selecting this payment method will 
benefit from receiving cleared funds in their bank account on the payment date, avoiding postal delays and removing the risk of any cheques being lost in the 
post. To change how you receive your dividends contact Equiniti or visit www.shareview.co.uk

Duplicate documents
If you have received two or more sets of the documents concerning the AGM this means that there is more than one account in your name on the shareholder 
register, perhaps because either your name or your address appear on each account in a slightly different way. If you think this might be the case and would like 
to combine your accounts, please contact Equiniti.

Moving house?
It is important that you notify Equiniti of your new address as soon as possible. If you hold 1,500 shares or fewer, and reside in the UK, this can be done quickly 
over the telephone. However, for holdings greater than 1,500 shares your instruction will need to be in writing, quoting your full name, shareholder reference 
number (if known), previous address and new address.

Electronic communications
Changes in legislation in recent years allow the Company to use its corporate website as the main way to communicate with shareholders. Annual Report and 
Accounts are only sent to those shareholders who have opted to receive a paper copy. Registering to receive shareholder documentation from the Company 
electronically will allow shareholders to:

view the Annual Report and Accounts on the day it is published;
receive an email alert when the Annual Report and Accounts and any other shareholder documents are available;
cast their AGM votes electronically; and

•
•
•
• manage their shareholding quickly and securely online, through www.shareview.co.uk

This reduces our impact on the environment, minimises waste and reduces printing and mailing costs. For further information and to register for electronic 
shareholder communications visit www.shareview.co.uk

Buying and selling shares in the UK
If you wish to buy or sell Marston’s PLC shares and hold a share certificate, you can:

•
•

use the services of a stockbroker or high street bank; or
use a telephone or online service.

If you sell your shares in this way you will need to present your share certificate at the time of sale. Details of low cost dealing services may be obtained from 
www.shareview.co.uk or 0845 603 7037**.

Marston's PLC   Annual Report and Accounts 2014

99

Information for Shareholders continued

Share fraud warning
Share fraud includes scams where investors are called out of the blue and offered shares that often turn out to be worthless or non-existent, or an inflated price 
for shares they own. These calls come from fraudsters operating ‘boiler rooms’ that are mostly based abroad. While high profits are promised, those who buy or 
sell shares in this way usually lose their money. The Financial Conduct Authority (FCA) has found most share fraud victims are experienced investors who lose an 
average of £20,000, with around £200 million lost in the UK each year.

If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company or research reports, you should take 
these steps before handing over any money:

Check the Financial Services Register at www.fca.org.uk/register to ensure they are authorised.

• Get the name of the person and organisation contacting you.
•
• Use the details on the FCA Register to contact the firm.
•
•
•

Call the FCA Consumer Helpline on 0800 111 6768 if there are no contact details on the Register or you are told they are out of date.
Search the FCA list of unauthorised firms and individuals to avoid doing business with.
Remember, if it sounds too good to be true, it probably is.

If you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial Ombudsman Service or Financial Services 
Compensation Scheme if things go wrong.

If you are approached about a share scam you should tell the FCA using the share fraud reporting form at www.fca.org.uk, where you will find out about the 
latest investment scams. You can also call the Consumer Helpline on 0800 111 6768.

If you have already paid money to share fraudsters you should contact Action Fraud on 0300 123 2040.

*  Calls cost 8 pence per minute plus network extras. Lines are open from 8.30am to 5.30pm Monday to Friday.
** Lines are open Monday to Friday, 8:00am to 4.30pm for dealing and until 6:00pm for enquiries.

Company details
Registered office: Marston’s House, Brewery Road, Wolverhampton, WV1 4JT
Telephone: 01902 711811
Company registration number: 31461

100

Marston's PLC   Annual Report and Accounts 2014

Glossary

BBPA British Beer & Pub Association – a body representing Britain’s brewers and pub companies

BIS Department for Business, Innovation and Skills – Government department of economic growth

Challenge 21 BBPA scheme to prevent underage sales – if a customer buying alcohol looks under the age of 21 they will be asked to provide proof of their age

Challenge 25 Extension to Challenge 21 – scheme where customers will be asked to prove their age if they look under 25

CROCCE Cash Return on Cash Capital Employed – calculated in the same way as ROC

CSR Corporate Social Responsibility – businesses response to their impact on society

Drinkaware An independent charity which promotes drinking responsibly and aims to tackle alcohol misuse

EBIT Earnings before interest and tax

EBITDA Earnings before interest and tax, depreciation and amortisation 

EPOS Electronic point of sale – software system for retail business

Export Anything sold outside of the UK

FCF Free Cash Flow – operating cash flow of the business after tax and interest

FIT Fairness, Integrity, Transparency – Marston’s internal code of behaviour 

F-Plan: Food, Families, Females, Forty/Fifty somethings

FRC Financial Reporting Council – independent regulator 

Free trade Independently owned pubs and clubs

LPG (emissions) Liquefied petroleum gas, used as a fuel in heating appliances, cooking equipment and vehicles

National on-trade Managed house pub groups, tenanted pub groups, brewers

NED Non-executive Director

Off-trade Business with food and drink retailers, such as supermarkets (also known as take home)

On-trade Business with hotels, bars, restaurants and pub companies

PBT Profit before tax

Responsibility Deal Government initiative directed at business sectors to encourage healthy lifestyles, encouraging healthy living by their employees  
and customers 

ROC Return on Capital – calculated in the same way as CROCCE

Take home Supermarkets, cash and carry, convenience stores (also known as off-trade)

TSR Total Shareholder Return – a combination of share price appreciation and dividends paid 

WRAP Food and Hospitality Agreement – Government agency for promoting waste reduction and recycling 

Picture Reference 

Front cover:  The Pine Marten, Dunbar

Page 8: 

The Bell, Tong, Shifnal
The Fallow Field, Telford
The Lost Coins, Haverfordwest
The Woolpack, Weston, Staffordshire
The Red Lion, Evenley, Northants

A full list of new openings during the year is available on our website www.marstons.co.uk

Marston's PLC 

Marston’s House 
Brewery Road 
Wolverhampton 
WV1 4JT
Telephone 01902 711811 
Registered No. 31461