Making Marston’s
The Place to Be
Marston’s PLC
Annual Report and Accounts 2018
Underlying* revenue (£m)
1,140.4m
14.9%
2018
2017
2016
1,140.4
992.2
905.8
2015
2014
845.5
787.6
Underlying* operating proft (£m)
182.5m
4.6%
2018
2017
2016
2015
2014
Underlying* proft before tax (£m)
104.0m
3.9%
2018
2017
2016
2015
2014
Underlying* earnings per share (p)
13.9p
2.1%
2018
2017
2016
2015
2014
Total dividend per share (p)
7.5p
2018
2017
2016
2015
2014
182.5
174.5
172.7
165.4
156.1
104.0
100.1
97.3
90.9
82.9
13.9
14.2
13.9
12.8
11.7
7.5
7.5
7.3
7.0
6.7
Marston’s PLC Annual Report and Accounts 2018
A Snapshot of 2018
• Record revenue and underlying
proft growth achieved; ffth
consecutive year of like-for-like
pub sales growth.
• Strong growth in Brewing
with own and licensed brands
exceeding 330 million pints.
• Net Asset Value increased
and supported by £2 billion
estate valuation.
• Full year dividend maintained
at 7.5 pence per share.
Dividend cover at 1.9 times.
• Clear plans for growth in 2019.
• Earnings per share refects the
equity issuance in May 2017.
Statutory reporting
* The underlying results reflect the performance of the
Group before exceptional and other adjusting items.
The Directors consider that these figures provide a more
appropriate indication of the underlying performance of
the Group.
On a statutory basis, profit before tax was £54.3 million
(2017: £100.3 million) and earnings per share were
7.1 pence per share (2017: 14.2 pence per share),
reflecting the non-cash impact of the estate valuation
during the year. A reconciliation between the underlying
results and the statutory numbers can be found in the
Group Income Statement on page 74.
Statutory profit before tax
2018
2017
2016
2015
2014
£54.3m
£100.3m
£80.8m
£31.3m
(£59.2m)
Strategic Report approval
The Strategic Report, outlined from the inside front cover to page 38
incorporates: A Snapshot of 2018, Our Investment Case, At a Glance,
Chairman’s Statement, Our Business Model, Resources and
Relationships underpinning our Business Model, Our Marketplace,
Chief Executive’s Statement, Our Strategy, Our Key Performance
Indicators, Group Operating and Financial Review, Non-Financial
Information Statement, Risks and Risk Management, Our Principal
Risks and Uncertainties, and Corporate Responsibility.
By order of the Board
Ralph Findlay
Chief Executive Officer
21 November 2018
Strategic Report
Governance
Financial Statements
Additional Information
1
Our ambition is to make Marston’s
The Place to Be…
We’re hugely proud of our heritage but a lot has
changed since we started running pubs and
brewing beer over 180 years ago. As markets and
customer needs continue to evolve and change,
we’re adapting with them so that our products,
services and teams continue to be the best they
can possibly be.
Our business has grown over time and we now
own a wide range of industry-leading assets –
from pubs to brands – which are the result of
investment decisions that deliver sustainable
growth and maximise return on capital.
We have more than 14,000 employees at around
1,600 pubs, inns, breweries, depots and offices
across the UK with a culture that is focused on
delivering a great customer experience.
We are a people-powered business that continues
to strive to inspire, engage and enable our people
to work together, to the same high standards, to
make Marston’s ‘The Place to Be’.
Our people
Our customers
Our shareholders
We aim to recruit,
retain and develop
the best people in
the industry.
We want our
customers to visit us
and then come back
time and time again.
We want to attract
long-term investors
who believe in and
support our business.
More online
This year we have incorporated material
information on our community involvement
and our people into our main narrative
report. More case studies about Marston’s
‘The Place to Be’ and additional Corporate
Responsibility information can be found on
our website.
www.marstons.co.uk/investors/strategy
www.marstons.co.uk/responsibility
For a full year end press release, preliminary
results presentation and webcast, visit:
www.marstons.co.uk/investors
Contents
Strategic Report
A Snapshot of 2018
Our Investment Case
At a Glance
Chairman’s Statement
Our Business Model
Resources and Relationships
underpinning our Business Model
Our Marketplace
Chief Executive’s Statement
Our Strategy
Our Key Performance Indicators
Group Operating and Financial Review
Non-Financial Information Statement
Risks and Risk Management
Our Levels of Defence
Our Principal Risks and Uncertainties
Corporate Responsibility
Governance
Chairman’s Introduction
Corporate Governance Report
Board of Directors
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report:
Annual Statement by Chairman
Remuneration Summary 2018
Annual Report on Remuneration
Directors’ Report
Statement of Directors’ Responsibilities
IFC
2
4
6
7
9
12
14
16
22
24
27
28
30
32
35
40
41
42
48
51
53
53
55
56
63
66
68
69
74
Financial Statements
Five Year Record
Independent Auditors’ Report
to the Members of Marston’s PLC
Group Income Statement
Group Statement of
74
Comprehensive Income
75
Group Cash Flow Statement
76
Group Balance Sheet
77
Group Statement of Changes in Equity
78
Notes
107
Company Balance Sheet
Company Statement of Changes in Equity 108
109
Notes
Additional Information
Information for Shareholders
Glossary
Pub-restaurants and lodges completed
during the period
118
121
122
2
Marston’s PLC Annual Report and Accounts 2018
Our Investment Case
What makes us different?
Our unique culture is what makes Marston’s different: we’re passionate about our
business and proud of its heritage. We’re able to build on our traditional strengths and
look for new ideas to further the growth of our business. We take pride in doing things
properly and we recognise our responsibilities to all of our stakeholders.
Our people
Our people are engaged,
enabled and proud to work
for Marston’s.
Good track record
Proft per pub continues to increase
and our share of the beer market
is growing.
We create value through our use
of capital and we have a stable
dividend payout.
Clear and consistent strategy
Our pubs business operates across all
segments of the market, catering for a
broad range of customers.
Our beer business has evolved to be a
market leader in premium ale with a
lager and craft licensed portfolio and
a leading service business.
14.9%
Increase in total underlying revenue
Strategic Report
Governance
Financial Statements
Additional Information
3
55%
Increase in average profit per pub
since 2012
Valuable assets and
secure financing
Our estate has been externally
valued at £2.2 billion and 93%
of that estate is freehold.
The fnancing of our business
is supported by a long-term
structure, a bank facility in
place to 2023 and fxed charge
cover of 2.5 times.
Future growth plans
• Continued investment in our pub estate and rooms business:
ten new pub-restaurants and bars and five lodges planned; growth
capital investment of £30 million within Destination and Premium;
and the acquisition of 15 pubs into our Taverns estate.
• Within Brewing, £10 million investment in a state of the art canning
line in Burton and a new distribution centre located in Thurrock.
• Flexibility over the allocation of expansionary capital between
development of sites within Destination and Premium, Taverns,
and Brewing.
• Developing our pub estate to meet changing consumer and
regulatory demands and challenges.
4
Marston’s PLC Annual Report and Accounts 2018
At a Glance
The Place to Be… across the nation
We have four operating segments, as set out below, which reflect different customer
profiles, flexible operating models, products and services. More detailed information
about each reporting segment can be found in Our Strategy on pages 16 to 21 and
Group Operating and Financial Review on pages 24 to 26.
Underlying revenue
by segment
33%
2018
£1,140.4m
40%
Destination and Premium
• Larger food-led managed pubs, premium bars and
restaurants, accommodation.
• Marston’s Two for One, Heritage, Milestone Rotisserie,
Milestone Carvery, Accent, Firebrand, Pitcher & Piano, Lost
& Found, Foundry and Revere Country.
• Typical customers: value seekers or those looking for a
premium experience.
27%
Destination and Premium
Taverns
Brewing
Underlying operating proft
by segment*
18%
2018
£182.5m
49%
47%
Destination and Premium
Taverns
Brewing
*Group Services has a 14% (£25.0m) impact
on underlying operating proft by segment.
Taverns
• Community and independently run pubs, either managed,
franchised or tenanted.
• Great pubs with a licensee who connects with
their community or that maximise the abilities of
skilled entrepreneurs.
• Typical customers: those wanting to enjoy a drink, socialise
and be entertained with people from their community.
Brewing
• Six breweries producing a wide portfolio of cask, keg and
packaged beers.
• Key brands: Pedigree, Hobgoblin, Wainwright and
Bombardier and licensed brands including Estrella Damm.
• Local provenance in regional markets with Banks’s,
Jennings, Mansfeld, Ringwood, Brakspear and Eagle.
• Typical customers: discerning and knowledgeable drinker at
home and away from home (in pubs, clubs and bars).
Group Services
• Our Group Services team provides a range of functional
services that support and connect the wider business,
including IT, HR, Finance, Retail Systems, Company
Secretariat, Legal, Risk and Compliance.
406
1,551
Underlying revenue
Movement
2017
Underlying
operating proft
Movement
2017
£450.7m
+2.9%
£438.0m
£89.4m
+0.6%
£88.9m
1,139
Underlying revenue
Movement
2017
Underlying
operating proft
Movement
2017
£312.0m
+3.6%
£301.3m
£86.1m
+2.4%
£84.1m
6
Underlying revenue
Movement
2017
Underlying
operating proft
Movement
2017
£377.7m
+49.3%
£252.9m
£32.0m
+25.5%
£25.5m
Strategic Report
Governance
Financial Statements
Additional Information
5
National coverage with a growing high quality estate
We operate across the UK and are focused on expanding a high quality estate, which
we continue to strengthen through organic development of pub-restaurants, bars and
franchise-style pubs, including new-build pubs, investment in lodges and bars that
widen our appeal. Our six breweries and 13 delivery depots provide national coverage
to supply and distribute a wide portfolio of beers to our estate, supermarkets and other
pub and leisure businesses across the nation.
Marston’s estate in 2018
Destination and Premium
Rooms
Taverns
Brewing
SCOTLAND
KEY
20
250
NORTH OF
ENGLAND
340
1
102
219
MIDLANDS
572
2
135
452
101
159
30
WALES
126
3
119
471
SOUTH OF
ENGLAND
6
Marston’s PLC Annual Report and Accounts 2018
Chairman’s Statement
Marston’s is a strong business with
a high quality estate and market
leading brewing business. In 2018,
in a difficult market, we delivered
record underlying revenue, 15% higher
than the previous year.
William Rucker
Chairman
This is my first report to you as Chairman, having joined the Board
on 1 October 2018. Marston’s is a very well established company with
a strongly embedded down to earth culture, great brands and pubs,
and a heritage which has been built up over 180 years of trading. I am
proud to be Chairman of Marston’s and to have the opportunity to
help deliver value to shareholders, communities and employees.
Our strategy, which has been implemented successfully since 2009,
has generated good growth and contributed to the development of
a better, higher quality business. However, we recognise we cannot
stand still and need to evolve and adapt for the future. I bring to the
Company a critical eye and experience of many other businesses and
hope to be able to bring those skills to bear.
We are operating in a testing market. For Marston’s, this brings
challenges but also opportunity. The Board is determined to navigate
the best path to deliver further value to all and I look forward to
working with the team in taking the Group forward.
Results
Marston’s is a strong business with a high quality estate and market
leading brewing business. In 2018 it performed well in a difficult
market, delivering record underlying revenue of £1.1 billion, 15%
higher than last year, and underlying profit before taxation up 4%
to £104 million. Underlying earnings per share were 13.9 pence per
share (2017: 14.2 pence per share) reflecting the equity issuance
in 2017.
On a statutory basis, profit before taxation was £54.3 million
(2017: £100.3 million) and earnings per share were 7.1 pence per
share (2017: 14.2 pence per share). The principal difference between
the underlying and statutory results were property revaluation
adjustments recognised in the first half year.
Dividend
The Board recommends a final dividend per share of 4.8 pence per
share, bringing the full year dividend per share to 7.5 pence per
share, unchanged compared to 2017. Dividend cover is maintained at
1.9 times.
Brexit and market
The political and economic agenda continues to be dominated
by Brexit, contributing to increased uncertainty. Our business is
almost entirely within the UK, and the principal risks to us relate
to continuity of supply in respect of food and drink from Europe for
which there are alternative sources elsewhere. We are appropriately
vigilant but these risks are manageable.
Challenges in the casual dining and restaurant sector over the last
year or so have been well documented. We continue to see good
opportunities for growth, but a degree of caution is appropriate.
We have reduced our openings programme in 2019 to ten pubs and
bars and five lodges, which will cut our capital spend by around
£30 million this year.
Our people
Our people have worked extremely hard to achieve these results and
have achieved much to be proud of. Having just joined Marston’s, the
dedication of our employees is evident to me and is a great strength.
I thank them all for their commitment and continued support.
The Board
I am grateful to Roger Devlin, Chairman until May this year, who
encouraged an open, constructive Board environment, and to
Carolyn Bradley, Senior Independent Director, for chairing the
Board prior to my appointment. Robin Rowland will step down
from the Board at the end of this financial year having been a non-
executive director for nine years and having brought his knowledge
and experience of the wider sector to the Board. Matthew Roberts
became Chair of Audit Committee in January 2018.
Outlook
Although the market has its challenges, Marston’s is a well-
managed company with great brands, assets and people, which
will stand us in good stead. I am looking forward to the challenge of
taking the business forward and demonstrating that we, together,
can create genuine value for shareholders.
William Rucker
Chairman
Strategic Report
Governance
Financial Statements
Additional Information
7
Our Business Model
Our core business is running pubs and selling, brewing and delivering beer – something
we have done for over 180 years – and whilst our business has grown and changed in
that time it is still focused on delivering robust and sustainable long-term returns from
offering customers a great experience.
A Balanced Business Model
We operate in a fast-moving and fiercely competitive market so we need to stand out from the crowd. Our competitive advantage comes
from our people and our unique culture, and how we use our property and brands, our innovation and insight and our disciplined approach
to finance.
Different operating models within our pub portfolio provide flexibility to maximise the return from each pub and our range of formats and
menus cater for all occasions. Investment in accommodation reflects the growing importance of this revenue stream. In addition to our own
portfolio of beers, we brew beer on behalf of other businesses and offer a variety of other products and services from the exclusive supply of
top world beers, to a national supply and distribution service. All of this is underpinned by our investment in our people and our approach to the
way that we work.
We maintain a strong financial discipline across the business to ensure that our growth is sustainable and maximises long-term returns
from our assets. All of our activities are supported by our Group Services who are focused on setting the strategic, financial and governance
framework to deliver growth to investors, our people and the communities in which we operate.
How we generate revenue
Destination and Premium
Our biggest contributor of profit
comes from the sites under our direct
management: from the sale of food
and drink, accommodation and gaming
machine income. We offer family dining
in a relaxed pub environment to more
premium offers in attractive, often iconic
locations. Food accounts for 57% of sales
in our Destination pubs and 31% of sales in
Premium pubs & bars.
Taverns
Aimed at meeting local customers’ needs,
our community-based pubs provide a more
traditional pub ambience. Typically drinks-
led, food accounts for 15% of sales.
The leased estate offers distinctive pubs
with a high degree of independence.
Different operating models provide
flexibility to maximise the return from each
of our pubs. For those managed externally,
revenue can be generated from rental
income from the property, drink sales and
gaming machine income.
Brewing
We generate most of our earnings in
the beer business from the sales of own
beer and exclusive licensed brands.
Premium beer accounts for 74% of the
beer we brew and 89% of our beers are
sold externally to other customers, of
which over 50% is to major supermarkets.
We also export our beers to over 61
countries. Building on our heritage and
expertise, we have evolved our business
and expanded into new markets: our
successful contract services business
brews and bottles ales on behalf of other
businesses and our national distribution
network delivers to over 10,500 customers
across the UK.
8
Marston’s PLC Annual Report and Accounts 2018
Our Business Model
continued
How we add value
FOOD
WE SELL AND BREW
GREAT BEER
DRINK
WE RUN GREAT PUBS
ROOMS
8
9
%
7
4
%
PREMIU M A L
E
o
f
b
e
er
brewed is sold e x t e r
a lly
n
Food/Drink
• Economies of scale from
Group buying power
• Continual assessment
of consumer trends and
preferences enables
more responsive food and
drink innovation
• Higher-margin premium and
craft drinks development
encourage increased spend
per head
Pubs
• Different models provide
Rooms
• Increased investment in
flexibility in selecting the best
way to operate each pub
rooms complements well-
positioned pubs
• Market-leading pub-
restaurant designs and
offers tempt increased spend
per head
• Room guests offer an
increased contribution
from drinking and eating in
our pubs
• Flexibility of formats to suit
• Evolving the design has
customer demand
• Skilled property team
identifies opportunities for
expansion into new locations
reduced the cost of these
well-appointed rooms at
budget prices
• Premium rooms command
higher room rates
Beer
• Own-brewed beers
reflect and strengthen our
regional provenance, brand
awareness and footfall into
our pubs and bars
• Ability to offer a complete
customer package for
selling, brewing, bottling and
distributing attracts major
industry customers
• A wider range of licensed
brands complements our
own-brand portfolio to
provide our sales teams with
greater opportunities to grow
our customer base
• Proven acquisition capability
provides a platform for
further opportunities
How we measure value
MARKET SHARE OF
PREMIUM ALE
NUMBER OF MAIN
MEALS SERVED
NEW-BUILD PUB-RESTAURANTS AND
LODGES COMPLETED
LIKE-FOR-LIKE SALES VERSUS MARKET (DESTINATION AND PREMIUM)
AVERAGE PROFIT PER PUB
EMPLOYEE ENGAGEMENT AND ENABLEMENT
CROCCE / FREE CASH FLOW (FCF) / UNDERLYING EARNINGS PER SHARE (EPS)
More on
page 22
Strategic Report
Governance
Financial Statements
Additional Information
9
Resources and Relationships underpinning our Business Model
Our competitive advantage comes from the behaviours and skills of our people and the
quality of the assets we invest in our business.
Our people – our most valuable asset
At Marston’s we have a unique culture – where our people are highly
engaged and highly enabled. Our people are proud to work for
Marston’s; consistently going above and beyond to do their very best
to make our business a success. We never take this for granted.
We know that the key to unlocking the potential of our people is
to engage, involve and motivate them, whilst also enabling them
to make decisions, take action and play their part. It’s a two-way
contract, one where we need to invest in our people and their future,
as much as they invest in Marston’s. We devote time, effort and
resources in making Marston’s ‘The Place to Be’ for our employees,
improving their day to day experience by investing in training,
development, performance management, policies and processes.
Performance and development
We continue to develop and embed our Performance, Career and
Development Review (PCDR) process to ensure our people have
clarity about what they need to achieve and how they need to achieve
it. Objective setting, a key area of focus, has improved and is driving
an increase in the number and quality of performance conversations
around our business.
Our PCDR process enables us to retain and develop existing
talent. With our focus on succession planning, we are significantly
improving our ability to identify and develop talent and our future
leaders from across the business.
Attracting newcomers
To complement our work on internal talent development we
are working on attracting fresh thinking into the business.
We are able to access a more diverse talent pool through
our new recruitment processes.
Critical to this talent pipeline is our positive approach to
apprenticeships. We have more than 500 apprentices learning
and developing through 13 different apprenticeship
programmes, including: Engineering,
Human Resources, Hospitality
(at team member, supervisor
and manager level),
Credit Control, Driving and
Operations Management.
As a result of the activity that began with the implementation of our
People Strategy in 2016, we are seeing progress in all areas related
to people. We have seen a significant improvement in employee
feedback scores related to career and development opportunities,
as well as the part our people play in delighting our customers and
driving business success.
How this supports value creation
Quite simply by building employee engagement, we continue to
develop and improve our customer experience. Engaged people
delight our customers either first hand or through the quality of the
beer they sell, brew and deliver.
How this supports value creation
We encourage and recognise those behaviours that make a positive
difference to our business results, whilst ensuring we retain a
pipeline of talented people developing satisfying careers within
our business.
1 in 3
employees received formal training
In September 2018, we won the Macro Apprenticeship Employer
of the Year at the West Midlands Regional Final of the National
Apprenticeship Service Awards. These awards recognise excellence
in businesses that grow their own talent with apprenticeships.
One member of our team, Alex Fuller, also won the Most
Outstanding Apprentice Award.
Under the banner of ‘Loving Hospitality’,
we have joined forces with a number of
hospitality organisations. Our mission is to
change negative perceptions and promote
the fantastic opportunities our sector
provides to young people, to gain new
skills and build a fulfilling career.
How this supports value creation
Recognising and rising to the challenge of the
talent shortage, attracting more people into our
industry and being able to offer award winning
development enables us to deliver the very best
business results by being ‘The Place to Be’ for our
customers and our people.
Developing a diverse and inclusive workforce
Marston’s is proud to have signed up to the Diversity in Hospitality,
Travel and Leisure Charter: Women in Hospitality 2020. This cross-
industry group aims to create an environment of collaboration where
diversity and inclusion are embraced and embedded.
We have also signed up to the Armed Forces Covenant. Through this
written commitment we promise to support the armed forces
community through the employment of veterans and their spouses
and partners, supporting employees who choose to be members of
the Reserve Forces and promoting our job opportunities as potential
future careers for service men and women.
How this supports value creation
The diversity of our people and our thinking means we are better
placed to meet the many and diverse needs of our existing and
potential future customers.
10
Marston’s PLC Annual Report and Accounts 2018
Resources and Relationships
continued
High quality freehold pub estate
Our balanced business model is underpinned by our pub
estate, six breweries and 13 distribution depots. New-
build pub and lodge designs have evolved to minimise
unnecessary costs and maximise customer experience.
How this supports value creation
• Higher quality of earnings
• Improved profit per pub
• Enhanced customer experience
Valued and recognised brands
We have an extensive portfolio of local and national
brands offering cask, keg and craft beers. We have
added a range of world and licensed beers.
How this supports value creation
• Broad appeal with focus on the growth areas of
High ABV
the market
• Ability to offer differential ranging to national
customers – the right product for the right venue
Regular ABV
• National trading footprint
• Value-adding partnerships in licensed brands and
Low ABV
supply chain
Innovation and insight
We use consumer insight to monitor market and
customer trends to identify opportunities to evolve our
food, drink and service offering.
Collaborations between pub and beer teams are aimed
at maximising the customers’ experience.
How this supports value creation
• Increased ranges (including healthy and vegan)
retains and attracts customers
• Collaborations enhance customer experiences and
encourage increased spend per head
Financial capital
We have a mix of long-term debt and equity together
with the availability of asset-backed financing for new-
build sites.
How this supports value creation
• 93% freehold estate provides attractive security for
funding providers at competitive rates
• Flexibility to invest in assets to maximise long-term
returns without covenant reporting obligations
Net
debt
(£m)
Managed
Destination
and
Premium
Wet
led
Taverns
Food
led
Leased
Independent
Golden
Amber
Dark
2016
Securitised
2017
Property fnancing
2018
Bank and cash
Strategic Report
Governance
Financial Statements
Additional Information
11
Our business model also depends on strong relationships with key stakeholders that help create and share
in the value.
The values and expectations of our stakeholders shape our performance and success, influencing the way
we make decisions. Long-term value creation is about more than just financial results alone – we recognise
that we need to act responsibly in partnership with our key stakeholders to build a sustainable business.
Our Corporate Responsibility section on page 35 expands on our approach to and relationship with
our customers, our people, our suppliers, our communities and our environmental impact.
Customers
We keep our customers at the heart of all we do by striving to exceed
their expectations and offer them choice and value as well as a great
experience. We focus on providing great experiences whilst offering
value for money and aim to provide market-leading support, advice
and innovation for our partners.
Suppliers
We look to build long-term relationships that provide security
for investment and expansion. We encourage innovation and
development, often working in collaboration with our partners,
and we operate fair and transparent terms and conditions.
We issue a food supply charter setting out our expectations to
suppliers, including accreditations and audit.
Community
We provide employment in local communities, creating nearly
700 new roles this year, and contribute to local social initiatives –
sponsoring ‘Pub is the Hub’ and supporting the ‘Long Live the Local’
campaign through our membership of the BBPA. As producers
and retailers of alcohol we act responsibly in all our marketing
campaigns and are members of Drinkaware, supporting its national
campaigns to Drink Responsibly. We encourage our pubs and
breweries to engage with their local communities and support their
involvement in local charities through matching fundraising at a
local level to participation in charitable activities.
Investors
Our strategy is to target sustainable growth, increasing return on
capital invested and reducing leverage over time. This then supports
a progressive dividend policy. Since 2009, return on capital has
increased from 9.8% to 10.3% and profit before tax is around 50%
higher. The estate is over 90% freehold.
The environment
We aim to operate a sustainable and responsible business, reducing
our environmental impact through investment in energy-saving
technology and recycling. This year our pubs have achieved zero
waste to landfill.
Government
We collect and pay a wide range of taxes. Our total tax contribution
was £530.9 million (2017: £431.0 million).
As a responsible business, we engage with government health
initiatives and are signed up to UK Government Public Health.
12
Marston’s PLC Annual Report and Accounts 2018
Our Marketplace
We operate in a competitive marketplace, which presents both immediate challenges and
long-term opportunities. Our market and consumer insight helps to support our strategic
and investment decisions.
Drink
Our pubs offer a broad range
of alcoholic and non-alcoholic
drinks, including beers, wines
and soft drinks to suit all
customer occasions.
Our breweries produce a
varied portfolio of cask
beers that appeal to all types
of drinkers.
Trends
• Experience – consumers are looking for
memorable experiences when visiting our
pubs and in how they drink our beers at home.
• Premiumisation – consumers are drinking
less but they are seeking more premium
products and are prepared to spend more
on these.
• Authenticity – consumers are looking for
products with heritage and provenance.
• Health – consumers are changing their
purchasing habits and looking to moderate
consumption of alcohol and/or high
sugar products.
Challenges
• Providing a balanced range of drinks that
meets the needs of consumers looking
for healthier options whilst still providing
breadth of choice for consumers who want to
treat themselves.
• Delivering compelling reasons to visit our
pubs, providing customers with experiences
that are better than they can create at home.
• Consistent delivery of premium products that
justify the increased price for customers.
• Engaging consumers around our range of
local and regional beers to enjoy both in pub
and at home.
Eat
Our pubs offer something for
everyone, from traditional
favourites to healthy options
and emerging culinary trends.
Stay
Marston’s Inns provide great
value accommodation in
convenient locations adjacent
to our pubs.
Trends
• Authenticity and provenance of ingredients:
there is a growing desire to know the story
behind where our food comes from.
• Balance and wellbeing is prevailing over
restrictive diets but an occasional treat is still
a key driver when choosing to dine out.
• Vegan and casual vegetarian diets are in
growth and research shows this is strongly
linked to improving health and weight loss.
• Eating out has become less formal with
customers looking for more interactive and
social dining experiences with increased
snacking and customisable options.
• Broadening customer spectrum with a growth
in younger consumers who eat out most
frequently but are less loyal to one brand.
Challenges
• Childhood obesity is on the rise. Our menus
provide healthy and nutritious options as well
as something fun and exciting to eat.
• The government has cast its spotlight on
the nation’s heath. Sugar and salt reduction
and calorie capping are all areas of focus,
in particular calorie counting on menus is
under consultation.
• Developing dishes that appeal to a wide range
of restrictive diets, and understanding the
preparation of those dishes within commercial
kitchens where there is a potential risk of
cross-contamination.
• Appealing to a multi-generational customer
base without resorting to discounting.
• Customers expect more from a food
and drink occasion. Experience is not
just entertainment, but service style
and communication.
• Tailoring communications to customers
based on their preferences, without holding
unnecessary personal data.
Trends
• Undersupply of branded operators in
secondary towns. Other major operators have
all announced room-stock expansion in recent
market announcements.
• In 2018 the weak pound saw a second annual
consecutive increase in overseas visitor
growth. Visit Britain reports a forecast of
40.9 million visitors, up 1.7 million on 2017
which was in itself a record year.
Challenges
• Attracting international visitors to regional
towns and budget hotel chains.
• Appealing to both business and
leisure guests.
• Maintaining technological pace with sole-
hotel operators.
• Finding new ways to communicate with guests
in the absence of uninvited direct-marketing.
• Technology becomes more important –
keyless entry, ‘one-click’ payment and instant
response are becoming standard.
• GDPR regulation makes it harder to direct-
market so experience and reputation are key
drivers of growth.
• As Millennials become a larger part of
the market the need for ‘experience’ over
‘function’ grows.
Strategic Report
Governance
Financial Statements
Additional Information
13
Opportunities
• Diversifying our range of drinks to include a
broader range of choices in premium soft,
coffee and lower alcohol drinks to tempt
customers to increase spend per visit.
• Developing the range of alcohol free beers
in our portfolio and developing ‘free from’
beers to tap into changing consumer tastes.
• Operating the best pubs in the area for
our customers to visit, providing genuinely
engaging experiences in relaxed and
enjoyable surroundings.
• Working with all our on-trade customers to
train their teams to deliver a perfect pint of
cask ale.
• Leveraging Marston’s expertise in brewing
to ensure that we have the best offer in the
market place, delivered by passionate and
knowledgeable teams.
Opportunities
• To offer everyday value within our core
menu pricing.
• Identifying the core customers and
occasions for different pub types to appeal
to the next generation of pub goers.
• Informality in eating, less strict meal times
with more snacking and grazing.
• Improving our in-pub and out of
pub communications to encourage
premiumisation and deliver
richer experiences.
• Customers who receive communications
that are tailored to them are twice as likely
to interact with that brand as they are with
generic communications.
• By understanding our customers and why
they visit different types of pubs we can
deliver an appropriate range of dishes
giving them more choice and options.
Opportunities
• Increasingly partnering with online travel
agents that have a major presence in
other countries.
• Being later to market allows us to choose
locations predicted to grow or near new
commercial or residential activity.
• Maximising an excellent pub occasion as
part of the experience for the guest.
• Using the ‘local’ approach to speak to
guests that we understand so well from
our pub and brewing heritage.
Our response
• Working with our brand partners, we offer a
market leading portfolio of low and alcohol
free beers to all of our customers both on
and off-trade.
• Leveraging our drinks portfolio and
relationship with suppliers to create drinks-
led events for consumers, such as real ale
festivals and gin tastings.
• An increasing number of our beers are
available in mini-kegs, multipacks and
mixed packs, allowing customers to create
an in-pub experience at home.
• We have increased the range of premium
products that we offer in our pubs and
ensured the right range of ales are available
in each pub to encourage increased spend
per visit.
Our response
• All the food we procure and develop
meets the Marston’s Food Charter.
• All menus feature a range of lower
calorie dishes, healthy switches and we
ensure each menu category has a range
of vegan and vegetarian dishes.
• Marston’s will not include any allergen
ingredients in its dishes unless they provide
a benefit to the final product. Our internal
processes, training and testing are focused
on ensuring this remains the case.
• Each menu has a unique web address for
customers to seek further nutritional and
dietary information and we are continually
looking at how we can improve nutritional
values in our products.
• Our menus focus on delivering pub classics
alongside more adventurous and specialist
dishes, and emerging culinary trends.
• All marketing campaigns consider
what value can be included to reward
our customers.
Our response
• We have developed a thriving partnership
with Expedia in 2018. This gives us access to
their considerable overseas booking client
base through Expedia, Trivago, Hotels.com
and Egencia.
• Our new, more traditional and homely,
room design has debuted in our latest three
lodges and three refurbishments resulting
in RevPAR growth in each of them.
• Our new website with improved look and
functionality arrived in November.
• We will launch a communications platform
to guests that wish to participate through
social media and email by December.
Premium packaged ales
(own ale)
(Composite barrels)
2018
2017
2016
236,539
225,901
368,140
Eating-out sales growth
(1.2%)
2018
2017
2016
2018
2017
2016
10.5%
8.7%
1.5%
1.7%
2.0%
Market
Marston’s
Revenue per available room
(RevPAR)
2018
2017
2016
£38.99
£37.74
£36.15
14
Marston’s PLC Annual Report and Accounts 2018
Chief Executive’s Statement
Marston’s balanced business model
has stood us in good stead, delivering
record sales and underlying profits
with revenue exceeding £1.1 billion
for the first time. Our community
pubs and market-leading brewing
business had an outstanding year.
The outlook for good pubs and brewing
remains attractive and we are well
placed to leverage the opportunity this
presents with our high quality, well
invested estate, leading brands and
great people.
Our ambition, purpose and strategy
Our ambition is to make Marston’s ‘The Place to Be’. We want
there to be no better place for our people to work, customers to
enjoy themselves and shareholders to invest.
This is why our core purpose is focused on helping people to feel
good. We know that if our employees can use their strengths
and skills to make a positive difference, they’ll enjoy working
at Marston’s. This ‘feel good factor’ will then be passed onto
our customers and stakeholders through our quality products,
inspiring environments and great service.
By helping our people to feel good, we start a chain reaction
that ultimately results in people buying more of our products
and returning to experience our hospitality time and time again.
This in turn helps us to meet our key Group strategic and financial
objectives and makes our investors feel good.
These objectives highlight the areas we intend to focus on both
now and in the future to make our business a success and to meet
our employee, customer, investor and other stakeholder needs.
Ralph Findlay
Chief Executive Offcer
Group overview
This has been an extraordinary year which has been
characterised by weather extremes, together with one-off
events such as the World Cup. Our balanced business model
has stood us in good stead and smoothed trading to achieve
revenue and profit growth in each of our trading divisions.
Our Taverns and Brewing businesses both had particularly
strong performances and clearly benefited from the warm
summer weather and England’s extended run in the World Cup.
Group strategy
Our Group strategy is focused on offering customers a great
experience through both our pubs and our beer. There are two key
objectives to achieving our strategy:
1 Operating high quality pubs and lodges offering great places to
drink, eat and stay.
2 Operating a ‘best in class’ beer business with a wide range of
premium and local brands and great service.
This is described in further detail in the Our Strategy pages
that follow.
Financial overview
Total underlying revenue increased by 14.9% reflecting the rollover
benefits of the acquisition of the Charles Wells Beer Business
(‘CWBB’) from last year, new distribution contracts in Brewing, the
positive impact of new openings and pub acquisitions, together with
positive like-for-like sales in our pub business.
As anticipated, Group operating margins were 1.6% behind last year
reflecting the dilution impact from the CWBB acquisition which
operates at a lower margin than our existing beer business, the
impact of distribution contracts in Brewing and the anticipated cost
increases in our pub business.
Underlying operating profit was up 4.6% at £182.5 million
(2017: £174.5 million).
Underlying profit before tax was up 3.9% to £104.0 million
(2017: £100.1 million), principally reflecting the strong performance
of Brewing and Taverns. Basic underlying earnings per share for
the period of 13.9 pence per share (2017: 14.2 pence per share)
were below last year, reflecting the impact of the equity issuance in
May 2017.
Strategic Report
Governance
Financial Statements
Additional Information
15
On a statutory basis, revenue was up 15% to £1,141.3 million
(2017: £1,011.3 million), profit before tax was £54.3 million
(2017: £100.3 million) and earnings per share were 7.1 pence per
share (2017: 14.2 pence per share), principally reflecting the non-
cash impact of the estate valuation during the year.
Operating cash flow of £182 million is 1% higher than last year,
after adjusting for the CWBB working capital settlement in 2017.
The increase principally reflects the higher EBITDA generated
during the period.
Net debt at the period end was £1,386 million (2017: £1,329 million),
incorporating the financing of new site expenditure, the acceleration
of pub brand conversions and investment in the new canning line
in Burton. Net debt excluding property leases has reduced by
£6 million in the period. A minor delay of some disposal activity in
the second half year has resulted in this now falling into the first
half of 2019 and as such we are increasing our disposals guidance
for the current year to £45 million. Excluding property leases with
freehold reversion entitlement, the ratio of net debt to underlying
EBITDA was 4.6 times at the period end (2017: 4.8 times) which is
expected to reduce further over time as the business grows and our
long-term debt amortises. In addition, fixed charge cover remains
strong at 2.5 times.
Cash Return on Cash Capital Employed (CROCCE) was 10.3%
(2017: 10.7%) reflecting the performance of the Destination and
Premium business as described later in the report. During the
year, the external valuation of our property portfolio was completed
confirming a value of £2.2 billion broadly in line with book value.
At the period end net asset value (NAV) per share was £1.51
(2017: £1.47).
Financial strategy
Over the last ten years we have built over 180 pub-restaurants
and bars, 21 lodges, and have a good pipeline of sites for future
development. We have also made acquisitions consistent with our
stated strategy: the acquisition of Thwaites brewing operations in
2015, CWBB in 2017 and a package of seven pubs from Whitbread in
2017 have contributed to growth in each of our operating segments.
We have set clear financial objectives: to target growth, increase
return on capital and reduce leverage over time. Since 2009, revenue
has grown by 77% (CAGR 7%), and underlying profit before taxation
by 48% (CAGR 4%). CROCCE increased from 9.8% to 10.3% on assets
of £2.2 billion. We have disposed of c.800 (mainly tenanted) pubs,
realising £517.0 million and resulting in a go-forward pub estate
which is fit for the future. Dividend payments to shareholders over
this time have totalled £379.1 million.
Net bank and securitised debt of £1,022 million is £275 million
lower than in April 2009. In addition, we have raised £364 million of
long-term, secured funding, specific to individual new-build pubs.
This debt has no associated reporting covenants.
In summary, compared to 2009 in the midst of the financial crisis,
underlying profit before taxation is approximately 50% higher.
We have transformed the quality of the estate with average profit per
pub up 77%. In addition, our pub portfolio is 93% freehold and suited
to long-term, secured debt. The debt structure has no short-term
refinancing requirement and is effectively at fixed rates of interest.
Current trading and outlook
Trading has been solid and in line with our expectations for the first
seven weeks of the current year with growth in both pub like-for-like
sales and own and licensed beer volumes. As we have highlighted
previously, the first quarter trading is heavily weighted to December
and the Christmas period. However, we are confident our pubs are
well prepared to maximise the opportunity which the Christmas and
New Year trading period presents. We expect to make progress once
again in the current financial year.
Since the year end we have secured the additional £40 million
accordion facility that formed part of our bank refinancing in 2017.
This increases the overall facility to £360 million to 2023 and
provides us with additional financing flexibility for the medium-term.
Ralph Findlay
Chief Executive Officer
Our values
Our Ways of Working (WoW) are the behaviours we expect of our people. If the ambition, purpose and strategic objectives are ‘what’ we are
striving to achieve, our WoW demonstrate ‘how’ we aim to achieve them.
We are one Marston’s, one team – trusted to make
the right decisions and play our part.
WE
CELEBRATE
We celebrate – when we do something really well,
we shout about it and have fun celebrating.
WE ARE
ONE
TEAM
WE
CARE
We care – we take time to listen, understand and do the
right things for our customers and stakeholders.
WE DREAM
BIG
We dream big – together we strive to make Marston’s
‘The Place to Be’ and always exceed expectations.
We are a people-powered business, so it’s essential our people work together, care about each other, recognise a job well done and always
strive to be the best.
16
Marston’s PLC Annual Report and Accounts 2018
Our Strategy
1 High quality pubs and lodges offering great places
to drink, eat and stay
We operate across the breadth of the market, with flexible operating models targeting
the growing UK eating-out and accommodation markets through new-build and format
development. This helps to ensure we have the right consumer offer and operating model
to maximise sales and profits for each individual pub. Our key segments are as follows:
Destination and Premium – 406 pubs
Our Destination pubs offer family experiences and great value in
a relaxed pub environment. We aim to retain strong pub values
whilst reflecting modern tastes and trends in a fast moving and
competitive market.
In 2018 we opened 14 new pub-restaurants and seven lodges
including our flagship 104 bedroom lodge in Ebbsfleet, Kent, and
have opened over 180 pub-restaurants and 21 lodges in the last ten
years. We have a good pipeline of sites for future development.
Our Pitcher & Piano bars, Revere bars (Lost & Found, Foundry) and
Revere Country pubs offer premium food and drink in attractive,
often iconic, town centre and suburban locations. In 2018 we had
openings in Leeds and Bristol (both Lost & Found), and Godstone
(Revere Country).
We target a CROCCE of 12-15% on freehold new-build investment.
Our medium-term strategy
Focus
• Estate development; high quality national estate.
• Offer a range of trading formats, brands and rooms.
• Customer focus on value for experience.
Objectives
• Continue to grow by at least ten sites per annum.
• Continue to develop formats and concepts.
• Continue to improve service and standards through investment
in our pubs and our people.
Progress
• Over 180 pub-restaurants and 21 lodges opened since 2009.
• £50 million maintenance capital spent improving our
existing pubs.
• Roll out of new EPOS system improving customer information,
speed of service and margin control.
Priorities for 2018/19
• Developing our in-pub experiences and staying contemporary
through more exciting drinks ranges and the traditional
retail offerings.
• Extending the range of pub formats in our new-build
programme and continuing the expansion of accommodation.
• Increasing our premium offers through the roll out of Accent
and more premium retail offers.
Case study
The Foundry Project
From the industrial loft style ‘Foundry Project’, complete with the
UK’s frst Estrella Damm tank, through to our Victorian inspired
‘Lost & Found’ cocktail bars, our Premium Bars & Restaurants team
has developed our retail offer to satisfy demand on the modern
high street.
The Lost & Found has previously been awarded two Restaurant &
Bar Design Awards for our conversion of historic buildings, and
our Foundry Project in Harrogate was shortlisted this year.
Whilst design is important it has to be matched by a quality range
of products.The teams from our bars are the driving force behind
everything we do, creating both our drink and food menus: from
Josper charcoal steaks through to amazing burgers and pizzas,
matched with an exciting cocktail menu and broad range of
craft beer.
Average profit per pub
£113k
across our entire estate
Strategic Report
Governance
Financial Statements
Additional Information
17
Increased room investment
We operate over 1,500 rooms across our Destination and Premium
pub estate. Accommodation acts as a complementary income
stream, and the combination of pub-restaurant with rooms or
adjacent lodge is attractive in the context of increasing business and
leisure travel.
Organic room income has been consistently strong with double-
digit sales growth for each of the last four years, with like-for-like
RevPAR up 7% in 2018 to £41.25.
We target a CROCCE of 12% on freehold lodge investment.
Case study
The Spring River pub and lodge,
Ebbsfeet
We acquired the site, located at the junction of the M2 and A2 and
a mile east of Ebbsfeet International Rail Station, in January 2017.
Nearby Ebbsfeet Garden City is a signifcant redevelopment with
over 15,000 houses and associated commercial development.
This site provided a great opportunity to build a signifcantly larger
pub and lodge development than we had previously undertaken.
We opened discussions to acquire the gateway site (fronting the
A2/M2) in 2016 and successfully secured it against competition
from signifcant other branded hotels. As well as achieving best
value, the vendor was keen to make sure that any buildings
conformed with the wider design guide and to provide facilities
for the growing local population. Essentially, the vendors wanted to
provide a ‘proper’ pub.
This was a perfect ft for our approach. As an unbranded but format
driven business we were able to design two buildings that were
appropriate to the local area and we are the only pub operator
able to develop such sites on this scale.
Construction commenced in early 2017 with the pub opening later
that year and the lodge in early 2018: both on time and on budget.
As our largest hotel development to date (104 bedrooms),
a dedicated openings team was located on site to ensure
everything ran smoothly.
Initial trading has been ahead of expectations, despite being
adjacent to a signifcant building site. Since opening, the site has
generated over £1 million of room sales.
This has given us the confdence to acquire further sites for
larger hotels adjacent to our pubs as part of our ongoing
programme.We are confdent that, in years to come, our largest
hotel development to date may be deemed a little small for the
latent demand!
TripAdvisor scores:
Restaurant:
Hotels:
3.5 4.5
Taverns – 1,139 pubs
Our community pubs are well located ‘great locals’ with a traditional
pub ambience. We operate under managed, franchised and leased
models offering flexibility for our licensees to run their pub under
a business model that is best suited to their needs to develop a
thriving, modern community pub business with growth potential.
As noted in the Chief Executive’s Statement, since the end of the
financial year we have agreed terms to acquire 15 well located
community pubs with good potential from Aprirose which are
highly complementary to our flexible business model. We expect to
complete and lease fund this acquisition in the first half of 2019 and
will invest approximately £4 million post acquisition with a target
EBITDA of around £0.5 million in 2019 and at least £1 million in 2020.
Our medium-term strategy
Focus
• To operate the best community pubs in their areas.
• To improve customer experiences with innovation in drink,
food, entertainment, service and design.
• To improve and grow our estate through strong investments.
• To attract the best partners – managed or self-employed.
• To enable our partners and employees to develop themselves,
their teams and their businesses.
Objectives
• To amaze our customers – through market-leading
offer development.
• To outperform the marketplace – clear focus on drinks
and socialising.
• To build a stable and growing business through a balance of
agreements – managed, franchised or leased.
• To target licensee stability rate at 90%.
Progress
• Like-for-like sales growth outperforming the market.
• Strong returns from investments: we target returns over 25%.
• Year-on-year improvements in licensee stability.
• Acquisition of 15 community pubs.
Priorities for 2018/19
• To drive footfall and improve customer experiences through
offer development and capital investment.
• To develop the support and enhance the experience for our
partners and employees.
• To build on our commitment to our local communities.
18
Marston’s PLC Annual Report and Accounts 2018
Our Strategy continued
Consumer experience: the right offer underpinned
by value, quality and service
The wider sector has seen intense competition in recent years, and
over-supply in certain areas. In the last five years, there has been
a net increase of c.4,000 in the number of restaurants across the
UK, mainly in high street locations in towns and cities. In our view,
this has led to extensive discounting which, in a backdrop of tighter
operating margins and increasing costs, is unsustainable.
To compete and maintain profitability against that backdrop:
• We operate pubs and bars, not just restaurants, and exploit
our brewing heritage, drinks knowledge and experience.
• We have invested in pub ambience, service and technology to stay
out of the price discounting trend seen across much of the sector.
This has been at some detriment to like-for-like sales growth, but
to the benefit of margins and longer-term sustainability. We have
completed major investments in around 50 pubs to date and
expect to complete our conversion programme within the next
two years.
• In our Premium pubs and bars, a combination of excellent pub
design, innovative drinks offers and a food menu utilising premium
and local produce have contributed to a strong sales performance.
• In Taverns, the continuing development of the franchise-style
model, pioneered by Marston’s, has further enhanced our ability
to respond quickly to consumer trends. In 2018, the growing
appeal of craft drinks, the World Cup and a hot early summer
highlighted the attractions of great community locals.
• We continue to improve our food offers, with our pizza offering
being rolled out extensively across the estate, a greater choice of
healthy options being offered and recently being first to market
with the launch of the vegan Moving Mountains™ B12 Burger,
with very strong initial sales and feedback. Our vegan menu
was awarded ‘best vegan menu’ by PETA (People for the Ethical
Treatment of Animals).
The trend in the on-trade for premiumisation continues across all
categories. This plays to Marston’s strengths and we are leveraging
the benefits of our market-leading beer portfolio.
We continue to target service improvement with our operational
teams incentivised on both customer satisfaction and EHO
standards. During the year, we have continued to invest in training
and development with one in three employees receiving formal
training, over 70,000 e-learning modules completed and just
under 35,000 learning resources accessed via our Talent Academy
online covering a broad range of areas, from health and safety
through to time management and delivering the ‘perfect serve’.
Communicating with our teams is also critical and we have
developed new digital platforms and are in the process of developing
further tools to communicate more effectively. In 2018, we were a
regional winner in the National Apprenticeship Awards.
Technological development in 2018 included continuing the roll out
of a new EPOS system and we are already starting to see operational
benefits from a customer perspective, together with efficiency
improvements in our back-of-house operations. The system
provides improved product and customer information enabling
us to respond to changing trends quickly.
NOMEAT Vegan Menu
Across our pubs we operate a number of different menu
formats, each of which may be refreshed up to twice a year.
The development stage takes an average 24 weeks from initial
thinking through to launch and our approach to food development
is to partner directly with our suppliers, enabling us to develop
tailored and bespoke dishes that will excite our customers.
Our Product Development and Innovation Manager (a role new to
the business) gathers insight on food innovation and market trends
to understand what is right for our customers and how we can
push boundaries without alienating them.
A key trend on the rise is veganism and we decided that now
was the time to further explore this trend. Initially we ran a
customer survey seeking to understand the key motivations for
excluding meat, how often people are choosing to do this and
their preferences on vegetarian and vegan food. Some of the key
insights included:
• Almost one in three of our customers surveyed are cutting
back the amount of meat they eat, often for health and weight
loss reasons.
• Our customers would like to see more meat free
dishes on menus, with the fexibility to add
meat, fsh or cheese to a core vegan dish.
• Our customers are more likely to choose a
pub or restaurant where they know there
will be something for everyone.
• The ‘fexitarian’ way of eating, for example,
choosing to do ‘meat free Monday’,
is more widely adopted than a pure
vegan lifestyle.
These insights helped inform what dishes we should develop
and how we might advertise the campaign.We agreed that we
should prioritise a new range of dishes across both Destination
and Taverns: one of the frst campaigns to operate across
both segments.
We decided early on that we needed a hero product to lead the
‘NOMEAT’ menu and agreed a plant-based burger would work
well; burgers are a growth category across all of our menus and
burgers are seen as being synonymous with pubs.
We sourced a plant-based burger that emulated meat and had
been extremely successful in the USA and was due to launch in
the UK.We placed an order only to discover that the shipment
would be delayed by several months.Through our network of
suppliers, we found a UK based company, operating within a few
niche London burger restaurants. Moving Mountains™ offers a
plant-based burger and we love their story. Led by one man with
a vision to create a burger that emulated meat without harming
animals, he spent ten years creating the B12 burger that looks and
tastes like beef.We seized the opportunity to be the frst national
pub company to offer this product to our customers.
The NOMEAT menu launched on 5 September
2018 in 418 pubs across our estate.
Customers were excited to try the B12 burger
alongside our other plant-based dishes
such as tikka masala and caulifower tacos.
We received extensive media coverage and
over 2,000 shares on social media. It was
also announced recently that we have won
PETA’s best vegan menu award for 2018!
Strategic Report
Governance
Financial Statements
Additional Information
19
2
Brewing – ‘best-in-class’ beer business offering a wide
range of premium and local brands and great service
Our Brewing business has a vision to be the UK’s leading beer business. Its strategy is
based around five strategic pillars of brands, service, supply chain, insight and innovation,
and people that provide a framework for its forward-looking approach to customers
and consumers.
n
o
i
s
i
V
s
r
a
l
l
i
p
c
i
g
e
t
a
r
t
S
‘The UK’s leading beer business’
Extend our No. 1 position with brands that are demanded and loved by our customers
Brands
Service
Supply chain
Insight and
innovation
People
Sustainable long-term
growth of local, national
and global portfolio
of brands
Recognised as best
in class
Lead with
complete customer
experience solution
Highest quality at
optimal cost in brewing
and logistics
Contract relationships
to drive consolidation
and effciencies
Insight-led
category leadership
and innovation
The team that
differentiates us –
talent, leadership,
WoW
Forward looking approach focused on customers and consumers
Choice, provenance, taste and interest in craft are positive trends in
the on and the off-trade. Innovation and investment in new brands
and products has increased across the sector, which has stimulated
further consumer interest.
The off-trade continues to see absolute growth and an increased
share of the drinks market. In beer, the strongest growth is in
premium bottled ale, canned craft beer and the rapid growth of mini-
keg which we introduced several years ago. IPAs, including US craft
beers, and more exciting keg beers, have seen increasing popularity.
In both the on and the off-trade, the trends are towards a consumer
preference for premium brands with higher value and reduced
volume. There is increasing demand for non-alcoholic drinks;
our range includes alcohol-free beers – such as Warsteiner and
Erdinger Alkoholfrei – which saw volume growth of 226% in 2018.
Our strategy has anticipated many of these trends and evolved
rapidly to meet the changing dynamics of the market. Our strategic
development is a consequence of consistent investment in consumer
insight, which has driven the following growth areas.
Development of market-leading ale portfolio
We have a 14% share of the total ale market, 20% of the premium
ale market in the on-trade and 27% of the premium bottled ale
market. We leverage our knowledge of the beer market to assist our
customers to improve their offers – an example is the On-Trade and
Off-Trade Beer Reports which we produce annually.
Our ale portfolio has been enhanced significantly through
acquisitions. Wainwright, acquired in 2015, was our best selling
cask ale in the summer; in 2017, the acquisition of Bombardier,
Young’s and Courage provided distribution opportunities in the
south of England, as has McEwan’s in Scotland. Together with our
established range which includes Marston’s, Banks’s, Jennings,
Wychwood and Ringwood beers, we have an unrivalled range of
own ale brands.
Hobgoblin remains our biggest brand and the “unofficial Beer of
Halloween”. Hobgoblin IPA was recently awarded the ‘best IPA in
the world’ in the World Beer Awards against some of the world’s
best known IPAs – a great endorsement of our brewing capability.
Other brands in the portfolio received a total of 19 Gold, Silver or
Bronze medals in 2018.
We have a track record of innovation, including the development
of fastcask™, and the introduction of the mini-cask and mini-keg.
Development of a licensed brand portfolio
Marston’s has exclusive UK licences for US craft beers including
Shipyard and Founders; world lagers including Estrella Damm,
Warsteiner and Kirin; and Kingstone Press Cider.
These brands have been an important growth driver. Estrella Damm
is one of the fastest growing premium lagers in the market, up 41%
in 2018; Shipyard – No. 2 craft beer in the UK on-trade – was up 34%.
20
Marston’s PLC Annual Report and Accounts 2018
Our Strategy continued
Our Strategy continued
We distribute directly to around
1 in 4 pubs
across the UK
Sector leading service
Our beer business provides brewing, packaging and distribution
services for a wide range of customers, in addition to our own pubs.
In 2018 we entered into new agreements to become the exclusive
distributor to around 1,600 Punch, Hawthorn Leisure and Brakspear
pubs, and we have now secured additional distribution agreements
with New River Retail and Trust Inns. We recently completed an
£8 million investment in a new canning line in Burton which will
further improve our canning efficiency and open up more customer
opportunities in addition to bottling; we currently package c.40% of
the UK premium bottled ale market.
Marston’s brewery (Burton upon Trent), the Eagle brewery (Bedford)
and the Banks’s brewery (Wolverhampton) are all British Retail
Consortium ‘A’ rated or above. For the fourth year running we
were awarded the Best Ale Supplier in the Morning Advertiser
Readers Choice Awards and our customer services team has also
achieved the highest ‘excellent’ rating from the G4S Customer
Services awards.
We distribute directly to around one in four pubs across the UK.
This extensive network is a strategic asset which enables us to offer
distribution at scale for existing and acquired brands.
This strategy has delivered strong financial results. In the last ten
years turnover has increased fourfold and profits have doubled,
in a beer market which has declined by 13%. We have increased
on-trade market share despite significant new competition, and we
have increased our market share of the premium off-trade by 50%.
In 2018 we sold over one million barrels of own and licensed brands
and around 2.2 million barrels in total to around a quarter of the
46,000 on-trade outlets in the UK.
National and local marketing
Our priorities are digital, local and print media. Hobgoblin is one of
the most followed ale brands on social media, being awarded the
Digital and Social Media Campaign of the Year at the PRCA Dare
Awards in 2017.
Local marketing includes event sponsorship such as the New Forest
Show, Henley Regatta and the Keswick Jazz Festival. Our brewery
tours at Wychwood and Ringwood both received tourist awards
this year.
Sports sponsorship includes a five year extension to the beer supply
into Lords Cricket Ground, which will include two Ashes tours and
the completion of the new stand in 2020. This provides us with an
excellent platform to showcase our brands in both London and
on a national basis.
In 2018 we undertook brand relaunches with new imaging for
Bombardier, Directors and McEwan’s.
Export
Following the acquisition of CWBB we acquired an experienced and
established export team. We now export 19 brands into 61 countries,
and export volumes now account for 9% of our external ale volume,
almost double the level from recent years.
We are making good progress in growing our six key markets:
Russia, France, Italy, Germany, Canada and the USA.
Looking forward, we believe there are opportunities to expand our
export operations into South America.
We export
19 brands
61 countries
into
Strategic Report
Governance
Financial Statements
Additional Information
21
Case study
Investment in the future and supporting
our ambitions
Canned beer in the UK has seen a resurgence over the past few
years, driven mainly by the growth of craft beer and the perception
of quality and convenience.
Having identifed this trend early on in the cycle, whilst also
looking to enhance our craft and brand aspirations, we decided
to invest £8 million in a brand new state-of-the-art canning line
at Burton upon Trent.
Having been commissioned in November 2018 it is already
running on a full two-shift system and is canning our complete
range of brands, in addition to those from other brewers.
The project has successfully rationalised all of our bottling and
canning operations at our Burton upon Trent site, fully utilising our
world class expertise in packaging.
Our medium-term strategy
Focus
• Four national brands: Pedigree, Hobgoblin, Wainwright
and Bombardier.
• Building on our local provenance in regional markets with
Banks’s, Jennings, Mansfield, Ringwood, Eagle and Brakspear.
• Innovation driven by independent consumer insight.
• Operational efficiency.
Objectives
• To be the UK’s leading drinks supplier with leadership in
premium packaged and draught beers.
• To continue to drive value from provenance and authenticity
from our six regional breweries and our licensed world beers
and ciders.
Progress
• Number one position in premium packaged and canned ale
maintained and extended.
• Further expansion of craft portfolio.
• Winner of ‘Best National Cask Ale Supplier’ for the fourth
successive year.
• Continuing partnership with Estrella Damm for the UK licence
and a new four year deal with Marylebone Cricket Club.
• Further consolidation of CWBB and driving benefit from
increased scale.
Priorities for 2018/19
• To build on market leadership in premium and draught beers.
• Class leading innovation driven by consumer insight.
• Operational and service excellence.
22
Marston’s PLC Annual Report and Accounts 2018
Our Key Performance Indicators
We have a range of financial and non-financial KPIs to help us stay focused on our
strategy and align remuneration to performance.
More on our strategy on
page 16
More on our principal risks on
page 32
More on our Remuneration Report on
page 53
Two key components to our strategy:
1
2
Operating high quality pubs and lodges offering great places to drink, eat and stay.
Operating a ‘best in class’ beer business offering a wide range of premium and local brands and great service.
Financial KPIs
Average profit per pub
Why we have chosen
this KPI
A measure of our success in creating
quality pubs that match customers’ needs.
How it links to Strategy,
Risk and Remuneration
1
Risk – market/operational, business
continuity and Brexit
Impacts bonus measure of Group profit
CROCCE
Why we have chosen
this KPI
A key driver of shareholder value and
reflects progress made on investments,
disposals and profitability of our core
estate. How we calculate CROCCE is
shown on page 26.
How it links to Strategy,
Risk and Remuneration
2
1
Risks – market/operational and
business continuity
Annual bonus and Long Term Incentive
Plan (LTIP) measure
Free cash flow (FCF)
Why we have chosen
this KPI
A measure of cash generated and
available to reinvest in the business,
return to shareholders in the form
of dividend or repay debt. FCF is the
operating cash flow of the business after
tax and interest are deducted. How we
calculate FCF is shown on page 26.
How it links to Strategy,
Risk and Remuneration
2
1
Risks – business continuity, Brexit and
financial covenants
LTIP measure
Underlying earnings per share
(EPS)
Why we have chosen
this KPI
A widely used profitability
and valuation measure.
How it links to Strategy,
Risk and Remuneration
2
1
Risks – market/operational, business
continuity and Brexit
Impacts bonus measure of Group profit
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
£113k
£111k
£108k
10.3%
10.7%
10.9%
£101.4m
£103.1m
£111.2m
13.9p
14.2p
13.9p
Strategic Report
Governance
Financial Statements
Additional Information
23
Non-financial KPIs
New-build pub-restaurants
and lodges completed
Why we have chosen this KPI
The programme is a key driver of profit
and returns growth within our business.
Our plan is to open at least ten pubs and
bars and five lodges in 2018/19.
How it links to Strategy,
Risk and Remuneration
1
Risks – market/operational, health and
safety, IT and financial covenants
Impacts bonus measure of Group profit
Lodges
2018
2017
2016
Pub-restaurants
2018
2017
2016
6
14
7
8
19
22
Like-for-like sales versus
market (Destination and
Premium)
Why we have chosen this KPI
Our aim is to make Marston’s ‘The Place
to Be’ and the best way to measure this
is to compare our like-for-like sales
performance against the market (based
on the Coffer Peach Business Tracker).
How it links to Strategy,
Risk and Remuneration
1
Risks – IT and our people
Impacts bonus measure
of Group profit
Number of main meals served
Why we have chosen this KPI
How it links to Strategy,
Risk and Remuneration
A key volume indicator of growth in food
sales, it provides the foundation from
which increased spend per head can
be achieved through starters, desserts
and coffee.
1
Risks – market/operational and
health and safety
(1.1%)
2018
2018
0.8%
2017
2016
2.5%
2018
2017
2016
35.5m
37.5m
38.8m
Market share of premium ale
Why we have chosen this KPI
How it links to Strategy,
Risk and Remuneration
2
Risks – business continuity and Brexit
How it links to Strategy,
Risk and Remuneration
2
1
Risks – health and safety
and our people
We seek to maintain our lead in the
premium cask and packaged ale market
through innovation, quality and range
of beers. This message allows us to
compare our relative performance to
competitors. Packaged ale includes both
bottle and can, to better reflect the market
we operate in. The restated figures
incorporate CWBB.
Employee engagement and
enablement
Why we have chosen this KPI
We believe that engagement and
enablement are inextricably linked and
essential to our ongoing success. If our
employees are engaged with us and our
strategy and enabled to contribute and
deliver, this will result in a positive work
environment, great customer service and
improved business performance.
Packaged (restated)
2018
2017
2016
Cask (restated)
2018
2017
2016
Engagement
2018*
21.6%
20.9%
20.9%
22.4%
23.3%
24.6%
2017 68%
73%
2016 68%
76%
Enablement
2018*
2017 65%
2016 65%
Benchmark
76%
77%
* We have decided not to undertake an employee engagement survey this year, postponing it for 12 months. We want to maximise the opportunity to embed action
planning put in place from the 2017 survey, maximising the return on our investment. As a result we are not able to provide any like-for like comparisons for 2018.
24
Marston’s PLC Annual Report and Accounts 2018
Group Operating and Financial Review
• Revenue and earnings growth in all
trading segments.
• Investment in estate and beer
business expansion.
• Reduced capital expenditure in 2019
to improve future cash flows.
Andrew Andrea
Chief Financial and Corporate Development Offcer
Destination and Premium
Taverns
Brewing
Group Services
Group
Underlying
revenue
Underlying
operating profit
Margin
2018
£m
450.7
312.0
377.7
–
1,140.4
2017
£m
438.0
301.3
252.9
–
992.2
2018
£m
89.4
86.1
32.0
(25.0)
182.5
2017
£m
88.9
84.1
25.5
(24.0)
174.5
2018
%
19.8
27.6
8.5
(2.2)
16.0
2017
%
20.3
27.9
10.1
(2.4)
17.6
Destination and Premium
Total revenue increased by 2.9% to £450.7 million reflecting the
performance of our new-build pub-restaurants offset by a decline in
like-for-like sales. Underlying operating profit of £89.4 million was
up 0.6% (2017: £88.9 million). Profit per pub is 3% down compared to
last year.
Total like-for-like sales were 1.2% below last year, principally
reflecting the adverse impact of the poor winter weather in the first
half year and the World Cup in the second half.
Reported operating margin of 19.8% is slightly below last year
reflecting previously anticipated cost increases in labour, business
rates and energy costs.
Taverns
Total revenue increased by 3.6% to £312.0 million, principally
reflecting like-for-like sales growth in the year in our managed and
franchised pubs. Operating profit was up 2.4% on last year reflecting
growth in the core business offset by disposals. Profit per pub was
up 4% on last year.
In our managed and franchised pubs like-for-like sales were up 3.8%.
Operating margin was 0.3% below last year at 27.6%, reflecting cost
increases and the continued impact of franchise conversion.
Brewing
Total revenue increased by 49.3% to £377.7 million, principally
reflecting the annualised benefit of the acquisition of CWBB in June
2017 and the benefits of the new distribution contracts secured in the
year. Underlying operating profit increased by 25.5% to £32.0 million.
Operating margin of 8.5% was below last year reflecting the
CWBB business which has historically operated at a lower margin
(driven equally by customer and product mix) and the impact of the
distribution contracts mentioned above.
Group Services
Central costs as a proportion of turnover were 0.2% lower than 2017.
Absolute costs increased reflecting inflationary pay increases, the
impact of both the apprenticeship and pub code levies, and higher
training and IT costs.
Allocation of expansionary capital
We have opened 14 pubs and bars and seven lodges in the current
year and we continue to see good opportunities for further
expansion. Given current sector trends, including high levels of
new openings and investment in the eating-out sector, together
with economic uncertainty, we highlighted earlier in the year that
we would be adopting a more cautious approach to new openings
in the short term. The market is beginning to respond to recent
over-supply and we expect that competition for new sites will reduce.
In the meantime we plan to open ten pubs and five lodges in 2019.
Other capital investment in 2019 will be around £80 million,
including £50 million maintenance capital and £30 million growth
capital. This, together with the reduction in new-build expansionary
capital described above, represents an overall reduction in capital
expenditure of £30 million versus 2018. Disposal proceeds are
expected to be around £45 million.
Future cash flow and debt targets
We are also targeting a further £20-30 million improvement to free
cash flow as follows:
• Continued improvement in EBITDA.
• Reduction in organic capital expenditure of £5-10 million per
annum from 2020 following completion of the roll out of the new
EPOS system and efficiencies in pub maintenance.
• Reduction in pension payments of £8 million per annum from 2021
based on eliminating the pension scheme funding deficit in 2021.
• Securitisation financing benefits from refinancing opportunities.
Whilst the outcome of our review of these opportunities is at an
early stage, we expect to report further in the course of the next
financial year.
As a consequence of these actions, we are targeting a 1 times
reduction in leverage within 3-5 years. At the same time, we are
setting clear guidelines in respect of capital structure. In addition
to our ongoing objective to reduce leverage we will also target a net
cash surplus before growth capital (acknowledging fluctuations
in working capital), acquisitions meeting strict return on capital
criteria, and a commitment to maintaining fixed charge cover (the
ratio of EBITDAR to interest and rent payments) of at least 2.5 times.
Strategic Report
Governance
Financial Statements
Additional Information
25
Return on capital targets
As described in the Our Strategy section (on page 16) we
target CROCCE of 12-15% from investment in new pubs and
accommodation (freehold investments) and 20% in organic pub
and brewing growth capital.
We will continue to review all of these targets to ensure they
remain appropriate and to explore further opportunities to improve
cash flow.
Taxation
The underlying rate of taxation of 15.5% in 2018 (2017: 15.6%) is below
the standard rate of corporation tax due to (i) significant deferred
tax movements in the year at the future enacted rate of 17%, (ii) a
deferred tax benefit created by the retention of capital allowances on
fixtures in property disposals and (iii) a prior year deferred tax credit
arising from rollover relief claims in respect of capital gains, where
the reduction in tax base cost of a property is offset by previously
unrecognised indexation.
Non-underlying items
There is a net non-underlying charge of £42.9 million after tax.
Primarily this reflects the external estate valuation undertaken in
the period, which resulted in a £39.8 million charge to the income
statement. A net revaluation increase of £8.6 million has also
been recognised in the revaluation reserve in respect of property
revaluations undertaken in the period. Other non-underlying items
comprise a charge of £0.1 million in respect of the change in the
rate assumptions used in calculating our onerous lease provisions,
reorganisation and integration costs of £7.3 million, principally from
the integration of CWBB, a charge of £0.1 million in respect of the
net interest on the net defined benefit pension asset/liability and a
£0.5 million net loss in respect of the mark-to-market movement
in the fair value of certain interest rate swaps. The revenue
of £0.9 million and expenses of £2.8 million in respect of the
management of the remaining pubs from the portfolio disposal
in December 2013 have also been included within non-underlying
items. These charges are offset by a credit of £6.8 million relating
to the tax on non-underlying items.
Capital expenditure and disposals
Capital expenditure was £162.7 million in the year
(2017: £196.3 million), including £63 million on new pubs.
During the year, we spent additional capital expenditure on brand
conversions in Destination and invested £8 million in the new
canning line described earlier and additional vehicles for the new
distribution contracts. We expect that capital expenditure will be
around £130 million in 2019, including around £50 million for the
construction of ten pubs and bars and five lodges.
Cash proceeds of £46.9 million have been received from the
sale of pubs and other assets, including £32.6 million of leasing
transactions. Disposal proceeds of around £45 million are
anticipated in 2019.
Financing
The Group has a £320 million bank facility to March 2023 and, since
the year end, has secured the additional £40 million accordion
facility that formed part of our bank refinancing in 2017. This facility,
together with the long-term securitisation of approximately
£776 million and the lease financing arrangements described
below, provide 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.
In recent years, the Group has entered into lease financing
arrangements which have a total value of £364 million as at
29 September 2018 (2017: £301 million). This financing is a form
of sale and leaseback agreement whereby the freehold reverts to
the Group at the end of the term of the lease 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 excluding lease financing of £1,022 million at 29 September
2018 is £6 million below last year. Operating cash flow of £182 million
is £1 million ahead of last year after adjusting for the working capital
offset arising from the CWBB acquisition in 2017.
For the period ended 29 September 2018, the ratio of net debt before
lease financing to underlying EBITDA was 4.6 times (2017: 4.8
times). It remains our intention to reduce this ratio over time,
principally through EBITDA growth generated from our new-build
investment programme.
Pensions
The surplus on our final salary scheme was £15.6 million at
29 September 2018 which compares to the £5.4 million deficit at last
year end. This movement is principally due to the fall in liabilities as a
consequence of the increase in corporate bond yields.
Total tax contribution
£530.9m
Duty
VAT
Employee payroll
Business rates
£261.6m
£168.7m
£39.2m
£31.6m
Employer payroll taxes
£16.8m
Corporation tax
Other
£7.6m
£5.4m
26
Marston’s PLC Annual Report and Accounts 2018
Group Operating and Financial Review continued
CROCCE
NON-CURRENT ASSETS:
Goodwill
Other intangible assets
Property, plant and equipment
Other non-current assets
CURRENT ASSETS:
Inventories
Assets held for sale
Trade and other receivables
LIABILITIES:
Creditors*
Balance
£m
Depreciation
£m
Revaluation
£m
6.2
187.5
(627.2)
230.3
70.0
2,408.1
9.6
44.6
2.3
104.9
(279.0)
2018
Adjusted
£m
230.3
76.2
1,968.4
9.6
44.6
2.3
104.9
(279.0)
CASH CAPITAL EMPLOYED
2,590.8
193.7
(627.2)
2,157.3
EBITDA
CROCCE
Free Cash Flow
Net cash inflow from operating activities
Interest received
Interest paid
Arrangement costs of borrowings
Purchase of own shares
Free Cash Flow (KPI)
*Creditors comprise trade and other payables, other non-current liabilities and provisions for other liabilities and charges.
222.6
10.3%
2018
£m
182.4
0.8
(74.9)
(5.7)
(1.2)
101.4
Strategic Report
Governance
Financial Statements
Additional Information
27
Non-Financial Information Statement
We aim to comply with the new Non-Financial Reporting requirements as set out
in sections 414CA and 414CB of the Companies Act 2006. Throughout the Annual
Report and Accounts we report certain information on environmental, employee and
social matters but here we have set out a summary of the Group’s approach, related
policies and how we monitor their effectiveness for the five areas covered by the new
requirements, together with signposts to other relevant sections of the Annual Report
and Accounts.
Environment
We recognise the importance of reducing our environmental impact
and take our responsibilities very seriously. We continually strive
to implement innovative technological solutions to reduce the use
of resources, minimise waste and increase efficiency, and we set
targets aimed at achieving continual improvements.
• Environmental policy and greenhouse gas emissions – page 64
• Targets and performance – Corporate Responsibility statement –
page 35
Human rights
We are committed to respecting and upholding human rights within
our business and also within our supply chain. We recognise our
responsibility to identify and address potential or actual human
rights infringements linked to the products and services we provide.
We encourage our suppliers to uphold the same standards as we
apply to ourselves
• Human Rights policy
• Ethical purchasing policy
• Environmental report – www.marstons.co.uk/responsibility
• Food Supplier charter
• Modern Slavery Statement – page 64
• Data privacy policy
• IT risk – page 33
Anti-corruption and anti-bribery
Marston’s is committed to conducting its operations in a fair
and ethical manner, and will not tolerate any form of bribery or
corruption from its employees, suppliers or any other parties.
• Anti-bribery and anti-corruption policy
• Corporate Hospitality and Gift policy
• Fraud policy
Employees
We want Marston’s to be a great place to work for all our people,
engaging and inspiring them to do their very best to make our
business successful. We know this is a two-way contract where
we invest in them as much as they invest in Marston’s. We aim
to provide a safe working environment, encourage personal
development, responsibility and respect, and attract a diverse and
inclusive workforce.
• Business Model – people resource – page 9
• Equal Opportunities policy
• Gender Pay Gap report – www.marstons.co.uk/responsibility
• Health and Safety policy
• People risk – page 33
• Health and Safety risk – page 33
Social matters
We are proud that our pubs and breweries are an integral part of our
communities and we believe that these relationships are crucial to
the long-term sustainable success of our heritage beer brands and
our pubs. We create employment in local communities and actively
involve ourselves in community events and charitable causes,
matching fundraising through our charity schemes.
• Business Model relationships – page 11
• Corporate Responsibility statement – page 35
• Alcohol awareness – www.marstons.co.uk/responsibility
28
Marston’s PLC Annual Report and Accounts 2018
Risks and Risk Management
Our approach to risks and our control of them
Risks are an inherent part of business, representing threats and opportunities.
The Board and the Audit Committee consider the management of those risks that
are material to the business in the context of our appetite for risk.
The trading environment in which our Group exists is constantly
changing, driven by our customers and the opportunities for growing
our business. These external factors continually impact upon the
risks faced by our business, many of which are unavoidable and
must be robustly mitigated against if our strategic objectives are
to be achieved.
Our Appetite for Risk:
“Marston’s is open to taking risks, providing those risks
Factors impacting upon our business at present include Brexit,
competition, regulation, technology, IT threats, supply chain,
environmental impacts and the UK economy.
The levels of risk management employed within our business ensure
that risks associated with these factors are identified early on so
that effective mitigation can be prepared. We plan for predictable
eventualities to ensure we have an appropriate level of resilience so
the business can withstand short-term setbacks.
We are satisfied that we have successfully handled the emerging
risks faced by our business operations during the year, and we have
worked to improve our resilience in a number of key areas including:
upgrading our computer network, data servers and cyber defence;
new systems and training for data security; and increased auditing
of our suppliers.
align with, and help us to achieve, our strategic objectives
in a responsible way and within agreed parameters.
Wherever possible and practical we will seek to remove
risks completely, avoiding those that pose a threat to
achieving our strategic objectives or, where a risk is
impossible to avoid, we aim to mitigate it by investing in
effective controls or by sharing risks with a third party.
These controls are managed and monitored to give
assurance that the risk levels are in accordance with the
parameters set by the Board and the PLC Exec.We believe
that our overriding principle of care remains integral to
achieving our strategic objectives and we continually
review the risks affecting our business to ensure we
maintain our responsibilities to our employees, our
customers and the public, by guarding against threats
to health, hygiene and safety as a priority.”
Changes to the business that impact on risks
Financial
Health and safety
Demand for our ales
Demand for our drink supply services
Popularity of our drink brands
Site activity at depots and breweries
Cyber and data security threats
IT network resilience
Pub menu development
Brexit uncertainty
Inflationary pressure
Consumer nervousness
Environmental public concern, particularly wastage
t
c
a
p
m
i
g
n
i
s
a
e
r
c
n
I
Brexit
IT
Market/operational
Business
continuity
People
development
Increasing likelihood
Examples of actions to decrease likelihood
Increased production capacity within our breweries and new
product development
Expansion of our logistics capability (warehouse capacity, fleet
performance, systems and teams)
Expansion of our Health & Safety team
Expansion of our food supplier auditing and raising the quality
standards expected from our suppliers
Deployment of our employee development programme (PCDR)
Redevelopment of our data servers
Upgrading our cyber defence monitoring
Data protection systems developed and policies adopted and
trained our people in preparation for GDPR (General Data
Protection Regulation)
Reduction in pub waste and emissions by developing new
systems of control and monitoring
Strategic Report
Governance
Financial Statements
Additional Information
29
What we did in 2018 to manage our risks
Information technology
(a) Resilience
Our IT network has been expanded so that the connections between our sites have alternative channels which ensures that a fault on
one does not stop the transmission of data. The interface between our network and the internet has been improved at our sites in order
to severely limit what an external attack could achieve. The monitoring of our network for any unauthorised device or activity has been
upgraded during the year.
(b) Crisis planning
The ability of our head office employees to relocate and work at alternative premises has been improved through the
increased agility of our teams following the issue of laptops to those teams performing time-critical tasks. Scenario
planning has been undertaken at our sites and an audit conducted of our supply chain resilience.
(c) Data protection
The business adopted the approach for GDPR as recommended by the Information Commissioner’s Office. Personal data was mapped within
the business, our people received training and security policies were revised and briefed to the business. The retention of personal data has
been reduced and confirmation from our customers has been sought where appropriate. Our privacy notices have been improved to offer
additional transparency and explanation of our data security practices.
Health and safety
Our Group Head of Health & Safety was appointed during the year reporting to the Group People Director. A comprehensive review of health
and safety risks and practices has been performed in order to identify areas of development. The Health & Safety team has also been
expanded to ensure that these areas of improvement can be achieved.
Market/operational
The business has made significant investment in a new EPOS system for managing the operations within our pub business. This will improve
the financial control of our pubs, customer service, customer information, stock control and management reporting. The initial signs of the
rollout have been encouraging and will continue across our managed pubs during 2019.
How we will be responding to emerging areas of high risk over the next year
Brexit
There is a risk that the UK will leave the EU with no deal which would have an impact upon our costs to import food and drink due to currency
fluctuation, tariffs and inflation. Our ability to export beer could also be impacted by changing tariffs. The uncertainty may mean that it is
harder to secure long-term agreements with our suppliers where they are sourcing food and drink from the EU. In addition border delays
could disrupt our supply chain, impacting upon the availability of food and drink brands to our pubs and our customers’ businesses. There is
likely to be an impact upon general inflation, interest rates and wider impacts upon the UK economy and consumer confidence. The UK
could see a tightening labour market as well as skills shortages which could affect our ability to recruit. We continue to monitor the risk and
develop processes able to deal with the additional administration. We will renegotiate our supply contracts when due in order to mitigate any
additional cost.
Market/operational
Our business exists in a highly competitive sector, reliant upon consumer discretionary spend. The dining-out experience is reliant upon
attracting customers choosing our own venues as opposed to other pubs or restaurants. Recently the casual dining market has seen heavily
discounted prices on food to attract customers. The Marston’s offer reflects the quality, range of choice and the overall experience at the
venue rather than purely competing upon price. We aim to mitigate this risk by gauging what our customers appreciate and keeping our offer
refreshed, innovative and exciting.
The volume of beer sold in the UK continues to move more to home consumption rather than within licensed premises. This creates risk
particularly upon margin control, however, Marston’s is well placed to take advantage of both sales to the on-trade as well as the off-trade.
Our lead on premium bottled ales means that we can meet this change in consumer demand and maintain a scale of operation to protect our
margin. At the same time the broad range of beer brands, particularly following the purchase of CWBB, has created an exciting and varied
mix of brands for our on-trade and off-trade customers to choose from.
The UK pub sector and wider alcoholic drinks industry continues to experience changes in legislation which can increase operating costs.
These changes impact upon our business directly and also the businesses of our tenants, lessees and retailers. Future changes in legislation
could impact upon employment costs, calorie labelling on our menus and wastage. Our Risk & Compliance Committee tracks and monitors
these developments so that the business can make appropriate changes before legislation itself imposes a deadline.
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Marston’s PLC Annual Report and Accounts 2018
Our Levels of Defence
1. Management ownership
Our managers are responsible for identifying and communicating
risks, and developing controls which mitigate those risks to a level
which is acceptable to the business.
Our managers are also responsible for assessing and reporting
upon the effectiveness of those controls to the Board via the
Corporate Risk Director. The effectiveness of those controls are
tested through the operation of the Internal Audit plan and reported
to the Board on a regular basis.
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.
• Embedding risk management into day-to-day activities and our
Ways of Working.
• Ensuring that our operations abide by all applicable laws
and regulations.
• Continual improvement by reporting on effectiveness,
recognition of weaknesses, investment, and by encouraging
and rewarding achievement.
• 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 which have risk
management embedded within them.
• 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 Group’s goals.
Control 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.
The Group operates within a clear set of policies established by the
Board and the PLC Executive Committee (PLC Exec). Such policies
ultimately manage the criteria within which the business accepts
risk. Authority is delegated through the business to ensure that
management is empowered to operate effectively within a system
of governance approved by the Board. Changes to policies occur,
normally at the instigation of management, in response to either
new threats, legislation or new opportunities.
2. Committee oversight
The PLC Exec and Marston’s Beer Company Board each meets
regularly to consider how to implement the actions required for
Marston’s to achieve its business objectives and to monitor risks
and opportunities within its Ways of Working.
Our Operational Directors within the PLC Exec take ownership of
the implementation of the business strategy to meet operational
and financial targets and the design of internal controls to reduce
risks. In order to understand the fundamental risks which impact
the business, management collects information through internal
processes and external sources and determines the response to
those risks. The management committees consider, communicate
and implement the decisions on risk made by the Board.
For further information, read more about our Governance Framework on
page 41
Marston’s operates a number of supporting committees that focus
upon particular areas of risk requiring attention:
Risk & Compliance Committee (chaired by the Group Secretary)
The Committee reviews the identification of the principal risks
and considers the audit and compliance testing of those risks.
It conducts a focused examination of areas of risk which have
changed significantly. In addition, new legislation is tracked by the
Committee, which considers the impact on the business and the
response to maintain legal compliance.
Data Security Committee (chaired by the Group Secretary)
The protection of personal and commercial data is considered.
Network protection is reported. Policies and training are developed
and monitored to encourage awareness and best practice by staff.
Ongoing compliance with data protection law is reported.
Corporate Responsibility Committee (chaired by the Corporate
Risk Director)
The ethical approach by the Group is considered in all respects.
The Committee defines the Corporate Responsibility priorities of the
business and oversees the actions and targets associated with them,
as well as the reputational risks.
Business Continuity Steering Committee (chaired by the Corporate
Risk Director)
The resilience of the Group to events outside of its control is
considered, and lessons learned from actual incidents or scenario
tests. Consideration is given to the resilience of our supply chain
and the capacity of our business to seek alternative supplies at
short notice. The Committee regularly reviews the strength of our
IT network to recover from disruption and interference.
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Governance
Financial Statements
Additional Information
31
3. Assurance Governance
The Group Risk team comprises the Corporate Risk Director and the
Internal Audit function. The team reports to the Group Secretary who
is a member of the PLC Exec and can elevate matters regarding risk
where appropriate to the Board. The Corporate Risk Director attends
the Audit Committee meetings and can raise any concerns regarding
risks independently.
Enterprise Risk Management (ERM)
The Corporate Risk Director operates an ERM process in order
to identify, monitor and report those risks which impact upon
our ability to achieve the strategic objectives. The key risks and
controls, and their ownership, are continually assessed, more
formally during bi-annual meetings with the managers who own the
key risks.
The risks are documented in a corporate risk register, access
to which is appropriately shared with those managers. We use
common risk management tools and language across the business
to establish consistent metrics.
The effectiveness of the controls at reducing risk to an acceptable
level is considered and reported to the Audit Committee.
Levels of insurance cover are managed by the Corporate Risk
Director with authority from the Board and in consultation with
external advisers.
Internal Audit
The Internal Audit function, within the Group Risk team, is managed
by the Group Internal Audit Manager, reporting to the Corporate
Risk Director and is independent from the operations of the Group.
The Internal Audit strategy is risk based and focuses its attention
upon the greatest risks to the Group. The strategy has been
approved by the Audit Committee and aims to provide a sufficient
level of assurance regarding the strength of the control environment
as well as supporting continual improvement in risk management.
The internal audit plan is produced by the Corporate Risk Director.
The plan takes into consideration the key risks within the business,
areas of increased risk and the regularity of testing those areas.
The audit team consults with the PLC Exec and the Risk &
Compliance Committee regarding areas of concern which require
additional assurance. Resource and expertise is sought from an
audit co-source for individual projects. The budget for internal audit
is submitted to the PLC Exec and the Audit Committee for approval.
Internal audit projects are planned with the assistance of key risk
owners and the results are reported back to those managers, the
Risk & Compliance Committee and the Audit Committee.
The Group Risk team gathers assurance during the year on a
wide range of legal compliance areas, pub financial controls, pub
compliance testing, security and health and safety.
4. Strategic
The PLC Exec, chaired by the Chief Executive Officer, is responsible
for the implementation of strategy, carrying out actions directed
by the Board, monitoring performance, and overseeing risk
management and internal controls. Actions required are
communicated to the senior managers of the Group.
5. Board/Audit Committee
The Board is ultimately responsible for the Group’s framework
of governance, internal control system and risk management.
The mitigation of risk is delegated to the Executive Directors and
other senior managers. The Board is responsible for ensuring that
risk owners monitor and communicate the effectiveness of the
internal controls. The Board is also responsible for determining the
nature and extent of the principal risks the business is prepared to
take in order to achieve its strategic objectives, its risk appetite and
approving the Viability Statement.
Management reporting is in sufficient detail for the Board to assess
their risk appetite in the context of the risks and opportunities and
to make informed decisions in order to accomplish our strategic
objectives and our ambition to make Marston’s ‘The Place to Be’.
The Board has performed a robust assessment of the principal
risks faced by the Group, taking into account our ability to achieve
its strategic objectives.
Viability Statement
The Directors regularly undertake an assessment of the
prospects of the Group by reference to its current and
historical fnancial performance, the current fnancial position,
and the principal risks as described in this Strategic Report.
The longer term strategy and business model is intended to
spread the operational risk of the business.This is achieved
through operating in food-led and wet-led pub businesses,
accommodation and a premium beer business.This means that
the Company is less exposed to a downturn in any single part
of the pub or beer market.
The Board annually reviews the Group strategy, which
incorporates fve year fnancial projections of trading
performance, cash fows and fnancing requirements. In recent
years the Group has performed strongly, delivering growth
whilst transforming both the pub and beer divisions into
businesses well placed to meet future market challenges.
In forming our plans, the Board has visibility of:
• the sensitivities of our results to changes in either the sales or
margin assumptions;
• the actions required to conserve cash in the event of a
signifcant downturn;
• the principal areas of risk as described in this Strategic
Report and the mitigating actions in place to offset those
risks; and
• confrmation that there is no single material contract or
activity that would affect the going concern of the business.
During the period, the Group extended its existing bank facility
by one year to the fnancial period 2022/23, utilising an option
included in the facility renewal last year.We intend to utilise
the option to extend the facility by a further year in the 2018/19
fnancial year. In addition, we intend to utilise a £40 million
accordion facility in 2019 to add further fnancial fexibility in
our short-term fnancing.These actions ensure that there are no
refnancing risks across the transitionary Brexit period.
In addition, the Group entered into an additional £63 million of
property lease fnancing during the period, demonstrating the
continued attractiveness of the Group’s pub estate expansion
plans to debt providers. An additional tranche of fnancing is
expected to be completed by January 2019.
The Group continues to have strong headroom against the
fnancial covenants underpinning the fnancing structure with
strong fxed charge cover of 2.5 times. As described in the
Strategic Report on pages 24 to 25, the Board has also identifed
areas to improve free cash fow to further underpin our ability to
meet our fnancial obligations.
The Board has assessed the viability of the Group over a fve
year period as this is consistent with their strategy review
process, as described above. Given the considerations
above, the Directors confrm that they believe the Group will
continue to be operationally and fnancially viable over the fve
year period.
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Marston’s PLC Annual Report and Accounts 2018
Our Principal Risks and Uncertainties
The following risks are, in the opinion of the Board, the principal risks which could impact
on the achievement of our strategy. It is not intended to be a complete analysis of all risks
and may change over time. A reminder of the two key components to our strategy:
1 Operating high quality pubs and lodges offering great places to drink, eat and stay.
2
Operating a ‘best in class’ beer business offering a wide range of premium and local brands and great service.
Market/operational
Risk context
The risk
Potential impact
Mitigation
Marston’s revenue is dependent
upon being able to offer
customers an enjoyable
experience at the right price. It
is reliant upon attracting back
existing customers and winning
new customers.
In addition, Brexit could impact
upon discretionary spend and
consumer confidence.
That our pubs, brands
or services fail to
attract customers, do
not reflect changing
customer preferences,
or offer poor service or
quality. Equally there
is a risk that our prices
become uncompetitive.
Reduction in sales,
or heavy discounting
in order to attract
customers.
• Customer satisfaction surveys, market and
consumer insight.
• Continual analysis of sales performance
data of individual sites and by pub format.
• Pricing strategy, built upon careful analysis
of customers’ sensitivities at a sufficient
level of detail.
• Cost control, including menu margin
analysis.
• Investment, location and design of our pubs.
• Structure of our teams aligned with our pub
formats.
Movement: The UK economy continues to face uncertainty. Economic drivers for our customers in the near future could be
employment uncertainty, interest rate rises, depreciation in the value of sterling and inflation. This creates a risk for our Group in
attracting customers and setting prices at an appropriate level. These conditions also present an opportunity to gain market share
from other operators who cannot manage the risk as effectively.
Business continuity
Risk context
The risk
Potential impact
Mitigation
Marston’s operations depend
upon supplies of goods and
services often from single
sources.
Disruption to key
suppliers, particularly
those closely involved
with our day-to-day
activities (logistics,
food, drink), or shortage
of commodities could
significantly impact
Marston’s operations.
Disruption to trade
impacting upon profit.
• Continual assessment of suppliers’
resilience and capacity.
• Site visits to our suppliers to assess crisis
planning.
• Contingency planning identifying how
products or services can be substituted.
Movement: Marston’s recognises the disruptive effects upon our ability to manage events outside of the Group’s control.
In 2018 we performed audits of resilience at some of our major suppliers’ sites in order to understand how the risk can be further
mitigated by working in partnership.
Strategic Report
Governance
Financial Statements
Additional Information
33
Health and safety, including food hygiene
Risk context
The risk
Potential impact
Mitigation
Ultimately, harm or
injury to people through
breaches of health and
safety or food hygiene
regulations.
Personal injury.
• Health, safety and hygiene management
Significant damage
to reputation,
particularly through
increased media
attention.
Financial penalties.
systems embedded.
• Dedicated health and safety managers
seeking improvement.
• Regular, documented inspections.
• Training of staff.
• Escalation of potential safety threats to
senior management.
Care for our employees, our
customers and the public is a
priority for our business and
defines the parameters for the
risks the business accepts and
those activities we reject. We
continually seek improvements in
the protection of people through
investment, training, policies and
practices.
Reducing accidents, increasing
safety and hygiene is a key
priority for our business.
Movement: At Marston’s, food hygiene has been consistently and rigorously controlled. The increase in business activity is likely to
put more pressure on safe practices. Our busy and evolving working environment continues to be a challenge.
In 2018 we took steps to invest in more resource for health and safety and repositioned its management within the Group HR function
in order to meet the need for greater focus.
Information technology
Risk context
The risk
Potential impact
Mitigation
Our business activity is very
reliant upon the Group’s IT
network to communicate, operate
effectively, serve our customers,
process transactions and report
on results.
Threats to IT are both
external and internal
and could result in a
network outage, loss,
theft or corruption
of data, or 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.
• 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 has evolved recently; theft of personal data is becoming more common; ransomware attacks are now
more widespread and attacks are more sophisticated.
Marston’s has conducted penetration testing on its network for many years. Specific cyber risk reviews have been conducted in
recent years on IT security by independent teams. We have invested in additional network and device monitoring functionality.
In 2018 we enhanced the monitoring of devices accessing our network. Next year we intend to engage more with our people to
encourage greater awareness of cyber threats and their role in protecting our IT network.
Our people
Risk context
The risk
Potential impact
Mitigation
Marston’s operates in a very
competitive environment with a
talent outflow from the sector
and a shortage of skilled roles
such as chefs. Demand for high
calibre people adds further
pressure in a labour market
tightening due to Brexit. Our
lack of brand presence and the
need to prudently manage costs
increases this challenge.
Failure to attract or
retain the best people.
Reduction in customer
satisfaction levels.
Financial targets and
strategic objectives are
not met.
• Continually review and benchmark our
people offer against our competitors
through participation in appropriate
networks.
• Development of our ‘People Promise’.
• Improved induction, training and
development programmes.
• Increased focus on development of our line
managers to improve employee retention.
Movement: The sustained growth in our business has allowed for improvements in training programmes and given more
opportunity for our people to progress.
Our Performance, Career and Development Review (PCDR) cycle has brought a common approach to people development across
the Group, enhancing the dialogue on expectation, achievement and career progression.
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Marston’s PLC Annual Report and Accounts 2018
Our Principal Risks and Uncertainties continued
Financial covenants, pension fund deficit and accounting controls
Risk context
The risk
Potential impact
Mitigation
The Group’s financial
system handles a large
number of transactions
accurately and securely.
Accurate reporting
is key to running the
business effectively and
in compliance with our
financial covenants.
Breach of the
covenants with our
lenders. Inadequate
funding of the pension
scheme. Incorrect
reporting of financial
results. Unauthorised
transactions.
Loss of investor
confidence and
reputational damage.
Potential loss as a result
of fraud. Breach of
covenants, resulting in
additional financial and
operating restrictions.
• Regular detailed management accounts, budgets
and forecasts.
• Constant monitoring of financial ratios.
• Programme of internal and external audits.
• Segregation of duties.
• Access controls within our systems.
• Levels of authority.
• Monitoring pension investment yields and
increasing contributions in order to clear the
pension deficit within a reasonable timeframe.
Movement: There are strong controls mitigating this risk to a low level. There has been no change in the risk since last year.
Brexit
Risk context
The risk
Potential impact
Mitigation
There is a risk that there
is no agreement by the
time the UK leaves the
EU on 29 March 2019.
The Withdrawal
Agreement setting out
the terms by which the
UK will leave the EU is
currently in negotiation.
Once concluded the
terms will still require
approval by the UK
Government and the EU.
• Continual assessment of supply contracts and
renegotiation of terms when they fall due, to protect
our business from Brexit related costs.
• Establish procedures to account for customs
declarations and tariffs.
• Consider alternative sources of supply if our
suppliers experience difficulty importing goods.
• Less than 4% of our employees are EU nationals.
We aim to support our people once information on
working within the UK has been confirmed.
A ‘no deal’ scenario
would impact upon our
costs to import food and
drink due to currency
fluctuation, tariffs and
inflation. Our ability to
export beer could also
be impacted by tariffs.
It may be harder to
secure long-term
agreements with our
suppliers.
Border delays could
disrupt our supply chain
impacting upon the
availability of food and
drink brands to our pubs
and our customers’
businesses. The UK job
market could become
less desirable for EU
nationals, which could
lead to a shortage of
specific types of skilled
workers within our
market sector.
Movement: Marston’s recognises the disruptive effects that Brexit has upon our business and the UK economy, particularly during
this period of uncertainty.
Brexit related risks will be continually monitored and reported to our PLC Exec and Board and independent assurance will be sought
regarding any business change necessary to meet legislative and commercial requirements.
Strategic Report
Governance
Financial Statements
Additional Information
35
Corporate Responsibility – A target-driven approach
Marston’s believes that Corporate Responsibility (CR) plays an integral role in
contributing to long-term growth, commercial viability and stable relationships with its
stakeholders. During 2018 the CR Committee has again focused upon a target-driven
approach, aligning our CR priorities to our business strategic objectives. This cross-
functional group meets several times per year to discuss our direction on CR and inform
each other on progress made against our targets. With members across teams such
as operations, procurement, food development, HR, risk and communications, the CR
Committee is representative of the importance that CR has for the business.
We have assessed our CR strategy and set CR priorities aligned to the Group’s
strategic objectives. This year has seen us implementing these objectives and making
considerable progress in focusing the business on integrating them across all areas.
We continue to work with our key stakeholders to make sure our activity stays relevant
and focused. We published our second Modern Slavery Statement this year and we have
extended the review of our suppliers, demonstrating our commitment to go beyond the
minimum that is required.
We remain committed to our five CR priorities:
• We invest in our people
• We partner with suppliers who share our values
• We care about our customers’ wellbeing
• We celebrate our local communities
• We reduce our environmental impacts
For each of these priorities we have identified our areas of focus that continue to support the Group’s strategy for
long-term growth:
WE INVEST
IN OUR PEOPLE
WE PARTNER WITH
SUPPLIERS WHO SHARE
OUR VALUES
WE CARE ABOUT
OUR CUSTOMERS’
WELLBEING
WE CELEBRATE
OUR LOCAL
COMMUNITIES
WE REDUCE
OUR ENVIRONMENTAL
IMPACTS
STRATEGIC
OBJECTIVES
Operating high quality pubs and lodges offering great places to drink, eat and stay
Operating a ‘best in class’ beer business offering a wide range of premium and local brands and great service
Apprenticeships
Food
supplier charter
Healthy options
on our menus
Support for
local charities
Reducing
landfll waste
AREAS OF
FOCUS
DURING
2017/18
Training
in our pubs
Improve our
supplier
audit programme
Safety
Talent
Academy online
Modern
slavery
Engagement
with Drinkaware
Head offce
involvement with
local charities
Support teams’
individual
contributions
Energy
consumption
Recycling rates
36
Marston’s PLC Annual Report and Accounts 2018
Corporate Responsibility continued
We invest
in our people
We partner with suppliers
who share our values
Why this matters to us
Why this matters to us
At Marston’s our people are our biggest asset. That’s why we do
everything we can to help them grow in confidence, skills and
knowledge, and to reach their goals. Keeping people at the heart
of our business is essential to our continual success. We recognise
that by developing our people Marston’s also develops for the future.
For the Group to remain relevant for our customers, our business
must continually adapt and change, so the skills of our team have to
develop to meet this challenge.
At Marston’s we recognise that our suppliers are an integral part of
our success and profitability. We strive for long-term relationships
with suppliers who share our sense of values. We have a robust
tendering process which examines the company management,
locations of production facilities, finances, codes of ethics and
accreditations. We have invested further this year in our process for
registering contracts, logging renewal periods and security over
data transferred.
What we have done this year
What we have done this year
• Our common philosophy is to put customers at the heart of what
all our staff do, wherever they work at Marston’s. This is what
makes Marston’s ‘The Place to Be’; that’s why all of our training
supports the customer experience, because in our view, personal
fulfilment translates into customer satisfaction and long-term
corporate success.
• We now have over 500 apprentices on our programme, for many of
whom working at Marston’s is their first experience of full or part-
time work. In 2018, Marston’s was named Macro Employer of the
Year for the West Midlands at the National Apprenticeship Awards.
• Talent Academy online has been further developed providing
our people with greater access to leading resources in order to
support their development. This includes core knowledge and
tools to carry out their role, as well as additional learning to
further stretch their personal development.
CR targets this year and how we
have performed
1. Performance, Career and Development Review (PCDR)
We have made significant progress with objective setting
throughout the organisation, which is creating greater clarity and
focus for our people, and driving more effective performance
conversations. During the year, we have continued to invest in
Training and Development with one in three employees receiving
formal training, over 70,000 e-learning modules completed and
just under 35,000 learning resources accessed via our Talent
Academy online platform, covering a broad range of topics,
from serving the perfect drink through to communication and
personal effectiveness.
2. Employee engagement
We have decided not to undertake
an employee engagement survey
this year, postponing it for
12 months until September 2019.
Following feedback from our
people, it was felt that more time
was needed to embed the action
planning put in place from last
year’s survey. We want to maximise
the opportunity to do this and, in
turn, maximise the return on
our investment from the
previous survey.
• We have sought food suppliers who, like us, are innovating for the
future. We had identified that there is a growing trend for meat
free days amongst our customers. We were able to partner with
Moving Mountains™. Based in the UK and led by an ambition to
create a burger that emulated meat but without harming animals,
they had created the B12 burger which was launched on our
menus this year. Our customers have been excited by the burger
and our other plant-based dishes such as tikka masala and
cauliflower tacos.
• All our main food suppliers are either BRC, or equivalent
standard, approved. In addition they also undergo an independent
audit on all aspects of hygiene, traceability, quality and ethical
approach. We work closely with our food suppliers to help ensure
the quality of ingredients is maintained.
• In 2018 we issued our second statement on Modern Slavery, and
since last year have contacted over 140 of our suppliers in order to
understand their own policy regarding the employment conditions
of staff in their supply chain. Our statement is available at:
www.marstons.co.uk/responsibility/modern-slavery-statement.
CR targets this year and how
we have performed
1. Re-issue our Food Supplier Charter
In 2018 our Food Supplier Charter was re-issued to all our food
suppliers, setting out our expectations regarding quality of
product, traceability of ingredients, ethical approach, sustainable
sourcing and employment rights. A copy of the Charter is
available at www.marstons.co.uk/responsibility/food.
2. Extensive supplier audits
All of our brewery suppliers for key ingredients have been audited
by our independent hygiene auditor during the year. We have
completed audits on all of our food suppliers as part of a
rolling programme.
Strategic Report
Governance
Financial Statements
Additional Information
37
We care about our
customers’ wellbeing
We celebrate our
local communities
Why this matters to us
Why this matters to us
Our customers experience a warm welcome at Marston’s; we believe
in giving them a range of choices and take the nutrition, quality
and safety of the food we serve very seriously. Our dishes cater for
various lifestyles, priorities and tastes, and we assist our customers
in making informed choices on our menus. In the past year, we have
deepened our engagement with key stakeholders and have made
significant progress in broadening our menu choices.
In order to foster a dialogue with our customers regarding any
issues concerning food, we have a catering hotline for our pubs that
is available 365 days per year.
What we have done this year
• Lower calorie dishes will remain prominently within our menus,
which will continue to allow customisation of accompaniment
options to create a healthy meal. Nutritional information is
available on our pub websites for all core menus. We are
continuing to monitor consumer trends and collect customer
feedback to ensure that our menus remain relevant to the
changing diets and lifestyles of our customers.
• Safety improvements within our pubs. This year we have updated
our safety policies, procedures, records and audits. We have
updated risk assessments, and revised the instructions to
our teams.
• Membership of Drinkaware. We associate operating a high-
quality pub estate with the responsible marketing of alcoholic
beverages and an openness when communicating with our
customers. We offer an enhanced range of soft drinks that appeal
to adults and stock a range of non-alcoholic variants. We promote
responsible drinking messages to our customers through our
websites and in-pub promotional materials.
• In order to ensure that no one under the age of 18 can purchase an
alcoholic drink in our pubs we operate a test purchase programme
in all of our managed and franchised pubs. In addition, we operate
the Challenge 21 or 25 age verification programme in our pubs.
CR targets this year and how
we have performed
1. Broaden our range of healthy options on pub menus
Our menus have been designed to offer a range of dishes with
lower calorie and non-gluten options.
2. More nutritional information given to customers
Specifications are maintained on all products on our menus
detailing ingredients, nutrition and allergen information. All core
company menus have an allergy app available detailing allergy
content of all menu items. Customers can quickly filter the menu
options by the allergen they wish to avoid: grill.marstons.co.uk.
3. Maintain the level of test purchases and age
verification checks.
All managed and franchised pubs receive test purchase visits
during the year.
Our breweries and pubs have a long and rich tradition of involvement
with their communities. We recognise the importance of these
local relationships to the success of our heritage beer brands,
and the long-term success of our pubs. We encourage our
operators to participate in Best Bar None, Pub Watch and Purple
Flag schemes where they exist. Each year we involve ourselves
actively in community events such as beer festivals, carnivals,
coffee mornings, family fun days and carol services. We support
many charities and fundraising activities within our communities.
We donate to Pub is the Hub each year, which supports pubs
diversifying within often small rural communities to incorporate
local stores, play areas, postal services and libraries.
What we have done this year
• Community Heroes Week – May 2018. For a week in May our
Head Office teams led the way in a number of charity fundraising
activities, including cycle riding, an exercise boot-camp, car
washing, raffle and BBQ. Our retail managers had the opportunity
to bid for an Area Manager to run their pubs for a day. Our pub
teams were invited to compete and win funds for their own
charities. Over 500 of our pubs took part, raising funds for their
own charities. Our Taverns operations team also got involved with
a sponsored challenge to carry a barrel of Jennings ale around
Lake Buttermere.
• Found in modern cities, market towns and rural villages, our
community pubs all have an individual feel and are designed to
meet the needs of the local people in the area. We are renovating
around 150 pubs across Taverns each year to help bring
communities together.
CR targets this year and how
we have performed
1. Encourage our pubs to engage with their local
communities
Marston’s Community Heroes Campaign launched this year,
encouraging all our Taverns pubs to run activities to raise funds
for local charities of their choice.
2. Broaden our engagement with the youth charity OnSide
Developing the connection we have in Wolverhampton with The
Way, a youth centre with over 2,500 members, we have reached
out to other youth centres run by OnSide. We intend to further
strengthen this link in the year ahead.
3. To match any contributions made to charities by our staff
through the payroll
We have matched the contributions of our employees to both the
Marston’s Inns and Taverns Charitable Trust and the Marston’s
Employee Charitable Fund.
38
Marston’s PLC Annual Report and Accounts 2018
Corporate Responsibility continued
We reduce our
environmental impact
Our future plans
We invest in people
• Maximise the contribution to performance our PCDR
process brings.
• Further increase our focus on apprenticeships as a key lever in
attracting, developing and retaining great talent for our business
– including the introduction of a work experience programme to
attract future young talent into our business.
We partner with suppliers who share our values
• Next year we would like to explore the possibility of an ingredients
supplier charter for our beer production.
• For our pub food we will continue to survey our customers’
preferences and work with suppliers to deliver innovative and
exciting offers.
We care about our customers’ wellbeing
• We are trialling a digital safety system to replace the manual
recording of hygiene and hygiene checks, to provide a greater
oversight and compliance.
• We are engaged with Public Health England and the Childhood
Obesity Plan.
We celebrate our local communities
• We are looking at opportunities to grow the Community Heroes
Campaign, including taking part in our own Volunteering Day,
collecting for two local foodbanks.
• Next year we intend to run our Community Heroes Week again in
order to encourage the fundraising activities of our pubs.
We reduce our environmental impact
• We are working with suppliers to reduce the plastic delivered
to our premises, for instance, replacing vegetables delivered in
plastic bags with cardboard crates.
• We are looking at using cardboard packaging on our multipacks of
bottles and cans.
• We have stopped handing plastic straws to customers unless
asked to (a 65% reduction in plastic straws), and we are
investigating environmentally friendly alternatives. We have
removed plastic stirrers completely (over 1 million a year).
• In 2017 Marston’s became only the third company in the
country to acquire a water self supply licence. We intend to
use this opportunity to drive greater efficiency and monitoring
of consumption.
• New and expanding electric car charging network.
For more information please see our Corporate Responsibility
Report at www.marstons.co.uk/responsibility.
Why this matters to us
We believe in the importance of reducing our environmental impact.
The environmental impact is monitored continually for our pubs,
breweries and logistics operations. We publish online our emissions
at www.marstons.co.uk/responsibility/environment.
What we have done this year
• The majority of our energy is used within our pubs for heating,
cooking, refrigeration and lighting. In recent years we have
reduced the energy demand in our pubs by investing in greater
efficiency: installation of LED lamps, more energy-efficient
catering equipment, voltage optimisation, heating controls and
cellar cooling.
• Marston’s takes its environmental responsibilities seriously and
continues to make good progress in implementing innovative
technological solutions to reduce the use of resources, minimise
waste and increase efficiency. Through educating and training
employees in food waste management, we have reduced the
amount sent to landfill. We have:
– internally engaged with our staff to help save energy and reduce
waste throughout the business
(see our promotional video Wise Up to Waste at:
www.marstons.co.uk/responsibility/environment);
– actively monitored and engaged with our pubs to ensure
compliance with waste and recycling regulations; and
– achieved a 85% rate of recycling this year, compared to 44%
ten years ago. We believe in thinking creatively, following the
principle of the circular economy; this year we turned the pub
garden at The Sun, Romsley,
into one entirely made from
recycled plastic, including
recycled plastic lumber
for walkways.
• We have spent £0.5 million on
a new boiler at Wolverhampton
in order to reduce gas
consumption and emissions.
A 500 tonne crane was
necessary to lift the 28
tonne boiler into place
across buildings.
CR targets this year and how
we have performed
1. Zero waste to landfill
Marston’s is the first in its sector of equivalent sized businesses
to be operating as zero waste to landfill. The equivalent of 17
Olympic swimming pools could be filled with all the glass we
recycled last year. Our breweries recycled 25,000 tonnes of grain
as animal feed.
2. Aim to manage CO2 emissions in relation to activity
Despite an increase in Group activity and a harsh winter our
energy usage has remained fairly flat. Expressed as a ratio
of revenue our emissions have decreased by 4% compared to
last year.
3. Increase food recycling
Food recycling is now taking place in 78% of sites with a food
offering, compared to 60% two years ago.
Strategic Report
Governance
Financial Statements
Additional Information
39
Governance
Chairman’s Introduction
Corporate Governance Report
Board of Directors
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report:
Annual Statement by Chairman
Remuneration Summary 2018
Annual Report on Remuneration
40
41
42
48
51
53
53
55
56
63
Directors’ Report
Statement of Directors’ Responsibilities 66
40
Marston’s PLC Annual Report and Accounts 2018
Chairman’s Introduction
William Rucker
Chairman
Good governance is fundamental to
achieving our aim of making Marston’s
‘The Place to Be’ for our people, our
customers, our shareholders and
other stakeholders.
Dear shareholder
As I begin my Chairmanship of Marston’s, I am pleased to present
our Governance Report to you. This review, together with the reports
that follow from each of the Nomination, Audit and Remuneration
Committees, provides an overview of our key governance activities
and practices during the period.
During my initial induction programme I have witnessed the unique
and special culture at Marston’s. Whether at our pubs, in our
breweries, out on the road or within our business support functions
based at our head office, Marston’s people are engaged, passionate
about our business and its heritage, and take pride in doing things
properly. These values are echoed throughout the organisation
and, in my short time with the Group, it is clear that the Board sets
the tone from the top. More details on my continuing induction
programme are set out on page 47 of this report.
My fellow Directors and I believe that good governance is
fundamental to achieving our aim of making Marston’s ‘The Place
to Be’ for our people, our customers, our shareholders and other
stakeholders. Our governance framework, set out on the following
page, continues to support the delivery of our strategic priorities and
helps to protect the interests of all our stakeholders. The 2016 UK
Corporate Governance Code (the ‘Code’) has applied throughout the
reporting period under review and I am pleased to confirm that the
Board considers it has fully complied with the principles of the Code.
In July 2018, the Financial Reporting Council published the 2018 UK
Corporate Governance Code (the ‘2018 Code’). The new 2018 Code
places emphasis on businesses building trust by forging strong
relationships with key stakeholders. I believe that Marston’s already
demonstrates this, as evidenced in our Strategic Report. The 2018
Code will apply to the Company for the 2019/20 reporting period
and, over the coming months, the Board and Committees will focus
on the new requirements to ensure we are ready to report on our
compliance in 2020.
Board effectiveness
I would like to take this opportunity to thank my predecessor,
Roger Devlin, who leaves a diverse, balanced Board with the right
mix of skills and experience to continue to grow and steer our
business in the right direction. Profiles of each Director, together
with information on their experience relevant to the Group, are set
out on pages 42 to 43. I would also like to thank Carolyn Bradley
who accepted the role of Interim Chairman during the period and
managed the recruitment process which led to my appointment.
Carolyn was also responsible for the most recent Board evaluation,
the findings of which were discussed in detail at the September
Board meeting; a summary of the agreed actions, plus progress
on the actions from the 2017 evaluation, are set out on page 46.
In line with the Code, next year’s evaluation will be conducted by an
external facilitator.
UK Corporate Governance Code
compliance statement
The version of the Corporate Governance Code applicable to
the current reporting period is the April 2016 UK Corporate
Governance Code. The Code is available on the Financial
Reporting Council’s website (www.frc.org.uk).
Marston’s PLC was compliant with all relevant provisions of the
Code during the reporting period under review.
Governance Report
We have used the key themes of the Code to structure this report:
1. Leadership
For our governance framework, management structure
and roles see page 41.
2. Effectiveness
For details of this year’s Board evaluation, training and
induction, and diversity details see page 46.
3. Shareholder relations
For details of our engagement with shareholders
see page 49.
4. Accountability
Details of our internal processes and our Audit Committee’s
report start on page 51.
5. Remuneration
Details of payments made to Directors are set out
on pages 53 to 62.
Board and Committee succession
As announced last year, following the retirement of Nick Backhouse
after the Annual General Meeting (‘AGM’) in January 2018, Matthew
Roberts took over as Chair of the Audit Committee. Robin Rowland
has indicated his intention to retire from the Board in August 2019
when he will have reached nine years’ service. I would like to
thank Robin on behalf of the Board for his valued and continuing
contribution to Marston’s during his tenure with the Group.
Board succession strategy is a key focus for the coming year and will
inform our decision on a successor for Robin. Further details on the
Board’s composition are given on page 41.
Remuneration and engagement with shareholders
Details of how we have applied our current Remuneration Policy
(approved by shareholders at the 2017 AGM) are provided in the
Directors’ Remuneration Report on pages 53 to 62.
Audit
The Audit Committee has continued to focus on the integrity of our
financial reporting and internal controls, together with the new
requirements of the Pubs Code Regulations. The Committee has
reviewed and approved the Company’s first annual compliance
report and further details are set out in the Audit Committee Report
on pages 51 to 52.
William Rucker
Chairman
21 November 2018
Strategic Report
Governance
Financial Statements
Additional Information
41
Corporate Governance Report
1. Leadership
Governance framework
The Board
Principal Committees
Audit, Nomination, Remuneration
Supporting
Committees
Risk & Compliance,
Business Continuity,
Data Security,
Corporate Responsibility,
Treasury Committee
Roles and
Responsibilities
Matters Reserved
for the Board
Committee terms of reference
Assurance
Internal controls,
Auditing,
Legal and regulatory
compliance
Making Marston’s
‘The Place to Be’
Implementation
of Strategy
Monitoring
performance
Management
Committees
PLC Exec,
Marston’s Beer Company
Divisional Board,
Disclosure Committee
Enterprise wide risk management
-
Ways of Working
This report describes our corporate governance structures,
procedures and the work of the Board, its Committees and
management, and how we have applied the main principles of the
UK Governance Code. Marston’s PLC was compliant with all relevant
provisions of the Code during the reporting period under review.
The Board considers its role is to provide guidance and effective
leadership by setting the strategic direction of the Group and
overseeing management’s implementation of the strategy. Its vision
is to set high standards of behaviour in the way we work, ensuring
we have good relationships with our shareholders and stakeholders.
Our Ways of Working support our ambitions and purpose, and
sustain our unique and special culture.
Board composition
Our Board currently comprises an independent Non-executive
Chairman, a Senior Independent Director, three further independent
Non-executive Directors and two Executive Directors, supported
by the Group Secretary. There is a clear division of responsibility
between the roles of the Chairman and the Chief Executive Officer
which are set out in writing and agreed by the Board.
We consider all of our Non-executive Directors (NEDs) to be
independent and the charts below portray the balance and tenure
of the Board as at the date of this report.
The Board is responsible for ensuring that it maintains the
necessary skills, experience and knowledge to discharge its
responsibility for the long-term success of the Group.
Balance between Executive
and Non-executive
Directors
Male/female
representation on
the Board
There are formal arrangements in place for sharing information,
encouraging strategic debate and facilitating informed and timely
decision-making. The Board is supported by the PLC Executive
Committee (PLC Exec) which consists of key members of Marston’s
senior management team.
Matters Reserved for the Board
Main matters relate 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, last reviewed
in September 2018, is available on the Company’s website.
The Management Committees meet on a regular basis to oversee
the implementation of strategy and monitor performance.
The Supporting Committees provide assurance to the Board on the
operation of internal controls, auditing and compliance with legal
and other regulatory obligations. This framework is supported and
enabled by the risk management process (see page 28) and our
Ways of Working (see page 15).
2
Male
Female
5
Chairman
Non-executive
Executive
Tenure of Chairman and
Non-executive Directors
2
1
2
0–3 years
3–6 years
6+ years
42
Marston’s PLC Annual Report and Accounts 2018
Board of Directors
Chairman
Executive Directors
Board
Committees
N*
Board
Committees
N
William Rucker
Ralph Findlay Chief Executive Offcer (CEO)
Past experience
Chairman of Crest
Nicholson Holdings plc
Chairman of
Quintain Estates
and Developments
Non-executive
Director of Rentokil
Initial plc
Independent
No
Appointed to the Board
May 1996
Initially appointed
Finance Director in 1996,
becoming CEO in 2001
Qualified Chartered
Accountant
and Treasurer
Other appointments
Senior Independent
Director and Chair of
Audit Committee at
Bovis Homes Group PLC
Independent
Yes
Appointed to the Board
October 2018
Qualified
Chartered Accountant
Other appointments
Chief Executive Officer
of Lazard UK
Chairman of
UK Dementia
Research Institute
Non-executive Directors
Andrew Andrea Chief Financial and
Corporate Development Offcer (CFO)
Independent
No
Appointed to the Board
March 2009
Joined the Company
in 2002
Qualified
Chartered Accountant
Other appointments
Non-executive Director
at Portmeirion
Group PLC
Past experience
Roles held at Guinness
Brewing Worldwide,
Bass Brewers Limited
and Dolland & Aitchison
Board
Committees
A* N
Board
Committees
N R*
Matthew Roberts
Catherine Glickman
Independent
Yes
Appointed to the Board
March 2017
Other appointments
Chief Financial Officer
of Intu Properties Plc
Past experience
Chief Financial
Officer of Gala Coral
Group Limited
Finance Director of
Debenhams plc
Member of the
Institute of Personnel
and Development
Past experience
Group HR Director
at Genus Plc
Group HR Director
at Tesco
Independent
Yes
Appointed to the Board
December 2014
Other appointments
Non-executive Director
of TheWorks.co.uk PLC
Non-executive Director
of Renishaw plc
Non-executive Director
of RPS PLC
Board
Committees
A N
R
Robin Rowland
Independent
Yes
Appointed to the Board
September 2010
Other appointments
Non-executive Director
of YO! Sushi Limited
Non-executive
Director at Caffè Nero
Group Limited
ALMR Board Director
Operating Partner at
TriSpan LLP
Past experience
Roles held at Whitbread
Inns, The Restaurant
Group Plc and Scottish
& Newcastle Plc
Strategic Report
Governance
Financial Statements
Additional Information
43
Senior Independent Director
Skills and experience of our Directors
that are complementary to our business
29%
Beer
43%
Pubs
29%
Rooms
71%
Food
86%
Retail
100%
Operational
57%
Leisure
57%
Finance
Board
Committees
A N
R
Carolyn Bradley
Independent
Yes
Appointed to the Board
October 2014
Other appointments
Trustee of Cancer
Research UK
Non-executive Director
of Majid Al Futtaim
Retail LLC
Non-executive Director
of SSP Group plc
Non-executive Director
of B&M European Value
Retail S.A.
Non-executive Director
at Legal and General
Group Plc (until
31 December 2018)
Past experience
UK Marketing Director
at Tesco
Trustee of the Drink
Aware Trust
Key
A
N
R
*
Audit Committee
Nomination Committee
Remuneration Committee
Denotes Committee Chairman
Group Secretary
Anne-Marie Brennan
Appointed as Secretary
October 2004
Joined the Company
in 1998
Qualified Chartered
Secretary and
Chartered Accountant
44
Marston’s PLC Annual Report and Accounts 2018
Corporate Governance Report continued
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. The key responsibilities for each Board member are set out below.
Chairman
William Rucker is responsible for:
Senior Independent Director
Carolyn Bradley is responsible for:
• The operation, leadership and governance of the Board.
• Acting as a ‘sounding board’ for the Chairman and an
• Safeguarding the effectiveness of the Board.
• Setting the agenda, style and tone of Board discussions with
a particular focus on strategic matters.
• Ensuring each Non-executive Director makes an effective
contribution to the Board.
• Ensuring, through the Group Secretary, that the Directors
receive accurate, timely and clear information.
intermediary for the other Directors.
• Acting as Chairman if the Chairman is conflicted.
• Leading the Non-executive Directors in their annual
assessment of the Chairman’s performance and
providing feedback.
• Acting as a conduit to the Board for the communication of
shareholder concerns that the normal channels have failed to
resolve, or for when such contact would be inappropriate.
Non-executive Directors
The roles of Catherine Glickman, Robin Rowland and Matthew
Roberts are to:
• Constructively challenge proposals on strategy.
• Contribute to the development of longer-term strategy.
• Meet with the Chairman, at least annually, without the
Executive Directors being present.
• Scrutinise management performance in the delivery of
strategic objectives.
• Monitor operational and financial performance.
Chief Executive Officer
Ralph Findlay is responsible for:
• The performance of the Group in line with the strategies
and objectives established by the Board and under powers
delegated by the Board.
• Ensuring the Board is supplied with information relevant to its
strategic role.
• Leading the PLC Exec and senior management in the
operational and financial management of the business.
• Providing clear and visible leadership in business conduct.
• The effective and ongoing communication with shareholders.
Chief Financial and Corporate
Development Officer
Andrew Andrea is responsible for:
• Working with the CEO to develop and implement the Group’s
strategic objectives.
• Managing the capital structure and projecting the long-term
financial picture of the Group.
• Delivering the financial performance and timely and accurate
financial reporting of the Group.
• Ensuring that the Group remains appropriately funded to
pursue its strategic objectives.
• Investor relations activities (and communications to investors)
with the CEO.
Group Secretary
Anne-Marie Brennan is responsible for:
• Framing the agenda for the Board and Committee meetings
and ensuring effective information channels within the Board
and its Committees, and between senior management and
Non-executive Directors.
• Advising on regulatory compliance and corporate governance.
• Facilitating individual induction programmes for Directors
and assisting with their development as required.
• Communications with retail shareholders and organisation of
the AGM.
• Chairing the Risk & Compliance Committee and Data
Security Committee.
Strategic Report
Governance
Financial Statements
Additional Information
45
Management Committees
The PLC Exec comprises the CEO, CFO, Managing Director (MD)
of Marston’s Beer Company (MBC), Group Estates Director, Group
People Director, Group Secretary and each of the Operations
Directors of Destination, Premium and Taverns. It meets monthly to
review operational performance, controls and people development;
consider property proposals, capital investment and new initiatives;
and to approve internal policies, governance and financial matters
within the authority limits delegated by the Board.
MBC has a separate management board owing to the breadth of
operations within the division. The MBC Board comprises the MD,
Director of Finance and Customer Services, Director of Brewing,
Director of Logistics, Director of Sales (Free Trade), Director of Sales
(National), Brands Marketing Director, Group People Director and
the Head of Technology Services. The division’s strategy is presented
to the PLC Board for approval each year and the extent of their
autonomy is determined by this strategy and the Group’s financial
authority limits. The MBC Board meets on a regular basis to review
the operational performance of each channel, capital investment
proposals, people development and strategic initiatives.
Board agenda and activities during the year
The Board’s agenda comprises a combination of regular business
matters and a forward agenda of other specific matters for
consideration. The agenda for each meeting is prepared by the Group
Secretary and agreed with the Chairman and CEO. This ensures
sufficient time is devoted to key business matters at the appropriate
time and the agenda remains flexible to accommodate the addition of
any specific items for discussion as required.
Standing items and regular reports cover the Group’s financial
position, risk management, regulatory compliance and consumer
insight. Updates on activities across each operating division and
performance against targets are reported to the Board in a monthly
summary of key business operations. Board papers are circulated
in advance of each meeting to ensure that Directors have sufficient
time to review them before the meeting. Items considered during the
period include:
Strategy
Annual strategy day
Customer Focus and
Business Operations
Leadership and
People Development
Governance
Shareholder
Focus
Warehousing capacity
and proposals
Key personnel
succession planning
Annual evaluation of the
effectiveness of Board
and Committees
Fair, balanced and
understandable review
of results and Annual
Report and Accounts
Dividend proposals
Annual plan
Retail systems update
Senior leadership
talent review
Matters Reserved
for the Board and
delegated authorities
Acquisition of
pubs package
Health, safety and food
hygiene review
Gender pay gap reporting Group risks and risk
management review
Going concern and
Viability Statement review
Financing proposals
Briefings and updates on
GDPR, CO2 and Brexit
Triennial
pension valuation
Assessment of
key business and
financial controls
AGM preparation
Review of sector activity
and company valuations
Electric car
charging proposals
Pension scheme accounts Pubs Code update
Shareholder feedback
and perceptions
Annual insurance renewal
Property disposals
Insight presentation on
World Beers category
Canning line investment
Modern
Slavery Statement
Corporate responsibility
and environmental update
Internal restructuring
of Group
subsidiary companies
Appointment of
Interim Chairman
46
Marston’s PLC Annual Report and Accounts 2018
Corporate Governance Report continued
Board and Committee meeting attendance
The Board met ten times during the year, allowing sufficient
opportunities to effectively challenge and monitor the Group’s
progress against its strategic objectives and within the governance
framework. The increased number of Board and Committee
meetings was due to the recruitment of the new Chairman.
The three principal Committees of the Board deal with financial and
risk matters, remuneration and succession planning. Each has its
own terms of reference which are regularly reviewed and updated
by the Committee before they are considered and approved by
the Board. Reports from each Committee can be found on pages
48, 51 and 53. The table below shows each Director’s attendance
throughout the year:
Board
Nomination Audit
Remuneration
10/10
–
–
3/3
1/1
1/1
–
–
Name
Andrew
Andrea
Nick
Backhouse1
Carolyn
Bradley2
10/10
Roger Devlin3
6/6
Ralph Findlay
10/10
Catherine
Glickman
10/10
Robin Rowland
10/10
7/7
2/2
7/7
7/7
7/7
2/2
4/4
–
–
–
3/3
–
–
4/4
4/4
Matthew
Roberts
10/10
6/7
3/3
–
1. Nick Backhouse stepped down from the Board with effect from 23 January 2018.
2. Carolyn Bradley joined the Audit Committee with effect from 23 January 2018.
3. Roger Devlin stepped down from the Board with effect from 31 May 2018.
4. William Rucker was appointed Chairman on 1 October 2018 and as part of his induction
attended the September Board meeting.
2018 strategy day – on the agenda
In addition to regular ongoing strategic discussions, the Board holds
an annual strategy day offsite. This enables the Board to focus in-
depth on the strategy, its implementation and progress. In 2018, all
of the PLC Exec attended the strategy day to contribute to the debate
around the continued development of strategy. The Non-executive
Directors were also able to engage with the PLC Exec members over
an informal dinner. The key themes of the strategy day comprised:
• General market trends, core activities and priorities, performance
and leverage.
• Five-year financial plan, lease accounting and
corporate opportunities.
• Pub estate expansion and opportunities for property development.
• The evolution of Destination pubs from value for money to value
for experience.
• The operational challenges and opportunities in achieving the beer
business vision.
Presentations were received from the Directors of Destination Pubs,
the beer business and Property. These informed the discussions and
considerations of the wider market trends and the five-year financial
plan. The Board and PLC Exec heard how Destination had simplified its
internal structures and menu formats to focus on customer innovation
and experience as well as increasing spend per head. The beer
business outlined its opportunities for further significant growth,
supported by a strong insights team that ensures the business remains
focused on the right areas. The reduction in the new-build programme
has allowed the Property team to review previous openings, including
land use, for opportunities to improve returns. As a result, more robust
selection criteria and greater use of data analytics, together with a
more inclusive decision-making process, have been adopted.
2. Effectiveness
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 Board has authority, under the Articles
of Association, 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 by the Chairman
as part of the annual evaluation process. During the year Carolyn
Bradley and Catherine Glickman consulted with the CEO and
Chairman before accepting their other external Board appointments.
Board evaluation
The annual Board evaluation is carried out in the final quarter of the
year and this year’s review was co-ordinated by the Interim Chairman
in preparation for the arrival of the new Chairman. The evaluation was
limited to a questionnaire completed by all Board members and it was
agreed that matters in progress and points raised would be taken up
by the new Chairman but that overall the Board were positive about its
own workings. Agenda items and the request for more site visits will
be incorporated into the forward agenda planning.
Agreed action points, together with an update on progress against
the action points from the 2017 evaluation, are shown below.
Board evaluation summary
Our 2017 recommendations
Update
Our 2018 recommendations
Senior management to attend Board meetings
on a regular basis.
Future presentations requested on employee
and customer feedback.
Board meetings to be held at our pubs and
brewery sites when practicable.
NEDs to meet 2-3 times per annum without
the Executive Directors; the CEO to be
invited occasionally.
Strategy day papers to adopt a more
rigorous review of evidence-based data to
support proposals.
The PLC Exec and other senior management
have attended Board meetings on a regular
basis including this year’s strategy day.
The Board has received an update on
employee feedback and the next consumer
insight presentation is scheduled
for December.
The NEDs has met several times during the
year without the Executive Directors, and the
CEO joined them on one occasion.
Presentations to strategy day were
supported by more external market data.
A review of the succession planning strategy.
Board papers to contain more insight data
where relevant.
More time to be spent by the Board in trade
and at beer business sites.
Board meetings to be held at various
Company premises.
Consideration of the investor register;
engagement and objectives of stakeholders.
Strategic Report
Governance
Financial Statements
Additional Information
47
Training and development
Since joining the Board, the new Chairman has met with each
Director to discuss their views on the Board’s effectiveness as well
as their own contribution. To ensure that each Director continues
to update their knowledge and familiarity with the business, a more
formal site visit programme has been introduced. Aimed at providing
the Non-executive Directors with a better understanding of business
operations, it provides focus on specific pub operations, the beer
business and Group Services. In addition, the NEDs attend external
technical seminars offered by professional advisers and the Group
Secretary continues to ensure appropriate briefings are provided
to the Board on compliance and regulatory matters of particular
significance to the Group. During the year the Board received
briefings on the implications of, preparations for, and ongoing
compliance with GDPR. The Group Secretary advises the Board on
all governance matters and is available to all Directors in an advisory
capacity. If necessary, Directors may seek independent professional
advice at the Group’s expense in the performance of their duties.
The Group’s induction programme is tailored to each individual
Director joining the Board and comprises a combination of meetings,
briefings and site visits. The Group Secretary met with the new
Chairman to discuss the initial areas of focus and priority before
finalising his induction programme. As part of this introduction,
William Rucker has met with the CEO, CFO and Group Secretary
to discuss the Group’s strategy, organisational structures and
governance framework as well as financing structures and the
five-year financial plan. Further meetings have taken place with
the Company’s brokers, Financial PR advisers and external Audit
partner. Online training has been completed for particular areas of
compliance (Data Protection and Competition Law) and one-to-one
meetings have been held with the Corporate Risk Director, the Group
Head of Health & Safety and Group People Director. William has also
spent time familiarising himself with the business by spending time
out in trade visiting pubs with each Pub Operations Director and the
Group Estates Director; in addition he has visited one brewery with
a day arranged to visit a second brewery and a depot with the MD of
MBC, during which time he has also learned about the growth plans
and challenges of the beer business. The Chairman has already met
with a number of major shareholders to listen to their views and
further meetings will be scheduled in the new year.
Our approach to diversity
The Board, through the CEO, takes overall responsibility for diversity
and equality across the Group. Catering for the preferences of
our many different customers is fundamental to our business and
therefore it is essential that we consider diversity in our decision
making processes. We recognise the importance that equality
legislation has to play in promoting equality and eliminating unlawful
discrimination and we seek to exceed our legal obligations.
In recent years female representation in senior roles in pub
management, Brewing, logistics and Group Services has increased
and we are committed to ensuring that this will continue. Our view
has been that the best way to increase senior female representation
is to ensure equality of opportunity at all levels, and that more
appointments of women in junior roles will result in well qualified,
experienced female talent coming through the business to take
senior roles in the future. Similarly, where we recruit new candidates
into our business, whilst we will always appoint the most qualified
for the role, we have used this as an opportunity to bring females into
senior roles.
This year, having signed up to the Diversity in Hospitality, Travel
and Leisure Charter, we have further strengthened our approach
to diversity by extending our work to include a focus on inclusion.
We understand that simply having diversity in our workforce is not
enough; we must create an inclusive environment where all people
can contribute their best work. Our focus has been on including and
engaging with the uniqueness and talents, beliefs, backgrounds,
capabilities and ways of working of individuals. We are continually
developing our culture in which people are valued and respected.
By embracing employee inclusion and diversity, we know we can
draw on the best talent, contribution and commitment from all
backgrounds, as does all of our work within our People Strategy.
Both our equal opportunity and our diversity and inclusion policy
can be found on our website. These polices are also reflective of our
Ways of Working which are shared throughout Marston’s.
Gender diversity
Number of employees at 29 September 2018:
Online training has been completed for particular
areas of compliance
7
2
5
66
19
14,149
7,361
47
6,788
Directors
Senior
Managers
Total
employees
Male
Female
Re-election of Directors
With the exception of William Rucker (who will offer himself for
election by shareholders at his first AGM), all Directors will offer
themselves for re-election at the AGM. Details of each Director
serving on the Board at the date of this report are set out on
pages 42 to 43 and shall be set out to shareholders in the papers
accompanying the re-election resolutions for the AGM. 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.
48
Marston’s PLC Annual Report and Accounts 2018
Nomination Committee Report
William Rucker
Chairman of the Nomination Committee
Dear shareholder
In my new role as Chairman of the Nomination Committee I am
responsible for writing this report on the activities of the Committee,
but all credit should go to my predecessors: Roger Devlin who left
the Board in May 2018 and Carolyn Bradley, our Senior Independent
Director, who stepped up to act as Interim Chairman until the end
of the financial year. I look forward to developing the role of the
Committee in the coming year to provide a succession planning
strategy linked to addressing the future needs and challenges of the
business. Much of what I report here is on behalf of Carolyn Bradley
who has now resumed her previous role.
Our approach to Board diversity
We continue to take note of the guidance provided and we require
search agencies that we engage with to have signed up to their
industry’s Voluntary Code of Conduct addressing gender diversity.
We will continue to make appointments on the basis of merit and, as
such, have not set a specific target for numbers of female Directors.
However, we do recognise the benefits that greater diversity can
bring and take into account such factors when considering any
particular appointment. Currently, two of Marston’s seven Board
Directors are female. Two members of our PLC Exec are female and
28% of our senior management population are female.
Re-election and evaluation
The Committee considered the time required from each Non-
executive Director, their effectiveness and the experience brought to
the Board. I believe that the tenure of each Board member provides
the right balance, together with their broad range of skills and
relevant experience. Noting that Robin Rowland will have reached
nine years on the Board by August 2019, he has indicated his
intention to step down at that time.
In accordance with our terms of reference, the Committee has also
considered its own effectiveness during the year. This allows an
opportunity for us to formally review the way we work and whether
the strategy for discharging our duties remains appropriate.
Reflecting on the recruitment process during the year and the duties
set out in the terms of reference, the Committee is satisfied that it
remains effective in discharging those duties.
Having discussed their personal effectiveness and commitment
with each Director in individual meetings, I have concluded that the
performance of each Board member continues to be effective and I
therefore recommend to you each Director standing for re-election
at the 2019 AGM.
William Rucker
Chairman of the Nomination Committee
Membership
William Rucker (Chairman)
Carolyn Bradley
Ralph Findlay
Catherine Glickman
Robin Rowland
Matthew Roberts
Our responsibilities
• To 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.
Attendees
Other Executive Directors, senior management and external
advisers may be invited to attend meetings.
Terms of reference
Full terms of reference of the Committee can be found in the
Investors section of the Company’s website.
Key activities during the reporting year
• Recruitment of new Chairman.
• Ensuring that succession planning is aligned with the ongoing
leadership requirements of the business.
• Considering the composition of Board and Committees.
• Reviewing the contribution and tenure of each Director before
recommending for re-election by shareholders.
• Considering future succession planning for the Board.
Developing the Non-executive team
Audit Committee Chairman and membership
At the conclusion of the 2018 AGM in January, Matthew Roberts took
over as Chairman of the Audit Committee from Nick Backhouse
when he retired from the Board. At the same time, Carolyn Bradley
joined the Committee. Matthew has provided robust scrutiny and
challenge using his financial experience as a Chartered Accountant
and current CFO of Intu Properties Plc.
Executive management
Having restructured the pubs business last year, the Committee
has continued to monitor the level of visibility and accountability for
performance by non-Board members. Each of the Pub Operations
Directors has attended a number of Board meetings throughout
the year at which they have provided an update on performance
and presented their plans for FY2019 as well as taking part in
wider discussions. On this basis the Committee is satisfied that
the Board continues to effectively discharge its duties with two
Executive Directors.
Strategic Report
Governance
Financial Statements
Additional Information
49
Recruitment of Chairman
Before commencing the search for a new Chairman, the
Committee met to consider the desired skills, personal attributes
and experience required for the role in the light of the future
needs and challenges of the business. In addition we discussed
the recruitment process and identified the criteria for selecting a
search agency.
A panel of four, comprising myself, Ralph Findlay, Matthew
Roberts and Anne-Marie Brennan were appointed to manage the
selection process whilst ensuring that all Directors were involved
at the various stages. The panel met with four search agencies
to assess the firm that best demonstrated their understanding
of the business and the critical factors in identifying the next
Chairman. Following these meetings, the panel recommended
and the Board appointed Russell Reynolds to act on behalf of the
Company in its search for a new Chairman.
A long list of potentially suitable candidates was presented
for the Committee’s consideration from which the first round
candidates were identified for interview by the panel. The panel
were unanimous in their selection of the shortlist based on the
relevance of each individual’s skills, experience and attributes
to the criteria already identified. Each of these shortlisted
candidates were then invited to spend time in the business with
the CEO and CFO to gain insight into the business and to enable
the candidate to assess what would be required of them over time
in the role as Chairman. I then met with each of the shortlisted
candidates to discuss their initial feedback and thoughts on the
role and the business. The Board took references, and soundings
from the Company’s advisers, before concluding that the City and
financial experience of William Rucker, together with his wider
skills (emotional intelligence, strong stakeholder management
skills and ability to help businesses grow) and previous Chairman
roles, made him the ideal candidate.
Carolyn Bradley
Senior Independent Director
3. Shareholder relations
Engagement with our shareholders is essential to ensure that
Marston’s attracts and retains long-term investors who support
our strategy. Meetings and communications focus on providing
updates on progress against strategy, clarifying understanding
of the business and an opportunity to listen to feedback.
Following meetings with the CEO and CFO to present the half
year and year-end results, the Board receives formal feedback
from analysts and institutional shareholders. The views and any
concerns are considered by the Board and, in particular, whether
any action or response is appropriate. The Chairman and Senior
Independent Director make themselves available for meetings with
the Company’s major institutional investors each year but none were
taken up this year. The Chairman and Senior Independent Director
will be inviting the governance teams of the Company’s top investors
to a meeting to discuss governance-related strategic matters.
The investor relations programme is managed by the Executive
Directors and focuses on engagement with institutional
shareholders, fund managers and analysts. Details of our Analysts
Day in June are set out on the following page. The CEO and CFO
meet with private client fund managers on a regular basis and at
several locations to discuss strategy, performance, management
and governance. The key topics discussed with investors this
year covered:
• Current market conditions
• Consumer trends
• The share price performance
• The expansion into lodges
• The impact of the World Cup on trading
• The debt position
On behalf of the Board, the Group Secretary oversees
communication with private individual shareholders. The key source
of communication is through the corporate section of the Marston’s
website which provides general information on the business as well
as details of our responsible approach to business. The shareholder
section provides share price information, financial calendars,
results presentations and regulatory announcements. The Annual
Report and Accounts is the main tool for providing a comprehensive
review of the business, details of our governance framework in
action and annual results. All shareholders have the opportunity to
communicate directly with the Board of Directors at the Company’s
AGM. Prior to the formal business of that meeting, the CEO
presents a summary of trading performance and developments
in the business over the financial period after which shareholders
are invited to ask questions. All Directors attend the AGM and the
Chairman of the Board and each Committee are available to answer
questions during the meeting. The senior management team are
also in attendance and meet with shareholders before and after the
meeting to assist with questions and understanding.
To allow all shareholders whether present in person, by proxy or
unable to attend, to vote on all resolutions in proportion to their
shareholding, the voting at the AGM is conducted by way of a poll.
The Company releases the results of voting including proxy votes
on each resolution, on its website on the next business day and
announces them through a regulatory news service. Details of the
2019 AGM are set out in the separate Notice of Meeting.
50
Marston’s PLC Annual Report and Accounts 2018
Corporate Governance Report continued
Analyst Day: June 2018
Leisure-sector analysts were invited to visit various pubs in Kent,
including The Spring River at Ebbsfleet, our new 104 bed lodge
and pub site, to hear presentations from the Operations Director of
Destination Pubs and the Group Estates Director. The Destination
presentation set out our plans for increasing margin by delivering
‘value for experience’ and reducing complexity to drive efficiency and
innovation and increase spend per head. The Group Estates Director
explained the growth opportunities in hotel development and the
evolution of our build design. Copies of both presentations are
available on the Corporate section of the Marston’s website.
Shareholder engagement summary:
key communication channels
4. Accountability
Fair, balanced and understandable assessment
It is a requirement of the Code that the Board should consider
whether the Annual Report and Accounts, taken as a whole, is
fair, balanced and understandable. To support this assessment,
comprehensive reviews are undertaken at regular intervals
throughout the year-end process by senior management.
The preparation of the Annual Report and Accounts is co-ordinated
by the Company Secretariat team with significant input from the
Finance team and support from other contributing colleagues
across the Group. Drafts of each section of the Annual Report and
Accounts are submitted to Board meetings prior to publication,
allowing sufficient time to review and provide an opportunity for
challenge and discussion, ahead of approving the final documents.
In addition, the external Auditors review the consistency between
the narrative reporting and financial disclosures.
Private client
fund managers
Regular meetings
with CEO and CFO
Institutional
shareholders
and analysts
Rolling
investor relations
programme
Bi-annual written
feedback received
Private shareholders
Compliance
AGM with full
Board and
senior management
present
Annual Report
and Accounts
Marston’s Risk & Compliance Committee, a supporting committee
within our governance framework, monitors all areas of legal and
regulatory compliance across the Group. The Committee meets
quarterly, and includes representatives from across the business,
in order to consider the impact of any emerging areas of legislation,
the effectiveness of our internal systems and challenges to current
compliance processes.
Chairman and SID
available to meet with
largest shareholders
Website
Risks and internal controls
The Group’s approach to risk management, systems and internal
controls is explained as part of the Strategic Report on pages 28
to 34.
Analysis of shareholder
register by investor type
Private client fund managers 29.70%
Private investors
Institutional investors
13.25%
57.05%
Strategic Report
Governance
Financial Statements
Additional Information
51
Audit Committee Report
Matthew Roberts
Chairman of the Audit Committee
Dear shareholder
As Chairman of the Audit Committee, I am pleased to present the
Audit Committee’s Report for the period ended 29 September 2018.
Following the retirement of Nick Backhouse after the 2018 AGM, I
became Chairman and Carolyn Bradley joined the Committee, which
continues to comprise three independent Non-executive Directors.
Each Committee member brings their own financial and business
experience to effectively assess the external and internal audits of
the Group and the internal control and risk management systems.
The Board is satisfied that I meet the requirements of the Code as
having recent and relevant financial experience.
Throughout the year we have continued our focus on the integrity of
financial reporting and internal controls, challenging and debating
the reports presented to us. In addition, we continue to monitor
changes in regulation and the potential impact on the Group’s
financial reporting and systems. The Committee reviews the
assurance process and risk management framework on a regular
basis to ensure that it remains appropriate and provides a robust
assessment of the principal risks to the business. This review
and assessment is further supported by the Internal Audit team.
In conjunction with the Corporate Risk Director, the Committee has
worked closely with the Internal Audit team in developing the internal
audit strategy and the detailed audit plan for the next 12 months.
The strategy and plan provide independent and objective assurance
using a risk-based methodology targeted to help the business
achieve its strategic objectives.
In accordance with the Pubs Code Regulations, as Chairman of
the Audit Committee, I approved the annual compliance report
submitted to the Adjudicator in July 2018, having satisfied myself as
to its accuracy. Ahead of its submission, the Audit Committee had
the opportunity to review the report and receive an update on Pubs
Code compliance matters.
Having reviewed the external audit process, the Committee
believes that PwC continue to provide an effective audit service and
recommends their re-appointment to shareholders. As explained
last year, the Company conducted a full tender of the external audit
and it is our intention to appoint KPMG at the conclusion of the
FY2018/19 audit.
Matthew Roberts
Chairman of the Audit Committee
Membership
Matthew Roberts (Chairman)
Nick Backhouse
(until 23 January 2018)
Carolyn Bradley
(from 23 January 2018)
Robin Rowland
Our responsibilities
• Reviewing the integrity of the Group’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 Group’s systems for detecting fraud, preventing
bribery and allowing employees to raise concerns in a safe and
confidential manner.
• Overseeing the relationship with the external Auditors,
specifically reviewing and approving their fees and the terms
of engagement.
• Reviewing and monitoring the external Auditors’ objectivity and
independence and the effectiveness of the audit process.
Attendees
The Corporate Risk Director and external Auditors attend
each meeting.
Other individuals, such as the CEO and CFO and members of
the Internal Audit team, are usually invited to attend all or part
of the Committee’s meetings.
Terms of reference
Full terms of reference of the Committee can be found in the
Investors section of the Company’s website: www.marstons.co.uk.
Key activities during the reporting year
• Reviewing the main corporate risks and the outcomes from
testing the systems and processes for managing and mitigating
those risks. The Committee has again satisfied itself that the
Risk Management Framework provides sufficient assurances.
• Reviewing the Viability Statement and assessing the prospects
of the Group over a five-year time horizon. The Committee
continues to consider the Group’s existing five-year financial
plan to be the most appropriate time period.
• Considering the Annual Report and Accounts and Interim
Results prior to review by the Board.
• Review and approval of the Internal Audit strategy, plan and
restructure of the Internal Audit team.
• Review of the key changes, timing and impact of the new lease
accounting standard (effective FY2020).
• Review and approval of the Statutory Pubs Code
compliance report.
52
Marston’s PLC Annual Report and Accounts 2018
Audit Committee Report continued
Auditors
The external Auditors attend each meeting, which allows the
Committee the opportunity to review and discuss the integrity of the
Company’s financial reports. The external Auditors also present
their audit strategy, findings and conclusions in respect of the
Annual Report and Accounts and Interim Results. In addition, 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 assessing the work of the external Auditors, the Committee
continues to be satisfied with the scope of their work and their
effectiveness, and recommends 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. In support of this view, the Committee notes the
annual review of independence that the external Auditors conduct
where they identify all services provided to the Group and assess
whether the content and scale of such work is a threat to their
independence. Further, the Committee accepts that whilst some
non-audit work is most appropriately undertaken by the external
Auditors, it must be permissible within the Committee’s terms
of reference and policy on non-audit services. Where such work
is expected to be in excess of £50,000, 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. In 2017/18 the Group engaged
PwC to facilitate a technical workshop in relation to our in-house
telecoms business. The Group has used other accounting firms for
some non-audit work comprising corporate and employment tax
advice and guidance on the new lease accounting requirements.
In each case, consideration is given to the need for value for money,
experience and objectivity required in the particular circumstances.
As disclosed last year, and following a five-year tenure, the PwC
audit partner was changed for the 2017/18 financial period until
handover to KPMG after the 2018/19 audit. This maintains a
freshness to perspective without losing the institutional knowledge.
Fees paid to the external Auditors are disclosed in Note 3 of the
Financial Statements on page 85.
Committee meetings
The Corporate Risk Director attends each Committee meeting to
provide ongoing assurance and regular updates on the Group’s
main risks and the scope and findings of internal audit. A number of
standing agenda items were reviewed by the Committee during the
period including preparations for GDPR, the Whistleblowing Policy
and matters arising from internal audits, which focused on the key
business risks and compliance and legal developments.
Statutory Pubs Code
Marston’s pub operations business is committed to complying with
the Pubs Code Regulations 2016 (the Code). On the inception of the
Code, Marston’s reviewed all of its processes and implemented
changes, where necessary, to comply with the provisions of the Code.
Marston’s also appointed a Code Compliance Officer as required
by the legislation. Following internal approval by the Chair of the
Audit Committee the Code Compliance Officer submitted an annual
compliance report to the Pubs Code Adjudicator (PCA), for the
reporting period from 21 July 2016 to 31 March 2018.
During the reporting period, Marston’s was not subject to any
investigations, enforcements or representations of unfair business
practices by the PCA. All advice notes issued by the PCA were noted and
the stakeholders affected by the notes were briefed on their contents.
Sixteen referrals were made to the PCA. Three awards were made
against Marston’s, for which remedial action was implemented in
all cases.
During the reporting period, all of Marston’s business development
managers received updates and training on the Code.
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 the items
classified as non-underlying and, in particular, the impairment
of properties, the reorganisation and integration costs, and the
ongoing management of the pub portfolio that was disposed of to
New River Retail. The Committee noted the consistency of treatment
to prior years and the Group’s accounting policies and is satisfied
that the items are classified appropriately to maintain comparability
of performance.
Valuation of property assets. Noting the outcome of the external
valuation of the Group’s freehold and leasehold properties in
January 2018, the Committee considered the assumptions,
disclosure and any subsequent factors that might affect the
valuation. The Committee noted that property based transactions
in the market place, together with the Company’s own property
disposals, continue to support the multiples applied to the valuation
and therefore they are satisfied that there are no market indicators
or other events that would indicate a need for any change to this
valuation. The Committee is also satisfied that the methodology and
assumptions applied to valuing the estate remain appropriate and in
line with the Company’s revaluation policy.
Strategic Report
Governance
Financial Statements
Additional Information
53
Directors’ Remuneration Report
Annual Statement
Catherine Glickman
Chairman of the Remuneration Committee
Dear shareholder
I am pleased to present our report for the period ended
29 September 2018. In a year of tough competition, together with the
extremes of both very cold and hot weather and a World Cup, I am
pleased to report Marston’s saw growth in all trading segments,
with particularly strong performances in our Taverns and Brewing
businesses. We saw strong growth in revenue, up 14.9%; the Beer
Company saw positive uplifts from the CWBB acquisition and new
distribution contracts; in pubs, we saw an increase in like-for-like
sales and a positive contribution from new sites. Group operating
margins were 1.6% behind last year, principally reflecting the dilution
impact from the CWBB acquisition which operates at a lower margin
than our existing beer business. The year-end underlying profit
before tax of £104.0 million represents an increase of 3.9% on 2017’s
outturn. A significant proportion of the short-term bonus is based
on underlying profit before tax and the impact on the Executive
Directors’ annual bonus outturn can be read in the Summary and
detailed Annual Report on Remuneration on pages 55 to 62, together
with the outturn on the other elements of reward.
The Committee recognises and takes seriously its responsibility
to provide an appropriate balance between fixed and variable pay,
setting suitably stretching performance conditions that act as an
appropriate incentive, without encouraging excessive risk taking.
Our approach to remuneration is to align it with shareholder
interests and support the creation of sustainable shareholder value.
Our current Directors’ Remuneration Policy became effective from
the close of the 2017 AGM and the following pages describe how
the policy has been applied in 2017/18. As was the case last year,
rather than reproduce the full policy in this report, we have provided
extracts alongside its implementation during the year. The full
policy can be found on pages 49 to 56 of the 2016 Annual Report
and Accounts and is also available in the Governance section of our
website (www.marstons.co.uk/investors/company-profile).
The 2017 Annual Report on Remuneration received high levels of
support, with over 95% of votes cast in favour of the resolution.
We will continue to engage with our shareholders as we move
to review our policy during 2019 and hope we can rely on your
continuing support. If you would like to contact me directly to
discuss any aspect of our policy or this report then please email me
at remunerationchair@marstons.co.uk. I will also be available to
answer your questions at our AGM on 23 January 2019.
Review of the year
Performance
Both William and Ralph, within their respective Chairman’s and Chief
Executive’s Statements, have reported on the key achievements
of our business for the year, namely record underlying revenue of
£1,140.4 million and growth of 3.9% in underlying profit before tax
to £104.0 million as mentioned above. These results have been
achieved against a background of Brexit and increased uncertainty,
unseasonal weather extremes and continuing cost pressures.
Performance outcomes
Annual bonus 2017/18
The 3.9% increase in underlying Group profit before tax versus
2017 is above the threshold performance level for that element of
the bonus. Underlying return on capital for the year was 10.3% and
below the base of 10.5% for that element of the bonus. Based on
these results, a bonus of 17.7% of salary is payable to Executive
Directors; further information is given on page 57.
LTIP 2014/15 Award vesting
As reported in the 2017 Remuneration Report, the performance
targets for the 2014/15 LTIP award were not met and the award
lapsed in June 2018.
LTIP 2015/16
The performance period for the 2015/16 LTIP award ended on
29 September 2018. The threshold performance levels were not
achieved and the awards will lapse.
Review of performance metrics for variable pay
In 2017 we set out our intention to review the current performance
metrics for both the annual and long-term elements of variable pay.
Annual bonus plan
During the review the Committee reviewed the efficacy of the
annual bonus scheme for the PLC Executive Committee (PLC
Exec) members (but not for the Executive Directors) and changes
were made effective 2018/19 to reward a combination of Group and
divisional profit performance, and to introduce customer or division
specific metrics for the first time. Group targets will continue for
those roles that operate at Group level. The new design has been
well received by the PLC Exec members, who feel they can have
direct influence over their bonus outturn. The Committee will
obtain feedback during the year on how effectively the scheme is
driving performance and will consider whether it wishes to align the
Executive Directors with this structure when it reviews the policy
in 2019.
Long Term Incentive Plan (LTIP)
When the LTIP was last reviewed, the Committee wanted to ensure
the performance measures were consistent with Marston’s strategic
and financial objectives: delivery of sustainable growth, increasing
return on capital and reducing leverage, whilst delivering market
competitive returns to shareholders. The Committee believes the
current structure has achieved those objectives. To ensure continued
alignment with the Group strategy, the Committee has agreed it will
review the design and targets against the strategy when it carries
out the next review of the Directors’ Remuneration Policy in 2019
and, as we already do, consult shareholders on changes.
54
Marston’s PLC Annual Report and Accounts 2018
Directors’ Remuneration Report continued
Other key activities of the Committee during the year
• Consideration of pay review proposals for the Executive Directors,
as outlined below.
Membership
Catherine Glickman (Chairman)
• Consideration of the appropriate fee for the Interim Chairman.
• 2018 bonus proposals and 2014/15 and 2015/16 LTIP award
Carolyn Bradley
Robin Rowland
vesting, as outlined above.
• Approval of SAYE and LTIP grants.
• Gender pay gap reporting.
• Review of Executive Directors and senior management
shareholdings in the Company, in the context of
shareholding guidelines.
• Consideration of how the Group currently engages with
its workforce.
Looking forward to 2018/19
Pay award effective 1 October 2018
The Committee reviewed the salaries paid to Executive Directors
and an increase in base salaries of 2% was approved, which is in line
with the average salary increases across the Group.
The new Chairman’s fee (set at £200,000 per annum) was agreed as
part of the recruitment process. The next review will be in line with
the usual timetable as set out in the Directors’ Remuneration Policy.
The Non-executive Directors’ fees, last reviewed in 2015/16, have
been reviewed by the Board and new rates will apply for 2018/19.
Further details are set out on page 59.
Incentive remuneration for 2018/19
No changes are proposed to the Executive Directors’ annual bonus
plan and LTIP for 2018/19.
Committee focus for 2018/19
The Committee will review the current Directors’ Remuneration
Policy and determine any appropriate changes for the next binding
policy vote, due at the 2020 AGM. Marston’s and the Committee
remain committed to a fair and responsible approach to executive
pay, which is aligned with the interests of shareholders and other
stakeholders in our business. This review of policy will take into
account the provisions of the new Corporate Governance Code which
will apply to the Company with effect from the 2019/20 financial
period. We will be reporting in full on how we intend to apply the
Code in our 2019 Annual Report and Accounts.
Catherine Glickman
Chairman of the Remuneration Committee
Our responsibilities
The Committee is responsible for setting the framework and
policy for Executive Directors’ remuneration and, within that
framework, for determining the remuneration packages for
the Executive Directors and the Chairman. The Committee
also approves the design and pay-outs of annual and long-
term incentives awards. In addition, we take note of any major
changes in employee benefit structures applicable to the wider
workforce and review pension provision and remuneration
trends across the Group.
Attendees
The Committee receives advice from a number of different
sources. This helps to inform decision making and ensures the
Committee is aware of pay and conditions in the Group as a
whole, and conditions in the wider market.
Ralph Findlay, CEO, has attended each meeting during the
year to provide advice in respect of the remuneration of the
other Executive Directors. Ralph is not in attendance for any
discussions regarding his own remuneration.
The Group Secretary, Anne-Marie Brennan, and the Group
People Director, Catherine Taylor, have also attended each
meeting during the year and provide advice to the Committee.
Deloitte LLP (Deloitte) were appointed by the Committee in 2003
and are retained as an independent adviser to the Committee,
attending meetings as and when required. 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 received fees
amounting to £16,600 during the year in respect of advice given
to the Committee, and also provided advice during the year in
relation to VAT and the operation of the Company’s share plans.
Terms of reference
The Committee’s terms of reference are reviewed annually and
can be found in the Governance section of the Company website
(www.marstons.co.uk/investors/company-profile).
Strategic Report
Governance
Financial Statements
Additional Information
55
Remuneration Summary 2018
Principles
• Ensure remuneration arrangements support sustainable growth and strategic objectives of the Group
• Substantial part of the incentive package for Executive Directors is delivered in the Company’s shares to ensure interests are aligned
with shareholders
• Ensure Director and senior management salaries are set with reference to the wider workforce
Component
Time horizon
Key features
Implementation in 2017/18
2018 2019 2020 2021 2022 2023
Basic salary
and core
benefits
Annual
bonus
Deferred
element
of bonus
Long Term
Incentive
Plan (LTIP)
Share
ownership
policy
Outcomes
Reflects scope of the role; to recruit and
retain calibre required; and reviewed in
context of wider Group
2% increase in salary in 2018 in line with the
average salary increases across the Group
Benefits package unchanged
Maximum 100% of salary
Committee discretion
Clawback provision for up to two years
Payments in excess of 40% usually
deferred into shares
17.7% bonus awarded reflecting performance
against targets as described on page 57
Bonus awarded less than 40%, no deferral
into shares
Maximum annual award is 150%
Normal maximum is 125%
Malus and clawback provisions apply
200% of salary for CEO
100% of salary for other Executive
Directors
2015/16 LTIP will lapse on the third anniversary
of grant
Awards of 125% of salary granted during
the period
329% for Ralph Findlay, CEO
123% for Andrew Andrea, CFO
Fixed
Basic salary and core benefits
Variable
Annual bonus
Long-term incentives1
Andrew Andrea
Ralph Findlay
2018
2017
2018
2017
£459,085
£450,303
£708,523
£694,903
£65,536
£72,600
£97,852
£108,400
£0
£0
£1,290
£0
Total
£524,621
£522,903
£807,665
£803,303
1. The long-term incentive figures for 2018, for Ralph Findlay, relates to the grant of SAYE options.
How we performed against our objectives
Annual bonus for 2017/18
Performance metric
Link to strategy
Weighting
Threshold
Target
Maximum
Actual
% of salary
Underlying Group
profit before taxation
Return on capital
These measures reflect
the Group’s business
priorities that underpin
our strategy
Bonus
67%
£100.1m
£107.5m
£114.9m
£104.0m
17.7%
33%
10.5%
10.9%
11.3%
10.3%
0.0%
17.7%
LTIP vesting in 2017/18 (2015/16 LTIP Award)
Performance
metric
CROCCE
Free cash flow
Relative TSR
Link to strategy
Weighting
Base
Threshold
On-target
50% vesting
Maximum
100% vesting
Actual
% LTIP
vesting
These reflect
the sum total of
our strategy and
ultimately determine
the success of the
Group
40%
10.5% Base+0.25%
Base+0.5%
Base+1.0%
10.3%
40%
£300m
Base+7.5% Base+15.0%
Base+30.0%
£315.7m
20%
–
Median
– Upper quintile Below median
0%
0%
0%
56
Marston’s PLC Annual Report and Accounts 2018
Annual Report on Remuneration
This part of the Directors’ Remuneration Report sets out how we have implemented our remuneration policy during the period ended
29 September 2018. The policy was approved by shareholders at the 2017 AGM and has applied since the close of that meeting.
Executive Directors
Single total figure of remuneration
Period ended 29 September 2018
Andrew Andrea
Ralph Findlay
Salary
£
370,260
552,840
Benefits
£
14,773
17,473
Bonus
£
65,536
97,852
1. The long-term incentives figure for the period ended 29 September 2018, for Ralph Findlay, relates to the grant of SAYE options.
Period ended 30 September 2017
Andrew Andrea
Ralph Findlay
Individual elements of remuneration
Fixed elements
Base Salary
Directors’ Remuneration Policy
Salary
£
363,000
542,000
Benefits
£
14,703
17,403
Bonus
£
72,600
108,400
Long-term
incentives1
£
0
1,290
Long-term
incentives
restated
£
0
0
Pension
£
74,052
138,210
Total
£
524,621
807.665
Pension
£
72,600
135,500
Total
£
522,903
803,303
Base salary is a core element of fixed remuneration, reflecting the size and scope of the role. Base salary is usually reviewed annually by
the Committee and fixed for the financial year. Salary increases are reviewed in the context of salary increases across the wider Group.
For 2018/19, the basic salary increase for Executive Directors is 2% which is in line with the average salary increases across the Group.
The base salaries for the individual Executive Directors are as set out below:
Andrew Andrea
Ralph Findlay
Benefits
Directors’ Remuneration Policy
2018/19
base salary
£377,670
£563,900
2017/18
base salary
£370,260
£552,840
Increase
2%
2%
Executive Directors receive benefits in line with market practice which are set at a level which the Committee considers appropriate against
the market.
The single figure table above shows the taxable value of benefits received by the Executive Directors in the period which comprises car
allowance, private medical insurance and life assurance.
Retirement benefits
Directors’ Remuneration Policy
Executive Directors are eligible to participate in the defined contribution pension scheme and, if a member before closure of the scheme,
the defined benefit scheme. In appropriate circumstances, Executive Directors may take a salary supplement instead of contributions into
a pension plan.
The pension figures shown in the single figure table above represent the cash value of pension contributions received by the Executive
Directors. This includes any salary supplement in lieu of a Company pension contribution.
Strategic Report
Governance
Financial Statements
Additional Information
57
Pension entitlements:
Executive Directors (excluding the Chief Executive Officer) may receive contributions of up to 20% of base salary under the defined contribution
pension scheme, an equivalent taxable cash allowance or a combination of the two (up to 20% of base salary).
• Defined contribution scheme. No contributions were made into the Group Personal Pension Plan (GPPP) on behalf of Andrew Andrea during
the year. For the period ended 29 September 2018, Andrew Andrea received a cash supplement of 20% in lieu of pension contributions.
• Cash supplement. Ralph Findlay was previously a member of the defined benefit scheme and has opted to no longer accrue future
benefits. For the period ended 29 September 2018, Ralph Findlay received a cash supplement of 25% as a salary supplement in lieu of
pension contributions.
• Defined benefit scheme. Ralph Findlay accrued benefits in the defined benefit scheme which closed to future accrual in 2014. Details are
shown in the table below:
Ralph Findlay
Accrued
pension at
30.09.18
£
114,349
Accrued
pension at
30.09.17
£
111,030
Normal
retirement
age
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 Ralph Findlay’s death, before retirement, a spouse’s pension is payable equal to 50% of his pension plus a lump sum
equal to his 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.
Variable elements
Annual Bonus and Deferred Bonus Plan
Directors’ Remuneration Policy
The Annual Bonus plan rewards performance against annual targets which support the strategic direction of the Group.
Compulsory deferral into shares aligns Executive Directors with shareholder interests and provides a retention element.
The usual maximum annual bonus opportunity is 100% of base salary. At least 50% of the award is based on financial performance
measures. The balance of the bonus opportunity is based on financial measures and/or the delivery of strategic/individual objectives.
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.
With the exception of our pub managers, field-based sales and operations teams, all bonus arrangements within the Group have the same
structure and payout 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.
Sales and operations teams have additional elements within their bonus schemes linked to segmental and individual performance.
Bonuses to Executive Directors and the senior management team, for the period under review, are based on performance against pre-set
targets for both Group profit (two thirds) and return on capital (one third).
2017/18 Outturn
Executive Directors could earn a bonus equivalent to 50% of base salary for on-target performance. Above this, the award increases on a
linear basis up to a maximum of 100% of base salary. If the target performance is not achieved then there is a linear reduction in the award
using, in the case of the profit measure, the prior period performance as a base.
The targets and actual performance for 2017/18 are set out below:
2017/18
Underlying Group profit before taxation
Return on capital
Award
Threshold
£100.1m
10.5%1
Target
£107.5m
10.9%
Maximum
£114.9m
11.3%
Actual
£104.0m
10.3%
% of salary
17.7%
0%
17.7%
Opportunity
67%
33%
100%
1. The threshold for return on capital is the same as the CROCCE base used for the LTIP performance metric.
The bonuses earned are below the level at which deferral applies and, accordingly, no amounts earned have been deferred.
2018/19 opportunity
No changes are proposed to the annual bonus scheme for 2018/19. The Directors consider that the future Group profit and return on capital
targets are commercially sensitive matters as they provide competitors with insight into our business plans and expectations and therefore
they should remain confidential to the Group until the performance period has ended. The Committee will continue to disclose how the bonus
payout delivered relates to performance against the targets on a retrospective basis.
58
Marston’s PLC Annual Report and Accounts 2018
Annual Report on Remuneration continued
Long Term Incentive Plan
Directors’ Remuneration Policy
The Long Term Incentive Plan (LTIP) incentivises Executive Directors to deliver against the Group’s strategy over the longer term. Long-
term performance targets and share-based remuneration support the creation of sustainable shareholder value.
Awards vest dependent on the achievement of performance targets, normally over a three-year performance period. The normal maximum
award size will be up to 150% of base salary in respect of any financial year. Awards for 2018/19 will be granted at the level of 125% of
salary and it is currently intended that awards will continue to be made at this level. Vested awards granted in respect of 2016/17 and
later years are normally subject to an additional holding period of two years before being released to participants. Malus and clawback
provisions apply.
At its discretion, the Committee may award dividend equivalents to reflect dividends that would have been paid on vested awards under the
LTIP from the end of the performance period until the date of release.
Vesting in respect of performance during 2017/18 (2015/16 LTIP award)
LTIP awards granted in 2015/16 were subject to the achievement of the metrics in the following table. Although the formal vesting date is not
until June 2019, the performance measures have not been achieved and the awards will lapse.
CROCCE
FCF
Relative TSR
Weighting
40%
40%
20%
Base
10.5%
£300m
–
Threshold at 25%
Base +0.25%
Base +7.5%
Median
On-target
50% vesting
Base +0.5%
Base +15%
Maximum
100% vesting
Base +1.0%
Base +30%
– Upper quintile
Actual
10.3%
£315.7m
Below median
Vesting
0%
0%
0%
• CROCCE removes any potential distortions from subjective decisions on depreciation policy and asset revaluation.
• FCF is set as a three-year cumulative amount. The operating cash flow of the business is more closely aligned to operating performance
than a simple leverage ratio and reflects the cash which is available to reinvest to increase returns, to pay down debt or to pay dividends.
• Relative TSR: the Remuneration Committee believes that a wider comparator group is a more robust and realistic way of measuring how
shareholders value the Company. The maximum award has been set at the upper quintile level recognising our commitment to ensuring
there are demanding performance targets in place.
• In addition the Committee applies a general performance underpin which enables the adjustment of the overall level of vesting if the
formulaic output is not justified on the basis of broader business and financial performance.
LTIP 2014/15 award lapse
The 2017 Directors’ Remuneration Report stated that the performance measures for the 2014/15 LTIP award had not been achieved.
Following the formal vesting date in June 2018, the Committee has confirmed that the awards have lapsed.
Granted during 2017/18
LTIP awards granted during 2017/18 were as follows:
Andrew Andrea
Ralph Findlay
Percentage
of salary
125%
125%
Number
of shares
382,500
571,115
Face value
at grant1,2
£462,825
£691,049
% of award
vesting at
threshold
25%
25%
Performance period
Financial periods
2017/18 – 2019/20
Holding period
Financial periods
2020/21 – 2021/22
1. The awards granted during 2017/18 were granted as Approved Performance Share Plan (‘APSP’) awards, with each award comprising the following three elements: (i) a tax advantaged option
with an exercise price of £1.21 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 24,793 shares.
2. Calculated using the mid-market share price at date of grant of £1.21.
The Committee reviewed the base numbers and performance conditions associated with each metric and agreed that they remain appropriate
and challenging and that the base amounts are sufficiently stretching without encouraging undue risk. Therefore, the same performance
conditions and targets apply as for previous awards as set out above.
2018/19 awards
It is intended to make awards under the LTIP in 2018/19 based on the same performance metrics as 2017/18, as set out above. Awards will
continue to be granted at the level of 125% of salary.
SAYE
For the period ended 29 September 2018 for Ralph Findlay, the long-term incentive value, shown in the single figure table, comprises the value
of SAYE options granted based on the fair value of the options at grant.
Strategic Report
Governance
Financial Statements
Additional Information
59
Non-executive Directors
Directors’ Remuneration Policy
Non-executive Directors’ fees are usually reviewed every two years and are set at a level that reflects market conditions and is sufficient
to attract individuals with appropriate knowledge and experience. 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).
Total remuneration (Chairman and Non-executive Directors)
Roger Devlin1
Nick Backhouse2
Carolyn Bradley3
Catherine Glickman
Neil Goulden4
Matthew Roberts5
Robin Rowland
Base
Fee
£
125,000
15,579
95,833
50,000
–
50,000
50,000
Committee
Chairman
£
–
2,181
–
6,000
–
4,818
–
SID
£
–
–
4,000
–
–
–
–
2017/18
Total
£
125,000
17,760
99,833
56,000
–
54,818
50,000
2016/17
Total
£
187,500
57,000
54,136
54,136
19,492
29,167
50,000
1. Roger Devlin stepped down from the Board on 31 May 2018 and his fees for the period reflect his service to that date.
2. Nick Backhouse stepped down from the Board on 23 January 2018 and his fees for the period reflect his service to that date.
3. Carolyn Bradley was appointed Interim Chairman from 1 June 2018 until 30 September 2018. During that period, Carolyn received fees based on the Chairman’s fees at the time
(£187,500 per annum) but the SID fee was suspended.
4. Neil Goulden stepped down from the Board on 24 January 2017.
5. Matthew Roberts became Chairman of the Audit Committee on 24 January 2018.
Fees
William Rucker was appointed as Chairman of the Board with effect from 1 October 2018 and received no remuneration for the reporting
period. He will receive a fee of £200,000 per annum (which was agreed as part of the recruitment process); further details of his recruitment
process are set out in the Nomination Committee Report on page 49. The Chairman’s fees are next scheduled to be reviewed in two years’
time, in line with the usual review timetable. Non-executive Directors’ fees, other than the Chairman’s, are determined by the Board and are
reviewed every two years. These fees were last reviewed by the Board in 2015/16 and this year the Board has reviewed the fee structure.
Taking into account the responsibilities and duties placed on each Non-executive Director, the time commitment required and with regard to
market practice, the fees that will apply from 1 October 2018 are set out below.
Basic fee
Additional fee for:
Chairmanship of the Audit Committee
Chairmanship of the Remuneration Committee
Senior Independent Director
2018/19
£54,000
2017/18
£50,000
£7,500
£7,500
£7,500
£7,000
£6,000
£6,000
The maximum authority for Non-executive Directors’ fees (in aggregate), as outlined in our Articles of Association, is £750,000 a year, and was
approved by shareholders at our 2017 AGM.
Interests in ordinary shares
The beneficial interests of the Non-executive Directors and their connected persons in the share capital of the Company are shown below:
Roger Devlin1
Nick Backhouse2
Carolyn Bradley
Catherine Glickman
Matthew Roberts
Robin Rowland
1. Roger Devlin stepped down from the Board on 31 May 2018. His interests in ordinary shares are shown as at that date.
2. Nick Backhouse stepped down from the Board on 23 January 2018. His interests in ordinary shares are shown as at that date.
3. William Rucker purchased 100,000 shares on 14 September 2018.
As at 29.09.18
150,000
25,000
25,000
50,000
25,000
152,219
As at 30.09.17
150,000
25,000
25,000
50,000
25,000
52,083
60
Marston’s PLC Annual Report and Accounts 2018
Annual Report on Remuneration continued
Payments to past Directors and payment for loss of office
As announced on 5 September 2017, following a senior management reorganisation, Peter Dalzell stepped down from the Board on
29 September 2017 and his employment with the Group ended. In accordance with our current Directors’ Remuneration Policy, as approved
by shareholders at the 2017 AGM, Peter was treated as a ‘good leaver’ by reason of redundancy. Details of the remuneration arrangements in
connection with Peter leaving the business, which are consistent with the Directors’ Remuneration Policy and authorised by the Committee,
are set out on page 60 of the 2017 Annual Report and Accounts. Of the total amount disclosed in the 2017 Annual Report and Accounts, £417,982
was paid in the year ended 29 September 2018.
As with the LTIP awards held by the other Executive Directors, Peter Dalzell’s 2015/16 award will lapse.
Total shareholder return chart and CEO remuneration
This graph shows the value, at 29 September 2018, 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.
The intermediate points show the value at the intervening financial period ends.
Marston’s Net TSR
FTSE All Share Net TSR
£
350
300
250
200
150
100
50
6 October
2008
3 October
2009
2 October
2010
1 October
2011
29 September
2012
5 October
2013
4 October
2014
3 October
2015
1 October
2016
30 September
2017
28 September
2018
The total remuneration of the CEO over the past ten financial periods is shown below. The annual bonus payout and LTIP vesting level as a
percentage of the maximum opportunity is also shown.
2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
2010/11
2009/10
2008/09
Total
remuneration
£807,665
£803,303
£1,008,320
£876,788
£1,121,294
£937,312
£815,690
£974,784
£826,677
£640,190
Annual
bonus
17.7%
20%
40%
40%
25%
0%
40%
46%
40%
0%
LTIP
vesting
0%
0%
21%
0%
41.9%
44.2%
0%
0%
0%
0%
Change in CEO and employee pay
The table below shows the percentage change in the salary, benefits and annual bonus for the CEO between the current and previous financial
period, compared to the wider workforce, excluding pub staff. The Committee believes this provides a more appropriate comparison as the
majority of pub-based staff have their remuneration rate set by statute rather than the market.
CEO
Wider workforce
Salary
2%
2%
Benefits
0.4%
0.4%
Annual bonus
(11.5)%
0%
Strategic Report
Governance
Financial Statements
Additional Information
61
Relative importance of spend on pay
The table below demonstrates the relative importance of the Group’s expenditure on total employee pay compared to dividend payments
to shareholders.
Dividend payments
Total employee pay1
1. Excluding non-underlying items.
2018
£47.5m
£230.6m
2017
£47.5m
£215.1m
change
0.0%
7.2%
Service contracts and letters of appointment
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 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 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.
Further details on current serving Directors’ service contracts and letters of appointment are available at www.marstons.co.uk in the
Investors section.
External appointments for Executive Directors
Executive Directors are permitted to take up external appointments, subject to approval by the Board, and are allowed to retain any
fees received.
Ralph Findlay is a Non-executive Director of Bovis Homes Group PLC and during the year he received fees of £58,000. Andrew Andrea is a
Non-executive Director of Portmeirion Group Plc and during the year he received fees of £32,000.
Shareholder voting
The following table sets out actual voting outcomes in respect of the Annual Report on Remuneration resolution at the Annual General Meeting
(AGM) held on 23 January 2018 and the Directors’ Remuneration Policy resolution at the AGM held on 24 January 2017.
Approval of the Annual Report on Remuneration (23 January 2018)
Approval of the Directors’ Remuneration Policy (24 January 2017)
Votes for
94,962,903
80,921,034
% of vote
95.67%
97.88%
Votes against
4,300,620
1,753,514
% of vote
4.33%
2.12%
Votes
withheld
113,505
1,214,429
62
Marston’s PLC Annual Report and Accounts 2018
Annual Report on Remuneration continued
Supplementary schedules
Shareholding guidelines
Directors’ Remuneration Policy
In order to further align the interests of Executive Directors with those of shareholders, the Committee applies shareholding guidelines.
These guidelines provide that the Chief Executive Officer is required to hold shares with a value equal to two times’ salary and the Chief
Financial Officer is required to hold shares with a value equal to one time’s salary. To achieve these holdings Directors are required to retain
any vested shares from the LTIP, net of tax, until the guidelines are satisfied. Shares subject to vested LTIP awards which are in a holding
period count towards this guideline (on a net of assumed tax basis).
Directors’ share interests
As at 29 September 2018, Andrew Andrea held in excess of 100% of base salary and Ralph Findlay held in excess of 200% of base salary
in shares.
Executive Directors’ share interests as at 29 September 2018
Andrew Andrea
Ralph Findlay
Shares owned outright
Share options
At 29.09.18
332,773
1,290,475
At 30.09.17
292,773
1,290,475
Not subject
to
performance
24,492
20,224
Subject to
performance
1,024,204
1,560,253
Target %
holding
100%
200%
Actual %
holding
123%
329%
In assessing the extent to which the guidelines are satisfied, shares are valued at the end of the relevant financial year. However, once the
required holding has been achieved, any change in the share price is disregarded when assessing the value attributed to shares already held.
Executive Directors’ interests in share options as at 29 September 2018
Granted
Exercised/
Vested
Cancelled/
Lapsed
Andrew
Andrea SAYE
LTIP
Ralph
Findlay SAYE
LTIP
Grant date
2014
2016
2015
2016
June 2017
December
2017
2014
2018
2015
2016
June 2017
December
2017
Brought
Forward
01.10.17
12,396
12,096
248,167
278,995
362,709
–
–
–
–
–
–
382,5001
7,438
–
397,831
447,572
541,566
–
20,224
–
–
–
–
571,1151
Carried
Forward
29.09.18
12,396
12,096
0
278,995
362,709
Exercise
Price
Vesting
Date
Release Date
1.21
1.24
2019
2021
2018
2019
2020
–
–
–
–
2021
–
–
248,167
–
–
–
382,500
2020
2022
7,438
–
397,831
–
–
0
20,224
0
447,572
541,566
1.21
0.89
2017
2021
2018
2019
2020
–
–
–
–
2021
–
571,115
2020
2022
–
–
–
–
–
–
–
–
–
–
–
–
1. The awards granted in December 2017 were granted as Approved Performance Share Plan (‘APSP’) awards, with each award comprising the following three elements: (i) a tax advantaged
option with an exercise price of £1.21 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 24,793 shares.
There have been no changes to the Directors’ share interests and interests in share options between 29 September 2018 and 19 November
2018 (being the latest practical date prior to the date of this report).
This report was approved by the Board and signed on its behalf by
Catherine Glickman
Chairman of the Remuneration Committee
21 November 2018
Strategic Report
Governance
Financial Statements
Additional Information
63
Directors’ Report
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 6 to the Statement of Directors’
Responsibilities on page 66, 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 the inside front
cover to page 38, which is incorporated in this report by reference.
Corporate Governance Statement
The Corporate Governance Statement, as required by the Financial
Conduct Authority’s Disclosure Guidance and Transparency Rules
(DTR) 7.2.1, is set out on page 40 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. Other sources of data include CGA: On Trade
Market and State of Nation and IRI Off Trade Market. We produce
our own On Trade and Off Trade ale reports into the market on an
annual basis.
Capital structure
Details of the Company’s issued share capital and of the movements
during the period are shown in note 28 to the financial statements
on page 103. 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 27 to the
financial statements on pages 102 to 103. 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 2018 Annual
General Meeting (AGM). The Company was also given authority at
its 2018 AGM to make market purchases of ordinary shares up to a
maximum number of 63,392,930 shares. Similar authority will again
be sought from shareholders at the 2019 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 41 to 47.
Directors
Biographies of the Directors currently serving on the Board are set
out on pages 42 and 43.
Changes to the Board during the period are set out in the Corporate
Governance Report starting on page 41. Details of Directors’ service
contracts are set out in the Directors’ Remuneration Report on
page 62.
In accordance with the requirements of the UK Corporate
Governance Code, all Directors will offer themselves for re-election
at the AGM on 23 January 2019, other than William Rucker who will
offer himself for election following his appointment to the Board on
1 October 2018.
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.
Dividends on ordinary shares
An interim dividend of 2.7 pence per ordinary share was paid on
3 July 2018. The Directors recommend a final dividend of 4.8 pence
per ordinary share to be paid on 28 January 2019 to shareholders
on the register on 14 December 2018. This would bring the total
dividend for 2017/18 to 7.5 pence per ordinary share (2017: 7.5 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. Further details are given in note 19 on page 97.
Interests in voting rights
Notifications of the following voting interests in the Company’s
ordinary share capital have been received by the Company (in
accordance with Chapter 5 of the DTR). The information shown below
was correct at the time of disclosure. However, the date received
may not have been within the current financial reporting period
and the percentages shown (as provided at the time of disclosure)
have not been re-calculated based on the issued share capital at
the period end. It should also be noted that these holdings may have
changed since the Company was notified, however, notification of any
change is not required until the next notifiable threshold is crossed.
Ordinary shares of 7.375 pence each
Shareholder
Standard Life Aberdeen plc
Dimensional Fund Advisors LLP
The Capital Group Companies, Inc
Brewin Dolphin
Royal London Asset Management
Limited
As at 29
September
2018
Voting rights
9,449,190
9,373,005
9,291,379
8,392,338
% of
voting Nature of
interest
rights
Indirect
5.04%
Indirect
5.00%
Indirect
4.97%
Indirect
4.94%
6,794,023
3.99%
Direct
Subsequent to the year-end, Standard Life Aberdeen plc has
disclosed information in accordance with DTR5 on 7 November 2018,
disclosing an indirect interest over 9,228,860 voting rights (4.93%).
Deutsche Bank AG has also disclosed information in accordance
with DTR5 on four occasions, the most recent being on 6 November,
disclosing that its interests are below the notifiable threshold.
No further notifications have been received by the Company between
29 September 2018 and 19 November 2018 (being the latest practical
date prior to the date of this report).
64
Marston’s PLC Annual Report and Accounts 2018
Directors’ Report continued
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
Hargreave Hale Nominees Ltd
% of
preference
share voting
rights
45.40%
13.88%
7.33%
5.81%
3.81%
3.67%
3.67%
3.60%
Number
34,048
10,407
5,500
4,356
2,855
2,750
2,750
2,700
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 29 September 2018 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 87.
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 Group is committed to keeping employees informed of business
performance and our strategy, aiming to drive engagement and
ensure employees are enabled. We do this in a variety of ways
from presentations of the interim and annual results by senior
management, to video and email messages from our CEO.
In addition, there are a range of internal communication channels
including newsletters, magazines, apps 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
also encouraged to participate in the Company’s SAYE scheme.
Human rights
Marston’s is committed to respecting and upholding human rights,
as expressed in the United Nations Universal Declaration of Human
Rights, within our business and also within our supply chain.
Our ways of working are aligned with our belief of, and commitment
to, the Declaration of Human Rights. Our Human Rights policy is
available at www.marstons.co.uk.
Modern Slavery Statement
Our Modern Slavery Act disclosure is available on our website
www.marstons.co.uk/responsibility/modern-slavery-statement.
Environmental policy and mandatory greenhouse
gas emissions reporting
Our approach to corporate responsibility is closely correlated with
our Group’s strategic objectives. One of our key priorities is to reduce
our environmental impact. We recognise the importance of this
to the long-term profitability of the business and operating a high
quality estate. Many of the environmental initiatives we adopt reduce
our environmental impact as well save expenditure on energy
and utilities.
Each year Marston’s publishes its approach on corporate
responsibility on its website available at www.marstons.co.uk.
The report includes information on our environmental performance
by business area including energy consumption, water usage, waste
volumes and recycling rates.
We have made particularly good progress increasing the waste
recycling rates within our pubs over the last two years from 60% to
78%, and we now operate as a ‘Zero Waste to Landfill’ business.
Electricity and gas emissions increased in 2018 due to the acquisition
of Eagle Brewery in May 2017, by an additional 7,390 CO2e tonnes,
as well as extremes in weather conditions experienced during the
year; gas consumption was high in order to heat our pubs during the
colder winter compared to relatively mild weather conditions in the
previous year. There was also an increase in energy as a result of
business activity, for instance, more food cooked in our kitchens and
more production in our breweries.
Despite the overall increase in energy consumption we have
achieved considerable reductions in energy usage by replacing the
lighting in the public areas of our managed and franchised pubs
with LED lighting, including this year many of the back of house
areas. Energy saving projects have also included installation of
energy efficient catering equipment, using ambient air to cool
our cellars rather than air conditioning, voltage optimisation,
building management systems, heating control systems and heat
recovery systems.
Fuel Types
Electricity and gas
Petrol and diesel
Refrigerants – breweries
Refrigerants – pubs
LPG
Oil
2018
CO2e
tonnes
125,156
13,644
9
5,179
2,537
235
2017
CO2e
tonnes
118,848
11,972
43
5,109
2,457
246
Greenhouse Gas Emissions Intensity Ratio:
CO2e tonnes per £100,000 of turnover
2018
13.34
2017
13.87
Notes:
1. We report on all the measured emissions sources required under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013.
2. Data collected is in respect of the year ended 31 March 2018, the period for which our
carbon emissions are reported under the Carbon Reduction Commitment Energy
Efficiency Scheme.
Strategic Report
Governance
Financial Statements
Additional Information
65
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 Group together with details of our treasury policy
and management are set out in note 25 to the financial statements
on pages 99 to 102.
Auditors
PricewaterhouseCoopers LLP have indicated their willingness to
continue as Auditors and their re-appointment has been approved
by the Audit Committee. Resolutions to re-appoint them and to
authorise the Audit Committee to determine their remuneration will
be proposed at the 2019 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 24 to 26. In addition, note 25 to the financial
statements on pages 99 to 102 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 25.
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 74 to 106 and 107 to 117 have been
prepared on the going concern basis.
Annual General Meeting
The AGM of the Company will be held at Wolverhampton Wanderers
Football Club, Molineux Stadium, Waterloo Road, Wolverhampton
WV1 4QR at 10:30am on 23 January 2019. 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 in the shareholder
section of our website at www.marstons.co.uk/investors where a
copy can be viewed and downloaded.
By order of the Board
Anne-Marie Brennan
Group Secretary
21 November 2018
Company registration number: 31461
66
Marston’s PLC Annual Report and Accounts 2018
Statement of Directors’ responsibilities in respect
of the financial statements
The Directors are responsible for preparing the Annual Report and
Accounts and the financial statements in accordance with applicable
law and regulation.
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 Company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 102 “The Financial
Reporting Standard applicable in the UK and Republic of Ireland”
(FRS 102), 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 Company and of the profit or loss of the Group for that period.
In preparing the financial statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable IFRS as adopted by the European
Union have been followed for the Group financial statements
and United Kingdom Accounting Standards, comprising FRS
102, have been followed for the Company financial statements,
subject to any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company 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.
The Directors are also responsible for safeguarding the assets of the
Group and Company 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.
Directors’ confirmations
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 the Group and
Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed on
pages 42 to 43 confirm that, to the best of their knowledge:
• the Company financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS
102, and applicable law), give a true and fair view of the assets,
liabilities and financial position of the Company;
• the Group financial statements, which have been prepared in
accordance with IFRS as adopted by the European Union, give a
true and fair view of the assets, liabilities, financial position and
profit of the Group; and
• the Strategic Report together with the Directors’ Report includes
a fair review of the development and performance of the business
and the position of the Group and Company, together with a
description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors’ Report
is approved:
• so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
• they have taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit
information and to establish that the Company’s auditors are
aware of that information.
Ralph Findlay
Chief Executive Officer
21 November 2018
Andrew Andrea
Chief Financial and Corporate
Development Officer
Strategic Report
Governance
Financial Statements
Additional Information
67
Financial
Statements
Five Year Record
Independent Auditors’ Report
Group Accounts
Notes to the Group Accounts
Company Accounts
Notes to the Company Accounts
68
69
74
78
107
109
68
Marston’s PLC Annual Report and Accounts 2018
Five Year Record
Underlying revenue
Underlying proft before taxation
Non-underlying items
(Loss)/proft before taxation
Taxation*
(Loss)/proft after taxation
2014
(52 weeks)
£m
787.6
82.9
(142.1)
(59.2)
8.5
(50.7)
2015
(52 weeks)
£m
845.5
90.9
(59.6)
31.3
(8.0)
23.3
2016
(52 weeks)
£m
905.8
97.3
(16.5)
80.8
(7.8)
73.0
2017
(52 weeks)
£m
992.2
100.1
0.2
100.3
(15.6)
84.7
2018
(52 weeks)
£m
1,140.4
104.0
(49.7)
54.3
(9.3)
45.0
Net assets
759.0
782.9
752.1
931.4
957.6
(Loss)/earnings per ordinary share
Non-underlying items
Underlying earnings per ordinary share
(8.9)p
20.6p
11.7p
4.1p
8.7p
12.8p
12.7p
1.2p
13.9p
14.2p
–
14.2p
7.1p
6.8p
13.9p
Dividend per ordinary share
6.7p
7.0p
7.3p
7.5p
7.5p
* Taxation includes the tax on non-underlying items together with non-underlying credits of £2.4 million in 2016 in respect of the change in corporation tax rate and a non-underlying credit of £4.1 million
in 2016 in respect of the additional tax relief claimed for previous periods following the agreement of the tax treatment of certain items with HM Revenue & Customs.
Strategic Report
Governance
Financial Statements
Additional Information
69
Independent Auditors’ Report to the Members of Marston’s PLC
Report on the audit of the fnancial statements
Our opinion
In our opinion,
• Marston’s PLC’s Group fnancial statements and Company fnancial statements (the “fnancial statements”) give a true and fair view of the
state of the Group’s and of the Company’s affairs as at 29 September 2018 and of the Group’s proft and cash fows for the 52 week period (the
“period”) then ended;
• the Group fnancial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union;
• the Company fnancial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”,
and applicable law); and
• the fnancial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group
fnancial statements, Article 4 of the IAS Regulation.
We have audited the fnancial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise: the Group and
Company Balance Sheets as at 29 September 2018; the Group Income Statement and the Group Statement of Comprehensive Income, the Group
Cash Flow Statement, and the Group and Company Statements of Changes in Equity for the period then ended; and the notes to the fnancial
statements, which include a description of the signifcant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the fnancial statements section of our report. We believe that the
audit evidence we have obtained is suffcient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the fnancial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulflled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
Group or the Company.
Other than those disclosed in note 3 to the fnancial statements, we have provided no non-audit services to the Group or the Company in the
period from 1 October 2017 to 29 September 2018.
Our audit approach
Overview
Materiality
• Overall Group materiality: £5.2 million (2017: £5.0 million), based on 5% of proft before tax and non-
underlying items.
• Overall Company materiality: £23.0 million (2017: £20.1 million), based on 1.75% of net assets.
Audit scope
• Audit performed at the level of the consolidated Group.
• Valuation of the estate (notes 1, 4, 11, 12 and 18) - Group and Company.
• Disclosure of items as ‘non-underlying (notes 1 and 4) - Group.
Areas of
focus
70
Marston’s PLC Annual Report and Accounts 2018
Independent Auditors’ Report to the Members of Marston’s PLC
continued
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the fnancial statements. In
particular, we looked at where the Directors made subjective judgements, for example in respect of signifcant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, and considered
the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. We designed audit procedures at Group
and signifcant component level to respond to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. We focused on laws and regulations that could give rise to a material misstatement in the Group and
Company fnancial statements, including, but not limited to, Companies Act 2006, the Listing Rules, pensions legislation, UK tax legislation,
health and safety regulations and data protection regulations. Our tests included, but were not limited to, reviews of compliance documentation,
searches of relevant regulatory websites for details of non-compliance and discussions with management of any potential impacts of non-
compliance with laws and regulations. There are inherent limitations in the audit procedures described above and the further removed non-
compliance with laws and regulations is from the events and transactions refected in the fnancial statements, the less likely we would become
aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits we also addressed the risk of
management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the Directors that
represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most signifcance in the audit of the fnancial
statements of the current period and include the most signifcant assessed risks of material misstatement (whether or not due to fraud)
identifed by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the fnancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. This is not a complete list of all risks identifed by our audit.
Key audit matter
How our audit addressed the key audit matter
Valuation of the estate (notes 1, 4, 11, 12 and 18) – Group
and Company
We focus on the Directors’ annual assessment of the carrying
value of land and buildings because properties are a signifcant
item on the balance sheet and there are complex and subjective
assumptions used in the valuations, including the future expected
fnancial performance of pubs and the earnings multiples applied.
A full external valuation of the estate has been completed during
the period in conjunction with the Group’s external property valuers
Christies and TSR. The exercise includes all freehold and leasehold
pubs, unlicensed properties, breweries and industrial premises.
The valuation in the period resulted in a net impairment charge
recorded in the income statement of £39.4 million and net
revaluation gains recognised in the revaluation reserve, within
shareholders’ equity, of £8.6 million.
We have considered the Directors’ annual assessment and examined
their assumptions therein, utilising internal specialists to validate the
conclusions reached.
We have assessed, through discussion with the Group’s external
property valuers, the valuation methodologies adopted, making
comparisons to industry practice and found them to be appropriate.
We checked that the source data being provided to the external valuers
agreed to the underlying fnancial records.
We verifed management’s and the valuer’s assumptions on future
earnings and multiples using recent market transactions data,
historical pub performance and the level of investment in properties
and considered the impact of movements in key assumptions. We also
took into account the impact of changes in macroeconomic conditions,
pub performance and recent market transactions and their associated
multiples. We found the assumptions adopted to be appropriate and
consistent with our knowledge of the business and the wider market.
We found that the estate had been valued in line with the Group’s
policy using appropriate methodologies and assumptions, which are
consistent with IFRS.
Disclosure of items as ‘non-underlying’ (notes 1 and 4) – Group
The fnancial statements include certain items which are disclosed
as ‘non-underlying’ such as reorganisation and integration costs,
movements in the fnancial assumptions used in determining the
onerous lease provisions, impairment of freehold and leasehold
properties, results arising from the management of the portfolio
of pubs subject to disposal in FY14, the net interest on the net
defned beneft asset/liability, movements in the fair value of
interest rate swaps. Management have included these items as
non-underlying using the criteria explained in their accounting
policy which is disclosed in note 1 to the fnancial statements.
We focused on this area because non-underlying items are not
defned 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 current period results
with previous periods.
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 found the Group’s accounting policy to be appropriate and
the classifcation of items to be consistent with the accounting policy.
We also considered an appropriate threshold to apply to non-
underlying items based on the fnancial statement line items that were
affected. For example, certain property related items are considered
by management to have a higher threshold for disclosure as non-
underlying. We concluded that the thresholds adopted are appropriate
in the circumstances.
We assessed whether other non-recurring items should have been
classifed as non-underlying and discussed this with the Directors and
the Audit Committee. We confrmed that all signifcant items meeting
the criteria in the Group’s accounting policy had been identifed and
that the treatment was consistent year on year.
Strategic Report
Governance
Financial Statements
Additional Information
71
We determined that there were no other key audit matters applicable to the Company to communicate in our report.
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 fnancial statements as a whole,
taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.
The Group is structured along three business lines being Destination and Premium, Taverns and Brewing, supported by Group Services. The
Group fnancial 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 fnancial statement line item based on the size and nature of the transactions and balances that are 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 fnancial statements.
Materiality
The scope of our audit was infuenced 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 on the
individual fnancial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
fnancial statements as a whole.
Based on our professional judgement, we determined materiality for the fnancial statements as a whole as follows:
Overall materiality
£5.2 million (2017: £5.0 million).
£23.0 million (2017: £20.1 million).
Group fnancial statements
Company fnancial statements
How we determined it
5% of proft before tax and non-underlying items.
1.75% of net assets.
Rationale for
benchmark applied
We believe that proft before tax and non-
underlying items is the primary measure used by
the shareholders in assessing the performance
of the Group and is a generally accepted auditing
benchmark. The exclusion of items classifed as non- appropriate upon which to base materiality.
underlying is consistent with previous periods and
practice within the sector.
Marston’s PLC holds some of the pubs relating to the
non-securitised business. These properties are then
occupied by Marston’s Trading Limited. As such it
is considered that the net asset balance is the most
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £nil and £9.0 million.
We agreed with the Audit Committee that we would report to them misstatements identifed during our audit above £0.3 million (Group audit)
(2017: £0.2 million) and £1.2 million (Company audit) (2017: £0.9 million) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw attention to in
respect of the Directors’ statement in the fnancial statements about whether the
Directors considered it appropriate to adopt the going concern basis of accounting in
preparing the fnancial statements and the Directors’ identifcation of any material
uncertainties to the Group’s and the Company’s ability to continue as a going
concern over a period of at least twelve months from the date of approval of the
fnancial statements.
We have nothing material to add or to draw attention
to. However, because not all future events or
conditions can be predicted, this statement is not a
guarantee as to the Group’s and Company’s ability to
continue as a going concern.
We are required to report if the Directors’ statement relating to going concern in
accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge
obtained in the audit.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the fnancial statements and our auditors’ report thereon.
The Directors are responsible for the other information. Our opinion on the fnancial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the fnancial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the fnancial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the fnancial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report based on these responsibilities.
72
Marston’s PLC Annual Report and Accounts 2018
Independent Auditors’ Report to the Members of Marston’s PLC
continued
With respect to the Strategic Report, Directors’ Report and Corporate Governance Report, we also considered whether the disclosures required
by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06), ISAs (UK) and
the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required by
ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the period ended 29 September 2018 is consistent with the fnancial statements and has been prepared in accordance with applicable
legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
Corporate Governance Statement
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Report (on
pages 41 to 47) about internal controls and risk management systems in relation to fnancial reporting processes and about share capital
structures in compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency Rules sourcebook of the FCA (“DTR”) is
consistent with the fnancial statements and has been prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in this information. (CA06)
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Report (on
pages 41 to 47) with respect to the Company’s corporate governance code and practices and about its administrative, management and
supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR. (CA06)
We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared by the
Company. (CA06)
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity
of the Group
We have nothing material to add or draw attention to regarding:
• The Directors’ confrmation on page 28 of the Annual Report that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The Directors’ explanation on page 31 of the Annual Report as to how they have assessed the prospects of the Group, over what period
they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifcations or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust assessment of the
principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope
than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the
statements are consistent with the knowledge and understanding of the Group and Company and their environment obtained in the course
of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 66, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Company’s position and
performance, business model and strategy is materially inconsistent with our knowledge of the Group and Company obtained in the
course of performing our audit.
• The section of the Annual Report on pages 51 to 52 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
• The Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specifed, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006. (CA06)
Strategic Report
Governance
Financial Statements
Additional Information
73
Responsibilities for the fnancial statements and the audit
Responsibilities of the Directors for the fnancial statements
As explained more fully in the statement of Directors’ responsibilities set out on page 66, the Directors are responsible for the preparation of the
fnancial statements in accordance with the applicable framework and for being satisfed that they give a true and fair view. The Directors are also
responsible for such internal control as they determine is necessary to enable the preparation of fnancial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the fnancial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the fnancial statements
Our objectives are to obtain reasonable assurance about whether the fnancial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to infuence the
economic decisions of users taken on the basis of these fnancial statements.
A further description of our responsibilities for the audit of the fnancial statements is located on the FRC’s website at: www.frc.org.uk/auditors/
audit-assurance. This description forms part of our auditors’ report.
Use of this report
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.
Other required reporting
Companies Act 2006 exception reporting
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 Company, or returns adequate for our audit have not been received from branches not
visited by us; or
• certain disclosures of Directors’ remuneration specifed by law are not made; or
• the Company fnancial 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.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 27 January 2003 to audit the fnancial statements
for the period ended 27 September 2003 and subsequent fnancial periods. The period of total uninterrupted engagement is 16 years, covering
the periods ended 27 September 2003 to 29 September 2018.
Andrew Lyon (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
21 November 2018
74
Marston’s PLC Annual Report and Accounts 2018
Group Income Statement
For the 52 weeks ended 29 September 2018
Revenue
Operating expenses
Operating proft
Finance costs
Finance income
Movement in fair value of interest
rate swaps
Net fnance costs
Proft before taxation
Taxation
Proft for the period attributable
to equity shareholders
Earnings per share:
Basic earnings per share
Basic underlying earnings per share
Diluted 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
Underlying
£m
1,140.4
(957.9)
182.5
(78.9)
0.4
–
(78.5)
104.0
(16.1)
2018
Non-
underlying
£m
0.9
(50.0)
(49.1)
(0.1)
–
(0.5)
(0.6)
(49.7)
6.8
Total
£m
1,141.3
(1,007.9)
133.4
(79.0)
0.4
(0.5)
(79.1)
54.3
(9.3)
Underlying
£m
992.2
(817.7)
174.5
(74.8)
0.4
–
(74.4)
100.1
(15.6)
87.9
(42.9)
45.0
84.5
2017
Non-
underlying
£m
19.1
(23.2)
(4.1)
(2.1)
–
6.4
4.3
0.2
–
0.2
7.1p
13.9p
7.0p
13.7p
Group Statement of Comprehensive Income
For the 52 weeks ended 29 September 2018
Proft for the period
Items of other comprehensive income that may subsequently be reclassifed to proft or loss
Gains arising on cash fow hedges
Transfers to the income statement on cash fow hedges
Tax on items that may subsequently be reclassifed to proft or loss
Items of other comprehensive income that will not be reclassifed to proft or loss
Remeasurement of retirement benefts
Unrealised surplus on revaluation of properties
Reversal of past revaluation surplus
Tax on items that will not be reclassifed to proft or loss
Other comprehensive income for the period
Total comprehensive income for the period
2018
£m
45.0
–
10.9
(1.8)
9.1
14.0
170.3
(161.7)
(2.3)
20.3
29.4
74.4
Total
£m
1,011.3
(840.9)
170.4
(76.9)
0.4
6.4
(70.1)
100.3
(15.6)
84.7
14.2p
14.2p
14.1p
14.0p
2017
£m
84.7
35.7
10.7
(7.9)
38.5
21.8
2.3
(0.8)
0.2
23.5
62.0
146.7
Strategic Report
Governance
Financial Statements
Additional Information
75
Group Cash Flow Statement
For the 52 weeks ended 29 September 2018
Operating activities
Underlying operating proft
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 defned beneft pension contributions paid and amounts charged
Income tax paid
Net cash infow 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
Acquisition of subsidiary
Movement in other non-current assets
Transfer to other cash deposits
Net cash outfow from investing activities
Financing activities
Equity dividends paid
Interest paid
Arrangement costs of bank facilities
Arrangement costs of other lease related borrowings
Issue of shares
Purchase of own shares
Proceeds from sale of own shares
Repayment of securitised debt
Repayment of bank borrowings
Advance of bank borrowings
Capital element of fnance leases repaid
Advance of other lease related borrowings
Net cash outfow from fnancing activities
Net decrease in cash and cash equivalents
Note
31
31
8
30
2018
£m
182.5
40.1
222.6
(49.1)
173.5
(2.1)
31.8
(5.4)
(8.0)
(7.4)
182.4
0.8
46.9
(162.7)
–
0.7
–
(114.3)
(47.5)
(74.9)
(0.6)
(5.1)
–
(1.2)
–
(30.0)
–
10.2
(0.2)
68.0
(81.3)
(13.2)
2017
£m
174.5
39.2
213.7
(4.1)
209.6
38.8
(7.9)
(9.1)
(8.3)
(9.5)
213.6
0.3
61.2
(196.3)
(90.5)
0.7
(120.0)
(344.6)
(44.1)
(70.2)
(3.3)
(4.6)
75.5
–
0.3
(28.4)
(263.0)
280.0
(0.1)
57.9
–
(131.0)
76
Marston’s PLC Annual Report and Accounts 2018
Group Balance Sheet
As at 29 September 2018
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Other non-current assets
Deferred tax assets
Retirement beneft surplus
Current assets
Inventories
Trade and other receivables
Other cash deposits*
Cash and cash equivalents
Assets held for sale
Current liabilities
Borrowings*
Derivative fnancial instruments
Trade and other payables
Current tax liabilities
Provisions for other liabilities and charges
Non-current liabilities
Borrowings
Derivative fnancial instruments
Other non-current liabilities
Provisions for other liabilities and charges
Deferred tax liabilities
Retirement beneft obligations
Net assets
Shareholders’ equity
Equity share capital
Share premium account
Revaluation reserve
Merger reserve
Capital redemption reserve
Hedging reserve
Own shares
Retained earnings
Total equity
29 September
2018
£m
30 September
2017
£m
Note
10
11
12
13
14
15
16
17
18
19
21
22
23
19
21
24
23
14
15
28
29
29
29
230.3
70.0
2,408.1
9.6
–
15.6
2,733.6
44.6
104.9
120.0
41.4
310.9
230.3
67.6
2,360.7
10.3
0.6
–
2,669.5
40.2
108.4
120.0
54.6
323.2
2.3
2.7
(158.4)
(28.9)
(252.2)
(4.0)
(2.8)
(446.3)
(1,389.0)
(148.6)
(1.5)
(22.5)
(81.3)
–
(1,642.9)
957.6
48.7
334.0
627.2
23.7
6.8
(118.1)
(112.3)
147.6
957.6
(148.8)
(28.7)
(256.1)
(3.5)
(3.3)
(440.4)
(1,354.9)
(159.2)
(0.6)
(26.9)
(76.6)
(5.4)
(1,623.6)
931.4
48.7
334.0
624.2
71.2
6.8
(127.2)
(111.3)
85.0
931.4
The fnancial statements on pages 74 to 106 were approved by the Board and authorised for issue on 21 November 2018 and are signed on its
behalf by:
Ralph Findlay
Chief Executive Officer
21 November 2018
* Other cash deposits comprises the £120.0 million (2017: £120.0 million) drawn down under the liquidity facility and borrowings includes the corresponding liability (note 30).
Strategic Report
Governance
Financial Statements
Additional Information
77
Group Statement of Changes in Equity
For the 52 weeks ended 29 September 2018
At 1 October 2017
Proft for the period
Remeasurement of retirement
benefts
Tax on remeasurement of retirement
benefts
Transfers to the income statement
on cash fow hedges
Tax on hedging reserve movements
Property revaluation
Property impairment
Deferred tax on properties
Total comprehensive income
Share-based payments
Purchase of own shares
Sale of own shares
Disposal of properties
Tax on disposal of properties
Transfer to retained earnings
Dividends paid
Total transactions with owners
At 29 September 2018
At 2 October 2016
Proft for the period
Remeasurement of retirement
benefts
Tax on remeasurement of retirement
benefts
Gains on cash fow hedges
Transfers to the income statement
on cash fow hedges
Tax on hedging reserve movements
Property revaluation
Property impairment
Deferred tax on properties
Total comprehensive income
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
At 30 September 2017
Equity
share
capital
£m
48.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48.7
Equity
share
capital
£m
44.4
–
–
–
–
–
–
–
–
–
–
–
4.3
–
–
–
–
–
4.3
48.7
Share
premium
account
£m
334.0
–
Revaluation
reserve
£m
624.2
–
Merger
reserve
£m
71.2
–
Capital
redemption
reserve
£m
6.8
–
Hedging
reserve
£m
(127.2)
–
Own
shares
£m
(111.3)
–
Retained
earnings
£m
85.0
45.0
Total
equity
£m
931.4
45.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
334.0
–
–
–
–
170.3
(161.7)
0.1
8.7
–
–
–
(5.6)
0.9
(1.0)
–
(5.7)
627.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(47.5)
(47.5)
23.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.8
Share
premium
account
£m
334.0
–
Revaluation
reserve
£m
623.1
–
Merger
reserve
£m
–
–
Capital
redemption
reserve
£m
6.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
334.0
–
–
–
–
–
2.3
(0.8)
3.9
5.4
–
–
–
(4.1)
0.7
(0.9)
–
(4.3)
624.2
–
–
–
–
–
–
–
–
–
–
71.2
–
–
–
–
–
71.2
71.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.8
–
–
10.9
(1.8)
–
–
–
9.1
–
–
–
–
–
–
–
–
(118.1)
Hedging
reserve
£m
(165.7)
–
–
–
35.7
10.7
(7.9)
–
–
–
38.5
–
–
–
–
–
–
–
–
(127.2)
–
–
14.0
14.0
(2.4)
(2.4)
–
–
–
–
–
–
–
(1.2)
0.2
–
–
–
–
(1.0)
(112.3)
–
–
–
–
–
56.6
0.5
–
(0.2)
5.6
(0.9)
1.0
–
6.0
147.6
Own
shares
£m
(113.7)
–
Retained
earnings
£m
23.2
84.7
10.9
(1.8)
170.3
(161.7)
0.1
74.4
0.5
(1.2)
–
–
–
–
(47.5)
(48.2)
957.6
Total
equity
£m
752.1
84.7
–
–
–
–
–
–
–
–
–
–
–
2.4
–
–
–
–
2.4
(111.3)
21.8
21.8
(3.7)
–
–
–
–
–
–
102.8
0.9
–
(2.1)
4.1
(0.7)
0.9
(44.1)
(41.0)
85.0
(3.7)
35.7
10.7
(7.9)
2.3
(0.8)
3.9
146.7
0.9
75.5
0.3
–
–
–
(44.1)
32.6
931.4
Further detail in respect of the Group’s equity is provided in notes 28 and 29 to the fnancial statements.
78
Marston’s PLC Annual Report and Accounts 2018
Notes
For the 52 weeks ended 29 September 2018
1 Accounting policies
Basis of preparation
These consolidated fnancial statements for the 52 weeks ended 29 September 2018 (2017: 52 weeks ended 30 September 2017) have been
prepared in accordance with IFRS and IFRS Interpretations Committee (IFRS IC) and Standing Interpretations Committee interpretations adopted
by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The fnancial statements
have been prepared under the historical cost convention as modifed by the revaluation of certain items, principally land and buildings, derivative
fnancial instruments, retirement benefts and share-based payments.
At the time of approving the fnancial statements, the Directors have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. Thus the Directors continue to adopt the going concern basis of accounting in preparing the
fnancial statements. Further detail is provided in the Viability Statement within the Strategic Report.
New standards and interpretations
The International Accounting Standards Board (IASB) and IFRS IC have issued the following new or revised standards and interpretations with
an effective date for fnancial periods beginning on or after the dates disclosed below. These standards and interpretations have not yet been
adopted by the Group.
IFRS 2
Share-based Payment
Amendments to clarify the classifcation and measurement of share-based payment transactions
1 January 2018
IFRS 3
Business Combinations
Amendments to clarify the defnition of a business
IFRS 4
Insurance Contracts
Amendments regarding the interaction of IFRS 4 and IFRS 9
IFRS 9
Financial Instruments
New accounting standard
IFRS 10
Consolidated Financial Statements
1 January 2020
1 January 2018
1 January 2018
Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture
Date deferred
IFRS 15
Revenue from Contracts with Customers
New accounting standard
IFRS 16
Leases
New accounting standard
IFRS 17
Insurance Contracts
New accounting standard
IAS 19
Employee Benefts
Amendments regarding plan amendments, curtailments or settlements
IAS 28
Investments in Associates and Joint Ventures
1 January 2018
1 January 2019
1 January 2021
1 January 2019
Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture
Amendments regarding long-term interests in associates and joint ventures
Date deferred
1 January 2019
IAS 40
Investment Property
Amendments to clarify transfers of property to, or from, investment property
IFRIC 22
IFRIC 23 Uncertainty over Income Tax Treatments
Foreign Currency Transactions and Advance Consideration
1 January 2018
1 January 2018
1 January 2019
The IASB have also issued a new Conceptual Framework for Financial Reporting and a number of minor amendments to standards as part of
their Annual Improvements to IFRS.
IFRS 9 ‘Financial Instruments’ introduces a new model for the classifcation and measurement of fnancial assets, a new expected credit loss
model for the impairment of fnancial assets held at amortised cost, and new requirements for hedge accounting. There are also a number of
new disclosure requirements. The Group is fnalising the impact of the adoption of IFRS 9 on its results and fnancial position. It is anticipated
that the adoption of the expected credit loss model will result in earlier recognition of impairment losses on trade and other receivables, which
will result in an initial reduction in net assets of around £5 million to £8 million. It is not anticipated that there will be a material impact on the
Group’s ongoing results from the adoption of the standard.
IFRS 15 ‘Revenue from Contracts with Customers’ introduces a new fve step model for the recognition of revenue, which is based on the
satisfaction of performance obligations. The core principle is that an entity will recognise revenue to depict the transfer of promised goods or
services to customers in an amount that refects the consideration to which the entity expects to be entitled in exchange for those goods and
services. The adoption of IFRS 15 is not expected to have a material impact on the Group’s results or fnancial position, but is expected to result in
further disclosures.
The adoption of IFRS 16 ‘Leases’ is expected to have a signifcant impact on both the Group’s balance sheet and income statement. For those
leases where it is the lessee the Group will be required to recognise assets and liabilities in the balance sheet in the majority of cases and
recognise depreciation and fnance costs in the income statement. The Group is undertaking a detailed assessment to determine the overall
impact of the adoption of IFRS 16 on its results and fnancial position, which will clearly depend upon the transition options selected and the
specifc circumstances at the date of adoption.
It is not anticipated that any of the other above new standards or interpretations will have a material impact on the Group’s results or
fnancial position.
Basis of consolidation
The consolidated fnancial statements incorporate the fnancial 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.
Strategic Report
Governance
Financial Statements
Additional Information
79
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. Identifable 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 identifable 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 identifable
net assets of the subsidiary acquired, the difference is recognised immediately in the income statement.
The consolidated fnancial statements incorporate the results of Marston’s Issuer PLC and its parent company, Marston’s Issuer Parent Limited.
Marston’s Issuer PLC was set up with the sole purpose of issuing debt secured on assets owned by the Group. Wilmington Trust SP Services (London)
Limited holds the shares of Marston’s Issuer Parent Limited under a declaration of trust for charitable purposes. The rights provided to the Group
through the securitisation give the Group power over these companies and the ability to use that power to affect its exposure to variable returns
from them. As such the Directors of Marston’s PLC consider that these companies are controlled by the Group, as defned in IFRS 10 ‘Consolidated
Financial Statements’, and hence for the purpose of the consolidated fnancial statements they have been treated as subsidiary undertakings.
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, packaging and distribution) supplied to customers, and rent receivable from licensed properties. Revenue from drink, food,
accommodation, brewing, packaging and distribution 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.
It is considered that, in respect of its franchised arrangements, the Group has exposure to the signifcant risks and rewards associated with the
sale of goods and rendering of services and as such the total income from franchised pubs (i.e. from gaming machines, accommodation and the
sale of food and drink) is included within the Group’s revenue.
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 four distinguishable operating segments, being Destination and Premium,
Taverns, Brewing and Group Services. This mirrors the Group’s internal reporting structure, and refects the different distribution channels,
customer profles and nature of products and services provided within each segment. An element of Group Services’ costs is allocated to each of
the trading segments. Transfer prices between operating segments are on an arm’s length basis.
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 ‘Operating Segments’ the chief operating decision maker has been identifed 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 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 defned as those items that, by virtue of their nature, size or expected frequency, warrant separate additional disclosure
in the fnancial 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 signifcant area of the business, the threshold for classifcation of property related items as exceptional is
higher than other items.
Other adjusting items comprise the revenue and expenses in respect of the ongoing management of the remainder of the portfolio of pubs
disposed of in the period ended 4 October 2014. The pubs subject to the management agreement no longer formed part of the Group’s core
activities and the Group did 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 an acquisition are
recognised separately from goodwill if the fair value of these assets can be identifed 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 indefnite 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. Any impairment
of carrying value is charged to the income statement.
The useful lives of the Group’s intangible assets are:
Acquired brands
Lease premiums
Computer software
Development costs
Indefnite
Life of the lease
3 to 15 years
10 years
Research and development expenditure
All expenditure on the research phase of an internal project is expensed as incurred.
80
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
1 Accounting policies (continued)
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 benefts;
• Adequate technical, fnancial 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.
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
identifable 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 fxtures, fttings, tools and
equipment are stated at cost.
• Depreciation is charged to the income statement on a straight-line basis to provide for the cost of the assets less their residual values over
their useful lives.
• Freehold and long leasehold buildings are depreciated to their residual values over 50 years.
• Short leasehold properties are depreciated over the life of the lease.
• Plant and machinery and fxtures, fttings, tools and equipment are depreciated over periods ranging from 3 to 20 years.
• 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 qualifed valuers on a suffciently regular basis using open market value so that the carrying value of an asset does
not differ signifcantly 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
Proft/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 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 a 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 classifed as fnance leases if the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All
other leases are classifed as operating leases.
The cost of assets held under fnance 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
fnance charge element of rentals is charged to the income statement and classifed within fnance costs as incurred.
Strategic Report
Governance
Financial Statements
Additional Information
81
1 Accounting policies (continued)
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.
Obligations arising from sale and leaseback arrangements with repurchase options that do not fall within the scope of IAS 17 ‘Leases’ are
classifed 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 ‘frst in, frst 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 fxtures and fttings, 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 classifcation. 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 classifes its fnancial assets in one of the following two categories: at fair value through proft or loss and loans and receivables. The
Group classifes its fnancial liabilities in one of the following two categories: at fair value through proft or loss and other fnancial liabilities.
The classifcation depends on the purpose for which the fnancial instruments were acquired. Management determines the classifcation of the
Group’s fnancial instruments at initial recognition.
Financial instruments at fair value through proft or loss
Derivatives are categorised as fnancial instruments at fair value through proft or loss unless they are designated as part of a hedging
relationship. The Group holds no other fnancial instruments at fair value through proft or loss.
Loans and receivables
Loans and receivables are non-derivative fnancial assets with fxed or determinable payments that are not quoted in an active market. The
Group’s loans and receivables comprise trade receivables, other receivables, trade loans, other cash deposits and cash and cash equivalents in
the balance sheet. Loans and receivables are carried at amortised cost using the effective interest method.
Other fnancial liabilities
Non-derivative fnancial liabilities are classifed as other fnancial liabilities. The Group’s other fnancial liabilities comprise borrowings, trade
payables and other payables. Other fnancial liabilities are carried at amortised cost using the effective interest method.
Financial assets are derecognised when the rights to receive cash fows 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 fnancial 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 fnancial instruments shall be undertaken.
Derivative fnancial instruments
The only derivative fnancial 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 fnance.
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 fow 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
fnance 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 fnance income or costs in the period in which they arise.
The fair value of a hedging derivative is classifed 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 classifed 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 fows 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 fnance income or costs.
82
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
1 Accounting policies (continued)
Amounts that have been recognised in other comprehensive income in respect of cash fow hedges are reclassifed from equity to proft or loss
as a reclassifcation adjustment in the same period or periods during which the hedged forecast cash fow affects proft 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. Signifcant fnancial diffculties of the debtor,
probability that the debtor will enter bankruptcy or fnancial 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 fows. 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 classifed
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. Signifcant trade loans are secured against the property of the loan recipient.
Other cash deposits
Cash held on deposit with banks with a maturity of more than three months at the date of acquisition is classifed within other cash deposits.
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 fow statement, cash and cash equivalents are as defned 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 classifed as liabilities. The dividends on these preference shares are recognised in the income statement as fnance costs.
Borrowing costs are recognised as an expense in the period in which they are incurred, except for interest costs incurred on the fnancing 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 benefts
Pension costs for the Group’s defned beneft 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 operating expenses and net fnance 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
defned beneft asset/liability is included within exceptional fnance costs/income and the administrative expenses paid from plan assets are
included within fnance 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
defned beneft asset/liability, is also recognised in other comprehensive income.
The asset/liability recognised in the balance sheet for the defned beneft pension plan is the fair value of plan assets less the present value of the
defned beneft obligation. Where the fair value of plan assets exceeds the present value of the defned beneft obligation, the Group recognises an
asset at the lower of the fair value of plan assets less the present value of the defned beneft obligation, and the present value of any economic
benefts available in the form of refunds from the plan or reductions in future contributions to the plan.
Should contributions payable under a minimum funding requirement not be available as a refund or reduction in future contributions after they
are paid into the plan, a liability would be recognised to this extent when the obligation arose.
Pension costs for the Group’s defned contribution pension plans are charged to the income statement in the period in which they arise.
Post-retirement medical benefts are accounted for in an identical way to the Group’s defned beneft 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 defned as the differences between the carrying value of
assets and liabilities and their tax base.
Strategic Report
Governance
Financial Statements
Additional Information
83
1 Accounting policies (continued)
Deferred tax assets are recognised to the extent that it is probable that future taxable proft 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 outfow of economic benefts will be required to settle the obligation.
When valuations of leasehold properties (based on future estimated income streams) give rise to a defcit 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 refects current market assessments of the time value of money and the risks specifc to the obligation. The
key assumptions used in the discounted cash fow calculations are the discount and infation rates and the market rents, vacant periods and
future trading income 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, and shares held on trust for employee share schemes, which are used for the issuing 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 fnancial 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 proft 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 signifcant 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 signifcant
judgements are in respect of retirement benefts, lease classifcation, non-underlying items, property, plant and equipment, impairment, fnancial
instruments and property lease provisions. Details of these assumptions and judgements are provided in the relevant accounting policy and
detailed note to the fnancial statements as set out below.
The following judgements (apart from those involving estimates) have had the most signifcant effect on amounts recognised in the
fnancial statements:
Retirement benefts
• Recognition of a retirement beneft surplus (see accounting policy).
Lease classifcation
• Judgements in respect of whether a lease has transferred substantially all the risks and rewards of ownership to the lessee, in particular
whether the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset and
whether the lease term is for the major part of the economic life of the asset (see accounting policy).
Non-underlying items
• Determination of items to be classed as non-underlying (see accounting policy).
The following estimates and assumptions have a signifcant risk of causing a material adjustment to the carrying amount of assets and liabilities:
Property, plant and equipment
• Valuation of properties (see accounting policy).
• Assets’ useful lives and residual values (see accounting policy).
84
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
1 Accounting policies (continued)
Impairment
• Assumptions made in the value in use calculation, in particular the pre-tax discount rate applied to cash fow projections and the growth rate
used to extrapolate projected cash fows beyond one year budgets (notes 10 and 11).
Retirement benefts
• Actuarial assumptions in respect of the defned beneft pension plan, which include discount rates, rates of increase in pensions, infation
rates and life expectancies (note 15).
Financial instruments
• Valuation of fnancial instruments that are not traded in an active market (note 25).
Property lease provisions
• Assumptions made in the discounted cash fow calculations, in particular the market rents, vacant periods, future trading income, infation
rates and discount rates (see accounting policy).
2 Segment reporting
For segment reporting purposes the Group is considered to have four distinguishable operating segments as follows:
Segment
Destination and Premium
Taverns
Brewing
Group Services
Revenue
Food and drink sales, accommodation and gaming machine income
Food and drink sales, rent from licensed properties, accommodation and gaming machine income
Drink sales and third party brewing, packaging and distribution
N/A
Underlying revenue by segment
Destination and Premium
Taverns
Brewing
Group Services
Underlying revenue
Non-underlying items
Revenue
Underlying operating proft by segment
Destination and Premium
Taverns
Brewing
Group Services
Underlying operating proft
Non-underlying operating items
Operating proft
Net fnance costs
Proft before taxation
Other segment information
Destination and Premium
Taverns
Brewing
Group Services
Total
2018
£m
450.7
312.0
377.7
–
1,140.4
0.9
1,141.3
2018
£m
89.4
86.1
32.0
(25.0)
182.5
(49.1)
133.4
(79.1)
54.3
2017
£m
438.0
301.3
252.9
–
992.2
19.1
1,011.3
2017
£m
88.9
84.1
25.5
(24.0)
174.5
(4.1)
170.4
(70.1)
100.3
Additions to
non-current assets*
Depreciation and
amortisation
2018
£m
102.6
29.1
27.3
6.7
165.7
2017
£m
152.9
29.6
18.2
7.4
208.1
2018
£m
16.4
9.2
10.7
3.8
40.1
2017
£m
15.6
9.6
10.5
3.5
39.2
* Excludes amounts relating to goodwill, deferred tax, retirement benefts and fnancial instruments.
In the prior period the Group had fve distinguishable operating segments being Destination and Premium, Taverns, Leased, Brewing and
Group Services. During the current period the Group merged its Taverns and Leased operational teams, meaning that it is no longer possible to
separate their performance and proftability. The results of the merged operations are now presented as one combined ‘Taverns’ segment in the
reporting to the chief operating decision maker and management decisions are made on a combined basis. The results for the 52 weeks ended
30 September 2017 have been restated to refect the merging of these two segments.
Revenue generated outside the United Kingdom during the period was £12.2 million (2017: £6.4 million).
Strategic Report
Governance
Financial Statements
Additional Information
85
3 Revenue and operating expenses
Revenue
Goods
Services
Revenue from services includes rent receivable from licensed properties of £15.4 million (2017: £17.1 million).
Operating expenses
Change in stocks of fnished 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:
Change in stocks of fnished goods and work in progress
Raw materials, consumables and excise duties
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
4 Non-underlying items
Exceptional operating items
Impact of change in rate assumptions used for onerous lease provisions
Reorganisation and integration costs
Impairment of freehold and leasehold properties
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
Net interest on net defned beneft asset/liability
Write-off of unamortised fnance costs
Movement in fair value of interest rate swaps
Total non-underlying items
2018
£m
1,056.5
84.8
1,141.3
2018
£m
(3.4)
(7.3)
(10.6)
456.4
39.0
1.1
234.3
0.9
17.6
(0.4)
39.4
240.9
1,007.9
2018
£m
0.2
–
3.7
0.2
39.4
6.5
50.0
2018
£m
0.2
0.1
0.1
0.4
2018
£m
0.1
7.3
39.8
47.2
1.9
1.9
49.1
0.1
–
0.5
0.6
49.7
2017
£m
945.4
65.9
1,011.3
2017
£m
(1.8)
(5.8)
(8.7)
370.9
38.1
1.1
219.1
0.8
20.6
(0.2)
3.9
202.9
840.9
2017
£m
0.3
5.3
4.0
5.0
–
8.6
23.2
2017
£m
0.2
0.1
0.1
0.4
2017
£m
(1.6)
5.5
–
3.9
0.2
0.2
4.1
0.7
1.4
(6.4)
(4.3)
(0.2)
86
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
4 Non-underlying items (continued)
Impact of change in rate assumptions used for onerous lease provisions
The update of the discount rate assumptions used in the calculation of the Group’s onerous property lease provisions resulted in an increase of
£0.1 million (2017: decrease of £1.6 million) in the total provision.
Reorganisation and integration costs
During the current period the Group incurred reorganisation and integration costs of £7.3 million (2017: £5.5 million), primarily as a result of the
acquisition of the beer business of Charles Wells in the prior period.
Impairment of freehold and leasehold properties
At 28 January 2018 the Group’s freehold and leasehold properties were revalued by independent chartered surveyors on an open market value
basis. The resulting revaluation adjustments have been recognised in the revaluation reserve or income statement as appropriate. The amount
recognised in the income statement comprises:
Impairment of other intangible assets (note 11)
Reversal of past impairment of other intangible assets (note 11)
Impairment of property, plant and equipment (note 12)
Reversal of past impairment of property, plant and equipment (note 12)
Impairment of assets held for sale (note 18)
Valuation fees
2018
£m
0.1
(0.3)
70.6
(31.4)
0.4
0.4
39.8
Portfolio disposal of pubs
During the period ended 4 October 2014 the Group disposed of a portfolio of 202 pubs and subsequently entered into a four year lease and
fve year management agreement in respect thereof. During the prior period the Group entered into new 15 year leases in respect of 22 of the
properties and these were removed from the management agreement. All of the other pubs were removed from the arrangements by the
purchaser before the end of the four year lease term in December 2017. The Group no longer had strategic control of the pubs whilst they were
subject to the management agreement and they did not form part of its core activities. As such the results in respect of the ongoing operation
and management of these pubs have been classifed as a non-underlying item, comprised as follows:
Revenue
Operating expenses
2018
£m
0.9
(2.8)
(1.9)
2017
£m
19.1
(19.3)
(0.2)
Net interest on net defned beneft asset/liability
The net interest on the net defned beneft asset/liability in respect of the Group’s defned beneft pension plan was a charge of £0.1 million
(2017: £0.7 million) (note 15).
Movement in fair value of interest rate swaps
The Group’s interest rate swaps are revalued to fair value at each balance sheet date. The movement in fair value of interest rate swaps which
are not designated as part of a hedging relationship, and the ineffective portion of the movement in fair value of interest rate swaps which are
accounted for as hedging instruments are both recognised in the income statement. The net loss of £0.5 million (2017: gain of £6.4 million) is
shown as an exceptional item.
Impact of taxation
The current tax credit relating to the above non-underlying items amounts to £1.6 million (2017: £0.9 million). The deferred tax credit relating to
the above non-underlying items amounts to £5.2 million (2017: charge of £0.9 million).
Prior period non-underlying items
During the prior period the Group entered into a new bank facility. As such the unamortised fnance costs relating to the previous facility were
written off.
5 Employees
Employee costs
Wages and salaries
Social security costs
Pension costs
Share-based payments
Termination costs
A non-underlying charge of £3.7 million (2017: £4.0 million) is included in employee costs.
2018
£m
206.4
17.1
8.7
0.5
1.6
234.3
2017
£m
194.0
15.2
7.4
0.9
1.6
219.1
Strategic Report
Governance
Financial Statements
Additional Information
87
5 Employees (continued)
Average monthly number of employees
Bar staff
Management, administration and production
Key management personnel compensation
Short-term employee benefts
Termination benefts
Share-based payments
6 Finance costs and income
Finance costs
Bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Other interest payable and similar charges
Exceptional fnance costs
Net interest on net defned beneft asset/liability
Write-off of unamortised fnance costs
Total fnance costs
Finance income
Deposit and other interest receivable
Total fnance 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 fnance costs
7 Taxation
Income statement
Current tax
Current period
Adjustments in respect of prior periods
Credit in respect of tax on non-underlying items
Deferred tax
Current period
Adjustments in respect of prior periods
(Credit)/charge in respect of tax on non-underlying items
Taxation charge reported in the income statement
Statement of comprehensive income
Remeasurement of retirement benefts
Impairment and revaluation of properties
Hedging reserve movements
Taxation charge reported in the statement of comprehensive income
2018
Number
11,433
2,865
2017
Number
11,572
2,547
2018
£m
1.7
–
–
1.7
2018
£m
11.6
46.2
1.4
18.0
1.7
78.9
0.1
–
0.1
79.0
(0.4)
(0.4)
(0.8)
1.3
0.5
79.1
2018
£m
10.1
(0.4)
(1.6)
8.1
7.6
(1.2)
(5.2)
1.2
9.3
2018
£m
2.4
(0.1)
1.8
4.1
2017
£m
2.2
0.4
0.2
2.8
2017
£m
11.1
46.1
1.2
15.0
1.4
74.8
0.7
1.4
2.1
76.9
(0.4)
(0.4)
(9.3)
2.9
(6.4)
70.1
2017
£m
10.7
(0.3)
(0.9)
9.5
6.1
(0.9)
0.9
6.1
15.6
2017
£m
3.7
(3.9)
7.9
7.7
88
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
7 Taxation (continued)
The actual tax rate for the period is lower (2017: lower) than the standard rate of corporation tax of 19% (2017: 19.5%). The differences are
explained below:
Tax reconciliation
Proft before tax
Proft before tax multiplied by the corporation tax rate of 19% (2017: 19.5%)
Effect of:
Adjustments in respect of prior periods
Net deferred tax 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
Current period taxation charge
2018
£m
54.3
10.3
(1.6)
(1.1)
2.6
(0.6)
(0.3)
9.3
2017
£m
100.3
19.6
(1.2)
(1.4)
0.7
(0.9)
(1.2)
15.6
The standard rate of corporation tax changed from 20% to 19% with effect from 1 April 2017. As such the Group’s profts for the prior period were
taxed at an effective rate of 19.5%. The March 2016 Budget announced that the standard rate of corporation tax would change from 19% to 17%
with effect from 1 April 2020. This change was substantively enacted in the Finance Act 2016 in September 2016.
8 Ordinary dividends on equity shares
Paid in the period
Final dividend for 2017 of 4.8p per share (2016: 4.7p)
Interim dividend for 2018 of 2.7p per share (2017: 2.7p)
2018
£m
30.4
17.1
47.5
2017
£m
27.0
17.1
44.1
A fnal dividend for 2018 of 4.8p per share amounting to £30.4 million has been proposed for approval at the Annual General Meeting, but has not
been refected in the fnancial statements.
This dividend will be paid on 28 January 2019 to those shareholders on the register at close of business on 14 December 2018.
9 Earnings per ordinary share
Basic earnings per share are calculated by dividing the proft attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the period, excluding treasury shares and those held on trust for employee share schemes.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential
ordinary shares. These represent share options granted to employees where the exercise price is less than the weighted average market price of
the Company’s shares during the period.
Underlying earnings per share fgures are presented to exclude the effect of exceptional and other adjusting items. The Directors consider that
the supplementary fgures are a useful indicator of performance.
2018
2017
Basic earnings per share
Diluted earnings per share
Underlying earnings per share fgures
Basic underlying earnings per share
Diluted underlying earnings per share
Basic weighted average number of shares
Dilutive options
Diluted weighted average number of shares
Earnings
£m
45.0
45.0
Per share
amount
p
7.1
7.0
87.9
87.9
13.9
13.7
Earnings
£m
84.7
84.7
84.5
84.5
2018
m
633.1
6.7
639.8
Per share
amount
p
14.2
14.1
14.2
14.0
2017
m
596.9
4.8
601.7
Strategic Report
Governance
Financial Statements
Additional Information
89
10 Goodwill
Cost
At 1 October 2017 and 29 September 2018
Aggregate impairment
At 1 October 2017 and 29 September 2018
Net book amount at 30 September 2017
Net book amount at 29 September 2018
Cost
At 2 October 2016
Additions
At 30 September 2017
Aggregate impairment
At 2 October 2016 and 30 September 2017
Net book amount at 1 October 2016
Net book amount at 30 September 2017
£m
231.4
1.1
230.3
230.3
£m
228.6
2.8
231.4
1.1
227.5
230.3
Additions in the prior period relate to the acquisition of the beer business of Charles Wells (note 35).
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.
Goodwill has been allocated to operating segments based on the extent to which the benefts of acquisitions fow to that segment, as follows:
Destination and Premium
Taverns
Brewing
2018
£m
87.5
113.1
29.7
230.3
2017
£m
87.5
113.1
29.7
230.3
The allocation by operating segment for the prior period has been restated for the merging of the Taverns and Leased segments (note 2).
The key assumptions used in determining value in use are the pre-tax discount rate applied to the cash fow projections of 5% (2017: 6%) and the
growth rate used to extrapolate the projected cash fows beyond the one year budgets of 2% (2017: 2%) 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 discount rate used is the Group’s weighted average cost of capital adjusted to
refect market conditions.
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.
90
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
11 Other intangible assets
Cost
At 1 October 2017
Additions
Net transfers to assets held for sale and disposals
At 29 September 2018
Amortisation
At 1 October 2017
Charge for the period
Impairment/reversal of impairment
Net transfers to assets held for sale and disposals
At 29 September 2018
Net book amount at 30 September 2017
Net book amount at 29 September 2018
Acquired
brands
£m
Lease
premiums
£m
Computer
software
£m
Development
costs
£m
62.1
–
–
62.1
–
–
–
–
–
62.1
62.1
1.5
–
–
1.5
0.9
0.1
(0.2)
–
0.8
0.6
0.7
10.7
3.3
(1.5)
12.5
5.8
1.0
–
(1.5)
5.3
4.9
7.2
0.1
–
–
0.1
0.1
–
–
–
0.1
–
–
Total
£m
74.4
3.3
(1.5)
76.2
6.8
1.1
(0.2)
(1.5)
6.2
67.6
70.0
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 indefnite useful lives and no annual amortisation is provided.
Lease premiums classifed as intangible assets are those acquired with new subsidiaries.
During the current period there was an impairment of other intangible assets of £0.1 million (2017: £nil) and a reversal of past impairment of
£0.3 million (2017: £nil).
Acquired
brands
£m
Lease
premiums
£m
Computer
software
£m
Development
costs
£m
Cost
At 2 October 2016
Additions
Acquisitions
Net transfers to assets held for sale and disposals
At 30 September 2017
Amortisation
At 2 October 2016
Charge for the period
Net transfers to assets held for sale and disposals
At 30 September 2017
Net book amount at 1 October 2016
Net book amount at 30 September 2017
32.1
–
30.0
–
62.1
–
–
–
–
32.1
62.1
1.5
–
–
–
1.5
0.9
–
–
0.9
0.6
0.6
11.1
1.4
–
(1.8)
10.7
6.5
1.1
(1.8)
5.8
4.6
4.9
Acquired brands relate to Brewing. The carrying value of acquired brands is split as follows:
Wychwood
Jennings
Ringwood
Thwaites
Eagle
0.1
–
–
–
0.1
0.1
–
–
0.1
–
–
2018
£m
13.6
2.8
2.9
12.8
30.0
62.1
Total
£m
44.8
1.4
30.0
(1.8)
74.4
7.5
1.1
(1.8)
6.8
37.3
67.6
2017
£m
13.6
2.8
2.9
12.8
30.0
62.1
Impairment testing of acquired brands
The carrying values of acquired brands are subject to annual impairment reviews. The recoverable amount of each brand is determined based on
the higher of value in use and fair value less costs to sell. The fair value of each brand is determined by applying an appropriate earnings multiple
to the anticipated future income generated by that brand. The key assumptions used in determining the value in use of each brand are the pre-
tax discount rate of 5% (2017: 6%) and the long-term growth rate used to extrapolate cash fows beyond the cash fow projection period of one
year of 2% (2017: 2%) 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 discount rate used is the Group’s weighted average cost of
capital adjusted to refect market conditions.
The above impairment tests demonstrated that the Group had suffcient levels of headroom and as such no impairment of acquired brands was
required in the current or prior period.
Strategic Report
Governance
Financial Statements
Additional Information
91
12 Property, plant and equipment
Cost or valuation
At 1 October 2017
Additions
Net transfers to assets held for sale and disposals
Revaluation
At 29 September 2018
Depreciation
At 1 October 2017
Charge for the period
Net transfers to assets held for sale and disposals
Revaluation/impairment
At 29 September 2018
Net book amount at 30 September 2017
Net book amount at 29 September 2018
Cost or valuation
At 2 October 2016
Additions
Acquisitions
Net transfers to assets held for sale and disposals
Revaluation
At 30 September 2017
Depreciation
At 2 October 2016
Charge for the period
Net transfers to assets held for sale and disposals
Impairment
At 30 September 2017
Net book amount at 1 October 2016
Net book amount at 30 September 2017
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
Cost or valuation of land and buildings comprises:
Valuation
At cost
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fttings,
tools and
equipment
£m
2,153.7
94.1
(42.7)
(39.0)
2,166.1
7.6
3.6
–
(8.8)
2.4
2,146.1
2,163.7
72.2
17.7
(5.1)
–
84.8
30.8
6.4
(4.4)
–
32.8
41.4
52.0
331.4
50.6
(37.3)
–
344.7
158.2
29.0
(35.3)
0.4
152.3
173.2
192.4
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fttings,
tools and
equipment
£m
2,018.8
146.5
19.6
(29.5)
(1.7)
2,153.7
4.5
3.1
–
–
7.6
2,014.3
2,146.1
61.9
9.5
5.7
(4.9)
–
72.2
29.3
6.0
(4.5)
–
30.8
32.6
41.4
320.3
50.7
0.2
(39.8)
–
331.4
167.8
29.0
(39.2)
0.6
158.2
152.5
173.2
2018
£m
1,855.5
227.1
81.1
2,163.7
2018
£m
2,116.5
49.6
2,166.1
Total
£m
2,557.3
162.4
(85.1)
(39.0)
2,595.6
196.6
39.0
(39.7)
(8.4)
187.5
2,360.7
2,408.1
Total
£m
2,401.0
206.7
25.5
(74.2)
(1.7)
2,557.3
201.6
38.1
(43.7)
0.6
196.6
2,199.4
2,360.7
2017
£m
1,830.2
253.2
62.7
2,146.1
2017
£m
1,977.3
176.4
2,153.7
If the freehold and leasehold properties had not been revalued, the historical cost net book amount would be £1,624.0 million (2017: £1,578.9 million).
Cost at 29 September 2018 includes £40.8 million (2017: £43.4 million) of assets in the course of construction.
Interest costs of £2.7 million (2017: £1.5 million) were capitalised in the period in respect of the fnancing of major projects. The capitalisation
rates used ranged from 5% to 6% (2017: 5% to 6%).
92
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
12 Property, plant and equipment (continued)
The net proft on disposal of property, plant and equipment, intangible assets and assets held for sale was £7.7 million (2017: £12.5 million). A net
proft on disposal of £8.3 million (2017: £12.5 million) has been included within the Group’s underlying results.
Capital expenditure authorised and committed at the period end but not provided for in the fnancial statements was £10.2 million
(2017: £14.4 million).
The net book amount of land and buildings held under fnance leases at 29 September 2018 was £34.6 million (2017: £36.3 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 £377.1 million
(2017: £337.9 million). The net book amount of plant and machinery held as security for bank borrowings was £3.2 million (2017: £nil).
Revaluation/impairment
At 28 January 2018 independent chartered surveyors revalued the Group’s freehold and leasehold properties on an open market value basis.
These valuations were incorporated into the fnancial statements and the resulting revaluation adjustments were recognised in the revaluation
reserve or income statement as appropriate.
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:
Impairment
Reversal of past impairment
Revaluation reserve:
Unrealised revaluation surplus
Reversal of past revaluation surplus
Net decrease in shareholders’ equity/property, plant and equipment
2018
£m
(70.6)
31.4
(39.2)
170.3
(161.7)
8.6
(30.6)
2017
£m
(3.8)
–
(3.8)
2.3
(0.8)
1.5
(2.3)
Fair value of land and buildings
IFRS 13 ‘Fair Value Measurement’ requires fair value measurements to be recognised using a fair value hierarchy that refects the signifcance 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
Land and buildings:
Specialised brewery properties
Other land and buildings
2018
2017
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
–
–
–
–
2,110.6
2,110.6
53.1
–
53.1
53.1
2,110.6
2,163.7
–
–
–
–
2,100.6
2,100.6
45.5
–
45.5
45.5
2,100.6
2,146.1
In the current period properties with a value of £5.1 million that were previously categorised within Level 2 have been transferred to Level 3 to
appropriately refect the valuation basis used in the external property valuation undertaken in the period. There were no other transfers between
Levels 1, 2 and 3 fair value measurements during the current or prior period.
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. Whilst there are two inputs to the fair value measurement of the public house
assets, being the fair maintainable trade and the multiplier applied, it is considered that the most signifcant input relates to the multiplier which,
being indirectly observable, is a Level 2 input. Thus it has been concluded that since the most signifcant infuence on the valuation is observable
indirectly Level 2 is the most appropriate categorisation for these fair value measurements.
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 confguration. 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 signifcant 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
Strategic Report
Governance
Financial Statements
Additional Information
93
12 Property, plant and equipment (continued)
Level 3 recurring fair value measurements
At beginning of the period
Additions
Acquisitions
Transfers
Revaluation
Depreciation charge for the period
At end of the period
2018
£m
45.5
0.6
–
5.1
2.3
(0.4)
53.1
2017
£m
25.3
0.8
19.6
–
–
(0.2)
45.5
The Group’s properties are revalued by external independent qualifed 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 28 January 2018. The Group has an internal team of qualifed
valuers and at each reporting date the estate is reviewed for any indication of signifcant 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
Acquisitions
Disposals, repayments and impairments
At end of the period
2018
£m
10.3
2.7
–
(3.4)
9.6
2017
£m
10.4
2.5
0.6
(3.2)
10.3
Other non-current assets are shown net of a provision of £1.9 million (2017: £2.4 million).
14 Deferred tax
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 17% (2017: 17%). The movement on the deferred tax accounts is shown below:
Net deferred tax liability
At beginning of the period
Acquisitions
Charged to the income statement
(Credited)/charged to equity:
Impairment and revaluation of properties
Hedging reserve
Retirement benefts
At end of the period
Recognised in the balance sheet
Deferred tax liabilities (after offsetting)
Deferred tax assets (after offsetting)
2018
£m
76.0
–
1.2
(0.1)
1.8
2.4
81.3
2018
£m
81.3
–
81.3
2017
£m
60.8
1.4
6.1
(3.9)
7.9
3.7
76.0
2017
£m
76.6
(0.6)
76.0
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12
‘Income Taxes’) 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 assets have been recognised in respect of all tax losses and other
temporary differences where it is probable that these assets will be recovered.
Deferred tax liabilities
At 1 October 2017
Charged/(credited) to the income statement
Charged/(credited) to equity
At 29 September 2018
Accelerated
capital
allowances
£m
30.2
4.8
–
35.0
Revaluation
of properties
£m
94.3
(6.5)
(0.1)
87.7
Rolled over
capital
gains
£m
6.1
0.7
–
6.8
Pensions
£m
–
0.3
2.4
2.7
Other
£m
4.0
0.3
–
4.3
Total
£m
134.6
(0.4)
2.3
136.5
94
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
14 Deferred tax (continued)
Deferred tax assets
At 1 October 2017
Charged to the income statement
Charged to equity
At 29 September 2018
Net deferred tax liability
At 30 September 2017
At 29 September 2018
Deferred tax liabilities
At 2 October 2016
Acquisitions
Charged/(credited) to the income statement
Credited to equity
At 30 September 2017
Deferred tax assets
At 2 October 2016
Acquisitions
Charged to the income statement
Charged to equity
At 30 September 2017
Net deferred tax liability
At 1 October 2016
At 30 September 2017
15 Retirement benefts
Pensions
£m
(0.9)
0.9
–
–
Tax losses
£m
(27.1)
0.7
–
(26.4)
Hedging
reserve
£m
(26.1)
–
1.8
(24.3)
Accelerated
capital
allowances
£m
27.9
(0.2)
2.5
–
30.2
Revaluation
of properties
£m
97.1
1.9
(0.8)
(3.9)
94.3
Rolled over
capital
gains
£m
4.4
–
1.7
–
6.1
Pensions
£m
(5.7)
–
1.1
3.7
(0.9)
Tax losses
£m
(27.4)
–
0.3
–
(27.1)
Hedging
reserve
£m
(34.0)
–
–
7.9
(26.1)
Other
£m
(4.5)
–
–
(4.5)
Other
£m
3.7
–
0.3
–
4.0
Other
£m
(5.2)
(0.3)
1.0
–
(4.5)
Total
£m
(58.6)
1.6
1.8
(55.2)
76.0
81.3
Total
£m
133.1
1.7
3.7
(3.9)
134.6
Total
£m
(72.3)
(0.3)
2.4
11.6
(58.6)
60.8
76.0
During the period the Group contributed to a funded defned beneft pension plan and a number of defned contribution pension plans.
Defned contribution plans
Pension costs for defned contribution plans are as follows:
Defned contribution plans
2018
£m
8.7
2017
£m
7.4
Defned beneft plan
The Marston’s PLC Pension and Life Assurance Scheme is a fnal salary pension plan which provides benefts 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
• Infation risk
• Changes in life expectancy
Strategic Report
Governance
Financial Statements
Additional Information
95
15 Retirement benefts (continued)
The movements in the fair value of plan assets and the present value of the defned beneft obligation during the period were:
At beginning of the period
Interest income/(expense)
Remeasurements:
Return on plan assets (excluding interest income)
Effect of changes in fnancial assumptions
Effect of changes in demographic assumptions
Effect of experience adjustments
Cash fows:
Employer contributions
Administrative expenses paid from plan assets
Benefts paid
At end of the period
Fair value
of plan assets
2018
£m
532.4
14.1
(11.7)
–
–
–
8.0
(0.9)
(25.3)
516.6
2017
£m
543.4
12.3
(5.2)
–
–
–
8.3
(0.8)
(25.6)
532.4
Present value
of defned
beneft obligation
2018
£m
(537.8)
(14.2)
2017
£m
(577.4)
(13.0)
–
16.6
2.9
6.2
–
–
25.3
(501.0)
–
27.0
–
–
–
–
25.6
(537.8)
Net surplus/
(defcit)
2018
£m
(5.4)
(0.1)
(11.7)
16.6
2.9
6.2
8.0
(0.9)
–
15.6
2017
£m
(34.0)
(0.7)
(5.2)
27.0
–
–
8.3
(0.8)
–
(5.4)
Pension costs recognised in the income statement
A charge of £0.1 million (2017: £0.7 million) comprising the net interest on the net defned beneft asset/liability is included within exceptional
fnance costs and a charge of £0.9 million (2017: £0.8 million) comprising the administrative expenses paid from plan assets is included within
fnance costs.
An updated actuarial valuation of the plan was performed by Mercer as at 29 September 2018 for the purposes of IAS 19 ‘Employee Benefts’. The
principal assumptions made by the actuaries were:
Discount rate
Rate of increase in pensions – 5% LPI
Rate of increase in pensions – 2.5% LPI
Infation assumption (RPI)
Infation assumption (CPI)
Employed deferred revaluation
Life expectancy for deferred members from age 65 (years)
Male
Female
Life expectancy for current pensioners from age 65 (years)
Male
Female
2018
2.9%
3.1%
2.2%
3.1%
2.1%
2.1%
23.6
26.1
21.8
24.0
2017
2.7%
3.1%
2.2%
3.1%
2.1%
2.1%
23.5
26.0
21.7
24.1
Mortality assumptions are based on standard tables adjusted for plan experience and with an allowance for future improvement in
life expectancy.
The sensitivity of the defned beneft obligation to changes in the principal actuarial assumptions is:
Discount rate
Infation assumption
Life expectancy
Change in assumption
0.25%
0.25%
One year
Increase in assumption
Decrease by 3.9%
Increase by 2.4%
Increase by 3.7%
Decrease in assumption
Increase by 4.2%
Decrease by 1.9%
Decrease by 3.7%
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 defned beneft asset/liability in the balance sheet i.e. the present value of the defned beneft
obligation calculated using the Projected Unit Credit Method.
Plan assets
Equities/Properties
Bonds/Gilts
Cash/Other
Buy-in policies (matching annuities)
2018
£m
134.3
191.1
7.6
183.6
516.6
2017
£m
131.8
189.8
6.4
204.4
532.4
The actual return on plan assets was a gain of £2.4 million (2017: £7.1 million).
A proportion of the defned beneft obligation has been secured by buy-in policies and as such this proportion of liabilities is matched
by annuities.
96
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
15 Retirement benefts (continued)
The Trustees of the plan hold a range of assets and are aiming to better align the cash fows from these to those of the plan. They are also
working with the Group to de-risk their portfolio further.
The Group is aiming to eliminate the plan’s funding defcit in the medium term. A schedule of contributions was agreed as part of the 30
September 2017 triennial valuation and contributions of £0.5 million per month are payable until 30 September 2021 as well as contributions in
respect of the plan’s expenses. These contributions may continue until 2031 depending on the plan’s funding position. The next triennial valuation
will be performed as at 30 September 2020.
The employer contributions expected to be paid during the fnancial period ending 28 September 2019 amount to £8.0 million.
The weighted average duration of the defned beneft obligation is 16 years.
On 26 October 2018 a High Court ruling indicated that guaranteed minimum pensions must be equalised for men and women. The Group is
assessing the impact of this requirement upon its defned beneft plan.
Post-retirement medical benefts
A gain of £nil (2017: £nil) in respect of the remeasurement of post-retirement medical benefts has been included in the statement of
comprehensive income.
16 Inventories
Raw materials and consumables
Work in progress
Finished goods
17 Trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
2018
£m
11.2
1.6
31.8
44.6
2018
£m
66.8
27.9
10.2
104.9
2017
£m
10.2
1.4
28.6
40.2
2017
£m
68.8
30.7
8.9
108.4
Trade receivables are shown net of a provision of £1.5 million (2017: £1.4 million). Other receivables are shown net of a provision of £4.2 million
(2017: £3.3 million). The ageing analysis of trade receivables is as follows:
Neither past due nor impaired
30 days or less
31 to 60 days
Greater than 60 days
2018
£m
46.5
14.0
2.0
4.3
66.8
2017
£m
44.9
9.6
10.0
4.3
68.8
Included within other receivables is an amount of £5.1 million (2017: £5.6 million), net of provision, which relates to amounts due from tenants of
licensed properties. A signifcant 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 29 September 2018 the value of collateral held in the form of cash deposits was £6.7 million (2017: £7.7 million).
18 Assets held for sale
Properties
2018
£m
2.3
2017
£m
2.7
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 or reversal of impairment. This review
identifed an impairment of £0.4 million (2017: £0.1 million) which has been recognised in the income statement.
Strategic Report
Governance
Financial Statements
Additional Information
97
19 Borrowings
Current
Bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Other borrowings
Non-current
Bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Preference shares
2018
£m
–
31.2
7.5
(0.3)
120.0
158.4
2018
£m
287.3
745.1
20.1
336.4
0.1
1,389.0
2017
£m
(0.7)
29.5
0.2
(0.2)
120.0
148.8
2017
£m
277.7
776.3
27.6
273.2
0.1
1,354.9
Bank borrowings of £3.2 million (2017: £nil) are secured against items of property, plant and equipment. All other bank borrowings
are unsecured.
Other lease related borrowings represent amounts due under sale and leaseback arrangements that do not fall within the scope of IAS 17
‘Leases’. The Group has an option to repurchase each leased property for a nominal amount at the end of the lease. The leases have terms of 35
to 40 years and rents which are linked to RPI, subject to a cap and collar.
Other borrowings comprises the amount drawn down under the securitisation’s liquidity facility. During the period ended 4 October 2014 the
facility’s provider, the Royal Bank of Scotland Group plc, had its short-term credit rating downgraded below the minimum prescribed in the facility
agreement and as such the Group exercised its entitlement to draw the full amount of the facility and hold it in a designated bank account. The
corresponding balance of £120.0 million (2017: £120.0 million) held in the relevant bank account is included within other cash deposits.
The Group has 75,000 (2017: 75,000) preference shares of £1 each in issue at the balance sheet date. The preference shares carry the right to a
fxed 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.
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 profle 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 fve years
In more than fve years
Gross
borrowings
£m
159.9
34.3
401.6
984.9
1,580.7
2018
Unamortised
issue costs
£m
(1.5)
(1.5)
(4.1)
(26.2)
(33.3)
Net
borrowings
£m
158.4
32.8
397.5
958.7
1,547.4
Gross
borrowings
£m
150.2
39.1
386.8
956.6
1,532.7
2017
Unamortised
issue costs
£m
(1.4)
(1.5)
(3.9)
(22.2)
(29.0)
Net
borrowings
£m
148.8
37.6
382.9
934.4
1,503.7
Fair value of borrowings
The carrying amount and the fair value of the Group’s borrowings are as follows:
Bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Other borrowings
Preference shares
Carrying amount
2018
£m
290.2
781.1
27.6
361.7
120.0
0.1
1,580.7
2017
£m
280.0
811.1
27.8
293.7
120.0
0.1
1,532.7
Fair value
2018
£m
290.2
770.0
27.6
361.7
120.0
0.1
1,569.6
2017
£m
280.0
808.4
27.8
293.7
120.0
0.1
1,530.0
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
all of the Group’s other borrowings approximate to their carrying amounts and are within Level 2 of the fair value hierarchy.
98
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
20 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 29 September 2018, 29 (2017: 32) of the securitised pubs were sold to third parties and 1 pub (2017: 1) was sold to
another member of the Group. The carrying amount of the securitised pubs at 29 September 2018 was £1,293.3 million (2017: £1,269.8 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
B
2018
£m
40.1
214.0
200.0
172.0
155.0
781.1
2017
£m
60.3
214.0
200.0
181.8
155.0
811.1
Interest
Floating
Fixed/floating
Fixed/floating
Floating
Fixed/floating
Principal repayment
period – by instalments
2018 to 2020
2020 to 2027
2027 to 2032
2018 to 2031
2032 to 2035
Expected
average life
2 years
9 years
14 years
13 years
17 years
Expected
maturity date
2020
2027
2032
2031
2035
The interest payable on each tranche is as follows:
Tranche
A1
A2
A3
A4
B
Before step up
3 month LIBOR + 0.55%
5.1576%
5.1774%
3 month LIBOR + 0.65%
5.6410%
After step up
3 month LIBOR + 1.375%
3 month LIBOR + 1.32%
3 month LIBOR + 1.45%
3 month LIBOR + 1.625%
3 month LIBOR + 2.55%
Step up date
July 2012
July 2019
April 2027
October 2012
July 2019
All foating rate notes are hedged in full by the Group using interest rate swaps whereby all interest payments are swapped to fxed interest payable.
At 29 September 2018 Marston’s Pubs Limited held cash of £27.5 million (2017: £39.2 million), which was governed by certain restrictions under the
covenants associated with the securitisation. In addition, Marston’s Issuer PLC held cash of £0.1 million (2017: £0.1 million) and other cash deposits
of £120.0 million (2017: £120.0 million) principally in respect of the amounts drawn down under the liquidity facility.
21 Derivative fnancial instruments
Interest rate swaps
Current liabilities
Non-current liabilities
Details of the Group’s interest rate swaps are provided in note 25.
22 Trade and other payables
Trade payables
Other taxes and social security
Accruals and deferred income
Other payables
2018
£m
(28.9)
(148.6)
(177.5)
2017
£m
(28.7)
(159.2)
(187.9)
2018
£m
123.2
33.1
82.1
13.8
252.2
2017
£m
113.6
30.1
98.3
14.1
256.1
Strategic Report
Governance
Financial Statements
Additional Information
99
23 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
Recognised in the balance sheet
Current liabilities
Non-current liabilities
2018
£m
30.2
(3.7)
3.0
0.5
(4.7)
25.3
2018
£m
2.8
22.5
25.3
2017
£m
38.8
(6.9)
3.5
0.5
(5.7)
30.2
2017
£m
3.3
26.9
30.2
When valuations of leasehold properties (based on future estimated income streams) give rise to a defcit 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 51 years (2017: 1 to 52 years).
The £0.1 million increase (2017: £1.6 million decrease) in the provision as a result of updating the discount rate assumptions used in the
calculation has been classifed as a non-underlying item (note 4).
24 Other non-current liabilities
Other liabilities
25 Financial instruments
Financial instruments by category
At 29 September 2018
Assets as per the balance sheet
Trade receivables (before provision)
Other receivables (before provision)
Trade loans (before provision)
Other cash deposits
Cash and cash equivalents
At 29 September 2018
Liabilities as per the balance sheet
Derivative fnancial instruments
Borrowings
Trade payables
Other payables
At 30 September 2017
Assets as per the balance sheet
Trade receivables (before provision)
Other receivables (before provision)
Trade loans (before provision)
Other cash deposits
Cash and cash equivalents
2018
£m
1.5
2017
£m
0.6
Loans and
receivables
£m
68.3
14.4
11.5
120.0
41.4
255.6
Other
fnancial
liabilities
£m
–
1,547.4
123.2
13.8
1,684.4
Loans and
receivables
£m
70.2
12.2
12.7
120.0
54.6
269.7
Total
£m
68.3
14.4
11.5
120.0
41.4
255.6
Total
£m
177.5
1,547.4
123.2
13.8
1,861.9
Total
£m
70.2
12.2
12.7
120.0
54.6
269.7
Liabilities
at fair
value
through
proft or
loss
£m
28.9
–
–
–
28.9
Derivatives
used for
hedging
£m
148.6
–
–
–
148.6
100
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
25 Financial instruments (continued)
At 30 September 2017
Liabilities as per the balance sheet
Derivative fnancial instruments
Borrowings
Trade payables
Other payables
Liabilities
at fair
value
through
proft or
loss
£m
28.7
–
–
–
28.7
Derivatives
used for
hedging
£m
159.2
–
–
–
159.2
Other
fnancial
liabilities
£m
–
1,503.7
113.6
14.1
1,631.4
Total
£m
187.9
1,503.7
113.6
14.1
1,819.3
Fair values of fnancial instruments
The only fnancial instruments which the Group holds at fair value are derivative fnancial instruments, which are classifed as at fair value
through proft or loss or derivatives used for hedging.
IFRS 13 ‘Fair Value Measurement’ requires fair value measurements to be recognised using a fair value hierarchy that refects the signifcance 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:
Liabilities as per the balance sheet
Derivative fnancial instruments
2018
2017
Level 1
£m
–
Level 2
£m
177.5
Level 3
£m
–
Total
£m
177.5
Level 1
£m
–
Level 2
£m
187.9
Level 3
£m
–
Total
£m
187.9
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 fnancial instruments have been obtained using a market approach and refect the estimated amount the
Group would expect to pay or receive on termination of the instruments. The Group utilises 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 fnancial instruments are equal to their book values, with the exception of borrowings (note 19). The carrying
amount less impairment provision of trade receivables, other receivables and trade loans, and the carrying amount of trade payables and other
payables, are assumed to approximate their fair values.
Financial risk factors
The Group’s activities expose it to a variety of fnancial 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 fnancial markets and seeks
to minimise potential adverse effects on the Group’s fnancial performance. The Group uses derivative fnancial 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
identifes, evaluates and hedges fnancial risks. The Board provides principles for overall risk management, as well as policies covering specifc
areas, such as interest rate risk, credit risk, investment of excess liquidity and use of derivative and non-derivative fnancial instruments.
Interest rate risk:
The Group’s income and operating cash fows are substantially independent of changes in market interest rates, and as such the Group’s interest
rate risk arises from its borrowings. Borrowings issued at variable rates expose the Group to cash fow interest rate risk. Borrowings issued at
fxed 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 refnancing, renewal
of existing positions, alternative fnancing and hedging. Based on these scenarios, the Group calculates the impact on the income statement of a
defned interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions.
The Group manages its cash fow interest rate risk by using foating-to-fxed interest rate swaps. Such interest rate swaps have the economic
effect of converting borrowings from foating rates to fxed rates. Generally, the Group raises borrowings at foating rates and then often swaps
them into fxed rates that are lower than those available if the Group borrowed at fxed rates directly. Under the interest rate swaps, the Group
agrees with other parties to exchange, at specifed intervals, the difference between fxed contract and foating rate interest amounts calculated
by reference to the agreed notional amounts.
If interest rates had been 0.5% higher/lower during the period ended 29 September 2018, with all other variables held constant, post-tax proft for
the period would have been £0.8 million (2017: £0.7 million) lower/higher as a result of higher/lower interest expense.
Strategic Report
Governance
Financial Statements
Additional Information
101
25 Financial instruments (continued)
Interest rate swaps designated as part of a hedging arrangement
The Group uses interest rate swaps to fx the interest rate payable on the foating rate tranches of its securitised debt (note 20). The notional
principal amounts of these interest rate swap contracts at 29 September 2018 totalled £212.1 million (2017: £242.1 million). These interest rate
swaps, including borrowing margins, fx interest at 6.2% and 7.7%. The movement in fair value recognised in other comprehensive income in the
period was a gain of £10.9 million (2017: £46.4 million). The movement in fair value recognised in the income statement in the period was a loss
of £0.3 million (2017: £2.9 million).
Interest rate swaps not designated as part of a hedging arrangement
On 22 March 2012 the Group entered into two forward starting interest rate swaps of £60.0 million each to fx the interest rate payable on the
Group’s bank borrowings. These interest rate swaps previously fxed interest at 3.0% until 30 April 2018 and at 4.5% and 4.6% thereafter and were
due to terminate on 30 April 2025. In the current period the termination date of the swaps was extended to 30 September 2029 and the terms were
amended to fx interest at 2.8% until 30 September 2019 and 3.9% and 4.0% thereafter. In total, the fair value of the two swaps at inception was
£(18.9) million. The movement in fair value recognised in the income statement in the period was a net gain of £0.6 million (2017: £9.3 million).
On 30 October 2017 the Group entered into a forward starting interest rate swap of £60.0 million to fx the interest rate payable on the Group’s
bank borrowings. This interest rate swap commences on 30 April 2025, fxes interest at 2.2% and terminates on 30 April 2029. The movement in
fair value recognised in the income statement in the period was a loss of £0.8 million (2017: £nil).
The interest rate risk profle, after taking account of derivative fnancial instruments, is as follows:
Borrowings
Floating rate
fnancial
liabilities
£m
679.5
2018
Fixed rate
fnancial
liabilities
£m
901.2
Floating rate
fnancial
liabilities
£m
601.5
Total
£m
1,580.7
2017
Fixed rate
fnancial
liabilities
£m
931.2
Total
£m
1,532.7
The weighted average interest rate of the fxed rate borrowings was 5.5% (2017: 5.2%) and the weighted average period for which the rate is fxed
was 12 years (2017: 12 years).
Foreign currency risk:
The Group buys and sells goods denominated in non-sterling currencies, principally US dollars, Canadian 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 signifcant.
Counterparty risk:
The Group’s counterparty risk in respect of its cash and cash equivalents and other cash deposits is mitigated by the use of various banking
institutions for its deposits.
There is no signifcant 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 fnancial 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 fxtures and
fttings. Receivables are written off against the provision for impairment when management considers that the debt is no longer recoverable.
The Group has no signifcant 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 suffcient 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 fexibility 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 fow. In addition, the Group’s liquidity management policy involves maintaining debt fnancing plans, projecting
cash fows 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.
102
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
25 Financial instruments (continued)
The tables below analyse the Group’s fnancial liabilities and non-settled derivative fnancial 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 tables are the contractual
undiscounted cash fows.
At 29 September 2018
Borrowings
Derivative fnancial instruments
Trade payables
Other payables
At 30 September 2017
Borrowings
Derivative fnancial instruments
Trade payables
Other payables
Less than
1 year
£m
224.5
12.3
123.2
13.8
373.8
Less than
1 year
£m
212.1
14.5
113.6
14.1
354.3
Between 1
and 2 years
£m
88.9
25.2
–
–
114.1
Between 1
and 2 years
£m
96.2
14.4
–
–
110.6
Between 2
and 5 years
£m
563.4
61.2
–
–
624.6
Between 2
and 5 years
£m
533.4
72.9
–
–
606.3
Over
5 years
£m
1,688.2
116.4
–
–
1,804.6
Over
5 years
£m
1,609.2
124.8
–
–
1,734.0
Total
£m
2,565.0
215.1
123.2
13.8
2,917.1
Total
£m
2,450.9
226.6
113.6
14.1
2,805.2
26 Subsidiary undertakings
Details of the Group’s subsidiary undertakings are provided in note 6 to the Company fnancial statements.
27 Share-based payments
During the period there were three 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 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) Deferred bonus. Under this scheme nil cost options are granted to eligible employees in lieu of a cash bonus. Exercise of options is subject
to continued employment.
(c) Long Term Incentive Plan (LTIP). Under this scheme nil cost options are granted that will only vest provided the participant satisfes the
minimum shareholding requirement and performance conditions relating to return on capital, free cash fow and relative total shareholder
return are met.
In 2010, HM Revenue & Customs (HMRC) approved an Approved Performance Share Plan (APSP) to enable participants in the LTIP to
beneft from UK tax effciencies. As such, awards made in 2010 and subsequent years may comprise an HMRC approved option (in respect
of the frst £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 satisfed by way of
shares held on 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.
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)
Weighted average
exercise price
2018
p
117.8
89.0
82.5
117.3
102.3
131.0
2017
p
123.3
110.0
84.9
126.4
117.8
120.1
Number of shares
2018
m
8.4
4.2
–
(5.0)
7.6
0.7
78.7p
to 136.0p
2.8
2017
m
6.8
4.1
(0.4)
(2.1)
8.4
1.4
76.1p
to 136.0p
2.7
Strategic Report
Governance
Financial Statements
Additional Information
103
27 Share-based payments (continued)
Deferred bonus:
Outstanding at beginning of the period
Granted
Outstanding at end of the period
Exercisable at end of the period
Exercise price
LTIP:
Outstanding at beginning of the period
Granted
Exercised
Expired
Outstanding at end of the period
Exercisable at end of the period
Exercise price
Number of shares
2018
m
0.2
0.1
0.3
–
–
2017
m
0.1
0.1
0.2
–
–
Number of shares
2018
m
6.0
2.3
–
(1.6)
6.7
–
–
2017
m
6.3
2.4
(0.3)
(2.4)
6.0
–
–
Weighted average
exercise price
2018
p
–
–
–
–
Weighted average
exercise price
2018
p
–
–
–
–
–
–
2017
p
–
–
–
–
2017
p
–
–
–
–
–
–
LTIP and deferred bonus options are exercisable no later than the tenth anniversary of the date of grant.
The fair values of the SAYE, deferred bonus and LTIP rights are calculated at the date of grant using the Black-Scholes option-pricing model. The
signifcant inputs into the model for all schemes unless otherwise stated were:
Dividend yield %
Expected volatility %
Risk-free interest rate %
Expected life of rights
SAYE
Deferred bonus
LTIP
2018
7.2 to 7.3
21.2 to 22.5
0.5 to 0.8
2017
5.5 to 5.6
19.7 to 20.5
0.2 to 0.4
3 years
3 years
5 years
3 to 5 years
1 year
3 years
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 6.4p (2017: 9.5p). The fair value of options
granted during the period in relation to the deferred bonus scheme was 97.6p (2017: 113.0p). The fair value of options granted during the period
in relation to the LTIP was 84.5p (2017: 105.7p).
The weighted average share price for options exercised over the period was 101.7p (2017: 120.5p). The total charge for the period relating
to employee share-based payment plans was £0.5 million (2017: £0.9 million), all of which related to equity-settled share-based payment
transactions. After tax, the total charge was £0.5 million (2017: £0.9 million).
28 Equity share capital
Allotted, called up and fully paid
Ordinary shares of 7.375p each:
At beginning of the period
Allotted
At end of the period
2018
Number
m
660.4
–
660.4
Value
£m
48.7
–
48.7
2017
Number
m
602.8
57.6
660.4
Value
£m
44.4
4.3
48.7
In May 2017, the Group issued 57.6 million ordinary shares of 7.375p each. The net proceeds were £75.5 million and as the share issue qualifed
for merger relief under section 612 of the Companies Act 2006, the excess of the net proceeds over the nominal value of the shares issued was
credited to a merger reserve rather than the share premium account (note 29).
29 Other components of equity
The merger reserve of £23.7 million (2017: £71.2 million) arose on the issue of ordinary shares in the prior period and represents the difference
between the nominal value of the shares issued and the net proceeds received, less the dividends paid in the current period.
The capital redemption reserve of £6.8 million (2017: £6.8 million) arose on share buybacks.
Own shares represent the carrying value of the investment in treasury shares and shares held on trust for employee share schemes (including
executive share option schemes) as set out in the table below. The trustees of the schemes are Banks’s Brewery Insurance Limited, a wholly-
owned subsidiary of Marston’s PLC, and Computershare Trustees (C.I.) Limited.
104
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
29 Other components of equity (continued)
Shares held on trust for employee share schemes
Treasury shares
2018
2017
Number
m
1.4
26.4
27.8
Value
£m
1.7
110.6
112.3
Number
m
0.3
26.4
26.7
Value
£m
0.5
110.8
111.3
The market value of own shares held is £27.5 million (2017: £29.0 million). Shares held on trust for employee share schemes represent 0.2%
(2017: nil%) of issued share capital. Treasury shares held represent 4.0% (2017: 4.0%) of issued share capital. Dividends on own shares have
been waived.
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 suffcient 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.
30 Net debt
Analysis of net debt
Cash and cash equivalents
Cash at bank and in hand
Financial assets
Other cash deposits
Debt due within one year
Bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Other borrowings
Debt due after one year
Bank borrowings
Securitised debt
Finance leases
Other lease related borrowings
Preference shares
Net debt
Non-cash
movements
and deferred
issue costs
£m
–
–
–
–
(0.7)
(31.7)
(7.5)
0.1
–
(39.8)
0.6
31.2
7.5
4.8
–
44.1
4.3
Cash fow
£m
(13.2)
(13.2)
–
–
–
30.0
0.2
–
–
30.2
(10.2)
–
–
(68.0)
–
(78.2)
(61.2)
2017
£m
54.6
54.6
120.0
120.0
0.7
(29.5)
(0.2)
0.2
(120.0)
(148.8)
(277.7)
(776.3)
(27.6)
(273.2)
(0.1)
(1,354.9)
(1,329.1)
2018
£m
41.4
41.4
120.0
120.0
–
(31.2)
(7.5)
0.3
(120.0)
(158.4)
(287.3)
(745.1)
(20.1)
(336.4)
(0.1)
(1,389.0)
(1,386.0)
Other borrowings comprises the amount drawn down under the securitisation’s liquidity facility. During the period ended 4 October 2014 the
facility’s provider, the Royal Bank of Scotland Group plc, had its short-term credit rating downgraded below the minimum prescribed in the facility
agreement and as such the Group exercised its entitlement to draw the full amount of the facility and hold it in a designated bank account. The
corresponding balance of £120.0 million (2017: £120.0 million) held in the relevant bank account is included within other cash deposits. The
amount drawn down can only be used for the purpose of meeting the securitisation’s debt service obligations should there ever be insuffcient
funds available from operations to meet such payments. As such this amount is considered to be restricted cash.
Included within cash and cash equivalents is an amount of £0.3 million (2017: £0.5 million) relating to a letter of credit with Royal Sun Alliance
Insurance, an amount of £1.4 million (2017: £1.4 million) relating to a letter of credit with Aviva, and an amount of £6.7 million (2017: £7.7 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 20).
Reconciliation of net cash fow to movement in net debt
Decrease in cash and cash equivalents in the period
Increase in other cash deposits
Cash infow from movement in debt
Change in debt resulting from cash fows
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
2018
£m
(13.2)
–
(48.0)
(61.2)
4.3
(56.9)
(1,329.1)
(1,386.0)
2017
£m
(131.0)
120.0
(46.4)
(57.4)
(2.3)
(59.7)
(1,269.4)
(1,329.1)
Strategic Report
Governance
Financial Statements
Additional Information
105
30 Net debt (continued)
Reconciliation of net debt before lease fnancing to net debt
Cash and cash equivalents
Other cash deposits
Bank borrowings
Securitised debt
Other borrowings
Preference shares
Net debt before lease fnancing
Finance leases
Other lease related borrowings
Net debt
Changes in liabilities arising from fnancing activities are as follows:
At beginning of the period
Cash fow
Changes in fair value
Other changes
At end of the period
2018
Derivative
fnancial
instruments
£m
(187.9)
13.5
10.4
(13.5)
(177.5)
Borrowings
£m
(1,503.7)
(48.0)
–
4.3
(1,547.4)
Total
fnancing
liabilities
£m
(1,691.6)
(34.5)
10.4
(9.2)
(1,724.9)
Borrowings
£m
(1,455.0)
(46.4)
–
(2.3)
(1,503.7)
31 Working capital and non-cash movements
Working capital movement
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
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
2018
£m
41.4
120.0
(287.3)
(776.3)
(120.0)
(0.1)
(1,022.3)
(27.6)
(336.1)
(1,386.0)
2017
Derivative
fnancial
instruments
£m
(240.7)
14.2
52.8
(14.2)
(187.9)
2018
£m
(4.4)
4.9
(2.6)
(2.1)
2018
£m
(0.4)
31.7
0.5
31.8
2017
£m
54.6
120.0
(277.0)
(805.8)
(120.0)
(0.1)
(1,028.3)
(27.8)
(273.0)
(1,329.1)
Total
fnancing
liabilities
£m
(1,695.7)
(32.2)
52.8
(16.5)
(1,691.6)
2017
£m
(3.0)
(4.9)
46.7
38.8
2017
£m
(0.2)
(8.6)
0.9
(7.9)
Further details of movements in respect of property, plant and equipment, assets held for sale and intangible assets are given in notes 4, 11, 12
and 18.
32 Operating leases
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:
Due:
Within one year
In more than one year but less than fve years
In more than fve years
2018
2017
Land and
buildings
£m
20.0
76.7
371.7
468.4
Other
£m
0.4
0.2
–
0.6
Land and
buildings
£m
19.2
70.6
331.0
420.8
Other
£m
0.6
0.6
–
1.2
106
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
32 Operating leases (continued)
The Group as lessor
The Group leases a proportion of its licensed estate and other unlicensed properties to tenants. The majority of lease agreements have terms
of 21 years or less and are classifed 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 fve years
In more than fve years
33 Finance leases
2018
2017
Land and
buildings
£m
17.6
55.4
66.4
139.4
Other
£m
–
–
–
–
Land and
buildings
£m
18.5
58.9
77.8
155.2
Other
£m
–
–
–
–
The Group leases a number of properties under fnance leases. The leases have various terms, escalation clauses and renewal rights. Future
minimum lease payments under fnance leases are as follows:
Due:
Within one year
In more than one year but less than fve years
In more than fve years
Future fnance charges
Present value of fnance lease obligations
The present value of fnance lease obligations is as follows:
Due:
Within one year
In more than one year but less than fve years
In more than fve years
Present value of fnance lease obligations
2018
£m
8.7
5.1
35.0
48.8
(21.2)
27.6
2018
£m
7.5
0.8
19.3
27.6
2017
£m
1.6
12.5
36.4
50.5
(22.7)
27.8
2017
£m
0.2
8.0
19.6
27.8
34 Contingent liabilities and fnancial 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 £2.2 million (2017: £2.3 million), all of which relates to CGT.
The Group has issued letters of credit in favour of Royal Sun Alliance Insurance totalling £0.3 million (2017: £0.5 million) and letters of credit in
favour of Aviva totalling £2.1 million (2017: £1.4 million) to secure reinsurance contracts. Certain of these letters of credit are secured on fxed
deposits (note 30).
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.
35 Charles Wells acquisition
On 2 June 2017, the Group acquired Bedford Canning Company Limited, which contained the beer business of Charles Wells. The business
incorporated a portfolio of well-known brands including Bombardier, Young’s and McEwan’s. The provisional fair values of the assets acquired
and liabilities assumed stated in the accounts for the 52 weeks ended 30 September 2017 are now confrmed, with no adjustments made to those
previously published.
Strategic Report
Governance
Financial Statements
Additional Information
107
Company Balance Sheet
As at 29 September 2018
Fixed assets
Tangible assets
Investments
Current assets
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
Merger reserve
Capital redemption reserve
Own shares
Proft and loss reserves
Total equity
29 September
2018
£m
30 September
2017
£m
Note
5
6
7
7
8
8
9
13
14
14
14
14
14
389.8
260.9
650.7
382.9
260.9
643.8
548.9
951.1
9.5
1,509.5
(700.9)
808.6
1,459.3
(120.8)
(23.1)
1,315.4
48.7
334.0
78.9
23.7
6.8
(112.3)
935.6
1,315.4
549.4
864.1
10.7
1,424.2
(769.5)
654.7
1,298.5
(121.5)
(27.2)
1,149.8
48.7
334.0
77.3
71.2
6.8
(111.3)
723.1
1,149.8
The proft of the Company for the 52 weeks ended 29 September 2018 was £211.5 million (2017: £81.1 million).
The fnancial statements on pages 107 to 117 were approved by the Board and authorised for issue on 21 November 2018 and are signed on its
behalf by:
Ralph Findlay
Chief Executive Officer
21 November 2018
Company registration number: 31461
108
Marston’s PLC Annual Report and Accounts 2018
Company Statement of Changes in Equity
For the 52 weeks ended 29 September 2018
At 1 October 2017
Proft for the period
Revaluation of properties
Deferred tax on properties
Total comprehensive income
Share-based payments
Purchase of own shares
Sale of own shares
Transfer to proft and loss reserves
Dividends paid
Total transactions with owners
At 29 September 2018
At 2 October 2016
Proft for the period
Deferred tax on properties
Total comprehensive income
Share-based payments
Issue of shares
Sale of own shares
Disposal of properties
Transfer to proft and loss reserves
Dividends paid
Total transactions with owners
At 30 September 2017
Equity
share
capital
£m
48.7
–
–
–
–
–
–
–
–
–
–
48.7
Equity
share
capital
£m
44.4
–
–
–
–
4.3
–
–
–
–
4.3
48.7
Share
premium
account
£m
334.0
–
–
–
–
–
–
–
–
–
–
334.0
Share
premium
account
£m
334.0
–
–
–
–
–
–
–
–
–
–
334.0
Revaluation
reserve
£m
77.3
–
(1.5)
3.8
2.3
–
–
–
(0.7)
–
(0.7)
78.9
Revaluation
reserve
£m
77.7
–
0.5
0.5
–
–
–
(0.2)
(0.7)
–
(0.9)
77.3
Merger
reserve
£m
71.2
–
–
–
–
–
–
–
–
(47.5)
(47.5)
23.7
Merger
reserve
£m
–
–
–
–
–
71.2
–
–
–
–
71.2
71.2
Capital
redemption
reserve
£m
6.8
–
–
–
–
–
–
–
–
–
–
6.8
Capital
redemption
reserve
£m
6.8
–
–
–
–
–
–
–
–
–
–
6.8
Own
shares
£m
(111.3)
–
–
–
–
–
(1.2)
0.2
–
–
(1.0)
(112.3)
Own
shares
£m
(113.7)
–
–
–
–
–
2.4
–
–
–
2.4
(111.3)
Proft
and loss
reserves
£m
723.1
211.5
–
–
211.5
0.5
–
(0.2)
0.7
–
1.0
935.6
Proft
and loss
reserves
£m
686.4
81.1
–
81.1
0.9
–
(2.1)
0.2
0.7
(44.1)
(44.4)
723.1
Total
equity
£m
1,149.8
211.5
(1.5)
3.8
213.8
0.5
(1.2)
–
–
(47.5)
(48.2)
1,315.4
Total
equity
£m
1,035.6
81.1
0.5
81.6
0.9
75.5
0.3
–
–
(44.1)
32.6
1,149.8
Strategic Report
Governance
Financial Statements
Additional Information
109
Notes
For the 52 weeks ended 29 September 2018
1 Accounting policies
Company information
Marston’s PLC is a public company limited by shares incorporated in England and Wales and domiciled in the UK. The registered offce is
Marston’s House, Brewery Road, Wolverhampton, WV1 4JT.
Basis of preparation
These fnancial statements have been prepared in accordance with FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic
of Ireland’ (FRS 102) and the requirements of the Companies Act 2006.
The fnancial statements are prepared in sterling, which is the functional currency of the Company. Monetary amounts in these fnancial
statements are rounded to the nearest £0.1 million.
The fnancial statements have been prepared under the historical cost convention modifed to include the revaluation of freehold and leasehold
properties and the holding of certain fnancial instruments at fair value. The principal accounting policies adopted are set out below.
The Company is a qualifying entity for the purposes of FRS 102, as it prepares publicly available consolidated fnancial statements, which are
intended to give a true and fair view of the assets, liabilities, fnancial position and proft or loss of the Group. The Company has therefore taken
advantage of the exemptions from the following disclosure requirements in FRS 102:
• Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;
• Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash fows and related notes and disclosures;
• Section 11 ‘Basic Financial Instruments’ – Carrying amounts, interest income/expense and net gains/losses for each category of
fnancial instrument not measured at fair value through proft or loss, and information that enables users to evaluate the signifcance of
fnancial instruments;
• Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
These fnancial statements present information about the Company as an individual entity and not about its group.
As permitted by section 408(3) of the Companies Act 2006, no proft and loss account has been presented for the Company.
At the time of approving the fnancial statements, the Directors have a reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future. Thus the Directors continue to adopt the going concern basis of accounting in
preparing the fnancial statements.
Turnover
Turnover represents rent receivable which is recognised in the period to which it relates.
Current and deferred tax
The tax currently payable is based on taxable proft for the period. Taxable proft differs from net proft as reported in the accounts because
it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or
deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting
end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable
that they will be recovered against the reversal of deferred tax liabilities or other future taxable profts. Such assets and liabilities are not
recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects
neither the tax proft nor the accounting proft.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that
suffcient taxable profts will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to proft or loss, except
when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and
liabilities are offset when the Company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and
liabilities relate to taxes levied by the same tax authority.
Fixed assets
• Freehold and leasehold properties are initially stated at cost and subsequently at valuation. Fixtures, fttings, plant and equipment are stated
at cost.
• Depreciation is charged to the proft and loss account on a straight-line basis to provide for the cost of the assets less their residual values over
their useful lives.
• Freehold and long leasehold buildings are depreciated to their residual values over 50 years.
• Short leasehold properties are depreciated over the life of the lease.
• Fixtures, fttings, plant and equipment are depreciated over periods ranging from 3 to 20 years.
• Interest costs directly attributable to capital projects are capitalised.
• Land is not depreciated.
Properties are revalued by qualifed valuers at least once in each rolling three year period, on an open market value 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.
110
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
1 Accounting policies (continued)
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 proft 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 proft and loss account.
Disposals of fxed assets
Proft/loss on disposal of fxed assets represents net sale proceeds less the carrying value of the assets. Any element of the revaluation reserve
relating to the fxed assets disposed of is transferred to proft and loss reserves at the date of sale.
Financial instruments
The Company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’
of FRS 102 to all of its fnancial instruments.
Financial instruments are recognised in the balance sheet when the Company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the fnancial statements, when there is a legally enforceable right to
set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic fnancial assets
Basic fnancial assets, which comprise amounts owed by Group undertakings, other debtors and cash and cash equivalents, are initially
measured at the transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method.
Other fnancial assets
Derivatives, including interest rate swaps, are not basic fnancial assets and are accounted for as set out below.
Financial assets, other than those held at fair value through proft and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of
the fnancial asset, the estimated future cash fows have been affected. If an asset is impaired, the impairment loss is the difference between the
carrying amount and the present value of the estimated cash fows discounted at the asset’s original effective interest rate. The impairment loss
is recognised in proft or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed.
The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not
previously been recognised. The impairment reversal is recognised in proft or loss.
Financial assets are derecognised only when the contractual rights to the cash fows from the asset expire or are settled, or when the Company
transfers the fnancial asset and substantially all the risks and rewards of ownership to another entity.
Financial liabilities and equity instruments are classifed according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Basic fnancial liabilities
Basic fnancial liabilities, comprising amounts owed to Group undertakings, other creditors and borrowings, are initially recognised at the
transaction price and subsequently carried at amortised cost using the effective interest method.
Other fnancial liabilities
Derivatives, including interest rate swaps, are not basic fnancial liabilities and are accounted for as set out below.
Financial liabilities are derecognised when the Company’s contractual obligations expire or are discharged or cancelled.
Derivatives
The Company uses derivative fnancial instruments to hedge the Group’s exposure to fuctuations in interest rates. Derivative fnancial
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 fnancial instruments as hedging instruments and as such any gains or losses on
remeasurement are recognised in the proft and loss account immediately.
A derivative with a positive fair value is recognised as a fnancial asset, whereas a derivative with a negative fair value is recognised as a
fnancial liability.
Leases
Leases are classifed as fnance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessee. All other leases are classifed as operating leases.
Assets held under fnance leases are recognised as assets at the lower of the assets’ fair value at the date of inception of the lease and the
present value of the minimum lease payments. The related liability is included in the balance sheet as a fnance lease obligation. Lease payments
are treated as consisting of capital and interest elements. The interest is charged to the proft and loss account so as to produce a constant
periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to the proft and loss account on a straight-line
basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which
economic benefts from the leased asset are consumed.
Strategic Report
Governance
Financial Statements
Additional Information
111
1 Accounting policies (continued)
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 Section 20 ‘Leases’ of
FRS 102 are classifed as other lease related borrowings and accounted for as secured loans on an amortised cost basis.
Investments in subsidiaries
Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The
investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised
immediately in proft or loss.
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 outfow of economic benefts will be required to settle the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date,
taking into account the risks and uncertainties surrounding the obligation.
Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present
value, using a pre-tax rate that refects current market assessments of the time value of money and the risks specifc to the obligation. When a
provision is measured at present value the unwinding of the discount is recognised as a fnance cost in proft or loss in the period it arises.
When valuations of leasehold properties (based on future estimated income streams) give rise to a defcit as a result of onerous lease conditions
they are recognised as provisions. Other contractual property costs are also recorded as provisions as appropriate.
Dividends
Dividends proposed by the Board but unpaid at the period end are recognised in the fnancial 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 proft and
loss account.
Group undertakings
There is an intra group funding agreement in place between the Company and certain other members of the 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.
There is a 12.5% subordinated loan owed to the Company by Marston’s Pubs Limited and there are deep discount bonds owed by the Company
to Banks’s Brewery Insurance 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 and deep discount bonds, repayable
on demand.
2 Judgements and key sources of estimation uncertainty
In the application of the Company’s accounting policies, the Directors are required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based
on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision
affects both current and future periods.
Critical judgements
The following judgements (apart from those involving estimates) have had the most signifcant effect on amounts recognised in the
fnancial statements:
Lease classifcation
In determining whether a lease is classifed as an operating lease or fnance lease, judgements are required in respect of whether the lease has
transferred substantially all the risks and rewards of ownership of the leased asset to the lessee, in particular whether the present value of the
minimum lease payments amounts to at least substantially all of the fair value of the asset and whether the lease term is for the major part of
the economic life of the asset.
Key sources of estimation uncertainty
The following estimates and assumptions have a signifcant risk of causing a material adjustment to the carrying amount of assets and liabilities:
Tangible fxed assets
The Company carries its freehold and leasehold properties at fair value. These properties are valued by external or internal valuers on an open
market value basis, primarily using earnings multiples derived from prices in observed transactions involving comparable businesses. The
estimation of the fair values requires a combination of assumptions, including future earnings and appropriate multiples.
112
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
2 Judgements and key sources of estimation uncertainty (continued)
The useful lives and residual values of the Company’s tangible fxed assets are estimated based on current property market trends, technological
advancement, physical condition of the assets and expected future investment. These are reviewed annually and amended when necessary to
refect current estimates. The annual depreciation charge is sensitive to changes in both the useful lives and residual values of the assets.
The carrying amount of tangible fxed assets is shown in note 5 and the useful lives are shown in note 1.
Property lease provisions
The amount provided in respect of onerous property leases is dependent on a number of assumptions including market rents, vacant periods,
infation rates and discount rates. The assumptions made refect historical experience and current trends and rates.
The amount provided for onerous property leases is shown in note 9.
Valuation of interest rate swaps
The Company’s interest rate swaps are held at fair value. The Company utilises valuations from counterparties who use a variety of assumptions
based on market conditions existing at each balance sheet date. The fair values are highly sensitive to the inputs to the valuations, such as
discount rates and yield curves.
The carrying amount of the interest rate swaps is shown in note 10.
3 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 fnancial 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 fnancial
statements disclose such fees on a consolidated basis.
4 Employees
The average monthly number of people employed by the Company during the period excluding Directors was nil (2017: nil).
5 Tangible fxed assets
Cost or valuation
At 1 October 2017
Additions
Transfers from Group undertakings
Revaluation
Disposals
At 29 September 2018
Depreciation
At 1 October 2017
Charge for the period
Revaluation
Disposals
At 29 September 2018
Net book amount at 30 September 2017
Net book amount at 29 September 2018
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
Land and
buildings
£m
Fixtures,
fttings,
plant and
equipment
£m
365.6
8.6
7.8
(20.9)
–
361.1
4.8
1.9
(5.5)
–
1.2
360.8
359.9
36.6
10.2
1.0
–
(2.2)
45.6
14.5
3.3
–
(2.1)
15.7
22.1
29.9
2018
£m
265.6
69.4
24.9
359.9
Total
£m
402.2
18.8
8.8
(20.9)
(2.2)
406.7
19.3
5.2
(5.5)
(2.1)
16.9
382.9
389.8
2017
£m
261.6
76.7
22.5
360.8
If the land and buildings had not been revalued, the historical cost net book amount would be £272.0 million (2017: £270.7 million).
Interest costs of £0.1 million (2017: £nil) were capitalised in the period in respect of the fnancing of major projects.
Capital expenditure authorised and committed at the period end but not provided for in the fnancial statements was £1.4 million
(2017: £0.5 million).
Strategic Report
Governance
Financial Statements
Additional Information
113
5 Tangible fxed assets (continued)
The net book amount of land and buildings held under fnance leases at 29 September 2018 was £26.9 million (2017: £28.7 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 Section 20 ‘Leases’ of FRS 102
was £125.8 million (2017: £136.4 million).
The Company has charged property with a value of £4.9 million (2017: £4.7 million) in favour of the Marston’s PLC Pension and Life Assurance
Scheme (the ‘Scheme’) as continuing security for the Group’s obligations to the Scheme.
Revaluation/impairment
At 28 January 2018 independent chartered surveyors revalued the Company’s freehold and leasehold properties on an open market value basis.
These valuations were incorporated into the fnancial statements and the resulting revaluation adjustments were recognised in the revaluation
reserve or proft and loss account as appropriate.
The impact of the revaluations/impairments described above is as follows:
Proft and loss account:
Impairment
Reversal of past impairment
Revaluation reserve:
Unrealised revaluation surplus
Reversal of past revaluation surplus
Net decrease in shareholders’ equity/tangible fxed assets
6 Fixed asset investments
Cost
At 1 October 2017
Additions
Disposals
Capital contribution in respect of equity-settled share-based payments
At 29 September 2018
Impairments
At 1 October 2017
Charged in the period
Disposals
At 29 September 2018
Net book amount at 30 September 2017
Net book amount at 29 September 2018
2018
£m
(16.9)
3.0
(13.9)
23.7
(25.2)
(1.5)
(15.4)
2017
£m
–
–
–
–
–
–
–
Subsidiary
undertakings
£m
318.6
260.9
(318.6)
0.5
261.4
57.7
0.5
(57.7)
0.5
260.9
260.9
During the current period the Company incorporated an intermediate holding company, Marston’s Corporate Holdings Limited, and all of its
investments were subsequently transferred to this company, either via a share for share exchange or for nominal consideration.
114
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
6 Fixed asset investments (continued)
These fnancial statements are separate company fnancial statements for Marston’s PLC.
The Company had the following subsidiary undertakings at 29 September 2018:
Marston’s Estates Limited
Marston’s Operating Limited
Marston’s Pubs Limited
Marston's Pubs Parent Limited
Marston's Telecoms Limited
Marston’s Trading Limited
Banks’s Brewery Insurance Limited
Bedford Canning Company Limited
Marston’s Corporate Holdings Limited
Marston's Acquisitions Limited
Mansfeld Brewery Limited
Marston's Issuer PLC
Marston's Issuer Parent Limited
Bluu Limited
Brasserie Restaurants Limited
Celtic Inns Holdings Limited
Celtic Inns Limited
Eldridge, Pope & Co., Limited
English Country Inns Limited
EP Investments 2004 Limited
Fairdeed Limited
Fayolle Limited
John Marston's Taverners Limited
Lambert Parker & Gaines Limited
Mansfeld Brewery Properties Limited
Mansfeld Brewery Trading Limited
Marston, Thompson & Evershed Limited
Marston’s Developments Limited
Marston’s Property Developments Limited
Osprey Inns Limited
Pitcher and Piano Limited
Porter Black (2003) Limited
QP Bars Limited
Refresh Group Limited
Refresh UK Limited
Ringwood Brewery Limited
S.K. Williams Limited
SDA Limited
Sherwood Forest Properties Limited
Sovereign Inns Limited
The Gray Ox Limited
The Wychwood Brewery Company Limited
W&DB (Finance) Limited
W. & D. Limited
Wizard Inns Limited
Wychwood Holdings Limited
Nature of business
Property management
Pub retailer and brewer
Pub retailer
Holding company
Telecommunications
Pub retailer and brewer
Insurance
Non trading
Holding company
Acquisition company
Holding company
Financing company
Holding company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Class of share
Ordinary 25p
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £5
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary 25p
Preference £1
Ordinary 25p
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary 1p
Ordinary £1
Ordinary 50p
Ordinary 50p
Ordinary 1p
‘A’ Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary 25p
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary 1p
Ordinary 10p
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
Ordinary £1
‘A’ Ordinary 1p
Deferred 1p
‘A’ Ordinary 1p
‘B’ Ordinary 1p
Proportion of shares
held directly by
Marston’s PLC
–
–
–
–
–
–
–
–
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Proportion
of shares held
by the Group
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The registered offce of all of the above subsidiaries is Marston’s House, Brewery Road, Wolverhampton, WV1 4JT, with the exception of Banks’s
Brewery Insurance Limited, Marston’s Issuer PLC and Marston’s Issuer Parent Limited. The registered offce of Banks’s Brewery Insurance
Limited is Maison Trinity, Trinity Square, St Peter Port, Guernsey, GY1 4AT. The registered offce of Marston’s Issuer PLC and Marston’s Issuer
Parent Limited is Wilmington Trust SP Services (London) Limited, Third Floor, 1 King’s Arms Yard, London, EC2R 7AF.
All subsidiaries have been included in the consolidated fnancial statements.
Although the Group does not hold any shares in Marston’s Issuer PLC and its parent company, Marston’s Issuer Parent Limited, these companies
are treated as subsidiary undertakings for the purpose of the consolidated fnancial statements as it is considered that they are controlled by the
Group. Marston’s Issuer PLC was set up with the sole purpose of issuing debt secured on the assets of Marston’s Pubs Limited. Wilmington Trust
SP Services (London) Limited holds the shares of Marston’s Issuer Parent Limited under a declaration of trust for charitable purposes.
Strategic Report
Governance
Financial Statements
Additional Information
115
7 Debtors
Amounts falling due within one year
Amounts owed by Group undertakings
Derivative fnancial instruments
Prepayments and accrued income
Other debtors
Amounts falling due after more than one year
12.5% subordinated loan owed by Group undertaking
8 Creditors
Amounts falling due within one year
Amounts owed to Group undertakings
Finance leases
Other lease related borrowings
Corporation tax
Derivative fnancial instruments
Accruals and deferred income
Amounts falling due after more than one year
Finance leases
Other lease related borrowings
Preference shares
Accruals and deferred income
Other creditors
2018
£m
520.5
28.1
0.1
0.2
548.9
2018
£m
951.1
2018
£m
654.4
0.2
(0.1)
9.3
28.1
9.0
700.9
2018
£m
20.1
88.0
0.1
12.1
0.5
120.8
2017
£m
520.5
28.7
0.1
0.1
549.4
2017
£m
864.1
2017
£m
725.9
0.2
(0.1)
7.4
28.7
7.4
769.5
2017
£m
20.3
88.0
0.1
12.8
0.3
121.5
The preference shares carry the right to a fxed cumulative preferential dividend. 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.
Other lease related borrowings represent amounts due under sale and leaseback arrangements that do not fall within the scope of Section 20
‘Leases’ of FRS 102. The Company has an option to repurchase each leased property for a nominal amount at the end of the lease. The leases
have terms of 35 to 40 years and rents which are linked to RPI, subject to a cap and collar.
The amount falling due for payment after more than fve years from the balance sheet date on debts repayable by instalments was £107.8 million
(2017: £107.9 million). Debts of £0.1 million (2017: £0.1 million) were repayable otherwise than by instalments after more than fve years from the
balance sheet date.
9 Provisions for liabilities and charges
At 1 October 2017
Provided in the period
Released in the period
Unwinding of discount
Utilised in the period
Credited to proft and loss
Credited to other comprehensive income
At 29 September 2018
Deferred
tax
£m
23.6
–
–
–
–
(0.6)
(3.8)
19.2
Payments are expected to continue in respect of these property leases for periods of 1 to 26 years (2017: 1 to 27 years).
Deferred tax
The amount provided in respect of deferred tax is as follows:
Excess of capital allowances over accumulated depreciation
Property related items
Property
leases
£m
3.6
1.1
(0.1)
0.1
(0.8)
–
–
3.9
2018
£m
6.1
13.1
19.2
Total
£m
27.2
1.1
(0.1)
0.1
(0.8)
(0.6)
(3.8)
23.1
2017
£m
5.4
18.2
23.6
116
Marston’s PLC Annual Report and Accounts 2018
Notes continued
For the 52 weeks ended 29 September 2018
10 Financial instruments
Carrying amount of fnancial assets
Measured at fair value through proft or loss
Carrying amount of fnancial liabilities
Measured at fair value through proft or loss
2018
£m
28.1
2018
£m
28.1
2017
£m
28.7
2017
£m
28.7
The only fnancial instruments that the Company holds at fair value are interest rate swaps. The fair values of the Company’s interest rate swaps
are obtained using a market approach and refect the estimated amount the Company would expect to pay or receive on termination of the
instruments. The Company utilises valuations from counterparties who use a variety of assumptions based on market conditions existing at each
balance sheet date.
11 Operating lease commitments
At 29 September 2018 the Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases
as follows:
Due:
Within one year
In more than one year and less than fve years
In more than fve years
12 Finance lease obligations
2018
£m
6.6
23.2
70.4
100.2
2017
£m
7.0
22.8
60.7
90.5
The Company leases a number of properties under fnance leases. The leases have various terms, escalation clauses and renewal rights. Future
minimum lease payments under fnance leases are as follows:
Due:
Within one year
In more than one year and less than fve years
In more than fve years
Future fnance charges
Present value of fnance lease obligations
13 Equity share capital
Allotted, called up and fully paid
Ordinary shares of 7.375p each
14 Reserves
2018
£m
1.3
5.1
35.0
41.4
(21.1)
20.3
2017
£m
1.3
5.0
36.4
42.7
(22.2)
20.5
2018
2017
Number
m
660.4
Value
£m
48.7
Number
m
660.4
Value
£m
48.7
The share premium account comprises amounts in excess of nominal value received for the issue of shares less any transaction costs.
When freehold and leasehold properties are revalued any gains and losses are recognised in the revaluation reserve, except to the extent that
a revaluation gain reverses a revaluation loss previously recognised in proft or loss or a revaluation loss exceeds the accumulated revaluation
gains recognised in the revaluation reserve; such gains and losses are recognised in proft or loss. The associated deferred tax on revaluations is
also recognised in the revaluation reserve. Amounts representing the equivalent depreciation are transferred to proft and loss reserves annually
and the full amount is transferred on disposal of the associated property.
The merger reserve arose on the issue of ordinary shares in the prior period and represents the difference between the nominal value of the
shares issued and the net proceeds received, less the dividends paid in the current period.
The capital redemption reserve arose on share buybacks.
Details of own shares are provided in note 29 to the Group fnancial statements.
Strategic Report
Governance
Financial Statements
Additional Information
117
15 Guarantees and contingent liabilities
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.
The Company has guaranteed the obligations of Trading under its banking facilities and the obligations of Marston’s Estates Limited under
various property leases.
118
Marston’s PLC Annual Report and Accounts 2018
Additional
Information
Information for Shareholders
Glossary
Pub-restaurants and lodges completed
during the period
119
121
122
Strategic Report
Governance
Financial Statements
Additional Information
119
Information for Shareholders
Annual General Meeting (AGM)
The Company’s AGM will be held on 23 January 2019 at 10:30am at Wolverhampton Wanderers Football Club, Molineux Stadium, Waterloo Road,
Wolverhampton, WV1 4QR.
Financial calendar
Ex-dividend date for fnal dividend
Record date for fnal dividend
AGM and Interim Management Statement
Final dividend payment date
Half-year results
Ex-dividend date for interim dividend
Interim dividend payment date
Full-year results
13 December 2018
14 December 2018
23 January 2019
28 January 2019
15 May 2019
May 2019
July 2019
27 November 2019
These dates are indicative only and may be subject to change.
The Marston’s 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 specifcally 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:
Online:
www.shareview.co.uk – from here you will be able to securely email Equiniti with your query
Telephone:
0371 384 2274*
Text phone:
0371 384 2255*
By post:
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA
* Lines are open from 8.30am to 5.30pm (UK time), Monday to Friday, excluding English public holidays.
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 beneft 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 certifcate, 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 certifcate at the time of sale. Details of low cost dealing services may be
obtained from www.shareview.co.uk or 0345 603 7037**.
**Lines are open Monday to Friday, 8.00am to 4.30pm for dealing and until 6.00pm for enquiries (UK time), excluding English public holidays.
120
Marston’s PLC Annual Report and Accounts 2018
Information for Shareholders continued
Ordinary shares
Range of shareholding
Balance Ranges
1–1,000
1,001–10,000
10,001–100,000
100,001–1,000,000
1,000,001–Highest
Total
Total Number of
Holdings
3,700
4,272
1,064
205
107
9,348
Percentage of
Holdings
39.6%
45.7%
11.4%
2.2%
1.1%
100.00%
Total Number of
Shares
1,536,833
16,422,969
29,377,989
70,379,782
542,644,621
660,362,194
Percentage
Issued Capital
0.2%
2.5%
4.4%
10.7%
82.2%
100.00%
An analysis of the register by shareholder type can be found in the Governance section on page 50.
Company details
Registered offce: Marston’s House, Brewery Road, Wolverhampton, WV1 4JT
Telephone: 01902 711811
Company registration number: 31461
Investor queries: investorrelations@marstons.co.uk
Auditors
PricewaterhouseCoopers LLP, Cornwall Court, 19 Cornwall Street, Birmingham, B3 2DT
Advisers
JP Morgan Cazenove, 20 Moorgate, London, EC2R 6DA
Numis Securities Limited, The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT
Solicitors
Freshfeld Bruckhaus Deringer LLP, 65 Fleet Street, London, EC4Y 1HS
Shoosmiths LLP, 2 Colmore Square, 38 Colmore Circus Queensway, Birmingham, B4 6BJ
Squire Patton Boggs (UK) LLP, Rutland House, 148 Edmund Street, Birmingham, B3 2JR
Pinsent Masons LLP, 55 Colmore Row, Birmingham, B3 2FF
Share fraud warning
Share fraud includes scams where investors are called out of the blue and offered an infated price for shares they own or shares that often
turn out to be worthless or non-existent. These calls come from fraudsters operating ‘boiler rooms’ that are mostly based abroad. While
high profts 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:
Get the name of the person and organisation contacting you.
Check the Financial Services Register at www.fca.org.uk/register to ensure they are authorised.
Use the details on the FCA Register to contact the frm.
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 frms and individuals to avoid doing business with.
Remember, if it sounds too good to be true, it probably is.
If you use an unauthorised frm 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
fnd out about the latest investment scams. You can also call the Consumer Helpline on 0800 111 6768.
Strategic Report
Governance
Financial Statements
Additional Information
121
Glossary
ALMR The Association of Licensed Multiple Retailers
NAV net asset value
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
NED Non-executive Director
NGCI Non gluten containing ingredient
NPD New product development
BRC British Retail Consortium
CAGR Compound Annual Growth Rate
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
Circular Economy An alternative to a traditional linear economy
(make, use, dispose) in which resources are kept in use for as long as
possible, extracting the maximum value from them, then recovering
and regenerating products and materials at the end of each service life
Coffer Peach Business Tracker Sales trends for the UK eating and
drinking out market
CROCCE Cash Return on Cash Capital Employed – calculated in the
same way as ROC
CR Corporate Responsibility – businesses’ response to their impact
on society
CWBB Charles Wells Beer Business
EBIT Earnings before interest and tax
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
Packaged Includes bottles and cans
PBT Proft before tax
PBA Premium bottled ale
PCA Pubs Code Adjudicator
PCDR Performance, Career & Development Review
PCI Payment card information
PETA People for the Ethical Treatment of Animals
POS Point of sale, for example, back bar runners, pump clips
RevPAR Revenue per available room
ROC Return on Capital – a measure of how effectively we use the
capital invested in our business
Take home Supermarkets, cash and carry, convenience stores (also
known as off-trade)
Taverns & Leased These two segments were combined in September
2018 and are now known as Taverns
EBITDA Earnings before interest, tax, depreciation and amortisation
The Pubs Code Statutory regulation effective 21 July 2016
TSR Total Shareholder Return – a combination of share price
appreciation and dividends paid
EHO Environmental Health Offcer
EPOS Electronic point of sale
EPS Earnings per share
Export Anything sold outside the UK
FCF Free Cash Flow – operating cash fow of the business after tax
and interest
FRC Financial Reporting Council – independent regulator
Free trade Independently owned pubs and clubs
FTSE4Good Ethical stock market indices launched in 2001, with
inclusion based on a range of Corporate Responsibility criteria
Generous George Destination pub brand
Give Back Week Internal annual charity activities across head offce
and pub sectors
LPG (emissions) Liquefed petroleum gas, used as a fuel in heating
appliances, cooking equipment and vehicles
Like-for-like Sales this year compared to sales in the previous year, of
all pubs trading in the same two periods, expressed as a percentage
InMoment External customer experience management company
MBC Marston’s Beer Company, internal division
MIT Marston’s Inns and Taverns, internal division
National on-trade Managed house pub groups, tenanted pub groups,
brewers
122
Marston’s PLC Annual Report and Accounts 2018
Pub-restaurants and lodges completed during the period
Scotland
Midlands
Old Gatehouse, Lenzie, Kirkintilloch, G66 3FB
Tulip Queen and Lodge, Spalding, PE12 6AE
Three Witches, Inverness, IV2 6ET
Woodcocks, Lincoln, LN1 2BE
Harbour Spring Lodge, Peterhead, AB42 3GT
Gamston Lock Lodge, Gamston, NG2 6NP
Ravens Cliff, Ravenscraig, ML1 2UE
North
South
Eight-foot Way, Sheffeld, S5 9QY
Lost & Found, Bristol, BS8 1QS
Lost & Found Leeds Club, Leeds, LS1 6JL
Spring River Lodge, Ebbsfeet, DA10 1AZ
Station Pilot, Crewe, CW2 5UZ
Iron Forge, Scunthorpe, DN17 2AB
Longacre, Skelton, TS12 2LH
Fly Line, Garforth, LS25 2EB
Pitcher & Piano, Sheffeld, S1 2GT
Queen of Hearts, Runcorn, WA7 6SA
Kings Chamber Lodge, Doncaster, Thorne, DN8 4JE
Wales
Clock Works, Ystradgynlais, SA9 1AD
Sun Verge, Rhyl, LL18 3AF
Picture Reference
Front cover: Bridge Inn, Derbyshire
Harbour Spring Lodge, Peterhead
Page 3:
Fly Line, Garforth
Page 5:
Fisherman’s Cot, Tiverton
The Pavilion, Birmingham
Page 7:
Ravens Cliff Lodge, Ravenscraig
Page 16:
The Foundry, Harrogate
Page 17:
Spring River, Ebbsfeet
Page 39:
Kings Chamber, Doncaster
Station Pilot, Crewe
Page 67:
The Talbot, Kempsey
Page118:
Clock Works, Ystradynlais
Hartford Hall, Northwich
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MARSTON'S PLC
Marston's House, Brewery Road,
Wolverhampton WV1 4JT
Telephone 01902 711811
Registered No. 31461